Edgar Filing: PARK NATIONAL CORP /OH/

e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009


o		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 þ No o

Indicated by check mark whether the registrant has submitted electronically and posted on its corporate Web Site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the proceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

Indicate by check mark whether the registrant is a large accelerated file, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

14,259,971 Common shares, no par value per share, outstanding at October 24, 2009.

PARK NATIONAL CORPORATION

CONTENTS


	Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Condensed Balance Sheets as of September 30, 2009 and December 31, 2008 (unaudited)		3

Consolidated Condensed Statements of Income for the Three and Nine Months Ended September 30, 2009 and 2008 (unaudited)		4

Consolidated Condensed Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2009 and 2008 (unaudited)		6

Consolidated Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2009 and 2008 (unaudited)		7

Notes to Unaudited Consolidated Condensed Financial Statements		9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		29

Item 3. Quantitative and Qualitative Disclosures About Market Risk		46

Item 4. Controls and Procedures		47

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		48

Item 1A. Risk Factors		48

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		51

Item 3. Defaults Upon Senior Securities		52

Item 4. Submission of Matters to a Vote of Security Holders		52

Item 5. Other Information		52

Item 6. Exhibits		53

SIGNATURES		55

Exhibit 12
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

PARK NATIONAL CORPORATION

Consolidated Condensed Balance Sheets (Unaudited)

(dollars in thousands, except per share data)


	September 30,			December 31,
	2009			2008

Assets:
Cash and due from banks	$	127,079		$	150,298

Money market instruments		10,583			20,963

Cash and cash equivalents		137,662			171,261

Interest bearing deposits		1			1

Securities available-for-sale, at fair value (amortized cost of $1,294,092 and $1,513,223 at September 30, 2009 and December 31, 2008)		1,356,971			1,561,896

Securities held-to-maturity, at amortized cost (fair value of $465,903 and $433,435 at September 30, 2009 and December 31, 2008)		448,062			428,350

Other investment securities		68,919			68,805


Loans		4,615,101			4,491,337

Allowance for loan losses		(110,040	)		(100,088	)

Net loans		4,505,061			4,391,249


Bank premises and equipment, net		67,194			68,553

Bank owned life insurance		136,555			132,916

Goodwill and other intangible assets		82,735			85,545

Other real estate owned		47,015			25,848

Mortgage loan servicing rights		10,543			8,306

Accrued income and other assets		109,960			127,990


Total assets	$	6,970,678		$	7,070,720


Liabilities and Stockholders’ Equity:
Deposits:
Noninterest bearing	$	817,897		$	782,625

Interest bearing		4,297,079			3,979,125

Total deposits		5,114,976			4,761,750


Short-term borrowings		345,167			659,196

Long-term debt		681,590			855,558

Subordinated debentures		40,000			40,000

Accrued expenses and other liabilities		101,618			111,553

Total liabilities		6,283,351			6,428,057


COMMITMENTS AND CONTINGENCIES

Stockholders’ equity:
Preferred stock (200,000 shares authorized at September 30, 2009 and December 31, 2008; 100,000 shares issued at September 30, 2009 and December 31, 2008 with $1,000 per share liquidation preference)		96,292			95,721

Common stock (No par value; 20,000,000 shares authorized; 16,151,123 shares issued at September 30, 2009 and 16,151,151 shares issued at December 31, 2008)		301,209			301,210

Common stock warrant		4,297			4,297

Retained earnings		447,122			438,504

Treasury stock (1,891,152 shares at September 30, 2009 and 2,179,424 shares at December 31, 2008)		(181,611	)		(207,665	)

Accumulated other comprehensive income, net of taxes		20,018			10,596

Total stockholders’ equity		687,327			642,663


Total liabilities and stockholders’ equity	$	6,970,678		$	7,070,720

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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PARK NATIONAL CORPORATION

Consolidated Condensed Statements of Income (Unaudited)

(dollars in thousands, except per share data)

Three Months Ended

Nine Months Ended

September 30,

2009

2008

2009

2008

Interest and dividend income:

Interest and fees on loans

69,339

75,167

206,923

229,109

Interest and dividends on:

Obligations of U.S. Government, its agencies and other securities

22,204

22,204

69,233

65,538

Obligations of states and political subdivisions

316

488

1,131

1,707

Other interest income

262

Total interest and dividend income

91,868

97,947

277,325

296,616

Interest expense:

Interest on deposits:

Demand and savings deposits

2,768

5,573

8,482

18,266

Time deposits

13,362

15,527

41,536

51,344

Interest on borrowings:

Short-term borrowings

688

3,265

2,685

12,097

Long-term debt

6,588

8,354

19,933

23,871

Total interest expense

23,406

32,719

72,636

105,578

Net interest income

68,462

65,228

204,689

191,038

Provision for loan losses

14,958

15,906

43,101

37,869

Net interest income after provision for loan losses

53,504

49,322

161,588

153,169

Other income:

Income from fiduciary activities

3,071

3,356

9,071

10,639

Service charges on deposit accounts

5,788

6,434

16,381

18,285

Other service income

3,895

2,361

15,179

8,299

Other

5,411

4,937

16,501

19,447

Total other income

18,165

17,088

57,132

56,670

Gain on sale of securities

—

7,340

896

Continued

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PARK NATIONAL CORPORATION

Consolidated Condensed Statements of Income (Unaudited)

(Continued)

(dollars in thousands, except per share data)


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2009		2008			2009		2008

Other expense:

Salaries and employee benefits	$	25,589	$	25,105		$	76,410	$	74,262

Occupancy expense		2,772		2,850			8,812		8,758

Furniture and equipment expense		2,463		2,412			7,339		7,305

Goodwill impairment charge		—		54,986			—		54,986

Other expense		15,228		14,126			49,504		41,878

Total other expense		46,052		99,479			142,065		187,189


Income (loss) before income taxes		25,617		(33,069	)		83,995		23,546


Income taxes		6,418		5,343			22,099		20,789


Net income (loss)	$	19,199	$	(38,412	)	$	61,896	$	2,757


Preferred stock dividends and accretion		1,440		—			4,321		—


Income (loss) available to common shareholders	$	17,759	$	(38,412	)	$	57,575	$	2,757


Per Common Share:

Income (loss) available to common shareholders
Basic	$	1.25	$	(2.75	)	$	4.10	$	0.20

Diluted	$	1.25	$	(2.75	)	$	4.10	$	0.20


Weighted average common shares outstanding
Basic		14,193,411		13,964,549			14,055,580		13,964,561

Diluted		14,193,411		13,964,549			14,055,580		13,964,561


Cash dividends declared	$	0.94	$	0.94		$	2.82	$	2.82

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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PARK NATIONAL CORPORATION

Consolidated Condensed Statements of Changes in Stockholders’ Equity (Unaudited)

(dollars in thousands, except share data)


												Accumulated
									Treasury			Other
	Preferred		Common			Retained			Stock			Comprehensive			Comprehensive
Nine Months ended September 30, 2009 and 2008	Stock		Stock			Earnings			at Cost			Income (loss)			Income

BALANCE AT DECEMBER 31, 2007	$	0	$	301,213		$	489,511		$	(208,104	)	$	(2,608	)

Net Income							2,757								$	2,757

Other comprehensive income (loss), net of tax:
Unrealized net holding loss on cash flow hedge, net of taxes ($23)													(42	)		(42	)

Unrealized net holding loss on securities available-for-sale, net of taxes ($937)													(1,740	)		(1,740	)

Total comprehensive income															$	975

Cash dividends on common stock at $2.82 per share							(39,335	)

Cash payment for fractional shares in dividend reinvestment plan				(2	)

Cumulative effect of new accounting pronouncement pertaining to endorsement split-dollar life insurance							(11,634	)

SFAS No.158 measurement date adjustment, net of taxes ($178)							(331	)

BALANCE AT SEPTEMBER 30, 2008	$	0	$	301,211		$	440,968		$	(208,104	)	$	(4,390	)


BALANCE AT DECEMBER 31, 2008	$	95,721	$	305,507		$	438,504		$	(207,665	)	$	10,596

Net Income							61,896								$	61,896

Other comprehensive income, net of tax:
Unrealized net holding gain on cash flow hedge, net of taxes $102													188			188

Unrealized net holding gain on securities available-for-sale, net of taxes $4,972													9,234			9,234

Total comprehensive income															$	71,318

Cash dividends on common stock at $2.82 per share							(39,573	)

Cash payment for fractional shares in dividend reinvestment plan				(1	)

Reissuance of common stock from treasury shares held							(9,384	)		26,054

Accretion of discount on preferred stock		571					(571	)

Preferred stock dividends							(3,750	)

BALANCE AT SEPTEMBER 30, 2009	$	96,292	$	305,506		$	447,122		$	(181,611	)	$	20,018

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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PARK NATIONAL CORPORATION

Consolidated Condensed Statements of Cash Flows (Unaudited)

(dollars in thousands)


	Nine Months Ended
	September 30,
	2009			2008

Operating activities:

Net income	$	61,896		$	2,757


Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, accretion and amortization		2,161			263

Provision for loan losses		43,101			37,869

Other-than-temporary impairment on investment securities		613			774

Stock dividends on Federal Home Loan Bank stock		—			(2,269	)

Goodwill impairment charge		—			54,986

Amortization of core deposit intangibles		2,810			3,019

Realized net investment security gains		(7,340	)		(896	)


Changes in assets and liabilities:
Increase in other assets		(13,985	)		(9,617	)

(Decrease) increase in other liabilities		(10,275	)		166


Net cash provided by operating activities		78,981			87,052


Investing activities:

Proceeds from sales of available-for-sale securities		204,304			80,894

Proceeds from maturity of:
Available-for-sale securities		363,547			245,560

Held-to-maturity securities		29,876			5,829

Purchases of:
Available-for-sale securities		(339,895	)		(355,612	)

Held-to-maturity securities		(49,586	)		(76,705	)

Net increase in other investments		(114	)		(3,370	)

Net increase in loans		(155,473	)		(274,177	)

Purchases of bank owned life insurance, net		—			(8,107	)

Purchases of premises and equipment, net		(4,342	)		(8,571	)


Net cash provided by (used for) investing activities		48,317			(394,259	)

Continued

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PARK NATIONAL CORPORATION

Consolidated Condensed Statements of Cash Flows (Unaudited)

(Continued)

(dollars in thousands)


	Nine Months Ended
	September 30,
	2009			2008

Financing activities:

Net increase in deposits	$	353,226		$	335,270

Net decrease in short-term borrowings		(314,029	)		(179,012	)

Proceeds from issuance of long-term debt		60,100			390,100

Repayment of long-term debt		(234,068	)		(196,069	)

Cash payment for fractional shares in dividend reinvestment plan		(1	)		(2	)

Proceeds from reissuance of common stock from treasury shares held		16,670			—

Cash dividends paid on common stock and preferred stock		(42,795	)		(52,508	)


Net cash (used for) provided by financing activities		(160,897	)		297,779


Decrease in cash and cash equivalents		(33,599	)		(9,428	)


Cash and cash equivalents at beginning of year		171,261			193,397


Cash and cash equivalents at end of period	$	137,662		$	183,969


Supplemental disclosures of cash flow information:

Cash paid for:
Interest	$	73,869		$	108,315


Income taxes	$	20,600		$	25,220

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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PARK NATIONAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Note 1 — Basis of Presentation

The accompanying unaudited consolidated condensed financial statements included in this report have been prepared by Park National Corporation (the “Registrant”, “Corporation”, “Company”, or “Park”) and all of its subsidiaries. In the opinion of management, all adjustments (consisting 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 three and nine month periods ended September 30, 2009 are not necessarily indicative of the operating results to be anticipated for the fiscal year ending December 31, 2009.

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and footnotes necessary for a fair presentation of the condensed balance sheets, condensed statements of income, condensed statements of changes in stockholders’ equity and condensed statements of cash flows in conformity with U.S. generally accepted accounting principles (“GAAP”). These financial statements should be read in conjunction with the consolidated financial statements incorporated by reference in the Annual Report on Form 10-K of Park for the fiscal year ended December 31, 2008 from Park’s 2008 Annual Report to Shareholders.

Park’s significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements included in Park’s 2008 Annual Report to Shareholders. For interim reporting purposes, Park follows the same basic accounting policies, as updated by the information contained in this report, and considers each interim period an integral part of an annual period. Management has evaluated events occurring subsequent to the balance sheet date through October 26, 2009 (the financial statement issuance date), determining no events require additional disclosure in these consolidated condensed financial statements.

Note 2 — Recent Accounting Pronouncements

Adoption of New Accounting Pronouncements:

Accounting for Business Combinations: Park adopted new guidance impacting Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 805, Business Combinations (SFAS 141(R), “Business Combinations”), on January 1, 2009. This guidance was issued with the objective to improve the comparability of information that a company provides in its financial statements related to a business combination. This new guidance establishes principles and requirements for how the acquirer: (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; (ii) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (iii) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This new guidance does not apply to combinations between entities under common control. The Company’s adoption of the new guidance had no impact on Park’s financial statements and applies prospectively to business combinations for which the acquisition date is on or after January 1, 2009.

Noncontrolling Interests in Consolidated Financial Statements: Park adopted new guidance impacting FASB ASC 810-10, Consolidation (SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements”), on January 1, 2009. A noncontrolling interest, also known as a “minority interest,” is the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent. This guidance was issued with the objective to improve upon the consistency of financial information that a company provides in its consolidated financial statements. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company’s adoption of the new guidance did not have a material impact on Park’s consolidated financial statements.

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Disclosures about Derivative Instruments and Hedging Activities: Park adopted new guidance impacting FASB ASC 815-10, Derivatives and Hedging (SFAS No. 161 “Disclosures about Derivative Instruments and Hedging Activities”), on January 1, 2009. This guidance requires enhanced disclosures about an entity’s derivative and hedging activities and therefore should improve the transparency of financial reporting, and is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company’s adoption of the new guidance did not have a material impact on Park’s consolidated financial statements.

Subsequent Events: Park adopted FASB ASC 855, Subsequent Events (SFAS No. 165 “Subsequent Events”), on June 30, 2009. This guidance establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The Company’s adoption of this guidance did not have a material impact on Park’s consolidated financial statements.

Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly: In April 2009, the FASB issued new guidance impacting FASB ASC 820, Fair Value Measurements and Disclosures (FASB Staff Position (FSP) FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”). This provides additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased. This also includes guidance on identifying circumstances that indicate a transaction is not orderly. The Company’s adoption of the new guidance, did not have a material impact on Park’s consolidated financial statements. See Note 14 — Fair Value for disclosures required by this new guidance.

Interim Disclosures about Fair Value of Financial Instruments: Park adopted new guidance impacting FASB ASC 825-10-50, Financial Instruments (FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments”), effective June 30, 2009. This guidance amended existing GAAP to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. The Company’s adoption of the new guidance did not have a material impact on Park’s consolidated financial statements. See Note 14 — Fair Value for disclosures required by this new guidance.

Recognition and Presentation of Other-Than-Temporary Impairments: In April 2009, the FASB issued new guidance impacting FASB ASC 320-10, Investments — Debt and Equity Securities (FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments”). This guidance amends the other-than-temporary impairment guidance in GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. This FSP does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. The Company’s adoption of the new guidance did not have a material impact on Park’s consolidated financial statements as Park has not experienced other-than-temporary impairment within its debt securities portfolio.

Recently Issued but not yet Effective Accounting Pronouncements:

Accounting for Transfers of Financial Assets: In June 2009, FASB issued SFAS No. 166 “Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140.” This removes the concept of a qualifying special-purpose entity from existing GAAP and removes the exception from applying FASB ASC 810-10, Consolidation (FASB Interpretation No. 46 (revised December 2003) Consolidation of Variable Interest Entities) to qualifying special purpose entities. The objective of this new guidance is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement in transferred financial assets. The new guidance will be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009 (for Park this will be as of January 1, 2010), for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Management is still evaluating the impact of this accounting standard.

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Amendments to FASB Interpretation No. 46(R): In June 2009, FASB issued SFAS No. 167 “Amendments to FASB Interpretation No. 46(R).” The objective of this new guidance is to amend certain requirements of FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, to improve financial reporting by enterprises involved with variable interest entities and to provide more relevant and reliable information to users of financial statements. This guidance will be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009 (for Park, this will be as of January 1, 2010), for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. Management is still evaluating the impact of this accounting standard.

