Park National Corporation reports financial results for second quarter and first half of 2020

Newark, Ohio, UNITED STATES


NEWARK, Ohio, July 27, 2020 (GLOBE NEWSWIRE) -- Park National Corporation (Park) (NYSE American: PRK) today reported financial results for the second quarter and first half of 2020 (three and six months ended June 30, 2020). Park's board of directors declared a quarterly cash dividend of $1.02 per common share, payable on September 10, 2020 to common shareholders of record as of August 21, 2020.

Park’s net income for the second quarter of 2020 was $29.5 million, a 33.1 percent increase from $22.2 million for the second quarter of 2019. Second quarter 2020 net income per diluted common share was $1.80, compared to $1.33 in the second quarter of 2019. Park's net income for the first half of 2020 was $51.9 million, an 8.9 percent increase from $47.6 million for the first half of 2019. Net income per diluted common share was $3.16 for the first half of 2020, compared to $2.94 for the first half of 2019.

Park's community-banking subsidiary, The Park National Bank, reported net income of $30.8 million for the second quarter of 2020, a 4.7 percent increase compared to $29.4 million for the same period of 2019. The bank reported net income of $56.7 million for the first half of 2020, compared to $56.1 million for the first half of 2019.

“Many families and businesses took the opportunity this spring to make improvements and investments into their property, through new or renovated homes and buildings or new vehicles and equipment. Our lenders were fully accessible and enjoyed connecting with customers in new ways during these unusual circumstances with physical distancing,” said Park Chairman David Trautman about the bank’s second quarter loan growth. “Despite economic turbulence that may still be ahead for our country as the effects of the pandemic issue continue, we will remain compassionate, creative, and steadfast in service to the communities that rely on us.”

Headquartered in Newark, Ohio, Park National Corporation had $9.7 billion in total assets (as of June 30, 2020). Park's banking operations are conducted through Park subsidiary The Park National Bank. Other Park subsidiaries are 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.

