Park National to raise additional capital: Bank plans to sell up to $70 million in stock, may repay TARP funds

May 29, 2009 (The Columbus Dispatch - McClatchy-Tribune Information Services via COMTEX) -- PRK | Quote | Chart | News | PowerRating -- Park National Corp. is set to raise as much as $70 million through the sale of common stock as a cushion in case the economy worsens.

"We don't need to raise the capital. We're in a very strong capital position, and anything we can raise will make us even stronger," said Brady Burt, Park's chief accounting officer.

The money is an insurance policy in case the economy takes a turn for the worse, he said. If it doesn't, it could be used to repay some or all of the $100 million the Newark-based bank received from the U.S. Treasury Department's Troubled Asset Relief Program.

"By strengthening their capital base through private-market sales, they'll be in a position to repay the TARP money," said Charles Crowley, managing director of investment banking at Stifel Nicolaus & Co., a Cleveland investment-banking firm.

Banks across the country are raising capital, many with an eye toward repaying the TARP money.

"When they accepted TARP, many banks viewed it as relatively cheap capital and as something for which the advantages outweighed the disadvantages," Crowley said. "As it developed and the rules have changed, many banks are looking to exit TARP" to reduce government control and restrictions.

Park's current tangible common-equity ratio is a very healthy 6.82 percent and will rise to more than 7 percent with the additional capital, said Matt Miller, the bank's vice president of finances.

Tangible common equity was one of the key measurements in the government's recent stress test of the nation's largest banks. It measures what a bank would have remaining for shareholders after paying all its debts and depositors.

A ratio of 4 percent was considered the minimum and a 6 percent ratio is needed to survive a worst-case economic scenario through the end of the year.

"They've historically been very profitable and strongly capitalized," Crowley said of Park, which was not included in the stress test. "They have struggled with their Florida acquisition but are still a very strongly capitalized company."

Park purchased Florida-based Vision Bank in 2007, and with it came exposure to a real-estate market that has lost a large percentage of its value. The bank's first-quarter results included a $19.2 million loan-loss provision for Vision.

"There's still a lot of uncertainty there and hard to say if it's at the bottom," Burt said.

swartenberg@dispatch.com

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