UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20212022
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
(Exact name of registrant as specified in its charter)
 
Ohio 31-1179518
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer Identification No.)
50 North Third Street,P.O. Box 3500Newark,Ohio43058-3500
(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   ☒   No   ☐

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

Yes  ☒   No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”,
“smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company    
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

 Yes   ☐   No   ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 16,219,57216,253,794 Common Shares, no par value per share, outstanding at November 2, 2021.July 29, 2022.




PARK NATIONAL CORPORATION
 
CONTENTS
 Page
PART I.   FINANCIAL INFORMATION 
  
Item 1.  Financial Statements 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  

3


Glossary of Abbreviations and Acronyms

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

AFSAvailable-for-saleLIBORLondon Inter-Bank Offered Rate
ACLAllowance for credit lossesMSRsMortgage servicing rights
AllowanceAllowance for credit lossesNAVNet asset value
AOCIAccumulated other comprehensive (loss) incomeNewDominionNewDominion Bank
ASCAccounting Standards CodificationOCIOther comprehensive (loss) income
ASUAccounting Standards UpdateOREOOther real estate owned
AUCLAllowance for unfunded credit lossesOWSOne-way sell
CABFCAB Financial Corporation and its subsidiariesParkPark National Corporation and its subsidiaries
CARES ActCoronavirus Aid, Relief, and Economic Security ActPBRSUsParkPerformance-based restricted stock unitsPark National Corporation and its subsidiaries
Carolina AllianceCAB Financial Corporation and its subsidiariesPCDPBRSUsPurchased credit deterioratedPerformance-based restricted stock units
CECLCurrent expected credit lossPCIPCDPurchased credit impaireddeteriorated
COVID-19Novel coronavirusPDProbability of default
DCFDiscounted cash flowPNBThe Park National Bank
FASBFinancial Accounting Standards BoardPPPCARES Act Paycheck Protection Program
FHLBFederal Home Loan BankROURight-of-use
FRBFederal Reserve BankSARsStock appreciation rights
GDPGross domestic productSBASmall Business Administration
GFSCGuardian Financial Services CompanySECU.S. Securities and Exchange Commission
HPIHome price indexSEPHSE Property Holdings, LLC
HPIHTMHome price indexHeld-to-maturityTBRSUsTime-based restricted stock units
HTMIRLCHeld-to-maturityInterest rate lock commitmentTDRsTroubled debt restructurings
IRLCKSOPInterest rate lock commitmentPark's qualified retirement plan that combines an employee stock ownership plan (ESOP) with a 401(k) planU.S. GAAPUnited States Generally Accepted Accounting Principles
LDALoss driver analysisU.S.United States
LGDLoss given default

4

Table of Contents


PARK NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets (Unaudited)
(in thousands, except share and per share data)    
                
September 30,
2021
December 31, 2020June 30,
2022
December 31, 2021
Assets:Assets:  Assets:  
Cash and due from banksCash and due from banks$127,685 $155,596 Cash and due from banks$171,114 $144,507 
Money market instrumentsMoney market instruments749,710 214,878 Money market instruments75,327 74,673 
Cash and cash equivalentsCash and cash equivalents877,395 370,474 Cash and cash equivalents246,441 219,180 
Investment securities:Investment securities:  Investment securities:  
Debt securities available-for-sale, at fair value (amortized cost of $1,519,098 and $1,007,834 at September 30, 2021 and December 31, 2020, respectively, and no allowance for credit losses at September 30, 2021)1,553,218 1,059,341 
Debt securities available-for-sale, at fair value (amortized cost of $1,939,877 and $1,727,363 at June 30, 2022 and December 31, 2021, respectively, and no allowance for credit losses at June 30, 2022 and December 31, 2021)Debt securities available-for-sale, at fair value (amortized cost of $1,939,877 and $1,727,363 at June 30, 2022 and December 31, 2021, respectively, and no allowance for credit losses at June 30, 2022 and December 31, 2021)1,839,103 1,754,140 
Other investment securitiesOther investment securities56,085 65,465 Other investment securities81,621 61,268 
Total investment securitiesTotal investment securities1,609,303 1,124,806 Total investment securities1,920,724 1,815,408 
Commercial loans held for saleCommercial loans held for sale6,321  
LoansLoans6,908,417 7,177,785 Loans6,958,685 6,871,122 
Allowance for credit lossesAllowance for credit losses(88,129)(85,675)Allowance for credit losses(81,448)(83,197)
Net loansNet loans6,820,288 7,092,110 Net loans6,877,237 6,787,925 
Bank owned life insuranceBank owned life insurance215,401 216,225 Bank owned life insurance219,579 215,792 
Prepaid assetsPrepaid assets116,228 103,523 Prepaid assets152,573 144,124 
GoodwillGoodwill159,595 159,595 Goodwill159,595 159,595 
Other intangible assetsOther intangible assets7,882 9,260 Other intangible assets6,657 7,462 
Premises and equipment, netPremises and equipment, net88,909 88,660 Premises and equipment, net85,531 89,008 
Affordable housing tax credit investmentsAffordable housing tax credit investments60,457 56,024 Affordable housing tax credit investments54,751 58,711 
OREOOREO813 1,431 OREO1,354 775 
Accrued interest receivableAccrued interest receivable23,628 24,926 Accrued interest receivable26,457 23,413 
Operating lease right-of-use assetOperating lease right-of-use asset13,426 15,078 Operating lease right-of-use asset16,314 13,446 
Mortgage loan servicing rightsMortgage loan servicing rights14,556 12,210 Mortgage loan servicing rights16,470 15,264 
OtherOther26,137 4,699 Other36,666 10,151 
Total assetsTotal assets$10,034,018 $9,279,021 Total assets$9,826,670 $9,560,254 

5

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PARK NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets (Unaudited) (Continued)
(in thousands, except share and per share data)
September 30,
2021
December 31, 2020
Liabilities and Shareholders' Equity:  
Deposits:  
Non-interest bearing$2,981,928 $2,727,100 
Interest bearing5,382,457 4,845,258 
Total deposits8,364,385 7,572,358 
Short-term borrowings235,979 342,230 
Long-term debt 32,500 
Subordinated notes188,099 187,774 
Unfunded commitments in affordable housing tax credit investments33,116 29,298 
Operating lease liability14,480 16,053 
Allowance for credit losses on off-balance sheet commitments4,642 116 
Accrued interest payable1,330 3,860 
Unsettled investment commitments52,508 — 
Other71,567 54,576 
Total liabilities$8,966,106 $8,238,765 
Shareholders' equity:  
Preferred shares (200,000 shares authorized; 0 shares issued)$ $— 
Common shares (No par value; 20,000,000 shares authorized; 17,623,132 shares issued at September 30, 2021 and 17,623,163 shares issued at December 31, 2020)459,953 460,687 
Retained earnings759,619 704,764 
Treasury shares (1,416,955 shares at September 30, 2021 and 1,308,966 shares at December 31, 2020)(143,850)(130,766)
Accumulated other comprehensive (loss) income, net of taxes(7,810)5,571 
Total shareholders' equity1,067,912 1,040,256 
Total liabilities and shareholders’ equity$10,034,018 $9,279,021 

June 30,
2022
December 31, 2021
Liabilities and Shareholders' Equity:  
Deposits:  
Non-interest bearing$3,057,977 $3,066,419 
Interest bearing5,239,677 4,838,109 
Total deposits8,297,654 7,904,528 
Short-term borrowings171,799 238,786 
Subordinated notes188,435 188,210 
Unfunded commitments in affordable housing tax credit investments21,232 28,484 
Operating lease liability17,067 14,339 
Allowance for credit losses on off-balance sheet commitments4,131 4,282 
Accrued interest payable3,080 3,116 
Other73,259 67,750 
Total liabilities$8,776,657 $8,449,495 
Shareholders' equity:  
Preferred shares (200,000 shares authorized; No shares issued)$ $— 
Common shares (No par value; 20,000,000 shares authorized; 17,623,104 shares issued at June 30, 2022 and 17,623,118 shares issued at December 31, 2021)460,645 461,800 
Retained earnings814,241 776,294 
Treasury shares (1,373,798 shares at June 30, 2022 and 1,403,555 shares at December 31, 2021)(139,469)(142,490)
Accumulated other comprehensive (loss) income, net of taxes(85,404)15,155 
Total shareholders' equity1,050,013 1,110,759 
Total liabilities and shareholders’ equity$9,826,670 $9,560,254 

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
6

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PARK NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Income (Unaudited)
(in thousands, except share and per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
 2021202020212020
Interest and dividend income:  
Interest and fees on loans$78,127 $82,617 $238,040 $243,459 
Interest and dividends on:  
Obligations of U.S. Government sponsored entities' and other securities - taxable4,904 4,841 13,760 15,398 
Obligations of states and political subdivisions - tax-exempt2,029 2,045 6,098 6,396 
Other interest income360 63 689 667 
Total interest and dividend income85,420 89,566 258,587 265,920 
Interest expense:  
Interest on deposits:  
Demand and savings deposits435 803 1,222 8,652 
Time deposits1,011 2,662 3,880 10,293 
Interest on borrowings:  
Short-term borrowings187 217 552 912 
Long-term debt2,185 2,044 6,746 4,754 
Total interest expense3,818 5,726 12,400 24,611 
Net interest income81,602 83,840 246,187 241,309 
Provision for (recovery of) credit loss1,972 13,836 (6,923)31,213 
Net interest income after provision for (recovery of) credit loss79,630 70,004 253,110 210,096 
Other income:  
Income from fiduciary activities8,820 7,335 25,562 21,241 
Service charges on deposit accounts2,389 2,118 6,475 6,322 
Other service income6,668 13,047 23,444 25,571 
Debit card fee income6,453 5,853 19,297 16,373 
Bank owned life insurance income1,462 1,192 3,776 3,619 
ATM fees622 491 1,807 1,341 
Gain (loss) on sale of OREO, net3 569 (26)1,214 
Net (loss) gain on sale of debt securities (27) 3,286 
Gain (loss) on equity securities, net609 1,201 2,886 (749)
Other components of net periodic pension benefit income2,038 1,988 6,114 5,964 
Miscellaneous3,347 2,791 8,403 5,826 
Total other income32,411 36,558 97,738 90,008 

Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
Interest and dividend income:  
Interest and fees on loans$77,787 $81,176 $150,203 $159,913 
Interest and dividends on:  
Debt securities - taxable7,624 4,600 13,754 8,856 
Debt securities - tax-exempt2,676 2,032 5,123 4,069 
Other interest income260 186 413 329 
Total interest and dividend income88,347 87,994 169,493 173,167 
Interest expense:  
Interest on deposits:  
Demand and savings deposits1,333 401 1,684 787 
Time deposits708 1,285 1,428 2,869 
Interest on borrowings:  
Short-term borrowings190 182 434 365 
Long-term debt2,177 2,275 4,322 4,561 
Total interest expense4,408 4,143 7,868 8,582 
Net interest income83,939 83,851 161,625 164,585 
Provision for (recovery of) credit losses2,991 (4,040)(1,614)(8,895)
Net interest income after provision for (recovery of) credit losses$80,948 $87,891 163,239 173,480 
Other income:  
Income from fiduciary activities$8,859 $8,569 17,656 16,742 
Service charges on deposit accounts2,563 2,032 4,637 4,086 
Other service income4,940 7,159 9,759 16,776 
Debit card fee income6,731 6,758 12,857 12,844 
Bank owned life insurance income2,374 1,149 3,549 2,314 
ATM fees583 655 1,115 1,185 
Gain on equity securities, net709 467 3,062 2,277 
Other components of net periodic pension benefit income3,027 2,038 6,054 4,076 
Miscellaneous1,407 2,411 4,160 5,027 
Total other income$31,193 $31,238 $62,849 $65,327 
 

7

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PARK NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Income (Unaudited) (Continued)
(in thousands, except share and per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
 2021202020212020
Other expense:  
Salaries$29,433 $31,632 $89,632 $90,760 
Employee benefits10,640 10,676 30,897 29,799 
Occupancy expense3,211 3,835 9,878 10,571 
Furniture and equipment expense2,797 4,687 8,163 13,856 
Data processing fees7,817 3,275 22,679 8,344 
Professional fees and services6,973 7,977 19,610 21,944 
Marketing1,574 1,454 4,355 4,076 
Insurance1,403 1,541 4,370 4,568 
Communication796 958 2,688 2,987 
State tax expense1,113 1,125 3,324 3,386 
Amortization of intangible assets420 525 1,378 1,738 
Foundation contribution — 4,000 — 
Miscellaneous2,312 2,174 6,780 8,905 
Total other expense68,489 69,859 207,754 200,934 
Income before income taxes43,552 36,703 143,094 99,170 
Income taxes8,118 5,857 25,697 16,447 
Net income$35,434 $30,846 $117,397 $82,723 
Earnings per common share:
Basic$2.17 $1.89 $7.20 $5.07 
Diluted$2.16 $1.88 $7.14 $5.04 
Weighted average common shares outstanding:  
Basic16,292,312 16,300,720 16,315,996 16,300,250 
Diluted16,423,912 16,393,792 16,445,568 16,398,350 
Cash dividends declared per common share$1.03 $1.02 $3.29 $3.26 

Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
Other expense:  
Salaries$31,052 $30,303 $61,573 $60,199 
Employee benefits10,199 10,056 20,698 20,257 
Occupancy expense3,040 3,027 6,254 6,667 
Furniture and equipment expense2,934 2,756 5,871 5,366 
Data processing fees8,416 7,150 15,920 14,862 
Professional fees and services6,775 6,973 12,633 12,637 
Marketing1,019 1,290 2,336 2,781 
Insurance1,245 1,276 2,650 2,967 
Communication935 770 1,825 1,892 
State tax expense1,167 1,103 2,359 2,211 
Amortization of intangible assets403 479 805 958 
Foundation contribution 4,000  4,000 
Miscellaneous2,863 2,217 4,497 4,468 
Total other expense$70,048 $71,400 $137,421 $139,265 
Income before income taxes$42,093 $47,729 $88,667 $99,542 
Income taxes7,769 8,597 15,468 17,579 
Net income$34,324 $39,132 $73,199 $81,963 
Earnings per common share:
Basic$2.11 $2.39 $4.51 $5.02 
Diluted$2.10 $2.38 $4.48 $4.98 
Weighted average common shares outstanding:  
Basic16,249,307 16,340,690 16,234,598 16,327,838 
Diluted16,361,246 16,472,800 16,346,141 16,455,673 
Regular cash dividends declared per common share$1.04 $1.03 $2.08 $2.06 
Special cash dividends declared per common share$ $— — $0.20 
 
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 


8

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PARK NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Comprehensive (Loss) Income (Unaudited)
(in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
 2021202020212020
Net income$35,434 $30,846 $117,397 $82,723 
Other comprehensive (loss) income, net of tax:
Net loss (gain) realized on sale of securities, net of income tax effect of $6 for the three months ended September 30, 2020, and $(690) for the nine months ended September 30, 2020— 21 — (2,596)
Unrealized net holding (loss) gain on debt securities available-for-sale, net of income tax effect of $(1,328) and $55 for the three months ended September 30, 2021 and 2020, respectively, and $(3,650) and $7,109 for the nine months ended September 30, 2021 and 2020, respectively(4,997)207 (13,736)26,742 
Unrealized gain (loss) on cash flow hedging derivatives, net of income tax effect of $31 and $30 for the three months ended September 30, 2021 and 2020, respectively, and $94 and $(94) for the nine months ended September 30, 2021 and 2020, respectively117 111 355 (357)
Other comprehensive (loss) income$(4,880)$339 $(13,381)$23,789 
Comprehensive income$30,554 $31,185 $104,016 $106,512 

Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
Net income$34,324 $39,132 $73,199 $81,963 
Other comprehensive (loss) income, net of tax:
Unrealized net holding (loss) gain on debt securities available-for-sale, net of income tax effect of $(11,963) and $1,291 for the three months ended June 30, 2022 and 2021, respectively, and $(26,786) and $(2,323) for the six months ended June 30, 2022 and 2021, respectively.(45,002)4,858 (100,765)(8,739)
Reclassification adjustment for losses included in net income on cash flow hedging derivatives, net of income tax effect of $14 for both the three months and six months ended June 30, 2022.52 — 52 — 
Unrealized gain on cash flow hedging derivatives, net of income tax effect of $4 and $30 for the three months ended June 30, 2022 and 2021, respectively, and $41 and $63 for the six months ended June 30, 2022 and 2021, respectively.15 113 154 238 
Other comprehensive (loss) income$(44,935)$4,971 $(100,559)$(8,501)
Comprehensive (loss) income$(10,611)$44,103 $(27,360)$73,462 
 
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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Table of Contents


PARK NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Changes in Shareholders' Equity (Unaudited)
(in thousands, except share and per share data)
  
Preferred
Shares
Common
Shares
Retained
Earnings
Treasury
Shares
Accumulated
Other
Comprehensive
Income (Loss)
Balance at December 31, 2020$ $460,687 $704,764 $(130,766)$5,571 
Cumulative change in accounting principle(7,956)
Balance at January 1, 2021$ $460,687 $696,808 $(130,766)$5,571 
Net income42,831 
Other comprehensive loss, net of tax(13,472)
Dividends on common shares at $1.23 per share(20,365)
Cash payment for fractional common shares in dividend reinvestment plan(1)
Issuance of 21,764 common shares under share-based compensation awards, net of 14,108 common shares withheld to pay employee income taxes(3,988)(44)2,174 
Share-based compensation expense1,836 
Balance at March 31, 2021$ $458,534 $719,230 $(128,592)$(7,901)
Net income39,132 
Other comprehensive income, net of tax4,971 
Dividends on common shares at $1.03 per share(17,081)
Cash payment for fractional common shares in dividend reinvestment plan(2)
Issuance of 4,834 common shares under share-based compensation awards, net of 2,973 common shares withheld to pay employee income taxes(743)(126)483 
Share-based compensation expense1,487 
Balance at June 30, 2021$ $459,276 $741,155 $(128,109)$(2,930)
Net income35,434 
Other comprehensive loss, net of tax(4,880)
Dividends on common shares at $1.03 per share(16,999)
Cash payment for fractional common shares in dividend reinvestment plan(1)
Issuance of 3,079 common shares under share-based compensation awards, net of 1,348 common shares withheld to pay employee income taxes(495)29 307 
Repurchase of 137,659 common shares to be held as treasury shares(16,048)
Share-based compensation expense1,173 
Balance at September 30, 2021$ $459,953 $759,619 $(143,850)$(7,810)
Preferred
Shares
Common
Shares
Retained
Earnings
Treasury
Shares
Accumulated
Other
Comprehensive
Income (Loss)
Balance at December 31, 2021$ $461,800 $776,294 $(142,490)$15,155 
Net income38,875 
Other comprehensive loss, net of tax(55,624)
Dividends on common shares at $1.04 per share(17,172)
Cash payment for fractional common shares in dividend reinvestment plan(2)
Issuance of 29,757 common shares under share-based compensation awards, net of 18,658 common shares withheld to pay employee income taxes(4,508)(964)3,021 
Share-based compensation expense1,981 
Balance at March 31, 2022$ $459,271 $797,033 $(139,469)$(40,469)
Net income$34,324 
Other comprehensive loss, net of tax$(44,935)
Dividends on common shares at $1.04 per share$(17,116)
Share-based compensation expense1,374 
Balance at June 30, 2022$ $460,645 $814,241 $(139,469)$(85,404)

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PARK NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Changes in Shareholders' Equity (Unaudited) (Continued)
(in thousands, except share and per share data)
Preferred
Shares
Common
Shares
Retained
Earnings
Treasury
Shares
Accumulated
Other
Comprehensive
Income (Loss)
Balance at January 1, 2020$— $459,389 $646,847 $(127,633)$(9,589)
Net income  22,372 
Other comprehensive income, net of tax 17,693 
Dividends on common shares at $1.22 per share  (20,111)
Cash payment for fractional common shares in dividend reinvestment plan (1) 
Issuance of 25,028 common shares under share-based compensation awards, net of 11,646 common shares withheld to pay employee income taxes(3,865)528 2,500 
Repurchase of 76,000 common shares to be held as treasury shares(7,507)
Share-based compensation expense1,254 
Balance at March 31, 2020$— $456,777 $649,636 $(132,640)$8,104 
Net income29,505 
Other comprehensive income, net of tax5,757 
Dividends on common shares at $1.02 per share(16,837)
Issuance of 970 common shares under share-based compensation awards, net of 530 common shares withheld to pay employee income taxes(142)96 
Share-based compensation expense1,331 
Balance at June 30, 2020$— $457,966 $662,311 $(132,544)$13,861 
Net income30,846 
Other comprehensive income, net of tax339 
Dividends on common shares at $1.02 per share(16,821)
Issuance of 4,345 common shares under share-based compensation awards, net of 1,860 common shares withheld to pay employee income taxes(690)129 435 
Share-based compensation expense1,164 
Balance at September 30, 2020$— $458,440 $676,465 $(132,109)$14,200 
Preferred
Shares
Common
Shares
Retained
Earnings
Treasury
Shares
Accumulated
Other
Comprehensive
Income (Loss)
Balance at December 31, 2020$— $460,687 $704,764 $(130,766)$5,571 
   Cumulative change in accounting principle(7,956)
Balance at January 1, 2021$— $460,687 $696,808 $(130,766)$5,571 
Net income  42,831 
Other comprehensive loss, net of tax (13,472)
Dividends on common shares at $1.23 per share  (20,365)
Cash payment for fractional common shares in dividend reinvestment plan (1) 
Issuance of 21,764 common shares under share-based compensation awards, net of 14,108 common shares withheld to pay employee income taxes(3,988)(44)2,174 
Share-based compensation expense1,836 
Balance at March 31, 2021$— $458,534 $719,230 $(128,592)$(7,901)
Net income39,132 
Other comprehensive income, net of tax4,971 
Dividends on common shares at $1.03 per share(17,081)
Cash payment for fractional common shares in dividend reinvestment plan(2)
Issuance of 4,834 common shares under share-based compensation awards, net of 2,973 common shares withheld to pay employee income taxes(743)(126)483 
Share-based compensation expense1,487 
Balance at June 30, 2021$— $459,276 $741,155 $(128,109)$(2,930)

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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PARK NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows (Unaudited)
(in thousands)
Nine Months Ended September 30,Six Months Ended June 30,
20212020 20222021
Operating activities:Operating activities:  Operating activities:  
Net incomeNet income$117,397 $82,723 Net income$73,199 $81,963 
Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:  Adjustments to reconcile net income to net cash provided by operating activities:  
(Recovery of) provision for credit losses(6,923)31,213 
Recovery of credit lossesRecovery of credit losses(1,614)(8,895)
Accretion of loan fees and costs, netAccretion of loan fees and costs, net(20,601)(12,191)Accretion of loan fees and costs, net(7,132)(13,675)
Depreciation of premises and equipmentDepreciation of premises and equipment9,951 7,888 Depreciation of premises and equipment6,943 6,507 
Amortization of investment securities, netAmortization of investment securities, net1,442 1,064 Amortization of investment securities, net1,704 797 
Net accretion of purchase accounting adjustmentsNet accretion of purchase accounting adjustments(1,375)(2,005)Net accretion of purchase accounting adjustments(241)(985)
Realized net debt securities gains (3,286)
(Gain) loss on equity securities, net(2,886)749 
Gain on equity securities, netGain on equity securities, net(3,062)(2,277)
Loan originations to be sold in secondary marketLoan originations to be sold in secondary market(465,278)(697,555)Loan originations to be sold in secondary market(128,306)(336,984)
Proceeds from sale of loans in secondary marketProceeds from sale of loans in secondary market503,032 676,275 Proceeds from sale of loans in secondary market135,241 367,748 
Gain on sale of loans in secondary marketGain on sale of loans in secondary market(15,032)(14,707)Gain on sale of loans in secondary market(3,227)(11,007)
Share-based compensation expenseShare-based compensation expense4,496 3,749 Share-based compensation expense3,355 3,323 
Loss (gain) on sale of OREO, net26 (1,214)
Bank owned life insurance incomeBank owned life insurance income(3,776)(3,619)Bank owned life insurance income(3,549)(2,314)
Investment in qualified affordable housing tax credits amortizationInvestment in qualified affordable housing tax credits amortization5,567 5,487 Investment in qualified affordable housing tax credits amortization3,960 3,712 
Changes in assets and liabilities:Changes in assets and liabilities:  Changes in assets and liabilities:  
Increase in prepaid dealer premiumsIncrease in prepaid dealer premiums(3,370)(7,889)Increase in prepaid dealer premiums(4,795)(2,412)
Increase in other assetsIncrease in other assets(11,021)(5,794)Increase in other assets(2,182)(15,580)
Increase (decrease) in other liabilities986 (8,452)
(Decrease) increase in other liabilities(Decrease) increase in other liabilities(13,802)10,250 
Net cash provided by operating activitiesNet cash provided by operating activities$112,635 $52,436 Net cash provided by operating activities$56,492 $80,171 
Investing activities:Investing activities:  Investing activities:  
Proceeds from the redemption/repurchase of Federal Home Loan Bank stockProceeds from the redemption/repurchase of Federal Home Loan Bank stock$8,677 $7,639 Proceeds from the redemption/repurchase of Federal Home Loan Bank stock$ $6,549 
Proceeds from sales of investment securitiesProceeds from sales of investment securities934 312,159 Proceeds from sales of investment securities 934 
Proceeds from calls and maturities of:Proceeds from calls and maturities of:  Proceeds from calls and maturities of:  
Debt securities AFSDebt securities AFS176,926 164,725 Debt securities AFS102,660 119,177 
Purchases of:Purchases of:  Purchases of:  
Debt securities AFSDebt securities AFS(637,123)(267,210)Debt securities AFS(316,878)(437,800)
Equity securitiesEquity securities (3,567)Equity securities(2,630)— 
Net decrease in other investmentsNet decrease in other investments2,655 201 Net decrease in other investments339 2,611 
Net loan paydowns (originations), portfolio loans269,353 (727,387)
Net loan (originations) paydowns, portfolio loansNet loan (originations) paydowns, portfolio loans(90,982)133,037 
Proceeds from the sale of non-mortgage loansProceeds from the sale of non-mortgage loans3,688 — Proceeds from the sale of non-mortgage loans 3,688 
Investment in qualified affordable housing tax creditsInvestment in qualified affordable housing tax credits(6,182)(4,301)Investment in qualified affordable housing tax credits(7,252)(6,094)
Proceeds from the sale of OREOProceeds from the sale of OREO659 5,595 Proceeds from the sale of OREO67 659 
Life insurance death benefitsLife insurance death benefits4,862 1,196 Life insurance death benefits7,525 674 
Purchases of bank owned life insurancePurchases of bank owned life insurance(7,500) 
Purchases of premises and equipmentPurchases of premises and equipment(10,670)(20,820)Purchases of premises and equipment(3,740)(7,814)
Net cash used in investing activitiesNet cash used in investing activities$(186,221)$(531,770)Net cash used in investing activities$(318,391)$(184,379)
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PARK NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows (Unaudited) (Continued)
(in thousands)
Nine Months Ended September 30,
 20212020
Financing activities:  
Net increase in deposits$900,305 $1,196,684 
Net increase in OWS deposits(108,239)(773,273)
Net (decrease) increase in short-term borrowings(106,251)89,778 
Proceeds from issuance of subordinated notes 172,620 
Repayment of long-term debt(32,500)(57,500)
Value of common shares withheld to pay employee income taxes(2,403)(1,002)
Repurchase of common shares to be held as treasury shares(16,048)(7,507)
Cash dividends paid(54,357)(53,713)
Net cash provided by financing activities$580,507 $566,087 
Increase in cash and cash equivalents506,921 86,753 
Cash and cash equivalents at beginning of year370,474 159,956 
Cash and cash equivalents at end of period$877,395 $246,709 
Supplemental disclosures of cash flow information:  
Cash paid for:  
Interest$14,930 $24,600 
Federal income tax16,430 17,400 
Non-cash items:
Loans transferred to OREO$78 $1,124 
Right-of-use assets obtained in exchange for lease obligations547 7,794
New commitments in affordable housing tax credit investments10,000 10,000 
Debt securities AFS purchase commitment52,508 — 

PARK NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows (Unaudited) (Continued)
(in thousands)
Six Months Ended June 30,
 20222021
Financing activities:  
Net increase in deposits$219,870 $744,350 
Net decrease (increase) in off-balance sheet deposits173,261 (102,053)
Net decrease in short-term borrowings(66,987)(56,369)
Repayment of long-term debt (5,000)
Value of common shares withheld to pay employee income taxes(2,451)(2,244)
Cash dividends paid(34,533)(37,526)
Net cash provided by financing activities$289,160 $541,158 
Increase in cash and cash equivalents27,261 436,950 
Cash and cash equivalents at beginning of year219,180 370,474 
Cash and cash equivalents at end of period$246,441 $807,424 
Supplemental disclosures of cash flow information:  
Cash paid for:  
Interest$7,904 $9,050 
Federal income tax10,500 9,350 
Non-cash items:
Loans transferred to OREO$1,409 $78 
Transfers from loans to commercial loans held for sale6,321 — 
Right-of-use assets obtained in exchange for lease obligations4,182 180 
New commitments in affordable housing tax credits 10,000 
AFS debt securities purchase commitment 38,163 
New commitments in other investment securities15,000 — 

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-monthsix-month periods ended SeptemberJune 30, 20212022 are not necessarily indicative of the operating results to be anticipated for the year ending December 31, 2021.2022.
 
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 (loss) income, consolidated condensed statements of changes in shareholders’ equity and consolidated condensed statements of cash flows in conformity with U.S. GAAP. These financial statements should be read in conjunction with the consolidated financial statements included in Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA in the Annual Report on Form 10-K of Park National Corporation for the fiscal year ended December 31, 20202021 ("Park's 20202021 Form 10-K"). Certain prior period amounts have been reclassified to conform to the current period presentation.
 
Park’s significant accounting policies are described in Note 1. Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Park’s 20202021 Form 10-K. For interim reporting purposes, Park follows the same basic accounting policies, as updated by the information contained in this report, and considers each interim period an integral part of an annual period.

The COVID-19 pandemic has caused significant, unprecedented disruption around the world that has affected daily living and negatively impacted the global economy. Additionally, geopolitical conflict (including the conflict in Ukraine) and inflationary pressures have added uncertainty to the overall economic environment. The effects of the COVID-19 pandemic, geopolitical conflict, and inflationary pressures may meaningfully impact significant estimates such as the allowance for credit losses, goodwill, mortgage servicing rights, and pension plan obligations and related expenses. Additionally, the COVID-19 pandemic mayhas particularly impactimpacted certain loan concentrations in the hotels and accommodations, restaurants and food service, and strip shopping centers industries.

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

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

Adoption of New Accounting Pronouncements

ASU 2016-13Staff Accounting Bulletin ("SAB") No. 121 - Financial Instruments - Credit Losses (Topic 326): MeasurementIn March 2022, the SEC issued SAB No. 121. This SAB adds interpretive guidance for entities to consider when they have obligations to safeguard crypto-assets held for their platform users. Specifically, this SAB provides interpretive guidance on the accounting and disclosure of Credit Losses on Financial Instruments: Effective January 1, 2021, Park adoptedASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13") ("ASC 326"), as amended. The new accountingobligations to safeguard crypto-assets held for platform users. This guidance in ASU 2016-13 replaceswas applicable no later than the incurred loss methodology with an expected loss methodology, whichfinancial statement covering the first interim or annual period ending after June 15, 2022. Management has reviewed its business activities and determined that SAB 121 is referred to as the current expected credit loss ("CECL") methodology. The CECL methodology is applicablenot materially impactful to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables, HTM 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 by a lessor. The CECL methodology requires an entity to estimate credit losses over the life of an asset or off-balance sheet credit exposure. The new accounting guidance was to have originally been effective for Park for annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2019.

Section 4014 of the CARES Act provided financial institutions with optional temporary relief from having to comply with ASU 2016-13, including the CECL methodology for estimating the allowance for credit losses. This temporary relief was set to expire on the earlier of the date on which the national emergency concerning COVID-19 terminated or December 31, 2020, with adoption being effective retrospectivelystatements as of January 1, 2020.

Section 540 of the Consolidated Appropriations Act, 2021, amended Section 4014 of the CARES Act by extending the relief period provided in the CARES Act. The Consolidated Appropriations Act, 2021, modifies the CARES Act so that temporary
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relief will expire on the earlier of the first day of the fiscal year that begins after the date on which the national emergency concerning COVID-19 terminates or January 1,June 30, 2022.

Park elected to delay the implementation of ASU 2016-13 following the approval of the CARES Act and continued to use the incurred loss methodology for estimating the allowance for credit losses in 2020. ASU 2016-13 requires financial institutions to calculate an allowance utilizing a reasonable and supportable forecast period which Park has established as a one-year period. In the unprecedented circumstances surrounding the COVID-19 pandemic and the response thereto, Park believed that adopting ASU 2016-13 in the first quarter of 2020 would have added an unnecessary level of subjectivity and volatility to the calculation of the allowance for credit losses. With the approval of the Consolidated Appropriations Act, 2021, management elected to further delay adoption of ASU 2016-13 to January 1, 2021. This allowed Park to utilize the CECL standard for the entire year of adoption.

Park adopted ASU 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for reporting periods beginning after January 1, 2021 are presented under ASC 326, while prior period amounts continue to be reported in accordance with the then applicable U.S. GAAP. Park recorded a net decrease to retained earnings of $8.0 million as of January 1, 2021 for the cumulative effect of adopting ASC 326.

Park adopted ASC 326 using the prospective transition approach for financial assets PCD that were previously classified as PCI and accounted for under ASC 310-30. In accordance with ASC 326, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2021, the amortized cost basis of the PCD assets was adjusted to reflect the addition of $52,000 to the allowance for credit losses. The remaining noncredit discount (based on the adjusted amortized cost basis) will be accreted into interest income at the effective interest rate as of January 1, 2021.

As permitted by ASC 326, Park elected to maintain pools of loans accounted for under ASC 310-30. In accordance with ASC 326, management did not reassess whether modifications to individual acquired financial assets accounted for in pools were TDRs as of the date of adoption.

The following table illustrates the impact of ASC 326:

January 1, 2021
(In thousands)As Reported Under ASC 326Pre-ASC 326 AdoptionImpact of ASC 326 Adoption
Assets:
Loans$7,177,666 $7,177,785 $(119)
ACL on loans
Commercial, financial and agricultural17,351 25,608 (8,257)
Commercial real estate25,599 23,480 2,119 
Construction real estate5,390 7,288 (1,898)
Residential real estate14,484 11,363 3,121 
Consumer28,343 17,418 10,925 
Leases598 518 80 
Total ACL on loans$91,765 $85,675 $6,090 
Liabilities:
ACL on off-balance sheet commitments$3,982 $116 $3,866 
Net deferred tax liability$777 $2,892 $(2,115)
Shareholders' equity:$1,032,300 $1,040,256 $(7,956)


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ACL - Debt Securities AFS
For debt securities AFS in an unrealized loss position, Park first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For debt securities AFS that do not meet the aforementioned criteria, Park evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes.
Changes in the ACL are recorded as a provision for (or recovery of) credit loss expense. Losses are charged against the ACL when management believes that uncollectibility of a debt security AFS is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Accrued interest receivable on debt securities AFS totaled $5.3 million at September 30, 2021 and is excluded from the estimate of credit losses.

ACL - HTM Debt Securities
Management measures expected credit losses on HTM debt securities on a collective basis by major security type. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Park does not currently hold any HTM debt securities.

ACL - Loans
The ACL is a valuation account that is deducted from the amortized cost of total loans to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes that the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of the amounts previously charged-off and expected to be charged-off.

Management estimates the allowance balance using relevant and available information from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors.

Accrued interest receivable on loans totaled $18.4 million at September 30, 2021 and is excluded from the estimate of credit losses.

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ACL - Loans - Collectively Evaluated
The ACL is measured on a collective pool basis when similar risk characteristics exist. Park has identified the following portfolio segments and measures the allowance for credit losses using the following methods:

Portfolio SegmentMeasurement MethodLoss Driver
Commercial, financial and agriculturalDiscounted Cash FlowOhio Unemployment, Ohio GDP
PPP loansOtherNot Applicable
OverdraftsHistorical Loss ExperienceNot Applicable
Commercial real estateDiscounted Cash FlowOhio Unemployment, Ohio GDP
Construction real estate:
CommercialDiscounted Cash FlowOhio Unemployment, Ohio GDP
RetailDiscounted Cash FlowOhio Unemployment, Ohio GDP
Residential real estate:
CommercialDiscounted Cash FlowOhio Unemployment, Ohio HPI
MortgageDiscounted Cash FlowOhio Unemployment, Ohio HPI
HELOCDiscounted Cash FlowOhio Unemployment, Ohio HPI
InstallmentDiscounted Cash FlowOhio Unemployment, Ohio HPI
Consumer:
ConsumerDiscounted Cash FlowOhio Unemployment, Ohio GDP
GFSCDiscounted Cash FlowOhio Unemployment, Ohio GDP
Check loansHistorical Loss ExperienceNot Applicable
LeasesRemaining LifeNot Applicable

Expected credit losses are estimated over the contractual term of the loans, adjusted for prepayments when appropriate. The contractual term excludes extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a TDR will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by Park.

In general,Park utilized a DCF method to estimate the quantitative portion of the allowance for credit losses for loans evaluated on a collective pooled basis. For each 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 utilized Park's own Federal Financial Institutions Examination Council's ("FFIEC") Call Report data for the commercial, financial and agricultural and residential real estate segments. Peer data was incorporated into the analysis for the commercial real estate, construction real estate, and consumer segments.

In creating the DCF model, Park has established a one-year reasonable and supportable forecast period with a one-year straight line reversion to the long-term historical average. Park's policy is to utilize its own data, which includes loan-level loss data from 2013 through September 30, 2021, whenever possible. Park and peer FFIEC call report data are utilized when there are not sufficient defaults for a statistically sound calculation, or if Park does not have its own loan-level detail reflecting similar economic conditions as the forecasted loss drivers.

Key inputs into the DCF model include loan-level detail, including the amortized cost basis of individual loans, payment structure, and loss history, and forecasted loss drivers. 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 weighting of the scenarios is evaluated on a quarterly basis considering the various scenarios in the context of the current economic environment and presumed risk of loss.

Additional key assumptions in the DCF model include the PD, LGD, and prepayment/curtailment rates. When possible, Park utilizes its own PDs for the reasonable and supportable forecast period. When it is not possible to use Park's own PDs, the LDA is utilized to determine PDs based on the forecasted economic factors. In all cases, the LDA is then utilized to determine the long-term historical average which is reached over the reversion period. When possible, Park's utilizes its own 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. The Frye Jacobs method is a mathematical formula that traces the relationship between
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LGD and PD over time and projects the LGD based on the level of PD forecasted. In all cases, the Frye Jacobs method is utilized to calculate LGDs during the reversion period and long-term historical average. Prepayment and curtailment rates were calculated based on Park's own data utilizing a three-year average.

When the discounted cash flow method is used to determine the allowance for credit losses, management incorporates expected prepayments to determine the effective interest rate utilized to discount expected cash flow.

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;
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;
Park’s lending policies and procedures, including changes in lending strategies, underwriting standards and practices for collections, write-offs, and recoveries;
The quality of Park's credit review function;
The experience, ability, and depth of Park’s lending, investment, collection, and other relevant management and staff;
The effect of other external factors such as the regulatory, legal and technological environments, competition, 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 which Park operates that affect the collectibility of financial assets;
Where the U.S. economy is within a given credit cycle; and
The extent that there is government assistance (stimulus).

ACL - Loans - Individually Evaluated
Loans that do not share risk characteristics are evaluated on an individual basis and are excluded from the collective evaluation. Park has determined that any commercial loans which have been placed on nonaccrual status or classified as TDRs will be individually evaluated and are labeled as impaired. Individual analysis establishes a specific reserve for loans in scope.  Specific reserves on impaired commercial loans are typically based on management’s best estimate of the fair value of collateral securing these loans, adjusted for selling costs as appropriate.

ACL - Purchased Credit Deteriorated Loans
The Company has purchased loans, some of which have shown evidence of credit deterioration since origination.  Upon adoption of ASC 326, Park elected to maintain pools of loans that were previously accounted for under ASC 310-30 and will continue to account for these pools as a unit of account. Loans are only removed from the existing pools if they are written off, paid off, or sold. Upon adoption of ASC 326, the allowance for credit losses was determined for each pool and added to the pool's carrying amount to establish a new amortized cost basis. The difference between the unpaid principal balance of the pool and the new amortized cost basis is the noncredit premium or discount which will be amortized into interest income over the remaining life of the pool. Changes to the allowance for credit losses after adoption are recorded through provision for credit loss expense.

ACL - Off-Balance Sheet Credit Exposures
Park estimates expected credit losses over the contractual period in which Park is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by Park. The allowance for credit losses on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over the commitments' respective estimated lives. Funding rates are based on a historical analysis of Park's portfolio, while estimates of credit losses are determined using the same loss rates as funded loans.

ASU 2019-20 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes: In December 2019, the FASB issued ASU 2019-20 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-20 includes amendments to simplify accounting for income taxes by removing certain exceptions and adding requirements with the intention of simplifying and clarifying existing guidance. The amendments in ASU 2019-20 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The adoption of this guidance on January 1, 2021, did not have a material impact on Park's consolidated financial statements.


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ASU 2020-01 - Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815: In January 2020, the FASB issued ASU 2020-01 - Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. ASU 2020-01 represents changes to clarify certain interactions between the guidance to account for certain equity securities under Topic 321, the guidance to account for investments under the equity method of accounting in Topic 323, and the guidance in Topic 815. These amendments improve current U.S. GAAP by reducing diversity in practice and increasing comparability of the accounting for these transactions. The amendments in ASU 2020-01 are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The adoption of this guidance on January 1, 2021 did not have a material impact on Park's consolidated financial statements.

ASU 2020-08 - Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs: In October 2020, the FASB issued ASU 2020-08 - Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs. ASU 2020-08 clarifies that an entity should reevaluate whether a callable debt security is within the scope of paragraph 310-20-35-33 for each reporting period. The amendments in ASU 2020-08 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The adoption of this guidance on January 1, 2021, did not have a material impact on Park's consolidated financial statements.

Issued But Not Yet Effective Accounting Standards

ASU 2021-062022-02 - Presentation of Financial StatementsInstruments - Credit Losses (Topic 205), Financial Services—Depository326) Troubled Debt Restructurings and Lending (Topic 942), and Financial Services—Investment Companies (Topic 946):Vintage Disclosures: In August 2021,March 2022, FASB issued ASU 2021-062022-02 - Presentation of Financial StatementsInstruments - Credit Losses (Topic 205), Financial Services—Depository326) Troubled Debt Restructuring and Lending (Topic 942), and Financial Services—Investment Companies (Topic 946)Vintage Disclosures. ASU 2021-06 updates2022-02 eliminates the codificationaccounting 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 origination for financing
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receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments - Credit Losses - Measured at Amortized Cost.

For entities, like Park, that have adopted the amendments in ASU 2016-13, the amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those years. Early adoption is permitted, including adoption in an interim period. An entity may elect to align with SEC Final Rule Releases No. 33-10786adopt the loan modification guidance and No. 33-10835. Specificrelated disclosure enhancements separately from the amendments related to financial institutions, these SEC releases updated required annual statisticalvintage disclosures. The amendments in this ASU 2021-06 were effective immediately. Park will update the statistical disclosures in its Annual Report on Form 10-Kshould be applied prospectively, except for the fiscal year ending December 31, 2021,amendments related to align withthe recognition and measurement of TDRs which may be applied prospectively, or using a modified retrospective transition method. Management intends to adopt this guidance.ASU effective January 1, 2023. The adoption of ASU 2022-02 is not expected to have a material impact on the financial statements but will impact disclosure requirements and reduce individually evaluated loan totals.

Note 3 – Investment Securities
 
Investment securities at SeptemberJune 30, 20212022 and December 31, 2020,2021, were as follows:
Debt securities AFS (In thousands)Amortized
Cost
Gross
Unrealized
Holding 
Gains
Gross
Unrealized
Holding 
Losses
Fair Value
September 30, 2021:
Obligations of states and political subdivisions$277,527 $21,567 $ $299,094 
U.S. Government sponsored entities' asset-backed securities844,128 17,876 4,855 857,149 
Collateralized loan obligations388,193 146 657 387,682 
Corporate debt securities9,250 43  9,293 
Total$1,519,098 $39,632 $5,512 $1,553,218 
Debt securities AFS (In thousands)Amortized
Cost
Gross
Unrealized
Holding 
Gains
Gross
Unrealized
Holding 
Losses
Fair Value
December 31, 2020:
Obligations of states and political subdivisions$279,245 $25,973 $— $305,218 
U.S. Government sponsored entities' asset-backed securities726,589 26,248 728 752,109 
Corporate debt securities2,000 14 — 2,014 
Total$1,007,834 $52,235 $728 $1,059,341 

Park’s U.S. Government sponsored entities' asset-backed securities consist primarily of 15-year residential mortgage-backed securities and collateralized mortgage obligations.
Debt securities AFS (In thousands)Amortized
Cost
Gross
Unrealized
Holding 
Gains
Gross
Unrealized
Holding 
Losses
Fair Value
June 30, 2022:
Obligations of U.S. Treasury and other U.S. Government sponsored entities$39,000 $ $1,016 $37,984 
Obligations of states and political subdivisions425,119 1,388 19,728 406,779 
U.S. Government sponsored entities' asset-backed securities922,864 331 59,461 863,734 
Collateralized loan obligations535,644  21,537 514,107 
Corporate debt securities17,250  751 16,499 
Total$1,939,877 $1,719 $102,493 $1,839,103 
Debt securities AFS (In thousands)Amortized
Cost
Gross
Unrealized
Holding 
Gains
Gross
Unrealized
Holding 
Losses
Fair Value
December 31, 2021:
Obligations of states and political subdivisions$366,933 $22,682 $24 $389,591 
U.S. Government sponsored entities' asset-backed securities849,114 13,437 8,088 854,463 
Collateralized loan obligations500,066 1,395 498,674 
Corporate debt securities11,250 169 11,412 
Total$1,727,363 $36,291 $9,514 $1,754,140 

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Investment securities in an unrealized loss position at SeptemberJune 30, 2021,2022, were as follows:

Unrealized loss position for less than 12 monthsUnrealized loss position for 12 months or longerTotalUnrealized loss position for less than 12 monthsUnrealized loss position for 12 months or longerTotal
(In thousands)(In thousands)Fair valueUnrealized
losses
Fair valueUnrealized
losses
Fair
value
Unrealized
losses
(In thousands)Fair valueUnrealized
losses
Fair valueUnrealized
losses
Fair
value
Unrealized
losses
Debt securities AFS
Debt securities AFS:Debt securities AFS:
Obligations of U.S. Treasury and other U.S. Government sponsored entitiesObligations of U.S. Treasury and other U.S. Government sponsored entities$37,984 $1,016 $ $ $37,984 $1,016 
Obligations of states and political subdivisionsObligations of states and political subdivisions275,874 19,728   275,874 19,728 
U.S. Government sponsored entities' asset-backed securitiesU.S. Government sponsored entities' asset-backed securities$296,586 $4,855 $ $ $296,586 $4,855 U.S. Government sponsored entities' asset-backed securities681,442 38,975 138,318 20,486 819,760 59,461 
Collateralized loan obligationsCollateralized loan obligations239,804 657   239,804 657 Collateralized loan obligations489,904 20,637 24,203 900 514,107 21,537 
Corporate debt securitiesCorporate debt securities9,499 751   9,499 751 
TotalTotal$536,390 $5,512 $ $ $536,390 $5,512 Total$1,494,703 $81,107 $162,521 $21,386 $1,657,224 $102,493 
 
 Investment securities in an unrealized loss position at December 31, 2020,2021, were as follows:

 
Unrealized loss position for less than 12 monthsUnrealized loss position for 12 months or longerTotalUnrealized loss position for less than 12 monthsUnrealized loss position for 12 months or longerTotal
(In thousands)(In thousands)Fair valueUnrealized
losses
Fair valueUnrealized
losses
Fair
value
Unrealized
losses
(In thousands)Fair valueUnrealized
losses
Fair valueUnrealized
losses
Fair
value
Unrealized
losses
Debt securities AFS
Debt securities AFS:Debt securities AFS:
Obligations of states and political subdivisionsObligations of states and political subdivisions$1,834 $24 $— $— $1,834 $24 
U.S. Government sponsored entities' asset-backed securitiesU.S. Government sponsored entities' asset-backed securities$86,393 $695 $4,727 $33 $91,120 $728 U.S. Government sponsored entities' asset-backed securities333,653 4,996 73,431 3,092 407,084 8,088 
Collateralized loan obligationsCollateralized loan obligations429,671 1,395 — — 429,671 1,395 
Corporate debt securitiesCorporate debt securities2,243 — — 2,243 
TotalTotal$86,393 $695 $4,727 $33 $91,120 $728 Total$767,401 $6,422 $73,431 $3,092 $840,832 $9,514 

UnrealizedAt June 30, 2022, Park’s debt securities portfolio consisted of $1.8 billion of securities, $1.7 billion of which were in an unrealized loss position with unrealized losses onof $102.5 million. Of the $1.7 billion of securities in an unrealized loss position, $162.5 million were in an unrealized loss position for 12 months or longer. Of the $102.5 million in unrealized losses, $59.5 million were related to Park’s U.S. Government sponsored entities' asset-basedasset-backed securities and collateralized loan obligationsportfolio. For non-agency debt securities, Park verified that the current credit ratings remain above investment grade. Unrealized losses have not been recognized into incomeearnings as they represent negative adjustments to fair value relative to the rate of interest paid on the securities and not losses related to the creditworthiness of the respective issuers. Management does not intend to sell, and it is not more likely than not that management would be required to sell, the securities prior to their anticipated recovery.recovery in respect of the unrealized losses. Management believes the value will recover as the securities approach maturity or market rates change.

