Park National Corporation reports third quarter 2018 financial results

NEWARK, Ohio, Oct. 22, 2018 (GLOBE NEWSWIRE) -- Park National Corporation (Park) (NYSE American: PRK) today reported financial results for the third quarter and first nine months of 2018 (three and nine months ended September 30, 2018). Park's board of directors also declared a quarterly cash dividend of $0.96 per common share, payable on December 10, 2018 to common shareholders of record as of November 16, 2018.

Park’s net income for the third quarter of 2018 was $24.8 million, a 12.0 percent increase from $22.1 million for the third quarter of 2017. Third quarter 2018 net income per diluted common share was $1.56, compared to $1.44 in the third quarter of 2017. Increased net interest income, increased non-interest income, and a decreased loan loss provision helped contribute to Park’s third quarter performance.

Park's net income for the first nine months of 2018 was $84.1 million, a 37.0 percent increase from $61.4 million for the same period in 2017. Net income per diluted common share was $5.41 for the first nine months of 2018, compared to $3.99 for the same period in 2017.

Park's community-banking subsidiary, The Park National Bank, reported net income of $27.9 million for the third quarter of 2018, a 31.0 percent increase from $21.3 million reported for the third quarter of 2017.The bank’s net income was $83.4 million for the nine months ended 2018, compared to $62.9 million for the same period in 2017.

“Our bankers are doing excellent work growing relationships with current and prospective clients, as well as with new colleagues,” said Park Chief Executive Officer David L. Trautman. “As we prepare to welcome Carolina Alliance Bank into our organization, it’s an exciting time in community banking. Our bankers are listening to our clients and communities, and we’re in a great position to respond with a blend of sophisticated resources and personalized service that clients have told us they want.”

Charlotte-based NewDominion Bank joined Park on July 1, 2018. On September 13, 2018 Park announced a definitive agreement and plan of merger with CAB Financial Corporation (OTCQX: CABF) based in Spartanburg, South Carolina. The transaction is expected to close in the first half of 2019.  

Headquartered in Newark, Ohio, Park National Corporation had $7.8 billion in total assets (as of September 30, 2018). The Park organization consists of 11 community bank divisions, a non-bank subsidiary and two specialty finance companies. Park's banking operations are conducted through Park subsidiary The Park National Bank and its divisions, which include Fairfield National Bank Division, Richland Bank Division, Century National Bank Division, First-Knox National Bank Division, United Bank, N.A. Division, Second National Bank Division, Security National Bank Division, Unity National Bank Division, The Park National Bank of Southwest Ohio & Northern Kentucky Division, and NewDominion Bank Division. The Park organization also includes Scope Leasing, Inc. (d.b.a. Scope Aircraft Finance), Guardian Financial Services Company (d.b.a. Guardian Finance Company) and SE Property Holdings, LLC.

Complete financial tables are listed below…

Media contact: Bethany Lewis, 740.349.0421, blewis@parknationalbank.com
Investor contact: Brady Burt, 740.322.6844, bburt@parknationalbank.com
Park National Corporation
50 N. Third Street, Newark, Ohio 43055
www.parknationalcorp.com

Important Information About the Merger

In connection with the proposed merger between Park and CAB Financial Corporation (“CABF”), Park will file with the Securities and Exchange Commission (the “SEC”) a Registration Statement on Form S-4 that will include a Proxy Statement of CABF and a Prospectus of Park, as well as other relevant documents concerning the proposed transaction. SHAREHOLDERS OF CABF ARE URGED TO READ THE REGISTRATION STATEMENT AND THE PROXY STATEMENT/PROSPECTUS REGARDING THE MERGER WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT PARK, CABF AND THE PROPOSED TRANSACTION.

A free copy of the Proxy Statement/Prospectus, as well as other filings containing information about Park and CABF, may be obtained at the SEC’s Internet site (http://www.sec.gov). You will also be able to obtain these documents, free of charge, from Park at the “Investor Relations” section of Park’s web site at www.parknationalcorp.com or from CABF at the “Investor Relations” section of CABF’s website at www.carolinaalliancebank.com. Copies of the Proxy Statement/Prospectus can also be obtained, free of charge, by directing a request to Park National Corporation, 50 North Third Street, P.O. Box 3500, Newark, OH 43058-3500, Attention: Brady Burt, Telephone: (740) 322-6844 or to CAB Financial Corporation, PO Box 932, Spartanburg, SC 29306, Attention: Lamar Simpson, Telephone: (864) 208-2265.

This communication shall not constitute an offer to sell or the solicitation of an offer to buy securities nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. This communication is also not a solicitation of any vote in any jurisdiction pursuant to the proposed transactions or otherwise. No offer of securities or solicitation will be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended. The communication is not a substitute for the Registration Statement that will be filed with the SEC or the Proxy Statement/Prospectus that will be sent to CABF shareholders.

Proxy Solicitation

CABF and certain of its directors, executive officers and certain other persons may be deemed to be participants in the solicitation of proxies from CABF’s shareholders in favor of the approval of the Merger. Information about the directors and executive officers of CABF and their ownership of CABF common stock, as well as information regarding the interests of other persons who may be deemed participants in the transaction, may be obtained by reading the Proxy Statement/Prospectus regarding the proposed merger when it becomes available. Free copies of this document may be obtained as described above.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Park cautions that any forward-looking statements contained in this Current Report on Form 8-K or made by management of Park are provided to assist in the understanding of anticipated future financial performance. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance.  The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties.  Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements.  Risks and uncertainties that could cause actual results to differ materially include, without limitation: Park's ability to execute 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, resulting in adverse impacts on the demand for loan, deposit and other financial services, delinquencies, defaults and counterparties' ability to meet credit and other obligations and the possible impairment of collectability of loans; changes in interest rates and prices may adversely impact prepayment penalty income, mortgage banking income, 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 the tax reform legislation, 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; the adequacy of our risk management program in the event of changes in the market, economic, operational, asset/liability repricing, liquidity, credit and interest rate risks associated with Park's business; disruption in the liquidity and other functioning of U.S. financial markets; 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 banking professionals; customers could pursue alternatives to bank deposits, causing us to lose a relatively inexpensive source of funding; uncertainty regarding the nature, timing, cost 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, rent regulation and housing, financial accounting and reporting, environmental protection, insurance, bank products and services, bank capital and liquidity standards, 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 Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Federal Reserve Board, to implement the Dodd-Frank Act's provisions, and the Basel III regulatory capital reforms; the effects of easing restrictions on participants in the financial services industry; 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 current presidential administration, including the Tax Cuts and Jobs Act, and uncertainty or speculation pending the enactment of such changes; uncertainties in Park's preliminary review of, and additional analysis of, the impact of the Tax Cuts and Jobs Act; 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 impact of our ability to anticipate and respond to technological changes on our ability to respond to customer needs and meet competitive demands; operational issues stemming from and/or capital spending necessitated by the potential need to adapt to industry changes in information technology systems on which Park and our subsidiaries are highly dependent; 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, resulting in failures or disruptions in customer account management, general ledger, deposit, loan, or other systems, including as a result of cyber attacks; the existence or exacerbation of general geopolitical instability and uncertainty; the effect of trade policies (including the impact of tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars and other changes in trade regulations), monetary and other fiscal policies (including the impact of money supply and interest rate policies to the Federal Reserve Board) and other governmental policies of the U.S. federal government; 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 actions to be taken to implement the referendum by United Kingdom voters to exit the European Union; our litigation and regulatory compliance exposure, including the costs and effects of any adverse developments in legal proceedings or other claims and the costs and effects of unfavorable resolution of regulatory and other governmental examinations or other inquiries; continued availability of earnings and excess capital sufficient for the lawful and prudent declaration of dividends; fraud, scams and schemes of third parties; the impact of widespread natural and other disasters, pandemics, dislocations, civil unrest, terrorist activities or international hostilities on the economy and financial markets generally and on us or our counterparties specifically; the effect of healthcare laws in the U.S. and potential changes for such laws which may increase our healthcare and other costs and negatively impact our operations and financial results; Park's ability to integrate recent acquisitions (including NewDominion Bank) as well as any future acquisitions, which may be unsuccessful, or may be more difficult, time-consuming or costly than expected; the ability to obtain required governmental and shareholder approvals with respect to, and the ability to complete the proposed merger of Park and CAB Financial Corporation ("CAB") on the proposed terms and within the expected time frame; the risk that the businesses of Park and CAB will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; expected revenue synergies and cost savings from the proposed merger of Park and CAB may not be fully realized or realized within the expected time frame; revenues following the proposed merger of Park and CAB may be lower than expected; customer and employee relationships and business operations may be disrupted by the proposed merger of Park and CAB; Park issued equity securities in the acquisition of NewDominion Bank and may issue equity securities in connection with future acquisitions, including the proposed merger of Park and CAB, which could cause ownership and economic dilution to Park's current shareholders; 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, 2017. Park does not undertake, and specifically disclaims any obligation, to publicly release the results of any revisions that may be made to update any forward-looking statement to reflect the events or circumstances after the date on which the forward-looking statement was made, or reflect the occurrence of unanticipated events, except to the extent required by law.

PARK NATIONAL CORPORATION
Financial Highlights
As of or for the three months ended September 30, 2018, June 30, 2018, and September 30, 2017
	2018			2018			2017				Percent change vs.
(in thousands, except share and per share data)	3rd QTR			2nd QTR			3rd QTR				2Q '18		3Q '17
INCOME STATEMENT:
Net interest income	$	67,676		$	64,742		$	61,551			4.5	%	10.0	%
Provision for loan losses	2,940			1,386			3,283				112.1	%	(10.4	)%
Other income	24,064			23,242			23,537				3.5	%	2.2	%
Other expense	59,316			52,534			51,259				12.9	%	15.7	%
Income before income taxes	$	29,484		$	34,064		$	30,546			(13.4	)%	(3.5	)%
Federal income taxes	4,722			5,823			8,434				(18.9	)%	(44.0	)%
Net income	$	24,762		$	28,241		$	22,112			(12.3	)%	12.0	%
MARKET DATA:
Earnings per common share - basic (b)	$	1.58		$	1.85		$	1.45			(14.6	)%	9.0	%
Earnings per common share - diluted (b)	1.56			1.83			1.44				(14.8	)%	8.3	%
Cash dividends per common share	0.96			1.21			0.94				(20.7	)%	2.1	%
Book value per common share at period end	51.58			49.51			49.71				4.2	%	3.8	%
Market price per common share at period end	105.56			111.42			107.99				(5.3	)%	(2.3	)%
Market capitalization at period end	1,655,870			1,699,277			1,649,770				(2.6	)%	0.4	%
Weighted average common shares - basic (a)	15,686,542			15,285,532			15,287,974				2.6	%	2.6	%
Weighted average common shares - diluted (a)	15,832,734			15,417,607			15,351,590				2.7	%	3.1	%
Common shares outstanding at period end	15,686,532			15,251,095			15,277,061				2.9	%	2.7	%
PERFORMANCE RATIOS: (annualized)
Return on average assets (a)(b)	1.26		%	1.52		%	1.11		%		(17.1	)%	13.5	%
Return on average shareholders' equity (a)(b)	12.11		%	15.02		%	11.52		%		(19.4	)%	5.1	%
Yield on loans	4.95		%	4.90		%	4.71		%		1.0	%	5.1	%
Yield on investment securities	2.76		%	2.73		%	2.48		%		1.1	%	11.3	%
Yield on money markets	2.61		%	1.99		%	1.28		%		31.2	%	103.9	%
Yield on earning assets	4.47		%	4.39		%	4.03		%		1.8	%	10.9	%
Cost of interest bearing deposits	0.83		%	0.64		%	0.48		%		29.7	%	72.9	%
Cost of borrowings	1.88		%	1.84		%	2.37		%		2.2	%	(20.7	)%
Cost of paying liabilities	0.95		%	0.79		%	0.83		%		20.3	%	14.5	%
Net interest margin (g)	3.78		%	3.81		%	3.40		%		(0.8	) %	11.2	%
Efficiency ratio (g)	64.16		%	59.23		%	59.34		%		8.3	%	8.1	%
OTHER RATIOS (NON - GAAP):
Annualized return on average tangible assets (a)(b)(e)	1.27		%	1.53		%	1.12		%		(17.0	)%	13.4	%
Annualized return on average tangible equity (a)(b)(c)	14.21		%	16.61		%	12.73		%		(14.4	)%	11.6	%
Tangible book value per share (d)	$	43.93		$	44.77		$	44.97			(1.9	)%	(2.3	)%
N.M. - Not meaningful
Note: Explanations for footnotes (a) - (g) are included at the end of the financial highlights.
PARK NATIONAL CORPORATION
Financial Highlights (continued)
As of or for the three months ended September 30, 2018, June 30, 2018, and September 30, 2017
											Percent change vs.
BALANCE SHEET:	September 30, 2018			June 30, 2018			September 30, 2017				2Q '18		3Q '17
Investment securities	$	1,439,011		$	1,513,238		$	1,571,038			(4.9	)%	(8.4	)%
Loans	5,625,323			5,324,974			5,365,877				5.6	%	4.8	%
Allowance for loan losses	50,246			49,452			55,232				1.6	%	(9.0	)%
Goodwill and other intangibles	119,999			72,334			72,334				65.9	%	65.9	%
Other real estate owned (OREO)	5,276			5,729			14,366				(7.9	)%	(63.3	)%
Total assets	7,756,491			7,462,156			7,862,695				3.9	%	(1.4	)%
Total deposits	6,279,326			6,015,844			5,974,322				4.4	%	5.1	%
Borrowings	594,818			631,139			1,056,888				(5.8	)%	(43.7	)%
Total shareholders' equity	809,091			755,088			759,367				7.2	%	6.5	%
Tangible equity (d)	689,092			682,754			687,033				0.9	%	0.3	%
Total nonperforming loans	83,281			98,867			111,949				(15.8	)%	(25.6	)%
Total nonperforming assets	95,727			104,596			126,315				(8.5	)%	(24.2	)%
ASSET QUALITY RATIOS:
Loans as a % of period end total assets	72.52		%	71.36		%	68.24		%		1.6	%	6.3	%
Nonperforming loans as a % of period end loans	1.48		%	1.86		%	2.09		%		(20.4	)%	(29.2	)%
Nonperforming assets as a % of period end loans + OREO + other nonperforming assets	1.70		%	1.96		%	2.35		%		(13.3	)%	(27.7	)%
Allowance for loan losses as a % of period end loans	0.89		%	0.93		%	1.03		%		(4.3	)%	(13.6	)%
Net loan charge-offs	$	2,146		$	903		$	1,873			137.7	%	14.6	%
Annualized net loan charge-offs as a % of average loans (a)	0.15		%	0.07		%	0.14		%		114.3	%	7.1	%
CAPITAL & LIQUIDITY:
Total shareholders' equity / Period end total assets	10.43		%	10.12		%	9.66		%		3.1	%	8.0	%
Tangible equity (d) / Tangible assets (f)	9.02		%	9.24		%	8.82		%		(2.4	)%	2.3	%
Average shareholders' equity / Average assets (a)	10.37		%	10.11		%	9.60		%		2.6	%	8.0	%
Average shareholders' equity / Average loans (a)	14.46		%	14.26		%	14.27		%		1.4	%	1.3	%
Average loans / Average deposits (a)	88.36		%	88.23		%	88.37		%		0.1	%	—	%

PARK NATIONAL CORPORATION
Financial Highlights
Nine months ended September 30, 2018 and 2017
	2018			2017
(in thousands, except share and per share data)	Nine months ended September 30			Nine months ended September 30				Percent change vs '17
INCOME STATEMENT:
Net interest income	$	197,268		$	180,281			9.4	%
Provision for loan losses	4,586			8,740				(47.5	)%
Other income	74,209			63,191				17.4	%
Other expense	166,158			149,723				11.0	%
Income before income taxes	$	100,733		$	85,009			18.5	%
Income taxes	16,607			23,598				(29.6	)%
Net income	$	84,126		$	61,411			37.0	%
MARKET DATA:
Earnings per common share - basic (b)	$	5.46		$	4.01			36.2	%
Earnings per common share - diluted (b)	5.41			3.99				35.6	%
Cash dividends per common share	3.11			2.82				10.3	%
Weighted average common shares - basic (a)	15,420,135			15,299,039				0.8	%
Weighted average common shares - diluted (a)	15,560,666			15,394,199				1.1	%
PERFORMANCE RATIOS: (annualized)
Return on average assets (a)(b)	1.48		%	1.06		%		39.6	%
Return on average shareholders' equity (a)(b)	14.57		%	10.90		%		33.7	%
Yield on loans	4.93		%	4.66		%		5.8	%
Yield on investment securities	2.71		%	2.45		%		10.6	%
Yield on money markets	2.03		%	1.15		%		76.5	%
Yield on earning assets	4.42		%	4.04		%		9.4	%
Cost of interest bearing deposits	0.68		%	0.43		%		58.1	%
Cost of borrowings	1.81		%	2.37		%		(23.6	)%
Cost of paying liabilities	0.82		%	0.80		%		2.5	%
Net interest margin (g)	3.82		%	3.44		%		11.0	%
Efficiency ratio (g)	60.73		%	60.61		%		0.2	%
ASSET QUALITY RATIOS:
Net loan charge-offs	4,328			4,132				4.7	%
Annualized net loan charge-offs as a % of average loans (a)	0.11		%	0.10		%		10.0	%
CAPITAL & LIQUIDITY:
Average shareholders' equity / Average assets (a)	10.18		%	9.72		%		4.7	%
Average shareholders' equity / Average loans (a)	14.29		%	14.17		%		0.8	%
Average loans / Average deposits (a)	88.64		%	90.29		%		(1.8	)%
OTHER RATIOS (NON - GAAP):
Annualized return on average tangible assets (a)(b)(e)	1.50		%	1.07		%		40.2	%
Annualized return on average tangible equity (a)(b)(c)	16.46		%	12.06		%		36.5	%
N.M. - Not meaningful
Note: Explanations (a) - (g) are included at the end of the financial highlights.

PARK NATIONAL CORPORATION
Financial Highlights (continued)
(a) Averages are for the three months ended September 30, 2018, June 30, 2018 and September 30, 2017 and for the nine months ended September 30, 2018 and September 30, 2017.
(b) Reported measure uses net income.
(c) Net income for each period divided by average tangible equity during the period. Average tangible equity equals average shareholders' equity during the applicable period less average goodwill and other intangibles during the applicable period.
RECONCILIATION OF AVERAGE SHAREHOLDERS' EQUITY TO AVERAGE TANGIBLE EQUITY:
	THREE MONTHS ENDED										NINE MONTHS ENDED
	September 30, 2018			June 30, 2018			September 30, 2017				September 30, 2018			September 30, 2017
AVERAGE SHAREHOLDERS' EQUITY	$	811,313		$	754,101		$	761,448			$	771,907		$	753,017
Less: Average goodwill and other intangibles	120,188			72,334			72,334				88,461			72,334
AVERAGE TANGIBLE EQUITY	$	691,125		$	681,767		$	689,114			$	683,446		$	680,683
(d) Tangible equity divided by common shares outstanding at period end. Tangible equity equals total shareholders' equity less goodwill and other intangibles, in each case at the end of the period.
RECONCILIATION OF TOTAL SHAREHOLDERS' EQUITY TO TANGIBLE EQUITY:
	September 30, 2018			June 30, 2018			September 30, 2017
TOTAL SHAREHOLDERS' EQUITY	$	809,091		$	755,088		$	759,367
Less: Goodwill and other intangibles	119,999			72,334			72,334
TANGIBLE EQUITY	$	689,092		$	682,754		$	687,033
(e) Net income for each period divided by average tangible assets during the period. Average tangible assets equals average assets less average goodwill and other intangibles, in each case during the applicable period.
RECONCILIATION OF AVERAGE ASSETS TO AVERAGE TANGIBLE ASSETS:
	THREE MONTHS ENDED										NINE MONTHS ENDED
	September 30, 2018			June 30, 2018			September 30, 2017				September 30, 2018			September 30, 2017
AVERAGE ASSETS	$	7,826,496		$	7,459,748		$	7,928,766			$	7,581,798		$	7,743,132
Less: Average goodwill and other intangibles	120,188			72,334			72,334				88,461			72,334
AVERAGE TANGIBLE ASSETS	$	7,706,308		$	7,387,414		$	7,856,432			$	7,493,337		$	7,670,798
(f) Tangible equity divided by tangible assets. Tangible assets equals total assets less goodwill and other intangibles, in each case at the end of the period.
RECONCILIATION OF TOTAL ASSETS TO TANGIBLE ASSETS:
	September 30, 2018			June 30, 2018			September 30, 2017
TOTAL ASSETS	$	7,756,491		$	7,462,156		$	7,862,695
Less: Goodwill and other intangibles	119,999			72,334			72,334
TANGIBLE ASSETS	$	7,636,492		$	7,389,822		$	7,790,361
(g) Efficiency ratio is calculated by dividing total other expense by the sum of fully taxable equivalent net interest income and other income. Fully taxable equivalent net interest income reconciliation is shown below assuming a 21% corporate federal income tax rate for 2018 and a 35% corporate federal income tax rate for 2017. Additionally, net interest margin is calculated on a fully taxable equivalent basis by dividing fully taxable equivalent net interest income by average interest earning assets.
RECONCILIATION OF FULLY TAXABLE EQUIVALENT NET INTEREST INCOME TO NET INTEREST INCOME
	THREE MONTHS ENDED										NINE MONTHS ENDED
	September 30, 2018			June 30, 2018			September 30, 2017				September 30, 2018			September 30, 2017
Interest income	$	80,229		$	74,691		$	73,224			$	228,634		$	212,455
Fully taxable equivalent adjustment	716			705			1,291				2,122			3,540
Fully taxable equivalent interest income	$	80,945		$	75,396		$	74,515			$	230,756		$	215,995
Interest expense	12,553			9,949			11,673				31,366			32,174
Fully taxable equivalent net interest income	$	68,392		$	65,447		$	62,842			$	199,390		$	183,821

PARK NATIONAL CORPORATION
Consolidated Statements of Income
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in thousands, except share and per share data)		2018				2017				2018				2017
Interest income:
Interest and fees on loans		$	69,905			$	63,110			198,803				184,240
Interest on:
Obligations of U.S. Government, its agencies and other securities - taxable		7,691				6,757				22,204				20,787
Obligations of states and political subdivisions - tax-exempt		2,205				1,974				6,557				5,098
Other interest income		428				1,383				1,070				2,330
Total interest income		80,229				73,224				228,634				212,455
Interest expense:
Interest on deposits:
Demand and savings deposits		6,412				2,882				13,809				6,787
Time deposits		3,328				2,521				8,765				7,139
Interest on borrowings		2,813				6,270				8,792				18,248
Total interest expense		12,553				11,673				31,366				32,174
Net interest income		67,676				61,551				197,268				180,281
Provision for loan losses		2,940				3,283				4,586				8,740
Net interest income after provision for loan losses		64,736				58,268				192,682				171,541
Other income		24,064				23,537				74,209				63,191
Other expense		59,316				51,259				166,158				149,723
Income before income taxes		29,484				30,546				100,733				85,009
Income taxes		4,722				8,434				16,607				23,598
Net income		$	24,762			$	22,112			84,126				61,411
Per Common Share:
Net income  - basic		$	1.58			$	1.45			$	5.46			$	4.01
Net income  - diluted		$	1.56			$	1.44			$	5.41			$	3.99
Weighted average shares - basic		15,686,542				15,287,974				15,420,135				15,299,039
Weighted average shares - diluted		15,832,734				15,351,590				15,560,666				15,394,199
Cash Dividends Declared		$	0.96			$	0.94			$	3.11			$	2.82

PARK NATIONAL CORPORATION
Consolidated Balance Sheets
(in thousands, except share data)	September 30, 2018			December 31, 2017
Assets
Cash and due from banks	$	126,064		$	131,946
Money market instruments	18,540			37,166
Investment securities	1,439,011			1,512,824
Loans	5,625,323			5,372,483
Allowance for loan losses	(50,246		)	(49,988		)
Loans, net	5,575,077			5,322,495
Bank premises and equipment, net	57,515			55,901
Goodwill and other intangibles	119,999			72,334
Other real estate owned	5,276			14,190
Other assets	415,009			390,764
Total assets	$	7,756,491		$	7,537,620
Liabilities and Shareholders' Equity
Deposits:
Noninterest bearing	$	1,727,210		$	1,633,941
Interest bearing	4,552,116			4,183,385
Total deposits	6,279,326			5,817,326
Borrowings	594,818			906,289
Other liabilities	73,256			57,904
Total liabilities	$	6,947,400		$	6,781,519
Shareholders' Equity:
Preferred shares (200,000 shares authorized; no shares outstanding at September 30, 2018 and December 31, 2017)	$	—		$	—
Common shares (No par value; 20,000,000 shares authorized in 2018 and 2017; 16,586,169 shares issued at September 30, 2018 and 16,150,752 shares issued at December 31, 2017)	357,709			307,726
Accumulated other comprehensive loss, net of taxes	(60,150		)	(26,454		)
Retained earnings	603,091			561,908
Treasury shares (899,637 shares at September 30, 2018 and 862,558 at December 31, 2017)	(91,559		)	(87,079		)
Total shareholders' equity	$	809,091		$	756,101
Total liabilities and shareholders' equity	$	7,756,491		$	7,537,620

PARK NATIONAL CORPORATION
Consolidated Average Balance Sheets
	Three Months Ended							Nine Months Ended
	September 30,							September 30,
(in thousands)	2018			2017				2018			2017
Assets
Cash and due from banks	$	134,503		$	114,313			$	123,933		$	114,060
Money market instruments	65,027			427,157				70,603			271,778
Investment securities	1,472,504			1,569,237				1,476,522			1,563,020
Loans	5,609,813			5,337,206				5,401,631			5,314,501
Allowance for loan losses	(49,788		)	(53,750		)		(50,040		)	(51,775		)
Loans, net	5,560,025			5,283,456				5,351,591			5,262,726
Bank premises and equipment, net	56,987			56,497				56,536			57,100
Goodwill and other intangibles	120,188			72,334				88,461			72,334
Other real estate owned	5,474			14,522				9,113			14,245
Other assets	411,788			391,250				405,039			387,869
Total assets	$	7,826,496		$	7,928,766			$	7,581,798		$	7,743,132
Liabilities and Shareholders' Equity
Deposits:
Noninterest bearing	$	1,706,300		$	1,534,395			$	1,626,370		$	1,522,802
Interest bearing	4,642,530			4,505,040				4,467,206			4,363,065
Total deposits	6,348,830			6,039,435				6,093,576			5,885,867
Borrowings	594,109			1,050,524				649,925			1,029,627
Other liabilities	72,244			77,359				66,390			74,621
Total liabilities	$	7,015,183		$	7,167,318			$	6,809,891		$	6,990,115
Shareholders' Equity:
Preferred shares	$	—		$	—			$	—		$	—
Common shares	356,768			306,496				324,245			306,101
Accumulated other comprehensive loss, net of taxes	(55,615		)	(11,905		)		(50,543		)	(14,298		)
Retained earnings	601,719			553,746				586,954			547,127
Treasury shares	(91,559		)	(86,889		)		(88,749		)	(85,913		)
Total shareholders' equity	$	811,313		$	761,448			$	771,907		$	753,017
Total liabilities and shareholders' equity	$	7,826,496		$	7,928,766			$	7,581,798		$	7,743,132

PARK NATIONAL CORPORATION
Consolidated Statements of Income - Linked Quarters
	2018			2018			2018			2017			2017
(in thousands, except per share data)	3rd QTR			2nd QTR			1st QTR			4th QTR			3rd QTR
Interest income:
Interest and fees on loans	$	69,905		$	64,496		$	64,402		$	64,447		$	63,110
Interest on:
Obligations of U.S. Government, its agencies and other securities - taxable	7,691			7,746			6,767			6,653			6,757
Obligations of states and political subdivisions - tax-exempt	2,205			2,178			2,174			2,112			1,974
Other interest income	428			271			371			757			1,383
Total interest income	80,229			74,691			73,714			73,969			73,224
Interest expense:
Interest on deposits:
Demand and savings deposits	6,412			4,107			3,290			2,677			2,882
Time deposits	3,328			2,886			2,551			2,490			2,521
Interest on borrowings	2,813			2,956			3,023			5,324			6,270
Total interest expense	12,553			9,949			8,864			10,491			11,673
Net interest income	67,676			64,742			64,850			63,478			61,551
Provision for (recovery of) loan losses	2,940			1,386			260			(183		)	3,283
Net interest income after provision for (recovery of) loan losses	64,736			63,356			64,590			63,661			58,268
Other income	24,064			23,242			26,903			23,238			23,537
Other expense	59,316			52,534			54,308			53,439			51,259
Income before income taxes	29,484			34,064			37,185			33,460			30,546
Income taxes	4,722			5,823			6,062			10,629			8,434
Net income	$	24,762		$	28,241		$	31,123		$	22,831		$	22,112
Per Common Share:
Net income - basic	$	1.58		$	1.85		$	2.04		$	1.49		$	1.45
Net income - diluted	$	1.56		$	1.83		$	2.02		$	1.48		$	1.44

PARK NATIONAL CORPORATION
Detail of other income and other expense - Linked Quarters
	2018			2018			2018			2017			2017
(in thousands)	3rd QTR			2nd QTR			1st QTR			4th QTR			3rd QTR
Other income:
Income from fiduciary activities	$	6,418		$	6,666		$	6,395		$	6,264		$	5,932
Service charges on deposits	2,861			2,826			2,922			3,142			3,216
Other service income	3,246			3,472			4,172			3,554			3,357
Checkcard fee income	4,352			4,382			4,002			4,023			3,974
Bank owned life insurance income	2,585			1,031			1,009			1,068			1,573
ATM fees	500			510			524			545			605
OREO valuation adjustments	(77		)	(114		)	(207		)	(91		)	(22		)
(Loss) gain on the sale of OREO, net	(81		)	(147		)	4,321			47			51
Net (loss) gain on sale of investment securities	—			—			(2,271		)	1,794			—
Unrealized (loss) gain on equity securities	(326		)	304			3,489			—			—
Other components of net periodic benefit income	1,705			1,705			1,705			1,450			1,448
Miscellaneous	2,881			2,607			842			1,442			3,403
Total other income	$	24,064		$	23,242		$	26,903		$	23,238		$	23,537
Other expense:
Salaries	$	27,229		$	24,103		$	25,320		$	23,157		$	23,302
Employee benefits	7,653			7,630			7,029			6,320			5,943
Occupancy expense	2,976			2,570			2,936			2,442			2,559
Furniture and equipment expense	3,807			4,013			4,149			4,198			3,868
Data processing fees	2,580			1,902			1,773			1,690			1,919
Professional fees and services	8,065			6,123			6,190			7,886			6,100
Marketing	1,364			1,185			1,218			1,112			1,122
Insurance	1,388			1,196			1,428			1,768			1,499
Communication	1,207			1,189			1,250			1,228			1,110
State tax expense	1,000			958			1,105			665			912
Amortization of intangibles	289			—			—			—			—
Miscellaneous	1,758			1,665			1,910			2,973			2,925
Total other expense	$	59,316		$	52,534		$	54,308		$	53,439		$	51,259

PARK NATIONAL CORPORATION
Asset Quality Information
											Year ended December 31,
(in thousands, except ratios)	September 30,  2018			June 30, 2018			March 31, 2018				2017			2016			2015			2014
Allowance for loan losses:
Allowance for loan losses, beginning of period	$	49,452		$	48,969		$	49,988			$	50,624		$	56,494		$	54,352		$	59,468
Charge-offs	3,474			2,716			3,450				19,403			20,799			14,290			24,780			(A)
Recoveries	1,328			1,813			2,171				10,210			20,030			11,442			26,997
Net charge-offs (recoveries)	2,146			903			1,279				9,193			769			2,848			(2,217		)
Provision for (recovery of) loan losses	2,940			1,386			260				8,557			(5,101		)	4,990			(7,333		)
Allowance for loan losses, end of period	$	50,246		$	49,452		$	48,969			$	49,988		$	50,624		$	56,494		$	54,352
(A) Year ended December 31, 2014 included $4.3 million in charge-offs related to the transfer of $22.0 million of commercial loans to the held for sale portfolio.
General reserve trends:
Allowance for loan losses, end of period	$	50,246		$	49,452		$	48,969			$	49,988		$	50,624		$	56,494		$	54,352
Specific reserves	1,846			1,396			1,207				684			548			4,191			3,660
General reserves	$	48,400		$	48,056		$	47,762			$	49,304		$	50,076		$	52,303		$	50,692
Total loans	$	5,625,323		$	5,324,974		$	5,292,349			$	5,372,483		$	5,271,857		$	5,068,085		$	4,829,682
Impaired commercial loans	46,698			61,705			50,292				56,545			70,415			80,599			73,676
Total loans less impaired commercial loans	$	5,578,625		$	5,263,269		$	5,242,057			$	5,315,938		$	5,201,442		$	4,987,486		$	4,756,006
Asset Quality Ratios:
Net charge-offs (recoveries) as a % of average loans (annualized)	0.15		%	0.07		%	0.10		%		0.17		%	0.02		%	0.06		%	(0.05		)%
Allowance for loan losses as a % of period end loans	0.89		%	0.93		%	0.93		%		0.93		%	0.96		%	1.11		%	1.13		%
General reserves as a % of total loans less impaired commercial loans	0.87		%	0.91		%	0.91		%		0.93		%	0.96		%	1.05		%	1.07		%
Nonperforming Assets - Park National Corporation:
Nonaccrual loans	$	66,654		$	81,124		$	66,151			$	72,056		$	87,822		$	95,887		$	100,393
Accruing troubled debt restructuring	14,602			16,306			18,682				20,111			18,175			24,979			16,254
Loans past due 90 days or more	2,025			1,437			1,372				1,792			2,086			1,921			2,641
Total nonperforming loans	$	83,281		$	98,867		$	86,205			$	93,959		$	108,083		$	122,787		$	119,288
Other real estate owned - Park National Bank	3,061			3,280			4,846				6,524			6,025			7,456			10,687
Other real estate owned - SEPH	2,215			2,449			4,209				7,666			7,901			11,195			11,918
Other nonperforming assets - Park National Bank	7,170			—			3,857				4,849			—			—			—
Total nonperforming assets	$	95,727		$	104,596		$	99,117			$	112,998		$	122,009		$	141,438		$	141,893
Percentage of nonaccrual loans to period end loans	1.18		%	1.52		%	1.25		%		1.34		%	1.67		%	1.89		%	2.08		%
Percentage of nonperforming loans to period end loans	1.48		%	1.86		%	1.63		%		1.75		%	2.05		%	2.42		%	2.47		%
Percentage of nonperforming assets to period end loans	1.70		%	1.96		%	1.87		%		2.10		%	2.31		%	2.79		%	2.94		%
Percentage of nonperforming assets to period end total assets	1.23		%	1.40		%	1.32		%		1.50		%	1.63		%	1.93		%	2.03		%
PARK NATIONAL CORPORATION
Asset Quality Information (continued)
											Year ended December 31,
(in thousands, except ratios)	September 30,  2018			June 30, 2018			March 31, 2018				2017			2016			2015			2014
Nonperforming Assets - Park National Bank and Guardian:
Nonaccrual loans	$	65,019		$	79,489		$	66,151			$	61,753		$	76,084		$	81,468		$	77,477
Accruing troubled debt restructuring	14,602			16,306			18,682				20,111			18,175			24,979			16,157
Loans past due 90 days or more	2,025			1,437			1,372				1,792			2,086			1,921			2,641
Total nonperforming loans	$	81,646		$	97,232		$	86,205			$	83,656		$	96,345		$	108,368		$	96,275
Other real estate owned - Park National Bank	3,061			3,280			4,846				6,524			6,025			7,456			10,687
Other nonperforming assets - Park National Bank	7,170			—			3,857				4,849			—			—			—
Total nonperforming assets	$	91,877		$	100,512		$	94,908			$	95,029		$	102,370		$	115,824		$	106,962
Percentage of nonaccrual loans to period end loans	1.16		%	1.49		%	1.25		%		1.15		%	1.45		%	1.61		%	1.61		%
Percentage of nonperforming loans to period end loans	1.45		%	1.83		%	1.63		%		1.56		%	1.83		%	2.14		%	2.00		%
Percentage of nonperforming assets to period end loans	1.63		%	1.89		%	1.79		%		1.77		%	1.95		%	2.29		%	2.23		%
Percentage of nonperforming assets to period end total assets	1.19		%	1.36		%	1.27		%		1.27		%	1.38		%	1.60		%	1.55		%
Nonperforming Assets - SEPH/Vision Bank (retained portfolio):
Nonaccrual loans	$	1,635		$	1,635		$	—			$	10,303		$	11,738		$	14,419		$	22,916
Accruing troubled debt restructuring	—			—			—				—			—			—			97
Loans past due 90 days or more	—			—			—				—			—			—			—
Total nonperforming loans	$	1,635		$	1,635		$	—			$	10,303		$	11,738		$	14,419		$	23,013
Other real estate owned - SEPH	2,215			2,449			4,209				7,666			7,901			11,195			11,918
Total nonperforming assets	$	3,850		$	4,084		$	4,209			$	17,969		$	19,639		$	25,614		$	34,931
New nonaccrual loan information - Park National Corporation
Nonaccrual loans, beginning of period	$	81,124		$	66,151		$	72,056			$	87,822		$	95,887		$	100,393		$	135,216
New nonaccrual loans	10,450			27,920			23,075				58,753			74,786			80,791			70,059
Resolved nonaccrual loans	24,920			12,947			28,980				74,519			82,851			85,165			86,384
Sale of nonaccrual loans held for sale	—			—			—				—			—			132			18,498
Nonaccrual loans, end of period	$	66,654		$	81,124		$	66,151			$	72,056		$	87,822		$	95,887		$	100,393
New nonaccrual loan information - Park National Bank and Guardian
Nonaccrual loans, beginning of period	$	79,489		$	66,151		$	61,753			$	76,084		$	81,468		$	77,477		$	99,108
New nonaccrual loans	10,450			26,285			23,075				58,753			74,663			80,791			69,389
Resolved nonaccrual loans	24,920			12,947			18,677				73,084			80,047			76,800			78,288
Sale of nonaccrual loans held for sale	—			—			—				—			—			—			12,732
Nonaccrual loans, end of period	$	65,019		$	79,489		$	66,151			$	61,753		$	76,084		$	81,468		$	77,477
New nonaccrual loan information - SEPH/Vision Bank (retained portfolio)
Nonaccrual loans, beginning of period	$	1,635		$	—		$	10,303			$	11,738		$	14,419		$	22,916		$	36,108
New nonaccrual loans	—			1,635			—				—			123			—			670
Resolved nonaccrual loans	—			—			10,303				1,435			2,804			8,365			8,096
Sale of nonaccrual loans held for sale	—			—			—				—			—			132			5,766
Nonaccrual loans, end of period	$	1,635		$	1,635		$	—			$	10,303		$	11,738		$	14,419		$	22,916
Impaired Commercial Loan Portfolio Information (period end):
Unpaid principal balance	$	57,767		$	73,089		$	60,264			$	66,585		$	95,358		$	109,304		$	106,156
Prior charge-offs	11,069			11,384			9,972				10,040			24,943			28,705			32,480
Remaining principal balance	46,698			61,705			50,292				56,545			70,415			80,599			73,676
Specific reserves	1,846			1,396			1,207				684			548			4,191			3,660
Book value, after specific reserves	$	44,852		$	60,309		$	49,085			$	55,861		$	69,867		$	76,408		$	70,016