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CST: 26/01/2020 20:08:45   

Park National Corporation reports 2018 financial results and announces next step in leadership succession

363 Days ago

Board increases quarterly cash dividend and awards special cash dividend

NEWARK, Ohio, Jan. 28, 2019 (GLOBE NEWSWIRE) -- Park National Corporation (Park) (NYSE American: PRK) today reported increased net income and earnings per share among its financial results for the fourth quarter and full year of 2018 (three and twelve months ended December 31, 2018).

Park’s net income for the fourth quarter of 2018 was $26.3 million, a 15.0 percent increase from $22.8 million for the fourth quarter of 2017. Fourth quarter 2018 net income per diluted common share was $1.67, compared to $1.48 in the fourth quarter of 2017. Increased net interest income and increased non-interest income helped contribute to Park’s fourth quarter performance.

Park's net income for the full year 2018 was $110.4 million, a 31.0 percent increase from $84.2 million for the same period in 2017. Net income per diluted common share was $7.07 for 2018, compared to $5.47 for 2017.

Park's community-banking subsidiary, The Park National Bank, reported net income of $26.1 million for the fourth quarter of 2018, a 7.0 percent increase from $24.4 million reported for the fourth quarter of 2017. The bank’s net income was $109.5 million for the full year 2018, compared to $87.3 million for the same period in 2017.

“Our success in 2018 is the result of many factors, none more important than our bankers’ unwavering dedication and consistent hard work. From our most tenured bankers to our newest colleagues, each person played a critical role in producing excellent results,” said Park Chief Executive Officer (CEO) David L. Trautman.

Charlotte-based NewDominion Bank joined Park on July 1, 2018. On September 13, 2018 Park announced a definitive agreement and plan of merger and reorganization with CAB Financial Corporation (OTCQX: CABF) based in Spartanburg, South Carolina. Park expects to close the transaction in the first half of 2019 (subject to customary closing conditions).

Park's board of directors declared a quarterly cash dividend of $1.01 per common share and a special cash dividend of $0.20 per common share, payable on March 8, 2019 to common shareholders of record as of February 15, 2019.  The board also authorized Park to repurchase, from time to time following receipt of any required regulatory approvals, up to 500,000 Park common shares in addition to the 500,000 Park common shares which had been authorized for repurchase by Park’s board of directors on January 23, 2017 and currently remain available for repurchase. The authorizations result in an aggregate of up to 1,000,000 Park common shares being available for repurchase under the stock repurchase authorizations in the future.

The Park board proposed to take action to approve a plan for changes in executive leadership and governance at the Park board meeting immediately following Park’s annual shareholder meeting on April 22, 2019.

Park’s CEO David L. Trautman will be elected chairman of the board, as current Chairman C. Daniel DeLawder will continue employment in a reduced capacity and remain chair of the Park board’s executive committee. Trautman will retain the CEO role, and Park’s Executive Vice President Matthew R. Miller will be elected to serve as president and a member of the boards of directors for each of The Park National Bank and Park National Corporation. These changes will be effective May 1, 2019.

“We have a great history of carefully planned leadership succession at Park, and we’re following the model that has served our organization so well for several generations. Our consistent approach to leadership transition helps preserve our culture and community banking values,” said DeLawder, who has 48 years of service with Park. He has not announced a timeline for his official retirement.

At the April meeting, Park’s board will increase the number of directors from 13 to 14, and the additional director (Miller) will serve in the class of directors whose terms expire in 2020.

Headquartered in Newark, Ohio, Park National Corporation had $7.8 billion in total assets (as of December 31, 2018). The Park organization consists of 11 community bank divisions, a non-bank subsidiary and two specialty finance companies. Park's banking operations are conducted through Park subsidiary The Park National Bank and its divisions, which include Fairfield National Bank Division, Richland Bank Division, Century National Bank Division, First-Knox National Bank Division, United Bank, N.A. Division, Second National Bank Division, Security National Bank Division, Unity National Bank Division, The Park National Bank of Southwest Ohio & Northern Kentucky Division, and NewDominion Bank Division. The Park organization also includes Scope Leasing, Inc. (d.b.a. Scope Aircraft Finance), Guardian Financial Services Company (d.b.a. Guardian Finance Company) and SE Property Holdings, LLC.

Complete financial tables are listed below…

Media contact: Bethany Lewis, 740.349.0421, blewis@parknationalbank.com
Investor contact: Brady Burt, 740.322.6844, bburt@parknationalbank.com
Park National Corporation, 50 N. Third Street, Newark, Ohio 43055

