Back to GetFilings.com
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, 2002
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 incorporation or organization) (I.R.S. Employer Identification No.)
50 North Third Street, P.O. Box 3500, Newark, Ohio 43058-3500
- -------------------------------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (740) 349-8451
------------------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ------------------------------------
Common Shares, without par value American Stock Exchange
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
---- ----
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. / /
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes X No
--- ---
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the Registrant's most recently completed second fiscal
quarter: $1,039,031,618 as of June 28, 2002 (for this purpose, common shares
held by the Registrant's banking subsidiaries in fiduciary accounts are not
considered to be held by affiliates).
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date: 13,781,447 common shares,
without par value, as of February 21, 2003.
Documents Incorporated by Reference:
(1) Portions of the Registrant's Annual Report to Shareholders for the
fiscal year ended December 31, 2002, 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 21, 2003, are
incorporated by reference into Part III of this Annual Report on Form
10-K.
Exhibit Index on Page E-1
2
PART I
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. Park's principal
executive offices are located at 50 North Third Street, Newark, Ohio 43055, and
its telephone number is (740) 349-8451. Park's common shares are listed on the
American Stock Exchange under the symbol "PRK."
Park maintains an Internet website at www.parknationalcorp.com (this
uniform resource locator, or URL, is an inactive textual reference only and is
not intended to incorporate Park's website into this Annual Report on Form
10-K). Park makes available free of charge on or through its website, its annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K, and amendments to those reports filed or furnished pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as soon as reasonably practicable after Park electronically files such
material with, or furnishes it to, the Securities and Exchange Commission (the
"SEC").
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 Consolidated
Financial Statements located on pages 48 and 49 of Park's Annual Report to
Shareholders for the fiscal year ended December 31, 2002. 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.
3
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, home equity
lines of credit and commercial and auto leasing;
- trust services;
- cash management;
- safe deposit operations;
- electronic funds transfers;
- online Internet banking with bill pay service; 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, 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.
There are certain risks inherent in making loans. These risks include
interest rate changes over the time period in which the loans may be repaid,
risks resulting from changes in the economy, risks inherent in dealing with
borrowers and, in the case of loans secured by collateral, risks resulting from
uncertainties about the future value of the collateral.
4
Commercial loans generally are viewed as having a higher credit risk
than residential real estate or consumer loans because they usually involve
larger loan balances to a single borrower and are more susceptible to a risk of
default during an economic downturn. The primary 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. Commercial loans may also be based on the underlying
collateral provided by the borrower. Most often, the collateral is inventory,
machinery, real estate or accounts receivable. In the case of loans secured by
accounts receivable, the availability of funds for the repayment of these loans
may be substantially dependent on the ability of the borrower to collect amounts
due from its customers. The collateral securing other loans may depreciate over
time, may be difficult to appraise and may fluctuate in value based on success
of the business.
At December 31, 2002, Park's banking subsidiaries had outstanding
approximately $1,096.4 million in commercial loans (including commercial real
estate loans) and commercial leases, representing approximately 40.7% 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 $17.8 million, $5.0
million, $5.0 million, $8.7 million, $2.1 million, $4.1 million, $10.9 million
and $2.3 million, respectively, at December 31, 2002. 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.
Park has a loan review program which re-evaluates annually all loans
with an outstanding balance 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. Scope
Leasing, Inc., a wholly-owned subsidiary of Park National Bank, specializes in
aircraft financing. At December 31, 2002, Scope Leasing had approximately $64.1
million of loans and operating leases secured by aircraft. Since September 2001,
the resale value of many aircraft has decreased more significantly than had
historically been the case. As a result, to the extent the other party to an
aircraft financing arrangement fails to satisfy its payment obligations, Scope
Leasing is more likely to incur a loss on the sale of the underlying collateral.
At December 31, 2002, Park's subsidiaries had outstanding consumer
loans (including automobile leases and credit cards) in an aggregate amount of
approximately $498.5 million,
5
constituting approximately 18.5% 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,
Morrow, Muskingum, Perry and Richland Counties in Ohio. Park Leasing Company, a
wholly-owned subsidiary of Park National Bank, has an automobile leasing program
with a 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 $12.1 million of automobile leases
outstanding under this program at December 31, 2002.
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 have a higher risk of default than real estate
mortgage loans. Consumer loans typically have shorter terms and lower balances
with higher yields as compared to real estate mortgage loans, but generally
carry higher risks of default. Consumer loan collections are dependent on the
borrower's continuing financial stability, and thus are more likely to be
affected by adverse personal circumstances. Furthermore, the application of
various federal and state laws, including bankruptcy and insolvency laws, may
limit the amount that can be recovered on these loans.
At December 31, 2002, Park's banking subsidiaries had outstanding
approximately $1,097.3 million in residential real estate, home equity lines of
credit and construction mortgages, representing approximately 40.8% 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, 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.
6
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 113 financial service offices and a network of 115 automatic banking
center locations in 25 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, 2002, Park and its subsidiaries had 1,600
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").
7
Richland Trust Company is subject to regulation, supervision and examination by
the 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.
8
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 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 November 19, 1999 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, DIRECTORS, EXECUTIVE OFFICERS AND SHAREHOLDERS
On October 31, 2002, the Federal Reserve Board approved Regulation W
which comprehensively implements Sections 23A and 23B of the Federal Reserve
Act. Sections 23A and 23B and Regulation W 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.
9
Generally, Sections 23A and 23B and Regulation W:
- 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);
- limit the extent to which a bank or its subsidiaries may engage in
"covered transactions" with all affiliates to 20% of that bank's
capital stock and surplus; 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.
Regulation W will become effective on April 1, 2003 and upon its
effective date, all existing Federal Reserve Board interpretations of Sections
23A and 23B will be rescinded.
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
10
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.
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 1.68 to 28.68 cents per $100 of domestic
deposits. Each of Park's banking subsidiaries is currently paying an
11
assessment rate of 1.68 cents per $100 of domestic deposits. An increase in this
assessment rate could have a material adverse effect on the earnings 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.
FEDERAL HOME LOAN BANK
The Federal Home Loan Banks ("FHLBs") provide credit to their members
in the form of advances. As a member of the FHLB of Cincinnati, each of the
banking subsidiaries of Park must maintain an investment in the capital stock of
the FHLB of Cincinnati. Each of Park's banking subsidiaries is in compliance
with this requirement, with the following investments in stock of the FHLB of
Cincinnati at December 31, 2002: Park National Bank - $7.2 million; Richland
Trust Company - $4.2 million; Century National Bank - $5.5 million; First-Knox
National Bank - $10.0 million; United Bank - $1.1 million; Second National Bank
- - $2.0 million; Security National Bank - $7.0 million; and Citizens National
Bank - $1.3 million.
Generally, the FHLBs are not permitted to make new advances to a member
without positive tangible capital. Upon the origination or renewal of a loan or
advance, each FHLB is required by law to obtain and maintain a security interest
in collateral in one or more of the following categories: fully disbursed, whole
first mortgage loans on improved residential property or securities representing
a whole interest in such loans; securities issued, insured or guaranteed by the
United States Government or an agency thereof; deposits in any FHLB; or other
real estate related collateral acceptable to the applicable FHLB, if such
collateral has a readily ascertainable value and the FHLB can perfect its
security interest in the collateral.
Each FHLB is required to establish standards of community investment or
service that its members must maintain for continued access to long-term
advances from the FHLB. The standards take into account a member's performance
under the Community Reinvestment Act and its record
12
of lending to first-time home buyers. All long-term advances by each FHLB must
be made only to provide funds for residential housing finance.
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
13
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.
Park is in compliance with the current applicable capital guideline
ratios. As of December 31, 2002, Park had a total risk-based capital ratio of
17.78%, Tier 1 risk-based capital ratio of 16.51% and a leverage ratio of
10.72%. 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, 2002 captioned "Financial Review" on page 32, which is incorporated
herein by reference.
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
14
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.
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
15
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.
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.
RECENT LEGISLATION
On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act
of 2002 (the "Sarbanes-Oxley Act"). The stated goals of the Sarbanes-Oxley Act
are to increase corporate responsibility, to provide for enhanced penalties for
accounting and auditing improprieties at publicly traded companies and to
protect investors by improving the accuracy and reliability of corporate
disclosures made pursuant to the securities laws. The changes are intended to
allow shareholders to monitor the performance of companies and directors more
easily and efficiently.
The Sarbanes-Oxley Act generally applies to all companies, both U.S.
and non-U.S., that file or are required to file periodic reports with the SEC
under the Exchange Act. Further, the Sarbanes-Oxley Act includes very specific
additional disclosure requirements and new corporate governance rules, requires
the SEC, securities exchanges and The NASDAQ Stock Market to adopt extensive
additional disclosure, corporate governance and other related rules and mandates
further studies of certain issues by the SEC and the Comptroller General of the
United States. Given the extensive SEC role in implementing rules relating to
many of the Sarbanes-Oxley Act's new requirements, the final scope of many of
these requirements remains to be determined.
16
The Sarbanes-Oxley Act addresses, among other matters: audit
committees; corporate responsibility for financial reports; a requirement that
chief executive and chief financial officers forfeit certain bonuses and profits
if their companies issue an accounting restatement as a result of misconduct; a
prohibition on insider trading during pension fund black out periods; disclosure
of off-balance sheet transactions; conditions for the use of pro forma financial
information; a prohibition on personal loans to directors and executive officers
(excluding loans by insured depository institutions that are subject to the
insider lending restrictions of the Federal Reserve Act); expedited filing
requirements for stock transaction reports by officers and directors; the
formation of the Public Company Accounting Oversight Board; auditor
independence; and various increased criminal penalties for violations of
securities laws.
The Board of Directors of Park is in the process of reviewing the
requirements of the Sarbanes-Oxley Act and the rules and regulations promulgated
by the SEC implementing the Sarbanes-Oxley Act as well as the rules proposed by
the American Stock Exchange related to corporate governance matters. The Board
of Directors intends to take appropriate action to comply with the American
Stock Exchange and SEC rules as those rules are finalized and implemented.
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, 2002 captioned "Financial
Review," on pages 25 through 33 and in Note 4 of the Notes to Consolidated
Financial Statements located on page 42 of that Annual Report to Shareholders,
which is incorporated herein by reference. 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 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,
including, without limitation, the statements specifically
17
identified as forward-looking statements within this document. In addition,
certain statements in future filings by Park with the SEC, 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 Private Securities Litigation Reform 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;
- competitive pressures among depository institutions increase
significantly;
- costs or difficulties related to the integration of acquired
businesses are greater than expected;
- general economic conditions, either national or in the geographic
areas in which Park's subsidiaries do business, are less favorable
than expected;
- prepayment speeds, loan origination and sale volumes, change-offs and
loan loss provisions are less favorable than expected;
- technological changes are more difficult or expensive to implement
than anticipated;
- changes in the interest rate environment reduce interest margins;
- legislative or regulatory changes adversely affect financial services
companies;
- 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 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.
18
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, Gahanna, Worthington 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 seven off-site
automatic banking center locations.
Richland Trust Company, in addition to eight 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 three 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 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, two financial service
offices 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. Second
National Bank also operates an off-site automatic banking center location.
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
19
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 Columbus, 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, a financial service office in Heath and a financial service
office in Springfield.
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 21, 2003, the positions presently held by those
individuals and their individual business experience during the past five years.
20
Positions Held with Park and its
Name Age Principal Subsidiaries and Principal Occupation
- ---- --- -----------------------------------------------
William T. McConnell 69 Chairman of the Board since 1994, Chief Executive Officer from 1986 to
1999, President from 1986 to 1994 and a Director since 1986, of Park;
Chairman of the Board since 1993, Chief Executive Officer from 1983 to 1999,
President from 1979 to 1993, and a Director since 1977 of Park National Bank
Harry O. Egger 63 Vice Chairman of the Board and a Director of Park since March 2001;
Chairman of the Board and Chief Executive Officer since 1997, President
from 1981 to 1997, and a Director since 1997 of Security National Bank;
Chairman of the Board, President and Chief Executive Officer of Security
Banc Corporation from 1997 until its merger with Park in March 2001
C. Daniel DeLawder 53 Chief Executive Officer since January 1999, President since 1994 and
Director since 1994, of Park; Chief Executive Officer since January 1999,
President since 1993, Executive Vice President from 1992 to 1993, and a
Director since 1992 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; a Director of Richland Trust Company since
1997; a Director of Second National Bank since 2000
David L. Trautman 41 Secretary of Park since July 2002; Executive Vice President since February
2002, Vice President from 1993 to May 1997, and a Director since February
2002, of Park National Bank; Chairman of the Board since March 2001,
President and Chief Executive from May 1997 to February 2002, and a
Director since May 1997, of First-Knox National Bank; a Director of United
Bank, N.A. since 2000
John W. Kozak 47 Chief Financial Officer of Park since April 1998, Senior Vice President
and Chief Financial Officer since 1998, and Vice President from 1991 to
1998, of Park National Bank; Chief Financial Officer from 1980 to 1991 and
a Director since 1988 of Century 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.
21
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The information called for in Items 201(a) through (c) 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, 2002 ("Park's 2002 Annual
Report to Shareholders").
On October 31, 2002, Park issued (a) 150 common shares to each of the
ten non-employee directors of Park (for an aggregate of 1,500 common shares),
(b) 50 common shares to each of 69 non-employee directors of one of Park's
banking subsidiaries or non-employee members of the advisory board of a division
of a banking subsidiary, who is not also a director of Park (for an aggregate of
3,450 common shares) and (c) 100 common shares to one individual who serves as a
non-employee director of one of Park's banking subsidiaries and as a member of
the advisory board of a division of that banking subsidiary. These common shares
were issued in lieu of an annual cash retainer for serving as a director or
advisory board member. The common shares had a market value of $89.50 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 2002 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 2002 Annual Report to Shareholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As noted on page 29 of Park's 2002 Annual Report to Shareholders,
during 2002, 2001 and 2000, 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 2002 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, 2002 and 2001, 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, 2002, the related Notes to
Consolidated Financial Statements, and the Report of Independent Auditors
appearing on pages 34 through 51 of Park's 2002 Annual Report to Shareholders,
are incorporated
22
herein by reference. Quarterly Financial Data set forth on page 33 of Park's
2002 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 21, 2003, under the captions "PRINCIPAL
SHAREHOLDERS OF PARK - Section 16(a) Beneficial Ownership Reporting Compliance"
and "ELECTION OF DIRECTORS." In addition, certain 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 21, 2003, under the captions "ELECTION OF
DIRECTORS--Compensation of Directors," "COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION" and "COMPENSATION OF EXECUTIVE OFFICERS." Such
incorporation by reference shall not be deemed to specifically incorporate by
reference the information referred to in Item 402(a)(8) of Regulation S-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The information called for in this Item 12 regarding the security
ownership of certain beneficial owners and management is incorporated herein by
reference to Park's definitive Proxy Statement relating to the Annual Meeting of
Shareholders to be held on April 21, 2003, under the caption "PRINCIPAL
SHAREHOLDERS OF PARK."
The information called for in this Item 12 regarding securities
authorized for issuance under equity compensation plans is included in the
following section.
EQUITY COMPENSATION PLAN INFORMATION
Park has one compensation plan (excluding plans assumed by Park in
mergers) under which common shares of Park are authorized for issuance to
officers or employees of Park and its subsidiaries in exchange for consideration
in the form of goods or services: the Park National Corporation 1995 Incentive
Stock Option (the "1995 Plan"). The 1995 Plan has been approved by Park's
shareholders. In addition, as described further below, each non-employee
director of Park or
23
one of its banking subsidiaries receives a specified number of common shares of
Park as an annual retainer. This arrangement has not been approved by the
shareholders.
The following table shows for the 1995 Plan, the number of common
shares issuable upon exercise of options outstanding at December 31, 2002, the
weighted average exercise price of those options and the number of common shares
remaining available for future issuance at December 31, 2002, excluding common
shares issuable upon exercise of outstanding options.
The table does not include common shares subject to outstanding
options granted under equity compensation plans assumed by Park in mergers.
Footnote (1) to the table sets forth the total number of common shares issuable
upon exercise of options granted under plans assumed in mergers and outstanding
at December 31, 2002, and the weighted average exercise price of those options.
Park cannot grant additional awards under the assumed plans.
NUMBER OF COMMON SHARES
NUMBER OF COMMON SHARES REMAINING AVAILABLE FOR
TO BE ISSUED UPON WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
EXERCISE OF OUTSTANDING EXERCISE PRICE OF EQUITY COMPENSATION PLANS
OPTIONS, WARRANTS AND OUTSTANDING OPTIONS, (EXCLUDING COMMON SHARES
RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (a))
PLAN CATEGORY (1) (a) (b) (c)
- ------------------------------------ -------------------------- -------------------------- ---------------------------
Equity compensation plans
approved by shareholders............ 512,148 $91.24 551,420
- ------------------------------------ -------------------------- -------------------------- ---------------------------
Equity compensation plans
not approved by
shareholders........................ 0 n/a (2)
- ------------------------------------ -------------------------- -------------------------- ---------------------------
Total............................... 512,148 $91.24 551,420
- ------------------------------------ -------------------------- -------------------------- ---------------------------
(1) The table does not include information for equity compensation plans
assumed by Park in mergers. A total of 40,058 common shares were
issuable upon exercise of options granted under plans assumed in
mergers and outstanding at December 31, 2002, including 33,704 common
shares issuable upon exercise of options granted under plans assumed by
Park in the merger with Security Banc Corporation effective March 23,
2001 and 6,354 common shares issuable upon exercise of options granted
under plans assumed by Park in the merger with First-Knox Banc Corp.
effective May 5, 1997. The weighted average exercise price of all
options granted under plans assumed in mergers and outstanding at
December 31, 2002, was $96.62. Park cannot grant additional awards
under these assumed plans.
(2) The board of directors of Park and each of its banking subsidiaries as
well as the advisory board for certain divisions of those banking
subsidiaries with two divisions, have determined that each of the
24
non-employee directors or non-employee advisory board members, as
appropriate, is to receive the annual retainer for service as a board
member in the form of Park common shares. Each director of Park who is
not an employee of Park or one of its subsidiaries receives an annual
retainer for service as a member of the Park board of directors in the
form of 100 Park common shares. Each non-employee director of one of
Park's banking subsidiaries receives an annual retainer for service as
a member of that subsidiary's board of directors in the form of 50 Park
common shares. Each non-employee member of an advisory board for a
division of a banking subsidiary receives an annual retainer for
service as a member of that advisory board in the form of 50 Park
common shares. These common shares are issued in the fourth quarter of
the fiscal year. The aggregate number of common shares issuable in
respect of any fiscal year will depend on the number of individuals
then serving as non-employee directors of Park and its banking
subsidiaries and as non-employee members of the advisory boards of
those banking subsidiaries with two divisions. As of March 26, 2003,
there were 8 non-employee directors of Park, a total of 61 non-employee
directors of Park's banking subsidiaries and a total of 15 non-employee
members of advisory boards for divisions of Park's banking
subsidiaries.
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 21, 2003, under the captions "ELECTION OF
DIRECTORS - Committees and Meetings of the Board of Directors," "COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" and "TRANSACTIONS INVOLVING
MANAGEMENT."
ITEM 14. CONTROLS AND PROCEDURES.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Within the 90 day period prior to the filing date of this Annual Report on
Form 10-K, Park, under the supervision, and with the participation, of its
management, including its principal executive officer and principal financial
officer, performed an evaluation of Park'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.
25
PART IV
ITEM 15. 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 33.
(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.
(b) Reports on Form 8-K.
-------------------
No Current Reports on Form 8-K were filed during the fiscal quarter
ended December 31, 2002.
(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
26
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 26, 2003 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 26th day of March, 2003.
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
- ------------------------------
John J. O'Neill
27
* Director
- ------------------------------
William A. Phillips
* Director
- ------------------------------
J. Gilbert Reese
* Director
- ------------------------------
Rick R. Taylor
- ----------------
* 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
28
CERTIFICATION
I, C. Daniel DeLawder, certify that:
1. I have reviewed this annual report on Form 10-K of Park National
Corporation;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 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
annual 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 of this annual report (the "Evaluation Date"); and
c. presented in this annual 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 functions):
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
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
29
6. The registrant's other certifying officer and I have indicated in this
annual report whether 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.
Dated: March 26, 2003 By: /s/ C. Daniel DeLawder
---------------------------------------
C. Daniel DeLawder
President and Chief Executive Officer
30
CERTIFICATION
I, John W. Kozak, certify that:
1. I have reviewed this annual report on Form 10-K of Park National
Corporation;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 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
annual 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 of this annual report (the "Evaluation Date"); and
c. presented in this annual 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 functions):
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
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
31
6. The registrant's other certifying officer and I have indicated in this
annual report whether 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.
Dated: March 26, 2003 By: /s/ John W. Kozak
-----------------------------
John W. Kozak
Chief Financial Officer
32
PARK NATIONAL CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 2002
INDEX TO FINANCIAL STATEMENTS
PAGE(S) IN
2002 ANNUAL
REPORT TO
DESCRIPTION SHAREHOLDERS
- ----------- ------------
Consolidated Balance Sheets at December 31, 2002 and 2001........................................ 34-35
Consolidated Statements of Income for the years ended December 31, 2002, 2001 and 2000........... 36-37
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2002,
2001 and 2000........................................................................... 38
Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000....... 39
Notes to Consolidated Financial Statements....................................................... 40-50
Report of Independent Auditors (Ernst & Young LLP)............................................... 51
33
PARK NATIONAL CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 2002
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
3.1 Articles of Incorporation of Park National Corporation
("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)
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)
E-1
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
4.1 Agreement to furnish instruments defining rights of holders
of long-term debt **
*10.1 Summary of Incentive Bonus Plan of Park National Corporation**
*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 to Exhibit 10.2 identifying other
identical Split-Dollar Agreements between subsidiaries of Park
and executive officers of such subsidiaries who are directors
or executive officers of Park **
*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 **
*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))
E-2
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
*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))
*10.11 First-Knox Banc Corp. 1990 Non-Qualified Stock Option and
Stock Appreciation Rights Plan (incorporated herein by
reference to Exhibit A to Exhibit 23 to the Annual Report on
Form 10-K for the fiscal year ended December 31, 1989 of
First-Knox Banc Corp. (File No. 0-13161))
*10.12 Resolution Regarding Amendment to First-Knox Banc Corp. 1990
Non-Qualified Stock Option and Stock Appreciation Rights Plan
on May 14, 1996 (incorporated herein by reference to Exhibit
10(h) to the Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 of First-Knox Banc Corp. (File No.
0-13161))
*10.13 Description of Annual Retainer for Service as Member of Board
of Directors of Park National Corporation or of a Banking
Subsidiary of Park National Corporation or as Member of
Advisory Board for a Division of a Banking Subsidiary**
13 Annual Report to Shareholders for the fiscal year ended
December 31, 2002 (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 33) **
21 Subsidiaries of Park National Corporation**
23 Consent of Ernst & Young LLP **
24 Powers of Attorney of Directors and Executive Officers
of Park **
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 **
- --------------
*Management contract or compensatory plan or arrangement
**Filed herewith
E-3