Blog: Park National Corporation reports financial results for first quarter 2021 – GlobeNewswire

NEWARK, Ohio, April 23, 2021 (GLOBE NEWSWIRE) — Park National Corporation (Park) (NYSE American: PRK) today reported financial results for the first quarter of 2021 (three months ended March 31, 2021), including net income growth driven by continued increases in lending activity. Park’s board of directors declared a quarterly cash dividend of $1.03 per common share, payable on June 10, 2021 to common shareholders of record as of May 21, 2021.

Park’s net income for the first quarter of 2021 was $42.8 million, a 91.4 percent increase from $22.4 million for the first quarter of 2020. First quarter 2021 net income per diluted common share was $2.61, compared to $1.36 in the first quarter of 2020. Like many financial institutions, Park did not experience the credit losses it had prepared for throughout the pandemic; and Park thus recognized a recovery in the first quarter of 2021. Additionally, steady growth in its consumer and commercial lending services over the past year helped drive first quarter 2021 performance.

“Business owners are financing property, equipment, and other developments throughout our communities. Columbus, Cincinnati, Charlotte and Louisville have been particularly robust,” Park Chairman and Chief Executive Officer David Trautman said. “We have been available for our business customers through periods of stress and we are here for them as the economy picks up momentum.”

Park’s community-banking subsidiary, The Park National Bank, reported net income of $45.1 million for the first quarter of 2021, a 74.2 percent increase compared to $25.9 million for the same period of 2020. The bank’s first quarter 2021 mortgage origination volume was $304 million, whereas it was $178 million in the first quarter of 2020.

“The real estate environment can be intense right now, and our customers continue to rely on our local bankers to help them take advantage of great opportunities in home buying and refinancing,” said Park President Matthew Miller. “Our responsiveness and experience with a variety of lending situations positioned us to serve customers more in the first quarter.”

Headquartered in Newark, Ohio, Park National Corporation has $9.9 billion in total assets (as of March 31, 2021). 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
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

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, 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 (such as quarantines, shut downs and other restrictions on travel and commercial, social or other activities), the development, availability and effectiveness of vaccines, 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;
  • Park may have more credit risk and higher credit losses to the extent there are loan concentrations by location or industry of borrowers or collateral;
  • the volatility from quarter to quarter of mortgage banking income, whether due to interest rates, demand, the fair value of mortgage loans, or other factors;
  • 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 and the follow-up legislation in the Consolidated Appropriations Act, 2021, 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 and the follow-up legislation in the Consolidated Appropriations Act, 2021, 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, 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, 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, including those of Park’s third-party vendors and other service providers, which may prove inadequate, and could adversely affect customer confidence in Park and/or result in Park incurring a financial loss;
  • 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 the impact of changes to the U.S. presidential administration and Congress on the regulatory landscape, capital markets, elevated U.S. government debt, potential changes in tax legislation that may increase tax rates 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;
  • 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 (including any resulting branch closures or damages), military or 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, 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 March 31, 2021, December 31, 2020, and March 31, 2020
             
  2021 2020 2020   Percent change vs.
(in thousands, except share and per share data) 1st QTR 4th QTR 1st QTR   4Q ’20
  1Q ’20
INCOME STATEMENT:                                      
Net interest income $ 80,734     $ 86,321     $ 76,283     (6.5 ) %   5.8   %
(Recovery of) provision for credit losses (l) (4,855 )   (19,159 )   5,153     N.M       N.M    
Other income 34,089     35,656     22,486     (4.4 ) %   51.6   %
Other expense 67,865     85,661     66,276     (20.8 ) %   2.4   %
Income before income taxes $ 51,813     $ 55,475     $ 27,340     (6.6 ) %   89.5   %
Income taxes 8,982     10,275     4,968     (12.6 ) %   80.8   %
Net income $ 42,831     $ 45,200     $ 22,372     (5.2 ) %   91.4   %
             
MARKET DATA:            
Earnings per common share – basic (a) $ 2.63     $ 2.77     $ 1.37     (5.1 ) %   92.0   %
Earnings per common share – diluted (a) 2.61     2.75     1.36     (5.1 ) %   91.9   %
Cash dividends declared per common share 1.23     1.02     1.22     20.6   %   0.8   %
Book value per common share at period end 63.74     63.76     60.25       %   5.8   %
Market price per common share at period end 129.30     105.01     77.64     23.1   %   66.5   %
Market capitalization at period end 2,112,238     1,713,154     1,265,180     23.3   %   67.0   %
             
