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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Corporation’s deferred tax assets and liabilities are as follows:

December 31 (In thousands)20242023
Deferred tax assets:
Allowance for credit losses$19,144 $18,248 
Allowance for unfunded credit losses1,288 1,125 
Accumulated other comprehensive loss – Unrealized losses on debt securities AFS16,728 18,045 
Deferred compensation6,811 6,177 
    Net deferred loan fees581 1,384 
Nonvested equity-based compensation3,130 3,019 
Net operating loss ("NOL") carryforward2,173 2,222 
    Fixed assets1,728 1,243 
Operating lease liability3,592 3,620 
Other1,009 939 
Total deferred tax assets before valuation allowance$56,184 $56,022 
Valuation allowance(562)— 
Total deferred tax assets$55,622 $56,022 
Deferred tax liabilities:
Accumulated other comprehensive gain – Pension Plan$4,453 $449 
Deferred investment income1,226 2,455 
Pension Plan21,776 19,962 
MSRs3,030 3,196 
Partnership adjustments1,080 1,540 
Purchase accounting adjustments791 807 
Operating lease right-of-use asset3,427 3,426 
Lessor adjustments2,287 2,308 
Other1,199 614 
Total deferred tax liabilities$39,269 $34,757 
Net deferred tax asset$16,353 $21,265 

As of December 31, 2024 and 2023, Park had a net deferred tax asset balance related to federal NOL carryforwards of approximately $1.6 million and $2.0 million, respectively, which expire at various dates from 2030-2039. Park also had a net deferred tax asset balance related to state NOL carryforwards of approximately $0.6 million and $0.2 million at December 31, 2024 and 2023, respectively, which expire at various dates from 2030-2039.

Park performs an analysis to determine if a valuation allowance against deferred tax assets is required in accordance with U.S. GAAP. At December 31, 2024, management determined that it was required to establish a $0.6 million state tax valuation allowance against certain deferred tax assets generated by one of its non-bank subsidiaries since it was not more likely than not
that the deferred tax assets would be fully utilized in future periods. No valuation allowance was required for the year ended December 31, 2023.

The components of the provision for federal income taxes are shown below:

December 31, (In thousands)202420232022
Currently payable
Federal
$23,905 $18,118 $22,574 
State
1,360 1,190 1,180 
       Amortization of qualified affordable housing projects and historic tax credits8,449 8,265 7,743 
Deferred
Federal
(517)(708)464 
State
108 5 147 
Total$33,305 $26,870 $32,108 

The following is a reconciliation of income tax expense to the amount computed at the statutory federal corporate income tax rate of 21% for the years ended December 31, 2024, 2023 and 2022.

202420232022
Statutory federal corporate income tax rate21.0 %21.0 %21.0 %
Changes in rates resulting from:
Tax exempt interest income, net of disallowed interest(1.0)%(1.9)%(1.6)%
Bank owned life insurance(0.9)%(0.7)%(0.7)%
Investments in qualified affordable housing projects, net of tax benefits(1.0)%(1.0)%(0.8)%
KSOP dividend deduction(0.5)%(0.6)%(0.5)%
Other0.4 %0.7 %0.4 %
Effective Tax Rate18.0 %17.5 %17.8 %

Park National Corporation and its subsidiaries do not pay state income tax to the state of Ohio, but pay a franchise tax based on equity. The franchise tax expense is included in "State tax expense" on Park’s Consolidated Statements of Income. Park is also subject to state income tax in various states, including North Carolina and South Carolina. State income tax expense is included in “Income taxes” on Park’s Consolidated Statements of Income. Park’s state income tax expense was $1.5 million, $1.2 million and $1.3 million for the years ended December 31, 2024, 2023 and 2022, respectively.
 
Unrecognized Tax Benefits
The following is a reconciliation of the beginning and ending amount of unrecognized tax benefits.

(In thousands)202420232022
January 1 Balance$145 $69 $339 
    Additions based on tax positions related to the current year5 47 — 
    Additions for tax positions of prior years— 52 25 
Reductions for tax positions of prior years(28)— — 
    Reductions due to statute of limitations(24)(23)(295)
December 31 Balance$98 $145 $69 

The amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in the future periods at December 31, 2024, 2023 and 2022 was $87,000, $123,000 and $62,000, respectively. Park does not expect the total amount of unrecognized tax benefits to significantly increase or decrease during 2024.
The expense (income) related to interest and penalties recorded on unrecognized tax benefits in the Consolidated Statements of Income for the years ended December 31, 2024, 2023, and 2022 was $1,500, $1,500, and $(56,000), respectively. The amount accrued for interest and penalties at December 31, 2024, 2023 and 2022 was $12,500, $11,000 and $9,500, respectively.
 
Park National Corporation and its subsidiaries are subject to U.S. federal income tax and income tax in various state jurisdictions. The Corporation is subject to routine audits of tax returns by the Internal Revenue Service and states in which we conduct business. No material adjustments have been made on closed federal and state tax audits. Generally, all tax years ended prior to December 31, 2021 are closed to examination by federal and state taxing authorities.