PARK NATIONAL CORP /OH/ 10-Q

Item 1. Financial Statements PARK NATIONAL CORPORATION AND SUBSIDIARIES Consolidated Condensed Balance Sheets (Unaudited) (in thousands, except common share and per common share data) March 31, 2024 December 31, 2023 Assets: Cash and due from banks $ 112,117 $ 160,477 Money market instruments 193,964 57,791 Cash and cash equivalents 306,081 218,268 Investment securities: Debt securities available-for-sale, at fair value (amortized cost of $ 1,334,973 and $ 1,418,770 at March 31, 2024 and December 31, 2023, respectively, and no allowance for credit losses at March 31, 2024 or at December 31, 2023) 1,248,787 1,332,842 Other investment securities 90,960 96,302 Total investment securities 1,339,747 1,429,144 Loans 7,525,005 7,476,221 Allowance for credit losses ( 85,084 ) ( 83,745 ) Net loans 7,439,921 7,392,476 Bank owned life insurance 233,245 231,631 Prepaid assets 167,488 165,879 Goodwill 159,595 159,595 Other intangible assets 4,332 4,652 Premises and equipment, net 73,818 74,211 Affordable housing tax credit investments 60,565 62,703 OREO 1,674 983 Accrued interest receivable 38,052 39,236 Operating lease ROU asset 15,786 15,715 Mortgage loan servicing rights 14,435 14,656 Other 26,338 27,304 Total assets $ 9,881,077 $ 9,836,453 5 Table of Contents PARK NATIONAL CORPORATION AND SUBSIDIARIES Consolidated Condensed Balance Sheets (Unaudited) (Continued) (in thousands, except common share and per common share data) March 31, 2024 December 31, 2023 Liabilities and Shareholders' Equity: Deposits: Non-interest bearing $ 2,587,152 $ 2,628,234 Interest bearing 5,718,880 5,414,332 Total deposits 8,306,032 8,042,566 Short-term borrowings 105,859 328,182 Subordinated notes 189,271 189,147 Unfunded commitments in affordable housing tax credit investments 24,674 28,768 Operating lease liability 16,510 16,605 Allowance for credit losses on off-balance sheet commitments 5,021 5,103 Accrued interest payable 5,494 6,860 Other 66,237 73,929 Total liabilities $ 8,719,098 $ 8,691,160 Shareholders' equity: Preferred shares (No par value; 200,000 shares authorized; No shares issued) $ — $ — Common shares (No par value; 20,000,000 shares authorized; 17,623,104 common shares issued at March 31, 2024 and at December 31, 2023) 459,532 463,280 Retained earnings 921,101 903,877 Treasury shares ( 1,473,581 common shares at March 31, 2024 and 1,506,625 common shares at December 31, 2023) ( 152,259 ) ( 155,673 ) Accumulated other comprehensive loss, net of taxes ( 66,395 ) ( 66,191 ) Total shareholders' equity 1,161,979 1,145,293 Total liabilities and shareholders’ equity $ 9,881,077 $ 9,836,453 SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 6 Table of Contents PARK NATIONAL CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Income (Unaudited) (in thousands, except common share and per common share data) Three Months Ended March 31, 2024 2023 Interest and dividend income: Interest and fees on loans $ 111,211 $ 91,614 Interest and dividends on: Debt securities - taxable 11,899 12,979 Debt securities - tax-exempt 1,410 2,912 Other interest income 2,120 3,396 Total interest and dividend income 126,640 110,901 Interest expense: Interest on deposits: Demand and savings deposits 19,855 14,212 Time deposits 7,338 1,347 Interest on borrowings: Short-term borrowings 1,464 824 Subordinated notes 2,360 2,320 Total interest expense 31,017 18,703 Net interest income 95,623 92,198 Provision for credit losses 2,180 183 Net interest income after provision for credit losses $ 93,443 $ 92,015 Other income: Income from fiduciary activities $ 10,024 $ 8,615 Service charges on deposit accounts 2,106 2,241 Other service income 2,524 2,697 Debit card fee income 6,243 6,457 Bank owned life insurance income 2,629 1,185 ATM fees 496 533 Gain (loss) on the sale of OREO, net 121 ( 9 ) Loss on the sale of debt securities, net ( 398 ) — Loss on equity securities, net ( 687 ) ( 405 ) Other components of net periodic pension benefit income 2,204 1,893 Miscellaneous 938 1,180 Total other income $ 26,200 $ 24,387 7 Table of Contents PARK NATIONAL CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Income (Unaudited) (Continued) (in thousands, except common share and per common share data) Three Months Ended March 31, 2024 2023 Other expense: Salaries $ 35,733 $ 34,871 Employee benefits 11,560 10,816 Occupancy expense 3,181 3,353 Furniture and equipment expense 2,583 3,246 Data processing fees 8,808 8,750 Professional fees and services 6,817 7,221 Marketing 1,741 1,319 Insurance 1,718 1,814 Communication 1,036 1,037 State tax expense 1,110 1,278 Amortization of intangible assets 320 327 Miscellaneous 2,621 2,471 Total other expense $ 77,228 $ 76,503 Income before income taxes $ 42,415 $ 39,899 Income taxes 7,211 6,166 Net income $ 35,204 $ 33,733 Earnings per common share: Basic $ 2.18 $ 2.08 Diluted $ 2.17 $ 2.07 Weighted average common shares outstanding: Basic 16,116,842 16,242,353 Diluted 16,191,065 16,324,823 Regular cash dividends declared per common share $ 1.06 $ 1.05 SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 8 Table of Contents PARK NATIONAL CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Comprehensive Income (Unaudited) (in thousands) Three Months Ended March 31, 2024 2023 Net income $ 35,204 $ 33,733 Other comprehensive (loss) income, net of tax: Unrealized net holding (loss) gain on debt securities available-for-sale, net of income tax effect of $( 138 ) and $ 3,285 for the three months ended March 31, 2024 and 2023, respectively ( 518 ) 12,361 Net loss realized on sale of debt securities, AFS, net of income tax effect of $ 84 for the three months ended March 31, 2024 314 — Other comprehensive (loss) income $ ( 204 ) $ 12,361 Comprehensive income $ 35,000 $ 46,094 SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 9 Table of Contents PARK NATIONAL CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Changes in Shareholders' Equity (Unaudited) (in thousands, except common share and per common share data) Preferred Shares Common Shares Retained Earnings Treasury Shares Accumulated Other Comprehensive Loss Balance at December 31, 2023 $ — $ 463,280 $ 903,877 $ ( 155,673 ) $ ( 66,191 ) Net income 35,204 Other comprehensive loss, net of tax ( 204 ) Dividends on common shares at $ 1.06 per common share ( 17,287 ) Issuance of 33,044 common shares under share-based compensation awards, net of 21,937 common shares withheld to pay employee income taxes ( 5,701 ) ( 693 ) 3,414 Share-based compensation expense 1,953 Balance at March 31, 2024 $ — $ 459,532 $ 921,101 $ ( 152,259 ) $ ( 66,395 ) Preferred Shares Common Shares Retained Earnings Treasury Shares Accumulated Other Comprehensive Loss Balance at December 31, 2022 $ — $ 462,404 $ 847,235 $ ( 138,019 ) $ ( 102,394 ) Cumulative effect of a change in accounting principle ( 303 ) Balance at January 1, 2023 $ — $ 462,404 $ 846,932 $ ( 138,019 ) $ ( 102,394 ) Net income 33,733 Other comprehensive income, net of tax 12,361 Dividends on common shares at $ 1.05 per common share ( 17,285 ) Issuance of 34,484 common shares under share-based compensation awards, net of 21,981 common shares withheld to pay employee income taxes ( 5,309 ) ( 862 ) 3,564 Share-based compensation expense 2,336 Repurchase of 124,000 common shares to be held as treasury shares $ ( 15,308 ) Balance at March 31, 2023 $ — $ 459,431 $ 862,518 $ ( 149,763 ) $ ( 90,033 ) SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 10 Table of Contents PARK NATIONAL CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (Unaudited) (in thousands) Three Months Ended March 31, 2024 2023 Operating activities: Net income $ 35,204 $ 33,733 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 2,180 183 Accretion of loan fees and costs, net ( 2,027 ) ( 2,169 ) Depreciation of premises and equipment 3,119 3,500 Amortization of investment securities, net 415 817 Net (accretion) amortization of purchase accounting adjustments ( 30 ) 119 Loss on the sale of debt securities, net 398 — Loss on equity securities, net 687 405 Loan originations to be sold in secondary market ( 16,382 ) ( 15,332 ) Proceeds from sale of loans in secondary market 17,892 15,730 Gain on sale of loans in secondary market ( 312 ) ( 325 ) Share-based compensation expense 1,953 2,336 (Gain) loss on sale of OREO, net ( 121 ) 9 Bank owned life insurance income ( 2,629 ) ( 1,185 ) Investment in qualified affordable housing tax credits amortization 2,138 2,097 Changes in assets and liabilities: Decrease in prepaid dealer premiums 173 601 Decrease (increase) in other assets 1,533 ( 2,116 ) Decrease in other liabilities ( 9,537 ) ( 13,986 ) Net cash provided by operating activities $ 34,654 $ 24,417 Investing activities: Proceeds from sales of investment securities $ 30,797 $ — Proceeds from the redemption/repurchase of FHLB stock 4,563 3,094 Proceeds from calls and maturities of: Debt securities AFS 54,287 34,085 Purchases of: Debt securities AFS ( 2,100 ) — Equity securities — ( 2,195 ) FHLB stock ( 225 ) — Net decrease (increase) in other investments 317 ( 183 ) Net loan (originations) paydowns, portfolio loans ( 49,181 ) 50,193 Investment in qualified affordable housing tax credits ( 4,094 ) ( 1,409 ) Proceeds from the sale of OREO 167 13 Bank owned life insurance death benefits 3,685 229 Purchases of bank owned life insurance ( 2,670 ) ( 2,500 ) Purchases of premises and equipment ( 3,142 ) ( 2,674 ) Net cash provided by investing activities $ 32,404 $ 78,653 11 Table of Contents PARK NATIONAL CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (Unaudited) (Continued) (in thousands) Three Months Ended March 31, 2024 2023 Financing activities: Net increase in deposits $ 264,560 $ 28,392 Net (increase) decrease in off-balance sheet deposits ( 1,094 ) 31,337 Net decrease in short-term borrowings ( 222,323 ) ( 55,284 ) Value of common shares withheld to pay employee income taxes ( 2,980 ) ( 2,607 ) Repurchase of common shares to be held as treasury shares — ( 15,308 ) Cash dividends paid ( 17,408 ) ( 17,409 ) Net cash provided by (used in) financing activities $ 20,755 $ ( 30,879 ) Increase in cash and cash equivalents 87,813 72,191 Cash and cash equivalents at beginning of year 218,268 189,728 Cash and cash equivalents at end of period $ 306,081 $ 261,919 Supplemental disclosures of cash flow information: Cash paid for: Interest $ 32,383 $ 20,528 Non-cash items: Loans transferred to OREO $ 737 $ 138 ROU assets obtained in exchange for lease obligations 547 136 SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 12 Table of Contents PARK NATIONAL CORPORATION NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS Note 1 – Basis of Presentation The accompanying unaudited consolidated condensed financial statements included in this report have been prepared for Park National Corporation (sometimes also referred to as the “Registrant”) and its subsidiaries. Unless the context otherwise requires, references to "Park", the "Corporation" or the "Company" and similar terms mean Park National Corporation and its subsidiaries. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results of operations for the interim periods included herein have been made. The results of operations for the three-month period ended March 31, 2024 are not necessarily indicative of the operating results to be anticipated for the year ending December 31, 2024. The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with the instructions for Quarterly Reports on Form 10-Q and, therefore, do not include all information and footnotes necessary for a fair presentation of the consolidated condensed balance sheets, consolidated condensed statements of income, consolidated condensed statements of comprehensive income, consolidated condensed statements of changes in shareholders’ equity and consolidated condensed statements of cash flows in conformity with U.S. GAAP. These financial statements should be read in conjunction with the consolidated financial statements included in Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA in the Annual Report on Form 10-K of Park National Corporation for the fiscal year ended December 31, 2023 ("Park's 2023 Form 10-K"). Certain prior period amounts have been reclassified to conform to the current period presentation. Park’s significant accounting policies are described in Note 1. Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Park’s 2023 Form 10-K. For interim reporting purposes, Park follows the same basic accounting policies, as updated by the information contained in this report, and considers each interim period an integral part of an annual period. Note 2 - Adoption of New Accounting Pronouncements and Issued But Not Yet Effective Accounting Standards The following is a summary of new accounting pronouncements impacting Park's consolidated financial statements: Adoption of New Accounting Pronouncements No significant new pronouncements were adopted during the three months ended March 31, 2024. Issued But Not Yet Effective Accounting Standards ASU 2023-06 - Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative: In October 2023, FASB issued ASU 2023-06 - Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative. ASU 2023-06 amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification. ASU 2023-06 was issued in response to the SEC's August 2018 final rule that updated and simplified disclosure requirements. In the final rule, the SEC identified 27 disclosure requirements that were incremental to those in the ASC and referred them to the FASB for potential incorporation into US GAAP. To avoid duplication, the SEC intended to eliminate those disclosure requirements from existing SEC regulations if the FASB incorporated them into the relevant ASC subtopics. The disclosure requirements are currently included in either SEC Regulation S-X or SEC Regulation S-K. ASU 2023-06 adds 14 of the 27 identified disclosure or presentation requirements to the ASC. For entities, like Park that are subject to the SEC's existing disclosure requirements, the effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The amendments are to be applied prospectively and, if by June 30, 2027 the SEC has not removed the applicable requirement from Regulation S-X or S-K, the pending content of the related amendment will be removed from the ASC and will not become effective for any entity. Management intends to adopt the provisions of ASU 2023-06 on their respective effective dates. The adoption of the provisions of ASU 2023-06 is not expected to have a material impact on Park's consolidated financial statements. 