PARK NATIONAL CORP /OH/

Park National Corporation is a financial holding company regulated under the Bank Holding Company Act of 1956, with its primary business being to own and oversee its subsidiaries engaged primarily in the business of banking. The company's banking operations are conducted through Park National Bank, a national banking association that engages in commercial banking, consumer banking, and wealth management including trust and investment services. Geographically, Park is focused on small and medium population areas in Ohio, North Carolina, South Carolina, and the metropolitan areas of Columbus, Cincinnati, Charlotte, Louisville, and Raleigh. As of December 31, 2025, Park National Bank operated 87 financial service offices, including 82 branches, in Ohio, Kentucky, North Carolina and South Carolina ¹. The financial services industry is highly competitive, with Park's subsidiaries competing with other local, regional and national service providers including banks, savings associations, credit unions, securities dealers, brokers, mortgage bankers, investment advisors, and financial technology companies. Digital assets and cryptocurrencies also operate as competitors, as many of these digital assets and cryptocurrencies seek to provide payment functionality.

The filing does not name specific primary competitors or provide market share data, but it states that competitors of Park may have greater resources and, as such, additional technology offerings and higher lending limits, which may adversely affect the ability of Park to compete. Certain nonfinancial institutions with which Park competes enjoy the benefits of fewer regulatory constraints, broader geographic service areas, greater capital and lower cost structures. Financial technology companies, or fintechs, are also providing nontraditional, but increasingly strong competition for Park's borrowers, depositors and other customers.

Park generates revenue primarily through net interest income, the difference between total interest income and total interest expense, which is its principal source of earnings. The company also generates other income from fiduciary activities, service charges on deposit accounts, debit card fee income, bank owned life insurance income, ATM fees, gains on equity securities, and other service income. Park's primary customer segments include consumers and businesses in the 24 Ohio counties, one Kentucky county, five North Carolina counties and four South Carolina counties where Park National Bank has office locations, with the exception of nationwide aircraft loans and nationwide asset-based lending to consumer finance companies. Park's subsidiaries accept deposits for demand, savings, and time accounts, and provide commercial, industrial, consumer and real estate lending, wealth management including trust and investment services, aircraft financing, commercial cash management, safe deposit operations, electronic funds transfers, and internet and mobile banking solutions with bill pay service.

Park's lending activities include commercial loans, which at December 31, 2025 totaled approximately $3,453 million in commercial loans and commercial leases outstanding, representing approximately 42.9% of their total aggregate loan portfolio as of that date ². Of this amount, approximately $1,212 million represented commercial, financial and agricultural loans, $2,209 million represented commercial real estate loans, and $32 million represented commercial leases ³. At December 31, 2025, Park National Bank had $274 million in loans outstanding to non-bank consumer finance companies, a national lending unit ⁴. Scope Aircraft Finance had $339 million in loans outstanding at December 31, 2025, primarily secured by aircraft and included in the commercial loan portfolio ⁵. Consumer loans at December 31, 2025 totaled $1,823 million, constituting approximately 22.6% of the aggregate total loan portfolio, of which $1,637 million were originated through indirect lending and $186 million were direct loans ⁶. Residential real estate and construction loans at December 31, 2025 totaled approximately $2,775 million, representing approximately 34.5% of total loans outstanding, including $2,376 million in residential real estate loans and $399 million in construction real estate loans ⁷. Park National Bank also originates fixed-rate real estate loans for sale to the secondary market and at December 31, 2025 reported $614 million of 15-year, fixed-rate residential mortgage loans on its Consolidated Balance Sheets ⁸. As of December 31, 2025, balances within special purpose mortgage loan programs totaled $234.2 million ⁹.

Park's wealth management services include trust and investment services, and the average market value of the wealth management assets managed by Park National Bank was $9.07 billion in 2025 ¹⁰. Income from fiduciary activities was $45.8 million in 2025 ¹¹. Park also provides aircraft financing through Scope Leasing, Inc., doing business as Scope Aircraft Finance, which serves customers throughout the U.S. and specializes in aircraft financing for small businesses and entrepreneurs. Park Investments, Inc., a subsidiary of Park National Bank, operates as an asset management company and as of December 31, 2025 held municipal securities with an amortized cost of $220.3 million ¹². Park's investment securities portfolio includes obligations of U.S. Government sponsored entities' asset-backed securities at $399.9 million, obligations of states and political subdivisions at $211.8 million, collateralized loan obligations at $56.1 million, corporate debt securities at $20.7 million, FHLB stock at $8.0 million, FRB stock at $14.7 million, and equities at $90.8 million as of December 31, 2025 ¹³.

On February 1, 2026, First Citizens Bancshares, Inc. merged into Park, with Park continuing as the surviving corporation, and immediately following the merger, First Citizens National Bank was merged into Park National Bank. As of January 31, 2026, First Citizens had $2.6 billion in total assets, $1.6 billion in total loans and leases, and $2.2 billion in total deposits ¹⁴. The acquisition was valued at $324.1 million and resulted in Park issuing 1,988,131 Park common shares as consideration ¹⁵. Park's consolidated assets surpassed $10.0 billion following the First Citizens acquisition ¹⁶. During 2025, Park sold certain AFS debt securities with a book value of $79.1 million at a gross loss of $2.3 million ¹⁷. On September 30, 2025, Park redeemed in full $15.0 million in Trust Preferred Securities ¹⁸. On September 1, 2025, Park redeemed in full $175 million outstanding of the Subordinated Notes ¹⁹. Park also declared a special cash dividend of $1.25 per share in the fourth quarter of 2025 ²⁰. Cash dividends declared on Park's common shares were $5.53 in 2025 ²¹.

Net income for the year ended December 31, 2025 was $180.1 million, a $28.7 million or 18.9% increase compared to $151.4 million for the year ended December 31, 2024 ²². Net interest income was $437.3 million in 2025 compared to $398.0 million in 2024 ²³. Pre-tax, pre-provision net income for 2025 was $232.8 million, a $33.5 million or 16.8% increase compared to $199.3 million for 2024 ²⁴. The net yield on interest earning assets (net interest margin) was 4.75% in 2025 compared to 4.41% in 2024 ²⁵. The efficiency ratio improved to 57.94% in 2025 from 61.44% in 2024 ²⁶. The ratio of total shareholders' equity to total assets was 13.80% at December 31, 2025 compared to 12.69% at December 31, 2024 ²⁷.

A major growth vector is the acquisition of First Citizens Bancshares, Inc., which closed on February 1, 2026. As of January 31, 2026, First Citizens had $2.6 billion in total assets, $1.6 billion in total loans and leases, and $2.2 billion in total deposits . The acquisition was valued at $324.1 million and resulted in Park issuing 1,988,131 Park common shares as consideration . Park's consolidated assets surpassed $10.0 billion following the First Citizens acquisition . Park expects that the total consolidated assets of Park will continue to exceed $10.0 billion at December 31, 2026, which would bring new Dodd-Frank Act regulatory obligations, including direct supervision and examination by the CFPB for compliance with federal consumer financial laws and caps on debit interchange fees ²⁸. Park anticipated these changes and has been preparing its systems and processes to ensure a smooth transition.

Another growth vector is the expansion of mortgage loan origination volume. Total mortgage loan originations were $461.0 million in 2025, compared to $431.0 million in 2024 and $407.0 million in 2023 ²⁹. The increase in 2025 was driven by a $957,000 increase in fee income related to mortgage loan originations to be sold in the secondary market, a $578,000 increase in mortgage servicing rights income, and a $458,000 increase in commercial related other service income ³⁰. Park also continues to focus on deposit offerings that provide incentives for customers to use their debit card, with debit card transaction volume increasing 0.99% in 2025 from 2024 and total sales dollars of debit card transactions increasing 3.2% in 2025 from 2024 ³¹.

The efficiency ratio improved to 57.94% in 2025 from 61.44% in 2024 . Salaries expense increased by $5.4 million or 3.7% to $152.7 million in 2025, while employee benefits expense decreased by $1.4 million or 3.3% to $40.4 million ³². Data processing fees increased by $4.7 million or 11.6% to $45.3 million, primarily related to an increase in software expenses of $5.7 million ³³. The average cost of interest bearing liabilities decreased by 31 basis points to 1.77% for 2025, compared to 2.08% for 2024 ³⁴. The net interest margin on a fully taxable equivalent basis was 4.75% in 2025 compared to 4.41% in 2024 .

As of December 31, 2025, Park operated 87 financial service offices and a network of 107 automated teller machines . Park had 1,731 active associates, comprising 1,589 full-time and 142 part-time, which equates to 1,694 full-time equivalent associates ³⁵. Park's technology infrastructure investments include the ParkDirect mobile banking application and internet-based banking by computer or mobile device. Park employs an in-depth, layered, defensive approach that leverages people, processes, encryption and multi-factor authentication technology to manage and maintain cybersecurity controls, and engages third parties on an annual basis to conduct and report on penetration testing exercises ³⁶.

During 2025, Park redeemed in full $15.0 million in Trust Preferred Securities on September 30, 2025 and redeemed in full $175 million outstanding of the Subordinated Notes on September 1, 2025 . As of December 31, 2025, Park has no subordinated debt outstanding ³⁷. Cash dividends declared on Park's common shares were $5.53 in 2025, including a special cash dividend of $1.25 per share in the fourth quarter . The quarterly cash dividend on Park's common shares was $1.07 per share for the first, second, third and fourth quarters of 2025 ³⁸. Park has historically targeted a dividend payout ratio of 50% each year ³⁹. As of December 31, 2025, Park had authorization to repurchase up to 876,088 common shares under its publicly announced stock repurchase authorizations ⁴⁰. Management purchased equity securities totaling $5.8 million in 2025 and entered into partnership agreements with commitments totaling $157,000 ⁴¹.

Structural headwinds include the potential for higher future credit losses due to changes in economic assumptions, as the CECL model uses a life-of-loan time horizon over which Park is required to estimate future credit losses, which could result in volatility in future provisions for credit losses. The filing notes that inflation generally increases the cost of goods and services used in business operations, which increases noninterest expenses, and that customers are also affected by inflation and rising costs, which could negatively impact their ability to repay loans. Additionally, changes in interest rates could have a material adverse effect on financial condition, results of operations and cash flows, as earnings and cash flows depend substantially on the interest rate spread.

Geographic and regulatory constraints include the concentration of lending and deposit gathering activities primarily in Ohio, Kentucky, North Carolina, South Carolina, and as of February 1, 2026, Tennessee, meaning success depends on the general economic conditions of these primary market areas. With Park's total consolidated assets expected to exceed $10.0 billion at December 31, 2026, Park will become subject to additional regulations including supervision by the CFPB, a modified methodology for FDIC insurance assessments, limitations on interchange transaction fees for debit card transactions, heightened compliance standards under the Volcker Rule, and enhanced supervision by the OCC and the Federal Reserve Board . The filing also notes that Park National Bank is subject to a Consent Order with the U.S. Department of Justice approved on March 2, 2023, which requires an investment of at least $7.75 million to increase credit opportunities, a minimum of $500,000 for community development partnerships and $750,000 for advertising and consumer education, and to maintain one new full-service branch, one mortgage loan production office, and four specialized mortgage lenders focused on community lending over a five-year period ⁴².

The allowance for credit losses may prove insufficient to absorb expected lifetime losses in the loan portfolio, and the CECL model requires management to make various assumptions and judgments about collectability, with a hypothetical adverse scenario resulting in a $30.0 million increase in the ACL as of December 31, 2025 ⁴³. Changes in interest rates could have a material adverse effect on financial condition, as earnings depend substantially on the interest rate spread, and the average cost of interest bearing liabilities was 1.77% in 2025 compared to 2.08% in 2024 . With total consolidated assets expected to exceed $10.0 billion at December 31, 2026, Park will become subject to additional regulations including CFPB supervision, potentially higher FDIC assessment rates, limitations on debit interchange fees, and heightened Volcker Rule compliance standards . Park is subject to a DOJ Consent Order requiring an investment of at least $7.75 million to increase credit opportunities, $500,000 for community development partnerships, and $750,000 for advertising and consumer education over a five-year period . The company faces intense competition from financial technology companies and digital assets, which serve as competition for deposits, and consumers may move money out of bank deposits in favor of other investments including digital or cryptocurrency.

Management's message emphasizes that Park's associates are driven by purpose, a theme referred to as 'Serving More,' and that the organization prioritizes doing the right thing. Management highlights that net income for 2025 of $180.1 million represented a $28.7 million or 18.9% increase compared to 2024, and pre-tax, pre-provision net income of $232.8 million represented a $33.5 million or 16.8% increase . Management notes that the efficiency ratio improved to 57.94% in 2025 from 61.44% in 2024 . Key strategic priorities emphasized include the successful integration of the First Citizens acquisition, which closed on February 1, 2026 and added $2.6 billion in total assets, and preparing for the regulatory obligations that come with total consolidated assets exceeding $10.0 billion . Management also emphasizes the commitment to associate development, noting the introduction of Leadership Pathways in 2025 and the launch of a Manager Onboarding program, as well as the focus on maintaining a strong capital position with a total shareholders' equity to total assets ratio of 13.80% at December 31, 2025 .