NEWARK -- Park National Corporation reported that it will repurchase all $100 million of the preferred stock (100,000 shares) it sold to the U.S. Department of the Treasury on Dec. 23, 2008, as part of the Capital Purchase Program (CPP). On April 19, 2012, Park received official approval from the Treasury to repurchase the preferred stock on Wednesday, April 25, 2012.
The repayment funds consist of $30 million from new subordinated debt issued to investors via private placement and $70 million from our own funds we've held in short-term investments (those investments earned an interest rate of only 0.25 percent).
The cost of the CPP funds was basically 7.69 percent. We are funding the repayment at a weighted average cost of 2.28 percent, saving Park about $5.4 million per year (pre-tax).
Park was one of the few bank holding companies in the United States over the past 5 years that maintained its historical level of quarterly dividend to common shareholders. Many bank holding companies were forced to suspend or significantly reduce their quarterly common dividend. It's also worth noting that Park did not change its lending practices throughout the recession period, as many other banks did.
Park's success is largely due to the 11 community bank affiliates that comprise The Park National Bank. Net income for The Park National Bank exceeded $100 million for each of the past three years.
"We are pleased to repay the $100 million of CPP funds next week. The continuing recovery in general economic conditions coupled with the sale on Feb. 16, 2012, of our former Vision Bank subsidiary makes this a natural next step," said Park Chairman C. Daniel DeLawder. "Park's participation in the CPP helped ensure our ability to lend money to individuals and businesses through a challenging recession. Our clients and communities rely on us for service and support regardless of economic conditions, good or bad. The CPP funds were a sensible tool we used to maintain our leadership role as local lenders and providers of financial services."