UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2022~~March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________________ to __________________________


Commission File Number			1-13006


PARK NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)


Ohio						31-1179518
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

50 North Third Street,

P.O. Box 3500

Newark,

Ohio

43058-3500

(Address of principal executive offices) (Zip Code)


(740)			349-8451
(Registrant’s telephone number, including area code)


N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common shares, without par value	PRK	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”,

“smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: ~~16,263,583~~16,178,425 Common Shares, no par value per share, outstanding at ~~November 7, 2022.~~April 28, 2023.

PARK NATIONAL CORPORATION

CONTENTS


			Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Condensed Balance Sheets a t ~~September~~March 31, 2023 ~~30, 2022~~ and December 31, 20 212 2 (unaudited)			5

Consolidated Condensed Statements of Income for the three ~~months and~~ ~~the~~ ~~nine~~months ended ~~September~~March 31 ~~30, 2022~~, 202 3 and 20 212 2 (unaudited)			7

Consolidated Condensed Statements of Comprehensive ~~(Loss)~~Income ( ~~Income~~Loss) for the three months ~~and~~ ~~the~~ ~~nine~~ ~~months~~ ended ~~September~~March 31 ~~30, 2022~~, 202 3 and 20 212 2 (unaudited)			9

Consolidated Condensed Statements of Changes in Shareholders’ Equity for the three months ~~and~~ ~~the~~ ~~nine~~ ~~months~~ ended ~~September~~March 31 ~~30, 2022~~, 202 3 and 20 212 2 (unaudited)			10

Consolidated Condensed Statements of Cash Flows for the ~~nine~~ three months ended ~~September~~March 31 ~~30, 2022~~, 202 3 and 20 212 2 (unaudited)			1211

Notes to Unaudited Consolidated Condensed Financial Statements			1413

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			7158

Item 3. Quantitative and Qualitative Disclosures About Market Risk			~~105~~86

Item 4. Controls and Procedures			~~105~~87

PART II. OTHER INFORMATION			~~107~~88

Item 1. Legal Proceedings			~~107~~88

Item 1A. Risk Factors			~~107~~88

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			~~107~~89

Item 3. Defaults Upon Senior Securities			~~108~~90

Item 4. Mine Safety Disclosures			~~108~~90

Item 5. Other Information			~~108~~90

Item 6. Exhibits			~~108~~90

SIGNATURES			~~111~~93

Glossary of Abbreviations and Acronyms

Park has identified the following list of abbreviations and acronyms that are used in the Unaudited Consolidated Condensed Financial Statements, Notes to Unaudited Consolidated Condensed Financial Statements, and Management's Discussion and Analysis of Financial Condition and Results of Operations.

~~AFS~~ACL

~~Available-for-sale~~Allowance for credit losses

LIBOR

London Inter-Bank Offered Rate

~~ACL~~AFS

~~Allowance for credit losses~~Available-for-sale

MSRs

Mortgage servicing rights

Allowance

Allowance for credit losses

NAV

Net asset value

~~AOCI~~

~~Accumulated other comprehensive (loss) income~~

~~NewDominion~~

~~NewDominion Bank~~

ASC

Accounting Standards Codification

~~OCI~~NewDominion

~~Other comprehensive (loss) income~~NewDominion Bank

ASU

Accounting Standards Update

OREO

Other real estate owned

~~AUCL~~ATM

~~Allowance for unfunded credit losses~~Automated teller machine

OWS

One-way sell

CARES Act

Coronavirus Aid, Relief, and Economic Security Act

Park

Park National Corporation and its subsidiaries

Carolina Alliance

CAB Financial Corporation and its subsidiaries

~~PBRSUs~~Park National Bank

~~Performance-based restricted stock units~~The Park National Bank

CECL

Current expected credit loss

PBRSUs

Performance-based restricted stock units

Company

Park National Corporation and its subsidiaries

PCD

Purchased credit deteriorated

~~COVID-19~~Corporation

~~Novel coronavirus~~Park National Corporation and its subsidiaries

Probability of default

~~DCF~~COVID

~~Discounted cash flow~~Novel coronavirus

PNB

The Park National Bank

~~FASB~~DCF

~~Financial Accounting Standards Board~~Discounted cash flow

PPP

CARES Act Paycheck Protection Program

~~FHLB~~DOJ

~~Federal Home Loan Bank~~Department of Justice

PTPP

Pre-tax, pre-provision

EPS

Earnings per common share

ROU

Right-of-use

~~FRB~~FASB

~~Federal Reserve Bank~~Financial Accounting Standards Board

SARs

Stock appreciation rights

~~GDP~~FHLB

~~Gross domestic product~~Federal Home Loan Bank

SBA

Small Business Administration

~~GFSC~~FRB

~~Guardian Financial Services Company~~Federal Reserve Bank

SEC

U.S. Securities and Exchange Commission

~~HPI~~FTE

~~Home price index~~Fully taxable equivalent

SEPH

SE Property Holdings, LLC

~~HTM~~GDP

~~Held-to-maturity~~Gross domestic product

TBRSUs

Time-based restricted stock units

GFSC

Guardian Financial Services Company

TDRs

Troubled debt restructurings

HELOC

Home equity line of credit

U.S.

United States of America

HPI

Home price index

U.S. GAAP

United States Generally Accepted Accounting Principles

IRLC

Interest rate lock commitment

~~TDRs~~United States

~~Troubled debt restructurings~~United States of America

KSOP

Park's qualified retirement plan that combines an employee stock ownership plan (ESOP) with a 401(k) plan

~~U.S. GAAP~~Vision

~~United States Generally Accepted Accounting Principles~~Vision Bancshares, Inc.

LDA

Loss driver analysis

~~U.S.~~VOV

~~United States~~Verification of value

LGD

Loss given default

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PARK NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Condensed Balance Sheets (Unaudited)

(in thousands, except common share and per common share data)


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Assets:	Assets:					Assets:
Cash and due from banks	Cash and due from banks	$	149,136	$	144,507	Cash and due from banks	$	146,155	$	156,750
Money market instruments	Money market instruments	58,297		74,673		Money market instruments	115,764		32,978
Cash and cash equivalents	Cash and cash equivalents	207,433		219,180		Cash and cash equivalents	261,919		189,728

Investment securities:	Investment securities:					Investment securities:
Debt securities available-for-sale, at fair value (amortized cost of $1,893,453 and $1,727,363 at September 30, 2022 and December 31, 2021, respectively, and no allowance for credit losses at September 30, 2022 and December 31, 2021)		1,742,123		1,754,140
Debt securities available-for-sale, at fair value (amortized cost of $1,819,950 and $1,854,852 at March 31, 2023 and December 31, 2022, respectively, and no allowance for credit losses at March 31, 2023 and at December 31, 2022)						Debt securities available-for-sale, at fair value (amortized cost of $1,819,950 and $1,854,852 at March 31, 2023 and December 31, 2022, respectively, and no allowance for credit losses at March 31, 2023 and at December 31, 2022)	1,714,440		1,733,696
Other investment securities	Other investment securities	85,945		61,268		Other investment securities	85,970		87,091
Total investment securities	Total investment securities	1,828,068		1,815,408		Total investment securities	1,800,410		1,820,787

Loans	Loans	7,103,246		6,871,122		Loans	7,093,857		7,141,891
Allowance for credit losses	Allowance for credit losses	(83,961)		(83,197)		Allowance for credit losses	(85,946)		(85,379)
Net loans	Net loans	7,019,285		6,787,925		Net loans	7,007,911		7,056,512

Bank owned life insurance	Bank owned life insurance	219,909		215,792		Bank owned life insurance	223,528		220,072
Prepaid assets	Prepaid assets	158,301		144,124		Prepaid assets	157,426		153,579
Goodwill	Goodwill	159,595		159,595		Goodwill	159,595		159,595
Other intangible assets	Other intangible assets	6,316		7,462		Other intangible assets	5,648		5,975
Premises and equipment, net	Premises and equipment, net	84,669		89,008		Premises and equipment, net	81,223		82,126
Affordable housing tax credit investments	Affordable housing tax credit investments	62,771		58,711		Affordable housing tax credit investments	58,871		60,968
OREO	OREO	1,354		775		OREO	1,468		1,354
Accrued interest receivable	Accrued interest receivable	29,144		23,413		Accrued interest receivable	33,245		34,704
Operating lease right-of-use asset	Operating lease right-of-use asset	15,536		13,446		Operating lease right-of-use asset	17,150		17,600
Mortgage loan servicing rights	Mortgage loan servicing rights	16,191		15,264		Mortgage loan servicing rights	15,505		15,792
Other	Other	46,475		10,151		Other	33,082		36,201
Total assets	Total assets	$	9,855,047	$	9,560,254	Total assets	$	9,856,981	$	9,854,993

Table of Contents

PARK NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Condensed Balance Sheets (Unaudited) (Continued)

(in thousands, except common share and per common share data)


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Liabilities and Shareholders' Equity:	Liabilities and Shareholders' Equity:					Liabilities and Shareholders' Equity:
Deposits:	Deposits:					Deposits:
Non-interest bearing	Non-interest bearing	$	3,138,417	$	3,066,419	Non-interest bearing	$	2,922,242	$	3,074,276
Interest bearing	Interest bearing	5,171,510		4,838,109		Interest bearing	5,372,202		5,160,439
Total deposits	Total deposits	8,309,927		7,904,528		Total deposits	8,294,444		8,234,715

Short-term borrowings	Short-term borrowings	189,493		238,786		Short-term borrowings	172,058		227,342
Subordinated notes	Subordinated notes	188,551		188,210		Subordinated notes	188,785		188,667
Unfunded commitments in affordable housing tax credit investments	Unfunded commitments in affordable housing tax credit investments	28,480		28,484		Unfunded commitments in affordable housing tax credit investments	26,723		28,132
Operating lease liability	Operating lease liability	16,414		14,339		Operating lease liability	18,651		19,291
Allowance for credit losses on off-balance sheet commitments	Allowance for credit losses on off-balance sheet commitments	4,451		4,282		Allowance for credit losses on off-balance sheet commitments	5,329		5,214
Accrued interest payable	Accrued interest payable	1,295		3,116		Accrued interest payable	1,661		3,486
Other	Other	80,264		67,750		Other	67,177		78,920
Total liabilities	Total liabilities	$	8,818,875	$	8,449,495	Total liabilities	$	8,774,828	$	8,785,767

Shareholders' equity:	Shareholders' equity:					Shareholders' equity:
Preferred shares (200,000 shares authorized; No shares issued)		$	—	$	—
Common shares (No par value; 20,000,000 shares authorized; 17,623,104 shares issued at September 30, 2022 and 17,623,118 shares issued at December 31, 2021)		461,321		461,800
Preferred shares (No par value; 200,000 shares authorized; No shares issued)						Preferred shares (No par value; 200,000 shares authorized; No shares issued)	$	—	$	—
Common shares (No par value; 20,000,000 shares authorized; 17,623,104 shares issued at March 31, 2023 and at December 31, 2022)						Common shares (No par value; 20,000,000 shares authorized; 17,623,104 shares issued at March 31, 2023 and at December 31, 2022)	459,431		462,404
Retained earnings	Retained earnings	839,207		776,294		Retained earnings	862,518		847,235
Treasury shares (1,369,310 shares at September 30, 2022 and 1,403,555 shares at December 31, 2021)		(139,013)		(142,490)
Accumulated other comprehensive (loss) income, net of taxes		(125,343)		15,155
Treasury shares (1,449,037 shares at March 31, 2023 and 1,359,521 shares at December 31, 2022)						Treasury shares (1,449,037 shares at March 31, 2023 and 1,359,521 shares at December 31, 2022)	(149,763)		(138,019)
Accumulated other comprehensive loss, net of taxes						Accumulated other comprehensive loss, net of taxes	(90,033)		(102,394)
Total shareholders' equity	Total shareholders' equity	1,036,172		1,110,759		Total shareholders' equity	1,082,153		1,069,226
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	9,855,047	$	9,560,254	Total liabilities and shareholders’ equity	$	9,856,981	$	9,854,993

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Table of Contents

PARK NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Condensed Statements of Income (Unaudited)

(in thousands, except common share and per common share data)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Interest and dividend income:	Interest and dividend income:									Interest and dividend income:

Interest and fees on loans	Interest and fees on loans	$	83,522	$	78,127	$	233,725	$	238,040	Interest and fees on loans	$	91,614	$	72,416

Interest and dividends on:	Interest and dividends on:									Interest and dividends on:
Debt securities - taxable	Debt securities - taxable	10,319		4,904		24,073		13,760		Debt securities - taxable	12,979		6,130
Debt securities - tax-exempt	Debt securities - tax-exempt	2,923		2,029		8,046		6,098		Debt securities - tax-exempt	2,912		2,447
Other interest income	Other interest income	3,180		360		3,593		689		Other interest income	3,396		153
Total interest and dividend income	Total interest and dividend income	99,944		85,420		269,437		258,587		Total interest and dividend income	110,901		81,146

Interest expense:	Interest expense:									Interest expense:

Interest on deposits:	Interest on deposits:									Interest on deposits:
Demand and savings deposits	Demand and savings deposits	5,757		435		7,441		1,222		Demand and savings deposits	14,212		351
Time deposits	Time deposits	825		1,011		2,253		3,880		Time deposits	1,347		720

Interest on borrowings:	Interest on borrowings:									Interest on borrowings:
Short-term borrowings	Short-term borrowings	306		187		740		552		Short-term borrowings	824		244
Long-term debt		2,228		2,185		6,550		6,746
Subordinated notes and long-term debt										Subordinated notes and long-term debt	2,320		2,145

Total interest expense	Total interest expense	9,116		3,818		16,984		12,400		Total interest expense	18,703		3,460

Net interest income	Net interest income	90,828		81,602		252,453		246,187		Net interest income	92,198		77,686

Provision for (recovery of) credit losses	Provision for (recovery of) credit losses	3,190		1,972		1,576		(6,923)		Provision for (recovery of) credit losses	183		(4,605)
Net interest income after provision for (recovery of) credit losses	Net interest income after provision for (recovery of) credit losses	$	87,638	$	79,630	250,877		253,110		Net interest income after provision for (recovery of) credit losses	$	92,015	$	82,291

Other income:	Other income:									Other income:
Income from fiduciary activities	Income from fiduciary activities	$	8,216	$	8,820	25,872		25,562		Income from fiduciary activities	$	8,615	$	8,797
Service charges on deposit accounts	Service charges on deposit accounts	2,859		2,389		7,496		6,475		Service charges on deposit accounts	2,241		2,074
Other service income	Other service income	2,956		6,668		12,715		23,444		Other service income	2,697		4,819
Debit card fee income	Debit card fee income	6,514		6,453		19,371		19,297		Debit card fee income	6,457		6,126
Bank owned life insurance income	Bank owned life insurance income	1,185		1,462		4,734		3,776		Bank owned life insurance income	1,185		1,175
ATM fees	ATM fees	610		622		1,725		1,807		ATM fees	533		532
Gain (loss) on sale of OREO, net		5,607		3		5,611		(26)
Loss on the sale of OREO, net										Loss on the sale of OREO, net	(9)		—
OREO valuation markup	OREO valuation markup	12,009		—		12,039		13		OREO valuation markup	15		30
Gain on equity securities, net		58		609		3,120		2,886
(Loss) gain on equity securities, net										(Loss) gain on equity securities, net	(405)		2,353
Other components of net periodic pension benefit income	Other components of net periodic pension benefit income	3,027		2,038		9,081		6,114		Other components of net periodic pension benefit income	1,893		3,027
Miscellaneous	Miscellaneous	3,653		3,347		7,779		8,390		Miscellaneous	1,165		2,723
Total other income	Total other income	$	46,694	$	32,411	$	109,543	$	97,738	Total other income	$	24,387	$	31,656

Table of Contents

PARK NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Condensed Statements of Income (Unaudited) (Continued)

(in thousands, except common share and per common share data)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Other expense:	Other expense:									Other expense:
Salaries	Salaries	$	37,889	$	29,433	$	99,462	$	89,632	Salaries	$	34,871	$	30,521
Employee benefits	Employee benefits	9,897		10,640		30,595		30,897		Employee benefits	10,816		10,499
Occupancy expense	Occupancy expense	3,455		3,211		9,709		9,878		Occupancy expense	3,353		3,214
Furniture and equipment expense	Furniture and equipment expense	2,912		2,797		8,783		8,163		Furniture and equipment expense	3,246		2,937
Data processing fees	Data processing fees	8,170		7,817		24,090		22,679		Data processing fees	8,750		7,504
Professional fees and services	Professional fees and services	8,359		6,973		20,992		19,610		Professional fees and services	7,221		5,858
Marketing	Marketing	1,595		1,574		3,931		4,355		Marketing	1,319		1,317
Insurance	Insurance	1,237		1,403		3,887		4,370		Insurance	1,814		1,405
Communication	Communication	1,098		796		2,923		2,688		Communication	1,037		890
State tax expense	State tax expense	1,186		1,113		3,545		3,324		State tax expense	1,278		1,192
Amortization of intangible assets	Amortization of intangible assets	341		420		1,146		1,378		Amortization of intangible assets	327		402
Foundation contribution		4,000		—		4,000		4,000
Miscellaneous	Miscellaneous	2,764		2,312		7,261		6,780		Miscellaneous	2,471		1,634
Total other expense	Total other expense	$	82,903	$	68,489	$	220,324	$	207,754	Total other expense	$	76,503	$	67,373

Income before income taxes	Income before income taxes	$	51,429	$	43,552	$	140,096	$	143,094	Income before income taxes	$	39,899	$	46,574

Income taxes	Income taxes	9,361		8,118		24,829		25,697		Income taxes	6,166		7,699

Net income	Net income	$	42,068	$	35,434	$	115,267	$	117,397	Net income	$	33,733	$	38,875

Earnings per common share:	Earnings per common share:									Earnings per common share:
Basic	Basic	$	2.59	$	2.17	$	7.10	$	7.20	Basic	$	2.08	$	2.40
Diluted	Diluted	$	2.57	$	2.16	$	7.05	$	7.14	Diluted	$	2.07	$	2.38

Weighted average common shares outstanding:	Weighted average common shares outstanding:									Weighted average common shares outstanding:
Basic	Basic	16,253,704		16,292,312		16,240,966		16,315,996		Basic	16,242,353		16,219,889
Diluted	Diluted	16,374,982		16,423,912		16,355,790		16,445,568		Diluted	16,324,823		16,331,031

Regular cash dividends declared per common share	Regular cash dividends declared per common share	$	1.04	$	1.03	$	3.12	$	3.09	Regular cash dividends declared per common share	$	1.05	$	1.04
Special cash dividends declared per common share		$	—	$	—	—		$	0.20

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Table of Contents

PARK NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Condensed Statements of Comprehensive Income (Loss) ~~Income~~ (Unaudited)

(in thousands)

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Net income $ 42,068 $ 35,434 $ 115,267 $ 117,397
Other comprehensive (loss) income, net of tax:
Unrealized net holding loss on debt securities available-for-sale, net of income tax effect of $(10,617) and $(1,328) for the three months ended September 30, 2022 and 2021, respectively, and $(37,403) and $(3,650) for the nine months ended September 30, 2022 and 2021, respectively. (39,939) (4,997) (140,704) (13,736)
Reclassification adjustment for losses included in net income on cash flow hedging derivatives, net of income tax effect of $14 for the nine months ended September 30, 2022. — — 52 —
Unrealized gain on cash flow hedging derivatives, net of income tax effect of $31 for the three months ended September 30, 2021, and $41 and $94 for the nine months ended September 30, 2022 and 2021, respectively. — 117 154 355
Other comprehensive loss $ (39,939) $ (4,880) $ (140,498) $ (13,381)
Comprehensive income (loss) $ 2,129 $ 30,554 $ (25,231) $ 104,016


	Three Months Ended March 31,
	2023		2022
Net income	$	33,733	$	38,875

Other comprehensive income (loss), net of tax:
Unrealized net holding gain (loss) on debt securities available-for-sale, net of income tax effect of $3,285 and $(14,823) for the three months ended March 31, 2023 and 2022, respectively	12,361		(55,763)
Unrealized gain on cash flow hedging derivatives, net of income tax effect of $37 for the three months ended March 31, 2022	—		139
Other comprehensive income (loss)	$	12,361	$	(55,624)

Comprehensive income (loss)	$	46,094	$	(16,749)

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Table of Contents

PARK NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Condensed Statements of Changes in Shareholders' Equity (Unaudited)

(in thousands, except common share and per common share data)

Preferred
Shares Common
Shares Retained
Earnings Treasury
Shares Accumulated
Other
Comprehensive
Income (Loss)
Balance at December 31, 2021 $ — $ 461,800 $ 776,294 $ (142,490) $ 15,155
Net income 38,875
Other comprehensive loss, net of tax (55,624)
Dividends on common shares at $1.04 per share (17,172)
Cash payment for fractional common shares in dividend reinvestment plan (2)
Issuance of 29,757 common shares under share-based compensation awards, net of 18,658 common shares withheld to pay employee income taxes (4,508) (964) 3,021
Share-based compensation expense 1,981
Balance at March 31, 2022 $ — $ 459,271 $ 797,033 $ (139,469) $ (40,469)
Net income 34,324
Other comprehensive loss, net of tax (44,935)
Dividends on common shares at $1.04 per share (17,116)
Share-based compensation expense 1,374
Balance at June 30, 2022 $ — $ 460,645 $ 814,241 $ (139,469) $ (85,404)
Net income 42,068
Other comprehensive loss, net of tax (39,939)
Dividends on common shares at $1.04 per share (17,101)
Issuance of 4,490 common shares under share-based compensation awards, net of 2,559 common shares withheld to pay employee income taxes (765) (1) $ 456
Share-based compensation expense 1,441
Balance at September 30, 2022 $ — $ 461,321 $ 839,207 $ (139,013) $ (125,343)


	Preferred Shares		Common Shares		Retained Earnings		Treasury Shares		Accumulated Other Comprehensive Loss
Balance at December 31, 2022	$	—	$	462,404	$	847,235	$	(138,019)	$	(102,394)
Cumulative effect of a change in accounting principle					(303)
Balance at January 1, 2023	$	—	$	462,404	$	846,932	$	(138,019)	$	(102,394)
Net income					33,733
Other comprehensive income, net of tax									12,361
Dividends on common shares at $1.05 per common share					(17,285)
Issuance of 34,484 common shares under share-based compensation awards, net of 21,981 common shares withheld to pay employee income taxes			(5,309)		(862)		3,564
Share-based compensation expense			2,336
Repurchase of 124,000 common shares to be held as treasury shares							$	(15,308)
Balance at March 31, 2023	$	—	$	459,431	$	862,518	$	(149,763)	$	(90,033)

~~Table of Contents~~

~~PARK NATIONAL CORPORATION AND SUBSIDIARIES~~

~~Consolidated Condensed Statements of Changes in Shareholders' Equity (Unaudited) (Continued)~~

~~(in thousands, except share and per share data)~~

Preferred
Shares Common
Shares Retained
Earnings Treasury
Shares Accumulated
Other
Comprehensive
Income (Loss)
Balance at December 31, 2020 $ — $ 460,687 $ 704,764 $ (130,766) $ 5,571
Cumulative change in accounting principle (7,956)
Balance at January 1, 2021 $ — $ 460,687 $ 696,808 $ (130,766) $ 5,571
Net income 42,831
Other comprehensive loss, net of tax (13,472)
Dividends on common shares at $1.23 per share (20,365)
Cash payment for fractional common shares in dividend reinvestment plan (1)
Issuance of 21,764 common shares under share-based compensation awards, net of 14,108 common shares withheld to pay employee income taxes (3,988) (44) 2,174
Share-based compensation expense 1,836
Balance at March 31, 2021 $ — $ 458,534 $ 719,230 $ (128,592) $ (7,901)
Net income 39,132
Other comprehensive income, net of tax 4,971
Dividends on common shares at $1.03 per share (17,081)
Cash payment for fractional common shares in dividend reinvestment plan (2)
Issuance of 4,834 common shares under share-based compensation awards, net of 2,973 common shares withheld to pay employee income taxes (743) (126) 483
Share-based compensation expense 1,487
Balance at June 30, 2021 $ — $ 459,276 $ 741,155 $ (128,109) $ (2,930)
Net income 35,434
Other comprehensive loss, net of tax (4,880)
Dividends on common shares at $1.03 per share (16,999)
Cash payment for fractional common shares in dividend reinvestment plan (1)
Issuance of 3,079 common shares under share-based compensation awards, net of 1,348 common shares withheld to pay employee income taxes (495) 29 307
Repurchase of 137,659 common shares to be held as treasury shares (16,048)
Share-based compensation expense 1,173
Balance at September 30, 2021 $ — $ 459,953 $ 759,619 $ (143,850) $ (7,810)


	Preferred Shares		Common Shares		Retained Earnings		Treasury Shares		Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2021	$	—	$	461,800	$	776,294	$	(142,490)	$	15,155
Net income					38,875
Other comprehensive loss, net of tax									(55,624)
Dividends on common shares at $1.04 per common share					(17,172)
Cash payment for fractional common shares in dividend reinvestment plan			(2)
Issuance of 29,757 common shares under share-based compensation awards, net of 18,658 common shares withheld to pay employee income taxes			(4,508)		(964)		3,021
Share-based compensation expense			1,981
Balance at March 31, 2022	$	—	$	459,271	$	797,033	$	(139,469)	$	(40,469)

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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PARK NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Condensed Statements of Cash Flows (Unaudited)

(in thousands)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021			2023		2022
Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	115,267	$	117,397	Net income	$	33,733	$	38,875

Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Provision for (recovery of) credit losses	Provision for (recovery of) credit losses	1,576		(6,923)		Provision for (recovery of) credit losses	183		(4,605)
Accretion of loan fees and costs, net	Accretion of loan fees and costs, net	(9,869)		(20,601)		Accretion of loan fees and costs, net	(2,169)		(3,772)
Depreciation of premises and equipment	Depreciation of premises and equipment	10,341		9,951		Depreciation of premises and equipment	3,500		3,482
Amortization of investment securities, net	Amortization of investment securities, net	2,596		1,442		Amortization of investment securities, net	817		875
Net accretion of purchase accounting adjustments		(402)		(1,375)
Gain on equity securities, net		(3,120)		(2,886)
Net amortization (accretion) of purchase accounting adjustments						Net amortization (accretion) of purchase accounting adjustments	119		(86)
Loss (gain) on equity securities, net						Loss (gain) on equity securities, net	405		(2,353)
Loan originations to be sold in secondary market	Loan originations to be sold in secondary market	(157,868)		(465,278)		Loan originations to be sold in secondary market	(15,332)		(73,713)
Proceeds from sale of loans in secondary market	Proceeds from sale of loans in secondary market	169,212		503,032		Proceeds from sale of loans in secondary market	15,730		77,189
Gain on sale of loans in secondary market	Gain on sale of loans in secondary market	(3,885)		(15,032)		Gain on sale of loans in secondary market	(325)		(1,941)
Share-based compensation expense	Share-based compensation expense	4,796		4,496		Share-based compensation expense	2,336		1,981
(Gain) loss on sale of OREO, net		(5,611)		26
Loss on sale of OREO, net						Loss on sale of OREO, net	9		—
OREO valuation markup	OREO valuation markup	(12,039)		(13)		OREO valuation markup	(15)		(30)
Gain on sale of non-mortgage loans		(495)		—
Bank owned life insurance income	Bank owned life insurance income	(4,734)		(3,776)		Bank owned life insurance income	(1,185)		(1,175)
Investment in qualified affordable housing tax credits amortization	Investment in qualified affordable housing tax credits amortization	5,940		5,567		Investment in qualified affordable housing tax credits amortization	2,097		1,980

Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Increase in prepaid dealer premiums		(10,827)		(3,370)
Increase in other assets		(2,302)		(11,021)
(Decrease) increase in other liabilities		(8,963)		986
Decrease in prepaid dealer premiums						Decrease in prepaid dealer premiums	601		94
(Increase) decrease in other assets						(Increase) decrease in other assets	(2,116)		1,253
Decrease in other liabilities						Decrease in other liabilities	(13,986)		(9,742)
Net cash provided by operating activities	Net cash provided by operating activities	$	89,613	$	112,622	Net cash provided by operating activities	$	24,402	$	28,312

Investing activities:	Investing activities:					Investing activities:
Proceeds from the redemption/repurchase of Federal Home Loan Bank stock	Proceeds from the redemption/repurchase of Federal Home Loan Bank stock	$	2,216	$	8,677	Proceeds from the redemption/repurchase of Federal Home Loan Bank stock	$	3,094	$	—
Proceeds from sales of investment securities		—		934
Proceeds from calls and maturities of:	Proceeds from calls and maturities of:					Proceeds from calls and maturities of:
Debt securities AFS	Debt securities AFS	148,192		176,926		Debt securities AFS	34,085		54,263
Purchases of:	Purchases of:					Purchases of:
Debt securities AFS	Debt securities AFS	(316,878)		(637,123)		Debt securities AFS	—		(128,731)
Equity securities	Equity securities	(9,165)		—		Equity securities	(2,195)		(1,630)
Net decrease in other investments		392		2,655
Net loan (originations) paydowns, portfolio loans		(234,239)		269,366
Proceeds from the sale of non-mortgage loans		4,345		3,688
Net (increase) decrease in other investments						Net (increase) decrease in other investments	(183)		124
Net loan paydowns, portfolio loans						Net loan paydowns, portfolio loans	50,208		52,474
Investment in qualified affordable housing tax credits	Investment in qualified affordable housing tax credits	(10,004)		(6,182)		Investment in qualified affordable housing tax credits	(1,409)		(7,252)
Proceeds from the sale of OREO	Proceeds from the sale of OREO	17,684		659		Proceeds from the sale of OREO	13		38
Life insurance death benefits	Life insurance death benefits	8,380		4,862		Life insurance death benefits	229		367
Purchases of bank owned life insurance	Purchases of bank owned life insurance	(7,500)		—		Purchases of bank owned life insurance	(2,500)		(7,500)
Purchases of premises and equipment	Purchases of premises and equipment	(6,576)		(10,670)		Purchases of premises and equipment	(2,674)		(2,127)
Net cash used in investing activities		$	(403,153)	$	(186,208)
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	$	78,668	$	(39,974)

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PARK NATIONAL CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (Unaudited) (Continued) (in thousands)	PARK NATIONAL CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (Unaudited) (Continued) (in thousands)					PARK NATIONAL CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (Unaudited) (Continued) (in thousands)
		Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021			2023		2022
Financing activities:	Financing activities:					Financing activities:
Net increase in deposits	Net increase in deposits	$	188,536	$	900,305	Net increase in deposits	$	28,392	$	257,927
Net decrease (increase) in off-balance sheet deposits	Net decrease (increase) in off-balance sheet deposits	216,869		(108,239)		Net decrease (increase) in off-balance sheet deposits	31,337		(166,134)
Net decrease in short-term borrowings	Net decrease in short-term borrowings	(49,293)		(106,251)		Net decrease in short-term borrowings	(55,284)		(32,859)
Repayment of long-term debt		—		(32,500)
Value of common shares withheld to pay employee income taxes	Value of common shares withheld to pay employee income taxes	(2,761)		(2,403)		Value of common shares withheld to pay employee income taxes	(2,607)		(2,451)
Repurchase of common shares to be held as treasury shares	Repurchase of common shares to be held as treasury shares	—		(16,048)		Repurchase of common shares to be held as treasury shares	(15,308)		—
Cash dividends paid	Cash dividends paid	(51,558)		(54,357)		Cash dividends paid	(17,409)		(17,109)
Net cash provided by financing activities		$	301,793	$	580,507
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	$	(30,879)	$	39,374

(Decrease) increase in cash and cash equivalents		(11,747)		506,921
Increase in cash and cash equivalents						Increase in cash and cash equivalents	72,191		27,712

Cash and cash equivalents at beginning of year	Cash and cash equivalents at beginning of year	219,180		370,474		Cash and cash equivalents at beginning of year	189,728		219,180

Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	207,433	$	877,395	Cash and cash equivalents at end of period	$	261,919	$	246,892

Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:

Cash paid for:	Cash paid for:					Cash paid for:
Interest	Interest	$	18,805	$	14,930	Interest	$	20,528	$	5,429

Federal income tax		16,070		16,430

Non-cash items:	Non-cash items:					Non-cash items:
Loans transferred to OREO	Loans transferred to OREO	$	13,418	$	78	Loans transferred to OREO	$	138	$	55

Right-of-use assets obtained in exchange for lease obligations	Right-of-use assets obtained in exchange for lease obligations	4,270		547		Right-of-use assets obtained in exchange for lease obligations	136		—

New commitments in affordable housing tax credits		10,000		10,000

AFS debt securities purchase commitment		—		52,508

New commitments in other investment securities	New commitments in other investment securities	15,000		—		New commitments in other investment securities	—		10,000

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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PARK NATIONAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Note 1 – Basis of Presentation

The accompanying unaudited consolidated condensed financial statements included in this report have been prepared for Park National Corporation (sometimes also referred to as the “Registrant”) and its subsidiaries. Unless the context otherwise requires, references to "Park", the "Corporation" or the "Company" and similar terms mean Park National Corporation and its subsidiaries. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results of operations for the interim periods included herein have been made. The results of operations for the three-month ~~and the nine-month periods~~period ended ~~September 30, 2022~~March 31, 2023 are not necessarily indicative of the operating results to be anticipated for the year ending December 31, ~~2022.~~2023.

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with the instructions for Quarterly Reports on Form 10-Q and, therefore, do not include all information and footnotes necessary for a fair presentation of the consolidated condensed balance sheets, consolidated condensed statements of income, consolidated condensed statements of comprehensive income (loss) ~~income,~~, consolidated condensed statements of changes in shareholders’ equity and consolidated condensed statements of cash flows in conformity with U.S. GAAP. These financial statements should be read in conjunction with the consolidated financial statements included in Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA in the Annual Report on Form 10-K of Park National Corporation for the fiscal year ended December 31, ~~2021~~2022 ("Park's ~~2021~~2022 Form 10-K"). Certain prior period amounts have been reclassified to conform to the current period presentation.

Park’s significant accounting policies are described in Note 1. Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Park’s ~~2021~~2022 Form 10-K. For interim reporting purposes, Park follows the same basic accounting policies, as updated by the information contained in this report, and considers each interim period an integral part of an annual period.

~~The COVID-19 pandemic~~Recent bank failures have called into question the stability of the financial services industry. While Park is well capitalized and has ~~caused~~ significant ~~unprecedented disruption around~~available liquidity, the world that has affected daily living and negatively impacted the global economy. Additionally, geopolitical conflict (including the conflict in Ukraine) and inflationary pressures have added uncertainty to the overall economic environment. The effects of ~~the COVID-19 pandemic, geopolitical conflict,~~these failures and ~~inflationary pressures~~potential future failures may meaningfully impact significant estimates such as the allowance for credit losses, goodwill, ~~mortgage servicing rights,~~ and pension plan obligations and related expenses. ~~Additionally, the COVID-19 pandemic has particularly impacted certain loan concentrations in the hotels and accommodations, restaurants and food service, and strip shopping centers industries.~~

Note 2 - Adoption of New Accounting Pronouncements and Issued But Not Yet Effective Accounting Standards

The following is a summary of new accounting pronouncements impacting Park's consolidated financial statements:

Adoption of New Accounting Pronouncements

~~Staff Accounting Bulletin ("SAB") No. 121~~ - In March 2022, the SEC issued SAB No. 121. This SAB adds interpretive guidance for entities to consider when they have obligations to safeguard crypto-assets held for their platform users. Specifically, this SAB provides interpretive guidance on the accounting and disclosure of obligations to safeguard crypto-assets held for platform users. This guidance was applicable no later than the financial statement covering the first interim or annual period ending after June 15, 2022. Management reviewed its business activities as of the date of adoption, June 30, 2022, and determined that SAB 121 is not materially impactful to the financial statements. Management has continued to monitor on a quarterly basis and has determined that SAB 121 is not materially impactful to the financial statements as of September 30, 2022.

~~Issued But Not Yet Effective Accounting Standards~~

ASU 2022-02 - Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures: In March 2022, FASB issued ASU 2022-02 - Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructuring and Vintage Disclosures. ASU 2022-02 ~~eliminates~~eliminated the accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables - Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. Additionally, the amendments

~~Table of Contents~~

in this ASU require that public business entities disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments - Credit Losses - Measured at Amortized Cost.

~~For entities, like~~ Park ~~that have~~ adopted ~~the amendments in ASU 2016-13, the amendments in~~ ASU 2022-02 are effective for fiscal years beginning after December 15, 2022, including interim periods within those years. Early adoption is permitted, including adoption in an interim period. An entity may elect to adoptusing the loan modification guidance and related disclosure enhancements separately from the amendments related to vintage disclosures. The amendments in ASU 2022-02 should be applied prospectively, except for the amendments related to the recognition and measurement of TDRs which may be applied prospectively, or using a modified retrospective transition ~~method. Management intends to adopt ASU 2022-02 effective~~method on January 1, 2023. Park recorded a $383,000 increase to the ACL, a $303,000 decrease to retained earnings and an $80,000 increase to deferred tax assets as of January 1, 2023 for the cumulative effect of adopting ASU 2022-02. 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 during the three months ended March 31, 2023 and individually evaluated loans decreased by $11.5 million.

The adoption of ASU 2022-02 isimpacted disclosures in Note 5 - Loans and Note 6 - Allowance for Credit Losses.

Table of Contents

Issued But Not Yet Effective Accounting Standards

There are no issued but not ~~expected~~yet effective accounting standards that are significant to ~~have a material impact on the financial statements but will impact disclosure requirements and reduce individually evaluated loan totals.~~Park.

Note 3 – Investment Securities

Investment securities at ~~September 30, 2022~~March 31, 2023 and at December 31, ~~2021,~~2022, were as follows:


Debt securities AFS (In thousands)	Debt securities AFS (In thousands)	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value		Debt securities AFS (In thousands)	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
September 30, 2022:
Obligations of U.S. Treasury and other U.S. Government sponsored entities		$	39,000	$	—	$	878	$	38,122
March 31, 2023:										March 31, 2023:
Obligations of U.S. Government sponsored entities										Obligations of U.S. Government sponsored entities	$	39,000	$	—	$	1,656	$	37,344
Obligations of states and political subdivisions	Obligations of states and political subdivisions	424,193		100		30,375		393,918		Obligations of states and political subdivisions	422,398		3,941		14,333		412,006
U.S. Government sponsored entities' asset-backed securities	U.S. Government sponsored entities' asset-backed securities	877,435		—		92,572		784,863		U.S. Government sponsored entities' asset-backed securities	805,466		—		75,205		730,261
Collateralized loan obligations	Collateralized loan obligations	535,575		—		26,517		509,058		Collateralized loan obligations	535,436		—		16,008		519,428
Corporate debt securities	Corporate debt securities	17,250		—		1,088		16,162		Corporate debt securities	17,650		—		2,249		15,401
Total	Total	$	1,893,453	$	100	$	151,430	$	1,742,123	Total	$	1,819,950	$	3,941	$	109,451	$	1,714,440


Debt securities AFS (In thousands)	Debt securities AFS (In thousands)	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value		Debt securities AFS (In thousands)	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
December 31, 2021:
December 31, 2022:										December 31, 2022:
Obligations of U.S. Government sponsored entities										Obligations of U.S. Government sponsored entities	$	39,000	$	—	$	1,787	$	37,213
Obligations of states and political subdivisions	Obligations of states and political subdivisions	$	366,933	$	22,682	$	24	$	389,591	Obligations of states and political subdivisions	423,285		1,620		18,194		406,711
U.S. Government sponsored entities' asset-backed securities	U.S. Government sponsored entities' asset-backed securities	849,114		13,437		8,088		854,463		U.S. Government sponsored entities' asset-backed securities	839,399		—		82,638		756,761
Collateralized loan obligations	Collateralized loan obligations	500,066		3		1,395		498,674		Collateralized loan obligations	535,518		—		18,979		516,539
Corporate debt securities	Corporate debt securities	11,250		169		7		11,412		Corporate debt securities	17,650		—		1,178		16,472
Total	Total	$	1,727,363	$	36,291	$	9,514	$	1,754,140	Total	$	1,854,852	$	1,620	$	122,776	$	1,733,696

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Investment securities in an unrealized loss position at ~~September 30, 2022,~~March 31, 2023, were as follows:


		Unrealized loss position for less than 12 months				Unrealized loss position for 12 months or longer				Total					Unrealized loss position for less than 12 months				Unrealized loss position for 12 months or longer				Total
(In thousands)	(In thousands)	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses		(In thousands)	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Debt securities AFS:	Debt securities AFS:													Debt securities AFS:
Obligations of U.S. Treasury and other U.S. Government sponsored entities		$	38,122	$	878	$	—	$	—	$	38,122	$	878
Obligations of U.S. Government sponsored entities														Obligations of U.S. Government sponsored entities	$	13,411	$	590	$	23,933	$	1,066	$	37,344	$	1,656
Obligations of states and political subdivisions	Obligations of states and political subdivisions	369,881		30,375		—		—		369,881		30,375		Obligations of states and political subdivisions	52,910		1,102		85,762		13,231		138,672		14,333
U.S. Government sponsored entities' asset-backed securities	U.S. Government sponsored entities' asset-backed securities	548,839		46,623		236,024		45,949		784,863		92,572		U.S. Government sponsored entities' asset-backed securities	197,348		7,644		532,913		67,561		730,261		75,205
Collateralized loan obligations	Collateralized loan obligations	361,935		19,046		147,123		7,471		509,058		26,517		Collateralized loan obligations	35,179		492		484,249		15,516		519,428		16,008
Corporate debt securities	Corporate debt securities	9,162		1,088		—		—		9,162		1,088		Corporate debt securities	11,844		1,556		3,557		693		15,401		2,249
Total	Total	$	1,327,939	$	98,010	$	383,147	$	53,420	$	1,711,086	$	151,430	Total	$	310,692	$	11,384	$	1,130,414	$	98,067	$	1,441,106	$	109,451

Investment securities in an unrealized loss position at December 31, ~~2021,~~2022, were as follows:


		Unrealized loss position for less than 12 months				Unrealized loss position for 12 months or longer				Total					Unrealized loss position for less than 12 months				Unrealized loss position for 12 months or longer				Total
(In thousands)	(In thousands)	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses		(In thousands)	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Debt securities AFS:	Debt securities AFS:													Debt securities AFS:
Obligations of U.S. Government sponsored entities														Obligations of U.S. Government sponsored entities	$	37,213	$	1,787	$	—	$	—	$	37,213	$	1,787
Obligations of states and political subdivisions	Obligations of states and political subdivisions	$	1,834	$	24	$	—	$	—	$	1,834	$	24	Obligations of states and political subdivisions	270,905		18,194		—		—		270,905		18,194
U.S. Government sponsored entities' asset-backed securities	U.S. Government sponsored entities' asset-backed securities	333,653		4,996		73,431		3,092		407,084		8,088		U.S. Government sponsored entities' asset-backed securities	446,423		27,507		310,338		55,131		756,761		82,638
Collateralized loan obligations	Collateralized loan obligations	429,671		1,395		—		—		429,671		1,395		Collateralized loan obligations	415,491		15,446		101,048		3,533		516,539		18,979
Corporate debt securities	Corporate debt securities	2,243		7		—		—		2,243		7		Corporate debt securities	7,388		862		1,684		316		9,072		1,178
Total	Total	$	767,401	$	6,422	$	73,431	$	3,092	$	840,832	$	9,514	Total	$	1,177,420	$	63,796	$	413,070	$	58,980	$	1,590,490	$	122,776

At ~~September 30, 2022,~~March 31, 2023, Park’s debt securities portfolio consisted of ~~$1.74~~$1.7 billion of securities, ~~$1.71~~$1.4 billion of which were in an unrealized loss position with unrealized losses of ~~$151.4~~$109.5 million. Of the ~~$1.71~~$1.4 billion of securities in an unrealized loss position, ~~$383.1 million~~$1.1 billion were in an unrealized loss position for 12 months or longer. Of the ~~$151.4~~$109.5 million in unrealized losses, an aggregate of ~~$93.5~~$76.9 million were related to Park's "Obligations of ~~U.S. Treasury and other~~ U.S. Government sponsored entities" portfolio and Park's "U.S. Government sponsored entities' asset-backed securities" portfolio. For non-agency debt securities, Park verified that the current credit ratings remain above investment grade. ~~Unrealized~~Management periodically reviews the credit profile of each non-agency debt security and assesses whether any impairment to the contractually obligated cash flow is likely to occur. Based on these reviews, management has concluded that the underlying creditworthiness for each security remains sufficient to maintain required payment obligations and, therefore, unrealized losses have not been recognized into ~~earnings as they represent negative adjustments to fair value relative to the rate of interest paid on the securities and not losses related to the creditworthiness of the respective issuers.~~net income. Management does not intend to sell, and it is not more likely than not that management would be required to sell, the securities prior to their anticipated recovery in respect of the unrealized losses. Management believes the value will recover as the securities approach maturity or market ~~conditions~~rates change.

There was no allowance for credit losses recorded for debt securities AFS at either ~~September 30, 2022~~March 31, 2023 or December 31, ~~2021.~~2022. Additionally, for the three months ended March 31, 2023 and ~~the nine months ended September 30,~~ 2022, ~~and 2021,~~ there were no credit-related investment impairment losses recognized.

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The amortized cost and estimated fair value of investments in debt securities AFS at ~~September 30, 2022,~~March 31, 2023, are shown in the following table by contractual maturity, except for asset-backed securities and collateral loan obligations, which are shown as a single total, due to the unpredictability of the timing of principal repayments. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.


(In thousands)	(In thousands)	Amortized cost		Fair value		Tax equivalent yield (1)		(In thousands)	Amortized cost		Fair value		Tax equivalent yield (1)
Debt Securities AFS	Debt Securities AFS							Debt Securities AFS
Obligations of U.S. Treasury and other U.S. Government sponsored entities	Obligations of U.S. Treasury and other U.S. Government sponsored entities							Obligations of U.S. Treasury and other U.S. Government sponsored entities
Due one through five years	Due one through five years	$	39,000	$	38,122	2.37	%	Due one through five years	$	39,000	$	37,344	2.37	%

Obligations of state and political subdivisions:	Obligations of state and political subdivisions:							Obligations of state and political subdivisions:
Due one through five years								Due one through five years	$	2,280	$	2,282	2.97	%
Due five through ten years	Due five through ten years	$	257,514	$	251,544	3.67	%	Due five through ten years	275,512		278,622		3.69	%
Due over ten years	Due over ten years	166,679		142,374		3.20	%	Due over ten years	144,606		131,102		3.12	%
Total (1)	Total (1)	$	424,193	$	393,918	3.49	%	Total (1)	$	422,398	$	412,006	3.49	%

U.S. Government sponsored entities' asset-backed securities	U.S. Government sponsored entities' asset-backed securities	$	877,435	$	784,863	1.92	%	U.S. Government sponsored entities' asset-backed securities	$	805,466	$	730,261	1.90	%

Collateralized loan obligations	Collateralized loan obligations	$	535,575	$	509,058	4.54	%	Collateralized loan obligations	$	535,436	$	519,428	6.51	%

Corporate debt securities	Corporate debt securities							Corporate debt securities
Due five through ten years	Due five through ten years	$	15,250	$	14,393	3.88	%	Due five through ten years	$	17,650	$	15,401	3.89	%
Due over ten years		$	2,000	$	1,769	3.13	%
Total		$	17,250	$	16,162	3.79	%

(1) The tax equivalent yield for certain obligations of state and political subdivisions includes the effect of a taxable equivalent adjustment using a 21% federal corporate income tax rate.

There were no sales of debt securities AFS during the three-month ~~or the nine-month~~ periods ended ~~September 30, 2022~~March 31, 2023 or ~~2021.~~2022.

Investment securities having ~~an amortized cost~~a fair value of ~~$764.0~~$778.7 million and ~~$733.7~~$753.6 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, were pledged to collateralize government and ~~trust department~~public fund deposits, ~~in accordance with federal and state requirements,~~ to secure repurchase agreements sold and as collateral for FHLB advance borrowings.

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Note 4 – Other Investment Securities

Other investment securities consist of restricted stock investments in the FHLB and the FRB, and equity securities. The restricted FHLB and FRB stock investments are carried at their redemption value. Equity securities with a readily determinable fair value are carried at fair value. Equity securities without a readily determinable fair value are recorded at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions ("modified cost"). Park's portfolio of equity investments in limited partnerships which provide mezzanine funding ("Partnership Investments") are valued using the NAV practical expedient in accordance with ASC 820.

The carrying amounts of other investment securities at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were as follows:


(In thousands)	(In thousands)	September 30, 2022		December 31, 2021		(In thousands)	March 31, 2023		December 31, 2022
FHLB stock	FHLB stock	$	11,197	$	13,413	FHLB stock	$	8,103	$	11,197
FRB stock	FRB stock	14,653		14,653		FRB stock	14,653		14,653
Equity investments carried at fair value	Equity investments carried at fair value	1,746		2,129		Equity investments carried at fair value	2,832		1,859
Equity investments carried at modified cost (1)	Equity investments carried at modified cost (1)	14,726		4,689		Equity investments carried at modified cost (1)	15,921		14,725
Equity investments carried at NAV	Equity investments carried at NAV	43,623		26,384		Equity investments carried at NAV	44,461		44,657
Total other investment securities	Total other investment securities	$	85,945	$	61,268	Total other investment securities	$	85,970	$	87,091

(1)There have been no impairments or downward adjustments made to equity investments carried at modified cost. An upward adjustment of $871,000 was recorded induring the ~~nine months~~year ended ~~September 30,~~December 31, 2022 as a result of observable price changes. There were no adjustments recorded during the three months ended March 31, 2023 or March 31, 2022 as a result of observable price changes.

During the three months ~~and the nine months~~ ended ~~September 30, 2022,~~March 31, 2023, the FHLB repurchased ~~22,160~~30,938 shares of FHLB stock with a book value of ~~$2.2~~$3.1 million. ~~During~~No shares of FHLB stock were repurchased during the the three months ended September 30, 2021, the FHLB repurchased 21,286 shares of FHLB stock with a book value of $2.1 million. During the nine months ended September 30, 2021, the FHLB repurchased 86,770 shares of FHLB stock with a book value of $8.7 million.March 31, 2022. No shares of FRB stock were purchased or sold during the three months ended March 31, 2023 or ~~the nine months ended September 30, 2022 or 2021.~~2022.

During the three months ended ~~September 30,~~March 31, 2023 and 2022, $(27,000) and ~~2021, $(39,000) and $97,000,~~$(92,000), respectively, of ~~(losses) gains~~losses on equity investments carried at fair value ~~or modified cost~~ were recorded within "Gain on equity securities, net" on the Consolidated Condensed Statements of Income. During the nine months ended September 30, 2022 and 2021, $488,000 and $492,000, respectively, of gains on equity investments carried at fair value or modified cost were recorded within "Gain"(Loss) gain on equity securities, net" on the Consolidated Condensed Statements of Income.

During the three months ended ~~September 30,~~March 31, 2023 and 2022, $(378,000) and ~~2021, $97,000 and $512,000,~~$2.4 million, respectively, of (losses) gains on equity investments carried at NAV were recorded within “Gain on equity securities, net” on the Consolidated Condensed Statements of Income. During the nine months ended September 30, 2022 and 2021, $2.6 million and $2.4 million, respectively, of gains on equity investments carried at NAV were recorded within “Gain“(Loss) gain on equity securities, net” on the Consolidated Condensed Statements of Income.

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Note 5 – Loans

The composition of the loan portfolio at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 was as follows:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
(In thousands)	(In thousands)	Amortized Cost		Amortized Cost		(In thousands)	Amortized Cost		Amortized Cost
Commercial, financial and agricultural: (1)	Commercial, financial and agricultural: (1)					Commercial, financial and agricultural: (1)
Commercial, financial and agricultural (1)	Commercial, financial and agricultural (1)	$	1,270,321	$	1,223,079	Commercial, financial and agricultural (1)	$	1,256,705	$	1,295,238
PPP loans	PPP loans	5,715		74,420		PPP loans	3,445		4,206
Overdrafts	Overdrafts	1,957		1,127		Overdrafts	1,831		1,489
Commercial real estate (1)	Commercial real estate (1)	1,790,801		1,801,792		Commercial real estate (1)	1,800,878		1,794,054
Construction real estate:	Construction real estate:					Construction real estate:
Commercial	Commercial	200,580		214,561		Commercial	173,668		208,982
Retail	Retail	111,127		107,225		Retail	117,075		116,433
Residential real estate:	Residential real estate:					Residential real estate:
Commercial	Commercial	532,921		533,802		Commercial	562,759		550,183
Mortgage	Mortgage	1,057,204		1,033,658		Mortgage	1,089,772		1,075,446
HELOC	HELOC	166,989		165,605		HELOC	164,656		167,151
Installment	Installment	4,251		5,642		Installment	3,987		4,091
Consumer:	Consumer:					Consumer:
Consumer	Consumer	1,938,913		1,685,793		Consumer	1,898,398		1,902,557
GFSC	GFSC	452		1,793		GFSC	140		274
Check loans	Check loans	2,144		2,093		Check loans	2,071		2,150
Leases	Leases	19,871		20,532		Leases	18,472		19,637
Total	Total	$	7,103,246	$	6,871,122	Total	$	7,093,857	$	7,141,891
Allowance for credit losses	Allowance for credit losses	(83,961)		(83,197)		Allowance for credit losses	(85,946)		(85,379)
Net loans	Net loans	$	7,019,285	$	6,787,925	Net loans	$	7,007,911	$	7,056,512

(1) Included within each of commercial, financial and agricultural loans and commercial real estate loans is an immaterial amount of consumer loans that were not broken out by class.

In order to support customers, Park participated in the CARES Act Paycheck Protection Program ("PPP"). For its assistance in ~~originating the first round of PPP~~making and retaining these loans, ~~during 2020,~~ Park received an aggregate of ~~$20.2 million in fees from the SBA, and for its assistance in originating additional PPP loans during 2021, Park received an aggregate of $12.9~~$33.1 million in fees from the SBA. During the three months ended ~~September 30,~~March 31, 2023 and March 31, 2022, $17,400 and September 30, 2021, $361,000 and $4.3 million, respectively, of PPP fee income was recognized within loan interest income. During the nine months ended September 30, 2022 and September 30, 2021, $2.9 million and $14.0$1.5 million, respectively, of PPP fee income was recognized within loan interest income.

Loans are shown net of deferred origination fees, costs and unearned income of ~~$18.2~~$17.7 million at ~~September 30, 2022,~~March 31, 2023, and of ~~$19.5~~$18.2 million at December 31, ~~2021,~~2022, which represented a net deferred income position in both years. At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, included in the net deferred origination fees, costs and unearned income were ~~$133,000~~$51,000 and ~~$2.8 million,~~$68,000, respectively, in net origination fees related to PPP loans. At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, loans included purchase accounting adjustments of ~~$2.7~~$2.3 million and ~~$4.2~~$2.5 million, respectively, which represented a net deferred income position at each date. This fair market value purchase accounting adjustment is expected to be recognized into interest income on a level yield basis over the remaining expected life of the loans.

Overdrawn deposit accounts of ~~$2.0~~$1.8 million and ~~$1.1~~$1.5 million were reclassified to loans at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Table of Contents

Credit Quality

Among other things, the adoption of ASU 2022-02 on January 1, 2023 eliminated the concept of TDRs. After the adoption of ASU 2022-02 on January 1, 2023, nonperforming loans consisted of nonaccrual loans and loans past due 90 days or more and still accruing. Prior to the adoption of ASU 2022-02, nonperforming loans consisted of nonaccrual loans, accruing TDRs and loans past due 90 days or more and still accruing.

The following table presents the amortized cost of nonaccrual loans and loans past due 90 days or more and still accruing, by class of loan, at March 31, 2023.


	March 31, 2023
(In thousands)	Nonaccrual Loans		Loans Past Due 90 Days or More and Accruing		Total Nonperforming Loans
Commercial, financial and agricultural:
Commercial, financial and agricultural	$	39,054	$	—	$	39,054
PPP loans	—		294		294
Overdrafts	—		—		—
Commercial real estate	15,476		—		15,476
Construction real estate:
Commercial	1,997		—		1,997
Retail	—		—		—
Residential real estate:
Commercial	2,338		—		2,338
Mortgage	10,888		291		11,179
HELOC	1,145		16		1,161
Installment	47		—		47
Consumer:
Consumer	1,545		634		2,179
GFSC	7		1		8
Check loans	—		—		—
Leases	617		15		632
Total loans	$	73,114	$	1,251	$	74,365

Table of Contents

~~Credit Quality~~

The following ~~tables present~~table presents the amortized cost of nonaccrual loans, accruing TDRs, and loans past due 90 days or more and still accruing, by class of loan, at ~~September 30, 2022 and~~ December 31, ~~2021:~~

September 30, 2022
(In thousands) Nonaccrual
Loans Accruing
TDRs Loans Past Due
90 Days
or More
and Accruing Total
Nonperforming
Loans
Commercial, financial and agricultural:
Commercial, financial and agricultural $ 10,736 $ 1,478 $ 30 $ 12,244
PPP loans — — 8 8
Overdrafts — — — —
Commercial real estate 18,866 9,068 — 27,934
Construction real estate:
Commercial 439 — — 439
Retail 10 4 — 14
Residential real estate:
Commercial 1,725 430 — 2,155
Mortgage 9,579 7,084 407 17,070
HELOC 1,172 197 — 1,369
Installment 67 1,009 4 1,080
Consumer:
Consumer 969 561 335 1,865
GFSC 14 — 6 20
Check loans — — — —
Leases 1,035 — — 1,035
Total loans $ 44,612 $ 19,831 $ 790 $ 65,233

2022:


	December 31, 2022
(In thousands)	Nonaccrual Loans		Accruing TDRs		Loans Past Due 90 Days or More and Accruing		Total Nonperforming Loans
Commercial, financial and agricultural
Commercial, financial and agricultural	$	38,158	$	3,261	$	—	$	41,419
PPP loans	—		—		389		389
Overdrafts	—		—		—		—
Commercial real estate	24,504		7,919		—		32,423
Construction real estate:
Commercial	1,712		—		—		1,712
Retail	1,254		12		—		1,266
Residential real estate:
Commercial	1,894		298		—		2,192
Mortgage	9,260		6,750		182		16,192
HELOC	1,133		187		7		1,327
Installment	51		1,037		—		1,088
Consumer
Consumer	1,012		670		703		2,385
GFSC	10		—		—		10
Check loans	—		—		—		—
Leases	708		—		—		708
Total loans	$	79,696	$	20,134	$	1,281	$	101,111

~~Table of Contents~~

December 31, 2021
(In thousands) Nonaccrual
Loans Accruing
TDRs Loans Past Due 90 Days or More and Accruing Total
Nonperforming
Loans
Commercial, financial and agricultural
Commercial, financial and agricultural $ 13,271 $ 9,396 $ — $ 22,667
PPP loans — — 793 793
Overdrafts — — — —
Commercial real estate 40,142 7,713 — 47,855
Construction real estate:
Commercial 52 169 — 221
Retail 716 9 — 725
Residential real estate:
Commercial 2,366 240 — 2,606
Mortgage 11,718 7,779 372 19,869
HELOC 1,590 803 — 2,393
Installment 82 1,508 — 1,590
Consumer
Consumer 1,518 700 431 2,649
GFSC 79 6 11 96
Check loans — — — —
Leases 1,188 — — 1,188
Total loans $ 72,722 $ 28,323 $ 1,607 $ 102,652

Table of Contents

The following tables provide additional detail on nonaccrual loans and the related ACL, by class of loan, at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


		September 30, 2022							March 31, 2023
(In thousands)	(In thousands)	Nonaccrual Loans With No ACL		Nonaccrual Loans With an ACL		Related ACL		(In thousands)	Nonaccrual Loans With No ACL		Nonaccrual Loans With an ACL		Related ACL
Commercial, financial and agricultural:	Commercial, financial and agricultural:							Commercial, financial and agricultural:
Commercial, financial and agricultural	Commercial, financial and agricultural	$	9,982	$	754	$	507	Commercial, financial and agricultural	$	29,007	$	10,047	$	4,112
PPP loans	PPP loans	—		—		—		PPP loans	—		—		—
Overdrafts	Overdrafts	—		—		—		Overdrafts	—		—		—
Commercial real estate	Commercial real estate	15,288		3,578		1,152		Commercial real estate	12,730		2,746		215
Construction real estate:	Construction real estate:							Construction real estate:
Commercial	Commercial	439		—		—		Commercial	1,997		—		—
Retail	Retail	—		10		1		Retail	—		—		—
Residential real estate:	Residential real estate:							Residential real estate:
Commercial	Commercial	1,725		—		—		Commercial	2,338		—		—
Mortgage	Mortgage	—		9,579		78		Mortgage	—		10,888		105
HELOC	HELOC	125		1,047		88		HELOC	—		1,145		175
Installment	Installment	—		67		17		Installment	—		47		18
Consumer	Consumer							Consumer
Consumer	Consumer	—		969		409		Consumer	—		1,545		364
GFSC	GFSC	—		14		1		GFSC	—		7		1
Check loans	Check loans	—		—		—		Check loans	—		—		—
Leases	Leases	943		92		18		Leases	593		24		2
Total loans	Total loans	$	28,502	$	16,110	$	2,271	Total loans	$	46,665	$	26,449	$	4,992

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Table of Contents


		December 31, 2021							December 31, 2022
(In thousands)	(In thousands)	Nonaccrual Loans With No ACL		Nonaccrual Loans With an ACL		Related ACL		(In thousands)	Nonaccrual Loans With No ACL		Nonaccrual Loans With an ACL		Related ACL
Commercial, financial and agricultural:	Commercial, financial and agricultural:							Commercial, financial and agricultural:
Commercial, financial and agricultural	Commercial, financial and agricultural	$	11,494	$	1,777	$	1,343	Commercial, financial and agricultural	$	28,291	$	9,867	$	3,440
PPP loans	PPP loans	—		—		—		PPP loans	—		—		—
Overdrafts	Overdrafts	—		—		—		Overdrafts	—		—		—
Commercial real estate	Commercial real estate	39,151		991		188		Commercial real estate	22,965		1,539		130
Construction real estate:	Construction real estate:							Construction real estate:			—
Commercial	Commercial	52		—		—		Commercial	1,712		—		—
Retail	Retail	—		716		67		Retail	—		1,254		19
Residential real estate:	Residential real estate:							Residential real estate:			—
Commercial	Commercial	2,366		—		—		Commercial	1,894		—		—
Mortgage	Mortgage	—		11,718		73		Mortgage	—		9,260		85
HELOC	HELOC	—		1,590		99		HELOC	—		1,133		191
Installment	Installment	—		82		24		Installment	—		51		17
Consumer	Consumer							Consumer
Consumer	Consumer	—		1,518		393		Consumer	—		1,012		283
GFSC	GFSC	—		79		10		GFSC	—		10		1
Check loans	Check loans	—		—		—		Check loans	—		—		—
Leases	Leases	914		274		43		Leases	680		28		9
Total	Total	$	53,977	$	18,745	$	2,240	Total	$	55,542	$	24,154	$	4,175

Nonaccrual commercial loans are evaluated on an individual basis and are excluded from the collective evaluation. Management’s general practice is to proactively charge down loans individually evaluated to the fair value of the underlying collateral. Nonaccrual consumer loans are collectively evaluated based on similar risk characteristics.

The following tables provide the amortized cost basis of collateral-dependent loans by class of loan, as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


		September 30, 2022									March 31, 2023
(In thousands)	(In thousands)	Real Estate		Business Assets		Other		Total		(In thousands)	Real Estate		Business Assets		Other		Total
Commercial, financial and agricultural	Commercial, financial and agricultural									Commercial, financial and agricultural
Commercial, financial and agricultural	Commercial, financial and agricultural	$	8,716	$	3,318	$	225	$	12,259	Commercial, financial and agricultural	$	8,541	$	7,364	$	23,133	$	39,038
Commercial real estate	Commercial real estate	31,436		30		—		31,466		Commercial real estate	18,782		155		—		18,937
Construction real estate:	Construction real estate:									Construction real estate:
Commercial	Commercial	1,107		—		—		1,107		Commercial	2,648		—		—		2,648
Residential real estate:	Residential real estate:									Residential real estate:
Commercial	Commercial	2,452		—		—		2,452		Commercial	2,613		—		—		2,613
Mortgage	Mortgage	94		—		—		94		Mortgage	86		—		—		86
HELOC		124		—		—		124
Leases	Leases	—		1,035		—		1,035		Leases	—		617		—		617
Total loans	Total loans	$	43,929	$	4,383	$	225	$	48,537	Total loans	$	32,670	$	8,136	$	23,133	$	63,939

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Table of Contents


		December 31, 2021									December 31, 2022
(In thousands)	(In thousands)	Real Estate		Business Assets		Other		Total		(In thousands)	Real Estate		Business Assets		Other		Total
Commercial, financial and agricultural	Commercial, financial and agricultural									Commercial, financial and agricultural
Commercial, financial and agricultural	Commercial, financial and agricultural	$	9,321	$	13,366	$	156	$	22,843	Commercial, financial and agricultural	$	8,242	$	7,788	$	23,125	$	39,155
Commercial real estate	Commercial real estate	52,901		37		—		52,938		Commercial real estate	35,908		28		—		35,936
Construction real estate:	Construction real estate:									Construction real estate:
Commercial	Commercial	1,178		—		—		1,178		Commercial	2,372		—		—		2,372
Residential real estate:	Residential real estate:									Residential real estate:
Commercial	Commercial	2,906		—		57		2,963		Commercial	2,479		—		—		2,479
Mortgage	Mortgage	370		—		—		370		Mortgage	90		—		—		90
HELOC		148		—		—		148
Leases	Leases	—		1,211		—		1,211		Leases	—		708		—		708
Total loans	Total loans	$	66,824	$	14,614	$	213	$	81,651	Total loans	$	49,091	$	8,524	$	23,125	$	80,740

Interest income on nonaccrual loans individually evaluated for impairment is recognized on a cash basis only when Park expects to receive the entire recorded investment in the loans. The following table presents interest income recognized on nonaccrual loans for the three-month ~~and the nine-month~~ periods ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:


		Interest Income Recognized									Interest Income Recognized
(In thousands)	(In thousands)	Three Months Ended September 30, 2022		Three Months Ended September 30, 2021		Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021		(In thousands)	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022
Commercial, financial and agricultural:	Commercial, financial and agricultural:									Commercial, financial and agricultural:
Commercial, financial and agricultural	Commercial, financial and agricultural	$	15	$	40	$	45	$	147	Commercial, financial and agricultural	$	605	$	17
PPP loans	PPP loans	—		—		—		—		PPP loans	—		—
Overdrafts	Overdrafts	—		—		—		—		Overdrafts	—		—
Commercial real estate	Commercial real estate	237		458		751		1,480		Commercial real estate	160		257
Construction real estate:	Construction real estate:									Construction real estate:
Commercial	Commercial	6		1		10		38		Commercial	32		1
Retail	Retail	—		—		4		1		Retail	—		4
Residential real estate:	Residential real estate:									Residential real estate:
Commercial	Commercial	24		60		64		180		Commercial	26		20
Mortgage	Mortgage	43		90		112		233		Mortgage	49		33
HELOC	HELOC	5		2		11		12		HELOC	8		4
Installment	Installment	1		—		3		2		Installment	1		2
Consumer:	Consumer:									Consumer:
Consumer	Consumer	14		23		42		71		Consumer	19		14
GFSC	GFSC	1		3		4		11		GFSC	—		2
Check loans	Check loans	—		—		—		—		Check loans	—		—
Leases	Leases	9		17		33		61		Leases	—		14
Total loans	Total loans	$	355	$	694	$	1,079	$	2,236	Total loans	$	900	$	368

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The following tables present the aging of the amortized cost in past due loans at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 by class of loan:


		September 30, 2022											March 31, 2023
(In thousands)	(In thousands)	Accruing Loans Past Due 30-89 Days		Past Due Nonaccrual Loans and Loans Past Due 90 Days or More and Accruing (1)		Total Past Due		Total Current (2)		Total Amortized Cost		(In thousands)	Accruing Loans Past Due 30-89 Days		Past Due Nonaccrual Loans and Loans Past Due 90 Days or More and Accruing (1)		Total Past Due		Total Current (2)		Total Amortized Cost
Commercial, financial and agricultural:	Commercial, financial and agricultural:											Commercial, financial and agricultural:
Commercial, financial and agricultural	Commercial, financial and agricultural	$	1,356	$	9,303	$	10,659	$	1,259,662	$	1,270,321	Commercial, financial and agricultural	$	2,732	$	31,450	$	34,182	$	1,222,523	$	1,256,705
PPP loans	PPP loans	780		8		788		4,927		5,715		PPP loans	—		294		294		3,151		3,445
Overdrafts	Overdrafts	—		—		—		1,957		1,957		Overdrafts	—		—		—		1,831		1,831
Commercial real estate	Commercial real estate	574		516		1,090		1,789,711		1,790,801		Commercial real estate	390		2,478		2,868		1,798,010		1,800,878
Construction real estate:	Construction real estate:											Construction real estate:
Commercial	Commercial	158		—		158		200,422		200,580		Commercial	—		—		—		173,668		173,668
Retail	Retail	—		—		—		111,127		111,127		Retail	50		—		50		117,025		117,075
Residential real estate:	Residential real estate:											Residential real estate:
Commercial	Commercial	9		362		371		532,550		532,921		Commercial	18		328		346		562,413		562,759
Mortgage	Mortgage	6,986		5,450		12,436		1,044,768		1,057,204		Mortgage	4,439		5,362		9,801		1,079,971		1,089,772
HELOC	HELOC	282		631		913		166,076		166,989		HELOC	418		745		1,163		163,493		164,656
Installment	Installment	46		7		53		4,198		4,251		Installment	11		—		11		3,976		3,987
Consumer:	Consumer:											Consumer:
Consumer	Consumer	4,498		477		4,975		1,933,938		1,938,913		Consumer	4,593		878		5,471		1,892,927		1,898,398
GFSC	GFSC	46		10		56		396		452		GFSC	26		2		28		112		140
Check loans	Check loans	5		—		5		2,139		2,144		Check loans	1		—		1		2,070		2,071
Leases	Leases	38		166		204		19,667		19,871		Leases	98		15		113		18,359		18,472
Total loans	Total loans	$	14,778	$	16,930	$	31,708	$	7,071,538	$	7,103,246	Total loans	$	12,776	$	41,552	$	54,328	$	7,039,529	$	7,093,857

(1) Includes an aggregate of ~~$790,000 of loans past due 90 days or more and accruing. The remaining loans were past due nonaccrual loans.~~

~~(2) Includes an aggregate of $28.5 million of nonaccrual loans which were current in regards to contractual principal and interest payments.~~

~~Table of Contents~~

December 31, 2021
(in thousands) Accruing
Loans
Past Due
30-89 Days
Past Due
Nonaccrual
Loans and Loans Past
Due 90 Days or
More and
Accruing (1)
Total Past
Due
Total
Current (2)
Total
Amortized Cost
Commercial, financial and agricultural
Commercial, financial and agricultural $ 2,908 $ 9,547 $ 12,455 $ 1,210,624 $ 1,223,079
PPP loans 242 793 1,035 73,385 74,420
Overdrafts — — — 1,127 1,127
Commercial real estate 65 1,461 1,526 1,800,266 1,801,792
Construction real estate:
Commercial — — — 214,561 214,561
Retail 346 660 1,006 106,219 107,225
Residential real estate:
Commercial 283 438 721 533,081 533,802
Mortgage 6,170 5,933 12,103 1,021,555 1,033,658
HELOC 565 1,011 1,576 164,029 165,605
Installment 49 31 80 5,562 5,642
Consumer
Consumer 2,614 618 3,232 1,682,561 1,685,793
GFSC 153 52 205 1,588 1,793
Check loans 10 — 10 2,083 2,093
Leases 60 526 586 19,946 20,532
Total loans $ 13,465 $ 21,070 $ 34,535 $ 6,836,587 $ 6,871,122

~~(1) Includes an aggregate of $1.6~~$1.3 million of loans past due 90 days or more and accruing. The remaining loans were past due nonaccrual loans.

(2) Includes an aggregate of ~~$53.3~~$32.8 million of nonaccrual loans which were current in regards to contractual principal and interest payments.

Table of Contents


	December 31, 2022
(in thousands)	Accruing Loans Past Due 30-89 Days		Past Due Nonaccrual Loans and Loans Past Due 90 Days or More and Accruing (1)		Total Past Due		Total Current (2)		Total Amortized Cost
Commercial, financial and agricultural
Commercial, financial and agricultural	$	378	$	9,246	$	9,624	$	1,285,614	$	1,295,238
PPP loans	155		389		544		3,662		4,206
Overdrafts	—		—		—		1,489		1,489
Commercial real estate	737		4,738		5,475		1,788,579		1,794,054
Construction real estate:
Commercial	751		—		751		208,231		208,982
Retail	1,035		523		1,558		114,875		116,433
Residential real estate:
Commercial	519		477		996		549,187		550,183
Mortgage	7,630		5,157		12,787		1,062,659		1,075,446
HELOC	832		587		1,419		165,732		167,151
Installment	57		4		61		4,030		4,091
Consumer
Consumer	5,451		964		6,415		1,896,142		1,902,557
GFSC	48		—		48		226		274
Check loans	2		—		2		2,148		2,150
Leases	—		—		—		19,637		19,637
Total loans	$	17,595	$	22,085	$	39,680	$	7,102,211	$	7,141,891

(1) Includes an aggregate of $1.3 million of loans past due 90 days or more and accruing. The remaining loans were past due nonaccrual loans.

(2) Includes an aggregate of $58.9 million of nonaccrual loans which were current in regards to contractual principal and interest payments.

Credit Quality Indicators

Management utilizes past due information as a credit quality indicator across the loan portfolio. Past due information at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 is included in the previous tables. The past due information is the primary credit quality indicator within the following classes of loans: (1) overdrafts in the commercial, financial and agricultural portfolio segment; (2) retail loans in the construction real estate portfolio segment; (3) mortgage loans, HELOC and installment loans in the residential real estate portfolio segment; and (4) consumer loans, GFSC loans, and check loans in the consumer portfolio segment. The primary credit indicator for commercial loans is based on an internal grading system that grades all commercial loans on a scale from 1 to 8. Credit grades are continuously monitored by the responsible loan officer and adjustments are made when appropriate. A grade of 1 indicates little or no credit risk and a grade of 8 is considered a loss. Commercial loans that are pass-rated (graded a 1 through a 4) are considered to be of acceptable credit risk. Commercial loans graded a 5 (special mention) are considered to be watch list credits and a higher PD is applied to these loans. Loans classified as special mention have potential weaknesses that require management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of Park’s credit position at some future date. Commercial loans graded a 6 (substandard), also considered watch list credits, are considered to represent higher credit risk and, as a result, a higher PD is applied to these loans. Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor or the value of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that Park will sustain some loss if the deficiencies are not corrected. Commercial loans graded a 7 (doubtful) are shown as nonaccrual and Park generally charges these loans down to their fair value by taking a partial charge-off or recording a specific reserve. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Certain 6-rated loans and all 7-rated loans are placed on nonaccrual status and included within the individually evaluated category. A commercial loan is deemed nonaccrual, and is individually evaluated, when management

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determines the borrower's ability to perform in accordance with the contractual loan agreement is in doubt. Any commercial loan graded an 8 (loss) is completely charged off.

Based on the then most recent analysis performed, the risk category of commercial loans by class of loans as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were as follows:


September 30, 2022		Term Loans Amortized Cost Basis by Origination Year
March 31, 2023																		March 31, 2023	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total		(In thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial, financial and agricultural: Commercial, financial and agricultural (1)	Commercial, financial and agricultural: Commercial, financial and agricultural (1)																	Commercial, financial and agricultural: Commercial, financial and agricultural (1)
Risk rating	Risk rating																	Risk rating
Pass	Pass	$	146,540	$	221,469	$	166,613	$	68,641	$	36,924	$	62,427	$	523,166	$	1,225,780	Pass	$	36,402	$	191,499	$	186,796	$	134,697	$	54,571	$	72,782	$	501,803	$	1,178,550
Special Mention	Special Mention	622		1,554		1,076		613		38		92		27,378		31,373		Special Mention	38		1,037		657		965		267		87		33,982		37,033
Substandard	Substandard	277		20		2,189		108		1,384		7,838		669		12,485		Substandard	19		254		126		2,777		122		1,718		26,511		31,527
Doubtful	Doubtful	—		—		7		99		99		273		205		683		Doubtful	—		786		—		—		150		8,568		91		9,595
Total	Total	$	147,439	$	223,043	$	169,885	$	69,461	$	38,445	$	70,630	$	551,418	$	1,270,321	Total	$	36,459	$	193,576	$	187,579	$	138,439	$	55,110	$	83,155	$	562,387	$	1,256,705

Current period gross write offs																		Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	52	$	—	$	52


Commercial, financial and agricultural: PPP	Commercial, financial and agricultural: PPP																	Commercial, financial and agricultural: PPP
Risk rating	Risk rating																	Risk rating
Pass	Pass	$	—	$	3,162	$	2,553	$	—	$	—	$	—	$	—	$	5,715	Pass	$	—	$	—	$	1,342	$	2,103	$	—	$	—	$	—	$	3,445
Special Mention	Special Mention	—		—		—		—		—		—		—		—		Special Mention	—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		—		—
Doubtful	Doubtful	—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	—	$	3,162	$	2,553	$	—	$	—	$	—	$	—	$	5,715	Total	$	—	$	—	$	1,342	$	2,103	$	—	$	—	$	—	$	3,445

Current period gross write offs																		Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


Commercial real estate (1)	Commercial real estate (1)																	Commercial real estate (1)
Risk rating	Risk rating																	Risk rating
Pass	Pass	$	271,557	$	379,993	$	389,071	$	228,751	$	112,182	$	327,854	$	14,433	$	1,723,841	Pass	$	66,791	$	318,942	$	369,914	$	362,128	$	217,432	$	390,197	$	14,372	$	1,739,776
Special Mention	Special Mention	397		757		3,934		6,821		13,830		22,311		—		48,050		Special Mention	—		197		4,859		3,845		743		35,851		96		45,591
Substandard	Substandard	413		1,292		1,043		1,549		4,293		6,596		150		15,336		Substandard	—		918		1,585		1,753		2,692		6,879		335		14,162
Doubtful	Doubtful	—		—		—		—		2,966		608		—		3,574		Doubtful	—		—		81		740		130		398		—		1,349
Total	Total	$	272,367	$	382,042	$	394,048	$	237,121	$	133,271	$	357,369	$	14,583	$	1,790,801	Total	$	66,791	$	320,057	$	376,439	$	368,466	$	220,997	$	433,325	$	14,803	$	1,800,878

Current period gross write offs																		Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Construction real estate: Commercial
Risk rating
Pass $ 69,238 $ 55,895 $ 30,411 $ 3,019 $ 3,194 $ 3,400 $ 34,080 $ 199,237
Special Mention — — 236 — — — — 236
Substandard — 132 307 — 668 — — 1,107
Doubtful — — — — — — — —
Total $ 69,238 $ 56,027 $ 30,954 $ 3,019 $ 3,862 $ 3,400 $ 34,080 $ 200,580


Residential Real Estate: Commercial
Construction real estate: Commercial																		Construction real estate: Commercial
Risk rating	Risk rating																	Risk rating
Pass	Pass	$	77,551	$	125,411	$	144,603	$	58,862	$	35,700	$	69,669	$	15,341	$	527,137	Pass	$	17,938	$	98,767	$	17,350	$	20,875	$	2,388	$	4,091	$	9,383	$	170,792
Special Mention	Special Mention	—		93		1,491		698		—		1,356		146		3,784		Special Mention	—		—		—		228		—		—		—		228
Substandard	Substandard	195		464		321		32		309		679		—		2,000		Substandard	988		647		105		257		—		651		—		2,648
Doubtful	Doubtful	—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	77,746	$	125,968	$	146,415	$	59,592	$	36,009	$	71,704	$	15,487	$	532,921	Total	$	18,926	$	99,414	$	17,455	$	21,360	$	2,388	$	4,742	$	9,383	$	173,668

Current period gross write offs																		Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

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September 30, 2022		Term Loans Amortized Cost Basis by Origination Year
March 31, 2023																		March 31, 2023	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total		(In thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Total
Leases
Residential Real Estate: Commercial																		Residential Real Estate: Commercial
Risk rating	Risk rating																	Risk rating
Pass	Pass	$	6,869	$	4,275	$	3,996	$	1,529	$	1,209	$	853	$	—	$	18,731	Pass	$	24,461	$	115,770	$	115,043	$	136,483	$	54,408	$	91,876	$	18,062	$	556,103
Special Mention	Special Mention	105		—		—		—		—		—		—		105		Special Mention	—		343		563		1,674		423		1,018		—		4,021
Substandard	Substandard	34		—		533		122		13		33		—		735		Substandard	56		597		350		260		38		995		339		2,635
Doubtful	Doubtful	74		91		26		108		—		1		—		300		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	7,082	$	4,366	$	4,555	$	1,759	$	1,222	$	887	$	—	$	19,871	Total	$	24,517	$	116,710	$	115,956	$	138,417	$	54,869	$	93,889	$	18,401	$	562,759

Current period gross write offs																		Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


Total Commercial Loans
Leases																		Leases
Risk rating	Risk rating																	Risk rating
Pass	Pass	$	571,755	$	790,205	$	737,247	$	360,802	$	189,209	$	464,203	$	587,020	$	3,700,441	Pass	$	1,205	$	6,618	$	3,007	$	2,939	$	864	$	1,304	$	—	$	15,937
Special Mention	Special Mention	1,124		2,404		6,737		8,132		13,868		23,759		27,524		83,548		Special Mention	413		857		526		85		37		—		—		1,918
Substandard	Substandard	919		1,908		4,393		1,811		6,667		15,146		819		31,663		Substandard	—		—		—		412		157		24		—		593
Doubtful	Doubtful	74		91		33		207		3,065		882		205		4,557		Doubtful	—		—		—		—		24		—		—		24
Total	Total	$	573,872	$	794,608	$	748,410	$	370,952	$	212,809	$	503,990	$	615,568	$	3,820,209	Total	$	1,618	$	7,475	$	3,533	$	3,436	$	1,082	$	1,328	$	—	$	18,472

Current period gross write offs																		Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


Total Commercial Loans
Risk rating
Pass	$	146,797	$	731,596	$	693,452	$	659,225	$	329,663	$	560,250	$	543,620	$	3,664,603
Special Mention	451		2,434		6,605		6,797		1,470		36,956		34,078		88,791
Substandard	1,063		2,416		2,166		5,459		3,009		10,267		27,185		51,565
Doubtful	—		786		81		740		304		8,966		91		10,968
Total	$	148,311	$	737,232	$	702,304	$	672,221	$	334,446	$	616,439	$	604,974	$	3,815,927

Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	52	$	—	$	52

(1) Included within each of commercial, financial and agricultural loans and commercial real estate loans is an immaterial amount of consumer loans that are not broken out by class.

December 31, 2021 Term Loans Amortized Cost Basis by Origination Year
(In thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total
Commercial, financial and agricultural: Commercial, financial and agricultural (1)
Risk rating
Pass $ 267,016 $ 208,078 $ 100,736 $ 52,705 $ 36,528 $ 59,909 $ 468,749 $ 1,193,721
Special Mention 1,608 1,592 429 59 277 — 11,986 15,951
Substandard 106 906 401 1,345 549 7,818 484 11,609
Doubtful — 30 465 227 463 125 488 1,798
Total $ 268,730 $ 210,606 $ 102,031 $ 54,336 $ 37,817 $ 67,852 $ 481,707 $ 1,223,079

Table of Contents

Commercial, financial and agricultural: PPP
Risk rating
Pass $ 69,588 $ 4,832 $ — $ — $ — $ — $ — $ 74,420
Special Mention — — — — — — — —
Substandard — — — — — — — —
Doubtful — — — — — — — —
Total $ 69,588 $ 4,832 $ — $ — $ — $ — $ — $ 74,420
Commercial real estate (1)
Risk rating
Pass $ 376,468 $ 445,780 $ 263,786 $ 154,637 $ 115,571 $ 317,371 $ 14,890 $ 1,688,503
Special Mention 786 6,206 32,965 9,354 4,297 17,829 996 72,433
Substandard 3,897 2,578 1,385 11,373 5,967 14,541 450 40,191
Doubtful — — — — 47 618 — 665
Total $ 381,151 $ 454,564 $ 298,136 $ 175,364 $ 125,882 $ 350,359 $ 16,336 $ 1,801,792


December 31, 2022	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial, financial and agricultural: Commercial, financial and agricultural (1)
Risk rating
Pass	$	197,497	$	198,999	$	142,487	$	60,845	$	32,887	$	47,135	$	546,237	$	1,226,087
Special Mention	700		313		918		315		4		35		25,536		27,821
Substandard	1,101		18		2,737		226		1,836		8,424		26,464		40,806
Doubtful	—		—		3		77		80		172		192		524
Total	$	199,298	$	199,330	$	146,145	$	61,463	$	34,807	$	55,766	$	598,429	$	1,295,238


Commercial, financial and agricultural: PPP
Risk rating
Pass	$	—	$	1,875	$	2,331	$	—	$	—	$	—	$	—	$	4,206
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	—	$	1,875	$	2,331	$	—	$	—	$	—	$	—	$	4,206


Commercial real estate (1)
Risk rating
Pass	$	323,235	$	374,763	$	372,653	$	220,072	$	107,467	$	305,539	$	14,052	$	1,717,781
Special Mention	199		3,256		3,388		5,863		16,059		22,220		150		51,135
Substandard	7,856		1,427		3,007		3,561		856		5,471		428		22,606
Doubtful	—		—		—		—		1,941		591		—		2,532
Total	$	331,290	$	379,446	$	379,048	$	229,496	$	126,323	$	333,821	$	14,630	$	1,794,054


Construction real estate: Commercial
Risk rating
Pass	$	107,976	$	40,534	$	21,556	$	2,686	$	1,428	$	3,015	$	29,183	$	206,378
Special Mention	—		—		232		—		—		—		—		232
Substandard	652		800		260		—		660		—		—		2,372
Doubtful	—		—		—		—		—		—		—		—
Total	$	108,628	$	41,334	$	22,048	$	2,686	$	2,088	$	3,015	$	29,183	$	208,982


Residential Real Estate: Commercial
Risk rating
Pass	$	107,086	$	120,303	$	147,802	$	56,980	$	33,140	$	63,499	$	15,191	$	544,001
Special Mention	—		92		1,477		440		—		1,625		—		3,634
Substandard	610		449		264		29		304		553		339		2,548
Doubtful	—		—		—		—		—		—		—		—
Total	$	107,696	$	120,844	$	149,543	$	57,449	$	33,444	$	65,677	$	15,530	$	550,183

Table of Contents

December 31, 2021 Term Loans Amortized Cost Basis by Origination Year
(In thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total
Construction real estate: Commercial
Risk rating
Pass $ 96,929 $ 76,867 $ 7,003 $ 4,841 $ 1,856 $ 3,412 $ 22,444 $ 213,352
Special Mention 202 — — 691 — — — 893
Substandard — 52 — 264 — — — 316
Doubtful — — — — — — — —
Total $ 97,131 $ 76,919 $ 7,003 $ 5,796 $ 1,856 $ 3,412 $ 22,444 $ 214,561


December 31, 2022	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	2022	2021	2020	2019	2018	Prior	Revolving Loans Amortized Cost Basis	Total


Leases
Risk rating
Pass	$	7,629	$	3,310	$	3,347	$	1,167	$	981	$	605	$	—	$	17,039
Special Mention	1,085		614		130		60		—		—		—		1,889
Substandard	—		—		464		111		12		26		—		613
Doubtful	—		—		—		96		—		—		—		96
Total	$	8,714	$	3,924	$	3,941	$	1,434	$	993	$	631	$	—	$	19,637

Residential Real Estate: Commercial
Risk rating
Pass $ 138,801 $ 165,202 $ 67,921 $ 44,896 $ 26,583 $ 70,434 $ 15,507 $ 529,344
Special Mention 95 884 106 79 — 497 135 1,796
Substandard 735 22 691 41 95 993 29 2,606
Doubtful 56 — — — — — — 56
Total $ 139,687 $ 166,108 $ 68,718 $ 45,016 $ 26,678 $ 71,924 $ 15,671 $ 533,802
Leases
Risk rating
Pass $ 6,705 $ 5,729 $ 2,628 $ 2,151 $ 705 $ 845 $ — $ 18,763
Special Mention 198 111 184 67 21 — — 581
Substandard — 698 — 23 19 78 — 818
Doubtful — — 332 16 22 — — 370
Total $ 6,903 $ 6,538 $ 3,144 $ 2,257 $ 767 $ 923 $ — $ 20,532


Total Commercial Loans	Total Commercial Loans																	Total Commercial Loans
Risk rating	Risk rating																	Risk rating
Pass	Pass	$	955,507	$	906,488	$	442,074	$	259,230	$	181,243	$	451,971	$	521,590	$	3,718,103	Pass	$	743,423	$	739,784	$	690,176	$	341,750	$	175,903	$	419,793	$	604,663	$	3,715,492
Special Mention	Special Mention	2,889		8,793		33,684		10,250		4,595		18,326		13,117		91,654		Special Mention	1,984		4,275		6,145		6,678		16,063		23,880		25,686		84,711
Substandard	Substandard	4,738		4,256		2,477		13,046		6,630		23,430		963		55,540		Substandard	10,219		2,694		6,732		3,927		3,668		14,474		27,231		68,945
Doubtful	Doubtful	56		30		797		243		532		743		488		2,889		Doubtful	—		—		3		173		2,021		763		192		3,152
Total	Total	$	963,190	$	919,567	$	479,032	$	282,769	$	193,000	$	494,470	$	536,158	$	3,868,186	Total	$	755,626	$	746,753	$	703,056	$	352,528	$	197,655	$	458,910	$	657,772	$	3,872,300

(1) Included within each of commercial, financial and agricultural loans and commercial real estate loans is an immaterial amount of consumer loans that are not broken out by class.

~~Table of Contents~~

Park considers the performance of the loan portfolio and its impact on the allowance for credit losses. For residential and consumer loan classes, Park also evaluates credit quality based on the aging status of the loan, which was previously presented, and by performing status. The following tables present the amortized cost in residential and consumer loans based on performing status. ~~Park defines a loan as~~As previously mentioned, the adoption of ASU 2022-02 on January 1, 2023 eliminated the concept of TDRs. After the adoption of ASU 2022-02 on January 1, 2023, nonperforming ~~if it is on~~loans consisted of nonaccrual ~~status, designated as an accruing TDR, or is greater than~~loans and loans past due 90 days or more and still accruing. Prior to the adoption of ASU 2022-02, nonperforming loans consisted of nonaccrual loans, accruing TDRs and loans past due 90 days or more and still accruing.


September 30, 2022		Term Loans Amortized Cost Basis by Origination Year
March 31, 2023																		March 31, 2023	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total		(In thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial, financial and agricultural: Overdrafts	Commercial, financial and agricultural: Overdrafts																	Commercial, financial and agricultural: Overdrafts
Performing	Performing	$	1,957	$	—	$	—	$	—	$	—	$	—	$	—	$	1,957	Performing	$	1,831	$	—	$	—	$	—	$	—	$	—	$	—	$	1,831
Nonperforming	Nonperforming	—		—		—		—		—		—		—		—		Nonperforming	—		—		—		—		—		—		—		—
Total	Total	$	1,957	$	—	$	—	$	—	$	—	$	—	$	—	$	1,957	Total	$	1,831	$	—	$	—	$	—	$	—	$	—	$	—	$	1,831

Current period gross write offs																		Current period gross write offs	$	297	$	—	$	—	$	—	$	—	$	—	$	—	$	297


Construction Real Estate: Retail	Construction Real Estate: Retail																	Construction Real Estate: Retail
Performing	Performing	$	49,821	$	43,035	$	9,093	$	4,751	$	1,746	$	2,591	$	76	$	111,113	Performing	$	6,050	$	79,178	$	17,718	$	5,986	$	4,121	$	3,948	$	74	$	117,075
Nonperforming	Nonperforming	—		—		—		—		—		14		—		14		Nonperforming	—		—		—		—		—		—		—		—
Total	Total	$	49,821	$	43,035	$	9,093	$	4,751	$	1,746	$	2,605	$	76	$	111,127	Total	$	6,050	$	79,178	$	17,718	$	5,986	$	4,121	$	3,948	$	74	$	117,075

Current period gross write offs																		Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Residential Real Estate: Mortgage
Performing $ 168,168 $ 217,090 $ 197,891 $ 93,470 $ 57,037 $ 306,478 $ — $ 1,040,134
Nonperforming — — 357 564 578 15,571 — 17,070
Total $ 168,168 $ 217,090 $ 198,248 $ 94,034 $ 57,615 $ 322,049 $ — $ 1,057,204

Table of Contents

Residential Real Estate: HELOC
Performing $ — $ 312 $ 24 $ 112 $ 117 $ 2,118 $ 162,937 $ 165,620
Nonperforming — — 45 — — 1,156 168 1,369
Total $ — $ 312 $ 69 $ 112 $ 117 $ 3,274 $ 163,105 $ 166,989

Residential Real Estate: Installment
Performing $ 78 $ — $ 2 $ 271 $ 68 $ 2,752 $ — $ 3,171
Nonperforming — — 8 3 19 1,050 — 1,080
Total $ 78 $ — $ 10 $ 274 $ 87 $ 3,802 $ — $ 4,251


Consumer: Consumer
March 31, 2023																		March 31, 2023	Term Loans Amortized Cost Basis by Origination Year
(In thousands)																		(In thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Total
Residential Real Estate: Mortgage																		Residential Real Estate: Mortgage
Performing	Performing	$	731,330	$	501,209	$	366,792	$	171,775	$	71,891	$	77,727	$	16,324	$	1,937,048	Performing	$	29,761	$	208,136	$	229,318	$	189,929	$	87,938	$	333,511	$	—	$	1,078,593
Nonperforming	Nonperforming	109		318		349		336		200		553		—		1,865		Nonperforming	—		835		597		939		549		8,259		—		11,179
Total	Total	$	731,439	$	501,527	$	367,141	$	172,111	$	72,091	$	78,280	$	16,324	$	1,938,913	Total	$	29,761	$	208,971	$	229,915	$	190,868	$	88,487	$	341,770	$	—	$	1,089,772

Current period gross write offs																		Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	20	$	—	$	20


Consumer: GFSC
Residential Real Estate: HELOC																		Residential Real Estate: HELOC
Performing	Performing	$	—	$	—	$	81	$	213	$	70	$	7	$	61	$	432	Performing	$	—	$	140	$	299	$	71	$	137	$	2,120	$	160,728	$	163,495
Nonperforming	Nonperforming	—		—		—		17		—		3		—		20		Nonperforming	—		—		—		—		99		787		275		1,161
Total	Total	$	—	$	—	$	81	$	230	$	70	$	10	$	61	$	452	Total	$	—	$	140	$	299	$	71	$	236	$	2,907	$	161,003	$	164,656

Current period gross write offs																		Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	9	$	—	$	9


Consumer: Check loans
Residential Real Estate: Installment																		Residential Real Estate: Installment
Performing	Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	2,144	$	2,144	Performing	$	74	$	180	$	—	$	7	$	213	$	3,466	$	—	$	3,940
Nonperforming	Nonperforming	—		—		—		—		—		—		—		—		Nonperforming	—		—		—		—		—		47		—		47
Total	Total	$	—	$	—	$	—	$	—	$	—	$	—	$	2,144	$	2,144	Total	$	74	$	180	$	—	$	7	$	213	$	3,513	$	—	$	3,987

Current period gross write offs																		Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


Total Consumer Loans
Consumer: Consumer																		Consumer: Consumer
Performing	Performing	$	951,354	$	761,646	$	573,883	$	270,592	$	130,929	$	391,673	$	181,542	$	3,261,619	Performing	$	146,771	$	778,177	$	422,523	$	299,815	$	129,981	$	109,603	$	9,349	$	1,896,219
Nonperforming	Nonperforming	109		318		759		920		797		18,347		168		21,418		Nonperforming	—		660		459		314		250		496		—		2,179
Total	Total	$	951,463	$	761,964	$	574,642	$	271,512	$	131,726	$	410,020	$	181,710	$	3,283,037	Total	$	146,771	$	778,837	$	422,982	$	300,129	$	130,231	$	110,099	$	9,349	$	1,898,398

Current period gross write offs																		Current period gross write offs	$	8	$	600	$	588	$	314	$	195	$	142	$	—	$	1,847


Consumer: GFSC
Performing	$	—	$	—	$	—	$	30	$	40	$	21	$	41	$	132
Nonperforming	—		—		—		—		8		—		—		8
Total	$	—	$	—	$	—	$	30	$	48	$	21	$	41	$	140

Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


Consumer: Check loans
Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	2,071	$	2,071
Nonperforming	—		—		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—	$	—	$	2,071	$	2,071

Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	10	$	10


Total Consumer Loans
Performing	$	184,487	$	1,065,811	$	669,858	$	495,838	$	222,430	$	452,669	$	172,263	$	3,263,356
Nonperforming	—		1,495		1,056		1,253		906		9,589		275		14,574
Total	$	184,487	$	1,067,306	$	670,914	$	497,091	$	223,336	$	462,258	$	172,538	$	3,277,930

Current period gross write offs	$	305	$	600	$	588	$	314	$	195	$	171	$	10	$	2,183

Table of Contents


Construction Real Estate: Retail
December 31, 2022																		December 31, 2022	Term Loans Amortized Cost Basis by Origination Year
(In thousands)																		(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial, financial and agricultural: Overdrafts																		Commercial, financial and agricultural: Overdrafts
Performing	Performing	$	68,374	$	26,247	$	5,710	$	2,743	$	1,505	$	1,842	$	79	$	106,500	Performing	$	1,489	$	—	$	—	$	—	$	—	$	—	$	—	$	1,489
Nonperforming	Nonperforming	—		647		57		—		—		21		—		725		Nonperforming	—		—		—		—		—		—		—		—
Total	Total	$	68,374	$	26,894	$	5,767	$	2,743	$	1,505	$	1,863	$	79	$	107,225	Total	1,489		$	—	$	—	$	—	$	—	$	—	$	—	$	1,489


Residential Real Estate: Mortgage
Construction Real Estate: Retail																		Construction Real Estate: Retail
Performing	Performing	$	230,299	$	217,022	$	114,077	$	68,774	$	59,939	$	323,678	$	—	$	1,013,789	Performing	$	71,923	$	26,134	$	8,218	$	4,619	$	1,618	$	2,580	$	75	$	115,167
Nonperforming	Nonperforming	—		626		785		824		574		17,060		—		19,869		Nonperforming	731		—		523		—		—		12		—		1,266
Total	Total	$	230,299	$	217,648	$	114,862	$	69,598	$	60,513	$	340,738	$	—	$	1,033,658	Total	$	72,654	$	26,134	$	8,741	$	4,619	$	1,618	$	2,592	$	75	$	116,433


Residential Real Estate: HELOC
Residential Real Estate: Mortgage																		Residential Real Estate: Mortgage
Performing	Performing	$	400	$	—	$	121	$	58	$	41	$	2,640	$	159,952	$	163,212	Performing	$	207,093	$	227,131	$	192,904	$	90,014	$	55,648	$	286,464	$	—	$	1,059,254
Nonperforming	Nonperforming	89		40		—		37		90		1,811		326		2,393		Nonperforming	—		—		700		650		518		14,324		—		16,192
Total	Total	$	489	$	40	$	121	$	95	$	131	$	4,451	$	160,278	$	165,605	Total	$	207,093	$	227,131	$	193,604	$	90,664	$	56,166	$	300,788	$	—	$	1,075,446


Residential Real Estate: Installment
Residential Real Estate: HELOC																		Residential Real Estate: HELOC
Performing	Performing	$	—	$	3	$	418	$	111	$	1,049	$	2,471	$	—	$	4,052	Performing	$	140	$	299	$	23	$	130	$	141	$	1,957	$	163,134	$	165,824
Nonperforming	Nonperforming	—		12		5		26		78		1,469		—		1,590		Nonperforming	—		—		43		100		—		999		185		1,327
Total	Total	$	—	$	15	$	423	$	137	$	1,127	$	3,940	$	—	$	5,642	Total	$	140	$	299	$	66	$	230	$	141	$	2,956	$	163,319	$	167,151

Consumer: Consumer
Performing $ 649,638 $ 505,555 $ 259,230 $ 119,222 $ 64,699 $ 62,136 $ 22,664 $ 1,683,144
Nonperforming 241 506 755 399 155 593 — 2,649
Total $ 649,879 $ 506,061 $ 259,985 $ 119,621 $ 64,854 $ 62,729 $ 22,664 $ 1,685,793
Consumer: GFSC
Performing $ — $ 243 $ 986 $ 292 $ 63 $ 5 $ 108 $ 1,697
Nonperforming — 9 73 5 9 — — 96
Total $ — $ 252 $ 1,059 $ 297 $ 72 $ 5 $ 108 $ 1,793
Consumer: Check loans
Performing $ — $ — $ — $ — $ — $ — $ 2,093 $ 2,093
Nonperforming — — — — — — — —
Total $ — $ — $ — $ — $ — $ — $ 2,093 $ 2,093
Total Consumer Loans
Performing $ 949,838 $ 749,070 $ 380,542 $ 191,200 $ 127,296 $ 392,772 $ 184,896 $ 2,975,614
Nonperforming
330 1,840 1,675 1,291 906 20,954 326 27,322
Total $ 950,168 $ 750,910 $ 382,217 $ 192,491 $ 128,202 $ 413,726 $ 185,222 $ 3,002,936


Residential Real Estate: Installment
Performing	$	187	$	—	$	1	$	241	$	62	$	2,512	$	—	$	3,003
Nonperforming	—		—		7		2		16		1,063		—		1,088
Total	$	187	$	—	$	8	$	243	$	78	$	3,575	$	—	$	4,091


Consumer: Consumer
Performing	$	823,484	$	462,014	$	333,336	$	150,237	$	61,174	$	65,612	$	4,315	$	1,900,172
Nonperforming	440		489		424		355		157		520		—		2,385
Total	$	823,924	$	462,503	$	333,760	$	150,592	$	61,331	$	66,132	$	4,315	$	1,902,557


Consumer: GFSC
Performing	$	—	$	—	$	55	$	111	$	45	$	2	$	51	$	264
Nonperforming	—		—		—		10		—		—		—		10
Total	$	—	$	—	$	55	$	121	$	45	$	2	$	51	$	274


Consumer: Check loans
Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	2,150	$	2,150
Nonperforming	—		—		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—	$	—	$	2,150	$	2,150


Total Consumer Loans
Performing	$	1,104,316	$	715,578	$	534,537	$	245,352	$	118,688	$	359,127	$	169,725	$	3,247,323
Nonperforming	1,171		489		1,697		1,117		691		16,918		185		22,268
Total	$	1,105,487	$	716,067	$	536,234	$	246,469	$	119,379	$	376,045	$	169,910	$	3,269,591

Table of Contents

Loans and Leases Acquired with Deteriorated Credit Quality

In conjunction with the NewDominion acquisition, Park acquired loans with a book value of $277.9 million as of the July 1, 2018 acquisition date. These loans were recorded at the initial fair value of $272.8 million. Loans acquired with deteriorated credit quality (ASC 310-30) with a book value of $5.1 million were recorded at the initial fair value of $4.9 million. In conjunction with the Carolina Alliance acquisition, Park acquired loans and leases with a book value of $589.7 million as of the April 1, 2019 acquisition date. These loans and leases were recorded at the initial fair value of $578.6 million. Loans and leases

~~Table of Contents~~

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

Upon adoption of CECL on January 1, 2021, $52,000 of the credit discount on PCD loans was reclassified to the allowance for credit losses. PCD loans are individually evaluated on a quarterly basis to determine if a specific reserve is necessary. At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, there was no allowance for credit losses on PCD loans. The carrying amount of loans acquired with deteriorated credit quality at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 was ~~$4.9~~$4.6 million and ~~$7.1~~$4.7 million, respectively.

~~Troubled Debt Restructurings~~Modifications to Borrowers Experiencing Financial Difficulty

Management ~~typically classifies~~identifies loans as ~~TDRs~~modifications to borrowers experiencing financial difficulty when a borrower is experiencing financial difficulties and Park has ~~granted a concession to~~altered the ~~borrower~~cash flow of the the loan as part of a modification or in the loan renewal process. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of the borrower's debt in the foreseeable future without the modification. This evaluation is performed in accordance with the Company’s internal underwriting policy. ~~Management’s policy is~~Park modifies loans to ~~modify loans~~borrowers experiencing financial difficulty by ~~extending the~~providing principal forgiveness, term extension, an other-than-insignificant payment delay or ~~by granting a temporary or permanent contractual~~ interest rate ~~below the market rate, not by forgiving debt. A court's discharge of a borrower's debt in a Chapter 7 bankruptcy is considered a concession when the borrower does not reaffirm the discharged debt.~~adjustments.

In ~~response~~some cases, Park provides multiple types of modifications on one loan. Typically, one type of modification, such as a term extension, is granted initially. If the borrower continues to ~~the COVID-19 pandemic, Park has worked with borrowers and provided modifications in the form of either interest only deferral or~~experience financial difficulty, another modification, such as principal and interest deferral, in each case, for initial periods of up to 90 days. As necessary, Park made available a second 90-day interest only deferral or principal and interest deferral bringing the total potential deferral period to six months. Modifications were structured in a manner to best address each individual customer's then current situation. A majority of these modifications were excluded from the TDR classification under Section 4013 of the CARES Act or under applicable interagency guidance of the federal banking regulators. The modified loans were considered current and continued to accrue interest during the deferral period. Section 4013 of the CARES Act expired on December 31, 2021; therefore, modifications occurring after that date are subject to previous TDR classification guidance.

Certain other loans which were modified during the three-month and the nine-month periods ended September 30, 2022 and 2021 did not meet the definition of a TDR as the modification was a delay in a payment that was considered to be insignificant. Management considers a forbearance period of up to three months or a delay in payment of up to 30 days to be insignificant. TDRsforgiveness, may be ~~classified as accruing if~~granted. For the borrower has been current for a period of at least six months with respect to loan payments and management expects that the borrower will be able to continue to make payments in accordance with the terms of the restructured note. Management reviews all accruing TDRs quarterly to ensure payments continue to be made in accordance with the modified terms.

~~At September 30, 2022 and December 31, 2021, there were $14.0 million and $20.9 million, respectively, of TDRs~~loans included in the ~~nonaccrual~~combination columns below, multiple types of modifications have been made on the same loan ~~totals. At September 30, 2022 and December 31, 2021, $4.3 million and $10.5 million, respectively, of these nonaccrual TDRs were performing in accordance with~~within the ~~terms~~current reporting period. The combination is at least two of the restructured notes. At September 30, 2022 and December 31, 2021, loans totaling $19.8 million and $28.3 million, respectively, were included in accruing TDR loan totals. Management will continue to review the restructured loans and may determine it is appropriate to move certain nonaccrual TDRs to accrual status in the future.

At September 30, 2022 and December 31, 2021, Park had commitments to lend $2.1 million and $3.0 million, respectively, of additional funds to borrowers whose outstanding loan terms had been modified infollowing: a ~~TDR.~~

At September 30, 2022 and December 31, 2021, there were $0.2 million and $0.3 million, respectively, of specific reserves related to TDRs. Modifications made in 2022 and 2021 were largely the result of renewals and extending the maturity date of the loans at terms consistent with the original notes. These modifications were deemed to be TDRs primarily due to Park’s conclusion that the respective borrowers would likely not have qualified for similar terms through another lender. Many of the modifications deemed to be TDRs were previously identified as loans individually evaluated for impairment. ~~There were $87,000 of additional specific reserves recorded during both the three-month and the nine-month periods ended September 30, 2022 as a result of TDRs identified in the respective periods.~~ ~~There were $156,000 and $174,000 of additional specific reserves recorded during the three-month and the nine-month periods ended~~ ~~September 30, 2021, respectively,~~ ~~as a result of TDRs identified in the respective periods.~~

Quarterly, management reviews renewals/modifications of loans previously identified as TDRs to consider if it is appropriate to remove the TDR classification. If the borrower is no longer experiencing financial difficulty and the renewal/modification did not contain a concessionary interest rate term extension, principal forgiveness, an other-than-insignificant payment delay and/or ~~other concessionary terms and the terms of the renewal/modification are considered~~

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to be market terms based on the current risk characteristics of the borrower, management considers the potential removal of the TDR classification. If deemed appropriate, the TDR classification is removed if the borrower has complied with the terms of the loan at the date of the renewal/modification and there was a reasonable expectation that the borrower will continue to comply with the terms of the loan subsequent to the date of the renewal/modification. The majority of these TDRs were originally considered restructurings in a prior year as a result of a renewal/modification with an interest rate ~~that was not commensurate with the risk of the underlying loan at the time of the renewal/modification.~~ There were no TDR reclassifications removed during the three-month period ended September 30, 2022. There were $1.0 million of TDR classifications removed during the nine-month period ended September 30, 2022. T~~he TDR classification was removed on $58,000 and $4.0 million of loans during the three-month and the nine-month periods ended September 30, 2021, respectively.~~

The terms of certain other loans were modified during the three-month and the nine-month periods ended September 30, 2022 and 2021 that did not meet the definition of a TDR. There were no substandard commercial loans modified during either of the three-month or the nine-month periods ended September 30, 2022, which did not meet the definition of a TDR. Excluding COVID-19 related modifications, there were no substandard commercial loans modified during either of the three-month or the nine-month periods ended September 30, 2021, which did not meet the definition of a TDR. Consumer loans modified during the three-month and the nine-month periods ended September 30, 2022, which did not meet the definition of a TDR, had a total amortized cost of $13.5 million and $29.5 million, respectively.~~Excluding COVID-19 related modifications, consumer loans modified during the three-month and the~~ ~~nine-month~~ ~~periods ended September 30, 2021, which did not meet the definition of a TDR, had a total amortized cost of $2.0 million and $4.8 million, respectively. Many of these loans were to borrowers who were not experiencing financial difficulties but who were looking to reduce their cost of funds.~~adjustment.

The ~~following tables detail~~starting point for the ~~number~~estimate of ~~contracts modified as TDRs during~~ the ~~three-month periods ended September 30, 2022~~allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. As a result, the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses and ~~2021, as well as~~a change to the ~~amortized cost of these contracts at September 30, 2022 and 2021. The amortized cost pre-and post-modification~~allowance for credit losses is generally not recorded upon modification. When principal forgiveness is provided, the ~~same due to~~amount of forgiveness is charged off against the ~~fact that Park does not typically forgive principal.~~

Three Months Ended
September 30, 2022
(In thousands) Number of
Contracts Accruing Nonaccrual Total Amortized Cost
Commercial, financial and agricultural
Commercial, financial and agricultural 4 $ 227 $ 511 $ 738
PPP loans — — — —
Overdrafts — — — —
Commercial real estate 1 31 — 31
Construction real estate:
  Commercial — — — —
  Retail — — — —
Residential real estate:
  Commercial 1 146 — 146
  Mortgage 3 545 120 665
  HELOC 1 — 10 10
  Installment 2 — 29 29
Consumer:
Consumer 21 3 169 172
GFSC — — — —
Check loans — — — —
Leases 10 — 115 115
Total loans 43 $ 952 $ 954 $ 1,906

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Three Months Ended
September 30, 2021
(In thousands) Number of
Contracts Accruing Nonaccrual Total Amortized Cost
Commercial, financial and agricultural
Commercial, financial and agricultural 5 $ 383 $ 868 $ 1,251
PPP loans — — — —
Overdrafts — — — —
Commercial real estate 5 — 5,053 5,053
Construction real estate:
  Commercial — — — —
  Retail — — — —
Residential real estate:
  Commercial 2 96 125 221
  Mortgage 3 — 102 102
  HELOC 1 33 — 33
  Installment 1 55 — 55
Consumer:
Consumer 28 15 250 265
GFSC — — — —
Check loans — — — —
Leases — — — —
Total loans 45 $ 582 $ 6,398 $ 6,980

~~Of those loans which were modified and determined to be a TDR during the three-month period ended September 30, 2022, $0.2 million were on nonaccrual status at December 31, 2021. Of those loans which were modified and determined to be a TDR during the three-month period ended September 30, 2021, $4.5 million were on nonaccrual status at December 31, 2020.~~allowance for credit losses.

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The following ~~tables detail the number of contracts modified as TDRs during the nine-month periods ended September 30, 2022 and 2021, as well as~~table presents the amortized cost basis of ~~these contracts~~loans at ~~September 30, 2022~~March 31, 2023 that were both experiencing financial difficulty and ~~2021.~~modified during the three months ended March 31, 2023 by class of and by type of modification. The percentage of the amortized cost ~~pre-and post-modification is generally the same due~~basis of loans that were modified to borrowers in financial difficulty as compared to the ~~fact that Park does not typically forgive principal.~~amortized cost basis of each class of financing receivable is also presented below.

Nine Months Ended
September 30, 2022
(In thousands) Number of
Contracts Accruing Nonaccrual Total Amortized Cost
Commercial, financial and agricultural
Commercial, financial and agricultural 6 $ 227 $ 511 $ 738
PPP loans — — — —
Overdrafts — — — —
Commercial real estate 6 1,090 150 1,240
Construction real estate:
  Commercial — — — —
  Retail — — — —
Residential real estate:
  Commercial 2 146 104 250
  Mortgage 11 870 222 1,092
  HELOC 3 — 29 29
  Installment 9 48 38 86
Consumer:
Consumer 62 13 315 328
GFSC — — — —
Check loans — — — —
Leases 10 — 115 115
Total loans 109 $ 2,394 $ 1,484 $ 3,878


	March 31, 2023
(In thousands)	Principal Forgiveness		Payment Delay		Term Extension		Interest Rate Adjustment		Combination Term Extension and Interest Rate Adjustment		Total		Percent of Total Class of Financing Receivable
Commercial, financial and agricultural:
Commercial, financial and agricultural	$	—	$	—	$	3,104	$	—	$	—	$	3,104	0.25	%
PPP loans	—		—		—		—		—		—		—	%
Overdrafts	—		—		—		—		—		—		—	%
Commercial real estate	—		—		—		—		—		—		—	%
Construction real estate:
Commercial	—		—		988		—		—		988		0.57	%
Retail	—		—		—		—		—		—		—	%
Residential real estate:
Commercial	—		—		150		—		13		163		0.03	%
Mortgage	—		—		—		—		—		—		—	%
HELOC	—		—		—		—		—		—		—	%
Installment	—		—		—		—		64		64		1.61	%
Consumer:
Consumer	—		—		—		15		—		15		—	%
GFSC	—		—		—		—		—		—		—	%
Check loans	—		—		—		—		—		—		—	%
Leases	—		—		—		—		—		—		—	%
Total	$	—	$	—	$	4,242	$	15	$	77	$	4,334	0.06	%

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Nine Months Ended
September 30, 2021
(In thousands) Number of
Contracts Accruing Nonaccrual Total Amortized Cost
Commercial, financial and agricultural
Commercial, financial and agricultural 9 $ 383 $ 899 $ 1,282
PPP loans — — — —
Overdrafts — — — —
Commercial real estate 13 1,571 6,137 7,708
Construction real estate:
  Commercial 1 98 — 98
  Retail — — — —
Residential real estate:
  Commercial 5 96 528 624
  Mortgage 13 148 377 525
  HELOC 5 80 106 186
  Installment 7 93 27 120
Consumer:
Consumer 104 137 379 516
GFSC — — — —
Check loans — — — —
Leases 1 — 351 351
Total loans 158 $ 2,606 $ 8,804 $ 11,410

~~Of those loans which were modified and determined~~Park has committed to ~~be a TDR during~~lend additional amounts totaling $1.7 million to the ~~nine-month period ended September 30, 2022, $0.7 million were on nonaccrual status at December~~borrowers included in the previous table as of March 31, ~~2021.~~ ~~Of those loans which were modified and determined to be a TDR during the nine-month period ended September 30, 2021, $6.1 million were on nonaccrual status at December 31, 2020.~~2023.

The following table presents the ~~amortized cost in~~financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three months ended March 31, 2023:


	Principal Forgiveness		Weighted Average Interest Rate Adjustment		Weighted Average Term Extension (years)
Commercial, financial and agricultural:
Commercial, financial and agricultural	$	—	—	%	0.3
PPP loans	—		—	%	0.0
Overdrafts	—		—	%	0.0
Commercial real estate	—		—	%	0.0
Construction real estate:
Commercial	—		—	%	0.2
Retail	—		—	%	0.0
Residential real estate:
Commercial	—		1.43	%	0.5
Mortgage	—		—	%	0.0
HELOC	—		—	%	0.0
Installment	—		(1.13)	%	10.0
Consumer:
Consumer	—		(4.19)	%	0.0
GFSC	—		—	%	0.0
Check loans	—		—	%	0.0
Leases	—		—	%	0.0
Total	$	—	(1.26)	%	0.4

Park closely monitors the performance of loans ~~which~~that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. There were no loans modified to borrowers experiencing financial difficulty that had been modified during thethree months ended March 31, 2023 that were greater than 30 days past due as ~~TDRs within the previous 12 months and for which~~of March 31, 2023. Additionally, there ~~was~~were no loans that had a payment default during the ~~three-month periods~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021, respectively. For this~~

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~~table, a loan is considered~~were modified to beborrowers experiencing financial difficulty in ~~default when it becomes 30 days contractually past due under~~ the ~~modified terms. The additional ACL resulting from the defaults on TDR loans was immaterial.~~

Three Months Ended
September 30, 2022 Three Months Ended
September 30, 2021
(In thousands) Number of
Contracts Amortized Cost Number of
Contracts Amortized Cost
Commercial, financial and agricultural:
Commercial, financial and agricultural 1 $ 3 — $ —
PPP loans — — — —
Overdrafts — — — —
Commercial real estate — — — —
Construction real estate:
Commercial — — — —
Retail — — — —
Residential real estate:
Commercial 1 103 — —
Mortgage 2 110 4 330
HELOC 2 9 1 95
Installment — — 1 4
Consumer
Consumer 12 103 15 122
GFSC — — — —
Check loans — — — —
Leases — — — —
Total loans 18 $ 328 21 $ 551

~~Of the $0.3 million in modified TDRs which defaulted during the three-month period ended September 30, 2022, $6,000 were accruing loans and $0.3 million were nonaccrual loans.~~ ~~Of the $0.6 million in modified TDRs which defaulted during the three-month period ended September 30, 2021, $29,000 were accruing loans and $0.5 million were nonaccrual loans.~~three months prior to that default.

~~The following table presents~~Upon the determination that a modified loan (or a portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost ~~in loans which were modified as TDRs within~~basis of the ~~previous 12 months and for which there was a payment default during the nine-month periods ended September 30, 2022 and 2021, respectively. For this~~

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~~table, a~~ loan is ~~considered to be in default when it becomes 30 days contractually past due under~~reduced by the ~~modified terms. The additional ACL resulting from~~uncollectible amount and the ~~defaults on TDR loans was immaterial.~~

Nine Months Ended
September 30, 2022 Nine Months Ended
September 30, 2021
(In thousands) Number of
Contracts Amortized Cost Number of
Contracts Amortized Cost
Commercial, financial and agricultural:
Commercial, financial and agricultural 2 $ 57 — $ —
PPP loans — — — —
Overdrafts — — — —
Commercial real estate — — — —
Construction real estate:
Commercial — — — —
Retail — — — —
Residential real estate:
Commercial 1 103 — —
Mortgage 2 110 6 396
HELOC 4 64 1 95
Installment — — 2 32
Consumer
Consumer 18 144 16 128
GFSC — — — —
Check loans — — — —
Leases — — 1 351
Total loans 27 $ 478 26 $ 1,002

Ofallowance for credit losses is adjusted by the ~~$0.5 million in modified TDRs which defaulted during the nine-month period ended September 30, 2022, $10,000 were accruing loans and $0.5 million were nonaccrual loans.~~ ~~Of the $1.0 million in modified TDRs which defaulted during the nine-month period ended September 30, 2021, $29,000 were accruing loans and $1.0 million were nonaccrual loans.~~same amounts.

Note 6 – Allowance for Credit Losses

The ACL is an estimate of the expected credit losses on financial assets measured at amortized cost, which is measured using relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. A provision for credit losses is charged to operations based on management’s periodic evaluation of these and other pertinent factors.

During the first quarter of ~~2021,~~2023, Park adopted ASU ~~2016-13, including the CECL methodology for estimating the ACL.~~2022-02. This standard was adopted ~~prospectively~~using a modified retrospective transition method on January 1, ~~2021,~~2023, resulting in a ~~$6.1 million~~$383,000 increase to the ~~ACL and a $3.9 million increase to the allowance for unfunded credit losses.~~ACL. A cumulative effect adjustment resulting in ~~an $8.0 million~~a $303,000 decrease to retained earnings ~~and a $2.1 million increase to deferred tax assets~~ was also recorded as a result of the adoption of ASU ~~2016-13.~~2022-02.

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Quantitative Considerations

The ACL is primarily calculated utilizing a DCF model. Key inputs and assumptions used in this model are discussed below:

•Forecast model - For each portfolio segment, a LDA was performed in order to identify appropriate loss drivers and create a regression model for use in forecasting cash flows. The LDA analysis utilized Park's own FFIEC Call Report data for the commercial, financial and agricultural and residential real estate portfolio segments. Peer data was incorporated into the analysis for the commercial real estate, construction real estate, and consumer portfolio segments. Park ~~plans to update~~updated the LDA ~~annually; however, due to the impact of COVID-19, the LDA analysis was last updated~~ in the fourth quarter of ~~2019.~~2022 with data through September 30, 2022. After considering the impact of the inclusion of periods impacted by COVID, as well as analysis of the ongoing applicability of the selected peer group, management decided it was appropriate to continue to utilize the LDA analysis from the fourth quarter of 2019 as the correlation of the LDA was higher.

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Whenever possible, Park utilizes its own loan-level PDs for the reasonable and supportable forecast period. When loan-level data is not available reflecting the forecasted economic conditions, a forecast model is utilized to estimate PDs.

•Loss given default – LGD is the percentage of the asset not expected to be collected due to default. Whenever possible, Park utilizes its own loan-level LGDs for the reasonable and supportable forecast period. When it is not possible to use Park's own LGDs, the LGD is derived using a method referred to as Frye Jacobs.

•Prepayments and curtailments – Prepayments and curtailments are calculated based on Park’s own data utilizing a three-year average. This analysis is updated annually in the fourth quarter and was last updated in the fourth quarter of ~~2021.~~2022.

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

•Economic forecast - Park utilizes a third party to provide economic forecasts under various scenarios, which are weighted in order to reflect model risk in the current economic environment. The scenario weighting is evaluated by management on a quarterly basis.

◦AsAs of December 31, ~~2021,~~2022, the "most likely" scenario forecasted Ohio unemployment between ~~3.32%~~4.14% and ~~3.97%~~ 4.36% during the next four quarters. In determining the appropriate weighting of scenarios at December 31, 2021, management considered the range of forecasted unemployment as well as a number of economic indicators. While some economic indications continued to be optimistic, the Omicron variant, rising inflation, volatility in consumer confidence, employment, supply chain and workforce challenges continued to cause uncertainty in the overall economic environment. Considering these factors, management determined it was appropriate to weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at December 31, 2021.

◦As of March 31, 2022, the "most likely" scenario forecasted Ohio unemployment between 3.36% and 3.75% during the next four quarters. In determining the appropriate weighting of scenarios at March 31, 2022, management considered the range of forecasted unemployment as well as a number of economic indicators. While some economic indications were optimistic, the surging inflation, volatility in consumer confidence, workforce challenges, and geopolitical conflict (including the conflict between Russia and Ukraine) continued to cause uncertainty in the overall economic environment. Considering these factors, management determined it was appropriate to maintain the previous quarter's weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at March 31, 2022. Improved forecasts, largely in the "moderate recession" scenario, resulted in a 4 basis point decline in the weighted quantitative allowance.

◦As of June 30, 2022, the "most likely" scenario forecasted Ohio unemployment between 3.36% and 3.57% during the next four quarters. In determining the appropriate weighting of scenarios at June 30, 2022, management considered the range of forecasted unemployment as well as a number of economic indicators. While some economic indications were optimistic, the surging inflation, declining consumer confidence, rising interest rates, geopolitical conflict (including the conflict between Russia and Ukraine), and workforce and supply chain challenges continued to cause uncertainty to the overall economic environment. Considering these factors, management determined it was appropriate to maintain the previous quarter's weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at June 30, 2022. Deteriorating forecasts, largely in the "moderate recession" scenario, resulted in a 4 basis point increase in the weighted quantitative allowance.

◦A~~s of September 30, 2022, the "most likely" scenario forecasted Ohio unemployment between 3.86% and 4.05%~~ ~~during the next four quarters. In determining the appropriate weighting of scenarios at September 30,~~ 2022, management considered the range of forecasted unemployment as well as a number of economic indicators. The continued high level of inflation, historically low consumer confidence, rising interest rates, geopolitical conflict (including the conflict between Russia and Ukraine), and workforce and supply chain challenges continued to cause uncertainty as to the overall economic environment. Considering these factors, management determined it was appropriate to maintain the ~~previous quarter's~~existing weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at ~~September 30,~~December 31, 2022. ~~Deteriorating forecasts, largely in~~

◦As of March 31, 2023, the "most likely" scenario forecasted Ohio unemployment between 4.15% and 4.51% during the next four quarters. In determining the appropriate weighting of scenarios at March 31, 2023, management considered the range of forecasted unemployment as well as a number of economic indicators. The continued high level of inflation, historically low consumer confidence, rising interest rates, financial system stress related to recent bank failures, geopolitical conflict, and workforce challenges continued to cause uncertainty as to the overall economic environment. Considering these factors, management determined it was appropriate to maintain the existing weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario ~~resulted in a 4 basis point increase in the weighted quantitative allowance.~~50% at March 31, 2023.

Qualitative Considerations

Park reviews various internal and external factors to consider the need for any qualitative adjustments to the quantitative model. Factors considered include the following:

•The nature and volume of Park’s financial assets; the existence, growth, and effect of any concentrations of credit and the volume and severity of past due financial assets, the volume of nonaccrual assets, and the volume and severity of adversely classified or graded assets. Specifically, management considers:

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

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

◦Level of and trend in new nonaccrual loans.

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

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

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•The quality of Park’s credit review function.

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

•The effect of other external factors such as the regulatory, legal and technological environments; competition; geopolitical conflict; and events such as natural disasters or pandemics.

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

•Where the U.S. economy is within a given credit cycle.

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

During 2020, Park added an additional reserve for three industries at particularly high risk due to the COVID-19 pandemic: hotels and accommodations; restaurants and food service; and strip shopping centers. These industries have experienced high levels of deferrals and have been particularly impacted by shut downs of non-essential businesses, increased health department regulations, and changes in consumer behavior. Management expects that a relatively higher percentage of the 4-rated credits in these portfolios will eventually migrate to special mention, substandard, or doubtful. In adopting CECL, management determined it was appropriate to retain this qualitative adjustment as this adjustment takes into account the additional risk in these portfolios, which is not captured in the quantitative calculation. Even though COVID-19 case numbers have declined since December 31, 2021, these industries are still recovering from the pandemic effects. As of ~~September 30, 2022, additional reserves totaling $1.4 million were added for these portfolios on top of the quantitative reserve already calculated. This was a decrease from $5.2 million as of~~March 31, 2023 and December 31, 2021 and reflected improvement in COVID-19 cases, eased COVID-19 health department precautions and improving affected industry performance. Management believes there is still residual risk in these portfolios related to pandemic effects and uncertainty in future COVID-19 strains and related impacts.

~~A breakout of the 4-rated balances within these portfolios and the additional reserve related to these portfolios is detailed in the following table:~~

September 30, 2022 December 31, 2021
(in thousands) 4-Rated Balance Additional Reserve 4-Rated Balance Additional Reserve
Hotels and accommodations $ 182,806 $ 687 $ 148,018 $ 2,226
Restaurants and food service 49,500 279 40,648 917
Strip shopping centers 168,144 464 184,171 2,033
Total $ 400,450 $ 1,430 $ 372,837 $ 5,176

Additionally, at September 30, 2022, management applied a 0.50% reserve to all hotels and accommodations loans in the collectively evaluated population to account for increased valuation risk. This 0.50% reserve was reduced from 0.75% at June 30, 2022 and 1.00% at December 31, 2021. At September 30, 2022, Park's collectively evaluated hotels and accommodation loans had a balance of $218.0 million with an additional reserve related to valuation risks of $1.1 million. At December 31, 2021, Park's collectively evaluated hotels and accommodation loans had a balance of $203.9 million with an additional reserve related to valuation risks of $2.0 million.

~~As of September 30,~~ 2022, Park had ~~$5.7~~$3.4 million and $4.2 million, respectively, of PPP loans which were included in the commercial, financial and agricultural portfolio segment. These loans are guaranteed by the SBA and thus have not been reserved for using the same methodology as the rest of Park’s loan portfolio. A 10 basis point reserve at both March 31, 2023 and December 31, 2022 was calculated for these loans to reflect minimal credit risk.

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ACL Activity

The activity in the ACL for the three-month ~~and the nine-month~~ periods ended ~~September 30,~~March 31, 2023 and March 31, 2022 ~~and September 30, 2021~~ is summarized in the following tables:


		Three Months Ended September 30, 2022															Three Months Ended March 31, 2023
(In thousands)	(In thousands)	Commercial, financial and agricultural		Commercial real estate		Construction real estate		Residential real estate		Consumer		Leases		Total		(In thousands)	Commercial, financial and agricultural		Commercial real estate		Construction real estate		Residential real estate		Consumer		Leases		Total
ACL:	ACL:															ACL:
Beginning balance	Beginning balance	$	12,747	$	22,339	$	4,391	$	13,619	$	28,149	$	203	$	81,448	Beginning balance	$	16,987	$	17,829	$	5,550	$	16,831	$	28,021	$	161	$	85,379
Impact of Adoption of ASU 2022-02																Impact of Adoption of ASU 2022-02	222		181		—		(20)		—		—		383
Charge-offs	Charge-offs	543		—		—		—		1,169		36		1,748		Charge-offs	349		—		—		29		1,857		—		2,235
Recoveries	Recoveries	110		36		20		20		884		1		1,071		Recoveries	46		232		496		357		1,105		—		2,236
Net charge-offs/(recoveries)	Net charge-offs/(recoveries)	$	433	$	(36)	$	(20)	$	(20)	$	285	$	35	$	677	Net charge-offs/(recoveries)	$	303	$	(232)	$	(496)	$	(328)	$	752	$	—	$	(1)
Provision for (recovery of) credit losses		563		(1,653)		87		1,464		2,699		30		3,190
(Recovery of) provision for credit losses																(Recovery of) provision for credit losses	(334)		(296)		(684)		750		784		(37)		183
Ending balance	Ending balance	$	12,877	$	20,722	$	4,498	$	15,103	$	30,563	$	198	$	83,961	Ending balance	$	16,572	$	17,946	$	5,362	$	17,889	$	28,053	$	124	$	85,946


		Three Months Ended September 30, 2021															Three Months Ended March 31, 2022
(In thousands)	(In thousands)	Commercial, financial and agricultural		Commercial real estate		Construction real estate		Residential real estate		Consumer		Leases		Total		(In thousands)	Commercial, financial and agricultural		Commercial real estate		Construction real estate		Residential real estate		Consumer		Leases		Total
ACL:	ACL:															ACL:
Beginning balance	Beginning balance	$	15,222	$	22,749	$	5,670	$	13,113	$	26,261	$	562	$	83,577	Beginning balance	$	14,025	$	25,466	$	5,758	$	11,424	$	26,286	$	238	$	83,197
Charge-offs	Charge-offs	221		—		—		—		781		—		1,002		Charge-offs	190		—		—		35		1,116		6		1,347
Recoveries	Recoveries	132		428		1,597		729		696		—		3,582		Recoveries	118		48		501		32		917		—		1,616
Net charge-offs/(recoveries)	Net charge-offs/(recoveries)	$	89	$	(428)	$	(1,597)	$	(729)	$	85	$	—	$	(2,580)	Net charge-offs/(recoveries)	$	72	$	(48)	$	(501)	$	3	$	199	$	6	$	(269)
Provision for (recovery of) credit losses		843		2,991		(1,003)		(2,080)		1,483		(262)		1,972
(Recovery of) provision for credit losses																(Recovery of) provision for credit losses	(665)		(1,783)		(2,029)		163		(290)		(1)		(4,605)
Ending balance	Ending balance	$	15,976	$	26,168	$	6,264	$	11,762	$	27,659	$	300	$	88,129	Ending balance	$	13,288	$	23,731	$	4,230	$	11,584	$	25,797	$	231	$	78,861

Nine Months Ended
September 30, 2022
(In thousands) Commercial,
financial and
agricultural Commercial
real estate Construction
real estate Residential
real estate Consumer Leases Total
ACL:
Beginning balance $ 14,025 $ 25,466 $ 5,758 $ 11,424 $ 26,286 $ 238 $ 83,197
Charge-offs 1,456 598 33 81 3,287 42 5,497
Recoveries 544 624 550 106 2,859 2 4,685
Net charge-offs/(recoveries) $ 912 $ (26) $ (517) $ (25) $ 428 $ 40 $ 812
(Recovery of) provision for credit losses (236) (4,770) (1,777) 3,654 4,705 — 1,576
Ending balance $ 12,877 $ 20,722 $ 4,498 $ 15,103 $ 30,563 $ 198 $ 83,961

Nine Months Ended
September 30, 2021
(In thousands) Commercial,
financial and
agricultural Commercial
real estate Construction
real estate Residential
real estate Consumer Leases Total
ACL:
Beginning balance, prior to adoption of ASC 326 $ 25,608 $ 23,480 $ 7,288 $ 11,363 $ 17,418 $ 518 $ 85,675
Impact of adopting ASC 326 (8,257) 2,119 (1,898) 3,121 10,925 80 6,090
Charge-offs 675 — — 37 3,061 — 3,773
Recoveries 487 724 2,078 859 2,912 — 7,060
Net charge-offs/(recoveries) $ 188 $ (724) $ (2,078) $ (822) $ 149 $ — $ (3,287)
Recovery of credit losses (1,187) (155) (1,204) (3,544) (535) (298) (6,923)
Ending balance $ 15,976 $ 26,168 $ 6,264 $ 11,762 $ 27,659 $ 300 $ 88,129

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ACL Summary

Loans collectively evaluated for impairment in the following tables include all performing loans at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, as well as nonperforming loans internally classified as consumer loans. Nonperforming consumer loans are not typically individually evaluated for impairment, but receive a portion of the statistical allocation of the ACL. Loans individually evaluated for impairment include all internally classified commercial nonaccrual loans at March 31, 2023 and all internally classified commercial nonaccrual loans and TDRs at ~~September 30, 2022 and~~ December 31, ~~2021,~~2022, which are individually evaluated for impairment in accordance with U.S. GAAP (see Note 1 - Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Park’s ~~2021~~2022 Form 10-K).

The composition of the ACL at ~~September 30, 2022~~March 31, 2023 and at December 31, ~~2021~~2022 was as follows:


		September 30, 2022																						March 31, 2023
(In thousands)	(In thousands)	Commercial, financial and agricultural			Commercial real estate			Construction real estate			Residential real estate			Consumer			Leases			Total			(In thousands)	Commercial, financial and agricultural			Commercial real estate			Construction real estate			Residential real estate			Consumer			Leases			Total
ACL:	ACL:																						ACL:
Ending allowance balance attributed to loans:	Ending allowance balance attributed to loans:																						Ending allowance balance attributed to loans:
Individually evaluated for impairment	Individually evaluated for impairment	$	579		$	1,153		$	—		$	—		$	—		$	18		$	1,750		Individually evaluated for impairment	$	4,100		$	216		$	—		$	—		$	—		$	2		$	4,318
Collectively evaluated for impairment	Collectively evaluated for impairment	12,298			19,569			4,498			15,103			30,563			180			82,211			Collectively evaluated for impairment	12,472			17,730			5,362			17,889			28,053			122			81,628
Acquired with deteriorated credit quality	Acquired with deteriorated credit quality	—			—			—			—			—			—			—			Acquired with deteriorated credit quality	—			—			—			—			—			—			—
Total ending allowance balance	Total ending allowance balance	$	12,877		$	20,722		$	4,498		$	15,103		$	30,563		$	198		$	83,961		Total ending allowance balance	$	16,572		$	17,946		$	5,362		$	17,889		$	28,053		$	124		$	85,946

Loan balance:	Loan balance:																						Loan balance:
Loans individually evaluated for impairment	Loans individually evaluated for impairment	$	12,138		$	27,904		$	439		$	2,154		$	—		$	1,035		$	43,670		Loans individually evaluated for impairment	$	38,955		$	15,477		$	1,997		$	2,338		$	—		$	617		$	59,384
Loans collectively evaluated for impairment	Loans collectively evaluated for impairment	1,265,734			1,759,335			310,600			1,758,695			1,941,509			18,836			7,054,709			Loans collectively evaluated for impairment	1,222,943			1,781,941			288,095			1,818,475			1,900,609			17,855			7,029,918
Loans acquired with deteriorated credit quality	Loans acquired with deteriorated credit quality	121			3,562			668			516			—			—			4,867			Loans acquired with deteriorated credit quality	83			3,460			651			361			—			—			4,555
Total ending loan balance	Total ending loan balance	$	1,277,993		$	1,790,801		$	311,707		$	1,761,365		$	1,941,509		$	19,871		$	7,103,246		Total ending loan balance	$	1,261,981		$	1,800,878		$	290,743		$	1,821,174		$	1,900,609		$	18,472		$	7,093,857

ACL as a percentage of loan balance:	ACL as a percentage of loan balance:																						ACL as a percentage of loan balance:
Loans individually evaluated for impairment	Loans individually evaluated for impairment	4.77		%	4.13		%	—		%	—		%	—		%	1.74		%	4.01		%	Loans individually evaluated for impairment	10.52		%	1.40		%	—		%	—		%	—		%	0.32		%	7.27		%
Loans collectively evaluated for impairment	Loans collectively evaluated for impairment	0.97		%	1.11		%	1.45		%	0.86		%	1.57		%	0.96		%	1.17		%	Loans collectively evaluated for impairment	1.02		%	0.99		%	1.86		%	0.98		%	1.48		%	0.68		%	1.16		%
Loans acquired with deteriorated credit quality	Loans acquired with deteriorated credit quality	—		%	—		%	—		%	—		%	—		%	—		%	—		%	Loans acquired with deteriorated credit quality	—		%	—		%	—		%	—		%	—		%	—		%	—		%
Total	Total	1.01		%	1.16		%	1.44		%	0.86		%	1.57		%	1.00		%	1.18		%	Total	1.31		%	1.00		%	1.84		%	0.98		%	1.48		%	0.67		%	1.21		%

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		December 31, 2021																						December 31, 2022
(In thousands)	(In thousands)	Commercial, financial and agricultural			Commercial real estate			Construction real estate			Residential real estate			Consumer			Leases			Total			(In thousands)	Commercial, financial and agricultural			Commercial real estate			Construction real estate			Residential real estate			Consumer			Leases			Total
ACL:	ACL:																						ACL:
Ending allowance balance attributed to loans:	Ending allowance balance attributed to loans:																						Ending allowance balance attributed to loans:
Individually evaluated for impairment	Individually evaluated for impairment	$	1,385		$	188		$	—		$	—		$	—		$	43		$	1,616		Individually evaluated for impairment	$	3,426		$	131		$	—		$	—		$	—		$	9		$	3,566
Collectively evaluated for impairment	Collectively evaluated for impairment	12,640			25,278			5,758			11,424			26,286			195			81,581			Collectively evaluated for impairment	13,561			17,698			5,550			16,831			28,021			152			81,813
Acquired with deteriorated credit quality	Acquired with deteriorated credit quality	—			—			—			—			—			—			—			Acquired with deteriorated credit quality	—			—			—			—			—			—			—
Total ending allowance balance	Total ending allowance balance	$	14,025		$	25,466		$	5,758		$	11,424		$	26,286		$	238		$	83,197		Total ending allowance balance	$	16,987		$	17,829		$	5,550		$	16,831		$	28,021		$	161		$	85,379

Loan balance:	Loan balance:																						Loan balance:
Loans individually evaluated for impairment	Loans individually evaluated for impairment	$	22,666		$	47,820		$	222		$	2,606		$	—		$	1,188		$	74,502		Loans individually evaluated for impairment	$	41,307		$	32,423		$	1,712		$	2,191		$	—		$	708		$	78,341
Loans collectively evaluated for impairment	Loans collectively evaluated for impairment	1,275,783			1,748,854			320,608			1,735,226			1,689,679			19,321			6,789,471			Loans collectively evaluated for impairment	1,259,524			1,758,118			323,043			1,794,302			1,904,981			18,929			7,058,897
Loans acquired with deteriorated credit quality	Loans acquired with deteriorated credit quality	177			5,118			956			875			—			23			7,149			Loans acquired with deteriorated credit quality	102			3,513			660			378			—			—			4,653
Total ending loan balance	Total ending loan balance	$	1,298,626		$	1,801,792		$	321,786		$	1,738,707		$	1,689,679		$	20,532		$	6,871,122		Total ending loan balance	$	1,300,933		$	1,794,054		$	325,415		$	1,796,871		$	1,904,981		$	19,637		$	7,141,891

ACL as a percentage of loan balance:	ACL as a percentage of loan balance:																						ACL as a percentage of loan balance:
Loans individually evaluated for impairment	Loans individually evaluated for impairment	6.11		%	0.39		%	—		%	—		%	—		%	3.62		%	2.17		%	Loans individually evaluated for impairment	8.29		%	0.40		%	—		%	—		%	—		%	1.27		%	4.55		%
Loans collectively evaluated for impairment	Loans collectively evaluated for impairment	0.99		%	1.45		%	1.80		%	0.66		%	1.56		%	1.01		%	1.20		%	Loans collectively evaluated for impairment	1.08		%	1.01		%	1.72		%	0.94		%	1.47		%	0.80		%	1.16		%
Loans acquired with deteriorated credit quality	Loans acquired with deteriorated credit quality	—		%	—		%	—		%	—		%	—		%	—		%	—		%	Loans acquired with deteriorated credit quality	—		%	—		%	—		%	—		%	—		%	—		%	—		%
Total	Total	1.08		%	1.41		%	1.79		%	0.66		%	1.56		%	1.16		%	1.21		%	Total	1.31		%	0.99		%	1.71		%	0.94		%	1.47		%	0.82		%	1.20		%

Note 7 – Loans Held For Sale

Mortgage loans held for sale are carried at their fair value. At ~~September 30, 2022~~both March 31, 2023 and December 31, ~~2021, respectively,~~2022, Park had ~~$1.9 million and $9.4~~$2.1 million in mortgage loans held for sale. These amounts are included in loans on the Consolidated Condensed Balance Sheets and in the residential real estate loan portfolio segment in Note 5 - Loans, and Note 6 - Allowance for Credit Losses. The contractual balance was ~~$1.9~~$2.0 million and ~~$9.2~~$2.1 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. The gain expected upon sale was ~~$26,000~~$32,000 and ~~$166,000~~$41,000 at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. None of these loans were 90 days or more past due or on nonaccrual status at ~~September 30, 2022~~March 31, 2023 or December 31, ~~2021.~~2022.

During the three months ended June 30, 2022, Park transferred certain commercial loans held for investment, previously nonperforming, with an amortized cost of $6.3 million, to the loans held for sale portfolio. The transferred loans were recorded at the lower of cost or fair value, recording a charge-off in each instance where the fair value of an individual loan was deemed to be below the carrying cost at the time the loans were moved to the held for sale portfolio. The sale of $3.9 million in loans held for sale was subsequently completed during the three months ended September 30, 2022, and Park recognized a gain on sale of $495,000 which is recorded within "Miscellaneous income" on the Consolidated Condensed Statements of Income. The remaining $2.4 million in loans held for sale were transferred back to loans held for investment at the lower of cost or fair value. No non-performing loans were held for sale or sold during the three months or the nine months ended September 30, 2021.

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Note 8 – Goodwill and Other Intangible Assets

The following ~~tables show~~table shows the activity in goodwill and other intangible assets for the three-month ~~and the nine-month~~ periods ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

(in thousands) Goodwill Other
intangible assets Total
July 1, 2021 $ 159,595 $ 8,302 $ 167,897
Amortization — 420 420
September 30, 2021 $ 159,595 $ 7,882 $ 167,477
July 1, 2022 $ 159,595 $ 6,657 $ 166,252
Amortization — 341 341
September 30, 2022 $ 159,595 $ 6,316 $ 165,911


(in thousands)	Goodwill		Other intangible assets		Total
December 31, 2021	$	159,595	$	7,462	$	167,057
Amortization	—		402		402
March 31, 2022	$	159,595	$	7,060	$	166,655

December 31, 2022	$	159,595	$	5,975	$	165,570
Amortization	—		327		327
March 31, 2023	$	159,595	$	5,648	$	165,243

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(in thousands) Goodwill Other
intangible assets Total
December 31, 2020 $ 159,595 $ 9,260 $ 168,855
Amortization — 1,378 1,378
September 30, 2021 $ 159,595 $ 7,882 $ 167,477
December 31, 2021 $ 159,595 $ 7,462 $ 167,057
Amortization — 1,146 1,146
September 30, 2022 $ 159,595 $ 6,316 $ 165,911

Park evaluates goodwill for impairment during the second quarter of each year, with financial data as of the immediately prior March 31. Based on the qualitative analysis performed as of April 1, 2022, the Company determined that goodwill for Park's reporting unit, PNB, was not impaired.

Acquired Intangible Assets

The following table shows the balance of acquired intangible assets ~~as of September 30, 2022~~at March 31, 2023 and at December 31, ~~2021.~~2022.


		September 30, 2022				December 31, 2021					March 31, 2023				December 31, 2022
(in thousands)	(in thousands)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		(in thousands)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Other intangible assets:	Other intangible assets:									Other intangible assets:
Core deposit intangible assets	Core deposit intangible assets	$	14,456	$	8,140	$	14,456	$	6,994	Core deposit intangible assets	$	14,456	$	8,808	$	14,456	$	8,481
Trade name intangible assets	Trade name intangible assets	1,300		1,300		1,300		1,300		Trade name intangible assets	1,300		1,300		1,300		1,300
Total	Total	$	15,756	$	9,440	$	15,756	$	8,294	Total	$	15,756	$	10,108	$	15,756	$	9,781

Core deposit intangible assets are being amortized, on an accelerated basis, over a period of ten years. Aggregate amortization expense was ~~$341,000~~$327,000 and ~~$420,000~~$402,000 for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and was $1.1 million and $1.4 million for the nine months ended September 30, 2022 and 2021,~~ respectively.

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Estimated amortization expense related to core deposit intangible assets for each of the next five years follows:


(in thousands)	(in thousands)	Total		(in thousands)	Total
Three months ending December 31, 2022		$	341
2023		1,323
Nine months ending December 31, 2023				Nine months ending December 31, 2023	$	995
2024	2024	1,215		2024	1,215
2025	2025	1,042		2025	1,042
2026	2026	887		2026	887
2027				2027	754

Note 9 – Investment in Qualified Affordable Housing

Park makes certain equity investments in various limited partnerships that sponsor affordable housing projects. The purposes of these investments are to achieve a satisfactory return on capital, help create affordable housing opportunities, and assist the Company to achieve its goals associated with the Community Reinvestment Act.

The table below details the balances of Park’s affordable housing tax credit investments and related unfunded commitments at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.


(in thousands)	(in thousands)	September 30, 2022		December 31, 2021		(in thousands)	March 31, 2023		December 31, 2022
Affordable housing tax credit investments	Affordable housing tax credit investments	$	62,771	$	58,711	Affordable housing tax credit investments	$	58,871	$	60,968
Unfunded commitments	Unfunded commitments	28,480		28,484		Unfunded commitments	26,723		28,132

Commitments are funded when capital calls are made by the general partner. Park expects that the current commitments will be funded between the remainder of ~~2022 and~~2023 through 2032.

Park recognized amortization expense of ~~$2.0~~$2.1 million and ~~$1.9~~$2.0 million, respectively, for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, and $5.9 million and $5.6 million, respectively, for the nine months ended September 30, 2022 and 2021,~~ which ~~were~~was included within the provision for income taxes. Additionally, during the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ Park recognized tax credits and other benefits from its affordable housing tax credit investments of ~~$2.5~~$2.4 million and ~~$1.9 million, respectively, and during the nine months ended September 30, 2022 and 2021, recognized $7.4 million and $7.2~~$2.8 million, respectively, which were included within the provision for income taxes.

Note 10 – Foreclosed and Repossessed Assets

Park typically transfers a loan to OREO at the time that Park takes deed/title to the real estate property asset. The carrying amounts of foreclosed real estate properties held at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 are listed below, as well as the

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recorded investment of loans secured by residential real estate properties for which formal foreclosure proceedings were in process at those dates.

(in thousands) September 30, 2022 December 31, 2021
OREO:
Commercial real estate $ 1,354 $ —
Residential real estate — 775
Total OREO $ 1,354 $ 775
Loans in process of foreclosure:
Residential real estate $ 1,567 $ 1,148

Assets acquired through or in lieu of loan foreclosure are initially recorded at fair value less costs to sell when acquired. During the three months and the nine months ended September 30, 2022, Park recognized a $12.0 million OREO valuation markup related to the foreclosure and subsequent sale of a property collateralizing a former Vision Bank relationship. This income is included in "OREO valuation markup" on the Consolidated Condensed Statements of Income. There was no OREO valuation

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~~markup related to former Vision Bank relationships during the three-month or the nine-month periods ended September 30, 2021.~~

During the three months and the nine months ended September 30, 2022, Park recognized a $5.6 million gain on the sale of OREO related to former Vision Bank relationships. This income is included in "Gain (loss) on sale of OREO, net" on the Consolidated Condensed Statements of Income. There was no gain or loss on sale of OREO related to former Vision Bank relationships during the three-month or the nine-month periods ended September 30, 2021.


(in thousands)	March 31, 2023		December 31, 2022
OREO:
Commercial real estate	$	1,354	$	1,354
Residential real estate	114		—
Total OREO	$	1,468	$	1,354

Loans in process of foreclosure:
Residential real estate	$	1,709	$	1,614

In addition to real estate, Park may also repossess different types of collateral. At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, Park had ~~$352,000~~$0.7 million and ~~$3.3~~$0.6 million, respectively, in other repossessed assets which are included in "Other assets" on the Consolidated Condensed Balance Sheets. ~~At December 31, 2021, the other repossessed assets largely consisted of an aircraft acquired as part of a loan workout.~~

Note 11 – Loan Servicing

Park serviced sold mortgage loans of ~~$2.09~~$2.02 billion at ~~September 30, 2022, $2.13~~March 31, 2023, $2.05 billion at December 31, ~~2021~~2022 and ~~$2.12~~$2.14 billion at ~~September 30, 2021.~~March 31, 2022. At ~~September 30, 2022, $3.3~~March 31, 2023, $3.2 million of the sold mortgage loans were sold with recourse, compared to ~~$3.3~~$3.2 million at December 31, ~~2021~~2022 and ~~$3.5~~$3.4 million at ~~September 30, 2021.~~March 31, 2022. Management closely monitors the delinquency rates on the mortgage loans sold with recourse. At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, management had established reserves of ~~$61,000~~$56,000 and ~~$57,000,~~$59,000, respectively, to account for expected losses on loan repurchases.

When Park sells mortgage loans with servicing rights retained, these servicing rights are initially recorded at fair value. Park has selected the “amortization method” as permissible within U.S. GAAP, whereby the servicing rights capitalized are amortized in proportion to and over the period of estimated future servicing income with respect to the underlying loan. At the end of each reporting period, the carrying value of MSRs is assessed for impairment with a comparison to fair value. MSRs are carried at the lower of their amortized cost or fair value. The amortization of MSRs is included within "Other service income" in the Consolidated Condensed Statements of Income.

Activity for MSRs and the related valuation allowance follows:

Three Months Ended
September 30, Nine Months Ended
September 30,
(In thousands) 2022 2021 2022 2021
Mortgage servicing rights:
Carrying amount, net, beginning of period $ 16,470 $ 14,316 $ 15,264 $ 12,210
Additions 254 1,114 1,336 4,061
Amortization (592) (835) (1,804) (2,753)
Change in valuation allowance 59 (39) 1,395 1,038
Carrying amount, net, end of period $ 16,191 $ 14,556 $ 16,191 $ 14,556
Valuation allowance:
Beginning of period $ 232 $ 2,112 $ 1,568 $ 3,189
Change in valuation allowance (59) 39 (1,395) (1,038)
End of period $ 173 $ 2,151 $ 173 $ 2,151


	Three Months Ended March 31,
(In thousands)	2023		2022
Mortgage servicing rights:
Carrying amount, net, beginning of period	$	15,792	$	15,264
Additions	124		626
Amortization	(425)		(628)
Change in valuation allowance	14		442
Carrying amount, net, end of period	$	15,505	$	15,704

Valuation allowance:
Beginning of period	$	182	$	1,568
Change in valuation allowance	(14)		(442)
End of period	$	168	$	1,126

Servicing fees included in "Other service income" were $1.3 million and $1.4 million for ~~each of~~ the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and were $4.1 million and $4.0 million for the nine months ended September 30, 2022 and 2021,~~ respectively.

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Note 12 - Leases

Park is a lessee in several noncancellable operating lease arrangements, primarily for retail branches, administrative and warehouse buildings, ATMs, and certain office equipment within its Ohio, North Carolina, South Carolina, and Kentucky markets. Certain of these leases contain renewal options for periods ranging from one to five years. Park’s leases generally do not include termination options for either party to the lease or restrictive financial or other covenants. Payments due under the

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lease ~~contracts~~arrangements include fixed payments plus, for many of Park’s real estate leases, variable payments such as Park's proportionate share of property taxes, insurance and common area maintenance.

Park elected the practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease components. Additionally, Park has elected not to recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less. Park recognizes the lease payments associated with its short-term leases as an expense on a cash basis.

Management determines if an arrangement is or contains a lease at contract inception. If an arrangement is determined to be or contain a lease, Park recognizes a ROU asset and a lease liability at the lease commencement date. Leases are classified as operating or finance leases at the lease commencement date. At September 30, 2022 and December 31, 2021, all of Park's leases were classified as operating leases.

Park’s lease liability is initially and subsequently measured as the present value of the unpaid lease payments at the lease commencement date. Key estimates and judgments related to the lease liability include how management determines (1) the discount rate it uses to discount the unpaid lease payments to present value, (2) the lease term, and (3) lease payments.

•ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. Generally, Park's management cannot determine the interest rate implicit in a lease because it does not have access to the lessor’s estimated residual value or the amount of the lessor’s deferred initial direct costs. Therefore, Park utilizes its incremental borrowing rate as the discount rate for leases. Park’s incremental borrowing rate for a lease is the rate of interest Park would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. To manage its capital and liquidity needs, Park periodically obtains wholesale funding from the FHLB on an over-collateralized basis. The impact of utilizing an interest rate on an over-collateralized borrowing versus a fully collateralized borrowing is not material. Therefore, the FHLB yield curve was selected by Park's management as a baseline to determine Park’s discount rates for leases.

•The lease term for all of Park's leases includes the noncancellable period of the lease plus any additional periods covered by either Park's option to extend (or not to terminate) the lease that Park is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor. If a lease contract contains multiple renewal options, Park's management generally models lease cash flows through the first renewal option period unless the contract contains economic incentives or other conditions that increase or decrease the likelihood that additional renewals are reasonably certain to be exercised.

•~~Lease payments included in the measurement of the lease liability are comprised of the following:~~

–~~Fixed payments, including in-substance fixed payments, owed over the lease term;~~

–~~For certain of Park's gross real estate leases, non-lease components such as real estate taxes, insurance, and common area maintenance; and~~

–~~Variable lease payments that depend on an index or rate, initially measured using the index or rate at the lease commencement date.~~

The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Park's operating lease ROU asset and lease liability are presented in “Operating lease right-of-use asset" and "Operating lease liability," respectively, on Park's Consolidated Condensed Balance Sheets. The carrying amounts of Park's ROU asset and lease liability at ~~September 30, 2022~~March 31, 2023 were ~~$15.5~~$17.2 million and ~~$16.4~~$18.7 million, respectively. At December 31, ~~2021,~~2022, the carrying amounts of Park's ROU asset and lease liability were ~~$13.4~~$17.6 million and ~~$14.3~~$19.3 million, respectively. Park's operating lease expense is recorded in "Occupancy expense" on the Company's Consolidated Condensed Statements of Income.

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Other information related to operating leases for the three-month ~~and the nine-month~~ periods ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ follows:


		Three Months Ended				Nine Months Ended					Three Months Ended
(in thousands)	(in thousands)	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021		(in thousands)	March 31, 2023		March 31, 2022
Lease cost	Lease cost									Lease cost
Operating lease cost	Operating lease cost	$	811	$	705	$	2,286	$	2,124	Operating lease cost	$	732	$	724
Sublease income	Sublease income	(63)		(63)		(189)		(189)		Sublease income	(63)		(63)
Total lease cost	Total lease cost	$	748	$	642	$	2,097	$	1,935	Total lease cost	$	669	$	661

Other information	Other information									Other information
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:									Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Operating cash flows from operating leases	$	766	$	777	$	2,307	$	2,329	Operating cash flows from operating leases	$	923	$	773
ROU assets obtained in exchange for new operating lease liabilities	ROU assets obtained in exchange for new operating lease liabilities	$	88	$	367	$	4,270	$	547	ROU assets obtained in exchange for new operating lease liabilities	$	136	$	—
Reductions to ROU assets resulting from reductions to lease obligations	Reductions to ROU assets resulting from reductions to lease obligations	$	(697)	$	(695)	$	(2,090)	$	(2,074)	Reductions to ROU assets resulting from reductions to lease obligations	$	(777)	$	(698)

At ~~September 30, 2022~~both March 31, 2023 and December 31, ~~2021,~~2022, Park's operating leases had a weighted average remaining term of ~~8.7 years and 6.8 years, respectively.~~10.0 years. The weighted average discount rate of Park's operating leases was ~~2.7% and 2.3%~~3.3% at ~~September 30, 2022~~both March 31, 2023 and December 31, ~~2021, respectively.~~2022.

Undiscounted cash flows included in lease liabilities have expected contractual payments as follows:

(in thousands) September 30, 2022
Three months ending December 31, 2022 $ 763
2023 3,306
2024 2,179
2025 1,860
2026 1,806
Thereafter 8,885
Total undiscounted minimum lease payments $ 18,799
Present value adjustment (2,385)
Total lease liabilities $ 16,414

In September 2021, the Company entered into a noncancellable operating lease for an additional retail office for an initial term of 12 years, with two five-year renewal options. This lease is expected to commence during the fourth quarter of 2022, and therefore, was not recognized as of December 31, 2021 or September 30, 2022. The fixed payments due on an undiscounted basis over the noncancellable 12-year period of the lease are $3.5 million. The Company will assess the lease term as of the lease commencement date, but does not presently expect that either of the five-year renewal periods will be exercised.


(in thousands)	March 31, 2023
Nine months ending December 31, 2023	$	2,713
2024	2,523
2025	2,180
2026	2,132
2027	2,030
Thereafter	11,020
Total undiscounted minimum lease payments	$	22,598
Present value adjustment	(3,947)
Total lease liabilities	$	18,651

Note 13 – Repurchase Agreement Borrowings

Securities sold under agreements to repurchase ("repurchase agreements") with customers represent funds deposited by customers, generally on an overnight basis, that are collateralized by investment securities owned by Park. Repurchase agreements with customers are included in "Short-term borrowings" on the Consolidated Condensed Balance Sheets.

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All repurchase agreements are subject to terms and conditions of repurchase/security agreements between Park and the client and are accounted for as secured borrowings. Park's repurchase agreements consist of customer accounts and securities which are pledged on an individual security basis.

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At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, Park's repurchase agreement borrowings totaled ~~$189.5~~$172.1 million and ~~$213.8~~$227.3 million, respectively. These borrowings were collateralized with U.S. ~~government~~Government sponsored entities' asset-backed securities with a fair value of ~~$236.8~~$304.8 million and ~~$334.9~~$313.1 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Declines in the value of the collateral would require Park to pledge additional securities. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, Park had ~~$1,164~~$1,150 million and ~~$1,225~~$1,147 million, respectively, of available unpledged securities.

The table below shows the remaining contractual maturity of repurchase agreements by collateral pledged at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


		September 30, 2022											March 31, 2023
(in thousands)	(in thousands)	Remaining Contractual Maturity of the Agreements										(in thousands)	Remaining Contractual Maturity of the Agreements
		Overnight and Continuous		Up to 30 days		30 - 90 days		Greater than 90 days		Total			Overnight and Continuous		Up to 30 days		30 - 90 days		Greater than 90 days		Total
U.S. government and agency securities	U.S. government and agency securities	$	189,493	$	—	$	—	$	—	$	189,493	U.S. government and agency securities	$	172,058	$	—	$	—	$	—	$	172,058

		December 31, 2021											December 31, 2022
(in thousands)	(in thousands)	Remaining Contractual Maturity of the Agreements										(in thousands)	Remaining Contractual Maturity of the Agreements
		Overnight and Continuous		Up to 30 days		30 - 90 days		Greater than 90 days		Total			Overnight and Continuous		Up to 30 days		30 - 90 days		Greater than 90 days		Total
U.S. government and agency securities	U.S. government and agency securities	$	213,786	$	—	$	—	$	—	$	213,786	U.S. government and agency securities	$	227,342	$	—	$	—	$	—	$	227,342

Note 14 - Derivatives

Park uses certain derivative financial instruments (or "derivatives") to meet the needs of ~~its~~Park's clients while managing the interest rate risk associated with certain transactions. Park does not use derivatives for speculative purposes. A summary of derivative financial instruments utilized by Park follows.

Interest Rate Swaps

Park utilizes interest rate swap agreements as part of its asset-liability management strategy to help manage its interest rate risk position and as a means to meet the financing, interest rate and other risk management needs of qualifying commercial banking customers. The notional amount of the interest rate swaps does not represent the amount exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.

Borrowing Derivatives: At ~~September 30,~~March 31, 2023 and December 31, 2022, Park had no borrowing derivatives. ~~Interest rate~~During the three-month period ended March 31, 2022, Park recognized interest expense of $148,000 related to borrowing swaps. Additionally, during the three-month period ended March 31, 2022, Park recognized a gain of $139,000, net of income taxes, related to borrowing swaps ~~with notional amounts totaling $25.0 million at~~ that was recorded in "Other comprehensive income (loss)" on the~~December 31, 2021~~ ~~were designated as cash flow hedges~~ Consolidated Condensed Statements of ~~certain FHLB advances.~~Comprehensive Income.

Loan Derivatives: In conjunction with the Carolina Alliance acquisition, Park acquired interest rate swaps related to certain commercial loans. Simultaneously with borrowers entering into interest rate swaps, Carolina Alliance entered into offsetting interest rate swaps executed with a third party, such that Carolina Alliance minimized its net interest rate risk exposure resulting from such transactions. These interest rate swaps had a notional amount totaling ~~$22.8~~$21.3 million and $~~29.7~~21.7 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

All of the Company's interest rate swaps were determined to be fully effective during each of the three-month ~~and the nine-month~~ periods ended ~~September 30, 2022~~March 31, 2023 and ~~September 30, 2021.~~March 31, 2022. As such, no amount of ineffectiveness has been included in net income. Therefore, the aggregate fair value of the swaps is recorded in "Other assets" and "Other liabilities" with changes in fair value recorded in "Other comprehensive income (loss) ~~income"~~". The amount included in "Accumulated other comprehensive ~~(loss) income,~~loss, net of tax" would be

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reclassified to ~~current earnings~~net income should the hedges no longer be considered effective. ~~During the~~ ~~nine-month period ended~~ September 30, 2022, Park recognized expense of $66,000 as the result of the early termination of a borrowing interest rate swap. No expense related to early termination was recognized during the three months ended September 30, 2022 or the three months or the nine months ended September 30, 2021. Park expects the outstanding hedges to remain fully effective during the remaining respective terms of the swaps.

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Summary information about Park's interest rate swaps ~~as of September 30, 2022~~at March 31, 2023 and at December 31, ~~2021~~2022 follows:

September 30, 2022 December 31, 2021
(In thousands, except weighted average data) Borrowing Derivatives Loan Derivatives Borrowing Derivatives Loan Derivatives
Notional amounts $ — $ 22,831 $ 25,000 $ 29,651
Weighted average pay rates — % 4.555 % 2.595 % 4.668 %
Weighted average receive rates — % 4.555 % 0.124 % 4.668 %
Weighted average maturity (years) 0.0 8.1 0.5 8.2
Unrealized losses $ — $ — $ 262 $ —

~~There was no interest expense recorded on swap transactions for the three months ended September 30, 2022. Interest expense recorded on swap transactions was $157,000 for the three-month period ended September 30, 2021, and was $171,000 and $457,000~~ ~~for the nine-month periods ended September 30, 2022 and 2021, respectively.~~


	March 31, 2023			December 31, 2022
(In thousands, except weighted average data)	Loan Derivatives			Loan Derivatives
Notional amounts	$	21,277		$	21,700
Weighted average pay rates	4.555		%	4.553		%
Weighted average receive rates	4.555		%	4.553		%
Weighted average maturity (years)	7.7			7.9
Unrealized losses	$	—		$	—

Interest Rate Swaps

The following table ~~presents the net gains, net of income taxes, recorded in OCI and the Consolidated Condensed Statements of Income related to interest rate swaps for the~~ ~~three-month and the~~ ~~nine-month periods ended September 30, 2022 and 2021:~~

Three Months Ended
September 30, 2022

~~(In thousands)~~

~~Amount of Net Gain Recognized in OCI (Effective Portion)~~

~~Amount of Gain (Loss) Reclassified from OCI to Interest Income~~

~~Amount of Expense Recognized in Miscellaneous Expense~~

~~Interest rate swaps~~

—

Three Months Ended
September 30, 2021

~~(In thousands)~~

~~Amount of Net Gain Recognized in OCI (Effective Portion)~~

~~Amount of Gain (Loss) Reclassified from OCI to Interest Income~~

~~Amount of Expense Recognized in Miscellaneous Expense~~

~~Interest rate swaps~~

~~117~~

—

Nine Months Ended
September 30, 2022
(In thousands) Amount of Net Gain Recognized in OCI (Effective Portion) Amount of Gain (Loss) Reclassified from OCI to Interest Income Amount of Expense Recognized in Miscellaneous Expense
Interest rate swaps $ 154 $ — $ 52

Nine Months Ended
September 30, 2021

~~(In thousands)~~

~~Amount of Net Gain Recognized in OCI (Effective Portion)~~

~~Amount of Gain (Loss) Reclassified from OCI to Interest Income~~

~~Amount of Expense Recognized in Miscellaneous Expense~~

~~Interest rate swaps~~

~~355~~

—

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~~The following tables reflect~~reflects the interest rate swaps included in the Consolidated Condensed Balance Sheets ~~as of September 30, 2022~~at March 31, 2023 and at December 31, ~~2021.~~2022.


(In thousands)	(In thousands)	September 30, 2022				December 31, 2021				(In thousands)	March 31, 2023				December 31, 2022
		Notional Amount		Fair Value		Notional Amount		Fair Value			Notional Amount		Fair Value		Notional Amount		Fair Value
Included in "Other assets":	Included in "Other assets":									Included in "Other assets":
Borrowing derivatives - interest rate swaps related to FHLB advances		$	—	$	—	$	—	$	—
Loan derivatives - instruments associated with loans	Loan derivatives - instruments associated with loans									Loan derivatives - instruments associated with loans
Matched interest rate swaps with borrower	Matched interest rate swaps with borrower	—		—		29,651		1,952		Matched interest rate swaps with borrower	$	—	$	—	$	—	$	—
Matched interest rate swaps with counterparty	Matched interest rate swaps with counterparty	22,831		1,622		—		—		Matched interest rate swaps with counterparty	21,277		1,119		21,700		1,508
Total included in "Other assets"	Total included in "Other assets"	$	22,831	$	1,622	$	29,651	$	1,952	Total included in "Other assets"	$	21,277	$	1,119	$	21,700	$	1,508

Included in "Other liabilities":	Included in "Other liabilities":									Included in "Other liabilities":
Borrowing derivatives - interest rate swaps related to FHLB advances		$	—	$	—	$	25,000	$	(262)
Loan derivatives - instruments associated with loans	Loan derivatives - instruments associated with loans									Loan derivatives - instruments associated with loans
Matched interest rate swaps with borrower	Matched interest rate swaps with borrower	22,831		(1,622)		—		—		Matched interest rate swaps with borrower	$	21,277	$	(1,119)	$	21,700	$	(1,508)
Matched interest rate swaps with counterparty	Matched interest rate swaps with counterparty	—		—		29,651		(1,952)		Matched interest rate swaps with counterparty	—		—		—		—
Total included in "Other liabilities"	Total included in "Other liabilities"	$	22,831	$	(1,622)	$	54,651	$	(2,214)	Total included in "Other liabilities"	$	21,277	$	(1,119)	$	21,700	$	(1,508)

Mortgage Banking Derivatives

Commitments to fund mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of these mortgage loans are accounted for as free standing derivatives. In order to hedge the change in interest rates resulting from its commitments to fund the loans, the Company enters into forward commitments for the future delivery of mortgage loans when interest rate locks are entered into. These mortgage banking derivatives are not designated as hedge relationships. The fair value of an interest rate lock is recorded at the time the commitment to fund the mortgage loan is executed and is adjusted for the expected exercise of the commitment before the loan is funded. Fair values of these mortgage banking derivatives are estimated based on changes in mortgage interest rates from the date the interest on the loan is locked. Changes in the fair values of these derivatives are included in "Other service income" in the Condensed Consolidated Statements of Income.

At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022, Park had ~~$5.4~~$3.9 million and ~~$13.3~~$2.1 million, respectively, of interest rate lock commitments. The fair value of these mortgage banking derivatives was reflected by a derivative asset of ~~$0.1 million~~$77,000 and ~~$0.3 million~~$46,000 at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022, respectively.

Other Derivatives

In connection with the sale of Park’s Class B Visa shares during 2009, Park entered into a swap agreement with the purchaser of the shares. The swap agreement adjusts for dilution in the conversion ratio of Class B Visa shares resulting from certain Visa litigation. At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022, the fair value of the swap liability of $~~243,000~~121,000 and ~~$226,000,~~$243,000, respectively, represented an estimate of the exposure based upon probability-weighted potential Visa litigation losses.

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Note 15 – Accumulated Other Comprehensive ~~(Loss) Income~~Loss

Other comprehensive ~~(loss) income~~loss components, net of tax, are shown in the following table for the three-month ~~and the~~ ~~nine-month~~ periods ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:

(in thousands) Changes in pension plan assets and benefit obligations Unrealized net holding (loss) gain on cash flow hedge Unrealized (losses) gains on debt securities AFS Total
Beginning balance at July 1, 2022 $ (5,792) $ — $ (79,612) $ (85,404)
Other comprehensive loss before reclassifications — — (39,939) (39,939)
Net current period other comprehensive loss — — (39,939) (39,939)
Ending balance at September 30, 2022 $ (5,792) $ — $ (119,551) $ (125,343)
Beginning balance at July 1, 2021 $ (34,421) $ (460) $ 31,951 $ (2,930)
Other comprehensive income (loss) before reclassifications — 117 (4,997) (4,880)
Net current period other comprehensive income (loss) — 117 (4,997) (4,880)
Ending balance at September 30, 2021 $ (34,421) $ (343) $ 26,954 $ (7,810)


(in thousands)	(in thousands)		Changes in pension plan assets and benefit obligations		Unrealized net holding (loss) gain on cash flow hedge		Unrealized gains (losses) on debt securities AFS		Total		(in thousands)		Changes in pension plan assets and benefit obligations		Unrealized net holding (loss) gain on cash flow hedge		Unrealized (losses) gains on debt securities AFS		Total
Beginning balance at January 1, 2023											Beginning balance at January 1, 2023		$	(6,680)	$	—	$	(95,714)	$	(102,394)
												Other comprehensive income before reclassifications	—		—		12,361		12,361
Net current period other comprehensive income											Net current period other comprehensive income		—		—		12,361		12,361
Ending balance at March 31, 2023											Ending balance at March 31, 2023		$	(6,680)	$	—	$	(83,353)	$	(90,033)

Beginning balance at January 1, 2022	Beginning balance at January 1, 2022		$	(5,792)	$	(206)	$	21,153	$	15,155	Beginning balance at January 1, 2022		$	(5,792)	$	(206)	$	21,153	$	15,155
		Other comprehensive income (loss) before reclassifications	—		154		(140,704)		(140,550)			Other comprehensive income (loss) before reclassifications	—		139		(55,763)		(55,624)
		Amounts reclassified from other comprehensive loss	—		52		—		52
Net current period other comprehensive income (loss)	Net current period other comprehensive income (loss)		—		206		(140,704)		(140,498)		Net current period other comprehensive income (loss)		—		139		(55,763)		(55,624)
Ending balance at September 30, 2022			$	(5,792)	$	—	$	(119,551)	$	(125,343)

Beginning balance at January 1, 2021			$	(34,421)	$	(698)	$	40,690	$	5,571
		Other comprehensive income (loss) before reclassifications	—		355		(13,736)		(13,381)
Net current period other comprehensive income (loss)			—		355		(13,736)		(13,381)
Ending balance at September 30, 2021			$	(34,421)	$	(343)	$	26,954	$	(7,810)
Ending balance at March 31, 2022											Ending balance at March 31, 2022		$	(5,792)	$	(67)	$	(34,610)	$	(40,469)

During the ~~nine-month period~~three-month periods ended September 30, 2022, there was $66,000 ($52,000 net of tax) reclassified out of accumulated other comprehensive loss due to a net loss on the early termination of a borrowing interest rate swap. This loss was recorded within "Miscellaneous" other expense on the Consolidated Condensed Statements of Income. During the three-month period ended September 30,March 31, 2023 and 2022, there were no reclassifications out of accumulated other comprehensive ~~(loss) income. During the three~~loss.~~-month and the~~ ~~nine-month~~ ~~periods ended September 30, 2021, there were no reclassifications out of accumulated other comprehensive (loss) income.~~

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Note 16 – Earnings Per Common Share

The following table sets forth the computation of basic and diluted earnings per common share for the three ~~month~~months ended March 31, 2023 and ~~nine~~ ~~months~~ ~~ended September 30, 2022 and 2021.~~

2022.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(In thousands, except share and per common share data)	(In thousands, except share and per common share data)	2022		2021		2022		2021		(In thousands, except share and per common share data)	2023		2022
Numerator:	Numerator:									Numerator:
Net income	Net income	$	42,068	$	35,434	$	115,267	$	117,397	Net income	$	33,733	$	38,875
Denominator:	Denominator:									Denominator:
Weighted-average common shares outstanding	Weighted-average common shares outstanding	16,253,704		16,292,312		16,240,966		16,315,996		Weighted-average common shares outstanding	16,242,353		16,219,889
Effect of dilutive PBRSUs and TBRSUs	Effect of dilutive PBRSUs and TBRSUs	121,278		131,600		114,824		129,572		Effect of dilutive PBRSUs and TBRSUs	82,470		111,142
Weighted-average common shares outstanding adjusted for the effect of dilutive PBRSUs and TBRSUs	Weighted-average common shares outstanding adjusted for the effect of dilutive PBRSUs and TBRSUs	16,374,982		16,423,912		16,355,790		16,445,568		Weighted-average common shares outstanding adjusted for the effect of dilutive PBRSUs and TBRSUs	16,324,823		16,331,031
Earnings per common share:	Earnings per common share:									Earnings per common share:
Basic earnings per common share	Basic earnings per common share	$	2.59	$	2.17	$	7.10	$	7.20	Basic earnings per common share	$	2.08	$	2.40
Diluted earnings per common share	Diluted earnings per common share	$	2.57	$	2.16	$	7.05	$	7.14	Diluted earnings per common share	$	2.07	$	2.38

Park awarded ~~52,335~~54,698 PBRSUs and ~~61,890~~52,335 PBRSUs to certain employees during the ~~nine months ended September 30, 2022 and 2021, respectively. No PBRSUs were awarded during either of the~~ three months ended ~~September 30,~~March 31, 2023 and 2022, ~~or 2021.~~respectively.

Park repurchased an aggregate of ~~137,659~~124,000 common shares during ~~each of~~ the three months ~~and nine months~~ ended ~~September 30, 2021,~~March 31, 2023, to fund the PBRSUs, the TBRSUs and the common shares to be awarded to directors of Park and to directors of Park's subsidiary PNB (and its divisions) ~~and~~. These repurchases were made pursuant to Park's previously announced stock repurchase authorizations. No common shares were repurchased during the three months ~~or the nine months~~ ended ~~September 30,~~March 31, 2022.

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Note 17 – Segment Information

The Corporation is a financial holding company headquartered in Newark, Ohio. The reportable segment for the Corporation is its chartered national bank subsidiary, PNB (headquartered in Newark, Ohio). "All Other", which primarily consists of Park as the "Parent Company", GFSC and SEPH, is shown to reconcile the segment totals to the Consolidated Condensed Statements of Income.

Management is required to disclose information about the different types of business activities in which a company engages and also information on the different economic environments in which a company operates, so that the users of the financial statements can better understand the company’s performance, better understand the potential for future cash flows, and make

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more informed judgments about the company as a whole. Park has one reportable segment, as: (i) discrete financial information is available for this reportable segment and (ii) the segment is aligned with internal reporting to Park’s Chief Executive ~~Officer.~~Officer, who is the chief operating decision-maker.


		Operating Results for the three months ended September 30, 2022							Operating Results for the three months ended March 31, 2023
(In thousands)	(In thousands)	PNB		All Other		Total		(In thousands)	PNB		All Other		Total
Net interest income (expense)	Net interest income (expense)	$	92,035	$	(1,207)	$	90,828	Net interest income (expense)	$	93,589	$	(1,391)	$	92,198
Provision for (recovery of) credit losses	Provision for (recovery of) credit losses	3,235		(45)		3,190		Provision for (recovery of) credit losses	915		(732)		183
Other income	Other income	28,918		17,776		46,694		Other income	24,262		125		24,387
Other expense	Other expense	79,070		3,833		82,903		Other expense	72,997		3,506		76,503
Income before income taxes		$	38,648	$	12,781	$	51,429
Income tax expense		7,133		2,228		9,361
Net income		$	31,515	$	10,553	$	42,068
Income (loss) before income taxes								Income (loss) before income taxes	$	43,939	$	(4,040)	$	39,899
Income tax expense (benefit)								Income tax expense (benefit)	7,670		(1,504)		6,166
Net income (loss)								Net income (loss)	$	36,269	$	(2,536)	$	33,733

Assets (at September 30, 2022)		$	9,816,644	$	38,403	$	9,855,047
Assets (at March 31, 2023)								Assets (at March 31, 2023)	$	9,817,967	$	39,014	$	9,856,981


		Operating Results for the three months ended September 30, 2021							Operating Results for the three months ended March 31, 2022
(In thousands)	(In thousands)	PNB		All Other		Total		(In thousands)	PNB		All Other		Total
Net interest income (expense)	Net interest income (expense)	$	82,835	$	(1,233)	$	81,602	Net interest income (expense)	$	79,372	$	(1,686)	$	77,686
Provision for (recovery of) credit losses		4,276		(2,304)		1,972
Recovery of credit losses								Recovery of credit losses	(4,547)		(58)		(4,605)
Other income	Other income	31,332		1,079		32,411		Other income	31,247		409		31,656
Other expense	Other expense	64,663		3,826		68,489		Other expense	64,216		3,157		67,373
Income (loss) before income taxes	Income (loss) before income taxes	$	45,228	$	(1,676)	$	43,552	Income (loss) before income taxes	$	50,950	$	(4,376)	$	46,574
Income tax expense (benefit)	Income tax expense (benefit)	8,777		(659)		8,118		Income tax expense (benefit)	9,482		(1,783)		7,699
Net income (loss)	Net income (loss)	$	36,451	$	(1,017)	$	35,434	Net income (loss)	$	41,468	$	(2,593)	$	38,875

Assets (at September 30, 2021)		$	10,012,868	$	21,150	$	10,034,018
Assets (at March 31, 2022)								Assets (at March 31, 2022)	$	9,544,545	$	31,807	$	9,576,352

Operating Results for the nine months ended September 30, 2022
(In thousands) PNB All Other Total
Net interest income (expense) $ 254,818 $ (2,365) $ 252,453
Provision for (recovery of) credit losses 2,045 (469) 1,576
Other income 89,420 20,123 109,543
Other expense 209,500 10,824 220,324
Income before income taxes $ 132,693 $ 7,403 $ 140,096
Income tax expense 24,770 59 24,829
Net income $ 107,923 $ 7,344 $ 115,267

Operating Results for the nine months ended September 30, 2021
(In thousands) PNB All Other Total
Net interest income (expense) $ 247,596 $ (1,409) $ 246,187
Recovery of credit losses (3,670) (3,253) (6,923)
Other income 95,258 2,480 97,738
Other expense 195,361 12,393 207,754
Income (loss) before income taxes $ 151,163 $ (8,069) $ 143,094
Income tax expense (benefit) 28,694 (2,997) 25,697
Net income (loss) $ 122,469 $ (5,072) $ 117,397

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The operating results in the “All Other” column are used to reconcile the segment totals to the Consolidated Condensed Statements of Income for the three-month ~~and the~~ ~~nine-month~~ periods ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. The reconciling amounts for consolidated total assets for the periods ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ consisted of the elimination of intersegment borrowings and the assets of the Parent Company, GFSC and SEPH which were not eliminated.

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Note 18 - Share-Based Compensation

The Park National Corporation 2017 Long-Term Incentive Plan for Employees (the "2017 Employees LTIP") was adopted by the Board of Directors of Park on January 23, 2017 and was approved by Park's shareholders at the Annual Meeting of Shareholders on April 24, 2017. The 2017 Employees LTIP makes equity-based awards and cash-based awards available for grant to employee participants in the form of incentive stock options, nonqualified stock options, stock appreciation rights ("SARs"), restricted stock, restricted stock units, other stock-based awards and cash-based awards. Under the 2017 Employees LTIP, 750,000 common shares are authorized to be delivered in connection with grants under the 2017 Employees LTIP. The common shares to be delivered under the 2017 Employees LTIP are to consist of either common shares currently held or common shares subsequently acquired by Park as treasury shares, including common shares purchased in the open market or in private transactions. At ~~September 30, 2022, 397,665~~March 31, 2023, 320,302 common shares were available for future grants under the 2017 Employees LTIP.

The Park National Corporation 2017 Long-Term Incentive Plan for Non-Employee Directors (the "2017 Non-Employee Directors LTIP") was adopted by the Board of Directors of Park on January 23, 2017 and was approved by Park's shareholders at the Annual Meeting of Shareholders on April 24, 2017. The 2017 Non-Employee Directors LTIP makes equity-based awards and cash-based awards available for grant to non-employee director participants in the form of nonqualified stock options, SARs, restricted stock, restricted stock units, other stock-based awards, and cash-based awards. Under the 2017 Non-Employee Directors LTIP, 150,000 common shares are authorized to be delivered in connection with grants under the 2017 Non-Employee Directors LTIP. The common shares to be delivered under the 2017 Non-Employee Directors LTIP are to consist of either common shares currently held or common shares subsequently acquired by Park as treasury shares, including common shares purchased in the open market or in private transactions. At ~~September 30, 2022, 86,850~~March 31, 2023, 75,000 common shares were available for future grants under the 2017 Non-Employee Directors LTIP.

During the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Compensation Committee of the Board of Directors of Park granted awards of PBRSUs, under the 2017 Employees LTIP, covering an aggregate of ~~52,335~~54,698 common shares and ~~61,890~~52,335 common shares, respectively, to certain employees of Park and its subsidiaries. ~~No awards were granted during either of the three months ended September 30, 2022 and 2021.~~

As of ~~September 30, 2022,~~March 31, 2023, Park has nonvested PBRSUs as well as TBRSUs. The number of PBRSUs earned or settled will depend on the level of achievement with respect to certain performance criteria over a three-year period and are also subject to subsequent service-based vesting. The number of TBRSUs earned or settled are subject to service-based vesting.

A summary of changes in the common shares subject to nonvested PBRSUs and TBRSUs for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 follows:


			Common shares subject to PBRSUs and TBRSUs
Nonvested at January 1, ~~2022~~2023			~~211,819~~199,650
Granted			~~52,335~~54,698
Vested			~~(55,464)~~(56,465)
Forfeited			~~(3,165)~~(570)
Adjustment for performance conditions of PBRSUs (1)			~~(634)~~—
Nonvested at ~~September 30, 2022~~March 31, 2023 (2)			~~204,891~~197,313

(1) The number of PBRSUs earned depends on the level of achievement with respect to certain performance criteria. Adjustment herein, if any, represents the difference between the maximum number of common shares which could be earned and the actual number earned for those PBRSUs as to which the performance period was completed.

(2) Nonvested amount herein represents the maximum number of nonvested PBRSUs and TBRSUs. As of ~~September 30, 2022,~~March 31, 2023, an aggregate of ~~203,578~~194,287 PBRSUs and TBRSUs ~~are~~were expected to vest.

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A summary of awards vested during the three months ended March 31, 2023 and ~~the nine months ended September 30,~~ 2022 ~~and 2021~~ follows:


		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended March 31,
		2022	2021	2022	2021		2023	2022
PBRSUs and TBRSUs vested	PBRSUs and TBRSUs vested	7,049	4,427	55,464	48,106	PBRSUs and TBRSUs vested	56,465	48,415
Common shares withheld to satisfy employee income tax withholding obligations	Common shares withheld to satisfy employee income tax withholding obligations	2,559	1,348	21,217	18,429	Common shares withheld to satisfy employee income tax withholding obligations	21,981	18,658
Net common shares issued	Net common shares issued	4,490	3,079	34,247	29,677	Net common shares issued	34,484	29,757

Share-based compensation expense of ~~$1.4~~$2.3 million and ~~$1.2~~$2.0 million was recognized for the three-month periods ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and share-based compensation expense of $4.8 million and $4.5 million was recognized for the nine-month periods ended September 30, 2022 and 2021,~~ respectively.

The following table details expected additional share-based compensation expense related to PBRSUs and TBRSUs outstanding at ~~September 30, 2022:~~March 31, 2023:


(In thousands)	(In thousands)			(In thousands)
Three months ending December 31, 2022		$	1,392
2023		4,487
Nine months ending December 31, 2023				Nine months ending December 31, 2023	$	4,350
2024	2024	2,939		2024	4,693
2025	2025	1,228		2025	3,076
2026	2026	197		2026	1,285
2027				2027	206
Total	Total	$	10,243	Total	$	13,610

Note 19 – Benefit Plans

Park has a noncontributory defined benefit pension plan (the "Pension Plan") covering substantially all of its employees. The Pension Plan provides benefits based on an employee’s years of service and compensation.

There were no Pension Plan contributions for ~~any~~either of the three-month ~~or the nine-month~~ periods ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. Additionally, no contributions are expected to be made during the remainder of ~~2022.~~2023.

The following table shows the components of net periodic pension benefit (income) expense:


		Three Months Ended September 30,				Nine Months Ended September 30,				Affected Line Item in the Consolidated Condensed Statements of Income		Three Months Ended March 31,				Affected Line Item in the Consolidated Condensed Statements of Income
(In thousands)	(In thousands)	2022		2021		2022		2021			(In thousands)	2023		2022
Service cost	Service cost	$	2,437	$	2,479	$	7,311	$	7,437	Employee benefits	Service cost	$	1,559	$	2,437	Employee benefits
Interest cost	Interest cost	1,426		1,340		4,278		4,020		Other components of net periodic pension benefit income	Interest cost	1,631		1,426		Other components of net periodic pension benefit income
Expected return on plan assets	Expected return on plan assets	(4,449)		(3,933)		(13,347)		(11,799)		Other components of net periodic pension benefit income	Expected return on plan assets	(3,536)		(4,449)		Other components of net periodic pension benefit income
Recognized net actuarial (gain) loss and prior service costs		(4)		555		(12)		1,665		Other components of net periodic pension benefit income
Recognized prior service cost (credit)											Recognized prior service cost (credit)	12		(4)		Other components of net periodic pension benefit income
Net periodic pension benefit (income) expense	Net periodic pension benefit (income) expense	$	(590)	$	441	$	(1,770)	$	1,323		Net periodic pension benefit (income) expense	$	(334)	$	(590)

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Park has entered into Supplemental Executive Retirement Plan Agreements (the “SERP Agreements”) with certain key officers of Park and its subsidiaries which provide defined pension benefits in excess of limits imposed by federal tax law. The expense

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for the Corporation related to the SERP Agreements for the three months ended March 31, 2023 and ~~the nine months ended September 30,~~ 2022 ~~and 2021~~ was as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,				Affected Line Item in the Consolidated Condensed Statements of Income		Three Months Ended March 31,				Affected Line Item in the Consolidated Condensed Statements of Income
(In thousands)	(In thousands)	2022		2021		2022		2021			(In thousands)	2023		2022
Service cost	Service cost	$	212	$	203	637		$	611	Employee benefits	Service cost	$	234	$	213	Employee benefits
Interest cost	Interest cost	183		150		549		448		Miscellaneous expense	Interest cost	176		183		Miscellaneous expense
Total SERP expense	Total SERP expense	$	395	$	353	$	1,186	$	1,059		Total SERP expense	$	410	$	396

Note 20 – Fair Value

The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that Park uses to measure fair value are as follows:

•Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that Park has the ability to access as of the measurement date.

•Level 2: Level 1 inputs for assets or liabilities that are not actively traded. Also consists of an observable market price for a similar asset or liability. This includes the use of “matrix pricing” to value debt securities absent the exclusive use of quoted prices.

•Level 3: Consists of unobservable inputs that are used to measure fair value when observable market inputs are not available. This could include the use of internally developed models, financial forecasting and similar inputs.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the balance sheet date. When possible, the Company looks to active and observable markets to price identical assets or liabilities. When identical assets and liabilities are not traded in active markets, the Company looks to observable market data for similar assets and liabilities. However, certain assets and liabilities are not traded in observable markets and Park must use other valuation methods to develop a fair value. The fair value of individually evaluated collateral dependent loans is typically based on the fair value of the underlying collateral, which is estimated through third-party appraisals in accordance with Park's valuation requirements under its commercial and real estate loan policies.

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Assets and Liabilities Measured at Fair Value on a Recurring Basis:

The following table presents assets and liabilities measured at fair value on a recurring basis:


Fair Value Measurements at September 30, 2022 using:
Fair Value Measurements at March 31, 2023 using:										Fair Value Measurements at March 31, 2023 using:
(In thousands)	(In thousands)	Level 1		Level 2		Level 3		Balance at September 30, 2022		(In thousands)	Level 1		Level 2		Level 3		Balance at March 31, 2023
Assets	Assets									Assets
Investment securities:	Investment securities:									Investment securities:
Obligations of U.S. Treasury and other U.S. Government sponsored entities		$	—	$	38,122	$	—	$	38,122
Obligations of U.S. Government sponsored entities										Obligations of U.S. Government sponsored entities	$	—	$	37,344	$	—	$	37,344
Obligations of states and political subdivisions	Obligations of states and political subdivisions	—		393,918		—		393,918		Obligations of states and political subdivisions	—		412,006		—		412,006
U.S. Government sponsored entities’ asset-backed securities	U.S. Government sponsored entities’ asset-backed securities	—		784,863		—		784,863		U.S. Government sponsored entities’ asset-backed securities	—		730,261		—		730,261
Collateralized loan obligations	Collateralized loan obligations	—		509,058		—		509,058		Collateralized loan obligations	—		519,428		—		519,428
Corporate debt securities	Corporate debt securities	—		16,162		—		16,162		Corporate debt securities	—		8,546		6,855		15,401
Equity securities	Equity securities	1,277		—		469		1,746		Equity securities	2,383		—		449		2,832
Mortgage loans held for sale	Mortgage loans held for sale	—		1,928		—		1,928		Mortgage loans held for sale	—		2,076		—		2,076
Mortgage IRLCs	Mortgage IRLCs	—		102		—		102		Mortgage IRLCs	—		77		—		77
Loan interest rate swaps	Loan interest rate swaps	—		1,622		—		1,622		Loan interest rate swaps	—		1,119		—		1,119

Liabilities	Liabilities									Liabilities
Fair value swap	Fair value swap	$	—	$	—	$	243	$	243	Fair value swap	$	—	$	—	$	121	$	121
Borrowing interest rate swap		—		—		—		—
Loan interest rate swaps	Loan interest rate swaps	—		1,622		—		1,622		Loan interest rate swaps	—		1,119		—		1,119


Fair Value Measurements at December 31, 2021 using:
Fair Value Measurements at December 31, 2022 using:										Fair Value Measurements at December 31, 2022 using:
(In thousands)	(In thousands)	Level 1		Level 2		Level 3		Balance at December 31, 2021		(In thousands)	Level 1		Level 2		Level 3		Balance at December 31, 2022
Assets	Assets									Assets
Investment securities:	Investment securities:									Investment securities:
Obligations of U.S. Government sponsored entities										Obligations of U.S. Government sponsored entities	$	—	$	37,213	$	—	$	37,213
Obligations of states and political subdivisions	Obligations of states and political subdivisions	$	—	$	389,591	$	—	$	389,591	Obligations of states and political subdivisions	—		406,711		—		406,711
U.S. Government sponsored entities’ asset-backed securities	U.S. Government sponsored entities’ asset-backed securities	—		854,463		—		854,463		U.S. Government sponsored entities’ asset-backed securities	—		756,761		—		756,761
Collateralized loan obligations	Collateralized loan obligations	—		498,674		—		498,674		Collateralized loan obligations	—		516,539		—		516,539
Corporate debt securities	Corporate debt securities	—		11,412		—		11,412		Corporate debt securities	—		9,472		7,000		16,472
Equity securities	Equity securities	1,630		—		499		2,129		Equity securities	1,420		—		439		1,859
Mortgage loans held for sale	Mortgage loans held for sale	—		9,387		—		9,387		Mortgage loans held for sale	—		2,149		—		2,149
Mortgage IRLCs	Mortgage IRLCs	—		333		—		333		Mortgage IRLCs	—		46		—		46
Loan interest rate swaps	Loan interest rate swaps	—		1,952		—		1,952		Loan interest rate swaps	—		1,508		—		1,508

Liabilities	Liabilities									Liabilities
Fair value swap	Fair value swap	$	—	$	—	$	226	$	226	Fair value swap	$	—	$	—	$	243	$	243
Borrowing interest rate swap		—		262		—		262
Loan interest rate swaps	Loan interest rate swaps	—		1,952		—		1,952		Loan interest rate swaps	—		1,508		—		1,508

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The following methods and assumptions were used by the Company in determining the fair value of the financial assets and liabilities discussed above:

Interest rate swaps: The fair values of interest rate swaps are based on valuation models using observable market data as of the measurement date (Level 2).

Investment securities: Fair values for investment securities are based on quoted market prices, where available (Level 1). If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows (Level 3).

Fair value swap: The fair value of the swap agreement entered into with the purchaser of the Visa Class B shares represents an internally developed estimate of the exposure based upon probability-weighted potential Visa litigation losses and is classified as Level 3.

Mortgage ~~Interest Rate Lock Commitments:~~interest rate lock commitments: Mortgage IRLCs are based on current secondary market pricing and are classified as Level 2.

Mortgage loans held for sale: Mortgage loans held for sale are carried at their fair value. Mortgage loans held for sale are estimated using market prices for similar product types and, therefore, are classified in Level 2.

The following tables present a reconciliation of the beginning and ending balances of the Level 3 inputs for the three-month ~~and~~ ~~nine-month~~periods ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ for financial instruments measured on a recurring basis and classified as Level 3:

Level 3 Fair Value Measurements
Three months ended September 30, 2022 and 2021
(In thousands) Equity securities Fair value
swap
Balance at July 1, 2022 $ 491 $ (447)
Total losses
Included in other income / expense (22) —
Purchases, sales, issuances and settlements, other, net — 204
Balance at September 30, 2022 $ 469 $ (243)
Balance at July 1, 2021 $ 490 $ (226)
Total gains
Included in other income 1 —
Balance at September 30, 2021 $ 491 $ (226)

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Level 3 Fair Value Measurements	Level 3 Fair Value Measurements						Level 3 Fair Value Measurements
Nine months ended September 30, 2022 and 2021
Three months ended March 31, 2023 and 2022							Three months ended March 31, 2023 and 2022
(In thousands)	(In thousands)	Equity securities			Fair value swap		(In thousands)	Corporate Debt Securities		Equity securities		Fair value swap
Balance at January 1, 2023							Balance at January 1, 2023	$	7,000	$	439	$	(243)
Transfers into level 3							Transfers into level 3	622		—		—
Total (losses) / gains							Total (losses) / gains
Included in other income							Included in other income	—		10		—
Included in other comprehensive income							Included in other comprehensive income	(767)		—		—
Purchases, sales, issuances and settlements, other, net							Purchases, sales, issuances and settlements, other, net	—		—		122
Balance at March 31, 2023							Balance at March 31, 2023	$	6,855	$	449	$	(121)

Balance at January 1, 2022	Balance at January 1, 2022	$	499		$	(226)	Balance at January 1, 2022	$	—	$	499	$	(226)
Total losses	Total losses						Total losses
Included in other income / expense		(30)			(221)
Purchases, sales, issuances and settlements, other, net		—			204
Balance at September 30, 2022		$	469		$	(243)

Balance at January 1, 2021		$	485		$	(226)
Total gains
Included in other income	Included in other income	6			—		Included in other income	—		(8)		—
Balance at September 30, 2021		$	491	491	$	(226)
Balance at March 31, 2022							Balance at March 31, 2022	$	—	$	491	$	(226)

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis:

The following methods and assumptions were used by the Company in determining the fair value of assets and liabilities measured at fair value on a nonrecurring basis as described below:

Individually evaluated collateral dependent loans: When a loan is individually evaluated, it is valued at the lower of cost or fair value. Collateral dependent loans which are individually evaluated and carried at fair value have been partially charged off or receive specific allocations of the allowance for credit losses. For collateral dependent loans, fair value is generally based on real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales approach and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments result in a Level 3 classification of the inputs for determining fair value. Collateral is then adjusted or discounted based on

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management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and the client’s business, resulting in a Level 3 fair value classification. Individually evaluated loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly. Additionally, ~~updated independent~~ valuations ~~are obtained annually~~ for all collateral dependent loans are updated annually, either through independent valuations by a licensed appraiser or a verification of value ("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.

After the adoption of ASU 2022-02 on January 1, 2023, loans individually evaluated for impairment include all internally classified commercial nonaccrual loans. Prior to the adoption of ASU 2022-02, loans individually evaluated for impairment included all internally classified commercial nonaccrual loans and accruing TDRs.

OREO: Assets acquired through or in lieu of loan foreclosure are initially recorded at fair value less costs to sell when acquired. The carrying value of OREO is not re-measured to fair value on a recurring basis, but is subject to fair value adjustments when the carrying value exceeds the fair value, less estimated selling costs. Fair value is based on recent real estate appraisals and is updated at least annually. These appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales approach and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments result in a Level 3 classification of the inputs for determining fair value.

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Appraisals for both individually evaluated collateral dependent loans and OREO are performed by licensed appraisers. Appraisals are generally obtained to support the fair value of collateral. In general, there are three types of appraisals received by the Company: real estate appraisals, income approach appraisals, and lot development loan appraisals. These are discussed below:

•Real estate appraisals typically incorporate measures such as recent sales prices for comparable properties. Appraisers may make adjustments to the sales prices of the comparable properties as deemed appropriate based on the age, condition or general characteristics of the subject property. Management generally applies a 15% discount to real estate appraised values which management expects will cover all disposition costs (including selling costs). This 15% discount is based on historical discounts to appraised values on sold OREO properties.

•Income approach appraisals typically incorporate the annual net operating income of the business divided by an appropriate capitalization rate, as determined by the appraiser. Management generally applies a 15% discount to income approach appraised values which management expects will cover all disposition costs (including selling costs).

•Lot development loan appraisals are typically performed using a discounted cash flow analysis. Appraisers determine an anticipated absorption period and a discount rate that takes into account an investor’s required rate of return based on recent comparable sales. Management generally applies a 6% discount to lot development appraised values, which is an additional discount above the net present value calculation included in the appraisal, to account for selling costs.

~~Other repossessed assets:~~ Other repossessed assets are initially recorded at fair value less costs to sell when acquired. The carrying value of other repossessed assets is not re-measured to fair value on a recurring basis, but is subject to fair value adjustments when the carrying value exceeds the fair value, less estimated selling costs. At December 31, 2021, other repossessed assets primarily consisted of aircraft acquired as part of a loan workout. Fair value is based on Aircraft Bluebook and VREF Aircraft Value Reference values based on the model of aircraft and adjustments for flight hours, features and other variables. Such adjustments result in a Level 3 classification of the inputs for determining fair value. There were no repossessed assets carried at fair value at September 30, 2022.

MSRs: MSRs are carried at the lower of cost or fair value. MSRs do not trade in active, open markets with readily observable prices. For example, sales of MSRs do occur, but precise terms and conditions typically are not readily available. As such, management, with the assistance of a third-party specialist, determines fair value based on the discounted value of the future cash flows estimated to be received. Significant inputs include the discount rate and assumed prepayment speeds. The calculated fair value is then compared to market values where possible to ascertain the reasonableness of the valuation in relation to current market expectations for similar products. Accordingly, MSRs are classified as Level 2.

The following tables present assets and liabilities measured at fair value on a nonrecurring basis. Individually evaluated collateral dependent loans secured by real estate are carried at fair value if they have been charged down to fair value or if a specific valuation allowance has been established. ~~As of September 30, 2022~~At March 31, 2023 and December 31, ~~2021,~~2022, there were no PCD loans

~~Table of Contents~~

carried at fair value. A new cost basis is established at the time a property is initially recorded in OREO. OREO properties are carried at fair value if a devaluation has been taken with respect to the property's value subsequent to the initial measurement.

Fair Value Measurements at September 30, 2022 using:
(In thousands) Level 1 Level 2 Level 3 Balance at September 30, 2022
Individually evaluated collateral dependent loans recorded at fair value:
Commercial real estate $ — $ — $ 4,685 $ 4,685
Residential real estate — — 204 204
Total individually evaluated collateral dependent loans recorded at fair value $ — $ — $ 4,889 $ 4,889
MSRs $ — $ 1,673 $ — $ 1,673
OREO recorded at fair value:
Residential real estate — — — —
Total OREO recorded at fair value $ — $ — $ — $ —
Other repossessed assets $ — $ — $ — $ —

Fair Value Measurements at December 31, 2021 using:
(In thousands) Level 1 Level 2 Level 3 Balance at December 31, 2021
Individually evaluated collateral dependent loans recorded at fair value:
Commercial real estate $ — $ — $ 831 $ 831
Residential real estate — — 272 272
Total individually evaluated collateral dependent loans recorded at fair value $ — $ — $ 1,103 $ 1,103
MSRs $ — $ 13,482 $ — $ 13,482
OREO recorded at fair value:
Residential real estate — — 775 775
Total OREO recorded at fair value $ — $ — $ 775 $ 775
Other repossessed assets $ — $ — $ 2,750 $ 2,750

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At March 31, 2023 and December 31, 2022, there were no OREO properties held by Park that were carried at fair value due to fair value adjustments made subsequent to the initial OREO measurement.


Fair Value Measurements at March 31, 2023 using:
(In thousands)	Level 1		Level 2		Level 3		Balance at March 31, 2023
Individually evaluated collateral dependent loans recorded at fair value:
Commercial real estate	$	—	$	—	$	2,873	$	2,873
Residential real estate	—		—		195		195
Total individually evaluated collateral dependent loans recorded at fair value	$	—	$	—	$	3,068	$	3,068

MSRs	$	—	$	1,793	$	—	$	1,793


Fair Value Measurements at December 31, 2022 using:
(In thousands)	Level 1		Level 2		Level 3		Balance at December 31, 2022
Individually evaluated collateral dependent loans recorded at fair value:
Commercial real estate	$	—	$	—	$	5,573	$	5,573
Residential real estate	—		—		200		200
Total individually evaluated collateral dependent loans recorded at fair value	$	—	$	—	$	5,773	$	5,773

MSRs	$	—	$	1,717	$	—	$	1,717

The table below provides additional detail on those individually evaluated loans which are recorded at fair value as well as the remaining individually evaluated loan portfolio not included above. The remaining individually evaluated loans consist of 1) loans which are not collateral dependent, 2) loans which are not secured by real estate, and 3) loans carried at cost as the fair value of the underlying collateral or the present value of expected future cash flows on each of the loans exceeded the book value for each respective credit.


		September 30, 2022									March 31, 2023
(In thousands)	(In thousands)	Loan Balance		Prior Charge-Offs		Specific Valuation Allowance		Carrying Balance		(In thousands)	Loan Balance		Prior Charge-Offs		Specific Valuation Allowance		Carrying Balance
Total individually evaluated collateral dependent loans recorded at fair value	Total individually evaluated collateral dependent loans recorded at fair value	$	6,042	$	543	$	1,153	$	4,889	Total individually evaluated collateral dependent loans recorded at fair value	$	3,284	$	1,293	$	216	$	3,068
Remaining individually evaluated loans	Remaining individually evaluated loans	37,628		252		597		37,031		Remaining individually evaluated loans	56,100		245		4,102		51,998
Total individually evaluated loans	Total individually evaluated loans	$	43,670	$	795	$	1,750	$	41,920	Total individually evaluated loans	$	59,384	$	1,538	$	4,318	$	55,066


		December 31, 2021									December 31, 2022
(In thousands)	(In thousands)	Loan Balance		Prior Charge-Offs		Specific Valuation Allowance		Carrying Balance		(In thousands)	Loan Balance		Prior Charge-Offs		Specific Valuation Allowance		Carrying Balance
Total individually evaluated collateral dependent loans recorded at fair value	Total individually evaluated collateral dependent loans recorded at fair value	$	1,291	$	240	$	188	$	1,103	Total individually evaluated collateral dependent loans recorded at fair value	$	5,903	$	1,523	$	130	$	5,773
Remaining individually evaluated loans	Remaining individually evaluated loans	73,211		384		1,428		71,783		Remaining individually evaluated loans	72,438		252		3,436		69,002
Total individually evaluated loans	Total individually evaluated loans	$	74,502	$	624	$	1,616	$	72,886	Total individually evaluated loans	$	78,341	$	1,775	$	3,566	$	74,775

The (expense) income ~~(expense)~~ from credit adjustments related to individually evaluated loans carried at fair value was ~~$7,000~~$(107,000) and ~~$(83,000)~~$24,000 for the three-month periods ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and was $(1.0) million and $462,000 for the nine-month periods ended September 30, 2022 and 2021,~~ respectively.

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MSRs totaled ~~$16.2~~$15.5 million at ~~September 30, 2022.~~March 31, 2023. Of this ~~$16.2~~$15.5 million MSR carrying balance, $1.8 million were recorded at fair value and included a valuation allowance of $0.2 million. The remaining $13.7 million were recorded at cost, as the fair value exceeded cost at March 31, 2023. At December 31, 2022, MSRs totaled $15.8 million. Of this $15.8 million MSR carrying balance, $1.7 million were recorded at fair value and included a valuation allowance of $0.2 million. The remaining $14.5 million were recorded at cost, as the fair value exceeded cost at September 30, 2022. At December 31, 2021, MSRs totaled $15.3 million. Of this $15.3 million MSR carrying balance, $13.5 million were recorded at fair value and included a valuation allowance of $1.6 million. The remaining $1.8$14.1 million were recorded at cost, as the fair value exceeded cost at December 31, ~~2021.~~2022. The income ~~(expense)~~ related to MSRs carried at fair value during the three-month periods ended ~~September 30,~~March 31, 2023 and 2022 was $14,000 and ~~2021 was $59,000 and $(39,000), respectively, and was $1.4 million and $1.0 million for the nine-month periods ended September 30, 2022 and 2021,~~$442,000, respectively.

~~Total OREO held by Park at September 30, 2022 and December 31, 2021 was $1.4 million and $775,000 respectively~~. At September 30, 2022, there was no OREO held by Park that was carried at fair value due to fair value adjustments made subsequent to the initial OREO measurement. At December 31, 2021, all of Park's OREO was carried at fair value. There was ~~$12.0 million~~ ~~and $11.3 million of income related to OREO fair value adjustments for the three-month and the nine-month periods ended September 30, 2022, respectively.~~ ~~There was no income or expense related to OREO fair value adjustments for the three-month period ended~~ ~~September 30, 2021. There was $13,000 of income related to OREO fair value adjustments for the~~ ~~nine-month period ended~~ ~~September 30, 2021~~.

Other repossessed assets totaled $0.4 million at September 30, 2022, of which there were no repossessed assets recorded at fair value. Other repossessed assets totaled $3.3 million at December 31, 2021, of which $2.8 million were recorded at fair value. ~~There was no expense related to fair value adjustments on other repossessed assets during any of the three-month periods or the nine-month periods ended September 30, 2022 and 2021.~~

~~Table of Contents~~

The following tables present qualitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:

~~September 30,~~March 31, 2023

(In thousands)

Fair Value

Valuation Technique

Unobservable Input(s)

Range
(Weighted Average)

Individually evaluated collateral dependent loans:

Commercial real estate

2,873

Sales comparison approach

Adj to comparables

3.9% - 202.0% (25.3%)

Income approach

Capitalization rate

7.5% - 8.5% (8.0%)

Residential real estate

195

Sales comparison approach

Adj to comparables

1.2% - 78.6% (7.9%)

December 31, 2022

(In thousands)

Fair Value

Valuation Technique

Unobservable Input(s)

Range
(Weighted Average)

Individually evaluated collateral dependent loans:

Commercial real estate

~~4,685~~5,573

Sales comparison approach

Adj to comparables

0.0% - ~~85.7% (11.9%~~202.0% (19.4%)

Income approach

Capitalization rate

~~7.5%~~7.0% - ~~8.3% (8.1%~~10.0% (7.9%)

Cost approach

Entrepreneurial profit

10.0% - 12.0% (11.4%)

Cost approach

Accumulated depreciation

~~26.0% (26.0%~~ 38.8% (38.8%)

Residential real estate

~~204~~200

Sales comparison approach

Adj to comparables

1.9% - 119.8% (17.4%)

~~December 31, 2021~~

~~(In thousands)~~

~~Fair Value~~

~~Valuation Technique~~

~~Unobservable Input(s)~~

Range
(Weighted Average)

~~Individually evaluated collateral dependent loans:~~

~~Commercial real estate~~

~~831~~

~~Sales comparison approach~~

~~Adj to comparables~~

~~0.0% - 232.0% (28.3%)~~

~~Residential real estate~~

~~272~~

~~Sales comparison approach~~

~~Adj to comparables~~

~~0.5% - 78.6% (11.6%)~~

~~Cost approach~~

~~Accumulated depreciation~~

~~8.3% (8.3%)~~

~~Other real estate owned:~~

~~Residential real estate~~

~~775~~

~~Sales comparison approach~~

~~Adj to comparables~~

~~5.0% - 32.5% (19.1%)~~

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Assets Measured at Net Asset Value:

Park's portfolio of Partnership Investments are valued using the NAV practical expedient in accordance with ASC 820.

At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, Park had Partnership Investments with a NAV of ~~$23.6~~$24.9 million and ~~$18.0~~$24.4 million, respectively. At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, Park had ~~$20.0~~$19.6 million and ~~$8.4~~$20.3 million, respectively, in unfunded commitments related to these Partnership Investments. For the three-month periods ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ Park recognized (expense) income of ~~$97,000 and $512,000, respectively, and for the nine-month periods ended September 30, 2022 and 2021, Park recognized income of $2.6~~$(0.4) million and $2.4 million respectively, related to these Partnership Investments.

The fair value of certain financial instruments at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, was as follows:


		September 30, 2022											March 31, 2023
				Fair Value Measurements											Fair Value Measurements
(In thousands)	(In thousands)	Carrying value		Level 1		Level 2		Level 3		Total fair value		(In thousands)	Carrying value		Level 1		Level 2		Level 3		Total fair value
Financial assets:	Financial assets:											Financial assets:
Cash and money market instruments	Cash and money market instruments	$	207,433	$	207,433	$	—	$	—	$	207,433	Cash and money market instruments	$	261,919	$	261,919	$	—	$	—	$	261,919
Investment securities (1)	Investment securities (1)	1,742,123		—		1,742,123		—		1,742,123		Investment securities (1)	1,714,440		—		1,707,585		6,855		1,714,440
Other investment securities (2)	Other investment securities (2)	1,746		1,277		—		469		1,746		Other investment securities (2)	2,832		2,383		—		449		2,832

Mortgage IRLCs	Mortgage IRLCs	102		—		102		—		102		Mortgage IRLCs	77		—		77		—		77
Mortgage loans held for sale	Mortgage loans held for sale	1,928		—		1,928		—		1,928		Mortgage loans held for sale	2,076		—		2,076		—		2,076
Individually evaluated loans carried at fair value	Individually evaluated loans carried at fair value	4,889		—		—		4,889		4,889		Individually evaluated loans carried at fair value	3,068		—		—		3,068		3,068
Other loans, net	Other loans, net	7,012,366		—		—		6,910,287		6,910,287		Other loans, net	7,002,690		—		—		6,887,490		6,887,490
Loans receivable, net	Loans receivable, net	$	7,019,285	$	—	$	2,030	$	6,915,176	$	6,917,206	Loans receivable, net	$	7,007,911	$	—	$	2,153	$	6,890,558	$	6,892,711

Financial liabilities:	Financial liabilities:											Financial liabilities:
Time deposits	Time deposits	$	613,222	$	—	$	615,544	$	—	$	615,544	Time deposits	$	531,850	$	—	$	531,277	$	—	$	531,277
Other	Other	5,280		5,280		—		—		5,280		Other	2,630		2,630		—		—		2,630
Deposits (excluding demand deposits)	Deposits (excluding demand deposits)	$	618,502	$	5,280	$	615,544	$	—	$	620,824	Deposits (excluding demand deposits)	$	534,480	$	2,630	$	531,277	$	—	$	533,907

Short-term borrowings	Short-term borrowings	$	189,493	$	—	$	189,493	$	—	$	189,493	Short-term borrowings	$	172,058	$	—	$	172,058	$	—	$	172,058
Subordinated notes	Subordinated notes	188,551		—		178,812		—		178,812		Subordinated notes	188,785		—		179,251		—		179,251

Derivative financial instruments - assets:	Derivative financial instruments - assets:											Derivative financial instruments - assets:
Loan interest rate swaps	Loan interest rate swaps	$	1,622	$	—	$	1,622	$	—	$	1,622	Loan interest rate swaps	$	1,119	$	—	$	1,119	$	—	$	1,119

Derivative financial instruments - liabilities:	Derivative financial instruments - liabilities:											Derivative financial instruments - liabilities:
Fair value swap	Fair value swap	$	243	$	—	$	—	$	243	$	243	Fair value swap	$	121	$	—	$	—	$	121	$	121
Borrowing interest rate swap		—		—		—		—		—
Loan interest rate swaps	Loan interest rate swaps	1,622		—		1,622		—		1,622		Loan interest rate swaps	1,119		—		1,119		—		1,119

(1) Includes debt securities AFS.

(2) Excludes FHLB stock and FRB stock which are carried at their respective redemption values, investment securities accounted for at modified cost as these investments do not have a readily determinable fair value, and Partnership Investments valued using the NAV practical expedient.

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		December 31, 2021											December 31, 2022
				Fair Value Measurements											Fair Value Measurements
(In thousands)	(In thousands)	Carrying value		Level 1		Level 2		Level 3		Total fair value		(In thousands)	Carrying value		Level 1		Level 2		Level 3		Total fair value
Financial assets:	Financial assets:											Financial assets:
Cash and money market instruments	Cash and money market instruments	$	219,180	$	219,180	$	—	$	—	$	219,180	Cash and money market instruments	$	189,728	$	189,728	$	—	$	—	$	189,728
Investment securities (1)	Investment securities (1)	1,754,140		—		1,754,140		—		1,754,140		Investment securities (1)	1,733,696		—		1,726,696		7,000		1,733,696
Other investment securities (2)	Other investment securities (2)	2,129		1,630		—		499		2,129		Other investment securities (2)	1,859		1,420		—		439		1,859

Mortgage loans held for sale	Mortgage loans held for sale	9,387		—		9,387		—		9,387		Mortgage loans held for sale	2,149		—		2,149		—		2,149
Mortgage IRLCs	Mortgage IRLCs	333		—		333		—		333		Mortgage IRLCs	46		—		46		—		46
Individually evaluated loans carried at fair value	Individually evaluated loans carried at fair value	1,103		—		—		1,103		1,103		Individually evaluated loans carried at fair value	5,773		—		—		5,773		5,773
Other loans, net	Other loans, net	6,777,102		—		—		6,783,848		6,783,848		Other loans, net	7,048,544		—		—		6,918,326		6,918,326
Loans receivable, net	Loans receivable, net	$	6,787,925	$	—	$	9,720	$	6,784,951	$	6,794,671	Loans receivable, net	$	7,056,512	$	—	$	2,195	$	6,924,099	$	6,926,294

Financial liabilities:	Financial liabilities:											Financial liabilities:
Time deposits	Time deposits	$	711,660	$	—	$	714,307	—		$	714,307	Time deposits	$	554,445	$	—	$	552,443	—		$	552,443
Other	Other	1,465		1,465		—		—		1,465		Other	1,325		1,325		—		—		1,325
Deposits (excluding demand deposits)	Deposits (excluding demand deposits)	$	713,125	$	1,465	$	714,307	$	—	$	715,772	Deposits (excluding demand deposits)	$	555,770	$	1,325	$	552,443	$	—	$	553,768

Short-term borrowings	Short-term borrowings	$	238,786	$	—	$	238,786	$	—	$	238,786	Short-term borrowings	$	227,342	$	—	$	227,342	$	—	$	227,342
Subordinated notes	Subordinated notes	188,210		—		207,912		—		207,912		Subordinated notes	188,667		—		177,928		—		177,928

Derivative financial instruments - assets:	Derivative financial instruments - assets:											Derivative financial instruments - assets:
Loan interest rate swaps	Loan interest rate swaps	$	1,952	$	—	$	1,952	$	—	$	1,952	Loan interest rate swaps	$	1,508	$	—	$	1,508	$	—	$	1,508

Derivative financial instruments - liabilities:	Derivative financial instruments - liabilities:											Derivative financial instruments - liabilities:
Fair value swap	Fair value swap	$	226	$	—	$	—	$	226	$	226	Fair value swap	$	243	$	—	$	—	$	243	$	243
Borrowing interest rate swap		262		—		262		—		262
Loan interest rate swaps	Loan interest rate swaps	1,952		—		1,952		—		1,952		Loan interest rate swaps	1,508		—		1,508		—		1,508

(1) Includes debt securities AFS.

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Note 21 - Revenue from Contracts with Customers

All of Park's revenue from contracts with customers within the scope of ASC 606 is recognized within "Other income" in the Consolidated Condensed Statements of Income.

The following table presents the Corporation's sources of other income by revenue stream and operating segment for the three-month ~~and the nine-month~~ periods ended ~~September 30, 2022~~March 31, 2023 and ~~September 30, 2021.~~March 31, 2022:


		Three Months Ended September 30, 2022							Three Months Ended March 31, 2023
Revenue by Operating Segment (in thousands)	Revenue by Operating Segment (in thousands)	PNB		All Other		Total		Revenue by Operating Segment (in thousands)	PNB		All Other		Total
Income from fiduciary activities	Income from fiduciary activities							Income from fiduciary activities
Personal trust and agency accounts	Personal trust and agency accounts	$	2,411	$	—	$	2,411	Personal trust and agency accounts	$	2,504	$	—	$	2,504
Employee benefit and retirement-related accounts	Employee benefit and retirement-related accounts	2,353		—		2,353		Employee benefit and retirement-related accounts	2,472		—		2,472
Investment management and investment advisory agency accounts	Investment management and investment advisory agency accounts	3,000		—		3,000		Investment management and investment advisory agency accounts	3,162		—		3,162
Other	Other	452		—		452		Other	477		—		477
Service charges on deposit accounts	Service charges on deposit accounts							Service charges on deposit accounts
Non-sufficient funds (NSF) fees	Non-sufficient funds (NSF) fees	1,722		—		1,722		Non-sufficient funds (NSF) fees	1,061		—		1,061
Demand deposit account (DDA) charges	Demand deposit account (DDA) charges	996		—		996		Demand deposit account (DDA) charges	1,038		—		1,038
Other	Other	141		—		141		Other	142		—		142
Other service income (1)	Other service income (1)							Other service income (1)
Credit card	Credit card	734		—		734		Credit card	683		—		683
HELOC	HELOC	103		—		103		HELOC	89		—		89
Installment	Installment	40		—		40		Installment	49		—		49
Real estate	Real estate	1,692		—		1,692		Real estate	1,455		—		1,455
Commercial	Commercial	384		3		387		Commercial	286		135		421
Debit card fee income	Debit card fee income	6,514		—		6,514		Debit card fee income	6,457		—		6,457
Bank owned life insurance income (2)	Bank owned life insurance income (2)	1,133		52		1,185		Bank owned life insurance income (2)	1,134		51		1,185
ATM fees	ATM fees	610		—		610		ATM fees	533		—		533
Gain on sale of OREO, net		—		5,607		5,607
Loss on sale of OREO, net								Loss on sale of OREO, net	(9)		—		(9)
OREO valuation markup	OREO valuation markup	—		12,009		12,009		OREO valuation markup	15		—		15
Gain on equity securities, net (2)		25		33		58
Loss on equity securities, net (2)								Loss on equity securities, net (2)	(307)		(98)		(405)
Other components of net periodic pension benefit income (2)	Other components of net periodic pension benefit income (2)	2,955		72		3,027		Other components of net periodic pension benefit income (2)	1,857		36		1,893
Miscellaneous (3)	Miscellaneous (3)	3,653		—		3,653		Miscellaneous (3)	1,164		1		1,165
Total other income	Total other income	$	28,918	$	17,776	$	46,694	Total other income	$	24,262	$	125	$	24,387

(1) Of the ~~$3.0~~$2.7 million of aggregate revenue included within "Other service income", approximately $1.4 million is within the scope of ASC 606, with the remaining ~~$1.6~~$1.3 million consisting primarily of certain residential real estate loan fees which are out of scope.

(2) Not within the scope of ASC 606.

(3) "Miscellaneous" income includes brokerage income, safe deposit box rentals, and miscellaneous bank fees totaling ~~$3.7~~$1.2 million, all of which are within scope of ASC 606.

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		Three Months Ended September 30, 2021							Three Months Ended March 31, 2022
Revenue by Operating Segment (in thousands)	Revenue by Operating Segment (in thousands)	PNB		All Other		Total		Revenue by Operating Segment (in thousands)	PNB		All Other		Total
Income from fiduciary activities	Income from fiduciary activities							Income from fiduciary activities
Personal trust and agency accounts	Personal trust and agency accounts	$	2,637	$	—	$	2,637	Personal trust and agency accounts	$	2,506	$	—	$	2,506
Employee benefit and retirement-related accounts	Employee benefit and retirement-related accounts	2,506		—		2,506		Employee benefit and retirement-related accounts	2,560		—		2,560
Investment management and investment advisory agency accounts	Investment management and investment advisory agency accounts	3,220		—		3,220		Investment management and investment advisory agency accounts	3,260		—		3,260
Other	Other	457		—		457		Other	471		—		471
Service charges on deposit accounts	Service charges on deposit accounts							Service charges on deposit accounts
Non-sufficient funds (NSF) fees	Non-sufficient funds (NSF) fees	1,498		—		1,498		Non-sufficient funds (NSF) fees	1,417		—		1,417
Demand deposit account (DDA) charges	Demand deposit account (DDA) charges	762		—		762		Demand deposit account (DDA) charges	516		—		516
Other	Other	129		—		129		Other	141		—		141
Other service income (1)	Other service income (1)							Other service income (1)
Credit card	Credit card	690		2		692		Credit card	642		—		642
HELOC	HELOC	100		—		100		HELOC	89		—		89
Installment	Installment	34		—		34		Installment	43		—		43
Real estate	Real estate	5,418		—		5,418		Real estate	3,719		—		3,719
Commercial	Commercial	281		143		424		Commercial	354		(28)		326
Debit card fee income	Debit card fee income	6,453		—		6,453		Debit card fee income	6,126		—		6,126
Bank owned life insurance income (2)	Bank owned life insurance income (2)	1,022		440		1,462		Bank owned life insurance income (2)	1,093		82		1,175
ATM fees	ATM fees	622		—		622		ATM fees	532		—		532
Gain on sale of OREO, net		3		—		3
Loss on sale of OREO, net								Loss on sale of OREO, net	—		—		—
OREO valuation markup	OREO valuation markup	—		—		—		OREO valuation markup	30		—		30
Gain on equity securities, net (2)	Gain on equity securities, net (2)	429		180		609		Gain on equity securities, net (2)	2,219		134		2,353
Other components of net periodic pension benefit income (2)	Other components of net periodic pension benefit income (2)	1,987		51		2,038		Other components of net periodic pension benefit income (2)	2,955		72		3,027
Miscellaneous (3)	Miscellaneous (3)	3,084		263		3,347		Miscellaneous (3)	2,574		149		2,723
Total other income	Total other income	$	31,332	$	1,079	$	32,411	Total other income	$	31,247	$	409	$	31,656

(1) Of the ~~$6.7~~$4.8 million of aggregate revenue included within "Other service income", approximately ~~$1.3~~$1.2 million is within the scope of ASC 606, with the remaining ~~$5.4~~$3.6 million consisting primarily of certain residential real estate loan fees which are out of scope.

(2) Not within the scope of ASC 606.

(3) "Miscellaneous" income includes brokerage income, safe deposit box rentals, and miscellaneous bank fees totaling ~~$3.3 million, all of which are within scope of ASC 606.~~

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Nine Months Ended
September 30, 2022
Revenue by Operating Segment (in thousands) PNB All Other Total
Income from fiduciary activities
   Personal trust and agency accounts $ 7,681 $ — $ 7,681
   Employee benefit and retirement-related accounts 7,384 — 7,384
   Investment management and investment advisory agency accounts 9,403 — 9,403
   Other 1,404 — 1,404
Service charges on deposit accounts
    Non-sufficient funds (NSF) fees 4,658 — 4,658
    Demand deposit account (DDA) charges 2,425 — 2,425
    Other 413 — 413
Other service income (1)
    Credit card 2,091 — 2,091
    HELOC 297 — 297
    Installment 128 — 128
    Real estate 8,685 — 8,685
    Commercial 1,039 475 1,514
Debit card fee income 19,371 — 19,371
Bank owned life insurance income (2)
3,356 1,378 4,734
ATM fees 1,725 — 1,725
Gain on sale of OREO, net 4 5,607 5,611
OREO valuation markup 30 12,009 12,039
Gain on equity securities, net (2)
2,285 835 3,120
Other components of net periodic pension benefit income (2)
8,864 217 9,081
Miscellaneous (3)
8,177 (398) 7,779
Total other income $ 89,420 $ 20,123 $ 109,543

~~(1)~~ Of the $12.7 million of aggregate revenue included within "Other service income", approximately $4.3 million is within the scope of ASC 606, with the remaining $8.4 million consisting primarily of certain residential real estate loan fees which are out of scope.

~~(2)~~ ~~Not within the scope of ASC 606.~~

~~(3)~~ ~~"Miscellaneous" income includes brokerage income, safe deposit box rentals, and miscellaneous bank fees totaling $7.8 million, all of which are within scope of ASC 606.~~

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Nine Months Ended
September 30, 2021
Revenue by Operating Segment (in thousands) PNB All Other Total
Income from fiduciary activities
   Personal trust and agency accounts $ 7,650 $ — $ 7,650
   Employee benefit and retirement-related accounts 7,170 — 7,170
   Investment management and investment advisory agency accounts 9,345 — 9,345
   Other 1,397 — 1,397
Service charges on deposit accounts
    Non-sufficient funds (NSF) fees 3,776 — 3,776
    Demand deposit account (DDA) charges 2,325 — 2,325
    Other 374 — 374
Other service income (1)
    Credit card 1,906 2 1,908
    HELOC 288 — 288
    Installment 114 — 114
    Real estate 19,867 — 19,867
    Commercial 1,063 204 1,267
Debit card fee income 19,297 — 19,297
Bank owned life insurance income (2)
3,169 607 3,776
ATM fees 1,807 — 1,807
Loss on sale of OREO, net (26) — (26)
OREO valuation markup 13 — 13
Gain on equity securities, net (2)
1,758 1,128 2,886
Other components of net periodic pension benefit income (2)
5,960 154 6,114
Miscellaneous (3)
8,005 385 8,390
Total other income $ 95,258 $ 2,480 $ 97,738

~~(1)~~ Of the $23.4 million of aggregate revenue included within "Other service income", approximately $3.8 million is within the scope of ASC 606, with the remaining $19.6 million consisting primarily of certain residential real estate loan fees which are out of scope.

~~(2)~~ ~~Not within the scope of ASC 606.~~

~~(3)~~ ~~"Miscellaneous" income includes brokerage income, safe deposit box rentals, and miscellaneous bank fees totaling $8.4~~$2.7 million, all of which are within scope of ASC 606.

A description of Park's material revenue streams accounted for under ASC 606 follows:

Income from fiduciary activities (gross): Park earns fiduciary fee income and investment brokerage fees from its contracts with trust customers for various fiduciary and investment-related services. These fees are earned over time as the Company provides the contracted monthly and quarterly services and are generally assessed based on the market value of the trust assets.

Service charges on deposit accounts and ATM fees: The Corporation earns fees from the Corporation's deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering fees, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Corporation fulfills the customer's request. Account maintenance fees, which relate primarily to monthly maintenance, are generally recognized at the end of the month, representing the period over which the Corporation satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer's account balance.

Other service income: Other service income includes income from (1) the sale and servicing of loans sold to the secondary market, (2) incentive income from third-party credit card issuers, and (3) loan customers for various loan-related activities and services. Income related to the sale and servicing of loans sold to the secondary market is included within "Other service income", but is not within the scope of ASC 606. Services that fall within the scope of ASC 606 are recognized as revenue when the Company satisfies the Company's performance obligation to the customer.

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Debit card fee income: Park earns interchange fees from debit cardholder transactions conducted primarily through the Visa payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, net of card network fees, concurrently with the transaction processing services provided to the cardholder.

Gain or loss on sale of OREO, net: The Corporation records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of delivery of an executed deed. When Park finances the sale of OREO to the buyer, the Corporation assesses whether the buyer is committed to perform the buyer's obligation under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Corporation adjusts the transaction price and related gain (loss) on sale if a significant financing component is present.

OREO valuation markup: The Corporation records an OREO valuation markup immediately prior to the transfer of a loan to OREO when the fair market value of the property less costs to sell exceeds the principal balance of the loan.

Note 22 - Other Matters

On February 28, 2023, Park National Bank reached an agreement with the DOJ to increase the efforts of Park National Bank to promote home lending in the Columbus, Ohio market. The agreement, which is reflected in the consent order filed on February 28, 2023, in the U.S. District Court for the Southern District of Ohio (the “DOJ Consent Order”) and approved by that Court on March 2, 2023, served to voluntarily resolve all claims of the U.S. alleging that Park National Bank’s mortgage lending practices within the Columbus, Ohio Metropolitan Statistical Area violated the Fair Housing Act and the Equal Credit Opportunity Act.

In accordance with the terms of the DOJ Consent Order, Park National Bank will invest a minimum of $7.75 million over five years in a loan subsidy fund to increase credit opportunities for home mortgage loans, home improvement loans, home refinance loans and home equity loans and lines of credit for consumers applying for loans in majority-minority census tracts ("MMCTs") in Fairfield, Franklin, Hocking, Licking, Morrow and Perry counties in Ohio (the “Columbus Lending Area”). Park National Bank will also devote a minimum of $500,000 over five years toward one or more community development partnership programs that provide services to residents of MMCTs in the Columbus Lending Area related to credit, financial education, homeownership and foreclosure prevention; and at least $750,000 over five years toward advertising, community outreach, consumer financial education and credit counseling in the Columbus Lending Area. Park National Bank will also establish one new mortgage loan production office and one new full-service branch in MMCTs in the Columbus Lending Area and hire four lenders, one of whom will be Spanish-speaking, focused on serving these communities. In addition, Park National Bank will continue to maintain, throughout the term of the DOJ Consent Order, Park National Bank’s full-time Director of Community Home Lending and Development position, who will oversee Park National Bank’s lending in MMCTs in the Columbus Lending Area.

Park is committed to investing at least $9.0 million over five years and will record the related expenses incurred in the period in which the associated activities occur.

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis contains forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. 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:

•the ever-changing effects of the global novel coronavirus (COVID-19) pandemic - - the duration, extent and severity of which are impossible to predict, including the possibility of further resurgence in the spread of COVID-19 or variants or mutations thereof - - on economies (local, national and international), supply chains and financial markets, on the labor market, including the potential for a sustained reduction in labor force participation, and on our customers (including potential changes in their banking preferences and behaviors), counterparties, employees and third-party service providers, as well as the effects of various responses of governmental and nongovernmental authorities to the COVID-19 pandemic;

•Park's ability to execute our business plan successfully and within the expected timeframe as well as our ability to manage strategic initiatives;

•current and future economic and financial market conditions, either nationally or in the states in which Park and our subsidiaries do business, that may reflect deterioration in business and economic conditions, including the effects of higher unemployment rates, an acceleration in the pace of inflation, interest rate fluctuations, 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

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the Russia-Ukraine conflict and associated ~~sanctions)~~sanctions and export controls), and any slowdown in global economic growth, in addition to the continuing impact of the ~~COVID-19~~COVID pandemic and recovery therefrom on our customers’ operations and financial condition, any of which may result in adverse impacts on the demand for loan, deposit and other financial services, delinquencies, defaults and counterparties' inability to meet credit and other obligations and the possible impairment of collectability of loans;

•factors that can impact the performance of our loan portfolio, including changes in real estate values and liquidity in our primary market areas, the financial health of our commercial borrowers and the success of construction projects that we finance, including any loans acquired in acquisition transactions;

•the effect of monetary and other fiscal policies (including the impact of money supply, 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, infrastructure spending and social programs;

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

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

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

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

•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;

•uncertainty regarding the nature, timing, cost and effect of changes in banking regulations or other regulatory or legislative requirements affecting the respective businesses of Park and our subsidiaries, including major reform of the regulatory oversight structure of the financial services industry and changes in laws and regulations concerning taxes, FDIC insurance premium levels, pensions, bankruptcy, consumer protection, rent regulation and housing, financial accounting and reporting, environmental protection, insurance, bank products and services, bank and bank holding company capital and liquidity standards, fiduciary standards, securities and other aspects of the financial services industry, specifically the reforms provided for in the ~~Coronavirus Aid, Relief and Economic Security (CARES)~~CARES Act and the follow-up legislation in the Consolidated Appropriations Act, 2021, the American Rescue Plan Act of 2021, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and the Basel III regulatory capital reforms, as well as regulations already adopted and which may be adopted in the future by the relevant regulatory agencies, including the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Federal Reserve Board, to implement the provisions of the CARES Act and the follow-up legislation in the Consolidated Appropriations Act, 2021, the provisions of the American Rescue Plan Act of 2021, the provisions of the Dodd-Frank Act, and the Basel III regulatory capital reforms;

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

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

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

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

•the impact of Park's ability to anticipate and respond to technological changes on Park's ability to respond to customer needs and meet competitive demands;

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

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

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•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,

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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, ~~and~~ the costs and effects of unfavorable resolution of regulatory and other governmental examinations or other ~~inquiries;~~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 (including the ~~COVID-19~~COVID pandemic), dislocations, regional or national protests and civil unrest (including any resulting branch closures or damages), military or terrorist activities or international hostilities (especially in light of the Russia-Ukraine conflict) on the economy and financial markets generally and on us or our counterparties specifically;

•a worsening 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, especially in light of the ~~COVID-19~~COVID pandemic, which may increase our healthcare and other costs and negatively impact our operations and financial results;

•risk and uncertainties associated with Park's entry into new geographic markets with our most recent acquisitions, including expected revenue synergies and cost savings from recent acquisitions not being fully realized or realized within the expected time frame;

•uncertainty surrounding the transition from the ~~London Inter-Bank Offered Rate (LIBOR)~~LIBOR to an alternate reference rate;

•a continuation of recent turmoil in the financial services industry, and the impact of responsive measures to mitigate and manage such turmoil, including potential increased supervisory and regulatory actions and costs;

•and other risk factors relating to the ~~banking~~financial services industry as detailed from time to time in Park's reports filed with the SEC including those described in "Item 1A. Risk Factors" of Part I of Park's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022 and "Item 1A. Risk Factors" of Part II of this Quarterly Report on Form 10-Q.

Park does not undertake, and specifically disclaims any obligation, to publicly release the results of any revisions that may be made to update any forward-looking statement to reflect the events or circumstances after the date on which the forward-looking statement was made, or reflect the occurrence of unanticipated events, except to the extent required by applicable law.

~~Non-GAAP~~Non-U.S. GAAP Financial Measures

This Management's Discussion and Analysis (or "MD&A") contains non-U.S. GAAP financial measures where management believes it to be helpful in understanding Park’s results of operations or financial position. Where non-U.S. GAAP financial measures are used, the comparable U.S. GAAP financial measure, as well as the reconciliation to the comparable U.S. GAAP financial measure, can be found herein.

Items Impacting Comparability of Period Results

From time to time, revenue, expenses and/or taxes are impacted by items judged by management of Park to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that their outsized impact is believed by management of Park at that time to be infrequent or short-term in nature. 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 / (recovery of) credit losses (aside from those related to former Vision Bank loan relationships), gains (losses) on equity securities, net, and asset valuation adjustments, reflect ordinary banking activities and are, therefore, typically excluded from consideration as items impacting comparability of period results.

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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.

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~~Non-GAAP~~Non-U.S. GAAP Financial Measures

Park's management uses certain ~~non-GAAP~~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, the tangible equity to tangible assets ratio, tangible book value per common share and pre-tax, pre-provision net income.

Management has included in the tables included within the "Items Impacting Comparability" section of this MD&A information relating to the annualized return on average tangible equity, the annualized return on average tangible assets, the tangible equity to tangible assets ratio, tangible book value per common share and pre-tax, pre-provision net income for the three months ~~and the nine months~~ ended and at ~~September 30, 2022~~March 31, 2023 and ~~September 30, 2021.~~March 31, 2022. For the purpose of calculating the annualized return on average tangible equity, a ~~non-GAAP~~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-GAAP~~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 the tangible equity to tangible assets ratio, a ~~non-GAAP~~non-U.S. GAAP financial measure, tangible equity is divided by tangible assets. Tangible equity equals total shareholders' equity less goodwill and other intangible assets, in each case at period end. Tangible assets equal total assets less goodwill and other intangible assets, in each case at period end. For the purpose of calculating tangible book value per common share, a ~~non-GAAP~~non-U.S. GAAP financial measure, tangible equity is divided by the number of common shares outstanding, in each case at period end. For the purpose of calculating pre-tax, pre-provision net income, a ~~non-GAAP~~non-U.S. GAAP financial measure, income taxes and the provision for (recovery of) credit losses are added back to net income, in each case during the applicable period.

Management believes that the disclosure of the annualized return on average tangible equity, the annualized return on average tangible assets, the tangible equity to tangible assets ratio, tangible book value per common share and pre-tax, pre-provision net income presents additional information to the reader of the condensed consolidated financial statements, which, when read in conjunction with the condensed consolidated financial statements prepared in accordance with U.S. GAAP, assists in analyzing Park's operating performance, ensures comparability of operating performance from period to period, and facilitates comparisons with the performance of Park's peer financial holding companies and bank holding companies, while eliminating certain non-operational effects of acquisitions. In the tables included within the "Items Impacting Comparability" section of this MD&A, Park has provided a reconciliation of average tangible equity to average shareholders' equity, average tangible assets to average assets, tangible equity to total shareholders' equity, tangible assets to total assets, and pre-tax, pre-provision net income to net income solely for the purpose of complying with SEC Regulation G and not as an indication that the annualized return on average tangible equity, the annualized return on average tangible assets, the tangible equity to tangible assets ratio, tangible book value per common share and pre-tax, pre-provision net income are substitutes for the annualized return on average equity, the annualized return on average assets, the total shareholders' equity to total assets ratio, book value per common share and net income, respectively, as determined in accordance with U.S. GAAP.

FTE (fully taxable equivalent) Financial Measures

Interest income, yields, and ratios on a FTE basis are considered ~~non-GAAP~~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 ~~federal statutory~~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.

Paycheck Protection Program ("PPP") Loans

Park originated an aggregate of $764.7 million in loans as part of the PPP. For its assistance in making and retaining these loans, Park received an aggregate of $33.1 million in fees from the SBA. These loans are not typical of Park's loan portfolio in that they are part of a specific government program to support businesses during the ~~COVID-19~~COVID pandemic and are 100% guaranteed by ~~the~~ SBA. As such, management considers growth in the loan portfolio excluding PPP loans, the total allowance for

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credit losses to total loans ratio (excluding PPP loans), and general reserve on collectively evaluated loans as a percentage of total collectively evaluated loans (excluding PPP loans) in addition to the related U.S. GAAP metrics which are not adjusted for PPP loans.

Critical Accounting Policies

Note 1 of the Notes to Consolidated Financial Statements included in Park’s ~~2021~~2022 Form 10-K lists significant accounting policies used in the development and presentation of Park’s consolidated financial statements. The accounting and reporting policies of Park conform with U.S. GAAP and general practices within the financial services industry. The preparation of

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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.

~~The COVID-19 pandemic~~Recent bank failures have called into question the stability of the financial services industry. While Park is well capitalized and has ~~caused~~ significant ~~unprecedented disruption around~~available liquidity, the world that has affected daily living and negatively impacted the global economy. Additionally, geopolitical conflict (including the conflict in Ukraine) and inflationary pressures have added uncertainty to the overall economic environment. The effects of ~~the COVID-19 pandemic, geopolitical conflict,~~these failures and ~~inflation~~potential future failures may meaningfully impact significant estimates such as the allowance for credit losses, goodwill, and pension plan obligations and related expenses.

Allowance for Credit Losses: Park believes the determination of the allowance for credit losses involves a higher degree of judgment and complexity than its other significant accounting policies. The allowance for credit losses is calculated with the objective of maintaining a reserve level believed by management to be sufficient to absorb estimated credit losses over the life of an asset or an off-balance sheet credit exposure. 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,~~LGD, the amounts and timing of expected future cash flows on individually evaluated loans, and estimated losses based on historical loss experience and forecasted economic conditions. All of these factors may be susceptible to significant change. To the extent that actual results differ from management estimates, additional provisions for credit losses may be required that would adversely impact earnings in future periods.

One of the most significant judgments impacting the ACL estimate is the economic forecast for Ohio unemployment, Ohio GDP, and Ohio HPI. Changes in the economic forecast could significantly affect the estimated credit losses which could potentially lead to materially different allowance levels from one reporting period to the next.

In calculating the ACL, management weighs several different scenarios, including a baseline (most likely) scenario and an adverse scenario. 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 ~~considers~~assumes among other things that: (1) the military conflict between Russia and Ukraine ~~worsens significantly and~~ persists longer than anticipated ~~resulting in a disruption in oil supply~~worsening supply-chain conditions and ~~increased inflation; (2) supply chain issues erode, with increased~~increasing shortages of many ~~goods, also boosting inflation;~~goods; (2) supply-chain shortages weaken manufacturing; (3) inflation remains elevated, ~~which leads to~~though slightly below the baseline amid persistent shortages and concerns about a ~~recession and increased unemployment;~~wage price spiral; (4) the Federal Reserve Board ~~continues to increase interest rates, at~~initially keeps the fed funds rate elevated, though a ~~higher degree~~bit less than in the baseline ~~scenario,~~because of weakening economy; (5) recent bank failures raise fears of further collapse in the banking industry, reducing consumer confidence and causing banks to ~~combat high inflation affecting consumer spending as well as causing businesses to have higher costs associated with obtaining capital, therefore slowing down growth;~~tighten lending standards; and ~~(5) new cases, hospitalizations and deaths from COVID-19 start to rise significantly again, slowing growth~~(6) the economy falls into recession in ~~spending on air travel, retail and hotels.~~the second quarter of 2023. The adverse scenario forecasts Ohio unemployment for the next twelve months to range from ~~6.3%~~6.5% to ~~8.3%~~9.1%. Excluding consideration of general reserve adjustments, this sensitivity analysis would result in a hypothetical increase in Park's ACL of ~~$23.5~~$27.7 million as of ~~September 30, 2022~~March 31, 2023 if only the adverse scenario was used. Excluding consideration of general reserve adjustments, a corresponding ~~$23.5~~$27.7 million decrease in Park's ACL would occur in a hypothetical scenario if only the baseline (most likely) scenario was used.

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

Goodwill: Management believes that the accounting for goodwill also involves a higher degree of judgment than most other significant accounting policies. U.S. GAAP establishes standards for the impairment assessment of goodwill. Goodwill arising from business combinations represents the value attributable to unidentifiable intangible assets in each business acquired. Park’s goodwill, as of ~~September 30, 2022,~~March 31, 2023, relates to the value inherent in the ~~banking~~financial services industry and that value is dependent upon the ability of Park’s national bank subsidiary, PNB, to provide quality, cost-effective banking services in a competitive marketplace. The goodwill value is supported by revenue that is in part driven by the volume of business transacted. A decrease in earnings resulting from a decline in the customer base, the inability to deliver cost-effective services over sustained periods or significant credit problems could lead to impairment of goodwill that could, in turn, adversely impact earnings in future periods.

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U.S. GAAP requires an annual evaluation of goodwill for impairment, or more frequently if events or changes in circumstances indicate that the asset might be impaired. Park evaluates goodwill for impairment during the second quarter of each year, with financial data as of the immediately preceding March 31. Based on the qualitative analysis performed as of April 1, 2022, the Company determined that goodwill for Park's reporting unit, PNB, was not impaired. The fair value of the goodwill, which resides on the books of PNB,

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is evaluated for potential impairment by reviewing the past and projected operating results for PNB, deposit and loan totals for PNB and ~~banking~~financial services industry comparable information.

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.

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Comparison of Results of Operations

For the Three Months Ended March 31, 2023 and ~~the Nine Months Ended September 30,~~ 2022 ~~and 2021~~

Summary Discussion of Results

Net income for the three months ended ~~September 30, 2022~~March 31, 2023 was ~~$42.1~~$33.7 million, compared to ~~$35.4~~$38.9 million for the ~~third~~first quarter of ~~2021.~~2022. Diluted earnings per common share were ~~$2.57~~$2.07 for the ~~third~~first quarter of ~~2022,~~2023, compared to ~~$2.16~~$2.38 for the ~~third~~first quarter of ~~2021.~~2022. Weighted average diluted common shares outstanding were ~~16,374,982 for the third quarter of 2022, compared to 16,423,912 weighted average diluted common shares outstanding for the third quarter of 2021.~~

~~Net income for the nine months ended September 30, 2022 was $115.3 million, compared to $117.4 million~~16,324,823 for the first ~~nine months~~quarter of ~~2021. Diluted earnings per common share were $7.05 for the first nine months of 2022,~~2023, compared to ~~$7.14 for the first nine months of 2021. Weighted average diluted common shares outstanding were 16,355,790 for the first nine months of 2022, compared to 16,445,568~~16,331,031 weighted average diluted common shares outstanding for the first ~~nine months~~quarter of ~~2021.~~2022.

~~COVID-19 Considerations~~Liquidity and Capital

Park continues to maintain strong capital and liquidity. Funds are available from a number of sources, including the capital markets, the investment securities portfolio, the core deposit base, FHLB borrowings and the capability to securitize or package loans for sale. The most easily accessible forms of liquidity, Fed Funds Sold, off balance sheet deposits, unpledged investment securities and available FHLB borrowing capacity, totaled $2.74 billion at March 31, 2023.

Park's debt securities portfolio is classified as available-for-sale ("AFS") and these debt securities are available to be sold in the future in response to Park's liquidity needs, changes in market interest rates, and asset-liability management strategies, among other reasons. AFS debt securities are reported at fair value, with unrealized holding gains and losses excluded from earnings, but included in other comprehensive loss, net of applicable income taxes. The table below provides additional detail on Park's debt securities portfolio and capital position.


(Dollars in thousands)	March 31, 2023		December 31, 2022		March 31, 2022		% change from 12/31/22		% change from 03/31/22
Net unrealized losses on debt securities	105,510		121,156		43,809		(12.91)	%	140.84	%
Net unrealized losses on debt securities as a percentage of period end total assets	1.07	%	1.23	%	0.46	%	(13.01)	%	132.61	%

Total shareholders' equity / Period end total assets	10.98	%	10.85	%	11.24	%	1.20	%	(2.31)	%
Tangible equity / Tangible assets (1)	9.46	%	9.33	%	9.67	%	1.39	%	(2.17)	%

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

Park's deposits grew during the COVID pandemic and normalized throughout 2022. In order to manage the impact of this growth on its balance sheet, Park has utilized a program where certain deposit balances are transferred off balance sheet while maintaining the customer relationship. Park is able to increase or decrease the amount 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

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balances have returned to normalized levels. The table below breaks out the change in deposit balances, by deposit type, for Park National Corporation.


(Dollars in thousands)	March 31, 2023			December 31, 2022			December 31, 2021			December 31, 2020			December 31, 2019
Retail Deposits
Non-interest bearing deposits	$	1,176,545		$	1,193,807		$	1,195,530		$	1,077,107		$	801,035
Transaction accounts	939,026			994,717			1,004,532			900,093			760,640
Savings	1,702,824			1,744,713			1,669,373			1,427,687			1,461,347
Certificates of deposit	445,552			455,157			546,793			620,965			725,017
Total retail deposits	$	4,263,947		$	4,388,394		$	4,416,228		$	4,025,852		$	3,748,039
$ change from prior period end	$	(124,447)		$	(27,834)		$	390,376		$	277,813
% change from prior period end	(2.8)		%	(0.6)		%	9.7		%	7.4		%

Commercial Deposits
Non-interest bearing deposits	$	1,745,697		$	1,880,469		$	1,870,889		$	1,649,992		$	1,158,900
Transaction accounts	1,231,790			993,388			498,344			481,386			868,102
Savings	966,712			873,176			954,200			1,171,521			863,458
Certificates of deposit	86,298			99,288			164,867			243,607			414,113
Total commercial deposits	$	4,030,497		$	3,846,321		$	3,488,300		$	3,546,506		$	3,304,573
$ change from prior period end	$	184,176		$	358,021		$	(58,206)		$	241,933
% change from prior period end	4.8		%	10.3		%	(1.6)		%	7.3		%

Total deposits	8,294,444			8,234,715			7,904,528			7,572,358			7,052,612
$ change from prior period end	$	59,729		$	330,187		$	332,170		$	519,746
% change from prior period end	0.7		%	4.2		%	4.4		%	7.4		%

Off balance sheet deposits	164,600			195,937			983,053			710,101			—
Total deposits including off balance sheet deposits	$	8,459,044		$	8,430,652		$	8,887,581		$	8,282,459		$	7,052,612
$ change from prior period end	$	28,392		$	(456,929)		$	605,122		$	1,229,847
% change from prior period end	0.3		%	(5.1)		%	7.3		%	17.4		%

During 2022 and 2021, Park provided calamity pay and special bonuses to certain associates related to the COVID-19 pandemic. The cost of the calamity pay and special bonuses was $747,000 and $1.5 million for the nine months ended September 30, 2022 and 2021, respectively, and is included within salaries expense. There were no calamity pay and special bonuses paid during either of the three months ended ~~September 30, 2022~~March 31, 2023, total deposits including off balance sheet deposits increased by $28.4 million, or 0.3%. This increase consisted of a $184.2 million increase in total commercial deposits offset by a $124.4 million decrease in total retail deposits and ~~2021.~~

~~Paycheck Protection Program:~~ ~~During 2020 and 2021,~~a $31.3 million decrease in off balance sheet deposits. Of the $184.2 million increase in total commercial deposits, $182.9 million was a result of an increase in public fund deposits. This increase is consistent with historical seasonality. As of March 31, 2023, Park ~~approved and funded 7,701 loans totaling $764.7~~had approximately $1.5 billion of uninsured deposits, which was 18.6% of total deposits. Uninsured deposits of $1.5 billion included $288 million ~~as part~~ of ~~the PPP. For its assistance in making and retaining these loans, Park received an aggregate of $33.1 million in fees from the SBA, of~~deposits which ~~$2.9 million and $14.0 million~~ were ~~recognized within loan interest income during the nine months ended September 30, 2022 and 2021, respectively. At September 30, 2022, the remaining balance of PPP loans was $5.7 million.~~

~~Loan Modifications:~~ During the COVID-19 pandemic, Park has worked with borrowers and provided modifications in the form of either interest only deferral or principal and interest deferral, in each case, for initial periods of up to 90 days. As necessary, Park made available a second 90-day interest only deferral or principal and interest deferral bringing the total potential deferral period to six months. Modificationsover $250,000 but were structured in a manner to best address each individual customer's then current situation. A majority of these modifications were excluded from the troubled debt restructuring ("TDR") classification under Section 4013 of the CARES Act or under applicable interagency guidance of the federal banking regulators. The modified loans were considered current and continued to accrue interest during the deferral period.

fully collateralized by Park's investment securities portfolio.

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Financial Results by Segment

The table below reflects the net income (loss) by segment for the first ~~second and third~~ quarters ~~of 2022, for the first nine months of each of 2022 and 2021~~ (the ~~nine~~three months ended ~~September 30)~~March 31) of 2023 and 2022 and for the years ended December 31, ~~2021~~2022 and ~~2020.~~2021. Park's segments include The Park National Bank ("PNB") and "All Other" which primarily consists of Park as the "Parent Company", Guardian Financial Services Company ("GFSC") and SE Property Holdings, LLC ("SEPH").


(In thousands)	(In thousands)	Q3 2022		Q2 2022		Q1 2022		Nine months YTD 2022		Nine months YTD 2021		2021		2020		(In thousands)	Q1 2023		Q1 2022		2022		2021
PNB	PNB	$	31,515	$	34,940	$	41,468	$	107,923	$	122,469	$	159,461	$	123,730	PNB	$	36,269	$	41,468	$	143,243	$	159,461
All Other	All Other	10,553		(616)		(2,593)		7,344		(5,072)		(5,516)		4,193		All Other	(2,536)		(2,593)		5,108		(5,516)
Total Park	Total Park	$	42,068	$	34,324	$	38,875	$	115,267	$	117,397	$	153,945	$	127,923	Total Park	$	33,733	$	38,875	$	148,351	$	153,945

Highlights from the three-month ~~and the nine-month~~ periods ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021 include:~~included:

•Net income for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 of ~~$115.3~~$33.7 million represented a ~~$2.1~~$5.1 million, or ~~1.8%~~13.2%, decrease compared to ~~$117.4~~$38.9 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022 and a $649,000, or 2.0%, increase compared to $33.1 million for the three months ended December 31, 2022.

•Pre-tax, pre-provision net income for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 of ~~$141.7~~$40.1 million represented a ~~$5.5~~$1.9 million, or ~~4.0%~~4.5%, ~~increase~~decrease compared to ~~$136.2~~$42.0 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022 and a $3.3 million, or 7.5%, decrease compared to $43.3 million for the three months ended December 31, 2022.

•During the three months ~~and the nine months~~ ended ~~September 20, 2022,~~March 31, 2023, Park recorded interest income of ~~$361,000 and $3.0 million, respectively,~~$26,000 related to PPP loans, compared to ~~$4.6 million and $15.5~~$1.6 million for the three months ended March 31, 2022 and ~~the nine months ended September 30, 2021, respectively.~~

•Park recognized a $5.6 million gain on the sale of OREO, net, during the three months and the nine months ended September 30, 2022 related to former Vision Bank relationships. There was no gain on the sale of OREO, net, related to former Vision Bank relationships during the three months and the nine months ended September 30, 2021.

•Park recognized a $12.0 million OREO valuation markup during the three months and the nine months ended September 30, 2022 related to the foreclosure and subsequent sale of a property collateralizing a former Vision Bank relationship. There was no OREO valuation markup related to former Vision Bank relationships during the three months and the nine months ended September 30, 2021.

•During the three months and the nine months ended September 30, 2022, Park recorded income of $1.2 million as a result of an annual Visa incentive, compared to $1.1 million during the three months and the nine months ended September 30, 2021.

•During the three months and the nine months ended September 30, 2022, Park paid $1.8 million in one-time bonuses and accrued an additional $1.5 million for future one-time bonuses for additional associates. There were no similar one-time bonuses paid or accrued during the three months or the nine months ended September 30, 2021.

•During the three months and the nine months ended September 30, 2022, Park incurred expenses of $1.3 million and $1.7 million, respectively, in direct expenses related to the collection of payments on former Vision Bank loan relationships, compared to $254,000 and $661,000$78,000 for the three months ~~and the nine months~~ ended ~~September 30, 2021, respectively.~~

•During the three months and the nine months ended September 30, 2022, Park contributed $4.0 million to its charitable foundation. There was no contribution made by Park to its charitable foundation during the three months ended September 20, 2021 and a $4.0 million contribution made by Park to its charitable foundation during the nine months ended September 30, 2021.December 31, 2022.

•PNB ~~loan growth (excluding PPP loans) of 2.20% and 4.45% for the three months and the nine months ended September 30, 2022, respectively,~~loans outstanding at March 31, 2023 increased 4.0%, compared to ~~declines (excluding PPP loans) of (0.13)%~~at March 31, 2022, and ~~(0.89%) for the three months and the nine months ended September 30, 2021, respectively.~~decreased 0.7% compared to at December 31, 2022.

•~~Park experienced~~Park's loan portfolio reflected continued good credit quality with ~~annualized~~ net loan recoveries as a percentage of average loans of 0.00% for the three months ended March 31, 2023, compared to net loan charge-offs as a percentage of average loans of ~~0.04% and 0.02%~~0.09% for the three months ended December 31, 2022, and ~~the nine months ended September 30, 2022, respectively, compared to annualized~~ net loan recoveries as a percentage of average loans of ~~0.15% and 0.06%~~0.02% for the three months ~~and the nine months~~ ended ~~September 30, 2021, respectively.~~March 31, 2022.

Net income for each of the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and March 31, 2022 ~~and 2021~~ included several items of income and expense that impacted comparability of period results. These items are detailed in the "Items Impacting Comparability" section within this MD&A.

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

The Park National Bank (PNB)

The table below reflects PNB's net income for the first ~~second and third~~ quarters ~~of 2022, for the first nine months of each of 2022 and 2021~~ (the ~~nine~~three months ended ~~September 30)~~March 31) of 2023 and 2022 and for the years ended December 31, ~~2021~~2022 and ~~2020.~~2021.

(In thousands) Q3 2022 Q2 2022 Q1 2022 Nine months YTD 2022 Nine months YTD 2021 2021 2020
Net interest income $ 92,035 $ 83,411 $ 79,372 $ 254,818 $ 247,596 $ 328,398 $ 326,375
Provision for (recovery of) credit losses (1)
3,235 3,357 (4,547) 2,045 (3,670) (8,554) 30,813
Other income 28,918 29,255 31,247 89,420 95,258 126,802 124,231
Other expense 79,070 66,214 64,216 209,500 195,361 266,678 268,938
Income before income taxes $ 38,648 $ 43,095 $ 50,950 $ 132,693 $ 151,163 $ 197,076 $ 150,855
Income tax expense 7,133 8,155 9,482 24,770 28,694 37,615 27,125
Net income $ 31,515 $ 34,940 $ 41,468 $ 107,923 $ 122,469 $ 159,461 $ 123,730

(1) Park adopted ASU 2016-13 effective January 1, 2021. The allowance for credit losses and the related provision for (recovery of) credit losses for all periods subsequent to the date of adoption were calculated utilizing this new guidance.


(In thousands)	Q1 2023		Q1 2022		2022		2021
Net interest income	$	93,589	$	79,372	$	350,646	$	328,398
Provision for (recovery of) credit losses	915		(4,547)		5,834		(8,554)
Other income	24,262		31,247		115,211		126,802
Other expense	72,997		64,216		283,670		266,678
Income before income taxes	$	43,939	$	50,950	$	176,353	$	197,076
Income tax expense	7,670		9,482		33,110		37,615
Net income	$	36,269	$	41,468	$	143,243	$	159,461

Net interest income of ~~$254.8~~$93.6 million for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 represented a ~~$7.2~~$14.2 million, or ~~2.9%~~17.9%, increase compared to ~~$247.6~~$79.4 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The increase was a result of a ~~$12.0~~$29.3 million increase in interest income, partially offset by a ~~$4.8~~$15.1 million increase in interest expense.

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The ~~$12.0~~$29.3 million increase in interest income was ~~primarily~~ due to a ~~$15.2~~$18.7 million increase in interest income on loans and a $10.6 million increase in investment ~~income, partially offset by a $3.1~~income. The $18.7 million ~~decrease in interest income on loans. The $15.2 million~~ increase in investment income was primarily the result of a $251.2 million increase in average investments, including money market investments, from $1.97 billion for the nine months ended September 30, 2021 to $2.22 billion for the nine months ended September 30, 2022. The increase was also the result of an increase in the yield on investments, which increased 78 basis points to 2.28% for the nine months ended September 30, 2022, compared to 1.50% for the nine months ended September 30, 2021. The decrease in interest income on loans was primarily the result of a ~~$12.5 million decrease in interest income on PPP loans, which was partially offset by a $9.4 million increase in interest income on all other loans. Excluding PPP loans, there was a $123.2~~$271.3 million increase in average loans, from ~~$6.75~~$6.83 billion for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 to ~~$6.87~~$7.10 billion for the ~~nine~~three months ended ~~September 30, 2022. Additionally, there was a 11 basis point~~March 31, 2023, as well as an increase in the yield ~~excluding PPP~~on loans, ~~from 4.33%~~which increased 91 basis points to 5.21% for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2023, compared to ~~4.44%~~4.30% for the ~~nine~~three months ended ~~September 30,~~March 31, 2022. The $10.6 million increase in investment income was partially the result of a $28.4 million increase in average investments, including money market instruments, from $2.12 billion for the three months ended March 31, 2022 to $2.15 billion for the three months ended March 31, 2023. The increase in investment income was also impacted by an increase in the yield on investments, which increased 198 basis points to 3.77% for the three months ended March 31, 2023, compared to 1.79% for the three months ended March 31, 2022.

The ~~$4.8~~$15.1 million increase in interest expense was ~~primarily~~ due to a ~~$4.6~~$14.5 million increase in interest expense on deposits, as well as a ~~$189,000~~$581,000 increase in interest expense on borrowings. The increase in interest expense on deposits was the result of a ~~$8.5~~$306.8 million increase in average on-balance sheet interest bearing deposits from ~~$5.28~~$5.17 billion for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, to ~~$5.29~~$5.48 billion for ~~nine~~the three months ended ~~September 30, 2022~~March 31, 2023 as well as ~~the result of~~ an increase in the cost of deposits of 11107 basis points, from ~~0.13%~~0.08% for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 to ~~0.24%~~1.15% for the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023. The increase in on-balance sheet interest bearing deposits was due to ~~increases~~an increase in transaction accounts, which ~~were~~was partially offset by decreases in both savings and time deposits. During the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ Park made the decision to continue its participation in a program to transfer deposits ~~off balance~~off-balance sheet in order to manage growth of the balance sheet.

The provision for credit losses of ~~$2.0 million~~$915,000 for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 represented a difference of ~~$5.7~~$5.5 million, compared to a recovery of credit losses of ~~$3.7~~$4.5 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. Refer to the “Credit Metrics and Provision for (Recovery of) Credit Losses” section for additional details regarding the level of the provision for (recovery of) credit losses recognized in each period presented above.

Other income of ~~$89.4~~$24.3 million for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 represented a decrease of ~~$5.8~~$7.0 million, or ~~6.1%~~22.4%, compared to ~~$95.3~~$31.2 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The ~~$5.8~~$7.0 million decrease was primarily related to (i) a ~~$11.0~~$2.5 million change in (loss) gain on equity securities, net, from a $2.2 million gain for the three months ended March 31, 2022 to a $307,000 loss for the three months ended March 31, 2023; (ii) a $2.3 million decrease in other service income, which was primarily due to declines in fee income from mortgage loan originations and mortgage servicing rights, partially offset ~~by an increase~~increases in investor rate locks and mortgage loans held for sale; (iii) a $1.4 million decrease in other miscellaneous income, which was primarily due to decreases in the net gain on the sale of other assets and decreases in other fee income; and (iv) a $1.1 million decrease in other components of net periodic benefit income. These decreases were partially offset by a $330,000 increase in debit card fee income.

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


(In thousands)	Q1 2023			Q1 2022			2022			2021
Mortgage Loan Origination Volume
Sold	$	13,756		$	69,053		$	159,142		$	555,278
Portfolio	32,743			53,498			263,287			284,686
Construction	13,124			32,928			120,794			119,555
Service released	1,576			4,660			14,738			13,802
Total mortgage loan originations	$	61,199		$	160,139		$	557,961		$	973,321

Refinances as a % of Total Mortgage Loan Originations	24.7		%	41.7		%	29.4		%	54.2		%

Total mortgage loan originations decreased $98.9 million, or 61.8%, to $61.2 million for the three months ended March 31, 2023 compared to $160.1 million for the three months ended March 31, 2022.

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sale. This decrease in other service income was partially offset by increases of (i) $2.9 million in other components of net periodic benefit income; (ii) $1.0 million in income from service charges on deposit accounts; (iii) $527,000 in gain on equity securities, net; (iv) $495,000 in gain on sale of loans recorded in miscellaneous income; and (v) $310,000 in income from fiduciary activities.

~~A summary of mortgage loan originations for each quarter of 2021, the year ended December 31, 2021 and the first three quarters of 2022 follows.~~

(In thousands) Q1 2021 Q2 2021 Q3 2021 Q4 2021 2021 Q1 2022 Q2 2022 Q3 2022
Mortgage Loan Origination Volume
Sold $ 191,116 $ 142,398 $ 123,757 $ 98,007 $ 555,278 $ 69,053 $ 50,013 $ 27,025
Portfolio 82,613 74,670 66,718 60,685 284,686 53,498 63,104 90,551
Construction 28,987 37,266 28,486 24,816 119,555 32,928 34,044 34,026
Service released 1,266 2,204 4,537 5,795 13,802 4,660 4,580 2,537
Total mortgage loan originations $ 303,982 $ 256,538 $ 223,498 $ 189,303 $ 973,321 $ 160,139 $ 151,741 $ 154,139
Refinances as a % of Total Mortgage Loan Originations 71.1 % 50.0 % 44.8 % 44.2 % 54.2 % 41.7 % 25.9 % 24.0 %

Total mortgage loan originations decreased $318.0 million, or 40.6%, to $466.0 million for the nine months ended September 30, 2022 compared to $784.0 million for the nine months ended September 30, 2021.

The table below reflects PNB's total other expense for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.


(Dollars in thousands)	(Dollars in thousands)	2022		2021		change		% change		(Dollars in thousands)	Q1 2023		Q1 2022		$ change		% change
Other expense:	Other expense:									Other expense:
Salaries	Salaries	$	96,340	$	86,194	$	10,146	11.8	%	Salaries	$	33,833	$	29,320	$	4,513	15.4	%
Employee benefits	Employee benefits	30,221		30,451		(230)		(0.8)	%	Employee benefits	10,799		10,413		386		3.7	%
Occupancy expense	Occupancy expense	9,699		9,440		259		2.7	%	Occupancy expense	3,343		3,230		113		3.5	%
Furniture and equipment expense	Furniture and equipment expense	8,782		8,157		625		7.7	%	Furniture and equipment expense	3,245		2,936		309		10.5	%
Data processing fees	Data processing fees	23,844		22,426		1,418		6.3	%	Data processing fees	8,680		7,423		1,257		16.9	%
Professional fees and services	Professional fees and services	16,020		14,332		1,688		11.8	%	Professional fees and services	5,679		4,698		981		20.9	%
Marketing	Marketing	3,922		4,354		(432)		(9.9)	%	Marketing	1,296		1,315		(19)		(1.4)	%
Insurance	Insurance	3,875		4,080		(205)		(5.0)	%	Insurance	1,810		1,400		410		29.3	%
Communication	Communication	2,894		2,650		244		9.2	%	Communication	1,017		874		143		16.4	%
State tax expense	State tax expense	3,332		2,986		346		11.6	%	State tax expense	1,129		1,123		6		0.5	%
Amortization of intangible assets	Amortization of intangible assets	1,146		1,378		(232)		(16.8)	%	Amortization of intangible assets	327		402		(75)		(18.7)	%
Foundation contributions		4,000		4,000		—		N.M.
Miscellaneous	Miscellaneous	5,425		4,913		512		10.4	%	Miscellaneous	1,839		1,082		757		70.0	%
Total other expense	Total other expense	$	209,500	$	195,361	$	14,139	7.2	%	Total other expense	$	72,997	$	64,216	$	8,781	13.7	%

Total other expense of ~~$209.5~~$73.0 million for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 represented an increase of ~~$14.1~~$8.8 million, or ~~7.2%~~13.7%, compared to ~~$195.4~~$64.2 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The increase in salaries expense was primarily related to increases in base salary expense, ~~additional~~incentive compensation expense and ~~officer incentive~~share-based compensation expense, partially offset by a decrease in additional compensation expense. The increase in employee benefits expense was primarily related to increases in group insurance expense and payroll tax expense, partially offset by a decrease in retirement benefit expense. The increase in furniture and equipment expense was primarily related to ~~an increase~~increases in depreciation expense and maintenance and repairs on equipment expense. The increase in data processing fees was primarily related to ~~an increase~~increases in software data processing expense ~~partially offset by a decrease in~~and debit card processing expense. The increase in professional fees and services expense was primarily due to increases in other fees, temporary wages, legal expense ~~recruiting fees~~ and ~~directors fees, which were partially offset by decreases~~directors' fees. The increase in ~~other credit related costs. The decrease in marketing~~insurance expense was due to ~~a decrease~~an increase in ~~advertising expenses.~~FDIC insurance assessment expense. The increase in miscellaneous expense was due to increased ~~supplies~~ expense for the allowance for unfunded lines of credit and increased training and ~~travel related~~travel-related expenses, ~~and increases~~which were partially offset by a decrease in ~~non-loan related losses.~~operating lease depreciation expense.

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The table below provides certain balance sheet information and financial ratios for PNB as of or for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 and ~~2021 and~~as of or for the year ended December 31, ~~2021.~~2022.


(Dollars in thousands)	(Dollars in thousands)	September 30, 2022		December 31, 2021		September 30, 2021		% change from 12/31/21		% change from 09/30/21		(Dollars in thousands)	March 31, 2023		December 31, 2022		March 31, 2022		% change from 12/31/22		% change from 03/31/22
Loans	Loans	7,102,503		6,868,935		6,905,245		3.40	%	2.86	%	Loans	7,093,498		7,141,362		6,820,090		(0.67)	%	4.01	%
Loans less PPP loans (1)	Loans less PPP loans (1)	7,096,788		6,794,515		6,773,762		4.45	%	4.77	%	Loans less PPP loans (1)	7,090,053		7,137,156		6,782,666		(0.66)	%	4.53	%
Allowance for credit losses	Allowance for credit losses	83,947		83,111		87,992		1.01	%	(4.60)	%	Allowance for credit losses	85,941		85,370		78,808		0.67	%	9.05	%
Net loans	Net loans	7,018,556		6,785,824		6,817,253		3.43	%	2.95	%	Net loans	7,007,557		7,055,992		6,741,282		(0.69)	%	3.95	%
Investment securities	Investment securities	1,805,163		1,807,392		1,601,376		(0.12)	%	12.73	%	Investment securities	1,774,137		1,796,613		1,817,493		(1.25)	%	(2.39)	%
Total assets	Total assets	9,816,644		9,538,217		10,012,868		2.92	%	(1.96)	%	Total assets	9,817,967		9,815,951		9,544,545		0.02	%	2.86	%
Total deposits	Total deposits	8,606,272		8,157,720		8,603,171		5.50	%	0.04	%	Total deposits	8,583,204		8,534,320		8,255,304		0.57	%	3.97	%
Average assets (2)	Average assets (2)	9,934,726		9,814,766		9,819,220		1.22	%	1.18	%	Average assets (2)	10,021,362		10,011,932		9,798,555		0.09	%	2.27	%
Efficiency ratio (3)	Efficiency ratio (3)	60.40	%	58.21	%	56.63	%	3.76	%	6.66	%	Efficiency ratio (3)	61.46	%	60.43	%	57.63	%	1.70	%	6.65	%
Return on average assets (4)	Return on average assets (4)	1.45	%	1.62	%	1.67	%	(10.49)	%	(13.17)	%	Return on average assets (4)	1.47	%	1.43	%	1.72	%	2.80	%	(14.53)	%

(1) Excludes ~~$5.7~~$3.4 million, ~~$74.4~~$4.2 million and ~~$131.5~~$37.4 million of PPP loans at ~~September 30, 2022,~~March 31, 2023, December 31, ~~2021~~2022 and ~~September 30, 2021.~~March 31, 2022.

(2) Average assets for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ and for the year ended December 31, ~~2021.~~2022.

(3) Efficiency ratio is calculated by dividing total other expense by the sum of fully taxable equivalent net interest income and other income. Fully taxable equivalent net interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustments were ~~$2.6 million~~$926,000 for the ~~nine~~three months ended ~~September 30, 2022, $2.1 million for the nine months ended September 30, 2021 and $2.9~~March 31, 2023, $3.5 million for the year ended December 31 ~~2021.~~2022 and $819,000 for the three months ended March 31 2022.

(4) Annualized for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

Loans outstanding at ~~September 30, 2022~~March 31, 2023 were ~~$7.10~~$7.09 billion, compared to ~~$6.87~~(i) $7.14 billion at December 31, ~~2021,~~2022, a decrease of $47.9 million, and (ii) $6.82 billion at March 31, 2022, an increase of ~~$233.6 million. Loans outstanding at September 30, 2022 were $7.10 billion, compared to $6.91 billion at September 30, 2021, an increase of $197.3~~$273.4 million. Excluding ~~$5.7~~$3.4 million, $4.2 million and ~~$74.4~~$37.4 million of PPP loans at ~~September 30,~~March 31, 2023, December 31, 2022 and ~~December~~March 31, ~~2021,~~2022, respectively, loans outstanding were ~~$7.10~~$7.09 billion at ~~September 30, 2022,~~March 31, 2023, compared to ~~$6.79~~(i) $7.14 billion at December 31, ~~2021,~~2022, a decrease of $47.1 million, and (ii) $6.78 billion at March 31, 2022, an increase of $302.3 million. Excluding $5.7 million and $131.5 million of PPP loans at September 30, 2022 and 2021, respectively, loans outstanding were $7.10 billion at September 30, 2022, compared to $6.77 billion at September 30, 2021, an increase of $323.0$307.4 million. The table below breaks out the change in loans outstanding, by loan type.


(Dollars in thousands)	(Dollars in thousands)	September 30, 2022		December 31, 2021		September 30, 2021		change from 12/31/21		% change from 12/31/21		change from 09/30/21		% change from 09/30/21		(Dollars in thousands)	March 31, 2023		December 31, 2022		March 31, 2022		$ change from 12/31/22		% change from 12/31/22		$ change from 3/31/22		% change from 3/31/22
Home equity	Home equity	$	167,072	$	165,691	$	166,557	$	1,381	0.83	%	$	515	0.31	%	Home equity	$	164,736	$	167,232	$	159,667	$	(2,496)	(1.5)	%	$	5,069	3.2	%
Installment	Installment	1,948,819		1,685,687		1,711,781		263,132		15.61	%	237,038		13.85	%	Installment	1,914,781		1,921,059		1,685,627		(6,278)		(0.3)	%	229,154		13.6	%
Real estate	Real estate	1,171,079		1,142,991		1,165,045		28,088		2.46	%	6,034		0.52	%	Real estate	1,210,045		1,195,037		1,126,666		15,008		1.3	%	83,379		7.4	%
Commercial (excluding PPP loans) (1)	Commercial (excluding PPP loans) (1)	3,807,976		3,797,673		3,725,362		10,303		0.27	%	82,614		2.22	%	Commercial (excluding PPP loans) (1)	3,800,284		3,850,477		3,807,310		(50,193)		(1.3)	%	(7,026)		(0.2)	%
PPP loans	PPP loans	5,715		74,420		131,483		(68,705)		(92.32)	%	(125,768)		(95.65)	%	PPP loans	3,445		4,206		37,424		(761)		(18.1)	%	(33,979)		(90.8)	%
Other	Other	1,842		2,473		5,017		(631)		(25.52)	%	(3,175)		(63.28)	%	Other	207		3,351		3,396		(3,144)		(93.8)	%	(3,189)		(93.9)	%
Total loans	Total loans	$	7,102,503	$	6,868,935	$	6,905,245	$	233,568	3.40	%	$	197,258	2.86	%	Total loans	$	7,093,498	$	7,141,362	$	6,820,090	(47,864)		(0.7)	%	273,408		4.0	%
Total loans (excluding PPP loans)(1)	Total loans (excluding PPP loans)(1)	$	7,096,788	$	6,794,515	$	6,773,762	$	302,273	4.45	%	$	323,026	4.77	%	Total loans (excluding PPP loans)(1)	$	7,090,053	$	7,137,156	$	6,782,666	$	(47,103)	(0.7)	%	$	307,387	4.5	%

(1) Excludes ~~$5.7~~$3.4 million of PPP loans at ~~September 30, 2022, $74.4~~March 31, 2023, $4.2 million of PPP loans at December 31, ~~2021~~2022, and ~~$131.5~~$37.4 million of PPP loans at ~~September 30, 2021.~~

~~Table of Contents~~

Loans outstanding at September 30, 2022 were $7.10 billion, compared to $6.96 billion at June 30, 2022, an increase of $144.9 million. Excluding $5.7 million and $13.4 million of PPP loans at September 30, 2022 and June 30, 2022, respectively, loans outstanding were $7.10 billion at September 30, 2022, compared to $6.94 billion at June 30, 2022, an increase of $152.6 million.

(Dollars in thousands) September 30, 2022 June 30, 2022 change from 06/30/22 % change from 06/30/22
Home equity $ 167,072 $ 162,616 $ 4,456 2.74 %
Installment 1,948,819 1,820,500 128,319 7.05 %
Real estate 1,171,079 1,134,763 36,316 3.20 %
Commercial (excluding PPP loans) (1) 3,807,976 3,821,686 (13,710) (0.36) %
PPP loans 5,715 13,428 (7,713) (57.44) %
Other 1,842 4,618 (2,776) (60.11) %
Total loans $ 7,102,503 $ 6,957,611 $ 144,892 2.08 %
Total loans (excluding PPP loans) $ 7,096,788 $ 6,944,183 $ 152,605 2.20 %

~~(1) Excludes $5.7 million of PPP loans at September 30, 2022 and $13.4 million of PPP loans at June 30,~~March 31, 2022.

PNB's allowance for credit losses ~~increased by $836,000, or 1.0%, to $83.9~~was $85.9 million at ~~September 30, 2022,~~March 31, 2023, compared to ~~$83.1~~(i) $85.4 million at December 31, ~~2021.~~2022, an increase of $571,000, or 0.7%, and (ii) $78.9 million at March 31, 2022, an increase of $7.1 million, or 9.1%. Net charge-offs were ~~$1.2 million,~~$727,000, or ~~0.02%~~0.04% of total average loans, for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and were ~~$640,000,~~$3.6 million, or ~~0.01%~~0.05% of total average loans, for the year ended December 31 ~~2021.~~2022. Net recoveries were $245,000, or 0.01% of total average loans, for the three months ended March 31, 2022. Refer to the “Credit Metrics and Provision for (Recovery of) Credit Losses” section for additional information regarding PNB's loan portfolio and the level of provision for (recovery of) credit losses recognized in each period presented.

Table of Contents

Total deposits at ~~September 30, 2022~~March 31, 2023 were ~~$8.61~~$8.58 billion, compared to ~~$8.16~~(i) $8.53 billion at December 31, ~~2021,~~2022, an increase of ~~$448.6~~$48.9 million, or ~~5.5%. Total deposits~~0.6%, and (ii) $8.26 billion at ~~September 30,~~March 31, 2022, ~~were $8.61 billion, compared to $8.60 million at September 30, 2021,~~ an increase of ~~$3.1~~$327.9 million, or ~~0.04%~~4.0%. During the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ and the year ended December 31, ~~2021,~~2022, Park made the decision to continue participation in ~~two programs~~a program to transfer deposits ~~off balance~~off-balance sheet in order to manage growth of the balance sheet, as deposits increased significantly throughout the ~~COVID-19~~COVID pandemic. At ~~September 30, 2022,~~March 31, 2023, December 31, ~~2021~~2022 and ~~September 30, 2021,~~March 31, 2022, Park had ~~$766.2~~$164.6 million, ~~$983.1~~$195.9 million, and ~~$818.3~~$1,149.2 million, respectively, in deposits which were off-balance sheet. Total deposits would have increased ~~$231.7~~$17.5 million, or ~~2.5%~~0.2%, compared to at December 31, ~~2021~~2022 had the ~~$766.2~~$164.6 million and ~~$983.1~~$195.9 million in deposits remained on the balance sheet at the respective dates. Total deposits would have decreased ~~$49.1~~$656.7 million, or ~~0.5%~~7.0%, compared to ~~September 30, 2021~~at March 31, 2022 had the ~~$766.2~~$164.6 million and ~~$818.3~~$1,149.2 million in deposits remained on the balance sheet at the respective dates. The table below breaks out the change in deposit balances, by deposit type.


(Dollars in thousands)	(Dollars in thousands)	September 30, 2022		December 31, 2021		September 30, 2021		change from 12/31/21		% change from 12/31/21		change from 09/30/21		% change from 09/30/21		(Dollars in thousands)	March 31, 2023		December 31, 2022		March 31, 2022		$ change from 12/31/22		% change from 12/31/22		$ change from 3/31/22		% change from 3/31/22
Non-interest bearing deposits	Non-interest bearing deposits	$	3,435,307	$	3,320,413	$	3,221,859	$	114,894	3.5	%	$	213,448	6.6	%	Non-interest bearing deposits	$	3,211,327	$	3,374,269	$	3,315,210	$	(162,942)	(4.8)	%	$	(103,883)	(3.1)	%
Transaction accounts	Transaction accounts	1,989,340		1,502,876		1,620,375		486,464		32.4	%	368,965		22.8	%	Transaction accounts	2,170,814		1,988,106		1,587,856		182,708		9.2	%	582,958		36.7	%
Savings	Savings	2,568,404		2,622,771		3,035,734		(54,367)		(2.1)	%	(467,330)		(15.4)	%	Savings	2,669,212		2,617,500		2,657,694		51,712		2.0	%	11,518		0.4	%
Certificates of deposit	Certificates of deposit	613,222		711,660		725,203		(98,438)		(13.8)	%	(111,981)		(15.4)	%	Certificates of deposit	531,851		554,445		694,544		(22,594)		(4.1)	%	(162,693)		(23.4)	%
Total deposits	Total deposits	$	8,606,273	$	8,157,720	$	8,603,171	$	448,553	5.5	%	$	3,102	—	%	Total deposits	$	8,583,204	$	8,534,320	$	8,255,304	$	48,884	0.6	%	$	327,900	4.0	%
Off balance sheet deposits	Off balance sheet deposits	766,184		983,053		818,340		(216,869)		(22.1)	%	(52,156)		(6.4)	%	Off balance sheet deposits	164,600		195,937		1,149,187		(31,337)		(16.0)	%	(984,587)		(85.7)	%
Total deposits including off balance sheet deposits	Total deposits including off balance sheet deposits	$	9,372,457	$	9,140,773	$	9,421,511	$	231,684	2.5	%	$	(49,054)	(0.5)	%	Total deposits including off balance sheet deposits	$	8,747,804	$	8,730,257	$	9,404,491	$	17,547	0.2	%	$	(656,687)	(7.0)	%

~~Table of Contents~~

All Other

The table below reflects All Other net (loss) income ~~(loss)~~ for the first ~~second and third~~ quarters ~~of 2022, for the first nine months of each of 2022 and 2021~~ (the ~~nine~~three months ended ~~September 30)~~March 31) of 2023 and 2022 and for the years ended December 31, ~~2021~~2022, and ~~2020.~~2021.

(In thousands) Q3 2022 Q2 2022 Q1 2022 Nine months YTD 2022 Nine months YTD 2021 2021 2020
Net interest (expense) income $ (1,207) $ 528 $ (1,686) $ (2,365) $ (1,409) $ 1,495 $ 1,255
Recovery of credit losses (1) (45) (366) (58) (469) (3,253) (3,362) (18,759)
Other income 17,776 1,938 409 20,123 2,480 3,142 1,433
Other expense 3,833 3,834 3,157 10,824 12,393 16,840 17,657
Net income (loss) before income tax benefit $ 12,781 $ (1,002) $ (4,376) $ 7,403 $ (8,069) $ (8,841) $ 3,790
Income tax expense (benefit) 2,228 (386) (1,783) 59 (2,997) (3,325) (403)
Net income (loss) $ 10,553 $ (616) $ (2,593) $ 7,344 $ (5,072) $ (5,516) $ 4,193

(1) Park adopted ASU 2016-13 effective January 1, 2021. The allowance for credit losses and the related recovery of credit losses for all periods subsequent to the date of adoption were calculated utilizing this new guidance.


(In thousands)	Q1 2023		Q1 2022		2022		2021
Net interest (expense) income	$	(1,391)	$	(1,686)	$	(3,587)	$	1,495
Recovery of credit losses	(732)		(58)		(1,277)		(3,362)
Other income	125		409		20,724		3,142
Other expense	3,506		3,157		14,308		16,840
Net (loss) income before income tax benefit	$	(4,040)	$	(4,376)	$	4,106	$	(8,841)
Income tax benefit	(1,504)		(1,783)		(1,002)		(3,325)
Net (loss) income	$	(2,536)	$	(2,593)	$	5,108	$	(5,516)

The net interest (expense) income for All Other included, for all periods presented, interest income on subordinated debt investments in PNB, which ~~were~~was eliminated in the consolidated Park National Corporation totals, as well as interest income on GFSC loans and SEPH impaired loan relationships. The net interest (expense) income for All Other also included interest expense on $175.0 million aggregate principal amount of 4.50% Fixed-to-Floating Rate Subordinated Notes due 2030 issued by Park in August 2020 (the "Park Subordinated Notes").

Net interest (expense) income reflected net interest expense of ~~$2.4 million for the nine months ended September 30, 2022, compared to~~ $1.4 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2023, compared to net interest expense of $1.7 million for the three months ended March 31, 2022. The change was largely the result of ~~a decrease~~an increase of ~~$371,000~~$565,000 in loan interest income related to payment collections at SEPH, ~~and~~partially offset by a decrease of ~~$791,000~~$96,000 in net interest income from GFSC ~~partially offset by~~and a decrease in interest expense on borrowings of ~~$196,000 mainly related to the Park Subordinated Notes.~~$174,000.

Refer to the “Credit Metrics and Provision for (Recovery of) Credit Losses” section for additional information regarding the All Other loan portfolio and the level of recovery of credit losses recognized in each period presented.

All Other had other ~~income~~expense of ~~$20.1~~$3.5 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, compared to ~~$2.5~~$3.2 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The ~~change~~increase was largely due to a ~~$12.0 million~~$382,000 increase in income from an OREO valuation markup, a $5.6 million increase in gain on the sale of OREO, net, a $771,000 increase in income from bank owned life insurance, mainly related to a death benefit payout, and a $222,000 increase in gain (loss) on equity securities, net, which went from a $361,000 gain for the nine months ended September 30, 2021 to a $584,000 gain for the nine months ended September 30, 2022. The forgoing increases were partially offset by $594,000 decrease in income due to an OREO devaluation and a $516,000 decrease in income related to Partnership Investments, which went from a $767,000 gain for the nine months ended September 30, 2021 to a $251,000 gain for the nine months ended September 30, 2022.

All Other had other expense of $10.8 million for the nine months ended September 30, 2022, compared to $12.4 million for the nine months ended September 30, 2021. The decrease was largely due to a $428,000 decrease in occupancy expense, a $316,000 decrease in salaries expense, a $305,000 decrease in professional fees and services ~~and~~expense which was partially offset by a ~~$278,000~~$162,000 decrease in ~~other insurance~~salaries expense.

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Table of Contents

~~The table below provides certain balance sheet information for All Other as of or for the nine months ended September 30, 2022 and 2021 and the year ended December 31, 2021.~~

(Dollars in thousands) September 30, 2022 December 31, 2021 September 30, 2021 % change from 12/31/21 % change from 9/30/21
Loans $ 743 $ 2,187 $ 3,172 (66.03) % (76.58) %
Allowance for credit losses
14 86 137 (83.72) % (89.78) %
Net loans 729 2,101 3,035 (65.30) % (75.98) %
Total assets 38,403 22,037 21,150 74.27 % 81.57 %
Average assets (1) 30,137 32,692 34,237 (7.82) % (11.98) %

~~(1) Average assets for the nine months ended September 30, 2022 and 2021, and the year ended December 31, 2021.~~

Park National Corporation

The table below reflects Park's consolidated net income for the first ~~second and third~~ quarters ~~of 2022, for the first nine months of each of 2022 and 2021~~ (the ~~nine~~three months ended ~~September 30)~~March 31) of 2023 and 2022 and for the years ended December 31, ~~2021~~2022 and ~~2020.~~2021.

(In thousands) Q3 2022 Q2 2022 Q1 2022 Nine months YTD 2022 Nine months YTD 2021 2021 2020
Net interest income $ 90,828 $ 83,939 $ 77,686 $ 252,453 $ 246,187 $ 329,893 $ 327,630
Provision for (recovery of) credit losses (1) 3,190 2,991 (4,605) 1,576 (6,923) (11,916) 12,054
Other income 46,694 31,193 31,656 109,543 97,738 129,944 125,664
Other expense 82,903 70,048 67,373 220,324 207,754 283,518 286,595
Income before income taxes $ 51,429 $ 42,093 $ 46,574 $ 140,096 $ 143,094 $ 188,235 $ 154,645
Income tax expense 9,361 7,769 7,699 24,829 25,697 34,290 26,722
Net income $ 42,068 $ 34,324 $ 38,875 $ 115,267 $ 117,397 $ 153,945 $ 127,923


(In thousands)	Q1 2023		Q1 2022		2022		2021
Net interest income	$	92,198	$	77,686	$	347,059	$	329,893
Provision for (recovery of) credit losses	183		(4,605)		4,557		(11,916)
Other income	24,387		31,656		135,935		129,944
Other expense	76,503		67,373		297,978		283,518
Income before income taxes	$	39,899	$	46,574	$	180,459	$	188,235
Income tax expense	6,166		7,699		32,108		34,290
Net income	$	33,733	$	38,875	$	148,351	$	153,945

~~Table of Contents~~

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.

Comparison for the ~~Third~~First Quarters of ~~2022~~2023 and ~~2021~~2022

Net interest income increased by ~~$9.2~~$14.5 million, or ~~11.3%~~18.7%, to ~~$90.8~~$92.2 million for the ~~third~~first quarter of ~~2022,~~2023, compared to ~~$81.6~~$77.7 million for the ~~third~~first quarter of ~~2021.~~2022. See the discussion under the table below.


		Three months ended September 30, 2022						Three months ended September 30, 2021							Three months ended March 31, 2023						Three months ended March 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Average balance		Interest		Tax equivalent yield/cost		Average balance		Interest		Tax equivalent yield/cost		(Dollars in thousands)	Average balance		Interest		Tax equivalent yield/cost		Average balance		Interest		Tax equivalent yield/cost
Loans (1)	Loans (1)	$	7,039,040	$	83,677	4.72	%	$	6,956,064	$	78,304	4.47	%	Loans (1)	$	7,099,240	$	91,766	5.24	%	$	6,829,336	$	72,584	4.31	%
Taxable investments	Taxable investments	1,528,169		10,319		2.68	%	1,121,281		4,904		1.74	%	Taxable investments	1,452,398		12,979		3.62	%	1,397,975		6,130		1.78	%
Tax-exempt investments (2)	Tax-exempt investments (2)	424,643		3,700		3.46	%	277,810		2,569		3.67	%	Tax-exempt investments (2)	422,832		3,686		3.54	%	371,695		3,098		3.38	%
Money market instruments	Money market instruments	573,858		3,180		2.20	%	895,784		360		0.16	%	Money market instruments	292,948		3,396		4.70	%	360,103		153		0.17	%
Interest earning assets	Interest earning assets	$	9,565,710	$	100,876	4.18	%	$	9,250,939	$	86,137	3.69	%	Interest earning assets	$	9,267,418	$	111,827	4.89	%	$	8,959,109	$	81,965	3.71	%

Interest bearing deposits	Interest bearing deposits	$	5,679,989	6,582		0.46	%	$	5,459,400	1,446		0.11	%	Interest bearing deposits	$	5,476,661	15,559		1.15	%	$	5,170,296	1,071		0.08	%
Short-term borrowings	Short-term borrowings	196,816		306		0.62	%	273,538		187		0.27	%	Short-term borrowings	204,471		824		1.64	%	223,157		244		0.44	%
Long-term debt	Long-term debt	188,494		2,228		4.69	%	197,610		2,185		4.39	%	Long-term debt	188,727		2,320		4.99	%	188,267		2,145		4.62	%
Interest bearing liabilities	Interest bearing liabilities	$	6,065,299	$	9,116	0.60	%	$	5,930,548	$	3,818	0.26	%	Interest bearing liabilities	$	5,869,859	$	18,703	1.29	%	$	5,581,720	$	3,460	0.25	%
Excess interest earning assets	Excess interest earning assets	$	3,500,411					$	3,320,391					Excess interest earning assets	$	3,397,559					$	3,377,389
Tax equivalent net interest income	Tax equivalent net interest income			$	91,760					$	82,319			Tax equivalent net interest income			$	93,124					$	78,505
Net interest spread	Net interest spread					3.58	%					3.43	%	Net interest spread					3.60	%					3.46	%
Net interest margin	Net interest margin					3.81	%					3.53	%	Net interest margin					4.08	%					3.55	%

(1) Loan interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was ~~$155,000~~$152,000 for the three months ended ~~September 30, 2022~~March 31, 2023 and ~~$177,000~~$168,000 for the same period of ~~2021.~~2022.

(2) Interest income on tax-exempt investment securities includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was ~~$777,000~~$774,000 for the three months ended ~~September 30, 2022~~March 31, 2023 and ~~$540,000~~$651,000 for the same period of ~~2021.~~2022.

Average interest earning assets for the ~~third~~first quarter of ~~2022~~2023 increased by ~~$314.8~~$308.3 million, or 3.4%, to ~~$9,566~~$9,267 million for the ~~third~~first quarter of ~~2022,~~2023, compared to ~~$9,251~~$8,959 million for the ~~third~~first quarter of ~~2021.~~2022. The average yield on interest earning assets increased by 49118 basis points to ~~4.18%~~4.89% for the ~~third~~first quarter of ~~2022,~~2023, compared to ~~3.69%~~3.71% for the ~~third~~first quarter of ~~2021.~~2022.

Table of Contents

Interest income for the three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ included purchase accounting accretion of ~~$494,000~~$200,000 and ~~$799,000,~~$477,000, respectively, related to the acquisitions of NewDominion and Carolina Alliance, as well as ~~$649,000~~$574,000 and ~~$414,000,~~$42,000, respectively, of interest income related to payments received on certain SEPH nonaccrual loan relationships, some of which are participated with PNB. Interest income for the three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ also included ~~$361,000~~$26,000 and ~~$4.6~~$1.6 million, respectively, of income related to PPP loans. Excluding the impact of the purchase accounting accretion, ~~SEPH~~SEPH-related income, and PPP income, the yield on loans was ~~4.64%~~5.20% and ~~4.25%~~4.22% for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, and the yield on earning assets was ~~4.13%~~4.86% and ~~3.52%~~3.64% for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

Average interest bearing liabilities for the ~~third~~first quarter of ~~2022~~2023 increased by ~~$134.8~~$288.1 million, or ~~2.3%~~5.2%, to ~~$6,065~~$5,870 million, compared to ~~$5,931~~$5,582 million for the ~~third~~first quarter of ~~2021.~~2022. The average cost of interest bearing liabilities increased by 34104 basis points to ~~0.60%~~1.29% for the ~~third~~first quarter of ~~2022,~~2023, compared to ~~0.26%~~0.25% for the ~~third~~first quarter of ~~2021.~~2022. During the ~~year~~three months ended ~~December~~March 31, ~~2020,~~2023 and 2022, Park ~~made the decision~~continued to participate in a OWS program in order to manage growth of the balance sheet. At ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ Park had ~~$766.2~~$164.6 million and $818.3 million, respectively, in OWS insured cash sweep deposits which were off-balance sheet. Management from time to time has elected to move these funds both on and off the balance sheet throughout the quarter due to favorable interest rate conditions and other factors. When on the balance sheet, these deposits are included in the average interest bearing liabilities and related interest expense.

~~Table of Contents~~

Removing the impacts of the accretion of purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance, the interest income related to payments on certain SEPH nonaccrual loan relationships and the interest income related to PPP loans, the net interest margin was 3.75% and 3.35% for the three months ended September 30, 2022 and 2021, respectively.

~~Yield on Loans:~~ Average loan balances increased $83.0 million, or 1.2%, to $7,039 million for the third quarter of 2022, compared to $6,956 million for the third quarter of 2021. The average yield on the loan portfolio increased by 25 basis points to 4.72% for the third quarter of 2022, compared to 4.47% for the third quarter of 2021. Average loans for the third quarters of 2022 and 2021 included $9.7 million and $194.8 million, respectively, of PPP loans.

~~The table below shows the average balance and tax equivalent yield by type of loan for the three months ended September 30, 2022 and 2021.~~
Three months ended
September 30, 2022 Three months ended
September 30, 2021
(Dollars in thousands) Average
balance Tax
equivalent
yield Average
balance Tax
equivalent
yield
Home equity loans $ 164,766 5.45 % $ 166,796 3.67 %
Installment loans 1,912,912 4.74 % 1,711,240 4.76 %
Real estate loans 1,147,402 3.85 % 1,173,116 3.69 %
Commercial loans (1)
3,808,863 4.93 % 3,901,243 4.60 %
Other 5,097 6.85 % 3,669 9.15 %
Total loans before allowance $ 7,039,040 4.72 % $ 6,956,064 4.47 %

(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 $155,000 for the three months ended September 30, 2022 and $177,000 for the same period of 2021.

Loan interest income for the three months ended September 30, 2022 and 2021 included the accretion of purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance, interest income related to payments on certain SEPH nonaccrual loan relationships and interest income related to PPP loans. Excluding the impact of the purchase accounting accretion, SEPH income, and PPP income, (a) the yield on home equity loans was 5.40%, the yield on installment loans was unchanged at 4.74%, the yield on real estate loans was 3.82%, the yield on commercial loans was 4.80% and the yield on total loans and leases before allowance was 4.64% for the three months ended September 30, 2022; and (b) the yield on home equity loans was 3.38%, the yield on installment loans was unchanged at 4.76%, the yield on real estate loans was 3.65%, the yield on commercial loans was 4.24% and the yield on total loans and leases before allowance was 4.25% for the three months ended September 30, 2021.

~~Cost of Deposits:~~ Average interest bearing deposit balances increased $220.6 million, or 4.0%, to $5,680 million for the third quarter of 2022, compared to $5,459 million for the third quarter of 2021. The average cost of funds on deposit balances increased by 35 basis points to 0.46% for the third quarter of 2022, compared to 0.11% for the third quarter of 2021.

~~The table below shows for the three months ended September 30, 2022 and 2021, the average balance and cost of funds by type of deposit.~~

Three months ended
September 30, 2022 Three months ended
September 30, 2021
(Dollars in thousands) Average
balance Cost of funds Average
balance Cost of funds
Transaction accounts $ 2,197,169 0.38 % $ 1,643,234 0.02 %
Savings deposits and clubs 2,837,613 0.51 % 3,071,014 0.04 %
Time deposits 645,207 0.51 % 745,152 0.54 %
Total interest bearing deposits $ 5,679,989 0.46 % $ 5,459,400 0.11 %

~~Table of Contents~~

~~Comparison for the First Nine Months of 2022 and 2021~~

Net interest income increased by $6.3 million, or 2.5%, to $252.5 million for the first nine months of 2022, compared to $246.2 million for the first nine months of 2021. See the discussion under the table below.

Nine months ended
September 30, 2022 Nine months ended
September 30, 2021
(Dollars in thousands) Average
balance Interest Tax
equivalent
yield/cost Average
balance Interest Tax
equivalent
yield/cost
Loans (1)
$ 6,904,019 $ 234,209 4.54 % $ 7,062,336 $ 238,568 4.52 %
Taxable investments 1,469,586 24,073 2.19 % 969,628 13,760 1.90 %
Tax-exempt investments (2)
398,405 10,185 3.42 % 278,379 7,719 3.71 %
Money market instruments 357,514 3,593 1.34 % 724,561 689 0.13 %
Interest earning assets $ 9,129,524 $ 272,060 3.98 % $ 9,034,904 $ 260,736 3.86 %
Interest bearing deposits $ 5,292,194 9,694 0.24 % $ 5,284,664 5,102 0.13 %
Short-term borrowings 203,888 740 0.49 % 296,132 552 0.25 %
Long-term debt 188,381 6,550 4.65 % 211,857 6,746 4.26 %
Interest bearing liabilities $ 5,684,463 $ 16,984 0.40 % $ 5,792,653 $ 12,400 0.29 %
Excess interest earning assets $ 3,445,061 $ 3,242,251
Tax equivalent net interest income $ 255,076 $ 248,336
Net interest spread 3.58 % 3.57 %
Net interest margin 3.74 % 3.67 %

(1) Loan interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was $484,000 for the nine months ended September 30, 2022 and $528,000 for the same period of 2021.

Average interest earning assets for the first nine months of 2022 increased by $94.6 million, or 1.0%, to $9,130 million for the first nine months of 2022, compared to $9,035 million for the first nine months of 2021. The average yield on interest earning assets increased by 12 basis points to 3.98% for the first nine months of 2022, compared to 3.86% for the first nine months of 2021.

Interest income for the nine months ended September 30, 2022 and 2021 included purchase accounting accretion of $1.5 million and $2.7 million, respectively, related to the acquisitions of NewDominion and Carolina Alliance, as well as $3.0 million and $3.4 million, respectively, of interest income related to payments received on certain SEPH nonaccrual loan relationships, some of which are participated with PNB. Interest income for the nine months ended September 30, 2022 and 2021 also included $3.0 million and $15.5 million, respectively, of income related to PPP loans. Excluding the impact of the purchase accounting accretion, SEPH income, and PPP income, the yield on loans was 4.41% and 4.29% for the nine months ended September 30, 2022 and 2021, respectively, and the yield on earning assets was 3.89% and 3.66% for the nine months ended September 30, 2022 and 2021, respectively.

Average interest bearing liabilities for the first nine months of 2022 decreased by $108.2 million, or 1.9%, to $5,684 million, compared to $5,793 million for the first nine months of 2021. The average cost of interest bearing liabilities increased by 11 basis points to 0.40% for the first nine months of 2022, compared to 0.29% for the first nine months of 2021. During the year ended December 31, 2020, Park made the decision to participate in a OWS program in order to manage growth of the balance sheet. At September 30, 2022 and 2021, Park had $766.2 million and $818.3$1,149.2 million, respectively, in OWS insured cash sweep deposits which were off-balance sheet. Management from time to time has elected to move these funds both on and off the balance sheet throughout the quarter due to favorable interest rate conditions and other factors. When on the balance sheet, these deposits are included in the average interest bearing liabilities and related interest expense.

Removing the impacts of the accretion of purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance, the interest income related to payments on certain SEPH nonaccrual loan relationships and the interest income related to PPP loans, the net interest margin was ~~3.64%~~4.04% and ~~3.47%~~3.48% for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

~~Table of Contents~~

Yield on Loans: Average loan balances ~~decreased $158.3~~increased $269.9 million, or ~~2.2%~~4.0%, to ~~$6,904~~$7,099 million for the first ~~nine~~quarter of ~~2022,~~2023, compared to ~~$7,062~~$6,829 million for the first ~~nine months~~quarter of ~~2021.~~2022. The average yield on the loan portfolio increased by 293 basis points to ~~4.54%~~5.24% for the first ~~nine months~~quarter of ~~2022,~~2023, compared to ~~4.52%~~4.31% for the first ~~nine months~~quarter of ~~2021.~~2022. Average loans for the first ~~nine months~~quarters of 2023 and 2022 ~~and 2021~~ included ~~$32.3~~$3.8 million and ~~$309.0~~$60.0 million, respectively, of PPP loans.

The table below shows the average balance and tax equivalent yield by type of loan for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.


		Nine months ended September 30, 2022				Nine months ended September 30, 2021					Three months ended March 31, 2023				Three months ended March 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Average balance		Tax equivalent yield		Average balance		Tax equivalent yield		(Dollars in thousands)	Average balance		Tax equivalent yield		Average balance		Tax equivalent yield
Home equity loans	Home equity loans	$	162,371	4.38	%	$	169,892	3.79	%	Home equity loans	$	166,648	7.74	%	$	161,827	3.53	%
Installment loans	Installment loans	1,778,231		4.69	%	1,684,026		4.83	%	Installment loans	1,911,708		5.03	%	1,680,738		4.67	%
Real estate loans	Real estate loans	1,133,199		3.76	%	1,185,141		3.79	%	Real estate loans	1,197,827		4.12	%	1,130,635		3.69	%
Commercial loans (1)	Commercial loans (1)	3,826,017		4.70	%	4,020,498		4.63	%	Commercial loans (1)	3,818,741		5.59	%	3,853,302		4.36	%
Other	Other	4,201		8.01	%	2,779		12.21	%	Other	4,316		8.37	%	2,834		11.73	%
Total loans before allowance	Total loans before allowance	$	6,904,019	4.54	%	$	7,062,336	4.52	%	Total loans before allowance	$	7,099,240	5.24	%	$	6,829,336	4.31	%

(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 ~~$484,000~~$152,000 for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~$528,000~~$168,000 for the same period of ~~2021.~~2022.

Loan interest income for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ included the accretion of purchase accounting

adjustments related to the acquisitions of NewDominion and Carolina Alliance, interest income related to payments on certain SEPH nonaccrual loan relationships and interest income related to PPP loans. Excluding the impact of the purchase accounting accretion, ~~SEPH~~SEPH-related income, and PPP income, (a) the yield on home equity loans was ~~4.28%~~7.67%, the yield on installment loans was unchanged at ~~4.69%~~5.03%, the yield on real estate loans was ~~3.74%~~unchanged at 4.12%, the yield on commercial loans was ~~4.49%~~5.51% and the yield on total loans ~~and leases~~ before allowance was ~~4.41%~~5.20% for the ~~nine~~three months ended ~~September 30, 2022;~~March 31, 2023; and (b) the yield on home equity loans was ~~3.43%~~3.40%, the yield on installment loans was unchanged at ~~4.83%~~4.67%, the yield on real estate loans was ~~3.76%~~3.67%, the

Table of Contents

yield on commercial loans was ~~4.25%~~4.21% and the yield on total loans ~~and leases~~ before allowance was ~~4.29%~~4.22% for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.

Cost of Deposits: Average interest bearing deposit balances increased ~~$7.5~~$306.4 million, or ~~0.1%~~5.9%, to ~~$5,292~~$5,477 million for the first ~~nine months~~quarter of ~~2022,~~2023, compared to ~~$5,285~~$5,170 million for the first ~~nine months~~quarter of ~~2021.~~2022. The average cost of funds on deposit balances increased by 11107 basis points to ~~0.24%~~1.15% for the first ~~nine months~~quarter of ~~2022,~~2023, compared to ~~0.13%~~0.08% for the first ~~nine months~~quarter of ~~2021.~~

2022.

The table below shows for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the average balance and cost of funds by type of deposit.


		Nine months ended September 30, 2022				Nine months ended September 30, 2021					Three months ended March 31, 2023				Three months ended March 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Average balance		Cost of funds		Average balance		Cost of funds		(Dollars in thousands)	Average balance		Cost of funds		Average balance		Cost of funds
Transaction accounts	Transaction accounts	$	1,848,771	0.19	%	$	1,543,451	0.02	%	Transaction accounts	$	2,156,473	1.15	%	$	1,639,828	0.02	%
Savings deposits and clubs	Savings deposits and clubs	2,766,837		0.23	%	2,947,088		0.04	%	Savings deposits and clubs	2,777,518		1.18	%	2,829,331		0.04	%
Time deposits	Time deposits	676,586		0.45	%	794,125		0.65	%	Time deposits	542,670		1.01	%	701,137		0.42	%
Total interest bearing deposits	Total interest bearing deposits	$	5,292,194	0.24	%	$	5,284,664	0.13	%	Total interest bearing deposits	$	5,476,661	1.15	%	$	5,170,296	0.08	%

~~Table of Contents~~

Yield on Average Interest Earning Assets: The following table shows the tax equivalent yield on average interest earning assets for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and for the years ended December 31, 2022, 2021 ~~2020~~ and ~~2019.~~2020.


		Loans (1) (3)		Investments (2)		Money Market Instruments		Total(3)			Loans (1) (3)		Investments (2)		Money Market Instruments		Total(3)
2019 - year		5.19	%	2.76	%	2.33	%	4.70	%
2020 - year	2020 - year	4.71	%	2.66	%	0.26	%	4.28	%	2020 - year	4.71	%	2.66	%	0.26	%	4.28	%
2021 - year	2021 - year	4.53	%	2.22	%	0.13	%	3.86	%	2021 - year	4.53	%	2.22	%	0.13	%	3.86	%
2022 - first nine months		4.54	%	2.45	%	1.34	%	3.98	%
2022 - year										2022 - year	4.65	%	2.66	%	2.07	%	4.14	%
2023 - first three months										2023 - first three months	5.24	%	3.60	%	4.70	%	4.89	%

(1) Loan interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was ~~$484,000~~$152,000 for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, and $627,000, $704,000, ~~$623,000,~~ and ~~$576,000~~$623,000 for the years ended December 31, 2022, 2021 ~~2020~~ and ~~2019,~~2020, respectively.

(2) Interest income on tax-exempt investment securities includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was ~~$2.1 million~~$774,000 for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, and ~~$2.2~~$2.9 million, $2.2 million and ~~$2.4~~$2.2 million for the years ended December 31, 2022, 2021 ~~2020~~ and ~~2019,~~2020, respectively.

(3) Interest income for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and for the years ended December 31, 2022, 2021 and 2020 ~~and 2019~~ included ~~$3.0~~$574,000, $3.7 million, $8.0 million, ~~$453,000,~~ and ~~$256,000,~~$453,000, respectively, related to payments received on certain SEPH nonaccrual loan relationships, some of which are participated with PNB, as well as ~~$1.5~~$200,000, $1.8 million, $3.3 million, ~~$4.4 million,~~ and ~~$5.2~~$4.4 million, respectively, of the accretion of purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance. Interest income for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and for the years ended December 31, 2022 2021, and ~~December 31,~~ 2020 included ~~$3.0~~$26,000, $3.1 million, $18.0 million and $16.7 million, respectively, of income related to PPP loans. Excluding all of these sources of income described in the preceding sentences of this footnote, the yield on loans was ~~4.41%~~5.20%, 4.55%, 4.27%, ~~4.63%,~~ and ~~5.09%,~~4.63% for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, and for the years ended December 31, 2022, 2021 ~~2020~~ and ~~2019,~~2020, respectively, and the yield on total earning assets was ~~3.89%~~4.86%, 4.06%, 3.64%, ~~4.20%,~~ and ~~4.62%,~~4.20% for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and for the years ended December 31, 2022, 2021 ~~2020~~ and ~~2019,~~2020, respectively.

Cost of Average Interest Bearing Liabilities: The following table shows the cost of funds on average interest bearing liabilities for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and for the years ended December 31, 2022, 2021 ~~2020~~ and ~~2019.~~2020.


		Interest bearing deposits (1)		Short-term borrowings		Long-term debt		Total (1)			Interest bearing deposits (1)		Short-term borrowings		Long-term debt		Total (1)
2019 - year		1.01	%	1.15	%	2.77	%	1.12	%
2020 - year	2020 - year	0.41	%	0.40	%	3.55	%	0.52	%	2020 - year	0.41	%	0.40	%	3.55	%	0.52	%
2021 - year	2021 - year	0.12	%	0.27	%	4.32	%	0.28	%	2021 - year	0.12	%	0.27	%	4.32	%	0.28	%
2022 - first nine months		0.24	%	0.49	%	4.65	%	0.40	%
2022 - year										2022 - year	0.39	%	0.67	%	4.69	%	0.54	%
2023 - first three months										2023 - first three months	1.15	%	1.64	%	4.99	%	1.29	%

(1) Interest expense for the ~~nine months ended September 30, 2022 and the~~ years ended December 31, 2022, 2021 and 2020 included $7,000, $46,000, and ~~2019 included $6,000, $46,000,~~ $226,000, ~~and $593,000,~~ respectively, of the accretion of purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance. Excluding this income, for the ~~nine months ended September 30, 2022 and the~~ years ended December 31, 2022, 2021 ~~2020~~ and ~~2019,~~2020, the cost of funds on interest bearing deposits was ~~0.25%~~0.39%, 0.12%, and 0.41%, ~~and 1.02%~~, respectively, and the cost of total interest bearing liabilities was ~~0.40%~~0.54%, 0.28%, and 0.53%, respectively. There was no accretion of purchase accounting adjustments related to the acquisitions of NewDominion and ~~1.13%, respectively.~~Carolina Alliance for the three months ended March 31, 2023.

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Credit Metrics and Provision for (Recovery of) Credit Losses

The provision for (recovery of) credit losses is the amount added to/subtracted from the allowance for credit losses to ensure the allowance is sufficient to absorb estimated credit losses over the life of a loan. The amount of the provision for (recovery of) credit losses is determined by management based on relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets.

The adoption of ASU ~~2016-13~~2022-02 on January 1, ~~2021~~2023 resulted in a ~~$6.1 million~~$383,000 increase to the allowance for ~~credit losses and a $3.9 million increase to the allowance for unfunded~~ credit losses. A cumulative effect adjustment resulting in ~~an $8.0 million~~a $303,000 decrease to retained earnings and ~~a $2.1 million~~an $80,000 increase to deferred tax assets was also recorded.

~~Table~~ Additionally, as a result of ~~Contents~~the adoption of this ASU and elimination of the concept of TDRs, total nonperforming loans decreased by $20.1 million during the three months ended March 31, 2023 and individually evaluated loans decreased by $11.5 million.

The table below provides additional information on the recovery of credit losses for the three-month ~~and the nine-month~~ periods ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

Three Months Ended
September 30, Nine Months Ended
September 30,
(Dollars in thousands) 2022 2021 2022 2021
Allowance for credit losses:
Beginning balance $ 81,448 $ 83,577 $ 83,197 $ 85,675
Cumulative change in accounting principle; adoption of ASU 2016-13 — — — 6,090
Charge-offs (1)
1,748 1,002 5,497 3,773
Recoveries 1,071 3,582 4,685 7,060
Net charge-offs (recoveries) 677 (2,580) 812 (3,287)
Provision for (recovery of) credit losses 3,190 1,972 1,576 (6,923)
Ending balance $ 83,961 $ 88,129 $ 83,961 88,129
Net charge-offs (recoveries) as a % of average loans (annualized) 0.04 % (0.15) % 0.02 % (0.06) %

~~(1) Charge-offs for the nine-month period ended September 30, 2022 included $1.2 million in charge-offs prior to the transfer of certain commercial loans to held for sale.~~


	Three Months Ended March 31,
(Dollars in thousands)	2023			2022
Allowance for credit losses:
Beginning balance	$	85,379		$	83,197
Cumulative change in accounting principle; adoption of ASU 2022-02	383			—
Charge-offs	2,235			1,347
Recoveries	2,236			1,616
Net recoveries	(1)			(269)
Provision for (recovery of) credit losses	183			(4,605)
Ending balance	$	85,946		$	78,861

Net charge-offs (recoveries) as a % of average loans (annualized)	—		%	(0.02)		%

The following table provides additional information related to the allowance for credit losses for Park including information related to specific reserves and general reserves, at ~~September 30, 2022, June 30, 2022,~~ March 31, ~~2022,~~2023, December 31, ~~2021~~2022, and ~~September 30, 2021.~~March 31, 2022.


Park - Allowance for Credit Losses
(Dollars in thousands)	(Dollars in thousands)	9/30/2022			6/30/2022			3/31/2022			12/31/2021			9/30/2021			(Dollars in thousands)	3/31/2023			12/31/2022			3/31/2022
Total allowance for credit losses	Total allowance for credit losses	$	83,961		$	81,448		$	78,861		$	83,197		$	88,129		Total allowance for credit losses	$	85,946		$	85,379		$	78,861
Allowance on PCD loans	Allowance on PCD loans	—			—			—			—			—			Allowance on PCD loans	—			—			—
Specific reserves on individually evaluated loans	Specific reserves on individually evaluated loans	1,750			1,874			1,513			1,616			3,466			Specific reserves on individually evaluated loans	4,318			3,566			1,513
General reserves on collectively evaluated loans	General reserves on collectively evaluated loans	$	82,211		$	79,574		$	77,348		$	81,581		$	84,663		General reserves on collectively evaluated loans	$	81,628		$	81,813		$	77,348

Total loans	Total loans	$	7,103,246		$	6,958,685		$	6,821,606		$	6,871,122		$	6,908,417		Total loans	$	7,093,857		$	7,141,891		$	6,821,606
PCD loans	PCD loans	4,867			5,934			6,987			7,149			8,705			PCD loans	4,555			4,653			6,987
Individually evaluated loans		43,670			42,523			63,209			74,502			79,264
Individually evaluated loans (1)																	Individually evaluated loans (1)	59,384			78,341			63,209
Collectively evaluated loans	Collectively evaluated loans	$	7,054,709		$	6,910,228		$	6,751,410		$	6,789,471		$	6,820,448		Collectively evaluated loans	$	7,029,918		$	7,058,897		$	6,751,410

Allowance for credit losses as a % of period end loans	Allowance for credit losses as a % of period end loans	1.18		%	1.17		%	1.16		%	1.21		%	1.28		%	Allowance for credit losses as a % of period end loans	1.21		%	1.20		%	1.16		%
Allowance for credit losses as a % of period end loans (excluding PPP loans) (1)		1.18		%	1.15		%	1.22		%	1.22		%	1.30		%

General reserve as a % of collectively evaluated loans	General reserve as a % of collectively evaluated loans	1.17		%	1.15		%	1.15		%	1.20		%	1.24		%	General reserve as a % of collectively evaluated loans	1.16		%	1.16		%	1.15		%
General reserve as a % of collectively evaluated loans (excluding PPP loans) (1)		1.17		%	1.15		%	1.21		%	1.21		%	1.27		%

(1) ~~Excluded $5.7 million~~After the adoption of ~~PPP~~ASU 2022-02 on January 1, 2023, loans individually evaluated for impairment include all internally classified commercial nonaccrual loans. Prior to the adoption of ASU 2022-02, loans individually evaluated for impairment included all internally classified commercial nonaccrual loans and ~~$6,000 in related~~accruing TDRs.

The allowance ~~at September 30, 2022; $13.4~~for credit losses of $85.9 million ~~of PPP loans and $14,000 in related allowance at June 30, 2022; $37.4 million of PPP loans and $39,000 in related allowance~~ at March 31, ~~2022; $74.4~~2023 represented a $567,000, or 0.7%, increase compared to $85.4 million ~~of PPP loans and $77,000 in related allowance~~ at December 31, ~~2021; and $131.5 million of PPP loans and $136,000 related allowance at September 30, 2021.~~

2022, The increase was largely due to a $752,000 increase in specific reserves, offset by a

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~~The allowance for credit losses~~decline of ~~$84.0 million at September 30, 2022 represented a $2.5 million, or 3.1%, increase compared to $81.4 million at June 30, 2022. The increase was largely due to a $2.6 million increase~~$185,000 in general reserves, taking into consideration deterioration in economic forecasts, inflationary pressures, rising interest rates, and geopolitical conflict (including the conflict between Russia and Ukraine), while balancing a decrease in risks associated with the COVID-19 pandemic, particularly in high risk loan portfolios such as hotels and accommodations, restaurants and food service and strip shopping centers.

The allowance for credit losses of $81.4 million at June 30, 2022 represented a $2.6 million, or 3.3%, increase compared to $78.9 million at March 31, 2022. The increase was largely due to a $2.2 million increase in general reserves, taking into consideration deterioration in economic forecasts, inflationary pressures, rising interest rates, and geopolitical conflict (including the conflict between Russia and Ukraine), while balancing a decrease in risks associated with the COVID-19 pandemic, particularly in high risk loan portfolios such as hotels and accommodations, restaurants and food service and strip shopping centers.

The allowance for credit losses of $78.9 million at March 31, 2022 represented a $4.3 million, or 5.2%, decrease compared to $83.2 million at December 31, 2021. The decline was largely due to a $4.2 million decrease in general reserves, taking into consideration improvement in economic forecasts and a decrease in risks associated with the COVID-19 pandemic, particularly in high risk loan portfolios such as hotels and accommodations, restaurants and food service and strip shopping centers while balancing risks associated with inflationary pressures and geopolitical conflict (including the conflict between Russia and Ukraine).reserves.

Generally, ~~management obtains updated~~ valuations for all nonperforming loans are updated at least ~~annually.~~annually, either through independent valuations by a licensed appraiser or a verification of value ("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: ~~Nonperforming~~After the adoption of ASU 2022-02 on January 1, 2023, which eliminated the TDR classification, non-performing assets include: (1) loans whose interest is accounted for on a nonaccrual basis; (2) loans which are contractually past due 90 days or more as to principal or interest payments but whose interest continues to accrue; and (3) OREO which results from taking possession of property that served as collateral for a defaulted loan. Prior to the adoption of ASU 2022-02 on January 1, 2023, nonperforming assets included: (1) loans whose interest is accounted for on a nonaccrual basis; (2) TDRs on accrual status; (3) loans which are contractually past due 90 days or more as to principal or interest payments but whose interest continues to accrue; and (4) OREO which results from taking possession of property that served as collateral for a defaulted loan; and (5) other nonperforming assets. At December 31, 2021 and September 30, 2021, other nonperforming assets consisted of aircraft acquired as part of a loan workout. There were no other nonperforming assets at September 30, 2022.loan.

The following table compares Park’s nonperforming assets at ~~September 30, 2022,~~March 31, 2023, December 31, ~~2021~~2022 and ~~September 30, 2021.~~March 31, 2022.


(In thousands)	(In thousands)	September 30, 2022			December 31, 2021			September 30, 2021			(In thousands)	March 31, 2023			December 31, 2022			March 31, 2022
Nonaccrual loans	Nonaccrual loans	$	44,612		$	72,722		$	87,791		Nonaccrual loans	$	73,114		$	79,696		$	54,018
Accruing TDRs		19,831			28,323			18,797
Accruing TDRs (for years 2022 and prior) (1)											Accruing TDRs (for years 2022 and prior) (1)	N.A.			20,134			32,428
Loans past due 90 days or more	Loans past due 90 days or more	790			1,607			284			Loans past due 90 days or more	1,251			1,281			445
Total nonperforming loans	Total nonperforming loans	$	65,233		$	102,652		$	106,872		Total nonperforming loans	$	74,365		$	101,111		$	86,891

OREO	OREO	1,354			775			813			OREO	1,468			1,354			760
Other nonperforming assets		—			2,750			3,164
Total nonperforming assets	Total nonperforming assets	$	66,587		$	106,177		$	110,849		Total nonperforming assets	$	75,833		$	102,465		$	87,651

Percentage of nonaccrual loans to total loans	Percentage of nonaccrual loans to total loans	0.63		%	1.06		%	1.27		%	Percentage of nonaccrual loans to total loans	1.03		%	1.12		%	0.79		%
Percentage of nonperforming loans to total loans		0.92		%	1.49		%	1.55		%
Percentage of nonperforming assets to total loans		0.94		%	1.55		%	1.60		%
Percentage of nonperforming assets to total assets		0.68		%	1.11		%	1.10		%
Percentage of nonperforming loans to total loans (1)											Percentage of nonperforming loans to total loans (1)	1.05		%	1.42		%	1.27		%
Percentage of nonperforming assets to total loans (1)											Percentage of nonperforming assets to total loans (1)	1.07		%	1.43		%	1.28		%
Percentage of nonperforming assets to total assets (1)											Percentage of nonperforming assets to total assets (1)	0.77		%	1.04		%	0.92		%

(1) Effective January 1, 2023, Park adopted ASU 2022-02. Among other things, this ASU eliminated the concept of TDRs.

Included in the OREO totals above were $1.4 million of SEPH OREO at ~~September 30,~~both March 31, 2023 and December 31, 2022, and $594,000 of SEPH OREO at ~~both December~~March 31, ~~2021 and September 30, 2021.~~2022.

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Park classifies loans as nonaccrual when a loan (1) is maintained on a cash basis because of deterioration in the financial condition of the borrower, (2) payment in full of principal or interest is not expected, or (3) principal or interest has been in default for a period of 90 days for commercial loans and 120 days for all other loans. As a result, loans may be classified as nonaccrual despite being current with their contractual terms. The following table details the delinquency status of nonaccrual loans at ~~September 30, 2022,~~March 31, 2023, December 31, ~~2021~~2022 and ~~September, 2021.~~March 31, 2022. Loans are classified as current if they are less than 30 days past due.


		September 30, 2022				December 31, 2021				September 30, 2021					March 31, 2023				December 31, 2022					March 31, 2022
(In thousands)	(In thousands)	Balance		Percent of Total Loans		Balance		Percent of Total Loans		Balance		Percent of Total Loans		(In thousands)	Balance		Percent of Total Loans		Balance		Percent of Total Loans			Balance		Percent of Total Loans
Nonaccrual loans - current	Nonaccrual loans - current	$	28,472	0.40	%	$	53,259	0.78	%	$	67,722	0.98	%	Nonaccrual loans - current	$	32,813	0.46	%	$	58,893	0.83	%	1	$	36,415	0.53	%
Nonaccrual loans - past due	Nonaccrual loans - past due	16,140		0.23	%	19,463		0.28	%	20,069		0.29	%	Nonaccrual loans - past due	40,301		0.57	%	20,803		0.29	%		17,603		0.26	%
Total nonaccrual loans	Total nonaccrual loans	$	44,612	0.63	%	$	72,722	1.06	%	$	87,791	1.27	%	Total nonaccrual loans	$	73,114	1.03	%	$	79,696	1.12	%		$	54,018	0.79	%

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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 a specific 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)	Commercial loans * (In thousands)	September 30, 2022		December 31, 2021		September 30, 2021		Commercial loans * (In thousands)	March 31, 2023		December 31, 2022		March 31, 2022
Pass-rated	Pass-rated	$	3,694,468	$	3,712,784	$	3,676,310	Pass-rated	$	3,664,298	$	3,709,065	$	3,696,217
Special mention	Special mention	77,156		75,397		92,659		Special mention	87,431		79,855		78,432
Substandard	Substandard	2,224		—		39		Substandard	2,176		1,965		75
Individually evaluated for impairment(1)	Individually evaluated for impairment(1)	43,670		74,502		79,264		Individually evaluated for impairment(1)	59,384		78,341		63,209
Accruing PCD	Accruing PCD	4,648		6,630		8,187		Accruing PCD	4,469		4,563		6,497
Total	Total	$	3,822,166	$	3,869,313	$	3,856,459	Total	$	3,817,758	$	3,873,789	$	3,844,430

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

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

Park's watch list includes all criticized and classified commercial loans, defined by Park as loans rated special mention or worse. Park had ~~$77.2~~$89.6 million of collectively evaluated commercial loans included on the watch list at ~~September 30, 2022,~~March 31, 2023, compared to ~~$75.4~~$81.8 million at December 31, ~~2021,~~2022, and ~~$92.7~~$78.5 million at ~~September 30, 2021.~~March 31, 2022. The existing conditions of these loans do not warrant classification as nonaccrual. However, these loans have shown some weakness and management performs additional analysis regarding each borrower's ability to comply with payment terms.

The $77.2 million of collectively evaluated commercial watch list loans as of September 30, 2022 was elevated compared to pre-pandemic levels, an increase of $50.4 million compared to $26.8 million at March 31, 2020. This $50.4 million increase was largely due to $34.0 million of hotels and accommodations loans that were downgraded to special mention as a result of the impact of COVID-19 and a $22.7 million downgrade to a special mention credit related to a loan to a non-bank consumer finance company, partially offset by problem loan resolutions. Park continues to closely monitor the impact of COVID-19 and related economic recovery on its borrowers' ability to repay their loans in accordance with contractual terms. As additional information becomes available, management will continue to evaluate loans to ensure appropriate risk classification.

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 ~~or classified as TDRs~~ will be individually evaluated. Individual analysis will establish a specific reserve for loans in scope. Specific reserves on individually evaluated commercial loans are typically based on management’s best estimate of the fair value of collateral securing these loans. The amount ultimately charged off for these loans may be different from the specific reserve as the ultimate liquidation of the collateral may be for an amount different from management’s estimate.

~~Table~~ Prior to the elimination of ~~Contents~~

TDRs with the adoption of ASU 2022-02 on January 1, 2023, Park also included commercial accruing TDRs as individually evaluated loans.

Individually evaluated commercial loans were ~~$43.7~~$59.4 million at ~~September 30, 2022,~~March 31, 2023, a decrease of ~~$30.8~~$19.0 million, compared to ~~$74.5~~$78.3 million at December 31, ~~2021~~2022 and a decrease of ~~$35.6~~$3.8 million, compared to ~~$79.3~~$63.2 million at ~~September 30, 2021.~~March 31, 2022. The ~~$43.7~~$78.3 million of individually evaluated commercial loans at ~~September 30,~~December 31, 2022 included ~~$10.9~~$11.5 million of loans modified in a TDR which ~~are currently~~were on accrual status and performing in accordance with the restructured terms, down from ~~$17.5~~$22.9 million at ~~December~~March 31, ~~2021.~~

2022.

At ~~September 30, 2022,~~March 31, 2023, Park had taken partial charge-offs of ~~$795,000~~$1.5 million related to the ~~$43.7~~$59.4 million of individually evaluated commercial loans, compared to partial charge-offs of ~~$624,000~~$1.8 million related to the ~~$74.5~~$78.3 million of individually evaluated commercial loans at December 31, ~~2021.~~2022.

Loans Acquired with Deteriorated Credit Quality: In conjunction with the NewDominion acquisition, Park acquired loans with a book value of $277.9 million as of the July 1, 2018 acquisition date. These loans were recorded at the initial fair value of $272.8 million. Loans acquired with deteriorated credit quality (ASC 310-30) with a book value of $5.1 million were recorded at the initial fair value of $4.9 million. In conjunction with the Carolina Alliance acquisition, Park acquired loans and leases with a book value of $589.7 million as of the April 1, 2019 acquisition date. These loans and leases were recorded at the initial fair value of $578.6 million. Loans and leases acquired with deteriorated credit quality (ASC 310-30) with a book value of $19.9 million were recorded at the initial fair value of $18.4 ~~million~~million.

Upon adoption of CECL on January 1, 2021, $52,000 of the credit discount on PCD loans ~~were~~was reclassified to the allowance for credit losses. PCD loans are individually evaluated on a quarterly basis to determine if a specific reserve is necessary. At ~~both September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, there was no allowance for credit losses on PCD loans. The carrying amount of loans

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acquired with deteriorated credit quality at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 was ~~$4.9~~$4.6 million and ~~$7.1~~$4.7 million, respectively.

Allowance for Credit Losses: The allowance for credit losses is calculated on a quarterly basis. The methodology for calculating the ACL and assumptions made as of ~~September 30, 2022~~March 31, 2023 are detailed below.

Quantitative Considerations

The ACL is primarily calculated utilizing a DCF model. Key inputs and ~~assumption~~assumptions used in this model are discussed below:

•Probability of default – PD is the probability that an asset will be in default within a given time frame. Park has defined default to be when a charge-off has occurred, a loan is placed on nonaccrual, or a loan is greater than 90 days past due. Whenever possible, Park utilizes its own loan-level PDs for the reasonable and supportable forecast period. When ~~loan level-data~~loan-level data is not available reflecting the forecasted economic conditions, a forecast model is utilized to estimate PDs.

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

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~~appropriate to weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at December 31, 2021.~~

◦As of March 31, 2023 the "most likely" scenario forecasted Ohio unemployment between 4.15% and 4.51% during the next four quarters. In determining the appropriate weighting of scenarios at March 31, 2023, management considered the range of forecasted unemployment as well as a number of economic indicators. The continued high level of inflation, historically low consumer confidence, rising interest rates, financial system stress related to recent bank failures, geopolitical conflict, and workforce challenges continued to cause uncertainty as to the overall economic environment. Considering these factors, management determined it was appropriate to maintain the existing weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario ~~resulted in a 4 basis point increase in the weighted quantitative allowance.~~50% at March 31, 2023.

Qualitative Considerations

Park reviews various internal and external factors to consider the need for any qualitative adjustments to the quantitative model. Factors considered include the ~~following:~~following:

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

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

◦Level of and trend in new nonaccrual loans.

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

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

•The quality of Park’s credit review function.

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

•The effect of other external factors such as the regulatory, legal and technological environments; competition; geopolitical conflict; and events such as natural disasters or pandemics.

•Where the U.S. economy is within a given credit cycle.

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

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determined it was appropriate to retain this qualitative adjustment as this adjustment takes into account the additional risk in these portfolios, which is not captured in the quantitative calculation. Even though COVID-19 case numbers have declined since December 31, 2021, these industries are still recovering from the pandemic effects. As of ~~September 30, 2022, additional reserves totaling $1.4 million were added for these portfolios on top of the quantitative reserve already calculated. This was a decrease from $5.2 million as of~~March 31, 2023 and December 31, 2021 and reflected improvement in COVID-19 cases, eased COVID-19 health department precautions and improving affected industry performance. Management believes there is still residual risk in these portfolios related to pandemic effects and uncertainty in future COVID-19 strains and related impacts.

~~A breakout of the 4-rated balances within these portfolios and the additional reserve related to these portfolios is detailed in the following table.~~

September 30, 2022 December 31, 2021
(in thousands) 4-Rated Balance Additional Reserve Pass Rated Balance Additional Reserve
Hotels and accommodations $ 182,806 $ 687 $ 148,018 $ 2,226
Restaurants and food service 49,500 279 40,648 917
Strip shopping centers 168,144 464 184,171 2,033
Total $ 400,450 $ 1,430 $ 372,837 $ 5,176

Other Income

Other income ~~increased~~decreased by ~~$14.3~~$7.3 million to ~~$46.7~~$24.4 million for the quarter ended ~~September 30, 2022,~~March 31, 2023, compared to ~~$32.4 million for the third quarter of 2021 and increased $11.8 million to $109.5~~$31.7 million for the first ~~nine months~~quarter of ~~2022, compared to $97.7 million for the first nine months of 2021.~~2022.

The ~~increase~~decrease for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021~~March 31, 2022 was primarily due to ~~increases in service charges on deposit accounts, gain on sale of OREO, net, income from an OREO valuation markup, and other components of net periodic pension benefit income, partially offset by~~ decreases in income from fiduciary activities, other service income, ~~and gain on equity securities, net.~~

The increase for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily due to increases in service charges on deposit accounts, bank owned life insurance income, gain on sale of OREO, net, income from an OREO valuation markup, and other components of net periodic pension benefit income, miscellaneous income, and a change in (loss) gain on equity securities, net, partially offset by ~~a decrease~~increases in ~~other~~ service ~~income~~charges on deposit accounts and ~~miscellaneous~~debit card fee income.

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


		Three months ended September 30,						Nine months ended September 30,							Three months ended March 31,
(In thousands)	(In thousands)	2022		2021		Change		2022		2021		Change		(In thousands)	2023		2022		Change
Income from fiduciary activities	Income from fiduciary activities	$	8,216	$	8,820	$	(604)	$	25,872	$	25,562	$	310	Income from fiduciary activities	$	8,615	$	8,797	$	(182)
Service charges on deposit accounts	Service charges on deposit accounts	2,859		2,389		470		7,496		6,475		1,021		Service charges on deposit accounts	2,241		2,074		167
Other service income	Other service income	2,956		6,668		(3,712)		12,715		23,444		(10,729)		Other service income	2,697		4,819		(2,122)
Debit card fee income	Debit card fee income	6,514		6,453		61		19,371		19,297		74		Debit card fee income	6,457		6,126		331
Bank owned life insurance income	Bank owned life insurance income	1,185		1,462		(277)		4,734		3,776		958		Bank owned life insurance income	1,185		1,175		10
ATM fees	ATM fees	610		622		(12)		1,725		1,807		(82)		ATM fees	533		532		1
Gain (loss) on sale of OREO, net		5,607		3		5,604		5,611		(26)		5,637
Loss on sale of OREO, net														Loss on sale of OREO, net	(9)		—		(9)
OREO valuation markup	OREO valuation markup	12,009		—		12,009		12,039		13		12,026		OREO valuation markup	15		30		(15)
Gain on equity securities, net		58		609		(551)		3,120		2,886		234
(Loss) gain on equity securities, net														(Loss) gain on equity securities, net	(405)		2,353		(2,758)
Other components of net periodic pension benefit income	Other components of net periodic pension benefit income	3,027		2,038		989		9,081		6,114		2,967		Other components of net periodic pension benefit income	1,893		3,027		(1,134)
Miscellaneous	Miscellaneous	3,653		3,347		306		7,779		8,390		(611)		Miscellaneous	1,165		2,723		(1,558)
Total other income	Total other income	$	46,694	$	32,411	$	14,283	$	109,543	$	97,738	$	11,805	Total other income	$	24,387	$	31,656	$	(7,269)

~~Income from fiduciary activities~~Other service income decreased by ~~$604,000,~~$2.1 million, or ~~6.8%~~44.0%, to ~~$8.2~~$2.7 million for the three months ended ~~September 30, 2022,~~March 31, 2023, compared to ~~$8.8~~$4.8 million for the same period of 2021 and increased $310,000, or 1.2%, to $25.9 million for the nine months ended September 30, 2022 compared to $25.6 million for the same period in 2021. The majority of fiduciary fees are calculated on a lag, based on the market value of the assets under management. The average market value of assets under management for the three months ended September 30, 2022 was $7,062 million compared to $7,557 million for the same period in 2021. The average market value of assets under management for the first nine months of 2022 was $7,216 million compared to $7,358 million for the same period in 2021.

Service charges on deposit accounts increased by $470,000, or 19.7%, to $2.9 million for the three months ended September 30, 2022, compared to $2.4 million for the same period of 2021 and increased $1.0 million, or 15.8%, to $7.5 million for the nine months ended September 30, 2022, compared to $6.5 million for the same period of 2021. The increases for both the three-month and the nine-month periods ended September 30, 2022 compared to September 30, 2021 were primarily due to an increase in NSF income and monthly maintenance fees on business accounts.

~~Other service income decreased by $3.7 million, or 55.7%, to $3.0 million for the three months ended September 30, 2022, compared to $6.7 million for the same period of 2021.~~2022. The primary ~~reason~~reasons for the decrease for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the same period of 2021 was a decrease in fee income related to mortgage loan originations to be sold in the secondary market of $3.4 million and a decrease in mortgage servicing rights income of $526,000, which were partially offset by an increase in investor rate locks and mortgage loans held for sale income of $187,000. Mortgage origination volume decreased by $69.4 million, or 31.0%, to $154.1 million for the three months ended September 30, 2022 ~~from $223.5 million for the three months ended September 30, 2021.~~

Other service income decreased by $10.7 million, or 45.8%, to $12.7 million for the nine months ended September 30, 2022, compared to $23.4 million for the same period of 2021. The primary reasons for the decrease for the nine months ended September 30, 2022 compared to the same period of 2021 were a decrease in fee income related to mortgage loan originations to be sold in the secondary market of ~~$11.1~~$1.6 million and a decrease in mortgage servicing rights income of ~~$1.5 million, which were partially offset by an increase in investor rate locks and mortgage loans held for sale income of $1.3 million and a $247,000 increase in commercial loan fee income.~~$731,000. Mortgage origination volume decreased by ~~$318.0~~$98.9 million, or ~~40.6%~~61.8%, to ~~$466.0~~$61.2 million for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 from ~~$784.0~~$160.1 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.

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~~Bank owned life insurance income decreased~~(Loss) gain on equity securities, net, changed by ~~$277,000, or 18.9%,~~$2.8 million, to ~~$1.2 million~~a net loss of $405,000 for the three months ended September 30, 2022, compared to $1.5 million for the same period of 2021 and increased $958,000, or 25.4%, to $4.7 million for the nine months ended September 30, 2022, compared to $3.8 million for the same period of 2021. The decrease for the three months ended September 30, 2022 compared to the same period in 2021 was due to a decrease in death benefit income of $335,000. The increase for the nine-month period ended September 30, 2022 compared to September 30, 2021 was due to an increase in death benefit income of $850,000.

Gain (loss) on sale of OREO, net increased by $5.6 million to a net gain on sale of OREO of $5.6 million for the three months ended September 30, 2022 compared to a net gain on sale of OREO of $3,000 for the three months ended September 30, 2021 and increased $5.6 million to a net gain on sale of OREO of $5.6 million for the nine months ended September 30, 2022 compared to a net loss on the sale of OREO of $26,000 for the same period in 2021. A $5.6 million gain on the sale of OREO, net, was recognized during the three months and the nine months ended September 30, 2022 related to former Vision Bank relationships. There was no gain on the sale of OREO, net, related to former Vision Bank relationships during the three months and the nine months ended September 30, 2021.

OREO valuation markup income increased by $12.0 million to $12.0 million for both the three months and the nine months ended September 30, 2022 compared to $13,000 for the nine months ended September 30, 2021. There was no OREO valuation market income recognized in the three months ended September 30, 2021. The $12.0 million OREO valuation markup during the three months and the nine months ended September 30, 2022 related to the foreclosure and subsequent sale of a property collateralizing a former Vision Bank relationship. There was no OREO valuation markup related to former Vision Bank relationships during the three months and the nine months ended September 30, 2021.

~~Gain on equity securities, net, decreased $551,000, to a net gain of $58,000 for the three months ended September 30, 2022,~~March 31, 2023, compared to a net gain of ~~$609,000 for the same period in 2021 and increased $234,000 to a net gain of $3.1 million for the nine months ended September 30, 2022 compared to a net gain of $2.9~~$2.4 million for the same period in ~~2021.~~2022. The ~~$551,000 decrease~~$2.8 million change for the three months ended ~~September 30,~~March 31, 2023 compared to the three months ended March 31, 2022 was related to a $136,000 decrease in gain (loss) on other equity securities which went from a $97,000 gain for the three months ended September 30, 2021 to a $39,000 loss for the three months ended September 30, 2022 and a $415,000 decrease$2.8 million change in the gain on equity securities held at NAV, declining from a $512,000 gain for the three months ended September 30, 2021 to a $97,000 gain for the three months ended September 30, 2022. The $234,000 increase for the nine months ended September 30, 2022 was related to a $4,000 decrease in gain (loss) on other equity securities which went from a $492,000 gain for the nine months ended September 30, 2021 to a $488,000 gain for the nine months ended September 30, 2022, and a $238,000 increase in the gain on equity securities held at NAV which went from a net gain of $2.4 million ~~gain~~ for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 to a ~~$2.6 million gain~~net loss of $377,000 for the ~~nine~~the three months ended ~~September 30, 2022.~~March 31, 2023.

Other components of net periodic pension benefit income ~~increased $1.0~~decreased $1.1 million to ~~$3.0~~$1.9 million for the three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$2.0~~$3.0 million for the same period in ~~2021, and increased $3.0 million, to $9.1 million for the nine months ended September 30, 2022 compared to $6.1 million for the nine months ended September 30, 2021.~~2022. The ~~increases for both the three-month and the nine-month periods were~~decrease was largely due to ~~an increase~~a decrease in the expected return on plan assets ~~as a result of the increased value of plan assets as well as a decrease~~and an increase in ~~the amortization of unrecognized net actuarial losses.~~interest cost.

Miscellaneous income ~~increased $306,000,~~decreased $1.6 million, or ~~9.1%~~57.2%, to ~~$3.7~~$1.2 million for the three months ended ~~September 30, 2022,~~March 31, 2023 compared to ~~$3.3~~$2.7 million for the same period of ~~2021 and decreased $611,000, or 7.3%, to $7.8 million for the nine months ended September 30, 2022 compared to $8.4 million for the same period of 2021.~~2022. The ~~increase~~decrease for the three-month period ended ~~September 30, 2022~~March 31, 2023 compared to the same period of ~~2021~~2022 was primarily a result of an increase in annual Visa incentive earned, an increase in fees earned on off-balance sheet deposit accounts, and a gain on sale of loans, partially offset by decreases in brokerage income, printed check sales income, operating lease rent and wire transfer fees. The decrease for the nine months ended September 30, 2022 compared to the same period of 2021 was primarily the result of decreases in brokerage income ~~printed check sales income,~~of $212,000 and operating lease ~~rent,~~income of $191,000, as well as a decrease of $434,000 in wire transfer and ACH fees ~~and an increase~~as a result of the reclassification of these fees to service charges on deposit accounts. Also contributing to the decline in ~~OREO devaluations, partially offset by~~miscellaneous income was a decrease in gains on ~~sale~~sales of ~~loans and assets, an increase~~assets. During the first quarter of 2022, a branch location was sold, resulting in ~~annual Visa incentive earned, and an increase in fees earned on off-balance sheet deposit accounts.~~a gain of $731,000. There were no comparable sales during the first quarter of 2023.

Other Expense

Other expense increased by ~~$14.4~~$9.1 million to ~~$82.9~~$76.5 million for the three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$68.5~~$67.3 million for the same period of ~~2021 and increased $12.5 million to $220.3 million for the nine months ended September 30, 2022, compared to $207.8 million for the nine months ended September 30, 2021.~~2022.

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


		Three months ended September 30,						Nine months ended September 30,							Three months ended March 31,
(In thousands)	(In thousands)	2022		2021		Change		2022		2021		Change		(In thousands)	2023		2022		Change
Salaries	Salaries	$	37,889	$	29,433	$	8,456	$	99,462	$	89,632	$	9,830	Salaries	$	34,871	$	30,521	$	4,350
Employee benefits	Employee benefits	9,897		10,640		(743)		30,595		30,897		(302)		Employee benefits	10,816		10,499		317
Occupancy expense	Occupancy expense	3,455		3,211		244		9,709		9,878		(169)		Occupancy expense	3,353		3,214		139
Furniture and equipment expense	Furniture and equipment expense	2,912		2,797		115		8,783		8,163		620		Furniture and equipment expense	3,246		2,937		309
Data processing fees	Data processing fees	8,170		7,817		353		24,090		22,679		1,411		Data processing fees	8,750		7,504		1,246
Professional fees and services	Professional fees and services	8,359		6,973		1,386		20,992		19,610		1,382		Professional fees and services	7,221		5,858		1,363
Marketing	Marketing	1,595		1,574		21		3,931		4,355		(424)		Marketing	1,319		1,317		2
Insurance	Insurance	1,237		1,403		(166)		3,887		4,370		(483)		Insurance	1,814		1,405		409
Communication	Communication	1,098		796		302		2,923		2,688		235		Communication	1,037		890		147
State tax expense	State tax expense	1,186		1,113		73		3,545		3,324		221		State tax expense	1,278		1,192		86
Amortization of intangible assets	Amortization of intangible assets	341		420		(79)		1,146		1,378		(232)		Amortization of intangible assets	327		402		(75)
Foundation contribution		4,000		—		4,000		4,000		4,000		—
Miscellaneous	Miscellaneous	2,764		2,312		452		7,261		6,780		481		Miscellaneous	2,471		1,634		837
Total other expense	Total other expense	$	82,903	$	68,489	$	14,414	$	220,324	$	207,754	$	12,570	Total other expense	$	76,503	$	67,373	$	9,130

Salaries increased by ~~$8.5~~$4.4 million, or ~~28.7%~~14.3%, to ~~$37.9~~$34.9 million for the three months ended ~~September 30, 2022,~~March 31, 2023, compared to ~~$29.4~~$30.5 million for the same period in ~~2021.~~2022. The increase for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the same period of ~~2021~~2022 was due to an increase of ~~$2.2~~$3.5 million in base salary expense as full-time equivalent employees increased from 1,679 as of March 31, 2022 to 1,766 as of March 31, 2023. Also contributing to the increase in the first quarter of 2023 compared to the same period in 2022 was an increase in ~~additional compensation~~long term incentive expense of ~~$3.6 million, which primarily related to payment of $1.8 million in one-time bonuses and an accrual of $1.5 million for future one-time bonuses for additional associates,~~$356,000, and an increase in officer incentive compensation of ~~$2.5~~$875,000, partially offset by a decrease in additional compensation expense of $449,000.

Employee benefits increased $317,000, or 3.0%, to $10.8 million ~~compared to~~for the three months ended ~~September 30, 2021.~~

~~Salaries increased by $9.9 million, or 11.0%, to $99.5 million for the nine months ended September 30, 2022,~~March 31, 2023, compared to ~~$89.6~~$10.5 million for the same period in ~~2021.~~2022. The $317,000 increase for the nine months ended September 30, 2022, was due to an increase of $4.9 million in base salary expense, an increase in additional compensation expense of $2.6 million, which primarily related to payment of $1.8 million in one-time bonuses and an accrual of $1.5 million for future one-time bonuses for additional associates, and an increase in officer incentive compensation of $1.5 million, compared to the nine months ended September 30, 2021.

~~Employee benefits decreased $743,000, or 7.0%, to $9.9 million~~ for the three months ended September 30, 2022, compared to $10.6 million for the same period in 2021, and decreased $302,000, or 1.0%, to $30.6 million for the nine months ended September 30, 2022 compared to $30.9 million for nine months ended September 30, 2021. The $743,000 decrease for the three months ended September 30, 2022March 31, 2023 compared to the same period in ~~2021~~2022 was primarily due to ~~a reduction~~an increase in group insurance costs of ~~$1.6 million partially offset by~~$337,000 and increased payroll tax expense of $529,000 and a $257,000 increase in Park's KSOP match. The $302,000 decrease for the nine months ended September 30, 2022 compared to the same period in 2021 was primarily due to a reduction in group insurance costs of $1.7 million,$646,000, partially offset by ~~increased payroll tax~~decreased pension plan expense of ~~$808,000 and a $414,000 increase in Park's KSOP match.~~$878,000.

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~~Furniture and equipment~~Data processing expense increased ~~$115,000,~~$1.2 million, or ~~4.1%~~16.6%, to ~~$2.9~~$8.8 million for the three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$2.8~~$7.5 million for the same period in 2021, and increased $620,000, or 7.6%, to $8.8 million for the nine months ended September 30, 2022 compared to $8.2 million for the nine months ended September 30, 2021. The increase for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was primarily related to an increase in maintenance expense and equipment purchases. The increase for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily related to an increase in depreciation expense, maintenance expense and equipment purchases.

Data processing expense increased $353,000, or 4.5%, to $8.2 million for the three months ended September 30, 2022 compared to $7.8 million for the same period in 2021, and increased $1.4 million, or 6.2%, to $24.1 million for the nine months ended September 30, 2022 compared to $22.7 million for the nine months ended September 30, 2021.2022. The increase for the three-month period ended ~~September 30, 2022~~March 31, 2023 compared to the same period in ~~2021~~2022 related to ana $938,000 increase in software expenses and ana $262,000 increase in debit card processing costs. The increase for the nine-month period ended September 30, 2022 compared to the same period in 2021 related to an increase in software expenses, partially offset by reduced debit card processing costs.

Professional fees and services expense increased $1.4 million, or ~~19.9%~~23.3%, to ~~$8.4~~$7.2 million for the three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$7.0~~$5.8 million for the same period in ~~2021, and increased $1.4 million, or 7.0%, to $21.0 million~~2022. The increase for the ~~nine months~~three-month period ended ~~September 30, 2022 compared to $19.6 million for the nine months ended September 30, 2021. The increases for both the three-month and nine-months periods ended September 30, 2022~~March 31, 2023 compared to the ~~periods ended September 30, 2021~~same period in 2022 related to ana $314,000 increase in director fees, a $347,000 increase in management consulting fees, ~~mostly related to direct~~and a $198,000 increase in legal expenses, ~~related to the collection of payments on former Vision Bank loan relationships,~~ as well as smaller increases in ~~director~~credit services expense, temporary wages, and other fees, partially offset by decreases in filing fees, appraisal costs, recruiting expenses, and ~~recruiting fees.~~supervisory examination costs.

Insurance expense ~~decreased $166,000,~~increased $409,000, or ~~11.8%~~29.1%, to ~~$1.2~~$1.8 million for the three months ended ~~September 30, 2022~~March 31, 2023 compared to $1.4 million for the same period in ~~2021, and decreased $483,000, or 11.1%, to $3.9 million~~2022. The increase for the ~~nine months~~three-month period ended ~~September 30, 2022 compared to $4.4 million for the nine months ended September 30, 2021. The decreases for both the three-month and the nine-month periods ended September 30, 2022~~March 31, 2023 compared to the ~~periods~~period ended ~~September 30, 2021~~March 31, 2022 related to ~~a decrease~~an increase in FDIC assessments.

The Foundation contribution increase for the three months ended September 30, 2022, compared to the same period of 2021, was due to a $4.0 million contribution being made to Park's charitable foundation during the three months ended September 30, 2022. The Foundation contribution for the nine months ended September 30, 2021 was made in second quarter of 2021.

The subcategory "miscellaneous" other expense includes expenses for supplies, travel and other miscellaneous expense. The subcategory miscellaneous other expense increased ~~$452,000,~~$837,000, or ~~19.6%~~51.2%, to ~~$2.8~~$2.5 million for the three-month period ended ~~September 30, 2022,~~March 31, 2023, compared to the same period in ~~2021, and increased $481,000, or 7.1%, to $7.3 million for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021.~~2022. The ~~$452,000~~$837,000 increase in expense for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the ~~same period~~three months ended ~~September 30, 2021~~March 31, 2022 was primarily related to an increase in travel expense of ~~$249,000, an increase of $245,000 in non-loan related losses, $126,000 in expenses related to the commercial loan sale,~~$328,000, and an increase of ~~$80,000~~$626,000 in the provision for the allowance for unfunded credit losses, partially offset by a $186,000 decrease of $105,000 in supplies expense and a $147,000 decrease in operating lease depreciation. The $481,000 increase in expense for the nine months ended September 30, 2022 compared to the same period ended September 30, 2021 was primarily related to a $222,000 expense related to a derivative liability, $126,000 in expenses related to the commercial loan sale, increased travel expense of $545,000, an increase of $166,000 in supplies expense, and an increase of $142,000 in non-loan related losses, partially offset by a decrease of $491,000 in the provision for the allowance for unfunded credit losses and a decrease of $285,000 in operating lease depreciation.

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Items Impacting Comparability

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				NINE MONTHS ENDED						THREE MONTHS ENDED
(in thousands)	(in thousands)	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021		Affected Line Item	(in thousands)	March 31, 2023			March 31, 2022			Affected Line Item
Net interest income	Net interest income	$	90,828	$	81,602	$	252,453	$	246,187		Net interest income	$	92,198		$	77,686
less purchase accounting accretion related to NewDominion and Carolina Alliance acquisitions	less purchase accounting accretion related to NewDominion and Carolina Alliance acquisitions	494		799		1,516		2,704		Interest and fees on loans	less purchase accounting accretion related to NewDominion and Carolina Alliance acquisitions	200			477			Interest and fees on loans
less purchase accounting accretion related to NewDominion and Carolina Alliance acquisitions	less purchase accounting accretion related to NewDominion and Carolina Alliance acquisitions	1		8		6		40		Interest on deposits	less purchase accounting accretion related to NewDominion and Carolina Alliance acquisitions	—			3			Interest on deposits
less interest income on former Vision Bank relationships	less interest income on former Vision Bank relationships	649		414		2,996		3,357		Interest and fees on loans	less interest income on former Vision Bank relationships	574			42			Interest and fees on loans
Net interest income - adjusted	Net interest income - adjusted	$	89,684	$	80,381	$	247,935	$	240,086		Net interest income - adjusted	$	91,424		$	77,164

Provision for (recovery of) credit losses	Provision for (recovery of) credit losses	$	3,190	$	1,972	$	1,576	$	(6,923)		Provision for (recovery of) credit losses	$	183		$	(4,605)
less recoveries on former Vision Bank relationships	less recoveries on former Vision Bank relationships	(20)		(2,231)		(527)		(2,640)		Provision for (recovery of) credit losses	less recoveries on former Vision Bank relationships	(723)			(1)			Provision for (recovery of) credit losses
Provision for (recovery of) credit losses - adjusted	Provision for (recovery of) credit losses - adjusted	$	3,210	$	4,203	$	2,103	$	(4,283)		Provision for (recovery of) credit losses - adjusted	$	906		$	(4,604)

Total other income	Total other income	$	46,694	$	32,411	$	109,543	$	97,738		Total other income	$	24,387		$	31,656
less other service income related to former Vision Bank relationships	less other service income related to former Vision Bank relationships	3		143		503		204		Other service income	less other service income related to former Vision Bank relationships	135			—			Other service income
less gain on the sale of OREO, net		5,607		—		5,607		—		Gain (loss) on sale of OREO, net
less Vision related OREO valuation markup		12,009		—		12,009		—		OREO valuation markup
Total other income - adjusted	Total other income - adjusted	$	29,075	$	32,268	$	91,424	$	97,534		Total other income - adjusted	$	24,252		$	31,656

Total other expense	Total other expense	$	82,903	$	68,489	$	220,324	$	207,754		Total other expense	$	76,503		$	67,373
less direct expenses related to collection of payments on former Vision Bank loan relationships	less direct expenses related to collection of payments on former Vision Bank loan relationships	1,295		254		1,661		661		Professional fees and services	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	less core deposit intangible amortization related to NewDominion and Carolina Alliance acquisitions	341		420		1,146		1,378		Amortization of intangible assets	less core deposit intangible amortization related to NewDominion and Carolina Alliance acquisitions	327			402			Amortization of intangible assets
less Foundation contribution		4,000		—		4,000		4,000		Foundation contribution
Total other expense - adjusted	Total other expense - adjusted	$	77,267	$	67,815	$	213,517	$	201,715		Total other expense - adjusted	$	76,076		$	66,971

Tax effect of adjustments to net income identified above (7)	Tax effect of adjustments to net income identified above (7)	$	(2,761)	$	(613)	$	(3,435)	$	(610)		Tax effect of adjustments to net income identified above (7)	$	(253)		$	(25)

Net income - reported	Net income - reported	$	42,068	$	35,434	$	115,267	$	117,397		Net income - reported	$	33,733		$	38,875
Net income - adjusted (6)	Net income - adjusted (6)	$	31,682	$	33,126	$	102,345	$	115,101		Net income - adjusted (6)	$	32,781		$	38,779

Diluted EPS											Diluted EPS	$	2.07		$	2.38
Diluted EPS, adjusted (6)											Diluted EPS, adjusted (6)	$	2.01		$	2.37

Annualized return on average assets (1)(2)											Annualized return on average assets (1)(2)	1.36		%	1.60		%
Annualized return on average assets, adjusted (1)(2)(6)											Annualized return on average assets, adjusted (1)(2)(6)	1.32		%	1.60		%

Annualized return on average tangible assets (1)(2)(4)											Annualized return on average tangible assets (1)(2)(4)	1.38		%	1.63		%
Annualized return on average tangible assets, adjusted (1)(2)(4)(6)											Annualized return on average tangible assets, adjusted (1)(2)(4)(6)	1.34		%	1.63		%

Annualized return on average shareholders' equity (1)(2)											Annualized return on average shareholders' equity (1)(2)	12.54		%	14.26		%
Annualized return on average shareholders' equity, adjusted (1)(2)(6)											Annualized return on average shareholders' equity, adjusted (1)(2)(6)	12.19		%	14.23		%

Annualized return on average tangible equity (1)(2)(3)											Annualized return on average tangible equity (1)(2)(3)	14.78		%	16.80		%
Annualized return on average tangible equity, adjusted (1)(2)(3)(6)											Annualized return on average tangible equity, adjusted (1)(2)(3)(6)	14.36		%	16.76		%

Efficiency ratio (5)											Efficiency ratio (5)	65.10		%	61.16		%
Efficiency ratio, adjusted (5)(6)											Efficiency ratio, adjusted (5)(6)	65.24		%	61.08		%

Annualized net interest margin (5)											Annualized net interest margin (5)	4.08		%	3.55		%
Annualized net interest margin, adjusted (5)(6)											Annualized net interest margin, adjusted (5)(6)	4.04		%	3.53		%

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THREE MONTHS ENDED NINE MONTHS ENDED
(in thousands, except share and per share data) September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021
Diluted EPS $ 2.57 $ 2.16 $ 7.05 $ 7.14
Diluted EPS, adjusted (6)
$ 1.93 $ 2.02 $ 6.26 $ 7.00
Annualized return on average assets (1)(2)
1.61 % 1.40 % 1.55 % 1.59 %
Annualized return on average assets, adjusted (1)(2)(6)
1.21 % 1.31 % 1.37 % 1.60 %
Annualized return on average tangible assets (1)(2)(4)
1.63 % 1.42 % 1.57 % 1.62 %
Annualized return on average tangible assets, adjusted (1)(2)(4)(6)
1.23 % 1.33 % 1.40 % 1.59 %
Annualized return on average shareholders' equity (1)(2)
15.50 % 13.04 % 14.22 % 14.79 %
Annualized return on average shareholders' equity, adjusted (1)(2)(6)
11.68 % 12.19 % 12.62 % 14.50 %
Annualized return on average tangible equity (1)(2)(3)
18.33 % 15.44 % 16.80 % 17.58 %
Annualized return on average tangible equity, adjusted (1)(2)(3)(6)
13.81 % 14.43 % 14.91 % 17.24 %
Efficiency ratio (5)
59.88 % 59.70 % 60.43 % 60.03 %
Efficiency ratio, adjusted (5)(6)
64.56 % 59.82 % 62.44 % 59.37 %
Annualized net interest margin (5)
3.81 % 3.53 % 3.74 % 3.67 %
Annualized net interest margin, adjusted (5)(6)
3.76 % 3.48 % 3.67 % 3.58 %


Financial Reconciliations

(1) Reported measure uses net income.

(2) Averages are for the three months ended March 31, 2023 and March 31, 2022, as appropriate.

(3) Net income for each period divided by average tangible equity during the period. Average tangible equity equals average shareholders' equity during the applicable period less average goodwill and other intangible assets during the applicable period.

RECONCILIATION OF AVERAGE SHAREHOLDERS' EQUITY TO AVERAGE TANGIBLE EQUITY:
	THREE MONTHS ENDED
	March 31, 2023		March 31, 2022
AVERAGE SHAREHOLDERS' EQUITY	$	1,090,952	$	1,105,540
Less: Average goodwill and other intangible assets	165,457		166,918
AVERAGE TANGIBLE EQUITY	$	925,495	$	938,622

(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 OF AVERAGE ASSETS TO AVERAGE TANGIBLE ASSETS
	THREE MONTHS ENDED
	March 31, 2023		March 31, 2022
AVERAGE ASSETS	$	10,058,880	$	9,825,382
Less: Average goodwill and other intangible assets	165,457		166,918
AVERAGE TANGIBLE ASSETS	$	9,893,423	$	9,658,464

(5) 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 reconciliation 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 fully taxable equivalent net interest income by average interest earning assets, in each case during the applicable period.

RECONCILIATION OF FULLY TAXABLE EQUIVALENT NET INTEREST INCOME TO NET INTEREST INCOME
	THREE MONTHS ENDED
	March 31, 2023		March 31, 2022
Interest income	$	110,901	$	81,146
FTE adjustment	926		819
FTE interest income	$	111,827	$	81,965
Interest expense	18,703		3,460
FTE net interest income	$	93,124	$	78,505

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

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

(8) Pre-tax, pre-provision ("PTPP") net income is calculated as net income, plus income taxes, plus the provision for (recovery of) credit losses, in each case during the applicable period. PTPP net income is a common industry metric utilized in capital analysis and review. PTPP is used to assess the operating performance of Park while excluding the impact of the provision for (recovery of) credit losses.

RECONCILIATION OF PRE-TAX, PRE-PROVISION NET INCOME
	THREE MONTHS ENDED
	March 31, 2023		March 31, 2022
Net income	$	33,733	$	38,875
Plus: Income taxes	6,166		7,699
Plus: Provision for (recovery of) credit losses	183		(4,605)
Pre-tax, pre-provision net income	$	40,082	$	41,969

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Financial Reconciliations
(1) Reported measure uses net income
(2) Averages are for the three months and nine months ended September 30, 2022 and September 30, 2021.
(3) Net income for each period divided by average tangible equity during the period. Average tangible equity equals average shareholders' equity during the applicable period less average goodwill and other intangible assets during the applicable period.
RECONCILIATION OF AVERAGE SHAREHOLDERS' EQUITY TO AVERAGE TANGIBLE EQUITY:
THREE MONTHS ENDED NINE MONTHS ENDED
September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021
AVERAGE SHAREHOLDERS' EQUITY $ 1,076,526 $ 1,078,465 $ 1,084,080 $ 1,061,066
Less: Average goodwill and other intangible assets 166,136 167,754 166,521 168,215
AVERAGE TANGIBLE EQUITY $ 910,390 $ 910,711 $ 917,559 $ 892,851
(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 OF AVERAGE ASSETS TO AVERAGE TANGIBLE ASSETS
THREE MONTHS ENDED NINE MONTHS ENDED
September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021
AVERAGE ASSETS $ 10,384,049 $ 10,070,716 $ 9,964,863 $ 9,583,457
Less: Average goodwill and other intangible assets 166,136 167,754 166,521 168,215
AVERAGE TANGIBLE ASSETS $ 10,217,913 $ 9,902,962 $ 9,798,342 $ 9,415,242
(5) 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 reconciliation is shown assuming a 21% federal corporate income tax rate. Additionally, net interest margin is calculated on a fully taxable equivalent basis by dividing fully taxable equivalent net interest income by average interest earning assets, in each case during the applicable period.
RECONCILIATION OF FULLY TAXABLE EQUIVALENT NET INTEREST INCOME TO NET INTEREST INCOME
THREE MONTHS ENDED NINE MONTHS ENDED
September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021
Interest income $ 99,944 $ 85,420 $ 269,437 $ 258,587
FTE adjustment 932 717 2,623 2,149
FTE interest income $ 100,876 $ 86,137 $ 272,060 $ 260,736
Interest expense 9,116 3,818 16,984 12,400
FTE net interest income $ 91,760 $ 82,319 $ 255,076 $ 248,336
(6) Adjustments to net income for each period presented are detailed in the non-GAAP reconciliations of net interest income, provision for (recovery of) credit losses, total other income and total other expense.
(7) The tax effect of adjustments to net income was calculated assuming a 21% federal corporate income tax rate.
(8) Pre-tax, pre-provision ("PTPP") net income is calculated as net income, plus income taxes, plus the provision for (recovery of) credit losses, in each case during the applicable period. PTPP net income is a common industry metric utilized in capital analysis and review. PTPP is used to assess the operating performance of Park while excluding the impact of the provision for (recovery of) credit losses.
RECONCILIATION OF PRE-TAX, PRE-PROVISION NET INCOME
THREE MONTHS ENDED NINE MONTHS ENDED
September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021
Net income $ 42,068 $ 35,434 $ 115,267 $ 117,397
Plus: Income Taxes 9,361 8,118 24,829 25,697
Plus: Provision for (recovery of) credit losses 3,190 1,972 1,576 (6,923)
Pre-tax, pre-provision net income $ 54,619 $ 45,524 $ 141,672 $ 136,171

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Income Tax

Income tax expense was ~~$9.4~~$6.2 million for the ~~third~~first quarter of ~~2022~~2023 and consisted of federal income tax expense of ~~$9.0~~$6.4 million and state income tax ~~expense~~benefits of ~~$341,000.~~$234,000, as the result of a refund. This compares to income tax expense of ~~$8.1~~$7.7 million for the ~~third~~first quarter of ~~2021~~2022 which consisted of federal income tax expense of ~~$7.9~~$7.4 million and state income tax expense of ~~$264,000.~~$305,000. The effective income tax rate for the ~~third~~first quarter of ~~2022~~2023 was ~~18.2%~~15.5%, compared to ~~18.6%~~16.5% for the same period in 2021. Income tax expense was $24.8 million for the nine months ended September 30, 2022 and consisted of federal income tax expense of $23.8 million and state income tax expense of $987,000. This compares to income tax expense of $25.7 million for the nine months ended September 30, 2021 which consisted of federal income tax expense of $24.9 million and state income tax expense of $793,000. The effective income tax rate for the nine months ended September 30, 2022 was 17.7%, compared to 18.0% for the same period in 2021.2022.

The difference between the statutory federal corporate income tax rate of 21% and Park's effective income tax rate reflects permanent tax differences, primarily consisting of tax-exempt interest income from municipal investments and loans, qualified affordable housing and historical tax credits, bank owned life insurance income, and dividends paid on the common shares held within Park's ~~salary deferral plan~~KSOP, offset by the impact of state income taxes. Park expects permanent federal income tax differences for the ~~2022~~2023 year will be approximately ~~$7.0~~$6.7 million.

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Comparison of Financial Condition

At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022

Changes in Financial Condition

Total assets increased by ~~$294.8~~$2.0 million ~~or 3.1%,~~ during the first ~~nine~~three months of ~~2022~~2023 to $9,857 million at March 31, 2023, compared to $9,855 million at ~~September 30, 2022, compared to $9,560 million at~~ December 31, ~~2021.~~2022. This increase was primarily due to the following:

•Cash and cash equivalents increased by $72.2 million, or 38.0%, to $261.9 million at March 31, 2023, compared to $189.7 million at December 31, 2022. Money market instruments increased by $82.8 million and cash and due from banks decreased by $10.6 million.

•Total investment securities ~~increased $12.7~~decreased by $20.4 million, or 1.1%, to $1,800 million at March 31, 2023, compared to $1,821 million at December 31, 2022.

•Loans decreased by $48.0 million, or 0.7%, to ~~$1,828~~$7,094 million at ~~September 30, 2022,~~March 31, 2023, compared to ~~$1,815~~$7,142 million at December 31, ~~2021.~~

•Loans increased by $232.1 million, or 3.4%, to $7,103 million at September 30, 2022, compared to $6,871 million at December 31, 2021. PPP loans were $5.7 million at September 30, 2022, compared to $74.4 million at December 31, 2021.

•~~Prepaid assets increased by $14.2 million, or 9.8%, to $158.3 million at September 30, 2022, compared to $144.1 million at December 31, 2021.~~

•Other assets increased by $36.3 million, or 357.8%, to $46.5 million at September 30, 2022, compared to $10.2 million at December 31, 2021. This was primarily related to an increase in deferred tax assets.2022.

Total liabilities ~~increased~~decreased by ~~$369.4~~$10.9 million, or ~~4.4%~~0.1%, during the first ~~nine~~three months of ~~2022~~2023 to ~~$8,819~~$8,775 million at ~~September 30, 2022,~~March 31, 2023, compared to ~~$8,449~~$8,786 million at December 31, ~~2021.~~2022. This ~~increase~~decrease was primarily due to the following:

•Short-term borrowings decreased by $55.3 million, or 24.3%, to $172.1 million at March 31, 2023, compared to $227.3 million at December 31, 2022 due to a decrease in securities sold under agreements to repurchase.

•Other liabilities decreased by $11.7 million, or 14.9%, to $67.2 million at March 31, 2023, compared to $78.9 million at December 31, 2022. This was primarily related to a decrease in accrued expenses payable.

•Total deposits increased by ~~$405.4~~$59.7 million, or ~~5.1%~~0.7%, to ~~$8,310~~$8,294 million at ~~September 30, 2022,~~March 31, 2023, compared to ~~$7,905~~$8,235 million at December 31, ~~2021.~~2022. During 2020, Park made the decision to participate in an OWS program in order to manage the balance sheet. At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, Park had ~~$766.2~~$164.6 million and ~~$983.1~~$195.9 million, respectively, in off-balance sheet deposits.

•~~Short-term borrowings decreased by $49.3 million, or 20.6%, to $189.5 million at September 30, 2022, compared to $238.8 million at December 31, 2021.~~

•Other liabilities increased by $12.5 million, or 18.5%, to $80.3 million at September 30, 2022, compared to $67.8 million at December 31, 2021. This was primarily related to an increase in liabilities related to Partnership Investments.

Total shareholders’ equity ~~decreased~~increased by ~~$74.6~~$12.9 million, or ~~6.7%~~1.2%, to ~~$1,036~~$1,082 million at ~~September 30, 2022,~~March 31, 2023, from ~~$1,111~~$1,069 million at December 31, ~~2021.~~2022. This ~~decrease~~increase was primarily due to the following:

•Accumulated other comprehensive ~~(loss) income,~~loss, net of taxes changed by ~~$140.5~~$12.4 million, from a ~~positive $15.2~~negative $102.4 million at December 31, ~~2021,~~2022, to a negative ~~$125.3~~$90.0 million at ~~September 30, 2022,~~March 31, 2023, and is largely ~~as a result~~comprised of unrealized net holding losses on debt securities AFS, net of taxes, of ~~$140.7 million.~~$83.4 million at March 31, 2023 compared to unrealized net holding losses on debt securities AFS, net of of taxes of $95.7 million at December 31, 2022.

•Retained earnings increased by ~~$62.9~~$15.3 million during the period primarily as a result of net income of ~~$115.3~~$33.7 million, partially offset by cash dividends on common shares of ~~$51.4~~$17.3 million.

•Treasury shares ~~decreased~~increased by ~~$3.5~~$11.7 million during the period as a result of the repurchase of 124,000 treasury shares, partially offset by the issuance of treasury shares under share-based compensation awards (net of common shares withheld to pay employee income taxes).

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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.

Liquidity

Cash provided by operating activities was ~~$89.6~~$24.4 million and ~~$112.6~~$28.3 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. Net income was the primary source of cash from operating activities for each of the ~~nine-month~~three-month periods ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

Cash provided by investing activities was $78.7 million and cash used in investing activities was ~~$403.2 million and $186.2~~$40.0 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. Proceeds from the sale, repayment, or maturity of investment securities provide cash and purchases of investment securities use cash. Net investment securities transactions ~~used~~provided cash of ~~$175.2~~$34.8 million for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and used cash of ~~$447.9~~$76.0 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. Another major use or source of cash in investing activities is the net increase or decrease in the loan portfolio. Cash ~~used by the net increase in the loan portfolio was $234.2 million for the nine months ended September 30, 2022 and cash~~ provided by

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the net decrease in the loan portfolio was ~~$269.4~~$50.2 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2023 and $52.5 million for the three months ended March 31, 2022.

Cash used in financing activities was $30.9 million and cash provided by financing activities was ~~$301.8 million and $580.5~~$39.4 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ 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 ~~$405.4~~$59.7 million and ~~$792.1~~$91.8 million of cash for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. Another major source/use of cash from financing activities is borrowings in the form of short-term borrowings, long-term debt and subordinated notes. For the ~~nine~~three months ended ~~September 30,~~March 31, 2023, net short-term borrowings decreased and used $55.3 million in cash. For the three months ended March 31, 2022, net short-term borrowings decreased and used ~~$49.3~~$32.9 million in cash. For the ~~nine~~three months ended ~~September 30, 2021, net short-term borrowings decreased and used $106.3~~March 31, 2023, cash declined by $15.3 million ~~in cash and net long-term borrowings decreased and used $32.5 million in cash.~~due to the repurchase of common shares to be held as treasury shares; while there were no repurchases of common shares during the three months ended March 31, 2022. Finally, cash declined by ~~$51.6~~$17.4 million and ~~$54.4~~$17.1 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ 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, off balance sheet deposits, unpledged investment securities and available FHLB borrowing capacity, totaled $2.74 billion at March 31, 2023. The Corporation’s loan to asset ratio was ~~71.23%~~71.97% at ~~September 30, 2022,~~March 31, 2023, compared to ~~71.87%~~72.47% at December 31, ~~2021~~2022 and ~~68.85%~~71.23% at ~~September 30, 2021.~~March 31, 2022. Cash and cash equivalents were ~~$207.4~~$261.9 million at ~~September 30, 2022,~~March 31, 2023, compared to ~~$219.2~~$189.7 million at December 31, ~~2021~~2022 and ~~$877.4~~$246.9 million at ~~September 30, 2021.~~March 31, 2022. Management believes that the present funding sources provide more than adequate liquidity for the Corporation to meet its cash flow needs.

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Capital Resources

~~Shareholders’~~Total shareholders’ equity at ~~September 30, 2022~~March 31, 2023 was ~~$1,036.2~~$1,082.2 million, or ~~10.5%~~11.0% of total assets, compared to ~~$1,110.8~~$1,069.2 million, or ~~11.6%~~10.9% of total assets, at December 31, ~~2021~~2022 and ~~$1,067.9~~$1,076.4 million, or ~~10.6%~~11.2% of total assets, at ~~September 30, 2021.~~March 31, 2022.

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.

Park and PNB met each of the well capitalized ratio guidelines applicable to them at ~~September 30, 2022.~~March 31, 2023. The following table indicates the capital ratios for PNB and Park at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.


		At September 30, 2022									At March 31, 2023
		Leverage		Tier 1 Risk-Based		Common Equity Tier 1		Total Risk-Based			Leverage		Tier 1 Risk-Based		Common Equity Tier 1		Total Risk-Based
The Park National Bank	The Park National Bank	8.23	%	10.68	%	10.68	%	12.12	%	The Park National Bank	8.61	%	10.89	%	10.89	%	12.31	%
Park National Corporation	Park National Corporation	9.76	%	12.70	%	12.51	%	16.00	%	Park National Corporation	10.17	%	12.91	%	12.72	%	16.26	%
Adequately capitalized ratio	Adequately capitalized ratio	4.00	%	6.00	%	4.50	%	8.00	%	Adequately capitalized ratio	4.00	%	6.00	%	4.50	%	8.00	%
Adequately capitalized ratio plus capital conservation buffer	Adequately capitalized ratio plus capital conservation buffer	4.00	%	8.50	%	7.00	%	10.50	%	Adequately capitalized ratio plus capital conservation buffer	4.00	%	8.50	%	7.00	%	10.50	%
Well capitalized ratio (PNB)	Well capitalized ratio (PNB)	5.00	%	8.00	%	6.50	%	10.00	%	Well capitalized ratio (PNB)	5.00	%	8.00	%	6.50	%	10.00	%
Well capitalized ratio (Park)	Well capitalized ratio (Park)	N/A		6.00	%	N/A		10.00	%	Well capitalized ratio (Park)	N/A		6.00	%	N/A		10.00	%

At December 31, 2021
Leverage Tier 1
Risk-Based Common Equity Tier 1 Total
Risk-Based
The Park National Bank 8.58 % 11.05 % 11.05 % 12.56 %
Park National Corporation 9.77 % 12.57 % 12.37 % 16.05 %
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 %

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	At December 31, 2022
	Leverage		Tier 1 Risk-Based		Common Equity Tier 1		Total Risk-Based
The Park National Bank	8.34	%	10.69	%	10.69	%	12.15	%
Park National Corporation	9.90	%	12.76	%	12.57	%	16.07	%
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 79 of Park’s ~~2021~~2022 Form 10-K (Table 39) for disclosure concerning contractual obligations and commitments at December 31, ~~2021.~~2022. There were no ~~other~~ significant changes in contractual obligations and commitments during the first ~~nine~~three months of ~~2022.~~2023.

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

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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)	(In thousands)	September 30, 2022		December 31, 2021		(In thousands)	March 31, 2023		December 31, 2022
Loan commitments	Loan commitments	$	1,444,741	$	1,364,224	Loan commitments	$	1,450,247	$	1,416,699
Standby letters of credit	Standby letters of credit	$	26,518	$	18,216	Standby letters of credit	$	32,292	$	30,468

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Management reviews interest rate sensitivity on a quarterly basis by modeling the consolidated financial statements under various interest rate scenarios. The primary reason for these efforts is to guard Park from adverse impacts of unforeseen changes in interest rates. With the rise in interest rates experienced throughout 2022 and continuing into 2023, Park is now more exposed to an adverse impact to earnings in a down rate environment. Management actively monitors changes in the sensitivity position and has ample tools to adjust exposure as needed. As a result, management expects further changes in interest rates to have a modest impact on net income.

On page 78 (Table 38) of Park’s ~~2021~~2022 Form 10-K, management reported that Park’s twelve-month cumulative rate sensitivity gap was a positive (assets exceeding liabilities) ~~$1,895.3~~$1,087 million or ~~21.70%~~11.9% of total interest earning assets at December 31, ~~2021.~~2022. At ~~September 30, 2022,~~March 31, 2023, Park’s twelve-month cumulative rate sensitivity gap was a positive (assets exceeding liabilities) ~~$1,245.3~~$860.3 million or ~~13.62%~~9.44% of total interest earning assets.

Management supplements the interest rate sensitivity gap analysis with periodic simulations of balance sheet sensitivity under various interest rate and what-if scenarios to better forecast and manage the net interest margin. Management uses a 50 basis

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point change in market interest rates per quarter for a total of 200 basis points per year in evaluating the impact of changing interest rates on net interest income and net income over a twelve-month horizon.

On page 79 of Park’s ~~2021~~2022 Form 10-K, management reported that at December 31, 2021, the earnings simulation model projected that net income would increase by 7.5% using a rising interest rate scenario and decrease by 15.1% using a declining interest rate scenario over the next year. At September 30, 2022, the earnings simulation model projected that net income would increase by ~~5.8%~~3.7% using a rising interest rate scenario and decrease by 5.4% using a declining interest rate scenario over the next year. At March 31, 2023, the earnings simulation model projected that net income would increase by 2.6% using a rising interest rate scenario and would decrease by ~~8.8%~~3.2% in a declining interest rate scenario. At ~~September 30, 2022,~~March 31, 2023, management continues to believe that it has the tools necessary to mitigate gradual changes in interest rates (50 basis points per quarter for a total of 200 basis points per year) such that the overall impact to net income will be modest.

ITEM 4 – CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

With the participation of the Chairman of the Board and Chief Executive Officer (the principal executive officer) and the Chief Financial Officer, Secretary and Treasurer (the principal financial officer) of Park, Park’s management has evaluated the effectiveness of Park’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of ~~September 30, 2022~~March 31, 2023 (the end of the quarterly period covered by this Quarterly Report on Form 10-Q). Based on that evaluation, Park’s Chairman of the Board and Chief Executive Officer and Park’s Chief Financial Officer, Secretary and Treasurer have concluded that:

•information required to be disclosed by Park in this Quarterly Report on Form 10-Q and the other reports that Park files or submits under the Exchange Act would be accumulated and communicated to Park’s management, including its principal executive officer and its principal financial officer, as appropriate to allow timely decisions regarding required disclosure;

•information required to be disclosed by Park in this Quarterly Report on Form 10-Q and the other reports that Park files or submits under the Exchange Act would be recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and

•Park’s disclosure controls and procedures were effective as of ~~September 30, 2022~~March 31, 2023 (the end of the quarterly period covered by this Quarterly Report on Form 10-Q).

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Changes in Internal Control Over Financial Reporting

There were no changes in Park's internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during Park's fiscal quarter ended ~~September 30, 2022,~~March 31, 2023, that have materially affected, or are reasonably likely to materially affect, Park's internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

~~There~~We are noroutinely engaged in various litigation and other legal matters. These include defending against claims of improper loan, deposit account, and other banking practices, as well as trust and investment, intellectual property, contract, and other legal matters, and we have a number of unresolved lawsuits and open matters pending ~~legal proceedings to which Park or any of its subsidiaries is a party or to which any of their property is subject, except for routine legal proceedings which Park's subsidiaries~~resolution. In addition, we are parties to litigation involving the collection of delinquent accounts, challenges to security interests in collateral, foreclosure lawsuits, and similar matters which are part of, or incidental to, ~~their respective businesses. Park considers none~~our ordinary course of ~~those proceedings~~business. While the ultimate liability with respect to these matters and claims cannot be determined at this time, we believe that losses, damages, or liabilities, if any, and other amounts relating to pending matters are not likely to be ~~material.~~material to our consolidated financial position or results of operations. Reserves are established for these various litigation and other legal matters, when appropriate under FASB ASC Topic 450, Contingencies, based in part upon the advice of legal counsel.

Item 1A. Risk Factors

There are certain risks and uncertainties in our business that could cause Park's actual results to differ materially from those anticipated. In “ITEM 1A. RISK FACTORS” of Part I of Park’s ~~2021~~2022 Form 10-K, we included a detailed discussion of our risk factors. In the first quarter of 2023, we identified one additional risk factor and updated an existing risk factor, described below. All of these risk factors should be read carefully in connection with evaluating Park's business and in connection with the forward-looking statements contained in this Quarterly Report on Form 10-Q. Any of the risks described in Park's ~~2021~~2022 Form 10-K or in this Quarterly Report on Form 10-Q could materially adversely affect our business, financial condition or future results and the actual outcome of matters as to which forward-looking statements are made. These are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

The impact of larger or similar-sized financial institutions encountering problems may adversely affect Park's business, earnings and financial condition.

Park is exposed to the risk that when a peer financial institution experiences financial difficulties, there could be an adverse impact on the regional banking industry and the business environment in which Park operates. The recent bank failures of Silicon Valley Bank in California, Signature Bank in New York, and First Republic Bank in California during the first and second quarters of 2023 have caused a degree of panic and uncertainty in the investor community and among bank customers generally. While Park does not believe that the circumstances of these three banks' failures are indicators of broader issues with the banking system, the failures may reduce customer confidence, affect sources of funding and liquidity, increase regulatory requirements and costs, adversely affect financial markets and/or have a negative reputational ramification for the financial services industry, including Park. Park will continue to monitor the ongoing events concerning these three banks as well as any future potential bank failures and volatility within the financial services industry generally, together with any responsive measures taken by the banking regulators to mitigate or manage potential turmoil in the financial services industry.

We may become subject to additional requirements and restrictions imposed by the DOJ.

On February 28, 2023, Park National Bank reached an agreement with the DOJ to increase the efforts of Park National Bank to promote home lending in the Columbus, Ohio market. The agreement, which is reflected in the consent order filed on February 28, 2023, in the U.S. District Court for the Southern District of Ohio, Western Division (the “DOJ Consent Order”) and approved on March 2, 2023 by that Court, serves to voluntarily resolve all claims of the U.S. alleging that Park National Bank’s mortgage lending practices within the Columbus, Ohio Metropolitan Statistical Area violated the Fair Housing Act and the Equal Credit Opportunity Act.

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Bank will continue to maintain, throughout the term of the DOJ Consent Order, Park National Bank’s full-time Director of Community Home Lending and Development position, who will oversee Park National Bank’s lending in MMCTs in the Columbus Lending Area.

Park is committed to investing at least $9.0 million over five years and will record the related expenses incurred in the

period in which the associated activities occur.

Although Park and Park National Bank are committed to full compliance with the DOJ Consent Order, achieving such compliance will require significant management attention from Park and may cause Park to incur unanticipated costs and expenses. Actions taken to achieve compliance with the DOJ Consent Order may affect Park’s financial performance and may require us to reallocate resources away from existing businesses or to undertake significant changes to our businesses, operations, products and services, and risk management practices. In addition, Park and Park National Bank could be subject to other enforcement actions relating to the alleged violations resolved by the DOJ Consent Order

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)Not applicable

(b)Not applicable

(c)The following table provides information concerning purchases of Park’s common shares ("Common Shares") made by or on behalf of Park or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Exchange Act, during the three months ended ~~September 30, 2022,~~March 31, 2023, as well as the maximum number of Common Shares that may be purchased under Park’s previously announced stock repurchase authorizations to fund the 2017 Long-Term Incentive Plan for Employees (the "2017 Employees LTIP") and the 2017 Long-Term Incentive Plan for Non-Employee Directors (the "2017 Non-Employee Directors LTIP") and Park's previously announced 2017 and 2019 stock repurchase authorizations:

~~Period~~

Total number of
Common Shares
purchased

Average price
paid per
Common
Share

Total number of Common
Shares purchased as part of
publicly announced plans
or programs

Maximum number of
Common Shares that may
yet be purchased under the
plans or programs (1)

~~July 1 through July 31, 2022~~

—

~~1,195,088~~

~~August 1 through August 31, 2022~~

—

~~1,195,088~~

~~September 1 through September 30, 2022~~

—

~~1,195,088~~

~~Total~~

—

~~1,195,088~~


Period	Total number of Common Shares purchased	Average price paid per Common Share		Total number of Common Shares purchased as part of publicly announced plans or programs	Maximum number of Common Shares that may yet be purchased under the plans or programs (1)
January 1 through January 31, 2023	—	$	—	—	1,195,088
February 1 through February 28, 2023	—	—		—	1,195,088
March 1 through March 31, 2023	124,000	123.44		124,000	1,071,088
Total	124,000	$	123.44	124,000	1,071,088

(1)The number shown represents, as of the end of each period, the maximum number of Common Shares that may yet be purchased as part of Park’s publicly announced stock repurchase authorizations to fund the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP, both of which became effective on April 24, 2017; Park's publicly announced stock repurchase authorization covering 500,000 Common Shares which was announced on January 23, 2017; and Park's stock repurchase authorization covering 500,000 Common Shares which was announced on January 28, 2019 and as to which approval from the Federal Reserve was obtained in the form of correspondence from the Federal Reserve Bank of Cleveland dated April 19, 2019.

At the 2017 Annual Meeting of Shareholders held on April 24, 2017, Park's shareholders approved the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP. The Common Shares to be issued and delivered under the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP may consist of either Common Shares currently held or Common Shares subsequently acquired by Park as treasury shares. No newly-issued Common Shares will be delivered under the 2017 Employees LTIP or the 2017 Non-Employee Directors LTIP. On April 24, 2017, Park's Board of Directors authorized the purchase, from time to time, of up to 750,000 Park Common Shares and 150,000 Park Common Shares, respectively, to be held

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as treasury shares for subsequent issuance and delivery under the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP.

On January 23, 2017, Park announced that on that same day, the Park Board of Directors authorized Park to purchase, from time to time, up to an aggregate of 500,000 Park Common Shares. On January 28, 2019, Park announced that on that same

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day, the Park Board of Directors authorized Park to repurchase, from time to time following receipt of any required approval from the Federal Reserve, up to 500,000 Park Common Shares in addition to the 500,000 Park Common Shares which had been authorized for repurchase by the Park Board of Directors on January 23, 2017 and remained available for repurchase as of January 28, 2019. The required approval was received by Park in the form of correspondence from the Federal Reserve Bank of Cleveland dated April 19, 2019.

Purchases may be made through NYSE American, in the over-the-counter market or in privately negotiated transactions, in each case in compliance with the Ohio General Corporation Law, applicable federal and state securities laws, the rules applicable to issuers having securities listed on NYSE American, regulations promulgated by the Federal Reserve Board and all other applicable laws and regulations, each as in effect at the time of each such purchase. Purchases will be made upon such terms and conditions and at such times and in such amounts as any one or more of the authorized officers of Park deem to be appropriate, subject to market conditions, regulatory requirements, any contractual obligations of Park and Park's subsidiaries and other factors, and in the best interest of Park and Park's shareholders. The January 23, 2017 stock repurchase authorization and the January 28, 2019 stock repurchase authorization are distinct from the stock repurchase authorizations to fund the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP.

Item 3. Defaults Upon Senior Securities

(a), (b) Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

(a), (b), (c) Not applicable.

Item 6. Exhibits


			3.1(a)			Articles of Incorporation of Park National Corporation as filed with the Ohio Secretary of State on March 24, 1992 (Incorporated herein by reference to Exhibit 3(a) to Park National Corporation’s Form 8-B, filed on May 20, 1992 (File No. 0-18772) (“Park’s Form 8-B”)) P

			3.1(b)			Certificate of Amendment to the Articles of Incorporation of Park National Corporation as filed with the Ohio Secretary of State on May 6, 1993 (Incorporated herein by reference to Exhibit 3(b) to Park National Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (File No. 0-18772)) P

			3.1(c)			Certificate of Amendment to the Articles of Incorporation of Park National Corporation as filed with the Ohio Secretary of State on April 16, 1996 (Incorporated herein by reference to Exhibit 3(a) to Park National Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1996 (File No. 1-13006))

			3.1(d)			Certificate of Amendment by Shareholders to the Articles of Incorporation of Park National Corporation as filed with the Ohio Secretary of State on April 22, 1997 (Incorporated herein by reference to Exhibit 3(a)(1) to Park National Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997 (File No. 1-13006) (“Park’s June 30, 1997 Form 10-Q”))

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			3.1(e)			Certificate of Amendment by Shareholders as filed with the Ohio Secretary of State on December 18, 2008 in order to evidence the adoption by the shareholders of Park National Corporation on December 18, 2008 of an amendment to Article FOURTH of Park National Corporation’s Articles of Incorporation to authorize Park National Corporation to issue up to 200,000 preferred shares, without par value (Incorporated herein by reference to Exhibit 3.1 to Park National Corporation’s Current Report on Form 8-K dated and filed December 19, 2008 (File No. 1-13006))

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			3.1(f)			Certificate of Amendment by Directors to Articles as filed with the Ohio Secretary of State on December 19, 2008, evidencing the adoption of an amendment by the Board of Directors of Park National Corporation to Article FOURTH of Park Na ti ~~onal Corporation~~'s National Corporation's Articles of Incorporation to establish the express terms of Fixed Rate Cumulative Perpetual Preferred Shares, Series A, each without par value, of Park National Corporation (Incorporated herein by reference to Exhibit 3.1 to Park National Corporation’s Current Report on Form 8-K dated and filed December 23, 2008 (File No. 1-13006))

			3.1(g)			Certificate of Amendment by Shareholders as filed with the Ohio Secretary of State on April 18, 2011 in order to evidence the adoption by Park National Corporation’s shareholders of an amendment to Article SIXTH of Park National Corporation’s Articles of Incorporation in order to provide that shareholders do not have preemptive rights (Incorporated herein by reference to Exhibit 3.1 to Park National Corporation’s Current Report on Form 8-K dated and filed April 19, 2011 (File No. 1-13006))

			3.1(h)			Certificate of Amendment as filed with the Ohio Secretary of State on April 26, 2022 in order to evidence the adoption by Park National Corporation's shareholders of an amendment to Park National Corporation's Articles of Incorporation to add a new Article NINTH to eliminate cumulative voting rights in the election of directors (Incorporated herein by reference to Exhibit 3.1 to Park National Corporation's Current Report on Form 8-K dated and filed April 27, 2022 (File No. 1-13006) ("Park's April 27, 2022 Form 8-K"))

			3.1(i)			Articles of Incorporation of Park National Corporation [This document represents the Articles of Incorporation of Park National Corporation in compiled form incorporating all amendments. This compiled document has not been filed with the Ohio Secretary of State.] (~~Incorporated~~(Incorporated herein by reference to Exhibit 3.1(i) to Park National Corporation's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 (File No. ~~1-13006) ("Park's March 31, 2022 Form 10-Q"~~1-13006 ))

			3.2(a)			Regulations of Park National Corporation (Incorporated herein by reference to Exhibit 3(b) to Park’s Form 8-B) P

			3.2(b)			Certified Resolution regarding Adoption of Amendment to Subsection 2.02(A) of the Regulations of Park National Corporation by Shareholders on April 21 , 1997 (Incorporated herein by reference to Exhibit 3(b)(1) to Park’s June 30, 1997 Form 10-Q)

			3.2(c)			Certificate Regarding Adoption of Amendments to Sections 1.04 and 1.11 of Park National Corporation’s Regulations by the Shareholders on April 17, 2006 (Incorporated herein by reference to Exhibit 3.1 to Park National Corporation’s Current Report on Form 8-K dated and filed on April 18, 2006 (File No. 1-13006))

			3.2(d)			Certificate Regarding Adoption by the Shareholders of Park National Corporation on April 21, 2008 of Amendment to Regulations to Add New Section 5.10 to Article Five (Incorporated herein by reference to Exhibit 3.2(d) to Park National Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2008 (File No. 1-13006))

			3.2(e)			Certificate Regarding Adoption by the Shareholders of Park National Corporation on April 25, 2022 of Amendments to Section 1.10 and Section 2.04 of Park National Corporation's Regulations to eliminate the textual references to the right of Park National Corporation's shareholders to have cumulative voting apply in the election of directors (Incorporated herein by reference to Exhibit 3.2 to ~~Park's April 27, 2022~~Park 's ~~Form-8-K~~April 2 7 , 202 2 F o r m -8 -K)

			3.2(f)			Certificate Regarding Adoption by the Shareholders of Park National Corporation on April 2 4 , 202 3 of an Amendment to Section 6.01 of Park National Corporation's Regulations to grant the Board of Directors the power to make limited future amendments to Park National Corporation 's Reg ulations to the extent permitted by the Ohio General Corporation Law (Incorporated herein by reference to Exhibit 3.1 to Park National Corporation 's Current R eport on Form 8-K dated and filed April 2 5 , 202 3 (File No. 1-13006))

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			~~3.2(f)~~3.2(g)			Regulations of Park National Corporation [This document represents the Regulations of Park National Corporation in compiled form incorporating all amendments, including ~~those~~the amendment adopted by the shareholders of Park National Corporation on April ~~25, 2022]~~24, 2023] (Filed herewith)

			10.1			Summary of Base Salaries for Executive Officers of Park National Corporation (Incorporated herein by reference to Exhibit ~~3.2(f)~~10.1 to Park National Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (File No. 1-13006)("Park's 2022 Form 10-K"))

			10.2			Summary of Certain Compensation for Directors of Park National Corporation (Incorporated herein by reference to Exhibit 10.17 to Park's ~~March 31,~~ 2022 ~~Form 10-Q)~~Form-10-K)

			10.3			Park National Corporation 2017 Long-Term Incentive Plan for Employees Performance-Based Restricted Stock Unit Award Agreement used to evidence awards of performance-based restricted stock units to employees of Park National Corporation and of its subsidiaries granted effective as of January 18 , 202 3 and to be used to evidence awards of performance-based restricted stock units to employees of Park National Corporation and of its subsidiaries to be granted after January 18 , 202 3 (Filed herewith )

			31.1			Rule 13a – 14(a) / 15d – 14(a) Certifications (Principal Executive Officer) (Filed herewith)

			31.2			Rule 13a – 14(a) / 15d – 14(a) Certifications (Principal Financial Officer) (Filed herewith)

			32.1			Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (Principal Executive Officer) (Furnished herewith)

			32.2			Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (Principal Financial Officer) (Furnished herewith)

			101			The following information from Park National Corporation's Quarterly Report on Form 10-Q for the quarterly period ended ~~September 30, 2022~~March 31, 2023 formatted in Inline XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Condensed Balance Sheets as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (unaudited); (ii) the Consolidated Condensed Statements of Income for the three months ended March 31, 2023 and ~~the nine months ended September 30,~~ 2022 ~~and 2021~~ (unaudited); (iii) the Consolidated Condensed Statements of Comprehensive Income (Loss) ~~Income~~ for the three months ended March 31, 2023 and ~~the nine months ended September 30,~~ 2022 ~~and 2021~~ (unaudited); (iv) the Consolidated Condensed Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2023 and ~~the nine months ended September 30,~~ 2022 ~~and 2021~~ (unaudited); (v) the Consolidated Condensed Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited); and (vi) the Notes to Unaudited Consolidated Condensed Financial Statements (electronically submitted herewith). *

			104			Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document with applicable taxonomy extension information contained in Exhibit 101)

* The instance document does not appear in the interactive data file because its XBRL tags are imbedded within the Inline XBRL document.

P Park National Corporation filed this exhibit with the SEC in paper form originally and this exhibit has not been filed with the SEC in electronic format.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


						PARK NATIONAL CORPORATION

~~DATE: November 8, 2022~~May 1, 2023						/s/ David L. Trautman
						David L. Trautman
						Chairman of the Board and Chief Executive Officer
						(Principal Executive Officer and Duly Authorized Officer)

~~DATE: November 8, 2022~~May 1, 2023						/s/ Brady T. Burt
						Brady T. Burt
						Chief Financial Officer, Secretary and Treasurer
						(Principal Financial Officer and Duly Authorized Officer)

~~111~~93


Residential Real Estate: Mortgage
Performing	$	168,168	$	217,090	$	197,891	$	93,470	$	57,037	$	306,478	$	—	$	1,040,134
Nonperforming	—		—		357		564		578		15,571		—		17,070
Total	$	168,168	$	217,090	$	198,248	$	94,034	$	57,615	$	322,049	$	—	$	1,057,204


Residential Real Estate: HELOC
Performing	$	—	$	312	$	24	$	112	$	117	$	2,118	$	162,937	$	165,620
Nonperforming	—		—		45		—		—		1,156		168		1,369
Total	$	—	$	312	$	69	$	112	$	117	$	3,274	$	163,105	$	166,989


Residential Real Estate: Installment
Performing	$	78	$	—	$	2	$	271	$	68	$	2,752	$	—	$	3,171
Nonperforming	—		—		8		3		19		1,050		—		1,080
Total	$	78	$	—	$	10	$	274	$	87	$	3,802	$	—	$	4,251


Consumer: Consumer
Performing	$	649,638	$	505,555	$	259,230	$	119,222	$	64,699	$	62,136	$	22,664	$	1,683,144
Nonperforming	241		506		755		399		155		593		—		2,649
Total	$	649,879	$	506,061	$	259,985	$	119,621	$	64,854	$	62,729	$	22,664	$	1,685,793


Total Consumer Loans
Performing	$	949,838	$	749,070	$	380,542	$	191,200	$	127,296	$	392,772	$	184,896	$	2,975,614
Nonperforming	330		1,840		1,675		1,291		906		20,954		326		27,322
Total	$	950,168	$	750,910	$	382,217	$	192,491	$	128,202	$	413,726	$	185,222	$	3,002,936


	Three Months Ended September 30, 2022
(In thousands)	Number of Contracts	Accruing		Nonaccrual		Total Amortized Cost
Commercial, financial and agricultural
Commercial, financial and agricultural	4	$	227	$	511	$	738
PPP loans	—	—		—		—
Overdrafts	—	—		—		—
Commercial real estate	1	31		—		31
Construction real estate:
Commercial	—	—		—		—
Retail	—	—		—		—
Residential real estate:
Commercial	1	146		—		146
Mortgage	3	545		120		665
HELOC	1	—		10		10
Installment	2	—		29		29
Consumer:
Consumer	21	3		169		172
GFSC	—	—		—		—
Check loans	—	—		—		—
Leases	10	—		115		115
Total loans	43	$	952	$	954	$	1,906


	Nine Months Ended September 30, 2022
(In thousands)	Amount of Net Gain Recognized in OCI (Effective Portion)		Amount of Gain (Loss) Reclassified from OCI to Interest Income		Amount of Expense Recognized in Miscellaneous Expense
Interest rate swaps	$	154	$	—	$	52


Level 3 Fair Value Measurements
Three months ended September 30, 2022 and 2021
(In thousands)	Equity securities		Fair value swap
Balance at July 1, 2022	$	491	$	(447)
Total losses
Included in other income / expense	(22)		—
Purchases, sales, issuances and settlements, other, net	—		204
Balance at September 30, 2022	$	469	$	(243)

Balance at July 1, 2021	$	490	$	(226)
Total gains
Included in other income	1		—
Balance at September 30, 2021	$	491	$	(226)


(In thousands)	Q1 2021			Q2 2021			Q3 2021			Q4 2021			2021			Q1 2022			Q2 2022			Q3 2022
Mortgage Loan Origination Volume
Sold	$	191,116		$	142,398		$	123,757		$	98,007		$	555,278		$	69,053		$	50,013		$	27,025
Portfolio	82,613			74,670			66,718			60,685			284,686			53,498			63,104			90,551
Construction	28,987			37,266			28,486			24,816			119,555			32,928			34,044			34,026
Service released	1,266			2,204			4,537			5,795			13,802			4,660			4,580			2,537
Total mortgage loan originations	$	303,982		$	256,538		$	223,498		$	189,303		$	973,321		$	160,139		$	151,741		$	154,139

Refinances as a % of Total Mortgage Loan Originations	71.1		%	50.0		%	44.8		%	44.2		%	54.2		%	41.7		%	25.9		%	24.0		%


(Dollars in thousands)	September 30, 2022		June 30, 2022		change from 06/30/22		% change from 06/30/22
Home equity	$	167,072	$	162,616	$	4,456	2.74	%
Installment	1,948,819		1,820,500		128,319		7.05	%
Real estate	1,171,079		1,134,763		36,316		3.20	%
Commercial (excluding PPP loans) (1)	3,807,976		3,821,686		(13,710)		(0.36)	%
PPP loans	5,715		13,428		(7,713)		(57.44)	%
Other	1,842		4,618		(2,776)		(60.11)	%
Total loans	$	7,102,503	$	6,957,611	$	144,892	2.08	%
Total loans (excluding PPP loans)	$	7,096,788	$	6,944,183	$	152,605	2.20	%


	THREE MONTHS ENDED						NINE MONTHS ENDED
(in thousands, except share and per share data)	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
Diluted EPS	$	2.57		$	2.16		$	7.05		$	7.14
Diluted EPS, adjusted (6)	$	1.93		$	2.02		$	6.26		$	7.00

Annualized return on average assets (1)(2)	1.61		%	1.40		%	1.55		%	1.59		%
Annualized return on average assets, adjusted (1)(2)(6)	1.21		%	1.31		%	1.37		%	1.60		%

Annualized return on average tangible assets (1)(2)(4)	1.63		%	1.42		%	1.57		%	1.62		%
Annualized return on average tangible assets, adjusted (1)(2)(4)(6)	1.23		%	1.33		%	1.40		%	1.59		%

Annualized return on average shareholders' equity (1)(2)	15.50		%	13.04		%	14.22		%	14.79		%
Annualized return on average shareholders' equity, adjusted (1)(2)(6)	11.68		%	12.19		%	12.62		%	14.50		%

Annualized return on average tangible equity (1)(2)(3)	18.33		%	15.44		%	16.80		%	17.58		%
Annualized return on average tangible equity, adjusted (1)(2)(3)(6)	13.81		%	14.43		%	14.91		%	17.24		%

Efficiency ratio (5)	59.88		%	59.70		%	60.43		%	60.03		%
Efficiency ratio, adjusted (5)(6)	64.56		%	59.82		%	62.44		%	59.37		%

Annualized net interest margin (5)	3.81		%	3.53		%	3.74		%	3.67		%
Annualized net interest margin, adjusted (5)(6)	3.76		%	3.48		%	3.67		%	3.58		%


Financial Reconciliations

(1) Reported measure uses net income
(2) Averages are for the three months and nine months ended September 30, 2022 and September 30, 2021.
(3) Net income for each period divided by average tangible equity during the period. Average tangible equity equals average shareholders' equity during the applicable period less average goodwill and other intangible assets during the applicable period.

RECONCILIATION OF AVERAGE SHAREHOLDERS' EQUITY TO AVERAGE TANGIBLE EQUITY:
	THREE MONTHS ENDED				NINE MONTHS ENDED
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
AVERAGE SHAREHOLDERS' EQUITY	$	1,076,526	$	1,078,465	$	1,084,080	$	1,061,066
Less: Average goodwill and other intangible assets	166,136		167,754		166,521		168,215
AVERAGE TANGIBLE EQUITY	$	910,390	$	910,711	$	917,559	$	892,851

(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 OF AVERAGE ASSETS TO AVERAGE TANGIBLE ASSETS
	THREE MONTHS ENDED				NINE MONTHS ENDED
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
AVERAGE ASSETS	$	10,384,049	$	10,070,716	$	9,964,863	$	9,583,457
Less: Average goodwill and other intangible assets	166,136		167,754		166,521		168,215
AVERAGE TANGIBLE ASSETS	$	10,217,913	$	9,902,962	$	9,798,342	$	9,415,242

(5) 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 reconciliation is shown assuming a 21% federal corporate income tax rate. Additionally, net interest margin is calculated on a fully taxable equivalent basis by dividing fully taxable equivalent net interest income by average interest earning assets, in each case during the applicable period.

RECONCILIATION OF FULLY TAXABLE EQUIVALENT NET INTEREST INCOME TO NET INTEREST INCOME
	THREE MONTHS ENDED				NINE MONTHS ENDED
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Interest income	$	99,944	$	85,420	$	269,437	$	258,587
FTE adjustment	932		717		2,623		2,149
FTE interest income	$	100,876	$	86,137	$	272,060	$	260,736
Interest expense	9,116		3,818		16,984		12,400
FTE net interest income	$	91,760	$	82,319	$	255,076	$	248,336

(6) Adjustments to net income for each period presented are detailed in the non-GAAP reconciliations of net interest income, provision for (recovery of) credit losses, total other income and total other expense.
(7) The tax effect of adjustments to net income was calculated assuming a 21% federal corporate income tax rate.

(8) Pre-tax, pre-provision ("PTPP") net income is calculated as net income, plus income taxes, plus the provision for (recovery of) credit losses, in each case during the applicable period. PTPP net income is a common industry metric utilized in capital analysis and review. PTPP is used to assess the operating performance of Park while excluding the impact of the provision for (recovery of) credit losses.

RECONCILIATION OF PRE-TAX, PRE-PROVISION NET INCOME
	THREE MONTHS ENDED				NINE MONTHS ENDED
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Net income	$	42,068	$	35,434	$	115,267	$	117,397
Plus: Income Taxes	9,361		8,118		24,829		25,697
Plus: Provision for (recovery of) credit losses	3,190		1,972		1,576		(6,923)
Pre-tax, pre-provision net income	$	54,619	$	45,524	$	141,672	$	136,171


	At December 31, 2021
	Leverage		Tier 1 Risk-Based		Common Equity Tier 1		Total Risk-Based
The Park National Bank	8.58	%	11.05	%	11.05	%	12.56	%
Park National Corporation	9.77	%	12.57	%	12.37	%	16.05	%
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	%