UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2023
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________ to __________________________

Commission File Number1-13006
PARK NATIONAL CORPORATION
Park National Corporation
(Exact name of registrant as specified in its charter)
Ohio31-1179518
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer Identification No.)
50 North Third Street,P.O. Box 3500Newark,Ohio 4305543058-3500
(Address of principal executive offices) (Zip Code)
(740) 349-8451
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common shares, without par valuePRKNYSE American


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


 Yes   ý☒   No   ¨☐


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


Yes  ý☒   No  ¨☐


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller
“smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerý☒Accelerated filer¨☐
Non-accelerated filer¨☐Smaller reporting company    ¨☐
(Do not check if a smaller reporting company)Emerging growth company
¨

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


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


 Yes   ¨☐   No   ý☒


Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 15,288,21116,178,425 Common shares,Shares, no par value per share, outstanding at October 30, 2017.April 28, 2023.






PARK NATIONAL CORPORATION
 
CONTENTS
Page
PART I.   FINANCIAL INFORMATION
Item 1.  Financial Statements
Consolidated Condensed Balance Sheets as of September 30, 2017 at March 31, 2023and December 31, 2016 2022(unaudited)
35
Consolidated Condensed Statements of Income for the threemonths ended March 31, 2023and nine months ended September 30, 2017 and 20162022 (unaudited)
47
Consolidated Condensed Statements of Comprehensive Income (Loss) for the three monthsendedMarch 31, 2023 and nine months ended September 30, 2017 and 20162022 (unaudited)
69
Consolidated Condensed Statements of Changes in Shareholders’ Equity for the nine three monthsended September 30, 2017March 31, 2023 and 20162022 (unaudited)
710
Consolidated Condensed Statements of Cash Flows for the nine threemonths ended September 30, 2017March 31, 2023 and 20162022 (unaudited)
811
Notes to Unaudited Consolidated Condensed Financial Statements
1013
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
4858
Item 3.  Quantitative and Qualitative Disclosures About Market Risk
7286
Item 4.  Controls and Procedures
7287
7388 
Item 1.  Legal Proceedings
7388
Item 1A. Risk Factors
7388
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
7389
Item 3.  Defaults Upon Senior Securities
7490
Item 4.  Mine Safety Disclosures
7590
Item 5.  Other Information
7590
Item 6.  Exhibits
7590
7793


3

Glossary of Abbreviations and Acronyms

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

ACLAllowance for credit lossesLIBORLondon Inter-Bank Offered Rate
AFSAvailable-for-saleMSRsMortgage servicing rights
AllowanceAllowance for credit lossesNAVNet asset value
ASCAccounting Standards CodificationNewDominionNewDominion Bank
ASUAccounting Standards UpdateOREOOther real estate owned
ATMAutomated teller machineOWSOne-way sell
CARES ActCoronavirus Aid, Relief, and Economic Security ActParkPark National Corporation and its subsidiaries
Carolina AllianceCAB Financial Corporation and its subsidiariesPark National BankThe Park National Bank
CECLCurrent expected credit lossPBRSUsPerformance-based restricted stock units
CompanyPark National Corporation and its subsidiariesPCDPurchased credit deteriorated
CorporationPark National Corporation and its subsidiariesPDProbability of default
COVIDNovel coronavirusPNBThe Park National Bank
DCFDiscounted cash flowPPPCARES Act Paycheck Protection Program
DOJDepartment of JusticePTPPPre-tax, pre-provision
EPSEarnings per common shareROURight-of-use
FASBFinancial Accounting Standards BoardSARsStock appreciation rights
FHLBFederal Home Loan BankSBASmall Business Administration
FRBFederal Reserve BankSECU.S. Securities and Exchange Commission
FTEFully taxable equivalentSEPHSE Property Holdings, LLC
GDPGross domestic productTBRSUsTime-based restricted stock units
GFSCGuardian Financial Services CompanyTDRsTroubled debt restructurings
HELOCHome equity line of creditU.S.United States of America
HPIHome price indexU.S. GAAPUnited States Generally Accepted Accounting Principles
IRLCInterest rate lock commitmentUnited StatesUnited States of America
KSOPPark's qualified retirement plan that combines an employee stock ownership plan (ESOP) with a 401(k) planVisionVision Bancshares, Inc.
LDALoss driver analysisVOVVerification of value
LGDLoss given default

4
Table of Contents


PART I. FINANCIAL INFORMATION
Item 1.      Financial Statements

PARK NATIONAL CORPORATION AND SUBSIDARIESSUBSIDIARIES
Consolidated Condensed Balance Sheets (Unaudited)
(in thousands, except common share and per common share data)    
March 31,
2023		December 31, 2022
Assets:  
Cash and due from banks$146,155 $156,750 
Money market instruments115,764 32,978 
Cash and cash equivalents261,919 189,728 
Investment securities:  
Debt securities available-for-sale, at fair value (amortized cost of $1,819,950 and $1,854,852 at March 31, 2023 and December 31, 2022, respectively, and no allowance for credit losses at March 31, 2023 and at December 31, 2022)1,714,440 1,733,696 
Other investment securities85,970 87,091 
Total investment securities1,800,410 1,820,787 
Loans7,093,857 7,141,891 
Allowance for credit losses(85,946)(85,379)
Net loans7,007,911 7,056,512 
Bank owned life insurance223,528 220,072 
Prepaid assets157,426 153,579 
Goodwill159,595 159,595 
Other intangible assets5,648 5,975 
Premises and equipment, net81,223 82,126 
Affordable housing tax credit investments58,871 60,968 
OREO1,468 1,354 
Accrued interest receivable33,245 34,704 
Operating lease right-of-use asset17,150 17,600 
Mortgage loan servicing rights15,505 15,792 
Other33,082 36,201 
Total assets$9,856,981 $9,854,993 

5
Table of Contents


 September 30,
2017		 December 31, 2016
Assets: 
  
Cash and due from banks$118,884
 $122,811
Money market instruments331,468
 23,635
Cash and cash equivalents450,352
 146,446
Investment securities: 
  
Securities available-for-sale, at fair value (amortized cost of $1,163,893 and $1,262,761 at September 30, 2017 and December 31, 2016, respectively)1,166,562
 1,258,139
Securities held-to-maturity, at amortized cost (fair value of $347,110 and $256,672 at September 30, 2017 and December 31, 2016, respectively)342,665
 259,833
Other investment securities61,811
 61,811
Total investment securities1,571,038
 1,579,783
    
Loans5,365,877
 5,271,857
Allowance for loan losses(55,232) (50,624)
Net loans5,310,645
 5,221,233
Bank owned life insurance188,254
 185,234
Prepaid assets95,717
 88,874
Goodwill72,334
 72,334
Premises and equipment, net56,179
 57,971
Affordable housing tax credit investments54,355
 52,947
Other real estate owned14,366
 13,926
Accrued interest receivable21,246
 18,822
Mortgage loan servicing rights, net9,479
 9,266
Other18,730
 20,750
Total assets$7,862,695
 $7,467,586
    
Liabilities and Shareholders' Equity: 
  
Deposits: 
  
Noninterest bearing$1,568,177
 $1,523,417
Interest bearing4,406,145
 3,998,539
Total deposits5,974,322
 5,521,956
Short-term borrowings192,896
 394,795
Long-term debt848,992
 694,281
Subordinated notes15,000
 45,000
Unfunded commitments in affordable housing tax credit investments21,282
 14,282
Accrued interest payable2,582
 2,151
Other48,254
 52,881
Total liabilities$7,103,328
 $6,725,346
    
 

 

Shareholders' equity: 
  
Preferred shares (200,000 shares authorized; 0 shares issued)$—
 $—
Common shares (No par value; 20,000,000 shares authorized; 16,150,769 shares issued at September 30, 2017 and 16,150,807 shares issued at December 31, 2016)307,143
 305,826
Retained earnings553,434
 535,631
Treasury shares (873,708 shares at September 30, 2017 and 810,089 at December 31, 2016)(88,205) (81,472)
Accumulated other comprehensive loss, net of taxes(13,005) (17,745)
Total shareholders' equity759,367
 742,240
Total liabilities and shareholders’ equity$7,862,695
 $7,467,586
PARK NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Condensed Balance Sheets (Unaudited) (Continued)
(in thousands, except common share and per common share data)

March 31,
2023		December 31, 2022
Liabilities and Shareholders' Equity:  
Deposits:  
Non-interest bearing$2,922,242 $3,074,276 
Interest bearing5,372,202 5,160,439 
Total deposits8,294,444 8,234,715 
Short-term borrowings172,058 227,342 
Subordinated notes188,785 188,667 
Unfunded commitments in affordable housing tax credit investments26,723 28,132 
Operating lease liability18,651 19,291 
Allowance for credit losses on off-balance sheet commitments5,329 5,214 
Accrued interest payable1,661 3,486 
Other67,177 78,920 
Total liabilities$8,774,828 $8,785,767 
Shareholders' equity:  
Preferred shares (No par value; 200,000 shares authorized; No shares issued)$— $— 
Common shares (No par value; 20,000,000 shares authorized; 17,623,104 shares issued at March 31, 2023 and at December 31, 2022)459,431 462,404 
Retained earnings862,518 847,235 
Treasury shares (1,449,037 shares at March 31, 2023 and 1,359,521 shares at December 31, 2022)(149,763)(138,019)
Accumulated other comprehensive loss, net of taxes(90,033)(102,394)
Total shareholders' equity1,082,153 1,069,226 
Total liabilities and shareholders’ equity$9,856,981 $9,854,993 

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

6
Table of Contents


PARK NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Income (Unaudited)
(in thousands, except common share and per common share data)

Three Months Ended
September 30,		 Nine Months Ended
September 30,		Three Months Ended
March 31,
2017 2016 2017 2016 20232022
Interest and dividend income: 
  
    Interest and dividend income:  
       
Interest and fees on loans$63,110
 $59,893
 $184,240
 $178,346
Interest and fees on loans$91,614 $72,416 
       
Interest and dividends on: 
  
    Interest and dividends on:  
Obligations of U.S. Government, its agencies and other securities6,757
 7,339
 20,787
 23,718
Obligations of states and political subdivisions1,974
 689
 5,098
 1,653
Debt securities - taxableDebt securities - taxable12,979 6,130 
Debt securities - tax-exemptDebt securities - tax-exempt2,912 2,447 
Other interest income1,383
 321
 2,330
 844
Other interest income3,396 153 
Total interest and dividend income73,224
 68,242
 212,455
 204,561
Total interest and dividend income110,901 81,146 
       
Interest expense: 
  
    Interest expense:  
       
Interest on deposits: 
  
    Interest on deposits:  
Demand and savings deposits2,882
 1,094
 6,787
 2,851
Demand and savings deposits14,212 351 
Time deposits2,521
 2,352
 7,139
 7,128
Time deposits1,347 720 
       
Interest on borrowings: 
  
    Interest on borrowings:  
Short-term borrowings197
 84
 616
 330
Short-term borrowings824 244 
Long-term debt6,073
 6,179
 17,632
 18,415
Subordinated notes and long-term debtSubordinated notes and long-term debt2,320 2,145 
       
Total interest expense11,673
 9,709
 32,174
 28,724
Total interest expense18,703 3,460 
       
Net interest income61,551
 58,533
 180,281
 175,837
Net interest income92,198 77,686 
       
Provision for (recovery of) loan losses3,283
 (7,366) 8,740
 (3,819)
Net interest income after provision for (recovery of) loan losses58,268
 65,899
 171,541
 179,656
Provision for (recovery of) credit lossesProvision for (recovery of) credit losses183 (4,605)
Net interest income after provision for (recovery of) credit lossesNet interest income after provision for (recovery of) credit losses$92,015 $82,291 
       
Other income: 
  
    Other income:  
Income from fiduciary activities5,932
 5,315
 17,471
 15,866
Income from fiduciary activities$8,615 $8,797 
Service charges on deposit accounts3,216
 3,800
 9,511
 10,798
Service charges on deposit accounts2,241 2,074 
Other service income3,357
 3,640
 9,608
 9,565
Other service income2,697 4,819 
Checkcard fee income3,974
 3,780
 11,775
 11,180
Debit card fee incomeDebit card fee income6,457 6,126 
Bank owned life insurance income1,573
 1,038
 3,790
 3,284
Bank owned life insurance income1,185 1,175 
ATM fees605
 581
 1,708
 1,734
ATM fees533 532 
OREO valuation adjustments(22) (233) (367) (572)
Gain on sale of OREO, net51
 783
 204
 1,079
Loss on the sale of OREO, netLoss on the sale of OREO, net(9)— 
OREO valuation markupOREO valuation markup15 30 
(Loss) gain on equity securities, net(Loss) gain on equity securities, net(405)2,353 
Other components of net periodic pension benefit incomeOther components of net periodic pension benefit income1,893 3,027 
Miscellaneous3,403
 1,831
 5,147
 3,726
Miscellaneous1,165 2,723 
Total other income22,089
 20,535
 58,847
 56,660
Total other income$24,387 $31,656 
       
 



7
Table of Contents



PARK NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Income (Unaudited) (Continued)
(in thousands, except common share and per common share data)

Three Months Ended
September 30,		 Nine Months Ended
September 30,		Three Months Ended
March 31,
2017 2016 2017 2016 20232022
Other expense: 
  
    Other expense:  
Salaries$23,302
 $22,084
 $69,020
 $64,894
Salaries$34,871 $30,521 
Employee benefits4,656
 5,073
 14,756
 14,740
Employee benefits10,816 10,499 
Occupancy expense2,559
 2,506
 7,759
 7,693
Occupancy expense3,353 3,214 
Furniture and equipment expense3,868
 3,437
 11,126
 10,296
Furniture and equipment expense3,246 2,937 
Data processing fees1,919
 1,450
 5,560
 4,040
Data processing fees8,750 7,504 
Professional fees and services6,100
 6,356
 16,947
 18,424
Professional fees and services7,221 5,858 
Marketing1,122
 1,062
 3,262
 3,246
Marketing1,319 1,317 
Insurance1,499
 1,423
 4,586
 4,272
Insurance1,814 1,405 
Communication1,110
 1,154
 3,598
 3,728
Communication1,037 890 
State tax expense912
 895
 2,918
 2,619
State tax expense1,278 1,192 
Amortization of intangible assetsAmortization of intangible assets327 402 
Miscellaneous2,764
 1,316
 5,847
 8,009
Miscellaneous2,471 1,634 
Total other expense49,811
 46,756
 145,379
 141,961
Total other expense$76,503 $67,373 
       
Income before income taxes30,546
 39,678
 85,009
 94,355
Income before income taxes$39,899 $46,574 
       
Federal income taxes8,434
 12,229
 23,598
 28,222
Income taxesIncome taxes6,166 7,699 
       
Net income$22,112
 $27,449
 $61,411
 $66,133
Net income$33,733 $38,875 
       
Earnings per Common Share:       
Earnings per common share:Earnings per common share:
Basic$1.45
 $1.79
 $4.01
 $4.31
Basic$2.08 $2.40 
Diluted$1.44
 $1.78
 $3.99
 $4.29
Diluted$2.07 $2.38 
       
Weighted average common shares outstanding 
  
    
Weighted average common shares outstanding:Weighted average common shares outstanding:  
Basic15,287,974
 15,330,791
 15,299,039
 15,330,802
Basic16,242,353 16,219,889 
Diluted15,351,590
 15,399,707
 15,394,199
 15,401,825
Diluted16,324,823 16,331,031 
       
Cash dividends declared$0.94
 $0.94
 $2.82
 $2.82
Regular cash dividends declared per common shareRegular cash dividends declared per common share$1.05 $1.04 
 
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 





8
Table of Contents


PARK NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Comprehensive Income (Loss) (Unaudited)
(in thousands)

Three Months Ended
September 30,		 Nine Months Ended
September 30,		Three Months Ended
March 31,
2017 2016 2017 2016 20232022
Net income$22,112
 $27,449
 $61,411
 $66,133
Net income$33,733 $38,875 
       
Other comprehensive income (loss), net of tax:       Other comprehensive income (loss), net of tax:
Unrealized net holding gain (loss) on securities available-for-sale, net of federal income tax effect of $380 and $(1,174) for the three months ended September 30, 2017 and 2016, and $2,551 and $7,459 for the nine months ended September 30, 2017 and 2016, respectively707
 (2,182) 4,740
 13,850
Unrealized net holding gain (loss) on debt securities available-for-sale, net of income tax effect of $3,285 and $(14,823) for the three months ended March 31, 2023 and 2022, respectivelyUnrealized net holding gain (loss) on debt securities available-for-sale, net of income tax effect of $3,285 and $(14,823) for the three months ended March 31, 2023 and 2022, respectively12,361 (55,763)
Unrealized gain on cash flow hedging derivatives, net of income tax effect of $37 for the three months ended March 31, 2022Unrealized gain on cash flow hedging derivatives, net of income tax effect of $37 for the three months ended March 31, 2022— 139 
Other comprehensive income (loss)$707
 $(2,182) $4,740
 $13,850
Other comprehensive income (loss)$12,361 $(55,624)
       
Comprehensive income$22,819
 $25,267
 $66,151
 $79,983
Comprehensive income (loss)Comprehensive income (loss)$46,094 $(16,749)
 
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



9
Table of Contents


PARK NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Changes in Shareholders' Equity (Unaudited)
(in thousands, except common share and per common share data)
Preferred
Shares		Common
Shares		Retained
Earnings		Treasury
Shares		Accumulated
Other
Comprehensive
Loss
Balance at December 31, 2022$— $462,404 $847,235 $(138,019)$(102,394)
Cumulative effect of a change in accounting principle(303)
Balance at January 1, 2023$— $462,404 $846,932 $(138,019)$(102,394)
Net income33,733 
Other comprehensive income, net of tax12,361 
Dividends on common shares at $1.05 per common share(17,285)
Issuance of 34,484 common shares under share-based compensation awards, net of 21,981 common shares withheld to pay employee income taxes(5,309)(862)3,564 
Share-based compensation expense2,336 
Repurchase of 124,000 common shares to be held as treasury shares$(15,308)
Balance at March 31, 2023$— $459,431 $862,518 $(149,763)$(90,033)

  
Preferred
Shares
 
Common
Shares
 
Retained
Earnings
 
Treasury
Shares
 
Accumulated
Other
Comprehensive
(Loss) Income
Balance at January 1, 2016 $—
 $303,966
 $507,505
 $(82,473) $(15,643)
Net income  
  
 66,133
  
  
Other comprehensive income, net of tax  
       13,850
Dividends on common shares at $2.82 per share  
  
 (43,461)  
  
Cash payment for fractional common shares in dividend reinvestment plan  
 (3)  
  
  
Share-based compensation expense   1,189
      
Balance at September 30, 2016 $—

$305,152
 $530,177
 $(82,473) $(1,793)
           
Balance at January 1, 2017 $—
 $305,826
 $535,631
��$(81,472) $(17,745)
Net income  
 

 61,411
 

 

Other comprehensive income, net of tax  
 

 

 

 4,740
Dividends on common shares at $2.82 per share  
 

 (43,411) 

 

Cash payment for fractional common shares in dividend reinvestment plan  
 (4) 

 

 

Issuance of 9,674 common shares under share-based compensation awards, net of 3,293 common shares withheld to pay employee income taxes   (795) (197) 645
  
Repurchase of 70,000 common shares to be held as treasury shares       (7,378)  
Share-based compensation expense   2,116
      
Balance at September 30, 2017 $—
 $307,143
 $553,434
 $(88,205) $(13,005)
Preferred
Shares		Common
Shares		Retained
Earnings		Treasury
Shares		Accumulated
Other
Comprehensive
Income (Loss)
Balance at December 31, 2021$— $461,800 $776,294 $(142,490)$15,155 
Net income  38,875 
Other comprehensive loss, net of tax (55,624)
Dividends on common shares at $1.04 per common share  (17,172)
Cash payment for fractional common shares in dividend reinvestment plan (2) 
Issuance of 29,757 common shares under share-based compensation awards, net of 18,658 common shares withheld to pay employee income taxes(4,508)(964)3,021 
Share-based compensation expense1,981 
Balance at March 31, 2022$— $459,271 $797,033 $(139,469)$(40,469)

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



10
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PARK NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows (Unaudited)
(in thousands)
Three Months Ended
March 31,
 20232022
Operating activities:  
Net income$33,733 $38,875 
Adjustments to reconcile net income to net cash provided by operating activities:  
Provision for (recovery of) credit losses183 (4,605)
Accretion of loan fees and costs, net(2,169)(3,772)
Depreciation of premises and equipment3,500 3,482 
Amortization of investment securities, net817 875 
Net amortization (accretion) of purchase accounting adjustments119 (86)
Loss (gain) on equity securities, net405 (2,353)
Loan originations to be sold in secondary market(15,332)(73,713)
Proceeds from sale of loans in secondary market15,730 77,189 
Gain on sale of loans in secondary market(325)(1,941)
Share-based compensation expense2,336 1,981 
Loss on sale of OREO, net9 — 
OREO valuation markup(15)(30)
Bank owned life insurance income(1,185)(1,175)
Investment in qualified affordable housing tax credits amortization2,097 1,980 
Changes in assets and liabilities:
Decrease in prepaid dealer premiums601 94 
(Increase) decrease in other assets(2,116)1,253 
Decrease in other liabilities(13,986)(9,742)
Net cash provided by operating activities$24,402 $28,312 
Investing activities:  
Proceeds from the redemption/repurchase of Federal Home Loan Bank stock$3,094 $— 
Proceeds from calls and maturities of:  
Debt securities AFS34,085 54,263 
Purchases of:  
Debt securities AFS— (128,731)
Equity securities(2,195)(1,630)
Net (increase) decrease in other investments(183)124 
Net loan paydowns, portfolio loans50,208 52,474 
Investment in qualified affordable housing tax credits(1,409)(7,252)
Proceeds from the sale of OREO13 38 
Life insurance death benefits229 367 
Purchases of bank owned life insurance(2,500)(7,500)
Purchases of premises and equipment(2,674)(2,127)
Net cash provided by (used in) investing activities$78,668 $(39,974)
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 Nine Months Ended
September 30,
 2017 2016
Operating activities: 
  
Net income$61,411
 $66,133
    
Adjustments to reconcile net income to net cash provided by operating activities: 
  
Provision for (recovery of) loan losses8,740
 (3,819)
Amortization of loan fees and costs, net6,927
 5,439
Provision for depreciation6,463
 6,283
Amortization of investment securities, net1,013
 103
Amortization of prepayment penalty on long-term debt4,711
 4,618
Loan originations to be sold in secondary market(168,255) (205,576)
Proceeds from sale of loans in secondary market170,703
 201,616
Gain on sale of loans in secondary market(3,431) (3,938)
Share-based compensation expense2,116
 1,189
OREO valuation adjustments367
 572
Gain on sale of OREO, net(204) (1,079)
Bank owned life insurance income(3,790) (3,284)
    
Changes in assets and liabilities: 
  
Increase in other assets(15,603) (15,890)
(Decrease) increase in other liabilities(4,502) 5,443
Net cash provided by operating activities$66,666
 $57,810
    
Investing activities: 
  
Proceeds from calls and maturities of: 
  
Available-for-sale securities$128,736
 $706,634
Held-to-maturity securities12,264
 19,301
Purchases of: 
  
Available-for-sale securities(29,684) (473,627)
Held-to-maturity securities(96,293) (61,155)
Net loan originations, portfolio loans(95,808) (109,114)
Investments in qualified affordable housing projects—
 (4,555)
  Proceeds from the sale of OREO2,363
 6,954
  Life insurance death benefits1,037
 1,050
  Purchases of premises and equipment, net(4,995) (5,516)
Net cash (used in) provided by investing activities$(82,380) $79,972
    
    
PARK NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows (Unaudited) (Continued)
(in thousands)
Three Months Ended
March 31,
 20232022
Financing activities:  
Net increase in deposits$28,392 $257,927 
Net decrease (increase) in off-balance sheet deposits31,337 (166,134)
Net decrease in short-term borrowings(55,284)(32,859)
Value of common shares withheld to pay employee income taxes(2,607)(2,451)
Repurchase of common shares to be held as treasury shares(15,308)— 
Cash dividends paid(17,409)(17,109)
Net cash (used in) provided by financing activities$(30,879)$39,374 
Increase in cash and cash equivalents72,191 27,712 
Cash and cash equivalents at beginning of year189,728 219,180 
Cash and cash equivalents at end of period$261,919 $246,892 
Supplemental disclosures of cash flow information:  
Cash paid for:  
Interest$20,528 $5,429 
Non-cash items:
Loans transferred to OREO$138 $55 
Right-of-use assets obtained in exchange for lease obligations136 — 
New commitments in other investment securities— 10,000 

PARK NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows (Unaudited) (Continued)
(in thousands)
 Nine Months Ended
September 30,
 2017 2016
Financing activities: 
  
Net increase in deposits$452,366
 $172,017
Net decrease in short-term borrowings(201,899) (176,028)
Proceeds from issuance of long-term debt150,000
 —
Repayment of subordinated notes(30,000) —
Value of common shares withheld to pay employee income taxes(347) —
Repurchase of common shares to be held as treasury shares(7,378) —
Cash dividends paid(43,122) (43,232)
Net cash provided by (used in) financing activities$319,620
 $(47,243)
    
Increase in cash and cash equivalents303,906
 90,539
    
Cash and cash equivalents at beginning of year146,446
 149,459
    
Cash and cash equivalents at end of period$450,352
 $239,998
    
Supplemental disclosures of cash flow information: 
  
    
Cash paid for: 
  
Interest$31,743
 $28,757
    
Income taxes$18,690
 $17,460
    
Non-cash items:   
Loans transferred to OREO$2,991
 $2,856
    
Securities purchase commitments$—
 $4,323
    
New commitments in affordable housing tax credit investments$7,000
 $9,000


SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



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PARK NATIONAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


Note 1 – Basis of Presentation
 
The accompanying unaudited consolidated condensed financial statements included in this report have been prepared for Park National Corporation (sometimes also referred to as the “Registrant”) and its subsidiaries. Unless the context otherwise requires, references to "Park", the "Corporation" or the "Company" and similar terms mean Park National Corporation and its subsidiaries. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results of operations for the interim periods included herein have been made. The results of operations for the three-month and nine-month periodsperiod ended September 30, 2017March 31, 2023 are not necessarily indicative of the operating results to be anticipated for the fiscal year ending December 31, 2017.2023.
 
The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with the instructions for Quarterly Reports on Form 10-Q and, therefore, do not include all information and footnotes necessary for a fair presentation of the consolidated condensed balance sheets, consolidated condensed statements of income, consolidated condensed statements of comprehensive income (loss), consolidated condensed statements of changes in shareholders’ equity and consolidated condensed statements of cash flows in conformity with United States ("U.S.") generally accepted accounting principles (“U.S. GAAP”).GAAP. These financial statements should be read in conjunction with the consolidated financial statements incorporated by referenceincluded in Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA in the Annual Report on Form 10-K of Park National Corporation for the fiscal year ended December 31, 2016 from Park’s 2016 Annual Report to Shareholders (“2022 ("Park's 2016 Annual Report”2022 Form 10-K"). Certain prior period amounts have been reclassified to conform to the current period presentation.
 
Park’s significant accounting policies are described in Note 11. Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Park’s 2016 Annual Report.2022 Form 10-K. For interim reporting purposes, Park follows the same basic accounting policies, as updated by the information contained in this report, and considers each interim period an integral part of an annual period.

Recent bank failures have called into question the stability of the financial services industry. While Park is well capitalized and has significant available liquidity, the effects of these failures and potential future failures may meaningfully impact significant estimates such as the allowance for credit losses, goodwill, and pension plan obligations and related expenses.

Note 2 – Recent- Adoption of New Accounting Pronouncements

ASU 2014-09 - Revenue from Contracts with Customers (Topic 606): In May 2014, the Financial and Issued But Not Yet Effective Accounting Standards Board (the "FASB") issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606).

The ASU createsfollowing is a summary of new topic, Topic 606, to provide guidance on revenue recognition for entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additional disclosures are required to provide quantitative and qualitative information regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2017. While interest income is specifically out of scope of this guidance, management is currently evaluating the revenue streams within "Other income" to assess the applicability of this guidance. Specifically, management is evaluating the impact of this new guidance on deposit fees recorded within "Service charges on deposit accounts", interchange income recorded within "Checkcard fee income", and trust income recorded within "Income from fiduciary activities." Additionally, management is evaluating new disclosure requirements as a result of this ASU.

ASU 2016-01 - Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. In January 2016, the FASB issued ASU 2016-01 - Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. Changes to the current U.S. GAAP model primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale securities. The new guidance is effective for annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2017. The adoption of this guidance is not expected to have a material impact onpronouncements impacting Park's consolidated financial statements, but will impact the fair value disclosures in Note 14.statements:


Adoption of New Accounting Pronouncements

ASU 2016-02 - Leases (Topic 842): In February 2016, the FASB issued ASU 2016-02 - Leases (Topic 842). The ASU will require all organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Additional qualitative and quantitative disclosures will be required so that users can understand more about the nature of an entity’s leasing activities. The new guidance is effective for annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted.

Management is currently analyzing data on leased assets. The adoption of this guidance is expected to increase both assets and liabilities, but is not expected to have a material impact on Park's consolidated statements of income.

ASU 2016-09 - Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting: In March 2016, FASB issued ASU 2016-09 - Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU provides simplification for several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The new guidance was effective for annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2016. The adoption of this guidance on January 1, 2017 did not have a material impact on Park's consolidated financial statements.

ASU 2016-132022-02 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments: Troubled Debt Restructurings and Vintage Disclosures: In June 2016,March 2022, FASB issued ASU 2016-132022-02 - Financial Instruments - Credit Losses (Topic 326): Measurement Troubled Debt Restructuring and Vintage Disclosures. ASU 2022-02 eliminated the accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables - Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. Additionally, the amendments in this ASU require that public business entities disclose current-period gross write-offs by year of Credit Losses on Financial Instruments. The new guidance replaces the incurred loss model with an expected loss model, which is referred to as the current expected credit loss ("CECL") model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loanorigination for financing receivables held-to-maturity debt securities, and reinsurance receivables. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized bywithin the scope of Subtopic 326-20, Financial Instruments - Credit Losses - Measured at Amortized Cost.

Park adopted ASU 2022-02 using the modified retrospective transition method on January 1, 2023. Park recorded a lessor. The CECL model requires$383,000 increase to the ACL, a $303,000 decrease to retained earnings and an entity$80,000 increase to estimatedeferred tax assets as of January 1, 2023 for the credit losses over the lifecumulative effect of an asset or off-balance sheet exposure. The new guidance is effective for annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted for annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2018.

Management is currently evaluating the impactadopting ASU 2022-02. Additionally, as a result of the adoption of this guidance on Park's consolidated financial statements. We anticipate thatASU and elimination of the concept of TDRs, total nonperforming loans decreased by $20.1 million during the three months ended March 31, 2023 and individually evaluated loans decreased by $11.5 million.

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


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Issued But Not Yet Effective Accounting Standards

There are no issued but not yet effective accounting standards that are significant to Park.

Note 3 – Investment Securities
Investment securities at March 31, 2023 and at December 31, 2022, were as follows:

Debt securities AFS (In thousands)Amortized
Cost		Gross
Unrealized
Holding 
Gains		Gross
Unrealized
Holding 
Losses		Fair Value
March 31, 2023:
Obligations of U.S. Government sponsored entities$39,000 $— $1,656 $37,344 
Obligations of states and political subdivisions422,398 3,941 14,333 412,006 
U.S. Government sponsored entities' asset-backed securities805,466 — 75,205 730,261 
Collateralized loan obligations535,436 — 16,008 519,428 
Corporate debt securities17,650 — 2,249 15,401 
Total$1,819,950 $3,941 $109,451 $1,714,440 
Debt securities AFS (In thousands)Amortized
Cost		Gross
Unrealized
Holding 
Gains		Gross
Unrealized
Holding 
Losses		Fair Value
December 31, 2022:
Obligations of U.S. Government sponsored entities$39,000 $— $1,787 $37,213 
Obligations of states and political subdivisions423,285 1,620 18,194 406,711 
U.S. Government sponsored entities' asset-backed securities839,399 — 82,638 756,761 
Collateralized loan obligations535,518 — 18,979 516,539 
Corporate debt securities17,650 — 1,178 16,472 
Total$1,854,852 $1,620 $122,776 $1,733,696 


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

Unrealized loss position for less than 12 monthsUnrealized loss position for 12 months or longerTotal
(In thousands)Fair valueUnrealized
losses		Fair valueUnrealized
losses		Fair
value		Unrealized
losses
Debt securities AFS:
Obligations of U.S. Government sponsored entities$13,411 $590 $23,933 $1,066 $37,344 $1,656 
Obligations of states and political subdivisions52,910 1,102 85,762 13,231 138,672 14,333 
U.S. Government sponsored entities' asset-backed securities197,348 7,644 532,913 67,561 730,261 75,205 
Collateralized loan obligations35,179 492 484,249 15,516 519,428 16,008 
Corporate debt securities11,844 1,556 3,557 693 15,401 2,249 
Total$310,692 $11,384 $1,130,414 $98,067 $1,441,106 $109,451 
 Investment securities in an unrealized loss position at December 31, 2022, were as follows:

Unrealized loss position for less than 12 monthsUnrealized loss position for 12 months or longerTotal
(In thousands)Fair valueUnrealized
losses		Fair valueUnrealized
losses		Fair
value		Unrealized
losses
Debt securities AFS:
Obligations of U.S. Government sponsored entities$37,213 $1,787 $— $— $37,213 $1,787 
Obligations of states and political subdivisions270,905 18,194 — — 270,905 18,194 
U.S. Government sponsored entities' asset-backed securities446,423 27,507 310,338 55,131 756,761 82,638 
Collateralized loan obligations415,491 15,446 101,048 3,533 516,539 18,979 
Corporate debt securities7,388 862 1,684 316 9,072 1,178 
Total$1,177,420 $63,796 $413,070 $58,980 $1,590,490 $122,776 

At March 31, 2023, Park’s debt securities portfolio consisted of $1.7 billion of securities, $1.4 billion of which were in an unrealized loss position with unrealized losses of $109.5 million. Of the CECL model will result$1.4 billion of securities in a material increase to Park's allowance for loan losses. Management has established a committee to oversee the implementation of CECL and is currentlyan unrealized loss position, $1.1 billion were in the process of implementing a software solution to assist in the adoption of this ASU. Management plans to run our current incurredan unrealized loss model and a CECL model concurrentlyposition for 12 months or longer. Of the $109.5 million in unrealized losses, an aggregate of $76.9 million were related to Park's "Obligations of U.S. Government sponsored entities" portfolio and Park's "U.S. Government sponsored entities' asset-backed securities" portfolio. For non-agency debt securities, Park verified that the current credit ratings remain above investment grade. Management periodically reviews the credit profile of each non-agency debt security and assesses whether any impairment to the contractually obligated cash flow is likely to occur. Based on these reviews, management has concluded that the underlying creditworthiness for each security remains sufficient to maintain required payment obligations and, therefore, unrealized losses have not been recognized into net income. Management does not intend to sell, and it is not more likely than not that management would be required to sell, the securities prior to the adoption of this guidance on January 1, 2020.

ASU 2016-15 - Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensustheir anticipated recovery in respect of the Emerging Issues Task Force):  In August 2016,unrealized losses. Management believes the FASB issued ASU 2016-15, Statementvalue will recover as the securities approach maturity or market rates change.

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





15
Table of Cash Flows (Topic 230): Classification of Certain Cash ReceiptsContents


The amortized cost and Cash Payments (a consensus of the Emerging Issues Task Force).  This ASU provides guidance on eight specific cash flow issues where current U.S. GAAP is either unclear or does not include specific guidance. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2017.  As such transactions arise, management will utilize the updated guidance in determining the amounts reported in Park’s consolidated statements of cash flows. 

ASU 2017-01 – Business Combinations (Topic 805): Clarifying the Definition of a Business: In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This ASU clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new guidance is effective for annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. Park intends to adopt this guidance in the fourth quarter of 2017 and will apply this guidance to all future transactions.

ASU 2017-04 - Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment:  In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU eliminates Step 2 from the goodwill impairment test. Instead, under the new guidance, an entity is to perform its annual goodwill impairment test by comparing theestimated fair value of investments in debt securities AFS at March 31, 2023, are shown in the following table by contractual maturity, except for asset-backed securities and collateral loan obligations, which are shown as a reporting unitsingle total, due to the unpredictability of the timing of principal repayments. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with its carrying amount. An impairment charge would be recognizedor without call or prepayment penalties.

 (In thousands)Amortized
cost		Fair value
Tax equivalent yield (1)
Debt Securities AFS
Obligations of U.S. Treasury and other U.S. Government sponsored entities
Due one through five years$39,000 $37,344 2.37 %
Obligations of state and political subdivisions:
Due one through five years$2,280 $2,282 2.97 %
Due five through ten years275,512 278,622 3.69 %
Due over ten years144,606 131,102 3.12 %
Total (1)
$422,398 $412,006 3.49 %
U.S. Government sponsored entities' asset-backed securities$805,466 $730,261 1.90 %
Collateralized loan obligations$535,436 $519,428 6.51 %
Corporate debt securities
Due five through ten years$17,650 $15,401 3.89 %
(1) The tax equivalent yield for certain obligations of state and political subdivisions includes the amount by whicheffect of a taxable equivalent adjustment using a 21% federal corporate income tax rate.

There were no sales of debt securities AFS during the carrying amount exceedsthree-month periods ended March 31, 2023 or 2022.

Investment securities having a fair value of $778.7 million and $753.6 million at March 31, 2023 and December 31, 2022, respectively, were pledged to collateralize government and public fund deposits, to secure repurchase agreements sold and as collateral for FHLB advance borrowings.

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Note 4 – Other Investment Securities
Other investment securities consist of restricted stock investments in the reporting unit'sFHLB and the FRB, and equity securities. The restricted FHLB and FRB stock investments are carried at their redemption value. Equity securities with a readily determinable fair value are carried at fair value. Equity securities without a readily determinable fair value are recorded at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions ("modified cost"). Park's portfolio of equity investments in limited partnerships which provide mezzanine funding ("Partnership Investments") are valued using the NAV practical expedient in accordance with ASC 820.

The new guidance is effective for annual reporting periods,carrying amounts of other investment securities at March 31, 2023 and interim reporting periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted for interim31, 2022 were as follows:
(In thousands)March 31, 2023December 31, 2022
FHLB stock$8,103 $11,197 
FRB stock14,653 14,653 
Equity investments carried at fair value2,832 1,859 
Equity investments carried at modified cost (1)
15,921 14,725 
Equity investments carried at NAV44,461 44,657 
Total other investment securities$85,970 $87,091 
(1) There have been no impairments or annual goodwill impairment tests performed on testing dates after January 1, 2017. The early adoptiondownward adjustments made to equity investments carried at modified cost. An upward adjustment of this guidance with Park's April 1, 2017 annual goodwill impairment test did not have an impact on Park's consolidated financial statements.

ASU 2017-07 - Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost: In March 2017, the FASB issued ASU 2017-07 - Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This ASU requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees$871,000 was recorded during the period. The other componentsyear ended December 31, 2022 as a result of netobservable price changes. There were no adjustments recorded during the three months ended March 31, 2023 or March 31, 2022 as a result of observable price changes.


benefit cost are required to be presented inDuring the income statement separately fromthree months ended March 31, 2023, the service cost component. The new guidance is effective for annual reporting periods,FHLB repurchased 30,938 shares of FHLB stock with a book value of $3.1 million. No shares of FHLB stock were repurchased during the the three months ended March 31, 2022. No shares of FRB stock were purchased or sold during the three months ended March 31, 2023 or 2022.

During the three months ended March 31, 2023 and interim reporting periods2022, $(27,000) and $(92,000), respectively, of losses on equity investments carried at fair value were recorded within those annual periods, beginning after December 15, 2017. Early adoption is permitted for interim or annual periods. The adoption"(Loss) gain on equity securities, net" on the Consolidated Condensed Statements of this guidance is not expected to have a material impactIncome.

During the three months ended March 31, 2023 and 2022, $(378,000) and $2.4 million, respectively, of (losses) gains on Park's consolidated financial statements.equity investments carried at NAV were recorded within “(Loss) gain on equity securities, net” on the Consolidated Condensed Statements of Income.


ASU 2017-08 - Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities: In March 2017, the FASB issued ASU 2017-08 - Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. This ASU amends the amortization period for certain purchased callable debt securities held at a premium. It shortens the amortization period for the premium to the earliest call date. Under current U.S. GAAP, premiums on callable debt securities generally are amortized to the maturity date. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted for interim or annual periods. The adoption
17
Table of this guidance is not expected to have a material impact on Park's consolidated financial statements.Contents


ASU 2017-09 - Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting: In May 2017, the FASB issued ASU 2017-09 - Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU amends the guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted for interim or annual periods. The adoption of this guidance is not expected to have a material impact on Park's consolidated financial statements.

ASU 2017-12 - Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities: In August 2017, the FASB issued ASU 2017-12 - Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This ASU amends the guidance with the objective of improving the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements. In addition, this ASU amends the current guidance to simplify the application of the hedge accounting guidance. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted for interim or annual periods. The adoption of this guidance is not expected to have a material impact on Park's consolidated financial statements. Park is considering the early adoption of this guidance.


