What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-02 compared with 2024-05-02 · 302 added, 194 removed, 545 unchanged (48% of the section changed)

77 unchanged sentences

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

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

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

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

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

At June 30, 2024, management applied a 50% weighting to the baseline scenario and applied a 50% weighting to the adverse scenario.

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

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

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

election in November 2024 results in a democratic President and a divided House of Representatives and Senate that will allow for policy status quo to endure.

Political divide will be intense, causing business and consumer sentiment to decline sharply;

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

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

(6) a recession occurs in the third quarter of 2024 and lasts through the first quarter of 2025 resulting in real GDP declining by 2.6%, unemployment rates rising to a peak of 8.0% in the third quarter of 2025, and the stock market falling 35% from the third quarter of 2024 to the first quarter of 2025.

The adverse scenario also forecasts Ohio unemployment for the next twelve months to range from 6.4% to 9.1%.

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

Excluding consideration of qualitative adjustments, this sensitivity analysis would result in a hypothetical increase in Park's ACL of $24.8 million as of June 30, 2024

if only the adverse scenario was used.

Excluding consideration of qualitative adjustments, a corresponding $24.8 million decrease in Park's ACL would occur in a hypothetical scenario if only the baseline (most likely) scenario was used.

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Comparison of Results of Operations

For the Three Months Ended March 31, 2024 and 2023

For the Three and Six Months Ended June 30, 2024 and 2023

Summary Discussion of Results

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

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

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

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

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

Net income for the three months ended June 30, 2024 of $39.4 million represented a $7.8 million, or 24.6%, increase compared to $31.6 million for the three months ended June 30, 2023.

Pre-tax, pre-provision net income for the three months ended June 30, 2024 of $51.4 million represented a $10.7 million, or 26.4%, increase compared to $40.7 million for the three months ended June 30, 2023.

Weighted average diluted common shares outstanding were 16,239,617 for the second quarter of 2024, compared to 16,240,600 weighted average diluted common shares outstanding for the second quarter of 2023.

Net income for the six months ended June 30, 2024 of $74.6 million represented a $9.3 million, or 14.2%, increase compared to $65.3 million for the six months ended June 30, 2023.

Pre-tax, pre-provision net income for the six months ended June 30, 2024 of $96.0 million represented a $15.2 million, or 18.9%, increase compared to $80.8 million for the six months ended June 30, 2023.

Weighted average diluted common shares outstanding were 16,215,342 for the first half of 2024, compared to 16,282,693 weighted average diluted common shares outstanding for the first half of 2023.

The following discussion provides additional information regarding Park.

Park National Corporation (Park)

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

(In thousands) Q1 2024 Q1 2023 2023 2022

The following table reflects the net income and financial ratios for the first and second quarters of 2024, for the first half of 2024 and 2023 (the six months ended June 30) and for the years ended December 31, 2023 and 2022.

(In thousands) Q2 2024 Q1 2024 Six months YTD 2024 Six months YTD 2023 2023 2022

Net interest income $ 97,837 $ 95,623 $ 193,460 $ 183,770 $ 373,113 $ 347,059

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Net income $ 39,369 $ 35,204 $ 74,573 $ 65,317 $ 126,734 $ 148,351

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

Return on average assets (1)

1.61 % 1.44 % 1.52 % 1.32 % 1.27 % 1.48 %

Return on average equity (1)

13.52 % 12.23 % 12.88 % 12.07 % 11.55 % 13.78 %

(1) Annualized for the three months and six months ended June 30, 2024 and 2023.

Net interest income of $193.5 million for the six months ended June 30, 2024 represented a $9.7 million, or 5.3%, increase compared to $183.8 million for the six months ended June 30, 2023.

The increase was a result of a $30.0 million increase in interest income, partially offset by a $20.3 million increase in interest expense.

The $30.0 million increase in interest income was due to a $38.5 million increase in interest income on loans, partially offset by a $8.5 million decrease in investment income.

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

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

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

The $38.5 million increase in interest income on loans was primarily the result of a $419.2 million (or 5.89%) increase in average loans, from $7.12 billion for the six months ended June 30, 2023 to $7.53 billion for the six months ended June 30, 2024, as well as an increase in the yield on loans, which increased 72 basis points to 6.06% for the six months ended June 30, 2024, compared to 5.34% for the six months ended June 30, 2023.

The $8.5 million decrease in investment income was primarily the result of a $581.1 million (or 28.0%) decrease in average investments, including money market investments, from $2.08 billion for the six months ended June 30, 2023 to $1.50 billion for the six months ended June 30, 2024.

The decrease in average investments was partially offset by an increase in the yield on investments, including money market investments, which increased 21 basis points to 4.00% for the six months ended June 30, 2024, compared to 3.79% for the six months ended June 30, 2023.

The $20.3 million increase in interest expense was due to a $19.5 million increase in interest expense on deposits, as well as a $0.8 million increase in interest expense on borrowings.

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

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

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

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

The increase in interest expense on deposits was the result of a $142.4 million (or 2.59%) increase in average on-balance sheet interest bearing deposits from $5.49 billion for the six months ended June 30, 2023, to $5.64 billion for the six months ended June 30, 2024, as well as an increase in the cost of deposits of 66 basis points, from 1.31% for the six months ended June 30, 2023 to 1.97% for the six months ended June 30, 2024.

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

The provision for credit losses of $5.3 million for the six months ended June 30, 2024 represented an increase of $2.6 million, compared to $2.7 million for the six months ended June 30, 2023.

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

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

The table below reflects Park's total other income for the six months ended June 30, 2024 and 2023.