Category: Earnings

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: the ever-changing effects of the novel coronavirus (COVID-19) pandemic - - the duration, extent and severity of which are impossible to predict - - on economies (local, national and international) and markets, and on our customers, counterparties, employees and third-party service providers, as well as the effects of various responses of governmental and nongovernmental authorities to the COVID-19 pandemic, including actions directed toward the containment of the COVID-19 pandemic and stimulus packages; Park's ability to execute our business plan successfully and within the expected timeframe as well as Park's ability to manage strategic initiatives; 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 in addition to continuing residual effects of prior recessionary conditions, 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; higher default rates on loans made to our customers due to the COVID-19 pandemic and its impact on our customers' operations and financial condition; changes in interest rates and prices as well as disruption in the liquidity and functioning of U.S. financial markets, as a result of the COVID-19 pandemic and reactions thereto, may adversely impact prepayment penalty income, mortgage banking income, income from fiduciary activities, 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 changes in retail distribution strategies, consumer preferences and behavior, changes in business and economic conditions (including as a result of the COVID-19 pandemic and reactions thereto), legislative and regulatory initiatives (including those undertaken in response to the COVID-19 pandemic), or other factors may be different than anticipated; changes in unemployment may be different than anticipated in light of the impacts of the COVID-19 pandemic; changes in customers', suppliers', and other counterparties' performance and creditworthiness may be different than anticipated in light of the impacts of the COVID-19 pandemic; the adequacy of our internal controls and risk management program in the event of changes in the market, economic, operational (including those which may result from more associates working remotely), 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 pressures among financial services organizations could increase significantly, including product and pricing pressures (which could in turn impact our credit spreads), customer acquisition and retention, changes to third-party relationships and revenues, changes in the manner of providing services, customer acquisition and retention pressures, and our ability to attract, develop and retain qualified banking professionals; customers could pursue alternatives to bank deposits, causing us to lose a relatively inexpensive source of funding; uncertainty regarding the nature, timing, cost and effect of changes in banking regulations or other regulatory or legislative requirements affecting the respective businesses of Park and our subsidiaries, including major reform of the regulatory oversight structure of the financial services industry and changes in laws and regulations concerning taxes, FDIC insurance premium levels, 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 Coronavirus Aid, Relief and Economic Security (CARES) Act, 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 provisions of the CARES Act, the provisions of the Dodd-Frank Act, and the Basel III regulatory capital reforms; the effect of changes in accounting policies and practices, as may be adopted by the Financial Accounting Standards Board (the "FASB"), the SEC, the Public Company Accounting Oversight Board and other regulatory agencies, including the extent to which the new current expected credit loss ("CECL") accounting standard issued by the FASB in June 2016 and in accordance with the CARES Act, the adoption of which can be deferred by Park (with retrospective application as of January 1, 2020) until the earlier of: (1) the interim reporting period during which the national emergency concerning the COVID-19 outbreak declared by the President on March 15, 2020 terminates; or (2) December 31, 2020, may adversely affect Park's reported financial condition or results of operations; Park's assumptions and estimates used in applying critical accounting policies and modeling, including under the CECL model, when adopted by Park, which may prove unreliable, inaccurate or not predictive of actual results; significant changes in the tax laws, which may adversely affect the fair values of net deferred tax assets and obligations of state and political subdivisions held in Park's investment securities portfolio; the impact of our ability to anticipate and respond to technological changes on our ability to respond to customer needs and meet competitive demands; operational issues stemming from and/or capital spending necessitated by the potential need to adapt to industry changes in information technology systems on which Park and our subsidiaries are highly dependent; the ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks; a failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors and other service providers, resulting in failures or disruptions in customer account management, general ledger, deposit, loan, or other systems, including as a result of cyber attacks; the existence or exacerbation of general geopolitical instability and uncertainty; the effect of trade policies (including the impact of potential or imposed tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars and other changes in trade regulations and changes in the relationship of the U.S. and its global trading partners), monetary and other fiscal policies (including the impact of money supply and interest rate policies of the Federal Reserve Board) and other governmental policies of the U.S. federal government, including those implemented in response to the COVID-19 pandemic; unexpected changes in interest rates or disruptions in the financial markets related to COVID-19 or responses to the related health crisis; 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; the impact on Park's business, personnel, facilities or systems of losses related to acts of fraud, scams and schemes of third parties; the impact of widespread natural and other disasters, pandemics (including the COVID-19 pandemic), dislocations, civil unrest, terrorist activities or international hostilities on the economy and financial markets generally and on us or our counterparties specifically; any of the foregoing factors, or other cascading effects of the COVID-19 pandemic that are not currently foreseeable, could materially affect our business, including our customers' willingness to conduct banking transactions and their ability to pay on existing obligations; the effect of healthcare laws in the U.S. and potential changes for such laws, especially in light of the COVID-19 pandemic, which may increase our healthcare and other costs and negatively impact our operations and financial results; risk and uncertainties associated with Park's entry into new geographic markets with its recent acquisitions, including expected revenue synergies and cost savings from recent acquisitions not being fully realized or realized within the expected time frame; the discontinuation of the London Inter-Bank Offered Rate (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, 2019  and in "Item 1A. Risk Factors" of Part II of Park's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020. 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, 2020, March 31, 2020, and June 30, 2019     
       
 202020202019 Percent change vs.
(in thousands, except share and per share data)2nd QTR1st QTR2nd QTR 1Q '202Q '19
INCOME STATEMENT:      
Net interest income$81,186 $76,283 $75,851  6.4 7.0 
Provision for loan losses12,224 5,153 1,919  137.2 537.0 
Other income30,964 22,486 22,808  37.7 35.8 
Other expense64,799 66,276 70,192  (2.2)(7.7)
Income before income taxes$35,127 $27,340 $26,548  28.5 32.3 
Income taxes5,622 4,968 4,385  13.2 28.2 
Net income$29,505 $22,372 $22,163  31.9 33.1 
       
MARKET DATA:      
Earnings per common share - basic (b)$1.81 $1.37 $1.34  32.1 35.1 
Earnings per common share - diluted (b)1.80 1.36 1.33  32.4 35.3 
Cash dividends declared per common share1.02 1.22 1.01  (16.4)1.0 
Book value per common share at period end61.46 60.25 56.92  2.0 8.0 
Market price per common share at period end70.38 77.64 99.39  (9.4)(29.2)
Market capitalization at period end1,146,942 1,265,180 1,631,741  (9.3)(29.7)
       
Weighted average common shares - basic (a)16,296,427 16,303,602 16,560,545   (1.6)
Weighted average common shares - diluted (a)16,375,434 16,425,881 16,642,571  (0.3)(1.6)
Common shares outstanding at period end16,296,425 16,295,461 16,417,562   (0.7)
       
