PARK NATIONAL CORP /OH/ (PRK) FY 2021 MD&A

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

FORWARD-LOOKING STATEMENTS

Management's discussion and analysis addresses the financial condition and results of operations for Park National Corporation and our subsidiaries (unless the context otherwise requires, collectively, "Park" or the "Corporation"). This discussion should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. Management’s discussion and analysis contains forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements.

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

•the ever-changing effects of the novel coronavirus (COVID-19) pandemic - - the duration, extent and severity of which are impossible to predict, including the possibility of further resurgence in the spread of COVID-19 or variants thereof - - on economies (local, national and international), supply chains and markets, on the labor market, including the potential for a sustained reduction in labor force participation, and on our customers, counterparties, employees and third-party service providers, as well as the effects of various responses of governmental and nongovernmental authorities to the COVID-19 pandemic, including public health actions directed toward the containment of the COVID-19 pandemic (such as quarantines, shut downs and other restrictions on travel and commercial, social or other activities), the availability, effectiveness and acceptance of vaccines, and the implementation of fiscal stimulus packages;

•the impact of future governmental and regulatory actions upon our participation in and execution of government programs related to the COVID-19 pandemic;

•Park's ability to execute our business plan successfully and within the expected timeframe as well as our ability to manage strategic initiatives in light of the impact of the COVID-19 pandemic and the various responses to the COVID-19 pandemic;

•general economic and financial market conditions, specifically in the real estate markets and the credit markets, either nationally or in the states in which Park and our subsidiaries do business, may experience a weaker recovery than anticipated, in addition to the continuing impact of the COVID-19 pandemic on our customers’ operations and financial condition, either of which may result in adverse impacts on the demand for loan, deposit and other financial services, delinquencies, defaults and counterparties' inability to meet credit and other obligations and the possible impairment of collectability of loans;

•factors that can impact the performance of our loan portfolio, including real estate values and liquidity in our primary market areas, the financial health of our commercial borrowers and the success of construction projects that we finance, including any loans acquired in acquisition transactions;

•the effect of monetary and other fiscal policies (including the impact of money supply, interest rate policies and policies impacting inflation of the Federal Reserve Board, the U.S. Treasury and other governmental agencies) as well as disruption in the liquidity and functioning of U.S. financial markets, as a result of the COVID-19 pandemic and government policies implemented in response thereto, may adversely impact prepayment penalty income, mortgage banking income, income from fiduciary activities, the value of securities, deposits and other financial instruments, in addition to the loan demand and the performance of our loan portfolio, and the interest rate sensitivity of our consolidated balance sheet as well as reduce interest margins;

•changes in the federal, state, or local tax laws may adversely affect the fair values of net deferred tax assets and obligations of state and political subdivisions held in Park's investment securities portfolio and otherwise negatively impact our financial performance;

•the impact of the changes in federal, state and local governmental policy, including the regulatory landscape, capital markets, elevated government debt, potential changes in tax legislation that may increase tax rates, infrastructure spending and social programs;

•changes in laws or requirements imposed by Park's regulators impacting Park's capital actions, including dividend payments and stock repurchases;

•changes in consumer spending, borrowing and saving habits, whether due to changes in retail distribution strategies, consumer preferences and behavior, changes in business and economic conditions (including as a result of the COVID-19 pandemic and reactions thereto), legislative and regulatory initiatives (including those undertaken in response to the COVID-19 pandemic), or other factors may be different than anticipated;

•changes in unemployment levels in the states in which Park and our subsidiaries do business may be different than anticipated due to the continuing impact of the COVID-19 pandemic;

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•changes in customers', suppliers', and other counterparties' performance and creditworthiness, and Park's expectations regarding future loan losses and our allowance for credit losses, may be different than anticipated due to the continuing impact of and the various responses to the COVID-19 pandemic;

•Park may have more credit risk and higher credit losses to the extent there are loan concentrations by location or industry of borrowers or collateral;

•the volatility from quarter to quarter of mortgage banking income, whether due to interest rates, demand, the fair value of mortgage loans, or other factors;

•the adequacy of our internal controls and risk management program in the event of changes in the market, economic, operational (including those which may result from more of our associates working remotely), asset/liability repricing, legal, compliance, strategic, cybersecurity, liquidity, credit and interest rate risks associated with Park's business;

•competitive pressures among financial services organizations could increase significantly, including product and pricing pressures (which could in turn impact our credit spreads), changes to third-party relationships and revenues, changes in the manner of providing services, customer acquisition and retention pressures, and Park's ability to attract, develop and retain qualified banking professionals;

•uncertainty regarding the nature, timing, cost and effect of changes in banking regulations or other regulatory or legislative requirements affecting the respective businesses of Park and our subsidiaries, including major reform of the regulatory oversight structure of the financial services industry and changes in laws and regulations concerning taxes, FDIC insurance premium levels, pensions, bankruptcy, consumer protection, rent regulation and housing, financial accounting and reporting, environmental protection, insurance, bank products and services, bank and bank holding company capital and liquidity standards, fiduciary standards, securities and other aspects of the financial services industry, specifically the reforms provided for in the Coronavirus Aid, Relief and Economic Security (CARES) Act and the follow-up legislation in the Consolidated Appropriations Act, 2021, the American Rescue Plan Act of 2021, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and the Basel III regulatory capital reforms, as well as regulations already adopted and which may be adopted in the future by the relevant regulatory agencies, including the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Federal Reserve Board, to implement the provisions of the CARES Act and the follow-up legislation in the Consolidated Appropriations Act, 2021, the provisions of the American Rescue Plan Act of 2021, the provisions of the Dodd-Frank Act, and the Basel III regulatory capital reforms;

•the effect of changes in accounting policies and practices, as may be adopted by the Financial Accounting Standards Board (the "FASB"), the SEC, the Public Company Accounting Oversight Board and other regulatory agencies, may adversely affect Park's reported financial condition or results of operations;

•Park's assumptions and estimates used in applying critical accounting policies and modeling, including under the CECL model, which may prove unreliable, inaccurate or not predictive of actual results;

•the impact of Park's ability to anticipate and respond to technological changes on Park's ability to respond to customer needs and meet competitive demands;

•operational issues stemming from and/or capital spending necessitated by the potential need to adapt to industry changes in information technology systems on which Park and our subsidiaries are highly dependent;

•the ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks, including those of Park's third-party vendors and other service providers, which may prove inadequate, and could adversely affect customer confidence in Park and/or result in Park incurring a financial loss;

•a failure in or breach of Park's operational or security systems or infrastructure, or those of our third-party vendors and other service providers, resulting in failures or disruptions in customer account management, general ledger, deposit, loan, or other systems, including as a result of cyber attacks;

•the impact on Park's business and operating results of any costs associated with obtaining rights in intellectual property claimed by others and of adequacy of Park's intellectual property protection in general;

•the existence or exacerbation of general geopolitical instability and uncertainty as well as the effect of trade policies (including the impact of potential or imposed tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars and other changes in trade regulations, closing of border crossings and changes in the relationship of the U.S. and its global trading partners);

•the impact on financial markets and the economy of any changes in the credit ratings of the U.S. Treasury obligations and other U.S. government-backed debt, as well as issues surrounding the levels of U.S., European and Asian government debt and concerns regarding the growth rates and financial stability of certain sovereign governments, supranationals and financial institutions in Europe and Asia and the risk they may face difficulties servicing their sovereign debt;

•the effect of a fall in stock market prices on Park's asset and wealth management businesses;

•our litigation and regulatory compliance exposure, including the costs and effects of any adverse developments in legal proceedings or other claims and the costs and effects of unfavorable resolution of regulatory and other governmental examinations or other inquiries;

•continued availability of earnings and excess capital sufficient for the lawful and prudent declaration of dividends;

•the impact on Park's business, personnel, facilities or systems of losses related to acts of fraud, scams and schemes of third parties;

•the impact of widespread natural and other disasters, pandemics (including the COVID-19 pandemic), dislocations, regional or national protests and civil unrest (including any resulting branch closures or damages), military or terrorist

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activities or international hostilities on the economy and financial markets generally and on us or our counterparties specifically;

•any of the foregoing factors, or other cascading effects of the COVID-19 pandemic that are not currently foreseeable, could materially affect our business, including our customers' willingness to conduct banking transactions and their ability to pay on existing obligations;

•the effect of healthcare laws in the U.S. and potential changes for such laws, especially in light of the COVID-19 pandemic, which may increase our healthcare and other costs and negatively impact our operations and financial results;

•risk and uncertainties associated with Park's entry into new geographic markets with our recent acquisitions, including expected revenue synergies and cost savings from recent acquisitions not being fully realized or realized within the expected time frame;

•the discontinuation of the London Inter-Bank Offered Rate (LIBOR) and other reference rates which may result in increased expenses and litigation, and adversely impact the effectiveness of hedging strategies;

•and other risk factors relating to the banking industry as detailed from time to time in Park's reports filed with the SEC including those described in "Item 1A. Risk Factors" of this Annual Report on Form 10-K.

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

NON-U.S. GAAP FINANCIAL MEASURES

Management's discussion and analysis contains non-U.S. GAAP financial measures where management believes it to be helpful in understanding Park’s results of operations or financial position. Where non-U.S. GAAP financial measures are used, the comparable U.S. GAAP financial measure, as well as the reconciliation to the comparable U.S. GAAP financial measure, can be found herein.

Items Impacting Comparability of Period Results

From time to time, revenue, expenses, and/or taxes are impacted by items judged by management of Park to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that their outsized impact is believed by management of Park at that time to be infrequent or short-term in nature. Most often, these items impacting comparability of period results are due to merger and acquisition activities, management restructuring, branch closures, a rebranding initiative, COVID-19 related expenses and revenue and expenses related to former Vision Bank loan relationships. In other cases, they may result from management's decisions associated with significant corporate actions outside of the ordinary course of business.

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

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

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

Non-U.S. GAAP Ratios

Park's management uses certain non-U.S. GAAP financial measures to evaluate Park's performance. Specifically, management reviews the ratio of tangible equity to tangible assets.

Management has included in this Management's Discussion and Analysis of Financial Condition and Results of Operation, information relating to the ratio of tangible equity to tangible assets. For the purpose of calculating the ratio of tangible equity to tangible assets, a non-U.S. GAAP financial measure, tangible equity is divided by tangible assets. Tangible equity equals total shareholders' equity less goodwill and other intangible assets, in each case at period end. Tangible assets equals total assets less goodwill and other intangible assets, in each case at period end.

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Management believes that the disclosure of the ratio of tangible equity to tangible assets presents additional information to the reader of the consolidated financial statements, which, when read in conjunction with the consolidated financial statements prepared in accordance with U.S. GAAP, assists in analyzing Park's operating performance, ensures comparability of operating performance from period to period, and facilitates comparisons with the performance of Park's peer financial holding companies and bank holding companies, while eliminating certain non-operational effects of acquisitions. Within the "CONTRACTUAL OBLIGATIONS - Capital" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations, Park has provided detail of the reconciliation of tangible equity to total shareholders' equity and of tangible assets to total assets solely for the purpose of complying with SEC Regulation G and not as an indication that the ratio of tangible equity to tangible assets is a substitute for the ratio of total shareholders' equity to total assets as determined in accordance with U.S. GAAP.

