Park National Corporation (NYSEMKT:PRK) Files An 8-K Results of Operations and Financial Condition
Item 2.02 – Results of Operations and Financial Condition.
On April 21, 2017, Park National Corporation (Park) issued a news
release (the Financial Results News Release) announcing financial
results for the three months ended March 31, 2017. A copy of the
Financial Results News Release is included as Exhibit 99.1 to
this Current Report on Form 8-K and incorporated by reference
herein.
release (the Financial Results News Release) announcing financial
results for the three months ended March 31, 2017. A copy of the
Financial Results News Release is included as Exhibit 99.1 to
this Current Report on Form 8-K and incorporated by reference
herein.
Park’s management uses certain non-GAAP (generally accepted
accounting principles) financial measures to evaluate Park’s
performance. Specifically, management reviews return on average
tangible equity, return on average tangible assets, tangible
equity to tangible assets and tangible book value per share.
Management has included in the Financial Results News Release
information relating to the annualized return on average tangible
equity, annualized return on average tangible assets, tangible
equity to tangible assets and tangible book value per share for
the three months ended and at March 31, 2017, December 31, 2016
and March 31, 2016. For purposes of calculating the annualized
return on average tangible equity, a non-GAAP financial measure,
net income for each period is divided by average tangible equity
during the period. Average tangible equity equals average
shareholders’ equity during the applicable period less average
goodwill during the applicable period. For the purpose of
calculating the annualized return on average tangible assets, a
non-GAAP financial measure, net income for each period is divided
by average tangible assets during the period. Average tangible
assets equals average assets during the applicable period less
average goodwill during the applicable period. For the purpose of
calculating tangible equity to tangible assets, a non-GAAP
financial measure, tangible equity is divided by tangible assets.
Tangible equity equals total shareholders’ equity less goodwill,
in each case at period end. Tangible assets equals total assets
less goodwill, in each case at period end. For the purpose of
calculating tangible book value per share, a non-GAAP financial
measure, tangible equity is divided by common shares outstanding
at period end. Management believes that the disclosure of return
on average tangible equity, return on average tangible assets,
tangible equity to tangible assets and tangible book value per
share presents additional information to the reader of the
consolidated financial statements, which, when read in
conjunction with the consolidated financial statements prepared
in accordance with GAAP, assists in analyzing Park’s operating
performance, ensures comparability of operating performance from
period to period, and facilitates comparisons with the
performance of Park’s peer financial holding companies and bank
holding companies, while eliminating certain non-operational
effects of acquisitions. In the Financial Results News Release,
Park has provided a reconciliation of average tangible equity to
average shareholders’ equity, average tangible assets to average
assets, tangible equity to total shareholders’ equity and
tangible assets to total assets solely for the purpose of
complying with SEC Regulation G and not as an indication that
return on average tangible equity, return on average tangible
assets, tangible equity to tangible assets and tangible book
value per share are substitutes for return on average equity,
return on average assets, total shareholders’ equity to total
assets and book value per share, respectively, as determined by
GAAP.
accounting principles) financial measures to evaluate Park’s
performance. Specifically, management reviews return on average
tangible equity, return on average tangible assets, tangible
equity to tangible assets and tangible book value per share.
Management has included in the Financial Results News Release
information relating to the annualized return on average tangible
equity, annualized return on average tangible assets, tangible
equity to tangible assets and tangible book value per share for
the three months ended and at March 31, 2017, December 31, 2016
and March 31, 2016. For purposes of calculating the annualized
return on average tangible equity, a non-GAAP financial measure,
net income for each period is divided by average tangible equity
during the period. Average tangible equity equals average
shareholders’ equity during the applicable period less average
goodwill during the applicable period. For the purpose of
calculating the annualized return on average tangible assets, a
non-GAAP financial measure, net income for each period is divided
by average tangible assets during the period. Average tangible
assets equals average assets during the applicable period less
average goodwill during the applicable period. For the purpose of
calculating tangible equity to tangible assets, a non-GAAP
financial measure, tangible equity is divided by tangible assets.
Tangible equity equals total shareholders’ equity less goodwill,
in each case at period end. Tangible assets equals total assets
less goodwill, in each case at period end. For the purpose of
calculating tangible book value per share, a non-GAAP financial
measure, tangible equity is divided by common shares outstanding
at period end. Management believes that the disclosure of return
on average tangible equity, return on average tangible assets,
tangible equity to tangible assets and tangible book value per
share presents additional information to the reader of the
consolidated financial statements, which, when read in
conjunction with the consolidated financial statements prepared
in accordance with GAAP, assists in analyzing Park’s operating
performance, ensures comparability of operating performance from
period to period, and facilitates comparisons with the
performance of Park’s peer financial holding companies and bank
holding companies, while eliminating certain non-operational
effects of acquisitions. In the Financial Results News Release,
Park has provided a reconciliation of average tangible equity to
average shareholders’ equity, average tangible assets to average
assets, tangible equity to total shareholders’ equity and
tangible assets to total assets solely for the purpose of
complying with SEC Regulation G and not as an indication that
return on average tangible equity, return on average tangible
assets, tangible equity to tangible assets and tangible book
value per share are substitutes for return on average equity,
return on average assets, total shareholders’ equity to total
assets and book value per share, respectively, as determined by
GAAP.
Item 7.01 – Regulation FD Disclosure
Financial Results by segment
The table below reflects the net income (loss) by segment for
the first quarters of 2017 and 2016, and for the fiscal years
ended December 31, 2016 and 2015. Park’s segments include The
Park National Bank (“PNB”), Guardian Financial Services
Company (GFSC), SE Property Holdings, LLC (“SEPH”) and all
other which primarily consists of Park as the “Parent
Company.”
the first quarters of 2017 and 2016, and for the fiscal years
ended December 31, 2016 and 2015. Park’s segments include The
Park National Bank (“PNB”), Guardian Financial Services
Company (GFSC), SE Property Holdings, LLC (“SEPH”) and all
other which primarily consists of Park as the “Parent
Company.”
|
Net income (loss) by segment
|
|||||||||||||||
|
(In thousands)
|
Q1 2017
|
Q1 2016
|
|
|
|||||||||||
|
PNB
|
$
|
21,486
|
$
|
21,744
|
$
|
84,451
|
$
|
84,345
|
|||||||
|
GFSC
|
|
(1,836
|
)
|
(307
|
)
|
1,423
|
|||||||||
|
Parent Company
|
(1,226
|
)
|
(1,834
|
)
|
(4,557
|
)
|
(4,549
|
)
|
|||||||
|
Ongoing operations
|
$
|
20,458
|
$
|
18,074
|
$
|
79,587
|
$
|
81,219
|
|||||||
|
SEPH
|
(191
|
)
|
|
6,548
|
(207
|
)
|
|||||||||
|
Total Park
|
$
|
20,267
|
$
|
18,686
|
$
|
86,135
|
$
|
81,012
|
The category Parent Company above excludes the results for
SEPH, an entity which is winding down commensurate with the
disposition of SEPH’s nonperforming assets. Management
considers the Ongoing operations results, which exclude the
results of SEPH, to reflect the business of Park and Park’s
subsidiaries going forward. The discussion below provides
additional information regarding the segments that make up the
Ongoing operations, followed by additional information
regarding SEPH.
SEPH, an entity which is winding down commensurate with the
disposition of SEPH’s nonperforming assets. Management
considers the Ongoing operations results, which exclude the
results of SEPH, to reflect the business of Park and Park’s
subsidiaries going forward. The discussion below provides
additional information regarding the segments that make up the
Ongoing operations, followed by additional information
regarding SEPH.
The Park National Bank (PNB)
The table below reflects PNB’s net income for the first
quarters of 2017 and 2016, and for the fiscal years ended
December 31, 2016 and 2015.
quarters of 2017 and 2016, and for the fiscal years ended
December 31, 2016 and 2015.
|
(In thousands)
|
Q1 2017
|
Q1 2016
|
|
|
||||||||
|
Net interest income
|
$
|
57,480
|
$
|
57,155
|
$
|
227,576
|
$
|
220,879
|
||||
|
Provision for loan losses
|
|
1,533
|
2,611
|
7,665
|
||||||||
|
Other income
|
17,711
|
17,223
|
74,803
|
75,188
|
||||||||
|
Other expense
|
43,803
|
41,360
|
177,562
|
167,476
|
||||||||
|
Income before income taxes
|
$
|
30,668
|
$
|
31,485
|
$
|
122,206
|
$
|
120,926
|
||||
|
Federal income tax expense
|
9,182
|
9,741
|
37,755
|
36,581
|
||||||||
|
Net income
|
$
|
21,486
|
$
|
21,744
|
$
|
84,451
|
$
|
84,345
|
Net interest income of $57.5 million for the three months ended
March 31, 2017 represented a $325,000, or 0.6% increase, compared
to $57.2 million for the same period of 2016. The increase was
the result of a $629,000 increase in interest income offset by a
$304,000 increase in interest expense.
March 31, 2017 represented a $325,000, or 0.6% increase, compared
to $57.2 million for the same period of 2016. The increase was
the result of a $629,000 increase in interest income offset by a
$304,000 increase in interest expense.
The $629,000 increase in interest income was due to a $1.0
million increase in interest income on loans, offset by a
$405,000 decrease in interest income on investments. The increase
in interest income on loans was largely the result of a $231
million, or 4.4%, increase in average loans from $5.0 billion for
the three months ended March 31, 2016, to $5.2 billion for the
three months ended March 31, 2017. Included in interest income
for the three months ended March 31, 2017 was $80,000 in income
related to PNB participations in legacy Vision Bank (“Vision”)
assets, compared to $561,000 for the three months ended March 31,
2016.
million increase in interest income on loans, offset by a
$405,000 decrease in interest income on investments. The increase
in interest income on loans was largely the result of a $231
million, or 4.4%, increase in average loans from $5.0 billion for
the three months ended March 31, 2016, to $5.2 billion for the
three months ended March 31, 2017. Included in interest income
for the three months ended March 31, 2017 was $80,000 in income
related to PNB participations in legacy Vision Bank (“Vision”)
assets, compared to $561,000 for the three months ended March 31,
2016.
The provision for loan losses of $720,000 for the three months
ended March 31, 2017 represented an improvement of $813,000,
compared to a provision of loan losses of $1.5 million for the
same period of 2016. Refer to the Credit Metrics and Provision
for (Recovery of) Loan Losses section for additional details
regarding the level of the provision for loan losses recognized
in each period presented above.
ended March 31, 2017 represented an improvement of $813,000,
compared to a provision of loan losses of $1.5 million for the
same period of 2016. Refer to the Credit Metrics and Provision
for (Recovery of) Loan Losses section for additional details
regarding the level of the provision for loan losses recognized
in each period presented above.
Other expense of $43.8 million for the three months ended March
31, 2017 represented an increase of $2.4 million, or 5.9%,
compared to $41.4 million for the same period of 2016. The $2.4
million increase was primarily related to a $1.1 million
increase in salaries expense, a $511,000 increase in employee
benefits expense (largely related to an increase in medical
expenses), an increase of $739,000 in data processing fees, an
increase of $177,000 in furniture and equipment expense, and an
$174,000 increase in insurance expense, offset by a decrease of
$310,000 in professional fees and services, and a $224,000
decrease in non-loan related losses which are included in
miscellaneous expense.
31, 2017 represented an increase of $2.4 million, or 5.9%,
compared to $41.4 million for the same period of 2016. The $2.4
million increase was primarily related to a $1.1 million
increase in salaries expense, a $511,000 increase in employee
benefits expense (largely related to an increase in medical
expenses), an increase of $739,000 in data processing fees, an
increase of $177,000 in furniture and equipment expense, and an
$174,000 increase in insurance expense, offset by a decrease of
$310,000 in professional fees and services, and a $224,000
decrease in non-loan related losses which are included in
miscellaneous expense.
PNB’s results for the first quarters of 2017 and 2016, and for
the fiscal year ended December 31, 2016, included income and
expense related to participations in legacy Vision assets. The
impact of these participations on particular items within
PNB’s income and expense for these periods is detailed in the
table below:
the fiscal year ended December 31, 2016, included income and
expense related to participations in legacy Vision assets. The
impact of these participations on particular items within
PNB’s income and expense for these periods is detailed in the
table below:
|
|
1Q 2017
|
|
1Q 2016
|
|
|
||||||||||||||||||||||||
|
(In thousands)
|
PNB as reported
|
Adjustments
(1) |
PNB as adjusted
|
|
PNB as reported
|
Adjustments
(1) |
PNB as adjusted
|
|
PNB as reported
|
Adjustments
(1) |
PNB as adjusted
|
||||||||||||||||||
|
Net interest income
|
$
|
57,480
|
$
|
|
$
|
57,400
|
|
$
|
57,155
|
$
|
|
$
|
56,594
|
|
$
|
227,576
|
|
$
|
|
|
$
|
226,775
|
|||||||
|
Provision for (recovery of) loan losses
|
|
|
(6
|
)
|
|
|
|
1,533
|
|
(5
|
)
|
1,538
|
|
|
2,611
|
|
(3,118
|
)
|
5,729
|
|
|||||||||
|
Other income
|
17,711
|
17,711
|
|
17,223
|
(202
|
)
|
17,425
|
|
74,803
|
|
74,609
|
||||||||||||||||||
|
Other expense
|
43,803
|
|
|
|
43,704
|
|
|
41,360
|
|
|
|
41,139
|
|
|
177,562
|
|
|
|
176,900
|
|
|||||||||
|
Income before income taxes
|
$
|
30,668
|
$
|
(13
|
)
|
$
|
30,681
|
|
$
|
31,485
|
$
|
|
$
|
31,342
|
|
$
|
122,206
|
$
|
3,451
|
$
|
118,755
|
||||||||
|
Federal income tax expense (benefit)
|
9,182
|
|
(4
|
)
|
9,186
|
|
|
9,741
|
|
|
|
9,697
|
|
|
37,755
|
|
1,066
|
|
36,689
|
|
|||||||||
|
Net income (expense)
|
$
|
21,486
|
|
$
|
(9
|
)
|
$
|
21,495
|
|
|
$
|
21,744
|
|
$
|
|
|
$
|
21,645
|
|
|
$
|
84,451
|
|
$
|
2,385
|
|
$
|
82,066
|
|
(1) Adjustments consist of the impact on the particular items
reported in PNB’s income statement of PNB participations in
legacy Vision assets.
reported in PNB’s income statement of PNB participations in
legacy Vision assets.
The table below provides certain balance sheet information and
financial ratios for PNB as of March 31, 2017, December 31,
2016 and March 31, 2016.
financial ratios for PNB as of March 31, 2017, December 31,
2016 and March 31, 2016.
|
(In thousands)
|
March 31, 2017
|
December 31, 2016
|
March 31, 2016
|
|
% change from 12/31/16
|
% change from 03/31/16
|
||||||||
|
Loans
|
$
|
5,276,643
|
$
|
5,234,828
|
$
|
5,023,659
|
0.80
|
%
|
5.04
|
%
|
||||
|
Allowance for loan losses
|
47,983
|
|
48,782
|
|
54,646
|
|
(1.64
|
)%
|
(12.19
|
)%
|
||||
|
Net loans
|
5,228,660
|
5,186,046
|
4,969,013
|
0.82
|
%
|
5.23
|
%
|
|||||||
|
Investment securities
|
1,559,241
|
|
1,573,320
|
|
1,599,598
|
|
(0.89
|
)%
|
(2.52
|
)%
|
||||
|
Total assets
|
7,667,288
|
7,389,538
|
7,347,378
|
3.76
|
%
|
4.35
|
%
|
|||||||
|
Total deposits
|
6,022,912
|
|
5,630,199
|
|
5,705,769
|
|
6.98
|
%
|
5.56
|
%
|
||||
|
Average assets
(1) |
7,481,810
|
7,337,438
|
7,325,133
|
1.97
|
%
|
2.14
|
%
|
|||||||
|
Efficiency ratio
|
57.44
|
%
|
58.26
|
%
|
55.28
|
%
|
(1.41
|
)%
|
3.91
|
%
|
||||
|
Return on average assets
(2) |
1.16
|
%
|
1.15
|
%
|
1.19
|
%
|
|
0.87
|
%
|
(2.52
|
)%
|
(1) Average assets for the three months ended March 31, 2017
and 2016, and for the fiscal year ended December 31, 2016.
and 2016, and for the fiscal year ended December 31, 2016.
(2) Annualized for the three months ended March 31, 2017 and
2016.
2016.
Loans outstanding at March 31, 2017 were $5.28 billion,
compared to $5.23 billion at December 31, 2016, an increase of
$42 million, or an annualized 3.2%. The loan growth for the
first three months of 2017 consisted of consumer loan growth of
$59.7 million (21.5% annualized), offset by a reduction in
commercial loan balances of $2.1 million (0.3% annualized),
HELOC loan balances of $1.1 million (2.2% annualized), and
residential loan balances of $13.4 million (4.5% annualized).
compared to $5.23 billion at December 31, 2016, an increase of
$42 million, or an annualized 3.2%. The loan growth for the
first three months of 2017 consisted of consumer loan growth of
$59.7 million (21.5% annualized), offset by a reduction in
commercial loan balances of $2.1 million (0.3% annualized),
HELOC loan balances of $1.1 million (2.2% annualized), and
residential loan balances of $13.4 million (4.5% annualized).
PNB’s allowance for loan losses decreased by $799,000, or
1.6%, to $48.0 million at March 31, 2017, compared to $48.8
million at December 31, 2016. Net charge-offs were $1.5
million, or 0.12% of total average loans, for the three months
ended March 31, 2017. Net charge-offs consisted of net
charge-offs of consumer loans of $1.1 million, commercial loans
of $216,000, mortgage loans of $113,000 and other loans of
$132,000. Refer to the Credit Metrics and Provision for
(Recovery of) Loan Losses section for additional information
regarding PNB’s loan portfolio and the level of provision for
loan losses recognized in each period presented.
1.6%, to $48.0 million at March 31, 2017, compared to $48.8
million at December 31, 2016. Net charge-offs were $1.5
million, or 0.12% of total average loans, for the three months
ended March 31, 2017. Net charge-offs consisted of net
charge-offs of consumer loans of $1.1 million, commercial loans
of $216,000, mortgage loans of $113,000 and other loans of
$132,000. Refer to the Credit Metrics and Provision for
(Recovery of) Loan Losses section for additional information
regarding PNB’s loan portfolio and the level of provision for
loan losses recognized in each period presented.
Guardian Financial Services Company (GFSC)
The table below reflects GFSC’s net income (loss) for the
first quarters of 2017 and 2016, and for the fiscal years
ended December 31, 2016 and 2015.
first quarters of 2017 and 2016, and for the fiscal years
ended December 31, 2016 and 2015.
|
(In thousands)
|
Q1 2017
|
Q1 2016
|
|
|
||||||||
|
Net interest income
|
$
|
1,478
|
|
$
|
1,504
|
|
$
|
5,874
|
|
$
|
6,588
|
|
|
Provision for loan losses
|
|
|
|
|
1,887
|
|
1,415
|
|
||||
|
Other (loss) income
|
|
|
|
|
(1
|
)
|
|
|
||||
|
Other expense
|
|
|
3,798
|
|
4,457
|
|
2,984
|
|
||||
|
Income (loss) before income taxes
|
$
|
|
|
$
|
(2,821
|
)
|
$
|
(471
|
)
|
$
|
2,191
|
|
|
Federal income tax expense (benefit)
|
|
|
(985
|
)
|
(164
|
)
|
|
|
||||
|
Net income (loss)
|
$
|
|
|
$
|
(1,836
|
)
|
$
|
(307
|
)
|
$
|
1,423
|
|
The provision for loan losses of $437,000 for the three
months ended March 31, 2017 represented a decrease of
$90,000, compared to $527,000 for the same period of 2016.
Refer to the Credit Metrics and Provision for (Recovery of)
Loan Losses section for additional information regarding
Guardian’s loan portfolio and the level of provision for
loan losses recognized in each period presented.
months ended March 31, 2017 represented a decrease of
$90,000, compared to $527,000 for the same period of 2016.
Refer to the Credit Metrics and Provision for (Recovery of)
Loan Losses section for additional information regarding
Guardian’s loan portfolio and the level of provision for
loan losses recognized in each period presented.
Other expense of $736,000 for the three months ended March
31, 2017 represented a $3.1 million decrease, compared to
$3.8 million for the three months ended March 31, 2016. This
decrease was primarily related to the evaluation of
respective litigation accruals during 2017 and 2016.
31, 2017 represented a $3.1 million decrease, compared to
$3.8 million for the three months ended March 31, 2016. This
decrease was primarily related to the evaluation of
respective litigation accruals during 2017 and 2016.
The table below provides certain balance sheet information
and financial ratios for GFSC as of March 31, 2017, December
31, 2016 and March 31, 2016.
and financial ratios for GFSC as of March 31, 2017, December
31, 2016 and March 31, 2016.
|
(In thousands)
|
March 31, 2017
|
December 31, 2016
|
March 31, 2016
|
|
% change from 12/31/16
|
% change from 03/31/16
|
||||||||
|
Loans
|
$
|
34,327
|
|
$
|
32,661
|
|
$
|
33,798
|
|
|
5.10
|
%
|
1.57
|
%
|
|
Allowance for loan losses
|
1,939
|
|
1,842
|
|
2,302
|
|
|
5.27
|
%
|
(15.77
|
)%
|
|||
|
Net loans
|
32,388
|
|
30,819
|
|
31,496
|
|
|
5.09
|
%
|
2.83
|
%
|
|||
|
Total assets
|
34,574
|
|
32,268
|
|
34,637
|
|
|
7.15
|
%
|
(0.18
|
)%
|
|||
|
Average assets
(1) |
32,943
|
|
33,370
|
|
35,372
|
|
|
(1.28
|
)%
|
(6.87
|
)%
|
|||
|
Return on average assets
(2) |
2.44
|
%
|
(0.92
|
)%
|
N.M.
|
|
|
N.M.
|
|
N.M.
|
|
(1) Average assets for the three months ended March 31, 2017
and 2016, and for the fiscal year ended December 31, 2016.
and 2016, and for the fiscal year ended December 31, 2016.
(2) Annualized for the three months ended March 31, 2017 and
2016.
2016.
Park Parent Company
The table below reflects the Park Parent Company net loss for
the first quarters of 2017 and 2016, and for the fiscal years
ended December 31, 2016 and 2015.
the first quarters of 2017 and 2016, and for the fiscal years
ended December 31, 2016 and 2015.
|
(In thousands)
|
Q1 2017
|
Q1 2016
|
|
|
||||||||
|
Net interest (expense) income
|
$
|
(207
|
)
|
$
|
(1
|
)
|
$
|
(138
|
)
|
$
|
|
|
|
Provision for loan losses
|
|
|
|
|
|
|
|
|
||||
|
Other (loss) income
|
(204
|
)
|
|
|
|
|
|
|
||||
|
Other expense
|
2,147
|
|
3,337
|
|
9,731
|
|
9,972
|
|
||||
|
Loss before income tax benefit
|
$
|
(2,558
|
)
|
$
|
(3,206
|
)
|
$
|
(8,914
|
)
|
$
|
(9,220
|
)
|
|
Federal income tax benefit
|
(1,332
|
)
|
(1,372
|
)
|
(4,357
|
)
|
(4,671
|
)
|
||||
|
Net loss
|
$
|
(1,226
|
)
|
$
|
(1,834
|
)
|
$
|
(4,557
|
)
|
$
|
(4,549
|
)
|
The net interest (expense) income for Park’s parent company
included, for all periods presented, interest income on
subordinated debt investments in PNB, which were eliminated
in the consolidated Park National Corporation totals. For the
fiscal years 2016 and 2015 and for the three months ended
March 31, 2016, the net interest (expense) income included
interest income on loans to SEPH (paid off on December 14,
2016). Additionally, net interest (expense) income included,
for all
included, for all periods presented, interest income on
subordinated debt investments in PNB, which were eliminated
in the consolidated Park National Corporation totals. For the
fiscal years 2016 and 2015 and for the three months ended
March 31, 2016, the net interest (expense) income included
interest income on loans to SEPH (paid off on December 14,
2016). Additionally, net interest (expense) income included,
for all
periods presented, interest expense related to the $30.00
million of 7% Subordinated Notes due April 20, 2022 issued
by Park to accredited investors on April 20, 2012, which
management intends to prepay in full (principal plus
accrued interest) on April 24, 2017.
million of 7% Subordinated Notes due April 20, 2022 issued
by Park to accredited investors on April 20, 2012, which
management intends to prepay in full (principal plus
accrued interest) on April 24, 2017.
Other expense of $2.1 million for the three months ended
March 31, 2017 represented a decrease of $1.2 million, or
35.7%, compared to $3.3 million for the three months ended
March 31, 2016. The $1.2 million decrease was primarily
related to a decrease of $0.8 million in professional fees
and services and a $0.5 million decrease in miscellaneous
other expense.
March 31, 2017 represented a decrease of $1.2 million, or
35.7%, compared to $3.3 million for the three months ended
March 31, 2016. The $1.2 million decrease was primarily
related to a decrease of $0.8 million in professional fees
and services and a $0.5 million decrease in miscellaneous
other expense.
SEPH
The table below reflects SEPH’s net (loss) income for the
first quarters of 2017 and 2016, and for the fiscal years
ended December 31, 2016 and 2015. SEPH holds the remaining
assets and liabilities retained by Vision subsequent to the
sale of the Vision business on February 16, 2012. Prior to
holding the remaining Vision assets, SEPH held OREO assets
that were transferred from Vision to SEPH. This segment
represents a run-off portfolio of the legacy Vision assets.
first quarters of 2017 and 2016, and for the fiscal years
ended December 31, 2016 and 2015. SEPH holds the remaining
assets and liabilities retained by Vision subsequent to the
sale of the Vision business on February 16, 2012. Prior to
holding the remaining Vision assets, SEPH held OREO assets
that were transferred from Vision to SEPH. This segment
represents a run-off portfolio of the legacy Vision assets.
|
(In thousands)
|
Q1 2017
|
Q1 2016
|
|
|
||||||||
|
Net interest income (expense)
|
$
|
|
|
$
|
1,161
|
|
$
|
4,774
|
|
$
|
(74
|
)
|
|
Recovery of loan losses
|
(281
|
)
|
(1,150
|
)
|
(9,599
|
)
|
(4,090
|
)
|
||||
|
Other income
|
|
|
|
|
2,974
|
|
1,848
|
|
||||
|
Other expense
|
|
|
1,404
|
|
7,273
|
|
6,182
|
|
||||
|
(Loss) income before income taxes
|
$
|
(294
|
)
|
$
|
|
|
$
|
10,074
|
|
$
|
(318
|
)
|
|
Federal income tax (benefit) expense
|
(103
|
)
|
|
|
3,526
|
|
(111
|
)
|
||||
|
Net (loss) income
|
$
|
(191
|
)
|
$
|
|
|
$
|
6,548
|
|
$
|
(207
|
)
|
Net interest income decreased to $201,000 for the three
months ended March 31, 2017 from $1.2 million for the same
period in 2016. The decrease was largely the result of a
decline in payments received from SEPH impaired loan
relationships.
months ended March 31, 2017 from $1.2 million for the same
period in 2016. The decrease was largely the result of a
decline in payments received from SEPH impaired loan
relationships.
For the three months ended March 31, 2017, SEPH had net
recoveries of loan losses of $281,000, compared to $1.2
million in the same period in 2016.
recoveries of loan losses of $281,000, compared to $1.2
million in the same period in 2016.
The $628,000 decrease in other expense for the three months
ended March 31, 2017, compared to the same period of 2016,
was primarily the result of a $467,000 decline in legal
fees and a $195,000 decline in management and consulting
fees.
ended March 31, 2017, compared to the same period of 2016,
was primarily the result of a $467,000 decline in legal
fees and a $195,000 decline in management and consulting
fees.
Legacy Vision assets at SEPH totaled $20.0 million as of
March 31, 2017 compared to $20.3 million at December 31,
2016 and $25.9 million at March 31, 2016. In addition to
these SEPH assets, PNB participations in legacy Vision
assets totaled $9.4 million at March 31, 2017 compared to
$9.6 million at December 31, 2016 and $9.8 million at March
31, 2016.
March 31, 2017 compared to $20.3 million at December 31,
2016 and $25.9 million at March 31, 2016. In addition to
these SEPH assets, PNB participations in legacy Vision
assets totaled $9.4 million at March 31, 2017 compared to
$9.6 million at December 31, 2016 and $9.8 million at March
31, 2016.
Park National Corporation
The table below reflects Park’s consolidated net income
for the first quarters of 2017 and 2016, and for the fiscal
years ended December 31, 2016 and 2015.
for the first quarters of 2017 and 2016, and for the fiscal
years ended December 31, 2016 and 2015.
|
(In thousands)
|
Q1 2017
|
Q1 2016
|
|
|
||||||||
|
Net interest income
|
$
|
58,952
|
|
$
|
59,819
|
|
$
|
238,086
|
|
$
|
227,632
|
|
|
Provision for (recovery of) loan losses
|
|
|
|
|
(5,101
|
)
|
4,990
|
|
||||
|
Other income
|
17,507
|
|
17,389
|
|
78,731
|
|
77,551
|
|
||||
|
Other expense
|
47,462
|
|
49,899
|
|
199,023
|
|
186,614
|
|
||||
|
Income before income taxes
|
$
|
28,121
|
|
$
|
26,399
|
|
$
|
122,895
|
|
$
|
113,579
|
|
|
Federal income taxes
|
7,854
|
|
7,713
|
|
36,760
|
|
32,567
|
|
||||
|
Net income
|
$
|
20,267
|
|
$
|
18,686
|
|
$
|
86,135
|
|
$
|
81,012
|
|
Credit Metrics and Provision for (Recovery of) Loan
Losses
Losses
On a consolidated basis, Park reported a provision for
loan losses for the three months ended March 31, 2017 of
$876,000, compared to $910,000 for the three months ended
March 31, 2016. The table below shows a breakdown of the
provision for (recovery of) loan losses by reportable
segment.
loan losses for the three months ended March 31, 2017 of
$876,000, compared to $910,000 for the three months ended
March 31, 2016. The table below shows a breakdown of the
provision for (recovery of) loan losses by reportable
segment.
|
(In thousands)
|
Q1 2017
|
Q1 2016
|
|
|
||||||||
|
PNB
|
$
|
|
|
$
|
1,533
|
|
$
|
2,611
|
|
$
|
7,665
|
|
|
GFSC
|
|
|
|
|
1,887
|
|
1,415
|
|
||||
|
Park Parent
|
|
|
|
|
|
|
|
|
||||
|
Total Ongoing Operations
|
$
|
1,157
|
|
$
|
2,060
|
|
$
|
4,498
|
|
$
|
9,080
|
|
|
SEPH
|
(281
|
)
|
(1,150
|
)
|
(9,599
|
)
|
(4,090
|
)
|
||||
|
Total Park
|
$
|
|
|
$
|
|
|
$
|
(5,101
|
)
|
$
|
4,990
|
|
PNB had net charge-offs of $1.5 million, GFSC had net
charge-offs of $341,000, and SEPH had net recoveries of
$281,000 for the three months ended March 31, 2017,
resulting in net charge-offs of $1.6 million for Park, on
a consolidated basis. Provision for loan losses at Park
on a consolidated basis were $876,000 for the three
months ended March 31, 2017. Excluding SEPH, Park had net
charge-offs of $1.9 million for the three months ended
March 31, 2017. The provision for loan losses for Park,
excluding SEPH, was $1.2 million for the three months
ended March 31, 2017, which was $702,000 lower than net
charge-offs, excluding SEPH. The $1.9 million in net
charge-offs, excluding SEPH, exceeded the provision for
loan losses and reflected Park’s ongoing evaluation of
the allowance for loan losses required to cover probable
incurred losses with respect to the Park loan portfolio.
charge-offs of $341,000, and SEPH had net recoveries of
$281,000 for the three months ended March 31, 2017,
resulting in net charge-offs of $1.6 million for Park, on
a consolidated basis. Provision for loan losses at Park
on a consolidated basis were $876,000 for the three
months ended March 31, 2017. Excluding SEPH, Park had net
charge-offs of $1.9 million for the three months ended
March 31, 2017. The provision for loan losses for Park,
excluding SEPH, was $1.2 million for the three months
ended March 31, 2017, which was $702,000 lower than net
charge-offs, excluding SEPH. The $1.9 million in net
charge-offs, excluding SEPH, exceeded the provision for
loan losses and reflected Park’s ongoing evaluation of
the allowance for loan losses required to cover probable
incurred losses with respect to the Park loan portfolio.
The table below provides additional information related
to specific reserves and general reserves for Park’s
ongoing operations as of March 31, 2017, December 31,
2016 and March 31, 2016.
to specific reserves and general reserves for Park’s
ongoing operations as of March 31, 2017, December 31,
2016 and March 31, 2016.
|
(In thousands)
|
3/31/2017
|
12/31/2016
|
3/31/2016
|
||||||
|
Total allowance for loan losses
|
$
|
49,922
|
|
$
|
50,624
|
|
$
|
56,948
|
|
|
Specific reserve
|
1,091
|
|
|
|
4,930
|
|
|||
|
General reserve
|
$
|
48,831
|
|
$
|
50,076
|
|
$
|
52,018
|
|
|
|
|
|
|
||||||
|
Total loans
|
$
|
5,301,520
|
|
$
|
5,259,503
|
|
$
|
5,047,177
|
|
|
Impaired commercial loans
|
58,584
|
|
58,676
|
|
63,894
|
|
|||
|
Total loans less impaired commercial loans
|
$
|
5,242,936
|
|
$
|
5,200,827
|
|
$
|
4,983,283
|
|
|
|
|
|
|
||||||
|
General reserve as a % of total loans less
impaired commercial loans |
0.93
|
%
|
0.96
|
%
|
1.04
|
%
|
Note:>The table above includes only those loans at PNB
and GFSC, as these are the entities that have an ALLL
balance. The table in the “Asset Quality Information”
section of the financial information included with the
Financial Results News Release, includes all Park loans
(including those at SEPH) and thus shows slightly
different information.
and GFSC, as these are the entities that have an ALLL
balance. The table in the “Asset Quality Information”
section of the financial information included with the
Financial Results News Release, includes all Park loans
(including those at SEPH) and thus shows slightly
different information.
The allowance for loan losses of $49.9 million at March
31, 2017 represented a $702,000 or 1.4% decrease,
compared to $50.6 million at December 31, 2016. This
decrease was the result of a $1.2 million decrease in
general reserves due to Park’s ongoing evaluation of the
allowance for loan losses required to cover probable
incurred losses with respect to the Park loan portfolio.
This decrease in general reserves was offset by a
$543,000 increase in specific reserves.
31, 2017 represented a $702,000 or 1.4% decrease,
compared to $50.6 million at December 31, 2016. This
decrease was the result of a $1.2 million decrease in
general reserves due to Park’s ongoing evaluation of the
allowance for loan losses required to cover probable
incurred losses with respect to the Park loan portfolio.
This decrease in general reserves was offset by a
$543,000 increase in specific reserves.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
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 managements 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; general economic and
financial market conditions, specifically in the real
estate markets and the credit markets, either
nationally or in the states in which Park and our
subsidiaries do business, may experience a slowing or
reversal of the recent economic expansion in addition
to continuing residual effects of recessionary
conditions and an uneven spread of positive impacts of
recovery on the economy and our counterparties,
including adverse impacts on the demand for loan,
deposit and other financial services, delinquencies,
defaults and counterparties’ ability to meet credit
and other obligations; 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 as well as reduce interest margins and impact
loan demand; changes in consumer spending, borrowing
and saving habits, whether due to changing business and
economic conditions, legislative and regulatory
initiatives, or other factors; changes in unemployment;
changes in customers’, suppliers’, and other
counterparties’ performance and creditworthiness;
asset/liability repricing risks and liquidity risks;
our liquidity requirements could be adversely affected
by changes to regulations governing bank and bank
holding company capital and liquidity standards as well
as by changes in our assets and liabilities;
competitive factors among financial services
organizations could increase significantly, including
product and pricing pressures, changes to third-party
relationships and our ability to attract, develop and
retain qualified bank professionals; clients could
pursue alternatives to bank deposits, causing us to
lose a relatively inexpensive source of funding;
uncertainty regarding the nature, timing 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, pensions, bankruptcy,
consumer protection, accounting, bank products and
services, fiduciary standards, securities and other
aspects of the financial services industry,
specifically the reforms provided for in 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 OCC, the FDIC, and the Federal
Reserve Board, to implement the Dodd-Frank Act’s
provisions, the Budget Control Act of 2011, the
American Taxpayer Relief Act of 2012, the JOBS Act, the
FAST 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 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;
changes in law and policy accompanying the new
presidential administration and uncertainty or
speculation pending the enactment of such changes;
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 effect of trade, monetary, fiscal and
other governmental policies of the U.S. federal
government, including money supply and interest rate
policies of the Federal Reserve Board; disruption in
the liquidity and other functioning of U.S. financial
markets; the impact on financial markets and the
economy of any changes in the credit ratings of the
U.S. Treasury obligations and other U.S.
government-backed debt, as well as issues surrounding
the levels of U.S., European and Asian government debt
and concerns regarding the creditworthiness of certain
sovereign governments, supranationals and financial
institutions in Europe and Asia; the uncertainty
surrounding the United Kingdom’s exit from the
European Union and its consequences; our litigation and
regulatory compliance exposure, including any adverse
developments in legal proceedings or other claims and
unfavorable resolution of regulatory and other
governmental examinations or other inquiries; the
adequacy of our risk management program; the ability to
secure confidential information and deliver products
and services through the use of computer systems and
telecommunications networks; a failure in or breach of
our operational or security systems or infrastructure,
or those of our third-party vendors and other service
providers, including as a result of cyber attacks;
fraud, scams and schemes of third parties; the impact
of widespread natural and other disasters, pandemics,
dislocations, terrorist activities or international
hostilities on the economy and financial markets
generally or on us or our counterparties specifically;
demand for loans in the respective market areas served
by Park and our subsidiaries; 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, 2016. 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.
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 managements 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; general economic and
financial market conditions, specifically in the real
estate markets and the credit markets, either
nationally or in the states in which Park and our
subsidiaries do business, may experience a slowing or
reversal of the recent economic expansion in addition
to continuing residual effects of recessionary
conditions and an uneven spread of positive impacts of
recovery on the economy and our counterparties,
including adverse impacts on the demand for loan,
deposit and other financial services, delinquencies,
defaults and counterparties’ ability to meet credit
and other obligations; 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 as well as reduce interest margins and impact
loan demand; changes in consumer spending, borrowing
and saving habits, whether due to changing business and
economic conditions, legislative and regulatory
initiatives, or other factors; changes in unemployment;
changes in customers’, suppliers’, and other
counterparties’ performance and creditworthiness;
asset/liability repricing risks and liquidity risks;
our liquidity requirements could be adversely affected
by changes to regulations governing bank and bank
holding company capital and liquidity standards as well
as by changes in our assets and liabilities;
competitive factors among financial services
organizations could increase significantly, including
product and pricing pressures, changes to third-party
relationships and our ability to attract, develop and
retain qualified bank professionals; clients could
pursue alternatives to bank deposits, causing us to
lose a relatively inexpensive source of funding;
uncertainty regarding the nature, timing 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, pensions, bankruptcy,
consumer protection, accounting, bank products and
services, fiduciary standards, securities and other
aspects of the financial services industry,
specifically the reforms provided for in 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 OCC, the FDIC, and the Federal
Reserve Board, to implement the Dodd-Frank Act’s
provisions, the Budget Control Act of 2011, the
American Taxpayer Relief Act of 2012, the JOBS Act, the
FAST 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 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;
changes in law and policy accompanying the new
presidential administration and uncertainty or
speculation pending the enactment of such changes;
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 effect of trade, monetary, fiscal and
other governmental policies of the U.S. federal
government, including money supply and interest rate
policies of the Federal Reserve Board; disruption in
the liquidity and other functioning of U.S. financial
markets; the impact on financial markets and the
economy of any changes in the credit ratings of the
U.S. Treasury obligations and other U.S.
government-backed debt, as well as issues surrounding
the levels of U.S., European and Asian government debt
and concerns regarding the creditworthiness of certain
sovereign governments, supranationals and financial
institutions in Europe and Asia; the uncertainty
surrounding the United Kingdom’s exit from the
European Union and its consequences; our litigation and
regulatory compliance exposure, including any adverse
developments in legal proceedings or other claims and
unfavorable resolution of regulatory and other
governmental examinations or other inquiries; the
adequacy of our risk management program; the ability to
secure confidential information and deliver products
and services through the use of computer systems and
telecommunications networks; a failure in or breach of
our operational or security systems or infrastructure,
or those of our third-party vendors and other service
providers, including as a result of cyber attacks;
fraud, scams and schemes of third parties; the impact
of widespread natural and other disasters, pandemics,
dislocations, terrorist activities or international
hostilities on the economy and financial markets
generally or on us or our counterparties specifically;
demand for loans in the respective market areas served
by Park and our subsidiaries; 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, 2016. 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.
Item 8.01 – Other Events
Declaration of Cash Dividend
As reported in the Financial Results News Release, on
April 21, 2017, the Park Board of Directors declared
a $0.94 per share quarterly cash dividend in respect
of Park’s common shares. The dividend is payable on
June 9, 2017 to common shareholders of record as of
the close of business on May 19, 2017. A copy of the
Financial Results News Release is included as Exhibit
99.1 and the portion thereof addressing the
declaration of the cash dividend by Park’s Board of
Directors is incorporated by reference herein.
April 21, 2017, the Park Board of Directors declared
a $0.94 per share quarterly cash dividend in respect
of Park’s common shares. The dividend is payable on
June 9, 2017 to common shareholders of record as of
the close of business on May 19, 2017. A copy of the
Financial Results News Release is included as Exhibit
99.1 and the portion thereof addressing the
declaration of the cash dividend by Park’s Board of
Directors is incorporated by reference herein.
Item 9.01 – Financial Statements and Exhibits.
|
(a)
|
Not applicable
|
|
(b)
|
Not applicable
|
|
(c)
|
Not applicable
|
|
(d)
|
Exhibits. The following exhibit is included
with this Current Report on Form 8-K: |
Exhibit No. Description
|
99.1
|
News Release issued by Park National
Corporation on April 21, 2017 addressing financial results for the three months ended March 31, 2017. |
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page follows.]
About Park National Corporation (NYSEMKT:PRK)
Park National Corporation (Park) is a financial holding company. Park’s principal business consists of owning and supervising its subsidiaries. Park’s banking operations are conducted through The Park National Bank (Park National Bank). Its segments include Park National Bank, Guardian Financial Services Company (Guardian Finance) and SE Property Holdings, LLC (SEPH). Park National Bank is a national banking association with its main office in Newark, Ohio and financial service offices in Ashland, Athens, Butler, Champaign, Clark, Clermont, Coshocton, Crawford, Darke, Hocking, Holmes, Knox, Licking, Madison, Marion, Mercer, Miami, Morrow, Muskingum, Perry, Richland, Tuscarawas, Warren and Wayne Counties in Ohio. Guardian Finance provides consumer finance services in the central Ohio area. SEPH has operations in Ohio, with the sole purpose of such operations being to sell other real estate owned and work out or sell problem loan situations with the respective borrowers. Park National Corporation (NYSEMKT:PRK) Recent Trading Information
Park National Corporation (NYSEMKT:PRK) closed its last trading session up +0.29 at 105.99 with 27,071 shares trading hands.