There was no allowance for credit losses recorded for debt securities AFS at Septembereither June 30, 2022 or December 31, 2021. Additionally, for the three-monthsthree months and nine-monthssix months ended SeptemberJune 30, 20212022 and 2020,2021, there were no credit-related investment impairment losses recognized.

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The amortized cost and estimated fair value of investments in debt securities AFS at SeptemberJune 30, 2021,2022, are shown in the following table by contractual maturity, except for asset-backed securities and collateral loan obligations, which are shown as a single
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total, due to the unpredictability of the timing of principal repayments. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

Debt securities AFS (In thousands)Amortized
cost
Fair value
Tax equivalent yield (1)
(In thousands) (In thousands)Amortized
cost
Fair value
Tax equivalent yield (1)
Debt Securities AFSDebt Securities AFS
Obligations of U.S. Treasury and other U.S. Government sponsored entitiesObligations of U.S. Treasury and other U.S. Government sponsored entities
Due one through five yearsDue one through five years$39,000 $37,984 2.37 %
Obligations of state and political subdivisions:Obligations of state and political subdivisions:
Due five through ten yearsDue five through ten years$251,333 $250,713 3.68 %
Due over ten yearsDue over ten years173,786 156,066 3.21 %
Total (1)
Total (1)
$425,119 $406,779 3.49 %
U.S. Government sponsored entities' asset-backed securitiesU.S. Government sponsored entities' asset-backed securities$844,128 $857,149 1.73 %U.S. Government sponsored entities' asset-backed securities$922,864 $863,734 1.96 %
Collateralized loan obligationsCollateralized loan obligations$388,193 $387,682 1.45 %Collateralized loan obligations$535,644 $514,107 3.06 %
Corporate debt securitiesCorporate debt securitiesCorporate debt securities
Due five through ten yearsDue five through ten years$9,250 $9,293 4.10 %Due five through ten years$17,250 $16,499 3.79 %
Obligations of state and political subdivisions:
Due five through ten years$136,029 $146,481 3.71 %
Due over ten years141,498 152,613 3.68 %
Total (1)
$277,527 $299,094 3.70 %
(1) The tax equivalent yield for certain obligations of state and political subdivisions includes the effects of a taxable equivalent adjustment using a 21% federal corporate income tax rate.

There were no sales of debt securities AFS during the three-month or nine-monthsix-month periods ended SeptemberJune 30, 2022 or 2021. During the three months ended September 30, 2020, Park sold certain debt securities AFS with a book value of $140.9 million at a gross gain of $37,000 and sold certain debt securities AFS with a book value of $112.5 million at a gross loss of $64,000. During the nine months ended September 30, 2020, Park sold certain debt securities AFS with a book value of $196.4 million at a gross gain of $3.4 million and sold certain debt securities AFS with a book value of $112.5 million at a gross loss of $64,000.

Investment securities having an amortized cost of $717.5$693.6 million and $691.0$733.7 million at SeptemberJune 30, 20212022 and December 31, 2020,2021, 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 4 – Other Investment Securities
 
Other investment securities consist of restricted stock investments in the FHLB, the FRB, and equity securities. The restricted FHLB and FRB stock investments are carried at their redemption value. Equity securities with a readily determinable fair value are carried at fair value. Equity securities without a readily determinable fair value are recorded at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions ("modified cost"). Park's portfolio of equity investments in limited partnerships which provide mezzanine funding ("Partnership Investments") are valued using the NAV practical expedient in accordance with ASC 820.

The carrying amounts of other investment securities at SeptemberJune 30, 20212022 and December 31, 20202021 were as follows:
 
(In thousands)(In thousands)September 30, 2021December 31, 2020(In thousands)June 30, 2022December 31, 2021
FHLB stockFHLB stock$13,413 $22,090 FHLB stock$13,413 $13,413 
FRB stockFRB stock14,653 14,653 FRB stock14,653 14,653 
Equity investments carried at fair valueEquity investments carried at fair value2,070 2,511 Equity investments carried at fair value1,785 2,129 
Equity investments carried at modified cost (1)
Equity investments carried at modified cost (1)
4,689 4,689 
Equity investments carried at modified cost (1)
8,191 4,689 
Equity investments carried at NAVEquity investments carried at NAV21,260 21,522 Equity investments carried at NAV43,579 26,384 
Total other investment securitiesTotal other investment securities$56,085 $65,465 Total other investment securities$81,621 $61,268 
(1) There have been no impairments downward adjustments, or upwarddownward adjustments made to equity investments carried at modified cost. An upward adjustment of $871,000 was recorded in the three months and six months ended June 30, 2022 as a result of observable price changes.

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No shares of FHLB stock were repurchased during the three months or six months ended June 30, 2022. During the three months ended SeptemberJune 30, 2021, and 2020, the FHLB repurchased 21,286 and 13,97122,651 shares respectively, of FHLB stock with a book value of $2.1 million and $1.4 million, respectively.$2.3 million. During the ninesix months ended SeptemberJune 30, 2021, and 2020, the FHLB repurchased 86,770 and 76,39465,484 shares respectively, of FHLB stock with a book value of $8.7 million and $7.6 million, respectively.$6.5 million. No shares of FRB stock were purchased or sold during the three months or the ninesix months ended SeptemberJune 30, 20212022 or 2020.2021.

During the three months ended SeptemberJune 30, 2022 and 2021, $619,000 and 2020, $97,000 and $(89,000)$(39,000), respectively, of gains (losses) on equity investments carried at fair value or modified cost were recorded within "Gain (loss) on equity securities, net" on the Consolidated Condensed Statements of Income. During the ninesix months ended SeptemberJune 30, 2022 and 2021, $527,000 and 2020, $492,000 and $(708,000),$396,000, respectively, of gains (losses) on equity investments carried at fair value or modified cost were recorded within "Gain (loss) on equity securities, net" on the Consolidated Condensed Statements of Income.

During the three months ended SeptemberJune 30, 2022 and 2021, $90,000 and 2020, $0.5$506,000, respectively, of gains on equity investments carried at NAV were recorded within “Gain on equity securities, net” on the Consolidated Condensed Statements of Income. During the six months ended June 30, 2022 and 2021, $2.5 million and $1.3$1.9 million, respectively, of gains on equity investments carried at NAV were recorded within “Gain (loss) on equity securities, net” on the Consolidated Condensed Statements of Income. During the nine months ended September 30, 2021 and 2020, $2.4 million and $(41,000), respectively, of gains (losses) on equity investments carried at NAV were recorded within “Gain (loss) on equity securities, net” on the Consolidated Condensed Statements of Income.

Note 5 – Loans
 
The composition of the loan portfolio at SeptemberJune 30, 20212022 and December 31, 20202021 was as follows:
 
September 30, 2021December 31, 2020June 30, 2022December 31, 2021
(In thousands)(In thousands)Amortized CostAmortized CostAccrued Interest ReceivableRecorded Investment(In thousands)Amortized CostAmortized Cost
Commercial, financial and agricultural: (1)
Commercial, financial and agricultural: (1)
$1,588,989 $6,528 $1,595,517 
Commercial, financial and agricultural: (1)
Commercial, financial and agricultural (1)
Commercial, financial and agricultural (1)
$1,179,354 (2)
Commercial, financial and agricultural (1)
$1,299,167 $1,223,079 
PPP loansPPP loans131,483 (2)PPP loans13,428 74,420 
OverdraftsOverdrafts4,033 (2)Overdrafts3,763 1,127 
Commercial real estate (1)
Commercial real estate (1)
1,761,596 1,748,189 6,017 1,754,206 
Commercial real estate (1)
1,760,867 1,801,792 
Construction real estate:Construction real estate:  Construction real estate:  
CommercialCommercial231,210 226,991 572 227,563 Commercial208,284 214,561 
RetailRetail111,677 116,430 235 116,665 Retail113,115 107,225 
Residential real estate:Residential real estate:  Residential real estate:  
CommercialCommercial527,151 526,222 1,161 527,383 Commercial545,160 533,802 
MortgageMortgage1,052,093 1,096,358 947 1,097,305 Mortgage1,018,924 1,033,658 
HELOCHELOC166,454 182,028 647 182,675 HELOC162,533 165,605 
InstallmentInstallment6,410 8,436 22 8,458 Installment4,741 5,642 
Consumer:Consumer:1,659,704 4,510 1,664,214 Consumer:
ConsumerConsumer1,710,608 (2)Consumer1,806,226 1,685,793 
GFSCGFSC2,624 (2)GFSC748 1,793 
Check loansCheck loans2,092 (2)Check loans2,112 2,093 
LeasesLeases21,632 24,438 14 24,452 Leases19,617 20,532 
TotalTotal$6,908,417 $7,177,785 $20,653 $7,198,438 Total$6,958,685 $6,871,122 
Allowance for credit lossesAllowance for credit losses(88,129)(85,675)Allowance for credit losses(81,448)(83,197)
Net loansNet loans$6,820,288 $7,092,110 Net loans$6,877,237 $6,787,925 
(1) Included within each of commercial, financial and agricultural loans and commercial real estate loans is an immaterial amount of consumer loans that were not broken out by class.
(2) Results for reporting periods beginning after January 1, 2021 are presented under ASC 326, while prior period amounts continue to be reported in accordance with previously applicable U.S. GAAP. Category was not broken out as a separate class at December 31, 2020.

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In order to support customers, Park participated in the CARES Act Paycheck Protection Program ("PPP"). PPP loans were broken out as a separate class as of September 30, 2021. Included within commercial, financial and agricultural loans as of December 31, 2020 were $331.6 million of PPP loans. For its assistance in originating the first round of PPP loans during 2020, Park received an aggregate of $20.2 million in fees from the SBA, and for its assistance in originating additional PPP loans during 2021, Park received an aggregate of $12.9 million in fees from the SBA. During the three months ended SeptemberJune 30, 2022 and June 30, 2021, and September 30, 2020, $4.3$1.0 million and $3.8$5.0 million, respectively, of PPP fee income werewas recognized within loan interest income. During the ninesix months ended SeptemberJune 30, 2022 and June 30, 2021, and September 30, 2020, $14.0$2.5 million and $6.6$9.6 million, respectively, of PPP fee income werewas recognized within loan interest income.
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Loans are shown net of deferred origination fees, costs and unearned income of $22.7$16.9 million at SeptemberJune 30, 2021,2022, and of $23.6$19.5 million at December 31, 2020,2021, which represented a net deferred income position in both years. At SeptemberJune 30, 20212022 and December 31, 2020,2021, included in the net deferred origination fees, costs and unearned income were $5.2 million$473,000 and $6.5$2.8 million, respectively, in net origination fees related to PPP loans. At SeptemberJune 30, 20212022 and December 31, 2020,2021, loans included purchase accounting adjustments of $4.8$3.2 million and $7.2$4.2 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 $4.0$3.8 million and $2.0$1.1 million were reclassified to loans at SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively. As of September 30, 2021, overdrafts were within their own class and as of December 31, 2020, were included in the commercial, financial and agricultural loan segment in the previous table.

Credit Quality
The following table presentstables present the amortized cost of nonaccrual loans, accruing TDRs, and loans past due 90 days or more and still accruing, by class of loan, at SeptemberJune 30, 2022 and December 31, 2021:
 
September 30, 2021 June 30, 2022
(In thousands)(In thousands)Nonaccrual
Loans
Accruing
TDRs
Loans Past Due
90 Days
 or More
and Accruing
Total
Nonperforming
Loans
(In thousands)Nonaccrual
Loans
Accruing
TDRs
Loans Past Due
90 Days
 or More
and Accruing
Total
Nonperforming
Loans
Commercial, financial and agricultural:Commercial, financial and agricultural:Commercial, financial and agricultural:
Commercial, financial and agriculturalCommercial, financial and agricultural$18,245 $3,812 $ $22,057 Commercial, financial and agricultural$10,529 $1,472 $ $12,001 
PPP loansPPP loans    PPP loans    
OverdraftsOverdrafts    Overdrafts    
Commercial real estateCommercial real estate46,803 3,740  50,543 Commercial real estate18,520 8,619  27,139 
Construction real estate:Construction real estate:    Construction real estate:    
CommercialCommercial61 380  441 Commercial314 146  460 
RetailRetail12 10  22 Retail11 4  15 
Residential real estate:Residential real estate:    Residential real estate:    
CommercialCommercial4,614 243  4,857 Commercial1,816 290  2,106 
MortgageMortgage13,122 7,387  20,509 Mortgage9,789 6,975 282 17,046 
HELOCHELOC1,683 697  2,380 HELOC1,463 310  1,773 
InstallmentInstallment113 1,661 29 1,803 Installment35 1,325  1,360 
Consumer:Consumer:Consumer:
ConsumerConsumer1,650 857 243 2,750 Consumer930 605 221 1,756 
GFSCGFSC82 10 12 104 GFSC33  4 37 
Check loansCheck loans    Check loans    
LeasesLeases1,406   1,406 Leases934   934 
Total loansTotal loans$87,791 $18,797 $284 $106,872 Total loans$44,374 $19,746 $507 $64,627 
 


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The following table presents the recorded investment in nonaccrual loans, accruing TDRs, and loans past due 90 days or more and still accruing, by class of loan, at December 31, 2020:

December 31, 2020 December 31, 2021
(In thousands)(In thousands)Nonaccrual
Loans
Accruing
TDRs
Loans Past Due 90 Days or More and AccruingTotal
Nonperforming
Loans
(In thousands)Nonaccrual
Loans
Accruing
TDRs
Loans Past Due 90 Days or More and AccruingTotal
Nonperforming
Loans
Commercial, financial and agriculturalCommercial, financial and agricultural$23,261 $5,619 $— $28,880 Commercial, financial and agricultural
Commercial, financial and agriculturalCommercial, financial and agricultural$13,271 $9,396 $— $22,667 
PPP loansPPP loans— — 793 793 
OverdraftsOverdrafts— — — — 
Commercial real estateCommercial real estate67,426 2,931 377 70,734 Commercial real estate40,142 7,713 — 47,855 
Construction real estate:Construction real estate:   Construction real estate:   
CommercialCommercial3,110 — — 3,110 Commercial52 169 — 221 
Mortgage14 31 — 45 
RetailRetail716 — 725 
Residential real estate:Residential real estate:    Residential real estate:    
CommercialCommercial4,304 253 — 4,557 Commercial2,366 240 — 2,606 
MortgageMortgage14,016 8,400 416 22,832 Mortgage11,718 7,779 372 19,869 
HELOCHELOC1,286 909 77 2,272 HELOC1,590 803 — 2,393 
InstallmentInstallment184 1,728 — 1,912 Installment82 1,508 — 1,590 
ConsumerConsumer2,172 1,017 724 3,913 Consumer
ConsumerConsumer1,518 700 431 2,649 
GFSCGFSC79 11 96 
Check loansCheck loans— — — — 
LeasesLeases1,595 — — 1,595 Leases1,188 — — 1,188 
Total loansTotal loans$117,368 $20,888 $1,594 $139,850 Total loans$72,722 $28,323 $1,607 $102,652 

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The following table providestables provide additional detail on nonaccrual loans and the related ACL, by class of loan, at SeptemberJune 30, 2022 and December 31, 2021:

September 30, 2021June 30, 2022
(In thousands)(In thousands)Nonaccrual Loans With No ACLNonaccrual Loans With an ACLRelated ACL(In thousands)Nonaccrual Loans With No ACLNonaccrual Loans With an ACLRelated ACL
Commercial, financial and agricultural:Commercial, financial and agricultural:Commercial, financial and agricultural:
Commercial, financial and agriculturalCommercial, financial and agricultural$13,270 $4,975 $3,190 Commercial, financial and agricultural$9,563 $966 $709 
PPP loansPPP loans   PPP loans   
OverdraftsOverdrafts   Overdrafts   
Commercial real estateCommercial real estate46,121 682 180 Commercial real estate14,854 3,666 1,160 
Construction real estate:Construction real estate:Construction real estate:
CommercialCommercial61   Commercial314   
RetailRetail 12  Retail 11 1 
Residential real estate:Residential real estate:Residential real estate:
CommercialCommercial4,614   Commercial1,816   
MortgageMortgage 13,122 84 Mortgage 9,789 73 
HELOCHELOC 1,683 110 HELOC125 1,338 138 
InstallmentInstallment 113 26 Installment 35 18 
ConsumerConsumerConsumer
ConsumerConsumer 1,650 470 Consumer 930 363 
GFSCGFSC 82 12 GFSC 33 6 
Check loansCheck loans   Check loans   
LeasesLeases930 476 103 Leases784 150 11 
Total loansTotal loans$64,996 $22,795 $4,175 Total loans$27,456 $16,918 $2,479 



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December 31, 2021
(In thousands)Nonaccrual Loans With No ACLNonaccrual Loans With an ACLRelated ACL
Commercial, financial and agricultural:
Commercial, financial and agricultural$11,494 $1,777 $1,343 
PPP loans— — — 
Overdrafts— — — 
Commercial real estate39,151 991 188 
Construction real estate:
Commercial52 — — 
Retail— 716 67 
Residential real estate:
Commercial2,366 — — 
Mortgage— 11,718 73 
HELOC— 1,590 99 
Installment— 82 24 
Consumer
Consumer— 1,518 393 
GFSC— 79 10 
Check loans— — — 
Leases914 274 43 
Total$53,977 $18,745 $2,240 

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

The following table presents loans individually evaluated for impairment by class of loan as of December 31, 2020:

12/31/2020
(In thousands)Unpaid Principal BalanceRecorded InvestmentACL Allocated
With no related allowance recorded
Commercial, financial and agricultural$23,316 $22,970 $— 
Commercial real estate63,639 63,467 — 
Construction real estate:
Commercial3,110 3,110 — 
Residential real estate:
Commercial4,522 4,448 — 
Leases568 568 — 
With an allowance recorded
Commercial, financial and agricultural5,881 5,866 3,758 
Commercial real estate6,890 6,890 1,316 
Construction real estate:
Commercial— — — 
Residential real estate:
Commercial109 109 16 
Leases1,027 1,027 344 
Total$109,062 $108,455 $5,434 

The following table providestables provide the amortized cost basis of collateral-dependent loans by class of loan, as of SeptemberJune 30, 2022 and December 31, 2021:

September 30, 2021 June 30, 2022
(In thousands)(In thousands)Real EstateBusiness AssetsOtherTotal(In thousands)Real EstateBusiness AssetsOtherTotal
Commercial, financial and agriculturalCommercial, financial and agriculturalCommercial, financial and agricultural
Commercial, financial and agriculturalCommercial, financial and agricultural$9,386 $12,232 $651 $22,269 Commercial, financial and agricultural$8,165 $3,638 $251 $12,054 
Commercial real estateCommercial real estate56,722 300 47 57,069 Commercial real estate31,401 32  31,433 
Construction real estate:Construction real estate:Construction real estate:
CommercialCommercial1,407   1,407 Commercial1,135   1,135 
Residential real estate:Residential real estate:Residential real estate:
CommercialCommercial5,250   5,250 Commercial2,406 10  2,416 
MortgageMortgage375   375 Mortgage361   361 
HELOCHELOC144   144 HELOC124   124 
LeasesLeases 1,455  1,455 Leases 934  934 
Total loansTotal loans$73,284 $13,987 $698 $87,969 Total loans$43,592 $4,614 $251 $48,457 

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 December 31, 2021
(In thousands)Real EstateBusiness AssetsOtherTotal
Commercial, financial and agricultural
Commercial, financial and agricultural$9,321 $13,366 $156 $22,843 
Commercial real estate52,901 37  52,938 
Construction real estate:
Commercial1,178   1,178 
Residential real estate:
Commercial2,906  57 2,963 
Mortgage370   370 
HELOC148   148 
Leases 1,211  1,211 
Total loans$66,824 $14,614 $213 $81,651 

Interest income on nonaccrual loans individually evaluated for impairment is recognized on a cash basis only when Park expects to receive the entire recorded investment in the loans. Interest income on accruing TDRs individually evaluated for impairment continues to be recorded on an accrual basis. The following table presents interest income recognized on nonaccrual loans for the three-month and nine-monthsix-month periods ended SeptemberJune 30, 2022 and 2021:

Interest Income RecognizedInterest Income Recognized
(In thousands)(In thousands)Three months ended
September 30, 2021
Nine months ended
September 30, 2021
(In thousands)Three Months Ended
June 30, 2022
Three Months Ended
June 30, 2021
Six Months Ended
June 30, 2022
Six Months Ended
June 30, 2021
Commercial, financial and agricultural:Commercial, financial and agricultural:Commercial, financial and agricultural:
Commercial, financial and agriculturalCommercial, financial and agricultural$40 $147 Commercial, financial and agricultural$13 $50 $30 $107 
PPP loansPPP loans  PPP loans —  — 
OverdraftsOverdrafts  Overdrafts —  — 
Commercial real estateCommercial real estate458 1,480 Commercial real estate257 507 514 1,022 
Construction real estate:Construction real estate:Construction real estate:
CommercialCommercial1 38 Commercial3 4 37 
RetailRetail 1 Retail — 4 
Residential real estate:Residential real estate:Residential real estate:
CommercialCommercial60 180 Commercial20 74 40 120 
MortgageMortgage90 233 Mortgage36 64 69 143 
HELOCHELOC2 12 HELOC2 6 10 
InstallmentInstallment 2 Installment 2 
Consumer:Consumer:Consumer:
ConsumerConsumer23 71 Consumer14 25 28 48 
GFSCGFSC3 11 GFSC1 3 
Check loansCheck loans  Check loans —  — 
LeasesLeases17 61 Leases10 24 24 44 
Total loansTotal loans$694 $2,236 Total loans$356 $758 $724 $1,542 

The following table presents the average recorded investment and interest income recognized subsequent to impairment on loans individually evaluated for impairment as of and for the three months and nine months ended September 30, 2020:

Three months ended
September 30, 2020
Nine months ended
September 30, 2020
(In thousands)Recorded Investment as of September 30, 2020Average Recorded InvestmentInterest Income RecognizedAverage Recorded InvestmentInterest Income Recognized
Commercial, financial and agricultural$33,098 $29,481 $159 30,426 543 
Commercial real estate72,519 58,195 526 50,479 1,416 
Construction real estate:
   Commercial3,142 1,212 743 14 
Residential real estate:
   Commercial4,897 5,061 65 4,271 166 
Leases2,524 2,079 — 909 — 
Total$116,180 $96,028 $756 $86,828 $2,139 


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The following table presentstables present the aging of the amortized cost in past due loans at SeptemberJune 30, 2022 and December 31, 2021 by class of loan:

September 30, 2021 June 30, 2022
(In thousands)(In thousands)Accruing Loans
Past Due 30-89
Days
Past Due 
Nonaccrual
Loans and Loans Past
Due 90 Days or
More and 
Accruing (1)
Total Past Due
Total Current (2)
Total 
Amortized Cost
(In thousands)Accruing 
Loans
Past Due 
30-89 Days
Past Due 
Nonaccrual
Loans and Loans
Past Due 90 Days
or More and 
Accruing (1)
Total Past 
Due
Total
Current (2)
Total 
Amortized Cost
Commercial, financial and agricultural:Commercial, financial and agricultural:Commercial, financial and agricultural:
Commercial, financial and agriculturalCommercial, financial and agricultural$3,210 $10,909 $14,119 $1,165,235 $1,179,354 Commercial, financial and agricultural$519 $9,413 $9,932 $1,289,235 $1,299,167 
PPP loansPPP loans1  1 131,482 131,483 PPP loans74  74 13,354 13,428 
OverdraftsOverdrafts   4,033 4,033 Overdrafts   3,763 3,763 
Commercial real estateCommercial real estate 1,009 1,009 1,760,587 1,761,596 Commercial real estate504 175 679 1,760,188 1,760,867 
Construction real estate:Construction real estate:Construction real estate:
CommercialCommercial815  815 230,395 231,210 Commercial   208,284 208,284 
RetailRetail1,202 12 1,214 110,463 111,677 Retail450  450 112,665 113,115 
Residential real estate:Residential real estate:Residential real estate:
CommercialCommercial 413 413 526,738 527,151 Commercial17 365 382 544,778 545,160 
MortgageMortgage5,931 5,884 11,815 1,040,278 1,052,093 Mortgage6,859 5,689 12,548 1,006,376 1,018,924 
HELOCHELOC487 997 1,484 164,970 166,454 HELOC334 770 1,104 161,429 162,533 
InstallmentInstallment37 93 130 6,280 6,410 Installment4 5 9 4,732 4,741 
Consumer:Consumer:Consumer:
ConsumerConsumer2,436 404 2,840 1,707,768 1,710,608 Consumer3,053 299 3,352 1,802,874 1,806,226 
GFSCGFSC196 57 253 2,371 2,624 GFSC62 22 84 664 748 
Check loansCheck loans8  8 2,084 2,092 Check loans6  6 2,106 2,112 
LeasesLeases53 576 629 21,003 21,632 Leases1,569  1,569 18,048 19,617 
Total loansTotal loans$14,376 $20,354 $34,730 $6,873,687 $6,908,417 Total loans$13,451 $16,738 $30,189 $6,928,496 $6,958,685 
(1) Includes an aggregate of $0.3 million$507,000 of loans past due 90 days or more and accruing. The remaining loans were past due nonaccrual loans.
(2) Includes an aggregate of $67.7$28.1 million of nonaccrual loans which were current in regards to contractual principal and interest payments.

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The following table presents the aging of the recorded investment in past due loans at December 31, 2020 by class of loan:

December 31, 2020 December 31, 2021
(in thousands)(in thousands)Accruing Loans
Past Due 30-89
Days
Past Due 
Nonaccrual
Loans and Loans Past
Due 90 Days or
More and 
Accruing (1)
Total Past Due
Total Current (2)
Total 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 agriculturalCommercial, financial and agricultural$7,372 $13,968 $21,340 $1,574,177 $1,595,517 Commercial, financial and agricultural
Commercial, financial and agriculturalCommercial, financial and agricultural$2,908 $9,547 $12,455 $1,210,624 $1,223,079 
PPP loansPPP loans242 793 1,035 73,385 74,420 
OverdraftsOverdrafts— — — 1,127 1,127 
Commercial real estateCommercial real estate82 972 1,054 1,753,152 1,754,206 Commercial real estate65 1,461 1,526 1,800,266 1,801,792 
Construction real estate:Construction real estate:    Construction real estate:
CommercialCommercial— 39 39 227,524 227,563 Commercial— — — 214,561 214,561 
Mortgage77 — 77 115,647 115,724 
Installment12 — 12 929 941 
RetailRetail346 660 1,006 106,219 107,225 
Residential real estate:Residential real estate:     Residential real estate:
CommercialCommercial17 493 510 526,873 527,383 Commercial283 438 721 533,081 533,802 
MortgageMortgage9,538 7,814 17,352 1,079,953 1,097,305 Mortgage6,170 5,933 12,103 1,021,555 1,033,658 
HELOCHELOC805 810 1,615 181,060 182,675 HELOC565 1,011 1,576 164,029 165,605 
InstallmentInstallment67 71 138 8,320 8,458 Installment49 31 80 5,562 5,642 
ConsumerConsumer5,496 1,213 6,709 1,657,505 1,664,214 Consumer
ConsumerConsumer2,614 618 3,232 1,682,561 1,685,793 
GFSCGFSC153 52 205 1,588 1,793 
Check loansCheck loans10 — 10 2,083 2,093 
LeasesLeases186 984 1,170 23,282 24,452 Leases60 526 586 19,946 20,532 
Total loansTotal loans$23,652 $26,364 $50,016 $7,148,422 $7,198,438 Total loans$13,465 $21,070 $34,535 $6,836,587 $6,871,122 
(1) Includes an aggregate of $1.6 million of loans past due 90 days or more and accruing. The remaining loans were past due nonaccrual loans.
(2) Includes an aggregate of $92.6$53.3 million of nonaccrual loans which were current in regards to contractual principal and interest payments.

Credit Quality Indicators
Management utilizes past due information as a credit quality indicator across the loan portfolio. Past due information at SeptemberJune 30, 20212022 and December 31, 20202021 is included in the previous tables. The past due information is the primary credit quality indicator within the following classes of loans: (1) overdrafts in the commercial, financial and agricultural portfolio segment; (2) retail loans in the construction real estate portfolio segment; (3) mortgage loans, HELOC and installment loans in the residential real estate portfolio segment; and (4) consumer loans, GFSC loans, and check loans in the consumer portfolio segment. The primary credit indicator for commercial loans is based on an internal grading system that grades all commercial loans on a scale from 1 to 8. Credit grades are continuously monitored by the responsible loan officer and adjustments are made when appropriate. A grade of 1 indicates little or no credit risk and a grade of 8 is considered a loss. Commercial loans that are pass-rated (graded a 1 through a 4) are considered to be of acceptable credit risk. Commercial loans graded a 5 (special mention) are considered to be watch list credits and a higher PD is applied to these loans. Loans classified as special mention have potential weaknesses that require management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of Park’s credit position at some future date. Commercial loans graded a 6 (substandard), also considered watch list credits, are considered to represent higher credit risk and, as a result, a higher PD is applied to these loans. Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor or the value of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that Park will sustain some loss if the deficiencies are not corrected. Commercial loans graded a 7 (doubtful) are shown as nonaccrual and Park generally charges these loans down to their fair value by taking a partial charge-off or recording a specific reserve. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Certain 6-rated loans and all 7-rated loans are placed on nonaccrual status and included within the impairedindividually evaluated category. A commercial loan is deemed impaired,nonaccrual, and is individually evaluated, when management
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determines the borrower's ability to perform in accordance with the contractual loan agreement is in doubt. Any commercial loan graded an 8 (loss) is completely charged off.





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Based on the most recent analysis performed, the risk category of loans by class of loans as of SeptemberJune 30, 2022 and December 31, 2021 were as follows:

September 30, 2021Term Loans Amortized Cost Basis by Origination Year
June 30, 2022June 30, 2022Term Loans Amortized Cost Basis by Origination Year
(In thousands)(In thousands)20212020201920182017PriorRevolving Loans Amortized Cost BasisTotal(In thousands)20222021202020192018PriorRevolving Loans Amortized Cost BasisTotal
Commercial, financial and agricultural: Commercial, financial and agricultural (1)
Commercial, financial and agricultural: Commercial, financial and agricultural (1)
Commercial, financial and agricultural: Commercial, financial and agricultural (1)
Risk ratingRisk ratingRisk rating
PassPass$195,565 $225,189 $111,003 $58,680 $47,081 $74,703 $439,145 $1,151,366 Pass$123,708 $230,009 $186,826 $75,102 $40,781 $66,149 $559,039 $1,281,614 
Special MentionSpecial Mention— 1,711 477 390 101 — 6,916 9,595 Special Mention— 1,792 807 524 46 198 3,547 6,914 
SubstandardSubstandard612 787 593 1,371 680 8,084 404 12,531 Substandard— 87 209 117 1,286 7,844 256 9,799 
DoubtfulDoubtful1,167 912 372 321 1,903 496 691 5,862 Doubtful50 — 13 122 114 304 237 840 
TotalTotal$197,344 $228,599 $112,445 $60,762 $49,765 $83,283 $447,156 $1,179,354 Total$123,758 $231,888 $187,855 $75,865 $42,227 $74,495 $563,079 $1,299,167 
Commercial, financial and agricultural: PPPCommercial, financial and agricultural: PPPCommercial, financial and agricultural: PPP
Risk ratingRisk ratingRisk rating
PassPass$117,405 $14,078 $— $— $— $— $— $131,483 Pass$— $10,644 $2,784 $— $— $— $— $13,428 
Special MentionSpecial Mention— — — — — — — — Special Mention— — — — — — — — 
SubstandardSubstandard— — — — — — — — Substandard— — — — — — — — 
DoubtfulDoubtful— — — — — — — — Doubtful— — — — — — — — 
TotalTotal$117,405 $14,078 $— $— $— $— $— $131,483 Total$— $10,644 $2,784 $— $— $— $— $13,428 
Commercial real estate (1)
Commercial real estate (1)
Commercial real estate (1)
Risk ratingRisk ratingRisk rating
PassPass$274,406 $453,316 $251,647 $167,526 $120,190 $345,899 $11,767 $1,624,751 Pass$154,408 $383,558 $409,919 $244,402 $117,846 $357,354 $13,815 $1,681,302 
Special MentionSpecial Mention1,571 12,615 34,376 10,602 7,725 18,777 3,590 89,256 Special Mention890 953 4,341 16,141 14,692 23,005 997 61,019 
SubstandardSubstandard1,429 3,866 4,679 12,175 8,486 15,587 439 46,661 Substandard— 2,311 2,251 996 4,336 4,880 140 14,914 
DoubtfulDoubtful— — 245 — 47 636 — 928 Doubtful— — — — 2,999 633 — 3,632 
TotalTotal$277,406 $469,797 $290,947 $190,303 $136,448 $380,899 $15,796 $1,761,596 Total$155,298 $386,822 $416,511 $261,539 $139,873 $385,872 $14,952 $1,760,867 
Construction real estate: CommercialConstruction real estate: CommercialConstruction real estate: Commercial
Risk ratingRisk ratingRisk rating
PassPass$65,351 $85,633 $43,410 $5,308 $1,900 $5,250 $22,951 $229,803 Pass$45,167 $77,086 $38,946 $3,224 $3,253 $3,530 $35,144 $206,350 
Special MentionSpecial Mention— — 98 699 — — 282 1,079 Special Mention— 944 — — 676 — ��� 1,620 
SubstandardSubstandard— 54 267 — — — 328 Substandard— — 314 — — — — 314 
DoubtfulDoubtful— — — — — — — — Doubtful— — — — — — — — 
TotalTotal$65,351 $85,687 $43,515 $6,274 $1,900 $5,250 $23,233 $231,210 Total$45,167 $78,030 $39,260 $3,224 $3,929 $3,530 $35,144 $208,284 
Residential Real Estate: Commercial
Risk rating
Pass$106,322 $172,182 $65,248 $46,258 $29,798 $86,348 $14,615 $520,771 
Special Mention96 — 413 80 — 507 337 1,433 
Substandard615 22 809 1,977 64 1,026 166 4,679 
Doubtful— — — — 244 24 — 268 
Total$107,033 $172,204 $66,470 $48,315 $30,106 $87,905 $15,118 $527,151 
Leases
Risk rating
Pass$5,179 $6,398 $4,017 $2,652 $907 $1,057 $— $20,210 
Special Mention— — — — — — — — 
Substandard— 792 — 41 — 75 — 908 
Doubtful— 76 354 21 47 16 — 514 
Total$5,179 $7,266 $4,371 $2,714 $954 $1,148 $— $21,632 





Residential Real Estate: Commercial
Risk rating
Pass$52,410 $131,458 $154,590 $62,875 $40,122 $81,606 $16,208 $539,269 
Special Mention— 94 1,505 691 — 1,387 145 3,822 
Substandard202 473 289 35 314 706 50 2,069 
Doubtful— — — — — — — — 
Total$52,612 $132,025 $156,384 $63,601 $40,436 $83,699 $16,403 $545,160 
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September 30, 2021Term Loans Amortized Cost Basis by Origination Year
(In thousands)20212020201920182017PriorRevolving Loans Amortized Cost BasisTotal

Total Commercial Loans
June 30, 2022June 30, 2022Term Loans Amortized Cost Basis by Origination Year
(In thousands)(In thousands)20222021202020192018PriorRevolving Loans Amortized Cost BasisTotal
LeasesLeases
Risk ratingRisk ratingRisk rating
PassPass$764,228 $956,796 $475,325 $280,424 $199,876 $513,257 $488,478 $3,678,384 Pass$5,146 $4,755 $4,350 $1,953 $1,408 $936 $— $18,548 
Special MentionSpecial Mention1,667 14,326 35,364 11,771 7,826 19,284 11,125 101,363 Special Mention136 — — — — — — 136 
SubstandardSubstandard2,656 5,521 6,088 15,831 9,230 24,772 1,009 65,107 Substandard— — 626 131 — 24 — 781 
DoubtfulDoubtful1,167 988 971 342 2,241 1,172 691 7,572 Doubtful— — — 122 14 16 — 152 
TotalTotal$769,718 $977,631 $517,748 $308,368 $219,173 $558,485 $501,303 $3,852,426 Total$5,282 $4,755 $4,976 $2,206 $1,422 $976 $— $19,617 
Total Commercial Loans
Risk rating
Pass$380,839 $837,510 $797,415 $387,556 $203,410 $509,575 $624,206 $3,740,511 
Special Mention1,026 3,783 6,653 17,356 15,414 24,590 4,689 73,511 
Substandard202 2,871 3,689 1,279 5,936 13,454 446 27,877 
Doubtful50 — 13 244 3,127 953 237 4,624 
Total$382,117 $844,164 $807,770 $406,435 $227,887 $548,572 $629,578 $3,846,523 
(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.

The table below presents the recorded investment by loan grade at December 31, 2020 for all commercial loans:0
December 31, 2021Term Loans Amortized Cost Basis by Origination Year
(In thousands)20212020201920182017PriorRevolving Loans Amortized Cost BasisTotal
Commercial, financial and agricultural: Commercial, financial and agricultural (1)
Risk rating
Pass$267,016 $208,078 $100,736 $52,705 $36,528 $59,909 $468,749 $1,193,721 
Special Mention1,608 1,592 429 59 277 — 11,986 15,951 
Substandard106 906 401 1,345 549 7,818 484 11,609 
Doubtful— 30 465 227 463 125 488 1,798 
Total$268,730 $210,606 $102,031 $54,336 $37,817 $67,852 $481,707 $1,223,079 
Commercial, financial and agricultural: PPP
Risk rating
Pass$69,588 $4,832 $— $— $— $— $— $74,420 
Special Mention— — — — — — — — 
Substandard— — — — — — — — 
Doubtful— — — — — — — — 
Total$69,588 $4,832 $— $— $— $— $— $74,420 
Commercial real estate (1)
Risk rating
Pass$376,468 $445,780 $263,786 $154,637 $115,571 $317,371 $14,890 $1,688,503 
Special Mention786 6,206 32,965 9,354 4,297 17,829 996 72,433 
Substandard3,897 2,578 1,385 11,373 5,967 14,541 450 40,191 
Doubtful— — — — 47 618 — 665 
Total$381,151 $454,564 $298,136 $175,364 $125,882 $350,359 $16,336 $1,801,792 
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December 31, 2020
(In thousands)5 Rated6 RatedNonaccrual and Accruing TDRsPCIPass-RatedRecorded
Investment
Commercial, financial and agricultural (1)
$14,638 $— $28,880 $337 $1,551,662 $1,595,517 
Commercial real estate (1)
87,439 117 70,357 7,461 1,588,832 1,754,206 
Construction real estate:
  Commercial164 — 3,110 1,002 223,287 227,563 
Residential real estate:
  Commercial798 22 4,557 1,510 520,496 527,383 
Leases331 — 1,595 112 22,414 24,452 
Total Commercial Loans$103,370 $139 $108,499 $10,422 $3,906,691 $4,129,121 

December 31, 2021Term Loans Amortized Cost Basis by Origination Year
(In thousands)20212020201920182017PriorRevolving Loans Amortized Cost BasisTotal
Construction real estate: Commercial
Risk rating
Pass$96,929 $76,867 $7,003 $4,841 $1,856 $3,412 $22,444 $213,352 
Special Mention202 — — 691 — — — 893 
Substandard— 52 — 264 — — — 316 
Doubtful— — — — — — — — 
Total$97,131 $76,919 $7,003 $5,796 $1,856 $3,412 $22,444 $214,561 
Residential Real Estate: Commercial
Risk rating
Pass$138,801 $165,202 $67,921 $44,896 $26,583 $70,434 $15,507 $529,344 
Special Mention95 884 106 79 — 497 135 1,796 
Substandard735 22 691 41 95 993 29 2,606 
Doubtful56 — — — — — — 56 
Total$139,687 $166,108 $68,718 $45,016 $26,678 $71,924 $15,671 $533,802 
Leases
Risk rating
Pass$6,705 $5,729 $2,628 $2,151 $705 $845 $— $18,763 
Special Mention198 111 184 67 21 — — 581 
Substandard— 698 — 23 19 78 — 818 
Doubtful— — 332 16 22 — — 370 
Total$6,903 $6,538 $3,144 $2,257 $767 $923 $— $20,532 
Total Commercial Loans
Risk rating
Pass$955,507 $906,488 $442,074 $259,230 $181,243 $451,971 $521,590 $3,718,103 
Special Mention2,889 8,793 33,684 10,250 4,595 18,326 13,117 91,654 
Substandard4,738 4,256 2,477 13,046 6,630 23,430 963 55,540 
Doubtful56 30 797 243 532 743 488 2,889 
Total$963,190 $919,567 $479,032 $282,769 $193,000 $494,470 $536,158 $3,868,186 
(1) Included within each of commercial, financial and agricultural loans and commercial real estate loans is an immaterial amount of consumer loans that wereare not broken out by class.


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Park considers the performance of the loan portfolio and its impact on the allowance for credit losses. For residential and consumer loan classes, Park also evaluates credit quality based on the aging status of the loan, which was previously presented, and by performing status. The following tables present the amortized cost in residential and consumer loans based on performing status. Park defines a loan as nonperforming if it is on nonaccrual status, designated as an accruing TDR, or is greater than 90 days past due and accruing.

September 30, 2021Term Loans Amortized Cost Basis by Origination Year
June 30, 2022June 30, 2022Term Loans Amortized Cost Basis by Origination Year
(In thousands)(In thousands)20212020201920182017PriorRevolving Loans Amortized Cost BasisTotal(In thousands)20222021202020192018PriorRevolving Loans Amortized Cost BasisTotal
Commercial, financial and agricultural: OverdraftsCommercial, financial and agricultural: OverdraftsCommercial, financial and agricultural: Overdrafts
PerformingPerforming$4,033 $— $— $— $— $— $— $4,033 Performing$3,763 $— $— $— $— $— $— $3,763 
NonperformingNonperforming— — — — — — — — Nonperforming— — — — — — — — 
TotalTotal$4,033 $— $— $— $— $— $— $4,033 Total$3,763 $— $— $— $— $— $— $3,763 
Construction Real Estate: RetailConstruction Real Estate: RetailConstruction Real Estate: Retail
PerformingPerforming$47,057 $49,942 $7,649 $3,045 $1,556 $2,326 $80 $111,655 Performing$29,000 $63,488 $10,510 $5,039 $2,172 $2,815 $76 $113,100 
NonperformingNonperforming— — — — — 22 — 22 Nonperforming— — — — — 15 — 15 
TotalTotal$47,057 $49,942 $7,649 $3,045 $1,556 $2,348 $80 $111,677 Total$29,000 $63,488 $10,510 $5,039 $2,172 $2,830 $76 $113,115 
Residential Real Estate: MortgageResidential Real Estate: MortgageResidential Real Estate: Mortgage
PerformingPerforming$195,203 $217,391 $123,465 $75,441 $63,593 $356,491 $— $1,031,584 Performing$96,635 $210,845 $203,217 $98,556 $58,895 $333,730 $— $1,001,878 
NonperformingNonperforming— 629 814 861 841 17,364 — 20,509 Nonperforming— — — 767 446 15,833 — 17,046 
TotalTotal$195,203 $218,020 $124,279 $76,302 $64,434 $373,855 $— $1,052,093 Total$96,635 $210,845 $203,217 $99,323 $59,341 $349,563 $— $1,018,924 
Residential Real Estate: HELOCResidential Real Estate: HELOCResidential Real Estate: HELOC
PerformingPerforming$299 $— $158 $22 $43 $2,490 $161,062 $164,074 Performing$— $345 $25 $154 $88 $2,391 $157,757 $160,760 
NonperformingNonperforming— — — 39 70 1,878 393 2,380 Nonperforming— — 36 — — 1,507 230 1,773 
TotalTotal$299 $— $158 $61 $113 $4,368 $161,455 $166,454 Total$— $345 $61 $154 $88 $3,898 $157,987 $162,533 
Residential Real Estate: InstallmentResidential Real Estate: InstallmentResidential Real Estate: Installment
PerformingPerforming$— $$553 $142 $1,231 $2,674 $— $4,607 Performing$— $— $$322 $76 $2,981 $— $3,381 
NonperformingNonperforming— 13 43 85 1,660 — 1,803 Nonperforming— — 10 21 1,325 — 1,360 
TotalTotal$— $20 $555 $185 $1,316 $4,334 $— $6,410 Total$— $— $12 $326 $97 $4,306 $— $4,741 
Consumer: ConsumerConsumer: ConsumerConsumer: Consumer
PerformingPerforming$544,465 $558,784 $293,738 $138,496 $77,438 $72,314 $22,623 $1,707,858 Performing$441,091 $549,090 $408,302 $197,503 $85,565 $113,635 $9,284 $1,804,470 
NonperformingNonperforming129 482 772 426 243 698 — 2,750 Nonperforming68 192 334 349 265 548 — 1,756 
TotalTotal$544,594 $559,266 $294,510 $138,922 $77,681 $73,012 $22,623 $1,710,608 Total$441,159 $549,282 $408,636 $197,852 $85,830 $114,183 $9,284 $1,806,226 
Consumer: GFSCConsumer: GFSCConsumer: GFSC
PerformingPerforming$— $333 $1,581 $452 $110 $(81)$125 $2,520 Performing$— $— $124 $379 $120 $17 $71 $711 
NonperformingNonperforming— — 70 19 15 — — 104 Nonperforming— — — 33 — — 37 
TotalTotal$— $333 $1,651 $471 $125 $(81)$125 $2,624 Total$— $— $124 $412 $120 $21 $71 $748 
Consumer: Check loansConsumer: Check loansConsumer: Check loans
PerformingPerforming$— $— $— $— $— $— $2,092 $2,092 Performing$— $— $— $— $— $— $2,112 $2,112 
NonperformingNonperforming— — — — — — — — Nonperforming— — — — — — — — 
TotalTotal$— $— $— $— $— $— $2,092 $2,092 Total$— $— $— $— $— $— $2,112 $2,112 
Total Consumer Loans
Performing$791,057 $826,457 $427,144 $217,598 $143,971 $436,214 $185,982 $3,028,423 
Nonperforming
129 1,124 1,658 1,388 1,254 21,622 393 27,568 
Total$791,186 $827,581 $428,802 $218,986 $145,225 $457,836 $186,375 $3,055,991 


Total Consumer Loans
Performing$570,489 $823,768 $622,180 $301,953 $146,916 $455,569 $169,300 $3,090,175 
Nonperforming
68 192 380 1,153 732 19,232 230 21,987 
Total$570,557 $823,960 $622,560 $303,106 $147,648 $474,801 $169,530 $3,112,162 

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December 31, 2021Term Loans Amortized Cost Basis by Origination Year
(In thousands)20212020201920182017PriorRevolving Loans Amortized Cost BasisTotal
Commercial, financial and agricultural: Overdrafts
Performing$1,127 $— $— $— $— $— $— $1,127 
Nonperforming— — — — — — — — 
Total1,127 $— $— $— $— $— $— $1,127 
Construction Real Estate: Retail
Performing$68,374 $26,247 $5,710 $2,743 $1,505 $1,842 $79 $106,500 
Nonperforming— 647 57 — — 21 — 725 
Total$68,374 $26,894 $5,767 $2,743 $1,505 $1,863 $79 $107,225 
Residential Real Estate: Mortgage
Performing$230,299 $217,022 $114,077 $68,774 $59,939 $323,678 $— $1,013,789 
Nonperforming— 626 785 824 574 17,060 — 19,869 
Total$230,299 $217,648 $114,862 $69,598 $60,513 $340,738 $— $1,033,658 
Residential Real Estate: HELOC
Performing$400 $— $121 $58 $41 $2,640 $159,952 $163,212 
Nonperforming89 40 — 37 90 1,811 326 2,393 
Total$489 $40 $121 $95 $131 $4,451 $160,278 $165,605 
Residential Real Estate: Installment
Performing$— $$418 $111 $1,049 $2,471 $— $4,052 
Nonperforming— 12 26 78 1,469 — 1,590 
Total$— $15 $423 $137 $1,127 $3,940 $— $5,642 
Consumer: Consumer
Performing$649,638 $505,555 $259,230 $119,222 $64,699 $62,136 $22,664 $1,683,144 
Nonperforming241 506 755 399 155 593 — 2,649 
Total$649,879 $506,061 $259,985 $119,621 $64,854 $62,729 $22,664 $1,685,793 
Consumer: GFSC
Performing$— $243 $986 $292 $63 $$108 $1,697 
Nonperforming— 73 — — 96 
Total$— $252 $1,059 $297 $72 $$108 $1,793 
Consumer: Check loans
Performing$— $— $— $— $— $— $2,093 $2,093 
Nonperforming— — — — — — — — 
Total$— $— $— $— $— $— $2,093 $2,093 
Total Consumer Loans
Performing$949,838 $749,070 $380,542 $191,200 $127,296 $392,772 $184,896 $2,975,614 
Nonperforming
330 1,840 1,675 1,291 906 20,954 326 27,322 
Total$950,168 $750,910 $382,217 $192,491 $128,202 $413,726 $185,222 $3,002,936 

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
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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. At SeptemberJune 30, 2022 and December 31, 2021, there was no allowance for credit losses on PCD loans. The carrying amount of loans acquired with deteriorated credit quality at SeptemberJune 30, 20212022 and December 31, 20202021 was $8.7$5.9 million and $11.2$7.1 million, respectively.

