Park National Corporation reports financial results for third quarter and first nine months of 2020

Monday, 26. October 2020 21:15

NEWARK, Ohio, Oct. 26, 2020 (GLOBE NEWSWIRE) -- Park National Corporation (Park) (NYSE American: PRK) today reported financial results for the third quarter and first nine months of 2020 (three and nine months ended September 30, 2020). Park's board of directors declared a quarterly cash dividend of $1.02 per common share, payable on December 10, 2020 to common shareholders of record as of November 20, 2020.

Park’s net income for the third quarter of 2020 was $30.8 million, a 1.0 percent decrease from $31.1 million for the third quarter of 2019. Third quarter 2020 net income per diluted common share was $1.88, compared to $1.89 in the third quarter of 2019. Park's net income for the first nine months of 2020 was $82.7 million, a 5.0 percent increase from $78.8 million for the first nine months of 2019. Net income per diluted common share was $5.04 for the first nine months of 2020, compared to $4.84 for the first nine months of 2019.

Park's community-banking subsidiary, The Park National Bank, reported net income of $32.9 million for the third quarter of 2020, a 6.3 percent increase compared to $30.9 million for the same period of 2019. The bank reported net income of $89.5 million for the first nine months of 2020, compared to $87.0 million for the first nine months of 2019.

“Our results through the spring and summer reflect the unwavering dedication our associates have to supporting customers in the most reliable and compassionate ways. Our service style has always included easy, direct access to local bankers, quick responses, and flexibility to fit unique situations. The excellent loan growth this year is absolutely connected to our bankers’ reputation for answering phones and providing solutions – even on evenings and weekends,” Park Chief Executive Office David Trautman explained.

“As our communities adapted to pandemic conditions, local businesses needed swift access to funds as they adjusted and persevered. Families needed fair financing for vehicles and recreational equipment, and many needed guidance about low mortgage rates. Everyone needed and deserves service in the quickest, safest way possible. We are extremely proud of and grateful for our associates, in every corner of our organization, who continue to dedicate themselves to serving our communities and neighbors.”

Headquartered in Newark, Ohio, Park National Corporation has $9.2 billion in total assets (as of September 30, 2020). Park's banking operations are conducted through its 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 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:

  • the ever-changing effects of the novel coronavirus (COVID-19) pandemic - - the duration, extent and severity of which are impossible to predict, including the possibility of further resurgence in the spread of COVID-19 - - 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 public health actions directed toward the containment of the COVID-19 pandemic, and the implementation of fiscal stimulus packages;
  • the impact of future governmental and regulatory actions upon our participation in and execution of government programs related to the COVID-19 pandemic;
  • Park's ability to execute our business plan successfully and within the expected timeframe as well as our ability to manage strategic initiatives in light of the impact of the COVID-19 pandemic and the various responses to the COVID-19 pandemic;
  • 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 weaker recovery than anticipated, in addition to the continuing impact of the COVID-19 pandemic on our customers’ operations and financial condition, either of which may result 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;
  • factors that can impact the performance of our loan portfolio, including real estate values and liquidity in our primary market areas, the financial health of our commercial borrowers and the success of construction projects that we finance, including any loans acquired in acquisition transactions;
  • the effect of monetary and other fiscal policies (including the impact of money supply and interest rate policies of the Federal Reserve Board) as well as disruption in the liquidity and functioning of U.S. financial markets, as a result of the COVID-19 pandemic and government policies implemented in response thereto, may adversely impact prepayment penalty income, mortgage banking income, income from fiduciary activities, the value of securities,  deposits and other financial instruments, in addition to the loan demand and the performance of our loan portfolio, and the interest rate sensitivity of our consolidated balance sheet as well as reduce interest margins;
  • 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 levels in the states in which Park and our subsidiaries do business may be different than anticipated due to the continuing impact of the COVID-19 pandemic;
  • changes in customers', suppliers', and other counterparties' performance and creditworthiness may be different than anticipated due to the continuing impact 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 of our associates working remotely), asset/liability repricing, legal, compliance, strategic, cybersecurity, liquidity, credit and interest rate risks associated with Park's business;
  • competitive pressures among financial services organizations could increase significantly, including product and pricing pressures (which could in turn impact our credit spreads), 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;
  • 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 and bank holding company 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 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 Park's ability to anticipate and respond to technological changes on Park's 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 Park's 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 as well as 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);
  • uncertainty regarding changes to the U.S. presidential administration and Congress and the impact thereof on the regulatory landscape, capital markets, and the response to and management of the COVID-19 pandemic;
  • 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 growth rates and financial stability of certain sovereign governments, supranationals and financial institutions in Europe and Asia and the risk they may face difficulties servicing their sovereign debt;
  • 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, regional or national protests and 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 our 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 June 30, 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 September 30, 2020, June 30, 2020, and September 30, 2019     
       
