This document outlines a presentation on bank valuation given by Park National Bank. The presentation covers understanding the basic components of a bank's balance sheet such as assets, liabilities, and equity. It then discusses how to value a bank using the asset, market, and income approaches. Specifically, it explores common valuation metrics like price-to-earnings and price-to-book value ratios. Finally, the presentation emphasizes adjusting multiples to account for bank-specific risk factors when determining the overall valuation of a bank.

1. PA R K N AT I O N A L B A N K
BANK VALUATION
2 0 2 0 N C S C H O O L O F B A N K I N G

2. Agenda
• Speaker Background
• First 45 minutes - Understanding the BS 
• Break
• Second 45 minutes – How to Value the Bank
• Test Questions
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3. P A R K N A T I O N A L B A N K
UNDERSTANDING THE
BALANCE SHEET
F I RST 4 5 MI NUT E S

4. ASSETS – LIABILITIES = EQUITY
P A R K N A T I O N A L B A N K
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5. ASSETS
• Cash
• Fed Funds Sold
• Bonds
• Loans
• Less: ALLL
• AIR
• Fixed Assets
• OREO
LIABILITIES
• Deposits
• Fed Funds Purchased
• FHLB Advances
• AIP
• Other Accrued Expenses
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EQUITY
• Common Stock
• Current Earnings
• Retained Earnings

6. INCOME – EXPENSE = NET INCOME
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7. INCOME
• Interest Income
• Cash
• Fed Funds Sold
• Bonds
• Loans
• Non-Interest Income
• Service Charges on Deposits
• Gain on Sale of Mortgages
EXPENSE
• Interest Expense
• Money Market and Savings
• Time Deposits
• Fed Funds Purchased
• FHLB advances
• Provision for Loan Losses
• Non-Interest Expense
• Salaries
• FDIC insurance
• Data processing
• Legal/Accounting/Consulting
• Advertising
• Office Supplies
• Income taxes
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NET INCOME

8. Financial Performance Metrics
• Return on Assets (ROA)
• Return on Equity (ROE)
• Net Interest Margin
• Asset Quality Ratios
• Capital Ratios
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9. P A R K N A T I O N A L B A N K
VALUING THE BANK
SE CO ND 4 5 MI NUT E S

10. Why Value a Bank?
• Stock Compensation
• Sale Transaction
• IPO
• Recapitalization
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11. Why do Banks Merge?
• Efficiency and Cost Savings
• Enter New Geographic Area
• Enter New Line of Business
• Age of Management
• Timeline of Private Equity Investors
• Eliminate a Competitor
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12. What Drives Bank Valuations?
What Helps:
• Core Earnings
• Earnings Potential
• Core Deposits
• Geography/Location
• People
• Excellent Asset Quality
What Doesn’t Help?
• Excess Capital
• Inadequate ALLL
• Significant Fixed Assets
• Lack of Flexibility to
Restructure BS
• High Transaction Costs
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13. Valuation Approaches
• Asset Approach
• Market Approach
• Income Approach
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14. Asset Approach
FV of Assets – FV of Liabilities
= FV of Equity
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15. Market Approach
Look at recent sales of other
similarly situated banks
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16. Income Approach
Look at future cash flows and
discount to current period
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17. Common Metrics Used in Bank
Valuations
• Price to Earnings (P/E)
• Price to Assets (P/A)
• Price to Tangible Assets (P/TA)
• Price to Book Value (P/BV)
• Price to Tangible Book Value (P/TBV)
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18. Multiples Should be Adjusted to
Compensate for…
• Risk
• Growth
• Profitability
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19. Bank Specific Risk Factors
• Credit Risk
• Interest Rate Risk
• Liquidity Risk
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20. NOW PUT IT ALL TOGETHER
COMPARE EACH APPROACH
WEIGHT AS APPROPRIATE
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21. PA R K N AT I O N A L B A N K
Thank You!