What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-01 compared with 2023-08-01 · 439 added, 416 removed, 681 unchanged (56% of the section changed)

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• 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 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;

• 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, the impact of continued elevated interest rates, changes in the economy or global supply chain, supply-demand imbalances affecting local real estate prices, U.S.

fiscal debt, budget and tax matters, geopolitical matters (including the impact of the Russia-Ukraine conflict and associated sanctions and export controls as well as the Israel-Hamas conflict), and any slowdown in global economic growth, any of which may result in adverse impacts on the demand for loan, deposit and other financial services, delinquencies, defaults and counterparties' inability to meet credit and other obligations and the possible impairment of collectability of loans;

• 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.

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

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

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

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

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

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

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

• uncertainty regarding the nature, timing, cost and effect of changes in banking regulations or other regulatory or legislative requirements affecting the respective businesses of Park 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;

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

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

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

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

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

• the impact of widespread natural and other disasters, pandemics (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;

• 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 and the Israel-Hamas conflict) on the economy and financial markets generally and on us or our counterparties specifically;

• the potential further deterioration of the U.S.

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• the effect of healthcare laws in the U.S.

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;

• 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;

and potential changes for such laws which may increase our healthcare and other costs and negatively impact our operations and financial results;

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

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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.

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

Risk Factors" of Part II of Park's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023 and in "Item 1A.

Risk Factors" of Part II of this Quarterly 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.

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This Management's Discussion and Analysis (or "MD&A") contains non-U.S.

GAAP financial measures where management believes it to be helpful in understanding Park’s results of operations or financial position.

GAAP financial measures where management believes them to be helpful in understanding Park’s results of operations or financial position.

Where non-U.S.

GAAP financial measures are used, the comparable U.S.

GAAP financial measure, as well as the reconciliation to the comparable U.S.

GAAP financial measure, can be found herein.

GAAP financial measures, as well as the reconciliation from the comparable U.S.

GAAP financial measures, can be found herein.

Items Impacting Comparability of Period Results

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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 and the six months ended and at June 30 2023 and June 30, 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.

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 and the nine months ended and at September 30, 2023 and September 30, 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.

For the purpose of calculating the annualized return on average tangible assets, a non-U.S.

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GAAP financial measure, income taxes and the provision for (recovery of) credit losses are added back to net income, in each case during the applicable period.

Management believes that the disclosure of the annualized return on average tangible equity, the annualized return on average tangible assets, the tangible equity to tangible assets ratio, tangible book value per common share and pre-tax, pre-provision net income presents additional information to the reader of the condensed consolidated financial statements, which, when read in conjunction with the condensed consolidated financial statements prepared in accordance with U.S.

income presents additional information to the reader of the condensed consolidated financial statements, which, when read in conjunction with the condensed consolidated financial statements prepared in accordance with U.S.

GAAP, assists in analyzing Park's operating performance, ensures comparability of operating performance from period to period, and facilitates comparisons with the performance of Park's peer financial holding companies and bank holding companies, while eliminating certain non-operational effects of acquisitions.

In the tables included within the "Items Impacting Comparability" section of this MD&A, Park has provided a reconciliation of average tangible equity to average shareholders' equity, average tangible assets to average assets, tangible equity to total shareholders' equity, tangible assets to total assets, and pre-tax, pre-provision net income to net income solely for the purpose of complying with SEC Regulation G and not as an indication that the annualized return on average tangible equity, the annualized return on average tangible assets, the tangible equity to tangible assets ratio, tangible book value per common share and pre-tax, pre-provision net income are substitutes for the annualized return on average equity, the annualized return on average assets, the total shareholders' equity to total assets ratio, book value per common share and net income, respectively, as determined in accordance with U.S.

In the tables included within the "Items Impacting Comparability" section of this MD&A, Park has provided a reconciliation of average tangible equity from average shareholders' equity, average tangible assets from average assets, tangible equity from total shareholders' equity, tangible assets from total assets, and pre-tax, pre-provision net income from net income solely for the purpose of complying with SEC Regulation G and not as an indication that the annualized return on average tangible equity, the annualized return on average tangible assets, the tangible equity to tangible assets ratio, tangible book value per common share and pre-tax, pre-provision net income are substitutes for the annualized return on average equity, the annualized return on average assets, the total shareholders' equity to total assets ratio, book value per common share and net income, respectively, as determined in accordance with U.S.

FTE (fully taxable equivalent) Financial Measures

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In the tables included within the "Items Impacting Comparability" section of this MD&A, Park has provided a reconciliation of FTE interest income solely for the purpose of complying with SEC Regulation G and not as an indication that FTE interest income, yields and ratios are substitutes for interest income, yields and ratios, as determined in accordance with U.S.

Paycheck Protection Program ("PPP") Loans

Park originated an aggregate of $764.7 million in loans as part of the PPP.

For its assistance in making and retaining these loans, Park received an aggregate of $33.1 million in fees from the SBA.

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.

GAAP metrics which are not adjusted for PPP loans.

Critical Accounting Policies

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Actual results could differ from those estimates.

Recent bank failures have called into question the stability of the financial services industry.

While Park is well capitalized and has significant available liquidity, the effects of these failures and potential future failures may meaningfully impact significant estimates such as the allowance for credit losses, goodwill, and pension plan obligations and related expenses.

Allowance for Credit Losses:

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

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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 weakening manufacturing;

(1) disagreements in Congress result in a longer shutdown of the federal government than in the baseline;

(2) the Russian invasion of Ukraine persists longer than expected;

(3) 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) the Federal Reserve Board keeps the fed funds rate elevated through the fourth quarter of 2023 due to continued concerns about inflation, but starts to ease subsequently because of weakening economic conditions;

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

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

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

The adverse scenario forecasts Ohio unemployment for the next twelve months to range from 6.2% to 8.8%.

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, this sensitivity analysis would result in a hypothetical increase in Park's ACL of $26.4 million as of

September 30, 2023 if only the adverse scenario was used.

Excluding consideration of general reserve adjustments, a corresponding $26.4 million decrease in Park's ACL would occur in a hypothetical scenario if only the baseline (most likely) scenario was used.

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

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

Management believes that the accounting for goodwill also involves a higher degree of judgment than most other significant accounting policies.

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

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.

Park’s goodwill, as of September 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.

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Comparison of Results of Operations

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

For the Three and Nine Months Ended September 30, 2023 and 2022

Summary Discussion of Results

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.

Net income for the three months ended September 30, 2023 was $36.9 million, compared to $42.1 million for the third quarter of 2022.

Diluted earnings per common share were $2.28 for the third quarter of 2023, compared to $2.57 for the third quarter of 2022.

Weighted average diluted common shares outstanding were 16,217,880 for the third quarter of 2023, compared to 16,374,982 weighted average diluted common shares outstanding for the third quarter of 2022.

Net income for the nine months ended September 30, 2023 was $102.2 million, compared to $115.3 million for the first nine months of 2022.

Diluted earnings per common share were $6.29 for the first nine months of 2023, compared to $7.05 for the first nine months of 2022.

Weighted average diluted common shares outstanding were 16,261,109 for the first nine months of 2023, compared to 16,355,790 weighted average diluted common shares outstanding for the first nine months of 2022.

The following table reflects Park's consolidated net income for the third quarters of each of 2023 and 2022 and for the the first nine months of each of 2023 and 2022 (the nine months ended September 30).

(In thousands) Q3 2023 Q3 2022 Nine months YTD 2023 Nine months YTD 2022 $ change Q to Q % change Q to Q $ change YTD to YTD % change YTD to YTD

Net interest income $ 94,269 $ 90,828 $ 278,039 $ 252,453 $ 3,441 3.8 % $ 25,586 10.1 %

(Recovery of) provision for credit losses (1,580) 3,190 1,095 1,576 $ (4,770) N.M.

$ (481) (30.5) %

Other income 27,713 46,694 77,115 109,543 $ (18,981) (40.6) % $ (32,428) (29.6) %

Other expense 77,808 82,903 230,196 220,324 $ (5,095) (6.1) % $ 9,872 4.5 %

Income before income taxes $ 45,754 $ 51,429 $ 123,863 $ 140,096 $ (5,675) (11.0) % $ (16,233) (11.6) %

Income tax expense 8,837 9,361 21,629 24,829 $ (524) (5.6) % $ (3,200) (12.9) %

Net income $ 36,917 $ 42,068 $ 102,234 $ 115,267 $ (5,151) (12.2) % $ (13,033) (11.3) %

Pre-tax, pre-provision net income (1)

$ 44,174 $ 54,619 $ 124,958 $ 141,672 $ (10,445) (19.1) % $ (16,714) (11.8) %

(1) Pre-tax, pre-provision ("PTPP") net income is calculated as net income, (minus) plus income taxes, plus the (recovery of) provision for credit losses, in each case during the applicable period.

