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Park National Corporation reports financial results for first quarter 2020

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Park National Corporation reports financial results for first quarter 2020

NEWARK, Ohio, April 27, 2020 (GLOBE NEWSWIRE) -- Park National Corporation (Park) (NYSE American: PRK) today reported financial results for the first quarter of 2020 (three months ended March 31, 2020). Park's board of directors declared a quarterly cash dividend of $1.02 per common share, payable on June 10, 2020 to common shareholders of record as of May 22, 2020.

Park’s net income for the first quarter of 2020 was $22.4 million, a 12.1 percent decrease from $25.5 million for the first quarter of 2019. First quarter 2020 net income per diluted common share was $1.36, compared to $1.62 in the first quarter of 2019.

Park's community-banking subsidiary, The Park National Bank, reported net income of $25.9 million for the first quarter of 2020, a 2.9 percent decrease compared to $26.7 million for the same period of 2019.

“In the face of unprecedented activity and uncertainty brought on by the COVID-19 situation, our bankers have responded with energy, enthusiasm and imagination. We are honored that people rely on us for a multitude of services throughout this crisis,” Park Chief Executive Officer David Trautman said. “We’ve found new ways to live out our motto, demonstrating daily that our customers and communities mean more to us than simple transactions or accounts.”

Headquartered in Newark, Ohio, Park National Corporation had $8.7 billion in total assets (as of March 31, 2020). 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.

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, 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. 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 March 31, 2020, December 31, 2019, and March 31, 2019

2020

2019

2019

Percent change vs.

(in thousands, except share and per share data)

1st QTR

4th QTR

1st QTR

4Q '19

1Q '19

INCOME STATEMENT:

Net interest income

$

76,283

$

77,009

$

67,776

(0.9

)

%

12.6

%

Provision for (recovery of) loan losses

5,153

(213

)

2,498

N.M.

106.3

%

Other income

22,486

24,224

22,025

(7.2

)

%

2.1

%

Other expense

66,276

71,231

56,827

(7.0

)

%

16.6

%

Income before income taxes

$

27,340

$

30,215

$

30,476

(9.5

)

%

(10.3

)

%

Income taxes

4,968

6,279

5,021

(20.9

)

%

(1.1

)

%

Net income

$

22,372

$

23,936

$

25,455

(6.5

)

%

(12.1

)

%

MARKET DATA:

Earnings per common share - basic (b)

$

1.37

$

1.46

$

1.63

(6.2

)

%

(16.0

)

%

Earnings per common share - diluted (b)

1.36

1.45

1.62

(6.2

)

%

(16.0

)

%

Cash dividends declared per common share

1.22

1.01

1.21

20.8

%

0.8

%

Book value per common share at period end

60.25

59.28

54.06

1.6

%

11.5

%

Market price per common share at period end

77.64

102.38

94.75

(24.2

)

%

(18.1

)

%

Market capitalization at period end

1,265,180

1,673,549

1,480,990

(24.4

)

%

(14.6

)

%

Weighted average common shares - basic (a)

16,303,602

16,342,485

15,651,541

(0.2

)

%

4.2

%

Weighted average common shares - diluted (a)

16,425,881

16,454,553

15,744,777

(0.2

)

%

4.3

%

Common shares outstanding at period end

16,295,461

16,346,442

15,630,499

(0.3

)

%

4.3

%

PERFORMANCE RATIOS: (annualized)

Return on average assets (a)(b)

1.04

%

1.09

%

1.32

%

(4.6

)

%

(21.2

)

%

Return on average shareholders' equity (a)(b)

9.16

%

9.83

%

12.31

%

(6.8

)

%

(25.6

)

%

Yield on loans

5.02

%

5.11

%

5.14

%

(1.8

)

%

(2.3

)

%

Yield on investment securities

2.72

%

2.72

%

2.82

%

%

(3.5

)

%

Yield on money market instruments

1.12

%

1.86

%

2.76

%

(39.8

)

%

(59.4

)

%

Yield on interest earning assets

4.57

%

4.64

%

4.66

%

(1.5

)

%

(1.9

)

%

Cost of interest bearing deposits

0.81

%

0.95

%

0.97

%

(14.7

)

%

(16.5

)

%

Cost of borrowings

2.08

%

2.18

%

2.01

%

(4.6

)

%

3.5

%

Cost of paying interest bearing liabilities

0.90

%

1.04

%

1.10

%

(13.5

)

%

(18.2

)

%

Net interest margin (g)

3.93

%

3.90

%

3.86

%

0.8

%

1.8

%

Efficiency ratio (g)

66.61

%

69.86

%

62.77

%

(4.7

)

%

6.1

%

OTHER RATIOS (NON-GAAP):

Tangible book value per share (d)

$

49.79

$

48.81

$

46.42

2.0

%

7.3

%

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 March 31, 2020, December 31, 2019, and March 31, 2019

Percent change vs.

