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 September 30, 2024 and September 30, 2023 and for the nine months ended September 30, 2024 and September 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 (recovery of) 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 March 31, 2025 and March 31, 2024. 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 September 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 begins to lower rates, but at a faster pace than the baseline scenario; (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 fourth quarter of 2024 and lasts through the second quarter of 2025 resulting in real GDP declining by 2.6%, unemployment rates rising to a peak of 8.3% in the fourth quarter of 2025, and the stock market falling 35% from the fourth quarter of 2024 to the second quarter of 2025. The adverse scenario also forecasts Ohio unemployment for the next twelve months to range from 6.9% to 9.5%. Excluding consideration of qualitative adjustments, this sensitivity analysis would result in a hypothetical increase in Park's ACL of $26.1 million as of September 30, 2024 if only the adverse scenario was used. Excluding consideration of qualitative adjustments, a corresponding $26.1 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 March 31, 2025, 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) Worries that the Israel-Hamas ceasefire will collapse and Russia's invasion of the Ukraine will persist longer than expected. Risk grows that China may block the Taiwan Strait, causing business and consumer confidence to decline. Retaliatory tariffs reduce U.S. exports and lead to a global downturn. (2) Due to continuing concerns about rising inflation, the Federal Reserve raises federal funds rates. However, the Federal Reserve resumes easing rates as the recession persists. (3) Europe goes into a recession as increased tariffs lower exports. Populism in Europe rises, raising uncertainties about the longevity of the Euro zone and causes financial stress to highly indebted nations. These developments further lower U.S. exports and the corporate earnings of foreign subsidiaries of U.S. companies. (4) Impacts of Trump tariffs and deportations are significantly worse than expected. Tariffs will be levied on China, Canada, Mexico and Europe and tariff rates will be the same as in the baseline forecast, however, tariffs will remain at the high level throughout 2025-2026. Retaliatory tariffs reduce U.S. exports and lead to global turn-down. Tax revenues are lower than in the baseline creating a higher deficit. (5) A recession occurs in the second quarter of 2025 and lasts through the fourth quarter of 2025 resulting in real GDP declining by 2.6%, unemployment rates rising to a peak of 8.3% in the second quarter of 2026, and the stock market falling 35% from the second quarter of 2025 to the fourth quarter of 2025. The adverse scenario also forecasts Ohio unemployment for the next twelve months to range from 6.7% to 9.6%. Excluding consideration of qualitative adjustments, this sensitivity analysis would result in a hypothetical increase in Park's ACL of $28.3 million as of March 31, 2025 if only the adverse scenario was used. Excluding consideration of qualitative adjustments, a corresponding $28.3 million decrease in Park's ACL would occur in a hypothetical scenario if only the baseline (most likely) scenario was used.

Previous wording

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

Current wording

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

Previous wording

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 income/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. During the three months and the nine months ended September 30, 2024, Park exceeded the pension settlement threshold established in ASC 715-30 and recognized in income a pro-rata portion of the unamortized gain in accumulated other comprehensive loss (pension settlement gain).

Current wording

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 income/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.

Previous wording

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.

Current wording

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 income/expense and obligation.

Previous wording

Net income for the three months ended September 30, 2024 of $38.2 million represented a $1.3 million, or 3.5%, increase compared to $36.9 million for the three months ended September 30, 2023. Pre-tax, pre-provision net income for the three months ended September 30, 2024 of $52.0 million represented a $7.8 million, or 17.6%, increase compared to $44.2 million for the three months ended September 30, 2023. Weighted average diluted common shares outstanding were 16,264,393 for the third quarter of 2024, compared to 16,217,880 weighted average diluted common shares outstanding for the third quarter of 2023.

Current wording

Net income for the three months ended March 31, 2025 of $42.2 million represented a $7.0 million, or 19.8%, increase compared to $35.2 million for the three months ended March 31, 2024. Pre-tax, pre-provision net income for the three months ended March 31, 2025 of $52.0 million represented a $7.4 million, or 16.5%, increase compared to $44.6 million for the three months ended March 31, 2024. Weighted average diluted common shares outstanding were 16,238,701 for the first quarter of 2025, compared to 16,191,065 weighted average diluted common shares outstanding for the first quarter of 2024.

Previous wording

Net interest income of $294.6 million for the nine months ended September 30, 2024 represented a $16.5 million, or 5.9%, increase compared to $278.0 million for the nine months ended September 30, 2023. The increase was a result of a $42.9 million increase in interest income, partially offset by a $26.4 million increase in interest expense.

Current wording

Net interest income of $104.4 million for the three months ended March 31, 2025 represented a $8.8 million, or 9.2%, increase compared to $95.6 million for the three months ended March 31, 2024. The increase was a result of a $5.6 million increase in interest income and a $3.2 million decrease in interest expense.

Previous wording

The $42.9 million increase in interest income was due to a $55.4 million increase in interest income on loans, partially offset by a $12.5 million decrease in investment income. The $55.4 million increase in interest income on loans was primarily the result of a $417.0 million (or 5.82%) increase in average loans, from $7.17 billion for the nine months ended September 30, 2023 to $7.58 billion for the nine months ended September 30, 2024, as well as an increase in the yield on loans, which increased 68 basis points to 6.12% for the nine months ended September 30, 2024, compared to 5.44% for the nine months ended September 30, 2023. The $12.5 million decrease in investment income was primarily the result of a $550.6 million (or 27.23%) decrease in average investments, including money market investments, from $2.02 billion for the nine months ended September 30, 2023 to $1.47 billion for the nine months ended September 30, 2024. The decrease in average investments was partially offset by an increase in the yield on investments, including money market investments, which increased 17 basis points to 3.97% for the nine months ended September 30, 2024, compared to 3.80% for the nine months ended September 30, 2023.

Current wording

The $5.6 million increase in interest income was due to a $9.4 million increase in interest income on loans, partially offset by a $3.8 million decrease in investment income. The $9.4 million increase in interest income on loans was primarily the result of a $350.6 million (or 4.69%) increase in average loans, from $7.48 billion for the three months ended March 31, 2024 to $7.83 billion for the three months ended March 31, 2025, as well as an increase in the yield on loans, which increased 27 basis points to 6.26% for the three months ended March 31, 2025, compared to 5.99% for the three months ended March 31, 2024. The $3.8 million decrease in investment income was primarily the result of a $188.4 million (or 12.03%) decrease in average investments, including money market investments, from $1.57 billion for the three months ended March 31, 2024 to $1.38 billion for the three months ended March 31, 2025. The decrease in investment income was also due to a decrease in the yield on investments, including money market investments, which decreased 56 basis points to 3.50% for the three months ended March 31, 2025, compared to 4.06% for the three months ended March 31, 2024.

Previous wording

The $26.4 million increase in interest expense was due to a $26.2 million increase in interest expense on deposits, as well as a $0.2 million increase in interest expense on borrowings. The increase in interest expense on deposits was the result of a $138.2 million (or 2.49%) increase in average on-balance sheet interest bearing deposits from $5.54 billion for the nine months ended September 30, 2023, to $5.68 billion for the nine months ended September 30, 2024, as well as an increase in the cost of deposits of 58 basis points, from 1.42% for the nine months ended September 30, 2023 to 2.00% for the nine months ended

Current wording

The $3.2 million decrease in interest expense was due to a $2.0 million decrease in interest expense on deposits, as well as a $1.2 million decrease in interest expense on borrowings. The decrease in interest expense on deposits was the result of a decrease in the cost of deposits of 18 basis points, from 1.94% for the three months ended March 31, 2024 to 1.76% for the three months ended March 31, 2025. This decrease was partially offset by a $149.8 million (or 2.65%) increase in average on-balance sheet interest bearing deposits from $5.64 billion for the three months ended March 31, 2024, to $5.79 billion for the three months ended March 31, 2025. The increase in on-balance sheet interest bearing deposits was due to an increase in savings accounts and time deposits, which was partially offset by decreases in transaction accounts and brokered and bid CD deposits. The decrease in interest expense on borrowings was the result of a decrease in the cost of borrowings of 31 basis points, from 4.25% for the three months ended March 31, 2024 to 3.94% for the three months ended March 31, 2025 as well as a $92.4 million (or 25.56%) decrease in average borrowings from $361.7 million for the three months ended March 31, 2024, to $269.3 million for the three months ended March 31, 2025.

Previous wording

The provision for credit losses of $10.6 million for the nine months ended September 30, 2024 represented an increase of $9.5 million, compared to $1.1 million for the nine months ended September 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.

Current wording

The provision for credit losses of $756,000 for the three months ended March 31, 2025 represented a decrease of $1.4 million, compared to $2.2 million for the three months ended March 31, 2024. 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 nine months ended September 30, 2024 and 2023.

Current wording

The table below reflects Park's total other income for the three months ended March 31, 2025 and 2024.

Previous wording

Other income of $91.5 million for the nine months ended September 30, 2024 represented an increase of $14.4 million, or 18.7%, compared to $77.1 million for the nine months ended September 30, 2023. The $4.8 million increase in income from fiduciary activities was largely due to an increase in the market value of assets under management as well as updates to the fee structure. The $515,000 increase in other service income was mainly due to an increase in mortgage related other service income. The $577,000 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 $2.3 million increase in bank owned life insurance income was primarily related to an increase in death benefits received during the nine months ended September 30, 2024. The change in pension settlement gain was due to a $5.8 million pension settlement gain, which was related to a combination of lump sum payouts as well as the purchase of a nonparticipating annuity contract that will provide ongoing benefits to vested and retired participants. 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 nine months ended September 30, 2024. No loss on sale of debt securities, net was recorded during the nine months ended September 30, 2023. The $610,000 increase in the gain on equity securities, net, was due to a $1.2 million increase in the gain on equity securities carried at fair value, partially offset by a $608,000 decrease in the gain on equity securities carried at NAV. The $933,000 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.

Current wording

Other income of $25.7 million for the three months ended March 31, 2025 represented a decrease of $454,000, or 1.7%, compared to $26.2 million for the three months ended March 31, 2024. The $970,000 increase in income from fiduciary activities was largely due to an increase in the market value of assets under management. The $301,000 increase in service charges on deposits was largely due to an increase in maintenance fees on deposits. The $412,000 increase in other service income was mainly due to an increase in mortgage related other service income. The $1.1 million decrease in bank owned life insurance income was primarily related to a decrease in death benefits received during the three months ended March 31, 2025. 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 compared to no net losses on the sale of debt securities during the three months ended March 31, 2025. The decrease in miscellaneous income was largely due to an increase in net loss on sale and disposal of assets, largely due to the impact of strategic initiatives.

Previous wording

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

Current wording

The table below reflects Park's total other expense for the three months ended March 31, 2025 and 2024.

Previous wording

Total other expense of $238.1 million for the nine months ended September 30, 2024 represented an increase of $7.9 million compared to $230.2 million for the nine months ended September 30, 2023. The increase in salaries expense was primarily related to increases in base salary expense and additional incentive compensation expense, that included a $1.7 million accrual for a one-time incentive payment, partially offset by a decrease in share-based compensation expense. The decrease in employee benefit expense was primarily due to a decrease in group insurance expense, partially offset by an increase in retirement expense. The decrease in furniture and equipment expense was primarily due to decreases in depreciation expense and maintenance and repairs expense. The increase in data processing fees was mainly related to an increase in software related expenses, partially offset by a decrease in ATM and debit card processing 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, audit fee expense and IntraFi deposit fee expense. The increase in marketing expense was primarily due to increases in advertising expense. The decrease in insurance expense was primarily due to decreases in FDIC insurance expense. The increase in foundation contributions was the result of a $2.0 million contribution made during the nine months ended September 30, 2024, with no contribution being made during the nine months ended September 30, 2023. The increase in miscellaneous expense is primarily due to an increase in expense for the allowance for unfunded credit losses.

Current wording

Total other expense of $78.2 million for the three months ended March 31, 2025 represented an increase of $936,000 compared to $77.2 million for the three months ended March 31, 2024. The increase in salaries expense was primarily related to increases in base salary expense, incentive compensation expense, and share-based compensation expense. The decrease in employee benefit expense was primarily due to a decrease in group insurance expense, partially offset by an increase in payroll tax related expense. The increase in occupancy expense was related to increases in rental of lease space expense and utilities expense. The decrease in furniture and equipment expense was primarily due to decreases in depreciation expense. The increase in data processing fees was mainly related to an increase in software related expenses, partially offset by a decrease in ATM and debit card processing expense. The increase in professional fees and services expense was primarily due to increases in legal expenses, consulting expenses, credit services expense and trust system provider expense, partially offset by decreases in other fees expense, temporary wages expense and appraisal related expense. The decrease in marketing expense was primarily due to decreases in advertising expense. The decrease in miscellaneous expense is primarily due to a decrease in expense for the allowance for unfunded credit losses and other non-loan related losses.

Previous wording

The table below provides certain balance sheet information and financial ratios for Park as of or for the nine months ended September 30, 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 three months ended March 31, 2025 and 2024 and the year ended December 31, 2024.

Previous wording

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

Current wording

(1) Average assets for the three months ended March 31, 2025 and 2024 and for the year ended December 31, 2024.

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 $1.8 million and $2.9 million for the nine months ended September 30, 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 $607,000, $616,000 and $2.4 million for the three months ended March 31, 2025 and 2024 and the year ended December 31, 2024, respectively.

Previous wording

(3) Annualized for the nine months ended September 30, 2024 and 2023.

Current wording

(3) Annualized for the three months ended March 31, 2025 and 2024.

Previous wording

Loans outstanding at September 30, 2024 were $7.73 billion, compared to (i) $7.48 billion at December 31, 2023, an increase of $254.8 million, and (ii) $7.35 billion at September 30, 2023, an increase of $381.2 million. The table below breaks out the change in loans outstanding, by loan type.

Current wording

Loans outstanding at March 31, 2025 were $7.88 billion, compared to (i) $7.82 billion at December 31, 2024, an increase of $66.6 million, and (ii) $7.53 billion at March 31, 2024, an increase of $358.7 million. The table below breaks out the change in loans outstanding, by loan type.

Previous wording

Park's allowance for credit losses was $87.2 million at September 30, 2024, compared to $83.7 million at December 31, 2023, an increase of $3.5 million, or 4.2%. 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 $88.1 million at March 31, 2025, compared to $88.0 million at December 31, 2024, an increase of $164,000, or 0.2%. 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

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 were 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 overall deposit balances declined toward pre-pandemic levels.

Current wording

In order to manage the impact of deposit growth on its balance sheet, Park utilizes 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.

Previous wording

During the nine months ended September 30, 2024, total deposits including off balance sheet deposits increased by $170.9 million, or 2.1%. This increase consisted of a $382.9 million increase in total commercial deposits, partially offset by a $136.8 million decrease in total retail deposits, a $74.0 million decrease in brokered and bid CD 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.

Current wording

During the three months ended March 31, 2025, total deposits including off balance sheet deposits increased by $193.8 million, or 2.3%. This increase consisted of a $146.4 million increase in total commercial deposits, a $135.7 million increase in off balance sheet deposits and a $42.8 million increase in retail deposits, partially offset by a $131.0 million decrease in brokered and bid CD deposits. The majority of off balance sheet deposits are commercial and thus impact the change in commercial deposits as the deposits are moved on or off the balance sheet.

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. Public funds are also included in Bid Ohio CDs. The following table details the change in public funds held on Park's balance sheet.

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 and off Park's balance sheet.

Previous wording

As of September 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 $412.9 million of deposits that were over $250,000, but were fully collateralized by Park's investment securities portfolio.

Current wording

As of March 31, 2025, Park had approximately $1.5 billion of uninsured deposits, which was 18.2% of total deposits. Uninsured deposits of $1.5 billion included $400.2 million of deposits that were over $250,000, but were fully collateralized by Park's investment securities portfolio.

Previous wording

Comparison for the Third Quarters of 2024 and 2023

Current wording

Comparison for the First Quarters of 2025 and 2024

Previous wording

Net interest income increased by $6.8 million, or 7.3%, to $101.1 million for the third quarter of 2024, compared to $94.3 million for the third quarter of 2023. See the discussion under the table below.

Current wording

Net interest income increased by $8.8 million, or 9.2%, to $104.4 million for the first quarter of 2025, compared to $95.6 million for the first quarter of 2024. See the discussion under the table below.

Previous wording

Yield on Loans: Average loan balances increased $413.2 million, or 5.7%, to $7,681 million for the third quarter of 2024, compared to $7,267 million for the third quarter of 2023. The average yield on the loan portfolio increased by 59 basis points to 6.24% for the third quarter of 2024, compared to 5.65% for the third quarter of 2023.

Current wording

Yield on Loans: Average loan balances increased $350.6 million, or 4.7%, to $7,833 million for the first quarter of 2025, compared to $7,483 million for the first quarter of 2024. The average yield on the loan portfolio increased by 27 basis points to 6.26% for the first quarter of 2025, compared to 5.99% for the first quarter of 2024.

Previous wording

Cost of Deposits: Average interest bearing deposit balances increased $130.5 million, or 2.3%, to $5,765 million for the third quarter of 2024, compared to $5,635 million for the third quarter of 2023. The average cost of funds on deposit balances increased by 43 basis points to 2.06% for the third quarter of 2024, compared to 1.63% for the third quarter of 2023. The table below shows for the three months ended September 30, 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 $149.8 million, or 2.7%, to $5,794 million for the first quarter of 2025, compared to $5,644 million for the first quarter of 2024. The average cost of funds on deposit balances decreased by 18 basis points to 1.76% for the first quarter of 2025, compared to 1.94% for the first quarter of 2024. The table below shows for the three months ended March 31, 2025 and 2024, 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 nine months ended September 30, 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 three months ended March 31, 2025 and for the years ended December 31, 2024, 2023 and 2022.

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 $1.1 million for the nine months ended September 30, 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 $337,000 for the three months ended March 31, 2025, and $1.5 million, $2.9 million and $2.9 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Previous wording

Cost of Average Interest Bearing Liabilities: The following table shows the cost of funds on average interest bearing liabilities for the nine months ended September 30, 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 three months ended March 31, 2025 and for the years ended December 31, 2024, 2023 and 2022.

Previous wording

The table below provides additional information on the provision for (recovery of) credit losses for the three-month and nine-month periods ended September 30, 2024 and 2023.

Current wording

The table below provides additional information on the provision for credit losses for the three-month periods ended March 31, 2025 and 2024.

Previous wording

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

Current wording

The following table provides additional information related to the allowance for credit losses for Park including information related to individual reserves and general reserves, at March 31, 2025, December 31, 2024, and March 31, 2024. Park has determined that any commercial loans which have been placed on nonaccrual status are to be individually evaluated. Additionally, accruing collateral dependent commercial loans to borrowers experiencing financial difficulty are also to be individually evaluated.

Previous wording

The total allowance for credit losses of $87.2 million at September 30, 2024 represented a $622,000, or 0.8%, increase compared to $86.6 million at June 30, 2024. The increase was due to a $3.5 million increase in general reserves, partially offset by a $2.8 million decrease in specific reserves.

Current wording

The total allowance for credit losses of $88.1 million at March 31, 2025 represented a $164,000, or 0.2%, increase compared to $88.0 million at December 31, 2024. The increase was due to a $419,000 increase in general reserves, partially offset by a $255,000 decrease in individual reserves on nonaccrual loans.

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 $73.0 million of collectively evaluated commercial loans included on the watch list at September 30, 2024, compared to $60.7 million at December 31, 2023, and $87.7 million at September 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.

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 $94.8 million of accruing commercial loans included on the watch list at March 31, 2025, compared to $99.9 million at December 31, 2024, and $59.5 million at March 31, 2024. 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 $24.9 million, or 0.32%, of total loans at September 30, 2024, compared to $23.5 million, or 0.31% of total loans at December 31, 2023, and $16.3 million or 0.22% of total loans at September 30, 2023.

Current wording

Park considers a loan delinquent when it reaches 30 days past due. Delinquent and accruing loans were $24.2 million, or 0.31%, of total loans at March 31, 2025, compared to $28.4 million, or 0.36% of total loans at December 31, 2024, and $21.6 million or 0.29% of total loans at March 31, 2024.

Previous wording

Individually Evaluated Loans: Loans that do not share risk characteristics are evaluated on an individual basis. Park has determined that any commercial loans which have been placed on nonaccrual status will be individually evaluated. Individual analysis will establish a reserve for loans in scope. Reserves on individually evaluated commercial loans are typically based on management’s best estimate of the fair value of collateral securing these loans. The amount ultimately charged off for these loans may be different from the reserve as the ultimate liquidation of the collateral may be for an amount different from management’s estimate.

Current wording

Individually Evaluated Loans: Loans that do not share risk characteristics are evaluated on an individual basis. Park has determined that any commercial loans which have been placed on nonaccrual status will be individually evaluated. Additionally, accruing collateral dependent commercial loans to borrowers experiencing financial difficulty will be individually evaluated. Individual analysis will establish a reserve for loans in scope. Reserves on individually evaluated commercial loans are typically based on management’s best estimate of the fair value of collateral securing these loans. The amount ultimately charged off for these loans may be different from the reserve as the ultimate liquidation of the collateral may be for an amount different from management’s estimate.

Previous wording

Individually evaluated commercial loans were $53.6 million at September 30, 2024, an increase of $8.4 million, compared to $45.2 million at December 31, 2023 and an increase of $12.8 million, compared to $40.8 million at September 30, 2023. At September 30, 2024, Park had taken partial charge-offs of $5.1 million related to the $53.6 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

At March 31, 2025 Park had taken partial charge-offs of $3.4 million related to the $47.7 million of nonaccrual individually evaluated commercial loans, compared to partial charge-offs of $5.0 million related to the $53.1 million of nonaccrual individually evaluated commercial loans at December 31, 2024.

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 September 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 September 30, 2024 and at December 31, 2023 was $2.2 million and $2.8 million, respectively. The carrying amount of nonaccrual loans acquired with deteriorated credit quality at September 30, 2024 and at December 31, 2023 was $548,000 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 March 31, 2025 and at December 31, 2024, there was no allowance for credit losses on PCD loans. The carrying amount of accruing loans acquired with deteriorated credit quality at March 31, 2025 and at December 31, 2024 was $2.1 million and $2.2 million, respectively. The carrying amount of nonaccrual loans acquired with deteriorated credit quality at March 31, 2025 and at December 31, 2024 was $546,000 and $551,000, respectively.

Previous wording

Additional Considerations: As part of its quarterly allowance process, Park evaluates certain industries which are more likely to be under economic stress in the current environment. The office sector continues to face challenges as it adjusts to the new normal of work from home brought on by the pandemic. Nationally, office properties in downtown and urban business districts are seeing the most stress. As of September 30, 2024, Park had $229.4 million of loans which were fully or partially secured by non-owner-occupied office space, $227.8 million of which were accruing. This portfolio is not currently exhibiting signs of stress, but Park continues to monitor this portfolio, and others, for signs of deterioration.

Current wording

Additional Considerations: As part of its quarterly allowance process, Park evaluates certain industries which are more likely to be under economic stress in the current environment. The office sector continues to face challenges as it adjusts to the new normal of work from home brought on by the pandemic. Nationally, office properties in downtown and urban business districts are seeing the most stress. As of March 31, 2025, Park had $247.4 million of loans which were fully or partially secured by non-owner-occupied office space, $245.2 million of which were accruing. This portfolio is not currently exhibiting signs of stress, but Park continues to monitor this portfolio, and others, for signs of deterioration.