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

July, 22 2019 04:15 PM Park National Corporation

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

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

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

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

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

Headquartered in Newark, Ohio, Park National Corporation had $8.7 billion in total assets (as of June 30, 2019). The Park organization consists of community bank divisions, specialty finance companies, and a non-bank subsidiary. Park's banking operations are conducted through Park subsidiary The Park National Bank and its divisions, which include Fairfield National Bank Division, Richland Bank Division, Century National Bank Division, First-Knox National Bank Division, United Bank, N.A. Division, Second National Bank Division, Security National Bank Division, Unity National Bank Division, The Park National Bank of Southwest Ohio & Northern Kentucky Division, NewDominion Bank Division and Carolina Alliance Bank Division. Park also includes Scope Leasing, Inc. (d.b.a. Scope Aircraft Finance), Guardian Financial Services Company (d.b.a. Guardian Finance Company) and SE Property Holdings, LLC.

Complete financial tables are listed below.

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

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Park cautions that any forward-looking statements contained in this News Release or made by management of Park are provided to assist in the understanding of anticipated future financial performance. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include, without limitation: Park's ability to execute our business plan successfully and within the expected timeframe; general economic and financial market conditions, specifically in the real estate markets and the credit markets, either nationally or in the states in which Park and our subsidiaries do business, may experience a slowing or reversal of the recent economic expansion in addition to continuing residual effects of recessionary conditions and an uneven spread of positive impacts of recovery on the economy and our counterparties, resulting in adverse impacts on the demand for loan, deposit and other financial services, delinquencies, defaults and counterparties' inability to meet credit and other obligations and the possible impairment of collectability of loans; changes in interest rates and prices may adversely impact prepayment penalty income, mortgage banking income, the value of securities, loans, deposits and other financial instruments and the interest rate sensitivity of our consolidated balance sheet as well as reduce interest margins and impact loan demand; changes in consumer spending, borrowing and saving habits, whether due to tax reform legislation, changes in retail distribution strategies, consumer preferences and behavior, changes in business and economic conditions, legislative and regulatory initiatives, or other factors; changes in unemployment; changes in customers', suppliers', and other counterparties' performance and creditworthiness; the adequacy of our internal controls and risk management program in the event of changes in the market, economic, operational, asset/liability repricing, legal, compliance, strategic, cybersecurity, liquidity, credit and interest rate risks associated with Park's business; disruption in the liquidity and other functioning of U.S. financial markets; our liquidity requirements could be adversely affected by changes to regulations governing bank and bank holding company capital and liquidity standards as well as by changes in our assets and liabilities; competitive factors among financial services organizations could increase significantly, including product and pricing pressures, customer acquisition and retention, changes to third-party relationships and revenues, changes in the manner of providing services, customer acquisition and retention pressures, and our ability to attract, develop and retain qualified banking professionals; customers could pursue alternatives to bank deposits, causing us to lose a relatively inexpensive source of funding; uncertainty regarding the nature, timing, cost and effect of changes in banking regulations or other regulatory or legislative requirements affecting the respective businesses of Park and our subsidiaries, including major reform of the regulatory oversight structure of the financial services industry and changes in laws and regulations concerning taxes, pensions, bankruptcy, consumer protection, rent regulation and housing, financial accounting and reporting, environmental protection, insurance, bank products and services, bank capital and liquidity standards, fiduciary standards, securities and other aspects of the financial services industry, specifically the reforms provided for in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and the Basel III regulatory capital reforms, as well as regulations already adopted and which may be adopted in the future by the relevant regulatory agencies, including the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Federal Reserve Board, to implement the Dodd-Frank Act's provisions, and the Basel III regulatory capital reforms; the effects of easing restrictions on participants in the financial services industry; the effect of changes in accounting policies and practices, as may be adopted by the Financial Accounting Standards Board (the "FASB"), the SEC, the Public Company Accounting Oversight Board and other regulatory agencies, including the new current expected credit loss rule issued by the FASB in June 2016, which will require banks to record, at the time of origination, credit losses expected throughout the life of the asset portfolio on loans and HTM securities, as opposed to the current practice of recording losses which it is probable that a loss event has occurred, which may adversely affect Park's reported financial condition or results of operations; Park's assumptions and estimates used in applying critical accounting policies, which may prove unreliable, inaccurate or not predictive of actual results; changes in law and policy accompanying the current presidential administration and uncertainty or speculation pending the enactment of such changes; significant changes in the tax laws, which may adversely affect the fair values of net deferred tax assets and obligations of state and political subdivisions held in Park's investment securities portfolio; the impact of our ability to anticipate and respond to technological changes on our ability to respond to customer needs and meet competitive demands; operational issues stemming from and/or capital spending necessitated by the potential need to adapt to industry changes in information technology systems on which Park and our subsidiaries are highly dependent; the ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks; a failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors and other service providers, resulting in failures or disruptions in customer account management, general ledger, deposit, loan, or other systems, including as a result of cyber attacks; the existence or exacerbation of general geopolitical instability and uncertainty; the effect of trade policies (including the impact of potential or imposed tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars and other changes in trade regulations), monetary and other fiscal policies (including the impact of money supply and interest rate policies to the Federal Reserve Board) and other governmental policies of the U.S. federal government; the impact on financial markets and the economy of any changes in the credit ratings of the U.S. Treasury obligations and other U.S. government - backed debt, as well as issues surrounding the levels of U.S., European and Asian government debt and concerns regarding the creditworthiness of certain sovereign governments, supranationals and financial institutions in Europe and Asia; the uncertainty surrounding the actions to be taken to implement the referendum by United Kingdom voters to exit the European Union; our litigation and regulatory compliance exposure, including the costs and effects of any adverse developments in legal proceedings or other claims and the costs and effects of unfavorable resolution of regulatory and other governmental examinations or other inquiries; continued availability of earnings and excess capital sufficient for the lawful and prudent declaration of dividends; fraud, scams and schemes of third parties; the impact of widespread natural and other disasters, pandemics, dislocations, civil unrest, terrorist activities or international hostilities on the economy and financial markets generally and on us or our counterparties specifically; the effect of healthcare laws in the U.S. and potential changes for such laws which may increase our healthcare and other costs and negatively impact our operations and financial results; Park's ability to integrate recent acquisitions (including CAB Financial Corporation ("CAB")) as well as any future acquisitions, which may be unsuccessful, or may be more difficult, time-consuming or costly than expected; risk and uncertainties associated with Park's entry into new geographic markets with its recent acquisitions, expected revenue synergies and cost savings from the merger of Park and CAB may not be fully realized or realized within the expected time frame; revenues following the merger of Park and CAB may be lower than expected; customer and employee relationships and business operations may be disrupted by the merger of Park and CAB; Park issued equity securities in the acquisitions of NewDominion Bank and CAB and may issue equity securities in connection with future acquisitions, which could cause ownership and economic dilution to Park's current shareholders; the discontinuation of LIBOR and other reference rates which may result in increased expenses and litigation, and adversely impact the effectiveness of hedging strategies; and other risk factors relating to the banking industry as detailed from time to time in Park's reports filed with the SEC including those described in "Item 1A. Risk Factors" of Part I of Park's Annual Report on Form 10-K for the fiscal year ended December 31, 2018. Park does not undertake, and specifically disclaims any obligation, to publicly release the results of any revisions that may be made to update any forward-looking statement to reflect the events or circumstances after the date on which the forward-looking statement was made, or reflect the occurrence of unanticipated events, except to the extent required by law.