(in thousands, except ratios)

March 31, 2020

December 31, 2019

March 31, 2019

4Q '19

1Q '19

BALANCE SHEET:

Investment securities

$

1,253,087

$

1,279,507

$

1,382,301

(2.1

)

%

(9.3

)

%

Loans

6,522,519

6,501,404

5,740,760

0.3

%

13.6

%

Allowance for loan losses

61,503

56,679

53,368

8.5

%

15.2

%

Goodwill and other intangible assets

170,512

171,118

119,421

(0.4

)

%

42.8

%

Other real estate owned (OREO)

3,600

4,029

4,629

(10.6

)

%

(22.2

)

%

Total assets

8,719,291

8,558,377

7,852,246

1.9

%

11.0

%

Total deposits

7,290,133

7,052,612

6,325,212

3.4

%

15.3

%

Borrowings

348,373

438,157

602,569

(20.5

)

%

(42.2

)

%

Total shareholders' equity

981,877

969,014

845,044

1.3

%

16.2

%

Tangible equity (d)

811,365

797,896

725,623

1.7

%

11.8

%

Total nonperforming loans

119,311

113,953

86,471

4.7

%

38.0

%

Total nonperforming assets

126,510

121,581

94,596

4.1

%

33.7

%

ASSET QUALITY RATIOS:

Loans as a % of period end total assets

74.81

%

75.97

%

73.11

%

(1.5

)

%

2.3

%

Total nonperforming loans as a % of period end loans

1.83

%

1.75

%

1.51

%

4.6

%

21.2

%

Total nonperforming assets as a % of period end loans + OREO + other nonperforming assets

1.94

%

1.87

%

1.65

%

3.7

%

17.6

%

Allowance for loan losses as a % of period end loans

0.94

%

0.87

%

0.93

%

8.0

%

1.1

%

Net loan charge-offs (recoveries)

$

329

$

(1,039

)

$

642

N.M.

N.M.

Annualized net loan charge-offs (recoveries) as a % of average loans (a)

0.02

%

(0.06

)

%

0.05

%

N.M.

N.M.

CAPITAL & LIQUIDITY:

Total shareholders' equity / Period end total assets

11.26

%

11.32

%

10.76

%

(0.5

)

%

4.6

%

Tangible equity (d) / Tangible assets (f)

9.49

%

9.51

%

9.38

%

(0.2

)

%

1.2

%

Average shareholders' equity / Average assets (a)

11.31

%

11.12

%

10.71

%

1.7

%

5.6

%

Average shareholders' equity / Average loans (a)

15.15

%

15.03

%

14.74

%

0.8

%

2.8

%

Average loans / Average deposits (a)

89.90

%

89.36

%

90.78

%

0.6

%

(1.0

)

%


PARK NATIONAL CORPORATION

Consolidated Statements of Income

Three Months Ended

March 31,

(in thousands, except share and per share data)

2020

2019

Interest income:

Interest and fees on loans

$

80,687

$

72,003

Interest on:

Obligations of U.S. Government, its agencies

and other securities - taxable

5,531

6,995

Obligations of states and political subdivisions - tax-exempt

2,200

2,217

Other interest income

491

641

Total interest income

88,909

81,856

Interest expense:

Interest on deposits:

Demand and savings deposits

6,342

7,093

Time deposits

4,285

3,777

Interest on borrowings

1,999

3,210

Total interest expense

12,626

14,080

Net interest income

76,283

67,776

Provision for loan losses

5,153

2,498

Net interest income after provision for loan losses

71,130

65,278

Other income

22,486

22,025

Other expense

66,276

56,827

Income before income taxes

27,340

30,476

Income taxes

4,968

5,021

Net income

$

22,372

$

25,455

Per common share:

Net income - basic

$

1.37

$

1.63

Net income - diluted

$

1.36

$

1.62

Weighted average shares - basic

16,303,602

15,651,541

Weighted average shares - diluted

16,425,881

15,744,777

Cash dividends declared

$

1.22

$

1.21


PARK NATIONAL CORPORATION

Consolidated Balance Sheets

(in thousands, except share data)

March 31, 2020

December 31, 2019

Assets

Cash and due from banks

$

145,062

$

135,567

Money market instruments

175,858

24,389

Investment securities

1,253,087

1,279,507

Loans

6,522,519

6,501,404

Allowance for loan losses

(61,503

)

(56,679

)

Loans, net

6,461,016

6,444,725

Bank premises and equipment, net

77,330

73,322

Goodwill and other intangible assets

170,512

171,118

Other real estate owned

3,600

4,029

Other assets

432,826

425,720

Total assets

$

8,719,291

$

8,558,377

Liabilities and Shareholders' Equity

Deposits:

Noninterest bearing

$

1,976,565

$

1,959,935

Interest bearing

5,313,568

5,092,677

Total deposits

7,290,133

7,052,612

Borrowings

348,373

438,157

Other liabilities

98,908

98,594

Total liabilities

$

7,737,414

$

7,589,363

Shareholders' Equity:

Preferred shares (200,000 shares authorized; no shares outstanding at March 31, 2020 and December 31, 2019)

$

$

Common shares (No par value; 20,000,000 shares authorized; 17,623,190 shares issued at March 31, 2020 and 17,623,199 shares issued at December 31, 2019)

456,777

459,389

Accumulated other comprehensive gain (loss), net of taxes

8,104

(9,589

)

Retained earnings

649,636

646,847

Treasury shares (1,327,729 shares at March 31, 2020 and 1,276,757 shares at December 31, 2019)

(132,640

)

(127,633

)

Total shareholders' equity

$

981,877

$

969,014

Total liabilities and shareholders' equity

$

8,719,291

$

8,558,377


PARK NATIONAL CORPORATION

Consolidated Average Balance Sheets

Three Months Ended

March 31,

(in thousands)

2020

2019

Assets

Cash and due from banks

$

132,029

$

117,803

Money market instruments

176,805

94,262

Investment securities

1,264,452

1,389,842

Loans

6,482,137

5,689,173

Allowance for loan losses

(57,615

)

(52,390

)

Loans, net

6,424,522

5,636,783

Bank premises and equipment, net

74,922

60,847

Goodwill and other intangible assets

170,909

119,611

Other real estate owned

3,800

4,373

Other assets

432,350

408,876

Total assets

$

8,679,789

$

7,832,397

Liabilities and Shareholders' Equity

Deposits:

Noninterest bearing

$

1,949,991

$

1,730,224

Interest bearing

5,260,385

4,536,501

Total deposits

7,210,376

6,266,725

Borrowings

386,511

647,658

Other liabilities

100,926

79,291

Total liabilities

$

7,697,813

$

6,993,674

Shareholders' Equity:

Preferred shares

$

$

Common shares

459,462

358,633

Accumulated other comprehensive loss, net of taxes

(94

)

(46,539

)

Retained earnings

654,465

621,568

Treasury shares

(131,857

)

(94,939

)

Total shareholders' equity

$

981,976

$

838,723

Total liabilities and shareholders' equity

$

8,679,789

$

7,832,397


PARK NATIONAL CORPORATION

Consolidated Statements of Income - Linked Quarters

2020

2019

2019

2019

2019

(in thousands, except per share data)

1st QTR

4th QTR

3rd QTR

2nd QTR

1st QTR

Interest income:

Interest and fees on loans

$

80,687

$

82,698

$

84,213

$

82,471

$

72,003

Interest on:

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

5,531

5,973

6,326

6,919

6,995

Obligations of states and political subdivisions - tax-exempt

2,200

2,205

2,225

2,308

2,217

Other interest income

491

953

1,825

528

641

Total interest income

88,909

91,829

94,589

92,226

81,856

Interest expense:

Interest on deposits:

Demand and savings deposits

6,342

7,795

9,649

8,811

7,093

Time deposits

4,285

4,666

4,694

4,357

3,777

Interest on borrowings

1,999

2,359

3,145

3,207

3,210

Total interest expense

12,626

14,820

17,488

16,375

14,080

Net interest income

76,283

77,009

77,101

75,851

67,776

Provision for (recovery of) loan losses

5,153

(213

)

1,967

1,919

2,498

Net interest income after provision for (recovery of) loan losses

71,130

77,222

75,134

73,932

65,278

Other income

22,486

24,224

28,136

22,808

22,025

Other expense

66,276

71,231

65,738

70,192

56,827

Income before income taxes

27,340

30,215