Note 3 — Goodwill and Intangible Assets

The following table shows the activity in goodwill and core deposit intangibles for the first nine months of 2009.


			Core Deposit
(In Thousands)	Goodwill		Intangibles			Total
December 31, 2008	$	72,334	$	13,211		$	85,545
Amortization		—		(2,810	)		(2,810	)

September 30, 2009	$	72,334	$	10,401		$	82,735

The core deposit intangibles are being amortized to expense principally on the straight-line method, over periods ranging from six to ten years. Management expects that the core deposit intangibles amortization expense will be approximately $0.9 million for the fourth quarter of 2009.

Core deposit intangibles amortization expense is projected to be as follows for each of the following years:


	Annual
(In Thousands)	Amortization
2009	$	3,746
2010		3,422
2011		2,677
2012		2,677
2013		689

Total	$	13,211

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Note 4 — Loans and Allowance for Loan Losses

The composition of the loan portfolio was as follows at the dates shown:


	September 30,		December 31,
(In Thousands)	2009		2008
Commercial, Financial and Agricultural	$	719,369	$	714,296
Real Estate:
Construction		506,777		533,788
Residential		1,532,859		1,560,198
Commercial		1,141,209		1,035,725
Consumer		711,337		643,507
Leases		3,550		3,823

Total Loans	$	4,615,101	$	4,491,337

Nonperforming loans are summarized as follows:


	September 30,		December 31,
(In Thousands)	2009		2008
Impaired Loans
Nonaccrual	$	179,377	$	140,097
Restructured		148		2,845

Total Impaired Loans		179,525		142,942
Other Nonaccrual Loans		27,687		19,415

Total Nonaccrual and Restructured Loans	$	207,212	$	162,357

Loans Past Due 90 Days or More and Accruing		4,849		5,421

Total Nonperforming Loans	$	212,061	$	167,778

The allowance for loan losses, specifically related to impaired loans at September 30, 2009 and December 31, 2008, was $21.1 million and $8.9 million, respectively.

The allowance for loan losses is that amount management believes is adequate to absorb probable incurred 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 as discussed within the critical accounting policy discussion in Park’s 2008 Annual Report to Shareholders.

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The following table shows the activity in the allowance for loan losses for the three and nine months ended September 30, 2009 and 2008.


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In Thousands)	2009			2008			2009			2008
Average Loans	$	4,610,716		$	4,409,188		$	4,582,037		$	4,317,204

Allowance for Loan Losses:
Beginning Balance	$	104,804		$	86,045		$	100,088		$	87,102

Charge-Offs:
Commercial, Financial and Agricultural		2,066			825			7,157			2,050
Real Estate — Construction		3,677			7,630			12,613			19,924
Real Estate — Residential		1,720			2,326			6,923			7,991
Real Estate — Commercial		1,791			630			3,258			2,811
Consumer		2,324			2,516			8,318			7,196
Lease Financing		—			—			9			4

Total Charge-Offs		11,578			13,927			38,278			39,976


Recoveries:
Commercial, Financial and Agricultural		235			203			795			612
Real Estate — Construction		557			12			1,079			62
Real Estate — Residential		411			268			1,126			548
Real Estate — Commercial		291			48			583			350
Consumer		361			639			1,543			2,611
Lease Financing		1			1			3			17

Total Recoveries		1,856			1,171			5,129			4,200


Net Charge-Offs		9,722			12,756			33,149			35,776


Provision for Loan Losses		14,958			15,906			43,101			37,869

Ending Balance	$	110,040		$	89,195		$	110,040		$	89,195


Annualized Ratio of Net Charge-Offs to Average Loans		0.84	%		1.15	%		0.97	%		1.11	%
Ratio of Allowance for Loan Losses to End of Period Loans		2.38	%		2.00	%		2.38	%		2.00	%

- 13 -

Note 5 — Earnings Per Common Share

The following table sets forth the computation of basic and diluted earnings (loss) per common share for the three and nine months ended September 30, 2009 and 2008.


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(Dollars in Thousands, Except Per Share Data)	2009		2008			2009		2008
Numerator:
Income (Loss) Available to Common Shareholders	$	17,759	$	<38,412	>	$	57,575	$	2,757
Denominator:
Denominator for Basic Earnings (Loss) Per Share (Weighted Average Common Shares Outstanding)		14,193,411		13,964,549			14,055,580		13,964,561
Effect of Dilutive Securities		—		—			—		—
Denominator for Diluted Earnings Per Share (Weighted Average Common Shares Outstanding Adjusted for the Dilutive Securities)		14,193,411		13,964,549			14,055,580		13,964,561
Earnings (Loss) Per Common Share:
Basic Earnings (Loss) Per Common Share	$	1.25	$	<2.75	>	$	4.10	$	0.20
Diluted Earnings (Loss) Per Common Share	$	1.25	$	<2.75	>	$	4.10	$	0.20

For the three and nine month periods ended September 30, 2009, options to purchase a weighted average 305,292 and 375,768 common shares, respectively, were outstanding under Park’s stock option plans. Additionally, a warrant to purchase 227,376 common shares was outstanding at September 30, 2009, related to our participation in the U.S. Treasury Capital Purchase Program (“CPP”). For the three and nine month periods ended September 30, 2008, options to purchase a weighted average 474,608 and 519,082 common shares, respectively, were outstanding under Park’s stock option plans. The common shares represented by the options and the warrant for the three and nine month periods ended September 30, 2009, totaling 532,668 and 603,144, respectively, and the common shares represented by the options for the three and nine month periods ended September 30, 2008, totaling 474,608 and 519,082, respectively, were not included in the computation of diluted earnings per common share because the respective exercise prices exceeded the market value of the underlying common shares such that their inclusion would have had an anti-dilutive effect.

Note 6 — Segment Information

The Corporation is a multi-bank holding company headquartered in Newark, Ohio. The operating segments for the Corporation are its two chartered bank subsidiaries, The Park National Bank (headquartered in Newark, Ohio) (“PNB”) and Vision Bank (headquartered in Panama City, Florida) (“VIS”). Management is required to disclose information about the different types of business activities in which a company engages and also information on the different economic environments in which a company operates, so that the users of the financial statements can better understand a company’s performance, better understand the potential for future cash flows, and make more informed judgments about the company as a whole. Park has two operating segments, as: (i) there are two separate and distinct geographic markets in which Park operates, (ii) discrete financial information is available for each operating segment and (iii) the segments are aligned with internal reporting to Park’s Chief Executive Officer, who is the chief operating decision maker.

- 14 -

Operating Results for the Three Months Ended September 30, 2009
(In Thousands)


	PNB		VIS			All Other		Total
Net Interest Income	$	59,396	$	6,017		$	3,049	$	68,462
Provision for Loan Losses		4,433		10,030			495		14,958
Other Income and Security Gains		17,820		263			82		18,165
Other Expense		36,270		6,926			2,856		46,052
Net Income (Loss)		25,087		<6,570	>		682		19,199

Balances at September 30, 2009
Assets	$	6,075,863	$	874,069		$	20,746	$	6,970,678

Operating Results for the Three Months Ended September 30, 2008
(In Thousands)


	PNB		VIS			All Other			Total
Net Interest Income	$	56,096	$	6,928		$	2,204		$	65,228
Provision for Loan Losses		3,988		11,474			444			15,906
Other Income and Security Gains		16,940		48			100			17,088
Goodwill Impairment		—		54,986			—			54,986
Other Expense		34,575		6,383			3,535			44,493
Net Income (Loss)		23,099		<61,682	>		171			<38,412	>

Balances at September 30, 2008
Assets	$	5,966,890	$	870,148		$	<37,305	>	$	6,799,733

Operating Results for the Nine Months Ended September 30, 2009
(In Thousands)


	PNB		VIS			All Other		Total
Net Interest Income	$	176,568	$	19,307		$	8,814	$	204,689
Provision for Loan Losses		13,113		28,430			1,558		43,101
Other Income and Security Gains		62,162		2,060			250		64,472
Other Expense		111,861		20,838			9,366		142,065
Net Income (Loss)		77,475		<17,145	>		1,566		61,896

Operating Results for the Nine Months Ended September 30, 2008
(In Thousands)


	PNB		VIS			All Other		Total
Net Interest Income	$	163,672	$	20,609		$	6,757	$	191,038
Provision for Loan Losses		8,752		27,729			1,388		37,869
Other Income and Security Gains		54,983		2,172			411		57,566
Goodwill Impairment		—		54,986			—		54,986
Other Expense		101,810		19,821			10,572		132,203
Net Income (Loss)		72,276		<70,216	>		697		2,757

The operating results of the Parent Company and Guardian Financial Services Company (GFC) in the “All Other” column are used to reconcile the segment totals to the consolidated condensed statements of income for the three and nine month periods ended September 30, 2009 and 2008. The reconciling amounts for consolidated total assets for both the three and nine month periods ended September 30, 2009 and 2008, consist of the elimination of intersegment borrowings and the assets of the Parent Company and GFC which are not eliminated.

- 15 -

Note 7 — Stock Option Plans

Park did not grant any stock options during the nine month periods ended September 30, 2009 and 2008. Additionally, no stock options vested during the first nine months of 2009 or 2008.

The following table summarizes stock option activity during the first nine months of 2009.


			Weighted
			Average Exercise
	Stock Options		Price Per Share
Outstanding at December 31, 2008		452,419	$	102.33
Granted		—		—
Exercised		—		—
Forfeited/Expired		182,923	$	107.29

Outstanding at September 30, 2009		269,496	$	98.95

All of the stock options outstanding at September 30, 2009 were exercisable. The aggregate intrinsic value of the outstanding stock options at September 30, 2009 was $0.

No stock options were exercised during the first nine months of 2009 or 2008. The weighted average contractual remaining term was 1.45 years for the stock options outstanding at September 30, 2009.

All of the common shares delivered upon exercise of incentive stock options granted under the Park National Corporation 2005 Incentive Stock Option Plan (the “2005 Plan”) and the Park National Corporation 1995 Incentive Stock Option Plan (the “1995 Plan”) are to be treasury shares. At September 30, 2009, incentive stock options (granted under both the 2005 Plan and the 1995 Plan) covering 269,474 common shares were outstanding. The remaining outstanding stock options at September 30, 2009, covering 22 common shares, were granted under a stock option plan (the “Security Plan”) assumed by Park in the acquisition of Security Banc Corporation in 2001. At September 30, 2009, Park held 1,008,681 treasury shares that are allocated for the stock option plans (including the Security Plan).

Note 8 — Mortgage Loans Held For Sale

Mortgage loans held for sale are carried at their fair value as of September 30, 2009 and at the lower of cost or fair value at December 31, 2008. Effective January 1, 2009, Park elected the fair value option of accounting for mortgage loans held for sale that were originated after January 1, 2009. At September 30, 2009, Park had approximately $12.0 million in mortgage loans held for sale, compared to $38.9 million at June 30, 2009, which represents a decline of $26.9 million during the third quarter of 2009. At December 31, 2008, Park had approximately $9.6 million in mortgage loans held for sale. These amounts are included in loans on the consolidated condensed balance sheets.

- 16 -

Note 9 — Investment Securities

The amortized cost and fair values of investment securities are shown in the following table. Management performs a quarterly evaluation of investment securities for any other-than-temporary impairment. During 2008, management determined that Park’s unrealized losses in the stocks of several financial institutions were other-than-temporarily impaired due to the duration and severity of the losses. Therefore, Park recognized losses of $980 thousand during 2008. For the three months ended September 30, 2009, there were no investment securities impairments recognized. For the nine month period ended September 30, 2009, Park recognized impairment charges of $613 thousand, related to equity investments in several financial institutions. These impairment charges represented the difference between each investment’s cost and fair value. For the three and nine month periods ended September 30, 2008, impairment charges of $335 thousand and $774 thousand, respectively, were recorded.


(In Thousands)
			Gross		Gross
September 30, 2009			Unrealized		Unrealized		Estimated Fair
Securities Available-for-Sale	Amortized Cost		Holding Gains		Holding Losses		Value
Obligations of U.S. Treasury and Other U.S. Government Sponsored Entities	$	339,899	$	2,636	$	—	$	342,535
Obligation of States and Political Subdivisions		20,271		661		—		20,932
U.S. Government Sponsored Entities’ Asset-Backed Securities		932,961		58,984		—		991,945
Equity Securities		961		640		42		1,559

Total	$	1,294,092	$	62,921	$	42	$	1,356,971


			Gross		Gross
September 30, 2009			Unrecognized		Unrecognized		Estimated
Securities Held-to-Maturity	Amortized Cost		Holding Gains		Holding Losses		Fair Value
Obligations of States and Political Subdivisions	$	5,077	$	38	$	—	$	5,115
U.S. Government Sponsored Entities’ Asset-Backed Securities		442,985		17,803		—		460,788

Total	$	448,062	$	17,841	$	—	$	465,903

At September 30, 2009, gross unrealized holding losses were limited to $42 thousand of unrealized losses in equity securities. Management does not believe any of the unrealized losses at September 30, 2009 or December 31, 2008, represents other-than-temporary impairment. Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

Securities with unrealized losses at September 30, 2009, were as follows:

(In thousands)

Less than 12 months

12 months or longer

Total

September 30, 2009

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

Securities Available-for-Sale

Value

losses

Value

losses

Value

losses

Other equity securities

—

216

- 17 -

Investment securities at December 31, 2008, were as follows:


(In Thousands)
			Gross		Gross
December 31, 2008			Unrealized		Unrealized		Estimated
Securities Available-for-Sale	Amortized Cost		Holding Gains		Holding Losses		Fair Value
Obligations of U.S. Treasury And Other U.S. Government Sponsored Entities	$	127,628	$	1,060	$	—	$	128,688
Obligation of States and Political Subdivisions		26,424		503		33		26,894
U.S. Government Sponsored Entities’ Asset-Backed Securities		1,357,710		47,050		229		1,404,531
Equity Securities		1,461		428		106		1,783

Total	$	1,513,223	$	49,041	$	368	$	1,561,896


			Gross		Gross
December 31, 2008			Unrecognized		Unrecognized		Estimated
Securities Held-to-Maturity	Amortized Cost		Holding Gains		Holding Losses		Fair Value
Obligations of States and Political Subdivisions	$	10,294	$	79	$	—	$	10,373
U.S. Government Sponsored Entities’ Asset-Backed Securities		418,056		5,035		29		423,062

Total	$	428,350	$	5,114	$	29	$	433,435

Securities with unrealized losses at December 31, 2008, were as follows:


(In thousands)	Less than 12 months				12 months or longer				Total
December 30, 2008	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Securities Available-for-Sale	Value		losses		Value		losses		Value		losses
Obligations of states and political subdivisions	$	1,135	$	1	$	278	$	32	$	1,413	$	33
U.S. Government agencies’ asset-backed securities		703		6		6,850		223		7,553		229
Other equity securities		17		14		314		92		331		106

Total	$	1,855	$	21	$	7,442	$	347	$	9,297	$	368


December 30, 2008
Securities Held-to-Maturity
U.S. Government agencies’ asset-backed securities	$	156	$	1	$	42,863	$	28	$	43,019	$	29

The amortized cost and estimated fair value of investments in debt securities at September 30, 2009, are shown in the following table by contractual maturity or the expected call date, except for asset-backed securities, which are shown as a single total, due to the unpredictability of the timing in principal repayments.


	Amortized		Estimated Fair
(Dollars in thousands)	Cost		Value
Securities Available-for-Sale
U.S. Treasury and agencies’ notes:
Due within one year	$	189,899	$	192,008
Due one through five years		150,000		150,527

Total	$	339,899	$	342,535


Obligations of states and political subdivisions:
Due within one year	$	13,829	$	14,145
Due one through five years		5,632		5,946
Due five through ten years		810		841

Total	$	20,271	$	20,932


U.S. Government agencies’ asset-backed securities:
Total	$	932,961	$	991,945


	Amortized		Estimated Fair
(Dollars in thousands)	Cost		Value
Securities Held-to-Maturity
Obligations of state and political subdivisions:
Due within one year	$	4,932	$	4,963
Due one through five years		145		152

Total	$	5,077	$	5,115


U.S. Government agencies’ asset-backed securities:
Total	$	442,985	$	460,788

All of Park’s U.S. Treasury and agencies’ notes are callable. Management estimates the average remaining life of Park’s investment portfolio to be 2.5 years at September 30, 2009. If interest rates were to rise by 100 basis points, management expects the average remaining life would extend to approximately 4.3 years.

