What changed in this filing

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Item 1. Business

2022-02-24 compared with 2021-02-26 · 108 added, 119 removed, 558 unchanged (29% of the section changed)

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Our branch delivery channels employ 32% of those associates.

At the end of 2020, our employee population was 69% female and 31% male, with an average tenure of 11 years.

At December 31, 2021, our associate population was 70% female and 30% male, with an average tenure of nine years.

We are committed to providing equal employment opportunities for all individuals.

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We have a Management Associate training program for exceptional college graduates.

Selected candidates spend a year working through different areas of the bank, learning about the financial industry from a variety of perspectives, including customer-facing and operational support roles.

Selected candidates spend two years working through different areas of the bank, learning about the financial industry from a variety of perspectives, including customer-facing and operational support roles.

Through Learning & Development (L&D), we work to foster professional growth by providing development opportunities to maximize associate performance and engagement, and drive our competitive advantage.

In 2021, our L&D team continued building a strategic infrastructure for the development of associates aligned with overall business outcomes.

This includes streamlining training, orientation, and onboarding;

This included streamlining training, orientation, and onboarding;

overseeing associate development;

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We are in the process of reviewing and updating our compensation strategy to ensure we conduct regular reviews and comparisons to current market data.

Available benefits include an Employee Stock Ownership Plan (KSOP) with a company matching contribution and a defined benefit pension plan;

Comprehensive benefit options are available to associates to encourage healthy and financially secure lives.

Available benefits include an Employees Stock Ownership Plan (KSOP) with a company matching contribution and a defined benefit pension plan;

health and life insurance;

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and an employee assistance program.

A project is currently underway to review all benefits offered to ensure we continue to have competitive options to attract and retain top talent.

Health and Safety

We are committed to providing a safe environment for associates and customers, and the safe preservation and maintenance of our facilities and equipment.

In response to the COVID-19 pandemic, we deployed multiple initiatives to ensure the safety of our associates and customers, and financial security of our associates.

Initiatives included implementing work from home;

moving to a drive-thru only model and selectively re-opening lobbies, serving customers through digital channels and by appointment;

providing $1.3 million in 2020 in calamity pay for associates with reduced hours due to closings, to keep their pay whole;

implementing an incentive recognition program that paid nearly $2.3 million in 2020 to associates for their extraordinary efforts in serving our customers during the COVID-19 pandemic;

providing paid time off to obtain vaccines;

and continually monitoring COVID-19 levels by county to determine ongoing office open/closed status.

ParkDirect, a virtual banking experience, was launched in May 2020.

While this created additional opportunities for customer engagement during the COVID-19 pandemic, it also has great potential to gain and retain customers in the post-COVID digital environment.

In late summer of 2020, we surveyed all associates to determine ongoing concerns and needs related to school starting.

As a result, we started an Educational Support Program to provide additional time off hours for full-time and part-time associates needing to support their dependents education due to altered school schedules and structure.

The program also provided over $21,000 to associates for the purchase of laptops/other electronic devices to support their dependents’ online learning experiences.

Many of the initiatives deployed in 2020 were continued into 2021 and evolved to ensure the safety of our associates and customers.

Initiatives included remote work for applicable positions;

providing over $400,000 in calamity pay for associates with COVID-related absences;

and continuing an incentive recognition program that paid over $1.7 million to associates for their extraordinary efforts in serving our customers during the COVID-19 pandemic.

Diversity and inclusion are embedded in Park National Bank’s values and culture.

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We believe it also means supporting a wide variety of community organizations and programs, and hiring associates from different backgrounds, locations and experiences.

In 2020, we conducted a D&I survey of all associates, with a 73% participation rate.

The outstanding participation affirms that D&I is important and must be an area of focus for our organization.

We measured accountability to D&I, inclusion, leadership, equity, and direct environment.

We received over 3,700 comments and hundreds of suggestions to enhance our organization for all associates.

We have partnered with an experienced D&I consultant to work with a team of leaders to explore common themes in the survey and created a shared language around diversity.

In order to ensure D&I remains top of mind for all of us, we will include D&I principles, reminders and ideas into our daily Serving More Stand-Up meetings.

In 2021, we will launch a series of D&I training for all associates.

We look forward to discussions we will have with our associates in these sessions.

In 2021, we held multiple virtual sessions of unconscious bias training entitled “Redefining Diversity and Exercising Inclusion”, which were attended by 576 managers and leaders.

The DEI consultant that led those sessions also recorded three short videos on the concepts covered which were uploaded to our Learning Management System for on-demand viewing.

In 2021, the Diversity Equity and Inclusion ("DEI") Taskforce met monthly and held open discussion sessions two times a month.

Goals were created by the DEI Task Force around DEI topics and initiatives.

Our organization is a wonderful blend of promising rookies, top draft picks, and seasoned veterans.

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Bound by these ideals, our colleagues tend to stay around for a long time.

Our voluntary turnover is low, at 16% for 2020.

At the end of our KSOP plan year, October 1, 2020, over 85% of our associates were shareholders through participation in our KSOP plan, for which we provide a discretionary 50% match for each associate regular contribution.

Our associate tenure reflects the effect of our efforts -- by the end of 2020, 37% of our staff had been with our organization 10 years or more.

Our voluntary turnover was 21% for 2021.

At the end of our KSOP plan year, October 1, 2021, over 85% of our associates were shareholders through participation in our KSOP plan, under which we provide a discretionary 50% match for each associate’s regular contribution.

Our associate tenure reflects the effect of our efforts -- by the end of 2021, 36% of our associates had been with our organization 10 years or more.

Banking Operations

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Park National Bank delivers financial products and services through its 96 financial service offices and a network of 116 automated teller machines, as well as telephone and internet-based banking through both personal computers and mobile devices, including ParkDirect, a mobile bank experience.

During 2020, Park began its transition from a division model to a regional model, with a common branding of Park National Bank, while still focusing on personal service by serving more in our communities.

Park National Bank, and one additional operating segment, Guardian Financial Services Company ("Guardian Finance"), comprise Park’s reportable operating segments under applicable accounting guidance.

The reportable segment for the Corporation is PNB.

Consumer Finance Subsidiary

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Guardian Finance provides consumer finance services in the central Ohio area.

As of the date of this Annual Report on Form 10-K, Guardian Finance had four financial service offices spanning four counties in Ohio:

Clark, Fairfield, Franklin and Licking.

Guardian Finance is no longer seeking new loans.

As of the date of this Annual Report on Form 10-K, Guardian Finance had one administrative office in Licking County, Ohio.

During 2019, Guardian Finance stopped seeking new loans.

SE Property Holdings, LLC ("SEPH")

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Through these contractual obligations, Park has fully and unconditionally guaranteed all of the Vision Trust’s obligations with respect to the floating rate preferred securities.

Both the junior subordinated notes and the floating rate preferred securities mature on December 30, 2035 (which maturity may be shortened), and carry a floating interest rate per annum, reset quarterly, equal to the sum of three-month LIBOR plus 148 basis points.

LIBOR plus 148 basis points.

Payment of interest on the junior subordinated notes, and payment of cash distributions on the floating rate preferred securities, may be deferred at any time or from time to time for a period not to exceed 20 consecutive quarters, subject to specified conditions.

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As of December 31, 2021, PII held municipal securities with an amortized cost of $366.9 million.

NSCB 2 LLC, River Park Properties, LLC, and Park ABQ, LLC are subsidiaries of Park National Bank that hold certain OREO properties or other nonperforming assets.

NSCB 2, LLC, River Park Properties, LLC, and Park ABQ, LLC, and X Holdings, LLC are subsidiaries of Park National Bank that hold certain OREO properties or other nonperforming assets.

The operations of these subsidiaries are not significant to the consolidated Park entity.

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COVID-19 Considerations

Banking has been identified by federal and state governmental authorities to be an essential service and Park is fully committed to continue serving our customers and communities through the COVID-19 public health crisis.

Banking has been identified by federal and state governmental authorities to be an essential service and Park is fully committed to continuing serving our customers and communities through the COVID-19 public health crisis.

For those in our communities experiencing a financial hardship, Park has offered various methods of support including loan modifications, payment deferral programs, participation in the CARES Act Paycheck Protection Program ("PPP"), participation in additional PPP loans authorized under the Consolidated Appropriations Act, 2021, and various other case by case accommodations.

Park has implemented various physical distancing guidelines to help protect associates, such as allowing associates to work from home, where practical, while maintaining customer service via our online banking services, mobile app, and ATMs, by keeping drive-thru lanes open to serve customers, maintaining selective branch office openings, and offering other banking services by appointment when necessary.

Park has implemented various guidelines to help protect associates, such as allowing associates to work from home where practical and required physical distancing, masks if working on-site.

COVID vaccines and boosters have also been encouraged for all associates.

During 2021, Park provided calamity pay and special one-time bonuses to certain associates.

The aggregate cost of the calamity pay and special bonuses amounted to $3.6 million for the twelve months ended December 31, 2020, respectively, and

is included within salaries expense.

Calamity pay was used to encourage those who are sick to stay home without any financial impact.

The bonus program was used to recognize those associates who consistently worked on-site or played vital roles in keeping our offices open.

The aggregate cost of calamity pay and special bonuses amounted to $2.1 million for the year ended December 31, 2021, and is included within salaries expense.

While all current retail offices remained fully open for the duration of 2021, customers were encouraged to continue utilizing our online banking services, the mobile app, including Park Direct, ATMs, and drive-thru services to safely do their banking.

Due to the uncertainty of the COVID-19 pandemic, on August 20, 2020, Park completed the issuance and sale of $175 million aggregate principal amount of its 4.50% Fixed-to-Floating Rate Subordinated Notes due 2030 (the "Subordinated Notes").

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Park intends to use the net proceeds for general corporate purposes, which may include providing capital to support Park's growth organically or through strategic acquisitions, repaying other indebtedness, financing investments, capital expenditures, repurchasing Park Common Shares and making investments in PNB as regulatory capital.

In order to adapt to changing customer behavior, lower transaction volume, service area overlap and to continue to focus on reducing operating expenses, Park closed 23 branches during 2020.

In order to adapt to changing customer behavior, lower transaction volume, service area overlap and to continue to focus on reducing operating expenses, Park closed 23 branches during 2020 and one branch during 2021.

Services Provided by Park’s Subsidiaries

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• ParkDirect, a personal banking app.

• a variety of additional banking-related services tailored to the needs of individual customers.

Park believes that the deposit mix of Park National Bank is currently such that no material portion has been obtained from a single customer and, consequently, the loss of any one customer of Park National Bank would not have a materially adverse effect on the business of Park National Bank.

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Of this amount, approximately $1,299 million represented commercial, financial and agricultural loans, $1,802 million represented commercial real estate loans, and $21 million represented commercial leases.

Commercial loans are made for a wide variety of general corporate purposes, including financing for industrial and commercial properties, financing for equipment, inventory and accounts receivable, acquisition financing, commercial leasing, and to consumer finance companies.

The term of each commercial loan varies by its purpose.

Repayment terms are structured such that commercial loans will be repaid within the economic useful life of the underlying asset.

Information concerning the loan maturity distribution within the commercial loan portfolio is provided in "Table 20 - Selected Loan Maturity Distribution" included in "ITEM 7.

Information concerning the loan maturity distribution within the commercial loan portfolio is provided in "Table 15 - Loan Maturity Distribution" included in "ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Annual Report on Form 10-K.

The commercial loan portfolio of Park’s current subsidiaries includes loans to a wide variety of corporations and businesses across many industrial classifications in the 26 Ohio counties, one Kentucky county, three North Carolina counties and four South Carolina counties where Park National Bank operates, with the exception of nationwide aircraft loans and nationwide asset-based lending to consumer finance companies.

The primary industries represented by these customers include real estate rental and leasing, finance and insurance, construction, agriculture, forestry, fishing and hunting, manufacturing, retail trade, health care, accommodation and food services and other services.

The primary industries represented by these customers include real estate rental and leasing, finance and insurance, construction, health care and social assistance, accommodation and food services, manufacturing, other services, retail trade, and agriculture, forestry, fishing and hunting.

Commercial loans are evaluated for the adequacy of repayment sources at the time of approval and are regularly reviewed for any possible deterioration in the ability of the borrower to repay the loan.

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CRE loans made for Park National Bank’s portfolio generally have a variable interest rate.

For more information concerning the loan maturity distribution in the CRE loan portfolio, please see "Table 20 - Selected Loan Maturity Distribution" included in "ITEM 7.

For more information concerning the loan maturity distribution in the CRE loan portfolio, please see "Table 15 - Loan Maturity Distribution" included in "ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Annual Report on Form 10-K.

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Other collateral securing commercial loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the borrower’s business.

Information concerning the loan loss experience and the allocation of the allowance for loan losses related to the commercial, financial and agricultural loan portfolio, the commercial real estate portfolio and the commercial lease portfolio is provided in "Table 34 - Summary of Loan Loss Experience" and "Table 35 - Allocation of Allowance for Loan Losses", respectively, included in "ITEM 7.

Information concerning the loan loss experience and the allocation of the allowance for credit losses related to the commercial, financial and agricultural loan portfolio, the commercial real estate portfolio and the commercial lease portfolio is provided in "Table 30 - Summary of Loan Credit Loss Experience" and "Table 32 - Allocation of Allowance for Credit Losses", respectively, included in "ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" found in Annual Report on Form 10-K.

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At December 31, 2021, Park's subsidiaries had outstanding consumer loans (including automobile loans) in an aggregate amount of $1,690 million, constituting approximately 24.6% of their aggregate total loan portfolio.

Park's subsidiaries make installment credit available to customers and prospective customers in their primary market areas through direct and indirect loans.

Park makes installment credit available to customers and prospective customers in their primary market areas through direct and indirect loans.

Indirect loans are facilitated through an automobile and other vehicle dealer;

whereas, direct loans are originated through direct customer interaction with Park's subsidiaries.

For both direct and indirect loans, the final credit decisions are made by Park's subsidiaries with the assistance of an automated underwriting system.

whereas, direct loans are originated through direct customer interaction with Park's regions.

For both direct and indirect loans, the final credit decisions are made by Park with the assistance of an automated underwriting system.

At December 31, 2021, of the $1,690 million in consumer loans, $1,485 million were originated through indirect lending, while the remaining $205 million were considered direct loans.

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A compliance officer, along with the appropriate line of business leaders, is responsible for monitoring each subsidiary’s performance and advising and updating loan personnel in this area.

Each subsidiary reviews its consumer loan portfolio monthly.

Loans are charged off in accordance with Park's policy.

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Consumer loan collections are dependent on borrowers' continuing financial stability, and thus are more likely to be affected by adverse personal circumstances.

Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount that can be recovered on these loans.

Information concerning the loan loss experience and the allocation of the allowance for loan losses related to the consumer loan portfolio is provided in "Table 34 - Summary of Loan Loss Experience" and "Table 35 - Allocation of Allowance for Loan Losses", respectively, included in "ITEM 7.

Furthermore, the application of

various federal and state laws, including bankruptcy and insolvency laws, may limit the amount that can be recovered on these loans.

Information concerning the loan credit loss experience and the allocation of the allowance for credit losses related to the consumer loan portfolio is provided in "Table 30 - Summary of Loan Credit Loss Experience" and "Table 32 - Allocation of Allowance for Credit Losses", respectively, included in "ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Annual Report on Form 10-K.

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Of the $2,060 million, approximately $1,739 million was included within the residential real estate loan segment, which included $534 million of commercial loans secured by residential real estate, $1,034 million of mortgage loans, $166 million of home equity lines of credit and $6 million of installment loans.

The remaining $343 million was included within the construction real estate loan segment, which included $227 million of commercial land and development loans, $115 million of 1-4 family residential construction loans, and $1 million of installment loans.

The remaining $322 million was included within the construction real estate loan segment, which included $215 million of commercial land and development loans and $107 million of 1-4 family residential construction loans.

The market area for real estate lending by Park National Bank is concentrated in Ohio, Kentucky, North Carolina and South Carolina.

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Independent third-party appraisals are generally obtained for consumer real estate loans.

Home equity lines of credit are generally secured by second mortgages by Park National Bank.

Home equity lines of credit are generally secured by second mortgages in favor of Park National Bank.

The maximum amount of a home equity line of credit is generally limited to 85% of the appraised value of the property less the balance of the first mortgage.

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A variable interest rate is generally charged on the home equity lines of credit.

Information concerning the loan loss experience and the allocation of the allowance for loan losses related to the residential real estate portfolio is provided in "Table 34 - Summary of Loan Loss Experience" and "Table 35 - Allocation of Allowance for Loan Losses", respectively, included in "ITEM 7.

Information concerning the loan credit loss experience and the allocation of the allowance for credit losses related to the residential real estate portfolio is provided in "Table 30 - Summary of Loan Credit Loss Experience" and "Table 32 - Allocation of Allowance for Credit Losses", respectively, included in "ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Annual Report on Form 10-K.

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Short-term construction loans are generally made with variable interest rates.

Information concerning the loan maturity distribution within the construction financing portfolio is provided in "Table 20 - Selected Loan Maturity Distribution" included in "ITEM 7.

Information concerning the loan maturity distribution within the construction financing portfolio is provided in "Table 15 - Loan Maturity Distribution" included in "ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS of this Annual Report on Form 10-K.

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Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the property’s value at completion of construction and the estimated cost (including interest) of construction.

If the estimate of construction cost proves to be inaccurate, Park National Bank may be required to advance funds beyond the amount originally committed to permit completion of the project.

If the estimate of

construction cost proves to be inaccurate, Park National Bank may be required to advance funds beyond the amount originally committed to permit completion of the project.

If the estimate of value proves inaccurate, Park National Bank may be confronted, at or prior to the maturity of the loan, with a project having a value insufficient to assure full repayment, should the borrower default.

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Park National Bank attempts to reduce such risks on loans to developers by requiring personal guarantees and reviewing current personal financial statements and tax returns as well as other projects undertaken by the developer.

For additional information concerning the loan loss experience, please see “ITEM 1A.

RISK FACTORS – Economic, Political and Market Risks – Changes in economic and political conditions could adversely affect our earnings and capital through declines in deposits, quality of investment securities, loan demand, our borrowers’ ability to repay loans, and the value of the collateral securing our loans.” and “– Business Operations Risks – Our allowance for loan losses may prove to be insufficient to absorb the probable, incurred losses in our loan portfolio.” in this Annual Report on Form 10-K.

Information concerning the loan loss experience and the allocation of the allowance for loan losses related to the construction financing portfolio is provided in "Table 34 - Summary of Loan Loss Experience" and "Table 35 - Allocation of Allowance for Loan Losses", respectively, included in "ITEM 7.

For additional information concerning the loan credit loss experience, please see “ITEM 1A.

RISK FACTORS – Economic, Political and Market Risks – Changes in economic and political conditions could adversely affect our earnings and capital through declines in deposits, quality of investment securities, loan demand, our borrowers’ ability to repay loans, and the value of the collateral securing our loans.” and “– Business Operations Risks – Our allowance for credit losses may prove to be insufficient to absorb the expected, lifetime losses in our loan portfolio.” in this Annual Report on Form 10-K.

Information concerning the loan credit loss experience and the allocation of the allowance for credit losses related to the construction financing portfolio is provided in "Table 30 - Summary of Loan Credit Loss Experience" and "Table 32 - Allocation of Allowance for Credit Losses", respectively, included in "ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Annual Report on Form 10-K.

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The primary factors in competing for deposits are interest rates paid on deposits, account liquidity, convenience and hours of office locations, convenience and availability of mobile banking options, and accessibility to trained and competent staff.

Competitors of Park’s subsidiaries may have greater resources and, as such, additional technology offerings and higher lending limits, which may adversely affect the ability of Park’s subsidiaries to compete.

In addition, certain nonfinancial institutions with which Park’s subsidiaries compete enjoy the benefits of fewer regulatory constraints, broader geographic service areas, greater capital and lower cost structures.

At December 31, 2020, Park and its subsidiaries had 1,756 full-time equivalent employees.

Competitors of Park may have greater resources and, as such, additional technology offerings and higher lending limits, which may adversely affect the ability of Park to compete.

In addition, certain nonfinancial institutions with which Park competes enjoy the benefits of fewer regulatory constraints, broader geographic service areas, greater capital and lower cost structures.

Financial technology companies, or "fintechs," are also providing nontraditional, but increasingly strong competition for our borrowers, depositors and other customers.

At December 31, 2021, Park and its subsidiaries had 1,685 full-time equivalent associates.

Supervision and Regulation of Park and its Subsidiaries

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The following information describes selected federal and state statutory and regulatory provisions and is qualified in its entirety by reference to the full text of such provisions.

These statutes and regulations are continually under review by the United States Congress and state legislatures and federal and state regulatory agencies.

These statutes and regulations are continually under review by the U.S.

Congress and state legislatures and federal and state regulatory agencies.

A change in statutes, regulations or regulatory policies applicable to Park and its subsidiaries could have a material effect on their respective businesses.

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A financial holding company is required by law and Federal Reserve Board policy to act as a source of financial and managerial strength to each subsidiary bank and to commit resources to support each such subsidiary bank.

The Federal Reserve Board may require a financial holding company to contribute additional capital to an undercapitalized subsidiary bank

and may disapprove of the payment of dividends to shareholders if the Federal Reserve Board believes the payment of such dividends would be an unsafe or unsound practice.

The Federal Reserve Board may require a financial holding company to contribute additional capital to an undercapitalized subsidiary bank and may disapprove of the payment of dividends to shareholders if the Federal Reserve Board believes the payment of such dividends would be an unsafe or unsound practice.

The Bank Holding Company Act requires the prior approval of the Federal Reserve Board in any case where a financial holding company proposes to:

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The Regulatory Relief Act also relieves bank holding companies and banks with consolidated assets of less than $100 billion, including Park, from certain record-keeping, reporting and disclosure requirements.

Certain other regulatory requirements applied only to banks with consolidated assets in excess of $50 billion and so did not apply to Park even before the enactment of the Regulatory Relief Act.

Certain other regulatory requirements applied only to banks with

consolidated assets in excess of $50 billion and so did not apply to Park even before the enactment of the Regulatory Relief Act.

Transactions with Affiliates, Directors, Executive Officers and Shareholders

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On June 30, 2019, the DRR reached 1.40%, and the FDIC applied credits for banks with assets of less than $10 billion ("small bank credits") beginning September 30, 2019.

The FDIC will continue to apply small bank credits so long as the DRR is at least 1.35%.

Park National Bank fully utilized its $2.2 million assessment credit during the third and fourth quarters of 2019.

As of June 30, 2020, the DRR fell below the minimum DRR to 1.30%.

As a result, the FDIC adopted a restoration plan requiring the restoration of the DRR to 1.35% within eight years of the plan establishment, by September 30, 2028.

This restoration plan maintained the scheduled assessments rates for all insured institutions.

The DRR was 1.27% as of September 30, 2021.

The FDIC rules further changed the method of determining risk-based assessment rates for established banks with less than $10 billion in assets to better ensure that banks taking on greater risks pay more for deposit insurance than banks that take on less risk.

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The Coronavirus Aid, Relief, and Economic Security Act of 2020 and Initiatives Related to COVID-19

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act of 2020, as amended (the “CARES Act”), was signed into law on March 27, 2020, to provide national emergency economic relief measures.

In response to the COVID-19 pandemic, the CARES Act, was signed into law on March 27, 2020, to provide national emergency economic relief measures.

Many of the CARES Act’s programs are dependent upon the direct involvement of U.S.

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Park is continuing to assess the impact of the CARES Act and other statutes, regulations and supervisory guidance related to the COVID-19 pandemic.

Section 1102 of the CARES Act amended the loan program of the Small Business Administration (the “SBA”), in which Park National Bank participates, to create a guaranteed, unsecured loan program, the Paycheck Protection Program (the “PPP”), to fund operational costs of eligible businesses, organizations and self-employed persons during the COVID-19 pandemic.

Section 1102 of the CARES Act amended the loan program of the SBA, in which Park National Bank participates, to create a guaranteed, unsecured loan program, the PPP, to fund operational costs of eligible businesses, organizations and self-employed persons during the COVID-19 pandemic.

These loans are eligible to be forgiven if certain conditions are satisfied and are fully guaranteed by the SBA.

In June 2020, the Paycheck Protection Program Flexibility Act was enacted, which, among other things, gave borrowers additional time and flexibility to use PPP loan proceeds.

Shortly thereafter, and due to the evolving impact of the COVID-19 pandemic, additional legislation was enacted authorizing the SBA to resume accepting PPP applications on July 6, 2020, and extending the PPP application deadline to August 8, 2020.

No collateral or personal guarantees were required.

Neither the government nor lenders are permitted to charge the recipients of PPP loans any fees.

It is anticipated that additional revisions to the SBA's interim final rules on forgiveness and loan review procedures will be forthcoming to address these and related changes.

December 27, 2020, the President signed into law omnibus federal spending and economic stimulus legislation titled the "Consolidated Appropriations Act, 2021" that included the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the "HHSB Act").

After previously being extended by Congress, the application deadline for PPP loans expired on May 31, 2021.

No collateral or personal guarantees were required for PPP loans.

In addition, neither the government nor lenders have been permitted to charge the recipients of PPP loans any fees.

On December 27, 2020, the President signed into law omnibus federal spending and economic stimulus legislation titled the "Consolidated Appropriations Act, 2021" that included the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the "HHSB Act").

Among other things, the HHSB Act renewed the PPP, allocating $284.45 billion for both new first-time PPP loans under the existing PPP and the expansion of existing PPP loans for certain qualified, existing PPP borrowers.

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As a participating lender in the PPP, Park National Bank continues to monitor legislative, regulatory, and supervisory developments related thereto.

On September 29, 2020, the federal bank regulatory agencies issued a final rule that neutralizes the regulatory capital and liquidity coverage ratio effects of participating in certain COVID-19 liquidity facilities due to the fact there is no credit or market risk in association with exposures pledged to such facilities.

market risk in association with exposures pledged to such facilities.

As a result, the final rule supports the flow of credit to households and businesses affected by COVID-19.

The CARES Act encouraged the Federal Reserve Board, in coordination with the Secretary of the Treasury, to establish or implement various programs to help mitigate the adverse effects of COVID-19 on midsize businesses, nonprofits, and municipalities.

In April 2020, the Federal Reserve established the Main Street Lending Program (“MSLP”) to implement certain of these recommendations.

The MSLP supported lending to small and medium-sized businesses that were in sound financial condition before the onset of COVID-19.

On November 19, 2020, Treasury Secretary Steven Mnuchin indicated that he would not reauthorize extending the MSLP past December 31, 2020.

However, the Federal Reserve Board extended the program to January 8, 2021, in order to process loans that were submitted on or before December 14, 2020.

The program ended on January 8, 2021.

On November 20, 2020, the federal bank regulatory agencies announced an interim final rule that provides temporary relief for specified community banking organizations related to certain regulations and reporting requirements as a result, in large part, of their growth in size from the response to COVID-19.

On December 2, 2020, the federal bank regulatory agencies announced an interim final rule that provides temporary relief for specified community banking organizations related to certain regulations and reporting requirements as a result, in large part, of their growth in size from the response to COVID-19.

Community banking organizations are subject to different rules and requirements based on their risk profile and asset size.

Due to their involvement in federal COVID-19 response programs (such as the PPP) and other lending that supports the U.S.

economy, many community banking organizations have experienced rapid and unexpected increases in their sizes, which are generally expected to be temporary.

The temporary increase in size could subject community banking organizations to new regulations or reporting requirements.

Community banking organizations, such as Park and Park National Bank, under $10.0 billion in total assets as of December 31, 2019 are permitted to use asset data as of December 31, 2019, in order to determine the applicability of various regulatory asset thresholds during calendar years 2020 and 2021.

This means that asset growth in 2020 and 2021 will not trigger new regulatory requirements for these community banking organizations until January 1, 2022, at the earliest.

This temporary regulatory burden relief applies to certain regulatory requirements.

economy, many community banking organizations experienced rapid and unexpected increases in their sizes, which were generally expected to be temporary.

The temporary increase in size could have subjected community banking organizations to new regulations or reporting requirements.

However, community banking organizations, such as Park and Park National Bank, under $10.0 billion in total assets as of December 31, 2019 were permitted to use asset data as of December 31, 2019, to determine the applicability of various regulatory asset thresholds during calendar years 2020 and 2021.

As such, it was not until January 1, 2022 that asset growth again triggered new regulatory requirements for these community banking organizations.

Regulatory Capital

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Capital levels, as measured by these standards, are also used to categorize financial institutions for purposes of certain prompt corrective action regulatory provisions.

In July 2013, the United States banking regulators issued capital rules applicable to smaller banking organizations which also implement certain of the provisions of the Dodd-Frank Act (the “Basel III Capital Rules”).

In July 2013, the U.S.

banking regulators issued capital rules applicable to smaller banking organizations which also implement certain of the provisions of the Dodd-Frank Act (the “Basel III Capital Rules”).

Community banking organizations, including Park and Park National Bank, began transitioning to the new rules on January 1, 2015.

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Common equity for the common equity tier 1 capital ratio generally consists of common stock (plus related surplus), retained earnings, accumulated other comprehensive income (unless an institution elects to exclude such income from regulatory capital), and limited amounts of minority interests in the form of common stock, subject to applicable regulatory adjustments and deductions.

Tier 1 capital general consists of common equity as defined for the common equity tier 1 capital ratio, plus certain non-cumulative preferred stock and related surplus, cumulative preferred stock and related surplus, trust preferred securities that have been grandfathered (but which are not otherwise permitted), and limited amounts of minority interests in the form of additional tier 1 capital instruments, less certain deductions.

Tier 2 capital, which can be included in the total capital ratio, generally consists of other preferred stock and subordinated debt meeting certain conditions plus limited amounts of the allowance for loan and lease losses, subject to specified eligibility criteria, less applicable deductions.

Tier 1 capital generally consists of common equity as defined for the common equity tier 1 capital ratio, plus certain non-cumulative preferred stock and related surplus, cumulative preferred stock and related surplus, trust preferred securities that have been grandfathered (but which are not otherwise permitted), and limited amounts of minority interests in the form of additional tier 1 capital instruments, less certain deductions.

Tier 2 capital, which can be included in the total capital ratio, generally consists of other preferred stock and subordinated debt meeting certain conditions plus limited amounts of the allowance for credit losses, subject to specified eligibility criteria, less applicable deductions.

The deductions from common equity tier 1 capital include goodwill and other intangibles, certain deferred tax assets, mortgage-servicing assets above certain levels, gains on sale in connection with a securitization, investments in a banking organization’s own capital instruments and investments in the capital of unconsolidated financial institutions (above certain levels).

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Congress provided this reprieve for a variety of reasons, including the fact that COVID-19 has created a volatile, uncertain lending environment that may result in significant credit losses for banks.

Park will not adopt CECL until 2021.

Park adopted CECL on January 1, 2021.

In September 2019, consistent with Section 201 of the Regulatory Relief Act, the Federal Reserve Board, along with the other federal bank regulatory agencies, issued a final rule, effective January 1, 2020, that gave community banks, including Park National Bank, the option to calculate a simple leverage ratio to measure capital adequacy, if the community banks met certain requirements.

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No CBLR Bank was required to calculate or report risk-based capital, and each CBLR Bank could opt out of the framework at any time, without restriction, by reverting to the generally applicable risk-based capital rule.

Pursuant to the CARES Act, on August 26, 2020, the federal banking agencies adopted a final rule that temporarily lowered the CBLR threshold and provides a gradual transition back to the prior level.

Specifically, the CBLR threshold was reduced to 8.0% for the remainder of 2020, increased to 8.5% for 2021, and will return to

9.0% beginning January 1, 2022.

Pursuant to the CARES Act, on August 26, 2020, the federal banking agencies adopted a final rule that temporarily lowered the CBLR threshold and provided a gradual transition back to the prior level.

Specifically, the CBLR threshold was reduced to 8.0% for the remainder of 2020, increased to 8.5% for 2021, and returned to 9.0% on January 1, 2022.

This final rule became effective on October 1, 2020.

Park does not intend to elect utilization of the CBLR in assessing capital adequacy.

Park did not utilize the CBLR in assessing capital adequacy.

In October 2021, effective in November 2021, the FDIC issued a final rule to incorporate the CBLR rule into the Real Estate Lending Standards.

This rule calculates the ratio of loans in excess of the supervisory loan-to-value limits (“LTV Limits”) using tier 1 capital plus the appropriate allowance for credit losses in the denominator.

This rule was adopted to allow a consistent approach for calculating the ratio of loans in excess of the supervisory LTV Limits at all FDIC supervised institutions, and to avoid any regulatory burden that could arise if an FDIC supervised institution subsequently decides to switch between different capital frameworks.

The federal banking agencies have established a system of prompt corrective action to resolve certain of the problems of undercapitalized depository institutions.

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Banking operations otherwise may be significantly affected depending on a bank’s capital category.

For example, a bank that is not “well capitalized” generally is prohibited from accepting brokered deposits and offering interest rates on deposits higher than the prevailing rate in its market, and the holding company of any undercapitalized depository institution must guarantee, in part, specific aspects of the bank’s capital plan for the plan to be acceptable.

For example, a bank that is not “well capitalized” generally is prohibited from accepting brokered

deposits and offering interest rates on deposits higher than the prevailing rate in its market, and the holding company of any undercapitalized depository institution must guarantee, in part, specific aspects of the bank’s capital plan for the plan to be acceptable.

In order to be “well-capitalized,” a bank must have a common equity tier I capital ratio of at least 6.5%, a total risk-based capital of at least 10.0%, a tier 1 risk-based capital ratio of at least 8.0% and a leverage ratio of at least 5.0%, and the bank must not be subject to any written agreement, order, capital directive or prompt corrective action directive to meet and maintain a specific capital level for any capital measure.

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These policies are used in varying degrees and combinations to directly affect the overall growth and distribution of bank loans, investments and deposits, as well as the interest rates charged on loans and paid on deposits.

In light of the changing conditions in the United States economy, including changes brought about by COVID-19, the money markets and the activities of fiscal and monetary authorities, Park can make no definitive predictions as to future changes in interest rates, credit availability or deposit levels.

In light of the changing conditions in the U.S.

economy, including changes brought about by COVID-19, the money markets and the activities of fiscal and monetary authorities, Park can make no definitive predictions as to future changes in interest rates, credit availability or deposit levels.

Limits on Dividends and Other Payments

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Accordingly, a financial holding company or a bank holding company should not pay cash dividends that exceed its net income or that can only be funded in ways that weaken the financial holding company's or bank holding company’s financial health, such as by borrowing.

In addition, Park may not pay dividends that would cause Park to fail to satisfy the capital adequacy regulations applicable to bank holding companies which qualify as financial holding companies, including having a capital conservation buffer that is greater than 2.5%.

In addition, Park may not pay dividends that

would cause Park to fail to satisfy the capital adequacy regulations applicable to bank holding companies which qualify as financial holding companies, including having a capital conservation buffer that is greater than 2.5%.

Park is subject to contractual restrictions on the declaration and payment of dividends under the terms of certain of Park's debt instruments.

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or (iii) during any period in which the payment of interest on the junior subordinated notes by Park (and the payment of cash distributions on the floating rate preferred securities of the Vision Trust) is being deferred.

Under the Credit Agreement, dated as of May 18, 2016, between Park and U.S.

Bank National Association (as amended, the "U.S.

Bank Credit Agreement"), Park would be prohibited from paying dividends on the Park Common Shares unless:

(i) Park is in compliance with the financial covenants specified in the U.S.

Bank Credit Agreement both before and after giving effect to the dividend payments;

(ii) no defined event of default under the U.S.

Bank Credit Agreement has occurred and is continuing;

and (iii) the proposed dividend payment has received all necessary regulatory approvals.

In December 2013, five federal agencies adopted a final regulation implementing the Volcker Rule provision of the Dodd-Frank Act (the "Volcker Rule").

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These SEC guidelines, and any other regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking law and regulations.

In November 2021, the OCC, the Federal Reserve Board and the FDIC issued a final rule requiring banking organizations that experience a computer-security incident to notify certain entities.

A computer-security incident occurs when actual or potential harm to the confidentiality, integrity or availability of an information system or the information occurs, or there is a violation or imminent threat of a violation to banking security policies and procedures.

The affected bank must notify its respective federal regulator of the computer-security incident as soon as possible and no later than 36 hours after the bank determines a computer-security incident has occurred.

These notifications are intended to promote early awareness of threats to banking organizations and will help banks react to those threats before they manifest into bigger incidents.

This rule also requires bank service providers to notify their customers of a computer-security incident.

State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations.

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The Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, as amended (the “Patriot Act”), substantially broadened the scope of U.S.

anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new

crimes and penalties and expanding the extra-territorial jurisdiction of the United States.

anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the United States.

The Patriot Act gives the U.S.

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Further, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions.

Among other requirements, Title III and related regulations require regulated financial institutions to establish a program specifying procedures for obtaining identifying information from customers seeking to open new accounts and establish enhanced due diligence policies, procedures and controls designed to detect and report suspicious activity.

detect and report suspicious activity.

Park National Bank has established policies and procedures that Park National Bank believes comply with the requirements of the Patriot Act.

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requires the development of standards for evaluating technology and internal processes for BSA compliance;

expands enforcement-related and investigation-related authority, including increasing available sanctions for certain BSA violations and instituting BSA whistleblower initiatives and protections.

and expands enforcement-related and investigation-related authority, including increasing available sanctions for certain BSA violations and instituting BSA whistleblower initiatives and protections.

Office of Foreign Assets Control Regulation

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The CRA requires Park National Bank's primary federal regulatory agency, the OCC, to assess Park National Bank's record in meeting the credit needs of the communities served by Park National Bank consistent with safe and sound banking practice.

Under the CRA, each depository institution is required to help meet the credit needs of its market area by, among other things, providing credit to low- and moderate-income individuals and communities.

Under the CRA, each depository institution is required to help meet the credit needs of its market area by, among other things, providing credit to low-income and moderate-income individuals and communities.

Depository institutions are periodically examined for compliance with the CRA and are assigned ratings that must be publically disclosed.

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The Board of Directors of Park has taken a series of actions to strengthen and improve Park’s already strong corporate governance practices in light of the rules of the SEC and NYSE American.

The Board of Directors has adopted and annually reviews charters for the Audit Committee, the Compensation Committee, the Executive Committee, the Nominating and Corporate Governance Committee (including as Exhibit A thereto, Corporate Governance Guidelines) and the Risk Committee, as well as a Code of Business Conduct and Ethics governing the directors, officers and associates of Park and its affiliates.

Executive and Incentive Compensation

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The proposed rule is intended to:

(i) prohibit incentive-based payment arrangements that the banking agencies determine could encourage certain financial institutions to take inappropriate risks by providing excessive compensation or that could lead to material financial loss;

(i) prohibit incentive-based payment arrangements that the bank regulatory agencies determine could encourage certain financial institutions to take inappropriate risks by providing excessive compensation or that could lead to material financial loss;

(ii) require the board of directors of those financial institutions to take certain oversight actions related to incentive-based compensation;

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and (iv) establish related definitions, reporting, and recordkeeping requirements.

No lenders are required to comply until the later of November 19, 2020, or until the court in litigation challenging the Small Dollar Rule lifted its stay of the compliance date.

In August 2021, the court overseeing the litigation challenging the Small Dollar Rule found in the CFPB’s favor, and ordered the compliance date to be 286 days after the final judgment.

Lenders are required to comply by June 13, 2022.

Separately, in May 2018, the OCC published guidance that encourages national banks and federal savings associations to offer responsible short-term, small-dollar installment loans with terms between two and twelve months and equal amortizing payments.

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A change in statutes, regulations or regulatory policies applicable to Park or any of its subsidiaries could have a material effect on Park's business, financial condition and results of operations.

Statistical Disclosure

The statistical disclosure relating to Park and its subsidiaries required under the SEC’s Industry Guide 3, “Statistical Disclosure by Bank Holding Companies,” is included "ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Annual Report on Form 10-K and in "Note 1 - Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements, "Note 5 - Investment Securities" of the Notes to Consolidated Financial Statements, "Note 6 - Loans" of the Notes to Consolidated Financial Statements, "Note 7 - Allowance for Loan Losses" of the Notes to Consolidated Financial Statements, "Note 13 - Deposits" of the Notes to Consolidated Financial Statements and "Note 15 - Short-Term Borrowings" of the Notes to Consolidated Financial Statements found in "ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" of this Annual Report on Form 10-K.

Effect of Environmental Regulation

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business