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Business Combinations | 6 Months Ended
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Jun. 30, 2019
Business Combinations [Abstract] |
Business Combination Disclosure [Text Block] | Business Combinations NewDominion Bank On July 1, 2018, NewDominion Bank, a North Carolina state-chartered bank (“NewDominion”), merged with and into The Park National Bank, the national bank subsidiary of Park, with PNB continuing as the surviving entity pursuant to the Agreement and Plan of Merger and Reorganization (the “NewDominion Merger Agreement”), dated as of January 22, 2018, by and among Park, PNB, and NewDominion. In accordance with the NewDominion Merger Agreement, NewDominion shareholders were permitted to make an election to receive for their shares of NewDominion common stock either $1.08 in cash without interest (the cash consideration) or 0.01023 of a Park common share, plus cash in lieu of any fractional Park common share (the stock consideration). Based on the terms of the New Dominion Merger Agreement, the aggregate consideration to be paid in the merger was subject to proration and allocation procedures to ensure that 60 percent of the shares of NewDominion common stock outstanding immediately prior to the completion of the merger were exchanged for the stock consideration and that the remaining 40 percent of the shares of NewDominion common stock outstanding immediately prior to the completion of the merger were exchanged for the cash consideration, including, in each case, shares of NewDominion common stock subject to NewDominion options and restricted stock awards. Purchase consideration consisted of 435,457 Park common shares, valued at $48.5 million, and $30.7 million in cash to acquire 91.45% of NewDominion's outstanding shares of common stock. The remaining 8.55% of NewDominion's outstanding shares of common stock was previously held by Park. Park recognized a gain of $3.5 million as a result of remeasuring to fair value its 8.55% equity interest in NewDominion held before the business combination. This non-taxable gain is included in "Gain on equity securities, net" in the consolidated condensed statements of income. The acquisition is expected to provide additional revenue growth and geographic diversification. NewDominion's results of operations were included in Park’s results beginning July 1, 2018. For the three and six months ended June 30, 2019, Park recorded merger-related expenses of $8,000 and $79,000, respectively, associated with the NewDominion acquisition. For the three and six months ended June 30, 2018, Park recorded merger-related expenses of $445,000 and $595,000, respectively, associated with the NewDominion acquisition. Goodwill of $40.4 million arising from the acquisition consisted largely of synergies and the cost savings resulting from the combining of the operations of the PNB and NewDominion. The goodwill is not deductible for income tax purposes as the transaction was accounted for as a tax-free exchange. The following table summarizes the consideration paid for NewDominion and the amounts of the assets acquired and liabilities assumed at their fair value:
(in thousands) |
Consideration |
Cash | $ | 30,684 |
Park common shares | 48,519 |
Previous 8.55% investment in NewDominion | 7,000 |
Fair value of total consideration transferred | $ | 86,203 |
Recognized amounts of identifiable assets acquired and liabilities assumed |
Cash and cash equivalents | $ | 42,954 |
Securities | 1,954 |
Loans | 272,753 |
Premises and equipment | 940 |
Core deposit intangibles | 6,249 |
Trade name intangible | 1,300 |
Other assets | 6,133 |
Total assets acquired | 332,283 |
Deposits | 284,231 |
Other liabilities | 2,254 |
Total liabilities assumed | 286,485 |
Net identifiable assets | 45,798 |
Goodwill | $ | 40,405 |
Park accounted for the NewDominion acquisition using the acquisition method of accounting and accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition date, in accordance with FASB ASC Topic 805, Business Combinations. The fair value of net assets acquired includes fair value adjustments to loans that were not considered impaired as of the acquisition date. The fair value adjustments were determined using discounted contractual cash flows. However, Park believes that all contractual cash flows related to these loans will be collected. As such, these loans were not considered impaired at the acquisition date and were not subject to the guidance relating to purchased credit impaired loans which have shown evidence of credit deterioration since origination. Loans acquired that were not subject to these requirements included non-impaired loans with a fair value and gross contractual amounts receivable of $267.9 million and $273.7 million, respectively, on the date of acquisition. The table below presents information with respect to the fair value of acquired loans as well as their book balance at the acquisition date.
(in thousands) | Book Balance |  | Fair Value
Commercial, financial and agricultural | $ | 19,246 |  |  | $ | 19,138 |
Commercial real estate | 119,434 |  |  | 117,638 |
Construction real estate: |  |  |
Commercial | 22,494 |  |  | 22,235 |
Mortgage | 8,391 |  |  | 8,111 |
Residential real estate: |  |  |
Commercial | 14,798 |  |  | 14,797 |
Mortgage | 50,295 |  |  | 48,714 |
HELOC | 37,651 |  |  | 36,688 |
Consumer | 541 |  |  | 539 |
Purchased credit impaired | 5,069 |  |  | 4,893 |
Total loans | $ | 277,919 |  |  | $ | 272,753 |
CAB Financial Corporation On April 1, 2019, CAB Financial Corporation, a South Carolina corporation, merged with and into Park, with Park continuing as the surviving entity pursuant to the Agreement and Plan of Merger and Reorganization (the "CABF Merger Agreement"), dated as of September 12, 2018, by and between Park and CABF. Immediately following the merger, Carolina Alliance Bank, a South Carolina state-chartered bank and a wholly-owned subsidiary of CABF, was merged with and into PNB, with PNB as the surviving bank. In accordance with the CABF Merger Agreement, CABF shareholders were to receive for each share of their CABF common stock (i) $3.80 in cash (the cash consideration) and (ii) 0.1378 of a Park common share (the stock consideration). CABF stock options and restricted stock awards were fully vested (with any performance-based vesting condition deemed satisfied) and canceled and converted automatically into the right to receive merger consideration. Purchase consideration consisted of 1,037,205 Park common shares, valued at $98.3 million, and $28.6 million in cash to acquire 100% of CABF outstanding shares of common stock. The acquisition is expected to provide additional revenue growth and geographic diversification. Carolina Alliance's results of operations were included in Park's results beginning April 1, 2019. For the three and six months ended June 30, 2019, Park recorded merger-related expenses of $6.1 million and $6.3 million, respectively, associated with the Carolina Alliance acquisition. No merger-related expenses were recorded for the three or six months ended June 30, 2018 associated with the Carolina Alliance acquisition. Goodwill of $45.3 million arising from the acquisition consisted largely of synergies and the cost savings resulting from the combining of the operations of PNB and Carolina Alliance. The goodwill is not deductible for income tax purposes as the transaction was accounted for as a tax-free exchange. The following table summarizes the consideration paid for Carolina Alliance and the amounts of the assets acquired and liabilities assumed at their fair value:
(in thousands) |
Consideration |
Cash | $ | 28,630 |
Park common shares | 98,275 |
Fair value of total consideration transferred | $ | 126,905 |
Recognized amounts of identifiable assets acquired and liabilities assumed |
Cash and cash equivalents | $ | 23,799 |
Securities | 97,606 |
Loans | 578,577 |
Premises and equipment | 8,337 |
Core deposit intangibles | 10,251 |
Other assets | 31,675 |
Total assets acquired | 750,245 |
Deposits | 632,707 |
Other liabilities | 35,951 |
Total liabilities assumed | 668,658 |
Net identifiable assets | 81,587 |
Goodwill | $ | 45,318 |
Park accounted for the Carolina Alliance acquisition using the acquisition method of accounting and accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition date, in accordance with FASB ASC Topic 805, Business Combinations. The fair value measurements of assets acquired and liabilities assumed are subject to refinement for up to one year after the closing date of the acquisition as additional information relative to closing date fair values becomes available. Park continues to finalize the fair values of loans, intangible assets, and deferred taxes. As a result, the fair value adjustments are preliminary and may change as information becomes available. Fair value adjustments will be finalized no later than April 2020. The fair value of net assets acquired includes fair value adjustments to loans that were not considered impaired as of the acquisition date. The fair value adjustments were determined using discounted contractual cash flows. However, Park believes that all contractual cash flows related to these loans will be collected. As such, these loans were not considered impaired at the acquisition date and were not subject to the guidance relating to purchased credit impaired loans which have shown evidence of credit deterioration since origination. Loans acquired that were not subject to these requirements included non-impaired loans with a fair value and gross contractual amounts receivable of $558.6 million and $570.8 million, respectively, on the date of acquisition. The table below presents information with respect to the fair value of acquired loans as well as their book balance at the acquisition date.
(in thousands) | Book Balance |  | Fair Value
Commercial, financial and agricultural | $ | 79,537 |  |  | $ | 79,373 |
Commercial real estate | 281,425 |  |  | 273,855 |
Construction real estate: |  |  |
Commercial | 43,106 |  |  | 42,176 |
Mortgage | 11,130 |  |  | 10,633 |
Residential real estate: |  |  |
Commercial | 48,546 |  |  | 48,684 |
Mortgage | 30,519 |  |  | 30,969 |
HELOC | 40,227 |  |  | 39,526 |
Consumer | 4,813 |  |  | 4,647 |
Leases | 28,589 |  |  | 28,781 |
Purchased credit impaired | 21,806 |  |  | 19,933 |
Total loans | $ | 589,698 |  |  | $ | 578,577 |
The following table presents supplemental pro forma information as if the NewDominion and Carolina Alliance acquisitions had occurred as of January 1, 2018. The unaudited pro forma information includes adjustments for interest income on loans and securities acquired, amortization of intangibles arising from the respective transactions, depreciation expense on property acquired, interest expense on deposits acquired, and the related tax effects. The pro forma information is not necessarily indicative of the results of operations that would have occurred had the transactions been effected on the assumed date.
| Six months ended June 30,
(dollars in thousands, except per share data) | 2019 | 2018
Net interest income | $ | 150,647 |  | $ | 151,085 |
Net income | $ | 54,477 |  | $ | 65,175 |
Basic earnings per share | $ | 3.28 |  | $ | 3.89 |
Diluted earnings per share | $ | 3.26 |  | $ | 3.85 |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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