Park National Profile
Park National Corporation operates as the bank holding company for The Park National Bank (Park National Bank or PNB), a national banking association that engages in the commercial banking and trust business, generally in small and medium population areas in Ohio, North Carolina, and South Carolina communities in addition to operations within the metropolitan areas of Columbus and Cincinnati, Ohio; Charlotte, North Carolina; and Louisville, Kentucky.
Park National Bank delivers financial products and services through its financial service offices and a network of automated teller machines, as well as telephone and internet-based banking through both personal computers and mobile devices, including ParkDirect, a mobile bank experience.
Consumer Finance Subsidiary
Guardian Finance, an Ohio consumer finance company, operates as a separate subsidiary of Park. Guardian Finance formerly provided consumer finance services in the central Ohio area.
SE Property Holdings, LLC (SEPH)
SEPH is a limited liability company and a direct subsidiary of Park. By letter dated January 30, 2012, the Federal Reserve Board authorized Park to engage in the business of extending credit through SEPH. As a result, SEPH is permitted to engage in lending activities and was able to succeed to the rights and obligations of Vision Bank in respect of the loans held by Vision Bank when Vision Bank merged into SEPH on February 16, 2012 (the Vision Bank-SEPH Merger). SEPH has operations in Ohio, with the sole purpose of such operations being to sell OREO in an effective and efficient manner and work out or sell problem loan situations with the respective borrowers.
Scope Leasing, Inc.
Scope Leasing, Inc. (which does business as Scope Aircraft Finance), a subsidiary of Park National Bank, specializes in aircraft financing. The customers of Scope Aircraft Finance include small businesses and entrepreneurs who utilize the aircraft for business or pleasure. Scope Aircraft Finance serves customers throughout the U.S. and Canada.
Vision Bancshares Trust I
In connection with the merger of Vision Bancshares, Inc. (Vision) into Park in March of 2007 (the Vision Merger), Park became the successor to Vision under the Junior Subordinated Indenture, dated as of December 5, 2005 (the Indenture), pursuant to which Vision issued junior subordinated notes to Vision Bancshares Trust I, a Delaware statutory trust (the Vision Trust).
Other Subsidiaries
Park Investments, Inc. (PII), which is a subsidiary of Park National Bank, operates as an asset management company. Park began purchasing and holding municipal bonds within PII.
NSCB 2, LLC; River Park Properties, LLC; Park ABQ, LLC; and X Holdings, LLC are subsidiaries of Park National Bank that hold certain OREO properties or other nonperforming assets.
87A Orange Beach, LLC; Morningside Holding, LLC; Swindall Holdings, LLC; Swindall Partnership Holdings, LLC; Farm Holdings, LLC; Marina Holdings Z, LLC; Marina Holding WE, LLC; Alabama Apartment Holdings, LLC; and Vision-Park Properties, L.L.C. are subsidiaries of SEPH that hold certain OREO properties. The operations of these subsidiaries are not significant to the consolidated Park entity.
Services Provided by Park's Subsidiaries
Park National Bank provides the following principal services:
the acceptance of deposits for demand, savings and time accounts and the servicing of those accounts;
commercial, industrial, consumer and real estate lending, including installment loans, credit cards (which are offered through a third party), home equity lines of credit and commercial leasing;
a national portfolio of loans to non-bank consumer finance companies;
trust and wealth management services;
aircraft financing;
cash management;
safe deposit operations;
electronic funds transfers;
internet and mobile banking solutions with bill pay service; and
ParkDirect, a personal banking app.
Lending Activities
Park National Bank deals with consumers and a wide cross-section of businesses and corporations located primarily in the 26 Ohio counties, one Kentucky county, four North Carolina counties and four South Carolina counties served by the financial service offices of Park National Bank. As of December 31, 2023, Park National Bank had no concentration of loans to borrowers engaged in the same or similar industries that exceeded 10% of total loans nor did it have any loans outstanding to persons domiciled outside the U.S. As a result of the Vision Bank-SEPH Merger, SEPH holds loans originated by Vision Bank previously serviced by the financial service offices of Vision Bank. It is expected that SEPH will originate loans only to further the collection efforts with respect to the loans transferred to SEPH by operation of law as a result of the Vision Bank-SEPH Merger. Such origination (or modification) volume has been and is expected to continue to be insignificant to the consolidated Park entity.
Park National Bank makes lending decisions in accordance with the written loan policies adopted by Park, which are designed to maintain acceptable loan quality. Park National Bank originates and retains for its own portfolio commercial and commercial real estate loans, commercial leases, residential real estate loans, home equity lines of credit, and installment loans. Park National Bank also originates fixed-rate residential real estate loans for sale to the secondary market.
There are certain risks inherent in making loans. These risks include changes in the credit worthiness of borrowers over the time period in which loans may be repaid, interest rate changes over the time period in which loans may be repaid, risks resulting from changes in the national and local economies, risks inherent in dealing with borrowers and, in the case of loans secured by collateral, risks resulting from uncertainties about the future value of the collateral.
Commercial Loans
Commercial loans are made for a wide variety of general corporate purposes, including financing for industrial and commercial properties, financing for equipment, inventory and accounts receivable, acquisition financing, commercial leasing, and loans originated by consumer finance companies. The term of each commercial loan varies by its purpose.
The commercial loan portfolio of Park's current subsidiaries includes loans to a wide variety of corporations and businesses across many industrial classifications in the counties where Park National Bank operates, with the exception of nationwide aircraft loans and nationwide asset-based lending to consumer finance companies. The primary industries represented by these customers include real estate rental and leasing, finance and insurance, construction, accommodation and food services, health care and social assistance, other services, manufacturing, retail trade, agriculture, forestry, fishing and hunting, and professional, scientific, and technical services.
Commercial loans are evaluated for the adequacy of repayment sources at the time of approval and are regularly reviewed for any possible deterioration in the ability of the borrower to repay the loan. The credit information required generally includes, depending on the amount of money lent, financial statements, third-party prepared financial statements, two years of federal income tax returns and a current credit report. Loan terms include amortization schedules commensurate with the purpose of each loan, identification of the source of each repayment and the risk involved. In most instances, collateral is required to provide an additional source of repayment in the event of default by a commercial borrower. The structure of the collateral package, including the type and amount of the collateral, varies from loan to loan depending on the financial strength of the borrower, the amount and terms of the loan and the collateral available to be pledged by the borrower. Most often, the collateral is inventory, machinery, accounts receivable and/or real estate. The guarantee of the business owners/principals is generally required on loans made to closely-held business entities.
Commercial real estate loans (CRE loans) include mortgage loans to developers and owners of commercial real estate. The lending policy for CRE loans is designed to address the unique risk attributes of CRE lending. The collateral for CRE loans is the underlying commercial real estate.
Park has an independent, internal loan review program which annually evaluates all commercial loan relationships greater than $1.0 million, all new commercial loans greater than $1.0 million in its metropolitan markets of Columbus, Ohio; Cincinnati, Ohio; Louisville, Kentucky; and Charlotte, North Carolina, all new commercial loans greater than $500,000 in all other markets, and a risk-based sample of commercial relationships less than $1.0 million.
Commercial loans are generally viewed as having a higher credit risk than consumer loans because commercial loans typically involve larger loan balances to a single borrower and are more susceptible to a risk of default during an economic downturn. Commercial loans also generally have variable interest rates. Park uses several indices for commercial loans that help determine loan interest rates, but the national prime rate and short-term FHLB of Cincinnati advance rates are the most common indices used.
Loans to Non-Bank Consumer Finance Companies
This is a national lending unit of Park National Bank. These asset-based loans are collateralized by cash flows from individuals, typically auto loans issued by a consumer finance company that is, in turn, a borrower from Park National Bank. These loans typically present a higher level of risk due to the underlying collateral and such risks are mitigated by more conservative underwriting and an intensive loan monitoring regimen commensurate with asset-based lending.
Aircraft Financing
Scope Aircraft Finance specializes in aircraft financing. The customers of Scope Aircraft Finance include small businesses and entrepreneurs intending to use the aircraft for business or pleasure. The customers of Scope Aircraft Finance are located throughout the United States. The lending officers of Scope Aircraft Finance are experienced in the aircraft financing industry and rely upon such experience and certain industry guides in determining whether to grant an aircraft loan or lease.
Consumer Loans
Park makes installment credit available to customers and prospective customers in their primary market areas through direct and indirect loans. Indirect loans are facilitated through an automobile and other vehicle dealer; whereas, direct loans are originated through direct customer interaction within Park's regions.
Residential Real Estate and Construction Loans
Credit approval for residential real estate loans requires demonstration of sufficient income to repay the principal and interest and the real estate taxes and insurance, stability of employment, an established credit record and a current independent third-party appraisal providing the market value of the real estate securing the loan. Residential real estate loans are generally analyzed through an automated underwriting platform (system) to determine a risk classification. All loans receiving a risk classification of caution require review by a senior lender and generally require additional documentation if the loan is approved.
Park National Bank generally requires that the residential real estate loan amount be no more than 80% of the purchase price or the appraised value of the real estate securing the loan, whichever is less, unless private mortgage insurance is obtained by the borrower. Loans in this lending category that are made to be held in Park National Bank's portfolio are both fixed-rate and adjustable-rate, fully amortized mortgages. The rates used are generally fully-indexed rates. From time to time, Park may offer a limited-time promotional rate on funds advanced on newly-originated home equity lines of credit. Park National Bank also originates fixed-rate real estate loans for sale to the secondary market. Park's management may decide to retain certain 15-year, fixed-rate residential mortgage loans, rather than sell in the secondary market. Park's management made a decision to retain certain 15-year, fixed-rate residential mortgage loans in 2023.
Home equity lines of credit are generally secured by second mortgages in favor of Park National Bank. The maximum amount of a home equity line of credit is generally limited to 85% of the appraised value of the property less the balance of the first mortgage. The home equity lines of credit are written with ten-year terms. A variable interest rate is generally charged on the home equity lines of credit.
Construction loans include commercial construction loans as well as residential construction loans. Construction loans may be in the form of a permanent loan or a short-term construction loan, depending on the needs of the individual borrower. Generally, the permanent construction loans have a variable interest rate although a permanent construction loan may be made with a fixed interest rate for a term generally not exceeding five years.
SEPH
SEPH is a non-bank subsidiary of Park that holds OREO property and non-performing loans. In addition to approximately $983,000 in OREO property, SEPH also held non-performing loans that were fully charged off as of December 31, 2023, all of which were on nonaccrual status. SEPH has one office in Licking County, Ohio.
Investment Securities
As of December 31, 2023, the company's investment securities included obligations of U.S. Government sponsored entities; obligations of states and political subdivisions; U.S. Government sponsored entities' asset-backed securities; collateralized loan obligations; corporate debt securities; FHLB stock; FRB stock; and equities.
Supervision and Regulation
As a financial holding company, the company is subject to regulation by the Federal Reserve Board (Board of Governors of Federal Reserve System) under the Bank Holding Company Act of 1956, as amended (Bank Holding Company Act) and to inspection, examination, and supervision by the Federal Reserve Board.
The company is also subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended (the 'Securities Act'); and the Exchange Act (Securities Exchange Act of 1934, as amended), as administered by the Securities and Exchange Commission (SEC).
The bank, as a national banking association, is subject to regulation, supervision, and examination primarily by the Office of the Comptroller of the Currency (the 'OCC') and secondarily by the Federal Deposit Insurance Corporation (FDIC).
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended (the 'Dodd-Frank Act'), established the Consumer Financial Protection Bureau (the 'CFPB'), which regulates consumer financial products and services and certain financial services providers.
Guardian Finance, a subsidiary of the company and an Ohio state-chartered consumer finance company, is subject to regulation, supervision, and examination by the Ohio Division of Financial Institutions (the 'ODFI') and the Federal Reserve Board.
As a subsidiary of the company, SEPH is also subject to inspection, examination, and supervision by the Federal Reserve Board.
As a national banking association, the bank is subject to regulation under the National Bank Act and is periodically examined by the OCC. Furthermore, the bank is subject, as a member bank, to certain rules and regulations of the Federal Reserve Board, many of which restrict activities and prescribe documentation to protect consumers. The bank is an insured depository institution and a member of the Deposit Insurance Fund (DIF). As a result, it is subject to regulation and deposit insurance assessments by the FDIC. In addition, the establishment of branches by the bank is subject to prior approval of the OCC.
The CFPB regulates consumer financial products and services provided by the bank through regulations designed to protect consumers.
As insurer, the FDIC is authorized to conduct examinations of and to require reporting by insured institutions, including the bank, to prohibit any insured institution from engaging in any activity the FDIC determines by regulation or order to pose a threat to the DIF, and to take enforcement actions against insured institutions.
The bank is a member of the FHLB (Federal Home Loan Bank) of Cincinnati. As an FHLB member, the bank must maintain an investment in the capital stock of the FHLB of Cincinnati.
The bank has established policies and procedures that comply with the requirements of the Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, as amended. As insurer, the FDIC is authorized to conduct examinations of and to require reporting by insured institutions, including Park National Bank, to prohibit any insured institution from engaging in any activity the FDIC determines by regulation or order to pose a threat to the DIF, and to take enforcement actions against insured institutions.
The Community Reinvestment Act (CRA) requires the bank's primary federal regulatory agency, the OCC, to assess the bank's record in meeting the credit needs of the communities served by the bank consistent with safe and sound banking practice. The bank received a rating of 'satisfactory' in its latest CRA examination.
As a consumer finance company incorporated under Ohio law, Guardian Finance is subject to regulation and supervision by the ODFI.
