Park National Corporation reports financial results for second quarter and first half of 2019

/EIN News/ -- NEWARK, Ohio, July 22, 2019 (GLOBE NEWSWIRE) -- Park National Corporation (Park) (NYSE American: PRK) today reported financial results for the second quarter and first half of 2019 (three and six months ended June 30, 2019). Park's board of directors declared a quarterly cash dividend of $1.01 per common share, payable on September 10, 2019 to common shareholders of record as of August 16, 2019.

Park’s net income for the second quarter of 2019 was $22.2 million, a 21.5 percent decrease from $28.2 million for the second quarter of 2018. Second quarter 2019 net income per diluted common share was $1.33, compared to $1.83 in the second quarter of 2018. Park's net income for first half of 2019 was $47.6 million, a 19.8 percent decrease from $59.4 million for first half of 2018. Net income per diluted common share was $2.94 for the first half of 2019, compared to $3.85 for the first half of 2018.

Park Chairman and CEO David Trautman said, “Comparing the first half of 2019 to the first half of 2018 is a challenge. The first half of 2018 included some unanticipated nonrecurring revenue and the second quarter of 2019 included anticipated merger-related expenses.”

“Our banking organization continues to perform consistently well, including increases in commercial loans and installment loans in the first half of this year,” Trautman said.

Park's community-banking subsidiary, The Park National Bank, reported net income of $29.4 million for the second quarter of 2019, a 2.1 percent increase from $28.8 million reported for the second quarter of 2018. The bank reported net income of $56.1 million for the first half of 2019, compared to $55.5 million for the first half of 2018. In the first half of 2019, the bank (not including loans from the Carolina Alliance Bank Division) grew installment loans by 10.1 percent annualized and commercial loans by 3.5 percent annualized.