13 Table of Contents ASU 2023-07 - Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures In November 2023, FASB issued ASU 2023-07 -Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . ASU 2023-07 will require public entities to disclose information about their reportable segments' significant expenses on an interim and annual basis. Public entities will be required to disclose other segment items for each reportable segment and provide a description of its composition. Significant expense categories are derived from expenses that are regularly reported to an entity's chief operating decision-makers and included in a segments' reported measures of profit or loss. ASU 2023-07 will also require for an entity to disclose the title and position of the chief operating decision-maker and explain how the chief operating decision-maker uses the reported measures of profit or loss to assess segment performance. ASU 2023-07 also requires interim disclosures of certain segment-related disclosures that previously were required only on an annual basis and clarifies that entities with a single reportable segment are subject to both new and existing segment reporting requirements under Topic 280. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. ASU 2023-07 requires entities to adopt the changes to the segment reporting guidance on a retrospective basis and early adoption is permitted. The adoption of the provisions of ASU 2023-07 is not expected to have an impact on Park's consolidated financial statements. ASU 2023-09- Income Taxes (Topic 740) Improvement to Income Tax Disclosures In December 2023, FASB issued ASU 2023-09 - Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 will require entities to disclose more detailed information in the reconciliation of their statutory tax rate to their effective tax rate. ASU 2023-09 also requires entities to disclose more detailed information about income taxes paid, including by jurisdiction. ASU 2023-09 is effective for public business entities for annual reporting periods beginning after December 15, 2024 and interim periods beginning after December 15, 2025. The adoption of the provisions of ASU 2023-09 is not expected to have an impact on Park's consolidated financial statements, but will impact disclosures. Note 3 – Investment Securities Investment securities at March 31, 2024 and at December 31, 2023, were as follows: Debt securities AFS (In thousands) Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Fair Value March 31, 2024: Obligations of states and political subdivisions $ 219,886 $ 392 $ 13,752 $ 206,526 U.S. Government sponsored entities' asset-backed securities 672,462 13 69,466 603,009 Collateralized loan obligations 420,041 320 1,364 418,997 Corporate debt securities 22,584 1 2,330 20,255 Total $ 1,334,973 $ 726 $ 86,912 $ 1,248,787 Debt securities AFS (In thousands) Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Fair Value December 31, 2023: Obligations of states and political subdivisions $ 251,531 $ 1,173 $ 11,520 $ 241,184 U.S. Government sponsored entities' asset-backed securities 703,645 23 68,193 635,475 Collateralized loan obligations 443,112 31 4,857 438,286 Corporate debt securities 20,482 — 2,585 17,897 Total $ 1,418,770 $ 1,227 $ 87,155 $ 1,332,842 14 Table of Contents Investment securities in an unrealized loss position at March 31, 2024, were as follows: Unrealized loss position for less than 12 months Unrealized loss position for 12 months or longer Total (In thousands) Fair value Unrealized losses Fair value Unrealized losses Fair value Unrealized losses Debt securities AFS: Obligations of states and political subdivisions $ 37,808 $ 276 $ 131,395 $ 13,476 $ 169,203 $ 13,752 U.S. Government sponsored entities' asset-backed securities — — 601,810 69,466 601,810 69,466 Collateralized loan obligations 34,873 25 254,721 1,339 289,594 1,364 Corporate debt securities 3,001 40 15,360 2,290 18,361 2,330 Total $ 75,682 $ 341 $ 1,003,286 $ 86,571 $ 1,078,968 $ 86,912 Investment securities in an unrealized loss position at December 31, 2023, were as follows: Unrealized loss position for less than 12 months Unrealized loss position for 12 months or longer Total (In thousands) Fair value Unrealized losses Fair value Unrealized losses Fair value Unrealized losses Debt securities AFS: Obligations of states and political subdivisions $ 46,685 $ 420 $ 103,993 $ 11,100 $ 150,678 $ 11,520 U.S. Government sponsored entities' asset-backed securities — — 634,261 68,193 634,261 68,193 Collateralized loan obligations — — 404,019 4,857 404,019 4,857 Corporate debt securities 9,530 702 8,367 1,883 17,897 2,585 Total $ 56,215 $ 1,122 $ 1,150,640 $ 86,033 $ 1,206,855 $ 87,155 At March 31, 2024, Park’s debt securities portfolio consisted of $ 1.2 billion of securities, $ 1.1 billion of which were in an unrealized loss position with aggregate unrealized losses of $ 86.9 million. Of the $ 1.1 billion of securities in an unrealized loss position, $ 1.0 billion were in an unrealized loss position for 12 months or longer. Of the $ 86.9 million in unrealized losses, $ 69.5 million were related to Park's "U.S. Government sponsored entities' asset-backed securities" portfolio. For non-agency debt securities, Park verified that the current credit ratings remain above investment grade. On a quarterly basis, management reviews the credit profile of each non-agency debt security and assesses whether any impairment to the contractually obligated cash flow is likely to occur. Based on these reviews, management has concluded that the underlying creditworthiness for each security remains sufficient to maintain required payment obligations and, therefore, unrealized losses have not been recognized into net income. Management does not intend to sell, and it is not more likely than not that management would be required to sell, the securities prior to their anticipated recovery in respect of the unrealized losses. Management believes the value will recover as the securities approach maturity or market interest rates change. There was no allowance for credit losses recorded for debt securities AFS at either March 31, 2024 or December 31, 2023. Additionally, for the three months ended March 31, 2024 and 2023, there were no credit-related investment impairment losses recognized. 15 Table of Contents The amortized cost and estimated fair value of investments in debt securities AFS at March 31, 2024, are shown in the following table by contractual maturity, except for asset-backed securities and collateral loan obligations, which are shown as a single total due to the unpredictability of the timing of principal repayments. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. (In thousands) Amortized cost Fair value Tax equivalent yield (1) Debt Securities AFS Obligations of state and political subdivisions: Due one through five years $ 1,505 $ 1,503 3.15 % Due five through ten years 87,545 85,731 3.26 % Due over ten years 130,836 119,292 3.14 % Total (1) $ 219,886 $ 206,526 3.19 % U.S. Government sponsored entities' asset-backed securities $ 672,462 $ 603,009 1.83 % Collateralized loan obligations $ 420,041 $ 418,997 7.23 % Corporate debt securities Due one through five years $ 2,834 $ 2,795 9.21 % Due five through ten years 19,750 17,460 4.10 % Total $ 22,584 $ 20,255 4.74 % (1) The tax equivalent yield for certain obligations of state and political subdivisions includes the effect of a taxable equivalent adjustment using a 21 % federal corporate income tax rate. During the 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 AFS during the three-month period ended March 31, 2023. Investment securities having a fair value of $ 762.1 million and $ 602.0 million at March 31, 2024 and December 31, 2023, respectively, were pledged to collateralize government and public fund deposits, to secure repurchase agreements and as collateral for FHLB advance borrowings. 16 Table of Contents Note 4 – Other Investment Securities Other investment securities consist of restricted stock investments in the FHLB and the FRB, and equity securities. The restricted FHLB and FRB stock investments are carried at their redemption value. Equity securities with a readily determinable fair value are carried at fair value. Equity securities without a readily determinable fair value are recorded at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions ("modified cost"). Park's portfolio of equity investments in limited partnerships which provide mezzanine funding ("Partnership Investments") are valued using the NAV practical expedient in accordance with ASC 820. The carrying amounts of other investment securities at March 31, 2024 and December 31, 2023 were as follows: (In thousands) March 31, 2024 December 31, 2023 FHLB stock $ 13,415 $ 17,754 FRB stock 14,653 14,653 Equity investments carried at fair value 2,092 2,089 Equity investments carried at modified cost (1) 15,921 15,921 Equity investments carried at NAV 44,879 45,885 Total other investment securities $ 90,960 $ 96,302 (1) There have been no impairments or downward adjustments made to equity investments carried at modified cost. Cumulatively, upward adjustments of $ 871,000 have been recorded as a result of observable price changes. There were no adjustments recorded during the three months March 31, 2024 or March 31, 2023 as a result of observable price changes. During the three months ended March 31, 2024, Park purchased 2,246 shares of FHLB stock with a book value of $ 225,000 . No shares of FHLB stock were purchased during the three months ended March 31, 2023. During the three months ended March 31, 2024, the FHLB repurchased 45,630 shares of FHLB stock with a book value of $ 4.6 million. During the three months ended March 31, 2023, the FHLB repurchased 30,938 shares of FHLB stock with a book value of $ 3.1 million. No shares of FRB stock were purchased or sold during the three months ended March 31, 2024 or 2023. During the three months ended March 31, 2024 and 2023, $ 3,000 and $( 27,000 ), respectively, of gains (losses) on equity investments carried at fair value were recorded within "Loss on equity securities, net" on the Consolidated Condensed Statements of Income. During the three months ended March 31, 2024 and 2023, $( 690,000 ) and $( 378,000 ), respectively, of losses on equity investments carried at NAV were recorded within “Loss on equity securities, net” on the Consolidated Condensed Statements of Income. 17 Table of Contents Note 5 – Loans The composition of the loan portfolio at March 31, 2024 and at December 31, 2023 was as follows: March 31, 2024 December 31, 2023 (In thousands) Amortized Cost Amortized Cost Commercial, financial and agricultural: (1) Commercial, financial and agricultural (1) $ 1,273,035 $ 1,292,025 PPP loans 1,800 2,116 Overdrafts 1,635 1,499 Commercial real estate (1) 1,900,968 1,875,993 Construction real estate: Commercial 238,721 209,226 Retail 103,118 95,873 Residential real estate: Commercial 617,002 609,410 Mortgage 1,251,340 1,239,861 HELOC 177,017 174,349 Installment 6,005 5,904 Consumer: Consumer 1,923,867 1,943,869 Check loans 1,900 2,067 Leases 28,597 24,029 Total $ 7,525,005 $ 7,476,221 Allowance for credit losses ( 85,084 ) ( 83,745 ) Net loans $ 7,439,921 $ 7,392,476 (1) Included within each of commercial, financial and agricultural loans and commercial real estate loans is an immaterial amount of consumer loans that were not broken out by class. Loans are shown net of deferred origination fees, costs and unearned income of $ 20.3 million at March 31, 2024, and of $ 19.8 million at December 31, 2023, which represented a net deferred income position at both dates. At March 31, 2024 and December 31, 2023, loans included purchase accounting adjustments of $ 1.5 million and $ 1.8 million, respectively, which represented a net deferred income position at each date. This fair market value purchase accounting adjustment is expected to be recognized into interest income on a level yield basis over the remaining expected life of the loans. Overdrawn deposit accounts of $ 1.6 million and $ 1.5 million were reclassified to loans at March 31, 2024 and at December 31, 2023, respectively. 18 Table of Contents Credit Quality Nonperforming loans consist of nonaccrual loans and loans past due 90 days or more and still accruing. The following tables present the amortized cost of nonaccrual loans and loans past due 90 days or more and still accruing, by class of loan, at March 31, 2024 and December 31, 2023. March 31, 2024 (In thousands) Nonaccrual Loans Loans Past Due 90 Days or More and Accruing Total Nonperforming Loans Commercial, financial and agricultural: Commercial, financial and agricultural $ 26,989 $ — $ 26,989 PPP loans — — — Overdrafts — — — Commercial real estate 21,968 — 21,968 Construction real estate: Commercial 1,949 — 1,949 Retail 148 251 399 Residential real estate: Commercial 3,833 — 3,833 Mortgage 12,233 586 12,819 HELOC 784 26 810 Installment 17 — 17 Consumer: Consumer 2,213 707 2,920 Check loans — — — Leases 55 — 55 Total loans $ 70,189 $ 1,570 $ 71,759 19 Table of Contents December 31, 2023 (In thousands) Nonaccrual Loans Loans Past Due 90 Days or More and Accruing Total Nonperforming Loans Commercial, financial and agricultural Commercial, financial and agricultural $ 21,284 $ 14 $ 21,298 PPP loans — — — Overdrafts — — — Commercial real estate 20,740 — 20,740 Construction real estate: Commercial 504 — 504 Retail — 26 26 Residential real estate: Commercial 2,670 — 2,670 Mortgage 11,786 206 11,992 HELOC 815 — 815 Installment 16 — 16 Consumer Consumer 2,371 613 2,984 Check loans — — — Leases 73 — 73 Total loans $ 60,259 $ 859 $ 61,118 20 Table of Contents The following tables provide additional detail on nonaccrual loans and the related ACL, by class of loan, at March 31, 2024 and December 31, 2023: March 31, 2024 (In thousands) Nonaccrual Loans With No ACL Nonaccrual Loans With an ACL Related ACL Commercial, financial and agricultural: Commercial, financial and agricultural $ 15,492 $ 11,497 $ 5,000 PPP loans — — — Overdrafts — — — Commercial real estate 21,078 890 35 Construction real estate: Commercial 1,949 — — Retail — 148 148 Residential real estate: Commercial 3,833 — — Mortgage — 12,233 126 HELOC — 784 25 Installment — 17 1 Consumer Consumer — 2,213 583 Check loans — — — Leases 55 — — Total loans $ 42,407 $ 27,782 $ 5,918 21 Table of Contents December 31, 2023 (In thousands) Nonaccrual Loans With No ACL Nonaccrual Loans With an ACL Related ACL Commercial, financial and agricultural: Commercial, financial and agricultural $ 8,634 $ 12,650 $ 4,985 PPP loans — — — Overdrafts — — — Commercial real estate 20,175 565 2 Construction real estate: Commercial 504 — — Retail — — — Residential real