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Item 2. Management’s Discussion and Analysis

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL 
 CONDITION AND RESULTS OF OPERATIONS 
 
 This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements as that term is used in the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements are provided to assist in the understanding of anticipated future financial performance. Forward-looking statements provide current expectations, estimates, or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. 
 
 Risks and uncertainties that could cause actual results to differ materially include, without limitation: 
 
 • Park's ability to execute our business plan successfully and within the expected timeframe as well as our ability to manage strategic initiatives; 
 • current and future economic and financial market conditions, either nationally or in the states in which Park does business, that may reflect deterioration in business and economic conditions, including the effects of higher unemployment rates or labor shortages, the impact of persistent inflation, the impact of continued elevated interest rates, changes in the economy or global supply chain, supply-demand imbalances affecting local real estate prices, U.S. fiscal debt, budget and tax matters, geopolitical matters (including the impact of the Russia-Ukraine conflict and associated sanctions and export controls as well as the Israel-Hamas conflict), and any slowdown in global economic growth, any of which may result in adverse impacts on the demand for loan, deposit and other financial services, delinquencies, defaults and counterparties' inability to meet credit and other obligations and the possible impairment of collectability of loans; 
 • factors that can impact the performance of our loan portfolio, including changes in real estate values and liquidity in our primary market areas, the financial health of our commercial borrowers and the success of construction projects that we finance; 
 • the effect of monetary and other fiscal policies (including the impact of money supply, ongoing increasing market interest rate policies and policies impacting inflation, of the Federal Reserve Board, the U.S. Treasury and other governmental agencies) as well as disruption in the liquidity and functioning of U.S. financial markets, may adversely impact prepayment penalty income, mortgage banking income, income from fiduciary activities, the value of securities, deposits and other financial instruments, in addition to the loan demand and the performance of our loan portfolio, and the interest rate sensitivity of our consolidated balance sheet as well as reduce net interest margins; 
 • changes in the federal, state, or local tax laws may adversely affect the fair values of net deferred tax assets and obligations of state and political subdivisions held in Park's investment securities portfolio and otherwise negatively impact our financial performance; 
 • the impact of the changes in federal, state and local governmental policy, including the regulatory landscape, capital markets, elevated government debt, potential changes in tax legislation that may increase tax rates, government shutdown, infrastructure spending and social programs; 
 • changes in laws or requirements imposed by Park's regulators impacting Park's capital actions, including dividend payments and stock repurchases; 
 • changes in consumer spending, borrowing and saving habits, whether due to changes in retail distribution strategies, consumer preferences and behaviors, changes in business and economic conditions, legislative and regulatory initiatives, or other factors may be different than anticipated; 
 • changes in customers', suppliers', and other counterparties' performance and creditworthiness, and Park's expectations regarding future credit losses and our allowance for credit losses, may be different than anticipated due to the continuing impact of and the various responses to inflationary pressures and continued elevated interest rates; 
 • Park may have more credit risk and higher credit losses to the extent there are loan concentrations by location or industry of borrowers or collateral; 
 • the volatility from quarter to quarter of mortgage banking income, whether due to interest rates, demand, the fair value of mortgage loans, or other factors; 
 • the adequacy of our internal controls and risk management program in the event of changes in the market, economic, operational (including those which may result from our associates working remotely), asset/liability repricing, legal, compliance, strategic, cybersecurity, liquidity, credit and interest rate risks associated with Park's business; 
 • competitive pressures among financial services organizations could increase significantly, including product and pricing pressures (which could in turn impact our credit spreads), changes to third-party relationships and revenues, changes in the manner of providing services, customer acquisition and retention pressures, and Park's ability to attract, develop and retain qualified banking professionals; 
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 • uncertainty regarding the nature, timing, cost and effect of changes in banking regulations or other regulatory or legislative requirements affecting the respective businesses of Park, including major reform of the regulatory oversight structure of the financial services industry and changes in laws and regulations concerning taxes, FDIC insurance premium levels, pensions, bankruptcy, consumer protection, rent regulation and housing, financial accounting and reporting, environmental protection, insurance, bank products and services, bank and bank holding company capital and liquidity standards, fiduciary standards, securities and other aspects of the financial services industry; 
 • Park's ability to meet heightened supervisory requirements and expectations; 
 • the effect of changes in accounting policies and practices, as may be adopted by the Financial Accounting Standards Board, the SEC, the Public Company Accounting Oversight Board and other regulatory agencies, may adversely affect Park's reported financial condition or results of operations; 
 • Park's assumptions and estimates used in applying critical accounting estimates and modeling which may prove unreliable, inaccurate or not predictive of actual results; 
 • the possibility that future credit losses may be higher than currently expected due to changes in economic assumptions; 
 • Park's ability to anticipate and respond to technological changes and Park's reliance on, and the potential failure of, a number of third-party vendors to perform as expected, including Park's primary core banking system provider, which can impact Park's ability to respond to customer needs and meet competitive demands; 
 • operational issues stemming from and/or capital spending necessitated by the potential need to adapt to industry changes in information technology systems on which Park is highly dependent; 
 • Park's ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks, including those of Park's third-party vendors and other service providers, which may prove inadequate, and could adversely affect customer confidence in Park and/or result in Park incurring a financial loss; 
 • a failure in or breach of Park's operational or security systems or infrastructure, or those of our third-party vendors and other service providers, resulting in failures or disruptions in customer account management, general ledger, deposit, loan, or other systems, including as a result of cyber attacks; 
 • the impact on Park's business and operating results of any costs associated with obtaining rights in intellectual property claimed by others and of the adequacy of Park's intellectual property protection in general; 
 • the existence or exacerbation of general geopolitical instability and uncertainty as well as the effect of trade policies (including the impact of potential or imposed tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars and other changes in trade regulations, closing of border crossings and changes in the relationship of the U.S. and its global trading partners); 
 • the impact on financial markets and the economy of any changes in the credit ratings of the U.S. Treasury obligations and other U.S. government-backed debt, as well as issues surrounding the levels of U.S., European and Asian government debt and concerns regarding the growth rates and financial stability of certain sovereign governments, supranationals and financial institutions in Europe and Asia and the risk they may face difficulties servicing their sovereign debt; 
 • the effect of a fall in stock market prices on Park's asset and wealth management businesses; 
 • our litigation and regulatory compliance exposure, including the costs and effects of any adverse developments in legal proceedings or other claims, the costs and effects of unfavorable resolution of regulatory and other governmental examinations or other inquiries, and liabilities and business restrictions resulting from litigation and regulatory investigations; 
 • continued availability of earnings and excess capital sufficient for the lawful and prudent declaration of dividends; 
 • the impact on Park's business, personnel, facilities or systems of losses related to acts of fraud, scams and schemes of third parties; 
 • the impact of widespread natural and other disasters, pandemics, dislocations, regional or national protests and civil unrest (including any resulting branch closures or damages), military or terrorist activities or international hostilities (especially in light of the Russia-Ukraine conflict and the Israel-Hamas conflict) on the economy and financial markets generally and on us or our counterparties specifically; 
 • the potential further deterioration of the U.S. economy due to financial, political, or other shocks; 
 • the effect of healthcare laws in the U.S. and potential changes for such laws which may increase our healthcare and other costs and negatively impact our operations and financial results; 
 • the impact of larger or similar-sized financial institutions encountering problems which may adversely affect the banking industry and/or Park's business generation and retention, funding and liquidity, including potential increased regulatory requirements and increased reputational risk and potential impacts to macroeconomic conditions; 
 • Park's continued ability to grow deposits or maintain adequate deposit levels due to changing customer behaviors; 
 • unexpected outflows of deposits which may require Park to sell assets at a loss; and 
 • other risk factors included in the current and periodic reports filed by Park with the SEC from time to time. 
 
