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What changed in PARK NATIONAL CORP /OH/'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of PARK NATIONAL CORP /OH/'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+461 added−549 removedSource: 10-K (2024-02-23) vs 10-K (2023-03-01)

Top changes in PARK NATIONAL CORP /OH/'s 2023 10-K

461 paragraphs added · 549 removed · 376 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

95 edited+23 added−17 removed207 unchanged
Biggest changeFurthermore, once final rules are adopted, the Cyber Incident Reporting for Critical Infrastructure Act, enacted in March 2022, will require certain covered entities to report a covered cyber incident to the U.S. Department of Homeland Security’s Cybersecurity & Infrastructure Security Agency (“CISA”) within 72 hours after a covered entity reasonably believes an incident has occurred.
Biggest changeThese SEC rules, and any other regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking law and regulations Furthermore, once final rules are adopted, the Cyber Incident Reporting for Critical Infrastructure Act, enacted in March 2022, will require certain covered entities to report a covered cyber incident to the U.S.
Under the terms of the Indenture governing the $15.5 million of junior subordinated notes issued by Vision to the Vision Trust and the related Guarantee Agreement, Park, as successor to Vision in accordance with the First Supplemental Indenture, is prohibited, subject to limited exceptions, from declaring or paying any dividends or distributions on any shares of its capital stock: (i) if an event of default under the Indenture has occurred and continues; (ii) if Park is in default with respect to -15- the payment of any obligations under the Guarantee Agreement; or (iii) during any period in which the payment of interest on the junior subordinated notes by Park (and the payment of cash distributions on the floating rate preferred securities of the Vision Trust) is being deferred.
Under the terms of the Indenture governing the $15.5 million of junior subordinated notes issued by Vision to the Vision Trust and the related Guarantee Agreement, Park, as successor to Vision in accordance with the First Supplemental Indenture, is prohibited, subject to limited exceptions, from declaring or paying any dividends or distributions on any shares of its capital stock: (i) if an event of default under the Indenture has occurred and continues; (ii) if Park is in default with respect to the payment of any obligations under the Guarantee Agreement; or (iii) during any period in which the payment of interest on the junior subordinated notes by Park (and the payment of cash distributions on the floating rate preferred securities of the Vision Trust) is being deferred.
Consumer Protection Laws and Regulations Banks are subject to regular examination to ensure compliance with federal consumer protection statutes and regulations, including, but not limited to, the following: • Equal Credit Opportunity Act (prohibiting discrimination in any credit transaction on the basis of any of various criteria) • Truth in Lending Act (requiring that credit terms be disclosed in a manner that permits a consumer to understand and compare credit terms more readily and knowledgeably) • Fair Housing Act (making it unlawful for a lender to discriminate in its housing-related lending activities against any person on the basis of certain criteria) • Home Mortgage Disclosure Act (requiring financial institutions to collect data that enables regulatory agencies to determine whether financial institutions are serving the housing credit needs of the communities in which they are located) • Real Estate Settlement Procedures Act (requiring that lenders provide borrowers with disclosures regarding the nature and cost of real estate settlements and prohibits abusive practices that increase borrowers' costs) • Fair Credit Reporting Act (governing the provision of consume information to credit reporting agencies and the use of consumer information) -19- • Fair Debt Collection Practices Act (governing the manner in which consumer debts may be collected by collection agencies) • Truth in Savings Act (requiring disclosure of deposit terms to consumers) • Electronic Funds Transfer Act (governing automatic deposits to and withdrawals from deposit accounts and customers' rights and liabilities arising from the use of ATMs and other electronic banking services) The bank regulators also use their authority under the Federal Trade Commission Act to take supervisory or enforcement action with respect to unfair or deceptive acts or practices by banks that may not necessarily fall within the scope of a specific banking or consumer finance law.
Consumer Protection Laws and Regulations Banks are subject to regular examination to ensure compliance with federal consumer protection statutes and regulations, including, but not limited to, the following: • Equal Credit Opportunity Act (prohibiting discrimination in any credit transaction on the basis of any of various criteria) • Truth in Lending Act (requiring that credit terms be disclosed in a manner that permits a consumer to understand and compare credit terms more readily and knowledgeably) • Fair Housing Act (making it unlawful for a lender to discriminate in its housing-related lending activities against any person on the basis of certain criteria) • Home Mortgage Disclosure Act (requiring financial institutions to collect data that enables regulatory agencies to determine whether financial institutions are serving the housing credit needs of the communities in which they are located) • Real Estate Settlement Procedures Act (requiring that lenders provide borrowers with disclosures regarding the nature and cost of real estate settlements and prohibits abusive practices that increase borrowers' costs) • Fair Credit Reporting Act (governing the provision of consumer information to credit reporting agencies and the use of consumer information) • Fair Debt Collection Practices Act (governing the manner in which consumer debts may be collected by collection agencies) • Truth in Savings Act (requiring disclosure of deposit terms to consumers) • Electronic Funds Transfer Act (governing automatic deposits to and withdrawals from deposit accounts and customers' rights and liabilities arising from the use of ATMs and other electronic banking services) The bank regulators also use their authority under the Federal Trade Commission Act to take supervisory or enforcement action with respect to unfair or deceptive acts or practices by banks that may not necessarily fall within the scope of a specific banking or consumer finance law.
Services Provided by Park’s Subsidiaries Park National Bank provides the following principal services: • the acceptance of deposits for demand, savings and time accounts and the servicing of those accounts; • commercial, industrial, consumer and real estate lending, including installment loans, credit cards (which are offered through a third party), home equity lines of credit and commercial leasing; • a national portfolio of loans to non-bank consumer finance companies; • trust and wealth management services; • aircraft financing; • cash management; • safe deposit operations; • electronic funds transfers; • internet and mobile banking solutions with bill pay service; and • ParkDirect, a personal banking app.
Services Provided by Park’s Subsidiaries Park National Bank provides the following principal services: • the acceptance of deposits for demand, savings and time accounts and the servicing of those accounts; • commercial, industrial, consumer and real estate lending, including installment loans, credit cards (which are offered through a third party), home equity lines of credit and commercial leasing; • a national portfolio of loans to non-bank consumer finance companies; • trust and wealth management services; • aircraft financing; • cash management; -4- • safe deposit operations; • electronic funds transfers; • internet and mobile banking solutions with bill pay service; and • ParkDirect, a personal banking app.
The Basel III Capital Rules also place restrictions on the payment of capital distributions, including dividends and stock repurchases, and certain discretionary bonus payments to executive officers if the banking organization does not hold a capital conservation buffer of greater than 2.5% composed of common equity tier 1 capital above its minimum risk-based -13- capital requirements, or if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5% at the beginning of the quarter.
The Basel III Capital Rules also place restrictions on the payment of capital distributions, including dividends and stock repurchases, and certain discretionary bonus payments to executive officers if the banking organization does not hold a capital conservation buffer of greater than 2.5% composed of common equity tier 1 capital above its minimum risk-based capital requirements, or if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5% at the beginning of the quarter.
In the event Park’s total consolidated assets exceed $10.0 billion for four consecutive quarters, Park National Bank will become subject to the FDIC’s large bank pricing methodology, which may result in a different, and potentially higher, assessment rate. -12- Federal Home Loan Bank The Federal Home Loan Banks (“FHLB”) provide credit to their members in the form of advances.
In the event Park’s total consolidated assets exceed $10.0 billion for four consecutive quarters, Park National Bank will become subject to the FDIC’s large bank pricing methodology, which may result in a different, and potentially higher, assessment rate. Federal Home Loan Bank The Federal Home Loan Banks (“FHLB”) provide credit to their members in the form of advances.
Park employs an in-depth, layered, defensive approach that leverages people, processes, encryption and multi-factor authentication technology to manage and maintain cybersecurity controls. Park employs a variety of preventative and detective tools to monitor, block and provide alerts regarding suspicious activity, as well as to report on any suspected advanced persistent threats.
Park employs an in-depth, layered, defensive approach that leverages people, processes, encryption and multi-factor authentication technology to manage and maintain cybersecurity controls. Park employs a variety of preventative and detective tools to monitor, block and provide alerts regarding suspicious activity, as well as to report on any -17- suspected advanced persistent threats.
Park’s management believes that Park National Bank meets the ratio requirements to be deemed “well-capitalized” according to the guidelines described above. See "Note 28 - Capital Ratios" of -14- the Notes to Consolidated Financial Statements found in "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" of this Annual Report on Form 10-K.
Park’s management believes that Park National Bank meets the ratio requirements to be deemed “well-capitalized” according to the guidelines described above. See "Note 28 - Capital Ratios" of the Notes to Consolidated Financial Statements found in "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" of this Annual Report on Form 10-K.
The credit information required generally includes, depending on the amount of money lent, financial statements, third-party prepared financial statements, two years of federal income tax returns and a current credit report. Loan terms include amortization schedules commensurate with the purpose of each loan, identification of the source of each repayment and the risk involved.
The credit information required -5- generally includes, depending on the amount of money lent, financial statements, third-party prepared financial statements, two years of federal income tax returns and a current credit report. Loan terms include amortization schedules commensurate with the purpose of each loan, identification of the source of each repayment and the risk involved.
This system is based on five capital level categories for insured depository institutions: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” The federal banking agencies may (or in some cases must) take certain supervisory actions depending upon a bank’s capital level.
This system is based on five capital level categories for insured depository -14- institutions: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” The federal banking agencies may (or in some cases must) take certain supervisory actions depending upon a bank’s capital level.
Park believes the nature of the operations of Park's subsidiaries has little, if any, environmental impact. As a result, Park, anticipates no material capital expenditures for environmental control facilities for Park's current fiscal year or for the foreseeable future. -20- Park believes its primary exposure to environmental risk is through the lending activities of Park's subsidiaries.
Park believes the nature of the operations of Park's subsidiaries has little, if any, environmental impact. As a result, Park, anticipates no material capital expenditures for environmental control facilities for Park's current fiscal year or for the foreseeable future. Park believes its primary exposure to environmental risk is through the lending activities of Park's subsidiaries.
Although the FDIC's rules reduced assessment rates on all banks, they imposed a surcharge on banks with assets of $10.0 billion or more to be paid until the DRR reached 1.35%. The DRR reached 1.35% on September 30, 2018. As a result, the previous surcharge imposed on banks with assets of $10.0 billion or more was lifted.
Although the FDIC's rules reduced assessment rates on all banks, they imposed a surcharge on banks with assets of $10.0 billion or more to be paid until the DRR reached 1.35%. The DRR reached 1.35% on September 30, 2018. As a result, the previous surcharge imposed on banks with assets of $10.0 billion or more was -12- lifted.
Financial Privacy Provisions Federal and state regulations limit the ability of banks and other financial institutions to disclose non-public information about consumers to non-affiliated third parties. These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a non-affiliated third party.
Financial Privacy Provisions Federal and state regulations limit the ability of banks and other financial institutions to disclose non-public information about consumers to non-affiliated third parties. These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a non- -16- affiliated third party.
The Financial Services Modernization Act defines “financial in nature” to include: • securities underwriting, dealing and market making; • sponsoring mutual funds and investment companies; • insurance underwriting and agency; • merchant banking; and • activities that the Federal Reserve Board has determined to be closely related to banking.
The Financial Services Modernization Act defines “financial in nature” to include: • securities underwriting, dealing and market making; -10- • sponsoring mutual funds and investment companies; • insurance underwriting and agency; • merchant banking; and • activities that the Federal Reserve Board has determined to be closely related to banking.
If a financial holding company or a subsidiary bank fails to maintain all requirements for the holding company to -10- maintain financial holding company status, material restrictions may be placed on the activities of the holding company and its subsidiaries and on the ability of the holding company to enter into certain transactions and obtain regulatory approvals for new activities and transactions.
If a financial holding company or a subsidiary bank fails to maintain all requirements for the holding company to maintain financial holding company status, material restrictions may be placed on the activities of the holding company and its subsidiaries and on the ability of the holding company to enter into certain transactions and obtain regulatory approvals for new activities and transactions.
Park’s subsidiaries compete with other local, regional and national service providers, including banks, savings associations, credit unions and other types of financial institutions and -8- finance companies. Other competitors include securities dealers, brokers, mortgage bankers, investment advisors and financial services subsidiaries of commercial and manufacturing companies.
Park’s subsidiaries compete with other local, regional and national service providers, including banks, savings associations, credit unions and other types of financial institutions and finance companies. Other competitors include securities dealers, brokers, mortgage bankers, investment advisors and financial services subsidiaries of commercial and manufacturing companies.
The guarantee of the business owners/principals is generally required on loans made to closely-held business entities. -5- Commercial real estate loans (“CRE loans”) include mortgage loans to developers and owners of commercial real estate. The lending policy for CRE loans is designed to address the unique risk attributes of CRE lending.
The guarantee of the business owners/principals is generally required on loans made to closely-held business entities. Commercial real estate loans (“CRE loans”) include mortgage loans to developers and owners of commercial real estate. The lending policy for CRE loans is designed to address the unique risk attributes of CRE lending.
The customers of Scope Aircraft Finance include small businesses and entrepreneurs who utilize the aircraft for business or pleasure. Scope Aircraft Finance serves customers throughout the U.S. and Canada. Vision Bancshares Trust I In connection with the merger of Vision Bancshares, Inc.
The customers of Scope Aircraft Finance include small businesses and entrepreneurs who utilize the aircraft for business or pleasure. Scope Aircraft Finance serves customers throughout the U.S. and Canada. -3- Vision Bancshares Trust I In connection with the merger of Vision Bancshares, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Annual Report on Form 10-K. SEPH SEPH is a non-bank subsidiary of Park that holds OREO property and non-performing loans.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Annual Report on Form 10-K. -8- SEPH SEPH is a non-bank subsidiary of Park that holds OREO property and non-performing loans.
These asset-based loans are collateralized by cash flows from individuals, typically auto loans issued by a consumer finance company that is, in turn, a borrower from Park National Bank.
These asset-based loans are collateralized by cash flows from -6- individuals, typically auto loans issued by a consumer finance company that is, in turn, a borrower from Park National Bank.
The underwriting of generally all commercial loans, regardless of type, includes cash flow analyses with rates shocked by 400 basis points. In the case of commercial loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of each borrower to collect amounts due from the borrower's customers.
The underwriting of generally all commercial loans, regardless of type, includes cash flow analyses with rates shocked by 300 basis points. In the case of commercial loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of each borrower to collect amounts due from the borrower's customers.
Park has an independent, internal loan review program which annually evaluates all loans greater than $1.0 million, all new loans greater than $1.0 million in its metropolitan markets of Columbus, Ohio, Cincinnati, Ohio, Louisville, Kentucky, and Charlotte, North Carolina, all new loans greater than $500,000 in all other markets, and a risk-based sample of loans less than $1.0 million.