estate: Commercial 2,670 — — Mortgage — 11,786 117 HELOC — 815 25 Installment — 16 — Consumer Consumer — 2,371 672 Check loans — — — Leases 73 — — Total $ 32,056 $ 28,203 $ 5,801 Nonaccrual commercial loans are evaluated on an individual basis and are excluded from the collective evaluation. Management’s general practice is to proactively charge down loans individually evaluated to the fair value of the underlying collateral. Nonaccrual consumer loans are collectively evaluated based on similar risk characteristics. The following tables provide the amortized cost basis of collateral-dependent loans by class of loan, at March 31, 2024 and at December 31, 2023: March 31, 2024 (In thousands) Real Estate Business Assets Other Total Commercial, financial and agricultural Commercial, financial and agricultural $ 8,319 $ 9,867 $ 8,766 $ 26,952 Commercial real estate 22,968 512 — 23,480 Construction real estate: Commercial 2,564 — — 2,564 Residential real estate: Commercial 4,062 — — 4,062 Mortgage 83 — — 83 Leases — 55 — 55 Total loans $ 37,996 $ 10,434 $ 8,766 $ 57,196 22 Table of Contents December 31, 2023 (In thousands) Real Estate Business Assets Other Total Commercial, financial and agricultural Commercial, financial and agricultural $ 8,137 $ 9,377 $ 3,737 $ 21,251 Commercial real estate 22,096 514 — 22,610 Construction real estate: Commercial 1,130 — — 1,130 Residential real estate: Commercial 2,910 — — 2,910 Mortgage 76 — — 76 Leases — 73 — 73 Total loans $ 34,349 $ 9,964 $ 3,737 $ 48,050 Interest income on nonaccrual loans individually evaluated for impairment is recognized on a cash basis only when Park expects to receive the entire recorded investment in the loans. The following table presents interest income recognized on nonaccrual loans for the three-month periods ended March 31, 2024 and 2023: Interest Income Recognized (In thousands) Three Months Ended March 31, 2024 Three Months Ended March 31, 2023 Commercial, financial and agricultural: Commercial, financial and agricultural $ 264 $ 605 PPP loans — — Overdrafts — — Commercial real estate 255 160 Construction real estate: Commercial 37 32 Retail — — Residential real estate: Commercial 48 26 Mortgage 70 49 HELOC 5 8 Installment — 1 Consumer: Consumer 31 19 Check loans — — Leases — — Total loans $ 710 $ 900 23 Table of Contents The following tables present the aging of the amortized cost in past due loans at March 31, 2024 and at December 31, 2023 by class of loan: March 31, 2024 (In thousands) Accruing Loans Past Due 30-89 Days Past Due Nonaccrual Loans and Loans Past Due 90 Days or More and Accruing (1) Total Past Due Total Current (2) Total Amortized Cost Commercial, financial and agricultural: Commercial, financial and agricultural $ 3,927 $ 11,334 $ 15,261 $ 1,257,774 $ 1,273,035 PPP loans 2 — 2 1,798 1,800 Overdrafts — — — 1,635 1,635 Commercial real estate 125 1,559 1,684 1,899,284 1,900,968 Construction real estate: Commercial — — — 238,721 238,721 Retail 26 399 425 102,693 103,118 Residential real estate: Commercial 12 219 231 616,771 617,002 Mortgage 7,847 6,025 13,872 1,237,468 1,251,340 HELOC 571 609 1,180 175,837 177,017 Installment — 3 3 6,002 6,005 Consumer: Consumer 7,510 1,079 8,589 1,915,278 1,923,867 Check loans 3 — 3 1,897 1,900 Leases — — — 28,597 28,597 Total loans $ 20,023 $ 21,227 $ 41,250 $ 7,483,755 $ 7,525,005 ( 1) Includes an aggregate of $ 1.6 million of loans past due 90 days or more and accruing. The remaining loans were past due nonaccrual loans. (2) Includes an aggregate of $ 50.5 million of nonaccrual loans which were current with respect to contractual principal and interest payments . 24 Table of Contents December 31, 2023 (in thousands) Accruing Loans Past Due 30-89 Days Past Due Nonaccrual Loans and Loans Past Due 90 Days or More and Accruing (1) Total Past Due Total Current (2) Total Amortized Cost Commercial, financial and agricultural Commercial, financial and agricultural $ 522 $ 11,629 $ 12,151 $ 1,279,874 $ 1,292,025 PPP loans 9 — 9 2,107 2,116 Overdrafts — — — 1,499 1,499 Commercial real estate 1,656 1,839 3,495 1,872,498 1,875,993 Construction real estate: Commercial — 205 205 209,021 209,226 Retail 554 26 580 95,293 95,873 Residential real estate: Commercial 295 219 514 608,896 609,410 Mortgage 9,831 6,450 16,281 1,223,580 1,239,861 HELOC 788 611 1,399 172,950 174,349 Installment 52 — 52 5,852 5,904 Consumer Consumer 8,974 1,183 10,157 1,933,712 1,943,869 Check loans 5 — 5 2,062 2,067 Leases — — — 24,029 24,029 Total loans $ 22,686 $ 22,162 $ 44,848 $ 7,431,373 $ 7,476,221 ( 1) Includes an aggregate of $ 0.9 million of loans past due 90 days or more and accruing. The remaining loans were past due nonaccrual loans. (2) Includes an aggregate of $ 39.0 million of nonaccrual loans which were current with respect to contractual principal and interest payments. Credit Quality Indicators Management utilizes past due information as a credit quality indicator across the loan portfolio. Past due information at March 31, 2024 and December 31, 2023 is included in the previous tables. The past due information is the primary credit quality indicator within the following classes of loans: (1) overdrafts in the commercial, financial and agricultural portfolio segment; (2) retail loans in the construction real estate portfolio segment; (3) mortgage loans, HELOC and installment loans in the residential real estate portfolio segment; and (4) consumer loans and check loans in the consumer portfolio segment. The primary credit indicator for commercial loans is based on an internal grading system that grades all commercial loans on a scale from 1 to 8. Credit grades are continuously monitored by the responsible loan officer and adjustments are made when appropriate. A grade of 1 indicates little or no credit risk and a grade of 8 is considered a loss. Commercial loans that are pass-rated (graded a 1 through a 4) are considered to be of acceptable credit risk. Commercial loans graded a 5 (special mention) are considered to be watch list credits and a higher PD is applied to these loans. Loans classified as special mention have potential weaknesses that require management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of Park’s credit position at some future date. Commercial loans graded a 6 (substandard), also considered watch list credits, are considered to represent higher credit risk and, as a result, a higher PD is applied to these loans. Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor or the value of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that Park will sustain some loss if the weaknesses are not corrected. Commercial loans graded a 7 (doubtful) are shown as nonaccrual and Park generally charges these loans down to their fair value by taking a partial charge-off or recording an individual reserve. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Certain 6-rated loans and all 7-rated loans are placed on nonaccrual status and included within the individually evaluated category. A commercial loan is deemed nonaccrual, and is individually evaluated, when management determines the borrower's ability to perform in accordance with the contractual loan agreement is in doubt. Any commercial loan graded an 8 (loss) is completely charged off. 25 Table of Contents Based on the most recent analysis performed, the risk category of commercial loans by class of loans at March 31, 2024 and at December 31, 2023 are detailed in the tables below. Also included in the tables detailing loan balances are gross charge offs for the three months ended March 31, 2024 and for the year ended December 31, 2023. March 31, 2024 Term Loans Amortized Cost Basis by Origination Year (In thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total Commercial, financial and agricultural: Commercial, financial and agricultural (1) Risk rating Pass $ 47,722 $ 190,793 $ 139,203 $ 106,098 $ 86,410 $ 76,150 $ 583,652 $ 1,230,028 Special Mention 786 1,017 2,744 285 626 75 10,423 15,956 Substandard 48 350 456 1,096 2,085 668 9,615 14,318 Doubtful — — 441 35 1,810 7,964 2,483 12,733 Total $ 48,556 $ 192,160 $ 142,844 $ 107,514 $ 90,931 $ 84,857 $ 606,173 $ 1,273,035 Current period gross charge-offs $ — $ — $ — $ 5 $ — $ — $ — $ 5 Commercial, financial and agricultural: PPP Risk rating Pass $ — $ — $ — $ 823 $ 977 $ — $ — $ 1,800 Special Mention — — — — — — — — Substandard — — — — — — — — Doubtful — — — — — — — — Total $ — $ — $ — $ 823 $ 977 $ — $ — $ 1,800 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Commercial real estate (1) Risk rating Pass $ 87,302 $ 274,310 $ 314,750 $ 323,474 $ 294,762 $ 530,032 $ 20,595 $ 1,845,225 Special Mention 1,088 2,005 3,494 6,515 6,435 12,721 — 32,258 Substandard 31 2,482 2,601 2,469 2,404 9,860 3,096 22,943 Doubtful — — — — — 542 — 542 Total $ 88,421 $ 278,797 $ 320,845 $ 332,458 $ 303,601 $ 553,155 $ 23,691 $ 1,900,968 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Construction real estate: Commercial Risk rating Pass $ 25,878 $ 89,993 $ 83,543 $ 3,414 $ 18,075 $ 3,646 $ 10,936 $ 235,485 Special Mention — 300 372 — — — — 672 Substandard — 615 1,899 50 — — — 2,564 Doubtful — — — — — — — — Total $ 25,878 $ 90,908 $ 85,814 $ 3,464 $ 18,075 $ 3,646 $ 10,936 $ 238,721 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — 26 Table of Contents March 31, 2024 Term Loans Amortized Cost Basis by Origination Year (In thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total Residential Real Estate: Commercial Risk rating Pass $ 24,393 $ 127,964 $ 100,789 $ 101,026 $ 114,211 $ 114,599 $ 22,952 $ 605,934 Special Mention 149 364 519 1,900 2,162 1,876 90 7,060 Substandard 438 162 392 154 1,181 1,461 220 4,008 Doubtful — — — — — — — — Total $ 24,980 $ 128,490 $ 101,700 $ 103,080 $ 117,554 $ 117,936 $ 23,262 $ 617,002 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Leases Risk rating Pass $ 10,916 $ 6,774 $ 3,916 $ 1,893 $ 1,629 $ 644 $ — $ 25,772 Special Mention 29 683 1,475 339 239 5 — 2,770 Substandard — — — — — 55 — 55 Doubtful — — — — — — — — Total $ 10,945 $ 7,457 $ 5,391 $ 2,232 $ 1,868 $ 704 $ — $ 28,597 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Total Commercial Loans Risk rating Pass $ 196,211 $ 689,834 $ 642,201 $ 536,728 $ 516,064 $ 725,071 $ 638,135 $ 3,944,244 Special Mention 2,052 4,369 8,604 9,039 9,462 14,677 10,513 58,716 Substandard 517 3,609 5,348 3,769 5,670 12,044 12,931 43,888 Doubtful — — 441 35 1,810 8,506 2,483 13,275 Total $ 198,780 $ 697,812 $ 656,594 $ 549,571 $ 533,006 $ 760,298 $ 664,062 $ 4,060,123 Current period gross charge-offs $ — $ — $ — $ 5 $ — $ — $ — $ 5 (1) Included within each of commercial, financial and agricultural loans and commercial real estate loans is an immaterial amount of consumer loans that are not broken out by class. 27 Table of Contents December 31, 2023 Term Loans Amortized Cost Basis by Origination Year (In thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total Commercial, financial and agricultural: Commercial, financial and agricultural (1) Risk rating Pass $ 204,601 $ 149,386 $ 118,992 $ 93,495 $ 38,205 $ 45,814 $ 600,301 $ 1,250,794 Special Mention 530 1,549 435 128 252 2 16,260 19,156 Substandard 149 894 1,041 1,133 143 582 7,427 11,369 Doubtful — — 39 1,771 96 7,848 952 10,706 Total $ 205,280 $ 151,829 $ 120,507 $ 96,527 $ 38,696 $ 54,246 $ 624,940 $ 1,292,025 Current period gross charge-offs $ — $ 13 $ 73 $ — $ 5 $ 52 $ 19 $ 162 Commercial, financial and agricultural: PPP Risk rating Pass $ — $ — $ 925 $ 1,191 $ — $ — $ — $ 2,116 Special Mention — — — — — — — — Substandard — — — — — — — — Doubtful — — — — — — — — Total $ — $ — $ 925 $ 1,191 $ — $ — $ — $ 2,116 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Commercial real estate (1) Risk rating Pass $ 278,922 $ 322,096 $ 334,452 $ 318,473 $ 204,740 $ 347,389 $ 17,174 $ 1,823,246 Special Mention 2,092 2,951 4,637 7,629 — 13,043 98 30,450 Substandard 1,828 1,589 2,509 2,668 3,406 7,495 1,584 21,079 Doubtful 889 — — — — 329 — 1,218 Total $ 283,731 $ 326,636 $ 341,598 $ 328,770 $ 208,146 $ 368,256 $ 18,856 $ 1,875,993 Current period gross charge-offs $ 224 $ — $ — $ — $ — $ 530 $ — $ 754 Construction real estate: Commercial Risk rating Pass $ 89,283 $ 77,988 $ 7,480 $ 18,195 $ 1,090 $ 2,718 $ 11,342 $ 208,096 Special Mention — — — — — — — — Substandard 831 236 63 — — — — 1,130 Doubtful — — — — — — — — Total $ 90,114 $ 78,224 $ 7,543 $ 18,195 $ 1,090 $ 2,718 $ 11,342 $ 209,226 Current period gross charge-offs $ 546 $ — $ — $ — $ — $ — $ — $ 546 28 Table of Contents December 31, 2023 Term Loans Amortized Cost Basis by Origination Year (In thousands) 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Total Residential Real Estate: Commercial Risk rating Pass $ 128,589 $ 104,008 $ 105,225 $ 117,442 $ 49,797 $ 71,489 $ 23,535 $ 600,085 Special Mention — 333 623 1,964 914 1,578 — 5,412 Substandard 195 560 159 1,192 16 1,601 190 3,913 Doubtful — — — — — — — — Total $ 128,784 $ 104,901 $ 106,007 $ 120,598 $ 50,727 $ 74,668 $ 23,725 $ 609,410 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Leases Risk rating Pass $ 11,440 $ 4,404 $ 2,197 $ 1,941 $ 356 $ 623 $ — $ 20,961 Special Mention 731 1,564 391 297 10 2 — 2,995 Substandard — — — — 67 6 — 73 Doubtful — — — — — — — — Total $ 12,171 $ 5,968 $ 2,588 $ 2,238 $ 433 $ 631 $ — $ 24,029 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Total Commercial Loans Risk rating Pass $ 712,835 $ 657,882 $ 569,271 $ 550,737 $ 294,188 $ 468,033 $ 652,352 $ 3,905,298 Special Mention 3,353 6,397 6,086 10,018 1,176 14,625 16,358 58,013 Substandard 3,003 3,279 3,772 4,993 3,632 9,684 9,201 37,564 Doubtful 889 — 39 1,771 96 8,177 952 11,924 Total $ 720,080 $ 667,558 $ 579,168 $ 567,519 $ 299,092 $ 500,519 $ 678,863 $ 4,012,799 Current period gross charge-offs $ 770 $ 13 $ 73 $ — $ 5 $ 582 $ 19 $ 1,462 (1) Included within each of commercial, financial and agricultural loans and commercial real estate loans is an immaterial amount of consumer loans that are not broken out by class. 