News Column

Park National Corporation Reports Increased Second Quarter and First Half of 2014 Financial Results and Declares Dividend

July 28, 2014

NEWARK, Ohio, July 28, 2014 (GLOBE NEWSWIRE) -- Park National Corporation (Park) (NYSE MKT:PRK) today reported an increase in net income and other financial results for the three months (second quarter) and six months (first half) ended June 30, 2014. Park's board of directors declared a quarterly cash dividend of $0.94 per common share, payable on September 10, 2014 to common shareholders of record as of August 22, 2014.

Net income for the second quarter of 2014 was $21.8 million, compared to $20.0 million for the same period in 2013, an increase of $1.8 million, or 9.0 percent. Net income per diluted common share for the second quarter of 2014 was $1.42, compared to $1.30 in the same period of 2013.

Net income for the six months ended June 30, 2014 was $41.4 million, compared to $40.7 million for the same period in 2013, an increase of $0.7 million, or 1.7 percent. Net income per diluted common share for the first half of 2014 was $2.69, compared to $2.64 in the same period of 2013.

The Park National Bank Results

Park's community-banking subsidiary, The Park National Bank, reported net income of $41.8 million for the six months ended June 30, 2014, compared to net income of $40.3 million for the same period of 2013. The Park National Bank had total assets of $6.7 billion at June 30, 2014 and $6.5 billion at June 30, 2013. This performance generated a return on average assets of 1.26 percent and 1.24 percent for the bank for the periods ended June 30, 2014 and 2013, respectively.

"Individuals and businesses in our communities are ready to borrow. Our reputation as a reliable local lender leads them to us. And, while we can't compel people to borrow money - and don't want to - when they are ready, we are here for them," said Park President David L. Trautman.

The Park National Bank loan portfolio experienced solid growth during the second quarter of 2014 and first half of 2014. Loans outstanding at June 30, 2014 were $4.68 billion, compared to $4.57 billion at March 31, 2014, an increase of $113 million or an annualized 9.89 percent. Loan growth through the first six months of 2014 was $120 million, an annualized increase of 5.3 percent, compared to the $4.56 billion outstanding at December 31, 2013. The $120 million increase in loans through the first six months of 2014 was primarily related to growth in the consumer loan portfolio, which increased by approximately $100 million.

"Whether it's someone who had a good experience with a recent mortgage refinance here or someone who appreciates our extended-hour responses and approvals, more people are choosing us for their vehicle loans - and we are pleased to serve them," Trautman said.

About Park National Corporation

Headquartered in Newark, Ohio, Park National Corporation had $6.8 billion in total assets (as of June 30, 2014). The Park organization principally consists of 11 community bank divisions, a non-bank subsidiary and two specialty finance companies. Park's Ohio-based 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, Farmers Bank Division, United Bank, N.A. Division, Second National Bank Division, Security National Bank Division, Unity National Bank Division, and The Park National Bank of Southwest Ohio & Northern Kentucky Division; and Scope Leasing, Inc. (d.b.a. Scope Aircraft Finance). The Park organization also includes 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 Current Report on Form 8-K or made by management of Park are provided to assist in the understanding of anticipated future financial performance. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management's expectations and are subject to a number of risks and uncertainties. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include, without limitation: Park's ability to execute its business plan successfully and within the expected timeframe; general economic and financial market conditions, and the uneven spread of positive impacts of the recovery on the economy, specifically in the real estate markets and the credit markets, either nationally or in the states in which Park and its subsidiaries do business, may be worse or slower than expected which could adversely impact the demand for loan, deposit and other financial services as well as loan delinquencies and defaults; changes in interest rates and prices may adversely impact the value of securities, loans, deposits and other financial instruments and the interest rate sensitivity of our consolidated balance sheet; changes in consumer spending, borrowing and saving habits; changes in unemployment; asset/liability repricing risks and liquidity risks; our liquidity requirements could be adversely affected by changes to regulations governing bank capital and liquidity standards as well as by changes in our assets and liabilities; competitive factors among financial services organizations could increase significantly, including product and pricing pressures and our ability to attract, develop and retain qualified bank professionals; the nature, timing and effect of changes in banking regulations or other regulatory or legislative requirements affecting the respective businesses of Park and its subsidiaries, including changes in laws and regulations concerning taxes, accounting, banking, securities and other aspects of the financial services industry, specifically the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act"), as well as future regulations which will be adopted by the relevant regulatory agencies, including the Consumer Financial Protection Bureau, to implement the Dodd-Frank Act's provisions, the Budget Control Act of 2011, the American Taxpayer Relief Act of 2012 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 SEC, the Public Company Accounting Oversight Board and other regulatory agencies, and the accuracy of our assumptions and estimates used to prepare our financial statements; the effect of fiscal and governmental policies of the United States federal government; the adequacy of our risk management program; a failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors and other service providers, including as a result of cyber attacks; demand for loans in the respective market areas served by Park and its subsidiaries; and other risk factors relating to the banking industry as detailed from time to time in Park's reports filed with the Securities and Exchange Commission 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, 2013. 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
Three months ended June 30, 2014, March 31, 2014, and June 30, 2013
           
 201420142013Percent change vs.
(in thousands, except share and per share data)2nd QTR1st QTR2nd QTR1Q '142Q '13
INCOME STATEMENT:          
Net interest income$ 56,561$ 54,480$ 54,712 3.8% 3.4%
(Recovery of) provision for loan losses (1,260) (2,225) 673 N.M. N.M.
Other income 19,671 16,648 19,298 18.2% 1.9%
Total other expense 48,196 47,698 46,570 1.0% 3.5%
Income before income taxes$ 29,296$ 25,655$ 26,767 14.2% 9.4%
Income taxes 7,469 6,036 6,733 23.7% 10.9%
Net income$ 21,827$19,619$ 20,034 11.3% 8.9%
           
MARKET DATA:          
Earnings per common share - basic (b)$ 1.42$ 1.27$ 1.30 11.8% 9.2%
Earnings per common share - diluted (b) 1.42 1.27 1.30 11.8% 9.2%
Cash dividends per common share 0.94 0.94 0.94 —% —%
Common book value per common share at period end 44.63 43.30 41.48 3.1% 7.6%
Stock price per common share at period end 77.20 76.89 68.79 0.4% 12.2%
Market capitalization at period end 1,188,295 1,183,525 1,060,190 0.4% 12.1%
           
Weighted average common shares - basic (a) 15,392,435 15,401,105 15,411,981 (0.1)% (0.1)%
Weighted average common shares - diluted (a) 15,412,167 15,414,897 15,411,981 —% —%
Common shares outstanding at period end 15,392,425 15,392,441 15,411,977 —% (0.1)%
           
PERFORMANCE RATIOS: (annualized)          
Return on average assets (a)(b) 1.29% 1.18% 1.20% 9.3% 7.5%
Return on average common equity (a)(b) 12.93% 12.02% 12.26% 7.6% 5.5%
Yield on loans 4.91% 4.84% 5.08% 1.4% (3.3)%
Yield on investments 2.60% 2.65% 2.68% (1.9)% (3.0)%
Yield on money markets 0.25% 0.25% 0.25% —% —%
Yield on earning assets 4.28% 4.20% 4.31% 1.9% (0.7)%
Cost of interest bearing deposits 0.27% 0.29% 0.36% (6.9)% (25.0)%
Cost of borrowings 2.60% 2.61% 2.64% (0.4)% (1.5)%
Cost of paying liabilities 0.81% 0.82% 0.88% (1.2)% (8.0)%
Net interest margin 3.65% 3.56% 3.61% 2.5% 1.1%
Efficiency ratio (g) 63.04% 66.85% 62.61% (5.7)% 0.7%
           
OTHER RATIOS (NON - GAAP):          
Annualized return on average tangible assets (a)(b)(e) 1.31% 1.19% 1.22% 10.1% 7.4%
Annualized return on average tangible common equity (a)(b)(c) 14.47% 13.50% 13.79% 7.2% 4.9%
Tangible common book value per common share (d)$ 39.93$ 38.60$ 36.77 3.4% 8.6%
           
N.M. - Not meaningful          
Note: Explanations (a) -(g) are included at the end of the financial highlights.          
           
           
PARK NATIONAL CORPORATION
Financial Highlights (continued)
Three months ended June 30, 2014, March 31, 2014, and June 30, 2013
           
   Percent change vs.
BALANCE SHEET:June 30, 2014March 31, 2014June 30, 20131Q '142Q '13
           
Investment securities$ 1,417,910$ 1,416,624$ 1,345,069 0.1% 5.4%
Loans 4,735,487 4,623,926 4,510,716 2.4% 5.0%
Allowance for loan losses 57,911 60,257 55,111 (3.9)% 5.1%
Goodwill and other intangibles 72,334 72,334 72,446 —% (0.2)%
Other real estate owned 23,909 35,112 35,662 (31.9)% (33.0)%
Total assets 6,789,173 6,811,072 6,640,473 (0.3)% 2.2%
Total deposits 4,927,211 4,976,698 4,851,314 (1.0)% 1.6%
Borrowings 1,118,404 1,118,894 1,086,875 —% 2.9%
Shareholders' equity 686,971 666,436 639,219 3.1% 7.5%
Common equity 686,971 666,436 639,219 3.1% 7.5%
Tangible common equity (d) 614,637 594,102 566,773 3.5% 8.4%
Nonperforming loans 142,902 147,272 169,313 (3.0)% (15.6)%
Nonperforming assets 166,811 182,384 204,975 (8.5)% (18.6)%
           
ASSET QUALITY RATIOS:          
Loans as a % of period end assets 69.75% 67.89% 67.93% 2.7% 2.7%
Nonperforming loans as a % of period end loans 3.02% 3.19% 3.75% (5.3)% (19.5)%
Nonperforming assets / Period end loans + OREO 3.50% 3.91% 4.51% (10.5)% (22.4)%
Allowance for loan losses as a % of period end loans 1.22% 1.30% 1.22% (6.2)% —%
Net loan charge-offs (recoveries)$ 1,086$ (3,014)$ 877 N.M. N.M.
Annualized net loan charge-offs (recoveries) as a % of average loans (a) 0.09% (0.27)% 0.08% N.M. N.M.
           
CAPITAL & LIQUIDITY:          
Total equity / Period end assets 10.12% 9.78% 9.63% 3.5% 5.1%
Common equity / Period end assets 10.12% 9.78% 9.63% 3.5% 5.1%
Tangible common equity (d) / Tangible assets (f) 9.15% 8.82% 8.63% 3.7% 6.0%
Average equity / Average assets (a) 10.00% 9.78% 9.83% 2.2% 1.7%
Average equity / Average loans (a) 14.48% 14.36% 14.62% 0.8% (1.0)%
Average loans / Average deposits (a) 95.12% 93.55% 92.52% 1.7% 2.8%
           
N.M. - Not meaningful
Note: Explanations (a) -(g) are included at the end of the financial highlights.
 
 
PARK NATIONAL CORPORATION
Financial Highlights
Six months ended June 30, 2014 and 2013
       
(in thousands, except share and per share data)20142013Percent change

vs. 2013
INCOME STATEMENT:      
Net interest income$ 111,041$ 110,165 0.8%
(Recovery of) provision for loan losses (3,485) 1,002 N.M.
Other income 36,319 38,103 (4.7)%
Total other expense 95,894 92,668 3.5%
Income before income taxes$ 54,951$ 54,598 0.6%
       
Income taxes 13,505 13,854 (2.5)%
Net income$ 41,446$ 40,744 1.7%
       
MARKET DATA:      
Earnings per common share - basic (b)$ 2.69$ 2.64 1.9%
Earnings per common share - diluted (b) 2.69 2.64 1.9%
Cash dividends per common share 1.88 1.88 —%
       
Weighted average common shares - basic (a) 15,396,770 15,411,986 (0.1)%
Weighted average common shares - diluted (a) 15,413,568 15,411,986 —%
       
PERFORMANCE RATIOS: (Annualized)      
Return on average assets (a)(b) 1.23% 1.23% —%
Return on average common equity (a)(b) 12.48% 12.56% (0.6)%
Yield on loans 4.87% 5.10% (4.5)%
Yield on investments 2.63% 2.80% (6.1)%
Yield on earning assets 4.24% 4.36% (2.8)%
Cost of interest bearing deposits 0.28% 0.37% (24.3)%
Cost of borrowings 2.61% 2.63% (0.8)%
Cost of paying liabilities 0.81% 0.89% (9.0)%
Net interest margin (g) 3.60% 3.66% (1.6)%
Efficiency ratio (g) 64.88% 62.18% 4.3%
       
ASSET QUALITY RATIOS:      
Net loan (recoveries) charge-offs$ (1,928)$ 1,428 (235.0)%
Annualized net loan (recoveries) charge-offs as a % of average loans (a) (0.08)% 0.06% (233.3)%
       
CAPITAL & LIQUIDITY:      
Average stockholders' equity / Average assets (a) 9.89% 9.79% 1.0%
Average stockholders' equity / Average loans (a) 14.42% 14.66% (1.6)%
Average loans / Average deposits (a) 94.34% 92.03% 2.5%
       
OTHER RATIOS (NON GAAP):      
Annualized return on average tangible assets (a)(b)(e) 1.25% 1.24% 0.8%
Annualized return on average tangible common equity (a)(b)(c) 13.99% 14.13% (1.0)%
     
     
PARK NATIONAL CORPORATION    
Financial Highlights (continued)    
           
(a) Averages are for the quarters ended June 30, 2014, March 31, 2014 and June 30, 2013.
(b) Reported measure uses net income available to common shareholders.
(c) Net income available to common shareholders for each period divided by average tangible common equity during the period. Average tangible common equity equals average shareholders' equity during the applicable period less average goodwill and other intangibles during the applicable period.
           
RECONCILIATION OF AVERAGE SHAREHOLDERS' EQUITY TO AVERAGE TANGIBLE COMMON EQUITY:
 
 THREE MONTHS ENDEDSIX MONTHS ENDED
 June 30, 2014March 31, 2014June 30, 2013June 30, 2014June 30, 2013
AVERAGE SHAREHOLDERS' EQUITY  $ 677,226  $ 661,785  $ 655,432  $ 669,547  $ 653,995
Less: Average goodwill and other intangibles 72,334 72,334 72,509 72,334 72,565
AVERAGE TANGIBLE COMMON EQUITY  $ 604,892  $ 589,451  $ 582,923  $ 597,213  $ 581,430
           
(d) Tangible common book value divided by common shares outstanding at period end. Tangible common equity equals ending shareholders' equity less goodwill and other intangibles, in each case at the end of the period.
           
RECONCILIATION OF SHAREHOLDERS' EQUITY TO TANGIBLE COMMON EQUITY:
 
 June 30, 2014March 31, 2014June 30, 2013    
SHAREHOLDERS' EQUITY  $ 686,971  $ 666,436  $ 639,219    
Less: Goodwill and other intangibles 72,334 72,334 72,446    
TANGIBLE COMMON EQUITY  $ 614,637  $ 594,102  $ 566,773    
           
(e) Net income available to common shareholders for each period divided by average tangible assets during the period. Average tangible assets equals average assets less average goodwill and other intangibles, in each case during the applicable period.
           
RECONCILIATION OF AVERAGE ASSETS TO AVERAGE TANGIBLE ASSETS:
 
 THREE MONTHS ENDEDSIX MONTHS ENDED
 June 30, 2014March 31, 2014June 30, 2013June 30, 2014June 30, 2013
AVERAGE ASSETS  $ 6,774,390  $ 6,766,807  $ 6,670,829  $ 6,770,619  $ 6,682,090
Less: Average goodwill and other intangibles 72,334 72,334 72,509 72,334 72,565
AVERAGE TANGIBLE ASSETS  $ 6,702,056  $ 6,694,473  $ 6,598,320  $ 6,698,285  $ 6,609,525
           
(f) Tangible common equity divided by tangible assets. Tangible assets equals total assets less goodwill and other intangibles, in each case at the end of the period.
           
RECONCILIATION OF TOTAL ASSETS TO TANGIBLE ASSETS:
 
 June 30, 2014March 31, 2014June 30, 2013    
TOTAL ASSETS  $ 6,789,173  $ 6,811,072  $ 6,640,473    
Less: Goodwill and other intangibles 72,334 72,334 72,446    
TANGIBLE ASSETS  $ 6,716,839  $ 6,738,738  $ 6,568,027    
           
(g) Efficiency ratio is calculated by taking total other expense divided by the sum of fully taxable equivalent net interest income and other income. Fully taxable equivalent net interest income reconciliation is shown below assuming a 35% tax rate. Additionally, net interest margin is calculated on a fully taxable equivalent basis.
           
RECONCILIATION OF FULLY TAXABLE EQUIVALENT NET INTEREST INCOME TO NET INTEREST INCOME
 
 THREE MONTHS ENDEDSIX MONTHS ENDED
 June 30, 2014March 31, 2014June 30, 2013June 30, 2014June 30, 2013
Interest income  $ 66,363  $ 64,342  $ 65,279  $ 130,705  $ 131,471
Fully taxable equivalent adjustment 221 223 368 444 755
Fully taxable equivalent interest income  $ 66,584  $ 64,565  $ 65,647  $ 131,149  $ 132,226
Interest expense 9,802 9,862 10,567 19,664 21,306
Fully taxable equivalent net interest income  $ 56,782  $ 54,703  $ 55,080  $ 111,485  $ 110,920
 
 
PARK NATIONAL CORPORATION
Consolidated Statements of Income
         
 Three Months EndedSix Months Ended
 June 30,June 30,
(in thousands, except share and per share data)2014 20132014 2013
         
Interest income:        
Interest and fees on loans57,004 56,388111,757 112,163
Interest on:        
Obligations of U.S. Government, its agencies and other securities9,271 8,67318,747 18,915
Obligations of states and political subdivisions1 163 33
Other interest income87 202198 360
Total interest income66,363 65,279130,705 131,471
         
Interest expense:        
Interest on deposits:        
Demand and savings deposits399 468792 969
Time deposits2,133 2,9004,411 5,990
Interest on borrowings7,270 7,19914,461 14,347
Total interest expense9,802 10,56719,664 21,306
         
Net interest income56,561 54,712111,041 110,165
         
(Recovery of) provision for loan losses(1,260) 673(3,485) 1,002
         
Net interest income after (recovery of) provision for loan losses57,821 54,039114,526 109,163
         
Other income19,671 19,29836,319 38,103
         
Total other expense48,196 46,57095,894 92,668
         
Income before income taxes29,296 26,76754,951 54,598
         
Income taxes7,469 6,73313,505 13,854
         
Net income21,827 20,03441,446 40,744
         
Per Common Share:        
Net income - basic1.42 1.302.69 2.64
Net income - diluted1.42 1.302.69 2.64
         
Weighted average shares - basic15,392,435 15,411,98115,396,770 15,411,986
Weighted average shares - diluted15,412,167 15,411,98115,413,568 15,411,986
         
Cash Dividends Declared 0.94 0.94 1.88 1.88
 
 
PARK NATIONAL CORPORATION
Consolidated Balance Sheets
     
(in thousands, except share data)June 30, 2014December 31, 2013
     
Assets    
     
Cash and due from banks$ 141,020$ 129,078
Money market instruments55,946 17,952
Investment securities1,417,910 1,424,234
Loans4,735,487 4,620,505
Allowance for loan losses57,911 59,468
Loans, net4,677,576 4,561,037
Bank premises and equipment, net54,884 55,278
Goodwill and other intangibles72,334 72,334
Other real estate owned23,909 34,636
Other assets345,594 343,798
Total assets$ 6,789,173$ 6,638,347
     
Liabilities and Shareholders' Equity    
     
Deposits:    
Noninterest bearing$ 1,163,288$ 1,193,553
Interest bearing3,763,923 3,596,441
Total deposits4,927,211 4,789,994
Borrowings1,118,404 1,132,820
Other liabilities56,587 63,786
Total liabilities$ 6,102,202$ 5,986,600
     
     
Shareholders' Equity:    
Preferred shares (200,000 shares authorized; no shares outstanding at June 30, 2014 and December 31, 2013)$ — $ —
Common shares (No par value; 20,000,000 shares authorized in 2014 and 2013; 16,150,914 shares issued at June 30, 2014 and 16,150,941 shares issued at December 31, 2013)302,869 302,651
Accumulated other comprehensive loss, net of taxes(11,399) (35,419)
Retained earnings473,114 460,643
Treasury shares (758,489 shares at June 30, 2014 and 738,989 at December 31, 2013)(77,613) (76,128)
Total shareholders' equity$ 686,971$ 651,747
     
Total liabilities and shareholders' equity$ 6,789,173$ 6,638,347
 
 
PARK NATIONAL CORPORATION
Consolidated Average Balance Sheets
         
 Three Months EndedSix Months Ended
 June 30,June 30,
(in thousands)2014 20132014 2013
         
Assets        
         
Cash and due from banks $ 106,844  $ 109,130 $ 110,169  $ 111,881
Money market instruments137,219 324,783159,001 292,433
Investment securities1,409,368 1,312,7961,413,252 1,376,186
Loans4,678,483 4,484,1614,643,037 4,461,361
Allowance for loan losses58,234 55,57959,487 56,434
Loans, net4,620,249 4,428,5824,583,550 4,404,927
Bank premises and equipment, net55,453 57,30655,633 56,204
Goodwill and other intangibles72,334 72,50972,334 72,565
Other real estate owned29,017 35,67131,489 34,980
Other assets343,906 330,052345,191 332,914
Total assets $ 6,774,390  $ 6,670,829 $ 6,770,619  $ 6,682,090
         
         
Liabilities and Shareholders' Equity        
         
Deposits:        
Noninterest bearing $ 1,172,952  $ 1,108,705 $ 1,174,520  $ 1,104,851
Interest bearing3,745,385 3,738,0393,747,105 3,742,810
Total deposits4,918,337 4,846,7444,921,625 4,847,661
Borrowings1,120,608 1,095,8321,119,263 1,102,034
Other liabilities58,219 72,82160,184 78,400
Total liabilities $ 6,097,164  $ 6,015,397 $ 6,101,072  $ 6,028,095
         
Shareholders' Equity:        
Preferred shares$ — $ —$ — $ —
Common shares302,754 302,653302,706 302,653
Accumulated other comprehensive loss, net of taxes(17,968) (21,207)(22,457) (19,983)
Retained earnings470,053 450,361466,591 447,700
Treasury shares(77,613) (76,375)(77,293) (76,375)
Total shareholders' equity $ 677,226  $ 655,432 $ 669,547  $ 653,995
         
Total liabilities and shareholders' equity $ 6,774,390  $ 6,670,829 $ 6,770,619  $ 6,682,090
 
 
PARK NATIONAL CORPORATION
Consolidated Statements of Income - Linked Quarters
           
 2014 2014 2013 2013 2013
(in thousands, except per share data)2nd QTR 1st QTR 4th QTR 3rd QTR 2nd QTR
           
Interest income:          
Interest and fees on loans $ 57,004  $ 54,753  $ 57,038  $ 56,337  $ 56,388
Interest on:          
Obligations of U.S. Government, its agencies and other securities9,271 9,476 8,911 8,880 8,673
Obligations of states and political subdivisions1 2 4 7 16
Other interest income87 111 113 186 202
Total interest income66,363 64,342 66,066 65,410 65,279
           
Interest expense:          
Interest on deposits:          
Demand and savings deposits399 393 382 422 468
Time deposits2,133 2,278 2,516 2,729 2,900
Interest on borrowings7,270 7,191 7,268 7,299 7,199
Total interest expense9,802 9,862 10,166 10,450 10,567
           
Net interest income56,561 54,480 55,900 54,960 54,712
           
(Recovery of) provision for loan losses(1,260) (2,225) (85) 2,498 673
           
Net interest income after (recovery of) provision for loan losses57,821 56,705 55,985 52,462 54,039
           
Other income19,671 16,648 17,778 17,396 19,298
           
Total other expense48,196 47,698 51,146 44,715 46,570
           
Income before income taxes29,296 25,655 22,617 25,143 26,767
           
Income taxes7,469 6,036 5,163 6,114 6,733
           
Net income $ 21,827  $ 19,619  $ 17,454  $ 19,029  $ 20,034
           
Per Common Share:          
Net income - basic $ 1.42  $ 1.27  $ 1.13  $ 1.23  $ 1.30
Net income - diluted $ 1.42  $ 1.27  $ 1.13  $ 1.23  $ 1.30
 
 
PARK NATIONAL CORPORATION
Detail of other income and other expense - Linked Quarters
           
 2014 2014 2013 2013 2013
(in thousands)2nd QTR 1st QTR 4th QTR 3rd QTR 2nd QTR
           
Other income:          
Income from fiduciary activities $ 4,825  $ 4,541  $ 4,590  $ 4,139  $ 4,328
Service charges on deposits3,942 3,659 4,169 4,255 4,070
Other service income2,527 1,918 2,185 3,391 3,352
Checkcard fee income3,493 3,213 3,330 3,326 3,316
Bank owned life insurance income1,026 1,262 1,274 1,311 1,254
ATM fees636 594 623 705 677
OREO valuation adjustments(675) (416) (951) (2,030) (600)
Gain on the sale of OREO, net2,603 706 358 895 1,633
Miscellaneous1,294 1,171 2,200 1,404 1,268
Total other income $ 19,671  $ 16,648  $ 17,778  $ 17,396  $ 19,298
           
Other expense:          
Salaries and employee benefits $ 26,140  $ 25,060  $ 25,115  $ 25,871  $ 24,679
Net occupancy expense2,457 2,832 2,415 2,348 2,444
Furniture and equipment expense2,994 2,998 3,022 2,639 2,981
Data processing fees1,121 1,114 1,064 1,042 1,049
Professional fees and services8,168 6,283 10,520 5,601 5,880
Amortization of intangibles— — — 112 113
Marketing1,006 1,118 1,126 863 953
Insurance1,467 1,447 1,391 1,174 1,338
Communication1,293 1,343 1,489 1,268 1,453
Miscellaneous3,550 5,503 5,004 3,797 5,680
Total other expense $ 48,196  $ 47,698  $ 51,146  $ 44,715  $ 46,570
 
 
PARK NATIONAL CORPORATION
Asset Quality Information
             
 Quarter endedYear ended December 31,
(in thousands, except ratios)June 30, 2014March 31, 20142013201220112010
             
Allowance for loan losses:            
Allowance for loan losses, beginning of period  $ 60,257  $ 59,468  $ 55,537  $ 68,444  $ 143,575  $ 116,717
Transfer of loans at fair value — — — — (219) —
Transfer of allowance to held for sale — — — — (13,100) —
Charge-offs (A) 7,695 3,827 19,153 61,268 133,882 66,314
Recoveries 6,609 6,841 19,669 12,942 8,798 6,092
Net charge-offs (recoveries) 1,086 (3,014) (516) 48,326 125,084 60,222
(Recovery of) provision for loan losses (1,260) (2,225) 3,415 35,419 63,272 87,080
Allowance for loan losses, end of period  $ 57,911  $ 60,257  $ 59,468  $ 55,537  $ 68,444  $ 143,575
(A) Year ended December 31, 2012 included the full charge-off of the Vision Bank ALLL of $12.1 million to bring the retained Vision Bank loan portfolio to fair value prior to the merger of Vision Bank (as constituted following the transaction with Centennial Bank and Home BancShares, Inc.) with and into SEPH, the non-bank subsidiary of Park, on February 16, 2012.
             
General reserve trends:            
Allowance for loan losses, end of period  $ 57,911  $ 60,257  $ 59,468  $ 55,537  $ 68,444  $ 143,575
Specific reserves 6,343 11,322 10,451 8,276 15,935 66,904
General reserves  $ 51,568  $ 48,935  $ 49,017  $ 47,261  $ 52,509  $ 76,671
             
Total loans  $ 4,735,487  $ 4,623,926  $ 4,620,505  $ 4,450,322  $ 4,317,099  $ 4,732,685
Impaired commercial loans 95,974 105,833 112,304 137,238 187,074 250,933
Non-impaired loans  $ 4,639,513  $ 4,518,093  $ 4,508,201  $ 4,313,084  $ 4,130,025  $ 4,481,752
             
             
Asset Quality Ratios:            
Net charge-offs (recoveries) as a % of average loans (annualized for quarterly periods) 0.09% (0.27)% (0.01)% 1.10% 2.65% 1.30%
Allowance for loan losses as a % of period end loans 1.22% 1.30% 1.29% 1.25% 1.59% 3.03%
General reserves as a % of non-impaired loans 1.11% 1.08% 1.09% 1.10% 1.27% 1.71%
             
Nonperforming Assets - Park National Corporation:            
Nonaccrual loans  $ 118,895  $ 128,026  $ 135,216  $ 155,536  $ 195,106  $ 289,268
Accruing troubled debt restructuring 17,514 17,957 18,747 29,800 28,607 —
Loans past due 90 days or more 6,493 1,289 1,677 2,970 3,489 3,590
Total nonperforming loans  $ 142,902  $ 147,272  $ 155,640  $ 188,306  $ 227,202  $ 292,858
Other real estate owned - Park National Bank 7,727 12,486 11,412 14,715 13,240 8,385
Other real estate owned - SEPH 16,182 22,626 23,224 21,003 29,032 —
Other real estate owned - Vision Bank — — — — — 33,324
Total nonperforming assets  $ 166,811  $ 182,384  $ 190,276  $ 224,024  $ 269,474  $ 334,567
Percentage of nonaccrual loans to period end loans 2.51% 2.77% 2.93% 3.49% 4.52% 6.11%
Percentage of nonperforming loans to period end loans 3.02% 3.19% 3.37% 4.23% 5.26% 6.19%
Percentage of nonperforming assets to period end loans 3.52% 3.94% 4.12% 5.03% 6.24% 7.07%
Percentage of nonperforming assets to period end assets 2.46% 2.68% 2.87% 3.37% 3.86% 4.59%
             
             
PARK NATIONAL CORPORATION
Asset Quality Information (continued)
             
     Year ended December 31,
(in thousands, except ratios)June 30, 2014March 31, 20142013201220112010
             
Nonperforming Assets - Park National Bank and Guardian:            
Nonaccrual loans  $ 89,231  $ 96,672  $ 99,108  $ 100,244  $ 96,113  $ 117,815
Accruing troubled debt restructuring 17,417 17,860 18,747 29,800 26,342 —
Loans past due 90 days or more 6,493 1,289 1,677 2,970 3,367 3,226
Total nonperforming loans  $ 113,141  $ 115,821  $ 119,532  $ 133,014  $ 125,822  $ 121,041
Other real estate owned - Park National Bank 7,727 12,486 11,412 14,715 13,240 8,385
Total nonperforming assets  $ 120,868  $ 128,307  $ 130,944  $ 147,729  $ 139,062  $ 129,426
Percentage of nonaccrual loans to period end loans 1.90% 2.11% 2.16% 2.28% 2.29% 2.88%
Percentage of nonperforming loans to period end loans 2.41% 2.52% 2.61% 3.03% 3.00% 2.96%
Percentage of nonperforming assets to period end loans 2.57% 2.79% 2.86% 3.36% 3.32% 3.16%
Percentage of nonperforming assets to period end assets 1.81% 1.91% 2.00% 2.27% 2.21% 1.99%
             
             
Nonperforming Assets - SEPH/Vision Bank (retained portfolio as of June 30, 2014, March 31, 2014, December 31, 2013, 2012, and 2011):
Nonaccrual loans  $ 29,664  $ 31,354  $ 36,108  $ 55,292  $ 98,993  $ 171,453
Accruing troubled debt restructuring 97 97 — — 2,265 —
Loans past due 90 days or more  —   —  —  —  $ 122  $ 364
Total nonperforming loans  $ 29,761  $ 31,451  $ 36,108  $ 55,292  $ 101,380  $ 171,817
Other real estate owned - Vision Bank — — — — — 33,324
Other real estate owned - SEPH 16,182 22,626 23,224 21,003 29,032 —
Total nonperforming assets  $ 45,943  $ 54,077  $ 59,332  $ 76,295  $ 130,412  $ 205,141
Percentage of nonaccrual loans to period end loans N.M. N.M. N.M. N.M. N.M. 26.77%
Percentage of nonperforming loans to period end loans N.M. N.M. N.M. N.M. N.M. 26.82%
Percentage of nonperforming assets to period end loans N.M. N.M. N.M. N.M. N.M. 32.02%
Percentage of nonperforming assets to period end assets N.M. N.M. N.M. N.M. N.M. 25.90%
             
             
New nonaccrual loan information - Park National Corporation            
Nonaccrual loans, beginning of period  $ 128,026  $ 135,216  $ 155,536  $ 195,106  $ 289,268  $ 233,544
New nonaccrual loans 14,785 12,875 67,398 83,204 124,158 175,175
Resolved nonaccrual loans 23,916 20,065 87,718 122,774 218,320 119,451
Nonaccrual loans, end of period  $ 118,895  $ 128,026  $ 135,216  $ 155,536  $ 195,106  $ 289,268
             
New nonaccrual loan information - Ohio - based operations            
Nonaccrual loans, beginning of period  $ 96,672  $ 99,108  $ 100,244  $ 96,113  $ 117,815  $ 85,197
New nonaccrual loans - Ohio-based operations 14,785 12,875 66,197 68,960 78,316 85,081
Resolved nonaccrual loans 22,226 15,311 67,333 64,829 100,018 52,463
Nonaccrual loans, end of period  $ 89,231  $ 96,672  $ 99,108  $ 100,244  $ 96,113  $ 117,815
             
New nonaccrual loan information - SEPH/Vision Bank            
Nonaccrual loans, beginning of period  $ 31,354  $ 36,108  $ 55,292  $ 98,993  $ 171,453  $ 148,347
New nonaccrual loans - SEPH/Vision Bank — — 1,201 14,243 45,842 90,094
Resolved nonaccrual loans 1,690 4,754 20,385 57,944 118,302 66,988
Nonaccrual loans, end of period  $ 29,664  $ 31,354  $ 36,108  $ 55,292  $ 98,993  $ 171,453
             
             
Impaired Commercial Loan Portfolio Information (period end):            
Unpaid principal balance  $ 154,396  $ 160,199  $ 175,576  $ 242,345  $ 290,908  $ 304,534
Prior charge-offs 58,422 54,366 63,272 105,107 103,834 53,601
Remaining principal balance 95,974 105,833 112,304 137,238 187,074 250,933
Specific reserves 6,343 11,322 10,451 8,276 15,935 66,904
Book value, after specific reserve  $ 89,631  $ 94,511  $ 101,853  $ 128,962  $ 171,139  $ 184,029

CONTACT: Media contact: Bethany Lewis, 740.349.0421 blewis@parknationalbank.com Investor contact: Brady Burt, 740.322.6844 bburt@parknationalbank.com

Source: Park National Bank


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