Note 10 — Other Investment Securities

Other investment securities consist of stock investments in the Federal Home Loan Bank and the Federal Reserve Bank. These restricted stock investments are carried at their redemption value.


	September 30,		December 31,
(In Thousands)	2009		2008
Federal Home Loan Bank Stock	$	62,043	$	61,929
Federal Reserve Bank Stock		6,876		6,876

Total	$	68,919	$	68,805

- 18 -

Note 11 — Pension Plan

Park has a noncontributory defined benefit pension plan covering substantially all of its employees. The plan provides benefits based on an employee’s years of service and compensation.

Park’s funding policy is to contribute annually an amount that can be deducted for federal income tax purposes using a different actuarial cost method and different assumptions from those used for financial reporting purposes. Park made a pension plan contribution of $20.0 million in January 2009.

The following table shows the components of net periodic benefit expense:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In Thousands)	2009			2008			2009			2008
Service Cost	$	953		$	863		$	2,859		$	2,589
Interest Cost		858			789			2,574			2,367
Expected Return on Plan Assets		<1,090	>		<1,152	>		<3,269	>		<3,456	>
Amortization of Prior Service Cost		9			8			25			24
Recognized Net Actuarial Loss		510			—			1,532			—

Benefit Expense	$	1,240		$	508		$	3,721		$	1,524

Note 12 — Derivative Instruments

FASB ASC 815, Derivatives and Hedging, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. As required by GAAP, the Company records all derivatives on the consolidated condensed balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings) and subsequently reclassified into earnings when the hedged transaction affects earnings, with any ineffective portion of changes in the fair value of the derivative recognized directly in earnings. The Company assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged item or transaction.

During the first quarter of 2008, the Company executed an interest rate swap to hedge a $25 million floating-rate subordinated note that was entered into by Park during the fourth quarter of 2007. The Company’s objective in using this derivative is to add stability to interest expense and to manage its exposure to interest rate risk. Our interest rate swap involves the receipt of variable-rate amounts in exchange for fixed-rate payments over the life of the agreement without exchange of the underlying principal amount, and has been designated as a cash flow hedge.

As of September 30, 2009, no derivatives were designated as fair value hedges or hedges of net investments in foreign operations. Additionally, the Company does not use derivatives for trading or speculative purposes.

At September 30, 2009, the derivative’s fair value of <$1.6> million was included in other liabilities. No hedge ineffectiveness on the cash flow hedge was recognized during the quarter. At September 30, 2009, the variable rate on the $25 million subordinated note was 2.28% (3-month LIBOR plus 200 basis points) and Park was paying 6.01% (4.01% fixed rate on the interest rate swap plus 200 basis points).

- 19 -

For the nine months ended September 30, 2009, the change in the fair value of the derivative designated as a cash flow hedge reported in other comprehensive income was $188 thousand (net of taxes of $102 thousand). Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.

As of September 30, 2009, Park had mortgage loan rate lock commitments outstanding of approximately $19.8 million. Park has specific forward contracts to sell each of these loans to a third party investor. These loan commitments represent derivative instruments, which are required to be carried at fair value. The derivative instruments used are not designated as hedges under GAAP. At September 30, 2009, the fair value of the derivatives was approximately $0.3 million. The fair value of the derivatives is included within loans held for sale and the corresponding income is included within other service income. Gains and losses resulting from expected sales of mortgage loans are recognized when the respective loan contract is entered into between the borrower, Park, and the third party investor. The fair value of Park’s mortgage interest rate lock commitments (IRLCs) is based on current secondary market pricing.

Note 13 — Loan Servicing

Park serviced sold mortgage loans of $1,504 million at September 30, 2009, compared to $1,369 million at December 31, 2008. At September 30, 2009, $55.7 million of the sold mortgage loans were sold with recourse compared to $65 million at December 31, 2008. Management closely monitors the delinquency rates on the mortgage loans sold with recourse. At September 30, 2009, management determined that no liability was deemed necessary for these loans.

When Park sells mortgage loans with servicing rights retained, servicing rights are initially recorded at fair value. Park selected the “amortization method” as permissible within GAAP, whereby the servicing rights capitalized are amortized in proportion to and over the period of estimated future servicing income of the underlying loan. At the end of each reporting period, the carrying value of mortgage servicing rights (“MSRs”) is assessed for impairment with a comparison to fair value. MSRs are carried at the lower of their amortized cost or fair value.

Activity for MSRs and the related valuation allowance follows:


	Three Months Ended			Nine Months Ended
	September 30,			September 30,
(In Thousands)	2009			2009
Mortgage Servicing Rights:
Carrying Amount, Net, Beginning of Period	$	9,928		$	8,306
Additions		986			4,778
Amortization		<605	>		<3,511	>
Changes in Valuation Inputs & Assumptions		234			970


Carrying Amount, Net, End of Period	$	10,543		$	10,543


Valuation Allowance:
Beginning of Period	$	<909	>	$	<1,645	>
Changes Due to Fair Value Adjustments		234			970

End of Period	$	<675	>	$	<675	>

Servicing fees included in other service income were $1.4 million for the three months ended September 30, 2009, and $4.2 million for the first nine months of 2009.

- 20 -

Note 14 — Fair Value

The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that Park uses to measure fair value are as follows:

•

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

•

Level 2: Level 1 inputs for assets or liabilities that are not actively traded. Also consists of an observable market price for a similar asset or liability. This includes the use of “matrix pricing” used to value debt securities absent the exclusive use of quoted prices.

•

Level 3: Consists of unobservable inputs that are used to measure fair value when observable market inputs are not available. This could include the use of internally developed models, financial forecasting, etc.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability between market participants at the balance sheet date. When possible, the Company looks to active and observable markets to price identical assets or liabilities. When identical assets and liabilities are not traded in active markets, the Company looks to observable market data for similar assets and liabilities. However, certain assets and liabilities are not traded in observable markets and Park must use other valuation methods to develop a fair value. The fair value of impaired loans is based on the fair value of the underlying collateral, which is estimated through third party appraisals or internal estimates of collateral values.

Assets and Liabilities Measured on a Recurring Basis :

The following table presents financial assets and liabilities measured on a recurring basis:


Fair Value Measurements at September 30, 2009 Using:
(In Thousands)
								Balance at
								September 30,
Description	Level 1		Level 2			Level 3		2009
Assets
Investment Securities
Obligations of U.S. Treasury and Other U.S. Government Sponsored Entities	$	—	$	342,535		$	—	$	342,535
Obligations of States and Political Subdivisions		—		17,720			3,212		20,932
U.S. Government Sponsored Entities’ Asset-Backed Securities		—		991,945			—		991,945
Equity Securities		1,559		—			—		1,559
Mortgage Loans Held for Sale		—		12,176			—		12,176
Mortgage IRLCs		—		305			—		305

Liabilities
Interest Rate Swap	$	—	$	<1,647	>	$	—	$	<1,647	>

- 21 -


Fair Value Measurements at December 31, 2008 Using:
(In Thousands)
								Balance at
								December 31,
Description	Level 1		Level 2			Level 3		2008
Assets
Investment Securities
Obligations of U.S. Treasury and Other U.S. Government Sponsored Entities	$	—	$	128,688		$	—	$	128,688
Obligations of States and Political Subdivisions		—		24,189			2,705		26,894
U.S. Government Sponsored Entities’ Asset-Backed Securities		—		1,404,531			—		1,404,531
Equity Securities		1,783		—			—		1,783

Liabilities
Interest Rate Swap	$	—	$	<1,937	>	$	—	$	<1,937	>

The following methods and assumptions were used by the Corporation in determining fair value of the financial assets and liabilities discussed above:

Investment securities: Fair values for investment securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. The table below excludes Park’s Federal Home Loan Bank stock and Federal Reserve Bank stock, which are carried at the redemption value, as it is not practicable to calculate their fair values. For securities where quoted prices or market prices of similar securities are not available, which include municipal securities, fair values are calculated using discounted cash flows.

Interest rate swaps: The fair value of interest rate swaps represents the estimated amount Park would pay or receive to terminate the agreements, considering current interest rates and the current creditworthiness of the counterparties.

Interest Rate Lock Commitments (IRLCs): IRLCs are based on current secondary market pricing and are classified as Level 2.

Mortgage Loans Held for Sale: Mortgage loans held for sale are carried at their fair value as of September 30, 2009 and at the lower of cost or fair value at December 31, 2008 (see Note 8 — Mortgage Loans Held for Sale). On January 1, 2009, Park elected the fair value option of accounting for mortgage loans held for sale. Mortgage loans held for sale are estimated using security prices for similar product types, and therefore, are classified in Level 2.

- 22 -

The table below is a reconciliation of the beginning and ending balances of the Level 3 inputs for the three and nine month periods ended September 30, 2009 and 2008, for financial instruments measured on a recurring basis and classified as Level 3:


Level 3 Fair Value Measurements
Three months ended September 30, 2009 and 2008
	Available for
(In Thousands)	Sale Securities
Balance June 30, 2009	$	2,798
Total Gains/(Losses)
Included in Earnings		—
Included in Other Comprehensive Income		414

Balance September 30, 2009	$	3,212


Balance June 30, 2008	$	2,841
Total Gains/(Losses)
Included in Earnings		—
Included in Other Comprehensive Income		<17	>

Balance September 30, 2008	$	2,824


Level 3 Fair Value Measurements
Nine months ended September 30, 2009 and 2008
	Available for
(In Thousands)	Sale Securities
Balance December 31, 2008	$	2,705
Total Gains/(Losses)
Included in Earnings		—
Included in Other Comprehensive Income		507

Balance September 30, 2009	$	3,212


Balance December 31, 2007	$	2,969
Total Gains/(Losses)
Included in Earnings		—
Included in Other Comprehensive Income		<145	>

Balance September 30, 2008	$	2,824

- 23 -

Assets and Liabilities Measured on a Nonrecurring Basis:

The following table presents financial assets and liabilities measured on a nonrecurring basis:


Fair Value Measurements at September 30, 2009 Using
(In Thousands)
							Balance at
Description	(Level 1)		(Level 2)		(Level 3)		September 30, 2009
SFAS No. 114 Impaired Loans	$	—	$	—	$	87,358	$	87,358
Mortgage Servicing Rights		—		10,543		—		10,543
Other Real Estate Owned		—		—		47,015		47,015


Fair Value Measurements at December 31, 2008 Using
(In Thousands)
							Balance at
Description	(Level 1)		(Level 2)		(Level 3)		December 31, 2008
SFAS No. 114 Impaired Loans	$	—	$	—	$	75,942	$	75,942
Mortgage Servicing Rights		—		8,306		—		8,306
Other Real Estate Owned		—		—		25,848		25,848

Impaired loans, which are usually measured for impairment using the fair value of collateral, had a carrying amount of $179.5 million at September 30, 2009, after a partial charge-off of $31.9 million. In addition, these loans have a specific valuation allowance of $21.1 million. Of the $179.5 million impaired loan portfolio, $87.4 million were carried at fair value, as a result of the aforementioned charge-offs and specific valuation allowance. The remaining $92.1 million of impaired loans are carried at cost, as the fair value of collateral on these loans exceeds the book value for each individual credit. At December 31, 2008, impaired loans had a carrying amount of $142.9 million. Of these, $75.9 million were carried at fair value, as a result of partial charge-offs of $30.0 million and a specific valuation allowance of $8.9 million. The financial impact of changes in the specific valuation allowance for the three and nine month periods ended September 30, 2009 was $7.6 million and $12.2 million, respectively.

MSRs, which are carried at lower of cost or fair value, were recorded at a fair value of $10.5 million, including a valuation allowance of $0.7 million, at September 30, 2009. MSRs do not trade in active, open markets with readily observable prices. For example, sales of MSRs do occur, but precise terms and conditions typically are not readily available. Accordingly, MSRs are classified Level 2. At December 31, 2008, MSRs were recorded at a fair value of $8.3 million, including a valuation allowance of $1.6 million.

Other real estate owned (OREO) is recorded at fair value based on property appraisals, less estimated selling costs, at the date of transfer. The carrying value of OREO is not re-measured to fair value on a recurring basis, but is subject to fair value adjustments when the carrying value exceeds the fair value, less estimated selling costs. At September 30, 2009 and December 31, 2008, the estimated fair value of OREO, less estimated selling costs amounted to $47.0 million and $25.8 million, respectively. The financial impact of OREO valuation adjustments for the three and nine months ended September 30, 2009 was $1.1 million and $1.7 million, respectively.

- 24 -

The following methods and assumptions were used by the Corporation in estimating its fair value disclosures for assets and liabilities not discussed above:

Cash and cash equivalents: The carrying amounts reported in the balance sheet for cash and short-term instruments approximate those assets’ fair values.

Interest bearing deposits with other banks: The carrying amounts reported in the balance sheet for interest bearing deposits with other banks approximate those assets’ fair values.

Loans receivable: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair values for certain mortgage loans (e.g., one-to-four family residential) are based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. The fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.

Off-balance sheet instruments: Fair values for the Corporation’s loan commitments and standby letters of credit are based on the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The carrying amount and fair value are not material.

Deposit liabilities: The fair values disclosed for demand deposits (e.g., interest and non-interest checking, savings, and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts for variable-rate, fixed-term certificates of deposit approximate their fair values at the reporting date. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities of time deposits.

Short-term borrowings: The carrying amounts of federal funds purchased, borrowings under repurchase agreements and other short-term borrowings approximate their fair values.

Long-term debt: Fair values for long-term debt are estimated using a discounted cash flow calculation that applies interest rates currently being offered on long-term debt to a schedule of monthly maturities.

Subordinated debt: Fair values for subordinated debt are estimated using a discounted cash flow calculation that applies interest rate spreads currently being offered on similar debt structures to a schedule of monthly maturities.

- 25 -

The fair value of financial instruments at September 30, 2009 and December 31, 2008, is as follows:


	September 30, 2009						December 31, 2008
(In Thousands)	Carrying Value			Fair Value			Carrying Value			Fair Value
Financial Assets:
Cash and Money Market Instruments	$	137,662		$	137,662		$	171,261		$	171,261
Interest Bearing Deposits with Other Banks		1			1			1			1
Investment Securities		1,873,952			1,891,795			2,059,051			2,064,136
Mortgage Loans Held for Sale		12,176			12,176			9,603			9,603
Impaired Loans Carried at Fair Value		87,358			87,358			75,942			75,942
Other Loans		4,405,527			4,410,380			4,301,881			4,321,006

Loans Receivable, Net	$	4,505,061		$	4,509,914		$	4,387,426		$	4,406,551


Financial Liabilities:
Noninterest Bearing Checking	$	817,897		$	817,897		$	782,625		$	782,625
Interest Bearing Transactions Accounts		1,191,220			1,191,220			1,204,530			1,204,530
Savings		827,310			827,310			694,721			694,721
Time Deposits		2,272,143			2,280,459			2,078,372			2,084,732
Other		6,406			6,406			1,502			1,502

Total Deposits	$	5,114,976		$	5,123,292		$	4,761,750		$	4,768,110


Short-Term Borrowings	$	345,167		$	345,167		$	659,196		$	659,196
Long-Term Debt		681,590			739,927			855,558			939,210
Subordinated Debentures		40,000			33,225			40,000			30,855

Derivative Financial Instruments:
Interest Rate Swap	$	<1,647	>	$	<1,647	>	$	<1,937	>	$	<1,937	>

Note 15 — Participation in the U.S. Treasury Capital Purchase Program (CPP)

On December 23, 2008, Park issued $100 million of cumulative perpetual preferred shares, with a liquidation preference of $1,000 per share (the “Senior Preferred Shares”). The Senior Preferred Shares constitute Tier 1 capital and rank senior to Park’s common shares. The Senior Preferred Shares pay cumulative dividends at a rate of 5% per annum through February 14, 2014 and will reset to a rate of 9% per annum thereafter. For the three and nine month periods ended September 30, 2009, Park recognized a charge to retained earnings of $1.4 million and $4.3 million, respectively, representing the preferred stock dividend and accretion of the discount on the preferred stock, associated with its participation in the CPP.

As part of its participation in the CPP, Park also issued a warrant to the U.S. Treasury to purchase 227,376 common shares having an exercise price of $65.97, which is equal to 15% of the aggregate amount of the Senior Preferred Shares purchased by the U.S. Treasury. The initial exercise price for the warrant and the market price for determining the number of common shares subject to the warrant were determined by reference to the market price of the common shares on the date the Company’s application for participation in the Capital Purchase Program was approved by the United States Department of the Treasury (calculated on a 20-day trailing average). The warrant has a term of 10 years.

A company that participates in the CPP must adopt certain standards for compensation and corporate governance, established under the American Recovery and Reinvestment Act of 2009 (the “ARRA”), which amended and replaced the executive compensation provisions of the Emergency Economic Stabilization Act of 2008 (“EESA”) in their entirety, and the Interim Final Rule promulgated by the Secretary of the U.S. Treasury under 31 C.F.R. Part 30 (collectively, the “Troubled Asset Relief Program (TARP) Compensation Standards”). In addition, Park’s ability to declare or pay dividends on or repurchase its common shares is partially restricted as a result of its participation in the CPP.

- 26 -

Note 16 — Sale of Common Shares

On May 27, 2009, Park announced that it had entered into a distribution agreement with the investment banking firm of Sandler O’Neill & Partners, L.P. (“Sandler O’Neill”). Under this distribution agreement, Park can offer and sell common shares having an aggregate sales proceeds of up to $70 million from time to time through Sandler O’Neill as sales agent, provided that the aggregate number of common shares offered and sold under offerings conducted pursuant to this distribution agreement shall not exceed 1,050,000 common shares. In accordance with the distribution agreement, sales of common shares can be made by means of ordinary brokers’ transactions on NYSE Amex at market prices, in block transactions or as otherwise agreed with Sandler O’Neill. For the three months ended September 30, 2009, Park sold 105,072 common shares at a weighted average price of $60.22, with sales proceeds of $6.3 million. Net proceeds for the common shares sold in the third quarter were $6.2 million, net of selling expenses of $0.1 million. Through September 30, 2009, Park sold 288,272 common shares at a weighted average sales price of $60.83 with sales proceeds of $17.5 million. Net of selling and due diligence expenses, Park raised $16.7 million in additional equity. At September 30, 2009, Park had the capability under the distribution agreement to sell additional common shares having aggregate sales proceeds of up to $52.5 million provided that the aggregate number of additional common shares sold does not exceed 761,728.

Note 17 — Other Comprehensive Income (Loss)

Other comprehensive income (loss) components and related taxes are shown in the following table for the three months ended September 30, 2009 and 2008.


Three months ended September 30	Before-tax			Tax			Net-of-tax
(In Thousands)	amount			expense			amount

2009:
Unrealized gains on available-for-sale securities	$	17,773		$	6,219		$	11,554
Unrealized net holding loss on cash flow hedge		<227	>		<79	>		<148	>

Other comprehensive income	$	17,546		$	6,140		$	11,406


2008:
Unrealized gains on available-for-sale securities	$	4,949		$	1,732		$	3,217
Unrealized net holding loss on cash flow hedge		<162	>		<57	>		<105	>

Other comprehensive income	$	4,787		$	1,675		$	3,112

- 27 -

The ending balance of each component of accumulated other comprehensive income (loss) is as follows:

Before-tax

Tax

Net-of-tax

(In Thousands)

amount

expense

amount

September 30, 2009:

Application of SFAS No. 158

<30,435>

<10,652>

<19,783>

Unrealized gains on available-for-sale securities

62,880

22,008

40,872

Unrealized net holding loss on cash flow hedge

<1,648>

<577>

<1,071>

Total accumulated other comprehensive income

30,797

10,779

20,018

December 31, 2008:

Application of SFAS No. 158

<30,435>

<10,652>

<19,783>

Unrealized gains on available-for-sale securities

48,674

17,036

31,638

Unrealized net holding loss on cash flow hedge

<1,937>

<678>

<1,259>

Total accumulated other comprehensive income

16,302

5,706

10,596

September 30, 2008:

Application of SFAS No. 158

<5,477>

<1,917>

<3,560>

Unrealized losses on available-for-sale securities

<1,212>

<424>

<788>

Unrealized net holding loss on cash flow hedge

<65>

<23>

<42>

Total accumulated other comprehensive loss

<6,754>

<2,364>

<4,390>

- 28 -


ITEM 2	— MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis contains forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include, without limitation: deterioration in the asset value of Park’s loan portfolio may be worse than expected; Park’s ability to execute its business plan successfully and within the expected timeframe; general economic and financial market conditions, and weakening in the economy, specifically, the real estate market and credit market, either national or in the states in which Park and its subsidiaries do business, may be worse than expected which could decrease the demand for loan, deposit and other financial services and increase loan delinquencies and defaults; changes in market rates and prices may adversely impact the value of securities, loans, deposits and other financial instruments and the interest rate sensitivity of our consolidated balance sheet; changes in consumer spending, borrowing and saving habits; changes in unemployment; asset/liability repricing risks and liquidity risks; our liquidity requirements could be adversely affected by changes in our assets and liabilities; competitive factors among financial institutions increase significantly, including product and pricing pressures and our ability to attract, develop and retain qualified bank professionals; the nature, timing and effect of changes in banking regulations or other regulatory or legislative requirements affecting the respective businesses of Park and its subsidiaries, including changes in laws concerning taxes, banking, securities and other aspects of the financial services industry; the effect of fiscal and governmental policies of the United States federal government; demand for loans in the respective market areas served by Park and its subsidiaries, and other risk factors relating to the banking industry as detailed from time to time in Park’s reports filed with the Securities and Exchange Commission including those described in “Item 1A. Risk Factors” of Part I of Park’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and in “Item 1A. Risk Factors” of Part II of this Quarterly Report on Form 10-Q. Undue reliance should not be placed on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Park does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to update any forward-looking statement to reflect the events or circumstances after the date on which the forward-looking statement is made, or reflect the occurrence of unanticipated events, except to the extent required by law.

- 29 -

Critical Accounting Policies

Note 1 of the Notes to Consolidated Financial Statements included in Park’s 2008 Annual Report to Shareholders lists significant accounting policies used in the development and presentation of Park’s consolidated financial statements. The accounting and reporting policies of Park conform with U.S. generally accepted accounting principles and general practices within the financial services industry. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates.

Park considers that the determination of the allowance for loan losses involves a higher degree of judgment and complexity than its other significant accounting policies. The allowance for loan losses is calculated with the objective of maintaining a reserve level believed by management to be sufficient to absorb probable incurred credit losses in the loan portfolio. Management’s determination of the adequacy of the allowance for loan losses is based on periodic evaluations of the loan portfolio and of current economic conditions. However, this evaluation is inherently subjective as it requires material estimates, including the amounts and timing of expected future cash flows on impaired loans and estimated losses on consumer loans and residential mortgage loans based on historical loss experience and the current economic conditions. All of those factors may be susceptible to significant change. To the extent that actual results differ from management estimates, additional loan loss provisions may be required that would adversely impact earnings for future periods.

Management’s assessment of the adequacy of the allowance for loan losses considers individual impaired loans, pools of unimpaired commercial loans, and pools of homogeneous loans with similar risk characteristics and other environmental risk factors. This assessment is updated on a quarterly basis. The allowance established for impaired commercial loans reflects expected losses resulting from analyses performed on each individual impaired commercial loan. The specific credit allocations are based on regular analyses of commercial, commercial real estate and construction loans where we have determined the loan to be impaired. These analyses involve a high degree of judgment in estimating the amount of loss associated with these impaired commercial loans.

Pools of unimpaired commercial loans and pools of homogeneous loans with similar risk characteristics are also assessed for probable losses. A loss migration analysis is performed on certain commercial, commercial real estate and construction loans. These are loans above a fixed dollar amount that are assigned an internal credit rating. Generally, residential real estate loans and consumer loans are not individually graded. The amount of loan loss reserve assigned to these loans is dependent on historical loss experience and the current economic environment.

Management also evaluates the impact of environmental factors which pose additional risks. Such environmental factors include: national and local economic trends and conditions; experience, ability, and depth of lending management and staff; effects of any changes in lending policies and procedures; levels of, and trends in, consumer bankruptcies, delinquencies, impaired loans and charge-offs and recoveries. The determination of this component of the allowance for loan losses requires considerable management judgment.

- 30 -

Generally accepted accounting principles (GAAP) requires management to establish a fair value hierarchy, which has the objective of maximizing the use of observable market inputs. GAAP also requires enhanced disclosures regarding the inputs used to calculate fair value. These are classified as Level 1, 2, and 3. Level 3 inputs are largely unobservable inputs that reflect a company’s own assumptions about the market for a particular instrument. Some of these inputs could be based on internal models and cash flow analysis. At September 30, 2009, the carrying amount of assets based on Level 3 inputs for Park were approximately $137.6 million. This was 9.1% of the total amount of assets measured at fair value as of the end of the third quarter. The fair value of impaired loans was approximately $87.4 million (or 63%) of the total amount of Level 3 inputs. The large majority of Park’s Level 2 inputs consist of available-for-sale (“AFS”) securities. The fair value of these AFS securities is obtained largely by the use of matrix pricing, which is a mathematical technique widely used in the financial services industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities.

Management believes that the accounting for goodwill and other intangible assets also involves a higher degree of judgment than most other significant accounting policies. Goodwill arising from business combinations represents the value attributable to unidentifiable intangible assets in the business acquired. Park’s goodwill relates to the value inherent in the banking industry and that value is dependent upon the ability of Park’s Ohio-based bank to provide quality, cost-effective banking services in a competitive marketplace. The goodwill value is supported by revenue that is in part driven by the volume of business transacted. A decrease in earnings resulting from a decline in the customer base, the inability to deliver cost-effective services over sustained periods or significant credit problems can lead to impairment of goodwill that could adversely impact earnings in future periods. GAAP requires an annual evaluation of goodwill for impairment, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The fair value of the goodwill, which resides on the books of Park’s Ohio-based bank, is estimated by reviewing the past and projected operating results for the Park Ohio-based bank and the banking industry comparable information.

At September 30, 2009, on a consolidated basis, Park had core deposit intangibles of $10.4 million subject to amortization and $72.3 million of goodwill, which was not subject to periodic amortization, and recorded at The Park National Bank. At September 30, 2009, the core deposit intangible asset recorded on the balance sheet of The Park National Bank was $3.2 million and the core deposit intangible asset at Vision Bank was $7.2 million. During the first quarter of 2009, Park’s management evaluated the goodwill for Park’s Ohio-based bank for impairment and concluded that the fair value of the goodwill for Park’s Ohio-based bank exceeded the carrying value of $72.3 million and accordingly was not impaired. Please see Note 3 — Goodwill and Intangible Assets of the Notes to Unaudited Consolidated Condensed Financial Statements in this Quarterly Report on Form 10-Q for additional information on intangible assets.

- 31 -

Comparison of Results of Operations
For the Three and Nine Months Ended September 30, 2009 and 2008

Summary Discussion of Results

Net income for the nine months ended September 30, 2009 was $61.9 million compared to $2.8 million for the same period in 2008, an increase of $59.1 million. The primary reason for the large increase in net income was the net loss of $70.2 million at Vision Bank for the first three quarters of 2008 compared to a net loss of $17.1 million at Vision Bank for the first nine months of 2009. During the third quarter of 2008, Vision Bank recognized a goodwill impairment charge of $55.0 million which reduced the goodwill asset to zero at Vision Bank.

Excluding the $55.0 million goodwill impairment charge in 2008, net income for the first nine months of 2009 increased by $4.2 million or 7.2% to $61.9 million, compared to $57.7 million for the first nine months of 2008.

Net income for the three months ended September 30, 2009 was $19.2 million compared to a net loss of $38.4 million for the third quarter of 2008, an increase of $57.6 million. Vision Bank had a net loss of $61.7 million for the third quarter of 2008 compared to a net loss of $6.6 million for the third quarter of 2009. The large improvement in net income for the third quarter of 2009 compared to the third quarter of 2008 was due to the $55.0 million goodwill impairment charge recognized by Vision Bank in the third quarter of 2008.

Excluding the $55.0 million goodwill impairment charge in the third quarter of 2008, net income for the three months ended September 30, 2009 increased by $2.6 million or 15.8% to $19.2 million, compared to $16.6 million for the third quarter of 2008.

The following tables compare the components of net income for the three and nine month periods ended September 30, 2009 with the components of net income for the three and nine month periods ended September 30, 2008. This information is provided for Park, Vision Bank and Park excluding Vision Bank. In general for 2009, the operating results for Park’s Ohio-based banking divisions have been better than management projected, but the credit losses at Vision Bank have been worse than expected. (Please note that some of the percentage changes in the following tables are not meaningful and accordingly we have shown them as N.M.)


Park Summary Income Statement
(In Thousands)
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
						%							%
	2009		2008			Change			2009		2008		Change
Net Interest Income	$	68,462	$	65,228			5.0	%	$	204,689	$	191,038		7.2	%
Provision for Loan Losses		14,958		15,906			<6.0	%>		43,101		37,869		13.8	%
Other Income		18,165		17,088			6.3	%		57,132		56,670		.8	%
Gain on Sale of Securities		—		—			—			7,340		896		N.M.
Goodwill Impairment Charge		—		54,986			<100.0	%>		—		54,986		<100.0	%>
Other Expense		46,052		44,493			3.5	%		142,065		132,203		7.5	%

Income (Loss) Before Taxes	$	25,617	$	<33,069	>		N.M.		$	83,995	$	23,546		N.M.
Income Taxes		6,418		5,343			20.1	%		22,099		20,789		6.3	%

Net Income (Loss)	$	19,199	$	<38,412	>		N.M.		$	61,896	$	2,757		N.M.

- 32 -

Park’s income statements for the first nine months of 2009 and 2008 include some special transactions that are discussed below.

During the second quarter of 2009, Park sold $197 million of U.S. Government Agency mortgage-backed securities for a gain of $7.3 million. Also during the second quarter, Park accrued $3.3 million of expense for the special assessment by the FDIC, which was charged to all depository institutions insured by the FDIC.

For the nine months ended September 30, 2008, other income included $3.1 million of income that was recognized by Park’s Ohio-based banking divisions as a result of the initial public stock offering by Visa.

For the three and nine months ended September 30, 2008, a goodwill impairment charge at Vision Bank reduced income before taxes and net income by $55.0 million.


Vision Bank — Summary Income Statement
(In Thousands)
	Three Months Ended									Nine Month Ended
	September 30,									September 30,
							Percent									Percent
	2009			2008			Change			2009			2008			Change
Net Interest Income	$	6,017		$	6,928			<13.1	%>	$	19,307		$	20,609			<6.3	%>
Provision for Loan Losses		10,030			11,474			<12.6	%>		28,430			27,729			2.5	%
Other Income		263			48			447.9	%		2,060			1,934			6.5	%
Gain on Sale of Securities		—			—			—			—			238			<100.0	%>
Goodwill Impairment Charge		—			54,986			<100.0	%>		—			54,986			<100.0	%>
Other Expense		6,926			6,383			8.5	%		20,838			19,821			5.1	%

Loss Before Taxes	$	<10,676	>	$	<65,867	>		N.M.		$	<27,901	>	$	<79,755	>		N.M.
Income Taxes		<4,106	>		<4,185	>		1.9	%		<10,756	>		<9,539	>		<12.8	%>

Net Loss	$	<6,570	>	$	<61,682	>		N.M.		$	<17,145	>	$	<70,216	>		N.M.