FTE (fully taxable equivalent) Ratios

Interest income, yields, and ratios on a FTE basis are considered non-U.S. GAAP financial measures. Management believes net interest income on a FTE basis provides an insightful picture of the interest margin for comparison purposes. The FTE basis also allows management to assess the comparability of revenue arising from both taxable and tax-exempt sources. The FTE basis assumes a federal statutory tax rate of 21%. In the tables included within the "ANALYSIS OF EARNINGS - Net Interest Income" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations, Park has provided detail of FTE interest income solely for the purpose of complying with SEC Regulation G and not as an indication that FTE interest income, yields and ratios are substitutes for interest income, yields and ratios, as determined in accordance with U.S. GAAP.

Paycheck Protection Program ("PPP") Loans

Through December 31, 2021, Park had originated $768.5 million in loans as part of the PPP. These loans are not typical of Park's loan portfolio in that they are part of a specific government program to support businesses during the COVID-19 pandemic and are 100% guaranteed by the Small Business Administration ("SBA"). As such, management considers growth in the loan portfolio excluding PPP loans, the total allowance for credit losses to total loans ratio (excluding PPP loans), and general reserve on collectively evaluated loans as a percentage of total collectively evaluated loans (excluding PPP loans) in addition to the related U.S. GAAP metrics which are not adjusted for PPP loans.

OVERVIEW

COVID-19 Considerations

Banking has been identified by federal and state governmental authorities to be an essential service and Park is fully committed to continue serving our customers and communities through the COVID-19 public health crisis. For those in our communities experiencing a financial hardship, Park has offered various methods of support including loan modifications, payment deferral programs, participation in the CARES Act PPP, participation in additional PPP loans authorized under the Consolidated Appropriations Act, 2021, and various other case by case accommodations. Throughout the pandemic, Park has implemented various physical distancing guidelines to help protect associates, such as allowing associates to work from home, where practical, while maintaining customer service via our online banking services, mobile app, and ATMs, by keeping drive-thru lanes open to serve customers, maintaining selective branch office openings, and offering other banking services by appointment when necessary. As of December 31, 2021, all branches had returned to normal operations.

During 2021 and 2020, Park provided calamity pay and special one-time bonuses to certain associates related to the COVID-19 pandemic. The cost of the calamity pay and special bonuses amounted to $2.1 million and $3.6 million for the years ended December 31, 2021 and 2020, respectively, and is included within salaries expense.

Paycheck Protection Program

During 2020, Park approved and funded 4,439 loans totaling $543.1 million under the PPP's first round of loans. These first round PPP loans had an average principal balance of $122,000. Of the $543.1 million in first round PPP loans, 21 loans totaling $68.2 million had a principal balance that was greater than $2 million. For its assistance in making and retaining the 4,439 loans, Park has received an aggregate of $20.2 million in fees from the SBA, of which $6.4 million and $13.7 million were recognized within loan interest income during the year ended December 31, 2021 and the year ended December 31, 2020, respectively. Park funded the PPP loans with excess on-balance sheet liquidity. At December 31, 2021, the remaining balance of the first round PPP loans funded in 2020 was $4.8 million.

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During 2021, Park offered additional PPP loans as authorized under the Consolidated Appropriations Act, 2021. Through December 31, 2021, Park approved and funded 3,262 loans totaling $221.6 million under the second round of PPP loans. These additional second round PPP loans had an average principal balance of $68,000. None of the $221.6 million in additional second round PPP loans had a principal balance that was greater than $2 million. For its assistance in making and retaining the 3,262 second round of PPP loans, Park has received an aggregate of $12.9 million in fees from the SBA, of which $9.9 million was recognized within loan interest income during the year ended December 31, 2021. Park funded the second round PPP loans with excess on-balance sheet liquidity. At December 31, 2021, the remaining balance of second round PPP loans funded in 2021 was $72.3 million.

As of February 21, 2022, Park had submitted 6,953 repayment requests on behalf of borrowers under the PPP to the SBA and has received $707.9 million in payments from the SBA.

Loan Modifications

During the two years ended December 31, 2021, Park modified a total of 5,138 consumer loans, with an aggregate balance of $72.2 million, and modified a total of 1,406 commercial loans, with an aggregate balance of $488.1 million, in each case related to a hardship caused by the COVID-19 pandemic and responses thereto. Park has worked with borrowers and provided modifications in the form of either interest only deferral or principal and interest deferral, in each case, for initial periods of up to 90 days. As necessary, Park made available a second 90-day interest only deferral or principal and interest deferral bringing the total potential deferral period to six months. Modifications were structured in a manner to best address each individual customer's then current situation. A majority of these modifications were excluded from the troubled debt restructuring ("TDR") classification under Section 4013 of the CARES Act or under applicable interagency guidance of the federal banking regulators. The modified loans are considered current and continue to accrue interest during the deferral period.

Of the $560.3 million of COVID-19 modifications during the two years ended December 31, 2021, $30.9 million, or 0.45% of total loans, remained in deferral as of December 31, 2021 and $7.1 million were greater than or equal to 30 days past due in accordance with the modified terms at December 31, 2021.

Financial Results by segment

The following table reflects the net income (loss) by segment for the years ended December 31, 2021, 2020 and 2019. Park's segments include PNB and "All Other" which primarily consists of Park as the "Parent Company", GFSC and SEPH. SEPH is a non-bank subsidiary of Park, holding former Vision Bank OREO property and non-performing loans.

Net income for the year ended December 31, 2021 of $153.9 million represented a $26.0 million, or 20.3%, increase compared to $127.9 million for the year ended December 31, 2020. Net income for both the year ended December 31, 2021 and the year ended December 31, 2020 included several items of income and expense that impact the comparability of period results. These items are detailed in the "ANALYSIS OF EARNINGS - Items Impacting Comparability" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations.

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

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The Park National Bank (PNB)

The table below reflects PNB's net income for the years ended December 31, 2021, 2020 and 2019.

(1) Park adopted ASU 2016-13 effective January 1, 2021. The allowance for credit losses as of December 31, 2021 and the related (recovery of) provision for credit losses for the year ended December 31, 2021 were calculated utilizing this new guidance.

Net interest income of $328.4 million for the year ended December 31, 2021 represented a $2.0 million, or 0.6%, increase compared to $326.4 million for the year ended December 31, 2020. The increase was a result of an $18.7 million decrease in interest expense, partially offset by a $16.7 million decrease in interest income.

The $16.7 million decrease in interest income was primarily due to a $312,000 decrease in investment income and a $16.3 million decrease in interest income on loans. The decrease in investment income was primarily the result of a decrease in the yield on investments, which decreased 43 basis points to 2.23% for the year ended December 31, 2021, compared to 2.66% for the year ended December 31, 2020, partially offset by a $200.5 million increase in average investments. The decrease in interest income on loans was primarily the result of a decrease in the yield on loans, which decreased 25 basis points to 4.41% for the year ended December 31, 2021, compared to 4.66% for the year ended December 31, 2020. The decrease in yield on loans was partially offset by a $35.5 million increase in average loans from $6.97 billion for the year ended December 31, 2020 to $7.01 billion for the year ended December 31, 2021. The increase in average loans was impacted by the addition of average PPP loans of approximately $257.4 million and $352.6 million for the years ended December 31, 2021 and 2020, respectively, and also resulted in interest and fee income of $18.0 million and $16.7 million for the year ended December 31, 2021 and 2020, respectively. Excluding the impact of PPP loans, the yield on loans was 4.31% for the year ended December 31, 2021, a decrease of 35 basis points compared to 4.66% for the year ended December 31, 2020.

The $18.7 million decrease in interest expense was primarily due to a $15.0 million decrease in interest expense on deposits as well as a $3.7 million decrease in interest expense on borrowings. The decrease in interest expense on deposits was partially the result of a decrease in the cost of deposits of 29 basis points, from 0.41% for the year ended December 31, 2020 to 0.12% for the year ended December 31, 2021. The decrease in the interest expense on deposits was partially offset by a $13.0 million increase in average on-balance sheet interest bearing deposits from $5.24 billion for the year ended December 31, 2020, to $5.25 billion for the year ended December 31, 2021. The increase in on-balance sheet interest bearing deposits was due to an increase in savings deposits, which was partially offset by declines in both higher-cost time deposits and transaction accounts. During the years ended December 31, 2021 and 2020, Park made the decision to participate in two programs to transfer deposits off balance sheet in order to manage growth of the balance sheet. This decision also minimized the increase in interest bearing deposits.

The decrease in interest expense on borrowings was partially the result of a $91.2 million decrease in average borrowings from $403.9 million for the year ended December 31, 2020, to $312.7 million for the year ended December 31, 2021. The cost of borrowings also decreased by 76 basis points, from 1.41% for the year ended December 31, 2020 to 0.65% for the year ended December 31, 2021.

The recovery of credit losses of $8.6 million for the year ended December 31, 2021 represented a difference of $39.4 million, compared to a provision for credit losses of $30.8 million for the year ended December 31, 2020. Refer to the “CREDIT METRICS AND (RECOVERY OF) PROVISION FOR CREDIT LOSSES" section for additional details regarding the level of the (recovery of) provision for credit losses recognized in each period presented above.

Other income of $126.8 million for the year ended December 31, 2021 represented an increase of $2.6 million, or 2.1%, compared to $124.2 million for the year ended December 31, 2020. The $2.6 million increase was primarily related to (i) a $5.6 million increase in income from fiduciary activities; (ii) a $3.7 million increase in debit card fee income; (iii) a $2.9 million increase in miscellaneous income, primarily related to refunds of a consumer insurance product, an increase in income

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from printed check sales and an increase in gain on sale of assets; and (iv) a $1.4 million increase in gain (loss) on equity securities, net. These increases were partially offset by a $3.3 million decrease in gain on sale of debt securities and a $7.7 million decrease in other service income. The decline in other service income was primarily due to declines in investor rate locks, mortgage loans held for sale and fee income from mortgage loan originations, partially offset by an increase in the valuation of mortgage servicing rights.

A summary of mortgage loan originations for the years ended December 31, 2021 and 2020 follows.

Total mortgage loan originations decreased $470.9 million, or 32.6%, to $973.3 million for the year ended December 31, 2021 compared to $1,444.3 million for the year ended December 31, 2020.

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The table below reflects PNB's other expense for the years ended December 31, 2021 and 2020.

