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PARK NATIONAL CORP /OH/

PARK NATIONAL CORP /OH/PRKEarnings & Financial Report

NYSE · logistics

National Retail Systems, Inc. (NRS) includes Keystone Freight Corp. & National Retail Transportation, Inc. (NRT). NRS is an asset based 3PL founded in 1952. It is headquartered in Lyndhurst, New Jersey, United States.

What changed in PARK NATIONAL CORP /OH/'s 10-K — 2023 vs 2024

Top changes in PARK NATIONAL CORP /OH/'s 2024 10-K

476 paragraphs added · 523 removed · 409 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

95 edited+20 added−48 removed182 unchanged
(“Vision”) into Park in March of 2007 (the “Vision Merger”), Park became the successor to Vision under (i) the Junior Subordinated Indenture, dated as of December 5, 2005 (the “Indenture”), pursuant to which Vision issued $15.5 million of junior subordinated notes to Vision Bancshares Trust I, a Delaware statutory trust (the “Vision Trust”).
(“Vision”) into Park in March of 2007 (the “Vision Merger”), Park became the successor to Vision under the Junior Subordinated Indenture, dated as of December 5, 2005 (the “Indenture”), pursuant to which Vision issued $15.5 million of junior subordinated notes to Vision Bancshares Trust I, a Delaware statutory trust (the “Vision Trust”).
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.
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) -18- • 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.
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.
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 -14- 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.
Under the terms of the Indenture and the related Guarantee Agreement, Park, as successor to Vision, is prohibited, subject to limited exceptions, from declaring or paying dividends or distributions on, or redeeming, repurchasing, acquiring or making any liquidation payments with respect to, any shares of Park’s 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 by the Vision Trust) is being deferred.
Under the terms of the Indenture and Guarantee Agreement, Park, as successor to Vision, is prohibited, subject to limited exceptions, from declaring or paying dividends or distributions on, or redeeming, repurchasing, acquiring or making any liquidation payments with respect to, any shares of Park’s 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 by the Vision Trust) is being deferred.
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.
In the event Park’s total consolidated assets exceed $10.0 billion for four consecutive quarters, Park National -11- 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.
In order to be “well-capitalized,” a bank must have a common equity tier 1 capital ratio of at least 6.5%, a total risk-based capital of at least 10.0%, a tier 1 risk-based capital ratio of at least 8.0% and a leverage ratio of at least 5.0%, and the bank must not be subject to any written agreement, order, capital directive or prompt corrective action directive to meet and maintain a specific capital level for any capital measure.
In order to be “well-capitalized,” a bank must have a common equity tier 1 capital ratio of at least 6.5%, a total risk-based capital of at least 10.0%, a tier 1 risk-based capital ratio of at least 8.0% and a leverage ratio of at least 5.0%, and the bank must not be subject to any written agreement, order, capital directive or prompt corrective action directive to meet and -13- maintain a specific capital level for any capital measure.
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 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.
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.
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.
The Patriot Act gives the U.S. government powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements. Title III of the Patriot Act encourages information sharing among bank regulatory agencies and law enforcement bodies.
The Patriot Act gives the U.S. government powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased -16- information sharing and broadened anti-money laundering requirements. Title III of the Patriot Act encourages information sharing among bank regulatory agencies and law enforcement bodies.
Available benefits include an employee stock ownership plan ("KSOP") with a company matching contribution, a defined benefit pension plan, health and life insurance, dependent care assistance, a health flexible spending plan, a long-term disability plan, paid time off, tuition reimbursement for qualified schooling and an employee assistance program.
Available benefits also include an employee stock ownership plan ("KSOP") with a company matching contribution, defined benefit pension plan, health and life insurance, dependent care assistance, health flexible spending plan, long-term disability plan, paid time off, tuition reimbursement for qualified schooling, and an employee assistance program.
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.
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.
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.
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.
The primary factors in competing for loans are the terms of the loan, interest rates charged and overall services provided to borrowers. The primary factors in competing for deposits are interest rates paid on deposits, account liquidity, convenience and hours of office locations, convenience and availability of mobile banking options, and accessibility to trained and competent staff.
The primary factors in competing for loans are the terms of the loan, interest rates charged and overall services provided to borrowers. The primary factors in competing for deposits are interest rates paid on deposits, account liquidity, -7- convenience and hours of office locations, convenience and availability of mobile banking options, and accessibility to trained and competent staff.
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.
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.
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.
For more information concerning the loan maturity distribution in the CRE loan portfolio, please see "Table 8 - Loan Maturity Distribution" included -4- in "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Annual Report on Form 10-K.
The other statement indicates that a financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the financial institution’s operations after a cybersecurity attack involving destructive malware.
The other statement indicates that a financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the -15- rapid recovery, resumption and maintenance of the financial institution’s operations after a cybersecurity attack involving destructive malware.
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.
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.
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.
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.
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.
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 27 - 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.
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.
At December 31, 2024, 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.
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.
Through these contractual obligations, Park has fully and unconditionally guaranteed all the Vision Trust’s obligations with respect to the floating rate preferred securities.
In addition, environmental assessments are typically required prior to any foreclosure activity involving non-residential real estate collateral.
In addition, environmental assessments are typically required prior to any foreclosure activity involving non-residential real estate collateral. -19-
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%.
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, 2024, the DRR remained below the statutory minimum of 1.35%.
No final rule implementing this provision of the Dodd-Frank Act has, as of the date of the filing of this Annual Report on Form 10-K, been adopted, but a proposed rule was published in 2016 that expanded upon a prior proposed rule published in 2011.
No final rule implementing this provision of the Dodd-Frank Act has, as of the date of the filing of this Annual Report on Form 10-K, been adopted, but a proposed rule was published in 2016, and again in 2024, that expanded upon a prior proposed rule published in 2011.
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 primary industries represented by these customers include real estate rental and leasing; construction; finance and insurance; accommodation and food services; other services (except public administration); health care and social assistance; manufacturing; retail trade; agriculture, forestry, fishing and hunting; and professional, scientific, and technical services.
The applicability date for the majority of the changes to the CRA regulations is January 1, 2026, and additional requirements will be applicable on January 1, 2027. The impact the changes to the CRA will have on Park National Bank’s operations cannot be predicted at this time.
The applicability date for the majority of the changes to the CRA regulations is January 1, 2026, and additional requirements will be applicable on January 1, 2027. The impact the changes to the CRA will have on Park National Bank’s operations cannot be predicted at this time, but is being evaluated.
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.
Customers of Scope Aircraft Finance include primarily small businesses and entrepreneurs who utilize aircraft for business or pleasure. Scope Aircraft Finance serves customers throughout the U.S. and Canada. -2- 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" 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.
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, 2024, Park National Bank had $325 million in loans outstanding to non-bank consumer finance companies. This is a national lending unit of Park National Bank.
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.
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.
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.
In addition to approximately $938,000 in OREO property, SEPH also held non-performing loans that were fully charged off as of December 31, 2024, all of which were on nonaccrual status. SEPH has one office in Licking County, Ohio.
Park National Bank originates and retains for its own portfolio commercial and commercial real estate loans, commercial leases, residential real estate loans, home equity lines of credit, and installment loans. Park National Bank also originates fixed-rate residential real estate loans for sale to the secondary market. There are certain risks inherent in making loans.
Park National Bank retains commercial and commercial real estate loans, commercial leases, residential real estate loans, home equity lines of credit, and installment loans for its portfolio, and also sells fixed-rate residential real estate loans to the secondary market. Park National Bank acknowledges there are certain risks inherent in making loans.
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.
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.
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.
The remaining $413 million was included within the construction real estate loan segment, which included $311 million of commercial land and development loans and $102 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.
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.
Commercial Loans At December 31, 2024, Park’s subsidiaries (including Scope Aircraft Finance) had approximately $3,294 million in commercial loans (commercial, financial and agricultural loans and commercial real estate loans) and commercial leases outstanding, representing approximately 42.1% of their total aggregate loan portfolio as of that date.
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.
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, 2024, Park's subsidiaries had outstanding approximately $2,613 million in construction real estate loans and residential real estate loans, representing approximately 33.4% of total loans outstanding.
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.
The regulatory limit for loans made to one borrower by Park National Bank was $161.4 million at December 31, 2024. Participations in a loan by Park National Bank in an amount larger than $53.0 million are generally sold to third-party banks or financial institutions.
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.
While Park National Bank has a loan limit of $161.4 million, the total exposure of the largest single borrower within the commercial portfolio was $75.0 million at December 31, 2024.
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.
The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. -12- 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.
ITEM 1. BUSINESS. The disclosures set forth in this Item are qualified by "ITEM 1A. RISK FACTORS" and the section captioned "FORWARD-LOOKING STATEMENTS" in "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Annual Report on Form 10-K and other cautionary statements set forth elsewhere in this Annual Report on Form 10-K.
ITEM 1. BUSINESS. The disclosures set forth in this Item are qualified by "ITEM 1A. RISK FACTORS" and the section captioned "FORWARD-LOOKING STATEMENTS" of this Annual Report on Form 10-K and other cautionary statements set forth elsewhere in this Annual Report on Form 10-K.
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.
Financial technology companies, or "fintechs," are also providing nontraditional, but increasingly strong competition for our borrowers, depositors and other customers. Associates At December 31, 2024, Park and its subsidiaries had 1,771 active associates, consisting of 1,620 full-time and 151 part-time, resulting in 1,725 full-time equivalent associates.
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.
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; • wealth management, including trust and investment services; • aircraft financing; • commercial cash management; • safe deposit operations; • electronic funds transfers; • internet and mobile banking solutions with bill pay service; and • ParkDirect, a personal banking app. -3- Park believes that Park National Bank's current deposit mix is diverse enough that the loss of any single customer would not significantly impact Park National Bank's business.
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.
Park has an independent, internal loan review program which annually evaluates all commercial loan relationships equal to or greater than $1.0 million, all new commercial loans equal to or greater than $1.0 million in its metropolitan markets of Columbus, Ohio; Cincinnati, Ohio; Louisville, Kentucky; Charlotte, North Carolina; and within its loans to non-bank consumer finance companies and aircraft financing sectors, all new commercial loans equal to or greater than $500,000 in all other markets, and a risk-based sample of commercial relationships less than $1.0 million.
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.
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.
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.
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 floating rate preferred securities are considered Tier 1 Capital under regulatory capital standards. Other Subsidiaries Park Investments, Inc. ("PII"), which is a subsidiary of Park National Bank, operates as an asset management company. Commencing in 2015, Park began purchasing and holding municipal bonds within PII.
The floating rate preferred securities are considered Tier 1 Capital under regulatory capital standards. Other Subsidiaries Park Investments, Inc. ("PII"), a subsidiary of Park National Bank, operates as an asset management company. Commencing in 2015, Park began purchasing and holding municipal bonds within PII. As of December 31, 2024, PII held municipal securities with an amortized cost of $203.4 million.
The SEPH employees work with a third-party work-out specialist to ensure effective and efficient resolution to the non-performing loans and OREO, while working closely with the borrowers of the loans to maximize collection efforts. Park expects that the OREO will reduce over time and result in cash inflow to Park. Competition The financial services industry is highly competitive.
The SEPH employees work with a third-party work-out specialist to ensure effective and efficient resolution to the non-performing loans and OREO, while working closely with the borrowers of the loans to maximize collection efforts. Competition The financial services industry is highly competitive.
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.
Of the $2,613 million, approximately $2,200 million was included within the residential real estate loan segment, which included $644 million of commercial loans secured by residential real estate, $1,347 million of mortgage loans, $203 million of home equity lines of credit and $6 million of installment loans.
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.
Of this amount, approximately $1,270 million represented commercial, financial and agricultural loans, $1,994 million represented commercial real estate loans, and $30 million represented commercial leases.
Such legislation could change banking statutes and the operating environment of Park and Park National Bank in substantial and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions and other financial institutions.
If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions and other financial institutions.
The Federal Reserve Board also has enforcement authority over financial holding companies, including, but not limited to, the ability to: • assess civil money penalties; • issue cease and desist or removal orders; and • require that a financial holding company divest subsidiaries (including a subsidiary bank).
Park is subject to regular examinations by the Federal Reserve Board and is required to file reports and such additional information as the Federal Reserve Board may require. -8- The Federal Reserve Board also has enforcement authority over financial holding companies, including, but not limited to, the ability to: • assess civil money penalties; • issue cease and desist or removal orders; and • require that a financial holding company divest subsidiaries (including a subsidiary bank).
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.
Park’s 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.
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.
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.
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.
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.
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.
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.
Each subsidiary bank of a financial holding company is subject to certain restrictions on the maintenance of reserves against deposits, extensions of credit to the financial holding company and its subsidiaries, investments in the stock and other securities of the financial holding company and its subsidiaries and the taking of such stock and securities as collateral for loans to borrowers.
If restrictions are imposed on the activities of a financial holding company, the existence of such restrictions may not be made publicly available pursuant to confidentiality regulations of the bank regulatory agencies. -9- Each subsidiary bank of a financial holding company is subject to certain restrictions on the maintenance of reserves against deposits, extensions of credit to the financial holding company and its subsidiaries, investments in the stock and other securities of the financial holding company and its subsidiaries and the taking of such stock and securities as collateral for loans to borrowers.
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.
Park National Bank delivers financial products and services through its 87 financial service offices and a network of 107 automated teller machines, as well as telephone and internet-based banking by computer or mobile device, including with ParkDirect, a Park National Bank-tailored mobile banking application for Park customers. There is one reportable segment for the Corporation.
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.
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.
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.
At December 31, 2024, approximately $133.8 million of the total shareholders’ equity of Park National Bank was available for payment to Park without the approval of the OCC. See "Note 24 - 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.
Such origination (or modification) volume has been and is expected to continue to be insignificant to the consolidated Park entity. Park National Bank makes lending decisions in accordance with the written loan policies adopted by Park, which are designed to maintain acceptable loan quality.
Such origination (or modification) volume has been and is expected to continue to be insignificant to the consolidated Park entity. To maintain acceptable loan quality, loan decisions are made to align with Park’s written policies and procedures.
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.
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.
Park National Bank received a rating of "satisfactory" in its latest CRA examination. -18- On October 24, 2023, the federal banking agencies, including the OCC, issued a final rule designed to strengthen and modernize the regulations implementing the CRA.
On October 24, 2023, the federal banking agencies, including the OCC, issued a final rule designed to strengthen and modernize the regulations implementing the CRA.
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.
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. -10- 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.
SEC regulations require public companies to provide various disclosures about executive compensation in annual reports and proxy statements and to present to their shareholders a non-binding vote on the approval of executive compensation. -19- Public companies are required to adopt and implement "clawback" policies for incentive compensation payments and to disclose the details of the procedures which allow recovery of incentive compensation that was paid on the basis of erroneous financial information necessitating an accounting restatement due to material noncompliance with financial reporting requirements.
Public companies are required to adopt and implement "clawback" policies for incentive compensation payments and to disclose the details of the procedures which allow recovery of incentive compensation that was paid on the basis of erroneous financial information necessitating an accounting restatement due to material noncompliance with financial reporting requirements.
The Board of Directors has adopted and annually reviews charters for the Audit Committee, the Compensation Committee, the Executive Committee, the Nominating and Corporate Governance Committee (including as Exhibit A thereto, Corporate Governance Guidelines) and the Risk Committee, as well as a Code of Business Conduct and Ethics governing the directors, officers and associates of Park and Park's subsidiaries.
The Board of Directors has adopted and annually reviews charters for the Audit Committee, the Compensation Committee, the Executive Committee, the Nominating and Corporate Governance Committee (including as Exhibit A thereto, Corporate Governance Guidelines) and the Risk Committee, as well as a Code of Business Conduct and Ethics governing the directors, officers and associates of Park and Park's subsidiaries. -17- Executive and Incentive Compensation The Dodd-Frank Act requires that the federal bank regulatory agencies, including the Federal Reserve Board and the OCC, establish joint regulations or guidelines related to incentive-based compensation.
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.
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. At December 31, 2024 and 2023, Park reported $586 million and $551 million, respectively, of 15-year, fixed-rate residential mortgage loans on Park's Consolidated Balance Sheets.
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.
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.
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).
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.
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.
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.
In most instances, collateral is required to provide an additional source of repayment in the event of default by a commercial borrower.
Loan terms include amortization schedules commensurate with the purpose of each loan, identification of the source of each repayment and the risk involved. In most instances, collateral is required to provide an additional source of repayment in the event of default by a commercial borrower.
The maximum amount of a home equity line of credit is generally limited to 85% of the appraised value of the property less the balance of the first mortgage. The home equity lines of credit are written with ten-year terms. A variable interest rate is generally charged on the home equity lines of credit.
The home equity lines of credit are written with ten-year terms. A variable interest rate is generally charged on the home equity lines of credit.
ODFI regulation and supervision are designed to protect consumers and can affect the lending activities of Guardian Finance, including interest rates, loan terms, advertising and record retention. If grounds provided by law exist, the ODFI may suspend or revoke an Ohio consumer finance company’s ability to make loans.
As a consumer finance company incorporated under Ohio law, Guardian Finance is subject to regulation and supervision by the ODFI. ODFI regulation and supervision are designed to protect consumers and can affect the lending activities of Guardian Finance, including interest rates, loan terms, advertising and record retention.
Under the final rule, community banks with $10.0 billion or less in total consolidated assets and total trading assets and liabilities of 5.0% or less of total consolidated assets were excluded from the restrictions of the Volcker Rule.
Community banks with $10.0 billion or less in total consolidated assets and total trading assets and liabilities of 5.0% or less of total consolidated assets were excluded from the restrictions of the Volcker Rule. However, in the event Park’s total consolidated assets exceed $10.0 billion for four consecutive quarters, Park National Bank will become subject to the Volcker Rule.
Such rule permits certain banking entities to offer financial services and engage in other activities that do not raise concerns that the Volcker Rule was originally intended to address.
On June 25, 2020, the federal bank regulatory agencies also finalized a rule modifying the Volcker Rule’s prohibition on banking entities investing in or sponsoring covered funds. Such rule permits certain banking entities to offer financial services and engage in other activities that do not raise concerns that the Volcker Rule was originally intended to address.
As a result, SEPH is permitted to engage in lending activities and was able to succeed to the rights and obligations of Vision Bank in respect of the loans held by Vision Bank when Vision Bank merged into SEPH on February 16, 2012 (the "Vision Bank-SEPH Merger").
Based on authorization from the Federal Reserve Board, SEPH is permitted to engage in lending activities and succeeded to the lending rights and obligations of Vision Bank when Vision Bank merged into SEPH on February 16, 2012 (the "Vision Bank-SEPH Merger").
We provide opportunities for growth and advancement by empowering our associates and offering ongoing training to develop knowledge and skills. We strive to provide a safe, fair, caring and courteous work environment. Associate Profile Our associates are driven by purpose. We call it Serving More, and it's what drives our associates.
Park provides opportunities for growth and advancement by empowering associates and offering ongoing training to develop knowledge and skills. Park strives to provide a safe, fair, caring and courteous work environment.
Commercial loans are evaluated for the adequacy of repayment sources at the time of approval and are regularly reviewed for any possible deterioration in the ability of the borrower to repay the loan.
Commercial loans are evaluated for the adequacy of repayment sources at the time of approval and are regularly reviewed for any possible deterioration in the ability of the borrower to repay the loan. The credit information required generally includes, depending on the amount of money lent, financial statements, two years of federal income tax returns and a current credit report.
Park National Bank has also required proof of hazard insurance with the lender named as the mortgagee and as the loss payee. Independent third-party appraisals are generally obtained for consumer real estate loans. Home equity lines of credit are generally secured by second mortgages in favor of Park National Bank.
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. Park National Bank has also required proof of hazard insurance with the lender named as the mortgagee and as the loss payee.
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.
Both the junior subordinated notes and the floating rate preferred securities mature on December 30, 2035 (which maturity may be shortened), and, since July 1, 2023, carry a floating rate based on three-month CME Term SOFR plus 174 basis points.
Residential real estate loans are generally analyzed through an automated underwriting platform (system) to determine a risk classification.
Residential real estate loans are generally analyzed through an automated underwriting platform (system) to determine a risk classification. All loans receiving a risk classification of caution require review by a senior lender and generally require additional documentation if the loan is approved.
The operations of these subsidiaries are not significant to the consolidated Park entity. 87A Orange Beach, LLC; Morningside Holding, LLC; Swindall Holdings, LLC; Swindall Partnership Holdings, LLC; Farm Holdings, LLC; Marina Holdings Z, LLC; Marina Holding WE, LLC; Alabama Apartment Holdings, LLC; and Vision-Park Properties, L.L.C. are subsidiaries of SEPH that hold certain OREO properties.
River Park Properties, LLC and Park ABQ, LLC, former subsidiaries of Park National Bank that held certain OREO properties or other nonperforming assets, were dissolved in 2024, as the entities were no longer engaged in business. 87A Orange Beach, LLC; Swindall Holdings, LLC; Swindall Partnership Holdings, LLC; Farm Holdings, LLC; Marina Holding WE, LLC; Alabama Apartment Holdings, LLC; and Vision-Park Properties, L.L.C. are subsidiaries of SEPH that hold certain OREO properties.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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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.
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.
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 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.
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.
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 -20- 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.
We are subject to environmental liability risk associated with lending activities. A significant portion of our loan portfolio is secured by real property. During the ordinary course of business, we foreclose on and take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties.
We are subject to environmental liability risk associated with lending activities. A significant portion of our loan portfolio is secured by real property. During the ordinary course of business, we foreclose on and take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances -24- could be found on these properties.
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.
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.
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.
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.
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.
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.
While we maintain specific "cybersecurity" insurance coverage, which would apply in the event of various breach scenarios, the amount of coverage may not be adequate in any particular case. Furthermore, because cybersecurity threat scenarios are -24- inherently difficult to predict and can take many forms, some breaches may not be covered under our cybersecurity insurance coverage.
While we maintain specific "cybersecurity" insurance coverage, which would apply in the event of various breach scenarios, the amount of coverage may not be adequate in any particular case. Furthermore, because cybersecurity threat scenarios are inherently difficult to predict and can take many forms, some breaches may not be covered under our cybersecurity insurance coverage.
In the event our subsidiaries become unable to pay dividends to us, we may not be able to service our debt, pay our other obligations or pay dividends on our common shares. Accordingly, our inability to receive dividends from our subsidiaries could also have a material adverse effect on our business, financial condition and results of operations.
In the event our -26- subsidiaries become unable to pay dividends to us, we may not be able to service our debt, pay our other obligations or pay dividends on our common shares. Accordingly, our inability to receive dividends from our subsidiaries could also have a material adverse effect on our business, financial condition and results of operations.
In addition, our customers are subject to a wide variety of federal, state and local taxes. Changes in taxes paid by our customers may adversely affect their ability to purchase homes or consumer products, which could adversely affect their demand for our loans and deposit products.
In addition, our customers are subject to a wide variety of federal, state and local taxes. Changes in taxes paid by our customers -30- may adversely affect their ability to purchase homes or consumer products, which could adversely affect their demand for our loans and deposit products.
Our risk and exposure to these matters remains heightened due to, among other factors, the evolving nature of these threats, our plans to continue to implement or expand Internet and mobile banking to meet customer demand, and the current economic and political environment.
Our -21- risk and exposure to these matters remains heightened due to, among other factors, the evolving nature of these threats, our plans to continue to implement or expand Internet and mobile banking to meet customer demand, and the current economic and political environment.
If the models we use to measure the fair value of financial instruments are inadequate, the fair value of such financial instruments may fluctuate unexpectedly or may not accurately reflect what we could realize upon sale or settlement of such financial instruments.
If the models we use to measure the fair value of financial instruments are inadequate, the fair value of such financial -28- instruments may fluctuate unexpectedly or may not accurately reflect what we could realize upon sale or settlement of such financial instruments.
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.
Throughout 2024 and 2025 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.
Congress and the federal agencies regulating the financial services industry have acted on an unprecedented scale in responding to the stresses experienced in the global financial markets. Some of the laws enacted by the U.S.
Most recently, the U.S. Congress and the federal agencies regulating the financial services industry have acted on an unprecedented scale in responding to the stresses experienced in the global financial markets. Some of the laws enacted by the U.S.
We have significant investments in financial service office premises and equipment for our financial service office network, including 96 financial service offices as well as our retail work force and other financial service office banking assets.
We have significant investments in financial service office premises and equipment for our financial service office network, including 87 financial service offices as well as our retail work force and other financial service office banking assets.
All of the types of cybersecurity incidents discussed above could result in damage to our reputation, loss of customer business, increased costs of incentives to customers or business partners in order to maintain their relationships, litigation, increased regulatory scrutiny and potential enforcement actions, repairs of system damage, increased investments in cybersecurity (such as obtaining additional technology, making organizational changes, deploying additional personnel, training personnel and engaging consultants), increased insurance premiums, and loss of investor confidence and a reduction in the price of our common shares, all of which could result in financial loss and material adverse effects on our results of operations and financial condition.
All of the types of cybersecurity incidents discussed above could result in damage to our reputation, loss of customer business, increased costs of incentives to customers or business partners in order to maintain their relationships, litigation, increased regulatory scrutiny and potential enforcement actions, repairs of system damage, increased investments in cybersecurity (such as obtaining additional technology, making organizational changes, deploying additional personnel, training personnel and engaging consultants), increased insurance premiums, and loss of investor confidence and a reduction in the price of our common shares, all of which could result in financial loss and material adverse effects on our results of operations and financial condition. -22- We extend credit to a variety of customers based on certain internal standards and the judgment of our loan officers.
We are further exposed to the risk that our external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees as we are) or that our (or our vendors’) consumer compliance, business continuity, and data security systems will prove to be inadequate. -23- Our business could be adversely affected by third-party service providers, data breaches and cyber-attacks.
We are further exposed to the risk that our external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees as we are) or that our (or our vendors’) consumer compliance, business continuity, and data security systems will prove to be inadequate.
We maintain an allowance for credit losses that we believe is a reasonable estimate of the expected losses within the CECL model, based on management’s quarterly analysis of our loan portfolio.
Our allowance for credit losses may prove to be insufficient to absorb the expected, lifetime losses in our loan portfolio. We maintain an allowance for credit losses that we believe is a reasonable estimate of the expected losses within the CECL model, based on management’s quarterly analysis of our loan portfolio.
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.
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 face the risk of operational disruption, failure or capacity constraints due to our dependency on third-party vendors for components of our business infrastructure. While we have selected these third-party vendors through our vendor management process, we do not control their operations.
Our business could be adversely affected by third-party service providers, data breaches and cyber-attacks. We face the risk of operational disruption, failure or capacity constraints due to our dependency on third-party vendors for components of our business infrastructure. While we have selected these third-party vendors through our vendor management process, we do not control their operations.
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.
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 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.
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.
The ability to access and use technology is an increasingly important competitive factor in the financial services industry, and it is a critically important component to customer satisfaction as it affects our ability to deliver the right products and services.
The ability to access and use technology is an increasingly important competitive factor in the financial services industry, and it is a critically important component to customer satisfaction as it affects our ability to deliver the right products and services. -25- Another increasingly competitive factor in the financial services industry is the competition to attract and retain talented associates across many of our business and support areas.
Additional information regarding our allowance for credit losses methodology and the sensitivity of the estimates can be found in the discussion of “CRITICAL ACCOUNTING POLICIES” included in “ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” of this Annual Report on Form 10-K.
Additional information regarding our allowance for credit losses methodology and the sensitivity of the estimates can be found in the discussion of “CRITICAL ACCOUNTING POLICIES” included in “ITEM 7.
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.
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.
Actions taken to achieve compliance with the DOJ Consent Order may affect Park’s financial performance and may require us to reallocate resources away from existing businesses or to undertake significant changes to our businesses, operations, products and services, and risk management practices.
Continuing to achieve compliance may continue to require management attention, may affect Park’s financial performance, and may require Park to allocate resources away from existing businesses or to undertake significant changes to our businesses, operations, products and services, and risk management practices.
We take credit risk by virtue of making loans and leases, extending loan commitments and letters of credit and, to a lesser degree, purchasing municipal bonds and purchasing collateralized loan obligations.
Our credit standards and on-going process of credit assessment might not protect us from significant credit losses. We take credit risk by virtue of making loans and leases, extending loan commitments and letters of credit and, to a lesser degree, purchasing municipal bonds and purchasing collateralized loan obligations.
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.
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.
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.
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.
Customers have increasingly used bill payment services that do not utilize banks, and these trends may result in losses of deposits and fee income.
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.
A failure to adequately address the competitive pressures we face could make it harder for us to attract and retain customers across our businesses.
This competition leads to increased expenses in many business areas and can also cause us to not pursue certain business opportunities. A failure to adequately address the competitive pressures we face could make it harder for us to attract and retain customers across our businesses.
Even the reduction of regulatory restrictions could have an adverse effect on us and our shareholders if such lessening of restrictions increases competition within our industry or our market area.
Even the reduction of regulatory restrictions could have an adverse effect on us and our shareholders if such lessening of restrictions increases competition within our industry or our market area. -27- 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.
These actions could lead to losses on these assets or could adversely impact the carrying value of other long-lived assets and may lead to increased expenditures to renovate and reconfigure remaining financial service offices or to otherwise reform our retail distribution channel.
These actions could lead to losses on these assets or could adversely impact the carrying value of other long-lived assets and may lead to increased expenditures to renovate and reconfigure remaining financial service offices or to otherwise reform our retail distribution channel. -29- General Risk Factors If our total consolidated assets exceed $10.0 billion, we will become subject to additional regulations As of December 31, 2024, Park had total consolidated assets of $9.8 billion.
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.
ITEM 1A. RISK FACTORS. Economic, Political and Market Risks Inflation may have an adverse impact on our business and on our customers. 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.
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.
During 2021-2024, 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. Our expansion into Kentucky, South Carolina and North Carolina may also expose Park to additional geographic risk.
Our credit risk may be exacerbated when collateral held by us to secure obligations to us cannot be realized upon by us or is liquidated at prices that are not sufficient to recover the full amount of the loan. -25- Up until 2020, Park's provision for credit losses had declined since the end of the most recent recession, which ended in June 2009, primarily due to improvement in general economic conditions, as well as actions taken by us to better manage our loan portfolio.
Up until 2020, Park's provision for credit losses had declined since the end of the most recent recession, which ended in June 2009, primarily due to improvement in general economic conditions, as well as actions taken by us to better manage our loan portfolio. During 2020, Park experienced elevated provision for credit losses primarily due to the impact of COVID-19.
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.
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.
Our estimation of future credit losses is susceptible to changes in economic, operating and other conditions, including changes in regulations and interest rates, which may be beyond our control, and the losses may exceed current estimates. We cannot be assured of the amount of timing of losses, nor whether the allowance for credit losses will be adequate in the future.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” of this Annual Report on Form 10-K. -23- Our estimation of future credit losses is susceptible to changes in economic, operating and other conditions, including changes in regulations and interest rates, which may be beyond our control, and the losses may exceed current estimates.
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.
BUSINESS" of this Annual Report on Form 10-K. 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.
Removed
Cautionary Statement Regarding Forward-Looking Information Certain statements contained in this Annual Report on Form 10-K and the documents incorporated herein by reference that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "PSLRA"), including, without limitation, the statements specifically identified as forward-looking statements within this Annual Report on Form 10-K.
Added
Park's earnings can also be impacted by the spread between short-term and long-term market interest rates.
Removed
In addition, certain statements in future filings by Park with the SEC, in press releases, and in oral and written statements made by or with the approval of Park which are not statements of historical fact constitute forward-looking statements within the meaning of the PSLRA.
Added
Our credit risk may be exacerbated when collateral held by us to secure obligations to us cannot be realized upon by us or is liquidated at prices that are not sufficient to recover the full amount of the loan.
Removed
Examples of forward-looking statements include: (i) projections of income or expense, earnings per share, the payment or non-payment of dividends, capital structure and other financial items; (ii) statements of plans and objectives of Park or our management or Board of Directors, including those relating to products or services or to potential or pending acquisitions; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements.
Added
We cannot be assured of the amount or timing of losses, nor whether the allowance for credit losses will be adequate in the future.
Removed
Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted” and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.
Added
Through its first two years, Park National Bank is in full compliance with the DOJ Consent Order and on target to complete its compliance with the DOJ Consent Order within the required five-year period.
Removed
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.
Removed
Park desires to take advantage of the “safe harbor” provisions of the PSLRA. Forward-looking statements involve risks and uncertainties. Actual results may differ materially from those predicted by the forward-looking statements because of various factors and possible events, including those factors and events identified below.
Removed
There is also the risk that Park’s management or Park's Board of Directors incorrectly analyzes these risks and uncertainties or that the strategies Park develops to address such risks and uncertainties are unsuccessful.
Removed
Forward-looking statements speak only as of the date on which they are made, and, except as may be required by applicable law, Park undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made.
Removed
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.
Removed
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
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
We extend credit to a variety of customers based on certain internal standards and the judgment of our loan officers. Our credit standards and on-going process of credit assessment might not protect us from significant credit losses.
Removed
Our expansion into Kentucky, South Carolina and North Carolina may also expose Park to additional geographic risk. Our allowance for credit losses may prove to be insufficient to absorb the expected, lifetime losses in our loan portfolio.
Removed
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
BUSINESS" of this Annual Report on Form 10-K.
Removed
Another increasingly competitive factor in the financial services industry is the competition to attract and retain talented associates across many of our business and support areas. This competition leads to increased expenses in many business areas and can also cause us to not pursue certain business opportunities.
Removed
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
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
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
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
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.
Removed
Although Park and Park National Bank are committed to full compliance with the DOJ Consent Order, achieving such compliance will require significant management attention from Park and may cause Park to incur unanticipated costs and expenses.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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The teams employ numerous security tools such as for threat detection, alerting and monitoring, data loss prevention, vulnerability remediation, and including end-point protections, webproxy, anti-malware, and email security protections. Park uses multi-factor authentication for computer and mobile devices, encryption technology, and requires virtual private network access to Park’s network for all remote employees.
The teams employ numerous security tools such as for threat detection, alerting and monitoring, data loss prevention, vulnerability remediation, and including end-point protections, webproxy, anti-malware, and email security protections. Park uses multi-factor authentication for computer and mobile devices, encryption -31- technology, and requires virtual private network access to Park’s network for all remote employees.
Park’s information security team prepares and issues a quarterly report to the full Board of Directors on the status of incidents, health of program, penetration testing results, and risk assessments. Park’s -34- cybersecurity operations team also prepares and issues a quarterly report to the full Board of Directors identifying cybersecurity trends, internal data, issues, events, and key-risk indicator metrics.
Park’s information security team and cybersecurity operations team jointly prepare and issue a quarterly report to the full Board of Directors on the status of incidents, health of program, penetration testing results, risk assessments, identifying cybersecurity trends, internal data, issues, events, and key-risk indicator metrics.
Park’s business strategy, results of operations, and financial performance have not been materially affected by risks from cybersecurity threats. Park cannot provide assurance that business strategy, results of operations, or financial performance will not be materially affected in the future by such risks or any future incidents.
Park cannot provide assurance that business strategy, results of operations, or financial performance will not be materially affected in the future by such risks or any future incidents.
Park engages teams, including but not limited to information security, information technology, and fraud and security, to address and remediate cybersecurity events and issues as they arise. Park engages outside legal counsel for assistance in evaluating and remediating cybersecurity issues and events. Information regarding issues and events is also shared by Park leadership with both internal and external auditors.
Park engages teams, including but not limited to information security, information technology, corporate fraud and security, and fraud prevention, to address and remediate cybersecurity events and issues as they arise. Park engages outside legal counsel for assistance in evaluating and remediating cybersecurity issues and events.
Added
Information regarding issues and events is also shared by Park leadership with both internal and external auditors. Park’s business strategy, results of operations, and financial performance have not been materially affected by risks from cybersecurity threats.

Item 2. Properties

Properties — owned and leased real estate

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Park National Bank has three financial service offices (including its main office) and three operations centers in Newark in Licking County, Ohio. We operate a total of 86 financial service offices in Ohio, one financial service office in Kentucky, four financial service offices in North Carolina and five financial service offices in South Carolina.
Park National Bank As of December 31, 2024, Park National Bank and its subsidiary Scope Leasing, Inc. had a total of 87 financial service offices in Ohio, Kentucky, North Carolina and South Carolina. Park National Bank has three financial service offices (including its main office) and three operations centers in Newark in Licking County, Ohio.
Guardian Finance As of the date of this Annual Report on Form 10-K, Guardian Finance had one administrative office in Newark in Licking County, Ohio, which it leases from Park National Bank. SE Property Holdings, LLC SEPH has one administrative office located in Newark in Licking County, Ohio, which it leases from Park National Bank.
Park National Bank also operates 32 off-site automated teller machines. -32- Scope Leasing, Inc. has an office located in Columbus in Franklin County, Ohio, which it leases. Guardian Finance As of the date of this Annual Report on Form 10-K, Guardian Finance had one administrative office in Newark in Licking County, Ohio, which it leases from Park National Bank.
Removed
ITEM 2. PROPERTIES. Park’s principal executive offices are located at 50 North Third Street, Newark, Ohio 43055. Park National Bank As of the date of this Annual Report on Form 10-K, Park National Bank and its subsidiary Scope Leasing, Inc. had a total of 96 financial service offices in Ohio, Kentucky, North Carolina and South Carolina.
Added
ITEM 2. PROPERTIES. Park’s principal executive offices are located at 51 North Third Street, Newark, Ohio 43055. This facility, which we own, houses our executive offices as well as various operational functions.
Removed
Of 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.
Added
We believe that our current facilities are suitable and adequate to meet our ongoing needs and that, if we require additional space, we will be able to obtain additional facilities.
Added
We operate a total of 76 financial service offices in Ohio, one financial service office in Kentucky, five financial service offices in North Carolina and five financial service offices in South Carolina. Of the financial service offices described above, 17 are leased and the remainder are owned.
Added
SE Property Holdings, LLC SEPH has one administrative office located in Newark in Licking County, Ohio, which it leases from Park National Bank.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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While the ultimate liability with respect to these matters and claims cannot be determined at this time, we believe that losses, damages, or liabilities, if any, and other amounts relating to pending matters are not likely to be material to our consolidated financial position or results of operations.
While the ultimate liability with respect to these matters and claims cannot be determined at this time, we believe that losses, damages, or liabilities, if any, and other amounts relating to pending matters, individually or in the aggregate, are not likely to have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows.
Added
See "Note 1 - Significant Accounting Policies - Loss Contingencies" of the Notes to the Financial Statements included in "Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" of this Annual Report on Form 10-K for additional information.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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.
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, 2019 to December 31, 2024. The NYSE Composite Index is a market capitalization-weighted index of the stocks listed on NYSE.
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.
Park currently intends to continue to pay quarterly cash dividends comparable to the regular quarterly cash dividends paid during the year ended December 31, 2024, subject to the regulatory restrictions described in "Note 24 - 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 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.
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, 2024, 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, 2024 — — — 996,088 November 1 through November 30, 2024 — — — 996,088 December 1 through December 31, 2024 — — — 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 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.
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.
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 February 21, 2025, Park had 3,035 shareholders of record.
SmallCap Banks Index were a positive 10.8%, a positive 5.6% and a positive 7.0%, respectively.
SmallCap Banks Index were a positive 9.0%, a positive 5.8% and a positive 5.8%, respectively.
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 100.00 90.82 126.43 111.47 112.03 132.44 The annual compound total return on Park’s common shares for the past five years was a positive 15.1%. 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. -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.
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. -34- Total Return Performance Period Ended Index 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 Park National Corporation 100.00 107.61 145.87 154.82 151.72 201.81 NYSE Composite Index 100.00 106.99 129.11 117.04 133.16 154.19 KBW NASDAQ Bank Index 100.00 89.69 124.06 97.52 96.65 132.60 S&P U.S.
Removed
At the 2017 Annual Meeting of Shareholders held on April 24, 2017, Park's shareholders approved the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP.
Added
Such authorizations are not subject to a fixed expiration date.
Removed
The common shares to be issued and delivered under the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP may consist of either common shares currently held or common shares subsequently acquired by Park as treasury shares. No newly-issued common shares will be delivered under the 2017 Employees LTIP or the 2017 Non-Employee Directors LTIP.
Removed
On April 24, 2017, Park's Board of Directors authorized the purchase, from time to time, of up to 750,000 Park common shares and 150,000 Park common shares, respectively, to be held as treasury shares for subsequent issuance and delivery under the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP.
Removed
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.
Removed
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.
Removed
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.

Item 7. Management's Discussion & Analysis

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

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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.
In the tables included within the "ANALYSIS OF EARNINGS - Items Impacting Comparability" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations, Park has provided a reconciliation of average tangible equity from average shareholders' equity, average tangible assets from average assets, tangible equity from total shareholders' equity, tangible assets from total assets, and pre-tax, pre-provision net income from net income solely for the purpose of complying with SEC Regulation G and not as an indication that the return on average tangible equity, the return on average tangible assets, the tangible equity to tangible assets ratio, and pre-tax, pre-provision net income are substitutes for the return on average equity, the return on average assets, the total shareholders' equity to total assets ratio, and net income, respectively, as determined in accordance with U.S.
Annual pension expense is principally based on four components: (1) the value of benefits earned by employees for working during the year (service cost), (2) the increase in the liability due to the passage of time (interest cost), and (3) other gains and losses, reduced by (4) the expected return on plan assets for our pension plan.
Annual pension income/expense is principally based on four components: (1) the value of benefits earned by employees for working during the year (service cost), (2) the increase in the liability due to the passage of time (interest cost), and (3) other gains and losses, reduced by (4) the expected return on plan assets for our pension plan.
The amount of the provision for (recovery of) credit losses is determined by management based on relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets.
The amount of the provision for credit losses is determined by management based on relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets.
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.
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. -38- One of the significant judgments impacting the ACL estimate is the economic forecasts for Ohio unemployment, Ohio GDP, and Ohio HPI.
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.
Management has included in this Management's Discussion and Analysis of Financial Condition and Results of Operation, information relating to the return on average tangible equity, the return on average tangible assets, the tangible equity to tangible assets ratio,and pre-tax, pre-provision net income for the years ended December 31, 2024, December 31, 2023, and December 31, 2022.
The Corporation’s operating lease obligations represent short-term and long-term lease and rental payments for facilities and equipment. Commitments, Contingent Liabilities, and Off-Balance Sheet Arrangements : In order to meet the financing needs of our customers, the Corporation issues loan commitments and standby letters of credit.
The Corporation’s operating lease obligations represent short-term and long-term lease and rental payments for facilities and equipment. -67- Commitments, Contingent Liabilities, and Off-Balance Sheet Arrangements : In order to meet the financing needs of our customers, the Corporation issues loan commitments and standby letters of credit.
CRITICAL ACCOUNTING POLICIES The significant accounting policies used in the development and presentation of Park’s consolidated financial statements are listed in "Note 1 - Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements included in "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA." The accounting and reporting policies of Park conform with U.S.
CRITICAL ACCOUNTING ESTIMATES The significant accounting estimates used in the development and presentation of Park’s consolidated financial statements are listed in "Note 1 - Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements included in "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA." The accounting and reporting estimates of Park conform with U.S.
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.
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.
GAAP, assists in analyzing Park's operating performance, ensures comparability of operating performance from period to period, and facilitates comparisons with the performance of Park's peer financial holding companies and bank holding companies, while eliminating certain non-operational effects of acquisitions.
GAAP, assists in analyzing Park's operating performance, ensures comparability of operating -36- performance from period to period, and facilitates comparisons with the performance of Park's peer financial holding companies and bank holding companies, while eliminating certain non-operational effects of acquisitions.
The quarterly cash dividend on Park's common shares was $1.04 per share for the first, second and third quarter of 2022, and $1.54 per share for the fourth quarter of 2022. The fourth quarter of 2022 included a one-time special cash dividend of $0.50 per share.
The quarterly cash dividend on Park's common shares was $1.04 per share for the first, second and third quarters of 2022, and $1.54 per share for the fourth quarter of 2022. The fourth quarter of 2022 included a one-time special cash dividend of $0.50 per share.
For the purpose of calculating pre-tax, pre-provision net income, a non-GAAP financial measure, income taxes and the provision for (recovery of) credit losses are added back to net income, in each case during the applicable period.
For the purpose of calculating pre-tax, pre-provision net income, a non-GAAP financial measure, income taxes and the provision for credit losses are added back to net income, in each case during the applicable period.
Prior to the adoption of ASU 2022-02 on January 1, 2023, nonperforming assets included: 1) loans whose interest is accounted for on a nonaccrual basis; 2) TDRs on accrual status; 3) loans which are contractually past due 90 days or more as to principal or interest payments but whose interest continues to accrue; and 4) OREO which results from taking possession of property that served as collateral for a defaulted loan; and 5) other nonperforming assets.
Prior to the adoption of ASU 2022-02 on January 1, 2023, nonperforming assets included: 1) loans whose interest is accounted for on a nonaccrual basis; 2) TDRs on accrual status; 3) loans which are contractually past due 90 days or more as to principal or interest payments but whose interest continues to accrue; and 4) OREO which results from taking possession of property that served as collateral for a defaulted loan.
During 2023, the change in net unrealized holding (loss) gain on AFS debt securities, net of income tax, was a gain of $27.8 million, which included a $6.2 million, net of income taxes, realized loss on the sale of debt securities.
During 2023, the change in net unrealized holding (loss) gain on AFS debt securities, net of income tax, was a gain of $27.8 million, which included a $6.2 million, net of income tax, realized loss on the sale of debt securities.
Refer to the “CREDIT METRICS AND PROVISION FOR (RECOVERY OF) CREDIT LOSSES” section within this "ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" for additional discussion.
Refer to the “CREDIT METRICS AND PROVISION FOR CREDIT LOSSES” section within this "ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" for additional discussion.
CREDIT METRICS AND PROVISION FOR (RECOVERY OF) CREDIT LOSSES The provision for (recovery of) credit losses is the amount added to/subtracted from the allowance for credit losses to ensure the allowance is sufficient to absorb estimated credit losses over the life of a loan.
CREDIT METRICS AND PROVISION FOR CREDIT LOSSES The provision for credit losses is the amount added to/subtracted from the allowance for credit losses to ensure the allowance is sufficient to absorb estimated credit losses over the life of a loan.
The 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.
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, 2024.
Due to the significant management judgment involved, our assumptions could have a material impact on the measurement of our pension plan expense and obligation.
Due to the significant management judgment involved, our assumptions could have a material impact on the measurement of our pension plan income/expense and obligation.
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.
Contractual Obligations : In the ordinary course of operations, Park enters into certain contractual obligations. The following table summarizes Park’s significant and determinable obligations by payment date at December 31, 2024. Further discussion of the nature of each specified obligation is included in the referenced Note to the Consolidated Financial Statements included in "ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" of this Annual Report on Form 10-K for information on the accounting for Park’s pension plan.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" of this Annual Report on Form 10-K for additional information on the accounting for Park’s pension plan.
Tangible equity equals total shareholders' equity less goodwill and other intangible assets, in each case at the end of the period.
(8) Tangible equity equals total shareholders' equity less goodwill and other intangible assets, in each case at the end of the period.
As a result, loans may be classified as nonaccrual despite being current with their contractual terms. The following table details the delinquency status of nonaccrual loans at December 31, 2023, 2022, and 2021. Loans are classified as current if they are less than 30 days past due.
As a result, loans may be classified as nonaccrual despite being current with their contractual terms. The following table details the delinquency status of nonaccrual loans at December 31, 2024, 2023, and 2022. Loans are classified as current if they are less than 30 days past due.
Management believes that the allowance for credit losses at year-end 2023 is adequate to absorb estimated life of loan credit losses in the loan portfolio. See "Note 1 - Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements included in "ITEM 8.
Management believes that the allowance for credit losses at year-end 2024 is adequate to absorb estimated life of loan credit losses in the loan portfolio. See "Note 1 - Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements included in "ITEM 8.
(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.
(2) Averages are for the years ended December 31, 2024, December 31, 2023 and December 31, 2022, as appropriate. (3) Net income for each period divided by average tangible equity during the period. Average tangible equity equals average shareholders' equity during the applicable period less average goodwill and other intangible assets during the applicable period.
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.
Government sponsored entities' asset-backed securities 47.1 % 44.4 % 41.6 % Collateralized loan obligations 24.7 % 30.7 % 28.4 % Corporate debt securities 1.7 % 1.3 % 0.9 % FHLB stock 0.8 % 1.2 % 0.6 % FRB stock 1.3 % 1.0 % 0.8 % Equities 7.4 % 4.5 % 3.4 % Total 100.0 % 100.0 % 100.0 % The carrying value of investments in debt securities at December 31, 2024, is shown in the following table by contractual maturity, except for asset-backed securities and collateralized loan obligations, which are shown as a single total, due to the unpredictability of the timing in principal repayments.
At December 31, 2023, management applied a 50% weighting to the baseline scenario and applied a 50% weighting to the adverse scenario. To create hypothetical sensitivity analyses, management calculated a quantitative allowance using a 100% weighting applied to a baseline scenario and a quantitative allowance using a 100% weighting applied to an adverse scenario.
At December 31, 2024, management applied a 50% weighting to the baseline scenario and applied a 50% weighting to the adverse scenario. To create hypothetical sensitivity analyses, management calculated a quantitative allowance using a 100% weighting applied to a baseline scenario and a quantitative allowance using a 100% weighting applied to an adverse scenario.
Nonaccrual loans of $60.3 million are included within the over five year maturity category. (2) Management considers interest bearing transaction accounts and savings accounts to be core deposits and, therefore, not as rate sensitive as other deposit accounts and borrowed money.
Nonaccrual loans of $68.2 million are included within the over five year maturity category. (2) Management considers interest bearing transaction accounts and savings accounts to be core deposits and, therefore, not as rate sensitive as other deposit accounts and borrowed money.
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.
The FTE 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 FTE net interest income by average interest earning assets, in each case during the applicable period.
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.
At year-end 2024, management estimated that the average maturity of the investment portfolio would decrease to 4.3 years with a 100 basis point decrease in long-term interest rates and to 4.0 years with a 200 basis point decrease in long-term interest rates. -46- The table below sets forth the carrying value of investment securities, as well as the percentage held within each category at year-end 2024, 2023 and 2022: Table 10 - Investment Securities December 31 (In thousands) 2024 2023 2022 Obligations of U.S.
The market value of overcollateralization is a measure of the underlying collateral value of the instrument relative to our specific tranche position, and our AAA or AA rated senior tranches are supported by subordinate tranches. Average taxable debt investment securities were $1,387 million in 2023, compared to $1,475 million in 2022 and $1,060 million in 2021.
The market value of overcollateralization is a measure of the underlying collateral value of the instrument relative to our specific tranche position, and our AAA or AA rated senior tranches are supported by subordinate tranches. Average taxable debt investment securities were $1,082 million in 2024, compared to $1,387 million in 2023 and $1,475 million in 2022.
At December 31, 2023, December 31, 2022 and December 31, 2021, there was no allowance for credit losses on PCD loans. The carrying amount of accruing loans acquired with deteriorated credit quality at December 31, 2023, 2022, and 2021 was $2.8 million, $4.7 million, and $7.1 million, respectively.
At December 31, 2024, December 31, 2023 and December 31, 2022, there was no allowance for credit losses on PCD loans. The carrying amount of accruing loans acquired with deteriorated credit quality at December 31, 2024, 2023, and 2022 was $2.2 million, $2.8 million, and $4.7 million, respectively.
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.
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 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 table below shows for the years ended December 31, 2024, 2023, and 2022, the average balance and cost of funds by type of deposit.
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.
This compares to the discount rate utilized for the December 31, 2023 calculation of 5.14% and the expected return on plan assets of 6.92%. Presented below is the estimated impact on Park's projected benefit obligation ("PBO") and 2024 pension expense assuming changes in the significant assumptions.
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.
These funds are used to manage the Corporation’s liquidity needs and interest rate sensitivity risk. The average rate paid on short-term borrowings generally moves closely with changes in market interest rates for short-term investments. The average rate paid on short-term borrowings was 2.60% in 2024, compared to 2.58% in 2023 and 0.67% in 2022.
Any commercial loan graded an 8 (loss) is completely charged off. -66- The following table highlights the credit trends within the commercial loan portfolio.
Any commercial loan graded an 8 (loss) is completely charged off. -63- The following table highlights the credit trends within the commercial loan portfolio.
At December 31, 2023, the Corporation had $1.5 billion of loan commitments and had $31.3 million of standby letters of credit.
At December 31, 2024, the Corporation had $1.5 billion of loan commitments and had $33.5 million of standby letters of credit. At December 31, 2023, the Corporation had $1.5 billion of loan commitments and had $31.3 million of standby letters of credit.
These items are detailed in the "ANALYSIS OF EARNINGS - Items Impacting Comparability" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations. DIVIDENDS ON COMMON SHARES Cash dividends declared on Park's common shares were $4.20 in 2023, $4.66 in 2022 and $4.52 in 2021.
These items are detailed in the "ANALYSIS OF EARNINGS - Items Impacting Comparability" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations. DIVIDENDS ON COMMON SHARES Cash dividends declared on Park's common shares were $4.74 in 2024, $4.20 in 2023 and $4.66 in 2022.
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.
In addition, loan interest income included $1.2 million, $633,000 and $1.8 million, respectively, of the accretion of loan purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance. Loan interest income for 2023 and 2022 included interest and fee income related to PPP loans of $69,000 and $3.1 million, respectively.
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.
For the years ended December 31, 2024, 2023 and 2022, $468,000, $371,000 and $2.4 million, respectively, of gains on equity investments carried at NAV were recorded within "Gain on equity securities, net" on Park's Consolidated Statements of Income.
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.
In addition, loan interest income included $1.2 million, $633,000 and $1.8 million, respectively, of the accretion of loan purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance. Loan interest income for 2023 and 2022 included interest and fee income related to PPP loans of $69,000 and $3.1 million, respectively.
Additionally, as a result of the adoption of this ASU and elimination of the concept of TDRs, total nonperforming loans decreased by $20.1 million effective January 1, 2023 and individually evaluated loans decreased by $11.5 million effective January 1, 2023. -62- The table below provides additional information on the provision for (recovery of) credits losses and the ACL for 2023, 2022 and 2021.
Additionally, as a result of the adoption of this ASU and elimination of the concept of TDRs, total nonperforming loans decreased by $20.1 million effective January 1, 2023 and individually evaluated loans decreased by $11.5 million effective January 1, 2023. -58- The table below provides additional information on the provision for credits losses and the ACL for 2024, 2023 and 2022.
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.
Park’s subsidiaries compete for deposits and loans with other banks, savings associations, credit unions and other types of financial institutions. At December 31, 2024, Park operated 87 financial service offices (including those of PNB and Scope Leasing, Inc.
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.
Loan interest income for 2024, 2023, and 2022 included $54,000, $631,000 and $3.7 million, respectively, related to payments received on certain SEPH nonaccrual loan relationships, some of which are participated with PNB, as well as $1.2 million, $633,000 and $1.8 million of purchase accounting accretion for 2024, 2023 and 2022, respectively.
There was no OREO valuation markup related to former Vision Bank relationships during the year ended December 31, 2021. • During the years ended December 31, 2023, 2022, and 2021, Park incurred $100,000, $1.8 million, and $1.4 million, respectively, in direct expenses related to the collection of payments on former Vision Bank loan relationships. • During the year ended December 31, 2023, Park contributed $1.0 million to its charitable foundation, compared to $4.0 million for each of the years ended December 31, 2022 and December 31, 2021. • Park's loans outstanding at December 31, 2023 increased 4.7% compared to December 31, 2022.
There was no OREO valuation markup related to former Vision Bank relationships during the year ended December 31, 2024. • During the years ended December 31, 2024, 2023, and 2022, Park incurred $215,000, $100,000 and $1.8 million, respectively, in direct expenses related to the collection of payments on former Vision Bank loan relationships. • During the year ended December 31, 2024, Park contributed $2.0 million to its charitable foundation, compared to $1.0 million for the year ended December 31, 2023 and $4.0 million for the year ended December 31, 2022. • Park's loans outstanding at December 31, 2024 increased 4.6% compared to December 31, 2023.
Pre-tax, pre-provision net income (non-U.S. GAAP) for the year ended December 31, 2023 of $156.5 million represented a $28.5 million, or 15.4%, decrease compared to $185.0 million for the year ended December 31, 2022.
Pre-tax, pre-provision net income for the year ended December 31, 2023 of $156.5 million represented a $28.5 million, or 15.4%, decrease compared to $185.0 million for the year ended December 31, 2022.
During this same time period, betas on loans and total interest earning assets were 24% and 31%, respectively. The table below shows for the years ended December 31, 2023, 2022, and 2021, the average balance and tax equivalent yield by type of loan.
During this same time period, betas on loans and total interest earning assets were 32% and 38%, respectively. The table below shows for the years ended December 31, 2024, 2023, and 2022, the average balance and tax equivalent yield by type of loan.
The following table indicates the capital ratios for PNB and Park at December 31, 2023 and December 31, 2022.
The following table indicates the capital ratios for PNB and Park at December 31, 2024 and 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. -44- 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 108 automated teller machines in 24 Ohio counties, five North Carolina counties, four South Carolina counties and one Kentucky county. SEPH and Guardian each operated one administrative office, located in Newark, Ohio. SOURCE OF FUNDS Deposits: Park’s major source of funds is deposits from individuals, businesses and local government entities.
The following table displays total other income for Park in 2023, 2022 and 2021.
The following table displays total other income for Park in 2024, 2023 and 2022.
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.
Excluding the impact of these items, the average tax equivalent yield on real estate loans was 5.07%, 4.38% and 3.80%, respectively. • The amount of interest related to PPP income, SEPH nonaccrual loan relationships and purchase accounting accretion included in commercial loan interest income for 2024, 2023 and 2022 was $935,000, $1.2 million and $8.2 million, respectively.
The most significant of these assumptions is the discount rate and the expected return on assets. The discount rate utilized for the December 31, 2023 calculation was 5.14% and the expected return on plan assets was 6.92%.
The most significant of these assumptions is the discount rate and the expected return on assets. The discount rate utilized for the December 31, 2024 calculation was 5.89% and the expected return on plan assets was 6.92%.
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.
Loan interest income for 2024, 2023, and 2022 included $54,000, $631,000 and $3.7 million, respectively, related to payments received on certain SEPH nonaccrual loan relationships, some of which are participated with PNB.
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.
Loan income also includes the effects of taxable equivalent adjustments using a 21% -48- federal corporate income tax rate in 2024, 2023 and 2022. The taxable equivalent adjustments were $964,000 in 2024, $811,000 in 2023 and $627,000 in 2022. (2) For the purpose of the computation for loans, nonaccrual loans are included in the daily average loans outstanding.
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.
Loan interest income for 2024, 2023, and 2022 included $54,000, $631,000 and $3.7 million, respectively, related to payments received on certain SEPH nonaccrual loan relationships, some of which are participated with PNB.
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.
Park's permanent federal tax differences were approximately $7.0 million in 2024, compared to $6.6 million in 2023 and $7.1 million in 2022. Park expects permanent federal tax differences for 2025 will be approximately $5.5 million.
Excluding the impact of the purchase accounting accretion, SEPH income, and PPP income, the average yield on earning assets was 5.17%, 4.06% and 3.64%, for the years ended December 31, 2023, 2022 and 2021, respectively, and the net interest margin was 4.09%, 3.72% and 3.46%, for the years ended December 31, 2023, 2022 and 2021, respectively.
Excluding the impact of the purchase accounting accretion, SEPH income, and PPP income, the average yield on earning assets was 5.77%, 5.17% and 4.06%, for the years ended December 31, 2024, 2023 and 2022, respectively, and the net interest margin was 4.39%, 4.09% and 3.72%, for the years ended December 31, 2024, 2023 and 2022, respectively.
GAAP. -41- OVERVIEW The table below reflects Park's net income for the years ended December 31, 2023, 2022 and 2021.
GAAP. OVERVIEW The table below reflects Park's net income for the years ended December 31, 2024, 2023 and 2022.
Government sponsored entities — % 2.0 % — % Obligations of states and political subdivisions 16.9 % 22.3 % 21.5 % U.S.
Government sponsored entities — % — % 2.0 % Obligations of states and political subdivisions 17.0 % 16.9 % 22.3 % U.S.
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.
Excluding the impact of these items, the average tax equivalent yield on commercial loans was 6.23%, 5.80% and 4.66%, for 2024, 2023 and 2022, respectively. • Excluding the impact of interest related to PPP income, SEPH nonaccrual loan relationships and purchase accounting accretion, the average tax equivalent yield on total loans and leases was 6.13%, 5.53% and 4.55%, for 2024, 2023, and 2022, respectively.
Excluding consideration of qualitative adjustments, this sensitivity analysis would result in a hypothetical increase in Park's ACL of $23.6 million as of December 31, 2023 if only the adverse scenario was used. Excluding consideration of qualitative adjustments, a corresponding $23.6 million decrease in Park's ACL would occur in a hypothetical scenario if only the baseline (most likely) scenario was used.
Excluding consideration of qualitative adjustments, this sensitivity analysis would result in a hypothetical increase in Park's ACL of $27.5 million as of December 31, 2024 if only the adverse scenario was used. Excluding consideration of qualitative adjustments, a corresponding $27.5 million decrease in Park's ACL would occur in a hypothetical scenario if only the baseline (most likely) scenario was used.
At December 31, 2021, the earnings simulation model projected that net income would increase by 7.5% using a rising interest rate scenario and decrease by 15.1% using a declining interest rate scenario over the next year. Park’s net interest margin was 4.11% in 2023, 3.80% in 2022 and 3.69% in 2021.
At December 31, 2022, the earnings simulation model projected that net income would increase by 3.69% using a rising interest rate scenario and decrease by 5.38% using a declining interest rate scenario over the next year. Park’s net interest margin was 4.41% in 2024, 4.11% in 2023 and 3.80% in 2022.
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.
Excluding the impact of the purchase accounting accretion, SEPH income, and PPP income, the average yield on loans was 6.13%, 5.53% and 4.55%, for the years ended December 31, 2024, 2023, and 2022.
Excluding the impact of the purchase accounting accretion, SEPH income, and PPP income, the average yield on loans was 5.53%, 4.55% and 4.27%, for the years ended December 31, 2023, 2022, and 2021.
Excluding the impact of the purchase accounting accretion, SEPH income, and PPP income, the average yield on loans was 6.13%, 5.53% and 4.55%, for the years ended December 31, 2024, 2023, and 2022.
A major source of cash provided by or used in financing activities is the net change in deposits. Deposits decreased and used $192.1 million of cash in 2023, and increased and provided $330.2 million of cash in 2022 and $332.2 million of cash in 2021.
A major source of cash provided by or used in financing activities is the net change in deposits. Deposits increased and provided $101.0 million of cash in 2024, decreased and used $192.1 million of cash in 2023, and increased and provided $330.2 million of cash in 2022.
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.
For the years ended December 31, 2024, 2023 and 2022, $2.6 million, $600,000 and $601,000, respectively, of gains on equity investments carried at fair value were recorded within "Gain on equity securities, net" on Park's Consolidated Statements of Income.
During 2023, Park sold certain AFS debt securities with a book value of $291.0 million at a gross loss of $7.9 million.
During 2023, Park sold certain AFS debt securities with a book value of $291.0 million at a gross loss of $7.9 million. No debt securities were sold in 2022.
The average tax-equivalent yield on tax-exempt debt investment securities was 3.47% in 2023, compared to 3.43% in 2022 and 3.65% in 2021. Total debt securities (at amortized cost) were $1,419 million at December 31, 2023, compared to $1,855 million at December 31, 2022 and $1,727 million at December 31, 2021.
The average tax-equivalent yield on tax-exempt debt investment securities was 3.19% in 2024, compared to 3.47% in 2023 and 3.43% in 2022. Total debt securities (at amortized cost) were $1,076 million at December 31, 2024, compared to $1,419 million at December 31, 2023 and $1,855 million at December 31, 2022.
Beginning in 2021, Park began investing in the AAA and AA rated tranches of Collateralized Loan Obligations ("CLOs"). CLOs had a fair value as of December 31, 2023 of $438.3 million. Management closely monitors the credit status of these securities. At December 31, 2023, the market value of overcollateralization was greater than 122% for each CLO.
Beginning in 2021, Park began investing in the AAA and AA rated tranches of Collateralized Loan Obligations ("CLOs"). CLOs had a fair value as of December 31, 2024 of $271.8 million. Management closely monitors the credit status of these securities. At December 31, 2024, the market value of overcollateralization was greater than 121% for each CLO.
The 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.
The Corporation may, at its option, beginning with the interest payment date of September 1, 2025 and on any interest payment date thereafter, redeem the Subordinated Notes, in whole or in part, subject to obtaining the prior approval of the Federal Reserve Board, if required, at a redemption price equal to 100% of the principal amount of the Subordinated Notes being redeemed, plus accrued and unpaid interest thereon to but excluding the date of redemption.
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.
Government sponsored entities' asset-backed securities were approximately 47.1% of the total investment portfolio at year-end 2024, 44.4% of the total investment portfolio at year-end 2023 and 43.6% of the total investment portfolio at year-end 2022.
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.
At year-end 2024, management estimated that the average maturity of the investment portfolio would lengthen to 5.1 years with a 100 basis point increase in long-term interest rates and would lengthen to 5.2 years with a 200 basis point increase in long-term interest rates.
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.
The interest rate sensitivity gap analysis provides an overall picture of Park’s static interest rate risk position. At December 31, 2024, the cumulative interest earning assets maturing or repricing within twelve months were $3,955 million compared to the cumulative interest bearing liabilities maturing or repricing within twelve months of $3,653 million.
These deposits consist of non-interest bearing and interest bearing deposits. Average total deposits were $8,360 million in 2023, compared to $8,450 million in 2022 and $8,187 million in 2021. The average interest rate paid on interest bearing deposits was 1.52% in 2023, compared to 0.39% in 2022 and 0.12% in 2021.
These deposits consist of non-interest bearing and interest bearing deposits. Average total deposits were $8,260 million in 2024, compared to $8,360 million in 2023 and $8,450 million in 2022. The average interest rate paid on interest bearing deposits was 1.97% in 2024, 1.52% in 2023 and 0.39% in 2022.
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.
Table 34 - PNB and Park Capital Ratios As of December 31, 2024 Leverage Tier 1 Risk-Based Common Equity Tier 1 Total Risk-Based PNB 9.80 % 11.44 % 11.44 % 12.85 % Park 11.51 % 13.46 % 13.28 % 16.63 % 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, 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 % 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.
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.
Interest income for 2023 -49- and 2022 included interest and fee income related to PPP loans of $69,000 and $3.1 million, 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 $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.
Interest income on nonaccrual loans may be recorded on a cash basis and be included in income only when Park expects to receive the entire recorded investment of the loan. Of the $6.4 million that would have been recognized, approximately $4.1 million was included in interest income for the year ended December 31, 2024 as a result of payments made.
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.
The unrealized net holding loss, net of income taxes, on AFS debt securities was $62.9 million at year-end 2024, compared to an unrealized net holding loss, net of income taxes, $67.9 million at year-end 2023 and compared to an unrealized net holding loss, net of income taxes, of $95.7 million at year-end 2022.
The 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 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.
These balances fluctuate based on seasonality and the cycle of collection and remittance of tax funds. The following table -45- details the change in public fund deposits.
These balances fluctuate based on seasonality and the cycle of collection and remittance of tax funds. Public funds include Bid Ohio CDs. The following table details the change in public fund deposits.
Common shares (including treasury shares) had a balance of $463.3 million, $462.4 million and $461.8 million at December 31, 2023, 2022, and 2021, respectively. Accumulated other comprehensive (loss) income, net reflected a loss of $66.2 million at December 31, 2023 and a loss of $102.4 million at December 31, 2022, and reflected income of $15.2 million at December 31, 2021.
Common shares (including treasury shares) had a balance of $463.7 million, $463.3 million and $462.4 million at December 31, 2024, 2023, and 2022, respectively. Accumulated other comprehensive (loss) income, net reflected a loss of $46.2 million, $66.2 million, and $102.4 million at December 31, 2024, 2023, and 2022, respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Annual Report on Form 10-K and in "Note 26 - Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with Concentrations of Credit Risk" of the Notes to Consolidated Financial Statements included in "ITEM 8.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Annual Report on Form 10-K and in "Note 25 - Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with Concentrations of Credit Risk" of the Notes to Consolidated Financial Statements included in "ITEM 8.
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.
The tax equivalent net interest margin was 4.41%, 4.11% and 3.80% for each of the years ended December 31, 2024, 2023 and 2022, 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. -73-
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" of this Annual Report on Form 10-K is incorporated herein by reference. -70-
MANAGEMENT'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.
MANAGEMENT'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 30 basis points in 2024, 31 basis points in 2023 and 11 basis points in 2022.

Other PRK 10-K year-over-year comparisons