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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 September 30, 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 [ ]
13,770,899 Common shares, no par value, outstanding at October 31, 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 September 30, 2003 and
December 31, 2002 (unaudited) 3
Consolidated Condensed Statements of Income for the Three Months and Nine Months
ended September 30, 2003 and 2002 (unaudited) 4, 5
Consolidated Condensed Statements of Changes in Stockholders' Equity for the Nine
Months ended September 30, 2003 and 2002 (unaudited) 6
Consolidated Condensed Statements of Cash Flows for the Nine Months ended September
30, 2003 and 2002 (unaudited) 7, 8
Notes to Consolidated Financial Statements 9-13
Item 2. Management's Discussion and analysis of Financial Condition and Results of Operations 13-23
Item 3. Quantitative and Qualitative Disclosures About Market Risk 24
Item 4. Controls and Procedures 24
PART II. OTHER INFORMATION 25
Item 1. Legal Proceedings 25
Item 2. Changes in Securities and Use of Proceeds 25
Item 3. Defaults Upon Senior Securities 25
Item 4. Submission of Matters to a Vote of Security Holders 25
Item 5. Other Information 25
Item 6. Exhibits and Reports on Form 8-K 25
SIGNATURES 26
-2-
PARK NATIONAL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(dollars in thousands, except share data)
September 30, December 31,
2003 2002
------------ ------------
Assets:
Cash and due from banks $ 142,477 $ 157,088
Federal funds sold 18,000 81,700
Interest bearing deposits 50 50
Securities available-for-sale, at fair value
(amortized cost of $1,562,365 and $993,317
at September 30, 2003 and December 31, 2002) 1,589,234 1,030,264
Securities held-to-maturity, at amortized cost
(fair value approximates $87,821 and $360,688
at September 30, 2003 and December 31, 2002) 86,704 352,878
Loans (net of unearned interest) 2,711,362 2,692,187
Allowance for possible loan losses 64,476 62,028
Net loans 2,646,886 2,630,159
Bank premises and equipment, net 37,450 38,734
Bank owned life insurance 81,718 74,355
Other assets 83,263 81,397
----------- -----------
Total assets $ 4,685,782 $ 4,446,625
----------- -----------
Liabilities and Stockholders' Equity:
Deposits:
Noninterest bearing $ 522,865 $ 594,157
Interest bearing 2,881,188 2,900,978
Total deposits 3,404,053 3,495,135
----------- -----------
Short-term borrowings 505,187 188,878
Long-term debt 185,954 187,226
Other liabilities 54,822 66,094
----------- -----------
Total liabilities 4,150,016 3,937,333
----------- -----------
Stockholders' Equity:
Common stock (No par value; 20,000,000 shares
authorized; 14,542,373 shares issued in 2003
and 14,540,449 issued in 2002) 105,898 105,768
Retained earnings 480,507 446,300
Treasury stock (772,841 shares in 2003
and 748,483 shares in 2002) (68,218) (65,194)
Accumulated other comprehensive income,
net of taxes 17,579 22,418
----------- -----------
Total stockholders' equity 535,766 509,292
----------- -----------
Total liabilities and
stockholders' equity $ 4,685,782 $ 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 Nine Months Ended
September 30, September 30,
-------------------------- -------------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Interest income:
Interest and fees on loans $ 45,696 $ 51,596 $ 139,205 $ 156,294
Interest on:
Obligations of U.S. Government,
its agencies and other securities 16,615 18,976 56,325 58,530
Obligations of states
and political subdivisions 1,533 1,719 4,706 5,277
Other interest income 207 111 649 274
--------- --------- --------- ---------
Total interest income 64,051 72,402 200,885 220,375
--------- --------- --------- ---------
Interest expense:
Interest on deposits:
Demand and savings deposits 1,763 3,275 6,403 9,728
Time deposits 9,743 13,829 31,484 43,363
Interest on borrowings:
Short-term borrowings 685 760 1,873 2,761
Long-term debt 2,510 2,608 7,974 8,447
--------- --------- --------- ---------
Total interest expense 14,701 20,472 47,734 64,299
--------- --------- --------- ---------
Net interest income 49,350 51,930 153,151 156,076
Provision for loan losses 3,156 3,194 9,425 11,357
Net interest income after
provision for loan losses 46,194 48,736 143,726 144,719
Other income 16,140 12,229 48,995 35,198
--------- --------- --------- ---------
Gain (loss) on sale of securities (4,474) - (5,387) (210)
--------- --------- --------- ---------
Continued
4
PARK NATIONAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(CONTINUED)
(dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- ----------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Other expense:
Salaries and employee benefits $ 16,566 $ 16,039 $ 50,619 $ 47,982
Occupancy expense 1,775 1,503 5,178 4,531
Furniture and equipment expense 1,610 1,493 4,837 4,499
Other expense 9,407 10,272 29,283 29,851
----------- ----------- ----------- -----------
Total other expense 29,358 29,307 89,917 86,863
Income before federal income taxes 28,502 31,658 97,417 92,844
Federal income taxes 8,302 9,585 28,928 27,351
----------- ----------- ----------- -----------
Net income $ 20,200 $ 22,073 $ 68,489 $ 65,493
=========== =========== =========== ===========
PER SHARE:
Net income:
Basic $ 1.47 $ 1.59 $ 4.97 $ 4.71
=========== =========== =========== ===========
Diluted $ 1.46 $ 1.59 $ 4.95 $ 4.70
=========== =========== =========== ===========
Weighted average
Basic 13,764,381 13,847,583 13,768,775 13,901,345
=========== =========== =========== ===========
Diluted 13,880,422 13,871,544 13,849,082 13,934,287
=========== =========== =========== ===========
Cash dividends declared $ 0.83 $ 0.76 $ 2.49 $ 2.28
=========== =========== =========== ===========
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)
Accumulated
Treasury Other
Common Retained Stock Comprehensive Comprehensive
NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 Stock Earnings at Cost Income Income
--------- --------- ---------- ------------- -------------
BALANCE AT DECEMBER 31, 2001 $ 105,771 $ 403,870 ($ 50,000) $ 8,705
Net Income 65,493 $ 65,493
Accumulated other comprehensive income,
net of income taxes of $ 8,007 14,871 14,871
----------
Total comprehensive income $ 80,364
==========
Cash dividends on common stock:
Park at $2.28 per share (31,688)
Cash paid for fractional shares - 18 shares (1)
Treasury stock purchased - 153,404 shares (14,200)
Treasury stock reissued for stock options - 44,556
shares 2,738
--------- --------- --------- ---------
BALANCE AT SEPTEMBER 30, 2002 $ 105,770 $ 437,675 ($ 61,462) $ 23,576
========= ========= ========= =========
BALANCE AT DECEMBER 31, 2002 $ 105,768 $ 446,300 ($ 65,194) $ 22,418
Net Income $ 68,489 $ 68,489
Accumulated other comprehensive income, net of tax:
Reverse additional minimum liability for pension
plan, net of taxes $860 1,598
Unrealized net holding loss on securities
available-for-sale, net of tax benefit of $3,466 (6,437) (4,839)
----------
Total comprehensive income $ 63,650
==========
Cash dividends on common stock:
Park at $2.49 per share (34,282)
Shares issued for stock options - 1,924 68
Tax benefit from exercise of stock options 62
Treasury stock purchased - 73,189 shares
(7,275)
Treasury stock reissued for stock options - 48,831 shares
4,251
--------- --------- --------- ---------
BALANCE AT SEPTEMBER 30, 2003 $ 105,898 $ 480,507 ($ 68,218) $ 17,579
========= ========= ========== =========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6
PARK NATIONAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollars in thousands)
Nine Months Ended
September 30,
--------------------------
2003 2002
----------- -----------
Operating activities:
Net income $ 68,489 $ 65,493
----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Accretion, depreciation and amortization (4,677) (2,525)
Provision for loan losses 9,425 11,357
Amortization of the excess of cost over
net assets of banks purchased 1,748 3,444
Realized investment security losses 5,387 210
Changes in assets and liabilities:
(Increase) decrease in other assets (7,336) 892
Increase (decrease) in other liabilities 1,789 (8,244)
----------- -----------
Net cash provided from operating activities 74,825 70,627
----------- -----------
Investing activities:
Proceeds from sales of:
Available-for-sale securities 487,944 99,673
Proceeds from maturity of:
Available-for-sale securities 2,153,513 775,311
Held-to-maturity securities 607,830 1,436
Purchases of:
Available-for-sale securities (3,210,590) (764,794)
Held-to-maturity securities (341,656) -
Net (increase) decrease in loans (22,504) 61,641
Purchases of premises and equipment, net (2,989) (3,065)
----------- -----------
Net cash (used by) provided from investing activities (328,452) 170,202
----------- -----------
Continued
7
PARK NATIONAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(CONTINUED)
(dollars in thousands)
Nine Months Ended
September 30,
----------------------
2003 2002
--------- ---------
Financing activities:
Net (decrease) increase in deposits ($ 91,082) $ 178,108
Net increase (decrease) in short-term borrowings 316,309 (139,034)
Cash paid for fractional shares - (1)
Exercise of stock options 130 -
Purchase of treasury stock, net (3,024) (11,462)
Long-term debt issued 175,000 -
Repayment of long-term debt (176,272) (190,281)
Cash dividends paid (45,745) (42,286)
Net cash provided from (used by) financing activities 175,316 (204,956)
(Decrease) increase in cash and cash equivalents (78,311) 35,873
Cash and cash equivalents at beginning of year 238,788 169,143
--------- ---------
Cash and cash equivalents at end of period $ 160,477 $ 205,016
========= =========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 49,432 $ 66,762
--------- ---------
Income taxes $ 28,800 $ 27,850
--------- ---------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8
PARK NATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Nine Month Periods Ended September 30, 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 periods ended September 30, 2003 are not
necessarily indicative of the operating results to be anticipated for the fiscal
year ended December 31, 2003.
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 accounting principles generally accepted in the United States. 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.
The balance sheet at December 31, 2002 has been derived from the audited
financial statements at that date, but does not include all the information and
footnotes required by accounting principles generally accepted in the United
States.
Park does not have any off-balance sheet derivative financial instruments such
as interest-rate swap agreements.
Note 2 - Intangible Assets
In September 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
September 30, 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.
-9-
Park also had core deposit intangibles included in other assets of $6.8 million
at September 30, 2003 and $8.5 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 $582,500 for the third quarter of 2003 compared to $1,493,500 for
the third quarter of 2002 and was $1,747,500 for the first nine months of 2003
compared to $3,443,500 for the first nine months of 2002.
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.
(In Thousands)
-----------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -----------------
2003 2002 2003 2002
---- ---- ---- ----
Beginning of Period $65,525 $ 63,030 $62,028 $ 59,959
Provision for Loan Losses 3,156 3,194 9,425 11,357
Losses Charged to the Reserve <5,921> <3,998> <12,103> <12,704>
Recoveries 1,716 1,427 5,126 5,041
------- -------- ------- --------
End of Period $64,476 $ 63,653 $64,476 $ 63,653
======= ======== ======= ========
-10-
Note 4- Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share for the three and nine month periods ended September 30, 2003 and 2002.
(Dollars in thousands, except per share data)
-----------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
2003 2002 2003 2002
---- ---- ---- ----
Numerator:
Net Income $ 20,200 $ 22,073 $ 68,489 $ 65,493
Denominator:
Denominator for basic earnings per
share (weighted-average shares) 13,764,381 13,847,583 13,768,775 13,901,345
Effect of dilutive securities 116,041 23,961 80,307 32,942
Denominator for diluted earnings
per share (adjusted weighted-average
shares & assumed conversions) 13,880,422 13,871,544 13,849,082 13,934,287
Earnings per share:
Basic earnings per share $ 1.47 $ 1.59 $ 4.97 $ 4.71
Diluted earnings per share $ 1.46 $ 1.59 $ 4.95 $ 4.70
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 September 30, 2003 (In Thousands)
------------------------------------------------------------------------------
PNB RTC CNB FKNB UB SNB SEC CIT All Other Total
--- --- --- ---- -- --- --- --- --------- -----
Net Interest Income $ 15,029 $ 5,003 $ 4,688 $ 7,838 $ 1,907 $ 3,370 $ 7,708 $ 1,534 $ 2,273 $ 49,350
Provision for Loan Losses 1,080 330 225 666 90 150 405 90 120 3,156
Other Income 3,870 1,095 1,250 1,950 848 607 1,795 84 167 11,666
Other Expense 8,799 2,508 2,876 3,966 1,454 1,825 5,030 1,138 1,762 29,358
Net Income $ 6,256 $ 2,153 $ 1,902 $ 3,495 $ 828 $ 1,413 $ 2,780 $ 278 $ 1,095 $ 20,200
Balances at
September 30, 2003
Assets $1,612,904 $483,801 $446,193 $742,036 $222,206 $360,969 $849,885 $194,247 ($226,459) $4,685,782
-11-
Operating Results for the Three Months Ended September 30, 2002 (In Thousands)
------------------------------------------------------------------------------
PNB RTC CNB FKNB UB SNB SEC CIT All Other Total
--- --- --- ---- -- --- --- --- --------- -----
Net Interest Income $ 15,479 $ 5,553 $ 4,851 $ 7,832 $ 2,257 $ 3,489 $ 8,647 $ 1,717 $ 2,105 $ 51,930
Provision for Loan Losses 1,095 360 240 624 90 150 420 90 125 3,194
Other Income 5,260 932 1,309 1,450 442 509 1,860 359 108 12,229
Other Expense 8,751 3,232 2,659 3,687 1,433 1,845 4,903 1,228 1,569 29,307
Net Income $ 7,299 $ 1,912 $ 2,168 $ 3,411 $ 798 $ 1,423 $ 3,497 $ 516 $ 1,049 $ 22,073
Balances at
September 30, 2002
Assets $1,411,458 $468,923 $436,623 $666,570 $196,863 $330,849 $849,815 $170,194 ($ 90,573) $4,440,722
Operating Results for the Nine Months Ended September 30, 2003 (In Thousands)
-----------------------------------------------------------------------------
PNB RTC CNB FKNB UB SNB SEC CIT All Other Total
--- --- --- ---- -- --- --- --- --------- -----
Net Interest Income $ 46,159 $ 16,030 $ 14,553 $ 23,589 $ 6,486 $ 10,394 $ 24,417 $ 4,895 $ 6,628 $153,151
Provision for Loan Losses 3,540 690 675 1,998 270 450 1,215 270 317 9,425
Other Income 17,773 3,785 4,424 5,256 2,143 2,093 6,711 935 488 43,608
Other Expense 27,362 7,588 8,476 12,040 4,396 5,487 14,769 3,376 6,423 89,917
Net Income $ 22,709 $ 7,603 $ 6,560 $ 10,100 $ 2,723 $ 4,596 $ 10,257 $ 1,497 $ 2,444 $ 68,489
Operating Results for the Nine Months Ended September 30, 2002 (In Thousands)
-----------------------------------------------------------------------------
PNB RTC CNB FKNB UB SNB SEC CIT All Other Total
--- --- --- ---- -- --- --- --- --------- -----
Net Interest Income $ 46,819 $ 17,032 $ 14,936 $ 22,805 $ 6,633 $ 10,370 $ 26,258 $ 5,185 $ 6,038 $156,076
Provision for Loan Losses 4,010 1,355 720 2,297 270 575 1,260 595 275 11,357
Other Income 15,136 2,495 3,539 4,375 1,059 1,137 5,813 1,113 321 34,988
Other Expense 26,092 8,735 8,013 11,169 4,376 5,397 14,529 3,423 5,129 86,863
Net Income $ 21,968 $ 6,232 $ 6,489 $ 9,465 $ 2,169 $ 3,967 $ 11,088 $ 1,567 $ 2,548 $ 65,493
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 three and nine month periods ended
September 30, 2003 and 2002. The reconciling amounts for consolidated total
assets at September 30, 2003 and 2002 consist of the elimination of intersegment
borrowings, and the assets of the Parent Company and GFC which are not
eliminated.
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.
-12-
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.
(Dollars in thousands, except per share data)
---------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- --------------------
2003 2002 2003 2002
---------- --------- -------- ---------
Net income as reported $ 20,200 $ 22,073 $ 68,489 $ 65,493
Deduct:
Total stock-based employee
compensation expense determined
under fair value method, net of related tax effects (40) (24) (1,852) (1,714)
Pro forma net income $ 20,160 $ 22,049 $ 66,637 $ 63,779
Basic earnings per share as reported $ 1.47 $ 1.59 $ 4.97 $ 4.71
Pro forma basic earnings per share $ 1.46 $ 1.59 $ 4.84 $ 4.59
Diluted earnings per share as reported $ 1.46 $ 1.59 $ 4.95 $ 4.70
Pro forma diluted earnings per share $ 1.45 $ 1.59 $ 4.81 $ 4.58
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. The 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 Park's 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.
-13-
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.
Comparison of Results of Operations for the Three and Nine Month Periods
Ended September 30, 2003 and 2002.
Summary Discussion of Results
Net income decreased by $1.9 million or 8.5% to $20.2 million for the three
months ended September 30, 2003 compared to $22.1 million for the same period in
2002. For the first nine months of 2003, net income increased by $3.0 million or
4.6% to $68.5 million compared to $65.5 million for the same period in 2002. The
annualized, net income to average asset ratio (ROA) was 1.72% for the third
quarter of 2003 and 1.90% for the first nine months of 2003, compared to 1.96%
for the third quarter of 2002 and 1.97% for the first nine months of 2002. The
annualized, net income to average equity ratio (ROE) was 15.37% for the third
quarter of 2003 and 17.75% for the first nine months of 2003, compared to 17.74%
for the third quarter of 2002 and 18.17% for the first nine months of 2002.
Diluted earnings per share decreased by 8.2% to $1.46 for the third quarter of
2003 and increased by 5.3% to $4.95 for the first nine months of 2003.
Net losses from the sale of investment securities totaled $4.5 million for the
quarter ended September 30, 2003, and $5.4 million for the first nine months of
2003. There were no net losses from the sale of investment securities during the
third quarter of 2002 and $210,000 in net losses for the first nine months of
2002. Long-term interest rates increased during the quarter and the proceeds
from the sale of investment securities were reinvested in higher yielding U.S.
Government Agency fifteen year mortgage-backed securities. Management expects
that the net losses from the sale of investment securities will be earned back
in three years from the higher reinvestment rate on the mortgage-backed
securities.
-14-
Total Other Income increased by $3.9 million or 32.0% to $16.1 million for the
three months ended September 30, 2003 and increased by $13.8 million or 39.2%
for the nine months ended September 30, 2003. The large increase for both
periods 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 first seven months of 2003, and management
was able to reallocate resources so that mortgage loan customers were able to
generally close on their mortgage loan within thirty days from application to
closing. Fixed rate mortgage loans totaling approximately $768 million were
originated and sold during the first nine months of 2003, compared to
approximately $276 million for the first nine months of 2002. With the increase
in long-term interest rates in August, fixed rate mortgage loan originations
have decreased sharply. Total Other Income during the fourth quarter of 2003 is
expected to be much less than in each of the first three quarters of 2003.
Net Interest Income Comparison for the Third Quarter of 2003 and 2002
Park's principal source of earnings is net interest income, the difference
between total interest income and total interest expense. Net interest income
decreased by $2.6 million or 5.0% to $49.35 million for the three months ended
September 30, 2003 compared to $51.93 million for the third quarter of 2002. The
following table compares the average balance and tax equivalent yield/cost for
interest earning assets and interest bearing liabilities for the third quarter
of 2003 with the same quarter in 2002.
Three Months Ended September 30,
(In Thousands)
-------------------------------------------------
2003 2002
----------------------- -----------------------
Tax Tax
Average Equivalent Average Equivalent
Balance % Balance %
---------- --------- ---------- ----------
Loans $2,700,373 6.74% $2,717,057 7.57%
Taxable Investments 1,495,549 4.43% 1,279,559 5.88%
Tax Exempt Investments 127,011 7.15% 142,895 7.03%
Federal Funds Sold and Securities Purchased
under Resale Agreements 31,736 1.36% 22,959 1.92%
Interest Earning Assets $4,354,669 5.92% $4,162,470 7.00%
Interest Bearing Deposits $2,911,736 1.57% $2,951,314 2.30%
Short-term Borrowings 400,626 .68% 210,780 1.43%
Long-term Debt 236,245 4.21% 233,965 4.42%
Interest Bearing Liabilities $3,548,607 1.64% $3,396,059 2.39%
Excess Interest Earning Assets $806,062 4.28% $766,411 4.61%
Net Interest Margin 4.58% 5.05%
Average interest earning assets increased by $192 million or 4.6% for the
quarter ended September 30, 2003 compared to the same quarter in 2002. The
average yield on interest earning assets decreased to 5.92% for the third
quarter of 2003 compared to 7.00% for the third quarter of 2002.
-15-
Average loan totals decreased by $17 million or .6% to $2,700 million for the
quarter ended September 30, 2003 compared to the same quarter in 2002. At
September 30, 2003, total loans outstanding were $2,711 million compared to
$2,692 million at December 31, 2002, an increase of $19 million. During the full
year 2002, total loans decreased by $104 million or 3.7%. Total loans also
decreased by $160 million or 5.4% for the full year 2001. The outstanding
balances for commercial and commercial real estate loans increased during the
first nine months of 2003, and the outstanding balances for consumer loans and
leases secured by automobiles increased during the second and third quarters of
2003. Management expects that the demand for commercial and consumer loans will
continue to be moderately strong during the fourth quarter of 2003, as the
economy continues to recover from the recession of 2001.
The demand for fixed rate long-term residential mortgage loans has been strong
for the past several quarters and was especially strong during the first eight
months 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 $37 million or 3.7% during the first nine months 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.
During the month of August 2003, long-term interest rates increased sharply and
reduced the demand for fixed rate residential mortgage loans. Mortgage loan
origination volume was still quite strong during the months of July and August
as borrowers locked in their mortgage rate during June and July. The demand for
adjustable rate mortgage loans has increased as a result of the higher long-term
interest rates. Management expects that real estate loan balances will start
growing during the fourth quarter, if long-term interest rates remain at the
higher levels of recent months.
The average yield on the loan portfolio was 6.74% for the third quarter of 2003
compared to 7.57% for the same period in 2002. The average prime lending rate
was 4.00% for the third quarter of 2003 compared to 4.75% for the same period in
2002. The yield on the loan portfolio is expected to decrease next quarter as
variable rate loans reprice lower and new loan originations have an average rate
that is lower than the current loan portfolio rate.
Average investment securities including federal funds sold increased by $209
million or 14.5% to $1,654 million for the third quarter of 2003 compared to
$1,445 million for the same period in 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 4.43% for the
third quarter of 2003 compared to 5.88% for the same quarter in 2002. The
average yield on tax exempt investments increased to 7.15% for the third quarter
of 2003 compared to 7.03% 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. The average yield on federal funds
sold and securities purchased under resale agreements was 1.36% for the three
months ended September 30, 2003 compared to 1.92% for the same quarter in 2002.
-16-
During the third quarter of 2003, Park borrowed on average $183 million of
short-term borrowings (dollar-roll repos) at an average interest rate of .25%
and reinvested the funds in short-term taxable securities and securities
purchased under resale agreements at an average yield of 1.04%. This large
investment in short-term securities reduced the yield on investments and earning
assets for the quarter but contributed approximately $364,000 to net interest
income for the quarter.
At September 30, 2003, Park's investment portfolio had an average tax equivalent
yield of 4.28% and a weighted average life of 2.8 years. Excluding the
short-term securities that were being used to arbitrage the dollar-roll repos,
the average tax equivalent yield on the investment portfolio was 5.05% and the
average life was 3.4 years. As mentioned previously, long-term interest rates
increased sharply during the month of August 2003. Park took advantage of the
higher interest rates and sold some investments at a loss during the third
quarter and reinvested the proceeds at a higher interest rate. This transaction
decreased third quarter earnings but will increase future earnings. Management
expects that security losses of approximately $.75 million could be realized
during the fourth quarter of 2003.
Average interest bearing liabilities increased by $153 million or 4.5% to $3,549
million for the quarter ended September 30, 2003 compared to the same quarter in
2002. Average interest bearing deposits decreased by $40 million or 1.3% to
$2,912 million for the third quarter of 2003 compared to the third quarter of
2002.
Average short-term borrowings increased by $190 million to $401 million for the
third quarter of 2003 compared to $211 million for the third quarter of 2002.
The large increase was due to the dollar-roll repo borrowings at a weighted
average rate of .25% for the quarter. The borrowings were secured by U.S.
Government Agency fifteen year mortgage-backed securities.
Average long-term debt was $236 million for the quarter ended September 30,
2003, and $234 million for the same period in 2002.
The average cost of interest bearing liabilities decreased by .75% to 1.64% in
2003 compared to 2.39% in 2002. The average cost of interest bearing deposits
decreased by .73% to 1.57% in 2003 compared to 2.30% in 2002.
The average cost of short-term borrowings decreased by .75% to .68% in 2003
compared to 1.43% in 2002 as the average cost of the dollar-roll repos was .25%
for the quarter. The average cost of long-term debt was 4.21% in 2003 and 4.42%
in 2002.
Net interest income decreased by $2.6 million to $49.35 million in the third
quarter of 2003 compared to $51.93 million for the same period in 2002. The net
interest spread (the difference between the yield on interest earning assets and
the cost of interest bearing liabilities) decreased by .33% to 4.28% for the
third quarter of 2003 compared to 4.61% in 2002. The tax equivalent net interest
margin (defined as net interest income divided by average interest earning
assets) decreased by .47% to 4.58% in 2003 compared to 5.05% in 2002.
Net Interest Income Comparison for the First Nine Months of 2003 and 2002
Net interest income decreased by $2.9 million or 1.9% to $153.2 million for the
nine months ended September 30, 2003 compared to $156.1 million for the same
period in 2002. The following table compares the average balance and tax
equivalent yield/cost for interest earning assets and interest bearing
liabilities for the first nine months of 2003 with the same period in 2002.
-17-
Nine Months Ended September 30,
(In Thousands)
2003 2002
----------------------- -----------------------
Tax Tax
Average Equivalent Average Equivalent
Balance % Balance %
---------- ---------- ---------- ----------
Loans $2,687,076 6.96% $2,722,131 7.71%
Taxable Investments 1,656,431 4.57% 1,272,988 6.15%
Tax Exempt Investments 129,510 7.24% 145,786 7.10%
Federal Funds Sold and Securities Purchased under
Resale Agreements 31,628 1.28% 19,101 1.92%
Interest Earning Assets $4,504,645 6.05% $4,160,006 7.19%
Interest Bearing Deposits $2,907,782 1.74% 2,896,377 2.45%
Short-term Borrowings 540,821 .46% 242,897 1.52%
Long-term Debt 280,774 3.80% 273,453 4.13%
Interest Bearing Liabilities $3,729,377 1.71% $3,412,727 2.52%
Excess Interest Earning Assets $ 775,268 4.34% $ 747,279 4.67%
Net Interest Margin 4.63% 5.12%
Average interest earning assets increased by $345 million or 8.3% to $4,505
million for the nine months ended September 30, 2003 compared to the same period
in 2002. Average loans decreased by $35 million or 1.3% to $2,687 million for
the first nine months of 2003 compared to the same period in 2002. The yield on
loans declined to 6.96% for the first nine months of 2003 compared to 7.71% for
the same period in 2002. The average prime lending rate was 4.17% for the first
nine months of 2003 compared to 4.75% for the first nine months of 2002.
Average investment securities including federal funds sold and securities
purchased under resale agreements increased by $380 million or 26.4% to $1,818
million for the first nine months of 2003 compared to the same period in 2002.
The large increase was primarily due to the purchase of short-term investment
securities to arbitrage the dollar-roll repo borrowings, which averaged $304
million for the first nine months of 2003. The yield on taxable investment
securities was 4.57% for the first nine months of 2003 compared to 6.15% for the
same period in 2002.
Average interest bearing liabilities increased by $317 million or 9.3% to $3,729
million for the first nine months compared to the same period in 2002. Average
interest bearing deposits increased by $11 million to $2,908 million for the
first nine months of 2003 compared to the same period in 2002. The average cost
of interest bearing deposits decreased to 1.74% for the first nine months of
2003 compared to 2.45% for the same period in 2002.
-18-
Average short-term borrowings increased by $298 million to $541 million for the
first nine months of 2003 compared to $243 million for the same period in 2002.
The average cost of short-term borrowings decreased to .46% for the first nine
months of 2003 compared to 1.52% for the same period in 2002. The increase in
average short-term borrowings in 2003 was due to the dollar-roll repos, which
had an average balance of $304 million for the first nine months of the year at
an average cost of .04%. Park did not have any dollar-roll repo borrowings in
2002.
The average cost of interest bearing liabilities decreased by .81% to 1.71% for
the first nine months of 2003 compared to 2.52% for the same period in 2002.
However, the yield on average earning assets decreased by 1.14% to 6.05% for the
first nine months of 2003 compared to 7.19% for the same period in 2002. The net
interest spread (the difference between the yield on interest earning assets and
the cost of interest bearing liabilities) decreased by .33% to 4.34% in 2003
compared to 4.67% in 2002. The tax equivalent net interest margin (defined as
net interest income divided by average interest earning assets) decreased by
..49% to 4.63% in 2003 from 5.12% in 2002. Management expects that the net
interest margin will stabilize at approximately 4.63% for the next few quarters.
Provision for Loan Losses
The provision for loan losses was $3.2 million and $9.4 million, respectively,
for the third quarter and first nine months of 2003 compared to $3.2 million and
$11.4 million for the same periods in 2002. Net charge-offs were $4.2 million
and $7.0 million, respectively, for the three and nine month periods ended
September 30, 2003 compared to $2.6 million and $7.7 million for the same
periods in 2002. Nonperforming loans defined as loans that are 90 days or more
past due, renegotiated loans, and nonaccrual loans were $25.0 million or .92% of
loans at September 30, 2003 compared to $26.5 million or .98% of loans at
December 31, 2002 and $26.4 million or .97% of loans at September 30, 2002. The
reserve for loan losses as a percentage of outstanding loans was 2.38% at
September 30, 2003 compared to 2.30% at December 31, 2002 and 2.33% at September
30, 2002. See Note 3 of the Notes to Consolidated Financial Statements for a
discussion of the factors considered by management in determining the provision
for loan losses.
Noninterest Income
Noninterest income increased by $3.9 million or 32.0% to $16.1 million for the
three months ended September 30, 2003 and increased by $13.8 million or 39.2% to
$49.0 million for the nine months ended September 30, 2003 compared to the same
periods in 2002. The following is a summary of the change in noninterest income.
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
(In Thousands) 2003 2002 Change 2003 2002 Change
- ----------------------------------- ---- ---- ------ ---- ---- ------
Fees from Fiduciary Activities $ 2,691 $ 1,963 $ 728 $ 7,551 $ 6,481 $ 1,070
Service Charges on Deposit Accounts 3,665 3,636 29 10,674 10,226 448
Other Service Income 5,818 3,017 2,801 18,683 7,786 10,897
Other Income 3,966 3,613 353 12,087 10,705 1,382
Total $16,140 $12,229 $3,911 $48,995 $35,198 $13,797
-19-
The large increase in Other Service Income for both the three and nine month
periods ended September 30, 2003, was primarily due to the large increase in fee
income earned from the origination and sale into the secondary market of fixed
rate mortgage loans. During the first nine months of 2003, approximately $768
million of fixed rate mortgage loans were originated and sold, compared to $276
million for the first nine months of 2002.
Management expects that fixed rate mortgage loan volume will decrease sharply
during the fourth quarter due to the increase in long-term interest rates, and
as a result Other Service Income is expected to significantly decrease from the
third quarter level of $5.8 million.
Fees from Fiduciary Activities and Service Charges on Deposits are expected to
continue to increase during the fourth quarter of 2003 due to both an increase
in the expected number of customers and an increase in the fees charged for
those services.
The increase in Other Income was primarily due to increases in check card and
ATM transactions for both the three and nine month periods ended September 30,
2003. The fees earned from check card transactions decreased in August as a
result of a settlement that Visa reached with a number of retailers. Other
Income increased by 9.8% for the quarter ended September 30, 2003 and increased
by 12.9% for the first nine months of 2003 compared to the same periods in 2002.
The reduction in check card fee income is expected to be about $90,000 per month
as a result of the Visa settlement, and as a result, Other Income is expected to
produce a smaller increase in fee income for the fourth quarter of 2003.
Gain (Loss) on Sale of Securities
The net loss from the sale of investment securities was $4.5 million for the
three months ended September 30, 2003. The proceeds from the sale of $339
million of U.S. Government Agency collateralized mortgage obligations and
mortgage-backed securities were reinvested in higher yielding fifteen year U.S.
Government Agency mortgage-backed securities. Management expects that the loss
from the sale of securities will be earned back from the higher reinvestment
rate over the next three years.
For the nine months ended September 30, 2003, the net loss from the sale of
investment securities was $5.4 million and $210,000 for the same period in 2002.
Management expects that additional investment securities may be sold at a loss
of approximately $.75 million during the fourth quarter of 2003.
Other Expense
Total other expense was $29.4 million for the three months ended September 30,
2003, compared to $29.3 million for the same period in 2002. Salaries and
employee benefits expense increased by $527,000 or 3.3% to $16.57 million for
the third quarter of 2003 compared to $16.04 million for the same period in
2002. The subcategory of other expense decreased by $865,000 to $9.4 million for
the third quarter of 2003. This decrease was primarily due to a decrease of
$911,000 in the amortization of intangible assets. See Note 2 of the Notes to
Consolidated Financial Statements for a discussion of the accounting for
intangible assets.
-20-
Total other expense increased by $3.1 million or 3.5% to $89.92 million for the
first nine months of 2003, compared to $86.86 million for the same period in
2002. Salaries and employee benefits expense increased by $2.6 million or 5.5%
to $50.6 million for the first nine months of 2003 compared to the same period
in 2002. Full time equivalent employees were 1,650 at September 30, 2003
compared to 1,590 at September 30, 2002.
Federal Income Taxes
Federal income tax expense was $8.3 million and $28.9 million, respectively, for
the three and nine month periods ended September 30, 2003 compared to $9.6
million and $27.4 million for the same periods in 2002. The ratio of federal
income tax expense to income before taxes was 29.1% for the three months ended
September 30, 2003 and 29.7% for the nine months ended September 30, 2003
compared to 30.3% and 29.5% for the same periods in 2002. The statutory rate was
35% for both 2003 and 2002. The difference between the effective federal income
tax rate and the statutory rate is primarily due to tax-exempt interest income
and low income housing tax credits.
-21-
COMPARISON OF FINANCIAL CONDITION
AT SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
Changes in Financial Condition and Liquidity
Total assets increased by $239 million or 5.4% to $4,686 million at September
30, 2003 compared to $4,447 million at December 31, 2002. Total loans increased
by $19 million to $2,711 million at September 30, 2003. The demand for
commercial and commercial real estate loans improved during the first nine
months of 2003 and the demand for consumer loans improved during the second and
third quarters. Investment securities including federal funds sold increased by
$311 million to $1,694 million at September 30, 2003. Part of this increase
($305 million) was due to the purchase of short-term investments to arbitrage
the increase in short-term borrowings from dollar-roll repos.
Total liabilities increased by $213 million or 5.4% to $4,150 million at
September 30, 2003 compared to $3,937 million at December 31, 2002. Total
borrowed money increased by $315 million to $691 million at September 30, 2003
compared to $376 million at December 31, 2002. The increase in borrowed money
was due primarily to $305 million in short-term dollar-roll repos. Total
deposits decreased by $91 million to $3,404 million at September 30, 2003
compared to $3,495 million at December 31, 2002.
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. Park's loan to asset ratio
was 57.86% at September 30, 2003 compared to 60.54% at December 31, 2002 and
61.46% at September 30, 2002. Cash and cash equivalents totaled $160 million at
September 30, 2003 compared to $239 million at December 31, 2002 and $205
million at September 30, 2002. The present funding sources provide more than
adequate liquidity for the Corporation to meet its cash flow needs.
-22-
Capital Resources
Stockholders' equity at September 30, 2003 was $536 million or 11.43% of total
assets compared to $509 million or 11.45% of total assets at December 31, 2002
and $506 million or 11.38% of total assets at September 30, 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
10.83% at September 30, 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 16.64% at September 30, 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 17.90% at September 30, 2003 and 17.78% at
December 31, 2002.
The financial institution subsidiaries of Park each met the well capitalized
capital ratio guidelines at September 30, 2003. The following table indicates
the capital ratios for each subsidiary and Park at September 30, 2003:
TIER I TOTAL
LEVERAGE RISK-BASED RISK-BASED
-------- ---------- ---------
Park National Bank 6.55% 9.77% 13.00%
Richland Trust Company 7.38% 12.39% 13.65%
Century National Bank 6.96% 11.71% 14.11%
First-Knox National Bank 6.58% 10.36% 13.99%
Second National Bank 6.58% 10.93% 14.52%
United Bank, N.A. 7.28% 13.28% 14.54%
Security National Bank 7.11% 10.59% 14.47%
Citizens National Bank 6.44% 12.48% 17.45%
Park National Corporation 10.83% 16.64% 17.90%
Minimum Capital Ratio 4.00% 4.00% 8.00%
Well Capitalized Ratio 5.00% 6.00% 10.00%
-23-
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Note 1 of the Notes to Consolidated Financial Statements 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 for the
first nine months of 2003 was 4.63% and it is expected to be relatively stable
at that level for the remainder of 2003.
ITEM 4 - CONTROLS AND PROCEDURES
With the participation of our management, including our principal executive
officer and principal financial officer, we have evaluated the effectiveness of
our disclosure controls and procedures (as defined in Rule 13a-15 of the
Securities Exchange Act of 1934 (the "Exchange Act")) as of the end of the
period covered by this Quarterly Report on Form 10-Q. Based upon that
evaluation, our principal executive officer and our principal financial officer
have concluded that such disclosure controls and procedures are effective as of
the end of the period covered by this Quarterly Report on Form 10-Q to ensure
that material information relating to Park National Corporation and its
consolidated subsidiaries is made known to them, particularly during the period
for which our periodic reports, including this Quarterly Report on Form 10-Q,
are being prepared.
In addition, there were no changes during the period covered by this Quarterly
Report on Form 10-Q in our internal control over financial reporting (as defined
in Rule 13a-15 of the Exchange Act) that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
-24-
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
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
31.1 Rule 13a - 14(a) / 15d - 14(a) Certification (Principal
Executive Officer)
31.2 Rule 13a - 14(a) / 15d - 14(a) Certification (Principal
Financial Officer)
32.1 Section 1350 Certification (Principal Executive Officer)
32.2 Section 1350 Certification (Principal Financial Officer)
b. Reports on Form 8-K
On July 14, 2003, Park National Corporation furnished information
regarding the press release announcing second 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.
On October 14, 2003, Park National Corporation furnished
information regarding the press release announcing third quarter
earnings for Park National Corporation under Item 12 in a Form 8-K.
The press release was included as Exhibit 99.
-25-
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: November 7, 2003 BY: /s/C. Daniel DeLawder
--------------------------
C. Daniel DeLawder
President and Chief Executive Officer
DATE: November 7, 2003 BY: /s/John W. Kozak
--------------------------
John W. Kozak
Chief Financial Officer
-26-