Categories: Wire Stories

Park National Corporation reports financial results for first quarter 2023

NEWARK, Ohio, April 21, 2023 (GLOBE NEWSWIRE) — Park National Corporation (Park) (NYSE American: PRK) today reported financial results for the first quarter of 2023. Park’s board of directors declared a quarterly cash dividend of $1.05 per common share, payable on June 9, 2023 to common shareholders of record as of May 19, 2023.

�Our associates serve customers when, where and how they prefer to be served. This produces solid financial results for our organization,” said Park Chairman and Chief Executive Officer, David Trautman. “Our colleagues’ commitment transcends banking, and begins with improving our communities.”

Park’s net income for the first quarter of 2023 was $33.7 million, a 13.2 percent decrease from $38.9 million for the first quarter of 2022. First quarter 2023 net income per diluted common share was $2.07, compared to $2.38 in the first quarter of 2022.

Park’s community-banking subsidiary, The Park National Bank, reported net income of $36.3 million for the first quarter of 2023, a 12.5 percent decrease compared to $41.5 million for the same period of 2022.

“Recent events in the financial industry have created some uncertainty,” Trautman said. “At Park, we govern our finances with discipline and a conservative spirit that ensures we safeguard the hard-earned money entrusted to us. Our capital position and liquidity remain strong. Our bankers are available and welcome conversations about the strength of our bank and the financial industry. We value the confidence our communities have in us.”

Headquartered in Newark, Ohio, Park National Corporation has $9.9 billion in total assets (as of March 31, 2023). 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 news release or made by management of Park are provided to assist in the understanding of anticipated future financial performance. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements.

Risks and uncertainties that could cause actual results to differ materially include, without limitation:

  • Park’s ability to execute our business plan successfully and within the expected timeframe as well as our ability to manage strategic initiatives;
  • current and future economic and financial market conditions, either nationally or in the states in which Park and our subsidiaries do business, that may reflect deterioration in business and economic conditions, including the effects of higher unemployment rates, an acceleration in the pace of inflation, interest rate fluctuations, changes in the economy or global supply chain, supply-demand imbalances affecting local real estate prices, U.S. fiscal debt, budget and tax matters, geopolitical matters (including the impact of the Russia-Ukraine conflict and associated sanctions and export controls), and any slowdown in global economic growth, in addition to the continuing impact of the COVID-19 pandemic and recovery therefrom on our customers’ operations and financial condition, any 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 changes in 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, market interest rate policies and policies impacting inflation, of the Federal Reserve Board, the U.S. Treasury and other governmental agencies) as well as disruption in the liquidity and functioning of U.S. financial markets, 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 net interest margins;
  • changes in the federal, state, or local tax laws 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 and otherwise negatively impact our financial performance;
  • the impact of the changes in federal, state and local governmental policy, including the regulatory landscape, capital markets, elevated government debt, potential changes in tax legislation that may increase tax rates, infrastructure spending and social programs;
  • changes in laws or requirements imposed by Park’s regulators impacting Park’s capital actions, including dividend payments and stock repurchases;
  • changes in consumer spending, borrowing and saving habits, whether due to changes in retail distribution strategies, consumer preferences and behaviors, changes in business and economic conditions, legislative and regulatory initiatives, or other factors may be different than anticipated;
  • changes in customers’, suppliers’, and other counterparties’ performance and creditworthiness, and Park’s expectations regarding future credit losses and our allowance for credit losses, may be different than anticipated due to the continuing impact of and the various responses to inflationary pressures;
  • 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 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 Park’s 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 American Rescue Plan Act of 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 American Rescue Plan Act of 2021, the provisions of the Dodd-Frank Act, and the Basel III regulatory capital reforms;
  • Park’s ability to meet heightened supervisory requirements and expectations;
  • 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;
  • the possibility that future credit losses may be higher than currently expected due to changes in economic assumptions;
  • 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 impact on Park’s business and operating results of any costs associated with obtaining rights in intellectual property claimed by others and of the adequacy of Park’s intellectual property protection in general;
  • 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, closing of border crossings and changes in the relationship of the U.S. and its global trading partners);
  • 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 effect of a fall in stock market prices on Park’s asset and wealth management businesses;
  • our litigation and regulatory compliance exposure, including the costs and effects of any adverse developments in legal proceedings or other claims, the costs and effects of unfavorable resolution of regulatory and other governmental examinations or other inquiries, and liabilities and business restrictions resulting from litigation and regulatory investigations;
  • 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 (especially in light of the Russia-Ukraine conflict) on the economy and financial markets generally and on us or our counterparties specifically;
  • a worsening of the U.S. economy due to financial, political, or other shocks;
  • 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 most recent acquisitions, including expected revenue synergies and cost savings from recent acquisitions not being fully realized or realized within the expected time frame;
  • uncertainty surrounding the transition from the London Inter-Bank Offered Rate (LIBOR) to an alternate reference rate;
  • a continuation of recent turmoil in the banking industry, and the impact of responsive measures to mitigate and manage such turmoil, including potential increased supervisory and regulatory actions and costs;
  • 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, 2022.

