<PAGE> 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 September 30, 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
------ ------
10,797,393 common shares, no par value per share, outstanding at October 31,
---------- 2000.
Page 1 of 25
Exhibit Index at Page 22
<PAGE> 2
PARK NATIONAL CORPORATION
CONTENTS
--------
PAGE
PART I. FINANCIAL INFORMATION 3-12
Item 1. Financial Statements 3-12
Consolidated Balance Sheets as of September 30, 2000 and
and December 31, 1999 (unaudited) 3
Consolidated Condensed Statements of Income for the Three
Months and Nine Months ended September 30, 2000 and 1999
(unaudited) 4,5
Consolidated Condensed Statements of Changes in
Stockholders' Equity for the Nine Months ended September
30, 2000 and 1999 (unaudited) 6
Consolidated Statements of Cash Flows for the Nine Months
ended September 30, 2000 and 1999 (unaudited) 7,8
Notes to Consolidated Financial Statements 9-13
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14-21
Item 3. Quantitative and Qualitative Disclosure About Market Risk 21
PART II. OTHER INFORMATION 22
Item 1. Legal Proceedings 22
Item 2. Changes in Securities and Use of Proceeds 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 23
EXHIBITS 24-25
-2-
<PAGE> 3
PARK NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
--------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Cash and due from banks $ 101,655 $ 123,975
--------------------------------------------------------------------------------------
Federal funds sold 0 1,550
--------------------------------------------------------------------------------------
Securities available-for-sale, at fair value
(amortized cost of $772,784 and $792,737
at September 30, 2000 and December 31,1999) 766,867 778,570
--------------------------------------------------------------------------------------
Securities held-to-maturity, at amortized cost
(fair value approximates $4,279 and $4,451
at September 30, 2000 and December 31,1999) 4,217 4,321
--------------------------------------------------------------------------------------
Loans (net of unearned interest) 2,256,146 2,127,425
--------------------------------------------------------------------------------------
Allowance for possible loan losses 48,266 45,176
--------------------------------------------------------------------------------------
Net loans 2,207,880 2,082,249
--------------------------------------------------------------------------------------
Bank premises and equipment, net 30,497 32,468
--------------------------------------------------------------------------------------
Other assets 101,068 110,230
--------------------------------------------------------------------------------------
Total assets $ 3,212,184 $ 3,133,363
--------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity:
Deposits:
Noninterest bearing $ 331,870 $ 342,680
--------------------------------------------------------------------------------------
Interest bearing 2,036,426 2,065,382
--------------------------------------------------------------------------------------
Total deposits 2,368,296 2,408,062
--------------------------------------------------------------------------------------
Short-term borrowings 326,784 364,258
--------------------------------------------------------------------------------------
Long-term debt 181,677 16,993
--------------------------------------------------------------------------------------
Other liabilities 27,874 53,989
--------------------------------------------------------------------------------------
Total liabilities 2,904,631 2,843,302
--------------------------------------------------------------------------------------
Stockholders' Equity:
Common stock (No par value; 20,000,000 shares
authorized; 11,191,729 shares issued in 2000
and 11,251,598 issued in 1999) 76,869 79,108
--------------------------------------------------------------------------------------
Retained earnings 264,783 243,488
--------------------------------------------------------------------------------------
Treasury stock (385,136 shares in 2000
and 359,190 shares in 1999) (30,386) (23,374)
--------------------------------------------------------------------------------------
Accumulated other comprehensive income,
net of taxes (3,713) (9,161)
--------------------------------------------------------------------------------------
Total stockholders' equity 307,553 290,061
--------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $ 3,212,184 $ 3,133,363
--------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE> 4
PARK NATIONAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-----------------------------------------------------
2000 1999 2000 1999
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 51,031 $ 43,820 $ 146,342 $ 127,520
---------------------------------------------------------------------------------------------------
Interest on:
Obligations of U.S. Government,
its agencies and other securities 10,776 10,625 32,328 31,985
---------------------------------------------------------------------------------------------------
Obligations of states
and political subdivisions 1,845 1,942 5,482 5,841
---------------------------------------------------------------------------------------------------
Other interest income 10 26 142 235
---------------------------------------------------------------------------------------------------
Total interest income 63,662 56,413 184,294 165,581
---------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits:
Demand and savings deposits 4,539 4,249 13,891 12,761
---------------------------------------------------------------------------------------------------
Time deposits 17,434 14,660 49,010 43,750
---------------------------------------------------------------------------------------------------
Interest on borrowings:
Short-term borrowings 3,926 3,915 10,990 9,996
---------------------------------------------------------------------------------------------------
Long-term debt 3,035 248 7,115 788
---------------------------------------------------------------------------------------------------
Total interest expense 28,934 23,072 81,006 67,295
---------------------------------------------------------------------------------------------------
Net interest income 34,728 33,341 103,288 98,286
---------------------------------------------------------------------------------------------------
Provision for loan losses 2,102 1,690 5,850 5,419
---------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 32,626 31,651 97,438 92,867
---------------------------------------------------------------------------------------------------
Other income 7,380 6,925 22,366 20,744
---------------------------------------------------------------------------------------------------
Gain (loss) on sale of securities 0 (708) 0 (944)
---------------------------------------------------------------------------------------------------
</TABLE>
Continued
4
<PAGE> 5
PARK NATIONAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(CONTINUED)
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------------------------------
2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Other expense:
Salaries and employee benefits $ 10,786 $ 9,983 $ 32,202 $ 29,618
-------------------------------------------------------------------------------------------------------------------
Occupancy expense 1,030 1,057 3,211 3,184
-------------------------------------------------------------------------------------------------------------------
Furniture and equipment expense 1,155 1,203 3,527 3,642
-------------------------------------------------------------------------------------------------------------------
Other expense 7,325 7,288 21,917 21,207
-------------------------------------------------------------------------------------------------------------------
Total other expense 20,296 19,531 60,857 57,651
-------------------------------------------------------------------------------------------------------------------
Income before federal income taxes 19,710 18,337 58,947 55,016
-------------------------------------------------------------------------------------------------------------------
Federal income taxes 5,594 5,249 16,529 15,798
-------------------------------------------------------------------------------------------------------------------
Net income $ 14,116 $ 13,088 $ 42,418 $ 39,218
===================================================================================================================
PER SHARE:
Net income:
Basic $ 1.30 $ 1.20 $ 3.91 $ 3.60
===================================================================================================================
Diluted $ 1.30 $ 1.20 $ 3.90 $ 3.59
===================================================================================================================
Weighted average
Basic 10,822,140 10,878,524 10,846,778 10,879,079
===================================================================================================================
Diluted 10,846,882 10,931,174 10,881,216 10,931,166
===================================================================================================================
Cash dividends declared $ 0.65 $ 0.57 $ 1.95 $ 1.71
===================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE> 6
PARK NATIONAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 Treasury
Common Retained Stock
Stock Earnings at Cost
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1998 $75,754 $221,597 ($20,208)
---------------------------------------------------------------------------------------------------------------------------------
Net Income 39,218
---------------------------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive income,
net of income taxes of ($6,379)
---------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income
---------------------------------------------------------------------------------------------------------------------------------
Cash dividends on common stock:
Park at $1.71 per share (16,731)
---------------------------------------------------------------------------------------------------------------------------------
Cash dividends paid by U. B. Bancshares and
SNB Corp. prior to merger (853)
---------------------------------------------------------------------------------------------------------------------------------
Shares issued by U. B. Bancshares prior to merger - 48,095 Shares 3,409
---------------------------------------------------------------------------------------------------------------------------------
Shares issued for stock options - 652 shares 35
---------------------------------------------------------------------------------------------------------------------------------
Treasury stock purchased - 52,568 shares (4,780)
---------------------------------------------------------------------------------------------------------------------------------
Treasury stock reissued for stock options - 12,054 shares 639
---------------------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1999 $79,198 $243,231 ($24,349)
=================================================================================================================================
---------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1999 $79,108 $243,488 ($23,374)
---------------------------------------------------------------------------------------------------------------------------------
Net Income $42,418
---------------------------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive income,
net of income taxes of $2,934
---------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income
---------------------------------------------------------------------------------------------------------------------------------
Cash dividends on common stock:
Park at $1.95 per share (20,404)
---------------------------------------------------------------------------------------------------------------------------------
Cash dividends paid by U. B. Bancshares and
SNB Corp. prior to merger (719)
---------------------------------------------------------------------------------------------------------------------------------
Retire treasury stock from U. B. Bancshares and SNB Corp. mergers - 66,360 shares (2,246) 2,246
---------------------------------------------------------------------------------------------------------------------------------
Cash payment for fractional shares in mergers - 406 shares (39)
---------------------------------------------------------------------------------------------------------------------------------
Shares issued for stock options - 6,897 shares 46
---------------------------------------------------------------------------------------------------------------------------------
Treasury stock purchased - 107,425 shares (10,071)
---------------------------------------------------------------------------------------------------------------------------------
Treasury stock reissued for stock options - 15,119 shares 813
---------------------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 2000 $76,869 $264,783 ($30,386)
=================================================================================================================================
THREE MONTHS ENDED SEPTEMBER 30, 2000 1999
---------------------------------------------------------------------------------------------------------------
Net Income $14,116 $13,088
---------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive income, net of income
taxes of $3,925 in 2000 and ($10) in 1999 7,289 (19)
---------------------------------------------------------------------------------------------------------------
Total comprehensive income $21,405 $13,069
---------------------------------------------------------------------------------------========================
<CAPTION>
Accumulated
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 Other
Comprehensive Comprehensive
Income Income
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BALANCE AT DECEMBER 31, 1998 $8,594
-----------------------------------------------------------------------------------------------------------
Net Income $39,218
----------------------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive income,
net of income taxes of ($6,379) (11,932) (11,932)
----------------------------------------------------------------------------------------------------------------------------
Total comprehensive income $27,286
-----------------------------------------------------------------------------------------------------------=================
Cash dividends on common stock:
Park at $1.71 per share
-----------------------------------------------------------------------------------------------------------
Cash dividends paid by U. B. Bancshares and
SNB Corp. prior to merger
-----------------------------------------------------------------------------------------------------------
Shares issued by U. B. Bancshares prior to merger - 48,095 Shares
-----------------------------------------------------------------------------------------------------------
Shares issued for stock options - 652 shares
-----------------------------------------------------------------------------------------------------------
Treasury stock purchased - 52,568 shares
-----------------------------------------------------------------------------------------------------------
Treasury stock reissued for stock options - 12,054 shares
-----------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1999 ($3,338)
===========================================================================================================
----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1999 ($9,161)
-----------------------------------------------------------------------------------------------------------
Net Income $42,418
----------------------------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive income,
net of income taxes of $2,934 5,448 5,448
----------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income $47,866
-----------------------------------------------------------------------------------------------------------=======================
Cash dividends on common stock:
Park at $1.95 per share
-----------------------------------------------------------------------------------------------------------
Cash dividends paid by U. B. Bancshares and
SNB Corp. prior to merger
-----------------------------------------------------------------------------------------------------------
Retire treasury stock from U. B. Bancshares and SNB Corp. mergers - 66,360 shares
-----------------------------------------------------------------------------------------------------------
Cash payment for fractional shares in mergers - 406 shares
-----------------------------------------------------------------------------------------------------------
Shares issued for stock options - 6,897 shares
-----------------------------------------------------------------------------------------------------------
Treasury stock purchased - 107,425 shares
-----------------------------------------------------------------------------------------------------------
Treasury stock reissued for stock options - 15,119 shares
-----------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 2000 ($3,713)
===========================================================================================================
THREE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------------------------------------
Net Income
-------------------------------------------------------------------------------------------
Accumulated other comprehensive income, net of income
taxes of $3,925 in 2000 and ($10) in 1999
-------------------------------------------------------------------------------------------
Total comprehensive income
-------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6
<PAGE> 7
PARK NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
2000 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating activities:
Net income $ 42,418 $ 39,218
--------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation, amortization and accretion 2,046 1,861
--------------------------------------------------------------------------------------------------
Provision for loan losses 5,850 5,419
--------------------------------------------------------------------------------------------------
Amortization of the excess of cost over
net assets of banks purchased 2,481 2,246
--------------------------------------------------------------------------------------------------
Realized investment security loss 0 944
--------------------------------------------------------------------------------------------------
Changes in assets and liabilities:
Decrease (increase) in other assets 3,879 (8,717)
--------------------------------------------------------------------------------------------------
Decrease in other liabilities (19,784) (1,773)
--------------------------------------------------------------------------------------------------
Net cash provided from operating activities 36,890 39,198
--------------------------------------------------------------------------------------------------
Investing activities:
Proceeds from sales of:
Available-for-sale securities 0 56,563
--------------------------------------------------------------------------------------------------
Proceeds from maturity of:
Available-for-sale securities 72,537 184,423
--------------------------------------------------------------------------------------------------
Held-to-maturity securities 77 622
--------------------------------------------------------------------------------------------------
Purchases of:
Available-for-sale securities (52,236) (228,180)
--------------------------------------------------------------------------------------------------
Net increase in loans (130,664) (173,536)
--------------------------------------------------------------------------------------------------
Purchases of premises and equipment, net (1,213) (2,875)
--------------------------------------------------------------------------------------------------
Net cash used by investing activities (111,499) (162,983)
--------------------------------------------------------------------------------------------------
</TABLE>
Continued
7
<PAGE> 8
PARK NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(CONTINUED)
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------------
2000 1999
--------------------------------------------------------------------------------------------
<S> <C> <C>
Financing activities:
Net (decrease) increase in deposits ($ 39,766) $ 45,044
--------------------------------------------------------------------------------------------
Net (decrease) increase in short-term borrowings (37,474) 92,130
--------------------------------------------------------------------------------------------
Issuance of stock by U. B. Bancshares prior to merger 0 3,409
--------------------------------------------------------------------------------------------
Exercise of stock options 46 35
--------------------------------------------------------------------------------------------
Purchase of treasury stock, net (9,297) (4,141)
--------------------------------------------------------------------------------------------
Long-term debt issued 165,000 0
--------------------------------------------------------------------------------------------
Repayment of long-term debt (316) (6,314)
--------------------------------------------------------------------------------------------
Cash dividends paid (27,454) (23,163)
--------------------------------------------------------------------------------------------
Net cash provided from financing activities 50,739 107,000
-----------------------------------------------------------------------------
Increase/(decrease) in cash and cash equivalents (23,870) (16,785)
-----------------------------------------------------------------------------
Cash and cash equivalents at beginning of year 125,525 126,705
--------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 101,655 $ 109,920
=============================================================================
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 80,291 $ 67,540
-----------------------------------------------------------------------------
Income taxes $ 11,125 $ 14,440
-----------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8
<PAGE> 9
PARK NATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Nine Month Periods Ended September 30, 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 periods ended September 30, 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 - Acquisitions
------------
Effective April 30, 2000, Park merged with U.B. Bancshares, Inc., a $180 million
one bank holding company headquartered in Bucyrus, Ohio. Park issued
approximately 325,000 shares of common stock to the stockholders of U.B.
Bancshares, Inc. based upon an exchange ratio of .577209 shares of Park common
stock for each outstanding share of U.B. Bancshares, Inc. common stock. United
Bank N.A., the wholly owned subsidiary of U.B. Bancshares, Inc., is being
operated as a separate banking subsidiary by Park.
-9-
<PAGE> 10
Park also merged with SNB Corp., a $300 million one bank holding company
headquartered in Greenville, Ohio, effective April 30, 2000. Park issued
approximately 835,000 shares of common stock to the stockholders of SNB Corp.
based upon an exchange ratio of 5.367537 shares of Park common stock for each
outstanding share of SNB Corp. common stock. Second National Bank, the wholly
owned subsidiary of SNB Corp., is being operated as a separate banking
subsidiary by Park.
The pooling-of-interests accounting treatment was used for both mergers and as a
result, the historical financial statements of Park have been restated to show
Park, U.B. Bancshares, Inc., and SNB Corp. on a combined basis. Separate results
of operations for Park, U.B. Bancshares, Inc., and SNB Corp. follow:
----------------------------------------------------------------------------
Three Months Nine Months
Ended Sept. 30, Ended Sept. 30,
1999 1999
----------------------------------------------------------------------------
Net Interest Income
----------------------------------------------------------------------------
Park $29,103 $85,740
----------------------------------------------------------------------------
U.B. Bancshares, Inc. 1,602 4,761
----------------------------------------------------------------------------
SNB Corp. 2,636 7,785
----------------------------------------------------------------------------
Combined $33,341 $98,286
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net Income
----------------------------------------------------------------------------
Park $11,800 $35,401
----------------------------------------------------------------------------
U.B. Bancshares, Inc. 326 1,043
----------------------------------------------------------------------------
SNB Corp. 962 2,774
----------------------------------------------------------------------------
Combined $13,088 $39,218
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Basic Earnings Per Share
----------------------------------------------------------------------------
Park $1.21 $3.63
----------------------------------------------------------------------------
U.B. Bancshares, Inc. .59 2.00
----------------------------------------------------------------------------
SNB Corp. 6.31 18.19
----------------------------------------------------------------------------
Combined $1.20 $3.60
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Diluted Earnings Per Share
----------------------------------------------------------------------------
Park $1.21 $3.61
----------------------------------------------------------------------------
U.B. Bancshares, Inc. .56 1.89
----------------------------------------------------------------------------
SNB Corp. 6.31 18.19
----------------------------------------------------------------------------
Combined $1.20 $3.59
----------------------------------------------------------------------------
Note 4 - 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.
-10-
<PAGE> 11
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
(In Thousands)
---------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
---------------------------------------------------------------------------------------------------------
2000 1999 2000 1999
----------------------------------------=================================================================
<S> <C> <C> <C> <C>
Beginning of Period $47,257 $43,982 $45,176 $41,215
---------------------------------------------------------------------------------------------------------
Provision for loan losses 2,102 1,690 5,850 5,419
---------------------------------------------------------------------------------------------------------
Losses charged to the reserve (2,199) (2,146) (5,875) (5,349)
---------------------------------------------------------------------------------------------------------
Recoveries 1,106 495 3,115 2,736
----------------------------------------=================================================================
---------------------------------------------------------------------------------------------------------
End of Period $48,266 $44,021 $48,266 $44,021
----------------------------------------=================================================================
</TABLE>
Note 5 - 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, 2000 and 1999.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data)
---------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
---------------------------------------------------------------------------------------------------------------------
2000 1999 2000 1999
-------------------------------------------------------==============================================================
<S> <C> <C> <C> <C>
Numerator:
---------------------------------------------------------------------------------------------------------------------
Net Income $14,116 $13,088 $42,418 $39,218
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Denominator:
---------------------------------------------------------------------------------------------------------------------
Denominator for basic earnings per share: 10,822,140 10,878,524 10,846,778 10,879,079
weighted-average shares
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Effect of dilutive securities 24,742 52,650 34,438 52,087
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Denominator for diluted earnings per share:
adjusted weighted-average shares & assumed
conversions 10,846,882 10,931,174 10,881,216 10,931,166
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Earnings per share:
---------------------------------------------------------------------------------------------------------------------
Basic earnings per share $1.30 $1.20 $3.91 $3.60
---------------------------------------------------------------------------------------------------------------------
Diluted earnings per share $1.30 $1.20 $3.90 $3.59
---------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 6 - 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), The First-Knox National Bank of Mount
-11-
<PAGE> 12
Vernon (FKNB), United Bank N.A. (UB), and Second National Bank (SNB). PNB
operates through two banking divisions with the Park National Division (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:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
Operating Results for the Three Months Ended Sept. 30, 2000 (In Thousands)
---------------------------------------------------------------------------------------------------------------
PND FND RTC CNB FKND FSD UB SNB All Total
Other
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Interest $10,926 $3,205 $4,458 $4,292 $5,765 $936 $1,800 $2,829 $517 $34,728
Income
---------------------------------------------------------------------------------------------------------------
Provision for 380 150 483 210 531 84 90 150 24 2,102
Loan Losses
---------------------------------------------------------------------------------------------------------------
Other Income 3,384 762 664 883 1,044 99 221 228 95 7,380
---------------------------------------------------------------------------------------------------------------
Other Expense 6,022 1,954 2,609 2,412 3,203 411 1,488 1,547 650 20,296
---------------------------------------------------------------------------------------------------------------
Net Income $5,528 $1,254 $1,350 $1,754 $2,191 $378 $345 $1,003 $313 $14,116
---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
Operating Results for the Three Months Ended Sept. 30, 1999 (In Thousands)
---------------------------------------------------------------------------------------------------------------
PND FND RTC CNB FKND FSD UB SNB All Total
Other
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Interest $10,371 $3,197 $4,379 $4,220 $5,839 $812 $1,602 $2,636 $285 $33,341
Income
---------------------------------------------------------------------------------------------------------------
Provision for 735 150 225 120 279 36 90 45 10 1,690
Loan Losses
---------------------------------------------------------------------------------------------------------------
Other Income 3,236 274 626 456 1,049 81 198 235 62 6,217
---------------------------------------------------------------------------------------------------------------
Other Expense 5,921 2,064 2,502 2,296 3,098 391 1,307 1,560 392 19,531
---------------------------------------------------------------------------------------------------------------
Net Income $4,857 $861 $1,508 $1,564 $2,472 $329 $338 $961 $198 $13,088
---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
Operating Results for the Nine Months Ended Sept. 30, 2000 (In Thousands)
----------------------------------------------------------------------------------------------------------------------
PND FND RTC CNB FKND FSD UB SNB All Other Total
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Interest $32,153 $9,694 $13,633 $12,720 $17,213 $2,666 $5,300 $8,370 $1,539 $103,288
Income
----------------------------------------------------------------------------------------------------------------------
Provision for 1,940 450 1,055 470 1,257 220 150 240 68 5,850
Loan Losses
----------------------------------------------------------------------------------------------------------------------
Other Income 10,238 2,257 1,940 2,506 3,332 299 629 689 476 22,366
----------------------------------------------------------------------------------------------------------------------
Other Expense 18,020 5,845 7,826 7,156 9,603 1,236 4,207 4,704 2,260 60,857
----------------------------------------------------------------------------------------------------------------------
Net Income $15,801 $3,813 $4,440 $5,231 $6,883 $1,060 $1,186 $3,079 $925 $42,418
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
Balances at September 30, 2000
----------------------------------------------------------------------------------------------------------------------
Assets 972,055 300,893 486,234 402,919 537,486 78,883 184,819 305,111 (56,216) $3,212,184
----------------------------------------------------------------------------------------------------------------------
</TABLE>
-12-
<PAGE> 13
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
Operating Results for the Nine Months Ended Sept. 30, 1999 (In Thousands)
---------------------------------------------------------------------------------------------------------------------------------
PND FND RTC CNB FKND FSD UB SNB All Other Total
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Interest $30,624 $9,394 $13,100 $12,317 $17,173 $2,358 $4,785 $7,785 $750 $98,286
Income
---------------------------------------------------------------------------------------------------------------------------------
Provision for 2,205 450 574 460 1,087 283 175 135 50 5,419
Loan Losses
---------------------------------------------------------------------------------------------------------------------------------
Other Income 9,542 1,357 1,868 1,950 3,312 271 676 642 182 19,800
---------------------------------------------------------------------------------------------------------------------------------
Other Expense 17,410 5,844 7,687 6,697 9,029 1,221 3,944 4,639 1,180 57,651
---------------------------------------------------------------------------------------------------------------------------------
Net Income $14,307 $3,031 $4,442 $4,902 $7,318 $810 $1,072 $2,787 $549 $39,218
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
Balances at September 30, 1999
---------------------------------------------------------------------------------------------------------------------------------
Assets $902,088 $296,920 $431,672 $395,317 $521,433 $72,560 $176,424 $300,129 $(21,069) $3,075,474
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The operating results of the Parent Company and Guardian Finance Company, which
began operating in May 1999, are included in the category "all other" to
reconcile the segment totals to the consolidated income statements for all
periods. The reconciling amounts for consolidated total assets as of September
30, 2000 and 1999 consist of the elimination of intersegment borrowings and the
Parent Company and Guardian Finance Company assets which are not eliminated.
-13-
<PAGE> 14
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Comparison of Results of Operations for the Three and Nine Month
Periods Ended September 30, 2000 and 1999
Net Interest Income
-------------------
Park's principal source of earnings is net interest income, the difference
between total interest income and total interest expense. Net interest income
increased by $1.4 million or 4.2% to $34.7 million for the three months ended
September 30, 2000 compared to $33.3 million for the third 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 third quarter
of 2000 with the same quarter in 1999.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Three Months Ended September 30,
(In Thousands)
------------------------------------------------------------------------------------------------
2000 1999
------------------------------------------------------------------------------------------------
Average Tax Average Tax
Balance Equivalent Balance Equivalent
% %
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loans $2,230,837 9.15% $2,011,830 8.71%
------------------------------------------------------------------------------------------------
Taxable Investments 639,512 6.70% 657,357 6.43%
------------------------------------------------------------------------------------------------
Tax Exempt Investments 145,903 7.15% 158,685 7.05%
------------------------------------------------------------------------------------------------
Federal Funds Sold 408 6.60% 2,585 4.10%
------------------------------------------======================================================
Interest Earning Assets $3,016,660 8.53% $2,830,457 8.08%
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Interest Bearing Deposits $2,072,503 4.22% $2,043,997 3.68%
------------------------------------------------------------------------------------------------
Short-term Borrowings 275,947 5.66% 321,538 4.84%
------------------------------------------------------------------------------------------------
Long-term Debt 181,712 6.64% 17,132 5.77%
------------------------------------------======================================================
Interest Bearing Liabilities $2,530,162 4.55% $2,382,667 3.85%
------------------------------------------------------------------------------------------------
Excess Interest Earning Assets 486,498 3.98% 447,790 4.23%
------------------------------------------------------------------------------------------------
Net Interest Margin 4.72% 4.84%
------------------------------------------------------------------------------------------------
</TABLE>
Average interest earning assets increased by $186 million or 6.6% to $3,017
million for the quarter ended September 30, 2000 compared to the same quarter in
1999. Average loan totals increased by $219 million or 10.9% to $2,231 million
for the third quarter of 2000 compared to the third quarter of 1999. The demand
for commercial, commercial real estate, and consumer loans and leases has been
strong for the past year and accounts for the growth in average loan balances
for the third quarter of 2000 compared to the same period in 1999. The average
yield on the loan portfolio was 9.15% for the third quarter of 2000 compared to
8.71% for the same period in 1999. The average prime lending rate for Park's
affiliate banks was 9.50% for the third quarter of 2000 compared to 8.10% for
the same period in 1999. The Federal Reserve increased the federal funds rate by
1.75% during the second half of 1999 and the first half of 2000. Park's
-14-
<PAGE> 15
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 is expected to increase over the
remainder of the year as variable rate loans reprice and new loan originations
have an average interest rate that is higher than the current loan portfolio
rate.
Average investment securities including federal funds sold decreased by $33
million or 4.0% to $786 million for the third quarter of 2000 compared to the
same quarter in 1999. The yield on taxable investment securities increased to
6.70% in 2000 compared to 6.43% in 1999 and the yield on tax exempt securities
increased to 7.15% in 2000 compared to 7.05% in 1999. The average maturity or
repricing of the investment portfolio was approximately 4.9 years at September
30, 2000 and September 30, 1999.
Average interest bearing liabilities increased by $147 million or 6.2% to $2,530
million for the quarter ended September 30, 2000 compared to the same quarter in
1999. Average interest bearing deposits increased by $29 million or 1.4% to
$2,073 million for the third quarter of 2000 compared to the same period in
1999. Average short-term borrowings decreased by $46 million or 14.2% to $276
million and average long-term debt increased by $165 million to $182 million for
the third quarter of 2000 compared to the same period in 1999. The increase in
average borrowed funds of $119 million was needed to help fund the increase in
the loan portfolio. The increase in 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 .70% to 4.55% in
2000 compared to 3.85% in 1999. The average cost of interest bearing deposits
increased by .54% to 4.22% in 2000 compared to 3.68% in 1999. The average cost
of total borrowed funds increased by 1.17% to 6.05% in 2000 compared to 4.88% 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 $1.4 million or 4.2% to $34.7 million for
the quarter ended September 30, 2000 was primarily due to the 6.6% 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 .25% to 3.98% in 2000 compared to 4.23% in 1999. However, the
increase in average interest earning assets of $186 million or 6.6% in 2000
compared to 1999 and the increase in excess interest earning assets of $39
million or 8.6% in 2000 compared to 1999 were still able to produce an increase
in net interest income of 4.2% for the third quarter of 2000 compared to the
third quarter of 1999. The tax equivalent net interest margin decreased by .12%
to 4.72% for the third quarter of 2000 compared to 4.84% in 1999. This decrease
in the net interest margin was due to the decrease in the net interest spread.
Net interest income increased by $5.0 million or 5.1% to $103.3 million for
the nine months ended September 30, 2000 compared to $98.3 million for the
same period in 1999. The following table
-15-
<PAGE> 16
compares the average balance and tax equivalent yield/cost for interest
earning assets and interest bearing liabilities for the first nine months of
2000 with the same period in 1999.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Nine Months Ended September 30, (In Thousands)
----------------------------------------------------------------------------------------------------
2000 1999
----------------------------------------------------------------------------------------------------
Average Tax Equivalent Average Tax Equivalent
Balance % Balance %
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loans $2,182,784 9.00% $1,946,079 8.79%
----------------------------------------------------------------------------------------------------
Taxable Investments 638,670 6.76% 651,845 6.55%
----------------------------------------------------------------------------------------------------
Tax Exempt Investments 148,952 7.03% 163,380 6.92%
----------------------------------------------------------------------------------------------------
Federal Funds Sold 3,177 5.95% 7,347 4.30%
----------------------------------------------------------------------------------------------------
Interest Earning Assets $2,973,583 8.42% $2,768,651 8.14%
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
Interest Bearing Deposits $2,084,775 4.03% $2,021,466 3.73%
----------------------------------------------------------------------------------------------------
Short-Term Borrowings 264,154 5.56% 288,714 4.61%
----------------------------------------------------------------------------------------------------
Long-Term Borrowings 147,995 6.42% 17,958 5.87%
----------------------------------------------------------------------------------------------------
Interest Bearing Liabilities 2,496,924 4.33% 2,328,138 3.86%
----------------------------------------------------------------------------------------------------
Excess Interest Earning Assets 476,659 4.09% 440,513 4.28%
----------------------------------------------------------------------------------------------------
Net Interest Margin 4.78% 4.90%
----------------------------------------------------------------------------------------------------
</TABLE>
Average interest earning assets increased by $205 million or 7.4% to $2,974
million for the nine months ended September 30, 2000 compared to the same period
in 1999. Average loans increased by $237 million or 12.2% to $2,183 million for
the first nine months of 2000 compared to the same period in 1999. The yield on
loans was 9.00% for the first nine months of 2000 compared to 8.79% for the same
period in 1999.
Average investment securities including federal funds sold decreased by $32
million or 3.9% to $791 million for the first nine months of 2000 compared to
the same period in 1999. The yield on taxable investment securities increased to
6.76% for the first nine months of 2000 compared to 6.55% for the same period in
1999.
Average interest bearing liabilities increased by $169 million or 7.3% to $2,497
million for the first nine months of 2000 compared to the same period in 1999.
Average interest bearing deposits increased by $63 million or 3.1% to $2,085
million for the first nine months of 2000 compared to the same period in 1999.
Average short-term borrowings decreased by $25 million or 8.5% to $264 million
and average long-term debt increased by $130 million to $148 million for the
first nine months of 2000 compared to the same period in 1999. The increase in
long-term debt consists of variable rate Federal Home Loan Bank advances.
The average cost of interest bearing liabilities increased by .47% to 4.33% in
2000 compared to 3.86% in 1999. The average cost of interest bearing deposits
increased by .30% to 4.03% in 2000 compared to 3.73% 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.
-16-
<PAGE> 17
The increase in net interest income of $5.0 million or 5.1% to $103.3 million
for the first nine months of 2000 was primarily due to the 7.4% 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 .19% to 4.09% in 2000 compared to 4.28% in 1999. However, the
increase in average interest earning assets of $205 million or 7.4% in 2000
compared to 1999 and the increase in excess interest earning assets of $36
million or 8.2% in 2000 compared to 1999 were still able to generate an increase
in net interest income of 5.1% for the first nine months of 2000 compared to the
same period in 1999. The tax equivalent net interest margin decreased by .12% to
4.78% for 2000 compared to 4.90% in 1999. This decrease in the net interest
margin was due to the decrease in the net interest spread.
PROVISION FOR LOAN LOSSES
-------------------------
The provision for loan losses was $2.1 million and $5.9 million, respectively,
for the third quarter and first nine months of 2000 compared to $1.7 million and
$5.4 million for the same periods in 1999. Net charge-offs were $1.1 million and
$2.8 million, respectively, for the three and nine month periods ended September
30, 2000 compared to $1.7 million and $2.6 million for the same periods in 1999.
Nonperforming loans defined as loans that are 90 days past due, renegotiated
loans, and nonaccrual loans were $7.5 million or .33% of loans at September 30,
2000 compared to $6.5 million or .30% of loans at December 31, 1999 and $6.4
million or .32% of loans at September 30, 1999. The reserve for loan losses as a
percentage of outstanding loans was 2.14% at September 30, 2000 compared to
2.12% at December 31, 1999 and 2.12% at September 30, 1999. See Note 4 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 $455,000 or 6.6% to $7.4 million for the three
months ended September 30, 2000 and increased by $1.6 million or 7.8% to $22.4
million for the nine months ended September 30, 2000 compared to the same
periods in 1999. The following is a summary of the change in noninterest income.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30th September 30th
---------------------------------------------------------------------------------------------------------
2000 1999 Change 2000 1999 Change
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fees from fiduciary
activities $1,522 $1,441 $81 $4,593 $4,075 $518
---------------------------------------------------------------------------------------------------------
Service charges on deposit
accounts 2,434 2,161 273 7,003 6,039 964
---------------------------------------------------------------------------------------------------------
Other service income
1,140 1,060 80 3,537 3,715 (178)
---------------------------------------------------------------------------------------------------------
Other income 2,284 2,263 21 7,233 6,915 318
---------------------------------------------------------------------------------------------------------
Total $7,380 $6,925 $455 $22,366 $20,744 $1,622
---------------------------------------------------------------------------------------------------------
</TABLE>
-17-
<PAGE> 18
The increase in fee income from fiduciary activities, for both periods, was
primarily due to an increase in assets under management for new trust department
customers. The increase in service charges on deposit accounts, for both
periods, was due to both an increase in the number of transaction accounts and
to increases in various deposit fees. The decrease in fees earned from other
service income, for the first nine months of 2000, 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. The
increase in other income, for both periods, was primarily due to increases in
fee income from debit cards and automated teller machines.
Gain (loss) On Sale of Securities
---------------------------------
Losses from the sale of securities were $708,000 and $944,000, respectively, for
the three and nine month periods ended September 30, 1999 compared to no gains
or losses during the first nine months of 2000. Longer term interest rates
increased during the second quarter of 1999 and as a result the market value of
the investment portfolio decreased. Mortgage-backed securities with an average
book yield of 6.00% and an average life of about 4 years were sold at losses,
and the proceeds were reinvested in callable U.S. Agency securities with a yield
of 7.00% and an average life of about 4 years.
The net unrealized holding loss on available-for-sale securities (accumulated
other comprehensive income) was $3.7 million at September 30, 2000 compared to a
loss of $9.2 million at December 31, 1999 and a loss of $5.3 million at
September 30, 1999. Management expects that losses will be realized from the
sale of investment securities during the fourth quarter of 2000 and the proceeds
from the sales will be reinvested at higher book yields with a similar average
life.
Other Expense
-------------
Total other expense increased by $765,000 or 3.9% to $20.3 million for the
quarter ended September 30, 2000 and increased by $3.2 million or 5.6% to $60.9
million for the nine months ended September 30, 2000 compared to the same
periods in 1999.
Salaries and employee benefits expense increased by $803,000 or 8.0% to $10.8
million for the quarter ended September 30, 2000 and increased by $2.6 million
or 8.7% to $32.2 million for the first nine months of 2000 compared to the same
periods in 1999. Salaries increased by $593,000 or 6.7% for the quarter ended
September 30, 2000 and increased by $1.9 million or 7.7% for the nine months
ended September 30, 2000 compared to the same periods in 1999. Full time
equivalent employees were 1,223 at September 30, 2000 compared to 1,238 at
September 30, 1999. Benefits expense increased by $210,000 or 12.6% for the
three months ended September 30, 2000 and increased by $705,000 or 13.2% for the
nine months ended September 30, 2000 compared to the same periods in 1999. The
increase in benefits expense was primarily due to the increase in cost of
medical insurance for employees.
-18-
<PAGE> 19
The subcategory other expense which includes data processing expense, fees and
service charges, supplies, marketing, telephone, postage, deposit insurance
premiums, state franchise taxes, and amortization of intangibles increased by
$710,000 or 3.4% to $21.9 million for the first nine months of 2000 compared to
the same period in 1999. The increase was due to increases in data processing
expense, and professional fees pertaining to the mergers.
Federal Income Taxes
--------------------
Federal income tax expense was $5.6 million and $16.5 million, respectively, for
the three and nine month periods ended September 30, 2000 compared to $5.2
million and $15.8 million for the same periods in 1999. The ratio of federal
income tax expense to income before taxes was approximately 28% for both the
three and nine month periods ended September 30, 2000 compared to approximately
29% for the same periods in 1999. The statutory rate was 35% for both 2000 and
1999. 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, which have both increased in 2000.
Net Income
----------
Net income increased by $1.0 million or 7.9% to $14.1 million for the three
months ended September 30, 2000 compared to $13.1 million for the same period in
1999. For the nine months ended September 30, 2000, net income increased by $3.2
million or 8.2% to $42.4 million compared to $39.2 million for the same period
in 1999. The annualized, net income to average assets ratio (ROA) was 1.76% and
1.80%, respectively, for the three and nine month periods ended September 30,
2000 compared to 1.72% and 1.77% for the same periods in 1999. The annualized,
net income to average equity ratio (ROE) was 18.93% and 19.57%, respectively,
for the three and nine month periods ended September 30, 2000 compared to 18.13%
and 18.18% for the same periods in 1999.
Diluted earnings per share increased by 8.3% to $1.30 for the third quarter of
2000 compared to $1.20 for the same quarter in 1999 and increased by 8.6% to
$3.90 for the first nine months of 2000 compared to $3.59 for the same period in
1999.
-19-
<PAGE> 20
COMPARISON OF FINANCIAL CONDITION
FOR SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
Changes in Financial Condition and Liquidity
--------------------------------------------
Total assets increased by $79 million or 2.5% to $3,212 million at September 30,
2000 compared to $3,133 million at December 31, 1999. Total loans increased by
$129 million, other assets decreased by $9 million, investments decreased by $12
million, and cash and due from banks decreased by $24 million.
Total liabilities increased by $61 million or 2.2% to $2,905 million at
September 30, 2000 compared to $2,843 million at December 31, 1999. Total
deposits decreased by $40 million, borrowed funds increased by $127 million, and
other liabilities decreased by $26 million. Long-term debt of $165 million was
borrowed from the Federal Home Loan Bank and was used to repay short-term
borrowings and fund the increase in loans. The long-term debt has a maturity of
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 70.2% at September 30, 2000 compared to 67.9% at December 31,
1999 and 67.4% at September 30, 1999. Cash and cash equivalents totaled $102
million at September 30, 2000 compared to $126 million at December 31, 1999 and
$110 million at September 30, 1999. The present funding sources provide more
than adequate liquidity for the Corporation to meet its cash flow needs.
Capital Resources
-----------------
Stockholders' equity at September 30, 2000 was $308 million or 9.57% of total
assets compared to $290 million or 9.26% of total assets at December 31, 1999
and $287 million or 9.52% of total assets at September 30, 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
9.36% at September 30, 2000 and 9.17% 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 13.56% at September 30, 2000 and
13.44% at December 31, 1999. The minimum total risk-based capital
-20-
<PAGE> 21
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 14.82% at September 30,
2000 and 14.70% at December 31, 1999.
The financial institution subsidiaries of Park each met the well capitalized
capital ratio guidelines at September 30, 2000. The following table indicates
the capital ratios for each subsidiary and Park at September 30, 2000:
<TABLE>
<CAPTION>
TIER I TOTAL
LEVERAGE RISK-BASED RISK-BASED
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
Park National Bank 7.70% 10.34% 12.68%
--------------------------------------------------------------------------------------
Richland Trust Company 6.99% 11.60% 12.86%
--------------------------------------------------------------------------------------
Century National Bank 7.23% 11.91% 13.18%
--------------------------------------------------------------------------------------
First-Knox National Bank 7.05% 9.87% 13.44%
--------------------------------------------------------------------------------------
United Bank N.A. 7.64% 12.84% 14.10%
--------------------------------------------------------------------------------------
Second National Bank 7.86% 11.71% 12.95%
--------------------------------------------------------------------------------------
Park National Corporation 9.36% 13.56% 14.82%
--------------------------------------------------------------------------------------
Minimum Capital Ratio 4.00% 4.00% 8.00%
--------------------------------------------------------------------------------------
Well Capitalized Ratio 5.00% 6.00% 10.00%
--------------------------------------------------------------------------------------
</TABLE>
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.
-21-
<PAGE> 22
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
--------
Exhibit 27.1 - Financial Data Schedule at September 30, 2000 -
page 24
Exhibit 27.2 - Restated Financial Data Schedule at September 30,
1999 - page 25
B. Reports On Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter ended September
30, 2000.
-22-
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PARK NATIONAL CORPORATION
DATE: NOVEMBER 9, 2000 BY: /S/C. DANIEL DELAWDER
---------------------- ----------------------
C. Daniel DeLawder
President and Chief Executive Officer
DATE: NOVEMBER 9, 2000 BY: /S/JOHN W. KOZAK
---------------------- ----------------
John W. Kozak
Chief Financial Officer
-23-