Note 35 – Loans
 
The composition of the loan portfolio by class of loan, as of September 30, 2017at March 31, 2023 and December 31, 20162022 was as follows:
March 31, 2023December 31, 2022
(In thousands)Amortized CostAmortized Cost
Commercial, financial and agricultural: (1)
Commercial, financial and agricultural (1)
$1,256,705 $1,295,238 
PPP loans3,445 4,206 
Overdrafts1,831 1,489 
Commercial real estate (1)
1,800,878 1,794,054 
Construction real estate:  
Commercial173,668 208,982 
Retail117,075 116,433 
Residential real estate:  
Commercial562,759 550,183 
Mortgage1,089,772 1,075,446 
HELOC164,656 167,151 
Installment3,987 4,091 
Consumer:
Consumer1,898,398 1,902,557 
GFSC140 274 
Check loans2,071 2,150 
Leases18,472 19,637 
Total$7,093,857 $7,141,891 
Allowance for credit losses(85,946)(85,379)
Net loans$7,007,911 $7,056,512 
 September 30, 2017  December 31, 2016
(In thousands)
Loan
Balance
 
Accrued
Interest
Receivable
 
Recorded
Investment
  
Loan
Balance
 
Accrued
Interest
Receivable
 
Recorded
Investment
Commercial, financial and agricultural *$1,025,057
 $4,581
 $1,029,638
  $994,619
 $3,558
 $998,177
Commercial real estate *1,155,662
 4,464
 1,160,126
  1,155,703
 4,161
 1,159,864
Construction real estate: 
  
  
   
  
  
Commercial139,210
 462
 139,672
  135,343
 398
 135,741
Mortgage47,629
 109
 47,738
  48,699
 106
 48,805
Installment4,209
 11
 4,220
  4,903
 17
 4,920
Residential real estate: 
  
  
   
  
  
Commercial391,502
 959
 392,461
  406,687
 940
 407,627
Mortgage1,135,289
 1,469
 1,136,758
  1,169,495
 1,459
 1,170,954
HELOC206,665
 896
 207,561
  212,441
 853
 213,294
Installment19,131
 54
 19,185
  19,874
 67
 19,941
Consumer1,238,191
 3,409
 1,241,600
  1,120,850
 3,385
 1,124,235
Leases3,332
 52
 3,384
  3,243
 29
 3,272
Total loans$5,365,877
 $16,466
 $5,382,343
  $5,271,857
 $14,973
 $5,286,830
*(1) Included within each of commercial, financial and agricultural loans and commercial real estate loans is an immaterial amount of consumer loans that arewere not broken out by class.


In order to support customers, Park participated in the CARES Act Paycheck Protection Program ("PPP"). For its assistance in making and retaining these loans, Park received an aggregate of $33.1 million in fees from the SBA. During the three months ended March 31, 2023 and March 31, 2022, $17,400 and $1.5 million, respectively, of PPP fee income was recognized within loan interest income.

Loans are shown net of deferred origination fees, costs and unearned income of $12.0$17.7 million at September 30, 2017March 31, 2023, and $11.1of $18.2 million at December 31, 2016,2022, which represented a net deferred income position in both periods.years. At March 31, 2023 and December 31, 2022, included in the net deferred origination fees, costs and unearned income were $51,000 and $68,000, respectively, in net origination fees related to PPP loans. At March 31, 2023 and December 31, 2022, loans included purchase accounting adjustments of $2.3 million and $2.5 million, respectively, which represented a net deferred income position at each date. This fair market value purchase accounting adjustment is expected to be recognized into interest income on a level yield basis over the remaining expected life of the loans.


Overdrawn deposit accounts of $1.8 million and $2.9$1.5 million had beenwere reclassified to loans at September 30, 2017March 31, 2023 and December 31, 2016, respectively, and are included in the commercial, financial and agricultural loan class above.2022, respectively.



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Credit Quality
The following tables presentAmong other things, the recorded investment inadoption of ASU 2022-02 on January 1, 2023 eliminated the concept of TDRs. After the adoption of ASU 2022-02 on January 1, 2023, nonperforming loans consisted of nonaccrual loans and loans past due 90 days or more and still accruing. Prior to the adoption of ASU 2022-02, nonperforming loans consisted of nonaccrual loans, accruing troubled debt restructurings ("TDRs"),TDRs and loans past due 90 days or more and still accruing.

The following table presents the amortized cost of nonaccrual loans and loans past due 90 days or more and still accruing, by class of loan, as of September 30, 2017 and Decemberat March 31, 2016:2023.
 March 31, 2023
(In thousands)Nonaccrual
Loans		Loans Past Due
90 Days
 or More
and Accruing		Total
Nonperforming
Loans
Commercial, financial and agricultural:
Commercial, financial and agricultural$39,054 $— $39,054 
PPP loans— 294 294 
Overdrafts— — — 
Commercial real estate15,476 — 15,476 
Construction real estate:   
Commercial1,997 — 1,997 
Retail— — — 
Residential real estate:   
Commercial2,338 — 2,338 
Mortgage10,888 291 11,179 
HELOC1,145 16 1,161 
Installment47 — 47 
Consumer:
Consumer1,545 634 2,179 
GFSC7 1 8 
Check loans— — — 
Leases617 15 632 
Total loans$73,114 $1,251 $74,365 
 

19
Table of Contents


  September 30, 2017
(In thousands) 
Nonaccrual
Loans
 Accruing Troubled Debt Restructurings 
Loans Past Due
90 Days or More
and Accruing
 
Total
Nonperforming
Loans
Commercial, financial and agricultural $29,141
 $737
 $—
 $29,878
Commercial real estate 17,889
 5,106
 —
 22,995
Construction real estate:  
  
  
  
Commercial 1,096
 364
 —
 1,460
Mortgage 8
 84
 —
 92
Installment 57
 —
 —
 57
Residential real estate:  
  
  
  
Commercial 19,071
 227
 —
 19,298
Mortgage 17,860
 10,599
 882
 29,341
HELOC 1,514
 1,094
 —
 2,608
Installment 778
 556
 —
 1,334
Consumer 3,154
 736
 1,155
 5,045
Total loans $90,568
 $19,503
 $2,037
 $112,108
  December 31, 2016
(In thousands) 
Nonaccrual
Loans
 Accruing Troubled Debt Restructurings 
Loans Past Due
90 Days or More
and Accruing
 
Total
Nonperforming
Loans
Commercial, financial and agricultural $20,057
 $600
 $15
 $20,672
Commercial real estate 19,169
 5,305
 —
 24,474
Construction real estate:  
  
  
  
Commercial 1,833
 393
 —
 2,226
Mortgage —
 104
 —
 104
Installment 61
 95
 12
 168
Residential real estate:  
  
  
  
Commercial 23,013
 89
 —
 23,102
Mortgage 18,313
 9,612
 887
 28,812
HELOC 1,783
 673
 25
 2,481
Installment 644
 609
 60
 1,313
Consumer 2,949
 748
 1,139
 4,836
Total loans $87,822
 $18,228
 $2,138
 $108,188

The following table provides additional information regarding those nonaccrual loans and accruing TDR loans that were individually evaluated for impairment and those collectively evaluated for impairment as of September 30, 2017 and December 31, 2016.

  September 30, 2017  December 31, 2016
(In thousands) Nonaccrual and Accruing TDRs 
Loans
Individually
Evaluated for
Impairment
 
Loans
Collectively
Evaluated for
Impairment
  Nonaccrual and Accruing TDRs 
Loans
Individually
Evaluated for
Impairment
 
Loans
Collectively
Evaluated for
Impairment
Commercial, financial and agricultural $29,878
 $29,848
 $30
  $20,657
 $20,624
 $33
Commercial real estate 22,995
 22,995
 —
  24,474
 24,474
 —
Construction real estate:  
  
  
   
  
  
Commercial 1,460
 1,460
 —
  2,226
 2,226
 —
Mortgage 92
 —
 92
  104
 —
 104
Installment 57
 —
 57
  156
 —
 156
Residential real estate:  
  
  
   
  
  
Commercial 19,298
 19,298
 —
  23,102
 23,102
 —
Mortgage 28,459
 —
 28,459
  27,925
 —
 27,925
HELOC 2,608
 —
 2,608
  2,456
 —
 2,456
Installment 1,334
 —
 1,334
  1,253
 —
 1,253
Consumer 3,890
 8
 3,882
  3,697
 —
 3,697
Total loans $110,071
 $73,609
 $36,462
  $106,050
 $70,426
 $35,624
All of the loans individually evaluated for impairment were evaluated using the fair value of the underlying collateral or the present value of expected future cash flows as the measurement method.
The following table presents the amortized cost of nonaccrual loans, individually evaluated for impairmentaccruing TDRs, and loans past due 90 days or more and still accruing, by class of loan, together withat December 31, 2022:

 December 31, 2022
(In thousands)Nonaccrual
Loans		Accruing
TDRs		Loans Past Due 90 Days or More and AccruingTotal
Nonperforming
Loans
Commercial, financial and agricultural
Commercial, financial and agricultural$38,158 $3,261 $— $41,419 
PPP loans— — 389 389 
Overdrafts— — — — 
Commercial real estate24,504 7,919 — 32,423 
Construction real estate:   
Commercial1,712 — — 1,712 
Retail1,254 12 — 1,266 
Residential real estate:    
Commercial1,894 298 — 2,192 
Mortgage9,260 6,750 182 16,192 
HELOC1,133 187 7 1,327 
Installment51 1,037 — 1,088 
Consumer
Consumer1,012 670 703 2,385 
GFSC10 — — 10 
Check loans— — — — 
Leases708 — — 708 
Total loans$79,696 $20,134 $1,281 $101,111 

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Table of Contents


The following tables provide additional detail on nonaccrual loans and the related allowance recorded, asACL, by class of September 30, 2017loan, at March 31, 2023 and December 31, 2016.2022:

March 31, 2023
(In thousands)Nonaccrual Loans With No ACLNonaccrual Loans With an ACLRelated ACL
Commercial, financial and agricultural:
Commercial, financial and agricultural$29,007 $10,047 $4,112 
PPP loans— — — 
Overdrafts— — — 
Commercial real estate12,730 2,746 215 
Construction real estate:
Commercial1,997 — — 
Retail— — — 
Residential real estate:
Commercial2,338 — — 
Mortgage— 10,888 105 
HELOC— 1,145 175 
Installment— 47 18 
Consumer
Consumer— 1,545 364 
GFSC— 7 1 
Check loans— — — 
Leases593 24 2 
Total loans$46,665 $26,449 $4,992 



21
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 September 30, 2017  December 31, 2016December 31, 2022
(In thousands) 
Unpaid
Principal
Balance
 
Recorded
Investment
 
Allowance
for Loan
Losses
Allocated
  
Unpaid
Principal
Balance
 
Recorded
Investment
 
Allowance
for Loan
Losses
Allocated
(In thousands)Nonaccrual Loans With No ACLNonaccrual Loans With an ACLRelated ACL
With no related allowance recorded:  
  
  
   
  
  
Commercial, financial and agricultural:Commercial, financial and agricultural:
Commercial, financial and agricultural $22,233
 $16,980
 $—
  $41,075
 $19,965
 $—
Commercial, financial and agricultural$28,291 $9,867 $3,440 
PPP loansPPP loans— — — 
OverdraftsOverdrafts— — — 
Commercial real estate 18,558
 18,158
 —
  23,961
 23,474
 —
Commercial real estate22,965 1,539 130 
Construction real estate:  
  
  
   
  
  
Construction real estate:— 
Commercial 2,923
 1,460
 —
  3,662
 2,226
 —
Commercial1,712 — — 
RetailRetail— 1,254 19 
Residential real estate:  
  
  
   
  
  
Residential real estate:— 
Commercial 19,393
 19,009
 —
  24,409
 22,687
 —
Commercial1,894 — — 
             
With an allowance recorded:  
  
  
   
  
  
Commercial, financial and agricultural 14,735
 12,868
 4,761
  810
 659
 152
Commercial real estate 5,357
 4,837
 320
  1,014
 1,000
 309
Construction real estate:  
  
  
   
  
  
Commercial —
 —
 —
  —
 —
 —
Residential real estate:  
  
  
   
  
  
Commercial 289
 289
 13
  427
 415
 87
MortgageMortgage— 9,260 85 
HELOCHELOC— 1,133 191 
InstallmentInstallment— 51 17 
Consumer 8
 8
 8
  —
 —
 —
Consumer
ConsumerConsumer— 1,012 283 
GFSCGFSC— 10 1 
Check loansCheck loans— — — 
LeasesLeases680 28 9 
Total $83,496
 $73,609
 $5,102
  $95,358
 $70,426
 $548
Total$55,542 $24,154 $4,175 


Nonaccrual commercial loans are evaluated on an individual basis and are excluded from the collective evaluation. Management’s general practice is to proactively charge down loans individually evaluated for impairment to the fair value of the underlying collateral. At September 30, 2017 and DecemberNonaccrual consumer loans are collectively evaluated based on similar risk characteristics.

The following tables provide the amortized cost basis of collateral-dependent loans by class of loan, as of March 31, 2016, there were $7.5 million and $24.7 million, respectively, of partial charge-offs on loans individually evaluated for impairment with no related allowance recorded and $2.4 million and $0.2 million, respectively, of partial charge-offs on loans individually evaluated for impairment that also had a specific reserve allocated.

The allowance for loan losses included specific reserves related to loans individually evaluated for impairment at September 30, 20172023 and December 31, 20162022:

 March 31, 2023
(In thousands)Real EstateBusiness AssetsOtherTotal
Commercial, financial and agricultural
Commercial, financial and agricultural$8,541 $7,364 $23,133 $39,038 
Commercial real estate18,782 155 — 18,937 
Construction real estate:
Commercial2,648 — — 2,648 
Residential real estate:
Commercial2,613 — — 2,613 
Mortgage86 — — 86 
Leases— 617 — 617 
Total loans$32,670 $8,136 $23,133 $63,939 

22
Table of $5.1 million and $0.5 million, respectively. These loans with specific reserves had a recorded investment of $18.0 million and $2.1 million as of September 30, 2017 and December 31, 2016, respectively.Contents


 December 31, 2022
(In thousands)Real EstateBusiness AssetsOtherTotal
Commercial, financial and agricultural
Commercial, financial and agricultural$8,242 $7,788 $23,125 $39,155 
Commercial real estate35,908 28 — 35,936 
Construction real estate:
Commercial2,372 — — 2,372 
Residential real estate:
Commercial2,479 — — 2,479 
Mortgage90 — — 90 
Leases— 708 — 708 
Total loans$49,091 $8,524 $23,125 $80,740 

Interest income on nonaccrual loans individually evaluated for impairment is recognized on a cash basis only when Park expects to receive the entire recorded investment ofin the loan. Interest income on accruing TDRs individually evaluated for impairment continues to be recorded on an accrual basis.loans. The following table presents the average recorded investment and interest income recognized subsequent to impairment on nonaccrual loans individually evaluated for impairment as of and for the threethree-month periods ended March 31, 2023 and nine months ended September 30, 2017 and September 30, 2016:2022:


Interest Income Recognized
(In thousands)Three Months Ended
March 31, 2023		Three Months Ended
March 31, 2022
Commercial, financial and agricultural:
Commercial, financial and agricultural$605 $17 
PPP loans— — 
Overdrafts— — 
Commercial real estate160 257 
Construction real estate:
Commercial32 1 
Retail— 4 
Residential real estate:
Commercial26 20 
Mortgage49 33 
HELOC8 4 
Installment1 2 
Consumer:
Consumer19 14 
GFSC— 2 
Check loans— — 
Leases— 14 
Total loans$900 $368 




23
Table of Contents


 Three Months Ended
September 30, 2017		  Three Months Ended
September 30, 2016
(In thousands)Recorded Investment as of September 30, 2017 
Average
Recorded
Investment
 
Interest
Income
Recognized
  Recorded Investment as of September 30, 2016 
Average
Recorded
Investment
 
Interest
Income
Recognized
Commercial, financial and agricultural$29,848
 $28,412
 $398
  $23,856
 $26,679
 $194
Commercial real estate22,995
 22,241
 192
  26,065
 27,982
 243
Construction real estate:            
   Commercial1,460
 1,554
 18
  4,377
 5,643
 16
Residential real estate:            
   Commercial19,298
 20,365
 46
  23,700
 24,422
 314
Consumer8
 8
 —
  —
 10
 —
Total$73,609
 $72,580
 $654
  $77,998
 $84,736
 $767

 Nine Months Ended
September 30, 2017		  Nine Months Ended
September 30, 2016
(In thousands)Recorded Investment as of September 30, 2017 
Average
Recorded
Investment
 
Interest
Income
Recognized
  Recorded Investment as of September 30, 2016 
Average
Recorded
Investment
 
Interest
Income
Recognized
Commercial, financial and agricultural$29,848
 $23,770
 $738
  $23,856
 $28,217
 $740
Commercial real estate22,995
 22,470
 663
  26,065
 22,108
 608
Construction real estate:            
   Commercial1,460
 1,830
 49
  4,377
 6,244
 44
Residential real estate:            
   Commercial19,298
 20,876
 452
  23,700
 24,618
 2,619
Consumer8
 7
 —
  —
 4
 —
Total$73,609
 $68,953
 $1,902
  $77,998
 $81,191
 $4,011



The following tables present the aging of the recorded investmentamortized cost in past due loans as of September 30, 2017at March 31, 2023 and December 31, 20162022 by class of loan. loan:


September 30, 2017 March 31, 2023
(In thousands)
Accruing Loans
Past Due 30-89
Days
 
Past Due 
Nonaccrual
Loans and Loans Past
Due 90 Days or
More and 
Accruing (1)
 Total Past Due 
Total Current (2)
 
Total Recorded
Investment
(In thousands)Accruing 
Loans
Past Due 
30-89 Days
Past Due 
Nonaccrual
Loans and Loans
Past Due 90 Days
or More and 
Accruing (1)
Total Past 
Due
Total
Current (2)
Total 
Amortized Cost
Commercial, financial and agricultural:Commercial, financial and agricultural:
Commercial, financial and agricultural$70
 $10,527
 $10,597
 $1,019,041
 $1,029,638
Commercial, financial and agricultural$2,732 $31,450 $34,182 $1,222,523 $1,256,705 
PPP loansPPP loans— 294 294 3,151 3,445 
OverdraftsOverdrafts— — — 1,831 1,831 
Commercial real estate82
 3,455
 3,537
 1,156,589
 1,160,126
Commercial real estate390 2,478 2,868 1,798,010 1,800,878 
Construction real estate: 
  
  
  
  
Construction real estate:
Commercial—
 —
 —
 139,672
 139,672
Commercial— — — 173,668 173,668 
Mortgage213
 —
 213
 47,525
 47,738
Installment11
 48
 59
 4,161
 4,220
RetailRetail50 — 50 117,025 117,075 
Residential real estate: 
  
  
  
  
Residential real estate:
Commercial—
 1,345
 1,345
 391,116
 392,461
Commercial18 328 346 562,413 562,759 
Mortgage11,305
 9,354
 20,659
 1,116,099
 1,136,758
Mortgage4,439 5,362 9,801 1,079,971 1,089,772 
HELOC400
 917
 1,317
 206,244
 207,561
HELOC418 745 1,163 163,493 164,656 
Installment349
 261
 610
 18,575
 19,185
Installment11 — 11 3,976 3,987 
Consumer:Consumer:
Consumer10,426
 2,333
 12,759
 1,228,841
 1,241,600
Consumer4,593 878 5,471 1,892,927 1,898,398 
GFSCGFSC26 2 28 112 140 
Check loansCheck loans1 — 1 2,070 2,071 
Leases—
 —
 —
 3,384
 3,384
Leases98 15 113 18,359 18,472 
Total loans$22,856
 $28,240
 $51,096
 $5,331,247
 $5,382,343
Total loans$12,776 $41,552 $54,328 $7,039,529 $7,093,857 
(1) Includes $2.0an aggregate of $1.3 million of loans past due 90 days or more and accruing. The remaining areloans were past due nonaccrual loans.
(2) Includes $64.4an aggregate of $32.8 million of nonaccrual loans which arewere current in regards to contractual principal and interest payments.


24
Table of Contents


December 31, 2016 December 31, 2022
(in thousands)
Accruing Loans
Past Due 30-89
Days
 
Past Due 
Nonaccrual
Loans and Loans Past
Due 90 Days or
More and 
Accruing (1)
 Total Past Due 
Total Current (2)
 
Total Recorded
Investment
(in thousands)Accruing 
Loans
Past Due 
30-89 Days
Past Due 
Nonaccrual
Loans and Loans Past
Due 90 Days or
More and 
Accruing (1)
Total Past 
Due
Total
Current (2)
Total 
Amortized Cost
Commercial, financial and agricultural$371
 $4,113
 $4,484
 $993,693
 $998,177
Commercial, financial and agricultural
Commercial, financial and agriculturalCommercial, financial and agricultural$378 $9,246 $9,624 $1,285,614 $1,295,238 
PPP loansPPP loans155 389 544 3,662 4,206 
OverdraftsOverdrafts— — — 1,489 1,489 
Commercial real estate355
 2,499
 2,854
 1,157,010
 1,159,864
Commercial real estate737 4,738 5,475 1,788,579 1,794,054 
Construction real estate: 
  
    
  
Construction real estate:
Commercial—
 541
 541
 135,200
 135,741
Commercial751 — 751 208,231 208,982 
Mortgage559
 —
 559
 48,246
 48,805
Installment223
 64
 287
 4,633
 4,920
RetailRetail1,035 523 1,558 114,875 116,433 
Residential real estate: 
  
  
  
  
Residential real estate:
Commercial330
 3,631
 3,961
 403,666
 407,627
Commercial519 477 996 549,187 550,183 
Mortgage10,854
 9,769
 20,623
 1,150,331
 1,170,954
Mortgage7,630 5,157 12,787 1,062,659 1,075,446 
HELOC970
 1,020
 1,990
 211,304
 213,294
HELOC832 587 1,419 165,732 167,151 
Installment350
 319
 669
 19,272
 19,941
Installment57 4 61 4,030 4,091 
Consumer12,579
 2,094
 14,673
 1,109,562
 1,124,235
Consumer
ConsumerConsumer5,451 964 6,415 1,896,142 1,902,557 
GFSCGFSC48 — 48 226 274 
Check loansCheck loans2 — 2 2,148 2,150 
Leases—
 —
 —
 3,272
 3,272
Leases— — — 19,637 19,637 
Total loans$26,591
 $24,050
 $50,641
 $5,236,189
 $5,286,830
Total loans$17,595 $22,085 $39,680 $7,102,211 $7,141,891 
(1) Includes $2.1an aggregate of $1.3 million of loans past due 90 days or more and accruing. The remaining areloans were past due nonaccrual loans.
(2) Includes $65.9an aggregate of $58.9 million of nonaccrual loans which arewere current in regards to contractual principal and interest payments.



Credit Quality Indicators
Management utilizes past due information as a credit quality indicator across the loan portfolio. Past due information as of September 30, 2017at March 31, 2023 and December 31, 20162022 is included in the tables above.previous tables. The past due information is the primary credit quality indicator within the following classes of loans: (1) mortgage loansoverdrafts in the commercial, financial and installmentagricultural portfolio segment; (2) retail loans in the construction real estate portfolio segment; (2)(3) mortgage loans, HELOC and installment loans in the residential real estate portfolio segment; and (3)(4) consumer loans.loans, GFSC loans, and check loans in the consumer portfolio segment. The primary credit indicator for commercial loans is based on an internal grading system that grades all commercial loans on a scale from 1 to 8. Credit grades are continuously monitored by the responsible loan officer and adjustments are made when appropriate. A grade of 1 indicates little or no credit risk and a grade of 8 is considered a loss. Commercial loans that are pass-rated (graded ana 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 loan loss reserve percentagePD is allocatedapplied to these loans. Loans classified as special mention have potential weaknesses that require management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of Park’s credit position at some future date. Commercial loans graded a 6 (substandard), also considered to be watch list credits, are considered to represent higher credit risk and, as a result, a higher loan loss reserve percentagePD is allocatedapplied to these loans. Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor or the value of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that Park will sustain some loss if the deficiencies are not corrected. Commercial loans that are graded a 7 (doubtful) are shown as nonaccrual and Park generally charges these loans down to their fair value by taking a partial charge-off or recording a specific reserve. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Certain 6-rated loans and all 7-rated loans are placed on nonaccrual status and included within the impairedindividually evaluated category. A commercial loan is deemed impairednonaccrual, and is individually evaluated, when management
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determines the borrower's ability to perform in accordance with the contractual loan agreement is in doubt. Any commercial loan graded an 8 (loss) is completely charged off.

The tables below presentBased on the recorded investmentthen most recent analysis performed, the risk category of commercial loans by loan grade at September 30, 2017class of loans as of March 31, 2023 and December 31, 2016 for all commercial loans:2022 were as follows:

March 31, 2023Term Loans Amortized Cost Basis by Origination Year
(In thousands)20232022202120202019PriorRevolving Loans Amortized Cost BasisTotal
Commercial, financial and agricultural: Commercial, financial and agricultural (1)
Risk rating
Pass$36,402 $191,499 $186,796 $134,697 $54,571 $72,782 $501,803 $1,178,550 
Special Mention38 1,037 657 965 267 87 33,982 37,033 
Substandard19 254 126 2,777 122 1,718 26,511 31,527 
Doubtful— 786 — — 150 8,568 91 9,595 
Total$36,459 $193,576 $187,579 $138,439 $55,110 $83,155 $562,387 $1,256,705 
Current period gross write offs$— $— $— $— $— $52 $— $52 
Commercial, financial and agricultural: PPP
Risk rating
Pass$— $— $1,342 $2,103 $— $— $— $3,445 
Special Mention— — — — — — — — 
Substandard— — — — — — — — 
Doubtful— — — — — — — — 
Total$— $— $1,342 $2,103 $— $— $— $3,445 
Current period gross write offs$— $— $— $— $— $— $— $— 
Commercial real estate (1)
Risk rating
Pass$66,791 $318,942 $369,914 $362,128 $217,432 $390,197 $14,372 $1,739,776 
Special Mention— 197 4,859 3,845 743 35,851 96 45,591 
Substandard— 918 1,585 1,753 2,692 6,879 335 14,162 
Doubtful— — 81 740 130 398 — 1,349 
Total$66,791 $320,057 $376,439 $368,466 $220,997 $433,325 $14,803 $1,800,878 
Current period gross write offs$— $— $— $— $— $— $— $— 
Construction real estate: Commercial
Risk rating
Pass$17,938 $98,767 $17,350 $20,875 $2,388 $4,091 $9,383 $170,792 
Special Mention— — — 228 — — — 228 
Substandard988 647 105 257 — 651 — 2,648 
Doubtful— — — — — — — — 
Total$18,926 $99,414 $17,455 $21,360 $2,388 $4,742 $9,383 $173,668 
Current period gross write offs$— $— $— $— $— $— $— $— 
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 September 30, 2017
(In thousands)5 Rated 6 Rated Nonaccrual and Accruing Troubled Debt Restructurings Pass-Rated 
Recorded
Investment
Commercial, financial and agricultural *$2,981
 $395
 $29,878
 $996,384
 $1,029,638
Commercial real estate *8,364
 —
 22,995
 1,128,767
 1,160,126
Construction real estate: 
  
  
  
  
Commercial—
 114
 1,460
 138,098
 139,672
Residential real estate: 
  
  
  
  
Commercial395
 5
 19,298
 372,763
 392,461
Leases—
 —
 —
 3,384
 3,384
Total commercial loans$11,740
 $514
 $73,631
 $2,639,396
 $2,725,281
March 31, 2023Term Loans Amortized Cost Basis by Origination Year
(In thousands)20232022202120202019PriorRevolving Loans Amortized Cost BasisTotal
Residential Real Estate: Commercial
Risk rating
Pass$24,461 $115,770 $115,043 $136,483 $54,408 $91,876 $18,062 $556,103 
Special Mention— 343 563 1,674 423 1,018 — 4,021 
Substandard56 597 350 260 38 995 339 2,635 
Doubtful— — — — — — — — 
Total$24,517 $116,710 $115,956 $138,417 $54,869 $93,889 $18,401 $562,759 
Current period gross write offs$— $— $— $— $— $— $— $— 
 *
Leases
Risk rating
Pass$1,205 $6,618 $3,007 $2,939 $864 $1,304 $— $15,937 
Special Mention413 857 526 85 37 — — 1,918 
Substandard— — — 412 157 24 — 593 
Doubtful— — — — 24 — — 24 
Total$1,618 $7,475 $3,533 $3,436 $1,082 $1,328 $— $18,472 
Current period gross write offs$— $— $— $— $— $— $— $— 
Total Commercial Loans
Risk rating
Pass$146,797 $731,596 $693,452 $659,225 $329,663 $560,250 $543,620 $3,664,603 
Special Mention451 2,434 6,605 6,797 1,470 36,956 34,078 88,791 
Substandard1,063 2,416 2,166 5,459 3,009 10,267 27,185 51,565 
Doubtful— 786 81 740 304 8,966 91 10,968 
Total$148,311 $737,232 $702,304 $672,221 $334,446 $616,439 $604,974 $3,815,927 
Current period gross write offs$— $— $— $— $— $52 $— $52 
(1) Included within each of commercial, financial and agricultural loans and commercial real estate loans is an immaterial amount of consumer loans that are not broken out by class.



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 December 31, 2016
(In thousands)5 Rated 6 Rated Nonaccrual and Accruing Troubled Debt Restructurings Pass-Rated 
Recorded
Investment
Commercial, financial and agricultural *$5,826
 $—
 $20,657
 $971,694
 $998,177
Commercial real estate *7,548
 190
 24,474
 1,127,652
 1,159,864
Construction real estate: 
  
  
  
  
Commercial287
 118
 2,226
 133,110
 135,741
Residential real estate: 
  
  
  
  
Commercial1,055
 124
 23,102
 383,346
 407,627
Leases—
 —
 —
 3,272
 3,272
Total Commercial Loans$14,716
 $432
 $70,459
 $2,619,074
 $2,704,681

*
December 31, 2022Term Loans Amortized Cost Basis by Origination Year
(In thousands)20222021202020192018PriorRevolving Loans Amortized Cost BasisTotal
Commercial, financial and agricultural: Commercial, financial and agricultural (1)
Risk rating
Pass$197,497 $198,999 $142,487 $60,845 $32,887 $47,135 $546,237 $1,226,087 
Special Mention700 313 918 315 4 35 25,536 27,821 
Substandard1,101 18 2,737 226 1,836 8,424 26,464 40,806 
Doubtful— — 3 77 80 172 192 524 
Total$199,298 $199,330 $146,145 $61,463 $34,807 $55,766 $598,429 $1,295,238 
Commercial, financial and agricultural: PPP
Risk rating
Pass$— $1,875 $2,331 $— $— $— $— $4,206 
Special Mention— — — — — — — — 
Substandard— — — — — — — — 
Doubtful— — — — — — — — 
Total$— $1,875 $2,331 $— $— $— $— $4,206 
Commercial real estate (1)
Risk rating
Pass$323,235 $374,763 $372,653 $220,072 $107,467 $305,539 $14,052 $1,717,781 
Special Mention199 3,256 3,388 5,863 16,059 22,220 150 51,135 
Substandard7,856 1,427 3,007 3,561 856 5,471 428 22,606 
Doubtful— — — — 1,941 591 — 2,532 
Total$331,290 $379,446 $379,048 $229,496 $126,323 $333,821 $14,630 $1,794,054 
Construction real estate: Commercial
Risk rating
Pass$107,976 $40,534 $21,556 $2,686 $1,428 $3,015 $29,183 $206,378 
Special Mention— — 232 — — — — 232 
Substandard652 800 260 — 660 — — 2,372 
Doubtful— — — — — — — — 
Total$108,628 $41,334 $22,048 $2,686 $2,088 $3,015 $29,183 $208,982 
Residential Real Estate: Commercial
Risk rating
Pass$107,086 $120,303 $147,802 $56,980 $33,140 $63,499 $15,191 $544,001 
Special Mention— 92 1,477 440 — 1,625 — 3,634 
Substandard610 449 264 29 304 553 339 2,548 
Doubtful— — — — — — — — 
Total$107,696 $120,844 $149,543 $57,449 $33,444 $65,677 $15,530 $550,183 
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December 31, 2022Term Loans Amortized Cost Basis by Origination Year
(In thousands)20222021202020192018PriorRevolving Loans Amortized Cost BasisTotal
Leases
Risk rating
Pass$7,629 $3,310 $3,347 $1,167 $981 $605 $— $17,039 
Special Mention1,085 614 130 60 — — — 1,889 
Substandard— — 464 111 12 26 — 613 
Doubtful— — — 96 — — — 96 
Total$8,714 $3,924 $3,941 $1,434 $993 $631 $— $19,637 
Total Commercial Loans
Risk rating
Pass$743,423 $739,784 $690,176 $341,750 $175,903 $419,793 $604,663 $3,715,492 
Special Mention1,984 4,275 6,145 6,678 16,063 23,880 25,686 84,711 
Substandard10,219 2,694 6,732 3,927 3,668 14,474 27,231 68,945 
Doubtful— — 3 173 2,021 763 192 3,152 
Total$755,626 $746,753 $703,056 $352,528 $197,655 $458,910 $657,772 $3,872,300 
(1) Included within each of commercial, financial and agricultural loans and commercial real estate loans is an immaterial amount of consumer loans that are not broken out by class.


Troubled Debt Restructurings ("TDRs")Park considers the performance of the loan portfolio and its impact on the allowance for credit losses. For residential and consumer loan classes, Park also evaluates credit quality based on the aging status of the loan, which was previously presented, and by performing status. The following tables present the amortized cost in residential and consumer loans based on performing status. As previously mentioned, the adoption of ASU 2022-02 on January 1, 2023 eliminated the concept of TDRs. After the adoption of ASU 2022-02 on January 1, 2023, nonperforming loans consisted of nonaccrual loans and loans past due 90 days or more and still accruing. Prior to the adoption of ASU 2022-02, nonperforming loans consisted of nonaccrual loans, accruing TDRs and loans past due 90 days or more and still accruing.

March 31, 2023Term Loans Amortized Cost Basis by Origination Year
(In thousands)20232022202120202019PriorRevolving Loans Amortized Cost BasisTotal
Commercial, financial and agricultural: Overdrafts
Performing$1,831 $— $— $— $— $— $— $1,831 
Nonperforming
— — — — — — — — 
Total$1,831 $— $— $— $— $— $— $1,831 
Current period gross write offs$297 $— $— $— $— $— $— $297 
Construction Real Estate: Retail
Performing$6,050 $79,178 $17,718 $5,986 $4,121 $3,948 $74 $117,075 
Nonperforming
— — — — — — — — 
Total$6,050 $79,178 $17,718 $5,986 $4,121 $3,948 $74 $117,075 
Current period gross write offs$— $— $— $— $— $— $— $— 
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March 31, 2023Term Loans Amortized Cost Basis by Origination Year
(In thousands)20232022202120202019PriorRevolving Loans Amortized Cost BasisTotal
Residential Real Estate: Mortgage
Performing$29,761 $208,136 $229,318 $189,929 $87,938 $333,511 $— $1,078,593 
Nonperforming
— 835 597 939 549 8,259 — 11,179 
Total$29,761 $208,971 $229,915 $190,868 $88,487 $341,770 $— $1,089,772 
Current period gross write offs$— $— $— $— $— $20 $— $20 
Residential Real Estate: HELOC
Performing$— $140 $299 $71 $137 $2,120 $160,728 $163,495 
Nonperforming
— — — — 99 787 275 1,161 
Total$— $140 $299 $71 $236 $2,907 $161,003 $164,656 
Current period gross write offs$— $— $— $— $— $9 $— $9 
Residential Real Estate: Installment
Performing$74 $180 $— $7 $213 $3,466 $— $3,940 
Nonperforming
— — — — — 47 — 47 
Total$74 $180 $— $7 $213 $3,513 $— $3,987 
Current period gross write offs$— $— $— $— $— $— $— $— 
Consumer: Consumer
Performing$146,771 $778,177 $422,523 $299,815 $129,981 $109,603 $9,349 $1,896,219 
Nonperforming— 660 459 314 250 496 — 2,179 
Total$146,771 $778,837 $422,982 $300,129 $130,231 $110,099 $9,349 $1,898,398 
Current period gross write offs$8 $600 $588 $314 $195 $142 $— $1,847 
Consumer: GFSC
Performing$— $— $— $30 $40 $21 $41 $132 
Nonperforming— — — — 8 — — 8 
Total$— $— $— $30 $48 $21 $41 $140 
Current period gross write offs$— $— $— $— $— $— $— $— 
Consumer: Check loans
Performing$— $— $— $— $— $— $2,071 $2,071 
Nonperforming
— — — — — — — — 
Total$— $— $— $— $— $— $2,071 $2,071 
Current period gross write offs$— $— $— $— $— $— $10 $10 
Total Consumer Loans
Performing$184,487 $1,065,811 $669,858 $495,838 $222,430 $452,669 $172,263 $3,263,356 
Nonperforming
— 1,495 1,056 1,253 906 9,589 275 14,574 
Total$184,487 $1,067,306 $670,914 $497,091 $223,336 $462,258 $172,538 $3,277,930 
Current period gross write offs$305 $600 $588 $314 $195 $171 $10 $2,183 

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December 31, 2022Term Loans Amortized Cost Basis by Origination Year
(In thousands)20222021202020192018PriorRevolving Loans Amortized Cost BasisTotal
Commercial, financial and agricultural: Overdrafts
Performing$1,489 $— $— $— $— $— $— $1,489 
Nonperforming
— — — — — — — — 
Total1,489 $— $— $— $— $— $— $1,489 
Construction Real Estate: Retail
Performing$71,923 $26,134 $8,218 $4,619 $1,618 $2,580 $75 $115,167 
Nonperforming
731 — 523 — — 12 — 1,266 
Total$72,654 $26,134 $8,741 $4,619 $1,618 $2,592 $75 $116,433 
Residential Real Estate: Mortgage
Performing$207,093 $227,131 $192,904 $90,014 $55,648 $286,464 $— $1,059,254 
Nonperforming
— — 700 650 518 14,324 — 16,192 
Total$207,093 $227,131 $193,604 $90,664 $56,166 $300,788 $— $1,075,446 
Residential Real Estate: HELOC
Performing$140 $299 $23 $130 $141 $1,957 $163,134 $165,824 
Nonperforming
— — 43 100 — 999 185 1,327 
Total$140 $299 $66 $230 $141 $2,956 $163,319 $167,151 
Residential Real Estate: Installment
Performing$187 $— $1 $241 $62 $2,512 $— $3,003 
Nonperforming
— — 7 2 16 1,063 — 1,088 
Total$187 $— $8 $243 $78 $3,575 $— $4,091 
Consumer: Consumer
Performing$823,484 $462,014 $333,336 $150,237 $61,174 $65,612 $4,315 $1,900,172 
Nonperforming
440 489 424 355 157 520 — 2,385 
Total$823,924 $462,503 $333,760 $150,592 $61,331 $66,132 $4,315 $1,902,557 
Consumer: GFSC
Performing$— $— $55 $111 $45 $2 $51 $264 
Nonperforming— — — 10 — — — 10 
Total$— $— $55 $121 $45 $2 $51 $274 
Consumer: Check loans
Performing$— $— $— $— $— $— $2,150 $2,150 
Nonperforming
— — — — — — — — 
Total$— $— $— $— $— $— $2,150 $2,150 
Total Consumer Loans
Performing$1,104,316 $715,578 $534,537 $245,352 $118,688 $359,127 $169,725 $3,247,323 
Nonperforming
1,171 489 1,697 1,117 691 16,918 185 22,268 
Total$1,105,487 $716,067 $536,234 $246,469 $119,379 $376,045 $169,910 $3,269,591 


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

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

Modifications to Borrowers Experiencing Financial Difficulty
Management classifiesidentifies loans as TDRsmodifications to borrowers experiencing financial difficulty when a borrower is experiencing financial difficulties and Park has granted a concession toaltered the borrowercash flow of the the loan as part of a modification or in the loan renewal process. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of the borrower's debt in the foreseeable future without the modification. This evaluation is performed in accordance with the Company’s internal underwriting policy. Management’s policy isPark modifies loans to modify loansborrowers experiencing financial difficulty by extending theproviding principal forgiveness, term extension, an other-than-insignificant payment delay or by granting a temporary or permanent contractual interest rate below the market rate, not by forgiving debt. A court's dischargeadjustments.

In some cases, Park provides multiple types of modifications on one loan. Typically, one type of modification, such as a borrower's debt in a Chapter 7 bankruptcyterm extension, is considered a concession when the borrower does not reaffirm the discharged debt.

Certain loans which were modified during the nine-month periods ended September 30, 2017 and September 30, 2016 did not meet the definition of a TDR as the modification was a delay in a payment that was considered to be insignificant. Management considers a forbearance period of up to three months or a delay in payment of up to 30 days to be insignificant. TDRs may be classified as accruing if the borrower has been current for a period of at least six months with respect to loan payments and management expects that the borrower will be able to continue to make payments in accordance with the terms of the restructured note. Management reviews all accruing TDRs quarterly to ensure payments continue to be made in accordance with the modified terms.
Quarterly, management reviews renewals/modifications of loans previously identified as TDRs to consider if it is appropriate to remove the TDR classification.granted initially. If the borrower continues to experience financial difficulty, another modification, such as principal forgiveness, may be granted. For the loans included in the combination columns below, multiple types of modifications have been made on the same loan within the current reporting period. The combination is no longerat least two of the following: a term extension, principal forgiveness, an other-than-insignificant payment delay and/or an interest rate adjustment.

The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. As a result, the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses and a change to the allowance for credit losses is generally not recorded upon modification. When principal forgiveness is provided, the amount of forgiveness is charged off against the allowance for credit losses.


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The following table presents the amortized cost basis of loans at March 31, 2023 that were both experiencing financial difficulty and modified during the renewal/modification did not contain a concessionary interest rate or other concessionary terms, management considers the potential removalthree months ended March 31, 2023 by class of and by type of modification. The percentage of the TDR classification. If deemed appropriate,amortized cost basis of loans that were modified to borrowers in financial difficulty as compared to the TDR classificationamortized cost basis of each class of financing receivable is removed ifalso presented below.