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Park cautions that any forward-looking statements contained in this Current Report on Form 8-K or made by management of Park 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: Park's ability to execute our business plan successfully and within the expected timeframe; 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 slowing or reversal of the recent economic expansion in addition to continuing residual effects of recessionary conditions and an uneven spread of positive impacts of recovery on the economy and our counterparties, resulting in adverse impacts on the demand for loan, deposit and other financial services, delinquencies, defaults and counterparties' ability to meet credit and other obligations and the possible impairment of collectability of loans; changes in interest rates and prices may adversely impact prepayment penalty income, mortgage banking income, the value of securities, loans, deposits and other financial instruments and the interest rate sensitivity of our consolidated balance sheet as well as reduce interest margins and impact loan demand; changes in consumer spending, borrowing and saving habits, whether due to the tax reform legislation, changing business and economic conditions, legislative and regulatory initiatives, or other factors; changes in unemployment; changes in customers', suppliers', and other counterparties' performance and creditworthiness; the adequacy of our risk management program in the event of changes in the market, economic, operational, asset/liability repricing, liquidity, credit and interest rate risks associated with Park's business; disruption in the liquidity and other functioning of U.S. financial markets; our liquidity requirements could be adversely affected by changes to regulations governing bank and bank holding company capital and liquidity standards as well as by changes in our assets and liabilities; competitive factors among financial services organizations could increase significantly, including product and pricing pressures, changes to third-party relationships and our ability to attract, develop and retain qualified banking professionals; customers could pursue alternatives to bank deposits, causing us to lose a relatively inexpensive source of funding; 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, pensions, bankruptcy, consumer protection, rent regulation and housing, financial accounting and reporting, environmental protection, insurance, bank products and services, bank capital and liquidity standards, fiduciary standards, securities and other aspects of the financial services industry, specifically the reforms provided for in 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 Dodd-Frank Act's provisions, and the Basel III regulatory capital reforms; the effects of easing restrictions on participants in the financial services industry; the effect of changes in accounting policies and practices, as may be adopted by the Financial Accounting Standards Board, the SEC, the Public Company Accounting Oversight Board and other regulatory agencies, and the accuracy of our assumptions and estimates used to prepare our financial statements; changes in law and policy accompanying the current presidential administration, including the Tax Cuts and Jobs Act, and uncertainty or speculation pending the enactment of such changes; significant changes in the tax laws, which 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; the impact of our ability to anticipate and respond to technological changes on our 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; a failure in or breach of our 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 existence or exacerbation of general geopolitical instability and uncertainty; the effect of trade policies (including the impact of tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars and other changes in trade regulations), monetary and other fiscal policies (including the impact of money supply and interest rate policies to the Federal Reserve Board) and other governmental policies of the U.S. federal government; 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 creditworthiness of certain sovereign governments, supranationals and financial institutions in Europe and Asia; the uncertainty surrounding the actions to be taken to implement the referendum by United Kingdom voters to exit the European Union; 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; fraud, scams and schemes of third parties; the impact of widespread natural and other disasters, pandemics, dislocations, civil unrest, terrorist activities or international hostilities on the economy and financial markets generally and on us or our counterparties specifically; the effect of healthcare laws in the U.S. and potential changes for such laws which may increase our healthcare and other costs and negatively impact our operations and financial results; Park's ability to integrate recent acquisitions (including NewDominion Bank) as well as any future acquisitions, which may be unsuccessful, or may be more difficult, time-consuming or costly than expected; the ability to complete the proposed merger of Park and CAB Financial Corporation ("CAB") on the proposed terms and within the expected time frame; the risk that the businesses of Park and CAB will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; expected revenue synergies and cost savings from the proposed merger of Park and CAB may not be fully realized or realized within the expected time frame; revenues following the proposed merger of Park and CAB may be lower than expected; customer and employee relationships and business operations may be disrupted by the proposed merger of Park and CAB; Park issued equity securities in the acquisition of NewDominion Bank and may issue equity securities in connection with future acquisitions, including the proposed merger of Park and CAB, if consummated, which could cause ownership and economic dilution to Park's current shareholders; the discontinuation of 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 Part I of Park's Annual Report on Form 10-K for the fiscal year ended December 31, 2017. 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.

PARK NATIONAL CORPORATION
Financial Highlights
As of or for the three months ended December 31, 2018, September 30, 2018, and December 31, 2017          
             
  2018 2018 2017   Percent change vs.
(in thousands, except share and per share data) 4th QTR 3rd QTR 4th QTR   3Q '18 4Q '17
INCOME STATEMENT:            
Net interest income $ 69,630   $ 67,676   $ 63,478     2.9 % 9.7 %
Provision for (recovery of) loan losses 3,359   2,940   (183 )   14.3 % N.M.  
Other income 26,892   24,064   23,238     11.8 % 15.7 %
Other expense 62,597   59,316   53,439     5.5 % 17.1 %
Income before income taxes $ 30,566   $ 29,484   $ 33,460     3.7 % (8.6 ) %
Income taxes 4,305   4,722   10,629     (8.8 )% (59.5 ) %
Net income $ 26,261   $ 24,762   $ 22,831     6.1 % 15.0 %
                 
MARKET DATA:                
Earnings per common share - basic (b) $ 1.67   $ 1.58   $ 1.49     5.7 % 12.1 %
Earnings per common share - diluted (b) 1.67   1.56   1.48     7.1 % 12.8 %
Cash dividends declared per common share 0.96   0.96   0.94     % 2.1 %
Book value per common share at period end 53.03   51.58   49.46     2.8 % 7.2 %
Market price per common share at period end 84.95   105.56   104.00     (19.5 )% (18.3 )%
Market capitalization at period end 1,333,560   1,655,870   1,589,972     (19.5 )% (16.1 )%
                 
Weighted average common shares - basic (a) 15,695,522   15,686,542   15,285,174     0.1 % 2.7 %
Weighted average common shares - diluted (a) 15,764,548   15,832,734   15,378,825     (0.4 )% 2.5 %
Common shares outstanding at period end 15,698,178   15,686,532   15,288,194     0.1 % 2.7 %
                 
PERFORMANCE RATIOS: (annualized)                
Return on average assets (a)(b) 1.34 % 1.26 % 1.17 %   6.3 % 14.5 %
Return on average shareholders' equity (a)(b) 12.70 % 12.11 % 11.85 %   4.9 % 7.2 %
Yield on loans 5.10 % 4.95 % 4.79 %   3.0 % 6.5 %
Yield on investment securities 2.74 % 2.76 % 2.55 %   (0.7 ) % 7.5 %
Yield on money market instruments 2.46 % 2.61 % 1.29 %   (5.7 ) % 90.7 %
Yield on interest earning assets 4.61 % 4.47 % 4.19 %   3.1 % 10.0 %
Cost of interest bearing deposits 0.85 % 0.83 % 0.48 %   2.4 % 77.1 %
Cost of borrowings 1.88 % 1.88 % 2.15 %   % (12.6 ) %
Cost of paying interest bearing liabilities 0.97 % 0.95 % 0.79 %   2.1 % 22.8 %
Net interest margin (g) 3.91 % 3.78 % 3.61 %   3.4 % 8.3 %
Efficiency ratio (g) 64.36 % 64.16 % 60.64 %   0.3 % 6.1 %
                             
OTHER RATIOS (NON - GAAP):                            
Annualized return on average tangible assets (a)(b)(e) 1.36 % 1.27 % 1.18 %   7.1 % 15.3 %
Annualized return on average tangible equity (a)(b)(c) 14.87 % 14.21 % 13.09 %   4.6 % 13.6 %
Tangible book value per share (d) $ 45.41   $ 43.93   $ 44.73     3.4 % 1.5 %
             
N.M. - Not meaningful            
Note: Explanations for footnotes (a) - (g) are included at the end of the financial highlights.            
             
             
PARK NATIONAL CORPORATION
Financial Highlights (continued)
As of or for the three months ended December 31, 2018, September 30, 2018, and December 31, 2017          
             
          Percent change vs.
BALANCE SHEET: December 31,
2018
September 30,
2018
December 31,
2017
  3Q '18 4Q '17
             
Investment securities $ 1,411,080   $ 1,439,011   $ 1,512,824     (1.9 ) % (6.7 ) %
Loans 5,692,132   5,625,323   5,372,483     1.2 % 5.9 %
Allowance for loan losses 51,512   50,246   49,988     2.5 % 3.0 %
Goodwill and other intangibles 119,710   119,999   72,334     (0.2 ) % 65.5 %
Other real estate owned (OREO) 4,303   5,276   14,190     (18.4 ) % (69.7 ) %
Total assets 7,804,308   7,756,491   7,537,620     0.6 % 3.5 %
Total deposits 6,260,860   6,279,326   5,817,326     (0.3 ) % 7.6 %
Borrowings 636,966   594,818   906,289     7.1 % (29.7 ) %
Total shareholders' equity 832,506   809,091   756,101     2.9 % 10.1 %
Tangible equity (d) 712,796   689,092   683,767     3.4 % 4.2 %
Total nonperforming loans 85,370   83,281   93,959     2.5 % (9.1 ) %
Total nonperforming assets 93,137   95,727   112,998     (2.7 ) % (17.6 ) %
                 
ASSET QUALITY RATIOS:                
Loans as a % of period end total assets 72.94 % 72.52 % 71.28 %   0.6 % 2.3 %
Total nonperforming loans as a % of period end loans 1.50 % 1.48 % 1.75 %   1.4 % (14.3 ) %
Total nonperforming assets as a % of period end loans + OREO + other nonperforming assets 1.63 % 1.70 % 2.10 %   (4.1 ) % (22.4 ) %
Allowance for loan losses as a % of period end loans 0.90 % 0.89 % 0.93 %   1.1 % (3.2 ) %
Net loan charge-offs $ 2,093   $ 2,146   $ 5,061     (2.5 ) % (58.6 ) %
Annualized net loan charge-offs as a % of average loans (a) 0.15 % 0.15 % 0.37 %   % (59.5 ) %
             
CAPITAL & LIQUIDITY:            
Total shareholders' equity / Period end total assets 10.67 % 10.43 % 10.03 %   2.3 % 6.4 %
Tangible equity (d) / Tangible assets (f) 9.28 % 9.02 % 9.16 %   2.9 % 1.3 %
Average shareholders' equity / Average assets (a) 10.56 % 10.37 % 9.88 %   1.8 % 6.9 %
Average shareholders' equity / Average loans (a) 14.56 % 14.46 % 14.24 %   0.7 % 2.2 %
Average loans / Average deposits (a) 90.06 % 88.36 % 90.73 %   1.9 % (0.7 ) %
             