PARK NATIONAL CORPORATION
Financial Highlights
As of or for the three months ended June 30, 2019, March 31, 2019, and June 30, 2018








2019
2019
2018

Percent change vs.
*(in thousands, except share and per share data)*
2nd QTR
1st QTR
2nd QTR

1Q '19
2Q '18
INCOME STATEMENT:






Net interest income
$
75,851

$
67,776

$
64,742


11.9
%
17.2
%
Provision for loan losses
1,919

2,498

1,386


(23.2
)%
38.5
%
Other income
22,808

22,025

23,242


3.6
%
(1.9
)%
Other expense
70,192

56,827

52,534


23.5
%
33.6
%
Income before income taxes
$
26,548

$
30,476

$
34,064


(12.9
)%
(22.1
)%
Income taxes
4,385

5,021

5,823


(12.7
)%
(24.7
)%
Net income
$
22,163

$
25,455

$
28,241


(12.9
)%
(21.5
)%







MARKET DATA:






Earnings per common share - basic (b)
$
1.34

$
1.63

$
1.85


(17.8
)%
(27.6
)%
Earnings per common share - diluted (b)
1.33

1.62

1.83


(17.9
)%
(27.3
)%
Cash dividends declared per common share
1.01

1.21

1.21


(16.5
)%
(16.5
)%
Book value per common share at period end
56.92

54.06

49.51


5.3
%
15.0
%
Market price per common share at period end
99.39

94.75

111.42


4.9
%
(10.8
)%
Market capitalization at period end
1,631,741

1,480,990

1,699,277


10.2
%
(4.0
)%







Weighted average common shares - basic (a)
16,560,545

15,651,541

15,285,532


5.8
%
8.3
%
Weighted average common shares - diluted (a)
16,642,571

15,744,777

15,417,607


5.7
%
7.9
%
Common shares outstanding at period end
16,417,562

15,630,499

15,251,095


5.0
%
7.6
%







PERFORMANCE RATIOS: (annualized)






Return on average assets (a)(b)
1.04
%
1.32
%
1.52
%

(21.2
)%
(31.6
)%
Return on average shareholders' equity (a)(b)
9.49
%
12.31
%
15.02
%

(22.9
)%
(36.8
)%
Yield on loans
5.23
%
5.14
%
4.90
%

1.8
%
6.7
%
Yield on investment securities
2.78
%
2.82
%
2.73
%

(1.4
) %
1.8
%
Yield on money market instruments
2.64
%
2.76
%
1.99
%

(4.3
) %
32.7
%
Yield on interest earning assets
4.76
%
4.66
%
4.39
%

2.1
%
8.4
%
Cost of interest bearing deposits
1.04
%
0.97
%
0.64
%

7.2
%
62.5
%
Cost of borrowings
2.15
%
2.01
%
1.84
%

7.0
%
16.8
%
Cost of paying interest bearing liabilities
1.16
%
1.10
%
0.79
%

5.5
%
46.8
%
Net interest margin (g)
3.92
%
3.86
%
3.81
%

1.6
%
2.9
%
Efficiency ratio (g)
70.61
%
62.77
%
59.23
%

12.5
%
19.2
%







OTHER RATIOS (NON-GAAP):






Tangible book value per share (d)
$
46.30

$
46.42

$
44.77


(0.3
)%
3.4
%







N.M. - Not meaningful






Note: Explanations for footnotes (a) - (i) are included at the end of the financial tables




















PARK NATIONAL CORPORATION
Financial Highlights (continued)
As of or for the three months ended June 30, 2019, March 31, 2019, and June 30, 2018












Percent change vs.
*(in thousands, except ratios)*
June 30, 2019
March 31, 2019
June 30, 2018

1Q '19
2Q '18
BALANCE SHEET:






Investment securities
$
1,396,530

$
1,400,987

$
1,529,783


(0.3
)%
(8.7
)%
Loans
6,376,737

5,740,760

5,324,974


11.1
%
19.8
%
Allowance for loan losses
54,003

53,368

49,452


1.2
%
9.2
%
Goodwill and other intangibles
174,288

119,421

72,334


45.9
%
140.9
%
Other real estate owned (OREO)
3,839

4,629

5,729


(17.1
)%
(33.0
)%
Total assets
8,657,453

7,852,246

7,462,156


10.3
%
16.0
%
Total deposits
7,032,120

6,325,212

6,015,844


11.2
%
16.9
%
Borrowings
595,578

602,569

631,139


(1.2
)%
(5.6
)%
Total shareholders' equity
934,432

845,044

755,088


10.6
%
23.8
%
Tangible equity (d)
760,144

725,623

682,754


4.8
%
11.3
%
Total nonperforming loans
86,833

86,471

98,867


0.4
%
(12.2
)%
Total nonperforming assets
94,168

94,596

104,596


(0.5
)%
(10.0
)%







ASSET QUALITY RATIOS:






Loans as a % of period end total assets
73.66
%
73.11
%
71.36
%

0.8
%
3.2
%
Total nonperforming loans as a % of period end loans
1.36
%
1.51
%
1.86
%

(9.9
)%
(26.9
)%
Total nonperforming assets as a % of period end loans + OREO + other nonperforming assets
1.48
%
1.65
%
1.96
%

(10.3
)%
(24.5
)%
Allowance for loan losses as a % of period end loans
0.85
%
0.93
%
0.93
%

(8.6
)%
(8.6
)%
Net loan charge-offs
$
1,284

$
642

$
903


100.0
%
42.2
%
Annualized net loan charge-offs as a % of average loans (a)
0.08
%
0.05
%
0.07
%

60.0
%
14.3
%







CAPITAL & LIQUIDITY:






Total shareholders' equity / Period end total assets
10.79
%
10.76
%
10.12
%

0.3
%
6.6
%
Tangible equity (d) / Tangible assets (f)
8.96
%
9.38
%
9.24
%

(4.5
)%
(3.0
)%
Average shareholders' equity / Average assets (a)
10.92
%
10.71
%
10.11
%

2.0
%
8.0
%
Average shareholders' equity / Average loans (a)
14.79
%
14.74
%
14.26
%

0.3
%
3.7
%
Average loans / Average deposits (a)
91.03
%
90.78
%
88.23
%

0.3
%
3.2
%

PARK NATIONAL CORPORATION
Financial Highlights
Six months ended June 30, 2019 and June 30, 2018






2019
2018


*(in thousands, except share and per share data and ratios)*
Six months ended June 30
Six months ended June 30

Percent change vs '18
INCOME STATEMENT:




Net interest income
$
143,627

$
129,592


10.8
%
Provision for loan losses
4,417

1,646


168.3
%
Other income
44,833

50,145


(10.6
)%
Other expense
127,019

106,842


18.9
%
Income before income taxes
$
57,024

$
71,249


(20.0
)%
Income taxes
9,406

11,885


(20.9
)%
Net income
$
47,618

$
59,364


(19.8
)%





MARKET DATA:




Earnings per common share - basic (b)
$
2.96

$
3.88


(23.7
)%
Earnings per common share - diluted (b)
2.94

3.85


(23.6
)%
Cash dividends declared per common share
2.22

2.15


3.3
%





Weighted average common shares - basic (a)
16,106,043

15,286,932


5.4
%
Weighted average common shares - diluted (a)
16,193,643

15,424,585


5.0
%





PERFORMANCE RATIOS: (annualized)




Return on average assets (a)(b)
1.17
%
1.61
%

(27.3
)%
Return on average shareholders' equity (a)(b)
10.81
%
15.92
%

(32.1
)%
Yield on loans
5.19
%
4.92
%

5.5
%
Yield on investment securities
2.80
%
2.68
%

4.5
%
Yield on money market instruments
2.70
%
1.76
%

53.4
%
Yield on interest earning assets
4.71
%
4.39
%

7.3
%
Cost of interest bearing deposits
1.01
%
0.59
%

71.2
%
Cost of borrowings
2.08
%
1.78
%

16.9
%
Cost of paying interest bearing liabilities
1.13
%
0.75
%

50.7
%
Net interest margin (g)
3.89
%
3.84
%

1.3
%
Efficiency ratio (g)
66.87
%
58.98
%

13.4
%





ASSET QUALITY RATIOS:




Net loan charge-offs
$
1,926

$
2,182


(11.7
)%
Annualized net loan charge-offs as a % of average loans (a)
0.06
%
0.08
%

(25.0
)%





CAPITAL & LIQUIDITY:




Average shareholders' equity / Average assets (a)
10.82
%
10.08
%

7.3
%
Average shareholders' equity / Average loans (a)
14.77
%
14.20
%

4.0
%
Average loans / Average deposits (a)
90.91
%
88.80
%

2.4
%





N.M. - Not meaningful




Note: Explanations for footnotes (a) - (i) are included at the end of the financial tables










PARK NATIONAL CORPORATION
Consolidated Statements of Income











Three Months Ended

Six Months Ended


June 30,

June 30,
*(in thousands, except share and per share data)*

2019

2018

2019

2018









Interest income:








Interest and fees on loans

$
82,471


$
64,496


$
154,474


$
128,898

Interest on:








Obligations of U.S. Government, its agencies








and other securities - taxable

6,919


7,746


13,914


14,513

Obligations of states and political subdivisions - tax-exempt

2,308


2,178


4,525


4,352

Other interest income

528


271


1,169


642

Total interest income

92,226


74,691


174,082


148,405










Interest expense:








Interest on deposits:








Demand and savings deposits

8,811


4,107


15,904


7,397

Time deposits

4,357


2,886


8,134


5,437

Interest on borrowings

3,207


2,956


6,417


5,979

Total interest expense

16,375


9,949


30,455


18,813










Net interest income

75,851


64,742


143,627


129,592










Provision for loan losses

1,919


1,386


4,417


1,646










Net interest income after provision for loan losses

73,932


63,356


139,210


127,946










Other income

22,808


23,242


44,833


50,145










Other expense

70,192


52,534


127,019


106,842










Income before income taxes

26,548


34,064


57,024


71,249










Income taxes

4,385


5,823


9,406


11,885










Net income

$
22,163


$
28,241


$
47,618


$
59,364










Per Common Share:








Net income - basic

$
1.34


$
1.85


$
2.96


$
3.88

Net income - diluted

$
1.33


$
1.83


$
2.94


$
3.85










Weighted average shares - basic

16,560,545


15,285,532


16,106,043


15,286,932

Weighted average shares - diluted

16,642,571


15,417,607


16,193,643


15,424,585










Cash dividends declared

$
1.01


$
1.21


$
2.22


$
2.15


PARK NATIONAL CORPORATION
Consolidated Balance Sheets



*(in thousands, except share data)*
June 30, 2019
December 31, 2018



Assets





Cash and due from banks
$
160,589

$
141,890

Money market instruments
98,916

25,324

Investment securities
1,396,530

1,428,145

Loans
6,376,737

5,692,132

Allowance for loan losses
(54,003
)
(51,512
)
Loans, net
6,322,734

5,640,620

Bank premises and equipment, net
72,129

59,771

Goodwill and other intangible assets
174,288

119,710

Other real estate owned
3,839

4,303

Other assets
428,428

384,545

Total assets
$
8,657,453

$
7,804,308




Liabilities and Shareholders' Equity





Deposits:


Noninterest bearing
$
1,907,027

$
1,804,881

Interest bearing
5,125,093

4,455,979

Total deposits
7,032,120

6,260,860

Borrowings
595,578

636,966

Other liabilities
95,323

73,976

Total liabilities
$
7,723,021

$
6,971,802







Shareholders' Equity:


Preferred shares (200,000 shares authorized; no shares outstanding at June 30, 2019 and December 31, 2018)
$
—

$
—

Common shares (No par value; 20,000,000 shares authorized in 2019 and 2018; 17,623,216 shares issued at June 30, 2019 and 16,586,165 shares issued at December 31, 2018)
456,911

358,598

Accumulated other comprehensive loss, net of taxes
(26,307
)
(49,788
)
Retained earnings
625,227

614,069

Treasury shares (1,205,654 shares at June 30, 2019 and 887,987 shares at December 31, 2018)
(121,399
)
(90,373
)
Total shareholders' equity
$
934,432

$
832,506

Total liabilities and shareholders' equity
$
8,657,453

$
7,804,308





PARK NATIONAL CORPORATION
Consolidated Average Balance Sheets







Three Months Ended

Six Months Ended

June 30,

June 30,
*(in thousands)*
2019
2018

2019
2018






Assets











Cash and due from banks
$
127,115

$
118,870


$
122,485

$
118,561

Money market instruments
80,239

54,551


87,212

73,437

Investment securities
1,413,309

1,506,699


1,401,641

1,478,564

Loans
6,332,167

5,289,056


6,012,446

5,295,814

Allowance for loan losses
(53,849
)
(49,750
)

(53,124
)
(50,168
)
Loans, net
6,278,318

5,239,306


5,959,322

5,245,646

Bank premises and equipment, net
71,253

56,109


66,079

56,307

Goodwill and other intangible assets
165,311

72,334


142,587

72,334

Other real estate owned
4,183

8,416


4,277

10,962

Other assets
436,767

403,463


422,899

401,608

Total assets
$
8,576,495

$
7,459,748


$
8,206,502

$
7,457,419













Liabilities and Shareholders' Equity











Deposits:





Noninterest bearing
$
1,887,335

$
1,602,228


$
1,809,213

$
1,585,742

Interest bearing
5,068,709

4,392,733


4,804,076

4,378,091

Total deposits
6,956,044

5,994,961


6,613,289

5,963,833

Borrowings
597,448

645,909


622,414

678,296

Other liabilities
86,377

64,777


82,853

63,414

Total liabilities
$
7,639,869

$
6,705,647


$
7,318,556

$
6,705,543







Shareholders' Equity:





Preferred shares
$
—

$
—


$
—

$
—

Common shares
455,895

307,689


407,533

307,714

Accumulated other comprehensive loss, net of taxes
(36,825
)
(54,184
)

(41,655
)
(47,965
)
Retained earnings
624,995

588,170


623,291

579,448

Treasury shares
(107,439
)
(87,574
)

(101,223
)
(87,321
)
Total shareholders' equity
$
936,626

$
754,101


$
887,946

$
751,876

Total liabilities and shareholders' equity
$
8,576,495

$
7,459,748


$
8,206,502

$
7,457,419


PARK NATIONAL CORPORATION
Consolidated Statements of Income - Linked Quarters







2019
2019
2018
2018
2018
*(in thousands, except per share data)*
2nd QTR
1st QTR
4th QTR
3rd QTR
2nd QTR






Interest income:





Interest and fees on loans
$
82,471

$
72,003

$
72,342

$
69,905

$
64,496

Interest on:





Obligations of U.S. Government, its agencies and other securities - taxable
6,919

6,995

7,275

7,691

7,746

Obligations of states and political subdivisions - tax-exempt
2,308

2,217

2,213

2,205

2,178

Other interest income
528

641

337

428

271

Total interest income
92,226

81,856

82,167

80,229

74,691







Interest expense:





Interest on deposits:





Demand and savings deposits
8,811

7,093

6,006

6,412

4,107

Time deposits
4,357

3,777

3,610

3,328

2,886

Interest on borrowings
3,207

3,210

2,921

2,813

2,956

Total interest expense
16,375

14,080

12,537

12,553

9,949







Net interest income
75,851

67,776

69,630

67,676

64,742







Provision for loan losses
1,919

2,498

3,359

2,940

1,386







Net interest income after provision for loan losses
73,932

65,278

66,271

64,736

63,356







Other income
22,808

22,025

26,892

24,064

23,242







Other expense
70,192

56,827

62,597

59,316

52,534







Income before income taxes
26,548

30,476

30,566

29,484

34,064







Income taxes
4,385

5,021

4,305

4,722

5,823







Net income
$
22,163

$
25,455

$
26,261

$
24,762

$
28,241







Per Common Share:





Net income - basic
$
1.34

$
1.63

$
1.67

$
1.58

$
1.85

Net income - diluted
$
1.33

$
1.62

$
1.67

$
1.56

$
1.83


PARK NATIONAL CORPORATION
Detail of other income and other expense - Linked Quarters







2019
2019
2018
2018
2018
(in thousands)
2nd QTR
1st QTR
4th QTR
3rd QTR
2nd QTR






Other income:





Income from fiduciary activities
$
6,935

$
6,723

$
6,814

$
6,418

$
6,666

Service charges on deposits
2,655

2,559

2,852

2,861

2,826

Other service income
4,040

2,818

3,279

3,246

3,472

Debit card fee income
5,227

4,369

4,581

4,352

4,382

Bank owned life insurance income
1,286

1,006

2,190

2,585

1,031

ATM fees
460

440

444

500

510

OREO valuation adjustments
(55
)
(27
)
(93
)
(77
)
(114
)
(Loss) gain on the sale of OREO, net
(159
)
(12
)
142

(81
)
(147
)
Net loss on the sale of investment securities
(607
)
—

—

—

—

Unrealized gain (loss) on equity securities
232

1,742

(17
)
89

1,348

Other components of net periodic benefit income
1,183

1,183

1,705

1,705

1,705

Gain on the sale of loans
—

—

2,826

—

—

Miscellaneous
1,611

1,224

2,169

2,466

1,563

Total other income
$
22,808

$
22,025

$
26,892

$
24,064

$
23,242







Other expense:





Salaries
$
32,093

$
25,805

$
27,103

$
27,229

$
24,103

Employee benefits
9,014

8,430

7,977

7,653

7,630

Occupancy expense
3,223

3,011

2,769

2,976

2,570

Furniture and equipment expense
4,386

4,150

4,170

3,807

4,013

Data processing fees
2,905

2,133

2,222

2,580

1,902

Professional fees and services
10,106

6,006

8,516

8,065

6,123

Marketing
1,455

1,226

1,377

1,364

1,185

Insurance
1,381

1,156

1,277

1,388

1,196

Communication
1,375

1,333

1,335

1,207

1,189

State tax expense
1,054

1,005

750

1,000

958

Amortization of intangible assets
702

289

289

289

—

Miscellaneous
2,498

2,283

4,812

1,758

1,665

Total other expense
$
70,192

$
56,827

$
62,597

$
59,316

$
52,534

PARK NATIONAL CORPORATION
Asset Quality Information










Year ended December 31,
*(in thousands, except ratios)*
June 30, 2019
March 31, 2019
2018
2017
2016
2015







Allowance for loan losses:






Allowance for loan losses, beginning of period
$
53,368

$
51,512

$
49,988

$
50,624

$
56,494

$
54,352

Charge-offs
2,928

2,987

13,552

19,403

20,799

14,290

Recoveries
1,644

2,345

7,131

10,210

20,030

11,442

Net charge-offs
1,284

642

6,421

9,193

769

2,848

Provision for (recovery of) loan losses
1,919

2,498

7,945

8,557

(5,101
)
4,990

Allowance for loan losses, end of period
$
54,003

$
53,368

$
51,512

$
49,988

$
50,624

$
56,494















General reserve trends:






Allowance for loan losses, end of period
$
54,003

$
53,368

$
51,512

$
49,988

$
50,624

$
56,494

Specific reserves
2,379

2,468

2,273

684

548

4,191

General reserves
$
51,624

$
50,900

$
49,239

$
49,304

$
50,076

$
52,303








Total loans
$
6,376,737

$
5,740,760

$
5,692,132

$
5,372,483

$
5,271,857

$
5,068,085

Impaired commercial loans
50,225

50,881

48,135

56,545

70,415

80,599

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

$
5,689,879

$
5,643,997

$
5,315,938

$
5,201,442

$
4,987,486















Asset Quality Ratios:






Net charge-offs as a % of average loans (annualized)
0.08
%
0.05
%
0.12
%
0.17
%
0.02
%
0.06
%
Allowance for loan losses as a % of period end loans
0.85
%
0.93
%
0.90
%
0.93
%
0.96
%
1.11
%
General reserves as a % of total loans less impaired commercial loans
0.82
%
0.89
%
0.87
%
0.93
%
0.96
%
1.05
%
General reserves as a % of total loans less impaired commercial loans (excluding acquired loans)
0.92
%
0.93
%
0.91
%

N.A.


N.A.


N.A.








Nonperforming assets:






Nonaccrual loans
$
66,675

$
69,175

$
67,954

$
72,056

$
87,822

$
95,887

Accruing troubled debt restructurings
17,759

15,757

15,173

20,111

18,175

24,979

Loans past due 90 days or more
2,399

1,539

2,243

1,792

2,086

1,921

Total nonperforming loans
$
86,833

$
86,471

$
85,370

$
93,959

$
108,083

$
122,787

Other real estate owned - Park National Bank
3,042

3,114

2,788

6,524

6,025

7,456

Other real estate owned - SEPH
797

1,515

1,515

7,666

7,901

11,195

Other nonperforming assets - Park National Bank
3,496

3,496

3,464

4,849

—

—

Total nonperforming assets
$
94,168

$
94,596

$
93,137

$
112,998

$
122,009

$
141,438

Percentage of nonaccrual loans to period end loans
1.05
%
1.20
%
1.19
%
1.34
%
1.67
%
1.89
%
Percentage of nonperforming loans to period end loans
1.36
%
1.51
%
1.50
%
1.75
%
2.05
%
2.42
%
Percentage of nonperforming assets to period end loans
1.48
%
1.65
%
1.64
%
2.10
%
2.31
%
2.79
%
Percentage of nonperforming assets to period end total assets
1.09
%
1.20
%
1.19
%
1.50
%
1.63
%
1.93
%














PARK NATIONAL CORPORATION
Asset Quality Information (continued)










Year ended December 31,
(in thousands, except ratios)
June 30, 2019
March 31, 2019
2018
2017
2016
2015














New nonaccrual loan information:






Nonaccrual loans, beginning of period
$
69,175

$
67,954

$
72,056

$
87,822

$
95,887

$
100,393

New nonaccrual loans
17,952

12,484

76,611

58,753

74,786

80,791

Resolved nonaccrual loans
20,452

11,263

80,713

74,519

82,851

85,297

Nonaccrual loans, end of period
$
66,675

$
69,175

$
67,954

$
72,056

$
87,822

$
95,887








Impaired commercial loan portfolio information (period end):






Unpaid principal balance
$
56,338

$
61,838

$
59,381

$
66,585

$
95,358

$
109,304

Prior charge-offs
6,113

10,957

11,246

10,040

24,943

28,705

Remaining principal balance
50,225

50,881

48,135

56,545

70,415

80,599

Specific reserves
2,379

2,468

2,273

684

548

4,191

Book value, after specific reserves
$
47,846

$
48,413

$
45,862

$
55,861

$
69,867

$
76,408

PARK NATIONAL CORPORATION
Financial Reconciliations







NON-GAAP RECONCILIATIONS







THREE MONTHS ENDED

SIX MONTHS ENDED
*(in thousands, except share and per share data)*
June 30, 2019
March 31, 2019
June 30, 2018

June 30, 2019
June 30, 2018
Net interest income
$
75,851

$
67,776

$
64,742


$
143,627

$
129,592

less purchase accounting accretion related to NewDominion and Carolina Alliance acquisitions
1,606

266

—


1,872

—

less interest income on former Vision Bank relationships
—

7

814


7

3,310

Net interest income - adjusted
$
74,245

$
67,503

$
63,928


$
141,748

$
126,282








Provision for loan losses
$
1,919

$
2,498

$
1,386


$
4,417

$
1,646

less recoveries on former Vision Bank relationships
(65
)
(100
)
(325
)

(165
)
(505
)
Provision for loan losses - adjusted
$
1,984

$
2,598

$
1,711


$
4,582

$
2,151








Other income
$
22,808

$
22,025

$
23,242


$
44,833

$
50,145

less net (loss) gain on sale of former Vision Bank OREO properties
$
(139
)
$
—

$
32


$
(139
)
$
4,202

less gain on 8.55% prior investment in NewDominion
—

—

—


—

3,500

less other service income related to former Vision Bank relationships
—

—

46


—

1,057

less net loss on the sale of debt securities in the ordinary course of business
(607
)
—

—


(607
)
(2,271
)
Other income - adjusted
$
23,554

$
22,025

$
23,164


$
45,579

$
43,657








Other expense
$
70,192

$
56,827

$
52,534


$
127,019

$
106,842

less merger related expenses related to NewDominion and Carolina Alliance acquisitions
6,058

276

445


6,334

595

less core deposit intangible amortization related to NewDominion and Carolina Alliance acquisitions
702

289

—


991

—

less management and consulting expenses related to collection of payments on former Vision Bank loan relationships
—

—

47


—

1,236

less one-time incentive expense
—

—

—


—

1,128

Other expense - adjusted
$
63,432

$
56,262

$
52,042


$
119,694

$
103,883








Tax effect of adjustments to net income identified above (i)
$
1,225

$
40

$
(152
)

$
1,266

$
(1,542
)







Net income - reported
$
22,163

$
25,455

$
28,241


$
47,618

$
59,364

Net income - adjusted
$
26,773

$
25,607

$
27,668


$
52,379

$
53,562








Diluted EPS
$
1.33

$
1.62

$
1.83


$
2.94

$
3.85

Diluted EPS, adjusted (h)
$
1.61

$
1.63

$
1.79


$
3.23

$
3.47








Annualized return on average assets (a)(b)
1.04
%
1.32
%
1.52
%

1.17
%
1.61
%
Annualized return on average assets, adjusted (a)(b)(h)
1.25
%
1.33
%
1.49
%

1.29
%
1.45
%







Annualized return on average tangible assets (a)(b)(e)
1.06
%
1.34
%
1.53
%

1.19
%
1.62
%
Annualized return on average tangible assets, adjusted (a)(b)(e)(h)
1.28
%
1.35
%
1.50
%

1.31
%
1.46
%







Annualized return on average equity (a)(b)
9.49
%
12.31
%
15.02
%

10.81
%
15.92
%
Annualized return on average equity, adjusted (a)(b)(h)
11.47
%
12.38
%
14.72
%

11.90
%
14.37
%







Annualized return on average tangible equity (a)(b)(c)
11.53
%
14.36
%
16.61
%

12.88
%
17.62
%
Annualized return on average tangible equity, adjusted (a)(b)(c)(h)
13.92
%
14.44
%
16.28
%

14.17
%
15.89
%







Efficiency ratio (g)
70.61
%
62.77
%
59.23
%

66.87
%
58.98
%
Efficiency ratio, adjusted (g)(h)
64.36
%
62.33
%
59.28
%

63.39
%
60.63
%







Annualized net interest margin (g)
3.92
%
3.86
%
3.81
%

3.89
%
3.84
%
Annualized net interest margin, adjusted (g)(h)
3.84
%
3.85
%
3.77
%

3.84
%
3.75
%







Note: Explanations for footnotes (a) - (i) are included at the end of the financial tables

PARK NATIONAL CORPORATION
Financial Highlights (continued)

(a) Averages are for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018 and the six months ended June 30, 2019 and June 30, 2018.
(b) Reported measure uses net income.
(c) Net income for each period divided by average tangible equity during the period. Average tangible equity equals average shareholders' equity during the applicable period less average goodwill and other intangible assets during the applicable period.







RECONCILIATION OF AVERAGE SHAREHOLDERS' EQUITY TO AVERAGE TANGIBLE EQUITY:



THREE MONTHS ENDED

SIX MONTHS ENDED

June 30, 2019
March 31, 2019
June 30, 2018

June 30, 2019
June 30, 2018
AVERAGE SHAREHOLDERS' EQUITY
$
936,626

$
838,723

$
754,101


$
887,946

$
751,876

Less: Average goodwill and other intangible assets
165,311

119,611

72,334


142,587

72,334

AVERAGE TANGIBLE EQUITY
$
771,315

$
719,112

$
681,767


$
745,359

$
679,542








(d) Tangible equity divided by common shares outstanding at period end. Tangible equity equals total shareholders' equity less goodwill and other intangible assets, in each case at the end of the period.







RECONCILIATION OF TOTAL SHAREHOLDERS' EQUITY TO TANGIBLE EQUITY:

June 30, 2019
March 31, 2019
June 30, 2018



TOTAL SHAREHOLDERS' EQUITY
$
934,432

$
845,044

$
755,088




Less: Goodwill and other intangible assets
174,288

119,421

72,334




TANGIBLE EQUITY
$
760,144

$
725,623

$
682,754











(e) Net income for each period divided by average tangible assets during the period. Average tangible assets equals average assets less average goodwill and other intangible assets, in each case during the applicable period.







RECONCILIATION OF AVERAGE ASSETS TO AVERAGE TANGIBLE ASSETS



THREE MONTHS ENDED

SIX MONTHS ENDED

June 30, 2019
March 31, 2019
June 30, 2018

June 30, 2019
June 30, 2018
AVERAGE ASSETS
$
8,576,495

$
7,832,397

$
7,459,748


$
8,206,502

$
7,457,419

Less: Average goodwill and other intangible assets
165,311

119,611

72,334


142,587

72,334

AVERAGE TANGIBLE ASSETS
$
8,411,184

$
7,712,786

$
7,387,414


$
8,063,915

$
7,385,085








(f) Tangible equity divided by tangible assets. Tangible assets equals total assets less goodwill and other intangible assets, in each case at the end of the period.







RECONCILIATION OF TOTAL ASSETS TO TANGIBLE ASSETS:

June 30, 2019
March 31, 2019
June 30, 2018



TOTAL ASSETS
$
8,657,453

$
7,852,246

$
7,462,156




Less: Goodwill and other intangible assets
174,288

119,421

72,334




TANGIBLE ASSETS
$
8,483,165

$
7,732,825

$
7,389,822











(g) Efficiency ratio is calculated by dividing total other expense by the sum of fully taxable equivalent net interest income and other income. Fully taxable equivalent net interest income reconciliation is shown assuming a 21% corporate federal income tax rate. Additionally, net interest margin is calculated on a fully taxable equivalent basis by dividing fully taxable equivalent net interest income by average interest earning assets.







RECONCILIATION OF FULLY TAXABLE EQUIVALENT NET INTEREST INCOME TO NET INTEREST INCOME

THREE MONTHS ENDED

SIX MONTHS ENDED

June 30, 2019
March 31, 2019
June 30, 2018

June 30, 2019
June 30, 2018
Interest income
$
92,226

$
81,856

$
74,691


$
174,082

$
148,405

Fully taxable equivalent adjustment
752

734

705


1,486

1,406

Fully taxable equivalent interest income
$
92,978

$
82,590

$
75,396


$
175,568

$
149,811

Interest expense
16,375

14,080

9,949


30,455

18,813

Fully taxable equivalent net interest income
$
76,603

$
68,510

$
65,447


$
145,113

$
130,998








(h) Adjustments to net income for each period presented are detailed in the non-GAAP reconciliation above.
(i) The tax effect of adjustments to net income was calculated assuming a 21% corporate federal income tax rate.

Company Name:	Park National Corporation
Stock Symbol:	PRK
Market:	NYSE
Website:	parknationalcorp.com

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