(Dollars in thousands) 2024 2023 $ change % change

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Debit card fee income 12,823 13,287 (464) (3.5) %

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

Bank owned life insurance income 4,194 2,517 1,677 66.6 %

ATM fees 954 1,086 (132) (12.2) %

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

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

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

Loss on equity securities, net (329) (380) 51 (13.4) %

Other components of net periodic benefit income 4,408 3,786 622 16.4 %

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Total other income $ 54,994 $ 49,402 $ 5,592 11.3 %

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

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

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

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

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

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

Other income of $55.0 million for the six months ended June 30, 2024 represented an increase of $5.6 million, or 11.3%, compared to $49.4 million for the six months ended June 30, 2023.

The $3.3 million increase in income from fiduciary activity was largely due to an increase in the market value of assets under management as well as updates to the fee structure.

The $464,000 decrease in debit card fee income was partially due to a decrease in the average blended interchange rate per transaction, which is influenced by various factors, including the average spend per transaction.

The $1.7 million increase in bank owned life insurance income was primarily related to an increase in death benefits received during the six months ended June 30, 2024.

The change in loss on sale of debt securities, net was due to net losses on the sale of debt securities of $398,000 recorded during the six months ended June 30, 2024.

No loss on sale of debt securities, net was recorded during the six months ended June 30, 2023.

The $622,000 increase in other components of net periodic benefit income was largely due to an increase in the expected return on plan assets, and was partially offset by an increase in interest cost.

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

The increase in miscellaneous income was largely due to an increase in net gain on sale of assets.

The table below reflects Park's total other expense for the six months ended June 30, 2024 and 2023.

(Dollars in thousands) 2024 2023 $ change % change

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Total other expense $ 152,417 $ 152,388 $ 29 — %

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

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

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

Total other expense of $152.4 million for the six months ended June 30, 2024 represented an increase of $29,000 compared to $152.4 million for the six months ended June 30, 2023.

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

expense and additional compensation expense.

The decrease in occupancy expense was primarily due to decreases in lease expense and utilities expense.

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

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

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

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

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

The table below provides certain balance sheet information and financial ratios for Park as of or for the six months ended June 30, 2024 and 2023 and the year ended December 31, 2023.

(Dollars in thousands) June 30, 2024 December 31, 2023 June 30, 2023 % change from 12/31/23 % change from 6/30/23

Loans 7,664,377 7,476,221 7,208,109 2.52 % 6.33 %

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1.52 % 1.27 % 1.32 % 19.69 % 15.15 %

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

(1) Average assets for the six months ended June 30, 2024 and 2023 and for the year ended December 31, 2023.

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

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

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

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

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

The taxable equivalent adjustments were $1.2 million and $1.8 million for the six months ended June 30, 2024 and 2023 and $3.7 million for the year ended December 31, 2023.

(3) Annualized for the six months ended June 30, 2024 and 2023.

Loans outstanding at June 30, 2024 were $7.66 billion, compared to (i) $7.48 billion at December 31, 2023, an increase of $188.2 million, and (ii) $7.21 billion at June 30, 2023, an increase of $456.3 million.

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

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

(Dollars in thousands) June 30, 2024 December 31, 2023 June 30, 2023 $ change from 12/31/23 % change from 12/31/23 $ change from 6/30/23 % change from 6/30/23

Home equity $ 185,635 $ 174,621 $ 168,256 $ 11,014 6.3 % $ 17,379 10.3 %

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Commercial 4,135,595 4,007,941 3,838,318 127,654 3.2 % 297,277 7.7 %

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

Other 5,571 3,186 4,102 2,385 74.9 % 1,469 35.8 %

$ 7,664,377 $ 7,476,221 $ 7,208,109 $ 188,156 2.5 % $ 456,268 6.3 %

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

Loans outstanding at June 30, 2024 were $7.66 billion, compared to $7.53 billion at March 31, 2024, an increase of $139.4 million.

The $139.4 million increase represented a 1.9% (7.4% annualized) increase during the three months ended June 30, 2024.

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

(Dollars in thousands) June 30, 2024 March 31, 2024 $ change from 3/31/24 % change from 3/31/24

Home equity $ 185,635 $ 177,094 $ 8,541 4.8 %

Installment 1,943,108 1,947,215 (4,107) (0.2) %

Real estate 1,394,468 1,359,193 35,275 2.6 %

Commercial 4,135,595 4,038,327 97,268 2.4 %

Other 5,571 3,176 2,395 75.4 %

$ 7,664,377 $ 7,525,005 $ 139,372 1.9 %

Park's allowance for credit losses was $86.6 million at June 30, 2024, compared to $83.7 million at December 31, 2023, an increase of $2.8 million, or 3.4%.

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

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

During the three months ended March 31, 2024 and 2023 and the year ended December 31, 2023, Park participated in a program to transfer deposits off-balance sheet in order to manage growth of the balance sheet, as deposits increased significantly throughout the COVID-19 pandemic.

At March 31, 2024, December 31, 2023 and March 31, 2023, Park had $2.3 million, $1.2 million and $164.6 million, respectively, in deposits which were off-balance sheet.

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

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

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

Total deposits at June 30, 2024 were $8.31 billion, compared to (i) $8.04 billion at December 31, 2023, an increase of $269.9 million and (ii) $8.36 billion at June 30, 2023, a decrease of $46.5 million.

(Dollars in thousands) June 30, 2024 December 31, 2023 June 30, 2023 $ change from 12/31/23 % change from 12/31/23 $ change from 6/30/23 % change from 6/30/23

Non-interest bearing deposits $ 2,542,446 $ 2,628,234 $ 2,796,009 $ (85,788) (3.3) % $ (253,563) (9.1) %

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Total deposits $ 8,312,505 $ 8,042,566 $ 8,358,976 $ 269,939 3.4 % $ (46,471) (0.6) %

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

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

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

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

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

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

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

The balance of deposits transferred off balance sheet has declined as deposit balances have declined toward pre-pandemic levels.

The balance of deposits transferred off balance sheet has declined as deposit balances declined toward pre-pandemic levels.

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

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

(Dollars in thousands) June 30, 2024 December 31, 2023 December 31, 2022 December 31, 2021 December 31, 2020 December 31, 2019

Retail deposits $ 3,968,739 $ 4,080,372 $ 4,388,394 $ 4,416,228 $ 4,025,852 $ 3,748,039

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

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

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

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

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

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

During the six months ended June 30, 2024, total deposits including off balance sheet deposits increased by $268.8 million, or 3.3%.

This increase consisted of a $370.4 million increase in total commercial deposits and a $11.2 million increase in brokered and bid CD deposits, partially offset by a $111.6 million decrease in total retail deposits and a $1.2 million decrease in off balance sheet deposits.

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

The table below breaks out the change in deposit balance, by deposit type, for June 30, 2024 compared to June 30, 2023.

(Dollars in thousands) June 30, 2024 June 30, 2023 $ change from 6/30/23 % change from 6/30/23

Retail deposits $ 3,968,739 $ 4,136,401 $ (167,662) (4.1) %

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Total deposits including off balance sheet deposits $ 8,312,505 $ 8,359,743 $ (47,238) (0.6) %

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

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

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

At June 30, 2024, total deposits, including off balance sheet deposits, decreased by $47.2 million, or 0.6%, to $8.31 billion compared to $8.36 billion at June 30, 2023.

This decrease consisted of a $167.7 million decrease in total retail deposits and a $55.0 million decrease in total commercial deposits, partially offset by a $176.2 million increase in brokered and bid CD deposits.

Included in the total commercial deposits and off balance sheet deposits shown in the previous tables are public fund deposits.

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

The following table details the change in public fund deposits.

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

Public funds are also included in Bid Ohio CDs.

The following table details the change in public funds held on Park's balance sheet.

(Dollars in thousands) June 30, 2024 December 31, 2023 June 30, 2023 December 31, 2022 December 31, 2021 December 31, 2020 December 31, 2019

Public funds included in commercial deposits $ 1,555,841 $ 1,198,418 $ 1,573,684 $ 1,335,400 $ 1,548,217 $ 1,406,101 $ 1,293,090

Bid Ohio CDs 135,000 15,000 — — — — —

Total public fund deposits $ 1,690,841 $ 1,213,418 $ 1,573,684 $ 1,335,400 $ 1,548,217 $ 1,406,101 $ 1,293,090

1 unchanged sentence

% change from prior period end 39.3 % (22.9) % 17.8 % (13.7) % 10.1 % 8.7 %

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

As of June 30, 2024, Park had approximately $1.4 billion of uninsured deposits, which was 16.9% of total deposits.

Uninsured deposits of $1.4 billion included $455.0 million of deposits that were over $250,000 but were fully collateralized by Park's investment securities portfolio.

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Net interest income results from average balances outstanding for interest earning assets and interest bearing liabilities in conjunction with the average rates earned and paid on them.

Comparison for the First Quarters of 2024 and 2023

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

Comparison for the Second Quarters of 2024 and 2023

Net interest income increased by $6.3 million, or 6.8%, to $97.8 million for the second quarter of 2024, compared to $91.6 million for the second quarter of 2023.

See the discussion under the table below.

Three months ended

March 31, 2024 Three months ended

March 31, 2023

June 30, 2024 Three months ended

June 30, 2023

(Dollars in thousands) Average

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

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

The taxable equivalent adjustment was $237,000 for the three months ended June 30, 2024 and $147,000 for the same period of 2023.

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

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

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

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

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

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

The taxable equivalent adjustment was $368,000 for the six months ended June 30, 2024 and $773,000 for the same period of 2023.

Average interest earning assets for the second quarter of 2024 decreased by $105.4 million, or 1.2%, to $9,017 million for the second quarter of 2024, compared to $9,122 million for the second quarter of 2023.

The average yield on interest earning assets increased by 70 basis points to 5.78% for the second quarter of 2024, compared to 5.08% for the second quarter of 2023.

Average interest bearing liabilities for the second quarter of 2024 increased by $83.3 million, or 1.4%, to $5,940 million, compared to $5,856 million for the second quarter of 2023.

The average cost of interest bearing liabilities increased by 52 basis points to 2.10% for the second quarter of 2024, compared to 1.58% for the second quarter of 2023.

Yield on Loans:

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

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

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

Average loan balances increased $455.1 million, or 6.4%, to $7,587 million for the second quarter of 2024, compared to $7,132 million for the second quarter of 2023.

The average yield on the loan portfolio increased by 70 basis points to 6.13% for the second quarter of 2024, compared to 5.43% for the second quarter of 2023.

The table below shows the average balance and tax equivalent yield by type of loan for the three months ended June 30, 2024 and 2023.

Three months ended

March 31, 2024 Three months ended

March 31, 2023

June 30, 2024 Three months ended

June 30, 2023

(Dollars in thousands) Average

8 unchanged sentences

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

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

The taxable equivalent adjustment was $237,000 for the three months ended June 30, 2024 and $147,000 for the same period of 2023.

Cost of Deposits:

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

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

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

Average interest bearing deposit balances increased $117.6 million, or 2.1%, to $5,627 million for the second quarter of 2024, compared to $5,509 million for the second quarter of 2023.

The average cost of funds on deposit balances increased by 53 basis points to 1.99% for the second quarter of 2024, compared to 1.46% for the second quarter of 2023.

The table below shows for the three months ended June 30, 2024 and 2023, the average balance and cost of funds by type of deposit.

Three months ended

March 31, 2024 Three months ended

March 31, 2023

June 30, 2024 Three months ended

June 30, 2023

(Dollars in thousands) Average

4 unchanged sentences

Time deposits 672,892 3.23 % 542,434 1.45 %

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

Brokered/bid CD deposits 167,002 5.12 % — N.A.

Total interest bearing deposits $ 5,626,577 1.99 % $ 5,509,022 1.46 %

Comparison for the First Half of 2024 and 2023

Net interest income increased by $9.7 million, or 5.3%, to $193.5 million for the first half of 2024, compared to $183.8 million for the first half of 2023.

See the discussion under the table below.

Six months ended

June 30, 2024 Six months ended

June 30, 2023

(Dollars in thousands) Average

balance Interest Tax

yield/cost Average

balance Interest Tax

$ 7,534,889 $ 227,008 6.06 % $ 7,115,723 $ 188,342 5.34 %

Taxable investments 1,150,985 22,849 3.99 % 1,435,414 26,410 3.71 %

Tax-exempt investments (2)

221,596 3,534 3.21 % 422,381 7,364 3.52 %

Money market instruments 125,084 3,374 5.42 % 220,951 5,305 4.84 %

Interest earning assets $ 9,032,554 $ 256,765 5.72 % $ 9,194,469 $ 227,421 4.99 %

Interest bearing deposits $ 5,635,332 $ 55,088 1.97 % $ 5,492,931 $ 35,593 1.31 %

Short-term borrowings 148,060 2,275 3.09 % 181,280 1,552 1.73 %

Long-term debt 189,273 4,721 5.02 % 188,787 4,660 4.98 %

Interest bearing liabilities $ 5,972,665 $ 62,084 2.09 % $ 5,862,998 $ 41,805 1.44 %

Excess interest earning assets $ 3,059,889 $ 3,331,471

Tax equivalent net interest income $ 194,681 $ 185,616

Net interest spread 3.63 % 3.55 %

Net interest margin 4.33 % 4.07 %

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

The taxable equivalent adjustment was $479,000 for the six months ended June 30, 2024 and $300,000 for the same period of 2023.

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

The taxable equivalent adjustment was $742,000 for the six months ended June 30, 2024 and $1.5 million for the same period of 2023.

Average interest earning assets for the first half of 2024 decreased by $161.9 million, or 1.8%, to $9,033 million for the first half of 2024, compared to $9,194 million for the first half of 2023.

The average yield on interest earning assets increased by 73 basis points to 5.72% for the first half of 2024, compared to 4.99% for the first half of 2023.

Average interest bearing liabilities for the first half of 2024 increased by $109.7 million, or 1.9%, to $5,973 million, compared to $5,863 million for the first half of 2023.

The average cost of interest bearing liabilities increased by 65 basis points to 2.09% for the first half of 2024, compared to 1.44% for the first half of 2023.

Yield on Loans:

Average loan balances increased $419.2 million, or 5.9%, to $7,535 million for the first half of 2024, compared to $7,116 million for the first half of 2023.

The average yield on the loan portfolio increased by 72 basis points to 6.06% for the first half of 2024, compared to 5.34% for the first half of 2023.

The table below shows the average balance and tax equivalent yield by type of loan for the six months ended June 30, 2024 and 2023.

Six months ended

June 30, 2024 Six months ended

June 30, 2023

(Dollars in thousands) Average

yield Average

Home equity loans $ 177,453 8.54 % $ 166,728 7.97 %

Installment loans 1,945,320 6.27 % 1,919,147 5.15 %

Real estate loans 1,360,025 4.93 % 1,213,362 4.20 %

Commercial loans (1)

4,048,234 6.23 % 3,812,390 5.68 %

Other 3,857 8.71 % 4,096 8.75 %

Total loans before allowance $ 7,534,889 6.06 % $ 7,115,723 5.34 %

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

The taxable equivalent adjustment was $479,000 for the six months ended June 30, 2024 and $300,000 for the same period of 2023.

Cost of Deposits:

Average interest bearing deposit balances increased $142.4 million, or 2.6%, to $5,635 million for the first half of 2024, compared to $5,493 million for the first half of 2023.

The average cost of funds on deposit balances increased by 66 basis points to 1.97% for the first half of 2024, compared to 1.31% for the first half of 2023.

The table below shows for the six months ended June 30, 2024 and 2023, the average balance and cost of funds by type of deposit.

Six months ended

June 30, 2024 Six months ended

June 30, 2023

(Dollars in thousands) Average

balance Cost of funds Average

balance Cost of funds

Transaction accounts $ 2,164,917 1.72 % $ 2,184,675 1.31 %

Savings deposits and clubs 2,629,155 1.66 % 2,765,704 1.32 %

Time deposits 665,628 3.12 % 542,552 1.23 %

Brokered/bid CD deposits 175,632 5.19 % — N.A.

Total interest bearing deposits $ 5,635,332 1.97 % $ 5,492,931 1.31 %

Yield on Average Interest Earning Assets:

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

The following table shows the tax equivalent yield on average interest earning assets for the six months ended June 30, 2024 and for the years ended December 31, 2023, 2022 and 2021.

