PARK NATIONAL CORP OH

Previous wording

Management has included in the tables included within the "Items Impacting Comparability" section of this MD&A information relating to the annualized return on average tangible equity, the annualized return on average tangible assets and pre-tax, pre-provision net income for the three months ended and at March 31, 2024 and March 31, 2023. For the purpose of calculating the annualized return on average tangible equity, a non-U.S. GAAP financial measure, net income for each period is divided by average tangible equity during the period. Average tangible equity equals average shareholders' equity during the applicable period less average goodwill and other intangible assets during the applicable period. For the purpose of calculating the annualized return on average tangible assets, a non-U.S. GAAP financial measure, net income for each period is divided by average tangible assets during the period. Average tangible assets equals average assets during the applicable period less average goodwill and other intangible assets during the applicable period. For the purpose of calculating pre-tax, pre-provision net income, a non-U.S. GAAP financial measure, income taxes and the provision for credit losses are added back to net income, in each case during the applicable period.

Current wording

Management has included in the tables included within the "Items Impacting Comparability" section of this MD&A information relating to the annualized return on average tangible equity, the annualized return on average tangible assets and pre-tax, pre-provision net income for the three months ended and at June 30, 2024 and June 30, 2023 and for the six months ended June 30, 2024 and June 30, 2023. For the purpose of calculating the annualized return on average tangible equity, a non-U.S. GAAP financial measure, net income for each period is divided by average tangible equity during the period. Average tangible equity equals average shareholders' equity during the applicable period less average goodwill and other intangible assets during the applicable period. For the purpose of calculating the annualized return on average tangible assets, a non-U.S. GAAP financial measure, net income for each period is divided by average tangible assets during the period. Average tangible assets equals average assets during the applicable period less average goodwill and other intangible assets during the applicable period. For the purpose of calculating pre-tax, pre-provision net income, a non-U.S. GAAP financial measure, income taxes and the provision for credit losses are added back to net income, in each case during the applicable period.

Previous wording

As noted above, in calculating the ACL, management weighs different scenarios, including a baseline (most likely) scenario and an adverse scenario. At March 31, 2024, management applied a 50% weighting to the baseline scenario and applied a 50% weighting to the adverse scenario. To create hypothetical sensitivity analyses, management calculated a quantitative allowance using a 100% weighting applied to a baseline scenario and a quantitative allowance using a 100% weighting applied to an adverse scenario. The adverse scenario assumes among other things that: (1) tensions with China and Taiwan increase, China briefly interrupts trade through the Taiwan Strait, the Russian invasion lasts longer than expected, and the Hamas-Israel conflict will lead to a wider conflict; (2) the FRB keeps the fed funds rate at the terminal range of 5.25-5.50% through the second quarter of 2024 and, as a downturn persists, the FRB begins to lower rates; (3) Europe goes into a recession. Populism in Europe rises, raising uncertainties about the longevity of the Euro and causes financial stress to highly indebted nations; (4) risk of an extended government shutdown increases, causing consumer and business confidence to fall; (5) concerns about bank failures raise fears of further collapse in the banking industry, reducing consumer confidence and causing banks to tighten lending standards; (6) a recession occurs in the second quarter of 2024 and lasts through the fourth quarter of 2024 resulting in real GDP declining by 2.6%, unemployment rates rising to a peak of 7.7% in the second quarter of 2025, and the stock market falling 37% from the second quarter of 2024 to the fourth quarter of 2024. The adverse scenario also forecasts Ohio unemployment for the next twelve months to range from 6.4% to 9.0%. Excluding consideration of qualitative adjustments, this sensitivity analysis would result in a hypothetical increase in Park's ACL of $24.2 million as of March 31, 2024 if only the adverse scenario was used. Excluding consideration of qualitative adjustments, a corresponding $24.2 million decrease in Park's ACL would occur in a hypothetical scenario if only the baseline (most likely) scenario was used.

Current wording

As noted above, in calculating the ACL, management weighs different scenarios, including a baseline (most likely) scenario and an adverse scenario. At June 30, 2024, management applied a 50% weighting to the baseline scenario and applied a 50% weighting to the adverse scenario. To create hypothetical sensitivity analyses, management calculated a quantitative allowance using a 100% weighting applied to a baseline scenario and a quantitative allowance using a 100% weighting applied to an adverse scenario. The adverse scenario assumes among other things that: (1) tensions with China and Taiwan increase, China briefly interrupts trade through the Taiwan Strait, the Russian invasion lasts longer than expected, and the Hamas-Israel conflict will lead to a wider conflict; (2) the FRB keeps the fed funds rate at the terminal range of 5.25-5.50% through the second quarter of 2024 and, as a downturn persists, the FRB begins to lower rates; (3) Europe goes into a recession. Populism in Europe rises, raising uncertainties about the longevity of the Euro and causes financial stress to highly indebted nations; (4) the U.S. election in November 2024 results in a democratic President and a divided House of Representatives and Senate that will allow for policy status quo to endure. Political divide will be intense, causing business and consumer sentiment to decline sharply; (5) concerns about bank failures raise fears of further collapse in the banking industry, reducing consumer confidence and causing banks to tighten lending standards; (6) a recession occurs in the third quarter of 2024 and lasts through the first quarter of 2025 resulting in real GDP declining by 2.6%, unemployment rates rising to a peak of 8.0% in the third quarter of 2025, and the stock market falling 35% from the third quarter of 2024 to the first quarter of 2025. The adverse scenario also forecasts Ohio unemployment for the next twelve months to range from 6.4% to 9.1%. Excluding consideration of qualitative adjustments, this sensitivity analysis would result in a hypothetical increase in Park's ACL of $24.8 million as of June 30, 2024 if only the adverse scenario was used. Excluding consideration of qualitative adjustments, a corresponding $24.8 million decrease in Park's ACL would occur in a hypothetical scenario if only the baseline (most likely) scenario was used.

Previous wording

Net income for the three months ended March 31, 2024 was $35.2 million, compared to $33.7 million for the first quarter of 2023. Pre-tax, pre-provision net income (non-U.S. GAAP) for the three months ended March 31, 2024 was $44.6 million, compared to $40.1 million for the first quarter of 2023. Diluted earnings per common share were $2.17 for the first quarter of 2024, compared to $2.07 for the first quarter of 2023. Weighted average diluted common shares outstanding were 16,191,065 for the first quarter of 2024, compared to 16,324,823 weighted average diluted common shares outstanding for the first quarter of 2023.

Current wording

Net income for the three months ended June 30, 2024 of $39.4 million represented a $7.8 million, or 24.6%, increase compared to $31.6 million for the three months ended June 30, 2023. Pre-tax, pre-provision net income for the three months ended June 30, 2024 of $51.4 million represented a $10.7 million, or 26.4%, increase compared to $40.7 million for the three months ended June 30, 2023. Weighted average diluted common shares outstanding were 16,239,617 for the second quarter of 2024, compared to 16,240,600 weighted average diluted common shares outstanding for the second quarter of 2023.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Net interest income of $95.6 million for the three months ended March 31, 2024 represented a $3.4 million, or 3.7%, increase compared to $92.2 million for the three months ended March 31, 2023. The increase was a result of a $15.7 million increase in interest income, partially offset by a $12.3 million increase in interest expense.

Current wording

Net interest income of $193.5 million for the six months ended June 30, 2024 represented a $9.7 million, or 5.3%, increase compared to $183.8 million for the six months ended June 30, 2023. The increase was a result of a $30.0 million increase in interest income, partially offset by a $20.3 million increase in interest expense.

Previous wording

The $15.7 million increase in interest income was due to a $19.6 million increase in interest income on loans partially offset by a $3.9 million decrease in investment income. The $19.6 million increase in interest income on loans was primarily the result of a $383.4 million (or 5.40%) increase in average loans, from $7.10 billion for the three months ended March 31, 2023 to $7.48 billion for the three months ended March 31, 2024, as well as an increase in the yield on loans, which increased 75 basis points to 5.99% for the three months ended March 31, 2024, compared to 5.24% for the three months ended March 31, 2023. The $3.9 million decrease in investment income was primarily the result of a decrease in average investments, including money market investments, from $2.17 billion for the three months ended March 31, 2023 to $1.57 billion for the three months ended March 31, 2024. The decrease in average investments was partially offset by an increase in the yield on investments, including money market investments, which increased 31 basis points to 4.06% for the three months ended March 31, 2024, compared to 3.75% for the three months ended March 31, 2023.

Current wording

The $30.0 million increase in interest income was due to a $38.5 million increase in interest income on loans, partially offset by a $8.5 million decrease in investment income. The $38.5 million increase in interest income on loans was primarily the result of a $419.2 million (or 5.89%) increase in average loans, from $7.12 billion for the six months ended June 30, 2023 to $7.53 billion for the six months ended June 30, 2024, as well as an increase in the yield on loans, which increased 72 basis points to 6.06% for the six months ended June 30, 2024, compared to 5.34% for the six months ended June 30, 2023. The $8.5 million decrease in investment income was primarily the result of a $581.1 million (or 28.0%) decrease in average investments, including money market investments, from $2.08 billion for the six months ended June 30, 2023 to $1.50 billion for the six months ended June 30, 2024. The decrease in average investments was partially offset by an increase in the yield on investments, including money market investments, which increased 21 basis points to 4.00% for the six months ended June 30, 2024, compared to 3.79% for the six months ended June 30, 2023.

Previous wording

The $12.3 million increase in interest expense was due to a $11.6 million increase in interest expense on deposits, as well as a $0.7 million increase in interest expense on borrowings. The increase in interest expense on deposits was the result of a $167.4 million (or 3.06%) increase in average on-balance sheet interest bearing deposits from $5.48 billion for the three months ended March 31, 2023, to $5.64 billion for the three months ended March 31, 2024, as well as an increase in the cost of deposits of 79 basis points, from 1.15% for the three months ended March 31, 2023 to 1.94% for the three months ended March 31, 2024. The increase in on-balance sheet interest bearing deposits was due to an increase in brokered deposits, bid CD deposits, time deposits and transaction accounts, which was partially offset by decreases in savings accounts. During the three months ended March 31, 2024 and 2023, Park continued to participate in a program to transfer deposits off-balance sheet in order to manage growth of the balance sheet.

Current wording

The $20.3 million increase in interest expense was due to a $19.5 million increase in interest expense on deposits, as well as a $0.8 million increase in interest expense on borrowings. The increase in interest expense on deposits was the result of a $142.4 million (or 2.59%) increase in average on-balance sheet interest bearing deposits from $5.49 billion for the six months ended June 30, 2023, to $5.64 billion for the six months ended June 30, 2024, as well as an increase in the cost of deposits of 66 basis points, from 1.31% for the six months ended June 30, 2023 to 1.97% for the six months ended June 30, 2024. The increase in on-balance sheet interest bearing deposits was due to an increase in brokered deposits, bid CD deposits and time deposits, which was partially offset by decreases in savings accounts and transaction accounts.

Previous wording

The provision for credit losses of $2.2 million for the three months ended March 31, 2024 represented an increase of $2.0 million, compared to $183,000 for the three months ended March 31, 2023. Refer to the “Credit Metrics and Provision for Credit Losses” section for additional details regarding the level of the provision for credit losses recognized in each period presented.

Current wording

The provision for credit losses of $5.3 million for the six months ended June 30, 2024 represented an increase of $2.6 million, compared to $2.7 million for the six months ended June 30, 2023. Refer to the “Credit Metrics and Provision for Credit Losses” section for additional details regarding the level of the provision for credit losses recognized in each period presented.

Previous wording

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

Current wording

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

Previous wording

Other income of $26.2 million for the three months ended March 31, 2024 represented an increase of $1.8 million, or 7.4%, compared to $24.4 million for the three months ended March 31, 2023. The $1.4 million increase in income from fiduciary activity was largely due to an increase in the market value of assets under management. The $1.4 million increase in bank owned life insurance income was primarily related to death benefits received during the three months ended March 31, 2024. The change in loss on sale of debt securities, net was due to net losses on the sale of debt securities of $398,000 recorded during the three months ended March 31, 2024. No loss on sale of debt securities, net was recorded during the three months ended March 31, 2023. The $282,000 change in loss on equity securities, net, was due to fair value adjustments on equity securities. The $311,000 increase in other components of net periodic benefit income was largely due to an increase in the expected return on plan assets, and was partially offset by an increase in interest cost.

Current wording

Other income of $55.0 million for the six months ended June 30, 2024 represented an increase of $5.6 million, or 11.3%, compared to $49.4 million for the six months ended June 30, 2023. The $3.3 million increase in income from fiduciary activity was largely due to an increase in the market value of assets under management as well as updates to the fee structure. The $464,000 decrease in debit card fee income was partially due to a decrease in the average blended interchange rate per transaction, which is influenced by various factors, including the average spend per transaction. The $1.7 million increase in bank owned life insurance income was primarily related to an increase in death benefits received during the six months ended June 30, 2024. The change in loss on sale of debt securities, net was due to net losses on the sale of debt securities of $398,000 recorded during the six months ended June 30, 2024. No loss on sale of debt securities, net was recorded during the six months ended June 30, 2023. The $622,000 increase in other components of net periodic benefit income was largely due to an increase in the expected return on plan assets, and was partially offset by an increase in interest cost. The increase in miscellaneous income was largely due to an increase in net gain on sale of assets.

Previous wording

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

Current wording

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

Previous wording

Total other expense of $77.2 million for the three months ended March 31, 2024 represented an increase of $725,000, or 0.9%, compared to $76.5 million for the three months ended March 31, 2023. The increase in salaries expense was primarily related to increases in base salary expense, partially offset by decreases in share-based compensation expense, additional compensation expense and officer incentive compensation expense. The increase in employee benefits expense was primarily related to increases in group insurance expense and retirement benefit expense. The decrease in furniture and equipment expense was primarily due to decreases in depreciation expense and maintenance and repairs expense. The decrease in professional fees and services expense was primarily due to decreases in legal expenses and other fees expense, partially offset by increases in credit services expense.

Current wording

Total other expense of $152.4 million for the six months ended June 30, 2024 represented an increase of $29,000 compared to $152.4 million for the six months ended June 30, 2023. The increase in salaries expense was primarily related to increases in base salary expense and officer incentive compensation expense, partially offset by decreases in share-based compensation expense and additional compensation expense. The decrease in occupancy expense was primarily due to decreases in lease expense and utilities expense. The decrease in furniture and equipment expense was primarily due to decreases in depreciation expense and maintenance and repairs expense. The decrease in professional fees and services expense was primarily due to decreases in legal expenses, consulting expenses and other fees expense, partially offset by increases in credit services expense and IntraFi deposit fee expense.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

(2) Efficiency ratio is calculated by dividing total other expense by the sum of fully taxable equivalent net interest income and other income. Fully taxable equivalent net interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustments were $616,000 and $926,000 for the three months ended March 31, 2024 and 2023 and $3.7 million for the year ended December 31, 2023.

Current wording

(2) Efficiency ratio is calculated by dividing total other expense by the sum of fully taxable equivalent net interest income and other income. Fully taxable equivalent net interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustments were $1.2 million and $1.8 million for the six months ended June 30, 2024 and 2023 and $3.7 million for the year ended December 31, 2023.

Previous wording

Loans outstanding at March 31, 2024 were $7.53 billion, compared to (i) $7.48 billion at December 31, 2023, an increase of $48.8 million, and (ii) $7.09 billion at March 31, 2023, an increase of $431.1 million. The table below breaks out the change in loans outstanding, by loan type.

Current wording

Loans outstanding at June 30, 2024 were $7.66 billion, compared to (i) $7.48 billion at December 31, 2023, an increase of $188.2 million, and (ii) $7.21 billion at June 30, 2023, an increase of $456.3 million. The table below breaks out the change in loans outstanding, by loan type.

Previous wording

Park's allowance for credit losses was $85.1 million at March 31, 2024, compared to $83.7 million at December 31, 2023, an increase of $1.3 million, or 1.6%. Refer to the “Credit Metrics and Provision for Credit Losses” section for additional information regarding Park's loan portfolio and the level of provision for credit losses recognized in each period presented.

Current wording

Park's allowance for credit losses was $86.6 million at June 30, 2024, compared to $83.7 million at December 31, 2023, an increase of $2.8 million, or 3.4%. Refer to the “Credit Metrics and Provision for Credit Losses” section for additional information regarding Park's loan portfolio and the level of provision for credit losses recognized in each period presented.

Previous wording

Total deposits at March 31, 2024 were $8.31 billion, compared to (i) $8.04 billion at December 31, 2023, an increase of $263.5 million and (ii) $8.29 billion at March 31, 2023, an increase of $11.6 million. During the three months ended March 31, 2024 and 2023 and the year ended December 31, 2023, Park participated in a program to transfer deposits off-balance sheet in order to manage growth of the balance sheet, as deposits increased significantly throughout the COVID-19 pandemic. At March 31, 2024, December 31, 2023 and March 31, 2023, Park had $2.3 million, $1.2 million and $164.6 million, respectively, in deposits which were off-balance sheet. Total deposits would have increased $264.6 million, or 3.3%, compared to December 31, 2023 and would have decreased $150.7 million, or 1.8%, had the $2.3 million, $1.2 million and $164.6 million in deposits remained on the balance sheet at the respective dates.

Current wording

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

Previous wording

Park's deposits grew during the COVID-19 pandemic and have declined toward pre-pandemic levels throughout 2022 and 2023. As previously noted, in order to manage the impact of this growth on its balance sheet, Park has utilized a program where certain deposit balances are transferred off balance sheet while maintaining the customer relationship. Park is able to increase or decrease the amount of deposit balances transferred off balance sheet based on its balance sheet management strategies and liquidity needs. The balance of deposits transferred off balance sheet has declined as deposit balances have declined toward pre-pandemic levels.

Current wording

Park's deposits grew during the COVID pandemic and declined toward pre-pandemic levels throughout 2022 and 2023. In order to manage the impact of this growth on its balance sheet, Park utilized a program where certain deposit balances are transferred off balance sheet while maintaining the customer relationship. Park is able to increase or decrease the amount of deposit balances transferred off balance sheet based on its balance sheet management strategies and liquidity needs. The balance of deposits transferred off balance sheet has declined as deposit balances declined toward pre-pandemic levels.

Previous wording

During the three months ended March 31, 2024, total deposits including off balance sheet deposits increased by $264.6 million, or 3.3%. This increase consisted of a $300.7 million increase in total commercial deposits, a $15.3 million increase in brokered and bid CD deposits and a $1.1 million increase in off balance sheet deposits, partially offset by a $52.6 million decrease in total retail deposits. The majority of off balance sheet deposits are commercial and thus impact the increase in commercial deposits as the deposits are moved back onto the balance sheet.

Current wording

During the six months ended June 30, 2024, total deposits including off balance sheet deposits increased by $268.8 million, or 3.3%. This increase consisted of a $370.4 million increase in total commercial deposits and a $11.2 million increase in brokered and bid CD deposits, partially offset by a $111.6 million decrease in total retail deposits and a $1.2 million decrease in off balance sheet deposits. The majority of off balance sheet deposits were commercial and thus impact the increase in commercial deposits as the deposits are moved back onto the balance sheet.

Previous wording

At March 31, 2024, total deposits including off balance sheet deposits decreased by $150.7 million, or 1.8%, to $8.31 billion compared to $8.46 billion at March 31, 2023. This decrease consisted of a $236.2 million decrease in total retail deposits and a $162.3 million decrease in off balance sheet deposits, partially offset by a $180.3 million increase in brokered and bid CD deposits and a $67.4 million increase in total commercial deposits. The majority of off balance sheet deposits are commercial and thus impact the increase in commercial deposits as the deposits are moved back onto the balance sheet.

Current wording

At June 30, 2024, total deposits, including off balance sheet deposits, decreased by $47.2 million, or 0.6%, to $8.31 billion compared to $8.36 billion at June 30, 2023. This decrease consisted of a $167.7 million decrease in total retail deposits and a $55.0 million decrease in total commercial deposits, partially offset by a $176.2 million increase in brokered and bid CD deposits.

Previous wording

Included in the total commercial deposits and off balance sheet deposits shown in the previous tables are public fund deposits. These balances fluctuate based on seasonality and the cycle of collection and remittance of tax funds. The following table details the change in public fund deposits.

Current wording

Included in the total commercial deposits and off balance sheet deposits shown in the previous tables are public fund deposits. These balances fluctuate based on seasonality and the cycle of collection and remittance of tax funds. Public funds are also included in Bid Ohio CDs. The following table details the change in public funds held on Park's balance sheet.

Previous wording

As of March 31, 2024, Park had approximately $1.4 billion of uninsured deposits, which was 16.8% of total deposits. Uninsured deposits of $1.4 billion included $410.0 million of deposits that were over $250,000 but were fully collateralized by Park's investment securities portfolio.

Current wording

As of June 30, 2024, Park had approximately $1.4 billion of uninsured deposits, which was 16.9% of total deposits. Uninsured deposits of $1.4 billion included $455.0 million of deposits that were over $250,000 but were fully collateralized by Park's investment securities portfolio.

Previous wording

Comparison for the First Quarters of 2024 and 2023

Current wording

Comparison for the Second Quarters of 2024 and 2023

Previous wording

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

Current wording

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

Previous wording

Average interest earning assets for the first quarter of 2024 decreased by $219.2 million, or 2.4%, to $9,048 million for the first quarter of 2024, compared to $9,267 million for the first quarter of 2023. The average yield on interest earning assets increased by 77 basis points to 5.66% for the first quarter of 2024, compared to 4.89% for the first quarter of 2023.

Current wording

Average interest earning assets for the second quarter of 2024 decreased by $105.4 million, or 1.2%, to $9,017 million for the second quarter of 2024, compared to $9,122 million for the second quarter of 2023. The average yield on interest earning assets increased by 70 basis points to 5.78% for the second quarter of 2024, compared to 5.08% for the second quarter of 2023.

Previous wording

Average interest bearing liabilities for the first quarter of 2024 increased by $135.9 million, or 2.3%, to $6,006 million, compared to $5,870 million for the first quarter of 2023. The average cost of interest bearing liabilities increased by 79 basis points to 2.08% for the first quarter of 2024, compared to 1.29% for the first quarter of 2023.

Current wording

Average interest bearing liabilities for the second quarter of 2024 increased by $83.3 million, or 1.4%, to $5,940 million, compared to $5,856 million for the second quarter of 2023. The average cost of interest bearing liabilities increased by 52 basis points to 2.10% for the second quarter of 2024, compared to 1.58% for the second quarter of 2023.

Previous wording

Yield on Loans: Average loan balances increased $383.4 million, or 5.4%, to $7,483 million for the first quarter of 2024, compared to $7,099 million for the first quarter of 2023. The average yield on the loan portfolio increased by 75 basis points to 5.99% for the first quarter of 2024, compared to 5.24% for the first quarter of 2023.

Current wording

Yield on Loans: Average loan balances increased $455.1 million, or 6.4%, to $7,587 million for the second quarter of 2024, compared to $7,132 million for the second quarter of 2023. The average yield on the loan portfolio increased by 70 basis points to 6.13% for the second quarter of 2024, compared to 5.43% for the second quarter of 2023.

Previous wording

Cost of Deposits: Average interest bearing deposit balances increased $167.4 million, or 3.1%, to $5,644 million for the first quarter of 2024, compared to $5,477 million for the first quarter of 2023. The average cost of funds on deposit balances increased by 79 basis points to 1.94% for the first quarter of 2024, compared to 1.15% for the first quarter of 2023. The table below shows for the three months ended March 31, 2024 and 2023, the average balance and cost of funds by type of deposit.

Current wording

Cost of Deposits: Average interest bearing deposit balances increased $117.6 million, or 2.1%, to $5,627 million for the second quarter of 2024, compared to $5,509 million for the second quarter of 2023. The average cost of funds on deposit balances increased by 53 basis points to 1.99% for the second quarter of 2024, compared to 1.46% for the second quarter of 2023. The table below shows for the three months ended June 30, 2024 and 2023, the average balance and cost of funds by type of deposit.

Previous wording

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

Current wording

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

Previous wording

(1) Loan interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was $241,000 for the three months ended March 31, 2024, and $811,000, $627,000, and $704,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

Current wording

(1) Loan interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was $479,000 for the six months ended June 30, 2024, and $811,000, $627,000, and $704,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

Previous wording

(2) Interest income on tax-exempt investment securities includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was $375,000 for the three months ended March 31, 2024, and $2.9 million, $2.9 million, and $2.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Current wording

(2) Interest income on tax-exempt investment securities includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was $742,000 for the six months ended June 30, 2024, and $2.9 million, $2.9 million, and $2.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

The total allowance for credit losses of $85.1 million at March 31, 2024 represented a $1.3 million, or 1.6%, increase compared to $83.7 million at December 31, 2023. The increase was due to a $1.3 million increase in general reserves and a $49,000 increase in specific reserves.

Current wording

The total allowance for credit losses of $86.6 million at June 30, 2024 represented a $1.5 million, or 1.8%, increase compared to $85.1 million at March 31, 2024. The increase was due to a $1.2 million increase in general reserves and a $279,000 increase in specific reserves.

Previous wording

Park's watch list includes all criticized and classified commercial loans defined by Park as loans rated special mention or worse. Park had $59.5 million of collectively evaluated commercial loans included on the watch list at March 31, 2024, compared to $60.7 million at December 31, 2023, and $89.6 million at March 31, 2023. 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.

Current wording

Park's watch list includes all criticized and classified commercial loans defined by Park as loans rated special mention or worse. Park had $74.1 million of collectively evaluated commercial loans included on the watch list at June 30, 2024, compared to $60.7 million at December 31, 2023, and $103.3 million at June 30, 2023. The existing conditions of these loans do not warrant classification as nonaccrual. However, these loans have shown some weakness and management performs additional analysis regarding each borrower's ability to comply with payment terms.

Previous wording

Park considers a loan delinquent when it reaches 30 days past due. Delinquent and accruing loans were $21.6 million, or 0.29%, of total loans at March 31, 2024, compared to $23.5 million, or 0.31% of total loans at December 31, 2023, and $14.0 million or 0.20% of total loans at March 31, 2023.

Current wording

Park considers a loan delinquent when it reaches 30 days past due. Delinquent and accruing loans were $25.4 million, or 0.33%, of total loans at June 30, 2024, compared to $23.5 million, or 0.31% of total loans at December 31, 2023, and $18.7 million or 0.26% of total loans at June 30, 2023.

Previous wording

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

Current wording

Individually evaluated commercial loans were $55.0 million at June 30, 2024, an increase of $9.8 million, compared to $45.2 million at December 31, 2023 and an increase of $11.1 million, compared to $43.9 million at June 30, 2023. At June 30, 2024, Park had taken partial charge-offs of $2.2 million related to the $55.0 million of individually evaluated commercial loans, compared to partial charge-offs of $2.3 million related to the $45.2 million of individually evaluated commercial loans at December 31, 2023.

Previous wording

Loans Acquired with Deteriorated Credit Quality: PCD loans are individually evaluated on a quarterly basis to determine if a reserve is necessary. At March 31, 2024 and at December 31, 2023, there was no allowance for credit losses on PCD loans. The carrying amount of accruing loans acquired with deteriorated credit quality at March 31, 2024 and at December 31, 2023 was $2.5 million and $2.8 million, respectively. The carrying amount of nonaccrual loans acquired with deteriorated credit quality at March 31, 2024 and at December 31, 2023 was $544,000 and $534,000, respectively.

Current wording

Loans Acquired with Deteriorated Credit Quality: PCD loans are individually evaluated on a quarterly basis to determine if a reserve is necessary. At June 30, 2024 and at December 31, 2023, there was no allowance for credit losses on PCD loans. The carrying amount of accruing loans acquired with deteriorated credit quality at June 30, 2024 and at December 31, 2023 was $2.4 million and $2.8 million, respectively. The carrying amount of nonaccrual loans acquired with deteriorated credit quality at June 30, 2024 and at December 31, 2023 was $546,000 and $534,000, respectively.