PARK NATIONAL CORPORATION
Financial Highlights
Twelve months ended December 31, 2018 and 2017        
           
           
(in thousands, except share and per share data) 2018 2017   Percent
change vs '
17
 
INCOME STATEMENT:          
Net interest income $ 266,898   $ 243,759     9.5 %  
Provision for loan losses 7,945   8,557     (7.2 ) %  
Other income 101,101   86,429     17.0 %  
Other expense 228,755   203,162     12.6 %  
Income before income taxes $ 131,299   $ 118,469     10.8 %  
Income taxes 20,912   34,227     (38.9 )%  
Net income $ 110,387   $ 84,242     31.0 %  
             
MARKET DATA:            
Earnings per common share - basic (b) $ 7.13   $ 5.51     29.4 %  
Earnings per common share - diluted (b) 7.07   5.47     29.3 %  
Cash dividends declared per common share 4.07   3.76     8.2 %  
             
Weighted average common shares - basic (a) 15,488,982   15,295,573     1.3 %  
Weighted average common shares - diluted (a) 15,611,489   15,390,352     1.4 %  
             
PERFORMANCE RATIOS:            
Return on average assets (a)(b) 1.45 % 1.09 %   33.0 %  
Return on average shareholders' equity (a)(b) 14.08 % 11.15 %   26.3 %  
Yield on loans 4.98 % 4.69 %   6.2 %  
Yield on investment securities 2.72 % 2.47 %   10.1 %  
Yield on money market instruments 1.93 % 1.18 %   63.6 %  
Yield on interest earning assets 4.46 % 4.08 %   9.3 %  
Cost of interest bearing deposits 0.72 % 0.44 %   63.6 %  
Cost of borrowings 1.83 % 2.32 %   (21.1 ) %  
Cost of paying interest bearing liabilities 0.86 % 0.80 %   7.5 %  
Net interest margin (g) 3.84 % 3.48 %   10.3 %  
Efficiency ratio (g) 61.68 % 60.62 %   1.7 %  
                     
ASSET QUALITY RATIOS:                    
Net loan charge-offs 6,421   9,193     (30.2 ) %  
Net loan charge-offs as a % of average loans (a) 0.12 % 0.17 %   (29.4 ) %  
                     
CAPITAL & LIQUIDITY:                    
Average shareholders' equity / Average assets (a) 10.28 % 9.76 %   5.3 %  
Average shareholders' equity / Average loans (a) 14.36 % 14.19 %   1.2 %  
Average loans / Average deposits (a) 89.01 % 90.40 %   (1.5 ) %  
                     
OTHER RATIOS (NON - GAAP):                    
Return on average tangible assets (a)(b)(e) 1.47 % 1.10 %   33.6 %  
Return on average tangible equity (a)(b)(c) 16.05 % 12.33 %   30.2 %  
           
N.M. - Not meaningful          
Note: Explanations (a) - (g) are included at the end of the financial highlights.          


PARK NATIONAL CORPORATION      
Financial Highlights (continued)            
             
(a) Averages are for the three months ended December 31, 2018, September 30, 2018 and December 31, 2017 and for the twelve months ended December 31, 2018 and December 31, 2017.
(b) Reported measure uses net income.      
(c) Net income for each period divided by average tangible equity during the period. Average tangible equity equals average shareholders' equity during the applicable period less average goodwill and other intangibles during the applicable period.
             
RECONCILIATION OF AVERAGE SHAREHOLDERS' EQUITY TO AVERAGE TANGIBLE EQUITY:      
  THREE MONTHS ENDED   TWELVE MONTHS ENDED
  December 31,
2018
September 30,
2018
December 31,
2017
  December 31,
2018
December 31,
2017
AVERAGE SHAREHOLDERS' EQUITY $ 820,445   $ 811,313   $ 764,211     $ 784,140   $ 755,839  
Less: Average goodwill and other intangibles 119,899   120,188   72,334     96,385   72,334  
AVERAGE TANGIBLE EQUITY $ 700,546   $ 691,125   $ 691,877     $ 687,755   $ 683,505  
             
(d) Tangible equity divided by common shares outstanding at period end. Tangible equity equals total shareholders' equity less goodwill and other intangibles, in each case at the end of the period.
             
RECONCILIATION OF TOTAL SHAREHOLDERS' EQUITY TO TANGIBLE EQUITY:      
  December 31,
2018
September 30,
2018
December 31,
2017
     
TOTAL SHAREHOLDERS' EQUITY $ 832,506   $ 809,091   $ 756,101        
Less: Goodwill and other intangibles 119,710   119,999   72,334        
TANGIBLE EQUITY $ 712,796   $ 689,092   $ 683,767        
             
(e) Net income for each period divided by average tangible assets during the period. Average tangible assets equals average assets less average goodwill and other intangibles, in each case during the applicable period.
             