Headquartered in Newark, Ohio, Park National Corporation had $8.7 billion in total assets (as of June 30, 2019). The Park organization consists of community bank divisions, specialty finance companies, and a non-bank subsidiary. 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 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' 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, 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 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, which 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), 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 any future 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, expected revenue synergies and cost savings from the merger of Park and CAB may not be 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 June 30, 2019, March 31, 2019, and June 30, 2018
	2019			2019			2018				Percent change vs.
(in thousands, except share and per share data)	2nd QTR			1st QTR			2nd QTR				1Q '19		2Q '18
INCOME STATEMENT:
Net interest income	$	75,851		$	67,776		$	64,742			11.9	%	17.2	%
Provision for loan losses	1,919			2,498			1,386				(23.2	)%	38.5	%
Other income	22,808			22,025			23,242				3.6	%	(1.9	)%
Other expense	70,192			56,827			52,534				23.5	%	33.6	%
Income before income taxes	$	26,548		$	30,476		$	34,064			(12.9	)%	(22.1	)%
Income taxes	4,385			5,021			5,823				(12.7	)%	(24.7	)%
Net income	$	22,163		$	25,455		$	28,241			(12.9	)%	(21.5	)%
MARKET DATA:
Earnings per common share - basic (b)	$	1.34		$	1.63		$	1.85			(17.8	)%	(27.6	)%
Earnings per common share - diluted (b)	1.33			1.62			1.83				(17.9	)%	(27.3	)%
Cash dividends declared per common share	1.01			1.21			1.21				(16.5	)%	(16.5	)%
Book value per common share at period end	56.92			54.06			49.51				5.3	%	15.0	%
Market price per common share at period end	99.39			94.75			111.42				4.9	%	(10.8	)%
Market capitalization at period end	1,631,741			1,480,990			1,699,277				10.2	%	(4.0	)%
Weighted average common shares - basic (a)	16,560,545			15,651,541			15,285,532				5.8	%	8.3	%
Weighted average common shares - diluted (a)	16,642,571			15,744,777			15,417,607				5.7	%	7.9	%
Common shares outstanding at period end	16,417,562			15,630,499			15,251,095				5.0	%	7.6	%
PERFORMANCE RATIOS: (annualized)
Return on average assets (a)(b)	1.04		%	1.32		%	1.52		%		(21.2	)%	(31.6	)%
Return on average shareholders' equity (a)(b)	9.49		%	12.31		%	15.02		%		(22.9	)%	(36.8	)%
Yield on loans	5.23		%	5.14		%	4.90		%		1.8	%	6.7	%
Yield on investment securities	2.78		%	2.82		%	2.73		%		(1.4	) %	1.8	%
Yield on money market instruments	2.64		%	2.76		%	1.99		%		(4.3	) %	32.7	%
Yield on interest earning assets	4.76		%	4.66		%	4.39		%		2.1	%	8.4	%
Cost of interest bearing deposits	1.04		%	0.97		%	0.64		%		7.2	%	62.5	%
Cost of borrowings	2.15		%	2.01		%	1.84		%		7.0	%	16.8	%
Cost of paying interest bearing liabilities	1.16		%	1.10		%	0.79		%		5.5	%	46.8	%
Net interest margin (g)	3.92		%	3.86		%	3.81		%		1.6	%	2.9	%
Efficiency ratio (g)	70.61		%	62.77		%	59.23		%		12.5	%	19.2	%
OTHER RATIOS (NON-GAAP):
Tangible book value per share (d)	$	46.30		$	46.42		$	44.77			(0.3	)%	3.4	%
N.M. - Not meaningful
Note: Explanations for footnotes (a) - (i) are included at the end of the financial tables
PARK NATIONAL CORPORATION
Financial Highlights (continued)
As of or for the three months ended June 30, 2019, March 31, 2019, and June 30, 2018
											Percent change vs.
(in thousands, except ratios)	June 30, 2019			March 31, 2019			June 30, 2018				1Q '19		2Q '18
BALANCE SHEET:
Investment securities	$	1,396,530		$	1,400,987		$	1,529,783			(0.3	)%	(8.7	)%
Loans	6,376,737			5,740,760			5,324,974				11.1	%	19.8	%
Allowance for loan losses	54,003			53,368			49,452				1.2	%	9.2	%
Goodwill and other intangibles	174,288			119,421			72,334				45.9	%	140.9	%
Other real estate owned (OREO)	3,839			4,629			5,729				(17.1	)%	(33.0	)%
Total assets	8,657,453			7,852,246			7,462,156				10.3	%	16.0	%
Total deposits	7,032,120			6,325,212			6,015,844				11.2	%	16.9	%
Borrowings	595,578			602,569			631,139				(1.2	)%	(5.6	)%
Total shareholders' equity	934,432			845,044			755,088				10.6	%	23.8	%
Tangible equity (d)	760,144			725,623			682,754				4.8	%	11.3	%
Total nonperforming loans	86,833			86,471			98,867				0.4	%	(12.2	)%
Total nonperforming assets	94,168			94,596			104,596				(0.5	)%	(10.0	)%
ASSET QUALITY RATIOS:
Loans as a % of period end total assets	73.66		%	73.11		%	71.36		%		0.8	%	3.2	%
Total nonperforming loans as a % of period end loans	1.36		%	1.51		%	1.86		%		(9.9	)%	(26.9	)%
Total nonperforming assets as a % of period end loans + OREO + other nonperforming assets	1.48		%	1.65		%	1.96		%		(10.3	)%	(24.5	)%
Allowance for loan losses as a % of period end loans	0.85		%	0.93		%	0.93		%		(8.6	)%	(8.6	)%
Net loan charge-offs	$	1,284		$	642		$	903			100.0	%	42.2	%
Annualized net loan charge-offs as a % of average loans (a)	0.08		%	0.05		%	0.07		%		60.0	%	14.3	%
CAPITAL & LIQUIDITY:
Total shareholders' equity / Period end total assets	10.79		%	10.76		%	10.12		%		0.3	%	6.6	%
Tangible equity (d) / Tangible assets (f)	8.96		%	9.38		%	9.24		%		(4.5	)%	(3.0	)%
Average shareholders' equity / Average assets (a)	10.92		%	10.71		%	10.11		%		2.0	%	8.0	%
Average shareholders' equity / Average loans (a)	14.79		%	14.74		%	14.26		%		0.3	%	3.7	%
Average loans / Average deposits (a)	91.03		%	90.78		%	88.23		%		0.3	%	3.2	%

 

PARK NATIONAL CORPORATION
Financial Highlights
Six months ended June 30, 2019 and June 30, 2018
	2019			2018
(in thousands, except share and per share data and ratios)	Six months ended June 30			Six months ended June 30				Percent change vs '18
INCOME STATEMENT:
Net interest income	$	143,627		$	129,592			10.8	%
Provision for loan losses	4,417			1,646				168.3	%
Other income	44,833			50,145				(10.6	)%
Other expense	127,019			106,842				18.9	%
Income before income taxes	$	57,024		$	71,249			(20.0	)%
Income taxes	9,406			11,885				(20.9	)%
Net income	$	47,618		$	59,364			(19.8	)%
MARKET DATA:
Earnings per common share - basic (b)	$	2.96		$	3.88			(23.7	)%
Earnings per common share - diluted (b)	2.94			3.85				(23.6	)%
Cash dividends declared per common share	2.22			2.15				3.3	%
Weighted average common shares - basic (a)	16,106,043			15,286,932				5.4	%
Weighted average common shares - diluted (a)	16,193,643			15,424,585				5.0	%
PERFORMANCE RATIOS: (annualized)
Return on average assets (a)(b)	1.17		%	1.61		%		(27.3	)%
Return on average shareholders' equity (a)(b)	10.81		%	15.92		%		(32.1	)%
Yield on loans	5.19		%	4.92		%		5.5	%
Yield on investment securities	2.80		%	2.68		%		4.5	%
Yield on money market instruments	2.70		%	1.76		%		53.4	%
Yield on interest earning assets	4.71		%	4.39		%		7.3	%
Cost of interest bearing deposits	1.01		%	0.59		%		71.2	%
Cost of borrowings	2.08		%	1.78		%		16.9	%
Cost of paying interest bearing liabilities	1.13		%	0.75		%		50.7	%
Net interest margin (g)	3.89		%	3.84		%		1.3	%
Efficiency ratio (g)	66.87		%	58.98		%		13.4	%
ASSET QUALITY RATIOS:
Net loan charge-offs	$	1,926		$	2,182			(11.7	)%
Annualized net loan charge-offs as a % of average loans (a)	0.06		%	0.08		%		(25.0	)%
CAPITAL & LIQUIDITY:
Average shareholders' equity / Average assets (a)	10.82		%	10.08		%		7.3	%
Average shareholders' equity / Average loans (a)	14.77		%	14.20		%		4.0	%
Average loans / Average deposits (a)	90.91		%	88.80		%		2.4	%
N.M. - Not meaningful
Note: Explanations for footnotes (a) - (i) are included at the end of the financial tables

 

PARK NATIONAL CORPORATION
Consolidated Statements of Income
		Three Months Ended								Six Months Ended
		June 30,								June 30,
(in thousands, except share and per share data)		2019				2018				2019				2018
Interest income:
Interest and fees on loans		$	82,471			$	64,496			$	154,474			$	128,898
Interest on:
Obligations of U.S. Government, its agencies
and other securities - taxable		6,919				7,746				13,914				14,513
Obligations of states and political subdivisions - tax-exempt		2,308				2,178				4,525				4,352
Other interest income		528				271				1,169				642
Total interest income		92,226				74,691				174,082				148,405
Interest expense:
Interest on deposits:
Demand and savings deposits		8,811				4,107				15,904				7,397
Time deposits		4,357				2,886				8,134				5,437
Interest on borrowings		3,207				2,956				6,417				5,979
Total interest expense		16,375				9,949				30,455				18,813
Net interest income		75,851				64,742				143,627				129,592
Provision for loan losses		1,919				1,386				4,417				1,646
Net interest income after provision for loan losses		73,932				63,356				139,210				127,946
Other income		22,808				23,242				44,833				50,145
Other expense		70,192				52,534				127,019				106,842
Income before income taxes		26,548				34,064				57,024				71,249
Income taxes		4,385				5,823				9,406				11,885
Net income		$	22,163			$	28,241			$	47,618			$	59,364
Per Common Share:
Net income  - basic		$	1.34			$	1.85			$	2.96			$	3.88
Net income  - diluted		$	1.33			$	1.83			$	2.94			$	3.85
Weighted average shares - basic		16,560,545				15,285,532				16,106,043				15,286,932
Weighted average shares - diluted		16,642,571				15,417,607				16,193,643				15,424,585
Cash dividends declared		$	1.01			$	1.21			$	2.22			$	2.15

 

PARK NATIONAL CORPORATION
Consolidated Balance Sheets
(in thousands, except share data)	June 30, 2019			December 31, 2018
Assets
Cash and due from banks	$	160,589		$	141,890
Money market instruments	98,916			25,324
Investment securities	1,396,530			1,428,145
Loans	6,376,737			5,692,132
Allowance for loan losses	(54,003		)	(51,512		)
Loans, net	6,322,734			5,640,620
Bank premises and equipment, net	72,129			59,771
Goodwill and other intangible assets	174,288			119,710
Other real estate owned	3,839			4,303
Other assets	428,428			384,545
Total assets	$	8,657,453		$	7,804,308
Liabilities and Shareholders' Equity
Deposits:
Noninterest bearing	$	1,907,027		$	1,804,881
Interest bearing	5,125,093			4,455,979
Total deposits	7,032,120			6,260,860
Borrowings	595,578			636,966
Other liabilities	95,323			73,976
Total liabilities	$	7,723,021		$	6,971,802
Shareholders' Equity:
Preferred shares (200,000 shares authorized; no shares outstanding at June 30, 2019 and December 31, 2018)	$	—		$	—
Common shares (No par value; 20,000,000 shares authorized in 2019 and 2018; 17,623,216 shares issued at June 30, 2019 and 16,586,165 shares issued at December 31, 2018)	456,911			358,598
Accumulated other comprehensive loss, net of taxes	(26,307		)	(49,788		)
Retained earnings	625,227			614,069
Treasury shares (1,205,654 shares at June 30, 2019 and 887,987 shares at December 31, 2018)	(121,399		)	(90,373		)
Total shareholders' equity	$	934,432		$	832,506
Total liabilities and shareholders' equity	$	8,657,453		$	7,804,308

 

PARK NATIONAL CORPORATION
Consolidated Average Balance Sheets
	Three Months Ended							Six Months Ended
	June 30,							June 30,
(in thousands)	2019			2018				2019			2018
Assets
Cash and due from banks	$	127,115		$	118,870			$	122,485		$	118,561
Money market instruments	80,239			54,551				87,212			73,437
Investment securities	1,413,309			1,506,699				1,401,641			1,478,564
Loans	6,332,167			5,289,056				6,012,446			5,295,814
Allowance for loan losses	(53,849		)	(49,750		)		(53,124		)	(50,168		)
Loans, net	6,278,318			5,239,306				5,959,322			5,245,646
Bank premises and equipment, net	71,253			56,109				66,079			56,307
Goodwill and other intangible assets	165,311			72,334				142,587			72,334
Other real estate owned	4,183			8,416				4,277			10,962
Other assets	436,767			403,463				422,899			401,608
Total assets	$	8,576,495		$	7,459,748			$	8,206,502		$	7,457,419
Liabilities and Shareholders' Equity
Deposits:
Noninterest bearing	$	1,887,335		$	1,602,228			$	1,809,213		$	1,585,742
Interest bearing	5,068,709			4,392,733				4,804,076			4,378,091
Total deposits	6,956,044			5,994,961				6,613,289			5,963,833
Borrowings	597,448			645,909				622,414			678,296
Other liabilities	86,377			64,777				82,853			63,414
Total liabilities	$	7,639,869		$	6,705,647			$	7,318,556		$	6,705,543
Shareholders' Equity:
Preferred shares	$	—		$	—			$	—		$	—
Common shares	455,895			307,689				407,533			307,714
Accumulated other comprehensive loss, net of taxes	(36,825		)	(54,184		)		(41,655		)	(47,965		)
Retained earnings	624,995			588,170				623,291			579,448
Treasury shares	(107,439		)	(87,574		)		(101,223		)	(87,321		)
Total shareholders' equity	$	936,626		$	754,101			$	887,946		$	751,876
Total liabilities and shareholders' equity	$	8,576,495		$	7,459,748			$	8,206,502		$	7,457,419

 

PARK NATIONAL CORPORATION
Consolidated Statements of Income - Linked Quarters
	2019			2019			2018			2018			2018
(in thousands, except per share data)	2nd QTR			1st QTR			4th QTR			3rd QTR			2nd QTR
Interest income:
Interest and fees on loans	$	82,471		$	72,003		$	72,342		$	69,905		$	64,496
Interest on:
Obligations of U.S. Government, its agencies and other securities - taxable	6,919			6,995			7,275			7,691			7,746
Obligations of states and political subdivisions - tax-exempt	2,308			2,217			2,213			2,205			2,178
Other interest income	528			641			337			428			271
Total interest income	92,226			81,856			82,167			80,229			74,691
Interest expense:
Interest on deposits:
Demand and savings deposits	8,811			7,093			6,006			6,412			4,107
Time deposits	4,357			3,777			3,610			3,328			2,886
Interest on borrowings	3,207			3,210			2,921			2,813			2,956
Total interest expense	16,375			14,080			12,537			12,553			9,949
Net interest income	75,851			67,776			69,630			67,676			64,742
Provision for loan losses	1,919			2,498			3,359			2,940			1,386
Net interest income after provision for loan losses	73,932			65,278			66,271			64,736			63,356
Other income	22,808			22,025			26,892			24,064			23,242
Other expense	70,192			56,827			62,597			59,316			52,534
Income before income taxes	26,548			30,476			30,566			29,484			34,064
Income taxes	4,385			5,021			4,305			4,722			5,823
Net income	$	22,163		$	25,455		$	26,261		$	24,762		$	28,241
Per Common Share:
Net income - basic	$	1.34		$	1.63		$	1.67		$	1.58		$	1.85
Net income - diluted	$	1.33		$	1.62		$	1.67		$	1.56		$	1.83

 

PARK NATIONAL CORPORATION
Detail of other income and other expense - Linked Quarters
	2019			2019			2018			2018			2018
(in thousands)	2nd QTR			1st QTR			4th QTR			3rd QTR			2nd QTR
Other income:
Income from fiduciary activities	$	6,935		$	6,723		$	6,814		$	6,418		$	6,666
Service charges on deposits	2,655			2,559			2,852			2,861			2,826
Other service income	4,040			2,818			3,279			3,246			3,472
Debit card fee income	5,227			4,369			4,581			4,352			4,382
Bank owned life insurance income	1,286			1,006			2,190			2,585			1,031
ATM fees	460			440			444			500			510
OREO valuation adjustments	(55		)	(27		)	(93		)	(77		)	(114		)
(Loss) gain on the sale of OREO, net	(159		)	(12		)	142			(81		)	(147		)
Net loss on the sale of investment securities	(607		)	—			—			—			—
Unrealized gain (loss) on equity securities	232			1,742			(17		)	89			1,348
Other components of net periodic benefit income	1,183			1,183			1,705			1,705			1,705
Gain on the sale of loans	—			—			2,826			—			—
Miscellaneous	1,611			1,224			2,169			2,466			1,563
Total other income	$	22,808		$	22,025		$	26,892		$	24,064		$	23,242
Other expense:
Salaries	$	32,093		$	25,805		$	27,103		$	27,229		$	24,103
Employee benefits	9,014			8,430			7,977			7,653			7,630
Occupancy expense	3,223			3,011			2,769			2,976			2,570
Furniture and equipment expense	4,386			4,150			4,170			3,807			4,013
Data processing fees	2,905			2,133			2,222			2,580			1,902
Professional fees and services	10,106			6,006			8,516			8,065			6,123
Marketing	1,455			1,226			1,377			1,364			1,185
Insurance	1,381			1,156			1,277			1,388			1,196
Communication	1,375			1,333			1,335			1,207			1,189
State tax expense	1,054			1,005			750			1,000			958
Amortization of intangible assets	702			289			289			289			—
Miscellaneous	2,498			2,283			4,812			1,758			1,665
Total other expense	$	70,192		$	56,827		$	62,597		$	59,316		$	52,534

 

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

 

PARK NATIONAL CORPORATION
Financial Reconciliations
NON-GAAP RECONCILIATIONS
	THREE MONTHS ENDED										SIX MONTHS ENDED
(in thousands, except share and per share data)	June 30, 2019			March 31, 2019			June 30, 2018				June 30, 2019			June 30, 2018
Net interest income	$	75,851		$	67,776		$	64,742			$	143,627		$	129,592
less purchase accounting accretion related to NewDominion and Carolina Alliance acquisitions	1,606			266			—				1,872			—
less interest income on former Vision Bank relationships	—			7			814				7			3,310
Net interest income - adjusted	$	74,245		$	67,503		$	63,928			$	141,748		$	126,282
Provision for loan losses	$	1,919		$	2,498		$	1,386			$	4,417		$	1,646
less recoveries on former Vision Bank relationships	(65		)	(100		)	(325		)		(165		)	(505		)
Provision for loan losses - adjusted	$	1,984		$	2,598		$	1,711			$	4,582		$	2,151
Other income	$	22,808		$	22,025		$	23,242			$	44,833		$	50,145
less net (loss) gain on sale of former Vision Bank OREO properties	$	(139	)	$	—		$	32			$	(139	)	$	4,202
less gain on 8.55% prior investment in NewDominion	—			—			—				—			3,500
less other service income related to former Vision Bank relationships	—			—			46				—			1,057
less net loss on the sale of debt securities in the ordinary course of business	(607		)	—			—				(607		)	(2,271		)
Other income - adjusted	$	23,554		$	22,025		$	23,164			$	45,579		$	43,657
Other expense	$	70,192		$	56,827		$	52,534			$	127,019		$	106,842
less merger related expenses related to NewDominion and Carolina Alliance acquisitions	6,058			276			445				6,334			595
less core deposit intangible amortization related to NewDominion and Carolina Alliance acquisitions	702			289			—				991			—
less management and consulting expenses related to collection of payments on former Vision Bank loan relationships	—			—			47				—			1,236
less one-time incentive expense	—			—			—				—			1,128
Other expense - adjusted	$	63,432		$	56,262		$	52,042			$	119,694		$	103,883
Tax effect of adjustments to net income identified above (i)	$	1,225		$	40		$	(152	)		$	1,266		$	(1,542	)
Net income - reported	$	22,163		$	25,455		$	28,241			$	47,618		$	59,364
Net income - adjusted	$	26,773		$	25,607		$	27,668			$	52,379		$	53,562
Diluted EPS	$	1.33		$	1.62		$	1.83			$	2.94		$	3.85
Diluted EPS, adjusted (h)	$	1.61		$	1.63		$	1.79			$	3.23		$	3.47
Annualized return on average assets (a)(b)	1.04		%	1.32		%	1.52		%		1.17		%	1.61		%
Annualized return on average assets, adjusted (a)(b)(h)	1.25		%	1.33		%	1.49		%		1.29		%	1.45		%
Annualized return on average tangible assets (a)(b)(e)	1.06		%	1.34		%	1.53		%		1.19		%	1.62		%
Annualized return on average tangible assets, adjusted (a)(b)(e)(h)	1.28		%	1.35		%	1.50		%		1.31		%	1.46		%
Annualized return on average equity (a)(b)	9.49		%	12.31		%	15.02		%		10.81		%	15.92		%
Annualized return on average equity, adjusted (a)(b)(h)	11.47		%	12.38		%	14.72		%		11.90		%	14.37		%
Annualized return on average tangible equity (a)(b)(c)	11.53		%	14.36		%	16.61		%		12.88		%	17.62		%
Annualized return on average tangible equity, adjusted (a)(b)(c)(h)	13.92		%	14.44		%	16.28		%		14.17		%	15.89		%
Efficiency ratio (g)	70.61		%	62.77		%	59.23		%		66.87		%	58.98		%
Efficiency ratio, adjusted (g)(h)	64.36		%	62.33		%	59.28		%		63.39		%	60.63		%
Annualized net interest margin (g)	3.92		%	3.86		%	3.81		%		3.89		%	3.84		%
Annualized net interest margin, adjusted (g)(h)	3.84		%	3.85		%	3.77		%		3.84		%	3.75		%
Note: Explanations for footnotes (a) - (i) are included at the end of the financial tables

PARK NATIONAL CORPORATION
Financial Highlights (continued)
(a) Averages are for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018 and the six months ended June 30, 2019 and June 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										SIX MONTHS ENDED
	June 30, 2019			March 31, 2019			June 30, 2018				June 30, 2019			June 30, 2018
AVERAGE SHAREHOLDERS' EQUITY	$	936,626		$	838,723		$	754,101			$	887,946		$	751,876
Less: Average goodwill and other intangible assets	165,311			119,611			72,334				142,587			72,334
AVERAGE TANGIBLE EQUITY	$	771,315		$	719,112		$	681,767			$	745,359		$	679,542
(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:
	June 30, 2019			March 31, 2019			June 30, 2018
TOTAL SHAREHOLDERS' EQUITY	$	934,432		$	845,044		$	755,088
Less: Goodwill and other intangible assets	174,288			119,421			72,334
TANGIBLE EQUITY	$	760,144		$	725,623		$	682,754
(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										SIX MONTHS ENDED
	June 30, 2019			March 31, 2019			June 30, 2018				June 30, 2019			June 30, 2018
AVERAGE ASSETS	$	8,576,495		$	7,832,397		$	7,459,748			$	8,206,502		$	7,457,419
Less: Average goodwill and other intangible assets	165,311			119,611			72,334				142,587			72,334
AVERAGE TANGIBLE ASSETS	$	8,411,184		$	7,712,786		$	7,387,414			$	8,063,915		$	7,385,085
(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:
	June 30, 2019			March 31, 2019			June 30, 2018
TOTAL ASSETS	$	8,657,453		$	7,852,246		$	7,462,156
Less: Goodwill and other intangible assets	174,288			119,421			72,334
TANGIBLE ASSETS	$	8,483,165		$	7,732,825		$	7,389,822
(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										SIX MONTHS ENDED
	June 30, 2019			March 31, 2019			June 30, 2018				June 30, 2019			June 30, 2018
Interest income	$	92,226		$	81,856		$	74,691			$	174,082		$	148,405
Fully taxable equivalent adjustment	752			734			705				1,486			1,406
Fully taxable equivalent interest income	$	92,978		$	82,590		$	75,396			$	175,568		$	149,811
Interest expense	16,375			14,080			9,949				30,455			18,813
Fully taxable equivalent net interest income	$	76,603		$	68,510		$	65,447			$	145,113		$	130,998
(h) Adjustments to net income for each period presented are detailed in the non-GAAP reconciliation above.
(i) The tax effect of adjustments to net income was calculated assuming a 21% corporate federal income tax rate.