March 31, 2023
(In thousands)Principal ForgivenessPayment DelayTerm ExtensionInterest Rate AdjustmentCombination Term Extension and Interest Rate AdjustmentTotalPercent of Total Class of Financing Receivable
Commercial, financial and agricultural:
Commercial, financial and agricultural$— $— $3,104 $— $— $3,104 0.25 %
PPP loans— — — — — — — %
Overdrafts— — — — — — — %
Commercial real estate— — — — — — — %
Construction real estate:
Commercial— — 988 — — 988 0.57 %
Retail— — — — — — — %
Residential real estate:
Commercial— — 150 — 13 163 0.03 %
Mortgage— — — — — — — %
HELOC— — — — — — — %
Installment— — — — 64 64 1.61 %
Consumer:
Consumer— — — 15 — 15 — %
GFSC— — — — — — — %
Check loans— — — — — — — %
Leases— — — — — — — %
Total$— $— $4,242 $15 $77 $4,334 0.06 %
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Park has committed to lend additional amounts totaling $1.7 million to the borrower has complied withborrowers included in the termsprevious table as of March 31, 2023.

The following table presents the financial effect of the loan atmodifications presented above to borrowers experiencing financial difficulty for the datethree months ended March 31, 2023:

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

Park closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the renewal/effectiveness of its modification and there was a reasonable expectation that the borrower would continue to comply with the terms of the loan subsequent to the date of the renewal/modification. The majority of these TDRs were originally considered restructurings in a prior year as a result of a renewal/modification with an interest rate that was not commensurate with the risk of the underlying loan at the time of the renewal/modification.efforts. There were no TDR classifications removed during the three-month or nine-month periods ended September 30, 2017. The TDR classification was removed on $335,000 of loans during the three-month period ended September 30, 2016 and on $2.0 million of loans during the nine-month period ended September 30, 2016.

At September 30, 2017 and December 31, 2016, there were $42.1 million and $46.9 million, respectively, of TDRs included in the nonaccrual loan totals. At September 30, 2017 and December 31, 2016, $35.6 million and $38.0 million, respectively, of these nonaccrual TDRs were performing in accordance with the terms of the restructured note. As of September 30, 2017 and December 31, 2016, loans with a recorded investment of $19.5 million and $18.2 million, respectively, were included in accruing TDR loan totals. Management will continue to review the restructured loans and may determine it appropriate to move certain nonaccrual TDRs to accrual status in the future.

At September 30, 2017 and December 31, 2016, Park had commitments to lend $0.5 million and $0.7 million, respectively, of additional fundsmodified to borrowers whose outstanding loan termsexperiencing financial difficulty that had been modified in a TDR.

Thereduring thethree months ended March 31, 2023 that were $0.8 million and $0.2 milliongreater than 30 days past due as of specific reserves related to TDRs at September 30, 2017 and DecemberMarch 31, 2016, respectively. Modifications made in 2016 and 2017 were largely the result of renewals and extending the maturity date of the loan at terms consistent with the original note. These modifications were deemed to be TDRs primarily due to Park’s conclusion that the borrower would likely not have qualified for similar terms through another lender. Many of the modifications deemed to be TDRs were previously identified as impaired loans, and thus were also previously evaluated for impairment under Accounting Standards Codification (ASC) 310.  There2023. Additionally, there were no specific reserves recorded during the three-month periods ended September 30, 2017 and September 30, 2016 as a result of TDRs identified in the respective period. Additional specific reserves of $290,000 and $975,000 were recorded during the nine-month periods ended September 30, 2017 and September 30, 2016, respectively, as a result of TDRs identified in the respective period.

The terms of certain other loans were modified during the three-month and nine-month periods ended September 30, 2017 and September 30, 2016 that did not meet the definition of a TDR. Substandard commercial loans modified during the three-month and nine-month periods ended September 30, 2017 which did not meet the definition of a TDR had a total recorded investment of $918,000 and $1.0 million, respectively. Substandard commercial loans with a recorded investment of $425,000 and $437,000 were modified during the three-month and nine-month periods ended September 30, 2016 and did not meet the definition of a TDR. The renewal/modification of these loans: (1) resulted in a delay in a payment that was considered to be insignificant, or (2) resulted in Park obtaining additional collateral or guarantees that improved the likelihood of the ultimate collection of the loans such that each modification was deemed to be at market terms. Consumer loans modified during the three-month and nine-month periods ended September 30, 2017 which did not meet the definition of a TDR had a total recorded investment of $3.1 million and $6.7 million, respectively. Consumer loans with a recorded investment of $1.3 million and $5.1 million were modified during the three-month and nine-month periods ended September 30, 2016 and did not meet the definition of a TDR. Many of these loans were to borrowers who were not experiencing financial difficulties but who were looking to reduce their cost of funds.

The following tables detail the number of contracts modified as TDRs during the three-month and nine-month periods ended September 30, 2017 and September 30, 2016, as well as the recorded investment of these contracts at September 30, 2017 and September 30, 2016. The recorded investment pre- and post-modification is generally the same due to the fact that Park does not typically provide for forgiveness of principal.

 Three Months Ended
September 30, 2017
(In thousands)
Number of
Contracts
 Accruing Nonaccrual 
Total
Recorded
Investment
Commercial, financial and agricultural14
 $400
 $1,015
 $1,415
Commercial real estate3
 974
 481
 1,455
Construction real estate:       
  Commercial—
 —
 —
 —
  Mortgage—
 —
 —
 —
  Installment—
 —
 —
 —
Residential real estate:       
  Commercial10
 144
 354
 498
  Mortgage5
 211
 206
 417
  HELOC4
 123
 45
 168
  Installment4
 110
 41
 151
Consumer99
 99
 735
 834
Total loans139
 $2,061
 $2,877
 $4,938

 Three Months Ended
September 30, 2016
(In thousands)
Number of
Contracts
 Accruing Nonaccrual 
Total
Recorded
Investment
Commercial, financial and agricultural12
 $152
 $6,451
 $6,603
Commercial real estate6
 —
 1,777
 1,777
Construction real estate:       
  Commercial1
 —
 947
 947
  Mortgage—
 —
 —
 —
  Installment—
 —
 —
 —
Residential real estate:       
  Commercial4
 —
 225
 225
  Mortgage14
 —
 1,173
 1,173
  HELOC2
 —
 91
 91
  Installment2
 33
 4
 37
Consumer74
 61
 1,508
 1,569
Total loans115
 $246
 $12,176
 $12,422

Of those loans which were modified and determined to be a TDR during the three-month period ended September 30, 2017, $0.5 million were on nonaccrual status as of December 31, 2016. Of those loans which were modified and determined to be a TDR during the three-month period ended September 30, 2016, $7.6 million were on nonaccrual status as of December 31, 2015.

 Nine Months Ended
September 30, 2017
(In thousands)
Number of
Contracts
 Accruing Nonaccrual 
Total
Recorded
Investment
Commercial, financial and agricultural25
 $400
 $3,769
 $4,169
Commercial real estate9
 1,525
 795
 2,320
Construction real estate:       
  Commercial—
 —
 —
 —
  Mortgage1
 —
 8
 8
  Installment—
 —
 —
 —
Residential real estate:       
  Commercial15
 144
 558
 702
  Mortgage24
 746
 923
 1,669
  HELOC16
 478
 51
 529
  Installment7
 175
 41
 216
Consumer228
 140
 1,012
 1,152
Total loans325
 $3,608
 $7,157
 $10,765


 Nine Months Ended
September 30, 2016
(In thousands)
Number of
Contracts
 Accruing Nonaccrual 
Total
Recorded
Investment
Commercial, financial and agricultural29
 $102
 $7,242
 $7,344
Commercial real estate10
 2,812
 2,306
 5,118
Construction real estate:       
  Commercial2
 —
 1,144
 1,144
  Mortgage—
 —
 —
 —
  Installment1
 —
 9
 9
Residential real estate:       
  Commercial7
 —
 918
 918
  Mortgage23
 96
 1,713
 1,809
  HELOC10
 17
 184
 201
  Installment4
 72
 7
 79
Consumer223
 115
 2,042
 2,157
Total loans309
 $3,214
 $15,565
 $18,779

Of those loans which were modified and determined to be a TDR during the nine-month period ended September 30, 2017, $3.0 million were on nonaccrual status as of December 31, 2016. Of those loans which were modified and determined to be a TDR during the nine-month period ended September 30, 2016, $8.5 million were on nonaccrual status as of December 31, 2015.

The following tables present the recorded investment in financing receivables which were modified as TDRs within the previous 12 months and for which there was a payment default during the three-monththree months ended March 31, 2023 and nine-month periods ended September 30, 2017 and September 30, 2016, respectively. For these tables, a loan is consideredwere modified to beborrowers experiencing financial difficulty in default when it becomes 30 days contractually past due under the modified terms. The additional allowance for loan loss resulting from the defaults on TDR loans was immaterial.
 Three Months Ended
September 30, 2017		  Three Months Ended
September 30, 2016		 
(In thousands)
Number of
Contracts
 
Recorded
Investment
  
Number of
Contracts
 
Recorded
Investment
 
Commercial, financial and agricultural1
 $20
  5
 $129
 
Commercial real estate1
 72
  4
 808
 
Construction real estate: 
  
      
Commercial—
 —
  —
 —
 
Mortgage—
 —
  —
 —
 
Installment—
 —
  —
 —
 
Residential real estate: 
  
      
Commercial1
 17
  3
 679
 
Mortgage6
 427
  13
 1,687
 
HELOC2
 27
  —
 —
 
Installment—
 —
  2
 7
 
Consumer33
 262
  53
 559
 
Leases—
 —
  —
 —
 
Total loans44
 $825
  80
 $3,869
 

Of the $0.8 million in modified TDRs which defaulted during the three months ended September 30, 2017, there were no accruing loans. Ofprior to that default.

Upon the $3.9 million indetermination that a modified TDRs which defaulted duringloan (or a portion of a loan) has subsequently been deemed uncollectible, the three months ended September 30, 2016, $14,000 were accruing loansloan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and $3.9 million were nonaccrual loans.the allowance for credit losses is adjusted by the same amounts.



 Nine Months Ended
September 30, 2017		  Nine Months Ended
September 30, 2016		 
(In thousands)
Number of
Contracts
 
Recorded
Investment
  
Number of
Contracts
 
Recorded
Investment
 
Commercial, financial and agricultural1
 $20
  5
 $129
 
Commercial real estate2
 248
  4
 808
 
Construction real estate:         
Commercial—
 —
  —
 —
 
Mortgage—
 —
  —
 —
 
Installment—
 —
  —
 —
 
Residential real estate:         
Commercial1
 17
  4
 709
 
Mortgage6
 426
  13
 1,687
 
HELOC3
 32
  —
 —
 
Installment—
 —
  2
 7
 
Consumer45
 345
  60
 611
 
Leases—
 —
  —
 —
 
Total loans58
 $1,088
  88
 $3,951
 

Of the $1.1 million in modified TDRs which defaulted during the nine months ended September 30, 2017, $2,000 were accruing loans and $1.1 million were nonaccrual loans. Of the $4.0 million in modified TDRs which defaulted during the nine months ended September 30, 2016, $14,000 were accruing loans and $3.9 million were nonaccrual loans.

Note 46 – Allowance for LoanCredit Losses

The allowance for loan losses ("ALLL")ACL is that amount management believes is adequate to absorb probable incurredan estimate of the expected credit losses in the loan portfolio based on management’s evaluation of various factorsfinancial assets measured at amortized cost, which is measured using relevant information about past events, including overall growth in the loan portfolio, an analysis of individual loans, prior and currenthistorical credit loss experience on financial assets with similar risk characteristics, current conditions, and current economic conditions.reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. A provision for loancredit losses is charged to operations based on management’s periodic evaluation of these and other pertinent factorsfactors.

During the first quarter of 2023, Park adopted ASU 2022-02. This standard was adopted using a modified retrospective transition method on January 1, 2023, resulting in a $383,000 increase to the ACL. A cumulative effect adjustment resulting in a $303,000 decrease to retained earnings was also recorded as discussed within Note 1a result of the Notesadoption of ASU 2022-02.

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

•Forecast model - For each portfolio segment, a LDA was performed in order to Consolidated Financial Statements includedidentify appropriate loss drivers and create a regression model for use in forecasting cash flows. The LDA analysis utilized Park's own FFIEC Call Report data for the commercial, financial and agricultural and residential real estate portfolio segments. Peer data was incorporated into the analysis for the commercial real estate, construction real estate, and consumer portfolio segments. Park updated the LDA in the fourth quarter of 2022 with data through September 30, 2022. After considering the impact of the inclusion of periods impacted by COVID, as well as analysis of the ongoing applicability of the selected peer group, management decided it was appropriate to continue to utilize the LDA analysis from the fourth quarter of 2019 as the correlation of the LDA was higher.
•Probability of default – PD is the probability that an asset will be in default within a given time frame. Park has defined default to be when a charge-off has occurred, a loan is placed on nonaccrual, or a loan is greater than 90 days past due. Whenever possible, Park utilizes its own loan-level PDs for the reasonable and supportable forecast period. When loan-level data is not available reflecting the forecasted economic conditions, a forecast model is utilized to estimate PDs.
•Loss given default – LGD is the percentage of the asset not expected to be collected due to default. Whenever possible, Park utilizes its own loan-level LGDs for the reasonable and supportable forecast period. When it is not possible to use Park's own LGDs, the LGD is derived using a method referred to as Frye Jacobs.
•Prepayments and curtailments – Prepayments and curtailments are calculated based on Park’s 2016 Annual Report.

Loss factors are reviewed quarterlyown data utilizing a three-year average. This analysis is updated annually in the fourth quarter and updated at least annually to reflect recent loan loss history and incorporate current risk and trends which may not be recognized in historical data. The historical loss factors werewas last updated in the fourth quarter of 20162022.
•Forecast and reversion – Park has established a one-year reasonable and supportable forecast period with a one-year straight line reversion to incorporate losses throughthe long-term historical average.
•Economic forecast - Park utilizes a third party to provide economic forecasts under various scenarios, which are weighted in order to reflect model risk in the current economic environment. The scenario weighting is evaluated by management on a quarterly basis.
◦As of December 31, 2016.2022, the "most likely" scenario forecasted Ohio unemployment between 4.14% and 4.36% during the next four quarters. In determining the appropriate weighting of scenarios at December 31, 2022, management considered the range of forecasted unemployment as well as a number of economic indicators. The continued high level of inflation, historically low consumer confidence, rising interest rates, geopolitical conflict (including the conflict between Russia and Ukraine), and workforce and supply chain challenges continued to cause uncertainty as to the overall economic environment. Considering these factors, management determined it was appropriate to maintain the existing weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at December 31, 2022.
◦As of March 31, 2023, the "most likely" scenario forecasted Ohio unemployment between 4.15% and 4.51% during the next four quarters. In determining the appropriate weighting of scenarios at March 31, 2023, management considered the range of forecasted unemployment as well as a number of economic indicators. The continued high level of inflation, historically low consumer confidence, rising interest rates, financial system stress related to recent bank failures, geopolitical conflict, and workforce challenges continued to cause uncertainty as to the overall economic environment. Considering these factors, management determined it was appropriate to maintain the existing weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at March 31, 2023.

Qualitative Considerations
Park reviews various internal and external factors to consider the need for any qualitative adjustments to the quantitative model. Factors considered include the following:
•The nature and volume of Park’s financial assets; the existence, growth, and effect of any concentrations of credit and the volume and severity of past due financial assets, the volume of nonaccrual assets, and the volume and severity of adversely classified or graded assets. Specifically, management considers:
◦Trends (e.g., growth, reduction) in specific categories of the loan portfolio, as well as adjustments to the types of loans offered by Park.
◦Level of and trend in loan delinquencies, troubled loans, commercial watch list loans and nonperforming loans.
◦Level of and trend in new nonaccrual loans.
◦Level of and trend in loan charge-offs and recoveries.
•Park's lending policies and procedures, including changes in lending strategies, underwriting standards and practices for collections, write-offs, and recoveries.
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•The quality of Park’s credit review function.
•The experience, ability, and depth of Park’s lending, investment, collection, and other relevant management and staff.
•The effect of other external factors such as the regulatory, legal and technological environments; competition; geopolitical conflict; and events such as natural disasters or pandemics.
•Actual and expected changes in international, national, regional, and local economic and business conditions and developments in the markets in which Park operates that affect the collectibility of financial assets.
•Where the U.S. economy is within a given credit cycle.
•The extent that there is government assistance (stimulus).

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

ACL Activity
The activity in the allowance for loan lossesACL for the three-month and nine-month periods ended September 30, 2017March 31, 2023 and September 30, 2016March 31, 2022 is summarized in the following tables.tables:

 Three Months Ended
March 31, 2023
(In thousands)Commercial,
financial and
agricultural		Commercial
real estate		Construction
real estate		Residential
real estate		ConsumerLeasesTotal
ACL:       
Beginning balance$16,987 $17,829 $5,550 $16,831 $28,021 $161 $85,379 
Impact of Adoption of ASU 2022-02222 181 — (20)— — 383 
Charge-offs349 — — 29 1,857 — 2,235 
Recoveries46 232 496 357 1,105 — 2,236 
Net charge-offs/(recoveries)$303 $(232)$(496)$(328)$752 $— $(1)
(Recovery of) provision for credit losses(334)(296)(684)750 784 (37)183 
Ending balance$16,572 $17,946 $5,362 $17,889 $28,053 $124 $85,946 
 Three Months Ended
March 31, 2022
(In thousands)Commercial,
financial and
agricultural		Commercial
real estate		Construction
real estate		Residential
real estate		ConsumerLeasesTotal
ACL:       
Beginning balance$14,025 $25,466 $5,758 $11,424 $26,286 $238 $83,197 
Charge-offs190 — — 35 1,116 6 1,347 
Recoveries118 48 501 32 917 — 1,616 
Net charge-offs/(recoveries)$72 $(48)$(501)$3 $199 $6 $(269)
(Recovery of) provision for credit losses(665)(1,783)(2,029)163 (290)(1)(4,605)
Ending balance$13,288 $23,731 $4,230 $11,584 $25,797 $231 $78,861 

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 Three Months Ended
September 30, 2017
(In thousands)
Commercial,
financial and
agricultural
 
Commercial
real estate
 
Construction
real estate
 
Residential
real estate
 Consumer Leases Total
Allowance for loan losses: 
  
  
  
  
  
  
Beginning balance$16,746
 $10,451
 $4,677
 $10,319
 $11,629
 $—
 $53,822
Charge-offs626
 628
 78
 217
 2,828
 —
 4,377
Recoveries115
 13
 303
 1,061
 1,011
 1
 2,504
Net charge-offs/(recoveries)511
 615
 (225) (844) 1,817
 (1) 1,873
Provision/(recovery)1,742
 336
 499
 (1,078) 1,785
 (1) 3,283
Ending balance$17,977
 $10,172
 $5,401
 $10,085
 $11,597
 $—
 $55,232

 Three Months Ended
September 30, 2016
(In thousands)
Commercial,
financial and
agricultural
 
Commercial
real estate
 
Construction
real estate
 
Residential
real estate
 Consumer Leases Total
Allowance for loan losses: 
  
  
  
  
  
  
Beginning balance$16,478
 $9,203
 $8,256
 $13,180
 $11,581
 $1
 $58,699
Charge-offs457
 4
 1,300
 293
 2,086
 —
 4,140
Recoveries246
 973
 3,659
 348
 1,142
 1
 6,369
Net charge-offs/(recoveries)211
 (969) (2,359) (55) 944
 (1) (2,229)
Provision/(recovery)3
 401
 (5,257) (1,907) (604) (2) (7,366)
Ending balance$16,270
 $10,573
 $5,358
 $11,328
 $10,033
 $—
 $53,562

 Nine Months Ended
September 30, 2017
(In thousands)
Commercial,
financial and
agricultural
 
Commercial
real estate
 
Construction
real estate
 
Residential
real estate
 Consumer Leases Total
Allowance for loan losses: 
  
  
  
  
  
  
Beginning balance$13,434
 $10,432
 $5,247
 $10,958
 $10,553
 $—
 $50,624
Charge-offs1,283
 1,050
 105
 987
 7,706
 —
 11,131
Recoveries647
 368
 686
 1,688
 3,609
 1
 6,999
Net charge-offs/(recoveries)636
 682
 (581) (701) 4,097
 (1) 4,132
Provision/(recovery)5,179
 422
 (427) (1,574) 5,141
 (1) 8,740
Ending balance$17,977
 $10,172
 $5,401
 $10,085
 $11,597
 $—
 $55,232
 Nine Months Ended
September 30, 2016
(In thousands)
Commercial,
financial and
agricultural
 
Commercial
real estate
 
Construction
real estate
 
Residential
real estate
 Consumer Leases Total
Allowance for loan losses: 
  
  
  
  
  
  
Beginning balance$13,694
 $9,197
 $8,564
 $13,514
 $11,524
 $1
 $56,494
Charge-offs1,601
 82
 1,318
 1,776
 7,183
 —
 11,960
Recoveries889
 3,005
 4,708
 1,226
 3,017
 2
 12,847
Net charge-offs/(recoveries)712
 (2,923) (3,390) 550
 4,166
 (2) (887)
Provision/(recovery)3,288
 (1,547) (6,596) (1,636) 2,675
 (3) (3,819)
Ending balance$16,270
 $10,573
 $5,358
 $11,328
 $10,033
 $—
 $53,562

ACL Summary
Loans collectively evaluated for impairment in the following tables include all performing loans at September 30, 2017March 31, 2023 and December 31, 2016,2022, as well as nonperforming loans internally classified as consumer loans. Nonperforming consumer loans are not typically individually evaluated for impairment, but receive a portion of the statistical allocation of the allowance for loan losses.ACL. Loans individually evaluated for impairment include all impaired loans internally classified as commercial nonaccrual loans at September 30, 2017March 31, 2023 and all internally classified commercial nonaccrual loans and TDRs at December 31, 2016,2022, which are individually evaluated for impairment in accordance with U.S. GAAP (see Note 1 - Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Park’s 2016 Annual Report)2022 Form 10-K).



The composition of the allowanceACL at March 31, 2023 and at December 31, 2022 was as follows:
 March 31, 2023
(In thousands)Commercial,
financial and
agricultural		Commercial
real estate		Construction
real estate		Residential
real estate		ConsumerLeasesTotal
ACL:       
Ending allowance balance attributed to loans:       
Individually evaluated for impairment$4,100$216$—$—$—$2$4,318
Collectively evaluated for impairment12,47217,7305,36217,88928,05312281,628
Acquired with deteriorated credit quality———————
Total ending allowance balance$16,572$17,946$5,362$17,889$28,053$124$85,946
Loan balance:       
Loans individually evaluated for impairment$38,955$15,477$1,997$2,338$—$617$59,384
Loans collectively evaluated for impairment1,222,9431,781,941288,0951,818,4751,900,60917,8557,029,918
Loans acquired with deteriorated credit quality833,460651361——4,555
Total ending loan balance$1,261,981$1,800,878$290,743$1,821,174$1,900,609$18,472$7,093,857
ACL as a percentage of loan balance:       
Loans individually evaluated for impairment10.52 %1.40 %— %— %— %0.32 %7.27 %
Loans collectively evaluated for impairment1.02 %0.99 %1.86 %0.98 %1.48 %0.68 %1.16 %
Loans acquired with deteriorated credit quality— %— %— %— %— %— %— %
Total1.31 %1.00 %1.84 %0.98 %1.48 %0.67 %1.21 %
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 December 31, 2022
(In thousands)Commercial,
financial and
agricultural		Commercial
real estate		Construction
real estate		Residential
real estate		ConsumerLeasesTotal
ACL:       
Ending allowance balance attributed to loans:       
Individually evaluated for impairment$3,426$131$—$—$—$9$3,566
Collectively evaluated for impairment13,56117,6985,55016,83128,02115281,813
Acquired with deteriorated credit quality———————
Total ending allowance balance$16,987$17,829$5,550$16,831$28,021$161$85,379
Loan balance:       
Loans individually evaluated for impairment$41,307$32,423$1,712$2,191$—$708$78,341
Loans collectively evaluated for impairment1,259,5241,758,118323,0431,794,3021,904,98118,9297,058,897
Loans acquired with deteriorated credit quality
1023,513660378——4,653
Total ending loan balance$1,300,933$1,794,054$325,415$1,796,871$1,904,981$19,637$7,141,891
ACL as a percentage of loan balance:       
Loans individually evaluated for impairment8.29 %0.40 %— %— %— %1.27 %4.55 %
Loans collectively evaluated for impairment1.08 %1.01 %1.72 %0.94 %1.47 %0.80 %1.16 %
Loans acquired with deteriorated credit quality— %— %— %— %— %— %— %
Total1.31 %0.99 %1.71 %0.94 %1.47 %0.82 %1.20 %
Note 7 – Loans Held For Sale
Mortgage loans held for loan lossessale are carried at September 30, 2017their fair value. At both March 31, 2023 and December 31, 20162022, Park had $2.1 million in mortgage loans held for sale. These amounts are included in loans on the Consolidated Condensed Balance Sheets and in the residential real estate loan portfolio segment in Note 5 - Loans, and Note 6 - Allowance for Credit Losses. The contractual balance was as follows:$2.0 million and $2.1 million at March 31, 2023 and December 31, 2022, respectively. The gain expected upon sale was $32,000 and $41,000 at March 31, 2023 and December 31, 2022, respectively. None of these loans were 90 days or more past due or on nonaccrual status at March 31, 2023 or December 31, 2022.

Note 8 – Goodwill and Other Intangible Assets

The following table shows the activity in goodwill and other intangible assets for the three-month periods ended March 31, 2023 and 2022.

(in thousands)GoodwillOther
intangible assets		Total
December 31, 2021$159,595 $7,462 $167,057 
Amortization— 402 402 
March 31, 2022$159,595 $7,060 $166,655 
December 31, 2022$159,595 $5,975 $165,570 
Amortization— 327 327 
March 31, 2023$159,595 $5,648 $165,243 
   
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 September 30, 2017
(In thousands)
Commercial,
financial and
agricultural
 
Commercial
real estate
 
Construction
real estate
 
Residential
real estate
 Consumer Leases Total
Allowance for loan losses: 
  
  
  
  
  
  
Ending allowance balance attributed to loans: 
  
  
  
  
  
  
Individually evaluated for impairment$4,761
 $320
 $—
 $13
 $8
 $—
 $5,102
Collectively evaluated for impairment13,216
 9,852
 5,401
 10,072
 11,589
 —
 50,130
Total ending allowance balance$17,977
 $10,172
 $5,401
 $10,085
 $11,597
 $—
 $55,232
              
Loan balance: 
  
  
  
  
  
  
Loans individually evaluated for impairment$29,844
 $22,943
 $1,458
 $19,297
 $8
 $—
 $73,550
Loans collectively evaluated for impairment995,213
 1,132,719
 189,590
 1,733,290
 1,238,183
 3,332
 5,292,327
Total ending loan balance$1,025,057
 $1,155,662
 $191,048
 $1,752,587
 $1,238,191
 $3,332
 $5,365,877
              
Allowance for loan losses as a percentage of loan balance: 
  
  
  
  
  
  
Loans individually evaluated for impairment15.95% 1.39% —% 0.07% —% —% 6.94%
Loans collectively evaluated for impairment1.33% 0.87% 2.85% 0.58% 0.94% —% 0.95%
Total1.75% 0.88% 2.83% 0.58% 0.94% —% 1.03%
              
Recorded investment: 
  
  
  
  
  
  
Loans individually evaluated for impairment$29,848
 $22,995
 $1,460
 $19,298
 $8
 $—
 $73,609
Loans collectively evaluated for impairment999,790
 1,137,131
 190,170
 1,736,667
 1,241,592
 3,384
 5,308,734
Total ending recorded investment$1,029,638
 $1,160,126
 $191,630
 $1,755,965
 $1,241,600
 $3,384
 $5,382,343
Park evaluates goodwill for impairment during the second quarter of each year, with financial data as of the immediately prior March 31. Based on the qualitative analysis performed as of April 1, 2022, the Company determined that goodwill for Park's reporting unit, PNB, was not impaired.


Acquired Intangible Assets

The following table shows the balance of acquired intangible assets at March 31, 2023 and at December 31, 2022.

March 31, 2023December 31, 2022
(in thousands)Gross Carrying AmountAccumulated AmortizationGross Carrying AmountAccumulated Amortization
Other intangible assets:
Core deposit intangible assets$14,456 $8,808 $14,456 $8,481 
Trade name intangible assets1,300 1,300 1,300 1,300 
Total$15,756 $10,108 $15,756 $9,781 

Core deposit intangible assets are being amortized, on an accelerated basis, over a period of ten years. Aggregate amortization expense was $327,000 and $402,000 for the three months ended March 31, 2023 and 2022, respectively.

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

(in thousands)Total
Nine months ending December 31, 2023$995 
20241,215 
20251,042 
2026887 
2027754 

Note 9 – Investment in Qualified Affordable Housing
  December 31, 2016
(In thousands) 
Commercial,
financial and
agricultural
 
Commercial
real estate
 
Construction
real estate
 
Residential
real estate
 Consumer Leases Total
Allowance for loan losses:  
  
  
  
  
  
  
Ending allowance balance attributed to loans:  
  
  
  
  
  
  
Individually evaluated for impairment $152
 $309
 $—
 $87
 $—
 $—
 $548
Collectively evaluated for impairment 13,282
 10,123
 5,247
 10,871
 10,553
 —
 50,076
Total ending allowance balance $13,434
 $10,432
 $5,247
 $10,958
 $10,553
 $—
 $50,624
               
Loan balance:  
  
  
  
  
  
  
Loans individually evaluated for impairment $20,622
 $24,465
 $2,226
 $23,102
 $—
 $—
 $70,415
Loans collectively evaluated for impairment 973,997
 1,131,238
 186,719
 1,785,395
 1,120,850
 3,243
 5,201,442
Total ending loan balance $994,619
 $1,155,703
 $188,945
 $1,808,497
 $1,120,850
 $3,243
 $5,271,857
               
Allowance for loan losses as a percentage of loan balance:  
  
  
  
  
  
  
Loans individually evaluated for impairment 0.74% 1.26% —% 0.38% —% —% 0.78%
Loans collectively evaluated for impairment 1.36% 0.89% 2.81% 0.61% 0.94% —% 0.96%
Total 1.35% 0.90% 2.78% 0.61% 0.94% —% 0.96%
               
Recorded investment:  
  
  
  
  
  
  
Loans individually evaluated for impairment $20,624
 $24,474
 $2,226
 $23,102
 $—
 $—
 $70,426
Loans collectively evaluated for impairment 977,553
 1,135,390
 187,240
 1,788,714
 1,124,235
 3,272
 5,216,404
Total ending recorded investment $998,177
 $1,159,864
 $189,466
 $1,811,816
 $1,124,235
 $3,272
 $5,286,830

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

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

(in thousands)March 31, 2023December 31, 2022
Affordable housing tax credit investments$58,871 $60,968 
Unfunded commitments26,723 28,132 

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

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

Note 510 – Other Real Estate Owned ("OREO")Foreclosed and Repossessed Assets

Park typically transfers a loan to OREO at the time that Park takes deed/title to the real estate property asset. The carrying amounts of foreclosed real estate properties held at September 30, 2017March 31, 2023 and December 31, 20162022 are listed below, as well as the
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recorded investment of loans secured by residential real estate properties for which formal foreclosure proceedings were in process at those dates.


(in thousands)March 31, 2023December 31, 2022
OREO:
Commercial real estate$1,354 $1,354 
Residential real estate114 — 
Total OREO$1,468 $1,354 
Loans in process of foreclosure:
Residential real estate$1,709 $1,614 

In addition to real estate, Park may also repossess different types of collateral. At March 31, 2023 and December 31, 2022, Park had $0.7 million and $0.6 million, respectively, in other repossessed assets which are included in "Other assets" on the Consolidated Condensed Balance Sheets.

Note 11 – Loan Servicing
Park serviced sold mortgage loans of $2.02 billion at March 31, 2023, $2.05 billion at December 31, 2022 and $2.14 billion at March 31, 2022. At March 31, 2023, $3.2 million of the sold mortgage loans were sold with recourse, compared to $3.2 million at December 31, 2022 and $3.4 million at March 31, 2022. Management closely monitors the delinquency rates on the mortgage loans sold with recourse. At March 31, 2023 and December 31, 2022, management had established reserves of $56,000 and $59,000, respectively, to account for expected losses on loan repurchases.
When Park sells mortgage loans with servicing rights retained, these servicing rights are initially recorded at fair value. Park has selected the “amortization method” as permissible within U.S. GAAP, whereby the servicing rights capitalized are amortized in proportion to and over the period of estimated future servicing income with respect to the underlying loan. At the end of each reporting period, the carrying value of MSRs is assessed for impairment with a comparison to fair value. MSRs are carried at the lower of their amortized cost or fair value. The amortization of MSRs is included within "Other service income" in the Consolidated Condensed Statements of Income.

Activity for MSRs and the related valuation allowance follows:

Three Months Ended
March 31,
(In thousands)20232022
Mortgage servicing rights: 
Carrying amount, net, beginning of period$15,792 $15,264 
Additions124 626 
Amortization(425)(628)
Change in valuation allowance14 442 
Carrying amount, net, end of period$15,505 $15,704 
Valuation allowance: 
Beginning of period$182 $1,568 
Change in valuation allowance(14)(442)
End of period$168 $1,126 
Servicing fees included in "Other service income" were $1.3 million and $1.4 million for the three months ended March 31, 2023 and 2022, respectively.

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(in thousands) September 30, 2017 December 31, 2016
OREO:    
Commercial real estate $8,049
 $7,642
Construction real estate 4,861
 4,624
Residential real estate 1,456
 1,660
Total OREO $14,366
 $13,926
     
Loans in process of foreclosure:    
Residential real estate $3,288
 $3,250
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Note 12 - Leases


Park is a lessee in several noncancellable operating lease arrangements, primarily for retail branches, administrative and warehouse buildings, ATMs, and certain office equipment within its Ohio, North Carolina, South Carolina, and Kentucky markets. Certain of these leases contain renewal options for periods ranging from one to five years. Park’s leases generally do not include termination options for either party to the lease or restrictive financial or other covenants. Payments due under the lease arrangements include fixed payments plus, for many of Park’s real estate leases, variable payments such as Park's proportionate share of property taxes, insurance and common area maintenance.

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

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

Three Months Ended
(in thousands)March 31, 2023March 31, 2022
Lease cost
Operating lease cost$732 $724 
Sublease income(63)(63)
Total lease cost$669 $661 
Other information
Cash paid for amounts included in the measurement of lease liabilities:
      Operating cash flows from operating leases$923 $773 
ROU assets obtained in exchange for new operating lease liabilities$136 $— 
Reductions to ROU assets resulting from reductions to lease obligations$(777)$(698)

At both March 31, 2023 and December 31, 2022, Park's operating leases had a weighted average remaining term of 10.0 years. The weighted average discount rate of Park's operating leases was 3.3% at both March 31, 2023 and December 31, 2022.

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

(in thousands)March 31, 2023
Nine months ending December 31, 2023$2,713 
20242,523 
20252,180 
20262,132 
20272,030 
Thereafter11,020 
Total undiscounted minimum lease payments$22,598 
Present value adjustment(3,947)
Total lease liabilities$18,651 

Note 613 – Repurchase Agreement Borrowings

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

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

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

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

March 31, 2023
(in thousands)Remaining Contractual Maturity of the Agreements
Overnight and ContinuousUp to 30 days30 - 90 daysGreater than 90 daysTotal
U.S. government and agency securities$172,058 $— $— $— $172,058 
December 31, 2022
(in thousands)Remaining Contractual Maturity of the Agreements
Overnight and ContinuousUp to 30 days30 - 90 daysGreater than 90 daysTotal
U.S. government and agency securities$227,342 $— $— $— $227,342 

Note 14 - Derivatives

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

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

Borrowing Derivatives: At March 31, 2023 and December 31, 2022, Park had no borrowing derivatives. During the three-month period ended March 31, 2022, Park recognized interest expense of $148,000 related to borrowing swaps. Additionally, during the three-month period ended March 31, 2022, Park recognized a gain of $139,000, net of income taxes, related to borrowing swaps that was recorded in "Other comprehensive income (loss)" on the Consolidated Condensed Statements of Comprehensive Income.

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

All of the Company's interest rate swaps were determined to be fully effective during each of the three-month periods ended March 31, 2023 and March 31, 2022. As such, no amount of ineffectiveness has been included in net income. Therefore, the aggregate fair value of the swaps is recorded in "Other assets" and "Other liabilities" with changes in fair value recorded in "Other comprehensive income (loss)". The amount included in "Accumulated other comprehensive loss, net of tax" would be
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reclassified to net income should the hedges no longer be considered effective. Park expects the outstanding hedges to remain fully effective during the remaining respective terms of the swaps.

Summary information about Park's interest rate swaps at March 31, 2023 and at December 31, 2022 follows:

March 31, 2023December 31, 2022
(In thousands, except weighted average data)Loan
Derivatives		Loan
Derivatives
Notional amounts$21,277 $21,700 
Weighted average pay rates4.555 %4.553 %
Weighted average receive rates4.555 %4.553 %
Weighted average maturity (years)7.77.9
Unrealized losses$— $— 

Interest Rate Swaps
The following table reflects the interest rate swaps included in the Consolidated Condensed Balance Sheets at March 31, 2023 and at December 31, 2022.

(In thousands)March 31, 2023December 31, 2022
Notional AmountFair ValueNotional AmountFair Value
Included in "Other assets":
Loan derivatives - instruments associated with loans
 Matched interest rate swaps with borrower$— $— $— $— 
 Matched interest rate swaps with counterparty21,277 1,119 21,700 1,508 
   Total included in "Other assets"$21,277 $1,119 $21,700 $1,508 
Included in "Other liabilities":
Loan derivatives - instruments associated with loans
 Matched interest rate swaps with borrower$21,277 $(1,119)$21,700 $(1,508)
 Matched interest rate swaps with counterparty— — — — 
    Total included in "Other liabilities"$21,277 $(1,119)$21,700 $(1,508)

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

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

Other Derivatives
In connection with the sale of Park’s Class B Visa shares during 2009, Park entered into a swap agreement with the purchaser of the shares. The swap agreement adjusts for dilution in the conversion ratio of Class B Visa shares resulting from certain Visa litigation. At March 31, 2023 and December 31, 2022, the fair value of the swap liability of $121,000 and $243,000, respectively, represented an estimate of the exposure based upon probability-weighted potential Visa litigation losses.
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Note 15 – Accumulated Other Comprehensive Loss

Other comprehensive loss components, net of tax, are shown in the following table for thethree-month periods ended March 31, 2023 and 2022:


(in thousands)		Changes in pension plan assets and benefit obligationsUnrealized net holding (loss) gain on cash flow hedgeUnrealized (losses) gains on debt securities AFSTotal
Beginning balance at January 1, 2023$(6,680)$— $(95,714)$(102,394)
Other comprehensive income before reclassifications— — 12,361 12,361 
Net current period other comprehensive income— — 12,361 12,361 
Ending balance at March 31, 2023$(6,680)$— $(83,353)$(90,033)
Beginning balance at January 1, 2022$(5,792)$(206)$21,153 $15,155 
Other comprehensive income (loss) before reclassifications— 139 (55,763)(55,624)
Net current period other comprehensive income (loss)— 139 (55,763)(55,624)
Ending balance at March 31, 2022$(5,792)$(67)$(34,610)$(40,469)

During the three-month periods ended March 31, 2023 and 2022, there were no reclassifications out of accumulated other comprehensive loss.

Note 16 – Earnings Per Common Share
 
The following table sets forth the computation of basic and diluted earnings per common share for the three months ended March 31, 2023 and nine months ended September 30, 2017 and 2016.2022.
Three Months Ended
March 31,
(In thousands, except share and per common share data)20232022
Numerator:  
Net income$33,733 $38,875 
Denominator:  
Weighted-average common shares outstanding16,242,353 16,219,889 
Effect of dilutive PBRSUs and TBRSUs82,470 111,142 
Weighted-average common shares outstanding adjusted for the effect of dilutive PBRSUs and TBRSUs16,324,823 16,331,031 
Earnings per common share:  
Basic earnings per common share$2.08 $2.40 
Diluted earnings per common share$2.07 $2.38 
  Three Months Ended
September 30,		 Nine Months Ended
September 30,
(In thousands, except share and per common share data) 2017 2016 2017 2016
Numerator:  
  
    
Net income $22,112
 $27,449
 $61,411
 $66,133
Denominator:  
  
    
Weighted-average common shares outstanding 15,287,974
 15,330,791
 15,299,039
 15,330,802
Effect of dilutive performance-based restricted stock units 63,616
 68,916
 95,160
 71,023
Weighted-average common shares outstanding adjusted for the effect of dilutive performance-based restricted stock units 15,351,590
 15,399,707
 15,394,199
 15,401,825
Earnings per common share:  
  
  
  
Basic earnings per common share $1.45
 $1.79
 $4.01
 $4.31
Diluted earnings per common share $1.44
 $1.78
 $3.99
 $4.29


Park awarded 45,78854,698 PBRSUs and 41,550 performance-based restricted stock units ("PBRSUs")52,335 PBRSUs to certain employees during the nine months ended September 30, 2017 and 2016, respectively. No PBRSUs were awarded during the three months ended September 30, 2017March 31, 2023 and 2016. As of September 30, 2017, 119,587 PBRSUs were outstanding. The PBRSUs vest based on service and performance conditions. The dilutive effect of the outstanding PBRSUs was the addition of 63,616 and 68,916 common shares for the three months ended September 30, 2017 and 2016, respectively, and 95,160 and 71,023 common shares for the nine months ended September 30, 2017 and 2016,2022, respectively.


Park repurchased 20,000 and 70,000an aggregate of 124,000 common shares during the three months and nine months ended September 30, 2017, respectively,March 31, 2023, to fund the PBRSUs, the TBRSUs and the common shares to be awarded to directors of Park and to directors of Park's subsidiary PNB (and its divisions). Park did notThese repurchases were made pursuant to Park's previously announced stock repurchase anyauthorizations. No common shares were repurchased during the three or nine months ended September 30, 2016.March 31, 2022.