Vision Bank has continued to have significant credit problems in 2009. Net loan charge-offs for the third quarter of 2009 were $5.1 million or an annualized 2.96% of average loans and for the first nine months of 2009, net loan charge-offs were $19.1 million or 3.68% of average loans. The large decrease in net interest income for Vision Bank of 13.1% for the third quarter of 2009 compared to 2008 was primarily due to an increase in nonaccrual loans. At September 30, 2009, nonaccrual loans at Vision Bank were $124.5 million, compared to $91.2 million at December 31, 2008 and $76.5 million at September 30, 2008. Generally, no interest income is recognized on nonaccrual loans at Vision Bank.


Park Excluding Vision Bank — Summary Income Statement
(In Thousands)
	Three Months Ended							Nine Months Ended
	September 30,							September 30,
					Percent							Percent
	2009		2008		Change			2009		2008		Change
Net Interest Income	$	62,445	$	58,300		7.1	%	$	185,382	$	170,429		8.8	%
Provision for Loan Losses		4,928		4,432		11.2	%		14,671		10,140		44.7	%
Other Income		17,902		17,040		5.1	%		55,072		54,736		.6	%
Gain on Sale of Securities		—		—		—			7,340		658		N.M.
Other Expense		39,126		38,110		2.7	%		121,227		112,382		7.9	%

Income Before Taxes	$	36,293	$	32,798		10.7	%	$	111,896	$	103,301		8.3	%
Income Taxes		10,524		9,528		10.5	%		32,855		30,328		8.3	%

Net Income	$	25,769	$	23,270		10.7	%	$	79,041	$	72,973		8.3	%

As mentioned previously, the income statements for the first nine months of 2009 and 2008 include some special transactions.

- 33 -

The entire gain from the sale of securities of $7.3 million during the second quarter of 2009 was recognized at Park’s Ohio-based banking divisions. Also during the second quarter, Park’s Ohio-based banking divisions accrued $2.9 million of expense for the special assessment by the FDIC.

Other income for the nine months ended September 30, 2008, includes $3.1 million that was recognized as a result of the initial public stock offering by Visa.

Overall, Park’s management was pleased with the strong performance in net interest income for the first nine months of 2009 by Park’s Ohio-based banking divisions.

Net Interest Income Comparison for the Third Quarter of 2009 and 2008

Net interest income (the difference between total interest income and total interest expense) is Park’s principal source of earnings, making up approximately 79.0% of total revenue for the third quarter of 2009 and 79.2% of total revenue for the third quarter of 2008. Net interest income increased by $3.3 million or 5.0% to $68.5 million for the third quarter of 2009 compared to $65.2 million for the third quarter of 2008.

The following table compares the average balance sheet and tax equivalent yield on interest earning assets and the average balance and cost of interest bearing liabilities for the third quarter of 2009 with the same quarter in 2008.


Three Months Ended September 30,
	2009					2008
	Average		Tax			Average		Tax
(In Thousands)	Balance		Equivalent %			Balance		Equivalent %
Loans (1)	$	4,610,716		5.99	%	$	4,409,188		6.80	%
Taxable Investments		1,807,147		4.87	%		1,782,413		4.96	%
Tax Exempt Investments		26,759		7.28	%		42,312		6.64	%
Money Market Instruments		31,661		.10	%		17,970		1.93	%

Interest Earning Assets	$	6,476,283		5.66	%	$	6,251,883		6.25	%

Interest Bearing Deposits	$	4,315,622		1.48	%	$	3,873,958		2.17	%
Short-Term Borrowings		336,611		.81	%		610,617		2.13	%
Long-Term Debt		721,693		3.62	%		904,289		3.68	%

Interest Bearing Liabilities	$	5,373,926		1.73	%	$	5,388,864		2.42	%
Excess Interest Earning Assets	$	1,102,357				$	863,019
Net Interest Spread				3.93	%				3.83	%
Net Interest Margin				4.22	%				4.17	%


(1)		For purposes of the computation, nonaccrual loans are included in the average balance.

Average interest earning assets for the third quarter of 2009 increased by $224 million or 3.6% to $6,476 million compared to $6,252 million for the third quarter of 2008. The average yield on interest earning assets decreased by 59 basis points to 5.66% for the third quarter of 2009 compared to 6.25% for the third quarter of 2008.

Average interest bearing liabilities for the third quarter of 2009 decreased by $15 million or .3% to $5,374 million compared to $5,389 million for the third quarter of 2008. The average cost of interest bearing liabilities decreased by 69 basis points to 1.73% for the third quarter of 2009 compared to 2.42% for the third quarter of 2008.

- 34 -

Interest Rates

During 2008, the Federal Open Market Committee (“FOMC”) of the Federal Reserve aggressively lowered the targeted federal funds rate from 4.25% at the beginning of the year to a range of 0% to .25% in December 2008.

The average federal funds rate was .16% for the third quarter of 2009 and .17% for the first nine months of 2009. The average federal funds rate was 1.94% for the third quarter of 2008 and 2.40% for the first nine months of 2008.

The sharp reduction in the targeted federal funds rate in 2008 was in response to weakness in the U.S. economy. The annualized change in the U.S. gross domestic product (“GDP”) in 2008 was a negative .7% in the first quarter, a positive 1.5% in the second quarter, a negative 2.7% in the third quarter and a negative 5.4% in the fourth quarter. Economic conditions have continued to be weak in the U.S. economy in 2009. The annualized change in GDP for the first quarter of 2009 was a negative 6.4% and a negative .7% for the second quarter of 2009. Recent economic indicators forecast that the U.S. economy will have positive GDP growth in the third quarter of 2009 and probably for the fourth quarter of 2009. If economic conditions would continue to improve, the FOMC would likely begin raising the targeted federal funds rate. Park’s management expects that the targeted federal funds rate will be 0% to .25% for the fourth quarter of 2009 and the first quarter of 2010.

Discussion of Loans, Investments, Deposits and Borrowings

Average loan balances increased by $202 million or 4.6% to $4,611 million for the three months ended September 30, 2009, compared to $4,409 million for the same period in 2008. The average yield on the loan portfolio decreased by 81 basis points to 5.99% for the third quarter of 2009 compared to 6.80% for the third quarter of 2008.

The average prime lending rate decreased by 175 basis points to 3.25% for the third quarter of 2009 compared to 5.00% for the third quarter of 2008. Management has negotiated floor interest rates on many commercial and commercial real estate loans which has prevented the yield on the loan portfolio from decreasing as much as the decrease in the prime lending rate. Management expects that the yield on the loan portfolio will be approximately 5.88% for the fourth quarter of 2009.

Loans outstanding decreased by $5 million during the third quarter of 2009, but have increased by $124 million during the first nine months of 2009 to $4,615 million at September 30, 2009. The annualized growth rate for loans was 3.7% for the first nine months of 2009. The decrease in loans outstanding during the third quarter of 2009 was due to a decline in mortgage loans held for sale. The balance of mortgage loans held for sale was $12 million at September 30, 2009, compared to $39 million at June 30, 2009 and $10 million at December 31, 2008. Management expects a small increase (2% to 3% annualized growth) in loans during the fourth quarter of 2009.

The average balance of taxable investment securities increased by $25 million or 1.4% to $1,807 million for the third quarter of 2009 compared to $1,782 million for the third quarter of 2008. The average yield on the taxable investment securities was 4.87% for the third quarter of 2009 compared to 4.96% for the third quarter of 2008.

The average balance of tax exempt investment securities decreased by $15 million or 36.8% to $27 million for the third quarter of 2009 compared to $42 million for the third quarter of 2008. The tax equivalent yield on tax exempt investment securities was 7.28% for the third quarter of 2009, compared to 6.64% for the third quarter of 2008.

At September 30, 2009, total investment securities (on an amortized cost basis) were $1,811 million compared to $1,869 million at June 30, 2009 and $2,010 million at December 31, 2008.

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During the second quarter of 2009, management sold U.S. Government Agency mortgage-backed securities with a book value of $197 million for a gain of $7.3 million. These securities had a book yield of 4.70% and a weighted average remaining life of about 3 years. These securities were sold at a price of approximately 103.2% of par for a give-up yield of 3.33%. Additionally, management purchased $250 million of U.S. Government Agency callable notes during the second quarter at a yield of 4.55%. These callable notes have final maturities in 9 to 10 years and have call dates from 1 to 3 years.

At September 30, 2009, the market value of the securities classified as available for sale exceeded the amortized cost by $63 million or 4.9%. However, Park’s management does not have any present plans to sell securities in the fourth quarter. It is possible that this strategy could change as market conditions change.

Average interest bearing deposit account balances increased by $442 million or 11.4% to $4,316 million for the third quarter of 2009 compared to $3,874 million for the third quarter of 2008. The average interest rate paid on interest bearing deposits decreased by 69 basis points to 1.48% for the third quarter of 2009 compared to 2.17% for the third quarter of 2008.

The large increase in interest bearing deposits of $442 million was partially due to an increase in deposits obtained through the use of brokers and an increase in CDARS. The average balance of brokered deposits was $94 million for the third quarter of 2009 and $34 million for the third quarter of 2008. The average balance of CDARS was $348 million for the third quarter of 2009 and $93 million for the third quarter of 2008.

Average total borrowings were $1,058 million for the three months ended September 30, 2009 compared to $1,515 million for the same period in 2008, a decrease of 30.1%. The average interest rate paid on total borrowings was 2.73% for the third quarter of 2009 compared to 3.05% for the third quarter of 2008.

The net interest spread (the difference between the tax equivalent yield on interest earning assets and the tax equivalent cost of interest bearing liabilities) increased by 10 basis points to 3.93% for the three months ended September 30, 2009 compared to 3.83% for the third quarter of 2008. The net interest margin (the annualized tax equivalent net interest income divided by average interest earning assets) was 4.22% for the third quarter of 2009 compared to 4.17% for the same quarter in 2008.

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Net Interest Comparison for the First Nine Months of 2009 and 2008

Net interest income increased by $13.7 million or 7.2% to $204.7 million for the first nine months of 2009 compared to $191.0 million for the first nine months of 2008. The following table compares the average balance and the annualized tax equivalent yield on interest earning assets and the average balance and cost of interest bearing liabilities for the first nine months of 2009 with the first nine months of 2008.


Nine Months Ended September 30,
	2009					2008
	Average		Tax			Average		Tax
(In Thousands)	Balance		Equivalent %			Balance		Equivalent %
Loans (1)	$	4,582,037		6.07	%	$	4,317,204		7.11	%
Taxable Investments		1,877,361		4.93	%		1,747,809		5.01	%
Tax Exempt Investments		31,902		7.37	%		48,913		6.77	%
Money Market Instruments		25,572		.17	%		14,734		2.37	%

Interest Earning Assets	$	6,516,872		5.72	%	$	6,128,660		6.48	%

Interest Bearing Deposits	$	4,186,578		1.60	%	$	3,803,387		2.44	%
Short-Term Borrowings		450,984		0.80	%		639,791		2.53	%
Long-Term Debt		806,689		3.30	%		836,587		3.81	%

Interest Bearing Liabilities	$	5,444,251		1.78	%	$	5,279,765		2.67	%
Excess Interest Earning Assets	$	1,072,621				$	848,895
Net Interest Spread				3.94	%				3.81	%
Net Interest Margin				4.23	%				4.18	%

(1)

For purposes of the computation, nonaccrual loans are included in the average balance.

Average interest earning assets increased by $388 million or 6.3% to $6,517 million for the first nine months of 2009 compared to $6,129 million for the first nine months of 2008. The average yield on interest earning assets was 5.72% for the nine months ended September 30, 2009 compared to 6.48% for the same period in 2008.

Average loans increased by $265 million or 6.1% to $4,582 million for the first nine months of 2009 compared to $4,317 million for the same period in 2008. The average yield on loans was 6.07% for the first nine months of 2009 compared to 7.11% for the same period in 2008.

Average investment securities, including money market instruments, were $1,935 million for the first nine months of 2009 compared to $1,811 million for the first nine months of 2008. The average yield on taxable investment securities was 4.93% for the first nine months of 2009 and 5.01% for the first nine months of 2008 and the average tax equivalent yield on tax exempt securities was 7.37% in 2009 and 6.77% in 2008.

Average interest bearing liabilities increased by $164 million or 3.1% to $5,444 million for the first nine months of 2009 compared to $5,280 million for the same period in 2008. The average cost of interest bearing liabilities was 1.78% for the first nine months of 2009 compared to 2.67% for the first nine months of 2008.

Average interest bearing deposits increased by $384 million or 10.1% to $4,187 million for the first nine months of 2009 compared to $3,803 million for the first nine months of 2008. The average interest rate paid on interest bearing deposit accounts was 1.60% for the first nine months of 2009 compared to 2.44% for the first nine months of 2008.

Average total borrowings were $1,258 million for the first nine months of 2009 compared to $1,476 million for the first nine months of 2008. The average interest rate paid on total borrowings was 2.40% for the first nine months of 2009 compared to 3.25% for the same period in 2008.

The net interest spread increased by 13 basis points to 3.94% for the first nine months of 2009 compared to 3.81% for the first nine months of 2008. The net interest margin increased by 5 basis points to 4.23% for the nine months ended September 30, 2009 compared to 4.18% for the first nine months of 2008.

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Guidance on Net Interest Income for 2009

Management provided guidance in Park’s 2008 Annual Report to Shareholders that net interest income for 2009 would be approximately $258 million to $263 million, the tax equivalent net interest margin would be approximately 4.08% and the average interest earning assets for the year would be approximately $6,400 million.

The actual results for the first nine months were better than management’s guidance. Net interest income for the first nine months of 2009 was $204.7 million, which annualized would be approximately $274 million for 2009. The tax equivalent net interest margin was 4.23% and the average interest earning assets were $6,517 million for the first nine months of 2009.

The following table displays for the past seven quarters the average balance of interest earning assets, net interest income and the tax equivalent net interest margin.


	Average Interest		Net Interest		Tax Equivalent
(In Thousands)	Earning Assets		Income		Net Interest Margin
March 2008	$	5,941,570	$	61,484		4.19%
June 2008	$	6,189,218	$	64,326		4.20%
September 2008	$	6,251,883	$	65,228		4.17%
December 2008	$	6,313,986	$	64,835		4.11%
March 2009	$	6,546,681	$	68,233		4.26%
June 2009	$	6,528,425	$	67,994		4.21%
September 2009	$	6,476,283	$	68,462		4.22%

Our current forecast projects that average interest earning assets will decrease to approximately $6,430 million for the fourth quarter of 2009, as the average balance of investment securities is expected to decline. Management anticipates that net interest income will be approximately $273 million for the year and that the tax equivalent net interest margin will be approximately 4.23% for 2009.

Provision for Loan Losses

The provision for loan losses was $15.0 million for the three months ended September 30, 2009, compared to $15.9 million for the same period in 2008. Net loan charge-offs were $9.7 million for the third quarter of 2009, compared to $12.8 million for the third quarter of 2008. The annualized ratio of net loan charge-offs to average loans was 0.84% for the three months ended September 30, 2009, compared to 1.15% for the same period in 2008.

For the first nine months of 2009, the provision for loan losses increased by $5.2 million to $43.1 million, compared to $37.9 million for the first three quarters of 2008. Net loan charge-offs were $33.1 million for the three quarters ended September 30, 2009, or 0.97% of average loans on an annualized basis, compared to $35.8 million or 1.11% of average loans annualized for the same period in 2008.

Vision Bank continued to experience credit problems during the third quarter of 2009. The loan loss provision for Vision Bank was $10.0 million for the three months ended September 30, 2009, compared to $11.5 million for the third quarter of 2008. Vision Bank had net loan charge-offs of $5.1 million, or an annualized 2.96% of average loans for the third quarter of 2009, compared to net loan charge-offs of $8.9 million, or 5.18% of average loans for the same period in 2008.

Park’s Ohio-based operations had a provision for loan losses of $5.0 million for the third quarter of 2009, compared to $4.4 million for the third quarter of 2008. Net loan charge-offs for Park’s Ohio-based operations were $4.6 million, or an annualized 0.47% of average loans for the third quarter of 2009, compared to $3.9 million, or an annualized 0.42% of average loans for the third quarter of 2008.

The allowance for loan losses was $110.0 million, or 2.38% of outstanding loans at September 30, 2009, compared to $100.1 million, or 2.23% of loans outstanding at December 31, 2008 and $89.2 million, or 2.00% of loans outstanding at September 30, 2008.

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Nonperforming loans, defined as loans that are 90 days past due, nonaccrual and renegotiated loans, were $212.1 million, or 4.59% of total loans at September 30, 2009, compared to $167.8 million or 3.74% at December 31, 2008, and $132.3 million or 2.96% at September 30, 2008. Vision Bank had nonperforming loans of $124.9 million or 18.3% of total loans at September 30, 2009, compared to $94.7 million or 13.7% at December 31, 2008, and $79.3 million or 11.6% at September 30, 2008. Park’s Ohio-based operations had nonperforming loans of $87.1 million or 2.21% of total loans at September 30, 2009, compared to $73.1 million or 1.9% at December 31, 2008, and $53.0 million or 1.40% at September 30, 2008.

Other real estate owned was $47.0 million at September 30, 2009, up from $25.8 million at December 31, 2008 and $19.8 million at September 30, 2008. Vision Bank had other real estate owned of $40.6 million at September 30, 2009, compared to $19.7 million at December 31, 2008 and $13.5 million at September 30, 2008. Management expects that other real estate owned will continue to increase through the remainder of 2009 as management works to reduce nonperforming loans.

Our allowance for loan losses includes an allocation for loans specifically identified as impaired. At the end of the third quarter of 2009, loans considered to be impaired consisted substantially of commercial loans graded as “doubtful” and placed on nonaccrual status, and totaled $179.5 million. The specific allowance for loan losses related to these loans was $21.1 million at September 30, 2009. At December 31, 2008, the impaired loan balance was $142.9 million, with a specific allowance for loan losses of $8.9 million. This specific reserve is based on management’s best estimate of the fair value of collateral securing these loans or based on projected cash flows from the sale of the underlying collateral and payments from the borrowers. The amount ultimately charged-off for these loans may be different from the specific reserve as the ultimate liquidation of the collateral and/or projected cash flows may be for amounts different from management’s estimates.

Historically, Park’s management has aggressively recorded partial charge-offs on nonperforming loans to write-down the loans to their fair value. As of September 30, 2009, management has taken partial charge-offs of $31.9 million related to the $179.5 million of commercial loans considered to be impaired. While we continue to take partial charge-offs on nonperforming loans, there is a higher level of uncertainty when valuing collateral or projecting cash flows in Vision Bank’s Florida and Alabama markets due to their illiquid nature, thus management has utilized specific reserves to a greater extent in 2009. Park’s specific reserve for impaired loans has increased to $21.1 million at September 30, 2009, compared to $8.9 million at December 31, 2008.

A significant portion of our allowance for loan losses is allocated to commercial loans classified as “special mention” or “substandard.” Special mention loans are loans that have potential weaknesses that may result in loss exposure to Park. Substandard loans are those that exhibit a well defined weakness; one that might jeopardize repayment of the loan, resulting in a higher probability that Park will suffer a loss on the loan unless the weakness is corrected. Our loss experience within special mention and substandard categories of loans for the past five years has been 1.87% and 5.49%, respectively, of the principal balance of these loans. However, given the challenging economic conditions and because our loss experience on these loans has been increasing, management has allocated 5.25% and 14.25%, respectively, of the principal balance of these loans in the allowance for loan losses at September 30, 2009, a slight increase from the allocation at December 31, 2008 when management allocated 5.12% and 14.00%, respectively. This equated to an allocation of approximately $9.7 million and $15.6 million, respectively, at September 30, 2009, and an allocation of $8.6 million and $10.4 million, respectively, at December 31, 2008, to special mention and substandard loans. Management is working to address weaknesses in each of these loan categories that may result in loss. Actual loss experience may be more or less than the amount allocated.

Management provided guidance in Park’s 2008 Annual Report to Shareholders that the loan loss provision for 2009 would be approximately $45 million and that the annualized net loan charge-off ratio would be approximately 1.00%. Within each of the previous Quarterly Reports on Form 10-Q filed by Park in 2009, management updated the guidance on the expected loan loss provision and the net charge-off ratio for the twelve months ended December 31, 2009. The actual results for the loan loss provision in the first nine months of 2009 were consistent with management’s June 30, 2009 projection, at $43.1 million, while the annualized net loan charge-off ratio for the first nine months of 2009 was slightly lower than the projected range, at 0.97%. Park’s most recent projection indicates that the loan loss provision for 2009 will be $55 to $60 million and the annualized net loan charge-off percentage for 2009 will be 1.05% to 1.15%. However, in referring to the table below which shows Park’s trends in problem loans, if Park experiences a significant increase in nonperforming loans, there is a risk that management’s projected loan loss provision for the fourth quarter of 2009 will be understated.

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The following table compares nonperforming assets at September 30, 2009, December 31, 2008 and September 30, 2008.


Nonperforming Assets	September 30,			December 31,			September 30,
(In Thousands)	2009			2008			2008
Nonaccrual Loans	$	207,064		$	159,512		$	126,336
Renegotiated Loans		148			2,845			1,575
Loans Past Due 90 Days or More		4,849			5,421			4,388

Total Nonperforming Loans	$	212,061		$	167,778		$	132,299

Other Real Estate Owned		47,015			25,848			19,750

Total Nonperforming Assets	$	259,076		$	193,626		$	152,049


Percentage of Nonperforming Loans to Loans		4.59	%		3.74	%		2.96	%
Percentage of Nonperforming Assets to Loans		5.61	%		4.31	%		3.39	%
Percentage of Nonperforming Assets to Total Assets		3.72	%		2.74	%		2.24	%

Total Other Income

Total other income exclusive of securities gains and losses increased by $1.1 million or 6.30% to $18.2 million for the quarter ended September 30, 2009, compared to $17.1 million for the third quarter of 2008. For the nine months ended September 30, 2009, total other income increased by $0.5 million or 0.82% to $57.1 million compared to $56.7 million for the same period in 2008.

The following table is a summary of the changes in the components of total other income.


(In Thousands)
	Three Months Ended							Nine Months Ended
	September 30,							September 30,
	2009		2008		Change			2009		2008		Change
Income from Fiduciary Activities	$	3,071	$	3,356	$	<285	>	$	9,071	$	10,639	$	<1,568	>
Service Charges on Deposits		5,788		6,434		<646	>		16,381		18,285		<1,904	>
Other Service Income		3,895		2,361		1,534			15,179		8,299		6,880
Other		5,411		4,937		474			16,501		19,447		<2,946	>

Total Other Income	$	18,165	$	17,088	$	1,077		$	57,132	$	56,670	$	462

Income from fiduciary activities, which represents revenue earned from Park’s trust activities, decreased by $0.3 million, or 8.5%, to $3.1 million for the quarter ended September 30, 2009 from $3.4 million for the same period in 2008. For the nine months ended September 30, 2009, income from fiduciary activities decreased by $1.6 million, or 14.7%, to $9.1 million compared to $10.6 million in 2008. Fiduciary fees are generally charged based on the market value of customer accounts. Due to the decrease in stock values over the past year, the market value for average assets under management has decreased by approximately 10% for the nine month period ended September 30, 2009 compared to the same period in 2008.

- 40 -

Service charges on deposits have decreased by $0.6 million, or 10.0%, to $5.8 million for the three month period ended September 30, 2009, compared to $6.4 million for the same period in 2008. Through the first nine months of 2009, service charges declined $1.9 million, or 10.4%, to $16.4 million, compared to $18.3 million in 2008. This was primarily due to the decline in non-sufficient funds charges during 2009, which declined approximately $1.9 million in the first nine months of 2009 compared to 2008.

Other service income increased by $1.5 million, or 65.0%, to $3.9 million for the three months ended September 30, 2009, compared to $2.4 million for the same period in 2008. For the nine months ended September 30, 2009, other service income increased $6.9 million, or 82.9%, to $15.2 million, compared to $8.3 million in 2008. The increase is due to higher income from the origination and sale of fixed-rate residential mortgages into the secondary market, which increased by $1.7 million for the three months ended September 30, 2009 and $7.8 million for the first nine months of the 2009, compared to the same periods in 2008. Park originated $531 million in fixed rate residential mortgage loans during the first nine months of 2009, compared to $134 million for the same period in 2008.

The subcategory called “Other” within “Total Other Income” increased by $0.5 million, or 9.6%, to $5.4 million for the three months ended September 30, 2009, compared to $4.9 million for the same period in 2008. For the nine month period ended September 30, 2009, the subcategory called “Other” decreased by $2.9 million, or 15.1%, to $16.5 million, compared to $19.4 million for the same period in 2008. This decline is primarily due to Park’s recognition of $3.1 million of other income as a result of Visa’s successful initial public offering in the first quarter of 2008.

The following table breaks out the change in total other income between Park’s Ohio-based divisions and Vision Bank.

Changes in Other Income

(In Thousands)

Three Months Ended

Nine Months Ended

September 30, 2009

Ohio-Based

Other

Vision

Other

Vision

Income

Bank

Total

Income

Bank

Total

Income from Fiduciary Activities

<302

<285

<1,613

<1,568

Service Charges on Deposits

<538

<108

<646

<1,513

<391

<1,904

Other Service Income

1,378

156

1,534

6,205

675

6,880

Other

324

150

474

<2,744

<202

<2,946

Total

862

215

1,077

335

127

462

Management provided guidance in Park’s 2008 Annual Report to Shareholders that total other income would be approximately $75 million for 2009. Based on the most recent projections, management believes that total other income will be between $73 million and $75 million for 2009. The decline in service charges and fiduciary income are key factors in this reduction from management’s original projection.

Gain on Sale of Securities

There were no gains on sale of securities during the third quarter of 2009 or 2008. However, during the second quarter of 2009, Park realized a gain of $7.3 million from the sale of $197 million of U.S. Agency mortgage backed securities. There have been no other securities sales in the first nine months of 2009. For the nine months ended September 30, 2008, Park sold $80 million of U.S. Governmental Agency securities, which resulted in a gain of $0.9 million.

- 41 -

Total Other Expense

The following table is a summary of the changes in the components of total other expense.


	Three Months Ended							Nine Months Ended
	September 30,							September 30,
(In Thousands)	2009		2008		Change			2009		2008		Change
Salaries and Employee Benefits	$	25,589	$	25,105	$	484		$	76,410	$	74,262	$	2,148
Net Occupancy Expense		2,772		2,850		<78	>		8,812		8,758		54
Furniture and Equipment Expense		2,463		2,412		51			7,339		7,305		34
Data Processing Fees		1,323		1,785		<462	>		4,130		5,436		<1,306	>
Professional Fees and Services		3,725		3,078		647			10,550		8,767		1,783
Amortization of Intangibles		936		1,008		<72	>		2,809		3,021		<212	>
Marketing		983		1,179		<196	>		2,832		3,307		<475	>
Insurance		2,254		878		1,376			9,696		1,738		7,958
Postage and Telephone		1,652		1,769		<117	>		5,183		5,465		<282	>
State Taxes		892		758		134			2,782		2,227		555
Goodwill Impairment Charge		—		54,986		<54,986	>		—		54,986		<54,986	>
Other		3,463		3,671		<208	>		11,522		11,917		<395	>

Total Other Expense	$	46,052	$	99,479	$	<53,427	>	$	142,065	$	187,189	$	<45,124	>

The $53.4 million decrease for the three months ended September 30, 2009 reflected:

•

$55.0 million decline in impairment charges, as the 2008 third quarter included a goodwill impairment charge for the remaining Vision Bank goodwill.

•

$0.5 million decline in data processing fees, largely due to the sale of our merchant services and credit card portfolios in September 2008.

Partially offset by:

•

$1.4 million increase in insurance expense, primarily due to increased FDIC premiums.

•

$0.5 million increase in salaries and employee benefits, due to a $0.2 million increase in salaries and a $0.3 million increase in employee benefits.

The $45.1 million decrease for the nine months ended September 30, 2009 reflected:

•

$55.0 million decline in impairment charges, as the 2008 third quarter included a goodwill impairment charge for the remaining Vision Bank goodwill.

•

$1.3 million decline in data processing fees, largely due to the sale of our merchant services and credit card portfolios in September 2008.

Partially offset by:

•

$8.0 million increase in insurance expense, primarily due to increased FDIC premiums throughout 2009.

•

$2.1 million increase in salaries and employee benefits, due to a $0.2 million increase in salaries and a $1.9 million increase in employee benefits. Park had a total of 2,050 FTE employees at September 30, 2009, compared to 2,060 FTE employees at September 30, 2008. The increase in employee benefits is largely due to increased pension plan expense during 2009.

- 42 -

The following table breaks out the change in total other expense between Park’s Ohio-based banking divisions and Vision Bank.

Three Months Ended

Nine Months Ended

September 30, 2009

Change in Total Other Expense

(In Thousands)

Ohio-Based

Vision Bank

Total

Ohio-Based

Vision Bank

Total

Salaries and Employee Benefits

428

484

2,324

<176

2,148

Net Occupancy Expense

<69

<78

<76

130

Furniture and Equipment Expense

119

<68

217

<183

Data Processing Fees

<467

<462

<1,253

<53

<1,306

Professional Fees and Services

313

334

647

1,461

322

1,783

Amortization of Intangibles

<72

—

<72

<212

—

<212

Marketing

<156

<40

<196

<346

<129

<475

Insurance

1,337

1,376

7,109

849

7,958

Postage and Telephone

<104

<13

<117

<161

<121

<282

State Taxes

138

134

593

<38

555

Goodwill Impairment Charge

—

<54,986

—

<54,986

Other

<451

243

<208

<811

416

<395

Total Other Expense

1,016

<54,443

<53,427

8,845

<53,969

<45,124

Park’s management continues to focus on controlling expenses during 2009. For the first nine months of 2009, Vision Bank has done an excellent job controlling expenses, with the only increase of note being FDIC insurance premiums, which have increased throughout the banking industry. All of Park’s Ohio-based banks were merged into one charter by September 30, 2008 and management continues to work to centralize processes. Project EPS, which began in December 2006, includes consolidating all of Park’s Ohio-based banking divisions into one common core operating system which is expected to be completed by December 31, 2009. At December 31, 2006, the Ohio-based banking divisions had 1,879 total FTE employees. On a “like-kind basis” (or same-store), management has reduced FTE employees for those affiliates, branches, and departments by 70 FTE employees by September 30, 2009. This decrease is a result of continued focus on efficiency, process improvement and centralization.

Management provided guidance in Park’s 2008 Annual Report to Shareholders that total other expense would be approximately $184 million for 2009. Management updated this guidance in the 2009 second quarter with an estimate of approximately $192 million, which included the inclusion of an estimated $4.0 million FDIC special assessment in the fourth quarter of 2009. Management now projects that other expense will be approximately $189 million for the 2009 year, which was reduced from the second quarter estimate due to the FDIC proposal to have banks prepay three years of FDIC insurance premiums. Park’s management does not anticipate a second FDIC special assessment during the fourth quarter of 2009.

Income Tax

Federal income tax expense was $6.9 million for the quarter ended September 30, 2009 and state income tax was a benefit of $0.5 million. For the first nine months of 2009, federal income tax expense was $23.5 million and the state income tax was a benefit of $1.4 million. Vision Bank is subject to state income tax in the states of Alabama and Florida. State income tax was a benefit for both the three and nine month periods ended September 30, 2009 because Vision Bank had a loss for those periods. Park and its Ohio-based banking divisions do not pay state income tax to the state of Ohio, but pay a franchise tax based on year-end equity. The franchise tax expense is included in “state taxes” as part of total other expense on Park’s Consolidated Condensed Statements of Income.

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Federal income tax was $5.9 million for the third quarter of 2008 and state income tax was a benefit of $0.5 million. For the first nine months of 2008, federal income tax was $22.0 million and state income tax was a benefit of $1.2 million.

Federal income tax as a percentage of income before taxes was 27.2% for the third quarter of 2009, compared to 26.9% for the third quarter of 2008 excluding the goodwill impairment charge. For the first nine months of 2009, the federal effective tax rate was 28.0%, compared to 28.1% for the same period in 2008 excluding the goodwill impairment charge. The federal effective tax rates for the third quarter of 2008 and the nine months ended September 30, 2008 exclude substantially all of the $55 million impairment charge to goodwill as the majority of this charge was not tax deductible and therefore should be excluded when comparing period to period. The federal effective tax rate is lower than the statutory rate of 35% primarily due to tax-exempt interest income from state and municipal investments and loans, low income housing tax credits and income from bank owned life insurance.

Management provided guidance in Park’s 2008 Annual Report to Shareholders that the federal effective income tax rate for 2009 will be approximately 29.0%. Management now believes that the effective tax rate for 2009 will be approximately 28.7%, which is unchanged from management’s guidance at June 30, 2009.

Comparison of Financial Condition
At September 30, 2009 and December 31, 2008

Changes in Financial Condition and Liquidity

Total assets remained fairly stable, decreasing by $100 million, or 1.4% to $6,971 million at September 30, 2009, compared to $7,071 million at December 31, 2008. Contributing to this decrease were available-for-sale securities and cash and cash equivalents, which decreased by $205 million and $34 million, respectively. These decreases were partially offset by an increase of $124 million in loans.

Total investment securities (including interest bearing deposits) decreased by $185 million to $1,874 million at September 30, 2009, compared to $2,059 million at December 31, 2008. During the first nine months of 2009, Park’s management purchased approximately $390 million of taxable investment securities. These consist of $340 million in callable Notes of U.S. Government sponsored entities yielding 4.56% and $50 million in U.S. Government Agency Collateralized Mortgage Obligations (CMO’s) yielding 4.57%. During the first nine months of 2009, Park had repayments of investment securities of $392 million. Additionally, $197 million of U.S. Government Agency mortgage-backed securities were sold during the second quarter of 2009. Management expects that Park will receive principal repayments on the investment portfolio of approximately $75 million during the fourth quarter of 2009. Unless interest rates increase, management is currently forecasting that investment securities purchases will be less than the $75 million of expected repayments.

Loan balances have increased by $124 million to $4,615 million at September 30, 2009, compared to $4,491 million at December 31, 2008. During the first nine months of 2009, Park’s Ohio-based operations had loan growth of approximately $132 million to $3,933 million at September 30, 2009, from $3,801 million at December 31, 2008.

Total liabilities decreased by $145 million during the first nine months of 2009 to $6,283 million at September 30, 2009, from $6,428 million at December 31, 2008. Total deposits increased by $353 million during the first nine months of 2009, which was more than offset by a decrease in total borrowings of $488 million during the nine months ended September 30, 2009.

Total deposits increased by $353 million to $5,115 million at September 30, 2009, from $4,762 million at December 31, 2008. The Ohio-based operations had an increase in total deposits of $277 million to $4,402 million at September 30, 2009 and Vision Bank had an increase of $76 million to $713 million at September 30, 2009. During the first nine months of 2009, customer CDARS and CD accounts increased by $228 million and $151 million, respectively, which were offset by a decrease in brokered deposits of $186 million. Additionally, savings accounts increased by $133 million, offset by a decline in transaction accounts (NOW and money markets) of $13 million.

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Total borrowings decreased during the first nine months of 2009 by $488 million to $1,067 million from $1,555 million at December 31, 2008 due to declines in short-term borrowings of $314 million and long-term borrowings of $174 million during the nine months ended September 30, 2009.

Total stockholders’ equity increased by $44 million to $687 million at September 30, 2009 from $643 million at December 31, 2008. Retained earnings increased by $8.6 million during the nine months ended September 30, 2009 due to: net income of $61.9 million, offset by the declaration of common stock dividends of $39.6 million, the retained earnings impact of the reissuance of common stock from treasury shares held of $9.4 million, and preferred stock dividends and accretion of discount on the preferred stock of $4.3 million. Treasury stock at cost decreased by $26.1 million to <$181.6> million at September 30, 2009 from <$207.7> million at December 31, 2008, due to the common shares sold out of treasury stock through the ATM offering. Accumulated other comprehensive income increased by $9.4 million to $20.0 million at September 30, 2009 from $10.6 million at December 31, 2008. This increase was due to unrealized net holding gains on available for sale securities of $9.2 million, net of taxes, during the nine month period, and an increase of $0.2 million related to the adjustment to record the unrealized net holding gain, net of taxes, for cash flow hedges.

Increases or decreases in the investment securities portfolio, short-term borrowings and long-term debt are greatly dependent upon the growth in loans and deposits. The primary objective of management is to grow loan and deposit totals. To the extent that management is unable to grow loan totals at a desired growth rate, additional investment securities may be acquired. Likewise, both short-term borrowings and long-term debt are utilized to fund the growth in earning assets if the growth in deposits and cash flow from operations are not sufficient to do so.

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 66.2% at September 30, 2009, compared to 63.5% at December 31, 2008 and 65.7% at September 30, 2008. Cash and cash equivalents were $137.6 million at September 30, 2009, compared to $171.3 million at December 31, 2008 and $184.0 million at September 30, 2008. 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, 2009 was $687 million, or 9.9% of total assets, compared to $643 million or 9.1% of total assets at December 31, 2008 and $530 million or 7.8% of total assets at September 30, 2008. Common equity, which is stockholders’ equity excluding the preferred stock, was $591 million at September 30, 2009, or 8.5% of total assets, compared to $547 million or 7.7% of total assets at December 31, 2008.

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 8.66% at September 30, 2009 and 8.36% at December 31, 2008. The minimum Tier 1 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 1 risk-based capital ratio was 11.90% at September 30, 2009 and 11.69% at December 31, 2008. The minimum total risk-based capital ratio (defined as leverage capital plus supplemental capital divided by risk-adjusted assets) is 8% and the well capitalized ratio is greater than or equal to 10%. Park’s total risk-based capital ratio was 13.66% at September 30, 2009 and 13.47% December 31, 2008.

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The financial institution subsidiaries of Park each met the well capitalized ratio guidelines at September 30, 2009. The following table indicates the capital ratios for each subsidiary and Park at September 30, 2009.


				Tier 1			Total
	Leverage			Risk Based			Risk-Based
The Park National Bank		6.28	%		8.83	%		10.94	%
Vision Bank		11.47	%		13.84	%		15.14	%
Park National Corporation		8.66	%		11.90	%		13.66	%
Minimum Capital Ratio		4.00	%		4.00	%		8.00	%
Well Capitalized Ratio		5.00	%		6.00	%		10.00	%

In addition to issuing common stock through the ATM program (see Note 16 – Sale of Common Shares), Park’s management is also considering other capital raising strategies. These strategies would include the sale of common stock to accredited investors through a registered direct offering and the sale of subordinated debentures at either or both of Park National Corporation and Park National Bank. Park management anticipates that the proceeds from additional capital raises, depending on the total amount raised, could be used to partially or wholly repay TARP.

Contractual Obligations and Commitments

In the ordinary course of operations, Park enters into certain contractual obligations. Such obligations include the funding of operations through debt issuances as well as leases for premises. See page 42 of Park’s 2008 Annual Report to Shareholders (Table 11) for disclosure concerning contractual obligations and commitments at December 31, 2008. There were no significant changes in contractual obligations and commitments during the first nine months of 2009.

Financial Instruments with Off-Balance Sheet Risk

All of the affiliate banks of Park are parties to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of their respective customers. These financial instruments include loan commitments and standby letters of credit. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements.

The exposure to credit loss (for the subsidiary banks of Park) in the event of nonperformance by the other party to the financial instrument for loan commitments and standby letters of credit is represented by the contractual amount of those instruments. Park and each of its subsidiary banks use the same credit policies in making commitments and conditional obligations as they do for on-balance sheet instruments. Since many of the loan commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan commitments to customers.

The total amounts of off-balance sheet financial instruments with credit risk were as follows:


(In Thousands)	September 30, 2009		December 31, 2008
Loan Commitments	$	953,307	$	949,889
Standby Letters of Credit		34,838		25,353

ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Management reviews interest rate sensitivity on a bi-monthly basis by modeling the consolidated financial statements under various interest rate scenarios. The primary reason for these efforts is to guard Park from adverse impacts of unforeseen changes in interest rates. Management continues to believe that further changes in interest rates will have a small impact on net income, consistent with the disclosure on pages 41 and 42 of Park’s 2008 Annual Report to Shareholders, which is incorporated by reference into Park’s 2008 Form 10-K.

On page 41 (Table 10) of Park’s 2008 Annual Report to Shareholders, management reported that Park’s twelve month cumulative rate sensitivity gap was a positive (assets exceeding liabilities) $162.4 million or 2.47% of interest earning assets at December 31, 2008. At September 30, 2009, Park’s twelve month cumulative rate sensitivity gap was a positive (assets exceeding liabilities) $460 million or 7.14% of interest earning assets. If interest rates were to increase by 100 basis points, Park’s callable U.S. Treasury notes would extend out beyond twelve months, and the twelve month cumulative rate sensitivity gap would be a positive $270 million. Park’s twelve-month cumulative rate sensitivity gap continues to be relatively balanced and stable.

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Management supplements the interest rate sensitivity gap analysis with periodic simulations of balance sheet sensitivity under various interest rate and what-if scenarios to better forecast and manage the net interest margin. Management uses a 50 basis point change in market interest rates per quarter for a total of 200 basis points per year in evaluating the impact of changing interest rates on net interest income and net income over a twelve month horizon.

On page 42 of Park’s 2008 Annual Report to Shareholders, management reported that at December 31, 2008, the earnings simulation model projected that net income would increase by 0.6% using a rising interest rate scenario and decrease by 3.3% using a declining interest rate scenario over the next year. At September 30, 2009, the earnings simulation model projected that net income would increase by 4.0% using a rising interest rate scenario and decrease by 3.7% using a declining interest rate scenario. At September 30, 2009, management continues to believe that gradual changes in interest rates (50 basis points per quarter for a total of 200 basis points per year) will have a small impact on net income.

ITEM 4 — CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

With the participation of the Chairman of the Board and Chief Executive Officer (the principal executive officer) and the Chief Financial Officer (the principal financial officer) of Park, Park’s management has evaluated the effectiveness of Park’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the quarterly period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, Park’s Chairman of the Board and Chief Executive Officer and Park’s Chief Financial Officer have concluded that:

•		information required to be disclosed by Park in this Quarterly Report on Form 10-Q and other reports that Park files or submits under the Exchange Act would be accumulated and communicated to Park’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure;

•		information required to be disclosed by Park in this Quarterly Report on Form 10-Q and the other reports that Park files or submits under the Exchange Act would be recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and

•		Park’s disclosure controls and procedures were effective as of the end of the quarterly period covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control Over Financial Reporting

There were no changes in Park’s internal control over financial reporting (as defined in Rule 13a - 15(f) under the Exchange Act) that occurred during Park’s fiscal quarter ended September 30, 2009, that have materially affected, or are reasonably likely to materially affect, Park’s internal control over financial reporting.

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PARK NATIONAL CORPORATION

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

There are no pending legal proceedings to which Park or any of its subsidiaries is a party or to which any of their property is subject, except for routine legal proceedings to which Park’s subsidiary banks are parties incidental to their respective banking business. Park considers none of those proceedings to be material.

Item 1A. Risk Factors

There are certain risks and uncertainties in our business that could cause our actual results to differ materially from those anticipated. In “ITEM 1A. RISK FACTORS” of Part I of Park’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (the “2008 Form 10-K”), we included a detailed discussion of our risk factors. The following information updates certain of our risk factors and should be read in conjunction with the risk factors disclosed in the 2008 Form 10-K. These risk factors should be read carefully in connection with evaluating our business and in connection with the forward-looking statements contained in this Quarterly Report on Form 10-Q. Any of the risks described below or in the 2008 Form 10-K could materially adversely affect our business, financial condition or future results and the actual outcome of matters as to which forward-looking statements are made. These are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Changes in economic and political conditions could adversely affect our earnings, as our borrowers’ ability to repay loans and the value of the collateral securing our loans decline.

Our success depends, to a certain extent, upon economic and political conditions, local and national, as well as governmental fiscal and monetary policies. Conditions such as inflation, recession, unemployment, changes in interest rates, money supply and other factors beyond our control may adversely affect our asset quality, deposit levels and loan demand and, therefore, our earnings and our capital. Because we have a significant amount of real estate loans, additional decreases in real estate values could adversely affect the value of property used as collateral and our ability to sell the collateral upon foreclosure. Adverse changes in the economy may also have a negative effect on the ability of our borrowers to make timely repayments of their loans, which would have an adverse impact on our earnings and cash flows. The substantial majority of the loans made by our subsidiaries are to individuals and businesses in Ohio or in markets served through Vision Bank operating in Alabama and Florida. Consequently, a significant continued decline in the economy in Ohio or in Gulf Coast communities in Alabama or the panhandle of Florida could have a materially adverse effect on our financial condition and results of operations.

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As disclosed earlier within this Form 10-Q, we continue to experience difficult credit conditions in the Florida markets in which we operate. For the first nine months of 2009, Vision Bank has experienced $19.1 million in net loan charge-offs, or an annualized 3.68% of average loans. For the first nine months of 2008, net loan charge-offs for Vision Bank were $25.2 million, or an annualized 5.01% of average loans. The loan loss provision for Vision Bank was $28.4 million for the nine months ended September 30, 2009. Park’s nonperforming loans, defined as loans that are 90 days past due, nonaccrual and renegotiated loans, were $212.1 million or 4.59% of loans at September 30, 2009, $167.8 million or 3.74% of loans at December 31, 2008, $132.3 million or 2.96% of loans at September 30, 2008 and $108.5 million or 2.57% of loans at December 31, 2007. At September 30, 2009, Vision Bank had non-performing loans of $124.9 million or 18.3% of loans, compared to $94.7 million or 13.7% of loans at December 31, 2008 and $79.3 million or 11.6% of loans at September 30, 2008. While we continue to generate net earnings on a consolidated basis, Vision Bank continues to generate net losses and may generate net losses in the future. For the nine months ended September 30, 2009, Vision Bank had a net loss of $17.1 million and Park contributed capital of $30.0 million to Vision Bank. Given the current economic environment in Vision Bank’s market, Park intends to maintain the leverage ratio at Vision Bank at 10% and to maintain the total risk-based capital ratio at 14%. It remains uncertain when the negative credit trends in our markets will reverse. As a result, Park’s future earnings continue to be susceptible to further declining credit conditions in the markets in which we operate.

U.S. and international credit markets and economic conditions as well as the governmental response to those markets and conditions could adversely affect our liquidity and financial condition.

The global and U.S. economies are experiencing significantly reduced business activity as a result of, among other factors, disruptions in the financial system during the past year. Dramatic declines in the housing market during the past year, with falling home prices and increasing foreclosures and unemployment, have resulted in significant write-downs of asset values by financial institutions, including government-sponsored entities and major commercial and investment banks. These write-downs have caused many financial institutions to seek additional capital, to merge with larger and stronger institutions and, in some cases, to fail.

Increases in FDIC insurance premiums may have a material adverse affect on our earnings.

During 2008, there were higher levels of bank failures which dramatically increased resolution costs of the Federal Deposit Insurance Corporation (“FDIC”) and depleted the deposit insurance fund. In order to maintain a strong funding position and restore reserve ratios of the deposit insurance fund, the FDIC voted on December 16, 2008 to increase assessment rates of insured institutions uniformly by 7 basis points (7 cents for every $100 of deposits), beginning with the first quarter of 2009. Additional changes, beginning April 1, 2009, were to require riskier institutions to pay a larger share of premiums by factoring in rate adjustments based on secured liabilities and unsecured debt levels.

The Emergency Economic Stabilization Act of 2008 (the “EESA”) instituted two temporary programs effective through December 31, 2009 to further insure customer deposits at FDIC-member banks: deposit accounts are now insured up to $250,000 per customer (up from $100,000) and noninterest bearing transactional accounts are fully insured (unlimited coverage). On May 20, 2009, President Obama signed into law the Helping Families Save Their Homes Act of 2009 (the “HFSTHA”) which, among other things, amends the EESA to extend the effectiveness of these temporary programs through December 31, 2013. On January 1, 2014, the standard insurance amount will return to $100,000 per depositor for all account categories except IRAs and certain other retirement accounts, which will remain at $250,000 per depositor.