 202020202019 Percent change vs.
(in thousands, except share and per share data)3rd QTR2nd QTR3rd QTR 2Q '203Q '19
INCOME STATEMENT:      
Net interest income$83,840 $81,186 $77,101  3.3 %8.7 %
Provision for loan losses13,836 12,224 1,967  13.2 %603.4 %
Other income36,558 30,964 28,136  18.1 %29.9 %
Other expense69,859 64,799 65,738  7.8 %6.3 %
Income before income taxes$36,703 $35,127 $37,532  4.5 %(2.2)%
Income taxes5,857 5,622 6,386  4.2 %(8.3)%
Net income$30,846 $29,505 $31,146  4.5 %(1.0)%
       
MARKET DATA:      
Earnings per common share - basic (a)$1.89 $1.81 $1.90  4.4 %(0.5)%
Earnings per common share - diluted (a)1.88 1.80 1.89  4.4 %(0.5)%
Cash dividends declared per common share1.02 1.02 1.01   %1.0 %
Book value per common share at period end62.39 61.46 58.54  1.5 %6.6 %
Market price per common share at period end81.96 70.38 94.81  16.5 %(13.6)%
Market capitalization at period end1,336,011 1,146,942 1,548,527  16.5 %(13.7)%
       
Weighted average common shares - basic (b)16,300,720 16,296,427 16,382,798   %(0.5)%
Weighted average common shares - diluted (b)16,393,792 16,375,434 16,475,741  0.1 %(0.5)%
Common shares outstanding at period end16,300,763 16,296,425 16,332,951   %(0.2)%
       
PERFORMANCE RATIOS: (annualized)      
Return on average assets (a)(b)1.28%1.26%1.41% 1.6 %(9.2)%
Return on average shareholders' equity (a)(b)12.03%11.89%13.07% 1.2 %(8.0)%
Yield on loans4.54%4.63%5.25% (1.9)%(13.5)%
Yield on investment securities2.35%2.76%2.72% (14.9)%(13.6)%
Yield on money market instruments0.11%0.10%2.43% 10.0 %(95.5)%
Yield on interest earning assets4.12%4.14%4.73% (0.5)%(12.9)%
Cost of interest bearing deposits0.26%0.36%1.08% (27.8)%(75.9)%
Cost of borrowings1.63%1.33%2.25% 22.6 %(27.6)%
Cost of paying interest bearing liabilities0.39%0.43%1.19% (9.3)%(67.2)%
Net interest margin (g)3.85%3.84%3.86% 0.3 %(0.3)%
Efficiency ratio (g)57.69%57.41%62.03% 0.5 %(7.0)%
       
OTHER RATIOS (NON-GAAP):      
Tangible book value per share (d)$52.00 $51.04 $47.92  1.9 %8.5 %
       
       
Note: Explanations for footnotes (a) - (k) are included at the end of the financial tables in the "Financial Reconciliations" section.      
       
PARK NATIONAL CORPORATION
Financial Highlights (continued)
As of or for the three months ended September 30, 2020, June 30, 2020, and September 30, 2019     
       
     Percent change vs.
(in thousands, except ratios)September 30,
2020
June 30,
2020
September 30,
2019
 2Q '203Q '19
BALANCE SHEET:      
Investment securities$1,097,598 $1,153,186 $1,328,930  (4.8)%(17.4)%
Loans7,278,546 7,204,445 6,403,647  1.0 %13.7 %
Allowance for loan losses87,038 73,476 55,853  18.5 %55.8 %
Goodwill and other intangible assets169,380 169,905 173,489  (0.3)%(2.4)%
Other real estate owned (OREO)836 1,356 3,779  (38.3)%(77.9)%
Total assets9,240,006 9,712,994 8,723,610  (4.9)%5.9 %
Total deposits7,475,829 8,161,900 7,168,259  (8.4)%4.3 %
Borrowings643,103 444,410 498,338  44.7 %29.0 %
Total shareholders' equity1,016,996 1,001,594 956,140  1.5 %6.4 %
Tangible equity (d)847,616 831,689 782,651  1.9 %8.3 %
Total nonperforming loans148,442
 126,044 111,184  17.8
 %33.5
 %
Total nonperforming assets152,670
 130,999 118,561  16.5
 %28.8
 %
       