29 Table of Contents Park considers the performance of the loan portfolio and its impact on the allowance for credit losses. For residential and consumer loan classes, Park also evaluates credit quality based on the aging status of the loan, which was previously presented, and by performing status. The following tables present the amortized cost in residential and consumer loans based on performing status and gross charge offs for the three months ended March 31, 2024 and for the year ended December 31, 2023. Nonperforming loans consisted of nonaccrual loans and loans past due 90 days or more and still accruing. March 31, 2024 Term Loans Amortized Cost Basis by Origination Year (In thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total Commercial, financial and agricultural: Overdrafts Performing $ 1,635 $ — $ — $ — $ — $ — $ — $ 1,635 Nonperforming — — — — — — — — Total $ 1,635 $ — $ — $ — $ — $ — $ — $ 1,635 Current period gross charge-offs $ 215 $ — $ — $ — $ — $ — $ — $ 215 Construction Real Estate: Retail Performing $ 4,442 $ 63,367 $ 17,289 $ 7,235 $ 4,094 $ 6,218 $ 74 $ 102,719 Nonperforming — 148 — 251 — — — 399 Total $ 4,442 $ 63,515 $ 17,289 $ 7,486 $ 4,094 $ 6,218 $ 74 $ 103,118 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Residential Real Estate: Mortgage Performing $ 38,674 $ 206,167 $ 261,025 $ 209,948 $ 173,087 $ 349,620 $ — $ 1,238,521 Nonperforming — 196 1,577 1,337 738 8,971 — 12,819 Total $ 38,674 $ 206,363 $ 262,602 $ 211,285 $ 173,825 $ 358,591 $ — $ 1,251,340 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Residential Real Estate: HELOC Performing $ — $ 147 $ 427 $ 352 $ 63 $ 1,930 $ 173,288 $ 176,207 Nonperforming — 20 — — — 614 176 810 Total $ — $ 167 $ 427 $ 352 $ 63 $ 2,544 $ 173,464 $ 177,017 Current period gross charge-offs $ — $ — $ — $ — $ — $ 1 $ — $ 1 Residential Real Estate: Installment Performing $ 422 $ 2,091 $ 156 $ — $ — $ 3,319 $ — $ 5,988 Nonperforming — — — — 2 15 — 17 Total $ 422 $ 2,091 $ 156 $ — $ 2 $ 3,334 $ — $ 6,005 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Consumer: Consumer Performing $ 155,368 $ 594,174 $ 564,502 $ 288,467 $ 190,160 $ 126,692 $ 1,584 $ 1,920,947 Nonperforming — 441 887 576 347 665 4 2,920 Total $ 155,368 $ 594,615 $ 565,389 $ 289,043 $ 190,507 $ 127,357 $ 1,588 $ 1,923,867 Current period gross charge-offs $ — $ 620 $ 1,107 $ 891 $ 246 $ 134 $ 2 $ 3,000 30 Table of Contents March 31, 2024 Term Loans Amortized Cost Basis by Origination Year (In thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total Consumer: Check loans Performing $ — $ — $ — $ — $ — $ — $ 1,900 $ 1,900 Nonperforming — — — — — — — — Total $ — $ — $ — $ — $ — $ — $ 1,900 $ 1,900 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ 19 $ 19 Total Consumer Loans Performing $ 200,541 $ 865,946 $ 843,399 $ 506,002 $ 367,404 $ 487,779 $ 176,846 $ 3,447,917 Nonperforming — 805 2,464 2,164 1,087 10,265 180 16,965 Total $ 200,541 $ 866,751 $ 845,863 $ 508,166 $ 368,491 $ 498,044 $ 177,026 $ 3,464,882 Current period gross charge-offs $ 215 $ 620 $ 1,107 $ 891 $ 246 $ 135 $ 21 $ 3,235 December 31, 2023 Term Loans Amortized Cost Basis by Origination Year (In thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total Commercial, financial and agricultural: Overdrafts Performing $ 1,499 $ — $ — $ — $ — $ — $ — $ 1,499 Nonperforming — — — — — — — — Total 1,499 $ — $ — $ — $ — $ — $ — $ 1,499 Current period gross charge-offs $ 1,064 $ — $ — $ — $ — $ — $ — $ 1,064 Construction Real Estate: Retail Performing $ 52,904 $ 24,219 $ 7,709 $ 4,251 $ 3,604 $ 2,891 $ 269 $ 95,847 Nonperforming — — — 26 — — — 26 Total $ 52,904 $ 24,219 $ 7,709 $ 4,277 $ 3,604 $ 2,891 $ 269 $ 95,873 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Residential Real Estate: Mortgage Performing $ 209,315 $ 259,076 $ 218,417 $ 177,518 $ 80,627 $ 282,916 $ — $ 1,227,869 Nonperforming 197 1,144 1,172 406 581 8,492 — 11,992 Total $ 209,512 $ 260,220 $ 219,589 $ 177,924 $ 81,208 $ 291,408 $ — $ 1,239,861 Current period gross charge-offs $ — $ — $ — $ — $ — $ 35 $ — $ 35 Residential Real Estate: HELOC Performing $ 99 $ 205 $ 379 $ 98 $ 221 $ 1,838 $ 170,694 $ 173,534 Nonperforming — — — — 32 603 180 815 Total $ 99 $ 205 $ 379 $ 98 $ 253 $ 2,441 $ 170,874 $ 174,349 Current period gross charge-offs $ — $ — $ — $ — $ — $ 9 $ — $ 9 31 Table of Contents December 31, 2023 Term Loans Amortized Cost Basis by Origination Year (In thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total Residential Real Estate: Installment Performing $ 2,225 $ 162 $ — $ 3 $ 144 $ 3,354 $ — $ 5,888 Nonperforming — — — — — 16 — 16 Total $ 2,225 $ 162 $ — $ 3 $ 144 $ 3,370 $ — $ 5,904 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Consumer: Consumer Performing $ 627,985 $ 613,019 $ 319,161 $ 214,714 $ 81,446 $ 65,955 $ 18,605 $ 1,940,885 Nonperforming 395 891 654 435 216 389 4 2,984 Total $ 628,380 $ 613,910 $ 319,815 $ 215,149 $ 81,662 $ 66,344 $ 18,609 $ 1,943,869 Current period gross charge-offs $ 560 $ 3,517 $ 2,371 $ 763 $ 545 $ 480 $ 6 $ 8,242 Consumer: Check loans Performing $ — $ — $ — $ — $ — $ — $ 2,067 $ 2,067 Nonperforming — — — — — — — — Total $ — $ — $ — $ — $ — $ — $ 2,067 $ 2,067 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ 51 $ 51 Total Consumer Loans Performing $ 894,027 $ 896,681 $ 545,666 $ 396,584 $ 166,042 $ 356,954 $ 191,635 $ 3,447,589 Nonperforming 592 2,035 1,826 867 829 9,500 184 15,833 Total $ 894,619 $ 898,716 $ 547,492 $ 397,451 $ 166,871 $ 366,454 $ 191,819 $ 3,463,422 Current period gross charge-offs $ 1,624 $ 3,517 $ 2,371 $ 763 $ 545 $ 524 $ 57 $ 9,401 32 Table of Contents Loans and Leases Acquired with Deteriorated Credit Quality PCD loans are individually evaluated on a quarterly basis to determine if a reserve is necessary. At 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 was $ 544,000 and $ 534,000 at March 31, 2024 and at December 31, 2023, respectively. Modifications to Borrowers Experiencing Financial Difficulty Management identifies loans as modifications to borrowers experiencing financial difficulty when a borrower is experiencing financial difficulties and Park has altered the cash flow of the loan as part of a modification or in the loan renewal process. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of the borrower's debt in the foreseeable future without the modification. This evaluation is performed in accordance with the Company’s internal underwriting policy. Park modifies loans to borrowers experiencing financial difficulty by providing principal forgiveness, a term extension, an other-than-insignificant payment delay or an interest rate reduction. In some cases, Park provides multiple types of modifications on one loan. Typically, one type of modification, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another modification, such as principal forgiveness, may be granted. For the loans included in the combination columns below, multiple types of modifications have been made on the same loan within the current reporting period. The combination is at least two of the following: a term extension, principal forgiveness, an other-than-insignificant payment delay and/or an interest rate reduction. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. As a result, the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses and a change to the allowance for credit losses is generally not recorded upon modification. When principal forgiveness is provided, the amount of forgiveness is charged off against the allowance for credit losses. 33 Table of Contents The following tables present the amortized cost basis of loans at March 31, 2024 and 2023 that were both experiencing financial difficulty and modified during the three months ended March 31, 2024 and 2023 by class and type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial difficulty as compared to the amortized cost basis of each class of financing receivable is also presented below. Three Months Ended March 31, 2024 (Dollars in thousands) Principal Forgiveness Payment Delay Term Extension Interest Rate Reduction Combination Term Extension and Interest Rate Reduction Other Total Percent of Total Class of Financing Receivable Commercial, financial and agricultural: Commercial, financial and agricultural $ — $ 54 $ 12,144 $ 2 $ — $ — $ 12,200 0.96 % PPP loans — — — — — — — — % Overdrafts — — — — — — — — % Commercial real estate — 161 4,522 344 122 — 5,149 0.27 % Construction real estate: Commercial — — — — — — — — % Retail — — — — — — — — % Residential real estate: Commercial — — 438 — 220 — 658 0.11 % Mortgage — — 48 — — — 48 — % HELOC — — — — — — — — % Installment — — 57 — — — 57 0.95 % Consumer: Consumer — — — 8 — — 8 — % Check loans — — — — — — — — % Leases — — — — — — — — % Total $ — $ 215 $ 17,209 $ 354 $ 342 $ — $ 18,120 0.24 % 34 Table of Contents Three Months Ended March 31, 2023 (Dollars in thousands) Principal Forgiveness Payment Delay Term Extension Interest Rate Reduction Combination Term Extension and Interest Rate Reduction Other Total Percent of Total Class of Financing Receivable Commercial, financial and agricultural: Commercial, financial and agricultural $ — $ — $ 3,104 $ — $ — $ — $ 3,104 0.25 % PPP loans — — — — — — — — % Overdrafts — — — — — — — — % Commercial real estate — — — — — — — — % Construction real estate: Commercial — — 988 — — — 988 0.57 % Retail — — — — — — — — % Residential real estate: Commercial — — 163 — — — 163 0.03 % Mortgage — — — — — — — — % HELOC — — — — — — — — % Installment — — — — 64 — 64 1.61 % Consumer: Consumer — — — 15 — — 15 — % Check loans — — — — — — — — % Leases — — — — — — — — % Total $ — $ — $ 4,255 $ 15 $ 64 $ — $ 4,334 0.06 % 35 Table of Contents At March 31, 2024 Park had commitments to lend $ 1.4 million related to to loans which were both experiencing financial difficulty and modified during the three months ended March 31, 2024. The following tables present the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three months ended March 31, 2024 and 2023: Three Months Ended March 31, 2024 (Dollars in thousands) Principal Forgiveness Weighted Average Interest Rate Reduction Weighted Average Term Extension (years) Weighted Average Payment Delay (years) Commercial, financial and agricultural: Commercial, financial and agricultural $ — ( 0.50 ) % 0.3 0.4 PPP loans — — % 0.0 0.0 Overdrafts — — % 0.0 0.0 Commercial real estate — ( 1.90 ) % 3.0 0.4 Construction real estate: Commercial — — % 0.0 0.0 Retail — — % 0.0 0.0 Residential real estate: Commercial — ( 1.00 ) % 3.0 0.0 Mortgage — — % 7.8 0.0 HELOC — — % 0.0 0.0 Installment — — % 7.8 0.0 Consumer: Consumer — ( 7.54 ) % 0.0 0.0 Check loans — — % 0.0 0.0 Leases — — % 0.0 0.0 Total $ — ( 1.68 ) % 1.2 0.4 36 Table of Contents Three Months Ended March 31, 2023 (Dollars in thousands) Principal Forgiveness Weighted Average Interest Rate Reduction Weighted Average Term Extension (years) Commercial, financial and agricultural: Commercial, financial and agricultural $ — — % 0.3 PPP loans — — % 0.0 Overdrafts — — % 0.0 Commercial real estate — — % 0.0 Construction real estate: Commercial — — % 0.2 Retail — — % 0.0 Residential real estate: Commercial — — % 0.5 Mortgage — — % 0.0 HELOC — — % 0.0 Installment — ( 1.13 ) % 10.0 Consumer: Consumer — ( 4.19 ) % 0.0 Check loans — — % 0.0 Leases — — % 0.0 Total $ — ( 1.69 ) % 0.4 Park closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of Park's modification efforts. There were $ 3.5 million in loans modified to borrowers experiencing financial difficulty that had been modified during the twelve months ended March 31, 2024 that were 60-89 days past due as of March 31, 2024 in the Commercial, financial, and agricultural loan portfolio segment. There were $ 9,000 in loans modified to borrowers experiencing financial difficulty that had been modified during the previous twelve months that were 30-59 days past due as of March 31, 2024 in the Commercial, financial, and agricultural loan portfolio segment. All other loans modified to borrowers experiencing financial difficulty during the twelve months ended March 31, 2024 were less than 30 days past due as of March 31, 2024. There were no loans modified to borrowers experiencing financial difficulty that had been modified during the three months ended March 31, 2023 that were greater than 30 days past due as of March 31, 2023. 37 Table of Contents The following table presents the amortized cost basis of loans that had a payment default subsequent to modification during the three months ended March 31, 2024 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty. For this table, a loan is considered to be in default when it becomes 30 days contractually past due under the modified terms: Three Months Ended March 31, 2024 Term Extension Interest Rate Reduction Combination Term Extension and Interest Rate Reduction Other Commercial, financial and agricultural: Commercial, financial and agricultural $ 3,507 $ — $ — $ 9 PPP loans — — — — Overdrafts — — — — Commercial real estate — — — — Construction real estate: Commercial — — — — Retail — — — — Residential real estate: — — — Commercial — — — — Mortgage — — — — HELOC — — — — Installment 19 — — — Consumer: Consumer — — — — Check loans — — — — Leases — — — — Total loans $ 3,526 $ — $ — $ 9 There were no loans that had a payment default during the three months ended March 31, 2023 and were modified to borrowers experiencing financial difficulty in the three months prior to that default. Upon the determination that a modified loan (or a portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged-off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amounts. Note 6 – Allowance for Credit Losses The ACL is an estimate of the expected credit losses on financial assets measured at amortized cost, which is measured using relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. A provision for credit losses is charged to operations based on management’s periodic evaluation of these and other pertinent factors. During the first quarter of 2023, Park adopted ASU 2022-02. This standard was adopted using a modified retrospective transition method on January 1, 2023, resulting in a $ 383,000 increase to the ACL. A cumulative effect adjustment resulting in a $ 303,000 decrease to retained earnings and an $ 80,000 increase to deferred tax assets was also recorded as a result of the adoption of ASU 2022-02 was also recorded as a result of the adoption of ASU 2022-02. 38 Table of Contents Quantitative Considerations The ACL is primarily calculated utilizing a DCF model. Key inputs and assumptions used in this model are discussed below: • Forecast model - For each portfolio segment, a LDA was performed in order to identify appropriate loss drivers and create a regression model for use in forecasting cash flows. The LDA analysis utilized Park's own FFIEC Call Report data for the commercial, financial and agricultural and residential real estate portfolio segments. Peer data was incorporated into the analysis for the commercial real estate, construction real estate, and consumer portfolio segments. Park updated the LDA in the fourth quarter of 2023. Per review of the correlation of data and subsequent results, management refined the peer group in the LDA and maintained the exclusion of periods impacted by COVID-19. Management reviewed and considered the impact of the inclusion of periods impacted by COVID-19 as part of the LDA update, but the correlation of the inclusion of COVID-19 periods was lower. • Probability of default – PD is the probability that an asset will be in default within a given time frame. Park has defined default to be when a charge-off has occurred, a loan is placed on nonaccrual, or a loan is greater than 90 days past due. Whenever possible, Park utilizes its own loan-level PDs for the reasonable and supportable forecast period. When loan-level data is not available reflecting the forecasted economic conditions, the LDA is utilized to estimate PDs. In all cases, the LDA is then utilized to determine the long-term historical average, which is reached over the reversion period. • Loss given default – LGD is the percentage of the asset not expected to be collected due to default. Whenever possible, Park utilizes its own loan-level LGDs for the reasonable and supportable forecast period. When it is not possible to use Park's own LGDs, the LGD is derived using a method referred to as Frye Jacobs. In all cases, the Frye Jacobs method is utilized to calculate LGDs during the reversion period and long-term historical average. • Prepayments and curtailments – Prepayments and curtailments are calculated based on Park’s own data utilizing a three-year average. This analysis is updated annually in the fourth quarter and was last updated in the fourth quarter of 2023. • Forecast and reversion – Park has established a one-year reasonable and supportable forecast period with a one-year straight line reversion to the long-term historical average. • Economic forecast - Park utilizes a third party to provide economic forecasts under various scenarios, which are weighted in order to reflect model risk in the current economic environment. The scenario weighting is evaluated by management on a quarterly basis. ◦ As of December 31, 2023, the "most likely" scenario forecasted Ohio unemployment between 4.05% and 4.66% during the next four quarters. In determining the appropriate weighting of scenarios at December 31, 2023, management considered the range of forecasted unemployment as well as a number of economic indicators. The continued elevated levels of inflation, volatile levels of consumer confidence, continued elevated interest rates, financial system stress and geopolitical conflict (including the conflicts between Russia and Ukraine and between Israel and Hamas) and stress in the commercial real estate sector, continued to cause uncertainty as to the overall economic environment. Considering these factors, management determined it was appropriate to maintain the existing weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at December 31, 2023. ◦ As of March 31, 2024, the "most likely" scenario forecasted Ohio unemployment between 4.31% and 4.79% during the next four quarters. In determining the appropriate weighting of scenarios at March 31, 2024, management considered the range of forecasted unemployment as well as a number of economic indicators. The continued elevated levels of inflation, volatile levels of consumer confidence, continued elevated interest rates, financial system stress and geopolitical conflict (including the conflicts between Russia and Ukraine and between Israel and Hamas) and stress in the commercial real estate sector, continued to cause uncertainty as to the overall economic environment. Considering these factors, management determined it was appropriate to maintain the existing weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at March 31, 2024. 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. 39 Table of Contents ◦ Level of and trend in new nonaccrual loans. ◦ Level of and trend in loan charge-offs and recoveries. • Park's lending policies and procedures, including changes in lending strategies, underwriting standards and practices for collections, charge-offs, and recoveries. • The quality of Park’s credit review function. • The experience, ability, and depth of Park’s lending, investment, collection, and other relevant management and staff. • The effect of other external factors such as the regulatory, legal and technological environments; competition; geopolitical conflict; and events such as natural disasters or pandemics. • Actual and expected changes in international, national, regional, and local economic and business conditions and developments in the markets in which Park operates that affect the collectability of financial assets. • Where the U.S. economy is within a given credit cycle. • The extent that there is government assistance (stimulus). Qualitative adjustments amounted to $ 428,000 and $ 417,000 at March 31, 2024 and December 31, 2023, respectively. ACL Activity The activity in the ACL for the three-month periods ended March 31, 2024 and March 31, 2023 is summarized in the following tables: Three Months Ended March 31, 2024 (In thousands) Commercial, financial and agricultural Commercial real estate Construction real estate Residential real estate Consumer Leases Total ACL: Beginning balance $ 15,496 $ 16,374 $ 5,227 $ 18,818 $ 27,713 $ 117 $ 83,745 Charge-offs 220 — — 1 3,019 — 3,240 Recoveries 171 22 914 82 1,210 — 2,399 Net charge-offs/(recoveries) $ 49 $ ( 22 ) $ ( 914 ) $ ( 81 ) $ 1,809 $ — $ 841 (Recovery of) provision for credit losses ( 476 ) 785 ( 399 ) 734 1,490 46 2,180 Ending balance $ 14,971 $ 17,181 $ 5,742 $ 19,633 $ 27,394 $ 163 $ 85,084 Three Months Ended March 31, 2023 (In thousands) Commercial, financial and agricultural Commercial real estate Construction real estate Residential real estate Consumer Leases Total ACL: Beginning balance $ 16,987 $ 17,829 $ 5,550 $ 16,831 $ 28,021 $ 161 $ 85,379 Impact of Adoption of ASU 2022-02 222 181 — ( 20 ) — — 383 Charge-offs 349 — — 29 1,857 — 2,235 Recoveries 46 232 496 357 1,105 — 2,236 Net charge-offs/(recoveries) $ 303 $ ( 232 ) $ ( 496 ) $ ( 328 ) $ 752 $ — $ ( 1 ) (Recovery of) provision for credit losses ( 334 ) ( 296 ) ( 684 ) 750 784 ( 37 ) 183 Ending balance $ 16,572 $ 17,946 $ 5,362 $ 17,889 $ 28,053 $ 124 $ 85,946 40 Table of Contents ACL Summary Loans collectively evaluated for impairment in the following tables include all performing loans at March 31, 2024 and at December 31, 2023, as well as nonperforming loans internally classified as consumer loans. Nonperforming consumer loans are not typically individually evaluated for impairment, but receive a portion of the statistical allocation of the ACL. Loans individually evaluated for impairment include all internally classified commercial nonaccrual loans which are individually evaluated for impairment in accordance with U.S. GAAP (see Note 1 - Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Park’s 2023 Form 10-K). The composition of the ACL at March 31, 2024 and at December 31, 2023 was as follows: March 31, 2024 (In thousands) Commercial, financial and agricultural Commercial real estate Construction real estate Residential real estate Consumer Leases Total ACL: Ending allowance balance attributed to loans: Individually evaluated for impairment $ 4,997 $ 35 $ — $ — $ — $ — $ 5,032 Collectively evaluated for impairment 9,974 17,146 5,742 19,633 27,394 163 80,052 Accruing loans acquired with deteriorated credit quality — — — — — — — Total ending allowance balance $ 14,971 $ 17,181 $ 5,742 $ 19,633 $ 27,394 $ 163 $ 85,084 Loan balance: Loans individually evaluated for impairment $ 26,937 $ 21,968 $ 1,949 $ 3,833 $ — $ 55 $ 54,742 Loans collectively evaluated for impairment 1,249,518 1,877,488 339,275 2,047,219 1,925,767 28,542 7,467,809 Accruing loans acquired with deteriorated credit quality 15 1,512 615 312 — — 2,454 Total ending loan balance $ 1,276,470 $ 1,900,968 $ 341,839 $ 2,051,364 $ 1,925,767 $ 28,597 $ 7,525,005 ACL as a percentage of loan balance: Loans individually evaluated for impairment 18.55 % 0.16 % — % — % — % — % 9.19 % Loans collectively evaluated for impairment 0.80 % 0.91 % 1.69 % 0.96 % 1.42 % 0.57 % 1.07 % Accruing loans acquired with deteriorated credit quality — % — % — % — % — % — % — % Total 1.17 % 0.90 % 1.68 % 0.96 % 1.42 % 0.57 % 1.13 % 41 Table of Contents December 31, 2023 (In thousands) Commercial, financial and agricultural Commercial real estate Construction real estate Residential real estate Consumer Leases Total ACL: Ending allowance balance attributed to loans: Individually evaluated for impairment $ 4,980 $ 3 $ — $ — $ — $ — $ 4,983 Collectively evaluated for impairment 10,516 16,371 5,227 18,818 27,713 117 78,762 Accruing loans acquired with deteriorated credit quality — — — — — — — Total ending allowance balance $ 15,496 $ 16,374 $ 5,227 $ 18,818 $ 27,713 $ 117 $ 83,745 Loan balance: Loans individually evaluated for impairment $ 21,228 $ 20,740 $ 504 $ 2,670 $ — $ 73 $ 45,215 Loans collectively evaluated for impairment 1,274,390 1,853,383 303,969 2,026,537 1,945,936 23,956 7,428,171 Accruing loans acquired with deteriorated credit quality 22 1,870 626 317 — — 2,835 Total ending loan balance $ 1,295,640 $ 1,875,993 $ 305,099 $ 2,029,524 $ 1,945,936 $ 24,029 $ 7,476,221 ACL as a percentage of loan balance: Loans individually evaluated for impairment 23.46 % 0.01 % — % — % — % — % 11.02 % Loans collectively evaluated for impairment 0.83 % 0.88 % 1.72 % 0.93 % 1.42 % 0.49 % 1.06 % Accruing loans acquired with deteriorated credit quality — % — % — % — % — % — % — % Total 1.20 % 0.87 % 1.71 % 0.93 % 1.42 % 0.49 % 1.12 % Note 7 – Loans Held For Sale Mortgage loans held for sale are carried at their fair value. At March 31, 2024 and at December 31, 2023, respectively, Park had $ 2.0 million and $ 3.2 million in mortgage loans held for sale. These amounts are included in loans on the Consolidated Condensed Balance Sheets and in the residential real estate loan portfolio segment in Note 5 - Loans, and Note 6 - Allowance for Credit Losses. The contractual balance was $ 2.0 million and $ 3.2 million at March 31, 2024 and at December 31, 2023, respectively. The gain expected upon sale was $ 33,000 and $ 53,000 at March 31, 2024 and at December 31, 2023, respectively. None of these loans were 90 days or more past due or on nonaccrual status at March 31, 2024 or at December 31, 2023. Note 8 – Goodwill and Other Intangible Assets The following table shows the activity in goodwill and other intangible assets for the three-month periods ended March 31, 2024 and 2023. (in thousands) Goodwill Other intangible assets Total December 31, 2022 $ 159,595 $ 5,975 $ 165,570 Amortization — 327 327 March 31, 2023 $ 159,595 $ 5,648 $ 165,243 December 31, 2023 $ 159,595 $ 4,652 $ 164,247 Amortization — 320 320 March 31, 2024 $ 159,595 $ 4,332 $ 163,927 42 Table of Contents Park evaluates goodwill for impairment during the second quarter of each year, with financial data as of the immediately prior March 31. Based on the qualitative analysis performed as of April 1, 2023, the Company determined that goodwill for Park's reporting unit, PNB, was not impaired. Acquired Intangible Assets The following table shows the balance of acquired intangible assets at March 31, 2024 and at December 31, 2023: March 31, 2024 December 31, 2023 (in thousands) Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Other intangible assets: Core deposit intangible assets $ 14,456 $ 10,124 $ 14,456 $ 9,804 Core deposit intangible assets are being amortized, on an accelerated basis, over a period of ten years. Aggregate amortization expense was $ 320,000 and $ 327,000 for the three months ended March 31, 2024 and 2023, respectively. Estimated amortization expense related to core deposit intangible assets for the remainder of 2024 and the next four years follows: (in thousands) Total Nine months ending December 31, 2024 $ 894 2025 1,042 2026 887 2027 754 2028 618 Note 9 – Investment in Qualified Affordable Housing Park makes certain equity investments in various limited partnerships that sponsor affordable housing projects. The purposes of these investments are to achieve a satisfactory return on capital, help create affordable housing opportunities, and assist the Company to achieve its goals associated with the Community Reinvestment Act. The table below details the balances of Park’s affordable housing tax credit investments and related unfunded commitments at March 31, 2024 and December 31, 2023. (in thousands) March 31, 2024 December 31, 2023 Affordable housing tax credit investments $ 60,565 $ 62,703 Unfunded commitments 24,674 28,768 Commitments are funded when capital calls are made by the general partner. Park expects that the current commitments will be funded between the remainder of 2024 through 2033. Park recognized amortization expense of $ 2.1 million for both the three months ended March 31, 2024 and 2023, which were included within the provision for income taxes. Additionally, during the three months ended March 31, 2024 and 2023, Park recognized tax credits and other benefits from its affordable housing tax credit investments of $ 2.6 million and $ 2.4 million, respectively, which were included within the provision for income taxes. Note 10 – Foreclosed and Repossessed Assets Park typically transfers a loan to OREO at the time that Park takes deed/title to the real estate property asset. The carrying amounts of foreclosed real estate properties held at March 31, 2024 and December 31, 2023 are listed below, as well as the 43 Table of Contents recorded investment of loans secured by residential real estate properties for which formal foreclosure proceedings were in process at those dates. (in thousands) March 31, 2024 December 31, 2023 OREO: Commercial real estate $ 1,184 $ 983 Residential real estate 476 — Construction real estate 14 — Total OREO $ 1,674 $ 983 Loans in process of foreclosure: Residential real estate $ 2,097 $ 1,957 In addition to real estate, Park may also repossess different types of collateral. At March 31, 2024 and December 31, 2023, Park had $ 1.2 million and $ 1.1 million, respectively, in other repossessed assets which are included in "Other assets" on the consolidated condensed balance sheets. Note 11 – Loan Servicing Park serviced sold mortgage loans of $ 1.91 billion at March 31, 2024, $ 1.93 billion at December 31, 2023 and $ 2.02 billion at March 31, 2023. At March 31, 2024, $ 2.9 million of the sold mortgage loans were sold with recourse, compared to $ 2.9 million at December 31, 2023 and $ 3.2 million at March 31, 2023. Management closely monitors the delinquency rates on the mortgage loans sold with recourse. At March 31, 2024 and December 31, 2023, management had established reserves of $ 50,000 and $ 54,000 , respectively, to account for expected losses on loan repurchases. When Park sells mortgage loans with servicing rights retained, these servicing rights are initially recorded at fair value. Park has selected the “amortization method” as permissible within U.S. GAAP, whereby the servicing rights capitalized are amortized in proportion to and over the period of estimated future servicing income with respect to the underlying loan. At the end of each reporting period, the carrying value of MSRs is assessed for impairment with a comparison to fair value. MSRs are carried at the lower of their amortized cost or fair value. The amortization of MSRs is included within "Other service income" in the consolidated condensed statements of income. Activity for MSRs and the related valuation allowance follows: Three Months Ended March 31, (In thousands) 2024 2023 Mortgage servicing rights: Carrying amount, net, beginning of period $ 14,656 $ 15,792 Additions 143 124 Amortization ( 389 ) ( 425 ) Change in valuation allowance 25 14 Carrying amount, net, end of period $ 14,435 $ 15,505 Valuation allowance: Beginning of period $ 94 $ 182 Change in valuation allowance ( 25 ) ( 14 ) End of period $ 69 $ 168 Servicing fees included in "Other service income" were $ 1.3 million for both the three months ended March 31, 2024 and 2023. 