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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
July 22, 2019
PARK NATIONAL CORP /OH/
(Exact name of registrant as specified in its charter)
Ohio
1-13006
31-1179518
(State or other jurisdiction
(Commission
(IRS Employer
of incorporation)
File Number)
Identification No.)
50 North Third Street,
P.O. Box 3500
Newark,
Ohio
43058-3500
(Address of principal executive offices) (Zip Code)
(740)
 349-8451
(Registrant’s telephone number, including area code)
 
 
Not Applicable
(Former name or former address, if changed since last report.)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common shares, without par value
PRK
NYSEAMER

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company   

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  


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Item 2.02 - Results of Operations and Financial Condition.

On July 22, 2019, Park National Corporation (“Park”) issued a news release (the “Financial Results News Release”) announcing financial results for the three months and six months ended June 30, 2019. A copy of the Financial Results News Release is included as Exhibit 99.1 to this Current Report on Form 8-K and incorporated by reference herein.

Non-GAAP Financial Measures
Item 7.01 of this Current Report on Form 8-K as well as the Financial Results News Release contain non-GAAP (generally accepted accounting principles) financial measures where management believes it to be helpful in understanding Park’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in the Financial Results News Release.

Items Impacting Comparability of Period Results
From time-to-time, revenue, expenses, and/or taxes are impacted by items judged by management of Park to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that their outsized impact is believed by management of Park at that time to be infrequent or short-term in nature. Most often, these items impacting comparability of period results result from merger and acquisition activities and revenue and expenses related to former Vision Bank relationships. In other cases, they may result from managements decisions associated with significant corporate actions outside of the ordinary course of business.

Even though certain revenue and expense items are naturally subject to more volatility than others due to changes in market and economic environment conditions, as a general rule volatility alone does not result in the inclusion of an item as one impacting comparability of period results. For example, changes in the provision for credit losses (aside from former Vision Bank relationships) and asset valuation writedowns, reflect ordinary banking activities and are, therefore, typically excluded from consideration as items impacting comparability of period results.

Management believes the disclosure of items impacting comparability of period results provide a better understanding of our performance and trends to ascertain which of such items, if any, to include or exclude from an analysis of our performance; i.e., within the context of determining how that performance differed from expectations, as well as how, if at all, to adjust estimates of future performance taking such items into account.

Items impacting comparability of the results of particular periods are not intended to be a complete list of items that may materially impact current or future period performance.

Non-GAAP Ratios
Park's management uses certain non-GAAP financial measures to evaluate Park's performance. Specifically, management reviews return on average tangible equity, return on average tangible assets, tangible equity to tangible assets and tangible book value per share.

Management has included in the Financial Results News Release information relating to the annualized return on average tangible equity, annualized return on average tangible assets, tangible equity to tangible assets and tangible book value per share for the three months ended and at June 30, 2019, March 31, 2019, and June 30, 2018 and the six months ended June 30, 2019 and June 30, 2018. For purposes of calculating the annualized return on average tangible equity, a non-GAAP financial measure, net income for each period is 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. For the purpose of calculating the annualized return on average tangible assets, a non-GAAP financial measure, net income for each period is divided by average tangible assets during the period. Average tangible assets equals average assets during the applicable period less average goodwill and other intangible assets during the applicable period. For the purpose of calculating tangible equity to tangible assets, a non-GAAP financial measure, tangible equity is divided by tangible assets. Tangible equity equals total shareholders' equity less goodwill and other intangible assets, in each case at period end. Tangible assets equals total assets less goodwill and other intangible assets, in each case at period end. For the purpose of calculating tangible book value per share, a non-GAAP financial measure, tangible equity is divided by the number of common shares outstanding, in each case at period end.