Highlights from the three-month and nine-month periods ended September 30, 2023 and 2022 included:

• During the three months ended September 30, 2023, Park recorded interest income of $16,000 related to PPP loans, compared to $361,000 for the three months ended September 30, 2022.

During the nine months ended September 30, 2023, Park recorded interest income of $57,000 related to PPP loans, compared to $3.0 million for the nine months ended September 30, 2022.

• Park recognized a $5.6 million gain on the sale of OREO, net, during the three months and the nine months ended September 30, 2022 related to former Vision Bank relationships.

There was no gain or loss on the sale of OREO, net, related to former Vision Bank relationships during the three months or the nine months ended September 30, 2023.

• Park recognized a $12.0 million OREO valuation markup during the three months and the nine months ended September 30, 2022 related to the foreclosure and subsequent sale of a property collateralizing a former Vision Bank relationship.

There was no OREO valuation markup related to former Vision Bank relationships during the three months or the nine months ended September 30, 2023.

• During the three months and the nine months ended September 30, 2023, Park recorded income of $1.2 million as a result of an annual Visa incentive, which was the same amount recorded during the three months and the nine months ended September 30, 2022.

• During the three months and the nine months ended September 30, 2022, Park paid $1.8 million in one-time bonuses and accrued an additional $1.5 million for future one-time bonuses for associates.

There were no similar one-time bonuses paid or accrued during the three months or the nine months ended September 30, 2023.

• During the three months and the nine months ended September 30, 2022, Park incurred expenses of $1.3 million and $1.7 million, respectively, in direct expenses related to the collection of payments on former Vision Bank loan relationships, compared to $0 and $100,000 for the three months and the nine months ended September 30, 2023, respectively.

• During the three months and the nine months ended September 30, 2022, Park contributed $4.0 million to its charitable foundation.

There was no contribution made by Park to its charitable foundation during the three months or the nine months ended September 30, 2023.

• PNB loans outstanding at September 30, 2023 (i) increased 3.5% compared to September 30, 2022, (ii) increased 2.9% compared to December 31, 2022, and (iii) increased 2.0% compared to June 30, 2023.

• Park's loan portfolio had net loan charge-offs as a percentage of average loans of 0.06% for the three months ended September 30, 2023, compared to net charge-offs as a percentage of average loans of 0.04% for the three months ended September 30, 2022.

Park's loan portfolio had net loan charge-offs as a percentage of average loans of 0.04% for the nine months ended September 30, 2023, compared to net loan charge-offs as a percentage of average loans of 0.02% for the nine months ended September 30, 2022.

Net income for each of the three months ended September 30, 2023 and September 30, 2022 and for each of the nine months ended September 30, 2023 and September 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.

Liquidity and Capital

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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 $2.53 billion at June 30, 2023.

The most easily accessible forms of liquidity, Fed Funds Sold, unpledged investment securities and available FHLB borrowing capacity, totaled $2.17 billion at September 30, 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.

AFS debt securities are reported at fair value, with unrealized holding gains and losses excluded from earnings, but included in other comprehensive loss, net of applicable income taxes.

AFS debt securities are reported at fair value, with unrealized holding gains and losses excluded from earnings, but included in other comprehensive income (loss), net of applicable income taxes.

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

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

(Dollars in thousands) September 30, 2023 December 31, 2022 September 30, 2022 % change from 12/31/22 % change from 09/30/22

Net unrealized losses on debt securities $ 138,240 $ 121,156 $ 151,330 14.10 % (8.65) %

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Tangible assets equal total assets less goodwill and other intangible assets, in each case at period end.

Park's deposits grew during the COVID pandemic and normalized throughout 2022.

Park has demonstrated that it has the tools available to remain under $10.0 billion in assets.

Various tools such as moving deposits off balance, regulating loan growth, securitizing or packaging loans, and the sale of investment securities may be used to manage Park's balance sheet.

Management expects to have assets totaling less than $10.0 billion at December 31, 2023.

Park's deposits grew during the COVID pandemic and normalized throughout 2022 and the first nine months of 2023.

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 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) June 30, 2023 March 31, 2023 December 31, 2022 December 31, 2021 December 31, 2020 December 31, 2019

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.

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

Retail deposits $ 4,110,821 $ 4,136,401 $ 4,263,947 $ 4,388,394 $ 4,416,228 $ 4,025,852 $ 3,748,039

Non-interest bearing deposits $ 1,130,037 $ 1,176,545 $ 1,193,807 $ 1,195,530 $ 1,077,107 $ 801,035

Transaction accounts 890,317 939,026 994,717 1,004,532 900,093 760,640

Savings 1,631,772 1,702,824 1,744,713 1,669,373 1,427,687 1,461,347

Certificates of deposit 484,275 445,552 455,157 546,793 620,965 725,017

Total retail deposits $ 4,136,401 $ 4,263,947 $ 4,388,394 $ 4,416,228 $ 4,025,852 $ 3,748,039

$ change from prior period end $ (127,546) $ (124,447) $ (27,834) $ 390,376 $ 277,813

% change from prior period end (3.0) % (2.8) % (0.6) % 9.7 % 7.4 %

Commercial deposits 4,133,903 4,222,575 4,030,497 3,846,321 3,488,300 3,546,506 3,304,573

Non-interest bearing deposits $ 1,665,972 $ 1,745,697 $ 1,880,469 $ 1,870,889 $ 1,649,992 $ 1,158,900

Transaction accounts 1,347,815 1,231,790 993,388 498,344 481,386 868,102

Savings 1,124,454 966,712 873,176 954,200 1,171,521 863,458

Certificates of deposit 84,334 86,298 99,288 164,867 243,607 414,113

Total commercial deposits $ 4,222,575 $ 4,030,497 $ 3,846,321 $ 3,488,300 $ 3,546,506 $ 3,304,573

$ change from prior period end $ 192,078 $ 184,176 $ 358,021 $ (58,206) $ 241,933

% change from prior period end 4.8 % 4.8 % 10.3 % (1.6) % 7.3 %

Total deposits $ 8,244,724 $ 8,358,976 $ 8,294,444 $ 8,234,715 $ 7,904,528 $ 7,572,358 $ 7,052,612

$ change from prior period end $ 64,532 $ 59,729 $ 330,187 $ 332,170 $ 519,746

% change from prior period end 0.8 % 0.7 % 4.2 % 4.4 % 7.4 %

Off balance sheet deposits 763 767 164,600 195,937 983,053 710,101 —

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% change from prior period end (1.4) % (1.2) % 0.3 % (5.1) % 7.3 % 17.4 %

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%.

During the three months ended September 30, 2023, total deposits including off balance sheet deposits decreased by $114.3 million, or 1.4%.

This decrease consisted of a $25.6 million decrease in total retail deposits and a $88.7 million decrease in total commercial deposits.

During the nine months ended September 30, 2023, total deposits including off balance sheet deposits decreased by $185.2 million, or 2.2%.

This decrease consisted of a $277.6 million decrease in total retail deposits and a $195.2 million decrease in off balance sheet deposits, partially offset by a $287.6 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.

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

Included in the total commercial deposits and off balance sheet deposits shown in the previous table 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

The following tables detail the change in public fund deposits.

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

Total public fund deposits $ 1,400,807 $ 1,573,684 $ 1,518,319 $ 1,335,400 $ 1,548,217 $ 1,406,101 $ 1,293,090

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% change from prior period end (11.0) % 3.6 % 13.7 % (13.7) % 10.1 % 8.7 %

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.

(Dollars in thousands) September 30, 2023 December 31, 2022 September 30, 2022 $ change from 12/31/22 % change from 12/31/22 $ change from 9/30/22 % change from 9/30/22

Total public fund deposits $ 1,400,807 $ 1,335,400 $ 1,743,210 $ 65,407 4.9 % $ (342,403) (19.6) %

As of September 30, 2023, Park had approximately $1.4 billion of uninsured deposits, which was 17.2% of total deposits.

Uninsured deposits of $1.4 billion included $300 million of deposits which were over the $250,000 FDIC insured limit 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 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.

The table below reflects the net income (loss) by segment for the first, second, and third quarters of 2023, for the first nine months of each of 2023 and 2022 (the nine months ended September 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) Q2 2023 Q1 2023 Six months YTD 2023 Six months YTD 2022 2022 2021

(In thousands) Q3 2023 Q2 2023 Q1 2023 Nine months YTD 2023 Nine months YTD 2022 2022 2021

PNB $ 40,788 $ 35,485 $ 36,269 $ 112,542 $ 107,923 $ 143,243 $ 159,461

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Total Park $ 36,917 $ 31,584 $ 33,733 $ 102,234 $ 115,267 $ 148,351 $ 153,945

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.

The following discussion provides additional information regarding the PNB segment, followed by additional information regarding All Other.

The following discussion provides additional information regarding the PNB segment, followed by additional information regarding the All Other segment.