44 Table of Contents Note 12 - Leases Park is a lessee in several noncancellable operating lease arrangements, primarily for retail branches, administrative and warehouse buildings, ATMs, and certain office equipment within its Ohio, North Carolina, South Carolina, and Kentucky markets. Certain of these leases contain renewal options for periods ranging from one year to five years. Park’s leases generally do not include termination options for either party to the lease or restrictive financial or other covenants. Payments due under the lease arrangements include fixed payments plus, for many of Park’s real estate leases, variable payments such as Park's proportionate share of property taxes, insurance and common area maintenance. Park's operating lease ROU asset and lease liability are presented in “Operating lease ROU asset" and "Operating lease liability," respectively, on Park's Consolidated Condensed Balance Sheets. The carrying amounts of Park's ROU asset and lease liability at March 31, 2024 were $ 15.8 million and $ 16.5 million, respectively. At December 31, 2023, the carrying amounts of Park's ROU asset and lease liability were $ 15.7 million and $ 16.6 million, respectively. Park's operating lease expense is recorded in "Occupancy expense" on the Company's consolidated condensed statements of income. Other information related to operating leases for the three-month periods ended March 31, 2024 and 2023 follows: Three Months Ended (in thousands) March 31, 2024 March 31, 2023 Lease cost Operating lease cost $ 622 $ 732 Sublease income ( 10 ) ( 63 ) Total lease cost $ 612 $ 669 Other information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 794 $ 923 ROU assets obtained in exchange for new operating lease liabilities $ 547 $ 136 Reductions to ROU assets resulting from reductions to lease obligations $ ( 658 ) $ ( 777 ) Park's operating leases had a weighted average remaining term of 10.0 years and 10.1 years at March 31, 2024 and at December 31, 2023, respectively. The weighted average discount rate of Park's operating leases was 3.6 % and 3.5 % at March 31, 2024 and at December 31, 2023, respectively. Undiscounted cash flows included in lease liabilities have expected contractual payments as follows: (in thousands) March 31, 2024 Nine months ending December 31, 2024 $ 1,759 2025 2,240 2026 2,177 2027 2,078 2028 2,092 Thereafter 9,806 Total undiscounted minimum lease payments $ 20,152 Present value adjustment ( 3,642 ) Total lease liabilities $ 16,510 In March 2024, the Company entered into a noncancellable operating lease for an additional retail office for an initial term of 88 months, with three five-year renewal options. This lease is expected to commence no later than the fourth quarter of 2024, and, therefore, was not recognized as of March 31, 2024. The fixed payments due on an undiscounted basis over the noncancellable 88-month period of the lease are $1.6 million . The Company will assess the lease renewal options as of the lease commencement date. 45 Table of Contents Note 13 – Repurchase Agreement Borrowings Securities sold under agreements to repurchase ("repurchase agreements") with customers represent funds deposited by customers, generally on an overnight basis, that are collateralized by investment securities owned by Park. Repurchase agreements with customers are included in "Short-term borrowings" on the consolidated condensed balance sheets. All repurchase agreements are subject to terms and conditions of repurchase/security agreements between Park and the customer and are accounted for as secured borrowings. Park's repurchase agreements consist of customer accounts and securities which are pledged on an individual security basis. At March 31, 2024 and at December 31, 2023, Park's repurchase agreement borrowings totaled $ 105.9 million and $ 108.2 million, respectively. These borrowings were collateralized with U.S. Government sponsored entities' asset-backed securities with a fair value of $ 143.5 million and $ 180.8 million at March 31, 2024 and at December 31, 2023, respectively. Declines in the value of the collateral would require Park to pledge additional securities. At March 31, 2024 and at December 31, 2023, Park had $ 647.8 million and $ 847.5 million, respectively, of available unpledged securities. The table below shows the remaining contractual maturity of repurchase agreements by collateral pledged at March 31, 2024 and at December 31, 2023: March 31, 2024 (in thousands) Remaining Contractual Maturity of the Agreements Overnight and Continuous Up to 30 days 30 - 90 days Greater than 90 days Total U.S. government and agency securities $ 105,859 $ — $ — $ — $ 105,859 December 31, 2023 (in thousands) Remaining Contractual Maturity of the Agreements Overnight and Continuous Up to 30 days 30 - 90 days Greater than 90 days Total U.S. government and agency securities $ 108,182 $ — $ — $ — $ 108,182 Note 14 - Derivatives Park uses certain derivative financial instruments (or "derivatives") to meet the needs of Park's customers while managing the interest rate risk associated with certain transactions. Park does not use derivatives for speculative purposes. A summary of derivative financial instruments utilized by Park follows. Interest Rate Swaps Park utilizes interest rate swap agreements (or "interest rate swaps") as part of its asset-liability management strategy to help manage its interest rate risk position and as a means to meet the financing, interest rate and other risk management needs of qualifying commercial banking customers. The notional amount of the interest rate swaps does not represent the amount exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. In conjunction with the Carolina Alliance acquisition, Park acquired interest rate swaps related to certain commercial loans. Simultaneously with borrowers entering into interest rate swaps, Carolina Alliance entered into offsetting interest rate swaps executed with a third party, such that Carolina Alliance minimized its net interest rate risk exposure resulting from such transactions. These interest rate swaps had a notional amount totaling $ 17.0 million and $ 18.2 million at March 31, 2024 and at December 31, 2023, respectively. All of the Company's interest rate swaps were determined to be fully effective during each of the three-month period s ended March 31, 2024 and March 31, 2023. As such, no amount of ineffectiveness has been included in net income. Therefore, the aggregate fair value of the interest rate swaps is recorded in "Other assets" and "Other liabilities" with changes in fair value recorded in "Other comprehensive (loss) income". The amount included in "Accumulated other comprehensive loss, net of tax" 46 Table of Contents would be reclassified to net income should the hedges no longer be considered effective. Park expects the outstanding hedges to remain fully effective during the remaining respective terms of the interest rate swaps. Summary information about Park's interest rate swaps at March 31, 2024 and at December 31, 2023 follows: March 31, 2024 December 31, 2023 (In thousands, except weighted average data) Loan Derivatives Loan Derivatives Notional amounts $ 16,974 $ 18,199 Weighted average pay rates 4.480 % 4.517 % Weighted average receive rates 4.480 % 4.517 % Weighted average maturity (years) 6.1 6.5 Unrealized losses $ — $ — The following table reflects the interest rate swaps included in the consolidated condensed balance sheets at March 31, 2024 and at December 31, 2023. (In thousands) March 31, 2024 December 31, 2023 Notional Amount Fair Value Notional Amount Fair Value Included in "Other assets": Loan derivatives - instruments associated with loans Matched interest rate swaps with borrower $ — $ — $ — $ — Matched interest rate swaps with counterparty 16,974 1,241 18,199 1,069 Total included in "Other assets" $ 16,974 $ 1,241 $ 18,199 $ 1,069 Included in "Other liabilities": Loan derivatives - instruments associated with loans Matched interest rate swaps with borrower $ 16,974 $ ( 1,241 ) $ 18,199 $ ( 1,069 ) Matched interest rate swaps with counterparty — — — — Total included in "Other liabilities" $ 16,974 $ ( 1,241 ) $ 18,199 $ ( 1,069 ) Mortgage Banking Derivatives Commitments to fund mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of these mortgage loans are accounted for as free-standing derivatives. In order to hedge the change in interest rates resulting from its commitments to fund the loans, the Company enters into forward commitments for the future delivery of mortgage loans when interest rate locks are entered into. These mortgage banking derivatives are not designated as hedge relationships. The fair value of an interest rate lock is recorded at the time the commitment to fund the mortgage loan is executed and is adjusted for the expected exercise of the commitment before the loan is funded. Fair values of these mortgage banking derivatives are estimated based on changes in mortgage interest rates from the date the interest on the loan is locked. Changes in the fair values of these derivatives are included in "Other service income" in the condensed consolidated statements of income. At March 31, 2024 and at December 31, 2023 , Park had $ 7.3 million and $ 4.0 million, respectively, of interest rate lock commitments. The fair value of these mortgage banking derivatives was reflected by a derivative asset of $ 158,000 and $ 87,000 at March 31, 2024 and at December 31, 2023 , respectively. Other Derivatives In connection with the sale of Park’s Class B Visa shares during 2009, Park entered into a swap agreement with the purchaser of the shares. The swap agreement adjusts for dilution in the conversion ratio of Class B Visa shares resulting from certain Visa litigation. At both March 31, 2024 and December 31, 2023 , the fair value of the swap agreement liability of $ 123,000 represented an estimate of the exposure based upon probability-weighted potential Visa litigation losses. 47 Table of Contents Note 15 – Accumulated Other Comprehensiv e Loss Other comprehensive income (loss) components, net of tax, are shown in the following table for the three-month periods ended March 31, 2024 and 2023: (in thousands) Changes in pension plan assets and benefit obligations Unrealized losses on debt securities AFS Total Beginning balance at January 1, 2024 $ 1,692 $ ( 67,883 ) $ ( 66,191 ) Other comprehensive loss before reclassifications — ( 518 ) ( 518 ) Amounts reclassified from accumulated other comprehensive loss — 314 314 Net current period other comprehensive loss — ( 204 ) ( 204 ) Ending balance at March 31, 2024 $ 1,692 $ ( 68,087 ) $ ( 66,395 ) Beginning balance at January 1, 2023 $ ( 6,680 ) $ ( 95,714 ) $ ( 102,394 ) Other comprehensive income before reclassifications — 12,361 12,361 Net current period other comprehensive income — 12,361 12,361 Ending balance at March 31, 2023 $ ( 6,680 ) $ ( 83,353 ) $ ( 90,033 ) During the three -months ended March 31, 2024, there was $ 398,000 ($ 314,000 net of tax) reclassified out of accumulated other comprehensive loss due to a net loss on the sale of debt securities. This loss was recorded within "Loss on the sale of debt securities, net" on the consolidated condensed statements of income. During the three -month period ended March 31, 2023, there were no reclassifications out of accumulated other comprehensive loss. Note 16 – Earnings Per Common Share The following table sets forth the computation of basic and diluted earnings per common share for the three months ended March 31, 2024 and 2023. Three Months Ended March 31, (In thousands, except common share and per common share data) 2024 2023 Numerator: Net income $ 35,204 $ 33,733 Denominator: Weighted-average common shares outstanding 16,116,842 16,242,353 Effect of dilutive PBRSUs and TBRSUs 74,223 82,470 Weighted-average common shares outstanding adjusted for the effect of dilutive PBRSUs and TBRSUs 16,191,065 16,324,823 Earnings per common share: Basic earnings per common share $ 2.18 $ 2.08 Diluted earnings per common share $ 2.17 $ 2.07 Park awarded 59,165 PBRSUs and 54,698 PBRSUs to certain employees during the three months ended March 31, 2024 and 2023, respectively. Park repurchased an aggregate 124,000 common shares during the three months ended March 31, 2023, to fund the PBRSUs, the TBRSUs and the common shares to be awarded to directors of Park and to directors of Park's subsidiary PNB (and its divisions) as well as pursuant to Park's previously announced stock repurchase authorizations. No common shares were repurchased during the three months ended March 31, 2024. 