Management believes that the disclosure of return on average tangible equity, return on average tangible assets, tangible equity to tangible assets and tangible book value per share presents additional information to the reader of the consolidated financial statements, which, when read in conjunction with the consolidated financial statements prepared in accordance with GAAP, assists in analyzing Park's operating performance, ensures comparability of operating performance from period to period, and facilitates comparisons with the performance of Park's peer financial holding companies and bank holding companies, while

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eliminating certain non-operational effects of acquisitions. In the Financial Results News Release, Park has provided a reconciliation of average tangible equity to average shareholders' equity, average tangible assets to average assets, tangible equity to total shareholders' equity and tangible assets to total assets solely for the purpose of complying with SEC Regulation G and not as an indication that return on average tangible equity, return on average tangible assets, tangible equity to tangible assets and tangible book value per share are substitutes for return on average equity, return on average assets, total shareholders' equity to total assets and book value per share, respectively, as determined in accordance with GAAP.

FTE (fully taxable equivalent) Ratios
Interest income, yields, and ratios on a FTE basis are considered non-GAAP financial measures. Management believes net interest income on a FTE basis provides an insightful picture of the interest margin for comparison purposes. The FTE basis also allows management to assess the comparability of revenue arising from both taxable and tax-exempt sources. The FTE basis assumes a federal statutory tax rate of 21 percent. In the Financial Results News Release, Park has provided a reconciliation of FTE interest income solely for the purpose of complying with SEC Regulation G and not as an indication that FTE interest income, yields and ratios are substitutes for interest income, yields and ratios, as determined in accordance with GAAP.

Item 7.01 - Regulation FD Disclosure

Financial Results by Segment

The table below reflects the net income (loss) by segment for the first and second quarters of 2019, for the first half of each of 2019 and 2018, and for the years ended December 31, 2018 and 2017. Park's segments include The Park National Bank ("PNB"), Guardian Financial Services Company ("GFSC") and "All Other" which primarily consists of Park as the "Parent Company" and SE Property Holdings, LLC ("SEPH"). SEPH is a non-bank subsidiary of Park, holding former Vision Bank OREO property and non-performing loans.
Net income (loss) by segment
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
 
Q2 2019
 
Q1 2019
 
Six months YTD 2019
 
Six months YTD 2018
 
2018
 
2017
PNB
 
$
29,382

 
$
26,692

 
$
56,074

 
$
55,542

 
$
109,472

 
$
87,315

GFSC
 
163

 
287

 
450

 
352

 
521

 
260

All Other
 
(7,382
)
 
(1,524
)
 
(8,906
)
 
3,470

 
394

 
(3,333
)
   Total Park
 
$
22,163

 
$
25,455

 
$
47,618

 
$
59,364

 
$
110,387

 
$
84,242


Net income for the six months ended June 30, 2019 of $47.6 million represented a $11.7 million, or 19.8%, decrease compared to $59.4 million for the six months ended June 30, 2018. Net income for both the six months ended June 30, 2019 and the six months ended June 30, 2018 included several items of income and expense that impact comparability of period results. These items are detailed in the "Financial Reconciliations" section within the Financial Results News Release.

The discussion below provides additional information regarding the two segments that make up Park's ongoing operations, followed by additional information regarding All Other, which consists of the Parent Company and SEPH.


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The Park National Bank (PNB)

The table below reflects PNB's net income for the first and second quarters of 2019, for the first half of each of 2019 and 2018, and for the years ended December 31, 2018 and 2017.

(In thousands)
Q2 2019
Q1 2019
Six months YTD 2019
Six months YTD 2018
2018
2017
Net interest income
$
74,893