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Note 717 – Segment Information
 
The Corporation is a financial holding company headquartered in Newark, Ohio. The operating segmentsreportable segment for the Corporation areis its chartered national bank subsidiary, The Park National BankPNB (headquartered in Newark, Ohio) (“PNB”). "All Other", SE Property Holdings, LLC (“SEPH”)which primarily consists of Park as the "Parent Company", GFSC and Guardian Financial Services Company (“GFSC”).SEPH, is shown to reconcile the segment totals to the Consolidated Condensed Statements of Income.
 
Management is required to disclose information about the different types of business activities in which a company engages and also information on the different economic environments in which a company operates, so that the users of the financial statements can better understand the company’s performance, better understand the potential for future cash flows, and make more informed judgments about the company as a whole. Park has three operating segments,one reportable segment, as: (i) discrete financial information is available for each operatingthis reportable segment and (ii) the segments aresegment is aligned with internal reporting to Park’s Chief Executive Officer, and President, who is the chief operating decision maker.decision-maker.



 Operating Results for the three months ended March 31, 2023
(In thousands)PNBAll OtherTotal
Net interest income (expense)$93,589 $(1,391)$92,198 
Provision for (recovery of) credit losses915 (732)183 
Other income24,262 125 24,387 
Other expense72,997 3,506 76,503 
Income (loss) before income taxes$43,939 $(4,040)$39,899 
Income tax expense (benefit)7,670 (1,504)6,166 
Net income (loss)$36,269 $(2,536)$33,733 
Assets (at March 31, 2023)$9,817,967 $39,014 $9,856,981 
 Operating Results for the three months ended March 31, 2022
(In thousands)PNBAll OtherTotal
Net interest income (expense)$79,372 $(1,686)$77,686 
Recovery of credit losses(4,547)(58)(4,605)
Other income31,247 409 31,656 
Other expense64,216 3,157 67,373 
Income (loss) before income taxes$50,950 $(4,376)$46,574 
Income tax expense (benefit)9,482 (1,783)7,699 
Net income (loss)$41,468 $(2,593)$38,875 
Assets (at March 31, 2022)$9,544,545 $31,807 $9,576,352 
  Operating Results for the three months ended September 30, 2017
(In thousands) PNB GFSC SEPH All Other Total
Net interest income $59,415
 $1,455
 $401
 $280
 $61,551
Provision for (recovery of) loan losses 3,820
 609
 (1,146) —
 3,283
Other income 20,367
 18
 411
 1,293
 22,089
Other expense 45,987
 734
 996
 2,094
 49,811
Income (loss) before income taxes $29,975
 $130
 $962
 $(521) $30,546
Federal income tax expense (benefit) 8,678
 46
 336
 (626) 8,434
Net income $21,297
 $84
 $626
 $105
 $22,112
           
Assets (as of September 30, 2017) $7,788,248
 $33,260
 $25,377
 $15,810
 $7,862,695

  Operating Results for the three months ended September 30, 2016
(In thousands) PNB GFSC SEPH All Other Total
Net interest income $57,033
 $1,472
 $8
 $20
 $58,533
Recovery of loan losses (3,345) (313) (3,708) —
 (7,366)
Other income (loss) 19,279
 (1) 1,126
 131
 20,535
Other expense 42,327
 800
 1,789
 1,840
 46,756
Income (loss) before income taxes $37,330
 $984
 $3,053
 $(1,689) $39,678
Federal income tax expense (benefit) 11,839
 344
 1,070
 (1,024) 12,229
Net income (loss) $25,491
 $640
 $1,983
 $(665) $27,449
           
Assets (as of September 30, 2016) $7,287,923
 $32,759
 $36,938
 $6,472
 $7,364,092

  Operating Results for the nine months ended September 30, 2017
(In thousands) PNB GFSC SEPH All Other Total
Net interest income $174,717
 $4,424
 $884
 $256
 $180,281
Provision for (recovery of) loan losses 9,114
 1,419
 (1,793) —
 8,740
Other income 57,257
 10
 390
 1,190
 58,847
Other expense 133,667
 2,295
 3,010
 6,407
 145,379
Income (loss) before income taxes $89,193
 $720
 $57
 $(4,961) $85,009
Federal income tax expense (benefit) 26,247
 252
 20
 (2,921) 23,598
Net income (loss) $62,946
 $468
 $37
 $(2,040) $61,411
  Operating Results for the nine months ended September 30, 2016
(In thousands) PNB GFSC SEPH All Other Total
Net interest income (expense) $170,194
 $4,416
 $1,240
 $(13) $175,837
(Recovery of) provision for loan losses (450) 1,658
 (5,027) —
 (3,819)
Other income (loss) 55,010
 (1) 1,272
 379
 56,660
Other expense 126,418
 3,632
 4,525
 7,386
 141,961
Income (loss) before income taxes $99,236
 $(875) $3,014
 $(7,020) $94,355
Federal income tax expense (benefit) 30,923
 (305) 1,056
 (3,452) 28,222
Net income (loss) $68,313
 $(570) $1,958
 $(3,568) $66,133

The operating results of the Parent Company in the “All Other” column are used to reconcile the segment totals to the consolidated condensed statementsConsolidated Condensed Statements of incomeIncome for the three-monththree-month periods ended March 31, 2023 and nine-month periods ended September 30, 2017 and 2016.2022. The reconciling amounts for consolidated total assets for the periods ended September 30, 2017March 31, 2023 and 20162022 consisted of the elimination of intersegment borrowings and the assets of the Parent Company, GFSC and SEPH which were not eliminated.


Note 8 – Loans Held For Sale
Mortgage loans held for sale are carried at their fair value. At September 30, 2017 and December 31, 2016, respectively, Park had approximately $11.4 million and $10.4 million in mortgage loans held for sale. These amounts are included in loans on the consolidated condensed balance sheets and in the residential real estate loan segments in Note 3 and Note 4. The contractual balance was $11.2 million and $10.3 million at September 30, 2017 and December 31, 2016, respectively. The gain expected upon sale was $153,000 and $131,000 at September 30, 2017 and December 31, 2016, respectively. None of these loans were 90 days or more past due or on nonaccrual status as of September 30, 2017 or December 31, 2016.

Note 9 – Investment Securities
The amortized cost and fair value of investment securities are shown in the following tables. Management performs a quarterly evaluation of investment securities for any other-than-temporary impairment. For the three-month and nine-month periods ended September 30, 2017 and 2016, there were no investment securities deemed to be other-than-temporarily impaired.
Investment securities at September 30, 2017, were as follows:

45
Securities Available-for-Sale (In thousands) 
Amortized
Cost
 
Gross
Unrealized
Holding 
Gains
 
Gross
Unrealized
Holding 
Losses
 
Estimated 
Fair Value
Obligations of U.S. Treasury and other U.S. Government sponsored entities $270,000
 $—
 $1,159
 $268,841
U.S. Government sponsored entities' asset-backed securities 892,784
 6,329
 5,408
 893,705
Other equity securities 1,109
 2,907
 —
 4,016
Total $1,163,893
 $9,236
 $6,567
 $1,166,562
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Securities Held-to-Maturity (In thousands) 
Amortized
Cost
 Gross
Unrecognized
Holding 
Gains		 Gross
Unrecognized
Holding 
Losses		 
Estimated
Fair Value
U.S. Government sponsored entities' asset-backed securities $58,947
 $1,003
 $15
 $59,935
Obligations of states and political subdivisions 283,718
 5,080
 $1,623
 287,175
Total $342,665
 $6,083
 $1,638
 $347,110

Investment securities with unrealized/unrecognized losses at September 30, 2017, were as follows:
  Unrealized/unrecognized loss position for less than 12 months Unrealized/unrecognized loss position for 12 months or longer Total
(In thousands) Fair value 
Unrealized/unrecognized
losses
 Fair value Unrealized/unrecognized
losses		 
Fair
value
 Unrealized/unrecognized
losses
Securities Available-for-Sale            
Obligations of U.S. Treasury and other U.S. Government sponsored entities $24,967
 $33
 $243,874
 $1,126
 $268,841
 $1,159
U.S. Government sponsored entities' asset-backed securities 519,984
 4,815
 $63,505
 593
 $583,489
 5,408
Total $544,951
 $4,848
 $307,379
 $1,719
 $852,330
 $6,567
Securities Held-to-Maturity  
  
  
  
  
  
U.S. Government sponsored entities' asset-backed securities $—
 $—
 $7,423
 $15
 $7,423
 $15
Obligations of states and political subdivisions 97,120
 $1,247
 12,983
 376
 $110,103
 1,623
Total $97,120
 $1,247
 $20,406
 $391
 $117,526
 $1,638
Investment securities at December 31, 2016, were as follows:
Securities Available-for-Sale (In thousands) 
Amortized
Cost
 Gross
Unrealized
Holding 
Gains		 Gross
Unrealized
Holding 
Losses		 
Estimated 
Fair Value
Obligations of U.S. Treasury and other U.S. Government sponsored entities $270,000
 $—
 $2,467
 $267,533
U.S. Government sponsored entities' asset-backed securities 991,642
 5,372
 9,842
 987,172
Other equity securities 1,119
 2,315
 —
 3,434
Total $1,262,761
 $7,687
 $12,309
 $1,258,139
Securities Held-to-Maturity (In thousands) 
Amortized
Cost
 Gross
Unrecognized
Holding 
Gains		 Gross
Unrecognized
Holding 
Losses		 
Estimated
Fair Value
Obligations of states and political subdivision $188,622
 $977
 $5,148
 $184,451
U.S. Government sponsored entities' asset-backed securities 71,211
 1,097
 87
 72,221
Total $259,833
 $2,074
 $5,235
 $256,672

Investment securities with unrealized/unrecognized losses at December 31, 2016, were as follows:
  Unrealized/unrecognized loss position for less than 12 months Unrealized/unrecognized loss position for 12 months or longer Total
(In thousands) Fair value Unrealized/unrecognized
losses		 Fair value Unrealized/unrecognized
losses		 Fair
value		 Unrealized/unrecognized
losses
Securities Available-for-Sale            
Obligations of U.S. Treasury and other U.S. Government sponsored entities $247,695
 $2,305
 $19,838
 $162
 $267,533
 $2,467
U.S. Government sponsored entities' asset-backed securities 612,321
 9,473
 27,325
 369
 639,646
 9,842
Total $860,016
 $11,778
 $47,163
 $531
 $907,179
 $12,309
Securities Held-to-Maturity  
  
  
  
  
  
Obligations of states and political subdivision $134,909
 $5,148
 $—
 $—
 $134,909
 $5,148
U.S. Government sponsored entities' asset-backed securities —
 —
 7,564
 87
 7,564
 87
Total $134,909
 $5,148
 $7,564
 $87
 $142,473
 $5,235
Management does not believe any of the unrealized/unrecognized losses at September 30, 2017 or December 31, 2016 represented other-than-temporary impairment. Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized within net income in the period the other-than-temporary impairment is identified.

Park’s U.S. Government sponsored entities' asset-backed securities consist of 15-year residential mortgage-backed securities and collateralized mortgage obligations.

The amortized cost and estimated fair value of investments in debt securities at September 30, 2017, are shown in the following table by contractual maturity, except for asset-backed securities, which are shown as a single total, due to the unpredictability of the timing of principal repayments. 
Securities Available-for-Sale (In thousands) 
Amortized
cost
 Fair value Tax equivalent yield
Obligations of U.S. Treasury and other U.S. Government sponsored entities' obligations:  
  
  
Due less than one year $75,000
 $74,930
 1.02%
Due one through five years 195,000
 193,911
 1.25%
Total $270,000
 $268,841
 1.18%
       
       
U.S. Government sponsored entities' asset-backed securities $892,784
 $893,705
 2.09%
Securities Held-to-Maturity (In thousands) 
Amortized
cost
 Fair value 
Tax equivalent yield (1)
Obligations of state and political subdivisions:      
Due over ten years $283,718
 $287,175
 4.47%
Total (1)
 $283,718
 $287,175
 4.47%
       
U.S. Government sponsored entities' asset-backed securities $58,947
 $59,935
 3.20%
(1) The tax equivalent yield for obligations of state and political subdivisions includes the effects of a taxable equivalent adjustment using a 35% rate. The aggregate taxable equivalent adjustment was $2.7 million for the nine months ended September 30, 2017.
All of Park’s securities shown in the table above as obligations of U.S. Treasury and other U.S. Government sponsored entities' obligations are callable notes. These callable notes have final maturities of 0.1 years to 2.7 years. Of the $268.8 million reported at September 30, 2017, none were expected to be called. The remaining average life of the entire investment portfolio is estimated to be 4.3 years.

There were no sales of investment securities during the three-month or nine-month periods ended September 30, 2017 or 2016.

Investment securities having an amortized cost of $933 million and $937 million at September 30, 2017 and December 31, 2016, respectively, were pledged to collateralize government and trust department deposits in accordance with federal and state requirements, to secure repurchase agreements sold and as collateral for FHLB advance borrowings.

Note 10 – Other Investment Securities
Other investment securities consist of stock investments in the Federal Home Loan Bank ("FHLB"), the Federal Reserve Bank ("FRB") and other equities carried at cost. The FHLB and FRB restricted stock investments are carried at their redemption value.
  September 30,
2017		 December 31, 2016
(In thousands)  
FHLB stock $50,086
 $50,086
FRB stock 8,225
 8,225
Other equity investments carried at cost 3,500
 3,500
Total other investment securities $61,811
 $61,811


Note 1118 - Share-Based Compensation

The Park National Corporation 2013 Long-Term Incentive Plan (the "2013 Incentive Plan") was adopted by the Board of Directors of Park on January 28, 2013 and was approved by Park's shareholders at the Annual Meeting of Shareholders on April 22, 2013. The 2013 Incentive Plan made equity-based awards and cash-based awards available for grant to participants in the form of incentive stock options, nonqualified stock options, stock appreciation rights (“SARs”), restricted common shares (“Restricted Stock”), restricted stock unit awards that may be settled in common shares, cash or a combination of the two (“Restricted Stock Units”), unrestricted common shares (“Other Stock-Based Awards”) and cash-based awards. Under the 2013 Incentive Plan, 600,000 common shares were authorized to be delivered in connection with grants under the 2013 Incentive Plan. The common shares to be delivered under the 2013 Incentive Plan are to consist of either common shares currently held or common shares subsequently acquired by Park as treasury shares, including common shares purchased in the open market or in private transactions. As of September 30, 2017, there were 119,587 common shares subject to performance-based restricted stock units (“PBRSUs”) issued under the 2013 Incentive Plan.


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


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

The 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP have replaced the provisions of the 2013 Incentive Plan with respect to the grant of future awards. As a result of the approval of the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP, Park will not grant any additional awards under the 2013 Incentive Plan after April 24, 2017. Awards made under the 2013 Incentive Plan prior to April 24, 2017 will remain in effect in accordance with their respective terms.


During the ninethree months ended September 30, 2017March 31, 2023 and 2016,2022, the Compensation Committee of the Board of Directors of Park granted awards of PBRSUs, under the 2013 Incentive Plan,2017 Employees LTIP, covering an aggregate of 45,78854,698 common shares and 41,55052,335 common shares, respectively, to certain employees of Park and its subsidiaries. No

As of March 31, 2023, Park has nonvested PBRSUs were granted during the three months ended September 30, 2017 and 2016.as well as TBRSUs. The number of PBRSUs earned or settled will depend on the level of achievement with respect to certain performance criteria over a three-year period and are also subject to subsequent service-based vesting. The number of TBRSUs earned or settled are subject to service-based vesting.



A summary of changes in the common shares subject to nonvested PBRSUs and TBRSUs for the ninethree months ended September 30, 2017March 31, 2023 follows:

Common shares subject to PBRSUs and TBRSUs
Nonvested at January 1, 2017202385,425199,650 
Granted45,78854,698 
Vested9,674(56,465)
Forfeited150(570)
Adjustment for performance conditions of PBRSUs (1)
(1,802— )
Nonvested at September 30, 2017March 31, 2023 (2)
119,587197,313
(1) The number of PBRSUs earned depends on the level of achievement with respect to certain performance criteria. Adjustment herein, if any, represents the difference between the maximum number of common shares which could be earned and the actual number earned for those PBRSUs as to which the performance period was completed.

On(2) Nonvested amount herein represents the maximum number of nonvested PBRSUs and TBRSUs. As of March 31, 2017, 9,6742023, an aggregate of 194,287 PBRSUs granted in 2014 vested. and TBRSUs were expected to vest.


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A totalsummary of 3,293 common shares were withheld to pay employee income taxes. This resulted in a net amount of 6,381 common shares being issued to employees of Park.awards vested during the three months ended March 31, 2023 and 2022 follows:


Three Months Ended
March 31,
2023 2022
PBRSUs and TBRSUs vested56,46548,415 
Common shares withheld to satisfy employee income tax withholding obligations21,98118,658 
Net common shares issued34,48429,757

Share-based compensation expense of $727,000$2.3 million and $398,000$2.0 million was recognized for the three-month periods ended September 30, 2017March 31, 2023 and 2016, respectively, and $2.1 million and $1.2 million for the nine-month periods ended September 30, 2017 and 2016,2022, respectively.


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


(In thousands)
Nine months ending December 31, 2023$4,350 
20244,693 
20253,076 
20261,285 
2027206 
Total$13,610 

(In thousands)  
Three months ending December 31, 2017 $711
2018 2,509
2019 1,867
2020 845
2021 141
Total $6,073

Note 1219 – Pension PlanBenefit Plans
 
Park has a noncontributory defined benefit pension plan (the "Pension Plan") covering substantially all of its employees. The planPension Plan provides benefits based on an employee’s years of service and compensation.
 
There were no pension planPension Plan contributions for either of the three-month or nine-month periods ended September 30, 2017March 31, 2023 and 2016.2022. Additionally, no contributions are expected to be made during the remainder of 2023.
 
The following table shows the components of net periodic pension benefit income:(income) expense:


Three Months Ended
March 31,		Affected Line Item in the Consolidated
Condensed Statements of Income
(In thousands)20232022
Service cost$1,559 $2,437 Employee benefits
Interest cost1,631 1,426 Other components of net
periodic pension benefit income
Expected return on plan assets(3,536)(4,449)Other components of net
periodic pension benefit income
Recognized prior service cost (credit)12 (4)Other components of net
periodic pension benefit income
Net periodic pension benefit (income) expense$(334)$(590)

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Table of Contents


  Three Months Ended
September 30,		 Nine Months Ended
September 30,
(In thousands) 2017 2016 2017 2016
Service cost $1,317
 $1,264
 $3,951
 $3,792
Interest cost 1,271
 1,217
 3,813
 3,651
Expected return on plan assets (2,863) (2,737) (8,589) (8,211)
Amortization of prior service cost —
 —
 —
 —
Recognized net actuarial loss 144
 193
 432
 579
Net periodic benefit income $(131) $(63) $(393) $(189)



Note 13 – Loan Servicing
Park serviced sold mortgage loanshas entered into Supplemental Executive Retirement Plan Agreements (the “SERP Agreements”) with certain key officers of $1.36 billion at September 30, 2017, $1.33 billion at December 31, 2016Park and $1.31 billion at September 30, 2016. At September 30, 2017, $3.2 millionits subsidiaries which provide defined pension benefits in excess of limits imposed by federal tax law. The expense for the sold mortgage loans were sold with recourse, comparedCorporation related to $4.1 million at December 31, 2016 and $4.3 million at September 30, 2016. Management closely monitors the delinquency rates on the mortgage loans sold with recourse. At both September 30, 2017 and December 31, 2016, management had established reserves of $266,000 to account for expected losses on loan repurchases.
When Park sells mortgage loans with servicing rights retained, servicing rights are initially recorded at fair value. Park selected the “amortization method” as permissible within U.S. GAAP, whereby the servicing rights capitalized are amortized in proportion to and over the period of estimated future servicing income of the underlying loan. At the end of each reporting period, the carrying value of mortgage servicing rights (“MSRs”) is assessed for impairment with a comparison to fair value. MSRs are carried at the lower of their amortized cost or fair value.

Activity for MSRs and the related valuation allowance follows:
  Three Months Ended
September 30,		 Nine Months Ended
September 30,
(In thousands) 2017 2016 2017 2016
Mortgage servicing rights:        
Carrying amount, net, beginning of period $9,476
 $8,880
 $9,266
 $9,008
Additions 559
 747
 1,434
 1,618
Amortization (448) (522) (1,213) (1,312)
Changes in valuation allowance (108) (360) (8) (569)
Carrying amount, net, end of period $9,479
 $8,745
 $9,479
 $8,745
         
Valuation allowance:        
Beginning of period $635
 $751
 $735
 $542
Changes in valuation allowance 108
 360
 8
 569
End of period $743
 $1,111
 $743
 $1,111
Servicing fees included in other service income were $0.8 millionSERP Agreements for the three months ended September 30, 2017March 31, 2023 and $0.9 million for the same period of 2016. Servicing fees included in other service income were $2.6 million for the nine months ended September 30, 2017 and $2.5 million for the same period of 2016.2022 was as follows:

Three Months Ended
March 31,		Affected Line Item in the Consolidated
Condensed Statements of Income
(In thousands)20232022
Service cost$234 $213 Employee benefits
Interest cost176 183 Miscellaneous expense
Total SERP expense$410 $396 

Note 1420 – Fair Value
 
The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that Park uses to measure fair value are as follows:


•Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that Park has the ability to access as of the measurement date.
•Level 2: Level 1 inputs for assets or liabilities that are not actively traded. Also consists of an observable market price for a similar asset or liability. This includes the use of “matrix pricing” to value debt securities absent the exclusive use of quoted prices.
•Level 3: Consists of unobservable inputs that are used to measure fair value when observable market inputs are not available. This could include the use of internally developed models, financial forecasting and similar inputs.
 
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the balance sheet date. When possible, the Company looks to active and observable markets to price identical assets or liabilities. When identical assets and liabilities are not traded in active markets, the Company looks to observable market data for similar assets and liabilities. However, certain assets and liabilities are not traded in observable markets and Park must use other valuation methods to develop a fair value. The fair value of impairedindividually evaluated collateral dependent loans is typically based on the fair value of the underlying collateral, which is estimated through third-party appraisals in accordance with Park's valuation requirements under its commercial and real estate loan policies.


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Assets and Liabilities Measured at Fair Value on a Recurring Basis:
 
The following table presents assets and liabilities measured at fair value on a recurring basis:
Fair Value Measurements at March 31, 2023 using:
(In thousands)Level 1Level 2Level 3Balance at March 31, 2023
Assets    
Investment securities:    
Obligations of U.S. Government sponsored entities$— $37,344 $— $37,344 
Obligations of states and political subdivisions— 412,006 — 412,006 
U.S. Government sponsored entities’ asset-backed securities— 730,261 — 730,261 
Collateralized loan obligations— 519,428 — 519,428 
Corporate debt securities— 8,546 6,855 15,401 
Equity securities2,383 — 449 2,832 
Mortgage loans held for sale— 2,076 — 2,076 
Mortgage IRLCs— 77 — 77 
Loan interest rate swaps— 1,119 — 1,119 
Liabilities    
Fair value swap$— $— $121 $121 
Loan interest rate swaps— 1,119 — 1,119 
Fair Value Measurements at September 30, 2017 using:
(In thousands) Level 1 Level 2 Level 3 Balance at September 30, 2017
Assets  
  
  
  
Investment securities:  
  
  
  
Obligations of U.S. Treasury and other U.S. Government sponsored entities $—
 $268,841
 $—
 $268,841
U.S. Government sponsored entities’ asset-backed securities —
 893,705
 —
 893,705
Equity securities 3,521
 —
 495
 4,016
Mortgage loans held for sale —
 11,396
 —
 11,396
Mortgage IRLCs —
 98
 —
 98
         
Liabilities  
  
  
  
Fair value swap $—
 $—
 $226
 $226
Fair Value Measurements at December 31, 2022 using:
(In thousands)Level 1Level 2Level 3Balance at December 31, 2022
Assets    
Investment securities:    
Obligations of U.S. Government sponsored entities$— $37,213 $— $37,213 
Obligations of states and political subdivisions— 406,711 — 406,711 
U.S. Government sponsored entities’ asset-backed securities— 756,761 — 756,761 
Collateralized loan obligations— 516,539 — 516,539 
Corporate debt securities— 9,472 7,000 16,472 
Equity securities1,420 — 439 1,859 
Mortgage loans held for sale— 2,149 — 2,149 
Mortgage IRLCs— 46 — 46 
Loan interest rate swaps— 1,508 — 1,508 
Liabilities    
Fair value swap$— $— $243 $243 
Loan interest rate swaps— 1,508 — 1,508 
 
49
Fair Value Measurements at December 31, 2016 using:
(In thousands) Level 1 Level 2 Level 3 Balance at December 31, 2016
Assets  
  
  
  
Investment securities:  
  
  
  
Obligations of U.S. Treasury and other U.S. Government sponsored entities $—
 $267,533
 $—
 $267,533
U.S. Government sponsored entities’ asset-backed securities —
 987,172
 —
 987,172
Equity securities 2,644
 —
 790
 3,434
Mortgage loans held for sale —
 10,413
 —
 10,413
Mortgage IRLCs —
 124
 —
 124
         
Liabilities  
  
  
  
Fair value swap $—
 $—
 $226
 $226
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There were no transfers between Level 1 and Level 2 during the three or nine months ended September 30, 2017 or 2016. Management’s policy is to transfer assets or liabilities from one level to another when the methodology to obtain the fair value changes such that there are more or fewer unobservable inputs as of the end of the reporting period.
The following methods and assumptions were used by the Company in determining the fair value of the financial assets and liabilities discussed above:

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

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

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



Mortgage Interest Rate Lock Commitments (IRLCs):interest rate lock commitments: Mortgage IRLCs are based on current secondary market pricing and are classified as Level 2.
 
Mortgage loans held for sale: Mortgage loans held for sale are carried at their fair value. Mortgage loans held for sale are estimated using securitymarket prices for similar product types and, therefore, are classified in Level 2.

The following tables below arepresent a reconciliation of the beginning and ending balances of the Level 3 inputs for the threethree-month periods ended March 31, 2023 and nine months ended September 30, 2017 and 2016,2022, for financial instruments measured on a recurring basis and classified as Level 3:


Level 3 Fair Value Measurements
Level 3 Fair Value Measurements
Three months ended March 31, 2023 and 2022
(In thousands)Corporate Debt SecuritiesEquity securitiesFair value
swap
Balance at January 1, 2023$7,000 $439 $(243)
Transfers into level 3622 — — 
Total (losses) / gains  
Included in other income— 10 — 
    Included in other comprehensive income(767)— — 
Purchases, sales, issuances and settlements, other, net— — 122 
Balance at March 31, 2023$6,855 $449 $(121)
Balance at January 1, 2022$— $499 $(226)
Total losses  
Included in other income— (8)— 
Balance at March 31, 2022$— $491 $(226)
Three months ended September 30, 2017 and 2016
(In thousands) 
Equity
Securities
 
Fair value
swap
Balance at July 1, 2017 $458
 $(226)
Total gains/(losses)  
  
Included in other comprehensive income 37
 —
Balance at September 30, 2017 $495
 $(226)
     
Balance at July 1, 2016 $821
 $(226)
Total gains/(losses)  
  
Included in other comprehensive income (42) —
Balance at September 30, 2016 $779
 $(226)

Level 3 Fair Value Measurements
Nine months ended September 30, 2017 and 2016
(In thousands) 
Equity
Securities
 
Fair value
swap
Balance at January 1, 2017 $790
 $(226)
Total gains/(losses)  
  
Transfers out of Level 3 (1)
 (346) —
Included in other comprehensive income 51
 —
Balance at September 30, 2017 $495
 $(226)
     
Balance at January 1, 2016 $769
 $(226)
Total gains/(losses)  
  
Included in other comprehensive income 10
 —
Balance at September 30, 2016 $779
 $(226)
(1) Transfered from Level 3 to Level 1 as the result of a quoted market price becoming available.


Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis:
 
The following methods and assumptions were used by the Company in determining the fair value of assets and liabilities measured at fair value on a nonrecurring basis as described below:


Impaired Loans: At the timeIndividually evaluated collateral dependent loans: When a loan is considered impaired,individually evaluated, it is valued at the lower of cost or fair value. Collateral dependent impaired loans which are individually evaluated and carried at fair value have been partially charged-offcharged off or receive specific allocations of the allowance for loancredit losses. For collateral dependent loans, fair value is generally based on real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales approach and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments result in a Level 3 classification of the inputs for determining fair value. Collateral is then adjusted or discounted based on
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management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and the client’s business, resulting in a Level 3 fair value classification. ImpairedIndividually evaluated loans are evaluated on a quarterly basis for additional impairment and adjusted

accordingly. Additionally, valuations for all collateral dependent loans are updated annually, either through independent valuations are obtained annually for all impaired loansby a licensed appraiser or a verification of value ("VOV") performed by an internal licensed appraiser, in accordance with Company policy. A VOV can only be used in select circumstances and verifies that the original appraised value has not deteriorated through property inspection, consideration of market conditions, and performance of all valuation methods utilized in a prior valuation.

Other Real Estate Owned ("OREO"):After the adoption of ASU 2022-02 on January 1, 2023, loans individually evaluated for impairment include all internally classified commercial nonaccrual loans. Prior to the adoption of ASU 2022-02, loans individually evaluated for impairment included all internally classified commercial nonaccrual loans and accruing TDRs.

OREO: Assets acquired through or in lieu of loan foreclosure are initially recorded at fair value less costs to sell when acquired. The carrying value of OREO is not re-measured to fair value on a recurring basis, but is subject to fair value adjustments when the carrying value exceeds the fair value, less estimated selling costs. Fair value is based on recent real estate appraisals and is updated at least annually. These appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales approach and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments result in a Level 3 classification of the inputs for determining fair value.
 
Appraisals for both individually evaluated collateral dependent impaired loans and OREO are performed by licensed appraisers. Appraisals are generally obtained to support the fair value of collateral. In general, there are three types of appraisals received by the Company: real estate appraisals, income approach appraisals, and lot development loan appraisals. These are discussed below:
 
•Real estate appraisals typically incorporate measures such as recent sales prices for comparable properties. Appraisers may make adjustments to the sales prices of the comparable properties as deemed appropriate based on the age, condition or general characteristics of the subject property. Management generally applies a 15% discount to real estate appraised values which management expects will cover all disposition costs (including selling costs). This 15% discount is based on historical discounts to appraised values on sold OREO properties.


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


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


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


The following tables present assets and liabilities measured at fair value on a nonrecurring basis. CollateralIndividually evaluated collateral dependent impaired loans secured by real estate are carried at fair value if they have been charged down to fair value or if a specific valuation allowance has been established. At March 31, 2023 and December 31, 2022, there were no PCD loans carried at fair value. A new cost basis is established at the time a property is initially recorded in OREO. OREO properties are carried at fair value if a devaluation has been taken with respect to the property's value subsequent to the initial measurement.
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Fair Value Measurements at September 30, 2017 using:
(In thousands) Level 1 Level 2 Level 3 Balance at September 30, 2017
Impaired loans recorded at fair value:  
  
  
  
Commercial real estate $—
 $—
 $6,147
 $6,147
Construction real estate —
 —
 127
 127
Residential real estate —
 —
 863
 863
Total impaired loans recorded at fair value $—
 $—
 $7,137
 $7,137
         
Mortgage servicing rights $—
 $7,110
 $—
 $7,110
         
OREO:        
Commercial real estate —
 —
 2,457
 2,457
Construction real estate —
 —
 3,212
 3,212
Residential real estate —
 —
 1,093
 1,093
Total OREO recorded at fair value $—
 $—
 $6,762
 $6,762
At March 31, 2023 and December 31, 2022, there were no OREO properties held by Park that were carried at fair value due to fair value adjustments made subsequent to the initial OREO measurement.

Fair Value Measurements at March 31, 2023 using:
(In thousands)Level 1Level 2Level 3Balance at March 31, 2023
Individually evaluated collateral dependent loans recorded at fair value:    
Commercial real estate$— $— $2,873 $2,873 
Residential real estate— — 195 195 
Total individually evaluated collateral dependent loans recorded at fair value$— $— $3,068 $3,068 
MSRs$— $1,793 $— $1,793 
Fair Value Measurements at December 31, 2016 using:
(In thousands) Level 1 Level 2 Level 3 Balance at December 31, 2016
Impaired loans recorded at fair value:  
  
  
  
Commercial real estate $—
 $—
 $3,057
 $3,057
Construction real estate —
 —
 541
 541
Residential real estate —
 —
 2,385
 2,385
Total impaired loans recorded at fair value $—
 $—
 $5,983
 $5,983
         
Mortgage servicing rights $—
 $6,769
 $—
 $6,769
         
OREO:        
Commercial real estate —
 —
 2,644
 2,644
Construction real estate —
 —
 3,322
 3,322
Residential real estate —
 —
 931
 931
Total OREO recorded at fair value $—
 $—
 $6,897
 $6,897
Fair Value Measurements at December 31, 2022 using:
(In thousands)Level 1Level 2Level 3Balance at December 31, 2022
Individually evaluated collateral dependent loans recorded at fair value:    
Commercial real estate$— $— $5,573 $5,573 
Residential real estate— — 200 200 
Total individually evaluated collateral dependent loans recorded at fair value$— $— $5,773 $5,773 
MSRs$— $1,717 $— $1,717 

The table below provides additional detail on those impairedindividually evaluated loans which are recorded at fair value as well as the remaining impairedindividually evaluated loan portfolio not included above. The remaining impairedindividually evaluated loans consist of 1) loans which are not collateral dependent, as well as2) loans which are not secured by real estate, and 3) loans carried at cost as the fair value of the underlying collateral or the present value of expected future cash flows on each of the loans exceeded the book value for each respective credit.


March 31, 2023
(In thousands)Loan BalancePrior Charge-OffsSpecific Valuation AllowanceCarrying Balance
Total individually evaluated collateral dependent loans recorded at fair value$3,284 $1,293 $216 $3,068 
Remaining individually evaluated loans56,100 245 4,102 51,998 
Total individually evaluated loans$59,384 $1,538 $4,318 $55,066 
  September 30, 2017
(In thousands) Recorded Investment Prior Charge-Offs Specific Valuation Allowance Carrying Balance
Impaired loans recorded at fair value $7,470
 $2,822
 $333
 $7,137
Remaining impaired loans 66,139
 7,124
 4,769
 61,370
Total impaired loans $73,609
 $9,946
 $5,102
 $68,507


December 31, 2022
(In thousands)Loan BalancePrior Charge-OffsSpecific Valuation AllowanceCarrying Balance
Total individually evaluated collateral dependent loans recorded at fair value$5,903 $1,523 $130 $5,773 
Remaining individually evaluated loans72,438 252 3,436 69,002 
Total individually evaluated loans$78,341 $1,775 $3,566 $74,775 

  December 31, 2016
(In thousands) Recorded Investment Prior Charge-Offs Specific Valuation Allowance Carrying Balance
Impaired loans recorded at fair value $6,379
 $3,681
 $396
 $5,983
Remaining impaired loans 64,047
 21,262
 152
 63,895
Total impaired loans $70,426
 $24,943
 $548
 $69,878


The (expense) income from credit adjustments related to impairedindividually evaluated loans carried at fair value duringwas $(107,000) and $24,000 for the three monthsthree-month periods ended September 30, 2017March 31, 2023 and 2016 was $(0.7) million and $2.9 million, respectively. The (expense) income from credit adjustments related to impaired loans carried at fair value during the nine months ended September 30, 2017 and 2016 was $(1.2) million and $1.9 million,2022, respectively.

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MSRs totaled $9.5$15.5 million at September 30, 2017.March 31, 2023. Of this $9.5$15.5 million MSR carrying balance, $7.1$1.8 million was were recorded at fair value and included a valuation allowance of $0.7 million.$0.2 million. The remaining $2.4$13.7 million was were recorded at cost, as the fair value of the MSRs exceeded cost at September 30, 2017.March 31, 2023. At December 31, 2016,2022, MSRs totaled $9.3 million.$15.8 million. Of this $9.3$15.8 million MSR carrying balance, $6.8$1.7 million waswere recorded at fair value and included a valuation allowance of $0.7 million.$0.2 million. The remaining $2.5$14.1 million waswere recorded at cost, as the fair value exceeded cost at December 31, 2016. 2022. The expense relatedincome related to MSRs carried at fair value during the three months ended September 30, 2017 and 2016 was $108,000 and $360,000, respectively. The expense related to MSRs carried at fair value during the nine months ended September 30, 2017 and 2016 was $8,000 and $569,000, respectively.
Total OREO held by Park at September 30, 2017 and December 31, 2016 was $14.4 million and $13.9 million, respectively. Approximately 47% and 50% of OREO held by Park at September 30, 2017 and December 31, 2016, respectively, was carried at fair value due to fair value adjustments made subsequent to the initial OREO measurement. At September 30, 2017 and December 31, 2016, OREO held at fair value, less estimated selling costs, amounted to $6.8 million and $6.9 million, respectively. The net expense related to OREO fair value adjustments was $22,000 and $233,000 for the three-month periods ended September 30, 2017March 31, 2023 and 2016,2022 was $14,000 and $442,000, respectively. The net expense related to OREO fair value adjustments was $367,000 and $572,000 for the nine-month periods ended September 30, 2017 and 2016, respectively.


The following tables present qualitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurringnonrecurring basis at September 30, 2017March 31, 2023 and December 31, 2016:2022:


March 31, 2023
(In thousands)Fair ValueValuation TechniqueUnobservable Input(s)Range
(Weighted Average)
Individually evaluated collateral dependent loans:
Commercial real estate$2,873Sales comparison approachAdj to comparables3.9% - 202.0% (25.3%)
Income approachCapitalization rate7.5% - 8.5% (8.0%)
Residential real estate$195Sales comparison approachAdj to comparables1.2% - 78.6% (7.9%)

December 31, 2022
(In thousands)Fair ValueValuation TechniqueUnobservable Input(s)Range
(Weighted Average)
Individually evaluated collateral dependent loans:
Commercial real estate$5,573 Sales comparison approachAdj to comparables0.0% - 202.0% (19.4%)
Income approachCapitalization rate7.0% - 10.0% (7.9%)
Cost approachEntrepreneurial profit10.0% - 12.0% (11.4%)
Cost approachAccumulated depreciation  38.8% (38.8%)
Residential real estate$200 Sales comparison approachAdj to comparables1.9% - 119.8% (17.4%)



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September 30, 2017
(In thousands) Fair Value Valuation Technique Unobservable Input(s) 
Range
(Weighted Average)
Impaired loans:  
      
Commercial real estate $6,147
 Sales comparison approach Adj to comparables 0.0% - 102.0% (40.1%)
    Income approach Capitalization rate 8.8% - 12.5% (9.4%)
    Cost approach Accumulated depreciation 90.1% (90.1%)
         
Construction real estate $127
 Sales comparison approach Adj to comparables 0.0% - 4.8% (2.4%)
         
Residential real estate $863
 Sales comparison approach Adj to comparables 0.1% - 33.0% (11.7%)
    Income approach Capitalization rate 10.5% (10.5%)
         
Other real estate owned:        
Commercial real estate $2,457
 Sales comparison approach Adj to comparables 0.0% - 68.4% (28.9%)
    Income approach Capitalization rate 12.0% - 13.0% (12.9%)
         
Construction real estate $3,212
 Sales comparison approach Adj to comparables 0.0% - 90.0% (24.4%)
    Bulk sale approach Discount rate 15.0% (15.0%)
         
Residential real estate $1,093
 Sales comparison approach Adj to comparables 1.2% - 79.7% (30.8%)
Assets Measured at Net Asset Value:



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

Balance at December 31, 2016
(In thousands) Fair Value Valuation Technique Unobservable Input(s) 
Range
(Weighted Average)
Impaired loans:  
      
Commercial real estate $3,057
 Sales comparison approach Adj to comparables 0.0% - 90.0% (20.2%)
    Income approach Capitalization rate 9.0% - 10.6% (10.1%)
    Cost approach Accumulated depreciation 17.0% - 18.0% (17.8%)
         
Construction real estate $541
 Sales comparison approach Adj to comparables 0.0% - 11.1% (1.6%)
    Bulk sale approach Discount rate 10.0% (10.0%)
         
Residential real estate $2,385
 Sales comparison approach Adj to comparables 0.3% - 110.0% (17.0%)
    Income approach Capitalization rate 10.0% (10.0%)
         
Other real estate owned:        
Commercial real estate $2,644
 Sales comparison approach Adj to comparables 0.0% - 68.4% (26.5%)
    Income approach Capitalization rate 13.0% - 14.0% (13.1%)
         
Construction real estate $3,322
 Sales comparison approach Adj to comparables 0.0% - 90.0% (24.7%)
    Bulk sale approach Discount rate 15.0% (15.0%)
         
Residential real estate $931
 Sales comparison approach Adj to comparables 3.2% - 79.7% (30.6%)
At March 31, 2023 and December 31, 2022, Park had Partnership Investments with a NAV of $24.9 million and $24.4 million, respectively. At March 31, 2023 and December 31, 2022, Park had $19.6 million and $20.3 million, respectively, in unfunded commitments related to these Partnership Investments. For the three-month periods ended March 31, 2023 and 2022, Park recognized (expense) income of $(0.4) million and $2.4 million respectively, related to these Partnership Investments.