The Park National Bank (PNB)

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

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

(In thousands) Q3 2023 Q2 2023 Q1 2023 Nine months YTD 2023 Nine months YTD 2022 2022 2021

Net interest income $ 96,078 $ 93,549 $ 93,589 $ 283,216 $ 254,818 $ 350,646 $ 328,398

Provision for (recovery of) credit losses 2,524 915 3,439 (1,190) 5,834 (8,554)

(Recovery of) provision for credit losses (1,538) 2,524 915 1,901 2,045 5,834 (8,554)

Other income 27,888 25,091 24,262 77,241 89,420 115,211 126,802

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Net income $ 40,788 $ 35,485 $ 36,269 $ 112,542 $ 107,923 $ 143,243 $ 159,461

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.

Net interest income of $283.2 million for the nine months ended September 30, 2023 represented a $28.4 million, or 11.1%, increase compared to $254.8 million for the nine months ended September 30, 2022.

The increase was a result of a $79.6 million increase in interest income, partially offset by a $51.2 million increase in interest expense.

The $79.6 million increase in interest income was due to a $60.1 million increase in interest income on loans and a $19.5 million increase in investment income.

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 $60.1 million increase in interest income on loans was primarily the result of a $263.8 million (or 3.82%) increase in average loans, from $6.90 billion for the nine months ended September 30, 2022 to $7.17 billion for the nine months ended September 30, 2023, as well as an increase in the yield on loans, which increased 96 basis points to 5.43% for the nine months ended September 30, 2023, compared to 4.47% for the nine months ended September 30, 2022.

The $19.5 million increase in investment income was primarily the result of an increase in the yield on investments, including money market investments, which increased 155 basis points to 3.83% for the nine months ended September 30, 2023, compared to 2.28% for the nine months ended September 30, 2022.

The increase in the yield on investments was partially offset by a decrease in average investments, including money market investments, from $2.22 billion for the nine months ended September 30, 2022 to $2.01 billion for the nine months ended September 30, 2023.

The $51.2 million increase in interest expense was due to a $49.0 million increase in interest expense on deposits, as well as a $2.2 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 $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 increase in interest expense on deposits was the result of a $248.8

million (or 4.70%) increase in average on-balance sheet interest bearing deposits from $5.29 billion for the nine months ended September 30, 2022, to $5.54 billion for the nine months ended September 30, 2023 as well as an increase in the cost of deposits of 118 basis points, from 0.24% for the nine months ended September 30, 2022 to 1.42% for the nine months ended September 30, 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 savings accounts and time deposits.

During the nine months ended September 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 $1.9 million for the nine months ended September 30, 2023 represented a decline of $144,000, compared to $2.0 million for the nine months ended September 30, 2022.

Refer to the “Credit Metrics and (Recovery of) Provision for 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 $77.2 million for the nine months ended September 30, 2023 represented a decrease of $12.2 million, or 13.6%, compared to $89.4 million for the nine months ended September 30, 2022.

The $12.2 million decrease was primarily related to (i) a $4.4 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 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

(ii) a $3.8 million decrease in other miscellaneous income, which was primarily due to decreases in the net gain on the sale of loans and other assets and in other fee income;

(iii) a $3.3 million decrease in other components of net periodic benefit income;

(iv) a $1.1 million decrease in gain on equity securities, net, from a $2.3 million gain for the nine months ended September 30, 2022 to a $1.1 million gain for the nine months ended September 30, 2023;

and (v) a $1.1 million decrease in service charges on deposits income, primarily related to a decrease in overdraft fee income.

These decreases were partially offset by a $658,000 increase in fiduciary income, a $568,000 increase in debit card fee income, and a $451,000 increase in bank owned life insurance income.

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

(In thousands) Q3 2023 Q2 2023 Q1 2023 Q3 2022 Q2 2022 Q1 2022 2022 2021

Mortgage Loan Origination Volume

5 unchanged sentences

Refinances as a % of Total Mortgage Loan Originations 15.2 % 19.1 % 24.7 % 24.0 % 25.9 % 41.7 % 29.4 % 54.2 %

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.

Total mortgage loan originations decreased $174.1 million, or 37.4%, to $291.9 million for the nine months ended September 30, 2023 compared to $466.0 million for the nine months ended September 30, 2022.

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

(Dollars in thousands) 2023 2022 $ change % change

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Amortization of intangible assets 989 1,146 (157) (13.7) %

Foundation contribution — 4,000 (4,000) (100.0) %

Miscellaneous 6,370 5,425 945 17.4 %

Total other expense $ 220,741 $ 209,500 $ 11,241 5.4 %

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.

Total other expense of $220.7 million for the nine months ended September 30, 2023 represented an increase of $11.2 million, or 5.4%, compared to $209.5 million for the nine months ended September 30, 2022.

The increase in salaries expense was primarily related to increases in base salary expense and share-based compensation expense, partially offset by decreases in additional compensation expense and officer incentive 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 consulting, other fees, temporary wages, legal expense, IntraFi insured deposit fees and directors fees.

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

7,204,784 7,137,156 6,944,183 0.95 % 3.75 %

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

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

(Dollars in thousands) September 30, 2023 December 31, 2022 September 30, 2022 % change from 12/31/22 % change from 09/30/22

Loans 7,349,580 7,141,362 7,102,503 2.92 % 3.48 %

Allowance for credit losses 84,601 85,370 83,947 (0.90) % 0.78 %

9 unchanged sentences

1.51 % 1.43 % 1.45 % 5.59 % 4.14 %

(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.

(1) Average assets for the nine months ended September 30, 2023 and 2022 and for the year ended December 31, 2022.

(2) Efficiency ratio is calculated by dividing total other expense by the sum of fully taxable equivalent net interest income and other income.

Fully taxable equivalent net interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate.

The taxable equivalent adjustments were $2.9 million for the nine months ended September 30, 2023, $3.5 million for the year ended December 31 2022 and $2.6 million for the nine months ended September 30 2022.

(3) Annualized for the nine months ended September 30, 2023 and 2022.

Loans outstanding at September 30, 2023 were $7.35 billion, compared to (i) $7.14 billion at December 31, 2022, an increase of $208.2 million, and (ii) $7.10 billion at September 30, 2022, an increase of $247.1 million.

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

(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

(Dollars in thousands) September 30, 2023 December 31, 2022 September 30, 2022 $ change from 12/31/22 % change from 12/31/22 $ change from 9/30/22 % change from 9/30/22

Home equity $ 173,570 $ 167,232 $ 167,072 $ 6,338 3.8 % $ 6,498 3.9 %

1 unchanged sentence

Real estate 1,295,769 1,195,037 1,171,079 100,732 8.4 % 124,690 10.6 %

Commercial (excluding PPP loans) (1)(2)

3,835,058 3,850,477 3,821,686 (15,419) (0.4) % 13,372 0.3 %

PPP loans 3,078 4,206 13,428 (1,128) (26.8) % (10,350) (77.1) %

Commercial 3,897,676 3,854,683 3,813,691 42,993 1.1 % 83,985 2.2 %

Other 4,835 3,351 1,842 1,484 44.3 % 2,993 162.5 %

Total loans (2)

$ 7,349,580 $ 7,141,362 $ 7,102,503 $ 208,218 2.9 % $ 247,077 3.5 %

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 $3.1 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.

Loans outstanding at September 30, 2023 were $7.35 billion, compared to $7.21 billion at June 30, 2023, an increase of $141.7 million.

The $141.7 million increase represented a 2.0% (7.8% annualized) increase during the three months ended September 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

(Dollars in thousands) September 30, 2023 June 30, 2023 $ change from 6/30/23 % change from 6/30/23

Home equity $ 173,570 $ 168,256 $ 5,314 3.2 %

1 unchanged sentence

Real estate 1,295,769 1,252,243 43,526 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.

Commercial 3,897,676 3,838,136 59,540 1.6 %

Other 4,835 4,102 733 17.9 %

Total loans $ 7,349,580 $ 7,207,862 $ 141,718 2.0 %

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 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.

PNB's allowance for credit losses was $84.6 million at September 30, 2023, compared to (i) $85.4 million at December 31, 2022, a decrease of $0.8 million, or 0.9%, and (ii) $83.9 million at September 30, 2022, an increase of $0.7 million, or 0.8%.

Net charge-offs were $3.1 million, or 0.06% of total average loans, for the nine months ended September 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 $1.2 million, or 0.02% of total average loans, for the nine months ended September 30, 2022.

Refer to the “Credit Metrics and (Recovery of) Provision for 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 September 30, 2023 were $8.54 billion, compared to (i) $8.53 billion at December 31, 2022, an increase of $2.1 million, and (ii) $8.61 billion at September 30, 2022, a decrease of $69.8 million, or 0.8%.

