Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to ________________________
Commission File Number 1-13006
-------------------
Park National Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-1179518
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
50 North Third Street, Newark, Ohio 43055
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(740) 349-8451
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes X No
--- ---
13,754,789 Common shares, no par value per share, outstanding at April 30, 2003.
- ----------
Page 1 of 26
PARK NATIONAL CORPORATION
CONTENTS
--------
Page
----
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements 3-12
Consolidated Condensed Balance Sheets as of March 31, 2003 and
December 31, 2002 (unaudited) 3
Consolidated Condensed Statements of Income for the
Three Months ended March 31, 2003 and 2002 (unaudited) 4,5
Consolidated Condensed Statements of Changes in Stockholders'
Equity for the Three Months ended March 31, 2003 and 2002 (unaudited) 6
Consolidated Condensed Statements of Cash Flows for the Three Months
ended March 31, 2003 and 2002 (unaudited) 7,8
Notes to Consolidated Financial Statements 9-12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 13-20
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
Item 4. Controls and Procedures 21
PART II. OTHER INFORMATION 22-23
Item 1. Legal Proceedings 22
Item 2. Changes in Securities and Use of Proceeds 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22-23
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 23
SIGNATURES 24
CERTIFICATIONS 25-26
-2-
PARK NATIONAL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(dollars in thousands, except share data)
March 31, December 31,
2003 2002
- --------------------------------------------------------------------------------------------------------------
Assets:
Cash and due from banks $165,047 $157,088
- ------------------------------------------------------------------------------------------------------------
Federal funds sold 38,200 81,700
- ------------------------------------------------------------------------------------------------------------
Interest bearing deposits 50 50
- ------------------------------------------------------------------------------------------------------------
Securities available-for-sale, at fair value
(amortized cost of $1,534,173 and $993,317
at March 31, 2003 and December 31, 2002) 1,571,784 1,030,264
- ------------------------------------------------------------------------------------------------------------
Securities held-to-maturity, at amortized cost
(fair value approximates $529,371 and $360,688
at March 31, 2003 and December 31, 2002) 527,699 352,878
- ------------------------------------------------------------------------------------------------------------
Loans (net of unearned interest) 2,683,023 2,692,187
- ------------------------------------------------------------------------------------------------------------
Allowance for possible loan losses 64,062 62,028
- ------------------------------------------------------------------------------------------------------------
Net loans 2,618,961 2,630,159
- ------------------------------------------------------------------------------------------------------------
Bank premises and equipment, net 38,190 38,734
- ------------------------------------------------------------------------------------------------------------
Bank owned life insurance 75,382 74,355
- ------------------------------------------------------------------------------------------------------------
Other assets 78,174 81,397
- ------------------------------------------------------------------------------------------------------------
Total assets $5,113,487 $4,446,625
- ------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity:
Deposits:
Noninterest bearing $528,509 $594,157
- ------------------------------------------------------------------------------------------------------------
Interest bearing 2,957,568 2,900,978
- ------------------------------------------------------------------------------------------------------------
Total deposits 3,486,077 3,495,135
- ------------------------------------------------------------------------------------------------------------
Short-term borrowings 742,535 188,878
- ------------------------------------------------------------------------------------------------------------
Long-term debt 311,965 187,226
- ------------------------------------------------------------------------------------------------------------
Other liabilities 51,683 66,094
- ------------------------------------------------------------------------------------------------------------
Total liabilities 4,592,260 3,937,333
- ------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Common stock (No par value; 20,000,000 shares
authorized; 14,541,752 shares issued in 2003
and 14,540,449 issued in 2002) 105,841 105,768
- ------------------------------------------------------------------------------------------------------------
Retained earnings 458,032 446,300
- ------------------------------------------------------------------------------------------------------------
Treasury stock (766,121 shares in 2003
and 748,483 shares in 2002) (67,158) (65,194)
- ------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive income,
net of taxes 24,512 22,418
- ------------------------------------------------------------------------------------------------------------
Total stockholders' equity 521,227 509,292
- ------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $5,113,487 $4,446,625
- ------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
PARK NATIONAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands, except per share data)
Three Months Ended
March 31,
---------------------------------------------
2003 2002
- --------------------------------------------------------------------------------------------------------------------
Interest income:
Interest and fees on loans $46,918 $53,192
- --------------------------------------------------------------------------------------------------------------------
Interest on:
Obligations of U.S. Government,
its agencies and other securities 20,260 19,751
- --------------------------------------------------------------------------------------------------------------------
Obligations of states
and political subdivisions 1,605 1,801
- --------------------------------------------------------------------------------------------------------------------
Other interest income 80 130
- --------------------------------------------------------------------------------------------------------------------
Total interest income 68,863 74,874
- --------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits:
Demand and savings deposits 2,352 3,260
- --------------------------------------------------------------------------------------------------------------------
Time deposits 11,200 15,159
- --------------------------------------------------------------------------------------------------------------------
Interest on borrowings:
Short-term borrowings 486 1,112
- --------------------------------------------------------------------------------------------------------------------
Long-term debt 2,620 3,096
- --------------------------------------------------------------------------------------------------------------------
Total interest expense 16,658 22,627
- --------------------------------------------------------------------------------------------------------------------
Net interest income 52,205 52,247
- --------------------------------------------------------------------------------------------------------------------
Provision for loan losses 3,433 4,519
- --------------------------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 48,772 47,728
- --------------------------------------------------------------------------------------------------------------------
Other income 15,455 11,795
- --------------------------------------------------------------------------------------------------------------------
Gain (loss) on sale of securities (1,234) (210)
- --------------------------------------------------------------------------------------------------------------------
Continued
4
PARK NATIONAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(CONTINUED)
(dollars in thousands, except per share data)
Three Months Ended
March 31,
---------------------------------------------
2003 2002
- --------------------------------------------------------------------------------------------------------------------
Other expense:
Salaries and employee benefits $17,536 $16,251
- --------------------------------------------------------------------------------------------------------------------
Occupancy expense 1,732 1,539
- --------------------------------------------------------------------------------------------------------------------
Furniture and equipment expense 1,627 1,529
- --------------------------------------------------------------------------------------------------------------------
Other expense 9,174 9,897
- --------------------------------------------------------------------------------------------------------------------
Total other expense 30,069 29,216
- --------------------------------------------------------------------------------------------------------------------
Income before federal income taxes 32,924 30,097
- --------------------------------------------------------------------------------------------------------------------
Federal income taxes 9,758 8,649
- --------------------------------------------------------------------------------------------------------------------
Net income $23,166 $21,448
====================================================================================================================
PER SHARE:
Net income:
Basic $1.68 $1.54
====================================================================================================================
Diluted $1.68 $1.53
====================================================================================================================
Weighted average
Basic 13,780,828 13,936,340
====================================================================================================================
Diluted 13,824,663 13,973,050
====================================================================================================================
Cash dividends declared $0.83 $0.76
====================================================================================================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
PARK NATIONAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
(dollars in thousands, except share data)
THREE MONTHS ENDED MARCH 31, 2003 AND 2002 Treasury
Common Retained Stock
Stock Earnings at Cost
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 2001 $105,771 $403,870 ($50,000)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income 21,448
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive income,
net of income taxes of ($3,049)
- -----------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income
- -----------------------------------------------------------------------------------------------------------------------------------
Cash dividends on common stock:
Park at $.76 per share (10,589)
- -----------------------------------------------------------------------------------------------------------------------------------
Cash paid for fractional shares - 11 shares (1) -
- -----------------------------------------------------------------------------------------------------------------------------------
Treasury stock purchased - 31,453 shares (2,973)
- -----------------------------------------------------------------------------------------------------------------------------------
Treasury stock reissued for stock options - 23,224 shares 1,400
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 2002 $105,770 $414,729 ($51,573)
===================================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 2002 $105,768 $446,300 ($65,194)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income 23,166
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive income, net of tax:
Reverse additional minimum liability for pension plan, net of taxes $860
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized net holding gain on securities available-for-sale, net of taxes $267
- -----------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income
- -----------------------------------------------------------------------------------------------------------------------------------
Cash dividends on common stock:
Park at $.83 per share (11,434)
- -----------------------------------------------------------------------------------------------------------------------------------
Shares issued for stock options - 1,303 46
- -----------------------------------------------------------------------------------------------------------------------------------
Tax benefit from exercise of stock options 27
- -----------------------------------------------------------------------------------------------------------------------------------
Treasury stock purchased - 37,803 shares (3,712)
- -----------------------------------------------------------------------------------------------------------------------------------
Treasury stock reissued for stock options - 20,165 shares 1,748
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 2003 $105,841 $458,032 ($67,158)
===================================================================================================================================
Accumulated
Three Months ended March 31, 2003 and 2002 Other
Comprehensive Comprehensive
Income Income
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 2001 $8,705
- ---------------------------------------------------------------------------------------------------------
Net Income $21,448
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive income,
net of income taxes of ($3,049) (5,662) (5,662)
- -----------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income $15,786
- --------------------------------------------------------------------------------------------------------------------===============
Cash dividends on common stock:
Park at $.76 per share
- ---------------------------------------------------------------------------------------------------------
Cash paid for fractional shares - 11 shares
- ---------------------------------------------------------------------------------------------------------
Treasury stock purchased - 31,453 shares
- ---------------------------------------------------------------------------------------------------------
Treasury stock reissued for stock options - 23,224 shares
- ---------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 2002 $3,043
=========================================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 2002 $22,418
- ---------------------------------------------------------------------------------------------------------
Net Income $23,166
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive income, net of tax:
Reverse additional minimum liability for pension plan, net of taxes $860 1,598 1,598
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized net holding gain on securities available-for-sale, net of taxes $267 496 496
- -----------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income $25,260
- --------------------------------------------------------------------------------------------------------------------===============
Cash dividends on common stock:
Park at $.83 per share
- ---------------------------------------------------------------------------------------------------------
Shares issued for stock options - 1,303
- ---------------------------------------------------------------------------------------------------------
Tax benefit from exercise of stock options
- ---------------------------------------------------------------------------------------------------------
Treasury stock purchased - 37,803 shares
- ---------------------------------------------------------------------------------------------------------
Treasury stock reissued for stock options - 20,165 shares
- ---------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 2003 $24,512
=========================================================================================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6
PARK NATIONAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollars in thousands)
Three Months Ended
March 31,
-------------------------------------
2003 2002
- -----------------------------------------------------------------------------------------------------------------------------------
Operating activities:
Net income $23,166 $21,448
- -----------------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Accretion, depreciation and amortization (2,123) (741)
- -----------------------------------------------------------------------------------------------------------------------------------
Provision for loan losses 3,433 4,519
- -----------------------------------------------------------------------------------------------------------------------------------
Amortization of the excess of cost over
net assets of banks purchased 583 975
- -----------------------------------------------------------------------------------------------------------------------------------
Realized investment security losses 1,234 210
- -----------------------------------------------------------------------------------------------------------------------------------
Changes in assets and liabilities:
Decrease (increase) in other assets 1,445 (3,778)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in other liabilities (1,350) (5,294)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 26,388 17,339
--------------------------------------------------------------------------------------------------------------------
Investing activities:
Proceeds from sales of:
Available-for-sale securities 98,766 99,673
- -----------------------------------------------------------------------------------------------------------------------------------
Proceeds from maturity of:
Available-for-sale securities 631,535 166,553
- -----------------------------------------------------------------------------------------------------------------------------------
Held-to-maturity securities 166,835 344
- -----------------------------------------------------------------------------------------------------------------------------------
Purchases of:
Available-for-sale securities (1,269,876) (239,113)
- -----------------------------------------------------------------------------------------------------------------------------------
Held-to-maturity securities (341,656) 0
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in loans 8,822 68,538
- -----------------------------------------------------------------------------------------------------------------------------------
Purchases of premises and equipment, net (905) (1,027)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash (used by) provided from investing activities (706,479) 94,968
--------------------------------------------------------------------------------------------------------------------
Continued
7
PARK NATIONAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(CONTINUED)
(dollars in thousands)
Three Months Ended
March 31,
-------------------------------------
2003 2002
- -----------------------------------------------------------------------------------------------------------------------------------
Financing activities:
Net (decrease) increase in deposits ($9,058) $16,579
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in short-term borrowings 553,657 (12,872)
- -----------------------------------------------------------------------------------------------------------------------------------
Cash paid for fractional shares 0 (1)
- -----------------------------------------------------------------------------------------------------------------------------------
Exercise of stock options 73 0
- -----------------------------------------------------------------------------------------------------------------------------------
Purchase of treasury stock, net (1,964) (1,573)
- -----------------------------------------------------------------------------------------------------------------------------------
Long-term debt issued 125,000 0
- -----------------------------------------------------------------------------------------------------------------------------------
Repayment of long-term debt (261) (135,042)
- -----------------------------------------------------------------------------------------------------------------------------------
Cash dividends paid (22,897) (21,195)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used by) financing activities 644,550 (154,104)
--------------------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents (35,541) (41,797)
--------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year 238,788 169,143
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $203,247 $127,346
====================================================================================================================
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $17,525 $24,205
-------------------------------------------------------------------------------------------------------
Income taxes $0 $0
-------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8
PARK NATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 2003 and 2002.
Note 1 - Basis of Presentation
---------------------
The consolidated financial statements included in this report have been prepared
by Park National Corporation (the "Registrant", "Corporation", "Company", or
"Park") without audit. In the opinion of management, all adjustments (consisting
solely of normal recurring accruals) necessary for a fair presentation of
results of operations for the interim periods included herein have been made.
The results of operations for the period ended March 31, 2003 are not
necessarily indicative of the operating results to be anticipated for the fiscal
year ended December 31, 2002.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions for Form 10-Q, and therefore, do not include
all information and footnotes necessary for a fair presentation of the condensed
balance sheets, condensed statements of income, condensed statements of changes
in stockholders' equity and condensed statements of cash flows in conformity
with generally accepted accounting principles. These financial statements should
be read in conjunction with the financial statements included in the Annual
Report on Form 10-K for the year ended December 31, 2002. Certain amounts in
2002 have been reclassified to conform to the financial statement presentation
used for 2003.
Park does not have any off-balance sheet derivative financial instruments such
as interest-rate swap agreements.
Note 2 - Intangible Assets
-----------------
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets, effective for fiscal years beginning after
December 15, 2001. Under the standards, goodwill and indefinite lived intangible
assets are no longer amortized and are subject to annual impairment tests. Other
intangible assets, such as core deposit intangibles, continue to be amortized
over their useful lives.
Park had approximately $7.5 million of goodwill included in other assets at
March 31, 2003 and December 31, 2002. This goodwill was evaluated for impairment
during the first quarter of each of 2002 and 2003 and a determination made that
the goodwill was not impaired and that the book value of the goodwill would
continue to be shown as $7.5 million. No amortization expense is being recorded
on the goodwill in 2003 and none was recorded in 2002.
Park also had core deposit intangibles included in other assets of $7.96 million
at March 31, 2003 and $8.54 million at December 31, 2002. The core deposit
intangibles are being amortized to expense, principally on the straight-line
method, over periods ranging from six to eight years. Core deposit amortization
expense was $583,000 for the first quarter of 2003 and $975,000 for the first
quarter of 2002.
-9-
Note 3- Allowance for Loan Losses
-------------------------
The allowance for loan losses is that amount believed adequate to absorb
estimated credit losses in the loan portfolio based on management's evaluation
of various factors including overall growth in the loan portfolio, an analysis
of individual loans, prior and current loss experience, and current economic
conditions. A provision for loan losses is charged to operations based on
management's periodic evaluation of these and other pertinent factors.
Allowance for Loan Losses
-------------------------
(In Thousands)
--------------
2003 2002
------ --------
Beginning January 1 $62,028 $59,959
Provision for loan losses 3,433 4,519
Losses charged to the reserve (2,854) (5,205)
Recoveries 1,455 1,420
------- -------
Balance March 31, $64,062 $60,693
======= =======
Note 4 - Earnings Per Share
------------------
The following table sets forth the computation of basic and diluted earnings per
share for the three month periods ended March 31, 2003 and 2002.
(Dollars in thousands, except per share data)
---------------------------------------------
Three Months Ended
------------------
March 31, 2003 2002
--------- ------- ------
Numerator:
Net Income $23,166 $21,448
---------- -----------
Denominator:
Denominator for basic earnings per share (weighted-avg. shares) 13,780,828 13,936,340
---------- -----------
Effect of dilutive securities 43,835 36,710
---------- -----------
Denominator for diluted earnings per share (adjusted weighted-average shares and
assumed conversions) 13,824,663 13,973,050
---------- -----------
Earnings per share:
Basic earnings per share $1.68 $1.54
Diluted earnings per share $1.68 $1.53
---------- -----------
-10-
Note 5 - Segment Information
-------------------
The Corporation is a multi-bank holding company headquartered in Newark, Ohio.
The operating segments for the Corporation are its financial institution
subsidiaries. The Corporation's financial institution subsidiaries are The Park
National Bank (PNB), The Richland Trust Company (RTC), Century National Bank
(CNB), The First-Knox National Bank of Mount Vernon (FKNB), United Bank N.A.
(UB), Second National Bank (SNB), The Security National Bank and Trust Co.
(SEC), and The Citizens National Bank of Urbana (CIT).
Operating Results for the Three Months Ended March 31, 2003 (In Thousands)
------------------------------------------------------------------------------------------------
PNB RTC CNB FKNB UB SNB SEC CIT All Other Total
--- --- --- ---- -- --- --- --- --------- -----
Net Interest
Income $15,813 $5,558 $4,948 $7,836 $2,305 $3,536 $8,453 $1,622 $2,134 $52,205
Provision for
Loan Losses 1,380 330 225 666 90 150 405 90 97 3,433
Other Income 6,271 1,193 1,445 1,452 566 584 2,170 390 150 14,221
Other Expense 9.317 2,597 2,864 4,021 1,480 1,872 5,023 1,148 1,747 30,069
Net Income 7,860 2,520 2,206 3,155 902 1,478 3,499 530 1,016 23,166
Balances at March 31, 2003
Assets 1,617,914 571,420 481,736 755,567 242,123 390,074 937,299 191,969 (74,615) $5,113,487
Operating Results for the Three Months Ended March 31, 2002 (In Thousands)
------------------------------------------------------------------------------------------------
PNB RTC CNB FKNB UB SNB SEC CIT All Other Total
--- --- --- ---- -- --- --- --- --------- -----
Net Interest
Income $15,861 $5,777 $5,105 $7,318 $2,147 $3,497 $8,869 $1,751 $1,922 $52,247
Provision for
Loan Losses 1,545 585 240 874 90 275 420 415 75 4,519
Other Income 5,192 689 1,198 1,495 289 344 1,951 316 111 11,585
Other Expense 8,673 2,805 2,746 3,777 1,484 1,774 4,944 1,109 1,904 29,216
Net Income $7,589 $2,033 $2,209 $2,893 $635 $1,289 $3,778 $377 $645 $21,448
Balances at March 31, 2002
Assets 1,396,530 480,258 436,830 659,485 197,382 317,084 874,610 172,527 (108,803) $4,425,903
The operating results of the Parent Company and Guardian Finance Company (GFC)
in the All Other column are used to reconcile the segment totals to the
consolidated income statements for the quarters ended March 31, 2003 and 2002.
The reconciling amounts for consolidated total assets for both of the quarters
ended March 31, 2003 and 2002 consist of the elimination of intersegment
borrowings, and the assets of the Parent Company and GFC which are not
eliminated.
-11-
Note 6 - Stock Option Plan
-----------------
Park accounts for its incentive stock option plan under the recognition and
measurement principles provided in Accounting Principles Board Opinion No. 25,
"Accounting for Stock issued to Employees" (APB 25) and related interpretations.
Under APB 25, because the exercise price of Park's employee stock options equals
the market price of the underlying stock on the date of grant, no compensation
expense is recognized.
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation", as amended by SFAS 148, requires pro forma
disclosures of net income and earnings per share for companies not adopting its
fair value accounting method for stock-based employee compensation. The
pro-forma disclosures below use the fair value method of SFAS 123 to measure
compensation expense for stock based employee compensation plans.
Three Months Ended March 31
(In thousands, except per share data)
-------------------------------------
2003 2002
------- --------
Net income as reported $23,166 $21,448
Deduct:
Total stock-based employee compensation expense determined
under fair value method, net of related tax effects (106) (110)
------- -------
Pro forma net income $23,060 $21,338
======= =======
Basic earnings per share as reported $1.68 $1.54
Pro forma basic earnings per share $1.67 $1.53
Diluted earnings per share as reported $1.68 $1.53
Pro forma diluted earnings per share $1.67 $1.53
-12-
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis by management contains forward-looking statements
that are provided to assist in the understanding of anticipated future financial
performance. These forward-looking statements involve significant risks and
uncertainties including changes in general economic and financial market
conditions, Park's ability to execute its business plans, as well as other risks
such as changes in government regulations and policies affecting bank holding
companies. Although Park believes that the expectations reflected in such
forward-looking statements are reasonable, actual results may differ materially.
Undue reliance should not be placed on the forward-looking statements, which
speak only as of the date hereof.
Critical Accounting Policies
- ----------------------------
Note 1 of the Notes to Consolidated Financial Statements included in Park's 2002
Annual Report lists significant accounting policies used in the development and
presentation of its financial statements. The accounting and reporting policies
of Park conform with accounting principles generally accepted in the United
States and general practices within the financial services industry. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
the accompanying notes. Actual results could differ from those estimates.
Park considers that the determination of the allowance for loan losses involves
a higher degree of judgement and complexity than its other significant
accounting policies. The allowance for loan losses is calculated with the
objective of maintaining a reserve level believed by management to be sufficient
to absorb estimated credit losses in the loan portfolio. Management's
determination of the adequacy of the allowance for loan losses is based on
periodic evaluations of the loan portfolio and of current economic conditions.
However, this evaluation is inherently subjective as it requires material
estimates, including expected default probabilities, loss given default,
expected commitment usage, the amounts and timing of expected future cash flows
on impaired loans, and estimated losses on consumer loans and residential
mortgage loans based on historical loss experience and the current economic
conditions. All of those factors may be susceptible to significant change. To
the extent that actual results differ from management estimates, additional loan
loss provisions may be required that would adversely impact earnings for future
periods.
-13-
Comparison of Results of Operations
For the Quarters Ended
March 31, 2003 and 2002
Summary Discussion of Results
- -----------------------------
Net income increased by $1.7 million or 8.0% to $23.16 million for the three
months ended March 31, 2003 compared to $21.45 million for the same period in
2002. The annualized, net income to average asset ratio (ROA) was 1.96% for the
first quarter of 2003 compared to 1.95% for the first quarter of 2002. The
annualized, net income to average equity ratio (ROE) was 18.56% for the first
three months of 2003 compared to 18.48% for the same period in 2002.
Diluted earnings per share increased by 9.8% to $1.68 for the first quarter of
2003 compared to $1.53 for the first quarter of 2002.
The increase in net income for the first quarter of 2003 was primarily due to
the 31.0% increase in Other Income to $15.45 million compared to $11.79 million
in 2002. This large increase was primarily due to the increase in fee income
earned from the origination and sale of fixed rate mortgage loans. Long-term
interest rates continued to be low throughout the quarter, and management was
able to reallocate resources so that mortgage loan customers were able to close
on their mortgage loan within 30 days from application to closing.
Net Interest Income
- -------------------
Park's principal source of earnings is net interest income, the difference
between total interest income and total interest expense. Net interest income
was $52.2 million for both the first quarter of 2003 and 2002. The following
table compares the average balance and tax equivalent yield/cost for interest
earning assets and interest bearing liabilities for the first quarter of 2003
with the same quarter in 2002.
Three Months Ended March 31,
(In Thousands)
----------------------------
2003 2002
--------------------------- -----------------------------
Average Tax Average Tax
Balance Equivalent Balance Equivalent
% %
- -------------------------------------- -------------- ------------ ---------------- -------------
Loans $2,675,702 7.14% $2,747,018 7.89%
Taxable Investments 1,638,152 5.02% 1,246,564 6.43%
Tax Exempt Investments 132,649 7.30% 149,032 7.17%
Federal Funds Sold 21,688 1.50% 29,765 1.78%
---------- ---- ---------- ----
Interest Earning Assets $4,468,191 6.34% $4,172,379 7.38%
Interest Bearing Deposits $2,895,747 1.90% $2,828,919 2.64%
Short-term Borrowings 547,348 .36% 281,448 1.60%
Long-term Debt 271,898 3.91% 331,302 3.79%
---------- ---- ---------- ----
Interest Bearing Liabilities $3,714,993 1.82% $3,441,669 2.67%
Excess Interest Earning Assets $753,198 4.52% $730,710 4.71%
Net Interest Margin 4.83% 5.18%
-14-
Average interest earning assets increased by $296 million or 7.1% to $4,468
million for the quarter ended March 31, 2003 compared to the same quarter in
2002. The average yield on interest earning assets decreased to 6.34% for the
first quarter of 2003 compared to 7.38% for the first quarter of 2002.
Average loan totals decreased by $71 million or 2.6% to $2,676 million for the
first quarter of 2003 compared to the first quarter of 2002. At March 31, 2003,
total loans were $2,683 million compared to $2,692 million at December 31, 2002,
a decrease of $9 million or .3%. Total loans decreased by $104 million or 3.7%
for the year 2002 and decreased by $160 million or 5.4% for the year 2001. The
demand for commercial and commercial real estate loans has improved during the
first quarter of 2003, but the demand for consumer loans and leases secured by
automobiles remains weak. Management is hopeful that loan totals will begin
increasing during the second quarter of 2003.
The demand for fixed rate long-term residential mortgage loans has been strong
for the past several quarters and even increased during the first quarter of
2003. This activity, the origination and sale of fixed rate mortgage loans
produced a significant increase in fee income during the past few quarters, but
did not increase loan totals since the loans are sold. Many borrowers have taken
advantage of low long-term interest rates to refinance their adjustable rate
mortgage loan into a fixed rate mortgage loan which reduces the loan balances
reported on Park's balance sheet. Residential real estate loans decreased by $26
million or 2.6% during the first quarter of 2003, compared to a decrease of $76
million or 7.0% for the year 2002 and a decrease of $88 million or 7.6% for the
year 2001.
The average yield on the loan portfolio was 7.14% for the first quarter of 2003
compared to 7.89% for the same period in 2002. The average prime lending rate
was 4.25% for the first quarter of 2003 compared to 4.75% for the first quarter
of 2002. Approximately 25% of Park's loan portfolio reprices based on the prime
lending rate. The yield on Park's loan portfolio is expected to continue to
decrease as new loan originations have an average rate that is lower than the
current loan portfolio rate and variable rate loans continue to reprice at lower
interest rates.
Average investment securities including federal funds sold increased by $367
million or 25.8% to $1,792 million for the first quarter of 2003 compared to
$1,425 million for the first quarter of 2002. The increase in the investment
portfolio was primarily funded by an increase in short-term borrowings.
The average yield on taxable investment securities decreased to 5.02% for the
first quarter of 2003 compared to 6.43% for the same quarter in 2002. The yield
on tax exempt investments increased to 7.30% for the first quarter of 2003
compared to 7.17% for the same period in 2002. No tax exempt securities were
purchased in the past year and the tax exempt securities that matured yielded
less than the average portfolio rate.
-15-
At March 31, 2003, the investment portfolio included $475 million of U.S Agency
discount notes, which had an average yield of 1.20%, and an average maturity of
33 days. These securities were purchased to provide an arbitrage for a similar
amount of short-term borrowings (dollar-roll repos) whose borrowing cost was a
negative .25% at March 31, 2003. The average balance of U.S. Agency discount
notes was $277 million for the quarter. At March 31, 2003, the yield on Park's
investment portfolio was 4.52% and the average maturity was 2.2 years. Excluding
the $475 million of U.S. Agency discount notes, the yield on the portfolio was
5.50% and the average maturity was 2.7 years. For comparison, at March 31, 2002
the yield on the investment portfolio was 6.30% and the average maturity was 3.6
years. Management expects that the yield on the investment portfolio will
continue to decrease as the yield on securities being purchased during the
second quarter of 2003 is approximately 4.50% and the securities maturing during
the quarter are yielding about 5.25%
Average interest bearing liabilities increased by $273 million or 7.9% to $3,715
million for the quarter ended March 31, 2003 compared to the same quarter in
2002. Average interest bearing deposits increased by $67 million or 2.4% to
$2,896 million for the first quarter of 2003 compared to the first quarter of
2002.
Average short-term borrowings increased by $266 million or 94.5% to $547 million
and average long-term debt decreased by $59 million or 17.9% to $272 million for
the first quarter of 2003 compared to the same period in 2002. The increase in
short-term borrowings was due to the dollar-roll repos which averaged $273
million for the quarter.
The average cost of interest bearing liabilities decreased by .85% to 1.82% in
2003 compared to 2.67% in 2002. The average cost of interest bearing deposits
decreased by .74% to 1.90% in 2003 compared to 2.64% in 2002.
The average cost of short-term borrowings decreased by 1.24% to .36% in 2003
compared to 1.60% in 2002 as the average cost of the dollar-roll repos was a
negative .46% for the quarter. The average cost of long-term debt was 3.91% in
2003 compared to 3.79% in 2002.
Net interest income decreased by $42,000 to $52.205 million in 2003 compared to
$52.247 million in 2002. The net interest spread (the difference between the
yield on interest earning assets and the cost of interest bearing liabilities)
decreased by .19% to 4.52% in 2003 compared to 4.71% in 2002. The tax equivalent
net interest margin (defined as net interest income divided by average interest
earning assets) decreased by .35% to 4.83% in 2003 compared to 5.18% in 2002.
However, the increase in average earning assets of 7.1% in 2003 allowed Park to
earn just $42,000 less in net interest income for the first quarter of 2003
compared to 2002.
Management expects that the net interest margin will continue to decrease during
2003 but that the growth in interest earning assets should enable Park to match
or exceed the net interest income earned in 2002. The arbitrage available due to
the low cost of dollar-roll repos will continue to have a positive impact on net
interest income for the second quarter of 2003, but management is uncertain if
this opportunity will be available later in the year.
-16-
Provision for Loan Losses
- -------------------------
The provision for loan losses decreased by $1.1 million or 24.0% to $3.4 million
for the first quarter of 2003 compared to $4.5 million for the first quarter of
2002. Net charge-offs were $1.4 million in 2003 compared to $3.8 million in
2002. Nonperforming loans, defined as loans that are 90 days past due,
renegotiated loans, and nonaccrual loans were $30.9 million or 1.15% of loans at
March 31, 2003 compared to $26.5 million or .98% of loans at December 31, 2002
and $28.4 million or 1.04% of loans at March 31, 2002. The reserve for loan
losses as a percentage of outstanding loans was 2.39% at March 31, 2003 compared
to 2.30% at December 31, 2002 and 2.23% at March 31, 2002. See Footnote 3 for a
discussion of the factors considered by management in determining the provision
for loan losses.
Noninterest Income
- -------------------
Noninterest income increased by $3.7 million or 31.0% to $15.5 million for the
first quarter of 2003 compared to $11.8 million for the first quarter of 2002.
The following table summarizes the change in noninterest income.
Three Months Ended
March 31,
(in thousands)
--------------------------------------------
2003 2002 Change
------ ------ ------
Fees from Fiduciary Activities $2,414 $2,201 $213
Service Charges on Deposit Accounts 3,412 3,216 196
Other Service Income 5,585 2,868 2,717
Other Income 4,044 3,510 534
------- ------- ------
Total $15,455 $11,795 $3,660
------- ------- ------
The large increase in fees earned from Other Service Income was primarily due to
an increase in the fee income earned from the origination and sale into the
secondary market of fixed rate mortgage loans. This high volume of mortgage loan
production is continuing into the second quarter. The increase in Other Income
was primarily due to increases in check card and ATM transactions. Management
expects that total noninterest income for the second quarter will be at
approximately the same level as the first quarter due primarily to the large fee
income earned from the origination and sale of fixed rate mortgage loans.
Gain (Loss) on Sale of Securities
- ---------------------------------
The loss on sale of securities of $1.2 million for the first quarter of 2003 was
due to the sale of $100 million of U.S. Agency collateralized mortgage
obligations. The proceeds were reinvested in fifteen year U.S. Agency
mortgage-backed securities. The increased interest income from the
mortgage-backed securities is expected to earn back the loss in twenty-two
months.
The loss on sale of securities of $210,000 for the first quarter of 2002 was due
to the sale of $100 million of U.S. Agency collateralized mortgage obligations.
These securities were sold to reduce the maturity extension risk in the
investment portfolio.
-17-
Other Expense
- -------------
Total other expense increased by $853,000 or 2.9% to $30.1 million for the
quarter ended March 31, 2003 compared to $29.2 million for the same period in
2002. Salaries and employee benefits expense increased by $1.3 million or 7.9%
to $17.54 million for the first quarter of 2003 compared to $16.25 million for
the first quarter of 2002. Full time equivalent employees were 1,617 at March
31, 2003 compared to 1,584 at March 31, 2002.
The subcategory other expense decreased by $723,000 or 7.3% to $9.2 million for
the three months ended March 31, 2003 compared to $9.9 million for the same
period in 2002. The decrease in this expense was primarily due to the $392,000
decrease in the amortization of intangible assets and to a decrease in data
processing expense and legal and other professional fees.
Federal Income Taxes
- --------------------
Federal income tax expense was $9.8 million for the first quarter of 2003
compared to $8.6 million for the same period in 2002. The ratio of federal
income tax expense to income before taxes was approximately 29.6% in 2003 and
28.7% in 2002. The primary difference between the effective federal income tax
rate and the statutory rate of 35% is due to tax-exempt interest income from
state and municipal loans and investments, and low income housing tax credits.
-18-
COMPARISON OF FINANCIAL CONDITION
AT MARCH 31, 2003 AND DECEMBER 31, 2002
Changes in Financial Condition and Liquidity
- --------------------------------------------
Total assets increased by $667 million or 15.0% to $5,113 million at March 31,
2003 compared to $4,447 million at December 31, 2002. Total loans decreased by
$9 million or .3% to $2,692 million as the demand for consumer loans continues
to be weak. The demand for commercial and commercial real estate loans improved
during the first quarter and management is hopeful that total loans will begin
growing during the second quarter. Investment securities increased by $716
million or 51.8% to $2,099 million at March 31, 2003. Part of this increase
($475 million) was due to the purchase of short-term U.S. Agency notes to
arbitrage the increase in short-term borrowings from the dollar-roll repos.
Total liabilities increased by $655 million or 16.6% to $4,592 million at March
31, 2003 compared to $3,937 million at December 31, 2002. Total borrowed money
increased by $678 million to $1,055 million at March 31, 2003 compared to $376
million at December 31, 2002. Most of the increase in borrowed money was due to
$486 million in short-term dollar-roll repos.
Effective liquidity management ensures that the cash flow requirements of
depositors and borrowers, as well as the operating cash needs of the
Corporation, are met.
Funds are available from a number of sources, including the securities
portfolio, the core deposit base, Federal Home Loan Bank borrowings, and the
capability to securitize or package loans for sale. The Corporation's loan to
asset ratio was 52.47% at March 31, 2003 compared to 60.54% at December 31, 2002
and 61.56% at March 31, 2002. Cash and cash equivalents totaled $203 million at
March 31, 2003 compared to $239 million at December 31, 2002 and $127 million at
March 31, 2002. The present funding sources provide more than adequate liquidity
for the Corporation to meet its cash flow needs.
Capital Resources
- -----------------
Stockholders' equity at March 31, 2003 was $521 million or 10.19% of total
assets compared to $509 million or 11.45% of total assets at December 31, 2002
and $472 million or 10.66% of total assets at March 31, 2002.
Financial institution regulators have established guidelines for minimum capital
ratios for banks, thrifts, and bank holding companies. The net unrealized gain
or loss on available-for-sale securities is generally not included in computing
regulatory capital. The minimum leverage capital ratio (defined as stockholders'
equity less intangible assets divided by tangible assets) is 4% and the well
capitalized ratio is greater than or equal to 5%. Park's leverage ratio was
10.07% at March 31, 2003 and 10.72% at December 31, 2002. The minimum Tier I
risk-based capital ratio (defined as leverage capital divided by risk-adjusted
assets) is 4% and the well capitalized ratio is greater than or equal to 6%.
Park's Tier I risk-based capital ratio was 15.88% at March 31, 2003 and 16.51%
at December 31, 2002. The minimum total risk-based capital ratio (defined as
leverage capital plus supplemental capital divided by risk-adjusted assets) is
8% and the well capitalized ratio is greater than or equal to 10%. Park's total
risk-based capital ratio was 16.81% at March 31, 2003 and 17.78% at December 31,
2002.
-19-
The financial institution subsidiaries of Park each met the well capitalized
capital ratio guidelines at March 31, 2003. The following table indicates the
capital ratios for each subsidiary and Park at March 31, 2003:
TIER I TOTAL
LEVERAGE RISK-BASED RISK-BASED
-------- ---------- ----------
Park National Bank 5.51% 8.48% 12.09%
Richland Trust Company 5.84% 10.23% 11.49%
Century National Bank 5.77% 10.20% 12.61%
First-Knox National Bank 5.54% 8.56% 12.45%
Second National Bank 5.48% 9.34% 12.89%
United Bank, N.A. 6.18% 11.32% 12.58%
Security National Bank 5.81% 8.72% 12.67%
Citizens National Bank 6.02% 11.47% 16.44%
Park National Corporation 10.07% 15.88% 16.81%
Minimum Capital Ratio 4.00% 4.00% 8.00%
Well Capitalized Ratio 5.00% 6.00% 10.00%
At the April 21, 2003 Park National Corporation Board of Directors' meeting, a
cash dividend of $.83 per share was declared payable on June 10, 2003 to
stockholders of record on May 23, 2003.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Footnote 1 for disclosure that Park does not have any off-balance sheet
derivative financial instruments.
Management reviews interest rate sensitivity on a quarterly basis by modeling
the financial statements under various interest rate scenarios. The primary
reason for these efforts is to guard Park from adverse impacts of unforeseen
changes in interest rates. Management continues to believe that further changes
in interest rates will have a small impact on net income, consistent with the
disclosure on pages 31 and 32 of our 2002 Annual Report, which is incorporated
by reference into our 2002 Form 10-K. However, as mentioned earlier in
management's analysis of net interest income, the net interest margin is
expected to continue to decrease in 2003.
-20-
ITEM 4 - CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Within the 90 day period prior to the filing date of this Quarterly Report on
Form 10-Q, Park, under the supervision, and with the participation, of its
management, including its principal executive officer and principal financial
officer, performed an evaluation of the Corporation's disclosure controls and
procedures, as contemplated by Rule 13a-15 under the Securities Exchange Act of
1934, as amended. Based on that evaluation, Park's principal executive officer
and principal financial officer concluded that such disclosure controls and
procedures are effective to ensure that material information relating to Park,
including its consolidated subsidiaries, is made known to them, particularly
during the period for which the periodic reports are being prepared.
CHANGES IN INTERNAL CONTROLS
No significant changes were made in Park's internal controls or in other factors
that could significantly affect these controls subsequent to the date of the
evaluation performed pursuant to Rule 13a-15 under the Securities Exchange Act
of 1934, as amended, referred to above.
-21-
PARK NATIONAL CORPORATION
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Park National Corporation is not engaged in any legal proceedings
of a material nature at the present time.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
Not applicable
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
I. Annual Meeting of Shareholders - April 21, 2003:
a. On April 21, 2003 Park National Corporation held its Annual
Meeting of Shareholders. At the close of business on the February 21,
2003 record date, 13,781,447 Park National Corporation common shares
were outstanding and entitled to vote. At the Annual Meeting,
12,492,068 or 90.64% of the outstanding common shares entitled to vote
were represented by proxy or in person.
b. Directors elected at the Annual Meeting for a three year term:
James J. Cullers
11,837,810 For 24,215 Withheld 630,043 Abstain and Broker Non-Votes
---------- ------ -------
R. William Geyer
11,848,649 For 12,903 Withheld 630,516 Abstain and Broker Non-Votes
---------- ------ -------
William T. McConnell
11,852,188 For 8,663 Withheld 631,217 Abstain and Broker Non-Votes
---------- ----- -------
William A. Phillips
12,027,599 For 8,455 Withheld 456,014 Abstain and Broker Non-Votes
---------- ----- -------
-22-
Directors whose term of office continued after the Annual Meeting:
Maureen Buchwald
C. Daniel DeLawder
D. C. Fanello
Harry O. Egger
Howard E. LeFevre
John J. O'Neill
J. Gilbert Reese
Rick R. Taylor
c. See Item (b) for the voting results for directors.
d. Not applicable
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits
--------
99.1 Certification Pursuant to Title 18, United States
Code, Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(Chief Executive Officer)
99.2 Certification Pursuant to Title 18, United State
Code, Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(Chief Financial Officer)
b. Reports on Form 8-K
-------------------
No reports on Form 8-K were filed by Park
National Corporation during the fiscal quarter
ended March 31, 2003. On April 21, 2003, Park
National Corporation furnished information
regarding the press release announcing first
quarter earnings for Park National Corporation
under Item 9 (which was also deemed provided
under Item 12) in a Form 8-K. The press release
was included as Exhibit 99.
-23-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PARK NATIONAL CORPORATION
DATE: May 8, 2003 BY: /s/C. Daniel DeLawder
----------- ----------------------
C. Daniel DeLawder
President and Chief Executive Officer
DATE: May 8, 2003 BY: /s/John W. Kozak
----------- ----------------
John W. Kozak
Chief Financial Officer
-24-
CERTIFICATIONS
I, C. Daniel DeLawder, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Park National
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant' s auditors any material weakness in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: May 8, 2003 /s/ C. Daniel DeLawder
--------------------------------------------
C. Daniel DeLawder
President and Chief Executive Officer
-25-
CERTIFICATIONS
I, John W. Kozak, certify that
1. I have reviewed this quarterly report on Form 10-Q of Park National
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made know to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: May 8, 2003 /s/ John W. Kozak
--------------------------------------------
John W. Kozak
Chief Financial Officer
-26-