Other expense of $266.7 million for the year ended December 31, 2021 represented a decrease of $2.3 million, or 0.8%, compared to $268.9 million for the year ended December 31, 2020. The decrease in salaries expense was primarily related to decreases in base salary expense, additional compensation expense and vacation accrual, partially offset by increases in officer incentive expense and share-based compensation expense. The increase in employee benefits expense was primarily related to increased pension plan expense, payroll tax expense and group insurance costs. The decrease in occupancy expense was primarily related to decreased lease expense. The decrease in furniture and equipment expense was primarily related to a change in the classification under which software and related maintenance costs were expensed, which are now classified under data processing fees. The impact of this decrease in furniture and equipment expense was partially offset by an increase in depreciation expense on equipment. The increase in data processing fees was related to increased debit card processing costs and other data processing and software costs, partially due to the previously mentioned change in classification from furniture and equipment expense and a change in expensing software costs from other fees within professional fees and services to data processing fees. The decrease in professional fees and services was primarily related to decreased legal expenses, title, appraisal and credit costs and decreases in other fees (due to the change to expensing software costs under data processing fees), partially offset by increases in management and consulting expenses. The decrease in the FHLB prepayment penalty was due to a $10.5 million prepayment penalty on FHLB borrowings of $150 million repaid during the year ended December 31, 2020; there was no similar prepayment during the year ended December 31, 2021. The increase in foundation contributions was due to a $4.0 million contribution to Park's charitable foundation during the year ended December 31, 2021, compared to a $3.0 million contribution made during the year ended December 31, 2020.

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The table below provides certain balance sheet information and financial ratios for PNB as of or for the years ended December 31, 2021 and 2020.

(1) Excludes $74.4 million of PPP loans at December 31, 2021 and $331.6 million of PPP loans at December 31, 2020.

(2) Park adopted ASU 2016-13 effective January 1, 2021. The allowance for credit losses as of December 31, 2021 and the related (recovery of) provision for credit losses for the year ended December 31, 2021 were calculated utilizing this new guidance.

(3) Average assets for the year ended December 31, 2021 and 2020.

(4) Calculated utilizing fully taxable equivalent net interest income which includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustments were $2.9 million for both the year ended December 31, 2021 and the year ended December 31, 2020.

Loans outstanding at December 31, 2021 were $6.87 billion, compared to $7.17 billion at December 31, 2020, a decrease of $296.9 million, or 4.1%. Excluding $74.4 million and $331.6 million of PPP loans at December 31, 2021 and December 31, 2020, respectively, loans outstanding were $6.79 billion at December 31, 2021, compared to $6.83 billion at December 31, 2020, a decrease of $39.8 million, or 0.6%. The table below breaks out the change in loans outstanding, by loan type.

(1) Excludes $74.4 million of PPP loans at December 31, 2021 and $331.6 million of PPP loans at December 31, 2020.

(2) Commercial (excluding PPP loans) decreased by $58.8 million, or 1.6% (2.1% annualized), from December 31, 2020 to September 30, 2021 and grew by $72.3 million, or 1.9% (7.7% annualized), from September 30, 2021 to December 31, 2021.

PNB's allowance for credit losses decreased by $1.2 million, or 1.4%, to $83.1 million at December 31, 2021, compared to $84.3 million at December 31, 2020. This decrease included the impact of a $6.7 million increase to the allowance for credit losses as the result of the adoption of ASU 2016-13. Net recoveries were $640,000, or 0.01% of total average loans, for the year ended December 31, 2021 and net charge-offs were $1.2 million, or 0.02% of total average loans, for the year ended December 31, 2020. Refer to the “CREDIT METRICS AND (RECOVERY OF) PROVISION FOR CREDIT LOSSES" section for additional information regarding PNB's loan portfolio and the level of provision for credit losses recognized in each period presented.

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Total deposits at December 31, 2021 were $8.16 billion, compared to $7.82 billion at December 31, 2020, an increase of $336.7 million, or 4.3%. During the years ended December 31, 2021 and 2020, Park made the decision to participate in two programs to transfer deposits off balance sheet in order to manage growth of the balance sheet, as deposits increased significantly throughout the COVID-19 pandemic. At December 31, 2021 and December 31, 2020, Park had $983.1 million and $710.1 million, respectively, in deposits which were off-balance sheet. Total deposits would have increased $609.7 million, or 7.1%, compared to December 31, 2020 had the $983.1 million and $710.1 million in deposits remained on the balance sheet at the respective dates. The table below breaks out the change in deposit balances, by deposit type.

All Other

The table below summarizes the All Other net (loss) income for the years ended December 31, 2021, 2020, and 2019.

(1) Park adopted ASU 2016-13 effective January 1, 2021. The allowance for credit losses as of December 31, 2021 and the related recovery of credit losses for the year ended December 31, 2021 were calculated utilizing this new guidance.

The net interest income for All Other included, for all periods presented, interest income on subordinated debt investments in PNB, which were eliminated in the consolidated Park National Corporation totals, as well as interest income on GFSC loans and SEPH nonaccrual loan relationships. The net interest income for All Other included for the years ended December 31, 2021 and 2020, interest expense on $175.0 million aggregate principal amount of 4.50% Fixed-to-Floating Rate Subordinated Notes due 2030 issued by Park in August 2020 (the "Park Subordinated Notes").

Net interest income reflected net interest income of $1.5 million for the year ended December 31, 2021, compared to net interest income of $1.3 million for the year ended December 31, 2020. The change was largely the result of an increase of $7.4 million in loan interest income related to payment collections at SEPH, offset by a decrease of $2.6 million in net interest income from GFSC, and by an increase in interest expense on borrowings of $4.4 million, mainly related to the Park Subordinated Notes.

SEPH had net recoveries of $2.7 million for the year ended December 31, 2021, compared to net recoveries of $19.0 million for the year ended December 31, 2020, and GFSC had net recoveries of $28,000 for the year ended December 31, 2021, compared to net charge-offs of $829,000 for the year ended December 31, 2020.

All Other had other income of $3.1 million for the year ended December 31, 2021, compared to $1.4 million for the year ended December 31, 2020. The change was largely due to an $878,000 increase in income related to partnership

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investments, which went from a $21,000 loss for the year ended December 31, 2020 to an $857,000 gain for the year ended December 31, 2021, and a $410,000 difference in gain (loss) on equity securities, net, which went from a $226,000 loss for the year ended December 31, 2020 to a $184,000 gain for the year ended December 31, 2021.

All Other had other expense of $16.8 million for the year ended December 31, 2021, compared to $17.7 million for the year ended December 31, 2020. The decrease was largely due to a $625,000 decrease in expense at GFSC, as well as a $605,000 decrease in merger-related expenses associated with the Carolina Alliance acquisition.

The table below provides certain balance sheet information for All Other as of or for the years ended December 31, 2021 and 2020.

(1) Park adopted ASU 2016-13 effective January 1, 2021. The allowance for credit losses as of December 31, 2021 and the related recovery of credit losses for the year ended December 31, 2021 were calculated utilizing this new guidance.

(2) Average assets for the years ended December 31, 2021 and 2020, respectively.

Park National Corporation

The table below summarizes Park's net income for the years ended December 31, 2021, 2020, and 2019.

DIVIDENDS ON COMMON SHARES

Cash dividends declared on Park's common shares were $4.52 in 2021, $4.28 in 2020 and $4.24 in 2019. The quarterly cash dividend on Park's common shares was $1.23 per share for the first quarter of 2021, $1.03 per share for the second and third quarter of 2021, and $1.23 per share for the fourth quarter of 2021. The first and fourth quarters of 2021 included a one-time special cash dividend of $0.20 per share. This was the fourth year in a row that Park has declared a special cash dividend ($0.20 twice in 2021, $0.20 in both 2020 and 2019, and $0.25 in 2018), which began in 2018 when the corporate federal income tax rate was reduced from 35% to 21% and has continued each year that the tax rates have remained at the lower level. The quarterly cash dividend on Park's common shares was $1.22 per share for the first quarter of 2020, and $1.02 per share for the second, third, and fourth quarter of 2020. The first quarter of 2020 included a one-time special cash dividend of $0.20 per share. The quarterly cash dividend on Park's common shares was $1.21 per share for the first quarter of 2019, and $1.01 per share for the second, third, and fourth quarter of 2019. The first quarter of 2019 included a one-time special cash dividend of $0.20 per share. Please see the discussion of limitations on Park's ability to pay dividends in the section captioned "Supervision and Regulation of Park and its Subsidiaries – Limits on Dividends and Other Payments" in "ITEM 1. BUSINESS" of this Annual Report on Form 10-K.

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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. GAAP and general practices within the financial services industry.  The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes.  Actual results could differ from those estimates.

The COVID-19 pandemic has caused significant unprecedented disruption around the world that has affected daily living and negatively impacted the global economy. The effects of the COVID-19 pandemic may meaningfully impact significant estimates such as the allowance for credit losses, goodwill, and pension plan obligations and related expenses.

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

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

In calculating the ACL, management weighs several different scenarios, including a baseline (most likely) scenario and an adverse scenario. To create a hypothetical sensitivity analysis, management calculated a quantitative allowance using a 100% weighting applied to an adverse scenario. This scenario considers among other things that, (1) new cases, hospitalizations and deaths from COVID rise again, causing some state and local governments to impose restrictions, those that are not vaccinated continue to refuse the vaccines, and worries about the Omicron variant rises; (2) as a result of the unknown Omicron variant, consumers’ uncertainty about the safety of hotels, stores, restaurants and flights rise again and, therefore, spending on travel, retail and hotels decline; and (3) disagreements in the U.S. Congress prevent any additional fiscal support. The adverse scenario forecasts unemployment for the next twelve months to range from 6.6% to 9.4%. Excluding consideration of general reserve adjustments, this sensitivity analysis would result in a hypothetical increase in Park's ACL of $20.7 million as of December 31, 2021.

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

Goodwill: Management believes that the accounting for goodwill also involves a higher degree of judgment than most other significant accounting policies. U.S. GAAP establishes standards for the impairment assessment of goodwill. Goodwill arising from business combinations represents the value attributable to unidentifiable intangible assets in each business acquired. Park’s goodwill, as of December 31, 2021, relates to the value inherent in the banking industry and that value is dependent upon the ability of Park’s national bank subsidiary, PNB, to provide quality, cost-effective banking services in a competitive marketplace. The goodwill value is supported by revenue that is in part driven by the volume of business transacted. A decrease in earnings resulting from a decline in the customer base, the inability to deliver cost-effective services over sustained periods or significant credit problems could lead to impairment of goodwill that could, in turn, adversely impact earnings in future periods.

U.S. GAAP requires an annual evaluation of goodwill for impairment, or more frequently if events or changes in circumstances indicate that the asset might be impaired. Park evaluates goodwill for impairment during the second quarter of each year, with financial data as of March 31. Based on the qualitative analysis performed as of April 1, 2021, the Company

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determined that goodwill for Park's reporting unit, PNB, was not impaired. Management continues to monitor economic factors, including economic conditions as a result of the COVID-19 pandemic and responses thereto, to evaluate goodwill impairment. The fair value of the goodwill, which resides on the books of PNB, is evaluated for potential impairment by reviewing the past and projected operating results for PNB, deposit and loan totals for PNB and banking industry comparable information.