48 Table of Contents Note 17 - Share-Based Compensation The Park National Corporation 2017 Long-Term Incentive Plan for Employees (the "2017 Employees LTIP") was adopted by the Board of Directors of Park on January 23, 2017 and was approved by Park's shareholders at the Annual Meeting of Shareholders on April 24, 2017. The 2017 Employees LTIP makes equity-based awards and cash-based awards available for grant to employee participants in the form of incentive stock options, nonqualified stock options, SARs, restricted stock, restricted stock units, other stock-based awards and cash-based awards. Under the 2017 Employees LTIP, 750,000 common shares are authorized to be delivered in connection with grants under the 2017 Employees LTIP. The common shares to be delivered under the 2017 Employees LTIP are to consist of either common shares currently held or common shares subsequently acquired by Park as treasury shares, including common shares purchased in the open market or in private transactions. At March 31, 2024, 240,835 common shares were available for future grants under the 2017 Employees LTIP. The Park National Corporation 2017 Long-Term Incentive Plan for Non-Employee Directors (the "2017 Non-Employee Directors LTIP") was adopted by the Board of Directors of Park on January 23, 2017 and was approved by Park's shareholders at the Annual Meeting of Shareholders on April 24, 2017. The 2017 Non-Employee Directors LTIP makes equity-based awards and cash-based awards available for grant to non-employee director participants in the form of nonqualified stock options, SARs, restricted stock, restricted stock units, other stock-based awards, and cash-based awards. Under the 2017 Non-Employee Directors LTIP, 150,000 common shares are authorized to be delivered in connection with grants under the 2017 Non-Employee Directors LTIP. The common shares to be delivered under the 2017 Non-Employee Directors LTIP are to consist of either common shares currently held or common shares subsequently acquired by Park as treasury shares, including common shares purchased in the open market or in private transactions. At March 31, 2024, 60,000 common shares were available for future grants under the 2017 Non-Employee Directors LTIP. During the three months ended March 31, 2024 and 2023, the Compensation Committee of the Board of Directors of Park granted awards of PBRSUs, under the 2017 Employees LTIP, covering an aggregate of 59,165 common shares and 54,698 common shares, respectively, to certain employees of Park and its subsidiaries. At March 31, 2024, Park reported 191,120 nonvested PBRSUs. The number of PBRSUs earned or settled will depend on the level of achievement with respect to certain performance criteria over a three-year period. The PBRSUs are also subject to subsequent service-based vesting. A summary of changes in the common shares subject to nonvested PBRSUs for the three months ended March 31, 2024 follows: Common shares subject to PBRSUs Nonvested at January 1, 2024 186,936 Granted 59,165 Vested ( 54,981 ) Forfeited — Adjustment for performance conditions of PBRSUs (1) — Nonvested at March 31, 2024 (2) 191,120 (1) The number of PBRSUs earned depends on the level of achievement with respect to certain performance criteria. Adjustment herein, if any, represents the difference between the maximum number of common shares which could be earned and the actual number earned for those PBRSUs as to which the performance period was completed. (2) Nonvested amount herein represents the maximum number of nonvested PBRSUs. As of March 31, 2024, an aggregate of 184,709 PBRSUs were expected to vest. 49 Table of Contents A summary of awards vested during the three months ended March 31, 2024 and 2023 follows: Three Months Ended March 31, 2024 2023 PBRSUs vested 54,981 56,465 Common shares withheld to satisfy employee income tax withholding obligations 21,937 21,981 Net common shares issued 33,044 34,484 Share-based compensation expense of $ 2.0 million and $ 2.3 million was recognized for the three-month periods ended March 31, 2024 and 2023, respectively. The following table details expected additional share-based compensation expense related to PBRSUs outstanding at March 31, 2024: (In thousands) Nine months ending December 31, 2024 $ 4,495 2025 4,828 2026 3,155 2027 1,317 2028 212 Total $ 14,007 Note 18 – Benefit Plans Park has a noncontributory defined benefit pension plan (the "Pension Plan") covering substantially all of its employees. The Pension Plan provides benefits based on an employee’s years of service and compensation. There were no Pension Plan contributions for either of the three-month periods ended March 31, 2024 or 2023. Additionally, no contributions are expected to be made during the remainder of 2024. The following table shows the components of net periodic pension benefit income: Three Months Ended March 31, Affected Line Item in the Consolidated Condensed Statements of Income (In thousands) 2024 2023 Service cost $ 1,750 $ 1,559 Employee benefits Interest cost 1,719 1,631 Other components of net periodic pension benefit income Expected return on plan assets ( 3,935 ) ( 3,536 ) Other components of net periodic pension benefit income Recognized prior service cost 12 12 Other components of net periodic pension benefit income Net periodic pension benefit income $ ( 454 ) $ ( 334 ) 50 Table of Contents Park has entered into Supplemental Executive Retirement Plan Agreements (the “SERP Agreements”) with certain key officers of Park and its subsidiaries which provide defined pension benefits in excess of limits imposed by federal tax law. The expense for the Corporation related to the SERP Agreements for the three months ended March 31, 2024 and 2023 was as follows: Three Months Ended March 31, Affected Line Item in the Consolidated Condensed Statements of Income (In thousands) 2024 2023 Service cost $ 216 $ 234 Employee benefits Interest cost 155 176 Miscellaneous expense Total SERP expense $ 371 $ 410 Note 19 – Fair Value The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that Park uses to measure fair value are as follows: • Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that Park has the ability to access as of the measurement date. • Level 2: Level 1 inputs for assets or liabilities that are not actively traded. Also consists of an observable market price for a similar asset or liability. This includes the use of “matrix pricing” to value debt securities absent the exclusive use of quoted prices. • Level 3: Consists of unobservable inputs that are used to measure fair value when observable market inputs are not available. This could include the use of internally developed models, financial forecasting and similar inputs. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the balance sheet date. When possible, the Company looks to active and observable markets to price identical assets or liabilities. When identical assets and liabilities are not traded in active markets, the Company looks to observable market data for similar assets and liabilities. However, certain assets and liabilities are not traded in observable markets and Park must use other valuation methods to develop a fair value. The fair value of individually evaluated collateral dependent loans is typically based on the fair value of the underlying collateral, which is estimated through third-party appraisals in accordance with Park's valuation requirements under its commercial and real estate loan policies. 51 Table of Contents Assets and Liabilities Measured at Fair Value on a Recurring Basis : The following table presents assets and liabilities measured at fair value on a recurring basis: Fair Value Measurements at March 31, 2024 using: (In thousands) Level 1 Level 2 Level 3 Balance at March 31, 2024 Assets Investment securities: Obligations of states and political subdivisions $ — $ 206,526 $ — $ 206,526 U.S. Government sponsored entities’ asset-backed securities — 603,009 — 603,009 Collateralized loan obligations — 418,997 — 418,997 Corporate debt securities — 13,883 6,372 20,255 Equity securities 1,597 — 495 2,092 Mortgage loans held for sale — 2,037 — 2,037 Mortgage IRLCs — 158 — 158 Loan interest rate swaps — 1,241 — 1,241 Liabilities Fair value swap $ — $ — $ 123 $ 123 Loan interest rate swaps — 1,241 — 1,241 Fair Value Measurements at December 31, 2023 using: (In thousands) Level 1 Level 2 Level 3 Balance at December 31, 2023 Assets Investment securities: Obligations of states and political subdivisions $ — $ 241,184 $ — $ 241,184 U.S. Government sponsored entities’ asset-backed securities — 635,475 — 635,475 Collateralized loan obligations — 438,286 — 438,286 Corporate debt securities — 11,548 6,349 17,897 Equity securities 1,616 — 473 2,089 Mortgage loans held for sale — 3,235 — 3,235 Mortgage IRLCs — 87 — 87 Loan interest rate swaps — 1,069 — 1,069 Liabilities Fair value swap $ — $ — $ 123 $ 123 Loan interest rate swaps — 1,069 — 1,069 The following methods and assumptions were used by the Company in determining the fair value of the financial assets and liabilities discussed above: Investment securities: Fair values for investment securities are based on quoted market prices, where available (Level 1). If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments (Level 2). 52 Table of Contents For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows (Level 3). Mortgage loans held for sale: Mortgage loans held for sale are carried at their fair value. Mortgage loans held for sale are estimated using market prices for similar product types and, therefore, are classified in Level 2. Mortgage interest rate lock commitments: Mortgage IRLCs are based on current secondary market pricing and are classified as Level 2. Interest rate swaps: The fair values of interest rate swaps are based on valuation models using observable market data as of the measurement date (Level 2). Fair value swap: The fair value of the swap agreement entered into with the purchaser of the Visa Class B shares represents an internally developed estimate of the exposure based upon probability-weighted potential Visa litigation losses and is classified as Level 3. The following tables present a reconciliation of the beginning and ending balances of the Level 3 inputs for the three-month periods ended March 31, 2024 and 2023, for financial instruments measured on a recurring basis and classified as Level 3: Level 3 Fair Value Measurements Three months ended March 31, 2024 and 2023 (In thousands) Corporate debt securities Equity securities Fair value swap Balance at January 1, 2024 $ 6,349 $ 473 $ ( 123 ) Transfer into (out of) level 3 — — — Total gains Included in other income — 22 — Included in other comprehensive income 23 — — Purchases, sales, issuances and settlements, other, net — — — Balance at March 31, 2024 $ 6,372 $ 495 $ ( 123 ) Balance at January 1, 2023 $ 7,000 $ 439 $ ( 243 ) Transfer into level 3 622 — — Total gains / (losses) Included in other income — 10 — Included in other comprehensive income ( 767 ) — — Purchases, sales, issuances and settlements, other, net — — 122 Balance at March 31, 2023 $ 6,855 $ 449 $ ( 121 ) Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis: The following methods and assumptions were used by the Company in determining the fair value of assets and liabilities measured at fair value on a nonrecurring basis as described below: Individually evaluated collateral dependent loans: When a loan is individually evaluated, it is valued at the lower of cost or fair value. Collateral dependent loans which are individually evaluated and carried at fair value have been partially charged off or receive allocations of the allowance for credit losses. For collateral dependent loans, fair value is generally based on real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales approach and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments result in a Level 3 classification of the inputs for determining fair value. Collateral is then adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the customer and the customer’s business, resulting in a Level 3 fair value classification. Individually evaluated loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly. Additionally, valuations for all collateral dependent loans are updated annually, either through independent valuations by a licensed appraiser or a VOV 53 Table of Contents performed by an internal licensed appraiser, in accordance with Company policy. A VOV can only be used in select circumstances and verifies that the original appraised value has not deteriorated through property inspection, consideration of market conditions, and performance of all valuation methods utilized in a prior valuation. Loans individually evaluated for impairment include all internally classified commercial nonaccrual loans. OREO: Assets acquired through or in lieu of loan foreclosure are initially recorded at fair value less costs to sell when acquired. The carrying value of OREO is not re-measured to fair value on a recurring basis, but is subject to fair value adjustments when the carrying value exceeds the fair value, less estimated selling costs. Fair value is based on recent real estate appraisals and is updated at least annually. These appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales approach and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments result in a Level 3 classification of the inputs for determining fair value. Appraisals for both individually evaluated collateral dependent loans and OREO are performed by licensed appraisers. Appraisals are generally obtained to support the fair value of collateral. In general, there are three types of appraisals received by the Company: real estate appraisals, income approach appraisals, and lot development loan appraisals. These are discussed below: • Real estate appraisals typically incorporate measures such as recent sales prices for comparable properties. Appraisers may make adjustments to the sales prices of the comparable properties as deemed appropriate based on the age, condition or general characteristics of the subject property. Management generally applies a 15 % discount to real estate appraised values which management expects will cover all disposition costs (including selling costs). This 15 % discount is based on historical discounts to appraised values on sold OREO. • Income approach appraisals typically incorporate the annual net operating income of the business divided by an appropriate capitalization rate, as determined by the appraiser. Management generally applies a 15 % discount to income approach appraised values which management expects will cover all disposition costs (including selling costs). • Lot development loan appraisals are typically performed using a discounted cash flow analysis. Appraisers determine an anticipated absorption period and a discount rate that takes into account an investor’s required rate of return based on recent comparable sales. Management generally applies a 6 % discount to lot development appraised values, which is an additional discount above the net present value calculation included in the appraisal, to account for selling costs. MSRs: MSRs are carried at the lower of cost or fair value. MSRs do not trade in active, open markets with readily observable prices. For example, sales of MSRs do occur, but precise terms and conditions typically are not readily available. As such, management, with the assistance