PERFORMANCE RATIOS: (annualized)      
Return on average assets (a)(b)1.26%1.04%1.04% 21.2 21.2 
Return on average shareholders' equity (a)(b)11.89%9.16%9.49% 29.8 25.3 
Yield on loans4.63%5.02%5.23% (7.8)(11.5)
Yield on investment securities2.76%2.72%2.78% 1.5 (0.7)
Yield on money market instruments0.10%1.12%2.64% (91.1)(96.2)
Yield on interest earning assets4.14%4.57%4.76% (9.4)(13.0)
Cost of interest bearing deposits0.36%0.81%1.04% (55.6)(65.4)
Cost of borrowings1.33%2.08%2.15% (36.1)(38.1)
Cost of paying interest bearing liabilities0.43%0.90%1.16% (52.2)(62.9)
Net interest margin (g)3.84%3.93%3.92% (2.3)(2.0)
Efficiency ratio (g)57.41%66.61%70.61% (13.8)(18.7)
       
OTHER RATIOS (NON-GAAP):      
Tangible book value per share (d)$51.04 $49.79 $46.30  2.5 10.2 
       
Note: Explanations for footnotes (a) - (i) are included at the end of the financial tables in the "Financial Reconciliations" section.      
       
       
       
PARK NATIONAL CORPORATION
Financial Highlights (continued)
As of or for the three months ended June 30, 2020, March 31, 2020, and June 30, 2019     
       
     Percent change vs.
(in thousands, except ratios)June 30, 2020March 31, 2020June 30, 2019 1Q '202Q '19
BALANCE SHEET:      
Investment securities$1,153,186 $1,253,087 $1,396,530  (8.0)%(17.4)%
Loans7,204,445 6,522,519 6,376,737  10.5%13.0%
Allowance for loan losses73,476 61,503 54,003  19.5%36.1%
Goodwill and other intangible assets169,905 170,512 174,288  (0.4)%(2.5)%
Other real estate owned (OREO)1,356 3,600 3,839  (62.3)%(64.7)%
Total assets9,712,994 8,719,291 8,657,453  11.4%12.2%
Total deposits8,161,900 7,290,133 7,032,120  12.0%16.1%
Borrowings444,410 348,373 595,578  27.6%(25.4)%
Total shareholders' equity1,001,594 981,877 934,432  2.0%7.2%
Tangible equity (d)831,689 811,365 760,144  2.5%9.4%
Total nonperforming loans126,044 119,311 86,833  5.6%45.2%
Total nonperforming assets130,999 126,510 94,168  3.5%39.1%
       
ASSET QUALITY RATIOS:      
Loans as a % of period end total assets74.17%74.81%73.66% (0.9)%0.7%
Total nonperforming loans as a % of period end loans1.75%1.83%1.36% (4.4)%28.7%
Total nonperforming assets as a % of period end loans + OREO + other nonperforming assets1.82%1.94%1.48% (6.2)%23.0%
Allowance for loan losses as a % of period end loans1.02%0.94%0.85% 8.5%20.0%
Net loan charge-offs$251 $329 $1,284  (23.7)%(80.5)%
Annualized net loan charge-offs as a % of average loans (a)0.01%0.02%0.08% (50.0)%(87.5)%
       
CAPITAL & LIQUIDITY:      
Total shareholders' equity / Period end total assets10.31%11.26%10.79% (8.4)%(4.4)%
Tangible equity (d) / Tangible assets (f)8.72%9.49%8.96% (8.1)%(2.7)%
Average shareholders' equity / Average assets (a)10.61%11.31%10.92% (6.2)%(2.8)%
Average shareholders' equity / Average loans (a)14.30%15.15%14.79% (5.6)%(3.3)%
Average loans / Average deposits (a)88.59%89.90%91.03% (1.5)%(2.7)%
       


 
PARK NATIONAL CORPORATION
Financial Highlights
Six months ended June 30, 2020 and June 30, 2019   
     
 20202019  
(in thousands, except share and per share data and ratios)Six months
ended June 30
Six months
ended June 30
 Percent change
vs '19
INCOME STATEMENT:    
Net interest income$157,469 $143,627  9.6%
Provision for loan losses17,377 4,417  293.4%
Other income53,450 44,833  19.2%
Other expense131,075 127,019  3.2%
Income before income taxes$62,467 $57,024  9.5%
Income taxes10,590 9,406  12.6%
Net income$51,877 $47,618  8.9%
     
MARKET DATA:    
Earnings per common share - basic (b)$3.18 $2.96  7.4%
Earnings per common share - diluted (b)3.16 2.94  7.5%
Cash dividends declared per common share2.24 2.22  0.9%
     
Weighted average common shares - basic (a)16,300,015 16,106,043  1.2%
Weighted average common shares - diluted (a)16,400,657 16,193,643  1.3%
     
PERFORMANCE RATIOS: (annualized)    
Return on average assets (a)(b)1.15%1.17% (1.7) %
Return on average shareholders' equity (a)(b)10.54%10.81% (2.5) %
Yield on loans4.81%5.19% (7.3) %
Yield on investment securities2.76%2.80% (1.4) %
Yield on money market instruments0.38%2.70% (85.9) %
Yield on interest earning assets4.35%4.71% (7.6) %
Cost of interest bearing deposits0.58%1.01% (42.6) %
Cost of borrowings1.69%2.08% (18.8) %
Cost of paying interest bearing liabilities0.66%1.13% (41.6) %
Net interest margin (g)3.89%3.89% %
Efficiency ratio (g)61.72%66.87% (7.7) %
     
ASSET QUALITY RATIOS:    
Net loan charge-offs$580 $1,926  (69.9) %
Annualized net loan charge-offs as a % of average loans (a)0.02%0.06% (66.7) %
     
CAPITAL & LIQUIDITY:    
Average shareholders' equity / Average assets (a)10.95%10.82% 1.2%
Average shareholders' equity / Average loans (a)14.71%14.77% (0.4) %
Average loans / Average deposits (a)89.21%90.91% (1.9) %
     
     
Note: Explanations for footnotes (a) - (i) are included at the end of the financial tables in the "Financial Reconciliations" section.    
     


         
PARK NATIONAL CORPORATION
Consolidated Statements of Income
         
  Three Months Ended Six Months Ended
  June 30, June 30,
(in thousands, except share and per share data) 2020 2019 2020 2019
         
Interest income:        
  Interest and fees on loans $80,155  $82,471  $160,842  $154,474 
  Interest on:        
  Obligations of U.S. Government, its agencies        
  and other securities - taxable 5,026  6,919  10,557  13,914 
  Obligations of states and political subdivisions - tax-exempt 2,151  2,308  4,351  4,525 
  Other interest income 113  528  604  1,169 
  Total interest income 87,445  92,226  176,354  174,082 
         
Interest expense:        
  Interest on deposits:        
  Demand and savings deposits 1,507  8,811  7,849  15,904 
  Time deposits 3,346  4,357  7,631  8,134 
  Interest on borrowings 1,406  3,207  3,405  6,417 
  Total interest expense 6,259  16,375  18,885  30,455 
         
  Net interest income 81,186  75,851  157,469  143,627 
         
Provision for loan losses 12,224  1,919  17,377  4,417 
         
  Net interest income after provision for loan losses 68,962  73,932  140,092  139,210 
         
Other income 30,964  22,808  53,450  44,833 
         
Other expense 64,799  70,192  131,075  127,019 
         
  Income before income taxes 35,127  26,548  62,467  57,024 
         
Income taxes 5,622  4,385  10,590  9,406 
         
  Net income $29,505  $22,163  $51,877  $47,618 
         
Per common share:        
  Net income  - basic $1.81  $1.34  $3.18  $2.96 
  Net income  - diluted $1.80  $1.33  $3.16  $2.94 
         
  Weighted average shares - basic 16,296,427  16,560,545  16,300,015  16,106,043 
  Weighted average shares - diluted 16,375,434  16,642,571  16,400,657  16,193,643 
         
  Cash dividends declared $1.02  $1.01  $2.24  $2.22 
         


 
PARK NATIONAL CORPORATION 
Consolidated Balance Sheets
   
(in thousands, except share data)June 30, 2020
 December 31, 2019
   
Assets  
   
Cash and due from banks$136,178   $135,567 
Money market instruments597,316   24,389 
Investment securities1,153,186   1,279,507 
Loans7,204,445   6,501,404 
Allowance for loan losses(73,476) (56,679)
Loans, net7,130,969   6,444,725 
Bank premises and equipment, net81,760   73,322 
Goodwill and other intangible assets169,905   171,118 
Other real estate owned1,356   4,029 
Other assets442,324   425,720 
Total assets$9,712,994   $8,558,377 
   
Liabilities and Shareholders' Equity  
   
Deposits:  
Noninterest bearing$2,518,437   $1,959,935 
Interest bearing5,643,463   5,092,677 
Total deposits8,161,900   7,052,612 
Borrowings444,410   438,157 
Other liabilities105,090   98,594 
Total liabilities$8,711,400   $7,589,363 
   
   
Shareholders' Equity:  
Preferred shares (200,000 shares authorized; no shares outstanding at June 30, 2020 and December 31, 2019)$—   $ 
Common shares (No par value; 20,000,000 shares authorized; 17,623,185 shares issued at June 30, 2020 and 17,623,199 shares issued at December 31, 2019)457,966   459,389 
Accumulated other comprehensive income (loss), net of taxes13,861   (9,589)
Retained earnings662,311   646,847 
Treasury shares (1,326,760 shares at June 30, 2020 and 1,276,757 shares at December 31, 2019)(132,544) (127,633)
Total shareholders' equity$1,001,594   $969,014 
Total liabilities and shareholders' equity$9,712,994   $8,558,377 


    
    
PARK NATIONAL CORPORATION    
Consolidated Average Balance Sheets   
      
 Three Months Ended Six Months Ended
 June 30, June 30,
(in thousands)20202019 20202019
      
Assets     
      
Cash and due from banks$134,386   $127,115   $133,208   $122,485  
Money market instruments461,055   80,239   318,930   87,212  
Investment securities 1,197,445   1,413,309   1,230,948   1,401,641  
Loans6,981,783   6,332,167   6,731,960   6,012,446  
Allowance for loan losses(62,387) (53,849)  (60,001) (53,124) 
Loans, net6,919,396   6,278,318   6,671,959   5,959,322  
Bank premises and equipment, net80,096   71,253   77,509   66,079  
Goodwill and other intangible assets170,303   165,311   170,606   142,587  
Other real estate owned2,765   4,183   3,282   4,277  
Other assets442,819   436,767   437,585   422,899  
Total assets$9,408,265   $8,576,495   $9,044,027   $8,206,502  
      
      
Liabilities and Shareholders' Equity     
      
Deposits:     
Noninterest bearing$2,400,809   $1,887,335   $2,175,400   $1,809,213  
Interest bearing5,480,366   5,068,709   5,370,376   4,804,076  
Total deposits7,881,175   6,956,044   7,545,776   6,613,289  
Borrowings425,349   597,448   405,930   622,414  
Other liabilities103,453   86,377   102,189   82,853  
Total liabilities$8,409,977   $7,639,869   $8,053,895   $7,318,556  
      
Shareholders' Equity:     
Preferred shares$—   $   $—   $  
Common shares456,830   455,895   458,146   407,533  
Accumulated other comprehensive income (loss), net of taxes10,756   (36,825)  5,331   (41,655) 
Retained earnings663,290   624,995   658,877   623,291  
Treasury shares(132,588) (107,439)  (132,222) (101,223) 
Total shareholders' equity$998,288   $936,626   $990,132   $887,946  
Total liabilities and shareholders' equity$9,408,265   $8,576,495   $9,044,027   $8,206,502  


 
 
PARK NATIONAL CORPORATION 
Consolidated Statements of Income - Linked Quarters
      
 20202020201920192019
(in thousands, except per share data)2nd QTR1st QTR4th QTR3rd QTR2nd QTR
      
Interest income:     
Interest and fees on loans$80,155  $80,687 $82,698  $84,213 $82,471 
Interest on:     
Obligations of U.S. Government, its agencies and other securities - taxable5,026  5,531 5,973  6,326 6,919 
Obligations of states and political subdivisions - tax-exempt2,151  2,200 2,205  2,225 2,308 
Other interest income113  491 953  1,825 528 
Total interest income87,445  88,909 91,829  94,589 92,226 
      
Interest expense:     
Interest on deposits:     
Demand and savings deposits1,507  6,342 7,795  9,649 8,811 
Time deposits3,346  4,285 4,666  4,694 4,357 
Interest on borrowings1,406  1,999 2,359  3,145 3,207 
Total interest expense6,259  12,626 14,820  17,488 16,375 
      
Net interest income81,186  76,283 77,009  77,101 75,851 
      
Provision for (recovery of) loan losses12,224  5,153 (213) 1,967 1,919 
      
Net interest income after provision for (recovery of) loan losses68,962  71,130 77,222  75,134 73,932 
      
Other income30,964  22,486 24,224  28,136 22,808 
      
Other expense64,799  66,276 71,231  65,738 70,192 
      
Income before income taxes35,127  27,340 30,215  37,532 26,548 
      
Income taxes5,622  4,968 6,279  6,386 4,385 
      
Net income $29,505  $22,372 $23,936  $31,146 $22,163 
      
Per common share:     
Net income - basic$1.81  $1.37 $1.46  $1.90 $1.34 
Net income - diluted$1.80  $1.36 $1.45  $1.89 $1.33 


 
 
PARK NATIONAL CORPORATION 
Detail of other income and other expense - Linked Quarters
      
 20202020201920192019
(in thousands)2nd QTR1st QTR4th QTR3rd QTR2nd QTR
      
Other income:     
Income from fiduciary activities$6,793   $7,113  $7,268  $6,842  $6,935 
Service charges on deposit accounts1,676   2,528  2,757  2,864  2,655 
Other service income8,758   3,766  4,382  4,260  4,040 
Debit card fee income5,560   4,960  5,341  5,313  5,227 
Bank owned life insurance income1,179   1,248  1,158  1,107  1,286 
ATM fees438   412  446  482  460 
Gain (loss) on the sale of OREO, net841   (196) 2  (53) (159)
Net gain (loss) on the sale of investment securities3,313       186  (607)
(Loss) gain on equity securities, net(977) (973) (191) 3,335  232 
Other components of net periodic benefit income1,988   1,988  1,183  1,183  1,183 
Miscellaneous1,395   1,640  1,878  2,617  1,556 
Total other income$30,964   $22,486  $24,224  $28,136  $22,808 
      
Other expense:     
Salaries$30,699   $28,429  $30,903  $30,713  $32,093 
Employee benefits9,080   10,043  8,973  10,389  9,014 
Occupancy expense3,256   3,480  3,355  3,226  3,223 
Furniture and equipment expense4,850   4,319  4,319  4,177  4,386 
Data processing fees2,577   2,492  2,777  2,935  2,905 
Professional fees and services6,901   7,066  10,503  6,702  10,106 
Marketing1,136   1,486  1,468  1,604  1,455 
Insurance1,477   1,550  317  276  1,381 
Communication874   1,155  1,256  1,387  1,375 
State tax expense1,116   1,145  1,024  746  1,054 
Amortization of intangible assets607   606  623  741  702 
Miscellaneous2,226   4,505  5,713  2,842  2,498 
Total other expense$64,799   $66,276  $71,231  $65,738  $70,192 


 
 
PARK NATIONAL CORPORATION 
Asset Quality Information
       
   Year ended December 31,
(in thousands, except ratios)June 30, 2020March 31, 20202019201820172016
       
Allowance for loan losses:      
Allowance for loan losses, beginning of period$61,503 $56,679 $51,512 $49,988 $50,624 $56,494 
Charge-offs2,130 2,685 11,177 13,552 19,403 20,799 
Recoveries1,879 2,356 10,173 7,131 10,210 20,030 
Net charge-offs251 329 1,004 6,421 9,193 769 
Provision for (recovery of) loan losses12,224 5,153 6,171 7,945 8,557 (5,101)
Allowance for loan losses, end of period$73,476 $61,503 $56,679 $51,512 $49,988 $50,624 
       
       
General reserve trends:      
Allowance for loan losses, end of period$73,476 $61,503 $56,679 $51,512 $49,988 $50,624 
Allowance on purchased credit impaired ("PCI") loans106 119 268    
Allowance on purchased loans25      
Specific reserves5,808 5,531 5,230 2,273 684 548 
General reserves on originated loans$67,537 $55,853 $51,181 $49,239 $49,304 $50,076 
       
Total loans$7,204,445 $6,522,519 $6,501,404 $5,692,132 $5,372,483 $5,271,857 
PCI loans12,569 13,765 14,331 3,943   
Purchased loans440,803 489,843 548,436 225,029   
Impaired commercial loans91,724 85,646 77,459 48,135 56,545 70,415 
Originated loans excluding impaired commercial loans$6,659,349 $5,933,265 $5,861,178 $5,415,025 $5,315,938 $5,201,442 
       
       
Asset Quality Ratios:      
Net charge-offs as a % of average loans (annualized)0.01%0.02%0.02%0.12%0.17%0.02%
Allowance for loan losses as a % of period end loans1.02%0.94%0.87%0.90%0.93%0.96%
General reserve as a % of originated total loans less impaired commercial loans1.01%0.94%0.87%0.91%0.93%0.96%
General reserves as a % of originated total loans less impaired commercial loans (excluding PPP loans)1.10%N.A. N.A. N.A. N.A. N.A. 
       