RECONCILIATION OF AVERAGE ASSETS TO AVERAGE TANGIBLE ASSETS:      
  THREE MONTHS ENDED   TWELVE MONTHS ENDED
  December 31,
2018
September 30,
2018
December 31,
2017
  December 31,
2018
December 31,
2017
AVERAGE ASSETS $ 7,770,140   $ 7,826,496   $ 7,734,844     $ 7,629,269   $ 7,741,043  
Less: Average goodwill and other intangibles 119,899   120,188   72,334     96,385   72,334  
AVERAGE TANGIBLE ASSETS $ 7,650,241   $ 7,706,308   $ 7,662,510     $ 7,532,884   $ 7,668,709  
             
(f) Tangible equity divided by tangible assets. Tangible assets equals total assets less goodwill and other intangibles, in each case at the end of the period.      
             
RECONCILIATION OF TOTAL ASSETS TO TANGIBLE ASSETS:      
  December 31,
2018
September 30,
2018
December 31,
2017
     
TOTAL ASSETS $ 7,804,308   $ 7,756,491   $ 7,537,620        
Less: Goodwill and other intangibles 119,710   119,999   72,334        
TANGIBLE ASSETS $ 7,684,598   $ 7,636,492   $ 7,465,286        
             
(g) Efficiency ratio is calculated by dividing total other expense by the sum of fully taxable equivalent net interest income and other income. Fully taxable equivalent net interest income reconciliation is shown below assuming a 21% corporate federal income tax rate for 2018 and a 35% corporate federal income tax rate for 2017. Additionally, net interest margin is calculated on a fully taxable equivalent basis by dividing fully taxable equivalent net interest income by average interest earning assets.
             
RECONCILIATION OF FULLY TAXABLE EQUIVALENT NET INTEREST INCOME TO NET INTEREST INCOME      
  THREE MONTHS ENDED   TWELVE MONTHS ENDED
  December 31,
2018
September 30,
2018
December 31,
2017
  December 31,
2018
December 31,
2017
Interest income $ 82,167   $ 80,229   $ 73,969     $ 310,801   $ 286,424  
Fully taxable equivalent adjustment 736   716   1,413     2,858   4,953  
Fully taxable equivalent interest income $ 82,903   $ 80,945   $ 75,382     $ 313,659   $ 291,377  
Interest expense 12,537   12,553   10,491     43,903   42,665  
Fully taxable equivalent net interest income $ 70,366   $ 68,392   $ 64,891     $ 269,756   $ 248,712  
             


                 
PARK NATIONAL CORPORATION
Consolidated Statements of Income
                 
    Three Months Ended   Twelve Months Ended
    December 31,   December 31,
(in thousands, except share and per share data)   2018   2017   2018   2017
                 
Interest income:                
Interest and fees on loans   $ 72,342     $ 64,447     271,145     248,687  
Interest on:                
Obligations of U.S. Government, its agencies                
and other securities - taxable   7,275     6,653     29,479     27,440  
Obligations of states and political subdivisions - tax-exempt   2,213     2,112     8,770     7,210  
Other interest income   337     757     1,407     3,087  
Total interest income   82,167     73,969     310,801     286,424  
                 
Interest expense:                
Interest on deposits:                
Demand and savings deposits   6,006     2,677     19,815     9,464  
Time deposits   3,610     2,490     12,375     9,629  
Interest on borrowings   2,921     5,324     11,713     23,572  
Total interest expense   12,537     10,491     43,903     42,665  
                 
Net interest income   69,630     63,478     266,898     243,759  
                 
Provision for (recovery of) loan losses   3,359     (183 )   7,945     8,557  
                 
Net interest income after provision for (recovery of) loan losses   66,271     63,661     258,953     235,202  
                 
Other income   26,892     23,238     101,101     86,429  
                 
Other expense   62,597     53,439     228,755     203,162  
                 
Income before income taxes   30,566     33,460     131,299     118,469  
                 
Income taxes   4,305     10,629     20,912     34,227  
                 
Net income   $ 26,261     $ 22,831     110,387     84,242  
                 
Per Common Share:                
Net income  - basic   $ 1.67     $ 1.49     $ 7.13     $ 5.51  
Net income  - diluted   $ 1.67     $ 1.48     $ 7.07     $ 5.47  
                 
Weighted average shares - basic   15,695,522     15,285,174     15,488,982     15,295,573  
Weighted average shares - diluted   15,764,548     15,378,825     15,611,489     15,390,352  
                 
Cash dividends declared   $ 0.96     $ 0.94     $ 4.07     $ 3.76  
                 


 
PARK NATIONAL CORPORATION
Consolidated Balance Sheets
     
(in thousands, except share data) December 31, 2018 December 31, 2017
     
Assets    
     
Cash and due from banks $ 141,890   $ 131,946  
Money market instruments 25,324   37,166  
Investment securities 1,411,080   1,512,824  
Loans 5,692,132   5,372,483  
Allowance for loan losses (51,512 ) (49,988 )
Loans, net 5,640,620   5,322,495  
Bank premises and equipment, net 59,771   55,901  
Goodwill and other intangibles 119,710   72,334  
Other real estate owned 4,303   14,190  
Other assets 401,610   390,764  
Total assets $ 7,804,308   $ 7,537,620  
     
Liabilities and Shareholders' Equity    
     
Deposits:    
Noninterest bearing $ 1,804,881   $ 1,633,941  
Interest bearing 4,455,979   4,183,385  
Total deposits 6,260,860   5,817,326  
Borrowings 636,966   906,289  
Other liabilities 73,976   57,904  
Total liabilities $ 6,971,802   $ 6,781,519  
     
     
Shareholders' Equity:    
Preferred shares (200,000 shares authorized; no shares outstanding at December 31, 2018 and December 31, 2017)
$   $  
Common shares (No par value; 20,000,000 shares authorized in 2018 and 2017; 16,586,165 shares issued at December 31, 2018 and 16,150,752 shares issued at December 31, 2017) 358,598   307,726  
Accumulated other comprehensive loss, net of taxes (49,788 ) (26,454 )
Retained earnings 614,069   561,908  
Treasury shares (887,987 shares at December 31, 2018 and 862,558 shares at December 31, 2017) (90,373 ) (87,079 )
Total shareholders' equity $ 832,506   $ 756,101  
Total liabilities and shareholders' equity $ 7,804,308   $ 7,537,620  


       
PARK NATIONAL CORPORATION
Consolidated Average Balance Sheets
           
  Three Months Ended   Twelve Months Ended
  December 31,   December 31,
(in thousands) 2018 2017   2018 2017
           
Assets          
           
Cash and due from banks $ 111,617   $ 113,355     $ 114,357   $ 113,882  
Money market instruments 54,443   233,384     73,001   262,100  
Investment securities 1,415,210   1,542,367     1,461,068   1,557,815  
Loans 5,635,837   5,366,100     5,460,664   5,327,507  
Allowance for loan losses (50,478 ) (55,397 )   (50,151 ) (52,688 )
Loans, net 5,585,359   5,310,703     5,410,513   5,274,819  
Bank premises and equipment, net 59,153   56,345     57,195   56,910  
Goodwill and other intangibles 119,899   72,334     96,385   72,334  
Other real estate owned 4,760   14,315     8,016   14,262  
Other assets 419,699   392,041     408,734   388,921  
Total assets $ 7,770,140   $ 7,734,844     $ 7,629,269   $ 7,741,043  
           
           
Liabilities and Shareholders' Equity          
           
Deposits:          
Noninterest bearing $ 1,765,670   $ 1,610,815     $ 1,661,481   $ 1,544,986  
Interest bearing 4,492,046   4,303,732     4,473,467   4,348,110  
Total deposits 6,257,716   5,914,547     6,134,948   5,893,096  
Borrowings 616,519   982,245     641,505   1,017,684  
Other liabilities 75,460   73,841     68,676   74,424  
Total liabilities $ 6,949,695   $ 6,970,633     $ 6,845,129   $ 6,985,204  
           
Shareholders' Equity:          
Preferred shares $   $     $   $  
Common shares 357,766   307,173     332,694   306,371  
Accumulated other comprehensive loss, net of taxes (59,780 ) (14,641 )   (52,871 ) (14,384 )
Retained earnings 613,103   559,064     593,544   550,136  
Treasury shares (90,644 ) (87,385 )   (89,227 ) (86,284 )
Total shareholders' equity $ 820,445   $ 764,211     $ 784,140   $ 755,839  
Total liabilities and shareholders' equity $ 7,770,140   $ 7,734,844     $ 7,629,269   $ 7,741,043  


 
PARK NATIONAL CORPORATION
Consolidated Statements of Income - Linked Quarters
           
  2018 2018 2018 2018 2017
(in thousands, except per share data) 4th QTR 3rd QTR 2nd QTR 1st QTR 4th QTR
           
Interest income:          
Interest and fees on loans $ 72,342   $ 69,905   $ 64,496   $ 64,402   $ 64,447  
Interest on:          
Obligations of U.S. Government, its agencies and other securities - taxable 7,275   7,691   7,746   6,767   6,653  
Obligations of states and political subdivisions - tax-exempt 2,213   2,205   2,178   2,174   2,112  
Other interest income 337   428   271   371   757  
Total interest income 82,167   80,229   74,691   73,714   73,969  
           
Interest expense:          
Interest on deposits:          
Demand and savings deposits 6,006   6,412   4,107   3,290   2,677  
Time deposits 3,610   3,328   2,886   2,551   2,490  
Interest on borrowings 2,921   2,813   2,956   3,023   5,324  
Total interest expense 12,537   12,553   9,949   8,864   10,491  
           
Net interest income 69,630   67,676   64,742   64,850   63,478  
           
Provision for (recovery of) loan losses 3,359   2,940   1,386   260   (183 )
           
Net interest income after provision for (recovery of) loan losses 66,271   64,736   63,356   64,590   63,661  
           
Other income 26,892   24,064   23,242   26,903   23,238  
           
Other expense 62,597   59,316   52,534   54,308   53,439  
           
Income before income taxes 30,566   29,484   34,064   37,185   33,460  
           
Income taxes 4,305   4,722   5,823   6,062   10,629  
           
Net income $ 26,261   $ 24,762   $ 28,241   $ 31,123   $ 22,831  
           
Per Common Share:          
Net income - basic $ 1.67   $ 1.58   $ 1.85   $ 2.04   $ 1.49  
Net income - diluted $ 1.67   $ 1.56   $ 1.83   $ 2.02   $ 1.48  


 
PARK NATIONAL CORPORATION
Detail of other income and other expense - Linked Quarters
           
  2018 2018 2018 2018 2017
(in thousands) 4th QTR 3rd QTR 2nd QTR 1st QTR 4th QTR
           
Other income:          
Income from fiduciary activities $ 6,814   $ 6,418   $ 6,666   $ 6,395   $ 6,264  
Service charges on deposits 2,852   2,861   2,826   2,922   3,142  
Other service income 3,279   3,246   3,472   4,172   3,554  
Checkcard fee income 4,581   4,352   4,382   4,002   4,023  
Bank owned life insurance income 2,190   2,585   1,031   1,009   1,068  
ATM fees 444   500   510   524   545  
OREO valuation adjustments (93 ) (77 ) (114 ) (207 ) (91 )
Gain (loss) on the sale of OREO, net 142   (81 ) (147 ) 4,321   47  
Net (loss) gain on the sale of investment securities       (2,271 ) 1,794  
Unrealized (loss) gain on equity securities (254 ) (326 ) 304   3,489    
Other components of net periodic benefit income 1,705   1,705   1,705   1,705   1,450  
Gain on the sale of loans 2,826          
Miscellaneous 2,406   2,881   2,607   842   1,442  
Total other income $ 26,892   $ 24,064   $ 23,242   $ 26,903   $ 23,238  
           
Other expense:          
Salaries $ 27,103   $ 27,229   $ 24,103   $ 25,320   $ 23,157  
Employee benefits 7,977   7,653   7,630   7,029   6,320  
Occupancy expense 2,769   2,976   2,570   2,936   2,442  
Furniture and equipment expense 4,170   3,807   4,013   4,149   4,198  
Data processing fees 2,222   2,580   1,902   1,773   1,690  
Professional fees and services 8,516   8,065   6,123   6,190   7,886  
Marketing 1,377   1,364   1,185   1,218   1,112  
Insurance 1,277   1,388   1,196   1,428   1,768  
Communication 1,335   1,207   1,189   1,250   1,228  
State tax expense 750   1,000   958   1,105   665  
Amortization of intangibles 289   289        
Miscellaneous 4,812   1,758   1,665   1,910   2,973  
Total other expense $ 62,597   $ 59,316   $ 52,534   $ 54,308   $ 53,439  


PARK NATIONAL CORPORATION
Asset Quality Information
             
  Year ended December 31,
(in thousands, except ratios) 2018 2017 2016 2015 2014  
             
Allowance for loan losses:            
Allowance for loan losses, beginning of period $ 49,988   $ 50,624   $ 56,494   $ 54,352   $ 59,468    
Charge-offs 13,552   19,403   20,799   14,290   24,780   (A)
Recoveries 7,131   10,210   20,030   11,442   26,997    
Net charge-offs (recoveries) 6,421   9,193   769   2,848   (2,217 )  
Provision for (recovery of) loan losses 7,945   8,557   (5,101 ) 4,990   (7,333 )  
Allowance for loan losses, end of period $ 51,512   $ 49,988   $ 50,624   $ 56,494   $ 54,352    
(A) Year ended December 31, 2014 included $4.3 million in charge-offs related to the transfer of $22.0 million of commercial loans to the held for sale portfolio.
             
General reserve trends:            
Allowance for loan losses, end of period $ 51,512   $ 49,988   $ 50,624   $ 56,494   $ 54,352    
Specific reserves 2,273   684   548   4,191   3,660    
General reserves $ 49,239   $ 49,304   $ 50,076   $ 52,303   $ 50,692    
             
Total loans $ 5,692,132   $ 5,372,483   $ 5,271,857   $ 5,068,085   $ 4,829,682    
Impaired commercial loans 48,135   56,545   70,415   80,599   73,676    
Total loans less impaired commercial loans $ 5,643,997   $ 5,315,938   $ 5,201,442   $ 4,987,486   $ 4,756,006    
             
             
Asset Quality Ratios:            
Net charge-offs (recoveries) as a % of average loans 0.12 % 0.17 % 0.02 % 0.06 % (0.05 ) %  
Allowance for loan losses as a % of period end loans 0.90 % 0.93 % 0.96 % 1.11 % 1.13 %  
General reserves as a % of total loans less impaired commercial loans 0.87 % 0.93 % 0.96 % 1.05 % 1.07 %  
General reserves as a % of total loans less impaired commercial loans (excluding acquired loans) 0.91 % N.A.   N.A.   N.A.   N.A.    
             
Nonperforming assets - Park National Corporation:            
Nonaccrual loans $ 67,954   $ 72,056   $ 87,822   $ 95,887   $ 100,393    
Accruing troubled debt restructurings 15,173   20,111   18,175   24,979   16,254    
Loans past due 90 days or more 2,243   1,792   2,086   1,921   2,641    
Total nonperforming loans $ 85,370   $ 93,959   $ 108,083   $ 122,787   $ 119,288    
Other real estate owned - Park National Bank 2,788   6,524   6,025   7,456   10,687    
Other real estate owned - SEPH 1,515   7,666   7,901   11,195   11,918    
Other nonperforming assets - Park National Bank 3,464   4,849          
Total nonperforming assets $ 93,137   $ 112,998   $ 122,009   $ 141,438   $ 141,893    
Percentage of nonaccrual loans to period end loans 1.19 % 1.34 % 1.67 % 1.89 % 2.08 %  
Percentage of nonperforming loans to period end loans 1.50 % 1.75 % 2.05 % 2.42 % 2.47 %  
Percentage of nonperforming assets to period end loans 1.64 % 2.10 % 2.31 % 2.79 % 2.94 %  
Percentage of nonperforming assets to period end total assets 1.19 % 1.50 % 1.63 % 1.93 % 2.03 %  
             
             
             
PARK NATIONAL CORPORATION
Asset Quality Information (continued)
             
  Year ended December 31,
(in thousands, except ratios) 2018 2017 2016 2015 2014  
             
Nonperforming assets - Park National Bank and Guardian:            
Nonaccrual loans $ 66,319   $ 61,753   $ 76,084   $ 81,468   $ 77,477    
Accruing troubled debt restructurings 15,173   20,111   18,175   24,979   16,157    
Loans past due 90 days or more 2,243   1,792   2,086   1,921   2,641    
Total nonperforming loans $ 83,735   $ 83,656   $ 96,345   $ 108,368   $ 96,275    
Other real estate owned - Park National Bank 2,788   6,524   6,025   7,456   10,687    
Other nonperforming assets - Park National Bank 3,464   4,849          
Total nonperforming assets $ 89,987   $ 95,029   $ 102,370   $ 115,824   $ 106,962    
Percentage of nonaccrual loans to period end loans 1.17 % 1.15 % 1.45 % 1.61 % 1.61 %  
Percentage of nonperforming loans to period end loans 1.47 % 1.56 % 1.83 % 2.14 % 2.00 %  
Percentage of nonperforming assets to period end loans 1.58 % 1.77 % 1.95 % 2.29 % 2.23 %  
Percentage of nonperforming assets to period end total assets 1.16 % 1.27 % 1.38 % 1.60 % 1.55 %  
             
Nonperforming assets - SEPH/Vision Bank (retained portfolio):
Nonaccrual loans $ 1,635   $ 10,303   $ 11,738   $ 14,419   $ 22,916    
Accruing troubled debt restructurings         97    
Loans past due 90 days or more            
Total nonperforming loans $ 1,635   $ 10,303   $ 11,738   $ 14,419   $ 23,013    
Other real estate owned - SEPH 1,515   7,666   7,901   11,195   11,918    
Total nonperforming assets $ 3,150   $ 17,969   $ 19,639   $ 25,614   $ 34,931    
             
New nonaccrual loan information - Park National Corporation            
Nonaccrual loans, beginning of period $ 72,056   $ 87,822   $ 95,887   $ 100,393   $ 135,216    
New nonaccrual loans 76,611   58,753   74,786   80,791   70,059    
Resolved nonaccrual loans 80,713   74,519   82,851   85,165   86,384    
Sale of nonaccrual loans held for sale       132   18,498    
Nonaccrual loans, end of period $ 67,954   $ 72,056   $ 87,822   $ 95,887   $ 100,393    
             
New nonaccrual loan information - Park National Bank and Guardian            
Nonaccrual loans, beginning of period $ 61,753   $ 76,084   $ 81,468   $ 77,477   $ 99,108    
New nonaccrual loans 74,976   58,753   74,663   80,791   69,389    
Resolved nonaccrual loans 70,410   73,084   80,047   76,800   78,288    
Sale of nonaccrual loans held for sale         12,732    
Nonaccrual loans, end of period $ 66,319   $ 61,753   $ 76,084   $ 81,468   $ 77,477    
             
New nonaccrual loan information - SEPH/Vision Bank (retained portfolio)
Nonaccrual loans, beginning of period $ 10,303   $ 11,738   $ 14,419   $ 22,916   $ 36,108    
New nonaccrual loans 1,635     123     670    
Resolved nonaccrual loans 10,303   1,435   2,804   8,365   8,096    
Sale of nonaccrual loans held for sale       132   5,766    
Nonaccrual loans, end of period $ 1,635   $ 10,303   $ 11,738   $ 14,419   $ 22,916    
             
Impaired commercial loan portfolio information (period end):            
Unpaid principal balance $ 59,381   $ 66,585   $ 95,358   $ 109,304   $ 106,156    
Prior charge-offs 11,246   10,040   24,943   28,705   32,480    
Remaining principal balance 48,135   56,545   70,415   80,599   73,676    
Specific reserves 2,273   684   548   4,191   3,660    
Book value, after specific reserves $ 45,862   $ 55,861   $ 69,867   $ 76,408   $ 70,016    
             

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