PARK NATIONAL CORPORATION Item 2.02 - Results of Operations and Financial Condition
OnApril 21, 2023 ,Park National Corporation ("Park") issued a news release (the "Financial Results News Release") announcing financial results for the three months endedMarch 31, 2023 . 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. Non-GAAP Financial Measures Item 7.01 of this Current Report on Form 8-K as well as the Financial Results News Release contain non-GAAP (generally accepted accounting principles inthe United States or "U.S. GAAP") financial measures where management believes them to be helpful in understanding Park's results of operations or financial position. Where non-GAAP financial measures are used, the comparableU.S. GAAP financial measures, as well as the reconciliation to the comparableU.S. GAAP financial measures, can be found in the Financial Results News Release. Items Impacting Comparability of Period Results From time to time, revenue, expenses and/or taxes are impacted by items judged by management of Park to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that their outsized impact is believed by management of Park at that time to be infrequent or short-term in nature. Most often, these items impacting comparability of period results are due to merger and acquisition activities and revenue and expenses related to former Vision Bank loan relationships. In other cases, they may result from management's decisions associated with significant corporate actions outside of the ordinary course of business. Even though certain revenue and expense items are naturally subject to more volatility than others due to changes in market and economic environment conditions, as a general rule volatility alone does not result in the inclusion of an item as one impacting comparability of period results. For example, changes in the provision for / (recovery of) credit losses (aside from those related to former Vision Bank loan relationships), gains (losses) on equity securities, net, and asset valuation adjustments, reflect ordinary banking activities and are, therefore, typically excluded from consideration as items impacting comparability of period results. Management believes the disclosure of items impacting comparability of period results provides a better understanding of Park's performance and trends and allows management to ascertain which of such items, if any, to include or exclude from an analysis of Park's performance; i.e., within the context of determining how that performance differed from expectations, as well as how, if at all, to adjust estimates of future performance taking such items into account.
Items impacting comparability of the results of particular periods are not intended to be a complete list of items that may materially impact current or future period performance.
Non-GAAP Financial Measures Park's management uses certain non-GAAP financial measures to evaluate Park's performance. Specifically, management reviews the return on average tangible equity, the return on average tangible assets, the tangible equity to tangible assets ratio, tangible book value per common share and pre-tax, pre-provision net income. Management has included in the Financial Results News Release information relating to the annualized return on average tangible equity, the annualized return on average tangible assets, the tangible equity to tangible assets ratio, tangible book value per common share and pre-tax, pre-provision net income for the three months ended and atMarch 31, 2023 ,December 31, 2022 andMarch 31, 2022 . For the purpose 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 and other intangible assets 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 and other intangible assets during the applicable period. For the purpose of calculating the tangible equity to tangible assets ratio, a non-GAAP financial measure, tangible equity is divided by tangible assets. Tangible equity equals total shareholders' equity less goodwill and other intangible assets, in each case at period end. Tangible assets equal total assets less goodwill and other intangible assets, in each case at period end. For the purpose of calculating tangible book value per common share, a non-GAAP financial measure, tangible equity is divided by the number of common shares outstanding, in each case at period end. For the purpose of calculating pre-tax, pre-provision net income, a non-GAAP financial measure, income taxes and the provision for (recovery of) credit losses are added back to net income, in each case during the applicable period. 2 -------------------------------------------------------------------------------- Management believes that the disclosure of the annualized return on average tangible equity, the annualized return on average tangible assets, the tangible equity to tangible assets ratio, tangible book value per common share and pre-tax, pre-provision net income presents additional information to the reader of the consolidated financial statements, which, when read in conjunction with the consolidated financial statements prepared in accordance withU.S. 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, tangible assets to total assets, and pre-tax, pre-provision net income to net income solely for the purpose of complying with SEC Regulation G and not as an indication that the annualized return on average tangible equity, the annualized return on average tangible assets, the tangible equity to tangible assets ratio, tangible book value per common share and pre-tax, pre-provision net income are substitutes for the annualized return on average equity, the annualized return on average assets, the total shareholders' equity to total assets ratio, book value per common share and net income, respectively, as determined in accordance withU.S. GAAP. FTE (fully taxable equivalent) Financial Measures Interest income, yields, and ratios on a FTE basis are considered non-GAAP financial measures. Management believes net interest income on a FTE basis provides an insightful picture of the interest margin for comparison purposes. . . .
Item 7.01 - Regulation FD Disclosure
Liquidity and Capital
Park continues to maintain strong capital and liquidity. Funds are available from a number of sources, including the capital markets, the investment securities portfolio, the core deposit base, FHLB borrowings and the capability to securitize or package loans for sale. The most easily accessible forms of liquidity, Fed Funds Sold, off balance sheet deposits, unpledged investment securities and available FHLB borrowing capacity, totaled$2.74 billion atMarch 31, 2023 . Park's debt securities portfolio is classified as available-for-sale ("AFS") and these debt securities are available to be sold in the future in response to Park's liquidity needs, changes in market interest rates, and asset-liability management strategies, among other reasons. AFS debt securities are reported at fair value, with unrealized holding gains and losses excluded from earnings, but included in other comprehensive loss, net of applicable income taxes. The table below provides additional detail on Park's debt securities portfolio and capital position. % change from % change from (Dollars in thousands) March 31, 2023 December 31, 2022 March 31, 2022 12/31/22 03/31/22 Net unrealized losses on debt securities 105,510 121,156 43,809 (12.91) % 140.84 % Net unrealized losses on debt securities as a percentage of period end total assets 1.07 % 1.23 % 0.46 % (13.01) % 132.61 % Total shareholders' equity / Period end total assets 10.98 % 10.85 % 11.24 % 1.20 % (2.31) % Tangible equity / Tangible assets (1) 9.46 % 9.33 % 9.67 % 1.39 % (2.17) %
(1) Tangible equity equals total shareholders' equity less goodwill and other intangible assets, in each case at period end. Tangible assets equal total assets less goodwill and other intangible assets, in each case at period end.
Park's deposits grew during the pandemic and normalized throughout 2022. In
order to manage the impact of this growth on its balance sheet, Park has
utilized a program where certain deposit balances are transferred off balance
sheet while maintaining the customer relationship. Park is able to increase or
decrease the amount off balance sheet based on its balance sheet management
strategies and liquidity needs. The balance of deposits transferred off balance
sheet has declined as deposit
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balances have returned to normalized levels. The table below breaks out the
change in deposit balances, by deposit type, for
December 31 ,
(Dollars in thousands)
December 31, 2021 December 31, 2020 2019 Retail Deposits Non-interest bearing deposits$ 1,176,545 $ 1,193,807 $ 1,195,530 $ 1,077,107 $ 801,035 Transaction accounts 939,026 994,717 1,004,532 900,093 760,640 Savings 1,702,824 1,744,713 1,669,373 1,427,687 1,461,347 Certificates of deposit 445,552 455,157 546,793 620,965 725,017 Total retail deposits$ 4,263,947 $ 4,388,394
(2.8) % (0.6) % 9.7 % 7.4 %
Commercial Deposits
Non-interest bearing deposits $ 1,745,697 $ 1,880,469 $ 1,870,889 $ 1,649,992 $ 1,158,900
Transaction accounts 1,231,790 993,388 498,344 481,386 868,102
Savings 966,712 873,176 954,200 1,171,521 863,458
Certificates of deposit 86,298 99,288 164,867 243,607 414,113
Total commercial deposits $ 4,030,497 $ 3,846,321
4.8 % 10.3 % (1.6) % 7.3 %
Total deposits 8,294,444 8,234,715 7,904,528 7,572,358 7,052,612
$ change from prior period end
0.7 % 4.2 % 4.4 % 7.4 %
Off balance sheet deposits 164,600 195,937 983,053 710,101 -
Total deposits including off balance
sheet deposits $ 8,459,044 $ 8,430,652
0.3 % (5.1) % 7.3 % 17.4 %
During the three months ended March 31, 2023 , total deposits including off
balance sheet deposits increased by $28.4 million , or 0.3%. This increase
consisted of a $184.2 million increase in total commercial deposits offset by a
$124.4 million decrease in total retail deposits and a $31.3 million decrease in
off balance sheet deposits. Of the $184.2 million increase in total commercial
deposits, $182.9 million was a result of an increase in public fund deposits.
This increase is consistent with historical seasonality. As of March 31, 2023 ,
Park had approximately $1.5 billion of uninsured deposits, which was 18.6% of
total deposits. Uninsured deposits of $1.5 billion included $288 million of
deposits which were over $250,000 but were fully collateralized by Park's
investment securities portfolio.
Financial Results by Segment
The table below reflects the net income (loss) by segment for the first quarters (the three months endedMarch 31 ) of 2023 and 2022 and for the years endedDecember 31, 2022 and 2021. Park's segments includePark National Bank ("PNB") and "All 5 --------------------------------------------------------------------------------
Other" which primarily consists of Park as the "Parent Company", Guardian . . .
Item 8.01 - Other Events Declaration of Cash Dividend As reported in the Financial Results News Release, onApril 21, 2023 , the Park Board of Directors (the "Park Board") declared a$1.05 per common share quarterly cash dividend in respect of Park's common shares. The cash dividend is payable onJune 9, 2023 to common shareholders of record as of the close of business onMay 19, 2023 . A copy of the Financial Results News Release is included as Exhibit 99.1 and the portion thereof addressing the declaration of the quarterly cash dividend by the Park Board 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 exhibits are included with this Current Report on Form 8-K:
Exhibit No. Description
99.1 News Release issued by
104 Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document)
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