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

During the twenty-one months ended September 30, 2021, Park modified 5,131 consumer loans, with an aggregate balance of $79.5 million, and modified 1,406 commercial loans, with an aggregate balance of $513.3 million, in each case relatedIn response to a hardship caused by the COVID-19 pandemic, and responses thereto. Park has worked with borrowers impacted by the COVID-19 pandemic and provided modifications to includein the form of either interest only deferral or principal and interest deferral, in each case, for initial periods of up to 90 days. As necessary, Park made available a second 90-day interest only deferral or principal and interest deferral bringing the total potential deferral period to six months. Modifications were structured in a manner to best address each individual customer's then current situation. A majority of these modifications were excluded from the TDR classification under Section 4013 of the CARES Act or under applicable interagency guidance of the federal banking regulators. In accordance with this guidance, suchThe modified loans arewere considered current and continuecontinued to accrue interest during the deferral period. Section 4013 of the CARES Act expired on December 31, 2021; therefore, modifications occurring after that date are subject to previous TDR classification guidance.

Certain other loans which were modified during the three-month and nine-monthsix-month periods ended SeptemberJune 30, 20212022 and 20202021 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.

At SeptemberJune 30, 20212022 and December 31, 2020,2021, there were $26.1$14.2 million and $25.8$20.9 million, respectively, of TDRs included in the nonaccrual loan totals. At SeptemberJune 30, 20212022 and December 31, 2020, $16.22021, $4.8 million and $12.9$10.5 million, respectively, of these nonaccrual TDRs were performing in accordance with the terms of the restructured notes. At SeptemberJune 30, 20212022 and December 31, 2020,2021, loans totaling $18.8$19.7 million and $20.9$28.3 million, respectively, were included in accruing TDR loan totals. Management will continue to review the restructured loans and may determine it is appropriate to move certain nonaccrual TDRs to accrual status in the future.

At SeptemberJune 30, 20212022 and December 31, 2020,2021, Park had commitments to lend $6.8$1.0 million and $6.7$3.0 million, respectively, of additional funds to borrowers whose outstanding loan terms had been modified in a TDR.
 
At SeptemberJune 30, 20212022 and December 31, 2020,2021, there were $0.5$0.1 million and $0.2$0.3 million, respectively, of specific reserves related to TDRs. Modifications made in 20212022 and 20202021 were largely the result of renewals and extending the maturity date of the loans at terms consistent with the original notes. These modifications were deemed to be TDRs primarily due to Park’s conclusion that the respective borrowers would likely not have qualified for similar terms through another lender. Many of the modifications deemed to be TDRs were previously identified as impaired loans and thus were also previouslyindividually evaluated for impairment under ASC 310.impairment. There were $156,000 and $174,000 ofno additional specific reserves recorded during the three-month and nine-monthor six-month periods ended SeptemberJune 30, 2021, respectively,2022 as a result of TDRs identified in the period. respective periods. There were no
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additional specific reserves recorded during eitherboth the three-month or nine-monthand six-month periods ended SeptemberJune 30, 20202021 as a result of TDRs identified in the period.respective periods.

Quarterly, management reviews renewals/modifications of loans previously identified as TDRs to consider if it is appropriate to remove the TDR classification. If the borrower is no longer experiencing financial difficulty and the renewal/modification did not contain a concessionary interest rate or other concessionary terms and the terms of the renewal/modification are considered to be market terms based on the current risk characteristics of the borrower, management considers the potential removal of the TDR classification. If deemed appropriate, the TDR classification is removed if the borrower has complied with the terms of the
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loan at the date of the renewal/modification and there was a reasonable expectation that the borrower will continue to comply with the terms of the loan subsequent to the date of the renewal/modification. The majority of these TDRs were originally considered restructurings in a prior year as a result of a renewal/modification with an interest rate that was not commensurate with the risk of the underlying loan at the time of the renewal/modification. There were $58,000$0.8 million and $4.0$1.0 million of TDR classifications removed during the three-month and nine-monthsix-month periods ended SeptemberJune 30, 2021,2022, respectively. There were no TDR classifications removed during the three-month period ended June 30, 2021. The TDR classification was removed on $709,000 and $1.6$3.9 million of loans during the three-month and nine-month periodssix-month period ended SeptemberJune 30, 2020, respectively.2021.

The terms of certain other loans were modified during the three-month and nine-monthsix-month periods ended SeptemberJune 30, 20212022 and 20202021 that did not meet the definition of a TDR. Excluding COVID-19 related modifications, there were no substandard commercial loans modified during either of the three-month and nine-monthor six-month periods ended SeptemberJune 30, 20212022 and SeptemberJune 30, 2020,2021, which did not meet the definition of a TDR. Consumer loans modified during the three-month and six-month periods ended June 30, 2022, which did not meet the definition of a TDR, had a total amortized cost of $11.9 million and $23.0 million, respectively.Excluding COVID-19 related modifications, consumer loans modified during the three-month and nine-month six-month periods ended SeptemberJune 30, 2021, which did not meet the definition of a TDR, had a total recorded investmentamortized cost of $2.0$2.7 million and $4.8$3.7 million respectively. Excluding COVID-19 related modifications, consumer loans modified during the three-month and nine-month periods ended September 30, 2020 which did not meet the definition of a TDR had a total recorded investment of $16.7 million and $58.2 million,, respectively. Many of these loans were to borrowers who were not experiencing financial difficulties but who were looking to reduce their cost of funds.

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The following tables detail the number of contracts modified as TDRs during the three-month periods ended SeptemberJune 30, 20212022 and 2020,2021, as well as the amortized cost/recorded investmentcost of these contracts at SeptemberJune 30, 20212022 and 2020.2021. The amortized cost/recorded investment pre- andcost pre-and post-modification is generally the same due to the fact that Park does not typically forgive principal.

Three Months Ended
September 30, 2021
Three Months Ended
June 30, 2022
(In thousands)(In thousands)Number of
Contracts
AccruingNonaccrualTotal Amortized Cost(In thousands)Number of
Contracts
AccruingNonaccrualTotal Amortized Cost
Commercial, financial and agriculturalCommercial, financial and agriculturalCommercial, financial and agricultural
Commercial, financial and agriculturalCommercial, financial and agricultural5 $383 $868 $1,251 Commercial, financial and agricultural $ $ $ 
PPP loansPPP loans    PPP loans    
OverdraftsOverdrafts    Overdrafts    
Commercial real estateCommercial real estate5  5,053 5,053 Commercial real estate1 488  488 
Construction real estate:Construction real estate:    Construction real estate:    
Commercial Commercial     Commercial    
Retail Retail     Retail    
Residential real estate:Residential real estate:    Residential real estate:    
Commercial Commercial2 96 125 221  Commercial    
Mortgage Mortgage3  102 102  Mortgage5 332 81 413 
HELOC HELOC1 33  33  HELOC1 30  30 
Installment Installment1 55  55  Installment3 24 1 25 
Consumer:Consumer:Consumer:
ConsumerConsumer28 15 250 265 Consumer17 3 171 174 
GFSCGFSC    GFSC    
Check loansCheck loans    Check loans    
LeasesLeases    Leases    
Total loansTotal loans45 $582 $6,398 $6,980 Total loans27 $877 $253 $1,130 

 Three Months Ended
September 30, 2020
(In thousands)Number of
Contracts
AccruingNonaccrualTotal
Recorded
Investment
Commercial, financial and agricultural$35 $117 $152 
Commercial real estate— 359 359 
Construction real estate:    
  Commercial— — — — 
  Mortgage— — — — 
  Installment— — — — 
Residential real estate:   
  Commercial— — — — 
  Mortgage258 109 367 
  HELOC21 — 21 
  Installment12 19 
Consumer64 109 479 588 
Total loans80 $435 $1,071 $1,506 
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 Three Months Ended
June 30, 2021
(In thousands)Number of
Contracts
AccruingNonaccrualTotal Amortized Cost
Commercial, financial and agricultural
Commercial, financial and agricultural$— $334 $334 
PPP loans— — — — 
Overdrafts— — — — 
Commercial real estate1,601 207 1,808 
Construction real estate:
  Commercial98 — 98 
  Retail— — — — 
Residential real estate:
  Commercial— 406 406 
  Mortgage58 195 253 
  HELOC134 33 167 
  Installment— 
Consumer:
Consumer42 77 289 366 
GFSC— — — — 
Check loans— — — — 
Leases— 362 362 
Total loans62 $1,970 $1,826 $3,796 

Of those loans which were modified and determined to be a TDR during the three-month period ended SeptemberJune 30, 2021, $4.5 million2022, no loans were on nonaccrual status at December 31, 2020. Of2021. Of those loans which were modified and determined to be a TDR during the three-month period ended SeptemberJune 30, 2020, $0.12021, $0.6 million were on nonaccrual status at December 31, 2019.2020.


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The following tables detail the number of contracts modified as TDRs during the nine-monthsix-month periods ended SeptemberJune 30, 20212022 and 2020,2021, as well as the amortized cost/recorded investmentcost of these contracts at SeptemberJune 30, 20212022 and 2020.2021. The amortized cost/recorded investment pre- andcost pre-and post-modification is generally the same due to the fact that Park does not typically forgive principal.

Nine Months Ended
September 30, 2021
Six Months Ended
June 30, 2022
(In thousands)(In thousands)Number of
Contracts
AccruingNonaccrualTotal Amortized Cost(In thousands)Number of
Contracts
AccruingNonaccrualTotal Amortized Cost
Commercial, financial and agriculturalCommercial, financial and agriculturalCommercial, financial and agricultural
Commercial, financial and agriculturalCommercial, financial and agricultural9 $383 $899 $1,282 Commercial, financial and agricultural2 $ $ $ 
PPP loansPPP loans    PPP loans    
OverdraftsOverdrafts    Overdrafts    
Commercial real estateCommercial real estate13 1,571 6,137 7,708 Commercial real estate5 1,077 140 1,217 
Construction real estate:Construction real estate: Construction real estate:
Commercial Commercial1 98  98  Commercial    
Retail Retail     Retail    
Residential real estate:Residential real estate: Residential real estate:
Commercial Commercial5 96 528 624  Commercial1  106 106 
Mortgage Mortgage13 148 377 525  Mortgage8 332 145 477 
HELOC HELOC5 80 106 186  HELOC2 30 20 50 
Installment Installment7 93 27 120  Installment7 51 27 78 
Consumer:Consumer: Consumer:
ConsumerConsumer104 137 379 516 Consumer41 12 272 284 
GFSCGFSC 0  GFSC    
Check loansCheck loans 0  Check loans    
LeasesLeases1 0351 351 Leases    
Total loansTotal loans158 $2,606 $8,804 $11,410 Total loans66 $1,502 $710 $2,212 

 Nine Months Ended
September 30, 2020
(In thousands)Number of
Contracts
AccruingNonaccrualTotal
Recorded
Investment
Commercial, financial and agricultural10 $117 $1,110 $1,227 
Commercial real estate1,136 2,068 3,204 
Construction real estate: 
  Commercial— — — — 
  Mortgage10 — 10 
  Installment— 14 14 
Residential real estate: 
  Commercial— 
  Mortgage24 735 1,005 1,740 
  HELOC25 18 43 
  Installment16 191 63 254 
Consumer177 235 655 890 
Total loans244 $2,449 $4,941 $7,390 
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 Six Months Ended
June 30, 2021
(In thousands)Number of
Contracts
AccruingNonaccrualTotal Amortized Cost
Commercial, financial and agricultural
Commercial, financial and agricultural$— $334 $334 
PPP loans— — — — 
Overdrafts— — — — 
Commercial real estate1,601 1,099 2,700 
Construction real estate:
  Commercial98 — 98 
  Retail— — — — 
Residential real estate:
  Commercial— 406 406 
  Mortgage10 193 300 493 
  HELOC134 33 167 
  Installment42 28 70 
Consumer:
Consumer76 127 368 495 
GFSC— — — — 
Check loans— — — — 
Leases— 362 362 
Total loans113 $2,195 $2,930 $5,125 

Of those loans which were modified and determined to be a TDR during the nine-monthsix-month period ended SeptemberJune 30, 2021, $6.12022, $0.6 million were on nonaccrual status at December 31, 2020. 2021. Of those loans which were modified and determined to be a TDR during the nine-monthsix-month period ended SeptemberJune 30, 2020, $0.42021, $1.6 million were on nonaccrual status at December 31, 2019.2020.
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The following tables presenttable presents the amortized cost/recorded investmentcost in loans which were modified as TDRs within the previous 12 months and for which there was a payment default during the three-month and nine-month periods ended SeptemberJune 30, 20212022 and 2020,2021, respectively. For these tables,this table, a
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loan is considered to be in default when it becomes 30 days contractually past due under the modified terms. The additional ACL resulting from the defaults on TDR loans was immaterial.
 
 Three Months Ended
September 30, 2021
Three Months Ended
September 30, 2020
(In thousands)Number of
Contracts
Amortized CostNumber of
Contracts
Recorded
Investment
Commercial, financial and agricultural:— $— 
Commercial, financial and agricultural $ (1)(1)
PPP loans  (1)(1)
Overdrafts  (1)(1)
Commercial real estate  50 
Construction real estate:
Commercial  — — 
Retail  14 
Residential real estate:
Commercial  — — 
Mortgage4 330 365 
HELOC1 95 16 
Installment1 4 16 
Consumer26 263 
Consumer15 122 (1)(1)
GFSC  (1)(1)
Check loans  (1)(1)
Leases  — — 
Total loans21 $551 34 $724 
(1) Results for reporting periods beginning after January 1, 2021 are presented under ASC 326, while prior period amounts continue to be reported in accordance with previously applicable U.S. GAAP. Category was not broken out as a separate class at December 31, 2020.
 Three Months Ended
June 30, 2022
Three Months Ended
June 30, 2021
(In thousands)Number of
Contracts
Amortized CostNumber of
Contracts
Amortized Cost
Commercial, financial and agricultural:
Commercial, financial and agricultural $ — $— 
PPP loans  — — 
Overdrafts  — — 
Commercial real estate  220 
Construction real estate:
Commercial  — — 
Retail  — — 
Residential real estate:
Commercial  — — 
Mortgage2 111 334 
HELOC1 20 — — 
Installment  
Consumer
Consumer7 64 14 100 
GFSC  — — 
Check loans  — �� 
Leases  — — 
Total loans10 $195 21 $660 

Of the $0.6$0.2 million in modified TDRs which defaulted during the three-month period ended SeptemberJune 30, 2021, $29,000 were accruing loans and $0.5 million2022, all were nonaccrual loans. Of the $0.7 million in modified TDRs which defaulted during the three-month period ended SeptemberJune 30, 2020, $65,0002021, $44,000 were accruing loans and $0.7$0.6 million were nonaccrual loans.

The following table presents the amortized cost in loans which were modified as TDRs within the previous 12 months and for which there was a payment default during the six-month periods ended June 30, 2022 and 2021, respectively. For this table, a
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 Nine Months Ended
September 30, 2021
Nine Months Ended
September 30, 2020
(In thousands)Number of
Contracts
Amortized CostNumber of
Contracts
Recorded
Investment
Commercial, financial and agricultural:89 
Commercial, financial and agricultural— — (1)(1)
PPP loans— — (1)(1)
Overdrafts— — (1)(1)
Commercial real estate— — 278 
Construction real estate:
Commercial— — — — 
Retail— — 14 
Residential real estate:
Commercial— — 
Mortgage396 768 
HELOC95 16 
Installment32 28 
Consumer32 365 
Consumer16 128 (1)(1)
GFSC— — (1)(1)
Check loans— — (1)(1)
Leases351 — — 
Total loans26 $1,002 49 $1,566 

(1) Results for reporting periods beginning after January 1, 2021 are presented under ASC 326, while prior period amounts continueloan is considered to be reported in accordance with previously applicable U.S. GAAP. Categorydefault when it becomes 30 days contractually past due under the modified terms. The additional ACL resulting from the defaults on TDR loans was not broken out as a separate class at December 31, 2020.immaterial.
 Six Months Ended
June 30, 2022
Six Months Ended
June 30, 2021
(In thousands)Number of
Contracts
Amortized CostNumber of
Contracts
Amortized Cost
Commercial, financial and agricultural:
Commercial, financial and agricultural $ — $— 
PPP loans  — — 
Overdrafts  — — 
Commercial real estate  220 
Construction real estate:
Commercial  — — 
Retail  — — 
Residential real estate:
Commercial  — — 
Mortgage2 111 373 
HELOC2 56 — — 
Installment  34 
Consumer
Consumer11 94 17 113 
GFSC  — — 
Check loans  — — 
Leases  362 
Total loans15 $261 27 $1,102 

Of the $1.0$0.3 million in modified TDRs which defaulted during the nine-monthsix-month period ended SeptemberJune 30, 2022, all were nonaccrual loans. Of the $1.1 million in modified TDRs which defaulted during the six-month period ended June 30, 2021, $29,000$84,000 were accruing loans and $1.0 million were nonaccrual loans. Of the $1.6 million in modified TDRs which defaulted during the nine-month period ended September 30, 2020, $621,000 were accruing loans and $945,000 were nonaccrual loans.

Note 6 – Allowance for Credit Losses

The ACL is an estimate of the expected credit losses on financial assets measured at amortized cost, which is measured using relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. A provision for credit losses is charged to operations based on management’s periodic evaluation of these and other pertinent factors as discussed within Note 2 – Adoption of New Accounting Pronouncements and Issued But Not Yet Effective Accounting Standards of the Notes to the Consolidated Condensed Financial Statements included in this Form 10-Q. factors.

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

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

Forecast model - For each portfolio segment, a LDA was performed in order to identify appropriate loss drivers and create a regression model for use in forecasting cash flows. The LDA analysis utilized Park's own FFIEC Call Report data for the commercial, financial and agricultural and residential real estate portfolio segments. Peer data was incorporated into the analysis for the commercial real estate, construction real estate, and consumer portfolio segments. Park plans to update the LDA annually; however, due to the impact of COVID-19, the LDA analysis was last updated in the fourth quarter of 2019.
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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 nonaccrual, or a loan is greater than 90 days past due.
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Whenever possible, Park utilizes its own loan-level PDs for the reasonable and supportable forecast period. When loan level-dataloan-level data is not available reflecting the forecasted economic conditions, a forecast model is utilized to estimate PDs.
Loss given default – LGD is the percentage of the asset not expected to be collected due to default. Whenever possible, Park utilizes its own loan-level LGDs for the reasonable and supportable forecast period. When it is not possible to use Park's own LGDs, the LGD is derived using a method referred to as Frye Jacobs.
Prepayments and curtailments – Prepayments and curtailments are calculated based on Park’s own data utilizing a three-year average. This analysis is updated annually in the fourth quarter and was last updated in the fourth quarter of 2020.2021.
Forecast and reversion – Park has established a one-year reasonable and supportable forecast period with a one-year straight line reversion to the long-term historical average.
Economic forecast - Park utilizes a third party to provide economic forecasts under various scenarios, which are weighted in order to reflect model risk in the current economic environment. The scenario weighting is evaluated by management on a quarterly basis.
As of January 1, 2021, the date of CECL adoption, Park weighted a "most likely" scenario 80%, a "slower near-term growth" scenario 10%, and a "moderate recession" scenario 10%. As of January 1, 2021, the "most likely" scenario forecasted Ohio unemployment to range between 5.31% and 5.79% during the next four quarters.
As of MarchDecember 31, 2021, the "most likely" scenario forecasted Ohio unemployment between 3.32% and 3.97% during the next four quarters. In determining the appropriate weighting of scenarios at December 31, 2021, management considered the range of forecasted unemployment as well as a number of economic indicators. While some economic indications continued to decrease significantly,be optimistic, the Omicron variant, rising inflation, volatility in consumer confidence, employment, supply chain and workforce challenges continued to a rangecause uncertainty in the overall economic environment. Considering these factors, management determined it was appropriate to maintain the previous quarter weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at December 31, 2021.
As of March 31, 2022, the "most likely" scenario forecasted Ohio unemployment between 3.70%3.36% and 4.93%3.75% during the next four quarters. In determining the appropriate weighting of scenarios at March 31, 2021,2022, management considered this improvedthe range of forecasted unemployment as well as a number of economic forecast while balancingindicators. While some economic indications were optimistic, the risks associated withsurging inflation, volatility in consumer confidence, workforce challenges, and geopolitical conflict (including the COVID-19 pandemic, includingconflict in Ukraine) continued to cause uncertainty in the risk of pandemic-related losses lagging behind the projected improvement in unemployment. Managementoverall economic environment. Considering these factors, management determined it was appropriate to weightmaintain the previous quarter weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario 50%. at March 31, 2022. Improved forecasts, largely in the "moderate recession" scenario, resulted in a 4 basis point decline in the weighted quantitative allowance.
As of June 30, 2021,2022, the "most likely" scenario forecasted Ohio unemployment to decrease significantly, to a range between 2.85%3.36% and 3.92%3.57% during the next four quarters. In determining the appropriate weighting of scenarios at June 30, 2021,2022, management considered this improved economic forecast and other positive economic indicators while balancing the risks associated with the COVID-19 pandemic, including the continued riskrange of pandemic-related losses lagging behind the projected improvement in unemployment. Management determined it was appropriate to weight the "most likely" scenario 55% and the "moderate recession" scenario 45% at June 30, 2021. Management believed that the resulting quantitative reserve appropriately balanced economic improvement with the ongoing risks.
As of September 30, 2021, the "most likely" scenario forecasted Ohio unemployment to decrease, to a range between 3.03% and 4.02%, during the next four quarters. In determining the appropriate weighting of scenarios at September 30, 2021, management consideredas well as a number of lesseconomic indicators. While some economic indications were optimistic, economic indicators, including: a slight uptick in Ohio unemployment, which was contrarythe surging inflation, declining consumer confidence, rising interest rates, geopolitical conflict (including the conflict between Russia and Ukraine), and workforce and supply chain challenges continued to cause uncertainty to the forecast; increased COVID cases; decreased consumer confidence; and decreased occupancy, among others.overall economic environment. Considering these factors, management determined it was appropriate to return tomaintain the March 31, 2021previous quarter weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at SeptemberJune 30, 2021.2022. Deteriorating forecasts, largely in the "moderate recession" scenario, resulted in a 4 basis point increase in the weighted quantitative allowance.

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.
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.
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The effect of other external factors such as the regulatory, legal and technological environments; competition; geopolitical conflict; and events such as natural disasters or pandemics.
Actual and expected changes in international, national, regional and local economic and business conditions and developments in the markets in which Park operates that affect the collectibility of financial assets.
Where the U.S. economy is within a given credit cycle.
The extent that there is government assistance (stimulus).

During 2020, Park added an additional reserve for three industries at particularly high risk due to the COVID-19 pandemic: hotels and accommodations; restaurants and food service; and strip shopping centers. These industries have experienced high levels of deferrals and have been particularly impacted by shut downs of non-essential businesses, increased health department regulations, and changes in consumer behavior. Management expects that a relatively higher percentage of the 4-rated credits in these portfolios will eventually migrate to special mention, substandard, or impaired status.doubtful. In adopting CECL, management determined it was appropriate to retain this qualitative adjustment as this adjustment takes into account the additional risk in these portfolios, which is not captured in the quantitative calculation. Even though COVID-19 case numbers have declined since December 31, 2021, these industries are still recovering from the pandemic effects. As of SeptemberJune 30, 2021,2022 additional reserves totaling $4.6$2.6 million were added for these portfolios on top of the quantitative reserve already calculated. This is an increasea decrease from $3.4 million as of June 30, 2021 and $4.5 million as of March 31, 2021 and reflects the previously discussed uncertainty regarding sustained economic improvement due to COVID-19. The $4.6 million in additional COVID-19-related reserves as of September 30, 2021 is also an increase compared to $3.8$5.2 million as of December 31, 2020, which had been calculated under the previous incurred loss methodology.2021 and reflects improvement in COVID-19 cases, eased COVID-19 health department precautions and improving affected industry performance. Management believes there is still residual risk in these portfolios related to pandemic effects and uncertainty in future COVID-19 strains and related impacts.

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

September 30, 2021June 30, 2022December 31, 2021
(in thousands)(in thousands)4-Rated BalanceAdditional Reserve(in thousands)4-Rated BalanceAdditional Reserve4-Rated BalanceAdditional Reserve
Hotels and accommodationsHotels and accommodations$123,249 $1,854 Hotels and accommodations$152,081 $1,145 $148,018 $2,226 
Restaurants and food serviceRestaurants and food service33,373 754 Restaurants and food service45,797 517 40,648 917 
Strip shopping centersStrip shopping centers177,635 1,961 Strip shopping centers172,893 954 184,171 2,033 
TotalTotal$334,257 $4,569 Total$370,771 $2,616 $372,837 $5,176 

Additionally, at June 30, 2022, management applied a 1.00%0.75% reserve to all hotels and accommodations loans in the collectively evaluated population to account for increased valuation risk. This is an increase0.75% reserve was reduced from 0.50%1.00% at December 31, 2021. At June 30, 20212022, Park's originated hotels and considers some decline in various economic conditions dueaccommodation loans had a balance of $199.0 million with an additional reserve related to the Delta variant and a decline in hotel occupancy rates.valuation risks of $1.5 million. At September 30,December 31, 2021, Park's originated hotels and accommodation loans had a balance of $193.8$203.9 million with an additional reserve related to valuation risks of $1.9$2.0 million.

There is still a significant amount of uncertainty related to the economic impact of COVID-19, including the duration of the pandemic, the risk related to new variants, future government programs that may be established in response to the pandemic, and the resiliency of the U.S. economy. Management will continue to evaluate its estimate of expected credit losses as new information becomes available.

As of SeptemberJune 30, 2021,2022, Park had $131.5$13.4 million 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 was calculated for these loans to reflect minimal credit risk.

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ACL Activity
The activity in the ACL for the three-month and nine-monthsix-month periods ended SeptemberJune 30, 20212022 and SeptemberJune 30, 20202021 is summarized in the following tables.tables:

Three Months Ended
September 30, 2021
Three Months Ended
June 30, 2022
(In thousands)(In thousands)Commercial,
financial and
agricultural
Commercial
real estate
Construction
real estate
Residential
real estate
ConsumerLeasesTotal(In thousands)Commercial,
financial and
agricultural
Commercial
real estate
Construction
real estate
Residential
real estate
ConsumerLeasesTotal
ACL:ACL:       ACL:       
Beginning balanceBeginning balance$15,222 $22,749 $5,670 $13,113 $26,261 $562 $83,577 Beginning balance$13,288 $23,731 $4,230 $11,584 $25,797 $231 $78,861 
Charge-offsCharge-offs221    781  1,002 Charge-offs723 598 33 46 1,002  2,402 
RecoveriesRecoveries132 428 1,597 729 696  3,582 Recoveries316 540 29 54 1,058 1 1,998 
Net charge-offs/(recoveries)Net charge-offs/(recoveries)$89 $(428)$(1,597)$(729)$85 $ $(2,580)Net charge-offs/(recoveries)$407 $58 $4 $(8)$(56)$(1)$404 
Provision for (recovery of) credit loss843 2,991 (1,003)(2,080)1,483 (262)1,972 
(Recovery of) provision for credit losses(Recovery of) provision for credit losses(134)(1,334)165 2,027 2,296 (29)2,991 
Ending balanceEnding balance$15,976 $26,168 $6,264 $11,762 $27,659 $300 $88,129 Ending balance$12,747 $22,339 $4,391 $13,619 $28,149 $203 $81,448 
 
Three Months Ended
September 30, 2020
Three Months Ended
June 30, 2021
(In thousands)(In thousands)Commercial,
financial and
agricultural
Commercial
real estate
Construction
real estate
Residential
real estate
ConsumerLeasesTotal(In thousands)Commercial,
financial and
agricultural
Commercial
real estate
Construction
real estate
Residential
real estate
ConsumerLeasesTotal
ACL:ACL:       ACL:       
Beginning balanceBeginning balance$23,476 $16,469 $6,828 $10,507 $15,624 $572 $73,476 Beginning balance$16,279 $24,487 $5,813 $14,037 $25,729 $541 $86,886 
Charge-offsCharge-offs241 45 — 34 1,208 1,529 Charge-offs308 — — 26 736 — 1,070 
RecoveriesRecoveries181 47 35 189 803 — 1,255 Recoveries232 210 229 68 1,062 — 1,801 
Net charge-offs/(recoveries)Net charge-offs/(recoveries)$60 $(2)$(35)$(155)$405 $$274 Net charge-offs/(recoveries)$76 $(210)$(229)$(42)$(326)$— $(731)
Provision for credit loss3,571 6,417 1,544 546 1,750 13,836 
(Recovery of) provision for credit losses(Recovery of) provision for credit losses(981)(1,948)(372)(966)206 21 (4,040)
Ending balanceEnding balance$26,987 $22,888 $8,407 $11,208 $16,969 $579 $87,038 Ending balance$15,222 $22,749 $5,670 $13,113 $26,261 $562 $83,577 

 Nine Months Ended
September 30, 2021
(In thousands)Commercial,
financial and
agricultural
Commercial
real estate
Construction
real estate
Residential
real estate
ConsumerLeasesTotal
ACL:       
Beginning balance, prior to adoption of ASC 326$25,608 $23,480 $7,288 $11,363 $17,418 $518 $85,675 
Impact of adopting ASC 326(8,257)2,119 (1,898)3,121 10,925 80 6,090 
Charge-offs675   37 3,061  3,773 
Recoveries487 724 2,078 859 2,912  7,060 
Net charge-offs/(recoveries)$188 $(724)$(2,078)$(822)$149 $ $(3,287)
Recovery of credit loss(1,187)(155)(1,204)(3,544)(535)(298)(6,923)
Ending balance$15,976 $26,168 $6,264 $11,762 $27,659 $300 $88,129 
Nine Months Ended
September 30, 2020
Six Months Ended
June 30, 2022
(In thousands)(In thousands)Commercial,
financial and
agricultural
Commercial
real estate
Construction
real estate
Residential
real estate
ConsumerLeasesTotal(In thousands)Commercial,
financial and
agricultural
Commercial
real estate
Construction
real estate
Residential
real estate
ConsumerLeasesTotal
ACL:ACL:       ACL:       
Beginning balanceBeginning balance$20,203 $10,229 $5,311 $8,610 $12,211 $115 $56,679 Beginning balance$14,025 $25,466 $5,758 $11,424 $26,286 $238 $83,197 
Charge-offsCharge-offs1,041 45 176 5,060 16 6,344 Charge-offs913 598 33 81 2,118 6 3,749 
RecoveriesRecoveries1,061 690 628 457 2,654 — 5,490 Recoveries434 588 530 86 1,975 1 3,614 
Net (recoveries)/charge-offs$(20)$(645)$(622)$(281)$2,406 $16 $854 
Provision for credit loss6,764 12,014 2,474 2,317 7,164 480 31,213 
Net charge-offs/(recoveries)Net charge-offs/(recoveries)$479 $10 $(497)$(5)$143 $5 $135 
(Recovery of) provision for credit losses(Recovery of) provision for credit losses(799)(3,117)(1,864)2,190 2,006 (30)(1,614)
Ending balanceEnding balance$26,987 $22,888 $8,407 $11,208 $16,969 $579 $87,038 Ending balance$12,747 $22,339 $4,391 $13,619 $28,149 $203 $81,448 


 Six Months Ended
June 30, 2021
(In thousands)Commercial,
financial and
agricultural
Commercial
real estate
Construction
real estate
Residential
real estate
ConsumerLeasesTotal
ACL:       
Beginning balance, prior to adoption of ASC 326$25,608 $23,480 $7,288 $11,363 $17,418 $518 $85,675 
Impact of adopting ASC 326(8,257)2,119 (1,898)3,121 10,925 80 6,090 
Charge-offs454 — — 37 2,280 — 2,771 
Recoveries355 296 481 130 2,216 — 3,478 
Net charge-offs/(recoveries)$99 $(296)$(481)$(93)$64 $— $(707)
Recovery of credit losses(2,030)(3,146)(201)(1,464)(2,018)(36)(8,895)
Ending balance$15,222 $22,749 $5,670 $13,113 $26,261 $562 $83,577 
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ACL Summary
Loans collectively evaluated for impairment in the following tables include all performing loans at SeptemberJune 30, 20212022 and December 31, 2020,2021, as well as nonperforming loans internally classified as consumer loans. Nonperforming consumer loans are not typically individually evaluated for impairment, but receive a portion of the statistical allocation of the ACL. Loans individually evaluated for impairment include all impaired loans internally classified as commercial nonaccrual loans and TDRs at SeptemberJune 30, 20212022 and December 31, 2020,2021, 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 20202021 Form 10-K).

The composition of the ACL at SeptemberJune 30, 20212022 and December 31, 20202021 was as follows:
 
September 30, 2021 June 30, 2022
(In thousands)(In thousands)Commercial,
financial and
agricultural
Commercial
real estate
Construction
real estate
Residential
real estate
ConsumerLeasesTotal(In thousands)Commercial,
financial and
agricultural
Commercial
real estate
Construction
real estate
Residential
real estate
ConsumerLeasesTotal
ACL:ACL:       ACL:       
Ending allowance balance attributed to loans:Ending allowance balance attributed to loans:       Ending allowance balance attributed to loans:       
Individually evaluated for impairmentIndividually evaluated for impairment$3,183 $180 $ $ $ $103 $3,466 Individually evaluated for impairment$703$1,160$$$$11$1,874
Collectively evaluated for impairmentCollectively evaluated for impairment12,793 25,988 6,264 11,762 27,659 197 84,663 Collectively evaluated for impairment12,04421,1794,39113,61928,14919279,574
Acquired with deteriorated credit qualityAcquired with deteriorated credit quality       Acquired with deteriorated credit quality
Total ending allowance balanceTotal ending allowance balance$15,976 $26,168 $6,264 $11,762 $27,659 $300 $88,129 Total ending allowance balance$12,747$22,339$4,391$13,619$28,149$203$81,448
Loan balance:Loan balance:       Loan balance:       
Loans individually evaluated for impairmentLoans individually evaluated for impairment$22,018 $50,541 $442 $4,857 $ $1,406 $79,264 Loans individually evaluated for impairment$11,916$27,109$459$2,105$$934$42,523
Loans collectively evaluated for impairmentLoans collectively evaluated for impairment1,292,601 1,704,527 341,480 1,746,339 1,715,324 20,177 6,820,448 Loans collectively evaluated for impairment1,304,3041,729,434320,2641,728,4571,809,08618,6836,910,228
Loans acquired with deteriorated credit qualityLoans acquired with deteriorated credit quality251 6,528 965 912  49 8,705 Loans acquired with deteriorated credit quality1384,3246767965,934
Total ending loan balanceTotal ending loan balance$1,314,870 $1,761,596 $342,887 $1,752,108 $1,715,324 $21,632 $6,908,417 Total ending loan balance$1,316,358$1,760,867$321,399$1,731,358$1,809,086$19,617$6,958,685
ACL as a percentage of loan balance:ACL as a percentage of loan balance:       ACL as a percentage of loan balance:       
Loans individually evaluated for impairmentLoans individually evaluated for impairment14.46 %0.36 % % % %7.33 %4.37 %Loans individually evaluated for impairment5.90 %4.28 % % % %1.18 %4.41 %
Loans collectively evaluated for impairmentLoans collectively evaluated for impairment0.99 %1.52 %1.83 %0.67 %1.61 %0.98 %1.24 %Loans collectively evaluated for impairment0.92 %1.22 %1.37 %0.79 %1.56 %1.03 %1.15 %
Loans acquired with deteriorated credit qualityLoans acquired with deteriorated credit quality % % % % % % %Loans acquired with deteriorated credit quality % % % % % % %
TotalTotal1.22 %1.49 %1.83 %0.67 %1.61 %1.39 %1.28 %Total0.97 %1.27 %1.37 %0.79 %1.56 %1.03 %1.17 %
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 December 31, 2020
(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$3,758 $1,316 $— $16 $— $344 $5,434 
Collectively evaluated for impairment21,809 22,093 7,288 11,292 17,418 174 80,074 
Acquired with deteriorated credit quality41 71 — 55 — — 167 
Total ending allowance balance$25,608 $23,480 $7,288 $11,363 $17,418 $518 $85,675 
Loan balance:       
Loans individually evaluated for impairment$28,811 $70,334 $3,110 $4,557 $— $1,595 $108,407 
Loans collectively evaluated for impairment1,559,842 1,670,510 339,312 1,806,126 1,659,704 22,731 7,058,225 
Loans acquired with deteriorated credit quality
336 7,345 999 2,361 — 112 11,153 
Total ending loan balance$1,588,989 $1,748,189 $343,421 $1,813,044 $1,659,704 $24,438 $7,177,785 
ACL as a percentage of loan balance:       
Loans individually evaluated for impairment13.04 %1.87 %— %0.35 %— %21.57 %5.01 %
Loans collectively evaluated for impairment1.40 %1.32 %2.15 %0.63 %1.05 %0.77 %1.13 %
Loans acquired with deteriorated credit quality12.20 %0.97 %— %2.33 %— %— %1.50 %
Total1.61 %1.34 %2.12 %0.63 %1.05 %2.12 %1.19 %
Recorded investment:       
Loans individually evaluated for impairment$28,836 $70,357 $3,110 $4,557 $— $1,595 $108,455 
Loans collectively evaluated for impairment1,566,344 1,676,388 340,116 1,808,892 1,664,214 22,745 7,078,699 
Loans acquired with deteriorated credit quality337 7,461 1,002 2,372 — 112 11,284 
Total ending recorded investment$1,595,517 $1,754,206 $344,228 $1,815,821 $1,664,214 $24,452 $7,198,438 

 December 31, 2021
(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$1,385$188$$$$43$1,616
Collectively evaluated for impairment12,64025,2785,75811,42426,28619581,581
Acquired with deteriorated credit quality
Total ending allowance balance$14,025$25,466$5,758$11,424$26,286$238$83,197
Loan balance:       
Loans individually evaluated for impairment$22,666$47,820$222$2,606$$1,188$74,502
Loans collectively evaluated for impairment1,275,7831,748,854320,6081,735,2261,689,67919,3216,789,471
Loans acquired with deteriorated credit quality
1775,118956875237,149
Total ending loan balance$1,298,626$1,801,792$321,786$1,738,707$1,689,679$20,532$6,871,122
ACL as a percentage of loan balance:       
Loans individually evaluated for impairment6.11 %0.39 %— %— %— %3.62 %2.17 %
Loans collectively evaluated for impairment0.99 %1.45 %1.80 %0.66 %1.56 %1.01 %1.20 %
Loans acquired with deteriorated credit quality— %— %— %— %— %— %— %
Total1.08 %1.41 %1.79 %0.66 %1.56 %1.16 %1.21 %
 
Note 7 – Loans Held For Sale
 
Mortgage loans held for sale are carried at their fair value. At SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively, Park had $8.9$5.7 million and $31.7$9.4 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 portfolio segment in Note 5 - Loans, and Note 6 - Allowance for Credit Losses. The contractual balance was $8.8$5.6 million and $30.9$9.2 million at SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively. The gain expected upon sale was $175,000$76,000 and $753,000$166,000 at SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively. None of these loans were 90 days or more past due or on nonaccrual status at SeptemberJune 30, 20212022 or December 31, 2020.2021.

During the three months ended June 30, 2022, Park transferred certain commercial loans held for investment, with an amortized cost of $6.3 million, to the loans held for sale portfolio. The transferred loans were recorded at the lower of cost or fair value, recording a charge-off in each instance where the fair value of an individual loan was deemed to be below the carrying cost at the time the loans were moved to the held for sale portfolio.
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Note 8 – Goodwill and Other Intangible Assets

The following tables show the activity in goodwill and other intangible assets for the three-month and nine-monthsix-month periods ended SeptemberJune 30, 20212022 and 2020.2021.
(in thousands)GoodwillOther
intangible assets
Total
July 1, 2020$159,595 $10,310 $169,905 
Amortization— 525 525 
September 30, 2020$159,595 $9,785 $169,380 
July 1, 2021$159,595 $8,302 $167,897 
Amortization— 420 420 
September 30, 2021$159,595 $7,882 $167,477 
(in thousands)GoodwillOther
intangible assets
Total
April 1, 2021$159,595 $8,781 $168,376 
Amortization— 479 479 
June 30, 2021$159,595 $8,302 $167,897 
April 1, 2022$159,595 $7,060 $166,655 
Amortization— 403 403 
June 30, 2022$159,595 $6,657 $166,252 

(in thousands)(in thousands)GoodwillOther
intangible assets
Total(in thousands)GoodwillOther
intangible assets
Total
December 31, 2019$159,595 $11,523 $171,118 
Amortization— 1,738 1,738 
September 30, 2020$159,595 $9,785 $169,380 
December 31, 2020December 31, 2020$159,595 $9,260 $168,855 December 31, 2020$159,595 $9,260 $168,855 
AmortizationAmortization— 1,378 1,378 Amortization— 958 958 
September 30, 2021$159,595 $7,882 $167,477 
June 30, 2021June 30, 2021$159,595 $8,302 $167,897 
December 31, 2021December 31, 2021$159,595 $7,462 $167,057 
AmortizationAmortization— 805 805 
June 30, 2022June 30, 2022$159,595 $6,657 $166,252 
   
Park evaluates goodwill for impairment during the second quarter of each year, with financial data as of March 31. Based on the qualitative analysis performed as of April 1, 2021,2022, the Company determined that goodwill for Park's reporting unit, PNB, was not impaired. Management continues to monitor economic factors, including economic conditions as a result of the COVID-19 pandemic and responses thereto, to evaluate goodwill impairment.

Acquired Intangible Assets

The following table shows the balance of acquired intangible assets as of SeptemberJune 30, 20212022 and December 31, 2020.2021.
September 30, 2021December 31, 2020June 30, 2022December 31, 2021
(in thousands)(in thousands)Gross Carrying AmountAccumulated AmortizationGross Carrying AmountAccumulated Amortization(in thousands)Gross Carrying AmountAccumulated AmortizationGross Carrying AmountAccumulated Amortization
Other intangible assets:Other intangible assets:Other intangible assets:
Core deposit intangible assetsCore deposit intangible assets$14,456 $6,574 $14,456 $5,196 Core deposit intangible assets$14,456 $7,799 $14,456 $6,994 
Trade name intangible assetsTrade name intangible assets1,300 1,300 1,300 1,300 Trade name intangible assets1,300 1,300 1,300 1,300 
TotalTotal$15,756 $7,874 $15,756 $6,496 Total$15,756 $9,099 $15,756 $8,294 

Core deposit intangible assets are being amortized, on an accelerated basis, over a period of ten years. Aggregate amortization expense was $420,000$403,000 and $525,000$479,000 for the three months ended SeptemberJune 30, 20212022 and 2020,2021, respectively, and was $1.4 million$805,000 and $1.7 million$958,000 for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively.

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

(in thousands)(in thousands)Total(in thousands)Total
Three months ending December 31, 2021$420 
20221,487 
Six months ending December 31, 2022Six months ending December 31, 2022$682 
202320231,323 20231,323 
202420241,215 20241,215 
202520251,042 20251,042 
20262026887 

Note 9 – Investment in Qualified Affordable Housing

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

The table below details the balances of Park’s affordable housing tax credit investments and related unfunded commitments at SeptemberJune 30, 20212022 and December 31, 2020.2021.

(in thousands)(in thousands)September 30, 2021December 31, 2020(in thousands)June 30, 2022December 31, 2021
Affordable housing tax credit investmentsAffordable housing tax credit investments$60,457 $56,024 Affordable housing tax credit investments$54,751 $58,711 
Unfunded commitmentsUnfunded commitments33,116 29,298 Unfunded commitments21,232 28,484 

Commitments are funded when capital calls are made by the general partner. Park expects that the current commitments will be funded between 2021the remainder of 2022 and 2031.2032.

Park recognized amortization expense of $1.9$2.0 million and $1.8 million, respectively, for the three months ended SeptemberJune 30, 2022 and 2021, and 2020, and recognized $5.6$4.0 million and $5.5$3.7 million, respectively, for each of the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, which were included within the provision for income taxes. Additionally, during the three months ended SeptemberJune 30, 20212022 and 2020,2021, Park recognized tax credits and other benefits from its affordable housing tax credit investments of $1.9$2.1 million and $2.3$2.4 million, respectively, and during the ninesix months ended SeptemberJune 30, 2022 and 2021, and 2020, recognized $7.2$4.9 million and $6.9$5.3 million, respectively, which were included within the provision for income taxes.

Note 10 – Foreclosed and Repossessed Assets

Park typically transfers a loan to OREO at the time that Park takes deed/title to the real estate property asset. The carrying amounts of foreclosed real estate properties held at SeptemberJune 30, 20212022 and December 31, 20202021 are listed below, as well as the recorded investment of loans secured by residential real estate properties for which formal foreclosure proceedings were in process at those dates.

(in thousands)(in thousands)September 30, 2021December 31, 2020(in thousands)June 30, 2022December 31, 2021
OREO:OREO:OREO:
Commercial real estateCommercial real estate$ $625 Commercial real estate$1,354 $— 
Residential real estateResidential real estate813 806 Residential real estate 775 
Total OREOTotal OREO$813 $1,431 Total OREO$1,354 1354$775 
Loans in process of foreclosure:Loans in process of foreclosure:Loans in process of foreclosure:
Residential real estateResidential real estate$1,397 $1,643 Residential real estate$1,523 $1,148 

In addition to real estate, Park may also repossess different types of collateral. At both SeptemberJune 30, 20212022 and December 31, 2020,2021, Park had $3.6$637,000 and $3.3 million, respectively, in other repossessed assets which are included in "Other assets" on the Consolidated Condensed Balance Sheets. At both dates presented,December 31, 2021, the other repossessed assets largely consisted of an aircraft acquired as part of a loan workout.

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Note 11 – Loan Servicing
 
Park serviced sold mortgage loans of $2.12 billion at SeptemberJune 30, 2021, $1.972022, $2.13 billion at December 31, 20202021 and $1.79$2.09 billion at SeptemberJune 30, 2020.2021. At SeptemberJune 30, 2021, $3.52022, $3.3 million of the sold mortgage loans were sold with recourse, compared to $1.7$3.3 million at December 31, 20202021 and $2.0$3.8 million at SeptemberJune 30, 2020.2021. Management closely monitors the delinquency rates on the mortgage loans sold with recourse. At SeptemberJune 30, 20212022 and December 31, 2020,2021, management had established reserves of $39,000$66,000 and $30,000,$57,000, respectively, to account for expected losses on loan repurchases.
 
When Park sells mortgage loans with servicing rights retained, these servicing rights are initially recorded at fair value. Park has selected the “amortization method” as permissible within U.S. GAAP, whereby the servicing rights capitalized are amortized in proportion to and over the period of estimated future servicing income with respect to the underlying loan. At the end of each reporting period, the carrying value of MSRs is assessed for impairment with a comparison to fair value. MSRs are carried at the lower of their amortized cost or fair value. The amortization of MSRs is included within "Other service income" in the Consolidated Condensed Statements of Income.