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, 2023, December 31, 2022, and March 31, 2022              
                 
    2023     2022     2022     Percent change vs.
(in thousands, except common share and per common share data and ratios) 1st QTR 4th QTR 1st QTR   4Q ’22 1Q ’22
INCOME STATEMENT:                
Net interest income $ 92,198   $ 94,606   $ 77,686     (2.5 )% 18.7 %
Provision for (recovery of) credit losses   183     2,981     (4,605 )   (93.9 )% N.M.  
Other income   24,387     26,392     31,656     (7.6 )% (23.0 )%
Other expense   76,503     77,654     67,373     (1.5 )% 13.6 %
Income before income taxes $ 39,899   $ 40,363   $ 46,574     (1.1 )% (14.3 )%
Income taxes   6,166     7,279     7,699     (15.3 )% (19.9 )%
Net income $ 33,733   $ 33,084   $ 38,875     2.0 % (13.2 )%
                 
MARKET DATA:                
Earnings per common share – basic (a) $ 2.08   $ 2.03   $ 2.40     2.5 % (13.3 )%
Earnings per common share – diluted (a)   2.07     2.02     2.38     2.5 % (13.0 )%
Quarterly cash dividend declared per common share   1.05     1.04     1.04     1.0 % 1.0 %
Special cash dividend declared per common share   —     0.50     —     N.M.   N.M.  
Book value per common share at period end   66.91     65.74     66.24     1.8 % 1.0 %
Market price per common share at period end   118.57     140.75     131.38     (15.8 )% (9.8 )%
Market capitalization at period end   1,917,759     2,289,099     2,134,834     (16.2 )% (10.2 )%
                 
Weighted average common shares – basic (b)   16,242,353     16,261,136     16,219,889     (0.1 )% 0.1 %
Weighted average common shares – diluted (b)   16,324,823     16,393,179     16,331,031     (0.4 )% — %
Common shares outstanding at period end   16,174,067     16,263,583     16,249,308     (0.6 )% (0.5 )%
                 
PERFORMANCE RATIOS: (annualized)                
Return on average assets (a)(b)   1.36 %   1.28 %   1.60 %   6.3 % (15.0 )%
Return on average shareholders’ equity (a)(b)   12.54 %   12.44 %   14.26 %   0.8 % (12.1 )%
Yield on loans   5.24 %   5.00 %   4.31 %   4.8 % 21.6 %
Yield on investment securities   3.60 %   3.25 %   2.11 %   10.8 % 70.6 %
Yield on money market instruments   4.70 %   3.63 %   0.17 %   29.5 % 2,664.7 %
Yield on interest earning assets   4.89 %   4.57 %   3.71 %   7.0 % 31.8 %
Cost of interest bearing deposits   1.15 %   0.81 %   0.08 %   42.0 % 1,337.5 %
Cost of borrowings   3.24 %   2.88 %   2.35 %   12.5 % 37.9 %
Cost of paying interest bearing liabilities   1.29 %   0.95 %   0.25 %   35.8 % 416.0 %
Net interest margin (g)   4.08 %   3.98 %   3.55 %   2.5 % 14.9 %
Efficiency ratio (g)   65.10 %   63.69 %   61.16 %   2.2 % 6.4 %
                 
OTHER DATA (NON-GAAP) AND BALANCE SHEET INFORMATION:                
Tangible book value per common share (d) $ 56.69   $ 55.56   $ 55.98     2.0 % 1.3 %
Average interest earning assets   9,267,418     9,517,746     8,959,109     (2.6 )% 3.4 %
Pre-tax, pre-provision net income (k)   40,082     43,344     41,969     (7.5 )% (4.5 )%
                 
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, 2023, December 31, 2022, and March 31, 2022              
                 
          Percent change vs.
(in thousands, except ratios) March 31,
2023
December 31,
2022
March 31,
2022
  4Q ’22 1Q ’22
BALANCE SHEET:                
Investment securities $ 1,800,410   $ 1,820,787   $ 1,832,274     (1.1 )% (1.7 )%
Loans   7,093,857     7,141,891     6,821,606     (0.7 )% 4.0 %
Allowance for credit losses   85,946     85,379     78,861     0.7 % 9.0 %
Goodwill and other intangible assets   165,243     165,570     166,655     (0.2 )% (0.8 )%
Other real estate owned (OREO)   1,468     1,354     760     8.4 % 93.2 %
Total assets   9,856,981     9,854,993     9,576,352     — % 2.9 %
Total deposits   8,294,444     8,234,715     7,996,318     0.7 % 3.7 %
Borrowings   360,843     416,009     394,249     (13.3 )% (8.5 )%
Total shareholders’ equity   1,082,153     1,069,226     1,076,366     1.2 % 0.5 %
Tangible equity (d)   916,910     903,656     909,711     1.5 % 0.8 %
Total nonperforming loans (l)   74,365     101,111     86,891     (26.5 )% (14.4 )%
Total nonperforming assets (l)   75,833     102,465     87,651     (26.0 )% (13.5 )%
                 
ASSET QUALITY RATIOS:                
Loans as a % of period end total assets   71.97 %   72.47 %   71.23 %   (0.7 )% 1.0 %
Total nonperforming loans as a % of period end loans   1.05 %   1.42 %   1.27 %   (26.1 )% (17.3 )%
Total nonperforming assets as a % of period end loans + OREO + other nonperforming assets   1.07 %   1.43 %   1.28 %   (25.2 )% (16.4 )%
Allowance for credit losses as a % of period end loans   1.21 %   1.20 %   1.16 %   0.8 % 4.3 %
Net loan (recoveries) charge-offs $ (1 ) $ 1,563   $ (269 )   (100.1 )% (99.6 )%
Annualized net loan (recoveries) charge-offs as a % of average loans (b)   — %   0.09 % (0.02 )%   (100.0 )% (100.0 )%
                 
CAPITAL & LIQUIDITY:                
Total shareholders’ equity / Period end total assets   10.98 %   10.85 %   11.24 %   1.2 % (2.3 )%
Tangible equity (d) / Tangible assets (f)   9.46 %   9.33 %   9.67 %   1.4 % (2.2 )%
Average shareholders’ equity / Average assets (b)   10.85 %   10.27 %   11.25 %   5.6 % (3.6 )%
Average shareholders’ equity / Average loans (b)   15.37 %   14.85 %   16.19 %   3.5 % (5.1 )%
Average loans / Average deposits (b)   84.04 %   81.87 %   83.32 %   2.7 % 0.9 %
                 
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)     2023     2022  
         
Interest income:        
Interest and fees on loans   $ 91,614   $ 72,416  
Interest on debt securities:        
Taxable     12,979     6,130  
Tax-exempt     2,912     2,447  
Other interest income     3,396     153  
Total interest income     110,901     81,146  
         
Interest expense:        
Interest on deposits:        
Demand and savings deposits     14,212     351  
Time deposits     1,347     720  
Interest on borrowings     3,144     2,389  
Total interest expense     18,703     3,460  
         
Net interest income     92,198     77,686  
         
Provision for (recovery of) credit losses     183     (4,605 )
         
Net interest income after provision for (recovery of) credit losses     92,015     82,291  
         
Other income     24,387     31,656  
         
Other expense     76,503     67,373  
         
Income before income taxes     39,899     46,574  
         
Income taxes     6,166     7,699  
         
Net income   $ 33,733   $ 38,875  
         
Per common share:        
Net income – basic   $ 2.08   $ 2.40  
Net income – diluted   $ 2.07   $ 2.38  
         
Weighted average common shares – basic     16,242,353     16,219,889  
Weighted average common shares – diluted     16,324,823     16,331,031  
         
Cash dividends declared:        
 Quarterly dividend   $ 1.05   $ 1.04  
         

 
PARK NATIONAL CORPORATION 
Consolidated Balance Sheets
     
(in thousands, except share data) March 31, 2023 December 31, 2022
     
Assets    
     
Cash and due from banks $ 146,155   $ 156,750  
Money market instruments   115,764     32,978  
Investment securities   1,800,410     1,820,787  
Loans   7,093,857     7,141,891  
Allowance for credit losses   (85,946 )   (85,379 )
Loans, net   7,007,911     7,056,512  
Bank premises and equipment, net   81,223     82,126  
Goodwill and other intangible assets   165,243     165,570  
Other real estate owned   1,468     1,354  
Other assets   538,807     538,916  
Total assets $ 9,856,981   $ 9,854,993  
     
Liabilities and Shareholders’ Equity    
     
Deposits:    
Noninterest bearing $ 2,922,242   $ 3,074,276  
Interest bearing   5,372,202     5,160,439  
Total deposits   8,294,444     8,234,715  
Borrowings   360,843     416,009  
Other liabilities   119,541     135,043  
Total liabilities $ 8,774,828   $ 8,785,767  
     
     
Shareholders’ Equity:    
Preferred shares (200,000 shares authorized; no shares outstanding at March 31, 2023 and December 31, 2022) $ —   $ —  
Common shares (No par value; 20,000,000 shares authorized; 17,623,104 shares issued at March 31, 2023 and December 31, 2022)   459,431     462,404  
Accumulated other comprehensive loss, net of taxes   (90,033 )   (102,394 )
Retained earnings   862,518     847,235  
Treasury shares (1,449,037 shares at March 31, 2023 and 1,359,521 shares at December 31, 2022)   (149,763 )   (138,019 )
Total shareholders’ equity $ 1,082,153   $ 1,069,226  
Total liabilities and shareholders’ equity $ 9,856,981   $ 9,854,993  

 
PARK NATIONAL CORPORATION 
Consolidated Average Balance Sheets
     
  Three Months Ended
  March 31,
(in thousands)   2023     2022  
     
Assets    
     
Cash and due from banks $ 155,582   $ 168,726  
Money market instruments   292,948     360,103  
Investment securities    1,806,679     1,801,527  
Loans   7,099,240     6,829,336  
Allowance for credit losses   (86,809 )   (83,434 )
Loans, net   7,012,431     6,745,902  
Bank premises and equipment, net   82,047     88,739  
Goodwill and other intangible assets   165,457     166,918  
Other real estate owned   1,434     759  
Other assets   542,302     492,708  
Total assets $ 10,058,880   $ 9,825,382  
     
     
Liabilities and Shareholders’ Equity    
     
Deposits:    
Noninterest bearing $ 2,970,470   $ 3,025,991  
Interest bearing   5,476,661     5,170,296  
Total deposits   8,447,131     8,196,287  
Borrowings   393,198     411,424  
Other liabilities   127,599     112,131  
Total liabilities $ 8,967,928   $ 8,719,842  
     
Shareholders’ Equity:    
Preferred shares $ —   $ —  
Common shares   462,562     461,798  
Accumulated other comprehensive loss, net of taxes   (96,240 )   (1,719 )
Retained earnings   865,276     787,917  
Treasury shares   (140,646 )   (142,456 )
Total shareholders’ equity $ 1,090,952   $ 1,105,540  
Total liabilities and shareholders’ equity $ 10,058,880   $ 9,825,382  
     

 
PARK NATIONAL CORPORATION 
Consolidated Statements of Income – Linked Quarters
                       
  2023 2022 2022 2022 2022
(in thousands, except per share data) 1st QTR 4th QTR 3rd QTR 2nd QTR 1st QTR
           
Interest income:          
Interest and fees on loans  $ 91,614 $ 89,382 $ 83,522 $ 77,787 $ 72,416  
Interest on debt securities:          
Taxable   12,979   11,974   10,319   7,624   6,130  
Tax-exempt   2,912   2,918   2,923   2,676   2,447  
Other interest income   3,396   4,536   3,180   260   153  
Total interest income   110,901   108,810   99,944   88,347   81,146  
           
Interest expense:          
Interest on deposits:          
Demand and savings deposits   14,212   10,205   5,757   1,333   351  
Time deposits   1,347   1,061   825   708   720  
Interest on borrowings   3,144   2,938   2,534   2,367   2,389  
Total interest expense   18,703   14,204   9,116   4,408   3,460  
           
Net interest income   92,198   94,606   90,828   83,939   77,686  
           
Provision for (recovery of) credit losses   183   2,981   3,190   2,991   (4,605 )
           
Net interest income after provision for (recovery of) credit losses   92,015   91,625   87,638   80,948   82,291  
           
Other income   24,387   26,392   46,694   31,193   31,656  
           
Other expense   76,503   77,654   82,903   70,048   67,373  
           
Income before income taxes   39,899   40,363   51,429   42,093   46,574  
           
Income taxes   6,166   7,279   9,361   7,769   7,699  
           
Net income  $ 33,733 $ 33,084 $ 42,068 $ 34,324 $ 38,875  
           
Per common share:          
Net income - basic $ 2.08 $ 2.03 $ 2.59 $ 2.11 $ 2.40  
Net income - diluted $ 2.07 $ 2.02 $ 2.57 $ 2.10 $ 2.38  

 
PARK NATIONAL CORPORATION 
Detail of other income and other expense – Linked Quarters
           
  2023 2022 2022 2022 2022
(in thousands) 1st QTR 4th QTR 3rd QTR 2nd QTR 1st QTR
           
Other income:          
Income from fiduciary activities $ 8,615   $ 8,219   $ 8,216 $ 8,859 $ 8,797
Service charges on deposit accounts   2,241     2,595     2,859   2,563   2,074
Other service income   2,697     2,580     2,956   4,940   4,819
Debit card fee income   6,457     6,675     6,514   6,731   6,126
Bank owned life insurance income   1,185     1,366     1,185   2,374   1,175
ATM fees   533     548     610   583   532
(Loss) gain on the sale of OREO, net   (9 )   —     5,607   4   —
OREO valuation markup   15     —     12,009   —   30
(Loss) gain on equity securities, net   (405 )   (165 )   58   709   2,353
Other components of net periodic benefit income   1,893     3,027     3,027   3,027   3,027
Miscellaneous   1,165     1,547     3,653   1,403   2,723
Total other income $ 24,387   $ 26,392   $ 46,694 $ 31,193 $ 31,656
           
Other expense:          
Salaries $ 34,871   $ 33,837   $ 37,889 $ 31,052 $ 30,521
Employee benefits   10,816     9,895     9,897   10,199   10,499
Occupancy expense   3,353     4,157     3,455   3,040   3,214
Furniture and equipment expense   3,246     3,118     2,912   2,934   2,937
Data processing fees   8,750     8,537     8,170   8,416   7,504
Professional fees and services   7,221     9,845     8,359   6,775   5,858
Marketing   1,319     1,404     1,595   1,019   1,317
Insurance   1,814     1,526     1,237   1,245   1,405
Communication   1,037     968     1,098   935   890
State tax expense   1,278     1,040     1,186   1,167   1,192
Amortization of intangible assets   327     341     341   403   402
Foundation contributions   —     —     4,000   —   —
Miscellaneous   2,471     2,986     2,764   2,863   1,634
Total other expense $ 76,503   $ 77,654   $ 82,903 $ 70,048 $ 67,373

   
PARK NATIONAL CORPORATION
Asset Quality Information
                                 
    Year ended December 31,  
(in thousands, except ratios) March 31, 2023   2022     2021     2020     2019     2018  
                                     
Allowance for credit losses:                                    
Allowance for credit losses, beginning of period $ 85,379   $ 83,197   $ 85,675   $ 56,679   $ 51,512   $ 49,988  
Cumulative change in accounting principle; adoption of ASU 2022-02 in 2023 and ASU 2016-13 in 2021   383     —     6,090     —     —     —  
Charge-offs   2,235     9,133     5,093     10,304     11,177     13,552  
Recoveries   2,236     6,758     8,441     27,246     10,173     7,131  
Net (recoveries) charge-offs   (1 )   2,375     (3,348 )   (16,942 )   1,004     6,421  
Provision for (recovery of) credit losses   183     4,557     (11,916 )   12,054     6,171     7,945  
Allowance for credit losses, end of period $ 85,946   $ 85,379   $ 83,197   $ 85,675   $ 56,679   $ 51,512  
                                     
General reserve trends:                                    
Allowance for credit losses, end of period $ 85,946   $ 85,379   $ 83,197   $ 85,675   $ 56,679   $ 51,512  
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 collectively evaluated loans (for years 2020 and prior)   N.A.     N.A.     N.A.     678     —     —  
Specific reserves on individually evaluated loans   4,318     3,566     1,616     5,434     5,230     2,273  
General reserves on collectively evaluated loans $ 81,628   $ 81,813   $ 81,581   $ 79,396   $ 51,181   $ 49,239  
                                     
Total loans $ 7,093,857   $ 7,141,891   $ 6,871,122   $ 7,177,785   $ 6,501,404   $ 5,692,132  
PCD loans (PCI loans for years 2020 and prior)   4,555     4,653     7,149     11,153     14,331     3,943  
Purchased loans excluded from collectively evaluated loans (for years 2020 and prior)   N.A.     N.A.     N.A.     360,056     548,436     225,029  
Individually evaluated loans (l)   59,384     78,341     74,502     108,407     77,459     48,135  
Collectively evaluated loans $ 7,029,918   $ 7,058,897   $ 6,789,471   $ 6,698,169   $ 5,861,178   $ 5,415,025  
                                     
Asset Quality Ratios:                                    
Net (recoveries) charge-offs as a % of average loans   — %   0.03 %   (0.05 )%   (0.24 )%   0.02 %   0.12 %
Allowance for credit losses as a % of period end loans   1.21 %   1.20 %   1.21 %   1.19 %   0.87 %   0.90 %
Allowance for credit losses as a % of period end loans (excluding PPP loans) (j)   1.21 %   1.20 %   1.22 %   1.25 %   N.A.     N.A.  
General reserve as a % of collectively evaluated loans   1.16 %   1.16 %   1.20 %   1.19 %   0.87 %   0.91 %
General reserves as a % of collectively evaluated loans (excluding PPP loans) (j)   1.16 %   1.16 %   1.21 %   1.24 %   N.A.     N.A.  
                                     
Nonperforming assets:                                    
Nonaccrual loans $ 73,114   $ 79,696   $ 72,722   $ 117,368   $ 90,080   $ 67,954  
Accruing troubled debt restructurings (for years 2022 and prior) (l)   N.A.     20,134     28,323     20,788     21,215     15,173  
Loans past due 90 days or more   1,251     1,281     1,607     1,458     2,658     2,243  
Total nonperforming loans $ 74,365   $ 101,111   $ 102,652   $ 139,614   $ 113,953   $ 85,370  
Other real estate owned – Park National Bank   114     —     181     837     3,100     2,788  
Other real estate owned – SEPH   1,354     1,354     594     594     929     1,515  
Other nonperforming assets – Park National Bank   —     —     2,750     3,164     3,599     3,464  
Total nonperforming assets $ 75,833   $ 102,465   $ 106,177   $ 144,209   $ 121,581   $ 93,137  
Percentage of nonaccrual loans to period end loans   1.03 %   1.12 %   1.06 %   1.64 %   1.39 %   1.19 %
Percentage of nonperforming loans to period end loans   1.05 %   1.42 %   1.49 %   1.95 %   1.75 %   1.50 %
Percentage of nonperforming assets to period end loans   1.07 %   1.43 %   1.55 %   2.01 %   1.87 %   1.64 %
Percentage of nonperforming assets to period end total assets   0.77 %   1.04 %   1.11 %   1.55 %   1.42 %   1.19 %
                                     
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, 2023   2022     2021     2020     2019     2018  
                 
New nonaccrual loan information:                                    
Nonaccrual loans, beginning of period $ 79,696   $ 72,722   $ 117,368   $ 90,080   $ 67,954   $ 72,056  
New nonaccrual loans   9,207     64,918     38,478     103,386     81,009     76,611  
Resolved nonaccrual loans   15,789     57,944     83,124     76,098     58,883     80,713  
Nonaccrual loans, end of period $ 73,114   $ 79,696   $ 72,722   $ 117,368   $ 90,080   $ 67,954  
                                     
Individually evaluated commercial loan portfolio information (period end): (l)                                    
Unpaid principal balance $ 60,922   $ 80,116   $ 75,126   $ 109,062   $ 78,178   $ 59,381  
Prior charge-offs   1,538     1,775     624     655     719     11,246  
Remaining principal balance   59,384     78,341     74,502     108,407     77,459     48,135  
Specific reserves   4,318     3,566     1,616     5,434     5,230     2,273  
Book value, after specific reserves $ 55,066   $ 74,775   $ 72,886   $ 102,973   $ 72,229   $ 45,862  
                                     
Note: Explanations for footnotes (a) – (l) are included at the end of the financial tables in the “Financial Reconciliations” section.  

PARK NATIONAL CORPORATION
Financial Reconciliations      
NON-GAAP RECONCILIATIONS      
  THREE MONTHS ENDED
(in thousands, except share and per share data) March 31, 2023 December 31, 2022 March 31, 2022
Net interest income $ 92,198   $ 94,606   $ 77,686  
less purchase accounting accretion related to NewDominion and Carolina Alliance acquisitions   200     258     480  
less interest income on former Vision Bank relationships   574     707     42  
Net interest income – adjusted $ 91,424   $ 93,641   $ 77,164  
       
Provision for (recovery of) credit losses $ 183   $ 2,981   $ (4,605 )
less recoveries on former Vision Bank relationships   (723 )   (792 )   (1 )
Provision for (recovery of) credit losses – adjusted $ 906   $ 3,773   $ (4,604 )
       
Other income $ 24,387   $ 26,392   $ 31,656  
less other service income related to former Vision Bank relationships   135     285     —  
Other income – adjusted $ 24,252   $ 26,107   $ 31,656  
       
Other expense $ 76,503   $ 77,654   $ 67,373  
less core deposit intangible amortization related to NewDominion and Carolina Alliance acquisitions   327     341     402  
less direct expenses related to collection of payments on former Vision Bank loan relationships   100     100     —  
Other expense – adjusted $ 76,076   $ 77,213   $ 66,971  
       
Tax effect of adjustments to net income identified above (i) $ (253 ) $ (336 ) $ (25 )
       
Net income – reported $ 33,733   $ 33,084   $ 38,875  
Net income – adjusted (h) $ 32,781   $ 31,819   $ 38,779  
       
Diluted earnings per common share $ 2.07   $ 2.02   $ 2.38  
Diluted earnings per common share, adjusted (h) $ 2.01   $ 1.94   $ 2.37  
       
Annualized return on average assets (a)(b)   1.36 %   1.28 %   1.60 %
Annualized return on average assets, adjusted (a)(b)(h)   1.32 %   1.23 %   1.60 %
       
Annualized return on average tangible assets (a)(b)(e)   1.38 %   1.30 %   1.63 %
Annualized return on average tangible assets, adjusted (a)(b)(e)(h)   1.34 %   1.25 %   1.63 %
       
Annualized return on average shareholders’ equity (a)(b)   12.54 %   12.44 %   14.26 %
Annualized return on average shareholders’ equity, adjusted (a)(b)(h)   12.19 %   11.96 %   14.23 %
       
Annualized return on average tangible equity (a)(b)(c)   14.78 %   14.75 %   16.80 %
Annualized return on average tangible equity, adjusted (a)(b)(c)(h)   14.36 %   14.19 %   16.76 %
       
Efficiency ratio (g)   65.10 %   63.69 %   61.16 %
Efficiency ratio, adjusted (g)(h)   65.24 %   63.99 %   61.08 %
       
Annualized net interest margin (g)   4.08 %   3.98 %   3.55 %
Annualized net interest margin, adjusted (g)(h)   4.04 %   3.94 %   3.53 %
       
Note: Explanations for footnotes (a) – (l) are included at the end of the financial tables in the “Financial Reconciliations” section.

PARK NATIONAL CORPORATION
Financial Reconciliations (continued)      
       
(a) Reported measure uses net income
(b) Averages are for the three months ended March 31, 2023, December 31, 2022, and March 31, 2022, 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, 2023 December 31, 2022 March 31, 2022
AVERAGE SHAREHOLDERS’ EQUITY $ 1,090,952 $ 1,055,509 $ 1,105,540  
Less: Average goodwill and other intangible assets   165,457   165,794   166,918  
AVERAGE TANGIBLE EQUITY $ 925,495 $ 889,715 $ 938,622  
       
(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, 2023 December 31, 2022 March 31, 2022
TOTAL SHAREHOLDERS’ EQUITY $ 1,082,153 $ 1,069,226 $ 1,076,366  
Less: Goodwill and other intangible assets   165,243   165,570   166,655  
TANGIBLE EQUITY $ 916,910 $ 903,656 $ 909,711  
       
(e) Net income for each period divided by average tangible assets during the period. Average tangible assets equal 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, 2023 December 31, 2022 March 31, 2022
AVERAGE ASSETS $ 10,058,880 $ 10,279,656 $ 9,825,382  
Less: Average goodwill and other intangible assets   165,457   165,794   166,918  
AVERAGE TANGIBLE ASSETS $ 9,893,423 $ 10,113,862 $ 9,658,464  
       
(f) Tangible equity divided by tangible assets. Tangible assets equal 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, 2023 December 31, 2022 March 31, 2022
TOTAL ASSETS $ 9,856,981 $ 9,854,993 $ 9,576,352  
Less: Goodwill and other intangible assets   165,243   165,570   166,655  
TANGIBLE ASSETS $ 9,691,738 $ 9,689,423 $ 9,409,697  
       
       
(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, in each case during the applicable period.
       
RECONCILIATION OF FULLY TAXABLE EQUIVALENT NET INTEREST INCOME TO NET INTEREST INCOME
  THREE MONTHS ENDED
  March 31, 2023 December 31, 2022 March 31, 2022
Interest income $ 110,901 $ 108,810 $ 81,146  
Fully taxable equivalent adjustment   926   918   819  
Fully taxable equivalent interest income $ 111,827 $ 109,728 $ 81,965  
Interest expense   18,703   14,204   3,460  
Fully taxable equivalent net interest income $ 93,124 $ 95,524 $ 78,505  
       
(h) Adjustments to net income for each period presented are detailed in the non-GAAP reconciliations of net interest income, provision for (recovery of) credit losses, other income, other expense and income taxes.
(i) The tax effect of adjustments to net income was calculated assuming a 21% corporate federal income tax rate.
(j) Excludes $3.4 million of PPP loans and $3,000 in related allowance at March 31, 2023, $4.2 million of PPP loans and $4,000 in related allowance at December 31, 2022, $74.4 million of PPP loans and $77,000 in related allowance at December 31, 2021 and $331.6 million of PPP loans and $337,000 in related allowance at December 31, 2020.
(k) Pre-tax, pre-provision (“PTPP”) net income is calculated as net income, plus income taxes, plus the provision for (recovery of) credit losses, in each case during the applicable period. PTPP net income is a common industry metric utilized in capital analysis and review. PTPP is used to assess the operating performance of Park while excluding the impact of the provision for (recovery of) credit losses.
       
RECONCILIATION OF PRE-TAX, PRE-PROVISION NET INCOME
  THREE MONTHS ENDED
  March 31, 2023 December 31, 2022 March 31, 2022
Net income $ 33,733 $ 33,084 $ 38,875  
Plus: Income taxes   6,166   7,279   7,699  
Plus: Provision for (recovery of) credit losses   183   2,981   (4,605 )
Pre-tax, pre-provision net income $ 40,082 $ 43,344 $ 41,969  
       
(l) Effective January 1, 2023, Park adopted Accounting Standards Update (“ASU”) 2022-02. Among other things, this ASU eliminated the concept of troubled debt restructurings (“TDRs”). As a result of the adoption of this ASU and elimination of the concept of TDRs, total nonperforming loans (“NPLs”) and total nonperforming assets (“NPAs”) each decreased by $20.1 million during the three months ended March 31, 2023. Additionally, as a result of the adoption of this ASU, individually evaluated loans decreased by $11.5 million.

 

CONTACT: Media contact: Michelle Hamilton, 740-3490-6014, media@parknationalbank.com

Investor contact: Brady Burt, 740-322-6844, brady.burt@parknationalbank.com

Alex

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