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 Forward-looking statements should be construed in the light of such risks. It is impossible to predict or identify all potential risk factors. Consequently, readers should not consider the foregoing list to be a complete set of all potential risks and uncertainties. Readers are cautioned not to place undue reliance on any forward-looking statements. Any forward looking statement in this Form 10-Q are based on current information as of the date of this Form 10-Q, and Park does not undertake, and specifically disclaims any obligation, to publicly release the results of any revisions that may be made to update any forward-looking statement to reflect the events or circumstances whether as a result of new information, future developments or otherwise, or reflect the occurrence of unanticipated events, except to the extent required by law. 
 
 Non-U.S. GAAP Financial Measures 
 
 This Management's Discussion and Analysis of Financial Condition and Results of Operations (or "MD&A") contains non-U.S. GAAP financial measures where management believes them to be helpful in understanding Park’s results of operations or financial position. Where non-U.S. GAAP financial measures are used, the comparable U.S. GAAP financial measures, as well as the reconciliation from the comparable U.S. GAAP financial measures, can be found herein. 
 
 Items Impacting Comparability of Period Results 
 From time to time, revenue, expenses and/or taxes are impacted by items judged by management of Park to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that their impact is believed by management of Park at that time to be infrequent or short-term in nature. Most often, these items impacting comparability of period results are due to merger and acquisition activities and revenue and expenses related to former Vision Bank loan relationships. In other cases, they may result from management's decisions associated with significant corporate actions outside of the ordinary course of business. 
 
 Even though certain revenue and expense items are naturally subject to more volatility than others due to changes in market and economic environment conditions, as a general rule volatility alone does not result in the inclusion of an item as one impacting comparability of period results. For example, changes in the provision for credit losses (aside from those related to former Vision Bank loan relationships), (losses) gains on equity securities, net, and asset valuation adjustments, reflect ordinary banking activities and are, therefore, typically excluded from consideration as items impacting comparability of period results. 
 
 Management believes the disclosure of items impacting comparability of period results provides a better understanding of Park's performance and trends and allows management to ascertain which of such items, if any, to include or exclude from an analysis of Park's performance; i.e., within the context of determining how that performance differed from expectations, as well as how, if at all, to adjust estimates of future performance taking such items into account. 
 
 Items impacting comparability of the results of particular periods are not intended to be a complete list of items that may materially impact current or future period performance. 
 
 Non-U.S. GAAP Financial Measures 
 Park's management uses certain non-U.S. GAAP financial measures to evaluate Park's performance. 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 June 30, 2024 and June 30, 2023 and for the six months ended June 30, 2024 and June 30, 2023. For the purpose of calculating the annualized return on average tangible equity, a non-U.S. GAAP financial measure, net income for each period is divided by average tangible equity during the period. Average tangible equity equals average shareholders' equity during the applicable period less average goodwill and other intangible assets during the applicable period. For the purpose of calculating the annualized return on average tangible assets, a non-U.S. GAAP financial measure, net income for each period is divided by average tangible assets during the period. Average tangible assets equals average assets during the applicable period less average goodwill and other intangible assets during the applicable period. For the purpose of calculating pre-tax, pre-provision net income, a non-U.S. GAAP financial measure, income taxes and the provision for credit losses are added back to net income, in each case during the applicable period. 
 