Nonperforming assets:      
Nonaccrual loans$100,406 $90,354 $90,080 $67,954 $72,056 $87,822 
Accruing troubled debt restructurings23,948 27,168 21,215 15,173 20,111 18,175 
Loans past due 90 days or more1,690 1,789 2,658 2,243 1,792 2,086 
Total nonperforming loans$126,044 $119,311 $113,953 $85,370 $93,959 $108,083 
Other real estate owned - Park National Bank427 2,671 3,100 2,788 6,524 6,025 
Other real estate owned - SEPH929 929 929 1,515 7,666 7,901 
Other nonperforming assets - Park National Bank3,599 3,599 3,599 3,464 4,849  
Total nonperforming assets$130,999 $126,510 $121,581 $93,137 $112,998 $122,009 
Percentage of nonaccrual loans to period end loans1.39%1.39%1.39%1.19%1.34%1.67%
Percentage of nonperforming loans to period end loans1.75%1.83%1.75%1.50%1.75%2.05%
Percentage of nonperforming assets to period end loans1.82%1.94%1.87%1.64%2.10%2.31%
Percentage of nonperforming assets to period end total assets1.35%1.45%1.42%1.19%1.50%1.63%
       
       
PARK NATIONAL CORPORATION 
Asset Quality Information (continued)
       
   Year ended December 31,
(in thousands, except ratios)June 30, 2020March 31,
2020
2019201820172016
       
       
New nonaccrual loan information:      
Nonaccrual loans, beginning of period$90,354 $90,080 $67,954 $72,056 $87,822 $95,887 
New nonaccrual loans21,995 21,651 81,009 76,611 58,753 74,786 
Resolved nonaccrual loans11,943 21,377 58,883 80,713 74,519 82,851 
Nonaccrual loans, end of period$100,406 $90,354 $90,080 $67,954 $72,056 $87,822 
       
Impaired commercial loan portfolio information (period end):      
Unpaid principal balance$92,374 $86,379 $78,178 $59,381 $66,585 $95,358 
Prior charge-offs650 733 719 11,246 10,040 24,943 
Remaining principal balance91,724 85,646 77,459 48,135 56,545 70,415 
Specific reserves5,808 5,531 5,230 2,273 684 548 
Book value, after specific reserves$85,916 $80,115 $72,229 $45,862 $55,861 $69,867 
       
 


PARK NATIONAL CORPORATION   
Financial Reconciliations      
NON-GAAP RECONCILIATIONS      
 THREE MONTHS ENDED SIX MONTHS ENDED
(in thousands, except share and per share data)June 30, 2020March 31, 2020June 30, 2019 June 30, 2020June 30, 2019
Net interest income$81,186  $76,283  $75,851   $157,469  $143,627 
less purchase accounting accretion related to NewDominion and Carolina Alliance acquisitions1,301  1,378  1,606   2,679  1,872 
less interest income on former Vision Bank relationships266  77     343  7 
Net interest income - adjusted$79,619  $74,828  $74,245   $154,447  $141,748 
       
Provision for loan losses$12,224  $5,153  $1,919   $17,377  $4,417 
less recoveries on former Vision Bank relationships(685) (764) (65)  (1,449) (165)
Provision for loan losses - adjusted$12,909  $5,917  $1,984   $18,826  $4,582 
       
Other income$30,964  $22,486  $22,808   $53,450  $44,833 
less net gain (loss) on sale of former Vision Bank OREO properties837    (139)  837  (139)
less rebranding initiative related expenses(274)      (274)  
less net gain (loss) on the sale of debt securities in the ordinary course of business3,313    (607)  3,313  (607)
Other income - adjusted$27,088  $22,486  $23,554   $49,574  $45,579 
       
Other expense$64,799  $66,276  $70,192   $131,075  $127,019 
less merger-related expenses related to NewDominion and Carolina Alliance acquisitions214  243  6,058   457  6,334 
less core deposit intangible amortization related to NewDominion and Carolina Alliance acquisitions607  606  702   1,213  991 
less FHLB prepayment penalty  1,793     1,793   
less rebranding initiative related expenses138  270  162   408  202 
less COVID-19 related expenses1,919  262     2,181   
Other expense - adjusted$61,921  $63,102  $63,270   $125,023  $119,492 
       
Tax effect of adjustments to net income identified above (i)$(683) $201  $1,259   $(482) $1,308 
       
Net income - reported$29,505  $22,372  $22,163   $51,877  $47,618 
Net income - adjusted$26,938  $23,126  $26,901   $50,064  $52,539 
       
Diluted EPS$1.80  $1.36  $1.33   $3.16  $2.94 
Diluted EPS, adjusted (h)$1.65  $1.41  $1.62   $3.05  $3.24 
       
Annualized return on average assets (a)(b)1.26%1.04%1.04% 1.15%1.17%
Annualized return on average assets, adjusted (a)(b)(h)1.15%1.07%1.26% 1.11%1.29%
       
Annualized return on average tangible assets (a)(b)(e)1.28%1.06%1.06% 1.18%1.19%
Annualized return on average tangible assets, adjusted (a)(b)(e)(h)1.17%1.09%1.28% 1.13%1.31%
       
Annualized return on average shareholders' equity (a)(b)11.89%9.16%9.49% 10.54%10.81%
Annualized return on average shareholders' equity, adjusted (a)(b)(h)10.85%9.47%11.52% 10.17%11.93%
       
Annualized return on average tangible equity (a)(b)(c)14.33%11.09%11.53% 12.73%12.88%
Annualized return on average tangible equity, adjusted (a)(b)(c)(h)13.09%11.47%13.99% 12.28%14.21%
       
Efficiency ratio (g)57.41%66.61%70.61% 61.72%66.87%
Efficiency ratio, adjusted (g)(h)57.64%64.36%64.20% 60.85%63.29%
       
Annualized net interest margin (g)3.84%3.93%3.92% 3.89%3.89%
Annualized net interest margin, adjusted (g)(h)3.77%3.86%3.84% 3.81%3.84%
       
Note: Explanations for footnotes (a) - (i) are included at the end of the financial tables in this "Financial Reconciliations" section.   
    


    
PARK NATIONAL CORPORATION   
Financial Reconciliations (continued)      
       
(a) Averages are for the three months ended June 30, 2020,  March 31, 2020, and June 30, 2019 and the six months ended June 30, 2020 and June 30, 2019.
(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, 2020March 31, 2020June 30, 2019 June 30, 2020June 30, 2019
AVERAGE SHAREHOLDERS' EQUITY$998,288 $981,976 $936,626  $990,132 $887,946 
Less: Average goodwill and other intangible assets170,303 170,909 165,311  170,606 142,587 
AVERAGE TANGIBLE EQUITY$827,985 $811,067 $771,315  $819,526 $745,359 
       
(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, 2020March 31, 2020June 30, 2019  
TOTAL SHAREHOLDERS' EQUITY$1,001,594 $981,877 $934,432    
Less: Goodwill and other intangible assets169,905 170,512 174,288    
TANGIBLE EQUITY$831,689 $811,365 $760,144    
       
(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, 2020March 31, 2020June 30, 2019 June 30, 2020June 30, 2019
AVERAGE ASSETS$9,408,265 $8,679,789 $8,576,495  $9,044,027 $8,206,502 
Less: Average goodwill and other intangible assets170,303 170,909 165,311  170,606 142,587 
AVERAGE TANGIBLE ASSETS$9,237,962 $8,508,880 $8,411,184  $8,873,421 $8,063,915 
       
(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, 2020March 31, 2020June 30, 2019   
TOTAL ASSETS$9,712,994 $8,719,291 $8,657,453    
Less: Goodwill and other intangible assets169,905 170,512 174,288    
TANGIBLE ASSETS$9,543,089 $8,548,779 $8,483,165    
       
(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, 2020March 31, 2020June 30, 2019 June 30, 2020June 30, 2019
Interest income$87,445 $88,909 $92,226  $176,354 $174,082 
Fully taxable equivalent adjustment723 725 752  1,448 1,486 
Fully taxable equivalent interest income$88,168 $89,634 $92,978  $177,802 $175,568 
Interest expense6,259 12,626 16,375  18,885 30,455 
Fully taxable equivalent net interest income$81,909 $77,008 $76,603  $158,917 $145,113 
       
(h) Adjustments to net income for each period presented are detailed in the non-GAAP reconciliations of net interest income, provision for (recovery of) loan losses, other income and other expense above.
(i) The tax effect of adjustments to net income was calculated assuming a 21% corporate federal income tax rate.   

 

 

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