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美國

證券交易委員會

華盛頓特區20549

 

表格 10-Q

 

（標記一）

☒			根據1934年證券交易法第13或15(d)節的季度報告

截至季度結束日期的財務報告2024年9月30日

或者

☐			根據1934年證券交易法第13或15(d)節的轉型報告書

在過渡期從______________________到________________________

  

委員會文件號碼			1-13006

 

國家公園公司
(根據其章程規定的註冊人準確名稱)

 

俄亥俄州						31-1179518
（國家或其他管轄區的 公司成立或組織）						（納稅人識別號碼）

北三街50號

郵政信箱3500號

紐瓦克

俄亥俄州

43058-3500

（總部地址）（郵政編碼）

(740)			349-8451
(註冊人電話號碼，包括區號)

無數據
（前名稱、地址及財政年度，如果自上次報告以來有更改）

在法案第12(b)條的規定下注冊的證券：

每一類的名稱			交易標誌			在其上註冊的交易所的名稱
普通股，無面值			PRK			紐交所美國

用複選標記表明註冊人（1）在過去的12個月中（或註冊人需要提交此類報告的較短期限）是否提交了1934年《證券交易法》第13或15（d）條要求提交的所有報告，以及（2）在過去的90天中是否受此類申報要求的約束。

 是☒ 不 ☐

在檢查標記中表明註冊人是否已經在過去的12個月內（或者爲註冊人需要提交這些文件的較短期間）根據S-T法規405規定，遞交了每個互動數據文件。

是 ☒ 是 ☐ 否

請用複選標記表示，註冊人是否爲大型加速歸檔者、加速歸檔者、非加速歸檔者、小型報告公司或新興成長型公司。請參閱"大型加速歸檔者"、"加速歸檔者"的定義

《交易所法》第120億.2條中的「小型報告公司」和「新興增長型公司」。

大型加速報告人			☒			加速文件提交人			☐
非加速文件提交人			☐			較小的報告公司			☐
						新興成長公司			☐

 

如果本公司是新興成長性公司，請勾選此項，表示本公司不選擇使用交易所法案第13(a)條規定的任何新的或修訂的財務會計準則的延長過渡期。 ☐

請在複選標誌處註明公司是否爲殼公司（根據交易所法令第12b-2條的定義）。

是☐否 ☒

2024年11月1日，註冊人發行並流通的普通股份無面值。 16,158,982.

---

國家公園公司

 

2024年6月4日，Nano Dimension股份有限公司（「註冊人」）發佈了一份新聞稿，題爲「大使喬吉特·莫斯巴赫加盟Nano Dimension董事會」，現附上99.1展覽，併成爲本文檔的一部分。

縮略語和首字母縮寫詞彙表。			4
關於前瞻性聲明的警示說明			5
第一部分。 基本報表
項目1. 基本報表
Consolidated Condensed Balance Sheets at 九月 30, 2024 和2020年12月31日23 （未經審計）			8
三個月的綜合縮減收入表和頁面。九 數月 結束了九月 30, 2024 及2023（未經審計）			10
綜合控件綜合報表基金爲三和頁面。九 數月 時間段爲 九月 30, 2024和20日23（未經審計）			12
三項股東權益變動彙總簡明報表和 九 數月 時間段爲 九月 30, 2024和20日23（未經審計）			13
綜合簡明現金流量表 九 三個月結束時 九月 30, 2024和20日23（未經審計）			15
未經審計的合併簡明財務報表附註			17
項目2。經營討論和財務狀況及運營結果分析			76
第3項。 關於市場風險的定量和定性披露			103
第4項。 控件和程序			103
第二部分。其他信息			104
項目1. 法律訴訟			104
項目1A.風險因素			104
項目2. 未經註冊的股權出售和頁面。Use of Proceeds			104
第三條。對於優先證券違約			105
第4條。礦山安全披露			105
項目5. 其他信息			105
項目6. 附件			105
簽名			107

3

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縮略語和首字母縮寫詞彙表。

本表格中對"我們," "我們的," "我們的," "公司," "公司,"或"Park"的引用集體指的是Park National Corporation及其子公司。此外，Park已經確定了以下縮寫列表 並且Park已經確定了下列縮寫詞和首字母縮寫詞，這些縮寫詞和首字母縮寫詞在未經審計的綜合簡明基本財務報表，未經審計的綜合簡明基本財務報表附註和管理討論和分析中被使用。

2017年僱員LTIP

park national 2017年員工長期激勵計劃

LGD

違約損失率

2017年非員工LTIP

park national 2017年非僱員董事長期激勵計劃

MSRs

按揭服務權

ACH

自動清算所

資產淨值

淨資產價值

ACL

信貸損失準備金

新天主教

新天主教銀行

可供出售金融資產

可供出售

NSF

非充足資金

ASC

會計準則編碼

OREO

其他房地產業擁有

會計準則更新

會計準則更新

park national 2023年10-K表格

截至2023年12月31日的Park National Corporation財政年度10-K年度報告

自動取款機

自動提款機

Hassane El-Khoury

基於績效的限制性股票單位

Carolina Alliance

CAb金融公司及其子公司

「PCD」是指斑岩銅 - 鉬系統。

購買信用衰退。

COVID-19

新冠病毒

PD。

違約概率

DCF

貼現現金流

PNB

national bank

DDA

活期存款帳戶。

PPP

CARES法案支持的工資保護計劃

每股收益

每股普通股收益

PBO

預計福利義務

FASB

財務會計準則委員會

PTPP

Pre-tax, pre-provision

聯邦存款保險公司

聯邦存款保險公司

申請人

Park National Corporation

聯邦金融機構檢查委員會

聯邦金融機構審查委員會

IFRS 16對2023年Q3和2022年Q3的影響如下： （i）分別減少$1,352和$1,309的SG＆A費用，其中包括對使用權利（「ROU」）資產的折舊影響，減去租金支付不包括在SG＆A費用中的影響；（ii）分別增加$1,214和$1,186的利息費用，因爲這些租賃負債在期間內必須記錄利息費用，（iii）分別有$36和$33遞延所得稅影響，根據對ROU資產和租賃負債餘額的稅務屬性計算而來。IFRS 16對2023年截至日期和2022年截至日期的影響如下：（i）分別減少了$3,885和$4,262的SG＆A費用，其中包括對ROU資產折舊的影響，減去租金支付不包括在SG＆A費用中的影響；（ii）分別增加$3,508和$3,582的利息費用，因爲這些租賃負債在期間內必須記錄利息費用，（iii）分別有$99和$180的遞延所得稅影響，基於記錄的ROU資產和租賃負債餘額的稅務屬性。

使用權

FHLB

聯邦住房貸款銀行

股票認購權

股票增值權

聯邦儲備委員會

聯儲局銀行

SEC

美國證券交易委員會

全額應稅當量

完全應稅等價

補充執行退休計劃

補充執行退休金計劃

GDP

國內生產總值

TBRSUs

基於時間的限制性股票單位

房屋淨值信貸

房屋淨值信貸額度

TDRs

有問題的債務重組

HPI

房屋價格指數

美國交易法案交易所

美利堅合衆國

IRLC

利率鎖定承諾

美國通用會計準則

美國通用會計準則

KSOP

park national的合格退休計劃，結合了員工股權所有計劃（ESOP）和401(k)計劃。

VOV

價值確認

LDA

虧損驅動分析

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關於前瞻性聲明的警示說明

Park在本季度報告第10-Q表格中所包含的某些聲明，包括但不限於在第一部分第2條「管理層對財務狀況和經營業績的討論與分析」中，或者在我們已經或將要向美國證券交易委員會（SEC）提交的其他材料中，以及口頭或書面聲明或將要由我們作出的其他陳述中，包含根據1995年修正的《私人證券訴訟改革法案》中使用的前瞻性陳述這一術語。此類前瞻性陳述旨在幫助理解預期的未來財務表現。前瞻性陳述提供了對未來事件的當前期望、估計或預測，並不代表未來業績的保證。前瞻性陳述基於管理層對未來結果或事件的當前期望、估計和預測，並受到多項風險和不確定性的影響。這些陳述通常被識別出來，因爲它們不僅侷限於歷史事實，還通過使用「期望」、「預期」、「設想」、「目標」、「目標」、「項目」、「打算」、「計劃」、「相信」、「尋求」、「估計」等前瞻性詞語或短語的使用。儘管管理層認爲這些前瞻性陳述所反映的期望是合理的，但實際結果可能會因各種風險因素而與此類聲明中表達或暗示的結果有實質性差異。有關這些風險因素的更多信息，請參閱Park 2023年度10-k表格第一部分「風險因素」，以及我們隨後向SEC提交的文件中隨時可能更新的相同內容。

Risks and uncertainties that could cause actual results to differ materially include, without limitation:

•Park's ability to execute our business plan successfully and within the expected timeframe as well as our ability to manage strategic initiatives;

•current and future economic and financial market conditions, either nationally or in the states in which Park does business, that may reflect deterioration in business and economic conditions, including the effects of higher unemployment rates or labor shortages, the impact of persistent inflation, the impact of continued elevated interest rates, changes in the economy or global supply chain, supply-demand imbalances affecting local real estate prices, U.S. fiscal debt, budget and tax matters, geopolitical matters (including the impact of the Russia-Ukraine conflict and associated sanctions and export controls as well as the Israel-Hamas conflict), and any slowdown in global economic growth, any of which may result in adverse impacts on the demand for loan, deposit and other financial services, delinquencies, defaults and counterparties' inability to meet credit and other obligations and the possible impairment of collectability of loans;

•factors that can impact the performance of our loan portfolio, including changes in real estate values and liquidity in our primary market areas, the financial health of our commercial borrowers and the success of construction projects that we finance;

•the effect of monetary and other fiscal policies (including the impact of money supply, ongoing increasing market interest rate policies and policies impacting inflation, of the Federal Reserve Board, the U.S. Treasury and other governmental agencies) as well as disruption in the liquidity and functioning of U.S. financial markets, may adversely impact prepayment penalty income, mortgage banking income, income from fiduciary activities, the value of securities, deposits and other financial instruments, in addition to the loan demand and the performance of our loan portfolio, and the interest rate sensitivity of our consolidated balance sheet as well as reduce net interest margins;

•changes in the federal, state, or local tax laws may adversely affect the fair values of net deferred tax assets and obligations of state and political subdivisions held in Park's investment securities portfolio and otherwise negatively impact our financial performance;

•the impact of the changes in federal, state and local governmental policy, including the regulatory landscape, capital markets, elevated government debt, potential changes in tax legislation that may increase tax rates, government shutdown, infrastructure spending and social programs;

•changes in laws or requirements imposed by Park's regulators impacting Park's capital actions, including dividend payments and stock repurchases;

•changes in consumer spending, borrowing and saving habits, whether due to changes in retail distribution strategies, consumer preferences and behaviors, changes in business and economic conditions, legislative and regulatory initiatives, or other factors may be different than anticipated;

•changes in customers', suppliers', and other counterparties' performance and creditworthiness, and Park's expectations regarding future credit losses and our allowance for credit losses, may be different than anticipated due to the continuing impact of and the various responses to inflationary pressures and continued elevated interest rates;

•Park may have more credit risk and higher credit losses to the extent there are loan concentrations by location or industry of borrowers or collateral;

•the volatility from quarter to quarter of mortgage banking income, whether due to interest rates, demand, the fair value of mortgage loans, or other factors;

•the adequacy of our internal controls and risk management program in the event of changes in the market, economic, operational (including those which may result from our associates working remotely), asset/liability repricing, legal, compliance, strategic, cybersecurity, liquidity, credit and interest rate risks associated with Park's business;

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•competitive pressures among financial services organizations could increase significantly, including product and pricing pressures (which could in turn impact our credit spreads), changes to third-party relationships and revenues, changes in the manner of providing services, customer acquisition and retention pressures, and Park's ability to attract, develop and retain qualified banking professionals;

•uncertainty regarding the nature, timing, cost and effect of changes in banking regulations or other regulatory or legislative requirements affecting the respective businesses of Park, including major reform of the regulatory oversight structure of the financial services industry and changes in laws and regulations concerning taxes, FDIC insurance premium levels, pensions, bankruptcy, consumer protection, rent regulation and housing, financial accounting and reporting, environmental protection, insurance, bank products and services, bank and bank holding company capital and liquidity standards, fiduciary standards, securities and other aspects of the financial services industry;

•Park's ability to meet heightened supervisory requirements and expectations;

•the effect of changes in accounting policies and practices, as may be adopted by the FASB, the SEC, the Public Company Accounting Oversight Board and other regulatory agencies, may adversely affect Park's reported financial condition or results of operations;

•Park's assumptions and estimates used in applying critical accounting estimates and modeling which may prove unreliable, inaccurate or not predictive of actual results;

•the possibility that future credit losses may be higher than currently expected due to changes in economic assumptions;

•Park's ability to anticipate and respond to technological changes and Park's reliance on, and the potential failure of, a number of third-party vendors to perform as expected, including Park's primary core banking system provider, which can impact Park's ability to respond to customer needs and meet competitive demands;

•operational issues stemming from and/or capital spending necessitated by the potential need to adapt to industry changes in information technology systems on which Park is highly dependent;

•Park's ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks, including those of Park's third-party vendors and other service providers, which may prove inadequate, and could adversely affect customer confidence in Park and/or result in Park incurring a financial loss;

•a failure in or breach of Park's operational or security systems or infrastructure, or those of our third-party vendors and other service providers, resulting in failures or disruptions in customer account management, general ledger, deposit, loan, or other systems, including as a result of cyber attacks;

•the impact on Park's business and operating results of any costs associated with obtaining rights in intellectual property claimed by others and of the adequacy of Park's intellectual property protection in general;

•the existence or exacerbation of general geopolitical instability and uncertainty as well as the effect of trade policies (including the impact of potential or imposed tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars and other changes in trade regulations, closing of border crossings and changes in the relationship of the U.S. and its global trading partners);

•the impact on financial markets and the economy of any changes in the credit ratings of the U.S. Treasury obligations and other U.S. government-backed debt, as well as issues surrounding the levels of U.S., European and Asian government debt and concerns regarding the growth rates and financial stability of certain sovereign governments, supranationals and financial institutions in Europe and Asia and the risk they may face difficulties servicing their sovereign debt;

•the effect of a fall in stock market prices on Park's asset and wealth management businesses;

•our litigation and regulatory compliance exposure, including the costs and effects of any adverse developments in legal proceedings or other claims, the costs and effects of unfavorable resolution of regulatory and other governmental examinations or other inquiries, and liabilities and business restrictions resulting from litigation and regulatory investigations;

•continued availability of earnings and excess capital sufficient for the lawful and prudent declaration of dividends;

•the impact on Park's business, personnel, facilities or systems of losses related to acts of fraud, scams and schemes of third parties;

•the impact of widespread natural and other disasters, pandemics, dislocations, regional or national protests and civil unrest (including any resulting branch closures or damages), military or terrorist activities or international hostilities (especially in light of the Russia-Ukraine conflict and the Israel-Hamas conflict) on the economy and financial markets generally and on us or our counterparties specifically;

•the potential further deterioration of the U.S. economy due to financial, political, or other shocks;

•the effect of healthcare laws in the U.S. and potential changes for such laws which may increase our healthcare and other costs and negatively impact our operations and financial results;

•the impact of larger or similar-sized financial institutions encountering problems which may adversely affect the banking industry and/or Park's business generation and retention, funding and liquidity, including potential increased regulatory requirements and increased reputational risk and potential impacts to macroeconomic conditions;

•Park's continued ability to grow deposits or maintain adequate deposit levels due to changing customer behaviors;

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•unexpected outflows of deposits which may require Park to sell assets at a loss; and

•other risk factors included in the current and periodic reports filed by Park with the SEC from time to time.

Forward-looking statements should be construed in the light of such risks. It is impossible to predict or identify all potential risk factors. Consequently, readers should not consider the foregoing list to be a complete set of all potential risks and uncertainties. Readers are cautioned not to place undue reliance on any forward-looking statements. Any forward looking statement in this Form 10-Q are based on current information as of the date of this Form 10-Q, and Park does not undertake, and specifically disclaims any obligation, to publicly release the results of any revisions that may be made to update any forward-looking statement to reflect the events or circumstances whether as a result of new information, future developments or otherwise, or reflect the occurrence of unanticipated events, except to the extent required by law.

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Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.      Financial Statements

PARK NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Condensed Balance Sheets (Unaudited)

(in thousands, except common share and per common share data)    

                

			September 30, 2024						December 31, 2023
Assets:
Cash and due from banks			$	147,338					$	160,477
Money market instruments			54,345						57,791
Cash and cash equivalents			201,683						218,268
Investment securities:
Debt securities available-for-sale, at fair value (amortized cost of $1,192,562 and $1,418,770 at September 30, 2024 and December 31, 2023, respectively, and no allowance for credit losses at September 30, 2024 or at December 31, 2023)			1,129,875						1,332,842
Other investment securities			103,422						96,302
Total investment securities			1,233,297						1,429,144
Loans			7,730,984						7,476,221
Allowance for credit losses			(87,237)						(83,745)
Net loans			7,643,747						7,392,476
Bank owned life insurance			235,434						231,631
Prepaid assets			194,734						165,879
Goodwill			159,595						159,595
Other intangible assets			3,725						4,652
Premises and equipment, net			70,939						74,211
Affordable housing tax credit investments			67,287						62,703
OREO			1,119						983
Accrued interest receivable			36,869						39,236
Operating lease ROU asset			16,169						15,715
Mortgage loan servicing rights			14,063						14,656
Other			24,388						27,304
Total assets			$	9,903,049					$	9,836,453

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PARK NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Condensed Balance Sheets (Unaudited) (Continued)

(in thousands, except common share and per common share data)

			September 30, 2024						December 31, 2023
Liabilities and Shareholders' Equity:
Deposits:
Non-interest bearing			$	2,516,722					$	2,628,234
Interest bearing			5,697,949						5,414,332
Total deposits			8,214,671						8,042,566
Short-term borrowings			117,442						328,182
Subordinated notes			189,522						189,147
Unfunded commitments in affordable housing tax credit investments			31,688						28,768
Operating lease liability			17,282						16,605
Allowance for credit losses on off-balance sheet commitments			6,150						5,103
Accrued interest payable			6,350						6,860
Other			80,531						73,929
Total liabilities			$	8,663,636					$	8,691,160
Shareholders' equity:
Preferred shares (No par value; 200,000 shares authorized; No shares issued)			$	—					$	—
Common shares (No par value; 20,000,000 shares authorized; 17,623,104 common shares issued at September 30, 2024 and at December 31, 2023)			462,129						463,280
Retained earnings			964,008						903,877
Treasury shares (1,471,464 common shares at September 30, 2024 and 1,506,625 common shares at December 31, 2023)			(152,040)						(155,673)
Accumulated other comprehensive loss, net of taxes			(34,684)						(66,191)
Total shareholders' equity			1,239,413						1,145,293
Total liabilities and shareholders’ equity			$	9,903,049					$	9,836,453

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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PARK NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Condensed Statements of Income (Unaudited)

(in thousands, except common share and per common share data)

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
Interest and dividend income:
Interest and fees on loans			$	120,203					$	103,258					$	346,732					$	291,300
Interest and dividends on:
Debt securities - taxable			10,228						13,321						33,077						39,731
Debt securities - tax-exempt			1,381						2,900						4,173						8,718
Other interest income			1,996						1,410						5,370						6,715
Total interest and dividend income			133,808						120,889						389,352						346,464
Interest expense:
Interest on deposits:
Demand and savings deposits			22,762						20,029						62,987						52,309
Time deposits			7,073						3,097						21,936						6,410
Interest on borrowings:
Short-term borrowings			492						1,136						2,767						2,688
Subordinated notes			2,367						2,358						7,088						7,018
Total interest expense			32,694						26,620						94,778						68,425
Net interest income			101,114						94,269						294,574						278,039
Provision for (recovery of) credit losses			5,315						(1,580)						10,608						1,095
Net interest income after provision for (recovery of) credit losses			$	95,799					$	95,849					$	283,966					$	276,944
Other income:
Income from fiduciary activities			$	10,615					$	9,100					$	31,367					$	26,531
Service charges on deposit accounts			2,362						2,109						6,682						6,391
Other service income			3,036						2,615						8,466						7,951
Debit card fee income			6,539						6,652						19,362						19,939
Bank owned life insurance income			2,057						1,448						6,251						3,965
ATM fees			471						575						1,425						1,661
Pension settlement gain			5,783						—						5,783						—
Loss on the sale of debt securities, net			—						—						(398)						—
Gain on equity securities, net			1,557						998						1,228						618
Other components of net periodic pension benefit income			2,204						1,893						6,612						5,679
Miscellaneous			1,906						2,323						4,746						4,380
Total other income			$	36,530					$	27,713					$	91,524					$	77,115

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PARK NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Condensed Statements of Income (Unaudited) (Continued)

(in thousands, except common share and per common share data)

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
Other expense:
Salaries			$	38,370					$	34,525					$	110,057					$	103,045
Employee benefits			10,162						10,822						31,595						32,176
Occupancy expense			3,731						3,203						9,887						9,770
Furniture and equipment expense			2,571						3,060						7,608						9,409
Data processing fees			11,764						9,700						30,114						28,032
Professional fees and services			7,842						7,572						20,681						22,158
Marketing			1,464						1,197						4,369						3,755
Insurance			1,640						2,158						5,135						5,932
Communication			955						1,135						2,993						3,217
State tax expense			1,116						1,125						3,355						3,499
Amortization of intangible assets			287						334						927						989
Foundation contributions			2,000						—						2,000						—
Miscellaneous			3,779						2,977						9,377						8,214
Total other expense			$	85,681					$	77,808					$	238,098					$	230,196
Income before income taxes			$	46,648					$	45,754					$	137,392					$	123,863
Income taxes			8,431						8,837						24,602						21,629
Net income			$	38,217					$	36,917					$	112,790					$	102,234
Earnings per common share:
Basic			$	2.37					$	2.29					$	6.99					$	6.32
Diluted			$	2.35					$	2.28					$	6.95					$	6.29
Weighted average common shares outstanding:
Basic			16,151,640						16,133,310						16,139,335						16,180,261
Diluted			16,264,393						16,217,880						16,231,766						16,261,109
Regular cash dividends declared per common share			$	1.06					$	1.05					$	3.18					$	3.15

 

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

 

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PARK NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Condensed Statements of Comprehensive Income (Unaudited)

(in thousands)

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
Net income			$	38,217					$	36,917					$	112,790					$	102,234
Other comprehensive income (loss), net of tax:
Defined benefit pension plan:
Amortization of prior service cost, net of income tax effect of $8 for the three months and nine months ended September 30, 2024			29						—						29						—
Unrealized net actuarial gain, net of income tax effect of $4,702 for the three months and nine months ended September 30, 2024			17,687						—						17,687						—
Gain recognition on partial settlement of vested benefits, net of income tax effect of $(1,214) for the three months and nine months ended September 30, 2024			(4,569)						—						(4,569)						—
Change in funded status of defined benefit pension plan, net of income tax effect			13,147						—						13,147						—
Debt securities available-for-sale:
Unrealized net holding gain (loss) on debt securities available-for-sale, net of income tax effect of $5,482 and $(5,078) for the three months ended September 30, 2024 and 2023, respectively, and $4,797 and $(3,588) for the nine months ended September 30, 2024 and 2023, respectively			20,623						(19,104)						18,046						(13,496)
Net loss realized on sale of debt securities, AFS, net of income tax effect of $84 for the nine months ended September 30, 2024			—						—						314						—
Unrealized net holding gain (loss) on debt securities available-for-sale, net of income tax effect			20,623						(19,104)						18,360						(13,496)
Other comprehensive income (loss)			$	33,770					$	(19,104)					$	31,507					$	(13,496)
Comprehensive income			$	71,987					$	17,813					$	144,297					$	88,738

 

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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PARK NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Condensed Statements of Changes in Shareholders' Equity (Unaudited)

(in thousands, except common share and per common share data)

  

						Preferred Shares						Common Shares						Retained Earnings						Treasury Shares						Accumulated Other Comprehensive Loss
Balance at December 31, 2023						$	—					$	463,280					$	903,877					$	(155,673)					$	(66,191)
Net income																		35,204
Other comprehensive loss, net of tax																														(204)
Dividends on common shares at $1.06 per common share																		(17,287)
Issuance of 33,044 common shares under share-based compensation awards, net of 21,937 common shares withheld to pay employee income taxes												(5,701)						(693)						3,414
Share-based compensation expense												1,953
Balance at March 31, 2024						$	—					$	459,532					$	921,101					$	(152,259)					$	(66,395)
Net income																		39,369
Other comprehensive loss, net of tax																														(2,059)
Dividends on common shares at $1.06 per common share																		(17,321)
Share-based compensation expense												1,289
Balance at June 30, 2024						$	—					$	460,821					$	943,149					$	(152,259)					$	(68,454)
Net income																		38,217
Other comprehensive income, net of tax																														33,770
Dividends on common shares at $1.06 per common share																		(17,322)
Issuance of 2,117 common shares under share-based compensation awards, net of 958 common shares withheld to pay employee income taxes												(319)						(36)						219
Share-based compensation expense												1,627
Balance at September 30, 2024						$	—					$	462,129					$	964,008					$	(152,040)					$	(34,684)

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PARK NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Condensed Statements of Changes in Shareholders' Equity (Unaudited) (Continued)

(in thousands, except common share and per common share data)

						Preferred Shares						Common Shares						Retained Earnings						Treasury Shares						Accumulated Other Comprehensive Loss
Balance at December 31, 2022						$	—					$	462,404					$	847,235					$	(138,019)					$	(102,394)
Cumulative effect of a change in accounting principle																		(303)
Balance at January 1, 2023						$	—					$	462,404					$	846,932					$	(138,019)					$	(102,394)
Net income																		33,733
Other comprehensive income, net of tax																														12,361
Dividends on common shares at $1.05 per common share																		(17,285)
Issuance of 34,484 common shares under share-based compensation awards, net of 21,981 common shares withheld to pay employee income taxes												(5,309)						(862)						3,564
Share-based compensation expense												2,336
Repurchase of 124,000 common shares to be held as treasury shares																								$	(15,308)
Balance at March 31, 2023						$	—					$	459,431					$	862,518					$	(149,763)					$	(90,033)
Net income																		31,584
Other comprehensive loss, net of tax																														(6,753)
Dividends on common shares at $1.05 per common share																		(17,187)
Issuance of 4,358 common shares under share-based compensation awards, net of 1,992 common shares withheld to pay employee income taxes												(602)						(85)						450
Share-based compensation expense												1,749
Repurchase of 25,000 common shares to be held as treasury shares																								(2,552)
Balance at June 30, 2023						$	—					$	460,578					$	876,830					$	(151,865)					$	(96,786)
Net income																		36,917
Other comprehensive loss, net of tax																														(19,104)
Dividends on common shares at $1.05 per common share																		(17,120)
Share-based compensation expense												1,271
Repurchase of 50,000 common shares to be held as treasury shares																								$	(5,157)
Balance at September 30, 2023						$	—					$	461,849					$	896,627					$	(157,022)					$	(115,890)

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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PARK NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Condensed Statements of Cash Flows (Unaudited)

(in thousands)

			Nine Months Ended September 30,
			2024						2023
Operating activities:
Net income			$	112,790					$	102,234
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses			10,608						1,095
Accretion of loan fees and costs, net			(6,663)						(6,621)
Depreciation of premises and equipment			9,114						10,635
Amortization of investment securities, net			1,203						3,156
Pension settlement gain			(5,783)						—
Loss on the sale of debt securities, net			398						—
Gain on equity securities, net			(1,228)						(618)
Loan originations to be sold in secondary market			(82,416)						(53,432)
Proceeds from sale of loans in secondary market			82,113						53,711
Gain on sale of loans in secondary market			(1,484)						(996)
Share-based compensation expense			4,869						5,356
Bank owned life insurance income			(6,251)						(3,965)
Investment in qualified affordable housing tax credits amortization			6,416						6,292
Changes in assets and liabilities:
Decrease (increase) in prepaid dealer premiums			115						(1,339)
Decrease (increase) in other assets			2,427						(6,030)
Increase (decrease) in other liabilities			3,395						(12,099)
Net cash provided by operating activities			$	129,623					$	97,379
Investing activities:
Proceeds from sales of investment securities			$	30,797					$	—
Proceeds from the redemption/repurchase of FHLB stock			15,989						4,605
Proceeds from calls and maturities of:
Debt securities AFS			196,410						108,281
Purchases of:
Debt securities AFS			(2,100)						(3,981)
Equity securities			(8,046)						(2,195)
FHLB stock			(9,225)						(13,636)
Net (increase) decrease in other investments			(2,110)						2,009
Net loan originations, portfolio loans			(254,937)						(203,822)
Investment in qualified affordable housing tax credits			(8,080)						(6,579)
Proceeds from the sale of OREO			987						965
Bank owned life insurance death benefits			5,171						1,658
Purchases of bank owned life insurance			(9,933)						(2,500)
Purchases of premises and equipment			(7,092)						(5,858)
Net cash used in investing activities			$	(52,169)					$	(121,053)

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PARK NATIONAL CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (Unaudited) (Continued) (in thousands)
			Nine Months Ended September 30,
			2024						2023
Financing activities:
Net increase (decrease) in deposits			$	170,920					$	(185,164)
Net decrease in off-balance sheet deposits			1,185						195,173
Net (decrease) increase in short-term borrowings			(210,740)						125,444
Value of common shares withheld to pay employee income taxes			(3,116)						(2,844)
Repurchase of common shares to be held as treasury shares			—						(23,017)
Cash dividends paid			(52,288)						(52,028)
Net cash (used in) provided by financing activities			$	(94,039)					$	57,564
(Decrease) increase in cash and cash equivalents			(16,585)						33,890
Cash and cash equivalents at beginning of year			218,268						189,728
Cash and cash equivalents at end of period			$	201,683					$	223,618
Supplemental disclosures of cash flow information:
Cash paid for:
Interest			$	95,288					$	68,634
Federal income tax			19,010						12,200
Non-cash items:
Loans transferred to OREO			$	1,008					$	1,051
ROU assets obtained in exchange for lease obligations			2,654						499
New commitments in affordable housing tax credits			11,000						10,000
New commitments in other investment securities			2,500						2,745

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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PARK NATIONAL CORPORATION

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 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 and the nine-month periods ended September 30, 2024 are not necessarily indicative of the operating results to be anticipated for the year ending December 31, 2024.