ASSET QUALITY RATIOS:      
Loans as a % of period end total assets78.77%74.17%73.41% 6.2 %7.3 %
Total nonperforming loans as a % of period end loans2.04
%1.75%1.74% 16.6
 %17.2
 %
Total nonperforming assets as a % of period end loans + OREO + other nonperforming assets2.10
%1.82%1.85% 15.4
 %13.5
 %
Allowance for loan losses as a % of period end loans1.20%1.02%0.87% 17.6 %37.9 %
Net loan charge-offs$274 $251 $117  9.2 %134.2 %
Annualized net loan charge-offs as a % of average loans (b)0.02%0.01%0.01% 100.0 %100.0 %
       
CAPITAL & LIQUIDITY:      
Total shareholders' equity / Period end total assets11.01%10.31%10.96% 6.8 %0.5 %
Tangible equity (d) / Tangible assets (f)9.34%8.72%9.15% 7.1 %2.1 %
Average shareholders' equity / Average assets (b)10.67%10.61%10.76% 0.6 %(0.8)%
Average shareholders' equity / Average loans (b)14.08%14.30%14.83% (1.5)%(5.1)%
Average loans / Average deposits (b)92.02%88.59%88.63% 3.9 %3.8 %
       
Note: Explanations for footnotes (a) - (k) are included at the end of the financial tables in the "Financial Reconciliations" section.   



PARK NATIONAL CORPORATION
Financial Highlights
Nine months ended September 30, 2020 and September 30, 2019   
     
 20202019  
(in thousands, except share and per share data and ratios)Nine months
ended
September 30
Nine months
ended
September 30
 Percent change
vs '19
INCOME STATEMENT:    
Net interest income$241,309 $220,728  9.3 %
Provision for loan losses31,213 6,384  388.9 %
Other income90,008 72,969  23.4 %
Other expense200,934 192,757  4.2 %
Income before income taxes$99,170 $94,556  4.9 %
Income taxes16,447 15,792  4.1 %
Net income$82,723 $78,764  5.0 %
     
MARKET DATA:    
Earnings per common share - basic (a)$5.07 $4.86  4.3 %
Earnings per common share - diluted (a)5.04 4.84  4.1 %
Cash dividends declared per common share3.26 3.23  0.9 %
     
Weighted average common shares - basic (b)16,300,250 16,198,294  0.6 %
Weighted average common shares - diluted (b)16,398,350 16,287,695  0.7 %
     
PERFORMANCE RATIOS: (annualized)    
Return on average assets (a)(b)1.20%1.25% (4.0)%
Return on average shareholders' equity (a)(b)11.05%11.61% (4.8)%
Yield on loans4.72%5.21% (9.4)%
Yield on investment securities2.62%2.77% (5.4)%
Yield on money market instruments0.31%2.53% (87.7)%
Yield on interest earning assets4.27%4.72% (9.5)%
Cost of interest bearing deposits0.47%1.03% (54.4)%
Cost of borrowings1.66%2.13% (22.1)%
Cost of paying interest bearing liabilities0.57%1.15% (50.4)%
Net interest margin (g)3.88%3.88%  %
Efficiency ratio (g)60.26%65.14% (7.5)%
     
ASSET QUALITY RATIOS:    
Net loan charge-offs$854 $2,043  (58.2)%
Annualized net loan charge-offs as a % of average loans (b)0.02%0.04% (50.0)%
     
CAPITAL & LIQUIDITY:    
Average shareholders' equity / Average assets (b)10.85%10.80% 0.5 %
Average shareholders' equity / Average loans (b)14.49%14.79% (2.0)%
Average loans / Average deposits (b)90.19%90.10% 0.1 %
     
     
Note: Explanations for footnotes (a) - (k) are included at the end of the financial tables in the "Financial Reconciliations" section.    



PARK NATIONAL CORPORATION    
Consolidated Statements of Income    
         
  Three Months Ended Nine Months Ended
  September 30, September 30,
(in thousands, except share and per share data) 2020 2019 2020 2019
         
Interest income:        
Interest and fees on loans $82,617   $84,213  $243,459   $238,687 
Interest on:        
Obligations of U.S. Government, its agencies        
and other securities - taxable 4,841   6,326  15,398   20,240 
Obligations of states and political subdivisions - tax-exempt 2,045   2,225  6,396   6,750 
Other interest income 63   1,825  667   2,994 
         Total interest income 89,566   94,589  265,920   268,671 
         
Interest expense:        
Interest on deposits:        
Demand and savings deposits 803   9,649  8,652   25,553 
Time deposits 2,662   4,694  10,293   12,828 
Interest on borrowings 2,261   3,145  5,666   9,562 
      Total interest expense 5,726   17,488  24,611   47,943 
         
         Net interest income 83,840   77,101  241,309   220,728 
         
Provision for loan losses 13,836   1,967  31,213   6,384 
         
         Net interest income after provision for loan losses 70,004   75,134  210,096   214,344 
         
Other income 36,558   28,136  90,008   72,969 
         
Other expense 69,859   65,738  200,934   192,757 
         
         Income before income taxes 36,703   37,532  99,170   94,556 
         
Income taxes 5,857   6,386  16,447   15,792 
         
         Net income $30,846   $31,146  $82,723   $78,764 
         
Per common share:        
         Net income  - basic $1.89   $1.90  $5.07   $4.86 
         Net income  - diluted $1.88   $1.89  $5.04   $4.84 
         
         Weighted average shares - basic 16,300,720   16,382,798  16,300,250   16,198,294 
         Weighted average shares - diluted 16,393,792   16,475,741  16,398,350   16,287,695 
         
        Cash dividends declared $1.02   $1.01  $3.26   $3.23 



PARK NATIONAL CORPORATION 
Consolidated Balance Sheets
   
(in thousands, except share data)September 30, 2020December 31, 2019
   
Assets  
   
Cash and due from banks$110,774   $135,567  
Money market instruments135,935   24,389  
Investment securities1,097,598   1,279,507  
Loans7,278,546   6,501,404  
Allowance for loan losses(87,038) (56,679) 
Loans, net7,191,508   6,444,725  
Bank premises and equipment, net85,287   73,322  
Goodwill and other intangible assets169,380   171,118  
Other real estate owned836   4,029  
Other assets448,688   425,720  
Total assets$9,240,006   $8,558,377  
   
Liabilities and Shareholders' Equity  
   
Deposits:  
Noninterest bearing$2,579,335   $1,959,935  
Interest bearing4,896,494   5,092,677  
Total deposits7,475,829   7,052,612  
Borrowings643,103   438,157  
Other liabilities104,078   98,594  
Total liabilities$8,223,010   $7,589,363  
   
   
Shareholders' Equity:  
Preferred shares (200,000 shares authorized; no shares outstanding at September 30, 2020 and December 31, 2019)$—   $  
Common shares (No par value; 20,000,000 shares authorized; 17,623,179 shares issued at September 30, 2020 and 17,623,199 shares issued at December 31, 2019)458,440   459,389  
Accumulated other comprehensive income (loss), net of taxes14,200   (9,589) 
Retained earnings676,465   646,847  
Treasury shares (1,322,416 shares at September 30, 2020 and 1,276,757 shares at December 31, 2019)(132,109) (127,633) 
Total shareholders' equity$1,016,996   $969,014  
Total liabilities and shareholders' equity$9,240,006   $8,558,377  



PARK NATIONAL CORPORATION    
Consolidated Average Balance Sheets   
      
 Three Months Ended Nine Months Ended
 Sept 30 Sept 30
(in thousands)20202019 20202019
      
Assets     
      
Cash and due from banks$121,973   $147,156   $129,436   $130,799  
Money market instruments223,563   298,441   286,909   158,395  
Investment securities1,330,520   1,339,292   1,264,381   1,380,629  
Loans7,247,021   6,371,323   6,904,900   6,133,386  
Allowance for loan losses(74,718) (54,867)  (64,942) (53,711) 
Loans, net7,172,303   6,316,456   6,839,958   6,079,675  
Bank premises and equipment, net83,609   73,077   79,557   68,437  
Goodwill and other intangible assets169,726   174,027   170,311   153,182  
Other real estate owned1,299   3,845   2,616   4,132  
Other assets454,689   433,398   443,327   426,438  
Total assets$9,557,682   $8,785,692   $9,216,495   $8,401,687  
      
      
Liabilities and Shareholders' Equity     
      
Deposits:     
Noninterest bearing$2,565,417   $1,901,024   $2,306,355   $1,840,153  
Interest bearing5,309,718   5,287,851   5,350,009   4,967,106  
Total deposits7,875,135   7,188,875   7,656,364   6,807,259  
Borrowings552,452   553,595   455,127   599,223  
Other liabilities109,856   98,077   104,763   87,984  
Total liabilities$8,537,443   $7,840,547   $8,216,254   $7,494,466  
      