Park has an independent, internal loan review program which annually evaluates all commercial loan relationships greater than $1.0 million, all new commercial loans greater than $1.0 million in its metropolitan markets of Columbus, Ohio; Cincinnati, Ohio; Louisville, Kentucky; and Charlotte, North Carolina, all new commercial loans greater than $500,000 in all other markets, and a risk-based sample of commercial relationships less than $1.0 million.
The AMLA is intended to be a comprehensive reform and modernization to U.S. bank secrecy -17- and anti-money laundering laws.
The AMLA is intended to be a comprehensive reform and modernization to U.S. bank secrecy and anti-money laundering laws.
At December 31, 2022, Park National Bank had no concentration of loans to borrowers engaged in the same or similar industries that exceeded 10% of total loans nor did it have any loans outstanding to persons domiciled outside the U.S.
At December 31, 2023, Park National Bank had no concentration of loans to borrowers engaged in the same or similar industries that exceeded 10% of total loans nor did it have any loans outstanding to persons domiciled outside the U.S.
For more information concerning the loan maturity distribution in the CRE loan portfolio, please see "Table 15 - Loan Maturity Distribution" included in "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Annual Report on Form 10-K.
For more information concerning the loan maturity distribution in the CRE loan portfolio, please see "Table 8 - Loan Maturity Distribution" included in "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Annual Report on Form 10-K.
Park National Bank also originates fixed-rate real estate loans for sale to the secondary market. Park’s management may decide to retain certain 15-year, fixed-rate residential mortgage loans, rather than sell in the secondary market. Park's management made a decision to retain certain 15-year, fixed-rate residential mortgage loans in 2022.
Park National Bank also originates fixed-rate real estate loans for sale to the secondary market. Park’s management may decide to retain certain 15-year, fixed-rate residential mortgage loans, rather than sell in the secondary market. Park's management made a decision to retain certain 15-year, fixed-rate residential mortgage loans in 2023.
Information concerning the loan maturity distribution within the construction financing portfolio is provided in "Table 15 - Loan Maturity Distribution" included in "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS of this Annual Report on Form 10-K.
Information concerning the loan maturity distribution within the construction financing portfolio is provided in "Table 8 - Loan Maturity Distribution" included in "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS of this Annual Report on Form 10-K.
Repayment terms are structured such that commercial loans will be repaid within the economic useful life of the underlying asset. Information concerning the loan maturity distribution within the commercial loan portfolio is provided in "Table 15 - Loan Maturity Distribution" included in "ITEM 7.
Repayment terms are structured such that commercial loans will be repaid within the economic useful life of the underlying asset. Information concerning the loan maturity distribution within the commercial loan portfolio is provided in "Table 8 - Loan Maturity Distribution" included in "ITEM 7.
As of the date of this Annual Report on Form 10-K, Park National Bank operated 96 financial service offices, including 92 branches, in Ohio, Kentucky, North Carolina and South Carolina.
As of the date of this Annual Report on Form 10-K, Park National Bank operated 96 financial service offices, including 91 branches, in Ohio, Kentucky, North Carolina and South Carolina.
The revised rate schedules are intended to increase the likelihood that the DRR reaches the statutory minimum level of 1.35% by September 30, 2028. As of December 31, 2022, the DRR remained below the statutory minimum of 1.35%.
The revised rate schedules are intended to increase the likelihood that the DRR reaches the statutory minimum level of 1.35% by September 30, 2028. As of December 31, 2023, the DRR remained below the statutory minimum of 1.35%.
Park National Bank delivers financial products and services through its 96 financial service offices and a network of 115 automated teller machines, as well as telephone and internet-based banking through both personal computers and mobile devices, including ParkDirect, a mobile bank experience. The reportable segment for the Corporation is PNB.
Park National Bank delivers financial products and services through its 96 financial service offices and a network of 115 automated teller machines, as well as telephone and internet-based banking through both personal computers and mobile devices, including ParkDirect, a mobile bank experience. There is one reportable segment for the Corporation.
The primary industries represented by these customers include real estate rental and leasing, finance and insurance, construction, health care and social assistance, accommodation and food services, manufacturing, other services, retail trade, and agriculture, forestry, fishing and hunting.
The primary industries represented by these customers include real estate rental and leasing, finance and insurance, construction, accommodation and food services, health care and social assistance, other services, manufacturing, retail trade, agriculture, forestry, fishing and hunting, and professional, scientific, and technical services.
The remaining $325 million was included within the construction real estate loan segment, which included $209 million of commercial land and development loans and $116 million of 1-4 family residential construction loans. The market area for real estate lending by Park National Bank is concentrated in Ohio, Kentucky, North Carolina and South Carolina.
The remaining $305 million was included within the construction real estate loan segment, which included $209 million of commercial land and development loans and $96 million of 1-4 family residential construction loans. The market area for real estate lending by Park National Bank is concentrated in Ohio, Kentucky, North Carolina and South Carolina.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" found in Annual Report on Form 10-K. Loans to Non-Bank Consumer Finance Companies At December 31, 2022, Park National Bank had $417 million in loans outstanding to non-bank consumer finance companies. This is a national lending unit of Park National Bank.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" found in Annual Report on Form 10-K. Loans to Non-Bank Consumer Finance Companies At December 31, 2023, Park National Bank had $414 million in loans outstanding to non-bank consumer finance companies. This is a national lending unit of Park National Bank.
At December 31, 2022 and 2021, Park reported $550 -7- million and $573 million, respectively, of 15-year, fixed-rate residential mortgage loans on Park's Consolidated Balance Sheets. Real estate loans are typically secured by first mortgages with evidence of title in favor of the lender in the form of an attorney’s opinion of title or a title insurance policy.
At December 31, 2023 and 2022, Park reported $551 million and $550 million, respectively, of 15-year, fixed-rate residential mortgage loans on Park's Consolidated Balance Sheets. Real estate loans are typically secured by first mortgages with evidence of title in favor of the lender in the form of an attorney’s opinion of title or a title insurance policy.
This clawback policy is intended to apply to compensation paid within the three completed fiscal years immediately preceding the date the issuer is required to prepare a restatement and would cover all executives (including former executives) who received incentive awards.
This clawback policy is intended to apply to compensation paid within the three completed fiscal years immediately preceding the date the issuer is required to prepare a restatement and would cover all executives (including former executives) who received incentive awards. Park has adopted and implemented a clawback policy.
Park’s principal business consists of owning and supervising its subsidiaries. Although Park directs the overall policies of its subsidiaries, including lending policies and financial resources, most day-to-day affairs are managed by the respective officers of Park’s subsidiaries. Human Capital Park is a family of community banking teams that deliver an exceptional breadth and depth of resources to individuals and businesses.
Park’s principal business consists of owning and supervising its subsidiaries. Although Park directs the overall policies of its subsidiaries, including lending policies and financial resources, most day-to-day affairs are managed by the respective officers of Park’s subsidiaries. Human Capital Park is a community banking team that delivers an exceptional breadth and depth of resources to individuals and businesses.
The lending officers of Scope Aircraft Finance are experienced in the aircraft financing industry and rely upon such experience and certain industry guides in determining whether to grant an aircraft loan or lease. At -6- December 31, 2022, Scope Aircraft Finance had $296 million in loans outstanding, primarily secured by aircraft (which are included in the commercial loan portfolio).
The lending officers of Scope Aircraft Finance are experienced in the aircraft financing industry and rely upon such experience and certain industry guides in determining whether to grant an aircraft loan or lease. At December 31, 2023, Scope Aircraft Finance had $295 million in loans outstanding, primarily secured by aircraft (which are included in the commercial loan portfolio).
At December 31, 2022, Guardian Finance loans outstanding totaled $529,000. SE Property Holdings, LLC ("SEPH") SEPH is a limited liability company, organized in 2011 under the laws of the State of Ohio, and a direct subsidiary of Park.
At December 31, 2023, Guardian Finance loans outstanding totaled $101,000. SE Property Holdings, LLC ("SEPH") SEPH is a limited liability company, organized in 2011 under the laws of the State of Ohio, and a direct subsidiary of Park.
Information concerning the loan loss experience and the allocation of the allowance for credit losses related to the commercial, financial and agricultural loan portfolio, the commercial real estate portfolio and the commercial lease portfolio is provided in "Table 30 - Summary of Loan Credit Loss Experience" and "Table 32 - Allocation of Allowance for Credit Losses", respectively, included in "ITEM 7.
Information concerning the loan loss experience and the allocation of the allowance for credit losses related to the commercial, financial and agricultural loan portfolio, the commercial real estate portfolio and the commercial lease portfolio is provided in "Table 24 - Summary of Loan Credit Loss Experience" and "Table 26 - Allocation of Allowance for Credit Losses", respectively, included in "ITEM 7.
A change in statutes, regulations or regulatory policies applicable to Park and Park's subsidiaries could have a material effect on their respective businesses. -9- Regulation of Financial Holding Companies As a financial holding company, Park’s activities are subject to regulation by the Federal Reserve Board.
Congress and state legislatures and federal and state regulatory agencies. A change in statutes, regulations or regulatory policies applicable to Park and Park's subsidiaries could have a material effect on their respective businesses. Regulation of Financial Holding Companies As a financial holding company, Park’s activities are subject to regulation by the Federal Reserve Board.
Information concerning the loan credit loss experience and the allocation of the allowance for credit losses related to the residential real estate portfolio is provided in "Table 30 - Summary of Loan Credit Loss Experience" and "Table 32 - Allocation of Allowance for Credit Losses", respectively, included in "ITEM 7.
Information concerning the loan credit loss experience and the allocation of the allowance for credit losses related to the residential real estate portfolio is provided in "Table 24 - Summary of Loan Credit Loss Experience" and "Table 26 - Allocation of Allowance for Credit Losses", respectively, included in "ITEM 7.
Information concerning the loan credit loss experience and the allocation of the allowance for credit losses related to the construction financing portfolio is provided in "Table 30 - Summary of Loan Credit Loss Experience" and "Table 32 - Allocation of Allowance for Credit Losses", respectively, included in "ITEM 7.
Information concerning the loan credit loss experience and the allocation of the allowance for credit losses related to the construction financing portfolio is provided in "Table 24 - Summary of Loan Credit Loss Experience" and "Table 26 - Allocation of Allowance for Credit Losses", respectively, included in "ITEM 7.
Consumer Loans At December 31, 2022, Park's subsidiaries had outstanding consumer loans (including automobile loans) in an aggregate amount of $1,905 million, constituting approximately 26.7% of their aggregate total loan portfolio. Park makes installment credit available to customers and prospective customers in their primary market areas through direct and indirect loans.
Consumer Loans At December 31, 2023, Park's subsidiaries had outstanding consumer loans (including automobile loans) in an aggregate amount of $1,946 million, constituting approximately 26.0% of their aggregate total loan portfolio. Park makes installment credit available to customers and prospective customers in their primary market areas through direct and indirect loans.
Information concerning the loan credit loss experience and the allocation of the allowance for credit losses related to the consumer loan portfolio is provided in "Table 30 - Summary of Loan Credit Loss Experience" and "Table 32 - Allocation of Allowance for Credit Losses", respectively, included in "ITEM 7.
Information concerning the loan credit loss experience and the allocation of the allowance for credit losses related to the consumer loan portfolio is provided in "Table 24 - Summary of Loan Credit Loss Experience" and "Table 26 - Allocation of Allowance for Credit Losses", respectively, included in "ITEM 7.
Transactions with Affiliates, Directors, Executive Officers and Shareholders Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Board Regulation W generally: • limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10.0% of the bank's capital stock and surplus; • limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with all affiliates to an amount equal to 20.0% of the bank's capital stock and surplus; and • require that all such transactions be on terms substantially the same, or at least as favorable to the bank or subsidiary, as those provided to a non-affiliate.
Transactions with Affiliates, Directors, Executive Officers and Shareholders Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Board Regulation W generally: • limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10.0% of the bank's capital stock and surplus; • limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with all affiliates to an amount equal to 20.0% of the bank's capital stock and surplus; and • require that all such transactions be on terms substantially the same, or at least as favorable to the bank or subsidiary, as those provided to a non-affiliate. -11- An affiliate of a bank is any company or entity that controls, is controlled by or is under common control with the bank.
While Park National Bank has a loan limit of $144.0 million, the total exposure of the largest single borrower within the commercial portfolio was $75.0 million at December 31, 2022.
While Park National Bank has a loan limit of $150.0 million, the total exposure of the largest single borrower within the commercial portfolio was $75.0 million at December 31, 2023.
The regulatory limit for loans made to one borrower by Park National Bank was $144.0 million at December 31, 2022. Participations in a loan by Park National Bank in an amount larger than $47.0 million are generally sold to third-party banks or financial institutions.
The regulatory limit for loans made to one borrower by Park National Bank was $150.0 million at December 31, 2023. Participations in a loan by Park National Bank in an amount larger than $49.0 million are generally sold to third-party banks or financial institutions.
As of December 31, 2022, PII held municipal securities with an amortized cost of $423.3 million. NSCB 2, LLC, River Park Properties, LLC, Park ABQ, LLC, and X Holdings, LLC are subsidiaries of Park National Bank that hold certain OREO properties or other nonperforming assets.
As of December 31, 2023, PII held municipal securities with an amortized cost of $251.5 million. NSCB 2, LLC; River Park Properties, LLC; Park ABQ, LLC; and X Holdings, LLC are subsidiaries of Park National Bank that hold certain OREO properties or other nonperforming assets.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Annual Report on Form 10-K. Residential Real Estate and Construction Loans At December 31, 2022, Park's subsidiaries had outstanding approximately $2,122 million in construction real estate loans and residential real estate loans, representing approximately 29.7% of total loans outstanding.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Annual Report on Form 10-K. Residential Real Estate and Construction Loans At December 31, 2023, Park's subsidiaries had outstanding approximately $2,335 million in construction real estate loans and residential real estate loans, representing approximately 31.2% of total loans outstanding.
Associates value an -2- environment where they can grow personally and professionally. We believe that is why so many choose to build a career and stay with Park. Our voluntary turnover was 19% for 2022.
Associates value an environment where they can grow personally and professionally. We believe that is why so many choose to build a career and stay with Park. Our voluntary turnover was 14.9% for 2023.
By the end of 2022, 34% of our associates had been with our organization 10 years or more. Banking Operations Park’s banking operations are conducted through The Park National Bank, a national banking association ("Park National Bank" or "PNB").
By the end of 2023, 35% of our associates had been with our organization 10 years or more. Banking Operations Park’s banking operations are conducted through Park National Bank, a national banking association.
Park believes that the deposit mix of Park National Bank is currently such that no material portion has been obtained from a single customer and, consequently, the loss of any one customer of Park National Bank would not have a materially adverse effect on the business of Park National Bank. -4- Guardian Finance formerly provided consumer finance services.
Park believes that the deposit mix of Park National Bank is currently such that no material portion has been obtained from a single customer and, consequently, the loss of any one customer of Park National Bank would not have a materially adverse effect on the business of Park National Bank.
In addition to approximately $1.4 million in OREO property, SEPH also held non-performing loans that were fully charged off as of December 31, 2022, all of which were on nonaccrual status. SEPH has one office in Licking County, Ohio.
In addition to approximately $983,000 in OREO property, SEPH also held non-performing loans that were fully charged off as of December 31, 2023, all of which were on nonaccrual status. SEPH has one office in Licking County, Ohio.
During 2019, Guardian Finance stopped seeking new loans. Lending Activities Park National Bank deals with consumers and a wide cross-section of businesses and corporations located primarily in the 26 Ohio counties, one Kentucky county, four North Carolina counties and four South Carolina counties served by the financial service offices of Park National Bank.
Lending Activities Park National Bank deals with consumers and a wide cross-section of businesses and corporations located primarily in the 26 Ohio counties, one Kentucky county, four North Carolina counties and four South Carolina counties served by the financial service offices of Park National Bank.
Our L&D team is a strategic business partner dedicated to supporting the organization and helping others meet their objectives. In 2022, this team continued building a strategic infrastructure for the development of associates aligned with overall business outcomes.
Our Learning and Development team is a strategic business partner dedicated to supporting the organization and helping associates meet their objectives. In 2023, this team continued building an infrastructure for the development of associates aligned with overall business outcomes.
Currently, the OCC is primarily responsible for examining Park National Bank’s compliance with the CFPB regulations and federal consumer financial protection laws. However, should Park’s total consolidated assets exceed $10.0 billion for four consecutive quarters, the CFPB will become primarily responsible for examining Park National Bank’s compliance with such laws and regulations.
However, should Park’s total consolidated assets exceed $10.0 billion for four consecutive quarters, the CFPB will become primarily responsible for examining Park National Bank’s compliance with such laws and regulations.
The commercial loan portfolio of Park’s current subsidiaries includes loans to a wide variety of corporations and businesses across many industrial classifications in the 26 Ohio counties, one Kentucky county, four North Carolina counties and four South Carolina counties where Park National Bank operates, with the exception of nationwide aircraft loans and nationwide asset-based lending to consumer finance companies.
The commercial loan portfolio of Park’s current subsidiaries includes loans to a wide variety of corporations and businesses across many industrial classifications in the counties where Park National Bank operates, with the exception of nationwide aircraft loans and nationwide asset-based lending to consumer finance companies.
Commercial Loans At December 31, 2022, Park’s subsidiaries (including Scope Aircraft Finance) had approximately $3,115 million in commercial loans (commercial, financial and agricultural loans and commercial real estate loans) and commercial leases outstanding, representing approximately 43.6% of their total aggregate loan portfolio as of that date.
Commercial Loans At December 31, 2023, Park’s subsidiaries (including Scope Aircraft Finance) had approximately $3,196 million in commercial loans (commercial, financial and agricultural loans and commercial real estate loans) and commercial leases outstanding, representing approximately 42.7% of their total aggregate loan portfolio as of that date.
Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements. Many states have also recently implemented or modified their data breach notification and data privacy requirements.
State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations. Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements. Many states have also recently implemented or modified their data breach notification and data privacy requirements.
Volcker Rule In December 2013, five federal agencies adopted a final regulation implementing the Volcker Rule provision of the Dodd-Frank Act (the "Volcker Rule"). The Volcker Rule placed limits on the trading activity of insured depository institutions and entities affiliated with depository institutions, subject to certain exceptions.
At December 31, 2023, the reserve requirement ratio remains at zero percent. Volcker Rule In December 2013, five federal agencies adopted a final regulation implementing the Volcker Rule provision of the Dodd-Frank Act (the "Volcker Rule"). The Volcker Rule placed limits on the trading activity of insured depository institutions and entities affiliated with depository institutions, subject to certain exceptions.
Financial technology companies, or "fintechs," are also providing nontraditional, but increasingly strong competition for our borrowers, depositors and other customers. Associates At December 31, 2022, Park and its subsidiaries had 1,794 active associates, consisting of 1,632 full-time and 162 part-time, resulting in 1,725 full-time equivalent associates.
Financial technology companies, or "fintechs," are also providing nontraditional, but increasingly strong competition for our borrowers, depositors and other customers. Associates At December 31, 2023, Park and its subsidiaries had 1,799 active associates, consisting of 1,653 full-time and 146 part-time, resulting in 1,782 full-time equivalent associates.
In addition, all subsidiary banks of a financial holding company must maintain a satisfactory or outstanding rating in order for the financial holding company to avoid limitations on its activities. Park National Bank received a rating of "satisfactory" in its latest CRA examination.
In addition, all subsidiary banks of a financial holding company must maintain a satisfactory or outstanding rating in order for the financial holding company to avoid limitations on its activities.
The CFPB is authorized to prevent unfair, deceptive or abusive acts or practices and ensures consistent enforcement of laws so that consumers have access to fair, transparent and competitive markets for consumer financial products and services. Since its establishment, the CFPB has extensively exercised its rulemaking and interpretative authority.
The CFPB is authorized to prevent unfair, deceptive or abusive acts or practices and ensures consistent enforcement of laws so that consumers have access to fair, transparent and competitive markets for consumer financial products and services.
Compensation & Benefits Our compensation program includes market-aligned salary grades, an annual incentive compensation program for eligible associates, referral and rewards incentive programs available to associates based on job function, a long-term incentive plan ("LTIP") for select associates, and premium pay for associates working extended hours.
Our compensation program includes market-aligned salary grades, an annual incentive compensation program for eligible associates, referral and rewards incentive programs available to associates based on job function, a long-term incentive plan ("LTIP") for select associates, and premium pay for associates working extended hours. Park offers comprehensive benefit options to encourage and support associates to live healthy and financially secure lives.
Of this amount, approximately $1,301 million represented commercial, financial and agricultural loans, $1,794 million represented commercial real estate loans, and $20 million represented commercial leases.
Of this amount, approximately $1,296 million represented commercial, financial and agricultural loans, $1,876 million represented commercial real estate loans, and $24 million represented commercial leases.
Tier 1 capital generally consists of common equity as defined for the common equity tier 1 capital ratio, plus certain non-cumulative preferred stock and related surplus, cumulative preferred stock and related surplus, trust preferred securities that have been grandfathered (but which are not otherwise permitted), and limited amounts of minority interests in the form of additional tier 1 capital instruments, less certain deductions.
Tier 1 capital generally consists of common equity as defined for the common equity tier 1 capital ratio, plus certain non-cumulative preferred stock and related surplus, cumulative preferred stock and related surplus, trust preferred securities that have been grandfathered (but which are not otherwise permitted), and limited amounts of minority interests in the form of additional tier 1 capital instruments, less certain deductions. -13- Tier 2 capital, which can be included in the total capital ratio, generally consists of other preferred stock and subordinated debt meeting certain conditions plus limited amounts of the allowance for credit losses, subject to specified eligibility criteria, less applicable deductions.
The Federal Reserve Board has also issued a policy statement with regard to the payment of cash dividends by financial holding companies and other bank holding companies.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" of this Annual Report on Form 10-K. -15- The Federal Reserve Board has also issued a policy statement with regard to the payment of cash dividends by financial holding companies and other bank holding companies.
Of the $2,122 million, approximately $1,797 million was included within the residential real estate loan segment, which included $550 million of commercial loans secured by residential real estate, $1,076 million of mortgage loans, $167 million of home equity lines of credit and $4 million of installment loans.
Of the $2,335 million, approximately $2,030 million was included within the residential real estate loan segment, which included $609 million of commercial loans secured by residential real estate, $1,240 million of mortgage loans, $174 million of home equity lines of credit and $6 million of installment loans.
The following information describes selected federal and state statutory and regulatory provisions and is qualified in its entirety by reference to the full text of such provisions. These statutes and regulations are continually under review by the U.S. Congress and state legislatures and federal and state regulatory agencies.
As a subsidiary of Park, SEPH is also subject to inspection, examination and supervision by the Federal Reserve Board. The following information describes selected federal and state statutory and regulatory provisions and is qualified in its entirety by reference to the full text of such provisions. These statutes and regulations are continually under review by the U.S.
At December 31, 2022, approximately $121.4 million of the total shareholders’ equity of Park National Bank was available for payment to Park without the approval of the OCC. See "Note 25 - Dividend Restrictions" of the Notes to Consolidated Financial Statements found in "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" of this Annual Report on Form 10-K.
At December 31, 2023, approximately $112.9 million of the total shareholders’ equity of Park National Bank was available for payment to Park without the approval of the OCC. See "Note 25 - Dividend Restrictions" of the Notes to Consolidated Financial Statements found in "ITEM 8.
Park uses several indices for commercial loans that help determine loan interest rates, but the national prime rate is the most common index used.
Park uses several indices for commercial loans that help determine loan interest rates, but the national prime rate and short-term FHLB of Cincinnati advance rates are the most common indices used.
Park National Bank generally requires that the residential real estate loan amount be no more than 80% of the purchase price or the appraised value of the real estate securing the loan, whichever is less, unless private mortgage insurance is obtained by the borrower.
All loans receiving a risk classification of caution require review by a senior lender and generally require additional documentation if the loan is approved. -7- Park National Bank generally requires that the residential real estate loan amount be no more than 80% of the purchase price or the appraised value of the real estate securing the loan, whichever is less, unless private mortgage insurance is obtained by the borrower.
Guardian Finance, a subsidiary of Park and an Ohio state-chartered consumer finance company, is subject to regulation, supervision and examination by the Ohio Division of Financial Institutions (the "ODFI") and the Federal Reserve Board. As a subsidiary of Park, SEPH is also subject to inspection, examination and supervision by the Federal Reserve Board.
Since its establishment, the CFPB has extensively exercised its rulemaking and interpretative authority. -9- Guardian Finance, a subsidiary of Park and an Ohio state-chartered consumer finance company, is subject to regulation, supervision and examination by the Ohio Division of Financial Institutions (the "ODFI") and the Federal Reserve Board.
Career Pathways and Professional Development Through Learning & Development ("L&D"), we work to foster professional growth by providing development opportunities to maximize associate performance, strengthen engagement and drive our competitive advantage. We enhance associates' knowledge and skills with high-quality, accessible training and professional development opportunities to support Park's mission of promoting long-term prosperity of the people and organizations we serve.
Our associates have the freedom to own their journey through genuine support from their leaders. We provide development opportunities to maximize associate performance, strengthen engagement, and drive our competitive advantage. We enhance associates' knowledge and skills with high-quality, accessible training and professional development opportunities to support Park's mission of promoting long-term prosperity of the people and organizations we serve.
In addition, the amount of loans a bank may make to these persons is based, in part, on the bank’s capital position, and specified approval procedures must be followed in making loans which exceed specified amounts. -11- Regulation of Nationally-Chartered Banks As a national banking association, Park National Bank is subject to regulation under the National Bank Act and is periodically examined by the OCC.
In addition, the amount of loans a bank may make to these persons is based, in part, on the bank’s capital position, and specified approval procedures must be followed in making loans which exceed specified amounts.
Through these contractual obligations, Park has fully and unconditionally guaranteed all of the Vision Trust’s obligations with respect to the floating rate preferred securities. -3- Both the junior subordinated notes and the floating rate preferred securities mature on December 30, 2035 (which maturity may be shortened), and carry a floating interest rate per annum, reset quarterly, equal to the sum of three-month LIBOR plus 148 basis points.
Both the junior subordinated notes and the floating rate preferred securities mature on December 30, 2035 (which maturity may be shortened), and carried a floating interest rate per annum, reset quarterly, equal to the sum of three-month LIBOR plus 148 basis points until the cessation of LIBOR on June 30, 2023.
The OCC has broad enforcement powers over national banks, including the power to impose fines and other civil and criminal penalties and to appoint a conservator or receiver if any of a number of conditions are met. The CFPB regulates consumer financial products and services provided by Park National Bank through regulations designed to protect consumers.
In addition, the establishment of branches by Park National Bank is subject to prior approval of the OCC. The OCC has broad enforcement powers over national banks, including the power to impose fines and other civil and criminal penalties and to appoint a conservator or receiver if any of a number of conditions are met.
OCC regulations govern permissible activities, capital requirements, dividend limitations, investments, loans and other matters. Furthermore, Park National Bank is subject, as a member bank, to certain rules and regulations of the Federal Reserve Board, many of which restrict activities and prescribe documentation to protect consumers. Park National Bank is an insured depository institution and a member of the DIF.
Furthermore, Park National Bank is subject, as a member bank, to certain rules and regulations of the Federal Reserve Board, many of which restrict activities and prescribe documentation to protect consumers. Park National Bank is an insured depository institution and a member of the DIF. As a result, it is subject to regulation and deposit insurance assessments by the FDIC.
Although a final rule has not been issued, Park and Park National Bank have undertaken efforts to ensure that their incentive compensation plans do not encourage inappropriate risks, consistent with the principles identified above. -18- In June 2010, the Federal Reserve Board, the OCC and the FDIC issued comprehensive final guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking.
In June 2010, the Federal Reserve Board, the OCC and the FDIC issued comprehensive final guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which we originated, funded or serviced the PPP loan, the SBA may deny the SBA's liability under the guaranty, reduce the amount of the guaranty, or, if the SBA has already paid under the guaranty, seek recovery of any loss related to the deficiency. -21- Changes in economic and political conditions could adversely affect our earnings and capital through declines in deposits, quality of investment securities, loan demand, our borrowers’ ability to repay loans, and the value of the collateral securing our loans.
Biggest changeChanges in economic and political conditions could adversely affect our earnings and capital through declines in deposits, quality of investment securities, loan demand, our borrowers’ ability to repay loans, and the value of the collateral securing our loans.
Any such expansion of our business will involve a number of expenses and risks, which may include: • the time and expense associated with identifying and evaluating potential expansions; • the potential inaccuracy of estimates and judgments used to evaluate credit, operations, management and market risk with respect to target financial institutions; • potential exposure to unknown or contingent liabilities of the target financial institution; • exposure to potential asset quality issues of the target financial institution; • the time and costs of evaluating new markets, hiring local management and opening new offices, and the delay between commencing these activities and the generation of profits from the expansion; • our financing of the expansion; • the diversion of management’s attention to the negotiation of a transaction and the integration of the operations and personnel of the combining businesses; • risks associated with entry into unfamiliar markets; • the introduction of new products and services into our existing business; • the incurrence and possible impairment of goodwill associated with an acquisition and possible adverse short-term effects on our results of operations; • the risk of loss of key employees and customers; • the risk associated with differing company cultures; and • difficulty in receiving appropriate regulatory approval for any proposed transaction.
Any such expansion of our business will involve a number of expenses and risks, which may include: • the time and expense associated with identifying and evaluating potential expansions; • the potential inaccuracy of estimates and judgments used to evaluate credit, operations, management and market risk with respect to target financial institutions; • potential exposure to unknown or contingent liabilities of the target financial institution; • exposure to potential asset quality issues of the target financial institution; • the time and costs of evaluating new markets, hiring local management and opening new offices, and the delay between commencing these activities and the generation of profits from the expansion; • our financing of the expansion; • the diversion of management’s attention to the negotiation of a transaction and the integration of the operations and personnel of the combining businesses; • risks associated with entry into unfamiliar markets; -31- • the introduction of new products and services into our existing business; • the incurrence and possible impairment of goodwill associated with an acquisition and possible adverse short-term effects on our results of operations; • the risk of loss of key employees and customers; • the risk associated with differing company cultures; and • difficulty in receiving appropriate regulatory approval for any proposed transaction.
Park National Bank will also devote a minimum of $500,000 over five years toward one or more community development partnership programs that provide services to residents of MMCTs in the Columbus Lending Area related to credit, financial education, homeownership and foreclosure prevention; and at least $750,000 over five years toward advertising, community outreach, consumer financial education and credit counseling in the Columbus Lending Area.
Park National Bank will also devote a minimum of $500,000 over five years toward one or more community development -33- partnership programs that provide services to residents of MMCTs in the Columbus Lending Area related to credit, financial education, homeownership and foreclosure prevention; and at least $750,000 over five years toward advertising, community outreach, consumer financial education and credit counseling in the Columbus Lending Area.
Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, access to capital, and the price of our Common Shares. Deposit insurance premiums assessed on Park National Bank may increase and have a negative effect on Park’s results of operations.
Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, access to capital, and the price of our Common Shares. -30- Deposit insurance premiums assessed on Park National Bank may increase and have a negative effect on Park’s results of operations.
Should the ultimate judgments or settlements in any litigation exceed our insurance coverage, they could have a material adverse effect on our financial condition, results of operations and cash flows. In addition, we may not be able to obtain appropriate types or levels of insurance in the future or obtain adequate replacement policies with acceptable terms.
Should the ultimate judgments or settlements in any litigation exceed our insurance coverage, they could have a material adverse effect on -32- our financial condition, results of operations and cash flows. In addition, we may not be able to obtain appropriate types or levels of insurance in the future or obtain adequate replacement policies with acceptable terms.
Federal deposit insurance is described in more detail in the section captioned "Supervision and Regulation of Park and Park's Subsidiaries – Federal Deposit Insurance" in "ITEM 1. BUSINESS" of this Annual Report on Form 10-K. -30- Changes in accounting standards, policies, estimates or procedures could impact our reported financial condition or results of operations.
Federal deposit insurance is described in more detail in the section captioned "Supervision and Regulation of Park and Park's Subsidiaries – Federal Deposit Insurance" in "ITEM 1. BUSINESS" of this Annual Report on Form 10-K. Changes in accounting standards, policies, estimates or procedures could impact our reported financial condition or results of operations.
As a result, concerns about, or a default or threatened default by, one financial institution could lead to significant market-wide liquidity and credit problems and/or losses or defaults by other financial institutions. This “systemic risk” may adversely affect our business. -32- We are at risk of increased losses from fraud.
As a result, concerns about, or a default or threatened default by, one financial institution could lead to significant market-wide liquidity and credit problems and/or losses or defaults by other financial institutions. This “systemic risk” may adversely affect our business. We are at risk of increased losses from fraud.
During 2020, Park experienced elevated provision for credit losses primarily due to the impact of COVID-19. During 2021 and 2022, the provision fluctuated as a result of changes in economic forecasts and other assumptions. If we were to experience higher levels of provision for credit losses, it could result in lower levels of net income.
During 2020, Park experienced elevated provision for credit losses primarily due to the impact of COVID-19. During 2021, 2022 and 2023, the provision fluctuated as a result of changes in economic forecasts and other assumptions. If we were to experience higher levels of provision for credit losses, it could result in lower levels of net income.
The PSLRA provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the forward-looking statements.
The PSLRA provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information so long as those statements are identified as forward-looking and are -21- accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the forward-looking statements.
We may also rely on representations of customers and counterparties as to the accuracy and completeness of that information and, -26- with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit to a business, we may assume that the customer’s audited financial statements conform with U.S.
We may also rely on representations of customers and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit to a business, we may assume that the customer’s audited financial statements conform with U.S.
On February 28, 2023, Park National Bank reached an agreement with the DOJ to increase the efforts of Park National Bank to promote home lending in the Columbus, Ohio market. The agreement, which is reflected in the proposed consent order filed on February 28, 2023, in the U.S.
On February 28, 2023, Park National Bank reached an agreement with the DOJ to increase the efforts of Park National Bank to promote home lending in the Columbus, Ohio market. The agreement, which is reflected in the consent order filed on February 28, 2023, in the U.S.
Throughout 2022 and 2023 to date, Park National Bank has been in compliance with all regulatory capital requirements and had sufficient capital under the “prompt corrective action” regulations to be deemed “well-capitalized.” There are also restrictions on the ability of Park National Bank to pay dividends if it does not hold the applicable capital conservation buffer.
Throughout 2023 and 2024 to date, Park National Bank has been in compliance with all regulatory capital requirements and had sufficient capital under the “prompt corrective action” regulations to be deemed “well-capitalized.” There are also restrictions on the ability of Park National Bank to pay dividends if it does not hold the applicable capital conservation buffer.
Information pertaining to the impact changes in interest rates could have on our net income is included in "Table 38 - Interest Rate Sensitivity" in "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Annual Report on Form 10-K, and is incorporated herein by reference.
Information pertaining to the impact changes in interest rates could have on our net income is included in "Table 31 - Interest Rate Sensitivity" in "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Annual Report on Form 10-K, and is incorporated herein by reference.
General Risk Factors If our total consolidated assets exceed $10.0 billion, we will become subject to additional regulations As of December 31, 2022, Park had total consolidated assets of $9.9 billion. However, should our total consolidated assets exceed $10.0 billion, Park and Park National Bank will become subject to heightened regulatory requirements stemming largely from the Dodd-Frank Act.
General Risk Factors If our total consolidated assets exceed $10.0 billion, we will become subject to additional regulations As of December 31, 2023, Park had total consolidated assets of $9.8 billion. However, should our total consolidated assets exceed $10.0 billion, Park and Park National Bank will become subject to heightened regulatory requirements stemming largely from the Dodd-Frank Act.
If we cannot raise additional capital when needed, it may have a material adverse effect on our financial condition, results of operations and prospects. -28- In addition, prior debt offerings could potentially have important consequences to us and our debt and equity investors, including: • requiring a substantial portion of our cash flow from operations to make interest payments; • making it more difficult to satisfy debt service and other obligations; • increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit the future availability of debt financing; • increasing our vulnerability to general adverse economic and industry conditions; • reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow our business; • limiting our flexibility in planning for, or reacting to, changes in our business and the industry; • placing us at a competitive disadvantage relative to our competitors that may not be as highly leveraged with debt; and • limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase securities.
In addition, prior debt offerings could potentially have important consequences to us and our debt and equity investors, including: • requiring a substantial portion of our cash flow from operations to make interest payments; -28- • making it more difficult to satisfy debt service and other obligations; • increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit the future availability of debt financing; • increasing our vulnerability to general adverse economic and industry conditions; • reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow our business; • limiting our flexibility in planning for, or reacting to, changes in our business and the industry; • placing us at a competitive disadvantage relative to our competitors that may not be as highly leveraged with debt; and • limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase securities.
In light of conditions in the global financial markets and the global economy that occurred in the last fifteen years, regulators have increased their focus on the regulation of the financial services industry. Most recently, the U.S.
In light of conditions in the global financial markets and the global economy that occurred in the last two decades, regulators have increased their focus on the regulation of the financial services industry. Most recently, the U.S.
District Court for the Southern District of Ohio, Western Division (the “DOJ Consent Order”), serves to voluntarily resolve all claims of the U.S. alleging that Park National Bank’s mortgage lending practices within the Columbus, Ohio Metropolitan Statistical Area violated the Fair Housing Act and the Equal Credit Opportunity Act.
District Court for the Southern District of Ohio, Eastern Division (the “DOJ Consent Order”) and approved on March 2, 2023 by that Court, serves to voluntarily resolve all claims of the U.S. alleging that Park National Bank’s mortgage lending practices within the Columbus, Ohio Metropolitan Statistical Area violated the Fair Housing Act and the Equal Credit Opportunity Act.
In addition, Park National Bank will continue to maintain, throughout the term of the DOJ Consent Order, Park National Bank’s full-time Director of Community Home Lending and Development position, who will oversee Park National Bank’s lending in MMCTs in the Columbus Lending Area. -33- The DOJ Consent Order must be approved by the U.S.
In addition, Park National Bank will continue to maintain, throughout the term of the DOJ Consent Order, Park National Bank’s full-time Director of Community Home Lending and Development position, who will oversee Park National Bank’s lending in MMCTs in the Columbus Lending Area.
Park National Bank will become subject to additional requirements and restrictions imposed by the U.S. Department of Justice (the “DOJ”) if the proposed DOJ Consent Order is approved by the U.S. District Court for the Southern District of Ohio, Western Division.
Park National Bank is subject to additional requirements and restrictions imposed by the U.S. Department of Justice (the “DOJ”) in the DOJ Consent Order approved by the U.S. District Court for the Southern District of Ohio, Eastern Division.
Adverse changes in the regional and general economic conditions could reduce our growth rate, impair our ability to collect payments on loans, increase loan delinquencies, increase problem assets and foreclosures, increase claims and lawsuits, increase devaluations recognized within our OREO portfolio, decrease the demand for our products and services and decrease the value of collateral for loans, especially real estate values, which could have a material adverse effect on our financial condition, results of operations and cash flows. -22- The transition away from the London Interbank Offered Rate ("LIBOR") as a reference rate for financial instruments could negatively affect our income and expenses and the value of various financial instruments.
Adverse changes in the regional and general economic conditions could reduce our growth rate, impair our ability to collect payments on loans, increase loan delinquencies, increase problem assets and foreclosures, increase claims and lawsuits, increase devaluations recognized within our OREO portfolio, decrease the demand for our products and services and decrease the value of collateral for loans, especially real estate values, which could have a material adverse effect on our financial condition, results of operations and cash flows.
GAAP or on financial statements and other financial information that are materially misleading. We may be required to repurchase loans we have sold or to indemnify loan purchasers under the terms of the sale agreements, which could adversely affect our liquidity, results of operations and financial condition.
We may be required to repurchase loans we have sold or to indemnify loan purchasers under the terms of the sale agreements, which could adversely affect our liquidity, results of operations and financial condition.
The provision for credit losses for the year ended December 31, 2022 amounted to $4.6 million. As a result of the implementation of the CECL model, the time horizon over which we are required to estimate future credit losses expanded, which could result in increased volatility in future provisions for credit losses.
As a result of the implementation of the CECL model, the time horizon over which we are required to estimate future credit losses expanded, which could result in increased volatility in future provisions for credit losses.
While we have taken measures intended to manage the risks of operating in a changing interest rate environment, there can be no assurance that such measures will be effective in avoiding undue interest rate risk, especially in light of the continued economic effects of sustained inflation.
Park's earnings can also be impacted by the spread between short-term and long-term market interest rates. -22- While we have taken measures intended to manage the risks of operating in a changing interest rate environment, there can be no assurance that such measures will be effective in avoiding undue interest rate risk, especially in light of the continued economic effects of sustained inflation.
Any regulatory effort to create an exchange or trading platform for credit derivatives and other over-the-counter derivative instruments, or a market shift toward standardized -29- derivative instruments, could reduce the risk associated with such transactions, but under certain circumstances could also limit our ability to develop derivative instruments that best suit our needs and those of our clients and adversely affect our profitability.
Any regulatory effort to create an exchange or trading platform for credit derivatives and other over-the-counter derivative instruments, or a market shift toward standardized derivative instruments, could reduce the risk associated with such transactions, but under certain circumstances could also limit our ability to develop derivative instruments that best suit our needs and those of our clients and adversely affect our profitability. -29- Our financial condition, results of operation, and stock price may be negatively impacted by unrelated bank failures and negative depositor confidence in depository institutions.
We may expend substantial time and resources pursing potential acquisitions which may not be consummated because regulatory approval or other closing conditions are not satisfied.
Any merger or acquisition opportunity that we decide to pursue will ultimately be subject to regulatory approval or other closing conditions. We may expend substantial time and resources pursing potential acquisitions which may not be consummated because regulatory approval or other closing conditions are not satisfied.
We may incur substantial costs to expand, and such expansion may not result in the levels of profits we expect. Integration efforts for any future acquisitions may not be successful.
We may incur substantial costs to expand, and such expansion may not result in the levels of profits we expect. Integration efforts for any future acquisitions may not be successful. We may issue equity securities in connection with acquisitions, which could dilute the economic and voting interests of our existing shareholders.
This competition is described in " ITEM 1. BUSINESS" of this Annual Report on Form 10-K under the caption "Competition." Competition in our industry could intensify as a result of the increasing consolidation of financial services companies, in connection with current market conditions, or otherwise.
BUSINESS" of this Annual Report on Form 10-K under the caption "Competition." Competition in our industry could intensify as a result of the increasing consolidation of financial services companies, in connection with current market conditions, or otherwise. Consumers may also move money out of bank deposits in favor of other investments, including digital or cryptocurrency.
GAAP and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. We may also rely on the audit report covering those financial statements. Our financial condition, results of operations and cash flows could be negatively impacted to the extent that we rely on financial statements that do not comply with U.S.
GAAP and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. We may also rely on the audit -26- report covering those financial statements.
All subsequent written and oral forward-looking statements attributable to Park or any person acting on Park’s behalf are qualified in their entirety by the preceding cautionary statements. Economic, Political and Market Risks The economic impact of COVID-19 or any other pandemic could adversely affect our business, financial condition, liquidity, and results of operations.
All subsequent written and oral forward-looking statements attributable to Park or any person acting on Park’s behalf are qualified in their entirety by the preceding cautionary statements. Economic, Political and Market Risks Inflation may have an adverse impact on our business and on our customers.
Consumers may also move money out of bank deposits in favor of other investments, including digital or cryptocurrency. Customers have increasingly used bill payment services that do not utilize banks, and these trends may result in losses of deposits and fee income.
Customers have increasingly used bill payment services that do not utilize banks, and these trends may result in losses of deposits and fee income.
Accordingly, there can be no assurance that we will be able to raise additional capital if needed or that the terms of available capital will be acceptable to us.
Accordingly, there can be no assurance that we will be able to raise additional capital if needed or that the terms of available capital will be acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our financial condition, results of operations and prospects.
Competition could adversely impact our customer acquisition, growth and retention, as well as our credit spreads and product pricing, causing us to lose market share and deposits and revenues. We are subject to intense competition from various financial institutions as well as from non-bank entities that engage in many similar activities without being subject to bank regulatory supervision and restrictions.
We are subject to intense competition from various financial institutions as well as from non-bank entities that engage in many similar activities without being subject to bank regulatory supervision and restrictions. This competition is described in " ITEM 1.
BUSINESS" of this Annual Report on Form 10-K. -27- We operate in a highly competitive environment, in terms of the products and services we offer and the geographic markets in which we conduct business, as well as in our labor markets where we compete for talented employees.
We operate in a highly competitive environment, in terms of the products and services we offer and the geographic markets in which we conduct business, as well as in our labor markets where we compete for talented employees. -27- Competition could adversely impact our customer acquisition, growth and retention, as well as our credit spreads and product pricing, causing us to lose market share and deposits and revenues.
Recent political developments have resulted in substantial changes in economic and political conditions for the U.S. and the remainder of the world. For example, on February 24, 2022, Russian military forces invaded Ukraine, and sustained conflict and disruption in the region have occurred and remain likely to continue.
Recent political developments, such as military conflicts in Ukraine and the Middle East, have resulted in substantial changes in economic and political conditions for the U.S. and the remainder of the world.
Removed
COVID-19 has negatively impacted global, national and local economies, disrupted global and national supply chains, lowered equity market valuations, and created significant volatility and disruption in financial markets.
Added
Inflation and rapid increases in interest rates have led to a decline in the trading value of previously issued government securities with interest rates below current market interest rates. Although the U.S.
Removed
The extent to which COVID-19 will continue to impact Park’s business, results of operations, and financial condition, as well as Park’s regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted. As of December 31, 2022, we hold and service PPP loans.
Added
Treasury Department, FDIC and Federal Reserve Board have announced a program to provide up to $25.0 billion of loans to financial institutions secured by certain of such government securities held by financial institutions to mitigate the risk of potential losses on the sale of such instruments, widespread demands for customer withdrawals or other liquidity needs of financial institutions for immediately liquidity may exceed the capacity of such program.
Removed
These PPP loans are subject to the provisions of the CARES Act and to complex and evolving rules and guidance issued by the SBA and other government agencies.
Added
There is no guarantee that the U.S. Treasury Department, FDIC and Federal Reserve Board will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions, or that they would do so in a timely fashion.
Removed
While a large number of our PPP borrowers have applied for and received full or partial forgiveness of their loan obligations, we still have credit risk on the remaining PPP loans in the event the SBA determines that there is a deficiency in the manner in which we originated, funded or serviced such PPP loans, including any issue with the eligibility of a borrower to receive funding.
Added
In addition, inflation generally increases the cost of goods and services we use in our business operations which increases our noninterest expenses. Furthermore, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us.
Removed
We could face additional risks in our administrative capabilities to service our PPP loans and to properly determine loan forgiveness.
Added
Our financial condition, results of operations and cash flows could be negatively impacted to the extent that we rely on financial statements that do not comply with U.S. GAAP or on financial statements and other financial information that are materially misleading.
Removed
Although the length, impact, and outcome of the ongoing war in Ukraine is highly unpredictable, this conflict has resulted, and could continue to result, in significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, changes in consumer or purchaser preferences, as well as increases in cyberattacks and espionage.
Added
BUSINESS" of this Annual Report on Form 10-K.
Removed
The extent and duration of the military action, sanctions and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and Park’s business for an unknown period of time.
Added
The recent bank failures of Silicon Valley Bank in California, Signature Bank in New York, and First Republic Bank in California, and the decision of Silvergate Bank in California to voluntarily liquidate its assets and wind down operations, each of which occurred during the first and second quarters of 2023, have caused uncertainty in the investor community and negative confidence among bank customers generally.
Removed
Park's earnings can also be impacted by the spread between short-term and long-term market interest rates.
Added
While we do not believe that the circumstances of these banks' failures and liquidations are indicators of broader issues with the banking system, the failures may reduce customer confidence, affect sources of funding and liquidity, increase regulatory requirements and costs, adversely affect financial markets and/or have a negative reputational ramification for the financial services industry, including us.
Removed
LIBOR was used extensively in the U.S. and globally as a benchmark for various commercial and financial contracts, including adjustable rate mortgages, corporate debt, interest rate swaps and other derivative financial instruments. LIBOR is set based on interest rate information reported by certain banks, which are set to stop reporting such information after June 30, 2023.
Added
These bank failures led to volatility and declines in the market for bank stocks and questions about depositor confidence in depository institutions, which in turn led to a greater focus by institutions, investors, and regulators on the on-balance sheet liquidity of and funding sources for financial institutions and the composition of its deposits.
Removed
In the U.S., the Alternative Reference Rate Committee (“ARRC”) has recommended the use of a Secured Overnight Funding Rate (“SOFR”) as the set of alternative U.S. dollar reference interest rates. SOFR is different from LIBOR in that it is a backward-looking secured rate rather than a forward-looking unsecured rate.
Added
Notwithstanding, our efforts to promote deposit insurance coverage with our customers and otherwise effectively manage our liquidity, deposit portfolio retention, and other related matters, our financial condition, results of operation, and stock price may be adversely affected by future negative events within the banking sector and adverse customer or investor responses to such events.
Removed
These differences could lead to a greater disconnect between our costs to raise funds for SOFR as compared to LIBOR. For cash products and loans, ARRC has also recommended Term SOFR, which is a forward-looking SOFR based on SOFR futures and may in part reduce differences between SOFR and LIBOR.
Removed
There are operational issues which may create a delay in the transition to SOFR or other substitute indices, leading to uncertainty across the industry. These consequences cannot be entirely predicted and could have an adverse impact on the market value for or value of LIBOR-linked securities, loans, and other financial obligations or extensions of credit.
Removed
Park has limited exposure to LIBOR, with total exposure at December 31, 2022 of approximately $608.4 million, consisting of $76.9 million of loans, $516.5 million of investment securities, and $15.0 million of subordinated notes. We do not believe the change to a benchmark like SOFR will have a material impact on our financial condition, results of operations or cash flows.
Removed
The adoption of the CECL model by Park resulted in a net decrease to retained earnings of $8.0 million as of January 1, 2021 for the cumulative effect of adopting ASC 326 and a net recovery of credit losses of $11.9 million for the year ended December 31, 2021.
Removed
We may issue equity securities in connection with acquisitions, which could dilute the economic and voting interests of our existing shareholders. -31- Any merger or acquisition opportunity that we decide to pursue will ultimately be subject to regulatory approval or other closing conditions.
Removed
District Court for the Southern District of Ohio, Western Division, and once approved and entered by that Court, the DOJ Consent Order will resolve all claims by the U.S. against Park National Bank.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOf the financial service offices described above, 16 are leased and the remainder are owned. Park National Bank also operates 28 off-site automated teller machines. Scope Leasing, Inc. has an office located in Columbus in Franklin County, Ohio, which it leases.
Biggest changeOf the financial service offices described above, 16 are leased and the remainder are owned. Park National Bank also operates 31 off-site automated teller machines. Scope Leasing, Inc. has an office located in Columbus in Franklin County, Ohio, which it leases.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS. We are routinely engaged in various litigation and other legal matters. These include defending against claims of improper loan, deposit account, and other banking practices, as well as trust and investment, intellectual property, contract, and other legal matters, and we have a number of unresolved lawsuits and open matters pending resolution.
Biggest changeITEM 3. LEGAL PROCEEDINGS. We are routinely engaged in various litigation and other legal matters that are part of, or incidental to, our ordinary course of business and we have a number of unresolved lawsuits and open matters pending resolution.
Removed
In addition, we are parties to litigation involving the collection of delinquent accounts, challenges to security interests in collateral, foreclosure lawsuits, and similar matters which are part of, or incidental to, our ordinary course of business.
Removed
Reserves are established for these various litigation and other legal matters, when appropriate under FASB ASC Topic 450, Contingencies, based in part upon the advice of legal counsel.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOn 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 as treasury shares for subsequent issuance and delivery under the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP. -36- 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.
Biggest changeOn 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 as treasury shares for subsequent issuance and delivery under the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP.
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.
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 -37- 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.
Park currently intends to continue to pay quarterly cash dividends comparable to the regular quarterly cash dividends paid during the year ended December 31, 2022, subject to the regulatory restrictions described in "Note 25 - Dividend Restrictions" of the Notes to Consolidated Financial Statements included in "ITEM 8.
Park currently intends to continue to pay quarterly cash dividends comparable to the regular quarterly cash dividends paid during the year ended December 31, 2023, subject to the regulatory restrictions described in "Note 25 - Dividend Restrictions" of the Notes to Consolidated Financial Statements included in "ITEM 8.
Issuer Purchases of Equity Securities The following table provides information regarding purchases of Park's common shares made by or on behalf of Park or any "affiliated purchaser" as defined in Rule 10b-18(a)(3) under the Exchange Act during the fiscal quarter ended December 31, 2022, as well as the maximum number of common 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: Period Total Number of Common Shares Purchased Average Price Paid per Common Share Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Common Shares that May Yet Be Purchased under the Plans or Programs (1) October 1 through October 31, 2022 — — — 1,195,088 November 1 through November 30, 2022 — — — 1,195,088 December 1 through December 31, 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.
Issuer Purchases of Equity Securities The following table provides information regarding purchases of Park's common shares made by or on behalf of Park or any "affiliated purchaser" as defined in Rule 10b-18(a)(3) under the Exchange Act during the three months ended December 31, 2023, as well as the maximum number of common 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: Period Total Number of Common Shares Purchased Average Price Paid per Common Share Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Common Shares that May Yet Be Purchased under the Plans or Programs (1) October 1 through October 31, 2023 — — — 996,088 November 1 through November 30, 2023 — — — 996,088 December 1 through December 31, 2023 — — — 996,088 Total — — — 996,088 (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.
Performance Graph The following graph compares the cumulative total shareholder return performance for Park's common shares with the NYSE Composite Index, the KBW NASDAQ Bank Index, and the S&P U.S. SmallCap Banks Index for the five-year period from December 31, 2017 to December 31, 2022. The NYSE Composite Index is a market capitalization-weighted index of the stocks listed on NYSE.
Performance Graph The following graph compares the cumulative total shareholder return performance for Park's common shares with the NYSE Composite Index, the KBW NASDAQ Bank Index, and the S&P U.S. SmallCap Banks Index for the five-year period from December 31, 2018 to December 31, 2023. The NYSE Composite Index is a market capitalization-weighted index of the stocks listed on NYSE.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Park's common shares (symbol: PRK) are traded on NYSE American. At December 31, 2022, Park had 3,333 shareholders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Park's common shares (symbol: PRK) are traded on NYSE American. At December 31, 2023, Park had 3,245 shareholders of record.
The required approval was received by Park in the form of correspondence from the Federal Reserve Bank of Cleveland dated April 19, 2019.
The required approval was received by Park in the form of correspondence from the Federal Reserve Bank of Cleveland dated April 19, 2019. These programs do not have a termination date.
SmallCap Banks Index were a positive 6.0%, a positive 1.8% and a positive 3.1%, respectively.
SmallCap Banks Index were a positive 10.8%, a positive 5.6% and a positive 7.0%, respectively.
SmallCap Banks Index 100.00 83.44 104.69 95.08 132.36 116.69 The annual compound total return on Park’s common shares for the past five years was a positive 10.6%. By comparison, the annual compound total returns for the past five years on the NYSE Composite Index, the KBW NASDAQ Bank Index, and the S&P U.S.
SmallCap Banks Index 100.00 125.46 113.94 158.62 139.85 140.55 The annual compound total return on Park’s common shares for the past five years was a positive 13.8%. By comparison, the annual compound total returns for the past five years on the NYSE Composite Index, the KBW NASDAQ Bank Index, and the S&P U.S.
SmallCap Banks Index are the appropriate industry indices for Park to use for the five-year total shareholder return performance comparison given the nature of the services provided by the financial services companies included in each. -35- Total Return Performance Period Ended Index 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 Park National Corporation 100.00 84.93 106.94 115.08 156.00 165.56 NYSE Composite Index 100.00 91.05 114.28 122.26 147.54 133.75 KBW NASDAQ Bank Index 100.00 82.29 112.01 100.46 138.97 109.23 S&P U.S.
SmallCap Banks Index are the appropriate industry indices for Park to use for the five-year total shareholder return performance comparison given the nature of the services provided by the financial services companies included in each. -36- Total Return Performance Period Ended Index 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Park National Corporation 100.00 125.91 135.49 183.67 194.94 191.04 NYSE Composite Index 100.00 125.51 134.28 162.04 146.89 167.12 KBW NASDAQ Bank Index 100.00 136.13 122.09 168.88 132.75 131.57 S&P U.S.
Added
No awards shall be granted under the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP after the tenth anniversary of these plans. 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.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

231 edited+51 added−138 removed71 unchanged
Biggest changeTreasury and other governmental agencies) as well as disruption in the liquidity and functioning of U.S. financial markets, may adversely impact prepayment penalty income, mortgage banking income, income from fiduciary activities, the value of securities, deposits and other financial instruments, in addition to the loan demand and the performance of our loan portfolio, and the interest rate sensitivity of our consolidated balance sheet as well as reduce net interest 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; -37- • the impact of the changes in federal, state and local governmental policy, including the regulatory landscape, capital markets, elevated government debt, potential changes in tax legislation that may increase tax rates, infrastructure spending and social programs; • changes in laws or requirements imposed by Park's regulators impacting Park's capital actions, including dividend payments and stock repurchases; • changes in consumer spending, borrowing and saving habits, whether due to changes in retail distribution strategies, consumer preferences and behaviors, changes in business and economic conditions, legislative and regulatory initiatives, or other factors may be different than anticipated; • 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 inflationary pressures; • Park may have more credit risk and higher credit losses to the extent there are loan concentrations by location or industry of borrowers or collateral; • the volatility from quarter to quarter of mortgage banking income, whether due to interest rates, demand, the fair value of mortgage loans, or other factors; • the adequacy of our internal controls and risk management program in the event of changes in the market, economic, operational (including those which may result from our associates working remotely), asset/liability repricing, legal, compliance, strategic, cybersecurity, liquidity, credit and interest rate risks associated with Park's business; • 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 Park'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; • Park's ability to meet heightened supervisory requirements and expectations; • the effect of changes in accounting policies and practices, as may be adopted by the Financial Accounting Standards Board (the "FASB"), the SEC, the Public Company Accounting Oversight Board and other regulatory agencies, 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 possibility that future credit losses may be higher than currently expected due to changes in economic assumptions; • 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 cybersecurity attacks; • the impact on Park's business and operating results of any costs associated with obtaining rights in intellectual property claimed by others and of the adequacy of Park's intellectual property protection in general; • the existence or exacerbation of general geopolitical instability and uncertainty 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.
Biggest changeTreasury and other governmental agencies) as well as disruption in the liquidity and functioning of U.S. financial markets, may adversely impact prepayment penalty income, mortgage banking income, income from fiduciary activities, the value of securities, deposits and other financial instruments, in addition to the loan demand and the performance of our loan portfolio, and the interest rate sensitivity of our consolidated balance sheet as well as reduce net interest 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 changes in federal, state and local governmental policy, including the regulatory landscape, capital markets, elevated government debt, potential changes in tax legislation that may increase tax rates, government shutdown, infrastructure spending and social programs; -38- • 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 behaviors, changes in business and economic conditions, legislative and regulatory initiatives, or other factors may be different than anticipated; • 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 inflationary pressures and continued elevated interest rates; • Park may have more credit risk and higher credit losses to the extent there are loan concentrations by location or industry of borrowers or collateral; • the volatility from quarter to quarter of mortgage banking income, whether due to interest rates, demand, the fair value of mortgage loans, or other factors; • the adequacy of our internal controls and risk management program in the event of changes in the market, economic, operational (including those which may result from our associates working remotely), asset/liability repricing, legal, compliance, strategic, cybersecurity, liquidity, credit and interest rate risks associated with Park's business; • 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 Park'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; • Park's ability to meet heightened supervisory requirements and expectations; • the effect of changes in accounting policies and practices, as may be adopted by the Financial Accounting Standards Board, the 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 which may prove unreliable, inaccurate or not predictive of actual results; • the possibility that future credit losses may be higher than currently expected due to changes in economic assumptions; • Park's ability to anticipate and respond to technological changes and Park's reliance on, and the potential failure of, a number of third-party vendors to perform as expected, including Park's primary core banking system provider, which can impact 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; • Park's 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 the adequacy of Park's intellectual property protection in general; • the existence or exacerbation of general geopolitical instability and uncertainty 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.
In the tables included within the "ANALYSIS OF EARNINGS - Items Impacting Comparability" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations, Park has provided a reconciliation of average tangible equity to average shareholders' equity, average tangible assets to average assets, tangible equity to total shareholders' equity, tangible assets to total assets, and pre-tax, pre-provision net income to net income solely for the purpose of complying with SEC Regulation G and not as an indication that the return on average tangible equity, the return on average tangible assets, the tangible equity to tangible assets ratio, and pre-provision net income are substitutes for the return on average equity, the return on average assets, the total shareholders' equity to total assets ratio, and net income, respectively, as determined in accordance with U.S.
In the tables included within the "ANALYSIS OF EARNINGS - Items Impacting Comparability" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations, Park has provided a reconciliation of average tangible equity from average shareholders' equity, average tangible assets from average assets, tangible equity from total shareholders' equity, tangible assets from total assets, and pre-tax, pre-provision net income from net income solely for the purpose of complying with SEC Regulation G and not as an indication that the return on average tangible equity, the return on average tangible assets, the tangible equity to tangible assets ratio, and pre-provision net income are substitutes for the return on average equity, the return on average assets, the total shareholders' equity to total assets ratio, and net income, respectively, as determined in accordance with U.S.
The decrease in 2022 compared to 2021 was primarily related to a decrease in other service income related to mortgage loan originations, including a $13.8 million decrease in fee income related to a $395.2 million decrease in mortgage loan originations to be sold in the secondary market and a $2.6 million decrease in mortgage servicing rights income, partially offset by a $1.4 million increase in income related to investor rate locks and loans held for sale.
The decrease in 2022 compared to 2021 was primarily related to a decrease in other service income related to mortgage loan originations, including a $13.8 million decrease in fee income related to a decrease in mortgage loan originations to be sold in the secondary market and a $2.6 million decrease in mortgage servicing rights income, partially offset by a $1.4 million increase in income related to investor rate locks and loans held for sale.
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. -39- Non-U.S. GAAP Financial Measures Park's management uses certain non-U.S. GAAP financial measures to evaluate Park's performance.
Items impacting comparability of the results of particular periods are not intended to be a complete list of items that may materially impact current or future period performance. Non-U.S. GAAP Financial Measures Park's management uses certain non-U.S. GAAP financial measures to evaluate Park's performance.
For the purpose of calculating the return on average tangible equity, a non-GAAP financial measure, net income for each period is divided by average tangible equity during the period. Average tangible equity equals average shareholders' equity during the applicable period less average goodwill and other intangible assets during the applicable period.
For the purpose of calculating the return on average tangible equity, a non-GAAP financial measure, net income for each period is -40- 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.
The Company may, at its option, beginning with the interest payment date of September 1, 2025 and on any interest payment date thereafter, redeem the Subordinated Notes, in whole or in part, from time to time, subject to obtaining the prior approval of the Federal Reserve Board to the extent the approval of the Federal Reserve Board is then required under the capital adequacy rules of the Federal Reserve Board, at a redemption price equal to 100% of the principal amount of the Subordinated Notes being redeemed, plus accrued and unpaid interest thereon to but excluding the date of redemption.
The Corporation may, at its option, beginning with the interest payment date of September 1, 2025 and on any interest payment date thereafter, redeem the Subordinated Notes, in whole or in part, from time to time, subject to obtaining the prior approval of the Federal Reserve Board to the extent the approval of the Federal Reserve Board is then required under the capital adequacy rules of the Federal Reserve Board, at a redemption price equal to 100% of the principal amount of the Subordinated Notes being redeemed, plus accrued and unpaid interest thereon to but excluding the date of redemption.
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 1 through 4) are considered to be of acceptable credit risk.
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.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" in this Annual Report on Form 10-K, for additional information on loan commitments and standby letters of credit. The Corporation did not have any unrecorded significant contingent liabilities at December 31, 2022. Capital : Park’s primary means of maintaining capital adequacy is through retained earnings.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" in this Annual Report on Form 10-K, for additional information on loan commitments and standby letters of credit. The Corporation did not have any unrecorded significant contingent liabilities at December 31, 2023. Capital : Park’s primary means of maintaining capital adequacy is through retained earnings.
The amounts shown below as the adequately capitalized ratio plus capital conservation buffer include 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 December 31, 2022.
The amounts shown below as the adequately capitalized ratio plus capital conservation buffer include 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 December 31, 2023.
("Scope Aircraft Finance")) and a network of 115 automated teller machines in 26 Ohio counties, four North Carolina counties, four South Carolina counties and one Kentucky county. SEPH and Guardian each operated one administrative office, located in Newark, Ohio. -49- SOURCE OF FUNDS Deposits: Park’s major source of funds is deposits from individuals, businesses and local government entities.
("Scope Aircraft Finance")) and a network of 115 automated teller machines in 26 Ohio counties, four North Carolina counties, four South Carolina counties and one Kentucky county. SEPH and Guardian each operated one administrative office, located in Newark, Ohio. -44- SOURCE OF FUNDS Deposits: Park’s major source of funds is deposits from individuals, businesses and local government entities.
CONTRACTUAL OBLIGATIONS In the ordinary course of operations, Park enters into certain contractual obligations. The following table summarizes Park’s significant and determinable obligations by payment date at December 31, 2022. Further discussion of the nature of each specified obligation is included in the referenced Note to the Consolidated Financial Statements included in "ITEM 8.
CONTRACTUAL OBLIGATIONS In the ordinary course of operations, Park enters into certain contractual obligations. The following table summarizes Park’s significant and determinable obligations by payment date at December 31, 2023. Further discussion of the nature of each specified obligation is included in the referenced Note to the Consolidated Financial Statements included in "ITEM 8.
Specifically, management reviews the return on average tangible equity, the return on average tangible assets, the tangible equity to tangible assets ratio, and pre-tax, pre-provision net income.
Specifically, management reviews the return on average tangible equity, the return on average tangible assets, the tangible equity to tangible assets ratio, and pre-tax, pre-provision net income ("PTPP").
Management has included in this Management's Discussion and Analysis of Financial Condition and Results of Operation, information relating to the return on average tangible equity, the return on average tangible assets, the tangible equity to tangible assets ratio, and pre-tax, pre-provision net income for the years ended December 31, 2022 and December 31, 2021.
Management has included in this Management's Discussion and Analysis of Financial Condition and Results of Operation, information relating to the return on average tangible equity, the return on average tangible assets, the tangible equity to tangible assets ratio, and pre-tax, pre-provision net income for the years ended December 31, 2023 and December 31, 2022.
However, all of the loan commitments and standby letters of credit were permitted to be drawn upon in 2022. See "Note 26 - Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with Concentration of Credit Risk" of the Notes to Consolidated Financial Statements included in "ITEM 8.
However, all of the loan commitments and standby letters of credit were permitted to be drawn upon in 2023. See "Note 26 - Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with Concentration of Credit Risk" of the Notes to Consolidated Financial Statements included in "ITEM 8.
(2) Averages are for the years ended December 31, 2022, December 31, 2021 and December 31, 2020, as appropriate. (3) Net income for each period divided by average tangible equity during the period. Average tangible equity equals average shareholders' equity during the applicable period less average goodwill and other intangible assets during the applicable period.
(2) Averages are for the years ended December 31, 2023, December 31, 2022 and December 31, 2021, as appropriate. (3) Net income for each period divided by average tangible equity during the period. Average tangible equity equals average shareholders' equity during the applicable period less average goodwill and other intangible assets during the applicable period.
Park’s subsidiaries compete for deposits and loans with other banks, savings associations, credit unions and other types of financial institutions. At December 31, 2022, Park operated 96 financial service offices (including those of PNB and Scope Leasing, Inc.
Park’s subsidiaries compete for deposits and loans with other banks, savings associations, credit unions and other types of financial institutions. At December 31, 2023, Park operated 96 financial service offices (including those of PNB and Scope Leasing, Inc.
(3) Interest income on tax-exempt investment securities includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate in 2022, 2021 and 2020. The taxable equivalent adjustments were $2.9 million in 2022, $2.2 million in 2021 and $2.2 million in 2020. (4) Includes subordinated notes.
(3) Interest income on tax-exempt investment securities includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate in 2023, 2022 and 2021. The taxable equivalent adjustments were $2.9 million in 2023, $2.9 million in 2022 and $2.2 million in 2021. (4) Includes subordinated notes.
There were no other nonperforming assets as of December 31, 2022. As of December 31, 2021 and 2020, other nonperforming assets consisted of aircraft acquired as part of a loan workout. Generally, management obtains updated appraisal information for nonperforming loans and OREO annually.
There were no other nonperforming assets as of December 31, 2023 and 2022. As of December 31, 2021 other nonperforming assets consisted of aircraft acquired as part of a loan workout. Generally, management obtains updated appraisal information for nonperforming loans and OREO annually.
Other investment securities (as shown on Park's Consolidated Balance Sheets) consist of restricted stock investments in the FHLB and the FRB and equity securities which include equity investments in limited partnerships which provide mezzanine funding.
Other investment securities (as shown on Park's Consolidated Balance Sheets) consist of restricted stock investments in the FHLB and the FRB and equity securities which include equity investments in other financial institutions and equity investments in limited partnerships which provide mezzanine funding.
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.
GAAP): From time to time, revenue, expenses, and/or taxes are impacted by items judged by management of Park to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that their outsized impact is believed by management of Park at that time to be infrequent or short-term in nature.
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.
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 significant judgments impacting the ACL estimate is the economic forecasts for Ohio unemployment, Ohio GDP, and Ohio HPI.
Government sponsored entities' asset-backed securities 41.6 % 47.1 % 66.9 % Collateralized loan obligations 28.4 % 27.5 % — % Corporate debt securities 0.9 % 0.6 % 0.2 % FHLB stock 0.6 % 0.7 % 2.0 % FRB stock 0.8 % 0.8 % 1.2 % Equities 3.4 % 1.8 % 2.6 % Total 100.0 % 100.0 % 100.0 % The carrying value of investments in debt securities at December 31, 2022, is shown in the following table by contractual maturity, except for asset-backed securities and collateralized loan obligations, which are shown as a single total, due to the unpredictability of the timing in principal repayments.
Government sponsored entities' asset-backed securities 44.4 % 41.6 % 47.1 % Collateralized loan obligations 30.7 % 28.4 % 27.5 % Corporate debt securities 1.3 % 0.9 % 0.6 % FHLB stock 1.2 % 0.6 % 0.7 % FRB stock 1.0 % 0.8 % 0.8 % Equities 4.5 % 3.4 % 1.8 % Total 100.0 % 100.0 % 100.0 % The carrying value of investments in debt securities at December 31, 2023, is shown in the following table by contractual maturity, except for asset-backed securities and collateralized loan obligations, which are shown as a single total, due to the unpredictability of the timing in principal repayments.
Park's permanent federal tax differences were approximately $7.1 million in 2022, compared to $6.3 million for 2021. Park expects permanent federal tax differences for 2023 will be approximately $6.5 million.
Park's permanent federal tax differences were approximately $6.6 million in 2023, compared to $7.1 million in 2022 and $6.3 million for 2021. Park expects permanent federal tax differences for 2024 will be approximately $5.5 million.
For the years ended December 31, 2022, 2021, and 2020, the average tax-equivalent yield on the total investment portfolio was 2.66%, 2.22% and 2.66%, respectively. The weighted average remaining maturity of the total investment portfolio was 5.0 years at December 31, 2022, 4.8 years at December 31, 2021 and 3.5 years at December 31, 2020. Obligations of U.S.
For the years ended December 31, 2023, 2022, and 2021, the average tax-equivalent yield on the total investment portfolio was 3.73%, 2.66% and 2.22%, respectively. The weighted average remaining maturity of the total investment portfolio was 4.8 years at December 31, 2023, 5.0 years at December 31, 2022 and 4.8 years at December 31, 2021. Obligations of U.S.
Management believes the most significant impact on financial results is the Corporation's ability to align our asset/liability management program to react to changes in interest rates. -81-
Management believes the most significant impact on financial results is the Corporation's ability to align our asset/liability management program to react to changes in interest rates. -72-
GAAP, Park reflects any unrealized holding gain or loss on AFS debt securities, any unrealized net holding gain or loss on cash flow hedging derivatives and any change in the funded status of Park's Pension Plan, in each case, net of income taxes, as accumulated other comprehensive (loss) income which is part of Park’s shareholders’ equity.
In accordance with U.S. GAAP, Park reflects any unrealized holding gain or loss on AFS debt securities, any unrealized net holding gain or loss on cash flow hedging derivatives and any change in the funded status of Park's pension plan, in each case, net of income taxes, as accumulated other comprehensive (loss) income which is part of Park’s shareholders’ equity.
The unrealized net holding loss, net of income taxes, on cash flow hedging derivatives was zero at year-end 2022, compared to $206,000 at year-end 2021 and $698,000 at year-end 2020. In accordance with U.S.
The unrealized net holding loss, net of income taxes, on cash flow hedging derivatives was zero at year-end 2023 and year-end 2022, compared to $206,000 at year-end 2021. In accordance with U.S.
The table below shows for the years ended December 31, 2022, 2021, and 2020, the average balance and cost of funds by type of deposit.
The table below shows for the years ended December 31, 2023, 2022, and 2021, the average balance and cost of funds by type of deposit.
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. Delinquencies have remained low over the past 36 months since January 1, 2020.
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. Delinquencies have remained low over the past 36 months.
The $78.3 million of individually evaluated commercial loans at December 31, 2022 included $11.5 million of loans modified in a TDR which were then on accrual status and performing in accordance with the restructured terms, a decrease from $17.5 million at December 31, 2021.
The $78.3 million of individually evaluated commercial loans at December 31, 2022 included $11.5 million of loans modified in a TDR which were on accrual status and performing in accordance with the restructured ter ms, a decrease from $17.5 million at December 31, 2021.
Average long-term debt was 48% of average total debt in 2022, compared to 42% of average total debt in 2021 and 44% of average total debt in 2020. Subordinated Notes: Park assumed, with the 2007 acquisition of Vision's parent holding company, $15.5 million of floating rate junior subordinated notes.
Average long-term debt was 51% of average total debt in 2023, compared to 48% of average total debt in 2022 and 42% of average total debt in 2021. Subordinated Notes: Park assumed, with the 2007 acquisition of Vision's parent holding company, $15.5 million of floating rate junior subordinated notes.
Fully taxable equivalent net interest income reconciliation is shown assuming a 21% corporate federal 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.
The reconciliation of FTE net interest income to net interest income is shown below assuming a 21% federal corporate income tax rate. Additionally, net interest margin is calculated on a fully taxable equivalent basis by dividing FTE net interest income by average interest earning assets, in each case during the applicable period.
For the years ended December 31, 2022, 2021 and 2020, $2.4 million, $4.5 million and $2.4 million, respectively, of gains on equity investments carried at NAV were recorded within "Gain on equity securities, net" on Park's Consolidated Statements of Income.
For the years ended December 31, 2023, 2022 and 2021, $371,000, $2.4 million and $4.5 million, respectively, of gains on equity investments carried at NAV were recorded within "Gain on equity securities, net" on Park's Consolidated Statements of Income.
Park has determined that any commercial loans which have been placed on nonaccrual status or classified as TDRs will be individually evaluated. Individual analysis will establish a specific reserve for loans in scope. Specific reserves on individually evaluated commercial loans are typically based on management’s best estimate of the fair value of collateral securing these loans.
Park has determined that any commercial loans which have been placed on nonaccrual status will be individually evaluated. Individual analysis will establish a reserve for loans in scope. Reserves on individually evaluated commercial loans are typically based on management’s best estimate of the fair value of collateral securing these loans.
Loan interest income for 2022, 2021, and 2020 included $3.7 million, $8.0 million and $453,000, respectively, related to payments received on certain SEPH nonaccrual loan relationships, some of which are participated with PNB.
Loan interest income for 2023, 2022, and 2021 included $631,000, $3.7 million and $8.0 million, respectively, related to payments received on certain SEPH nonaccrual loan relationships, some of which are participated with PNB.
These funds are used to manage the Corporation’s liquidity needs and interest rate sensitivity risk. The average rate paid on short-term borrowings generally moves closely with changes in market interest rates for short-term investments. The average rate paid on short-term borrowings was 0.67% in 2022, compared to 0.27% in 2021 and 0.40% in 2020.
These funds are used to manage the Corporation’s liquidity needs and interest rate sensitivity risk. The average rate paid on short-term borrowings generally moves closely with changes in market interest rates for short-term investments. The average rate paid on short-term borrowings was 2.58% in 2023, compared to 0.67% in 2022 and 0.27% in 2021.
The year-end balance for short-term borrowings was $227 million at December 31, 2022, compared to $239 million at December 31, 2021 and $342 million at December 31, 2020. Long-Term Debt: Long-term debt primarily consists of borrowings from the Federal Home Loan Bank.
The year-end balance for short-term borrowings was $328 million at December 31, 2023, compared to $227 million at December 31, 2022 and $239 million at December 31, 2021. Long-Term Debt: Long-term debt primarily consists of borrowings from the Federal Home Loan Bank.
The increase was largely due to a $2.0 million increase in specific reserves and a $232,000 increase in general reserves, taking into consideration changing economic forecasts while balancing the risks associated with inflation and other economic risks.
The increase was largely due to a $2.0 million increase in individual reserves and a -63- $232,000 increase in general reserves, taking into consideration changing economic forecasts while balancing the risks associated with inflation and other economic factors.
Loan income also includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate in 2022, 2021 and 2020. The taxable equivalent adjustments were $627,000 in 2022, $704,000 in 2021 and $623,000 in 2020. (2) For the purpose of the computation for loans, nonaccrual loans are included in the daily average loans outstanding.
Loan income also includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate in 2023, 2022 and 2021. The taxable equivalent adjustments were $811,000 in 2023, $627,000 in 2022 and $704,000 in 2021. -52- (2) For the purpose of the computation for loans, nonaccrual loans are included in the daily average loans outstanding.
Finally, during 2022, Park recognized an other comprehensive gain of $206,000, net of income tax, related to an unrealized net holding gain on cash flow hedging derivatives, compared to an other comprehensive gain of $492,000, net of income tax, related to an unrealized net holding gain on cash flow hedging derivatives in 2021 and compared to an other comprehensive loss of $244,000, net of income tax, related to an unrealized net holding loss on cash flow hedging derivatives in 2020.
Finally, during 2022, Park recognized an other comprehensive gain of $206,000, net of income tax, related to an unrealized net holding gain on cash flow hedging derivatives, compared to an other comprehensive gain of $492,000, net of income tax, related to an unrealized net holding gain on cash flow hedging derivatives in 2021.
The following table indicates the capital ratios for PNB and Park at December 31, 2022 and December 31, 2021.
The following table indicates the capital ratios for PNB and Park at December 31, 2023 and December 31, 2022.
The following table displays total other income for Park in 2022, 2021 and 2020.
The following table displays total other income for Park in 2023, 2022 and 2021.
Excluding the impact of these items, the average tax equivalent yield on real estate loans was 3.80%, 3.71% and 4.08%, respectively. • The amount of interest related to PPP income, SEPH nonaccrual loan relationships and purchase accounting accretion included in commercial loan interest income for 2022, 2021, and 2020 was $8.2 million, $28.5 million and $19.9 million, respectively.
Excluding the impact of these items, the average tax equivalent yield on real estate loans was 4.38%, 3.80% and 3.71%, respectively. • The amount of interest related to PPP income, SEPH nonaccrual loan relationships and purchase accounting accretion included in commercial loan interest income for 2023, 2022 and 2021 was $1.2 million, $8.2 million and $28.5 million, respectively.
For the years ended December 31, 2022, 2021 and 2020, $601,000, $552,000 and $(239,000), respectively, of gains (losses) on equity investments carried at fair value were recorded within "Gain on equity securities, net" on Park's Consolidated Statements of Income.
For the years ended December 31, 2023, 2022 and 2021, $600,000, $601,000 and $552,000, respectively, of gains on equity investments carried at fair value were recorded within "Gain on equity securities, net" on Park's Consolidated Statements of Income.
At year-end 2022, management estimated that the average maturity of the investment portfolio would decrease to 4.6 years with a 100 basis point decrease in long-term interest rates and to 4.4 years with a 200 basis point decrease in long-term interest rates. -54- The table below sets forth the carrying value of investment securities, as well as the percentage held within each category at year-end 2022, 2021 and 2020: Table 17 - Investment Securities December 31 (In thousands) 2022 2021 2020 Obligations of U.S.
At year-end 2023, management estimated that the average maturity of the investment portfolio would decrease to 4.4 years with a 100 basis point decrease in long-term interest rates and to 4.3 years with a 200 basis point decrease in long-term interest rates. -50- The table below sets forth the carrying value of investment securities, as well as the percentage held within each category at year-end 2023, 2022 and 2021: Table 10 - Investment Securities December 31 (In thousands) 2023 2022 2021 Obligations of U.S.
Changes in the economic forecast could significantly affect the estimated credit losses which could potentially lead to materially different allowance levels from one reporting period to the next. In calculating the ACL, management weighs several different scenarios, including a baseline (most likely) scenario and an adverse scenario.
Changes in the economic forecast or weighting could significantly affect the estimated credit losses which could potentially lead to materially different allowance levels from one reporting period to the next. As noted above, in calculating the ACL, management weighs different scenarios, including a baseline (most likely) scenario and an adverse scenario.
Excluding the impact of these items, the average tax equivalent yield on commercial loans was 4.66%, 4.24% and 4.66%, for 2022, 2021, and 2020, respectively. • Excluding the impact of interest related to PPP income, SEPH nonaccrual loan relationships and purchase accounting accretion, the average tax equivalent yield on total loans and leases was 4.55%, 4.27% and 4.63%, for 2022, 2021, and 2020, respectively.
Excluding the impact of these items, the average tax equivalent yield on commercial loans was 5.80%, 4.66% and 4.24%, for 2023, 2022 and 2021, respectively. • Excluding the impact of interest related to PPP income, SEPH nonaccrual loan relationships and purchase accounting accretion, the average tax equivalent yield on total loans and leases was 5.53%, 4.55% and 4.27%, for 2023, 2022, and 2021, respectively.
Park’s watch list includes all criticized and classified commercial loans, defined by Park as loans rated special mention or worse. Park had $81.8 million of collectively evaluated commercial loans included on the watch list at December 31, 2022, compared to $75.4 million at December 31, 2021, and $102.9 million at December 31, 2020.
Park’s watch list includes all criticized and classified commercial loans, defined by Park as loans rated special mention or worse. Park had $60.7 million of collectively evaluated commercial loans included on the watch list at December 31, 2023, compared to $81.8 million at December 31, 2022, and $75.4 million at December 31, 2021.
Interest income for 2022, 2021, and 2020 included $3.7 million, $8.0 million and $453,000, respectively, related to payments received on certain SEPH nonaccrual loan relationships, some of which are participated with PNB as well as $1.8 million, $3.3 million and $4.4 million of purchase accounting accretion for 2022, 2021 and 2020, respectively.
Loan interest income for 2023, 2022, and 2021 included $631,000, $3.7 million and $8.0 million, respectively, related to payments received on certain SEPH nonaccrual loan relationships, some of which are participated with PNB, as well as $633,000, $1.8 million and $3.3 million of purchase accounting accretion for 2023, 2022 and 2021, respectively.
Interest income on nonaccrual loans may be recorded on a cash basis and be included in income only when Park expects to receive the entire recorded investment of the loan. Of the $4.8 million that would have been recognized, approximately $3.3 million was included in interest income for the year ended December 31, 2022 as a result of payments made.
Interest income on nonaccrual loans may be recorded on a cash basis and be included in income only when Park expects to receive the entire recorded investment of the loan. Of the $5.7 million that would have been recognized, approximately $3.9 million was included in interest income for the year ended December 31, 2023 as a result of payments made.
Delinquent and accruing loans were $18.9 million, or 0.26% of total loans at December 31, 2022, compared to $15.1 million, or 0.22% of total loans at December 31, 2021, and $20.1 million, or 0.28% of total loans at December 31, 2020. Individually Evaluated Loans: Loans that do not share risk characteristics are evaluated on an individual basis.
Delinquent and accruing loans were $23.5 million, or 0.31% of total loans at December 31, 2023, compared to $18.9 million, or 0.26% of total loans at December 31, 2022, and $15.1 million, or 0.22% of total loans at December 31, 2021. Individually Evaluated Loans: Loans that do not share risk characteristics are evaluated on an individual basis.
The $15.5 million of junior subordinated notes were purchased by Vision Bancshares Trust I ("Trust I") following the issuance of Trust I's $15.0 million of floating rate preferred securities. The interest rate on these junior subordinated notes adjusts every quarter at 148 basis points above the three-month LIBOR interest rate.
The $15.5 million of junior subordinated notes were purchased by Vision Bancshares Trust I ("Trust I") following the issuance of Trust I's $15.0 million of floating rate preferred securities. The interest rate on these junior subordinated notes adjusts every quarter at 174 basis points above the three-month CME Term SOFR.
The unrealized net holding loss, net of income taxes, on AFS debt securities was $95.7 million at year-end 2022, compared to an unrealized net holding gain, net of income taxes, of $21.2 million at year-end 2021 and of $40.7 million at year-end 2020.
The unrealized net holding loss, net of income taxes, on AFS debt securities was $67.9 million at year-end 2023, compared to an unrealized net holding loss, net of income taxes, of $95.7 million at year-end 2022 and compared to an unrealized net holding gain, net of income taxes, of $21.2 million at year-end 2021.
During 2022, the change in net -80- unrealized holding (loss) gain on AFS debt securities, net of income tax, was a loss of $116.9 million. During 2021, the change in net unrealized holding (loss) gain on AFS debt securities, net of income tax, was a loss of $19.5 million.
During 2022, the change in net unrealized holding (loss) gain on AFS debt securities, net of income tax, was a loss of $116.9 million.
Table 41 - PNB and Park Capital Ratios As of December 31, 2022 Leverage Tier 1 Risk-Based Common Equity Tier 1 Total Risk-Based PNB 8.34 % 10.69 % 10.69 % 12.15 % Park 9.90 % 12.76 % 12.57 % 16.07 % Adequately capitalized ratio 4.00 % 6.00 % 4.50 % 8.00 % Adequately capitalized ratio plus capital conservation buffer 4.00 % 8.50 % 7.00 % 10.50 % Well-capitalized ratio - PNB 5.00 % 8.00 % 6.50 % 10.00 % Well-capitalized ratio - Park N/A 6.00 % N/A 10.00 % As of December 31, 2021 Leverage Tier 1 Risk-Based Common Equity Tier 1 Total Risk-Based PNB 8.58 % 11.05 % 11.05 % 12.56 % Park 9.77 % 12.57 % 12.37 % 16.05 % Adequately capitalized ratio 4.00 % 6.00 % 4.50 % 8.00 % Adequately capitalized ratio plus capital conservation buffer 4.00 % 8.50 % 7.00 % 10.50 % Well-capitalized ratio - PNB 5.00 % 8.00 % 6.50 % 10.00 % Well-capitalized ratio - Park N/A 6.00 % N/A 10.00 % Effects of Inflation : Balance sheets of financial institutions typically contain assets and liabilities that are monetary in nature and, therefore, differ greatly from most commercial and industrial companies which have significant investments in premises, equipment and inventory.
Table 34 - PNB and Park Capital Ratios As of December 31, 2023 Leverage Tier 1 Risk-Based Common Equity Tier 1 Total Risk-Based PNB 9.11 % 10.95 % 10.95 % 12.35 % Park 10.74 % 12.97 % 12.79 % 16.19 % Adequately capitalized ratio 4.00 % 6.00 % 4.50 % 8.00 % Adequately capitalized ratio plus capital conservation buffer 4.00 % 8.50 % 7.00 % 10.50 % Well-capitalized ratio - PNB 5.00 % 8.00 % 6.50 % 10.00 % Well-capitalized ratio - Park N/A 6.00 % N/A 10.00 % As of December 31, 2022 Leverage Tier 1 Risk-Based Common Equity Tier 1 Total Risk-Based PNB 8.34 % 10.69 % 10.69 % 12.15 % Park 9.90 % 12.76 % 12.57 % 16.07 % Adequately capitalized ratio 4.00 % 6.00 % 4.50 % 8.00 % Adequately capitalized ratio plus capital conservation buffer 4.00 % 8.50 % 7.00 % 10.50 % Well-capitalized ratio - PNB 5.00 % 8.00 % 6.50 % 10.00 % Well-capitalized ratio - Park N/A 6.00 % N/A 10.00 % Effects of Inflation : Balance sheets of financial institutions typically contain assets and liabilities that are monetary in nature and, therefore, differ greatly from most commercial and industrial companies which have significant investments in premises, equipment and inventory.
There was no gain on the sale of OREO, net, related to former Vision Bank relationships during the the year ended December 31, 2021. • Park recognized a $12.0 million OREO valuation markup during the year ended December 31, 2022 related to the foreclosure and subsequent sale of a property collateralizing a former Vision Bank relationship.
There was no gain on the sale of OREO, net, related to former Vision Bank relationships during the years ended December 31, 2023 or December 31, 2021. • Park recognized a $12.0 million OREO valuation markup during the year ended December 31, 2022 related to the foreclosure and subsequent sale of a property collateralizing a former Vision Bank relationship compared to $46,000 for the year ended December 31, 2023.
(2) Pension payments reflect 10 years of payments, through 2032. As of December 31, 2022, Park had $28.1 million in unfunded commitments related to investments in qualified affordable housing projects which are not included in "Table 39 - Contractual Obligations" above. Commitments are funded when capital calls are made by the general partner.
(2) Pension payments reflect 10 years of payments, through 2033. As of December 31, 2023, Park had $28.8 million in unfunded commitments related to investments in qualified affordable housing projects which are not included in "Table 32 - Contractual Obligations" above. Commitments are funded when capital calls are made by the general partner.
Excluding the impact of the purchase accounting accretion, SEPH income, and PPP income, the average yield on loans was 4.55%, 4.27% and 4.63%, for the years ended December 31, 2022, 2021, and 2020.
Excluding the impact of the purchase accounting accretion, SEPH income, and PPP income, the average yield on loans was 5.53%, 4.55% and 4.27%, for the years ended December 31, 2023, 2022, and 2021.
The increases in 2022 and 2021 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 in 2022.
The increase in 2022 was 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 in 2022.
Shareholders' Equity: The ratio of total shareholders' equity to total assets was 10.85% at December 31, 2022, compared to 11.62% at December 31, 2021 and 11.21% at December 31, 2020.
Shareholders' Equity: The ratio of total shareholders' equity to total assets was 11.64% at December 31, 2023, compared to 10.85% at December 31, 2022 and 11.62% at December 31, 2021.
At year-end 2022, management estimated that the average maturity of the investment portfolio would lengthen to 5.1 years with a 100 basis point increase in long-term interest rates and would lengthen to 5.7 years with a 200 basis point increase in long-term interest rates.
At year-end 2023, management estimated that the average maturity of the investment portfolio would lengthen to 5.0 years with a 100 basis point increase in long-term interest rates and would lengthen to 5.4 years with a 200 basis point increase in long-term interest rates.
The increase in 2022 primarily related to an increase in software expenses of $2.4 million, partially offset by a decrease in debit card processing costs of $277,000.
The increase in 2023 primarily related to an increase in software expenses of $3.7 million and an increase in debit card processing costs of $1.4 million. The increase in 2022 primarily related to an increase in software expenses of $2.4 million, partially offset by a decrease in debit card processing costs of $277,000.
Risks and uncertainties that could cause actual results to differ materially include, without limitation: • Park's ability to execute our business plan successfully and within the expected timeframe as well as our ability to manage strategic initiatives; • current and future economic and financial market conditions, either nationally or in the states in which Park and our subsidiaries do business, including the effects of higher unemployment rates, an acceleration in the pace of inflation, interest rate fluctuations, changes in the economy or global supply chain, supply-demand imbalances affecting local real estate prices, U.S. fiscal debt, budget and tax matters, geopolitical matters (including the impact of the Russia-Ukraine conflict and associated sanctions and export controls), and any slowdown in global economic growth, in addition to the continuing impact of the COVID-19 pandemic and recovery therefrom on our customers’ operations and financial condition, any 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, market interest rate policies and policies impacting inflation, of the Federal Reserve Board, the U.S.
Risks and uncertainties that could cause actual results to differ materially include, without limitation: • Park's ability to execute our business plan successfully and within the expected timeframe as well as our ability to manage strategic initiatives; • current and future economic and financial market conditions, either nationally or in the states in which Park and our subsidiaries do business, that may reflect deterioration in business and economic conditions, including the effects of higher unemployment rates or labor shortages, the impact of persistent inflation, the impact of continued elevated interest rates, changes in the economy or global supply chain, supply-demand imbalances affecting local real estate prices, U.S. fiscal debt, budget and tax matters, geopolitical matters (including the impact of the Russia-Ukraine conflict and associated sanctions and export controls as well as the Israel-Hamas conflict), and any slowdown in global economic growth, any 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; • the effect of monetary and other fiscal policies (including the impact of money supply, ongoing increasing market interest rate policies and policies impacting inflation, of the Federal Reserve Board, the U.S.
Circumstances that could result in the sale of a security include: to better manage interest rate risk; to meet liquidity needs; or to improve the overall yield in the investment portfolio.
Circumstances that could result in the sale of a security include: to better manage interest rate risk; to meet liquidity needs; or to improve the overall net interest margin.
These increases in deposits included a decrease in off-balance sheet deposits of $787.1 million in 2022 and increases in off-balance sheet deposits of $273.0 million and $710.1 million in 2021 and 2020, respectively. Other major sources of cash from financing activities are short-term borrowings and long-term debt.
These decreases and increases in deposits included a decrease in off-balance sheet deposits of $194.8 million in 2023, $787.1 million in 2022 and increases in off-balance sheet deposits of $273.0 million in 2021. Other major sources of cash from financing activities are short-term borrowings and long-term debt.
Consumer loans increased by $215.3 million, or 12.7%, in 2022 and increased $30.0 million, or 1.8%, in 2021. The increase in consumer loans in each of 2022 and 2021 was primarily due to an increase in automobile lending in Ohio.
Consumer loans increased by $41.0 million, or 2.1%, in 2023 and increased by $215.3 million, or 12.7%, in 2022. The increase in consumer loans in each of 2023 and 2022 was primarily due to an increase in automobile lending in Ohio.
These gains on equity securities were made up of gains (losses) on equity investments carried at fair value as well as gains on equity investments carried at NAV.
These gains on equity securities were made up of gains (losses) on equity investments carried at fair value as well as gains (losses) on equity investments carried at modified cost and gains (losses) on partnership investments carried at NAV.
Cash used in investing activities was $403.7 million in 2022, $412.1 million in 2021 and $455.9 million in 2020. Investment securities transactions and loan originations/repayments are the major uses or sources of cash in investing activities. Proceeds from the sale, repayment or maturity of investment securities provide cash and purchases of investment securities use cash.
Cash provided by investing activities was $64.2 in 2023, cash used in investing activities was $403.7 million in 2022 and $412.1 million in 2021. Investment securities transactions and loan originations/repayments are the major uses or sources of cash in investing activities. Proceeds from the sale, repayment or maturity of investment securities provide cash and purchases of investment securities use cash.
Government sponsored entities and U.S. Government sponsored entities' asset-backed securities were approximately 43.6% of the total investment portfolio at year-end 2022, 47.1% of the total investment portfolio at year-end 2021 and 66.9% of the total investment portfolio at year-end 2020.
Government sponsored entities and U.S. Government sponsored entities' asset-backed securities were approximately 44.4% of the total investment portfolio at year-end 2023, 43.6% of the total investment portfolio at year-end 2022 and 47.1% of the total investment portfolio at year-end 2021.
At December 31, 2022, Park had taken partial charge-offs of $1.8 million related to the $78.3 million of the individually evaluated commercial loans, compared to partial charge-offs of $624,000 related to the $74.5 million of individually evaluated commercial loans at December 31, 2021 and compared to partial charge-offs of $655,000 related to the $108.4 million of individually evaluated commercial loans at December 31, 2020.
At December 31, 2023, Park had taken partial charge-offs of $2.3 million related to the $45.2 million of the individually evaluated commercial loans, compared to partial charge-offs of $1.8 million related to the $78.3 million of individually evaluated commercial loans at December 31, 2022 and compared to partial charge-offs of $624,000 related to the $74.5 million of individually evaluated commercial loans at December 31, 2021.
Government sponsored entities $ 37,213 $ — $ — Obligations of states and political subdivisions 406,711 389,591 305,218 U.S.
Government sponsored entities $ — $ 37,213 $ — Obligations of states and political subdivisions 241,184 406,711 389,591 U.S.
Government sponsored entities 2.0 % — % — % Obligations of states and political subdivisions 22.3 % 21.5 % 27.1 % U.S.
Government sponsored entities — % 2.0 % — % Obligations of states and political subdivisions 16.9 % 22.3 % 21.5 % U.S.
The interest rate sensitivity gap analysis provides an overall picture of Park’s static interest rate risk position. At December 31, 2022, the cumulative interest earning assets maturing or repricing within twelve months were $3,676 million compared to the cumulative interest bearing liabilities maturing or repricing within twelve months of $2,589 million.
The interest rate sensitivity gap analysis provides an overall picture of Park’s static interest rate risk position. At December 31, 2023, the cumulative interest earning assets maturing or repricing within twelve months were $4,182 million compared to the cumulative interest bearing liabilities maturing or repricing within twelve months of $3,400 million.
In 2022, net short-term borrowings decreased and used $11.4 million in cash and net long-term debt was unchanged. In 2021, net short-term borrowings decreased and used $103.4 million in cash and net long-term debt decreased and used $32.5 million in cash.
In 2023, net short-term borrowings increased and provided $100.8 million in cash and net long-term borrowings was unchanged. In 2022, net short-term borrowings decreased and used $11.4 million in cash and net long-term debt was unchanged. In 2021, net short-term borrowings decreased and used $103.4 million in cash and net long-term debt decreased and used $32.5 million in cash.
The most significant of these assumptions are the discount rate and the expected return on assets. The discount rate utilized for the December 31, 2022 calculation was 5.32% and the expected return on plan assets was 6.92%. Presented below is the estimated impact on Park's projected benefit obligation ("PBO") and 2023 pension expense assuming changes in the significant assumptions.
This compares to the discount rate utilized for the December 31, 2022 calculation of 5.32% and the expected return on plan assets of 6.92%. Presented below is the estimated impact on Park's projected benefit obligation ("PBO") and 2024 pension expense assuming changes in the significant assumptions.
The decrease in 2021 compared to 2020 was primarily related to a decrease in other service income related to mortgage loan originations, including a $6.4 million decrease in fee income related to a $457.3 million decrease in mortgage loan originations to be sold in the secondary market and a $3.7 million decrease in income related to investor rate locks and loans held for sale, partially offset by a $1.2 million increase in mortgage investor fees and a $927,000 increase in mortgage servicing rights income.
The decrease in 2023 compared to 2022 was primarily related to a decrease in other service income related to mortgage loan originations, including a $2.6 million decrease in fee income related to mortgage loan originations to be sold in the secondary market and a $1.7 million decrease in mortgage servicing rights income, partially offset by a $465,000 increase in income related to investor rate locks and loans held for sale.
At year-end 2022, the balance in accumulated other comprehensive loss pertaining to the pension plan was an unrealized loss of $6.7 million, compared to $5.8 million at December 31, 2021 and $34.4 million at December 31, 2020. INVESTMENT OF FUNDS Loans: Average loans were $6,956 million in 2022, compared to $7,015 million in 2021 and $6,990 million in 2020.
At year-end 2023, the balance in accumulated other comprehensive income pertaining to the pension plan was unrealized income of $1.7 million, compared to an unrealized loss of $6.7 million at December 31, 2022 and compared to an unrealized loss of $5.8 million at December 31, 2021. -47- INVESTMENT OF FUNDS Loans: Average loans were $7,222 million in 2023, compared to $6,956 million in 2022 and $7,015 million in 2021.
In addition, loan interest income included $1.8 million, $3.3 million and $4.4 million, respectively, of the accretion of loan purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance. Loan interest income for 2022, 2021 and 2020 included interest and fee income related to PPP loans of $3.1 million, $18.0 million and $16.7 million, respectively.
In addition, loan interest income included $633,000, $1.8 million and $3.3 million, respectively, of the accretion of loan purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance. Loan interest income for 2023, 2022 and 2021 included interest and fee income related to PPP loans of $69,000, $3.1 million and $18.0 million, respectively.
Park expects that the current commitments will be funded between 2023 and 2032. As of December 31, 2022, Park had $20.3 million in unfunded commitments related to certain equity investments which are not included in "Table 39 - Contractual Obligations" above. Commitments are funded when capital calls are made by the general partner.
Park expects that the current commitments will be funded between 2024 and 2033. As of December 31, 2023, Park had $18.4 million in unfunded commitments related to certain equity investments which are not included in "Table 32 - Contractual Obligations" above. Commitments are funded when capital calls are made by the general partner.
Table 11-Pension Sensitivity Discount Rate Expected Return on Plan Assets (In thousands) - 25 BPS +25 BPS - 50 BPS +50 BPS Change in PBO $ 3,270 $ (3,110) N.A. N.A. Change in Pension Expense 70 (70) $ 1,020 $ (1,020) Our assumptions reflect our historical experience and management’s best judgment regarding future expectations.
Table 2 - Pension Sensitivity Discount Rate Expected Return on Plan Assets (In thousands) - 25 BPS +25 BPS - 50 BPS +50 BPS Change in PBO $ 3,580 $ (3,420) N.A. N.A. Change in Pension Expense 80 (70) $ 1,140 $ (1,140) Our assumptions reflect our historical experience and management’s best judgment regarding future expectations.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Annual Report on Form 10-K, Park’s tax equivalent net interest margin increased by eleven basis points in 2022, decreased by twenty-four basis points in 2021 and increased four basis points in 2020.
Biggest changeMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Annual Report on Form 10-K, Park’s tax equivalent net interest margin increased by 31 basis points in 2023, increased by 11 basis points in 2022 and decreased by 24 basis points in 2021.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. As noted in "Table 19 - Distribution of Assets, Liabilities and Shareholders' Equity" included in "ITEM 7.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. As noted in "Table 12 - Distribution of Assets, Liabilities and Shareholders' Equity" included in "ITEM 7.
The tax equivalent net interest margin was 3.80%, 3.69% and 3.93% for each of the years ended December 31, 2022, 2021 and 2020, respectively. The discussion of interest rate sensitivity included in "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Annual Report on Form 10-K is incorporated herein by reference.
The tax equivalent net interest margin was 4.11%, 3.80% and 3.69% for each of the years ended December 31, 2023, 2022 and 2021, respectively. The discussion of interest rate sensitivity included in "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Annual Report on Form 10-K is incorporated herein by reference.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" of this Annual Report on Form 10-K is incorporated herein by reference. -82-
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" of this Annual Report on Form 10-K is incorporated herein by reference. -73-

Other PRK 10-K year-over-year comparisons