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CST: 26/01/2020 20:49:00   

Park National Corporation reports financial results for third quarter and first nine months of 2019

90 Days ago

NEWARK, Ohio, Oct. 28, 2019 (GLOBE NEWSWIRE) -- Park National Corporation (Park) (NYSE American: PRK) today reported financial results for the third quarter and first nine months of 2019 (three and nine months ended September 30, 2019). Park's board of directors declared a quarterly cash dividend of $1.01 per common share, payable on December 10, 2019 to common shareholders of record as of November 15, 2019.

“We continue to benefit from welcoming our newest banking teams into our family,” said Park Chairman David Trautman. In the past two years, Park has added NewDominion Bank Division (Charlotte, NC) and Carolina Alliance Bank Division (Spartanburg, SC), as well as a Park National Bank division team in Louisville, KY. “Our colleagues remain unrelenting in their efforts to share resources and information, further uniting our divisions and serving customers and prospects more.”  

Park’s net income for the third quarter of 2019 was $31.1 million, a 25.8 percent increase from $24.8 million for the third quarter of 2018. Third quarter 2019 net income per diluted common share was $1.89, compared to $1.56 in the third quarter of 2018. Park's net income for first nine months of 2019 was $78.8 million, a 6.4 percent decrease from $84.1 million for first nine months of 2018. Net income per diluted common share was $4.84 for the first nine months of 2019, compared to $5.41 for the first nine months of 2018.

“Our financial performance and earnings per share include some effects of our recent partnerships with NewDominion Bank and Carolina Alliance Bank,” said Park President Matthew Miller. “Our investments into growth markets, among other activities, include some one-time revenue and expenses. Those influence comparisons between 2019 and 2018 results, as exhibited in the financial tables.”

Park's community-banking subsidiary, The Park National Bank, reported net income of $30.9 million for the third quarter of 2019, an 11.1 percent increase from $27.9 million reported for the third quarter of 2018. The bank reported net income of $87.0 million for the first nine months of 2019, compared to $83.4 million for the first nine months of 2018. In the first nine months of 2019, the bank (not including loans from the Carolina Alliance Bank Division) grew installment loans by 13.2 percent annualized, real estate loans by 2.0 percent annualized and total deposits by 5.6 percent annualized.

Headquartered in Newark, Ohio, Park National Corporation had $8.7 billion in total assets (as of September 30, 2019). 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, NewDominion Bank Division and Carolina Alliance Bank Division. Park 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 News Release 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 current 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' inability 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 tax reform legislation, changes in retail distribution strategies, consumer preferences and behavior, changes in 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 internal controls and risk management program in the event of changes in the market, economic, operational, asset/liability repricing, legal, compliance, strategic, cybersecurity, 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 (which could in turn impact our credit spreads), customer acquisition and retention, changes to third-party relationships and revenues, changes in the manner of providing services, customer acquisition and retention pressures, 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 "FASB"), the SEC, the Public Company Accounting Oversight Board and other regulatory agencies, including the extent to which the new current expected credit loss rule issued by the FASB in June 2016, which will require banks to record, at the time of origination, credit losses expected throughout the life of the asset portfolio on loans and HTM securities, as opposed to the current practice of recording losses which it is probable that a loss event has occurred, may adversely affect Park's reported financial condition or results of operations; Park's assumptions and estimates used in applying critical accounting policies, which may prove unreliable, inaccurate or not predictive of actual results; changes in law and policy accompanying the current presidential administration 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 potential or imposed tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars and other changes in trade regulations and changes in the relationship of the U.S. and its global trading partners), 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 CAB Financial Corporation ("CAB")) as well as to identify, make or integrate any future suitable strategic acquisitions, which may be unsuccessful, or may be more difficult, time-consuming or costly than expected; risk and uncertainties associated with Park's entry into new geographic markets with its recent acquisitions, including expected revenue synergies and cost savings from the merger of Park and CAB not being fully realized or realized within the expected time frame; revenues following the merger of Park and CAB may be lower than expected; customer and employee relationships and business operations may be disrupted by the merger of Park and CAB; Park issued equity securities in the acquisitions of NewDominion Bank and CAB and may issue equity securities in connection with future acquisitions, 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, 2018. 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 September 30, 2019, June 30, 2019, and September 30, 2018          
             
  2019 2019 2018   Percent change vs.
(in thousands, except share and per share data) 3rd QTR 2nd QTR 3rd QTR   2Q '19 3Q '18
INCOME STATEMENT:            
Net interest income $ 77,101   $ 75,851   $ 67,676     1.6 % 13.9 %
Provision for loan losses 1,967   1,919   2,940     2.5 % (33.1 )%
Other income 28,136   22,808   24,064     23.4 % 16.9 %
Other expense 65,738   70,192   59,316     (6.3 )% 10.8 %
Income before income taxes $ 37,532   $ 26,548   $ 29,484     41.4 % 27.3 %
Income taxes 6,386   4,385   4,722     45.6 % 35.2 %
Net income $ 31,146   $ 22,163   $ 24,762     40.5 % 25.8 %
             
MARKET DATA:            
Earnings per common share - basic (b) $ 1.90   $ 1.34   $ 1.58     41.8 % 20.3 %
Earnings per common share - diluted (b) 1.89   1.33   1.56     42.1 % 21.2 %
Cash dividends declared per common share 1.01   1.01   0.96     % 5.2 %
Book value per common share at period end 58.54   56.92   51.58     2.8 % 13.5 %
Market price per common share at period end 94.81   99.39   105.56     (4.6 )% (10.2 )%
Market capitalization at period end 1,548,527   1,631,741   1,655,870     (5.1 )% (6.5 )%
             
Weighted average common shares - basic (a) 16,382,798   16,560,545   15,686,542     (1.1 )% 4.4 %
Weighted average common shares - diluted (a) 16,475,741   16,642,571   15,832,734     (1.0 )% 4.1 %
Common shares outstanding at period end 16,332,951   16,417,562   15,686,532     (0.5 )% 4.1 %
             
PERFORMANCE RATIOS: (annualized)            
Return on average assets (a)(b) 1.41 % 1.04 % 1.26 %   35.6 % 11.9 %
Return on average shareholders' equity (a)(b) 13.07 % 9.49 % 12.11 %   37.7 % 7.9 %
Yield on loans 5.25 % 5.23 % 4.95 %   0.4 % 6.1 %
Yield on investment securities 2.72 % 2.78 % 2.76 %   (2.2 )% (1.4 )%
Yield on money market instruments 2.43 % 2.64 % 1.95 %   (8.0 )% 24.6 %
Yield on interest earning assets 4.73 % 4.76 % 4.46 %   (0.6 )% 6.1 %
Cost of interest bearing deposits 1.08 % 1.04 % 0.83 %   3.8 % 30.1 %
Cost of borrowings 2.25 % 2.15 % 1.88 %   4.7 % 19.7 %
Cost of paying interest bearing liabilities 1.19 % 1.16 % 0.95 %   2.6 % 25.3 %
Net interest margin (g) 3.86 % 3.92 % 3.77 %   (1.5 )% 2.4 %
Efficiency ratio (g) 62.03 % 70.61 % 64.16 %   (12.2 )% (3.3 )%
             
OTHER RATIOS (NON-GAAP):            
Tangible book value per share (d) $ 47.92   $ 46.30   $ 43.93     3.5 % 9.1 %
             
Note: Explanations for footnotes (a) - (i) are included at the end of the financial tables in the "Financial Reconciliations" section. 
             
             
             
             
PARK NATIONAL CORPORATION
Financial Highlights (continued)
As of or for the three months ended September 30, 2019, June 30, 2019, and September 30, 2018          
             
          Percent change vs.
(in thousands, except ratios) September 30,
2019
June 30,
2019
September 30,
2018
  2Q '19 3Q '18
BALANCE SHEET:            
Investment securities $ 1,328,930   $ 1,396,530   $ 1,439,011     (4.8 )% (7.6 )%
Loans 6,403,647   6,376,737   5,625,323     0.4 % 13.8 %
Allowance for loan losses 55,853   54,003   50,246     3.4 % 11.2 %
Goodwill and other intangible assets 173,489   174,288   119,999     (0.5 )% 44.6 %
Other real estate owned (OREO) 3,779   3,839   5,276     (1.6 )% (28.4 )%
Total assets 8,723,610   8,657,453   7,756,491     0.8 % 12.5 %
Total deposits 7,168,259   7,032,120   6,279,326     1.9 % 14.2 %
Borrowings 498,338   595,578   594,818     (16.3 )% (16.2 )%
Total shareholders' equity 956,140   934,432   809,091     2.3 % 18.2 %
Tangible equity (d) 782,651   760,144   689,092     3.0 % 13.6 %
Total nonperforming loans 111,184   86,833   83,281     28.0 % 33.5 %
Total nonperforming assets 118,561   94,168   95,727     25.9 % 23.9 %
             
ASSET QUALITY RATIOS:            
Loans as a % of period end total assets 73.41 % 73.66 % 72.52 %   (0.3 )% 1.2 %
Total nonperforming loans as a % of period end loans 1.74 % 1.36 % 1.48 %   27.9 % 17.6 %
Total nonperforming assets as a % of period end loans + OREO + other nonperforming assets 1.85 % 1.48 % 1.70 %   25.0 % 8.8 %
Allowance for loan losses as a % of period end loans 0.87 % 0.85 % 0.89 %   2.4 % (2.2 )%
Net loan charge-offs $ 117   $ 1,284   $ 2,146     (90.9 )% (94.5 )%
Annualized net loan charge-offs as a % of average loans (a) 0.01 % 0.08 % 0.15 %   (87.5 )% (93.3 )%
             
CAPITAL & LIQUIDITY:            
Total shareholders' equity / Period end total assets 10.96 % 10.79 % 10.43 %   1.6 % 5.1 %
Tangible equity (d) / Tangible assets (f) 9.15 % 8.96 % 9.02 %   2.1 % 1.4 %
Average shareholders' equity / Average assets (a) 10.76 % 10.92 % 10.37 %   (1.5 )% 3.8 %
Average shareholders' equity / Average loans (a) 14.83 % 14.79 % 14.46 %   0.3 % 2.6 %
Average loans / Average deposits (a) 88.63 % 91.03 % 88.36 %   (2.6 )% 0.3 %
             


PARK NATIONAL CORPORATION
Financial Highlights
Nine months ended September 30, 2019 and September 30, 2018      
         
  2019 2018    
(in thousands, except share and per share data and ratios) Nine months
ended
September 30
Nine months
ended
September 30
  Percent
change vs '18
INCOME STATEMENT:        
Net interest income $ 220,728   $ 197,268     11.9 %
Provision for loan losses 6,384   4,586     39.2 %
Other income 72,969   74,209     (1.7 )%
Other expense 192,757   166,158     16.0 %
Income before income taxes $ 94,556   $ 100,733     (6.1 )%
Income taxes 15,792   16,607     (4.9 )%
Net income $ 78,764   $ 84,126     (6.4 )%
         
MARKET DATA:        
Earnings per common share - basic (b) $ 4.86   $ 5.46     (11.0 )%
Earnings per common share - diluted (b) 4.84   5.41     (10.5 )%
Cash dividends declared per common share 3.23   3.11     3.9 %
         
Weighted average common shares - basic (a) 16,198,294   15,420,135     5.0 %
Weighted average common shares - diluted (a) 16,287,695   15,560,666     4.7 %
         
PERFORMANCE RATIOS: (annualized)        
Return on average assets (a)(b) 1.25 % 1.48 %   (15.5 )%
Return on average shareholders' equity (a)(b) 11.61 % 14.57 %   (20.3 )%
Yield on loans 5.21 % 4.93 %   5.7 %
Yield on investment securities 2.77 % 2.71 %   2.2 %
Yield on money market instruments 2.53 % 1.80 %   40.6 %
Yield on interest earning assets 4.72 % 4.41 %   7.0 %
Cost of interest bearing deposits 1.03 % 0.68 %   51.5 %
Cost of borrowings 2.13 % 1.81 %   17.7 %
Cost of paying interest bearing liabilities 1.15 % 0.82 %   40.2 %
Net interest margin (g) 3.88 % 3.81 %   1.8 %
Efficiency ratio (g) 65.14 % 60.73 %   7.3 %
         
ASSET QUALITY RATIOS:        
Net loan charge-offs $ 2,043   $ 4,328     (52.8 )%
Annualized net loan charge-offs as a % of average loans (a) 0.04 % 0.11 %   (63.6 )%
         
CAPITAL & LIQUIDITY:        
Average shareholders' equity / Average assets (a) 10.80 % 10.18 %   6.1 %
Average shareholders' equity / Average loans (a) 14.79 % 14.29 %   3.5 %
Average loans / Average deposits (a) 90.10 % 88.64 %   1.6 %
         
Note: Explanations for footnotes (a) - (i) are included at the end of the financial tables in the "Financial Reconciliations" section. 


PARK NATIONAL CORPORATION
Consolidated Statements of Income
                 
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
(in thousands, except share and per share data)   2019   2018   2019   2018
                 
Interest income:                
Interest and fees on loans   $ 84,213     $ 69,905     $ 238,687     $ 198,803  
Interest on:                
Obligations of U.S. Government, its agencies and other securities - taxable   6,326     7,691     20,240     22,204  
Obligations of states and political subdivisions - tax-exempt   2,225     2,205     6,750     6,557  
Other interest income   1,825     428     2,994     1,070  
Total interest income   94,589     80,229     268,671     228,634  
                 
Interest expense:                
Interest on deposits:                
Demand and savings deposits   9,649     6,412     25,553     13,809  
Time deposits   4,694     3,328     12,828     8,765  
Interest on borrowings   3,145     2,813     9,562     8,792  
Total interest expense   17,488     12,553     47,943     31,366  
                 
Net interest income   77,101     67,676     220,728     197,268  
                 
Provision for loan losses   1,967     2,940     6,384     4,586  
                 
Net interest income after provision for loan losses   75,134     64,736     214,344     192,682  
                 
Other income   28,136     24,064     72,969     74,209  
                 
Other expense   65,738     59,316     192,757     166,158  
                 
Income before income taxes   37,532     29,484     94,556     100,733  
                 
Income taxes   6,386     4,722     15,792     16,607  
                 
Net income   $ 31,146     $ 24,762     $ 78,764     $ 84,126  
                 
Per Common Share:                
Net income  - basic   $ 1.90     $ 1.58     $ 4.86     $ 5.46  
Net income  - diluted   $ 1.89     $ 1.56     $ 4.84     $ 5.41  
                 
Weighted average shares - basic   16,382,798     15,686,542     16,198,294     15,420,135  
Weighted average shares - diluted   16,475,741     15,832,734     16,287,695     15,560,666  
                 
Cash dividends declared   $ 1.01     $ 0.96     $ 3.23     $ 3.11  
                 


 
PARK NATIONAL CORPORATION
Consolidated Balance Sheets
     
(in thousands, except share data) September 30, 2019 December 31, 2018
     
Assets    
     
Cash and due from banks $ 190,353   $ 141,890  
Money market instruments 182,373   25,324  
Investment securities 1,328,930   1,428,145  
Loans 6,403,647   5,692,132  
Allowance for loan losses (55,853 ) (51,512 )
Loans, net 6,347,794   5,640,620  
Bank premises and equipment, net 72,779   59,771  
Goodwill and other intangible assets 173,489   119,710  
Other real estate owned 3,779   4,303  
Other assets 424,113   384,545  
Total assets $ 8,723,610   $ 7,804,308  
     
Liabilities and Shareholders' Equity    
     
Deposits:    
Noninterest bearing $ 1,941,694   $ 1,804,881  
Interest bearing 5,226,565   4,455,979  
Total deposits 7,168,259   6,260,860  
Borrowings 498,338   636,966  
Other liabilities 100,873   73,976  
Total liabilities $ 7,767,470   $ 6,971,802  
     
     
Shareholders' Equity:    
Preferred shares (200,000 shares authorized; no shares outstanding at September 30, 2019 and December 31, 2018)
$   $  
Common shares (No par value; 20,000,000 shares authorized in 2019 and 2018; 17,623,208 shares issued at September 30, 2019 and 16,586,165 shares issued at December 31, 2018) 458,142   358,598  
Accumulated other comprehensive loss, net of taxes (12,614 ) (49,788 )
Retained earnings 639,594   614,069  
Treasury shares (1,290,257 shares at September 30, 2019 and 887,987 shares at December 31, 2018) (128,982 ) (90,373 )
Total shareholders' equity $ 956,140   $ 832,506  
Total liabilities and shareholders' equity $ 8,723,610   $ 7,804,308  


       
PARK NATIONAL CORPORATION
Consolidated Average Balance Sheets
           
  Three Months Ended   Nine Months Ended
  September 30,   September 30,
(in thousands) 2019 2018   2019 2018
           
Assets          
           
Cash and due from banks $ 147,156   $ 112,387     $ 130,799   $ 115,280  
Money market instruments 298,441   87,143     158,395   79,256  
Investment securities 1,339,292   1,472,504     1,380,629   1,476,522  
Loans 6,371,323   5,609,813     6,133,386   5,401,631  
Allowance for loan losses (54,867 ) (49,788 )   (53,711 ) (50,040 )
Loans, net 6,316,456   5,560,025     6,079,675   5,351,591  
Bank premises and equipment, net 73,077   56,987     68,437   56,536  
Goodwill and other intangible assets 174,027   120,188     153,182   88,461  
Other real estate owned 3,845   5,474     4,132   9,113  
Other assets 433,398   411,788     426,438   405,039  
Total assets $ 8,785,692   $ 7,826,496     $ 8,401,687   $ 7,581,798  
           
           
Liabilities and Shareholders' Equity          
           
Deposits:          
Noninterest bearing $ 1,901,024   $ 1,706,300     $ 1,840,153   $ 1,626,370  
Interest bearing 5,287,851   4,642,530     4,967,106   4,467,206  
Total deposits 7,188,875   6,348,830     6,807,259   6,093,576  
Borrowings 553,595   594,109     599,223   649,925  
Other liabilities 98,077   72,244     87,984   66,390  
Total liabilities $ 7,840,547   $ 7,015,183     $ 7,494,466   $ 6,809,891  
           
Shareholders' Equity:          
Preferred shares $   $     $   $  
Common shares 457,029   356,768     424,213   324,245  
Accumulated other comprehensive loss, net of taxes (26,010 ) (55,615 )   (36,383 ) (50,543 )
Retained earnings 638,639   601,719     628,463   586,954  
Treasury shares (124,513 ) (91,559 )   (109,072 ) (88,749 )
Total shareholders' equity $ 945,145   $ 811,313     $ 907,221   $ 771,907  
Total liabilities and shareholders' equity $ 8,785,692   $ 7,826,496     $ 8,401,687   $ 7,581,798  


 
PARK NATIONAL CORPORATION
Consolidated Statements of Income - Linked Quarters
           
  2019 2019 2019 2018 2018
(in thousands, except per share data) 3rd QTR 2nd QTR 1st QTR 4th QTR 3rd QTR
           
Interest income:          
Interest and fees on loans $ 84,213   $ 82,471   $ 72,003   $ 72,342   $ 69,905  
Interest on:          
Obligations of U.S. Government, its agencies and other securities - taxable 6,326   6,919   6,995   7,275   7,691  
Obligations of states and political subdivisions - tax-exempt 2,225   2,308   2,217   2,213   2,205  
Other interest income 1,825   528   641   337   428  
Total interest income 94,589   92,226   81,856   82,167   80,229  
           
Interest expense:          
Interest on deposits:          
Demand and savings deposits 9,649   8,811   7,093   6,006   6,412  
Time deposits 4,694   4,357   3,777   3,610   3,328  
Interest on borrowings 3,145   3,207   3,210   2,921   2,813  
Total interest expense 17,488   16,375   14,080   12,537   12,553  
           
Net interest income 77,101   75,851   67,776   69,630   67,676  
           
Provision for loan losses 1,967   1,919   2,498   3,359   2,940  
           
Net interest income after provision for loan losses 75,134   73,932   65,278   66,271   64,736  
           
Other income 28,136   22,808   22,025   26,892   24,064  
           
Other expense 65,738   70,192   56,827   62,597   59,316  
           
Income before income taxes 37,532   26,548   30,476   30,566   29,484  
           
Income taxes 6,386   4,385   5,021   4,305   4,722  
           
Net income $ 31,146   $ 22,163   $ 25,455   $ 26,261   $ 24,762  
           
Per Common Share:          
Net income - basic $ 1.90   $ 1.34   $ 1.63   $ 1.67   $ 1.58  
Net income - diluted $ 1.89   $ 1.33   $ 1.62   $ 1.67   $ 1.56  


 
PARK NATIONAL CORPORATION
Detail of other income and other expense - Linked Quarters
           
  2019 2019 2019 2018 2018
(in thousands) 3rd QTR 2nd QTR 1st QTR 4th QTR 3rd QTR
           
Other income:          
Income from fiduciary activities $ 6,842   $ 6,935   $ 6,723   $ 6,814   $ 6,418  
Service charges on deposit accounts 2,864   2,655   2,559   2,852   2,861  
Other service income 4,260   4,040   2,818   3,279   3,246  
Debit card fee income 5,313   5,227   4,369   4,581   4,352  
Bank owned life insurance income 1,107   1,286   1,006   2,190   2,585  
ATM fees 482   460   440   444   500  
OREO valuation adjustments (41 ) (55 ) (27 ) (93 ) (77 )
(Loss) gain on the sale of OREO, net (53 ) (159 ) (12 ) 142   (81 )
Net gain (loss) on the sale of investment securities 186   (607 )      
Gain (loss) on equity securities, net 3,335   232   1,742   (17 ) 89  
Other components of net periodic benefit income 1,183   1,183   1,183   1,705   1,705  
Gain on the sale of loans       2,826    
Miscellaneous 2,658   1,611   1,224   2,169   2,466  
Total other income $ 28,136   $ 22,808   $ 22,025   $ 26,892   $ 24,064  
           
Other expense:          
Salaries $ 30,713   $ 32,093   $ 25,805   $ 27,103   $ 27,229  
Employee benefits 10,389   9,014   8,430   7,977   7,653  
Occupancy expense 3,226   3,223   3,011   2,769   2,976  
Furniture and equipment expense 4,177   4,386   4,150   4,170   3,807  
Data processing fees 2,935   2,905   2,133   2,222   2,580  
Professional fees and services 6,702   10,106   6,006   8,516   8,065  
Marketing 1,604   1,455   1,226   1,377   1,364  
Insurance 276   1,381   1,156   1,277   1,388  
Communication 1,387   1,375   1,333   1,335   1,207  
State tax expense 746   1,054   1,005   750   1,000  
Amortization of intangible assets 741   702   289   289   289  
Miscellaneous 2,842   2,498   2,283   4,812   1,758  
Total other expense $ 65,738   $ 70,192   $ 56,827   $ 62,597   $ 59,316  


PARK NATIONAL CORPORATION
Asset Quality Information
               
        Year ended December 31,
(in thousands, except ratios) September 30,
2019
June 30,
2019
March 31,
2019
2018 2017 2016 2015
               
Allowance for loan losses:              
Allowance for loan losses, beginning of period $ 54,003   $ 53,368   $ 51,512   $ 49,988   $ 50,624   $ 56,494   $ 54,352  
Charge-offs 2,479   2,928   2,987   13,552   19,403   20,799   14,290  
Recoveries 2,362   1,644   2,345   7,131   10,210   20,030   11,442  
Net charge-offs 117   1,284   642   6,421   9,193   769   2,848  
Provision for (recovery of) loan losses 1,967   1,919   2,498   7,945   8,557   (5,101 ) 4,990  
Allowance for loan losses, end of period $ 55,853   $ 54,003   $ 53,368   $ 51,512   $ 49,988   $ 50,624   $ 56,494  
               
               
General reserve trends:              
Allowance for loan losses, end of period $ 55,853   $ 54,003   $ 53,368   $ 51,512   $ 49,988   $ 50,624   $ 56,494  
Specific reserves 3,083   2,379   2,468   2,273   684   548   4,191  
General reserves $ 52,770   $ 51,624   $ 50,900   $ 49,239   $ 49,304   $ 50,076   $ 52,303  
               
Total loans $ 6,403,647   $ 6,376,737   $ 5,740,760   $ 5,692,132   $ 5,372,483   $ 5,271,857   $ 5,068,085  
Impaired commercial loans 74,424   50,225   50,881   48,135   56,545   70,415   80,599  
Total loans less impaired commercial loans $ 6,329,223   $ 6,326,512   $ 5,689,879   $ 5,643,997   $ 5,315,938   $ 5,201,442   $ 4,987,486  
               
               
Asset Quality Ratios:              
Net charge-offs as a % of average loans (annualized) 0.01 % 0.08 % 0.05 % 0.12 % 0.17 % 0.02 % 0.06 %
Allowance for loan losses as a % of period end loans 0.87 % 0.85 % 0.93 % 0.90 % 0.93 % 0.96 % 1.11 %
General reserves as a % of total loans less impaired commercial loans 0.83 % 0.82 % 0.89 % 0.87 % 0.93 % 0.96 % 1.05 %
General reserves as a % of total loans less impaired commercial loans (excluding performing acquired loans) 0.93 % 0.92 % 0.93 % 0.91 %   N.A.     N.A.     N.A.  
               
Nonperforming assets:              
Nonaccrual loans $ 89,555   $ 66,675   $ 69,175   $ 67,954   $ 72,056   $ 87,822   $ 95,887  
Accruing troubled debt restructurings 18,382   17,759   15,757   15,173   20,111   18,175   24,979  
Loans past due 90 days or more 3,247   2,399   1,539   2,243   1,792   2,086   1,921  
Total nonperforming loans $ 111,184   $ 86,833   $ 86,471   $ 85,370   $ 93,959   $ 108,083   $ 122,787  
Other real estate owned - Park National Bank 2,982   3,042   3,114   2,788   6,524   6,025   7,456  
Other real estate owned - SEPH 797   797   1,515   1,515   7,666   7,901   11,195  
Other nonperforming assets - Park National Bank 3,598   3,496   3,496   3,464   4,849      
Total nonperforming assets $ 118,561   $ 94,168   $ 94,596   $ 93,137   $ 112,998   $ 122,009   $ 141,438  
Percentage of nonaccrual loans to period end loans 1.40 % 1.05 % 1.20 % 1.19 % 1.34 % 1.67 % 1.89 %
Percentage of nonperforming loans to period end loans 1.74 % 1.36 % 1.51 % 1.50 % 1.75 % 2.05 % 2.42 %
Percentage of nonperforming assets to period end loans 1.85 % 1.48 % 1.65 % 1.64 % 2.10 % 2.31 % 2.79 %
Percentage of nonperforming assets to period end total assets 1.36 % 1.09 % 1.20 % 1.19 % 1.50 % 1.63 % 1.93 %
               
               
PARK NATIONAL CORPORATION
Asset Quality Information (continued)
               
        Year ended December 31,
(in thousands, except ratios) September 30,
2019
June 30,
2019
March 31,
2019
2018 2017 2016 2015
               
               
New nonaccrual loan information:              
Nonaccrual loans, beginning of period $ 66,675   $ 69,175   $ 67,954   $ 72,056   $ 87,822   $ 95,887   $ 100,393  
New nonaccrual loans 34,035   17,952   12,484   76,611   58,753   74,786   80,791  
Resolved nonaccrual loans 11,155   20,452   11,263   80,713   74,519   82,851   85,297  
Nonaccrual loans, end of period $ 89,555   $ 66,675   $ 69,175   $ 67,954   $ 72,056   $ 87,822   $ 95,887  
               
Impaired commercial loan portfolio information (period end):              
Unpaid principal balance $ 80,057   $ 56,338   $ 61,838   $ 59,381   $ 66,585   $ 95,358   $ 109,304  
Prior charge-offs 5,633   6,113   10,957   11,246   10,040   24,943   28,705  
Remaining principal balance 74,424   50,225   50,881   48,135   56,545   70,415   80,599  
Specific reserves 3,083   2,379   2,468   2,273   684   548   4,191  
Book value, after specific reserves $ 71,341   $ 47,846   $ 48,413   $ 45,862   $ 55,861   $ 69,867   $ 76,408  
               
 


PARK NATIONAL CORPORATION      
       
Financial Reconciliations            
                                 
NON-GAAP RECONCILIATIONS            
  THREE MONTHS ENDED   NINE MONTHS ENDED
(in thousands, except share and per share data) September 30,
2019
June 30,
2019
September 30,
2018
  September 30,
2019
September 30,
2018
Net interest income $ 77,101   $ 75,851   $ 67,676     $ 220,728   $ 197,268  
less purchase accounting accretion related to NewDominion and Carolina Alliance acquisitions 1,967   1,606   582     3,839   582  
less interest income on former Vision Bank relationships     119     7   3,429  
Net interest income - adjusted $ 75,134   $ 74,245   $ 66,975     $ 216,882   $ 193,257  
             
Provision for loan losses $ 1,967   $ 1,919   $ 2,940     $ 6,384   $ 4,586  
less recoveries on former Vision Bank relationships (575 ) (65 ) (179 )   (740 ) (684 )
Provision for loan losses - adjusted $ 2,542   $ 1,984   $ 3,119     $ 7,124   $ 5,270  
             
Other income $ 28,136   $ 22,808   $ 24,064     $ 72,969   $ 74,209  
less net (loss) gain on sale of former Vision Bank OREO properties   (139 ) (118 )   (139 ) 4,084  
less gain on 8.55% prior investment in NewDominion           3,500  
less other service income related to former Vision Bank relationships 52     24     52   1,081  
less net gain (loss) on the sale of debt securities in the ordinary course of business 186   (607 )     (421 ) (2,271 )
Other income - adjusted $ 27,898   $ 23,554   $ 24,158     $ 73,477   $ 67,815  
             
Other expense $ 65,738   $ 70,192   $ 59,316     $ 192,757   $ 166,158  
less merger related expenses related to NewDominion and Carolina Alliance acquisitions 658   6,058   3,323     6,992   3,918  
less core deposit intangible amortization related to NewDominion and Carolina Alliance acquisitions 741   702   289     1,732   289  
less FDIC assessment credit (1,057 )       (1,057 )  
less management and consulting expenses related to collection of payments on former Vision Bank loan relationships     36       1,272  
less one-time incentive expense           1,128  
Other expense - adjusted $ 65,396   $ 63,432   $ 55,668     $ 185,090   $ 159,551  
             
Tax effect of adjustments to net income identified above (i) $ (512 ) $ 1,225   $ 601     $ 754   $ (941 )
             
Net income - reported $ 31,146   $ 22,163   $ 24,762     $ 78,764   $ 84,126  
Net income - adjusted $ 29,220   $ 26,773   $ 27,023     $ 81,599   $ 80,585  
             
Diluted EPS $ 1.89   $ 1.33   $ 1.56     $ 4.84   $ 5.41  
Diluted EPS, adjusted (h) $ 1.77   $ 1.61   $ 1.71     $ 5.01   $ 5.18  
             
Annualized return on average assets (a)(b) 1.41 % 1.04 % 1.26 %   1.25 % 1.48 %
Annualized return on average assets, adjusted (a)(b)(h) 1.32 % 1.25 % 1.37 %   1.30 % 1.42 %
             
Annualized return on average tangible assets (a)(b)(e) 1.43 % 1.06 % 1.27 %   1.28 % 1.50 %
Annualized return on average tangible assets, adjusted (a)(b)(e)(h) 1.35 % 1.28 % 1.39 %   1.32 % 1.44 %
             
Annualized return on average equity (a)(b) 13.07 % 9.49 % 12.11 %   11.61 % 14.57 %
Annualized return on average equity, adjusted (a)(b)(h) 12.27 % 11.47 % 13.21 %   12.03 % 13.96 %
             
Annualized return on average tangible equity (a)(b)(c) 16.02 % 11.53 % 14.21 %   13.97 % 16.46 %
Annualized return on average tangible equity, adjusted (a)(b)(c)(h) 15.03 % 13.92 % 15.51 %   14.47 % 15.76 %
             
Efficiency ratio (g) 62.03 % 70.61 % 64.16 %   65.14 % 60.73 %
Efficiency ratio, adjusted (g)(h) 63.02 % 64.36 % 60.61 %   63.26 % 60.62 %
             
Annualized net interest margin (g) 3.86 % 3.92 % 3.77 %   3.88 % 3.81 %
Annualized net interest margin, adjusted (g)(h) 3.76 % 3.84 % 3.73 %   3.81 % 3.74 %
             
Note: Explanations for footnotes (a) - (i) are included at the end of the financial tables in this "Financial Reconciliations" section. 
                                 
(a) Averages are for the three months ended September 30, 2019, June 30, 2019 and September 30, 2018 and the nine months ended September 30, 2019 and September 30, 2018. 
(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 intangible assets during the applicable period. 


RECONCILIATION OF AVERAGE SHAREHOLDERS' EQUITY TO AVERAGE TANGIBLE EQUITY:  
  THREE MONTHS ENDED   NINE MONTHS ENDED  
  September 30,
2019
June 30,
2019
September 30,
2018
  September 30,
2019
September 30,
2018
 
AVERAGE SHAREHOLDERS' EQUITY $ 945,145   $ 936,626   $ 811,313     $ 907,221   $ 771,907  
Less: Average goodwill and other intangible assets 174,027   165,311   120,188     153,182   88,461  
AVERAGE TANGIBLE EQUITY $ 771,118   $ 771,315   $ 691,125     $ 754,039   $ 683,446  
               
(d) Tangible equity divided by common shares outstanding at period end. Tangible equity equals total shareholders' equity less goodwill and other intangible assets, in each case at the end of the period. 
               
RECONCILIATION OF TOTAL SHAREHOLDERS' EQUITY TO TANGIBLE EQUITY:  
  September 30,
2019
June 30,
2019
September 30,
2018
       
TOTAL SHAREHOLDERS' EQUITY $ 956,140   $ 934,432   $ 809,091          
Less: Goodwill and other intangible assets 173,489   174,288   119,999          
TANGIBLE EQUITY $ 782,651   $ 760,144   $ 689,092          
               
(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 intangible assets, in each case during the applicable period. 
               
RECONCILIATION OF AVERAGE ASSETS TO AVERAGE TANGIBLE ASSETS      
  THREE MONTHS ENDED   NINE MONTHS ENDED  
  September 30,
2019
June 30,
2019
September 30,
2018
  September 30,
2019
September 30,
2018
 
AVERAGE ASSETS $ 8,785,692   $ 8,576,495   $ 7,826,496     $ 8,401,687   $ 7,581,798  
Less: Average goodwill and other intangible assets 174,027   165,311   120,188     153,182   88,461  
AVERAGE TANGIBLE ASSETS $ 8,611,665   $ 8,411,184   $ 7,706,308     $ 8,248,505   $ 7,493,337  
               
(f) Tangible equity divided by tangible assets. Tangible assets equals total assets less goodwill and other intangible assets, in each case at the end of the period. 
                                 
RECONCILIATION OF TOTAL ASSETS TO TANGIBLE ASSETS:  
  September 30,
2019
June 30,
2019
September 30,
2018
       
TOTAL ASSETS $ 8,723,610   $ 8,657,453   $ 7,756,491          
Less: Goodwill and other intangible assets 173,489   174,288   119,999          
TANGIBLE ASSETS $ 8,550,121   $ 8,483,165   $ 7,636,492          
               
(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 assuming a 21% corporate federal income tax rate. 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   NINE MONTHS ENDED  
  September 30,
2019
June 30,
2019
September 30,
2018
  September 30,
2019
September 30, 2018  
Interest income $ 94,589   $ 92,226   $ 80,229     $ 268,671   $ 228,634  
Fully taxable equivalent adjustment 744   752   716     2,230   2,122  
Fully taxable equivalent interest income $ 95,333   $ 92,978   $ 80,945     $ 270,901   $ 230,756  
Interest expense 17,488   16,375   12,553     47,943   31,366  
Fully taxable equivalent net interest income $ 77,845   $ 76,603   $ 68,392     $ 222,958   $ 199,390  
               
(h) Adjustments to net income for each period presented are detailed in the non-GAAP reconciliations of net interest income, provision for loan losses, other income and other expense above.
(i) The tax effect of adjustments to net income was calculated assuming a 21% corporate federal income tax rate.


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