What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-01 compared with 2023-05-01 · 443 added, 263 removed, 654 unchanged (52% of the section changed)

7 unchanged sentences

• 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 and our subsidiaries do business, that may reflect deterioration in business and economic conditions, including the effects of higher unemployment rates, an acceleration in the pace of inflation, interest rate fluctuations, 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), and any slowdown in global economic growth, in addition to the continuing impact of the COVID pandemic and recovery therefrom on our customers’ operations and financial condition, 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;

• current and future economic and financial market conditions, either nationally or in the states in which Park and our subsidiaries do 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, ongoing interest rate increases, 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), and any slowdown in global economic growth, in addition to the continuing impact of the COVID-19 pandemic and recovery therefrom on our customers’ operations and financial condition, 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, including any loans acquired in acquisition transactions;

• the effect of monetary and other fiscal policies (including the impact of money supply, market interest rate policies and policies impacting inflation, of the Federal Reserve Board, the U.S.

• 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.

9 unchanged sentences

• 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 and our subsidiaries, 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, specifically the reforms provided for in the CARES Act and the follow-up legislation in the Consolidated Appropriations Act, 2021, the American Rescue Plan Act of 2021, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and the Basel III regulatory capital reforms, as well as regulations already adopted and which may be adopted in the future by the relevant regulatory agencies, including the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Federal Reserve Board, to implement the provisions of the CARES Act and the follow-up legislation in the Consolidated Appropriations Act, 2021, the provisions of the American Rescue Plan Act of 2021, the provisions of the Dodd-Frank Act, and the Basel III regulatory capital reforms;

• 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 and our subsidiaries, 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, specifically the reforms provided for in the Coronavirus Aid, Relief and Economic Security (CARES) Act and the follow-up legislation in the Consolidated Appropriations Act, 2021, the American Rescue Plan Act of 2021, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and the Basel III regulatory capital reforms, as well as regulations already adopted and which may be adopted in the future by the relevant regulatory agencies, including the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Federal Reserve Board, to implement the provisions of the CARES Act and the follow-up legislation in the Consolidated Appropriations Act, 2021, the provisions of the American Rescue Plan Act of 2021, the provisions of the Dodd-Frank Act, and the Basel III regulatory capital reforms;

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

2 unchanged sentences

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

• the impact of Park's ability to anticipate and respond to technological changes on Park's ability to respond to customer needs and meet competitive demands;

• 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 and our subsidiaries are highly dependent;

• the 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;

• 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;

11 unchanged sentences

• the impact of widespread natural and other disasters, pandemics (including the COVID-19 pandemic), 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) on the economy and financial markets generally and on us or our counterparties specifically;

• a worsening of the U.S.

• the potential further deterioration of the U.S.

economy due to financial, political, or other shocks;

1 unchanged sentence

and potential changes for such laws, especially in light of the COVID-19 pandemic, which may increase our healthcare and other costs and negatively impact our operations and financial results;

• risk and uncertainties associated with Park's entry into new geographic markets with our most recent acquisitions, including expected revenue synergies and cost savings from recent acquisitions not being fully realized or realized within the expected time frame;

• uncertainty surrounding the transition from the LIBOR to an alternate reference rate;

• a continuation of recent turmoil in the financial services industry, and the impact of responsive measures to mitigate and manage such turmoil, including potential increased supervisory and regulatory actions and costs;

• risks and uncertainties associated with Park's entry into new geographic markets with our most recent acquisitions, including expected revenue synergies and cost savings from recent acquisitions not being fully realized or realized within the expected time frame;

• uncertainty surrounding the transition from the London Inter-Bank Offered Rate (LIBOR) to an alternate reference rate;

• the impact of larger or similar-sized financial institutions encountering problems, such as the recent closures of Silicon Valley Bank in California, Signature Bank in New York and First Republic Bank in California, 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 in light of the recent bank failures;

• unexpected outflows of deposits which may require Park to sell investment securities at a loss;

• and other risk factors relating to the financial services industry as detailed from time to time in Park's reports filed with the SEC including those described in "Item 1A.

Risk Factors" of Part I of Park's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and "Item 1A.

Risk Factors" of Part II of this Quarterly Report on Form 10-Q.

Risk Factors" of Part I of Park's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, in "Item 1A.

Risk Factors" of Part II of Park's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 and in "Item 1A.

Risk Factors" of Part II of this Quarter Report on Form 10-Q.

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 after the date on which the forward-looking statement was made, or reflect the occurrence of unanticipated events, except to the extent required by applicable law.

19 unchanged sentences

Specifically, management reviews the return on average tangible equity, the return on average tangible assets, the tangible equity to tangible assets ratio, tangible book value per common share 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, the tangible equity to tangible assets ratio, tangible book value per common share and pre-tax, pre-provision net income for the three months ended and at March 31, 2023 and March 31, 2022.

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.

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.

23 unchanged sentences

These loans are not typical of Park's loan portfolio in that they are part of a specific government program to support businesses during the COVID pandemic and are 100% guaranteed by SBA.

As such, management considers growth in the loan portfolio excluding PPP loans, the total allowance for

credit losses to total loans ratio (excluding PPP loans), and general reserve on collectively evaluated loans as a percentage of total collectively evaluated loans (excluding PPP loans) in addition to the related U.S.

As such, management considers growth in the loan portfolio excluding PPP loans, the total allowance for credit losses to total loans ratio (excluding PPP loans), and general reserve on collectively evaluated loans as a percentage of total collectively evaluated loans (excluding PPP loans) in addition to the related U.S.

GAAP metrics which are not adjusted for PPP loans.

10 unchanged sentences

Park believes the determination of the allowance for credit losses involves a higher degree of judgment and complexity than its other significant accounting policies.

The allowance for credit losses 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 an off-balance sheet credit exposure.

The allowance for credit losses 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 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.

7 unchanged sentences

The adverse scenario assumes among other things that:

(1) the military conflict between Russia and Ukraine persists longer than anticipated worsening supply-chain conditions and increasing shortages of many goods;

(2) supply-chain shortages weaken manufacturing;

(3) inflation remains elevated, though slightly below the baseline amid persistent shortages and concerns about a wage price spiral;

(4) the Federal Reserve Board initially keeps the fed funds rate elevated, though a bit less than in the baseline because of weakening economy;

(1) the military conflict between Russia and Ukraine persists longer than anticipated worsening supply-chain conditions and weakening manufacturing;

(2) tensions between China and Taiwan increase and China briefly interrupts trade through the Taiwan Strait, worsening supply chain issues and eroding consumer and business confidence;

(3) the Federal Reserve Board initially keeps the fed funds rate elevated due to continued concerns about inflation, though a bit less than in the baseline because of weakening economic conditions;

(4) recent bank failures raise fears of further collapse in the banking industry, reducing consumer confidence and causing banks to tighten lending standards;

and (6) the economy falls into recession in the second quarter of 2023.

and (5) the economy falls into recession in the third quarter of 2023.

The adverse scenario forecasts Ohio unemployment for the next twelve months to range from 6.2% to 9.0%.

Excluding consideration of general reserve adjustments, this sensitivity analysis would result in a hypothetical increase in Park's ACL of $27.7 million as of March 31, 2023 if only the adverse scenario was used.

Excluding consideration of general reserve adjustments, this sensitivity analysis would result in a hypothetical increase in Park's ACL of $28.5 million as of June 30, 2023 if only the adverse scenario was used.

Excluding consideration of general reserve adjustments, a corresponding $28.5 million decrease in Park's ACL would occur in a hypothetical scenario if only the baseline (most likely) scenario was used.

3 unchanged sentences

Goodwill arising from business combinations represents the value attributable to unidentifiable intangible assets in each business acquired.

Park’s goodwill, as of March 31, 2023, relates to the value inherent in the financial services industry and that value is dependent upon the ability of Park’s national bank subsidiary, PNB, to provide quality, cost-effective banking services in a competitive marketplace.

Park’s goodwill, as of June 30, 2023, relates to the value inherent in the financial services industry and that value is dependent upon the ability of Park’s national bank subsidiary, PNB, to provide quality, cost-effective banking services in a competitive marketplace.

The goodwill value is supported by revenue that is in part driven by the volume of business transacted.

8 unchanged sentences

(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.

On January 1, 2023 the pension plan was amended to update the pension plan's benefit formula, vesting schedule and the hours of service basis.

These changes were taken into account in the calculation of annual pension expense.

Significant assumptions used to measure our annual pension expense include:

6 unchanged sentences

Comparison of Results of Operations

For the Three Months Ended March 31, 2023 and 2022

For the Three and Six Months Ended June 30, 2023 and 2022

Summary Discussion of Results

Net income for the three months ended March 31, 2023 was $33.7 million, compared to $38.9 million for the first quarter of 2022.

Diluted earnings per common share were $2.07 for the first quarter of 2023, compared to $2.38 for the first quarter of 2022.

Weighted average diluted common shares outstanding were 16,324,823 for the first quarter of 2023, compared to 16,331,031 weighted average diluted common shares outstanding for the first quarter of 2022.

Net income for the three months ended June 30, 2023 was $31.6 million, compared to $34.3 million for the second quarter of 2022.

Diluted earnings per common share were $1.94 for the second quarter of 2023, compared to $2.10 for the second quarter of 2022.

Weighted average diluted common shares outstanding were 16,240,600 for the second quarter of 2023, compared to 16,361,246 weighted average diluted common shares outstanding for the second quarter of 2022.

Net income for the six months ended June 30, 2023 was $65.3 million, compared to $73.2 million for the first half of 2022.

Diluted earnings per common share were $4.01 for the first half of 2023, compared to $4.48 for the first half of 2022.

Weighted average diluted common shares outstanding were 16,282,693 for the first half of 2023, compared to 16,346,141 weighted average diluted common shares outstanding for the first half of 2022.

Liquidity and Capital

1 unchanged sentence

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, off balance sheet deposits, unpledged investment securities and available FHLB borrowing capacity, totaled $2.74 billion at March 31, 2023.

Park's debt securities portfolio is classified as available-for-sale ("AFS") and these debt securities are available to be sold in the future in response to Park's liquidity needs, changes in market interest rates, and asset-liability management strategies, among other reasons.

1 unchanged sentence

The table below provides additional detail on Park's debt securities portfolio and capital position.

(Dollars in thousands) March 31, 2023 December 31, 2022 March 31, 2022 % change from 12/31/22 % change from 03/31/22

(Dollars in thousands) June 30, 2023 December 31, 2022 June 30, 2022 % change from 12/31/22 % change from 06/30/22

Net unrealized losses on debt securities 114,058 121,156 100,774 (5.86) % 13.18 %

7 unchanged sentences

In order to manage the impact of this growth on its balance sheet, Park has utilized a program where certain deposit balances are transferred off balance sheet while maintaining the customer relationship.

Park is able to increase or decrease the amount off balance sheet based on its balance sheet management strategies and liquidity needs.

The balance of deposits transferred off balance sheet has declined as deposit

balances have returned to normalized levels.

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 deposit balances have returned to normalized levels.

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

(Dollars in thousands) March 31, 2023 December 31, 2022 December 31, 2021 December 31, 2020 December 31, 2019

(Dollars in thousands) June 30, 2023 March 31, 2023 December 31, 2022 December 31, 2021 December 31, 2020 December 31, 2019

Retail Deposits

21 unchanged sentences

% change from prior period end (1.2) % 0.3 % (5.1) % 7.3 % 17.4 %

During the three months ended March 31, 2023, total deposits including off balance sheet deposits increased by $28.4 million, or 0.3%.

This increase consisted of a $184.2 million increase in total commercial deposits offset by a $124.4 million decrease in total retail deposits and a $31.3 million decrease in off balance sheet deposits.

Of the $184.2 million increase in total commercial deposits, $182.9 million was a result of an increase in public fund deposits.

This increase is consistent with historical seasonality.

As of March 31, 2023, Park had approximately $1.5 billion of uninsured deposits, which was 18.6% of total deposits.

During the three months ended June 30, 2023, total deposits including off balance sheet deposits decreased by $99.3 million, or 1.2%.

This decrease consisted of a $127.5 million decrease in total retail deposits and a $163.8 million decrease in off balance sheet deposits, partially offset by a $192.1 million increase in total commercial deposits.

During the six months ended June 30, 2023, total deposits including off balance sheet deposits decreased by $70.9 million, or 0.8%.

This decrease consisted of a $252.0 million decrease in total retail deposits and a $195.2 million decrease in off balance sheet deposits, partially offset by a $376.3 million increase in total commercial deposits.

The majority of off balance sheet deposits are commercial and would also impact the increase in commercial deposits, as the deposits are moved back onto the balance sheet.

Included in total commercial deposits and off balance sheet deposits above are public fund deposits.

These balances fluctuate based on seasonality and the cycle of collection and remittance of tax funds.

The public fund deposit increases during the three months and the six months ended June 30, 2023 are consistent with historical seasonality.

The following table details the change in public fund deposits.

(Dollars in thousands) June 30, 2023 March 31, 2023 December 31, 2022 December 31, 2021 December 31, 2020 December 31, 2019

Total public fund deposits $ 1,429,770 $ 1,346,261 $ 1,108,055 $ 1,334,431 $ 1,088,871 $ 1,117,433

$ change from prior period end $ 83,509 $ 238,206 $ (226,376) $ 245,560 $ (28,562)

% change from prior period end 6.2 % 21.5 % (17.0) % 22.6 % (2.6) %

As of June 30, 2023, Park had approximately $1.4 billion of uninsured deposits, which represented 17.0% of total deposits.

Uninsured deposits of $1.4 billion included $301 million of deposits which were over $250,000 but were fully collateralized by Park's investment securities portfolio.

Financial Results by Segment

The table below reflects the net income (loss) by segment for the first quarters (the three months ended March 31) of 2023 and 2022 and for the years ended December 31, 2022 and 2021.

The table below reflects the net income (loss) by segment for the first and second quarters of 2023, for the first half of each of 2023 and 2022 (the six months ended June 30) and for the years ended December 31, 2022 and 2021.

Park's segments include The Park National Bank ("PNB") and "All Other" which primarily consists of Park as the "Parent Company", Guardian Financial Services Company ("GFSC") and SE Property Holdings, LLC ("SEPH").

(In thousands) Q1 2023 Q1 2022 2022 2021

(In thousands) Q2 2023 Q1 2023 Six months YTD 2023 Six months YTD 2022 2022 2021

PNB $ 35,485 $ 36,269 $ 71,754 $ 76,408 $ 143,243 $ 159,461

1 unchanged sentence

Total Park $ 31,584 $ 33,733 $ 65,317 $ 73,199 $ 148,351 $ 153,945

Highlights from the three-month periods ended March 31, 2023 and 2022 included:

• Net income for the three months ended March 31, 2023 of $33.7 million represented a $5.1 million, or 13.2%, decrease compared to $38.9 million for the three months ended March 31, 2022 and a $649,000, or 2.0%, increase compared to $33.1 million for the three months ended December 31, 2022.

• Pre-tax, pre-provision net income for the three months ended March 31, 2023 of $40.1 million represented a $1.9 million, or 4.5%, decrease compared to $42.0 million for the three months ended March 31, 2022 and a $3.3 million, or 7.5%, decrease compared to $43.3 million for the three months ended December 31, 2022.

• During the three months ended March 31, 2023, Park recorded interest income of $26,000 related to PPP loans, compared to $1.6 million for the three months ended March 31, 2022 and $78,000 for the three months ended December 31, 2022.

• PNB loans outstanding at March 31, 2023 increased 4.0%, compared to at March 31, 2022, and decreased 0.7% compared to at December 31, 2022.

• Park's loan portfolio reflected continued good credit quality with net loan recoveries as a percentage of average loans of 0.00% for the three months ended March 31, 2023, compared to net loan charge-offs as a percentage of average loans of 0.09% for the three months ended December 31, 2022, and net loan recoveries as a percentage of average loans of 0.02% for the three months ended March 31, 2022.

Net income for each of the three months ended March 31, 2023 and March 31, 2022 included several items of income and expense that impacted comparability of period results.

Highlights from the three-month and six-month periods ended June 30, 2023 and 2022 included:

• Net income for the three months ended June 30, 2023 of $31.6 million represented a $2.7 million, or 8.0%, decrease compared to $34.3 million for the three months ended June 30, 2022.

Net income for the six months ended June 30, 2023 of $65.3 million represented a $7.9 million, or 10.8%, decrease compared to $73.2 million for the six months ended June 30, 2022.

• Pre-tax, pre-provision net income for the three months ended June 30, 2023 of $40.7 million represented a $4.4 million, or 9.7%, decrease compared to $45.1 million for the three months ended June 30, 2022.

Pre-tax, pre-provision net income for the six months ended June 30, 2023 of $80.8 million represented a $6.3 million, or 7.2%, decrease compared to $87.1 million for the six months ended June 30, 2022.

• Net interest income for the three months ended June 30, 2023 of $91.6 million represented a $7.6 million, or 9.1%, increase compared to $83.9 million for the three months ended June 30, 2022.

Net interest income for the six months ended June 30, 2023 of $183.8 million represented a $22.1 million, or 13.7%, increase compared to $161.6 million for the six months ended June 30, 2022.

• During the three months ended June 30, 2023, Park recorded interest income of $15,000 related to PPP loans, compared to $1.0 million for the three months ended June 30, 2022.

During the six months ended June 30, 2023, Park recorded interest income of $41,000 related to PPP loans, compared to $2.6 million for the six months ended June 30, 2022.

• PNB loans outstanding at June 30, 2023 (i) increased 3.6% compared to at June 30, 2022, (ii) increased 0.9% compared to at December 31, 2022, and (iii) increased 1.6% compared to at March 31, 2023.

• Park's loan portfolio had net loan charge-offs as a percentage of average loans of 0.07% for the three months ended June 30, 2023, compared to net loan charge-offs as a percentage of average loans of 0.02% for the three months ended June 30, 2022.

Park's loan portfolio had net loan charge-offs as a percentage of average loans of 0.03% for the six months ended June 30, 2023, compared to net loan charge-offs as a percentage of average loans of 0.0% for the six months ended June 30, 2022.

Net income for each of the three months ended June 30, 2023 and June 30, 2022 and for each of the six months ended June 30, 2023 and June 30, 2022, included several items of income and expense that impacted comparability of period results.

These items are detailed in the "Items Impacting Comparability" section within this MD&A.

1 unchanged sentence

The Park National Bank (PNB)

The table below reflects PNB's net income for the first quarters (the three months ended March 31) of 2023 and 2022 and for the years ended December 31, 2022 and 2021.

(In thousands) Q1 2023 Q1 2022 2022 2021

The table below reflects PNB's net income for the first and second quarters of 2023, for the first half of each of 2023 and 2022 (the six months ended June 30) and for the years ended December 31, 2022 and 2021.

(In thousands) Q2 2023 Q1 2023 Six months YTD 2023 Six months YTD 2022 2022 2021

Net interest income $ 93,549 $ 93,589 $ 187,138 $ 162,783 $ 350,646 $ 328,398

5 unchanged sentences

Net income $ 35,485 $ 36,269 $ 71,754 $ 76,408 $ 143,243 $ 159,461

Net interest income of $93.6 million for the three months ended March 31, 2023 represented a $14.2 million, or 17.9%, increase compared to $79.4 million for the three months ended March 31, 2022.

Net interest income of $187.1 million for the six months ended June 30, 2023 represented a $24.4 million, or 15.0%, increase compared to $162.8 million for the six months ended June 30, 2022.

The increase was a result of a $58.0 million increase in interest income, partially offset by a $33.6 million increase in interest expense.

The $58.0 million increase in interest income was due to a $39.7 million increase in interest income on loans and a $18.2 million increase in investment income.

The $18.7 million increase in interest income on loans was primarily the result of a $271.3 million increase in average loans, from $6.83 billion for the three months ended March 31, 2022 to $7.10 billion for the three months ended March 31, 2023, as well as an increase in the yield on loans, which increased 91 basis points to 5.21% for the three months ended March 31, 2023, compared to 4.30% for the three months ended March 31, 2022.

The $10.6 million increase in investment income was partially the result of a $28.4 million increase in average investments, including money market instruments, from $2.12 billion for the three months ended March 31, 2022 to $2.15 billion for the three months ended March 31, 2023.

The increase in investment income was also impacted by an increase in the yield on investments, which increased 198 basis points to 3.77% for the three months ended March 31, 2023, compared to 1.79% for the three months ended March 31, 2022.

The $15.1 million increase in interest expense was due to a $14.5 million increase in interest expense on deposits, as well as a $581,000 increase in interest expense on borrowings.

The increase in interest expense on deposits was the result of a $306.8 million increase in average on-balance sheet interest bearing deposits from $5.17 billion for the three months ended March 31, 2022, to $5.48 billion for the three months ended March 31, 2023 as well as an increase in the cost of deposits of 107 basis points, from 0.08% for the three months ended March 31, 2022 to 1.15% for the three months ended March 31, 2023.

The increase in on-balance sheet interest bearing deposits was due to an increase in transaction accounts, which was partially offset by decreases in both savings and time deposits.

During the three months ended March 31, 2023 and 2022, Park made the decision to continue its participation in a program to transfer deposits off-balance sheet in order to manage growth of the balance sheet.

The provision for credit losses of $915,000 for the three months ended March 31, 2023 represented a difference of $5.5 million, compared to a recovery of credit losses of $4.5 million for the three months ended March 31, 2022.

The $39.7 million increase in interest income on loans was primarily the result of a $281.5 million increase in average loans, from $6.83 billion for the six months ended June 30, 2022 to $7.12 billion for the six months ended June 30, 2023, as well as an increase in the yield on loans, which increased 95 basis points to 5.32% for the six months ended June 30, 2023, compared to 4.37% for the six months ended June 30, 2022.

The $18.2 million increase in investment income was primarily the result of an increase in the yield on investments, which increased 180 basis points to 3.81% for the six months ended June 30, 2023, compared to 2.01% for the six months ended June 30, 2022.

The increase in the yield on investments was partially offset by a decrease in average investments, including money market investments, from $2.07 billion for the six months ended June 30, 2022 to $2.06 billion for the six months ended June 30, 2023.

The $33.6 million increase in interest expense was due to a $32.5 million increase in interest expense on deposits, as well as a $1.1 million increase in interest expense on borrowings.

The increase in interest expense on deposits was the result of a $398.2 million increase in average on-balance sheet interest bearing deposits from $5.09 billion for the six months ended June 30, 2022, to $5.49 billion for the six months ended June 30, 2023 as well as an increase in the cost of deposits of 119 basis points, from 0.12% for the six months ended June 30, 2022 to 1.31% for the six months ended June 30, 2023.

The increase in on-balance sheet interest bearing deposits was due to an increase in transaction accounts and savings accounts, which was partially offset by a decrease in time deposits.

During each of the six months ended June 30, 2023 and 2022, Park made the decision to continue its participation in a program to transfer deposits off-balance sheet in order to manage growth of the balance sheet.

The provision for credit losses of $3.4 million for the six months ended June 30, 2023 represented a difference of $4.6 million, compared to a recovery of credit losses of $1.2 million for the six months ended June 30, 2022.

Refer to the “Credit Metrics and Provision for (Recovery of) Credit Losses” section for additional details regarding the level of the provision for (recovery of) credit losses recognized in each period presented above.

Other income of $24.3 million for the three months ended March 31, 2023 represented a decrease of $7.0 million, or 22.4%, compared to $31.2 million for the three months ended March 31, 2022.

The $7.0 million decrease was primarily related to (i) a $2.5 million change in (loss) gain on equity securities, net, from a $2.2 million gain for the three months ended March 31, 2022 to a $307,000 loss for the three months ended March 31, 2023;

(ii) a $2.3 million decrease in other service income, which was primarily due to declines in fee income from mortgage loan originations and mortgage servicing rights, partially offset increases in investor rate locks and mortgage loans held for sale;

(iii) a $1.4 million decrease in other miscellaneous income, which was primarily due to decreases in the net gain on the sale of other assets and decreases in other fee income;

Other income of $49.4 million for the six months ended June 30, 2023 represented a decrease of $11.1 million, or 18.4%, compared to $60.5 million for the six months ended June 30, 2022.

The $11.1 million decrease was primarily related to (i) a $4.1 million decrease in other service income, which was primarily due to declines in fee income from mortgage loan originations and mortgage servicing rights, partially offset by increases in investor rate locks and mortgage loans held for sale;

(ii) a $2.5 million decrease in other miscellaneous income, which was primarily due to decreases in the net gain on the sale of

other assets and in other fee income;

(iii) a $2.4 million change in (loss) gain on equity securities, net, from a $2.3 million gain for the six months ended June 30, 2022 to a $118,000 loss for the six months ended June 30, 2023;

and (iv) a $2.2 million decrease in other components of net periodic benefit income.

These decreases were partially offset by a $430,000 increase in debit card fee income.

A summary of mortgage loan originations for the first quarters of 2023 and 2022 and the years ended December 31, 2022 and 2021 follows.

(In thousands) Q1 2023 Q1 2022 2022 2021

A summary of mortgage loan originations for the first and second quarters of 2023 and 2022 and the years ended December 31, 2022 and 2021 follows.

(In thousands) Q2 2023 Q1 2023 Q2 2022 Q1 2022 2022 2021

Mortgage Loan Origination Volume

5 unchanged sentences

Refinances as a % of Total Mortgage Loan Originations 19.1 % 24.7 % 25.9 % 41.7 % 29.4 % 54.2 %

Total mortgage loan originations decreased $98.9 million, or 61.8%, to $61.2 million for the three months ended March 31, 2023 compared to $160.1 million for the three months ended March 31, 2022.

The table below reflects PNB's total other expense for the three months ended March 31, 2023 and 2022.

(Dollars in thousands) Q1 2023 Q1 2022 $ change % change

Total mortgage loan originations decreased $147.4 million, or 47.3%, to $164.5 million for the six months ended June 30, 2023 compared to $311.9 million for the six months ended June 30, 2022.

The table below reflects PNB's total other expense for the six months ended June 30, 2023 and 2022.

(Dollars in thousands) 2023 2022 $ change % change

Other expense:

12 unchanged sentences

Total other expense $ 146,118 $ 130,430 $ 15,688 12.0 %

Total other expense of $73.0 million for the three months ended March 31, 2023 represented an increase of $8.8 million, or 13.7%, compared to $64.2 million for the three months ended March 31, 2022.

The increase in salaries expense was primarily related to increases in base salary expense, incentive compensation expense and share-based compensation expense, partially offset by a decrease in additional compensation expense.

Total other expense of $146.1 million for the six months ended June 30, 2023 represented an increase of $15.7 million, or 12.0%, compared to $130.4 million for the six months ended June 30, 2022.

The increase in salaries expense was primarily related to increases in base salary expense and share-based compensation expense, partially offset by a decrease in additional compensation expense.

The increase in employee benefits expense was primarily related to increases in group insurance expense and payroll tax expense, partially offset by a decrease in retirement benefit expense.

1 unchanged sentence

The increase in data processing fees was primarily related to increases in software data processing expense and debit card processing expense.

The increase in professional fees and services expense was primarily due to increases in other fees, temporary wages, legal expense and directors' fees.

The increase in professional fees and services expense was primarily due to increases in consulting, other fees, temporary wages, legal expense, IntraFi insured deposit fees and directors fees.

The increase in insurance expense was due to an increase in FDIC insurance assessment expense.

The increase in miscellaneous expense was due to increased expense for the allowance for unfunded lines of credit and increased training and travel-related expenses, which were partially offset by a decrease in operating lease depreciation expense.

The table below provides certain balance sheet information and financial ratios for PNB as of or for the three months ended March 31, 2023 and 2022 and as of or for the year ended December 31, 2022.

(Dollars in thousands) March 31, 2023 December 31, 2022 March 31, 2022 % change from 12/31/22 % change from 03/31/22

Loans 7,093,498 7,141,362 6,820,090 (0.67) % 4.01 %

The increase in miscellaneous expense was due to increased

expense for the allowance for unfunded lines of credit, other miscellaneous expense and increased training and travel-related expenses, which were partially offset by a decrease in operating lease depreciation expense.

The table below provides certain balance sheet information and financial ratios for PNB as of or for the six months ended June 30, 2023 and 2022 and as of or for the year ended December 31, 2022.

(Dollars in thousands) June 30, 2023 December 31, 2022 June 30, 2022 % change from 12/31/22 % change from 06/30/22

7,207,862 7,141,362 6,957,611 0.93 % 3.60 %

Loans less PPP loans (2)

11 unchanged sentences

1.45 % 1.43 % 1.58 % 1.40 % (8.23) %

(1) Excludes $3.4 million, $4.2 million and $37.4 million of PPP loans at March 31, 2023, December 31, 2022 and March 31, 2022.

(2) Average assets for the three months ended March 31, 2023 and 2022 and for the year ended December 31, 2022.

(3) 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 $926,000 for the three months ended March 31, 2023, $3.5 million for the year ended December 31 2022 and $819,000 for the three months ended March 31 2022.

(4) Annualized for the three months ended March 31, 2023 and 2022.

Loans outstanding at March 31, 2023 were $7.09 billion, compared to (i) $7.14 billion at December 31, 2022, a decrease of $47.9 million, and (ii) $6.82 billion at March 31, 2022, an increase of $273.4 million.

Excluding $3.4 million, $4.2 million and $37.4 million of PPP loans at March 31, 2023, December 31, 2022 and March 31, 2022, respectively, loans outstanding were $7.09 billion at March 31, 2023, compared to (i) $7.14 billion at December 31, 2022, a decrease of $47.1 million, and (ii) $6.78 billion at March 31, 2022, an increase of $307.4 million.

(1) Excluded from total loans at June 30, 2022 were $6.3 million in commercial loans held for sale.

There were no similar exclusions at June 30, 2023 or December 31, 2022.

(2) Excludes $3.1 million, $4.2 million and $13.4 million of PPP loans at June 30, 2023, December 31, 2022 and June 30, 2022.

(3) Average assets for the six months ended June 30, 2023 and 2022 and for the year ended December 31, 2022.

(4) Efficiency ratio is calculated by dividing total other expense by the sum of FTE net interest income and other income.

FTE 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 for the six months ended June 30, 2023, $3.5 million for the year ended December 31 2022 and $1.7 million for the six months ended June 30 2022.

(5) Annualized for the six months ended June 30, 2023 and 2022.

Loans outstanding at June 30, 2023 were $7.21 billion, compared to (i) $7.14 billion at December 31, 2022, an increase of $66.5 million, and (ii) $6.96 billion at June 30, 2022, an increase of $250.3 million.

Excluding $3.0 million, $4.2 million and $13.4 million of PPP loans at June 30, 2023, December 31, 2022 and June 30, 2022, respectively, loans outstanding were $7.20 billion at June 30, 2023, compared to (i) $7.14 billion at December 31, 2022, an increase of $67.6 million, and (ii) $6.94 billion at June 30, 2022, an increase of $260.6 million.

The table below breaks out the change in loans outstanding, by loan type.

(Dollars in thousands) March 31, 2023 December 31, 2022 March 31, 2022 $ change from 12/31/22 % change from 12/31/22 $ change from 3/31/22 % change from 3/31/22

(Dollars in thousands) June 30, 2023 December 31, 2022 June 30, 2022 $ change from 12/31/22 % change from 12/31/22 $ change from 6/30/22 % change from 6/30/22

Home equity $ 168,256 $ 167,232 $ 162,616 $ 1,024 0.6 % $ 5,640 3.5 %

6 unchanged sentences

Total loans (2)

$ 7,207,862 $ 7,141,362 $ 6,957,611 $ 66,500 0.9 % $ 250,251 3.6 %

Total loans (excluding PPP loans) (1)(2)

$ 7,204,784 $ 7,137,156 $ 6,944,183 $ 67,628 0.9 % $ 260,601 3.8 %

(1) Excludes $3.4 million of PPP loans at March 31, 2023, $4.2 million of PPP loans at December 31, 2022, and $37.4 million of PPP loans at March 31, 2022.

PNB's allowance for credit losses was $85.9 million at March 31, 2023, compared to (i) $85.4 million at December 31, 2022, an increase of $571,000, or 0.7%, and (ii) $78.9 million at March 31, 2022, an increase of $7.1 million, or 9.1%.

Net charge-offs were $727,000, or 0.04% of total average loans, for the three months ended March 31, 2023 and were $3.6 million, or 0.05% of total average loans, for the year ended December 31 2022.

Net recoveries were $245,000, or 0.01% of total average loans, for the three months ended March 31, 2022.

(1) Excludes $3.1 million of PPP loans at June 30, 2023, $4.2 million of PPP loans at December 31, 2022, and $13.4 million of PPP loans at June 30, 2022.

(2) Excluded from commercial (excluding PPP loans), total loans, and total loans (excluding PPP loans) at June 30, 2022 were $6.3 million in commercial loans held for sale.

Loans outstanding at June 30, 2023 were $7.21 billion, compared to $7.09 billion at March 31, 2023, an increase of $114.4 million.

The $114.4 million increase represented a 1.6% (6.5% annualized) increase during the three months ended June 30, 2023.

Excluding $3.1 million and $3.4 million of PPP loans at June 30, 2023 and March 31, 2023, respectively, loans outstanding were $7.20 billion at June 30, 2023, compared to $7.09 billion at March 31, 2023, an increase of $114.7 million.

The $114.7 million increase represented a 1.6% (6.5% annualized) increase during the three months ended June 30, 2023.

The table below breaks out the change in loans outstanding, by loan type.

(Dollars in thousands) June 30, 2023 March 31, 2023 $ change from 3/31/23 % change from 3/31/23

Home equity $ 168,256 $ 164,736 $ 3,520 2.1 %

Installment 1,945,125 1,914,781 30,344 1.6 %

Real estate 1,252,243 1,210,045 42,198 3.5 %

Commercial (excluding PPP loans) (1)

3,835,058 3,800,284 34,774 0.9 %

PPP loans 3,078 3,445 (367) (10.7) %

Other 4,102 207 3,895 N.M.

Total loans $ 7,207,862 $ 7,093,498 $ 114,364 1.6 %

Total loans (excluding PPP loans) (1)

$ 7,204,784 $ 7,090,053 $ 114,731 1.6 %

(1) Excludes $3.1 million of PPP loans at June 30, 2023 and $3.4 million of PPP loans at March 31, 2023.

PNB's allowance for credit losses was $87.2 million at June 30, 2023, compared to (i) $85.4 million at December 31, 2022, an increase of $1.8 million, or 2.1%, and (ii) $81.4 million at June 30, 2022, an increase of $5.8 million, or 7.1%.

Net charge-offs were $2.0 million, or 0.06% of total average loans, for the six months ended June 30, 2023 and were $3.6 million, or 0.05% of total average loans, for the year ended December 31, 2022.

Net charge-offs were $506,000, or 0.01% of total average loans, for the six months ended June 30, 2022.

Refer to the “Credit Metrics and Provision for (Recovery of) Credit Losses” section for additional information regarding PNB's loan portfolio and the level of provision for (recovery of) credit losses recognized in each period presented.

Total deposits at March 31, 2023 were $8.58 billion, compared to (i) $8.53 billion at December 31, 2022, an increase of $48.9 million, or 0.6%, and (ii) $8.26 billion at March 31, 2022, an increase of $327.9 million, or 4.0%.

During the three months ended March 31, 2023 and 2022 and the year ended December 31, 2022, Park made the decision to continue participation in a program to transfer deposits off-balance sheet in order to manage growth of the balance sheet, as deposits increased significantly throughout the COVID pandemic.

At March 31, 2023, December 31, 2022 and March 31, 2022, Park had $164.6 million, $195.9 million, and $1,149.2 million, respectively, in deposits which were off-balance sheet.

Total deposits would have increased $17.5 million, or 0.2%, compared to at December 31, 2022 had the $164.6 million and $195.9 million in deposits remained on the balance sheet at the respective dates.

Total deposits would have decreased $656.7 million, or 7.0%, compared to at March 31, 2022 had the $164.6 million and $1,149.2 million in deposits remained on the balance sheet at the respective dates.

Total deposits at June 30, 2023 were $8.66 billion, compared to (i) $8.53 billion at December 31, 2022, an increase of $121.8 million, or 1.4%, and (ii) $8.58 billion at June 30, 2022, an increase of $80.9 million, or 0.9%.

During the six months ended June 30, 2023 and 2022 and the year ended December 31, 2022, Park made the decision to continue participation in a program to transfer deposits off-balance sheet in order to manage growth of the balance sheet, as deposits increased significantly throughout the COVID-19 pandemic.

At June 30, 2023, December 31, 2022 and June 30, 2022, Park had $767,000, $195.9 million, and $809.8 million, respectively, in deposits which were off-balance sheet.

Total deposits would have decreased $73.3 million, or 0.8%, compared to December 31, 2022 had the $767,000 and $195.9 million in deposits remained on the balance sheet at the respective dates.

Total deposits would have decreased $728.2 million, or 7.8%, compared to June 30, 2022 had the $767,000 and $809.8 million in deposits remained on the balance sheet at the respective dates.

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

(Dollars in thousands) March 31, 2023 December 31, 2022 March 31, 2022 $ change from 12/31/22 % change from 12/31/22 $ change from 3/31/22 % change from 3/31/22

(Dollars in thousands) June 30, 2023 December 31, 2022 June 30, 2022 $ change from 12/31/22 % change from 12/31/22 $ change from 6/30/22 % change from 6/30/22

Non-interest bearing deposits $ 3,093,460 $ 3,374,269 $ 3,336,212 $ (280,809) (8.3) % $ (242,752) (7.3) %

3 unchanged sentences

Total deposits $ 8,656,161 $ 8,534,320 $ 8,575,310 $ 121,841 1.4 % $ 80,851 0.9 %

Off balance sheet deposits 164,600 195,937 1,149,187 (31,337) (16.0) % (984,587) (85.7) %

Off balance sheet deposits 767 195,937 809,792 (195,170) N.M.

(809,025) N.M.

Total deposits including off balance sheet deposits $ 8,656,928 $ 8,730,257 $ 9,385,102 $ (73,329) (0.8) % $ (728,174) (7.8) %

The table below reflects All Other net (loss) income for the first quarters (the three months ended March 31) of 2023 and 2022 and for the years ended December 31, 2022, and 2021.

(In thousands) Q1 2023 Q1 2022 2022 2021

Total deposits at June 30, 2023 were $8.66 billion, compared to $8.58 billion at March 31, 2023, an increase of $73.0 million, or 0.8%.

During the six months ended June 30, 2023, Park made the decision to continue participation in a program to transfer deposits off-balance sheet in order to manage growth of the balance sheet, as deposits increased significantly throughout the COVID-19 pandemic.

At June 30, 2023 and March 31, 2023, Park had $767,000 and $164.6 million, respectively, in deposits which were off-balance sheet.

Total deposits would have decreased $90.9 million, or 1.0%, compared to March 31, 2023 had

the $767,000 and $164.6 million in deposits remained on the balance sheet at the respective dates.

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

(Dollars in thousands) June 30, 2023 March 31, 2023 $ change from 3/31/23 % change from 3/31/23

Non-interest bearing deposits $ 3,093,460 $ 3,211,327 $ (117,867) (3.7) %

Transaction accounts 2,238,131 2,170,814 67,317 3.1 %

Savings 2,755,961 2,669,212 86,749 3.2 %

Certificates of deposit 568,609 531,851 36,758 6.9 %

Total deposits $ 8,656,161 $ 8,583,204 $ 72,957 0.8 %

Off balance sheet deposits 767 164,600 (163,833) N.M.

Total deposits including off balance sheet deposits $ 8,656,928 $ 8,747,804 $ (90,876) (1.0) %

The table below reflects All Other net (loss) income for the first and second quarters of 2023, for the first half of each of 2023 and 2022 (the six months ended June 30) and for the years ended December 31, 2022, and 2021.

(In thousands) Q2 2023 Q1 2023 Six months YTD 2023 Six months YTD 2022 2022 2021

Net interest (expense) income $ (1,977) $ (1,391) $ (3,368) $ (1,158) $ (3,587) $ 1,495

7 unchanged sentences

The net interest (expense) income for All Other also included interest expense on $175.0 million aggregate principal amount of 4.50% Fixed-to-Floating Rate Subordinated Notes due 2030 issued by Park in August 2020 (the "Park Subordinated Notes").

Net interest (expense) income reflected net interest expense of $1.4 million for the three months ended March 31, 2023, compared to net interest expense of $1.7 million for the three months ended March 31, 2022.

The change was largely the result of an increase of $565,000 in loan interest income related to payment collections at SEPH, partially offset by a decrease of $96,000 in net interest income from GFSC and a decrease in interest expense on borrowings of $174,000.

Net interest (expense) income reflected net interest expense of $3.4 million for the six months ended June 30, 2023, compared to net interest expense of $1.2 million for the six months ended June 30, 2022.

The change was largely the result of a decrease of $1.7 million in loan interest income related to payment collections at SEPH, a decrease of $157,000 in net interest income from GFSC and an increase in interest expense on borrowings of $338,000 as the result of an increase in average rate.

Refer to the “Credit Metrics and Provision for (Recovery of) Credit Losses” section for additional information regarding the All Other loan portfolio and the level of recovery of credit losses recognized in each period presented.

All Other had other expense of $3.5 million for the three months ended March 31, 2023, compared to $3.2 million for the three months ended March 31, 2022.

The increase was largely due to a $382,000 increase in professional fees and services expense which was partially offset by a $162,000 decrease in salaries expense.

All Other had other income of $49,000 for the six months ended June 30, 2023, compared to $2.3 million for the six months ended June 30, 2022.

The decrease was due to a $1.2 million decrease in bank owned life insurance income as the result of death benefits received in 2022 which did not reoccur in 2023, as well as a $1.1 million decrease in gain (loss) on equity securities, net.

All Other had other expense of $6.3 million for the six months ended June 30, 2023, compared to $7.0 million for the six months ended June 30, 2022.

The decrease was largely due to a $648,000 decrease in professional fees and services expense and a $198,000 decrease in salaries expense.

Park National Corporation

The table below reflects Park's consolidated net income for the first quarters (the three months ended March 31) of 2023 and 2022 and for the years ended December 31, 2022 and 2021.

(In thousands) Q1 2023 Q1 2022 2022 2021

The table below reflects Park's consolidated net income for the first and second quarters of 2023, for the first half of each of 2023 and 2022 (the six months ended June 30) and for the years ended December 31, 2022, and 2021.

(In thousands) Q2 2023 Q1 2023 Six months YTD 2023 Six months YTD 2022 2022 2021

Net interest income $ 91,572 $ 92,198 $ 183,770 $ 161,625 $ 347,059 $ 329,893

8 unchanged sentences

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.

Comparison for the First Quarters of 2023 and 2022

Net interest income increased by $14.5 million, or 18.7%, to $92.2 million for the first quarter of 2023, compared to $77.7 million for the first quarter of 2022.

Comparison for the Second Quarters of 2023 and 2022

Net interest income increased by $7.6 million, or 9.1%, to $91.6 million for the second quarter of 2023, compared to $83.9 million for the second quarter of 2022.

See the discussion under the table below.

Three months ended

March 31, 2023 Three months ended

March 31, 2022

June 30, 2023 Three months ended

June 30, 2022

(Dollars in thousands) Average

17 unchanged sentences

(1) Loan interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate.

The taxable equivalent adjustment was $152,000 for the three months ended March 31, 2023 and $168,000 for the same period of 2022.

The taxable equivalent adjustment was $147,000 for the three months ended June 30, 2023 and $161,000 for the same period of 2022.

(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 $774,000 for the three months ended March 31, 2023 and $651,000 for the same period of 2022.

Average interest earning assets for the first quarter of 2023 increased by $308.3 million, or 3.4%, to $9,267 million for the first quarter of 2023, compared to $8,959 million for the first quarter of 2022.

The average yield on interest earning assets increased by 118 basis points to 4.89% for the first quarter of 2023, compared to 3.71% for the first quarter of 2022.

Interest income for the three months ended March 31, 2023 and 2022 included purchase accounting accretion of $200,000 and $477,000, respectively, related to the acquisitions of NewDominion and Carolina Alliance, as well as $574,000 and $42,000, respectively, of interest income related to payments received on certain SEPH nonaccrual loan relationships, some of which are participated with PNB.

Interest income for the three months ended March 31, 2023 and 2022 also included $26,000 and $1.6 million, respectively, of income related to PPP loans.

Excluding the impact of the purchase accounting accretion, SEPH-related income, and PPP income, the yield on loans was 5.20% and 4.22% for the three months ended March 31, 2023 and 2022, respectively, and the yield on earning assets was 4.86% and 3.64% for the three months ended March 31, 2023 and 2022, respectively.

Average interest bearing liabilities for the first quarter of 2023 increased by $288.1 million, or 5.2%, to $5,870 million, compared to $5,582 million for the first quarter of 2022.

The average cost of interest bearing liabilities increased by 104 basis points to 1.29% for the first quarter of 2023, compared to 0.25% for the first quarter of 2022.

During the three months ended March 31, 2023 and 2022, Park continued to participate in a OWS program in order to manage growth of the balance sheet.

At March 31, 2023 and 2022, Park had $164.6 million and $1,149.2 million, respectively, in OWS insured cash sweep deposits which were off-balance sheet.

The taxable equivalent adjustment was $773,000 for the three months ended June 30, 2023 and $711,000 for the same period of 2022.

Average interest earning assets for the second quarter of 2023 increased by $265.2 million, or 3.0%, to $9,122 million for the second quarter of 2023, compared to $8,857 million for the second quarter of 2022.

The average yield on interest earning assets increased by 104 basis points to 5.08% for the second quarter of 2023, compared to 4.04% for the second quarter of 2022.

Interest income for the three months ended June 30, 2023 and 2022 included purchase accounting accretion of $164,000 and $545,000, respectively, related to the acquisitions of NewDominion and Carolina Alliance, as well as $13,000 and $2.3 million, respectively, of interest income related to payments received on certain SEPH nonaccrual loan relationships, some of which are participated with PNB.

Interest income for the three months ended June 30, 2023 and 2022 also included $15,000 and $1.0 million, respectively, of income related to PPP loans.

Excluding the impact of the purchase accounting accretion, SEPH-related income, and PPP income, the yield on loans was 5.42% and 4.36% for the three months ended June 30, 2023 and 2022, respectively, and the yield on earning assets was 5.08% and 3.88% for the three months ended June 30, 2023 and 2022, respectively.

Average interest bearing liabilities for the second quarter of 2023 increased by $455.2 million, or 8.4%, to $5,856 million, compared to $5,401 million for the second quarter of 2022.

The average cost of interest bearing liabilities increased by 125 basis points to 1.58% for the second quarter of 2023, compared to 0.33% for the second quarter of 2022.

During the three months ended June 30, 2023 and 2022, Park continued to participate in a OWS program in order to manage growth of the balance sheet.

At June 30, 2023 and 2022, Park had $767,000 and $809.8 million, respectively, in OWS insured cash sweep deposits which were off-balance sheet.

Management from time to time has elected to move these funds both on and off the balance sheet throughout the quarter due to favorable interest rate conditions and other factors.

When on the balance sheet, these deposits are included in the average interest bearing liabilities and related interest expense.

Removing the impacts of the accretion of purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance, the interest income related to payments on certain SEPH nonaccrual loan relationships and the interest income related to PPP loans, the net interest margin was 4.04% and 3.48% for the three months ended March 31, 2023 and 2022, respectively.

Removing the impacts of the accretion of purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance, the interest income related to payments on certain SEPH nonaccrual loan relationships and the interest income related to PPP loans, the net interest margin was 4.06% and 3.68% for the three months ended June 30, 2023 and 2022, respectively.

Yield on Loans:

Average loan balances increased $269.9 million, or 4.0%, to $7,099 million for the first quarter of 2023, compared to $6,829 million for the first quarter of 2022.

The average yield on the loan portfolio increased by 93 basis points to 5.24% for the first quarter of 2023, compared to 4.31% for the first quarter of 2022.

Average loans for the first quarters of 2023 and 2022 included $3.8 million and $60.0 million, respectively, of PPP loans.

The table below shows the average balance and tax equivalent yield by type of loan for the three months ended March 31, 2023 and 2022.

Average loan balances increased $290.6 million, or 4.2%, to $7,132 million for the second quarter of 2023, compared to $6,841 million for the second quarter of 2022.

The average yield on the loan portfolio increased by 86 basis points to 5.43% for the second quarter of 2023, compared to 4.57% for the second quarter of 2022.

Average loans for the second quarters of 2023 and 2022 included $3.3 million and $27.8 million, respectively, of PPP loans.

The table below shows the average balance and tax equivalent yield by type of loan for the three months ended June 30, 2023 and 2022.

Three months ended

March 31, 2023 Three months ended

March 31, 2022

June 30, 2023 Three months ended

June 30, 2022

(Dollars in thousands) Average

8 unchanged sentences

(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 $152,000 for the three months ended March 31, 2023 and $168,000 for the same period of 2022.

Loan interest income for the three months ended March 31, 2023 and 2022 included the accretion of purchase accounting

The taxable equivalent adjustment was $147,000 for the three months ended June 30, 2023 and $161,000 for the same period of 2022.

Loan interest income for the three months ended June 30, 2023 and 2022 included the accretion of purchase accounting

adjustments related to the acquisitions of NewDominion and Carolina Alliance, interest income related to payments on certain SEPH nonaccrual loan relationships and interest income related to PPP loans.

Excluding the impact of the purchase accounting accretion, SEPH-related income, and PPP income, (a) the yield on home equity loans was 7.67%, the yield on installment loans was unchanged at 5.03%, the yield on real estate loans was unchanged at 4.12%, the yield on commercial loans was 5.51% and the yield on total loans before allowance was 5.20% for the three months ended March 31, 2023;

and (b) the yield on home equity loans was 3.40%, the yield on installment loans was unchanged at 4.67%, the yield on real estate loans was 3.67%, the

yield on commercial loans was 4.21% and the yield on total loans before allowance was 4.22% for the three months ended March 31, 2022.

Excluding the impact of the purchase accounting accretion, SEPH-related income, and PPP income, (a) the yield on home equity loans was 8.16%, the yield on installment loans was unchanged at 5.26%, the yield on real estate loans was unchanged at 4.27%, the yield on commercial loans was 5.75% and the yield on total loans before allowance was 5.42% for the three months ended June 30, 2023;

and (b) the yield on home equity loans was 3.96%, the yield on installment loans was unchanged at 4.64%, the yield on real estate loans was 3.72%, the yield on

commercial loans was 4.44% and the yield on total loans before allowance was 4.36% for the three months ended June 30, 2022.

Cost of Deposits:

Average interest bearing deposit balances increased $306.4 million, or 5.9%, to $5,477 million for the first quarter of 2023, compared to $5,170 million for the first quarter of 2022.

The average cost of funds on deposit balances increased by 107 basis points to 1.15% for the first quarter of 2023, compared to 0.08% for the first quarter of 2022.

The table below shows for the three months ended March 31, 2023 and 2022, the average balance and cost of funds by type of deposit.

Average interest bearing deposit balances increased $488.3 million, or 9.7%, to $5,509 million for the second quarter of 2023, compared to $5,021 million for the second quarter of 2022.

The average cost of funds on deposit balances increased by 130 basis points to 1.46% for the second quarter of 2023, compared to 0.16% for the second quarter of 2022.

The table below shows for the three months ended June 30, 2023 and 2022, the average balance and cost of funds by type of deposit.

Three months ended

March 31, 2023 Three months ended

March 31, 2022

June 30, 2023 Three months ended

June 30, 2022

(Dollars in thousands) Average

5 unchanged sentences

Total interest bearing deposits $ 5,509,022 1.46 % $ 5,020,698 0.16 %

Comparison for the First Half of 2023 and 2022

Net interest income increased by $22.1 million, or 13.7%, to $183.8 million for the first half of 2023, compared to $161.6 million for the first half of 2022.

See the discussion under the table below.

Six months ended

June 30, 2023 Six months ended

June 30, 2022

(Dollars in thousands) Average

balance Interest Tax

yield/cost Average

balance Interest Tax

$ 7,115,723 $ 188,342 5.34 % $ 6,835,389 $ 150,532 4.44 %

Taxable investments 1,435,414 26,410 3.71 % 1,439,811 13,754 1.93 %

Tax-exempt investments (2)

422,381 7,364 3.52 % 385,068 6,485 3.40 %

Money market instruments 220,951 5,305 4.84 % 247,549 413 0.34 %

Interest earning assets $ 9,194,469 $ 227,421 4.99 % $ 8,907,817 $ 171,184 3.88 %

Interest bearing deposits $ 5,492,931 35,593 1.31 % $ 5,095,085 3,112 0.12 %

Short-term borrowings 181,280 1,552 1.73 % 207,482 434 0.42 %

Long-term debt 188,787 4,660 4.98 % 188,324 4,322 4.63 %

Interest bearing liabilities $ 5,862,998 $ 41,805 1.44 % $ 5,490,891 $ 7,868 0.29 %

Excess interest earning assets $ 3,331,471 $ 3,416,926

Tax equivalent net interest income $ 185,616 $ 163,316

Net interest spread 3.55 % 3.59 %

Net interest margin 4.07 % 3.70 %

(1) Loan interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate.

The taxable equivalent adjustment was $300,000 for the six months ended June 30, 2023 and $329,000 for the same period of 2022.

(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 $1.5 million for the six months ended June 30, 2023 and $1.4 million for the same period of 2022.

Average interest earning assets for the first half of 2023 increased by $286.7 million, or 3.2%, to $9,194 million for the first half of 2023, compared to $8,908 million for the first half of 2022.

The average yield on interest earning assets increased by 111 basis points to 4.99% for the first half of 2023, compared to 3.88% for the first half of 2022.

Interest income for the six months ended June 30, 2023 and 2022 included purchase accounting accretion of $364,000 and $1.0 million, respectively, related to the acquisitions of NewDominion and Carolina Alliance, as well as $587,000 and $2.3 million, respectively, of interest income related to payments received on certain SEPH nonaccrual loan relationships, some of which are

participated with PNB.

Interest income for the six months ended June 30, 2023 and 2022 also included $41,000 and $2.6 million, respectively, of income related to PPP loans.

Excluding the impact of the purchase accounting accretion, SEPH-related income, and PPP income, the yield on loans was 5.31% and 4.29% for the six months ended June 30, 2023 and 2022, respectively, and the yield on earning assets was 4.97% and 3.76% for the six months ended June 30, 2023 and 2022, respectively.

Average interest bearing liabilities for the first half of 2023 increased by $372.1 million, or 6.8%, to $5,863 million, compared to $5,491 million for the first half of 2022.

The average cost of interest bearing liabilities increased by 115 basis points to 1.44% for the first half of 2023, compared to 0.29% for the first half of 2022.

During the six months ended June 30, 2023 and 2022, Park continued to participate in a OWS program in order to manage growth of the balance sheet.

At June 30, 2023 and 2022, Park had $767,000 and $809.8 million, respectively, in OWS insured cash sweep deposits which were off-balance sheet.

Management from time to time has elected to move these funds both on and off the balance sheet throughout the quarter due to favorable interest rate conditions and other factors.

When on the balance sheet, these deposits are included in the average interest bearing liabilities and related interest expense.

Removing the impacts of the accretion of purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance, the interest income related to payments on certain SEPH nonaccrual loan relationships and the interest income related to PPP loans, the net interest margin was 4.05% and 3.58% for the six months ended June 30, 2023 and 2022, respectively.

Yield on Loans:

Average loan balances increased $280.3 million, or 4.1%, to $7,116 million for the first half of 2023, compared to $6,835 million for the first half of 2022.

The average yield on the loan portfolio increased by 90 basis points to 5.34% for the first half of 2023, compared to 4.44% for the first half of 2022.

Average loans for the first halves of 2023 and 2022 included $3.6 million and $43.8 million, respectively, of PPP loans.

The table below shows the average balance and tax equivalent yield by type of loan for the six months ended June 30, 2023 and 2022.

Six months ended

June 30, 2023 Six months ended

June 30, 2022

(Dollars in thousands) Average

yield Average

Home equity loans $ 166,728 7.97 % $ 161,153 3.82 %

Installment loans 1,919,147 5.15 % 1,709,775 4.65 %

Real estate loans 1,213,362 4.20 % 1,125,980 3.71 %

Commercial loans (1)

3,812,390 5.68 % 3,834,736 4.58 %

Other 4,096 8.75 % 3,745 8.81 %

Total loans before allowance $ 7,115,723 5.34 % $ 6,835,389 4.44 %

(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 $300,000 for the six months ended June 30, 2023 and $329,000 for the same period of 2022.

Loan interest income for the six months ended June 30, 2023 and 2022 included the accretion of purchase accounting

Excluding the impact of the purchase accounting accretion, SEPH-related income, and PPP income, (a) the yield on home equity loans was 7.91%, the yield on installment loans was unchanged at 5.15%, the yield on real estate loans was unchanged at 4.20%, the yield on commercial loans was 5.63% and the yield on total loans before allowance was 5.31% for the six months ended June 30, 2023;

and (b) the yield on home equity loans was 3.68%, the yield on installment loans was unchanged at 4.65%, the yield on real estate loans was 3.69%, the yield on commercial loans was 4.32% and the yield on total loans before allowance was 4.29% for the six months ended June 30, 2022.

Cost of Deposits:

Average interest bearing deposit balances increased $397.8 million, or 7.8%, to $5,493 million for the first half of 2023, compared to $5,095 million for the first half of 2022.

The average cost of funds on deposit balances increased by

119 basis points to 1.31% for the first half of 2023, compared to 0.12% for the first half of 2022.

The table below shows for the six months ended June 30, 2023 and 2022, the average balance and cost of funds by type of deposit.

Six months ended

June 30, 2023 Six months ended

June 30, 2022

(Dollars in thousands) Average

balance Cost of funds Average

balance Cost of funds

Transaction accounts $ 2,184,675 1.31 % $ 1,671,685 0.06 %

Savings deposits and clubs 2,765,704 1.32 % 2,730,864 0.09 %

Time deposits 542,552 1.23 % 692,536 0.42 %

Total interest bearing deposits $ 5,492,931 1.31 % $ 5,095,085 0.12 %

Yield on Average Interest Earning Assets:

The following table shows the tax equivalent yield on average interest earning assets for the three months ended March 31, 2023 and for the years ended December 31, 2022, 2021 and 2020.

The following table shows the tax equivalent yield on average interest earning assets for the six months ended June 30, 2023 and for the years ended December 31, 2022, 2021 and 2020.

Loans (1) (3)

4 unchanged sentences

2022 - year 4.65 % 2.66 % 2.07 % 4.14 %

2023 - first three months 5.24 % 3.60 % 4.70 % 4.89 %

2023 - first six months 5.34 % 3.67 % 4.84 % 4.99 %

(1) Loan interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate.

The taxable equivalent adjustment was $152,000 for the three months ended March 31, 2023, and $627,000, $704,000, and $623,000 for the years ended December 31, 2022, 2021 and 2020, respectively.

The taxable equivalent adjustment was $300,000 for the six months ended June 30, 2023, and $627,000, $704,000, and $623,000 for the years ended December 31, 2022, 2021 and 2020, 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 $774,000 for the three months ended March 31, 2023, and $2.9 million, $2.2 million and $2.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.

(3) Interest income for the three months ended March 31, 2023 and for the years ended December 31, 2022, 2021 and 2020 included $574,000, $3.7 million, $8.0 million, and $453,000, respectively, related to payments received on certain SEPH nonaccrual loan relationships, some of which are participated with PNB, as well as $200,000, $1.8 million, $3.3 million, and $4.4 million, respectively, of the accretion of purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance.

Interest income for the three months ended March 31, 2023 and for the years ended December 31, 2022 2021, and 2020 included $26,000, $3.1 million, $18.0 million and $16.7 million, respectively, of income related to PPP loans.

Excluding all of these sources of income described in the preceding sentences of this footnote, the yield on loans was 5.20%, 4.55%, 4.27%, and 4.63% for the three months ended March 31, 2023, and for the years ended December 31, 2022, 2021 and 2020, respectively, and the yield on total earning assets was 4.86%, 4.06%, 3.64%, and 4.20% for the three months ended March 31, 2023 and for the years ended December 31, 2022, 2021 and 2020, respectively.

The taxable equivalent adjustment was $1.5 million for the six months ended June 30, 2023, and $2.9 million, $2.2 million and $2.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.

(3) Interest income for the six months ended June 30, 2023 and for the years ended December 31, 2022, 2021 and 2020 included $587,000, $3.7 million, $8.0 million, and $453,000, respectively, related to payments received on certain SEPH nonaccrual loan relationships, some of which are participated with PNB, as well as $364,000, $1.8 million, $3.3 million, and $4.4 million, respectively, of the accretion of purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance.

Interest income for the six months ended June 30, 2023 and for the years ended December 31, 2022 2021, and 2020 included $41,000, $3.1 million, $18.0 million and $16.7 million, respectively, of income related to PPP loans.

Excluding all of these sources of income described in the preceding sentences of this footnote, the yield on loans was 5.31%, 4.55%, 4.27%, and 4.63% for the six months ended June 30, 2023, and for the years ended December 31, 2022, 2021 and 2020, respectively, and the yield on total earning assets was 4.97%, 4.06%, 3.64%, and 4.20% for the six months ended June 30, 2023 and for the years ended December 31, 2022, 2021 and 2020, respectively.

Cost of Average Interest Bearing Liabilities:

The following table shows the cost of funds on average interest bearing liabilities for the three months ended March 31, 2023 and for the years ended December 31, 2022, 2021 and 2020.

The following table shows the cost of funds on average interest bearing liabilities for the six months ended June 30, 2023 and for the years ended December 31, 2022, 2021 and 2020.

Interest bearing deposits (1)

3 unchanged sentences

2022 - year 0.39 % 0.67 % 4.69 % 0.54 %

2023 - first three months 1.15 % 1.64 % 4.99 % 1.29 %

2023 - first six months 1.31 % 1.73 % 4.98 % 1.44 %

(1) Interest expense for the years ended December 31, 2022, 2021 and 2020 included $7,000, $46,000, and $226,000, respectively, of the accretion of purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance.

Excluding this income, for the years ended December 31, 2022, 2021 and 2020, the cost of funds on interest bearing deposits was 0.39%, 0.12%, and 0.41%, respectively, and the cost of total interest bearing liabilities was 0.54%, 0.28%, and 0.53%, respectively.

There was no accretion of purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance for the three months ended March 31, 2023.

There was no accretion of purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance for the six months ended June 30, 2023.

Credit Metrics and Provision for (Recovery of) Credit Losses

3 unchanged sentences

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 during the three months ended March 31, 2023 and individually evaluated loans decreased by $11.5 million.

The table below provides additional information on the recovery of credit losses for the three-month periods ended March 31, 2023 and 2022.

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 six-month periods ended June 30, 2023 and 2022.

Three Months Ended

June 30, Six Months Ended

(Dollars in thousands) 2023 2022 2023 2022

3 unchanged sentences

adoption of ASU 2022-02 — — 383 —

2,685 2,402 4,920 3,749

Recoveries 1,453 1,998 3,689 3,614

Net recoveries (1) (269)

Net charge-offs 1,232 404 1,231 135

Provision for (recovery of) credit losses 2,492 2,991 2,675 (1,614)

Ending balance $ 87,206 $ 81,448 $ 87,206 $ 81,448

Net charge-offs (recoveries) as a % of average loans (annualized) — % (0.02) %

The following table provides additional information related to the allowance for credit losses for Park including information related to specific reserves and general reserves, at March 31, 2023, December 31, 2022, and March 31, 2022.

Net charge-offs as a % of average loans (annualized) 0.07 % 0.02 % 0.03 % — %

The following table provides additional information related to the allowance for credit losses for Park including information related to specific reserves and general reserves, at June 30, 2023, March 31, 2023, December 31, 2022, and June 30, 2022.

(Dollars in thousands) 6/30/2023 3/31/2023 12/31/2022 6/30/2022

12 unchanged sentences

Prior to the adoption of ASU 2022-02, loans individually evaluated for impairment included all internally classified commercial nonaccrual loans and accruing TDRs.

The allowance for credit losses of $85.9 million at March 31, 2023 represented a $567,000, or 0.7%, increase compared to $85.4 million at December 31, 2022, The increase was largely due to a $752,000 increase in specific reserves, offset by a

decline of $185,000 in general reserves.

Generally, valuations for all nonperforming loans are updated at least annually, either through independent valuations by a licensed appraiser or a verification of value ("VOV") performed by an internal licensed appraiser, in accordance with Company policy.

The allowance for credit losses of $87.2 million at June 30, 2023 represented a $1.3 million, or 1.5%, increase compared to

$85.9 million at March 31, 2023.

The increase was largely due to a $1.4 million increase in general reserves, offset by a decline of $186,000 in specific reserves.

Generally, valuations for all nonperforming loans are updated at least 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.

9 unchanged sentences

(3) loans which are contractually past due 90 days or more as to principal or interest payments but whose interest continues to accrue;

(4) commercial loans held for sale that were previously nonperforming;

and (5) OREO which results from taking possession of property that served as collateral for a defaulted loan.

The following table compares Park’s nonperforming assets at March 31, 2023, December 31, 2022 and March 31, 2022.

(In thousands) March 31, 2023 December 31, 2022 March 31, 2022

The following table compares Park’s nonperforming assets at June 30, 2023, December 31, 2022 and June 30, 2022.

(In thousands) June 30, 2023 December 31, 2022 June 30, 2022

Nonaccrual loans $ 57,279 $ 79,696 $ 44,374

3 unchanged sentences

Total nonperforming loans $ 58,229 $ 101,111 $ 64,627

Commercial loans held for sale, previously nonperforming — — 5,619

Total nonperforming loans, including commercial loans held for sale $ 58,229 $ 101,111 $ 70,246

OREO 2,267 1,354 1,354

9 unchanged sentences

Among other things, this ASU eliminated the concept of TDRs.

Included in the OREO totals above were $1.4 million of SEPH OREO at both March 31, 2023 and December 31, 2022, and $594,000 of SEPH OREO at March 31, 2022.

Included in the OREO totals above were $1.4 million of SEPH OREO at June 30, 2023, December 31, 2022, and June 30, 2022.

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 March 31, 2023, December 31, 2022 and March 31, 2022.

The following table details the delinquency status of nonaccrual loans at June 30, 2023, December 31, 2022 and June 30, 2022.

Loans are classified as current if they are less than 30 days past due.

March 31, 2023 December 31, 2022 March 31, 2022

June 30, 2023 December 31, 2022 June 30, 2022

(In thousands) Balance Percent of Total Loans Balance Percent of Total Loans Balance Percent of Total Loans

13 unchanged sentences

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

Commercial loans * (In thousands) March 31, 2023 December 31, 2022 March 31, 2022

Commercial loans * (In thousands) June 30, 2023 December 31, 2022 June 30, 2022

Pass-rated $ 3,694,097 $ 3,709,065 $ 3,737,354

8 unchanged sentences

Park's watch list includes all criticized and classified commercial loans defined by Park as loans rated special mention or worse.

Park had $89.6 million of collectively evaluated commercial loans included on the watch list at March 31, 2023, compared to $81.8 million at December 31, 2022, and $78.5 million at March 31, 2022.

Park had $103.3 million of collectively evaluated commercial loans included on the watch list at June 30, 2023, compared to $81.8 million at December 31, 2022, and $65.0 million at June 30, 2022.

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 six months of 2023 was largely due to a $16.9 million hotel loan which was downgraded to special mention and a $8.8 million loan to a non-bank consumer finance company which was downgraded to special mention, partially offset by problem loan resolutions.

These two downgraded loans were both current in respect to their contractual terms at June 30, 2023.

Delinquent and accruing loans were $18.7 million, or 0.26%, of total loans at June 30, 2023, compared to $18.9 million, or 0.26% of total loans at December 31, 2022, and $14.0 million or 0.20% of total loans at June 30, 2022.

Individually Evaluated Loans:

3 unchanged sentences

Specific 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 specific reserve as the ultimate liquidation of the collateral may be for an amount different from management’s estimate.

The amount ultimately charged off for these loans may be different from the specific reserve as the ultimate liquidation of the collateral may be for an

amount different from management’s estimate.

Prior to the elimination of TDRs with the adoption of ASU 2022-02 on January 1, 2023, Park also included commercial accruing TDRs as individually evaluated loans.

Individually evaluated commercial loans were $59.4 million at March 31, 2023, a decrease of $19.0 million, compared to $78.3 million at December 31, 2022 and a decrease of $3.8 million, compared to $63.2 million at March 31, 2022.

The $78.3 million of individually evaluated commercial loans at December 31, 2022 included $11.5 million of loans modified in a TDR which were on accrual status and performing in accordance with the restructured terms, down from $22.9 million at March 31, 2022.

At March 31, 2023, Park had taken partial charge-offs of $1.5 million related to the $59.4 million of individually evaluated commercial loans, compared to partial charge-offs of $1.8 million related to the $78.3 million of individually evaluated commercial loans at December 31, 2022.

Individually evaluated commercial loans were $43.9 million at June 30, 2023, a decrease of $34.4 million, compared to $78.3 million at December 31, 2022 and an increase of $1.4 million, compared to $42.5 million at June 30, 2022.

At June 30, 2023, Park had taken partial charge-offs of $2.1 million related to the $43.9 million of individually evaluated commercial loans, compared to partial charge-offs of $1.8 million related to the $78.3 million of individually evaluated commercial loans at December 31, 2022.

Loans Acquired with Deteriorated Credit Quality:

5 unchanged sentences

Loans and leases acquired with deteriorated credit quality (ASC 310-30) with a book value of $19.9 million were recorded at the initial fair value of $18.4 million.

Upon adoption of CECL on January 1, 2021, $52,000 of the credit discount on PCD loans was reclassified to the allowance for credit losses.

Upon Park's adoption of CECL on January 1, 2021, $52,000 of the credit discount on PCD loans was reclassified to the allowance for credit losses.

PCD loans are individually evaluated on a quarterly basis to determine if a specific reserve is necessary.

At March 31, 2023 and December 31, 2022, there was no allowance for credit losses on PCD loans.

The carrying amount of loans

acquired with deteriorated credit quality at March 31, 2023 and December 31, 2022 was $4.6 million and $4.7 million, respectively.

At June 30, 2023 and at December 31, 2022, there was no allowance for credit losses on PCD loans.

The carrying amount of loans acquired with deteriorated credit quality at June 30, 2023 and at December 31, 2022 was $4.5 million and $4.7 million, respectively.

Allowance for Credit Losses:

The allowance for credit losses is calculated on a quarterly basis.

The methodology for calculating the ACL and assumptions made as of March 31, 2023 are detailed below.

The methodology for calculating the ACL and assumptions made as of June 30, 2023 are detailed below.

Quantitative Considerations

2 unchanged sentences

• 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.

The LDA analysis utilized Park's own FFIEC Call Report data for the commercial, financial and agricultural and the residential real estate portfolio segments.

Peer data was incorporated into the analysis for the commercial real estate, the construction real estate, and the consumer portfolio segments.

Park updated the LDA in the fourth quarter of 2022 with data through September 30, 2022.

13 unchanged sentences

◦ A s of December 31, 2022, the "most likely" scenario forecasted Ohio unemployment between 4.14% and 4.36% during the next four quarters.

In determining the appropriate weighting of scenarios at December 31, 2022, management considered the range of forecasted unemployment as well as a number of economic indicators.

In determining the appropriate weighting of scenarios at December 31, 2022, management considered the range of forecasted unemployment as well as a number of economic

The continued high level of inflation, historically low consumer confidence, rising interest rates, geopolitical conflict (including the conflict between Russia and Ukraine), and workforce and supply chain challenges continued to cause uncertainty as to the overall economic environment.

4 unchanged sentences

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, 2023 .

◦ A s of June 30, 2023, the "most likely" scenario forecasted Ohio unemployment between 4.01% and 4.62% during the next four quarters.

In determining the appropriate weighting of scenarios at June 30, 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, the likelihood of interest rates increasing, financial system stress and geopolitical conflict continued to cause uncertainty as to the overall economic environment.

Qualitative Considerations

8 unchanged sentences

◦ Level of and trend in loan charge-offs and recoveries.

• Park's lending policies and procedures, including changes in lending strategies, underwriting standards and practices for collections, write-offs, and recoveries.

• 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.

7 unchanged sentences

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

As of March 31, 2023 and December 31, 2022, Park had $3.4 million and $4.2 million, respectively, of PPP loans which were included in the commercial, financial and agricultural portfolio segment.

As of June 30, 2023 and December 31, 2022, Park had $3.1 million and $4.2 million, respectively, of PPP loans which were included in the commercial, financial and agricultural portfolio segment.

These loans are guaranteed by the SBA and thus have not been reserved for using the same methodology as the rest of Park’s loan portfolio.

A 10 basis point reserve at both March 31, 2023 and December 31, 2022 was calculated for these loans to reflect minimal credit risk.

Other income decreased by $7.3 million to $24.4 million for the quarter ended March 31, 2023, compared to $31.7 million for the first quarter of 2022.

The decrease for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was primarily due to decreases in income from fiduciary activities, other service income, other components of net periodic pension benefit income, miscellaneous income, and a change in (loss) gain on equity securities, net, partially offset by increases in service charges on deposit accounts and debit card fee income.

A 10 basis point reserve at each of June 30, 2023 and December 31, 2022 was calculated for these loans to reflect minimal credit risk.

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 June 30, 2023, Park had $206.2 million of loans which were fully or partially secured by non-owner-occupied office space.

Of the $206.2 million in loans collateralized by non-owner-occupied office space, $202.9 million 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 decreased by $6.2 million to $25.0 million for the quarter ended June 30, 2023, compared to $31.2 million for the second quarter of 2022 and decreased $13.4 million to $49.4 million for the first half of 2023, compared to $62.8 million for the first half of 2022.

The decrease for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 was primarily due to decreases in other service income, other components of net periodic pension benefit income, bank owned life insurance income, service charges on deposit accounts, a change in gain (loss) on equity securities, net, and miscellaneous income.

The decrease for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was primarily due to decreases in other service income, a change in gain (loss) on equity securities net, other components of net periodic pension benefit income, miscellaneous income, bank owned life insurance income, service charges on deposit accounts, and income from fiduciary activities, partially offset by an increase in debit card fee income.

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

Three months ended

(In thousands) 2023 2022 Change

June 30, Six months ended

(In thousands) 2023 2022 Change 2023 2022 Change

Income from fiduciary activities $ 8,816 $ 8,859 $ (43) $ 17,431 $ 17,656 $ (225)

4 unchanged sentences

ATM fees 553 583 (30) 1,086 1,115 (29)

Loss on sale of OREO, net (9) — (9)

Gain on sale of OREO, net 12 4 8 3 4 (1)

OREO valuation markup — — — 15 30 (15)

(Loss) gain on equity securities, net (405) 2,353 (2,758)

Gain (loss) on equity securities, net 25 709 (684) (380) 3,062 (3,442)

Other components of net periodic pension benefit income 1,893 3,027 (1,134) 3,786 6,054 (2,268)

1 unchanged sentence

Total other income $ 25,015 $ 31,193 $ (6,178) $ 49,402 $ 62,849 $ (13,447)

Other service income decreased by $2.1 million, or 44.0%, to $2.7 million for the three months ended March 31, 2023, compared to $4.8 million for the same period of 2022.

The primary reasons for the decrease for the three months ended March 31, 2023 compared to the same period of 2022 were a decrease in fee income related to mortgage loan originations to be sold in the secondary market of $1.6 million and a decrease in mortgage servicing rights income of $731,000.

Mortgage origination volume decreased by $98.9 million, or 61.8%, to $61.2 million for the three months ended March 31, 2023 from $160.1 million for the three months ended March 31, 2022.

(Loss) gain on equity securities, net, changed by $2.8 million, to a net loss of $405,000 for the three months ended March 31, 2023, compared to a net gain of $2.4 million for the same period in 2022.

The $2.8 million change for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was related to $2.8 million change in the gain (loss) on equity securities held at NAV which went from a net gain of $2.4 million for the three months ended March 31, 2022 to a net loss of $377,000 for the the three months ended March 31, 2023.

Other components of net periodic pension benefit income decreased $1.1 million to $1.9 million for the three months ended March 31, 2023 compared to $3.0 million for the same period in 2022.

Service charges on deposit accounts decreased by $522,000, or 20.4%, to $2.0 million for the three months ended June 30, 2023, compared to $2.6 million for the same period of 2022 and decreased $355,000, or 7.7%, to $4.3 million for the six months ended June 30, 2023 compared to $4.6 million for the same period of 2022.

The decreases for both the three-month and six-month periods ended June 30, 2023 compared to June 30, 2022 were primarily due to a decrease in NSF income, partially offset by an increase in account maintenance fees.

Other service income decreased by $2.3 million, or 46.6%, to $2.7 million for the three months ended June 30, 2023, compared to $4.9 million for the same period of 2022.

The primary reasons for the decrease for the three months ended June 30, 2023 compared to the same period of 2022 were a decrease in fee income related to mortgage loan originations to be sold in the secondary market of $985,000, a decrease in mortgage servicing rights income of $1.0 million, and a decrease in commercial loan fee income of $545,000, partially offset by an increase in investor rate locks and mortgage loans held for sale of $214,000.

Mortgage origination volume decreased by $48.4 million, or 31.9%, to $103.3 million for the three months ended June 30, 2023 from $151.7 million for the three months ended June 30, 2022.

Other service income decreased by $4.4 million, or 45.3%, to $5.3 million for the six months ended June 30, 2023, compared to $9.8 million for the same period of 2022.

The primary reasons for the decrease for the six months ended June 30, 2023 compared to the same period of 2022 were a decrease in fee income related to mortgage loan originations to be sold in the secondary market of $2.6 million, a decrease in mortgage servicing rights income of $1.8 million, and a decrease in commercial loan fee income of $450,000, partially offset by an increase in investor rate locks and mortgage loans held for sale of $305,000.

Mortgage origination volume decreased by $147.4 million, or 47.3%, to $164.5 million for the six months ended June 30, 2023 from $311.9 million for the six months ended June 30, 2022.

Bank owned life insurance income decreased by $1.0 million, or 43.9%, to $1.3 million for the three months ended June 30, 2023, compared to $2.4 million for the same period of 2022 and decreased $1.0 million, or 29.1%, to $2.5 million for the six months ended June 30, 2023, compared to $3.5 million for the same period of 2022.

The decreases for both the three-month and six-month periods ended June 30, 2023 compared to June 30, 2022 were due to a decrease in received death benefits.

Gain (loss) on equity securities, net, decreased by $684,000, to a net gain of $25,000 for the three months ended June 30, 2023, compared to a net gain of $709,000 for the same period in 2022.

The $684,000 change for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 was related to a $731,000 change in the gain (loss) on other equity securities which went from a net gain of $619,000 for the three months ended June 30, 2022 to a net loss of $112,000 for the three months ended June 30, 2023.

Gain (loss) on equity securities, net, changed by $3.4 million, to a net loss of $380,000 for the six months ended June 30, 2023, compared to a net gain of $3.1 million for the same period in 2022.

The $3.4 million change for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was related to a $666,000 decrease in gain (loss) on other equity securities which went from a $527,000 net gain for the six months ended June 30, 2022 to a $139,000 net loss for the six months ended June 30, 2023, and a $2.8 million decrease in the gain (loss) on equity securities held at NAV, which went from a $2.5 million net gain for the six months ended June 30, 2022 to a $241,000 net loss for the six months ended June 30, 2023.

Other components of net periodic pension benefit income decreased $1.1 million to $1.9 million for the three months ended June 30, 2023 compared to $3.0 million for the same period in 2022 and decreased $2.3 million to $3.8 million for the six months ended June 30, 2023 compared to $6.1 million for the same period in 2022.

The decrease was largely due to a decrease in the expected return on plan assets and an increase in interest cost.

Miscellaneous income decreased $1.6 million, or 57.2%, to $1.2 million for the three months ended March 31, 2023 compared to $2.7 million for the same period of 2022.

The decrease for the three-month period ended March 31, 2023 compared to the same period of 2022 was primarily a result of decreases in brokerage income of $212,000 and operating lease income of $191,000, as well as a decrease of $434,000 in wire transfer and ACH fees as a result of the reclassification of these fees to service charges on deposit accounts.

Also contributing to the decline in miscellaneous income was a decrease in gains on sales of assets.

During the first quarter of 2022, a branch location was sold, resulting in a gain of $731,000.

There were no comparable sales during the first quarter of 2023.

Miscellaneous income decreased $529,000, or 37.7%, to $874,000 for the three months ended June 30, 2023 compared to $1.4 million for the same period of 2022 and decreased $2.1 million, or 50.6% to $2.0 million for the six months ended June 30, 2023 compared to $4.1 million for the same period of 2022.

The decrease for the three-month period ended June 30, 2023 compared to the same period of 2022 was primarily a result of decreases in brokerage income and operating lease income, as well as decreases in wire transfer and ACH fees as a result of the reclassification of these fees to service charges on deposit accounts, and a decrease in settlement income and fees earned on off-balance sheet deposit accounts, partially offset by a decrease in OREO devaluations.

The decrease for the six-month period ended June 30, 2023 compared to the same period of 2022 was primarily a result of decreases in brokerage income and operating lease income, as well as decreases in wire transfer and ACH fees as a result of the reclassification of these fees to service charges on deposit accounts, a decrease in settlement income and fees earned on off-balance sheet deposit accounts, and a decrease in gains on sale of assets, partially offset by a decrease in OREO devaluations.

Other Expense

Other expense increased by $9.1 million to $76.5 million for the three months ended March 31, 2023 compared to $67.3 million for the same period of 2022.

Other expense increased by $5.8 million to $75.9 million for the three months ended June 30, 2023 compared to $70.0 million for the same period of 2022 and increased by $15.0 million to $152.4 million for the first half of 2023 compared to $137.4 million for the first half of 2022.

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

Three months ended

(In thousands) 2023 2022 Change

June 30, Six months ended

(In thousands) 2023 2022 Change 2023 2022 Change

Salaries $ 33,649 $ 31,052 $ 2,597 $ 68,520 $ 61,573 $ 6,947

11 unchanged sentences

Total other expense $ 75,885 $ 70,048 $ 5,837 $ 152,388 $ 137,421 $ 14,967

Salaries increased by $4.4 million, or 14.3%, to $34.9 million for the three months ended March 31, 2023, compared to $30.5 million for the same period in 2022.

The increase for the three months ended March 31, 2023 compared to the same period of 2022 was due to an increase of $3.5 million in base salary expense as full-time equivalent employees increased from 1,679 as of March 31, 2022 to 1,766 as of March 31, 2023.

Also contributing to the increase in the first quarter of 2023 compared to the same period in 2022 was an increase in long term incentive expense of $356,000, and an increase in officer incentive compensation of $875,000, partially offset by a decrease in additional compensation expense of $449,000.

Employee benefits increased $317,000, or 3.0%, to $10.8 million for the three months ended March 31, 2023, compared to $10.5 million for the same period in 2022.

The $317,000 increase for the three months ended March 31, 2023 compared to the same period in 2022 was primarily due to an increase in group insurance costs of $337,000 and increased payroll tax expense of $646,000, partially offset by decreased pension plan expense of $878,000.

Data processing expense increased $1.2 million, or 16.6%, to $8.8 million for the three months ended March 31, 2023 compared to $7.5 million for the same period in 2022.

The increase for the three-month period ended March 31, 2023 compared to the same period in 2022 related to a $938,000 increase in software expenses and a $262,000 increase in debit card processing costs.

Professional fees and services expense increased $1.4 million, or 23.3%, to $7.2 million for the three months ended March 31, 2023 compared to $5.8 million for the same period in 2022.

The increase for the three-month period ended March 31, 2023 compared to the same period in 2022 related to a $314,000 increase in director fees, a $347,000 increase in management consulting fees, and a $198,000 increase in legal expenses, as well as smaller increases in credit services expense, temporary wages, and other fees, partially offset by decreases in filing fees, appraisal costs, recruiting expenses, and supervisory examination costs.

Insurance expense increased $409,000, or 29.1%, to $1.8 million for the three months ended March 31, 2023 compared to $1.4 million for the same period in 2022.

The increase for the three-month period ended March 31, 2023 compared to the period ended March 31, 2022 related to an increase in FDIC assessments.

Salaries increased by $2.6 million, or 8.4%, to $33.7 million for the three months ended June 30, 2023, compared to $31.1 million for the same period in 2022.

The increase for the three months ended June 30, 2023 compared to the same period of 2022 was due to an increase of $3.1 million in base salary expense as full-time equivalent employees increased from 1,681 as of June 30, 2022 to 1,786 as of June 30, 2023.

Also contributing to the increase in the second quarter of 2023 compared to the same period in 2022 was an increase in long-term incentive expense of $374,000.

These increases were partially offset by decreases in officer incentive compensation of $680,000 and additional compensation expense of $251,000.

Salaries increased by $6.9 million, or 11.3%, to $68.5 million for the six months ended June 30, 2023, compared to $61.6 million for the same period in 2022.

The increase for the six months ended June 30, 2023 compared to the same period of 2022 was due to an increase of $6.6 million in base salary expense, an increase in long-term incentive expense of $730,000 and an increase in officer incentive compensation of $195,000.

These increases were partially offset by a decrease in additional compensation expense of $701,000.

Employee benefits increased $339,000, or 3.3%, to $10.5 million for the three months ended June 30, 2023, compared to $10.2 million for the same period in 2022 and increased $656,000, or 3.2%, to $21.4 million for the six months ended June 30, 2023 compared to $20.7 million for the same period.

The $339,000 increase for the three months ended June 30, 2023 compared to the same period in 2022 was primarily due to an increase in group insurance costs of $1.2 million, partially offset by decreased pension plan expense of $878,000.

The $656,000 increase for the six months ended June 30, 2023 compared to the same period in 2022 was primarily due to an increase in group insurance costs of $1.6 million, and an increase in payroll tax expense of $552,000, partially offset by a decrease in pension plan expense of $1.8 million.

Data processing expense increased $1.2 million, or 13.9%, to $9.6 million for the three months ended June 30, 2023 compared to $8.4 million for the same period in 2022, and increased $2.4 million, or 15.2%, to $18.3 million for the six months ended June 30, 2023 from $15.9 million for the same period in 2022 The increase for both the three-month and the six-month periods ended June 30, 2023 compared to the same periods in 2022 related to an increase in software expenses and debit card processing costs.

Professional fees and services expense increased $590,000, or 8.7%, to $7.4 million for the three months ended June 30, 2023 compared to $6.8 million for the same period in 2022 and increased $2.0 million, or 15.5%, to $14.6 million for the six months ended June 30, 2023 compared to $12.6 million for the same period in 2022.

The increase for the three-month period ended June 30, 2023 compared to the same period in 2022 related to a $267,000 increase in insured cash sweep ("ICS") fees, a $125,000 increase in legal expenses, and a $101,000 increase in temporary wages.

The increase for the six-month period ended June 30, 2023 compared to the same period in 2022 related to a $296,000 increase in directors fees, a $388,000 increase in ICS fees, a $323,000 increase in legal expenses, a $306,000 increase in management consulting fees, and a $344,000 increase in temporary wages.

Insurance expense increased $715,000, or 57.4%, to $2.0 million for the three months ended June 30, 2023 compared to $1.2 million for the same period in 2022 and increased $1.1 million, or 42.4%, to $3.8 million for the six months ended June 30, 2023 compared to $2.7 million for the same period in 2022.

The increase for both the three-month and the six-month periods ended June 30, 2023 compared to the periods ended June 30, 2022 related to an increase in FDIC insurance assessment expense.

The subcategory "miscellaneous" other expense includes expenses for supplies, travel and other miscellaneous expense.

The subcategory miscellaneous other expense increased $837,000, or 51.2%, to $2.5 million for the three-month period ended March 31, 2023, compared to the same period in 2022.

The $837,000 increase in expense for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was primarily related to an increase in travel expense of $328,000, and an increase of $626,000 in the provision for the allowance for unfunded credit losses, partially offset by a $186,000 decrease in operating lease depreciation.

The subcategory miscellaneous other expense decreased $97,000, or 3.4%, to $2.8 million for the three-month period ended June 30, 2023, compared to the same period in 2022 and increased $740,000, or 16.5%, to $5.2 million for the six-month period ended June 30, 2023 compared to the same period in 2022.

The $97,000 decrease in expense for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 was primarily related to a decrease of $236,000 in the provision for unfunded credit losses, and a $172,000 decrease in operating lease depreciation, partially offset by an increase in travel expense of $210,000 and an increase in training expense of $129,000.

The $740,000 increase in expense for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was primarily related to an increase in travel expense of $442,000, an increase in training expense of $214,000 and an increase of $390,000 in the provision for the allowance for unfunded credit losses, partially offset by a $358,000 decrease in operating lease depreciation and a $149,000 decline in non-loan related losses.

Items Impacting Comparability

3 unchanged sentences

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

THREE MONTHS ENDED

(in thousands) March 31, 2023 March 31, 2022 Affected Line Item

THREE MONTHS ENDED SIX MONTHS ENDED

(in thousands) June 30, 2023 June 30, 2022 June 30, 2022 June 30, 2022 Affected Line Item

Net interest income $ 91,572 $ 83,939 $ 183,770 $ 161,625

47 unchanged sentences

(1) Reported measure uses net income.

(2) Averages are for the three months ended March 31, 2023 and March 31, 2022, as appropriate.

(2) Averages are for the three months and the six months ended June 30, 2023 and June 30, 2022, as appropriate.

(3) Net income for each period divided by average tangible equity during the period.

1 unchanged sentence

RECONCILIATION OF AVERAGE SHAREHOLDERS' EQUITY TO AVERAGE TANGIBLE EQUITY:

THREE MONTHS ENDED

March 31, 2023 March 31, 2022

THREE MONTHS ENDED SIX MONTHS ENDED

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

AVERAGE SHAREHOLDERS' EQUITY $ 1,091,016 $ 1,070,493 $ 1,090,985 $ 1,087,919

4 unchanged sentences

RECONCILIATION OF AVERAGE ASSETS TO AVERAGE TANGIBLE ASSETS

THREE MONTHS ENDED

March 31, 2023 March 31, 2022

THREE MONTHS ENDED SIX MONTHS ENDED

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

AVERAGE ASSETS $ 9,917,805 $ 9,679,020 $ 9,987,953 $ 9,751,796

1 unchanged sentence

AVERAGE TANGIBLE ASSETS $ 9,752,676 $ 9,512,504 $ 9,822,661 $ 9,585,080

(5) 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 reconciliation 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 fully taxable equivalent net interest income by average interest earning assets, in each case during the applicable period.

RECONCILIATION OF FULLY TAXABLE EQUIVALENT NET INTEREST INCOME TO NET INTEREST INCOME

THREE MONTHS ENDED

March 31, 2023 March 31, 2022

(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 OF FTE NET INTEREST INCOME TO NET INTEREST INCOME

THREE MONTHS ENDED SIX MONTHS ENDED

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Interest income $ 114,674 $ 88,347 $ 225,575 $ 169,493

9 unchanged sentences

RECONCILIATION OF PRE-TAX, PRE-PROVISION NET INCOME

THREE MONTHS ENDED

March 31, 2023 March 31, 2022

THREE MONTHS ENDED SIX MONTHS ENDED

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Net income $ 31,584 $ 34,324 $ 65,317 $ 73,199

2 unchanged sentences

Pre-tax, pre-provision net income $ 40,702 $ 45,084 $ 80,784 $ 87,053

Income tax expense was $6.2 million for the first quarter of 2023 and consisted of federal income tax expense of $6.4 million and state income tax benefits of $234,000, as the result of a refund.

This compares to income tax expense of $7.7 million for the first quarter of 2022 which consisted of federal income tax expense of $7.4 million and state income tax expense of $305,000.

The effective income tax rate for the first quarter of 2023 was 15.5%, compared to 16.5% for the same period in 2022.

Income tax expense was $6.6 million for the second quarter of 2023 and consisted of federal income tax expense of $6.3 million and state income tax expense of $345,000.

This compares to income tax expense of $7.8 million for the second quarter of 2022, which consisted of federal income tax expense of $7.4 million and state income tax expense of $341,000.

The effective income tax rate for the second quarter of 2023 was 17.3%, compared to 18.5% for the same period in 2022.

Income tax expense was $12.8 million for the first half of 2023 and consisted of federal income tax expense of $12.7 million and state income tax expense of $111,000.

This compares to income tax expense of $15.5 million for the first half of 2022, which consisted of federal income tax expense of $14.8 million and state income tax expense of $646,000.

The effective income tax rate for the first half of 2023 was 16.4%, compared to 17.4% for the same period in 2022.

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.

1 unchanged sentence

Comparison of Financial Condition

At March 31, 2023 and December 31, 2022

At June 30, 2023 and December 31, 2022

Changes in Financial Condition

Total assets increased by $2.0 million during the first three months of 2023 to $9,857 million at March 31, 2023, compared to $9,855 million at December 31, 2022.

Total assets increased by $44.6 million during the first six months of 2023 to $9,900 million at June 30, 2023, compared to $9,855 million at December 31, 2022.

This increase was primarily due to the following:

• Cash and cash equivalents increased by $72.2 million, or 38.0%, to $261.9 million at March 31, 2023, compared to $189.7 million at December 31, 2022.

Money market instruments increased by $82.8 million and cash and due from banks decreased by $10.6 million.

• Total investment securities decreased by $20.4 million, or 1.1%, to $1,800 million at March 31, 2023, compared to $1,821 million at December 31, 2022.

• Loans decreased by $48.0 million, or 0.7%, to $7,094 million at March 31, 2023, compared to $7,142 million at December 31, 2022.

Total liabilities decreased by $10.9 million, or 0.1%, during the first three months of 2023 to $8,775 million at March 31, 2023, compared to $8,786 million at December 31, 2022.

This decrease was primarily due to the following:

• Short-term borrowings decreased by $55.3 million, or 24.3%, to $172.1 million at March 31, 2023, compared to $227.3 million at December 31, 2022 due to a decrease in securities sold under agreements to repurchase.

• Other liabilities decreased by $11.7 million, or 14.9%, to $67.2 million at March 31, 2023, compared to $78.9 million at December 31, 2022.

This was primarily related to a decrease in accrued expenses payable.

• Total deposits increased by $59.7 million, or 0.7%, to $8,294 million at March 31, 2023, compared to $8,235 million at December 31, 2022.

• Cash and cash equivalents increased by $40.7 million, or 21.4%, to $230.4 million at June 30, 2023, compared to $189.7 million at December 31, 2022.

Money market instruments increased by $37.9 million and cash and due from banks increased by $2.8 million.

• Loans increased by $66.2 million, or 0.9%, to $7,208 million at June 30, 2023, compared to $7,142 million at December 31, 2022.

• Total investment securities decreased by $63.8 million, or 3.5%, to $1,757 million at June 30, 2023, compared to $1,821 million at December 31, 2022.

Total liabilities increased by $25.0 million, or 0.3%, during the first six months of 2023 to $8,811 million at June 30, 2023, compared to $8,786 million at December 31, 2022.

This increase was primarily due to the following:

• Total deposits increased by $124.3 million, or 1.5%, to $8,359 million at June 30, 2023, compared to $8,235 million at December 31, 2022.

During 2020, Park made the decision to participate in an OWS program in order to manage the balance sheet.

At March 31, 2023 and December 31, 2022, Park had $164.6 million and $195.9 million, respectively, in off-balance sheet deposits.

Total shareholders’ equity increased by $12.9 million, or 1.2%, to $1,082 million at March 31, 2023, from $1,069 million at December 31, 2022.

At June 30, 2023 and at December 31, 2022, Park had $767,000 and $195.9 million, respectively, in off-balance sheet deposits.

• Short-term borrowings decreased by $83.4 million, or 36.7%, to $143.9 million at June 30, 2023, compared to $227.3 million at December 31, 2022 due to a decrease in securities sold under agreements to repurchase.

• Other liabilities decreased by $9.9 million, or 12.5%, to $69.0 million at June 30, 2023, compared to $78.9 million at December 31, 2022.

This was primarily related to a decrease in accrued expenses payable.

Total shareholders’ equity increased by $19.5 million, or 1.8%, to $1,089 million at June 30, 2023, from $1,069 million at December 31, 2022.

This increase was primarily due to the following:

• Accumulated other comprehensive loss, net of taxes changed by $12.4 million, from a negative $102.4 million at December 31, 2022, to a negative $90.0 million at March 31, 2023, and is largely comprised of unrealized net holding losses on debt securities AFS, net of taxes, of $83.4 million at March 31, 2023 compared to unrealized net holding losses on debt securities AFS, net of of taxes of $95.7 million at December 31, 2022.

• Accumulated other comprehensive loss, net of taxes changed by $5.6 million, from a negative $102.4 million at December 31, 2022, to a negative $96.8 million at June 30, 2023, and was largely comprised of unrealized net holding losses on debt securities AFS, net of taxes, of $90.1 million at June 30, 2023 compared to unrealized net holding losses on debt securities AFS, net of of taxes of $95.7 million at December 31, 2022.

• Retained earnings increased by $29.6 million during the period primarily as a result of net income of $65.3 million, partially offset by cash dividends on common shares of $34.5 million.

• Treasury shares increased by $11.7 million during the period as a result of the repurchase of 124,000 treasury shares, partially offset by the issuance of treasury shares under share-based compensation awards (net of common shares withheld to pay employee income taxes).

• Treasury shares increased by $13.8 million during the period as a result of the repurchase of an aggregate of 149,000 treasury shares, partially offset by the issuance of treasury shares under share-based compensation awards (net of common shares withheld to pay employee income taxes).

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.

2 unchanged sentences

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.

Cash provided by operating activities was $24.4 million and $28.3 million for the three months ended March 31, 2023 and 2022, respectively.

Net income was the primary source of cash from operating activities for each of the three-month periods ended March 31, 2023 and 2022.

Cash provided by investing activities was $78.7 million and cash used in investing activities was $40.0 million for the three months ended March 31, 2023 and 2022, respectively.

Cash provided by operating activities was $57.7 million and $56.5 million for the six months ended June 30, 2023 and 2022, respectively.

Net income was the primary source of cash from operating activities for each of the six-month periods ended June 30, 2023 and 2022.

Cash used in investing activities was $2.0 million and $318.4 million for the six months ended June 30, 2023 and 2022, 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 $34.8 million for the three months ended March 31, 2023 and used cash of $76.0 million for the three months ended March 31, 2022.

Net investment securities transactions provided cash of $71.3 million for the six months ended June 30, 2023 and used cash of $216.5 million for the six months ended June 30, 2022.

Another major use or source of cash in investing activities is the net increase or decrease in the loan portfolio.

Cash provided by

the net decrease in the loan portfolio was $50.2 million for the three months ended March 31, 2023 and $52.5 million for the three months ended March 31, 2022.

Cash used in financing activities was $30.9 million and cash provided by financing activities was $39.4 million for the three months ended March 31, 2023 and 2022, respectively.

Cash used by the net increase in the loan portfolio was $62.4 million and $91.0 million for the six months ended June 30, 2023 and 2022, respectively.

Cash used in financing activities was $15.0 million and cash provided by financing activities was $289.2 million for the six months ended June 30, 2023 and 2022, 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 $59.7 million and $91.8 million of cash for the three months ended March 31, 2023 and 2022, respectively.

Deposits (net of off-balance sheet deposits) increased and provided $124.3 million and $393.1 million of cash for the six months ended June 30, 2023 and 2022, 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 three months ended March 31, 2023, net short-term borrowings decreased and used $55.3 million in cash.

For the three months ended March 31, 2022, net short-term borrowings decreased and used $32.9 million in cash.

For the three months ended March 31, 2023, cash declined by $15.3 million due to the repurchase of common shares to be held as treasury shares;

while there were no repurchases of common shares during the three months ended March 31, 2022.

Finally, cash declined by $17.4 million and $17.1 million for the three months ended March 31, 2023 and 2022, respectively, from the payment of dividends.

For the six months ended June 30, 2023, net short-term borrowings decreased and used $83.4 million in cash.

For the six months ended June 30, 2022, net short-term borrowings decreased and used $67.0 million in cash.

For the six months ended June 30, 2023, cash declined by $17.9 million due to the repurchase of common shares to be held as treasury shares;

while there were no repurchases of common shares during the six months ended June 30, 2022.

Finally, cash declined by $35.1 million and $34.5 million for the six months ended June 30, 2023 and 2022, 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.

The Corporation’s loan to asset ratio was 71.97% at March 31, 2023, compared to 72.47% at December 31, 2022 and 71.23% at March 31, 2022.

Cash and cash equivalents were $261.9 million at March 31, 2023, compared to $189.7 million at December 31, 2022 and $246.9 million at March 31, 2022.

The most easily accessible forms of liquidity, Fed Funds Sold, off-balance sheet deposits, unpledged investment securities and available FHLB borrowing capacity, totaled $2.53 billion at June 30, 2023.

The Corporation’s loan to asset ratio was 72.81% at June 30, 2023, compared to 72.47% at December 31, 2022 and 70.81% at June 30, 2022.

Cash and cash equivalents were $230.4 million at June 30, 2023, compared to $189.7 million at December 31, 2022 and $246.4 million at June 30, 2022.

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 March 31, 2023 was $1,082.2 million, or 11.0% of total assets, compared to $1,069.2 million, or 10.9% of total assets, at December 31, 2022 and $1,076.4 million, or 11.2% of total assets, at March 31, 2022.

Total shareholders’ equity at June 30, 2023 was $1,088.8 million, or 11.0% of total assets, compared to $1,069.2 million, or 10.9% of total assets, at December 31, 2022 and $1,050.0 million, or 10.7% of total assets, at June 30, 2022.

Financial institution regulators have established guidelines for minimum capital ratios for banks, thrifts and bank holding companies.

4 unchanged sentences

The Federal Reserve Board has also adopted capital requirements Park must maintain to be deemed "well capitalized" and remain a financial holding company.

Park and PNB met each of the well capitalized ratio guidelines applicable to them at March 31, 2023.

The following table indicates the capital ratios for PNB and Park at March 31, 2023 and December 31, 2022.

At March 31, 2023

Park and PNB met each of the well capitalized ratio guidelines applicable to them at June 30, 2023.

The following table indicates the capital ratios for PNB and Park at June 30, 2023 and December 31, 2022.

At June 30, 2023

Leverage Tier 1

19 unchanged sentences

See page 79 of Park’s 2022 Form 10-K (Table 39) for disclosure concerning contractual obligations and commitments at December 31, 2022.

There were no significant changes in contractual obligations and commitments during the first three months of 2023.

There were no significant changes in contractual obligations and commitments during the first six months of 2023.

Financial Instruments with Off-Balance Sheet Risk

7 unchanged sentences

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

(In thousands) March 31,

(In thousands) June 30,

2023 December 31, 2022

2 unchanged sentences

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-Q

Item 2. Management’s Discussion and Analysis