$
66,282

$
141,175

$
124,124

$
258,547

$
235,243

Provision for loan losses
1,803

2,440

4,243

1,556

7,569

9,898

Other income
22,674

20,708

43,382

41,985

88,981

82,742

Other expense
60,014

51,974

111,988

97,170

206,843

185,891

Income before income taxes
$
35,750

$
32,576

$
68,326

$
67,383

$
133,116

$
122,196

Income tax expense
6,368

5,884

12,252

11,841

23,644

34,881

Net income
$
29,382

$
26,692

$
56,074

$
55,542

$
109,472

$
87,315


Net interest income of $141.2 million for the six months ended June 30, 2019 represented a $17.1 million, or 13.7%, increase compared to $124.1 million for the six months ended June 30, 2018. The increase was a result of a $28.2 million increase in interest income, offset by a $11.1 million increase in interest expense.
The $28.2 million increase in interest income was due to a $28.1 million increase in interest income on loans, along with a $105,000 increase in interest income on investments. The increase in interest income on loans was partially the result of a $717.6 million increase in average loans from $5.27 billion for the six months ended June 30, 2018, to $5.99 billion for the six months ended June 30, 2019. Additionally, the yield on loans increased by 38 basis points to 5.12% for the six months ended June 30, 2019, compared to 4.74% for the six months ended June 30, 2018. Interest income was also impacted by the acquisition of NewDominion Bank ("NewDominion") on July 1, 2018 and the acquisition of CAB Financial Corporation, the parent of Carolina Alliance Bank ("Carolina Alliance") on April 1, 2019. The NewDominion and Carolina Alliance affiliates contributed an aggregate of $16.1 million to interest income at PNB during the six months ended June 30, 2019.
The $11.1 million increase in interest expense was primarily due to a $11.2 million increase in interest expense on deposits. The increase in interest expense on deposits was partially the result of a $425.4 million increase in average interest-earning deposits from $4.37 billion for the six months ended June 30, 2018, to $4.80 billion for the six months ended June 30, 2019. Additionally, the cost of deposits increased by 42 basis points from 0.59% for the six months ended June 30, 2018 to 1.01% for the six months ended June 30, 2019. Interest expense was also impacted by the acquisition of NewDominion on July 1, 2018 and the acquisition of Carolina Alliance on April 1, 2019. The NewDominion and Carolina Alliance affiliates contributed an aggregate of $1.9 million to interest expense at PNB during the six months ended June 30, 2019.
The provision for loan losses of $4.2 million for the six months ended June 30, 2019 represented an increase of $2.7 million, compared to $1.6 million for the six months ended June 30, 2018. Refer to the “Credit Metrics and Provision for (Recovery of) Loan Losses” section for additional details regarding the level of the provision for (recovery of) loan losses recognized in each period presented above.
Other income of $43.4 million for the six months ended June 30, 2019 represented an increase of $1.4 million, or 3.3%, compared to $42.0 million for the six months ended June 30, 2018. The $1.4 million increase was primarily related to a $1.2 million increase in debit card fee income, a $597,000 increase in fiduciary income, a $449,000 increase in operating lease income, a $433,000 increase in income related to partnership investments which is included in miscellaneous income, and a decrease of $1.7 million in net losses on the sale of securities, offset by a $1.4 million decrease in net gains on sale of OREO, a $1.0 million decrease in other components of net periodic benefit income, and a $534,000 decrease in service charges on deposit accounts. Other income was also impacted by the acquisition of NewDominion on July 1, 2018 and the acquisition of Carolina Alliance on April 1, 2019. The NewDominion and Carolina Alliance affiliates contributed an aggregate of $1.7 million to other income at PNB during the six months ended June 30, 2019.

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Other expense of $112.0 million for the six months ended June 30, 2019 represented an increase of $14.8 million, or 15.2%, compared to $97.2 million for the six months ended June 30, 2018. The $14.8 million increase was related to a $5.6 million increase in salary expense, a $2.9 million increase in employee benefits expense, primarily related to increased group insurance costs, payroll taxes and an increase in the company match in Park's defined contribution plan, a $1.3 million increase in data processing expense, a $1.4 million increase in professional fees and services expense, a $991,000 increase in core deposit intangible amortization expense, a $718,000 increase in occupancy expense, a $446,000 increase in operating lease depreciation, a $393,000 increase in equipment expense, and a $312,000 increase in other non loan related losses. Other expense was also impacted by the acquisition of NewDominion on July 1, 2018 and the acquisition of Carolina Alliance on April 1, 2019. The NewDominion and Carolina Alliance affiliates added $4.5 million and $5.9 million, respectively, to other expense at PNB during the six months ended June 30, 2019. Cost savings related to the Carolina Alliance acquisition are expected to be fully realized following the fourth quarter of 2019 conversion of Carolina Alliance's core banking system.
The table below provides certain balance sheet information and financial ratios for PNB as of or for the six months ended June 30, 2019 and 2018, the three months ended March 31, 2019 and the year ended December 31, 2018.

(In thousands)
June 30, 2019
March 31, 2019
December 31, 2018
June 30, 2018
 
% change from 03/31/19
% change from 12/31/18
% change from 6/30/18
Loans
$
6,355,251

$
5,719,373

$
5,671,173

$
5,305,560

 
11.12
 %
12.06
 %
19.78
 %
Allowance for loan losses
51,760

51,064

49,067

47,110

 
1.36
 %
5.49
 %
9.87
 %
Net loans
6,303,491

5,668,309

5,622,106

5,258,450

 
11.21
 %
12.12
 %
19.87
 %
Investment securities
1,387,731

1,390,627

1,418,938

1,512,641

 
(0.21
)%
(2.20
)%
(8.26
)%
Total assets
8,607,583

7,801,148

7,753,848

7,404,498

 
10.34
 %
11.01
 %
16.25
 %
Total deposits
7,095,772

6,418,471

6,334,796

6,126,119

 
10.55
 %
12.01
 %
15.83
 %
Average assets (1)
8,157,472

7,783,150

7,573,713

7,396,316

 
4.81
 %
7.71
 %
10.29
 %
Efficiency ratio (2)
60.19
%
59.25
%
59.03
%
58.01
%
 
1.59
 %
1.97
 %
3.76
 %
Return on average assets (3)
1.39
%
1.39
%
1.45
%
1.51
%
 
 %
(4.14
)%
(7.95
)%
(1) Average assets for the six months ended June 30, 2019 and 2018, the three months ended March 31, 2019 and for the year ended December 31, 2018.
(2) Calculated utilizing fully taxable equivalent net interest income which includes the effects of taxable equivalent adjustments using a 21% federal corporate income tax rate. The taxable equivalent adjustments were $1.5 million and $1.4 million for the six months ended June 30, 2019 and 2018, respectively, $734,000 for the three months ended March 31, 2019, and $2.9 million for the year ended December 31, 2018.
(3) Annualized for the six months ended June 30, 2019 and 2018 and the three months ended March 31, 2019.

Loans outstanding at June 30, 2019 were $6.36 billion, compared to $5.72 billion at March 31, 2019, an increase of $635.9 million, or 11.1% (44.6% annualized). Excluding $576.0 million of loans at Carolina Alliance, loans outstanding at June 30, 2019 were $5.78 billion, compared to $5.72 billion at March 31, 2019, an increase of $59.8 million, or 1.0% (4.2% annualized). The table below breaks out the change in loans outstanding by loan type.

PNB less Carolina Alliance
(In thousands)
June 30, 2019
March 31, 2019
 
change
% change
% change annualized
Home equity
$
201,751

$
208,452

 
$
(6,701
)
(3.2
)%
(12.9
)%
Installment
1,343,806

1,288,904

 
54,902

4.3
 %
17.1
 %
Real estate
1,213,681

1,201,999

 
11,682

1.0
 %
3.9
 %
Commercial
3,014,884

3,015,008

 
(124
)
 %
 %
Other
5,091

5,010

 
81

1.6
 %
6.5
 %
Total loans
$
5,779,213

$
5,719,373

 
$
59,840

1.0
 %
4.2
 %


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Loans outstanding at June 30, 2019 were $6.36 billion, compared to $5.67 billion at December 31, 2018, an increase of $684.1 million, or 12.1% (24.3% annualized). Excluding $576.0 million of loans at Carolina Alliance, loans outstanding at June 30, 2019 were $5.78 billion, compared to $5.67 billion at December 31, 2018, an increase of $108.0 million, or 1.9% (3.8% annualized). The table below breaks out the change in loans outstanding by loan type.

PNB less Carolina Alliance
(In thousands)
June 30, 2019
December 31, 2018
 
change
% change
% change annualized
Home equity
$
201,751

$
215,426

 
$
(13,675
)
(6.3
)%
(12.8
)%
Installment
1,343,806

1,279,831

 
63,975

5.0
 %
10.1
 %
Real estate
1,213,681

1,207,160

 
6,521

0.5
 %
1.1
 %
Commercial
3,014,884

2,963,339

 
51,545

1.7
 %
3.5
 %
Other
5,091

5,417

 
(326
)
(6.0
)%
(12.1
)%
Total loans
$
5,779,213

$
5,671,173

 
$
108,040

1.9
 %
3.8
 %

Loans outstanding at June 30, 2019 were $6.36 billion, compared to $5.31 billion at June 30, 2018, an increase of $1,049.7 million, or 19.8%. Excluding $866.2 million of loans outstanding at NewDominion and Carolina Alliance, collectively, loans outstanding at June 30, 2019 were $5.49 billion, compared to $5.31 billion at June 30, 2018, an increase of $183.5 million, or 3.5%. The table below breaks out the change in loans outstanding by loan type.

PNB less Carolina Alliance and NewDominion
(In thousands)
June 30, 2019
June 30, 2018
 
change
% change
Home equity
$
173,222

$
188,797

 
$
(15,575
)
(8.2
)%
Installment
1,343,295

1,271,795

 
71,500

5.6
 %
Real estate
1,151,596

1,149,813

 
1,783

0.2
 %
Commercial
2,815,884

2,691,118

 
124,766

4.6
 %
Other
5,091

4,037

 
1,054

26.1
 %
Total loans
$
5,489,088

$
5,305,560

 
$
183,528

3.5
 %

PNB's allowance for loan losses increased by $2.7 million, or 5.5%, to $51.8 million at June 30, 2019, compared to $49.1 million at December 31, 2018. Net charge offs were $1.6 million, or 0.05% of total average loans (annualized), for the six months ended June 30, 2019 and were $6.1 million, or 0.11% of total average loans, for the twelve months ended December 31, 2018. Refer to the “Credit Metrics and Provision for (Recovery of) Loan Losses” section for additional information regarding PNB's loan portfolio and the level of provision for (recovery of) loan losses recognized in each period presented.

Total deposits at June 30, 2019 were $7.10 billion, compared to $6.42 billion at March 31, 2019, an increase of $677.3 million, or 10.6% (42.3% annualized). Excluding $609.1 million of total deposits at Carolina Alliance, total deposits at June 30, 2019 were $6.49 billion, compared to $6.42 billion at March 31, 2019, an increase of $68.2 million, or 1.1% (4.3% annualized). The table below breaks out the change in deposit balances by deposit type.

PNB less Carolina Alliance
(In thousands)
June 30, 2019
March 31, 2019
 
change
% change
% change annualized
Non-interest bearing deposits
$
1,837,834

$
1,864,932

 
$
(27,098
)
(1.5
)%
(5.8
)%
Transaction accounts
1,417,279

1,418,759

 
(1,480
)
(0.1
)%
(0.4
)%
Savings
2,234,451

2,151,797

 
82,654

3.8
 %
15.4
 %
Certificates of deposits
997,072

982,983

 
14,089

1.4
 %
5.7
 %
Total deposits
$
6,486,636

$
6,418,471

 
$
68,165

1.1
 %
4.3
 %


6



Total deposits at June 30, 2019 were $7.10 billion, compared to $6.33 billion at December 31, 2018, an increase of $761.0 million, or 12.0% (24.2% annualized). Excluding $609.1 million of total deposits at Carolina Alliance, total deposits at June 30, 2019 were $6.49 billion, compared to $6.33 billion at December 31, 2018, an increase of $151.8 million, or 2.4% (4.8% annualized). The table below breaks out the change in deposit balances by deposit type.

PNB less Carolina Alliance
(In thousands)
June 30, 2019
December 31, 2018
 
change
% change
% change annualized
Non-interest bearing deposits
$
1,837,834

$
1,882,979

 
$
(45,145
)
(2.4
)%
(4.8
)%
Transaction accounts
1,417,279

1,364,743

 
52,536

3.8
 %
7.8
 %
Savings
2,234,451

2,043,897

 
190,554

9.3
 %
18.8
 %
Certificates of deposits
997,072

1,043,177

 
(46,105
)
(4.4
)%
(8.9
)%
Total deposits
$
6,486,636

$
6,334,796

 
$
151,840

2.4
 %
4.8
 %

Total deposits at June 30, 2019 were $7.10 billion, compared to $6.13 billion at June 30, 2018, an increase of $969.7 million, or 15.8%. Excluding $812.5 million of total deposits at NewDominion and Carolina Alliance, collectively, total deposits at June 30, 2019 were $6.28 billion, compared to $6.13 billion at June 30, 2018, an increase of $157.2 million, or 2.6%. The table below breaks out the change in deposit balances by deposit type.

PNB less Carolina Alliance and NewDominion
(In thousands)
June 30, 2019
June 30, 2018
 
change
% change
Non-interest bearing deposits
$
1,751,928

$
1,705,549

 
$
46,379

2.7
 %
Transaction accounts
1,338,130

1,330,809

 
7,321

0.6
 %
Savings
2,232,466

2,062,841

 
169,625

8.2
 %
Certificates of deposits
960,787

1,026,920

 
(66,133
)
(6.4
)%
Total deposits
$
6,283,311

$
6,126,119

 
$
157,192

2.6
 %

Guardian Financial Services Company (GFSC)

The table below reflects GFSC's net income for the first and second quarters of 2019, for the first half of each of 2019 and 2018, and for the years ended December 31, 2018 and 2017.

(In thousands)
Q2 2019
Q1 2019
Six months YTD 2019
Six months YTD 2018
2018
2017
Net interest income
$
1,217

$
1,325

$
2,542

$
2,566

$
5,048

$
5,839

Provision for loan losses
170

145

315

590

1,328

1,917

Other income
51

32

83

72

187

103

Other expense
891

845

1,736

1,602

3,245

3,099

Income before income taxes
$
207

$
367

$
574

$
446

$
662

$
926

    Income tax expense
44

80

124

94

141

666

Net income
$
163

$
287

$
450

$
352

$
521

$
260



7



The table below provides certain balance sheet information and financial ratios for GFSC as of or for the six months ended June 30, 2019 and 2018 and for the year ended December 31, 2018.

(In thousands)
June 30, 2019
December 31, 2018
June 30, 2018
 
% change from 12/31/18
% change from 6/30/18
Loans
$
29,981

$
32,664

$
30,612

 
(8.21
)%
(2.06
)%
Allowance for loan losses
2,243

2,445

2,342

 
(8.26
)%
(4.23
)%
Net loans
27,738

30,219

28,270

 
(8.21
)%
(1.88
)%
Total assets
29,222

31,388

29,232

 
(6.90
)%
(0.03
)%
Average assets (1)
30,279

29,741

30,656

 
1.81
 %
(1.23
)%
Return on average assets (2)
3.00
%
1.75
%
2.32
%
 
71.43
 %
29.31
 %
(1) Average assets for the six months ended June 30, 2019 and 2018 and for the year ended December 31, 2018.
(2) Annualized for the six months ended June 30, 2019 and 2018.

All Other

The table below reflects All Other net (loss) income for the first and second quarters of 2019, for the first half of each of 2019 and 2018, and for the years ended December 31, 2018 and 2017.

(In thousands)
Q2 2019
Q1 2019
Six months YTD 2019
Six months YTD 2018
2018
2017
Net interest (expense) income
$
(259
)
$
169

$
(90
)
$
2,902

$
3,303

$
2,677

Recovery of loan losses
(54
)
(87
)
(141
)
(500
)
(952
)
(3,258
)
Other income
83

1,285

1,368

8,088

11,933

3,584

Other expense
9,287

4,008

13,295

8,070

18,667

14,172

Net (loss) income before income tax benefit
$
(9,409
)
$
(2,467
)
$
(11,876
)
$
3,420

$
(2,479
)
$
(4,653
)
    Income tax (benefit) expense
(2,027
)
(943
)
(2,970
)
(50
)
(2,873
)
(1,320
)
Net (loss) income
$
(7,382
)
$
(1,524
)
$
(8,906
)
$
3,470

$
394

$
(3,333
)

The net interest income for All Other included, for all periods presented, interest income on subordinated debt investments in PNB, which were eliminated in the consolidated Park National Corporation totals, as well as interest income on SEPH impaired loan relationships.

Net interest (expense) income decreased to net expense of $90,000 for the six months ended June 30, 2019 from net income of$2.9 million for the six months ended June 30, 2018. The decrease was the result of a decrease in interest payments received from SEPH impaired loan relationships.

SEPH had net recoveries of $141,000 for the six months ended June 30, 2019, compared to net recoveries of $500,000 for the six months ended June 30, 2018.

Other income of $1.4 million for the six months ended June 30, 2019 represented a decrease of $6.7 million, compared to $8.1 million for the six months ended June 30, 2018. The $6.7 million decrease was largely due to a $3.6 million decrease in income related to equity securities, a $2.9 million decrease in gain on sale of OREO, net, and a $1.1 million decrease in loan fee income as a result of a reduction in payments received from SEPH impaired loan relationships, offset by a $606,000 increase in income related to partnership investments which is included in unrealized gain (loss) on equity securities.

Other expense of $13.3 million for the six months ended June 30, 2019 represented an increase of $5.2 million, or 64.7%, compared to $8.1 million for the six months ended June 30, 2018. The $5.2 million increase was primarily related to an increase of $2.8 million in salary expense, and a $2.3 million increase in professional fees and services (both increases primarily related to merger related expenses).


8



Park National Corporation

The table below reflects Park's consolidated net income for the first and second quarters of 2019, for the first half of each of 2019 and 2018, and for the years ended December 31, 2018 and 2017.

(In thousands)
Q2 2019
Q1 2019
Six months YTD 2019
Six months YTD 2018
2018
2017
Net interest income
$
75,851

$
67,776

$
143,627

$
129,592

$
266,898

$
243,759

Provision for loan losses
1,919

2,498

4,417

1,646

7,945

8,557

Other income
22,808

22,025

44,833

50,145

101,101

86,429

Other expense
70,192

56,827

127,019

106,842

228,755

203,162

Income before income taxes
$
26,548

$
30,476

$
57,024

$
71,249

$
131,299

$
118,469

    Income tax expense
4,385

5,021

9,406

11,885

20,912

34,227

Net income
$
22,163

$
25,455

$
47,618

$
59,364

$
110,387

$
84,242


Credit Metrics and Provision for (Recovery of) Loan Losses

On a consolidated basis, Park reported a provision for loan losses for the six months ended June 30, 2019 of $4.4 million, compared to $1.6 million for the six months ended June 30, 2018. The table below shows a breakdown of the provision for (recovery of) loan losses by reportable segment.

(In thousands)
Q 2019
Q1 2019
Six months YTD 2019
Six months YTD 2018
2018
2017
PNB
$
1,803

$
2,440

$
4,243

$
1,556

$
7,569

$
9,898

GFSC
170

145

315

590

1,328

1,917

All Other
(54
)
(87
)
(141
)
(500
)
(952
)
(3,258
)
    Total Park
$
1,919

$
2,498

$
4,417

$
1,646

$
7,945

$
8,557


PNB had net charge-offs of $1.6 million, GFSC had net charge-offs of $517,000, and All Other had net recoveries of $141,000 for the six months ended June 30, 2019, resulting in net charge-offs of $1.9 million for Park, on a consolidated basis. PNB had net charge-offs of $2.1 million, GFSC had net charge-offs of $630,000, and All Other had net recoveries of $500,000 for the six months ended June 30, 2018, resulting in net charge-offs of $2.2 million for Park, on a consolidated basis.


9



The table below provides additional information related to specific reserves and general reserves for Park as of June 30, 2019, December 31, 2018, and June 30, 2018.

(In thousands)
6/30/2019
12/31/2018
6/30/2018
Total allowance for loan losses
$
54,003

$
51,512

$
49,452

Specific reserve
2,379

2,273

1,396

General reserve
$
51,624

$
49,239

$
48,056

 

 
 
Total loans
$
6,376,737

$
5,692,132

$
5,324,974

Impaired commercial loans
50,225

48,135

61,705

Total loans less impaired commercial loans
$
6,326,512

$
5,643,997

$
5,263,269

 



General reserve as a % of total loans less impaired commercial loans
0.82
%
0.87
%
0.91
%
General reserve as a % of total loans less impaired commercial loans (excluding acquired loans)
0.92
%
0.91
%
0.91
%

The allowance for loan losses of $54.0 million at June 30, 2019 represented a $2.5 million, or 4.8%, increase compared to $51.5 million at December 31, 2018. This increase was the result of a $2.4 million increase in general reserves and a $106,000 increase in specific reserves. As of June 30, 2019, no allowance had been established for acquired loans.

10



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' 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

11



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.
Item 8.01 - Other Events

Declaration of Cash Dividend

As reported in the Financial Results News Release, on July 22, 2019, the Park Board of Directors (the "Park Board") declared a $1.01 per common share quarterly cash dividend in respect of Park's common shares. The dividends are payable on September 10, 2019 to common shareholders of record as of the close of business on August 16, 2019. A copy of the Financial Results News Release is included as Exhibit 99.1 and the portion thereof addressing the declaration of the cash dividends by the Park Board is incorporated by reference herein.


Item 9.01 - Financial Statements and Exhibits.

(a)
Not applicable
    
(b)
Not applicable

(c)
Not applicable

(d)
Exhibits. The following exhibit is included with this Current Report on Form 8-K:



Exhibit No.        Description

99.1News Release issued by Park National Corporation on July 22, 2019 addressing financial results for the three months and six months ended June 30, 2019 and declaration of quarterly cash dividend.




[Remainder of page intentionally left blank;
signature page follows.]




12







SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
PARK NATIONAL CORPORATION
 
 
 
Dated: July 22, 2019
By:
/s/ Brady T. Burt
 
 
Brady T. Burt
 
 
Chief Financial Officer, Secretary and Treasurer
 
 
 


13
(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


398838731_prknewsreleasea01a01a01a16.jpg


July 22, 2019                                        Exhibit 99.1
Park National Corporation reports financial results
for second quarter and first half of 2019

NEWARK, Ohio - 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 added.
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

Park National Corporation
50 N. Third Street, Newark, Ohio 43055
www.parknationalcorp.com




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

Park National Corporation
50 N. Third Street, Newark, Ohio 43055
www.parknationalcorp.com




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
50 N. Third Street, Newark, Ohio 43055
www.parknationalcorp.com





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
50 N. Third Street, Newark, Ohio 43055
www.parknationalcorp.com



 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
50 N. Third Street, Newark, Ohio 43055
www.parknationalcorp.com



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
50 N. Third Street, Newark, Ohio 43055
www.parknationalcorp.com





 
 
 
 
 
 
 
 
 
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
50 N. Third Street, Newark, Ohio 43055
www.parknationalcorp.com



 
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
50 N. Third Street, Newark, Ohio 43055
www.parknationalcorp.com



 
 
 
 
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
50 N. Third Street, Newark, Ohio 43055
www.parknationalcorp.com



 
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
50 N. Third Street, Newark, Ohio 43055
www.parknationalcorp.com



 
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