of a third-party specialist, determines fair value based on the discounted value of the future cash flows estimated to be received. Significant inputs include the discount rate and assumed prepayment speeds. The calculated fair value is then compared to market values where possible to ascertain the reasonableness of the valuation in relation to current market expectations for similar products. Accordingly, MSRs are classified as Level 2. The following tables present assets and liabilities measured at fair value on a nonrecurring basis. Individually evaluated collateral dependent loans secured by real estate are carried at fair value if they have been charged down to fair value or if a specific valuation allowance has been established. At March 31, 2024 and December 31, 2023, there were no PCD loans 54 Table of Contents carried at fair value. A new cost basis is established at the time a property is initially recorded in OREO. OREO are carried at fair value if a devaluation has been taken with respect to the property's value subsequent to the initial measurement. Fair Value Measurements at March 31, 2024 using: (In thousands) Level 1 Level 2 Level 3 Balance at March 31, 2024 Individually evaluated collateral dependent loans recorded at fair value: Commercial real estate $ — $ — $ 1,641 $ 1,641 Residential real estate — — 176 176 Total individually evaluated collateral dependent loans recorded at fair value $ — $ — $ 1,817 $ 1,817 MSRs $ — $ 950 $ — $ 950 OREO recorded at fair value: Commercial real estate $ — $ — $ 938 $ 938 Total OREO recorded at fair value $ — $ — $ 938 $ 938 Fair Value Measurements at December 31, 2023 using: (In thousands) Level 1 Level 2 Level 3 Balance at December 31, 2023 Individually evaluated collateral dependent loans recorded at fair value: Commercial real estate $ — $ — $ 2,315 $ 2,315 Residential real estate — — 182 182 Total individually evaluated collateral dependent loans recorded at fair value $ — $ — $ 2,497 $ 2,497 MSRs $ — $ 866 $ — $ 866 OREO recorded at fair value: Commercial real estate $ — $ — $ 938 $ 938 Total OREO recorded at fair value $ — $ — $ 938 $ 938 The following table provides additional detail on those individually evaluated loans which are recorded at fair value as well as the remaining individually evaluated loan portfolio not included above. The remaining individually evaluated loans consist of 1) loans which are not collateral dependent, 2) loans which are not secured by real estate, and 3) loans carried at cost as the fair 55 Table of Contents value of the underlying collateral or the present value of expected future cash flows on each of the loans exceeded the book value for each respective credit. March 31, 2024 (In thousands) Loan Balance Prior Charge-Offs Specific Valuation Allowance Carrying Balance Total individually evaluated collateral dependent loans recorded at fair value $ 1,852 $ 2,048 $ 35 $ 1,817 Remaining individually evaluated loans 52,890 263 4,997 47,893 Total individually evaluated loans $ 54,742 $ 2,311 $ 5,032 $ 49,710 December 31, 2023 (In thousands) Loan Balance Prior Charge-Offs Specific Valuation Allowance Carrying Balance Total individually evaluated collateral dependent loans recorded at fair value $ 2,499 $ 2,048 $ 2 $ 2,497 Remaining individually evaluated loans 42,716 301 4,981 37,735 Total individually evaluated loans $ 45,215 $ 2,349 $ 4,983 $ 40,232 The expense from credit adjustments related to individually evaluated loans carried at fair value was $ 35,000 and $ 107,000 for the three-month periods ended March 31, 2024 and 2023, respectively. MSRs totaled $ 14.4 million at March 31, 2024. Of this $ 14.4 million MSR carrying balance, $ 1.0 million was recorded at fair value and included a valuation allowance of $ 0.1 million. The remaining $ 13.4 million was recorded at cost, as the fair value exceeded cost at March 31, 2024. At December 31, 2023, MSRs totaled $ 14.7 million. Of this $ 14.7 million MSR carrying balance, $ 0.9 million was recorded at fair value and included a valuation allowance of $ 0.1 million. The remaining $ 13.8 million was recorded at cost, as the fair value exceeded cost at December 31, 2023. The income r elated to MSRs carried at fair value during the three-month periods ended March 31, 2024 and 2023 was $ 25,000 and $ 14,000 , respectively. Total OREO held by Park at March 31, 2024 and December 31, 2023 was $ 1.7 million and $ 1.0 million, respectively. At both March 31, 2024 and December 31, 2023 there was $ 938,000 of OREO held by Park that was carried at fair value due to fair value adjustments made subsequent to the initial OREO measurement. There was no net (expense) income related to OREO fair value adjustments for the three months ended March 31, 2024. The net income related to OREO fair value adjustments was $ 15,000 for the three months ended March 31, 2023. 56 Table of Contents The following tables present qualitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at March 31, 2024 and December 31, 2023: March 31, 2024 (In thousands) Fair Value Valuation Technique Unobservable Input(s) Range (Weighted Average) Individually evaluated collateral dependent loans: Commercial real estate $ 1,641 Sales comparison approach Adj to comparables 2.6 % - 52.0 % ( 22.7 %) Income approach Capitalization rate 7.5 % - 9.5 % ( 9.0 %) Residential real estate $ 176 Sales comparison approach Adj to comparables 1.2 % - 78.6 % ( 7.5 %) Other real estate owned: Commercial real estate $ 938 Sales comparison approach Adj to comparables 5.0% - 10.0% (7.5%) Cost approach Entrepreneurial profit 5.0% 5.0% Cost approach Accumulated depreciation 50.0% 50.0% December 31, 2023 (In thousands) Fair Value Valuation Technique Unobservable Input(s) Range (Weighted Average) Individually evaluated collateral dependent loans: Commercial real estate $ 2,315 Sales comparison approach Adj to comparables 0.2 % - 89.0 % ( 21.2 %) Income approach Capitalization rate 7.5 % - 9.5 % ( 8.9 %) Residential real estate $ 182 Sales comparison approach Adj to comparables 1.2 % - 78.6 % ( 7.6 %) Other real estate owned: Commercial real estate $ 938 Sales comparison approach Adj to comparables 5.0% - 10.0% (7.5%) Cost approach Entrepreneurial profit 5.0% (5.0%) Cost approach Accumulated depreciation 50.0% (50.0%) 57 Table of Contents Assets Measured at Net Asset Value: Park's portfolio of Partnership Investments is valued using the NAV practical expedient in accordance with ASC 820. At March 31, 2024 and at December 31, 2023, Park had Partnership Investments with a NAV of $ 27.0 million and $ 27.5 million, respectively. At March 31, 2024 and at December 31, 2023, Park had $ 17.9 million and $ 18.4 million, respectively, in unfunded commitments related to these Partnership Investments. For the three-month periods ended March 31, 2024 and 2023, Park recogniz ed expense of $ 690,000 and $ 378,000 , respectively, related to these Partnership Investments. The fair value of certain financial instruments at March 31, 2024 and at December 31, 2023, was as follows: March 31, 2024 Fair Value Measurements (In thousands) Carrying value Level 1 Level 2 Level 3 Total fair value Financial assets: Cash and money market instruments $ 306,081 $ 306,081 $ — $ — $ 306,081 Investment securities (1) 1,248,787 — 1,242,415 6,372 1,248,787 Other investment securities (2) 2,092 1,597 — 495 2,092 Mortgage loans held for sale 2,037 — 2,037 — 2,037 Mortgage IRLCs 158 — 158 — 158 Individually evaluated loans carried at fair value 1,817 — — 1,817 1,817 Other loans, net 7,435,909 — — 7,260,568 7,260,568 Loans receivable, net $ 7,439,921 $ — $ 2,195 $ 7,262,385 $ 7,264,580 Financial liabilities: Time deposits $ 663,859 $ — $ 664,032 $ — $ 664,032 Brokered deposits and Bid Ohio CDs 180,332 — 180,241 — 180,241 Other 2,461 2,461 — — 2,461 Deposits (excluding demand deposits) $ 846,652 $ 2,461 $ 844,273 $ — $ 846,734 Short-term borrowings $ 105,859 $ — $ 105,859 $ — $ 105,859 Subordinated notes 189,271 — 180,947 — 180,947 Derivative financial instruments - assets: Loan interest rate swaps $ 1,241 $ — $ 1,241 $ — $ 1,241 Derivative financial instruments - liabilities: Fair value swap $ 123 $ — $ — $ 123 $ 123 Loan interest rate swaps 1,241 — 1,241 — 1,241 (1) Includes debt securities AFS. (2) Excludes FHLB stock and FRB stock which are carried at their respective redemption values, investment securities accounted for at modified cost as these investments do not have a readily determinable fair value, and Partnership Investments valued using the NAV practical expedient. 58 Table of Contents December 31, 2023 Fair Value Measurements (In thousands) Carrying value Level 1 Level 2 Level 3 Total fair value Financial assets: Cash and money market instruments $ 218,268 $ 218,268 $ — $ — $ 218,268 Investment securities (1) 1,332,842 — 1,326,493 6,349 1,332,842 Other investment securities (2) 2,089 1,616 — 473 2,089 Mortgage loans held for sale 3,235 — 3,235 — 3,235 Mortgage IRLCs 87 — 87 — 87 Individually evaluated loans carried at fair value 2,497 — — 2,497 2,497 Other loans, net 7,386,657 — — 7,200,851 7,200,851 Loans receivable, net $ 7,392,476 $ — $ 3,322 $ 7,203,348 $ 7,206,670 Financial liabilities: Time deposits $ 641,615 $ — $ 641,180 — $ 641,180 Brokered deposits and Bid Ohio CDs 164,985 165,059 165,059 Other 1,261 1,261 — — 1,261 Deposits (excluding demand deposits) $ 807,861 $ 1,261 $ 806,239 $ — $ 807,500 Short-term borrowings $ 328,182 $ — $ 328,182 $ — $ 328,182 Subordinated notes 189,147 — 172,059 — 172,059 Derivative financial instruments - assets: Loan interest rate swaps $ 1,069 $ — $ 1,069 $ — $ 1,069 Derivative financial instruments - liabilities: Fair value swap $ 123 $ — $ — $ 123 $ 123 Loan interest rate swaps 1,069 — 1,069 — 1,069 (1) Includes debt securities AFS. (2) Excludes FHLB stock and FRB stock which are carried at their respective redemption values, investment securities accounted for at modified cost as these investments do not have a readily determinable fair value, and Partnership Investments valued using the NAV practical expedient. 59 Table of Contents Note 20 - Revenue from Contracts with Customers All of Park's revenue from contracts with customers within the scope of ASC 606 is recognized within "Other income" in the consolidated condensed statements of income. All of Park's operations are considered by management to be aggregated in one reportable segment. The following table presents the Corporation's sources of other income by revenue stream for the three-month periods ended March 31, 2024 and March 31, 2023: Three Months Ended March 31, Revenue by Operating Segment (in thousands) 2024 2023 Income from fiduciary activities Personal trust and agency accounts $ 2,954 $ 2,504 Employee benefit and retirement-related accounts 2,651 2,472 Investment management and investment advisory agency accounts 3,800 3,162 Other 619 477 Service charges on deposit accounts Non-sufficient funds (NSF) fees 792 1,061 Demand deposit account (DDA) charges 1,208 1,038 Other 106 142 Other service income (1) Credit card 611 683 HELOC 82 89 Installment 20 49 Real estate 1,497 1,455 Commercial 314 421 Debit card fee income 6,243 6,457 Bank owned life insurance income (2) 2,629 1,185 ATM fees 496 533 Gain (loss) on sale of OREO, net 121 ( 9 ) Loss on the sale of debt securities, net (2) ( 398 ) — Loss on equity securities, net (2) ( 687 ) ( 405 ) Other components of net periodic pension benefit income (2) 2,204 1,893 Miscellaneous (3) 938 1,180 Total other income $ 26,200 $ 24,387 (1) "Other Service Income" totaled $ 2.5 million and $ 2.7 million for the three months ended March 31, 2024 and 2023, respectively. Of this aggregate revenue approximately $ 1.2 million and $ 1.4 million was within the scope of ASC 606, with the remaining $ 1.3 million, in each period presented, consisting primarily of certain residential real estate loan fees which were out of scope. (2) Not within the scope of ASC 606. (3) "Miscellaneous Income" included brokerage income, safe deposit box rentals, and miscellaneous bank fees totaling $ 0.9 million and $ 1.2 million for the three months ended March 31, 2024 and 2023, respectively, all of which were within the scope of ASC 606. 60 Table of Contents A description of Park's material revenue streams accounted for under ASC 606 follows: Income from fiduciary activities (gross) : Park earns fiduciary fee income and investment brokerage fees from its contracts with trust customers for various fiduciary and investment-related services. These fees are earned over time as the Company provides the contracted monthly and quarterly services and are generally assessed based on the market value of the trust assets. Service charges on deposit accounts and ATM fees : The Corporation earns fees from the Corporation's deposit customers for transaction-based, account maintenance, and overdraft services. Fees for transaction-based services, which include services such as ATM use fees, stop payment charges, statement rendering fees, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Corporation fulfills the customer's request. Account maintenance fees, which relate primarily to monthly maintenance, are generally recognized at the end of the month, representing the period over which the Corporation satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer's account balance. Other service income : Other service income includes income from (1) the sale and servicing of loans sold to the secondary market, (2) incentive income from third-party credit card issuers, and (3) loan customers for various loan-related activities and services. Income related to the sale and servicing of loans sold to the secondary market is included within "Other service income", but is not within the scope of ASC 606. Services that fall within the scope of ASC 606 are recognized as revenue when the Company satisfies the Company's performance obligation to the customer. Debit card fee income : Park earns interchange fees from debit cardholder transactions conducted primarily through the Visa payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, net of card network fees, concurrently with the transaction processing services provided to the cardholder. Gain or loss on sale of OREO, net : The Corporation records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of delivery of an executed deed. When Park finances the sale of OREO to the buyer, the Corporation assesses whether the buyer is committed to perform the buyer's obligation under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Corporation adjusts the transaction price and related gain (loss) on sale if a significant financing component is present. 61 Table of Contents