During the nine months ended September 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 September 30, 2023, December 31, 2022 and September 30, 2022, Park had $763,000, $195.9 million, and $766.2 million, respectively, in deposits which were off-balance sheet.

Total deposits would have decreased $193.1 million, or 2.2%, compared to December 31, 2022 had the $763,000 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.

Total deposits would have decreased $835.3 million, or 8.9%, compared to September 30, 2022 had the $763,000 and $766.2 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 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

(Dollars in thousands) September 30, 2023 December 31, 2022 September 30, 2022 $ change from 12/31/22 % change from 12/31/22 $ change from 9/30/22 % change from 9/30/22

Non-interest bearing deposits $ 3,024,412 $ 3,374,269 $ 3,435,307 $ (349,857) (10.4) % $ (410,895) (12.0) %

6 unchanged sentences

Total deposits including off-balance sheet deposits $ 8,537,196 $ 8,730,257 $ 9,372,457 $ (193,061) (2.2) % $ (835,261) (8.9) %

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.

Total deposits at September 30, 2023 were $8.54 billion, compared to $8.66 billion at June 30, 2023, a decrease of $119.7 million, or 1.4%.

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

(Dollars in thousands) September 30, 2023 June 30, 2023 $ change from 6/30/23 % change from 6/30/23

Non-interest bearing deposits $ 3,024,412 $ 3,093,460 $ (69,048) (2.2) %

3 unchanged sentences

Total deposits $ 8,536,433 $ 8,656,161 $ (119,728) (1.4) %

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

Off-balance sheet deposits 763 767 (4) (0.5) %

Total deposits including off-balance sheet deposits $ 8,537,196 $ 8,656,928 $ (119,732) (1.4) %

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

The table below reflects All Other net (loss) income for the first, second and third quarters of 2023, for the first nine months of

each of 2023 and 2022 (the nine months ended September 30) and for the years ended December 31, 2022, and 2021.

(In thousands) Q3 2023 Q2 2023 Q1 2023 Nine months YTD 2023 Nine months YTD 2022 2022 2021

Net interest (expense) income $ (1,809) $ (1,977) $ (1,391) $ (5,177) $ (2,365) $ (3,587) $ 1,495

Recovery of credit losses (42) (32) (732) (806) (469) (1,277) (3,362)

Other income (76) 125 49 2,347 20,724 3,142

Other (loss) income (175) (76) 125 (126) 20,123 20,724 3,142

Other expense 3,185 2,764 3,506 9,455 10,824 14,308 16,840

Net (loss) income before income tax benefit $ (4,785) $ (4,040) $ (8,825) $ (5,378) $ 4,106 $ (8,841)

Income tax benefit (884) (1,504) (2,388) (2,169) (1,002) (3,325)

Net (loss) income before income tax (benefit) expense $ (5,127) $ (4,785) $ (4,040) $ (13,952) $ 7,403 $ 4,106 $ (8,841)

Income tax (benefit) expense (1,256) (884) (1,504) (3,644) 59 (1,002) (3,325)

Net (loss) income $ (3,871) $ (3,901) $ (2,536) $ (10,308) $ 7,344 $ 5,108 $ (5,516)

The net interest (expense) income for All Other included, for all periods presented, interest income on subordinated debt investments in PNB, which was eliminated in the consolidated Park National Corporation totals, as well as interest income on GFSC loans and SEPH impaired loan relationships.

The net interest (expense) income for All Other included, for all periods presented, interest income on subordinated debt investments in PNB, which was eliminated in the consolidated Park totals, as well as interest income on GFSC loans and SEPH impaired loan relationships.

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 $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 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.

Net interest (expense) income reflected net interest expense of $5.2 million for the nine months ended September 30, 2023, compared to net interest expense of $2.4 million for the nine months ended September 30, 2022.

The change was largely the result of a decrease of $2.4 million in loan interest income related to payment collections at SEPH, a decrease of $197,000 in net interest income from GFSC and an increase in interest expense on borrowings of $469,000 as the result of an increase in the applicable interest rate.

Refer to the “Credit Metrics and (Recovery of) Provision for 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 loss of $(126,000) for the nine months ended September 30, 2023, compared to other income of $20.1 million for the nine months ended September 30, 2022.

The decrease was due to a $12.0 million decrease in income from an OREO valuation markup, a $5.6 million decrease in gain on sale of OREO, net, 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 $1.4 million decrease in gain (loss) on equity securities, net.

All Other had other expense of $9.5 million for the nine months ended September 30, 2023, compared to $10.8 million for the nine months ended September 30, 2022.

The decrease was largely due to a $1.5 million decrease in professional fees and services expense.

Park National Corporation

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

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

(In thousands) Q3 2023 Q2 2023 Q1 2023 Nine months YTD 2023 Nine months YTD 2022 2022 2021

Net interest income $ 94,269 $ 91,572 $ 92,198 $ 278,039 $ 252,453 $ 347,059 $ 329,893

Provision for (recovery of) credit losses 2,492 183 2,675 (1,614) 4,557 (11,916)

(Recovery of) provision for credit losses (1,580) 2,492 183 1,095 1,576 4,557 (11,916)

Other income 27,713 25,015 24,387 77,115 109,543 135,935 129,944

6 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 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.

Comparison for the Third Quarters of 2023 and 2022

Net interest income increased by $3.4 million, or 3.8%, to $94.3 million for the third quarter of 2023, compared to $90.8 million for the third quarter of 2022.

See the discussion under the table below.

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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 $147,000 for the three months ended June 30, 2023 and $161,000 for the same period of 2022.

The taxable equivalent adjustment was $271,000 for the three months ended September 30, 2023 and $155,000 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 $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.

The taxable equivalent adjustment was $771,000 for the three months ended September 30, 2023 and $777,000 for the same period of 2022.

Average interest earning assets for the third quarter of 2023 decreased by $387.4 million, or 4.1%, to $9,178 million for the third quarter of 2023, compared to $9,566 million for the third quarter of 2022.

The average yield on interest earning assets increased by 109 basis points to 5.27% for the third quarter of 2023, compared to 4.18% for the third quarter of 2022.

Interest income for the three months ended September 30, 2023 and 2022 included purchase accounting accretion of $145,000 and $494,000, respectively, related to the acquisitions of NewDominion and Carolina Alliance, as well as $9,000 and $649,000, 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 September 30, 2023 and 2022 also included $16,000 and $361,000, respectively, of interest income related to PPP loans.

Excluding the impact of the purchase accounting accretion, SEPH-related income, and PPP income, the yield on loans was 5.64% and 4.64% for the three months ended September 30, 2023 and 2022, respectively, and the yield on earning assets was 5.26% and 4.13% for the three months ended September 30, 2023 and 2022, respectively.

Average interest bearing liabilities for the third quarter of 2023 decreased by $77.5 million, or 1.3%, to $5,988 million, compared to $6,065 million for the third quarter of 2022.

The average cost of interest bearing liabilities increased by 116 basis points to 1.76% for the third quarter of 2023, compared to 0.60% for the third quarter of 2022.

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

At September 30, 2023 and 2022, Park had $763,000 and $766.2 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 4.06% and 3.68% for the three months ended June 30, 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 4.11% and 3.75% for the three months ended September 30, 2023 and 2022, respectively.

Yield on Loans:

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.

Average loan balances increased $228.4 million, or 3.2%, to $7,267 million for the third quarter of 2023, compared to $7,039 million for the third quarter of 2022.

The average yield on the loan portfolio increased by 93 basis points to 5.65% for the third quarter of 2023, compared to 4.72% for the third quarter of 2022.

Average loans for the third quarters of 2023 and 2022 included $2.4 million and $9.7 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 September 30, 2023 and 2022.

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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 $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

The taxable equivalent adjustment was $271,000 for the three months ended September 30, 2023 and $155,000 for the same period of 2022.

Loan interest income for the three months ended September 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 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.

Excluding the impact of the purchase accounting accretion, SEPH-related income, and PPP income, (a) the yield on home equity loans was 8.29%, the yield on installment loans was unchanged at 5.66%, the yield on real estate loans was unchanged at 4.45%, the yield on commercial loans was 5.90% and the yield on total loans before allowance was 5.64% for the three months ended September 30, 2023;

and (b) the yield on home equity loans was 5.40%, the yield on installment loans was unchanged at 4.74%, the yield on real estate loans was 3.82%, the

yield on commercial loans was 4.80% and the yield on total loans and leases before allowance was 4.64% for the three months ended September 30, 2022.

Cost of Deposits:

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.

Average interest bearing deposit balances decreased $45.4 million, or 0.8%, to $5,635 million for the third quarter of 2023, compared to $5,680 million for the third quarter of 2022.

The average cost of funds on deposit balances increased by 117 basis points to 1.63% for the third quarter of 2023, compared to 0.46% for the third quarter of 2022.

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

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5 unchanged sentences

Total interest bearing deposits $ 5,634,621 1.63 % $ 5,679,989 0.46 %

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.

Comparison for the First Nine Months of 2023 and 2022

Net interest income increased by $25.6 million, or 10.1%, to $278.0 million for the first nine months of 2023, compared to $252.5 million for the first nine months of 2022.

See the discussion under the table below.

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

The taxable equivalent adjustment was $571,000 for the nine months ended September 30, 2023 and $484,000 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.

The taxable equivalent adjustment was $2.3 million for the nine months ended September 30, 2023 and $2.1 million for the same period of 2022.

Average interest earning assets for the first nine months of 2023 increased by $59.5 million, or 0.7%, to $9,189 million for the first nine months of 2023, compared to $9,130 million for the first nine months of 2022.

The average yield on interest earning assets increased by 110 basis points to 5.08% for the first nine months of 2023, compared to 3.98% for the first nine months of 2022.

Interest income for the nine months ended September 30, 2023 and 2022 included purchase accounting accretion of $509,000 and $1.5 million, respectively, related to the acquisitions of NewDominion and Carolina Alliance, as well as $596,000 and $3.0

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 nine months ended September 30, 2023 and 2022 also included $57,000 and $3.0 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 4.41% for the nine months ended September 30, 2023 and 2022, respectively, and the yield on earning assets was 5.07% and 3.89% for the nine months ended September 30, 2023 and 2022, respectively.

Average interest bearing liabilities for the first nine months of 2023 decreased by $220.6 million, or 3.9%, to $5,905 million, compared to $5,684 million for the first nine months of 2022.

The average cost of interest bearing liabilities increased by 115 basis points to 1.55% for the first nine months of 2023, compared to 0.40% for the first nine months of 2022.

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

At September 30, 2023 and 2022, Park had $763,000 and $766.2 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.

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 4.07% and 3.64% for the nine months ended September 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.

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Average loan balances increased $262.8 million, or 3.8%, to $7,167 million for the first nine months of 2023, compared to $6,904 million for the first nine months of 2022.

The average yield on the loan portfolio increased by 90 basis points to 5.44% for the first nine months of 2023, compared to 4.54% for the first nine months of 2022.

Average loans for the first nine months of 2023 and 2022 included $3.3 million and $32.3 million, respectively, of PPP loans.

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

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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 $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

The taxable equivalent adjustment was $571,000 for the nine months ended September 30, 2023 and $484,000 for the same period of 2022.

Loan interest income for the nine months ended September 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.

Excluding the impact of the purchase accounting accretion, SEPH-related income, and PPP income, (a) the yield on home equity loans was 8.03%, the yield on installment loans was unchanged at 5.32%, the yield on real estate loans was unchanged at 4.29%, the yield on commercial loans was 5.72% and the yield on total loans before allowance was 5.42% for the nine months ended September 30, 2023;

and (b) the yield on home equity loans was 4.28%, the yield on installment loans was unchanged at 4.69%, the yield on real estate loans was 3.74%, the yield on commercial loans was 4.49% and the yield on total loans and leases before allowance was 4.41% for the nine months ended September 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.

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Average interest bearing deposit balances increased $248.5 million, or 4.7%, to $5,541 million for the first nine months of 2023, compared to $5,292 million for the first nine months of 2022.

The average cost of funds on deposit balances increased by 118 basis points to 1.42% for the first nine months of 2023, compared to 0.24% for the first nine months of 2022.

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

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6 unchanged sentences

Yield on Average Interest Earning Assets:

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.

The following table shows the tax equivalent yield on average interest earning assets for the nine months ended September 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 six months 5.34 % 3.67 % 4.84 % 4.99 %

2023 - first nine months 5.44 % 3.69 % 4.94 % 5.08 %

(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 $627,000, $704,000, and $623,000 for the years ended December 31, 2022, 2021 and 2020, respectively.

The taxable equivalent adjustment was $571,000 for the nine months ended September 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 $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.

The taxable equivalent adjustment was $2.3 million for the nine months ended September 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 nine months ended September 30, 2023 and for the years ended December 31, 2022, 2021 and 2020 included $596,000, $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 $509,000, $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 nine months ended September 30, 2023 and for the years ended December 31, 2022, 2021, and 2020 included $57,000, $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 5.42%, 4.55%, 4.27%, and 4.63% for the nine months ended September 30, 2023, and for the years ended December 31, 2022, 2021 and 2020, respectively, and the yield on total earning assets was 5.07%, 4.06%, 3.64%, and 4.20% for the nine months ended September 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 six months ended June 30, 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 nine months ended September 30, 2023 and for the years ended December 31, 2022, 2021 and 2020.

Interest bearing deposits (1)

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2022 - year 0.39 % 0.67 % 4.69 % 0.54 %

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

2023 - first nine months 1.42 % 2.05 % 4.97 % 1.55 %

(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 six months ended June 30, 2023.

Credit Metrics and Provision for (Recovery of) Credit Losses

The provision for (recovery of) credit losses is the amount added to/subtracted from the allowance for credit losses to ensure the allowance is sufficient to absorb estimated credit losses over the life of a loan.

The amount of the provision for (recovery of) credit losses is determined by management based on relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets.

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

Credit Metrics and (Recovery of) Provision for Credit Losses

The (recovery of) provision for credit losses is the amount subtracted from/added to the allowance for credit losses to ensure the allowance is sufficient to absorb estimated credit losses over the life of a loan.

The amount of the (recovery of) provision for credit losses is determined by management based on relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets.

The adoption of ASU 2022-02 on January 1, 2023 resulted in a $383,000 increase to the allowance for credit losses.

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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.

The table below provides additional information on the (recovery of) provision for credit losses for the three-month and nine-month periods ended September 30, 2023 and 2022.

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(Dollars in thousands) 2023 2022 2023 2022

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Net charge-offs 1,024 677 2,255 812

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

(Recovery of) provision for credit losses (1,580) 3,190 1,095 1,576

Ending balance $ 84,602 $ 83,961 $ 84,602 $ 83,961

Net charge-offs as a % of average loans (annualized) 0.06 % 0.04 % 0.04 % 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 June 30, 2023, March 31, 2023, December 31, 2022, and June 30, 2022.

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 September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022, and September 30, 2022.

(Dollars in thousands) 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022

Total allowance for credit losses $ 84,602 $ 87,206 $ 85,946 $ 85,379 $ 83,961

Allowance on PCD loans — — — —

Allowance on accruing PCD loans — — — — —

Specific reserves on individually evaluated loans 3,422 4,132 4,318 3,566 1,750

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Total loans $ 7,349,745 $ 7,208,109 $ 7,093,857 $ 7,141,891 $ 7,103,246

PCD loans 4,455 4,555 4,653 5,934

Accruing PCD loans 3,807 4,455 4,555 4,653 4,867

Individually evaluated loans (1)

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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 $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.

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.

The allowance for credit losses of $84.6 million at September 30, 2023 represented a $2.6 million, or 3.0%, decrease compared to $87.2 million at June 30, 2023.

The decrease was largely due to a $1.9 million decrease in general reserves, reflecting an improvement in economic forecasts, particularly in the adverse scenario, along with a reduction in special mention loans during the quarter.

Also contributing to the decline was a decrease of $710,000 in specific reserves.

The allowance for credit losses of $84.6 million at September 30, 2023 represented a $777,000, or 0.9%, decrease compared to $85.4 million at December 31, 2022.

The decrease was due to a $633,000 decrease in general reserves and a decline of $144,000 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.

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(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 (4) 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 June 30, 2023, December 31, 2022 and June 30, 2022.

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

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

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

Nonaccrual loans $ 55,008 $ 79,696 $ 44,612

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Total nonperforming loans $ 55,635 $ 101,111 $ 65,233

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 1,354 1,354 1,354

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

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

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

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

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

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

September 30, 2023 December 31, 2022 September 30, 2022

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

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

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

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

Pass-rated $ 3,774,839 $ 3,709,065 $ 3,694,468

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

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.

Park had $87.7 million of collectively evaluated commercial loans included on the watch list at September 30, 2023, compared to $81.8 million at December 31, 2022, and $79.4 million at September 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.

The increase in watch list credits during the first nine months of 2023 was largely due to a $16.8 million hotel loan which was downgraded to special mention and a $7.3 million loan to a non-bank consumer finance company which was downgraded to special mention, partially offset by problem loan resolutions, including the upgrade to pass-rated of a $8.9 million hotel relationship.

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

Park considers a loan delinquent when it reaches 30 days past due.

Delinquent and accruing loans were $16.3 million, or 0.22%, of total loans at September 30, 2023, compared to $18.9 million, or 0.26% of total loans at December 31, 2022, and $15.4 million or 0.22% of total loans at September 30, 2022.

Individually Evaluated Loans:

6 unchanged sentences

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 $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.

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, up from $10.5 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.