Weighted average common shares – basic (b) 16,314,987     16,310,551     16,303,602       %   0.1   %
Weighted average common shares – diluted (b) 16,439,920     16,434,812     16,425,881       %   0.1   %
Common shares outstanding at period end 16,335,951     16,314,197     16,295,461     0.1   %   0.2   %
             
PERFORMANCE RATIOS: (annualized)            
Return on average assets (a)(b) 1.81   % 1.93   % 1.04 %   (6.2 ) %   74.0   %
Return on average shareholders’ equity (a)(b) 16.63   % 17.37   % 9.16 %   (4.3 ) %   81.6   %
Yield on loans 4.48   % 4.69   % 5.02 %   (4.5 ) %   (10.8 ) %
Yield on investment securities 2.53   % 2.80   % 2.72 %   (9.6 ) %   (7.0 ) %
Yield on money market instruments 0.11   % 0.11   % 1.12 %     %   (90.2 ) %
Yield on interest earning assets 3.96   % 4.33   % 4.57 %   (8.5 ) %   (13.3 ) %
Cost of interest bearing deposits 0.16   % 0.19   % 0.81 %   (15.8 ) %   (80.2 ) %
Cost of borrowings 1.86   % 2.01   % 2.08 %   (7.5 ) %   (10.6 ) %
Cost of paying interest bearing liabilities 0.32   % 0.40   % 0.90 %   (20.0 ) %   (64.4 ) %
Net interest margin (g) 3.76   % 4.07   % 3.93 %   (7.6 ) %   (4.3 ) %
Efficiency ratio (g) 58.74   % 69.82   % 66.61 %   (15.9 ) %   (11.8 ) %
             
OTHER RATIOS (NON-GAAP):            
Tangible book value per share (d) $ 53.43     $ 53.41     $ 49.79       %   7.3   %
             
             
Note: Explanations for footnotes (a) – (l) 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, 2021, December 31, 2020, and March 31, 2020          
             
          Percent change vs.
(in thousands, except ratios) March 31, 2021 December 31, 2020 March 31, 2020   4Q ’20
  1Q ’20
BALANCE SHEET:                                      
Investment securities $ 1,176,240     $ 1,124,806     $ 1,253,087     4.6   %   (6.1 ) %
Loans 7,168,745     7,177,785     6,522,519     (0.1 ) %   9.9   %
Allowance for credit losses (l) 86,886     85,675     61,503     1.4   %   41.3   %
Goodwill and other intangible assets 168,376     168,855     170,512     (0.3 ) %   (1.3 ) %
Other real estate owned (OREO) 844     1,431     3,600     (41.0 ) %   (76.6 ) %
Total assets 9,914,069     9,279,021     8,719,291     6.8   %   13.7   %
Total deposits 8,236,199     7,572,358     7,290,133     8.8   %   13.0   %
Borrowings 523,266     562,504     348,373     (7.0 ) %   50.2   %
Total shareholders’ equity 1,041,271     1,040,256     981,877     0.1   %   6.0   %
Tangible equity (d) 872,895     871,401     811,365     0.2   %   7.6   %
Total nonperforming loans 130,327     139,614     119,311     (6.7 ) %   9.2   %
Total nonperforming assets 134,335     144,209     126,510     (6.8 ) %   6.2   %
                                       
ASSET QUALITY RATIOS:                                      
Loans as a % of period end total assets 72.31   % 77.35   % 74.81 %   (6.5 ) %   (3.3 ) %
Total nonperforming loans as a % of period end loans 1.82   % 1.95   % 1.83 %   (6.7 ) %   (0.5 ) %
Total nonperforming assets as a % of period end loans + OREO + other nonperforming assets 1.87   % 2.01   % 1.94 %   (7.0 ) %   (3.6 ) %
Allowance for credit losses as a % of period end loans 1.21   % 1.19   % 0.94 %   1.7   %   28.7   %
Net loan charge-offs (recoveries) $ 24     $ (17,796 )   $ 329     N.M       N.M    
Annualized net loan charge-offs (recoveries) as a % of average loans (b)   % (0.98 ) % 0.02 %   N.M       N.M    
             
CAPITAL & LIQUIDITY:            
Total shareholders’ equity / Period end total assets 10.50   % 11.21   % 11.26 %   (6.3 ) %   (6.7 ) %
Tangible equity (d) / Tangible assets (f) 8.96   % 9.57   % 9.49 %   (6.4 ) %   (5.6 ) %
Average shareholders’ equity / Average assets (b) 10.87   % 11.11   % 11.31 %   (2.2 ) %   (3.9 ) %
Average shareholders’ equity / Average loans (b) 14.63   % 14.29   % 15.15 %   2.4   %   (3.4 ) %
Average loans / Average deposits (b) 90.12   % 95.80   % 89.90 %   (5.9 ) %   0.2   %
             
Note: Explanations for footnotes (a) – (l) are included at the end of the financial tables in the “Financial Reconciliations” section.      
       

PARK NATIONAL CORPORATION
Consolidated Statements of Income
         
    Three Months Ended
    March 31
(in thousands, except share and per share data)   2021   2020
         
Interest income:        
Interest and fees on loans   $ 78,737      $ 80,687  
Interest on:        
Obligations of U.S. Government, its agencies        
 and other securities – taxable   4,256      5,531  
Obligations of states and political subdivisions – tax-exempt   2,037      2,200  
Other interest income   143      491  
 Total interest income   85,173      88,909  
         
Interest expense:        
Interest on deposits:        
Demand and savings deposits   386      6,342  
Time deposits   1,584      4,285  
Interest on borrowings   2,469      1,999  
Total interest expense   4,439      12,626  
         
Net interest income   80,734      76,283  
         
(Recovery of) provision for credit losses (l)   (4,855 )   5,153  
         
Net interest income after (recovery of) provision for credit losses   85,589      71,130  
         
Other income   34,089      22,486  
         
Other expense   67,865      66,276  
         
Income before income taxes   51,813      27,340  
         
Income taxes   8,982      4,968  
         
Net income   $ 42,831      $ 22,372  
         
Per common share:        
Net income – basic   $ 2.63      $ 1.37  
Net income – diluted   $ 2.61      $ 1.36  
         
Weighted average shares – basic   16,314,987      16,303,602  
Weighted average shares – diluted   16,439,920      16,425,881  
         
Cash dividends declared   $ 1.23      $ 1.22  
         

PARK NATIONAL CORPORATION 
Consolidated Balance Sheets
     
(in thousands, except share data) March 31, 2021
  December 31, 2020
               
Assets              
               
Cash and due from banks $ 131,357      $ 155,596  
Money market instruments 811,918      214,878  
Investment securities 1,176,240      1,124,806  
Loans 7,168,745      7,177,785  
Allowance for credit losses (l) (86,886 )   (85,675 )
Loans, net 7,081,859      7,092,110  
Bank premises and equipment, net 89,533      88,660  
Goodwill and other intangible assets 168,376      168,855  
Other real estate owned 844      1,431  
Other assets 453,942      432,685  
Total assets $ 9,914,069      $ 9,279,021  
     
Liabilities and Shareholders’ Equity    
     
Deposits:    
Noninterest bearing $ 2,907,020      $ 2,727,100  
Interest bearing 5,329,179      4,845,258  
Total deposits 8,236,199      7,572,358  
Borrowings 523,266      562,504  
Other liabilities 113,333      103,903  
Total liabilities $ 8,872,798      $ 8,238,765  
     
     
Shareholders’ Equity:    
Preferred shares (200,000 shares authorized; no shares outstanding at March 31, 2021 and December 31, 2020) $ —      $  
Common shares (No par value; 20,000,000 shares authorized; 17,623,154 shares issued at March 31, 2021 and 17,623,163 shares issued at December 31, 2020) 458,534      460,687  
Accumulated other comprehensive (loss) income, net of taxes (7,901 )   5,571  
Retained earnings 719,230      704,764  
Treasury shares (1,287,203 shares at March 31, 2021 and 1,308,966 shares at December 31, 2020) (128,592 )   (130,766 )
Total shareholders’ equity $ 1,041,271      $ 1,040,256  
Total liabilities and shareholders’ equity $ 9,914,069      $ 9,279,021  

 
PARK NATIONAL CORPORATION 
Consolidated Average Balance Sheets
     
  Three Months Ended
  Mar 31
(in thousands) 2021
  2020
               
Assets              
               
Cash and due from banks $ 148,264      $ 132,029  
Money market instruments 553,906      176,805  
Investment securities 1,160,509      1,264,452  
Loans 7,138,854      6,482,137  
Allowance for credit losses (l) (89,954 )   (57,615 )
Loans, net 7,048,900      6,424,522  
Bank premises and equipment, net 89,740      74,922  
Goodwill and other intangible assets 168,690      170,909  
Other real estate owned 1,212      3,800  
Other assets 441,321      432,350  
Total assets $ 9,612,542      $ 8,679,789  
     
     
Liabilities and Shareholders’ Equity    
     
Deposits:    
Noninterest bearing $ 2,792,398      $ 1,949,991  
Interest bearing 5,129,357      5,260,385  
Total deposits 7,921,755      7,210,376  
Borrowings 538,706      386,511  
Other liabilities 107,669      100,926  
Total liabilities $ 8,568,130      $ 7,697,813  
               
Shareholders’ Equity:              
Preferred shares $ —      $  
Common shares 460,721      459,462  
Accumulated other comprehensive income (loss), net of taxes 1,179      (94 )
Retained earnings 713,254      654,465  
Treasury shares (130,742 )   (131,857 )
Total shareholders’ equity $ 1,044,412      $ 981,976  
Total liabilities and shareholders’ equity $ 9,612,542      $ 8,679,789  

 
PARK NATIONAL CORPORATION 
Consolidated Statements of Income – Linked Quarters
           
  2021 2020 2020 2020 2020
(in thousands, except per share data) 1st QTR 4th QTR 3rd QTR 2nd QTR 1st QTR
           
Interest income:          
Interest and fees on loans  $ 78,737    $ 85,268    $ 82,617    $ 80,155    $ 80,687   
Interest on:          
Obligations of U.S. Government, its agencies and other securities – taxable 4,256    4,420    4,841    5,026    5,531   
Obligations of states and political subdivisions – tax-exempt 2,037    2,040    2,045    2,151    2,200   
Other interest income 143    72    63    113    491   
Total interest income 85,173    91,800    89,566    87,445    88,909   
           
Interest expense:          
Interest on deposits:          
Demand and savings deposits 386    490    803    1,507    6,342   
Time deposits 1,584    1,893    2,662    3,346    4,285   
Interest on borrowings 2,469    3,096    2,261    1,406    1,999   
Total interest expense 4,439    5,479    5,726    6,259    12,626   
           
Net interest income 80,734    86,321    83,840    81,186    76,283   
           
(Recovery of) provision for credit losses (l) (4,855   (19,159   13,836    12,224    5,153   
           
Net interest income after (recovery of) provision for credit losses 85,589    105,480    70,004    68,962    71,130   
           
Other income 34,089    35,656    36,558    30,964    22,486   
           
Other expense 67,865    85,661    69,859    64,799    66,276   
           
Income before income taxes 51,813    55,475    36,703    35,127    27,340   
                               
Income taxes 8,982    10,275    5,857    5,622    4,968   
                               
Net income  $ 42,831    $ 45,200    $ 30,846    $ 29,505    $ 22,372   
                               
Per common share:                              
Net income - basic $ 2.63    $ 2.77    $ 1.89    $ 1.81    $ 1.37   
Net income - diluted $ 2.61    $ 2.75    $ 1.88    $ 1.80    $ 1.36   

 
PARK NATIONAL CORPORATION 
Detail of other income and other expense – Linked Quarters
           
  2021 2020 2020 2020 2020
(in thousands) 1st QTR 4th QTR 3rd QTR 2nd QTR 1st QTR
           
Other income:          
Income from fiduciary activities $ 8,173      $ 7,632     $ 7,335     $ 6,793     $ 7,113  
Service charges on deposit accounts 2,054      2,123     2,118     1,676     2,528  
Other service income 9,617      12,040     13,047     8,758     3,766  
Debit card fee income 6,086      5,787     5,853     5,560     4,960  
Bank owned life insurance income 1,165      1,170     1,192     1,179     1,248  
ATM fees 530      432     491     438     412  
(Loss) gain on the sale of OREO, net (33 )   (7 )   569     841     (196 )
Net gain (loss) on the sale of investment securities 177          (27 )   3,313      
Gain (loss) on equity securities, net 1,633      2,931     1,201     (977 )   (973 )
Other components of net periodic benefit income 2,038      1,988     1,988     1,988     1,988  
Miscellaneous 2,649      1,560     2,791     1,395     1,640  
Total other income $ 34,089      $ 35,656     $ 36,558     $ 30,964     $ 22,486  
           
Other expense:          
Salaries $ 29,896      $ 37,280     $ 31,632     $ 30,699     $ 28,429  
Employee benefits 10,201      7,316     10,676     9,080     10,043  
Occupancy expense 3,640      3,231     3,835     3,256     3,480  
Furniture and equipment expense 2,610      4,949     4,687     4,850     4,319  
Data processing fees 7,712      3,315     3,275     2,577     2,492  
Professional fees and services 5,664      9,359     7,977     6,901     7,066  
Marketing 1,491      1,752     1,454     1,136     1,486  
Insurance 1,691      1,855     1,541     1,477     1,550  
Communication 1,122      1,097     958     874     1,155  
State tax expense 1,108      605     1,125     1,116     1,145  
Amortization of intangible assets 479      525     525     607     606  
FHLB prepayment penalty —      8,736             1,793  
Foundation contributions —      3,000              
Miscellaneous 2,251      2,641     2,174     2,226     2,712  
Total other expense $ 67,865      $ 85,661     $ 69,859     $ 64,799     $ 66,276  

PARK NATIONAL CORPORATION 
Asset Quality Information
           
    Year ended December 31,
(in thousands, except ratios) March 31,
2021

  2020 2019 2018 2017
                                   
Allowance for credit losses:                                  
Allowance for credit losses, beginning of period $ 85,675     $ 56,679     $ 51,512   $ 49,988   $ 50,624  
Cumulative change in accounting principle; adoption of ASU 2016-13 6,090              
Charge-offs 1,701     10,304     11,177   13,552   19,403  
Recoveries 1,677     27,246     10,173   7,131   10,210  
Net charge-offs (recoveries) 24     (16,942 )   1,004   6,421   9,193  
(Recovery of) provision for credit losses (4,855 )   12,054     6,171   7,945   8,557  
Allowance for credit losses, end of period $ 86,886     $ 85,675     $ 56,679   $ 51,512   $ 49,988  
                                   
                                   
General reserve trends:                                  
Allowance for credit losses, end of period $ 86,886     $ 85,675     $ 56,679   $ 51,512   $ 49,988  
Allowance on purchased credit deteriorated (“PCD”) loans (purchased credit impaired (“PCI”) loans for years 2020 and prior)     167     268      
Allowance on purchased loans excluded from the general reserve     678          
Specific reserves on individually evaluated loans 4,962     5,434     5,230   2,273   684  
General reserves on collectively evaluated loans $ 81,924     $ 79,396     $ 51,181   $ 49,239   $ 49,304  
           
Total loans $ 7,168,745     $ 7,177,785     $ 6,501,404   $ 5,692,132   $ 5,372,483  
PCD loans (PCI loans for years 2020 and prior) 10,284     11,153     14,331   3,943    
Purchased loans excluded from collectively evaluated loans     360,056     548,436   225,029    
Individually evaluated loans 100,407     108,407     77,459   48,135   56,545  
Collectively evaluated loans $ 7,058,054     $ 6,698,169     $ 5,861,178   $ 5,415,025   $ 5,315,938  
           
Asset Quality Ratios:          
Net charge-offs (recoveries) as a % of average loans (annualized)   % (0.24 ) % 0.02 % 0.12 % 0.17 %
Allowance for credit losses as a % of period end loans 1.21   % 1.19   % 0.87 % 0.90 % 0.93 %
Allowance for credit losses as a % of period end loans (excluding PPP loans) (k) 1.28   % 1.25   % . N.A   . N.A   . N.A  
General reserve as a % of collectively evaluated loans 1.16   % 1.19   % 0.87 % 0.91 % 0.93 %
General reserves as a % of collectively evaluated loans (excluding PPP loans) (k) 1.22   % 1.24   % . N.A   . N.A   . N.A  
           
Nonperforming assets:          
Nonaccrual loans $ 114,708     $ 117,368     $ 90,080   $ 67,954   $ 72,056  
Accruing troubled debt restructurings 14,817     20,788     21,215   15,173   20,111  
Loans past due 90 days or more 802     1,458     2,658   2,243   1,792  
Total nonperforming loans $ 130,327     $ 139,614     $ 113,953   $ 85,370   $ 93,959  
Other real estate owned – Park National Bank 250     837     3,100   2,788   6,524  
Other real estate owned – SEPH 594     594     929   1,515   7,666  
Other nonperforming assets – Park National Bank 3,164     3,164     3,599   3,464   4,849  
Total nonperforming assets $ 134,335     $ 144,209     $ 121,581   $ 93,137   $ 112,998  
Percentage of nonaccrual loans to period end loans 1.60   % 1.64   % 1.39 % 1.19 % 1.34 %
Percentage of nonperforming loans to period end loans 1.82   % 1.95   % 1.75 % 1.50 % 1.75 %
Percentage of nonperforming assets to period end loans 1.87   % 2.01   % 1.87 % 1.64 % 2.10 %
Percentage of nonperforming assets to period end total assets 1.35   % 1.55   % 1.42 % 1.19 % 1.50 %
           
Note: Explanations for footnotes (a) – (l) 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) March 31, 2021 2020 2019 2018 2017
           
           
New nonaccrual loan information:          
Nonaccrual loans, beginning of period $ 117,368   $ 90,080   $ 67,954   $ 72,056   $ 87,822  
New nonaccrual loans 12,540   103,386   81,009   76,611   58,753  
Resolved nonaccrual loans 15,200   76,098   58,883   80,713   74,519  
Nonaccrual loans, end of period $ 114,708   $ 117,368   $ 90,080   $ 67,954   $ 72,056  
           
Impaired commercial loan portfolio information (period end):          
Unpaid principal balance $ 100,996   $ 109,062   $ 78,178   $ 59,381   $ 66,585  
Prior charge-offs 589   655   719   11,246   10,040  
Remaining principal balance 100,407   108,407   77,459   48,135   56,545  
Specific reserves 4,962   5,434   5,230   2,273   684  
Book value, after specific reserves $ 95,445   $ 102,973   $ 72,229   $ 45,862   $ 55,861  
           

PARK NATIONAL CORPORATION
Financial Reconciliations      
NON-GAAP RECONCILIATIONS      
       
  THREE MONTHS ENDED
   
(in thousands, except share and per share data) March 31, 2021 December 31,
2020
March 31, 2020
Net interest income $ 80,734     $ 86,321     $ 76,283    
less purchase accounting accretion related to NewDominion
and Carolina Alliance acquisitions
1,131     919     1,378    
less interest income on former Vision Bank relationships 105     102     77    
Net interest income – adjusted $ 79,498     $ 85,300     $ 74,828    
       
(Recovery of) provision for credit losses $ (4,855 )   $ (19,159 )   $ 5,153    
less recoveries on former Vision Bank relationships (257 )   (20,496 )   (764 )  
(Recovery of) provision for credit losses – adjusted $ (4,598 )   $ 1,337     $ 5,917    
                         
Other income $ 34,089     $ 35,656     $ 22,486    
less other service income related to former Vision Bank relationships 58     503        
less rebranding initiative related expenses     (298 )      
Other income – adjusted $ 34,031     $ 35,451     $ 22,486    
       
Other expense $ 67,865     $ 85,661     $ 66,276    
less merger-related expenses related to NewDominion and Carolina Alliance acquisitions 12     9     243    
less core deposit intangible amortization related to NewDominion and Carolina Alliance acquisitions 479     525     606    
less direct expenses related to collection of payments on former Vision Bank loan relationships 107     4,051        
less FHLB prepayment penalty     8,736     1,793    
less rebranding initiative related expenses 618     229     270    
less Foundation contribution     3,000        
less severance and restructuring charges 108     4,039     88    
less COVID-19 related expenses (j) 634     738     262    
Other expense – adjusted $ 65,907     $ 64,334     $ 63,014    
       
Tax effect of adjustments to net income identified above (i) $ 85     $ (83 )   $ 219    
       
Net income – reported $ 42,831     $ 45,200     $ 22,372    
Net income – adjusted $ 43,153     $ 44,888     $ 23,196    
       
Diluted EPS $ 2.61     $ 2.75     $ 1.36    
Diluted EPS, adjusted (h) $ 2.62     $ 2.73     $ 1.41    
       
Annualized return on average assets (a)(b) 1.81   % 1.93   % 1.04   %
Annualized return on average assets, adjusted (a)(b)(h) 1.82   % 1.92   % 1.07   %
       
Annualized return on average tangible assets (a)(b)(e) 1.84   % 1.97   % 1.06   %
Annualized return on average tangible assets, adjusted (a)(b)(e)(h) 1.85   % 1.95   % 1.10   %
       
Annualized return on average shareholders’ equity (a)(b) 16.63   % 17.37   % 9.16   %
Annualized return on average shareholders’ equity, adjusted (a)(b)(h) 16.76   % 17.25   % 9.50   %
       
Annualized return on average tangible equity (a)(b)(c) 19.84   % 20.76   % 11.09   %
Annualized return on average tangible equity, adjusted (a)(b)(c)(h) 19.98   % 20.61   % 11.50   %
       
Efficiency ratio (g) 58.74   % 69.82   % 66.61   %
Efficiency ratio, adjusted (g)(h) 57.69   % 52.97   % 64.27   %
       
Annualized net interest margin (g) 3.76   % 4.07   % 3.93   %
Annualized net interest margin, adjusted (g)(h) 3.70   % 4.02   % 3.86   %
       

PARK NATIONAL CORPORATION
Financial Reconciliations (continued)      
       
(a) Reported measure uses net income
(b) Averages are for the three months ended March 31, 2021, December 31, 2020, and March 31, 2020, as appropriate
(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
  March 31, 2021 December 31,
2020
March 31, 2020
AVERAGE SHAREHOLDERS’ EQUITY $ 1,044,412   $ 1,035,493   $ 981,976  
Less: Average goodwill and other intangible assets 168,690   169,199   170,909  
AVERAGE TANGIBLE EQUITY $ 875,722   $ 866,294   $ 811,067  
       
(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:
  March 31, 2021 December 31,
2020
March 31, 2020
TOTAL SHAREHOLDERS’ EQUITY $ 1,041,271   $ 1,040,256   $ 981,877  
Less: Goodwill and other intangible assets 168,376   168,855   170,512  
TANGIBLE EQUITY $ 872,895   $ 871,401   $ 811,365  
       
(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
  March 31, 2021 December 31,
2020
March 31, 2020
AVERAGE ASSETS $ 9,612,542   $ 9,316,499   $ 8,679,789  
Less: Average goodwill and other intangible assets 168,690   169,199   170,909  
AVERAGE TANGIBLE ASSETS $ 9,443,852   $ 9,147,300   $ 8,508,880  
       
(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:
  March 31, 2021 December 31,
2020
March 31, 2020
TOTAL ASSETS $ 9,914,069   $ 9,279,021   $ 8,719,291  
Less: Goodwill and other intangible assets 168,376   168,855   170,512  
TANGIBLE ASSETS $ 9,745,693   $ 9,110,166   $ 8,548,779  
       
(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
  March 31, 2021 December 31,
2020
March 31, 2020
Interest income $ 85,173   $ 91,800   $ 88,909  
Fully taxable equivalent adjustment 714   712   725  
Fully taxable equivalent interest income $ 85,887   $ 92,512   $ 89,634  
Interest expense 4,439   5,479   12,626  
Fully taxable equivalent net interest income $ 81,448   $ 87,033   $ 77,008  
       
(h) Adjustments to net income for each period presented are detailed in the non-GAAP reconciliations of net interest income, (recovery of) provision for loan losses, other income and other expense.
(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 $387.0 million and $331.6 million of PPP loans at March 31, 2021 and December 31, 2020, respectively.
(l) Park adopted ASU 2016-13 effective January 1, 2021. The allowance for credit losses as of March 31, 2021 and the related (recovery of) provision for credit losses for the three months ended March 31, 2021 was calculated utilizing this new guidance.

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