-----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, SVhMqEJ2eKWttAi2TLRPrkaFGqA1JMaAQCgFs5hg1LpPRhu6pSQUSIioCa90lYOl dfwdD5WIUdKg56FIXyl/9A== 0000950152-03-005158.txt : 20030508 0000950152-03-005158.hdr.sgml : 20030508 20030508133623 ACCESSION NUMBER: 0000950152-03-005158 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030508 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: 1934 Act SEC FILE NUMBER: 001-13006 FILM NUMBER: 03687704 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 l00868ae10vq.txt PARK NATIONAL CORPORATION | FORM 10-Q UNITED STATES 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, 2003 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 --- --- Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes X No --- --- 13,754,789 Common shares, no par value per share, outstanding at April 30, 2003. - ---------- Page 1 of 26 PARK NATIONAL CORPORATION CONTENTS --------
Page ---- PART I. FINANCIAL INFORMATION 3 Item 1. Financial Statements 3-12 Consolidated Condensed Balance Sheets as of March 31, 2003 and December 31, 2002 (unaudited) 3 Consolidated Condensed Statements of Income for the Three Months ended March 31, 2003 and 2002 (unaudited) 4,5 Consolidated Condensed Statements of Changes in Stockholders' Equity for the Three Months ended March 31, 2003 and 2002 (unaudited) 6 Consolidated Condensed Statements of Cash Flows for the Three Months ended March 31, 2003 and 2002 (unaudited) 7,8 Notes to Consolidated Financial Statements 9-12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13-20 Item 3. Quantitative and Qualitative Disclosures About Market Risk 20 Item 4. Controls and Procedures 21 PART II. OTHER INFORMATION 22-23 Item 1. Legal Proceedings 22 Item 2. Changes in Securities and Use of Proceeds 22 Item 3. Defaults Upon Senior Securities 22 Item 4. Submission of Matters to a Vote of Security Holders 22-23 Item 5. Other Information 23 Item 6. Exhibits and Reports on Form 8-K 23 SIGNATURES 24 CERTIFICATIONS 25-26
-2- PARK NATIONAL CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) (dollars in thousands, except share data)
March 31, December 31, 2003 2002 - -------------------------------------------------------------------------------------------------------------- Assets: Cash and due from banks $165,047 $157,088 - ------------------------------------------------------------------------------------------------------------ Federal funds sold 38,200 81,700 - ------------------------------------------------------------------------------------------------------------ Interest bearing deposits 50 50 - ------------------------------------------------------------------------------------------------------------ Securities available-for-sale, at fair value (amortized cost of $1,534,173 and $993,317 at March 31, 2003 and December 31, 2002) 1,571,784 1,030,264 - ------------------------------------------------------------------------------------------------------------ Securities held-to-maturity, at amortized cost (fair value approximates $529,371 and $360,688 at March 31, 2003 and December 31, 2002) 527,699 352,878 - ------------------------------------------------------------------------------------------------------------ Loans (net of unearned interest) 2,683,023 2,692,187 - ------------------------------------------------------------------------------------------------------------ Allowance for possible loan losses 64,062 62,028 - ------------------------------------------------------------------------------------------------------------ Net loans 2,618,961 2,630,159 - ------------------------------------------------------------------------------------------------------------ Bank premises and equipment, net 38,190 38,734 - ------------------------------------------------------------------------------------------------------------ Bank owned life insurance 75,382 74,355 - ------------------------------------------------------------------------------------------------------------ Other assets 78,174 81,397 - ------------------------------------------------------------------------------------------------------------ Total assets $5,113,487 $4,446,625 - ------------------------------------------------------------------------------------------------------------ Liabilities and Stockholders' Equity: Deposits: Noninterest bearing $528,509 $594,157 - ------------------------------------------------------------------------------------------------------------ Interest bearing 2,957,568 2,900,978 - ------------------------------------------------------------------------------------------------------------ Total deposits 3,486,077 3,495,135 - ------------------------------------------------------------------------------------------------------------ Short-term borrowings 742,535 188,878 - ------------------------------------------------------------------------------------------------------------ Long-term debt 311,965 187,226 - ------------------------------------------------------------------------------------------------------------ Other liabilities 51,683 66,094 - ------------------------------------------------------------------------------------------------------------ Total liabilities 4,592,260 3,937,333 - ------------------------------------------------------------------------------------------------------------ Stockholders' Equity: Common stock (No par value; 20,000,000 shares authorized; 14,541,752 shares issued in 2003 and 14,540,449 issued in 2002) 105,841 105,768 - ------------------------------------------------------------------------------------------------------------ Retained earnings 458,032 446,300 - ------------------------------------------------------------------------------------------------------------ Treasury stock (766,121 shares in 2003 and 748,483 shares in 2002) (67,158) (65,194) - ------------------------------------------------------------------------------------------------------------ Accumulated other comprehensive income, net of taxes 24,512 22,418 - ------------------------------------------------------------------------------------------------------------ Total stockholders' equity 521,227 509,292 - ------------------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $5,113,487 $4,446,625 - ------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3 PARK NATIONAL CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED) (dollars in thousands, except per share data)
Three Months Ended March 31, --------------------------------------------- 2003 2002 - -------------------------------------------------------------------------------------------------------------------- Interest income: Interest and fees on loans $46,918 $53,192 - -------------------------------------------------------------------------------------------------------------------- Interest on: Obligations of U.S. Government, its agencies and other securities 20,260 19,751 - -------------------------------------------------------------------------------------------------------------------- Obligations of states and political subdivisions 1,605 1,801 - -------------------------------------------------------------------------------------------------------------------- Other interest income 80 130 - -------------------------------------------------------------------------------------------------------------------- Total interest income 68,863 74,874 - -------------------------------------------------------------------------------------------------------------------- Interest expense: Interest on deposits: Demand and savings deposits 2,352 3,260 - -------------------------------------------------------------------------------------------------------------------- Time deposits 11,200 15,159 - -------------------------------------------------------------------------------------------------------------------- Interest on borrowings: Short-term borrowings 486 1,112 - -------------------------------------------------------------------------------------------------------------------- Long-term debt 2,620 3,096 - -------------------------------------------------------------------------------------------------------------------- Total interest expense 16,658 22,627 - -------------------------------------------------------------------------------------------------------------------- Net interest income 52,205 52,247 - -------------------------------------------------------------------------------------------------------------------- Provision for loan losses 3,433 4,519 - -------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 48,772 47,728 - -------------------------------------------------------------------------------------------------------------------- Other income 15,455 11,795 - -------------------------------------------------------------------------------------------------------------------- Gain (loss) on sale of securities (1,234) (210) - --------------------------------------------------------------------------------------------------------------------
Continued 4 PARK NATIONAL CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED) (CONTINUED) (dollars in thousands, except per share data)
Three Months Ended March 31, --------------------------------------------- 2003 2002 - -------------------------------------------------------------------------------------------------------------------- Other expense: Salaries and employee benefits $17,536 $16,251 - -------------------------------------------------------------------------------------------------------------------- Occupancy expense 1,732 1,539 - -------------------------------------------------------------------------------------------------------------------- Furniture and equipment expense 1,627 1,529 - -------------------------------------------------------------------------------------------------------------------- Other expense 9,174 9,897 - -------------------------------------------------------------------------------------------------------------------- Total other expense 30,069 29,216 - -------------------------------------------------------------------------------------------------------------------- Income before federal income taxes 32,924 30,097 - -------------------------------------------------------------------------------------------------------------------- Federal income taxes 9,758 8,649 - -------------------------------------------------------------------------------------------------------------------- Net income $23,166 $21,448 ==================================================================================================================== PER SHARE: Net income: Basic $1.68 $1.54 ==================================================================================================================== Diluted $1.68 $1.53 ==================================================================================================================== Weighted average Basic 13,780,828 13,936,340 ==================================================================================================================== Diluted 13,824,663 13,973,050 ==================================================================================================================== Cash dividends declared $0.83 $0.76 ====================================================================================================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5 PARK NATIONAL CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) (dollars in thousands, except share data)
THREE MONTHS ENDED MARCH 31, 2003 AND 2002 Treasury Common Retained Stock Stock Earnings at Cost - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 2001 $105,771 $403,870 ($50,000) - ----------------------------------------------------------------------------------------------------------------------------------- Net Income 21,448 - ----------------------------------------------------------------------------------------------------------------------------------- Accumulated other comprehensive income, net of income taxes of ($3,049) - ----------------------------------------------------------------------------------------------------------------------------------- Total comprehensive income - ----------------------------------------------------------------------------------------------------------------------------------- Cash dividends on common stock: Park at $.76 per share (10,589) - ----------------------------------------------------------------------------------------------------------------------------------- Cash paid for fractional shares - 11 shares (1) - - ----------------------------------------------------------------------------------------------------------------------------------- Treasury stock purchased - 31,453 shares (2,973) - ----------------------------------------------------------------------------------------------------------------------------------- Treasury stock reissued for stock options - 23,224 shares 1,400 - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 2002 $105,770 $414,729 ($51,573) =================================================================================================================================== - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 2002 $105,768 $446,300 ($65,194) - ----------------------------------------------------------------------------------------------------------------------------------- Net Income 23,166 - ----------------------------------------------------------------------------------------------------------------------------------- Accumulated other comprehensive income, net of tax: Reverse additional minimum liability for pension plan, net of taxes $860 - ----------------------------------------------------------------------------------------------------------------------------------- Unrealized net holding gain on securities available-for-sale, net of taxes $267 - ----------------------------------------------------------------------------------------------------------------------------------- Total comprehensive income - ----------------------------------------------------------------------------------------------------------------------------------- Cash dividends on common stock: Park at $.83 per share (11,434) - ----------------------------------------------------------------------------------------------------------------------------------- Shares issued for stock options - 1,303 46 - ----------------------------------------------------------------------------------------------------------------------------------- Tax benefit from exercise of stock options 27 - ----------------------------------------------------------------------------------------------------------------------------------- Treasury stock purchased - 37,803 shares (3,712) - ----------------------------------------------------------------------------------------------------------------------------------- Treasury stock reissued for stock options - 20,165 shares 1,748 - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 2003 $105,841 $458,032 ($67,158) ===================================================================================================================================
Accumulated Three Months ended March 31, 2003 and 2002 Other Comprehensive Comprehensive Income Income - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 2001 $8,705 - --------------------------------------------------------------------------------------------------------- Net Income $21,448 - ----------------------------------------------------------------------------------------------------------------------------------- Accumulated other comprehensive income, net of income taxes of ($3,049) (5,662) (5,662) - ----------------------------------------------------------------------------------------------------------------------------------- Total comprehensive income $15,786 - --------------------------------------------------------------------------------------------------------------------=============== Cash dividends on common stock: Park at $.76 per share - --------------------------------------------------------------------------------------------------------- Cash paid for fractional shares - 11 shares - --------------------------------------------------------------------------------------------------------- Treasury stock purchased - 31,453 shares - --------------------------------------------------------------------------------------------------------- Treasury stock reissued for stock options - 23,224 shares - --------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 2002 $3,043 ========================================================================================================= - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 2002 $22,418 - --------------------------------------------------------------------------------------------------------- Net Income $23,166 - ----------------------------------------------------------------------------------------------------------------------------------- Accumulated other comprehensive income, net of tax: Reverse additional minimum liability for pension plan, net of taxes $860 1,598 1,598 - ----------------------------------------------------------------------------------------------------------------------------------- Unrealized net holding gain on securities available-for-sale, net of taxes $267 496 496 - ----------------------------------------------------------------------------------------------------------------------------------- Total comprehensive income $25,260 - --------------------------------------------------------------------------------------------------------------------=============== Cash dividends on common stock: Park at $.83 per share - --------------------------------------------------------------------------------------------------------- Shares issued for stock options - 1,303 - --------------------------------------------------------------------------------------------------------- Tax benefit from exercise of stock options - --------------------------------------------------------------------------------------------------------- Treasury stock purchased - 37,803 shares - --------------------------------------------------------------------------------------------------------- Treasury stock reissued for stock options - 20,165 shares - --------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 2003 $24,512 =========================================================================================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6 PARK NATIONAL CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (dollars in thousands)
Three Months Ended March 31, ------------------------------------- 2003 2002 - ----------------------------------------------------------------------------------------------------------------------------------- Operating activities: Net income $23,166 $21,448 - ----------------------------------------------------------------------------------------------------------------------------------- Adjustments to reconcile net income to net cash provided by operating activities: Accretion, depreciation and amortization (2,123) (741) - ----------------------------------------------------------------------------------------------------------------------------------- Provision for loan losses 3,433 4,519 - ----------------------------------------------------------------------------------------------------------------------------------- Amortization of the excess of cost over net assets of banks purchased 583 975 - ----------------------------------------------------------------------------------------------------------------------------------- Realized investment security losses 1,234 210 - ----------------------------------------------------------------------------------------------------------------------------------- Changes in assets and liabilities: Decrease (increase) in other assets 1,445 (3,778) - ----------------------------------------------------------------------------------------------------------------------------------- Decrease in other liabilities (1,350) (5,294) - ----------------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 26,388 17,339 -------------------------------------------------------------------------------------------------------------------- Investing activities: Proceeds from sales of: Available-for-sale securities 98,766 99,673 - ----------------------------------------------------------------------------------------------------------------------------------- Proceeds from maturity of: Available-for-sale securities 631,535 166,553 - ----------------------------------------------------------------------------------------------------------------------------------- Held-to-maturity securities 166,835 344 - ----------------------------------------------------------------------------------------------------------------------------------- Purchases of: Available-for-sale securities (1,269,876) (239,113) - ----------------------------------------------------------------------------------------------------------------------------------- Held-to-maturity securities (341,656) 0 - ----------------------------------------------------------------------------------------------------------------------------------- Net decrease in loans 8,822 68,538 - ----------------------------------------------------------------------------------------------------------------------------------- Purchases of premises and equipment, net (905) (1,027) - ----------------------------------------------------------------------------------------------------------------------------------- Net cash (used by) provided from investing activities (706,479) 94,968 --------------------------------------------------------------------------------------------------------------------
Continued 7 PARK NATIONAL CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED) (dollars in thousands)
Three Months Ended March 31, ------------------------------------- 2003 2002 - ----------------------------------------------------------------------------------------------------------------------------------- Financing activities: Net (decrease) increase in deposits ($9,058) $16,579 - ----------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in short-term borrowings 553,657 (12,872) - ----------------------------------------------------------------------------------------------------------------------------------- Cash paid for fractional shares 0 (1) - ----------------------------------------------------------------------------------------------------------------------------------- Exercise of stock options 73 0 - ----------------------------------------------------------------------------------------------------------------------------------- Purchase of treasury stock, net (1,964) (1,573) - ----------------------------------------------------------------------------------------------------------------------------------- Long-term debt issued 125,000 0 - ----------------------------------------------------------------------------------------------------------------------------------- Repayment of long-term debt (261) (135,042) - ----------------------------------------------------------------------------------------------------------------------------------- Cash dividends paid (22,897) (21,195) - ----------------------------------------------------------------------------------------------------------------------------------- Net cash provided from (used by) financing activities 644,550 (154,104) -------------------------------------------------------------------------------------------------------------------- Decrease in cash and cash equivalents (35,541) (41,797) -------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at beginning of year 238,788 169,143 - ----------------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $203,247 $127,346 ==================================================================================================================== Supplemental disclosures of cash flow information: Cash paid for: Interest $17,525 $24,205 ------------------------------------------------------------------------------------------------------- Income taxes $0 $0 -------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8 PARK NATIONAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Three Months Ended March 31, 2003 and 2002. 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, 2003 are not necessarily indicative of the operating results to be anticipated for the fiscal year ended December 31, 2002. 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 condensed balance sheets, condensed statements of income, condensed statements of changes in stockholders' equity and condensed 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, 2002. Certain amounts in 2002 have been reclassified to conform to the financial statement presentation used for 2003. Park does not have any off-balance sheet derivative financial instruments such as interest-rate swap agreements. Note 2 - Intangible Assets ----------------- In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001. Under the standards, goodwill and indefinite lived intangible assets are no longer amortized and are subject to annual impairment tests. Other intangible assets, such as core deposit intangibles, continue to be amortized over their useful lives. Park had approximately $7.5 million of goodwill included in other assets at March 31, 2003 and December 31, 2002. This goodwill was evaluated for impairment during the first quarter of each of 2002 and 2003 and a determination made that the goodwill was not impaired and that the book value of the goodwill would continue to be shown as $7.5 million. No amortization expense is being recorded on the goodwill in 2003 and none was recorded in 2002. Park also had core deposit intangibles included in other assets of $7.96 million at March 31, 2003 and $8.54 million at December 31, 2002. The core deposit intangibles are being amortized to expense, principally on the straight-line method, over periods ranging from six to eight years. Core deposit amortization expense was $583,000 for the first quarter of 2003 and $975,000 for the first quarter of 2002. -9- Note 3- Allowance for Loan Losses ------------------------- The allowance for loan losses is that amount believed adequate to absorb estimated credit losses in the loan portfolio based on management's evaluation of various factors including overall growth in the loan portfolio, an analysis of individual loans, prior and current loss experience, and current 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 Loan Losses ------------------------- (In Thousands) -------------- 2003 2002 ------ -------- Beginning January 1 $62,028 $59,959 Provision for loan losses 3,433 4,519 Losses charged to the reserve (2,854) (5,205) Recoveries 1,455 1,420 ------- ------- Balance March 31, $64,062 $60,693 ======= =======
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, 2003 and 2002.
(Dollars in thousands, except per share data) --------------------------------------------- Three Months Ended ------------------ March 31, 2003 2002 --------- ------- ------ Numerator: Net Income $23,166 $21,448 ---------- ----------- Denominator: Denominator for basic earnings per share (weighted-avg. shares) 13,780,828 13,936,340 ---------- ----------- Effect of dilutive securities 43,835 36,710 ---------- ----------- Denominator for diluted earnings per share (adjusted weighted-average shares and assumed conversions) 13,824,663 13,973,050 ---------- ----------- Earnings per share: Basic earnings per share $1.68 $1.54 Diluted earnings per share $1.68 $1.53 ---------- -----------
-10- 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), and The Citizens National Bank of Urbana (CIT).
Operating Results for the Three Months Ended March 31, 2003 (In Thousands) ------------------------------------------------------------------------------------------------ PNB RTC CNB FKNB UB SNB SEC CIT All Other Total --- --- --- ---- -- --- --- --- --------- ----- Net Interest Income $15,813 $5,558 $4,948 $7,836 $2,305 $3,536 $8,453 $1,622 $2,134 $52,205 Provision for Loan Losses 1,380 330 225 666 90 150 405 90 97 3,433 Other Income 6,271 1,193 1,445 1,452 566 584 2,170 390 150 14,221 Other Expense 9.317 2,597 2,864 4,021 1,480 1,872 5,023 1,148 1,747 30,069 Net Income 7,860 2,520 2,206 3,155 902 1,478 3,499 530 1,016 23,166 Balances at March 31, 2003 Assets 1,617,914 571,420 481,736 755,567 242,123 390,074 937,299 191,969 (74,615) $5,113,487
Operating Results for the Three Months Ended March 31, 2002 (In Thousands) ------------------------------------------------------------------------------------------------ PNB RTC CNB FKNB UB SNB SEC CIT All Other Total --- --- --- ---- -- --- --- --- --------- ----- Net Interest Income $15,861 $5,777 $5,105 $7,318 $2,147 $3,497 $8,869 $1,751 $1,922 $52,247 Provision for Loan Losses 1,545 585 240 874 90 275 420 415 75 4,519 Other Income 5,192 689 1,198 1,495 289 344 1,951 316 111 11,585 Other Expense 8,673 2,805 2,746 3,777 1,484 1,774 4,944 1,109 1,904 29,216 Net Income $7,589 $2,033 $2,209 $2,893 $635 $1,289 $3,778 $377 $645 $21,448 Balances at March 31, 2002 Assets 1,396,530 480,258 436,830 659,485 197,382 317,084 874,610 172,527 (108,803) $4,425,903
The operating results of the Parent Company and Guardian Finance Company (GFC) in the All Other column are used to reconcile the segment totals to the consolidated income statements for the quarters ended March 31, 2003 and 2002. The reconciling amounts for consolidated total assets for both of the quarters ended March 31, 2003 and 2002 consist of the elimination of intersegment borrowings, and the assets of the Parent Company and GFC which are not eliminated. -11- Note 6 - Stock Option Plan ----------------- Park accounts for its incentive stock option plan under the recognition and measurement principles provided in Accounting Principles Board Opinion No. 25, "Accounting for Stock issued to Employees" (APB 25) and related interpretations. Under APB 25, because the exercise price of Park's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation", as amended by SFAS 148, requires pro forma disclosures of net income and earnings per share for companies not adopting its fair value accounting method for stock-based employee compensation. The pro-forma disclosures below use the fair value method of SFAS 123 to measure compensation expense for stock based employee compensation plans.
Three Months Ended March 31 (In thousands, except per share data) ------------------------------------- 2003 2002 ------- -------- Net income as reported $23,166 $21,448 Deduct: Total stock-based employee compensation expense determined under fair value method, net of related tax effects (106) (110) ------- ------- Pro forma net income $23,060 $21,338 ======= ======= Basic earnings per share as reported $1.68 $1.54 Pro forma basic earnings per share $1.67 $1.53 Diluted earnings per share as reported $1.68 $1.53 Pro forma diluted earnings per share $1.67 $1.53
-12- 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, Park's ability to execute its business plans, as well as other risks such as changes in government regulations and policies affecting bank holding companies. 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. Critical Accounting Policies - ---------------------------- Note 1 of the Notes to Consolidated Financial Statements included in Park's 2002 Annual Report lists significant accounting policies used in the development and presentation of its financial statements. The accounting and reporting policies of Park conform with accounting principles generally accepted in the United States and general practices within the financial services industry. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates. Park considers that the determination of the allowance for loan losses involves a higher degree of judgement and complexity than its other significant accounting policies. The allowance for loan losses is calculated with the objective of maintaining a reserve level believed by management to be sufficient to absorb estimated credit losses in the loan portfolio. Management's determination of the adequacy of the allowance for loan losses is based on periodic evaluations of the loan portfolio and of current economic conditions. However, this evaluation is inherently subjective as it requires material estimates, including expected default probabilities, loss given default, expected commitment usage, the amounts and timing of expected future cash flows on impaired loans, and estimated losses on consumer loans and residential mortgage loans based on historical loss experience and the current economic conditions. All of those factors may be susceptible to significant change. To the extent that actual results differ from management estimates, additional loan loss provisions may be required that would adversely impact earnings for future periods. -13- Comparison of Results of Operations For the Quarters Ended March 31, 2003 and 2002 Summary Discussion of Results - ----------------------------- Net income increased by $1.7 million or 8.0% to $23.16 million for the three months ended March 31, 2003 compared to $21.45 million for the same period in 2002. The annualized, net income to average asset ratio (ROA) was 1.96% for the first quarter of 2003 compared to 1.95% for the first quarter of 2002. The annualized, net income to average equity ratio (ROE) was 18.56% for the first three months of 2003 compared to 18.48% for the same period in 2002. Diluted earnings per share increased by 9.8% to $1.68 for the first quarter of 2003 compared to $1.53 for the first quarter of 2002. The increase in net income for the first quarter of 2003 was primarily due to the 31.0% increase in Other Income to $15.45 million compared to $11.79 million in 2002. This large increase was primarily due to the increase in fee income earned from the origination and sale of fixed rate mortgage loans. Long-term interest rates continued to be low throughout the quarter, and management was able to reallocate resources so that mortgage loan customers were able to close on their mortgage loan within 30 days from application to closing. Net Interest Income - ------------------- Park's principal source of earnings is net interest income, the difference between total interest income and total interest expense. Net interest income was $52.2 million for both the first quarter of 2003 and 2002. 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 2003 with the same quarter in 2002.
Three Months Ended March 31, (In Thousands) ---------------------------- 2003 2002 --------------------------- ----------------------------- Average Tax Average Tax Balance Equivalent Balance Equivalent % % - -------------------------------------- -------------- ------------ ---------------- ------------- Loans $2,675,702 7.14% $2,747,018 7.89% Taxable Investments 1,638,152 5.02% 1,246,564 6.43% Tax Exempt Investments 132,649 7.30% 149,032 7.17% Federal Funds Sold 21,688 1.50% 29,765 1.78% ---------- ---- ---------- ---- Interest Earning Assets $4,468,191 6.34% $4,172,379 7.38% Interest Bearing Deposits $2,895,747 1.90% $2,828,919 2.64% Short-term Borrowings 547,348 .36% 281,448 1.60% Long-term Debt 271,898 3.91% 331,302 3.79% ---------- ---- ---------- ---- Interest Bearing Liabilities $3,714,993 1.82% $3,441,669 2.67% Excess Interest Earning Assets $753,198 4.52% $730,710 4.71% Net Interest Margin 4.83% 5.18%
-14- Average interest earning assets increased by $296 million or 7.1% to $4,468 million for the quarter ended March 31, 2003 compared to the same quarter in 2002. The average yield on interest earning assets decreased to 6.34% for the first quarter of 2003 compared to 7.38% for the first quarter of 2002. Average loan totals decreased by $71 million or 2.6% to $2,676 million for the first quarter of 2003 compared to the first quarter of 2002. At March 31, 2003, total loans were $2,683 million compared to $2,692 million at December 31, 2002, a decrease of $9 million or .3%. Total loans decreased by $104 million or 3.7% for the year 2002 and decreased by $160 million or 5.4% for the year 2001. The demand for commercial and commercial real estate loans has improved during the first quarter of 2003, but the demand for consumer loans and leases secured by automobiles remains weak. Management is hopeful that loan totals will begin increasing during the second quarter of 2003. The demand for fixed rate long-term residential mortgage loans has been strong for the past several quarters and even increased during the first quarter of 2003. This activity, the origination and sale of fixed rate mortgage loans produced a significant increase in fee income during the past few quarters, but did not increase loan totals since the loans are sold. Many borrowers have taken advantage of low long-term interest rates to refinance their adjustable rate mortgage loan into a fixed rate mortgage loan which reduces the loan balances reported on Park's balance sheet. Residential real estate loans decreased by $26 million or 2.6% during the first quarter of 2003, compared to a decrease of $76 million or 7.0% for the year 2002 and a decrease of $88 million or 7.6% for the year 2001. The average yield on the loan portfolio was 7.14% for the first quarter of 2003 compared to 7.89% for the same period in 2002. The average prime lending rate was 4.25% for the first quarter of 2003 compared to 4.75% for the first quarter of 2002. Approximately 25% of Park's loan portfolio reprices based on the prime lending rate. The yield on Park's loan portfolio is expected to continue to decrease as new loan originations have an average rate that is lower than the current loan portfolio rate and variable rate loans continue to reprice at lower interest rates. Average investment securities including federal funds sold increased by $367 million or 25.8% to $1,792 million for the first quarter of 2003 compared to $1,425 million for the first quarter of 2002. The increase in the investment portfolio was primarily funded by an increase in short-term borrowings. The average yield on taxable investment securities decreased to 5.02% for the first quarter of 2003 compared to 6.43% for the same quarter in 2002. The yield on tax exempt investments increased to 7.30% for the first quarter of 2003 compared to 7.17% for the same period in 2002. No tax exempt securities were purchased in the past year and the tax exempt securities that matured yielded less than the average portfolio rate. -15- At March 31, 2003, the investment portfolio included $475 million of U.S Agency discount notes, which had an average yield of 1.20%, and an average maturity of 33 days. These securities were purchased to provide an arbitrage for a similar amount of short-term borrowings (dollar-roll repos) whose borrowing cost was a negative .25% at March 31, 2003. The average balance of U.S. Agency discount notes was $277 million for the quarter. At March 31, 2003, the yield on Park's investment portfolio was 4.52% and the average maturity was 2.2 years. Excluding the $475 million of U.S. Agency discount notes, the yield on the portfolio was 5.50% and the average maturity was 2.7 years. For comparison, at March 31, 2002 the yield on the investment portfolio was 6.30% and the average maturity was 3.6 years. Management expects that the yield on the investment portfolio will continue to decrease as the yield on securities being purchased during the second quarter of 2003 is approximately 4.50% and the securities maturing during the quarter are yielding about 5.25% Average interest bearing liabilities increased by $273 million or 7.9% to $3,715 million for the quarter ended March 31, 2003 compared to the same quarter in 2002. Average interest bearing deposits increased by $67 million or 2.4% to $2,896 million for the first quarter of 2003 compared to the first quarter of 2002. Average short-term borrowings increased by $266 million or 94.5% to $547 million and average long-term debt decreased by $59 million or 17.9% to $272 million for the first quarter of 2003 compared to the same period in 2002. The increase in short-term borrowings was due to the dollar-roll repos which averaged $273 million for the quarter. The average cost of interest bearing liabilities decreased by .85% to 1.82% in 2003 compared to 2.67% in 2002. The average cost of interest bearing deposits decreased by .74% to 1.90% in 2003 compared to 2.64% in 2002. The average cost of short-term borrowings decreased by 1.24% to .36% in 2003 compared to 1.60% in 2002 as the average cost of the dollar-roll repos was a negative .46% for the quarter. The average cost of long-term debt was 3.91% in 2003 compared to 3.79% in 2002. Net interest income decreased by $42,000 to $52.205 million in 2003 compared to $52.247 million in 2002. The net interest spread (the difference between the yield on interest earning assets and the cost of interest bearing liabilities) decreased by .19% to 4.52% in 2003 compared to 4.71% in 2002. The tax equivalent net interest margin (defined as net interest income divided by average interest earning assets) decreased by .35% to 4.83% in 2003 compared to 5.18% in 2002. However, the increase in average earning assets of 7.1% in 2003 allowed Park to earn just $42,000 less in net interest income for the first quarter of 2003 compared to 2002. Management expects that the net interest margin will continue to decrease during 2003 but that the growth in interest earning assets should enable Park to match or exceed the net interest income earned in 2002. The arbitrage available due to the low cost of dollar-roll repos will continue to have a positive impact on net interest income for the second quarter of 2003, but management is uncertain if this opportunity will be available later in the year. -16- Provision for Loan Losses - ------------------------- The provision for loan losses decreased by $1.1 million or 24.0% to $3.4 million for the first quarter of 2003 compared to $4.5 million for the first quarter of 2002. Net charge-offs were $1.4 million in 2003 compared to $3.8 million in 2002. Nonperforming loans, defined as loans that are 90 days past due, renegotiated loans, and nonaccrual loans were $30.9 million or 1.15% of loans at March 31, 2003 compared to $26.5 million or .98% of loans at December 31, 2002 and $28.4 million or 1.04% of loans at March 31, 2002. The reserve for loan losses as a percentage of outstanding loans was 2.39% at March 31, 2003 compared to 2.30% at December 31, 2002 and 2.23% at March 31, 2002. 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 $3.7 million or 31.0% to $15.5 million for the first quarter of 2003 compared to $11.8 million for the first quarter of 2002. The following table summarizes the change in noninterest income.
Three Months Ended March 31, (in thousands) -------------------------------------------- 2003 2002 Change ------ ------ ------ Fees from Fiduciary Activities $2,414 $2,201 $213 Service Charges on Deposit Accounts 3,412 3,216 196 Other Service Income 5,585 2,868 2,717 Other Income 4,044 3,510 534 ------- ------- ------ Total $15,455 $11,795 $3,660 ------- ------- ------
The large 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. This high volume of mortgage loan production is continuing into the second quarter. The increase in Other Income was primarily due to increases in check card and ATM transactions. Management expects that total noninterest income for the second quarter will be at approximately the same level as the first quarter due primarily to the large fee income earned from the origination and sale of fixed rate mortgage loans. Gain (Loss) on Sale of Securities - --------------------------------- The loss on sale of securities of $1.2 million for the first quarter of 2003 was due to the sale of $100 million of U.S. Agency collateralized mortgage obligations. The proceeds were reinvested in fifteen year U.S. Agency mortgage-backed securities. The increased interest income from the mortgage-backed securities is expected to earn back the loss in twenty-two months. The loss on sale of securities of $210,000 for the first quarter of 2002 was due to the sale of $100 million of U.S. Agency collateralized mortgage obligations. These securities were sold to reduce the maturity extension risk in the investment portfolio. -17- Other Expense - ------------- Total other expense increased by $853,000 or 2.9% to $30.1 million for the quarter ended March 31, 2003 compared to $29.2 million for the same period in 2002. Salaries and employee benefits expense increased by $1.3 million or 7.9% to $17.54 million for the first quarter of 2003 compared to $16.25 million for the first quarter of 2002. Full time equivalent employees were 1,617 at March 31, 2003 compared to 1,584 at March 31, 2002. The subcategory other expense decreased by $723,000 or 7.3% to $9.2 million for the three months ended March 31, 2003 compared to $9.9 million for the same period in 2002. The decrease in this expense was primarily due to the $392,000 decrease in the amortization of intangible assets and to a decrease in data processing expense and legal and other professional fees. Federal Income Taxes - -------------------- Federal income tax expense was $9.8 million for the first quarter of 2003 compared to $8.6 million for the same period in 2002. The ratio of federal income tax expense to income before taxes was approximately 29.6% in 2003 and 28.7% in 2002. 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. -18- COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2003 AND DECEMBER 31, 2002 Changes in Financial Condition and Liquidity - -------------------------------------------- Total assets increased by $667 million or 15.0% to $5,113 million at March 31, 2003 compared to $4,447 million at December 31, 2002. Total loans decreased by $9 million or .3% to $2,692 million as the demand for consumer loans continues to be weak. The demand for commercial and commercial real estate loans improved during the first quarter and management is hopeful that total loans will begin growing during the second quarter. Investment securities increased by $716 million or 51.8% to $2,099 million at March 31, 2003. Part of this increase ($475 million) was due to the purchase of short-term U.S. Agency notes to arbitrage the increase in short-term borrowings from the dollar-roll repos. Total liabilities increased by $655 million or 16.6% to $4,592 million at March 31, 2003 compared to $3,937 million at December 31, 2002. Total borrowed money increased by $678 million to $1,055 million at March 31, 2003 compared to $376 million at December 31, 2002. Most of the increase in borrowed money was due to $486 million in short-term dollar-roll repos. 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 52.47% at March 31, 2003 compared to 60.54% at December 31, 2002 and 61.56% at March 31, 2002. Cash and cash equivalents totaled $203 million at March 31, 2003 compared to $239 million at December 31, 2002 and $127 million at March 31, 2002. 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, 2003 was $521 million or 10.19% of total assets compared to $509 million or 11.45% of total assets at December 31, 2002 and $472 million or 10.66% of total assets at March 31, 2002. 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 4% and the well capitalized ratio is greater than or equal to 5%. Park's leverage ratio was 10.07% at March 31, 2003 and 10.72% at December 31, 2002. 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 15.88% at March 31, 2003 and 16.51% at December 31, 2002. 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 16.81% at March 31, 2003 and 17.78% at December 31, 2002. -19- The financial institution subsidiaries of Park each met the well capitalized capital ratio guidelines at March 31, 2003. The following table indicates the capital ratios for each subsidiary and Park at March 31, 2003:
TIER I TOTAL LEVERAGE RISK-BASED RISK-BASED -------- ---------- ---------- Park National Bank 5.51% 8.48% 12.09% Richland Trust Company 5.84% 10.23% 11.49% Century National Bank 5.77% 10.20% 12.61% First-Knox National Bank 5.54% 8.56% 12.45% Second National Bank 5.48% 9.34% 12.89% United Bank, N.A. 6.18% 11.32% 12.58% Security National Bank 5.81% 8.72% 12.67% Citizens National Bank 6.02% 11.47% 16.44% Park National Corporation 10.07% 15.88% 16.81% Minimum Capital Ratio 4.00% 4.00% 8.00% Well Capitalized Ratio 5.00% 6.00% 10.00%
At the April 21, 2003 Park National Corporation Board of Directors' meeting, a cash dividend of $.83 per share was declared payable on June 10, 2003 to stockholders of record on May 23, 2003. 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. Management reviews interest rate sensitivity on a quarterly basis by modeling the financial statements under various interest rate scenarios. The primary reason for these efforts is to guard Park from adverse impacts of unforeseen changes in interest rates. Management continues to believe that further changes in interest rates will have a small impact on net income, consistent with the disclosure on pages 31 and 32 of our 2002 Annual Report, which is incorporated by reference into our 2002 Form 10-K. However, as mentioned earlier in management's analysis of net interest income, the net interest margin is expected to continue to decrease in 2003. -20- ITEM 4 - CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES Within the 90 day period prior to the filing date of this Quarterly Report on Form 10-Q, Park, under the supervision, and with the participation, of its management, including its principal executive officer and principal financial officer, performed an evaluation of the Corporation's disclosure controls and procedures, as contemplated by Rule 13a-15 under the Securities Exchange Act of 1934, as amended. Based on that evaluation, Park's principal executive officer and principal financial officer concluded that such disclosure controls and procedures are effective to ensure that material information relating to Park, including its consolidated subsidiaries, is made known to them, particularly during the period for which the periodic reports are being prepared. CHANGES IN INTERNAL CONTROLS No significant changes were made in Park's internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation performed pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended, referred to above. -21- 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. Annual Meeting of Shareholders - April 21, 2003: a. On April 21, 2003 Park National Corporation held its Annual Meeting of Shareholders. At the close of business on the February 21, 2003 record date, 13,781,447 Park National Corporation common shares were outstanding and entitled to vote. At the Annual Meeting, 12,492,068 or 90.64% 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: James J. Cullers 11,837,810 For 24,215 Withheld 630,043 Abstain and Broker Non-Votes ---------- ------ ------- R. William Geyer 11,848,649 For 12,903 Withheld 630,516 Abstain and Broker Non-Votes ---------- ------ ------- William T. McConnell 11,852,188 For 8,663 Withheld 631,217 Abstain and Broker Non-Votes ---------- ----- ------- William A. Phillips 12,027,599 For 8,455 Withheld 456,014 Abstain and Broker Non-Votes ---------- ----- ------- -22- Directors whose term of office continued after the Annual Meeting: Maureen Buchwald C. Daniel DeLawder D. C. Fanello Harry O. Egger Howard E. LeFevre John J. O'Neill J. Gilbert Reese Rick R. Taylor c. See Item (b) for the voting results for directors. d. Not applicable Item 5. Other Information ----------------- Not applicable. Item 6. Exhibits and Reports on Form 8-K -------------------------------- a. Exhibits -------- 99.1 Certification Pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer) 99.2 Certification Pursuant to Title 18, United State Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer) b. Reports on Form 8-K ------------------- No reports on Form 8-K were filed by Park National Corporation during the fiscal quarter ended March 31, 2003. On April 21, 2003, Park National Corporation furnished information regarding the press release announcing first quarter earnings for Park National Corporation under Item 9 (which was also deemed provided under Item 12) in a Form 8-K. The press release was included as Exhibit 99. -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, 2003 BY: /s/C. Daniel DeLawder ----------- ---------------------- C. Daniel DeLawder President and Chief Executive Officer DATE: May 8, 2003 BY: /s/John W. Kozak ----------- ---------------- John W. Kozak Chief Financial Officer -24- CERTIFICATIONS I, C. Daniel DeLawder, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Park National Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant' s auditors any material weakness in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 8, 2003 /s/ C. Daniel DeLawder -------------------------------------------- C. Daniel DeLawder President and Chief Executive Officer -25- CERTIFICATIONS I, John W. Kozak, certify that 1. I have reviewed this quarterly report on Form 10-Q of Park National Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made know to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 8, 2003 /s/ John W. Kozak -------------------------------------------- John W. Kozak Chief Financial Officer -26- EX-99.1 3 l00868aexv99w1.txt EX-99.1 CERTIFICATION BY DELAWDER EXHIBIT 99.1 CERTIFICATION PURSUANT TO - ------------------------- TITLE 18, UNITED STATES CODE, SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Park National Corporation (the "Company") on Form 10-Q for the quarterly period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, C. Daniel DeLawder, Chief Executive Officer of the Company, certify, pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/C. Daniel DeLawder ** --------------------- C. Daniel DeLawder President and Chief Executive Officer May 8, 2003 **-A signed original of this written statement required by Section 906 has been provided to Park National Corporation and will be retained by Park National Corporation and furnished to the Securities and Exchange commission or its staff upon request. EX-99.2 4 l00868aexv99w2.txt EX-99.2 CERTIFICATION BY KOZAK EXHIBIT 99.2 CERTIFICATION PURSUANT TO - ------------------------- TITLE 18, UNITED STATES CODE, SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Park National Corporation (the "Company") on Form 10-Q for the quarterly period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John W. Kozak, Chief Financial Officer of the Company, certify, pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/John W. Kozak ** ----------------- John W. Kozak Chief Financial Officer May 8, 2003 **-A signed original of this written statement required by Section 906 has been provided to Park National Corporation and will be retained by Park National Corporation and furnished to the Securities and Exchange commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----