Shareholders' Equity:     
Preferred shares$—   $   $—   $  
Common shares457,571   457,029   457,953   424,213  
Accumulated other comprehensive income (loss), net of taxes15,400   (26,010)  8,712   (36,383) 
Retained earnings679,519   638,639   665,808   628,463  
Treasury shares(132,251) (124,513)  (132,232) (109,072) 
Total shareholders' equity$1,020,239   $945,145   $1,000,241   $907,221  
Total liabilities and shareholders' equity$9,557,682   $8,785,692   $9,216,495   $8,401,687  



PARK NATIONAL CORPORATION 
Consolidated Statements of Income - Linked Quarters
      
 20202020202020192019
(in thousands, except per share data)3rd QTR2nd QTR1st QTR4th QTR3rd QTR
      
Interest income:     
Interest and fees on loans$82,617  $80,155 $80,687 $82,698  $84,213 
Interest on:     
Obligations of U.S. Government, its agencies and other securities - taxable4,841  5,026 5,531 5,973  6,326 
Obligations of states and political subdivisions - tax-exempt2,045  2,151 2,200 2,205  2,225 
Other interest income63  113 491 953  1,825 
Total interest income89,566  87,445 88,909 91,829  94,589 
      
Interest expense:     
Interest on deposits:     
Demand and savings deposits803  1,507 6,342 7,795  9,649 
Time deposits2,662  3,346 4,285 4,666  4,694 
Interest on borrowings2,261  1,406 1,999 2,359  3,145 
Total interest expense5,726  6,259 12,626 14,820  17,488 
      
Net interest income83,840  81,186 76,283 77,009  77,101 
      
Provision for (recovery of) loan losses13,836  12,224 5,153 (213) 1,967 
      
Net interest income after provision for (recovery of) loan losses70,004  68,962 71,130 77,222  75,134 
      
Other income36,558  30,964 22,486 24,224  28,136 
      
Other expense69,859  64,799 66,276 71,231  65,738 
      
Income before income taxes36,703  35,127 27,340 30,215  37,532 
      
Income taxes5,857  5,622 4,968 6,279  6,386 
      
Net income $30,846  $29,505 $22,372 $23,936  $31,146 
      
Per common share:     
Net income - basic$1.89  $1.81 $1.37 $1.46  $1.90 
Net income - diluted$1.88  $1.80 $1.36 $1.45  $1.89 



PARK NATIONAL CORPORATION 
Detail of other income and other expense - Linked Quarters
      
 20202020202020192019
(in thousands)3rd QTR2nd QTR1st QTR4th QTR3rd QTR
      
Other income:     
Income from fiduciary activities$7,335   $6,793   $7,113   $7,268   $6,842   
Service charges on deposit accounts2,118   1,676   2,528   2,757   2,864   
Other service income13,047   8,758   3,766   4,382   4,260   
Debit card fee income5,853   5,560   4,960   5,341   5,313   
Bank owned life insurance income1,192   1,179   1,248   1,158   1,107   
ATM fees491   438   412   446   482   
Gain (loss) on the sale of OREO, net569   841   (196)   (53) 
Net (loss) gain on the sale of investment securities(27) 3,313   —   —   186   
Gain (loss) on equity securities, net1,201   (977) (973) (191) 3,335   
Other components of net periodic benefit income1,988   1,988   1,988   1,183   1,183   
Miscellaneous2,791   1,395   1,640   1,878   2,617   
Total other income$36,558   $30,964   $22,486   $24,224   $28,136   
      
Other expense:     
Salaries$31,632   $30,699   $28,429   $30,903   $30,713   
Employee benefits10,676   9,080   10,043   8,973   10,389   
Occupancy expense3,835   3,256   3,480   3,355   3,226   
Furniture and equipment expense4,687   4,850   4,319   4,319   4,177   
Data processing fees3,275   2,577   2,492   2,777   2,935   
Professional fees and services7,977   6,901   7,066   10,503   6,702   
Marketing1,454   1,136   1,486   1,468   1,604   
Insurance1,541   1,477   1,550   317   276   
Communication958   874   1,155   1,256   1,387   
State tax expense1,125   1,116   1,145   1,024   746   
Amortization of intangible assets525   607   606   623   741   
Miscellaneous2,174   2,226   4,505   5,713   2,842   
Total other expense$69,859   $64,799   $66,276   $71,231   $65,738   



PARK NATIONAL CORPORATION 
Asset Quality Information
        
    Year ended December 31,
(in thousands, except ratios)September 30,
2020
June 30, 2020March 31,
2020
2019201820172016
        
Allowance for loan losses:       
Allowance for loan losses, beginning of period$73,476 $61,503 $56,679 $51,512 $49,988 $50,624 $56,494  
Charge-offs1,529 2,130 2,685 11,177 13,552 19,403 20,799  
Recoveries1,255 1,879 2,356 10,173 7,131 10,210 20,030  
Net charge-offs274 251 329 1,004 6,421 9,193 769  
Provision for (recovery of) loan losses13,836 12,224 5,153 6,171 7,945 8,557 (5,101) 
Allowance for loan losses, end of period$87,038 $73,476 $61,503 $56,679 $51,512 $49,988 $50,624  
        
        
General reserve trends:       
Allowance for loan losses, end of period$87,038 $73,476 $61,503 $56,679 $51,512 $49,988 $50,624  
Allowance on purchased credit impaired ("PCI") loans103 106 119 268     
Allowance on purchased loans371 25       
Specific reserves8,666 5,808 5,531 5,230 2,273 684 548  
General reserves on originated loans$77,898 $67,537 $55,853 $51,181 $49,239 $49,304 $50,076  
        
Total loans$7,278,546 $7,204,445 $6,522,519 $6,501,404 $5,692,132 $5,372,483 $5,271,857  
PCI loans11,877 12,569 13,765 14,331 3,943    
Purchased loans393,752 440,803 489,843 548,436 225,029    
Impaired commercial loans116,138
 91,724 85,646 77,459 48,135 56,545 70,415  
Originated loans excluding impaired commercial loans$6,762,779 $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)0.02%0.01%0.02%0.02%0.12%0.17%0.02 %
Allowance for loan losses as a % of period end loans1.20%1.02%0.94%0.87%0.90%0.93%0.96 %
Allowance for loan losses on originated loans as % of originated total loans (excluding PPP loans) (k)1.36%1.17%N.A.N.A.N.A.N.A.N.A.
General reserve as a % of originated total loans less impaired commercial loans1.15%1.01%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) (k)1.24%1.10%N.A.N.A.N.A.N.A.N.A.
        
Nonperforming assets:       
Nonaccrual loans$123,050
 $100,406 $90,354 $90,080 $67,954 $72,056 $87,822  
Accruing troubled debt restructurings23,774 23,948 27,168 21,215 15,173 20,111 18,175  
Loans past due 90 days or more1,618 1,690 1,789 2,658 2,243 1,792 2,086  
Total nonperforming loans$148,442
 $126,044 $119,311 $113,953 $85,370 $93,959 $108,083  
Other real estate owned - Park National Bank242 427 2,671 3,100 2,788 6,524 6,025  
Other real estate owned - SEPH594 929 929 929 1,515 7,666 7,901  
Other nonperforming assets - Park National Bank3,392 3,599 3,599 3,599 3,464 4,849   
Total nonperforming assets$152,670
 $130,999 $126,510 $121,581 $93,137 $112,998 $122,009  
Percentage of nonaccrual loans to period end loans1.69
%1.39%1.39%1.39%1.19%1.34%1.67 %
Percentage of nonperforming loans to period end loans2.04
%1.75%1.83%1.75%1.50%1.75%2.05 %
Percentage of nonperforming assets to period end loans2.10
%1.82%1.94%1.87%1.64%2.10%2.31 %
Percentage of nonperforming assets to period end total assets1.65
%1.35%1.45%1.42%1.19%1.50%1.63 %
        
Note: Explanations for footnotes (a) - (k) are included at the end of the financial tables in the "Financial Reconciliations" section.



PARK NATIONAL CORPORATION 
Asset Quality Information (continued)
        
    Year ended December 31,
(in thousands, except ratios)September 30, 2020June 30, 2020March 31, 20202019201820172016
        
        
New nonaccrual loan information:       
Nonaccrual loans, beginning of period$100,406 $90,354 $90,080 $67,954 $72,056 $87,822 $95,887 
New nonaccrual loans38,631
 21,995 21,651 81,009 76,611 58,753 74,786 
Resolved nonaccrual loans15,987 11,943 21,377 58,883 80,713 74,519 82,851 
Nonaccrual loans, end of period$123,050
 $100,406 $90,354 $90,080 $67,954 $72,056 $87,822 
        
Impaired commercial loan portfolio information (period end):       
Unpaid principal balance$116,701
 $92,374 $86,379 $78,178 $59,381 $66,585 $95,358 
Prior charge-offs563 650 733 719 11,246 10,040 24,943 
Remaining principal balance116,138
 91,724 85,646 77,459 48,135 56,545 70,415 
Specific reserves8,666 5,808 5,531 5,230 2,273 684 548 
Book value, after specific reserves$107,472
 $85,916 $80,115 $72,229 $45,862 $55,861 $69,867 



PARK NATIONAL CORPORATION   
Financial Reconciliations      
NON-GAAP RECONCILIATIONS      
 THREE MONTHS ENDED NINE MONTHS ENDED
(in thousands, except share and per share data)September 30,
2020
June 30, 2020September 30,
2019
 September 30,
2020
September 30,
2019
Net interest income$83,840  $81,186  $77,101   $241,309  $220,728  
less purchase accounting accretion related to NewDominion and Carolina Alliance acquisitions1,071  1,301  1,967   3,750  3,839  
less interest income on former Vision Bank relationships8  266     351  7  
Net interest income - adjusted$82,761  $79,619  $75,134   $237,208  $216,882  
       
Provision for loan losses$13,836  $12,224  $1,967   $31,213  $6,384  
less recoveries on former Vision Bank relationships(37) (685) (575)  (1,486) (740) 
Provision for loan losses - adjusted$13,873  $12,909  $2,542   $32,699  $7,124  
       
Other income$36,558  $30,964  $28,136   $90,008  $72,969  
less net gain (loss) on sale of former Vision Bank OREO properties371  837     1,208  (139) 
less rebranding initiative related expenses  (274)    (274)   
less net (loss) gain on the sale of debt securities in the ordinary course of business(27) 3,313  186   3,286  (421) 
Other income - adjusted$36,214  $27,088  $27,950   $85,788  $73,529  
       
Other expense$69,859  $64,799  $65,738   $200,934  $192,757  
less merger-related expenses related to NewDominion and Carolina Alliance acquisitions163  214  658   620  6,992  
less core deposit intangible amortization related to NewDominion and Carolina Alliance acquisitions525  607  741   1,738  1,732  
less FDIC assessment credit    (1,057)    (1,057) 
less management and consulting expenses related to collection of payments on former Vision Bank loan relationships232       232    
less FHLB prepayment penalty    120   1,793  120  
less rebranding initiative related expenses429  138  139   837  341  
less COVID-19 related expenses (j)744  1,878     2,884    
Other expense - adjusted$67,766  $61,962  $65,137   $192,830  $184,629  
       
Tax effect of adjustments to net income identified above (i)$133  $(691) $(447)  $(358) $861  
       
Net income - reported$30,846  $29,505  $31,146   $82,723  $78,764  
Net income - adjusted$31,346  $26,905  $29,446   $81,378  $82,005  
       
Diluted EPS$1.88  $1.80  $1.89   $5.04  $4.84  
Diluted EPS, adjusted (h)$1.91  $1.64  $1.79   $4.96  $5.03  
       
Annualized return on average assets (a)(b)1.28 %1.26 %1.41 % 1.20 %1.25 %
Annualized return on average assets, adjusted (a)(b)(h)1.30 %1.15 %1.33 % 1.18 %1.30 %
       
Annualized return on average tangible assets (a)(b)(e)1.31 %1.28 %1.43 % 1.22 %1.28 %
Annualized return on average tangible assets, adjusted (a)(b)(e)(h)1.33 %1.17 %1.36 % 1.20 %1.33 %
       
Annualized return on average shareholders' equity (a)(b)12.03 %11.89 %13.07 % 11.05 %11.61 %
Annualized return on average shareholders' equity, adjusted (a)(b)(h)12.22 %10.84 %12.37 % 10.87 %12.09 %
       
Annualized return on average tangible equity (a)(b)(c)14.43 %14.33 %16.02 % 13.31 %13.97 %
Annualized return on average tangible equity, adjusted (a)(b)(c)(h)14.66 %13.07 %15.16 % 13.10 %14.54 %
       
Efficiency ratio (g)57.69 %57.41 %62.03 % 60.26 %65.14 %
Efficiency ratio, adjusted (g)(h)56.62 %57.68 %62.74 % 59.30 %63.09 %
       
Annualized net interest margin (g)3.85 %3.84 %3.86 % 3.88 %3.88 %
Annualized net interest margin, adjusted (g)(h)3.80 %3.77 %3.76 % 3.81 %3.81 %



PARK NATIONAL CORPORATION   
Financial Reconciliations (continued)      
       
(a) Reported measure uses net income
(b) Averages are for the three months ended September 30, 2020,  June 30, 2020, and September 30, 2019 and the nine months ended September 30, 2020 and September 30, 2019.
(c) Net income for each period divided by average tangible equity during the period. Average tangible equity equals average shareholders' equity during the applicable period less average goodwill and other intangible assets during the applicable period.
       
RECONCILIATION OF AVERAGE SHAREHOLDERS' EQUITY TO AVERAGE TANGIBLE EQUITY:   
 THREE MONTHS ENDED NINE MONTHS ENDED
 September 30, 2020June 30, 2020September 30, 2019 September 30, 2020September 30, 2019
AVERAGE SHAREHOLDERS' EQUITY$1,020,239 $998,288 $945,145  $1,000,241 $907,221 
Less: Average goodwill and other intangible assets169,726 170,303 174,027  170,311 153,182 
AVERAGE TANGIBLE EQUITY$850,513 $827,985 $771,118  $829,930 $754,039 
       
(d) Tangible equity divided by common shares outstanding at period end. Tangible equity equals total shareholders' equity less goodwill and other intangible assets, in each case at the end of the period.
       
RECONCILIATION OF TOTAL SHAREHOLDERS' EQUITY TO TANGIBLE EQUITY:  
 September 30, 2020June 30, 2020September 30, 2019  
TOTAL SHAREHOLDERS' EQUITY$1,016,996 $1,001,594 $956,140    
Less: Goodwill and other intangible assets169,380 169,905 173,489    
TANGIBLE EQUITY$847,616 $831,689 $782,651    
       
(e) Net income for each period divided by average tangible assets during the period. Average tangible assets equals average assets less average goodwill and other intangible assets, in each case during the applicable period.
       
RECONCILIATION OF AVERAGE ASSETS TO AVERAGE TANGIBLE ASSETS   
 THREE MONTHS ENDED NINE MONTHS ENDED
 September 30, 2020June 30, 2020September 30, 2019 September 30, 2020September 30, 2019
AVERAGE ASSETS$9,557,682 $9,408,265 $8,785,692  $9,216,495 $8,401,687 
Less: Average goodwill and other intangible assets169,726 170,303 174,027  170,311 153,182 
AVERAGE TANGIBLE ASSETS$9,387,956 $9,237,962 $8,611,665  $9,046,184 $8,248,505 
       
(f) Tangible equity divided by tangible assets. Tangible assets equals total assets less goodwill and other intangible assets, in each case at the end of the period.
       
RECONCILIATION OF TOTAL ASSETS TO TANGIBLE ASSETS:  
 September 30, 2020June 30, 2020September 30, 2019   
TOTAL ASSETS$9,240,006 $9,712,994 $8,723,610    
Less: Goodwill and other intangible assets169,380 169,905 173,489    
TANGIBLE ASSETS$9,070,626 $9,543,089 $8,550,121    
       
(g) Efficiency ratio is calculated by dividing total other expense by the sum of fully taxable equivalent net interest income and other income. Fully taxable equivalent net interest income reconciliation is shown assuming a 21% corporate federal income tax rate. Additionally, net interest margin is calculated on a fully taxable equivalent basis by dividing fully taxable equivalent net interest income by average interest earning assets.
       
RECONCILIATION OF FULLY TAXABLE EQUIVALENT NET INTEREST INCOME TO NET INTEREST INCOME
 THREE MONTHS ENDED NINE MONTHS ENDED
 September 30, 2020June 30, 2020September 30, 2019 September 30, 2020September 30, 2019
Interest income$89,566 $87,445 $94,589  $265,920 $268,671 
Fully taxable equivalent adjustment706 723 744  2,154 2,230 
Fully taxable equivalent interest income$90,272 $88,168 $95,333  $268,074 $270,901 
Interest expense5,726 6,259 17,488  24,611 47,943 
Fully taxable equivalent net interest income$84,546 $81,909 $77,845  $243,463 $222,958 
       
(h) Adjustments to net income for each period presented are detailed in the non-GAAP reconciliations of net interest income, provision for loan losses, other income and other expense above.
(i) The tax effect of adjustments to net income was calculated assuming a 21% corporate federal income tax rate.   
(j) COVID-19 related expenses include calamity pay and special one-time bonuses to certain associates.    
(k) Excludes $542.8 million and $543.1 million of PPP loans at September 30, 2020 and June 30, 2020, respectively.
Media contact: Bethany Lewis, 740.349.0421, bethany.lewis@parknationalbank.com
Investor contact: Brady Burt, 740.322.6844, brady.burt@parknationalbank.com
Park National Corporation, 50 N. Third Street, Newark, Ohio 43055

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