1
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, 2000
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
----- -----
9,681,263 common shares, no par value per share, outstanding at April 19, 2000.
- ----------
Page 1 of 27
Exhibit Index at Page 21
2
PARK NATIONAL CORPORATION
CONTENTS
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Page
----
PART I. FINANCIAL INFORMATION 3-12
Item 1. Financial Statements 3-12
Consolidated Balance Sheets as of March 31, 2000 and
December 31, 1999 (unaudited) 3
Consolidated Condensed Statements of Income for the
Three Months ended March 31, 2000 and 1999 (unaudited) 4,5
Consolidated Condensed Statements of Changes in Stockholders'
Equity for the Three Months ended March 31, 2000 and 1999
(unaudited) 6
Consolidated Statements of Cash Flows for the Three Months
ended March 31, 2000 and 1999 (unaudited) 7,8
Notes to Consolidated Financial Statements 9-12
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 13-18
Item 3. Quantitative and Qualitative Disclosure About Market Risk 18
PART II. OTHER INFORMATION 19-20
Item 1. Legal Proceedings 19
Item 2. Changes in Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19-20
Item 5. Other Information 20-21
Item 6. Exhibits and Reports on Form 8-K 21-22
SIGNATURES 23
EXHIBITS 24-27
-2-
3
PARK NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands, except per share data)
March 31, December 31,
2000 1999
- ------------------------------------------------------------------------------------------------------------------
Assets:
Cash and due from banks $87,047 $104,222
- ------------------------------------------------------------------------------------------------------------------
Securities available-for-sale, at fair value
(amortized cost of $637,084 and $630,586
at March 31, 2000 and December 31, 1999) 622,129 619,009
- ------------------------------------------------------------------------------------------------------------------
Securities held-to-maturity, at amortized cost
(fair value approximates $4,413 and $4,451
at March 31, 2000 and December 31, 1999) 4,311 4,321
- ------------------------------------------------------------------------------------------------------------------
Loans (net of unearned interest) 1,858,359 1,833,948
- ------------------------------------------------------------------------------------------------------------------
Allowance for possible loan losses 42,257 41,266
- ------------------------------------------------------------------------------------------------------------------
Net loans 1,816,102 1,792,682
- ------------------------------------------------------------------------------------------------------------------
Bank premises and equipment, net 26,076 26,542
- ------------------------------------------------------------------------------------------------------------------
Other assets 94,444 87,561
- ------------------------------------------------------------------------------------------------------------------
Total assets $2,650,109 $2,634,337
- ------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity:
Deposits:
Noninterest-bearing $281,304 $289,291
- ------------------------------------------------------------------------------------------------------------------
Interest-bearing 1,780,255 1,725,856
- ------------------------------------------------------------------------------------------------------------------
Total deposits 2,061,559 2,015,147
- ------------------------------------------------------------------------------------------------------------------
Short-term borrowings 199,999 348,199
- ------------------------------------------------------------------------------------------------------------------
Long-term debt 125,075 76
- ------------------------------------------------------------------------------------------------------------------
Other liabilities 24,953 31,335
- ------------------------------------------------------------------------------------------------------------------
Total liabilities 2,411,586 2,394,757
- ------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Common stock (No par value; 20,000,000 shares
authorized; 10,031,135 shares issued in 2000
and 10,031,135 issued in 1999) 68,383 68,383
- ------------------------------------------------------------------------------------------------------------------
Unrealized holding gain on
available-for-sale securities, net (9,721) (7,525)
- ------------------------------------------------------------------------------------------------------------------
Retained earnings 205,846 199,736
- ------------------------------------------------------------------------------------------------------------------
Treasury stock (337,872 shares in 2000
and 291,301 shares in 1999) (25,985) (21,014)
- ------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 238,523 239,580
- ------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $2,650,109 $2,634,337
- ------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-3-
4
PARK NATIONAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands, except per share data)
Three Months Ended
March 31,
------------------------------------------------
2000 1999
- -------------------------------------------------------------------------------------------------------------
Interest income:
Interest and fees on loans $40,399 $36,105
- -------------------------------------------------------------------------------------------------------------
Interest on:
Obligations of U.S. Government,
its agencies and other securities 9,013 8,780
- -------------------------------------------------------------------------------------------------------------
Obligations of states
and political subdivisions 1,312 1,343
- -------------------------------------------------------------------------------------------------------------
Other interest income 7 13
- -------------------------------------------------------------------------------------------------------------
Total interest income 50,731 46,241
- -------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits:
Demand and savings deposits 3,466 3,301
- -------------------------------------------------------------------------------------------------------------
Time deposits 13,116 12,184
- -------------------------------------------------------------------------------------------------------------
Interest on borrowings:
Short-term borrowings 3,425 2,738
- -------------------------------------------------------------------------------------------------------------
Long-term debt 1,214 120
- -------------------------------------------------------------------------------------------------------------
Total interest expense 21,221 18,343
- -------------------------------------------------------------------------------------------------------------
Net interest income 29,510 27,898
- -------------------------------------------------------------------------------------------------------------
Provision for loan losses 1,634 1,545
- -------------------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 27,876 26,353
- -------------------------------------------------------------------------------------------------------------
Other income 6,797 6,379
- -------------------------------------------------------------------------------------------------------------
Gain on sale of securities 0 0
- -------------------------------------------------------------------------------------------------------------
Continued
-4-
5
PARK NATIONAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(CONTINUED)
(dollars in thousands, except per share data)
Three Months Ended
March 31,
----------------------------------------------
2000 1999
- -----------------------------------------------------------------------------------------------------------------
Other expense:
Salaries and employee benefits $9,492 $8,584
- -----------------------------------------------------------------------------------------------------------------
Occupancy expense 963 941
- -----------------------------------------------------------------------------------------------------------------
Furniture and equipment expense 899 986
- -----------------------------------------------------------------------------------------------------------------
Other expense 5,904 5,697
- -----------------------------------------------------------------------------------------------------------------
Total other expense 17,258 16,208
- -----------------------------------------------------------------------------------------------------------------
Income before federal income taxes 17,415 16,524
- -----------------------------------------------------------------------------------------------------------------
Federal income taxes 4,981 4,926
- -----------------------------------------------------------------------------------------------------------------
Net income $12,434 $11,598
=================================================================================================================
PER SHARE:
Net income:
Basic $1.28 $1.19
- -----------------------------------------------------------------------------------------------------------------
Diluted $1.27 $1.18
=================================================================================================================
Weighted average common shares outstanding:
Basic 9,724,234 9,771,925
- -----------------------------------------------------------------------------------------------------------------
Diluted 9,767,434 9,810,600
=================================================================================================================
Cash dividends declared $0.65 $0.57
=================================================================================================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-5-
6
PARK NATIONAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
(dollars in thousands, except per share data)
Common Retained
Stock Earnings
- -------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1998 $68,398 $177,050
- -------------------------------------------------------------------------------------------------------------------------
Net Income 11,598
- -------------------------------------------------------------------------------------------------------------------------
Net unrealized losses on securities available-for-sale
net of income taxes of ($1,069)
- -------------------------------------------------------------------------------------------------------------------------
Total comprehensive income
- -------------------------------------------------------------------------------------------------------------------------
Cash dividends on common stock:
Park at $.57 per share (5,585)
- -------------------------------------------------------------------------------------------------------------------------
Shares issued for stock options - 652 shares 22
- -------------------------------------------------------------------------------------------------------------------------
Treasury stock purchased - 13,340 shares
- -------------------------------------------------------------------------------------------------------------------------
Treasury stock reissued for stock options - 8,750 shares
- -------------------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1999 $68,420 $183,063
=========================================================================================================================
- -------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1999 $68,383 $199,736
- -------------------------------------------------------------------------------------------------------------------------
Net Income $12,434
- -------------------------------------------------------------------------------------------------------------------------
Net unrealized losses on securities available-for-sale
net of income taxes of ($1,182)
- -------------------------------------------------------------------------------------------------------------------------
Total comprehensive income
- -------------------------------------------------------------------------------------------------------------------------
Cash dividends on common stock:
Park at $.65 per share (6,324)
- -------------------------------------------------------------------------------------------------------------------------
Shares issued for stock options - 0 shares
- -------------------------------------------------------------------------------------------------------------------------
Treasury stock purchased - 54,948 shares
- -------------------------------------------------------------------------------------------------------------------------
Treasury stock reissued for stock options - 8,377 shares
- -------------------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 2000 $68,383 $205,846
=========================================================================================================================
Accumulated
Treasury Other
Stock Comprehensive Comprehensive
at Cost Income Income
- --------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1998 ($17,294) $7,536
- --------------------------------------------------------------------------------------------------------
Net Income $11,598
- --------------------------------------------------------------------------------------------------------------------------
Net unrealized losses on securities available-for-sale
net of income taxes of ($1,069) (1,987) (1,987)
- --------------------------------------------------------------------------------------------------------------------------
Total comprehensive income $9,611
- --------------------------------------------------------------------------------------------------------==================
Cash dividends on common stock:
Park at $.57 per share
- --------------------------------------------------------------------------------------------------------
Shares issued for stock options - 652 shares
- --------------------------------------------------------------------------------------------------------
Treasury stock purchased - 13,340 shares (1,211)
- --------------------------------------------------------------------------------------------------------
Treasury stock reissued for stock options - 8,750 shares 462
- --------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1999 ($18,043) $5,549
========================================================================================================
- --------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1999 ($21,014) ($7,525)
- --------------------------------------------------------------------------------------------------------
Net Income $12,434
- --------------------------------------------------------------------------------------------------------------------------
Net unrealized losses on securities available-for-sale
net of income taxes of ($1,182) (2,196) (2,196)
- --------------------------------------------------------------------------------------------------------------------------
Total comprehensive income $10,238
- --------------------------------------------------------------------------------------------------------==================
Cash dividends on common stock:
Park at $.65 per share
- --------------------------------------------------------------------------------------------------------
Shares issued for stock options - 0 shares
- --------------------------------------------------------------------------------------------------------
Treasury stock purchased - 54,948 shares (5,396)
- --------------------------------------------------------------------------------------------------------
Treasury stock reissued for stock options - 8,377 shares 425
- --------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 2000 ($25,985) ($9,721)
========================================================================================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-6-
7
PARK NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollars in thousands)
Three Months Ended
March 31,
--------------------------------------------
2000 1999
- --------------------------------------------------------------------------------------------------------------------------
Operating activities:
Net income $12,434 $11,598
- --------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation, amortization and accretion 466 487
-------------------------------------------------------------------------------------------------------------------
Provision for loan losses 1,634 1,545
-------------------------------------------------------------------------------------------------------------------
Amortization of the excess of cost over
net assets of banks purchased 654 575
-------------------------------------------------------------------------------------------------------------------
Realized investment security gains 0 0
-------------------------------------------------------------------------------------------------------------------
Changes in assets and liabilities:
Increase in other assets (6,375) (2,267)
-------------------------------------------------------------------------------------------------------------------
Decrease in other liabilities (51) (2,272)
-------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 8,762 9,666
-------------------------------------------------------------------------------------------------------------------
Investing activities:
Proceeds from sales of:
Available-for-sale securities 0 0
-------------------------------------------------------------------------------------------------------------------
Proceeds from maturities of:
Available-for-sale securities 13,925 47,930
-------------------------------------------------------------------------------------------------------------------
Held-to-maturity securities 10 15
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Purchases of:
Available-for-sale securities (20,254) (56,425)
-------------------------------------------------------------------------------------------------------------------
Net increase in loans (24,787) (1,574)
-------------------------------------------------------------------------------------------------------------------
Purchases of premises and equipment, net (416) (430)
-------------------------------------------------------------------------------------------------------------------
Net cash used by
investing activities (31,522) (10,484)
-------------------------------------------------------------------------------------------------------------------
Continued
-7-
8
PARK NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(CONTINUED)
(dollars in thousands)
Three Months Ended
March 31,
------------------------------------------------
2000 1999
- ----------------------------------------------------------------------------------------------------------------------
Financing activities:
Net increase/(decrease) in deposits $46,412 ($27,471)
---------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in short-term borrowings (148,200) 28,738
---------------------------------------------------------------------------------------------------------------
Exercise of stock options 0 22
---------------------------------------------------------------------------------------------------------------
Purchase of treasury stock, net (4,971) (749)
---------------------------------------------------------------------------------------------------------------
Repayment of long-term debt (1) (8,353)
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Long-term debt issued 125,000 0
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Cash dividends paid (12,655) (11,171)
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Net cash (used)/provided from financing activities 5,585 (18,984)
---------------------------------------------------------------------------------------------------------------
(Decrease) in cash and cash equivalents (17,175) (19,802)
---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year 104,222 100,291
- ----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $87,047 $80,489
======================================================================================================================
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $21,700 $18,660
---------------------------------------------------------------------------------------------------------------
Income taxes $0 $0
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SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-8-
9
PARK NATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 2000 and 1999.
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, 2000 are not
necessarily indicative of the operating results to be anticipated for the fiscal
year ended December 31, 2000.
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 balance
sheets, condensed statements of income, condensed statements of changes in
stockholders' equity and 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, 1999. Certain amounts in 1999 have been
reclassified to conform to the financial statement presentation used for 2000.
Park does not have any off-balance sheet derivative financial instruments such
as interest-rate swap agreements.
NOTE 2 - STOCK DIVIDEND
The Corporation's Board of Directors approved a 5% stock dividend in November
1999. The additional shares resulting from the dividend were distributed on
December 15, 1999 to stockholders of record as of December 3, 1999. The
unaudited consolidated financial statements, notes, and other references to
share and per share data have been retroactively restated for the stock
dividend.
NOTE 3 - ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible 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.
-9-
10
Allowance for Possible Loan Losses
- ----------------------------------------------------------------------------
(In Thousands)
- ----------------------------------------------------------------------------
2000 1999
- ----------------------------------------------------------------------------
Beginning January 1 $41,266 $37,989
- ----------------------------------------------------------------------------
Provision for loan losses 1,634 1,545
- ----------------------------------------------------------------------------
Losses charged to the reserve (1,771) (1,536)
- ----------------------------------------------------------------------------
Recoveries 1,128 1,459
------- -------
- ----------------------------------------------------------------------------
Balance March 31, $42,257 $39,457
======= =======
- ----------------------------------------------------------------------------
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, 2000 and 1999.
- ----------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
- ----------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
- ----------------------------------------------------------------------------------------------------------------------
MARCH 31, 2000 1999
- ----------------------------------------------------------------------------------------------------------------------
NUMERATOR:
- ----------------------------------------------------------------------------------------------------------------------
NET INCOME $12,434 $11,598
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
DENOMINATOR:
- ----------------------------------------------------------------------------------------------------------------------
DENOMINATOR FOR BASIC EARNINGS PER SHARE-WEIGHTED-AVG. SHARES 9,724,234 9,771,925
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
EFFECT OF DILUTIVE SECURITIES 43,200 38,675
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
DENOMINATOR FOR DILUTED EARNINGS PER SHARE-ADJUSTED WEIGHTED- 9,767,434 9,810,600
AVERAGE SHARES AND ASSUMED CONVERSIONS
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE:
- ----------------------------------------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE $1.28 $1.19
- ----------------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE $1.27 $1.18
- ----------------------------------------------------------------------------------------------------------------------
NOTE 5 - SEGMENT INFORMATION
The Corporation is a multi-bank holding company headquartered in Newark, Ohio.
The operating segments for the Corporation are its banking subsidiaries and
their respective divisions. The Corporation's banking subsidiaries are The Park
National Bank (PNB), The Richland Trust Company (RTC), Century National Bank
(CNB), and The First-Knox National Bank of Mount Vernon (FKNB). PNB operates
through two banking divisions with the Park National Division
-10-
11
(PND) headquartered in Newark, Ohio and the Fairfield National Division (FND)
headquartered in Lancaster, Ohio. FKNB also operates through two banking
divisions with the First-Knox National Division (FKND) headquartered in Mount
Vernon, Ohio and the Farmers and Savings Division (FSD) headquartered in
Loudonville, Ohio. Information about reportable segments follows:
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2000 (IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
PND FND RTC CNB FKND FSD All Other Total
- ----------------------------------------------------------------------------------------------------------------------------------
Net Interest $10,461 $3,242 $4,606 $4,224 $5,622 $846 $509 $29,510
Income
- ----------------------------------------------------------------------------------------------------------------------------------
Provision for 780 150 225 120 279 60 20 1,634
Loan Losses
- ----------------------------------------------------------------------------------------------------------------------------------
Other Income 3,405 719 580 785 1,124 94 90 6,797
- ----------------------------------------------------------------------------------------------------------------------------------
Other Expense 6,067 1,952 2,629 2,387 3,254 421 548 17,258
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income $4,964 $1,256 $1,547 $1,722 $2,286 $324 $335 $12,434
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Balances at March 31, 2000:
- ----------------------------------------------------------------------------------------------------------------------------------
Assets $961,581 $292,191 $444,846 $393,330 $524,079 $70,016 $(35,934) $2,650,109
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1999 (IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
PND FND RTC CNB FKND FSD All Other Total
- ----------------------------------------------------------------------------------------------------------------------------------
Net Interest $10,049 $3,005 $4,294 $3,990 $5,574 $757 $229 $27,898
Income
- ----------------------------------------------------------------------------------------------------------------------------------
Provision for 735 150 225 120 279 36 -- 1,545
Loan Losses
- ----------------------------------------------------------------------------------------------------------------------------------
Other Income 3,025 644 697 754 1,123 75 61 6,379
- ----------------------------------------------------------------------------------------------------------------------------------
Other Expense 5,834 1,905 2,598 2,202 2,992 429 248 16,208
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income $4,527 $1,080 $1,437 $1,666 $2,419 $265 $204 $11,598
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Balances at March 31, 1999:
- ----------------------------------------------------------------------------------------------------------------------------------
Assets $842,345 $282,602 $410,042 $375,556 $487,622 $62,897 $(11,930) $2,449,134
- ----------------------------------------------------------------------------------------------------------------------------------
The operating results of the Parent Company and Guardian Finance Company (GFC)
(all other) are used to reconcile the segment totals to the consolidated income
statements for the quarters ended March 31, 2000 and 1999. The reconciling
amounts for consolidated total assets for both of the quarters ended March 31,
2000 and 1999 consist of the elimination of intersegment borrowings and the
assets of the Parent Company and GFC which are not eliminated.
-11-
12
NOTE 6 - ACQUISITIONS
On December 14, 1999, the Corporation entered into an Agreement and Plan of
Merger (as amended, the "UB Merger Agreement") with U.B. Bancshares, Inc. (UB),
a $180 million bank holding company headquartered in Bucyrus, Ohio, providing
for a merger of UB into the Corporation. The UB Merger became effective April
30, 2000. Under terms of the UB Merger Agreement, the shareholders of UB are
expected to receive .577209 Park common shares for each outstanding share of UB
in a tax free exchange. The Corporation expects to issue an aggregate of 325,500
common shares in connection with the UB Merger which will be accounted for as a
pooling-of-interests.
On December 17, 1999, the Corporation entered into an Agreement and Plan of
Merger (as amended the "SNB Merger Agreement") with SNB Corp. (SNB), a $300
million bank holding company headquartered in Greenville, Ohio, providing for a
merger of SNB into the Corporation. The SNB Merger also became effective April
30, 2000. Under terms of the SNB Merger Agreement, the shareholders of SNB are
expected to receive 5.367537 Park common shares for each outstanding share of
SNB in a tax free exchange. The Corporation expects to issue an aggregate of
835,500 common shares to complete the SNB Merger which will be accounted for as
a pooling-of-interests.
-12-
13
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Comparison of Results of Operations for the Quarters Ended March 31, 2000
and 1999.
NET INTEREST INCOME
The Corporation's principal source of earnings is net interest income, the
difference between total interest income and total interest expense. Net
interest income increased by $1.6 million or 5.8% to $29.5 million for the three
months ended March 31, 2000 compared to $27.9 million for the first quarter of
1999. 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 2000 with the same quarter in 1999.
- -------------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31,
(IN THOUSANDS)
- -------------------------------------------------------------------------------------------------
2000 1999
- -------------------------------------------------------------------------------------------------
Average Tax Average Tax
Balance Equivalent Balance Equivalent
% %
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
LOANS $1,845,096 8.86% $1,640,973 8.96%
- -------------------------------------------------------------------------------------------------
TAXABLE INVESTMENTS $535,645 6.77% $530,925 6.71%
- -------------------------------------------------------------------------------------------------
TAX EXEMPT INVESTMENTS $102,831 7.22% $105,282 7.27%
- -------------------------------------------------------------------------------------------------
FEDERAL FUNDS SOLD $466 5.53% $917 5.47%
- -------------------------------------------------------------------------------------------------
INTEREST EARNING ASSETS $2,484,038 8.33% $2,278,097 8.35%
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
INTEREST BEARING DEPOSITS $1,736,463 3.84% $1,644,428 3.82%
- -------------------------------------------------------------------------------------------------
SHORT-TERM BORROWINGS $267,239 5.15% $262,093 4.30%
- -------------------------------------------------------------------------------------------------
LONG-TERM DEBT $81,119 6.02% $4,853 6.44%
- -------------------------------------------------------------------------------------------------
INTEREST BEARING LIABILITIES $2,084,821 4.09% $1,911,374 3.89%
- -------------------------------------------------------------------------------------------------
EXCESS INTEREST EARNING ASSETS $399,217 4.24% $366,723 4.46%
- -------------------------------------------------------------------------------------------------
NET INTEREST MARGIN 4.89% 5.09%
- -------------------------------------------------------------------------------------------------
Average interest earning assets increased by $206 million or 9.0% to $2,484
million for the quarter ended March 31, 2000 compared to the same quarter in
1999. Average loan totals increased by $204 million or 12.4% to $1,845 million
for the first quarter of 2000 compared to the first quarter in 1999. The demand
for commercial, commercial real estate, and consumer loans and leases secured by
automobiles has continued to be relatively strong and accounts for the growth in
average loan balances for the first quarter of 2000 compared to the same period
in 1999. The average yield on the loan portfolio was 8.86% for the first quarter
of 2000 compared to 8.96% for the same period in 1999. The average prime lending
rate for Park's affiliate banks was 8.69% for the first quarter of 2000 compared
to 7.75% for the same period in 1999. The Federal Reserve increased the federal
funds rate by 1.25% during the second half of
-13-
14
1999 and the first quarter of 2000. Park's prime lending rate was increased by
the same magnitude at the same time. Approximately 25% of Park's loan portfolio
reprices based on the prime lending rate. The yield on Park's loan portfolio was
8.83% for the second quarter of 1999, 8.73% for the third quarter of 1999 and
8.88% for the fourth quarter of 1999. The yield on Park's loan portfolio is
expected to increase over the remainder of the year as variable rate loans
reprice and new loan originations have an average rate that is higher than the
current loan portfolio rate.
Average investment securities including federal funds sold increased by $2
million or .3% to $639 million for the first quarter of 2000 compared to the
same quarter in 1999. The yield on taxable investment securities increased to
6.77% in 2000 compared to 6.71% in 1999 and the yield on tax exempt securities
decreased to 7.22% in 2000 compared to 7.27% in 1999. The average maturity or
repricing of the investment portfolio was approximately 5.5 years at March 31,
2000 compared to 3.5 years at March 31, 1999. The extension of the average
maturity of the investment portfolio was primarily due to callable U.S. Agency
securities of approximately $200 million being priced to their maturity of 7.5
years compared to their first call date in 2 years. If interest rates were to
decline in 2000, the average maturity of the investment portfolio could shorten
by two years.
Average interest bearing liabilities increased by $173 million or 9.1% to $2,085
million for the quarter ended March 31, 2000 compared to the same quarter in
1999. Average interest bearing deposits increased by $92 million or 5.6% to
$1,736 million for the first quarter of 2000 compared to the same period in
1999. Average short-term borrowings increased by $5 million or 2.0% to $267
million and average long-term debt increased by $76 million to $81 million for
the first quarter of 2000 compared to the same period in 1999. The increase in
borrowed funds was needed to help fund the increase in the loan portfolio.
Long-term debt consists of variable rate Federal Home Loan Bank advances with a
maturity of two years. These advances reprice every thirty days based on the one
month LIBOR index.
The average cost of interest bearing liabilities increased by .20% to 4.09% in
2000 compared to 3.89% in 1999. The average cost of interest bearing deposits
increased slightly by .02% to 3.84% in 2000 compared to 3.82% in 1999. The
average cost of total borrowing increased by 1.02% to 5.36% in 2000 compared to
4.34% in 1999. The cost of Park's interest bearing liabilities is expected to
continue to increase over the remainder of the year as the cost of new
certificates of deposit is higher than the current portfolio rate.
The increase in net interest income of $1.6 million or 5.8% to $29.5 million for
the quarter ended March 31, 2000 was primarily due to the 9.0% increase in
interest earning assets. The net interest spread (the difference between the
yield on interest earning assets and the cost of interest bearing liabilities)
decreased by .22% to 4.24% in 2000 compared to 4.46% in 1999. However, the
increase in average interest earning assets of $206 million or 9.0% in 2000
compared to 1999 and the increase in excess interest earning assets of $32
million or 8.9% in 2000 compared to 1999 was still able to produce an increase
in net interest income of 5.8% for the first quarter of 2000 compared to the
first quarter of 1999. The tax equivalent net interest margin (defined as net
interest income divided by average interest earning assets) decreased by .20% to
4.89% for the first quarter of 2000 compared to 5.09% in 1999. This decrease in
the net interest margin was due to the decrease in the net interest spread.
-14-
15
PROVISION FOR LOAN LOSSES
The provision for loan losses increased by $89,000 or 5.8% to $1.6 million for
the quarter ended March 31, 2000 compared to $1.5 million for the same period in
1999. Net charge-offs were $643,000 in 2000 compared to $77,000 in 1999.
Nonperforming loans, defined as loans that are 90 days past due, renegotiated
loans, and nonaccrual loans were $5.1 million or .27% of loans at March 31, 2000
compared to $5.1 million or .28% of loans at December 31, 1999 and $5.0 million
or .30% of loans at March 31, 1999. The reserve for loan losses as a percentage
of outstanding loans was 2.27% at March 31, 2000 compared to 2.25% at December
31, 1999 and 2.40% at March 31, 1999. 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 $418,000 or 6.6% to $6.8 million for the first
quarter of 2000 compared to $6.4 million for the first quarter of 1999. The
following table summarizes the change in noninterest income.
----------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31,
(in thousands)
----------------------------------------------------------------------------------------------------------
2000 1999 Change
----------------------------------------------------------------------------------------------------------
Fees from Fiduciary Activities $1,526 $1,327 $199
----------------------------------------------------------------------------------------------------------
Service Charges on Deposit Accounts 2,036 1,692 344
----------------------------------------------------------------------------------------------------------
Other Service Income 1,113 1,295 (182)
----------------------------------------------------------------------------------------------------------
Other Income 2,122 2,065 57
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Total $6,797 $6,379 $418
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The increase in fee income from fiduciary activities was primarily due to an
increase in assets under management for new trust department customers. The
increase in service charges on deposit accounts was due to increases in the
number of transaction accounts and to fee increases. The decrease in fees earned
from other service income was primarily due to a decrease in the fee income
earned from the origination and sale into the secondary market of fixed rate
mortgage loans due to higher interest rates.
OTHER EXPENSE
Total other expense increased by $1.1 million or 6.5% to $17.3 million for the
three months ended March 31, 2000 compared to $16.2 million for the same period
in 1999. Salaries and employee benefits expense increased by $908,000 or 10.6%
to $9.5 million for the first quarter of 2000 compared to the same period in
1999. Salaries increased by $655,000 or 9.6% and benefits expense increased by
$253,000 or 14.3% in 2000 compared to 1999. Full time equivalent employees were
1,017 at March 31, 2000 and 1,005 at March 31, 1999.
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FEDERAL INCOME TAXES
Federal income tax expense was $5.0 million for the first quarter of 2000
compared to $4.9 million for the same period in 1999. The ratio of federal
income tax expense to income before taxes was approximately 28.6% in 2000 and
29.8% in 1999. The primary difference between the effective federal income tax
rate and the statutory rate of 35% is due to tax-exempt interest income on loans
and investments.
NET INCOME
Net income increased by $836,000 or 7.2% to $12.4 million for the three months
ended March 31, 2000 compared to $11.6 million for the first quarter of 1999.
The annualized, first quarter net income to average assets ratio (ROA) was 1.90%
in 2000 compared to 1.93% in 1999. The annualized, first quarter net income to
average equity ratio (ROE) was 21.30% in 2000 compared to 20.03% in 1999.
Diluted earnings per share increased by 7.6% to $1.27 for the first quarter of
2000 compared to $1.18 for the same quarter in 1999.
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COMPARISON OF FINANCIAL CONDITION
FOR MARCH 31, 2000 AND DECEMBER 31, 1999
CHANGES IN FINANCIAL CONDITION AND LIQUIDITY
Total assets increased by $16 million or .6% to $2,650 million at March 31, 2000
compared to $2,634 million at December 31, 1999. Total loans increased by $24
million, investments increased by $3 million, other assets increased by $6
million and cash and due from banks decreased by $17 million.
Total liabilities increased by $17 million or .7% to $2,412 million at March 31,
2000 compared to $2,395 million at December 31, 1999. Total deposits increased
by $46 million, borrowed funds decreased by $23 million and other liabilities
decreased by $6 million. Long-term debt of $125 million was borrowed from the
Federal Home Loan Bank and was used to repay short-term borrowings. The
long-term debt has a maturity in two years and reprices every thirty days based
on the one month LIBOR index.
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 70.1% at March 31, 2000 compared to 69.6% at December 31, 1999
and 67.1% at March 31, 1999. Cash and cash equivalents totaled $87 million at
March 31, 2000 compared to $104 million at December 31, 1999 and $80 million at
March 31, 1999. 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, 2000 was $239 million or 9.00% of total assets
compared to $240 million or 9.09% of total assets at December 31, 1999 and $239
million or 9.76% of total assets at March 31, 1999.
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
9.06% at March 31, 2000 and 9.05% at December 31, 1999. 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 13.07% at March 31, 2000 and 13.15%
at December 31, 1999. The minimum total risk-based capital ratio (defined as
leverage capital plus supplemental capital divided by risk-adjusted assets) is
8% and the well
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capitalized ratio is greater than or equal to 10%. Park's total risk-based
capital ratio was 14.33% at March 31, 2000 and 14.41% at December 31, 1999.
The financial institution subsidiaries of Park each met the well capitalized
capital ratio guidelines at March 31, 2000. The following table indicates the
capital ratios for each subsidiary and Park at March 31, 2000:
TIER I TOTAL
LEVERAGE RISK-BASED RISK-BASED
- -----------------------------------------------------------------------------------------
Park National Bank 6.75% 9.15% 11.53%
- -----------------------------------------------------------------------------------------
Richland Trust Company 6.44% 10.67% 11.93%
- -----------------------------------------------------------------------------------------
Century National Bank 6.51% 11.02% 12.29%
- -----------------------------------------------------------------------------------------
First-Knox National Bank 6.27% 8.92% 12.56%
- -----------------------------------------------------------------------------------------
Park National Corporation 9.06% 13.07% 14.33%
- -----------------------------------------------------------------------------------------
Minimum Capital Ratio 4.00% 4.00% 8.00%
- -----------------------------------------------------------------------------------------
Well Capitalized Ratio 5.00% 6.00% 10.00%
- -----------------------------------------------------------------------------------------
At the April 17, 2000 Park National Corporation Board of Director's meeting, a
cash dividend of $.65 per share was declared payable on June 9, 2000 to
stockholders of record on May 26, 2000.
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.
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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
a. On April 17, 2000 Park National Corporation held its Annual Meeting
of Shareholders. At the close of business on the February 25, 2000
record date, 9,719,637 Park National Corporation common shares were
outstanding and entitled to vote. At the meeting, 8,468,745 or 87.1%
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
8,458,393 For 10,352 Withheld -0- Abstain and Broker Non-Votes
--------- ------ ---
R. William Geyer
8,455,144 For 13,601 Withheld -0- Abstain and Broker Non-Votes
--------- ------ ---
William T. McConnell
8,455,819 For 12,926 Withheld -0- Abstain and Broker Non-Votes
---------- ------ ---
James A. McElroy
8,457,404 For 11,341 Withheld -0- Abstain and Broker Non-Votes
--------- ------ ---
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William A. Phillips
8,458,525 For 10,220 Withheld -0- Abstain and Broker Non-Votes
--------- ------ ---
John L. Warner
8,452,199 For 16,546 Withheld -0- Abstain and Broker Non-Votes
--------- -------- ---
Directors whose term of office continued after the Annual Meeting:
C. Daniel DeLawder
Philip H. Jordan, Jr., Ph.D.
Howard E. LeFevre
John J. O'Neill
Maureen Buchwald
D. C. Fanello
Phillip T. Leitnaker
J. Gilbert Reese
Rick R. Taylor
Tami L. Longaberger resigned as a director effective April 17,
2000.
c. See Item 4(b) for the voting results for directors.
d. Not applicable
Item 5. OTHER INFORMATION
Effective 11:59 p.m., Eastern Daylight Time, on April 30, 2000 (the "
UB Effective Time"), Park acquired U.B. Bancshares, Inc. of Bucyrus, Ohio ("UB")
through the merger of UB with and into Park (the "UB Merger"). The UB Merger was
effected pursuant to the terms of the Agreement and Plan of Merger, dated as of
December 14, 1999, as amended by the Amendment to Agreement and Plan of Merger,
dated as of February 14, 2000 (collectively, the "UB Merger Agreement"), between
Park and UB. Under the terms of the UB Merger Agreement, each share of UB common
stock, stated value $1.67 per share (the "UB Common Stock"), outstanding
immediately prior to the UB Effective Time was cancelled and extinguished and
the holder thereof became entitled to receive .577209 Park common shares,
without par value, in a tax free exchange. This exchange ratio was determined by
negotiation between representatives of Park and UB, and represents the number
obtained by dividing 325,500 by the number of shares of UB Common Stock
outstanding immediately prior to the UB Effective Time. The UB Merger will be
accounted for as a pooling-of-interests. The Park common shares to be issued to
the former UB shareholders will be newly-issued Park common shares which have
been registered under the Securities Act of 1933 on a Registration Statement on
Form S-4 (Registration No. 333-30858) and listed with the American Stock
Exchange.
At the end of March 2000, UB had approximately $180 million in assets.
Through its
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subsidiary United Bank, N.A., a national banking association, UB served banking
customers from eight offices located in Crawford and Marion counties in Ohio. As
a result of the UB Merger, United Bank, N.A. became a community bank affiliate
of Park. United Bank, N.A. will retain its separate identity, current management
and Board of Directors to serve the banking needs of its customers and
community.
Effective 11:59 p.m., Eastern Daylight Time, on April 30, 2000 (the
"SNB Effective Time"), Park also acquired SNB Corp. of Greenville, Ohio ("SNB")
through the merger of SNB with and into Park (the "SNB Merger"). The SNB Merger
was effected pursuant to the terms of the Agreement and Plan of Merger, dated as
of December 17, 1999, as amended by the Amendment to Agreement and Plan of
Merger, dated as of March 3, 2000, and the Amendment No. 2 to Agreement and Plan
of Merger, dated as of April 25, 2000 (collectively, the "SNB Merger
Agreement"), between Park and SNB. Under the terms of the SNB Merger Agreement,
each SNB common share, without par value, outstanding immediately prior to the
SNB Effective Time was converted into the right to receive 5.367537 Park common
shares in a tax free exchange. This exchange ratio was determined by negotiation
between representatives of Park and SNB, and represents the number obtained by
dividing 835,500 by the number of SNB common shares outstanding immediately
prior to the SNB Effective Time. The SNB Merger will be accounted for as a
pooling-of-interests. The Park common shares to be issued to the former SNB
shareholders will be newly-issued Park common shares which have been registered
under the Securities Act of 1933 on a Registration Statement on Form S-4
(Registration No. 333-31810) and listed with the American Stock Exchange.
At the end of March 2000, SNB had approximately $300 million in assets.
Through its subsidiary Second National Bank, a national banking association, SNB
served banking customers from eight offices located in Darke and Mercer counties
in Ohio. As a result of the SNB Merger, Second National Bank became a community
bank affiliate of Park. Second National Bank will retain its separate identity,
current management and Board of Directors to serve the banking needs of its
customers and community.
Cash will be paid for any fractional Park common shares resulting from the
exchange in an amount determined by multiplying the fractional Park common share
interest by $96.83, which amount represents the average trading price of Park
common shares for the 20 trading days prior to the expiration of the waiting
period following Federal Reserve Board approval of the UB Merger and SNB Merger.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS
Exhibit No. Description
- ----------- -----------
2.1 Agreement and Plan of Merger (excluding exhibits and
schedules), dated as of December 17, 1999, by and
between Park and SNB (incorporated herein by
reference to Exhibit 2.1 to Park's Pre-Effective
Amendment No. 1 to Registration Statement on Form S-4
filed March 20, 2000 (Registration No. 333-31810))
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Exhibit No. Description
- ----------- -----------
2.2 Amendment to Agreement and Plan of Merger, dated as
of March 3, 2000, by and between Park and SNB
(incorporated herein by reference to Exhibit 2.2 to
Park's Pre-Effective Amendment No. 1 to Registration
Statement on Form S-4 filed March 20, 2000
(Registration No. 333-31810))
2.3 Amendment No. 2 to Agreement and Plan of Merger,
dated as of April 25, 2000, by and between Park and
SNB
2.4 Agreement and Plan of Merger (excluding exhibits and
schedules), dated as of December 14, 1999, by and
between Park and UB(incorporated herein by reference
to Exhibit 2.1 to Park's Pre-Effective Amendment No.
1 to Registration Statement on Form S-4 filed March
13, 2000 (Registration No. 333-30858))
2.5 Amendment to Agreement and Plan of Merger, dated as
of February 14, 2000, by and between Park and UB
(incorporated herein by reference to Exhibit 2.2 to
Park's Pre-Effective Amendment No. 1 to Registration
Statement on Form S-4 filed March 13, 2000
(Registration No. 333-30858))
27 Financial Data Schedule
99 Press Release issued by Park on April 28, 2000
regarding completion of SNB Merger and UB Merger
b. REPORTS ON FORM 8-K
On February 29, 2000, Park filed a Current Report on Form 8-K, dated that same
date, in order to report the mailing of a letter by UB to its shareholders
advising them of the status of the transactions contemplated by the UB Merger
Agreement.
On March 15, 2000, Park filed a Current Report on Form 8-K, dated that same
date, in order to report the mailing of a letter by SNB to its shareholders
advising them of the status of the transactions contemplated by the SNB Merger
Agreement.
On April 18, 2000, Park filed a Current Report on Form 8-K, dated April 17,
2000, in order to report earnings for the first quarter ended March 31, 2000 and
the status of the pending mergers with UB and SNB.
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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 3, 2000 BY: /s/C. Daniel DeLawder
----------- ----------------------
C. Daniel DeLawder
President and Chief Executive
Officer
DATE: May 3, 2000 BY: /s/John W. Kozak
----------- ----------------
John W. Kozak
Chief Financial Officer
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