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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 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
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(Exact name of Registrant as specified in its charter)
Ohio 31-1179518
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
50 North Third Street, P.O. Box 3500, Newark, Ohio 43058-3500
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (740) 349-8451
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Shares, without par value American Stock Exchange
(13,940,083 common shares outstanding
on February 22, 2002)
Securities registered pursuant to Section 12(g) of the Act: None
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 ____
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Based upon the closing price reported on the American Stock Exchange on February
22, 2002 ($95.25), the aggregate market value of the common shares of the
Registrant held by non-affiliates (for this purpose, common shares held by the
Registrant's banking subsidiaries in fiduciary accounts are not considered to be
held by affiliates) on that date was $1,154,843,194.
Documents Incorporated by Reference:
(1) Portions of the Registrant's Annual Report to Shareholders for the
fiscal year ended December 31, 2001, are incorporated by reference
into Parts I and II of this Annual Report on Form 10-K.
(2) Portions of the Registrant's definitive Proxy Statement for its
Annual Meeting of Shareholders to be held on April 15, 2002, are
incorporated by reference into Part III of this Annual Report on
Form 10-K.
Exhibit Index on Page E-1
PART I
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ITEM 1. BUSINESS.
GENERAL
Park National Corporation ("Park") is a bank holding company under the
Bank Holding Company Act of 1956 and is subject to regulation by the Federal
Reserve Board. Park was incorporated under Ohio law in 1992.
Through its subsidiaries, The Park National Bank, Newark, Ohio, a
national banking association, The Richland Trust Company, Mansfield, Ohio, an
Ohio state-chartered bank, Century National Bank, Zanesville, Ohio, a national
banking association, The First-Knox National Bank of Mount Vernon, a national
banking association, United Bank, N.A., Bucyrus, Ohio, a national banking
association, Second National Bank, Greenville, Ohio, a national banking
association, The Security National Bank and Trust Co., Springfield, Ohio, a
national banking association, and The Citizens National Bank of Urbana, Urbana,
Ohio, a national banking association, Park engages in a general commercial
banking and trust business in small and medium population Ohio communities. Park
National Bank operates through two banking divisions with the Park National
Division headquartered in Newark, Ohio and the Fairfield National Division
headquartered in Lancaster, Ohio. First-Knox National Bank also operates through
two banking divisions with the First-Knox National Division headquartered in
Mount Vernon, Ohio and the Farmers and Savings Division headquartered in
Loudonville, Ohio. Security National Bank also operates through two divisions
with the Security National Division headquartered in Springfield, Ohio and the
Unity National Division (formerly The Third Savings and Loan Company)
headquartered in Piqua, Ohio. Park's banking subsidiaries and their respective
divisions comprise Park's segments. Financial information about Park's
reportable segments is included in Note 19 of the Notes to the Consolidated
Financial Statements located on pages 48 and 49 of Park's Annual Report to
Shareholders for the fiscal year ended December 31, 2001. That financial
information is incorporated herein by reference.
Guardian Financial Services Company, an Ohio consumer finance company
based in Hilliard, Ohio, also operates as a separate subsidiary of Park.
Guardian Finance provides consumer finance services in the central Ohio area.
On March 23, 2001, Park merged with Security Banc Corporation
("Security") of Springfield, Ohio, an Ohio corporation which was a bank holding
company with three financial institution subsidiaries (Security National Bank,
Citizens National Bank, and The Third Savings and Loan Company). The merger was
effected pursuant to the terms of the Agreement and Plan of Merger, dated as of
November 20, 2000, between Park and Security. Under the terms of the Security
merger agreement, each outstanding Security common share was cancelled and
extinguished and the holder thereof became entitled to receive .284436 Park
common shares in a tax-free exchange. Park issued approximately 3,350,000 common
shares in this merger transaction accounted for as a pooling-of-interests. Each
option to purchase Security common shares that was outstanding immediately prior
to completion of the merger was converted into an option to purchase Park common
shares. The number of Park common shares subject to each converted option, as
well as the exercise price of that option, was adjusted to reflect the exchange
ratio.
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The three financial institution subsidiaries of Security are being
operated as two separate subsidiaries by Park. The Third Savings and Loan
Company was merged into Security National Bank effective December 27, 2001 and
is now being operated as a separate division of Security National Bank under the
name of Unity National. Citizens National Bank continues to be operated as a
separate banking subsidiary of Park.
SERVICES PROVIDED BY PARK'S SUBSIDIARIES
Park National Bank, Richland Trust Company, Century National Bank,
First-Knox National Bank, United Bank, Second National Bank, Security National
Bank and Citizens National Bank provide the following principal services:
- the acceptance of deposits for demand, savings and time
accounts and the servicing of those accounts;
- commercial, industrial, consumer and real estate lending,
including installment loans and automobile leasing, credit
cards and personal lines of credit;
- safe deposit operations;
- trust services;
- cash management;
- electronic funds transfers; and
- a variety of additional banking-related services tailored to
the needs of individual customers.
Park believes that the deposit mix of its banking subsidiaries is such
that no material portion has been obtained from a single customer and,
consequently, the loss of any one customer of any banking subsidiary would not
have a materially adverse effect on the business of that banking subsidiary or
Park.
Park's banking subsidiaries deal with a wide cross-section of
businesses and corporations located primarily in Ashland, Athens, Champaign,
Clark, Coshocton, Crawford, Darke, Fairfield, Fayette, Franklin, Greene,
Hamilton, Hocking, Holmes, Knox, Licking, Madison, Marion, Mercer, Miami,
Montgomery, Morgan, Morrow, Muskingum, Perry and Richland Counties in Ohio. Few
loans are made to borrowers outside these counties. Each banking subsidiary
makes lending decisions in accordance with written loan policies designed to
maintain loan quality. Each banking subsidiary originates and retains for its
own portfolio commercial and commercial real estate loans, variable rate
residential real estate loans, home equity lines of credit, installment loans
and credit card loans. Each banking subsidiary also generates fixed rate
residential real estate loans for the secondary market. The loans of each
banking subsidiary are spread over a broad range of industrial classifications.
Park believes that its banking subsidiaries have no significant concentrations
of loans to borrowers engaged in the same or similar industries and have no
loans to foreign entities.
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Commercial lending entails significant additional risks as compared
with consumer lending--i.e., single-family residential mortgage lending, home
equity lines of credit, installment lending, credit card loans and automobile
leasing. In addition, the payment experience on commercial loans typically
depends on adequate cash flow of a business and thus may be subject, to a
greater extent, to adverse conditions in the economy generally or adverse
conditions in a specific industry.
At December 31, 2001, Park's banking subsidiaries had outstanding
approximately $1,076.9 million in commercial loans (including commercial real
estate loans) and commercial leases, representing approximately 38.5% of their
total aggregate loan portfolio as of that date. The regulatory limits for loans
made to one borrower by Park National Bank, Richland Trust Company, Century
National Bank, First-Knox National Bank, United Bank, Second National Bank,
Security National Bank and Citizens National Bank were $17.5 million, $5.0
million, $4.9 million, $8.8 million, $2.0 million, $4.0 million, $11.1 million
and $2.4 million, respectively, at December 31, 2001. However, participations in
loans of amounts larger than $10.0 million are generally sold to other banks or
financial institutions. Loan terms include amortization schedules commensurate
with the purpose of each loan, the source of each repayment and the risk
involved. Approval by the Executive Committee of Park is required for loans to
existing borrowers whose aggregate total debt, including the principal amount of
the proposed loan, exceeds $8.0 million. For new borrowers, a loan of $4.0
million or more requires the approval of the Executive Committee. The primary
analysis technique used in determining whether to grant a commercial loan is the
review of a schedule of cash flows to evaluate whether anticipated future cash
flows will be adequate to service both interest and principal due.
Park has a loan review program which re-evaluates annually all loans
with an outstanding amount greater than $250,000. If deterioration has occurred,
the lender subsidiary takes effective and prompt action designed to assure
payment of the loan. Upon detection of the reduced ability of a borrower to
service interest and/or principal on a loan, the subsidiary downgrades the loan
and places it on non-accrual status. The subsidiary then works with the borrower
to develop a payment schedule which they anticipate will permit service of the
principal and interest on the loan by the borrower. Loans which deteriorate and
show the inability of a borrower to repay principal and do not meet the
subsidiary's standards are charged off quarterly.
Park National Bank and its subsidiaries also lease equipment under
terms similar to the commercial lending policies described above. Park
Commercial Leasing, a division of Park National Bank, originates and services
direct leases of equipment which it acquires with no outside financing. In
addition, Scope Leasing, Inc., another wholly-owned subsidiary of Park National
Bank, specializes in aircraft financing.
At December 31, 2001, Park's subsidiaries had outstanding consumer
loans (including automobile leases and credit cards) in an aggregate amount of
approximately $555.9 million, constituting approximately 19.9% of their
aggregate total loan portfolio. The subsidiaries make installment credit
available to customers and prospective customers in their primary market area of
Ashland, Athens, Champaign, Clark, Coshocton, Crawford, Darke, Fairfield,
Fayette, Franklin, Greene, Hamilton, Hocking, Holmes, Knox, Licking, Madison,
Marion, Mercer, Miami, Montgomery, Morgan, Morrow, Muskingum, Perry and Richland
Counties in Ohio. In addition, during the first half of 2001, Park National Bank
participated in an automobile installment loan
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program sponsored by a major national insurance company under which automobile
installment loans were made to borrowers throughout the State of Ohio. This
automobile lending program stopped during the third quarter of 2001 as the
national insurance company utilizes its own banking operations in the State of
Ohio. Park National Bank had approximately $61.4 million of automobile
installment loans outstanding under this program at December 31, 2001. Park
Leasing Company, a wholly-owned subsidiary of Park National Bank, also has an
automobile leasing program with the same major national insurance company under
which automobile leases may be entered into with lessees throughout several
states including the State of Ohio. Park Leasing Company had approximately $10.0
million of automobile leases outstanding under this program at December 31,
2001.
Credit approval for consumer loans requires demonstration of sufficient
income to repay principal and interest due, stability of employment, a positive
credit record and sufficient collateral for secured loans. It is the policy of
Park's subsidiaries to adhere strictly to all laws and regulations governing
consumer lending. A qualified compliance officer is responsible for monitoring
each subsidiary's performance in this area and for advising and updating loan
personnel. Park's subsidiaries make credit life insurance and health and
accident insurance available to all qualified buyers, thus reducing their risk
of loss when a borrower's income is terminated or interrupted. Each subsidiary
reviews its consumer loan portfolio monthly and charges off loans which do not
meet that subsidiary's standards. Each banking subsidiary also offers VISA and
MasterCard accounts through its consumer lending department. These accounts are
administered under the same standards as other consumer loans and leases.
Consumer loans generally involve more risk as to collectibility than
mortgage loans because of the type and nature of the collateral and, in certain
instances, the absence of collateral. As a result, consumer lending collections
depend upon the borrower's continued financial stability, and thus are more
likely to be adversely affected by job loss, divorce or personal bankruptcy and
by adverse economic conditions.
At December 31, 2001, Park's banking subsidiaries had outstanding
approximately $1,163.0 million in residential real estate, home equity lines of
credit and construction mortgages, representing approximately 41.6% of total
loans outstanding. The market area for real estate lending by the banking
subsidiaries is concentrated in Ashland, Athens, Champaign, Clark, Coshocton,
Crawford, Darke, Fairfield, Fayette, Franklin, Greene, Hamilton, Hocking,
Holmes, Knox, Licking, Madison, Marion, Mercer, Miami, Montgomery, Morgan,
Morrow, Muskingum, Perry and Richland Counties in Ohio. Each banking subsidiary
generally requires that the residential real estate loan amount be no more than
80% of the purchase price or the appraised value of the real estate securing the
loan, unless private mortgage insurance is obtained by the borrower. Loans made
for each banking subsidiary's portfolio in this lending category are generally
adjustable rate, fully amortized mortgages. Each banking subsidiary also
originates fixed rate real estate loans for the secondary market. These loans
are generally sold immediately after closing. All real estate loans are secured
by first mortgages with evidence of title in favor of the banking subsidiary in
the form of an attorney's opinion of title or a title insurance policy. Each
banking subsidiary also requires proof of hazard insurance with the banking
subsidiary named as the mortgagee and as the loss payee. Independent appraisals
are generally obtained for consumer real estate loans.
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Home equity lines of credit are generally made as second mortgages by
Park's banking subsidiaries. The maximum amount of a home equity line of credit
is generally limited to 85% of the appraised value of the property less the
balance of the first mortgage. The home equity lines of credit are written with
ten-year terms but are subject to review and reappraisal every three years. A
variable interest rate is generally charged on the home equity lines of credit.
Construction financing is generally considered to involve a higher
degree of risk of loss than long-term financing on improved, occupied real
estate. Risk of loss on a construction loan depends largely upon the accuracy of
the initial estimate of the property's value at completion of construction and
the estimated cost (including interest) of construction. If the estimate of
construction cost proves to be inaccurate, the banking subsidiary making the
loan may be required to advance funds beyond the amount originally committed to
permit completion of the project. If the estimate of value proves inaccurate,
the banking subsidiary may be confronted, at or prior to the maturity of the
loan, with a project having a value insufficient to assure full repayment,
should the borrower default.
COMPETITION
Park's subsidiaries compete for deposits and loans with other banks,
savings associations, credit unions and other types of financial institutions
and operate 107 financial service offices and a network of 109 automatic banking
center locations in 26 central and southern Ohio counties. Competitors now
include securities dealers, brokers, mortgage bankers, investment advisors,
finance companies, insurance companies and financial services subsidiaries of
commercial and manufacturing companies. Many of these competitors enjoy the
benefits of advanced technology, fewer regulatory constraints, and lower cost
structures. Many of the newer competitors offer one-stop financial services to
their customers that may include services that banks may not have been able or
legally permitted to offer their customers in the past. The primary factors in
competing for loans are interest rates charged and overall services provided to
borrowers. The primary factors in competing for deposits are interest rates paid
on deposits, account liquidity and convenience of office locations.
EMPLOYEES
As of December 31, 2001, Park and its subsidiaries had 1,551 full-time
equivalent employees.
SUPERVISION AND REGULATION
Park, as a bank holding company, is regulated extensively under federal
law. Park National Bank, Century National Bank, First-Knox National Bank, United
Bank, Second National Bank, Security National Bank and Citizens National Bank,
as national banks, and Richland Trust Company, as an Ohio state-chartered bank,
are regulated extensively under federal and state law. Guardian Finance, as an
Ohio state-chartered consumer finance company, is regulated under state law.
Park is subject to regulation, supervision and examination by the Federal
Reserve Board. Park National Bank, Century National Bank, First-Knox National
Bank, United Bank, Second National Bank, Security National Bank and Citizens
National Bank are subject to regulation by the Office of the Comptroller of the
Currency ("OCC") and the Federal Deposit Insurance Corporation ("FDIC").
Richland Trust Company is subject to regulation, supervision and examination by
the
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Ohio Division of Financial Institutions and the FDIC and Guardian Finance is
subject to regulation, supervision and examination by the Ohio Division of
Financial Institutions.
The following information describes selected federal and Ohio statutory
and regulatory provisions and is qualified in its entirety by reference to the
full text of the particular statutory or regulatory provisions. These statutes
and regulations are continually under review by Congress and state legislatures
and federal and state regulatory agencies. A change in statutes, regulations or
regulatory policies applicable to Park and its subsidiaries could have a
material effect on their respective businesses.
REGULATION OF BANK HOLDING COMPANIES
Park is registered with the Federal Reserve Board as a bank holding
company under the Bank Holding Company Act. Bank holding companies and their
activities are subject to extensive regulation by the Federal Reserve Board.
Bank holding companies are required to file reports with the Federal Reserve
Board and such additional information as the Federal Reserve Board may require,
and are subject to regular examinations by the Federal Reserve Board.
The Federal Reserve Board also has extensive enforcement authority over
bank holding companies, including, among other things, the ability to:
- assess civil money penalties;
- issue cease and desist or removal orders; and
- require that a bank holding company divest subsidiaries
(including its bank subsidiaries).
In general, the Federal Reserve Board may initiate enforcement actions for
violations of law and regulations and unsafe or unsound practices.
Under Federal Reserve Board policy, a bank holding company is expected
to act as a source of financial strength to each subsidiary bank and to commit
resources to support those subsidiary banks. Under this policy, the Federal
Reserve Board may require a bank holding company to contribute additional
capital to an undercapitalized subsidiary bank.
The Bank Holding Company Act requires the prior approval of the Federal
Reserve Board in any case where a bank holding company proposes to:
- acquire direct or indirect ownership or control of more than
5% of the voting shares of any bank that is not already
majority-owned by it;
- acquire all or substantially all of the assets of another bank
or bank holding company; or
- merge or consolidate with any other bank holding company.
Section 4 of the Bank Holding Company Act also prohibits a bank holding
company, with certain exceptions, from acquiring more than 5% of the voting
shares of any company that is not a
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bank and from engaging in any business other than banking or managing or
controlling banks. The primary exception allows the ownership of shares by a
bank holding company in any company the activities of which the Federal Reserve
Board had determined as of March 10, 2000 to be so closely related to banking as
to be a proper incident thereto. The Federal Reserve Board by regulation had
determined that the following activities, among others, were so closely related
to banking:
- operating a savings association, mortgage company, finance
company, credit card company or factoring company;
- performing certain data processing operations;
- providing investment and financial advice; and
- acting as an insurance agent for certain types of
credit-related insurance.
Since March 11, 2000, subject to certain conditions, bank holding
companies that elect to become financial holding companies have been permitted
to affiliate with securities firms and insurance companies and engage in other
activities that are financial in nature. Also since March 11, 2000, no
regulatory approval has been required for a financial holding company to acquire
a company, other than a bank or savings association, engaged in activities that
are financial in nature or incidental to activities that are financial in
nature, as determined by the Federal Reserve Board. As of the date of this
Annual Report on Form 10-K, Park has not elected to become a financial holding
company.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act on maintenance of reserves
against deposits, extensions of credit to the bank holding company or any of its
subsidiaries, investments in the stock or other securities of the bank holding
company or its subsidiaries and the taking of such stock or securities as
collateral for loans to any borrower. Further, a bank holding company and its
subsidiaries are prohibited from engaging in certain tying arrangements in
connection with any extension of credit, lease or sale of property or furnishing
of any services. Various consumer laws and regulations also affect the
operations of these subsidiaries.
TRANSACTIONS WITH AFFILIATES
Sections 23A and 23B of the Federal Reserve Act restrict transactions
by banks and their subsidiaries with their affiliates. An affiliate of a bank is
any company or entity which controls, is controlled by or is under common
control with the bank. Generally, Sections 23A and 23B:
- limit the extent to which a bank or its subsidiaries may
engage in "covered transactions" with any one affiliate to an
amount equal to 10% of that bank's capital stock and surplus
(i.e., tangible capital); and
- require that all such transactions be on terms substantially
the same, or at least as favorable to the bank or subsidiary,
as those provided to a non-affiliate.
The term "covered transaction" includes the making of loans, purchase of assets,
issuance of a guarantee and other similar types of transactions.
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A bank's authority to extend credit to executive officers, directors
and greater than 10% shareholders, as well as entities such persons control, is
subject to Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O
promulgated thereunder by the Federal Reserve Board. Among other things, these
loans must be made on terms substantially the same as those offered to
unaffiliated individuals and must not involve a greater than normal risk of
repayment. In addition, the amount of loans a bank may make to these persons is
based, in part, on the bank's capital position, and specified approval
procedures must be followed in making loans which exceed specified amounts.
REGULATION OF NATIONALLY-CHARTERED BANKS
As national banking associations, Park National Bank, Century National
Bank, First-Knox National Bank, United Bank, Second National Bank, Security
National Bank and Citizens National Bank are subject to regulation under the
National Banking Act and are periodically examined by the OCC. They are subject,
as member banks, to the rules and regulations of the Federal Reserve Board. Each
is an insured institution. Park National Bank, First-Knox National Bank, United
Bank, Second National Bank, Security National Bank and Citizens National Bank
are members of the Bank Insurance Fund, and Century National Bank is a member of
the Savings Association Insurance Fund. As a result, they are subject to
regulation by the FDIC. The establishment of branches of each of Park National
Bank, Century National Bank, First-Knox National Bank, United Bank, Second
National Bank, Security National Bank and Citizens National Bank is subject to
prior approval of the OCC.
REGULATION OF OHIO STATE-CHARTERED BANKS AND CONSUMER FINANCE COMPANIES
The FDIC is the primary federal regulator of Richland Trust Company.
The FDIC issues regulations governing the operations of Richland Trust Company
and examines Richland Trust Company. The FDIC may initiate enforcement actions
against insured depository institutions and persons affiliated with them for
violations of laws and regulations or for engaging in unsafe or unsound
practices. If the grounds provided by law exist, the FDIC may appoint a
conservator or a receiver for a nonmember bank.
As a bank incorporated under Ohio law, Richland Trust Company is
subject to regulation and supervision by the Ohio Division of Financial
Institutions. Division regulation and supervision affects the internal
organization of Richland Trust Company, as well as its savings, mortgage lending
and other investment activities. The Division of Financial Institutions may
initiate supervisory measures or formal enforcement actions against Ohio
commercial banks. Ultimately, if the grounds provided by law exist, the Division
of Financial Institutions may place an Ohio bank in conservatorship or
receivership. Whenever the Superintendent of Financial Institutions considers it
necessary or appropriate, the Superintendent may also examine the affairs of any
holding company or any affiliate or subsidiary of an Ohio bank.
As a consumer finance company incorporated under Ohio law, Guardian
Finance is also subject to regulation and supervision by the Division of
Financial Institutions. Division regulation and supervision affect the lending
activities of Guardian Finance. If grounds provided by law exist, the Division
of Financial Institutions may suspend or revoke an Ohio consumer finance
company's ability to make loans.
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FEDERAL DEPOSIT INSURANCE CORPORATION
The FDIC is an independent federal agency which insures the deposits,
up to prescribed statutory limits, of federally-insured banks and savings
associations and safeguards the safety and soundness of the financial
institution industry. Two separate insurance funds are maintained and
administered by the FDIC. In general, banking institutions are members of the
"BIF," and savings associations are "SAIF" members. The insurance fund
conversion provisions do not prohibit a SAIF member from either converting to a
bank charter, as long as the resulting bank remains a SAIF member (as Century
National Bank did when it converted to a national bank charter in April 1998),
or merging with a bank, as long as the bank continues to pay the SAIF insurance
assessments on the deposits acquired. Exit and entrance fees must be paid to the
FDIC in full conversions.
Insurance Premiums. Insurance premiums for SAIF and BIF members are
determined during each semi-annual assessment period based upon the members'
respective categorization as well capitalized, adequately capitalized or
undercapitalized. The FDIC assigns banks to one of three supervisory subgroups
within each capital group. The supervisory subgroup to which a bank is assigned
is based on a supervisory evaluation provided to the FDIC by the bank's primary
federal regulator and information which the FDIC determines to be relevant to
the bank's financial condition and the risk posed to the deposit insurance funds
(which may include, if applicable, information provided by the bank's state
supervisor). A bank's assessment rate depends on the capital category and
supervisory category to which it is assigned.
Effective January 1, 2000, the BIF assessment rate and the SAIF
assessment rate became the same. This assessment (which includes the FICO
assessment) currently ranges from 1.82 to 28.82 cents per $100 of domestic
deposits. Each of Park's banking subsidiaries is currently paying an assessment
rate of 1.82 cents per $100 of domestic deposits. An increase in this assessment
rate could have a material adverse effect on the earning of the affected banks,
depending on the amount of the increase.
Insurance of deposits may be terminated by the FDIC upon a finding that
the institution has engaged in unsafe or unsound practices, is in an unsafe or
unsound condition to continue operations, or has violated any applicable law,
regulation, rule, order or condition enacted or imposed by the bank's regulatory
agency.
Depositor Preference. The Federal Deposit Insurance Act provides that,
in the event of the "liquidation or other resolution" of a bank, the claims of
depositors of the bank, including the claims of the FDIC as subrogee of insured
depositors, and certain claims for administrative expenses of the FDIC as a
receiver will have priority over other general unsecured claims against the
bank. If a bank fails, insured and uninsured depositors, along with the FDIC,
will have priority in payment ahead of unsecured, nondeposit creditors.
Liability of Commonly Controlled Banks. Under the Federal Deposit
Insurance Act, a bank is generally liable for any loss incurred, or reasonably
expected to be incurred, by the FDIC in connection with (a) the default of a
commonly controlled bank or (b) any assistance provided by the FDIC to a
commonly controlled bank in danger of default. "Default" means generally the
appointment of a conservator or receiver. "In danger of default" means generally
the existence of conditions indicating that a default is likely to occur in the
absence of regulatory assistance.
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REGULATORY CAPITAL
The Federal Reserve Board has adopted risk-based capital guidelines for
bank holding companies and state member banks. The OCC and the FDIC have adopted
risk-based capital guidelines for national banks and state non-member banks,
respectively. The guidelines provide a systematic analytical framework which
makes regulatory capital requirements sensitive to differences in risk profiles
among banking organizations, takes off-balance sheet exposures expressly into
account in evaluating capital adequacy, and minimizes disincentives to holding
liquid, low-risk assets. Capital levels as measured by these standards also are
used to categorize financial institutions for purposes of certain prompt
corrective action regulatory provisions.
The minimum guideline for the ratio of total capital to risk-weighted
assets (including certain off-balance sheet items such as standby letters of
credit) is 8%. This total risk-based capital ratio must be at least 10% for a
bank holding company to be considered well capitalized. At least half of the
minimum total risk-based capital ratio (4%) must be composed of common
shareholders' equity, minority interests in the equity accounts of consolidated
subsidiaries, a limited amount of qualifying preferred stock, less goodwill and
certain other deductions, including the unrealized net gains and losses, after
applicable taxes, on available-for-sale securities carried at fair value
(commonly known as "Tier 1" risk-based capital). To be considered well
capitalized, the Tier 1 risk-based capital ratio must be at least 6%. The
remainder of total risk-based capital (commonly known as "Tier 2" risk-based
capital) may consist of mandatory convertible debt, subordinated debt, preferred
stock not qualifying as Tier 1 capital, a limited amount of the loan and lease
loss allowance and net unrealized gains, after applicable taxes, on
available-for-sale equity securities with readily determinable fair values,
subject to limitations established by the guidelines.
Under the guidelines, capital is compared to the relative risk related
to the balance sheet. To derive the risk included in the balance sheet, one of
four risk weights (0%, 20%, 50% and 100%) is applied to different balance sheet
and off-balance sheet assets, primarily based on the relative credit risk of the
counterparty. For example, claims guaranteed by the U.S. government or one of
its agencies are risk-weighted at 0%. Off-balance sheet items, such as loan
commitments and derivative financial instruments, are also assigned one of the
above risk weights after calculating balance sheet equivalent amounts. For
example, certain loan commitments are converted at 50% and then risk-weighted at
100%. Derivative financial instruments are converted to balance sheet
equivalents based on notional values, replacement costs and remaining
contractual terms. The capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings and
other factors.
The Federal Reserve Board has established minimum leverage ratio
guidelines for bank holding companies. The Federal Reserve Board guidelines
provide for a minimum ratio of Tier 1 risk-based capital to average assets
(excluding the loan and lease loss allowance, goodwill and certain other
intangibles), or "leverage ratio," of 3% for bank holding companies that meet
certain criteria, including having the highest regulatory rating, and 4% for all
other bank holding companies. To be considered well capitalized, the leverage
ratio for a bank holding company must be at least 5%. The guidelines further
provide that bank holding companies making acquisitions will be expected to
maintain strong capital positions substantially above the minimum levels. The
OCC and the FDIC have each also adopted minimum leverage ratio guidelines for
national banks and for state non-member banks, respectively.
- 11 -
Park is in compliance with the current applicable capital guideline
ratios. As of December 31, 2001, Park had a total risk-based capital ratio of
16.09%, Tier 1 risk-based capital ratio of 14.84% and a leverage ratio of 9.97%.
Park's management believes that each of its subsidiary banks is "well
capitalized" according to the guidelines described above. See Table 12 included
in the section of Park's Annual Report to Shareholders for the fiscal year ended
December 31, 2001 captioned "Financial Review" on page 32.
FISCAL AND MONETARY POLICIES
The business and earnings of Park are affected significantly by the
fiscal and monetary policies of the federal government and its agencies. Park is
particularly affected by the policies of the Federal Reserve Board, which
regulates the supply of money and credit in the United States. Among the
instruments of monetary policy available to the Federal Reserve Board are
- conducting open market operations in United States government
securities;
- changing the discount rates of borrowings of depository
institutions;
- imposing or changing reserve requirements against depository
institutions' deposits; and
- imposing or changing reserve requirements against certain
borrowing by banks and their affiliates.
These methods are used in varying degrees and combinations to directly affect
the availability of bank loans and deposits, as well as the interest rates
charged on loans and paid on deposits. For that reason alone, the policies of
the Federal Reserve Board have a material effect on the earnings of Park.
PROMPT CORRECTIVE REGULATORY ACTION
The federal banking agencies have established a system of prompt
corrective action to resolve certain of the problems of undercapitalized
institutions. This system is based on five capital level categories for insured
depository institutions: "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized."
The federal banking agencies may (or in some cases must) take certain
supervisory actions depending upon a bank's capital level. For example, the
banking agencies must appoint a receiver or conservator for a bank within 90
days after it becomes "critically undercapitalized" unless the bank's primary
regulator determines, with the concurrence of the FDIC, that other action would
better achieve regulatory purposes. Banking operations otherwise may be
significantly affected depending on a bank's capital category. For example, a
bank that is not "well capitalized" generally is prohibited from accepting
brokered deposits and offering interest rates on deposits higher than the
prevailing rate in its market, and the holding company of any undercapitalized
depository institution must guarantee, in part, specific aspects of the bank's
capital plan for the plan to be acceptable.
- 12 -
As noted above, Park's management believes that each of its subsidiary
banks qualifies as "well capitalized."
LIMITS ON DIVIDENDS AND OTHER PAYMENTS
There are various legal limitations on the extent to which subsidiary
banks may finance or otherwise supply funds to their parent holding companies.
Under federal and Ohio law, subsidiary banks may not, subject to certain limited
exceptions, make loans or extensions of credit to, or investments in the
securities of, their bank holding companies. Subsidiary banks are also subject
to collateral security requirements for any loans or extension of credit
permitted by such exceptions.
None of the Park banking subsidiaries may pay dividends out of its
surplus if, after paying these dividends, it would fail to meet the required
minimum levels under the risk-based capital guidelines and minimum leverage
ratio requirements established by the OCC and the FDIC. In addition, each bank
must have the approval of its regulatory authority if a dividend in any year
would cause the total dividends for that year to exceed the sum of the bank's
current year's "net profits" (or net income, less dividends declared during the
period based on regulatory accounting principles) and the retained net profits
for the preceding two years, less required transfers to surplus. Payment of
dividends by any of the Park banking subsidiaries may be restricted at any time
at the discretion of its regulatory authorities, if such regulatory authorities
deem such dividends to constitute unsafe and/or unsound banking practices or if
necessary to maintain adequate capital.
The ability of Park to obtain funds for the payment of dividends and
for other cash requirements is largely dependent on the amount of dividends
which may be declared by its subsidiary banks. However, the Federal Reserve
Board expects Park to serve as a source of strength to its subsidiary banks,
which may require Park to retain capital for further investment in its
subsidiary banks, rather than pay dividends to the Park shareholders. Payment of
dividends by one of Park's banking subsidiaries may be restricted at any time at
the discretion of its applicable regulatory authorities, if they deem such
dividends to constitute an unsafe and/or unsound banking practice. These
provisions could have the effect of limiting Park's ability to pay dividends on
its common shares.
GRAMM-LEACH-BLILEY ACT
On November 12, 1999, President Clinton signed into law the
Gramm-Leach-Bliley Act (also known as the Financial Services Modernization Act
of 1999) which, effective March 11, 2000, permits bank holding companies to
become financial holding companies and thereby affiliate with securities firms
and insurance companies and engage in other activities that are financial in
nature. A bank holding company may become a financial holding company if each of
its subsidiary banks is well capitalized, is well managed, and has at least a
satisfactory rating under the Community Reinvestment Act, by filing a
declaration that the bank holding company wishes to become a financial holding
company. No regulatory approval will be required for a financial holding company
to acquire a company, other than a bank or savings association, engaged in
activities that are financial in nature or incidental to activities that are
financial in nature, as determined by the Federal Reserve Board.
- 13 -
The Gramm-Leach-Bliley Act defines "financial in nature" to include:
- securities underwriting, dealing and market making;
- sponsoring mutual funds and investment companies;
- insurance underwriting and agency;
- merchant banking activities;
- and activities that the Federal Reserve Board has determined
to be closely related to banking.
A national bank also may engage, subject to limitations on investment,
in activities that are financial in nature (other than insurance underwriting,
insurance company portfolio investment, real estate development and real estate
investment) through a financial subsidiary of the bank, if the bank is well
capitalized and well managed, has at least a satisfactory Community Reinvestment
Act rating and has received the prior approval of the OCC to engage in such
activities. Subsidiary banks of a financial holding company or national banks
with financial subsidiaries must continue to be well capitalized and well
managed in order to continue to engage in activities that are financial in
nature without regulatory actions or restrictions, which could include
divestiture of the financial in nature subsidiary or subsidiaries. In addition,
a financial holding company or a bank may not acquire a company that is engaged
in activities that are financial in nature unless each of the subsidiary banks
of the financial holding company or the bank has a Community Reinvestment Act
rating of satisfactory or better.
STATISTICAL DISCLOSURE
The statistical disclosure relating to Park and its subsidiaries
required under the SEC's Industry Guide 3, "Statistical Disclosure by Bank
Holding Companies," is included in the section of Park's Annual Report to
Shareholders for the fiscal year ended December 31, 2001 captioned "Financial
Review," on pages 25 through 33 and in Note 4 to the Consolidated Financial
Statements located on page 42 of that Annual Report to Shareholders. This
statistical disclosure is incorporated herein by reference.
EFFECT OF ENVIRONMENTAL REGULATION
Compliance with federal, state and local provisions regulating the
discharge of materials into the environment, or otherwise relating to the
protection of the environment, has not had a material effect upon the capital
expenditures, earnings or competitive position of Park and its subsidiaries.
Park believes the nature of the operations of its subsidiaries has little, if
any, environmental impact. Park, therefore, anticipates no material capital
expenditures for environmental control facilities for its current fiscal year or
for the foreseeable future.
Park believes its primary exposure to environmental risk is through the
lending activities of its subsidiaries. In cases where management believes
environmental risk potentially exists, Park's subsidiaries mitigate their
environmental risk exposures by requiring environmental site assessments at the
time of loan origination to confirm collateral quality as to commercial real
estate
- 14 -
parcels posing higher than normal potential for environmental impact, as
determined by reference to present and past uses of the subject property and
adjacent sites. Environmental assessments are typically required prior to any
foreclosure activity involving non-residential real estate collateral.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain statements contained in this Annual Report on Form 10-K which
are not statements of historical fact constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Act"), including, without limitation, the statements specifically identified as
forward-looking statements within this document. In addition, certain statements
in future filings by Park with the Securities and Exchange Commission, in press
releases, and in oral and written statements made by or with the approval of
Park which are not statements of historical fact constitute forward-looking
statements within the meaning of the Act. Examples of forward-looking statements
include: (i) projections of revenues, income or loss, earnings or loss per
share, the payment or non-payment of dividends, capital structure and other
financial items; (ii) statements of plans and objectives of Park or its
management or board of directors, including those relating to products or
services; (iii) statements of future economic performance; and (iv) statements
of assumptions underlying such statements. Words such as "believes",
"anticipates", "expects", "intends", "targeted", and similar expressions are
intended to identify forward-looking statements but are not the exclusive means
of identifying those statements.
Forward-looking statements involve risks and uncertainties. Actual
results may differ materially from those predicted by the forward-looking
statements because of various factors and possible events, including the
following:
- the costs of providing compensation and benefits to Park's
employees increase;
- competition increases in the banking industry or the markets
served by Park's subsidiaries;
- costs or difficulties related to the integration of Security's
business or other acquired businesses are greater than
expected;
- there are adverse changes in general economic conditions or in
competitive forces;
- technological changes are more difficult or expensive to
implement than anticipated;
- there are adverse changes in the securities markets; and
- Park suffers the loss of key personnel.
There is also the risk that we incorrectly analyze these risks and
forces, or that the strategies we develop to address them are unsuccessful.
Forward-looking statements speak only as of the date on which they are
made, and Park undertakes no obligation to update any forward-looking statement
to reflect events or circumstances after the date on which the statement is made
to reflect unanticipated events. All subsequent
- 15 -
written and oral forward-looking statements attributable to Park or any person
acting on our behalf are qualified by the cautionary statements in this section.
ITEM 2. PROPERTIES.
Park's principal executive offices are located at 50 North Third
Street, Newark, Ohio 43055. Park does not lease or own any physical property,
real or personal.
Park National Bank, in addition to having six financial service offices
(including the main office) and the operations center in Newark, has financial
service offices in Granville, Heath (two offices), Hebron, Johnstown,
Kirkersville, Pataskala and Utica in Licking County, financial service offices
in Canal Winchester and Columbus in Franklin County, a financial service office
in Cincinnati in Hamilton County, a financial service office in Dayton in
Montgomery County and financial service offices in Baltimore, Pickerington and
Lancaster (seven offices) in Fairfield County. The financial service offices in
Canal Winchester and Fairfield County comprise the Fairfield National Division.
Park National Bank also operates six off-site automatic banking center
locations.
Richland Trust Company, in addition to seven financial service offices
in Mansfield (including the main office), has financial service offices in
Butler, Lexington, Ontario and Shelby (two offices) in Richland County. Richland
Trust Company also operates five off-site automatic banking center locations.
Century National Bank, in addition to having five financial service
offices (including the main office) and a mortgage lending office in Zanesville,
has financial service offices in New Concord and Dresden in Muskingum County, a
financial service office in Malta in Morgan County, a financial service office
in New Lexington in Perry County, a financial service office in Logan in Hocking
County, a financial service office in Athens in Athens County and a financial
service office in Coshocton in Coshocton County. Century National Bank also
operates three off-site automatic banking center locations.
First-Knox National Bank, in addition to having two financial service
offices (including the main office) in Mount Vernon, has financial service
offices in Loudonville and Perrysville in Ashland County, a financial service
office in Millersburg in Holmes County, financial service offices in Centerburg,
Danville and Fredericktown in Knox County, two financial service offices in
Mount Gilead in Morrow County and a financial service office in Bellville in
Richland County. The financial service offices in Ashland County comprise the
Farmers and Savings Division. First-Knox National Bank also operates nine
off-site automatic banking center locations.
United Bank, in addition to its main office in Bucyrus, has financial
service offices in Crestline and Galion in Crawford County and financial service
offices in Waldo, Marion, Caledonia and Prospect in Marion County. United Bank
also operates two off-site automatic banking center locations.
Second National Bank, in addition to having five financial service
offices (including the main office) in Greenville, has two financial service
offices in Arcanum and a financial service office in Versailles in Darke County
and a financial service office in Fort Recovery in Mercer County.
- 16 -
Security National Bank, in addition to having five financial service
offices (including the main office) in Springfield, has financial service
offices in Enon, Medway, South Charleston and New Carlisle (two offices) in
Clark County, two financial service offices in Jamestown and two financial
services offices in Xenia in Greene County, a financial service office in
Jeffersonville in Fayette County and financial service offices in Troy, Tipp
City and Piqua (three offices including an administrative building) in Miami
County. The financial service offices in Miami County comprise the Unity
National Division. Security National Bank also operates three off-site automatic
banking center locations.
Citizens National Bank, in addition to having two financial service
offices (including the main office) in Urbana, has a financial service office in
Mechanicsburg and North Lewisburg in Champaign County and a financial service
office in Plain City in Madison County. Citizens National Bank also operates one
off-site automatic banking center location.
Guardian Finance has its main office in Hilliard in Franklin County, a
financial service office in Mansfield where it leases space from Richland Trust
Company, a financial service office in Lancaster where it leases space from the
Fairfield National Division of Park National Bank, and a financial service
office in Heath.
ITEM 3. LEGAL PROCEEDINGS.
There are no pending legal proceedings to which Park or any of its
subsidiaries is a party or to which any of their property is subject, except
routine legal proceedings to which Park's banking subsidiaries are parties
incidental to their respective banking businesses. Park considers none of those
proceedings to be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table lists the names and ages of the executive officers
of Park as of February 22, 2002, the positions presently held by those
individuals and their individual business experience during the past five years.
- 17 -
Positions Held with Park and its
Name Age Principal Subsidiaries and Principal Occupation
- ---- --- -----------------------------------------------
William T. McConnell 68 Chairman of the Board since 1994, Chief Executive Officer from 1986 to
1999, President from 1986 to 1994 and Director since 1986, of Park;
Chairman of the Board since 1993, Chief Executive Officer from 1983 to
1999, President from 1979 to 1993, and Director of Park National Bank;
Director of Century National Bank; Director of First-Knox National Bank
Harry O. Egger 62 Vice Chairman of the Board and Director of Park since March 2001; Chairman
of the Board and Chief Executive Officer since 1997, President from 1981
to 1997, and Director since 1997 of Security National Bank; Chairman of
the Board, President and Chief Executive Officer of Security from 1997 to
March 2001
C. Daniel DeLawder 52 Chief Executive Officer since 1999, President since 1994 and Director
since 1994, of Park; Chief Executive Officer since 1999, President since
1993, Executive Vice President from 1992 to 1993, and Director of Park
National Bank; Chairman of Advisory Board since 1989 and President from
1985 to 1992 of the Fairfield National Division of Park National Bank;
Director of Richland Trust Company; Director of Second National Bank
David C. Bowers 65 Secretary since 1987, Chief Financial Officer and Chief Accounting Officer
from 1990 to 1998, and Director from 1989 to 1990, of Park; Executive Vice
President since 1999, Senior Vice President from 1986 to 1999, and
Director of Park National Bank
The executive officers serve at the pleasure of the Board of Directors
of Park and in the case of Mr. Egger, pursuant to an employment agreement.
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information called for in Item 201 of Regulation S-K is
incorporated herein by reference to page 33 of Park's Annual Report to
Shareholders for the fiscal year ended December 31, 2001 ("Park's 2001 Annual
Report to Shareholders").
On November 19, 2001, Park issued (a) 150 common shares to each of the
eleven non-employee directors of Park (for an aggregate of 1,650 common shares),
(b) 50 common shares to each of 68 non-employee directors of one of Park's
banking subsidiaries who is not also a director of Park (for an aggregate of
3,400 common shares) and (c) 100 common shares to one individual
- 18 -
who serves as a non-employee director of two of Park's subsidiaries, in each
case in lieu of an annual cash retainer for serving as a director. The common
shares had a market value of $92.20 per share. Park issued the common shares in
reliance upon the exemptions from registration provided by Sections 4(2) and
4(6) under the Securities Act of 1933 based upon the limited number of
individuals to whom the common shares were "sold" and the status of each
individual as a director of Park or of one of its subsidiaries.
ITEM 6. SELECTED FINANCIAL DATA.
The information called for in this Item 6 is incorporated herein by
reference to page 33 of Park's 2001 Annual Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
The information called for in this Item 7 is incorporated herein by
reference to pages 25 through 33 of Park's 2001 Annual Report to Shareholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
As noted on page 29 of Park's 2001 Annual Report to Shareholders,
during 2001, 2000 and 1999, Park and its subsidiaries had no investment in
off-balance sheet derivative instruments. The discussion of interest rate
sensitivity included on pages 31 and 32 of Park's 2001 Annual Report to
Shareholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Balance Sheets of Park and its subsidiaries at
December 31, 2001 and 2000, the related Consolidated Statements of Income, of
Changes in Stockholders' Equity and of Cash Flows for each of the fiscal years
in the three-year period ended December 31, 2001, the related Notes to
Consolidated Financial Statements, and the Report of Independent Auditors
appearing on pages 34 through 51 of Park's 2001 Annual Report to Shareholders,
are incorporated herein by reference. Quarterly Financial Data set forth on page
33 of Park's 2001 Annual Report to Shareholders are also incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
No response required.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information called for in this Item 10 is incorporated herein by
reference to Park's definitive proxy statement relating to the annual meeting of
shareholders to be held on April 15, 2002, under the captions "PRINCIPAL
SHAREHOLDERS OF PARK - Section 16(a) Beneficial Ownership Reporting Compliance"
and "ELECTION OF DIRECTORS." In addition, certain
- 19 -
information concerning the executive officers of Park is set forth in the
portion of Part I of this Annual Report on Form 10-K entitled "SUPPLEMENTAL
ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT."
ITEM 11. EXECUTIVE COMPENSATION.
The information called for in this Item 11 is incorporated herein by
reference to Park's definitive proxy statement relating to the annual meeting of
shareholders to be held on April 15, 2002, under the captions "ELECTION OF
DIRECTORS--Compensation of Directors," "COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION" and "COMPENSATION OF EXECUTIVE OFFICERS."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information called for in this Item 12 is incorporated herein by
reference to Park's definitive proxy statement relating to the annual meeting of
shareholders to be held on April 15, 2002, under the caption "PRINCIPAL
SHAREHOLDERS OF PARK."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for in this Item 13 is incorporated herein by
reference to Park's definitive proxy statement relating to the annual meeting of
shareholders to be held on April 15, 2002, under the captions "COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" and "TRANSACTIONS INVOLVING
MANAGEMENT."
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements.
--------------------
For a list of all financial statements included with this Annual Report
on Form 10-K, see "Index to Financial Statements" at page 24.
(a)(2) Financial Statement Schedules.
-----------------------------
All schedules for which provision is made in the applicable accounting
regulations of the SEC are not required under the related instructions
or are inapplicable and have been omitted.
(a)(3) Exhibits.
--------
Exhibits filed with this Annual Report on Form 10-K are attached
hereto. For a list of such exhibits, see the Index to Exhibits
beginning at page E-1.
- 20 -
(b) Reports on Form 8-K.
-------------------
No Current Reports on Form 8-K were filed during the fiscal quarter
ended December 31, 2001.
(c) Exhibits.
--------
Exhibits filed with this Annual Report on Form 10-K are attached
hereto. For a list of such exhibits, see the Index to Exhibits
beginning at page E-1.
(d) Financial Statement Schedules.
-----------------------------
None
- 21 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 22, 2002 By: /s/ C. Daniel DeLawder
-------------------------------------
C. Daniel DeLawder,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 22nd day of March, 2002.
Name Capacity
---- --------
* Chairman of the Board and Director
- ------------------------------
William T. McConnell
/s/ C. Daniel DeLawder President, Chief Executive Officer and Director
- ------------------------------
C. Daniel DeLawder
* Vice Chairman of the Board and Director
- ------------------------------
Harry O. Egger
/s/ John W. Kozak Chief Financial Officer and Principal Accounting Officer
- ------------------------------
John W. Kozak
* Director
- ------------------------------
Maureen Buchwald
* Director
- ------------------------------
James J. Cullers
* Director
- ------------------------------
Dominick C. Fanello
* Director
- ------------------------------
R. William Geyer
* Director
- ------------------------------
Howard E. LeFevre
* Director
- ------------------------------
James A. McElroy
* Director
- ------------------------------
John J. O'Neill
- 22 -
* Director
- ------------------------------
William A. Phillips
* Director
- ------------------------------
J. Gilbert Reese
* Director
- ------------------------------
Rick R. Taylor
* Director
- ------------------------------
John L. Warner
* By C. Daniel DeLawder pursuant to Powers of Attorney executed by the
directors and executive officers listed above, which Powers of Attorney have
been filed with the Securities and Exchange Commission.
/s/ C. Daniel DeLawder
- ------------------------------
C. Daniel DeLawder
President and Chief Executive Officer
- 23 -
PARK NATIONAL CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 2001
INDEX TO FINANCIAL STATEMENTS
-----------------------------
PAGE(S) IN
2001 ANNUAL
REPORT TO
DESCRIPTION SHAREHOLDERS
- ----------- ------------
Consolidated Balance Sheets at December 31, 2001 and 2000........................................ 34-35
Consolidated Statements of Income for the years ended December 31, 2001, 2000
and 1999................................................................................ 36-37
Consolidated Statements of Changes in Stockholders' Equity for the years ended
December 31, 2001, 2000 and 1999........................................................ 38
Consolidated Statements of Cash Flows for the years ended December 31, 2001,
2000 and 1999........................................................................... 39
Notes to Consolidated Financial Statements....................................................... 40-50
Report of Independent Auditors (Ernst & Young LLP)............................................... 51
- 24 -
PARK NATIONAL CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 2001
---------------------------------------
INDEX TO EXHIBITS
-----------------
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
2.1 Agreement and Plan of Merger (excluding exhibits and schedules), dated as of November 20, 2000,
by and between Park National Corporation ("Park") and Security Banc Corporation (incorporated
herein by reference to Exhibit 2.1 to Park's Pre-Effective Amendment No. 1 to Registration
Statement on Form S-4 filed January 29, 2001 (Registration No. 333-53038))
3.1 Articles of Incorporation of Park as filed with the Ohio Secretary of State on March 24, 1992
(incorporated herein by reference to Exhibit 3(a) to Park's Form 8-B, filed on May 20, 1992 (File
No. 0-18772) ("Park's Form 8-B"))
3.2 Certificate of Amendment to the Articles of Incorporation of Park as filed with the Ohio
Secretary of State on May 6, 1993 (incorporated herein by reference to Exhibit 3(b) to Park's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (File No. 0-18772))
3.3 Certificate of Amendment to the Articles of Incorporation of Park as filed with the Ohio
Secretary of State on April 16, 1996 (incorporated herein by reference to Exhibit 3(a) to Park's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1996 (File No. 1-13006))
3.4 Certificate of Amendment by Shareholders to the Articles of Incorporation of Park as filed with
the Ohio Secretary of State on April 22, 1997 (incorporated herein by reference to Exhibit
3(a)(1) to Park's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997 (File
No. 1-13006)("Park's June 1997 Form 10-Q"))
3.5 Articles of Incorporation of Park (reflecting amendments through April 22, 1997) [for SEC
reporting compliance purposes only - not filed with Ohio Secretary of State] (incorporated herein
by reference to Exhibit 3(a)(2) to Park's June 1997 Form 10-Q)
3.6 Regulations of Park (incorporated herein by reference to Exhibit 3(b) to Park's Form 8-B)
E-1
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
3.7 Certified Resolution regarding adoption of amendment to Subsection 2.02(A) of the Regulations of
Park by Shareholders on April 22, 1997 (incorporated herein by reference to Exhibit 3(b)(1) to
Park's June 1997 Form 10-Q)
3.8 Regulations of Park (reflecting amendments through April 22, 1997) [for SEC reporting compliance
purposes only] (incorporated herein by reference to Exhibit 3(b)(2) to Park's June 1997 Form 10-Q)
*10.1 Summary of Incentive Bonus Plan of Park **
*10.2 Split-Dollar Agreement, dated May 17, 1993, between William T. McConnell and The Park National
Bank (incorporated herein by reference to Exhibit 10(f) to Park's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993 (File No. 0-18772)); and Schedule A identifying other
identical Split-Dollar Agreements between subsidiaries of Park and executive officers of such
subsidiaries who are directors or executive officers of Park (incorporated herein by reference to
Exhibit 10.2 to Park's Registration Statement on Form S-4 filed February 22, 2000 Registration
No. 333-30858))
*10.3 Split-Dollar Agreement dated September 29, 1993, between Dominick C. Fanello and The Richland
Trust Company (incorporated herein by reference to Exhibit 10(g) to Park's Annual Report on Form
10-K for the fiscal year ended December 31, 1993 (File No. 0-18772)); and Schedule A to
Exhibit 10.3 identifying other identical Split-Dollar Agreements between directors of Park and
The Park National Bank, The Richland Trust Company, Century National Bank or The First-Knox
National Bank of Mount Vernon as identified in such Schedule A **
*10.4 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 Park's
Registration Statement on Form S-8 filed April 23, 2001 (Registration No. 333-59360))
*10.5 Form of Stock Option Agreement executed in connection with the grant of options under the Park
National Corporation 1995 Incentive Stock Option Plan, as amended (incorporated herein by
reference to Exhibit 10(i) to Park's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 (File No. 1-13006))
*10.6 Description of Park National Corporation Supplemental Executive Retirement Plan (incorporated
herein by reference to Exhibit 10(i) to Park's Registration Statement on Form S-4, filed on
January 24, 1997 (Registration No. 333-20417))
E-2
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
*10.7 Security Banc Corporation 1987 Stock Option Plan, which was assumed by Park (incorporated herein
by reference to Exhibit 10(a) to Park's Registration Statement on Form S-8 filed April 23, 2001
(Registration No. 333-59378))
*10.8 Security Banc Corporation 1995 Stock Option Plan, which was assumed by Park (incorporated herein
by reference to Exhibit 10(b) to Park's Registration Statement on Form S-8 filed April 23, 2001
(Registration No. 333-59378))
*10.9 Security Banc Corporation 1998 Stock Option Plan, which was assumed by Park (incorporated herein
by reference to Exhibit 10(c) to Park's Registration Statement on Form S-8 filed April 23, 2001
(Registration No. 333-59378))
*10.10 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 (incorporated herein by reference to
Exhibit 10(e) to Park's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2001
(File No. 1-13006))
13 Annual Report to Shareholders for the fiscal year ended December 31, 2001 (not deemed filed
except for portions thereof which are specifically incorporated by reference in this Annual
Report on Form 10-K) (incorporated by reference to the financial statements portion of this
Annual Report on Form 10-K beginning at page 24) **
21 Subsidiaries of Park **
23 Consent of Ernst & Young LLP **
24 Powers of Attorney of Directors and Executive Officers of Park **
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*Management contract or compensatory plan or arrangement
**Filed herewith
E-3