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

Assumptions used to measure our annual pension expense include:

•the interest rate used to determine the present value of liabilities (discount rate);

•certain employee-related factors, such as turnover, retirement age and mortality;

•the expected return on assets in our funded pension plan; and

•the rate of salary increases where benefits are based on earnings.

The most significant of these assumption are the discount rate and the expected return on assets. The discount rate utilized for the December 31, 2021 calculation was 3.23% and the expected return on plan assets was 6.92%. Presented below is the estimated impact on Park's projected benefit obligation ("PBO") and 2022 pension expense assuming changes in the significant assumptions.

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

ABOUT OUR BUSINESS

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

Park’s subsidiaries compete for deposits and loans with other banks, savings associations, credit unions and other types of financial institutions.  At December 31, 2021, Park operated 96 financial service offices (including those of PNB and Scope Leasing, Inc. ("Scope Aircraft Finance")) and a network of 116 automated teller machines in 26 Ohio counties, three North Carolina counties, four South Carolina counties and one Kentucky county. SEPH and Guardian each operated one administrative office, located in Newark, Ohio.

SOURCE OF FUNDS

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

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Average total deposits were $8,187 million in 2021, compared to $7,633 million in 2020, and $6,905 million in 2019. The table below provides a summary of deposit balances as of December 31, 2021 and 2020, along with the change over the past year.

During the years ended December 31, 2021 and 2020, Park made the decision to participate in two programs in order to manage growth of the balance sheet, as deposits increased significantly throughout the COVID-19 pandemic. At December 31, 2021 and December 31, 2020, Park had $983.1 million and $710.1 million, respectively, in off balance sheet deposits. Total deposits would have increased $605.1 million, or 7.3%, compared to December 31, 2020 had the $983.1 million and $710.1 million in deposits remained on the balance sheet.

The average interest rate paid on interest bearing deposits was 0.12% in 2021, compared to 0.41% in 2020 and 1.01% in 2019. The average cost of interest bearing deposits for each quarter of 2021 was 0.09% for the fourth quarter, 0.11% for the third quarter, 0.13% for the second quarter and 0.16% for the first quarter.

As of December 31, 2021 and 2020, approximately $1.7 billion and $1.8 billion, respectively, of our deposit portfolio was uninsured. The uninsured amounts are estimates based on the methodologies used for the Corporation's regulatory reporting requirements.

The following table provides a summary of the portion of the Corporation's time deposits, by account, that are in excess of the FDIC insurance limit of $250,000, by remaining time until maturity, as of December 31, 2021:

Short-Term Borrowings: Short-term borrowings consist of securities sold under agreements to repurchase, Federal Home Loan Bank advances, Federal Funds purchased and other borrowings.  These funds are used to manage the Corporation’s liquidity needs and interest rate sensitivity risk.  The average rate paid on short-term borrowings generally moves closely with changes in market interest rates for short-term investments.  The average rate paid on short-term borrowings was 0.27% in 2021, compared to 0.40% in 2020 and 1.15% in 2019. The year-end balance for short-term borrowings was $239 million at December 31, 2021, compared to $342 million at December 31, 2020 and $231 million at December 31, 2019.

Long-Term Debt: Long-term debt primarily consists of borrowings from the Federal Home Loan Bank. In addition, Park had a term note with another financial institution which was paid off on August 2, 2021. The average balance of long-term debt and the average cost of long-term debt include the subordinated notes discussed in the following section. In 2021, the average balance of long-term debit was $206 million, compared to $216 million in 2020 and $341 million in 2019. The average interest rate paid on long-term debt was 4.32% in 2021, compared to 3.55% in 2020 and 2.77% in 2019. Average total debt (long-term and short-term) was $493 million in 2021, compared to $495 million in 2020 and $557 million in 2019. Average total debt decreased by $2 million, or 0.3%, in 2021 compared to 2020, and decreased by $62 million, or 11.1%, in 2020

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compared to 2019. Average long-term debt was 42% of average total debt in 2021, compared to 44% of average total debt in 2020 and 61% of average total debt in 2019.

Subordinated Notes: Park assumed, with the 2007 acquisition of Vision's parent holding company, $15.5 million of floating rate junior subordinated notes.  The $15.5 million of junior subordinated notes were purchased by Vision Bancshares Trust I ("Trust I") following the issuance of Trust I's $15.0 million of floating rate preferred securities. The interest rate on these junior subordinated notes adjusts every quarter at 148 basis points above the three-month LIBOR interest rate.  The maturity date for the junior subordinated notes is December 30, 2035 and the junior subordinated notes may be prepaid, without penalty, after December 30, 2010.  These junior subordinated notes qualify as Tier 1 capital under current Federal Reserve Board guidelines.

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

See "Note 16 - Subordinated Notes" of the Notes to Consolidated Financial Statements included in "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" of this Annual Report on Form 10-K for additional information about the Subordinated Notes.

Shareholders' Equity: The ratio of total shareholders' equity to total assets was 11.62% at December 31, 2021, compared to 11.21% at December 31, 2020 and 11.32% at December 31, 2019. The ratio of tangible shareholders’ equity [shareholders' equity ($1,110.8 million) less goodwill ($159.6 million) and other intangible assets ($7.5 million)] to tangible assets [total assets ($9,560.3 million) less goodwill ($159.6 million) and other intangible assets ($7.5 million)] was 10.05% at December 31, 2021, compared to 9.57% at December 31, 2020 and 9.51% at December 31, 2019.

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, net of income taxes, as accumulated other comprehensive income (loss) which is part of Park’s shareholders’ equity.

The unrealized net holding gain, net of income taxes, on AFS debt securities was $21.2 million at year-end 2021, compared to $40.7 million at year-end 2020 and $17.5 million at year-end 2019.

The unrealized net holding loss, net of income taxes, on cash flow hedging derivatives was $206,000 at year-end 2021, compared to $698,000 at year-end 2020 and $454,000 at year-end 2019.

In accordance with U.S. GAAP, Park adjusts accumulated other comprehensive income to recognize the net actuarial gain or loss reflected in the funding status of Park’s pension plan.  See "Note 19 - Benefit Plans" of the Notes to Consolidated Financial Statements included in "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" of this Annual Report on Form 10-K for information on the accounting for Park’s pension plan. Pertaining to the funding status of the pension plan, Park recognized a net comprehensive gain of $28.6 million in 2021, compared to a net comprehensive loss of $7.7 million in 2020 and a net comprehensive gain of $3.0 million in 2019. The net comprehensive gain in 2021 was due to greater than expected investment returns on pension plan assets as well as a net decrease in the benefit obligation due to assumption changes. The net comprehensive loss in 2020 was due to changes in actuarial assumptions which were partially offset by increased investment returns on pension plan assets. The net comprehensive gain in 2019 was due to changes in actuarial assumptions being more than offset by increased investment returns on pension plan assets.

At year-end 2021, the balance in accumulated other comprehensive loss pertaining to the pension plan was an unrealized loss of $5.8 million, compared to $34.4 million at December 31, 2020 and $26.7 million at December 31, 2019.

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INVESTMENT OF FUNDS

Loans:  Average loans were $7,015 million in 2021, compared to $6,990 million in 2020 and $6,208 million in 2019. The average yield on average loan balances was 4.53% in 2021, compared to 4.71% in 2020 and 5.19% in 2019. Approximately 49% of Park’s loan balances mature or reprice within one year (see Table 38).  The average yield on average loan balances for each quarter of 2021 was 4.58% for the fourth quarter, 4.47% for the third quarter, 4.60% for the second quarter and 4.48% for the first quarter.

Loan interest income for 2021, 2020, and 2019 included $8.0 million, $453,000 and $256,000, respectively, related to payments received on certain SEPH nonaccrual loan relationships, some of which are participated with PNB. In addition, loan interest income included $3.3 million, $4.4 million and $5.2 million, respectively, of the accretion of loan purchase accounting adjustments related to the acquisitions of NewDominion and Carolina Alliance. Loan interest income for 2021 and 2020 included interest and fee income related to PPP loans of $18.0 million and $16.7 million, respectively. Excluding the impact of the purchase accounting accretion, SEPH income, and PPP income, the average yield on loans was 4.27%, 4.63% and 5.09%, for the years ended December 31, 2021, 2020, and 2019. Excluding the impact of the purchase accounting accretion, SEPH income, and PPP income, the average yield on loans was 4.20% for the fourth quarter of 2021, 4.25% for the third quarter of 2021, 4.29% for the second quarter of 2021, and 4.34% for the first quarter of 2021.

At December 31, 2021, loan balances were $6,871 million, compared to $7,178 million at year-end 2020, a decrease of $307 million, or 4.3%. Excluding $74.4 million and $331.6 million of PPP loans at December 31, 2021 and 2020, respectively, loans outstanding at December 31, 2021 were $6,797 million, a decrease of $49 million, or 0.7%, compared to $6,846 million at December 31, 2020. At December 31, 2020, loan balances were $7,178 million, compared to $6,501 million at year-end 2019, an increase of $676 million, or 10.4%. Excluding $331.6 million of PPP loans at December 31, 2020, loans outstanding at December 31, 2020 were $6,846 million, compared to $6,501 million at December 31, 2019, an increase of $345 million, or 5.3%.

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

(1) PPP loans are included in Commercial, financial and agricultural above.

On a combined basis, year-end commercial, financial and agricultural loans, construction real estate loans and commercial real estate loans decreased by $258 million, or 7.0%, in 2021. The decrease in 2021 was due to a decrease in commercial, financial and agricultural loans of $290.4 million, a decrease in construction real estate loans of $21.6 million, and an increase in commercial real estate loans of $53.6 million. Included within commercial, financial and agricultural loans were $74.4 million of PPP loans. On a combined basis, year-end commercial, financial and agricultural loans, construction real estate loans and commercial real estate loans increased by $554 million, or 17.7%, in 2020. The increase in 2020 was due to an increase in commercial real estate loans of $138.8 million, an increase in construction real estate loans of $11.7 million and an increase in commercial, financial and agricultural loans of $403.9 million. Included within commercial, financial and agricultural loans were $331.6 million of PPP loans. Excluding $74.4 million and $331.6 million of PPP loans at December 31, 2021 and 2020, respectively, commercial, financial and agricultural loans decreased $33 million, or 2.6% in 2021 and increased $72 million, or 6.1% in 2020.

Consumer loans increased by $30.0 million, or 1.8%, in 2021 and increased $207.3 million, or 14.3%, in 2020. The increase in consumer loans in each of 2021 and 2020 was primarily due to an increase in automobile lending in Ohio.

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Residential real estate loans decreased by $74.3 million, or 4.1%, in 2021 and decreased by $79.7 million, or 4.2%, in 2020. The decrease in 2021 was due to a decrease in mortgage loans secured by residential real estate of $62.7 million, a decrease in home equity loans secured by residential real estate of $16.4 million and a decrease in installment loans secured by residential real estate of $2.8 million, partially offset by an increase in commercial loans secured by residential real estate of $7.6 million.

Leases decreased by $3.9 million to $20.5 million in 2021 and decreased $5.6 million to $24.4 million in 2020.

The table below summarizes the distribution of maturities for loan segments as of December 31, 2021:

(1) Nonaccrual loans of $72.7 million are included within the one year or less classification above.

The table below summarizes the composition of the loan portfolio by fixed and adjustable rate as of December 31, 2021 that are contractually due after December 31, 2022:

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

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

Beginning in 2021, Park began investing in the AAA and AA rated tranches of Collateralized Loan Obligations ("CLOs"). CLOs had a fair value as of December 31, 2021 of $498.7 million. Management closely monitors the credit status of these securities. At December 31, 2021 the market value over collateralization was greater than 120% for each CLO.

Prior to September 1, 2019, Park classified certain types of U.S. Government sponsored entity collateralized mortgage obligations (“CMOs”) and tax-exempt municipal securities that it purchased as Held-To-Maturity ("HTM").  These debt securities had been classified as HTM because they were generally not as liquid as the investment securities that Park classified as AFS. A classification of HTM meant that Park had the positive intent and the ability to hold these securities until maturity.

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On September 1, 2019, Park adopted the portion of ASU 2019-04 which allowed for a one-time reclassification of securities from HTM to AFS. On that date, Park transferred HTM securities with a fair value of $373.9 million to the AFS classification. The transfer occurred at fair value and had a related unrealized gain, net of taxes, of $19.1 million recorded in other comprehensive income.

Average taxable debt investment securities were $1,060 million in 2021, compared to $858 million in 2020 and $1,052 million in 2019. The average yield on taxable debt investment securities was 1.84% in 2021, compared to 2.31% in 2020 and 2.49% in 2019. Average tax-exempt debt investment securities were $288 million in 2021, compared to $289 million in 2020 and $309 million in 2019. The average tax-equivalent yield on tax-exempt debt investment securities was 3.65% in 2021, compared to 3.69% in 2020 and 3.67% in 2019.

Total debt securities (at amortized cost) were $1,727 million at December 31, 2021, compared to $1,008 million at December 31, 2020 and $1,187 million at December 31, 2019. Management purchased debt securities totaling $954 million in 2021 and $354 million in 2020. There were no purchases of debt securities in 2019. Proceeds from repayments, redemptions and maturities of debt securities were $232 million in 2021, compared to $224 million in 2020 and $196 million in 2019.

There were no sales of AFS debt securities in 2021. During 2020, Park sold certain AFS debt securities with a book value of $112.5 million at a gross loss of $64,000, and sold certain AFS debt securities with a book value of $196.4 million at a gross gain of $3.4 million. During 2019, Park sold certain AFS debt investment securities with a book value of $62.4 million at a gross loss of $692,000, and sold certain AFS debt investment securities with a book value of $29.1 million at a gross gain of $271,000.

For the years ended December 31, 2021, 2020, and 2019, the average tax-equivalent yield on the total investment portfolio was 2.22%, 2.66% and 2.76%, respectively.  The weighted average remaining maturity of the total investment portfolio was 4.8 years at December 31, 2021, 3.5 years at December 31, 2020 and 4.2 years at December 31, 2019. Obligations of the U.S. Treasury and other U.S. Government sponsored entities and U.S. Government sponsored entities' asset-backed securities were approximately 47.1% of the total investment portfolio at year-end 2021, 66.9% of the total investment portfolio at year-end 2020 and 69.5% of the total investment portfolio at year-end 2019.

Other investment securities (as shown on Park's Consolidated Balance Sheets) consist of stock investments in the FHLB, the FRB and equity securities which includes equity investments in limited partnerships which provide mezzanine funding.  Total other investment securities were $61 million at December 31, 2021, compared to $65 million at December 31, 2020 and $70 million at December 31, 2019. Management purchased equity securities totaling $3.6 million in 2020, compared to $100,000 in 2019. There were no equity security purchases in 2021. Management purchased $6.4 million of FRB stock in 2019. There were no FRB stock purchases in 2021 or 2020. Proceeds from the redemption/repurchase of FHLB stock were $8.7 million in 2021, compared to $8.0 million in 2020 and $14.7 million in 2019.

"Gain on equity securities, net" on Park's Consolidated Statements of Income were $5.0 million, $2.2 million and $5.1 million for the years ended December 31, 2021, 2020 and 2019, respectively. These gains on equity securities were made up of gains (losses) on equity investments carried at fair value as well as gains (losses) on equity investments carried at NAV.

For the years ended December 31, 2021, 2020 and 2019, $552,000, $(239,000) and $345,000, respectively, of gains (losses) on equity investments carried at fair value were recorded within "Gain on equity securities, net" on Park's Consolidated Statements of Income.

For the years ended December 31, 2021, 2020 and 2019, $4.5 million, $2.4 million and $4.8 million, respectively, of gains on equity investments carried at NAV were recorded within "Gain on equity securities, net" on Park's Consolidated Statements of Income.

The average maturity of the investment portfolio would lengthen if long-term interest rates were to increase as principal repayments from mortgage-backed securities and CMOs would decrease and callable securities would price to their maturity dates.  At year-end 2021, management estimated that the average maturity of the investment portfolio would lengthen to 4.9 years with a 100 basis point increase in long-term interest rates and would lengthen to 5.1 years with a 200 basis point increase in long-term interest rates. Likewise, the average maturity of the investment portfolio would shorten if long-term interest rates were to decrease as the principal repayments from mortgage-backed securities and CMOs would increase and callable securities would price to their call dates. At year-end 2021, management estimated that the average maturity of the investment portfolio would decrease to 4.1 years with a 100 basis point decrease in long-term interest rates and to 3.8 years with a 200 basis point decrease in long-term interest rates.

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The table below sets forth the carrying value of investment securities, as well as the percentage held within each category at year-end 2021, 2020 and 2019:

The carrying value of investments in debt securities at December 31, 2021, is shown in the following table by contractual maturity, except for asset-backed securities and collateralized loan obligations, which are shown as a single total, due to the unpredictability of the timing in principal repayments. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

ANALYSIS OF EARNINGS

Net Interest Income: Park’s principal source of earnings is net interest income, the difference between total interest income and total interest expense.  Net interest income results from average balances outstanding for interest earning assets and interest bearing liabilities in conjunction with the average rates earned and paid on them.  (See the table below for three years of history on the average balances of the balance sheet categories as well as the average rates earned on interest earning assets and the average rates paid on interest bearing liabilities.)

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(1)Loan income includes net loan-related fee income, purchase accounting accretion and origination expense in the aggregate amount of $11.1 million in 2021, $12.9 million in 2020 and $0.6 million in 2019. Loan income also includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate in 2021, 2020 and 2019. The taxable equivalent adjustments were $704,000 in 2021, $623,000 in 2020 and $576,000 in 2019.

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

(3)Interest income on tax-exempt investment securities includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate in 2021, 2020 and 2019. The taxable equivalent adjustments were $2.2 million in 2021, $2.2 million in 2020 and $2.4 million in 2019.

(4)Includes subordinated notes.

Average interest earning assets for 2021 increased by $610 million, or 7.2% to $9,028 million, compared to $8,419 million for 2020. Average interest earning assets for 2020 increased by $680 million, or 8.8%, to $8,419 million, compared to $7,739 million for 2019. The average yield on interest earning assets decreased by 42 basis points to 3.86% for 2021, compared to 4.28% for 2020 and 4.70% for 2019. For 2019, the acquisition of Carolina Alliance added average interest earning assets of $432.7 million.

Interest income for 2021, 2020, and 2019 included $8.0 million, $453,000 and $256,000, respectively, related to payments received on certain SEPH nonaccrual loan relationships, some of which are participated with PNB as well as $3.3 million, $4.4 million and $5.2 million of purchase accounting accretion for 2021, 2020 and 2019, respectively. Interest income for 2021 and 2020 included $18.0 million and $16.7 million, respectively, of income related to PPP loans. Excluding the impact of the purchase accounting accretion, SEPH income, and PPP income, the average yield on loans was 4.27%, 4.63% and 5.09%, for the years ended December 31, 2021, 2020 and 2019, respectively, the average yield on earning assets was 3.64%, 4.20% and 4.62%, for the years ended December 31, 2021, 2020 and 2019, respectively, and the net interest margin was 3.46%, 3.82% and 3.80%, for the years ended December 31, 2021, 2020 and 2019, respectively.

Average interest bearing liabilities for 2021 increased by $10 million, or 0.2%, to $5,742 million, compared to $5,733 million for 2020. Average interest bearing liabilities for 2020 increased by $146 million, or 2.6%, to $5,733 million for 2020, compared to $5,586 million for 2019. The average cost of interest bearing liabilities decreased by 24 basis points to 0.28% for 2021, compared to 0.52% for 2020 and 1.12% for 2019. For 2019, the acquisition of Carolina Alliance added average interest bearing liabilities of $368.8 million.

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The table below shows for the years ended December 31, 2021, 2020, and 2019, the average balance and tax equivalent yield by type of loan.

(1) Commercial loan interest income includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate in 2021, 2020 and 2019. The taxable equivalent adjustments were $704,000 in 2021, $623,000 in 2020 and $576,000 in 2019.

Loan interest income for 2021, 2020, and 2019 included $8.0 million, $453,000 and $256,000, respectively, related to payments received on certain SEPH nonaccrual loan relationships, some of which are participated with PNB as well as $3.3 million, $4.4 million and $5.2 million of purchase accounting accretion for 2021, 2020 and 2019, respectively. Below is a summary of the impact of these items on the tax equivalent yield of loans.

•The amount of interest related to SEPH nonaccrual loan relationships and purchase accounting accretion included in home equity loan interest income for 2021, 2020 and 2019 was $479,000, $395,000 and $443,000, respectively. Excluding the impact of these items, the average tax equivalent yield on home equity loans was 3.41%, 3.83% and 5.37%, respectively.

•The amount of interest related to SEPH nonaccrual loan relationships and purchase accounting accretion included in real estate loan interest income for 2021, 2020 and 2019 was $243,000, $391,000 and $617,000. Excluding the impact of these items, the average tax equivalent yield on real estate loans was 3.71%, 4.08% and 4.30%, respectively.

•The amount of interest related to PPP income, SEPH nonaccrual loan relationships and purchase accounting accretion included in commercial loan interest income for 2021, 2020, and 2019 was $28.5 million, $19.9 million and $4.3 million, respectively. Excluding the impact of these items, the average tax equivalent yield on commercial loans was 4.24%, 4.66% and 5.26%, for 2021, 2020, and 2019, respectively.

•Excluding the impact of interest related to PPP income, SEPH nonaccrual loan relationships and purchase accounting accretion, the average tax equivalent yield on total loans and leases was 4.27%, 4.63% and 5.09%, for 2021, 2020, and 2019, respectively.

The table below shows for the years ended December 31, 2021, 2020, and 2019, the average balance and cost of funds by type of deposit.

(1) Time deposit interest expense for 2021, 2020 and 2019 benefited from $46,000, $226,000 and $593,000, respectively, of purchase accounting accretion related to the acquisition of NewDominion for all of 2021, 2020 and 2019 and Carolina Alliance for all of 2021 and 2020 and the second, third and fourth quarters of 2019. Excluding the impact of this accretion, the average cost of funds on time deposits for 2021, 2020 and 2019 was 0.61%, 1.25% and 1.62%, respectively, and the average cost of funds on total interest bearing deposits for 2021, 2020 and 2019 was 0.12%, 0.41% and 1.02%, respectively.

The following table displays (for each quarter of 2021) the average balance of interest earning assets, the net interest income and the tax equivalent net interest income and net interest margin.

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(1) Net interest income for the first, second, third and fourth quarters of 2021 included $105,000, $2.8 million, $414,000 and $4.6 million, respectively, related to payments received on certain SEPH nonaccrual loan relationships, some of which are participated with PNB. Net interest income for the first, second, third, and fourth quarters of 2021 included $1.1 million, $806,000, $807,000 and $559,000 of purchase accounting accretion related to the acquisition of NewDominion and Carolina Alliance. Net interest income for the first, second, third, and fourth quarters of 2021 included $5.2 million, $5.7 million, $4.6 million and $2.5 million, respectively, related to PPP loans. Excluding the impact of these loan payments and accretion, the tax equivalent net interest margin was 3.61%, 3.47%, 3.35%, and 3.42%, for the first, second, third, and fourth quarters of 2021, respectively, and 3.46% for the year ended December 31, 2021.

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

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Other Income:  Other income was $129.9 million in 2021, compared to $125.7 million in 2020 and $97.2 million in 2019.

The following table displays total other income for Park in 2021, 2020 and 2019.

Income from fiduciary activities increased by $5.6 million, or 19.3%, to $34.4 million in 2021, compared to $28.9 million in 2020. The $28.9 million was an increase of $1.1 million, or 4.0%, compared to $27.8 million in 2019. The increases in fiduciary fee income in 2021 and 2020 were primarily due to improvements in equity market values and also due to an increase in the total account balances serviced by PNB’s Trust Department.  PNB charges fiduciary fees largely based on the market value of the trust assets. The average market value of the trust assets managed by PNB was $7.45 billion in 2021, compared to $6.17 billion in 2020 and $5.85 billion in 2019.

Service charges on deposit accounts increased $387,000, or 4.6%, to $8.8 million in 2021, compared to $8.4 million in 2020 and decreased by $2.4 million, or 22.1%, in 2020 compared to $10.8 million in 2019. The increase in 2021 was related to an increase in other non-sufficient funds (NSF) fee income and service charges on demand deposit accounts. The decline in 2020 was related to declines in service charges on deposits, largely as a result of a decline in other NSF fee income and service charges on demand deposit accounts.

Other service income decreased $7.8 million, or 20.7%, to $29.8 million in 2021, compared to $37.6 million in 2020, and increased $22.1 million, or 142.7%, in 2020 compared to $15.5 million in 2019. The decrease in 2021 compared to 2020 was primarily related to a decrease in other service income related to mortgage loan originations, including a $6.4 million decrease in fee income related to a $457.3 million decrease in mortgage loan originations to be sold in the secondary market and a $3.7 million decrease in income related to investor rate locks and loans held for sale, partially offset by a $1.2 million increase in mortgage investor fees and a $927,000 increase in mortgage servicing rights income. The increase in 2020 compared to 2019 was primarily related to an increase in other service income related to mortgage loan originations, including a $17.2 million increase in fee income related to a $686.5 million increase in mortgage loan originations to be sold in the secondary market, a $1.7 million increase in income related to investor rate locks and loans held for sale, and a $2.3 million increase in mortgage servicing rights income.

Debit card fee income, which is generated from debit card transactions, increased $3.7 million, or 16.7%, to $25.9 million in 2021, compared to $22.2 million in 2020, and increased $1.9 million, or 9.4%, in 2020 compared to $20.3 million in 2019. The increases in 2021 and 2020 were attributable to continued increases in the volume of debit card transactions, which increased 10.0% in 2021 from 2020, and increased 4.4% in 2020 from 2019, and increases in total sale dollars of debit card transactions, which increased 17.1% in 2021 from 2020, and increased 12.5% in 2020 from 2019. In addition, the increase in 2020 was attributable to changes in our point of sale network. Park continues to focus on deposit offerings that provide incentives for our customers to use their debit card.

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(Loss) gain on the sale of OREO, net, reflected a loss of $4,000 in 2021, a decrease of $1.2 million, compared to income of $1.2 million in 2020, and the income of $1.2 million in 2020 reflected an increase of $1.4 million, compared to a loss of $222,000 in 2019. The decrease in 2021 and the increase in 2020 were primarily due to a $1.2 million gain on the sale of two OREO properties during 2020, one of which was participated to PNB from SEPH.

During 2020, Park sold certain AFS debt securities with a book value of $112.5 million at a gross loss of $64,000, and sold certain AFS debt securities with a book value of $196.4 million at a gross gain of $3.4 million. During 2019, Park sold certain AFS debt securities with a book value of $62.4 million at a gross loss of $692,000, and sold certain AFS debt securities with a book value of $29.1 million at a gross gain of $271,000. No debt securities were sold in 2021.

During the years ended December 31, 2021, 2020 and 2019, $552,000, $(239,000) and $345,000, respectively, of gains (losses) on equity investments carried at fair value were recorded within "Gain on equity securities, net" on Park's Consolidated Statements of Income. For the years ended December 31, 2021, 2020 and 2019, $4.5 million, $2.4 million and $4.8 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.

Other components of net periodic pension benefit income increased by $200,000, or 2.5% to $8.2 million in 2021, compared to $8.0 million in 2020, and increased $3.2 million, or 68.0%, to $8.0 million in 2020, compared to $4.7 million in 2019. The increases in 2021 and 2020 were largely due to an increase in the expected return on plan assets as a result of the increased value of plan assets.

Miscellaneous income increased by $3.2 million, or 42.9%, to $10.6 million in 2021, compared to $7.4 million in 2020, and increased $138,000, or 1.9%, to $7.4 million in 2020, compared to $7.2 million in 2019. The increase in 2021 was primarily related to refunds of a consumer insurance product, an increase in income from printed check sales and an increase in gain on sale of assets.

Other Expense: Other expense was $283.5 million in 2021, compared to $286.6 million in 2020 and $264.0 million in 2019. Other expense decreased by $3.1 million, or 1.1%, in 2021 and increased by $22.6 million, or 8.6% in 2020. The following table displays total other expense for Park for 2021, 2020 and 2019.

Salaries expense decreased by $2.5 million, to $125.6 million in 2021, compared to $128.0 million in 2020, and increased by $8.5 million, or 7.1%, in 2020 compared to $119.5 in 2019. The decrease in 2021 was due to a $4.2 million decrease in salary expense, primarily related to a $3.2 million decrease in severance and restructuring related expense, a $1.1

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million decrease in expense related to the vacation accrual, a $1.0 million decrease in base salary expense and a $1.0 million decrease in additional compensation expense, partially offset by a $3.3 million increase in incentive compensation expense and a $347,000 increase in share-based compensation expenses related to PBRSU awards granted under the Park 2013 Long-Term Incentive Plan (the "2013 Incentive Plan") (prior to 2017) and both PBRSU and TBRSU awards granted under the Park 2017 Long-Term Incentive Plan for Employees (the "2017 Employee LTIP"). The increase in 2020 was due to a $4.6 million increase in salary expense, which was primarily related to increases in base salary and $3.6 million in severance and restructuring related expense, a $1.9 million increase in additional compensation expense, an $850,000 increase in expense related to the vacation accrual and a $1.0 million increase in share-based compensation expenses.

Park had 1,685 full-time equivalent employees at year-end 2021, compared to 1,755 full-time equivalent employees at year-end 2020 and 1,907 full-time equivalent employees at year-end 2019. During 2020, Park closed 23 offices, which resulted in the significant reduction in full-time equivalent employees during 2020.

Employee benefits expense increased $4.5 million, or 12.1%, to $41.6 million in 2021, compared to $37.1 million in 2020, and increased $309,000, or 0.8%, in 2020 compared to $36.8 million in 2019. The increase in 2021 was due to a $2.7 million increase in group insurance costs, a $1.6 million increase in pension plan expense and a $693,000 increase in payroll tax expense, partially offset by a $496,000 decrease in miscellaneous employee benefits. The increase in 2020 was due to a $2.4 million increase in pension plan expense, a $505,000 increase in miscellaneous employee benefits and a $300,000 increase in the KSOP match, partially offset by a $3.0 million decrease in group insurance costs.

Occupancy expense decreased $763,000, or 5.5%, to $13.0 million in 2021, compared to $13.8 million in 2020, and increased by $987,000, or 7.7%, in 2020 compared to $12.8 million in 2019. The $763,000 decrease in 2021 was primarily the result of decreased lease expense, which was mainly the result of the closure of some leased branches in 2020. The $987,000 increase in 2020 was primarily the result of increased depreciation on premises and a write-down in the right-of-use lease asset related to branches that closed September 30, 2020.

Furniture and equipment expense decreased $7.9 million, or 42.1%, to $10.9 million in 2021, compared to $18.8 million in 2020. and increased $1.8 million, or 10.4%, in 2020 compared to $17.0 million in 2019. The decrease in 2021 was primarily related to a change in the classification under which software and related maintenance costs are expensed, which are now classified under data processing fees, partially offset by increases in depreciation of furniture and equipment. The increase in 2020 was primarily related to increased expenses related to repairs and maintenance on equipment, which also included software maintenance and costs, as well as increased depreciation on furniture and equipment.

Data processing fees increased by $18.9 million, or 161.9%, to $30.5 million in 2021, compared to $11.7 million in 2020, and increased $909,000, or 8.5%, in 2020 compared to $10.8 million in 2019. The increase in 2021 was related to increased other data processing and software costs, partially due to the previously mentioned change in classification from furniture and equipment expense and a change in expensing software costs from other fees within professional fees and services to data processing fees. The increase was also impacted by changes in debit card processing costs, which increased $832,000. Overall data processing and software costs across all line items, excluding debit card processing costs, increased $2.3 million. The increase in 2020 was related to increased mortgage processing costs, debit card processing costs and other data processing and software costs.

Professional fees and services decreased $3.9 million, or 12.3%, to $27.5 million, compared to $31.3 million for 2020, and decreased by $2.0 million, or 6.0%, in 2020 compared to $33.3 million in 2019. This subcategory of total other expense includes legal fees, management consulting fees, directors' fees, audit fees, regulatory examination fees and memberships in industry associations. The decrease in professional fees and services expense in 2021 was primarily due to decreases in other fees (due to the change in expensing software costs under data processing fees), credit costs and title and appraisal costs, partially offset by increases in legal expense. The decrease in professional fees and services expense in 2020 was largely related to a $4.4 million decrease in fees related to the acquisition of Carolina Alliance and a $1.0 million decrease in legal expense, partially offset by a $2.1 million increase in management and consulting expense and a $1.2 million increase in title, appraisal and credit costs.

Insurance expense decreased by $506,000, or 7.9%, to $5.9 million, compared to $6.4 million in 2020, and increased by $3.3 million, or 105.2%, in 2020 compared to $3.1 million in 2019. The decrease in 2021 was impacted by a decrease in the average FDIC assessment rate compared to 2020. The increase in 2020 was primarily due to the utilization of a $2.2 million assessment credit to reduce the FDIC insurance expense during the third and fourth quarters of 2019. 2020 was also impacted by an increase in the assessment base compared to 2019.

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Communication expense decreased by $545,000, or 13.3%, to $3.5 million in 2021, compared to $4.1 million in 2020, and decreased $1.3 million, or 23.7%, in 2020 compared to $5.4 million in 2019. The decrease in 2021 was primarily related to lower telephone, cable and data related communication costs. The decrease in 2020 was primarily related to a change in statement mailing and production costs, which resulted in lower direct postage expense, but was more than offset by an increase in supply expense which is included in miscellaneous expense.

The subcategory "Miscellaneous" other expense includes expenses for supplies, travel, and other miscellaneous expense. The subcategory Miscellaneous other expense decreased by $920,000, or 9.4%, to $8.8 million in 2021, compared to $9.8 million in 2020. The $9.8 million in 2020 was a decrease of $1.5 million, or 13.1%, compared to $11.2 million in 2019. The decrease in 2021 was primarily related to a decrease in supply expense, operating lease depreciation, OREO expense and training and travel related related expenses, partially offset by an increase in non-loan related losses. The decrease in 2020 was primarily due to a decrease in training and travel related expenses as well as a decrease in non-loan related losses.

Efficiency Ratio: The following table details the calculation of the efficiency ratio for the years ended December 31, 2021, 2020, and 2019.

Items Impacting Comparability: From time to time, revenue, expenses, and/or taxes are impacted by items judged by management of Park to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that their outsized impact is believed by management of Park at that time to be infrequent or short term in nature. Most often, these items impacting comparability of period results are due to merger and acquisition activities, management restructuring, branch closures, a rebranding initiative, COVID-19 related expenses and revenue and expenses related to former Vision Bank loan relationships. In other cases, they may result from management's decisions associated with significant corporate actions outside of the ordinary course of business.

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

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Income Taxes: Income tax expense was $34.3 million in 2021, compared to $26.7 million in 2020 and $22.1 million in 2019. Income tax expense as a percentage of income before taxes was 18.2% in 2021, 17.3% in 2020 and 17.7% in 2019. The difference between the statutory federal corporate income tax rate of 21% for 2021 and Park’s effective tax rate reflected permanent tax differences, primarily consisting of tax-exempt interest income from municipal investments and loans, qualified affordable housing and historical tax credits, bank owned life insurance income, and dividends paid on common shares held within Park’s salary deferral plan, offset by the impact of state income taxes. Park's permanent federal tax differences for 2021 were approximately $6.3 million in 2021, compared to $6.7 million for 2020. Park expects permanent federal tax differences for 2022 will be approximately $5.8 million.

CREDIT METRICS AND (RECOVERY OF) PROVISION FOR CREDIT LOSSES

The (recovery of) provision for credit losses is the amount added to/subtracted from the allowance for credit losses to ensure the allowance is sufficient to absorb estimated credit losses over the life of a loan. The amount of the provision for credit losses is determined by management based on relevant information about past events, including historical credit loss experience

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on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets.

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

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

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

The adoption of ASU 2016-13 on January 1, 2021 resulted in a $6.1 million increase to the allowance for credit losses and a $3.9 million increase to the allowance for unfunded credit losses. A cumulative effect adjustment resulting in an $8.0 million decrease to retained earnings and a $2.1 million increase to deferred tax assets was also recorded.

The table below provides additional information on the (recovery of) provision for credits losses and the ACL for 2021, 2020 and 2019.

For the year ended December 31, 2021, gross income of $4.2 million would have been recognized on loans that were nonaccrual as of December 31, 2021 had these loans been current in accordance with their original terms. Interest income on nonaccrual loans may be recorded on a cash basis and be included in earnings only when Park expects to receive the entire recorded investment of the loan. Of the $4.2 million that would have been recognized, approximately $2.7 million was included in interest income for the year ended December 31, 2021.

Charge-offs for 2021 included the charge-off of $15,000 in specific reserves for which provision expense had been recognized in a prior year, compared to $283,000 for 2020 and $236,000 for 2019. Net (recoveries) charge-offs adjusted for changes in specific reserves as a percentage of average loans for the years ended December 31, 2021, 2020 and 2019 were (0.10)%, (0.24)%, and 0.06%, respectively.

SEPH, as a non-bank subsidiary of Park, does not carry an ACL balance, but recognizes a provision for credit losses when a charge-off is taken and recognizes a recovery of credit losses when a recovery is received.

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At year-end 2021, the allowance for credit losses was $83.2 million, or 1.21%, of total loans outstanding, compared to $85.7 million, or 1.19%, of total loans outstanding at year-end 2020, and $56.7 million, or 0.87% of total loans outstanding at year-end 2019.

The following table provides additional information related to the allowance for credit losses for Park including information related to specific reserves and general reserves, at December 31, 2021, December 31, 2020 and December 31, 2019. Also included is the January 1, 2021 allowance for credit losses calculated under the CECL methodology prescribed in ASU 2016-13.

(1) Excludes $74.4 million of PPP loans and $77,000 in related allowance at December 31, 2021; $331.6 million of PPP loans and $337,000 in related allowance at January 1, 2021; and $331.6 million of PPP loans and $337,000 in related allowance at December 31, 2020.

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The allowance for credit losses of $83.2 million at December 31, 2021 represented an $8.6 million, or 9.3%, decrease compared to $91.8 million at January 1, 2021 as calculated under the CECL methodology. The decline since January 1, 2021 was largely due to a $4.7 million decrease in general reserves, taking into consideration improved economic forecasts while balancing the risks associated with the COVID-19 pandemic and the delta and omicron variants, particularly in high risk portfolios such as hotels and accommodations, restaurants and food service and strip shopping centers. Additionally, there was a $3.8 million decrease in specific reserves on individually evaluated loans from $5.4 million at January 1, 2021 to $1.6 million at December 31, 2021.

The allowance for credit losses of $85.7 million at December 31, 2020 represented a $29.0 million, or 51.2%, increase compared to $56.7 million at December 31, 2019. This increase was largely the result of a $28.2 million increase in general reserves on total originated loans and a $204,000 increase in specific reserves. As of December 31, 2020, a $678,000 allowance had been established for performing purchased loans and a $167,000 allowance had been established for PCI loans. In addition to the established allowance related to purchased loans, as of December 31, 2020, these loans had a remaining purchase accounting discount of $7.2 million. The $28.2 million increase in general reserves was the result of the estimated increase in incurred losses as a result of the impact of the COVID-19 pandemic. This estimate was established based on consideration of Park's then existing environmental loss factors, modification programs Park had put in place, and balances of high risk portfolios such as hotel and accommodations, restaurants and food service and strip shopping centers.

Management believes that the allowance for credit losses at year-end 2021 is adequate to absorb estimated life of loan credit losses in the loan portfolio. See "Note 1 - Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements included in "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" of this Annual Report on Form 10-K, and the discussion under the heading “CRITICAL ACCOUNTING POLICIES” earlier in this Management's Discussion and Analysis of Financial Condition and Results of Operations, for additional information on management’s evaluation of the adequacy of the allowance for credit losses.

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

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

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

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

As of December 31, 2021, Park had no concentrations of loans exceeding 10% to borrowers engaged in the same or similar industries nor did Park have any loans to foreign governments.

Nonperforming Assets: Nonperforming assets include: 1) loans whose interest is accounted for on a nonaccrual basis; 2) troubled debt restructurings (TDRs) on accrual status; 3) loans which are contractually past due 90 days or more as to principal or interest payments, where interest continues to accrue; 4) OREO which results from taking possession of property that served as collateral for a defaulted loan; and 5) other nonperforming assets. As of December 31, 2021, 2020 and 2019, other nonperforming assets consisted of aircraft acquired as part of a loan workout.

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

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

Included in OREO totals above were $594,000 of SEPH OREO at both December 31, 2021 and December 31, 2020 and $929,000 of SEPH OREO at December 31, 2019.

Park classifies loans as nonaccrual when a loan 1) is maintained on a cash basis because of deterioration in the financial condition of the borrower, 2) payment in full of principal or interest is not expected, or 3) principal or interest has been in default for a period of 90 days for commercial loans and 120 days for all other loans. As a result, loans may be classified as nonaccrual despite being current with their contractual terms. The following table details the delinquency status of nonaccrual loans at December 31, 2021, 2020, and 2019.

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

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

*Commercial loans include: (1) commercial, financial and agricultural loans; (2) commercial real estate loans; (3) commercial related loans in the construction portfolio; (4) commercial related loans in the residential real estate portfolio; and (5) leases.

Park’s watch list includes all criticized and classified commercial loans, defined by Park as loans rated special mention or worse. Park had $75.4 million of collectively evaluated commercial loans included on the watch list at December 31, 2021, compared to $102.9 million at December 31, 2020, and $28.3 million at December 31, 2019. The existing conditions of these loans do not warrant classification as nonaccrual. However, these loans have shown some weakness and management performs additional analysis regarding each borrower's ability to comply with payment terms.

The $75.4 million of collectively evaluated commercial watch list loans as of December 31, 2021 is elevated compared to pre-pandemic levels, an increase of $48.6 million compared to $26.8 million at March 31, 2020. This $48.6 million increase was largely due to $54.1 million of hotels and accommodations loans that were downgraded to special mention or substandard as a result of the impact of COVID-19. In addition to the $54.1 million in hotels and accommodations loans that were downgraded to special mention, $15.3 million in hotels and accommodations loans were downgraded to impaired status. Park is closely monitoring the impact of COVID-19 on its borrowers' ability to repay their loans in accordance with contractual terms. As additional information becomes available, management will continue to evaluate loans to ensure appropriate risk classification.

Delinquencies have remained low over the past 36 months since January 1, 2019. Delinquent and accruing loans were $15.1 million, or 0.22% of total loans at December 31, 2021, compared to $20.1 million, or 0.28% of total loans at December 31, 2020, and $23.8 million, or 0.37% of total loans at December 31, 2019.

Individually Evaluated Loans: Loans that do not share risk characteristics are evaluated on an individual basis. Park has determined that any commercial loans which have been placed on nonaccrual status or classified as TDRs will be individually evaluated and are labeled as individually evaluated. Individual analysis will establish a specific reserve for loans in scope.  Specific reserves on individually evaluated commercial loans are typically based on management’s best estimate of the fair value of collateral securing these loans. The amount ultimately charged off for these loans may be different from the specific reserve as the ultimate liquidation of the collateral may be for an amount different from management’s estimate.

Individually evaluated were $74.5 million at December 31, 2021, a decrease of $33.9 million, compared to $108.4 million at December 31, 2020, and a decrease of $3.0 million at December 31, 2020, compared to $77.5 million at December 31, 2019. The $74.5 million of individually evaluated commercial loans at December 31, 2021 included $17.5 million of loans modified in a TDR which were then currently on accrual status and performing in accordance with the restructured terms, up from $8.8 million at December 31, 2020.

At December 31, 2021, Park had taken partial charge-offs of $624,000 related to the $74.5 million of the individually evaluated commercial loans, compared to partial charge-offs of $655,000 related to the $108.4 million of individually evaluated commercial loans at December 31, 2020 and compared to partial charge-offs of $719,000 related to the $77.5 million of individually evaluated commercial loans at December 31, 2019.

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The table below provides additional information related to Park's individually evaluated commercial loans at December 31, 2021, 2020, and 2019.

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

Upon adoption of CECL on January 1, 2021, $52,000 of the credit discount on PCD loans was reclassified to the allowance for credit losses. At December 31, 2021, there was no allowance for credit losses on PCD loans. The carrying amount of loans acquired with deteriorated credit quality at December 31, 2021 was $7.1 million. The carrying amount of loans acquired with deteriorated credit quality at December 31, 2020 was $11.2 million, of which none were considered impaired due to additional credit deterioration post acquisition. The carrying amount of loans acquired with deteriorated credit quality at December 31, 2019 was $14.3 million, of which $5,000 were considered impaired due to additional credit deterioration post acquisition.

Allowance for Credit Losses: The allowance for credit losses is calculated on a quarterly basis. The methodology for calculating the ACL and assumptions made as of December 31, 2021 are detailed below.

Quantitative Considerations

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

•Forecast model - For each portfolio segment, a loss driver analysis ("LDA") was performed in order to identify appropriate loss drivers and create a regression model for use in forecasting cash flows. The LDA analysis utilized Park's own FFIEC Call Report data for the commercial, financial and agricultural and residential real estate portfolio segments. Peer data was incorporated into the analysis for the commercial real estate, construction real estate, and consumer portfolio segments. Park plans to update the LDA annually; however, due to the impact of COVID-19, the LDA analysis was last updated in the fourth quarter of 2019.

•Probability of default – PD is the probability that an asset will be in default within a given time frame. Park has defined default to be when a charge-off has occurred, a loan is placed on nonaccrual, or a loan is greater than 90 days past due. Whenever possible, Park utilizes its own loan-level PDs for the reasonable and supportable forecast period. When loan-level data is not available reflecting the forecasted economic conditions, a forecast model is utilized to estimate PDs.

•Loss given default – LGD is the percentage of the asset not expected to be collected due to default. Whenever possible, Park utilizes its own loan-level LGDs for the reasonable and supportable forecast period. When it is not possible to use Park's own LGDs, the LGD is derived using a method referred to as Frye Jacobs.

•Prepayments and curtailments – Prepayments and curtailments are calculated based on Park’s own data utilizing a three-year average. This analysis is updated annually in the fourth quarter and was last updated in the fourth quarter of 2021.

•Forecast and reversion – Park has established a one-year reasonable and supportable forecast period with a one-year straight line reversion to the long-term historical average.

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•Economic forecast - Park utilizes a third party to provide economic forecasts under various scenarios, which are weighted in order to reflect model risk in the current economic environment. The scenario weighting is evaluated by management on a quarterly basis.

◦As of January 1, 2021, the date of CECL adoption, Park weighted a "most likely" scenario 80%, a "slower near-term growth" scenario 10%, and a "moderate recession" scenario 10%. As of January 1, 2021, the "most likely" scenario forecasted Ohio unemployment to range between 5.31% and 5.79% during the next four quarters.

◦As of March 31, 2021, the "most likely" scenario forecasted Ohio unemployment to decrease significantly, to a range between 3.70% and 4.93% during the next four quarters. In determining the appropriate weighting of scenarios at March 31, 2021, management considered this improved economic forecast while balancing the risks associated with the COVID-19 pandemic, including the risk of pandemic-related losses lagging behind the projected improvement in unemployment. The calculation utilizing the 80% "most likely" scenario, 10% "slower near-term growth" scenario, and 10% "moderate recession scenario" resulted in a quantitative reserve of $58 million, which would have resulted in a decline of $17 million from the quantitative reserve of $75 million as of January 1, 2021. Management then considered the reason for this decline and whether or not it was appropriate given the economic environment at March 31, 2021. Upon review, management noted that the decline was the result of a significant decrease in forecasted unemployment. The March 31, 2021 "most likely" scenario forecasted unemployment rates lower than any post-1975 Ohio unemployment rates of record. Given the uncertainty at March 31, 2021 due to the COVID-19 pandemic, management did not believe that such a significant decrease in reserves was appropriate and sought to re-evaluate the weightings in order to calculate a more accurate life of loan loss estimate. Management determined it was appropriate to weight the "most likely" scenario 50% and the "moderate recession" scenario 50%.

◦As of December 31, 2021, the "most likely" scenario forecasted Ohio unemployment to decrease, to a range between 3.32% and 3.97%, during the next four quarters. In determining the appropriate weighting of scenarios at December 31, 2021, management considered the range of forecasted unemployment as well as a number of economic indicators. While some economic indications continued to be optimistic, the Omicron variant, rising inflation, volatility in consumer confidence, employment, supply chain and workforce challenges continued to cause uncertainty to the overall economic environment. Considering these factors, management determined it was appropriate to maintain the previous quarter weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at December 31, 2021.

Qualitative Considerations

Park reviews various internal and external factors to consider the need for any qualitative adjustments to the quantitative model. Factors considered include the following:

•The nature and volume of Park’s financial assets; the existence, growth, and effect of any concentrations of credit and the volume and severity of past due financial assets, the volume of nonaccrual assets, and the volume and severity of adversely classified or graded assets. Specifically, management considers:

◦Trends (e.g., growth, reduction) in specific categories of the loan portfolio, as well as adjustments to the types of loans offered by Park.

◦Level of and trend in loan delinquencies, troubled loans, commercial watch list loans and nonperforming loans.

◦Level of and trend in new nonaccrual loans.

◦Level of and trend in loan charge-offs and recoveries.

•Park's lending policies and procedures, including changes in lending strategies, underwriting standards and practices for collections, write-offs, and recoveries.

•The quality of Park’s credit review function.

•The experience, ability, and depth of Park’s lending, investment, collection, and other relevant management and staff.

•The effect of other external factors such as the regulatory, legal and technological environments; competition; and events such as natural disasters or pandemics.

•Actual and expected changes in international, national, regional, and local economic and business conditions and developments in the markets in which Park operates that affect the collectibility of financial assets.

•Where the U.S. economy is within a given credit cycle.

•The extent that there is government assistance (stimulus).

During 2020, Park added an additional reserve for three industries at particularly high risk due to the COVID-19 pandemic: hotels and accommodations; restaurants and food service; and strip shopping centers. These industries have experienced high levels of deferrals and have been particularly impacted by shut downs of non-essential businesses, increased health department regulations, and changes in consumer behavior. Management expects that a relatively higher percentage of the 4-rated credits in these portfolios will eventually migrate to special mention, substandard, or impaired status. In adopting CECL, management determined it was appropriate to retain and maintain this qualitative adjustment throughout 2021 as this

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adjustment takes into account the additional risk in these portfolios, which is not captured in the quantitative calculation. As of December 31, 2021, additional reserves totaling $5.2 million were added for these portfolios on top of the quantitative reserve already calculated. This represented an increase from $3.8 million as of December 31, 2020, which had been calculated under the previous incurred loss methodology.

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

Additionally, management applied a 1.00% reserve to all hotels and accommodations loans in the collectively evaluated population to account for increased valuation risk. This was consistent with 2020 year end and considered various economic conditions due to COVID-19 variants, continued volatility in the hotel industry, and travel trends, all of which impacted valuations. At December 31, 2021, Park's originated hotels and accommodation loans included in the population of collectively evaluated loans had a balance of $203.9 million with an additional reserve related to valuation risks of $2.0 million. At December 31, 2020, Park's originated hotels and accommodation loans included in the population of collectively evaluated loans had a balance of $181.4 million with an additional reserve related to valuation risks of $1.8 million.

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

As of December 31, 2021, Park had $74.4 million of PPP loans which were included in the commercial, financial and agricultural portfolio segment compared to $331.6 million as of December 31, 2020. These loans are guaranteed by the SBA and thus have not been reserved for using the same methodology as the rest of Park’s loan portfolio. A 10 basis point reserve was calculated for these loans to reflect minimal credit risk as of December 31, 2021 and 2020.

CAPITAL RESOURCES

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

Cash and cash equivalents decreased by $151.3 million during 2021 to $219.2 million at year end. Cash provided by operating activities was $157.3 million in 2021, $111.6 million in 2020 and $111.6 million in 2019. Net income was the primary source of cash provided by operating activities during each year.

Cash used in investing activities was $412.1 million in 2021 and $455.9 million in 2020, while cash provided by investing activities was $60.1 million in 2019. Investment securities transactions and loan originations/repayments are the major uses or sources of cash in investing activities.  Proceeds from the sale, repayment or maturity of investment securities provide cash and purchases of investment securities use cash.  Net investment securities transactions used cash of $709.5 million in 2021 and provided cash of $188.1 million in 2020 and $302.2 million in 2019. Cash provided by the net paydown in the loan portfolio was $312.2 million in 2021, and cash used by the net increase in the loan portfolio was $620.2 million in 2020 and $216.4 million in 2019.

Cash provided by financing activities was $103.5 million in 2021 and $554.8 million in 2020, while cash used in financing activities was $179.0 million in 2019. A major source of cash provided by or used in financing activities is the net change in deposits.  Deposits increased and provided $332.2 million of cash in 2021, $520.0 million of cash in 2020 and $159.7 million of cash in 2019. Other major sources of cash from financing activities are short-term borrowings and long-term debt. In 2021, net short-term borrowings decreased and used $103.4 million in cash and net long-term debt decreased and used $32.5

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million in cash. In 2020, net short-term borrowings increased and provided $111.6 million in cash and net long-term debt increased and provided $2.1 million in cash. In 2019, net short-term borrowings decreased and used $20.1 million in cash and net long-term debt decreased and used $208.1 million in cash. Cash used in the repurchase of common shares was $16.0 million in 2021, $7.5 million in 2020 and $40.5 million in 2019. Finally, cash declined by $74.3 million in 2021, $70.4 million in 2020 and $69.1 million in 2019, from the payment of cash dividends.

Funds are available from a number of sources, including the capital markets, the investment securities portfolio, the core deposit base, FHLB borrowings and the capability to securitize or package loans for sale. In the opinion of Park's management, the present funding sources provide more than adequate liquidity for Park to meet our cash flow needs.

The following table shows interest rate sensitivity data for five different time intervals as of December 31, 2021: