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Item 2. Management’s Discussion and Analysis

2024-05-02 compared with 2023-11-01 · 294 added, 675 removed, 445 unchanged (69% of the section changed)

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CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis contains forward-looking statements that are provided to assist in the understanding of anticipated future financial performance.

Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements as that term is used in the Private Securities Litigation Reform Act of 1995, as amended.

Such forward-looking statements are provided to assist in the understanding of anticipated future financial performance.

Forward-looking statements provide current expectations, estimates, or forecasts of future events and are not guarantees of future performance.

The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties.

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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, 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.

• current and future economic and financial market conditions, either nationally or in the states in which Park does business, that may reflect deterioration in business and economic conditions, including the effects of higher unemployment rates or labor shortages, the impact of persistent inflation, the impact of continued elevated interest rates, changes in the economy or global supply chain, supply-demand imbalances affecting local real estate prices, U.S.

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

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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;

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

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

• the effect of changes in accounting policies and practices, as may be adopted by the 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 which may prove unreliable, inaccurate or not predictive of actual results;

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

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

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

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

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

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

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

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

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

• the potential further deterioration of the U.S.

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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;

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

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

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

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

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

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

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

Forward-looking statements should be construed in the light of such risks.

It is impossible to predict or identify all potential risk factors.

Consequently, readers should not consider the foregoing list to be a complete set of all potential risks and uncertainties.

Readers are cautioned not to place undue reliance on any forward-looking statements.

Any forward looking statement in this Form 10-Q are based on current information as of the date of this Form 10-Q, and Park does not undertake, and specifically disclaims any obligation, to publicly release the results of any revisions that may be made to update any forward-looking statement to reflect the events or circumstances whether as a result of new information, future developments or otherwise, or reflect the occurrence of unanticipated events, except to the extent required by law.

GAAP Financial Measures

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

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

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

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Items Impacting Comparability of Period Results

From time to time, revenue, expenses and/or taxes are impacted by items judged by management of Park to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that their outsized impact is believed by management of Park at that time to be infrequent or short-term in nature.

From time to time, revenue, expenses and/or taxes are impacted by items judged by management of Park to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that their impact is believed by management of Park at that time to be infrequent or short-term in nature.

Most often, these items impacting comparability of period results are due to merger and acquisition activities and revenue and expenses related to former Vision Bank loan relationships.

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Even though certain revenue and expense items are naturally subject to more volatility than others due to changes in market and economic environment conditions, as a general rule volatility alone does not result in the inclusion of an item as one impacting comparability of period results.

For example, changes in the provision for (recovery of) credit losses (aside from those related to former Vision Bank loan relationships), gains (losses) on equity securities, net, and asset valuation adjustments, reflect ordinary banking activities and are, therefore, typically excluded from consideration as items impacting comparability of period results.

For example, changes in the provision for credit losses (aside from those related to former Vision Bank loan relationships), (losses) gains on equity securities, net, and asset valuation adjustments, reflect ordinary banking activities and are, therefore, typically excluded from consideration as items impacting comparability of period results.

Management believes the disclosure of items impacting comparability of period results provides a better understanding of Park's performance and trends and allows management to ascertain which of such items, if any, to include or exclude from an analysis of Park's performance;

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GAAP financial measures to evaluate Park's performance.

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 nine months ended and at September 30, 2023 and September 30, 2022.

Specifically, management reviews the return on average tangible equity, the return on average tangible assets and pre-tax, pre-provision net income.

Management has included in the tables included within the "Items Impacting Comparability" section of this MD&A information relating to the annualized return on average tangible equity, the annualized return on average tangible assets and pre-tax, pre-provision net income for the three months ended and at March 31, 2024 and March 31, 2023.

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

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

For the purpose of calculating the tangible equity to tangible assets ratio, a non-U.S.

GAAP financial measure, tangible equity is divided by tangible assets.

Tangible equity equals total shareholders' equity less goodwill and other intangible assets, in each case at period end.

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

For the purpose of calculating tangible book value per common share, a non-U.S.

GAAP financial measure, tangible equity is divided by the number of common shares outstanding, in each case at period end.

For the purpose of calculating pre-tax, pre-provision net income, a non-U.S.

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

Management believes that the disclosure of the annualized return on average tangible equity, the annualized return on average tangible assets, 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.

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

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

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

In the tables included within the "Items Impacting Comparability" section of this MD&A, Park has provided a reconciliation of average tangible equity from average shareholders' equity, average tangible assets from average assets, 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.

In the tables

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

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.

Critical Accounting Policies

Note 1 of the Notes to Consolidated Financial Statements included in Park’s 2022 Form 10-K lists significant accounting policies used in the development and presentation of Park’s consolidated financial statements.

The accounting and reporting policies of Park conform with U.S.

GAAP and general practices within the financial services industry.

Critical Accounting Estimates

The preparation of financial statements in conformity with U.S.

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Management’s determination of the adequacy of the allowance for credit losses is based on periodic evaluations of past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets.

However, this evaluation has subjective components requiring material estimates, including expected default probabilities, the expected LGD, the amounts and timing of expected future cash flows on individually evaluated loans, and estimated losses based on historical loss experience and forecasted economic conditions.

However, this evaluation has subjective components requiring material estimates, including expected default probabilities, the expected loss given default, the amounts and timing of expected future cash flows on individually evaluated loans, and estimated losses based on historical loss experience and forecasted economic conditions.

All of these factors may be susceptible to significant change.

To the extent that actual results differ from management estimates, additional provisions for credit losses may be required that would adversely impact earnings in future periods.

One of the most significant judgments impacting the ACL estimate is the economic forecast for Ohio unemployment, Ohio GDP, and Ohio HPI.

Changes in the economic forecast could significantly affect the estimated credit losses which could potentially lead to materially different allowance levels from one reporting period to the next.

In calculating the ACL, management weighs several different scenarios, including a baseline (most likely) scenario and an adverse scenario.

One of the significant judgments impacting the ACL is the economic forecasts for Ohio unemployment, Ohio GDP, and Ohio HPI.

These economic forecasts inform the regression model used to calculate cash flows during the reasonable and supportable forecast period.

Additionally, multiple economic forecast scenarios are weighted to arrive at the quantitative reserve.

Changes in the economic forecast or weighting could significantly affect the estimated credit losses which could potentially lead to materially different allowance levels from one reporting period to the next.

As noted above, in calculating the ACL, management weighs different scenarios, including a baseline (most likely) scenario and an adverse scenario.

At March 31, 2024, management applied a 50% weighting to the baseline scenario and applied a 50% weighting to the adverse scenario.

To create hypothetical sensitivity analyses, management calculated a quantitative allowance using a 100% weighting applied to a baseline scenario and a quantitative allowance using a 100% weighting applied to an adverse scenario.

The adverse scenario assumes among other things that:

(1) 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;

(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 (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 $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 (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.

GAAP establishes standards for the impairment assessment of goodwill.

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

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.

A decrease in earnings resulting from a decline in the customer base, the inability to deliver cost-effective services over sustained periods or significant credit problems could lead to impairment of goodwill that could, in turn, adversely impact earnings in future periods.

GAAP requires an annual evaluation of goodwill for impairment, or more frequently if events or changes in circumstances indicate that the asset might be impaired.

Park evaluates goodwill for impairment during the second quarter of each year, with financial data as of the immediately preceding March 31.

Based on the qualitative analysis performed as of April 1, 2023, the Company determined that goodwill for Park's reporting unit, PNB, was not impaired.

The fair value of the goodwill, which resides on the books of PNB, is evaluated for potential impairment by reviewing the past and projected operating results for PNB, deposit and loan totals for PNB and financial services industry comparable information.

(1) tensions with China and Taiwan increase, China briefly interrupts trade through the Taiwan Strait, the Russian invasion lasts longer than expected, and the Hamas-Israel conflict will lead to a wider conflict;

(2) the FRB keeps the fed funds rate at the terminal range of 5.25-5.50% through the second quarter of 2024 and, as a downturn persists, the FRB begins to lower rates;

(3) Europe goes into a recession.

Populism in Europe rises, raising uncertainties about the longevity of the Euro and causes financial stress to highly indebted nations;

(4) risk of an extended government shutdown increases, causing consumer and business confidence to fall;

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

(6) a recession occurs in the second quarter of 2024 and lasts through the fourth quarter of 2024 resulting in real GDP declining by 2.6%, unemployment rates rising to a peak of 7.7% in the second quarter of 2025, and the stock market falling 37% from the second quarter of 2024 to the fourth quarter of 2024.

The adverse scenario also forecasts Ohio unemployment for the next twelve months to range from 6.4% to 9.0%.

Excluding consideration of qualitative adjustments, this sensitivity analysis would result in a hypothetical increase in Park's ACL of $24.2 million as of March 31, 2024 if only the adverse scenario was used.

Excluding consideration of qualitative adjustments, a corresponding $24.2 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 Credit Losses" section of this MD&A for additional discussion.

Pension Plan:

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(1) the value of benefits earned by employees for working during the year (service cost), (2) the increase in the liability due to the passage of time (interest cost), and (3) other gains and losses, reduced by (4) the expected return on plan assets for our Pension Plan.

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

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

Significant assumptions used to measure our annual pension expense include:

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Comparison of Results of Operations

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

For the Three Months Ended March 31, 2024 and 2023

Summary Discussion of Results

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

Park continues to maintain strong capital and liquidity.

Funds are available from a number of sources, including the capital markets, the investment securities portfolio, the core deposit base, FHLB borrowings and the capability to securitize or package loans for sale.

The most easily accessible forms of liquidity, Fed Funds Sold, unpledged investment securities and available FHLB borrowing capacity, totaled $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 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) 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) %

Net unrealized losses on debt securities as a percentage of period end total assets 1.38 % 1.23 % 1.54 % 12.20 % (10.39) %

Total shareholders' equity / Period end total assets 10.85 % 10.85 % 10.51 % — % 3.24 %

Tangible equity / Tangible assets (1)

9.36 % 9.33 % 8.98 % 0.32 % 4.23 %

(1) Tangible equity equals total shareholders' equity less goodwill and other intangible assets, in each case at period end.

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

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.

(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

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

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

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

Total deposits including off balance sheet deposits $ 8,245,487 $ 8,359,743 $ 8,459,044 $ 8,430,652 $ 8,887,581 $ 8,282,459 $ 7,052,612

$ change from prior period end $ (114,256) $ (99,301) $ 28,392 $ (456,929) $ 605,122 $ 1,229,847

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

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, 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 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

$ change from prior period end $ (172,877) $ 55,365 $ 182,919 $ (212,817) $ 142,116 $ 113,011

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

(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, 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) 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

All Other (3,871) (3,901) (2,536) (10,308) 7,344 5,108 (5,516)

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

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 the All Other segment.

The Park National Bank (PNB)

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 income for the three months ended March 31, 2024 was $35.2 million, compared to $33.7 million for the first quarter of 2023.

Pre-tax, pre-provision net income (non-U.S.

GAAP) for the three months ended March 31, 2024 was $44.6 million, compared to $40.1 million for the first quarter of 2023.

Diluted earnings per common share were $2.17 for the first quarter of 2024, compared to $2.07 for the first quarter of 2023.

Weighted average diluted common shares outstanding were 16,191,065 for the first quarter of 2024, compared to 16,324,823 weighted average diluted common shares outstanding for the first quarter of 2023.

The following discussion provides additional information regarding Park.

Park National Corporation (Park)

The following table reflects the net income for the first quarters (the three months ended March 31) of 2024 and 2023, and for the years ended December 31, 2023 and 2022.

(In thousands) Q1 2024 Q1 2023 2023 2022

Net interest income $ 95,623 $ 92,198 $ 373,113 $ 347,059

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

Provision for credit losses 2,180 183 2,904 4,557

Other income 26,200 24,387 92,634 135,935

3 unchanged sentences

Net income $ 35,204 $ 33,733 $ 126,734 $ 148,351

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.

Net interest income of $95.6 million for the three months ended March 31, 2024 represented a $3.4 million, or 3.7%, increase compared to $92.2 million for the three months ended March 31, 2023.

The increase was a result of a $15.7 million increase in interest income, partially offset by a $12.3 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 $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 $15.7 million increase in interest income was due to a $19.6 million increase in interest income on loans partially offset by a $3.9 million decrease in investment income.

The $19.6 million increase in interest income on loans was primarily the result of a $383.4 million (or 5.40%) increase in average loans, from $7.10 billion for the three months ended March 31, 2023 to $7.48 billion for the three months ended March 31, 2024, as well as an increase in the yield on loans, which increased 75 basis points to 5.99% for the three months ended March 31, 2024, compared to 5.24% for the three months ended March 31, 2023.

million decrease in investment income was primarily the result of a decrease in average investments, including money market investments, from $2.17 billion for the three months ended March 31, 2023 to $1.57 billion for the three months ended March 31, 2024.

The decrease in average investments was partially offset by an increase in the yield on investments, including money market investments, which increased 31 basis points to 4.06% for the three months ended March 31, 2024, compared to 3.75% for the three months ended March 31, 2023.

The $12.3 million increase in interest expense was due to a $11.6 million increase in interest expense on deposits, as well as a $0.7 million increase in interest expense on borrowings.

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 $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

Sold $ 19,035 $ 15,805 $ 13,756 $ 27,025 $ 50,013 $ 69,053 $ 159,142 $ 555,278

Portfolio 78,847 65,252 32,743 90,551 63,104 53,498 263,287 284,686

Construction 27,826 20,659 13,124 34,026 34,044 32,928 120,794 119,555

Service released 1,678 1,583 1,576 2,537 4,580 4,660 14,738 13,802

Total mortgage loan originations $ 127,386 $ 103,299 $ 61,199 $ 154,139 $ 151,741 $ 160,139 $ 557,961 $ 973,321

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 $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.

The increase in interest expense on deposits was the result of a $167.4 million (or 3.06%) increase in average on-balance sheet interest bearing deposits from $5.48 billion for the three months ended March 31, 2023, to $5.64 billion for the three months ended March 31, 2024, as well as an increase in the cost of deposits of 79 basis points, from 1.15% for the three months ended March 31, 2023 to 1.94% for the three months ended March 31, 2024.

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

During the three months ended March 31, 2024 and 2023, Park continued to participate in a program to transfer deposits off-balance sheet in order to manage growth of the balance sheet.

The provision for credit losses of $2.2 million for the three months ended March 31, 2024 represented an increase of $2.0 million, compared to $183,000 for the three months ended March 31, 2023.

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

The table below reflects Park's total other income for the three months ended March 31, 2024 and 2023.

(Dollars in thousands) 2024 2023 $ change % change

Other income:

Income from fiduciary activities $ 10,024 $ 8,615 $ 1,409 16.4 %

Service charges on deposit accounts 2,106 2,241 (135) (6.0) %

Other service income 2,524 2,697 (173) (6.4) %

Debit card fee income 6,243 6,457 (214) (3.3) %

Bank owned life insurance income 2,629 1,185 1,444 N.M.

ATM fees 496 533 (37) (6.9) %

Gain (loss) on the sale of OREO, net 121 (9) 130 N.M.

Loss on sale of debt securities, net (398) — (398) N.M.

Loss on equity securities, net (687) (405) (282) N.M.

Other components of net periodic benefit income 2,204 1,893 311 16.4 %

Miscellaneous 938 1,180 (242) (20.5) %

Total other income $ 26,200 $ 24,387 $ 1,813 7.4 %

Other income of $26.2 million for the three months ended March 31, 2024 represented an increase of $1.8 million, or 7.4%, compared to $24.4 million for the three months ended March 31, 2023.

The $1.4 million increase in income from fiduciary activity was largely due to an increase in the market value of assets under management.

The $1.4 million increase in bank owned life insurance income was primarily related to death benefits received during the three months ended March 31, 2024.

The change in loss on sale of debt securities, net was due to net losses on the sale of debt securities of $398,000 recorded during the three months ended March 31, 2024.

No loss on sale of debt securities, net was recorded during the three months ended March 31, 2023.

The $282,000 change in loss on equity securities, net, was due to fair value adjustments on equity securities.

The $311,000 increase in other components of net periodic benefit income was largely due to an increase in the expected return on plan assets, and was partially offset by an increase in interest cost.

The table below reflects Park's total other expense for the three months ended March 31, 2024 and 2023.

(Dollars in thousands) 2024 2023 $ change % change

Other expense:

10 unchanged sentences

Amortization of intangible assets 320 327 (7) (2.1) %

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

Miscellaneous 2,621 2,471 150 6.1 %

Total other expense $ 77,228 $ 76,503 $ 725 0.9 %

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.

The increase in furniture and equipment expense was primarily related to increases in depreciation expense and maintenance and repairs on equipment expense.

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, 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 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

Total other expense of $77.2 million for the three months ended March 31, 2024 represented an increase of $725,000, or 0.9%, compared to $76.5 million for the three months ended March 31, 2023.

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

The increase in employee benefits expense was primarily related to increases in group insurance expense and retirement benefit expense.

The decrease in furniture and equipment expense was primarily due to decreases in depreciation expense and maintenance and repairs expense.

The decrease in professional fees and services expense was primarily due to decreases in legal expenses and other fees expense, partially offset by increases in credit services expense.

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

(Dollars in thousands) March 31, 2024 December 31, 2023 March 31, 2023 % change from 12/31/23 % change from 3/31/23

Loans 7,525,005 7,476,221 7,093,857 0.65 % 6.08 %

10 unchanged sentences

1.44 % 1.27 % 1.36 % 13.39 % 5.88 %

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

(1) Average assets for the three months ended March 31, 2024 and 2023 and for the year ended December 31, 2023.

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

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

The taxable equivalent adjustments were $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 taxable equivalent adjustments were $616,000 and $926,000 for the three months ended March 31, 2024 and 2023 and $3.7 million for the year ended December 31, 2023.

(3) Annualized for the three months ended March 31, 2024 and 2023.

Loans outstanding at March 31, 2024 were $7.53 billion, compared to (i) $7.48 billion at December 31, 2023, an increase of $48.8 million, and (ii) $7.09 billion at March 31, 2023, an increase of $431.1 million.

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

(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

(Dollars in thousands) March 31, 2024 December 31, 2023 March 31, 2023 $ change from 12/31/23 % change from 12/31/23 $ change from 3/31/23 % change from 3/31/23

Home equity $ 177,094 $ 174,621 $ 164,736 $ 2,473 1.4 % $ 12,358 7.5 %

2 unchanged sentences

Commercial 4,038,327 4,007,941 3,803,948 30,386 0.8 % 234,379 6.2 %

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

Other 3,176 3,186 207 (10) (0.3) % 2,969 N.M.

$ 7,525,005 $ 7,476,221 $ 7,093,857 $ 48,784 0.7 % $ 431,148 6.1 %

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) 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 %

Installment 1,977,730 1,945,125 32,605 1.7 %

Real estate 1,295,769 1,252,243 43,526 3.5 %

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 %

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 $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) 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

Park's allowance for credit losses was $85.1 million at March 31, 2024, compared to $83.7 million at December 31, 2023, an increase of $1.3 million, or 1.6%.

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

Total deposits at March 31, 2024 were $8.31 billion, compared to (i) $8.04 billion at December 31, 2023, an increase of $263.5 million and (ii) $8.29 billion at March 31, 2023, an increase of $11.6 million.

During the three months ended March 31, 2024 and 2023 and the year ended December 31, 2023, Park participated 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 March 31, 2024, December 31, 2023 and March 31, 2023, Park had $2.3 million, $1.2 million and $164.6 million, respectively, in deposits which were off-balance sheet.

Total deposits would have increased $264.6 million, or 3.3%, compared to December 31, 2023

and would have decreased $150.7 million, or 1.8%, had the $2.3 million, $1.2 million and $164.6 million in deposits remained on the balance sheet at the respective dates.

(Dollars in thousands) March 31, 2024 December 31, 2023 March 31, 2023 $ change from 12/31/23 % change from 12/31/23 $ change from 3/31/23 % change from 3/31/23

Non-interest bearing deposits $ 2,587,152 $ 2,628,234 $ 2,922,242 $ (41,082) (1.6) % $ (335,090) (11.5) %

2 unchanged sentences

Certificates of deposit 663,859 641,615 531,851 22,244 3.5 % 132,008 24.8 %

Brokered and bid cd deposits 180,332 164,985 — 15,347 9.3 % 180,332 N.M.

Total deposits $ 8,306,032 $ 8,042,566 $ 8,294,444 $ 263,466 3.3 % $ 11,588 0.1 %

Off-balance sheet deposits 763 195,937 766,184 (195,174) N.M.

(765,421) N.M.

Off balance sheet deposits 2,279 1,185 164,600 1,094 92.3 % (162,321) (98.6) %

Total deposits including off balance sheet deposits $ 8,308,311 $ 8,043,751 $ 8,459,044 $ 264,560 3.3 % $ (150,733) (1.8) %

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) 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) %

Transaction accounts 2,193,054 2,238,131 (45,077) (2.0) %

Savings 2,715,802 2,755,961 (40,159) (1.5) %

Certificates of deposit 603,165 568,609 34,556 6.1 %

Park's deposits grew during the COVID-19 pandemic and have declined toward pre-pandemic levels throughout 2022 and 2023.

As previously noted, 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 declined toward pre-pandemic levels.

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

(Dollars in thousands) March 31, 2024 December 31, 2023 December 31, 2022 December 31, 2021 December 31, 2020 December 31, 2019

Retail deposits $ 4,027,777 $ 4,080,372 $ 4,388,394 $ 4,416,228 $ 4,025,852 $ 3,748,039

Commercial deposits 4,097,923 3,797,209 3,846,321 3,488,300 3,535,578 3,233,269

Brokered and bid CD deposits 180,332 164,985 — — 10,928 71,304

Total deposits $ 8,306,032 $ 8,042,566 $ 8,234,715 $ 7,904,528 $ 7,572,358 $ 7,052,612

1 unchanged sentence

Total deposits including off balance sheet deposits $ 8,308,311 $ 8,043,751 $ 8,430,652 $ 8,887,581 $ 8,282,459 $ 7,052,612

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 (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) 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 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 $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, 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

(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

Other expense 77,808 75,885 76,503 230,196 220,324 297,978 283,518

Income before income taxes $ 45,754 $ 38,210 $ 39,899 $ 123,863 $ 140,096 $ 180,459 $ 188,235

Income tax expense 8,837 6,626 6,166 21,629 24,829 32,108 34,290

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

$ change from prior period end $ 264,560 $ (386,901) $ (456,929) $ 605,122 $ 1,229,847

% change from prior period end 3.3 % (4.6) % (5.1) % 7.3 % 17.4 %

During the three months ended March 31, 2024, total deposits including off balance sheet deposits increased by $264.6 million, or 3.3%.

This increase consisted of a $300.7 million increase in total commercial deposits, a $15.3 million increase in brokered and bid CD deposits and a $1.1 million increase in off balance sheet deposits, partially offset by a $52.6 million decrease in total retail 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.

The table below breaks out the change in deposit balance, by deposit type, for March 31, 2024 compared to March 31, 2023.

(Dollars in thousands) March 31, 2024 March 31, 2023 $ change from 3/31/23 % change from 3/31/23

Retail deposits $ 4,027,777 $ 4,263,947 $ (236,170) (5.5) %

Commercial deposits 4,097,923 4,030,497 67,426 1.7 %

Brokered and bid CD deposits 180,332 — 180,332 N.M.

Total deposits $ 8,306,032 $ 8,294,444 $ 11,588 0.1 %

Off balance sheet deposits 2,279 164,600 (162,321) (98.6) %

Total deposits including off balance sheet deposits $ 8,308,311 $ 8,459,044 $ (150,733) (1.8) %

At March 31, 2024, total deposits including off balance sheet deposits decreased by $150.7 million, or 1.8%, to $8.31 billion compared to $8.46 billion at March 31, 2023.

This decrease consisted of a $236.2 million decrease in total retail deposits and a $162.3 million decrease in off balance sheet deposits, partially offset by a $180.3 million increase in brokered and bid CD deposits and a $67.4 million increase in total commercial 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 tables are public fund deposits.

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

The following table details the change in public fund deposits.

(Dollars in thousands) March 31, 2024 December 31, 2023 March 31, 2023 December 31, 2022 December 31, 2021 December 31, 2020 December 31, 2019

Total public fund deposits $ 1,603,490 $ 1,213,418 $ 1,518,319 $ 1,335,400 $ 1,548,217 $ 1,406,101 $ 1,293,090

$ change from prior period end $ 390,072 $ (304,901) $ 182,919 $ (212,817) $ 142,116 $ 113,011

% change from prior period end 32.1 % (20.1) % 13.7 % (13.7) % 10.1 % 8.7 %

As of March 31, 2024, Park had approximately $1.4 billion of uninsured deposits, which was 16.8% of total deposits.

Uninsured deposits of $1.4 billion included $410.0 million of deposits that were over $250,000 but were fully collateralized by Park's investment securities portfolio.

Net Interest Income

1 unchanged sentence

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 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.

Comparison for the First Quarters of 2024 and 2023

Net interest income increased by $3.4 million, or 3.7%, to $95.6 million for the first quarter of 2024, compared to $92.2 million for the first quarter of 2023.

See the discussion under the table below.

Three months ended

September 30, 2023 Three months ended

September 30, 2022

March 31, 2024 Three months ended

March 31, 2023

(Dollars in thousands) Average

17 unchanged sentences

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

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

The taxable equivalent adjustment was $241,000 for the three months ended March 31, 2024 and $152,000 for the same period of 2023.

(2) Interest income on tax-exempt investment securities includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate.

The taxable equivalent adjustment was $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 4.11% and 3.75% for the three months ended September 30, 2023 and 2022, respectively.

The taxable equivalent adjustment was $375,000 for the three months ended March 31, 2024 and $774,000 for the same period of 2023.

Average interest earning assets for the first quarter of 2024 decreased by $219.2 million, or 2.4%, to $9,048 million for the first quarter of 2024, compared to $9,267 million for the first quarter of 2023.

The average yield on interest earning assets increased by 77 basis points to 5.66% for the first quarter of 2024, compared to 4.89% for the first quarter of 2023.

Average interest bearing liabilities for the first quarter of 2024 increased by $135.9 million, or 2.3%, to $6,006 million, compared to $5,870 million for the first quarter of 2023.

The average cost of interest bearing liabilities increased by 79 basis points to 2.08% for the first quarter of 2024, compared to 1.29% for the first quarter of 2023.

Yield on Loans:

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.

Average loan balances increased $383.4 million, or 5.4%, to $7,483 million for the first quarter of 2024, compared to $7,099 million for the first quarter of 2023.

The average yield on the loan portfolio increased by 75 basis points to 5.99% for the first quarter of 2024, compared to 5.24% for the first quarter of 2023.

The table below shows the average balance and tax equivalent yield by type of loan for the three months ended March 31, 2024 and 2023.

Three months ended

September 30, 2023 Three months ended

September 30, 2022

March 31, 2024 Three months ended

March 31, 2023

(Dollars in thousands) Average

8 unchanged sentences

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

The taxable equivalent adjustment was $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 8.29%, 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.

The taxable equivalent adjustment was $241,000 for the three months ended March 31, 2024 and $152,000 for the same period of 2023.

Cost of Deposits:

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.

Average interest bearing deposit balances increased $167.4 million, or 3.1%, to $5,644 million for the first quarter of 2024, compared to $5,477 million for the first quarter of 2023.

The average cost of funds on deposit balances increased by 79 basis points to 1.94% for the first quarter of 2024, compared to 1.15% for the first quarter of 2023.

The table below shows for the three months ended March 31, 2024 and 2023, the average balance and cost of funds by type of deposit.

Three months ended

September 30, 2023 Three months ended

September 30, 2022

(Dollars in thousands) Average

balance Cost of funds Average

balance Cost of funds

Transaction accounts $ 2,309,320 1.62 % $ 2,197,169 0.38 %

Savings deposits and clubs 2,742,151 1.54 % 2,837,613 0.51 %

Time deposits 583,150 2.11 % 645,207 0.51 %

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

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.

Nine months ended

September 30, 2023 Nine months ended

September 30, 2022

(Dollars in thousands) Average

balance Interest Tax

yield/cost Average

balance Interest Tax

$ 7,166,863 $ 291,871 5.44 % $ 6,904,019 $ 234,209 4.54 %

Taxable investments 1,418,433 39,731 3.74 % 1,469,586 24,073 2.19 %

Tax-exempt investments (2)

421,925 11,035 3.50 % 398,405 10,185 3.42 %

Money market instruments 181,793 6,715 4.94 % 357,514 3,593 1.34 %

Interest earning assets $ 9,189,014 $ 349,352 5.08 % $ 9,129,524 $ 272,060 3.98 %

Interest bearing deposits $ 5,540,680 $ 58,719 1.42 % $ 5,292,194 $ 9,694 0.24 %

Short-term borrowings 175,537 2,688 2.05 % 203,888 740 0.49 %

Long-term debt 188,847 7,018 4.97 % 188,381 6,550 4.65 %

Interest bearing liabilities $ 5,905,064 $ 68,425 1.55 % $ 5,684,463 $ 16,984 0.40 %

Excess interest earning assets $ 3,283,950 $ 3,445,061

Tax equivalent net interest income $ 280,927 $ 255,076

Net interest spread 3.53 % 3.58 %

Net interest margin 4.09 % 3.74 %

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

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 $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 4.07% and 3.64% for the nine months ended September 30, 2023 and 2022, respectively.

Yield on Loans:

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.

Nine months ended

September 30, 2023 Nine months ended

September 30, 2022

(Dollars in thousands) Average

yield Average

Home equity loans $ 168,246 8.10 % $ 162,371 4.38 %

Installment loans 1,933,664 5.32 % 1,778,231 4.69 %

Real estate loans 1,232,501 4.29 % 1,133,199 3.76 %

Commercial loans (1)

3,828,457 5.76 % 3,826,017 4.70 %

Other 3,995 8.86 % 4,201 8.01 %

Total loans before allowance $ 7,166,863 5.44 % $ 6,904,019 4.54 %

(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 $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 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 $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.

Nine months ended

September 30, 2023 Nine months ended

September 30, 2022

March 31, 2024 Three months ended

March 31, 2023

(Dollars in thousands) Average

4 unchanged sentences

Time deposits 658,364 3.01 % 542,670 1.01 %

Brokered/bid CD deposits 184,262 5.26 % — — %

Total interest bearing deposits $ 5,644,088 1.94 % $ 5,476,661 1.15 %

Yield on Average Interest Earning Assets:

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

Loans (1) (3)

The following table shows the tax equivalent yield on average interest earning assets for the three months ended March 31, 2024 and for the years ended December 31, 2023, 2022 and 2021.

Investments (2)

3 unchanged sentences

2023 - year 5.55 % 3.73 % 5.00 % 5.18 %

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

2024 - first three months 5.99 % 3.90 % 5.48 % 5.66 %

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

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.

The taxable equivalent adjustment was $241,000 for the three months ended March 31, 2024, and $811,000, $627,000, and $704,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

(2) Interest income on tax-exempt investment securities includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate.

The taxable equivalent adjustment was $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.

The taxable equivalent adjustment was $375,000 for the three months ended March 31, 2024, and $2.9 million, $2.9 million, and $2.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Cost of Average Interest Bearing Liabilities:

The following table shows the cost of funds on average interest bearing liabilities for the nine months ended September 30, 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 three months ended March 31, 2024 and for the years ended December 31, 2023, 2022 and 2021.

Interest bearing deposits (1)

3 unchanged sentences

2023 - year 1.52 % 2.58 % 4.97 % 1.67 %

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 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.

2024 - first three months 1.94 % 3.41 % 5.02 % 2.08 %

Credit Metrics and Provision for Credit Losses

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

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

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

1 unchanged sentence

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 (recovery of) provision for credit losses for the three-month and nine-month periods ended September 30, 2023 and 2022.

The table below provides additional information on the provision for credit losses for the three-month periods ended March 31, 2024 and 2023.

Three Months Ended

September 30, Nine Months Ended

September 30,

(Dollars in thousands) 2024 2023

3 unchanged sentences

adoption of ASU 2022-02 — 383

2,293 1,748 7,213 5,497

Recoveries 2,399 2,236

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

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

Net charge-offs (recoveries) 841 (1)

Provision for credit losses 2,180 183

Ending balance $ 85,084 $ 85,946

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

Net charge-offs (recoveries) as a % of average loans (annualized) 0.05 % — %

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

(Dollars in thousands) 3/31/2024 12/31/2023 3/31/2023

1 unchanged sentence

Allowance on accruing PCD loans — — —

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

Reserves on individually evaluated loans 5,032 4,983 4,318

General reserves on collectively evaluated loans $ 80,052 $ 78,762 $ 81,628

2 unchanged sentences

Individually evaluated loans 54,742 45,215 59,384

40,839 43,887 59,384 78,341 43,670

Collectively evaluated loans $ 7,467,809 $ 7,428,171 $ 7,029,918

1 unchanged sentence

General reserve as a % of collectively evaluated loans 1.07 % 1.06 % 1.16 %

(1) After the adoption of ASU 2022-02 on January 1, 2023, loans individually evaluated for impairment include all internally classified commercial nonaccrual loans.

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 $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.

The total allowance for credit losses of $85.1 million at March 31, 2024 represented a $1.3 million, or 1.6%, increase compared to $83.7 million at December 31, 2023.

The increase was due to a $1.3 million increase in general reserves and a $49,000 increase 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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Nonperforming Assets:

After the adoption of ASU 2022-02 on January 1, 2023, which eliminated the TDR classification , non-performing assets include:

(1) loans whose interest is accounted for on a nonaccrual basis;

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

and (3) OREO which results from taking possession of property that served as collateral for a defaulted loan.

Prior to the adoption of ASU 2022-02 on January 1, 2023, nonperforming assets included:

Non-performing assets include:

(1) loans whose interest is accounted for on a nonaccrual basis;

(2) TDRs on accrual status;

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

and (3) OREO which results from taking possession of property that served as collateral for a defaulted loan.

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

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

(In thousands) March 31, 2024 December 31, 2023 March 31, 2023

Nonaccrual loans $ 70,189 $ 60,259 $ 73,114

Accruing TDRs (for years 2022 and prior) (1)

— 20,134 19,831

Loans past due 90 days or more 1,570 859 1,251

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Percentage of nonperforming loans to total loans 0.95 % 0.82 % 1.05 %

0.76 % 1.42 % 0.92 %

Percentage of nonperforming assets to total loans 0.98 % 0.83 % 1.07 %

0.78 % 1.43 % 0.94 %

Percentage of nonperforming assets to total assets 0.74 % 0.63 % 0.77 %

0.57 % 1.04 % 0.68 %

(1) Effective January 1, 2023, Park adopted ASU 2022-02.

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

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

The following table details the delinquency status of nonaccrual loans at March 31, 2024, December 31, 2023 and March 31, 2023.

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

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

March 31, 2024 December 31, 2023 March 31, 2023

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

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Commercial loans graded a 6 (substandard), also considered to be watch list credits, represent higher credit risk than those rated special mention and, as a result, a higher PD is applied to these loans.

Commercial loans that are graded a 7 (doubtful) are shown as nonperforming and Park charges these loans down to their fair value by taking a partial charge-off or recording a specific reserve.

Commercial loans that are graded a 7 (doubtful) are shown as nonperforming and Park charges these loans down to their fair value by taking a partial charge-off or recording an individual reserve.

Certain 6-rated loans and all 7-rated loans are placed on nonaccrual status and included within the individually evaluated category.

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

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

Commercial loans * (In thousands) March 31, 2024 December 31, 2023 March 31, 2023

Pass-rated $ 3,945,112 $ 3,905,673 $ 3,664,298

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Individually evaluated for impairment 54,742 45,215 59,384

40,839 78,341 43,670

Accruing PCD 2,372 2,760 4,469

Total $ 4,061,758 $ 4,014,298 $ 3,817,758

(1) Prior to the adoption of ASU 2002-02 on January 1, 2023, accruing TDRs were also included in individually evaluated for impairment loans totals.

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

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

Park had $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.

Park had $59.5 million of collectively evaluated commercial loans included on the watch list at March 31, 2024, compared to $60.7 million at December 31, 2023, and $89.6 million at March 31, 2023.

The existing conditions of these loans do not warrant classification as nonaccrual.

However, these loans have shown some weakness and management performs additional analysis regarding each borrower's ability to comply with payment terms.

The increase in watch list credits during the first nine months of 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.

Delinquent and accruing loans were $21.6 million, or 0.29%, of total loans at March 31, 2024, compared to $23.5 million, or 0.31% of total loans at December 31, 2023, and $14.0 million or 0.20% of total loans at March 31, 2023.

Individually Evaluated Loans:

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Park has determined that any commercial loans which have been placed on nonaccrual status will be individually evaluated.

Individual analysis will establish a specific reserve for loans in scope.

Specific reserves on individually evaluated commercial loans are typically based on management’s best estimate of the fair value of collateral securing these loans.

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

amount different from management’s estimate.

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 $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.

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 ter ms, up from $10.9 mil lion 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.

Individual analysis will establish a reserve for loans in scope.

Reserves on individually evaluated commercial loans are typically based on management’s best estimate of the fair value of collateral securing these loans.

The amount ultimately charged off for these loans may be different from the reserve as the ultimate liquidation of the collateral may be for an amount different from management’s estimate.

Individually evaluated commercial loans were $54.7 million at March 31, 2024, an increase of $9.5 million, compared to $45.2 million at December 31, 2023 and a decrease of $4.7 million, compared to $59.4 million at March 31, 2023.

At March 31, 2024, Park had taken partial charge-offs of $2.3 million related to the $54.7 million of individually evaluated commercial loans, compared to partial charge-offs of $2.3 million related to the $45.2 million of individually evaluated commercial loans at December 31, 2023.

Loans Acquired with Deteriorated Credit Quality:

In conjunction with the NewDominion acquisition, Park acquired loans with a book value of $277.9 million as of the July 1, 2018 acquisition date.

These loans were recorded at the initial fair value of $272.8 million.

Loans acquired with deteriorated credit quality (ASC 310-30) with a book value of $5.1 million were recorded at the initial fair value of $4.9 million.

In conjunction with the Carolina Alliance acquisition, Park acquired loans and leases with a book value of $589.7 million as of the April 1, 2019 acquisition date.

These loans and leases were recorded at the initial fair value of $578.6 million.

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

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

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

At 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 September 30, 2023 are detailed below.

Quantitative Considerations

The ACL is primarily calculated utilizing a DCF model.

Key inputs and assumptions used in this model are discussed below:

• Forecast model - For each portfolio segment, a LDA was performed in order to identify appropriate loss drivers and create a regression model for use in forecasting cash flows.

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

After considering the impact of the inclusion of periods impacted by COVID, as well as analysis of the ongoing applicability of the selected peer group, management decided it was appropriate to continue to utilize the LDA analysis from the fourth quarter of 2019 as the correlation of the LDA was higher.

• Probability of default – PD is the probability that an asset will be in default within a given time frame.

Park has defined default to be when a charge-off has occurred, a loan is placed on nonaccrual, or a loan is greater than 90 days past due.

Whenever possible, Park utilizes its own loan-level PDs for the reasonable and supportable forecast period.

When loan-level data is not available reflecting the forecasted economic conditions, a forecast model is utilized to estimate PDs.

• Loss given default – LGD is the percentage of the asset not expected to be collected due to default.

Whenever possible, Park utilizes its own loan-level LGDs for the reasonable and supportable forecast period.

When it is not possible to use Park's own LGDs, the LGD is derived using a method referred to as Frye Jacobs.

• Prepayments and curtailments – Prepayments and curtailments are calculated based on Park’s own data utilizing a three-year average.

This analysis is updated annually in the fourth quarter and was last updated in the fourth quarter of 2022.

• Forecast and reversion – Park has established a one-year reasonable and supportable forecast period with a one-year straight line reversion to the long-term historical average.

• Economic forecast - Park utilizes a third party to provide economic forecasts under various scenarios, which are weighted in order to reflect model risk in the current economic environment.

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

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

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

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.

Considering these factors, management determined it was appropriate to maintain the existing weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at December 31, 20 22.

◦ A s of March 31, 2023, the "most likely" scenario forecasted Ohio unemployment between 4.15% and 4.51% during the next four quarters.

In determining the appropriate weighting of scenarios at March 31, 2023, 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, financial system stress related to recent bank failures, geopolitical conflict, and workforce challenges continued to cause uncertainty as to the overall economic environment.

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

In determining the appropriate weighting of scenarios at June 30, 2023, management considered the range of forecasted unemployment as well as a number of economic indicators.

The continued elevated levels of inflation, volatile levels of consumer confidence, the likelihood of interest rates increasing, financial system stress and geopolitical conflict continued to cause uncertainty as to the overall economic environment.

◦ 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

Park reviews various internal and external factors to consider the need for any qualitative adjustments to the quantitative model.

Factors considered include the following :

• The nature and volume of Park’s financial assets;

the existence, growth, and effect of any concentrations of credit and the volume and severity of past due financial assets, the volume of nonaccrual assets, and the volume and severity of adversely classified or graded assets.

Specifically, management considers:

◦ Trends (e.g., growth, reduction) in specific categories of the loan portfolio, as well as adjustments to the types of loans offered by Park.

◦ Level of and trend in loan delinquencies, troubled loans, commercial watch list loans and nonperforming loans.

◦ Level of and trend in new nonaccrual loans.

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

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

• The quality of Park’s credit review function.

• The experience, ability, and depth of Park’s lending, investment, collection, and other relevant management and staff.

• The effect of other external factors such as the regulatory, legal and technological environments;

geopolitical conflict;

and events such as natural disasters or pandemics.

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

• Where the U.S.

economy is within a given credit cycle.

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

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 September 30, 2023 and December 31, 2022 was calculated for these loans to reflect minimal credit risk.

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

At March 31, 2024 and at December 31, 2023, there was no allowance for credit losses on PCD loans.

The carrying amount of accruing loans acquired with deteriorated credit quality at March 31, 2024 and at December 31, 2023 was $2.5 million and $2.8 million, respectively.

The carrying amount of nonaccrual loans acquired with deteriorated credit quality at March 31, 2024 and at December 31, 2023 was $544,000 and $534,000, respectively.

Additional Considerations:

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Nationally, office properties in downtown and urban business districts are seeing the most stress.

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.

As of March 31, 2024, Park had $224.2 million of loans which were fully or partially secured by non-owner-occupied office space, $222.6 million of which were accruing.

This portfolio is not currently exhibiting signs of stress, but Park continues to monitor this portfolio, and others, for signs of deterioration.

Other income 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.

Other income increased by $1.8 million to $26.2 million for the quarter ended March 31, 2024, compared to $24.4 million for the first quarter of 2023.

The increase for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily due to increases in income from fiduciary activities, bank owned life insurance income, and other components of net periodic pension benefit income, partially offset by decreases in debit card fee income, a loss on the sale of debt securities, net, loss on equity securities, net, and a decrease in miscellaneous income.

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

Three months ended

September 30, Nine months ended

September 30,

(In thousands) 2023 2022 Change 2023 2022 Change

(In thousands) 2024 2023 Change

Income from fiduciary activities $ 10,024 $ 8,615 $ 1,409

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ATM fees 496 533 (37)

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

Gain (loss) on sale of OREO, net 121 (9) 130

Loss on the sale of debt securities, net (398) — (398)

Loss on equity securities, net (687) (405) (282)

Other components of net periodic pension benefit income 2,204 1,893 311

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Total other income $ 26,200 $ 24,387 $ 1,813

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.

Income from fiduciary activities increased by $1.4 million, or 16.4%, to $10.0 million for the three months ended March 31, 2024, compared to $8.6 million for the same period of 2023.

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 $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.

The average market value of assets under management for the three months ended March 31, 2024 was $8,373 million compared to $7,463 million for the same period in 2023.

Bank owned life insurance income increased by $1.4 million to $2.6 million for the three months ended March 31, 2024, compared to $1.2 million for the same period of 2023.

The increase for the three-month period ended March 31, 2024 compared to March 31, 2023 was due to an increase in received death benefits.

During the three-month period ended March 31, 2024, Park sold certain AFS debt securities with a book value of $31.2 million at a gross loss of $398,000.

There were no sales of debt securities during the three-month period ended March 31, 2023.

Loss on equity securities, net, changed by $282,000, to a net loss of $687,000 for the three months ended March 31, 2024 compared to a net loss of $405,000 for the same period in 2023.

The $282,000 change for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was related to a $30,000 change in the gain (loss) on other equity securities which went from a net loss of $27,000 for the three months ended March 31, 2023 to a net gain of $3,000 for the three months ended March 31, 2024, and a $312,000 increase in the loss on equity securities held at NAV, which went from a $378,000 net loss for the three months ended March 31, 2023 to a $690,000 net loss for the three months ended March 31, 2024.

Other components of net periodic pension benefit income increased $311,000, or 16.4%, to $2.2 million for the three months ended March 31, 2024 compared to $1.9 million for the same period in 2023.

The increase was largely due to an increase in the expected return on plan assets, partially offset by an increase in interest cost.

Other Expense

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.

Other expense increased by $725,000 to $77.2 million for the three months ended March 31, 2024 compared to $76.5 million for the same period of 2023.

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

Three months ended

September 30, Nine months ended

September 30,

(In thousands) 2023 2022 Change 2023 2022 Change

(In thousands) 2024 2023 Change

Salaries $ 35,733 $ 34,871 $ 862

9 unchanged sentences

Amortization of intangible assets 320 327 (7)

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

Miscellaneous 2,621 2,471 150

Total other expense $ 77,228 $ 76,503 $ 725

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 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

Salaries increased by $862,000, or 2.5%, to $35.7 million for the three months ended March 31, 2024, compared to $34.9 million for the same period in 2023.

The increase for the three months ended March 31, 2024 compared to the same period of 2023 was due to an increase of $1.6 million in base salary expense.

These increases were partially offset by a decrease in share-based compensation expense of $383,000 and a decrease of $154,000 in additional compensation incentives.

Employee benefits increased $744,000, or 6.9%, to $11.6 million for the three months ended March 31, 2024, compared to $10.8 million for the same period in 2023.The $744,000 increase for the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to an increase in group insurance costs of $458,000, an increase in payroll tax expense of $175,000, and an increase in pension plan expense of $191,000, partially offset by a decrease in other employee benefits of $193,000.

Furniture and equipment expense decreased $663,000, or 20.4%, to $2.6 million for the three months ended March 31, 2024 compared to $3.2 million for the same period in 2023.

The decrease for the three-months ended March 31, 2024 compared to the same period in 2023 related to decreases in depreciation and maintenance and repairs expense.

Professional fees and services expense decreased $404,000, or 5.6%, to $6.8 million for the three months ended March 31, 2024 compared to $7.2 million for the same period in 2023.

The decrease for the three-month period ended March 31, 2024 compared to the same period in 2023 related to a $756,000 decrease in legal expenses and a $332,000 decrease in other fees, partially offset by (i) an increase of $132,000 in temporary wages;

(ii) an increase of $119,000 in credit services expense;

(iii) an increase of $114,000 in ICS fees;

(iv) an increase of $103,000 in consulting fees;

and (v) an increase of $103,000 in appraisal and title expenses.

Marketing expense increased $422,000, or 32.0%, to $1.7 million for the three months ended March 31, 2024 compared to $1.3 million for the same period in 2023.

The increase for the three-month period ended March 31, 2024 compared to the same period in 2023 related to an increase in advertising expense.

Items Impacting Comparability (Non-U.S.

From time to time, revenue, expenses, and/or taxes are impacted by items judged by management of Park to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that their outsized impact is believed by management of Park at that time to be infrequent or short-term in nature.

2 unchanged sentences

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

THREE MONTHS ENDED NINE MONTHS ENDED

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

THREE MONTHS ENDED

(in thousands except per common share data) March 31, 2024 March 31, 2023 Affected Line Item

Net interest income $ 95,623 $ 92,198

less purchase accounting accretion related to NewDominion and Carolina Alliance acquisitions 352 200 Interest and fees on loans

less purchase accounting accretion related to NewDominion and Carolina Alliance acquisitions — 1 — 6 Interest on deposits

less interest income on former Vision Bank relationships 2 574 Interest and fees on loans

Net interest income - adjusted $ 95,269 $ 91,424

(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

Provision for credit losses $ 2,180 $ 183

less recoveries on former Vision Bank relationships (953) (723) Provision for credit losses

Provision for credit losses - adjusted $ 3,133 $ 906

Total other income $ 26,200 $ 24,387

less loss on sale of debt securities, net (398) — Loss on the sale of debt securities, net

less write-downs on strategic initiatives (155) — Miscellaneous

less Vision related gain on the sale of OREO, net 121 — Gain (loss) on sale of OREO, net

less other service income related to former Vision Bank relationships 7 135 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 $ 26,625 $ 24,252

2 unchanged sentences

less core deposit intangible amortization related to NewDominion and Carolina Alliance acquisitions 320 327 Amortization of intangible assets

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

Total other expense - adjusted $ 76,908 $ 76,076

15 unchanged sentences

1.44 % 1.34 %

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 nine months ended September 30, 2023 and September 30, 2022, as appropriate.

(2) Averages are for the three months ended March 31, 2024 and March 31, 2023, as appropriate.

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

1 unchanged sentence

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

THREE MONTHS ENDED

March 31, 2024 March 31, 2023

AVERAGE SHAREHOLDERS' EQUITY $ 1,158,184 $ 1,090,952

4 unchanged sentences

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

THREE MONTHS ENDED

March 31, 2024 March 31, 2023

AVERAGE ASSETS $ 9,363,378 $ 10,058,880

5 unchanged sentences

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

THREE MONTHS ENDED

March 31, 2024 March 31, 2023

Interest income $ 126,640 $ 110,901

3 unchanged sentences

FTE net interest income $ 96,239 $ 93,124

(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."

(6) Adjustments to net income for each period presented are detailed in the non-GAAP reconciliations of net interest income, 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 (recovery of) provision for 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 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.

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

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

THREE MONTHS ENDED

March 31, 2024 March 31, 2023

Net income $ 35,204 $ 33,733

Income taxes 7,211 6,166

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

Provision for credit losses 2,180 183

Pre-tax, pre-provision net income $ 44,595 $ 40,082

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.

Income tax expense was $7.2 million for the first quarter of 2024 and consisted of federal income tax expense of $6.9 million and state income tax expense of $321,000.

This compares to income tax expense of $6.2 million for the first quarter of 2023, which consisted of federal income tax expense of $6.4 million and state income tax benefit of $234,000, as a result of a refund.

The effective income tax rate for the first quarter of 2024 was 17.0%, compared to 15.5% for the same period in 2023.

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

1 unchanged sentence

Comparison of Financial Condition

At September 30, 2023 and at December 31, 2022

At March 31, 2024 and at December 31, 2023

Changes in Financial Condition

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.

Total assets increased by $44.6 million during the first three months of 2024 to $9,881 million at March 31, 2024, compared to $9,836 million at December 31, 2023.

This increase was primarily due to the following:

• 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.

• Cash and cash equivalents increased by $87.8 million, or 40.2%, to $306.1 million at March 31, 2024, compared to $218.3 million at December 31, 2023.

Money market instruments increased by $136.2 million and cash and due from banks decreased by $48.4 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.

• Loans increased by $48.8 million, or 0.7%, to $7,525 million at March 31, 2024, compared to $7,476 million at December 31, 2023.

• Total investment securities decreased by $89.4 million, or 6.3%, to $1,340 million at March 31, 2024, compared to $1,429 million at December 31, 2023.

Total liabilities increased by $27.9 million, or 0.3%, during the first three months of 2024 to $8,719 million at March 31, 2024, compared to $8,691 million at December 31, 2023.

This increase was primarily due to the following:

• 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 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.

• Total deposits increased by $263.5 million, or 3.3%, to $8,306 million at March 31, 2024, compared to $8,043 million at December 31, 2023.

• Short-term borrowings decreased by $222.3 million, or 67.7%, to $105.9 million at March 31, 2024, compared to $328.2 million at December 31, 2023.

• Other liabilities decreased by $7.7 million, or 10.4%, to $66.2 million at March 31, 2024, compared to $73.9 million at December 31, 2023.

Total shareholders’ equity increased by $16.7 million, or 1.5%, to $1,162 million at March 31, 2024, from $1,145 million at December 31, 2023.

This increase was primarily due to the following:

• Retained earnings increased by $17.2 million during the period primarily as a result of net income of $35.2 million, partially offset by cash dividends on common shares of $17.3 million.

• 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.

• Treasury shares decreased by $3.4 million during the period as a result of the issuance of treasury shares under share-based compensation awards (net of common shares withheld to pay employee income taxes).

• Common shares decreased by $3.7 million during the period as a result of the issuance of treasury shares under share-based compensation awards (net of common shares withheld to pay employee income taxes), partially offset by an increase due to share-based compensation expense.

Increases or decreases in the investment securities portfolio, short-term borrowings and long-term debt are greatly dependent upon the growth in loans and deposits.

2 unchanged sentences

Likewise, both short-term borrowings and long-term debt are utilized to fund the growth in earning assets if the growth in deposits and cash flow from operations are not sufficient to do so.

Cash provided by operating activities was $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.

Cash provided by operating activities was $34.7 million and $24.4 million for the three months ended March 31, 2024 and 2023, respectively.

Net income was the primary source of cash from operating activities for each of the three-month periods ended March 31, 2024 and 2023.

Cash provided by investing activities was $32.4 million and $78.7 million for the three months ended March 31, 2024 and 2023, respectively.

Proceeds from the sale, repayment, or maturity of investment securities provide cash and purchases of investment securities use cash.

Net investment securities transactions provided cash of $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.

Net investment securities transactions provided cash of $87.6 million for the three months ended March 31, 2024 and $34.8 million for the three months ended March 31, 2023.

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

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

Cash used by the net increase in the loan portfolio was $49.2 million and cash provided by the net decrease in the loan portfolio was $50.2 million for the three months ended March 31, 2024 and 2023, respectively.

Cash provided by financing activities was $20.8 million and cash used in financing activities was $30.9 million for the three months ended March 31, 2024 and 2023, respectively.

A major source of cash for financing activities is the net change in deposits.

Deposits (net of off-balance sheet deposits) increased and provided $10.0 million and $405.4 million of cash for the nine months ended September 30, 2023 and 2022, respectively.

Deposits (net of off-balance sheet deposits) increased and provided $263.5 million and $59.7 million of cash for the three months ended March 31, 2024 and 2023, respectively.

Another major source/use of cash from financing activities is borrowings in the form of short-term borrowings, long-term debt and subordinated notes.

For the nine months ended September 30, 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.

For the three months ended March 31, 2024 and 2023, net short-term borrowings decreased and used $222.3 million and $55.3 million in cash, respectively.

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

while there were no repurchases of common shares during the three months ended March 31, 2024.

Finally, cash declined by $17.4 million for both the three months ended March 31, 2024 and 2023, respectively, from the payment of dividends.

Effective liquidity management ensures that the cash flow requirements of depositors and borrowers, as well as the operating cash needs of the Corporation, are met.

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.

The most easily accessible forms of liquidity, Fed Funds Sold, unpledged investment securities and available FHLB borrowing capacity, totaled $2.15 billion at March 31, 2024.

The Corporation’s loan to asset ratio was 76.16% at March 31, 2024, compared to 76.01% at December 31, 2023 and 71.97% at March 31, 2023.

Cash and cash equivalents were $306.1 million at March 31, 2024, compared to $218.3 million at December 31, 2023 and $261.9 million at March 31, 2023.

Management believes that the present funding sources provide more than adequate liquidity for the Corporation to meet its cash flow needs.

Capital Resources

Total shareholders’ equity at September 30, 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.

Total shareholders’ equity at March 31, 2024 was $1,162 million, or 11.8% of total assets, compared to $1,145 million, or 11.6% of total assets, at December 31, 2023 and $1,082 million, or 11.0% of total assets, at March 31, 2023.

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

4 unchanged sentences

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

Park and PNB met each of the well capitalized ratio guidelines applicable to them at 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

Park and PNB met each of the well capitalized ratio guidelines applicable to them at March 31, 2024.

The following table indicates the capital ratios for PNB and Park at March 31, 2024 and December 31, 2023.

At March 31, 2024

Leverage Tier 1

19 unchanged sentences

See page 70 of Park’s 2023 Form 10-K (Table 32) for disclosure concerning contractual obligations and commitments at December 31, 2023.

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

There were no significant changes in contractual obligations and commitments during the first three months of 2024.

Financial Instruments with Off-Balance Sheet Risk

7 unchanged sentences

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

(In thousands) September 30,

(In thousands) March 31,

2024 December 31, 2023

2 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis