PARK NATIONAL CORP /OH/ [PRK] Filings

10-Q 1 prk-20220630.htm 10-Q prk-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________________ to __________________________


Commission File Number			1-13006


PARK NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)


Ohio						31-1179518
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

50 North Third Street,

P.O. Box 3500

Newark,

Ohio

43058-3500

(Address of principal executive offices) (Zip Code)


(740)			349-8451
(Registrant’s telephone number, including area code)


N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common shares, without par value	PRK	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”,

“smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 16,253,794 Common Shares, no par value per share, outstanding at July 29, 2022.

PARK NATIONAL CORPORATION

CONTENTS


			Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Condensed Balance Sheets a t June 30 , 2022 and December 31, 20 21 (unaudited)			5

Consolidated Condensed Statements of Income for the three months and six months ended June 30 , 2022 and 20 21 (unaudited)			7

Consolidated Condensed Statements of Comprehensive (Loss) Income for the three months and six months ended June 3 0 , 2022 and 20 21 (unaudited)			9

Consolidated Condensed Statements of Changes in Shareholders’ Equity for the three months and six months ended June 3 0 , 2022 and 20 21 (unaudited)			10

Consolidated Condensed Statements of Cash Flows for the six months ended June 30 , 2022 and 20 21 (unaudited)			12

Notes to Unaudited Consolidated Condensed Financial Statements			14

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			69

Item 3. Quantitative and Qualitative Disclosures About Market Risk			101

Item 4. Controls and Procedures			101

PART II. OTHER INFORMATION			103

Item 1. Legal Proceedings			103

Item 1A. Risk Factors			103

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			103

Item 3. Defaults Upon Senior Securities			104

Item 4. Mine Safety Disclosures			104

Item 5. Other Information			104

Item 6. Exhibits			104

SIGNATURES			107

Glossary of Abbreviations and Acronyms

Park has identified the following list of abbreviations and acronyms that are used in the Unaudited Consolidated Condensed Financial Statements, Notes to Unaudited Consolidated Condensed Financial Statements, and Management's Discussion and Analysis of Financial Condition and Results of Operations.

AFS

Available-for-sale

LIBOR

London Inter-Bank Offered Rate

ACL

Allowance for credit losses

MSRs

Mortgage servicing rights

Allowance

Allowance for credit losses

NAV

Net asset value

AOCI

Accumulated other comprehensive (loss) income

NewDominion

NewDominion Bank

ASC

Accounting Standards Codification

OCI

Other comprehensive (loss) income

ASU

Accounting Standards Update

OREO

Other real estate owned

AUCL

Allowance for unfunded credit losses

OWS

One-way sell

CARES Act

Coronavirus Aid, Relief, and Economic Security Act

Park

Park National Corporation and its subsidiaries

Carolina Alliance

CAB Financial Corporation and its subsidiaries

PBRSUs

Performance-based restricted stock units

CECL

Current expected credit loss

PCD

Purchased credit deteriorated

COVID-19

Novel coronavirus

Probability of default

DCF

Discounted cash flow

PNB

The Park National Bank

FASB

Financial Accounting Standards Board

PPP

CARES Act Paycheck Protection Program

FHLB

Federal Home Loan Bank

ROU

Right-of-use

FRB

Federal Reserve Bank

SARs

Stock appreciation rights

GDP

Gross domestic product

SBA

Small Business Administration

GFSC

Guardian Financial Services Company

SEC

U.S. Securities and Exchange Commission

HPI

Home price index

SEPH

SE Property Holdings, LLC

HTM

Held-to-maturity

TBRSUs

Time-based restricted stock units

IRLC

Interest rate lock commitment

TDRs

Troubled debt restructurings

KSOP

Park's qualified retirement plan that combines an employee stock ownership plan (ESOP) with a 401(k) plan

U.S. GAAP

United States Generally Accepted Accounting Principles

LDA

Loss driver analysis

U.S.

United States

LGD

Loss given default

Table of Contents

PARK NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Condensed Balance Sheets (Unaudited)

(in thousands, except share and per share data)


	June 30, 2022		December 31, 2021
Assets:
Cash and due from banks	$	171,114	$	144,507
Money market instruments	75,327		74,673
Cash and cash equivalents	246,441		219,180

Investment securities:
Debt securities available-for-sale, at fair value (amortized cost of $1,939,877 and $1,727,363 at June 30, 2022 and December 31, 2021, respectively, and no allowance for credit losses at June 30, 2022 and December 31, 2021)	1,839,103		1,754,140
Other investment securities	81,621		61,268
Total investment securities	1,920,724		1,815,408

Commercial loans held for sale	6,321		—

Loans	6,958,685		6,871,122
Allowance for credit losses	(81,448)		(83,197)
Net loans	6,877,237		6,787,925

Bank owned life insurance	219,579		215,792
Prepaid assets	152,573		144,124
Goodwill	159,595		159,595
Other intangible assets	6,657		7,462
Premises and equipment, net	85,531		89,008
Affordable housing tax credit investments	54,751		58,711
OREO	1,354		775
Accrued interest receivable	26,457		23,413
Operating lease right-of-use asset	16,314		13,446
Mortgage loan servicing rights	16,470		15,264
Other	36,666		10,151
Total assets	$	9,826,670	$	9,560,254

Table of Contents

PARK NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Condensed Balance Sheets (Unaudited) (Continued)

(in thousands, except share and per share data)


	June 30, 2022		December 31, 2021
Liabilities and Shareholders' Equity:
Deposits:
Non-interest bearing	$	3,057,977	$	3,066,419
Interest bearing	5,239,677		4,838,109
Total deposits	8,297,654		7,904,528

Short-term borrowings	171,799		238,786
Subordinated notes	188,435		188,210
Unfunded commitments in affordable housing tax credit investments	21,232		28,484
Operating lease liability	17,067		14,339
Allowance for credit losses on off-balance sheet commitments	4,131		4,282
Accrued interest payable	3,080		3,116
Other	73,259		67,750
Total liabilities	$	8,776,657	$	8,449,495

Shareholders' equity:
Preferred shares (200,000 shares authorized; No shares issued)	$	—	$	—
Common shares (No par value; 20,000,000 shares authorized; 17,623,104 shares issued at June 30, 2022 and 17,623,118 shares issued at December 31, 2021)	460,645		461,800
Retained earnings	814,241		776,294
Treasury shares (1,373,798 shares at June 30, 2022 and 1,403,555 shares at December 31, 2021)	(139,469)		(142,490)
Accumulated other comprehensive (loss) income, net of taxes	(85,404)		15,155
Total shareholders' equity	1,050,013		1,110,759
Total liabilities and shareholders’ equity	$	9,826,670	$	9,560,254

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Table of Contents

PARK NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Condensed Statements of Income (Unaudited)

(in thousands, except share and per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Interest and dividend income:

Interest and fees on loans	$	77,787	$	81,176	$	150,203	$	159,913

Interest and dividends on:
Debt securities - taxable	7,624		4,600		13,754		8,856
Debt securities - tax-exempt	2,676		2,032		5,123		4,069
Other interest income	260		186		413		329
Total interest and dividend income	88,347		87,994		169,493		173,167

Interest expense:

Interest on deposits:
Demand and savings deposits	1,333		401		1,684		787
Time deposits	708		1,285		1,428		2,869

Interest on borrowings:
Short-term borrowings	190		182		434		365
Long-term debt	2,177		2,275		4,322		4,561

Total interest expense	4,408		4,143		7,868		8,582

Net interest income	83,939		83,851		161,625		164,585

Provision for (recovery of) credit losses	2,991		(4,040)		(1,614)		(8,895)
Net interest income after provision for (recovery of) credit losses	$	80,948	$	87,891	163,239		173,480

Other income:
Income from fiduciary activities	$	8,859	$	8,569	17,656		16,742
Service charges on deposit accounts	2,563		2,032		4,637		4,086
Other service income	4,940		7,159		9,759		16,776
Debit card fee income	6,731		6,758		12,857		12,844
Bank owned life insurance income	2,374		1,149		3,549		2,314
ATM fees	583		655		1,115		1,185
Gain on equity securities, net	709		467		3,062		2,277
Other components of net periodic pension benefit income	3,027		2,038		6,054		4,076
Miscellaneous	1,407		2,411		4,160		5,027
Total other income	$	31,193	$	31,238	$	62,849	$	65,327

Table of Contents

PARK NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Condensed Statements of Income (Unaudited) (Continued)

(in thousands, except share and per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Other expense:
Salaries	$	31,052	$	30,303	$	61,573	$	60,199
Employee benefits	10,199		10,056		20,698		20,257
Occupancy expense	3,040		3,027		6,254		6,667
Furniture and equipment expense	2,934		2,756		5,871		5,366
Data processing fees	8,416		7,150		15,920		14,862
Professional fees and services	6,775		6,973		12,633		12,637
Marketing	1,019		1,290		2,336		2,781
Insurance	1,245		1,276		2,650		2,967
Communication	935		770		1,825		1,892
State tax expense	1,167		1,103		2,359		2,211
Amortization of intangible assets	403		479		805		958
Foundation contribution	—		4,000		—		4,000
Miscellaneous	2,863		2,217		4,497		4,468
Total other expense	$	70,048	$	71,400	$	137,421	$	139,265

Income before income taxes	$	42,093	$	47,729	$	88,667	$	99,542

Income taxes	7,769		8,597		15,468		17,579

Net income	$	34,324	$	39,132	$	73,199	$	81,963

Earnings per common share:
Basic	$	2.11	$	2.39	$	4.51	$	5.02
Diluted	$	2.10	$	2.38	$	4.48	$	4.98

Weighted average common shares outstanding:
Basic	16,249,307		16,340,690		16,234,598		16,327,838
Diluted	16,361,246		16,472,800		16,346,141		16,455,673

Regular cash dividends declared per common share	$	1.04	$	1.03	$	2.08	$	2.06
Special cash dividends declared per common share	$	—	$	—	—		$	0.20

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Table of Contents

PARK NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Condensed Statements of Comprehensive (Loss) Income (Unaudited)

(in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income	$	34,324	$	39,132	$	73,199	$	81,963

Other comprehensive (loss) income, net of tax:
Unrealized net holding (loss) gain on debt securities available-for-sale, net of income tax effect of $(11,963) and $1,291 for the three months ended June 30, 2022 and 2021, respectively, and $(26,786) and $(2,323) for the six months ended June 30, 2022 and 2021, respectively.	(45,002)		4,858		(100,765)		(8,739)
Reclassification adjustment for losses included in net income on cash flow hedging derivatives, net of income tax effect of $14 for both the three months and six months ended June 30, 2022.	52		—		52		—
Unrealized gain on cash flow hedging derivatives, net of income tax effect of $4 and $30 for the three months ended June 30, 2022 and 2021, respectively, and $41 and $63 for the six months ended June 30, 2022 and 2021, respectively.	15		113		154		238
Other comprehensive (loss) income	$	(44,935)	$	4,971	$	(100,559)	$	(8,501)

Comprehensive (loss) income	$	(10,611)	$	44,103	$	(27,360)	$	73,462

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Table of Contents

PARK NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Condensed Statements of Changes in Shareholders' Equity (Unaudited)

(in thousands, except share and per share data)


	Preferred Shares		Common Shares		Retained Earnings		Treasury Shares		Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2021	$	—	$	461,800	$	776,294	$	(142,490)	$	15,155
Net income					38,875
Other comprehensive loss, net of tax									(55,624)
Dividends on common shares at $1.04 per share					(17,172)
Cash payment for fractional common shares in dividend reinvestment plan			(2)
Issuance of 29,757 common shares under share-based compensation awards, net of 18,658 common shares withheld to pay employee income taxes			(4,508)		(964)		3,021
Share-based compensation expense			1,981
Balance at March 31, 2022	$	—	$	459,271	$	797,033	$	(139,469)	$	(40,469)
Net income					$	34,324
Other comprehensive loss, net of tax									$	(44,935)
Dividends on common shares at $1.04 per share					$	(17,116)
Share-based compensation expense			1,374
Balance at June 30, 2022	$	—	$	460,645	$	814,241	$	(139,469)	$	(85,404)

Table of Contents

PARK NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Condensed Statements of Changes in Shareholders' Equity (Unaudited) (Continued)

(in thousands, except share and per share data)


	Preferred Shares		Common Shares		Retained Earnings		Treasury Shares		Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2020	$	—	$	460,687	$	704,764	$	(130,766)	$	5,571
Cumulative change in accounting principle					(7,956)
Balance at January 1, 2021	$	—	$	460,687	$	696,808	$	(130,766)	$	5,571

PARK NATIONAL CORP /OH/ [PRK] Filings
10-Q	[2022-08-01]
10-Q	[2022-05-03]
10-K	[2022-02-24]
10-Q	[2021-11-03]
10-Q	[2021-08-03]
10-Q	[2021-05-06]
10-K	[2021-02-26]
10-Q	[2020-11-04]
10-Q	[2020-08-04]
10-Q	[2020-05-08]
10-K	[2020-02-28]
10-Q	[2019-11-04]
10-Q	[2019-08-02]
10-Q	[2019-05-02]
10-K	[2019-02-26]
10-Q	[2018-11-02]
10-Q	[2018-07-27]
10-Q	[2018-05-02]
10-K	[2018-02-27]
10-Q	[2017-10-31]
10-Q	[2017-07-27]
10-Q	[2017-04-27]
10-K	[2017-02-21]
10-Q	[2016-10-28]
10-Q	[2016-07-28]
10-Q	[2016-04-27]
10-K	[2016-02-18]
10-Q	[2015-10-27]
10-Q	[2015-07-28]
10-Q	[2015-04-27]
10-K	[2015-02-24]
10-Q	[2014-10-28]
10-Q	[2014-08-01]
10-Q	[2014-05-02]
10-K	[2014-02-25]
10-Q	[2013-11-01]
10-Q	[2013-08-02]
10-Q	[2013-05-02]
10-K	[2013-02-26]
10-Q	[2012-11-07]
10-Q	[2012-08-03]
10-Q	[2012-05-04]
10-K	[2012-02-29]