The HFSTHA also increases the borrowing authority of the FDIC from $30.0 billion to $100.0 billion to help fund the increased deposit insurance resolution costs. On May 22, 2009, the FDIC adopted a final rule that imposed a special assessment for the second quarter of 2009 of 5 basis points on each insured depositary institution’s assets minus its Tier 1 capital as of June 30, 2009, which was collected on September 30, 2009 in the amount of $3.3 million. The FDIC further decided on May 22, 2009 that it could impose a similar assessment for each of the third and fourth quarters of 2009. The latest possible date for imposing additional special assessments under the final rule would be December 31, 2009, with collection on March 30, 2010.

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On September 29, 2009, the FDIC adopted a Notice of Proposed Rulemaking that would require insured institutions to prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011 and 2012, in lieu of a second FDIC special assessment. The prepaid assessments for these periods would be collected on December 30, 2009, along with the regular quarterly risk-based deposit insurance assessment for the third quarter of 2009. For the fourth quarter of 2009 and for all of 2010, the prepaid assessment rate would be based on each institution’s total base assessment rate for the third quarter of 2009, modified to assume that the assessment rate in effect for the institution on September 30, 2009, has been in effect for the entire third quarter of 2009. The prepaid assessment rate for 2011 and 2012 would be equal to that institution’s modified third quarter 2009 total base assessment rate plus 3 basis points. Each institution’s prepaid assessment base would be calculated using its third quarter 2009 assessment base, adjusted quarterly for an estimated five percent annual growth rate in the assessment base through the end of 2012. Management estimates the three year prepayment to be approximately $28 million for Park, which would be expensed over the three-year life of the asset.

We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance. If there are additional bank or financial institution failures, we may be required to pay even higher FDIC premiums than the recently increased levels. These announced increases and any future increases in FDIC insurance premiums may materially adversely affect our results of operations and our ability to continue to pay dividends on our common shares at the current rate or at all.

Because of our participation in the Capital Purchase Program, we are subject to several restrictions including restrictions on our ability to declare or pay dividends and repurchase our shares and restrictions on compensation paid to our executive officers and certain other most highly-compensated employees.

Park is a participant in the Capital Purchase Program. The Capital Purchase Program is a component program of the Troubled Assets Relief Program (“TARP”) established by the United States Department of the Treasury (the “U.S. Treasury”) pursuant to the Emergency Economic Stabilization Act of 2008 (“EESA”). To finalize Park’s participation in the Capital Purchase Program, Park and the U.S. Treasury entered into a Letter Agreement and related Securities Purchase Agreement — Standard Terms attached thereto, on December 23, 2008 (the “Securities Purchase Agreement”). Pursuant to the Securities Purchase Agreement, Park issued and sold to the U.S. Treasury (i) 100,000 Fixed Rate Cumulative Perpetual Preferred Shares, Series A (the “Series A Preferred Shares”) and (ii) a warrant to purchase 227,376 Park common shares (the “Warrant”), for an aggregate purchase price of $100.0 million in cash. The Securities Purchase Agreement limits our ability to declare or pay dividends on any of our shares. Specifically, we are unable to declare dividend payments on common shares, junior preferred shares or pari passu preferred shares if we are in arrears on the payment of dividends on the Series A Preferred Shares. Further, we are not permitted to increase dividends on our common shares above the amount of the last quarterly cash dividend per common share declared prior to October 14, 2008 ($0.94 per common share) without the U.S. Treasury’s approval until December 23, 2011, unless all of the Series A Preferred Shares have been redeemed or transferred by the U.S. Treasury to unaffiliated third parties. In addition, our ability to repurchase our shares is restricted. The consent of the U.S. Treasury generally is required for us to make any share repurchase (other than in connection with the administration of any employee benefit plan in the ordinary course of business and consistent with past practice and certain other limited circumstances specified in our Articles of Incorporation) until December 23, 2011, unless all of the Series A Preferred Shares have been redeemed or transferred by the U.S. Treasury to unaffiliated third parties. Further, common shares, junior preferred shares or pari passu preferred shares may not be repurchased if we are in arrears on the payment of Series A Preferred Share dividends.

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As a recipient of government funding under the Capital Purchase Program, we must comply with the executive compensation and corporate governance standards imposed by the American Recovery and Reinvestment Act of 2009 (the “ARRA”) and the standards established by the Secretary of the Treasury under the ARRA, for so long as the U.S. Treasury holds any securities acquired from us pursuant to the Securities Purchase Agreement or upon exercise of the Warrant, excluding any period during which the U.S. Treasury holds only the Warrant (the “TARP Period”). On June 15, 2009, the Secretary of the Treasury established executive compensation and corporate governance standards applicable to TARP recipients, including Park, by promulgating an Interim Final Rule under 31 C.F.R. Part 30 (the “Interim Final Rule”). The ARRA and the Interim Final Rule impose limitations on our executive compensation practices by: (a) limiting the deductibility, for U.S. federal income tax purposes, of compensation paid to any of our Senior Executive Officers (as defined in the Interim Final Rule) to $500,000 per year; (b) prohibiting the payment or accrual of any bonus, retention award or incentive compensation to our five most highly-compensated employees, except in the form and under the limited circumstances permitted by the Interim Final Rule; (c) prohibiting the payment of golden parachute payments (as defined in the Interim Final Rule) to our Senior Executive Officers or any of our next five most highly-compensated employees upon a departure from the Company or due to a change in control of the Company, except for payments for services performed or benefits accrued; (d) requiring the Company to “clawback” any bonus, retention award or incentive compensation paid (or under a legally binding obligation to be paid) to a Senior Executive Officer or any of our next 20 most highly-compensated employees if the payment was based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria; (e) prohibiting the Company from maintaining any employee compensation plan (as defined in the Interim Final Rule) that would encourage the manipulation of our reported earnings to enhance the compensation of any of our employees; (f) prohibiting the Company from maintaining compensation plans and arrangements for our Senior Executive Officers that encourage our Senior Executive Officers to take unnecessary and excessive risks that threaten the value of the Company; (g) prohibiting the Company from providing (formally or informally) “gross-ups” to any of our Senior Executive Officers or our next 20 most highly-compensated employees; and (h) subjecting any bonus, retention award or other compensation paid before February 17, 2009 to our Senior Executive Officers or our next 20 most highly-compensated employees to retroactive review by the U.S. Treasury to determine whether any such payments were inconsistent with the purposes of TARP or otherwise contrary to the public interest. The ARRA and the Interim Final Rule also require that the Park Board of Directors adopt a Company-wide policy regarding “excessive or luxury expenditures,” which was adopted on September 4, 2009.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

	(a.)		Not applicable

	(b.)		Not applicable

	(c.)		No purchases of Park’s common shares were made by or on behalf of Park or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended, during the three months ended September 30, 2009. The following table provides information concerning changes in the maximum number of common shares that may be purchased under Park’s previously announced repurchase programs as a result of the forfeiture of previously outstanding incentive stock options:


			Average Price		Total Number of Common		Maximum Number of
	Total Number of		Paid Per		Shares Purchased as Part of		Common Shares that May
	Common Shares		Common		Publicly Announced Plans		Yet be Purchased Under the
Period	Purchased		Share		or Programs		Plans or Programs (1)
July 1 thru July 31, 2009		—		—		—		1,527,826
August 1 thru August 31, 2009		—		—		—		1,494,716
September 1 thru September 30, 2009		—		—		—		1,493,388
Total		—		—		—		1,493,388

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(1)		The number shown represents, as of the end of each period, the maximum aggregate number of common shares that may yet be purchased as part of Park’s publicly announced stock repurchase authorization to fund the Park National Corporation 2005 and 1995 Incentive Stock Option Plans as well as Park’s publicly announced stock repurchase program.

		On July 16, 2007, Park announced that its Board of Directors authorized management to purchase up to an aggregate of one million common shares over the three-year period ending July 15, 2010 in open market purchases or through privately negotiated transactions, to be held as treasury shares for general corporate purposes. At September 30, 2009, 992,174 common shares remained authorized for repurchase under this stock repurchase authorization. No common shares have been purchased under this authorization in 2008 or 2009.

		The Park National Corporation 2005 Incentive Stock Option Plan (the “2005 Plan”) was adopted by the Board of Directors of Park on January 18, 2005 and was approved by the Park shareholders at the Annual Meeting of Shareholders on April 18, 2005. Under the 2005 Plan, 1,500,000 common shares are authorized for delivery upon the exercise of incentive stock options granted under the 2005 Plan. All of the common shares delivered upon the exercise of incentive stock options granted under the 2005 Plan are to be treasury shares. As of September 30, 2009, incentive stock options covering 259,601 common shares were outstanding and 1,240,399 common shares were available for future grants.

		The Park National Corporation 1995 Incentive Stock Option Plan (the “1995 Plan”) was adopted April 17, 1995, and amended April 20, 1998 and April 16, 2001. Pursuant to the terms of the 1995 Plan, all of the common shares delivered upon exercise of incentive stock options granted under the 1995 Plan are to be treasury shares. No further incentive stock options may be granted under the 1995 Plan. As of September 30, 2009, incentive stock options covering 9,873 common shares were outstanding.

		Incentive stock options, granted under both the 2005 Plan and the 1995 Plan, covering an aggregate of 269,474 common shares were outstanding as of September 30, 2009 and 1,240,399 common shares were available for future grants under the 2005 Plan. With 1,008,659 common shares held as treasury shares for purposes of the 2005 Plan and 1995 Plan at September 30, 2009, an additional 501,214 common shares remain authorized for repurchase for purposes of funding the 2005 Plan and 1995 Plan.

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

(a), (b) Not applicable

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Item 6. Exhibits


Exhibits

	3.1	(a)	Articles of Incorporation of Park National Corporation as filed with the Ohio Secretary of State on March 24, 1992 (Incorporated herein by reference to Exhibit 3(a) to Park National Corporation’s Form 8-B, filed on May 20, 1992 (File No. 0-18772) (“Park’s Form 8-B”))

	3.1	(b)	Certificate of Amendment to the Articles of Incorporation of Park National Corporation as filed with the Ohio Secretary of State on May 6, 1993 (Incorporated herein by reference to Exhibit 3(b) to Park National Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (File No. 0-18772))

	3.1	(c)	Certificate of Amendment to the Articles of Incorporation of Park National Corporation as filed with the Ohio Secretary of State on April 16, 1996 (Incorporated herein by reference to Exhibit 3(a) to Park National Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1996 (File No. 1-13006))

	3.1	(d)	Certificate of Amendment by Shareholders to the Articles of Incorporation of Park National Corporation as filed with the Ohio Secretary of State on April 22, 1997 (Incorporated herein by reference to Exhibit 3(a)(1) to Park National Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997 (File No. 1-13006) (“Park’s June 30, 1997 Form 10-Q”))

	3.1	(e)	Certificate of Amendment by Shareholders or Members as filed with the Secretary of State of the State of Ohio on December 18, 2008 in order to evidence the adoption by the shareholders of Park National Corporation on December 18, 2008 of an amendment to Article FOURTH of Park National Corporation’s Articles of Incorporation to authorize Park National Corporation to issue up to 200,000 preferred shares, without par value (Incorporated herein by reference to Exhibit 3.1 to Park National Corporation’s Current Report on Form 8-K dated and filed December 19, 2008 (File No. 1-13006))

	3.1	(f)	Certificate of Amendment by Directors or Incorporators to Articles as filed with the Secretary of State of the State of Ohio on December 19, 2008, evidencing adoption of amendment by Board of Directors of Park National Corporation to Article FOURTH of Articles of Incorporation to establish express terms of Fixed Rate Cumulative Perpetual Preferred Shares, Series A, each without par value, of Park National Corporation (Incorporated herein by reference to Exhibit 3.1 to Park National Corporation’s Current Report on Form 8-K dated and filed December 23, 2008 (File No. 1-13006))

	3.1	(g)	Articles of Incorporation of Park National Corporation (reflecting amendments through December 19, 2008) [for SEC reporting compliance purposes only — not filed with Ohio Secretary of State] (incorporated herein by reference to Exhibit 3.1(g) to Park National Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (File No. 1-13006))

	3.2	(a)	Regulations of Park National Corporation (Incorporated herein by reference to Exhibit 3(b) to Park’s Form 8-B)

	3.2	(b)	Certified Resolution regarding Adoption of Amendment to Subsection 2.02(A) of the Regulations of Park National Corporation by Shareholders on April 21, 1997 (Incorporated herein by reference to Exhibit 3(b)(1) to Park’s June 30, 1997 Form 10-Q)

	3.2	(c)	Certificate Regarding Adoption of Amendments to Sections 1.04 and 1.11 of Park National Corporation’s Regulations by the Shareholders on April 17, 2006 (Incorporated herein by reference to Exhibit 3.1 to Park National Corporation’s Current Report on Form 8-K dated and filed on April 18, 2006 (File No. 1-13006))

	3.2	(d)	Certificate Regarding Adoption by the Shareholders of Park National Corporation on April 21, 2008 of Amendment to Regulations to Add New Section 5.10 to Article Five (Incorporated herein by reference to Exhibit 3.2(d) to Park National Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2008 (File No. 1-13006) (“Park’s March 31, 2008 Form 10-Q”))

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Exhibits

	3.2	(e)	Regulations of Park National Corporation (reflecting amendments through April 21, 2008) [For purposes of SEC reporting compliance only] (Incorporated herein by reference to Exhibit 3.2(e) to Park’s March 31, 2008 Form 10-Q)

	10.1		Letter Agreement, dated July 20, 2009, between Park National Corporation and C. Daniel DeLawder [NOTE: Supersedes Letter Agreement, dated December 19, 2008, between Park National Corporation and C. Daniel DeLawder, which was previously filed as Exhibit 10.2.1 to Park National Corporation’s Current Report on Form 8-K dated and filed on December 23, 2008 (File No. 1-13006) (“Park’s December 23, 2008 Form 8-K”)] (Incorporated herein by reference to Exhibit 10.1 to Park National Corporation’s Current Report on Form 8-K dated and filed July 20, 2009 (File No. 1-13006)(“Park’s July 20, 2009 Form 8-K”))

	10.2		Letter Agreement, dated July 20, 2009, between Park National Corporation and David L. Trautman [NOTE: Supersedes Letter Agreement, dated December 19, 2008, between Park National Corporation and David L. Trautman, which was previously filed as Exhibit 10.2.2 to Park’s December 23, 2008 Form 8-K] (Incorporated herein by reference to Exhibit 10.2 to Park’s July 20, 2009 Form 8-K)

	10.3		Letter Agreement, dated July 20, 2009, between Park National Corporation and John W. Kozak [NOTE: Supersedes Letter Agreement, dated December 19, 2008, between Park National Corporation and John W. Kozak, which was previously filed as Exhibit 10.2.3 to Park’s December 23, 2008 Form 8-K] (Incorporated herein by reference to Exhibit 10.3 to Park’s July 20, 2009 Form 8-K)

	12		Computation of Ratios (filed herewith)

	31.1		Rule 13a — 14(a) / 15d — 14(a) Certifications (Principal Executive Officer)

	31.2		Rule 13a — 14(a) / 15d — 14(a) Certifications (Principal Financial Officer)

	32.1		Section 1350 Certifications (Principal Executive Officer)

	32.2		Section 1350 Certifications (Principal Financial Officer)

	99.1		Distribution Agreement, dated May 27, 2009, among Park National Corporation, The Park National Bank, and Sandler O’Neill & Partners, L.P. (Incorporated herein by reference to Exhibit 99.1 to Park National Corporation’s Current Report on Form 8-K dated and filed May 27, 2009 (File No. 1-13006))

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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: October 26, 2009	/s/ C. Daniel DeLawder
	C. Daniel DeLawder
	Chairman of the Board and Chief Executive Officer

DATE: October 26, 2009	/s/ John W. Kozak
	John W. Kozak
	Chief Financial Officer

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Exhibit Index


Exhibit Number		Description

	12	Computation of Ratios (filed herewith)

	31.1	Rule 13a — 14(a) / 15d — 14(a) Certifications (Principal Executive Officer)

	31.2	Rule 13a — 14(a) / 15d — 14(a) Certifications (Principal Financial Officer)

	32.1	Section 1350 Certifications (Principal Executive Officer)

	32.2	Section 1350 Certifications (Principal Financial Officer)