 

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with the instructions for Quarterly Reports on Form 10-Q and Article 10 of Regulation S-X of the SEC. Therefore, they 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 Park's 2023 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 2023 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 preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated condensed financial statements and accompanying notes. Actual results could differ materially from those estimates.

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 condensed financial statements:

Adoption of New Accounting Pronouncements

No significant new pronouncements were adopted during the three months or nine months ended September 30, 2024.

Issued But Not Yet Effective Accounting Standards

ASU 2023-06 - Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative: In October 2023, FASB issued ASU 2023-06 - Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative. ASU 2023-06 amends the disclosure or presentation requirements related to various subtopics in the FASB ASC. ASU 2023-06 was issued in response to the SEC's August 2018 final rule that updated and simplified disclosure requirements. In the final rule, the SEC identified 27 disclosure requirements that were incremental to those in the ASC and referred them to the FASB for potential incorporation into US GAAP. To avoid duplication, the SEC intended to eliminate those disclosure requirements from existing SEC regulations if the FASB incorporated them into the relevant ASC subtopics. The disclosure requirements are currently included in either SEC Regulation S-X or SEC Regulation S-K. ASU 2023-06 adds 14 of the 27 identified disclosure or presentation requirements to the ASC.

For entities, like Park that are subject to the SEC's existing disclosure requirements, the effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The amendments are to be applied prospectively and, if by June 30, 2027 the SEC has not removed the applicable requirement from Regulation S-X or S-K, the pending content of the related amendment will be removed from the ASC and will not become effective for any entity. Management intends to adopt the provisions of ASU 2023-06 on their respective effective dates. The adoption of the provisions of ASU 2023-06 is not expected to have a material impact on Park's consolidated financial statements.

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ASU 2023-07 - Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures

In November 2023, FASB issued ASU 2023-07 -Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 will require public entities to disclose information about their reportable segments' significant expenses on an interim and annual basis. Public entities will be required to disclose other segment items for each reportable segment and provide a description of its composition. Significant expense categories are derived from expenses that are regularly reported to an entity's chief operating decision-makers and included in a segments' reported measures of profit or loss. ASU 2023-07 will also require for an entity to disclose the title and position of the chief operating decision-maker and explain how the chief operating decision-maker uses the reported measures of profit or loss to assess segment performance. ASU 2023-07 also requires interim disclosures of certain segment-related disclosures that previously were required only on an annual basis and clarifies that entities with a single reportable segment are subject to both new and existing segment reporting requirements under Topic 280.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. ASU 2023-07 requires entities to adopt the changes to the segment reporting guidance on a retrospective basis and early adoption is permitted. The adoption of the provisions of ASU 2023-07 is not expected to have an impact on Park's consolidated financial statements, but will impact disclosures.

ASU 2023-09- Income Taxes (Topic 740) Improvement to Income Tax Disclosures

In December 2023, FASB issued ASU 2023-09 - Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 will require entities to disclose more detailed information in the reconciliation of their statutory tax rate to their effective tax rate. ASU 2023-09 also requires entities to disclose more detailed information about income taxes paid, including by jurisdiction.

ASU 2023-09 is effective for public business entities for annual reporting periods beginning after December 15, 2024 and interim periods beginning after December 15, 2025. The adoption of the provisions of ASU 2023-09 is not expected to have an impact on Park's consolidated financial statements, but will impact disclosures.

Note 3 – Investment Securities

 

Investment securities at September 30, 2024 and at December 31, 2023, were as follows:

Debt securities AFS (In thousands)						Amortized Cost						Gross Unrealized Holding  Gains						Gross Unrealized Holding  Losses						Fair Value
September 30, 2024:
Obligations of U.S. Government sponsored entities						$	250					$	—					$	2					$	248
Obligations of states and political subdivisions						219,248						484						13,362						206,370
U.S. Government sponsored entities' asset-backed securities						608,962						74						48,187						560,849
Collateralized loan obligations						343,370						434						75						343,729
Corporate debt securities						20,732						4						2,057						18,679
Total						$	1,192,562					$	996					$	63,683					$	1,129,875

 

Debt securities AFS (In thousands)						Amortized Cost						Gross Unrealized Holding  Gains						Gross Unrealized Holding  Losses						Fair Value
December 31, 2023:
Obligations of states and political subdivisions						$	251,531					$	1,173					$	11,520					$	241,184
U.S. Government sponsored entities' asset-backed securities						703,645						23						68,193						635,475
Collateralized loan obligations						443,112						31						4,857						438,286
Corporate debt securities						20,482						—						2,585						17,897
Total						$	1,418,770					$	1,227					$	87,155					$	1,332,842

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Investment securities in an unrealized loss position at September 30, 2024, were as follows:

						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:
Obligations of U.S. Government sponsored entities						$	248					$	2					$	—					$	—					$	248					$	2
Obligations of states and political subdivisions						23,999						312						144,936						13,050						168,935						13,362
U.S. Government sponsored entities' asset-backed securities						—						—						553,361						48,187						553,361						48,187
Collateralized loan obligations						66,578						22						73,616						53						140,194						75
Corporate debt securities						944						16						15,609						2,041						16,553						2,057
Total						$	91,769					$	352					$	787,522					$	63,331					$	879,291					$	63,683

 

 Investment securities in an unrealized loss position at December 31, 2023, were as follows:

 

						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:
Obligations of states and political subdivisions						$	46,685					$	420					$	103,993					$	11,100					$	150,678					$	11,520
U.S. Government sponsored entities' asset-backed securities						—						—						634,261						68,193						634,261						68,193
Collateralized loan obligations						—						—						404,019						4,857						404,019						4,857
Corporate debt securities						9,530						702						8,367						1,883						17,897						2,585
Total						$	56,215					$	1,122					$	1,150,640					$	86,033					$	1,206,855					$	87,155

At September 30, 2024, Park’s debt securities portfolio consisted of $1.1 billion of securities, $879.3 million of which were in an unrealized loss position with aggregate unrealized losses of $63.7 million. Of the $879.3 million of securities in an unrealized loss position, $787.5 million were in an unrealized loss position for 12 months or longer. Of the $63.7 million in unrealized losses, $48.2 million were related to Park's "Obligations of U.S. Government sponsored entities" and "U.S. Government sponsored entities' asset-backed securities" portfolios. For non-agency debt securities, Park verified that the current credit ratings remain above investment grade. On a quarterly basis, management reviews the credit profile of each non-agency debt security and assesses whether any impairment to the contractually obligated cash flow is likely to occur. Based on these reviews, management has concluded that the underlying creditworthiness for each security remains sufficient to maintain required payment obligations and that changes in value are largely the result of changes in the yield curve, therefore, unrealized losses have not been recognized into net income. 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 in respect of the unrealized losses. Management believes the value will recover as the securities approach maturity or market interest rates change.

There was no ACL recorded for debt securities AFS at either September 30, 2024 or December 31, 2023. Additionally, for the three months and the nine months ended September 30, 2024 and 2023, there were no credit-related investment impairment losses recognized.

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The amortized cost and estimated fair value of investments in debt securities AFS at September 30, 2024, are shown in the following table by contractual maturity, except for asset-backed securities and collateral loan obligations, which are shown as a single total due to the unpredictability of the timing of principal repayments. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

(In thousands)						Amortized cost						Fair value						Tax equivalent yield (1)
Debt Securities AFS
Obligations of U.S.Government sponsored entities
Due within one year						$	250					$	248					2.88		%
Total						$	250					$	248					2.88		%
Obligations of state and political subdivisions:
Due within one year						$	250					$	250					6.06		%
Due one through five years						1,494						1,494						3.15		%
Due five through ten years						94,696						91,936						3.18		%
Due over ten years						122,808						112,690						3.19		%
Total						$	219,248					$	206,370					3.19		%
U.S. Government sponsored entities' asset-backed securities						$	608,962					$	560,849					1.86		%
Collateralized loan obligations						$	343,370					$	343,729					7.00		%
Corporate debt securities
Due within one year						$	961					$	945					9.67		%
Due five through ten years						19,771						17,734						4.10		%
Total						$	20,732					$	18,679					4.36		%

(1) The tax equivalent yield for certain obligations of state and political subdivisions includes the effect of a taxable equivalent adjustment using a 21% federal corporate income tax rate.

During the nine-month period ended September 30, 2024, Park sold certain AFS debt securities with a book value of $31.2 million at a gross loss of $398,000. There were no sales of debt securities AFS during the three month period ended September 30, 2024. There were no sales of debt securities AFS during the three month or nine-month periods ended September 30, 2023.

Investment securities having a fair value of $724.7 million and $602.0 million at September 30, 2024 and December 31, 2023, respectively, were pledged to collateralize government and public fund deposits, to secure repurchase agreements and as collateral for FHLB advance borrowings.

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Note 4 – Other Investment Securities

 

Other investment securities consist of restricted stock investments in the FHLB and the FRB, and equity securities. The restricted 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 September 30, 2024 and December 31, 2023 were as follows:

 

(In thousands)						September 30, 2024						December 31, 2023
FHLB stock						$	10,990					$	17,754
FRB stock						14,653						14,653
Equity investments carried at fair value						7,861						2,089
Equity investments carried at modified cost (1)						19,347						15,921
Equity investments carried at NAV						50,571						45,885
Total other investment securities						$	103,422					$	96,302

(1) There have been no impairments or downward adjustments made to equity investments carried at modified cost. Cumulatively, upward adjustments of $1.4 million have been recorded as a result of observable price changes. There were $571,000 in upward adjustments recorded during the nine months ended September 30, 2024 as a result of observable price changes. There were no adjustments recorded during the three months ended September 30, 2024 as a result of observable price changes. There were no adjustments recorded during the three months and nine months ended September 30, 2023 as a result of observable price changes.

During the three months ended September 30, 2024, Park purchased 27,233 shares of FHLB stock with a book value of $2.7 million. During the nine months ended September 30, 2024, Park purchased 92,245 shares of FHLB stock with a book value of $9.2 million. During the three months ended September 30, 2023, Park purchased 122,296 shares of FHLB stock with a book value of $12.2 million. During the nine months ended September 30, 2023, Park purchased 136,371 shares of FHLB stock with a book value of $13.6 million.

During the three months ended September 30, 2024, the FHLB repurchased 23,548 shares of FHLB stock with a book value of $2.4 million. During the nine months ended September 30, 2024, the FHLB repurchased 159,886 shares of FHLB stock with a book value of $16.0 million. During the three months ended September 30, 2023, the FHLB repurchased 10,002 shares of FHLB stock with a book value of $1.0 million. During the nine months ended September 30, 2023, the FHLB repurchased 46,054 shares of FHLB stock with a book value of $4.6 million.

No shares of FRB stock were purchased or sold during the three months or nine months ended September 30, 2024 or 2023.

During the three months ended September 30, 2024 and 2023, $700,000 and $74,000, respectively, of gains on equity investments carried at fair value were recorded within "Gain on equity securities, net" on the Consolidated Condensed Statements of Income. During the nine months ended September 30, 2024 and 2023, $1.2 million and $(65,000), respectively, of gains (losses) on equity investments carried at fair value were recorded within "Gain on equity securities, net" on the Consolidated Condensed Statements of Income.

During the three months ended September 30, 2024 and 2023, $857,000 and $924,000, respectively, of gains on equity investments carried at NAV were recorded within “Gain on equity securities, net” on the Consolidated Condensed Statements of Income. During the nine months ended September 30, 2024 and 2023, $75,000 and $683,000, respectively, of gains on equity investments carried at NAV were recorded within “Gain on equity securities, net” on the Consolidated Condensed Statements of Income.

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Note 5 – Loans

 

The composition of the loan portfolio at September 30, 2024 and at December 31, 2023 was as follows:

 

			September 30, 2024									December 31, 2023
(In thousands)			Amortized Cost									Amortized Cost
Commercial, financial and agricultural: (1)
Commercial, financial and agricultural (1)			$	1,299,399								$	1,292,025
PPP loans			1,123									2,116
Overdrafts			1,012									1,499
Commercial real estate (1)			1,957,079									1,875,993
Construction real estate:
Commercial			252,120									209,226
Retail			98,767									95,873
Residential real estate:
Commercial			627,680									609,410
Mortgage			1,319,170									1,239,861
HELOC			197,008									174,349
Installment			6,152									5,904
Consumer:
Consumer			1,941,225									1,943,869
Check loans			1,948									2,067
Leases			28,301									24,029
Total			$	7,730,984								$	7,476,221
Allowance for credit losses			(87,237)									(83,745)
Net loans			$	7,643,747								$	7,392,476

(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.

Loans are shown net of deferred origination fees, costs and unearned income of $20.2 million at September 30, 2024, and of $19.8 million at December 31, 2023, which represented a net deferred income position at both dates. At September 30, 2024 and December 31, 2023, loans included purchase accounting adjustments of $918,000 and $1.8 million, respectively, which represented a net deferred income position at each date. This fair market value purchase accounting adjustment 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 $1.0 million and $1.5 million were reclassified to loans at September 30, 2024 and at December 31, 2023, respectively.

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Credit Quality

Nonperforming loans consist of nonaccrual loans and loans past due 90 days or more and still accruing.

The following tables present the amortized cost of nonaccrual loans and loans past due 90 days or more and still accruing, by class of loan, at September 30, 2024 and December 31, 2023.

 

						September 30, 2024
(In thousands)						Nonaccrual Loans									Loans Past Due 90 Days  or More and Accruing						Total Nonperforming Loans
Commercial, financial and agricultural:
Commercial, financial and agricultural						$	28,305								$	2,004					$	30,309
PPP loans						—									—						—
Overdrafts						—									—						—
Commercial real estate						21,090									—						21,090
Construction real estate:
Commercial						25									—						25
Retail						23									—						23
Residential real estate:
Commercial						4,179									—						4,179
Mortgage						11,082									689						11,771
HELOC						834									—						834
Installment						33									—						33
Consumer:
Consumer						2,399									857						3,256
Check loans						—									—						—
Leases						21									—						21
Total loans						$	67,991								$	3,550					$	71,541

 

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						December 31, 2023
(In thousands)						Nonaccrual Loans						Loans Past Due 90 Days or More and Accruing						Total Nonperforming Loans
Commercial, financial and agricultural
Commercial, financial and agricultural						$	21,284					$	14					$	21,298
PPP loans						—						—						—
Overdrafts						—						—						—
Commercial real estate						20,740						—						20,740
Construction real estate:
Commercial						504						—						504
Retail						—						26						26
Residential real estate:
Commercial						2,670						—						2,670
Mortgage						11,786						206						11,992
HELOC						815						—						815
Installment						16						—						16
Consumer
Consumer						2,371						613						2,984
Check loans						—						—						—
Leases						73						—						73
Total loans						$	60,259					$	859					$	61,118

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The following tables provide additional detail on nonaccrual loans and the related ACL, by class of loan, at September 30, 2024 and December 31, 2023:

						September 30, 2024
(In thousands)						Nonaccrual Loans With No ACL						Nonaccrual Loans With an ACL						Related ACL
Commercial, financial and agricultural:
Commercial, financial and agricultural						$	22,961					$	5,344					$	2,479
PPP loans						—						—						—
Overdrafts						—						—						—
Commercial real estate						20,641						449						13
Construction real estate:
Commercial						25						—						—
Retail						—						23						1
Residential real estate:
Commercial						4,179						—						—
Mortgage						—						11,082						112
HELOC						—						834						136
Installment						—						33						1
Consumer
Consumer						—						2,399						552
Check loans						—						—						—
Leases						21						—						—
Total loans						$	47,827					$	20,164					$	3,294

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						December 31, 2023
(In thousands)						Nonaccrual Loans With No ACL						Nonaccrual Loans With an ACL						Related ACL
Commercial, financial and agricultural:
Commercial, financial and agricultural						$	8,634					$	12,650					$	4,985
PPP loans						—						—						—
Overdrafts						—						—						—
Commercial real estate						20,175						565						2
Construction real estate:
Commercial						504						—						—
Retail						—						—						—
Residential real estate:
Commercial						2,670						—						—
Mortgage						—						11,786						117
HELOC						—						815						25
Installment						—						16						—
Consumer
Consumer						—						2,371						672
Check loans						—						—						—
Leases						73						—						—
Total						$	32,056					$	28,203					$	5,801

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 tables provide the amortized cost basis of collateral-dependent loans by class of loan, at September 30, 2024 and at December 31, 2023:

						September 30, 2024
(In thousands)						Real Estate						Business Assets						Other			Total
Commercial, financial and agricultural
Commercial, financial and agricultural						$	5,788					$	14,235					$	7,905		$	27,928
Commercial real estate						22,395						11						—			22,406
Construction real estate:
Commercial						618						—						—			618
Residential real estate:
Commercial						4,382						—						—			4,382
Mortgage						79						—						—			79
Leases						—						21						—			21
Total loans						$	33,262					$	14,267					$	7,905		$	55,434

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						December 31, 2023
(In thousands)						Real Estate						Business Assets						Other			Total
Commercial, financial and agricultural
Commercial, financial and agricultural						$	8,137					$	9,377					$	3,737		$	21,251
Commercial real estate						22,096						514						—			22,610
Construction real estate:
Commercial						1,130						—						—			1,130
Residential real estate:
Commercial						2,910						—						—			2,910
Mortgage						76						—						—			76
Leases						—						73						—			73
Total loans						$	34,349					$	9,964					$	3,737		$	48,050

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. The following table presents interest income recognized on nonaccrual loans for the three-month and the nine-month periods ended September 30, 2024 and 2023:

						Interest Income Recognized
(In thousands)						Three Months Ended September 30, 2024						Three Months Ended September 30, 2023									Nine Months Ended September 30, 2024						Nine Months Ended September 30, 2023
Commercial, financial and agricultural:
Commercial, financial and agricultural						$	441					$	253								$	1,018					$	1,580
PPP loans						—						—									—						—
Overdrafts						—						—									—						—
Commercial real estate						257						177									822						537
Construction real estate:
Commercial						—						5									38						59
Retail						1						—									1						—
Residential real estate:
Commercial						62						37									169						100
Mortgage						85						58									238						160
HELOC						2						1									9						16
Installment						—						1									—						3
Consumer:
Consumer						32						25									90						65
Check loans						—						—									—						—
Leases						—						—									—						—
Total loans						$	880					$	557								$	2,385					$	2,520

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The following tables present the aging of the amortized cost in past due loans at September 30, 2024 and at December 31, 2023 by class of loan:

			September 30, 2024
(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			$	3,265					$	16,815					$	20,080					$	1,279,319					$	1,299,399
PPP loans			1						—						1						1,122						1,123
Overdrafts			—						—						—						1,012						1,012
Commercial real estate			236						2,146						2,382						1,954,697						1,957,079
Construction real estate:
Commercial			—						—						—						252,120						252,120
Retail			86						—						86						98,681						98,767
Residential real estate:
Commercial			717						219						936						626,744						627,680
Mortgage			8,666						5,120						13,786						1,305,384						1,319,170
HELOC			231						621						852						196,156						197,008
Installment			28						22						50						6,102						6,152
Consumer:
Consumer			7,894						1,283						9,177						1,932,048						1,941,225
Check loans			1						—						1						1,947						1,948
Leases			196						—						196						28,105						28,301
Total loans			$	21,321					$	26,226					$	47,547					$	7,683,437					$	7,730,984

(1) Includes an aggregate of $3.6 million of loans past due 90 days or more and accruing. The remaining loans were past due nonaccrual loans.

(2) Includes an aggregate of $45.3 million of nonaccrual loans which were current with respect to contractual principal and interest payments.

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			December 31, 2023
(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			$	522					$	11,629					$	12,151					$	1,279,874					$	1,292,025
PPP loans			9						—						9						2,107						2,116
Overdrafts			—						—						—						1,499						1,499
Commercial real estate			1,656						1,839						3,495						1,872,498						1,875,993
Construction real estate:
Commercial			—						205						205						209,021						209,226
Retail			554						26						580						95,293						95,873
Residential real estate:
Commercial			295						219						514						608,896						609,410
Mortgage			9,831						6,450						16,281						1,223,580						1,239,861
HELOC			788						611						1,399						172,950						174,349
Installment			52						—						52						5,852						5,904
Consumer
Consumer			8,974						1,183						10,157						1,933,712						1,943,869
Check loans			5						—						5						2,062						2,067
Leases			—						—						—						24,029						24,029
Total loans			$	22,686					$	22,162					$	44,848					$	7,431,373					$	7,476,221

(1) Includes an aggregate of $859,000 of loans past due 90 days or more and accruing. The remaining loans were past due nonaccrual loans.

(2) Includes an aggregate of $39.0 million of nonaccrual loans which were current with respect 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 September 30, 2024 and December 31, 2023 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; and (4) consumer 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 weaknesses 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 an individual 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 individually evaluated category. A commercial loan is deemed nonaccrual, 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.

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Based on the most recent analysis performed, the risk category of commercial loans by class of loans at September 30, 2024 and at December 31, 2023 are detailed in the tables below. Also included in the tables detailing loan balances are gross charge offs for the nine months ended September 30, 2024 and for the year ended December 31, 2023.

September 30, 2024			Term Loans Amortized Cost Basis by Origination Year
(In thousands)			2024			2023			2022			2021			2020			Prior			Revolving Loans Amortized Cost Basis			Total
Commercial, financial and agricultural: Commercial, financial and agricultural (1)
Risk rating
Pass			$	160,107		$	161,990		$	116,352		$	91,264		$	74,094		$	52,195		$	577,740		$	1,233,742
Special Mention			1,285			902			3,597			333			791			1,399			27,500			35,807
Substandard			1,161			904			945			406			826			5,466			16,264			25,972
Doubtful			298			525			89			792			1,786			49			339			3,878
Total			$	162,851		$	164,321		$	120,983		$	92,795		$	77,497		$	59,109		$	621,843		$	1,299,399
Current period gross charge-offs			$	—		$	51		$	11		$	5		$	18		$	2,869		$	50		$	3,004

Commercial, financial and agricultural: PPP
Risk rating
Pass			$	—		$	—		$	—		$	628		$	495		$	—		$	—		$	1,123
Special Mention			—			—			—			—			—			—			—			—
Substandard			—			—			—			—			—			—			—			—
Doubtful			—			—			—			—			—			—			—			—
Total			$	—		$	—		$	—		$	628		$	495		$	—		$	—		$	1,123
Current period gross charge-offs			$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

Commercial real estate (1)
Risk rating
Pass			$	223,379		$	263,320		$	302,460		$	305,453		$	289,772		$	492,078		$	30,720		$	1,907,182
Special Mention			2,007			1,968			7,228			4,310			5,599			6,697			—			27,809
Substandard			1,125			4,394			1,398			3,177			1,595			7,210			2,623			21,522
Doubtful			—			117			449			—			—			—			—			566
Total			$	226,511		$	269,799		$	311,535		$	312,940		$	296,966		$	505,985		$	33,343		$	1,957,079
Current period gross charge-offs			$	—		$	40		$	—		$	—		$	—		$	—		$	—		$	40

Construction real estate: Commercial
Risk rating
Pass			$	98,732		$	87,482		$	38,473		$	2,692		$	3,121		$	2,888		$	17,748		$	251,136
Special Mention			—			—			367			—			—			—			—			367
Substandard			—			593			—			24			—			—			—			617
Doubtful			—			—			—			—			—			—			—			—
Total			$	98,732		$	88,075		$	38,840		$	2,716		$	3,121		$	2,888		$	17,748		$	252,120
Current period gross charge-offs			$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

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September 30, 2024			Term Loans Amortized Cost Basis by Origination Year
(In thousands)			2024			2023			2022			2021			2020			Prior			Revolving Loans Amortized Cost Basis			Total
Residential Real Estate: Commercial
Risk rating
Pass			$	82,553		$	114,783		$	91,862		$	96,814		$	106,212		$	101,169		$	23,194		$	616,587
Special Mention			508			546			1,000			510			1,762			1,469			659			6,454
Substandard			562			93			861			331			1,172			1,053			384			4,456
Doubtful			—			—			183			—			—			—			—			183
Total			$	83,623		$	115,422		$	93,906		$	97,655		$	109,146		$	103,691		$	24,237		$	627,680
Current period gross charge-offs			$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

Leases
Risk rating
Pass			$	14,134		$	6,447		$	4,097		$	1,584		$	1,055		$	492		$	—		$	27,809
Special Mention			—			48			270			—			153			—			—			471
Substandard			21			—			—			—			—			—			—			21
Doubtful			—			—			—			—			—			—			—			—
Total			$	14,155		$	6,495		$	4,367		$	1,584		$	1,208		$	492		$	—		$	28,301
Current period gross charge-offs			$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

Total Commercial Loans
Risk rating
Pass			$	578,905		$	634,022		$	553,244		$	498,435		$	474,749		$	648,822		$	649,402		$	4,037,579
Special Mention			3,800			3,464			12,462			5,153			8,305			9,565			28,159			70,908
Substandard			2,869			5,984			3,204			3,938			3,593			13,729			19,271			52,588
Doubtful			298			642			721			792			1,786			49			339			4,627
Total			$	585,872		$	644,112		$	569,631		$	508,318		$	488,433		$	672,165		$	697,171		$	4,165,702
Current period gross charge-offs			$	—		$	91		$	11		$	5		$	18		$	2,869		$	50		$	3,044

(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.

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December 31, 2023			Term Loans Amortized Cost Basis by Origination Year
(In thousands)			2023			2022			2021			2020			2019			Prior			Revolving Loans Amortized Cost Basis			Total
Commercial, financial and agricultural: Commercial, financial and agricultural (1)
Risk rating
Pass			$	204,601		$	149,386		$	118,992		$	93,495		$	38,205		$	45,814		$	600,301		$	1,250,794
Special Mention			530			1,549			435			128			252			2			16,260			19,156
Substandard			149			894			1,041			1,133			143			582			7,427			11,369
Doubtful			—			—			39			1,771			96			7,848			952			10,706
Total			$	205,280		$	151,829		$	120,507		$	96,527		$	38,696		$	54,246		$	624,940		$	1,292,025
Current period gross charge-offs			$	—		$	13		$	73		$	—		$	5		$	52		$	19		$	162

Commercial, financial and agricultural: PPP
Risk rating
Pass			$	—		$	—		$	925		$	1,191		$	—		$	—		$	—		$	2,116
Special Mention			—			—			—			—			—			—			—			—
Substandard			—			—			—			—			—			—			—			—
Doubtful			—			—			—			—			—			—			—			—
Total			$	—		$	—		$	925		$	1,191		$	—		$	—		$	—		$	2,116
Current period gross charge-offs			$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

Commercial real estate (1)
Risk rating
Pass			$	278,922		$	322,096		$	334,452		$	318,473		$	204,740		$	347,389		$	17,174		$	1,823,246
Special Mention			2,092			2,951			4,637			7,629			—			13,043			98			30,450
Substandard			1,828			1,589			2,509			2,668			3,406			7,495			1,584			21,079
Doubtful			889			—			—			—			—			329			—			1,218
Total			$	283,731		$	326,636		$	341,598		$	328,770		$	208,146		$	368,256		$	18,856		$	1,875,993
Current period gross charge-offs			$	224		$	—		$	—		$	—		$	—		$	530		$	—		$	754

Construction real estate: Commercial
Risk rating
Pass			$	89,283		$	77,988		$	7,480		$	18,195		$	1,090		$	2,718		$	11,342		$	208,096
Special Mention			—			—			—			—			—			—			—			—
Substandard			831			236			63			—			—			—			—			1,130
Doubtful			—			—			—			—			—			—			—			—
Total			$	90,114		$	78,224		$	7,543		$	18,195		$	1,090		$	2,718		$	11,342		$	209,226
Current period gross charge-offs			$	546		$	—		$	—		$	—		$	—		$	—		$	—		$	546

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December 31, 2023			Term Loans Amortized Cost Basis by Origination Year
(In thousands)			2022			2021			2020			2019			2018			Prior			Revolving Loans Amortized Cost Basis			Total

Residential Real Estate: Commercial
Risk rating
Pass			$	128,589		$	104,008		$	105,225		$	117,442		$	49,797		$	71,489		$	23,535		$	600,085
Special Mention			—			333			623			1,964			914			1,578			—			5,412
Substandard			195			560			159			1,192			16			1,601			190			3,913
Doubtful			—			—			—			—			—			—			—			—
Total			$	128,784		$	104,901		$	106,007		$	120,598		$	50,727		$	74,668		$	23,725		$	609,410
Current period gross charge-offs			$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

Leases
Risk rating
Pass			$	11,440		$	4,404		$	2,197		$	1,941		$	356		$	623		$	—		$	20,961
Special Mention			731			1,564			391			297			10			2			—			2,995
Substandard			—			—			—			—			67			6			—			73
Doubtful			—			—			—			—			—			—			—			—
Total			$	12,171		$	5,968		$	2,588		$	2,238		$	433		$	631		$	—		$	24,029
Current period gross charge-offs			$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

Total Commercial Loans
Risk rating
Pass			$	712,835		$	657,882		$	569,271		$	550,737		$	294,188		$	468,033		$	652,352		$	3,905,298
Special Mention			3,353			6,397			6,086			10,018			1,176			14,625			16,358			58,013
Substandard			3,003			3,279			3,772			4,993			3,632			9,684			9,201			37,564
Doubtful			889			—			39			1,771			96			8,177			952			11,924
Total			$	720,080		$	667,558		$	579,168		$	567,519		$	299,092		$	500,519		$	678,863		$	4,012,799
Current period gross charge-offs			$	770		$	13		$	73		$	—		$	5		$	582		$	19		$	1,462

(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.

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Park considers the performance of the loan portfolio and its impact on the ACL. 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 and gross charge offs for the nine months ended September 30, 2024 and for the year ended December 31, 2023. Nonperforming loans consisted of nonaccrual loans and loans past due 90 days or more and still accruing.

September 30, 2024			Term Loans Amortized Cost Basis by Origination Year
(In thousands)			2024			2023			2022			2021			2020			Prior			Revolving Loans Amortized Cost Basis			Total
Commercial, financial and agricultural: Overdrafts
Performing			$	1,012		$	—		$	—		$	—		$	—		$	—		$	—		$	1,012
Nonperforming			—			—			—			—			—			—			—			—
Total			$	1,012		$	—		$	—		$	—		$	—		$	—		$	—		$	1,012
Current period gross charge-offs			$	653		$	—		$	—		$	—		$	—		$	—		$	—		$	653

Construction Real Estate: Retail
Performing			$	31,232		$	42,301		$	8,920		$	6,480		$	3,683		$	5,670		$	458		$	98,744
Nonperforming			—			—			—			—			23			—			—			23
Total			$	31,232		$	42,301		$	8,920		$	6,480		$	3,706		$	5,670		$	458		$	98,767
Current period gross charge-offs			$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

Residential Real Estate: Mortgage
Performing			$	150,381		$	224,396		$	255,824		$	199,200		$	161,092		$	316,506		$	—		$	1,307,399
Nonperforming			—			546			1,340			581			1,525			7,779			—			11,771
Total			$	150,381		$	224,942		$	257,164		$	199,781		$	162,617		$	324,285		$	—		$	1,319,170
Current period gross charge-offs			$	—		$	—		$	—		$	—		$	—		$	22		$	—		$	22

Residential Real Estate: HELOC
Performing			$	13		$	145		$	425		$	346		$	59		$	1,173		$	194,013		$	196,174
Nonperforming			—			39			14			57			—			616			108			834
Total			$	13		$	184		$	439		$	403		$	59		$	1,789		$	194,121		$	197,008
Current period gross charge-offs			$	—		$	—		$	—		$	—		$	—		$	9		$	—		$	9

Residential Real Estate: Installment
Performing			$	1,102		$	1,848		$	140		$	—		$	—		$	3,029		$	—		$	6,119
Nonperforming			—			—			—			—			2			31			—			33
Total			$	1,102		$	1,848		$	140		$	—		$	2		$	3,060		$	—		$	6,152
Current period gross charge-offs			$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

Consumer: Consumer
Performing			$	493,184		$	499,892		$	470,356		$	229,546		$	144,550		$	94,407		$	6,034		$	1,937,969
Nonperforming			136			870			1,005			476			262			504			3			3,256
Total			$	493,320		$	500,762		$	471,361		$	230,022		$	144,812		$	94,911		$	6,037		$	1,941,225
Current period gross charge-offs			$	451		$	2,315		$	3,149		$	1,922		$	656		$	617		$	2		$	9,112

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September 30, 2024			Term Loans Amortized Cost Basis by Origination Year
(In thousands)			2024			2023			2022			2021			2020			Prior			Revolving Loans Amortized Cost Basis			Total
Consumer: Check loans
Performing			$	—		$	—		$	—		$	—		$	—		$	—		$	1,948		$	1,948
Nonperforming			—			—			—			—			—			—			—			—
Total			$	—		$	—		$	—		$	—		$	—		$	—		$	1,948		$	1,948
Current period gross charge-offs			$	—		$	—		$	—		$	—		$	—		$	—		$	51		$	51

Total Consumer Loans
Performing			$	676,924		$	768,582		$	735,665		$	435,572		$	309,384		$	420,785		$	202,453		$	3,549,365
Nonperforming			136			1,455			2,359			1,114			1,812			8,930			111			15,917
Total			$	677,060		$	770,037		$	738,024		$	436,686		$	311,196		$	429,715		$	202,564		$	3,565,282
Current period gross charge-offs			$	1,104		$	2,315		$	3,149		$	1,922		$	656		$	648		$	53		$	9,847

December 31, 2023			Term Loans Amortized Cost Basis by Origination Year
(In thousands)			2023			2022			2021			2020			2019			Prior			Revolving Loans Amortized Cost Basis			Total
Commercial, financial and agricultural: Overdrafts
Performing			$	1,499		$	—		$	—		$	—		$	—		$	—		$	—		$	1,499
Nonperforming			—			—			—			—			—			—			—			—
Total			1,499			$	—		$	—		$	—		$	—		$	—		$	—		$	1,499
Current period gross charge-offs			$	1,064		$	—		$	—		$	—		$	—		$	—		$	—		$	1,064

Construction Real Estate: Retail
Performing			$	52,904		$	24,219		$	7,709		$	4,251		$	3,604		$	2,891		$	269		$	95,847
Nonperforming			—			—			—			26			—			—			—			26
Total			$	52,904		$	24,219		$	7,709		$	4,277		$	3,604		$	2,891		$	269		$	95,873
Current period gross charge-offs			$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

Residential Real Estate: Mortgage
Performing			$	209,315		$	259,076		$	218,417		$	177,518		$	80,627		$	282,916		$	—		$	1,227,869
Nonperforming			197			1,144			1,172			406			581			8,492			—			11,992
Total			$	209,512		$	260,220		$	219,589		$	177,924		$	81,208		$	291,408		$	—		$	1,239,861
Current period gross charge-offs			$	—		$	—		$	—		$	—		$	—		$	35		$	—		$	35

Residential Real Estate: HELOC
Performing			$	99		$	205		$	379		$	98		$	221		$	1,838		$	170,694		$	173,534
Nonperforming			—			—			—			—			32			603			180			815
Total			$	99		$	205		$	379		$	98		$	253		$	2,441		$	170,874		$	174,349
Current period gross charge-offs			$	—		$	—		$	—		$	—		$	—		$	9		$	—		$	9

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December 31, 2023			Term Loans Amortized Cost Basis by Origination Year
(In thousands)			2023			2022			2021			2020			2019			Prior			Revolving Loans Amortized Cost Basis			Total
Residential Real Estate: Installment
Performing			$	2,225		$	162		$	—		$	3		$	144		$	3,354		$	—		$	5,888
Nonperforming			—			—			—			—			—			16			—			16
Total			$	2,225		$	162		$	—		$	3		$	144		$	3,370		$	—		$	5,904
Current period gross charge-offs			$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

Consumer: Consumer
Performing			$	627,985		$	613,019		$	319,161		$	214,714		$	81,446		$	65,955		$	18,605		$	1,940,885
Nonperforming			395			891			654			435			216			389			4			2,984
Total			$	628,380		$	613,910		$	319,815		$	215,149		$	81,662		$	66,344		$	18,609		$	1,943,869
Current period gross charge-offs			$	560		$	3,517		$	2,371		$	763		$	545		$	480		$	6		$	8,242

Consumer: Check loans
Performing			$	—		$	—		$	—		$	—		$	—		$	—		$	2,067		$	2,067
Nonperforming			—			—			—			—			—			—			—			—
Total			$	—		$	—		$	—		$	—		$	—		$	—		$	2,067		$	2,067
Current period gross charge-offs			$	—		$	—		$	—		$	—		$	—		$	—		$	51		$	51

Total Consumer Loans
Performing			$	894,027		$	896,681		$	545,666		$	396,584		$	166,042		$	356,954		$	191,635		$	3,447,589
Nonperforming			592			2,035			1,826			867			829			9,500			184			15,833
Total			$	894,619		$	898,716		$	547,492		$	397,451		$	166,871		$	366,454		$	191,819		$	3,463,422
Current period gross charge-offs			$	1,624		$	3,517		$	2,371		$	763		$	545		$	524		$	57		$	9,401

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Loans and Leases Acquired with Deteriorated Credit Quality

PCD loans are individually evaluated on a quarterly basis to determine if a reserve is necessary. At September 30, 2024 and at December 31, 2023, there was no ACL on PCD loans. The carrying amount of accruing loans acquired with deteriorated credit quality at September 30, 2024 and at December 31, 2023 was $2.2 million and $2.8 million, respectively. The carrying amount of nonaccrual loans acquired with deteriorated credit quality was $548,000 and $534,000 at September 30, 2024 and at December 31, 2023, respectively.

Modifications to Borrowers Experiencing Financial Difficulty

Management identifies loans as modifications to borrowers experiencing financial difficulty when a borrower is experiencing financial difficulties and Park has altered the cash flow of the loan 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. Park modifies loans to borrowers experiencing financial difficulty by providing principal forgiveness, a term extension, an other-than-insignificant payment delay or an interest rate reduction.

In some cases, Park provides multiple types of modifications on one loan. Typically, one type of modification, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another modification, such as principal forgiveness, may be granted. For the loans included in the combination columns below, multiple types of modifications have been made on the same loan within the current reporting period. The combination is at least two of the following: a term extension, principal forgiveness, an other-than-insignificant payment delay and/or an interest rate reduction.

The starting point for the estimate of the ACL is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. As a result, the effect of most modifications made to borrowers experiencing financial difficulty is already included in the ACL and a change to the ACL is generally not recorded upon modification. When principal forgiveness is provided, the amount of forgiveness is charged off against the ACL.

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The following tables present the amortized cost basis of loans at September 30, 2024 and 2023 that were both experiencing financial difficulty and modified during the three months and the nine months ended September 30, 2024 and 2023 by class and type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial difficulty as compared to the amortized cost basis of each class of financing receivable is also presented below.

						Three Months Ended September 30, 2024
(Dollars in thousands)						Principal Forgiveness						Payment Delay						Term Extension						Interest Rate Reduction						Combination Term Extension and Interest Rate Reduction						Other						Total						Percent of Total Class of Financing Receivable
Commercial, financial and agricultural:
Commercial, financial and agricultural						$	—					$	—					$	6,137					$	416					$	—					$	—					$	6,553					0.50		%
PPP loans						—						—						—						—						—						—						—						—		%
Overdrafts						—						—						—						—						—						—						—						—		%
Commercial real estate						—						—						1,750						128						15						—						1,893						0.10		%
Construction real estate:
Commercial						—						—						—						—						—						—						—						—		%
Retail						—						—						—						—						—						—						—						—		%
Residential real estate:
Commercial						—						—						278						—						—						—						278						0.04		%
Mortgage						—						—						175						89						81						—						345						0.03		%
HELOC						—						—						—						—						—						—						—						—		%
Installment						—						—						104						—						—						—						104						1.69		%
Consumer:
Consumer						—						—						—						11						—						—						11						—		%
Check loans						—						—						—						—						—						—						—						—		%
Leases						—						—						—						—						—						—						—						—		%
Total						$	—					$	—					$	8,444					$	644					$	96					$	—					$	9,184					0.12		%

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						Three Months Ended September 30, 2023
(Dollars in thousands)						Principal Forgiveness						Payment Delay						Term Extension						Interest Rate Reduction						Combination Term Extension and Interest Rate Reduction						Other						Total						Percent of Total Class of Financing Receivable
Commercial, financial and agricultural:
Commercial, financial and agricultural						$	—					$	—					$	3,870					$	387					$	618					$	—					$	4,875					0.38		%
PPP loans						—						—						—						—						—						—						—						—		%
Overdrafts						—						—						—						—						—						—						—						—		%
Commercial real estate						—						—						877						—						—						—						877						0.05		%
Construction real estate:
Commercial						—						—						865						—						—						—						865						0.47		%
Retail						—						—						—						—						—						—						—						—		%
Residential real estate:
Commercial						—						—						—						—						147						—						147						0.03		%
Mortgage						—						—						—						—						95						—						95						0.01		%
HELOC						—						—						—						—						—						—						—						—		%
Installment						—						—						174						—						121						—						295						5.57		%
Consumer:
Consumer						—						—						—						22						—						—						22						—		%
Check loans						—						—						—						—						—						—						—						—		%
Leases						—						—						—						—						—						—						—						—		%
Total						$	—					$	—					$	5,786					$	409					$	981					$	—					$	7,176					0.10		%

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						Nine Months Ended September 30, 2024
(Dollars in thousands)						Principal Forgiveness						Payment Delay						Term Extension						Interest Rate Reduction						Combination Term Extension and Interest Rate Reduction						Other						Total						Percent of Total Class of Financing Receivable
Commercial, financial and agricultural:
Commercial, financial and agricultural						$	—					$	54					$	16,320					$	423					$	—					$	—					$	16,797					1.29		%
PPP loans						—						—						—						—						—						—						—						—		%
Overdrafts						—						—						—						—						—						—						—						—		%
Commercial real estate						—						160						6,141						456						135						—						6,892						0.35		%
Construction real estate:
Commercial						—						—						—						—						—						—						—						—		%
Retail						—						—						—						—						—						—						—						—		%
Residential real estate:
Commercial						—						—						819						—						238						—						1,057						0.17		%
Mortgage						—						—						268						89						81						—						438						0.03		%
HELOC						—						—						—						—						—						—						—						—		%
Installment						—						—						208						—						75						—						283						4.60		%
Consumer:
Consumer						—						—						—						15						—						—						15						—		%
Check loans						—						—						—						—						—						—						—						—		%
Leases						—						—						—						—						—						—						—						—		%
Total						$	—					$	214					$	23,756					$	983					$	529					$	—					$	25,482					0.33		%

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						Nine Months Ended September 30, 2023
(Dollars in thousands)						Principal Forgiveness						Payment Delay						Term Extension						Interest Rate Reduction						Combination Term Extension and Interest Rate Reduction						Other						Total						Percent of Total Class of Financing Receivable
Commercial, financial and agricultural:
Commercial, financial and agricultural						$	—					$	—					$	11,147					$	387					$	617					$	11					$	12,162					0.95		%
PPP loans						—						—						—						—						—						—						—						—		%
Overdrafts						—						—						—						—						—						—						—						—		%
Commercial real estate						—						—						1,877						—						—						—						1,877						0.10		%
Construction real estate:
Commercial						—						—						865						—						—						—						865						0.47		%
Retail						—						—						—						—						—						—						—						—		%
Residential real estate:
Commercial						—						—						11						—						147						—						158						0.03		%
Mortgage						—						—						—						—						229						—						229						0.02		%
HELOC						—						—						—						—						—						—						—						—		%
Installment						—						—						178						—						199						—						377						7.12		%
Consumer:
Consumer						—						—						—						39						—						—						39						—		%
Check loans						—						—						—						—						—						—						—						—		%
Leases						—						—						—						—						—						—						—						—		%
Total						$	—					$	—					$	14,078					$	426					$	1,192					$	11					$	15,707					0.21		%

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At September 30, 2024, Park had commitments to lend $2.8 million related to loans which were both experiencing financial difficulty and modified during the nine months ended September 30, 2024.

The following tables present the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three months and the nine months ended September 30, 2024 and 2023:

						Three Months Ended September 30, 2024
(Dollars in thousands)						Principal Forgiveness						Weighted Average Interest Rate Reduction						Weighted Average Term Extension (years)						Weighted Average Payment Delay (years)
Commercial, financial and agricultural:
Commercial, financial and agricultural						$	—					(2.68)		%				0.5						0.0
PPP loans						—						—		%				0.0						0.0
Overdrafts						—						—		%				0.0						0.0
Commercial real estate						—						(1.01)		%				5.6						0.0
Construction real estate:
Commercial						—						—		%				0.0						0.0
Retail						—						—		%				0.0						0.0
Residential real estate:
Commercial						—						—		%				0.3						0.0
Mortgage						—						(2.30)		%				6.5						0.0
HELOC						—						—		%				0.0						0.0
Installment						—						—		%				7.6						0.0
Consumer:
Consumer						—						(2.79)		%				0.0						0.0
Check loans						—						—		%				0.0						0.0
Leases						—						—		%				0.0						0.0
Total						$	—					(2.27)		%				1.8						0.0

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						Three Months Ended September 30, 2023
(Dollars in thousands)						Principal Forgiveness						Weighted Average Interest Rate Reduction						Weighted Average Term Extension (years)						Weighted Average Payment Delay (years)
Commercial, financial and agricultural:
Commercial, financial and agricultural						$	—					(1.42)		%				0.5						0.0
PPP loans						—						—		%				0.0						0.0
Overdrafts						—						—		%				0.0						0.0
Commercial real estate						—						—		%				2.0						0.0
Construction real estate:
Commercial						—						—		%				1.6						0.0
Retail						—						—		%				0.0						0.0
Residential real estate:
Commercial						—						(2.75)		%				1.1						0.0
Mortgage						—						(4.00)		%				0.8						0.0
HELOC						—						—		%				0.0						0.0
Installment						—						(0.89)		%				13.6						0.0
Consumer:
Consumer						—						(1.49)		%				0.0						0.0
Check loans						—						—		%				0.0						0.0
Leases						—						—		%				0.0						0.0
Total						$	—					(1.69)		%				1.4						0.0

						Nine Months Ended September 30, 2024
(Dollars in thousands)						Principal Forgiveness						Weighted Average Interest Rate Reduction						Weighted Average Term Extension (years)						Weighted Average Payment Delay (years)
Commercial, financial and agricultural:
Commercial, financial and agricultural						$	—					(2.65)		%				0.4						0.4
PPP loans						—						—		%				0.0						0.0
Overdrafts						—						—		%				0.0						0.0
Commercial real estate						—						(1.68)		%				3.7						0.4
Construction real estate:
Commercial						—						—		%				0.0						0.0
Retail						—						—		%				0.0						0.0
Residential real estate:
Commercial						—						(1.00)		%				2.3						0.0
Mortgage						—						(2.30)		%				5.9						0.0
HELOC						—						—		%				0.0						0.0
Installment						—						(1.22)		%				8.9						0.0
Consumer:
Consumer						—						(4.18)		%				0.0						0.0
Check loans						—						—		%				0.0						0.0
Leases						—						—		%				0.0						0.0
Total						$	—					(1.92)		%				1.5						0.4

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						Nine Months Ended September 30, 2023
(Dollars in thousands)						Principal Forgiveness						Weighted Average Interest Rate Reduction						Weighted Average Term Extension (years)						Weighted Average Payment Delay (years)
Commercial, financial and agricultural:
Commercial, financial and agricultural						$	—					(1.42)		%				0.6						0.0
PPP loans						—						—		%				0.0						0.0
Overdrafts						—						—		%				0.0						0.0
Commercial real estate						—						—		%				3.1						0.0
Construction real estate:
Commercial						—						—		%				1.6						0.0
Retail						—						—		%				0.0						0.0
Residential real estate:
Commercial						—						(2.75)		%				1.4						0.0
Mortgage						—						(2.76)		%				0.6						0.0
HELOC						—						—		%				0.0						0.0
Installment						—						(1.21)		%				12.9						0.0
Consumer:
Consumer						—						(2.33)		%				0.0						0.0
Check loans						—						—		%				0.0						0.0
Leases						—						—		%				0.0						0.0
Total						$	—					(1.73)		%				1.3						0.0

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Park closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of Park's modification efforts. The following table provides the performance of loans as of the period end date, of modifications made to borrowers experiencing financial difficulty during the twelve months preceding September 30, 2024:

			Twelve Months Ended September 30, 2024
(Dollars in thousands)						Current						30-59 days past due						60-89 days past due						90 days or more past due						Total
Commercial, financial and agricultural:
Commercial, financial and agricultural						$	10,939					$	—					$	6					$	7,624					$	18,569
PPP loans						—						—						—						—						—
Overdrafts						—						—						—						—						—
Commercial real estate						7,266						—						—						—						7,266
Construction real estate:																														—
Commercial						—						—						—						—						—
Retail						—						—						—						—						—
Residential real estate:																														—
Commercial						1,057						—						—						—						1,057
Mortgage						547						—						—						89						636
HELOC						—						—						—						—						—
Installment						623						—						—						19						642
Consumer:																														—
Consumer						15						—						—						—						15
Check loans						—						—						—						—						—
Leases						—						—						—						—						—
Total						$	20,447					$	—					$	6					$	7,732					$	28,185

There were $11,000 in loans modified to borrowers experiencing financial difficulty that had been modified during the nine months ended September 30, 2023 that were 30-59 days past due as of September 30, 2023 in the commercial, financial, and agricultural loan portfolio segment.

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The following tables present the amortized cost basis of loans that had a payment default subsequent to modification during the three and nine months ended September 30, 2024 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty. For this table, a loan is considered to be in default when it becomes 30 days contractually past due under the modified terms:

			Three Months Ended September 30, 2024
			Term Extension						Interest Rate Reduction						Combination Term Extension and Interest Rate Reduction						Payment Delay
Commercial, financial and agricultural:
Commercial, financial and agricultural			$	7,577					$	—					$	—					$	54
PPP loans			—						—						—						—
Overdrafts			—						—						—						—
Commercial real estate			—						—						—						—
Construction real estate:
Commercial			—						—						—						—
Retail			—						—						—						—
Residential real estate:
Commercial			—						—						—						—
Mortgage			—						89						70						—
HELOC			—						—						—						—
Installment			19						—						—						—
Consumer:
Consumer			—						—						—						—
Check loans			—						—						—						—
Leases			—						—						—						—
Total loans			$	7,596					$	89					$	70					$	54

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			Nine Months Ended September 30, 2024
			Term Extension						Interest Rate Reduction						Combination Term Extension and Interest Rate Reduction						Payment Delay
Commercial, financial and agricultural:
Commercial, financial and agricultural			$	10,164					$	—					$	—					$	54
PPP loans			—						—						—						—
Overdrafts			—						—						—						—
Commercial real estate			—						—						—						—
Construction real estate:
Commercial			—						—						—						—
Retail			—						—						—						—
Residential real estate:
Commercial			—						—						—						—
Mortgage			48						89						70						—
HELOC			—						—						—						—
Installment			19						—						—						—
Consumer:
Consumer			—						—						—						—
Check loans			—						—						—						—
Leases			—						—						—						—
Total loans			$	10,231					$	89					$	70					$	54

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The following table presents the amortized cost basis of loans that had a payment default during the three months ended September 30, 2023 and were modified in the nine months prior to that default to borrowers experiencing financial difficulty. For this table, a loan is considered to be in default when it becomes 30 days contractually past due under the modified terms:

			Three Months Ended September 30, 2023
			Term Extension						Interest Rate Reduction						Combination Term Extension and Interest Rate Reduction						Other
Commercial, financial and agricultural:
Commercial, financial and agricultural			$	—					$	—					$	—					$	11
PPP loans			—						—						—						—
Overdrafts			—						—						—						—
Commercial real estate			—						—						—						—
Construction real estate:
Commercial			—						—						—						—
Retail			—						—						—						—
Residential real estate:
Commercial			—						—						—						—
Mortgage			—						—						—						—
HELOC			—						—						—						—
Installment			—						—						—						—
Consumer:
Consumer			—						—						—						—
Check loans			—						—						—						—
Leases			—						—						—						—
Total loans			$	—					$	—					$	—					$	11

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The following table presents the amortized cost basis of loans that had a payment default during the nine months ended September 30, 2023 and were modified in the nine months prior to that default to borrowers experiencing financial difficulty. For this table, a loan is considered to be in default when it becomes 30 days contractually past due under the modified terms:

			Nine Months Ended September 30, 2023
			Term Extension						Interest Rate Reduction						Combination Term Extension and Interest Rate Reduction						Other
Commercial, financial and agricultural:
Commercial, financial and agricultural			$	—					$	—					$	—					$	11
PPP loans			—						—						—						—
Overdrafts			—						—						—						—
Commercial real estate			—						—						—						—
Construction real estate:
Commercial			—						—						—						—
Retail			—						—						—						—
Residential real estate:
Commercial			—						—						147						—
Mortgage			—						—						134						—
HELOC			—						—						—						—
Installment			—						—						—						—
Consumer:
Consumer			—						4						—						—
Check loans			—						—						—						—
Leases			—						—						—						—
Total loans			$	—					$	4					$	281					$	11

Upon the determination that a modified loan (or a portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged-off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL is adjusted by the same amounts.

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.

During the first quarter of 2023, Park adopted ASU 2022-02. This standard was adopted using a modified retrospective transition method on January 1, 2023, resulting in a $383,000 increase to the ACL. A cumulative effect adjustment resulting in a $303,000 decrease to retained earnings and an $80,000 increase to deferred tax assets was also recorded as a result of the adoption of ASU 2022-02.

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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 updated the LDA in the fourth quarter of 2023. Per review of the correlation of data and subsequent results, management refined the peer group in the LDA and maintained the exclusion of periods impacted by COVID-19. Management reviewed and considered the impact of the inclusion of periods impacted by COVID-19 as part of the LDA update, but the correlation of the inclusion of COVID-19 periods was lower.

•Probability of default – PD is the probability that an asset will be in default within a given time frame. Park has defined default to be when a charge-off has occurred, a loan is placed on 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, the LDA is utilized to estimate PDs. In all cases, the LDA is then utilized to determine the long-term historical average, which is reached over the reversion period.

•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. In all cases, the Frye Jacobs method is utilized to calculate LGDs during the reversion period and long-term historical average.

•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 2023.

•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. The scenario weighting is evaluated by management on a quarterly basis.

◦As of December 31, 2023, the "most likely" scenario forecasted Ohio unemployment between 4.05% and 4.66% during the next four quarters. In determining the appropriate weighting of scenarios at December 31, 2023, management considered the range of forecasted unemployment as well as a number of economic indicators. The continued elevated levels of inflation, volatile levels of consumer confidence, continued elevated interest rates, financial system stress and geopolitical conflict (including the conflicts between Russia and Ukraine and between Israel and Hamas) and stress in the commercial real estate sector, continued to cause uncertainty as to the overall economic environment. Considering these factors, management determined it was appropriate to maintain the existing weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at December 31, 2023.

◦As of March 31, 2024, the "most likely" scenario forecasted Ohio unemployment between 4.31% and 4.79% during the next four quarters. In determining the appropriate weighting of scenarios at March 31, 2024, management considered the range of forecasted unemployment as well as a number of economic indicators. The continued elevated levels of inflation, volatile levels of consumer confidence, continued elevated interest rates, financial system stress and geopolitical conflict (including the conflicts between Russia and Ukraine and between Israel and Hamas) and stress in the commercial real estate sector, continued to cause uncertainty as to the overall economic environment. Considering these factors, management determined it was appropriate to maintain the existing weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at March 31, 2024.

◦As of June 30, 2024, the "most likely" scenario forecasted Ohio unemployment between 4.33% and 4.56% during the next four quarters. In determining the appropriate weighting of scenarios at June 30, 2024, management considered the range of forecasted unemployment as well as a number of economic indicators. The continued elevated levels of inflation, volatile levels of consumer confidence, continued elevated interest rates, financial system stress and geopolitical conflict (including the conflicts between Russia and Ukraine and between Israel and Hamas) and stress in the commercial real estate sector, continued to cause uncertainty as to the overall economic environment. Considering these factors, management determined it was appropriate to maintain the existing weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at June 30, 2024.

◦As of September 30, 2024, the "most likely" scenario forecasted Ohio unemployment between 4.64% and 4.70% during the next four quarters. In determining the appropriate weighting of scenarios at September 30,

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2024, management considered the range of forecasted unemployment as well as a number of economic indicators. The low and volatile levels of consumer confidence, increased unemployment rates, the impact of elevated inflation for several years, the interest rate environment, financial system stress, and geopolitical conflict (including the conflicts between Russia and Ukraine and between Israel and Hamas) and stress in the commercial real estate sector, continued to cause uncertainty as to the overall economic environment. Considering these factors, management determined it was appropriate to maintain the existing weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at September 30, 2024.

Qualitative Considerations

Park reviews various internal and external factors to consider the need for any qualitative adjustments to the quantitative model. Factors considered include the following:

•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 Park.

◦Level of and trend in loan delinquencies, troubled loans, commercial watch list loans 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, charge-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; geopolitical conflict; 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 the markets in which Park operates that affect the collectability of financial assets.

•Where the U.S. economy is within a given credit cycle.

•The extent that there is government assistance (stimulus).

Qualitative adjustments amounted to $2.1 million and $417,000 at September 30, 2024 and December 31, 2023, respectively. Qualitative adjustments at September 30, 2024 included a $1.7 million reserve related to Hurricane Helene which impacted borrowers in Park's Carolina region. This reserve considers the overall population of loans to borrowers in this area as well as industries in which commercial borrowers operate. Management will continue to evaluate potential losses as a result of Hurricane Helene as additional information becomes available

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ACL Activity

The activity in the ACL for the three-month and the nine-month periods ended September 30, 2024 and September 30, 2023 is summarized in the following tables:

			Three Months Ended September 30, 2024
(In thousands)			Commercial, financial and agricultural						Commercial real estate						Construction real estate						Residential real estate						Consumer						Leases						Total
ACL:
Beginning balance			$	16,663					$	16,855					$	5,867					$	19,450					$	27,579					$	161					$	86,575
Charge-offs			3,151						40						—						—						3,363						—						6,554
Recoveries			79						223						25						40						1,534						—						1,901
Net charge-offs/(recoveries)			$	3,072					$	(183)					$	(25)					$	(40)					$	1,829					$	—					$	4,653
Provision for credit losses			284						1,818						194						768						2,247						4						5,315
Ending balance			$	13,875					$	18,856					$	6,086					$	20,258					$	27,997					$	165					$	87,237

 

			Three Months Ended September 30, 2023
(In thousands)			Commercial, financial and agricultural						Commercial real estate						Construction real estate						Residential real estate						Consumer						Leases						Total
ACL:
Beginning balance			$	16,278					$	19,141					$	4,886					$	18,419					$	28,370					$	112					$	87,206
Charge-offs			218						—						—						1						2,074						—						2,293
Recoveries			79						3						40						8						1,139						—						1,269
Net charge-offs/(recoveries)			$	139					$	(3)					$	(40)					$	(7)					$	935					$	—					$	1,024
(Recovery of) provision for credit losses			(1,171)						(526)						373						(1,437)						1,185						(4)						(1,580)
Ending balance			$	14,968					$	18,618					$	5,299					$	16,989					$	28,620					$	108					$	84,602

			Nine Months Ended September 30, 2024
(In thousands)			Commercial, financial and agricultural						Commercial real estate						Construction real estate						Residential real estate						Consumer						Leases						Total
ACL:
Beginning balance			$	15,496					$	16,374					$	5,227					$	18,818					$	27,713					$	117					$	83,745
Charge-offs			3,657						40						—						31						9,163						—						$	12,891
Recoveries			340						250						1,058						307						3,820						—						5,775
Net charge-offs/(recoveries)			$	3,317					$	(210)					$	(1,058)					$	(276)					$	5,343					$	—					$	7,116
Provision for (recovery of) credit losses			1,696						2,272						(199)						1,164						5,627						48						10,608
Ending balance			$	13,875					$	18,856					$	6,086					$	20,258					$	27,997					$	165					$	87,237

			Nine Months Ended September 30, 2023
(In thousands)			Commercial, financial and agricultural						Commercial real estate						Construction real estate						Residential real estate						Consumer						Leases						Total
ACL:
Beginning balance			$	16,987					$	17,829					$	5,550					$	16,831					$	28,021					$	161					$	85,379
Impact of Adoption of ASU 2022-02			222						181						—						(20)						—						—						$	383
Charge-offs			755						530						—						44						5,884						—						$	7,213
Recoveries			209						235						548						479						3,487						—						4,958
Net charge-offs/(recoveries)			$	546					$	295					$	(548)					$	(435)					$	2,397					$	—					$	2,255
(Recovery of) provision for credit losses			(1,695)						903						(799)						(257)						2,996						(53)						1,095
Ending balance			$	14,968					$	18,618					$	5,299					$	16,989					$	28,620					$	108					$	84,602

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ACL Summary

Loans collectively evaluated for impairment in the following tables include all performing loans at September 30, 2024 and at December 31, 2023, 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 internally classified commercial nonaccrual loans which are individually 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 2023 Form 10-K).

The composition of the ACL at September 30, 2024 and at December 31, 2023 was as follows:

 

			September 30, 2024
(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			$	2,476					$	13					$	—					$	—					$	—					$	—					$	2,489
Collectively evaluated for impairment			11,399						18,843						6,086						20,258						27,997						165						84,748
Accruing loans acquired with deteriorated credit quality			—						—						—						—						—						—						—
Total ending allowance balance			$	13,875					$	18,856					$	6,086					$	20,258					$	27,997					$	165					$	87,237
Loan balance:
Loans individually evaluated for impairment			$	28,258					$	21,090					$	25					$	4,179					$	—					$	21					$	53,573
Loans collectively evaluated for impairment			1,273,276						1,934,673						350,269						2,145,549						1,943,173						28,280						7,675,220
Accruing loans acquired with deteriorated credit quality			—						1,316						593						282						—						—						2,191
Total ending loan balance			$	1,301,534					$	1,957,079					$	350,887					$	2,150,010					$	1,943,173					$	28,301					$	7,730,984
ACL as a percentage of loan balance:
Loans individually evaluated for impairment			8.76		%				0.06		%				—		%				—		%				—		%				—		%				4.65		%
Loans collectively evaluated for impairment			0.90		%				0.97		%				1.74		%				0.94		%				1.44		%				0.58		%				1.10		%
Accruing loans acquired with deteriorated credit quality			—		%				—		%				—		%				—		%				—		%				—		%				—		%
Total			1.07		%				0.96		%				1.73		%				0.94		%				1.44		%				0.58		%				1.13		%

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						December 31, 2023
(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						$	4,980					$	3					$	—					$	—					$	—					$	—					$	4,983
Collectively evaluated for impairment						10,516						16,371						5,227						18,818						27,713						117						78,762
Accruing loans acquired with deteriorated credit quality						—						—						—						—						—						—						—
Total ending allowance balance						$	15,496					$	16,374					$	5,227					$	18,818					$	27,713					$	117					$	83,745
Loan balance:
Loans individually evaluated for impairment						$	21,228					$	20,740					$	504					$	2,670					$	—					$	73					$	45,215
Loans collectively evaluated for impairment						1,274,390						1,853,383						303,969						2,026,537						1,945,936						23,956						7,428,171
Accruing loans acquired with deteriorated credit quality						22						1,870						626						317						—						—						2,835
Total ending loan balance						$	1,295,640					$	1,875,993					$	305,099					$	2,029,524					$	1,945,936					$	24,029					$	7,476,221
ACL as a percentage of loan balance:
Loans individually evaluated for impairment						23.46		%				0.01		%				—		%				—		%				—		%				—		%				11.02		%
Loans collectively evaluated for impairment						0.83		%				0.88		%				1.72		%				0.93		%				1.42		%				0.49		%				1.06		%
Accruing loans acquired with deteriorated credit quality						—		%				—		%				—		%				—		%				—		%				—		%				—		%
Total						1.20		%				0.87		%				1.71		%				0.93		%				1.42		%				0.49		%				1.12		%

 

Note 7 – Loans Held For Sale

 

Mortgage loans held for sale are carried at their fair value. At September 30, 2024 and at December 31, 2023, respectively, Park had $5.0 million and $3.2 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 $4.9 million and $3.2 million at September 30, 2024 and at December 31, 2023, respectively. The gain expected upon sale was $82,000 and $53,000 at September 30, 2024 and at December 31, 2023, respectively. None of these loans were 90 days or more past due or on nonaccrual status at September 30, 2024 or at December 31, 2023.

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Note 8 – Goodwill and Other Intangible Assets

The following table shows the activity in goodwill and other intangible assets for the three-month and nine-month periods ended September 30, 2024 and 2023.

(in thousands)						Goodwill						Other intangible assets						Total
July 1, 2023						$	159,595					$	5,320					$	164,915
Amortization						—						334						334
September 30, 2023						$	159,595					$	4,986					$	164,581
July 1, 2024						$	159,595					$	4,012					$	163,607
Amortization						—						287						287
September 30, 2024						$	159,595					$	3,725					$	163,320

(in thousands)						Goodwill						Other intangible assets						Total
December 31, 2022						$	159,595					$	5,975					$	165,570
Amortization						—						989						989
September 30, 2023						$	159,595					$	4,986					$	164,581
December 31, 2023						$	159,595					$	4,652					$	164,247
Amortization						—						927						927
September 30, 2024						$	159,595					$	3,725					$	163,320

   

Park evaluates goodwill for impairment during the second quarter of each year, with financial data as of the immediately prior March 31. Based on the qualitative analysis performed as of April 1, 2024, the Company determined that goodwill for Park's reporting unit, PNB, was not impaired.

Acquired Intangible Assets

The following table shows the balance of acquired intangible assets at September 30, 2024 and at December 31, 2023:

						September 30, 2024												December 31, 2023
(in thousands)						Gross Carrying Amount						Accumulated Amortization						Gross Carrying Amount						Accumulated Amortization
Other intangible assets:
Core deposit intangible assets						$	14,456					$	10,731					$	14,456					$	9,804

Core deposit intangible assets are being amortized, on an accelerated basis, over a period of ten years. Aggregate amortization expense was $287,000 and $334,000 for the three months ended September 30, 2024 and 2023, respectively and was $927,000 and $989,000 for the nine months ended September 30, 2024 and 2023, respectively.

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Estimated amortization expense related to core deposit intangible assets for the remainder of 2024 and the next four years follows:

(in thousands)						Total
Three months ending December 31, 2024						$	287
2025						1,042
2026						887
2027						754
2028						618

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 September 30, 2024 and December 31, 2023.

(in thousands)						September 30, 2024			December 31, 2023
Affordable housing tax credit investments						$	67,287		$	62,703
Unfunded commitments						31,688			28,768

Commitments are funded when capital calls are made by the general partner. Park expects that the current commitments will be funded between the remainder of 2024 through 2039.

Park recognized amortization expense of $2.1 million for both the three months ended September 30, 2024 and 2023, and $6.4 million and $6.3 million, respectively, for the nine months ended September 30, 2024 and 2023, which were included within the provision for income taxes. Additionally, during each of the three months ended September 30, 2024 and 2023, Park recognized tax credits and other benefits from its affordable housing tax credit investments of $2.7 million and $2.6 million, respectively, and during the nine months ended September 30, 2024 and 2023, recognized $7.9 million and $7.6 million respectively, which were 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 September 30, 2024 and December 31, 2023 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)						September 30, 2024						December 31, 2023
OREO:
Commercial real estate						$	938					$	983
Construction real estate						181						—
Total OREO						$	1,119					$	983
Loans in process of foreclosure:
Residential real estate						$	2,263					$	1,957

In addition to real estate, Park may also repossess different types of collateral. At September 30, 2024 and December 31, 2023, Park had $1.2 million and $1.1 million, respectively, in other repossessed assets which are included in "Other assets" on the Consolidated Condensed Balance Sheets.

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Note 11 – Loan Servicing

 

Park serviced sold mortgage loans of $1.87 billion at September 30, 2024, $1.93 billion at December 31, 2023 and $1.96 billion at September 30, 2023. At September 30, 2024, $2.6 million of the sold mortgage loans were sold with recourse, compared to $2.9 million at December 31, 2023 and $3.0 million at September 30, 2023. Management closely monitors the delinquency rates on the mortgage loans sold with recourse. At September 30, 2024 and December 31, 2023, management had established reserves of $50,000 and $54,000, 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 September 30,												Nine Months Ended September 30,
(In thousands)						2024						2023						2024						2023
MSRs:
Carrying amount, net, beginning of period						$	14,271					$	15,237					$	14,656					$	15,792
Additions						286						169						684						437
Amortization						(494)						(462)						(1,343)						(1,366)
Change in valuation allowance						—						16						66						97
Carrying amount, net, end of period						$	14,063					$	14,960					$	14,063					$	14,960
Valuation allowance:
Beginning of period						$	28					$	101					$	94					$	182
Change in valuation allowance						—						(16)						(66)						(97)
End of period						$	28					$	85					$	28					$	85

 

Servicing fees included in "Other service income" were $1.2 million and $1.3 million for the three months ended September 30, 2024 and 2023, respectively, and were $3.7 million and $3.9 million for the nine months ended September 30, 2024 and 2023, 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 year 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 arrangements 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's operating lease ROU asset and lease liability are presented in “Operating lease ROU 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 September 30, 2024 were $16.2 million and $17.3 million, respectively. At December 31, 2023, the carrying amounts of Park's ROU asset and lease liability were $15.7 million and $16.6 million, respectively. Park's operating lease expense is recorded in "Occupancy expense" on the Company's Consolidated Condensed Statements of Income.

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Other information related to operating leases for the three-month and the nine-month periods ended September 30, 2024 and 2023 follows:

			Three Months Ended												Nine Months Ended
(in thousands)			September 30, 2024						September 30, 2023						September 30, 2024						September 30, 2023
Lease cost
Operating lease cost			$	640					$	727					$	1,880					$	2,187
Sublease income			—						(73)						(10)						(199)
Total lease cost			$	640					$	654					$	1,870					$	1,988
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases			$	573					$	890					$	1,944					$	2,734
ROU assets obtained in exchange for new operating lease liabilities			$	204					$	320					$	2,654					$	499
Reductions to ROU assets resulting from reductions to lease obligations			$	(435)					$	(753)					$	(1,530)					$	(2,307)

Park's operating leases had a weighted average remaining term of 9.8 years and 10.1 years at September 30, 2024 and at December 31, 2023, respectively. The weighted average discount rate of Park's operating leases was 3.8% and 3.5% at September 30, 2024 and at December 31, 2023, respectively.

Undiscounted cash flows included in lease liabilities have expected contractual payments as follows:

(in thousands)			September 30, 2024
Three months ending December 31, 2024 (1)			$	87
2025			2,504
2026			2,506
2027			2,389
2028			2,359
Thereafter			11,641
Total undiscounted minimum lease payments			$	21,486
Present value adjustment			(4,204)
Total lease liabilities			$	17,282

(1) Includes a tenant improvement allowance of $524,000 related to the reimbursement of leasehold expenditures.

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 customer and are accounted for as secured borrowings. Park's repurchase agreements consist of customer accounts and securities which are pledged on an individual security basis.

At September 30, 2024 and at December 31, 2023, Park's repurchase agreement borrowings totaled $87.4 million and $108.2 million, respectively. These borrowings were collateralized with U.S. Government sponsored entities' asset-backed securities with a fair value of $144.1 million and $180.8 million at September 30, 2024 and at December 31, 2023, respectively. Declines in the value of the collateral would require Park to pledge additional securities. At September 30, 2024 and at December 31, 2023, Park had $550.4 million and $847.5 million, respectively, of available unpledged securities.

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The table below shows the remaining contractual maturity of repurchase agreements by collateral pledged at September 30, 2024 and at December 31, 2023:

						September 30, 2024
(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						$	87,442					$	—					$	—					$	—					$	87,442
						December 31, 2023
(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						$	108,182					$	—					$	—					$	—					$	108,182

Note 14 - Derivatives

Park uses certain derivative financial instruments (or "derivatives") to meet the needs of Park's customers while managing the interest rate risk associated with certain transactions. Park does not use derivatives for speculative purposes. A summary of derivative financial instruments utilized by Park follows.

Interest Rate Swaps

Park utilizes interest rate swap agreements (or "interest rate swaps") 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.

In conjunction with the Carolina Alliance acquisition, Park acquired interest rate swaps related to certain commercial loans. Simultaneously with borrowers entering into interest rate swaps, Carolina Alliance entered into offsetting interest rate swaps 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 $15.8 million and $18.2 million at September 30, 2024 and at December 31, 2023, respectively.

All of the Company's interest rate swaps were determined to be fully effective during each of the three-month and the nine-month periods ended September 30, 2024 and September 30, 2023. As such, no amount of ineffectiveness has been included in net income. Therefore, the aggregate fair value of the interest rate swaps is recorded in "Other assets" and "Other liabilities" with changes in fair value recorded in "Other comprehensive income (loss)". The amount included in "Accumulated other comprehensive loss, net of tax" would be reclassified to net income should the hedges no longer be considered effective. Park expects the outstanding hedges to remain fully effective during the remaining respective terms of the interest rate swaps.

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Summary information about Park's interest rate swaps at September 30, 2024 and at December 31, 2023 follows:

						September 30, 2024						December 31, 2023
(In thousands, except weighted average data)						Loan Derivatives						Loan Derivatives
Notional amounts						$	15,824					$	18,199
Weighted average pay rates						4.498		%				4.517		%
Weighted average receive rates						4.498		%				4.517		%
Weighted average maturity (years)						5.7						6.5
Unrealized losses						$	—					$	—

The following table reflects the interest rate swaps included in the consolidated condensed balance sheets at September 30, 2024 and at December 31, 2023.

(In thousands)						September 30, 2024												December 31, 2023
						Notional Amount						Fair Value						Notional Amount						Fair Value
Included in "Other assets":
Loan derivatives - instruments associated with loans
Matched interest rate swaps with borrower						$	—					$	—					$	—					$	—
Matched interest rate swaps with counterparty						15,824						672						18,199						1,069
Total included in "Other assets"						$	15,824					$	672					$	18,199					$	1,069
Included in "Other liabilities":
Loan derivatives - instruments associated with loans
Matched interest rate swaps with borrower						$	15,824					$	(672)					$	18,199					$	(1,069)
Matched interest rate swaps with counterparty						—						—						—						—
Total included in "Other liabilities"						$	15,824					$	(672)					$	18,199					$	(1,069)

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 an 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 September 30, 2024 and at December 31, 2023, Park had $6.9 million and $4.0 million, respectively, of interest rate lock commitments. The fair value of these mortgage banking derivatives was reflected by a derivative asset of $131,000 and $87,000 at September 30, 2024 and at December 31, 2023, 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 September 30, 2024 and December 31, 2023, the fair value of the swap agreement liability of $623,000 and $123,000, respectively, represented an estimate of the exposure based upon probability-weighted potential Visa litigation losses.

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Note 15 – Accumulated Other Comprehensive Loss

Other comprehensive income (loss) components, net of tax, are shown in the following table for the three-month and the nine-month periods ended September 30, 2024 and 2023:

(in thousands)									Changes in pension plan assets and benefit obligations						Unrealized (losses) gains on debt securities AFS						Total
Beginning balance at July 1, 2024									$	1,692					$	(70,146)					$	(68,454)
			Other comprehensive income before reclassifications						17,687						20,623						38,310
			Amounts reclassified from accumulated other comprehensive loss						(4,540)						—						(4,540)
Net current period other comprehensive income									13,147						20,623						33,770
Ending balance at September 30, 2024									$	14,839					$	(49,523)					$	(34,684)
Beginning balance at July 1, 2023									$	(6,680)					$	(90,106)					$	(96,786)
			Other comprehensive loss before reclassifications						—						(19,104)						(19,104)
Net current period other comprehensive loss									—						(19,104)						(19,104)
Ending balance at September 30, 2023									$	(6,680)					$	(109,210)					$	(115,890)

(in thousands)									Changes in pension plan assets and benefit obligations						Unrealized (losses) gains on debt securities AFS						Total
Beginning balance at January 1, 2024									$	1,692					$	(67,883)					$	(66,191)
			Other comprehensive income before reclassifications						17,687						18,046						35,733
			Amounts reclassified from accumulated other comprehensive loss						(4,540)						314						(4,226)
Net current period other comprehensive income									13,147						18,360						31,507
Ending balance at September 30, 2024									$	14,839					$	(49,523)					$	(34,684)
Beginning balance at January 1, 2023									$	(6,680)					$	(95,714)					$	(102,394)
			Other comprehensive loss before reclassifications						—						(13,496)						(13,496)
Net current period other comprehensive loss									—						(13,496)						(13,496)
Ending balance at September 30, 2023									$	(6,680)					$	(109,210)					$	(115,890)

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The following table provides information concerning amounts reclassified out of accumulated other comprehensive loss for the three-month and the nine-month periods ended September 30, 2024 and 2023:

									Three Months Ended September 30,												Nine Months Ended September 30,
(In thousands)									2024						2023						2024						2023						Affected Line Item in the Consolidated Condensed Statements of Income
Change in funded status of defined benefit pension items
			Amortization of prior service costs						$	37					$	—					$	37					$	—					Other components of net periodic pension benefit income
			Gain recognition on partial settlement of vested benefits						(5,783)						—						(5,783)						—						Pension settlement gain
Income before income taxes									(5,746)						—						(5,746)						—						Income before income taxes
			Income tax effect						(1,206)						—						(1,206)						—						Income taxes
			Net of income tax						$	(4,540)					$	—					$	(4,540)					$	—					Net income
Unrealized losses on AFS debt securities
			Net loss on the sale of debt securities						$	—					$	—					$	398					$	—					Loss on the sale of debt securities, net
Loss before income taxes									—						—						398						—						Income before income taxes
			Income tax effect						—						—						84						—						Income taxes
			Net of income tax						$	—					$	—					$	314					$	—					Net income

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 and nine months ended September 30, 2024 and 2023.

 

						Three Months Ended September 30,												Nine Months Ended September 30,
(In thousands, except common share and per common share data)						2024						2023						2024						2023
Numerator:
Net income						$	38,217					$	36,917					$	112,790					$	102,234
Denominator:
Weighted-average common shares outstanding						16,151,640						16,133,310						16,139,335						16,180,261
Effect of dilutive PBRSUs and TBRSUs						112,753						84,570						92,431						80,848
Weighted-average common shares outstanding adjusted for the effect of dilutive PBRSUs and TBRSUs						16,264,393						16,217,880						16,231,766						16,261,109
Earnings per common share:
Basic earnings per common share						$	2.37					$	2.29					$	6.99					$	6.32
Diluted earnings per common share						$	2.35					$	2.28					$	6.95					$	6.29

Park awarded 59,165 PBRSUs and 54,698 PBRSUs to certain employees during the nine months ended September 30, 2024 and 2023, respectively. No PBRSUs were awarded during either of the three months ended September 30, 2024 and 2023.

Park repurchased an aggregate of 50,000 and 199,000 common shares during the three months and nine months ended September 30, 2023, respectively, to fund the PBRSUs, the TBRSUs and the common shares to be awarded to directors of Park and to directors of Park's subsidiary PNB (and its divisions) as well as pursuant to Park's previously announced stock repurchase authorizations. No common shares were repurchased during the three months or the nine months ended September 30, 2024.

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Note 17 - Share-Based Compensation

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 September 30, 2024, 240,835 common shares were available for future grants under the 2017 Employees LTIP.

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 September 30, 2024, 60,000 common shares were available for future grants under the 2017 Non-Employee Directors LTIP.

During the nine months ended September 30, 2024 and 2023, the Compensation Committee of the Board of Directors of Park granted awards of PBRSUs, under the 2017 Employees LTIP, covering an aggregate of 59,165 common shares and 54,698 common shares, respectively, to certain employees of Park and its subsidiaries. No awards were granted during either of the three months ended September 30, 2024 or 2023.

At September 30, 2024, Park reported 186,020 nonvested PBRSUs. 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. The PBRSUs are also subject to subsequent service-based vesting.

A summary of changes in the common shares subject to nonvested PBRSUs for the nine months ended September 30, 2024 follows:

			Common shares subject to PBRSUs
Nonvested at January 1, 2024			186,936
Granted			59,165
Vested			(58,056)
Forfeited			(2,025)
Adjustment for performance conditions of PBRSUs (1)			—
Nonvested at September 30, 2024 (2)			186,020

(1) The number of PBRSUs earned depends on the level of achievement with respect to certain performance criteria. Adjustment herein, if any, 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. As of September 30, 2024, an aggregate of 184,596 PBRSUs were expected to vest.

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A summary of awards vested during the three months and nine months ended September 30, 2024 and 2023 follows:

						Three Months Ended September 30,												Nine Months Ended September 30,
						2024						2023						2024						2023
PBRSUs vested						3,075						—						58,056						62,815
Common shares withheld to satisfy employee income tax withholding obligations						958						—						22,895						23,973
Net common shares issued						2,117						—						35,161						38,842

Share-based compensation expense of $1.6 million and $1.3 million was recognized for the three-month periods ended September 30, 2024 and 2023, respectively, and share-based compensation expense of $4.9 million and $5.4 million was recognized for the nine-month periods ended September 30, 2024 and 2023, respectively.

The following table details expected additional share-based compensation expense related to PBRSUs outstanding at September 30, 2024:

(In thousands)
Three months ending December 31, 2024						$	1,559
2025						5,018
2026						3,310
2027						1,383
2028						223
Total						$	11,493

Note 18 – 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 any of the three-month or the nine-month periods ended September 30, 2024 or 2023. Additionally, no contributions are expected to be made during the remainder of 2024.

 

The following table shows the components of net periodic pension benefit income:

						Three Months Ended September 30,															Nine Months Ended September 30,												Affected Line Item in the Consolidated Condensed Statements of Income
(In thousands)						2024						2023									2024						2023
Service cost						$	1,750					$	1,559								$	5,250					$	4,677					Employee benefits
Interest cost						1,719						1,631									5,157						4,893						Other components of net periodic pension benefit income
Expected return on plan assets						(3,936)						(3,536)									(11,806)						(10,608)						Other components of net periodic pension benefit income
Recognized prior service cost						13						12									37						36						Other components of net periodic pension benefit income
Pension settlement gain						(5,783)						—									(5,783)						—						Pension settlement gain
Net periodic pension benefit income						$	(6,237)					$	(334)								$	(7,145)					$	(1,002)

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During the three months and nine months ended September 30, 2024, Park recognized a $5.8 million pension settlement gain due to a combination of lump sum payouts as well as the purchase of a nonparticipating annuity contract which will provide ongoing benefits to vested participants. To calculate the gain, the PBO was remeasured as of September 30, 2024. In calculating the September 30, 2024 PBO, a discount rate of 5.17% was used which was a 3 basis point increase from the discount rate utilized to calculate the December 31, 2023 PBO. There were no changes from December 31, 2023 to the assumptions utilized for the long-term rate of return on plan assets, salaries increases, turnover rates or mortality. There was no pension settlement gain recognized during the three months or the nine months ended September 30, 2023.

Park has entered into Supplemental Executive Retirement Plan Agreements (the “SERP Agreements”) with certain key officers of Park 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 and the nine months ended September 30, 2024 and 2023 was as follows:

						Three Months Ended September 30,												Nine Months Ended September 30,												Affected Line Item in the Consolidated Condensed Statements of Income
(In thousands)						2024						2023						2024						2023
Service cost						$	216					$	234					$	1,201					$	702					Employee benefits
Interest cost						154						176						464						527						Miscellaneous expense
Total SERP expense						$	370					$	410					$	1,665					$	1,229

Note 19 – 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: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market date.

•Level 3: Significant unobservable inputs that reflect Park's own assumptions about the assumptions that market participants would use in pricing an asset or liability. 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.

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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 September 30, 2024 using:
(In thousands)						Level 1						Level 2						Level 3						Balance at September 30, 2024
Assets
Investment securities:
Obligations of U.S. Government sponsored entities						$	—					$	248					$	—					$	248
Obligations of states and political subdivisions						—						206,370						—						206,370
U.S. Government sponsored entities’ asset-backed securities						—						560,849						—						560,849
Collateralized loan obligations						—						343,729						—						343,729
Corporate debt securities						—						12,099						6,580						18,679
Equity securities						7,348						—						513						7,861
Mortgage loans held for sale						—						5,022						—						5,022
Mortgage IRLCs						—						131						—						131
Loan interest rate swaps						—						672						—						672
Liabilities
Fair value swap						$	—					$	—					$	623					$	623
Loan interest rate swaps						—						672						—						672

 

Fair Value Measurements at December 31, 2023 using:
(In thousands)						Level 1						Level 2						Level 3						Balance at December 31, 2023
Assets
Investment securities:
Obligations of states and political subdivisions						$	—					$	241,184					$	—					$	241,184
U.S. Government sponsored entities’ asset-backed securities						—						635,475						—						635,475
Collateralized loan obligations						—						438,286						—						438,286
Corporate debt securities						—						11,548						6,349						17,897
Equity securities						1,616						—						473						2,089
Mortgage loans held for sale						—						3,235						—						3,235
Mortgage IRLCs						—						87						—						87
Loan interest rate swaps						—						1,069						—						1,069
Liabilities
Fair value swap						$	—					$	—					$	123					$	123
Loan interest rate swaps						—						1,069						—						1,069

 

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The following methods and assumptions were used by the Company in determining the fair value of the financial assets and financial liabilities discussed above:

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 and is classified as Level 3.

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 DCF (Level 3).

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 following tables present a reconciliation of the beginning and ending balances of the Level 3 inputs for the three-month and the nine-month periods ended September 30, 2024 and 2023, for financial instruments measured on a recurring basis and classified as Level 3:

Level 3 Fair Value Measurements
Three months ended September 30, 2024 and 2023
(In thousands)						Corporate debt securities						Equity securities						Fair value swap
Balance at July 1, 2024						$	6,427					$	495					$	(123)
Transfer into (out of) level 3						—						—						—
Total gains / (losses)
Included in other income / other (expense)						—						18						(500)
Included in other comprehensive income						153						—						—
Balance at September 30, 2024						$	6,580					$	513					$	(623)
Balance at July 1, 2023						$	6,116					$	455					$	(296)
Transfer into (out of) level 3, net						—						—						—
Total gains
Included in other income						—						11						—
Included in other comprehensive income						10						—						—
Purchases, sales, issuances and settlements, other, net						—						—						173
Balance at September 30, 2023						$	6,126					$	466					$	(123)

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Level 3 Fair Value Measurements
Nine months ended September 30, 2024 and 2023
(In thousands)						Corporate debt securities						Equity securities						Fair value swap
Balance at January 1, 2024						$	6,349					$	473					$	(123)
Transfer into (out of) level 3						—						—						—
Total gains / (losses)
Included in other income / other (expense)						—						40						(500)
Included in other comprehensive income						231						—						—
Balance at September 30, 2024						$	6,580					$	513					$	(623)
Balance at January 1, 2023						$	7,000					$	439					$	(243)
Transfers into (out of) level 3, net						11						—						—
Total (losses) / gains
Included in other income / other (expense)						—						27						(175)
Included in other comprehensive income						(885)						—						—
Purchases, sales, issuances and settlements, other, net						—						—						295
Balance at September 30, 2023						$	6,126					$	466					$	(123)

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:

Individually evaluated collateral dependent loans: When a loan is individually evaluated, it is valued at the lower of cost or fair value. Collateral dependent loans which are individually evaluated and carried at fair value have been partially charged off or receive 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 customer and the customer’s business, resulting in a Level 3 fair value classification. Individually evaluated loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly. Additionally, valuations for all collateral dependent loans are updated annually, either through independent valuations by a licensed appraiser or a VOV performed by an internal licensed appraiser, in accordance with Company policy. A VOV can only be used in select circumstances and verifies that the original appraised value has not deteriorated through property inspection, consideration of market conditions, and performance of all valuation methods utilized in a prior valuation.

Loans individually evaluated for impairment include all internally classified commercial nonaccrual loans.

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 individually evaluated collateral dependent 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

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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.

•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 DCF analysis. Appraisers determine an anticipated absorption period and a discount rate that takes into account an investor’s required rate of return based on recent comparable sales. Management generally applies a 6% discount to lot development appraised values, which is an additional discount above the net present value calculation included in the appraisal, to account for selling costs.

MSRs: MSRs are carried at the lower of cost or fair value. MSRs do not trade in active, open markets with readily observable prices. For example, sales of MSRs do occur, but precise terms and conditions typically are not readily available. As such, management, with the assistance of a third-party specialist, determines fair value based on the discounted value of the future cash flows estimated to be received. Significant inputs include the discount rate and assumed prepayment speeds. The calculated fair value is then compared to market values where possible to ascertain the reasonableness of the valuation in relation to current market expectations for similar products. Accordingly, MSRs are classified as Level 2.

The following tables present assets and liabilities measured at fair value on a nonrecurring basis. Individually evaluated collateral dependent 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. At September 30, 2024 and December 31, 2023, 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 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 September 30, 2024 using:
(In thousands)						Level 1						Level 2						Level 3						Balance at September 30, 2024
Individually evaluated collateral dependent loans recorded at fair value:
Commercial real estate						$	—					$	—					$	2,070					$	2,070
Residential real estate						—						—						20						20
Total individually evaluated collateral dependent loans recorded at fair value						$	—					$	—					$	2,090					$	2,090
MSRs						$	—					$	497					$	—					$	497
OREO recorded at fair value:
Commercial real estate						$	—					$	—					$	938					$	938
Total OREO recorded at fair value						$	—					$	—					$	938					$	938

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Fair Value Measurements at December 31, 2023 using:
(In thousands)						Level 1						Level 2						Level 3						Balance at December 31, 2023
Individually evaluated collateral dependent loans recorded at fair value:
Commercial real estate						$	—					$	—					$	2,315					$	2,315
Residential real estate						—						—						182						182
Total individually evaluated collateral dependent loans recorded at fair value						$	—					$	—					$	2,497					$	2,497
MSRs						$	—					$	866					$	—					$	866
OREO recorded at fair value:
Commercial real estate						$	—					$	—					$	938					$	938
Total OREO recorded at fair value						$	—					$	—					$	938					$	938

The following table provides additional detail on those individually evaluated loans which are recorded at fair value as well as the remaining individually evaluated loan portfolio not included above. The remaining individually evaluated 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.

						September 30, 2024
(In thousands)						Loan Balance						Prior Charge-Offs						Specific Valuation Allowance						Carrying Balance
Total individually evaluated collateral dependent loans recorded at fair value						$	2,103					$	1,948					$	13					$	2,090
Remaining individually evaluated loans						51,470						3,122						2,476						48,994
Total individually evaluated loans						$	53,573					$	5,070					$	2,489					$	51,084

						December 31, 2023
(In thousands)						Loan Balance						Prior Charge-Offs						Specific Valuation Allowance						Carrying Balance
Total individually evaluated collateral dependent loans recorded at fair value						$	2,499					$	2,048					$	2					$	2,497
Remaining individually evaluated loans						42,716						301						4,981						37,735
Total individually evaluated loans						$	45,215					$	2,349					$	4,983					$	40,232

The expense from credit adjustments related to individually evaluated loans carried at fair value was $14,000 and $275,000 for the three-month periods ended September 30, 2024 and 2023, respectively, and was $71,000 and $933,000 for the nine-month periods ended September 30, 2024 and 2023, respectively.

MSRs totaled $14.1 million at September 30, 2024. Of this $14.1 million MSR carrying balance, $0.5 million was recorded at fair value and included a valuation allowance of $28,000. The remaining $13.6 million was recorded at cost, as the fair value exceeded cost at September 30, 2024. At December 31, 2023, MSRs totaled $14.7 million. Of this $14.7 million MSR carrying balance, $0.9 million was recorded at fair value and included a valuation allowance of $94,000. The remaining $13.8 million was recorded at cost, as the fair value exceeded cost at December 31, 2023. There was no income or expense related to MSRs carried at fair value during the three-month period ended September 30, 2024. The income related to MSRs carried at fair value during the three-month period ended September 30, 2023 was and $16,000, and was $66,000 and $97,000 for the nine-month periods ended September 30, 2024 and 2023, respectively.

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Total OREO held by Park at September 30, 2024 and December 31, 2023 was $1.1 million and $1.0 million, respectively. At both September 30, 2024 and December 31, 2023 there was $938,000 of OREO held by Park that was carried at fair value due to fair value adjustments made subsequent to the initial OREO measurement. There was no expense related to OREO fair value adjustments for the three-month or the nine-month periods ended September 30, 2024 or the three-month period ended September 30, 2023. The net expense related to OREO fair value adjustments was $77,000 for the nine-month period ended September 30, 2023.

The following tables present qualitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at September 30, 2024 and December 31, 2023:

September 30, 2024

(In thousands)

Fair Value

Valuation Technique

Unobservable Input(s)

Range (Weighted Average)

Individually evaluated collateral dependent loans:

Commercial real estate

$

2,070

Sales comparison approach

Adj to comparables

0.0% - 46.6% (18.2%)

Income approach

Capitalization rate

6.3% - 10.0% (8.7%)

Residential real estate

$

20

Sales comparison approach

Adj to comparables

12.3% - 78.6% (33.4%)

OREO:

Commercial real estate

$

938

Sales comparison approach

Adj to comparables

5.0% - 10.0% (7.5%)

Cost approach

Entrepreneurial profit

5.0% (5.0%)

Cost approach

Accumulated depreciation

50.0% (50.0%)

December 31, 2023

(In thousands)

Fair Value

Valuation Technique

Unobservable Input(s)

Range (Weighted Average)

Individually evaluated collateral dependent loans:

Commercial real estate

$

2,315

Sales comparison approach

Adj to comparables

0.2% - 89.0% (21.2%)

Income approach

Capitalization rate

7.5% - 9.5% (8.9%)

Residential real estate

$

182

Sales comparison approach

Adj to comparables

1.2% - 78.6% (7.6%)

OREO:

Commercial real estate

$

938

Sales comparison approach

Adj to comparables

5.0% - 10.0% (7.5%)

Cost approach

Entrepreneurial profit

5.0% (5.0%)

Cost approach

Accumulated depreciation

50.0% (50.0%)

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Assets Measured at Net Asset Value:

Park's portfolio of Partnership Investments is valued using the NAV practical expedient in accordance with ASC 820.

At September 30, 2024 and at December 31, 2023, Park had Partnership Investments with a NAV of $30.8 million and $27.5 million, respectively. At September 30, 2024 and at December 31, 2023, Park had $19.8 million and $18.4 million, respectively, in unfunded commitments related to these Partnership Investments. For the three-month periods ended September 30, 2024 and 2023, Park recognized income of $857,000 and $924,000, respectively, and for the nine-month periods ended September 30, 2024 and 2023, Park recognized income of $75,000 and $683,000, respectively, related to these Partnership Investments.

Fair Value Balance Sheet:

The fair value of certain financial instruments at September 30, 2024 and at December 31, 2023, was as follows:

						September 30, 2024
												Fair Value Measurements
(In thousands)						Carrying value						Level 1						Level 2						Level 3						Total fair value
Financial assets:
Cash and money market instruments						$	201,683					$	201,683					$	—					$	—					$	201,683
Investment securities (1)						1,129,875						—						1,123,295						6,580						1,129,875
Other investment securities (2)						7,861						7,348						—						513						7,861
Mortgage loans held for sale						5,022						—						5,022						—						5,022
Mortgage IRLCs						131						—						131						—						131
Individually evaluated loans carried at fair value						2,090						—						—						2,090						2,090
Other loans, net						7,636,504						—						—						7,491,584						7,491,584
Loans receivable, net						$	7,643,747					$	—					$	5,153					$	7,493,674					$	7,498,827
Financial liabilities:
Time deposits						$	722,236					$	—					$	723,599					$	—					$	723,599
Brokered deposits and Bid Ohio CDs						90,998						—						91,026						—						91,026
Other						4,488						4,488						—						—						4,488
Deposits (excluding demand deposits)						$	817,722					$	4,488					$	814,625					$	—					$	819,113
Short-term borrowings						$	117,442					$	—					$	117,442					$	—					$	117,442
Subordinated notes						189,522						—						184,213						—						184,213
Derivative financial instruments - assets:
Loan interest rate swaps						$	672					$	—					$	672					$	—					$	672
Derivative financial instruments - liabilities:
Fair value swap						$	623					$	—					$	—					$	623					$	623
Loan interest rate swaps						672						—						672						—						672

(1) Includes debt securities AFS.

(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.

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						December 31, 2023
												Fair Value Measurements
(In thousands)						Carrying value						Level 1						Level 2						Level 3						Total fair value
Financial assets:
Cash and money market instruments						$	218,268					$	218,268					$	—					$	—					$	218,268
Investment securities (1)						1,332,842						—						1,326,493						6,349						1,332,842
Other investment securities (2)						2,089						1,616						—						473						2,089
Mortgage loans held for sale						3,235						—						3,235						—						3,235
Mortgage IRLCs						87						—						87						—						87
Individually evaluated loans carried at fair value						2,497						—						—						2,497						2,497
Other loans, net						7,386,657						—						—						7,200,851						7,200,851
Loans receivable, net						$	7,392,476					$	—					$	3,322					$	7,203,348					$	7,206,670
Financial liabilities:
Time deposits						$	641,615					$	—					$	641,180					—						$	641,180
Brokered deposits and Bid Ohio CDs						164,985						—						165,059						—						165,059
Other						1,261						1,261						—						—						1,261
Deposits (excluding demand deposits)						$	807,861					$	1,261					$	806,239					$	—					$	807,500
Short-term borrowings						$	328,182					$	—					$	328,182					$	—					$	328,182
Subordinated notes						189,147						—						172,059						—						172,059
Derivative financial instruments - assets:
Loan interest rate swaps						$	1,069					$	—					$	1,069					$	—					$	1,069
Derivative financial instruments - liabilities:
Fair value swap						$	123					$	—					$	—					$	123					$	123
Loan interest rate swaps						1,069						—						1,069						—						1,069

(1) Includes debt securities AFS.

(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.

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Note 20 - 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. All of Park's operations are considered by management to be aggregated in one reportable segment.

The following table presents the Corporation's sources of other income by revenue stream for the three-month and nine-month periods ended September 30, 2024 and September 30, 2023:

						Three Months Ended September 30,
Revenue by Operating Segment (in thousands)						2024						2023
Income from fiduciary activities
Personal trust and agency accounts						$	3,124					$	2,593
Employee benefit and retirement-related accounts						2,766						2,568
Investment management and investment advisory agency accounts						4,142						3,407
Other						583						532
Service charges on deposit accounts
NSF fees						867						943
DDA charges						1,380						1,060
Other						115						106
Other service income (1)
Credit card						693						719
HELOC						112						100
Installment						53						39
Real estate						1,869						1,497
Commercial						309						260
Debit card fee income						6,539						6,652
Bank owned life insurance income (2)						2,057						1,448
ATM fees						471						575
Pension settlement gain (2)						5,783						—
Gain on equity securities, net (2)						1,557						998
Other components of net periodic pension benefit income (2)						2,204						1,893
Miscellaneous (3)						1,906						2,323
Total other income						$	36,530					$	27,713

(1) "Other Service Income" totaled $3.0 million and $2.6 million for the three months ended September 30, 2024 and 2023, respectively. Of this aggregate revenue approximately $1.4 million and $1.3 million was within the scope of ASC 606, with the remaining $1.6 million and $1.3 million consisting primarily of certain residential real estate loan fees which were out of scope for the three months ended September 30, 2024 and 2023, respectively.

(2) Not within the scope of ASC 606.

(3) "Miscellaneous Income" included brokerage income, safe deposit box rentals, gains/losses on asset sales and miscellaneous bank fees totaling $1.9 million and $2.3 million for the three months ended September 30, 2024 and 2023, respectively, all of which were within the scope of ASC 606.

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						Nine Months Ended September 30,
Revenue by Operating Segment (in thousands)						2024						2023
Income from fiduciary activities
Personal trust and agency accounts						$	9,558					$	7,668
Employee benefit and retirement-related accounts						8,092						7,507
Investment management and investment advisory agency accounts						11,959						9,842
Other						1,758						1,514
Service charges on deposit accounts
NSF fees						2,436						2,864
DDA charges						3,919						3,167
Other						327						360
Other service income (1)
Credit card						1,974						2,132
HELOC						308						297
Installment						113						123
Real estate						5,219						4,462
Commercial						852						937
Debit card fee income						19,362						19,939
Bank owned life insurance income (2)						6,251						3,965
ATM fees						1,425						1,661
Pension settlement gain (2)						5,783						—
Loss on the sale of debt securities, net (2)						(398)						—
Gain on equity securities, net (2)						1,228						618
Other components of net periodic pension benefit income (2)						6,612						5,679
Miscellaneous (3)						4,746						4,380
Total other income						$	91,524					$	77,115

(1) "Other Service Income" totaled $8.5 million and $8.0 million for the nine months ended September 30, 2024 and 2023, respectively. Of this aggregate revenue approximately $4.0 million and $4.1 million was within the scope of ASC 606, with the remaining $4.5 million and $3.9 million consisting primarily of certain residential real estate loan fees which were out of scope for the nine months ended September 30, 2024 and 2023, respectively.

(2) Not within the scope of ASC 606.

(3) "Miscellaneous Income" included brokerage income, safe deposit box rentals, gains/losses on asset sales and miscellaneous bank fees totaling $4.7 million and $4.4 million for the nine months ended September 30, 2024 and 2023, respectively, all of which were within the scope of ASC 606.

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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 the Corporation's deposit customers for transaction-based, account maintenance, and overdraft services. Fees for transaction-based services, which include services such as ATM use fees, stop payment charges, statement rendering fees, 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 the Company's 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.

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

 

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements as that term is used in the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements are provided to assist in the understanding of anticipated future financial performance. Forward-looking statements provide current expectations, estimates, or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management’s current expectations, estimates, and projections concerning future results or events, and are subject to a number of risks and uncertainties. These statements are often identified because they are not limited to historical fact or by the use of forward-looking words or phrases such as “expects,” “anticipates,” “envisions,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements, as a result of various risk factors. See Item 1A. Risk Factors” in Part I of Park's 2023 Form 10-K, as the same may be updated from time to time in our subsequent filings with the SEC, for more information regarding those risk factors.

Non-U.S. GAAP Financial Measures

This Management's Discussion and Analysis of Financial Condition and Results of Operations (or "MD&A") contains non-U.S. GAAP financial measures where management believes them to be helpful in understanding Park’s results of operations or financial position. Where non-U.S. GAAP financial measures are used, the comparable U.S. GAAP financial measures, as well as the reconciliation from the comparable U.S. GAAP financial measures, can be found herein.

Items Impacting Comparability of Period Results

From time to time, revenue, expenses and/or taxes are impacted by items judged by management of Park to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that their impact is believed by management of Park at that time to be infrequent or short-term in nature. Most often, these items impacting comparability of period results are due to merger and acquisition activities and revenue and expenses related to former Vision Bank loan relationships. In other cases, they may result from management's decisions associated with significant corporate actions outside of the ordinary course of business.

Even though certain revenue and expense items are naturally subject to more volatility than others due to changes in market and economic environment conditions, as a general rule volatility alone does not result in the inclusion of an item as one impacting comparability of period results. For example, changes in the provision for (recovery of) credit losses (aside from those related to former Vision Bank loan relationships), gains (losses) on equity securities, net, and asset valuation adjustments, reflect

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ordinary banking activities and are, therefore, typically excluded from consideration as items impacting comparability of period results.

Management believes the disclosure of items impacting comparability of period results provides a better understanding of Park's performance and trends and allows management to ascertain which of such items, if any, to include or exclude from an analysis of Park's performance; i.e., within the context of determining how that performance differed from expectations, as well as how, if at all, to adjust estimates of future performance taking such items into account.

Items impacting comparability of the results of particular periods are not intended to be a complete list of items that may materially impact current or future period performance.

Non-U.S. GAAP Financial Measures

Park's management uses certain non-U.S. GAAP financial measures to evaluate Park's performance. Specifically, management reviews the return on average tangible equity, the return on average tangible assets and pre-tax, pre-provision net income.

Management has included in the tables included within the "Items Impacting Comparability" section of this MD&A information relating to the annualized return on average tangible equity, the annualized return on average tangible assets and pre-tax, pre-provision net income for the three months ended September 30, 2024 and September 30, 2023 and for the nine months ended September 30, 2024 and September 30, 2023. For the purpose of calculating the annualized return on average tangible equity, a non-U.S. GAAP financial measure, net income for each period is divided by average tangible equity during the period. Average tangible equity equals average shareholders' equity during the applicable period less average goodwill and other intangible assets during the applicable period. For the purpose of calculating the annualized return on average tangible assets, a non-U.S. GAAP financial measure, net income for each period is divided by average tangible assets during the period. Average tangible assets equals average assets during the applicable period less average goodwill and other intangible assets during the applicable period. For the purpose of calculating pre-tax, pre-provision net income, a non-U.S. GAAP financial measure, income taxes and the provision for (recovery of) credit losses are added back to net income, in each case during the applicable period.

Management believes that the disclosure of the annualized return on average tangible equity, the annualized return on average tangible assets and pre-provision net income presents additional information to the reader of the condensed consolidated financial statements, which, when read in conjunction with the condensed consolidated financial statements prepared in accordance with U.S. GAAP, assists in analyzing Park's operating performance, ensures comparability of operating performance from period to period, and facilitates comparisons with the performance of Park's peer financial holding companies and bank holding companies, while eliminating certain non-operational effects of acquisitions. In the tables included within the "Items Impacting Comparability" section of this MD&A, Park has provided a reconciliation of average tangible equity from average shareholders' equity, average tangible assets from average assets and pre-tax, pre-provision net income from net income solely for the purpose of complying with SEC Regulation G and not as an indication that the annualized return on average tangible equity, the annualized return on average tangible assets and pre-tax, pre-provision net income are substitutes for the annualized return on average equity, the annualized return on average assets and net income, respectively, as determined in accordance with U.S. GAAP.

FTE (fully taxable equivalent) Financial Measures

Interest income, yields, and ratios on a FTE basis are considered non-U.S. GAAP financial measures. Management believes net interest income on a FTE basis provides an insightful picture of the interest margin for comparison purposes. The FTE basis also allows management to assess the comparability of revenue arising from both taxable and tax-exempt sources. The FTE basis assumes a federal corporate income tax rate of 21 percent. In the tables included within the "Items Impacting Comparability" section of this MD&A, Park has provided a reconciliation of FTE interest income solely for the purpose of complying with SEC Regulation G and not as an indication that FTE interest income, yields and ratios are substitutes for interest income, yields and ratios, as determined in accordance with U.S. GAAP.

Critical Accounting Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates.

 

Allowance for Credit Losses: Park believes the determination of the allowance for credit losses involves a higher degree of judgment and complexity than its other significant accounting estimates. The ACL is calculated with the objective of maintaining a reserve level believed by management to be sufficient to absorb estimated credit losses over the life of an asset or

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an off-balance sheet credit exposure. Management’s determination of the adequacy of the allowance for credit losses is based on periodic evaluations of 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. However, this evaluation has subjective components requiring material estimates, including expected default probabilities, the expected loss given default, the amounts and timing of expected future cash flows on individually evaluated loans, and estimated losses based on historical loss experience and forecasted economic conditions. All of these factors may be susceptible to significant change. To the extent that actual results differ from management estimates, additional provisions for credit losses may be required that would adversely impact earnings in future periods.

One of the significant judgments impacting the ACL is the economic forecasts for Ohio unemployment, Ohio GDP, and Ohio HPI. These economic forecasts inform the regression model used to calculate cash flows during the reasonable and supportable forecast period. Additionally, multiple economic forecast scenarios are weighted to arrive at the quantitative reserve. Changes in the economic forecast or weighting could significantly affect the estimated credit losses which could potentially lead to materially different allowance levels from one reporting period to the next.

As noted above, in calculating the ACL, management weighs different scenarios, including a baseline (most likely) scenario and an adverse scenario. At September 30, 2024, management applied a 50% weighting to the baseline scenario and applied a 50% weighting to the adverse scenario. To create hypothetical sensitivity analyses, management calculated a quantitative allowance using a 100% weighting applied to a baseline scenario and a quantitative allowance using a 100% weighting applied to an adverse scenario. The adverse scenario assumes among other things that: (1) tensions with China and Taiwan increase, China briefly interrupts trade through the Taiwan Strait, the Russian invasion lasts longer than expected, and the Hamas-Israel conflict will lead to a wider conflict; (2) the FRB begins to lower rates, but at a faster pace than the baseline scenario; (3) Europe goes into a recession. Populism in Europe rises, raising uncertainties about the longevity of the Euro and causes financial stress to highly indebted nations; (4) the U.S. election in November 2024 results in a democratic President and a divided House of Representatives and Senate that will allow for policy status quo to endure. Political divide will be intense, causing business and consumer sentiment to decline sharply; (5) concerns about bank failures raise fears of further collapse in the banking industry, reducing consumer confidence and causing banks to tighten lending standards; (6) a recession occurs in the fourth quarter of 2024 and lasts through the second quarter of 2025 resulting in real GDP declining by 2.6%, unemployment rates rising to a peak of 8.3% in the fourth quarter of 2025, and the stock market falling 35% from the fourth quarter of 2024 to the second quarter of 2025. The adverse scenario also forecasts Ohio unemployment for the next twelve months to range from 6.9% to 9.5%. Excluding consideration of qualitative adjustments, this sensitivity analysis would result in a hypothetical increase in Park's ACL of $26.1 million as of September 30, 2024 if only the adverse scenario was used. Excluding consideration of qualitative adjustments, a corresponding $26.1 million decrease in Park's ACL would occur in a hypothetical scenario if only the baseline (most likely) scenario was used.

Refer to the "Credit Metrics and Provision for (Recovery of) Credit Losses" section of this MD&A for additional discussion.

Pension Plan: The determination of Pension Plan obligations and related expenses requires the use of assumptions to estimate the amount of benefits that employees will earn while working, as well as the present value of those benefits. Annual pension income/expense is principally based on four components: (1) the value of benefits earned by employees for working during the year (service cost), (2) the increase in the liability due to the passage of time (interest cost), and (3) other gains and losses, reduced by (4) the expected return on plan assets for our Pension Plan. During the three months and the nine months ended September 30, 2024, Park exceeded the pension settlement threshold established in ASC 715-30 and recognized in income a pro-rata portion of the unamortized gain in accumulated other comprehensive loss (pension settlement gain).

Significant assumptions used to measure our annual pension expense include:

•the interest rate used to determine the present value of liabilities (discount rate);

•certain employee-related factors, such as turnover, retirement age and mortality;

•the expected return on assets in our funded Pension Plan; and

•the rate of salary increases where benefits are based on earnings.

Our assumptions reflect our historical experience and management’s best judgment regarding future expectations. Due to the significant management judgment involved, our assumptions could have a material impact on the measurement of our Pension Plan expense and obligation.

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Comparison of Results of Operations

For the Three and Nine Months Ended September 30, 2024 and 2023

 

Summary Discussion of Results

Net income for the three months ended September 30, 2024 of $38.2 million represented a $1.3 million, or 3.5%, increase compared to $36.9 million for the three months ended September 30, 2023. Pre-tax, pre-provision net income for the three months ended September 30, 2024 of $52.0 million represented a $7.8 million, or 17.6%, increase compared to $44.2 million for the three months ended September 30, 2023. Weighted average diluted common shares outstanding were 16,264,393 for the third quarter of 2024, compared to 16,217,880 weighted average diluted common shares outstanding for the third quarter of 2023.

Net income for the nine months ended September 30, 2024 of $112.8 million represented a $10.6 million, or 10.3%, increase compared to $102.2 million for the nine months ended September 30, 2023. Pre-tax, pre-provision net income for the nine months ended September 30, 2024 of $148.0 million represented a $23.0 million, or 18.4%, increase compared to $125.0 million for the nine months ended September 30, 2023. Weighted average diluted common shares outstanding were 16,231,766 for the first nine months of 2024, compared to 16,261,109 weighted average diluted common shares outstanding for the first nine months of 2023.

The following discussion provides additional information regarding Park.

Park National Corporation (Park)

The following table reflects the net income for the first, second and third quarters of 2024, for the first nine months of 2024 and 2023 (the nine months ended September 30) and for the year ended December 31, 2023.

(In thousands)			Q3 2024			Q2 2024			Q1 2024			Nine months YTD 2024			Nine months YTD 2023			2023
Net interest income			$	101,114		$	97,837		$	95,623		$	294,574		$	278,039		$	373,113
Provision for credit losses			5,315			3,113			2,180			10,608			1,095			2,904
Other income			36,530			28,794			26,200			91,524			77,115			92,634
Other expense			85,681			75,189			77,228			238,098			230,196			309,239
Income before income taxes			$	46,648		$	48,329		$	42,415		$	137,392		$	123,863		$	153,604
Income tax expense			8,431			8,960			7,211			24,602			21,629			26,870
Net income			$	38,217		$	39,369		$	35,204		$	112,790		$	102,234		$	126,734

Net interest income of $294.6 million for the nine months ended September 30, 2024 represented a $16.5 million, or 5.9%, increase compared to $278.0 million for the nine months ended September 30, 2023. The increase was a result of a $42.9 million increase in interest income, partially offset by a $26.4 million increase in interest expense.

The $42.9 million increase in interest income was due to a $55.4 million increase in interest income on loans, partially offset by a $12.5 million decrease in investment income. The $55.4 million increase in interest income on loans was primarily the result of a $417.0 million (or 5.82%) increase in average loans, from $7.17 billion for the nine months ended September 30, 2023 to $7.58 billion for the nine months ended September 30, 2024, as well as an increase in the yield on loans, which increased 68 basis points to 6.12% for the nine months ended September 30, 2024, compared to 5.44% for the nine months ended September 30, 2023. The $12.5 million decrease in investment income was primarily the result of a $550.6 million (or 27.23%) decrease in average investments, including money market investments, from $2.02 billion for the nine months ended September 30, 2023 to $1.47 billion for the nine months ended September 30, 2024. The decrease in average investments was partially offset by an increase in the yield on investments, including money market investments, which increased 17 basis points to 3.97% for the nine months ended September 30, 2024, compared to 3.80% for the nine months ended September 30, 2023.

The $26.4 million increase in interest expense was due to a $26.2 million increase in interest expense on deposits, as well as a $0.2 million increase in interest expense on borrowings. The increase in interest expense on deposits was the result of a $138.2 million (or 2.49%) increase in average on-balance sheet interest bearing deposits from $5.54 billion for the nine months ended September 30, 2023, to $5.68 billion for the nine months ended September 30, 2024, as well as an increase in the cost of deposits of 58 basis points, from 1.42% for the nine months ended September 30, 2023 to 2.00% for the nine months ended

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September 30, 2024. The increase in on-balance sheet interest bearing deposits was due to an increase in brokered deposits, bid CD deposits and time deposits, which was partially offset by decreases in savings accounts and transaction accounts.

The provision for credit losses of $10.6 million for the nine months ended September 30, 2024 represented an increase of $9.5 million, compared to $1.1 million for the nine months ended September 30, 2023. Refer to the “Credit Metrics and Provision for Credit Losses” section for additional details regarding the level of the provision for credit losses recognized in each period presented.

The table below reflects Park's total other income for the nine months ended September 30, 2024 and 2023.

(Dollars in thousands)			2024			2023			$ change			% change
Other income:
Income from fiduciary activities			$	31,367		$	26,531		$	4,836		18.2		%
Service charges on deposit accounts			6,682			6,391			291			4.6		%
Other service income			8,466			7,951			515			6.5		%
Debit card fee income			19,362			19,939			(577)			(2.9)		%
Bank owned life insurance income			6,251			3,965			2,286			57.7		%
ATM fees			1,425			1,661			(236)			(14.2)		%
Pension settlement gain			5,783			—			5,783			N.M.
Loss on sale of debt securities, net			(398)			—			(398)			N.M.
Gain on equity securities, net			1,228			618			610			98.7		%
Other components of net periodic benefit income			6,612			5,679			933			16.4		%
Miscellaneous			4,746			4,380			366			8.4		%
Total other income			$	91,524		$	77,115		$	14,409		18.7		%

Other income of $91.5 million for the nine months ended September 30, 2024 represented an increase of $14.4 million, or 18.7%, compared to $77.1 million for the nine months ended September 30, 2023. The $4.8 million increase in income from fiduciary activities was largely due to an increase in the market value of assets under management as well as updates to the fee structure. The $515,000 increase in other service income was mainly due to an increase in mortgage related other service income. The $577,000 decrease in debit card fee income was partially due to a decrease in the average blended interchange rate per transaction, which is influenced by various factors, including the average spend per transaction. The $2.3 million increase in bank owned life insurance income was primarily related to an increase in death benefits received during the nine months ended September 30, 2024. The change in pension settlement gain was due to a $5.8 million pension settlement gain, which was related to a combination of lump sum payouts as well as the purchase of a nonparticipating annuity contract that will provide ongoing benefits to vested and retired participants. The change in loss on sale of debt securities, net was due to net losses on the sale of debt securities of $398,000 recorded during the nine months ended September 30, 2024. No loss on sale of debt securities, net was recorded during the nine months ended September 30, 2023. The $610,000 increase in the gain on equity securities, net, was due to a $1.2 million increase in the gain on equity securities carried at fair value, partially offset by a $608,000 decrease in the gain on equity securities carried at NAV. The $933,000 increase in other components of net periodic benefit income was largely due to an increase in the expected return on plan assets, and was partially offset by an increase in interest cost. The increase in miscellaneous income was largely due to an increase in net gain on sale of assets.

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The table below reflects Park's total other expense for the nine months ended September 30, 2024 and 2023.

(Dollars in thousands)			2024			2023			$ change			% change
Other expense:
Salaries			$	110,057		$	103,045		$	7,012		6.8		%
Employee benefits			31,595			32,176			(581)			(1.8)		%
Occupancy expense			9,887			9,770			117			1.2		%
Furniture and equipment expense			7,608			9,409			(1,801)			(19.1)		%
Data processing fees			30,114			28,032			2,082			7.4		%
Professional fees and services			20,681			22,158			(1,477)			(6.7)		%
Marketing			4,369			3,755			614			16.4		%
Insurance			5,135			5,932			(797)			(13.4)		%
Communication			2,993			3,217			(224)			(7.0)		%
State tax expense			3,355			3,499			(144)			(4.1)		%
Amortization of intangible assets			927			989			(62)			(6.3)		%
Foundation contributions			2,000			—			2,000			N.M.
Miscellaneous			9,377			8,214			1,163			14.2		%
Total other expense			$	238,098		$	230,196		$	7,902		3.4		%

Total other expense of $238.1 million for the nine months ended September 30, 2024 represented an increase of $7.9 million compared to $230.2 million for the nine months ended September 30, 2023. The increase in salaries expense was primarily related to increases in base salary expense and additional incentive compensation expense, that included a $1.7 million accrual for a one-time incentive payment, partially offset by a decrease in share-based compensation expense. The decrease in employee benefit expense was primarily due to a decrease in group insurance expense, partially offset by an increase in retirement expense. The decrease in furniture and equipment expense was primarily due to decreases in depreciation expense and maintenance and repairs expense. The increase in data processing fees was mainly related to an increase in software related expenses, partially offset by a decrease in ATM and debit card processing expense. The decrease in professional fees and services expense was primarily due to decreases in legal expenses, consulting expenses and other fees expense, partially offset by increases in credit services expense, audit fee expense and IntraFi deposit fee expense. The increase in marketing expense was primarily due to increases in advertising expense. The decrease in insurance expense was primarily due to decreases in FDIC insurance expense. The increase in foundation contributions was the result of a $2.0 million contribution made during the nine months ended September 30, 2024, with no contribution being made during the nine months ended September 30, 2023. The increase in miscellaneous expense is primarily due to an increase in expense for the allowance for unfunded credit losses.

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The table below provides certain balance sheet information and financial ratios for Park as of or for the nine months ended September 30, 2024 and 2023 and the year ended December 31, 2023.

(Dollars in thousands)			September 30, 2024			December 31, 2023			September 30, 2023						% change from 12/31/23			% change from 9/30/23
Loans			7,730,984			7,476,221			7,349,745						3.41		%	5.19		%
Allowance for credit losses			87,237			83,745			84,602						4.17		%	3.11		%
Net loans			7,643,747			7,392,476			7,265,143						3.40		%	5.21		%
Investment securities			1,233,297			1,429,144			1,708,827						(13.70)		%	(27.83)		%
Total assets			9,903,049			9,836,453			10,000,914						0.68		%	(0.98)		%
Total deposits			8,214,671			8,042,566			8,244,724						2.14		%	(0.36)		%
Average assets (1)			9,865,315			9,957,554			9,980,256						(0.93)		%	(1.15)		%
Efficiency ratio (2)			61.38		%	65.87		%	64.29		%				(6.82)		%	(4.53)		%
Return on average assets (3)			1.53		%	1.27		%	1.37		%				20.47		%	11.68		%

(1) Average assets for the nine months ended September 30, 2024 and 2023 and for the year ended December 31, 2023.

(2) Efficiency ratio is calculated by dividing total other expense by the sum of fully taxable equivalent net interest income and other income. Fully taxable equivalent net interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustments were $1.8 million and $2.9 million for the nine months ended September 30, 2024 and 2023 and $3.7 million for the year ended December 31, 2023.

(3) Annualized for the nine months ended September 30, 2024 and 2023.

Loans

Loans outstanding at September 30, 2024 were $7.73 billion, compared to (i) $7.48 billion at December 31, 2023, an increase of $254.8 million, and (ii) $7.35 billion at September 30, 2023, an increase of $381.2 million. The table below breaks out the change in loans outstanding, by loan type.

(Dollars in thousands)			September 30, 2024			December 31, 2023			September 30, 2023						$ change from 12/31/23			% change from 12/31/23			$ change from 9/30/23			% change from 9/30/23
Home equity			$	197,470		$	174,621		$	173,570					$	22,849		13.1		%	$	23,900		13.8		%
Installment			1,961,680			1,950,304			1,977,750						11,376			0.6		%	(16,070)			(0.8)		%
Real estate			1,423,120			1,340,169			1,295,769						82,951			6.2		%	127,351			9.8		%
Commercial			4,146,473			4,007,941			3,897,821						138,532			3.5		%	248,652			6.4		%
Other			2,241			3,186			4,835						(945)			(29.7)		%	(2,594)			(53.7)		%
Total loans			$	7,730,984		$	7,476,221		$	7,349,745					$	254,763		3.4		%	$	381,239		5.2		%

Park's allowance for credit losses was $87.2 million at September 30, 2024, compared to $83.7 million at December 31, 2023, an increase of $3.5 million, or 4.2%. Refer to the “Credit Metrics and Provision for Credit Losses” section for additional information regarding Park's loan portfolio and the level of provision for credit losses recognized in each period presented.

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Deposits

Total deposits at September 30, 2024 were $8.21 billion, compared to (i) $8.04 billion at December 31, 2023, an increase of $172.1 million and (ii) $8.24 billion at September 30, 2023, a decrease of $30.1 million.

(Dollars in thousands)			September 30, 2024			December 31, 2023			September 30, 2023						$ change from 12/31/23			% change from 12/31/23			$ change from 9/30/23			% change from 9/30/23
Non-interest bearing deposits			$	2,516,722		$	2,628,234		$	2,732,504					$	(111,512)		(4.2)		%	$	(215,782)		(7.9)		%
Transaction accounts			2,141,208			2,064,512			2,193,054						76,696			3.7		%	(51,846)			(2.4)		%
Savings			2,743,507			2,543,220			2,716,001						200,287			7.9		%	27,506			1.0		%
Certificates of deposit			722,236			641,615			603,165						80,621			12.6		%	119,071			19.7		%
Brokered and bid CD deposits			90,998			164,985			—						(73,987)			(44.8)		%	90,998			N.M.
Total deposits			$	8,214,671		$	8,042,566		$	8,244,724					$	172,105		2.1		%	$	(30,053)		(0.4)		%

Park's deposits grew during the COVID pandemic and declined toward pre-pandemic levels throughout 2022 and 2023. In order to manage the impact of this growth on its balance sheet, Park utilized a program where certain deposit balances were transferred off balance sheet while maintaining the customer relationship. Park is able to increase or decrease the amount of deposit balances transferred off balance sheet based on its balance sheet management strategies and liquidity needs. The balance of deposits transferred off balance sheet has declined as overall deposit balances declined toward pre-pandemic levels.

The table below breaks out the change in deposit balances, by deposit type, for Park.

(Dollars in thousands)			September 30, 2024			December 31, 2023			December 31, 2022			December 31, 2021			December 31, 2020			December 31, 2019
Retail deposits			$	3,943,537		$	4,080,372		$	4,388,394		$	4,416,228		$	4,025,852		$	3,748,039
Commercial deposits			4,180,136			3,797,209			3,846,321			3,488,300			3,535,578			3,233,269
Brokered and bid CD deposits			90,998			164,985			—			—			10,928			71,304
Total deposits			$	8,214,671		$	8,042,566		$	8,234,715		$	7,904,528		$	7,572,358		$	7,052,612
Off balance sheet deposits			—			1,185			195,937			983,053			710,101			—
Total deposits including off balance sheet deposits			$	8,214,671		$	8,043,751		$	8,430,652		$	8,887,581		$	8,282,459		$	7,052,612
$ change from prior period end			$	170,920		$	(386,901)		$	(456,929)		$	605,122		$	1,229,847
% change from prior period end			2.1		%	(4.6)		%	(5.1)		%	7.3		%	17.4		%
Noninterest bearing deposits to total deposits			30.6		%	32.7		%	37.3		%	38.8		%	36.0		%	27.8		%

During the nine months ended September 30, 2024, total deposits including off balance sheet deposits increased by $170.9 million, or 2.1%. This increase consisted of a $382.9 million increase in total commercial deposits, partially offset by a $136.8 million decrease in total retail deposits, a $74.0 million decrease in brokered and bid CD deposits and a $1.2 million decrease in off balance sheet deposits. The majority of off balance sheet deposits were commercial and thus impact the increase in commercial deposits as the deposits are moved back onto the balance sheet.

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The table below breaks out the change in deposit balance, by deposit type, for September 30, 2024 compared to September 30, 2023.

(Dollars in thousands)			September 30, 2024			September 30, 2023			$ change from 9/30/23			% change from 9/30/23
Retail deposits			$	3,943,537		$	4,110,821		$	(167,284)		(4.1)		%
Commercial deposits			4,180,136			4,133,903			46,233			1.1		%
Brokered and bid CD deposits			90,998			—			90,998			N.M.
Total deposits			$	8,214,671		$	8,244,724		$	(30,053)		(0.4)		%
Off balance sheet deposits			—			763			(763)			(100.0)		%
Total deposits including off balance sheet deposits			$	8,214,671		$	8,245,487		$	(30,816)		(0.4)		%
Noninterest bearing deposits to total deposits			30.6		%	33.1		%	N.M.			N.M.

At September 30, 2024, total deposits including off balance sheet deposits decreased by $30.8 million, or 0.4%, to $8.21 billion compared to $8.25 billion at September 30, 2023. This decrease consisted of a $167.3 million decrease in total retail deposits, partially offset by a $46.2 million increase in total commercial deposits and $91.0 million increase in brokered and bid CD deposits.

Included in the total commercial deposits and off balance sheet deposits shown in the previous tables are public fund deposits. These balances fluctuate based on seasonality and the cycle of collection and remittance of tax funds. Public funds are also included in Bid Ohio CDs. The following table details the change in public funds held on Park's balance sheet.

(Dollars in thousands)			September 30, 2024			December 31, 2023			September 30, 2023			December 31, 2022			December 31, 2021			December 31, 2020			December 31, 2019
Public funds included in commercial deposits			$	1,467,432		$	1,198,418		$	1,400,807		$	1,335,400		$	1,548,217		$	1,406,101		$	1,293,090
Bid Ohio CDs			90,998			15,000			—			—			—			—			—
Total public fund deposits			$	1,558,430		$	1,213,418		$	1,400,807		$	1,335,400		$	1,548,217		$	1,406,101		$	1,293,090
$ change from prior period end			$	345,012		$	(187,389)		$	65,407		$	(212,817)		$	142,116		$	113,011
% change from prior period end			28.4		%	(13.4)		%	4.9		%	(13.7)		%	10.1		%	8.7		%
Cost of public fund deposits			2.44		%	2.24		%	2.20		%	0.60		%	0.11		%	0.52		%	1.77		%
Cost of total interest bearing deposits (1)			2.00		%	1.52		%	1.42		%	0.39		%	0.12		%	0.41		%	1.01		%

(1) Annualized for the nine months ended September 30, 2024

As of September 30, 2024, Park had approximately $1.4 billion of uninsured deposits, which was 16.9% of total deposits. Uninsured deposits of $1.4 billion included $412.9 million of deposits that were over $250,000, but were fully collateralized by Park's investment securities portfolio.

Net Interest Income

Park’s principal source of earnings is net interest income, the difference between total interest income and total interest expense. Net interest income results from average balances outstanding for interest earning assets and interest bearing liabilities in conjunction with the average rates earned and paid on them.

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Comparison for the Third Quarters of 2024 and 2023

 

Net interest income increased by $6.8 million, or 7.3%, to $101.1 million for the third quarter of 2024, compared to $94.3 million for the third quarter of 2023. See the discussion under the table below.

 

						Three months ended  September 30, 2024												Three months ended  September 30, 2023
(Dollars in thousands)						Average balance			Interest			Tax equivalent  yield/cost						Average balance			Interest			Tax equivalent  yield/cost
Loans (1)						$	7,680,657		$	120,430		6.24		%				$	7,267,476		$	103,529		5.65		%
Taxable investments						1,052,977			10,228			3.86		%				1,385,023			13,321			3.82		%
Tax-exempt investments (2)						219,252			1,748			3.17		%				421,028			3,671			3.46		%
Money market instruments						147,708			1,996			5.38		%				104,754			1,410			5.34		%
Interest earning assets						$	9,100,594		$	134,402		5.88		%				$	9,178,281		$	121,931		5.27		%
Interest bearing deposits						$	5,765,082		$	29,835		2.06		%				$	5,634,621		$	23,126		1.63		%
Short-term borrowings						97,303			492			2.01		%				164,237			1,136			2.74		%
Long-term debt						189,460			2,367			4.97		%				188,966			2,358			4.95		%
Interest bearing liabilities						$	6,051,845		$	32,694		2.15		%				$	5,987,824		$	26,620		1.76		%
Excess interest earning assets						$	3,048,749											$	3,190,457
Tax equivalent net interest income									$	101,708											$	95,311
Net interest spread												3.73		%										3.51		%
Net interest margin												4.45		%										4.12		%

(1) Loan interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was $227,000 for the three months ended September 30, 2024 and $271,000 for the same period of 2023.

(2) Interest income on tax-exempt investment securities includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was $367,000 for the three months ended September 30, 2024 and $771,000 for the same period of 2023.

 

Average interest earning assets for the third quarter of 2024 decreased by $77.7 million, or 0.8%, to $9,101 million for the third quarter of 2024, compared to $9,178 million for the third quarter of 2023. The average yield on interest earning assets increased by 61 basis points to 5.88% for the third quarter of 2024, compared to 5.27% for the third quarter of 2023.

Average interest bearing liabilities for the third quarter of 2024 increased by $64.0 million, or 1.1%, to $6,052 million, compared to $5,988 million for the third quarter of 2023. The average cost of interest bearing liabilities increased by 39 basis points to 2.15% for the third quarter of 2024, compared to 1.76% for the third quarter of 2023.

Yield on Loans: Average loan balances increased $413.2 million, or 5.7%, to $7,681 million for the third quarter of 2024, compared to $7,267 million for the third quarter of 2023. The average yield on the loan portfolio increased by 59 basis points to 6.24% for the third quarter of 2024, compared to 5.65% for the third quarter of 2023.

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The table below shows the average balance and tax equivalent yield by type of loan for the three months ended September 30, 2024 and 2023.

						Three months ended  September 30, 2024												Three months ended  September 30, 2023
(Dollars in thousands)						Average balance						Tax equivalent  yield						Average balance						Tax equivalent  yield
Home equity loans						$	189,792					8.52		%				$	171,235					8.34		%
Installment loans						1,947,453						6.59		%				1,962,225						5.66		%
Real estate loans						1,403,590						5.18		%				1,270,156						4.45		%
Commercial loans (1)						4,131,749						6.33		%				3,860,066						5.91		%
Other						8,073						4.23		%				3,794						9.10		%
Total loans before allowance						$	7,680,657					6.24		%				$	7,267,476					5.65		%

(1) Commercial loan interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was $227,000 for the three months ended September 30, 2024 and $271,000 for the same period of 2023.

Cost of Deposits: Average interest bearing deposit balances increased $130.5 million, or 2.3%, to $5,765 million for the third quarter of 2024, compared to $5,635 million for the third quarter of 2023. The average cost of funds on deposit balances increased by 43 basis points to 2.06% for the third quarter of 2024, compared to 1.63% for the third quarter of 2023. The table below shows for the three months ended September 30, 2024 and 2023, the average balance and cost of funds by type of deposit.

						Three months ended  September 30, 2024												Three months ended  September 30, 2023
(Dollars in thousands)						Average balance						Cost of funds						Average balance						Cost of funds
Transaction accounts						$	2,198,472					1.78		%				$	2,309,320					1.62		%
Savings deposits and clubs						2,750,688						1.87		%				2,742,151						1.54		%
Time deposits						701,588						3.17		%				583,150						2.11		%
Brokered/bid CD deposits						114,334						5.18		%				—						N.A.
Total interest bearing deposits						$	5,765,082					2.06		%				$	5,634,621					1.63		%

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Comparison for the First Nine Months of 2024 and 2023

 

Net interest income increased by $16.5 million, or 5.9%, to $294.6 million for the first nine months of 2024, compared to $278.0 million for the first nine months of 2023. See the discussion under the table below.

 

						Nine months ended  September 30, 2024												Nine months ended  September 30, 2023
(Dollars in thousands)						Average balance			Interest			Tax equivalent  yield/cost						Average balance			Interest			Tax equivalent  yield/cost
Loans (1)						$	7,583,833		$	347,438		6.12		%				$	7,166,863		$	291,871		5.44		%
Taxable investments						1,118,077			33,077			3.95		%				1,418,433			39,731			3.74		%
Tax-exempt investments (2)						220,809			5,282			3.20		%				421,925			11,035			3.50		%
Money market instruments						132,681			5,370			5.41		%				181,793			6,715			4.94		%
Interest earning assets						$	9,055,400		$	391,167		5.77		%				$	9,189,014		$	349,352		5.08		%
Interest bearing deposits						$	5,678,898		$	84,923		2.00		%				$	5,540,680		$	58,719		1.42		%
Short-term borrowings						131,018			2,767			2.82		%				175,537			2,688			2.05		%
Long-term debt						189,335			7,088			5.00		%				188,847			7,018			4.97		%
Interest bearing liabilities						$	5,999,251		$	94,778		2.11		%				$	5,905,064		$	68,425		1.55		%
Excess interest earning assets						$	3,056,149											$	3,283,950
Tax equivalent net interest income									$	296,389											$	280,927
Net interest spread												3.66		%										3.53		%
Net interest margin												4.37		%										4.09		%

(1) Loan interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was $706,000 for the nine months ended September 30, 2024 and $571,000 for the same period of 2023.

(2) Interest income on tax-exempt investment securities includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was $1.1 million for the nine months ended September 30, 2024 and $2.3 million for the same period of 2023.

 

Average interest earning assets for the first nine months of 2024 decreased by $133.6 million, or 1.5%, to $9,055 million for the first nine months of 2024, compared to $9,189 million for the first nine months of 2023. The average yield on interest earning assets increased by 69 basis points to 5.77% for the first nine months of 2024, compared to 5.08% for the first nine months of 2023.

Average interest bearing liabilities for the first nine months of 2024 increased by $94.2 million, or 1.6%, to $5,999 million, compared to $5,905 million for the first nine months of 2023. The average cost of interest bearing liabilities increased by 56 basis points to 2.11% for the first nine months of 2024, compared to 1.55% for the first nine months of 2023.

Yield on Loans: Average loan balances increased $417.0 million, or 5.8%, to $7,584 million for the first nine months of 2024, compared to $7,167 million for the first nine months of 2023. The average yield on the loan portfolio increased by 68 basis points to 6.12% for the first nine months of 2024, compared to 5.44% for the first nine months of 2023.

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The table below shows the average balance and tax equivalent yield by type of loan for the nine months ended September 30, 2024 and 2023.

						Nine months ended  September 30, 2024												Nine months ended  September 30, 2023
(Dollars in thousands)						Average balance						Tax equivalent  yield						Average balance						Tax equivalent  yield
Home equity loans						$	181,596					8.53		%				$	168,246					8.10		%
Installment loans						1,946,036						6.38		%				1,933,664						5.32		%
Real estate loans						1,374,653						5.01		%				1,232,501						4.29		%
Commercial loans (1)						4,076,275						6.26		%				3,828,457						5.76		%
Other						5,273						6.41		%				3,995						8.86		%
Total loans before allowance						$	7,583,833					6.12		%				$	7,166,863					5.44		%

(1) Commercial loan interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was $706,000 for the nine months ended September 30, 2024 and $571,000 for the same period of 2023.

Cost of Deposits: Average interest bearing deposit balances increased $138.2 million, or 2.5%, to $5,679 million for the first nine months of 2024, compared to $5,541 million for the first nine months of 2023. The average cost of funds on deposit balances increased by 58 basis points to 2.00% for the first nine months of 2024, compared to 1.42% for the first nine months of 2023. The table below shows for the nine months ended September 30, 2024 and 2023, the average balance and cost of funds by type of deposit.

						Nine months ended  September 30, 2024												Nine months ended  September 30, 2023
(Dollars in thousands)						Average balance						Cost of funds						Average balance						Cost of funds
Transaction accounts						$	2,176,184					1.74		%				$	2,226,680					1.42		%
Savings deposits and clubs						2,669,962						1.74		%				2,757,767						1.39		%
Time deposits						677,702						3.14		%				556,233						1.54		%
Brokered/bid CD deposits						155,050						5.19		%				—						N.A.
Total interest bearing deposits						$	5,678,898					2.00		%				$	5,540,680					1.42		%

Yield on Average Interest Earning Assets: The following table shows the tax equivalent yield on average interest earning assets for the nine months ended September 30, 2024 and for the years ended December 31, 2023, 2022 and 2021.

						Loans (1)						Investments (2)						Money Market Instruments						Total
2021 - year						4.53		%				2.22		%				0.13		%				3.86		%
2022 - year						4.65		%				2.66		%				2.07		%				4.14		%
2023 - year						5.55		%				3.73		%				5.00		%				5.18		%
2024 - first nine months						6.12		%				3.83		%				5.41		%				5.77		%

(1) Loan interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was $706,000 for the nine months ended September 30, 2024, and $811,000, $627,000, and $704,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

(2) Interest income on tax-exempt investment securities includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was $1.1 million for the nine months ended September 30, 2024, and $2.9 million, $2.9 million, and $2.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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Cost of Average Interest Bearing Liabilities: The following table shows the cost of funds on average interest bearing liabilities for the nine months ended September 30, 2024 and for the years ended December 31, 2023, 2022 and 2021.

						Interest bearing deposits						Short-term borrowings						Long-term debt						Total
2021 - year						0.12		%				0.27		%				4.32		%				0.28		%
2022 - year						0.39		%				0.67		%				4.69		%				0.54		%
2023 - year						1.52		%				2.58		%				4.97		%				1.67		%
2024 - first nine months						2.00		%				2.82		%				5.00		%				2.11		%

Credit Metrics and Provision for (Recovery of) Credit Losses

The provision for credit losses is the amount subtracted from/added to the allowance for credit losses to ensure the allowance is sufficient to absorb estimated credit losses over the life of a loan. The amount of the provision for credit losses is determined by management based on 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.

The adoption of ASU 2022-02 on January 1, 2023 resulted in a $383,000 increase to the allowance for credit losses. A cumulative effect adjustment resulting in a $303,000 decrease to retained earnings and an $80,000 increase to deferred tax assets was also recorded. Additionally, as a result of the adoption of this ASU and elimination of the concept of TDRs, total nonperforming loans decreased by $20.1 million effective January 1, 2023 and individually evaluated loans decreased by $11.5 million effective January 1, 2023.

The table below provides additional information on the provision for (recovery of) credit losses for the three-month and nine-month periods ended September 30, 2024 and 2023.

			Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in thousands)			2024			2023			2024			2023
Allowance for credit losses:
Beginning balance			$	86,575		$	87,206		$	83,745		$	85,379
Cumulative change in accounting principle; adoption of ASU 2022-02			—			—			—			383
Charge-offs			6,554			2,293			12,891			7,213
Recoveries			1,901			1,269			5,775			4,958
Net charge-offs			4,653			1,024			7,116			2,255
Provision for (recovery of) credit losses			5,315			(1,580)			10,608			1,095
Ending balance			$	87,237		$	84,602		$	87,237		$	84,602
Net charge-offs as a % of average loans (annualized)			0.24		%	0.06		%	0.13		%	0.04		%

Net charge-offs were $4.7 million, or 0.24% annualized, of total average loans, for the three months ended September 30, 2024, compared to $1.0 million, or 0.06% annualized, of total average loans, for the three months ended September 30, 2023. Net charge-offs were $7.1 million, or 0.13% annualized, of total average loans, for the nine months ended September 30, 2024, compared to $2.3 million, or 0.04% annualized, of total average loans, for the nine months ended September 30, 2023. Included in net charge-offs for the three months and nine months ended September 30, 2024 was a $2.9 million charge-off related to one relationship that previously carried a specific reserve.

The following table provides additional information related to the allowance for credit losses for Park including information related to individual reserves and general reserves, at September 30, 2024, June 30, 2024, March 31, 2024, December 31, 2023,

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and September 30, 2023.

(Dollars in thousands)			9/30/2024			6/30/2024			3/31/2024			12/31/2023			9/30/2023
Total allowance for credit losses			$	87,237		$	86,575		$	85,084		$	83,745		$	84,602
Allowance on accruing PCD loans			—			—			—			—			—
Reserves on individually evaluated loans			2,489			5,311			5,032			4,983			3,422
General reserves on collectively evaluated loans			$	84,748		$	81,264		$	80,052		$	78,762		$	81,180
Total loans			$	7,730,984		$	7,664,377		$	7,525,005		$	7,476,221		$	7,349,745
Accruing PCD loans			2,191			2,420			2,454			2,835			3,807
Individually evaluated loans			53,573			54,993			54,742			45,215			40,839
Collectively evaluated loans			$	7,675,220		$	7,606,964		$	7,467,809		$	7,428,171		$	7,305,099
Allowance for credit losses as a % of period end loans			1.13		%	1.13		%	1.13		%	1.12		%	1.15		%
General reserve as a % of collectively evaluated loans			1.10		%	1.07		%	1.07		%	1.06		%	1.11		%

The total allowance for credit losses of $87.2 million at September 30, 2024 represented a $622,000, or 0.8%, increase compared to $86.6 million at June 30, 2024. The increase was due to a $3.5 million increase in general reserves, partially offset by a $2.8 million decrease in specific reserves.

The total allowance for credit losses of $87.2 million at September 30, 2024 represented a $3.5 million, or 4.2%, increase compared to $83.7 million at December 31, 2023. The increase was due to a $6.0 million increase in general reserves partially offset by a $2.5 million decrease in specific reserves.

The increase in general reserves at September 30, 2024 compared to June 30, 2024 and December 31, 2023 included a $1.7 million additional reserve related to Hurricane Helene, which impacted borrowers in Park's Carolina region. Park identified $148.1 million in loans to borrowers in the hardest hit areas of Asheville and Hendersonville North Carolina. This reserve considers the overall population of loans to borrowers in this area as well as the industries in which commercial borrowers operate. Management will continue to evaluate potential losses as a result of Hurricane Helene as additional information becomes available.

The decrease in specific reserves at September 30, 2024 compared to June 30, 2024 and December 31, 2023 was primarily related to the charge-off of one loan relationship which carried a $2.8 million specific reserve.

Nonperforming Assets: Non-performing assets include: (1) loans whose interest is accounted for on a nonaccrual basis; (2) loans which are contractually past due 90 days or more as to principal or interest payments but whose interest continues to accrue; and (3) OREO which results from taking possession of property that served as collateral for a defaulted loan.

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The following table compares Park’s nonperforming assets at September 30, 2024, June 30, 2024, March 31, 2024, December 31, 2023 and September 30, 2023.

 

(In thousands)						September 30, 2024						June 30, 2024						March 31, 2024						December 31, 2023						September 30, 2023
Nonaccrual loans						$	67,991					$	71,368					$	70,189					$	60,259					$	55,008
Loans past due 90 days or more						3,550						1,377						1,570						859						627
Total nonperforming loans						$	71,541					$	72,745					$	71,759					$	61,118					$	55,635
OREO						1,119						1,210						1,674						983						1,354
Total nonperforming assets						$	72,660					$	73,955					$	73,433					$	62,101					$	56,989
Percentage of nonaccrual loans to total loans						0.88		%				0.93		%				0.93		%				0.81		%				0.75		%
Percentage of nonperforming loans to total loans						0.93		%				0.95		%				0.95		%				0.82		%				0.76		%
Percentage of nonperforming assets to total loans						0.94		%				0.96		%				0.98		%				0.83		%				0.78		%
Percentage of nonperforming assets to total assets						0.73		%				0.75		%				0.74		%				0.63		%				0.57		%

Nonperforming loans as of September 30, 2024 of $71.5 million represented a $1.2 million, or 1.66%, decrease from $72.7 million at June 30, 2024, and represented a $10.4 million, or 17.1%, increase from $61.1 million at December 31, 2023. A majority of the increase occurred in the three months ended March 31, 2024 and included the downgrade of a $5.6 million loan to a non-bank consumer financial company as well as several smaller downgrades.

Park classifies loans as nonaccrual when a loan (1) is maintained on a cash basis because of deterioration in the financial condition of the borrower, (2) payment in full of principal or interest is not expected, or (3) principal or interest has been in default for a period of 90 days for commercial loans and 120 days for all other loans. As a result, loans may be classified as nonaccrual despite being current with their contractual terms. The following table details the delinquency status of nonaccrual loans at September 30, 2024, December 31, 2023 and September 30, 2023. Loans are classified as current if they are less than 30 days past due.

						September 30, 2024												December 31, 2023												September 30, 2023
(In thousands)						Balance						Percent of Total Loans						Balance						Percent of Total Loans						Balance						Percent of Total Loans
Nonaccrual loans - current						$	45,315					0.59		%				$	38,956					0.52		%	1			$	33,470					0.46		%
Nonaccrual loans - past due						22,676			0.88		%	0.29		%				21,303						0.29		%				21,538						0.29		%
Total nonaccrual loans						$	67,991					0.88		%				$	60,259					0.81		%				$	55,008					0.75		%

Credit Quality Indicators: When determining the quarterly credit loss provision, Park reviews the grades of commercial loans. These loans are graded from 1 to 8. 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. Commercial loans graded a 6 (substandard), also considered to be watch list credits, represent higher credit risk than those rated special mention and, as a result, a higher PD is applied to these loans. Commercial loans that are graded a 7 (doubtful) are shown as nonperforming and Park charges these loans down to their fair value by taking a partial charge-off or recording an individual reserve. Certain 6-rated loans and all 7-rated loans are placed on nonaccrual status and included within the individually evaluated category. Any commercial loan graded an 8 (loss) is completely charged off.

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The following table highlights the credit trends within the commercial loan portfolio.

Commercial loans * (In thousands)						September 30, 2024						December 31, 2023						September 30, 2023
Pass-rated						$	4,038,013					$	3,905,673					$	3,774,839
Special mention						70,116						57,236						84,517
Substandard						2,901						3,414						3,170
Individually evaluated for impairment						53,573						45,215						40,839
Accruing PCD						2,111						2,760						3,728
Total						$	4,166,714					$	4,014,298					$	3,907,093

* Commercial loans include (1) Commercial, financial and agricultural loans, (2) Commercial real estate loans, (3) Commercial related loans in the construction real estate portfolio, (4) Commercial related loans in the residential real estate portfolio and (5) Leases.

Park's watch list includes all criticized and classified commercial loans defined by Park as loans rated special mention or worse. Park had $73.0 million of collectively evaluated commercial loans included on the watch list at September 30, 2024, compared to $60.7 million at December 31, 2023, and $87.7 million at September 30, 2023. The existing conditions of these loans do not warrant classification as nonaccrual. However, these loans have shown some weakness and management performs additional analysis regarding each borrower's ability to comply with payment terms.

The increase in watch list credits during the first nine months of 2024 was largely due to a $17.5 million loan to a non-bank consumer finance company which was downgraded to special mention, partially offset by problem loan resolutions. The downgraded loan was current in respect to its contractual terms at September 30, 2024.

Park considers a loan delinquent when it reaches 30 days past due. Delinquent and accruing loans were $24.9 million, or 0.32%, of total loans at September 30, 2024, compared to $23.5 million, or 0.31% of total loans at December 31, 2023, and $16.3 million or 0.22% of total loans at September 30, 2023.

Individually Evaluated Loans: Loans that do not share risk characteristics are evaluated on an individual basis. Park has determined that any commercial loans which have been placed on nonaccrual status will be individually evaluated. Individual analysis will establish a reserve for loans in scope.  Reserves on individually evaluated commercial loans are typically based on management’s best estimate of the fair value of collateral securing these loans. The amount ultimately charged off for these loans may be different from the reserve as the ultimate liquidation of the collateral may be for an amount different from management’s estimate.

Individually evaluated commercial loans were $53.6 million at September 30, 2024, an increase of $8.4 million, compared to $45.2 million at December 31, 2023 and an increase of $12.8 million, compared to $40.8 million at September 30, 2023. At September 30, 2024, Park had taken partial charge-offs of $5.1 million related to the $53.6 million of individually evaluated commercial loans, compared to partial charge-offs of $2.3 million related to the $45.2 million of individually evaluated commercial loans at December 31, 2023.

Loans Acquired with Deteriorated Credit Quality: PCD loans are individually evaluated on a quarterly basis to determine if a reserve is necessary. At September 30, 2024 and at December 31, 2023, there was no allowance for credit losses on PCD loans. The carrying amount of accruing loans acquired with deteriorated credit quality at September 30, 2024 and at December 31, 2023 was $2.2 million and $2.8 million, respectively. The carrying amount of nonaccrual loans acquired with deteriorated credit quality at September 30, 2024 and at December 31, 2023 was $548,000 and $534,000, respectively.

Additional Considerations: As part of its quarterly allowance process, Park evaluates certain industries which are more likely to be under economic stress in the current environment. The office sector continues to face challenges as it adjusts to the new normal of work from home brought on by the pandemic. Nationally, office properties in downtown and urban business districts are seeing the most stress. As of September 30, 2024, Park had $229.4 million of loans which were fully or partially secured by non-owner-occupied office space, $227.8 million of which were accruing. This portfolio is not currently exhibiting signs of stress, but Park continues to monitor this portfolio, and others, for signs of deterioration.

Other Income

 

Other income increased by $8.8 million to $36.5 million for the quarter ended September 30, 2024, compared to $27.7 million for the third quarter of 2023 and increased $14.4 million to $91.5 million for the first nine months of 2024 compared to $77.1 million for the first nine months of 2023.

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The following table provides a summary of the changes in the components of other income:

			Three months ended September 30,																		Nine months ended September 30,
(In thousands)			2024						2023						Change						2024						2023						Change
Income from fiduciary activities			$	10,615					$	9,100					$	1,515					$	31,367					$	26,531					$	4,836
Service charges on deposit accounts			2,362						2,109						253						6,682						6,391						291
Other service income			3,036						2,615						421						8,466						7,951						515
Debit card fee income			6,539						6,652						(113)						19,362						19,939						(577)
Bank owned life insurance income			2,057						1,448						609						6,251						3,965						2,286
ATM fees			471						575						(104)						1,425						1,661						(236)
Pension settlement gain			5,783						—						5,783						5,783						—						5,783
Loss on the sale of debt securities, net			—						—						—						(398)						—						(398)
Gain on equity securities, net			1,557						998						559						1,228						618						610
Other components of net periodic pension benefit income			2,204						1,893						311						6,612						5,679						933
Miscellaneous			1,906						2,323						(417)						4,746						4,380						366
Total other income			$	36,530					$	27,713					$	8,817					$	91,524					$	77,115					$	14,409

Income from fiduciary activities increased by $1.5 million, or 16.6%, to $10.6 million for the three months ended September 30, 2024, compared to $9.1 million for the same period of 2023 and increased $4.8 million, or 18.2%, to $31.4 million for the nine months ended September 30, 2024 compared to $26.5 million for the same period of 2023. The increase in income from fiduciary activities was largely due to an increase in the market value of assets under management as well as updates to the fee structure. The average market value of assets under management for the three months ended September 30, 2024 was $8,733 million compared to $7,797 million for the same period in 2023. The average market value of assets under management for the nine months ended September 30, 2024 was $8,493 million compared to $7,635 million for the same period in 2023.

Other service income increased by $421,000, or 16.1%, to $3.0 million for the three months ended September 30, 2024, compared to $2.6 million for the same period of 2023. The primary reason for the increase for the three months ended September 30, 2024 compared to the same period of 2023 was a $372,000 increase in income related to mortgage loans.

Other service income increased by $515,000, or 6.5%, to $8.5 million for the nine months ended September 30, 2024, compared to $8.0 million for the same period of 2023. The primary reason for the increase for the nine months ended September 30, 2024 compared to the same period of 2023 was a $757,000 increase in income related to mortgage loans.

Debit card fee income decreased by $113,000 or 1.7%, to $6.5 million for the three months ended September 30, 2024, compared to $6.7 million for the same period of 2023 and decreased $577,000, or 2.9%, to $19.4 million for the nine months ended September 30, 2024, compared to $19.9 million for the same period of 2023. The decrease for both the three-month and nine-month periods was partially due to a decrease in the average blended interchange rate per transaction, which is influenced by various factors, including the average spend per transaction.

Bank owned life insurance income increased by $609,000 to $2.1 million for the three months ended September 30, 2024, compared to $1.4 million for the same period of 2023, and increased $2.3 million to $6.3 million for the nine months ended September 30, 2024, compared to $4.0 million for the same period of 2023. The increase for the three-month and nine-month periods ended September 30, 2024 compared to the three-month and nine-month periods ended September 30, 2023 was primarily due to an increase in received death benefits as well as an increase in monthly income on the bank owned life insurance policies.

During the three months and nine months ended September 30, 2024, Park recognized a $5.8 million pension settlement gain due to a combination of lump sum payouts as well as the purchase of a nonparticipating annuity contract which will provide ongoing benefits to vested participants. There was no pension settlement gain recognized during the three months or the nine months ended September 30, 2023.

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During the nine-month period ended September 30, 2024, Park sold certain AFS debt securities with a book value of $31.2 million at a gross loss of $398,000. There were no sales of debt securities during the three-month period ended September 30, 2024 or the three-month and nine-month periods ended September 30, 2023.

Gain on equity securities, net, changed by $559,000, to a net gain of $1.6 million for the three months ended September 30, 2024 compared to a net gain of $998,000 for the same period in 2023. The $559,000 change for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was related to a $626,000 change in the gain on other equity securities which went from a net gain of $74,000 for the three months ended September 30, 2023 to a net gain of $700,000 for the three months ended September 30, 2024, partially offset by a $67,000 decline in the gain on equity securities held at NAV, which went from a $924,000 net gain for the three months ended September 30, 2023 to a $857,000 net gain for the three months ended September 30, 2024.

Gain on equity securities, net, changed by $610,000, to a net gain of $1.2 million for the nine months ended September 30, 2024 compared to a net gain of $618,000 for the same period in 2023. The $610,000 change for the nine months ended September 30, 2024 compared to the three months ended September 30, 2023 was related to a $1.2 million change in the gain (loss) on other equity securities which went from a net loss of $65,000 for the nine months ended September 30, 2023 to a net gain of $1.2 million for the nine months ended September 30, 2024, partially offset by a $608,000 decline in the gain on equity securities held at NAV, which went from a $683,000 net gain for the nine months ended September 30, 2023 to a $75,000 net gain for the nine months ended September 30, 2024.

Other components of net periodic pension benefit income increased $311,000 to $2.2 million for the three months ended September 30, 2024 compared to $1.9 million for the same period in 2023 and increased $933,000 to $6.6 million for the nine months ended September 30, 2024 compared to $5.7 million for the same period in 2023. The increase was largely due to an increase in the expected return on plan assets, partially offset by an increase in interest cost.

Miscellaneous income decreased $417,000, or 18.0%, to $1.9 million for the three months ended September 30, 2024, compared to $2.3 million for the same period in 2023. The decrease for the three-month period ended September 30, 2024 compared to the same period of 2023 was due to a decline in gains on sales of other asset, and a decline in miscellaneous income that was received during the three months ended September 30, 2023 as the result of an investment fund liquidation, partially offset by an increase in net gains on sale of repossessed assets.

Miscellaneous income increased $366,000, or 8.4%, to $4.7 million for the nine months ended September 30, 2024, compared to $4.4 million for the same period in 2023. The increase for the nine-month period ended September 30, 2024 compared to the same period of 2023 was primarily the result of an increase in the net gain on the sale of assets, an increase in filing fee income, and an increase in net gains on the sale of repossessed assets, partially offset by a decline in miscellaneous income that was received during the nine months ended September 30, 2023 as the result of an investment fund liquidation.

Other Expense

Other expense increased by $7.9 million to $85.7 million for the three months ended September 30, 2024 compared to $77.8 million for the same period of 2023 and increased by $7.9 million, to $238.1 million for the nine months ended September 30, 2024 compared to $230.2 million for the same period of 2023.

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The following table is a summary of the changes in the components of other expense:

			Three months ended September 30,																		Nine months ended September 30,
(In thousands)			2024						2023						Change						2024						2023						Change
Salaries			$	38,370					$	34,525					$	3,845					$	110,057					$	103,045					$	7,012
Employee benefits			10,162						10,822						(660)						31,595						32,176						(581)
Occupancy expense			3,731						3,203						528						9,887						9,770						117
Furniture and equipment expense			2,571						3,060						(489)						7,608						9,409						(1,801)
Data processing fees			11,764						9,700						2,064						30,114						28,032						2,082
Professional fees and services			7,842						7,572						270						20,681						22,158						(1,477)
Marketing			1,464						1,197						267						4,369						3,755						614
Insurance			1,640						2,158						(518)						5,135						5,932						(797)
Communication			955						1,135						(180)						2,993						3,217						(224)
State tax expense			1,116						1,125						(9)						3,355						3,499						(144)
Amortization of intangible assets			287						334						(47)						927						989						(62)
Foundation contributions			2,000						—						2,000						2,000						—						2,000
Miscellaneous			3,779						2,977						802						9,377						8,214						1,163
Total other expense			$	85,681					$	77,808					$	7,873					$	238,098					$	230,196					$	7,902

Salaries increased by $3.8 million, or 11.1%, to $38.4 million for the three months ended September 30, 2024, compared to $34.5 million for the same period in 2023. The increase for the three months ended September 30, 2024 compared to the same period of 2023 was due to an increase of $2.5 million in incentive compensation expense, an increase of $1.1 million in base salary expense, and an increase of $356,000 in share-based compensation expense. During the three months ended September 30, 2024, Park accrued $1.7 million for future one-time bonuses for associates. There were no similar one-time bonuses paid or accrued during the three months ended September 30, 2023.

Salaries increased by $7.0 million, or 6.8%, to $110.1 million for the nine months ended September 30, 2024, compared to $103.0 million for the same period in 2023. The increase for the nine months ended September 30, 2024 compared to the same period of 2023 was due to an increase of $3.9 million in incentive compensation expense, and an increase of $3.8 million in base salary expense. These increases were partially offset by a decrease in share-based compensation expense of $486,000. As previously mentioned, during the nine months ended September 30, 2024, Park accrued $1.7 million for future one-time bonuses for associates. There were no similar one-time bonuses paid or accrued during the nine months ended September 30, 2023.

Employee benefits decreased $660,000, or 6.1%, to $10.2 million for the three months ended September 30, 2024, compared to $10.8 million for the same period in 2023 and decreased $581,000 or 1.8%, to $31.6 million for the nine months ended September 30, 2024, compared to $32.2 million for the same period in 2023. The $660,000 decrease for the three months ended September 30, 2024 compared to the same period in 2023 was primarily due to a decrease in group insurance costs of $870,000, partially offset by an increase in pension plan expense of $191,000. The $581,000 decrease for the nine months ended September 30, 2024 compared to the same period in 2023 was primarily due to a decrease in group insurance costs of $2.0 million, partially offset by an increase in pension plan expense of $573,000, an increase in SERP expense of $498,000, and an increase in company match KSOP contributions of $261,000.

Occupancy expense increased $528,000, or 16.5%, to $3.7 million for the three months ended September 30, 2024, compared to $3.2 million for the same period in 2023. The increase for the three-month period ended September 30, 2024 compared to the same period in 2023 was primarily due to an increase in expense for the rental of leased space of $288,000 and an increase in maintenance and repairs expense of $265,000 which included $349,000 in expenses related to a building demolition.

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Furniture and equipment expense decreased $489,000, or 16.0%, to $2.6 million for the three months ended September 30, 2024 compared to $3.1 million for the same period in 2023 and decreased $1.8 million, or 19.1%, to $7.6 million for the nine months ended September 30, 2024 compared to $9.4 million for the same period in 2023. The decrease for the three-month period ended September 30, 2024 compared to the same period in 2023 related to a decrease in depreciation expense. The decrease for the nine-month period ended September 30, 2024 compared to the same period in 2023 related to decreases in depreciation expense and repairs and maintenance expense.

Data processing expense increased $2.1 million, or 21.3%, to $11.8 million for the three months ended September 30, 2024 compared to $9.7 million for the same period in 2023, and increased $2.1 million, or 7.4%, to $30.1 million for the nine months ended September 30, 2023 from $28.0 million for the same period in 2023. The increase for both the three-month and the nine-month periods ended September 30, 2024 compared to the same periods in 2023 related to an increase in software expense, partially offset by a decline in debit card and ATM processing costs.

Professional fees and services expense decreased $1.5 million, or 6.7%, to $20.7 million for the nine months ended September 30, 2024 compared to $22.2 million for the same period in 2023. The decrease for the nine-month period ended September 30, 2024 compared to the same period in 2023 primarily related to a $1.3 million decrease in legal expense and a $746,000 decrease in consulting fees, partially offset by a $312,000 increase in credit services expense and an increase of $233,000 in audit and supervisory expenses.

Marketing expense increased $614,000, or 16.4%, to $4.4 million for the nine months ended September 30, 2024 compared to $3.8 million for the same period in 2023. The increase for the nine-month period ended September 30, 2024 compared to the same period in 2023 related to an increase in advertising expense.

Insurance expense decreased $518,000 or 24.0%, to $1.6 million for the three months ended September 30, 2024 compared to $2.2 million for the same period in 2023 and decreased $797,000, or 13.4%, to $5.1 million for the nine months ended September 30, 2024 compared to $5.9 million for the same period in 2023. The decrease for both the three-month and the nine-month periods ended September 30, 2024 compared to the periods ended September 30, 2023 related to a decrease in FDIC insurance assessment expense.

The Foundation contribution increase for the three months and the nine months ended September 30, 2024, compared to the same periods of 2023, was due to a $2.0 million contribution being made to Park's charitable foundation during the three months and the nine months ended September 30, 2024. There was no contribution made by Park to its charitable foundation during the three months and the nine months ended September 30, 2023.

The subcategory "miscellaneous" other expense includes expenses for supplies, travel and other miscellaneous expense. The subcategory miscellaneous other expense increased $802,000, or 26.9%, to $3.8 million for the three-month period ended September 30, 2024, compared to $3.0 million for the same period in 2023. This $802,000 increase in expense was primarily related to an increase of $1.2 million in the provision for unfunded credit losses, partially offset by a decrease in non-loan related losses of $318,000.

The subcategory "miscellaneous" other expense includes expenses for supplies, travel and other miscellaneous expense. The subcategory miscellaneous other expense increased $1.2 million or 14.2%, to $9.4 million for the nine-month period ended September 30, 2024, compared to $8.2 million for the same period in 2023. The $1.2 million increase in expense for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was primarily related to an increase of $1.1 million in the provision for unfunded credit losses.

Items Impacting Comparability (Non-U.S. GAAP)

From time to time, revenue, expenses, and/or taxes are impacted by items judged by management of Park to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that their outsized impact is believed by management of Park at that time to be infrequent or short-term in nature. Most often, these items impacting comparability of period results relate to merger and acquisition activities and revenue and expenses related to former Vision Bank loan relationships. In other cases, they may result from management's decisions associated with significant corporate actions outside of the ordinary course of business.

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The following table details those items which management believes impact the comparability of current and prior period amounts.

			THREE MONTHS ENDED									NINE MONTHS ENDED
(in thousands except per common share data)			September 30, 2024			September 30, 2023						September 30, 2024			September 30, 2023						Affected Line Item
Net interest income			$	101,114		$	94,269					$	294,574		$	278,039
less purchase accounting accretion related to NewDominion and Carolina Alliance acquisitions			281			145						904			509						Interest and fees on loans
less interest income on former Vision Bank relationships			9			9						16			596						Interest and fees on loans
Net interest income - adjusted			$	100,824		$	94,115					$	293,654		$	276,934
Provision for (recovery of) credit losses			$	5,315		$	(1,580)					$	10,608		$	1,095
less recoveries on former Vision Bank relationships			(234)			(40)						(1,304)			(788)						Provision for (recovery of) credit losses
Provision for (recovery of) credit losses - adjusted			$	5,549		$	(1,540)					$	11,912		$	1,883
Total other income			$	36,530		$	27,713					$	91,524		$	77,115
less loss on sale of debt securities, net			—			—						(398)			—						Loss on the sale of debt securities, net
less pension settlement gain			5,783			—						5,783			—						Pension settlement gain
less impact of strategic initiatives			—			—						658			—						Miscellaneous
less Vision related gain on the sale of OREO, net			1			—						115			—						Miscellaneous
less other service income related to former Vision Bank relationships			—			—						13			135						Other service income
Total other income - adjusted			$	30,746		$	27,713					$	85,353		$	76,980
Total other expense			$	85,681		$	77,808					$	238,098		$	230,196
less Foundation contribution			2,000			—						2,000			—						Foundation contributions
less one-time incentive			1,700			—						1,700			—						Salaries
less building demolition costs			349			—						414			—						Occupancy expense
less direct expenses related to collection of payments on former Vision Bank loan relationships			—			—						—			100						Professional fees and services
less core deposit intangible amortization related to NewDominion and Carolina Alliance acquisitions			287			334						927			989						Amortization of intangible assets
Total other expense - adjusted			$	81,345		$	77,474					$	233,057		$	229,107
Tax effect of adjustments to net income identified above (7)			$	(414)		$	29					$	(704)		$	(197)
Net income - reported			$	38,217		$	36,917					$	112,790		$	102,234
Net income - adjusted (6)			$	36,659		$	37,028					$	110,140		$	101,492

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			THREE MONTHS ENDED									NINE MONTHS ENDED
(in thousands except per common share data)			September 30, 2024			September 30, 2023						September 30, 2024			September 30, 2023
Diluted EPS			$	2.35		$	2.28					$	6.95		$	6.29
Diluted EPS- adjusted (6)			$	2.25		$	2.28					$	6.79		$	6.24
Annualized return on average assets (1)(2)			1.53		%	1.47		%				1.53		%	1.37		%
Annualized return on average assets- adjusted (1)(2)(6)			1.47		%	1.47		%				1.49		%	1.36		%
Annualized return on average tangible assets (1)(2)(4)			1.56		%	1.49		%				1.55		%	1.39		%
Annualized return on average tangible assets- adjusted (1)(2)(4)(6)			1.49		%	1.50		%				1.52		%	1.38		%
Annualized return on average shareholders' equity (1)(2)			12.56		%	13.28		%				12.77		%	12.48		%
Annualized return on average shareholders' equity- adjusted (1)(2)(6)			12.05		%	13.32		%				12.47		%	12.39		%
Annualized return on average tangible equity (1)(2)(3)			14.52		%	15.62		%				14.82		%	14.70		%
Annualized return on average tangible equity- adjusted (1)(2)(3)(6)			13.93		%	15.66		%				14.48		%	14.59		%
Efficiency ratio (5)			61.98		%	63.25		%				61.38		%	64.29		%
Efficiency ratio- adjusted (5)(6)			61.55		%	63.05		%				61.20		%	64.21		%
Annualized net interest margin (5)			4.45		%	4.12		%				4.37		%	4.09		%
Annualized net interest margin- adjusted (5)(6)			4.43		%	4.11		%				4.36		%	4.07		%

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Financial Reconciliations
(1) Reported measure uses net income.
(2) Averages are for the three months and nine months ended September 30, 2024 and September 30, 2023, as appropriate.
(3) Net income for each period divided by average tangible equity during the period. Average tangible equity equals average shareholders' equity during the applicable period less average goodwill and other intangible assets during the applicable period.
RECONCILIATION TO AVERAGE SHAREHOLDERS' EQUITY OF AVERAGE TANGIBLE EQUITY:
			THREE MONTHS ENDED						NINE MONTHS ENDED
			September 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
AVERAGE SHAREHOLDERS' EQUITY			$	1,210,565		$	1,102,677		$	1,180,143		$	1,094,924
Less: Average goodwill and other intangible assets			163,509			164,801			163,820			165,127
AVERAGE TANGIBLE EQUITY			$	1,047,056		$	937,876		$	1,016,323		$	929,797
(4) Net income for each period divided by average tangible assets during the period. Average tangible assets equals average assets less average goodwill and other intangible assets, in each case during the applicable period.
RECONCILIATION TO AVERAGE ASSETS OF AVERAGE TANGIBLE ASSETS:
			THREE MONTHS ENDED						NINE MONTHS ENDED
			September 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
AVERAGE ASSETS			$	9,920,633		$	9,965,114		$	9,865,315		$	9,980,256
Less: Average goodwill and other intangible assets			163,509			164,801			163,820			165,127
AVERAGE TANGIBLE ASSETS			$	9,757,124		$	9,800,313		$	9,701,495		$	9,815,129
(5) Efficiency ratio is calculated by dividing total other expense by the sum of FTE net interest income and other income. The reconciliation of FTE net interest income to net interest income is shown below assuming a 21% federal corporate income tax rate. Additionally, net interest margin is calculated on a fully taxable equivalent basis by dividing FTE net interest income by average interest earning assets, in each case during the applicable period.
RECONCILIATION TO FTE NET INTEREST INCOME OF NET INTEREST INCOME
			THREE MONTHS ENDED						NINE MONTHS ENDED
			September 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
Interest income			$	133,808		$	120,889		$	389,352		$	346,464
FTE adjustment			594			1,042			1,815			2,888
FTE interest income			$	134,402		$	121,931		$	391,167		$	349,352
Interest expense			32,694			26,620			94,778			68,425
FTE net interest income			$	101,708		$	95,311		$	296,389		$	280,927
(6) Adjustments to net income for each period presented are detailed in the non-GAAP reconciliations of net interest income, provision for (recovery of) credit losses, total other income, and total other expense, as well as the disclosure of the "Tax effect of adjustments to net income identified above."
(7) The tax effect of adjustments to net income was calculated assuming a 21% federal corporate income tax rate.
(8) PTPP net income is calculated as net income, plus income taxes, plus the provision for (recovery of) credit losses, in each case during the applicable period. PTPP net income is a common industry metric utilized in capital analysis and review. PTPP is used to assess the operating performance of Park while excluding the impact of the provision for (recovery of) credit losses.
RECONCILIATION TO NET INCOME OF PRE-TAX, PRE-PROVISION NET INCOME
			THREE MONTHS ENDED						NINE MONTHS ENDED
			September 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
Net income			$	38,217		$	36,917		$	112,790		$	102,234
Plus: Income taxes			8,431			8,837			24,602			21,629
Plus: Provision for (recovery of) credit losses			5,315			(1,580)			10,608			1,095
Pre-tax, pre-provision net income			$	51,963		$	44,174		$	148,000		$	124,958

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Income Tax

 

Income tax expense was $8.4 million for the third quarter of 2024 and consisted of federal income tax expense of $8.2 million and state income tax expense of $273,000. This compares to income tax expense of $8.8 million for the second quarter of 2023, which consisted of federal income tax expense of $7.9 million and state income tax expense of $920,000. The effective income tax rate for the third quarter of 2024 was 18.1%, compared to 19.3% for the same period in 2023. Income tax expense was $24.6 million for the first nine months of 2024 and consisted of federal income tax expense of $23.7 million and state income tax expense of $868,000. This compares to income tax expense of $21.6 million for the first nine months of 2023, which consisted of federal income tax expense of $20.6 million and state income tax expense of $1.0 million. The effective income tax rate for the first half of 2024 was 17.9%, compared to 17.4% for the same period in 2023.

The difference between the statutory federal corporate income tax rate of 21% and Park's effective income tax rate reflects permanent tax differences, primarily consisting of tax-exempt interest income from municipal investments and loans, qualified affordable housing and historical tax credits, bank owned life insurance income, and dividends paid on the common shares held within Park's KSOP, offset by the impact of state income taxes. Park expects permanent federal income tax differences for the 2024 year will be approximately $6.5 million.

Comparison of Financial Condition

At September 30, 2024 and at December 31, 2023

 

Changes in Financial Condition

 

Total assets increased by $66.6 million during the first nine months of 2024 to $9,903 million at September 30, 2024, compared to $9,836 million at December 31, 2023. This increase was primarily due to the following:

•Loans increased by $254.8 million, or 3.4%, to $7,731 million at September 30, 2024, compared to $7,476 million at December 31, 2023.

•Prepaid assets increased by $28.9 million, or 17.4%, to $194.7 million at September 30, 2024, compared to $165.9 million at December 31, 2023. This was primarily due to a change in the prepaid pension asset which was impacted by the remeasurement of the funded status of Park's pension plan as of September 30, 2024.

•Total investment securities decreased by $195.8 million, or 13.7%, to $1,233 million at September 30, 2024, compared to $1,429 million at December 31, 2023.

•Cash and cash equivalents decreased by $16.6 million, or 7.6%, to $201.7 million at September 30, 2024, compared to $218.3 million at December 31, 2023. Money market instruments decreased by $3.4 million and cash and due from banks decreased by $13.1 million.

Total liabilities decreased by $27.5 million, or 0.3%, during the first nine months of 2024 to $8,664 million at September 30, 2024, compared to $8,691 million at December 31, 2023. This change was primarily due to the following:

•Total deposits increased by $172.1 million, or 2.1%, to $8,215 million at September 30, 2024, compared to $8,043 million at December 31, 2023.

•Short-term borrowings decreased by $210.7 million, or 64.2%, to $117.4 million at September 30, 2024, compared to $328.2 million at December 31, 2023.

Total shareholders’ equity increased by $94.1 million, or 8.2%, to $1,239 million at September 30, 2024, from $1,145 million at December 31, 2023. This change was primarily due to the following:

•Retained earnings increased by $60.1 million during the period primarily as a result of net income of $112.8 million, partially offset by cash dividends on common shares of $51.9 million.

•Accumulated other comprehensive loss, net of taxes decreased by $31.5 million during the period primarily as a result of a $18.4 million unrealized net holding gain on debt securities available-for-sale, net of income tax effect and a $13.1 million change in funded status of defined benefit pension plan, net of income tax effect.

•Treasury shares decreased by $3.6 million during the period as a result of the issuance of treasury shares under share-based compensation awards (net of common shares withheld to pay employee income taxes).

•Common shares decreased by $1.2 million during the period as a result of the issuance of treasury shares under share-based compensation awards (net of common shares withheld to pay employee income taxes), partially offset by an increase due to share-based compensation expense.

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Increases or decreases in the investment securities portfolio, short-term borrowings and long-term debt are greatly dependent upon the growth in loans and deposits. The primary objective of management is to grow loan and deposit totals. To the extent that management is unable to grow loan totals at a desired growth rate, additional investment securities may be acquired. Likewise, both short-term borrowings and long-term debt are utilized to fund the growth in earning assets if the growth in deposits and cash flow from operations are not sufficient to do so.

Liquidity

Cash provided by operating activities was $129.6 million and $97.4 million for the nine months ended September 30, 2024 and 2023, respectively. Net income was the primary source of cash from operating activities for each of the nine-months periods ended September 30, 2024 and 2023.

Cash used in investing activities was $52.2 million and $121.1 million for the nine months ended September 30, 2024 and 2023, respectively. Proceeds from the sale, repayment, or maturity of investment securities provide cash and purchases of investment securities use cash. Net investment securities transactions provided cash of $221.7 million for the nine months ended September 30, 2024 and $95.1 million for the nine months ended September 30, 2023. Another major use or source of cash in investing activities is the net increase or decrease in the loan portfolio. Cash used by the net increase in the loan portfolio was $254.9 million and $203.8 million for the nine months ended September 30, 2024 and 2023, respectively.

Cash used in financing activities was $94.0 million and cash provided by financing activities was $57.6 million for the nine months ended September 30, 2024 and 2023, respectively. A major source of cash for financing activities is the net change in deposits. Deposits (net of off-balance sheet deposits) increased and provided $172.1 million and $10.0 million of cash for the nine months ended September 30, 2024 and 2023, respectively. Another major source/use of cash from financing activities is borrowings in the form of short-term borrowings, long-term debt and subordinated notes. For the nine months ended September 30, 2024, net short-term borrowings decreased and used $210.7 million in cash. For the nine months ended September 30, 2023, net short-term borrowings increased and provided $125.4 million in cash. For the nine months ended September 30, 2023, cash declined by $23.0 million due to the repurchase of common shares to be held as treasury shares; while there were no repurchases of common shares during the nine months ended September 30, 2024. Finally, cash declined by $52.3 million and $52.0 million for the nine months ended September 30, 2024 and 2023, respectively, from the payment of dividends.

Effective liquidity management ensures that the cash flow requirements of depositors and borrowers, as well as the operating cash needs of the Corporation, are met. Funds are available from a number of sources, including the capital markets, the investment securities portfolio, the core deposit base, FHLB borrowings and the capability to securitize or package loans for sale. The most easily accessible forms of liquidity, Fed Funds Sold, unpledged investment securities and available FHLB borrowing capacity, totaled $1.90 billion at September 30, 2024. The Corporation’s loan to asset ratio was 78.07% at September 30, 2024, compared to 76.01% at December 31, 2023 and 73.49% at September 30, 2023. Cash and cash equivalents were $201.7 million at September 30, 2024, compared to $218.3 million at December 31, 2023 and $223.6 million at September 30, 2023. Management believes that the present funding sources provide more than adequate liquidity for the Corporation to meet its cash flow needs.

  

Capital Resources

 

Total shareholders’ equity at September 30, 2024 was $1,239 million, or 12.5% of total assets, compared to $1,145 million, or 11.6% of total assets, at December 31, 2023 and $1,086 million, or 10.9% of total assets, at September 30, 2023.

 

Financial institution regulators have established guidelines for minimum capital ratios for banks, thrifts and bank holding companies. Park has elected not to include the net unrealized gain or loss on debt securities AFS in computing regulatory capital. Park has adopted the Basel III regulatory capital framework as approved by the federal banking agencies. Under the Basel III regulatory capital framework, in order to avoid limitations on capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers, Park must hold a capital conservation buffer of 2.5% above the adequately capitalized risk-based capital ratios. The amounts shown below as the adequately capitalized ratio plus capital conservation buffer include the 2.50% buffer. The Federal Reserve Board has also adopted capital requirements Park must maintain to be deemed "well capitalized" and remain a financial holding company.

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Park and PNB met each of the well capitalized ratio guidelines applicable to them at September 30, 2024. The following table indicates the capital ratios for PNB and Park at September 30, 2024 and December 31, 2023.

			At September 30, 2024
			Leverage						Tier 1 Risk-Based						Common Equity Tier 1						Total Risk-Based
The Park National Bank			9.76		%				11.35		%				11.35		%				12.77		%
Park National Corporation			11.43		%				13.33		%				13.15		%				16.50		%
Adequately capitalized ratio			4.00		%				6.00		%				4.50		%				8.00		%
Adequately capitalized ratio plus capital conservation buffer			4.00		%				8.50		%				7.00		%				10.50		%
Well capitalized ratio (PNB)			5.00		%				8.00		%				6.50		%				10.00		%
Well capitalized ratio (Park)			N/A						6.00		%				N/A						10.00		%

			At December 31, 2023
			Leverage						Tier 1 Risk-Based						Common Equity Tier 1						Total Risk-Based
The Park National Bank			9.11		%				10.95		%				10.95		%				12.35		%
Park National Corporation			10.74		%				12.97		%				12.79		%				16.19		%
Adequately capitalized ratio			4.00		%				6.00		%				4.50		%				8.00		%
Adequately capitalized ratio plus capital conservation buffer			4.00		%				8.50		%				7.00		%				10.50		%
Well capitalized ratio (PNB)			5.00		%				8.00		%				6.50		%				10.00		%
Well capitalized ratio (Park)			N/A						6.00		%				N/A						10.00		%

Contractual Obligations and Commitments

 

In the ordinary course of operations, Park enters into certain contractual obligations. Such obligations include the funding of operations through debt issuances as well as leases for premises. See page 70 of Park’s 2023 Form 10-K (Table 32) for disclosure concerning contractual obligations and commitments at December 31, 2023. There were no significant changes in contractual obligations and commitments during the first nine months of 2024.

 

Financial Instruments with Off-Balance Sheet Risk

 

PNB is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include loan commitments and standby letters of credit. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated financial statements.

 

The exposure to credit loss (for PNB) in the event of nonperformance by the other party to the financial instrument for loan commitments and standby letters of credit is represented by the contractual amount of those instruments. PNB uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Since many of the loan commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan commitments to customers.

 

The total amounts of off-balance sheet financial instruments with credit risk were as follows:

(In thousands)						September 30, 2024						December 31, 2023
Loan commitments						$	1,606,896					$	1,527,577
Standby letters of credit						$	35,644					$	31,261

 

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ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Management reviews interest rate sensitivity on a quarterly basis by modeling the consolidated financial statements under various interest rate scenarios. The primary reason for these efforts is to guard Park from adverse impacts of unforeseen changes in interest rates. With the shift in deposit mix and other balance sheet composition changes, Park has experienced a moderation in earnings risk exposure to either rising or falling interest rate environments, and management views its risk profile as being relatively interest rate risk neutral. Management actively monitors changes in the sensitivity position and has ample tools to adjust exposure as needed. As a result, management expects further changes in interest rates to have a modest impact on net income.

 

On page 69 (Table 31) of Park’s 2023 Form 10-K, management reported that Park’s twelve-month cumulative rate sensitivity gap was a positive (assets exceeding liabilities) $782.9 million or 8.7% of total interest earning assets at December 31, 2023. At September 30, 2024, Park’s twelve-month cumulative rate sensitivity gap was a positive (assets exceeding liabilities) $407.8 million or 4.49% of total interest earning assets.

 

Management supplements the interest rate sensitivity gap analysis with periodic simulations of balance sheet sensitivity under various interest rate and what-if scenarios to better forecast and manage the net interest margin. Management uses a 50 basis point change in market interest rates per quarter for a total of 200 basis points per year in evaluating the impact of changing interest rates on net interest income and net income over a twelve-month horizon.

 

On page 70 of Park’s 2023 Form 10-K, management reported that at December 31, 2023, the earnings simulation model projected that net income would increase by 1.5% using a rising interest rate scenario and decrease by 1.9% using a declining interest rate scenario over the next year. At September 30, 2024, the earnings simulation model projected that net income would increase by 0.2% using a rising interest rate scenario and would decrease by 1.0% in a declining interest rate scenario. At September 30, 2024, management continues to believe that it has the tools necessary to mitigate gradual changes in interest rates (50 basis points per quarter for a total of 200 basis points per year) such that the overall impact to net income will be modest.

 

ITEM 4 – CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

With the participation of the Chairman of the Board and Chief Executive Officer (the principal executive officer) and the Chief Financial Officer, Secretary and Treasurer (the principal financial officer) of Park, Park’s management has evaluated the effectiveness of Park’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, 2024 (the end of the quarterly period covered by this Quarterly Report on Form 10-Q). Based on that evaluation, Park’s Chairman of the Board and Chief Executive Officer and Park’s Chief Financial Officer, Secretary and Treasurer have concluded that:

 

•information required to be disclosed by Park in this Quarterly Report on Form 10-Q and the other reports that Park files or submits under the Exchange Act would be accumulated and communicated to Park’s management, including its principal executive officer and its principal financial officer, as appropriate to allow timely decisions regarding required disclosure;

•information required to be disclosed by Park in this Quarterly Report on Form 10-Q and the other reports that Park files or submits under the Exchange Act would be recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and

•Park’s disclosure controls and procedures were effective as of September 30, 2024 (the end of the quarterly period covered by this Quarterly Report on Form 10-Q).

Changes in Internal Control Over Financial Reporting

There were no changes in Park's internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during Park's fiscal quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, Park's internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1.       Legal Proceedings

    We are routinely engaged in various litigation and other legal matters that are part of, or incidental to, our ordinary course of business and we have a number of unresolved lawsuits and open matters pending resolution. While the ultimate liability with respect to these matters and claims cannot be determined at this time, we believe that losses, damages, or liabilities, if any, and other amounts relating to pending matters, individually or in the aggregate, are not likely to have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows.

Item 1A.     Risk Factors

 

There are certain risks and uncertainties in our business that could cause Park's actual results to differ materially from those anticipated. In “ITEM 1A. RISK FACTORS” of Part I of Park’s 2023 Form 10-K, we included a detailed discussion of our risk factors. All of these risk factors should be read carefully in connection with evaluating Park's business and in connection with the forward-looking statements contained in this Quarterly Report on Form 10-Q. There have been no material changes to the risk factors set forth in Park's 2023 Form 10-K. Any of the risks described in Park's 2023 Form 10-K could materially adversely affect our business, financial condition or future results and the actual outcome of matters as to which forward-looking statements are made. These are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds

(a)Not applicable

(b)Not applicable

(c)The following table provides information concerning purchases of Park’s common shares ("Common Shares") made by or on behalf of Park or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Exchange Act, during the three months ended September 30, 2024, as well as the maximum number of Common Shares that may be purchased under Park’s previously announced stock repurchase authorizations to fund the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP and Park's previously announced 2017 and 2019 stock repurchase authorizations:

Period						Total number of Common Shares purchased						Average price paid per Common Share						Total number of Common Shares purchased as part of publicly announced plans or programs						Maximum number of Common Shares that may yet be purchased under the plans or programs (1)
July 1 through July 31, 2024						—						$	—					—						996,088
August 1 through August 31, 2024						—						—						—						996,088
September 1 through September 30, 2024						—						—						—						996,088
Total						—						$	—					—						996,088

(1)The number shown represents, as of the end of each period, the maximum number of Common Shares that may yet be purchased as part of Park’s publicly announced stock repurchase authorizations to fund the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP, which announcement was made on April 24, 2017; Park's publicly announced stock repurchase authorization covering 500,000 Common Shares which was announced on January 23, 2017; and Park's stock repurchase authorization covering 500,000 Common Shares which was announced on January 28, 2019 and as to which approval from the Federal Reserve was obtained in the form of correspondence from the Federal Reserve Bank of Cleveland dated April 19, 2019. Such authorizations are not subject to a fixed expiration date.

 

    At the 2017 Annual Meeting of Shareholders held on April 24, 2017, Park's shareholders approved the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP. The Common Shares to be issued and delivered under the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP may consist of either Common Shares currently held or Common

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Shares subsequently acquired by Park as treasury shares. No newly-issued Common Shares will be delivered under the 2017 Employees LTIP or the 2017 Non-Employee Directors LTIP. On April 24, 2017, Park's Board of Directors authorized the purchase, from time to time, of up to 750,000 Park Common Shares and 150,000 Park Common Shares, respectively, to be held as treasury shares for subsequent issuance and delivery under the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP. No awards shall be granted under the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP after the tenth anniversary of these plans.

    On January 23, 2017, the Park Board of Directors authorized Park to purchase, from time to time, up to an aggregate of 500,000 Park Common Shares. On January 28, 2019, the Park Board of Directors authorized Park to repurchase, from time to time following receipt of any required approval from the Federal Reserve, up to 500,000 Park Common Shares in addition to the 500,000 Park Common Shares which had been authorized for repurchase by the Park Board of Directors on January 23, 2017 and remained available for repurchase as of January 28, 2019. The required approval was received by Park in the form of correspondence from the Federal Reserve Bank of Cleveland dated April 19, 2019. These programs do not have a termination date.

    

    Purchases may be made through NYSE American, in the over-the-counter market or in privately negotiated transactions, in each case in compliance with the Ohio General Corporation Law, applicable federal and state securities laws, the rules applicable to issuers having securities listed on NYSE American, regulations promulgated by the Federal Reserve Board and all other applicable laws and regulations, each as in effect at the time of each such purchase. Purchases will be made upon such terms and conditions and at such times and in such amounts as any one or more of the authorized officers of Park deem to be appropriate, subject to market conditions, regulatory requirements, any contractual obligations of Park and Park's subsidiaries and other factors, and in the best interest of Park and Park's shareholders. The January 23, 2017 stock repurchase authorization and the January 28, 2019 stock repurchase authorization are distinct from the stock repurchase authorizations to fund the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP.

Item 3.      Defaults Upon Senior Securities

 

(a), (b) Not applicable.

Item 4.      Mine Safety Disclosures

 

Not applicable.

Item 5.      Other Information

 

(a)None

(b)None

(c)During the three months (the quarterly period) ended September 30, 2024, no director and no officer of Park (as defined in Rule 16a-1(f) under the Exchange Act) of Park adopted, modified, or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of SEC Regulation S-K.

Item 6.      Exhibits

			3.1			Articles of Incorporation of Park National Corporation [This document represents the Articles of Incorporation of Park National Corporation in compiled form incorporating all amendments. This compiled document has not been filed with the Ohio Secretary of State.] (Incorporated herein by reference to Exhibit 3.1(i) to Park National Corporation's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 (File No. 1-13006))
			3.2			Regulations of Park National Corporation [This document represents the Regulations of Park National Corporation in compiled form incorporating all amendments, including the amendments adopted and approved by the Board of Directors of Park National Corporation on October 23, 2023] (Incorporated herein by reference to Exhibit 3.1(b) to Park National Corporation's Current Report on Form 8-K dated and filed October 27, 2023 (File No. 1-13006))
			31.1			Rule 13a – 14(a) / 15d – 14(a) Certifications (Principal Executive Officer) (Filed herewith)

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			31.2			Rule 13a – 14(a) / 15d – 14(a) Certifications (Principal Financial Officer) (Filed herewith)
			32.1			Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (Principal Executive Officer) (Filed herewith)
			32.2			Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (Principal Financial Officer) (Filed herewith)
			101			The following information from Park National Corporation's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024 formatted in Inline XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Condensed Balance Sheets as of September 30, 2024 and December 31, 2023 (unaudited); (ii) the Consolidated Condensed Statements of Income for the three months and the nine months ended September 30, 2024 and 2023 (unaudited); (iii) the Consolidated Condensed Statements of Comprehensive Income for the three months and the nine months ended September 30, 2024 and 2023 (unaudited); (iv) the Consolidated Condensed Statements of Changes in Shareholders’ Equity for the three months and the nine months ended September 30, 2024 and 2023 (unaudited); (v) the Consolidated Condensed Statements of Cash Flows for the nine months ended September 30, 2024 and 2023 (unaudited); and (vi) the Notes to Unaudited Consolidated Condensed Financial Statements (electronically submitted herewith). *
			104			Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document with applicable taxonomy extension information contained in Exhibit 101)

______________________________________

* The instance document does not appear in the interactive data file because its XBRL tags are imbedded within the Inline XBRL document.

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

						PARK NATIONAL CORPORATION
November 4, 2024						/s/ David L. Trautman
						David L. Trautman
						Chairman of the Board and Chief Executive Officer
						(Principal Executive Officer and Duly Authorized Officer)
November 4, 2024						/s/ Brady T. Burt
						Brady T. Burt
						Chief Financial Officer, Secretary and Treasurer
						(Principal Financial Officer and Duly Authorized Officer)

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