Investments (2)

3 unchanged sentences

2023 - year 5.55 % 3.73 % 5.00 % 5.18 %

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

2024 - first six months 6.06 % 3.87 % 5.42 % 5.72 %

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

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

The taxable equivalent adjustment was $479,000 for the six months ended June 30, 2024, and $811,000, $627,000, and $704,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

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

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

The taxable equivalent adjustment was $742,000 for the six months ended June 30, 2024, and $2.9 million, $2.9 million, and $2.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Cost of Average Interest Bearing Liabilities:

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

Interest bearing deposits (1)

Short-term borrowings Long-term debt Total

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

Interest bearing deposits Short-term borrowings Long-term debt Total

2021 - year 0.12 % 0.27 % 4.32 % 0.28 %

1 unchanged sentence

2023 - year 1.52 % 2.58 % 4.97 % 1.67 %

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

2024 - first six months 1.97 % 3.09 % 5.02 % 2.09 %

Credit Metrics and Provision for Credit Losses

4 unchanged sentences

Additionally, as a result of the adoption of this ASU and elimination of the concept of TDRs, total nonperforming loans decreased by $20.1 million effective January 1, 2023 and individually evaluated loans decreased by $11.5 million effective January 1, 2023.

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

The table below provides additional information on the provision for credit losses for the three-month and six-month periods ended June 30, 2024 and 2023.

Three Months Ended

June 30, Six Months Ended

(Dollars in thousands) 2024 2023 2024 2023

3 unchanged sentences

adoption of ASU 2022-02 — — — 383

3,097 2,685 6,337 4,920

Recoveries 1,475 1,453 3,874 3,689

Net charge-offs (recoveries) 841 (1)

Net charge-offs 1,622 1,232 2,463 1,231

Provision for credit losses 3,113 2,492 5,293 2,675

Ending balance $ 86,575 $ 87,206 $ 86,575 $ 87,206

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

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

Net charge-offs as a % of average loans (annualized) 0.09 % 0.07 % 0.07 % 0.03 %

The following table provides additional information related to the allowance for credit losses for Park including information related to individual reserves and general reserves, at June 30, 2024, March 31, 2024, December 31, 2023, and June 30, 2023.

(Dollars in thousands) 6/30/2024 3/31/2024 12/31/2023 6/30/2023

9 unchanged sentences

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

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

The total allowance for credit losses of $86.6 million at June 30, 2024 represented a $1.5 million, or 1.8%, increase compared to $85.1 million at March 31, 2024.

The increase was due to a $1.2 million increase in general reserves and a $279,000 increase in specific reserves.

The total allowance for credit losses of $86.6 million at June 30, 2024 represented a $2.8 million, or 3.4%, increase compared to $83.7 million at December 31, 2023.

The increase was due to a $2.5 million increase in general reserves and a $328,000 increase in specific reserves.

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

6 unchanged sentences

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

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

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

The following table compares Park’s nonperforming assets at June 30, 2024, December 31, 2023 and June 30, 2023.

(In thousands) June 30, 2024 March 31, 2024 December 31, 2023 June 30, 2023

Nonaccrual loans $ 71,368 $ 70,189 $ 60,259 $ 57,279

7 unchanged sentences

Percentage of nonperforming assets to total assets 0.75 % 0.74 % 0.63 % 0.61 %

Nonperforming loans as of June 30, 2024 of $72.7 million represented a $1.0 million, or 1.37%, increase from $71.8 million at March 31, 2024 and represented a $11.6 million, or 19.0%, increase from $61.1 million at December 31, 2023.

A majority of the increase occurred in the three months ended March 31, 2024 and included the downgrade of a $5.6 million loan to a non-bank consumer financial company as well as several smaller downgrades.

Park classifies loans as nonaccrual when a loan (1) is maintained on a cash basis because of deterioration in the financial condition of the borrower, (2) payment in full of principal or interest is not expected, or (3) principal or interest has been in default for a period of 90 days for commercial loans and 120 days for all other loans.

As a result, loans may be classified as nonaccrual despite being current with their contractual terms.

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

The following table details the delinquency status of nonaccrual loans at June 30, 2024, December 31, 2023 and June 30, 2023.

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

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

June 30, 2024 December 31, 2023 June 30, 2023

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

13 unchanged sentences

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

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

Commercial loans * (In thousands) June 30, 2024 December 31, 2023 June 30, 2023

Pass-rated $ 4,018,735 $ 3,905,673 $ 3,694,097

6 unchanged sentences

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

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

Park had $74.1 million of collectively evaluated commercial loans included on the watch list at June 30, 2024, compared to $60.7 million at December 31, 2023, and $103.3 million at June 30, 2023.

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

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

The increase in watch list credits during the first six months of 2024 was largely due to a $20.3 million loan to a non-bank consumer finance company which was downgraded to special mention, partially offset by problem loan resolutions.

The downgraded loan was current in respect to its contractual terms at June 30, 2024.

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

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

Delinquent and accruing loans were $25.4 million, or 0.33%, of total loans at June 30, 2024, compared to $23.5 million, or 0.31% of total loans at December 31, 2023, and $18.7 million or 0.26% of total loans at June 30, 2023.

Individually Evaluated Loans:

4 unchanged sentences

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

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

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

Individually evaluated commercial loans were $55.0 million at June 30, 2024, an increase of $9.8 million, compared to $45.2 million at December 31, 2023 and an increase of $11.1 million, compared to $43.9 million at June 30, 2023.

At June 30, 2024, Park had taken partial charge-offs of $2.2 million related to the $55.0 million of individually evaluated commercial loans, compared to partial charge-offs of $2.3 million related to the $45.2 million of individually evaluated commercial loans at December 31, 2023.

Loans Acquired with Deteriorated Credit Quality:

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

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

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

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

At June 30, 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 June 30, 2024 and at December 31, 2023 was $2.4 million and $2.8 million, respectively.

The carrying amount of nonaccrual loans acquired with deteriorated credit quality at June 30, 2024 and at December 31, 2023 was $546,000 and $534,000, respectively.

Additional Considerations:

2 unchanged sentences

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

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

As of June 30, 2024, Park had $226.4 million of loans which were fully or partially secured by non-owner-occupied office space, $224.9 million of which were accruing.

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

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

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

Other income increased by $3.8 million to $28.8 million for the quarter ended June 30, 2024, compared to $25.0 million for the second quarter of 2023 and increased $5.6 million to $55.0 million for the first half of 2024 compared to $49.4 million for the first half of 2023.

The increase for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was primarily due to increases in income from fiduciary activities, miscellaneous income, bank owned life insurance income, gain (loss) on equity securities, net, other components of net periodic pension benefit income and other service income, partially offset by a decrease in debit card fee income.

The increase for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily due to increases in income from fiduciary activities, bank owned life insurance income, miscellaneous income, and other components of net periodic pension benefit income, partially offset by decreases in debit card fee income, and a loss on the sale of debt securities, net.

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

Three months ended

(In thousands) 2024 2023 Change

June 30, Six months ended

(In thousands) 2024 2023 Change 2024 2023 Change

Income from fiduciary activities $ 10,728 $ 8,816 $ 1,912 $ 20,752 $ 17,431 $ 3,321

4 unchanged sentences

ATM fees 458 553 (95) 954 1,086 (132)

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

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

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

Gain (loss) on equity securities, net 358 25 333 (329) (380) 51

Other components of net periodic pension benefit income 2,204 1,893 311 4,408 3,786 622

1 unchanged sentence

Total other income $ 28,794 $ 25,015 $ 3,779 $ 54,994 $ 49,402 $ 5,592

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

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

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

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

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

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

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

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

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

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

Income from fiduciary activities increased by $1.9 million, or 21.7%, to $10.7 million for the three months ended June 30, 2024, compared to $8.8 million for the same period of 2023 and increased $3.3 million, or 19.1%, to $20.7 million for the six months ended June 30, 2024 compared to $17.4 million for the same period of 2023.

The increase in income from fiduciary activities was largely due to an increase in the market value of assets under management as well as updates to the fee structure.

The average market value of assets under management for the three months ended June 30, 2024 was $8,373 million compared to $7,646 million for the same period in 2023.

The average market value of assets under management for the six months ended June 30, 2024 was $8,373 million compared to $7,554 million for the same period in 2023.

Other service income increased by $267,000, or 10.1%, to $2.9 million for the three months ended June 30, 2024, compared to $2.6 million for the same period of 2023.

The primary reasons for the increase for the three months ended June 30, 2024 compared to the same period of 2023 was an increase in fee income related to mortgage loan originations to be sold in the secondary market of $255,000 and an increase in mortgage servicing rights income of $106,000, partially offset by a decrease in real estate investor fees of $70,000 and a decrease in merchant fees of $57,000.

Debit card fee income decreased by $250,000, or 3.7%, to $6.6 million for the three months ended June 30, 2024, compared to $6.8 million for the same period of 2023 and decreased $464,000, or 3.5%, to $12.8 million for the six months ended June 30, 2024, compared to $13.3 million for the same period of 2023.

The decrease for both the three-month and six-month periods was partially due to a decrease in the average blended interchange rate per transaction, which is influenced by various factors, including the average spend per transaction.

Bank owned life insurance income increased by $233,000 to $1.6 million for the three months ended June 30, 2024, compared to $1.3 million for the same period of 2023, and increased $1.7 million to $4.2 million for the six months ended June 30, 2024, compared to $2.5 million for the same period of 2023.

The increase for the three-month period ended June 30, 2024 compared to the three-month period ended June 30, 2023 was primarily due to an increase in monthly income on the bank owned life insurance policies, as well as an increase in received death benefits.

The increase for the six-month period ended June 30, 2024 compared to June 30, 2023 was primarily related to an increase in received death benefits as well as an increase in monthly income on the bank owned life insurance policies.

During the six-month period ended June 30, 2024, Park sold certain AFS debt securities with a book value of $31.2 million at a gross loss of $398,000.

There were no sales of debt securities during the three-month period ended June 30, 2024 or the three-month and six-month periods ended June 30, 2023.

Gain (loss) on equity securities, net, changed by $333,000, to a net gain of $358,000 for the three months ended June 30, 2024 compared to a net gain of $25,000 for the same period in 2023.

The $333,000 change for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was related to a $561,000 change in the gain (loss) on other equity securities which went from a net loss of $112,000 for the three months ended June 30, 2023 to a net gain of $449,000 for the three months ended June 30, 2024, and a $228,000 change in the gain (loss) on equity securities held at NAV, which went from a $136,000 net gain for the three months ended June 30, 2023 to a $92,000 net loss for the three months ended June 30, 2024.

Other components of net periodic pension benefit income increased $311,000 to $2.2 million for the three months ended June 30, 2024 compared to $1.9 million for the same period in 2023 and increased $622,000 to $4.4 million for the six months ended June 30, 2024 compared to $3.8 million for the same period in 2023.

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

Miscellaneous income increased $895,000, or 101.0%, to $1.8 million for the three months ended June 30, 2024, compared to $886,000 million for the same period in 2023.

The increase for the three-month period ended June 30, 2024 compared to the same period of 2023 was primarily the result of an increase in the net gain on the sale of assets of $767,000.

Miscellaneous income increased $783,000, or 38.1%, to $2.8 million for the six months ended June 30, 2024, compared to to $2.1 million for the same period in 2024.

The increase for the six-month period ended June 30, 2024 compared to the same period of 2023 was primarily the result of an increase in the net gain on the sale of assets of $612,000.

Other Expense

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

Other expense decreased by $696,000 to $75.2 million for the three months ended June 30, 2024 compared to $75.9 million for the same period of 2023 and increased by $29,000, to remain at $152.4 million, for the six months ended June 30, 2024 compared to the same period of 2023

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

Three months ended

(In thousands) 2024 2023 Change

June 30, Six months ended

(In thousands) 2024 2023 Change 2024 2023 Change

Salaries $ 35,954 $ 33,649 $ 2,305 $ 71,687 $ 68,520 $ 3,167

11 unchanged sentences

Total other expense $ 75,189 $ 75,885 $ (696) $ 152,417 $ 152,388 $ 29

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Salaries increased by $2.3 million, or 6.9%, to $36.0 million for the three months ended June 30, 2024, compared to $33.6 million for the same period in 2023.

The increase for the three months ended June 30, 2024 compared to the same period of 2023 was due to an increase of $1.7 million in incentive compensation expense and an increase of $1.1 million in base salary expense.

These increases were partially offset by a decrease in share-based compensation expense of $459,000.

Salaries increased by $3.2 million, or 4.6%, to $71.7 million for the six months ended June 30, 2024, compared to $68.5 million for the same period in 2023.

The increase for the six months ended June 30, 2024 compared to the same period of 2023 was due to an increase of $2.7 million in base salary expense and an increase of $1.4 million in incentive compensation expense.

These increases were partially offset by a decrease in share-based compensation expense of $842,000.

Employee benefits decreased $665,000, or 6.3%, to $9.9 million for the three months ended June 30, 2024, compared to $10.5 million for the same period in 2023.

The $665,000 decrease for the three months ended June 30, 2024 compared to the same period in 2023 was primarily due to a decrease in group insurance costs of $1.6 million and a decrease in payroll tax expense of $193,000, partially offset by an increase in SERP expense of $535,000, an increase in other employee benefits expense of $352,000 and an increase in pension plan expense of $191,000.

Occupancy expense decreased $239,000, or 7.4%, to $3.0 million for the three months ended June 30, 2024, compared to $3.2 million for the same period in 2023 and decreased $411,000, or 6.3%, to $6.2 million for the six months ended June 30, 2024, compared to $6.6 million for the same period in 2023.

The decrease for the three-month period ended June 30, 2024 compared to the same period in 2023 was primarily due to decreases in expense for the rental of leased space, depreciation expense, and parking expense.

The decrease for the six-month period ended June 30, 2024 compared to the same period in 2023 was due to decreases in utilities expense and expense for the rental of leased space.

Furniture and equipment expense decreased $649,000, or 20.9%, to $2.5 million for the three months ended June 30, 2024 compared to $3.1 million for the same period in 2023 and decreased $1.3 million, or 20.7%, to $5.0 million for the six months ended June 30, 2024 compared to $6.3 million for the same period in 2023.

The decrease for both the three-month and six-month periods ended June 30, 2024 compared to the same periods in 2023 related to decreases in depreciation and maintenance and repairs expense.

Professional fees and services expense decreased $1.3 million, or 18.2%, to $6.0 million for the three months ended June 30, 2024 compared to $7.4 million for the same period in 2023.

The decrease for the three-month period ended June 30, 2024 compared to the same period in 2023 primarily related to a $777,000 decrease in consulting fees and a $719,000 decrease in legal expenses.

Professional fees and services expense decreased $1.8 million, or 12.0%, to $12.8 million for the six months ended June 30, 2024 compared to $14.6 million for the same period in 2023.

The decrease for the six-month period ended June 30, 2024 compared to the same period in 2023 primarily related to a $1.5 million decrease in legal expense and a $674,000 decrease in consulting fees.

Marketing expense increased $347,000, or 13.6%, to $2.9 million for the six months ended June 30, 2024 compared to $2.6 million for the same period in 2023.

The increase for the six-month period ended June 30, 2024 compared to the same period in 2023 related to an increase in advertising expense and community relations and donations expense.

Insurance expense decreased $183,000 or 9.3%, to $1.8 million for the three months ended June 30, 2024 compared to $2.0 million for the same period in 2023 and decreased $279,000, or 7.4%, to $3.5 million for the six months ended June 30, 2024 compared to $3.8 million for the same period in 2023.

The decrease for both the three-month and the six-month periods ended June 30, 2024 compared to the periods ended June 30, 2023 related to a decrease in FDIC insurance assessment expense.

Items Impacting Comparability (Non-U.S.

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

THREE MONTHS ENDED

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

THREE MONTHS ENDED SIX MONTHS ENDED

(in thousands except per common share data) June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023 Affected Line Item

Net interest income $ 97,837 $ 91,572 $ 193,460 $ 183,770

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less write-downs on strategic initiatives 813 — 658 — Miscellaneous

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

less Vision related gain on the sale of OREO, net (7) — 114 — Miscellaneous

less other service income related to former Vision Bank relationships 6 — 13 135 Other service income

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(1) Reported measure uses net income.

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

(2) Averages are for the three months and six months ended June 30, 2024 and June 30, 2023, as appropriate.

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

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RECONCILIATION TO AVERAGE SHAREHOLDERS' EQUITY OF AVERAGE TANGIBLE EQUITY:

THREE MONTHS ENDED

March 31, 2024 March 31, 2023

THREE MONTHS ENDED SIX MONTHS ENDED

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

AVERAGE SHAREHOLDERS' EQUITY $ 1,171,347 $ 1,091,016 $ 1,164,765 $ 1,090,985

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RECONCILIATION TO AVERAGE ASSETS OF AVERAGE TANGIBLE ASSETS:

THREE MONTHS ENDED

March 31, 2024 March 31, 2023

THREE MONTHS ENDED SIX MONTHS ENDED

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

AVERAGE ASSETS $ 9,811,326 $ 9,917,805 $ 9,837,352 $ 9,987,953

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RECONCILIATION TO FTE NET INTEREST INCOME OF NET INTEREST INCOME

THREE MONTHS ENDED

March 31, 2024 March 31, 2023

THREE MONTHS ENDED SIX MONTHS ENDED

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

Interest income $ 128,904 $ 114,674 $ 255,544 $ 225,575

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

THREE MONTHS ENDED

March 31, 2024 March 31, 2023

THREE MONTHS ENDED SIX MONTHS ENDED

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

Net income $ 39,369 $ 31,584 $ 74,573 $ 65,317

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Pre-tax, pre-provision net income $ 51,442 $ 40,702 $ 96,037 $ 80,784

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

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

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

Income tax expense was $9.0 million for the second quarter of 2024 and consisted of federal income tax expense of $8.7 million and state income tax expense of $273,000.

This compares to income tax expense of $6.6 million for the second quarter of 2023, which consisted of federal income tax expense of $6.3 million and state income tax expense of $345,000.

The effective income tax rate for the second quarter of 2024 was 18.5%, compared to 17.3% for the same period in 2023.

Income tax expense was $16.2 million for the first half of 2024 and consisted of federal income tax expense of $15.6 million and state income tax expense of $595,000.

This compares to income tax expense of $12.8 million for the first half of 2023, which consisted of federal income tax expense of $12.7 million and state income tax expense of $111,000.

The effective income tax rate for the first half of 2024 was 17.8%, compared to 16.4% for the same period in 2023.

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

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Comparison of Financial Condition

At March 31, 2024 and at December 31, 2023

At June 30, 2024 and at December 31, 2023

Changes in Financial Condition

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

Total assets increased by $83.3 million during the first six months of 2024 to $9,920 million at June 30, 2024, compared to $9,836 million at December 31, 2023.

This increase was primarily due to the following:

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

• Cash and cash equivalents increased by $43.2 million, or 19.8%, to $261.5 million at June 30, 2024, compared to $218.3 million at December 31, 2023.

Money market instruments increased by $61.1 million and cash and due from banks decreased by $17.9 million.

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

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

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

This increase was primarily due to the following:

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

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

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

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

This increase was primarily due to the following:

• Loans increased by $188.2 million, or 2.5%, to $7,664 million at June 30, 2024, compared to $7,476 million at December 31, 2023.

• Total investment securities decreased by $164.3 million, or 11.5%, to $1,265 million at June 30, 2024, compared to $1,429 million at December 31, 2023.

Total liabilities increased by $45.4 million, or 0.5%, during the first six months of 2024 to $8,737 million at June 30, 2024, compared to $8,691 million at December 31, 2023.

This change was primarily due to the following:

• Total deposits increased by $269.9 million, or 3.4%, to $8,313 million at June 30, 2024, compared to $8,043 million at December 31, 2023.

This increase was primarily due to the seasonal increase in public funds.

• Short-term borrowings decreased by $233.7 million, or 71.2%, to $94.5 million at June 30, 2024, compared to $328.2 million at December 31, 2023.

Total shareholders’ equity increased by $38.0 million, or 3.3%, to $1,183 million at June 30, 2024, from $1,145 million at December 31, 2023.

This change was primarily due to the following:

• Retained earnings increased by $39.3 million during the period primarily as a result of net income of $74.6 million, partially offset by cash dividends on common shares of $34.6 million.

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

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

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

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

Cash provided by operating activities was $85.2 million and $57.7 million for the six months ended June 30, 2024 and 2023, respectively.

Net income was the primary source of cash from operating activities for each of the six-months periods ended June 30, 2024 and 2023.

Cash used in investing activities was $40.2 million and $2.0 million for the six months ended June 30, 2024 and 2023, respectively.

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

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

Net investment securities transactions provided cash of $162.4 million for the six months ended June 30, 2024 and $71.3 million for the six months ended June 30, 2023.

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

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

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

Cash used by the net increase in the loan portfolio was $185.4 million and $62.4 million for the six months ended June 30, 2024 and 2023, respectively.

Cash used in financing activities was $1.9 million and $15.0 million for the six months ended June 30, 2024 and 2023, respectively.

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

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

Deposits (net of off-balance sheet deposits) increased and provided $269.9 million and $124.3 million of cash for the six months ended June 30, 2024 and 2023, respectively.

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

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

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

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

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

For the six months ended June 30, 2024 and 2023, net short-term borrowings decreased and used $233.7 million and $83.4 million in cash, respectively.

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

while there were no repurchases of common shares during the six months ended June 30, 2024.

Finally, cash declined by $35.1 million for both of the six months ended June 30, 2024 and 2023, respectively, from the payment of dividends.

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

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

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

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

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

The most easily accessible forms of liquidity, Fed Funds Sold, unpledged investment securities and available FHLB borrowing capacity, totaled $2.09 billion at June 30, 2024.

The Corporation’s loan to asset ratio was 77.26% at June 30, 2024, compared to 76.01% at December 31, 2023 and 72.81% at June 30, 2023.

Cash and cash equivalents were $261.5 million at June 30, 2024, compared to $218.3 million at December 31, 2023 and $230.4 million at June 30, 2023.

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

Capital Resources

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

Total shareholders’ equity at June 30, 2024 was $1,183 million, or 11.9% of total assets, compared to $1,145 million, or 11.6% of total assets, at December 31, 2023 and $1,089 million, or 11.0% of total assets, at June 30, 2023.

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

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

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

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

At March 31, 2024

Park and PNB met each of the well capitalized ratio guidelines applicable to them at June 30, 2024.

The following table indicates the capital ratios for PNB and Park at June 30, 2024 and December 31, 2023.

At June 30, 2024

Leverage Tier 1

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

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

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

Financial Instruments with Off-Balance Sheet Risk

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

(In thousands) March 31,

(In thousands) June 30,

2024 December 31, 2023

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis