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| PRK > SEC Filings for PRK > Form 8-K on 29-Oct-2012 | All Recent SEC Filings |
29-Oct-2012
Results of Operations and Financial Condition, Regulation FD Disclosure,
On October 29, 2012, Park National Corporation ("Park") issued a news release (the "Financial Results News Release") announcing financial results for the three and nine months ended September 30, 2012. A copy of this 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-U.S. GAAP (U.S. generally accepted accounting
principles) financial measures to evaluate Park's performance. Specifically,
management reviews return on average tangible common equity, return on average
tangible assets, tangible common equity to tangible assets and tangible common
book value per common share. Management has included in the Financial Results
News Release information relating to the return on average tangible common
equity, return on average tangible assets, tangible common equity to tangible
assets and tangible common book value per common share for the three and nine
month periods ended September 30, 2012 and 2011. For purposes of calculating the
return on average tangible common equity, a non-U.S. GAAP financial measure, net
income available to common shareholders for each period is divided by average
tangible common equity during the period. Average tangible common equity equals
average stockholders' equity during the applicable period less (i) average
goodwill and other intangible assets during the applicable period and
(ii) average preferred stock during the applicable period. For the purpose of
calculating the return on average tangible assets, a non-U.S. GAAP financial
measure, net income available to common shareholders 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
tangible common equity to tangible assets, a non-U.S. GAAP financial measure,
tangible common equity is divided by tangible assets. Tangible common equity
equals stockholders' equity less preferred stock and goodwill and intangible
assets. Tangible assets equals total assets less goodwill and intangible assets.
For the purpose of calculating tangible common book value per common share, a
non-U.S. GAAP financial measure, tangible common equity is divided by common
shares outstanding at period end. Management believes that the disclosure of
return on average tangible common equity, return on average tangible assets,
tangible common equity to tangible assets and tangible common book value per
common 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 U.S. GAAP, assists in analyzing
Park's operating performance and ensures comparability of operating performance
from period to period while eliminating certain non-operational effects of
acquisitions and, in the case of return on average common equity and tangible
common book value per common share, the impact of preferred stock. In the
Financial Results News Release, Park has provided a reconciliation of average
tangible common equity to average stockholders' equity, average tangible assets
to average assets, tangible common equity to stockholders' 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 common equity, return
on average tangible assets, tangible common equity to tangible assets and
tangible common book value per common share are substitutes for return on
average equity, return on average assets, common equity to assets and common
book value per common share, respectively, as determined by U.S. GAAP.
The following is a discussion of the financial results for the three and nine months ended September 30, 2012 and a comparison of these results to the guidance previously provided within the Annual Report to Shareholders for the fiscal year ended December 31, 2011 (the "2011 Annual Report").
The table below reflects the net income (loss) by segment for the first, second and third quarters of 2012, projected results for the fourth quarter of 2012, and results for each of the prior two fiscal years ended December 31, 2011 and 2010. 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."
Projected Q4
(In thousands) Q1 2012 Q2 2012 Q3 2012 2012 Projected 2012 2011 2010
PNB $ 21,561 $ 23,483 $ 22,068 $ 21,661 $ 88,773 $ 106,851 $ 102,948
GFSC 806 909 971 993 3,679 2,721 2,006
Park Parent Company 49 134 274 (191 ) 266 (1,595 ) (1,439 )
Ongoing operations $ 22,416 $ 24,526 $ 23,313 $ 22,463 $ 92,718 $ 107,977 $ 103,515
Vision Bank - - - - - (22,526 ) (45,414 )
SEPH 9,059 (5,640 ) (11,331 ) (4,047 ) (11,959 ) (3,311 ) -
Total Park $ 31,475 $ 18,886 $ 11,982 $ 18,416 $ 80,759 $ 82,140 $ 58,101
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The "Park Parent Company" above excludes the results for SEPH, an entity which is winding down commensurate with the disposition of its problem assets. Management considers the "Ongoing operations" results to be reflective of the business of Park and its subsidiaries on a going forward basis. The discussion below provides some additional information regarding the segments that make up the "Ongoing operations".
The Park National Bank (PNB)
The table below reflects the results for PNB for the first, second and third
quarters of 2012, projected results for the fourth quarter of 2012, and results
for each of the prior two fiscal years ended December 31, 2011 and 2010.
Projected Q4 Projected
(In thousands) Q1 2012 Q2 2012 Q3 2012 2012 2012 2011 2010
Net interest income $ 55,846 $ 56,022 $ 55,366 $ 54,216 $ 221,450 $ 236,282 $ 237,281
Provision for loan losses 4,672 3,756 4,125 3,826 16,379 30,220 23,474
Fee income 16,661 17,700 18,150 18,081 70,592 67,348 68,648
Security gains - - - - - 23,634 11,864
Total other expense 38,056 37,260 39,609 38,513 153,438 146,235 144,051
Income before income taxes $ 29,779 $ 32,706 $ 29,782 $ 29,958 $ 122,225 $ 150,809 $ 150,268
Federal income taxes 8,218 9,223 7,714 8,297 33,452 43,958 47,320
Net income $ 21,561 $ 23,483 $ 22,068 $ 21,661 $ 88,773 $ 106,851 $ 102,948
Net income excluding
security gains $ 21,561 $ 23,483 $ 22,068 $ 21,661 $ 88,773 $ 91,489 $ 95,236
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Management previously projected 2012 net income for PNB of approximately $93 million within the 2011 Annual Report. Due primarily to the continued low interest rate environment, management's most recent projection for PNB's net income is $89 million.
The table below provides certain balance sheet information and financial ratios for PNB as of September 30, 2012, for the year ended December 31, 2011 and as of September 30, 2011.
% change % change
Sept. 30, Dec. 31, Sept. 30, from from
(In thousands) 2012 2011 2011 12/31/11 9/30/11
Loans $ 4,311,117 $ 4,172,424 $ 4,111,272 3.32 % 4.86 %
Allowance for loan losses 53,145 55,409 63,780 (4.09 )% (16.67 )%
Net loans 4,257,972 4,117,015 4,047,492 3.42 % 5.20 %
Total assets 6,601,785 6,281,747 6,346,125 5.09 % 4.03 %
Average assets (YTD) 6,530,055 6,453,404 6,489,781 1.19 % 0.62 %
Deposits 4,895,627 4,611,646 4,671,968 6.16 % 4.79 %
Return on average assets * 1.37 % 1.42 % 1.49 % (3.52 )% (8.05 )%
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The $139 million (3.32%) increase in loans experienced at PNB through the first nine months of 2012 is primarily related to continued demand in the mortgage loan portfolio, which has increased by $98.4 million. Of the $98.4 million increase in the mortgage loan portfolio, approximately $96.8 million of the increase is associated with our decision to retain a portion of the 15-year, fixed-rate mortgages originated by PNB rather than selling them in the secondary market. As noted above, PNB's allowance for loan losses has declined by $10.6 million, or 16.67%, to $53.1 million at September 30, 2012 compared to $63.8 million at September 30, 2011. The decline in PNB's allowance for loan losses is due to continued improvement in the credit metrics across the PNB loan portfolio, as well as declines in specific reserves established for impaired commercial loans. Refer to the "Credit Metrics and Provision for Loan Losses" section below for additional information regarding the improvements in the credit metrics of PNB's loan portfolio.
Guardian Financial Services Company (GFSC)
The table below reflects the results for GFSC for the first, second and third
quarters of 2012, projected results for the fourth quarter of 2012, and results
for each of the prior two fiscal years ended December 31, 2011 and 2010.
Projected Q4
(In thousands) Q1 2012 Q2 2012 Q3 2012 2012 Projected 2012 2011 2010
Net interest income $ 2,211 $ 2,305 $ 2,371 $ 2,407 $ 9,294 $ 8,693 $ 7,611
Provision for loan losses 250 200 184 151 785 2,000 2,200
Fee income - - - 1 1 - 2
Total other expense 721 706 693 728 2,848 2,506 2,325
Income before income taxes $ 1,240 $ 1,399 $ 1,494 $ 1,529 $ 5,662 $ 4,187 $ 3,088
Federal income taxes 434 490 523 536 1,983 1,466 1,082
Net income $ 806 $ 909 $ 971 $ 993 $ 3,679 $ 2,721 $ 2,006
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In the 2011 Annual Report, management stated that GFSC was expected to make net income of $3.0 million in 2012. Management's latest guidance for 2012 reflects a slight increase in net income for GFSC to approximately $3.7 million. This improvement is the result of a lower provision for loan losses based on credit analysis performed by GFSC's management.
The table below provides certain balance sheet information and financial ratios for GFSC as of September 30, 2012, for the year ended December 31, 2011 and as of September 30, 2011.
Sept. 30, Sept. 30, % change from % change from
(In thousands) 2012 Dec. 31, 2011 2011 12/31/11 9/30/11
Loans $ 50,099 $ 47,111 $ 46,680 6.34 % 7.32 %
Allowance for loan losses 2,419 2,297 2,043 5.31 % 18.40 %
Net loans 47,680 44,814 44,637 6.40 % 6.82 %
Total assets 49,921 46,682 46,449 6.94 % 7.47 %
Average assets (YTD) 47,819 45,588 45,345 4.89 % 5.46 %
Return on average assets * 7.50 % 5.97 % 5.79 % 25.63 % 29.53 %
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Park Parent Company
The table below reflects the results for Park's Parent Company for the first,
second and third quarters of 2012, projected results for the fourth quarter of
2012, and results for each of the prior two fiscal years ended December 31, 2011
and 2010.
Projected Q4
(In thousands) Q1 2012 Q2 2012 Q3 2012 2012 Projected 2012 2011 2010
Net interest income $ 1,061 $ 1,478 $ 1,167 $ 1,211 $ 4,917 $ 2,155 $ 1,285
Provision for loan
losses - - - - - - -
Fee income 68 83 120 80 351 350 390
Total other expense 1,528 1,839 1,373 1,861 6,601 7,115 9,107
Income (loss) before
income taxes $ (399 ) $ (278 ) $ (86 ) $ (570 ) $ (1,333 ) $ (4,610 ) $ (7,432 )
Federal income tax
(benefit) (448 ) (412 ) (360 ) (379 ) (1,599 ) (3,015 ) (5,993 )
Net income (loss) $ 49 $ 134 $ 274 $ (191 ) $ 266 $ (1,595 ) $ (1,439 )
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In the 2011 Annual Report, management projected net income of $1 million for the Parent Company, Vision Bank through February 16, 2012 and SEPH. Typically, we expect the Park Parent Company will perform around breakeven. Management's most recent projection shows net income of $0.3 million for 2012.
The net interest income for Park's parent company includes interest income on loans to SEPH and on subordinated debt investments with PNB, which are eliminated in the consolidated Park National Corporation totals. Additionally, net interest income includes interest expense related to the $35.25 million and $30 million of subordinated notes issued by Park in December 2009 and April 2012, respectively.
SEPH / Vision Bank
Vision Bank ("Vision") merged with and into SEPH, a non-bank subsidiary of Park, following the sale of the Vision business to Centennial Bank ("Centennial") on February 16, 2012. SEPH holds the remaining assets and liabilities retained by Vision subsequent to the sale. SEPH's assets consist primarily of performing and nonperforming loans and other real estate owned ("OREO"). This segment represents a run off portfolio of the legacy Vision assets.
. . .
(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
October 29, 2012 addressing operating results for the
three and nine months ended September 30, 2012.
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