-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ds3MLNGdnlYAKQk+GNOzutgDRYpEYJQhazso9EH7hY3gTzXlPIG2lppz160pqxy8 P3nzJI7A1iLWd7qD4lK6dQ== 0000950152-01-501580.txt : 20010509 0000950152-01-501580.hdr.sgml : 20010509 ACCESSION NUMBER: 0000950152-01-501580 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010508 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PARK NATIONAL CORP /OH/ CENTRAL INDEX KEY: 0000805676 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 311179518 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13006 FILM NUMBER: 1625254 BUSINESS ADDRESS: STREET 1: 50 NORTH THIRD ST CITY: NEWARK STATE: OH ZIP: 43055 BUSINESS PHONE: 6143498451 MAIL ADDRESS: STREET 1: P O BOX 3500 CITY: NEWARK STATE: OH ZIP: 43058-3500 10-Q 1 l88210ae10-q.txt PARK NATIONAL CORPORATION FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to ________________________ Commission File Number 1-13006 -------------------------------------------------------- Park National Corporation - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 31-1179518 - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 50 North Third Street, Newark, Ohio 43055 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (740) 349-8451 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) N/A - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------ 14,039,289 common shares, no par value per share, outstanding at April 27, 2001. Page 1 of 23 Exhibit Index at Page 22 2 PARK NATIONAL CORPORATION CONTENTS --------
Page ---- PART I. FINANCIAL INFORMATION 3-12 Item 1. Financial Statements 3-12 Consolidated Balance Sheets as of March 31, 2001 and and December 31, 2000 (unaudited) 3 Consolidated Condensed Statements of Income for the Three Months ended March 31, 2001 and 2000 (unaudited) 4,5 Consolidated Condensed Statements of Changes in Stockholders' Equity for the Three Months ended March 31, 2001 and 2000 (unaudited) 6 Consolidated Statements of Cash Flows for the Three Months ended March 31, 2001 and 2000 (unaudited) 7,8 Notes to Consolidated Financial Statements 9-12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13-18 Item 3. Quantitative and Qualitative Disclosure About Market Risk 18 PART II. OTHER INFORMATION 19-20 Item 1. Legal Proceedings 19 Item 2. Changes in Securities and Use of Proceeds 19 Item 3. Defaults Upon Senior Securities 19 Item 4. Submission of Matters to a Vote of Security Holders 19-21 Item 5. Other Information 21 Item 6. Exhibits and Reports on Form 8-K 21-22 SIGNATURES 23 EXHIBITS
-2- 3 PARK NATIONAL CORPORATION CONSOLIDATED BALANCE SHEETS (UNAUDITED) (dollars in thousands, except per share data)
March 31, December 31, 2001 2000 - ------------------------------------------------------------------------------------------------ Assets: Cash and due from banks $ 111,107 $141,547 - ------------------------------------------------------------------------------------------------ Federal funds sold 22,500 28,030 - ------------------------------------------------------------------------------------------------ Interest bearing deposits 550 1,638 - ------------------------------------------------------------------------------------------------ Securities available-for-sale, at fair value (amortized cost of $944,110 and $919,288 at March 31, 2001 and December 31, 2000) 961,562 925,496 - ------------------------------------------------------------------------------------------------ Securities held-to-maturity, at amortized cost (fair value approximates $30,593 and $30,497 at March 31, 2001 and December 31, 2000) 30,326 30,474 - ------------------------------------------------------------------------------------------------ Loans (net of unearned interest) 2,913,643 2,956,204 - ------------------------------------------------------------------------------------------------ Allowance for possible loan losses 58,165 57,473 - ------------------------------------------------------------------------------------------------ Net loans 2,855,478 2,898,731 - ------------------------------------------------------------------------------------------------ Bank premises and equipment, net 39,946 39,616 - ------------------------------------------------------------------------------------------------ Other assets 140,516 140,013 - ------------------------------------------------------------------------------------------------ Total assets $4,161,985 $4,205,545 - ------------------------------------------------------------------------------------------------ Liabilities and Stockholders' Equity: Deposits: Noninterest bearing $ 433,490 $493,994 - ------------------------------------------------------------------------------------------------ Interest bearing 2,763,790 2,658,257 - ------------------------------------------------------------------------------------------------ Total deposits 3,197,280 3,152,251 - ------------------------------------------------------------------------------------------------ Short-term borrowings 249,311 275,699 - ------------------------------------------------------------------------------------------------ Long-term debt 222,714 290,127 - ------------------------------------------------------------------------------------------------ Other liabilities 40,703 44,819 - ------------------------------------------------------------------------------------------------ Total liabilities 3,710,008 3,762,896 - ------------------------------------------------------------------------------------------------ Stockholders' Equity: Common stock (No par value; 20,000,000 shares authorized; 14,541,730 shares issued in 2001 and 14,801,010 issued in 2000) 105,868 119,229 - ------------------------------------------------------------------------------------------------ Retained earnings 374,902 365,975 - ------------------------------------------------------------------------------------------------ Treasury stock (493,762 shares in 2001 and 676,293 shares in 2000) (40,139) (46,583) - ------------------------------------------------------------------------------------------------ Accumulated other comprehensive income, net of taxes 11,346 4,028 - ------------------------------------------------------------------------------------------------ Total stockholders' equity 451,977 442,649 - ------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $4,161,985 $4,205,545 - ------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3 4 PARK NATIONAL CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED) (dollars in thousands, except per share data) Three Months Ended March 31, -------------------- 2001 2000 - -------------------------------------------------------------------- Interest income: Interest and fees on loans $65,441 $60,261 - -------------------------------------------------------------------- Interest on: Obligations of U.S. Government, its agencies and other securities 12,849 13,712 - -------------------------------------------------------------------- Obligations of states and political subdivisions 1,997 2,150 - -------------------------------------------------------------------- Other interest income 527 363 - -------------------------------------------------------------------- Total interest income 80,814 76,486 - -------------------------------------------------------------------- Interest expense: Interest on deposits: Demand and savings deposits 6,586 6,473 - -------------------------------------------------------------------- Time deposits 22,478 19,232 - -------------------------------------------------------------------- Interest on borrowings: Short-term borrowings 2,600 3,105 - -------------------------------------------------------------------- Long-term debt 3,719 3,319 - -------------------------------------------------------------------- Total interest expense 35,383 32,129 - -------------------------------------------------------------------- Net interest income 45,431 44,357 - -------------------------------------------------------------------- Provision for loan losses 2,259 2,039 - -------------------------------------------------------------------- Net interest income after provision for loan losses 43,172 42,318 - -------------------------------------------------------------------- Other income 10,156 9,138 - -------------------------------------------------------------------- Gain (loss) on sale of securities 142 - - -------------------------------------------------------------------- Continued 4 5 PARK NATIONAL CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED) (CONTINUED) (dollars in thousands, except per share data)
Three Months Ended March 31, -------------------------------- 2001 2000 - ------------------------------------------------------------------------------------- Other expense: Salaries and employee benefits $ 14,566 $ 13,933 - ------------------------------------------------------------------------------------- Occupancy expense 1,517 1,435 - ------------------------------------------------------------------------------------- Furniture and equipment expense 1,415 1,553 - ------------------------------------------------------------------------------------- Other expense 9,472 9,026 - ------------------------------------------------------------------------------------- Total other expense 26,970 25,947 - ------------------------------------------------------------------------------------- Income before federal income taxes 26,500 25,509 - ------------------------------------------------------------------------------------- Federal income taxes 7,610 7,496 - ------------------------------------------------------------------------------------- Net income $ 18,890 $ 18,013 ===================================================================================== PER SHARE: Net income: Basic $ 1.34 $ 1.26 ===================================================================================== Diluted $ 1.34 $ 1.25 ===================================================================================== Weighted average Basic 14,094,604 14,299,948 ===================================================================================== Diluted 14,120,492 14,366,000 ===================================================================================== Cash dividends declared $ 0.71 $ 0.65 =====================================================================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5 6 PARK NATIONAL CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) (dollars in thousands, except per share data)
THREE MONTHS ENDED MARCH 31, 2001 AND 2000 Treasury Common Retained Stock Stock Earnings at Cost - ------------------------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1999 $ 121,210 $ 333,572 ($ 29,295) - ------------------------------------------------------------------------------------------------------------------------------- Net Income 18,013 - ------------------------------------------------------------------------------------------------------------------------------- Accumulated other comprehensive income, net of income taxes of ($1,489) - ------------------------------------------------------------------------------------------------------------------------------- Total comprehensive income - ------------------------------------------------------------------------------------------------------------------------------- Cash dividends on common stock: Park at $.65 per share (6,324) - ------------------------------------------------------------------------------------------------------------------------------- Cash dividends paid by U. B. Bancshares, SNB Corp. and Security Banc Corporation prior to merger (2,398) - ------------------------------------------------------------------------------------------------------------------------------- Shares issued for stock options - 1,094 shares 50 - ------------------------------------------------------------------------------------------------------------------------------- Treasury stock purchased - 86,477 shares (8,461) - ------------------------------------------------------------------------------------------------------------------------------- Treasury stock reissued for stock options - 8,377 shares 425 - ------------------------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 2000 $ 121,260 $ 342,863 ($ 37,331) =============================================================================================================================== =============================================================================================================================== BALANCE AT DECEMBER 31, 2000 $ 119,229 $ 365,975 ($ 46,583) - ------------------------------------------------------------------------------------------------------------------------------- Net Income $ 18,890 - ------------------------------------------------------------------------------------------------------------------------------- Accumulated other comprehensive income, net of income taxes of $3,940 - ------------------------------------------------------------------------------------------------------------------------------- Total comprehensive income - ------------------------------------------------------------------------------------------------------------------------------- Cash dividends on common stock: Park at $.71 per share (7,608) - ------------------------------------------------------------------------------------------------------------------------------- Cash dividends paid by Security Banc Corporation prior to merger (2,355) - ------------------------------------------------------------------------------------------------------------------------------- Retire treasury stock from Security Banc Corporation merger - 259,280 shares (13,361) 13,361 - ------------------------------------------------------------------------------------------------------------------------------- Treasury stock purchased - 85,334 shares (7,379) - ------------------------------------------------------------------------------------------------------------------------------- Treasury stock reissued for stock options - 8,585 shares 462 - ------------------------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 2001 $ 105,868 $ 374,902 ($ 40,139) ===============================================================================================================================
Accumulated THREE MONTHS ENDED MARCH 31, 2001 AND 2000 Other Comprehensive Comprehensive Income Income - -------------------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1999 ($ 16,304) - -------------------------------------------------------------------------------------------------- Net Income $ 18,013 - -------------------------------------------------------------------------------------------------------------------------- Accumulated other comprehensive income, net of income taxes of ($1,489) (2,765) (2,765) - -------------------------------------------------------------------------------------------------------------------------- Total comprehensive income $ 15,248 - --------------------------------------------------------------------------------------------------------------============ Cash dividends on common stock: Park at $.65 per share - -------------------------------------------------------------------------------------------------- Cash dividends paid by U. B. Bancshares, SNB Corp. and Security Banc Corporation prior to merger - -------------------------------------------------------------------------------------------------- Shares issued for stock options - 1,094 shares - -------------------------------------------------------------------------------------------------- Treasury stock purchased - 86,477 shares - -------------------------------------------------------------------------------------------------- Treasury stock reissued for stock options - 8,377 shares - -------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 2000 ($ 19,069) ================================================================================================== ========================================================================================================================== BALANCE AT DECEMBER 31, 2000 $ 4,028 - -------------------------------------------------------------------------------------------------- Net Income $ 18,890 - -------------------------------------------------------------------------------------------------------------------------- Accumulated other comprehensive income, net of income taxes of $3,940 7,318 7,318 - -------------------------------------------------------------------------------------------------------------------------- Total comprehensive income $ 26,208 - --------------------------------------------------------------------------------------------------------------============ Cash dividends on common stock: Park at $.71 per share - -------------------------------------------------------------------------------------------------- Cash dividends paid by Security Banc Corporation prior to merger - -------------------------------------------------------------------------------------------------- Retire treasury stock from Security Banc Corporation merger - 259,280 shares - -------------------------------------------------------------------------------------------------- Treasury stock purchased - 85,334 shares - -------------------------------------------------------------------------------------------------- Treasury stock reissued for stock options - 8,585 shares - -------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 2001 $ 11,346 ==================================================================================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6 7 PARK NATIONAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (dollars in thousands)
Three Months Ended March 31, ----------------------------- 2001 2000 - ---------------------------------------------------------------------------------------------------- Operating activities: Net income $ 18,890 $ 18,013 - ---------------------------------------------------------------------------------------------------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and accretion 772 1,161 - ---------------------------------------------------------------------------------------------------- Provision for loan losses 2,259 2,039 - ---------------------------------------------------------------------------------------------------- Amortization of the excess of cost over net assets of banks purchased 988 993 - ---------------------------------------------------------------------------------------------------- Realized investment security gain (142) 0 - ---------------------------------------------------------------------------------------------------- Changes in assets and liabilities: Increase in other assets (5,417) (1,113) - ---------------------------------------------------------------------------------------------------- Increase (decrease) in other liabilities 3,554 (15,897) - ---------------------------------------------------------------------------------------------------- Net cash provided from operating activities 20,904 5,196 ----------------------------------------------------------------------------------------- Investing activities: Proceeds from sales of: Available-for-sale securities 24,968 0 - ---------------------------------------------------------------------------------------------------- Proceeds from maturity of: Available-for-sale securities 92,191 29,915 - ---------------------------------------------------------------------------------------------------- Held-to-maturity securities 148 57 - ---------------------------------------------------------------------------------------------------- Purchases of: Available-for-sale securities (141,641) (22,341) - ---------------------------------------------------------------------------------------------------- Net decrease (increase) in interest bearing deposits with other banks 1,088 (110) - ---------------------------------------------------------------------------------------------------- Net decrease (increase) in loans 41,245 (32,969) - ---------------------------------------------------------------------------------------------------- Purchases of premises and equipment, net (1,551) (553) - ---------------------------------------------------------------------------------------------------- Net cash provided from (used by) investing activities 16,448 (26,001) ----------------------------------------------------------------------------------------
Continued 7 8 PARK NATIONAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED) (dollars in thousands)
Three Months Ended March 31, ----------------------- 2001 2000 - ----------------------------------------------------------------------------------- Financing activities: Net increase in deposits $ 45,029 $ 75,241 - ----------------------------------------------------------------------------------- Net decrease in short-term borrowings (26,388) (164,143) - ----------------------------------------------------------------------------------- Exercise of stock options 0 50 - ----------------------------------------------------------------------------------- Purchase of treasury stock, net (6,917) (8,036) - ----------------------------------------------------------------------------------- Long-term debt issued 80,000 125,000 - ----------------------------------------------------------------------------------- Repayment of long-term debt (147,413) (19,665) - ----------------------------------------------------------------------------------- Cash dividends paid (17,633) (15,676) - ----------------------------------------------------------------------------------- Net cash used by financing activities (73,322) (7,229) ------------------------------------------------------------------------ Decrease in cash and cash equivalents (35,970) (28,034) ------------------------------------------------------------------------ Cash and cash equivalents at beginning of year 169,577 185,751 - ----------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 133,607 $ 157,717 ======================================================================== Supplemental disclosures of cash flow information: Cash paid for: Interest $ 34,897 $ 31,735 ------------------------------------------------------------ Income taxes $ 0 $ 0 ------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8 9 PARK NATIONAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Three Months Ended March 31, 2001 and 2000. Note 1 - BASIS OF PRESENTATION The consolidated financial statements included in this report have been prepared by Park National Corporation (the "Registrant", "Corporation", "Company", or "Park") without audit. In the opinion of management, all adjustments (consisting solely of normal recurring accruals) necessary for a fair presentation of results of operations for the interim periods included herein have been made. The results of operations for the period ended March 31, 2001 are not necessarily indicative of the operating results to be anticipated for the fiscal year ended December 31, 2001. The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q, and therefore, do not include all information and footnotes necessary for a fair presentation of the balance sheets, condensed statements of income, condensed statements of changes in stockholders' equity and statements of cash flows in conformity with generally accepted accounting principles. These financial statements should be read in conjunction with the financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2000. Certain amounts in 2000 have been reclassified to conform to the financial statement presentation used for 2001. Park does not have any off-balance sheet derivative financial instruments such as interest-rate swap agreements. Note 2 - ACQUISITIONS On March 23, 2001, Park merged with Security Banc Corporation, a $995 million bank holding company headquartered in Springfield, Ohio in a transaction accounted for as a pooling-of-interests. Park issued approximately 3,350,000 shares of common stock to the stockholders of Security Banc Corporation based upon an exchange ratio of .284436 shares of Park common stock for each outstanding share of Security Banc Corporation common stock. The three financial institution subsidiaries of Security Banc Corporation (The Security National Bank and Trust Co., The Citizens National Bank of Urbana, and The Third Savings and Loan Company) are being operated as separate subsidiaries by Park. On April 30, 2000, Park merged with U.B. Bancshares, Inc., a $180 million one bank holding company headquartered in Bucyrus, Ohio in a transaction accounted for as a pooling-of-interests. 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., the wholly owned subsidiary of U.B. Bancshares, Inc., is being operated as a separate banking subsidiary by Park. Park also merged with SNB Corp., a $300 million one bank holding company headquartered in -9- 10 Greenville, Ohio, on April 30, 2000 in a transaction accounted for as a pooling-of-interest. 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, the wholly owned subsidiary of SNB Corp., is being operated as a separate banking subsidiary by Park. The historical financial statements of the Corporation have been restated to show Security Banc Corporation, U.B. Bancshares, SNB Corp., and Park on a combined basis. Separate results of operations for Park, Security Banc Corporation, U.B. Bancshares, Inc. and SNB Corp. follow: - ----------------------------------------------------------------- Three Months Ended March 31, 2000 - ----------------------------------------------------------------- (Dollars in Thousands) (except per share data) Net Interest Income - ----------------------------------------------------------------- Park $29,510 - ----------------------------------------------------------------- Security Banc Corporation 10,368 - ----------------------------------------------------------------- U.B. Bancshares, Inc. 1,706 - ----------------------------------------------------------------- SNB Corp. 2,773 - ----------------------------------------------------------------- Combined $44,357 ======= - ----------------------------------------------------------------- - ----------------------------------------------------------------- Net Income - ----------------------------------------------------------------- Park $12,434 - ----------------------------------------------------------------- Security Banc Corporation 4,149 - ----------------------------------------------------------------- U.B. Bancshares, Inc. 427 - ----------------------------------------------------------------- SNB Corp. 1,003 - ----------------------------------------------------------------- Combined $18,013 ======= - ----------------------------------------------------------------- - ----------------------------------------------------------------- Basic Earnings Per Share - ----------------------------------------------------------------- Park $1.28 - ----------------------------------------------------------------- Security Banc Corporation .34 - ----------------------------------------------------------------- U.B. Bancshares, Inc. .77 - ----------------------------------------------------------------- SNB Corp. 6.44 - ----------------------------------------------------------------- Combined $1.26 ===== - ----------------------------------------------------------------- - ----------------------------------------------------------------- Diluted Earnings Per Share - ----------------------------------------------------------------- Park $1.27 - ----------------------------------------------------------------- Security Banc Corporation .34 - ----------------------------------------------------------------- U.B. Bancshares, Inc. .75 - ----------------------------------------------------------------- SNB Corp. 6.44 - ----------------------------------------------------------------- Combined $1.25 ===== - ----------------------------------------------------------------- Note 3 - ALLOWANCE FOR POSSIBLE LOAN LOSSES The allowance for possible loan losses is that amount believed adequate to absorb -10- 11 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 economic conditions. A provision for loan losses is charged to operations based on management's periodic evaluation of these and other pertinent factors. Allowance for Possible Loan Losses ---------------------------------- - ---------------------------------------------------------------------------- (In Thousands) - ---------------------------------------------------------------------------- 2001 2000 - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- Beginning January 1 $57,473 $52,140 - ---------------------------------------------------------------------------- Provision for loan losses 2,259 2,039 - ---------------------------------------------------------------------------- Losses charged to the reserve (3,206) (2,735) - ---------------------------------------------------------------------------- Recoveries 1,639 1,274 ------- ------- - ---------------------------------------------------------------------------- Balance March 31, $58,165 $52,718 ======= ======= - ---------------------------------------------------------------------------- Note 4 - EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share for the three month periods ended March 31, 2001 and 2000.
- ---------------------------------------------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) - ---------------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED - ---------------------------------------------------------------------------------------------------------------------- MARCH 31, 2001 2000 - ---------------------------------------------------------------------------------------------------------------------- NUMERATOR: - ---------------------------------------------------------------------------------------------------------------------- NET INCOME $18,890 $18,013 - ---------------------------------------------------------------------------------------------------------------------- DENOMINATOR: - ---------------------------------------------------------------------------------------------------------------------- DENOMINATOR FOR BASIC EARNINGS PER SHARE (WEIGHTED-AVG. SHARES) 14,094,604 14,299,948 - ---------------------------------------------------------------------------------------------------------------------- EFFECT OF DILUTIVE SECURITIES 25,888 66,052 - ---------------------------------------------------------------------------------------------------------------------- DENOMINATOR FOR DILUTED EARNINGS PER SHARE (ADJUSTED WEIGHTED-AVERAGE SHARES AND 14,120,492 14,366,000 ASSUMED CONVERSIONS) - ---------------------------------------------------------------------------------------------------------------------- EARNINGS PER SHARE: - ---------------------------------------------------------------------------------------------------------------------- BASIC EARNINGS PER SHARE $1.34 $1.26 - ---------------------------------------------------------------------------------------------------------------------- DILUTED EARNINGS PER SHARE $1.34 $1.25 - ----------------------------------------------------------------------------------------------------------------------
-11- 12 Note 5 - SEGMENT INFORMATION The Corporation is a multi-bank holding company headquartered in Newark, Ohio. The operating segments for the Corporation are its financial institution subsidiaries. The Corporation's financial institution subsidiaries are The Park National Bank (PNB), The Richland Trust Company (RTC), Century National Bank (CNB), The First-Knox National Bank of Mount Vernon (FKNB), United Bank N.A. (UB), Second National Bank (SNB), The Security National Bank and Trust Co. (SEC), The Citizens National Bank of Urbana (CIT), and The Third Savings and Loan Company (TSL).
- --------------------------------------------------------------------------------------------------------------------------------- Operating Results for the Three Months Ended March 31, 2001 (In Thousands) - --------------------------------------------------------------------------------------------------------------------------------- PNB RTC CNB FKNB UB SNB SEC CIT TSL All Other Total - --------------------------------------------------------------------------------------------------------------------------------- Net Interest $14,141 $4,442 $4,431 $6,918 $1,708 $2,807 $6,395 $1,633 $1,730 $1,226 $45,431 Income - --------------------------------------------------------------------------------------------------------------------------------- Provision for 720 270 150 444 60 75 300 135 75 30 2,259 Loan Losses - --------------------------------------------------------------------------------------------------------------------------------- Other Income 4,409 703 890 1,332 303 401 1,635 403 115 107 10,298 - --------------------------------------------------------------------------------------------------------------------------------- Other Expense 8,432 2,701 2,410 3,672 1,439 1,763 3,567 1,083 1,022 881 26,970 - --------------------------------------------------------------------------------------------------------------------------------- Net Income $6,516 $1,444 $1,846 $3,071 $396 $1,016 $2,870 $562 $446 $723 $18,890 - --------------------------------------------------------------------------------------------------------------------------------- Balances at March 31, 2001 - --------------------------------------------------------------------------------------------------------------------------------- Assets 1,338,720 441,923 408,111 609,875 175,424 302,933 655,677 172,741 198,889 (142,308) $4,161,985 - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- Operating Results for the Three Months Ended March 31, 2000 (In Thousands) - --------------------------------------------------------------------------------------------------------------------------------- PNB RTC CNB FKNB UB SNB SEC CIT TSL All Other Total - --------------------------------------------------------------------------------------------------------------------------------- Net Interest $13,703 $4,606 $4,224 $6,469 $1,730 $2,746 $6,538 $1,640 $1,774 $927 $44,357 Income - --------------------------------------------------------------------------------------------------------------------------------- Provision for 930 225 120 339 30 45 300 -- 30 20 2,039 Loan Losses - --------------------------------------------------------------------------------------------------------------------------------- Other Income 4,124 579 785 1,218 191 205 1,517 292 137 90 9,138 - --------------------------------------------------------------------------------------------------------------------------------- Other Expense 8,019 2,629 2,387 3,675 1,327 1,546 3,654 1,106 1,021 583 25,947 - --------------------------------------------------------------------------------------------------------------------------------- Net Income $6,219 $1,547 $1,722 $2,610 $423 $1,010 $2,811 $571 $518 $582 $18,013 - --------------------------------------------------------------------------------------------------------------------------------- Balances at March 31, 2000 - --------------------------------------------------------------------------------------------------------------------------------- Assets 1,253,772 444,846 393,330 594,096 178,507 301,458 625,031 165,403 190,433 (44,980) $4,101,896 - ---------------------------------------------------------------------------------------------------------------------------------
The operating results of the Parent Company and Guardian Finance Company (GFC) (all other) are used to reconcile the segment totals to the consolidated income statements for the quarters ended March 31, 2001 and 2000. The reconciling amounts for consolidated total assets for both of the quarters ended March 31, 2001 and 2000 consist of the elimination of intersegment borrowings, and the assets of the Parent Company and GFC which are not eliminated. -12- 13 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This discussion and analysis by management contains forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. These forward-looking statements involve significant risks and uncertainties including changes in general economic and financial market conditions and Park's ability to execute its business plans. Although Park believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially. Undue reliance should not be placed on the forward-looking statements, which speak only as of the date hereof. Park does not undertake any obligation to publicly update any forward-looking statement. Comparison of Results of Operations for the Quarters Ended March 31, 2001 and 2000. NET INTEREST INCOME The Corporation's principal source of earnings is net interest income, the difference between total interest income and total interest expense. Net interest income increased by $1.1 million or 2.4% to $45.43 million for the three months ended March 31, 2001 compared to $44.36 million for the first quarter of 2000. The following table compares the average balance and tax equivalent yield/cost for interest earning assets and interest bearing liabilities for the first quarter of 2001 with the same quarter in 2000.
- ------------------------------------------------------------------------------------------------- Three Months Ended March 31, (In Thousands) - ------------------------------------------------------------------------------------------------- 2001 2000 - ------------------------------------------------------------------------------------------------- Average Tax Average Tax Balance Equivalent Balance Equivalent % % - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- Loans $2,929,017 9.10% $2,789,918 8.72% - ------------------------------------------------------------------------------------------------- Taxable Investments 772,719 6,74% 832,309 6.63% - ------------------------------------------------------------------------------------------------- Tax Exempt Investments 164,903 6.93% 178,290 7.01% - ------------------------------------------------------------------------------------------------- Federal Funds Sold 36,460 5.87% 26,076 5.60% - ------------------------------------------------------------------------------------------------- Interest Earning Assets $3,903,099 8.51% $3,826,593 8.16% - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- Interest Bearing Deposits $2,697,633 4.37% $2,662,696 3.88% - ------------------------------------------------------------------------------------------------- Short-term Borrowings 253,713 4.16% 246,008 5.08% - ------------------------------------------------------------------------------------------------- Long-term Debt 274,242 5.50% 267,462 4.99% - ------------------------------------------------------------------------------------------------- Interest Bearing Liabilities $3,225,588 4.45% $3,176,166 4.07% - ------------------------------------------------------------------------------------------------- Excess Interest Earning Assets $677,511 4.06% $650,427 4.09% - ------------------------------------------------------------------------------------------------- Net Interest Margin 4.83% 4.79% - -------------------------------------------------------------------------------------------------
Average interest earning assets increased by $76 million or 2.0% to $3,903 million for the quarter ended March 31, 2001 compared to the same quarter in 2000. Average loan totals increased by $139 million or 5.0% to $2,929 million for the first quarter of 2001 compared -13- 14 to the first quarter in 2000. The demand for commercial, commercial real estate, and consumer loans and leases secured by automobiles decreased sharply during the first quarter of 2001 compared to the same period in 2000. The average yield on the loan portfolio was 9.10% for the first quarter of 2001 compared to 8.72% for the same period in 2000. The average prime lending rate for Park's affiliate banks was 8.62% for the first quarter of 2001 compared to 8.69% for the same period in 2000. The Federal Reserve decreased the federal funds rate by 1.50% during the first quarter of 2001 and by another .50% on April 18, 2001 to 4.50%. Park's prime lending rate was decreased by the same magnitude at the same time. Approximately 25% of Park's loan portfolio reprices based on the prime lending rate. The yield on Park's loan portfolio is expected to decrease over the remainder of the year as variable rate loans reprice lower and new loan originations have an average rate that is lower than the current loan portfolio rate. Average investment securities including federal funds sold decreased by $63 million or 6.0% to $974 million for the first quarter of 2001 compared to the same quarter in 2000. The yield on taxable investment securities increased to 6.74% in 2001 compared to 6.63% in 2000 and the yield on tax exempt securities decreased to 6.93% in 2001 compared to 7.01% in 2000. The average maturity or repricing of the investment portfolio was approximately 3.9 years at March 31, 2001 compared to 5.5 years at March 31, 2000. Average interest bearing liabilities increased by $49 million or 1.6% to $3,226 million for the quarter ended March 31, 2001 compared to the same quarter in 2000. Average interest bearing deposits increased by $35 million or 1.3% to $2,698 million for the first quarter of 2001 compared to the same period in 2000. Average short-term borrowings increased by $8 million or 3.1% to $254 million and average long-term debt increased by $7 million to $274 million for the first quarter of 2001 compared to the same period in 2000. Long-term debt consists of Federal Home Loan Bank advances. The average cost of interest bearing liabilities increased by .38% to 4.45% in 2001 compared to 4.07% in 2000. The average cost of interest bearing deposits increased by .49% to 4.37% in 2001 compared to 3.88% in 2000. The average cost of total borrowing decreased by .20% to 4.85% in 2001 compared to 5.05% in 2000. The cost of Park's interest bearing liabilities is expected to decrease over the remainder of the year as the cost of new certificates of deposit is lower than the current portfolio rate and rates paid on other deposit accounts have been lowered. The increase in net interest income of $1.1 million or 2.4% to $45.4 million for the quarter ended March 31, 2001 was primarily due to the 2.0% increase in interest earning assets. The net interest spread (the difference between the yield on interest earning assets and the cost of interest bearing liabilities) decreased slightly by .03% to 4.06% in 2001 compared to 4.09% in 2000. The tax equivalent net interest margin (defined as net interest income divided by average interest earning assets) increased by .04% to 4.83% for the first quarter of 2001 compared to 4.79% in 2000. PROVISION FOR LOAN LOSSES The provision for loan losses increased by $220,000 or 10.8% to $2.2 million for the quarter ended March 31, 2001 compared to $2.0 million for the same period in 2000. Net charge-offs were $1.6 million in 2001 compared to $1.5 million in 2000. Nonperforming loans, defined as loans that are 90 days past due, renegotiated loans, and nonaccrual loans were $21.2 million or -14- 15 .73% of loans at March 31, 2001 compared to $20.7 million or .70% of loans at December 31, 2000 and $10.7 million or .38% of loans at March 31, 2000. The reserve for loan losses as a percentage of outstanding loans was 2.00% at March 31, 2001 compared to 1.94% at December 31, 2000 and 1.87% at March 31, 2000. See Footnote 3 for a discussion of the factors considered by management in determining the provision for loan losses. NONINTEREST INCOME Noninterest income increased by $1.0 million or 11.1% to $10.2 million for the first quarter of 2001 compared to $9.1 million for the first quarter of 2000. The following table summarizes the change in noninterest income.
--------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED MARCH 31, (in thousands) --------------------------------------------------------------------------------------------------------- 2001 2000 Change --------------------------------------------------------------------------------------------------------- Fees from Fiduciary Activities $2,162 $2,051 $111 --------------------------------------------------------------------------------------------------------- Service Charges on Deposit Accounts 3,156 2,964 192 --------------------------------------------------------------------------------------------------------- Other Service Income 1,552 1,260 292 --------------------------------------------------------------------------------------------------------- Other Income 3,286 2,863 423 --------------------------------------------------------------------------------------------------------- Total $10,156 $9,138 $1,018 ---------------------------------------------------------------------------------------------------------
The increase in fee income from fiduciary activities was primarily due to an increase in assets under management for new trust department customers. The increase in service charges on deposit accounts was due to increases in the number of transaction accounts and to fee increases. The increase in fees earned from other service income was primarily due to an increase in the fee income earned from the origination and sale into the secondary market of fixed rate mortgage loans due to lower interest rates. The fee income from the origination and sale of fixed rate mortgage loans is expected to increase during the second quarter. The increase in other fee income was primarily due to increases in check card and ATM transactions. GAIN ON SALE OF SECURITIES The gain on sale of securities of $142,000 for the first quarter of 2001 was due to the sale of United States Treasury notes with the proceeds reinvested in Agency mortgage-backed securities. The Agency mortgage-backed securities yield 1.70% more than the give-up yield on the Treasury notes. OTHER EXPENSE Total other expense increased by $1.0 million or 3.9% to $26.97 million for the three months -15- 16 ended March 31, 2001 compared to $25.95 million for the same period in 2000. Salaries and employee benefits expense increased by $633,000 or 4.5% to $14.6 million for the first quarter of 2001 compared to the same period in 2000. Salaries increased by $415,000 or 3.8% and benefits expense increased by $218,000 or 7.6% in 2001 compared to 2000. Full time equivalent employees were 1,525 at March 31, 2001 and 1,522 at March 31, 2000. FEDERAL INCOME TAXES Federal income tax expense was $7.6 million for the first quarter of 2001 compared to $7.5 million for the same period in 2000. The ratio of federal income tax expense to income before taxes was approximately 28.7% in 2001 and 29.4% in 2000. The primary difference between the effective federal income tax rate and the statutory rate of 35% is due to tax-exempt interest income from state and municipal loans and investments, and low income housing tax credits. NET INCOME Net income increased by $877,000 or 4.9% to $18.9 million for the three months ended March 31, 2001 compared to $18.0 million for the first quarter of 2000. The annualized, first quarter net income to average assets ratio (ROA) was 1.85% in 2001 compared to 1.78% in 2000. The annualized, first quarter net income to average equity ratio (ROE) was 17.33% in 2001 compared to 17.97% in 2000. Diluted earnings per share increased by 7.2% to $1.34 for the first quarter of 2001 compared to $1.25 for the same quarter in 2000. -16- 17 COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2001 AND DECEMBER 31, 2000 CHANGES IN FINANCIAL CONDITION AND LIQUIDITY Total assets decreased by $44 million or 1.0% to $4,162 million at March 31, 2001 compared to $4,206 million at December 31, 2000. Total loans decreased by $43 million or 1.4% to $2,914 million as demand for commercial loans, commercial real estate loans, and consumer loans and leases secured by automobiles was weak during the first quarter. Due to the drop in interest rates during the quarter, fixed rate mortgage loan volume increased. However, the fixed rate mortgage loans are sold in the secondary market and as a result do not increase the loan portfolio, but the related fee income does increase other service income. Growth in the loan portfolio is expected to be slow during the second quarter as loan demand continues to be weak. Total liabilities decreased by $53 million or 1.4% to $3,710 million at March 31, 2001 compared to $3,763 million at December 31, 2000. Total borrowed money decreased by $94 million or 16.6% to $472 million at March 31, 2001 compared to $566 million at December 31, 2000. Total deposits increased by $45 million or 1.4% to $3,197 million at March 31, 2001 compared to $3,152 million at year-end 2000. Borrowed money was repaid with excess available funds which resulted from the poor loan demand during the first quarter. Effective liquidity management ensures that the cash flow requirements of depositors and borrowers, as well as the operating cash needs of the Corporation, are met. Funds are available from a number of sources, including the securities portfolio, the core deposit base, Federal Home Loan Bank borrowings, and the capability to securitize or package loans for sale. The Corporation's loan to asset ratio was 70.0% at March 31, 2001 compared to 70.3% at December 31, 2000 and 68.6% at March 31, 2000. Cash and cash equivalents totaled $134 million at March 31, 2001 compared to $170 million at December 31, 2000 and $158 million at March 31, 2000. The present funding sources provide more than adequate liquidity for the Corporation to meet its cash flow needs. CAPITAL RESOURCES Stockholders' equity at March 31, 2001 was $452 million or 10.86% of total assets compared to $443 million or 10.53% of total assets at December 31, 2000 and $408 million or 9.94% of total assets at March 31, 2000. Financial institution regulators have established guidelines for minimum capital ratios for banks, thrifts, and bank holding companies. The net unrealized gain or loss on available-for-sale securities is generally not included in computing regulatory capital. The minimum leverage capital ratio (defined as stockholders' equity less intangible assets divided by tangible assets) is -17- 18 4% and the well capitalized ratio is greater than or equal to 5%. Park's leverage ratio was 10.10% at March 31, 2001 and 9.90% at December 31, 2000. The minimum Tier I risk-based capital ratio (defined as leverage capital divided by risk-adjusted assets) is 4% and the well capitalized ratio is greater than or equal to 6%. Park's Tier I risk-based capital ratio was 15.66% at March 31, 2001 and 15.00% at December 31, 2000. The minimum total risk-based capital ratio (defined as leverage capital plus supplemental capital divided by risk-adjusted assets) is 8% and the well capitalized ratio is greater than or equal to 10%. Park's total risk-based capital ratio was 16.92% at March 31, 2001 and 16.26% at December 31, 2000. The financial institution subsidiaries of Park each met the well capitalized capital ratio guidelines at March 31, 2001. The following table indicates the capital ratios for each subsidiary and Park at March 31, 2001:
TIER I TOTAL LEVERAGE RISK-BASED RISK-BASED -------- ---------- ---------- - -------------------------------------------------------------------------------------- Park National Bank 6.03% 8.36% 11.77% - -------------------------------------------------------------------------------------- Richland Trust Company 6.68% 11.58% 12.85% - -------------------------------------------------------------------------------------- Century National Bank 6.28% 10.11% 12.60% - -------------------------------------------------------------------------------------- First-Knox National Bank 6.37% 9.19% 12.81% - -------------------------------------------------------------------------------------- Second National Bank 5.94% 9.01% 12.76% - -------------------------------------------------------------------------------------- United Bank, N.A. 6.24% 10.65% 11.89% - -------------------------------------------------------------------------------------- Security National Bank 6.76% 10.36% 15.08% - -------------------------------------------------------------------------------------- Citizens National Bank 7.16% 12.09% 16.80% - -------------------------------------------------------------------------------------- Third Savings and Loan 9.31% 11.60% 16.11% - -------------------------------------------------------------------------------------- Park National Corporation 10.10% 15.66% 16.92% - -------------------------------------------------------------------------------------- Minimum Capital Ratio 4.00% 4.00% 8.00% - -------------------------------------------------------------------------------------- Well Capitalized Ratio 5.00% 6.00% 10.00% - --------------------------------------------------------------------------------------
At the April 16, 2001 Park National Corporation Board of Director's meeting, a cash dividend of $.71 per share was declared payable on June 8, 2001 to stockholders of record on May 25, 2001. ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See Footnote 1 for disclosure that Park does not have any off-balance sheet derivative financial instruments. -18- 19 PARK NATIONAL CORPORATION PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS Park National Corporation is not engaged in any legal proceedings of a material nature at the present time. Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Not applicable Item 3. DEFAULTS UPON SENIOR SECURITIES Not applicable Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS I. Special Meeting of Shareholders - March 12, 2001: a. On March 12, 2001, Park National Corporation held a Special Meeting of Shareholders to consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of November 20, 2000 (the "Security Merger Agreement"), between Park and Security Banc Corporation ("Security"). At the close of business on the January 29, 2001 record date, there were 10,771,952 Park common shares outstanding and entitled to vote. At the meeting, 9,407,358 or 87.33% of the outstanding Park common shares entitled to vote were represented by proxy or in person. b. No separate election of directors occurred at the Special Meeting of Shareholders. However, pursuant to the terms of the Security Merger Agreement, following the merger of Security into Park, Harry O. Egger became a director of Park with a term expiring in 2002. c. The proposal to adopt the Security Merger Agreement was passed with 85.24% of the issued and outstanding Park common shares voting for the proposal. The affirmative vote of the holders of at least two-thirds of the issued and outstanding Park common shares was required for adoption. The vote was as follows: 9,182,513 For 177,539 Against 47,306 Abstain and Broker Non-Votes --------- ------- ------
d. Not Applicable -19- 20 II. Annual Meeting of Shareholders - April 16, 2001: a. On April 16, 2001 Park National Corporation held its Annual Meeting of Shareholders. At the close of business on the February 23, 2001 record date, 10,735,013 Park National Corporation common shares were outstanding and entitled to vote. At the meeting, 9,862,310 or 91.9% of the outstanding common shares entitled to vote were represented by proxy or in person. b. Directors elected at the Annual Meeting for a three year term:
Maureen Buchwald 9,712,753 For 149,557 Withheld -0- Abstain and Broker Non-Votes ---------- ------- --- D.C. Fanello 9,799,213 For 63,097 Withheld -0- Abstain and Broker Non-Votes --------- ------ --- Phillip T. Leitnaker 9,795,907 For 66,403 Withheld -0- Abstain and Broker Non-Votes --------- ------ ---- J. Gilbert Reese 9,789,572 For 72,738 Withheld -0- Abstain and Broker Non-Votes --------- ------ --- Rick R. Taylor 9,804,797 For 57,513 Withheld -0- Abstain and Broker Non-Votes --------- ------- ---
Directors whose term of office continued after the Annual Meeting: James J. Cullers C. Daniel DeLawder Harry O. Egger R. William Geyer Howard E. LeFevre William T. McConnell James A. McElroy John J. O'Neill William A. Phillips John L. Warner Phillip H. Jordan, Jr. resigned as a director effective April 16, 2001. c. See Item II (b) for the voting results for directors. 1. Proposal to amend the Park National Corporation 1995 Incentive Stock Option Plan, to increase the number of common shares -20- 21 available under that Plan from 735,000 to 1,200,000. The proposal passed with 88.8% of the issued and outstanding Park common shares voting for the proposal. The affirmative vote of 75% of the issued and outstanding Park common shares were required for passage. 9,529,129 For 227,092 Against 106,089 Abstain and Broker Non-Votes --------- ------- -------
d. Not applicable Item 5. OTHER INFORMATION Not applicable. Item 6. EXHIBITS AND REPORTS ON FORM 8-K a. EXHIBITS See page 22 for Index to Exhibits b. REPORTS ON FORM 8-K On March 28, 2001, Park filed a Current Report on Form 8-K, dated March 28, 2001, in order to report the consummation of the merger with Security Banc Corporation effective March 23, 2001. -21- 22 INDEX TO EXHIBITS ----------------- EXHIBIT NO. DESCRIPTION - ---------- ----------- 2 Agreement and Plan of Merger (excluding exhibits and schedules), dated as of November 20, 2000, by and between Park National Corporation ("Registrant") and Security Banc Corporation [incorporated herein by reference to Exhibit 2.1 to Registrant's Pre-Effective Amendment No. 1 to Registration Statement on Form S-4 filed January 29, 2001 (Registration No. 333-53038)] 10(a) Security Banc Corporation 1987 Stock Option Plan [incorporated herein by reference to Exhibit 10(a) to Registrant's Registration Statement on Form S-8 filed April 23, 2001 (Registration No. 333-59378)] 10(b) Security Banc Corporation 1995 Stock Option Plan [incorporated herein by reference to Exhibit 10(b) to Registrant's Registration Statement on Form S-8 filed April 23, 2001 (Registration No. 33-59378)] 10(c) Security Banc Corporation 1998 Stock Option Plan [incorporated herein by reference to Exhibit 10(c) to Registrant's Registration Statement on Form S-8 filed April 23, 2001 (Registration No. 333-59378)] 10(d) Park National Corporation 1995 Incentive Stock Option Plan (reflects amendments and share dividends through April 16, 2001) [incorporated herein by reference to Exhibit 10 to Registrant's Registration Statement on Form S-8 filed April 23, 2001 (Registration No. 333-59360)] 10(e) Employment Agreement, made and entered into as of December 22, 1999, and the Amendment thereto, dated March 23, 2001, between The Security National Bank and Trust Co. (also known as Security National Bank and Trust Co.) and Harry O. Egger -22- 23 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 DATE: May 8, 2001 BY: /S/C. Daniel DeLawder ----------- ---------------------- C. Daniel DeLawder President and Chief Executive Officer DATE: May 8, 2001 BY: /S/John W. Kozak ----------- ---------------- John W. Kozak Chief Financial Officer -23- EX-10.E 2 l88210aex10-e.txt EXHIBIT 10(E) 1 Exhibit No. 10e EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of December 22, 1999, by and between SECURITY NATIONAL BANK AND TRUST CO. (hereinafter referred to as the "Bank") and Harry O. Egger (The "Employee"). WHEREAS, the Employee will serve as Chairman of the Board of Directors and Chief Executive Officer; and WHEREAS, the Board of Directors of the Bank recognizes that, as is the case with publicly held corporations generally, the possibility of a change in control of Security Banc Corporation (the "Holding Company"), the holding company of the Bank, may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure of distraction of key management personnel to the detriment of the Bank, the Holding Company and its stockholders; and WHEREAS, the Board of Directors of the Bank believes it is in the best interests of the Bank to enter into this Agreement with the Employee in order to assure continuity of management of the Bank and to reinforce and encourage the continued attention and dedication of the Employee to his assigned duties without distraction in the face of potentially disruptive circumstances arising from the possibility of a change in control of the Holding Company, although no such change is now contemplated; and WHEREAS, on November 16, 1999, the Board of Directors of the Bank approved and authorized the execution of this Agreement with the Employee to take effect as stated in Section 4 hereof; NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements of the parties herein contained, it is AGREED as follows: 1. EMPLOYMENT. The Employee shall be employed as Chairman of the Board of Directors and Chief Executive Officer of the Bank. As Chairman of the Board of Directors and Chief Executive Officer, Employee shall render administrative and management services as are customarily performed by persons situated in similar executive capacities, and shall have other powers and duties as may from time to time be prescribed by the Board of Directors, provided that such duties are consistent with the Employee's position. The Employee, as top officer shall provide leadership, broad direction and guidance of Corporation and affiliate bank activities to ensure profitability, fair treatment and development of employees and effective community relations. The Employee shall continue to devote his best efforts and substantially all his business time and attention to the business and affairs of the Bank and its Holding Company and affiliated companies. 2. COMPENSATION. (a) SALARY. The Bank agrees to pay the Employee during the term of this Agreement a salary established by the Board of Directors. The salary hereunder as of the Commencement Date (as defined in Section 4 hereof) shall be at least the Employee's stated salary. The salary provided for herein shall be payable in accordance with the practices of the 2 Bank, provided, however, that no such salary is required to be paid by the terms of this Agreement in respect of any month or portion thereof subsequent to the termination of this Agreement and provided further, that the amount of such salary shall be reviewed by the Bank not less often than annually and may be increased (but not decreased) from time to time in such amounts as the Bank in its discretion may decide, subject to the customary withholding tax and other employee taxes as required with respect to compensation paid by a corporation to an employee. (b) DISCRETIONARY BONUSES. The Employee shall be entitled to participate in an equitable manner with all other executive officers of the Bank in discretionary bonuses as authorized and declared by the Board of Directors of the Bank to its executive employees. No other compensation provided for in this Agreement shall be deemed a substitute for the Employee's right to participate in such bonuses when and as declared by the Board of Directors, except for restrictions on bonuses contained in 3(c) below. (c) EXPENSES. During the term of his employment hereunder, the Employee shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by him (in accordance with policies and procedures at least as favorable to the Employee as those presently applicable to the senior executive officers of the Bank) in performing services hereunder, provided that the Employee properly accounts therefor in accordance with Bank policy. 3. BENEFITS. (a) PARTICIPATION IN RETIREMENT AND EMPLOYEE BENEFIT PLANS. The Employee shall be entitled while employed hereunder to participate in, and receive benefits under, all plans relating to stock options, stock purchases, pension, profit-sharing, group life insurance, medical coverage, education, cash or stock bonuses, and other retirement or employee benefits or combinations thereof, that are now or hereafter maintained for the benefit of the Bank's executive employees or for its employees generally. Normal retirement is defined as age sixty-five (65). (b) FRINGE BENEFITS. The Employee shall be eligible while employed hereunder to participate in, and receive benefits under any other fringe benefits which are or may be applicable to the Bank's executive employees or to its employees generally. (c) SUPPLEMENTAL RETIREMENT. In the event the Employee terminates employment for reason of Termination for Cause (as defined herein), or Change of Control (as defined herein), this section will become null and void and no benefits will be due to the Employee under this section. In the event the Employee terminates employment for any reason other than those specifically listed above, the Employee will be eligible to begin receiving immediately, upon termination, an annual supplemental retirement benefit based upon his age at termination according to the following schedule: Termination at Age 65: Annual Benefit $153,320 Termination at Age 64: Annual Benefit $132,365 Termination at Age 63: Annual Benefit $114,520 Termination at Age 62: Annual Benefit $99,250 Termination at Age 61: Annual Benefit $86,120 Termination at Age 60: Annual Benefit $74,720 3 The above annual benefit amounts are expressed as 50% Joint & Survivor annuity amounts. That is, the Employee will receive the annual benefit for life. Upon his death, his spouse (if still living) will receive, for the remainder of her life, an annual benefit equal to 50% of the annual benefit paid to the Employee. Age shall be defined as the Employee's age as of his nearest birthday. Benefits payable pursuant to this section are separate from, and in addition to, any benefits payable from any other employer sponsored and/or employee financed retirement programs. All bonuses received by Employee until his retirement shall be first applied to yearly cost for the supplemental benefit, and any bonus sum, if any, above the bank's yearly cost, will be paid to Employee. 4. TERM. The term of employment under this Agreement shall be a period of three (3) years commencing on the date as of which this agreement is entered into ("Commencement Date"). At the end of each month during said term, the term shall be automatically extended for another month and (1) the term shall be continuously a three (3) year agreement until the Agreement herein is terminated as provided herein, or (2) by normal retirement. 5. VACATIONS. The Employee shall be entitled, without loss of pay, to absent himself voluntarily from the performance of his employment under this Agreement, all such voluntary absences to count as vacation time, provided that; (a) The Employee shall be entitled to an annual vacation of not less than either (8) weeks per year in the year 2000 and nine (9) weeks starting in the year 2001 and each year thereafter until retirement. (b) The timing of vacations shall be scheduled in a reasonable manner by the Employee; and (c) Management shall, solely at the Employee's request, be entitled to grant to the Employee a leave or leaves of absence for sick leave and personal reasons with or without pay at such time or times and upon such terms and conditions as management, in its discretion, may determine. 6. TERMINATION OF EMPLOYMENT. (a) The Board of Directors may terminate the Employee's employment at any time, but any termination by the Bank's Board of Directors, other than termination for cause, shall not prejudice the Employee's right to compensation or other benefits under the Agreement. If the employment of the Employee is involuntarily terminated other than for "cause" as provided in this Section 6(a) or pursuant to any of Sections 6(d) through 6(e) or by reason of death or disability as provided in Sections 6(c) or 7, the Employee shall be entitled to receive (i) his then applicable salary for the then-remaining term of the Agreement as calculated in accordance with Section 4 hereof, payable in such manner and at such times as such salary would have been payable to the Employee under Section 2 had he remained in the employee of the Bank, and (ii) health insurance benefits maintained by the Bank for its senior executives of for its employees generally over the then-remaining term of the Agreement as calculated in accordance 4 with Section 3 hereof. Employee will continue to share in costs at rates equivalent to those paid by executives still employed by company. Payment from any Retirement Plan will be made according to the provisions of said Plan. The terms "termination" or "involuntarily terminated" in this Agreement shall refer to the termination of the employment of Employee without his express written consent. The Employee shall be considered to be involuntarily terminated if (l) the employment of the Employee is involuntarily terminated, other than for "cause" as provided in this Section 6(a), pursuant to any of Sections 6(d) through 6(e) or by reason of death or disability as provided in Sections 6(c) and 7; or (2) there occurs a material diminution of or interference with the Employee's duties, responsibilities and benefits as Chairman of the Board of Directors and Chief Executive Officer. By way of example and not by way of limitation, any of the following action, if unreasonable or materially adverse to the Employee, shall constitute such diminution or interference unless consented to in writing by the Employee: (i) a change on the principal workplace of the Employee to a location more than 35 miles from the Bank's main office, or (ii) a material demotion of the Employee, a substantial reduction in the number of other Bank personnel reporting to the Employee, other than as part of a Bank or Holding Company-wide reduction in staff; or (iii) a reduction or adverse change in the salary, perquisites, benefits, contingent benefits or vacation time which had theretofore been provided to the Employee, other than as part of an overall program applied uniformly and with equitable effect to all members of the senior management of the Bank or the Holding Company. In case of termination of the Employee's employment for cause, the Bank shall pay the Employee his salary through the date of termination, and the Bank shall have no further obligation to the Employee under this Agreement. The Employee shall have no right to receive compensation or other benefits for any period after termination for cause. For purposes of this Agreement, termination for "cause" shall include termination because of the Employee's personal dishonesty, willful misconduct, breach of a fiduciary duty involving, intentional failure to perform stated duties, conviction of a felony, or breach of a final cease and desist order, or material breach of any provision of this Agreement. Notwithstanding the foregoing, the Employee shall not be deemed to have been terminated for cause unless and until there shall have been delivered to the Employee a copy of a Resolution, duly adopted by the affirmative vote of not less than a majority of the disinterested members of the Board of Directors of the Bank at a meeting of the Board called and held for such purpose (after reasonable notice to the Employee and an opportunity for the Employee, together with the Employee's counsel, to be heard before the Board), stating that in the good faith opinion of the Board the Employee was guilty of conduct constituting "cause" as set forth above and specifying the particulars thereof in detail. (b) The Employee's employment may be voluntarily terminated by the Employee at any time upon ninety (90) days written notice to the Bank or upon such shorter period as may be agreed upon between the Employee and the Board of Directors of the Bank. In the event of such voluntary termination, the Bank shall be obligated to continue to pay the Employee his salary only through the date of termination, at the time such payments are due, and the Bank shall have no further obligation to the Employee under this Agreement. (c) In the event of the death of the Employee during the term of employment under this Agreement and prior to any termination hereunder, the Employee's estate, or such person as the Employee may have previously designated in writing, shall be entitled to receive from the Bank the salary of the Employee through the last day of the calendar month in which his death shall have occurred, and the term of employment under this Agreement shall end on such 5 last day of the month. Employee's estate may receive a pro-rata annual incentive award for the fiscal year of death, based on actual performance for such year, payable when such awards are paid to other senior executives. (d) If the Employee is suspended from office and/or temporarily prohibited from participating in the conduct of the Bank's affairs by any action of any Federal or State banking authorities, the Bank's obligations under this Agreement shall terminate as of the date of service of suspension notice, unless stayed by appropriate proceedings. If the charges by the banking authorities are dismissed, the Bank may in its discretion (i) pay the Employee all or part of the compensation withheld while its obligations under this Agreement were suspended and (ii) reinstate in whole or in part any of the obligations which were suspended. Basic salary and vacation is paid through the end of the week in which suspension occurs. (e) In the event the Bank purports to terminate the Employee for cause, but it is determined by a court of competent jurisdiction or by an arbitrator pursuant to Section 16 that cause did not exist for such termination, or if in any event it is determined by any such court that the Bank has failed to make timely payment of any amounts owed to the Employee under this Agreement, the Employee shall be entitled to reimbursement for all reasonable costs, including attorneys' fees, incurred in challenging such termination or collecting such amounts. Such reimbursement shall be in addition to all rights to which the Employee is otherwise entitled under this Agreement. If employee wins his arbitration appeal on a single issue or provision, employee shall be reimbursed all expert witness fees, attorney fees and expenses of arbitration. 7. DISABILITY. If during the term of employment hereunder the Employee shall become disabled or incapacitated to the extent that he is unable to perform his duties, he shall be entitled to receive insurance disability benefits of the type provided for other executive employees of the Bank. The Bank shall, in addition to the insurance benefit, pay an additional sum to provide a total benefit as provided in Section 6(a) herein for the remainder of the term of this Agreement. 8. CHANGE IN CONTROL. (a) INVOLUNTARY TERMINATION. If the Employee's employment is involuntarily terminated (other than for cause or pursuant to any of Sections 6(c) through (e) or Section 7 of this Agreement) in connection with or within twelve (12) months after a change in control which occurs at any time during the term of employment under this Agreement, the Bank shall pay to the Employee in a lump sum in cash within twenty-five (25) business days after the date of Termination (as hereinafter defined) of employment an amount equal to three (3) times the Employee's annual salary as of the Date of Termination. (b) DEFINITIONS. For purposes of Section 8, 9, and 11 of this Agreement, "Date of Termination" means the earlier of (i) the date upon which the Bank gives notice to the Employee of the termination of his employment with the Bank or (ii) the date upon which the Employee ceases to serve as an Employee of the Bank, and "change in control" is defined solely as any of the following: (1) acquisition of control of the Bank or Holding Company which would require the filing of an application for acquisition of control or notice of change in control in a manner as set forth in any Federal or State regulation or any successor regulation; (2) the Bank ceases to exist as a corporate entity for any reason (including, but not limited to, the merger of Bank into, or consolidation of the Bank with another corporation, or; (3) 6 in the event Bank sells all of or substantially all of its assets to a third party, or; (4) in the event a majority of the number of outstanding shares of Bank are sold by the shareholders to another firm, association, corporation or person in one transaction, or in separate transactions, which result in transfer of majority ownership and control of the Bank from its present shareholders to others. (c) COMPLIANCE WITH REQUIREMENTS. Notwithstanding anything in this Agreement to the contrary, no payments may be made pursuant to Section 8 hereof without the prior approval of any Federal authorities if following such payment the Bank would not be in compliance with any Federal regulations. (d) RETIREMENT. To the extent Employee is not vested in any retirement plan, Employee will become fully vested in said Retirement Plan if terminated under this Section. Payment from any qualified defined benefit retirement plan will be made pursuant to the Plan as if the Employee were to have thirty-six (36) additional months of service and thirty-six (36) months of age. (e) IN ADDITION TO ANY OTHER RETIREMENT BENEFITS. The Employee will receive an annual benefit of $153,320 beginning immediately payable for the remainder of his life. Upon his death, his spouse (if living) will receive an annual benefit of $76,660 for the remainder of her life. (f) OTHER. No payment made due to severance will be included as compensation for the purchase of calculating any amount payable from any benefit program where compensation is a variable. (g) GROSS-UP PAYMENT. In the event the Executive becomes entitled to one or more payments which are, or become, subject to the tax imposed by Section 4999 of the Internal Revenue Code of 1986 as amended, the Bank shall pay the Executive an additional amount ("gross-up payment") that puts the Executive in the same after-tax position as if such tax has not been imposed. 9. CONFIDENTIAL INFORMATION; LOYALTY; NON-COMPETITION. (a) During the term of the Employee's employment hereunder and thereafter, the Employee shall not, except as may be required to perform his duties hereunder or as required by law, disclose to others or use, whether directly or indirectly, any Confidential Information. "Confidential Information" means information about the Bank and the Bank's clients and customers which is not available to the general public and was or shall be learned by the Employee in the course of his employment by the Bank, including without limitation any data, formulae, information, proprietary knowledge, trade secrets, and credit reports and analyses owned, developed and used in the course of the business of the Bank, including client and customer lists and information related thereto; and all papers, resumes, records and other documents (and all copies thereof) containing such Confidential Information. The Employee acknowledges that such Confidential Information is specialized, unique in nature and of great value to the Bank. The Employee agrees that upon the expiration of the Employee's term of employment hereunder or in the event the Employee's employment hereunder is terminated prior thereto for any reason wheresoever, the Employee will promptly deliver to the Bank all documents (and all copies thereof) containing any Confidential Information. 7 (b) The Employee shall devote his full time to the performance of his employment under this Agreement; provided, however, that the Employee may serve, without compensation, with charitable, community and industry organizations and continue to serve, with compensation, as a director of any business corporation of which he is currently a director to the extent such directorships do not inhibit the performance of his duties thereunder or conflict with the business of the Bank. During the term of the Employee's employment hereunder, the Employee shall not engage in any business or activity contrary to the business affairs or interests of the Bank. (c) Upon the expiration of the term of the Employee's employment hereunder or in the event the Employee's employment hereunder terminates prior thereto for any reason whatsoever, the Employee shall not, for a period of three (3) years after the occurrence of such event, for himself, or as the agent of, on behalf of, or in conjunction with, any person or entity, solicit or attempt to solicit, whether directly or indirectly: (i) any employee of the Bank to terminate such employee's employment relationship with the Bank; or (ii) any savings and loan, banking or similar business from any person or entity that is or was a client, employee, or customer of the Bank and had dealt with the Employee or any other employee of the Bank under the supervision of the Employee. (d) In the event Employee voluntarily resigns pursuant to Section 6(b) of this Agreement, or in the event the Employee's employment hereunder is terminated for cause, the Employee shall not, for a period of three (3) years from the date of termination, directly or indirectly, own, manage, operate or control, or participate in the ownership, management, operation or control of, or be employed by or connected in any manner within any financial institution having an office located within fifty (50) miles of any office of the Bank as of the date of termination. (e) The provisions of this Section shall survive the termination of the Employee's employment hereunder whether by expiration of the term thereof or otherwise. 10. DISPARAGEMENT. Employee shall conduct himself and the Bank's business at all times so as to not detract from, or reflect adversely on the Security National Bank and Trust Co. and Security Banc Corporation, their services, business, products, employees, officers and customers; and, after the termination of this Agreement, not to defame or disparage Security National Bank and Trust Co. and Security Banc Corporation its services, business, products, officers, employees or customers, nor engage in any unfair trade or business practices. 11. NO ASSIGNMENTS. (a) This Agreement is personal to each of the parties hereto, and neither party may assign or delegate any of its rights or obligations hereunder without first obtaining the written consent of the other party; provided, however, that the Bank will require any successor assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Bank, by an assumption agreement in form and substance satisfactory to the Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform it if no such succession or assignment had taken place. Failure of the Bank to obtain such an assumption agreement prior to the effectiveness of any such succession or assignment shall be a breach of this Agreement and shall entitle the Employee to compensation from the Bank in the same amount and on the same terms as the compensation pursuant to Section 8(a) hereof. For purposes of implementing the provisions of this Section 11(a), the date on which any such succession becomes effective shall be deemed the Date of Termination. 8 (b) This Agreement and all rights of the Employee hereunder shall inure to the benefit of and be enforceable by the Employee's personal and legal representative, executors, administrators, successors, heirs, distributes, devisees and legatees. If the Employee should die while any amounts would still be payable to the Employee hereunder if the Employee had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Employee's devisee, legatee or other designee or if there is no such designee, to the Employee's estate. 12. NOTICE. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or sent by certified mail, return receipt requested, postage prepaid, addressed to the Security National Bank and Trust Company's main office and the Employee's last known address (provided that all notices to the Bank shall also be directed to the attention of the Board of Directors of the Bank with a copy to the Secretary of the Bank), or to such other address as either party may have furnished to the other in writing in accordance herewith. 13. AMENDMENTS. No amendments or additions to this Agreement shall be binding unless in writing and signed by both parties, except as herein otherwise provided. 14. PARAGRAPH HEADINGS. The paragraph headings used in this Agreement are included solely for convenience and shall not affect, or be used in connection with, the interpretation of this Agreement. 15. SEVERABILITY. The provision of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. 16. GOVERNING LAW. This Agreement shall be governed by the laws of the United States to the extent applicable and otherwise by the laws of the State of Ohio. 17. ARBITRATION. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. SECURITY NATIONAL BANK AND TRUST CO. By /S/ William C. Fralick ------------------------------------------ William C. Fralick, President /s/ Harry O. Egger --------------------------------------------- Harry O. Egger, Chairman of the Board/CEO EMPLOYEE 9 AMENDMENT TO EMPLOYMENT AGREEMENT --------------------------------- This Amendment to Employment Agreement, dated March 23, 2001 (the "Amendment"), is made and entered into by The Security National Bank and Trust Co. (also known as Security National Bank and Trust Co.) (the "Bank") and Harry O. Egger (the "Employee"). WITNESSETH: ----------- WHEREAS, Park National Corporation ("Park") and Security Banc Corporation ("Security") have entered into an Agreement and Plan of Merger, dated as of November 20, 2000 (the "Agreement and Plan of Merger"), pursuant to which Security will merge into Park as of the Effective Time specified therein; and WHEREAS, the Agreement and Plan of Merger requires, as a condition precedent to the performance of Park's obligations thereunder, the amendment of the Employment Agreement entered into as of December 22, 1999, by and between the Bank and the Employee (the "Employment Agreement") as contemplated by this Amendment; and WHEREAS, Park has agreed to honor the Employment Agreement provided the Employment Agreement has been modified prior to the Effective Time as contemplated by this Amendment; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Bank and the Employee agree as follows: 1. DEFINITIONS. The capitalized terms used herein that are defined in the Agreement and Plan of Merger and not otherwise defined herein shall, when used herein, have the meanings ascribed to them in the Agreement and Plan of Merger. 2. AMENDMENT OF EMPLOYMENT AGREEMENT. Section 4 of the Employment Agreement is hereby amended by deleting the same in its entirety and substituting therefor the following: 4. TERM. The term of employment under this Agreement commenced on December 22, 1999 and shall end on March 23, 2004. 3. ACKNOWLEDGEMENT OF AGREEMENT BY PARK TO HONOR EMPLOYMENT AGREEMENT. (a) The Employee hereby acknowledges that pursuant to Section 6.02 of the Agreement and Plan of Merger, Park has agreed to honor the Employment Agreement, as amended by this Amendment. The Employee hereby agrees that such agreement shall satisfy any obligation of Park which may be deemed to exist under Section 11(a) of the Employment Agreement and that the change in the Bank's status from one of three financial institution subsidiaries of Security to one of nine financial institution subsidiaries of Park shall not be deemed to constitute a material diminution of the Employee's duties or responsibilities for purposes of Section 6 (a) of the Employment Agreement. 10 (b) The Employee hereby acknowledges that he has been advised of the benefits which Park or an affiliate of Park intends to provide to the Employee as an employee of the Bank following the merger of Security into Park. Such benefits are collectively referred to as the "Park Benefits". The Employee agrees that the Park Benefits do not constitute a material diminution of his benefits from those provided by the Bank or Security for purposes of Section 6(a) of the Employment Agreement. 4. MISCELLANEOUS. (a) This Amendment shall be construed in accordance with and governed by the laws of the State of Ohio. (b) Except as expressly provided for in this Amendment, the Employment Agreement shall remain in full force and effect in accordance with its terms. IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and year first written above. THE SECURITY NATIONAL BANK AND TRUST CO. (also known as SECURITY BANK AND TRUST CO.) BY /s/ William C. Fralick ------------------------------------------------ William C. Fralick, President EMPLOYEE /s/ Harry O. Egger ------------------------------------------------ Harry O. Egger, Chairman and CEO -----END PRIVACY-ENHANCED MESSAGE-----