Individually evaluated commercial loans were $40.8 million at September 30, 2023, a decrease of $37.5 million, compared to $78.3 million at December 31, 2022 and a decrease of $2.8 million, compared to $43.7 million at September 30, 2022.

At September 30, 2023, Park had taken partial charge-offs of $2.1 million related to the $40.8 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:

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

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.

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

The carrying amount of accruing loans acquired with deteriorated credit quality at September 30, 2023 and at December 31, 2022 was $3.8 million and $4.7 million, respectively.

The carrying amount of nonaccrual loans acquired with deteriorated credit quality was $549,000 at September 30, 2023.

There were no nonaccrual loans acquired with deteriorated quality at December 31, 2022.

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 June 30, 2023 are detailed below.

The methodology for calculating the ACL and assumptions made as of September 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 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.

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

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

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

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◦ 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

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.

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.

8 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 June 30, 2023.

◦ As of September 30, 2023, the "most likely" scenario forecasted Ohio unemployment between 4.07% and 4.66% during the next four quarters.

In determining the appropriate weighting of scenarios at September 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, continued elevated interest rates, financial system stress and geopolitical conflict (including the conflicts between Russia and Ukraine and between Israel and Hamas), continued to cause uncertainty as to the overall economic environment.

Qualitative Considerations

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and events such as natural disasters or pandemics.

• Actual and expected changes in international, national, regional, and local economic and business conditions and developments in the markets in which Park operates that affect the collectibility of financial assets.

• Where the U.S.

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

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.

At September 30, 2023 and at December 31, 2022, Park had $2.4 million and $4.2 million, respectively, of PPP loans which were included in the commercial, financial and agricultural loan 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 each of June 30, 2023 and December 31, 2022 was calculated for these loans to reflect minimal credit risk.

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

Additional Considerations

2 unchanged sentences

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.

As of September 30, 2023, Park had $212.7 million of loans which were fully or partially secured by non-owner-occupied office space.

Of the $212.7 million in loans collateralized by non-owner-occupied office space, $210.1 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.

Other income decreased by $19.0 million to $27.7 million for the quarter ended September 30, 2023, compared to $46.7 million for the third quarter of 2022 and decreased $32.4 million to $77.1 million for the first nine months of 2023, compared to $109.5 million for the first nine months of 2022.

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

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

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

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

(In thousands) 2023 2022 Change 2023 2022 Change

5 unchanged sentences

ATM fees 575 610 (35) 1,661 1,725 (64)

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

(Loss) gain on sale of OREO, net (6) 5,607 (5,613) (3) 5,611 (5,614)

OREO valuation markup — 12,009 (12,009) 15 12,039 (12,024)

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

Gain on equity securities, net 998 58 940 618 3,120 (2,502)

Other components of net periodic pension benefit income 1,893 3,027 (1,134) 5,679 9,081 (3,402)

1 unchanged sentence

Total other income $ 27,713 $ 46,694 $ (18,981) $ 77,115 $ 109,543 $ (32,428)

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.

Income from fiduciary activities increased by $884,000, or 10.8%, to $9.1 million for the three months ended September 30, 2023, compared to $8.2 million for the same period of 2022 and increased $659,000, or 2.5%, to $26.5 million for the nine months ended September 30, 2023 compared to $25.9 million for the same period in 2022.

The majority of fiduciary fees are calculated on a lag, based on the market value of the assets under management.

The average market value of assets under management for the three months ended September 30, 2023 was $7,797 million compared to $7,062 million for the same period in 2022.

The average market value for the first nine months of 2023 was $7,635 million compared to $7,216 million for the same period in 2022.

Service charges on deposit accounts decreased by $750,000, or 26.2%, to $2.1 million for the three months ended September 30, 2023, compared to $2.9 million for the same period of 2022 and decreased $1.1 million, or 14.7%, to $6.4 million for the nine months ended September 30, 2023 compared to $7.5 million for the same period of 2022.

The decreases for both the three-month and nine-month periods ended September 30, 2023 compared to the same periods in September 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 $341,000, or 11.5%, to $2.6 million for the three months ended September 30, 2023, compared to $3.0 million for the same period of 2022.

The primary reasons for the decrease for the three months ended September 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 $287,000 and a decrease in commercial loan fee income of $128,000, partially offset by an increase in investor rate locks and mortgage loans held for sale of $54,000 and an increase in other consumer real estate fees of $121,000.

Mortgage origination volume decreased by $26.8 million, or 17.4%, to $127.4 million for the three months ended September 30, 2023 from $154.1 million for the three months ended September 30, 2022.

Other service income decreased by $4.8 million, or 37.5%, to $7.9 million for the nine months ended September 30, 2023, compared to $12.7 million for the same period of 2022.

The primary reasons for the decrease for the nine months ended September 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 $2.9 million, a decrease in mortgage servicing rights income of $1.8 million, and a decrease in commercial loan fee income of $578,000, partially offset by an increase in investor rate locks and mortgage loans held for sale of $359,000 and an increase in other consumer real estate fees of $297,000.

Mortgage origination volume decreased by $174.1 million, or 37.4%, to $291.9 million for the nine months ended September 30, 2023 from $466.0 million for the nine months ended September 30, 2022.

Bank owned life insurance income increased by $263,000, or 22.2%, to $1.4 million for the three months ended September 30, 2023, compared to $1.2 million for the same period of 2022 and decreased $769,000, or 16.2%, to $4.0 million for the nine months ended September 30, 2023, compared to $4.7 million for the same period of 2022.

The increase for the three-month period ended September 30, 2023 compared to September 30, 2022 was due to an increase in received death benefits.

The decrease for the nine-month period ended September 30, 2023 compared to September 30, 2022 was due to a decrease in received death benefits.

(Loss) gain on sale of OREO, net decreased by $5.6 million to a net loss on sale of OREO of $6,000 for the three months ended September 30, 2023 compared to a net gain on sale of OREO of $5.6 million for the three months ended September 30, 2022 and decreased $5.6 million to a loss gain on sale of OREO of $3,000 for the nine months ended September 30, 2023 compared to a net gain on the sale of OREO of $5.6 million for the same period in 2022.

A $5.6 million gain on the sale of OREO, net, was recognized during the three months and the nine months ended September 30, 2022 related to former Vision Bank relationships.

There was no gain on the sale of OREO, net, related to former Vision Bank relationships during the three months and the nine months ended September 30, 2023.

There was no OREO valuation markup income recognized in the three months ended September 30, 2023 compared to $12.0 million recognized during the three months ended September 30, 2022.

OREO valuation markup income decreased by $12.0 million to $15,000 for the nine months ended September 30, 2023 compared to $12.0 million for the nine months ended September 30, 2022.

The $12.0 million OREO valuation markup during the three months and the nine months ended September 30, 2022 related to the foreclosure and subsequent sale of a property collateralizing a former Vision Bank relationship.

There was no OREO valuation markup related to former Vision Bank relationships during the three months and the nine months ended September 30, 2023.

Gain on equity securities, net, increased by $940,000, to a net gain of $998,000 for the three months ended September 30, 2023, compared to a net gain of $58,000 for the same period in 2022.

The $940,000 increase for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 was related to a $113,000 change in the gain (loss) on other equity securities which went from a net loss of $39,000 for the three months ended September 30, 2022 to a net gain of $74,000 for the three months ended September 30, 2023, and a $827,000 increase in the gain on equity securities held at NAV, which went from a $97,000 net gain for the three months ended September 30, 2022 to a $924,000 net gain for the three months ended September 30, 2023.

Gain on equity securities, net, decreased by $2.5 million, to a net gain of $618,000 for the nine months ended September 30, 2023, compared to a net gain of $3.1 million for the same period in 2022.

The $2.5 million change for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was related to a $553,000 change in gain (loss) on other equity securities which went from a $488,000 net gain for the nine months ended September 30, 2022 to a $65,000 net loss for the nine months ended September 30, 2023, and a $1.9 million decrease in the gain on equity securities held at NAV, which went from a $2.6 million net gain for the nine months ended September 30, 2022 to a $683,000 net gain for the nine months ended September 30, 2023.

Other components of net periodic pension benefit income decreased $1.1 million to $1.9 million for the three months ended September 30, 2023 compared to $3.0 million for the same period in 2022 and decreased $3.4 million to $5.7 million for the nine months ended September 30, 2023 compared to $9.1 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 $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.

Miscellaneous income decreased $1.3 million, or 36.2%, to $2.3 million for the three months ended September 30, 2023 compared to $3.7 million for the same period of 2022.

The decrease for the three-month period ended September 30, 2023 compared to the same period of 2022 was primarily a result of decreases in gains on sales of loans and other assets and settlement income and fees earned on off-balance sheet deposit accounts, partially offset by miscellaneous income received as a part of an investment fund liquidation.

Miscellaneous income decreased $3.4 million, or 43.8% to $4.4 million for the nine months ended September 30, 2023 compared to $7.8 million for the same period of 2022.

The decrease for the nine-month period ended September 30, 2023 compared to the same period of 2022 was primarily a result of decreases in (i) brokerage income;

(ii) operating lease income;

(iii) wire transfer and ACH fees as a result of the reclassification of these fees to service charges on deposit accounts;

(iv) settlement income and fees earned on off-balance sheet deposit accounts;

and (v) gains on sales of loans and other assets;

partially offset by a decrease in OREO devaluations and miscellaneous income received as a part of an investment fund liquidation.

Other Expense

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.

Other expense decreased by $5.1 million to $77.8 million for the three months ended September 30, 2023 compared to $82.9 million for the same period of 2022 and increased by $9.9 million to $230.2 million for the nine months ended September 30, 2023 compared to $220.3 million for the nine months ended September 30, 2022.

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

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

(In thousands) 2023 2022 Change 2023 2022 Change

10 unchanged sentences

Amortization of intangible assets 334 341 (7) 989 1,146 (157)

Foundation contribution — 4,000 (4,000) — 4,000 (4,000)

Miscellaneous 2,977 2,764 213 8,214 7,261 953

Total other expense $ 77,808 $ 82,903 $ (5,095) $ 230,196 $ 220,324 $ 9,872

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.

Salaries decreased by $3.4 million, or 8.9%, to $34.5 million for the three months ended September 30, 2023, compared to $37.9 million for the same period in 2022.

The decrease for the three months ended September 30, 2023 compared to the same period of 2022 was due to a decrease of $3.7 million in additional compensation expense, a decrease of $2.2 million in officer incentive compensation, and a decrease in long-term incentive expense of $170,000.

These decreases were partially offset by an increase in base salary expense of $2.6 million.

Salaries increased by $3.6 million, or 3.6%, to $103.0 million for the nine months ended September 30, 2023, compared to $99.5 million for the same period in 2022.

The increase for the nine months ended September 30, 2023 compared to the same period of 2022 was due to an increase of $9.3 million in base salary expense as full-time equivalent employees increased from 1,711 at September 30, 2022 to 1,794 at September 30, 2023.

Also contributing to the increase in the first nine months of 2023 compared to the first nine months of 2022 was an increase in long-term incentive expense of $559,000.

These increases were partially offset by a decrease in additional compensation expense of $4.4 million and a decrease of $2.0 million in officer incentive compensation expense.

Employee benefits increased $925,000, or 9.3%, to $10.8 million for the three months ended September 30, 2023, compared to $9.9 million for the same period in 2022 and increased $1.6 million, or 5.2%, to $32.2 million for the nine months ended September 30, 2023 compared to $30.6 million for the same period.

The $925,000 increase for the three months ended September 30, 2023 compared to the same period in 2022 was primarily due to an increase in group insurance costs of $1.3 million and an increase in payroll tax expense of $262,000, partially offset by decreased pension plan expense of $878,000.

The $1.6 million increase for the nine months ended September 30, 2023 compared to the same period in 2022 was primarily due to an increase in group insurance costs of $2.9 million, an increase in payroll tax expense of $815,000, and an increase in company match KSOP contributions of $247,000, partially offset by a decrease in pension plan expense of $2.6 million.

Furniture and equipment expense increased $148,000, or 5.1%, to $3.1 million for the three months ended September 30, 2023 compared to $2.9 million for the same period in 2022, and increased $626,000, or 7.1%, to $9.4 million for the nine months ended September 30, 2023 from $8.8 million for the same period in 2022.

The increase for both the three-month and the nine-month periods ended September 30, 2023 compared to the same periods in 2022 related to an increase in depreciation expense.

Data processing expense increased $1.5 million, or 18.7%, to $9.7 million for the three months ended September 30, 2023 compared to $8.2 million for the same period in 2022, and increased $3.9 million, or 16.4%, to $28.0 million for the nine months ended September 30, 2023 from $24.1 million for the same period in 2022.

The increase for both the three-month and the nine-month periods ended September 30, 2023 compared to the same periods in 2022 related to an increase in software expense and debit card processing costs.

Professional fees and services expense decreased $787,000, or 9.4%, to $7.6 million for the three months ended September 30, 2023 compared to $8.4 million for the same period in 2022.

The decrease for the three-month period ended September 30, 2023 compared to the same period in 2022 related to (i) a $1.0 million decrease in management consulting fees with the elevated 2022 amount due to direct expenses related to the collection of payments on former Vision Bank loan relationships;

(ii) a decrease of $280,000 in recruiting expenses;

and (iii) a decrease of $387,000 in audit and supervisory exam expense, partially offset by a $310,000 increase in legal fees and a $266,000 increase in down payment assistance costs.

Professional fees and services expense increased $1.2 million, or 5.6%, to $22.2 million for the nine months ended September 30, 2023 compared to $21.0 million for the same period in 2022.

The increase for the nine-month period ended September 30, 2023 compared to the same period in 2022 related to (i) a $252,000 increase in directors fees;

(ii) a $527,000 increase in ICS fees;

(iii) a $633,000 increase in legal expenses;

(iv) a $300,000 increase in down payment assistance costs;

(v) a $462,000 increase in other fees;

and (vi) a $403,000 increase in temporary wages;

partially offset by a $694,000 decrease in management consulting fees, a $374,000 decrease in recruiting expenses, and a $513,000 decrease in audit and supervisory exam expense.

Insurance expense increased $921,000 or 74.5%, to $2.2 million for the three months ended September 30, 2023 compared to $1.2 million for the same period in 2022 and increased $2.0 million, or 52.6%, to $5.9 million for the nine months ended September 30, 2023 compared to $3.9 million for the same period in 2022.

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

The Foundation contribution decrease for the three months and the nine months ended September 30, 2023, compared to the same periods of 2022, was due to a $4.0 million contribution being made to Park's charitable foundation during the three months and the nine months ended September 30, 2022.

There was no contribution made by Park to its charitable foundation during the three months and the nine months ended September 30, 2023.

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

The subcategory miscellaneous other expense 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.

The subcategory miscellaneous other expense increased $213,000, or 7.7%, to $3.0 million for the three-month period ended September 30, 2023, compared to $2.8 million for the same period in 2022.

The $213,000 increase in expense for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 was primarily related to an increase in non-loan related losses of $248,000 and the accrual of a potential tax penalty of $592,000, partially offset by a decrease of $571,000 in the provision for unfunded credit losses.

The subcategory "miscellaneous" other expense increased $953,000, or 13.1%, to $8.2 million for the nine-month period ended September 30, 2023 compared to $7.3 million for the same period in 2022.

The $953,000 increase in expense for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was primarily related to an increase in non-loan related losses of $268,000, the accrual of a potential tax penalty of $592,000, an increase in travel expense of $329,000, and an increase of $419,000 in training expenses, partially offset by a $385,000 decrease in operating lease deprecation and a decrease of $181,000 in the provision for unfunded credit 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 SIX MONTHS ENDED

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

THREE MONTHS ENDED NINE MONTHS ENDED

(in thousands except per common share data) September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Affected Line Item

Net interest income $ 94,269 $ 90,828 $ 278,039 $ 252,453

3 unchanged sentences

Net interest income - adjusted $ 94,115 $ 89,684 $ 276,934 $ 247,935

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

less recoveries on former Vision Bank relationships (25) (506) (748) (507) Provision for (recovery of) credit losses

Provision for (recovery of) credit losses - adjusted $ 2,517 $ 3,497 $ 3,423 $ (1,107)

(Recovery of) provision for credit losses $ (1,580) $ 3,190 $ 1,095 $ 1,576

less recoveries on former Vision Bank relationships (40) (20) (788) (527) (Recovery of) provision for credit losses

(Recovery of) provision for credit losses - adjusted $ (1,540) $ 3,210 $ 1,883 $ 2,103

Total other income $ 27,713 $ 46,694 $ 77,115 $ 109,543

less other service income related to former Vision Bank relationships — 3 135 503 Other service income

less Vision Bank related gain on the sale of OREO, net — 5,607 — 5,607 (Loss) gain on the sale of OREO, net

less Vision Bank related OREO valuation markup — 12,009 — 12,009 OREO valuation markup

Total other income - adjusted $ 27,713 $ 29,075 $ 76,980 $ 91,424

2 unchanged sentences

less core deposit intangible amortization related to NewDominion and Carolina Alliance acquisitions 334 341 989 1,146 Amortization of intangible assets

less Foundation contribution — 4,000 — 4,000 Foundation contribution

Total other expense - adjusted $ 77,474 $ 77,267 $ 229,107 $ 213,517

15 unchanged sentences

1.50 % 1.23 % 1.38 % 1.40 %

THREE MONTHS ENDED NINE MONTHS ENDED

(in thousands except per common share data) September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Annualized return on average shareholders' equity (1)(2)

16 unchanged sentences

(1) Reported measure uses net income.

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

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

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

Average tangible equity equals average shareholders' equity during the applicable period less average goodwill and other intangible assets during the applicable period.

RECONCILIATION OF AVERAGE SHAREHOLDERS' EQUITY TO AVERAGE TANGIBLE EQUITY:

THREE MONTHS ENDED SIX MONTHS ENDED

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

RECONCILIATION TO AVERAGE SHAREHOLDERS' EQUITY OF AVERAGE TANGIBLE EQUITY:

THREE MONTHS ENDED NINE MONTHS ENDED

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

AVERAGE SHAREHOLDERS' EQUITY $ 1,102,677 $ 1,076,526 $ 1,094,924 $ 1,084,080

3 unchanged sentences

Average tangible assets equals average assets less average goodwill and other intangible assets, in each case during the applicable period.

RECONCILIATION OF AVERAGE ASSETS TO AVERAGE TANGIBLE ASSETS

THREE MONTHS ENDED SIX MONTHS ENDED

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

RECONCILIATION TO AVERAGE ASSETS OF AVERAGE TANGIBLE ASSETS

THREE MONTHS ENDED NINE MONTHS ENDED

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

AVERAGE ASSETS $ 9,965,114 $ 10,384,049 $ 9,980,256 $ 9,964,863

4 unchanged sentences

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

RECONCILIATION TO FTE NET INTEREST INCOME OF NET INTEREST INCOME

THREE MONTHS ENDED NINE MONTHS ENDED

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Interest income $ 120,889 $ 99,944 $ 346,464 $ 269,437

3 unchanged sentences

FTE net interest income $ 95,311 $ 91,760 $ 280,927 $ 255,076

(6) Adjustments to net income for each period presented are detailed in the non-GAAP reconciliations of net interest income, provision for (recovery of) credit losses, total other income, and total other expense, as well as the disclosure of the "Tax effect of adjustments to net income identified above."

(6) Adjustments to net income for each period presented are detailed in the non-GAAP reconciliations of net interest income, (recovery of) provision for credit losses, total other income, and total other expense, as well as the disclosure of the "Tax effect of adjustments to net income identified above."

(7) The tax effect of adjustments to net income was calculated assuming a 21% federal corporate income tax rate.

(8) Pre-tax, pre-provision ("PTPP") net income is calculated as net income, plus income taxes, plus the provision for (recovery of) credit losses, in each case during the applicable period.

(8) Pre-tax, pre-provision ("PTPP") net income is calculated as net income, plus income taxes, plus the (recovery of) provision for credit losses, in each case during the applicable period.

PTPP net income is a common industry metric utilized in capital analysis and review.

PTPP is used to assess the operating performance of Park while excluding the impact of the provision for (recovery of) credit losses.

RECONCILIATION OF PRE-TAX, PRE-PROVISION NET INCOME

THREE MONTHS ENDED SIX MONTHS ENDED

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

RECONCILIATION TO NET INCOME OF PRE-TAX, PRE-PROVISION NET INCOME

THREE MONTHS ENDED NINE MONTHS ENDED

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Net income $ 36,917 $ 42,068 $ 102,234 $ 115,267

Income taxes 8,837 9,361 21,629 24,829

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

(Recovery of) provision for credit losses (1,580) 3,190 1,095 1,576

Pre-tax, pre-provision net income $ 44,174 $ 54,619 $ 124,958 $ 141,672

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.

Income tax expense was $8.8 million for the third quarter of 2023 and consisted of federal income tax expense of $7.9 million and state income tax expense of $920,000.

This compares to income tax expense of $9.4 million for the third quarter of 2022, which consisted of federal income tax expense of $9.0 million and state income tax expense of $341,000.

The effective income tax rate for the third quarter of 2023 was 19.3%, compared to 18.2% for the same period in 2022.

Income tax expense was $21.6 million for the nine months ended September 30, 2023 and consisted of federal income tax expense of $20.6 million and state income tax expense of $1.0 million.

This compares to income tax expense of $24.8 million for the nine months ended September 30, 2022, which consisted of federal income tax expense of $23.8 million and state income tax expense of $987,000.

The effective income tax rate for the nine months ended September 30, 2023 was 17.4%, compared to 17.7% 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 June 30, 2023 and December 31, 2022

At September 30, 2023 and at December 31, 2022

Changes in Financial Condition

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.

Total assets increased by $145.9 million during the first nine months of 2023 to $10,001 million at September 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 $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.

• Cash and cash equivalents increased by $33.9 million, or 17.9%, to $223.6 million at September 30, 2023, compared to $189.7 million at December 31, 2022.

Money market instruments increased by $50.4 million and cash and due from banks decreased by $16.5 million.

• Loans increased by $207.9 million, or 2.9%, to $7,350 million at September 30, 2023, compared to $7,142 million at December 31, 2022.

• Total investment securities decreased by $112.0 million, or 6.1%, to $1,709 million at September 30, 2023, compared to $1,821 million at December 31, 2022.

Total liabilities increased by $129.6 million, or 1.5%, during the first nine months of 2023 to $8,915 million at September 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.

• Total deposits increased by $10.0 million, or 0.1%, to $8,245 million at September 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 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.

At September 30, 2023 and at December 31, 2022, Park had $763,000 and $195.9 million, respectively, in off-balance sheet deposits.

• Short-term borrowings increased by $125.4 million, or 55.2%, to $352.8 million at September 30, 2023, compared to $227.3 million at December 31, 2022.

• Other liabilities decreased by $7.6 million, or 9.6%, to $71.4 million at September 30, 2023, compared to $78.9 million at December 31, 2022.

Total shareholders’ equity increased by $16.3 million, or 1.5%, to $1,086 million at September 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 $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 $49.4 million during the period primarily as a result of net income of $102.2 million, partially offset by cash dividends on common shares of $51.6 million.

• 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).

• Treasury shares increased by $19.0 million during the period as a result of the repurchase of an aggregate of 199,000 common shares to be held in treasury, partially offset by the issuance of treasury shares under share-based compensation awards (net of common shares withheld to pay employee income taxes).

• The increases noted above were partially offset by a $13.5 million change in accumulated other comprehensive loss, net of taxes, from a negative $102.4 million at December 31, 2022, to a negative $115.9 million at September 30, 2023, and was largely comprised of unrealized net holding losses on debt securities AFS, net of taxes, of $109.2

million at September 30, 2023 compared to unrealized net holding losses on debt securities AFS, net of taxes of $95.7 million at December 31, 2022.

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.

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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 $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.

Cash provided by operating activities was $96.9 million and $89.6 million for the nine months ended September 30, 2023 and 2022, respectively.

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

Cash used in investing activities was $120.5 million and $403.2 million for the nine months ended September 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 $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.

Net investment securities transactions provided cash of $95.1 million for the nine months ended September 30, 2023 and used cash of $175.2 million for the nine months ended September 30, 2022.

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

Cash used by the net increase in the loan portfolio was $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.

Cash used by the net increase in the loan portfolio was $203.3 million and $234.2 million for the nine months ended September 30, 2023 and 2022, respectively.

Cash provided by financing activities was $57.6 million and $301.8 million for the nine months ended September 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 $124.3 million and $393.1 million of cash for the six months ended June 30, 2023 and 2022, respectively.

Deposits (net of off-balance sheet deposits) increased and provided $10.0 million and $405.4 million of cash for the nine months ended September 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 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.

For the nine months ended September 30, 2023, net short-term borrowings increased and provided $125.4 million in cash.

For the nine months ended September 30, 2022, net short-term borrowings decreased and used $49.3 million in cash.

For the nine months ended September 30, 2023, cash declined by $23.0 million due to the repurchase of common shares to be held as treasury shares;

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

Finally, cash declined by $52.0 million and $51.6 million for the nine months ended September 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 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.

The most easily accessible forms of liquidity, Fed Funds Sold, unpledged investment securities and available FHLB borrowing capacity, totaled $2.17 billion at September 30, 2023.

The Corporation’s loan to asset ratio was 73.49% at September 30, 2023, compared to 72.47% at December 31, 2022 and 71.23% at September 30, 2022.

Cash and cash equivalents were $223.6 million at September 30, 2023, compared to $189.7 million at December 31, 2022 and $207.4 million at September 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 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.

Total shareholders’ equity at September 30, 2023 was $1,085.6 million, or 10.9% of total assets, compared to $1,069.2 million, or 10.9% of total assets, at December 31, 2022 and $1,036.2 million, or 10.5% of total assets, at September 30, 2022.

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

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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 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

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

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

At September 30, 2023

Leverage Tier 1

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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 six months of 2023.

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

Financial Instruments with Off-Balance Sheet Risk

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

(In thousands) June 30,

(In thousands) September 30,

2023 December 31, 2022

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis