PARK NATIONAL CORP /OH/ (PRK) FY 2024 MD&A

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

NON-U.S. GAAP FINANCIAL MEASURES

Management's discussion and analysis 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 measures, as well as the reconciliation from the comparable U.S. GAAP financial measures, can be found herein.

Items Impacting Comparability of Period Results

From time to time, revenue, expenses and/or taxes are impacted by items judged by management of Park to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that their 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.

Management believes the disclosure of items impacting comparability of period results provides a better understanding of Park's performance and trends and allows management to ascertain which of such items, if any, to include or exclude from an analysis of Park's performance; i.e., within the context of determining how that performance differed from expectations, as well as how, if at all, to adjust estimates of future performance taking such items into account.

Items impacting comparability of the results of particular periods are not intended to be a complete list of items that may materially impact current or future period performance.

Non-U.S. GAAP Financial Measures

Park's management uses certain non-U.S. GAAP financial measures to evaluate Park's performance. Specifically, management reviews the return on average tangible equity, the return on average tangible assets, the tangible equity to tangible assets ratio, and pre-tax, pre-provision net income ("PTPP").

Management has included in this Management's Discussion and Analysis of Financial Condition and Results of Operation, information relating to the return on average tangible equity, the return on average tangible assets, the tangible equity to tangible assets ratio,and pre-tax, pre-provision net income for the years ended December 31, 2024, December 31, 2023, and December 31, 2022. For the purpose of calculating the return on average tangible equity, a non-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 return on average tangible assets, a non-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 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 pre-tax, pre-provision net income, a non-GAAP financial measure, income taxes and the provision for credit losses are added back to net income, in each case during the applicable period.

Management believes that the disclosure of the return on average tangible equity, the return on average tangible assets, the tangible equity to tangible assets ratio, and pre-tax, pre-provision net income presents additional information to the reader of the consolidated financial statements, which, when read in conjunction with the consolidated financial statements prepared in accordance with U.S. GAAP, assists in analyzing Park's operating performance, ensures comparability of operating

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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 "ANALYSIS OF EARNINGS - Items Impacting Comparability" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations, Park has provided a reconciliation of average tangible equity from average shareholders' equity, average tangible assets from average assets, tangible equity from total shareholders' equity, tangible assets from total assets, and pre-tax, pre-provision net income from net income solely for the purpose of complying with SEC Regulation G and not as an indication that the return on average tangible equity, the return on average tangible assets, the tangible equity to tangible assets ratio, and pre-tax, pre-provision net income are substitutes for the return on average equity, the return on average assets, the total shareholders' equity to total assets ratio, and net income, respectively, as determined in accordance with U.S. GAAP

FTE (fully taxable equivalent) Financial Measures

Interest income, yields, and ratios on a FTE basis are considered non-U.S. GAAP financial measures. Management believes net interest income on a FTE basis provides an insightful picture of the interest margin for comparison purposes. The FTE basis also allows management to assess the comparability of revenue arising from both taxable and tax-exempt sources. The FTE basis assumes a corporate federal statutory tax rate of 21%. In the tables included within the "ANALYSIS OF EARNINGS - Net Interest Income" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations, Park has provided detail 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.

OVERVIEW

The table below reflects Park's net income for the years ended December 31, 2024, 2023 and 2022.

(1) PTPP net income is calculated as net income, plus income taxes, plus the provision for credit losses, in each case during the applicable period.

Net income for the year ended December 31, 2024 of $151.4 million represented a $24.7 million, or 19.5%, increase compared to $126.7 million for the year ended December 31, 2023. Net income for the year ended December 31, 2023 of $126.7 million represented a $21.6 million, or 14.6%, decrease compared to $148.4 million for the year ended December 31, 2022.

Pre-tax, pre-provision net income (non-U.S. GAAP) for the year ended December 31, 2024 of $199.3 million represented a $42.8 million, or 27.3%, increase compared to $156.5 million for the year ended December 31, 2023. Pre-tax, pre-provision net income for the year ended December 31, 2023 of $156.5 million represented a $28.5 million, or 15.4%, decrease compared to $185.0 million for the year ended December 31, 2022.

Highlights from the years ended December 31, 2024, 2023, and 2022 included:

•During the year ended December 31, 2024, Park recognized a $6.1 million pension settlement gain due to a combination of lump sum payouts as well as the purchase of a nonparticipating annuity contract which will provide ongoing benefits to vested and retired participants. There was no pension settlement gain recognized during the years ended December 31, 2023 and December 31, 2022.

•Park completed a series of debt security sale trades in November 2023, selling an aggregate of $291.0 million in available-for-sale ("AFS") debt securities with a net pre-tax loss of $7.9 million for the year ended December 31, 2023. Among the various objectives of the trade, the liquidity generated from the sale was used to reduce borrowing needs

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and improve the overall net interest margin. A net loss on sale of debt securities of $526,000 was recognized during the year ended December 31, 2024. No gain or loss on the sale of debt securities was recorded in the year ended December 31, 2022.

•During the years ended December 31, 2024 and 2022, Park recognized $115,000 and $5.6 million, respectively, in net gains on the sale of OREO related to former Vision Bank relationships. There was no gain on the sale of OREO, net, related to former Vision Bank relationships during the year ended December 31, 2023.

•During the years ended December 31, 2023 and 2022, Park recognized $46,000 and $12.0 million, respectively, in OREO valuation markups related to the foreclosure and subsequent sale of properties collateralizing former Vision Bank relationships. There was no OREO valuation markup related to former Vision Bank relationships during the year ended December 31, 2024.

•During the years ended December 31, 2024, 2023, and 2022, Park incurred $215,000, $100,000 and $1.8 million, respectively, in direct expenses related to the collection of payments on former Vision Bank loan relationships.

•During the year ended December 31, 2024, Park contributed $2.0 million to its charitable foundation, compared to $1.0 million for the year ended December 31, 2023 and $4.0 million for the year ended December 31, 2022.

•Park's loans outstanding at December 31, 2024 increased 4.6% compared to December 31, 2023. Park's loans outstanding at December 31, 2023 increased 4.7% compared to December 31, 2022.

Net income for each of the years ended December 31, 2024, 2023 and 2022, included several items of income and expense that impacted comparability of period results. These items are detailed in the "ANALYSIS OF EARNINGS - Items Impacting Comparability" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations.

DIVIDENDS ON COMMON SHARES

Cash dividends declared on Park's common shares were $4.74 in 2024, $4.20 in 2023 and $4.66 in 2022. Dividends declared as a percentage of net income was 51%, 54% and 51% for 2024, 2023 and 2022, respectively. Management targets a dividend payout ratio of 50% each year.

The quarterly cash dividend on Park's common shares was $1.06 per share for the first, second and third quarters of 2024, and $1.56 per share for the fourth quarter of 2024. The fourth quarter of 2024 included a one-time special cash dividend of $0.50 per share. The quarterly cash dividend on Park's common shares was $1.05 per share for each of the quarters of 2023. The quarterly cash dividend on Park's common shares was $1.04 per share for the first, second and third quarters of 2022, and $1.54 per share for the fourth quarter of 2022. The fourth quarter of 2022 included a one-time special cash dividend of $0.50 per share.

Please see the discussion of limitations on Park's ability to pay dividends in the section captioned "Supervision and Regulation of Park and its Subsidiaries – Limits on Dividends and Other Payments" in "ITEM 1. BUSINESS" of this Annual Report on Form 10-K.

CRITICAL ACCOUNTING ESTIMATES

The significant accounting estimates used in the development and presentation of Park’s consolidated financial statements are listed in "Note 1 - Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements included in "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA."  The accounting and reporting estimates of Park conform with U.S. GAAP and general practices within the financial services industry.  The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes.  Actual results could differ from those estimates.

Allowance for Credit Losses: Park believes the determination of the allowance for credit losses involves a higher degree of judgment and complexity than its other significant accounting policies. The allowance for credit losses is calculated with the objective of maintaining a reserve level believed by management to be sufficient to absorb estimated credit losses over the life of an asset or an off-balance sheet credit exposure. Management’s determination of the adequacy of the allowance for credit losses is based on periodic evaluations of past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. However, this evaluation has subjective components requiring material estimates, including expected default probabilities, the expected loss given default, the amounts and timing of expected future cash flows on individually evaluated loans, and estimated losses based on historical loss experience and forecasted economic conditions. All of these factors may be susceptible to significant change. To the extent that actual results differ from management estimates, additional provisions for credit losses may be required that would adversely impact earnings in future periods.

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One of the significant judgments impacting the ACL estimate is the economic forecasts for Ohio unemployment, Ohio GDP, and Ohio HPI. These economic forecasts inform the regression model used to calculate cash flows during the reasonable and supportable forecast period. Additionally, multiple economic forecast scenarios are weighted to arrive at the quantitative reserve. Changes in the economic forecast or weighting could significantly affect the estimated credit losses which could potentially lead to materially different allowance levels from one reporting period to the next.

As noted above, in calculating the ACL, management weighs different scenarios, including a baseline (most likely) scenario and an adverse scenario. At December 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 and China briefly interrupts trade through the Taiwan Strait and the Russian invasion lasts longer than expected. Worries grow that the Hamas-Israel conflict will lead to a wider conflict. (2) Due to continuing concerns about rising inflation, the Federal Reserve raises the federal funds rate. However, it resumes easing in Q3 2025 as a downturn persists. (3) Europe goes into a recession as increased tariffs lower exports. Populism in Europe rises, raising uncertainties about longevity of the Euro and causes financial stress to highly indebted nations, especially Italy. (4) Impacts of Trump tariffs and deportations are significantly worse than expected. Tariffs will be levied on China, Canada, Mexico and Europe and the tariff rate will increase more than in the baseline forecast before rolling back in 2026. Retaliatory tariffs reduce US exports and lead to a global turndown. Tax revenues are lower than in the baseline creating a higher deficit. (5) Recession in Q1 2025 which lasts through Q3 2025. Real GDP declines by 2.6%. The unemployment rate rises to a peak of 8.3% in Q1 2026. The stock market falls 35% from Q1 2025 to Q3 2025. The adverse scenario forecasts Ohio unemployment for the next twelve months to range from 6.6% to 9.5%. Excluding consideration of qualitative adjustments, this sensitivity analysis would result in a hypothetical increase in Park's ACL of $27.5 million as of December 31, 2024 if only the adverse scenario was used. Excluding consideration of qualitative adjustments, a corresponding $27.5 million decrease in Park's ACL would occur in a hypothetical scenario if only the baseline (most likely) scenario was used.

Refer to the “CREDIT METRICS AND PROVISION FOR CREDIT LOSSES” section within this "ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" for additional discussion.

Pension Plan: The determination of pension plan obligations and related expenses requires the use of assumptions to estimate the amount of benefits that employees will earn while working, as well as the present value of those benefits. Annual pension 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 year ended December 31, 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).

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.

The most significant of these assumptions is the discount rate and the expected return on assets. The discount rate utilized for the December 31, 2024 calculation was 5.89% and the expected return on plan assets was 6.92%. This compares to the discount rate utilized for the December 31, 2023 calculation of 5.14% and the expected return on plan assets of 6.92%. Presented below is the estimated impact on Park's projected benefit obligation ("PBO") and 2024 pension expense assuming changes in the significant assumptions.

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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.

ABOUT OUR BUSINESS

Through our national bank subsidiary, PNB, Park is engaged in a general commercial banking and trust business, primarily in Ohio, Kentucky, North Carolina and South Carolina, with the exception of nationwide aircraft loans and nationwide asset-based lending to consumer finance companies. Management believes there are a significant number of consumers and businesses that seek long-term relationships with community-based financial institutions of quality and strength.  While not engaging in activities such as foreign lending, nationally syndicated loans or investment banking, Park attempts to meet the needs of our customers for commercial, real estate and consumer loans, and investment, fiduciary and deposit services.

Park’s subsidiaries compete for deposits and loans with other banks, savings associations, credit unions and other types of financial institutions.  At December 31, 2024, Park operated 87 financial service offices (including those of PNB and Scope Leasing, Inc. ("Scope Aircraft Finance")) and a network of 108 automated teller machines in 24 Ohio counties, five North Carolina counties, four South Carolina counties and one Kentucky county. SEPH and Guardian each operated one administrative office, located in Newark, Ohio.

SOURCE OF FUNDS

Deposits: Park’s major source of funds is deposits from individuals, businesses and local government entities.  These deposits consist of non-interest bearing and interest bearing deposits.

Average total deposits were $8,260 million in 2024, compared to $8,360 million in 2023 and $8,450 million in 2022. The average interest rate paid on interest bearing deposits was 1.97% in 2024, 1.52% in 2023 and 0.39% in 2022. The average cost of interest bearing deposits for each quarter of 2024 was 1.90% for the fourth quarter, 2.06% for the third quarter, 1.99% for the second quarter and 1.94% for the first quarter.

The table below provides a summary of deposit balances as of December 31, 2024 and 2023, along with the change over the past year.

During the years ended December 31, 2024 and 2023, Park decided to continue participation in a program to transfer deposits off-balance sheet in order to manage growth of the balance sheet. Park is able to increase or decrease the amount of deposit

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balances transferred off balance sheet based on its balance sheet management strategies and liquidity needs. At December 31, 2024 and December 31, 2023, Park had $115.2 million and $1.2 million, respectively, in off balance sheet deposits.

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

During the year ended December 31, 2024, total deposits including off balance sheet deposits increased by $215.0 million, or 2.7%. This increase consisted of a $134.5 million increase in total commercial deposits, a $114.0 million increase in off balance sheet deposits and a $11.5 million increase in brokered and bid CD deposits, partially offset by a $45.0 million decrease in total retail 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.

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

As of December 31, 2024, Park had approximately $1.4 billion of uninsured deposits, which was 17.6% of total deposits. Uninsured deposits of $1.4 billion included $395.4 million of deposits that were over $250,000, but were fully collateralized by Park's investment securities portfolio. As of December 31, 2023, Park had approximately $1.3 billion of uninsured deposits, which was 16.2% of total deposits. Uninsured deposits of $1.3 billion included $288.2 million of deposits which were over $250,000 but were fully collateralized by Park's investment securities portfolio. The uninsured amounts, those in excess of the $250,000 FDIC insurance limit, are estimates based on the methodologies used for the Corporation's regulatory reporting requirements.

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The following table provides a summary of the portion of the Corporation's time deposits, by account, that are in excess of the FDIC insurance limit of $250,000, by remaining time until maturity, as of December 31, 2024:

Short-Term Borrowings: Short-term borrowings consist of securities sold under agreements to repurchase, Federal Home Loan Bank advances, Federal Funds purchased and other borrowings.  These funds are used to manage the Corporation’s liquidity needs and interest rate sensitivity risk.  The average rate paid on short-term borrowings generally moves closely with changes in market interest rates for short-term investments.  The average rate paid on short-term borrowings was 2.60% in 2024, compared to 2.58% in 2023 and 0.67% in 2022. The year-end balance for short-term borrowings was $90 million at December 31, 2024, compared to $328 million at December 31, 2023 and $227 million at December 31, 2022.

Subordinated Notes: Park assumed, with the 2007 acquisition of Vision's parent holding company, $15.5 million of floating rate junior subordinated notes.  The $15.5 million of junior subordinated notes were purchased by Vision Bancshares Trust I ("Trust I") following the issuance of Trust I's $15.0 million of floating rate preferred securities. The interest rate on these junior subordinated notes adjusts every quarter at 174 basis points above the three-month CME Term SOFR.  The maturity date for the junior subordinated notes is December 30, 2035, and, since December 30, 2010, Park has had the right to prepay the junior subordinated notes, without penalty.  These junior subordinated notes qualify as Tier 1 capital under current Federal Reserve Board guidelines.

On August 20, 2020, Park completed the issuance and sale of $175 million aggregate principal amount of its 4.50% Fixed-to-Floating Rate Subordinated Notes due 2030 (the "Subordinated Notes"). The Subordinated Notes initially bear a fixed interest rate of 4.50% per year, payable semi-annually in arrears on March 1 and September 1 of each year, commencing on March 1, 2021. Commencing on September 1, 2025, the Subordinated Notes will bear interest at a floating rate per annum equal to the Benchmark rate, which is expected to be Three-Month Term SOFR, plus a spread of 439 basis points for each quarterly interest period during the floating rate period, payable quarterly in arrears; provided, however, that if the Benchmark rate is less than zero, then the Benchmark rate will be deemed to be zero. The Corporation may, at its option, beginning with the interest payment date of September 1, 2025 and on any interest payment date thereafter, redeem the Subordinated Notes, in whole or in part, subject to obtaining the prior approval of the Federal Reserve Board, if required, at a redemption price equal to 100% of the principal amount of the Subordinated Notes being redeemed, plus accrued and unpaid interest thereon to but excluding the date of redemption. The Subordinated Notes qualify as Tier 2 capital for Park under the Federal Reserve Board's capital adequacy rules.

In 2024, the average balance of subordinated notes was $189 million, compared to $189 million in 2023 and $188 million in 2022. The average interest rate paid on subordinated notes was 4.98% in 2024, compared to 4.97% in 2023 and 4.69% in 2022.

See "Note 18 - Subordinated Notes" of the Notes to Consolidated Financial Statements included in "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" of this Annual Report on Form 10-K for additional information about the Subordinated Notes.

Total Debt: Average total debt (subordinated notes and short-term) was $310 million in 2024, compared to $372 million in 2023 and $396 million in 2022. Average total debt decreased by $62.0 million, or 16.7% in 2024 compared to 2023 and decreased $23.6 million, or 6.0% in 2023 compared to 2022. Average long term subordinated notes were 61% of average total debt in 2024, compared to 51% of average total debt in 2023 and 48% of average total debt in 2022.

Shareholders' Equity: The ratio of total shareholders' equity to total assets was 12.69% at December 31, 2024, compared to 11.64% at December 31, 2023 and 10.85% at December 31, 2022. The non-GAAP ratio of tangible shareholders’ equity [shareholders' equity ($1,243.8 million) less goodwill ($159.6 million) and other intangible assets ($3.4 million)] to tangible assets [total assets ($9,805.4 million) less goodwill ($159.6 million) and other intangible assets ($3.4 million)] was 11.21% at December 31, 2024, compared to 10.14% at December 31, 2023 and 9.33% at December 31, 2022.

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In accordance with U.S. GAAP, Park reflects any unrealized holding gain or loss on AFS debt securities, any unrealized net holding gain or loss on cash flow hedging derivatives and any change in the funded status of Park's pension plan, in each case, net of income taxes, as accumulated other comprehensive (loss) income which is part of Park’s shareholders’ equity.

The unrealized net holding loss, net of income taxes, on AFS debt securities was $62.9 million at year-end 2024, compared to an unrealized net holding loss, net of income taxes, $67.9 million at year-end 2023 and compared to an unrealized net holding loss, net of income taxes, of $95.7 million at year-end 2022. The unrealized net holding loss on AFS debt securities at December 31, 2024 was impacted by the realization of $415,000 in losses, net of income taxes, during the year ended December 31, 2024 as the result of the sale of $44.6 million in AFS debt securities. The unrealized net holding loss on AFS debt securities at December 31, 2023 was impacted by the realization of $6.2 million in losses, net of income taxes, during the year ended December 31, 2023 as the result of the sale of $291.0 million in AFS debt securities.

The unrealized net holding loss, net of income taxes, on cash flow hedging derivatives was zero at year-end 2024, year-end 2023 and year-end 2022. Park's only borrowing cash flow hedging derivative was terminated during 2022.

In accordance with U.S. GAAP, Park adjusts accumulated other comprehensive (loss) income to recognize the net actuarial gain or loss and prior service cost or credit reflected in the funding status of Park’s pension plan.  See "Note 21 - Benefit Plans" of the Notes to Consolidated Financial Statements included in "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" of this Annual Report on Form 10-K for additional information on the accounting for Park’s pension plan. At year-end 2024, the balance in accumulated other comprehensive loss pertaining to the pension plan was unrealized income of $16.8 million, compared to unrealized income of $1.7 million at December 31, 2023 and compared to an unrealized loss of $6.7 million at December 31, 2022.

The net other comprehensive income in 2024 was largely due to a $25.2 million ($19.9 million, net of taxes) net unrealized actuarial gain, partially offset by a $6.1 million ($4.9 million, net of taxes) realized pension settlement gain. The unrealized gain was due to asset returns greater than expected, an increase in the discount rate and assumption updates for a change in the mortality table for lump sum distributions, reflecting updates for the 2024 assumption study, partially offset by demographic losses and an increase in the interest credit rate. The realized pension settlement gain was recognized as a result of a combination of lump sum payouts as well as the purchase of a nonparticipating annuity contract which will provide ongoing benefits to vested participants.

The net other comprehensive income in 2023 was largely due to a $10.5 million ($8.3 million, net of taxes) net actuarial gain. The gain was due to asset returns greater than expected, partially offset by the impact of demographic losses driven by salary increases greater than assumed and a decrease in the discount rate. The net other comprehensive loss in 2022 was largely due to $558,000 ($441,000, net of taxes) in prior service cost, as a result of plan amendments, and a $551,000 ($435,000, net of taxes) net actuarial loss.

INVESTMENT OF FUNDS

Loans:  Average loans were $7,627 million in 2024, compared to $7,222 million in 2023 and $6,956 million in 2022. The average yield on average loan balances was 6.14% in 2024, compared to 5.55% in 2023 and 4.65% in 2022. Approximately 45% of Park’s loan balances mature or reprice within one year (see Table 31).  The average yield on average loan balances for each quarter of 2024 was 6.21% for the fourth quarter, 6.24% for the third quarter, 6.13% for the second quarter and 5.99% for the first quarter.

Loan interest income for 2024, 2023, and 2022 included $54,000, $631,000 and $3.7 million, respectively, related to payments received on certain SEPH nonaccrual loan relationships, some of which are participated with PNB. In addition, loan interest income included $1.2 million, $633,000 and $1.8 million, respectively, of the accretion of loan purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance. Loan interest income for 2023 and 2022 included interest and fee income related to PPP loans of $69,000 and $3.1 million, respectively.

Excluding the impact of the purchase accounting accretion, SEPH income, and PPP income, the average yield on loans was 6.13%, 5.53% and 4.55%, for the years ended December 31, 2024, 2023, and 2022. Excluding the impact of the purchase accounting accretion, SEPH income, and PPP income, the average yield on loans was 6.20% for the fourth quarter of 2024, 6.22% for the third quarter of 2024, 6.11% for the second quarter of 2024, and 5.97% for the first quarter of 2024.

At December 31, 2024, loan balances were $7,817 million compared to $7,476 million at year-end 2023, an increase of $341 million, or 4.6%. At December 31, 2023, loan balances were $7,476 million, compared to $7,142 million at year-end 2022, an increase of $334 million, or 4.7%.

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The table below reports year-end loan balances by type of loan for the past three years.

On a combined basis, year-end commercial, financial and agricultural loans, construction real estate loans and commercial real estate loans increased by $199.8 million, or 5.7%, in 2024. The increase in 2024 was due to an increase in commercial real estate loans of $118.3 million and an increase in construction real estate loans of $107.5 million, which were partially offset by an decrease in commercial, financial and agricultural loans of $26.1 million. On a combined basis, year-end commercial, financial and agricultural loans, construction real estate loans and commercial real estate loans increased $56.3 million, or 1.6%, in 2023. The increase in 2023 was due to an increase in commercial real estate of $81.9 million, partially offset by a decrease of $20.3 million in construction real estate and a $5.3 million decrease in commercial, financial and agricultural loans.

Consumer loans decreased by $35.6 million, or 1.8% in 2024 and increased by $41.0 million, or 2.1%, in 2023. The change in consumer loans in 2024 and 2023 was primarily due to fluctuations in automobile lending in Ohio.

Residential real estate loans increased by $170.9 million, or 8.4% in 2024 and increased by $232.7 million, or 12.9%, in 2023. The increase in 2024 was due to an increase in mortgage loans secured by residential real estate of $106.7 million, an increase in commercial loans secured by residential real estate of $35.0 million, an increase in home equity loans secured by residential real estate of $29.1 million and an increase in installment loans secured by residential real estate of $109,000. The increase in 2023 was due to an increase in mortgage loans secured by residential real estate of $164.4 million, an increase in commercial loans secured by residential real estate of $59.2 million, an increase in home equity loans secured by residential real estate of $7.2 million and an increase in installment loans secured by residential real estate of $1.8 million.

Leases increased by $5.8 million to $29.8 million in 2024 and increased by $4.4 million to $24.0 million in 2023.

The table below summarizes the distribution of maturities for loan segments as of December 31, 2024:

(1) Nonaccrual loans of $68.2 million are included within the one year or less classification above.

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The table below summarizes the composition of the loan portfolio by fixed and adjustable rate as of December 31, 2024 that are contractually due after December 31, 2025:

Investment Securities: Park’s investment securities portfolio is structured to minimize credit risk, provide liquidity and contribute to earnings. As conditions change over time, Park’s overall interest rate risk, liquidity needs and potential return on the investment portfolio will change.  Management regularly evaluates the securities in the investment portfolio as circumstances evolve.  Circumstances that could result in the sale of a security include: to better manage interest rate risk; to meet liquidity needs; or to improve the overall net interest margin.

AFS debt securities are carried on the books at their estimated fair value with the unrealized holding gain or loss, net of income taxes, accounted for as accumulated other comprehensive (loss) income. The debt securities that are classified as AFS are free to be sold in future periods in carrying out Park’s investment strategies.

Beginning in 2021, Park began investing in the AAA and AA rated tranches of Collateralized Loan Obligations ("CLOs"). CLOs had a fair value as of December 31, 2024 of $271.8 million. Management closely monitors the credit status of these securities. At December 31, 2024, the market value of overcollateralization was greater than 121% for each CLO. The market value of overcollateralization is a measure of the underlying collateral value of the instrument relative to our specific tranche position, and our AAA or AA rated senior tranches are supported by subordinate tranches.

Average taxable debt investment securities were $1,082 million in 2024, compared to $1,387 million in 2023 and $1,475 million in 2022. The average yield on taxable debt investment securities was 3.86% in 2024, compared to 3.81% in 2023 and 2.44% in 2022. Average tax-exempt debt investment securities were $219 million in 2024, compared to $400 million in 2023 and $405 million in 2022. The average tax-equivalent yield on tax-exempt debt investment securities was 3.19% in 2024, compared to 3.47% in 2023 and 3.43% in 2022.

Total debt securities (at amortized cost) were $1,076 million at December 31, 2024, compared to $1,419 million at December 31, 2023 and $1,855 million at December 31, 2022. Management purchased debt securities totaling $3 million in 2024, $4 million in 2023 and $317 million in 2022. Proceeds from repayments, redemptions and maturities of debt securities were $300 million in 2024, $145 million in 2023 and $186 million in 2022.

During 2024, Park sold certain AFS debt securities with a book value of $42.3 million at a gross loss of $553,000 and sold certain AFS debt securities with a book value of $2.3 million for a gross gain of $27,000. During 2023, Park sold certain AFS debt securities with a book value of $291.0 million at a gross loss of $7.9 million. There were no sales of AFS debt securities in 2022.

For the years ended December 31, 2024, 2023, and 2022, the average tax-equivalent yield on the total investment portfolio was 3.74%, 3.73% and 2.66%, respectively.  The weighted average remaining maturity of the total investment portfolio was 4.7 years at December 31, 2024, 4.8 years at December 31, 2023 and 5.0 years at December 31, 2022. Obligations of U.S. Government sponsored entities and U.S. Government sponsored entities' asset-backed securities were approximately 47.1% of the total investment portfolio at year-end 2024, 44.4% of the total investment portfolio at year-end 2023 and 43.6% of the total investment portfolio at year-end 2022.

Other investment securities (as shown on Park's Consolidated Balance Sheets) consist of restricted stock investments in the FHLB and the FRB and equity securities which include equity investments in other financial institutions and equity investments in limited partnerships which provide mezzanine funding.  Total other investment securities were $104 million at December 31, 2024, $96 million at December 31, 2023 and $87 million at December 31, 2022. There were $9.2 million in FHLB stock

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purchases in 2024, $18.2 million in FHLB stock purchases in 2023 and no FHLB stock purchases in 2022. Proceeds from the redemption/repurchase of FHLB stock were $18.4 million in 2024, compared to $11.7 million in 2023 and compared to $2.2 million in 2022. No shares of FRB stock were purchased or sold in any of the years ended December 31, 2024, 2023, or 2022. Management purchased equity securities totaling $10.2 million in 2024, $2.2 million in 2023 and $9.2 million in 2022. During the years ended December 31, 2024, 2023, and 2022. Park entered into partnership agreements with commitments totaling $2.5 million, $2.7 million and $16.3 million, respectively. Funding of limited partnerships totaled $7.5 million, $5.6 million and $4.8 million during the years ended December 31, 2024, 2023, and 2022, respectively.

"Gain on equity securities, net" on Park's Consolidated Statements of Income were $3.1 million, $971,000 and $3.0 million for the years ended December 31, 2024, 2023 and 2022, respectively. These gains on equity securities were made up of gains (losses) on equity investments carried at fair value as well as gains (losses) on equity investments carried at modified cost and gains (losses) on partnership investments carried at NAV.

For the years ended December 31, 2024, 2023 and 2022, $2.6 million, $600,000 and $601,000, respectively, of gains on equity investments carried at fair value were recorded within "Gain on equity securities, net" on Park's Consolidated Statements of Income.

For the years ended December 31, 2024, 2023 and 2022, $468,000, $371,000 and $2.4 million, respectively, of gains on equity investments carried at NAV were recorded within "Gain on equity securities, net" on Park's Consolidated Statements of Income.

The average maturity of the investment portfolio would lengthen if long-term interest rates were to increase as principal repayments from mortgage-backed securities and CMOs would decrease and callable securities would price to their maturity dates.  At year-end 2024, management estimated that the average maturity of the investment portfolio would lengthen to 5.1 years with a 100 basis point increase in long-term interest rates and would lengthen to 5.2 years with a 200 basis point increase in long-term interest rates. Likewise, the average maturity of the investment portfolio would shorten if long-term interest rates were to decrease as the principal repayments from mortgage-backed securities and CMOs would increase and callable securities would price to their call dates. At year-end 2024, management estimated that the average maturity of the investment portfolio would decrease to 4.3 years with a 100 basis point decrease in long-term interest rates and to 4.0 years with a 200 basis point decrease in long-term interest rates.

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The table below sets forth the carrying value of investment securities, as well as the percentage held within each category at year-end 2024, 2023 and 2022:

The carrying value of investments in debt securities at December 31, 2024, is shown in the following table by contractual maturity, except for asset-backed securities and collateralized loan obligations, which are shown as a single total, due to the unpredictability of the timing in 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.

ANALYSIS OF EARNINGS

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.  (See the table below for three years of history on the average balances of the balance sheet categories as well as the average rates earned on interest earning assets and the average rates paid on interest bearing liabilities.)

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(1)Loan income includes net loan-related fee (expense) income, purchase accounting accretion and origination expense in the aggregate amount of $(11.6) million in 2024, $(12.1) million in 2023 and $(5.5) million in 2022.  Loan income also includes the effects of taxable equivalent adjustments using a 21%

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federal corporate income tax rate in 2024, 2023 and 2022. The taxable equivalent adjustments were $964,000 in 2024, $811,000 in 2023 and $627,000 in 2022.

(2)For the purpose of the computation for loans, nonaccrual loans are included in the daily average loans outstanding.

(3)Interest income on tax-exempt investment securities includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate in 2024, 2023 and 2022. The taxable equivalent adjustments were $1.5 million in 2024, $2.9 million in 2023 and $2.9 million in 2022.

Average interest earning assets for 2024 decreased $86 million, or 0.9% to $9,086 million, compared to $9,172 million for 2023. The decrease was largely due to a $486 million decrease in average investment securities and a $5 million decrease in average money market instruments, partially offset by a $405 increase in average loans. Average interest earning assets for 2023 decreased by $55 million, or 0.6%, to $9,172 million, compared to $9,227 million for 2022. The average yield on interest earning assets increased by 60 basis points to 5.78% for 2024, compared to 5.18% for 2023 and 4.14% for 2022.

Loan interest income for 2024, 2023, and 2022 included $54,000, $631,000 and $3.7 million, respectively, related to payments received on certain SEPH nonaccrual loan relationships, some of which are participated with PNB. In addition, loan interest income included $1.2 million, $633,000 and $1.8 million, respectively, of the accretion of loan purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance. Loan interest income for 2023 and 2022 included interest and fee income related to PPP loans of $69,000 and $3.1 million, respectively. Excluding the impact of the purchase accounting accretion, SEPH income, and PPP income, the average yield on loans was 6.13%, 5.53% and 4.55%, for the years ended December 31, 2024, 2023, and 2022. Excluding the impact of the purchase accounting accretion, SEPH income, and PPP income, the average yield on earning assets was 5.77%, 5.17% and 4.06%, for the years ended December 31, 2024, 2023 and 2022, respectively, and the net interest margin was 4.39%, 4.09% and 3.72%, for the years ended December 31, 2024, 2023 and 2022, respectively.

Average interest bearing liabilities for 2024 increased by $88 million, or 1.5%, to $6,006 million, compared to $5,918 million for 2023. Average interest bearing liabilities for 2023 increased by $166 million, or 2.9%, to $5,918 million, compared to $5,752 million for 2022. The average cost of interest bearing liabilities increased by 41 basis points to 2.08% for 2024, compared to 1.67% for 2023 and 0.54% for 2022.

For the most recent interest rate cycle, peak through-the-cycle beta on interest bearing deposits (measured as the change from December 31, 2021 to September 30, 2024 compared to the peak change in the Fed Funds target rate) totaled 38%, while the peak through-the-cycle betas on total deposits and total cost of funds were both 26%. During this same time period, betas on loans and total interest earning assets were 32% and 38%, respectively.

The table below shows for the years ended December 31, 2024, 2023, and 2022, the average balance and tax equivalent yield by type of loan.

(1) Commercial loan interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate in 2023, 2022 and 2021. The taxable equivalent adjustments were $964,000 in 2024, $811,000 in 2023 and $627,000 in 2022.

Loan interest income for 2024, 2023, and 2022 included $54,000, $631,000 and $3.7 million, respectively, related to payments received on certain SEPH nonaccrual loan relationships, some of which are participated with PNB, as well as $1.2 million, $633,000 and $1.8 million of purchase accounting accretion for 2024, 2023 and 2022, respectively. Interest income for 2023

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and 2022 included interest and fee income related to PPP loans of $69,000 and $3.1 million, respectively. Below is a summary of the impact of these items on the tax equivalent yield of loans.

•The amount of interest related to purchase accounting accretion included in home equity loan interest income for 2024, 2023 and 2022 was $184,000, $79,000 and $173,000, respectively. Excluding the impact of these items, the average tax equivalent yield on home equity loans was 8.23%, 8.11% and 4.93%, respectively.

•The amount of interest related to purchase accounting accretion included in real estate loan interest income for 2024, 2023 and 2022 was $80,000, $4,000 and $170,000, respectively. Excluding the impact of these items, the average tax equivalent yield on real estate loans was 5.07%, 4.38% and 3.80%, respectively.

•The amount of interest related to PPP income, SEPH nonaccrual loan relationships and purchase accounting accretion included in commercial loan interest income for 2024, 2023 and 2022 was $935,000, $1.2 million and $8.2 million, respectively. Excluding the impact of these items, the average tax equivalent yield on commercial loans was 6.23%, 5.80% and 4.66%, for 2024, 2023 and 2022, respectively.

•Excluding the impact of interest related to PPP income, SEPH nonaccrual loan relationships and purchase accounting accretion, the average tax equivalent yield on total loans and leases was 6.13%, 5.53% and 4.55%, for 2024, 2023, and 2022, respectively.

The table below shows for the years ended December 31, 2024, 2023, and 2022, the average balance and cost of funds by type of deposit.

The following table displays (for each quarter of 2024) the average balance of interest earning assets, the net interest income and the tax equivalent net interest income and net interest margin.

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In the following table, the change in tax equivalent interest due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.

Other Income:  Other income was $122.6 million for 2024, compared to $92.6 million for 2023 and $135.9 million for 2022.

The following table displays total other income for Park in 2024, 2023 and 2022.

Income from fiduciary activities increased by $7.0 million, or 19.8%, to $42.5 million, compared to $35.5 million in 2023. The $35.5 million in 2023 was an increase of $1.4 million, or 4.1%, compared to $34.1 million in 2022. 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 the wealth management assets managed by PNB was $8.58 billion in 2024, compared to $7.69 billion in 2023 and $7.22 billion in 2022.

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The increase in fiduciary fee income in 2024 was largely due to an increase in the market value of assets under management as well as updates to the fee structure. The increase in fiduciary fee income in 2023 was primarily related to an increase in wealth management assets due to improvements in equity market values and new wealth management accounts.

Service charges on deposit accounts increased $556,000, or 6.6%, to $9.0 million in 2024, compared to $8.4 million in 2023. The $8.4 million in 2023 was a decrease of $1.6 million, or 16.3%, compared to $10.1 million in 2022. The increase in 2024 was related to increases in service charges on demand deposit accounts, partially offset by decreases in non-sufficient funds (NSF) fee income. The decrease in 2023 was related to decreases in non-sufficient funds (NSF) fee income.

Other service income increased $1.4 million in 2024, or 14.0%, to $11.7 million, compared to $10.3 million in 2023. The $10.3 million in 2023 was a decrease of $5.0 million, or 32.7%, compared to $15.3 million in 2022. The increase in 2024 compared to 2023 was primarily due to an increase in other service income related to mortgage loan originations, including a $950,000 increase in fee income related to mortgage loan originations to be sold in the secondary market and a $400,000 increase in mortgage servicing rights income. The decrease in 2023 compared to 2022 was primarily related to a decrease in other service income related to mortgage loan originations, including a $2.6 million decrease in fee income related to mortgage loan originations to be sold in the secondary market and a $1.7 million decrease in mortgage servicing rights income, partially offset by a $465,000 increase in income related to investor rate locks and loans held for sale. Park has experienced fluctuations in mortgage loan origination volume resulting in increases and decreases in other service income. A summary of mortgage loan originations for the years ended December 31, 2024, 2023 and 2022 follows.

Debit card fee income, which is generated from debit card transactions, decreased $649,000, or 2.4%, to $25.9 million in 2024, compared to $26.5 million in 2023. The $26.5 million in 2023 was an increase of $476,000, or 1.8%, compared to $26.0 million in 2022. The decrease in 2024 was attributable to a decrease in the average blended interchange rate per transaction, which is influenced by various factors, including the average spend per transaction. This decrease was partially offset by continued increases in both the volume of debit card transactions and increases in total sales dollars of debit card transactions. The increase in 2023 was attributable to continued increases in both the volume of debit card transactions and increases in total sales dollars of debit card transactions. Debit card transaction volume increased 1.3% in 2024 from 2023. Total sales dollars of debit card transactions increased 1.4% in 2024 from 2023. Debit card transaction volume increased 3.4% in 2023 from 2022. Total sales dollars of debit card transactions increased 2.5% in 2023 from 2022. Park continues to focus on deposit offerings that provide incentives for our customers to use their debit card.

Bank owned life insurance income increased $2.4 million, or 45.6%, to $7.8 million in 2024, compared to $5.3 million in 2023. The $5.3 million in 2023 was a decrease of $762,000, or 12.5%, compared to $6.1 million in 2022. The increase in 2024 and the decrease in 2023 was related to death benefit income of $2.0 million recognized in 2024, compared to $325,000 recognized in 2023 and compared to $1.4 million recognized in 2022.

During 2024, Park recognized a $6.1 million pension settlement gain due to a combination of lump sum payouts as well as the purchase of a nonparticipating annuity contract which will provide ongoing benefits to vested participants. There was no pension settlement gain recognized during 2023 or 2022.

Gain (loss) on the sale of OREO, net, reflected a net gain of $42,000 in 2024, compared to a net loss of $3,000 in 2023, and a net gain of $5.6 million in 2022. A $5.6 million gain on the sale of OREO, net, was recognized during 2022 and was related to former Vision Bank relationships.

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OREO valuation markup income was $30,000, $60,000 and $12.0 million for 2024, 2023 and 2022, respectively. The $12.0 million OREO valuation markup during 2022 related to the foreclosure of a property collateralizing a former Vision Bank relationship. This property was subsequently sold during 2022.

During 2024, Park sold certain AFS debt securities with a book value of $42.3 million at a gross loss of $553,000 and sold certain AFS debt securities with a book value of $2.3 million for a gross gain of $27,000. During 2023, Park sold certain AFS debt securities with a book value of $291.0 million at a gross loss of $7.9 million. No debt securities were sold in 2022.

During the years ended December 31, 2024, 2023 and 2022, $2.6 million, $600,000 and $601,000, respectively, of gains on equity investments carried at fair value or modified cost were recorded within "Gain on equity securities, net". For the years ended December 31, 2024, 2023 and 2022, $468,000, $371,000 and $2.4 million, respectively, of gains on equity investments carried at NAV were recorded within "Gain on equity securities, net".

Other components of net periodic pension benefit income increased $1.7 million, or 22.3%, to $9.3 million in 2024, compared to $7.6 million in 2023. The $7.6 million in 2023 was a decrease of $4.5 million, or 37.5%, compared to $12.1 million in 2022. The increase in 2024 was largely due to an increase in the expected return on plan assets, partially offset by a decrease in interest cost. The decrease in 2023 was largely due a decrease in the expected return on plan assets as well as an increase in interest cost.

Miscellaneous income increased by $2.2 million, or 59.8%, to $5.8 million in 2024, compared to $3.7 million in 2023. The $3.7 million in 2023 was a decrease of $5.7 million, or 60.8%, compared to $9.3 million in 2022. The increase in 2024 was primarily due to an increase in the net gain on the sale of assets, an increase in filing fee income, an increase in net gains on the sale of repossessed assets and a decrease in OREO devaluations, partially offset by a decline in miscellaneous income that was received in 2023 as the result of an investment fund liquidation. The decrease in 2023 was primarily due to a decrease in the net gain on the sale of loans and other assets, a decrease due to the write downs on strategic initiatives, and a decrease in fees earned on off-balance sheet deposit accounts.

Other Expense: Other expense was $321.3 million in 2024, compared to $309.2 million in 2023 and $298.0 million in 2022. Other expense increased by $12.1 million, or 3.9% in 2024, compared to 2023 and increased by $11.3 million, or 3.8%, in 2023 compared to 2022. The following table displays total other expense for Park for 2024, 2023 and 2022.

Salaries expense increased by $8.1 million, or 5.8%, to $147.3 million in 2024, compared to $139.2 million in 2023. The $139.2 million in 2023 was an increase of $5.9 million, or 4.5%, compared to $133.3 million in 2022. The increase in 2024 was due to an increase in salaries expense of $4.9 million, a $2.6 million increase in officer incentive compensation expense, and a $1.2 million increase in additional compensation expense, partially offset by a $340,000 decrease in share-based compensation

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expenses related to PBRSU and TBRSU awards granted under the 2017 Employee LTIP and a $288,000 decrease in the vacation expense accrual. The increase in 2023 was due to an increase in salaries expense of $11.1 million and a $909,000 increase in share-based compensation expenses related to PBRSU and TBRSU awards granted under the 2017 Employee LTIP, partially offset by a $4.4 million decrease in additional compensation expense and a $1.6 million decrease in officer incentive compensation expense.

Park had 1,725 full-time equivalent employees at year-end 2024, compared to 1,782 full-time equivalent employees at year-end 2023, and 1,725 full-time equivalent employees at year-end 2022.

Employee benefits expense decreased by $540,000, or 1.3%, to $41.7 million in 2024, compared to $42.3 million in 2023. The $42.3 million in 2023 was an increase of $1.8 million, or 4.4%, compared to $40.5 million in 2022. The decrease in 2024 was due to a $1.9 million decrease in group insurance costs, partially offset by a $680,000 increase in pension plan expense, a $310,000 increase in the KSOP match and a $175,000 increase in payroll tax expense. The increase in 2023 was due to a $3.5 million increase in group insurance costs, a $1.0 million increase in payroll tax expense and a $347,000 increase in the KSOP match, partially offset by a $3.5 million decrease in pension plan expense.

Occupancy expense decreased by $298,000, or 2.3%, to $12.8 million in 2024, compared to $13.1 million in 2023. The $13.1 million in 2023 was a decrease of $752,000, or 5.4%, compared to $13.9 million in 2022. The $298,000 decrease was primarily due to decreased expense for the rental of leased space and decreased utilities expense, partially offset by increases in maintenance and repairs expense, which included expenses related to a building demolition. The $752,000 decrease in 2023 was primarily related to decreased lease expense and depreciation expense, partially offset by an increase in maintenance and repair expenses and an increase in utilities expense.

Furniture and equipment expense decreased $2.3 million, or 18.4%, to $10.0 million in 2024, compared to $12.2 million in 2023. The $12.2 million in 2023 was an increase of $332,000, or 2.8%, compared to $11.9 million in 2022. The decrease in 2024 was primarily related to decreased depreciation expense and decreased expenses related to repairs on maintenance and equipment. The increase in 2023 was primarily related to increased depreciation expense and increased expenses related to repairs and maintenance on equipment.

Data processing fees increased by $2.9 million, or 7.8%, to $40.6 million in 2024, compared to $37.6 million in 2023. The $37.6 million in 2023 was an increase of $5.0 million, or 15.4%, compared to $32.6 million in 2022. The increase in 2024 primarily related to an increase in software expenses of $5.9 million, partially offset by a decrease in debit card processing costs of $3.0 million. The increase in 2023 primarily related to an increase in software expenses of $3.7 million and an increase in debit card processing costs of $1.4 million.

Professional fees and services increased $2.0 million, or 6.8%, to $31.1 million in 2024, compared to $29.2 million in 2023. The $29.2 million in 2023 was a decrease of $1.7 million, or 5.4%, compared to $30.8 million in 2022. This subcategory of total other expense includes legal fees, management consulting fees, directors' fees, audit fees, regulatory examination fees and memberships in industry associations. The $2.0 million increase in 2024 related to increases in management consulting fees, credit services expense, IntraFi insured deposit fees, temporary wages and recruiting fees, partially offset by decreases in legal fees and other fees. The $1.7 million decrease in 2023 related to decreases in management consulting fees and recruiting fees, partially offset by increases in IntraFi insured deposit fees and temporary wages.

Marketing expense increased by $847,000, or 15.5%, to $6.3 million in 2024, compared to $5.5 million in 2023. The $5.5 million in 2023 was an increase of $136,000, or 2.5%, compared to $5.3 million in 2022. The $847,000 increase in 2024 was primarily due to an increase in advertising expense.

Insurance expense decreased by $905,000, or 11.8% to $6.7 million in 2024, compared to $7.6 million in 2023. The $7.6 million in 2023 was an increase of $2.2 million, or 41.1%, compared to $5.4 million in 2022. The decrease in 2024 and the increase in 2023 were related to fluctuations in FDIC assessment expense.

The subcategory "Miscellaneous" other expense includes expenses for supplies, travel, and other miscellaneous expense. The subcategory Miscellaneous other expense increased by $1.7 million, or 14.6%, to $12.9 million in 2024, compared to $11.3 million in 2023. The $11.3 million in 2023 was an increase of $1.0 million, or 10.1%, compared to $10.2 million in 2022. The increase in 2024 was related to increases in fraud and other non loan related losses as well as an increase in the provision for unfunded credit losses. The increase in 2023 was related to increases in training and travel expenses and increased expense related to losses as a result of fraud and other non loan related losses and other miscellaneous expenses, partially offset by a decrease in operating lease depreciation expense and a decrease in the expense for the provision for unfunded credit losses.

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Efficiency Ratio: The following table details the calculation of the efficiency ratio for the years ended December 31, 2024, 2023, and 2022.

Items Impacting Comparability (non-U.S. GAAP): From time to time, revenue, expenses, and/or taxes are impacted by items judged by management of Park to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that their outsized impact is believed by management of Park at that time to be infrequent or short-term in nature. Most often, these items impacting comparability of period results relate to merger and acquisition activities and revenue and expenses related to former Vision Bank loan relationships. In other cases, they may result from management's decisions associated with significant corporate actions outside of the ordinary course of business.

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

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Income Taxes:

Income tax expense was $33.3 million in 2024 and consisted of federal income tax expense of $31.8 million and state income tax expense of $1.5 million. Income tax expense was $26.9 million in 2023 and consisted of federal income tax expense of $25.7 million and state income tax expense of $1.2 million. This compares to income tax expense of $32.1 million in 2022, which consisted of federal income tax expense of $30.8 million and state income tax expense of $1.3 million. The effective income tax rate was 18.0% in 2024, 17.5% in 2023 and 17.8% in 2022.

The difference between the statutory federal corporate income tax rate of 21% and Park’s effective tax rate reflected 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 common shares held within Park’s salary deferral plan, offset by the impact of state income taxes. Park's permanent federal tax differences were approximately $7.0 million in 2024, compared to $6.6 million in 2023 and $7.1 million in 2022. Park expects permanent federal tax differences for 2025 will be approximately $5.5 million.

CREDIT METRICS AND PROVISION FOR CREDIT LOSSES

The provision for 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 credit losses is determined by management based on relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets.

The adoption of ASU 2022-02 on January 1, 2023 resulted in a $383,000 increase to the allowance for credit losses. A cumulative effect adjustment resulting in a $303,000 decrease to retained earnings and an $80,000 increase to deferred tax assets was also recorded. Additionally, as a result of the adoption of this ASU and elimination of the concept of TDRs, total nonperforming loans decreased by $20.1 million effective January 1, 2023 and individually evaluated loans decreased by $11.5 million effective January 1, 2023.

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The table below provides additional information on the provision for credits losses and the ACL for 2024, 2023 and 2022.

For the year ended December 31, 2024, gross income of $6.4 million would have been recognized on loans that were nonaccrual as of December 31, 2024 had these loans been current in accordance with their original terms. Interest income on nonaccrual loans may be recorded on a cash basis and be included in income only when Park expects to receive the entire recorded investment of the loan. Of the $6.4 million that would have been recognized, approximately $4.1 million was included in interest income for the year ended December 31, 2024 as a result of payments made.

At year-end 2024, the allowance for credit losses was $88.0 million, or 1.13%, of total loans outstanding, compared to $83.7 million, or 1.12%, of total loans outstanding at year-end 2023, and $85.4 million, or 1.20% of total loans outstanding at year-end 2022.

The following table provides additional information related to the allowance for credit losses for Park including information related to individual reserves and collective reserves, at December 31, 2024, December 31, 2023 and December 31, 2022. 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.

(1) Includes accruing collateral dependent commercial loans to borrowers experiencing financial difficulty at December 31, 2024 and 2023 and accruing TDRs at December 31, 2022.

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The allowance for credit losses of $88.0 million at December 31, 2024 represented a $4.2 million, or 5.0%, increase compared to $83.7 million at December 31, 2023. The increase was due to a $7.9 million increase in general reserves and a $3.7 million decrease in individual reserves on nonaccrual loans. The $7.9 million increase in general reserves takes into account changing economic forecasts and prepayment and curtailment speeds, while balancing the risks associated with other economic factors. Additionally, the $7.9 million increase in general reserves included a $757,000 additional reserve related to Hurricane Helene which impacted borrowers in Park's Carolina region. The decrease in individual reserves at December 31, 2024 compared to December 31, 2023 was primarily related to $4.2 million in charge-offs related to two relationships that previously carried individual reserves, partially offset by new or increasing reserves on other credits.

The allowance for credit losses of $83.7 million at December 31, 2023 represented a $1.6 million, or 1.9%, decrease compared to $85.4 million at December 31, 2022. The decrease was largely due to a $3.1 million decrease in general reserves taking into account changing economic forecasts while balancing the risks associated with other economic factors and a $1.4 million increase in individual reserves.

Management believes that the allowance for credit losses at year-end 2024 is adequate to absorb estimated life of loan credit losses in the loan portfolio. See "Note 1 - Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements included in "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" of this Annual Report on Form 10-K, and the discussion under the heading “CRITICAL ACCOUNTING POLICIES” earlier in this Management's Discussion and Analysis of Financial Condition and Results of Operations, for additional information on management’s evaluation of the adequacy of the allowance for credit losses.

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ACL Detail by Loan Type: The following tables breakdown the allowance for credit losses and components by loan type.

The table below provides a summary of Park's loan loss experience over the past three years:

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The follow table presents net-charge offs (recoveries), average loans outstanding, and net charge-offs (recoveries) as a percentage of average loans, by type of loan over the past three years:

The following table summarizes Park's allocation of the allowance for credit losses for the past three years:

Nonperforming Assets: 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.

Generally, management obtains updated appraisal information for nonperforming loans and OREO annually. As new appraisal information is received, management performs an evaluation of the appraisal and applies a discount for anticipated disposition costs to determine the net realizable value of the collateral, which is compared to the outstanding principal balance to determine if additional write-downs are necessary.

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The following is a summary of Park’s nonperforming assets at the end of the last three years:

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

Park classifies loans as nonaccrual when 1) a loan 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 December 31, 2024, 2023, and 2022. Loans are classified as current if they are less than 30 days past due.

Credit Quality Indicators: When determining the quarterly credit loss provision, Park reviews the grades of commercial loans. These loans are graded from 1 to 8. A grade of 1 indicates little or no credit risk and a grade of 8 is considered a loss. Commercial loans that are pass-rated (graded an 1 through a 4) are considered to be of acceptable credit risk. Commercial loans graded a 5 (special mention) are considered to be watch list credits and a higher PD is applied to these loans. Commercial loans graded a 6 (substandard), also considered to be watch list credits, represent higher credit risk than those rated special mention and, as a result, a higher PD is applied to these loans. Commercial loans that are graded a 7 (doubtful) are shown as nonperforming and Park charges these loans down to their fair value by taking a partial charge-off or recording an individual reserve. Certain 6-rated loans and all 7-rated loans are placed on nonaccrual status and included within the individually evaluated category. Any commercial loan graded an 8 (loss) is completely charged off.

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

(1) Includes accruing collateral dependent commercial loans to borrowers experiencing financial difficulty at December 31, 2024 and 2023 and accruing TDRs at December 31, 2022.

*Commercial loans include: (1) commercial, financial and agricultural loans; (2) commercial real estate loans; (3) commercial related loans in the construction 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 $99.9 million of collectively evaluated commercial loans and accruing individually evaluated for impairment loans included on the watch list at December 31, 2024, compared to $60.7 million at December 31, 2023, and $93.3 million at December 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 increase in watch list credits during the year ended 2024 was largely due to the downgrade of two non-bank consumer finance company relationships to special mention and/or accruing individually evaluated totaling $28.0 million, partially offset by problem loan resolutions. The downgraded loans were current in respect to their contractual terms at December 31, 2024.

Delinquencies have remained low over the past 36 months. Delinquent and accruing loans were $28.4 million, or 0.36% of total loans at December 31, 2024, compared to $23.5 million, or 0.31% of total loans at December 31, 2023, and $18.9 million, or 0.26% of total loans at December 31, 2022.

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

Nonaccrual individually evaluated commercial loans were $53.1 million at December 31, 2024, an increase of $7.9 million, compared to $45.2 million at December 31, 2023 and a decrease of $13.7 million, compared to $66.9 million at December 31, 2022. Accruing individually evaluated commercial loans were $15.3 million at December 31, 2024, compared to no accruing individually evaluated commercial loans at December 31, 2023 and $11.5 million of accruing individually evaluated commercial loans at December 31, 2022. The $11.5 million of individually evaluated commercial loans at December 31, 2022 consisted of loans modified in a TDR which were performing in accordance with the restructured terms.

At December 31, 2024, Park had taken partial charge-offs of $5.0 million related to the $53.1 million of the nonaccrual individually evaluated commercial loans, compared to partial charge-offs of $2.3 million related to the $45.2 million of nonaccrual individually evaluated commercial loans at December 31, 2023 and compared to partial charge-offs of $1.8 million related to the $78.3 million of nonaccrual individually evaluated commercial loans at December 31, 2022.

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The table below provides additional information related to Park's nonaccrual individually evaluated commercial loans at December 31, 2024, 2023, and 2022.

Loans Acquired with Deteriorated Credit Quality: PCD loans are individually evaluated on a quarterly basis to determine if a specific reserve is necessary. At December 31, 2024, December 31, 2023 and December 31, 2022, there was no allowance for credit losses on PCD loans. The carrying amount of accruing loans acquired with deteriorated credit quality at December 31, 2024, 2023, and 2022 was $2.2 million, $2.8 million, and $4.7 million, respectively. The carrying amount of nonaccrual loans acquired with deteriorated credit quality was $551,000 and $534,000 at December 31, 2024 and December 31, 2023, respectively. There were no nonaccrual loans acquired with deteriorated quality at December 31, 2022.

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 December 31, 2024, Park had $247.2 million of loans which were fully or partially secured by non-owner-occupied office space, $244.0 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.

CAPITAL RESOURCES

Liquidity and Interest Rate Sensitivity Management: Park’s objective in managing its liquidity is to maintain the ability to continuously meet the cash flow needs of customers, such as borrowings or deposit withdrawals, while at the same time seeking higher yields from longer-term lending and investing activities.

Cash and cash equivalents decreased by $57.7 million during 2024 to $160.6 million at year end. Cash provided by operating activities was $178.8 million in 2024, $151.1 million in 2023 and $136.6 million in 2022. Net income was the primary source of cash provided by operating activities during each year.

Cash used in investing activities was $19.1 million in 2024, cash provided by investing activities was $63.5 in 2023 and cash used in investing activities was $405.5 million in 2022. Investment securities transactions and loan originations/repayments are the major uses or sources of cash in investing activities.  Proceeds from the sale, repayment or maturity of investment securities provide cash and purchases of investment securities use cash.  Net investment securities transactions provided cash of $338.5 million in 2024, provided cash of $418.9 million in 2023 and used cash of $137.8 million in 2022. Cash used by the net increase in the loan portfolio was $341.5 million in 2024, $330.4 million in 2023 and $273.5 million in 2022.

Cash used in financing activities was $217.4 million in 2024, $186.1 million in 2023 and cash provided by financing activities was $239.4 million in 2022. A major source of cash provided by or used in financing activities is the net change in deposits.  Deposits increased and provided $101.0 million of cash in 2024, decreased and used $192.1 million of cash in 2023, and increased and provided $330.2 million of cash in 2022. These decreases and increases in deposits included an increase in off-balance sheet deposits of $114.0 million in 2024, a decrease in off-balance sheet deposits of $194.8 million in 2023 and a decrease in off-balance sheet deposits of $787.1 million in 2022. Other major sources of cash from financing activities are short-term borrowings. In 2024, net short-term borrowings decreased and used $237.8 million in cash. In 2023, net short-term borrowings increased and provided $100.8 million in cash. In 2022, net short-term borrowings decreased and used $11.4 million in cash. Cash used in the repurchase of common shares was $23.0 million in 2023. No common shares were repurchased in 2024 or 2022. Finally, cash declined by $77.5 million in 2024, $69.0 million in 2023 and $76.6 million in 2022, from the payment of cash dividends.

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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. In the opinion of Park's management, the present funding sources provide more than adequate liquidity for Park to meet our cash flow needs in the short- and long-term.

The following table shows interest rate sensitivity data for five different time intervals as of December 31, 2024:

(1)Investment securities and loans that are subject to prepayment are shown in the table by the earlier of their re-pricing date or their expected repayment date and not by their contractual maturity date. Nonaccrual loans of $68.2 million are included within the over five year maturity category.

(2)Management considers interest bearing transaction accounts and savings accounts to be core deposits and, therefore, not as rate sensitive as other deposit accounts and borrowed money. Accordingly, only 59.3% of interest bearing transaction accounts and 53.2% of savings accounts are considered to re-price within one year. If all of the interest bearing transaction accounts and savings accounts were considered to re-price within one year, the one-year cumulative gap would change from a positive 3.36% to a negative 19.39%.

The interest rate sensitivity gap analysis provides an overall picture of Park’s static interest rate risk position.  At December 31, 2024, the cumulative interest earning assets maturing or repricing within twelve months were $3,955 million compared to the cumulative interest bearing liabilities maturing or repricing within twelve months of $3,653 million.  For the twelve-month cumulative interest rate sensitivity gap position, rate sensitive assets exceeded rate sensitive liabilities by $302 million or 3.4% of interest earning assets. The cumulative twelve-month interest rate sensitivity gap position at year-end 2023 was a positive $783 million or 8.7% of total interest earning assets.  The percentage of interest earning assets maturing or repricing within one year was 44.0% at year-end 2024, compared to 46.5% at year-end 2023.  The percentage of interest bearing liabilities maturing or repricing within one year was 62.9% at year-end 2024, compared to 57.3% at year-end 2023.

A positive twelve-month cumulative rate sensitivity gap (assets exceed liabilities) would suggest that Park’s net interest margin would increase if interest rates were to increase.  Conversely, a negative twelve-month cumulative rate sensitivity gap would suggest that Park’s net interest margin would decrease if interest rates were to increase. However, the usefulness of the interest rate sensitivity gap analysis as a forecasting tool in projecting net interest income is limited.  The gap analysis does not consider the magnitude, timing or frequency by which assets or liabilities will reprice during a period and also contains assumptions as to the repricing of interest bearing transaction accounts and savings accounts that may not prove to be correct.

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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.  Park’s management uses an earnings simulation model to analyze net interest income sensitivity to movements in interest rates.  This model is based on actual cash flows and repricing characteristics for balance sheet instruments and incorporates market-based assumptions regarding the impact of changing interest rates on the prepayment rate of certain assets and liabilities.  This model also includes management’s projections for activity levels of various balance sheet instruments and non-interest fee income and operating expense.  Assumptions based on the historical behavior of deposit rates and balances in relation to changes in interest rates are also incorporated into this earnings simulation model.  These assumptions are inherently uncertain and, as a result, the model cannot precisely measure net interest income and net income.  Actual results will differ from simulated results due to the timing, magnitude and frequency of interest rate changes as well as changes in market conditions and management strategies.

Management uses a 50 basis 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. At December 31, 2024, the earnings simulation model projected that net income would increase by 1.25% using a rising interest rate scenario and decrease by 1.34% using a declining interest rate scenario over the next year. At December 31, 2023, the earnings simulation model projected that net income would increase by 1.52% using a rising interest rate scenario and decrease by 1.92% using a declining interest rate scenario over the next year. At December 31, 2022, the earnings simulation model projected that net income would increase by 3.69% using a rising interest rate scenario and decrease by 5.38% using a declining interest rate scenario over the next year. Park’s net interest margin was 4.41% in 2024, 4.11% in 2023 and 3.80% in 2022.

Contractual Obligations: In the ordinary course of operations, Park enters into certain contractual obligations. The following table summarizes Park’s significant and determinable obligations by payment date at December 31, 2024.

Further discussion of the nature of each specified obligation is included in the referenced Note to the Consolidated Financial Statements included in "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" of this Annual Report on Form 10-K.