Activity for MSRs and the related valuation allowance follows:
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
(In thousands)(In thousands)2021202020212020(In thousands)2022202120222021
Mortgage servicing rights:Mortgage servicing rights: Mortgage servicing rights: 
Carrying amount, net, beginning of periodCarrying amount, net, beginning of period$14,316 $9,505 $12,210 $10,070 Carrying amount, net, beginning of period$15,704 $13,635 $15,264 $12,210 
AdditionsAdditions1,114 2,987 4,061 5,796 Additions456 1,269 1,082 2,947 
AmortizationAmortization(835)(1,254)(2,753)(2,853)Amortization(584)(813)(1,212)(1,918)
Change in valuation allowanceChange in valuation allowance(39)(198)1,038 (1,973)Change in valuation allowance894 225 1,336 1,077 
Carrying amount, net, end of periodCarrying amount, net, end of period$14,556 $11,040 $14,556 $11,040 Carrying amount, net, end of period$16,470 $14,316 $16,470 $14,316 
Valuation allowance:Valuation allowance: Valuation allowance: 
Beginning of periodBeginning of period$2,112 $2,600 $3,189 $825 Beginning of period$1,126 $2,337 $1,568 $3,189 
Change in valuation allowanceChange in valuation allowance39 198 (1,038)1,973 Change in valuation allowance(894)(225)(1,336)(1,077)
End of periodEnd of period$2,151 $2,798 $2,151 $2,798 End of period$232 $2,112 $232 $2,112 
 
Servicing fees included in other"Other service incomeincome" were $1.4 million and $1.0$1.3 million for the three months ended SeptemberJune 30, 20212022 and 2020,2021, respectively, and were $4.0$2.7 million and $2.9$2.6 million for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively.

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

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

Management determines if an arrangement is or contains a lease at contract inception. If an arrangement is determined to be or contain a lease, Park recognizes a ROU asset and a lease liability at the lease commencement date. Leases are classified as operating or finance leases at the lease commencement date. At SeptemberJune 30, 20212022 and December 31, 2020,2021, all of Park's leases were classified as operating leases.

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

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

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

Lease payments included in the measurement of the lease liability are comprised of the following:
Fixed payments, including in-substance fixed payments, owed over the lease term;
For certain of Park's gross real estate leases, non-lease components such as real estate taxes, insurance, and common area maintenance; and
Variable lease payments that depend on an index or rate, initially measured using the index or rate at the lease commencement date.

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

Park's operating lease ROU asset and lease liability are presented in “Operating lease right-of-use asset" and "Operating lease liability," respectively, on Park's Consolidated Condensed Balance Sheets. The carrying amounts of Park's ROU asset and lease liability at SeptemberJune 30, 20212022 were $13.4$16.3 million and $14.5$17.1 million, respectively. At December 31, 2020,2021, the carrying amounts of Park's ROU asset and lease liability were $15.1$13.4 million and $16.1$14.3 million, respectively. Park's operating lease expense is recorded in "Occupancy expense" on the Company's Consolidated Condensed Statements of Income.

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Other information related to operating leases for the three monthsthree-month and nine monthssix-month periods ended SeptemberJune 30, 20212022 and 2020 was as2021 follows:

Three Months EndedNine Months EndedThree Months EndedSix Months Ended
(in thousands)(in thousands)September 30, 2021September 30, 2020September 30, 2021September 30, 2020(in thousands)June 30, 2022June 30, 2021June 30, 2022June 30, 2021
Lease costLease costLease cost
Operating lease costOperating lease cost$705 $905 $2,124 $2,671 Operating lease cost$751 $698 $1,475 $1,419 
Sublease incomeSublease income(63)(95)(189)(289)Sublease income(63)(63)(126)(126)
Total lease costTotal lease cost$642 $810 $1,935 $2,382 Total lease cost$688 $635 $1,349 $1,293 
Other informationOther informationOther information
Cash paid for amounts included in the measurement of lease liabilities:Cash paid for amounts included in the measurement of lease liabilities:Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases Operating cash flows from operating leases$777 $906 $2,329 $2,710  Operating cash flows from operating leases$768 $770 $1,541 $1,552 
ROU assets obtained in exchange for new operating lease liabilitiesROU assets obtained in exchange for new operating lease liabilities$367 $25 $547 $7,794 ROU assets obtained in exchange for new operating lease liabilities$4,182 $180 $4,182 $180 
Reductions to ROU assets resulting from reductions to lease obligationsReductions to ROU assets resulting from reductions to lease obligations$(695)$(789)$(2,074)$(2,347)Reductions to ROU assets resulting from reductions to lease obligations$(695)$(685)$(1,393)$(1,379)

At SeptemberJune 30, 20212022 and December 31, 2020,2021, Park's operating leases had a weighted average remaining term of 6.88.7 years and 7.26.8 years, respectively. The weighted average discount rate of Park's operating leases waswas 2.7% and 2.3% at both SeptemberJune 30, 20212022 and December 31, 2020.2021, respectively.

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

(in thousands)(in thousands)September 30, 2021(in thousands)June 30, 2022
3 months ending December 31, 2021$783 
20223,085 
Six months ending December 31, 2022Six months ending December 31, 2022$1,524 
202320232,944 20233,293 
202420241,791 20242,205 
202520251,451 20251,877 
202620261,796 
ThereafterThereafter5,602 Thereafter8,866 
Total undiscounted minimum lease paymentsTotal undiscounted minimum lease payments$15,656 Total undiscounted minimum lease payments$19,561 
Present value adjustmentPresent value adjustment(1,176)Present value adjustment(2,494)
Total lease liabilitiesTotal lease liabilities$14,480 Total lease liabilities$17,067 

In September 2021, the Company entered into a noncancellable operating lease for an additional retail office for an initial term of 12 years, with two five-year renewal options. The lease commenced on July 1, 2022, and therefore, was not recognized as of December 31, 2021 or June 30, 2022. The fixed payments due on an undiscounted basis over the noncancellable 12-year period of the lease are $3.5 million. The Company will assess the lease term as of the lease commencement date, but does not presently expect that either of the five-year renewal periods will be exercised.

Note 13 – Repurchase Agreement Borrowings

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

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 consistedconsist of customer accounts and securities which are pledged on an individual security basis.

At SeptemberJune 30, 20212022 and December 31, 2020,2021, Park's repurchase agreement borrowings totaled $211$171.8 million and $317$213.8 million, respectively. These borrowings were collateralized with U.S. government and agencysponsored entities' asset-backed securities with a fair
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value of $319$216.6 million and $366$334.9 million at SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively. Declines in the value of the collateral would require Park to pledge additional securities. As of SeptemberJune 30, 20212022 and December 31, 2020,2021, Park had $909$1,263 million and $439$1,225 million, respectively, of available unpledged securities.

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The table below shows the remaining contractual maturity of repurchase agreements by collateral pledged at SeptemberJune 30, 20212022 and December 31, 2020:2021:

September 30, 2021June 30, 2022
(in thousands)(in thousands)Remaining Contractual Maturity of the Agreements(in thousands)Remaining Contractual Maturity of the Agreements
Overnight and ContinuousUp to 30 days30 - 90 daysGreater than 90 daysTotalOvernight and ContinuousUp to 30 days30 - 90 daysGreater than 90 daysTotal
U.S. government and agency securitiesU.S. government and agency securities$210,979 $ $ $ $210,979 U.S. government and agency securities$171,799 $ $ $ $171,799 
December 31, 2020December 31, 2021
(in thousands)(in thousands)Remaining Contractual Maturity of the Agreements(in thousands)Remaining Contractual Maturity of the Agreements
Overnight and ContinuousUp to 30 days30 - 90 daysGreater than 90 daysTotalOvernight and ContinuousUp to 30 days30 - 90 daysGreater than 90 daysTotal
U.S. government and agency securitiesU.S. government and agency securities$317,230 $— $— $— $317,230 U.S. government and agency securities$213,786 $— $— $— $213,786 

Note 14 - Derivatives

Park uses certain derivative financial instruments (or "derivatives") to meet the needs of its 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 June 30, 2022, Park had no borrowing derivatives. Interest rate swaps with notional amounts totaling $25.0 million at both September 30, 2021 and December 31, 20202021 were designated as cash flow hedges of certain FHLB advances.

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 $30.1$26.8 million and $33.329.7 million at SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively.

All of the Company's interest rate swaps were determined to be fully effective during each of the three-month and nine-monthsix-month periods ended SeptemberJune 30, 20212022 and SeptemberJune 30, 2020.2021. 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 (loss) income. The amount included in accumulated other comprehensive (loss) income would be reclassified to current earnings should the hedges no longer be considered effective. During the three-month and six-month periods ended June 30, 2022, Park recognized expense of $66,000 as the result of the early termination of a borrowing interest rate swap. Park expects the outstanding hedges to remain fully effective during the remaining respective terms of the swaps.

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Summary information about Park's interest rate swaps as of SeptemberJune 30, 20212022 and December 31, 20202021 follows:

September 30, 2021December 31, 2020June 30, 2022December 31, 2021
(In thousands, except weighted average data)(In thousands, except weighted average data)Borrowing DerivativesLoan DerivativesBorrowing DerivativesLoan Derivatives(In thousands, except weighted average data)Borrowing DerivativesLoan DerivativesBorrowing DerivativesLoan Derivatives
Notional amountsNotional amounts$25,000 $30,118 $25,000 $33,310 Notional amounts$ $26,823 $25,000 $29,651 
Weighted average pay ratesWeighted average pay rates2.595 %4.664 %2.595 %4.695 %Weighted average pay rates %4.647 %2.595 %4.668 %
Weighted average receive ratesWeighted average receive rates0.134 %4.664 %0.218 %4.695 %Weighted average receive rates %4.647 %0.124 %4.668 %
Weighted average maturity (years)Weighted average maturity (years)0.78.51.59.3Weighted average maturity (years)0.08.60.58.2
Unrealized lossesUnrealized losses$436 $ $885 $— Unrealized losses$ $ $262 $— 

Interest expense recorded on swap transactions was $157,000$23,000 and $140,000$152,000 for the three-month periods ended SeptemberJune 30, 20212022 and 2020,2021, respectively, and was $171,000 and $300,000 $457,000 and $272,000for the sixnine-month-month periods ended SeptemberJune 30, 20212022 and 2020,2021, respectively.

Interest Rate Swaps
The following table presents the net gains, (losses), net of income taxes, recorded in OCI and the Consolidated Condensed Statements of Income related to interest rate swaps for the three-month and nine-month six-month periods ended SeptemberJune 30, 20212022 and 2020.2021:

Three Months Ended
June 30, 2022
(In thousands)Amount of Net Gain Recognized in OCI (Effective Portion)Amount of Gain (Loss) Reclassified from OCI to Interest IncomeAmount of Expense Recognized in Miscellaneous Expense
Interest rate swaps$15 $ $52 

Three Months Ended
SeptemberJune 30, 2021
(In thousands)Amount of Net Gain (Loss) Recognized in OCI (Effective Portion)Amount of Gain (Loss) Reclassified from OCI to Interest IncomeAmount of Gain (Loss)Expense Recognized in Other Non-interest Income (Ineffective Portion)Miscellaneous Expense
Interest rate contractsswaps$117113 $ $ 

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

ThreeSix Months Ended
SeptemberJune 30, 20202021
(In thousands)Amount of Net Gain (Loss) Recognized in OCI (Effective Portion)Amount of Gain (Loss) Reclassified from OCI to Interest IncomeAmount of Gain (Loss)Expense Recognized in Other Non-interest Income (Ineffective Portion)Miscellaneous Expense
Interest rate contractsswaps$111238 $— $— 

Nine Months Ended
September 30, 2021
(In thousands)Amount of Gain (Loss) Recognized in OCI (Effective Portion)Amount of Gain (Loss) Reclassified from OCI to Interest IncomeAmount of Gain (Loss) Recognized in Other Non-interest Income (Ineffective Portion)
Interest rate contracts$355$$

Nine Months Ended
September 30, 2020
(In thousands)Amount of Gain (Loss) Recognized in OCI (Effective Portion)Amount of Gain (Loss) Reclassified from OCI to Interest IncomeAmount of Gain (Loss) Recognized in Other Non-interest Income (Ineffective Portion)
Interest rate contracts$(357)$— $— 
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The following tables reflect the interest rate swaps included in the Consolidated Condensed Balance Sheets as of SeptemberJune 30, 20212022 and December 31, 2020.2021.

(In thousands)(In thousands)September 30, 2021December 31, 2020(In thousands)June 30, 2022December 31, 2021
Notional AmountFair ValueNotional AmountFair ValueNotional AmountFair ValueNotional AmountFair Value
Included in other assets:Included in other assets:Included in other assets:
Borrowing derivatives - interest rate swaps related to FHLB advancesBorrowing derivatives - interest rate swaps related to FHLB advances$ $ $— $— Borrowing derivatives - interest rate swaps related to FHLB advances$ $ $— $— 
Loan derivatives - instruments associated with loansLoan derivatives - instruments associated with loansLoan derivatives - instruments associated with loans
Matched interest rate swaps with borrower Matched interest rate swaps with borrower30,118 2,258 33,310 3,934  Matched interest rate swaps with borrower7,290 129 29,651 1,952 
Matched interest rate swaps with counterparty Matched interest rate swaps with counterparty  — —  Matched interest rate swaps with counterparty19,533 720 — — 
Total included in other assets Total included in other assets$30,118 $2,258 $33,310 $3,934  Total included in other assets$26,823 $849 $29,651 $1,952 
Included in other liabilities:Included in other liabilities:Included in other liabilities:
Borrowing derivatives - interest rate swaps related to FHLB advancesBorrowing derivatives - interest rate swaps related to FHLB advances$25,000 $(436)$25,000 $(885)Borrowing derivatives - interest rate swaps related to FHLB advances$ $ $25,000 $(262)
Loan derivatives - instruments associated with loansLoan derivatives - instruments associated with loansLoan derivatives - instruments associated with loans
Matched interest rate swaps with borrower Matched interest rate swaps with borrower  — —  Matched interest rate swaps with borrower19,533 (720)— — 
Matched interest rate swaps with counterparty Matched interest rate swaps with counterparty30,118 (2,258)33,310 (3,934) Matched interest rate swaps with counterparty7,290 (129)29,651 (1,952)
Total included in other liabilities Total included in other liabilities$55,118 $(2,694)$58,310 $(4,819) Total included in other liabilities$26,823 $(849)$54,651 $(2,214)

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 SeptemberJune 30, 20212022 and December 31, 20202021, Park had $15.9$5.8 million and $58.2$13.3 million, respectively, of interest rate lock commitments. The fair value of these mortgage banking derivatives was reflected by a derivative asset of $0.4$0.1 million and $1.5$0.3 million at SeptemberJune 30, 20212022 and December 31, 20202021, 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 both SeptemberJune 30, 20212022 and December 31, 20202021, the fair value of the swap liability of $447,000 and $226,000, respectively, was an estimate of the exposure based upon probability-weighted potential Visa litigation losses.

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

Other comprehensive (loss) income (loss) components, net of income tax, are shown in the following table for the three-monththree month and nine-monthsix month periods ended SeptemberJune 30, 20212022 and 2020:2021:


(in thousands)
Changes in pension plan assets and benefit obligationsUnrealized net holding gain (loss) on cash flow hedgeUnrealized gains (losses) on debt securities AFSTotal
Beginning balance at July 1, 2021$(34,421)$(460)$31,951 $(2,930)
Other comprehensive income (loss) before reclassifications— 117 (4,997)(4,880)
Net current period other comprehensive income (loss) 117 (4,997)(4,880)
Ending balance at September 30, 2021$(34,421)$(343)$26,954 $(7,810)
Beginning balance at July 1, 2020$(26,674)$(922)$41,457 $13,861 
Amounts reclassified from accumulated other comprehensive income— — 21 21 
Other comprehensive income before reclassifications— 111 207 318 
Net current period other comprehensive income— 111 228 339 
Ending balance at September 30, 2020$(26,674)$(811)$41,685 $14,200 

(in thousands)
Changes in pension plan assets and benefit obligationsUnrealized net holding gain (loss) on cash flow hedgeUnrealized gains (losses) on debt securities AFSTotal
Beginning balance at April 1, 2022$(5,792)$(67)$(34,610)$(40,469)
Other comprehensive income (loss) before reclassifications— 15 (45,002)(44,987)
Amounts reclassified from other comprehensive loss 52  52 
Net current period other comprehensive income (loss) 67 (45,002)(44,935)
Ending balance at June 30, 2022$(5,792)$ $(79,612)$(85,404)
Beginning balance at April 1, 2021$(34,421)$(573)$27,093 $(7,901)
Other comprehensive income before reclassifications— 113 4,858 4,971 
Net current period other comprehensive income— 113 4,858 4,971 
Ending balance at June 30, 2021$(34,421)$(460)$31,951 $(2,930)


(in thousands)
Changes in pension plan assets and benefit obligationsUnrealized net holding gain (loss) on cash flow hedgeUnrealized gains (losses) on debt securities AFSTotal
Beginning balance at January 1, 2021$(34,421)$(698)$40,690 $5,571 
Other comprehensive income (loss) before reclassifications— 355 (13,736)(13,381)
Net current period other comprehensive income (loss) 355 (13,736)(13,381)
Ending balance at September 30, 2021$(34,421)$(343)$26,954 $(7,810)
Beginning balance at January 1, 2020$(26,674)$(454)$17,539 $(9,589)
Amounts reclassified from accumulated other comprehensive income— — (2,596)(2,596)
Other comprehensive (loss) income before reclassifications— (357)26,742 26,385 
Net current period other comprehensive (loss) income— (357)24,146 23,789 
Ending balance at September 30, 2020$(26,674)$(811)$41,685 $14,200 

(in thousands)
Changes in pension plan assets and benefit obligationsUnrealized net holding gain (loss) on cash flow hedgeUnrealized gains (losses) on debt securities AFSTotal
Beginning balance at January 1, 2022$(5,792)$(206)$21,153 $15,155 
Other comprehensive income (loss) before reclassifications— 154 (100,765)(100,611)
Amounts reclassified from other comprehensive loss 52  52 
Net current period other comprehensive income (loss) 206 (100,765)(100,559)
Ending balance at June 30, 2022$(5,792)$ $(79,612)$(85,404)
Beginning balance at January 1, 2021$(34,421)$(698)$40,690 $5,571 
Other comprehensive income (loss) before reclassifications— 238 (8,739)(8,501)
Net current period other comprehensive income (loss)— 238 (8,739)(8,501)
Ending balance at June 30,2021$(34,421)$(460)$31,951 $(2,930)

During the three-monththree-month and nine-monthsix-month periods ended SeptemberJune 30, 2022, there was $66,000 ($52,000 net of tax) reclassified out of accumulated other comprehensive loss due to a net loss on the early termination of a borrowing interest rate swap. This loss was recorded within"Miscellaneous" other expense on the Consolidated Condensed Statements of Income. During the three-month and six-month periods ended June 30, 2021, there were no reclassifications out of accumulated other comprehensive income (loss). During the three-month period ended September 30, 2020, there was $27,000 ($21,000 net of tax) reclassified out of accumulated other comprehensive income due to net losses on the sale of debt securities AFS. During the nine-month period ended September 30, 2020, there was $3.3 million ($2.6 million net of tax) reclassified out of accumulated other comprehensive income due to net gains on the sale of debt securities AFS. These gains were recorded within "Net gain on the sale of debt securities" on the Consolidated Condensed Statements of Income.

income.
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Note 16 – Earnings Per Common Share
 
The following table sets forth the computation of basic and diluted earnings per common share for the three monthsmonth and nine six months ended SeptemberJune 30, 20212022 and 2020.2021.

 
Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
(In thousands, except share and per common share data)(In thousands, except share and per common share data)2021202020212020(In thousands, except share and per common share data)2022202120222021
Numerator:Numerator:  Numerator:  
Net incomeNet income$35,434 $30,846 $117,397 $82,723 Net income$34,324 $39,132 $73,199 $81,963 
Denominator:Denominator:  Denominator:  
Weighted-average common shares outstandingWeighted-average common shares outstanding16,292,312 16,300,720 16,315,996 16,300,250 Weighted-average common shares outstanding16,249,307 16,340,690 16,234,598 16,327,838 
Effect of dilutive PBRSUs and TBRSUsEffect of dilutive PBRSUs and TBRSUs131,600 93,072 129,572 98,100 Effect of dilutive PBRSUs and TBRSUs111,939 132,110 111,543 127,835 
Weighted-average common shares outstanding adjusted for the effect of dilutive PBRSUs and TBRSUsWeighted-average common shares outstanding adjusted for the effect of dilutive PBRSUs and TBRSUs16,423,912 16,393,792 16,445,568 16,398,350 Weighted-average common shares outstanding adjusted for the effect of dilutive PBRSUs and TBRSUs16,361,246 16,472,800 16,346,141 16,455,673 
Earnings per common share:Earnings per common share:  Earnings per common share:  
Basic earnings per common shareBasic earnings per common share$2.17 $1.89 $7.20 $5.07 Basic earnings per common share$2.11 $2.39 $4.51 $5.02 
Diluted earnings per common shareDiluted earnings per common share$2.16 $1.88 $7.14 $5.04 Diluted earnings per common share$2.10 $2.38 $4.48 $4.98 

Park awarded 61,89052,335 and 62,26561,890 PBRSUs to certain employees during the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively. No PBRSU'sPBRSUs were awarded during either of the three months ended SeptemberJune 30, 20212022 or 2020.2021.

Park repurchased an aggregate of 137,659 common shares during both the three months and nine months ended September 30, 2021, to fund the PBRSUs, the TBRSUs and common shares to be awarded to directors of Park and to directors of Park's subsidiary PNB (and its divisions) and pursuant to Park's previously announced stock repurchase authorizations. Park repurchased an aggregate of 76,000 common shares during the nine months ended September 30, 2020, to fund the PBRSUs, the TBRSUs and common shares to be awarded to directors of Park and to directors of Park's subsidiary PNB (and its divisions). No common shares were repurchased during the three months or six months ended SeptemberJune 30, 2020.2022 or 2021.

Note 17 – Segment Information
 
The Corporation is a financial holding company headquartered in Newark, Ohio. The reportable segment for the Corporation is its chartered national bank subsidiary, PNB (headquartered in Newark, Ohio). "All Other", which primarily consists of Park as the "Parent Company", GFSC and SEPH, is shown to reconcile the segment totals to the Consolidated Condensed Statements of Income.
 
Management is required to disclose information about the different types of business activities in which a company engages and also information on the different economic environments in which a company operates, so that the users of the financial statements can better understand the company’s performance, better understand the potential for future cash flows, and make
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more informed judgments about the company as a whole. Park has 1 reportable segment, as: (i) discrete financial information
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is available for this reportable segment and (ii) the segment is aligned with internal reporting to Park’s Chief Executive Officer, who is the chief operating decision maker.Officer.

Operating Results for the three months ended September 30, 2021 Operating Results for the three months ended June 30, 2022
(In thousands)(In thousands)PNBAll OtherTotal(In thousands)PNBAll OtherTotal
Net interest income (expense)$82,835 $(1,233)$81,602 
Net interest incomeNet interest income$83,411 $528 $83,939 
Provision for (recovery of) credit lossesProvision for (recovery of) credit losses4,276 (2,304)1,972 Provision for (recovery of) credit losses3,357 (366)2,991 
Other incomeOther income31,332 1,079 32,411 Other income29,255 1,938 31,193 
Other expenseOther expense64,663 3,826 68,489 Other expense66,214 3,834 70,048 
Income (loss) before income taxesIncome (loss) before income taxes$45,228 $(1,676)$43,552 Income (loss) before income taxes$43,095 $(1,002)$42,093 
Income tax expense (benefit)Income tax expense (benefit)8,777 (659)8,118 Income tax expense (benefit)8,155 (386)7,769 
Net income (loss)Net income (loss)$36,451 $(1,017)$35,434 Net income (loss)$34,940 $(616)$34,324 
Assets (at September 30, 2021)$10,012,868 $21,150 $10,034,018 
Assets (at June 30, 2022)Assets (at June 30, 2022)$9,794,711 $31,959 $9,826,670 
 
Operating Results for the three months ended September 30, 2020 Operating Results for the three months ended June 30, 2021
(In thousands)(In thousands)PNBAll OtherTotal(In thousands)PNBAll OtherTotal
Net interest incomeNet interest income$83,795 $45 $83,840 Net interest income$82,675 $1,176 $83,851 
Provision for (recovery of) loan losses13,839 (3)13,836 
Recovery of credit lossesRecovery of credit losses(3,752)(288)(4,040)
Other incomeOther income35,430 1,128 36,558 Other income31,126 112 31,238 
Other expenseOther expense65,590 4,269 69,859 Other expense67,122 4,278 71,400 
Income (loss) before income taxesIncome (loss) before income taxes$39,796 $(3,093)$36,703 Income (loss) before income taxes$50,431 $(2,702)$47,729 
Income tax expense (benefit)Income tax expense (benefit)6,908 (1,051)5,857 Income tax expense (benefit)9,535 (938)8,597 
Net income (loss)Net income (loss)$32,888 $(2,042)$30,846 Net income (loss)$40,896 $(1,764)$39,132 
Assets (at September 30, 2020)$9,195,911 $44,095 $9,240,006 
Assets (at June 30, 2021)Assets (at June 30, 2021)$9,922,623 $25,371 $9,947,994 

Operating Results for the nine months ended September 30, 2021 Operating Results for the six months ended June, 30, 2022
(In thousands)(In thousands)PNBAll OtherTotal(In thousands)PNBAll OtherTotal
Net interest income (expense)Net interest income (expense)$247,596 $(1,409)$246,187 Net interest income (expense)$162,783 $(1,158)$161,625 
Recovery of credit lossesRecovery of credit losses(3,670)(3,253)(6,923)Recovery of credit losses(1,190)(424)(1,614)
Other incomeOther income95,258 2,480 97,738 Other income60,502 2,347 62,849 
Other expenseOther expense195,361 12,393 207,754 Other expense130,430 6,991 137,421 
Income (loss) before income taxesIncome (loss) before income taxes$151,163 $(8,069)$143,094 Income (loss) before income taxes$94,045 $(5,378)$88,667 
Income tax expense (benefit)Income tax expense (benefit)28,694 (2,997)25,697 Income tax expense (benefit)17,637 (2,169)15,468 
Net income (loss)Net income (loss)$122,469 $(5,072)$117,397 Net income (loss)$76,408 $(3,209)$73,199 

 Operating Results for the nine months ended September 30, 2020
(In thousands)PNBAll OtherTotal
Net interest income$238,900 $2,409 $241,309 
Provision for (recovery of) loan losses32,256 (1,043)31,213 
Other income89,920 88 90,008 
Other expense187,661 13,273 200,934 
Income (loss) before income taxes$108,903 $(9,733)$99,170 
Income tax expense (benefit)19,357 (2,910)16,447 
Net income (loss)$89,546 $(6,823)$82,723 
 Operating Results for the six months ended June, 30, 2021
(In thousands)PNBAll OtherTotal
Net interest income (expense)$164,761 $(176)$164,585 
Recovery of credit losses(7,946)(949)(8,895)
Other income63,926 1,401 65,327 
Other expense130,698 8,567 139,265 
Income (loss) before income taxes$105,935 $(6,393)$99,542 
Income tax expense (benefit)19,917 (2,338)17,579 
Net income (loss)$86,018 $(4,055)$81,963 
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The operating results in the “All Other” column are used to reconcile the segment totals to the Consolidated Condensed Statements of Income for the three-monththree-month and nine-month periodssix-month periods ended SeptemberJune 30, 20212022 and 2020.2021. The reconciling amounts for consolidated total assets for the periods ended SeptemberJune 30, 20212022 and 20202021 consisted of the elimination of intersegment borrowings and the assets of the Parent Company, GFSC and SEPH which were not eliminated.

Note 18 - 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 (who could have been employees or non-employee directors) in the form of incentive stock options, nonqualified stock options, 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 were 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, 2021, there were no common shares subject to PBRSUs issued under the 2013 Incentive Plan outstanding.

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 SeptemberJune 30, 2021, 463,1102022, 397,665 common shares were available for future grants under the 2017 Employees LTIP.

The Park National Corporation 2017 Long-Term Incentive Plan for Non-Employee Directors (the "2017 Non-Employee Directors LTIP") was adopted by the Board of Directors of Park on January 23, 2017 and was approved by Park's shareholders at the Annual Meeting of Shareholders on April 24, 2017. The 2017 Non-Employee Directors LTIP makes equity-based awards and cash-based awards available for grant to non-employee director participants in the form of nonqualified stock options, SARs, Restricted Stock, Restricted Stock Units, Other Stock-Based Awards,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 SeptemberJune 30, 2021, 100,2502022, 86,850 common shares were available for future grants under 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 has not granted and will not grant any additional awards under the 2013 Incentive Plan after April 24, 2017. Awards made under the 2013 Incentive Plan have vested or have expired.

During the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, the Compensation Committee of the Board of Directors of Park granted awards of PBRSUs, under the 2017 Employees LTIP, covering an aggregate of 61,89052,335 and 62,26561,890 common shares, respectively, to certain employees of Park and its subsidiaries. No awards were granted during either of the three months ended SeptemberJune 30, 2021 or 2020.2022 and 2021.

As of SeptemberJune 30, 2021,2022, Park has nonvested PBRSUs as well as TBRSUs. The number of PBRSUs earned or settled will depend on the level of achievement with respect to certain performance criteria over a three-year period and are also subject to subsequent service-based vesting. The number of TBRSUs earned or settled will be subject to service-based vesting.

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A summary of changes in the common shares subject to nonvested PBRSUs and TBRSUs for the ninesix months ended SeptemberJune 30, 20212022 follows:
Common shares subject to PBRSUs and TBRSUs
Nonvested at January 1, 20212022204,108211,819 
Granted61,89052,335 
Vested(48,106)(48,415)
Forfeited(1,458)(1,913)
Adjustment for performance conditions of PBRSUs (1)
(2,551)(634)
Nonvested at SeptemberJune 30, 20212022 (2)
213,883213,192 
(1) The number of PBRSUs earned depends on the level of achievement with respect to certain performance criteria. Adjustment herein represents the difference between the maximum number of common shares which could be earned and the actual number earned for those PBRSUs as to which the performance period was completed.
(2) Nonvested amount herein represents the maximum number of nonvested PBRSUs and TBRSUs. As of SeptemberJune 30, 2021,2022, an aggregate of 197,311208,431 PBRSUs and TBRSUs are expected to vest.


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A summary of awards vested during the three months and ninesix months ended SeptemberJune 30, 20212022 and 20202021 follows:

Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
20212020202120202022202120222021
PBRSU and TBRSU vested4,4276,205 48,10644,379
PBRSUs and TBRSUs vestedPBRSUs and TBRSUs vested7,80748,41543,679
Common shares withheld to satisfy employee income tax withholding obligationsCommon shares withheld to satisfy employee income tax withholding obligations1,3481,860 18,42914,036Common shares withheld to satisfy employee income tax withholding obligations2,97318,65817,081
Net common shares issuedNet common shares issued3,079 4,345 29,677 30,343 Net common shares issued4,83429,75726,598

Share-based compensation expense of $1.2$1.4 million and $1.5 million was recognized for each of the three-month periods ended SeptemberJune 30, 2022 and 2021, and 2020,respectively, and share-based compensation expense of $4.5$3.4 million and $3.7$3.3 million was recognized for the nine-monthsix-month periods ended SeptemberJune 30, 20212022 and 2020,2021, respectively.

The following table details expected additional share-based compensation expense related to PBRSUs and TBRSUs outstanding at SeptemberJune 30, 2021:2022:

(In thousands)(In thousands)(In thousands)
Three months ending December 31, 2021$1,204 
20223,971 
Six months ending December 31, 2022Six months ending December 31, 2022$2,747 
202320232,563 20234,405 
202420241,059 20242,866 
20252025169 20251,192 
20262026191 
TotalTotal$8,966 Total$11,401 

Note 19 – Benefit Plans
 
Park has a noncontributory defined benefit pension plan (the "Pension Plan") covering substantially all of its employees. The Pension Plan provides benefits based on an employee’s years of service and compensation.
 
There were no Pension Plan contributions for any of the three-month or nine-monthsix-month periods ended SeptemberJune 30, 20212022 and 2020.2021. Additionally, no contributions are expected to be made during the remainder of 2022.
 
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The following table shows the components of net periodic pension benefit (income) expense:

Three Months Ended
September 30,
Nine Months Ended
September 30,
Affected Line Item in the Consolidated
Condensed Statements of Income
Three Months Ended
June 30,
Six Months Ended
June 30,
Affected Line Item in the Consolidated
Condensed Statements of Income
(In thousands)(In thousands)2021202020212020(In thousands)2022202120222021
Service costService cost$2,479 $2,080 $7,437 $6,240 Employee benefitsService cost$2,437 $2,479 $4,874 $4,958 Employee benefits
Interest costInterest cost1,340 1,320 4,020 3,960 Other components of net
periodic pension benefit income
Interest cost1,426 1,340 2,852 2,680 Other components of net
periodic pension benefit income
Expected return on plan assetsExpected return on plan assets(3,933)(3,602)(11,799)(10,806)Other components of net
periodic pension benefit income
Expected return on plan assets(4,449)(3,933)(8,898)(7,866)Other components of net
periodic pension benefit income
Recognized net actuarial loss and prior service costs555 294 1,665 882 Other components of net
periodic pension benefit income
Net periodic pension benefit expense$441 $92 $1,323 $276 
Recognized net actuarial (gain) loss and prior service costsRecognized net actuarial (gain) loss and prior service costs(4)555 (8)1,110 Other components of net
periodic pension benefit income
Net periodic pension benefit (income) expenseNet periodic pension benefit (income) expense$(590)$441 $(1,180)$882 

Park has entered into Supplemental Executive Retirement Plan Agreements (the “SERP Agreements”) with certain key officers of the CorporationPark and its subsidiaries which provide defined pension benefits in excess of limits imposed by federal tax law. The expense
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for the Corporation related to the SERP Agreements for the three months and ninesix months ended SeptemberJune 30, 20212022 and 20202021 was as follows:

Three Months Ended
September 30,
Nine Months Ended
September 30,
Affected Line Item in the Consolidated
Condensed Statements of Income
Three Months Ended
June 30,
Six Months Ended
June 30,
Affected Line Item in the Consolidated
Condensed Statements of Income
(In thousands)(In thousands)2021202020212020(In thousands)2022202120222021
Service costService cost$203 $218 $611 $801 Employee benefitsService cost$212 $204 425 $408 Employee benefits
Interest costInterest cost150 134 448 401 Miscellaneous expenseInterest cost183 149 366 298 Miscellaneous expense
Total SERP expenseTotal SERP expense$353 $352 $1,059 $1,202 Total SERP expense$395 $353 $791 $706 

Note 20 – Fair Value
 
The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that Park uses to measure fair value are as follows:

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

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Assets and Liabilities Measured at Fair Value on a Recurring Basis:
 
The following table presents assets and liabilities measured at fair value on a recurring basis:
 
Fair Value Measurements at September 30, 2021 using:
Fair Value Measurements at June 30, 2022 using:Fair Value Measurements at June 30, 2022 using:
(In thousands)(In thousands)Level 1Level 2Level 3Balance at September 30, 2021(In thousands)Level 1Level 2Level 3Balance at June 30, 2022
AssetsAssets    Assets    
Investment securities:Investment securities:    Investment securities:    
Obligations of U.S. Treasury and other U.S. Government sponsored entitiesObligations of U.S. Treasury and other U.S. Government sponsored entities$ $37,984 $ $37,984 
Obligations of states and political subdivisionsObligations of states and political subdivisions$ $299,094 $ $299,094 Obligations of states and political subdivisions 406,779  406,779 
U.S. Government sponsored entities’ asset-backed securitiesU.S. Government sponsored entities’ asset-backed securities 857,149  857,149 U.S. Government sponsored entities’ asset-backed securities 863,734  863,734 
Collateralized loan obligationsCollateralized loan obligations387,682  — 387,682 Collateralized loan obligations 514,107 — 514,107 
Corporate debt securitiesCorporate debt securities 9,293  9,293 Corporate debt securities 16,499  16,499 
Equity securitiesEquity securities1,579  491 2,070 Equity securities1,294  491 1,785 
Mortgage loans held for saleMortgage loans held for sale 8,944  8,944 Mortgage loans held for sale 5,679  5,679 
Mortgage IRLCsMortgage IRLCs 404  404 Mortgage IRLCs 125  125 
Loan interest rate swapsLoan interest rate swaps 2,258  2,258 Loan interest rate swaps 849  849 
LiabilitiesLiabilities    Liabilities    
Fair value swapFair value swap$ $ $226 $226 Fair value swap$ $ $447 $447 
Borrowing interest rate swapBorrowing interest rate swap 436  436 Borrowing interest rate swap    
Loan interest rate swapsLoan interest rate swaps 2,258  2,258 Loan interest rate swaps 849  849 
 
Fair Value Measurements at December 31, 2020 using:
Fair Value Measurements at December 31, 2021 using:Fair Value Measurements at December 31, 2021 using:
(In thousands)(In thousands)Level 1Level 2Level 3Balance at December 31, 2020(In thousands)Level 1Level 2Level 3Balance at December 31, 2021
AssetsAssets    Assets    
Investment securities:Investment securities:    Investment securities:    
Obligations of states and political subdivisionsObligations of states and political subdivisions$— $305,218 $— $305,218 Obligations of states and political subdivisions$— $389,591 $— $389,591 
U.S. Government sponsored entities’ asset-backed securitiesU.S. Government sponsored entities’ asset-backed securities— 752,109 — 752,109 U.S. Government sponsored entities’ asset-backed securities— 854,463 — 854,463 
Collateralized loan obligationsCollateralized loan obligations— 498,674 — 498,674 
Corporate debt securitiesCorporate debt securities— 2,014 — 2,014 Corporate debt securities— 11,412 — 11,412 
Equity securitiesEquity securities2,026 — 485 2,511 Equity securities1,630 — 499 2,129 
Mortgage loans held for saleMortgage loans held for sale— 31,666 — 31,666 Mortgage loans held for sale— 9,387 — 9,387 
Mortgage IRLCsMortgage IRLCs— 1,545 — 1,545 Mortgage IRLCs— 333 — 333 
Loan interest rate swapsLoan interest rate swaps— 3,934 — 3,934 Loan interest rate swaps— 1,952 — 1,952 
LiabilitiesLiabilities    Liabilities    
Fair value swapFair value swap$— $— $226 $226 Fair value swap$— $— $226 $226 
Borrowing interest rate swapBorrowing interest rate swap— 885 — 885 Borrowing interest rate swap— 262 — 262 
Loan interest rate swapsLoan interest rate swaps— 3,934 — 3,934 Loan interest rate swaps— 1,952 — 1,952 
 
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The following methods and assumptions were used by the Company in determining the fair value of the financial assets and liabilities discussed above:

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

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

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

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

The tablestable below presentpresents a reconciliation of the beginning and ending balances of the Level 3 inputs for the three-month and nine-monthsix-month periods ended SeptemberJune 30, 20212022 and 2020,2021, for financial instruments measured on a recurring basis and classified as Level 3:

Level 3 Fair Value Measurements
Three months ended September 30, 2021 and 2020
(In thousands)Equity
Securities
Fair value
swap
Balance at July 1, 2021$490 $(226)
Total gains  
Included in other income1  
Balance at September 30, 2021$491 $(226)
Balance at July 1, 2020$471 $(226)
Total gains  
Included in other income13 — 
Balance at September 30, 2020$484 $(226)
Level 3 Fair Value Measurements
Three months ended June 30, 2022 and 2021
(In thousands)Equity
Securities
Fair value
swap
Balance at April 1, 2022$491 $(226)
Total losses  
Included in other income / expense (221)
Balance at June 30, 2022$491 $(447)
Balance at April 1, 2021$490 $(226)
Total gains (losses)  
Included in other income / expense— — 
Balance at June 30, 2021$490 $(226)

Level 3 Fair Value Measurements
Nine months ended September 30, 2021 and 2020
(In thousands)Equity
Securities
Fair value
swap
Balance at January 1, 2021$485 $(226)
Total gains  
Included in other income6  
Balance at September 30, 2021$491 $(226)
Balance at January 1, 2020$456 $(226)
Total gains  
Included in other income28 — 
Balance at September 30, 2020$484 $(226)
Level 3 Fair Value Measurements
Six months ended June 30, 2022 and 2021
(In thousands)Equity
Securities
Fair value
swap
Balance at January 1, 2022$499 $(226)
Total losses  
Included in other income / expense(8)(221)
Balance at June 30, 2022$491 $(447)
Balance at January 1, 2021$485 $(226)
Total gains  
Included in other income / expense— 
Balance at June 30, 2021$490 $(226)

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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:Commercial loans held for sale: Commercial loans held for sale are carried at the lower of cost or fair value. Loans are evaluated quarterly with any subsequent fair value adjustments being recorded to a valuation allowance. Fair value is determined based on third-party broker pricing, resulting in a Level 3 classification.

Individually 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 credit losses. For collateral dependent loans, fair value is generally based on real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales approach and the income approach.
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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 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, updated independent valuations are obtained annually for all impairedcollateral dependent loans in accordance with Company policy.

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.

Other repossessed assets: Other repossessed assets are initially recorded at fair value less costs to sell when acquired. The carrying value of other repossessed assets is not re-measured to fair value on a recurring basis, but is subject to fair value adjustments when the carrying value exceeds the fair value, less estimated selling costs. As of September 30, 2021 andAt December 31, 2020,2021, other repossessed assets primarily consisted of aircraft acquired as part of a loan workout. Fair value is based on Aircraft Bluebook and VREF Aircraft Value Reference values based on the model of aircraft and adjustments for flight hours, features and other variables. Such adjustments result in a Level 3 classification of the inputs for determining fair value. There were no other repossessed assets carried at fair value at June 30, 2022.

MSRs: MSRs are carried at the lower of cost or fair value. MSRs do not trade in active, open markets with readily observable prices. For example, sales of MSRs do occur, but precise terms and conditions typically are not readily available. As such,
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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.
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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. As of SeptemberJune 30, 20212022 and December 31, 2020,2021, 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.

Fair Value Measurements at September 30, 2021 using:
Fair Value Measurements at June 30, 2022 using:Fair Value Measurements at June 30, 2022 using:
(In thousands)(In thousands)Level 1Level 2Level 3Balance at September 30, 2021(In thousands)Level 1Level 2Level 3Balance at June 30, 2022
Impaired loans recorded at fair value:    
Commercial loans held for saleCommercial loans held for sale$ $ $4,926 $4,926 
Individually evaluated collateral dependent loans recorded at fair value:Individually evaluated collateral dependent loans recorded at fair value:    
Commercial real estateCommercial real estate$ $ $571 $571 Commercial real estate$ $ $2,525 $2,525 
Residential real estateResidential real estate  277 277 Residential real estate  207 207 
Total impaired loans recorded at fair value$ $ $848 $848 
Total individually evaluated collateral dependent loans recorded at fair valueTotal individually evaluated collateral dependent loans recorded at fair value$ $ $2,732 $2,732 
MSRsMSRs$ $14,286 $ $14,286 MSRs$ $1,459 $ $1,459 
OREO recorded at fair value:OREO recorded at fair value:OREO recorded at fair value:
Residential real estateResidential real estate  735 735 Residential real estate    
Total OREO recorded at fair valueTotal OREO recorded at fair value$ $ $735 $735 Total OREO recorded at fair value$ $ $ $ 
Other repossessed assetsOther repossessed assets$ $ $3,164 $3,164 Other repossessed assets$ $ $ $ 
 
Fair Value Measurements at December 31, 2020 using:
Fair Value Measurements at December 31, 2021 using:Fair Value Measurements at December 31, 2021 using:
(In thousands)(In thousands)Level 1Level 2Level 3Balance at December 31, 2020(In thousands)Level 1Level 2Level 3Balance at December 31, 2021
Impaired loans recorded at fair value:    
Individually evaluated collateral dependent loans recorded at fair value:Individually evaluated collateral dependent loans recorded at fair value:    
Commercial real estateCommercial real estate$— $— $6,749 $6,749 Commercial real estate$— $— $831 $831 
Residential real estateResidential real estate— — 175 175 Residential real estate— — 272 272 
Total impaired loans recorded at fair value$— $— $6,924 $6,924 
Total individually evaluated collateral dependent loans recorded at fair valueTotal individually evaluated collateral dependent loans recorded at fair value$— $— $1,103 $1,103 
MSRsMSRs$— $12,179 $— $12,179 MSRs$— $13,482 $— $13,482 
OREO recorded at fair value:OREO recorded at fair value:OREO recorded at fair value:
Residential real estateResidential real estate— — 735 735 Residential real estate— — 775 775 
Total OREO recorded at fair valueTotal OREO recorded at fair value$— $— $735 $735 Total OREO recorded at fair value$— $— $775 $775 
Other repossessed assetsOther repossessed assets$— $— $3,164 $3,164 Other repossessed assets$— $— $2,750 $2,750 

Commercial loans held for sale are carried at the lower of cost or fair value. At June 30, 2022, Park had $6.3 million of commercial loans held for sale. Of these loans, $4.9 million were held at fair value. The remaining $1.4 million were carried at cost as the fair value of the loans exceeded the book value for each individual credit. For the three months and six months ended June 30, 2022, expense related to commercial loans held for sale was $1.2 million, which was recorded in the provision for credit losses prior to the transfer of the loans to held for sale classification.
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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, 2) loans which are not secured by real estate, and 3) loans carried at cost as the fair value of the underlying collateral or the present value of expected future cash flows on each of the loans exceeded the book value for each respective credit.

September 30, 2021
(In thousands)Loan BalancePrior Charge-OffsSpecific Valuation AllowanceCarrying Balance
Impaired loans recorded at fair value$1,028 $240 $180 $848 
Remaining impaired loans78,236 448 3,286 74,950 
Total impaired loans$79,264 $688 $3,466 $75,798 
June 30, 2022
(In thousands)Loan BalancePrior Charge-OffsSpecific Valuation AllowanceCarrying Balance
Total individually evaluated collateral dependent loans recorded at fair value$3,892 $162 $1,160 $2,732 
Remaining individually evaluated loans38,631 220 714 37,917 
Total individually evaluated loans$42,523 $382 $1,874 $40,649 

December 31, 2020
(In thousands)Recorded InvestmentPrior Charge-OffsSpecific Valuation AllowanceCarrying Balance
Impaired loans recorded at fair value$8,256 $269 $1,332 $6,924 
Remaining impaired loans100,199 386 4,102 96,097 
Total impaired loans$108,455 $655 $5,434 $103,021 
December 31, 2021
(In thousands)Loan BalancePrior Charge-OffsSpecific Valuation AllowanceCarrying Balance
Total individually evaluated collateral dependent loans recorded at fair value$1,291 $240 $188 $1,103 
Remaining individually evaluated loans73,211 384 1,428 71,783 
Total individually evaluated loans$74,502 $624 $1,616 $72,886 

The (expense) income from credit adjustments related to impairedindividually evaluated loans carried at fair value was $(83,000)$(1.0) million and $(3.1)$(0.4) million for the three-month periods ended SeptemberJune 30, 20212022 and 2020,2021, respectively, and was $462,000$(1.0) million and $(3.5)$0.5 million for the nine-monthsix-month periods ended SeptemberJune 30, 20212022 and 2020,2021, respectively.

MSRs totaled $14.6$16.5 million at SeptemberJune 30, 2021.2022. Of this $14.6$16.5 million MSR carrying balance, $14.3$1.5 million waswere recorded at fair value and included a valuation allowance of $2.2$0.2 million. The remaining $0.3$15.0 million waswere recorded at cost, as the fair value exceeded cost at SeptemberJune 30, 2021.2022. At December 31, 2020,2021, MSRs totaled $12.2$15.3 million. Of this $12.2$15.3 million MSR carrying balance, $12.2$13.5 million waswere recorded at fair value and included a valuation allowance of $3.2$1.6 million. The remaining $31,000 was$1.8 million were recorded at cost, as the fair value exceeded cost at December 31, 2020. 2021. The (expense) income relatedrelated to MSRs carried at fair value during the three monthsthree-month periods ended SeptemberJune 30, 2022 and 2021 was $0.9 million and 2020 was $(39,000) and $(198,000),$0.2 million, respectively, and was $1.0$1.3 million and $(2.0)$1.1 million for the nine monthssix-month periods ended SeptemberJune 30, 2022 and 2021, and 2020, respectively.

Total OREO held by Park at SeptemberJune 30, 20212022 and December 31, 20202021 was $0.8$1.4 million and $1.4 million, respectively. Approximately 90% and 51% of$775,000 respectively. At June 30, 2022, there was no OREO held by Park at September 30, 2021 and December 31, 2020, respectively,that was carried at fair value due to fair value adjustments made subsequent to the initial OREO measurement. At both September 30, 2021 and December 31, 2020,2021, all of Park's OREO heldwas carried at fair value. The net expense related to OREO fair value less estimated selling costs, amounted to $735,000. adjustments was$735,000 and $765,000 for the three-month and six-month periods ended June 30, 2022, respectively. There was no expense related to OREO fair value adjustments for either of the three-month period or nine-month periods six-month period ended SeptemberJune 30, 2021. The net income related to OREO fair value adjustments was $115,000 and $80,000 for the three-month and nine-month periods ended September 30, 2020, respectively2021.

Other repossessed assets totaled $3.6$0.6 million at SeptemberJune 30, 2021,2022, of which $3.2 millionthere were no repossessed assets recorded at fair value. Other repossessed assets totaled $3.6$3.3 million at December 31, 2020,2021, of which $3.2$2.8 million were recorded at fair value. There was no expense related to fair value adjustments on other repossessed assets during either of the three-month period or nine-month periodssix-month period ended SeptemberJune 30, 2021. There was $207,000 of expense related to fair value adjustments on other repossessed assets during the three-month2022 and nine month periods ended September 30, 2020.

2021.
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The following tables present qualitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at SeptemberJune 30, 20212022 and December 31, 2020:2021:

SeptemberJune 30, 20212022
(In thousands)Fair ValueValuation TechniqueUnobservable Input(s)Range
(Weighted Average)
ImpairedIndividually evaluated collateral dependent loans:    
Commercial real estate$5712,525 Sales comparison approachAdj to comparables0.0% - 232.0% (25.9%85.7% (11.4%)
Income approachCapitalization rate8.0% (8.0%)
Residential real estate$277207 Sales comparison approachAdj to comparables0.5%1.9% - 64.3% (9.5%)
Cost approachAccumulated depreciation8.3% (8.3%)
Other real estate owned:
Residential real estate$735Sales comparison approachAdj to comparables5.0% - 32.5% (19.1%119.8% (17.5%)

Balance at December 31, 20202021
(In thousands)Fair ValueValuation TechniqueUnobservable Input(s)Range
(Weighted Average)
ImpairedIndividually evaluated collateral dependent loans:    
Commercial real estate$6,749831 Sales comparison approachAdj to comparables0.0% - 139.0% (11.8%)
Income approachCapitalization rate9.3% - 20.0% (10.3%)
Cost approachEntrepreneurial profit10.0% (10.0%)
Cost approachAccumulated depreciation2.6% (2.6%232.0% (28.3%)
Residential real estate$175272 Sales comparison approachAdj to comparables2.0%0.5% - 47.8% (11.9%78.6% (11.6%)
Cost approachAccumulated depreciation8.3% (8.3%)
Other real estate owned:
Residential real estate$735775 Sales comparison approachAdj to comparables7.8%5.0% - 9.9% (8.9%32.5% (19.1%)



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Assets Measured at Net Asset Value:

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.

At SeptemberJune 30, 20212022 and December 31, 2020,2021, Park had Partnership Investments with a NAV of $15.6$23.2 million and $15.4$18.0 million, respectively. At SeptemberJune 30, 20212022 and December 31, 2020,2021, Park had $5.7$20.3 million and $6.2$8.4 million, respectively, in unfunded commitments related to these Partnership Investments. For the three-month periods ended SeptemberJune 30, 20212022 and 2020,2021, Park recognized income of $513,000$0.1 million and $1.3$0.5 million, respectively, and for the nine-monthsix-month periods Septemberended June 30, 20212022 and 2020, Park2021 recognized income (expense) of $2.4$2.5 million and $(41,000),$1.9 million, respectively, related to these Partnership Investments.

The fair value of certain financial instruments at SeptemberJune 30, 20212022 and December 31, 2020,2021, was as follows:

September 30, 2021June 30, 2022
 Fair Value Measurements  Fair Value Measurements
(In thousands)(In thousands)Carrying valueLevel 1Level 2Level 3Total fair value(In thousands)Carrying valueLevel 1Level 2Level 3Total fair value
Financial assets:Financial assets:Financial assets:
Cash and money market instrumentsCash and money market instruments$877,395 $877,395 $ $ $877,395 Cash and money market instruments$246,441 $246,441 $ $ $246,441 
Investment securities (1)
Investment securities (1)
1,553,218 387,682 1,165,536  1,553,218 
Investment securities (1)
1,839,103  1,839,103  1,839,103 
Other investment securities (2)
Other investment securities (2)
2,070 1,579  491 2,070 
Other investment securities (2)
1,785 1,294  491 1,785 
Commercial loans held for saleCommercial loans held for sale6,321   6,625 6,625 
Mortgage IRLCsMortgage IRLCs125  125  125 
Mortgage loans held for saleMortgage loans held for sale8,944  8,944  8,944 Mortgage loans held for sale5,679  5,679  5,679 
Mortgage IRLCs404  404  404 
Impaired loans carried at fair value848   848 848 
Individually evaluated loans carried at fair valueIndividually evaluated loans carried at fair value2,732   2,732 2,732 
Other loans, netOther loans, net6,810,092   6,834,592 6,834,592 Other loans, net6,868,701   6,802,832 6,802,832 
Loans receivable, netLoans receivable, net$6,820,288 $ $9,348 $6,835,440 $6,844,788 Loans receivable, net$6,877,237 $ $5,804 $6,805,564 $6,811,368 
Financial liabilities:Financial liabilities:     Financial liabilities:     
Time depositsTime deposits$725,203 $ $749,710 $ $749,710 Time deposits$674,193 $ $675,858 $ $675,858 
OtherOther5,389 5,389   5,389 Other4,048 4,048   4,048 
Deposits (excluding demand deposits)Deposits (excluding demand deposits)$730,592 $5,389 $749,710 $ $755,099 Deposits (excluding demand deposits)$678,241 $4,048 $675,858 $ $679,906 
Short-term borrowingsShort-term borrowings$235,979 $ $235,979 $ $235,979 Short-term borrowings$171,799 $ $171,799 $ $171,799 
Subordinated notesSubordinated notes188,099  197,119  197,119 Subordinated notes188,435  183,285  183,285 
Derivative financial instruments - assets:Derivative financial instruments - assets:Derivative financial instruments - assets:
Loan interest rate swapsLoan interest rate swaps2,258  2,258  2,258 Loan interest rate swaps849  849  849 
Derivative financial instruments - liabilities:Derivative financial instruments - liabilities:     Derivative financial instruments - liabilities:     
Fair value swapFair value swap226   226 226 Fair value swap447   447 447 
Borrowing interest rate swapBorrowing interest rate swap436  436  436 Borrowing interest rate swap     
Loan interest rate swapsLoan interest rate swaps2,258  2,258  2,258 Loan interest rate swaps849  849  849 
(1) Includes debt securities AFS.
(2) Excludes FHLB stock and FRB stock which are carried at their respective redemption values, investment securities accounted for at modified cost as these investments do not have a readily determinable fair value, and Partnership Investments valued using the NAV practical expedient.
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December 31, 2020
  Fair Value Measurements
(In thousands)Carrying valueLevel 1Level 2Level 3Total fair value
Financial assets:
Cash and money market instruments$370,474 $370,474 $— $— $370,474 
Investment securities (1)
1,059,341 — 1,059,341 — 1,059,341 
Other investment securities (2)
2,511 2,026 — 485 2,511 
Mortgage loans held for sale31,666 — 31,666 — 31,666 
Mortgage IRLCs1,545 — 1,545 — 1,545 
Impaired loans carried at fair value6,924 — — 6,924 6,924 
Other loans, net7,051,975 — — 7,072,339 7,072,339 
Loans receivable, net$7,092,110 $— $33,211 $7,079,263 $7,112,474 
Financial liabilities:     
Time deposits$864,573 $— $870,804 — $870,804 
Other1,379 1,379 — — 1,379 
Deposits (excluding demand deposits)$865,952 $1,379 $870,804 $— $872,183 
Short-term borrowings$342,230 $— $342,230 $— $342,230 
Long-term debt32,500 — 31,376 — 31,376 
Subordinated notes187,774 — 179,147 — 179,147 
Derivative financial instruments - assets:     
Loan interest rate swaps3,934 — 3,934 — 3,934 
Derivative financial instruments - liabilities:
Fair value swap$226 $— $— $226 $226 
Borrowing interest rate swap885 — 885 — 885 
Loan interest rate swaps3,934 — 3,934 — 3,934 

December 31, 2021
  Fair Value Measurements
(In thousands)Carrying valueLevel 1Level 2Level 3Total fair value
Financial assets:
Cash and money market instruments$219,180 $219,180 $— $— $219,180 
Investment securities (1)
1,754,140 — 1,754,140 — 1,754,140 
Other investment securities (2)
2,129 1,630 — 499 2,129 
Mortgage loans held for sale9,387 — 9,387 — 9,387 
Mortgage IRLCs333 — 333 — 333 
Individually evaluated loans carried at fair value1,103 — — 1,103 1,103 
Other loans, net6,777,102 — — 6,783,848 6,783,848 
Loans receivable, net$6,787,925 $— $9,720 $6,784,951 $6,794,671 
Financial liabilities:     
Time deposits$711,660 $— $714,307 — $714,307 
Other1,465 1,465 — — 1,465 
Deposits (excluding demand deposits)$713,125 $1,465 $714,307 $— $715,772 
Short-term borrowings$238,786 $— $238,786 $— $238,786 
Subordinated notes188,210 — 207,912 — 207,912 
Derivative financial instruments - assets:     
Loan interest rate swaps1,952 — 1,952 — 1,952 
Derivative financial instruments - liabilities:
Fair value swap$226 $— $— $226 $226 
Borrowing interest rate swap262 — 262 — 262 
Loan interest rate swaps1,952 — 1,952 — 1,952 
(1) Includes debt securities AFS.
(2) Excludes FHLB stock and FRB stock which are carried at their respective redemption values, investment securities accounted for at modified cost as these investments do not have a readily determinable fair value, and Partnership Investments valued using the NAV practical expedient.
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Note 21 - Revenue from Contracts with Customers

All of Park's revenue from contracts with customers within the scope of ASC 606 is recognized within "Other income" in the Consolidated Condensed Statements of Income. The following table presents the Corporation's sources of other income by revenue stream and operating segment for the three-month and nine-monthsix-month periods ended SeptemberJune 30, 20212022 and SeptemberJune 30, 2020.2021.

Three Months Ended
September 30, 2021
Three Months Ended
June 30, 2022
Revenue by Operating Segment (in thousands)Revenue by Operating Segment (in thousands)PNBAll OtherTotalRevenue by Operating Segment (in thousands)PNBAll OtherTotal
Income from fiduciary activitiesIncome from fiduciary activitiesIncome from fiduciary activities
Personal trust and agency accounts Personal trust and agency accounts$2,637 $ $2,637  Personal trust and agency accounts$2,764 $ $2,764 
Employee benefit and retirement-related accounts Employee benefit and retirement-related accounts2,506  2,506  Employee benefit and retirement-related accounts2,471  2,471 
Investment management and investment advisory agency accounts Investment management and investment advisory agency accounts3,220  3,220  Investment management and investment advisory agency accounts3,143  3,143 
Other Other457  457  Other481  481 
Service charges on deposit accountsService charges on deposit accountsService charges on deposit accounts
Non-sufficient funds (NSF) fees Non-sufficient funds (NSF) fees1,498  1,498  Non-sufficient funds (NSF) fees1,519  1,519 
Demand deposit account (DDA) charges Demand deposit account (DDA) charges762  762  Demand deposit account (DDA) charges913  913 
Other Other129  129  Other131  131 
Other service income (1)
Other service income (1)
Other service income (1)
Credit card Credit card690 2 692  Credit card715  715 
HELOC HELOC100  100  HELOC105  105 
Installment Installment34  34  Installment45  45 
Real estate Real estate5,418  5,418  Real estate3,274  3,274 
Commercial Commercial281 143 424  Commercial301 500 801 
Debit card fee incomeDebit card fee income6,453  6,453 Debit card fee income6,731  6,731 
Bank owned life insurance income (2)
Bank owned life insurance income (2)
1,022 440 1,462 
Bank owned life insurance income (2)
1,130 1,244 2,374 
ATM feesATM fees622  622 ATM fees583  583 
Gain on sale of OREO, net3  3 
Gain on equity securities, net (2)
Gain on equity securities, net (2)
429 180 609 
Gain on equity securities, net (2)
41 668 709 
Other components of net periodic pension benefit income (2)
Other components of net periodic pension benefit income (2)
1,987 51 2,038 
Other components of net periodic pension benefit income (2)
2,954 73 3,027 
Miscellaneous (3)
Miscellaneous (3)
3,084 263 3,347 
Miscellaneous (3)
1,954 (547)1,407 
Total other incomeTotal other income$31,332 $1,079 $32,411 Total other income$29,255 $1,938 $31,193 
(1) Of the $6.7$4.9 million of aggregate revenue included within "Other service income", approximately $1.3$1.7 million is within the scope of ASC 606, with the remaining $5.4$3.2 million consisting primarily of certain residential real estate loan fees which are out of scope.
(2) Not within the scope of ASC 606.
(3) "Miscellaneous" income includes brokerage income, safe deposit box rentals, and miscellaneous bank fees totaling $3.3$1.4 million, all of which are within scope of ASC 606.
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Three Months Ended
September 30, 2020
Revenue by Operating Segment (in thousands)PNBAll OtherTotal
Income from fiduciary activities
   Personal trust and agency accounts$2,290 $— $2,290 
   Employee benefit and retirement-related accounts1,967 — 1,967 
   Investment management and investment advisory agency accounts2,695 — 2,695 
   Other383 — 383 
Service charges on deposit accounts
    Non-sufficient funds (NSF) fees1,201 — 1,201 
    Demand deposit account (DDA) charges787 — 787 
    Other130 — 130 
Other service income (1)
    Credit card487 488 
    HELOC108 — 108 
    Installment43 — 43 
    Real estate11,806 — 11,806 
    Commercial567 35 602 
Debit card fee income5,853 — 5,853 
Bank owned life insurance income (2)
1,109 83 1,192 
ATM fees491 — 491 
Gain on sale of OREO, net198 371 569 
Net loss on sale of debt securities (2)
(27)— (27)
Gain on equity securities, net (2)
739 462 1,201 
Other components of net periodic pension benefit income (2)
1,940 48 1,988 
Miscellaneous (3)
2,663 128 2,791 
Total other income$35,430 $1,128 $36,558 

Three Months Ended
June 30, 2021
Revenue by Operating Segment (in thousands)PNBAll OtherTotal
Income from fiduciary activities
   Personal trust and agency accounts$2,626 $— $2,626 
   Employee benefit and retirement-related accounts2,363 — 2,363 
   Investment management and investment advisory agency accounts3,116 — 3,116 
   Other464 — 464 
Service charges on deposit accounts
    Non-sufficient funds (NSF) fees1,144 — 1,144 
    Demand deposit account (DDA) charges774 — 774 
    Other114 — 114 
Other service income (1)
    Credit card636 — 636 
    HELOC99 — 99 
    Installment46 — 46 
    Real estate6,011 — 6,011 
    Commercial364 367 
Debit card fee income6,758 — 6,758 
Bank owned life insurance income (2)
1,062 87 1,149 
ATM fees655 — 655 
Gain (loss) on equity securities, net (2)
495 (28)467 
Other components of net periodic pension benefit income (2)
1,986 52 2,038 
Miscellaneous (3)
2,413 (2)2,411 
Total other income$31,126 $112 $31,238 
(1) Of the $13.0$7.2 million of aggregate revenue included within "Other service income", approximately $1.3 million is within the scope of ASC 606, with the remaining $11.7$5.9 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 $2.8$2.4 million, all of which are within scope of ASC 606.

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Nine Months Ended
September 30, 2021
Revenue by Operating Segment (in thousands)PNBAll OtherTotal
Income from fiduciary activities
   Personal trust and agency accounts$7,650 $ $7,650 
   Employee benefit and retirement-related accounts7,170  7,170 
   Investment management and investment advisory agency accounts9,345  9,345 
   Other1,397  1,397 
Service charges on deposit accounts
    Non-sufficient funds (NSF) fees3,776  3,776 
    Demand deposit account (DDA) charges2,325  2,325 
    Other374  374 
Other service income (1)
    Credit card1,906 2 1,908 
    HELOC288  288 
    Installment114  114 
    Real estate19,867  19,867 
    Commercial1,063 204 1,267 
Debit card fee income19,297  19,297 
Bank owned life insurance income (2)
3,169 607 3,776 
ATM fees1,807  1,807 
Loss on sale of OREO, net(26) (26)
Gain on equity securities, net (2)
1,758 1,128 2,886 
Other components of net periodic pension benefit income (2)
5,960 154 6,114 
Miscellaneous (3)
8,018 385 8,403 
Total other income$95,258 $2,480 $97,738 

Six Months Ended
June 30, 2022
Revenue by Operating Segment (in thousands)PNBAll OtherTotal
Income from fiduciary activities
   Personal trust and agency accounts$5,270 $ $5,270 
   Employee benefit and retirement-related accounts5,031  5,031 
   Investment management and investment advisory agency accounts6,403  6,403 
   Other952  952 
Service charges on deposit accounts
    Non-sufficient funds (NSF) fees2,936  2,936 
    Demand deposit account (DDA) charges1,429  1,429 
    Other272  272 
Other service income (1)
    Credit card1,357  1,357 
    HELOC194  194 
    Installment88  88 
    Real estate6,993  6,993 
    Commercial655 472 1,127 
Debit card fee income12,857  12,857 
Bank owned life insurance income (2)
2,223 1,326 3,549 
ATM fees1,115  1,115 
Gain on equity securities, net (2)
2,260 802 3,062 
Other components of net periodic pension benefit income (2)
5,909 145 6,054 
Miscellaneous (3)
4,558 (398)4,160 
Total other income$60,502 $2,347 $62,849 
(1) Of the $23.4$9.8 million of aggregate revenue included within "Other service income", approximately $3.8$3.0 million is within the scope of ASC 606, with the remaining $19.6$6.8 million consisting primarily of certain residential real estate loan fees which are out of scope.
(2) Not within the scope of ASC 606.
(3) "Miscellaneous" income includes brokerage income, safe deposit box rentals, and miscellaneous bank fees totaling $8.4$4.2 million, all of which are within scope of ASC 606.

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Nine Months Ended
September 30, 2020
Revenue by Operating Segment (in thousands)PNBAll OtherTotal
Income from fiduciary activities
   Personal trust and agency accounts$6,550 $— $6,550 
   Employee benefit and retirement-related accounts5,702 — 5,702 
   Investment management and investment advisory agency accounts7,852 — 7,852 
   Other1,137 — 1,137 
Service charges on deposit accounts
    Non-sufficient funds (NSF) fees3,644 — 3,644 
    Demand deposit account (DDA) charges2,289 — 2,289 
    Other389 — 389 
Other service income (1)
    Credit card1,544 1,548 
    HELOC319 — 319 
    Installment144 — 144 
    Real estate22,228 — 22,228 
    Commercial1,245 87 1,332 
Debit card fee income16,373 — 16,373 
Bank owned life insurance income (2)
3,452 167 3,619 
ATM fees1,341 — 1,341 
Gain on sale of OREO, net843 371 1,214 
Net gain on sale of debt securities (2)
3,286 — 3,286 
Gain (loss) on equity securities, net (2)
113 (862)(749)
Other components of net periodic pension benefit income (2)
5,820 144 5,964 
Miscellaneous (3)
5,649 177 5,826 
Total other income$89,920 $88 $90,008 

Six Months Ended
June 30, 2021
Revenue by Operating Segment (in thousands)PNBAll OtherTotal
Income from fiduciary activities
   Personal trust and agency accounts$5,013 $— $5,013 
   Employee benefit and retirement-related accounts4,664 — 4,664 
   Investment management and investment advisory agency accounts6,125 — 6,125 
   Other940 — 940 
Service charges on deposit accounts
    Non-sufficient funds (NSF) fees2,278 — 2,278 
    Demand deposit account (DDA) charges1,563 — 1,563 
    Other245 — 245 
Other service income (1)
    Credit card1,216 — 1,216 
    HELOC188 — 188 
    Installment80 — 80 
    Real estate14,449 — 14,449 
    Commercial782 61 843 
Debit card fee income12,844 — 12,844 
Bank owned life insurance income (2)
2,147 167 2,314 
ATM fees1,185 — 1,185 
Gain on equity securities, net (2)
1,329 948 2,277 
Other components of net periodic pension benefit income (2)
3,973 103 4,076 
Miscellaneous (3)
4,905 122 5,027 
Total other income$63,926 $1,401 $65,327 
(1) Of the $25.6$16.8 million of aggregate revenue included within "Other service income", approximately $3.7$2.6 million is within the scope of ASC 606, with the remaining $21.9$14.2 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 $5.8$5.0 million, all of which are within scope of ASC 606.

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

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

Service charges on deposit accounts and ATM fees: The Corporation earns fees from itsthe 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 itsthe Company's performance obligation to the customer.


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

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

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

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

the ever-changing effects of the global novel coronavirus (COVID-19) pandemic - - the duration, extent and severity of which are impossible to predict, including the possibility of further resurgence in the spread of COVID-19 or variants thereof - - on economies (local, national and international), supply chains and markets, on the labor market, including the potential for a sustained reduction in labor force participation, and on our customers, counterparties, employees and third-party service providers, as well as the effects of various responses of governmental and nongovernmental authorities to the COVID-19 pandemic, including public health actions directed toward the containment of the COVID-19 pandemic (such as quarantines, shut downs and other restrictions on travel and commercial, social or other activities), the availability, effectiveness and effectivenessacceptance of vaccines, and the implementation of fiscal stimulus packages;
the impact of future governmental and regulatory actions upon our participation in and execution of government programs related to the COVID-19 pandemic;
Park's ability to execute our business plan successfully and within the expected timeframe as well as our ability to manage strategic initiatives in light of the impact of the COVID-19 pandemic and the various responses to the COVID-19 pandemic;
generalcurrent 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, may experience a weaker recovery than anticipated,including the effects of higher unemployment rates, an acceleration in the pace of inflation, U.S. fiscal debt, budget and tax matters, geopolitical matters (including the impact of the Russia-Ukraine conflict and associated sanctions), and any slowdown in global economic growth, in addition to the continuing impact of the COVID-19 pandemic on our customers’ operations and financial condition, eitherany of which may result in adverse impacts on the demand for loan, deposit and other financial services, delinquencies, defaults and counterparties' inability to meet credit and other obligations and the possible impairment of collectability of loans;
factors that can impact the performance of our loan portfolio, including changes in real estate values and liquidity in our primary market areas, the financial health of our commercial borrowers and the success of construction projects that we finance, including any loans acquired in acquisition transactions;
the effect of monetary and other fiscal policies (including the impact of money supply, andmarket interest rate policies and policies impacting inflation, of the Federal Reserve Board)Board, the U.S. Treasury and other governmental agencies) as well as disruption in the liquidity and functioning of U.S. financial markets, as a result of the COVID-19 pandemic and government policies implemented in response thereto, may adversely impact prepayment penalty income, mortgage banking income, income from fiduciary activities, the value of securities, deposits and other financial instruments, in addition to the loan demand and the performance of our loan portfolio, and the interest rate sensitivity of our consolidated balance sheet as well as reduce interest margins;
changes in the federal, state, or local tax laws may adversely affect the fair values of net deferred tax assets and obligations of state and political subdivisions held in Park's investment securities portfolio and otherwise negatively impact our financial performance;
the impact of the results of the 2020 U.S. elections,changes in federal, state and local governmental policy, including on the regulatory landscape, capital markets, elevated government debt, potential changes in tax policy,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 changes in retail distribution strategies, consumer preferences and behavior, changes in business and economic conditions (including as a result of the COVID-19 pandemic and reactions thereto), legislative and regulatory initiatives (including those undertaken in response to the COVID-19 pandemic), or other factors may be different than anticipated;
changes in unemployment levels in the states in which Park and our subsidiaries do business may be different than anticipated due to the continuing impact
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changes in customers', suppliers', and other counterparties' performance and creditworthiness, and Park's expectations regarding future credit losses and our allowance for credit losses, may be different than anticipated due to the continuing impact of and the various responses to the COVID-19 pandemic;pandemic and 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 more of our associates working remotely), asset/liability repricing, legal, compliance, strategic, cybersecurity, liquidity, credit and interest rate risks associated with Park's business;
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competitive pressures among financial services organizations could increase significantly, including product and pricing pressures (which could in turn impact our credit spreads), changes to third-party relationships and revenues, changes in the manner of providing services, customer acquisition and retention pressures, and ourPark's ability to attract, develop and retain qualified banking professionals;
uncertainty regarding the nature, timing, cost and effect of changes in banking regulations or other regulatory or legislative requirements affecting the respective businesses of Park and our subsidiaries, including major reform of the regulatory oversight structure of the financial services industry and changes in laws and regulations concerning taxes, FDIC insurance premium levels, pensions, bankruptcy, consumer protection, rent regulation and housing, financial accounting and reporting, environmental protection, insurance, bank products and services, bank and bank holding company capital and liquidity standards, fiduciary standards, securities and other aspects of the financial services industry, specifically the reforms provided for in the Coronavirus Aid, Relief and Economic Security (CARES) Act and the follow-up legislation in the Consolidated Appropriations Act, 2021, the American Rescue Plan Act of 2021, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and the Basel III regulatory capital reforms, as well as regulations already adopted and which may be adopted in the future by the relevant regulatory agencies, including the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Federal Reserve Board, to implement the provisions of the CARES Act and the follow-up legislation in the Consolidated Appropriations Act, 2021, the provisions of the American Rescue Plan Act of 2021, the provisions of the Dodd-Frank Act, and the Basel III regulatory capital reforms;
the effect of changes in accounting policies and practices, as may be adopted by the Financial Accounting Standards Board (the "FASB"), the SEC, the Public Company Accounting Oversight Board and other regulatory agencies, may adversely affect Park's reported financial condition or results of operations;
Park's assumptions and estimates used in applying critical accounting policies and modeling, including under the CECL model, which may prove unreliable, inaccurate or not predictive of actual results;
the impact of Park's ability to anticipate and respond to technological changes on Park's ability to respond to customer needs and meet competitive demands;
operational issues stemming from and/or capital spending necessitated by the potential need to adapt to industry changes in information technology systems on which Park and our subsidiaries are highly dependent;
the ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks, including those of Park's third-party vendors and other service providers, which may prove inadequate, and could adversely affect customer confidence in Park and/or result in Park incurring a financial loss;
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 adequacy of Park's intellectual property protection in general;
the existence or exacerbation of general geopolitical instability and uncertainty (including the impact of the Russia-Ukraine conflict) as well as the effect of trade policies (including the impact of potential or imposed tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars and other changes in trade regulations, closing of border crossings and changes in the relationship of the U.S. and its global trading partners);
the impact on financial markets and the economy of any changes in the credit ratings of the U.S. Treasury obligations and other U.S. government-backed debt, as well as issues surrounding the levels of U.S., European and Asian government debt and concerns regarding the growth rates and financial stability of certain sovereign governments, supranationals and financial institutions in Europe and Asia and the risk they may face difficulties servicing their sovereign debt;
the effect of a fall in stock market prices on Park's asset and wealth management businesses;
our litigation and regulatory compliance exposure, including the costs and effects of any adverse developments in legal proceedings or other claims and the costs and effects of unfavorable resolution of regulatory and other governmental examinations or other inquiries;
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continued availability of earnings and excess capital sufficient for the lawful and prudent declaration of dividends;
the impact on Park's business, personnel, facilities or systems of losses related to acts of fraud, scams and schemes of third parties;
the impact of widespread natural and other disasters, pandemics (including the COVID-19 pandemic), dislocations, regional or national protests and civil unrest (including any resulting branch closures or damages), military or terrorist activities or international hostilities (especially in light of the Russia-Ukraine conflict) on the economy and financial markets generally and on us or our counterparties specifically;
any of the foregoing factors, or other cascading effects of the COVID-19 pandemic that are not currently foreseeable, could materially affect our business, including our customers' willingness to conduct banking transactions and their ability to pay on existing obligations;
the effect of healthcare laws in the U.S. and potential changes for such laws, especially in light of the COVID-19 pandemic, which may increase our healthcare and other costs and negatively impact our operations and financial results;
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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;
the discontinuationreplacement of the London Inter-Bank Offered Rate (LIBOR) andwith other reference rates which may result in increased expenses and litigation, and adversely impact the effectiveness of hedging strategies;
and other risk factors relating to the banking 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, 2020.2021.

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.


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Non-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), gain (loss)gains (losses) on equity securities, net, and asset valuation writedowns,adjustments, reflect ordinary banking activities and are, therefore, typically excluded from consideration as items impacting comparability of period results.

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

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


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Non-GAAP Ratios
Park's management uses certain non-GAAP financial measures to evaluate Park's performance. Specifically, management reviews the return on average tangible equity, the return on average tangible assets, the tangible equity to tangible assets ratio, and the tangible book value per share.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, and the annualized return on average tangible assets, the tangible equity to tangible assets ratio, the tangible book value per share and pre-tax, pre-provision net income for the three months ended and nineat June 30, 2022, March 31, 2022 and June 30, 2021 and for the six months ended and at SeptemberJune 30, 20212022 and SeptemberJune 30, 2020.2021. For purposesthe purpose of calculating the annualized return on average tangible equity, a non-GAAP financial measure, net income for each period is divided by average tangible equity during the period. Average tangible equity equals average shareholders' equity during the applicable period less average goodwill and other intangible assets during the applicable period. For the purpose of calculating the annualized return on average tangible assets, a non-GAAP financial measure, net income for each period is divided by average tangible assets during the period. Average tangible assets equals average assets during the applicable period less average goodwill and other intangible assets during the applicable period. For the purpose of calculating the tangible equity to tangible assets ratio, a non-GAAP financial measure, tangible equity is divided by tangible assets. Tangible equity equals total shareholders' equity less goodwill and other intangible assets, in each case at period end. Tangible assets equal total assets less goodwill and other intangible assets, in each case at period end.

For the purpose of calculating the tangible book value per share, a non-GAAP financial measure, tangible equity is divided by the number of common shares outstanding, in each case at period end. For the purpose of calculating pre-tax, pre-provision net income, a non-GAAP 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.

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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, and the tangible book value per share and pre-tax, pre-provision net income presents additional information to the reader of the consolidated financial statements, which, when read in conjunction with the consolidated financial statements prepared in accordance with U.S. GAAP, assists in analyzing Park's operating performance, ensures comparability of operating 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, and 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, and the tangible book value per 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, and the book value per share and net income, respectively, as determined in accordance with U.S. GAAP.

FTE (fully taxable equivalent) Ratios
Interest income, yields, and ratios on a FTE basis are considered non-U.S. GAAPnon-GAAP financial measures. Management believes net interest income on a FTE basis provides an insightful picture of the interest margin for comparison purposes. The FTE basis also allows management to assess the comparability of revenue arising from both taxable and tax-exempt sources. The FTE basis assumes a corporate federal statutory corporate income tax rate of 21 percent. In the tables included within the "Items Impacting Comparability" section of this MD&A, Park has provided detaila 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
Through September 30, 2021, Park had originated $768.5$764.7 million in loans as part of the PPP. These loans are not typical of Park's loan portfolio in that they are part of a specific government program to support businesses during the COVID-19 pandemic and are 100% guaranteed by the SBA. As such, management considers growth in the loan portfolio excluding PPP loans, the total allowance for 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 20202021 Form 10-K as updated in Note 2 of the Notes to Unaudited Consolidated Condensed Financial Statements in this Quarterly Report on Form 10-Q, lists significant accounting policies used in the development and presentation of Park’s consolidated financial statements. The accounting and reporting policies of Park conform with U.S. GAAP and general practices within the financial services industry. The preparation of
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financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates.

The COVID-19 pandemic has caused significant, unprecedented disruption around the world that has affected daily living and negatively impacted the global economy. Additionally, geopolitical conflict (including the conflict in Ukraine) and inflationary pressures have added uncertainty to the overall economic environment. The effects of the COVID-19 pandemic, geopolitical conflict, and inflation may meaningfully impact significant estimates such as the allowance for credit losses, goodwill, and pension plan obligations and related expenses.
 
Allowance for Credit Losses: Park believes the determination of the allowance for credit losses involves a higher degree of judgment and complexity than its other significant accounting policies. The allowance for credit losses is calculated with the objective of maintaining a reserve level believed by management to be sufficient to absorb estimated credit losses over the life of an asset or an off-balance sheet credit exposure. Management’s determination of the adequacy of the allowance for credit losses is based on periodic evaluations of past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. However, this evaluation has subjective components requiring material estimates, including expected default probabilities, the expected loss given default, the amounts and timing of expected future cash flows on impairedindividually evaluated loans, and estimated losses based on historical loss experience and forecasted economic conditions. All of these factors may be susceptible to significant change. To the extent that actual results differ from management estimates, additional provisions for credit losses may be required that would adversely impact earnings in future periods.

One of the most significant judgments impacting the ACL estimate is the economic forecast for Ohio unemployment, Ohio GDP, and Ohio HPI. Changes in the economic forecasts 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 a hypothetical sensitivity analysis, management calculated a quantitative allowance using a 100% weighting applied to an adverse scenario. This scenario considers among other things that: (1) the military conflict between Russia and Ukraine worsens significantly and persists longer than anticipated resulting in a disruption in oil supply and increased inflation; (2) supply chain issues erode, with increased shortages of many goods, also boosting inflation; (3) inflation continues to increase which leads to a recession and increased unemployment; and (4) new cases, hospitalizations and deaths from COVID-19 start to rise significantly again, slowing growth in spending on air travel, retail and hotels. The adverse scenario forecasts unemployment for the next twelve months to range from 6.1% to 8.5%. Excluding consideration of general reserve adjustments, this sensitivity analysis would result in a hypothetical increase in Park's ACL of $20.7 million as of June 30, 2022. Excluding consideration of general reserve adjustments, a corresponding $20.7 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) Credit Losses”Losses" section withinof this MD&A for additional discussion.

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Fair Value: 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 debt securities AFS. The fair value of these debt securities AFS is calculated 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 debt securities but rather relying on the debt securities’ relationship to other benchmark quoted debt securities. Please see Note 20 - 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 each business acquired. Park’s goodwill, as of SeptemberJune 30, 2021,2022, relates to the value inherent in the banking industry and that value is dependent upon the ability of Park’s national bank subsidiary, PNB, to provide quality, cost-effective banking services in a competitive marketplace. The goodwill value is supported by revenue that is in part driven by the volume of business transacted. A decrease in earnings resulting from a decline in the customer base, the inability to deliver cost-effective services over sustained periods or significant credit problems could lead to impairment of goodwill that could, in turn, adversely impact earnings in future periods.

U.S. GAAP requires an annual evaluation of goodwill for impairment, or more frequently if events or changes in circumstances indicate that the asset might be impaired. Park evaluates goodwill for impairment during the second quarter of each year, with financial data as of March 31. Based on the qualitative analysis performed as of April 1, 2021,2022, the Company determined that goodwill for Park's reporting unit, PNB, was not impaired. Management continues to monitor economic factors, including economic conditions as a result of the COVID-19 pandemic and responses thereto, to evaluate goodwill impairment. 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 banking 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
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expense is principally based on four components: (1) the value of benefits earned by employees for working during the year (service cost), (2) the increase in the liability due to the passage of time (interest cost), and (3) other gains and losses, reduced by (4) the expected return on plan assets for our pension plan.

Significant assumptions used to measure our annual pension expense include:

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

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

Comparison of Results of Operations
For the Three and NineSix Months Ended SeptemberJune 30, 20212022 and 20202021
 
Summary Discussion of Results

Net income for the three months ended SeptemberJune 30, 20212022 was $35.4$34.3 million, compared to $30.8$39.1 million for the thirdsecond quarter of 2020.2021. Diluted earnings per common share were $2.16$2.10 for the thirdsecond quarter of 2021,2022, compared to $1.88$2.38 for the thirdsecond quarter of 2020.2021. Weighted average diluted common shares outstanding were 16,423,91216,361,246 for the thirdsecond quarter of 2021,2022, compared to 16,393,79216,472,800 weighted average diluted common shares outstanding for the thirdsecond quarter of 2020.2021.

Net income for the ninesix months ended SeptemberJune 30, 20212022 was $117.4$73.2 million, compared to $82.7$82.0 million for the first nine monthshalf of 2020.2021. Diluted earnings per common share were $7.14$4.48 for the first nine monthshalf of 2021,2022, compared to $5.04$4.98 for the
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first nine months of 2020.2021. Weighted average diluted common shares outstanding were 16,445,56816,346,141 for the first nine monthshalf of 2021,2022, compared to 16,398,35016,455,673 weighted average diluted common shares outstanding for the first nine monthshalf of 2020.2021.

COVID-19 Considerations

Banking has been identified by federalDuring 2022 and state governmental authorities to be an essential service and Park is fully committed to continue serving our customers and communities through the COVID-19 public health crisis. For those in our communities experiencing a financial hardship, Park has offered various methods of support including loan modifications, payment deferral programs, participation in the CARES Act PPP, participation in additional PPP loans authorized under the Consolidated Appropriations Act, 2021, and various other case by case accommodations. Throughout the pandemic, Park has implemented various physical distancing guidelines to help protect associates, such as allowing associates to work from home, where practical, while maintaining customer service via our online banking services, mobile app, and ATMs, by keeping drive-thru lanes open to serve customers, maintaining selective branch office openings, and offering other banking services by appointment when necessary. As of September 30, 2021, all branches have returned to normal operations.
During 2021 and 2020, Park provided calamity pay and special one-time bonuses to certain associates related to the COVID-19 pandemic. The cost of the calamity pay and special bonuses amounted to $744,000was $141,000 and $670,000 for the three-month periodthree months ended SeptemberJune 30, 2020,2022 and 2021, respectively, and was $747,000 and $1.5 million and $2.9 million for the nine-month periodssix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively, and is included within salaries expense. There was no calamity pay or special bonus paid during the three-month period ended September 30, 2021.

Paycheck Protection Program: During 2020 and 2021, Park approved and funded 4,4397,701 loans totaling $543.1 million under the PPP's first round of loans. These first round PPP loans had an average principal balance of $122,000. Of the $543.1 million in first round PPP loans, 21 loans totaling $68.2 million had a principal balance that was greater than $2$764.7 million. For its assistance in making and retaining the 4,439these loans, Park has received an aggregate of $20.2$33.1 million in fees from the SBA, of which $6.4SBA. During the three months ended June 30, 2022 and June 30, 2021, $1.0 million and $13.7$5.0 million, were recognized within loan interest income during the nine months ended September 30, 2021 and the twelve months ended December 31, 2020, respectively. Park funded the PPP loans with excess on-balance sheet liquidity. At September 30, 2021, the remaining balance of the first round PPP loans funded in 2020 was $14.1 million.

During 2021, Park offered additional PPP loans as authorized under the Consolidated Appropriations Act, 2021, signed into law on December 27, 2020. Through September 30, 2021, Park had approved and funded 3,262 loans totaling $221.6 million under the second roundrespectively, of PPP loans. These additional second round PPP loans had an average principal balance of $68,000. None of the $221.6 million in additional second round PPP loans had a principal balance that was greater than $2 million. For its assistance in making and retaining the 3,262 second round of PPP loans, Park has received an aggregate of $12.9 million in fees from the SBA, of which $7.6 millionfee income was recognized within loan interest income duringincome. During the ninesix months ended SeptemberJune 30, 2021. Park funded the second round PPP loans with excess on-balance sheet liquidity. At September2022 and June 30, 2021, the remaining balance$2.5 million and $9.6 million, respectively, of second round PPP loans funded in 2021fee income was $122.3 million.

recognized within loan interest income.
As of October 29, 2021, Park has submitted approximately 6,458 repayment requests on behalf of borrowers under the PPP to the SBA and has received $653.4 million in payments from the SBA.

Loan Modifications: During the twenty-one months ended September 30, 2021, Park modified a total of 5,131 consumer loans, with an aggregate balance of $79.5 million, and modified a total of 1,406 commercial loans, with an aggregate balance of $513.3 million, in each case related to a hardship caused by the COVID-19 pandemic and responses thereto. Park has worked with borrowers and provided modifications in the form of either interest only deferral or principal and interest deferral, in each case, for initial periods of up to 90 days. As necessary, Park made available a second 90-day interest only deferral or principal and interest deferral bringing the total potential deferral period to six months. Modifications were structured in a manner to best address each individual customer's then current situation. A majority of these modifications were excluded from the TDR classification under Section 4013 of the CARES Act or under applicable interagency guidance of the federal banking regulators. ModifiedThe modified loans arewere considered current and continuecontinued to accrue interest during the deferral period. Section 4013 of the CARES Act expired on December 31, 2021; therefore, modifications occurring after that date are subject to previous TDR classification guidance.

Of the $592.8 million of COVID-19 modifications during the twenty-one months ended September 30, 2021, $30.8 million, or 0.45% of total loans, remained in deferral as of September 30, 2021 and $6.8 million were at least 30 days past due in accordance with the modified terms at September 30, 2021.

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Financial Results by Segment

The table below reflects the net income (loss) by segment for the first second and thirdsecond quarters of 2021,2022, for the first nine monthshalf of each of 20212022 and 20202021 and for the years ended December 31, 20202021 and 2019.2020. Park's segments include PNB and "All Other" which primarily consists of Park as the "Parent Company", GFSC and SEPH. SEPH is a non-bank subsidiary of Park, holding former Vision Bank OREO property and non-performing loans.

(In thousands)Q3 2021Q2 2021Q1 2021Nine months YTD 2021Nine months YTD 202020202019
PNB$36,451 $40,896 $45,122 $122,469 $89,546 $123,730 $113,600 
All Other(1,017)(1,764)(2,291)(5,072)(6,823)4,193 (10,900)
   Total Park$35,434 $39,132 $42,831 $117,397 $82,723 $127,923 $102,700 
(In thousands)Q2 2022Q1 2022Six months YTD 2022Six months YTD 202120212020
PNB$34,940 $41,468 $76,408 $86,018 $159,461 $123,730 
All Other(616)(2,593)(3,209)(4,055)(5,516)4,193 
   Total Park$34,324 $38,875 $73,199 $81,963 $153,945 $127,923 

Net income for the ninesix months ended SeptemberJune 30, 20212022 of $117.4$73.2 million represented a $34.7$8.8 million, or 41.9%10.7%, increasedecrease compared to $82.7$82.0 million for the ninesix months ended SeptemberJune 30, 2020.2021. Pre-tax, pre-provision net income for the six months ended June 30, 2022 of $87.1 million represented a $3.6 million, or 4.0%, decrease compared to $90.6 million for the six months ended June 30, 2021. Net income for each of the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 included several items of income and expense that impactimpacted comparability of period results. These items are detailed in the "Items Impacting Comparability" section within this MD&A.

During the first quarter of 2021, Park adopted FASB Accounting Standards Update 2016-13, Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 established the CECL methodology for estimating the allowance for credit losses. This standard was adopted prospectively on January 1, 2021, resulting in a $6.1 million increase to the allowance for credit losses and a $3.9 million increase to the allowance for unfunded credit losses. A cumulative effect adjustment resulting in a $8.0 million decrease to retained earnings and a $2.1 million increase to deferred tax assets was also recorded as of the adoption of ASU 2016-13. Refer to the “Credit Metrics and Provision for (Recovery of) Credit Losses” section for further detail.

The following discussion provides additional information regarding the PNB segment, that is made up of PNB, followed by additional information regarding All Other, which consists of the Parent Company, GFSC and SEPH.Other.

The Park National Bank (PNB)

The table below reflects PNB's net income for the first second and thirdsecond quarters of 2021,2022, for the first nine monthshalf of each of2022 and 2021 and 2020 and for the years ended December 31, 20202021 and 2019.2020.

(In thousands)(In thousands)Q3 2021Q2 2021Q1 2021Nine months YTD 2021Nine months YTD 202020202019(In thousands)Q2 2022Q1 2022Six months YTD 2022Six months YTD 202120212020
Net interest incomeNet interest income$82,835 $82,675 $82,086 $247,596 $238,900 $326,375 $293,130 Net interest income$83,411 $79,372 $162,783 $164,761 $328,398 $326,375 
Provision for (recovery of) credit losses (1)
Provision for (recovery of) credit losses (1)
4,276 (3,752)(4,194)(3,670)32,256 30,813 8,356 
Provision for (recovery of) credit losses (1)
3,357 (4,547)(1,190)(7,946)(8,554)30,813 
Other incomeOther income31,332 31,126 32,800 95,258 89,920 124,231 92,392 Other income29,255 31,247 60,502 63,926 126,802 124,231 
Other expenseOther expense64,663 67,122 63,576 195,361 187,661 268,938 237,433 Other expense66,214 64,216 130,430 130,698 266,678 268,938 
Income before income taxesIncome before income taxes$45,228 $50,431 $55,504 $151,163 $108,903 $150,855 $139,733 Income before income taxes$43,095 $50,950 $94,045 $105,935 $197,076 $150,855 
Income tax expenseIncome tax expense8,777 9,535 10,382 28,694 19,357 27,125 26,133 Income tax expense8,155 9,482 17,637 19,917 37,615 27,125 
Net incomeNet income$36,451 $40,896 $45,122 $122,469 $89,546 $123,730 $113,600 Net income$34,940 $41,468 $76,408 $86,018 $159,461 $123,730 
(1) Park adopted ASU 2016-13 effective January 1, 2021. The allowance for credit losses as of SeptemberJune 30, 2022 and 2021, and as of December 31, 2021 and the related provision for (recovery of) credit losses for the three months and six months ended March 31, 2021, June 30, 2021,2022 and September 30, 2021 and the nine monthsyear ended September 30,December 31, 2021 were calculated utilizing this new guidance.

Net interest income of $247.6$162.8 million for the ninesix months ended SeptemberJune 30, 20212022 represented a $8.7$2.0 million, or 3.6%1.2%, increasedecrease compared to $238.9$164.8 million for the ninesix months ended SeptemberJune 30, 2020.2021. The increasedecrease was a result of a $16.9$2.4 million decrease in interest expense,income, partially offset by a $8.2 million$470,000 decrease in interest income.expense.

The $8.2$2.4 million decrease in interest income was primarily due to a $1.9 million decrease in investment income and a $6.3$8.4 million decrease in interest income on loans. The decreaseloans, partially offset by a $6.0 million increase in investment income was primarily the result of a decrease in the
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yield on investments, which decreased 31 basis points to 2.31% for the nine months ended September 30, 2021, compared to 2.62% for the nine months ended September 30, 2020.income. The decrease in interest income on loans was primarily the result of a $8.3 million decrease in the yieldinterest income on PPP loans which decreased 22 basis points to 4.44% for the nine months ended September 30, 2021, compared to 4.66% for the nine months ended September 30, 2020. Theand a $170,000 decrease in yieldinterest income on all other loans. Excluding PPP loans, there was partially offset by a $169.4$47.3 million increase in average loans from $6.89$6.743 billion for the ninesix months ended SeptemberJune 30, 20202021 to $7.06$6.790 billion for the ninesix months ended SeptemberJune 30, 2021. The2022. This increase in average loans was impactedoffset by a 3 basis point decline in the addition of averageyield excluding PPP loans of approximately $309.0 million and $312.2 millionfrom 4.35% for the ninesix months ended SeptemberJune 30, 2021 and 2020, respectively, and also resulted in interest and fee income of $15.5 million and $8.7 millionto 4.32% for the ninesix months ended SeptemberJune 30, 2022.

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The $6.0 million increase in investment income was primarily the result of a $652.8 million increase in average investments, from $1.17 billion for the six months ended June 30, 2021 and 2020, respectively. Excludingto $1.82 billion for the impact of PPP loans,six months ended June 30, 2022. The increase was partially offset by a decrease in the yield on loans was 4.33%investments, which decreased 18 basis points to 2.24% for the ninesix months ended SeptemberJune 30, 2021, a decrease of 38 basis points2022, compared to 4.71%2.42% for the ninesix months ended SeptemberJune 30, 2020.2021.

The $16.9 million$470,000 decrease in interest expense was primarily due to a $13.8 million$538,000 decrease in interest expense on deposits, as well aspartially offset by a $3.1 million decrease$68,000 increase in interest expense on borrowings. The decrease in interest expense on deposits was partiallythe result of a $99.7 million decrease in average on-balance sheet interest bearing deposits from $5.19 billion for the six months ended June 30, 2021, to $5.09 billion for the six months ended June 30, 2022 as well as the result of a decrease in the cost of deposits of 342 basis points, from 0.47%0.14% for the ninesix months ended SeptemberJune 30, 20202021 to 0.13%0.12% for the ninesix months ended SeptemberJune 30, 2021. The decrease was also the result of a $63.7 million decrease in average on-balance sheet interest bearing deposits from $5.35 billion for the nine months ended September 30, 2020, to $5.28 billion for the nine months ended September 30, 2021.2022. The decrease in on-balance sheet interest bearing deposits consisted of declineswas due to decreases in both higher-costsavings deposits and time deposits, and transaction accounts and waswhich were partially offset by an increase in savings deposits.transaction accounts. During the ninesix months ended SeptemberJune 30, 20212022 and the year ended December 31, 2020,2021, Park made the decision to participate in a one-way sell (OWS) program to transfer deposits off balance sheet in order to manage growth of the balance sheet. This decision also contributed to a decline in interest bearing deposits.

The decrease in interest expense on borrowings was partially the result of a $78.3 million decrease in average borrowings from $400.1 million for the nine months ended September 30, 2020, to $321.8 million for the nine months ended September 30, 2021. The cost of borrowings also decreased by 91 basis points, from 1.53% for the nine months ended September 30, 2020 to 0.62% for the nine months ended September 30, 2021.

The recovery of credit losses of $3.7$1.2 million for the ninesix months ended SeptemberJune 30, 20212022 represented a difference of $35.9$6.7 million, compared to a provision forrecovery of credit losses of $32.3$7.9 million for the ninesix months ended SeptemberJune 30, 2020.2021. Refer to the “Credit Metrics and Provision for (Recovery of) Credit Losses” section for additional details regarding the level of the provision for (recovery of) credit losses recognized in each period presented above.

Other income of $95.3$60.5 million for the ninesix months ended SeptemberJune 30, 20212022 represented an increasea decrease of $5.3$3.4 million, or 5.9%5.4%, compared to $89.9$63.9 million for the ninesix months ended SeptemberJune 30, 2020.2021. The $5.3$3.4 million increasedecrease was primarily related to (i) a $4.3 million increase in income from fiduciary activities; (ii) a $2.9 million increase in debit card fee income; (iii) a $2.4 million increase in miscellaneous income, primarily related to a refund of a consumer insurance product, an increase in income from printed check sales and an increase in gain on sale of assets; and (iv) a $1.6 million increase in gain (loss) on equity securities, net. These increases were partially offset by a $3.3 million decrease in gain on sale of debt securities and a $2.2$7.4 million decrease in other service income, which was primarily due to a declinedeclines in fee income from mortgage loan originations and mortgage servicing rights, partially offset by an increase in investor rate locks and mortgage loans held for sale,sale. Additionally, there was a $382,000 decrease in other miscellaneous income. These decreases were partially offset by an increaseincreases of (i) $1.9 million in feeother components of net periodic benefit income; (ii) $931,000 in gain on equity securities, net; (iii) $914,000 in income from mortgage loan originationsfiduciary activities, and the valuation of mortgage servicing rights.(iv) $552,000 in income from service charges on deposits.

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A summary of mortgage loan originations for each quarter of 2021, the nine monthsyear ended September 30,December 31, 2021 and 2020, as well as the first two quarters within each nine-month period, asof 2022 follows.

(In thousands)(In thousands)Q1 2021Q2 2021Q3 2021Nine months ended September 30, 2021Q1 2020Q2 2020Q3 2020Nine months ended September 30, 2020(In thousands)Q1 2021Q2 2021Q3 2021Q4 20212021Q1 2022Q2 2022
Mortgage Origination Volume
Mortgage Loan Origination VolumeMortgage Loan Origination Volume
SoldSold$191,116 $142,398 $123,757 $457,271 $85,030 $248,339 $355,755 $689,124 Sold$191,116 $142,398 $123,757 $98,007 $555,278 $69,053 $50,013 
PortfolioPortfolio82,613 74,670 66,718 224,001 56,018 64,351 61,227 181,596 Portfolio82,613 74,670 66,718 60,685 284,686 53,498 63,104 
ConstructionConstruction28,987 37,266 28,486 94,739 33,109 33,754 40,560 107,423 Construction28,987 37,266 28,486 24,816 119,555 32,928 34,044 
Service releasedService released1,266 2,204 4,537 8,007 3,794 2,362 2,275 8,431 Service released1,266 2,204 4,537 5,795 13,802 4,660 4,580 
Total mortgage originations$303,982 $256,538 $223,498 $784,018 $177,951 $348,806 $459,817 $986,574 
Total mortgage loan originationsTotal mortgage loan originations$303,982 $256,538 $223,498 $189,303 $973,321 $160,139 $151,741 
Refinances as a % of Total Originations71.1 %50.0 %44.8 %56.7 %48.1 %67.8 %68.5 %64.6 %
Refinances as a % of Total Mortgage Loan OriginationsRefinances as a % of Total Mortgage Loan Originations71.1 %50.0 %44.8 %44.2 %54.2 %41.7 %25.9 %

Total mortgage loan originations decreased $202.6$248.6 million, or 20.5%44.4%, to $784.0$311.9 million for the ninesix months ended SeptemberJune 30, 20212022 compared to $986.6$560.5 million for the ninesix months ended SeptemberJune 30, 2020.2021.

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The table below reflects PNB's other expense for the ninesix months ended SeptemberJune 30, 20212022 and 2020.2021.

(Dollars in thousands)(Dollars in thousands)20212020change% change(Dollars in thousands)20222021change% change
Other expense:Other expense:Other expense:
SalariesSalaries$86,194 $86,736 $(542)(0.6)%Salaries$59,459 $57,747 $1,712 3.0 %
Employee benefitsEmployee benefits30,451 29,113 1,338 4.6 %Employee benefits20,467 19,976 491 2.5 %
Occupancy expenseOccupancy expense9,440 10,395 (955)(9.2)%Occupancy expense6,255 6,304 (49)(0.8)%
Furniture and equipment expenseFurniture and equipment expense8,157 13,834 (5,677)(41.0)%Furniture and equipment expense5,870 5,362 508 9.5 %
Data processing feesData processing fees22,426 8,338 14,088 169.0 %Data processing fees15,757 14,697 1,060 7.2 %
Professional fees and servicesProfessional fees and services14,332 16,961 (2,629)(15.5)%Professional fees and services9,553 9,137 416 4.6 %
MarketingMarketing4,354 4,073 281 6.9 %Marketing2,335 2,780 (445)(16.0)%
InsuranceInsurance4,080 4,090 (10)(0.2)%Insurance2,642 2,682 (40)(1.5)%
CommunicationCommunication2,650 2,894 (244)(8.4)%Communication1,800 1,857 (57)(3.1)%
State tax expenseState tax expense2,986 2,792 194 6.9 %State tax expense2,216 1,989 227 11.4 %
Amortization of intangible assetsAmortization of intangible assets1,378 1,738 (360)(20.7)%Amortization of intangible assets805 958 (153)(16.0)%
FHLB prepayment penalty— 1,793 (1,793)N.M.
Foundation contributionsFoundation contributions4,000 — 4,000 N.M.Foundation contributions— 4,000 (4,000)N.M.
MiscellaneousMiscellaneous4,913 4,904 0.2 %Miscellaneous3,271 3,209 62 1.9 %
Total other expenseTotal other expense$195,361 $187,661 $7,700 4.1 %Total other expense$130,430 $130,698 $(268)(0.2)%

OtherTotal other expense of $195.4$130.4 million for the ninesix months ended SeptemberJune 30, 20212022 represented an increasea decrease of $7.7 million,$268,000, or 4.1%0.2%, compared to $187.7$130.7 million for the ninesix months ended SeptemberJune 30, 2020.2021. The decreaseincrease in salaries expense was primarily related to a decreaseincreases in base salary expense, and additional compensation expense, partially offset by increasesdecreases in officer incentive compensation expense and share-basedadditional compensation expense. The increase in employee benefits expense was primarily related to increased pension plan expense, payroll tax expense and group insurance costs.other retirement benefits. The decrease in occupancy expense was primarily related to a decrease in lease expense. The decreaseincrease in furniture and equipment expense was primarily related to a change in the classification under which software and related maintenance costs are expensed, which are now classified under data processing fees. The impact of this decrease in furniture and equipment expense was partially offset by an increase in depreciation expense on equipment.expense. The increase in data processing fees was primarily related to increasedan increase in software data processing expense, partially offset by a decrease in debit card processing costs
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and other data processing and software costs, partially due to the previously mentioned change in classification from furniture and equipment expense and a change in expensing software costs from other fees within professional fees and services to data processing fees.expense. The decreaseincrease in professional fees and services expense was primarily relateddue to decreased title, appraisal and credit costs and decreases in other fees (due to the change in expensing software costs under data processing fees), partially offset by increases in management and consulting expenses.expense, legal expense and directors fees, which were partially offset by decreases in credit costs and other fees. The decrease in the FHLB prepayment penaltymarketing expense was due to a $1.8 prepayment penalty on FHLB borrowings of $50 million repaid during the nine months ended September 30, 2020; there was no similar prepaymentdecrease in the same period of 2021.advertising expenses. The increasedecrease in foundation contributions was due to a $4.0 million contribution to Park's charitable foundation having been made during the ninesix months ended SeptemberJune 30, 2021, with no similar contribution being made during the ninesix months ended SeptemberJune 30, 2020. The 2020 contribution to Park's charitable foundation was made during the fourth quarter2022.
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Table of 2020. Park does not expect to make any additional contributions to Park's charitable foundation in 2021.Contents


The table below provides certain balance sheet information and financial ratios for PNB as of or for the ninesix months ended SeptemberJune 30, 2022 and 2021 and 2020 and as of or for the year ended December 31, 2020.2021.

(Dollars in thousands)(Dollars in thousands)September 30, 2021December 31, 2020September 30, 2020% change from 12/31/20% change from 9/30/20(Dollars in thousands)June 30, 2022December 31, 2021June 30, 2021% change from 12/31/21% change from 06/30/21
Loans less PPP$6,773,762 $6,834,269 $6,720,619 (0.89)%0.79 %
Loans6,905,245 7,165,840 7,263,380 (3.64)%(4.93)%
Loans (1)
Loans (1)
6,957,611 6,868,935 7,031,199 1.29 %(1.05)%
Loans less PPP loans (2)
Loans less PPP loans (2)
6,944,183 6,794,515 6,782,319 2.20 %2.39 %
Allowance for credit losses (1)
Allowance for credit losses (1)
87,992 84,321 85,249 4.35 %3.22 %
Allowance for credit losses (1)
81,415 83,111 83,374 (2.04)%(2.35)%
Net loansNet loans6,817,253 7,081,519 7,178,131 (3.73)%(5.03)%Net loans6,876,196 6,785,824 6,947,825 1.33 %(1.03)%
Investment securitiesInvestment securities1,601,376 1,114,742 1,088,149 43.65 %47.17 %Investment securities1,904,387 1,807,392 1,454,170 5.37 %30.96 %
Total assetsTotal assets10,012,868 9,236,915 9,195,911 8.40 %8.88 %Total assets9,794,711 9,538,217 9,922,623 2.69 %(1.29)%
Total depositsTotal deposits8,603,171 7,820,983 7,725,562 10.00 %11.36 %Total deposits8,575,310 8,157,720 8,481,017 5.12 %1.11 %
Average assets (2)(3)
Average assets (2)(3)
9,819,220 9,198,141 9,171,998 6.75 %7.06 %
Average assets (2)(3)
9,723,664 9,814,766 9,707,256 (0.93)%0.17 %
Efficiency ratio (3)(4)
Efficiency ratio (3)(4)
56.63 %59.31 %56.70 %(4.52)%(0.12)%
Efficiency ratio (3)(4)
57.98 %58.21 %56.80 %(0.40)%2.08 %
Return on average assets (4)(5)
Return on average assets (4)(5)
1.67 %1.35 %1.30 %23.70 %28.46 %
Return on average assets (4)(5)
1.58 %1.62 %1.79 %(2.47)%(11.73)%
(1) Park adopted ASU 2016-13 effective January 1, 2021. The allowanceExcluded from total loans at June 30, 2022 were $6.3 million in commercial loans held for credit losses assale.
(2) Excluded $13.4 million, $74.4 million and $248.9 million of SeptemberPPP loans at June 30, 2022, December 31, 2021 and the related provision for (recovery of) credit losses for the nine months ended SeptemberJune 30, 2021 were calculated utilizing this new guidance.2021.
(2)(3) Average assets for the ninesix months ended SeptemberJune 30, 20212022 and 20202021 and for the year ended December 31, 2020.2021.
(3)(4) Calculated utilizing fully taxable equivalent net interest income which includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustments were $2.1$1.7 million for the ninesix months ended SeptemberJune 30, 2021, $2.22022, $1.4 million for the ninesix months ended SeptemberJune 30, 20202021 and $2.9 million for the year ended December 31, 2020.2021.
(4)(5) Annualized for the ninesix months ended SeptemberJune 30, 20212022 and 2020.2021.

Loans outstanding at SeptemberJune 30, 20212022 were $6.91$6.96 billion, compared to $7.17$6.87 billion at December 31, 2020,2021, an increase of $88.7 million. Loans outstanding at June 30, 2022 were $6.96 billion, compared to $7.03 billion at June 30, 2021, a decrease of $260.6 million, or 3.6%. Loans outstanding at September 30, 2021 were $6.91 billion, compared to $7.26 billion at September 30, 2020, a decrease of $358.1 million, or 4.9%.$73.6 million. Excluding $131.5 million, $331.6$13.4 million and $542.8$74.4 million of PPP loans at SeptemberJune 30, 2021,2022 and December 31, 2020 and September 30, 2020,2021, respectively, loans outstanding were $6.77$6.94 billion at SeptemberJune 30, 2021,2022, compared to $6.83$6.79 billion at December 31, 2020, a decrease of $60.5 million, or 0.9%, and2021, an increase of
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$53.1 million, or 0.8%,PPP loans at June 30, 2022 and 2021, respectively, loans outstanding were $6.94 billion at June 30, 2022, compared to $6.72$6.78 billion at SeptemberJune 30, 2020.2021, an increase of $161.9 million. The table below breaks out the change in loans outstanding, by loan type.

(Dollars in thousands)(Dollars in thousands)September 30, 2021December 31, 2020September 30, 2020change from 12/31/20% change from 12/31/20change from 9/30/20% change from 9/30/20(Dollars in thousands)June 30, 2022December 31, 2021June 30, 2021change from 12/31/21% change from 12/31/21change from 06/30/21% change from 06/30/21
Home equityHome equity$166,557 $182,131 $194,445 $(15,574)(8.55)%$(27,888)(14.34)%Home equity$162,616 $165,691 $167,624 $(3,075)(1.86)%$(5,008)(2.99)%
InstallmentInstallment1,711,781 1,650,620 1,633,730 61,161 3.71 %78,051 4.78 %Installment1,820,500 1,685,687 1,700,083 134,813 8.00 %120,417 7.08 %
Real estateReal estate1,165,045 1,213,820 1,232,196 (48,775)(4.02)%(67,151)(5.45)%Real estate1,134,763 1,142,991 1,182,877 (8,228)(0.72)%(48,114)(4.07)%
Commercial (excluding PPP)3,725,362 3,784,153 3,654,342 (58,791)(1.55)%71,020 1.94 %
Commercial (excluding PPP loans) (1) (2)
Commercial (excluding PPP loans) (1) (2)
3,821,686 3,797,673 3,731,788 24,013 0.63 %89,898 2.41 %
PPP loansPPP loans131,483 331,571 542,761 (200,088)(60.35)%(411,278)(75.78)%PPP loans13,428 74,420 248,880 (60,992)(81.96)%(235,452)(94.60)%
OtherOther5,017 3,545 5,906 1,472 41.52 %(889)(15.05)%Other4,618 2,473 (53)2,145 86.74 %4,671 N.M.
Total loansTotal loans$6,905,245 $7,165,840 $7,263,380 $(260,595)(3.64)%$(358,135)(4.93)%Total loans$6,957,611 $6,868,935 $7,031,199 $88,676 1.29 %$(73,588)(1.05)%
Total loans (excluding PPP)$6,773,762 $6,834,269 $6,720,619 $(60,507)(0.89)%$53,143 0.79 %
Total loans (excluding PPP loans)Total loans (excluding PPP loans)$6,944,183 $6,794,515 $6,782,319 $149,668 2.20 %$161,864 2.39 %
(1) Excluded $13.4 million of PPP loans at June 30, 2022, $74.4 million of PPP loans at December 31, 2021 and $248.9 million of PPP loans at June 30, 2021.
(2) Excluded from total loans at June 30, 2022 were $6.3 million in commercial loans held for sale.

PNB's allowance for credit losses increaseddecreased by $3.7$1.7 million, or 4.4%2.0%, to $88.0$81.4 million at SeptemberJune 30, 2021,2022, compared to $84.3$83.1 million at December 31, 2020. This increase included a $6.7 million increase to the allowance for credit losses as the result of the adoption of ASU 2016-13.2021. Net recoveriescharge-offs were $638,000,$506,000, or 0.01% of total average loans, for the ninesix months ended SeptemberJune 30, 20212022 and net charge-offs were $1.2 million,$640,000, or 0.02%0.01% of total average loans, for the year ended December 31, 2020.2021. Refer to the “Credit Metrics and Provision for (Recovery of) Credit Losses” section for additional information regarding PNB's loan portfolio and the level of provision for (recovery of) credit losses recognized in each period presented.

Total deposits at SeptemberJune 30, 20212022 were $8.60$8.58 billion, compared to $7.82$8.16 billion at December 31, 2020,2021, an increase of $782.2$417.6 million, or 10.0%5.1%. Total deposits at June 30, 2022 were $8.58 billion, compared to $8.48 million at June 30, 2021, an increase of
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$94.3 million, or 1.1%. During the ninesix months ended SeptemberJune 30, 2022 and 2021 and the year ended December 31, 2020,2021, Park made the decision to participate in a one-way sell (OWS) programtwo programs to transfer deposits off balance sheet in order to manage growth of the balance sheet, as deposits increased significantly throughout the COVID-19 pandemic. At SeptemberJune 30, 2022, December 31, 2021 and June 30, 2021, December 31, 2020 and September 30, 2020, Park had $818.3$809.8 million, $710.1$983.1 million and $773.3$812.2 million, respectively, in OWS insured cash sweep deposits which were off-balance sheet. Total deposits would have increased $890.4$244.3 million, or 10.4%2.7%, compared to December 31, 20202021 had the $818.3$809.8 million and $710.1$983.1 million in deposits remained on the balance sheet at the respective dates. Total deposits would have increased $922.7$91.9 million, or 10.9%1.0%, compared to SeptemberJune 30, 20202021 had the $818.3$809.8 million and $773.3$812.2 million in deposits remained on the balance sheet at the respective dates. The table below breaks out the change in deposit balances, by deposit type.

(Dollars in thousands)(Dollars in thousands)September 30, 2021December 31, 2020September 30, 2020change from 12/31/20% change from 12/31/20change from 9/30/20% change from 9/30/20(Dollars in thousands)June 30, 2022December 31, 2021June 30, 2021change from 12/31/21% change from 12/31/21change from 06/30/21% change from 06/30/21
Non-interest bearing depositsNon-interest bearing deposits$3,221,859 $2,978,005 $2,831,767 $243,854 8.2 %$390,092 13.8 %Non-interest bearing deposits$3,336,212 $3,320,413 $3,143,998 $15,799 0.5 %$192,214 6.1 %
Transaction accountsTransaction accounts1,620,375 1,381,479 1,365,783 238,896 17.3 %254,592 18.6 %Transaction accounts1,845,379 1,502,876 1,504,559 342,503 22.8 %340,820 22.7 %
SavingsSavings3,035,734 2,596,926 2,596,811 438,808 16.9 %438,923 16.9 %Savings2,719,526 2,622,771 3,067,795 96,755 3.7 %(348,269)(11.4)%
Certificates of deposits725,203 864,573 931,201 (139,370)(16.1)%(205,998)(22.1)%
Certificates of depositCertificates of deposit674,193 711,660 764,665 (37,467)(5.3)%(90,472)(11.8)%
Total depositsTotal deposits$8,603,171 $7,820,983 $7,725,562 $782,188 10.0 %$877,609 11.4 %Total deposits$8,575,310 $8,157,720 $8,481,017 $417,590 5.1 %$94,293 1.1 %
OWS insured cash sweep deposits818,340 710,101 773,273 108,239 15.2 %45,067 5.8 %
Total deposits including OWS deposits$9,421,511 $8,531,084 $8,498,835 $890,427 10.4 %$922,676 10.9 %
Off balance sheet depositsOff balance sheet deposits809,792 983,053 812,154 (173,261)(17.6)%(2,362)(0.3)%
Total deposits including off balance sheet depositsTotal deposits including off balance sheet deposits$9,385,102 $9,140,773 $9,293,171 $244,329 2.7 %$91,931 1.0 %


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All Other

The table below reflects All Other net (loss) income for the first second and thirdsecond quarters of 2021,2022, for the first nine monthshalf of each of 20212022 and 20202021 and for the years ended December 31, 20202021 and 2019.2020.

(In thousands)(In thousands)Q3 2021Q2 2021Q1 2021Nine months YTD 2021Nine months YTD 202020202019(In thousands)Q2 2022Q1 2022Six months YTD 2022Six months YTD 202120212020
Net interest (expense) income$(1,233)$1,176 $(1,352)$(1,409)$2,409 $1,255 $4,607 
Net interest income (expense)Net interest income (expense)$528 $(1,686)$(1,158)$(176)$1,495 $1,255 
Recovery of credit losses (1)
Recovery of credit losses (1)
(2,304)(288)(661)(3,253)(1,043)(18,759)(2,185)
Recovery of credit losses (1)
(366)(58)(424)(949)(3,362)(18,759)
Other incomeOther income1,079 112 1,289 2,480 88 1,433 4,801 Other income1,938 409 2,347 1,401 3,142 1,433 
Other expenseOther expense3,826 4,278 4,289 12,393 13,273 17,657 26,555 Other expense3,834 3,157 6,991 8,567 16,840 17,657 
Net (loss) income before income tax benefitNet (loss) income before income tax benefit$(1,676)$(2,702)$(3,691)$(8,069)$(9,733)$3,790 $(14,962)Net (loss) income before income tax benefit$(1,002)$(4,376)$(5,378)$(6,393)$(8,841)$3,790 
Income tax benefit Income tax benefit(659)(938)(1,400)(2,997)(2,910)(403)(4,062) Income tax benefit(386)(1,783)(2,169)(2,338)(3,325)(403)
Net (loss) incomeNet (loss) income$(1,017)$(1,764)$(2,291)$(5,072)$(6,823)$4,193 $(10,900)Net (loss) income$(616)$(2,593)$(3,209)$(4,055)$(5,516)$4,193 
(1) Park adopted ASU 2016-13 effective January 1, 2021. The allowance for credit losses as of SeptemberJune 30, 2022 and 2021 and December 31, 2021 and the related provision for (recovery of)recovery of credit losses for the three months and six months ended March 31, 2021, June 30, 2021,2022 and September 30, 2021, and the nine monthsyear ended September 30,December 31, 2021 were calculated utilizing this new guidance.

The net interest income (expense) income for All Other included, for all periods presented, interest income on subordinated debt investments in PNB, which were eliminated in the consolidated Park National Corporation totals, as well as interest income on GFSC loans and SEPH impaired loan relationships. The net interest income (expense) income for All Other included for the nine months ended September 30, 2021 and 2020 and the year ended December 31, 2020, 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 income (expense) income reflected net interest expense of $1.4$1.2 million for the ninesix months ended SeptemberJune 30, 2021,2022, compared to net interest income of $2.4 million$176,000 for the ninesix months ended SeptemberJune 30, 2020.2021. The change was largely the result of an increasea decrease of $630,000 in loan interest income related to payment collections at SEPH, and a decrease of $595,000 in net interest income from GFSC, partially offset by a decrease in interest expense on borrowings of $4.6 million,$239,000 mainly related to the Park Subordinated Notes, and a decrease of $2.0 million in net interest income from GFSC, which were partially offset by an increase of $3.0 million in loan interest income.Notes.

SEPH had net recoveries of $2.6 million for the nine months ended September 30, 2021, compared to net recoveries of $1.4 million for the nine months ended September 30, 2020, and GFSC had net recoveries of $11,000 for the nine months ended September 30, 2021, compared to net charge-offs of $536,000 for the nine months ended September 30, 2020. Refer to the “Credit Metrics and Provision for (Recovery of) Credit Losses” section for additional information regarding the All Other loan portfolio and the level of recovery of credit losses recognized in each period presented.

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All Other had other income of $2.5$2.3 million for the ninesix months ended SeptemberJune 30, 2021,2022, compared to $88,000$1.4 million for the ninesix months ended SeptemberJune 30, 2020.2021. The change was largely due to a $1.0$1.2 million increase in income from bank owned life insurance, mainly related to Partnership Investments, which went from a $203,000 loss for the nine months ended September 30, 2020 to a $767,000 gain for the nine months ended September 30, 2021,death benefit payout, and a $844,000 difference$474,000 increase in gain (loss) on equity securities, net, which went from a $659,000 loss for the nine months ended September 30, 2020 to a $185,000$130,000 gain for the ninesix months ended SeptemberJune 30, 2021.2021 to a $603,000 gain for the six months ended June 30, 2022. The increase was partially offset by an $442,000 decrease in income related to Partnership Investments, which went from a $642,000 gain for the six months ended June 30, 2021 to a $199,000 gain for the six months ended June 30, 2022.

All Other had other expense of $12.4$7.0 million for the ninesix months ended SeptemberJune 30, 2021,2022, compared to $13.3$8.6 million for the ninesix months ended SeptemberJune 30, 2020.2021. The decrease was largely due to a $600,000$419,000 decrease in merger-relatedprofessional fees and services, a $364,000 decrease in occupancy expenses, associated with the Carolina Alliance acquisition.a $337,000 decrease in salaries expense, and a $277,000 decrease in other insurance expense.

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The table below provides certain balance sheet information for All Other as of or for the ninesix months ended SeptemberJune 30, 2022 and 2021 and 2020 and as of or for the year ended December 31, 2020.2021.

(Dollars in thousands)(Dollars in thousands)September 30, 2021December 31, 2020September 30, 2020% change from 12/31/20% change from 9/30/20(Dollars in thousands)June 30, 2022December 31, 2021June 30, 2021% change from 12/31/21% change from 6/30/21
LoansLoans$3,172 $11,945 $15,166 (73.44)%(79.08)%Loans$1,074 $2,187 $4,446 (50.89)%(75.84)%
Allowance for credit losses (1)
Allowance for credit losses (1)
137 1,354 1,789 (89.88)%(92.34)%
Allowance for credit losses (1)
33 86 203 (61.63)%(83.74)%
Net loansNet loans3,035 10,591 13,377 (71.34)%(77.31)%Net loans1,041 2,101 4,243 (50.45)%(75.47)%
Total assetsTotal assets21,150 42,106 44,095 (49.77)%(52.04)%Total assets31,959 22,037 25,371 45.02 %25.97 %
Average assets (2)(1)
Average assets (2)(1)
34,237 43,492 44,497 (21.28)%(23.06)%
Average assets (2)(1)
28,132 32,692 35,771 (13.95)%(21.36)%
(1) Park adopted ASU 2016-13 effective January 1, 2021. The allowance for credit losses as of September 30, 2021 and the related provision for (recovery of) credit losses for the three months ended March 31, 2021, June 30, 2021, and September 30, 2021 and the nine months ended September 30, 2021 were calculated utilizing this new guidance.
(2) Average assets for the ninesix months ended SeptemberJune 30, 2022 and 2021, and 2020 and for the year ended December 31, 2020.2021.

Park National Corporation

The table below reflects Park's consolidated net income for the first second and thirdsecond quarters of 2021,2022, for the first nine monthshalf of each of 20212022 and 20202021 and for the years ended December 31, 20202021 and 2019.2020.

(In thousands)(In thousands)Q3 2021Q2 2021Q1 2021Nine months YTD 2021Nine months YTD 202020202019(In thousands)Q2 2022Q1 2022Six months YTD 2022Six months YTD 202120212020
Net interest incomeNet interest income$81,602 $83,851 $80,734 $246,187 $241,309 $327,630 $297,737 Net interest income$83,939 $77,686 $161,625 $164,585 $329,893 $327,630 
Provision for (recovery of) credit losses (1)
Provision for (recovery of) credit losses (1)
1,972 (4,040)(4,855)(6,923)31,213 12,054 6,171 
Provision for (recovery of) credit losses (1)
2,991 (4,605)(1,614)(8,895)(11,916)12,054 
Other incomeOther income32,411 31,238 34,089 97,738 90,008 125,664 97,193 Other income31,193 31,656 62,849 65,327 129,944 125,664 
Other expenseOther expense68,489 71,400 67,865 207,754 200,934 286,595 263,988 Other expense70,048 67,373 137,421 139,265 283,518 286,595 
Income before income taxesIncome before income taxes$43,552 $47,729 $51,813 $143,094 $99,170 $154,645 $124,771 Income before income taxes$42,093 $46,574 $88,667 $99,542 $188,235 $154,645 
Income tax expense Income tax expense8,118 8,597 8,982 25,697 16,447 26,722 22,071  Income tax expense7,769 7,699 15,468 17,579 34,290 26,722 
Net incomeNet income$35,434 $39,132 $42,831 $117,397 $82,723 $127,923 $102,700 Net income$34,324 $38,875 $73,199 $81,963 $153,945 $127,923 
(1) Park adopted ASU 2016-13 effective January 1, 2021. The allowance for credit losses as of SeptemberJune 30, 2022 and 2021 and December 31, 2021 and the related provision for (recovery of) credit losses for the three months and six months ended March 31, 2021, June 30, 2021,2022 and September 30, 2021, and the nine monthsyear ended September 30,December 31, 2021 were calculated utilizing this new guidance.


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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 ThirdSecond Quarters of 20212022 and 20202021
 
Net interest income decreasedincreased by $2.2 million,$88,000, or 2.7%0.1%, to $81.6$83.9 million for the thirdsecond quarter of 2021,2022, compared to $83.8$83.9 million for the thirdsecond quarter of 2020.2021. See the discussion under the table below.
 
Three months ended 
September 30, 2021
Three months ended 
September 30, 2020
Three months ended 
June 30, 2022
Three months ended 
June 30, 2021
(Dollars in thousands)(Dollars in thousands)Average
balance
InterestTax
equivalent 
yield/cost
Average
balance
InterestTax
equivalent 
yield/cost
(Dollars in thousands)Average
balance
InterestTax
equivalent 
yield/cost
Average
balance
InterestTax
equivalent 
yield/cost
Loans (1)
Loans (1)
$6,956,064 $78,304 4.47 %$7,247,021 $82,780 4.54 %
Loans (1)
$6,841,376 $77,948 4.57 %$7,094,099 $81,354 4.60 %
Taxable investmentsTaxable investments1,121,281 4,904 1.74 %976,389 4,841 1.97 %Taxable investments1,481,186 7,624 2.06 %969,647 4,600 1.90 %
Tax-exempt investments (2)
Tax-exempt investments (2)
277,810 2,569 3.67 %280,085 2,588 3.68 %
Tax-exempt investments (2)
398,295 3,387 3.41 %278,384 2,572 3.71 %
Money market instrumentsMoney market instruments895,784 360 0.16 %223,563 63 0.11 %Money market instruments136,232 260 0.77 %720,238 186 0.10 %
Interest earning assetsInterest earning assets$9,250,939 $86,137 3.69 %$8,727,058 $90,272 4.12 %Interest earning assets$8,857,089 $89,219 4.04 %$9,062,368 $88,712 3.93 %
Interest bearing depositsInterest bearing deposits$5,459,400 1,446 0.11 %$5,309,718 3,465 0.26 %Interest bearing deposits$5,020,698 2,041 0.16 %$5,261,608 1,686 0.13 %
Short-term borrowingsShort-term borrowings273,538 187 0.27 %320,871 217 0.27 %Short-term borrowings191,981 190 0.40 %296,946 182 0.25 %
Long-term debtLong-term debt197,610 2,185 4.39 %231,581 2,044 3.51 %Long-term debt188,380 2,177 4.63 %217,909 2,275 4.19 %
Interest bearing liabilitiesInterest bearing liabilities$5,930,548 $3,818 0.26 %$5,862,170 $5,726 0.39 %Interest bearing liabilities$5,401,059 $4,408 0.33 %$5,776,463 $4,143 0.29 %
Excess interest earning assetsExcess interest earning assets$3,320,391 $2,864,888  Excess interest earning assets$3,456,030 $3,285,905  
Tax equivalent net interest incomeTax equivalent net interest income$82,319 $84,546 Tax equivalent net interest income$84,811 $84,569 
Net interest spreadNet interest spread 3.43 % 3.73 %Net interest spread 3.71 % 3.64 %
Net interest marginNet interest margin 3.53 % 3.85 %Net interest margin 3.84 % 3.74 %
(1) Loan interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was $177,000$161,000 for the three months ended SeptemberJune 30, 20212022 and $163,000$178,000 for the same period of 2020.2021.
(2) Interest income on tax-exempt investment securities includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was $540,000$711,000 for the three months ended SeptemberJune 30, 20212022 and $543,000$540,000 for the same period of 2020.2021.
 
Average interest earning assets for the thirdsecond quarter of 2021 increased2022 decreased by $523.9$205.3 million, or 6.0%2.3%, to $9,251 million, compared to $8,727$8,857 million for the thirdsecond quarter of 2020.2022, compared to $9,062 million for the second quarter of 2021. The average yield on interest earning assets decreasedincreased by 4311 basis points to 3.69%4.04% for the thirdsecond quarter of 2021,2022, compared to 4.12%3.93% for the thirdsecond quarter of 2020.2021.

Interest income for the three months ended SeptemberJune 30, 20212022 and 20202021 included purchase accounting accretion of $799,000$545,000 and $1.0 million,$795,000, respectively, related to the acquisitions of NewDominion and Carolina Alliance, as well as $414,000$2.3 million and $8,000,$2.8 million, respectively, of interest income related to payments received on certain SEPH impairednonaccrual loan relationships, some of which are participated with PNB. Interest income for the three months ended SeptemberJune 30, 20212022 and 20202021 also included $4.6$1.0 million and $5.1$5.7 million, respectively, of income related to PPP loans. Excluding the impact of the purchase accounting accretion, SEPH income, and PPP income, the yield on loans was 4.25%4.36% and 4.54%4.29% for the three months ended SeptemberJune 30, 20212022 and 2020,2021, respectively, and the yield on earning assets was 3.52%3.88% and 4.08%3.66% for the three months ended SeptemberJune 30, 20212022 and 2020,2021, respectively.

Average interest bearing liabilities for the thirdsecond quarter of 2021 increased2022 decreased by $68.4$375.4 million, or 1.2%6.5%, to $5,931$5,401 million, compared to $5,862$5,776 million for the thirdsecond quarter of 2020.2021. The average cost of interest bearing liabilities decreasedincreased by 134 basis points to 0.26%0.33% for the thirdsecond quarter of 2021,2022, compared to 0.39%0.29% for the thirdsecond quarter of 2020.2021. During the three monthsyear ended September 30,December 31, 2020, Park made the decision to participate in a OWS program in order to manage growth of the balance sheet. At SeptemberJune 30, 20212022 and 2020,2021, Park had $818.3$809.8 million and $773.3$812.2 million, respectively, in OWS insured cash sweep deposits which were off-balance sheet. Excluding the impact of these off-balance sheet OWS deposits, the average cost of interest bearing liabilities would have been 0.22%0.27% and 0.34%0.25% for the third quartersecond quarters of 20212022 and 2020,2021, respectively.

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Interest expense
Removing the impacts of the accretion of purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance, the interest income related to payments on certain SEPH nonaccrual loan relationships and the interest income related to PPP loans, the net interest margin was 3.68% and 3.47% for the three months ended SeptemberJune 30, 2022 and 2021, respectively.

Yield on Loans: Average loan balances decreased $252.7 million, or 3.6%, to $6,841 million for the second quarter of 2022, compared to $7,094 million for the second quarter of 2021. The average yield on the loan portfolio decreased by 3 basis points to 4.57% for the second quarter of 2022, compared to 4.60% for the second quarter of 2021. Average loans for the second quarters of 2022 and 20202021 included $27.8 million and $363.1 million, respectively, of PPP loans.

The table below shows the average balance and tax equivalent yield by type of loan for the three months ended June 30, 2022 and 2021.
Three months ended 
June 30, 2022
Three months ended 
June 30, 2021
(Dollars in thousands)Average
balance
Tax
equivalent 
yield
Average
balance
Tax
equivalent 
yield
Home equity loans$160,486 4.10 %$167,478 3.79 %
Installment loans1,738,493 4.64 %1,682,154 4.81 %
Real estate loans1,121,377 3.73 %1,184,891 3.78 %
Commercial loans (1)
3,816,374 4.80 %4,057,591 4.78 %
Other4,646 7.05 %1,985 16.44 %
Total loans before allowance$6,841,376 4.57 %$7,094,099 4.60 %
(1) Commercial loan interest income includes the effects of taxable equivalent adjustments using a benefit from21% federal corporate income tax rate. The taxable equivalent adjustment was $161,000 for the three months ended June 30, 2022 and $178,000 for the same period of 2021.

Loan interest income for the three months ended June 30, 2022 and 2021 included the accretion of purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance, interest income related to payments on certain SEPH nonaccrual loan relationships and interest income related to PPP loans. Excluding the impact of the purchase accounting accretion, SEPH income, and PPP income, (a) the yield on home equity loans was 3.96%, the yield on installment loans was unchanged at 4.64%, the yield on real estate loans was 3.72%, the yield on commercial loans was 4.44% and the yield on total loans and leases before allowance was 4.36% for the three months ended June 30, 2022; and (b) the yield on home equity loans was 3.43%, the yield on installment loans was unchanged at 4.81%, the yield on real estate loans was 3.77%, the yield on commercial loans was 4.25% and the yield on total loans and leases before allowance was 4.29% for the three months ended June 30, 2021.

Cost of Deposits: Average interest bearing deposit balances decreased $240.9 million, or 4.6%, to $5,021 million for the second quarter of 2022, compared to $5,262 for the second quarter of 2021. The average cost of funds on deposit balances increased by 3 basis points to 0.16% for the second quarter of 2022, compared to 0.13% for the second quarter of 2021.

The table below shows for the three months ended June 30, 2022 and 2021, the average balance and cost of funds by type of deposit.
Three months ended 
June 30, 2022
Three months ended 
June 30, 2021
(Dollars in thousands)Average
balance
Cost of fundsAverage
balance
Cost of funds
Transaction accounts$1,703,192 0.09 %$1,527,464 0.02 %
Savings deposits and clubs2,633,478 0.14 %2,943,614 0.04 %
Time deposits684,028 0.42 %790,530 0.65 %
Total interest bearing deposits$5,020,698 0.16 %$5,261,608 0.13 %

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Comparison for the First Half of 2022 and 2021
Net interest income decreased by $3.0 million, or 1.8%, to $161.6 million for the first half of 2022, compared to $164.6 million for the first half of 2021. See the discussion under the table below.
Six months ended 
June 30, 2022
Six months ended 
June 30, 2021
(Dollars in thousands)Average
balance
InterestTax
equivalent 
yield/cost
Average
balance
InterestTax
equivalent 
yield/cost
Loans (1)
$6,835,389 $150,532 4.44 %$7,116,353 $160,264 4.54 %
Taxable investments1,439,811 13,754 1.93 %892,545 8,856 2.00 %
Tax-exempt investments (2)
385,068 6,485 3.40 %278,668 5,150 3.73 %
Money market instruments247,549 413 0.34 %637,531 329 0.10 %
Interest earning assets$8,907,817 $171,184 3.88 %$8,925,097 $174,599 3.95 %
Interest bearing deposits$5,095,085 3,112 0.12 %$5,195,848 3,656 0.14 %
Short-term borrowings207,482 434 0.42 %307,617 365 0.24 %
Long-term debt188,324 4,322 4.63 %219,098 4,561 4.20 %
Interest bearing liabilities$5,490,891 $7,868 0.29 %$5,722,563 $8,582 0.30 %
Excess interest earning assets$3,416,926 $3,202,534  
Tax equivalent net interest income$163,316 $166,017 
Net interest spread 3.59 % 3.65 %
Net interest margin 3.70 % 3.75 %
(1) Loan interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was $329,000 for the six months ended June 30, 2022 and $351,000 for the same period of 2021.
(2) Interest income on tax-exempt investment securities includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was $1.4 million for the six months ended June 30, 2022 and $1.1 million for the same period of 2021.
Average interest earning assets for the first half of 2022 decreased by $17.3 million, or 0.2%, to $8,908 million for the first half of 2022, compared to $8,925 million for the first half of 2021. The average yield on interest earning assets decreased by 7 basis points to 3.88% for the first half of 2022, compared to 3.95% for the first half of 2021.

Interest income for the six months ended June 30, 2022 and 2021 included purchase accounting accretion of $8,000$1.0 million and $42,000,$1.9 million, respectively, related to the acquisitions of NewDominion and Carolina Alliance.Alliance, as well as $2.3 million and $2.9 million, respectively, of interest income related to payments received on certain SEPH nonaccrual loan relationships, some of which are participated with PNB. Interest income for the six months ended June 30, 2022 and 2021 also included $2.6 million and $10.9 million, respectively, of income related to PPP loans. Excluding the impact of thisthe purchase accounting accretion, SEPH income, and PPP income, the yield on loans was 4.29% and 4.31% for the six months ended June 30, 2022 and 2021, respectively, and the yield on earning assets was 3.76% and 3.74% for the six months ended June 30, 2022 and 2021, respectively.

Average interest bearing liabilities for the first half of 2022 decreased by $231.7 million, or 4.0%, to $5,491 million, compared to $5,723 million for the first half of 2021. The average cost of interest bearing liabilities decreased by 1 basis points to 0.29% for the first half of 2022, compared to 0.30% for the first half of 2021. During the year ended December 31, 2020, Park made the decision to participate in a OWS program in order to manage growth of the balance sheet. At June 30, 2022 and 2021, Park had $809.8 million and $812.2 million, respectively, in OWS insured cash sweep deposits which were off-balance sheet. Excluding the impact of these off-balance sheet OWS deposits, the average cost of interest bearing liabilities was unchanged atwould have been 0.24% and 0.26% for the three months ended September 30,first half of 2022 and 2021, and 0.39% for the three months ended September 30, 2020.respectively.

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 impairednonaccrual loan relationships and the interest income related to PPP loans, the net interest margin was 3.35%3.58% and 3.80%3.54% for the threesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively.

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Yield on Loans: Average loan balances decreased $291.0$281.0 million, or 4.0%3.9%, to $6,956$6,835 million for the third quarterfirst half of 2021,2022, compared to $7,247$7,116 million for the third quarterfirst half of 2020.2021. The average yield on the loan portfolio decreased by 710 basis points to 4.47%4.44% for the third quarterfirst half of 2021,2022, compared to 4.54% for the third quarterfirst half of 2020.2021. Average loans for the third quartersfirst half of 2022 and 2021 and 2020 included $194.8$43.8 million and $542.8$366.1 million, respectively, of PPP loans.

The table below shows the average balance and tax equivalent yield by type of loan for the threesix months ended SeptemberJune 30, 20212022 and 2020.2021.
Three months ended 
September 30, 2021
Three months ended 
September 30, 2020
Six months ended 
June 30, 2022
Six months ended 
June 30, 2021
(Dollars in thousands)(Dollars in thousands)Average
balance
Tax
equivalent 
yield
Average
balance
Tax
equivalent 
yield
(Dollars in thousands)Average
balance
Tax
equivalent 
yield
Average
balance
Tax
equivalent 
yield
Home equity loansHome equity loans$166,796 3.67 %$199,299 3.78 %Home equity loans$161,153 3.82 %$171,465 3.85 %
Installment loansInstallment loans1,711,240 4.76 %1,599,373 5.13 %Installment loans1,709,775 4.65 %1,670,193 4.86 %
Real estate loansReal estate loans1,173,116 3.69 %1,284,116 4.02 %Real estate loans1,125,980 3.71 %1,191,253 3.83 %
Commercial loans (1)
Commercial loans (1)
3,901,243 4.60 %4,160,079 4.51 %
Commercial loans (1)
3,834,736 4.58 %4,081,115 4.64 %
OtherOther3,669 9.15 %4,154 9.28 %Other3,745 8.81 %2,327 14.65 %
Total loans and leases before allowance$6,956,064 4.47 %$7,247,021 4.54 %
Total loans before allowanceTotal loans before allowance$6,835,389 4.44 %$7,116,353 4.54 %
(1) Commercial loan interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was $177,000$329,000 for the threesix months ended SeptemberJune 30, 20212022 and $163,000$351,000 for the same period of 2020.2021.

Loan interest income for the threesix months ended SeptemberJune 30, 20212022 and 20202021 included the accretion of purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance, interest income related to payments on certain SEPH impairednonaccrual loan relationships and interest income related to PPP loans. Excluding the impact of the purchase accounting accretion, SEPH income, and PPP income, (a) the yield on home equity loans was 3.38%3.68%, the yield on installment loans was unchanged at 4.76%4.65%, the yield on real estate loans was 3.65%3.69%, the yield on commercial loans was 4.24%4.32% and the yield on total loans and leases before allowance was 4.25%4.29% for the threesix months ended SeptemberJune 30, 2021;2022; and (b) the yield on home equity loans was 3.61%3.46%, the yield on installment loans was unchanged at 5.13%4.86%, the yield on real estate loans was 4.00%3.81%, the yield on commercial loans was 4.52%4.26% and the yield on total loans and leases before allowance was unchanged at 4.54%4.31% for the threesix months ended SeptemberJune 30, 2020.2021.

Cost of Deposits: Average interest bearing deposit balances increased $149.7decreased $100.8 million, or 2.8%1.9%, to $5,459$5,095 million for the third quarterfirst half of 2021,2022, compared to $5,310$5,196 for the third quarterfirst half of 2020.2021. The average cost of funds on deposit balances decreased by 152 basis points to 0.11%0.12% for the third quarterfirst half of 2021,2022, compared to 0.26%0.14% for the third quarterfirst half of 2020.2021.

The table below shows for the threesix months ended SeptemberJune 30, 20212022 and 2020,2021, the average balance and cost of funds by type of deposit.
Three months ended 
September 30, 2021
Three months ended 
September 30, 2020
Six months ended 
June 30, 2022
Six months ended 
June 30, 2021
(Dollars in thousands)(Dollars in thousands)Average
balance
Cost of fundsAverage
balance
Cost of funds(Dollars in thousands)Average
balance
Cost of fundsAverage
balance
Cost of funds
Transaction accountsTransaction accounts$1,643,234 0.02 %$1,732,893 0.07 %Transaction accounts$1,671,685 0.06 %$1,492,733 0.02 %
Savings deposits and clubsSavings deposits and clubs3,071,014 0.04 %2,609,808 0.08 %Savings deposits and clubs2,730,864 0.09 %2,884,098 0.04 %
Time depositsTime deposits745,152 0.54 %967,017 1.10 %Time deposits692,536 0.42 %819,017 0.71 %
Total interest bearing depositsTotal interest bearing deposits$5,459,400 0.11 %$5,309,718 0.26 %Total interest bearing deposits$5,095,085 0.12 %$5,195,848 0.14 %

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Deposit
Yield on Average Interest Earning Assets: The following table shows the tax equivalent yield on average interest expenseearning assets for the threesix months ended SeptemberJune 30, 20212022 and 2020 included the accretion of purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance of $8,000 and $42,000, respectively. Excluding this income, the cost of funds for time deposits was unchanged 0.54% and the cost of total interest bearing deposits was unchanged at 0.11% for the three monthsyears ended September 30,December 31, 2021, 2020 and the cost of funds for time deposits was 1.11% and the cost of total interest bearing deposits was unchanged at 0.26% for the three months ended September 30, 2020.2019.

Comparison for the First Nine Months of 2021 and 2020
Net interest income increased by $4.9 million, or 2.0%, to $246.2 million for the first nine months of 2021, compared to $241.3 million for the first nine months of 2020. See the discussion under the table below.
Nine months ended 
September 30, 2021
Nine months ended 
September 30, 2020
(Dollars in thousands)Average
balance
InterestTax
equivalent 
yield/cost
Average
balance
InterestTax
equivalent 
yield/cost
Loans (1)
$7,062,336 $238,568 4.52 %$6,904,900 $243,913 4.72 %
Taxable investments969,628 13,760 1.90 %905,665 15,398 2.27 %
Tax-exempt investments (2)
278,379 7,719 3.71 %292,672 8,096 3.69 %
Money market instruments724,561 689 0.13 %286,909 667 0.31 %
Interest earning assets$9,034,904 $260,736 3.86 %$8,390,146 $268,074 4.27 %
Interest bearing deposits$5,284,664 5,102 0.13 %$5,350,009 18,945 0.47 %
Short-term borrowings296,132 552 0.25 %264,842 912 0.46 %
Long-term debt211,857 6,746 4.26 %190,285 4,754 3.34 %
Interest bearing liabilities$5,792,653 $12,400 0.29 %$5,805,136 $24,611 0.57 %
Excess interest earning assets$3,242,251 $2,585,010  
Tax equivalent net interest income$248,336 $243,463 
Net interest spread 3.57 % 3.70 %
Net interest margin 3.67 % 3.88 %
Loans (1) (3)
Investments (2)
Money Market
Instruments
Total(3)
2019 - year5.19 %2.76 %2.33 %4.70 %
2020 - year4.71 %2.66 %0.26 %4.28 %
2021 - year4.53 %2.22 %0.13 %3.86 %
2022 - first six months4.44 %2.24 %0.34 %3.88 %
(1) Loan interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was $528,000$329,000 for the ninesix months ended SeptemberJune 30, 20212022, and $454,000 for the same period of 2020.
(2) Interest income on tax-exempt investment securities includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was $1.6 million for the nine months ended September 30, 2021$704,000, $623,000, and $1.7 million for the same period of 2020.
Average interest earning assets for the first nine months of 2021 increased by $644.8 million, or 7.7%, to $9,035 million, compared to $8,390 million for the first nine months of 2020. The average yield on interest earning assets decreased by 41 basis points to 3.86% for the first nine months of 2021, compared to 4.27% for the first nine months of 2020.

Interest income for the nine months ended September 30, 2021 and 2020 included purchase accounting accretion of $2.7 million and $3.6 million, respectively, related to the acquisitions of NewDominion and Carolina Alliance, as well as $3.4 million and $351,000, respectively, of interest income related to payments received on certain SEPH impaired loan relationships, some of which are participated with PNB. Interest income for the nine months ended September 30, 2021 and 2020 also included $15.5 million and $8.7 million, respectively, of income related to PPP loans. Excluding the impact of the purchase accounting accretion, SEPH income, and PPP income, the yield on loans was 4.29% and 4.68% for the nine months ended September 30, 2021 and 2020, respectively, and the yield on earning assets was 3.66% and 4.22% for the nine months ended September 30, 2021 and 2020, respectively.

Average interest bearing liabilities for the first nine months of 2021 decreased by $12.5 million, or 0.2%, to $5,793 million, compared to $5,805 million for the first nine months of 2020. The average cost of interest bearing liabilities decreased by 28 basis points to 0.29% for the first nine months of 2021, compared to 0.57% for the first nine months of 2020. During the nine months ended September 30, 2020, Park made the decision to participate in a OWS program in order to manage the growth of the balance sheet. At September 30, 2021 and 2020, Park had $818.3 million and $773.3 million, respectively, in OWS insured cash sweep deposits which were off-balance sheet. Excluding the impact of these off-balance sheet OWS deposits, the average cost of interest bearing liabilities would have been 0.25% and 0.55% for the first nine months of 2021 and 2020, respectively.

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Interest expense for the nine months ended September 30, 2021 and 2020 included a benefit from purchase accounting accretion of $39,000 and $194,000, respectively, related to the acquisitions of NewDominion and Carolina Alliance. Excluding the impact of this income, the average cost of interest bearing liabilities was unchanged at 0.13% for the nine months ended September 30, 2021 and 0.48% for the nine months ended September 30, 2020.

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 impaired loan relationships and the interest income related to PPP loans, the net interest margin was 3.47% and 3.81% for the nine months ended September 30, 2021 and 2020, respectively.

Yield on Loans: Average loan balances increased $157 million, or 2.3%, to $7,062 million for the first nine months of 2021, compared to $6,905 million for the first nine months of 2020. The average yield on the loan portfolio decreased by 20 basis points to 4.52% for the first nine months of 2021, compared to 4.72% for the first nine months of 2020. Average loans for the first nine months of 2021 and 2020 included $309.0 million and $312.2 million, respectively, of PPP loans.

The table below shows the average balance and tax equivalent yield by type of loan for the nine months ended September 30, 2021 and 2020.
Nine months ended 
September 30, 2021
Nine months ended 
September 30, 2020
(Dollars in thousands)Average
balance
Tax
equivalent 
yield
Average
balance
Tax
equivalent 
yield
Home equity loans$169,892 3.79 %$211,421 4.11 %
Installment loans1,684,026 4.83 %1,510,580 5.23 %
Real estate loans1,185,141 3.79 %1,284,858 4.14 %
Commercial loans (1)
4,020,498 4.63 %3,893,807 4.74 %
Other2,779 12.21 %4,234 10.10 %
Total loans and leases before allowance$7,062,336 4.52 %$6,904,900 4.72 %
(1) Commercial loan interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was $528,000 for the nine months ended September 30, 2021 and $454,000 for the same period of 2020.

Loan interest income for the nine months ended September 30, 2021 and 2020 included the accretion of purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance, interest income related to payments on certain SEPH impaired loan relationships and interest income related to PPP loans. Excluding the impact of the purchase accounting accretion, SEPH income, and PPP income, (a) the yield on home equity loans was 3.43%, the yield on installment loans was unchanged at 4.83%, the yield on real estate loans was 3.76%, the yield on commercial loans was 4.25% and the yield on total loans and leases before allowance was 4.29% for the nine months ended September 30, 2021; and (b) the yield on home equity loans was 3.93%, the yield on installment loans was unchanged at 5.23%, the yield on real estate loans was 4.10%, the yield on commercial loans was 4.69% and the yield on total loans and leases before allowance was 4.68% for the nine months ended September 30, 2020.

Cost of Deposits: Average interest bearing deposit balances decreased $65.3 million, or 1.2%, to $5,285 million for the first nine months of 2021, compared to $5,350 for the first nine months of 2020. The average cost of funds on deposit balances decreased by 34 basis points to 0.13% for the first nine months of 2021, compared to 0.47% for the first nine months of 2020.

The table below shows for the nine months ended September 30, 2021 and 2020, the average balance and cost of funds by type of deposit.
Nine months ended 
September 30, 2021
Nine months ended 
September 30, 2020
(Dollars in thousands)Average
balance
Cost of fundsAverage
balance
Cost of funds
Transaction accounts$1,543,451 0.02 %$1,780,253 0.26 %
Savings deposits and clubs2,947,088 0.04 %2,538,193 0.27 %
Time deposits794,125 0.65 %1,031,563 1.33 %
Total interest bearing deposits$5,284,664 0.13 %$5,350,009 0.47 %

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Deposit interest expense for the nine months ended September 30, 2021 and 2020 included the accretion of purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance of $39,000 and $194,000, respectively. Excluding this income, the cost of funds for time deposits was 0.66% and the cost of total interest bearing deposits was unchanged at 0.13% for the nine months ended September 30, 2021, and the cost of funds for time deposits was 1.36% and the cost of total interest bearing deposits was 0.48% for the nine months ended September 30, 2020.

Yield on Average Interest Earning Assets: The following table shows the tax equivalent yield on average interest earning assets for the nine months ended September 30, 2021 and$576,000 for the years ended December 31, 2021, 2020 2019 and 2018.

Loans (1) (3)
Investments (2)
Money Market
Instruments
Total(3)
2018 - year4.98 %2.72 %1.93 %4.46 %
2019 - year5.19 %2.76 %2.33 %4.70 %
2020 - year4.71 %2.66 %0.26 %4.28 %
2021 - first nine months4.52 %2.30 %0.13 %3.86 %
(1) Loan interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was $528,000 for the nine months ended September 30, 2021, and $623,000, $576,000 and $528,000 for the years ended December 31, 2020, 2019, and 2018, respectively.
(2) Interest income on tax-exempt investment securities includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustment was $1.6$1.4 million for the ninesix months ended SeptemberJune 30, 2021,2022, and $2.2 million, $2.4$2.2 million and $2.3$2.4 million for the years ended December 31, 2021, 2020 2019 and 2018,2019, respectively.
(3) Interest income for the ninesix months ended SeptemberJune 30, 20212022 and for the years ended December 31, 2021, 2020 and 2019 included $2.3 million, $8.0 million,$453,000, and 2018 included $3.4 million, $453,000, $256,000, and $3.4 million, respectively, related to payments received on certain SEPH impairednonaccrual loan relationships, some of which are participated with PNB, as well as $2.7$1.0 million, $3.3 million, $4.4 million, $5.2 million and $1.1$5.2 million, respectively, of the accretion of purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance. Interest income for the ninesix months ended SeptemberJune 30, 20212022 and for the yearyears ended December 31, 2021 and December 31, 2020 included $15.5$2.6 million, $18.0 million and $16.7 million, respectively, of income related to PPP loans. Excluding all of these sources of income described in the preceding sentences of this footnote, the yield on loans was 4.29%, 4.27%, 4.63%, 5.09% and 4.89%5.09%, for the ninesix months ended SeptemberJune 30, 2021,2022, and for the years ended December 31, 2021, 2020 2019 and 2018,2019, respectively, and the yield on earning assets was 3.66%3.76%, 3.64%, 4.20%, 4.62% and 4.40%4.62%, for the ninesix months ended SeptemberJune 30, 20212022 and for the years ended December 31, 2021, 2020 2019 and 2018,2019, respectively.

Cost of Average Interest Bearing Liabilities: The following table shows the cost of funds on average interest bearing liabilities for the ninesix months ended SeptemberJune 30, 20212022 and for the years ended December 31, 2021, 2020 2019 and 2018.2019.

Interest bearing deposits (1)
Short-term borrowingsLong-term debt
Total (1)
Interest bearing deposits (1)
Short-term borrowingsLong-term debt
Total (1)
2018 - year0.72 %0.74 %2.38 %0.86 %
2019 - year2019 - year1.01 %1.15 %2.77 %1.12 %2019 - year1.01 %1.15 %2.77 %1.12 %
2020 - year2020 - year0.41 %0.40 %3.55 %0.52 %2020 - year0.41 %0.40 %3.55 %0.52 %
2021 - first nine months0.13 %0.25 %4.26 %0.29 %
2021 - year2021 - year0.12 %0.27 %4.32 %0.28 %
2022 - first six months2022 - first six months0.12 %0.42 %4.63 %0.29 %
(1) Interest expense for the ninesix months ended SeptemberJune 30 20212022 and the years ended December 31, 2021, 2020 and 2019 included $5,000, $46,000, $226,000, and 2018 included $39,000, $226,000, $593,000, and $287,000, respectively, of the accretion of purchase accounting adjustments related to the acquisitions of NewDominion (for all of these periods) and Carolina Alliance (forAlliance. Excluding this income, for the ninesix months ended SeptemberJune 30, 20212022 and the years ended December 31, 2021, 2020 and 2019). Excluding this income, for the nine months ended September 30, 2021 and the years ended December 31, 2020, 2019, and 2018, the cost of funds on interest bearing deposits was 0.13%0.12%, 0.12%, 0.41%, 1.02% and 0.73%1.02%, respectively, and the cost of interest bearing liabilities was 0.29%, 0.28%, 0.53%, 1.13% and 0.86%1.13%, respectively.

Credit Metrics and Provision for (Recovery of) Credit Losses

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

Section 4014 of the CARES Act provided financial institutions with optional temporary relief from having to comply with ASU 2016-13 including the CECL methodology for estimating the allowance for credit losses. This temporary relief was set to expire on the earlier of the date on which the national emergency concerning COVID-19 terminated or December 31, 2020, with adoption being effective retrospectively as of January 1, 2020.

Section 540 of the Consolidated Appropriations Act, 2021, amended Section 4014 of the CARES Act by extending the relief period provided in the CARES Act. The Consolidated Appropriations Act, 2021, modified the CARES Act so that temporary
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relief will expire on the earlier of the first day of the fiscal year that begins after the date on which the national emergency concerning COVID-19 terminates or January 1, 2022.

Park elected to delay the implementation of ASU 2016-13 following the approval of the CARES Act and continued to use the incurred loss methodology for estimating the allowance for credit losses in 2020. ASU 2016-13 requires financial institutions to calculate an allowance utilizing a reasonable and supportable forecast period which Park has established as a one-year period. In the unprecedented circumstances surrounding the COVID-19 pandemic and the response thereto, Park believed that adopting ASU 2016-13 in the first quarter of 2020 would have added an unnecessary level of subjectivity and volatility to the calculation of the allowance for credit losses. With the approval of the Consolidated Appropriations Act, 2021, management elected to further delay adoption of ASU 2016-13 to January 1, 2021. This allowed Park to utilize the CECL standard for the entire year of adoption.

The adoption of ASU 2016-13 on January 1, 2021 resulted in a $6.1 million increase to the allowance for credit losses and a $3.9 million increase to the allowance for unfunded credit losses. A cumulative effect adjustment resulting in an $8.0 million decrease to retained earnings and a $2.1 million increase to deferred tax assets was also recorded.
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The table below provides additional information on the provision for (recovery of)recovery of credit losses for the three-month and nine-monthsix-month periods ended SeptemberJune 30, 20212022 and 2020.2021.

Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
(Dollars in thousands)(Dollars in thousands)2021202020212020(Dollars in thousands)2022202120222021
Allowance for credit losses:Allowance for credit losses:Allowance for credit losses:
Beginning balanceBeginning balance$83,577 $73,476 $85,675 $56,679 Beginning balance$78,861 $86,886 $83,197 $85,675 
Cumulative change in accounting principle; adoption of ASU 2016-13Cumulative change in accounting principle; adoption of ASU 2016-13— — 6,090 — Cumulative change in accounting principle; adoption of ASU 2016-13— — — 6,090 
Charge-offs(1)Charge-offs(1)1,002 1,529 3,773 6,344 Charge-offs(1)2,402 1,070 3,749 2,771 
RecoveriesRecoveries3,582 1,255 7,060 5,490 Recoveries1,998 1,801 3,614 3,478 
Net (recoveries) charge-offs(2,580)274 (3,287)854 
Net charge-offs (recoveries)Net charge-offs (recoveries)404 (731)135 (707)
Provision for (recovery of) credit lossesProvision for (recovery of) credit losses1,972 13,836 (6,923)31,213 Provision for (recovery of) credit losses2,991 (4,040)(1,614)(8,895)
Ending balanceEnding balance$88,129 87,038 $88,129 87,038 Ending balance$81,448 $83,577 $81,448 83,577 
Net (recoveries) charge-offs as a % of average loans (annualized)(0.15)%0.02 %(0.06)%0.02 %
Net charge-offs (recoveries) as a % of average loans (annualized)Net charge-offs (recoveries) as a % of average loans (annualized)0.02 %(0.04)%— %(0.02)%
(1) Charge-offs for the three-month and six-month periods ended June 30, 2022 included $1.2 million in charge-offs prior to the transfer of certain commercial loans to held for sale.


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The following table provides additional information related to the allowance for credit losses for Park including information related to specific reserves and general reserves, at SeptemberJune 30, 2021,2022, March 31, 2022, December 31, 20202021 and SeptemberJune 30, 2020. Also included is the January 1, 2021 allowance for credit losses calculated under the CECL methodology prescribed in ASU 2016-13.2021.

Park - Allowance for Credit LossesPark - Allowance for Credit LossesPark - Allowance for Credit Losses
(Dollars in thousands)(Dollars in thousands)9/30/2021 (CECL methodology)1/1/2021 (CECL methodology)12/31/2020 (Incurred Loss methodology)9/30/2020 (Incurred Loss methodology)(Dollars in thousands)6/30/20223/31/202212/31/20216/30/2021
Total allowance for credit lossesTotal allowance for credit losses$88,129 $91,764 $85,675 $87,038 Total allowance for credit losses$81,448 $78,861 $83,197 $83,577 
Allowance on PCD loans (PCI loans for the periods ended in 2020)— 52 167 103 
Allowance on purchased loans excluded from the general reserve— — 678 371 
Allowance on PCD loansAllowance on PCD loans— — — — 
Specific reserves on individually evaluated loansSpecific reserves on individually evaluated loans3,466 5,434 5,434 8,666 Specific reserves on individually evaluated loans1,874 1,513 1,616 3,915 
General reserves on collectively evaluated loansGeneral reserves on collectively evaluated loans$84,663 $86,278 $79,396 $77,898 General reserves on collectively evaluated loans$79,574 $77,348 $81,581 $79,662 
Total loansTotal loans$6,908,417 $7,177,537 $7,177,785 $7,278,546 Total loans$6,958,685 $6,821,606 $6,871,122 $7,035,646 
PCD loans (PCI loans for periods ended in 2020)8,705 10,903 11,153 11,877 
Purchased loans excluded from collectively evaluated loans— — 360,056 393,752 
PCD loansPCD loans5,934 6,987 7,149 1,007 
Individually evaluated loansIndividually evaluated loans79,264 108,274 108,407 116,138 Individually evaluated loans42,523 63,209 74,502 86,874 
Collectively evaluated loansCollectively evaluated loans$6,820,448 $7,058,360 $6,698,169 $6,756,779 Collectively evaluated loans$6,910,228 $6,751,410 $6,789,471 $6,947,765 
Allowance for credit losses as a % of period end loansAllowance for credit losses as a % of period end loans1.28 %1.28 %1.19 %1.20 %Allowance for credit losses as a % of period end loans1.17 %1.16 %1.21 %1.19 %
Allowance for credit losses as a % of period end loans (excluding PPP loans) (1)
Allowance for credit losses as a % of period end loans (excluding PPP loans) (1)
1.30 %1.34 %1.25 %1.28 %
Allowance for credit losses as a % of period end loans (excluding PPP loans) (1)
1.15 %1.22 %1.22 %1.23 %
General reserve as a % of collectively evaluated loansGeneral reserve as a % of collectively evaluated loans1.24 %1.22 %1.19 %1.15 %General reserve as a % of collectively evaluated loans1.15 %1.15 %1.20 %1.15 %
General reserve as a % of collectively evaluated loans (excluding PPP loans) (1)
General reserve as a % of collectively evaluated loans (excluding PPP loans) (1)
1.27 %1.28 %1.24 %1.24 %
General reserve as a % of collectively evaluated loans (excluding PPP loans) (1)
1.15 %1.21 %1.21 %1.19 %
(1) Excludes $131.5Excluded $13.4 million of PPP loans and $136,000$14,000 in related allowance at SeptemberJune 30, 2021; $331.62022; $37.4 million of PPP loans and $337,000$39,000 in related allowance at January 1, 2021; $331.6March 31, 2022; $74.4 million of PPP loans and $337,000$77,000 in related allowance at December 31, 2020;2021; and $542.8$248.9 million of PPP loans and $543,000$258,000 related allowance at SeptemberJune 30, 2020.2021.

The allowance for credit losses of $88.1$81.4 million at SeptemberJune 30, 20212022 represented a $3.6$2.6 million, or 4.0%3.3%, decreaseincrease compared to $91.8$78.9 million at January 1, 2021 as calculated under the CECL methodology.March 31, 2022. The decline since January 1, 2021increase was largely due to a $1.6 million decrease$2.2 increase in general reserves, taking into consideration improveddeterioration in economic forecasts, inflationary pressures, rising interest rates, and geopolitical conflict (including the conflict between Russia and Ukraine), while balancing thea decrease in risks associated with the COVID-19 pandemic, and the Delta variant, particularly in high risk loan portfolios such as hotelshotel and accommodations, restaurants and food service and strip shopping centers. Additionally, there

The allowance for credit losses of $78.9 million at March 31, 2022 represented a $4.3 million, or 5.2%, decrease compared to
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$83.2 million at December 31, 2021. The decline was largely due to a $2.0$4.2 million decrease in specificgeneral reserves, on individually evaluated loans from $5.4 million at January 1, 2021 to $3.5 million at September 30, 2021.taking into consideration improvement in economic forecasts and a decrease in risks associated with the COVID-19 pandemic, particularly in high risk loan portfolios such as hotel and accommodations, restaurants and food service and strip shopping centers while balancing risks associated with inflationary pressures and geopolitical conflict (including the conflict between Russia and Ukraine). See the section entitled "Allowance for Credit Losses" for further details.

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

Nonperforming Assets: Nonperforming assets include: (1) loans whose interest is accounted for on a nonaccrual basis; (2) TDRs on accrual status; (3) loans which are contractually past due 90 days or more as to principal or interest payments but whose interest continues to accrue; (4) commercial loans held for sale that were previously classified as nonperforming; (5) OREO which results from taking possession of property that served as collateral for a defaulted loan; and (5)(6) other nonperforming assets. At SeptemberDecember 31, 2021 and June 30, 2021, December 31, 2020 and September 30, 2020, other nonperforming assets consisted of aircraft acquired as part of a loan workout. There were no other nonperforming assets at June 30, 2022.


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The following table compares Park’s nonperforming assets at SeptemberJune 30, 2021,2022, December 31, 20202021 and SeptemberJune 30, 2020.2021.
 
Park National Corporation - Nonperforming Assets
(In thousands)(In thousands)September 30, 2021December 31, 2020September 30, 2020(In thousands)June 30, 2022December 31, 2021June 30, 2021
Nonaccrual loansNonaccrual loans$87,791 $117,368 $123,050 Nonaccrual loans$44,374 $72,722 $96,760 
Accruing TDRsAccruing TDRs18,797 20,788 23,774 Accruing TDRs19,746 28,323 17,420 
Loans past due 90 days or moreLoans past due 90 days or more284 1,458 1,618 Loans past due 90 days or more507 1,607 515 
Total nonperforming loansTotal nonperforming loans$106,872 $139,614 $148,442 Total nonperforming loans$64,627 $102,652 $114,695 
Commercial loans held for sale, previously nonperformingCommercial loans held for sale, previously nonperforming5,619 — — 
Total nonperforming loans, including commercial loans held for saleTotal nonperforming loans, including commercial loans held for sale$70,246 $102,652 $114,695 
OREOOREO813 1,431 836 OREO1,354 775 813 
Other nonperforming assetsOther nonperforming assets3,164 3,164 3,392 Other nonperforming assets— 2,750 3,164 
Total nonperforming assetsTotal nonperforming assets$110,849 $144,209 $152,670 Total nonperforming assets$71,600 $106,177 $118,672 
Percentage of nonaccrual loans to total loansPercentage of nonaccrual loans to total loans1.27 %1.64 %1.69 %Percentage of nonaccrual loans to total loans0.64 %1.06 %1.38 %
Percentage of nonperforming loans to total loansPercentage of nonperforming loans to total loans1.55 %1.95 %2.04 %Percentage of nonperforming loans to total loans0.93 %1.49 %1.63 %
Percentage of nonperforming assets to total loansPercentage of nonperforming assets to total loans1.60 %2.01 %2.10 %Percentage of nonperforming assets to total loans1.03 %1.55 %1.69 %
Percentage of nonperforming assets to total assetsPercentage of nonperforming assets to total assets1.10 %1.55 %1.65 %Percentage of nonperforming assets to total assets0.73 %1.11 %1.19 %
 
Included in the OREO totals above were $1.4 million of SEPH OREO at June 30, 2022, and $594,000 of SEPH OREO at each of September 30, 2021,both December 31, 20202021 and SeptemberJune 30, 2020.2021.

Park classifies loans as nonaccrual when a loan (1) is maintained on a cash basis because of deterioration in the financial condition of the borrower, (2) payment in full of principal or interest is not expected, or (3) principal or interest has been in default for a period of 90 days for commercial loans and 120 days for all other loans. As a result, loans may be classified as nonaccrual despite being current with their contractual terms. The following table details the delinquency status of nonaccrual loans at SeptemberJune 30, 2021,2022, December 31, 20202021 and SeptemberJune 30, 2020.2021. Loans are classified as current if they are less than 30 days past due.

September 30, 2021December 31, 2020September 30, 2020June 30, 2022December 31, 2021June 30, 2021
(In thousands)(In thousands)BalancePercent of Total LoansBalancePercent of Total LoansBalancePercent of Total Loans(In thousands)BalancePercent of Total LoansBalancePercent of Total LoansBalancePercent of Total Loans
Nonaccrual loans - currentNonaccrual loans - current$67,722 0.98 %$92,600 1.29 %$101,551 1.39 %Nonaccrual loans - current$28,144 0.41 %$53,259 0.78 %$76,674 1.09 %
Nonaccrual loans - past dueNonaccrual loans - past due20,069 0.29 %24,768 0.35 %21,499 0.30 %Nonaccrual loans - past due16,230 0.23 %19,463 0.28 %20,086 0.29 %
Total nonaccrual loansTotal nonaccrual loans$87,791 1.27 %$117,368 1.64 %$123,050 1.69 %Total nonaccrual loans$44,374 0.64 %$72,722 1.06 %$96,760 1.38 %
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Credit Quality Indicators: When determining the quarterly credit loss provision, Park reviews the grades of commercial loans. These loans are graded from 1 to 8. A grade of 1 indicates little or no credit risk and a grade of 8 is considered a loss. Commercial loans that are pass-rated (graded an 1 through a 4) are considered to be of acceptable credit risk. Commercial loans graded a 5 (special mention) are considered to be watch list credits and a higher PD is applied to these loans. Commercial loans graded a 6 (substandard), also considered to be watch list credits, represent higher credit risk than those rated special mention and, as a result, a higher PD is applied to these loans. Commercial loans that are graded a 7 (doubtful) are shown as nonperforming and Park charges these loans down to their fair value by taking a partial charge-off or recording a specific reserve. Any commercial loan graded an 8 (loss) is completely charged-off.

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

Commercial loans * (In thousands)Commercial loans * (In thousands)September 30, 2021December 31, 2020September 30, 2020Commercial loans * (In thousands)June 30, 2022December 31, 2021June 30, 2021
Pass-ratedPass-rated$3,676,310 $3,893,205 $3,959,026 Pass-rated$3,737,354 $3,712,784 $3,798,344 
Special mentionSpecial mention92,659 102,812 103,570 Special mention64,876 75,397 95,110 
SubstandardSubstandard39 109 1,147 Substandard84 — 130 
Impaired79,264 108,407 116,138 
Accruing PCI8,187 10,296 11,018 
Individually evaluated for impairmentIndividually evaluated for impairment42,523 74,502 86,874 
Accruing PCDAccruing PCD5,449 6,630 9,490 
TotalTotal$3,856,459 $4,114,829 $4,190,899 Total$3,850,286 $3,869,313 $3,989,948 
* 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 had $92.7$64.9 million of collectively evaluated commercial loans included on the watch list at SeptemberJune 30, 2021,2022, compared to $102.9$75.4 million at December 31, 2020,2021, and $104.7$95.1 million at SeptemberJune 30, 2020.2021. The existing conditions of these loans do not warrant classification as nonaccrual. However, these loans have shown some weakness and management performs additional analysis regarding each borrower's ability to comply with payment terms.

The $92.7$64.9 million of collectively evaluated commercial watch list loans as of SeptemberJune 30, 2021 is2022 was elevated compared to pre-pandemic levels, an increase of $65.9$38.1 million compared to $26.8 million at March 31, 2020. This $65.9$38.1 million increase was largely due to $68.3$43.7 million of hotels and accommodations loans that were downgraded to special mention or substandard as a result of the impact of COVID-19.COVID-19 offset by problem loan resolutions. In addition to the $68.3$43.7 million in hotels and accommodations loans that were downgraded to special mention, $15.6$3.5 million in hotels and accommodations loans were downgraded to impairednonaccrual status. Park is closely monitoring the impact of COVID-19 and related economic recovery on its borrowers' ability to repay their loans in accordance with contractual terms. As additional information becomes available, management will continue to evaluate loans to ensure appropriate risk classification.

Delinquencies have remained low over the past 33 months since January 1, 2019. Delinquent and accruing loans were $14.3 million, or 0.21% of total loans at September 30, 2021, compared to $20.1 million, or 0.28% of total loans at December 31, 2020, and $23.8 million, or 0.37% of total loans at December 31, 2019.

Individually Evaluated Loans: Loans that do not share risk characteristics are evaluated on an individual basis. Park has determined that any commercial loans which have been placed on nonaccrual status or classified as TDRs will be individually evaluated and are labeled as impaired.evaluated. Individual analysis will establish a specific reserve for loans in scope.  Specific reserves on impairedindividually 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.

ImpairedIndividually evaluated commercial loans were $79.3$42.5 million at SeptemberJune 30, 2021,2022, a decrease of $29.1$32.0 million, compared to $108.4$74.5 million at December 31, 20202021 and a decrease of $36.9$44.4 million, compared to $116.1$86.9 million at SeptemberJune 30, 2020.2021. The $79.3$42.5 million of impairedindividually evaluated commercial loans at SeptemberJune 30, 20212022 included $8.2$10.5 million of loans modified in a TDR which were thenare currently on accrual status and performing in accordance with the restructured terms, down from $8.8$17.5 million at December 31, 2020.2021.

At SeptemberJune 30, 2021,2022, Park had taken partial charge-offs of $688,000$382,000 related to the $79.3$42.5 million of individually evaluated commercial loans, considered to be impaired, compared to partial charge-offs of $655,000$624,000 related to the $108.4$74.5 million of impairedindividually evaluated commercial loans at December 31, 2020.2021.

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
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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 waswere 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 Septemberboth June 30, 2022 and December 31, 2021, 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 SeptemberJune 30, 20212022 and December 31, 20202021 was $8.7$5.9 million and $11.2$7.1 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 SeptemberJune 30, 20212022 are detailed below.

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

Forecast model - For each portfolio segment, a LDA was performed in order to identify appropriate loss drivers and create a regression model for use in forecasting cash flows. The LDA analysis utilized Park's own FFIEC Call Report data for the commercial, financial and agricultural and residential real estate portfolio segments. Peer data was incorporated into the analysis for the commercial real estate, construction real estate, and consumer portfolio segments. Park plans to update the LDA annually; however, due to the impact of COVID-19, the LDA analysis was last updated in the fourth quarter of 2019.
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 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 JacobsJacobs.
Prepayments and curtailments – Prepayments and curtailments are calculated based on Park’s own data utilizing a three-year average. This analysis is updated annually in the fourth quarter and was last updated in the fourth quarter of 2020.2021.
Forecast and reversion – Park has established a one-year reasonable and supportable forecast period with a one-year straight line reversion to the long-term historical average.
Economic forecast - Park utilizes a third party to provide economic forecasts under various scenarios, which are weighted in order to reflect model risk in the current economic environment. The scenario weighting is evaluated by management on a quarterly basis.
As of January 1, 2021, the date of CECL adoption, Park weighted a "most likely" scenario 80%, a "slower near-term growth" scenario 10%, and a "moderate recession" scenario 10%. As of January 1, 2021, the "most likely" scenario forecasted Ohio unemployment to range between 5.31% and 5.79% during the next four quarters.
As of MarchDecember 31, 2021, the "most likely" scenario forecasted Ohio unemployment between 3.32% and 3.97%, during the next four quarters. In determining the appropriate weighting of scenarios at December 31, 2021, management considered the range of forecasted unemployment as well as a number of economic indicators. While some economic indications continued to decrease significantly,be optimistic, the Omicron variant, rising inflation, volatility in consumer confidence, employment, supply chain and workforce challenges continued to a rangecause uncertainty in the overall economic environment. Considering these factors, management determined it was appropriate to maintain the previous quarter weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at December 31, 2021.
As of March 31, 2022, the "most likely" scenario forecasted Ohio unemployment between 3.70%3.36% and 4.93%3.75%, during the next four quarters. In determining the appropriate weighting of scenarios at March 31, 2021,2022, management considered this improvedthe range of forecasted unemployment as well as a number of economic forecast while balancingindicators. While some economic indications were optimistic, the risks associated withsurging inflation, volatility in consumer confidence, workforce challenges, and geopolitical conflict (including the COVID-19 pandemic, includingconflict in Ukraine) continued to cause uncertainty in the risk of pandemic-related losses lagging behind the projected improvement in unemployment. Managementoverall economic environment. Considering these factors, management determined it was appropriate to weightmaintain the previous quarter weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario 50%. at March 31, 2022. Improved forecasts, largely in the "moderate recession" scenario, resulted in a 4 basis point decline in the weighted quantitative allowance.
As of June 30, 2021,2022, the "most likely" scenario forecasted Ohio unemployment to decrease significantly, to a range between 2.85%3.36% and 3.92%3.57%, during the next four quarters. In determining the appropriate weighting of scenarios at June 30, 2021,2022, management considered this improved economic forecast and other positive economic indicators while balancing the risks associated with the COVID-19 pandemic, including the continued riskrange of pandemic-related losses lagging behind the projected improvement in unemployment. Management determined it was appropriate to weight the "most likely" scenario 55% and the "moderate recession" scenario 45% at June 30, 2021. Management believed that the resulting quantitative reserve appropriately balanced economic improvement with the ongoing risks.
As of September 30, 2021, the "most likely" scenario forecasted Ohio unemployment to decrease, to a range between 3.03% and 4.02%, during the next four quarters. In determining the appropriate weighting of scenarios at September 30, 2021, management consideredas well as a number of lesseconomic indicators. While some economic indications were optimistic, economic indicators, including: a slight uptick in Ohio unemployment, which was contrarythe surging inflation, declining consumer confidence, rising interest rates, geopolitical conflict (including the conflict between Russia and Ukraine), and workforce
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and supply chain challenges continued to cause uncertainty to the forecast; increased COVID cases; decreased consumer confidence; and decreased occupancy, among others.overall economic environment. Considering these factors, management determined it was appropriate to return tomaintain the March 31, 2021previous quarter weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at SeptemberJune 30, 2021.2022. Deteriorating forecasts, largely in the "moderate recession" scenario resulted in a 4 basis point increase in the weighted quantitative allowance.


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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.
The quality of Park’s credit review function.
The experience, ability, and depth of Park’s lending, investment, collection, and other relevant management and staff.
The effect of other external factors such as the regulatory, legal and technological environments; competition; geopolitical conflict; and events such as natural disasters or pandemics.
Actual and expected changes in international, national, regional and local economic and business conditions and developments in the markets in which Park operates that affect the collectibility of financial assets.
Where the U.S. economy is within a given credit cycle.
The extent that there is government assistance (stimulus).

During 2020, Park added an additional reserve for three industries at particularly high risk due to the COVID-19 pandemic: hotels and accommodations; restaurants and food service; and strip shopping centers. These industries have experienced high levels of deferrals and have been particularly impacted by shut downs of non-essential businesses, increased health department regulations, and changes in consumer behavior. Management expects that a relatively higher percentage of the 4-rated credits in these portfolios will eventually migrate to special mention, substandard, or impaired status.doubtful. In adopting CECL, management determined it was appropriate to retain this qualitative adjustment as this adjustment takes into account the additional risk in these portfolios, which is not captured in the quantitative calculation.calculation Even though COVID-19 case numbers have declined since December 31, 2021, these industries are still recovering from the pandemic effects. As of SeptemberJune 30, 2021,2022, additional reserves totaling $4.6$2.6 million were added for these portfolios on top of the quantitative reserve already calculated. This is an increasea decrease from $3.4 million as of June 30, 2021 and $4.5 million as of March 31, 2021 and reflects the previously discussed uncertainty regarding sustained economic improvement due to COVID-19. The $4.6 million in additional COVID-19-related reserves as of September 30, 2021 is also an increase compared to $3.8$5.2 million as of December 31, 2020, which had been calculated under the previous incurred loss methodology.2021 and reflects improvement in COVID-19 cases, eased COVID-19 health department precautions and improving affected industry performance. Management believes there is still residual risk in these portfolios related to pandemic effects and uncertainty in future COVID-19 strains and related impacts.

A breakout of the 4-rated balances within these portfolios and the additional reserve related to these portfolios is detailed in the following table.
September 30, 2021
(in thousands)4-Rated BalanceAdditional Reserve
Hotels and accommodations$123,249 $1,854 
Restaurants and food service33,373 754 
Strip shopping centers177,635 1,961 
Total$334,257 $4,569 

June 30, 2022December 31, 2021
(in thousands)4-Rated BalanceAdditional ReservePass Rated BalanceAdditional Reserve
Hotels and accommodations$152,081 $1,145 $148,018 $2,226 
Restaurants and food service45,797 517 40,648 917 
Strip shopping centers172,893 954 184,171 2,033 
Total$370,771 $2,616 $372,837 $5,176 

Additionally, at June 30, 2022, management applied a 1.00%0.75% reserve to all hotels and accommodations loans in the general reservecollectively evaluated population to account for increased valuation risk. This is an increase0.75% reserve was reduced from 0.50%1.00% at December 31, 2021. At June 30, 20212022, Park's originated hotels and considers some decline in various conditions dueaccommodation loans had a balance of $199.0 million with an additional
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reserve related to the Delta variant and a decline in hotel occupancy rates.valuation risks of $1.5 million. At September 30,December 31, 2021, Park's originated hotels and accommodation loans had a balance of $193.8$203.9 million with an additional reserve related to valuation risks of $1.9$2.0 million.

There is still a significant amount of uncertainty related to the economic impact of COVID-19, including the duration of the pandemic, the risk related to new variants, future government programs that may be established in response to the pandemic, and the resiliency of the U.S. economy. Management will continue to evaluate its estimate of expected credit losses as new information becomes available.

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As of SeptemberJune 30, 2021,2022, Park had $131.5$13.4 million 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 was calculated for these loans to reflect minimal credit risk.

Other Income
 
Other income decreased by $4.1 million$45,000 to $32.4$31.2 million for the quarter ended SeptemberJune 30, 2021,2022, compared to $36.6$31.2 million for the thirdsecond quarter of 20202021 and increased by $7.7decreased $2.5 million to $97.7$62.8 million for the first nine monthshalf of 2021,2022, compared to $90.0$65.3 million for the first nine monthshalf of 2020.2021.

The decrease for the three months ended SeptemberJune 30, 20212022 compared to the three months ended SeptemberJune 30, 20202021 was primarily due: (a)due to decreasesa decrease in other service income; gains on sale of OREO, net;income and gains on equity securities, net; (b)miscellaneous income, partially offset by increases in income from fiduciary activities;activities, service charges on deposit accounts; debit card fee income;accounts, bank owned life insurance income;income, gain on equity securities, net, and miscellaneousother components of net periodic pension benefit income.

The increasedecrease for the ninesix months ended SeptemberJune 30, 20212022 compared to the ninesix months ended SeptemberJune 30, 20202021 was primarily due to: (a)to a decrease in other service income and miscellaneous income, partially offset by increases in income from fiduciary activities;activities, service charges on deposit accounts, bank owned life insurance income, gain (loss) on equity securities, net; debit card fee income; ATM fees;net, and miscellaneous income; (b) partially offset by declines in other service income; gain (loss) on salecomponents of OREO, net; and net (loss) gain on sale of debt securities.periodic pension benefit income.

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

Three months ended
September 30,
Nine months ended
September 30,
(In thousands)20212020Change20212020Change
Income from fiduciary activities$8,820 $7,335 $1,485 $25,562 $21,241 $4,321 
Service charges on deposit accounts2,389 2,118 271 6,475 6,322 153 
Other service income6,668 13,047 (6,379)23,444 25,571 (2,127)
Debit card fee income6,453 5,853 600 19,297 16,373 2,924 
Bank owned life insurance income1,462 1,192 270 3,776 3,619 157 
ATM fees622 491 131 1,807 1,341 466 
Gain (loss) on sale of OREO, net569 (566)(26)1,214 (1,240)
Net (loss) gain on sale of debt securities— (27)27 — 3,286 (3,286)
Gain (loss) on equity securities, net609 1,201 (592)2,886 (749)3,635 
Other components of net periodic pension benefit income2,038 1,988 50 6,114 5,964 150 
Miscellaneous3,347 2,791 556 8,403 5,826 2,577 
Total other income$32,411 $36,558 $(4,147)$97,738 $90,008 $7,730 
Three months ended
June 30,
Six months ended
June 30,
(In thousands)20222021Change20222021Change
Income from fiduciary activities$8,859 $8,569 $290 $17,656 $16,742 $914 
Service charges on deposit accounts2,563 2,032 531 4,637 4,086 551 
Other service income4,940 7,159 (2,219)9,759 16,776 (7,017)
Debit card fee income6,731 6,758 (27)12,857 12,844 13 
Bank owned life insurance income2,374 1,149 1,225 3,549 2,314 1,235 
ATM fees583 655 (72)1,115 1,185 (70)
Gain on equity securities, net709 467 242 3,062 2,277 785 
Other components of net periodic pension benefit income3,027 2,038 989 6,054 4,076 1,978 
Miscellaneous1,407 2,411 (1,004)4,160 5,027 (867)
Total other income$31,193 $31,238 $(45)$62,849 $65,327 $(2,478)
 
Income from fiduciary activities increased by $1.5 million,$290,000, or 20.2%3.4%, to $8.8$8.9 million for the three months ended SeptemberJune 30, 2021,2022, compared to $7.3$8.6 million for the same period of 20202021 and increased $4.3 million,$914,000, or 20.3%5.5%, to $25.6$17.7 million for the ninesix months ended SeptemberJune 30, 2021,2022 compared to $21.2$16.7 million for the same period in 2020. Fiduciary2021. The majority of fiduciary fees are charged are generallyon a lag, based on the market value of customer accounts. Thethe assets under management.The average market value of assets under management for the three months ended SeptemberJune 30, 20212022 was $7,548$7,073 million compared to $6,301$7,457 million for the same period in 2020.2021. The average market value of assets under management for the first nine monthshalf of 20212022 was $7,355$7,294 million compared to $6,023$7,259 million for the same period in 2020.2021.

Service charges on deposit accounts increased by $271,000,$531,000, or 12.8%26.1%, to $2.4$2.6 million for the three months ended SeptemberJune 30, 2021,2022, compared to $2.1$2.0 million for the same period of 20202021 and increased $153,000,$551,000, or 2.4%13.5%, to $6.5$4.6 million for the ninesix months ended SeptemberJune 30, 2021,2022, compared to $6.3$4.1 million for the same period of 2020.2021. The changesincreases for both the threethree-month and nine monthsix-month periods ended SeptemberJune 30, 2022 compared to June 30, 2021 comparedwere primarily due to September 30, 2020 were due mostly to increasesan increase in NSF income. Park implemented an NSF fee increase in December 2020.

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Other service income decreased by $6.4$2.2 million, or 48.9%31.0%, to $6.7$4.9 million for the three months ended SeptemberJune 30, 2021,2022, compared to $13.0$7.2 million for the same period of 2020,2021. The primary reason for the decrease for the three months ended June 30, 2022 compared to the same period of 2021 was a decrease in fee income related to mortgage loan originations to be sold in the secondary market of $3.1 million, which was partially offset by an increase in investor rate locks and mortgage loans held for sale of $257,000 and a $432,000 increase in commercial fee income. Mortgage origination volume decreased $2.1by $104.8 million, or 8.3%40.9%, to $23.4$151.7 million for the ninethree months ended SeptemberJune 30, 2021,2022 from $256.5 million for the three months ended June 30, 2021. Other service income decreased by $7.0 million, or 41.8%, to $9.8 million for the six months ended June 30, 2022, compared to $25.6$16.8 million for the same period in 2020.of 2021. The primary reasons for the decrease for the threesix months ended SeptemberJune 30, 20212022 compared to the same period of 2020 was2021 were a decrease in fee income fromrelated to mortgage loan originations to be sold in the secondary market of $5.0$7.8 million and a decrease in mortgage servicing rights income of $1.3 million. The primary reason for the decrease for the nine months ended September 30, 2021 compared to the same period of 2020 was a $5.1 million decrease$929,000, which were partially offset by an increase in income related to investor rate locks and mortgage loans held for sale offsetof $1.2 million. Mortgage origination volume decreased by a $1.4$248.6 million, increase in mortgage servicing rights income and a $324,000 increase in fee incomeor 44.4%, to $311.9 million for the six months ended June 30, 2022 from mortgage loan originations.$560.5 million for the six months ended June 30, 2021.

Debit card feeBank owned life insurance income increased $600,000,by $1.2 million, or 10.3%106.6%, to $6.5$2.4 million for the three months ended SeptemberJune 30, 2021,2022, compared to $5.9$1.1 million for the same period of 20202021 and increased $2.9$1.2 million, or 17.9%53.4%, to $19.3$3.5 million for the ninesix months ended SeptemberJune 30, 2022, compared to $2.3 million for the same period of 2021. The increases for both the three-month and six-month periods ended June 30, 2022 compared to June 30, 2021 were due to an increase in received death benefits.

Gain on equity securities, net, increased $242,000, to a net gain of $709,000 for the three months ended June 30, 2022, compared to $16.4a net gain of $467,000 for the same period in 2021 and increased $785,000 to a net gain of $3.1 million for the six month ended June 30, 2022 compared to a net gain of $2.3 million for the same period in 2020.2021. The increases in 2021 for the three-month and nine-month periods were attributable to a continued$242,000 increase in the sales volume and dollar value of debit card transactions. The volume of debit card transactions for the nine months ended September 30, 2021 increased by 10.3% compared to the same period in 2020 and the dollar value of transactions increased 17.7% compared to the same period in 2020.

ATM fees increased $131,000, or 26.7%, to $622,000 for the three months ended SeptemberJune 30, 2021, compared2022 was related to $491,000 for the same period of 2020, and increased $466,000, or 34.8%, to $1.8 million for the nine months ended September 30, 2021, compared to $1.3 million for the first nine months of 2020. Thea $658,000 increase in ATM fee income was primarily due to Park implementing additional charges for ATM balance inquiries and transfers during the second quarter of 2021.

Gaingain (loss) on sale of OREO, net decreased by $566,000, toother equity securities which went from a net gain of $3,000$39,000 loss for the three months ended SeptemberJune 30, 2021 compared to a net$619,000 gain of $569,000 for the same period of 2020, and decreased by $1.2 million, to a net loss of $26,000 for the nine months ended September 30, 2021, compared to a net gain of $1.2 million for the same period of 2020. The decrease for the three months ended SeptemberJune 30, 20212022, which was primarily due tooffset by a $379,000 gain on the sale of one OREO property at SEPH during the three months ended September 30, 2020 that did not occur$416,000 decrease in the three months ended September 30, 2021, and the decrease during first nine months of 2021 was due to minimal OREO sale activity during the first nine months of 2021 compared to a $1.2 million gain on the sale of two OREO properties during the first nine months of 2020, one of which was participated to PNB from SEPH.

There were no sales of debt securities during the three and nine months ended September 30, 2021. During the three months ended September 30, 2020, investment securities with a book value of $253.4 million were sold at a net loss of $27,000. During the nine months ended September 30, 2020, investment securities with a book value of $308.9 million were sold at a net gain of $3.3 million.

Gain (loss) on equity securities net decreased $592,000, toheld at NAV, declining from a net$506,000 gain of $609,000 for the three months ended SeptemberJune 30, 2021 compared to a net$90,000 gain of $1.2 million for the same period in 2020 and increased $3.6 million to a net gain of $2.9 million for the nine months ended September 30, 2021 compared to a net loss of $749,000 during the same time period in 2020. The $592,000 decrease for the three months ended SeptemberJune 30, 20212022. The $785,000 increase for the six months ended June 30, 2022 was related to a $778,000 decrease$132,000 increase in gain (loss) on other equity securities which went from a $395,000 gain for the six months ended June 30, 2021 to a $527,000 gain for the six months ended June 30, 2022, and a $653,000 increase in the gain (loss) on equity securities held at NAV, which went from a $1.3$1.9 million gain for the threesix months ended SeptemberJune 30, 20202021 to a $512,000 gain for the three months ended September 30, 2021, offset by a $186,000 increase in unrealized gain (loss) on equity securities, which went from an $89,000 unrealized loss for the three months ended September 30, 2020 to a $97,000 unrealized gain for the three months ended September 30, 2021. The $3.6 million increase for the nine months ended September 30, 2021 was related to a $2.4 million increase in the gain (loss) on equity securities held at NAV, which went from a $40,000 loss for the nine months ended September 30, 2020 to a $2.4$2.5 million gain for the ninesix months ended SeptemberJune 30, 2021, and a $1.0 million increase in unrealized gain (loss) on equity securities, which went from a $708,000 unrealized loss for the nine months ended September 30, 2020 to a $316,000 unrealized gain for the nine months ended September 30, 2021. During the nine months ended September 30, 2021, equity securities with a book value of $757,000 were sold at a gain of $177,000. There were no equity securities sold during the three months ended September 30, 2021 and 2020 and during the nine months ended September 30, 2020.2022.

MiscellaneousOther components of net periodic pension benefit income increased $556,000, or 19.9%,$1.0 million to $3.3$3.0 million for the three months ended SeptemberJune 30, 2021,2022 compared to $2.8$2.0 million for the same period in 2021, and increased $2.0 million, to $6.1 million for the six months ended June 30, 2022 compared to $4.1 million for the six months ended June 30, 2021. The increases for both the three-month and six-month periods were largely due to an increase in the expected return on plan assets as a result of the increased value of plan assets as well as a decrease in the amortization of unrecognized net actuarial losses.

Miscellaneous income decreased $1.0 million, or 41.6%, to $1.4 million for the three months ended June 30, 2022, compared to $2.4 million for the same period of 20202021 and increased $2.6 million,decreased $867,000, or 44.2%17.2%, to $8.4$4.2 million for the ninesix months ended SeptemberJune 30, 20212022 compared to $5.9$5.0 million for the same period of 20202021. The increasedecrease for the three months period ended SeptemberJune 30, 2022 compared to the same period of 2021 was primarily a result of an increasedecreases in printed check sales income an increase inand wire transfer fees, an increase in VISA incentive income, and a decrease in the lossgain on sales of assets.assets, and increased OREO devaluations, which were partially offset by the receipt of settlement income. The increasedecrease for the ninesix months ended June 30, 2022 compared to the same period ended September 30,of 2021 was primarily the result of an increasedecreases in printed check sales income, an insurance refund received on a consumer loan insurance product, an increase in VISA incentive income,operating lease rent, and wire transfer fees, and an increase in wire transfer fees.OREO devaluations, offset by an increase in the gain on sales of assets.

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Other Expense

Other expense decreased by $1.4 million to $68.5$70.0 million for the three months ended SeptemberJune 30, 2021,2022 compared to $69.9$71.4 million for the same period of 20202021 and increased $6.8decreased $1.9 million to $207.8$137.4 million for the ninesix months ended SeptemberJune 30, 2021,2022, compared to $200.9$139.3 million for the first nine monthshalf of 2020.2021.

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The following table is a summary of the changes in the components of other expense:
 Three months ended
September 30,
Nine months ended
September 30,
(In thousands)20212020Change20212020Change
Salaries$29,433 $31,632 $(2,199)$89,632 $90,760 $(1,128)
Employee benefits10,640 10,676 (36)30,897 29,799 1,098 
Occupancy expense3,211 3,835 (624)9,878 10,571 (693)
Furniture and equipment expense2,797 4,687 (1,890)8,163 13,856 (5,693)
Data processing fees7,817 3,275 4,542 22,679 8,344 14,335 
Professional fees and services6,973 7,977 (1,004)19,610 21,944 (2,334)
Marketing1,574 1,454 120 4,355 4,076 279 
Insurance1,403 1,541 (138)4,370 4,568 (198)
Communication796 958 (162)2,688 2,987 (299)
State tax expense1,113 1,125 (12)3,324 3,386 (62)
Amortization of intangible assets420 525 (105)1,378 1,738 (360)
Foundation contribution— — — 4,000 — 4,000 
Miscellaneous2,312 2,174 138 6,780 8,905 (2,125)
Total other expense$68,489 $69,859 $(1,370)$207,754 $200,934 $6,820 

 Three months ended
June 30,
Six months ended
June 30,
(In thousands)20222021Change20222021Change
Salaries$31,052 $30,303 $749 $61,573 $60,199 $1,374 
Employee benefits10,199 10,056 143 20,698 20,257 441 
Occupancy expense3,040 3,027 13 6,254 6,667 (413)
Furniture and equipment expense2,934 2,756 178 5,871 5,366 505 
Data processing fees8,416 7,150 1,266 15,920 14,862 1,058 
Professional fees and services6,775 6,973 (198)12,633 12,637 (4)
Marketing1,019 1,290 (271)2,336 2,781 (445)
Insurance1,245 1,276 (31)2,650 2,967 (317)
Communication935 770 165 1,825 1,892 (67)
State tax expense1,167 1,103 64 2,359 2,211 148 
Amortization of intangible assets403 479 (76)805 958 (153)
Foundation contribution— 4,000 (4,000)— 4,000 (4,000)
Miscellaneous2,863 2,217 646 4,497 4,468 29 
Total other expense$70,048 $71,400 $(1,352)$137,421 $139,265 $(1,844)

Salaries decreasedincreased by $2.2 million,$749,000, or 7.0%2.5%, to $29.4$31.1 million for the three months ended SeptemberJune 30, 2021,2022, compared to $31.6$30.3 million for the same period in 2020.2021. The decreaseincrease for the three months ended June 30, 2022 compared to the same period of 2021 was due to a $1.1an increase of $2.0 million decrease in officer incentive compensation,base salary expense and a $934,000reduction in deferred salary cost benefit of $509,000, partially offset by a decrease in additional compensation expense of $605,000, which primarily related to calamity pay and special one-time bonuses to certain associates as a result of the COVID-19 public health crisis.crisis, and a decrease in officer incentive compensation of $1.0 million, compared to the three months ended June 30, 2021.

Salaries decreasedincreased by $1.1$1.4 million, or 1.2%2.3%, to $89.6$61.6 million for the ninesix months ended SeptemberJune 30, 2021,2022, compared to $90.8$60.2 million for the same period in 2020.2021. The decreaseincrease for the six months ended June 30, 2022, was due to a $1.7an increase of $2.6 million decrease in base salary expense and a $906,000reduction in deferred salary cost benefit of $625,000, partially offset by a decrease in additional compensation expense partially offset byof $928,000, which primarily related to calamity pay and special one-time bonuses as a $1.0 million increaseresult of the COVID-19 public health crisis and a decrease in officer incentive compensation expense and a $746,000 increase in share-based compensation expense.of $1.0 million, compared to the six months ended June 30, 2021.

Employee benefits decreased $36,000,increased $143,000, or 0.3%1.4%, to $10.6$10.2 million for the three months ended SeptemberJune 30, 2021,2022, compared to $10.7$10.1 million for the same period in 2020,2021, and increased $1.1 million,$441,000, or 3.7%2.2%, to $30.9$20.7 for the six months ended June 30, 2022 compared to $20.3 million for the ninefirst half of 2021. The $143,000 increase for the three months ended SeptemberJune 30, 2021,2022 compared to $29.8the same period in 2021 was primarily due to increased payroll tax expense of $103,000 and a $57,000 increase in Park's KSOP match, offset by a reduction in group insurance costs. The $441,000 increase for the six months ended June 30, 2022 compared to the same period in 2021 was primarily due to increased payroll tax expense of $278,000 and a $158,000 increase in Park's KSOP match.
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Occupancy expense increased by $13,000, or 0.4%, to $3.0 million for the three months ended June 30, 2022, compared to $3.0 million for the same period in 2020. The $36,000 decrease2021 and decreased by $413,000, or 6.2%, to $6.3 million for the threesix months ended SeptemberJune 30, 2022 compared to $6.7 million for the six month ended June 30, 2021. The decrease of $413,000 for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was dueprimarily related to a $365,000 decreasereductions in group insurance costsrental, maintenance, and a $87,000 decrease in employer payroll taxesjanitorial expenses, partially offset by an increase of $399,000 in pension service cost expense. The $1.1 million increase for the nine months ended September 30, 2021 was due to a $1.2 million increase in pension service cost expense and a $112,000 increase in group insurance cost, partially offset by a $201,000 decrease in miscellaneous employee benefitsutilities expense.

Furniture and equipment expense decreased by $1.9 million,increased $178,000, or 40.3%6.5%, to $2.8$2.9 million for the three months ended SeptemberJune 30, 2021,2022 compared to $4.7$2.8 million for the same period in 2020,2021, and decreased $5.7 million,increased $505,000, or 41.1%9.4%, to $8.2$5.9 million for the ninesix months ended SeptemberJune 30, 2022 compared to $5.4 million for the six months ended June 30, 2021. The increases for both the three-month and six-month periods ended June 30, 2022 compared to June 30, 2021 related to an increase in depreciation expense.

Data processing expense increased $1.3 million, or 17.7%, to $8.4 million for the three months ended June 30, 2022 compared to $13.9$7.2 million for the same period in 2020.2021, and increased $1.1 million, or 7.1%, to $15.9 million for the six months ended June 30, 2022 compared to $14.9 million for the six months ended June 30, 2021. The decreaseincrease for both the three-month and six- month periods was primarilyended June 30, 2022 compared to the periods ended June 30, 2021 related to a changean increase in the classification under which software and related maintenance costs are expensed, which are now classified under data processing fees,expenses, partially offset by increases in depreciation of furniture and equipment.reduced debit card processing costs.

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Data processing fees increased by $4.5 million,Marketing expense decreased $271,000, or 21.0%, to $7.8$1.0 million for the three months ended SeptemberJune 30, 2021,2022 compared to $3.3$1.3 million for the same period of 2020,in 2021, and increased by $14.3 million,decreased $445,000, or 16.0%, to $22.7$2.3 million for the ninesix months ended SeptemberJune 30, 2021,2022 compared to $8.3$2.8 million for the same period of 2020.six months ended June 30, 2021. The increasedecreases for both the three-month and six-month periods wasended June 30, 2022 compared to the periods ended June 30, 2021 related to increased other data processing and software costs, partially due to the previously mentioned changea decrease in classification from furniture and equipment expense and a change in expensing software costs from other fees within professional fees and services to data processing fees. advertising expense.

The change in data processing fees was also impacted by changes in debit card processing costs. Duringfoundation contribution decrease for both the three months and six months ended SeptemberJune 30, 2021, debit card processing costs declined $68,0002022, compared to the same periodperiods of 2020 and increased by $770,000 for the nine months ended September 30, 2021, compared to the same period of 2020.

Professional fees and services decreased $1.0 million, or 12.6%, to $7.0 million for the three months ended September 30, 2021, compared to $8.0 million for the same period of 2020 and decreased $2.3 million, or 10.6%, to $19.6 million for the nine months ended September 30, 2021 compared to $21.9 million for the same period of 2020. The $1.0 million decrease for the three months ended September 30, 2021 was primarily due to decreases in other fees (due to the change in expensing software costs under data processing fees), credit costs and recruiting expense, partially offset by increases in legal expense, appraisal fees, consulting fees, and filing fees. The $2.3 million decrease for the nine months ended September 30, 2021 was primarily due to decreases in other fees (due to the change in expensing software costs under data processing fees), decreased title and credit costs and ICS promontory fees, partially offset by increases in consulting fees, recruiting expense, legal expense and membership dues.

The Foundation contribution increase for the nine months ended September 30, 2021, compared to the same period of 2020, was due to a $4.0 million contribution being made to Park's charitable foundation during the ninethree months and six months ended SeptemberJune 30, 2021 and no similar contribution during the nine months ended September 30, 2020. The 2020 contribution wasbeing made during the fourth quarter of 2020. Park does not expect to make any additional contributions to Park's charitable foundation in 2021.six months ended June 30, 2022.

The subcategory "miscellaneous" other expense includes expenses for supplies, travel and other miscellaneous expense. The subcategory miscellaneous other expense decreased $2.1 million,increased $646,000, or 23.9%29.1%, to $6.8$2.9 million for the nine monthsthree-month period ended SeptemberJune 30, 2021,2022, compared to $8.9the same period in 2021, and increased $29,000, or 0.6%, to $4.5 million for the same period of 2020. The $2.1 million decrease was primarily due to a $1.8 million prepayment penalty on FHLB borrowings paid during the ninesix months ended SeptemberJune 30, 2020 and no similar prepayment during2022, compared to the first ninesix months of 2021 partially offset by anended June 30, 2021. The $646,000 increase in expense for the three months ended June 30, 2022 compared to the same period ended June 30, 2021 was primarily related to a $222,000 expense related to a derivative liability, an increase of $47,000 in non-loan related losses and an increase of $167,000 in supplies expense. The $29,000 increase in expense for the six months ended June 30, 2022 compared to the same period ended June 30, 2021 was primarily related to a $222,000 expense related to a derivative liability, increased travel expense of $161,000, and an increase of $271,000 in supplies expense, offset by a decrease of $402,000 in the provision for the allowance for unfunded credit losses and an increasea decline of $103,000 in non-loan related losses.


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Items Impacting Comparability

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

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

THREE MONTHS ENDEDNINE MONTHS ENDEDTHREE MONTHS ENDEDSIX MONTHS ENDED
(in thousands, except share and per share data)September 30, 2021September 30, 2020September 30, 2021September 30, 2020Affected Line Item
(in thousands)(in thousands)June 30, 2022June 30, 2021June 30, 2022June 30, 2021Affected Line Item
Net interest incomeNet interest income$81,602 $83,840 $246,187 $241,309 Net interest income$83,939 $83,851 $161,625 $164,585 
less purchase accounting accretion related to NewDominion and Carolina Alliance acquisitionsless purchase accounting accretion related to NewDominion and Carolina Alliance acquisitions799 1,029 2,704 3,556 Interest and fees on loansless purchase accounting accretion related to NewDominion and Carolina Alliance acquisitions545 795 1,022 1,905 Interest and fees on loans
less purchase accounting accretion related to NewDominion and Carolina Alliance acquisitionsless purchase accounting accretion related to NewDominion and Carolina Alliance acquisitions42 40 194 Interest on depositsless purchase accounting accretion related to NewDominion and Carolina Alliance acquisitions11 32 Interest on deposits
less interest income on former Vision Bank relationshipsless interest income on former Vision Bank relationships414 3,357 351 Interest and fees on loansless interest income on former Vision Bank relationships2,305 2,838 2,347 2,943 Interest and fees on loans
Net interest income - adjustedNet interest income - adjusted$80,381 $82,761 $240,086 $237,208 Net interest income - adjusted$81,087 $80,207 $158,251 $159,705 
Provision for (recovery of) credit lossesProvision for (recovery of) credit losses$1,972 $13,836 $(6,923)$31,213 Provision for (recovery of) credit losses$2,991 $(4,040)$(1,614)$(8,895)
less recoveries on former Vision Bank relationshipsless recoveries on former Vision Bank relationships(2,231)(37)(2,640)(1,486)Provision for (recovery of) credit lossesless recoveries on former Vision Bank relationships(506)(152)(507)(409)Provision for (recovery of) credit losses
Provision for (recovery of) credit losses - adjustedProvision for (recovery of) credit losses - adjusted$4,203 $13,873 $(4,283)$32,699 Provision for (recovery of) credit losses - adjusted$3,497 $(3,888)$(1,107)$(8,486)
Total other incomeTotal other income$32,411 $36,558 $97,738 $90,008 Total other income$31,193 $31,238 $62,849 $65,327 
less net (loss) gain on the sale of debt securities in the ordinary course of business— (27)— 3,286 Net (loss) gain on sale of debt securities
less rebranding initiative related expenses— — — (274)Miscellaneous income
less net gain on sale of former Vision Bank OREO properties— 371 — 1,208 Gain (loss) on sale of OREO, net
less other service income related to former Vision Bank relationshipsless other service income related to former Vision Bank relationships143 36 204 88 Other service incomeless other service income related to former Vision Bank relationships500 500 61 Other service income
Total other income - adjustedTotal other income - adjusted$32,268 $36,178 $97,534 $85,700 Total other income - adjusted$30,693 $31,235 $62,349 $65,266 
Total other expenseTotal other expense$68,489 $69,859 $207,754 $200,934 Total other expense$70,048 $71,400 $137,421 $139,265 
less merger-related expenses related to NewDominion and Carolina Alliance acquisitionsless merger-related expenses related to NewDominion and Carolina Alliance acquisitions— 117 Salariesless merger-related expenses related to NewDominion and Carolina Alliance acquisitions— — — Salaries
less merger-related expenses related to NewDominion and Carolina Alliance acquisitionsless merger-related expenses related to NewDominion and Carolina Alliance acquisitions— 152 — 491 Professional fees and servicesless merger-related expenses related to NewDominion and Carolina Alliance acquisitions— — Insurance
less merger-related expenses related to NewDominion and Carolina Alliance acquisitions12 12 Insurance
less COVID-19 related expensesless COVID-19 related expenses— 744 1,535 2,884 Salariesless COVID-19 related expenses141 670 747 1,535 Salaries
less severance and restructuring chargesless severance and restructuring charges140 67 294 403 Salariesless severance and restructuring charges497 46 539 154 Salaries
less management and consulting expenses related to collection of payments on former Vision Bank loan relationships254 232 661 232 Professional fees and services
less rebranding initiative related expenses— — — 72 Employee benefits
less rebranding initiative related expenses79 47 231 47 Occupancy expense
less rebranding initiative related expenses263 — 786 75 Furniture and equipment expense
less rebranding initiative related expenses— — 591 — Data processing fees
less direct expenses related to collection of payments on former Vision Bank loan relationshipsless direct expenses related to collection of payments on former Vision Bank loan relationships366 300 366 407 Professional fees and services
less rebranding initiative related expensesless rebranding initiative related expenses95 372 126 531 Professional fees and servicesless rebranding initiative related expenses74 77 154 152 Occupancy expense
less rebranding initiative related expensesless rebranding initiative related expenses— — — 25 Marketingless rebranding initiative related expenses262 261 526 523 Furniture and equipment expense
less rebranding initiative related expensesless rebranding initiative related expenses— — — Communicationless rebranding initiative related expenses— — 591 Data processing fees
less rebranding initiative related expensesless rebranding initiative related expenses— 10 — 85 Miscellaneousless rebranding initiative related expenses— — 31 Professional fees and services
less core deposit intangible amortization related to NewDominion and Carolina Alliance acquisitionsless core deposit intangible amortization related to NewDominion and Carolina Alliance acquisitions420 525 1,378 1,738 Amortization of intangible assetsless core deposit intangible amortization related to NewDominion and Carolina Alliance acquisitions403 479 805 958 Amortization of intangible assets
less Foundation contributionless Foundation contribution— 4,000 — 4,000 Foundation contribution
Total other expense - adjustedTotal other expense - adjusted$68,305 $65,559 $134,284 $130,898 
Tax effect of adjustments to net income identified above (7)
Tax effect of adjustments to net income identified above (7)
$(444)$429 $(261)$634 
Net income - reportedNet income - reported$34,324 $39,132 $73,199 $81,963 
Net income - adjusted (6)
Net income - adjusted (6)
$32,653 $40,745 $72,216 $84,346 
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THREE MONTHS ENDEDNINE MONTHS ENDED
(in thousands, except share and per share data)September 30, 2021September 30, 2020September 30, 2021September 30, 2020Affected Line Item
less Foundation contribution— 4,000 — Foundation contribution
less FHLB prepayment penalty— — — 1,793 Miscellaneous
Total other expense - adjusted$67,234 $67,699 $198,132 $192,427 
Tax effect of adjustments to net income identified above (7)
$(491)$139 $142 $(291)
Net income - reported$35,434 $30,846 $117,397 $82,723 
Net income - adjusted$33,585 $31,371 $117,932 $81,626 
Diluted EPS$2.16 $1.88 $7.14 $5.04 
Diluted EPS, adjusted (6)
$2.04 $1.91 $7.17 $4.98 
Annualized return on average assets (1)(2)
1.40 %1.28 %1.59 %1.20 %
Annualized return on average assets, adjusted (1)(2)(6)
1.32 %1.31 %1.60 %1.18 %
Annualized return on average tangible assets (1)(2)(4)
1.42 %1.31 %1.62 %1.22 %
Annualized return on average tangible assets, adjusted (1)(2)(4)(6)
1.35 %1.33 %1.63 %1.21 %
Annualized return on average shareholders' equity (1)(2)
13.04 %12.03 %14.79 %11.05 %
Annualized return on average shareholders' equity, adjusted (1)(2)(6)
12.36 %12.23 %14.86 %10.90 %
Annualized return on average tangible equity (1)(2)(3)
15.44 %14.43 %17.58 %13.31 %
Annualized return on average tangible equity, adjusted (1)(2)(3)(6)
14.63 %14.67 %17.66 %13.14 %
Efficiency ratio (5)
59.70 %57.69 %60.03 %60.26 %
Efficiency ratio, adjusted (5)(6)
59.31 %56.58 %58.31 %59.20 %
Annualized net interest margin (5)
3.53 %3.85 %3.67 %3.88 %
Annualized net interest margin, adjusted (5)(6)
3.48 %3.80 %3.58 %3.81 %

THREE MONTHS ENDEDSIX MONTHS ENDED
(in thousands, except share and per share data)June 30, 2022June 30, 2021June 30, 2022June 30, 2021
Diluted EPS$2.10 $2.38 $4.48 $4.98 
Diluted EPS, adjusted (6)
$2.00 $2.47 $4.42 $5.13 
Annualized return on average assets (1)(2)
1.42 %1.59 %1.51 %1.70 %
Annualized return on average assets, adjusted (1)(2)(6)
1.35 %1.66 %1.49 %1.75 %
Annualized return on average tangible assets (1)(2)(4)
1.45 %1.62 %1.54 %1.73 %
Annualized return on average tangible assets, adjusted (1)(2)(4)(6)
1.38 %1.68 %1.52 %1.78 %
Annualized return on average shareholders' equity (1)(2)
12.86 %14.81 %13.57 %15.71 %
Annualized return on average shareholders' equity, adjusted (1)(2)(6)
12.23 %15.42 %13.39 %16.16 %
Annualized return on average tangible equity (1)(2)(3)
15.23 %17.60 %16.02 %18.70 %
Annualized return on average tangible equity, adjusted (1)(2)(3)(6)
14.49 %18.33 %15.81 %19.25 %
Efficiency ratio (5)
60.38 %61.65 %60.76 %60.20 %
Efficiency ratio, adjusted (5)(6)
60.63 %58.45 %60.41 %57.82 %
Annualized net interest margin (5)
3.84 %3.74 %3.70 %3.75 %
Annualized net interest margin, adjusted (5)(6)
3.71 %3.58 %3.62 %3.64 %
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THREE MONTHS ENDED
NINE MONTHS ENDED
(in thousands, except share and per share data)September 30, 2021September 30, 2020September 30, 2021September 30, 2020Affected Line Item
Financial Reconciliations
(1) Reported measure uses net income
(2) Averages are for the three months and nine months ended September 30, 2021 and September 30, 2020
(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 ENDEDNINE MONTHS ENDED
September 30, 2021September 30, 2020September 30, 2021September 30, 2020
AVERAGE SHAREHOLDERS' EQUITY$1,078,465 $1,020,239 $1,061,066 $1,000,241 
Less: Average goodwill and other intangible assets167,754 169,726 168,215 170,311 
AVERAGE TANGIBLE EQUITY$910,711 $850,513 $892,851 $829,930 
(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 ENDEDNINE MONTHS ENDED
September 30, 2021September 30, 2020September 30, 2021September 30, 2020
AVERAGE ASSETS$10,070,716 $9,557,682 $9,583,457 $9,216,495 
Less: Average goodwill and other intangible assets167,754 169,726 168,215 170,311 
AVERAGE TANGIBLE ASSETS$9,902,962 $9,387,956 $9,415,242 $9,046,184 
(5) Efficiency ratio is calculated by dividing total other expense by the sum of fully taxable equivalent net interest income and other income. Fully taxable equivalent net interest income reconciliation is shown assuming a 21% federal corporate income tax rate. Additionally, net interest margin is calculated on a fully taxable equivalent basis by dividing fully taxable equivalent net interest income by average interest earning assets.
RECONCILIATION OF FULLY TAXABLE EQUIVALENT NET INTEREST INCOME TO NET INTEREST INCOME
THREE MONTHS ENDEDNINE MONTHS ENDED
September 30, 2021September 30, 2020September 30, 2021September 30, 2020
Interest income$85,420 $89,566 $258,587 $265,920 
Fully taxable equivalent adjustment717 706 2,149 2,154 
Fully taxable equivalent interest income$86,137 $90,272 $260,736 $268,074 
Interest expense3,818 5,726 12,400 24,611 
Fully taxable equivalent net interest income$82,319 $84,546 $248,336 $243,463 
(6) Adjustments to net income for each period presented are detailed in the non-GAAP reconciliations of net interest income, provision for (recovery of) credit losses, total other income and total other expense.
(7) The tax effect of adjustments to net income was calculated assuming a 21% federal corporate income tax rate.

Financial Reconciliations
(1) Reported measure uses net income
(2) Averages are for the three months and six months ended June 30, 2022 and June 30, 2021.
(3) Net income for each period divided by average tangible equity during the period. Average tangible equity equals average shareholders' equity during the applicable period less average goodwill and other intangible assets during the applicable period.
RECONCILIATION OF AVERAGE SHAREHOLDERS' EQUITY TO AVERAGE TANGIBLE EQUITY:
THREE MONTHS ENDEDSIX MONTHS ENDED
June 30, 2022June 30, 2021June 30, 2022June 30, 2022
AVERAGE SHAREHOLDERS' EQUITY$1,070,493 $1,059,949 $1,087,919 $1,052,223 
Less: Average goodwill and other intangible assets166,516 168,211 166,716 168,449 
AVERAGE TANGIBLE EQUITY$903,977 $891,738 $921,203 $883,774 
(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 ENDEDSIX MONTHS ENDED
June 30, 2022June 30, 2021June 30, 2022June 30, 2022
AVERAGE ASSETS$9,679,020 $9,872,078 $9,751,796 $9,743,027 
Less: Average goodwill and other intangible assets166,516 168,211 166,716 168,449 
AVERAGE TANGIBLE ASSETS$9,512,504 $9,703,867 $9,585,080 $9,574,578 
(5) Efficiency ratio is calculated by dividing total other expense by the sum of FTE net interest income and other income. Fully taxable equivalent net interest income reconciliation is shown assuming a 21% federal corporate income tax rate. Additionally, net interest margin is calculated on a fully taxable equivalent basis by dividing fully taxable equivalent net interest income by average interest earning assets, in each case during the applicable period.
RECONCILIATION OF FULLY TAXABLE EQUIVALENT NET INTEREST INCOME TO NET INTEREST INCOME
THREE MONTHS ENDEDSIX MONTHS ENDED
June 30, 2022June 30, 2021June 30, 2022June 30, 2022
Interest income$88,347 $87,994 $169,493 $173,167 
FTE adjustment872 718 1,691 1,432 
FTE interest income$89,219 $88,712 $171,184 $174,599 
Interest expense4,408 4,143 7,868 8,582 
FTE net interest income$84,811 $84,569 $163,316 $166,017 
(6) Adjustments to net income for each period presented are detailed in the non-GAAP reconciliations of net interest income, provision for (recovery of) credit losses, total other income and total other expense.
(7) The tax effect of adjustments to net income was calculated assuming a 21% federal corporate income tax rate.
(8) Pre-tax, pre-provision ("PTPP") net income is calculated as net income during the applicable period, plus income taxes, and 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 ENDEDSIX MONTHS ENDED
June 30, 2022June 30, 2021June 30, 2022June 30, 2021
Net income$34,324 $39,132 $73,199 $81,963 
Plus: Income Taxes7,769 8,597 15,468 17,579 
Plus: Provision for (recovery of) credit losses2,991 (4,040)(1,614)(8,895)
Pre-tax, pre-provision net income$45,084 $43,689 $87,053 $90,647 


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Income Tax
 
Income tax expense was $8.1$7.8 million for the thirdsecond quarter of 20212022 and consisted of federal income tax expense of $7.9$7.4 million and state income tax expense of $341,000. This compares to income tax expense of $8.6 million for the second quarter of 2021 which consisted of federal income tax expense of $8.3 million and state income tax expense of $264,000. The effective income tax rate for the second quarter of 2022 was 18.5%, compared to 18.0% for the same period in 2021. Income tax expense was $15.5 million for the first half of 2022 and consisted of federal income tax expense of $14.8 million and state income tax expense of $646,000. This compares to income tax expense of $5.9$17.6 million for the third quarterfirst half of 20202021 which consisted of federal income tax expense of $5.6$17.1 million and state income tax expense of $271,000. The effective income tax rate for the third quarter of 2021 was 18.6%, compared to 16.0% for the same period in 2020.

Income tax expense was $25.7 million for the first nine months of 2021 and consisted of federal income tax expense of $24.9 million and state income tax expense of $793,000. This compares to income tax expense of $16.4 million for the first nine months of 2020 which consisted of federal income tax expense of $15.6 million and state income tax expense of $814,000.$529,000. The effective income tax rate for the first nine monthshalf of 20212022 was 18.0%17.4%, compared to 16.6%17.7% for the same period in 2020.2021.

The difference between the statutory federal corporate income tax rate of 21% and Park's effective income tax rate reflects permanent tax differences, primarily consisting of tax-exempt interest income from municipal investments and loans, qualified affordable housing and historical tax credits, bank owned life insurance income, and dividends paid on the common shares held within Park's salary deferral plan offset by the impact of state income taxes. Park expects permanent federal income tax differences for the 20212022 year will be approximately $6.3$6.9 million.

Comparison of Financial Condition
At SeptemberJune 30, 20212022 and December 31, 20202021
 
Changes in Financial Condition
 
Total assets increased by $755.0$266.4 million, or 8.1%2.8%, during the first ninesix months of 20212022 to $10,034$9,827 million at SeptemberJune 30, 2021,2022, compared to $9,279$9,560 million at December 31, 2020.2021. This increase was primarily due to the following:

Cash and cash equivalents increased by $506.9$27.3 million, or 136.8%12.4%, to $877.4$246.4 million at SeptemberJune 30, 2021,2022, compared to $370.5$219.2 million at December 31, 2020.2021. Money market instruments were $749.7$75.3 million at SeptemberJune 30, 2021,2022, compared to $214.9$74.7 million at December 31, 20202021 and cash and due from banks were $127.7$171.1 million at SeptemberJune 30, 2021,2022, compared to $155.6$144.5 million at December 31, 2020.2021.
Investment securities increased $484.5$105.3 million, or 43.1%5.8%, to $1,609$1,921 million at SeptemberJune 30, 2021,2022, compared to $1,125$1,815 million at December 31, 2020.2021.
Loans increased by $87.6 million, or 1.3%, to $6,959 million at June 30, 2022, compared to $6,871 million at December 31, 2021. PPP loans were $13.4 million at June 30, 2022 compared to $74.4 million at December 31, 2021.
Prepaid assets increased by $8.4 million, or 5.9%, to $152.6 million at June 30, 2022, compared to $144.1 million at December 31, 2021.
Other assets increased by $21.4$26.5 million, or 456.2%261.2%, to $26.1$36.7 million at SeptemberJune 30, 2021,2022, compared to $4.7$10.2 million at December 31, 2020.2021. This was primarily related to a re-classification ofan increase in deferred items and tax payables between assets and liabilities.
Prepaid assets increased by $12.7 million, or 12.3%, to $116.2 million at September 30, 2021, compared to $103.5 million at December 31, 2020.
Loans decreased by $269.4 million, or 3.8%, to $6,908 million at September 30, 2021, compared to $7,178 million at December 31, 2020. PPP loans were $131.5 million at September 30, 2021 compared to $331.6 million at December 31, 2020.assets.

Total liabilities increased by $727.3$327.2 million, or 8.8%3.9%, during the first ninesix months of 20212022 to $8,966$8,777 million at SeptemberJune 30, 2021,2022, compared to $8,239$8,449 million at December 31, 2020.2021. This increase was primarily due to the following:

Total deposits increased by $792.0$393.1 million, or 10.5%5.0%, to $8,364$8,298 million at SeptemberJune 30, 2021,2022, compared to $7,572$7,905 million at December 31, 2020.2021. During 2020, Park made the decision to participate in aan OWS program in order to manage the balance sheet. At SeptemberJune 30, 20212022 and December 31, 2020,2021, Park had $818.3$809.8 million and $710.1$983.1 million, respectively, in OWS insured cash sweep deposits which were off-balance sheet.
Unsettled investment commitments were $52.5 million at September 30, 2021. There were no unsettled investment commitments at December 31, 2020. This liability relates to a purchase commitment of debt securities AFS.
Other liabilities increased $17.0 million, or 31.1%, to $71.6 million at September 30, 2021, compared to $54.6 million at December 31, 2020. This was primarily related to a re-classification of deferred items and tax payables between assets and liabilities.
The allowance for credit loss on off-balance sheet commitments increased by $4.5 million to $4.6 million at September 30, 2021, compared to $116,000 at December 31, 2020. This increase was due to the adoption of ASU 2016-13 effective January 1, 2021.deposits.
Short-term borrowings decreased by $106.3$67.0 million, or 31.0%28.1%, to $236.0$171.8 million at SeptemberJune 30, 2021,2022, compared to $342.2$238.8 million at December 31, 2020.2021.
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Long-term borrowingsUnfunded commitments in affordable housing tax credit investments decreased by $32.5$7.3 million, or 100%. There were no long-term borrowings25.5%, to $21.2 million at SeptemberJune 30, 2021,2022, compared to $32.5$28.5 million at December 31, 2020.2021.

Total shareholders’ equity increaseddecreased by $27.7$60.7 million, or 2.7%5.5%, to $1,067.9$1,050.0 million at SeptemberJune 30, 2021,2022, from $1,040.3$1,110.8 million at December 31, 2020.2021. This increasedecrease was primarily due to the following:

Accumulated other comprehensive (loss) income, net of taxes changed by $100.6 million, from a positive $15.2 million at December 31, 2021, to a negative $85.4 million at June 30, 2022, largely as a result of unrealized net holding losses on debt securities AFS, net of taxes, of $100.8 million.
Retained earnings increased by $54.9$37.9 million during the period primarily as a result of net income of $117.4$73.2 million, partially offset by cash dividends on common share dividendsshares of $54.4 million and the impact$34.3 million.
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Table of the adoption of ASU 2016-13 of $8.0 million.Contents


Treasury shares decreased by $13.1$3.0 million during the period as a result of the repurchase of treasury shares partially offset by the issuance of treasury shares under share-based compensation awards (net of common shares withheld to pay employee income taxes).
Accumulated other comprehensive (loss) income, net of taxes declined by $13.4 million, from a positive $5.6 million at December 31, 2020, to a negative $7.8 million at September 30, 2021, as a result of unrealized net holding losses on debt securities AFS, net of taxes, of $13.7 million, partially offset by an unrealized gain on cash flow hedging derivatives, net of taxes, of $355,000.
 
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 $112.6$56.5 million and $52.4$80.2 million for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively. Net income was the primary source of cash from operating activities for each of the nine-monthsix-month periods ended SeptemberJune 30, 20212022 and 2020.2021.

Cash used in investing activities was $186.2$318.4 million and $531.8$184.4 million for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively. Proceeds from the sale, repayment, or maturity of investment securities provide cash and purchases of investment securities use cash. Net investment securities transactions used cash of $447.9$216.5 million for the ninesix months ended SeptemberJune 30, 20212022 and providedused cash of $213.9$308.5 million for the ninesix months ended SeptemberJune 30, 2020.2021. Another major use or source of cash in investing activities is the net increase or decrease in the loan portfolio. Cash used by the net increase in the loan portfolio was $91.0 million for the six months ended June 30, 2022 and cash provided by the net decrease in the loan portfolio was $269.4$136.7 million for the ninesix months ended SeptemberJune 30, 2021 and cash used by the net increase in the loan portfolio was $727.4 million for the nine months ended September 30, 2020.2021.

Cash provided by financing activities was $580.5$289.2 million and $566.1$541.2 million for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively. A major source of cash for financing activities is the net change in deposits. Deposits (net of off-balance sheet deposits) increased and provided $792.1$393.1 million (net of OWS) and $423.4$642.3 million of cash for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively. Another major source/use of cash from financing activities is borrowings in the form of short-term borrowings, long-term debt and subordinated notes. For the ninesix months ended SeptemberJune 30, 2022, net short-term borrowings decreased and used $67.0 million in cash. For the six months ended June 30, 2021, net short-term borrowings decreased and used $106.3$56.4 million in cash and net long-term borrowings decreased and used $32.5 million in cash. For the nine months ended September 30, 2020, net short-term borrowings increased and provided $89.8 million in cash and net long-term borrowings decreased and used $57.5 million in cash. In addition, the proceeds from the issuance of subordinated notes provided $172.6$5.0 million in cash. Finally, cash declined by $54.4$34.5 million and $53.7$37.5 million for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively, from the payment of dividends.

Effective liquidity management ensures that the cash flow requirements of depositors and borrowers, as well as the operating cash needs of the Corporation, are met. Funds are available from a number of sources, including the capital markets, the investment securities portfolio, the core deposit base, FHLB borrowings and the capability to securitize or package loans for sale. The Corporation’s loan to asset ratio was 68.85%70.81% at SeptemberJune 30, 2021,2022, compared to 77.35%71.87% at December 31, 20202021 and 78.77%70.72% at SeptemberJune 30, 2020.2021. Cash and cash equivalents were $877.4$246.4 million at SeptemberJune 30, 2021,2022, compared to $370.5$219.2 million at December 31, 20202021 and $246.7$807.4 million at SeptemberJune 30, 2020.2021. Management believes that the present funding sources provide more than adequate liquidity for the Corporation to meet its cash flow needs.
  

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Capital Resources
 
Shareholders’ equity at SeptemberJune 30, 20212022 was $1,067.9$1,050.0 million, or 10.6%10.7% of total assets, compared to $1,040.3$1,110.8 million, or 11.2%11.6% of total assets, at December 31, 20202021 and $1,017.0$1,069.4 million, or 11.0%10.7% of total assets, at SeptemberJune 30, 2020.2021.
 
Financial institution regulators have established guidelines for minimum capital ratios for banks, thrifts and bank holding companies. Park has elected not to include the net unrealized gain or loss on debt securities AFS in computing regulatory capital. 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 an additional ratio, common equity tier 1, and revised the adequately and well-capitalized thresholds under the prompt corrective action regulations applicable to PNB. Additionally, under this framework, in order to avoid limitations on capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers, Park must hold a capital conservation buffer of 2.5% above the adequately capitalized risk-based capital ratios. The capital conservation buffer was fully phased in at 2.50% on January 1, 2019. The amounts shown below as the adequately capitalized ratio plus capital conservation buffer includesinclude the 2.50% buffer. The Federal Reserve Board has also adopted capital requirements Park must maintain to be deemed "well capitalized" and remain a financial holding company.

Park and PNB met each of the well capitalized ratio guidelines applicable to them at SeptemberJune 30, 2021.2022. The following table indicates the capital ratios for PNB and Park at SeptemberJune 30, 20212022 and December 31, 2020.2021.

At September 30, 2021At June 30, 2022
LeverageTier 1
Risk-Based
Common Equity Tier 1Total
Risk-Based
LeverageTier 1
Risk-Based
Common Equity Tier 1Total
Risk-Based
The Park National BankThe Park National Bank8.28 %11.04 %11.04 %12.63 %The Park National Bank8.83 %10.87 %10.87 %12.30 %
Park National CorporationPark National Corporation9.32 %12.40 %12.19 %15.97 %Park National Corporation10.24 %12.62 %12.43 %15.95 %
Adequately capitalized ratioAdequately 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 bufferAdequately 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)Well capitalized ratio (PNB)5.00 %8.00 %6.50 %10.00 %Well capitalized ratio (PNB)5.00 %8.00 %6.50 %10.00 %
Well capitalized ratio (Park)Well capitalized ratio (Park)N/A6.00 %N/A10.00 %Well capitalized ratio (Park)N/A6.00 %N/A10.00 %

At December 31, 2020At December 31, 2021
LeverageTier 1
Risk-Based
Common Equity Tier 1Total
Risk-Based
LeverageTier 1
Risk-Based
Common Equity Tier 1Total
Risk-Based
The Park National BankThe Park National Bank8.59 %10.66 %10.66 %12.16 %The Park National Bank8.58 %11.05 %11.05 %12.56 %
Park National CorporationPark National Corporation9.63 %11.92 %11.72 %15.43 %Park National Corporation9.77 %12.57 %12.37 %16.05 %
Adequately capitalized ratioAdequately 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 bufferAdequately 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)Well capitalized ratio (PNB)5.00 %8.00 %6.50 %10.00 %Well capitalized ratio (PNB)5.00 %8.00 %6.50 %10.00 %
Well capitalized ratio (Park)Well capitalized ratio (Park)N/A6.00 %N/A10.00 %Well capitalized ratio (Park)N/A6.00 %N/A10.00 %

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 8379 of Park’s 20202021 Form 10-K (Table 42)39) for disclosure concerning contractual obligations and commitments at December 31, 2020.2021. There were no other significant changes in contractual obligations and commitments during the first ninesix months of 2021.2022.
 
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.
 
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The exposure to credit loss (for PNB) in the event of nonperformance by the other party to the financial instrument for loan commitments and standby letters of credit is represented by the contractual amount of those instruments. PNB uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Since many of
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the loan commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan commitments to customers.
 
The total amounts of off-balance sheet financial instruments with credit risk were as follows:
(In thousands)(In thousands)September 30,
2021
December 31, 2020(In thousands)June 30,
2022
December 31, 2021
Loan commitmentsLoan commitments$1,379,838 $1,372,182 Loan commitments$1,422,968 $1,364,224 
Standby letters of creditStandby letters of credit$19,641 $17,015 Standby letters of credit$23,276 $18,216 
 
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ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Management reviews interest rate sensitivity on a monthly 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. Management continues to believe that further changes in interest rates will have a small impact on net income, consistent with the disclosure on page 8379 of Park’s 20202021 Form 10-K.
 
On page 8178 (Table 41)38) of Park’s 20202021 Form 10-K, management reported that Park’s twelve-month cumulative rate sensitivity gap was a positive (assets exceeding liabilities) $1,294.6$1,895.3 million or 15.29%21.70% of total interest earning assets at December 31, 2020.2021. At SeptemberJune 30, 2021,2022, Park’s twelve-month cumulative rate sensitivity gap was a positive (assets exceeding liabilities) $1,871.8$1,589.0 million or 20.3%17.53% 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 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 8379 of Park’s 20202021 Form 10-K, management reported that at December 31, 2020, the earnings simulation model projected that net income would decrease by 2.9% using a rising interest rate scenario and decrease by 8.8% using a declining interest rate scenario over the next year. At September 30, 2021, the earnings simulation model projected that net income would increase by 6.6%7.5% using a rising interest rate scenario and decrease by 15.1% using a declining interest rate scenario over the next year. At June 30, 2022, the earnings simulation model projected that net income would increase by 3.7% using a rising interest rate scenario and would decrease by 13.5%7.4% in a declining interest rate scenario. At SeptemberJune 30, 2021,2022, management continues to believe that gradual changes in interest rates (50 basis points per quarter for a total of 200 basis points per year) will have a small impact on net income.
 
ITEM 4 – CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures
 
With the participation of the Chairman of the Board and Chief Executive Officer (the principal executive officer) and the Chief Financial Officer, Secretary and Treasurer (the principal financial officer) of Park, Park’s management has evaluated the effectiveness of Park’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of theJune 30, 2022 (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 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 theJune 30, 2022 (the end of the quarterly period covered by this Quarterly Report on Form 10-Q.10-Q).



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Changes in Internal Control Over Financial Reporting
Effective January 1, 2021, Park adopted the CECL accounting guidance under ASU 2016-13 and ASC 326. The Company designed new controls and modified existing controls as part of this adoption to ensure compliance with the revised accounting and disclosure requirements. These additional controls over financial reporting included controls over model creation and design, model governance, assumptions, and expanded controls over loan level data.

There were no changes in Park's internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during Park's fiscal quarter ended SeptemberJune 30, 2021,2022, that have materially affected, or are reasonably likely to materially affect, Park's internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1.       Legal Proceedings

    There are no pending legal proceedings to which Park or any of its subsidiaries is a party or to which any of their property is subject, except for routine legal proceedings which Park's subsidiaries are parties to incidental to their respective businesses. Park considers none of those proceedings to be material.

Item 1A.     Risk Factors
 
There are certain risks and uncertainties in our business that could cause Park's actual results to differ materially from those anticipated. In “ITEM 1A. RISK FACTORS” of Part I of Park’s 20202021 Form 10-K, we included a detailed discussion of our risk factors. All of these risk factors should be read carefully in connection with evaluating Park's business and in connection with the forward-looking statements contained in this Quarterly Report on Form 10-Q. Any of the risks described in Park's 20202021 Form 10-K 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.

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

(a)Not applicable
(b)Not applicable
(c)The following table provides information concerning purchases of Park’s common shares ("Common Shares") made by or on behalf of Park or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Exchange Act, during the three months ended SeptemberJune 30, 2021,2022, as well as the maximum number of common sharesCommon Shares that may be purchased under Park’s previously announced stock repurchase authorizations to fund the 2017 Long-Term Incentive Plan for Employees (the "2017 Employees LTIP") and the 2017 Long-Term Incentive Plan for Non-Employee Directors (the "2017 Non-Employee Directors LTIP") and Park's previously announced 2017 and 2019 stock repurchase authorizations:
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)
July 1 through July 31, 2021— $— — 1,332,747 
August 1 through August 31, 202175,000 118.21 75,000 1,257,747 
September 1 through September 30, 202162,659 114.60 62,659 1,195,088 
Total137,659 $116.57 137,659 1,195,088 
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)
April 1 through April 30, 2022— $— — 1,195,088 
May 1 through May 31, 2022— — — 1,195,088 
June 1 through June 30, 2022— — — 1,195,088 
Total— $— — 1,195,088 
(1)The number shown represents, as of the end of each period, the maximum number of Common Shares that may yet be purchased as part of Park’s publicly announced stock repurchase authorizations to fund the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP, both of which became effective on April 24, 2017; Park's publicly announced stock repurchase authorization covering 500,000 Common Shares which was announced on January 23, 2017; and Park's stock repurchase authorization covering 500,000 Common Shares which was announced on January 28, 2019 and as to which approval from the Federal Reserve was obtained in the form of correspondence from the Federal Reserve Bank of Cleveland dated April 19, 2019.
 
    At the 2017 Annual Meeting of Shareholders held on April 24, 2017, Park's shareholders approved the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP. The Common Shares to be issued and delivered under the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP may consist of either Common Shares currently held or Common Shares subsequently acquired by Park as treasury shares. No newly-issued Common Shares will be delivered under the 2017 Employees LTIP or the 2017 Non-Employee Directors LTIP. On April 24, 2017, Park's Board of Directors authorized the purchase, from time to time, of up to 750,000 Park Common Shares and 150,000 Park Common Shares, respectively, to be held
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as treasury shares for subsequent issuance and delivery under the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP.

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

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

Item 4.      Mine Safety Disclosures
 
Not applicable.

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

Item 6.      Exhibits
 
2.1
2.2
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)
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3.1(d)
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3.1(e)
3.1(f)
3.1(g)
3.1(h)
3.1(i)
Articles of Incorporation of Park National Corporation [This document represents the Articles of Incorporation of Park National Corporation in compiled form incorporating all amendments. This compiled document has not been filed with the Ohio Secretary of State.] (Incorporated(Incorporated herein by reference to Exhibit 3.1(h)3.1(i) to Park National Corporation’sCorporation's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 20112022 (File No. 1-13006) ("Park's March 31, 2022 Form 10-Q"))
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)
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3.2(f)Regulations of Park National Corporation [This document represents the Regulations of Park National Corporation in compiled form incorporating all amendments]amendments, including those adopted by the shareholders of Park National Corporation on April 25, 2022] (Incorporated herein by reference to Exhibit 3.2(e)3.2(f) to Park’sPark's March 31, 20082022 Form 10-Q)
31.1
31.2
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32.1
32.2
101The following information from Park’s Quarterly Report on Form 10-Q for the quarterly period ended SeptemberJune 30, 20212022 formatted in Inline XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Condensed Balance Sheets as of SeptemberJune 30, 20212022 and December 31, 20202021 (unaudited); (ii) the Consolidated Condensed Statements of Income for the three months and ninesix months ended SeptemberJune 30, 20212022 and 20202021 (unaudited); (iii) the Consolidated Condensed Statements of Comprehensive (Loss) Income for the three months and ninesix months ended SeptemberJune 30, 20212022 and 20202021 (unaudited); (iv) the Consolidated Condensed Statements of Changes in Shareholders’ Equity for the three months and ninesix months ended SeptemberJune 30, 20212022 and 20202021 (unaudited); (v) the Consolidated Condensed Statements of Cash Flows for the ninesix months ended SeptemberJune 30, ,2022 and 2021 and 2020 (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)


*Annexes, schedules and exhibits have been omitted pursuant to Item 601(b)(2) of SEC Regulation S-K, as in effect at the time of filing of the Agreement and Plan of Merger and Reorganization, and Item 601(a)(5) of SEC Regulation S-K, as currently in effect. A copy of any omitted attachment will be furnished supplementally to the SEC or the SEC's staff upon its request.

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

P Park National Corporation filed this exhibit with the SEC in paper form originally and this exhibit has not been filed with the SEC in electronic format.





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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
  PARK NATIONAL CORPORATION
   
DATE: November 3, 2021August 1, 2022 /s/ David L. Trautman
  David L. Trautman
  Chairman of the Board and Chief Executive Officer
  (Principal Executive Officer and Duly Authorized Officer)
   
DATE: November 3, 2021August 1, 2022 /s/ Brady T. Burt
  Brady T. Burt
  Chief Financial Officer, Secretary and Treasurer
(Principal Financial Officer and Duly Authorized Officer)


111107