 Management believes that the disclosure of the annualized return on average tangible equity, the annualized return on average tangible assets and pre-provision net income presents additional information to the reader of the condensed consolidated financial statements, which, when read in conjunction with the condensed consolidated financial statements prepared in accordance with U.S. GAAP, assists in analyzing Park's operating performance, ensures comparability of operating performance from period to period, and facilitates comparisons with the performance of Park's peer financial holding companies and bank holding companies, while eliminating certain non-operational effects of acquisitions. In the tables 
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 included within the "Items Impacting Comparability" section of this MD&A, Park has provided a reconciliation of average tangible equity from average shareholders' equity, average tangible assets from average assets and pre-tax, pre-provision net income from net income solely for the purpose of complying with SEC Regulation G and not as an indication that the annualized return on average tangible equity, the annualized return on average tangible assets and pre-tax, pre-provision net income are substitutes for the annualized return on average equity, the annualized return on average assets and net income, respectively, as determined in accordance with U.S. GAAP. 
 
 FTE (fully taxable equivalent) Financial Measures 
 Interest income, yields, and ratios on a FTE basis are considered non-U.S. GAAP financial measures. Management believes net interest income on a FTE basis provides an insightful picture of the interest margin for comparison purposes. The FTE basis also allows management to assess the comparability of revenue arising from both taxable and tax-exempt sources. The FTE basis assumes a federal corporate income tax rate of 21 percent. In the tables included within the "Items Impacting Comparability" section of this MD&A, Park has provided a reconciliation of FTE interest income solely for the purpose of complying with SEC Regulation G and not as an indication that FTE interest income, yields and ratios are substitutes for interest income, yields and ratios, as determined in accordance with U.S. GAAP. 
 
 Critical Accounting Estimates 
 
 The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates. 
 
 Allowance for Credit Losses: Park believes the determination of the allowance for credit losses involves a higher degree of judgment and complexity than its other significant accounting policies. The allowance for credit losses is calculated with the objective of maintaining a reserve level believed by management to be sufficient to absorb estimated credit losses over the life of an asset or an off-balance sheet credit exposure. Management’s determination of the adequacy of the allowance for credit losses is based on periodic evaluations of past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. However, this evaluation has subjective components requiring material estimates, including expected default probabilities, the expected loss given default, the amounts and timing of expected future cash flows on individually evaluated loans, and estimated losses based on historical loss experience and forecasted economic conditions. All of these factors may be susceptible to significant change. To the extent that actual results differ from management estimates, additional provisions for credit losses may be required that would adversely impact earnings in future periods. 
 
 One of the significant judgments impacting the ACL is the economic forecasts for Ohio unemployment, Ohio GDP, and Ohio HPI. These economic forecasts inform the regression model used to calculate cash flows during the reasonable and supportable forecast period. Additionally, multiple economic forecast scenarios are weighted to arrive at the quantitative reserve. Changes in the economic forecast or weighting could significantly affect the estimated credit losses which could potentially lead to materially different allowance levels from one reporting period to the next. 
 
 As noted above, in calculating the ACL, management weighs different scenarios, including a baseline (most likely) scenario and an adverse scenario. At 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. The adverse scenario assumes among other things that: (1) tensions with China and Taiwan increase, China briefly interrupts trade through the Taiwan Strait, the Russian invasion lasts longer than expected, and the Hamas-Israel conflict will lead to a wider conflict; (2) the FRB keeps the fed funds rate at the terminal range of 5.25-5.50% through the second quarter of 2024 and, as a downturn persists, the FRB begins to lower rates; (3) Europe goes into a recession. Populism in Europe rises, raising uncertainties about the longevity of the Euro and causes financial stress to highly indebted nations; (4) the U.S. 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 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 $24.8 million as of June 30, 2024 
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 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. 
 Refer to the "Credit Metrics and Provision for Credit Losses" section of this MD&A for additional discussion. 
 
 Pension Plan: The determination of Pension Plan obligations and related expenses requires the use of assumptions to estimate the amount of benefits that employees will earn while working, as well as the present value of those benefits. Annual pension expense is principally based on four components: (1) the value of benefits earned by employees for working during the year (service cost), (2) the increase in the liability due to the passage of time (interest cost), and (3) other gains and losses, reduced by (4) the expected return on plan assets for our Pension Plan. 
 
 Significant assumptions used to measure our annual pension expense include: 
 
 • the interest rate used to determine the present value of liabilities (discount rate); 
 • certain employee-related factors, such as turnover, retirement age and mortality; 
 • the expected return on assets in our funded Pension Plan; and 
 • the rate of salary increases where benefits are based on earnings. 
 
 Our assumptions reflect our historical experience and management’s best judgment regarding future expectations. Due to the significant management judgment involved, our assumptions could have a material impact on the measurement of our Pension Plan expense and obligation. 
 
 Comparison of Results of Operations 
 For the Three and Six Months Ended June 30, 2024 and 2023 
 
 Summary Discussion of Results 
 
 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. 
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 Park National Corporation (Park) 
 
 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 
 Provision for credit losses 3,113 2,180 5,293 2,675 2,904 4,557 
 Other income 28,794 26,200 54,994 49,402 92,634 135,935 
 Other expense 75,189 77,228 152,417 152,388 309,239 297,978 
 Income before income taxes $ 48,329 $ 42,415 $ 90,744 $ 78,109 $ 153,604 $ 180,459 
 Income tax expense 8,960 7,211 16,171 12,792 26,870 32,108 
 Net income $ 39,369 $ 35,204 $ 74,573 $ 65,317 $ 126,734 $ 148,351 
 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 $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 $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. 
 
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 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 
 Other income: 
 Income from fiduciary activities $ 20,752 $ 17,431 $ 3,321 19.1 % 
 Service charges on deposit accounts 4,320 4,282 38 0.9 % 
 Other service income 5,430 5,336 94 1.8 % 
 Debit card fee income 12,823 13,287 (464) (3.5) % 
 Bank owned life insurance income 4,194 2,517 1,677 66.6 % 
 ATM fees 954 1,086 (132) (12.2) % 
 Loss on sale of debt securities, net (398) — (398) 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 % 
 Miscellaneous 2,840 2,057 783 38.1 % 
 Total other income $ 54,994 $ 49,402 $ 5,592 11.3 % 

 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 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 
 Other expense: 
 Salaries $ 71,687 $ 68,520 $ 3,167 4.6 % 
 Employee benefits 21,433 21,354 79 0.4 % 
 Occupancy expense 6,156 6,567 (411) (6.3) % 
 Furniture and equipment expense 5,037 6,349 (1,312) (20.7) % 
 Data processing fees 18,350 18,332 18 0.1 % 
 Professional fees and services 12,839 14,586 (1,747) (12.0) % 
 Marketing 2,905 2,558 347 13.6 % 
 Insurance 3,495 3,774 (279) (7.4) % 
 Communication 2,038 2,082 (44) (2.1) % 
 State tax expense 2,239 2,374 (135) (5.7) % 
 Amortization of intangible assets 640 655 (15) (2.3) % 
 Miscellaneous 5,598 5,237 361 6.9 % 
 Total other expense $ 152,417 $ 152,388 $ 29 — % 

 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 
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 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, 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 % 
 Allowance for credit losses 86,575 83,745 87,206 3.38 % (0.72) % 
 Net loans 7,577,802 7,392,476 7,120,903 2.51 % 6.42 % 
 Investment securities 1,264,858 1,429,144 1,756,953 (11.50) % (28.01) % 
 Total assets 9,919,783 9,836,453 9,899,551 0.85 % 0.20 % 
 Total deposits 8,312,505 8,042,566 8,358,976 3.36 % (0.56) % 
 Average assets (1) 
 9,837,352 9,957,554 9,987,953 (1.21) % (1.51) % 
 Efficiency ratio (2) 
 61.05 % 65.87 % 64.84 % (7.32) % (5.85) % 
 Return on average assets (3) 
 1.52 % 1.27 % 1.32 % 19.69 % 15.15 % 

 (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 $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 
 
 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) 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 % 
 Installment 1,943,108 1,950,304 1,945,190 (7,196) (0.4) % (2,082) (0.1) % 
 Real estate 1,394,468 1,340,169 1,252,243 54,299 4.1 % 142,225 11.4 % 
 Commercial 4,135,595 4,007,941 3,838,318 127,654 3.2 % 297,277 7.7 % 
 Other 5,571 3,186 4,102 2,385 74.9 % 1,469 35.8 % 
 Total loans 
 $ 7,664,377 $ 7,476,221 $ 7,208,109 $ 188,156 2.5 % $ 456,268 6.3 % 

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 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 % 
 Total loans 
 $ 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. 
 
 Deposits 
 
 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) % 
 Transaction accounts 2,146,457 2,064,512 2,238,131 81,945 4.0 % (91,674) (4.1) % 
 Savings 2,765,196 2,543,220 2,756,228 221,976 8.7 % 8,968 0.3 % 
 Certificates of deposit 682,207 641,615 568,608 40,592 6.3 % 113,599 20.0 % 
 Brokered and bid CD deposits 176,199 164,985 — 11,214 6.8 % 176,199 N.M. 
 Total deposits $ 8,312,505 $ 8,042,566 $ 8,358,976 $ 269,939 3.4 % $ (46,471) (0.6) % 

 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 declined toward pre-pandemic levels. 
 
 The table below breaks out the change in deposit balances, by deposit type, for Park. 
 
 (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 
 Commercial deposits 4,167,567 3,797,209 3,846,321 3,488,300 3,535,578 3,233,269 
 Brokered and bid CD deposits 176,199 164,985 — — 10,928 71,304 
 Total deposits $ 8,312,505 $ 8,042,566 $ 8,234,715 $ 7,904,528 $ 7,572,358 $ 7,052,612 
 Off balance sheet deposits — 1,185 195,937 983,053 710,101 — 
 Total deposits including off balance sheet deposits $ 8,312,505 $ 8,043,751 $ 8,430,652 $ 8,887,581 $ 8,282,459 $ 7,052,612 
 $ change from prior period end $ 268,754 $ (386,901) $ (456,929) $ 605,122 $ 1,229,847 
 % change from prior period end 3.3 % (4.6) % (5.1) % 7.3 % 17.4 % 

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 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) % 
 Commercial deposits 4,167,567 4,222,575 (55,008) (1.3) % 
 Brokered and bid CD deposits 176,199 — 176,199 N.M. 
 Total deposits $ 8,312,505 $ 8,358,976 $ (46,471) (0.6) % 
 Off balance sheet deposits $ — $ 767 $ (767) (100.0) % 
 Total deposits including off balance sheet deposits $ 8,312,505 $ 8,359,743 $ (47,238) (0.6) % 

 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. 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 
 $ change from prior period end $ 477,423 $ (360,266) $ 238,284 $ (212,817) $ 142,116 $ 113,011 
 % change from prior period end 39.3 % (22.9) % 17.8 % (13.7) % 10.1 % 8.7 % 

 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. 
 
 Net Interest Income 
 
 Park’s principal source of earnings is net interest income, the difference between total interest income and total interest expense. 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. 
 
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 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 
June 30, 2024 Three months ended 
June 30, 2023 
 (Dollars in thousands) Average
balance Interest Tax
equivalent 
yield/cost Average
balance Interest Tax
equivalent 
yield/cost 
 Loans (1) 
 $ 7,587,127 $ 115,555 6.13 % $ 7,132,025 $ 96,575 5.43 % 
 Taxable investments 1,115,461 10,950 3.95 % 1,418,617 13,431 3.80 % 
 Tax-exempt investments (2) 
 219,659 1,750 3.20 % 421,936 3,679 3.50 % 
 Money market instruments 94,658 1,254 5.33 % 149,745 1,909 5.11 % 
 Interest earning assets $ 9,016,905 $ 129,509 5.78 % $ 9,122,323 $ 115,594 5.08 % 
 
 Interest bearing deposits $ 5,626,577 $ 27,895 1.99 % $ 5,509,022 $ 20,034 1.46 % 
 Short-term borrowings 123,628 811 2.64 % 158,345 728 1.84 % 
 Long-term debt 189,335 2,361 5.02 % 188,846 2,340 4.97 % 
 Interest bearing liabilities $ 5,939,540 $ 31,067 2.10 % $ 5,856,213 $ 23,102 1.58 % 
 Excess interest earning assets $ 3,077,365 $ 3,266,110 
 Tax equivalent net interest income $ 98,442 $ 92,492 
 Net interest spread 3.68 % 3.50 % 
 Net interest margin 4.39 % 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 $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 $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 $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. 
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 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 
June 30, 2024 Three months ended 
June 30, 2023 
 (Dollars in thousands) Average
balance Tax
equivalent 
yield Average
balance Tax
equivalent 
yield 
 Home equity loans $ 180,012 8.52 % $ 166,806 8.20 % 
 Installment loans 1,946,319 6.36 % 1,926,504 5.26 % 
 Real estate loans 1,375,013 5.00 % 1,228,725 4.27 % 
 Commercial loans (1) 
 4,082,282 6.28 % 3,806,110 5.77 % 
 Other 3,501 9.39 % 3,880 9.17 % 
 Total loans before allowance $ 7,587,127 6.13 % $ 7,132,025 5.43 % 

 (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 $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 $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 
June 30, 2024 Three months ended 
June 30, 2023 
 (Dollars in thousands) Average
balance Cost of funds Average
balance Cost of funds 
 Transaction accounts $ 2,161,072 1.74 % $ 2,212,568 1.47 % 
 Savings deposits and clubs 2,625,611 1.69 % 2,754,020 1.45 % 
 Time deposits 672,892 3.23 % 542,434 1.45 % 
 Brokered/bid CD deposits 167,002 5.12 % — N.A. 
 Total interest bearing deposits $ 5,626,577 1.99 % $ 5,509,022 1.46 % 

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 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
equivalent 
yield/cost Average
balance Interest Tax
equivalent 
yield/cost 
 Loans (1) 
 $ 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. 
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 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
balance Tax
equivalent 
yield Average
balance Tax
equivalent 
yield 
 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 six months ended June 30, 2024 and for the years ended December 31, 2023, 2022 and 2021. 
 
 Loans (1) 
 Investments (2) 
 Money Market
Instruments Total 
 2021 - year 4.53 % 2.22 % 0.13 % 3.86 % 
 2022 - year 4.65 % 2.66 % 2.07 % 4.14 % 
 2023 - year 5.55 % 3.73 % 5.00 % 5.18 % 
 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 $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 $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. 
 
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 Cost of Average Interest Bearing Liabilities: The following table shows the cost of funds on average interest bearing liabilities for the six months ended June 30, 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 % 
 2022 - year 0.39 % 0.67 % 4.69 % 0.54 % 
 2023 - year 1.52 % 2.58 % 4.97 % 1.67 % 
 2024 - first six months 1.97 % 3.09 % 5.02 % 2.09 % 

 Credit Metrics and Provision for Credit Losses 
 
 The provision for credit losses is the amount subtracted from/added to the allowance for credit losses to ensure the allowance is sufficient to absorb estimated credit losses over the life of a loan. The amount of the provision for credit losses is determined by management based on relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. 
 
 The adoption of ASU 2022-02 on January 1, 2023 resulted in a $383,000 increase to the allowance for credit losses. A cumulative effect adjustment resulting in a $303,000 decrease to retained earnings and an $80,000 increase to deferred tax assets was also recorded. Additionally, as a result of the adoption of this ASU and elimination of the concept of TDRs, total nonperforming loans decreased by $20.1 million 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 and six-month periods ended June 30, 2024 and 2023. 
 
 Three Months Ended 
June 30, Six Months Ended 
June 30, 
 (Dollars in thousands) 2024 2023 2024 2023 
 Allowance for credit losses: 
 Beginning balance $ 85,084 $ 85,946 $ 83,745 $ 85,379 
 Cumulative change in accounting principle; adoption of ASU 2022-02 — — — 383 
 Charge-offs 
 3,097 2,685 6,337 4,920 
 Recoveries 1,475 1,453 3,874 3,689 
 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 as a % of average loans (annualized) 0.09 % 0.07 % 0.07 % 0.03 % 

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 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 
 Total allowance for credit losses $ 86,575 $ 85,084 $ 83,745 $ 87,206 
 Allowance on accruing PCD loans — — — — 
 Reserves on individually evaluated loans 5,311 5,032 4,983 4,132 
 General reserves on collectively evaluated loans $ 81,264 $ 80,052 $ 78,762 $ 83,074 
 
 Total loans $ 7,664,377 $ 7,525,005 $ 7,476,221 $ 7,208,109 
 Accruing PCD loans 2,420 2,454 2,835 4,455 
 Individually evaluated loans 54,993 54,742 45,215 43,887 
 Collectively evaluated loans $ 7,606,964 $ 7,467,809 $ 7,428,171 $ 7,159,767 
 
 Allowance for credit losses as a % of period end loans 1.13 % 1.13 % 1.12 % 1.21 % 
 General reserve as a % of collectively evaluated loans 1.07 % 1.07 % 1.06 % 1.16 % 

 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. 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. As new valuation information is received, management performs an evaluation and applies a discount for anticipated disposition costs to determine the net realizable value of the collateral, which is compared against the outstanding principal balance to determine if additional write-downs are necessary. 
 
 Nonperforming Assets: Non-performing assets include: (1) loans whose interest is accounted for on a nonaccrual basis; (2) loans which are contractually past due 90 days or more as to principal or interest payments but whose interest continues to accrue; and (3) OREO which results from taking possession of property that served as collateral for a defaulted loan. 
 
 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 
 Loans past due 90 days or more 1,377 1,570 859 950 
 Total nonperforming loans $ 72,745 $ 71,759 $ 61,118 $ 58,229 
 
 OREO 1,210 1,674 983 2,267 
 Total nonperforming assets $ 73,955 $ 73,433 $ 62,101 $ 60,496 
 
 Percentage of nonaccrual loans to total loans 0.93 % 0.93 % 0.81 % 0.79 % 
 Percentage of nonperforming loans to total loans 0.95 % 0.95 % 0.82 % 0.81 % 
 Percentage of nonperforming assets to total loans 0.96 % 0.98 % 0.83 % 0.84 % 
 Percentage of nonperforming assets to total assets 0.75 % 0.74 % 0.63 % 0.61 % 

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 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 June 30, 2024, December 31, 2023 and June 30, 2023. Loans are classified as current if they are less than 30 days past due. 
 
 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 
 Nonaccrual loans - current $ 45,895 0.60 % $ 38,956 0.52 % 1 $ 36,618 0.51 % 
 Nonaccrual loans - past due 25,473 0.33 % 21,303 0.29 % 20,661 0.28 % 
 Total nonaccrual loans $ 71,368 0.93 % $ 60,259 0.81 % $ 57,279 0.79 % 

 Credit Quality Indicators: When determining the quarterly credit loss provision, Park reviews the grades of commercial loans. These loans are graded from 1 to 8. 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 an 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. Commercial loans graded a 6 (substandard), also considered to be watch list credits, represent higher credit risk than those rated special mention and, as a result, a higher PD is applied to these loans. Commercial loans that are graded a 7 (doubtful) are shown as nonperforming and Park charges these loans down to their fair value by taking a partial charge-off or recording an individual reserve. Certain 6-rated loans and all 7-rated loans are placed on nonaccrual status and included within the individually evaluated category. Any commercial loan graded an 8 (loss) is completely charged off. 
 
 The following table highlights the credit trends within the commercial loan portfolio. 
 
 Commercial loans * (In thousands) June 30, 2024 December 31, 2023 June 30, 2023 
 Pass-rated $ 4,018,735 $ 3,905,673 $ 3,694,097 
 Special mention 73,383 57,236 101,387 
 Substandard 739 3,414 1,868 
 Individually evaluated for impairment 54,993 45,215 43,887 
 Accruing PCD 2,339 2,760 4,373 
 Total $ 4,150,189 $ 4,014,298 $ 3,845,612 

 * Commercial loans include (1) Commercial, financial and agricultural loans, (2) Commercial real estate loans, (3) Commercial related loans in the construction real estate portfolio, (4) Commercial related loans in the residential real estate portfolio and (5) Leases. 
 
 Park's watch list includes all criticized and classified commercial loans defined by Park as loans rated special mention or worse. Park had $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 $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. 
 
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 Individually Evaluated Loans: Loans that do not share risk characteristics are evaluated on an individual basis. Park has determined that any commercial loans which have been placed on nonaccrual status will be individually evaluated. Individual analysis will establish a reserve for loans in scope. Reserves on individually evaluated commercial loans are typically based on management’s best estimate of the fair value of collateral securing these loans. The amount ultimately charged off for these loans may be different from the reserve as the ultimate liquidation of the collateral may be for an amount different from management’s estimate. 
 
 Individually evaluated commercial loans were $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 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: As part of its quarterly allowance process, Park evaluates certain industries which are more likely to be under economic stress in the current environment. The office sector continues to face challenges as it adjusts to the new normal of work from home brought on by the pandemic. Nationally, office properties in downtown and urban business districts are seeing the most stress. As of June 30, 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 
 
 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. 
 
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 The following table provides a summary of the changes in the components of other income: 
 
 Three months ended
June 30, Six months ended
June 30, 
 (In thousands) 2024 2023 Change 2024 2023 Change 
 Income from fiduciary activities $ 10,728 $ 8,816 $ 1,912 $ 20,752 $ 17,431 $ 3,321 
 Service charges on deposit accounts 2,214 2,041 173 4,320 4,282 38 
 Other service income 2,906 2,639 267 5,430 5,336 94 
 Debit card fee income 6,580 6,830 (250) 12,823 13,287 (464) 
 Bank owned life insurance income 1,565 1,332 233 4,194 2,517 1,677 
 ATM fees 458 553 (95) 954 1,086 (132) 
 Loss on the sale of debt securities, net — — — (398) — (398) 
 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 
 Miscellaneous 1,781 886 895 2,840 2,057 783 
 Total other income $ 28,794 $ 25,015 $ 3,779 $ 54,994 $ 49,402 $ 5,592 

 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. 
 
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 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 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
June 30, Six months ended
June 30, 
 (In thousands) 2024 2023 Change 2024 2023 Change 
 Salaries $ 35,954 $ 33,649 $ 2,305 $ 71,687 $ 68,520 $ 3,167 
 Employee benefits 9,873 10,538 (665) 21,433 21,354 79 
 Occupancy expense 2,975 3,214 (239) 6,156 6,567 (411) 
 Furniture and equipment expense 2,454 3,103 (649) 5,037 6,349 (1,312) 
 Data processing fees 9,542 9,582 (40) 18,350 18,332 18 
 Professional fees and services 6,022 7,365 (1,343) 12,839 14,586 (1,747) 
 Marketing 1,164 1,239 (75) 2,905 2,558 347 
 Insurance 1,777 1,960 (183) 3,495 3,774 (279) 
 Communication 1,002 1,045 (43) 2,038 2,082 (44) 
 State tax expense 1,129 1,096 33 2,239 2,374 (135) 
 Amortization of intangible assets 320 328 (8) 640 655 (15) 
 Miscellaneous 2,977 2,766 211 5,598 5,237 361 
 Total other expense $ 75,189 $ 75,885 $ (696) $ 152,417 $ 152,388 $ 29 

 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. 
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 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. GAAP) 
 
 From time to time, revenue, expenses, and/or taxes are impacted by items judged by management of Park to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that their outsized impact is believed by management of Park at that time to be infrequent or short-term in nature. Most often, these items impacting comparability of period results relate to merger and acquisition activities and revenue and expenses related to former Vision Bank loan relationships. In other cases, they may result from management's decisions associated with significant corporate actions outside of the ordinary course of business. 
 
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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 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 
 less purchase accounting accretion related to NewDominion and Carolina Alliance acquisitions 271 164 623 364 Interest and fees on loans 
 less interest income on former Vision Bank relationships 5 13 7 587 Interest and fees on loans 
 Net interest income - adjusted $ 97,561 $ 91,395 $ 192,830 $ 182,819 
 
 Provision for credit losses $ 3,113 $ 2,492 $ 5,293 $ 2,675 
 less recoveries on former Vision Bank relationships (117) (25) (1,070) (748) Provision for credit losses 
 Provision for credit losses - adjusted $ 3,230 $ 2,517 $ 6,363 $ 3,423 
 
 Total other income $ 28,794 $ 25,015 $ 54,994 $ 49,402 
 less loss on sale of debt securities, net — — (398) — Loss on the sale of debt securities, net 
 less write-downs on strategic initiatives 813 — 658 — Miscellaneous 
 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 
 Total other income - adjusted $ 27,982 $ 25,015 $ 54,607 $ 49,267 
 
 Total other expense $ 75,189 $ 75,885 $ 152,417 $ 152,388 
 less direct expenses related to collection of payments on former Vision Bank loan relationships — — — 100 Professional fees and services 
 less core deposit intangible amortization related to NewDominion and Carolina Alliance acquisitions 320 328 640 655 Amortization of intangible assets 
 Total other expense - adjusted $ 74,869 $ 75,557 $ 151,777 $ 151,633 
 
 Tax effect of adjustments to net income identified above (7) 
 $ (186) $ 26 $ (304) $ (227) 
 
 Net income - reported $ 39,369 $ 31,584 $ 74,573 $ 65,317 
 Net income - adjusted (6) 
 $ 38,670 $ 31,684 $ 73,430 $ 64,465 
 
 Diluted EPS $ 2.42 $ 1.94 $ 4.60 $ 4.01 
 Diluted EPS- adjusted (6) 
 $ 2.38 $ 1.95 $ 4.53 $ 3.96 
 
 Annualized return on average assets (1)(2) 
 1.61 % 1.28 % 1.52 % 1.32 % 
 Annualized return on average assets- adjusted (1)(2)(6) 
 1.59 % 1.28 % 1.50 % 1.30 % 
 
 Annualized return on average tangible assets (1)(2)(4) 
 1.64 % 1.30 % 1.55 % 1.34 % 
 Annualized return on average tangible assets- adjusted (1)(2)(4)(6) 
 1.61 % 1.30 % 1.53 % 1.32 % 
 
 Annualized return on average shareholders' equity (1)(2) 
 13.52 % 11.61 % 12.88 % 12.07 % 
 Annualized return on average shareholders' equity- adjusted (1)(2)(6) 
 13.28 % 11.65 % 12.68 % 11.92 % 
 
 Annualized return on average tangible equity (1)(2)(3) 
 15.72 % 13.68 % 14.98 % 14.23 % 
 Annualized return on average tangible equity- adjusted (1)(2)(3)(6) 
 15.44 % 13.73 % 14.76 % 14.04 % 
 
 Efficiency ratio (5) 
 59.09 % 64.58 % 61.05 % 64.84 % 
 Efficiency ratio- adjusted (5)(6) 
 59.35 % 64.40 % 61.04 % 64.82 % 
 
 Annualized net interest margin (5) 
 4.39 % 4.07 % 4.33 % 4.07 % 
 Annualized net interest margin- adjusted (5)(6) 
 4.38 % 4.06 % 4.32 % 4.05 % 

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 Financial Reconciliations 
 
 (1) Reported measure uses net income. 
 
 (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. Average tangible equity equals average shareholders' equity during the applicable period less average goodwill and other intangible assets during the applicable period. 
 
 RECONCILIATION TO AVERAGE SHAREHOLDERS' EQUITY OF AVERAGE TANGIBLE EQUITY: 
 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 
 Less: Average goodwill and other intangible assets 163,816 165,129 163,977 165,292 
 AVERAGE TANGIBLE EQUITY $ 1,007,531 $ 925,887 $ 1,000,788 $ 925,693 
 
 (4) Net income for each period divided by average tangible assets during the period. Average tangible assets equals average assets less average goodwill and other intangible assets, in each case during the applicable period. 
 
 RECONCILIATION TO AVERAGE ASSETS OF AVERAGE TANGIBLE ASSETS: 
 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 
 Less: Average goodwill and other intangible assets 163,816 165,129 163,977 165,292 
 AVERAGE TANGIBLE ASSETS $ 9,647,510 $ 9,752,676 $ 9,673,375 $ 9,822,661 
 
 (5) Efficiency ratio is calculated by dividing total other expense by the sum of FTE net interest income and other income. The reconciliation of FTE net interest income to net interest income is shown below assuming a 21% federal corporate income tax rate. Additionally, net interest margin is calculated on a fully taxable equivalent basis by dividing FTE net interest income by average interest earning assets, in each case during the applicable period. 
 
 RECONCILIATION TO FTE NET INTEREST INCOME OF NET INTEREST INCOME 
 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 
 FTE adjustment 605 920 1,221 1,846 
 FTE interest income $ 129,509 $ 115,594 $ 256,765 $ 227,421 
 Interest expense 31,067 23,102 62,084 41,805 
 FTE net interest income $ 98,442 $ 92,492 $ 194,681 $ 185,616 
 
 (6) Adjustments to net income for each period presented are detailed in the non-GAAP reconciliations of net interest income, provision for credit losses, total other income, and total other expense, as well as the disclosure of the "Tax effect of adjustments to net income identified above." 
 
 (7) The tax effect of adjustments to net income was calculated assuming a 21% federal corporate income tax rate. 
 
 (8) Pre-tax, pre-provision ("PTPP") net income is calculated as net income, plus income taxes, plus the provision for credit losses, in each case during the applicable period. PTPP net income is a common industry metric utilized in capital analysis and review. PTPP is used to assess the operating performance of Park while excluding the impact of the provision for credit losses. 
 
 RECONCILIATION TO NET INCOME OF PRE-TAX, PRE-PROVISION NET INCOME 
 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 
 Plus: Income taxes 8,960 6,626 16,171 12,792 
 Plus: Provision for credit losses 3,113 2,492 5,293 2,675 
 Pre-tax, pre-provision net income $ 51,442 $ 40,702 $ 96,037 $ 80,784 

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 Income Tax 
 
 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. Park expects permanent federal income tax differences for the 2024 year will be approximately $6.3 million. 
 
 Comparison of Financial Condition 
 At June 30, 2024 and at December 31, 2023 
 
 Changes in Financial Condition 
 
 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 $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 $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. 
 • Treasury shares decreased by $3.4 million during the period as a result of the issuance of treasury shares under share-based compensation awards (net of common shares withheld to pay employee income taxes). 
 • Common shares decreased by $2.5 million during the period as a result of the issuance of treasury shares under share-based compensation awards (net of common shares withheld to pay employee income taxes), partially offset by an increase due to share-based compensation expense. 
 
 Increases or decreases in the investment securities portfolio, short-term borrowings and long-term debt are greatly dependent upon the growth in loans and deposits. The primary objective of management is to grow loan and deposit totals. To the extent that management is unable to grow loan totals at a desired growth rate, additional investment securities may be acquired. 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. 
 
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 Liquidity 
 
 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 $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 $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 $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 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 $2.09 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 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. Park has elected not to include the net unrealized gain or loss on debt securities AFS in computing regulatory capital. Park has adopted the Basel III regulatory capital framework as approved by the federal banking agencies. Under the Basel III regulatory capital framework, in order to avoid limitations on capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers, Park must hold a capital conservation buffer of 2.5% above the adequately capitalized risk-based capital ratios. The amounts shown below as the adequately capitalized ratio plus capital conservation buffer include the 2.50% buffer. The Federal Reserve Board has also adopted capital requirements Park must maintain to be deemed "well capitalized" and remain a financial holding company. 
 
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 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
Risk-Based Common Equity Tier 1 Total
Risk-Based 
 The Park National Bank 9.62 % 11.23 % 11.23 % 12.64 % 
 Park National Corporation 11.29 % 13.22 % 13.04 % 16.41 % 
 Adequately capitalized ratio 4.00 % 6.00 % 4.50 % 8.00 % 
 Adequately capitalized ratio plus capital conservation buffer 4.00 % 8.50 % 7.00 % 10.50 % 
 Well capitalized ratio (PNB) 5.00 % 8.00 % 6.50 % 10.00 % 
 Well capitalized ratio (Park) N/A 6.00 % N/A 10.00 % 

 At December 31, 2023 
 Leverage Tier 1
Risk-Based Common Equity Tier 1 Total
Risk-Based 
 The Park National Bank 9.11 % 10.95 % 10.95 % 12.35 % 
 Park National Corporation 10.74 % 12.97 % 12.79 % 16.19 % 
 Adequately capitalized ratio 4.00 % 6.00 % 4.50 % 8.00 % 
 Adequately capitalized ratio plus capital conservation buffer 4.00 % 8.50 % 7.00 % 10.50 % 
 Well capitalized ratio (PNB) 5.00 % 8.00 % 6.50 % 10.00 % 
 Well capitalized ratio (Park) N/A 6.00 % N/A 10.00 % 

 Contractual Obligations and Commitments 
 
 In the ordinary course of operations, Park enters into certain contractual obligations. Such obligations include the funding of operations through debt issuances as well as leases for premises. 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 six months of 2024. 
 
 Financial Instruments with Off-Balance Sheet Risk 
 
 PNB is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include loan commitments and standby letters of credit. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated financial statements. 
 
 The exposure to credit loss (for PNB) in the event of nonperformance by the other party to the financial instrument for loan commitments and standby letters of credit is represented by the contractual amount of those instruments. PNB uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Since many of the loan commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan commitments to customers. 
 
 The total amounts of off-balance sheet financial instruments with credit risk were as follows: 
 
 (In thousands) June 30,
2024 December 31, 2023 
 Loan commitments $ 1,584,439 $ 1,527,577 
 Standby letters of credit $ 32,599 $ 31,261 

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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
PARK NATIONAL CORP /OH/ 10-Q

Item 2. Management’s Discussion and Analysis