The following methods and assumptions were used by Park in estimating its fair value disclosures for assetsof certain financial instruments at March 31, 2023 and liabilities not discussed above:December 31, 2022, was as follows:

Cash and cash equivalents:The carrying amounts reported in the consolidated condensed balancesheets for cash and short-term instruments approximate those assets’ fair values.
March 31, 2023
  Fair Value Measurements
(In thousands)Carrying valueLevel 1Level 2Level 3Total fair value
Financial assets:
Cash and money market instruments$261,919 $261,919 $— $— $261,919 
Investment securities (1)
1,714,440 — 1,707,585 6,855 1,714,440 
Other investment securities (2)
2,832 2,383 — 449 2,832 
Mortgage IRLCs77 — 77 — 77 
Mortgage loans held for sale2,076 — 2,076 — 2,076 
Individually evaluated loans carried at fair value3,068 — — 3,068 3,068 
Other loans, net7,002,690 — — 6,887,490 6,887,490 
Loans receivable, net$7,007,911 $— $2,153 $6,890,558 $6,892,711 
Financial liabilities:     
Time deposits$531,850 $— $531,277 $— $531,277 
Other2,630 2,630 — — 2,630 
Deposits (excluding demand deposits)$534,480 $2,630 $531,277 $— $533,907 
Short-term borrowings$172,058 $— $172,058 $— $172,058 
Subordinated notes188,785 — 179,251 — 179,251 
Derivative financial instruments - assets:
Loan interest rate swaps$1,119 $— $1,119 $— $1,119 
Derivative financial instruments - liabilities:     
Fair value swap$121 $— $— $121 $121 
Loan interest rate swaps1,119 — 1,119 — 1,119 

(1) Includes debt securities AFS.
Other investments: (2) Excludes FHLB stock and FRB stock within "Other investments"which are carried at their respective redemption values, as it is not practical to calculate their fair values. Additional investments within "Other investments" are carriedinvestment securities accounted for at theirmodified cost basis as these investments do not have a readily determinable fair value, and Park does not havePartnership Investments valued using the ability to influence the operating or financial decisionsNAV practical expedient.
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Loans receivable:For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair values for certain mortgage loans (e.g., one-to-four family residential) are based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. The fair values for other loans are estimated using discounted cash flow analyses, based upon interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. The methods utilized to estimate the fair value do not necessarily represent what the exit price would be.
Off-balance sheet instruments:Fair values for Park’s loan commitments and standby letters of credit are based on the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The carrying amount and fair value are not material.

Deposit liabilities:The fair values disclosed for demand deposits (e.g., interest and non-interest checking, savings, and money market accounts) are, by definition, equal to the amounts payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts for variable-rate, fixed-term certificates of deposit approximate their fair values at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities of time deposits.
Short-term borrowings:The carrying amounts of federal funds purchased, borrowings under repurchase agreements and other short-term borrowings approximate their fair values.
Long-term debt:Fair values for long-term debt are estimated using a discounted cash flow calculation that applies interest rates currently being offered on long-term debt to a schedule of monthly maturities.
Subordinated notes:Fair values for subordinated notes are estimated using a discounted cash flow calculation that applies interest rate spreads currently being offered on similar debt structures to a schedule of monthly maturities.



The fair value of financial instruments at September 30, 2017 and December 31, 2016, was as follows:


 September 30, 2017December 31, 2022
   Fair Value Measurements  Fair Value Measurements
(In thousands) Carrying value Level 1 Level 2 Level 3 Total fair value(In thousands)Carrying valueLevel 1Level 2Level 3Total fair value
Financial assets:          Financial assets:
Cash and money market instruments $450,352
 $450,352
 $—
 $—
 $450,352
Cash and money market instruments$189,728 $189,728 $— $— $189,728 
Investment securities (1)
 1,509,227
 3,521
 1,509,656
 495
 1,513,672
Investment securities (1)
1,733,696 — 1,726,696 7,000 1,733,696 
Accrued interest receivable - securities 4,780
 —
 4,780
 —
 4,780
Accrued interest receivable - loans 16,466
 —
 —
 16,466
 16,466
Other investment securities (2)
Other investment securities (2)
1,859 1,420 — 439 1,859 

          
Loans held for sale 11,396
 —
 11,396
 —
 11,396
Mortgage loans held for saleMortgage loans held for sale2,149 — 2,149 — 2,149 
Mortgage IRLCs 98
 —
 98
 —
 98
Mortgage IRLCs46 — 46 — 46 
Impaired loans carried at fair value 7,137
 —
 —
 7,137
 7,137
Individually evaluated loans carried at fair valueIndividually evaluated loans carried at fair value5,773 — — 5,773 5,773 
Other loans, net 5,292,014
 —
 —
 5,269,250
 5,269,250
Other loans, net7,048,544 — — 6,918,326 6,918,326 
Loans receivable, net $5,310,645
 $—
 $11,494
 $5,276,387
 $5,287,881
Loans receivable, net$7,056,512 $— $2,195 $6,924,099 $6,926,294 
          
Financial liabilities:  
  
  
  
  
Financial liabilities:     
Noninterest bearing checking accounts $1,568,177
 $1,568,177
 $—
 $—
 $1,568,177
Interest bearing transactions accounts 1,374,401
 1,374,401
 —
 —
 1,374,401
Savings accounts 1,969,887
 1,969,887
 —
 —
 1,969,887
Time deposits 1,056,570
 —
 1,058,886
 —
 1,058,886
Time deposits$554,445 $— $552,443 — $552,443 
Other 5,287
 5,287
 —
 —
 5,287
Other1,325 1,325 — — 1,325 
Total deposits $5,974,322
 $4,917,752
 $1,058,886
 $—
 $5,976,638
Deposits (excluding demand deposits)Deposits (excluding demand deposits)$555,770 $1,325 $552,443 $— $553,768 
          
Short-term borrowings $192,896
 $—
 $192,896
 $—
 $192,896
Short-term borrowings$227,342 $— $227,342 $— $227,342 
Long-term debt 848,992
 —
 859,473
 —
 859,473
Subordinated notes 15,000
 —
 12,738
 —
 12,738
Subordinated notes188,667 — 177,928 — 177,928 
Accrued interest payable – deposits 1,142
 63
 1,079
 —
 1,142
Accrued interest payable – debt/borrowings 1,140
 2
 1,438
 —
 1,440
          
Derivative financial instruments:�� 
  
  
  
  
Derivative financial instruments - assets:Derivative financial instruments - assets:     
Loan interest rate swapsLoan interest rate swaps$1,508 $— $1,508 $— $1,508 
Derivative financial instruments - liabilities:Derivative financial instruments - liabilities:
Fair value swap $226
 $—
 $—
 $226
 $226
Fair value swap$243 $— $— $243 $243 
Loan interest rate swapsLoan interest rate swaps1,508 — 1,508 — 1,508 
(1) InvestmentIncludes debt securities excludes the category "Other investment securities." This category consists of AFS.
(2) Excludes FHLB stock and FRB stock which are carried at their respective redemption values, as it is not practical to calculate their fair values. Additional investments within "Other investment securities" are carriedsecurities accounted for at theirmodified cost basis as these investments do not have a readily determinable fair value, and Park does not havePartnership Investments valued using the ability to influenceNAV practical expedient.
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Note 21 - Revenue from Contracts with Customers

All of Park's revenue from contracts with customers within the operating or financial decisionsscope of the investee.


  December 31, 2016
    Fair Value Measurements
(In thousands) Carrying value Level 1 Level 2 Level 3 Total fair value
Financial assets:          
Cash and money market instruments $146,466
 $146,466
 $—
 $—
 $146,466
Investment securities (1)
 1,517,972
 2,644
 1,511,377
 790
 1,514,811
Accrued interest receivable - securities 3,849
 —
 3,849
 —
 3,849
Accrued interest receivable - loans 14,973
 —
 —
 14,973
 14,973

          
Loans held for sale 10,413
 —
 10,413
 —
 10,413
Mortgage IRLCs 124
 —
 124
 —
 124
Impaired loans carried at fair value 5,983
 —
 —
 5,983
 5,983
Other loans, net 5,204,713
 —
 —
 5,161,919
 5,161,919
Loans receivable, net $5,221,233
 $—
 $10,537
 $5,167,902
 $5,178,439
           
Financial liabilities:  
  
  
  
  
Noninterest bearing checking accounts $1,523,417
 $1,523,417
 $—
 $—
 $1,523,417
Interest bearing transactions accounts 1,174,448
 1,174,448
 —
 —
 1,174,448
Savings accounts 1,704,920
 1,704,920
 —
 —
 1,704,920
Time deposits 1,117,870
 —
 1,122,598
 —
 1,122,598
Other 1,301
 1,301
 —
 —
 1,301
Total deposits $5,521,956
 $4,404,086
 $1,122,598
 $—
 $5,526,684
           
Short-term borrowings $394,795
 $—
 $394,795
 $—
 $394,795
Long-term debt 694,281
 —
 712,958
 —
 712,958
Subordinated notes 45,000
 —
 40,903
 —
 40,903
Accrued interest payable – deposits 900
 82
 818
 —
 900
Accrued interest payable – debt/borrowings 1,251
 1
 1,250
 —
 1,251
           
Derivative financial instruments:  
  
  
  
  
Fair value swap $226
 $—
 $—
 $226
 $226
(1) Investment securities excludes the category "Other investment securities." This category consists of FHLB and FRB stock carried at their respective redemption values as itASC 606 is not practical to calculate their fair values. Additional investmentsrecognized within "Other investment securities" are carried at their cost basis as these investments do not have a readily determinable fair value and Park does not have the ability to influence the operating or financial decisions of the investee.


Note 15 – Other Comprehensive Income

Other comprehensive income components, net of tax, are shownincome" in the Consolidated Condensed Statements of Income.

The following table presents the Corporation's sources of other income by revenue stream and operating segment for the three-month and nine-month periods ended September 30, 2017March 31, 2023 and 2016:
March 31, 2022:

(in thousands)
 Changes in pension plan assets and benefit obligations Unrealized gains (losses) on available for sale securities Total
Beginning balance at July 1, 2017 $(14,740) $1,028
 $(13,712)
 Other comprehensive income before reclassifications —
 707
 707
 Amounts reclassified from accumulated other comprehensive loss —
 —
 —
Net current period other comprehensive income —
 707
 707
Ending balance at September 30, 2017 $(14,740) $1,735
 $(13,005)
        
Beginning balance at July 1, 2016 $(15,351) $15,740
 $389
 Other comprehensive loss before reclassifications —
 (2,182) (2,182)
 Amounts reclassified from accumulated other comprehensive loss —
 —
 —
Net current period other comprehensive loss —
 (2,182) (2,182)
Ending balance at September 30, 2016 $(15,351) $13,558
 $(1,793)


Three Months Ended
March 31, 2023
Revenue by Operating Segment (in thousands)PNBAll OtherTotal
Income from fiduciary activities
   Personal trust and agency accounts$2,504 $— $2,504 
   Employee benefit and retirement-related accounts2,472 — 2,472 
   Investment management and investment advisory agency accounts3,162 — 3,162 
   Other477 — 477 
Service charges on deposit accounts
    Non-sufficient funds (NSF) fees1,061 — 1,061 
    Demand deposit account (DDA) charges1,038 — 1,038 
    Other142 — 142 
Other service income (1)
    Credit card683 — 683 
    HELOC89 — 89 
    Installment49 — 49 
    Real estate1,455 — 1,455 
    Commercial286 135 421 
Debit card fee income6,457 — 6,457 
Bank owned life insurance income (2)
1,134 51 1,185 
ATM fees533 — 533 
Loss on sale of OREO, net(9)— (9)
OREO valuation markup15 — 15 
Loss on equity securities, net (2)
(307)(98)(405)
Other components of net periodic pension benefit income (2)
1,857 36 1,893 
Miscellaneous (3)
1,164 1 1,165 
Total other income$24,262 $125 $24,387 

(in thousands)
 Changes in pension plan assets and benefit obligations Unrealized gains (losses) on available for sale securities Total
Beginning balance at January 1, 2017 $(14,740) $(3,005) $(17,745)
 Other comprehensive income before reclassifications —
 4,740
 4,740
 Amounts reclassified from accumulated other comprehensive loss —
 —
 —
Net current period other comprehensive income —
 4,740
 4,740
Ending balance at September 30, 2017 $(14,740) $1,735
 $(13,005)
        
Beginning balance at January 1, 2016 $(15,351) $(292) $(15,643)
 Other comprehensive income before reclassifications —
 13,850
 13,850
 Amounts reclassified from accumulated other comprehensive loss —
 —
 —
Net current period other comprehensive income —
 13,850
 13,850
Ending balance at September 30, 2016 $(15,351) $13,558
 $(1,793)

During(1) Of the three-month and nine-month periods ended September 30, 2017 and 2016, there were no reclassifications out$2.7 million of accumulated other comprehensive income.

Note 16 – Investment in Qualified Affordable Housing

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

The table below details the balances of Park’s affordable housing tax credit investments and related unfunded commitments as of September 30, 2017 and December 31, 2016.
(in thousands) September 30, 2017December 31, 2016
Affordable housing tax credit investments $54,355
$52,947
Unfunded commitments 21,282
14,282

Commitments are funded when capital calls are made by the general partner. Park expects that the current commitments will be funded between 2017 and 2027.
During the three months ended September 30, 2017 and 2016, Park recognized amortization expense of $1.9 million and $1.8 million, respectively, and during the nine months ended September 30, 2017 and 2016, Park recognized amortization expense of $5.6 million and $5.5 million, respectively, which wasaggregate revenue included within "Other service income", approximately $1.4 million is within the provision for income taxes. Additionally, during eachscope of the three months ended September 30, 2017 and 2016, Park recognized tax credits and other benefits from its affordable housing tax credit investments of $2.3 million, respectively, and during the nine months ended September 30, 2017 and 2016, recognized tax credits and other benefits from its affordable housing tax credit investments of $6.9 million and $7.0 million, respectively.
Note 17 – Repurchase Agreement Borrowings

Securities sold under agreements to repurchase ("repurchase agreements") with customers represent funds deposited by customers, generally on an overnight basis, that are collateralized by investment securities owned by Park. Repurchase agreements with customers are included in short-term borrowings on the consolidated condensed balance sheets. Park's repurchase agreements with a third-party financial institution are classified as long-term debt on the consolidated condensed balance sheets.

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

At September 30, 2017 and December 31, 2016, Park's repurchase agreement borrowings totaled $493 million and $510 million, respectively. At both September 30, 2017 and December 31, 2016, $300 million of Park's repurchase agreement borrowings were classified as long-term debtASC 606, with the remaining amount being classified$1.3 million consisting primarily of certain residential real estate loan fees which are out of scope.
(2) Not within the scope of ASC 606.
(3) "Miscellaneous" income includes brokerage income, safe deposit box rentals, and miscellaneous bank fees totaling $1.2 million, all of which are within scope of ASC 606.
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Three Months Ended
March 31, 2022
Revenue by Operating Segment (in thousands)PNBAll OtherTotal
Income from fiduciary activities
   Personal trust and agency accounts$2,506 $— $2,506 
   Employee benefit and retirement-related accounts2,560 — 2,560 
   Investment management and investment advisory agency accounts3,260 — 3,260 
   Other471 — 471 
Service charges on deposit accounts
    Non-sufficient funds (NSF) fees1,417 — 1,417 
    Demand deposit account (DDA) charges516 — 516 
    Other141 — 141 
Other service income (1)
    Credit card642 — 642 
    HELOC89 — 89 
    Installment43 — 43 
    Real estate3,719 — 3,719 
    Commercial354 (28)326 
Debit card fee income6,126 — 6,126 
Bank owned life insurance income (2)
1,093 82 1,175 
ATM fees532 — 532 
Loss on sale of OREO, net— — — 
OREO valuation markup30 — 30 
Gain on equity securities, net (2)
2,219 134 2,353 
Other components of net periodic pension benefit income (2)
2,955 72 3,027 
Miscellaneous (3)
2,574 149 2,723 
Total other income$31,247 $409 $31,656 
(1) Of the $4.8 million of aggregate revenue included within "Other service income", approximately $1.2 million is within the scope of ASC 606, with the remaining $3.6 million consisting primarily of certain residential real estate loan fees which are out of scope.
(2) Not within the scope of ASC 606.
(3) "Miscellaneous" income includes brokerage income, safe deposit box rentals, and miscellaneous bank fees totaling $2.7 million, all of which are within scope of ASC 606.

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

Income from fiduciary activities (gross): Park earns fiduciary fee income and investment brokerage fees from its contracts with trust customers for various fiduciary and investment-related services. These fees are earned over time as short-term debtthe Company provides the contracted monthly and quarterly services and are generally assessed based on the consolidated condensed balance sheets. These borrowings were collateralized with U.S. government and agency securities with a carrying value of $540 million and $569 million at September 30, 2017 and December 31, 2016, respectively. Declines in themarket value of the collateral would requiretrust assets.

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

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

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

Gain or loss on sale of September 30, 2017OREO, net: The Corporation records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of delivery of an executed deed. When Park finances the sale of OREO to the buyer, the Corporation assesses whether the buyer is committed to perform the buyer's obligation under the contract and December 31, 2016, Park had $619 millionwhether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and $640 million, respectively,the gain or loss on sale is recorded upon the transfer of available unpledged securities.control of the property to the buyer. In determining the gain or loss on the sale, the Corporation adjusts the transaction price and related gain (loss) on sale if a significant financing component is present.


OREO valuation markup: The table below showsCorporation records an OREO valuation markup immediately prior to the remaining contractual maturitytransfer of repurchase agreements by collateral pledged at September 30, 2017 and December 31, 2016:a loan to OREO when the fair market value of the property less costs to sell exceeds the principal balance of the loan.


  September 30, 2017
(in thousands) Remaining Contractual Maturity of the Agreements
  Overnight and Continuous Up to 30 days 30 - 90 days Greater than 90 days Total
U.S. government and agency securities $191,792
 $—
 $300,000
 $1,104
 $492,896
           
  December 31, 2016
(in thousands) Remaining Contractual Maturity of the Agreements
  Overnight and Continuous Up to 30 days 30 - 90 days Greater than 90 days Total
U.S. government and agency securities $208,691
 $—
 $—
 $301,104
 $509,795
Note 22 - Other Matters



On November 30, 2012,February 28, 2023, Park restructured $300National Bank reached an agreement with the DOJ to increase the efforts of Park National Bank to promote home lending in the Columbus, Ohio market. The agreement, which is reflected in the consent order filed on February 28, 2023, in the U.S. District Court for the Southern District of Ohio (the “DOJ Consent Order”) and approved by that Court on March 2, 2023, served to voluntarily resolve all claims of the U.S. alleging that Park National Bank’s mortgage lending practices within the Columbus, Ohio Metropolitan Statistical Area violated the Fair Housing Act and the Equal Credit Opportunity Act.

In accordance with the terms of the DOJ Consent Order, Park National Bank will invest a minimum of $7.75 million over five years in repurchase agreements with a third-partyloan subsidy fund to increase credit opportunities for home mortgage loans, home improvement loans, home refinance loans and home equity loans and lines of credit for consumers applying for loans in majority-minority census tracts ("MMCTs") in Fairfield, Franklin, Hocking, Licking, Morrow and Perry counties in Ohio (the “Columbus Lending Area”). Park National Bank will also devote a minimum of $500,000 over five years toward one or more community development partnership programs that provide services to residents of MMCTs in the Columbus Lending Area related to credit, financial institutioneducation, homeownership and paid a $25 million prepayment penalty. The penalty is includedforeclosure prevention; and at least $750,000 over five years toward advertising, community outreach, consumer financial education and credit counseling in long-term debtthe Columbus Lending Area. Park National Bank will also establish one new mortgage loan production office and is being amortized as an adjustmentone new full-service branch in MMCTs in the Columbus Lending Area and hire four lenders, one of whom will be Spanish-speaking, focused on serving these communities. In addition, Park National Bank will continue to interest expense overmaintain, throughout the remaining term of the repurchase agreements using the effective interest method. Of the $25 million prepayment penalty, $868,000DOJ Consent Order, Park National Bank’s full-time Director of Community Home Lending and $4.7 million remained unamortized as of September 30, 2017 and December 31, 2016, respectively. These repurchase agreements mature on November 30, 2017.

Note 18 - Contingent Liabilities

The Company is a defendantDevelopment position, who will oversee Park National Bank’s lending in lawsuits and other adversary proceedings arisingMMCTs in the ordinary course of business. Legal costsColumbus Lending Area.

Park is committed to investing at least $9.0 million over five years and will record the related expenses incurred in connection with the resolution of claims and lawsuits are generally expensed as incurred, andperiod in which the Company establishes accruals for the outcome of litigation where losses are deemed probable and reasonably estimable. The Company’s assessment of the current exposure could change in the event of the discovery of additional facts with respect to legal matters pending against the Company or determinations by judges, juries, administrative agencies or other finders of fact that are not in accordance with the Company’s evaluation of claims.associated activities occur.


As of June 30, 2017, the Company had accrued charges of approximately $2.3 million for legal contingencies related to various legal and other adversary proceedings. This amount was paid out in full settlement of the related litigation during the three months ended September 30, 2017.


ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 
Management’s discussion and analysis (“MD&A”) contains forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements.

Risks and uncertainties that could cause actual results to differ materially include, without limitation:

•Park's ability to execute our business plan successfully and within the expected timeframe; generaltimeframe as well as our ability to manage strategic initiatives;
•current and future economic and financial market conditions, specifically in the real estate markets and the credit markets, either nationally or in the states in which Park and our subsidiaries do business, that may experience a slowingreflect deterioration in business and economic conditions, including the effects of higher unemployment rates, an acceleration in the pace of inflation, interest rate fluctuations, changes in the economy or reversalglobal supply chain, supply-demand imbalances affecting local real estate prices, U.S. fiscal debt, budget and tax matters, geopolitical matters (including the impact of
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the recentRussia-Ukraine conflict and associated sanctions and export controls), and any slowdown in global economic expansiongrowth, in addition to the continuing residual effectsimpact of recessionary conditionsthe COVID pandemic and an uneven spreadrecovery therefrom on our customers’ operations and financial condition, any of positive impacts of recovery on the economy and our counterparties, resultingwhich may result in adverse impacts on the demand for loan, deposit and other financial services, delinquencies, defaults and counterparties' abilityinability to meet credit and other obligations;obligations and the possible impairment of collectability of loans;
•factors that can impact the performance of our loan portfolio, including changes in real estate values and liquidity in our primary market areas, the financial health of our commercial borrowers and the success of construction projects that we finance, including any loans acquired in acquisition transactions;
•the effect of monetary and other fiscal policies (including the impact of money supply, market interest ratesrate policies and pricespolicies impacting inflation, of the Federal Reserve Board, the U.S. Treasury and other governmental agencies) as well as disruption in the liquidity and functioning of U.S. financial markets, may adversely impact prepayment penalty income, mortgage banking income, income from fiduciary activities, the value of securities, loans, deposits and other financial instruments, in addition to the loan demand and the performance of our loan portfolio, and the interest rate sensitivity of our consolidated balance sheet as well as reduce net interest marginsmargins;
•changes in the federal, state, or local tax laws may adversely affect the fair values of net deferred tax assets and obligations of state and political subdivisions held in Park's investment securities portfolio and otherwise negatively impact loan demand; our financial performance;
•the impact of the changes in federal, state and local governmental policy, including the regulatory landscape, capital markets, elevated government debt, potential changes in tax legislation that may increase tax rates, infrastructure spending and social programs;
•changes in laws or requirements imposed by Park's regulators impacting Park's capital actions, including dividend payments and stock repurchases;
•changes in consumer spending, borrowing and saving habits, whether due to changingchanges in retail distribution strategies, consumer preferences and behaviors, changes in business and economic conditions, legislative and regulatory initiatives, or other factors; changes in unemployment; factors may be different than anticipated;
•changes in customers', suppliers', and other counterparties' performance and creditworthiness;creditworthiness, and Park's expectations regarding future credit losses and our allowance for credit losses, may be different than anticipated due to the continuing impact of and the various responses to inflationary pressures;
•Park may have more credit risk and higher credit losses to the extent there are loan concentrations by location or industry of borrowers or collateral;
•the volatility from quarter to quarter of mortgage banking income, whether due to interest rates, demand, the fair value of mortgage loans, or other factors;
•the adequacy of our internal controls and risk management program in the event of changes in the market, economic, operational (including those which may result from our associates working remotely), asset/liability repricing, legal, compliance, strategic, cybersecurity, liquidity, credit and interest rate risks and liquidity risks; our liquidity requirements could be adversely affected by changes to regulations governing bank and bank holding company capital and liquidity standards as well as by changes in our assets and liabilities; associated with Park's business;
•competitive factorspressures among financial services organizations could increase significantly, including product and pricing pressures (which could in turn impact our credit spreads), changes to third-party relationships and ourrevenues, changes in the manner of providing services, customer acquisition and retention pressures, and Park's ability to attract, develop and retain qualified bankbanking professionals; clients could pursue alternatives to bank deposits, causing us to lose a relatively inexpensive source of funding;
•uncertainty regarding the nature, timing, cost and effect of changes in banking regulations or other regulatory or legislative requirements affecting the respective businesses of Park and our subsidiaries, including major reform of the regulatory oversight structure of the financial services industry and changes in laws and regulations concerning taxes, FDIC insurance premium levels, pensions, bankruptcy, consumer protection, rent regulation and housing, financial accounting and reporting, environmental protection, insurance, bank products and services, bank and bank holding company capital and liquidity standards, fiduciary standards, securities and other aspects of the financial services industry, specifically the reforms provided for in the CARES Act and the follow-up legislation in the Consolidated Appropriations Act, 2021, the American Rescue Plan Act of 2021, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and the Basel III regulatory capital reforms, as well as regulations already adopted and which may be adopted in the future by the relevant regulatory agencies, including the Consumer Financial Protection Bureau, the OCC,Office of the FDIC,Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Federal Reserve Board, to implement the Dodd-Frank Act's provisions of the Budget ControlCARES Act and the follow-up legislation in the Consolidated Appropriations Act, 2021, the provisions of the American Rescue Plan Act of 2011,2021, the American Taxpayer Relief Actprovisions of 2012, the JOBS Act, the FASTDodd-Frank Act, and the Basel III regulatory capital reforms;
•Park's ability to meet heightened supervisory requirements and expectations;
•the effect of changes in accounting policies and practices, as may be adopted by the Financial Accounting Standards Board (the "FASB"), the SEC, the Public Company Accounting Oversight Board and other regulatory agencies, and the accuracymay adversely affect Park's reported financial condition or results of ouroperations;
•Park's assumptions and estimates used in applying critical accounting policies and modeling, including under the CECL model, which may prove unreliable, inaccurate or not predictive of actual results;
•the possibility that future credit losses may be higher than currently expected due to prepare our financial statements; changes in laweconomic assumptions;
•the impact of Park's ability to anticipate and policy accompanyingrespond to technological changes on Park's ability to respond to customer needs and meet competitive demands;
•operational issues stemming from and/or capital spending necessitated by the new presidential administrationpotential need to adapt to industry changes in information technology systems on which Park and our subsidiaries are highly dependent;
•the ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks, including those of Park's third-party vendors and other service providers, which may prove inadequate, and could adversely affect customer confidence in Park and/or result in Park incurring a financial loss;
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•a failure in or breach of Park's operational or security systems or infrastructure, or those of our third-party vendors and other service providers, resulting in failures or disruptions in customer account management, general ledger, deposit, loan, or other systems, including as a result of cyber attacks;
•the impact on Park's business and operating results of any costs associated with obtaining rights in intellectual property claimed by others and of the adequacy of Park's intellectual property protection in general;
•the existence or exacerbation of general geopolitical instability and uncertainty or speculation pending the enactment of such changes; the effect of healthcare laws in the United States and potential changes for such laws which may

increase our healthcare and other costs and negatively impact our operations and financial results; significant changes in the tax laws, which may adversely affect the fair values of net deferred tax assets and obligations of state and political subdivisions held in Park's investment securities portfolio;as well as the effect of trade monetary, fiscalpolicies (including the impact of potential or imposed tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars and other governmental policieschanges in trade regulations, closing of border crossings and changes in the relationship of the U.S. federal government, including money supply and interest rate policies of the Federal Reserve Board; disruption in the liquidity and other functioning of U.S. financial markets; its global trading partners);
•the impact on financial markets and the economy of any changes in the credit ratings of the U.S. Treasury obligations and other U.S. government-backed debt, as well as issues surrounding the levels of U.S., European and Asian government debt and concerns regarding the creditworthinessgrowth rates and financial stability of certain sovereign governments, supranationals and financial institutions in Europe and Asia;Asia and the uncertainty surrounding risk they may face difficulties servicing their sovereign debt;
•the actions to be taken to implement the referendum by United Kingdom voters to exit the European Union; effect of a fall in stock market prices on Park's asset and wealth management businesses;
•our litigation and regulatory compliance exposure, including the costs and effects of any adverse developments in legal proceedings or other claims, the costs and effects of unfavorable resolution of regulatory and other governmental examinations or other inquiries;inquiries, and liabilities and business restrictions resulting from litigation and regulatory investigations;
•continued availability of earnings and excess capital sufficient for the adequacylawful and prudent declaration of our risk management program; dividends;
•the impact on Park's business, personnel, facilities or systems of our abilitylosses related to anticipate and respond to technological changes on our ability to respond to customer needs and meet competitive demands; the ability to secure confidential information and deliver products and services through the useacts of computer systems and telecommunications networks; a failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors and other service providers, including as a result of cyber attacks; fraud, scams and schemes of third parties;
•the impact of widespread natural and other disasters, pandemics (including the COVID pandemic), dislocations, regional or national protests and civil unrest (including any resulting branch closures or damages), military or terrorist activities or international hostilities (especially in light of the Russia-Ukraine conflict) on the economy and financial markets generally orand on us or our counterparties specifically; demand for loans
•a worsening of the U.S. economy due to financial, political, or other shocks;
•the effect of healthcare laws in the respective market areas served by ParkU.S. and potential changes for such laws, especially in light of the COVID pandemic, which may increase our subsidiaries; healthcare and other costs and negatively impact our operations and financial results;
•risk and uncertainties associated with Park's entry into new geographic markets with our most recent acquisitions, including expected revenue synergies and cost savings from recent acquisitions not being fully realized or realized within the expected time frame;
•uncertainty surrounding the transition from the LIBOR to an alternate reference rate;
•a continuation of recent turmoil in the financial services industry, and the impact of responsive measures to mitigate and manage such turmoil, including potential increased supervisory and regulatory actions and costs;
•and other risk factors relating to the bankingfinancial services industry as detailed from time to time in Park's reports filed with the SEC including those described in "Item 1A. Risk Factors" of Part I of Park's Annual Report on Form 10-K for the fiscal year ended December 31, 2016. 2022 and "Item 1A. Risk Factors" of Part II of this Quarterly Report on Form 10-Q.

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


Non-U.S. GAAP Financial Measures

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

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

Even though certain revenue and expense items are naturally subject to more volatility than others due to changes in market and economic environment conditions, as a general rule volatility alone does not result in the inclusion of an item as one impacting comparability of period results. For example, changes in the provision for / (recovery of) credit losses (aside from those related to former Vision Bank loan relationships), gains (losses) on equity securities, net, and asset valuation adjustments, reflect ordinary banking activities and are, therefore, typically excluded from consideration as items impacting comparability of period results.

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

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

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, tangible book value per common share and pre-tax, pre-provision net income.

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

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

FTE (fully taxable equivalent) Financial Measures
Interest income, yields, and ratios on a FTE basis are considered non-U.S. GAAP financial measures. Management believes net interest income on a FTE basis provides an insightful picture of the interest margin for comparison purposes. The FTE basis also allows management to assess the comparability of revenue arising from both taxable and tax-exempt sources. The FTE basis assumes a federal corporate income tax rate of 21 percent. In the tables included within the "Items Impacting Comparability" section of this MD&A, Park has provided a reconciliation of FTE interest income solely for the purpose of complying with SEC Regulation G and not as an indication that FTE interest income, yields and ratios are substitutes for interest income, yields and ratios, as determined in accordance with U.S. GAAP.

Paycheck Protection Program ("PPP") Loans
Park originated an aggregate of $764.7 million in loans as part of the PPP. For its assistance in making and retaining these loans, Park received an aggregate of $33.1 million in fees from the SBA. These loans are not typical of Park's loan portfolio in that they are part of a specific government program to support businesses during the COVID pandemic and are 100% guaranteed by SBA. As such, management considers growth in the loan portfolio excluding PPP loans, the total allowance for
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credit losses to total loans ratio (excluding PPP loans), and general reserve on collectively evaluated loans as a percentage of total collectively evaluated loans (excluding PPP loans) in addition to the related U.S. GAAP metrics which are not adjusted for PPP loans.

Critical Accounting Policies
 
Note 1 of the Notes to Consolidated Financial Statements included in Park’s 2016 Annual Report2022 Form 10-K lists significant accounting policies used in the development and presentation of Park’s consolidated financial statements. The accounting and reporting policies of Park conform with U.S. GAAP and general practices within the financial services industry. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates.

Recent bank failures have called into question the stability of the financial services industry. While Park is well capitalized and has significant available liquidity, the effects of these failures and potential future failures may meaningfully impact significant estimates such as the allowance for credit losses, goodwill, and pension plan obligations and related expenses.
Allowance for Credit Losses: Park believes the determination of the allowance for loancredit losses involves a higher degree of judgment and complexity than its other significant accounting policies. The allowance for loancredit losses is calculated with the objective of maintaining a reserve level believed by management to be sufficient to absorb probable incurredestimated credit losses inover the loan portfolio.life of an asset or an off-balance sheet credit exposure. Management’s determination of the adequacy of the allowance for loancredit 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 loan portfolio andcollectability of current economic conditions.the remaining cash flows over the contractual term of the financial assets. However, this evaluation has subjective components requiring material estimates, including expected default probabilities, the expected loss given default,LGD, the amounts and timing of expected future cash flows on impairedindividually evaluated loans, and estimated losses on consumer loans and residential mortgage loans based on historical loss experience and currentforecasted economic conditions. All of these factors may be susceptible to significant change. To the extent that actual results differ from management estimates, additional loan loss provisions for credit losses may be required that would adversely impact earnings in future periods.

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

In calculating the ACL, management weighs several different scenarios, including a baseline (most likely) scenario and an adverse scenario. To create hypothetical sensitivity analyses, management calculated a quantitative allowance using a 100% weighting applied to a baseline scenario and a quantitative allowance using a 100% weighting applied to an adverse scenario. The adverse scenario assumes among other things that: (1) the military conflict between Russia and Ukraine persists longer than anticipated worsening supply-chain conditions and increasing shortages of many goods; (2) supply-chain shortages weaken manufacturing; (3) inflation remains elevated, though slightly below the baseline amid persistent shortages and concerns about a wage price spiral; (4) the Federal Reserve Board initially keeps the fed funds rate elevated, though a bit less than in the baseline because of weakening economy; (5) recent bank failures raise fears of further collapse in the banking industry, reducing consumer confidence and causing banks to tighten lending standards; and (6) the economy falls into recession in the second quarter of 2023. The adverse scenario forecasts Ohio unemployment for the next twelve months to range from 6.5% to 9.1%. Excluding consideration of general reserve adjustments, this sensitivity analysis would result in a hypothetical increase in Park's ACL of $27.7 million as of March 31, 2023 if only the adverse scenario was used. Excluding consideration of general reserve adjustments, a corresponding $27.7 million decrease in Park's ACL would occur in a hypothetical scenario if only the baseline (most likely) scenario was used.

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


Other real estate owned (“OREO”), property acquired through foreclosure, is recorded at estimated fair value less anticipated selling costs (net realizable value). If the net realizable value is below the carrying value of the loan on the date of transfer, the difference is charged to the allowance for loan losses. Subsequent declines in value, OREO devaluations, are reported as adjustments to the carrying amount of OREO and are expensed within other income. Gains or losses not previously recognized, resulting from the sale of OREO, are recognized within other income on the date of sale.
U.S. GAAP requires management to establish a fair value hierarchy, which has the objective of maximizing the use of observable market inputs. U.S. GAAP also requires enhanced disclosures regarding the inputs used to calculate fair value. These are classified as Level 1, Level 2, and Level 3. Level 3 inputs are those with significant unobservable inputs that reflect a company’s own assumptions about the market for a particular instrument. Some of these inputs could be based on internal models and cash flow analyses. The large majority of Park’s assets whose fair value is determined using Level 2 inputs consists of available-for-sale (“AFS”) securities. The fair value of these AFS securities is obtained largely through the use of matrix pricing, which is a mathematical technique widely used in the financial services industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather relying on the securities’ relationship to other

benchmark quoted securities. Please see Note 14 - Fair Value of the Notes to Unaudited Consolidated Condensed Financial Statements in this Quarterly Report on Form 10-Q for additional information on fair value.
Goodwill: Management believes that the accounting for goodwill also involves a higher degree of judgment than most other significant accounting policies. U.S. GAAP establishes standards for the impairment assessment of goodwill. Goodwill arising from business combinations represents the value attributable to unidentifiable intangible assets in theeach business acquired. Park’s goodwill, as of March 31, 2023, relates to the value inherent in the bankingfinancial services industry and that value is dependent upon the ability of Park’s Ohio-based national bank subsidiary, The Park National Bank (“PNB”)PNB, to provide quality, cost-effective banking services in a competitive marketplace. The goodwill value is supported by revenue that is in part driven by the volume of business transacted. A decrease in earnings resulting from a decline in the customer base, the inability to deliver cost-effective services over sustained periods or significant credit problems cancould lead to impairment of goodwill that could, in turn, adversely impact earnings in future periods.
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U.S. GAAP requires an annual evaluation of goodwill for impairment, or more frequently if events or changes in circumstances indicate that the asset might be impaired. Park’s most recent evaluation was completedPark evaluates goodwill for impairment during the second quarter of 2017 and resulted in no impairmenteach year, with financial data as of goodwill. Further, there have been no events subsequent to thatthe immediately preceding March 31. Based on the qualitative analysis that provide any evidenceperformed as of April 1, 2022, the Company determined that goodwill isfor Park's reporting unit, PNB, was not impaired. The fair value of the goodwill, which resides on the books of PNB, is estimatedevaluated for potential impairment by reviewing the past and projected operating results for PNB, deposit and loan totals for PNB and bankingfinancial services industry comparable information.


Pension Plan: The determination of pension plan obligations and related expenses requires the use of assumptions to estimate the amount of benefits that employees will earn while working, as well as the present value of those benefits. Annual pension expense is principally based on four components: (1) the value of benefits earned by employees for working during the year (service cost), (2) the increase in the liability due to the passage of time (interest cost), and (3) other gains and losses, reduced by (4) the expected return on plan assets for our pension plan.


Significant assumptions used to measure our annual pension expense include:


•the interest rate used to determine the present value of liabilities (discount rate);
•certain employee-related factors, such as turnover, retirement age and mortality;
•the expected return on assets in our funded pension plan; and
for pension expense, •the rate of salary increases where benefits are based on earnings.


Our assumptions reflect our historical experience and management’s best judgment regarding future expectations. Due to the significant management judgment involved, our assumptions could have a material impact on the measurement of our pension plan expense and obligation.



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Comparison of Results of Operations
For the Three and Nine Months Ended September 30, 2017March 31, 2023 and 20162022
 
Summary Discussion of Results


Net income for the three months ended September 30, 2017March 31, 2023 was $22.1$33.7 million, compared to $27.4$38.9 million for the thirdfirst quarter of 2016.2022. Diluted earnings per common share were $1.44$2.07 for the thirdfirst quarter of 2017,2023, compared to $1.78$2.38 for the thirdfirst quarter of 2016.2022. Weighted average diluted common shares outstanding were 15,351,59016,324,823 for the thirdfirst quarter of 2017,2023, compared to 15,399,70716,331,031 weighted average diluted common shares outstanding for the thirdfirst quarter of 2016.2022.


NetLiquidity and Capital

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

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

(Dollars in thousands)March 31, 2023December 31, 2022March 31, 2022% change from 12/31/22% change from 03/31/22
Net unrealized losses on debt securities105,510 121,156 43,809 (12.91)%140.84 %
Net unrealized losses on debt securities as a percentage of period end total assets1.07 %1.23 %0.46 %(13.01)%132.61 %
Total shareholders' equity / Period end total assets10.98 %10.85 %11.24 %1.20 %(2.31)%
Tangible equity / Tangible assets (1)
9.46 %9.33 %9.67 %1.39 %(2.17)%
(1) Tangible equity equals total shareholders' equity less goodwill and other intangible assets, in each case at period end. Tangible assets equal total assets less goodwill and other intangible assets, in each case at period end.

Park's deposits grew during the COVID pandemic and normalized throughout 2022. In order to manage the impact of this growth on its balance sheet, Park has utilized a program where certain deposit balances are transferred off balance sheet while maintaining the customer relationship. Park is able to increase or decrease the amount off balance sheet based on its balance sheet management strategies and liquidity needs. The balance of deposits transferred off balance sheet has declined as deposit
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balances have returned to normalized levels. The table below breaks out the change in deposit balances, by deposit type, for Park National Corporation.

(Dollars in thousands)March 31, 2023December 31, 2022December 31, 2021December 31, 2020December 31, 2019
Retail Deposits
Non-interest bearing deposits$1,176,545 $1,193,807 $1,195,530 $1,077,107 $801,035 
Transaction accounts939,026 994,717 1,004,532 900,093 760,640 
Savings1,702,824 1,744,713 1,669,373 1,427,687 1,461,347 
Certificates of deposit445,552 455,157 546,793 620,965 725,017 
Total retail deposits$4,263,947 $4,388,394 $4,416,228 $4,025,852 $3,748,039 
$ change from prior period end$(124,447)$(27,834)$390,376 $277,813 
% change from prior period end(2.8)%(0.6)%9.7 %7.4 %
Commercial Deposits
Non-interest bearing deposits$1,745,697 $1,880,469 $1,870,889 $1,649,992 $1,158,900 
Transaction accounts1,231,790 993,388 498,344 481,386 868,102 
Savings966,712 873,176 954,200 1,171,521 863,458 
Certificates of deposit86,298 99,288 164,867 243,607 414,113 
Total commercial deposits$4,030,497 $3,846,321 $3,488,300 $3,546,506 $3,304,573 
$ change from prior period end$184,176 $358,021 $(58,206)$241,933 
% change from prior period end4.8 %10.3 %(1.6)%7.3 %
Total deposits8,294,444 8,234,715 7,904,528 7,572,358 7,052,612 
$ change from prior period end$59,729 $330,187 $332,170 $519,746 
% change from prior period end0.7 %4.2 %4.4 %7.4 %
Off balance sheet deposits164,600 195,937 983,053 710,101 — 
Total deposits including off balance sheet deposits$8,459,044 $8,430,652 $8,887,581 $8,282,459 $7,052,612 
$ change from prior period end$28,392 $(456,929)$605,122 $1,229,847 
% change from prior period end0.3 %(5.1)%7.3 %17.4 %

During the ninethree months ended September 30, 2017March 31, 2023, total deposits including off balance sheet deposits increased by $28.4 million, or 0.3%. This increase consisted of a $184.2 million increase in total commercial deposits offset by a $124.4 million decrease in total retail deposits and a $31.3 million decrease in off balance sheet deposits. Of the $184.2 million increase in total commercial deposits, $182.9 million was $61.4a result of an increase in public fund deposits. This increase is consistent with historical seasonality. As of March 31, 2023, Park had approximately $1.5 billion of uninsured deposits, which was 18.6% of total deposits. Uninsured deposits of $1.5 billion included $288 million compared to $66.1 million for the same period of 2016. Diluted earnings per common share for the nine months ended September 30, 2017deposits which were $3.99, compared to $4.29 for the same periodover $250,000 but were fully collateralized by Park's investment securities portfolio.


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Table of 2016. Weighted average diluted common shares outstanding were 15,394,199 for the nine months ended September 30, 2017, compared to 15,401,825 weighted average diluted common shares outstanding for the same period of 2016.Contents



Financial Results by segmentSegment


The table below reflects the net income (loss) by segment for the first secondquarters (the three months ended March 31) of 2023 and third quarters of 2017, for the first nine months of 2017 and 2016,2022 and for the fiscal years ended December 31, 20162022 and 2015.2021. Park's segments include The Park National Bank ("PNB"), Guardian Financial Services Company ("GFSC"), SE Property Holdings, LLC ("SEPH") and all other"All Other" which primarily consists of Park as the "Parent Company."
Company", Guardian Financial Services Company ("GFSC") and SE Property Holdings, LLC ("SEPH").
Net income (loss) by segment             
(In thousands)Q3 2017 Q2 2017 Q1 2017 Nine months YTD 2017 Nine months YTD 2016 2016 2015
PNB$21,297
 $20,163
 $21,486
 $62,946
 $68,313
 $84,451
 $84,345
GFSC84
 186
 198
 468
 (570) (307) 1,423
Parent Company105
 (919) (1,226) (2,040) (3,568) (4,557) (4,549)
   Ongoing operations$21,486
 $19,430
 $20,458
 $61,374
 $64,175
 $79,587
 $81,219
SEPH626
 (398) (191) 37
 1,958
 6,548
 (207)
   Total Park$22,112
 $19,032
 $20,267
 $61,411
 $66,133
 $86,135
 $81,012
(In thousands)Q1 2023Q1 202220222021
PNB$36,269 $41,468 $143,243 $159,461 
All Other(2,536)(2,593)5,108 (5,516)
   Total Park$33,733 $38,875 $148,351 $153,945 


Highlights from the three-month periods ended March 31, 2023 and 2022 included:

•Net income for the three months ended March 31, 2023 of $33.7 million represented a $5.1 million, or 13.2%, decrease compared to $38.9 million for the three months ended March 31, 2022 and a $649,000, or 2.0%, increase compared to $33.1 million for the three months ended December 31, 2022.
•Pre-tax, pre-provision net income for the three months ended March 31, 2023 of $40.1 million represented a $1.9 million, or 4.5%, decrease compared to $42.0 million for the three months ended March 31, 2022 and a $3.3 million, or 7.5%, decrease compared to $43.3 million for the three months ended December 31, 2022.
•During the three months ended March 31, 2023, Park recorded interest income of $26,000 related to PPP loans, compared to $1.6 million for the three months ended March 31, 2022 and $78,000 for the three months ended December 31, 2022.
•PNB loans outstanding at March 31, 2023 increased 4.0%, compared to at March 31, 2022, and decreased 0.7% compared to at December 31, 2022.
•Park's loan portfolio reflected continued good credit quality with net loan recoveries as a percentage of average loans of 0.00% for the three months ended March 31, 2023, compared to net loan charge-offs as a percentage of average loans of 0.09% for the three months ended December 31, 2022, and net loan recoveries as a percentage of average loans of 0.02% for the three months ended March 31, 2022.

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

The category “Parent Company” above excludes the results for SEPH, an entity which is winding down commensurate with the disposition of SEPH's nonperforming assets. Management considers the “Ongoing operations” results, which exclude the results of SEPH, to reflect the business of Park and Park's subsidiaries going forward. Thefollowing discussion below provides additional information regarding the segments that make up the “Ongoing operations”,PNB segment, followed by additional information regarding SEPH.All Other.



The Park National Bank (PNB)


The table below reflects PNB's net income for the first secondquarters (the three months ended March 31) of 2023 and third quarters of 2017, for the first nine months of 2017 and 2016,2022 and for the fiscal years ended December 31, 20162022 and 2015.2021.

(In thousands)Q3 2017Q2 2017Q1 2017Nine months YTD 2017Nine months YTD 201620162015(In thousands)Q1 2023Q1 202220222021
Net interest income$59,415
$57,822
$57,480
$174,717
$170,194
$227,576
$220,879
Net interest income$93,589 $79,372 $350,646 $328,398 
Provision for (recovery of) loan losses3,820
4,574
720
9,114
(450)2,611
7,665
Provision for (recovery of) credit lossesProvision for (recovery of) credit losses915 (4,547)5,834 (8,554)
Other income20,367
19,179
17,711
57,257
55,010
74,803
75,188
Other income24,262 31,247 115,211 126,802 
Other expense45,987
43,877
43,803
133,667
126,418
177,562
167,476
Other expense72,997 64,216 283,670 266,678 
Income before income taxes$29,975
$28,550
$30,668
$89,193
$99,236
$122,206
$120,926
Income before income taxes$43,939 $50,950 $176,353 $197,076 
Federal income tax expense8,678
8,387
9,182
26,247
30,923
37,755
36,581
Income tax expenseIncome tax expense7,670 9,482 33,110 37,615 
Net income$21,297
$20,163
$21,486
$62,946
$68,313
$84,451
$84,345
Net income$36,269 $41,468 $143,243 $159,461 


Net interest income of $174.7$93.6 million for the ninethree months ended September 30, 2017March 31, 2023 represented a $4.5$14.2 million, or 2.7%17.9%, increase compared to $170.2$79.4 million for the same period of 2016.three months ended March 31, 2022. The increase was thea result of an $8.8a $29.3 million increase in interest income, partially offset by a $4.3$15.1 million increase in interest expense.

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The $8.8$29.3 million increase in interest income was due to a $6.8$18.7 million increase in interest income on loans along withand a $2.0$10.6 million increase in interest income on investments.investment income. The $18.7 million increase in interest income on loans was largelyprimarily the result of a $226$271.3 million or 4.5%, increase in average loans, from $5.09$6.83 billion for the ninethree months ended September 30, 2016,March 31, 2022 to $5.31$7.10 billion for the ninethree months ended September 30, 2017. IncludedMarch 31, 2023, as well as an increase in interest incomethe yield on loans, which increased 91 basis points to 5.21% for the ninethree months ended September 30, 2017 and 2016March 31, 2023, compared to 4.30% for the three months ended March 31, 2022. The $10.6 million increase in investment income was $149,000 and $725,000partially the result of a $28.4 million increase in interestaverage investments, including money market instruments, from $2.12 billion for the three months ended March 31, 2022 to $2.15 billion for the three months ended March 31, 2023. The increase in investment income respectively, relatedwas also impacted by an increase in the yield on investments, which increased 198 basis points to PNB participations in legacy Vision Bank ("Vision") assets.3.77% for the three months ended March 31, 2023, compared to 1.79% for the three months ended March 31, 2022.

The $4.3$15.1 million increase in interest expense was due to a $4.0$14.5 million increase in interest expense on deposits, along withas well as a $354,000$581,000 increase in interest expense on borrowings. The increase in interest expense on deposits was partially the result of a $168$306.8 million or 4.0%, increase in average interest-bearingon-balance sheet interest bearing deposits from $4.19$5.17 billion for the ninethree months ended September 30, 2016,March 31, 2022, to $4.36$5.48 billion for the ninethree months ended September 30, 2017. Additionally,March 31, 2023 as well as an increase in the cost of deposits increased by 11of 107 basis points, from 0.32%0.08% for the ninethree months ended September 30, 2016March 31, 2022 to 0.43%1.15% for the ninethree months ended September 30, 2017.March 31, 2023. The increase in on-balance sheet interest bearing deposits was due to an increase in transaction accounts, which was partially offset by decreases in both savings and time deposits. During the three months ended March 31, 2023 and 2022, Park made the decision to continue its participation in a program to transfer deposits off-balance sheet in order to manage growth of the balance sheet.

The provision for loancredit losses of $9.1 million$915,000 for the ninethree months ended September 30, 2017March 31, 2023 represented an increasea difference of $9.6$5.5 million, compared to a recovery of loancredit losses of $450,000$4.5 million for the same period of 2016.three months ended March 31, 2022. Refer to the “Credit Metrics and Provision for (Recovery of) LoanCredit Losses” section for additional details regarding the level of the provision for (recovery of) loancredit losses recognized in each period presented above.

Other income of $57.3$24.3 million for the ninethree months ended September 30, 2017March 31, 2023 represented a decrease of $7.0 million, or 22.4%, compared to $31.2 million for the three months ended March 31, 2022. The $7.0 million decrease was primarily related to (i) a $2.5 million change in (loss) gain on equity securities, net, from a $2.2 million gain for the three months ended March 31, 2022 to a $307,000 loss for the three months ended March 31, 2023; (ii) a $2.3 million decrease in other service income, which was primarily due to declines in fee income from mortgage loan originations and mortgage servicing rights, partially offset increases in investor rate locks and mortgage loans held for sale; (iii) a $1.4 million decrease in other miscellaneous income, which was primarily due to decreases in the net gain on the sale of other assets and decreases in other fee income; and (iv) a $1.1 million decrease in other components of net periodic benefit income. These decreases were partially offset by a $330,000 increase in debit card fee income.

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

(In thousands)Q1 2023Q1 202220222021
Mortgage Loan Origination Volume
Sold$13,756$69,053$159,142$555,278
Portfolio32,74353,498263,287284,686
Construction13,12432,928120,794119,555
Service released1,5764,66014,73813,802
Total mortgage loan originations$61,199$160,139$557,961$973,321
Refinances as a % of Total Mortgage Loan Originations24.7 %41.7 %29.4 %54.2 %

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

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

(Dollars in thousands)Q1 2023Q1 2022$ change% change
Other expense:
Salaries$33,833 $29,320 $4,513 15.4 %
Employee benefits10,799 10,413 386 3.7 %
Occupancy expense3,343 3,230 113 3.5 %
Furniture and equipment expense3,245 2,936 309 10.5 %
Data processing fees8,680 7,423 1,257 16.9 %
Professional fees and services5,679 4,698 981 20.9 %
Marketing1,296 1,315 (19)(1.4)%
Insurance1,810 1,400 410 29.3 %
Communication1,017 874 143 16.4 %
State tax expense1,129 1,123 6 0.5 %
Amortization of intangible assets327 402 (75)(18.7)%
Miscellaneous1,839 1,082 757 70.0 %
Total other expense$72,997 $64,216 $8,781 13.7 %

Total other expense of $73.0 million for the three months ended March 31, 2023 represented an increase of $2.2$8.8 million, or 4.1%13.7%, compared to $55.0$64.2 million for the same period of 2016.three months ended March 31, 2022. The $2.2 million increase in salaries expense was primarily related to a $1.6 million increaseincreases in fiduciary income, income of $478,000 related to proceeds from the death benefits received from bank owned life insurance policies, a $437,000 increase in miscellaneous income, mainly related to anbase salary expense, incentive received on check cards, a $261,000 increase in other service income,compensation expense and a $595,000 increase in check card fee income,share-based compensation expense, partially offset by a $1.3 million decrease in service charges on deposit accounts.
Other expense of $133.7 million for the nine months ended September 30, 2017 represented an increase of $7.2 million, or 5.7%, compared to $126.4 million for the same period of 2016.additional compensation expense. The $7.2 million increase was primarily related to a $4.0 million increase in salaries expense, a $391,000 increase in employee benefits expense an $1.5 million increasewas primarily related to increases in data processing fees, an $824,000group insurance expense and payroll tax expense, partially offset by a decrease in retirement benefit expense. The increase in furniture and equipment expense a $381,000was primarily related to increases in depreciation expense and maintenance and repairs on equipment expense. The increase in insurancedata processing fees was primarily related to increases in software data processing expense and a $732,000debit card processing expense. The increase in professional fees and services expense was primarily due to increases in other fees, temporary wages, legal expense and directors' fees. The increase in insurance expense was due to an increase in FDIC insurance assessment expense. The increase in miscellaneous expense was due to increased expense for the allowance for unfunded lines of credit and increased training and travel-related expenses, which were partially offset by an $817,000a decrease in non-loan related losses which are included in miscellaneousoperating lease depreciation expense.


PNB's results for the nine months ended September 30, 2017 and 2016, and for the fiscal year ended December 31, 2016, included income and expense related to participations in legacy Vision assets. The impact of these participations on particular items within PNB's income and expense for these periods is detailed in the table below:
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 Nine months YTD 2017 Nine months YTD 2016 2016
(In thousands) PNB as reported
Adjustments (1)
 PNB as adjusted  PNB as reported
Adjustments (1)
 PNB as adjusted  PNB as reported
Adjustments (1)
 PNB as adjusted
Net interest income$174,717
$149
$174,568
 $170,194
$725
$169,469
 $227,576
$801
$226,775
Provision for (recovery of) loan losses9,114
(5)9,119
 (450)(2,736)2,286
 2,611
(3,118)5,729
Other income57,257
216
57,041
 55,010
163
54,847
 74,803
194
74,609
Other expense133,667
398
133,269
 126,418
479
125,939
 177,562
662
176,900
Income (loss) before income taxes$89,193
$(28)$89,221
 $99,236
$3,145
$96,091
 $122,206
$3,451
$118,755
Federal income tax expense (benefit)26,247
(8)26,255
 30,923
980
29,943
 37,755
1,066
36,689
Net income (expense)$62,946
$(20)$62,966
 $68,313
$2,165
$66,148
 $84,451
$2,385
$82,066
(1) Adjustments consist of the impact on the particular items reported in PNB's income statement of PNB participations in legacy Vision assets.

The table below provides certain balance sheet information and financial ratios for PNB as of or for the periodthree months ended September 30, 2017, June 30, 2017,March 31, 2023 and 2022 and as of or for the year ended December 31, 20162022.

(Dollars in thousands)March 31, 2023December 31, 2022March 31, 2022% change from 12/31/22% change from 03/31/22
Loans7,093,498 7,141,362 6,820,090 (0.67)%4.01 %
Loans less PPP loans (1)
7,090,053 7,137,156 6,782,666 (0.66)%4.53 %
Allowance for credit losses85,941 85,370 78,808 0.67 %9.05 %
Net loans7,007,557 7,055,992 6,741,282 (0.69)%3.95 %
Investment securities1,774,137 1,796,613 1,817,493 (1.25)%(2.39)%
Total assets9,817,967 9,815,951 9,544,545 0.02 %2.86 %
Total deposits8,583,204 8,534,320 8,255,304 0.57 %3.97 %
Average assets (2)
10,021,362 10,011,932 9,798,555 0.09 %2.27 %
Efficiency ratio (3)
61.46 %60.43 %57.63 %1.70 %6.65 %
Return on average assets (4)
1.47 %1.43 %1.72 %2.80 %(14.53)%
(1) Excludes $3.4 million, $4.2 million and September 30, 2016.
$37.4 million of PPP loans at March 31, 2023, December 31, 2022 and March 31, 2022.
(In thousands)September 30, 2017June 30, 2017December 31, 2016September 30, 2016 % change from 6/30/17% change from 12/31/16% change from 09/30/16
Loans$5,332,308
$5,329,172
$5,234,828
$5,148,482
 0.06 %1.86 %3.57 %
Allowance for loan losses52,888
51,699
48,782
51,573
 2.30 %8.42 %2.55 %
Net loans5,279,420
5,277,473
5,186,046
5,096,909
 0.04 %1.80 %3.58 %
Investment securities1,564,051
1,573,092
1,573,320
1,475,863
 (0.57)%(0.59)%5.98 %
Total assets7,788,248
7,754,898
7,389,538
7,287,923
 0.43 %5.40 %6.87 %
Total deposits6,051,268
6,037,148
5,630,199
5,626,391
 0.23 %7.48 %7.55 %
Average assets (1)
7,665,957
7,571,295
7,337,438
7,339,517
 1.25 %4.48 %4.45 %
Efficiency ratio56.76%56.77%58.26%55.73% (0.02)%(2.57)%1.85 %
Return on average assets (2)
1.10%1.11%1.15%1.24% (0.90)%(4.35)%(11.29)%
(1)(2) Average assets for the ninethree months ended September 30, 2017March 31, 2023 and 2016, for the six months ended June 30, 20172022 and for the fiscal year ended December 31, 2016.2022.
(2)(3) Efficiency ratio is calculated by dividing total other expense by the sum of fully taxable equivalent net interest income and other income. Fully taxable equivalent net interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustments were $926,000 for the three months ended March 31, 2023, $3.5 million for the year ended December 31 2022 and $819,000 for the three months ended March 31 2022.
(4) Annualized for the ninethree months ended September 30, 2017March 31, 2023 and 2016 and for the six months ended June 30, 2017.2022.


Loans outstanding at September 30, 2017March 31, 2023 were $5.33$7.09 billion, compared to $5.23(i) $7.14 billion at December 31, 2016,2022, a decrease of $47.9 million, and (ii) $6.82 billion at March 31, 2022, an increase of $97.5$273.4 million. Excluding $3.4 million, or$4.2 million and $37.4 million of PPP loans at March 31, 2023, December 31, 2022 and March 31, 2022, respectively, loans outstanding were $7.09 billion at March 31, 2023, compared to (i) $7.14 billion at December 31, 2022, a decrease of $47.1 million, and (ii) $6.78 billion at March 31, 2022, an annualized 2.5%.increase of $307.4 million. The table below breaks out the change in loans outstanding, by loan growth for the first nine monthstype.

(Dollars in thousands)March 31, 2023December 31, 2022March 31, 2022$ change from 12/31/22% change from 12/31/22$ change from 3/31/22% change from 3/31/22
Home equity$164,736 $167,232 $159,667 $(2,496)(1.5)%$5,069 3.2 %
Installment1,914,781 1,921,059 1,685,627 (6,278)(0.3)%229,154 13.6 %
Real estate1,210,045 1,195,037 1,126,666 15,008 1.3 %83,379 7.4 %
Commercial (excluding PPP loans) (1)
3,800,284 3,850,477 3,807,310 (50,193)(1.3)%(7,026)(0.2)%
PPP loans3,445 4,206 37,424 (761)(18.1)%(33,979)(90.8)%
Other207 3,351 3,396 (3,144)(93.8)%(3,189)(93.9)%
Total loans$7,093,498 $7,141,362 $6,820,090 (47,864)(0.7)%273,408 4.0 %
Total loans (excluding PPP loans) (1)
$7,090,053 $7,137,156 $6,782,666 $(47,103)(0.7)%$307,387 4.5 %
(1) Excludes $3.4 million of 2017 consistedPPP loans at March 31, 2023, $4.2 million of consumer loan growthPPP loans at December 31, 2022, and $37.4 million of $116.2 million (13.8% annualized) and commercial loan growth of $21.9 million (1.1% annualized), offset by a reduction in HELOC loan balances of $5.8 million (3.6% annualized) and residential loan balances of $33.7 million (3.7% annualized).PPP loans at March 31, 2022.


PNB's allowance for loancredit losses increased by $4.1 million, or 8.4%, to $52.9was $85.9 million at September 30, 2017,March 31, 2023, compared to $48.8(i) $85.4 million at December 31, 2016.2022, an increase of $571,000, or 0.7%, and (ii) $78.9 million at March 31, 2022, an increase of $7.1 million, or 9.1%. Net charge-offs were $5.0 million,$727,000, or 0.13% (annualized)0.04% of total average loans, for the ninethree months ended September 30, 2017.March 31, 2023 and were $3.6 million, or 0.05% of total average loans, for the year ended December 31 2022. Net charge-offs consistedrecoveries were $245,000, or 0.01% of net charge-offs of consumertotal average loans, of $3.1 million, commercial loans of $1.2 million, mortgage loans of $278,000 and other loans of $487,000.for the three months ended March 31, 2022. Refer to the “Credit Metrics and Provision for (Recovery of) LoanCredit Losses” section for additional information regarding PNB's loan portfolio and the level of provision for (recovery of) loancredit losses recognized in each period presented.



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Total deposits at September 30, 2017March 31, 2023 were $6.05$8.58 billion, compared to $5.63(i) $8.53 billion at December 31, 2016,2022, an increase of $421.1$48.9 million, or an annualized 10.0%0.6%, and compared to $5.63(ii) $8.26 billion at September 30, 2016,March 31, 2022, an increase of $424.9$327.9 million, or 7.6%4.0%. The deposit growth forDuring the first ninethree months of 2017 consisted of savingsended March 31, 2023 and 2022 and the year ended December 31, 2022, Park made the decision to continue participation in a program to transfer deposits off-balance sheet in order to manage growth of $265.2the balance sheet, as deposits increased significantly throughout the COVID pandemic. At March 31, 2023, December 31, 2022 and March 31, 2022, Park had $164.6 million, (20.8% annualized)$195.9 million, and $1,149.2 million, respectively, in deposits which were off-balance sheet. Total deposits would have increased $17.5 million, or 0.2%, transaction account growth of $200.0compared to at December 31, 2022 had the $164.6 million (22.8% annualized) and non-interest bearing$195.9 million in deposits remained on the balance sheet at the respective dates. Total deposits would have decreased $656.7 million, or 7.0%, compared to at March 31, 2022 had the $164.6 million and $1,149.2 million in deposits remained on the balance sheet at the respective dates. The table below breaks out the change in deposit growth of $13.3 million (1.1% annualized), offsetbalances, by a decline in time deposits of $61.3 million (7.3% annualized). The deposit growth for the twelve months ended September 30, 2017 consisted of savings growth of $253.1 million (14.8%), transaction account growth of $146.4 million (11.9%), and non-interest bearing deposit growth of $109.2 million (7.1%), offset by a reduction in time deposits of $83.7 million (7.3%).type.


Guardian Financial Services Company (GFSC)
(Dollars in thousands)March 31, 2023December 31, 2022March 31, 2022$ change from 12/31/22% change from 12/31/22$ change from 3/31/22% change from 3/31/22
Non-interest bearing deposits$3,211,327 $3,374,269 $3,315,210 $(162,942)(4.8)%$(103,883)(3.1)%
Transaction accounts2,170,814 1,988,106 1,587,856 182,708 9.2 %582,958 36.7 %
Savings2,669,212 2,617,500 2,657,694 51,712 2.0 %11,518 0.4 %
Certificates of deposit531,851 554,445 694,544 (22,594)(4.1)%(162,693)(23.4)%
Total deposits$8,583,204 $8,534,320 $8,255,304 $48,884 0.6 %$327,900 4.0 %
Off balance sheet deposits164,600 195,937 1,149,187 (31,337)(16.0)%(984,587)(85.7)%
Total deposits including off balance sheet deposits$8,747,804 $8,730,257 $9,404,491 $17,547 0.2 %$(656,687)(7.0)%


All Other

The table below reflects GFSC'sAll Other net (loss) income (loss) for the first secondquarters (the three months ended March 31) of 2023 and third quarters of 2017, for the first nine months of 2017 and 2016,2022 and for the fiscal years ended December 31, 20162022, and 2015.2021.

(In thousands)Q3 2017Q2 2017Q1 2017Nine months YTD 2017Nine months YTD 201620162015
Net interest income$1,455
$1,491
$1,478
$4,424
$4,416
$5,874
$6,588
Provision for loan losses609
373
437
1,419
1,658
1,887
1,415
Other income (loss)18
(8)—
10
(1)(1)2
Other expense734
825
736
2,295
3,632
4,457
2,984
Income (loss) before income taxes$130
$285
$305
$720
$(875)$(471)$2,191
    Federal income tax expense (benefit)46
99
107
252
(305)(164)768
Net income (loss)$84
$186
$198
$468
$(570)$(307)$1,423
(In thousands)Q1 2023Q1 202220222021
Net interest (expense) income$(1,391)$(1,686)$(3,587)$1,495 
Recovery of credit losses(732)(58)(1,277)(3,362)
Other income125 409 20,724 3,142 
Other expense3,506 3,157 14,308 16,840 
Net (loss) income before income tax benefit$(4,040)$(4,376)$4,106 $(8,841)
    Income tax benefit(1,504)(1,783)(1,002)(3,325)
Net (loss) income$(2,536)$(2,593)$5,108 $(5,516)

The provision for loan losses of $1.4 million for the nine months ended September 30, 2017 represented a decrease of $239,000, compared to $1.7 million for the same period of 2016. Refer to the “Credit Metrics and Provision for (Recovery of) Loan Losses” section for additional information regarding Guardian's loan portfolio and the level of provision for loan losses recognized in each period presented.

Other expense of $2.3 million for the nine months ended September 30, 2017 represented a $1.3 million decrease, compared to $3.6 million for the nine months ended September 30, 2016. This decrease was primarily related to the evaluation of respective litigation accruals during 2017 and 2016.

The table below provides certain balance sheet information and financial ratios for GFSC as of or for the period ended September 30, 2017, June 30, 2017, December 31, 2016 and September 30, 2016.
(In thousands)September 30, 2017June 30, 2017December 31, 2016September 30, 2016 % change from 06/30/17% change from 12/31/16% change from 09/30/16
Loans$33,686
$34,179
$32,661
$32,236
 (1.44)%3.14%4.50 %
Allowance for loan losses2,344
2,123
1,842
1,988
 10.41 %27.25%17.91 %
Net loans31,342
32,056
30,819
30,248
 (2.23)%1.70%3.62 %
Total assets33,260
33,860
32,268
32,759
 (1.77)%3.07%1.53 %
Average assets (1)
33,537
33,691
33,370
33,621
 (0.46)%0.50%(0.25)%
Return on average assets (2)
1.86%2.29%(0.92)%(2.27)% (18.78)%N.M.
N.M.
(1) Average assets for the nine months ended September 30, 2017 and 2016, for the six months ended June 30, 2017 and for the fiscal year ended December 31, 2016.
(2) Annualized for the nine months ended September 30, 2017 and 2016 and for the six months ended June 30, 2017.


Park Parent Company

The table below reflects the Park Parent Company net income (loss) for the first, second and third quarters of 2017, for the first nine months of 2017 and 2016, and for the fiscal years ended December 31, 2016 and 2015.
(In thousands)Q3 2017Q2 2017Q1 2017Nine months YTD 2017Nine months YTD 201620162015
Net interest income (expense)$280
$183
$(207)$256
$(13)$(138)$239
Provision for loan losses—
—
—
—
—
—
—
Other income (loss)1,293
101
(204)1,190
379
955
513
Other expense2,094
2,166
2,147
6,407
7,386
9,731
9,972
Loss before income tax benefit$(521)$(1,882)$(2,558)$(4,961)$(7,020)$(8,914)$(9,220)
    Federal income tax benefit(626)(963)(1,332)(2,921)(3,452)(4,357)(4,671)
Net income (loss)$105
$(919)$(1,226)$(2,040)$(3,568)$(4,557)$(4,549)


The net interest (expense) income (expense) for Park's parent companyAll Other included, for all periods presented, interest income on subordinated debt investments in PNB, which werewas eliminated in the consolidated Park National Corporation totals. For the fiscal years 2016totals, as well as interest income on GFSC loans and 2015 andSEPH impaired loan relationships. The net interest (expense) income for All Other also included interest expense on $175.0 million aggregate principal amount of 4.50% Fixed-to-Floating Rate Subordinated Notes due 2030 issued by Park in August 2020 (the "Park Subordinated Notes").

Net interest (expense) income reflected net interest expense of $1.4 million for the ninethree months ended September 30, 2016,March 31, 2023, compared to net interest expense of $1.7 million for the three months ended March 31, 2022. The change was largely the result of an increase of $565,000 in loan interest income related to payment collections at SEPH, partially offset by a decrease of $96,000 in net interest income (expense) included interest income on loans to SEPH (paid off on December 14, 2016). Additionally, net interest income (expense) includedfrom GFSC and a decrease in interest expense relatedon borrowings of $174,000.

Refer to the $30.00 million“Credit Metrics and Provision for (Recovery of) Credit Losses” section for additional information regarding the All Other loan portfolio and the level of 7% Subordinated Notes due April 20, 2022 issued by Park to accredited investors on April 20, 2012, which Park prepaidrecovery of credit losses recognized in full (principal plus accrued interest) on April 24, 2017.each period presented.


All Other incomehad other expense of $1.2$3.5 million for the ninethree months ended September 30, 2017 represented an increase of $811,000March 31, 2023, compared to $379,000 for the nine months ended September 30, 2016. The $811,000 increase was primarily related to an $832,000 increase in income from certain equity investments.

Other expense of $6.4$3.2 million for the ninethree months ended September 30, 2017 represented a decrease of $1.0 million, or 13.3%, compared to $7.4 million for the nine months ended September 30, 2016.March 31, 2022. The $1.0 million decreaseincrease was primarily relatedlargely due to a decrease of $835,000$382,000 increase in professional fees and services expense which was partially offset by a $322,000$162,000 decrease in miscellaneous other expense and a $331,000 decrease in employee benefit expense, offset by an increasesalaries expense.
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Table of $235,000 in salaries expense and an increase of $315,000 in state tax expense.Contents


SEPH

The table below reflects SEPH's net income (loss) for the first, second and third quarters of 2017, for the first nine months of 2017 and 2016, and for the fiscal years ended December 31, 2016 and 2015. SEPH holds the remaining assets and liabilities retained by Vision subsequent to the sale of the Vision business on February 16, 2012. Prior to holding the remaining Vision assets, SEPH held OREO assets that were transferred from Vision to SEPH. This segment represents a run-off portfolio of the legacy Vision assets.

(In thousands)Q3 2017Q2 2017Q1 2017Nine months YTD 2017Nine months YTD 201620162015
Net interest income (expense)$401
$282
$201
$884
$1,240
$4,774
$(74)
Recovery of loan losses(1,146)(366)(281)(1,793)(5,027)(9,599)(4,090)
Other income (loss)411
(21)—
390
1,272
2,974
1,848
Other expense996
1,238
776
3,010
4,525
7,273
6,182
Income (loss) before income taxes$962
$(611)$(294)$57
$3,014
$10,074
$(318)
    Federal income tax expense (benefit)336
(213)(103)20
1,056
3,526
(111)
Net income (loss)$626
$(398)$(191)$37
$1,958
$6,548
$(207)


Net interest income decreased to $884,000 for the nine months ended September 30, 2017 from $1.2 million for the same period in 2016. The decrease was largely the result of a decline in interest payments received from SEPH impaired loan relationships.

For the nine months ended September 30, 2017, SEPH had net recoveries of loan losses of $1.8 million, compared to $5.0 million for the same period in 2016.

The $1.5 million decrease in other expense for the nine months ended September 30, 2017, compared to the same period of 2016, was primarily the result of a $832,000 decline in management and consulting fees and a $496,000 decline in legal fees.

Legacy Vision assets at SEPH totaled $18.7 million as of September 30, 2017, compared to $20.3 million at December 31, 2016 and $22.3 million at September 30, 2016. In addition to these SEPH assets, PNB participations in legacy Vision assets totaled $9.0 million at September 30, 2017, compared to $9.6 million at both December 31, 2016 and September 30, 2016.

Park National Corporation


The table below reflects Park's consolidated net income for the first secondquarters (the three months ended March 31) of 2023 and third quarters of 2017, for the first nine months of 2017 and 2016,2022 and for the fiscal years ended December 31, 20162022 and 2015.2021.

(In thousands)Q3 2017Q2 2017Q1 2017Nine months YTD 2017Nine months YTD 201620162015(In thousands)Q1 2023Q1 202220222021
Net interest income$61,551
$59,778
$58,952
$180,281
$175,837
$238,086
$227,632
Net interest income$92,198 $77,686 $347,059 $329,893 
Provision for (recovery of) loan losses3,283
4,581
876
8,740
(3,819)(5,101)4,990
Provision for (recovery of) credit lossesProvision for (recovery of) credit losses183 (4,605)4,557 (11,916)
Other income22,089
19,251
17,507
58,847
56,660
78,731
77,551
Other income24,387 31,656 135,935 129,944 
Other expense49,811
48,106
47,462
145,379
141,961
199,023
186,614
Other expense76,503 67,373 297,978 283,518 
Income before income taxes$30,546
$26,342
$28,121
$85,009
$94,355
$122,895
$113,579
Income before income taxes$39,899 $46,574 $180,459 $188,235 
Federal income taxes8,434
7,310
7,854
23,598
28,222
36,760
32,567
Income tax expense Income tax expense6,166 7,699 32,108 34,290 
Net income$22,112
$19,032
$20,267
$61,411
$66,133
$86,135
$81,012
Net income$33,733 $38,875 $148,351 $153,945 




Net Interest Income


Park’s principal source of earnings is net interest income, the difference between total interest income and total interest expense. Net interest income results from average balances outstanding for interest earning assets and interest bearing liabilities in conjunction with the average rates earned and paid on them.


Comparison for the Third QuarterFirst Quarters of 20172023 and 20162022
 
Net interest income increased by $3.0$14.5 million, or 5.2%18.7%, to $61.6$92.2 million for the thirdfirst quarter of 2017,2023, compared to $58.5$77.7 million for the thirdfirst quarter of 2016.2022. See the discussion under the table below.
  Three months ended 
September 30, 2017		 Three months ended 
September 30, 2016
(Dollars in thousands) 
Average
balance
Interest
Tax
equivalent 
yield/cost
 
Average
balance
InterestTax
equivalent 
yield/cost
Loans (1)
 $5,337,206
$63,338
4.71% $5,139,781
$60,141
4.66%
Taxable investments 1,293,571
6,757
2.07% 1,388,892
7,339
2.10%
Tax-exempt investments (2)
 271,305
3,037
4.44% 95,513
1,060
4.41%
Money market instruments 427,157
1,383
1.28% 247,475
321
0.52%
Interest earning assets $7,329,239
$74,515
4.03% $6,871,661
$68,861
3.99%
         
Interest bearing deposits $4,505,040
5,403
0.48% $4,238,301
3,446
0.32%
Short-term borrowings 187,319
197
0.42% 214,559
85
0.16%
Long-term debt 863,205
6,073
2.79% 787,202
6,178
3.12%
Interest bearing liabilities $5,555,564
$11,673
0.83% $5,240,062
$9,709
0.74%
Excess interest earning assets $1,773,675
  
 $1,631,599
  
Tax equivalent net interest income  $62,842
   $59,152
 
Net interest spread  
 3.20%  
 3.25%
Net interest margin  
 3.40%  
 3.42%
Three months ended 
March 31, 2023		Three months ended 
March 31, 2022
(Dollars in thousands)Average
balance		InterestTax
equivalent 
yield/cost		Average
balance		InterestTax
equivalent 
yield/cost
Loans (1)
$7,099,240 $91,766 5.24 %$6,829,336 $72,584 4.31 %
Taxable investments1,452,398 12,979 3.62 %1,397,975 6,130 1.78 %
Tax-exempt investments (2)
422,832 3,686 3.54 %371,695 3,098 3.38 %
Money market instruments292,948 3,396 4.70 %360,103 153 0.17 %
Interest earning assets$9,267,418 $111,827 4.89 %$8,959,109 $81,965 3.71 %
Interest bearing deposits$5,476,661 15,559 1.15 %$5,170,296 1,071 0.08 %
Short-term borrowings204,471 824 1.64 %223,157 244 0.44 %
Long-term debt188,727 2,320 4.99 %188,267 2,145 4.62 %
Interest bearing liabilities$5,869,859 $18,703 1.29 %$5,581,720 $3,460 0.25 %
Excess interest earning assets$3,397,559 $3,377,389  
Tax equivalent net interest income$93,124 $78,505 
Net interest spread 3.60 % 3.46 %
Net interest margin 4.08 % 3.55 %
(1) Loan interest income includes the effects of taxable equivalent adjustments using a 35%21% federal corporate income tax rate in 2017 and 2016.rate. The taxable equivalent adjustment was $228,000$152,000 for the three months ended September 30, 2017March 31, 2023 and $248,000$168,000 for the same period of 2016.2022.
(2) Interest income on tax-exempt investment securities includes the effects of taxable equivalent adjustments using a 35%21% federal corporate income tax rate in 2017 and 2016.rate. The taxable equivalent adjustment was $1.1 million$774,000 for the three months ended September 30, 2017March 31, 2023 and $371,000$651,000 for the same period of 2016.2022.
 
Average interest earning assets for the thirdfirst quarter of 20172023 increased by $458$308.3 million, or 6.7%3.4%, to $7,329 million, compared to $6,872$9,267 million for the thirdfirst quarter of 2016.2023, compared to $8,959 million for the first quarter of 2022. The average yield on interest earning assets increased by 4118 basis points to 4.03%4.89% for the thirdfirst quarter of 2017,2023, compared to 3.99%3.71% for the thirdfirst quarter of 2016.2022.


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

Average interest bearing liabilities for the thirdfirst quarter of 20172023 increased by $316$288.1 million, or 6.0%5.2%, to $5,556$5,870 million, compared to $5,240$5,582 million for the thirdfirst quarter of 2016.2022. The average cost of interest bearing liabilities increased by 9104 basis points to 0.83%1.29% for the thirdfirst quarter of 2017,2023, compared to 0.74%0.25% for the thirdfirst quarter of 2016.2022. During the three months ended March 31, 2023 and 2022, Park continued to participate in a OWS program in order to manage growth of the balance sheet. At March 31, 2023 and 2022, Park had $164.6 million and $1,149.2 million, respectively, in OWS insured cash sweep deposits which were off-balance sheet. Management from time to time has elected to move these funds both on and off the balance sheet throughout the quarter due to favorable interest rate conditions and other factors. When on the balance sheet, these deposits are included in the average interest bearing liabilities and related interest expense.



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

Yield on Loans: Average loan balances increased by $197$269.9 million, or 3.8%4.0%, to $5,337$7,099 million for the thirdfirst quarter of 2017,2023, compared to $5,140$6,829 million for the thirdfirst quarter of 2016.2022. The average yield on the loan portfolio increased by 593 basis points to 4.71%5.24% for the thirdfirst quarter of 2017,2023, compared to 4.66%4.31% for the thirdfirst quarter of 2016.2022. Average loans for the first quarters of 2023 and 2022 included $3.8 million and $60.0 million, respectively, of PPP loans.


The table below shows for the three months ended September 30, 2017 and 2016, the average balance and tax equivalent yield by type of loan.

  Three months ended 
September 30, 2017		 Three months ended 
September 30, 2016
(Dollars in thousands) 
Average
balance
 Tax
equivalent 
yield		 
Average
balance
 Tax
equivalent 
yield
Home equity $208,741
 4.56% $213,630
 3.99%
Installment and indirect loans 1,261,542
 4.96% 1,071,493
 5.28%
Real estate loans 1,188,550
 3.87% 1,229,884
 3.82%
Commercial loans (1)
 2,673,207
 4.96% 2,618,728
 4.83%
Other 5,166
 11.97% 6,046
 10.95%
Total loans and leases before allowance $5,337,206
 4.71% $5,139,781
 4.66%
(1) Commercial loan interest income includes the effects of taxable equivalent adjustments using a 35% tax rate in 2017 and 2016. The taxable equivalent adjustment was $228,000 for the three months ended September 30, 2017March 31, 2023 and $248,000 for the same period of 2016.2022.

Cost of Deposits: Average interest bearing deposit balances increased by $267 million, or 6.3%, to $4,505 million for the third quarter of 2017, compared to $4,238 million for the third quarter of 2016. The average cost of funds on deposit balances increased by 16 basis points to 0.48% for the third quarter of 2017, compared to 0.32% for the third quarter of 2016.

The table below shows for the three months ended September 30, 2017 and 2016, the average balance and cost of funds by type of deposit.

  Three months ended 
September 30, 2017		 Three months ended 
September 30, 2016
(Dollars in thousands) 
Average
balance
 Cost of funds 
Average
balance
 Cost of funds
Transaction accounts $1,395,919
 0.30% $1,271,801
 0.11%
Savings deposits and clubs 2,011,251
 0.36% 1,753,451
 0.17%
Time deposits 1,097,870
 0.91% 1,213,049
 0.77%
Total interest bearing deposits $4,505,040
 0.48% $4,238,301
 0.32%


Comparison for the First Nine Months of 2017 and 2016
Net interest income increased by $4.4 million, or 2.5%, to $180.3 million for the first nine months of 2017, compared to $175.8 million for the first nine months of 2016. See the discussion under the table below.
  Nine months ended 
September 30, 2017		 Nine months ended 
September 30, 2016
(Dollars in thousands) 
Average
balance
Interest
Tax
equivalent 
yield/cost
 
Average
balance
InterestTax
equivalent 
yield/cost
Loans (1)
 $5,314,501
$185,034
4.66% $5,091,148
$179,074
4.70%
Taxable investments 1,329,589
20,787
2.09% 1,443,131
23,718
2.20%
Tax-exempt investments (2)
 232,751
7,844
4.51% 75,538
2,543
4.50%
Money market instruments 271,778
2,330
1.15% 220,461
844
0.51%
Interest earning assets $7,148,619
$215,995
4.04% $6,830,278
$206,179
4.03%
         
Interest bearing deposits $4,363,065
13,926
0.43% $4,195,328
9,979
0.32%
Short-term borrowings 223,043
616
0.37% 238,514
330
0.19%
Long-term debt 806,584
17,632
2.92% 785,661
18,415
3.13%
Interest bearing liabilities $5,392,692
$32,174
0.80% $5,219,503
$28,724
0.74%
Excess interest earning assets $1,755,927
  
 $1,610,775
  
Tax equivalent net interest income  $183,821
   $177,455
 
Net interest spread  
 3.24%  
 3.29%
Net interest margin  
 3.44%  
 3.47%
(1) Loan interest income includes the effects of taxable equivalent adjustments using a 35% tax rate in 2017 and 2016. The taxable equivalent adjustment was $794,000 for the nine months ended September 30, 2017 and $728,000 for the same period of 2016.
(2) Interest income on tax-exempt investment securities includes the effects of taxable equivalent adjustments using a 35% tax rate in 2017 and 2016. The taxable equivalent adjustment was $2.7 million for the nine months ended September 30, 2017 and $890,000 for the same period of 2016.
Average interest earning assets for the first nine months of 2017 increased by $318 million, or 4.7%, to $7,149 million, compared to $6,830 million for the first nine months of 2016. The average yield on interest earning assets increased by 1 basis point to 4.04% for the first nine months of 2017, compared to 4.03% for the same period of 2016. Interest income for the first nine months of 2016 included $1.7 million related to a payment from one SEPH impaired loan relationship which is also participated with PNB. Excluding this income, the yield on loans was 4.65%, the yield on interest earning assets was 4.00%, and the net interest margin was 3.44%.

Average interest bearing liabilities for the first nine months of 2017 increased by $173 million, or 3.3%, to $5,393 million, compared to $5,220 million for the same period of 2016. The average cost of interest bearing liabilities increased by 6 basis points to 0.80% for the first nine months of 2017, compared to 0.74% for the same period of 2016.

Yield on Loans: Average loan balances increased by $223 million, or 4.4%, to $5,315 million for the first nine months of 2017, compared to $5,091 million for the same period of 2016. The average yield on the loan portfolio decreased by 4 basis points to 4.66% for the first nine months of 2017, compared to 4.70% for the first nine months of 2016. The yield on loans for the first nine months of 2016 was positively impacted by a payment from one SEPH impaired loan relationship which is also participated with PNB. Excluding this income, for the first nine months of 2016, the yield on commercial loans and the yield on total loans was 4.80% and 4.65%, respectively.

The table below shows for the nine months ended September 30, 2017 and 2016, the average balance and tax equivalent yield by type of loan.
  Nine months ended 
September 30, 2017		 Nine months ended 
September 30, 2016
(Dollars in thousands) 
Average
balance
 Tax
equivalent 
yield		 
Average
balance
 Tax
equivalent 
yield
Home equity $210,648
 4.38% $211,958
 4.03%
Installment and indirect loans 1,226,508
 4.97% 1,034,864
 5.39%
Real estate loans 1,199,414
 3.84% 1,236,143
 3.80%
Commercial loans (1)
 2,672,555
 4.89% 2,602,252
 4.89%
Other 5,376
 11.55% 5,931
 11.36%
Total loans and leases before allowance $5,314,501
 4.66% $5,091,148
 4.70%
Three months ended 
March 31, 2023		Three months ended 
March 31, 2022
(Dollars in thousands)Average
balance		Tax
equivalent 
yield		Average
balance		Tax
equivalent 
yield
Home equity loans$166,648 7.74 %$161,827 3.53 %
Installment loans1,911,708 5.03 %1,680,738 4.67 %
Real estate loans1,197,827 4.12 %1,130,635 3.69 %
Commercial loans (1)
3,818,741 5.59 %3,853,302 4.36 %
Other4,316 8.37 %2,834 11.73 %
Total loans before allowance$7,099,240 5.24 %$6,829,336 4.31 %
(1) Commercial loan interest income includes the effects of taxable equivalent adjustments using a 35%21% federal corporate income tax rate in 2017 and 2016.rate. The taxable equivalent adjustment was $794,000$152,000 for the ninethree months ended September 30, 2017March 31, 2023 and $728,000$168,000 for the same period of 2016.2022.


Loan interest income for the three months ended March 31, 2023 and 2022 included the accretion of purchase accounting
adjustments related to the acquisitions of NewDominion and Carolina Alliance, interest income related to payments on certain SEPH nonaccrual loan relationships and interest income related to PPP loans. Excluding the impact of the purchase accounting accretion, SEPH-related income, and PPP income, (a) the yield on home equity loans was 7.67%, the yield on installment loans was unchanged at 5.03%, the yield on real estate loans was unchanged at 4.12%, the yield on commercial loans was 5.51% and the yield on total loans before allowance was 5.20% for the three months ended March 31, 2023; and (b) the yield on home equity loans was 3.40%, the yield on installment loans was unchanged at 4.67%, the yield on real estate loans was 3.67%, the
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yield on commercial loans was 4.21% and the yield on total loans before allowance was 4.22% for the three months ended March 31, 2022.

Cost of Deposits: Average interest bearing deposit balances increased $306.4 million, or 5.9%, to $5,477 million for the first quarter of 2023, compared to $5,170 million for the first quarter of 2022. The average cost of funds on deposit balances increased by 107 basis points to 1.15% for the first quarter of 2023, compared to 0.08% for the first quarter of 2022.
The table below shows for the three months ended March 31, 2023 and 2022, the average balance and cost of funds by type of deposit.

Three months ended 
March 31, 2023		Three months ended 
March 31, 2022
(Dollars in thousands)Average
balance		Cost of fundsAverage
balance		Cost of funds
Transaction accounts$2,156,473 1.15 %$1,639,828 0.02 %
Savings deposits and clubs2,777,518 1.18 %2,829,331 0.04 %
Time deposits542,670 1.01 %701,137 0.42 %
Total interest bearing deposits$5,476,661 1.15 %$5,170,296 0.08 %

Yield on Average Interest Earning Assets: The following table shows the tax equivalent yield on average interest earning assets for the ninethree months ended September 30, 2017March 31, 2023 and for the fiscal years ended December 31, 2016, 20152022, 2021 and 2014.2020.


  
Loans (1)
 
Investments (2)
 
Money Market
Instruments
 Total
2014 - year 4.84% 2.58% 0.25% 4.19%
2015 - year 4.66% 2.46% 0.26% 3.95%
2016 - year 4.74% 2.30% 0.51% 4.08%
2017 - first nine months 4.66% 2.45% 1.15% 4.04%
Loans (1) (3)
Investments (2)
Money Market
Instruments
Total(3)
2020 - year4.71 %2.66 %0.26 %4.28 %
2021 - year4.53 %2.22 %0.13 %3.86 %
2022 - year4.65 %2.66 %2.07 %4.14 %
2023 - first three months5.24 %3.60 %4.70 %4.89 %
(1) Loan interest income includes the effects of taxable equivalent adjustments using a 35%21% federal corporate income tax rate. The taxable equivalent adjustment was $794,000$152,000 for the ninethree months ended September 30, 2017,March 31, 2023, and $1.0 million, $767,000$627,000, $704,000, and $843,000$623,000 for the fiscal years ended December 31, 2016, 20152022, 2021 and 2014,2020, respectively.
(2) Interest income on tax-exempt investment securities includes the effects of taxable equivalent adjustments using a 35%21% federal corporate income tax rate. The taxable equivalent adjustment was $2.7$774,000 for the three months ended March 31, 2023, and $2.9 million, $2.2 million and $2.2 million for the nine months ended September 30, 2017, and $1.4 million, $98,000, and $2,000 for the fiscal years ended December 31, 2016, 2015,2022, 2021 and 2014,2020, respectively.

Cost of Deposits: Average interest bearing deposit balances increased by $168 million, or 4.0%, to $4,363 million(3) Interest income for the first ninethree months of 2017, compared to $4,195 millionended March 31, 2023 and for the same periodyears ended December 31, 2022, 2021 and 2020 included $574,000, $3.7 million, $8.0 million, and $453,000, respectively, related to payments received on certain SEPH nonaccrual loan relationships, some of 2016. The average costwhich are participated with PNB, as well as $200,000, $1.8 million, $3.3 million, and $4.4 million, respectively, of funds on deposit balances increased by 11 basis pointsthe accretion of purchase accounting adjustments related to 0.43%the acquisitions of NewDominion and Carolina Alliance. Interest income for the first ninethree months of 2017, compared to 0.32%ended March 31, 2023 and for the first nine monthsyears ended December 31, 2022 2021, and 2020 included $26,000, $3.1 million, $18.0 million and $16.7 million, respectively, of 2016.

The table below showsincome related to PPP loans. Excluding all of these sources of income described in the preceding sentences of this footnote, the yield on loans was 5.20%, 4.55%, 4.27%, and 4.63% for the ninethree months ended September 30, 2017March 31, 2023, and 2016,for the average balanceyears ended December 31, 2022, 2021 and cost of funds by type of deposit.2020, respectively, and the yield on total earning assets was 4.86%, 4.06%, 3.64%, and 4.20% for the three months ended March 31, 2023 and for the years ended December 31, 2022, 2021 and 2020, respectively.


  Nine months ended 
September 30, 2017		 Nine months ended 
September 30, 2016
(Dollars in thousands) 
Average
balance
 Cost of funds 
Average
balance
 Cost of funds
Transaction accounts $1,319,492
 0.24% $1,243,323
 0.10%
Savings deposits and clubs 1,935,887
 0.30% 1,704,914
 0.15%
Time deposits 1,107,686
 0.86% 1,247,091
 0.76%
Total interest bearing deposits $4,363,065
 0.43% $4,195,328
 0.32%

Cost of Average Interest Bearing Liabilities: The following table shows the cost of funds on average interest bearing liabilities for the ninethree months ended September 30, 2017March 31, 2023 and for the fiscal years ended December 31, 2016, 20152022, 2021 and 2014.2020.


Interest bearing deposits (1)
Short-term borrowingsLong-term debt
Total (1)
2020 - year0.41 %0.40 %3.55 %0.52 %
2021 - year0.12 %0.27 %4.32 %0.28 %
2022 - year0.39 %0.67 %4.69 %0.54 %
2023 - first three months1.15 %1.64 %4.99 %1.29 %
(1) Interest expense for the years ended December 31, 2022, 2021 and 2020 included $7,000, $46,000, and $226,000, respectively, of the accretion of purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance. Excluding this income, for the years ended December 31, 2022, 2021 and 2020, the cost of funds on interest bearing deposits was 0.39%, 0.12%, and 0.41%,, respectively, and the cost of total interest bearing liabilities was 0.54%, 0.28%, and 0.53%, respectively. There was no accretion of purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance for the three months ended March 31, 2023.


73
  Interest bearing deposits Short-term borrowings Long-term debt Total
2014 - year 0.29% 0.20% 3.29% 0.81%
2015 - year 0.30% 0.18% 3.10% 0.72%
2016 - year 0.32% 0.19% 3.13% 0.74%
2017 - first nine months 0.43% 0.37% 2.92% 0.80%
Table of Contents



Credit Metrics and Provision for (Recovery of) LoanCredit Losses


The provision for (recovery of) loancredit losses is the amount added toto/subtracted from the allowance for loan and leasecredit losses ("ALLL") to ensure the allowance is sufficient to absorb probable, incurredestimated credit losses.losses over the life of a loan. The amount of the provision for (recovery of) loancredit losses is determined by management after reviewing thebased 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 loan portfolio, historicremaining 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 current loan loss experiencean $80,000 increase to deferred tax assets was also recorded. Additionally, as a result of the adoption of this ASU and current economic conditions.elimination of the concept of TDRs, total nonperforming loans decreased by $20.1 million during the three months ended March 31, 2023 and individually evaluated loans decreased by $11.5 million.


Park's Ohio-based subsidiaries, PNB and GFSC, are the only subsidiaries that carry an ALLL balance. The table below provides additional information on the provision for (recovery of) loanrecovery of credit losses and the ALLL for Park, Park's Ohio-based operations, and SEPH for the three-month and nine-month periods ended September 30, 2017March 31, 2023 and 2016.2022.

 Three Months Ended
September 30,		 Nine Months Ended
September 30,
(Dollars in thousands)20172016 20172016
ALLL, beginning balance$53,822
$58,699
 $50,624
$56,494
      
Net charge-offs (recoveries) :     
Park's Ohio-based operations3,019
1,479
 5,925
4,140
SEPH(1,146)(3,708) (1,793)(5,027)
Park1,873
(2,229) 4,132
(887)
    
 
Provision for (recovery of) loan losses:     
Park's Ohio-based operations4,429
(3,658) 10,533
1,208
SEPH(1,146)(3,708) (1,793)(5,027)
Park3,283
(7,366) 8,740
(3,819)
      
ALLL, ending balance$55,232
$53,562
 $55,232
$53,562
      
Annualized ratio of net charge-offs (recoveries) to average loans:     
Park's Ohio-based operations0.22 %0.11 % 0.15 %0.11 %
SEPH(41.46)%(102.63)% (20.54)%(45.63)%
Park0.14 %(0.17)% 0.10 %(0.02)%
Three Months Ended
March 31,
(Dollars in thousands)20232022
Allowance for credit losses:
Beginning balance$85,379 $83,197 
Cumulative change in accounting principle; adoption of ASU 2022-02383 — 
Charge-offs
2,235 1,347 
Recoveries2,236 1,616 
Net recoveries(1)(269)
Provision for (recovery of) credit losses183 (4,605)
Ending balance$85,946 $78,861 
Net charge-offs (recoveries) as a % of average loans (annualized)— %(0.02)%
SEPH, as a non-bank subsidiary of Park, does not carry an ALLL balance, but recognizes a provision for loan losses when a charge-off is taken and recognizes a recovery of loan losses when a recovery is received.



The following table provides additional information related to the allowance for loancredit losses for Park's Ohio-based operations,Park including information related to specific reserves and general reserves, at September 30, 2017,March 31, 2023, December 31, 20162022, and September 30, 2016.March 31, 2022.

Park Ohio-based operations - Allowance for Loan Losses
(In thousands) September 30, 2017 December 31, 2016 September 30, 2016
Total allowance for loan losses $55,232
 $50,624
 $53,562
Specific reserves 5,102
 548
 4,232
General reserves $50,130
 $50,076
 $49,330
       
Total loans $5,355,142
 $5,259,503
 $5,172,601
Impaired commercial loans 63,407
 58,676
 64,313
Non-impaired loans $5,291,735
 $5,200,827
 $5,108,288
       
Total allowance for loan losses to total loans ratio 1.03% 0.96% 1.04%
General reserves as a % of non-impaired loans 0.95% 0.96% 0.97%
(Dollars in thousands)3/31/202312/31/20223/31/2022
Total allowance for credit losses$85,946 $85,379 $78,861 
Allowance on PCD loans— — — 
Specific reserves on individually evaluated loans4,318 3,566 1,513 
General reserves on collectively evaluated loans$81,628 $81,813 $77,348 
Total loans$7,093,857 $7,141,891 $6,821,606 
PCD loans4,555 4,653 6,987 
Individually evaluated loans (1)
59,384 78,341 63,209 
Collectively evaluated loans$7,029,918 $7,058,897 $6,751,410 
Allowance for credit losses as a % of period end loans1.21 %1.20 %1.16 %
General reserve as a % of collectively evaluated loans1.16 %1.16 %1.15 %

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

The allowance for loancredit losses of $55.2$85.9 million at September 30, 2017March 31, 2023 represented a $4.6 million,$567,000, or 9.1%0.7%, increase compared to $50.6$85.4 million at December 31, 2016. This increase was mainly the result of a $4.6 million increase in specific reserves.2022, The increase in specific reserves was largely due to a $3.6 million reserve established on$752,000 increase in specific reserves, offset by a commercial loan relationship
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decline of $185,000 in PNB's national portfolio of loans to non-bank consumer finance companies, of which $800,000 was established in the third quarter of 2017.general reserves.


Generally, management obtains updated valuations for all nonperforming loans including those held at SEPH,are updated at least annually.annually, either through independent valuations by a licensed appraiser or a verification of value ("VOV") performed by an internal licensed appraiser, in accordance with Company policy. A VOV can only be used in select circumstances and verifies that the original appraised value has not deteriorated through property inspection, consideration of market conditions, and performance of all valuation methods utilized in a prior valuation. As new valuation information is received, management performs an evaluation and applies a discount for anticipated disposition costs to determine the net realizable value of the collateral, which is compared against the outstanding principal balance to determine if additional write-downs are necessary.


Nonperforming Assets: NonperformingAfter the adoption of ASU 2022-02 on January 1, 2023, which eliminated the TDR classification, non-performing assets include: 1)(1) loans whose interest is accounted for on a nonaccrual basis; 2)(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)(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.


The following table compares Park’s nonperforming assets at September 30, 2017,March 31, 2023, December 31, 20162022 and September 30, 2016.March 31, 2022.
 
Park National Corporation - Nonperforming Assets
(In thousands) September 30, 2017 December 31, 2016 September 30, 2016(In thousands)March 31, 2023December 31, 2022March 31, 2022
Nonaccrual loans $90,568
 $87,822
 $97,832
Nonaccrual loans$73,114 $79,696 $54,018 
Accruing TDRs 19,401
 18,175
 17,350
Accruing TDRs (for years 2022 and prior) (1)
Accruing TDRs (for years 2022 and prior) (1)
N.A.20,134 32,428 
Loans past due 90 days or more 1,980
 2,086
 1,682
Loans past due 90 days or more1,251 1,281 445 
Total nonperforming loans $111,949
 $108,083
 $116,864
Total nonperforming loans$74,365 $101,111 $86,891 
      
OREO – PNB 6,701
 6,025
 7,004
OREO – SEPH 7,665
 7,901
 7,937
OREOOREO1,468 1,354 760 
Total nonperforming assets $126,315
 $122,009

$131,805
Total nonperforming assets$75,833 $102,465 $87,651 
      
Percentage of nonaccrual loans to total loans 1.69% 1.67% 1.89%Percentage of nonaccrual loans to total loans1.03 %1.12 %0.79 %
Percentage of nonperforming loans to total loans 2.09% 2.05% 2.25%
Percentage of nonperforming assets to total loans 2.35% 2.31% 2.54%
Percentage of nonperforming assets to total assets 1.61% 1.63% 1.79%
Percentage of nonperforming loans to total loans (1)
Percentage of nonperforming loans to total loans (1)
1.05 %1.42 %1.27 %
Percentage of nonperforming assets to total loans (1)
Percentage of nonperforming assets to total loans (1)
1.07 %1.43 %1.28 %
Percentage of nonperforming assets to total assets (1)
Percentage of nonperforming assets to total assets (1)
0.77 %1.04 %0.92 %
 (1) Effective January 1, 2023, Park adopted ASU 2022-02. Among other things, this ASU eliminated the concept of TDRs.


Nonperforming assets for Park's Ohio-based operationsIncluded in the OREO totals above were $1.4 million of SEPH OREO at both March 31, 2023 and for SEPH as of September 30, 2017, December 31, 20162022, and September 30, 2016 were$594,000 of SEPH OREO at March 31, 2022.

Park classifies loans as reportednonaccrual when a loan (1) is maintained on a cash basis because of deterioration in the following two tables:
Park's Ohio-based operations - Nonperforming Assets
(In thousands) September 30, 2017 December 31, 2016 September 30, 2016
Nonaccrual loans $80,424
 $76,084
 $84,045
Accruing TDRs 19,401
 18,175
 17,350
Loans past due 90 days or more 1,980
 2,086
 1,682
Total nonperforming loans $101,805
 $96,345
 $103,077
       
OREO – PNB 6,701
 6,025
 7,004
Total nonperforming assets
$108,506

$102,370
 $110,081
       
Percentage of nonaccrual loans to total loans 1.50% 1.45% 1.62%
Percentage of nonperforming loans to total loans 1.90% 1.83% 1.99%
Percentage of nonperforming assets to total loans 2.03% 1.95% 2.13%
Percentage of nonperforming assets to total assets 1.39% 1.38% 1.51%
SEPH - Nonperforming Assets
(In thousands) September 30, 2017 December 31, 2016 September 30, 2016
Nonaccrual loans $10,144
 $11,738
 $13,787
Accruing TDRs —
 —
 —
Loans past due 90 days or more —
 —
 —
Total nonperforming loans $10,144
 $11,738
 $13,787
       
OREO – SEPH 7,665
 7,901
 7,937
Total nonperforming assets $17,809

$19,639
 $21,724
Impaired Loans: Park’s allowancefinancial 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 loan losses includes an allocationa period of 90 days for loans specifically identified as impaired under GAAP. At September 30, 2017, loans considered to be impaired consisted substantially of commercial loans graded as "substandard" or “doubtful” and placed on non-accrual status.  Specific reserves on impaired commercial loans are typically based on management’s best estimate of the fair value of collateral securing these120 days for all other loans. The amount ultimately charged off for theseAs a result, loans may be different fromclassified as nonaccrual despite being current with their contractual terms. The following table details the specific reservedelinquency status of nonaccrual loans at March 31, 2023, December 31, 2022 and March 31, 2022. Loans are classified as the ultimate liquidationcurrent if they are less than 30 days past due.

March 31, 2023December 31, 2022March 31, 2022
(In thousands)BalancePercent of Total LoansBalancePercent of Total LoansBalancePercent of Total Loans
Nonaccrual loans - current$32,813 0.46 %$58,893 0.83 %1$36,415 0.53 %
Nonaccrual loans - past due40,301 0.57 %20,803 0.29 %17,603 0.26 %
Total nonaccrual loans$73,114 1.03 %$79,696 1.12 %$54,018 0.79 %

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Credit Quality Indicators: When determining the quarterly loancredit 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 loan loss reserve percentagePD is allocatedapplied 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 loan loss reserve percentagePD is allocatedapplied to these loans. Commercial loans that are graded a 7 (doubtful) are shown as nonperforming and Park charges these loans down to their fair value by taking a partial charge-off or recording a specific reserve. Certain 6-rated loans and all 7-rated loans are placed on nonaccrual status and included within the impairedindividually evaluated category. A loan is deemed impaired when management determines that the borrower's ability to perform in accordance with the contractual loan agreement is in doubt. Any commercial loan graded an 8 (loss) is completely charged-off.

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

Commercial loans * (In thousands)March 31, 2023December 31, 2022March 31, 2022
Pass-rated$3,664,298 $3,709,065 $3,696,217 
Special mention87,431 79,855 78,432 
Substandard2,176 1,965 75 
Individually evaluated for impairment (1)
59,384 78,341 63,209 
Accruing PCD4,469 4,563 6,497 
Total$3,817,758 $3,873,789 $3,844,430 
(1) Prior to the adoption of September 30, 2017,ASU 2002-02 on January 1, 2023, accruing TDRs were also included in individually evaluated for impairment loans totals.
* Commercial loans include (1) Commercial, financial and agricultural loans, (2) Commercial real estate loans, (3) Commercial related loans in the construction real estate portfolio, (4) Commercial related loans in the residential real estate portfolio and (5) Leases.

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

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

Individually evaluated commercial loans were $59.4 million at March 31, 2023, a decrease of $19.0 million, compared to $78.3 million at December 31, 2022 and a decrease of $3.8 million, compared to $63.2 million at March 31, 2022. The $78.3 million of individually evaluated commercial loans at December 31, 2022 included $11.5 million of loans modified in a TDR which were on accrual status and performing in accordance with the restructured terms, down from $22.9 million at March 31, 2022.
At March 31, 2023, Park had taken partial charge-offs of $9.9$1.5 million related to the $73.6$59.4 million of individually evaluated commercial loans, considered to be impaired, compared to partial charge-offs of approximately $24.9$1.8 million related to the $70.4$78.3 million of impairedindividually evaluated commercial loans at December 31, 2016.2022.


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

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

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

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

•Forecast model - For each portfolio segment, a LDA was performed in order to identify appropriate loss drivers and create a regression model for use in forecasting cash flows. The LDA analysis utilized Park's own FFIEC Call Report data for the commercial, financial and agricultural and residential real estate portfolio segments. Peer data was incorporated into the analysis for the commercial real estate, construction real estate, and consumer portfolio segments. Park updated the LDA in the fourth quarter of 2022 with data through September 30, 2022. After considering the impact of the inclusion of periods impacted by COVID, as well as analysis of the ongoing applicability of the selected peer group, management decided it was appropriate to continue to utilize the LDA analysis from the fourth quarter of 2019 as the correlation of the LDA was higher.
•Probability of default – PD is the probability that an asset will be in default within a given time frame. Park has defined default to be when a charge-off has occurred, a loan losses: is placed on nonaccrual, or a loan is greater than 90 days past due. Whenever possible, Park utilizes its own loan-level PDs for the reasonable and supportable forecast period. When loan-level data is not available reflecting the forecasted economic conditions, a forecast model is utilized to estimate PDs.
•Loss factorsgiven default – LGD is the percentage of the asset not expected to be collected due to default. Whenever possible, Park utilizes its own loan-level LGDs for the reasonable and supportable forecast period. When it is not possible to use Park's own LGDs, the LGD is derived using a method referred to as Frye Jacobs.
•Prepayments and curtailments – Prepayments and curtailments are reviewed quarterlycalculated based on Park’s own data utilizing a three-year average. This analysis is updated annually in the fourth quarter and updated at least annually to reflect recent loan loss history and incorporate current risks and trends which may not be recognized in historical data. The historical loss factors werewas last updated in the fourth quarter of 20162022.
•Forecast and reversion – Park has established a one-year reasonable and supportable forecast period with a one-year straight line reversion to incorporate losses throughthe long-term historical average.
•Economic forecast - Park utilizes a third party to provide economic forecasts under various scenarios, which are weighted in order to reflect model risk in the current economic environment. The scenario weighting is evaluated by management on a quarterly basis.
◦As of December 31, 2016.

The allowance for loan losses related to performing commercial loans was $32.4 million or 1.23%2022, the "most likely" scenario forecasted Ohio unemployment between 4.14% and 4.36% during the next four quarters. In determining the appropriate weighting of the outstanding principal balance of performing commercial loans at September 30, 2017. At September 30, 2017, the coverage level within the commercial loan portfolio was approximately 3.12 years compared to 3.20 yearsscenarios at December 31, 2016. Historical loss experience, defined2022, management considered the range of forecasted unemployment as charge-offs plus changeswell as a number of economic indicators. The continued high level of inflation, historically low consumer confidence, rising interest rates, geopolitical conflict (including the conflict between Russia and Ukraine), and workforce and supply chain challenges continued to cause uncertainty as to the overall economic environment. Considering these factors, management determined it was appropriate to maintain the existing weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at December 31, 2022.
◦As of March 31, 2023 the "most likely" scenario forecasted Ohio unemployment between 4.15% and 4.51% during the next four quarters. In determining the appropriate weighting of scenarios at March 31, 2023, management considered the range of forecasted unemployment as well as a number of economic indicators. The continued high level of inflation, historically low consumer confidence, rising interest rates, financial system stress related to recent bank failures, geopolitical conflict, and workforce challenges continued to cause uncertainty as to the overall economic environment. Considering these factors, management determined it was appropriate to maintain the existing weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at March 31, 2023.

Qualitative Considerations
Park reviews various internal and external factors to consider the need for any qualitative adjustments to the quantitative model. Factors considered include the following:
•The nature and volume of Park’s financial assets; the existence, growth, and effect of any concentrations of credit and the volume and severity of past due financial assets, the volume of nonaccrual assets, and the volume and severity of adversely classified or graded assets. Specifically, management considers:
◦Trends (e.g., growth, reduction) in specific reserves, over the 84 month period ended December 31, 2016, for the commercial loan portfolio was 0.39%. This 84-month loss experience includes only the performance of the PNB loan portfolio and excludes the impact of PNB participations in Vision loans.

The overall reserve of 1.23% for accruing commercial loans breaks down as follows: pass-rated commercial loans are reserved at 1.22%; special mention commercial loans are reserved at 2.99%; and substandard commercial loans are reserved at 15.71%. The reserve levels for pass-rated, special mention and substandard commercial loans in excess of the 84-month loss experience of 0.39% are due to the following factors which management reviews on a quarterly or annual basis:

Loss Emergence Period Factor: At least annually, management calculates the loss emergence period for each commercial loan segment. Each loss emergence period is calculated based upon the average period of time it takes from the probable occurrence of a loss event to a credit being moved to nonaccrual status. If the loss emergence period for any commercial loan segment is greater than one year, management applies additional general reserves to all performing loans within that segment of the commercial loan portfolio. The loss emergence periods were last updated in the fourth quarter of 2016.
Loss Migration Factor: Park’s commercial loans are individually risk graded. If loan downgrades occur, the probability of default increases, and accordingly, management allocates a higher percentage reserve to those accruing commercial loans graded special mention and substandard. Annually, management calculates a loss migration factor for each commercial loan segment for special mention and substandard credits based on a review of losses over the period of time a loan takes to migrate from pass-rated to impaired. The loss migration factors were last updated in the fourth quarter of 2016.
Environmental Loss Factor: Management has identified certain macroeconomic factors that trend in accordance with losses in Park’s commercial loan portfolio. These macroeconomic factors are reviewed quarterly and the adjustments made to the environmental loss factor impacting each segment in the performing commercial loan portfolio correlate to changes in the macroeconomic environment.
Generally, consumer loans are not individually graded. Consumer loans include: (1) mortgage and installment loans included in the construction real estate segmentcategories of the loan portfolio; (2) mortgage, home equity lines of credit ("HELOC"), and installment loans included in the residential real estate segment of the loan portfolio; and (3) all loans included in the consumer segment of the loan portfolio. The amount of loan loss reserve assigned to these loans is based on historical loss experience over the past 84 months, through December 31, 2016. Management generally considers a one-year coverage period (the “Historical Loss Factor”) appropriate because the probable loss on any given loan in the consumer loan pool should ordinarily become apparent in that time frame. However, management may incorporateportfolio, as well as adjustments to the Historical Loss Factor as circumstances warrant additional reserves (e.g., increasedtypes of loans offered by Park.
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◦Level of and trend in loan delinquencies, improving or deteriorating economic conditions,troubled loans, commercial watch list loans and nonperforming loans.
◦Level of and trend in new nonaccrual loans.
◦Level of and trend in loan charge-offs and recoveries.
•Park's lending policies and procedures, including changes in lending management and changes instrategies, underwriting standards etc.). At September 30, 2017, the coverage level within the consumer loan portfolio was approximately 1.90 years compared to 1.95 years at December 31, 2016. Historical loss experience, over the 84-month period ended December 31, 2016,and practices for the consumer loan portfolio was 0.35%.collections, write-offs, and recoveries.

•The quality of Park’s credit review function.
•The judgmental increases discussed above incorporate management’s evaluation of the impact of environmental qualitative factors which pose additional risks and assignment of a component of the allowance for loan losses in consideration of these factors. Such environmental qualitative factors include: global, national and local economic trends and conditions; experience, ability, and depth of Park’s lending, investment, collection, and other relevant management and staff; effectsstaff.
•The effect of anyother external factors such as the regulatory, legal and technological environments; competition; geopolitical conflict; and events such as natural disasters or pandemics.
•Actual and expected changes in lending policiesinternational, national, regional, and procedures;local economic and levelsbusiness conditions and developments in the markets in which Park operates that affect the collectibility of financial assets.
•Where the U.S. economy is within a given credit cycle.
•The extent that there is government assistance (stimulus).

As of March 31, 2023 and trendsDecember 31, 2022, Park had $3.4 million and $4.2 million, respectively, of PPP loans which were included in consumer bankruptcies, delinquencies, impairedthe commercial, financial and agricultural portfolio segment. These loans are guaranteed by the SBA and charge-offsthus have not been reserved for using the same methodology as the rest of Park’s loan portfolio. A 10 basis point reserve at both March 31, 2023 and recoveries. The determination of this component of the allowanceDecember 31, 2022 was calculated for loan losses requires considerable management judgment. Actual loss experience may be more or less than the amount allocated.these loans to reflect minimal credit risk.


Other Income
 
Other income increaseddecreased by $1.6$7.3 million to $22.1$24.4 million for the quarter ended September 30, 2017,March 31, 2023, compared to $20.5$31.7 million for the thirdfirst quarter of 2016 and increased by $2.2 million to $58.8 million2022.

The decrease for the ninethree months ended September 30, 2017,March 31, 2023 compared to $56.7 million for the same periodthree months ended March 31, 2022 was primarily due to decreases in income from fiduciary activities, other service income, other components of 2016.net periodic pension benefit income, miscellaneous income, and a change in (loss) gain on equity securities, net, partially offset by increases in service charges on deposit accounts and debit card fee income.


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

 
Three months ended
September 30,
 Nine months ended
September 30,		Three months ended
March 31,
(In thousands) 2017 2016 Change 2017 2016 Change(In thousands)20232022Change
Income from fiduciary activities $5,932
 $5,315
 $617
 $17,471
 $15,866
 $1,605
Income from fiduciary activities$8,615 $8,797 $(182)
Service charges on deposit accounts 3,216
 3,800
 (584) 9,511
 10,798
 (1,287)Service charges on deposit accounts2,241 2,074 167 
Other service income 3,357
 3,640
 (283) 9,608
 9,565
 43
Other service income2,697 4,819 (2,122)
Check card fee income 3,974
 3,780
 194
 11,775
 11,180
 595
Debit card fee incomeDebit card fee income6,457 6,126 331 
Bank owned life insurance income 1,573
 1,038
 535
 3,790
 3,284
 506
Bank owned life insurance income1,185 1,175 10 
ATM fees 605
 581
 24
 1,708
 1,734
 (26)ATM fees533 532 1 
OREO valuation adjustments (22) (233) 211
 (367) (572) 205
Gain on sale of OREO, net 51
 783
 (732) 204
 1,079
 (875)
Loss on sale of OREO, netLoss on sale of OREO, net(9)— (9)
OREO valuation markupOREO valuation markup15 30 (15)
(Loss) gain on equity securities, net(Loss) gain on equity securities, net(405)2,353 (2,758)
Other components of net periodic pension benefit incomeOther components of net periodic pension benefit income1,893 3,027 (1,134)
Miscellaneous 3,403
 1,831
 1,572
 5,147
 3,726
 1,421
Miscellaneous1,165 2,723 (1,558)
Total other income $22,089
 $20,535
 $1,554
 $58,847
 $56,660
 $2,187
Total other income$24,387 $31,656 $(7,269)
 
The following table breaks out the change in total otherOther service income for the three and nine months ended September 30, 2017 compared to the same periods ended September 30, 2016 between Park’s Ohio-based operations and SEPH.

  Change from 2016 to 2017 for the three months ended September 30 Change from 2016 to 2017 for the nine months ended September 30
(In thousands) Ohio-based operations SEPH Total Ohio-based operations SEPH Total
Income from fiduciary activities $617
 $—
 $617
 $1,605
 $—
 $1,605
Service charges on deposit accounts (584) —
 (584) (1,287) —
 (1,287)
Other service income (357) 74
 (283) 252
 (209) 43
Check card fee income 194
 —
 194
 595
 —
 595
Bank owned life insurance income 535
 —
 535
 506
 —
 506
ATM fees 24
 —
 24
 (26) —
 (26)
OREO valuation adjustments 211
 —
 211
 205
 —
 205
Gain on sale of OREO, net 10
 (742) (732) (67) (808) (875)
Miscellaneous 1,619
 (47) 1,572
 1,286
 135
 1,421
Total other income $2,269
 $(715) $1,554
 $3,069
 $(882) $2,187

Income from fiduciary activities, which represents revenue earned from Park’s trust activities, increaseddecreased by $617,000,$2.1 million, or 11.6%44.0%, to $5.9$2.7 million for the three months ended September 30, 2017,March 31, 2023, compared to $5.3$4.8 million for the same period of 2022. The primary reasons for the decrease for the three months ended March 31, 2023 compared to the same period of 2022 were a decrease in fee income related to mortgage loan originations to be sold in the secondary market of $1.6 million and a decrease in mortgage servicing rights income of $731,000. Mortgage origination volume decreased by $98.9 million, or 61.8%, to $61.2 million for the three months ended March 31, 2023 from $160.1 million for the three months ended March 31, 2022.

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(Loss) gain on equity securities, net, changed by $2.8 million, to a net loss of $405,000 for the three months ended March 31, 2023, compared to a net gain of $2.4 million for the same period in 2016. Fiduciary income increased by $1.62022. The $2.8 million or 10.1%,change for the three months ended March 31, 2023 compared to $17.5the three months ended March 31, 2022 was related to $2.8 million change in the gain (loss) on equity securities held at NAV which went from a net gain of $2.4 million for the ninethree months ended September 30, 2017,March 31, 2022 to a net loss of $377,000 for the the three months ended March 31, 2023.

Other components of net periodic pension benefit income decreased $1.1 million to $1.9 million for the three months ended March 31, 2023 compared to $15.9$3.0 million for the same period in 2016. Fiduciary fees charged are generally based2022. The decrease was largely due to a decrease in the expected return on the market value of customer accounts. The average market value forplan assets under management for the nine months ended September 30, 2017 was $4,976and an increase in interest cost.

Miscellaneous income decreased $1.6 million, compared to $4,501 million for the nine months ended September 30, 2016.

Service charges on deposit accounts decreased by $584,000, or 15.4%57.2%, to $3.2$1.2 million for the three months ended September 30, 2017,March 31, 2023 compared to $3.8$2.7 million for the same period of 2016. Service charges on deposits decreased by $1.3 million, or 11.9%, to $9.5 million2022. The decrease for the nine monthsthree-month period ended September 30, 2017,March 31, 2023 compared to $10.8 million for the same period of 2016. The2022 was primarily a result of decreases were primarily related to declines in NSF fee income and the discontinuation of daily overdraft fees related to deposit products.


Check card fee income, which is generated from debit card transactions, increased by $194,000, or 5.1%, to $4.0 million for the three months ended September 30, 2017, compared to $3.8 million for the same period in 2016. Check card fee income increased by $595,000, or 5.3%, to $11.8 million for the nine months ended September 30, 2017, compared to $11.2 million for the same period in 2016. The increases were primarily related to an increase in the volume of debit card transactions.

Bank owned life insurance income increased by $535,000, or 51.5%, to $1.6 million for the three months ended September 30, 2017, compared to $1.0 million for the same period in 2016. Bank owned life insurance income increased by $506,000, or 15.4%, to $3.8 million for the nine months ended September 30, 2017, compared to $3.3 million for the same period in 2016. The increases were related tobrokerage income of $478,000 related$212,000 and operating lease income of $191,000, as well as a decrease of $434,000 in wire transfer and ACH fees as a result of the reclassification of these fees to proceeds from death benefits receivedservice charges on deposit accounts. Also contributing to the decline in miscellaneous income was a decrease in gains on sales of assets. During the first quarter of 2022, a branch location was sold, resulting in a gain of $731,000. There were no comparable sales during the three months ended September 30, 2017.first quarter of 2023.


Gain on sale of OREO, net decreased by $732,000, or 93.5%, to $51,000 for the three months ended September 30, 2017, compared to $783,000 for the same period in 2016. Gain on sale of OREO, net decreased by $875,000, or 81.1%, to $204,000 for the nine months ended September 30, 2017, compared to $1.1 million for the same period in 2016. The book value on OREO sales for the three months ended September 30, 2017 was $593,000, compared to $3.1 million for the same period of 2016. The book value on OREO sales for the nine months ended September 30, 2017 was $2.1 million, compared to $5.9 million for the same period of 2016.

Miscellaneous income increased by $1.6 million, or 85.9%, to $3.4 million for the three months ended September 30, 2017, compared to $1.8 million for the same period in 2016. Miscellaneous income increased by $1.4 million, or 38.1%, to $5.1 million, compared to $3.7 million for the same period of 2016. The increase is mainly related to an $832,000 increase in income from certain equity investments and a $738,000 increase in the timing of income from check card incentives.

Other Expense


Other expense increased by $3.1$9.1 million to $49.8$76.5 million for the quarterthree months ended September 30, 2017,March 31, 2023 compared to $46.8 million for the third quarter of 2016 and increased by $3.4 million to $145.4 million for the nine months ended September 30, 2017, compared to $142.0$67.3 million for the same period of 2016.2022.


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


 Three months ended
March 31,
(In thousands)20232022Change
Salaries$34,871 $30,521 $4,350 
Employee benefits10,816 10,499 317 
Occupancy expense3,353 3,214 139 
Furniture and equipment expense3,246 2,937 309 
Data processing fees8,750 7,504 1,246 
Professional fees and services7,221 5,858 1,363 
Marketing1,319 1,317 2 
Insurance1,814 1,405 409 
Communication1,037 890 147 
State tax expense1,278 1,192 86 
Amortization of intangible assets327 402 (75)
Miscellaneous2,471 1,634 837 
Total other expense$76,503 $67,373 $9,130 
  
Three months ended
September 30,
 
Nine months ended
September 30,
(In thousands) 2017 2016 Change 2017 2016 Change
Salaries $23,302
 $22,084
 $1,218
 $69,020
 $64,894
 $4,126
Employee benefits 4,656
 5,073
 (417) 14,756
 14,740
 16
Occupancy expense 2,559
 2,506
 53
 7,759
 7,693
 66
Furniture and equipment expense 3,868
 3,437
 431
 11,126
 10,296
 830
Data processing fees 1,919
 1,450
 469
 5,560
 4,040
 1,520
Professional fees and services 6,100
 6,356
 (256) 16,947
 18,424
 (1,477)
Marketing 1,122
 1,062
 60
 3,262
 3,246
 16
Insurance 1,499
 1,423
 76
 4,586
 4,272
 314
Communication 1,110
 1,154
 (44) 3,598
 3,728
 (130)
State tax expense 912
 895
 17
 2,918
 2,619
 299
Miscellaneous 2,764
 1,316
 1,448
 5,847
 8,009
 (2,162)
Total other expense $49,811
 $46,756
 $3,055
 $145,379
 $141,961
 $3,418

The following table breaks out the change in total other expense for the three and nine months ended September 30, 2017, compared to the same periods ended September 30, 2016 between Park’s Ohio-based operations and SEPH.
  Change from 2016 to 2017 for the three months ended September 30 Change from 2016 to 2017 for the nine months ended September 30
(In thousands) Ohio based operations SEPH Total Ohio based operations SEPH Total
Salaries $1,232
 $(14) $1,218
 $4,146
 $(20) $4,126
Employee benefits (402) (15) (417) 60
 (44) 16
Occupancy expense 53
 —
 53
 66
 —
 66
Furniture and equipment expense 431
 —
 431
 830
 —
 830
Data processing fees 469
 —
 469
 1,520
 —
 1,520
Professional fees and services 452
 (708) (256) (139) (1,338) (1,477)
Marketing 60
 —
 60
 19
 (3) 16
Insurance 76
 —
 76
 316
 (2) 314
Communication (43) (1) (44) (127) (3) (130)
State tax expense 53
 (36) 17
 355
 (56) 299
Miscellaneous 1,467
 (19) 1,448
 (2,112) (50) (2,162)
Total other expense $3,848
 $(793) $3,055
 $4,934
 $(1,516) $3,418


Salaries increased by $1.2$4.4 million, or 5.5%14.3%, to $23.3$34.9 million for the three months ended September 30, 2017,March 31, 2023, compared to $22.1$30.5 million for the same period in 2016. Salaries increased by $4.1 million, or 6.4%, to $69.0 million for the nine months ended September 30, 2017, compared to $64.9 million for the same period in 2016.2022. The increase for the three months ended September 30, 2017March 31, 2023 compared to the same period of 2022 was due to an $1.1increase of $3.5 million in base salary expense as full-time equivalent employees increased from 1,679 as of March 31, 2022 to 1,766 as of March 31, 2023. Also contributing to the increase in salary expense and a $329,000the first quarter of 2023 compared to the same period in 2022 was an increase in share-basedlong term incentive expense of $356,000, and an increase in officer incentive compensation expense related to performance-based restricted stock unit awards granted under the 2013 Incentive Plan,of $875,000, partially offset by a $244,000 decrease in incentive compensation expense. The increase for the nine months ended September 30, 2017 was due to a $3.9 million increase in salary expense and a $926,000 increase in share-basedadditional compensation expense related to performance-based restricted stock unit awards granted under the 2013 Incentive Plan, offset by a $731,000 decrease in incentive compensation expense.of $449,000.


Furniture and equipment expenseEmployee benefits increased by $431,000,$317,000, or 12.5%3.0%, to $3.9$10.8 million for the three months ended September 30, 2017,March 31, 2023, compared to $3.4$10.5 million for the same period in 2016,2022. The $317,000 increase for the three months ended March 31, 2023 compared to the same period in 2022 was primarily due to an increase in group insurance costs of $337,000 and increased payroll tax expense of $646,000, partially offset by $830,000,decreased pension plan expense of $878,000.

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Data processing expense increased $1.2 million, or 8.1%16.6%, to $11.1$8.8 million for the ninethree months ended September 30, 2017,March 31, 2023 compared to $10.3$7.5 million for the same period in 2016.2022. The increasesincrease for the threethree-month period ended March 31, 2023 compared to the same period in 2022 related to a $938,000 increase in software expenses and nine months ended September 30, 2017 were primarily due to maintenancea $262,000 increase in debit card processing costs.

Professional fees and repairs on equipment.

Data processing feesservices expense increased by $469,000,$1.4 million, or 32.3%23.3%, to $1.9$7.2 million for the three months ended September 30, 2017,March 31, 2023 compared to $1.5$5.8 million for the same period in 2016. Data processing2022. The increase for the three-month period ended March 31, 2023 compared to the same period in 2022 related to a $314,000 increase in director fees, a $347,000 increase in management consulting fees, and a $198,000 increase in legal expenses, as well as smaller increases in credit services expense, temporary wages, and other fees, partially offset by decreases in filing fees, appraisal costs, recruiting expenses, and supervisory examination costs.

Insurance expense increased by $1.5 million,$409,000, or 37.6%29.1%, to $5.6$1.8 million for the ninethree months ended September 30, 2017,March 31, 2023 compared to $4.0$1.4 million for the same period in 2016.2022. The increasesincrease for the three-month period ended March 31, 2023 compared to the period ended March 31, 2022 related to an increase in FDIC assessments.

The subcategory "miscellaneous" other expense includes expenses for supplies, travel and other miscellaneous expense. The subcategory miscellaneous other expense increased $837,000, or 51.2%, to $2.5 million for the three-month period ended March 31, 2023, compared to the same period in 2022. The $837,000 increase in expense for the three and nine months ended September 30, 2017 wereMarch 31, 2023 compared to the three months ended March 31, 2022 was primarily related to an increase in travel expense of $328,000, and an increase of $626,000 in the provision for the allowance for unfunded credit losses, partially offset by a $186,000 decrease in operating lease depreciation.

Items Impacting Comparability

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


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The following table details those items which management believes impact the comparability of current and related card costs, plus an increase in debit card transactions.prior period amounts.


Professional fees and services decreased by $256,000, or 4.0%, to $6.1 million for the three months ended September 30, 2017, compared to $6.4 million for the same period in 2016. Professional fees and services decreased by $1.5 million, or 8.0%, to $16.9 million for the nine months ended September 30, 2017, compared to $18.4 million for the same period in 2016. The decreases for the three months and nine months ended September 30, 2017 were primarily due to an overall decrease in legal and consulting expenses.
THREE MONTHS ENDED
(in thousands)March 31, 2023March 31, 2022Affected Line Item
Net interest income$92,198 $77,686 
less purchase accounting accretion related to NewDominion and Carolina Alliance acquisitions200 477 Interest and fees on loans
less purchase accounting accretion related to NewDominion and Carolina Alliance acquisitions— 3 Interest on deposits
less interest income on former Vision Bank relationships574 42 Interest and fees on loans
Net interest income - adjusted$91,424 $77,164 
Provision for (recovery of) credit losses$183 $(4,605)
less recoveries on former Vision Bank relationships(723)(1)Provision for (recovery of) credit losses
Provision for (recovery of) credit losses - adjusted$906 $(4,604)
Total other income$24,387 $31,656 
less other service income related to former Vision Bank relationships135 — Other service income
Total other income - adjusted$24,252 $31,656 
Total other expense$76,503 $67,373 
less direct expenses related to collection of payments on former Vision Bank loan relationships100 — Professional fees and services
less core deposit intangible amortization related to NewDominion and Carolina Alliance acquisitions327 402 Amortization of intangible assets
Total other expense - adjusted$76,076 $66,971 
Tax effect of adjustments to net income identified above (7)
$(253)$(25)
Net income - reported$33,733 $38,875 
Net income - adjusted (6)
$32,781 $38,779 
Diluted EPS$2.07 $2.38 
Diluted EPS, adjusted (6)
$2.01 $2.37 
Annualized return on average assets (1)(2)
1.36 %1.60 %
Annualized return on average assets, adjusted (1)(2)(6)
1.32 %1.60 %
Annualized return on average tangible assets (1)(2)(4)
1.38 %1.63 %
Annualized return on average tangible assets, adjusted (1)(2)(4)(6)
1.34 %1.63 %
Annualized return on average shareholders' equity (1)(2)
12.54 %14.26 %
Annualized return on average shareholders' equity, adjusted (1)(2)(6)
12.19 %14.23 %
Annualized return on average tangible equity (1)(2)(3)
14.78 %16.80 %
Annualized return on average tangible equity, adjusted (1)(2)(3)(6)
14.36 %16.76 %
Efficiency ratio (5)
65.10 %61.16 %
Efficiency ratio, adjusted (5)(6)
65.24 %61.08 %
Annualized net interest margin (5)
4.08 %3.55 %
Annualized net interest margin, adjusted (5)(6)
4.04 %3.53 %




Miscellaneous expense increased by $1.4 million, or 110.0%, to $2.8 million for the three months ended September 30, 2017, compared to $1.3 million for the same period
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Table of 2016. Miscellaneous expense decreased by $2.2 million, or 27.0%, to $5.8 million for the nine months ended September 30, 2017, compared to $8.0 million for the same periodContents


Financial Reconciliations
(1) Reported measure uses net income.
(2) Averages are for the three months ended March 31, 2023 and March 31, 2022, as appropriate.
(3) Net income for each period divided by average tangible equity during the period. Average tangible equity equals average shareholders' equity during the applicable period less average goodwill and other intangible assets during the applicable period.
RECONCILIATION OF AVERAGE SHAREHOLDERS' EQUITY TO AVERAGE TANGIBLE EQUITY:
THREE MONTHS ENDED
March 31, 2023March 31, 2022
AVERAGE SHAREHOLDERS' EQUITY$1,090,952 $1,105,540 
Less: Average goodwill and other intangible assets165,457 166,918 
AVERAGE TANGIBLE EQUITY$925,495 $938,622 
(4) Net income for each period divided by average tangible assets during the period. Average tangible assets equals average assets less average goodwill and other intangible assets, in each case during the applicable period.
RECONCILIATION OF AVERAGE ASSETS TO AVERAGE TANGIBLE ASSETS
THREE MONTHS ENDED
March 31, 2023March 31, 2022
AVERAGE ASSETS$10,058,880 $9,825,382 
Less: Average goodwill and other intangible assets165,457 166,918 
AVERAGE TANGIBLE ASSETS$9,893,423 $9,658,464 
(5) Efficiency ratio is calculated by dividing total other expense by the sum of fully taxable equivalent net interest income and other income. Fully taxable equivalent net interest income reconciliation to net interest income is shown below assuming a 21% federal corporate income tax rate. Additionally, net interest margin is calculated on a fully taxable equivalent basis by dividing fully taxable equivalent net interest income by average interest earning assets, in each case during the applicable period.
RECONCILIATION OF FULLY TAXABLE EQUIVALENT NET INTEREST INCOME TO NET INTEREST INCOME
THREE MONTHS ENDED
March 31, 2023March 31, 2022
Interest income$110,901 $81,146 
FTE adjustment926 819 
FTE interest income$111,827 $81,965 
Interest expense18,703 3,460 
FTE net interest income$93,124 $78,505 
(6) Adjustments to net income for each period presented are detailed in the non-GAAP reconciliations of net interest income, provision for (recovery of) credit losses, total other income, and total other expense, as well as the disclosure of the "Tax effect of adjustments to net income identified above."
(7) The tax effect of adjustments to net income was calculated assuming a 21% federal corporate income tax rate.
(8) Pre-tax, pre-provision ("PTPP") net income is calculated as net income, plus income taxes, plus the provision for (recovery of) credit losses, in each case during the applicable period. PTPP net income is a common industry metric utilized in capital analysis and review. PTPP is used to assess the operating performance of Park while excluding the impact of the provision for (recovery of) credit losses.
RECONCILIATION OF PRE-TAX, PRE-PROVISION NET INCOME
THREE MONTHS ENDED
March 31, 2023March 31, 2022
Net income$33,733 $38,875 
Plus: Income taxes6,166 7,699 
Plus: Provision for (recovery of) credit losses183 (4,605)
Pre-tax, pre-provision net income$40,082 $41,969 
82
Table of 2016.  The increase for the three months ended September 30, 2017 was due to a $1.5 million increase in contribution expense. The decrease for the nine months ended September 30, 2017 was due to the fact that miscellaneous expense for the nine months ended September 30, 2016 included $1.7 million in accruals due to the ongoing evaluation of litigation and other proceedings impacting the GFSC subsidiary and the Parent Company. Additionally, there was a $822,000 decrease in non-loan related losses for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016.Contents



Income Tax
 
Federal incomeIncome tax expense was $8.4 million for the third quarter of 2017, compared to $12.2 million for the third quarter of 2016. The effective federal income tax rate for the third quarter of 2017 was 27.6%, compared to 30.8% for the same period in 2016. Federal income tax expense was $23.6$6.2 million for the first nine monthsquarter of 2017, compared2023 and consisted of federal income tax expense of $6.4 million and state income tax benefits of $234,000, as the result of a refund. This compares to $28.2income tax expense of $7.7 million for the first nine monthsquarter of 2016.2022 which consisted of federal income tax expense of $7.4 million and state income tax expense of $305,000. The effective federal income tax rate for the first nine monthsquarter of 20172023 was 27.8%15.5%, compared to 29.9%16.5% for the same period in 2016. 2022.

The difference between the statutory federal corporate income tax rate of 35%21% and Park’sPark's effective income tax rate is due toreflects permanent tax differences, primarily consisting of tax-exempt interest income from municipal investments and loans, the tax benefit of investments in qualified affordable housing projects, federal historic preservationand historical tax credits, bank owned life insurance income, and dividends paid on the common shares held within Park’s salary deferral plan.Park's KSOP, offset by the impact of state income taxes. Park expects permanent federal income tax differences for the 20172023 year will be approximately $8.3$6.7 million.

Park and its Ohio-based affiliates do not pay state income taxes to the state

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Table of Ohio, but Park pays a franchise tax based on Park's year-end equity. The franchise tax expense is included in “state taxes” as part of other expense on Park’s Consolidated Condensed Statements of Income.Contents




Comparison of Financial Condition
At September 30, 2017March 31, 2023 and December 31, 20162022
 
Changes in Financial Condition
 
Total assets increased by $395.1$2.0 million or 5.3%, during the first ninethree months of 20172023 to $7,863$9,857 million at September 30, 2017,March 31, 2023, compared to $7,468$9,855 million at December 31, 2016.2022. This increase was primarily due to the following:


•Cash and cash equivalents increased by $303.9$72.2 million, or 38.0%, to $450.4$261.9 million at September 30, 2017,March 31, 2023, compared to $146.4$189.7 million at December 31, 2016.2022. Money market instruments represented the majority of this increase,increased by $82.8 million and were $331.5cash and due from banks decreased by $10.6 million.
•Total investment securities decreased by $20.4 million, or 1.1%, to $1,800 million at September 30, 2017,March 31, 2023, compared to $23.6$1,821 million at December 31, 2016. Management has increased cash balances in anticipation of the maturity of $350 million of long-term debt in November of 2017.2022.
•Loans increaseddecreased by $94.0$48.0 million, or 1.8%0.7%, to $5,366$7,094 million at September 30, 2017,March 31, 2023, compared to $5,272$7,142 million at December 31, 2016.2022.

Total liabilities increaseddecreased by $378.0$10.9 million, or 5.6%0.1%, during the first ninethree months of 20172023 to $7,103$8,775 million at September 30, 2017, from $6,725March 31, 2023, compared to $8,786 million at December 31, 2016.2022. This decrease was primarily due to the following:

•Short-term borrowings decreased by $55.3 million, or 24.3%, to $172.1 million at March 31, 2023, compared to $227.3 million at December 31, 2022 due to a decrease in securities sold under agreements to repurchase.
•Other liabilities decreased by $11.7 million, or 14.9%, to $67.2 million at March 31, 2023, compared to $78.9 million at December 31, 2022. This was primarily related to a decrease in accrued expenses payable.
•Total deposits increased by $59.7 million, or 0.7%, to $8,294 million at March 31, 2023, compared to $8,235 million at December 31, 2022. During 2020, Park made the decision to participate in an OWS program in order to manage the balance sheet. At March 31, 2023 and December 31, 2022, Park had $164.6 million and $195.9 million, respectively, in off-balance sheet deposits.

Total shareholders’ equity increased by $12.9 million, or 1.2%, to $1,082 million at March 31, 2023, from $1,069 million at December 31, 2022. This increase was primarily due to the following:


Total deposits increased•Accumulated other comprehensive loss, net of taxes changed by $452.4$12.4 million, or 8.2%, to $5,974 million at September 30, 2017, compared to $5,522from a negative $102.4 million at December 31, 2016. The increase in deposits in the first nine months of 2017 was largely the result of the product offering for Promontory's Insured Cash Sweep ("ICS") deposits.
Short-term borrowings decreased by $201.9 million, or 51.1%,2022, to $192.9a negative $90.0 million at September 30, 2017,March 31, 2023, and is largely comprised of unrealized net holding losses on debt securities AFS, net of taxes, of $83.4 million at March 31, 2023 compared to $394.8unrealized net holding losses on debt securities AFS, net of of taxes of $95.7 million at December 31, 2016.2022.
Long-term borrowings increased by $154.7 million, or 22.3%, to $849.0 million at September 30, 2017, compared to $694.3 million at December 31, 2016.
Total shareholders’ equity increased by $17.1 million, or 2.3%, to $759.4 million at September 30, 2017, from $742.2 million at December 31, 2016.

•Retained earnings increased by $17.8$15.3 million during the period primarily as a result of net income of $61.4$33.7 million, partially offset by cash dividends on common share dividendsshares of $43.4$17.3 million.
•Treasury shares increased by $6.7$11.7 million during the period as a result of the repurchase of 124,000 treasury shares, in the total amount of $7.4 million,partially offset by the issuance of treasury shares under share-based compensation awards (net of $0.6 million.common shares withheld to pay employee income taxes).
Accumulated other comprehensive loss, net of taxes decreased during the period as a result of unrealized net holding gains on securities available for sale, net of taxes, of $4.7 million.

Increases or decreases in the investment securities portfolio, short-term borrowings and long-term debt are greatly dependent upon the growth in loans and deposits. The primary objective of management is to grow loan and deposit totals. To the extent that management is unable to grow loan totals at a desired growth rate, additional investment securities may be acquired. Likewise, both short-term borrowings and long-term debt are utilized to fund the growth in earning assets if the growth in deposits and cash flow from operations are not sufficient to do so.

Liquidity


Cash provided by operating activities was $66.7$24.4 million and $57.8$28.3 million for the ninethree months ended September 30, 2017March 31, 2023 and 2016,2022, respectively. Net income was the primary source of cash from operating activities for each of the nine monthsthree-month periods ended September 30, 2017March 31, 2023 and 2016.2022.

Cash provided by investing activities was $78.7 million and cash used in investing activities was $82.4$40.0 million for the ninethree months ended September 30, 2017March 31, 2023 and cash provided by investing activities was $80.0 million for the nine months ended September 30, 2016.2022, respectively. Proceeds from the sale, repayment, or maturity of investment securities provide cash and purchases of investment securities use cash. Net investment securities transactions provided cash of $15.0$34.8 million for the ninethree months ended September 30, 2017March 31, 2023 and $191.2used cash of $76.0 million for the ninethree months ended September 30, 2016.March 31, 2022. Another major use or source of cash in investing activities is the net increase or decrease in the loan portfolio. Cash usedprovided by
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the net increasedecrease in the loan portfolio was $95.8 million and $109.1$50.2 million for the ninethree months ended September 30, 2017March 31, 2023 and 2016, respectively.$52.5 million for the three months ended March 31, 2022.

Cash used in financing activities was $30.9 million and cash provided by financing activities was $319.6$39.4 million for the ninethree months ended September 30, 2017March 31, 2023 and cash used by financing activities was $47.2 million for the nine months ended September 30, 2016.2022, respectively. A major source of cash for financing activities is the net change in deposits. Deposits (net of off-balance sheet deposits) increased and provided $452.4$59.7 million and $172.0$91.8 million of cash for the nine

three months ended September 30, 2017March 31, 2023 and 2016,2022, respectively. Another major sourcesource/use of cash from financing activities is borrowings in the form of short-term borrowings, long-term debt and long-term debt.subordinated notes. For the ninethree months ended September 30, 2017,March 31, 2023, net short-term borrowings decreased and used $201.9 million in cash, net long-term borrowings increased and provided $150.0 million in cash and the repayment of subordinated notes used $30.0$55.3 million in cash. For the ninethree months ended September 30, 2016,March 31, 2022, net short-term borrowings decreased and used $176.0$32.9 million in cash. For the three months ended March 31, 2023, cash and net long-term borrowings remained unchanged.declined by $15.3 million due to the repurchase of common shares to be held as treasury shares; while there were no repurchases of common shares during the three months ended March 31, 2022. Finally, cash declined by $43.1$17.4 million and $43.2$17.1 million respectively, for each of the ninethree months ended September 30, 2017March 31, 2023 and 2016,2022, respectively, from the payment of dividends.

Effective liquidity management ensures that the cash flow requirements of depositors and borrowers, as well as the operating cash needs of the Corporation, are met. Funds are available from a number of sources, including the capital markets, the investment securities portfolio, the core deposit base, Federal Home Loan BankFHLB borrowings and the capability to securitize or package loans for sale,sale. The most easily accessible forms of liquidity, Fed Funds Sold, off balance sheet deposits, unpledged investment securities and a $10.0 million revolving line of credit with another financial institution, which did not have an outstanding balance as of September 30, 2017.available FHLB borrowing capacity, totaled $2.74 billion at March 31, 2023. The Corporation’s loan to asset ratio was 68.24%71.97% at September 30, 2017,March 31, 2023, compared to 70.60%72.47% at December 31, 20162022 and 70.44%71.23% at September 30, 2016.March 31, 2022. Cash and cash equivalents were $450.4$261.9 million at September 30, 2017,March 31, 2023, compared to $146.4$189.7 million at December 31, 20162022 and $240.0$246.9 million at September 30, 2016.March 31, 2022. Management believes that the present funding sources provide more than adequate liquidity for the Corporation to meet its cash flow needs.
  
Capital Resources
 
Shareholders’Total shareholders’ equity at September 30, 2017March 31, 2023 was $759.4$1,082.2 million, or 9.7%11.0% of total assets, compared to $742.2$1,069.2 million, or 9.9%10.9% of total assets, at December 31, 20162022 and $751.1$1,076.4 million, or 10.2%11.2% of total assets, at September 30, 2016.March 31, 2022.
 
Financial institution regulators have established guidelines for minimum capital ratios for banks, thrifts and bank holding companies. Park has elected not to include the net unrealized gain or loss on available-for-saledebt securities AFS in computing regulatory capital. During the first quarter of 2015, Park has adopted the Basel III regulatory capital framework as approved by the federal banking agencies. The adoption of this framework modifiedUnder the calculation of the variousBasel III regulatory capital ratios, added a new ratio, common equity tier 1, and revised the adequately and well capitalized thresholds. Additionally, under this framework, in order to avoid limitations on capital distributions, including dividend payments and stock repurchases, of common shares,and certain discretionary bonus payments to executive officers, Park must hold a capital conservation buffer of 2.5% above the adequately capitalized risk-based capital ratios. The capital conservation buffer is being phased in from 0.0% for 2015 to 2.50% by 2019. The capital conservation buffer for 2017 is 1.25%. The amounts shown below as the adequately capitalized ratio plus capital conservation buffer includesinclude the fully phased-in 2.50% buffer. The Federal Reserve Board has also adopted capital requirements Park must maintain to be deemed "well capitalized" and remain a financial holding company.

Park and PNB met each of the well capitalized ratio guidelines applicable to them at September 30, 2017.March 31, 2023. The following table indicates the capital ratios for PNB and Park at September 30, 2017March 31, 2023 and December 31, 2016.2022.

At March 31, 2023
 LeverageTier 1
Risk-Based		Common Equity Tier 1Total
Risk-Based
The Park National Bank8.61 %10.89 %10.89 %12.31 %
Park National Corporation10.17 %12.91 %12.72 %16.26 %
Adequately capitalized ratio4.00 %6.00 %4.50 %8.00 %
Adequately capitalized ratio plus capital conservation buffer4.00 %8.50 %7.00 %10.50 %
Well capitalized ratio (PNB)5.00 %8.00 %6.50 %10.00 %
Well capitalized ratio (Park)N/A6.00 %N/A10.00 %

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As of September 30, 2017At December 31, 2022
Leverage 
Tier 1
Risk-Based
 Common Equity Tier 1 
Total
Risk-Based
 LeverageTier 1
Risk-Based		Common Equity Tier 1Total
Risk-Based
The Park National Bank7.06% 10.18% 10.18% 11.63%The Park National Bank8.34 %10.69 %10.69 %12.15 %
Park National Corporation9.08% 13.03% 12.76% 14.07%Park National Corporation9.90 %12.76 %12.57 %16.07 %
Adequately capitalized ratio4.00% 6.00% 4.50% 8.00%Adequately capitalized ratio4.00 %6.00 %4.50 %8.00 %
Adequately capitalized ratio plus capital conservation buffer4.00% 8.50% 7.00% 10.50%Adequately capitalized ratio plus capital conservation buffer4.00 %8.50 %7.00 %10.50 %
Well capitalized ratio (PNB only)5.00% 8.00% 6.50% 10.00%
Well capitalized ratio (PNB)Well capitalized ratio (PNB)5.00 %8.00 %6.50 %10.00 %
Well capitalized ratio (Park)Well capitalized ratio (Park)N/A6.00 %N/A10.00 %

 As of December 31, 2016
 Leverage 
Tier 1
Risk-Based
 Common Equity Tier 1 
Total
Risk-Based
The Park National Bank7.34% 10.09% 10.09% 11.49%
Park National Corporation9.56% 13.11% 12.83% 14.63%
Adequately capitalized ratio4.00% 6.00% 4.50% 8.00%
Adequately capitalized ratio plus capital conservation buffer4.00% 8.50% 7.00% 10.50%
Well capitalized ratio (PNB only)5.00% 8.00% 6.50% 10.00%




Contractual Obligations and Commitments
 
In the ordinary course of operations, Park enters into certain contractual obligations. Such obligations include the funding of operations through debt issuances as well as leases for premises. See page 4379 of Park’s 2016 Annual Report2022 Form 10-K (Table 36)39) for disclosure concerning contractual obligations and commitments at December 31, 2016.2022. There were no significant changes in contractual obligations and commitments during the first ninethree months of 2017.2023.
 
Financial Instruments with Off-Balance Sheet Risk
 
PNB is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include loan commitments and standby letters of credit. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated financial statements.
 
The exposure to credit loss (for PNB) in the event of nonperformance by the other party to the financial instrument for loan commitments and standby letters of credit is represented by the contractual amount of those instruments. PNB uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Since many of the loan commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan commitments to customers.
 
The total amounts of off-balance sheet financial instruments with credit risk were as follows:


(In thousands) September 30,
2017		 December 31, 2016(In thousands)March 31,
2023		December 31, 2022
Loan commitments $910,949
 $912,007
Loan commitments$1,450,247 $1,416,699 
Standby letters of credit $11,107
 $13,746
Standby letters of credit$32,292 $30,468 
 

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Management reviews interest rate sensitivity on a monthlyquarterly basis by modeling the consolidated financial statements under various interest rate scenarios. The primary reason for these efforts is to guard Park from adverse impacts of unforeseen changes in interest rates. With the rise in interest rates experienced throughout 2022 and continuing into 2023, Park is now more exposed to an adverse impact to earnings in a down rate environment. Management continuesactively monitors changes in the sensitivity position and has ample tools to believe thatadjust exposure as needed. As a result, management expects further changes in interest rates willto have a smallmodest impact on net income, consistent with the disclosure on page 42 of Park’s 2016 Annual Report.income.
 
On page 4278 (Table 35)38) of Park’s 2016 Annual Report,2022 Form 10-K, management reported that Park’s twelve-month cumulative rate sensitivity gap was a positive (assets exceeding liabilities) $198.6$1,087 million or 2.89%11.9% of total interest earning assets at December 31, 2016.2022. At September 30, 2017,March 31, 2023, Park’s twelve-month cumulative rate sensitivity gap was a positive (assets exceeding liabilities) $450.8$860.3 million or 6.20%9.44% of total interest earning assets.
 
Management supplements the interest rate sensitivity gap analysis with periodic simulations of balance sheet sensitivity under various interest rate and what-if scenarios to better forecast and manage the net interest margin. Management uses a 50 basis
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point change in market interest rates per quarter for a total of 200 basis points per year in evaluating the impact of changing interest rates on net interest income and net income over a twelve-month horizon.
 
On page 4279 of Park’s 2016 Annual Report,2022 Form 10-K, management reported that at December 31, 2016,2022, the earnings simulation model projected that net income would decreaseincrease by 1.9%3.7% using a rising interest rate scenario and decrease by 6.3%5.4% using a declining interest rate scenario over the next year. At September 30, 2017,March 31, 2023, the earnings simulation model projected that net income would decreaseincrease by 2.6% using a rising interest rate scenario and would decrease by 5.1%3.2% in a declining interest rate scenario. At September 30, 2017,March 31, 2023, management continues to believe that it has the tools necessary to mitigate gradual changes in interest rates (50 basis points per quarter for a total of 200 basis points per year) such that the overall impact to net income will have a small impact on net income.be modest.
 
ITEM 4 – CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures
 
With the participation of the Chairman of the Board and Chief Executive Officer and President (the principal executive officer) and the Chief Financial Officer, Secretary and Treasurer (the principal financial officer) of Park, Park’s management has evaluated the effectiveness of Park’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of theMarch 31, 2023 (the end of the quarterly period covered by this Quarterly Report on Form 10-Q.10-Q). Based on that evaluation, Park’s Chairman of the Board and Chief Executive Officer and President and Park’s Chief Financial Officer, Secretary and Treasurer have concluded that:
 
•information required to be disclosed by Park in this Quarterly Report on Form 10-Q and the other reports that Park files or submits under the Exchange Act would be accumulated and communicated to Park’s management, including its principal executive officer and its principal financial officer, as appropriate to allow timely decisions regarding required disclosure;
•information required to be disclosed by Park in this Quarterly Report on Form 10-Q and the other reports that Park files or submits under the Exchange Act would be recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and
•Park’s disclosure controls and procedures were effective as of theMarch 31, 2023 (the end of the quarterly period covered by this Quarterly Report on Form 10-Q.10-Q).


Changes in Internal Control Over Financial Reporting

There were no changes in Park’sPark's internal control over financial reporting (as defined in Rule 13a-5(f)13a-15(f) under the Exchange Act) that occurred during Park’sPark's fiscal quarter ended September 30, 2017,March 31, 2023, that have materially affected, or are reasonably likely to materially affect, Park’sPark's internal control over financial reporting.



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PART II – OTHER INFORMATION


Item 1.       Legal Proceedings


The Company is    We are routinely engaged in various litigation and other legal matters. These include defending against claims of improper loan, deposit account, and other banking practices, as well as trust and investment, intellectual property, contract, and other legal matters, and we have a defendant innumber of unresolved lawsuits and other adversary proceedings arisingopen matters pending resolution. In addition, we are parties to litigation involving the collection of delinquent accounts, challenges to security interests in thecollateral, foreclosure lawsuits, and similar matters which are part of, or incidental to, our ordinary course of business. Legal costs incurred in connection withWhile the resolution of claims and lawsuits are generally expensed as incurred, and the Company establishes accruals for the outcome of litigation where losses are deemed probable and reasonably estimable. The Company’s assessment of the current exposure could change in the event of the discovery of additional factsultimate liability with respect to these matters and claims cannot be determined at this time, we believe that losses, damages, or liabilities, if any, and other amounts relating to pending matters are not likely to be material to our consolidated financial position or results of operations. Reserves are established for these various litigation and other legal matters, pending againstwhen appropriate under FASB ASC Topic 450, Contingencies, based in part upon the Company or determinations by judges, juries, administrative agencies or other findersadvice of fact that are not in accordance with the Company’s evaluation of claims.legal counsel.



Item 1A.     Risk Factors
 
There are certain risks and uncertainties in our business that could cause ourPark's actual results to differ materially from those anticipated. In “ITEM 1A. RISK FACTORS” of Part I of Park’s Annual Report on2022 Form 10-K, for the fiscal year ended December 31, 2016 (the “2016 Form 10-K”), we included a detailed discussion of our risk factors. In the first quarter of 2023, we identified one additional risk factor and updated an existing risk factor, described below. All of these risk factors should be read carefully in connection with evaluating ourPark's business and in connection with the forward-looking statements contained in this Quarterly Report on Form 10-Q. Any of the risks described in the 2016Park's 2022 Form 10-K or in this Quarterly Report on Form 10-Q could materially adversely affect our business, financial condition or future results and the actual outcome of matters as to which forward-looking statements are made. These are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.


The impact of larger or similar-sized financial institutions encountering problems may adversely affect Park's business, earnings and financial condition.

Park is exposed to the risk that when a peer financial institution experiences financial difficulties, there could be an adverse impact on the regional banking industry and the business environment in which Park operates. The recent bank failures of Silicon Valley Bank in California, Signature Bank in New York, and First Republic Bank in California during the first and second quarters of 2023 have caused a degree of panic and uncertainty in the investor community and among bank customers generally. While Park does not believe that the circumstances of these three banks' failures are indicators of broader issues with the banking system, the failures may reduce customer confidence, affect sources of funding and liquidity, increase regulatory requirements and costs, adversely affect financial markets and/or have a negative reputational ramification for the financial services industry, including Park. Park will continue to monitor the ongoing events concerning these three banks as well as any future potential bank failures and volatility within the financial services industry generally, together with any responsive measures taken by the banking regulators to mitigate or manage potential turmoil in the financial services industry.

We may become subject to additional requirements and restrictions imposed by the DOJ.

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

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

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

Although Park and Park National Bank are committed to full compliance with the DOJ Consent Order, achieving such compliance will require significant management attention from Park and may cause Park to incur unanticipated costs and expenses. Actions taken to achieve compliance with the DOJ Consent Order may affect Park’s financial performance and may require us to reallocate resources away from existing businesses or to undertake significant changes to our businesses, operations, products and services, and risk management practices. In addition, Park and Park National Bank could be subject to other enforcement actions relating to the alleged violations resolved by the DOJ Consent Order

Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds


(a)Not applicable
(b)Not applicable
(c)The following table provides information concerning purchases of Park’s common shares made by or on behalf of Park or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended, during the three months ended September 30, 2017,
(a)Not applicable
(b)Not applicable
(c)The following table provides information concerning purchases of Park’s common shares ("Common Shares") made by or on behalf of Park or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Exchange Act, during the three months ended March 31, 2023, as well as the maximum number of common shares that may be purchased under Park’s previously announced stock repurchase authorization to fund the 2013 Long-Term Incentive Plan (the "2013 Incentive Plan"), which was replaced on April 24, 2017, the 2017 Long-Term Incentive Plan for Employees (the "2017 Employees LTIP") and the 2017 Long-Term Incentive Plan for Non-Employee Directors (the "2017 Non-Employee Directors LTIP") and Park's previously announced 2017 stock repurchase authorization:

Period 
Total number of
common shares
purchased
 
Average price
paid per
common
share
 
Total number of common
shares purchased as part of
publicly announced plans
or programs
 
Maximum number of
common shares that may
yet be purchased under the
plans or programs (1)
July 1 through July 31, 2017 —
 $—
 —
 1,400,000
August 1 through August 31, 2017 20,000
 97.64
 —
 1,380,000
September 1 through September 30, 2017 —
 —
 —
 1,380,000
Total 20,000
 $97.64
 —
 1,380,000
(1)The number shown represents, as of the end of each period, the maximum number of common shares that may yet be purchased as part of Park’s publicly announced stock repurchase authorization to fund the 2017 Employees LTIP which became effective on April 24, 2017, the 2017 Non-Employee Directors LTIP which became effective on April 24, 2017 and Park's publicly announced 2017 stock repurchase authorization which became effective on January 23, 2017.
At the 2013 Annual Meeting of Shareholders held on April 22, 2013, Park's shareholders approved the 2013 Incentive Plan. The aggregate number of common shares with respect to which awards couldCommon Shares that may be grantedpurchased under the 2013 Incentive Plan was 600,000. The common shares to be issued and delivered under the 2013 Incentive Plan were to consist of either common shares currently held or common shares subsequently acquired by Park as treasury shares. As of April 24, 2017, the date on which the 2013 Incentive Plan was replaced with respect to the grant of future awards as discussed below, there were outstanding performance-based restrictedPark’s previously announced stock unit awards covering a maximum of 119,587 common shares and 429,889 common shares available for future grants. As of April 24, 2017, Park held sufficient treasury shares to satisfy the outstanding awards under the 2013 Incentive Plan and, as a result, no additional common shares are to be repurchased in orderrepurchase authorizations to fund the 20132017 Long-Term Incentive Plan.Plan for Employees (the "2017 Employees LTIP") and the 2017 Long-Term Incentive Plan for Non-Employee Directors (the "2017 Non-Employee Directors LTIP") and Park's previously announced 2017 and 2019 stock repurchase authorizations:
PeriodTotal number of
Common Shares
purchased		Average price
paid per
Common
Share		Total number of Common
Shares purchased as part of
publicly announced plans
or programs		Maximum number of
Common Shares that may
yet be purchased under the
plans or programs (1)
January 1 through January 31, 2023— $— — 1,195,088 
February 1 through February 28, 2023— — — 1,195,088 
March 1 through March 31, 2023124,000 123.44 124,000 1,071,088 
Total124,000 $123.44 124,000 1,071,088 

(1)The number shown represents, as of the end of each period, the maximum number of Common Shares that may yet be purchased as part of Park’s publicly announced stock repurchase authorizations to fund the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP, both of which became effective on April 24, 2017; Park's publicly announced stock repurchase authorization covering 500,000 Common Shares which was announced on January 23, 2017; and Park's stock repurchase authorization covering 500,000 Common Shares which was announced on January 28, 2019 and as to which approval from the Federal Reserve was obtained in the form of correspondence from the Federal Reserve Bank of Cleveland dated April 19, 2019.
At the 2017 Annual Meeting of Shareholders held on April 24, 2017, Park's shareholders approved the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP. The common sharesCommon Shares to be issued and delivered under the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP may consist of either common sharesCommon Shares currently held or common sharesCommon Shares subsequently acquired by Park as treasury shares. No newly-issued common sharesCommon Shares will be delivered under the 2017 Employees LTIP or the 2017 Non-Employee Directors LTIP. On April 24, 2017, Park's Board of Directors authorized the purchase, from time to time, of up to 750,000 Park common sharesCommon Shares and 150,000 common shares,Park Common Shares, respectively, to be held as treasury shares for subsequent issuance and delivery under the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP.


The 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP have replaced the provisions of the 2013 Incentive Plan with respect to the grant of future awards. As a result of the approval of the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP, Park will not grant any additional awards under the 2013 Incentive Plan after April 24, 2017. Awards made under the 2013 Incentive Plan prior to April 24, 2017 will remain in effect in accordance with their respective terms.

On January 23, 2017, Park announced that on that same day, the Park Board of Directors authorized Park to purchase, from time to time, up to an aggregate of 500,000 Park Common Shares. On January 28, 2019, Park announced that on that same
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day, the Park Board of Directors authorized Park to repurchase, from time to time following receipt of any required approval from the Federal Reserve, up to 500,000 Park Common Shares in addition to the 500,000 Park Common Shares which had been authorized for repurchase by the Park Board of Directors on January 23, 2017 and remained available for repurchase as of January 28, 2019. The required approval was received by Park in the form of correspondence from the Federal Reserve Bank of Cleveland dated April 19, 2019.
    Purchases may be made through NYSE American, in the over-the-counter market or in privately negotiated transactions, in each case in compliance with the Ohio General Corporation Law, applicable lawsfederal and regulations andstate securities laws, the rules applicable to issuers having securities listed on NYSE American.American, regulations promulgated by the Federal Reserve Board and all other applicable laws and regulations, each as in effect at the time of each such purchase. Purchases will be made upon such terms and conditions and at such times and in such amounts as any one or more of the authorized officers of Park deem to be appropriate, subject to market conditions, regulatory requirements, any contractual obligations of Park and Park's subsidiaries and other factors, and in the best interest of Park and Park's shareholders. The January 23, 2017 stock repurchase authorization isand the January 28, 2019 stock repurchase authorization are distinct from the stock repurchase authorizationauthorizations to fund the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP.


Item 3.      Defaults Upon Senior Securities
 
(a), (b) Not applicable.



Item 4.      Mine Safety Disclosures
 
Not applicable.


Item 5.      Other Information
 
(a), (b), (c) Not applicable.



Item 6.      Exhibits
3.1(a)Articles of Incorporation of Park National Corporation as filed with the Ohio Secretary of State on March 24, 1992 (Incorporated herein by reference to Exhibit 3(a) to Park National Corporation’s Form 8-B, filed on May 20, 1992 (File No. 0-18772) (“Park’s Form 8-B”)) P
3.1(b)Certificate of Amendment to the Articles of Incorporation of Park National Corporation as filed with the Ohio Secretary of State on May 6, 1993 (Incorporated herein by reference to Exhibit 3(b) to Park National Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (File No. 0-18772)) P
3.1(c)
3.1(d)
3.1(e)
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3.1(f)
3.1(g)
3.1(h)
3.1(i)
3.2(a)Regulations of Park National Corporation (Incorporated herein by reference to Exhibit 3(b) to Park’s Form 8-B)

P
3.2(b)
3.2(c)
3.2(d)
3.2(e)
3.2(f)
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3.2(g)
10.1
31.110.2
10.3
31.1
31.2
32.1
32.2
101The following information from Park’sPark National Corporation's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017March 31, 2023 formatted in Inline XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Condensed Balance Sheets as of September 30, 2017March 31, 2023 and December 31, 20162022 (unaudited); (ii) the Consolidated Condensed Statements of Income for the three and nine months ended September 30, 2017March 31, 2023 and 20162022 (unaudited); (iii) the Consolidated Condensed Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2017March 31, 2023 and 20162022 (unaudited); (iv) the Consolidated Condensed Statements of Changes in Shareholders’ Equity for the ninethree months ended September 30, 2017March 31, 2023 and 20162022 (unaudited); (v) the Consolidated Condensed Statements of Cash Flows for the ninethree months ended September 30, 2017March 31, 2023 and 20162022 (unaudited); and (vi) the Notes to Unaudited Consolidated Condensed Financial Statements (electronically submitted herewith). *
104Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document with applicable taxonomy extension information contained in Exhibit 101)


* The instance document does not appear in the interactive data file because its XBRL tags are imbedded within the Inline XBRL document.


P Park National Corporation filed this exhibit with the SEC in paper form originally and this exhibit has not been filed with the SEC in electronic format.
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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PARK NATIONAL CORPORATION
DATE: October 31, 2017May 1, 2023/s/ David L. Trautman
David L. Trautman
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer and PresidentDuly Authorized Officer)
May 1, 2023
DATE: October 31, 2017/s/ Brady T. Burt
Brady T. Burt
Chief Financial Officer, Secretary and Treasurer
(Principal Financial Officer and Duly Authorized Officer)





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