8-K 1 l85697ae8-k.txt PARK NATIONAL CORPORATION FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) December 21, 2000 ----------------- PARK NATIONAL CORPORATION ------------------------------------------------------------------ (Exact name of registrant as specified in its charter) Ohio 1-13006 31-1179518 -------------------- ------------------------ --------------------- (State or other (Commission File Number) (IRS Employer jurisdiction of Identification No.) incorporation) 50 North Third Street, Newark, Ohio 43055 ------------------------------------------- -------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (614) 349-8451 --------------- Not Applicable --------------------------------------------------------------------- (Former name or former address, if changed since last report.) 2 Item 5. Other Events and Regulation FD Disclosure This Current Report on Form 8-K is being filed for the purpose of including supplemental consolidated financial statements which give retroactive effect to the mergers of U.B. Bancshares, Inc. and SNB Corp. into Park National Corporation, effective April 30, 2000. Each merger was accounted for as a pooling-of-interests as described in Note 1 of the Notes to Supplemental Consolidated Financial Statements included in "Item 7 - Financial Statements and Exhibits." Considered together, U.B. Bancshares, Inc. and SNB Corp. are not significant pursuant to Rule 11-01(b) of Regulation S-X promulgated by the Securities and Exchange Commission. Item 7. Financial Statements and Exhibits (a.) Financial Statements of Businesses Acquired The following supplemental consolidated financial statements and accompanying notes of Park National Corporation have been restated to include the accounts and operations of U.B. Bancshares, Inc. and SNB Corp. for all periods presented. Report of Ernst & Young, LLP Independent Auditors . . . . . . . . 3 Supplemental Financial Statements: Park National Corporation and Subsidiaries Supplemental Consolidated Balance Sheets . . . . . . . . 4,5 Supplemental Consolidated Statements of Income . . . . . . . . 6,7 Supplemental Consolidated Statements of Changes in Shareholders' Equity . . . . . . . . 8 Supplemental Consolidated Statements of Cash Flows . . . . . . . . 9 Notes to Supplemental Consolidated Financial Statements . . . . . . . . 10 (c.) Exhibits Filed: Exhibit 23.1 Consent of Independent Auditors Exhibit 27.1 Restated Financial Data Schedule for Dec. 31, 1999 Exhibit 27.2 Restated Financial Data Schedule for Dec. 31, 1998 Exhibit 27.3 Restated Financial Data Schedule for Dec. 31, 1997 2 3 Report of Independent Auditors To the Board of Directors and Stockholders Park National Corporation We have audited the accompanying supplemental consolidated balance sheets of Park National Corporation and Subsidiaries as of December 31, 1999 and 1998, and the related supplemental consolidated statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 1999. The supplemental consolidated financial statements give retroactive effect to the mergers of Park National Corporation with SNB Corp. and U.B. Bancshares, Inc., both on April 30, 2000, which have been accounted for using the pooling of interests method of accounting as described in Note 1. These supplemental consolidated financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these supplemental financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. Generally accepted accounting principles proscribe giving effect to consummated business combinations accounted for using the pooling of interests method in financial statements that do not include the date of consummation. These supplemental consolidated financial statements do not extend through the dates of consummation; however, they will become the historical consolidated financial statements of Park National Corporation and Subsidiaries after financial statements covering the dates of consummation of the business combination are issued. In our opinion, the supplemental consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Park National Corporation and Subsidiaries at December 31, 1999 and 1998, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, after giving retroactive effect to the mergers with SNB Corp. and U.B. Bancshares, Inc. as described in Note 1, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young, LLP Columbus, Ohio December 20, 2000 3 4 Park National Corporation and Subsidiaries Supplemental Consolidated Balance Sheets
DECEMBER 31 1999 1998 ---------------------------------- (Dollars in thousands) ASSETS Cash and due from banks $ 123,975 $ 119,620 Federal funds sold 1,550 7,085 Investment securities: Securities available-for-sale, at fair value (amortized cost of $792,626 and $786,235 at December 31, 1999 and 1998, respectively) 778,570 799,432 Securities held-to-maturity, at amortized cost (fair value of $4,451 and $35,281 at December 31, 1999 and 1998, respectively) 4,321 34,373 ---------------------------------- Total investment securities 782,891 833,805 Loans 2,144,187 1,913,697 Unearned loan interest (16,762) (12,491) ---------------------------------- Total loans 2,127,425 1,901,206 Allowance for possible loan losses (45,176) (41,215) ---------------------------------- Net loans 2,082,249 1,859,991 Other assets: Premises and equipment, net 32,468 32,889 Accrued interest receivable 18,798 18,647 Other 91,432 72,842 ---------------------------------- Total other assets 142,698 124,378 ---------------------------------- Total assets $3,133,363 $2,944,879 ==================================
4 5
DECEMBER 31 1999 1998 --------------------------------- (Dollars in thousands) LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Noninterest bearing $ 342,680 $ 338,939 Interest bearing 2,065,382 1,993,439 --------------------------------- Total deposits 2,408,062 2,332,378 Short-term borrowings 364,258 269,208 Long-term debt 16,993 23,402 Other liabilities: Accrued interest payable 9,797 9,305 Other 44,192 24,849 --------------------------------- Total other liabilities 53,989 34,154 --------------------------------- Total liabilities 2,843,302 2,659,142 Stockholders' equity: Common stock, no par value (20,000,000 shares authorized; 11,251,598 shares issued in 1999 79,108 75,754 and 11,203,445 issued in 1998) Accumulated other comprehensive income, net (9,161) 8,594 Retained earnings 243,488 221,597 Less: Treasury stock (359,190 shares in 1999 and 341,089 shares in 1998) (23,374) (20,208) --------------------------------- Total stockholders' equity 290,061 285,737 --------------------------------- Total liabilities and stockholders' equity $3,133,363 $2,944,879 =================================
The accompanying notes are an integral part of the supplemental consolidated financial statements. 5 6 Park National Corporation and Subsidiaries Supplemental Consolidated Statements of Income
YEAR ENDED DECEMBER 31 1999 1998 1997 ---------------------------------------------- (Dollars in thousands, except per share data) Interest income: Interest and fees on loans $ 173,722 $ 169,943 $ 164,315 Interest and dividends on: Obligations of U.S. Government, its agencies and other securities 42,449 39,349 38,096 Obligations of states and political subdivisions 7,777 7,188 5,973 Other interest income 368 966 833 ---------------------------------------------- Total interest income 224,316 217,446 209,217 Interest expense: Interest on deposits: Demand and savings deposits 17,056 19,900 19,834 Time deposits 59,238 62,570 59,361 Interest on short-term borrowings 14,225 9,938 8,422 Interest on long-term debt 1,035 1,460 3,162 ---------------------------------------------- Total interest expense 91,554 93,868 90,779 ---------------------------------------------- Net interest income 132,762 123,578 118,438 Provision for loan losses 11,269 6,978 7,284 ---------------------------------------------- Net interest income after provision for loan losses 121,493 116,600 111,154 Other income: Income from fiduciary activities 5,662 5,081 5,192 Service charges on deposit accounts 8,355 7,500 6,936 Gain /(loss) on sale of securities (4,809) 97 (10) Other service income 4,836 6,013 3,974 Other 9,520 7,764 6,443 ---------------------------------------------- Total other income 23,564 26,455 22,535
6 7
YEAR ENDED DECEMBER 31 1999 1998 1997 ---------------------------------------------- (Dollars in thousands, except per share data) Other expense: Salaries and employee benefits $ 40,550 $ 37,182 $ 36,697 Data processing fees 5,484 4,588 5,377 Fees and service charges 5,620 3,663 3,944 Net occupancy expense of bank premises 4,233 3,978 3,883 Amortization of intangibles 3,073 3,462 2,305 Furniture and equipment expense 4,972 5,668 4,511 Insurance 927 988 945 Marketing 2,598 2,461 2,405 Postage and telephone 3,674 3,417 3,071 State taxes 2,288 2,241 2,452 Other 6,493 7,675 6,320 ---------------------------------------------- Total other expense 79,912 75,323 71,910 ---------------------------------------------- Income before federal income taxes 65,145 67,732 61,779 Federal income taxes 18,358 20,724 18,738 ---------------------------------------------- Net income $ 46,787 $ 47,008 $ 43,041 ============================================== Earnings per share: Basic $ 4.30 $ 4.31 $ 3.93 Diluted $ 4.28 $ 4.28 $ 3.91
The accompanying notes are an integral part of the supplemental consolidated financial statements. 7 8 Park National Corporation and Subsidiaries Supplemental Consolidated Statements of Changes in Stockholders' Equity (Dollars in thousands, except per share data)
COMMON STOCK SHARES RETAINED OUTSTANDING AMOUNT EARNINGS --------------------------------------------------- Balance, January 1 1997 10,941,463 $ 71,595 $ 169,178 Treasury stock purchased (120,697) - - Treasury stock reissued primarily for stock options exercised 28,783 - - Shares issued for dividend reinvestment plan and stock options 113,683 2,335 - Cash payment for fractional shares in merger (630) (40) - Tax benefit from exercise of stock options - 1,379 - Net income - - 43,041 Other comprehensive income, net of tax: Unrealized net holding gain on securities available-for-sale, net of income taxes of $1,451 Total other comprehensive income Comprehensive income Cash Dividends: Corporation at $1.60 per share - - (14,905) Cash dividends declared at First-Knox, SNB Corp., and U.B. Bancshares prior to merger - (2,184) --------------------------------------------------- Balance, December 31, 1997 10,962,602 75,269 195,130 Treasury stock purchased (144,754) - - Treasury stock reissued primarily for stock options exercised 39,495 - - Shares issued for stock options 2,314 81 - Tax benefit from exercise of stock options - 42 - Issuance of stock by U.B. Bancshares prior to merger 2,699 362 Net income - - 47,008 Other comprehensive income, net of tax: Unrealized net holding gain on securities available-for-sale, net of income taxes of $536 Total other comprehensive income Comprehensive income Cash dividends: Corporation at $1.94 per share - - (19,057) Cash dividends declared at SNB Corp. and U.B. Bancshares prior to merger (1,484) --------------------------------------------------- Balance, December 31, 1998 10,862,356 75,754 221,597 Treasury stock purchased (57,825) - - Treasury stock reissued primarily for stock options exercised 39,723 (39) - Shares issued for stock options 652 29 - Tax benefit from exercise of stock options - 14 - Issuance of stock by U.B. Bancshares prior to merger 48,096 3,401 - Cash payment for fractional shares in 5% stock dividend (594) (51) Net income - - 46,787 Other comprehensive income, net of tax: Unrealized net holding loss on securities available-for-sale, net of income taxes of ($(9,498) Total other comprehensive income Comprehensive income Cash dividends: Corporation at $2.36 per share - - (23,061) Cash dividends declared at SNB Corp. and U.B. Bancshares prior to merger (1,835) --------------------------------------------------- Balance, December 31, 1999 10,892,408 $ 79,108 $ 243,488 ===================================================
ACCUMULATED OTHER COMPREHENSIVE TREASURY INCOME STOCK TOTAL ----------------------------------------------- Balance, January 1 1997 $ 4,861 $ (4,239) $ 241,395 Treasury stock purchased - (7,165) (7,165) Treasury stock reissued primarily for stock options exercised - 1,530 1,530 Shares issued for dividend reinvestment plan and stock options - - 2,335 Cash payment for fractional shares in merger - - (40) Tax benefit from exercise of stock options - - 1,379 Net income - - 43,041 Other comprehensive income, net of tax: Unrealized net holding gain on securities available-for-sale, net of income taxes of $1,451 2,713 2,713 --------------- Total other comprehensive income 2,713 --------------- Comprehensive income 45,754 Cash Dividends: Corporation at $1.60 per share - - (14,905) Cash dividends declared at First-Knox, SNB Corp., and U.B. Bancshares prior to merger - - (2,184) ----------------------------------------------- Balance, December 31, 1997 7,574 (9,874) 268,099 Treasury stock purchased - (12,581) (12,581) Treasury stock reissued primarily for stock options exercised - 2,247 2,247 Shares issued for stock options - - 81 Tax benefit from exercise of stock options - - 42 Issuance of stock by U.B. Bancshares prior to merger 362 Net income - - 47,008 Other comprehensive income, net of tax: Unrealized net holding gain on securities available-for-sale, net of income taxes of $536 1,020 1,020 --------------- Total other comprehensive income 1,020 --------------- Comprehensive income 48,028 Cash dividends: Corporation at $1.94 per share - - (19,057) Cash dividends declared at SNB Corp. and U.B. Bancshares prior to merger (1,484) ----------------------------------------------- Balance, December 31, 1998 8,594 (20,208) 285,737 Treasury stock purchased - (5,285) (5,285) Treasury stock reissued primarily for stock options exercised - 2,119 2,080 Shares issued for stock options - - 29 Tax benefit from exercise of stock options - - 14 Issuance of stock by U.B. Bancshares prior to merger - - 3,401 Cash payment for fractional shares in 5% stock dividend (51) Net income - - 46,787 Other comprehensive income, net of tax: Unrealized net holding loss on securities available-for-sale, net of income taxes of ($(9,498) (17,755) (17,755) --------------- Total other comprehensive income (17,755) --------------- Comprehensive income 29,032 Cash dividends: Corporation at $2.36 per share - - (23,061) Cash dividends declared at SNB Corp. and U.B. Bancshares prior to merger (1,835) ----------------------------------------------- Balance, December 31, 1999 $ (9,161) $ (23,374) $ 290,061 ===============================================
The accompanying notes are an integral part of the supplemental consolidated financial statements. 8 9 Park National Corporation and Subsidiaries Supplemental Consolidated Statements of Cash Flows
YEAR ENDED DECEMBER 31 1999 1998 1997 -------------------------------------------- (Dollars in thousands) OPERATING ACTIVITIES Net income $46,787 $47,008 $43,041 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 11,269 6,978 7,284 Amortization of loan costs and fees, net (1,069) (796) (788) Provision for depreciation and amortization 4,302 5,182 3,927 Amortization of the excess of cost over net assets of banks purchased 3,103 3,462 2,305 Amortization (accretion) of investment securities 176 (931) (1,119) Deferred income taxes 3,968 755 115 Realized investment security losses (gains) 4,809 (97) 10 Changes in assets and liabilities: Increase in other assets (8,460) (13,170) (6,190) Increase in other liabilities 1,212 715 3,080 -------------------------------------------- Net cash provided by operating activities 66,097 49,106 51,665 INVESTING ACTIVITIES Proceeds from sales of available-for-sale securities 162,013 51,839 46,569 Proceeds from maturities of securities: Held-to-maturity 31,017 11,821 7,581 Available-for-sale 193,905 168,251 164,637 Purchase of securities: Held-to-maturity (965) (21,654) (5,702) Available-for-sale (355,202) (380,481) (185,605) Net increase in loans (232,458) (53,531) (121,580) Purchase of loans - (2,991) (11,582) Cash paid for branches (2,587) (5,354) (6,748) Purchases of premises and equipment, net (3,490) (4,560) (3,849) -------------------------------------------- Net cash used in investing activities (207,767) (236,660) (116,279) FINANCING ACTIVITIES Purchase of deposits 14,887 45,524 49,192 Net increase in deposits 60,797 97,639 48,766 Net increase in short-term borrowings 95,050 100,156 17,790 Cash payment for fractional shares of common stock (51) - (40) Exercise of stock options 4 123 3,714 Purchase of treasury stock, net (3,166) (10,334) (5,635) Proceeds from issuance of common stock 3,401 362 - Proceeds from long-term debt 2,300 14,796 14,000 Repayment of long-term debt (8,709) (30,534) (37,600) Cash dividends paid (24,023) (19,359) (15,942) -------------------------------------------- Net cash provided by financing activities 140,490 198,373 74,245 -------------------------------------------- (Decrease) increase in cash and cash equivalents (1,180) 10,819 9,631 Cash and cash equivalents at beginning of year 126,705 115,886 106,255 -------------------------------------------- Cash and cash equivalents at end of year $125,525 $126,705 $115,886 ============================================
The accompanying notes are an integral part of the supplemental consolidated financial statements. 9 10 Park National Corporation and Subsidiaries Notes to Supplemental Consolidated Financial Statements December 31, 1999 1. ORGANIZATION AND ACQUISITIONS Park National Corporation (Park or the Corporation) is a multi-bank holding company headquartered in Newark, Ohio. Through its banking subsidiaries, The Park National Bank (PNB), The Richland Trust Company (RTC), Century National Bank (CNB), and The First-Knox National Bank of Mount Vernon (FKNB). Park is engaged in a general commercial banking and trust business, primarily in Central Ohio. A new wholly subsidiary of Park, Guardian Finance Company (GFC) began operating in May 1999. GFC is a consumer finance company located in Central Ohio. PNB operates through two banking divisions with the Park National Division (PND) headquartered in Newark, Ohio and the Fairfield National Division (FND) headquartered in Lancaster, Ohio. FKNB also operates through two banking divisions with the First-Knox National Division (FKND) headquartered in Mount Vernon, Ohio and the Farmers and Savings Division (FSD) headquartered in Loudonville, Ohio. All of the banking subsidiaries and their respective divisions provide the following principal services: the acceptance of deposits for demand, savings, and time accounts; commercial, industrial, consumer and real estate lending, including installment loans, credit cards, home equity lines of credit and commercial and auto leasing; trust services; cash management; safe deposit operations; electronic funds transfers; and a variety of additional banking-related services. See Note 19 for financial information on the Corporation's banking subsidiaries. On November 20, 2000, Park entered into an Agreement and Plan of Merger (the "Merger Agreement") with Security Banc Corporation (Security), a bank holding company headquartered in Springfield, Ohio providing for a merger of Security into Park. Under the terms of the Merger Agreement, the stockholders of Security are expected to receive .2844 shares of Park's common stock per share of Security common stock in a tax free exchange. Park expects to issue an aggregate of 3,350,000 shares to complete the merger which will be accounted for as a pooling-of-interests. Completion of the merger is subject to certain conditions, including the approval of bank regulators and other governmental agencies, the approval of stockholders of Security and Park, and other conditions to closing customary of a transaction of this type. The merger is expected to be completed during the second quarter of 2001. Effective April 30, 2000, Park merged with U.B. Bancshares, Inc., a $180 million one bank holding company headquartered in Bucyrus, Ohio. Park issued approximately 325,000 shares of common stock to the stockholders of U.B. Bancshares, Inc. based upon an exchange ratio of .577209 shares of Park common stock for each outstanding share of U.B. Bancshares, Inc. common stock. United Bank, N.A. (UB), the wholly owned subsidiary of U.B. Bancshares, Inc. is being operated as a separate banking subsidiary by Park. 10 11 1. ORGANIZATION AND ACQUISITIONS (CONTINUED) Park also merged with SNB Corp., a $300 million one bank holding company headquartered in Greenville, Ohio, effective April 30, 2000. Park issued approximately 835,000 shares of common stock to the stockholders of SNB Corp. based upon an exchange ratio of 5.367537 shares of Park common stock for each outstanding share of SNB Corp. common stock. Second National Bank (SNB), the wholly owned subsidiary of SNB Corp., is being operated as a separate banking subsidiary by Park. The mergers with U.B. Bancshares, Inc. and SNB Corp. were both accounted for as pooling-of-interests. The supplemental consolidated financial statements and accompanying notes have been restated to include the accounts and operations of U.B. Bancshares, Inc. and SNB Corp. for all periods presented. The supplemental consolidated financial statements will become the historical consolidated financial statements of Park after financial statements covering the date of consummation of the transaction are issued. On May 5, 1997, the Corporation merged with First-Knox Banc Corp. (First-Knox), a $569 million bank holding company headquartered in Mount Vernon, Ohio, in a transaction accounted for as a pooling-of-interest. Park issued approximately 2.3 million shares of common stock to the stockholders of First-Knox based upon an exchange ratio of .5914 shares of Park common stock for each outstanding share of First-Knox common stock. The historical financial statements of the Corporation have been restated to show Park and First-Knox on a combined basis. On September 24, 1999, Park National Division acquired a branch office in Utica, Ohio from National City Bank. In addition to the fixed assets, the purchase included $15 million of deposits. The excess of the cost over net assets purchased was $2 million and is being amortized using the straight-line method over seven years. On April 17, 1998, United Bank acquired two branch offices located in Galion and Caledonia, Ohio. In addition to the fixed assets, the purchase included $46 million of deposits and $3 million of loans. The excess of the cost over net assets purchased was $5 million and is being amortized using the straight-line method over seven years. On December 8, 1997, Fairfield National Division acquired three branch offices in Lancaster, Ohio from KeyBank National Association. In addition to the fixed assets, the purchase included $49 million of deposits and $12 million of loans. The excess of the cost over net assets purchased was $6 million and is being amortized using the straight-line method over seven years. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed in the preparation of the supplemental consolidated financial statements: 11 12 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PRINCIPLES OF CONSOLIDATION The supplemental consolidated financial statements include the accounts of Park and all of its subsidiaries. Material intercompany accounts and transactions have been eliminated. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform with current year presentation. INVESTMENT SECURITIES Investment securities are classified upon acquisition into one of three categories: Held-to-maturity, available-for-sale, or trading (see Note 4). Held-to-maturity securities are those securities that the Corporation has the positive intent and ability to hold to maturity and are recorded at amortized cost. Available-for-sale securities are those securities that would be available to be sold in the future in response to the Corporation's liquidity needs, changes in market interest rates, and asset-liability management strategies, among others. Available-for-sale securities are reported at fair value, with unrealized holding gains and losses excluded from earnings and are included in other comprehensive income, net of applicable taxes. At December 31, 1999 and 1998, the Corporation did not hold any trading securities. Gains and losses realized on the sale of investment securities have been accounted for on the completed transaction method in the year of sale on an "identified certificate" basis. PREMISES AND EQUIPMENT Premises and equipment are stated at cost, less accumulated depreciation. Depreciation is generally provided on the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized over the lives of the respective leases or the estimated useful lives of the improvements, whichever are the shorter periods. Upon the sale or other disposal of the assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is recognized. Maintenance and repairs are charged to expense as incurred while renewals and improvements are capitalized. 12 13 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) OTHER REAL ESTATE OWNED Other real estate owned is recorded at the lower of cost or fair market value (which is not in excess of estimated net realizable value) and consists of property acquired through foreclosure, loans in judgment and subject to redemption, and real estate held for sale. Subsequent to acquisition, allowances for losses are established if carrying values exceed fair value less estimated costs to sell. Costs relating to development and improvement of such properties are capitalized (not in excess of fair value less estimated costs to sell), whereas costs relating to holding the properties are charged to expense. INCOME RECOGNITION Income earned by the Corporation and its subsidiaries is recognized principally on the accrual basis of accounting. Loan origination fees are amortized over the life of the loans using the interest method on a loan by loan basis, and origination costs are deferred and amortized if material. Certain fees, principally service, are recognized as income when billed or collected. The Corporation's subsidiaries suspend the accrual of interest when, in management's opinion, the collection of all or a portion of interest has become doubtful. Generally, when a loan is placed on non-accrual, the Corporation's subsidiaries charge all previously accrued and unpaid interest against income. In future periods, interest will be included in income to the extent received only if complete principal recovery is reasonably assured. ALLOWANCE FOR POSSIBLE LOAN LOSSES The allowance for possible loan losses is that amount believed adequate to absorb estimated credit losses in the loan portfolio based on management's evaluation of various factors including overall growth in the loan portfolio, an analysis of individual loans, prior and current loss experience, and current and anticipated economic conditions. A provision for loan losses is charged to operations based on management's periodic evaluation of these and other pertinent factors. Statement of Financial Accounting Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan", as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan--Income Recognition and Disclosure" requires an allowance to be established as a component of the allowance for loan losses for certain loans when it is probable that all amounts due pursuant to the contractual terms of the loan will not be collected, and the recorded investment in the loan exceeds the fair value. Fair value is measured using either the present value of expected future cash flows based upon the initial effective interest rate on the loan, the observable market price of the loan or the fair value of the collateral if the loan is collateral dependent. 13 14 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) LEASE FINANCING Leases of equipment, automobiles, and aircraft to customers generally are direct leases in which the Corporation's subsidiaries have acquired the equipment, automobiles, or aircraft with no outside financing. Such leases are accounted for as direct financing leases for financial reporting purposes. Under the direct financing method, a receivable is recorded for the total amount of the lease payments to be received. Unearned lease income, representing the excess of the sum of the aggregate rentals of the equipment, automobiles or aircraft over its cost is included in income over the term of the lease under the interest method. EXCESS OF COST OVER NET ASSETS OF BANKS PURCHASED The excess of cost over net assets of the banks purchased is being amortized, principally on the straight-line method, over periods ranging from seven to fifteen years. SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS Cash and cash equivalents include cash and cash items, amounts due from banks and federal funds sold. Generally federal funds are purchased and sold for one day periods. Net cash provided by operating activities reflects cash payments as follows:
DECEMBER 31 1999 1998 1997 ------------------------------------------------- (Dollars in thousands) Interest paid on deposits and other borrowings $91,148 $93,539 $90,654 ================================================= Income taxes paid $19,326 $21,297 $16,076 =================================================
INCOME TAXES The Corporation accounts for income taxes using the asset and liability approach. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. 14 15 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) STOCK DIVIDEND The Corporation's Board of Directors approved a 5% stock dividend in November 1999. The additional shares resulting from the dividend were distributed on December 15, 1999 to stockholders of record as of December 3, 1999. The consolidated financial statements, notes and other references to share and per share data have been retroactively restated for the stock dividend. ACCOUNTING CHANGES Statement of Financial Accounting Standard ("SFAS") No. 130, "Reporting Comprehensive Income", establishes reporting and display standards for comprehensive income and its components in a full set of general-purpose financial statements. Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances arising from nonowner sources. The statement requires the Corporation's unrealized gains or losses on securities available-for-sale, to be included in other comprehensive income. Since SFAS No. 130 only requires additional information, it had no impact on the Corporation's financial position or results of operations. Prior year financial statements have been reclassified to conform with the new requirements. Comprehensive income is presented in the Statements of Changes in Stockholders' Equity. In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The provisions of this statement require that derivative instruments be carried at fair value on the balance sheet. The statement continues to allow derivative instruments to be used to hedge various risks and sets forth specific criteria to be used to determine when hedge accounting can be used. The statement also provided for offsetting changes in fair value or cash flows of both the derivative and the hedged asset or liability to be recognized in earnings in the same period; however, any changes in fair value or cash flow that represent the ineffective portion of a hedge are required to be recognized in earnings and cannot be deferred. For derivative instruments not accounted for as hedges, changes in fair value are required to be recognized in earnings. The provisions of this statement become effective for quarterly and annual reporting beginning January 1, 2001. Although the statement allows for early adoption in any quarterly period that began after June 1998, the Corporation has no plans to adopt the provisions of SFAS No. 133 prior to the effective date. The Corporation did not use any derivative instruments in 1999 and 1998 and as a result does not expect that adoption of this statement will have any impact of the Corporation's financial position, results of operations and cash flows. 3. RESTRICTIONS ON CASH AND DUE FROM BANKS The Corporation's banking subsidiaries are required to maintain average reserve balances with the Federal Reserve Bank. The average required reserve balance was approximately $24,418,000 and $20,028,000 at December 31, 1999 and 1998, respectively. No other compensating balance arrangements were in existence at year end. 15 16 4. INVESTMENT SECURITIES The amortized cost and fair values of investment securities at December 31 are as follows (in thousands):
1999 ---------------------------------------------------------------------- GROSS GROSS UNREALIZED AMORTIZED UNREALIZED HOLDING ESTIMATED FAIR SECURITIES AVAILABLE-FOR-SALE COST HOLDING GAINS LOSSES VALUE ---------------------------------------------------------------------- Obligations of U.S. Treasury and other U.S. Government agencies $293,235 $ 158 $ 8,813 $284,580 Obligations of states and political subdivisions 151,810 804 2,941 149,673 U.S. Government agencies' asset-backed securities and other asset- backed securities 321,602 270 3,673 318,199 Other equity securities 25,979 377 238 26,118 ---------------------------------------------------------------------- Total $792,626 $1,609 $15,665 $778,570 ====================================================================== 1999 ---------------------------------------------------------------------- GROSS GROSS UNREALIZED AMORTIZED UNREALIZED HOLDING ESTIMATED FAIR SECURITIES HELD-TO-MATURITY COST HOLDING GAINS LOSSES VALUE ---------------------------------------------------------------------- Obligations of states and political subdivisions $4,290 $131 $2 $4,419 Other asset-backed securities 31 1 0 32 ---------------------------------------------------------------------- Total $4,321 $132 $2 $4,451 ====================================================================== 1998 ---------------------------------------------------------------------- GROSS GROSS UNREALIZED AMORTIZED UNREALIZED HOLDING ESTIMATED FAIR SECURITIES AVAILABLE-FOR-SALE COST HOLDING GAINS LOSSES VALUE ---------------------------------------------------------------------- Obligations of U.S. Treasury and other U.S. Government agencies $257,856 $ 4,411 $ 58 $262,209 Obligations of states and political subdivisions 142,662 4,688 92 147,258 U.S. Government agencies' asset-backed securities and other asset- backed securities 363,166 3,730 246 366,650 Other equity securities 22,551 764 -- 23,315 ---------------------------------------------------------------------- Total $786,235 $13,593 $396 $799,432 ======================================================================
16 17 4. INVESTMENT SECURITIES (CONTINUED)
1998 ---------------------------------------------------------------------- GROSS GROSS UNREALIZED AMORTIZED UNREALIZED HOLDING ESTIMATED FAIR SECURITIES HELD-TO-MATURITY COST HOLDING GAINS LOSSES VALUE ---------------------------------------------------------------------- Obligations of U.S. Treasury and other U.S. Government agencies $ 4 $ -- $-- $ 4 Obligations of states and political subdivisions 24,796 844 18 25,622 Other asset-backed securities 9,573 87 5 9,655 ---------------------------------------------------------------------- Total $34,373 $931 $23 $35,281 ======================================================================
The amortized cost and estimated fair value of investments in debt securities at December 31, 1999 are shown below (in thousands) by contractual maturity except for asset-backed securities which are shown based on expected maturities. The average yield is computed on a tax equivalent basis using a 35 percent tax rate.
WEIGHTED AMORTIZED ESTIMATED AVERAGE AVERAGE SECURITIES AVAILABLE-FOR-SALE COST FAIR VALUE MATURITY YIELD ---------------------------------------------------------------------- U.S. Treasury and agencies' notes: Due within one year $28,515 $28,613 .9 YEARS 6.70% Due one through five years 37,280 36,721 3.1 YEARS 6.40% Due five through ten years 207,670 199,617 7.8 YEARS 6.58% Due over ten years 19,770 19,629 10.5 YEARS 6.85% ---------------------------------------------------------------------- Total $293,235 $284,580 6.7 YEARS 6.59% ---------------------------------------------------------------------- Obligations of states and political subdivisions: Due within one year $15,055 $15,094 .8 YEARS 7.50% Due one through five years 38,600 38,770 3.1 YEARS 7.35% Due five through ten years 62,289 61,465 7.8 YEARS 7.30% Due over ten years 35,866 34,344 12.5 YEARS 6.90% ---------------------------------------------------------------------- Total $151,810 $149,673 7.0 YEARS 7.24% ----------------------------------------------------------------------
17 18 4. INVESTMENT SECURITIES (CONTINUED)
U.S. Government agencies' asset-backed securities and other asset-backed securities: Due within one year $ 17,575 $ 17,603 .7 YEARS 6.68% Due one through five years 284,010 281,607 3.6 YEARS 6.77% Due five through ten years 20,017 18,989 5.5 YEARS 6.31% ---------------------------------------------------------------------- Total $321,602 $318,199 3.6 YEARS 6.74% ====================================================================== WEIGHTED AMORTIZED ESTIMATED AVERAGE AVERAGE SECURITIES HELD-TO-MATURITY COST FAIR VALUE MATURITY YIELD ---------------------------------------------------------------------- Obligations of state and political subdivisions: Due within one year $1,387 $1,430 .9 YEARS 11.26% Due one through five years 2,128 2,214 2.5 YEARS 10.44% Due five through ten years 630 630 8.0 YEARS 7.63% Due over ten years 145 145 10.9 YEARS 7.63% ---------------------------------------------------------------------- Total $4,290 $4,419 3.1 YEARS 10.20% ====================================================================== Other asset-backed securities: Due one through five years $31 $32 3.6 YEARS 8.70%
Investment securities having a book value of $533,337,000 and $475,109,000 at December 31, 1999 and 1998, respectively, were pledged to collateralize government and trust department deposits in accordance with federal and state requirements and to secure repurchase agreements sold. In 1999, 1998 and 1997, gross gains of $343,000, $159,000, and $64,000 and gross losses of $5,152,000, $62,000 and $74,000 were realized, respectively. Tax benefits related to net securities losses were $1,674,000 in 1999, and $3,000 in 1997. Tax expense related to net securities gains in 1998 was $34,000. 18 19 5. LOANS The composition of the loan portfolio is as follows:
DECEMBER 31 1999 1998 ----------------------------------- (Dollars in thousands) Commercial, financial and agricultural $ 291,746 $ 265,937 Real estate: Construction 78,969 84,389 Residential 812,542 780,202 Commercial 375,485 338,477 Consumer, net 448,478 368,886 Leases, net 120,205 63,315 ----------------------------------- Total loans $2,127,425 $1,901,206 ===================================
Under the Corporation's credit policies and practices, all non-accrual and restructured commercial, financial, agricultural, construction and commercial real estate loans meet the definition of impaired loans under SFAS No. 114 and 118. Impaired loans as defined by SFAS No. 114 and 118 exclude certain consumer loans, residential real estate loans and lease financing classified as non-accrual. The majority of the loans deemed impaired were evaluated using the fair value of the collateral as the measurement method. Non-accrual and restructured loans are summarized as follows:
DECEMBER 31 1999 1998 ----------------------------------- (Dollars in thousands) Impaired loans: Non-accrual $4,284 $3,447 Restructured 429 492 ----------------------------------- Total impaired loans 4,713 3,939 Other non-accrual loans -- 5 ----------------------------------- Total non-accrual and restructured loans $4,713 $3,944 ===================================
The allowance for credit losses related to impaired loans at December 31, 1999 and 1998 was $942,000 and $789,000, respectively. All impaired loans for both periods were subject to a related allowance for credit losses. The average balance of impaired loans was $3,671,000, $3,665,000 and $5,010,000 for 1999, 1998 and 1997, respectively. 19 20 5. LOANS (CONTINUED) Interest income on impaired loans is recognized after all past due and current principal payments have been made, and collectibility is no longer doubtful. For the years ended December 31, 1999, 1998, and 1997, the Corporation recognized $427,000, $253,000 and $436,000, respectively, of interest income on impaired loans, which included $413,000, $225,000 and $423,000, respectively, of interest income recognized using the cash basis method of income recognition. Certain of the Corporation's executive officers, directors and their affiliates are loan customers of the Corporation's banking subsidiaries. As of December 31, 1999 and 1998, loans aggregating approximately $54,043,000 and $48,457,000, respectively, were outstanding to such parties. 6. ALLOWANCE FOR POSSIBLE LOAN LOSSES Activity in the allowance for possible loan losses is summarized as follows:
1999 1998 1997 ----------------------------------------------------- (Dollars in thousands) Balance, January 1 $41,215 $38,764 $35,525 Provision for loan losses 11,269 6,978 7,284 Losses charged to the reserve (11,084) (7,658) (6,723) Recoveries 3,776 3,131 2,678 ----------------------------------------------------- Balance, December 31 $45,176 $41,215 $38,764 =====================================================
7. INVESTMENT IN FINANCING LEASES The following is a summary of the components of the Corporation's affiliates' net investment in direct financing leases:
DECEMBER 31 1999 1998 ----------------------------------- (Dollars in thousands) Total minimum payments to be received $ 88,600 $51,698 Estimated unguaranteed residual value of leased property 44,843 20,642 Less unearned income (13,238) (9,025) ----------------------------------- $120,205 $63,315 ===================================
Minimum lease payments, in thousands, to be received as of December 31, 1999 are:
2000 $32,472 2001 21,920 2002 16,187 2003 11,840 2004 5,253 Thereafter 928 ----------------- $88,600 =================
20 21 8. PREMISES AND EQUIPMENT The major categories of premises and equipment and accumulated depreciation are summarized as follows:
DECEMBER 31 1999 1998 ----------------------------------- (Dollars in thousands) Land $ 7,279 $ 7,118 Buildings 32,789 31,918 Equipment, furniture and fixtures 35,658 33,625 Leasehold improvements 1,204 1,144 ----------------------------------- 76,930 73,805 Less accumulated depreciation and amortization (44,462) (40,916) ----------------------------------- $ 32,468 $ 32,889 ===================================
Depreciation and amortization expense amounted to $4,302,000, $5,182,000 and $3,927,000 for the three years ended December 31, 1999, 1998 and 1997, respectively. The Corporation and its subsidiaries lease certain premises and equipment accounted for as operating leases. The following is a schedule of the future minimum rental payments required for the next five years under such leases with initial terms in excess of one year (in thousands):
2000 $ 491,644 2001 405,236 2002 314,994 2003 269,183 2004 244,270 Thereafter 213,500 ---------------- $1,938,827 ================
Rent expense amounted to $745,000, $693,000 and $666,000, for the three years ended December 31, 1999, 1998 and 1997, respectively. 9. SHORT-TERM BORROWINGS Short-term borrowings are as follows:
DECEMBER 31 1999 1998 ----------------------------------- (Dollars in thousands) Securities sold under agreements to repurchase and federal funds purchased $165,738 $179,665 Federal Home Loan Bank advances 190,100 80,000 Other short-term borrowings 8,420 9,543 ----------------------------------- Total short-term borrowings $364,258 $269,208 ===================================
21 22 9. SHORT-TERM BORROWINGS (CONTINUED) The outstanding balances for all short-term borrowings as of December 31, 1999, 1998 and 1997 (in thousands) and the weighted-average interest rates as of and paid during each of the years then ended are as follows:
REPURCHASE DEMAND NOTES AGREEMENTS AND FEDERAL HOME DUE U.S. FEDERAL FUNDS LOAN BANK TREASURY PURCHASED ADVANCES AND OTHER ----------------------------------------------------- 1999: Ending balance $165,738 $190,100 $ 8,420 Highest month-end balance 207,025 197,600 10,044 Average daily balance 172,625 133,418 3,898 Weighted-average interest rate: As of year-end 4.18% 5.82% 4.47% Paid during the year 4.09% 5.18% 5.07% 1998: Ending balance $179,665 $80,000 $ 9,543 Highest month-end balance 203,483 104,300 9,543 Average daily balance 173,959 29,356 6,020 Weighted-average interest rate: As of year-end 4.19% 6.00% 4.68% Paid during the year 4.54% 5.83% 5.13% 1997: Ending balance $145,015 $18,900 $ 5,137 Highest month-end balance 180,562 86,000 5,137 Average daily balance 147,965 26,741 2,909 Weighted-average interest rate: As of year-end 4.62% 6.25% 5.75% Paid during the year 4.60% 5.49% 5.25%
At December 31, 1999, Federal Home Loan Bank (FHLB) advances were collateralized by the FHLB stock owned by the Corporation's affiliate banks and by residential mortgage loans pledged under a blanket agreement by the Corporation's affiliate banks. 22 23 10. LONG-TERM DEBT Long-term debt is listed below:
DECEMBER 31 1999 1998 ------------- ------------ (Dollars in thousands) Fixed rate Federal Home Loan Bank advances with monthly principal and interest payments: 6.02% Advance due February 2005 $ 3,273 $ 3,286 5.40% Advance due February 2006 95 135 5.56% Advance due December 2008 3,359 3,500 5.45% Advance due November 2013 1,896 1,986 6.00% Advance due April 2014 878 ---- 6.00% Advance due April 2014 1,366 ---- 6.25% Advance due April 2016 50 65 2.00% Advance due November 2027 38 39 2.00% Advance due January 2028 38 39 5.60% Advance due August 2003 ---- 1,443 5.70% Advance due May 2004 ---- 3,199 5.85% Advance due January 2016 ---- 3,710 Fixed rate Federal Home Loan Bank advances with monthly interest payments 5.91% Advance due April 2003 1,000 1,000 5.96% Advance due June 2005 2,000 2,000 5.85% Advance due September 2005 3,000 3,000 ------------- ------------ Total long-term debt $16,993 $23,402 ------------- ------------
At December 31, 1999, Federal Home Loan Bank (FHLB) advances were collateralized by the FHLB stock owned by the Corporation's affiliate banks and by residential mortgage loans pledged under a blanket agreement by the Corporation's affiliate banks. 11. STOCK OPTION PLAN The Park National Corporation 1995 Incentive Stock Option Plan ("the Park Plan") was adopted April 17, 1995 and amended April 20, 1998. The Park Plan is intended as an incentive to encourage stock ownership by the key employees of the Corporation. The maximum number of common shares with respect to which incentive stock options may be granted under the Park Plan is 735,000. At December 31, 1999, 420,214 shares were available for future grants of options under this plan. Incentive stock options may be granted at a price not less than the fair market value at the date of the grant, and for an option term of up to five years. No incentive stock options may be granted under the Park Plan after January 16, 2005. In conjunction with the First-Knox Merger in 1997, the Corporation assumed the 1995 First-Knox Director's Stock Option and Stock Appreciation Rights Plan and the 1990 First-Knox Stock Option 23 24 11. STOCK OPTION PLAN (CONTINUED) and Stock Appreciation Rights Plan. Additionally, in conjunction with the merger in 1997, all former First-Knox Plans were terminated with respect to the granting of any additional options and stock appreciation rights. The stock option plans of SNB Corp. and U.B. Bancshares, Inc. are included in Park's stock option activity and related information summarized below. All data has been restated, as applicable, for subsequent stock dividends.
STOCK OPTIONS STOCK APPRECIATION RIGHTS ---------------------------- ---------------------------- OUTSTANDING OUTSTANDING ---------------------------- ---------------------------- WEIGHTED WEIGHTED AVERAGE AVERAGE EXERCISE EXERCISE PRICE PER PRICE PER NUMBER SHARE NUMBER SHARE -------------- ------------- ------------ ---------------- January 1, 1997 224,782 29.79 27,791 23.52 Granted 92,006 59.23 - - Exercised (144,247) 26.72 (27,767) 23.52 Forfeited/Expired (4,449) 56.26 (24) 22.90 -------------- ------------- ------------- ------------- December 31, 1997 168,092 47.88 - - Authorized - - - - Granted 95,759 87.79 - - Exercised (37,910) 51.57 - - Forfeited/Expired (6,832) 58.61 - - -------------- ------------- ------------- ------------- December 31, 1998 219,109 64.32 - - Granted 71,407 91.36 - - Exercised (36,442) 41.03 - - Forfeited/Expired (4,257) 84.91 - - -------------- ------------- ------------- ------------- December 31, 1999 249,817 75.10 - -
Range of exercise prices: $28.67 - $110.75 Weighted-average remaining contractual life: 3.4 Years Exerciseable at year end: 239,026 Weighted-average exercise price of exerciseable options: $75.25 Compensation expense related to stock appreciation rights was $0, $0 and $339,000 in 1999, 1998 and 1997, respectively. The Corporation has elected to follow Accounting Principles Board Opinion No. 25 "Accounting for Stock issued to Employees" (APB 25) and related interpretations in accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under 24 25 11. STOCK OPTION PLAN (CONTINUED) SFAS No. 123, "Accounting for Stock Based Compensation," requires the use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of the Corporation's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. The fair value of these options was estimated at the date of grant using a Black-Scholes options pricing model with the following weighted-average assumptions for 1999, 1998 and 1997 respectively: risk-free interest rates of 5.50%, 5.25% and 6.25%; a dividend yield of 2.50%, a volatility factor of the expected market price of the Corporation's common stock of .213, .237 and .219 and a weighted-average expected option life of 4.0 years. The weighted-average fair value of options granted were $18.04, $18.52 and $13.28 for 1999, 1998 and 1997, respectively. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, options valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Corporation's employee stock options have characteristics significantly different from those traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. The Corporation's pro-forma information follows:
1999 1998 1997 ----------------------------------------------------- (Dollars in thousands, except per share data) Net income as reported $46,787 $47,008 $43,041 Pro-forma net income 45,398 45,175 41,965 Basic earnings per share as reported 4.30 4.31 3.93 Pro-forma basic earnings per share 4.17 4.14 3.83 Diluted earnings per share as reported 4.28 4.28 3.91 Pro-forma diluted earnings per share 4.15 4.12 3.81
12. BENEFIT PLANS The Corporation has a noncontributory defined benefit pension plan covering substantially all of its employees. The plan provides benefits based on an employee's years of service and compensation. The Corporation's funding policy is to contribute annually an amount that can be deducted for federal income tax purposes using a different actuarial cost method and different assumptions from those used for financial reporting purposes. The employees of SNB Corp. and U.B. Bancshares, Inc. joined the pension plan as new employees during 2000. 25 26 12. BENEFIT PLANS (CONTINUED)
1999 1998 ----------------------------- (Dollars in thousands) CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of year $17,497 $16,498 Service cost 1,197 1,055 Interest cost 1,120 1,189 Actuarial (1,535) 2,096 Benefits paid (1,071) (3,341) ----------------------------- Benefit obligation at end of year $17,208 17,497 ----------------------------- CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year 17,135 19,578 Actual return on plan assets 2,951 662 Company contributions 602 236 Benefits paid (1,071) (3,341) ----------------------------- Fair value of plan assets at end of year 19,617 17,135 ----------------------------- Funded status of the plan (underfunded) 2,409 (362) Unrecognized net actuarial loss (gain) (2,803) 314 Unrecognized prior service cost 9 3 Unrecognized net transaction asset (93) (157) ----------------------------- Accrued benefit cost $ (478) (202) ============================= WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31 1999 1998 ----------------------------- Discount rate 7.64% 6.52% Expected return on plan assets 8.00% 8.00% Rate of compensation increase 5.00% 5.00% COMPONENTS OF NET PERIODIC BENEFIT COST 1999 1998 1997 ----------------------------------------- Service cost $ 1,197 $ 1,055 $ 942 Interest cost 1,120 1,189 1,098 Expected return on plan assets (1,369) (1,555) (1,375) Amortization of prior service cost (6) (64) (6) Recognized net actuarial loss (64) (62) (60) ========================================= Benefit cost $ 878 $ 563 $ 599 =========================================
The Corporation has a voluntary salary deferral plan covering substantially all of its employees. Eligible employees may contribute a portion of their compensation subject to a maximum statutory limitation. The Corporation provides a matching contribution established annually by the Corporation. Contribution expense for the Corporation was $949,000, $906,000 and $787,000 for 1999, 1998 and 1997, respectively. 26 27 12. BENEFIT PLANS (CONTINUED) The Corporation has a Supplemental Executive Retirement Plan (SERP) covering certain key officers of the Corporation and its subsidiaries with defined pension benefits in excess of limits imposed by federal tax law. At December 31, 1999 and 1998, the accrued benefit cost for this plan totaled $520,000 and$32,000, respectively. The expense for the Corporation was $480,000, $30,000, and $14,000 for 1999, 1998, and 1997, respectively. 13. FEDERAL INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Corporation's deferred tax assets and liabilities are as follows:
DECEMBER 31 1999 1998 ----------------------------------- Deferred tax assets: (Dollars in thousands) Allowance for loan losses $15,752 $14,147 Unrealized holding loss on securities 4,894 - Deferred loan fees 695 461 Deferred compensation 413 474 Other 4,195 3,481 ----------------------------------- Total deferred tax assets 25,949 18,563 Deferred tax liabilities: Lease revenue reporting 13,011 7,115 Unrealized holding gain on securities - 4,603 Fixed assets, principally due to depreciation 542 506 Other 6,979 5,913 ----------------------------------- Total deferred tax liabilities 20,532 18,137 ----------------------------------- Net deferred tax assets $ 5,417 $ 426 ===================================
The components of the provision for federal income taxes are shown below:
1999 1998 1997 ----------------------------------------------------- (Dollars in thousands) Currently payable $13,871 $19,969 $18,623 Deferred 4,487 755 115 ----------------------------------------------------- Total $18,358 $20,724 $18,738 =====================================================
The following is a reconcilement of federal income tax expense to the amount computed at the statutory rate of 35% for the year ended December 31, 1999 and the weighted average statutory rate of 34.9% for the years ended December 31, 1998 and 1997. 27 28 13. FEDERAL INCOME TAXES (CONTINUED)
  1999 1998 1997 ----------------------------------------------------- Statutory corporate tax rate 35.0% 34.9% 34.9% Changes in rates resulting from: Tax-exempt interest income (4.5%) (3.7%) (3.5%) Tax credits (low income housing) (1.8%) (.9%) (.8%) Other (.5%) .3% (.3%) ----------------------------------------------------- Effective tax rate 28.2% 30.6% 30.3% =====================================================
The following is a summary of the income tax effect allocated to other comprehensive income.
YEAR ENDED DECEMBER 31, 1999 ------------------------------------------------- BEFORE-TAX TAX NET-OF-TAX AMOUNT EXPENSE AMOUNT ------------------------------------------------ Unrealized losses on available-for -sale securities ($32,062) ($11,172) ($20,890) Less: reclassification adjustment for losses realized in net income 4,809 1,674 3,135 ------------------------------------------------ Other comprehensive income $(27,253) $(9,498) $(17,755) ================================================= YEAR ENDED DECEMBER 31, 1998 ------------------------------------------------- Before - Tax Tax Expense Net-of-Tax Amount Amount ------------------------------------------------ Unrealized gains on available-for -sale securities $1,653 $570 $1,083 Less: reclassification adjustment for gains realized in net income (97) (34) (63) ------------------------------------------------ Other comprehensive income $1,556 $536 $1,020 ================================================= YEAR ENDED DECEMBER 31, 1997 ------------------------------------------------- Before - Tax Tax Expense Net-of-Tax Amount Amount ------------------------------------------------ Unrealized gains on available-for-sale securities $4,154 $1,448 $2,706 Less: reclassification adjustment for losses realized in net income 10 3 7 ------------------------------------------------ Other comprehensive income $4,164 $1,451 $2,713 =================================================
28 29 14. EARNINGS PER SHARE SFAS No. 128, "Earnings Per Share" requires the reporting of basic and diluted earnings per share. Basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. The following table sets forth the computation of basic and diluted earnings per share:
YEAR ENDED DECEMBER 31 1999 1998 1997 -------------------------------------------------- (Dollars in thousands, except per share data) Numerator: Net income $46,787 $47,008 $43,041 Denominator: Basic earnings per share: Weighted-average shares 10,878,045 10,902,374 10,964,198 Effect of dilutive securities - stock options 56,158 68,539 57,688 Diluted earnings per share: Adjusted weighted-average shares and assumed conversions 10,934,203 10,970,913 11,021,886 Earnings per share: Basic earnings per share $4.30 $4.31 $3.93 Diluted earnings per share $4.28 $4.28 $3.91
15. DIVIDEND RESTRICTIONS Bank regulators limit the amount of dividends a subsidiary bank can declare in any calendar year without obtaining prior approval. At December 31, 1999, approximately $23,291,000 of the total stockholders' equity of the bank subsidiaries is available for the payment of dividends to the Corporation, without approval by the applicable regulatory authorities. 16. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF CREDIT RISK The Corporation is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include loan commitments and standby letters of credit. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements. 29 30 16. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF CREDIT RISK (CONTINUED) The Corporation's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for loan commitments and standby letters of credit is represented by the contractual amount of those instruments. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Since many of the loan commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan commitments to customers. The total amounts of off-balance sheet financial instruments with credit risk are as follows:
DECEMBER 31 1999 1998 ----------------------------------- (Dollars in thousands) Loan commitments $333,273 $312,249 Unused credit card limits 102,518 103,041 Standby letters of credit 9,538 6,267
The loan commitments are generally for variable rates of interest. The Corporation grants retail, commercial and commercial real estate loans to customers primarily located in Central Ohio. The Corporation evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on management's credit evaluation of the customer. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties. Although the Corporation has a diversified loan portfolio, a substantial portion of the borrowers' ability to honor their contracts is dependent upon the economic conditions in each borrower's geographic location. 17. FAIR VALUES OF FINANCIAL INSTRUMENTS The following methods and assumptions were used by the Corporation in estimating its fair value disclosures for financial instruments: Cash and cash equivalents: The carrying amounts reported in the balance sheet for cash and short-term instruments approximate those assets' fair values. Investment securities: Fair values for investment securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. 30 31 17. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED) Loans receivable: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair values for certain mortgage loans (e.g., one-to-four family residential) are based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. The fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Off-balance sheet instruments: Fair values for the Corporation's loan commitments and standby letters of credit are based on the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counter parties' credit standing. Deposit liabilities: The fair values disclosed for demand deposits (e.g., interest and non-interest checking, savings, and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts for variable-rate, fixed-term certificates of deposit approximate their fair values at the reporting date. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits. Short-term borrowings: The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings approximate their fair values. 31 32 17. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED) The fair value of financial instruments at December 31, 1999 and 1998 is as follows (in thousands):
1999 1998 ------------------------------ ------------------------------ CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE ------------------------------- ------------------------------ Financial assets: Cash and federal funds sold $ 125,525 $ 125,525 $ 126,705 $ 126,705 Investment securities 782,891 783,054 833,805 834,167 Loans: Commercial, financial and agricultural 291,746 291,746 265,937 265,937 Real estate: Construction 78,969 78,969 84,389 84,389 Residential 812,542 819,264 780,202 780,836 Commercial 375,485 373,678 338,477 338,927 Consumer, net 448,478 446,855 368,886 370,904 ------------------------------- ------------------------------ Total loans 2,007,220 2,010,512 1,837,891 1,840,993 Allowance for loan losses (45,176) - (41,215) - ------------------------------- ------------------------------ Loans receivable, net 1,962,044 2,010,512 1,796,676 1,840,993 Financial liabilities: Noninterest bearing checking 342,680 342,680 338,939 338,939 Interest bearing checking 304,491 304,491 295,387 295,387 Savings 365,921 365,921 365,683 365,683 Money market accounts 161,245 161,245 171,429 171,429 Time deposits 1,232,116 1,233,193 1,159,240 1,167,329 Other 1,609 1,609 1,700 1,700 ------------------------------- ------------------------------ Total deposits 2,408,062 2,409,139 2,332,378 2,340,467 Short-term borrowings 364,258 364,258 269,208 269,208 Long-term debt 16,993 17,665 23,402 23,668 Unrecognized financial instruments: Loan commitments - (333) - (312) Standby letters of credit - (48) - (31)
32 33 18. CAPITAL RATIOS The following table reflects various measures of capital at December 31, 1999 and December 31, 1998 (dollars in thousands):
1999 1998 ------------------------------------ ------------------------------------ AMOUNT RATIO AMOUNT RATIO ---------------- ------------------- ------------------ ----------------- Total equity (1) $290,061 9.26% $285,737 9.70% Tier 1 capital (2) 282,466 13.44% 259,454 13.95% Total risk-based capital (3) 308,988 14.70% 283,042 15.22% Leverage (4) 282,466 9.17% 259,454 9.10%
(1) Computed in accordance with generally accepted accounting principles, including accumulated other comprehensive income. (2) Stockholders' equity less certain intangibles and accumulated other comprehensive income; computed as a ratio to risk-adjusted assets as defined. (3) Tier 1 capital plus qualifying loan loss allowance; computed as a ratio to risk-adjusted assets, as defined. (4) Tier 1 capital computed as a ratio to average total assets less certain intangibles. The Corporation's Tier 1 capital, total risk-based capital and leverage ratios are well above both the required minimum levels of 4.00%, 8.00% and 4.00%, respectively, and the well-capitalized levels of 6.00%, 10.00% and 5.00%, respectively. At December 31, 1999, and 1998, all of the Corporation's subsidiary financial institutions met the well-capitalized levels under the capital definitions prescribed in the FDIC Improvement Act of 1991. 33 34 19. SEGMENT INFORMATION The Corporation segment is operations by its banking subsidiaries and their respective divisions. The operating results of the banking subsidiaries and their respective divisions are monitored closely by senior management and each president of the subsidiary or division is held accountable for their results. Information about reportable segments is listed follows (in thousands). See Note 1 for a detailed description of individual banking subsidiaries and their respective divisions
-------------------------------------------------------------------------------------------------------------------- Operating Results for the year ended December 31, 1999 -------------------------------------------------------------------------------------------------------------------- PND FND RTC CNB FKND FSD SNB UB ALL TOTAL OTHER -------------------------------------------------------------------------------------------------------------------- Net Int. Income $41,448 $12,734 $17,739 $16,520 $23,095 $3,211 $10,474 $6,455 $1,086 $132,762 -------------------------------------------------------------------------------------------------------------------- Provision for Loan Losses 710 755 1,039 1,410 2,353 646 3,200 1,100 56 11,269 -------------------------------------------------------------------------------------------------------------------- Other Income 12,290 2,081 1,261 2,280 4,213 343 61 455 580 23,564 ---------------- --------- --------- --------- -------- --------- -------- ---------- --------- --------- ---------- Depreciation & Amortization 1,092 406 483 489 814 103 457 304 154 4,302 -------------------------------------------------------------------------------------------------------------------- Other Expense 22,649 7,461 9,822 8,727 11,828 1,576 5,693 4,990 2,864 75,610 -------------------------------------------------------------------------------------------------------------------- Income Before Income Taxes 29,287 6,193 7,656 8,174 12,313 1,229 1,185 516 (1,408) 65,145 -------------------------------------------------------------------------------------------------------------------- Income Taxes 8,876 1,984 2,571 2,486 3,548 326 (215) (105) (1,113) 18,358 -------------------------------------------------------------------------------------------------------------------- Net Income $20,411 $4,209 $5,085 $5,688 $8,765 $903 $1,400 $621 $(295) $46,787 --------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1999 Assets $949,212 $280,451 $435,220 $393,733 $541,724 $62,474 $308,067 $180,216 $(17,734) $3,133,363 Loans 693,579 168,078 243,037 269,897 396,412 62,374 204,606 88,871 571 2,127,425 Deposits 691,356 219,598 354,521 316,702 394,084 57,598 233,873 159,042 (18,712) 2,408,062
Operating Results for the year ended December 31, 1998 ALL PND FND RTC CNB FKND FSD SNB UB OTHER TOTAL ------------------------------------------------------------------------------------------------- Net Interest Income $39,877 $11,586 $16,018 $15,510 $20,910 $2,827 $10,343 $5,584 $ 923 $123,578 Provision for Loan Losses 2,880 600 1,602 480 1,116 120 130 50 - 6,978 Other Income 11,468 2,349 2,972 3,079 3,833 268 1,086 1,336 64 26,455 Depreciation & Amortization 1,119 354 558 648 1,513 149 418 273 150 5,182 Other Expense 20,483 6,689 9,283 8,168 11,646 1,490 5,466 4,684 2,232 70,141 ------------------------------------------------------------------------------------------------- Income Before Income Taxes 26,863 6,292 7,547 9,293 10,468 1,336 5,415 1,913 (1,395) 67,732 ------------------------------------------------------------------------------------------------- Income Taxes 8,530 2,038 2,541 2,961 2,927 376 1,441 379 (469) 20,724 ------------------------------------------------------------------------------------------------- Net Income $18,333 $ 4,254 $ 5,006 $ 6,332 $ 7,541 $ 960 $ 3,974 $1,534 $ (926) $ 47,008 =================================================================================================
34 35 19. SEGMENT INFORMATION (CONTINUED)
BALANCES AT DECEMBER 31, 1998 Assets $865,974 $277,482 $413,590 $385,150 $484,965 $62,303 $302,320 $181,780 $(28,685) $2,944,879 Loans 636,189 149,487 213,360 239,032 351,695 51,749 181,374 78,320 - 1,901,206 Deposits 641,618 219,907 337,964 310,769 394,470 55,789 233,402 159,198 (20,739) 2,332,378
Operating Results for the year ended December 31, 1997 ALL PND FND RTC CNB FKND FSD SNB UB OTHER TOTAL ------------------------------------------------------------------------------------------------------------- Net Interest Income $39,106 $9,676 $16,018 $14,590 $20,507 $2,569 $10,186 $4,996 $ 790 $118,438 Provision for Loan Losses 220 450 650 330 4,870 479 180 105 - 7,284 Other Income 10,648 1,740 2,383 2,571 3,148 211 932 902 - 22,535 Depreciation & Amortization 824 219 505 494 1,000 82 439 215 149 3,927 Other Expense 19,138 5,046 9,531 7,928 15,144 1,579 5,182 3,644 791 67,983 ------------------------------------------------------------------------------------------------------------- Income Before Income Taxes 29,572 5,701 7,715 8,409 2,641 640 5,317 1,934 (150) 61,779 ------------------------------------------------------------------------------------------------------------- Income Taxes 9,559 1,808 2,520 2,604 125 128 1,436 452 106 18,738 Net Income $20,013 $3,893 $ 5,195 $ 5,805 $ 2,516 $ 512 $ 3,881 $1,482 $(256) $ 43,041 =============================================================================================================
Balances at December 31, 1997 Assets $777,707 $250,324 $401,683 $353,816 $492,315 $63,322 $276,315 $133,065 $(50,784) $2,697,763 Loans 589,044 137,567 229,658 247,663 340,88 47,107 184,777 71,711 -- 1,848,415 Deposits 578,050 211,004 330,922 301,967 384,278 56,946 218,487 115,764 (8,203) 2,189,215
Reconciliation of financial information for the reportable segments to the Corporation's consolidated totals.
1999 ------------------------------------------------------------------------------------ INTEREST DEPRECIATION OTHER INCOME INCOME EXPENSE EXPENSE TAXES ASSETS DEPOSITS ------------------------------------------------------------------------------------ Totals for reportable segments $131,676 $4,148 $72,746 $19,471 $3,151,097 $2,426,774 Elimination of intersegment items -- -- -- -- (40,904) (18,712) Parent Co. and GFC totals -not eliminated 1,086 4 2,864 (1,113) 23,170 -- Other items -- 150 -- -- -- -- ------------------------------------------------------------------------------------ Totals $132,762 $4,302 $75,610 $18,358 $3,133,363 $2,408,062 ====================================================================================
35 36 19. SEGMENT INFORMATION (CONTINUED)
1998 ------------------------------------------------------------------------------------ INTEREST DEPRECIATION OTHER INCOME INCOME EXPENSE EXPENSE TAXES ASSETS DEPOSITS ------------------------------------------------------------------------------------ Totals for reportable segments $122,655 $5,032 $67,909 $21,193 $2,973,564 $2,353,117 Elimination of intersegment items - - - - (35,764) (20,739) Parent Co. totals -not eliminated 923 - - - 7,079 - Other items - 150 2,232 (469) - - ------------------------------------------------------------------------------------ Totals $123,578 $5,182 $70,141 $20,724 $2,944,879 $2,332,378 ==================================================================================== 1997 ------------------------------------------------------------------------------------ INTEREST DEPRECIATION OTHER INCOME INCOME EXPENSE EXPENSE TAXES ASSETS DEPOSITS ------------------------------------------------------------------------------------ Totals for reportable segments $117,648 $3,778 $67,192 $18,632 $2,748,547 $2,197,418 Elimination of intersegment items - - - - (57,181) (8,203) Parent Co. totals -not eliminated 790 - 791 106 6,397 - Other items - 149 - - - - ------------------------------------------------------------------------------------ Totals $118,438 $3,927 $67,983 $18,738 $2,697,763 $2,189,215 ====================================================================================
20. PARENT COMPANY STATEMENTS The Parent Company statements should be read in conjunction with the supplemental consolidated financial statements and the information set forth below. Investments in subsidiaries are accounted for using the equity method of accounting. The effective tax rate for the Parent Company is substantially less than the statutory rate due principally to tax-exempt dividends from subsidiaries. Cash represents noninterest bearing deposits with a bank subsidiary. Net cash provided by operating activities reflects cash payments for income taxes of $657,000, $53,000, and $1,045,000 in 1999, 1998 and 1997, respectively. At December 31, 1999 and 1998, stockholders' equity reflected in the Parent Company balance sheet includes $112.3 million and $108.9 million, respectively, of undistributed earnings of the Corporation's subsidiaries which are restricted from transfer as dividends to the Corporation. 36 37 20. PARENT COMPANY STATEMENTS (CONTINUED)
Supplemental Balance Sheets DECEMBER 31 1999 1998 ----------------------------------- (Dollars in thousands) ASSETS Cash $ 37,822 $ 42,403 Investment in subsidiaries 204,903 211,613 Debentures receivable from subsidiary banks 20,000 12,000 Other investments 1,298 507 Dividends receivable from subsidiaries 25,500 21,375 Other assets 9,426 7,869 ----------------------------------- Total assets $298,949 $295,767 =================================== LIABILITIES Dividends payable $ 6,954 $ 6,081 Note payable -- 3,500 ----------------------------------- Other liabilities 1,934 449 ----------------------------------- Total liabilities 8,888 10,030 Total stockholders' equity 290,061 285,737 ----------------------------------- Total liabilities and stockholders' equity $298,949 $295,767 ===================================
37 38 20. PARENT COMPANY STATEMENTS (CONTINUED) Supplemental Statements of Income
YEAR ENDED DECEMBER 31 1999 1998 1997 ---------------------------------------------- (Dollars in thousands) INCOME Dividends from subsidiaries $36,544 $37,697 $49,371 Interest and dividends 960 923 790 Other 579 64 - ---------------------------------------------- Total income 38,083 38,684 50,161 EXPENSE Interest Expense 24 -- -- Amortization of intangibles -- 295 304 Other, net 2,695 1,937 487 ---------------------------------------------- Total expenses 2,719 2,232 791 ---------------------------------------------- Income before federal taxes and equity in undistributed earnings of subsidiaries 35,364 36,452 49,370 Federal income tax benefit (expense) 1,085 469 (106) ---------------------------------------------- Income before equity in undistributed earnings of subsidiaries 36,449 36,921 49,264 Equity in undistributed earnings of subsidiaries 10,338 10,087 (6,223) ---------------------------------------------- Net income $46,787 $47,008 $43,041 ==============================================
38 39 20. PARENT COMPANY STATEMENTS (CONTINUED) Supplemental Statements of Cash Flows
YEAR ENDED DECEMBER 31 1999 1998 1997 ---------------------------------------------- (Dollars in thousands) OPERATING ACTIVITIES Net income $ 46,787 $ 47,008 $ 43,041 Adjustments to reconcile net income to net cash provided by operating activities: Amortization - 295 304 Undistributed earnings of subsidiaries (10,338) (10,087) 6,223 (Increase) decrease in dividends receivable from subsidiaries (4,125) 10,325 (23,000) Increase in other assets (1,489) (1,224) (1,736) Increase (decrease) increase in other liabilities 1,244 (500) (259) ---------------------------------------------- Net cash provided by operating activities 32,079 45,817 24,573 INVESTING ACTIVITIES (Purchase) repayment of debenture from subsidiary bank (10,000) 10,500 (20,500) Repayment of note payable (3,500) -- -- Proceeds from note payable -- 3,500 -- Capital contribution to subsidiary (300) (3,631) - Purchase of investment securities (1,025) (423) - Other, net 2,000 (42) (1,379) ---------------------------------------------- Net cash used in investing activities (12,825) 9,904 (21,879) FINANCING ACTIVITIES Cash dividends paid (24,023) (19,359) (15,942) Proceeds from issuance of common stock 3,354 485 3,674 Purchase of treasury stock, net (3,166) (10,334) (5,635) ---------------------------------------------- Net cash used in financing activities (23,835) (29,208) (17,903) ---------------------------------------------- (Decrease) increase in cash (4,581) 26,513 (15,209) Cash at beginning of year 42,403 15,890 31,099 ---------------------------------------------- Cash at end of year $ 37,822 $ 42,403 $ 15,890 ==============================================
The following exhibits are being filed with this Current Report on Form 8-K: Exhibit 23.1 Consent of Independent Auditors Exhibit 27.1 Restated Financial Data Schedule for Dec. 31, 1999 Exhibit 27.2 Restated Financial Data Schedule for Dec. 31, 1998 Exhibit 27.3 Restated Financial Data Schedule for Dec. 31, 1997 39 40 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PARK NATIONAL CORPORATION ------------------------- (Registrant) Dated: December 21, 2000 By: /s/ C. Daniel DeLawder ------------------------ --------------------------------------- C. Daniel DeLawder President and Chief Executive Officer Dated: December 21, 2000 By: /s/ John W. Kozak ------------------------ --------------------------------------- John W. Kozak Chief Financial Officer