10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.   20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR

15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR

15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-13006

Park National Corporation

(Exact name of registrant as specified in its charter)

Ohio	31-1179518
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

50 North Third Street, Newark, Ohio 43055

(Address of principal executive offices) (Zip Code)

(740) 349-8451

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant 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 preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, 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	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨
(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 ¨ No x

15,398,919 Common shares, no par value per share, outstanding at May 2, 2011.

PARK NATIONAL CORPORATION

CONTENTS

	Page
PART I.   FINANCIAL INFORMATION
Item 1.  Financial Statements	3
Consolidated Condensed Balance Sheets as of March 31, 2011 (unaudited) and December 31, 2010	3
Consolidated Condensed Statements of Income for the three months ended March 31, 2011 and 2010 (unaudited)	4
Consolidated Condensed Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2011 and 2010 (unaudited)	6
Consolidated Condensed Statements of Cash Flows for the three months ended March 31, 2011 and 2010 (unaudited)	7
Notes to Unaudited Consolidated Condensed Financial Statements	9
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3.  Quantitative and Qualitative Disclosures about Market Risk	57
Item 4.  Controls and Procedures	58
PART II.  OTHER INFORMATION
Item 1.  Legal Proceedings	59
Item 1A. Risk Factors	59
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 3.  Defaults Upon Senior Securities	61
Item 4.  [Reserved]	61
Item 5.  Other Information	61
Item 6.  Exhibits	61
SIGNATURES	64

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PARK NATIONAL CORPORATION

Consolidated Condensed Balance Sheets (Unaudited)

(in thousands, except share and per share data)

	March 31,			December 31,
	2011			2010
Assets:
Cash and due from banks	$	111,472		$	109,058
Money market instruments		22,775			24,722
Cash and cash equivalents		134,247			133,780
Investment securities
Securities available-for-sale, at fair value (amortized cost of $1,349,431 and $1,274,258 at March 31, 2011 and December 31, 2010)		1,362,893			1,297,522
Securities held-to-maturity, at amortized cost (fair value of $625,334 and $686,114 at March 31, 2011 and December 31, 2010)		614,064			673,570
Other investment securities		68,699			68,699
Total investment securities		2,045,656			2,039,791
Loans		4,750,975			4,732,685
Allowance for loan losses		(126,859	)		(121,397	)
Net loans		4,624,116			4,611,288
Bank owned life insurance		150,683			146,450
Goodwill and other intangible assets		77,708			78,377
Bank premises and equipment, net		69,673			69,567
Other real estate owned		47,133			44,325
Accrued interest receivable		25,083			24,137
Mortgage loan servicing rights		10,365			10,488
Other		153,739			140,174
Total assets	$	7,338,403		$	7,298,377
Liabilities and Stockholders' Equity:
Deposits:
Noninterest bearing	$	955,005		$	937,719
Interest bearing		4,359,673			4,157,701
Total deposits		5,314,678			5,095,420
Short-term borrowings		316,719			663,669
Long-term debt		786,709			636,733
Subordinated debentures and notes		75,250			75,250
Accrued interest payable		6,255			6,123
Other		93,554			75,358
Total liabilities		6,593,165			6,552,553
COMMITMENTS AND CONTINGENCIES
Stockholders' equity:
Preferred stock (200,000 shares authorized; 100,000 shares issued with $1,000 per share liquidation preference)		97,504			97,290
Common stock (No par value; 20,000,000 shares authorized;  16,151,052 shares issued at March 31, 2011 and 16,151,062 shares issued at December 31, 2010)		301,203			301,204
Common stock warrants		4,473			4,473
Retained earnings		427,897			422,458
Treasury stock (752,129 shares at March 31, 2011 and 752,128 shares at December 31, 2010)		(77,733	)		(77,733	)
Accumulated other comprehensive (loss), net of taxes		(8,106	)		(1,868	)
Total stockholders' equity		745,238			745,824
Total liabilities and stockholders' equity	$	7,338,403		$	7,298,377

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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PARK NATIONAL CORPORATION

Consolidated Condensed Statements of Income (Unaudited)

(in thousands, except share and per share data)

	Three Months Ended
	March 31,
	2011			2010
Interest and dividend income:
Interest and fees on loans	$	65,454		$	66,441
Interest and dividends on:
Obligations of U.S. Government, its agencies and other securities		19,053			20,475
Obligations of states and political subdivisions		149			217
Other interest income		6			69
Total interest and dividend income		84,662			87,202
Interest expense:
Interest on deposits:
Demand and savings deposits		991			1,775
Time deposits		6,734			10,650
Interest on borrowings:
Short-term borrowings		267			344
Long-term debt		7,357			7,053
Total interest expense		15,349			19,822
Net interest income		69,313			67,380
Provision for loan losses		13,500			16,550
Net interest income after provision for loan losses		55,813			50,830
Other income:
Income from fiduciary activities		3,722			3,422
Service charges on deposit accounts		4,245			4,746
Other service income		2,301			2,982
Checkcard fee income		2,976			2,444
Bank owned life insurance income		1,229			1,216
ATM fees		654			765
OREO devaluations		(4,394	)		(1,145	)
Other		2,438			2,280
Total other income		13,171			16,710
Gain on sale of securities		6,635			8,304

Continued

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PARK NATIONAL CORPORATION

Consolidated Condensed Statements of Income (Unaudited)

(Continued)

(in thousands, except share and per share data)

	Three Months Ended
	March 31,
	2011		2010
Other expense:
Salaries and employee benefits	$	25,064	$	25,171
Occupancy expense		3,000		3,117
Furniture and equipment expense		2,657		2,632
Data processing fees		1,253		1,593
Professional fees and services		4,874		4,856
Amortization of intangibles		669		936
Marketing		623		902
Insurance		2,269		2,198
Communication		1,556		1,769
State taxes		457		845
Other expense		3,924		3,871
Total other expense		46,346		47,890
Income before income taxes		29,273		27,954
Income taxes		7,895		7,175
Net income	$	21,378	$	20,779
Preferred stock dividends and accretion		1,464		1,452
Net income available to common shareholders	$	19,914	$	19,327
Per Common Share:
Net income available to common shareholders
Basic	$	1.29	$	1.30
Diluted	$	1.29	$	1.30
Weighted average common shares outstanding
Basic		15,398,930		14,882,774
Diluted		15,403,420		14,882,774
Cash dividends declared	$	0.94	$	0.94

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)

(in thousands, except per share data)

												Accumulated
									Treasury			Other
	Preferred		Common			Retained			Stock			Comprehensive			Comprehensive
Three Months ended March 31, 2011 and 2010	Stock		Stock			Earnings			at Cost			Income/(Loss)			Income
Balance at December 31, 2009	$	96,483	$	306,569		$	423,872		$	(125,321	)	$	15,661
Net Income							20,779								$	20,779
Other comprehensive income, net of tax:
Unrealized net holding loss on cash flow hedge, net of income taxes of $(60)													(111	)		(111	)
Unrealized net holding loss on securities available-for-sale, net of income taxes of $(966)													(1,793	)		(1,793	)
Total comprehensive income															$	18,875
Cash dividends on common stock at $0.94 per share							(13,990	)
Cash payment for fractional shares in dividend reinvestment plan				(1	)
Accretion of discount on preferred stock		202					(202	)
Preferred stock dividends							(1,250	)
Balance at March 31, 2010	$	96,685	$	306,568		$	429,209		$	(125,321	)	$	13,757
Balance at December 31, 2010	$	97,290	$	305,677		$	422,458		$	(77,733	)	$	(1,868	)
Net Income							21,378								$	21,378
Other comprehensive loss, net of tax:
Unrealized net holding gain on cash flow hedge, net of income taxes of $71													133			133
Unrealized net holding (loss) on securities available-for-sale, net of income taxes of $(3,431)													(6,371	)		(6,371	)
Total comprehensive income															$	15,140
Cash dividends on common stock at $0.94 per share							(14,475	)
Cash payment for fractional shares in dividend reinvestment plan				(1	)
Accretion of discount on preferred stock		214					(214	)
Preferred stock dividends							(1,250	)
Balance at March 31, 2011	$	97,504	$	305,676		$	427,897		$	(77,733	)	$	(8,106	)

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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PARK NATIONAL CORPORATION

Consolidated Condensed Statements of Cash Flows (Unaudited)

(in thousands)

	Three Months Ended
	March 31,
	2011			2010
Operating activities:
Net income	$	21,378		$	20,779
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, accretion and amortization		2,784			2,205
Provision for loan losses		13,500			16,550
Other-than-temporary impairment on investment securities		-			-
Amortization of core deposit intangibles		669			936
Realized net investment security gains		(6,635	)		(8,304	)
OREO devaluations		4,394			1,145
Changes in assets and liabilities:
(Increase) in other assets		(21,217	)		(10,678	)
(Decrease) in other liabilities		(6,539	)		(4,079	)
Net cash provided by operating activities	$	8,334		$	18,554
Investing activities:
Proceeds from sales of available-for-sale securities	$	113,105		$	284,031
Proceeds from maturity of:
Available-for-sale securities		75,071			269,462
Held-to-maturity securities		59,506			22,478
Purchases of:
Available-for-sale securities		(231,714	)		(533,677	)
Held-to-maturity securities		-			(2,205	)
Net (increase) decrease in loans		(25,403	)		30,349
Purchases of bank owned life insurance, net		(3,000	)		(4,562	)
Purchases of premises and equipment, net		(1,990	)		(1,862	)
Net cash (used in) provided by investing activities	$	(14,425	)	$	64,014

Continued

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PARK NATIONAL CORPORATION

Consolidated Condensed Statements of Cash Flows (Unaudited)

(Continued)

(in thousands)

	Three Months Ended
	March 31,
	2011			2010
Financing activities:
Net increase in deposits	$	219,258		$	80,806
Net (decrease) in short-term borrowings		(346,950	)		(57,144	)
Proceeds from issuance of long-term debt		150,000			-
Repayment of long-term debt		(24	)		(20	)
Cash payment for fractional shares in dividend reinvestment plan		(1	)		(1	)
Cash dividends paid on common and preferred stock		(15,725	)		(15,240	)
Net cash provided by financing activities	$	6,558		$	8,401
Increase in cash and cash equivalents		467			90,969
Cash and cash equivalents at beginning of year		133,780			159,091
Cash and cash equivalents at end of period	$	134,247		$	250,060
Supplemental disclosures of cash flow information:
Cash paid for:
Interest	$	15,217		$	20,494
Income taxes	$	-		$	-
Non cash activities:
Securities acquired through payable	$	25,000		$	112,450

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 for Park National Corporation (the “Registrant”, “Corporation”, “Company”, or “Park”) and 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 month period ended March 31, 2011 are not necessarily indicative of the operating results to be anticipated for the fiscal year ending December 31, 2011.

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, 2010 from Park’s 2010 Annual Report to Shareholders (“2010 Annual Report”).

Park’s significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements included in Park’s 2010 Annual Report. 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, determining no events require additional disclosure in these consolidated condensed financial statements.

Note 2 – Recent Accounting Pronouncements

Adoption of New Accounting Pronouncements:

Improving Disclosures About Fair Value Measurements: In January 2010, the FASB issued an amendment to Fair Value Measurements and Disclosures, Topic 820, Improving Disclosures About Fair Value Measurements. This amendment requires new disclosures regarding significant transfers in and out of Level 1 and 2 fair value measurements and the reasons for the transfers. This amendment also requires that a reporting entity present separately information about purchases, sales, issuances and settlements, on a gross basis rather than a net basis for activity in Level 3 fair value measurements using significant unobservable inputs. This amendment also clarifies existing disclosures on the level of disaggregation, in that the reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities, and that a reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements for Level 2 and 3. The new disclosures and clarifications of existing disclosures for ASC 820 are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of ASC 820 did not have a material effect on the Company’s consolidated financial statements.

Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses: In July 2010, FASB issued Accounting Standards Update 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses (ASU 2010-20), to address concerns about the sufficiency, transparency, and robustness of credit risk disclosures for finance receivables and the related allowance for credit losses.  This ASU requires new and enhanced disclosures at disaggregated levels, specifically defined as “portfolio segments” and “classes”.  Among other things, the expanded disclosures include roll-forward schedules of the allowance for credit losses and information regarding the credit quality of receivables as of the end of a reporting period.  New and enhanced disclosures are required for interim and annual periods ending after December 15, 2010, although the disclosures of reporting period activity are required for interim and annual periods beginning after December 15, 2010.  The adoption of the new guidance impacted interim and annual disclosures included in the Company’s consolidated financial statements.

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No. 2011-01 - Receivables (Topic 310) Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2001-20:   In January 2011, FASB issued Accounting Standards Update 2011-01, Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20 (ASU 2011-01).  ASU 2011-01 was issued as a result of concerns raised from stakeholders that the introduction of new disclosure requirements (paragraphs 310-10-50-31 through 50-34 of the FASB Accounting Standards Codification) about troubled debt restructurings in one reporting period followed by a change in what constitutes a troubled debt restructuring shortly thereafter would be burdensome for preparers and may not provide financial statement users with useful information.

No. 2011-02 – Receivables (Topic 310) A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring:  In April 2011, FASB issued Accounting Standards Update 2011-02, A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring (ASU 2011-02).  The ASU provides additional guidance to creditors for evaluating whether a modification or restructuring of a receivable is a troubled debt restructuring (“TDR”).  The new guidance requires creditors to evaluate modifications and restructurings of receivables using a more principles-based approach, which may result in more modifications and restructurings being considered TDRs.   Additionally, creditors will be required to provide additional disclosures about their TDR activities in accordance with the requirements of ASU 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses which was deferred by ASU 2011-01 Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20 (ASU 2011-01).  The new guidance will be effective for the first interim or annual period beginning on or after June 15, 2011, with retrospective application required to the beginning of the annual period of adoption.  Disclosures requirements will be effective for the first interim and annual period beginning on or after June 15, 2011.  Management is currently working through the guidance to determine the impact, if any, to the consolidated financial statements.

Note 3 – Goodwill and Intangible Assets

The following table shows the activity in goodwill and core deposit intangibles for the first three months of 2011.

(in thousands)	Goodwill		Core Deposit Intangibles		Total
December 31, 2010	$	72,334	$	6,043	$	78,377
Amortization		-		669		669
March 31, 2011	$	72,334	$	5,374	$	77,708

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 $669,000 for the second, third and fourth quarters of 2011.

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

(in thousands)	Annual Amortization
Remainder of 2011	$	2,007
2012		2,677
2013		690
Total	$	5,374

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Note 4 – Loans

The composition of the loan portfolio, by class of loan, as of March 31, 2011 and December 31, 2010 was as follows:

	March 31, 2011						December 31, 2010
	Loan Balance		Accrued Interest Receivable		Recorded Investment		Loan Balance		Accrued Interest Receivable		Recorded Investment
(In thousands)
Commercial, financial and agricultural *	$	727,993	$	2,967	$	730,960	$	737,902	$	2,886	$	740,788
Commercial real estate *		1,254,636		4,956		1,259,592		1,226,616		4,804		1,231,420
Construction real estate:
Vision commercial land and development *		161,140		290		161,430		171,334		282		171,616
Remaining commercial		191,770		637		192,407		195,693		622		196,315
Mortgage		21,685		74		21,759		26,326		95		26,421
Installment		14,738		63		14,801		13,127		54		13,181
Residential real estate
Commercial		463,308		1,445		464,753		464,903		1,403		466,306
Mortgage		944,309		2,955		947,264		906,648		2,789		909,437
HELOC		256,329		959		257,288		260,463		1,014		261,477
Installment		56,108		223		56,331		60,195		255		60,450
Consumer		656,618		2,887		659,505		666,871		3,245		670,116
Leases		2,341		44		2,385		2,607		56		2,663
Total loans	$	4,750,975	$	17,500	$	4,768,475	$	4,732,685	$	17,505	$	4,750,190

* Included within commercial, financial and agricultural loans, commercial real estate loans, and Vision commercial land and development loans are an immaterial amount of consumer loans that are not broken out by class.

- 11 -

The following tables present the recorded investment in nonaccrual, restructured, and loans past due 90 days or more and still accruing by class of loans as of March 31, 2011 and December 31, 2010:

	March 31, 2011
(In thousands)	Nonaccrual Loans		Restructured loans		Loans past due 90 days or more and accruing		Total nonperforming loans
Commercial, financial and agricultural	$	19,464	$	-	$	-	$	19,464
Commercial real estate		53,259		-		-		53,259
Construction real estate:
Vision commercial land and development		82,799		-		-		82,799
Remaining commercial		26,126		-		-		26,126
Mortgage		61		-		-		61
Installment		413		-		-		413
Residential real estate
Commercial		58,123		-		-		58,123
Mortgage		32,927		260		1,526		34,713
HELOC		1,944		-		-		1,944
Installment		1,581		-		86		1,667
Consumer		2,122		-		665		2,787
Leases		-		-		-		-
Total loans	$	278,819	$	260	$	2,277	$	281,356

	December 31, 2010
(In thousands)	Nonaccrual Loans		Restructured loans		Loans past due 90 days or more and accruing		Total nonperforming loans
Commercial, financial and agricultural	$	19,276	$	-	$	-	$	19,276
Commercial real estate		57,941		-		20		57,961
Construction real estate:
Vision commercial land and development		87,424		-		-		87,424
Remaining commercial		27,080		-		-		27,080
Mortgage		354		-		-		354
Installment		417		-		13		430
Residential real estate
Commercial		60,227		-		-		60,227
Mortgage		32,479		-		2,175		34,654
HELOC		964		-		149		1,113
Installment		1,195		-		277		1,472
Consumer		1,911		-		1,059		2,970
Leases		-		-		-		-
Total loans	$	289,268	$	-	$	3,693	$	292,961

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The following table provides additional information regarding those nonaccrual loans that are individually evaluated for impairment and those collectively evaluated for impairment as of March 31, 2011 and December 31, 2010.

	March 31, 2011
(In thousands)	Nonaccrual Loans		Loans individually evaluated for impairment		Loans collectively evaluated for impairment
Commercial, financial and agricultural	$	19,464	$	19,391	$	73
Commercial real estate		53,259		53,259		-
Construction real estate:
Vision commercial land and development		82,799		82,060		739
Remaining commercial		26,126		26,126		-
Mortgage		61		-		61
Installment		413		-		413
Residential real estate:
Commercial		58,123		58,123		-
Mortgage		32,927		-		32,927
HELOC		1,944		-		1,944
Installment		1,581		-		1,581
Consumer		2,122		-		2,122
Leases		-		-		-
Total loans	$	278,819	$	238,959	$	39,860

	December 31, 2010
(In thousands)	Nonaccrual Loans		Loans individually evaluated for impairment		Loans collectively evaluated for impairment
Commercial, financial and agricultural	$	19,276	$	19,205	$	71
Commercial real estate		57,941		57,930		11
Construction real estate:
Vision commercial land and development		87,424		86,491		933
Remaining commercial		27,080		27,080		—
Mortgage		354		—		354
Installment		417		—		417
Residential real estate:
Commercial		60,227		60,227		—
Mortgage		32,479		—		32,479
HELOC		964		—		964
Installment		1,195		—		1,195
Consumer		1,911		—		1,911
Leases		-		—		—
Total loans	$	289,268	$	250,933	$	38,335

- 13 -

All of the loans individually evaluated for impairment were evaluated using the fair value of the collateral or present value of expected future cash flows as the measurement method.

The following tables present loans individually evaluated for impairment by class of loans as of March 31, 2011 and December 31, 2010.

	March 31, 2011
	Unpaid principal balance		Recorded Investment		Allowance for loan losses allocated
(in thousands)
With no related allowance recorded
Commercial, financial and agricultural	$	7,226	$	6,819	$	-
Commercial real estate		22,864		17,653		-
Construction real estate:
Vision commercial land and development		11,632		9,333		-
Remaining commercial		13,118		12,251		-
Residential real estate:
Commercial		39,886		38,072		-
With an allowance recorded
Commercial, financial and agricultural		14,197		12,572		2,980
Commercial real estate		38,583		35,606		9,760
Construction real estate:
Vision commercial land and development		100,966		72,727		25,543
Remaining commercial		22,373		13,875		2,842
Residential real estate:
Commercial		23,510		20,051		6,162
Total	$	294,355	$	238,959	$	47,287

- 14 -

	December 31, 2010
	Unpaid principal balance		Recorded Investment		Allowance for loan losses allocated
(in thousands)
With no related allowance recorded
Commercial, financial and agricultural	$	9,347	$	8,891	$	-
Commercial real estate		24,052		19,697		-
Construction real estate:
Vision commercial land and development		23,021		20,162		-
Remaining commercial		15,192		14,630		-
Residential real estate:
Commercial		51,261		47,009		-
With an allowance recorded
Commercial, financial and agricultural		11,801		10,314		3,028
Commercial real estate		42,263		38,233		10,001
Construction real estate:
Vision commercial land and development		92,122		66,329		23,585
Remaining commercial		20,676		12,450		2,802
Residential real estate:
Commercial		14,799		13,218		4,043
Total	$	304,534	$	250,933	$	43,459

Management’s general practice is to proactively charge down loans individually evaluated for impairment to the fair value of the underlying collateral.  At March 31, 2011 and December 31, 2010, there were $10.6 million and $12.5 million, respectively, of partial charge-offs on loans individually evaluated for impairment with no related allowance recorded and $44.8 million and $41.1 million, respectively, of partial charge-offs on loans individually evaluated for impairment that also had a specific reserve allocated.

The allowance for loan losses included specific reserves related to loans individually evaluated for impairment at March 31, 2011 and December 31, 2010, of $47.3 million and $43.5 million, respectively, related to loans with a recorded investment of $154.8 million and $140.5 million.

- 15 -

The following table presents the average recorded investment and interest income recognized on loans individually evaluated for impairment for the three months ended March 31, 2011:

			Three months ended March 31, 2011
	Recorded investment as of March 31, 2011		Average recorded investment		Interest income recognized
(in thousands)
Commercial, financial and agricultural	$	19,391	$	19,515	$	65
Commercial real estate		53,259		55,076		70
Construction real estate:
Vision commercial land and development		82,060		84,272		-
Remaining commercial		26,126		26,789		78
Residential real estate:
Commercial		58,123		59,465		139
Consumer		-		22		-
Total	$	238,959	$	245,139	$	352

The following tables present the aging of the recorded investment in past due loans as of March 31, 2011 and December 31, 2010 by class of loans.

	March 31, 2011
	Accruing loans past due 30-89 days		Past due nonaccrual loans and loans past due 90 days or more and accruing*		Total past due		Total current		Total recorded investment
(In thousands)
Commercial, financial and agricultural	$	4,573	$	14,185	$	18,758	$	712,202	$	730,960
Commercial real estate		7,187		49,324		56,511		1,203,081		1,259,592
Construction real estate:
Vision commercial land and development		4,077		72,679		76,756		84,674		161,430
Remaining commercial		47		18,312		18,359		174,048		192,407
Mortgage		47		61		108		21,651		21,759
Installment		354		386		740		14,061		14,801
Residential real estate
Commercial		3,814		25,576		29,390		435,363		464,753
Mortgage		15,076		22,782		37,858		909,406		947,264
HELOC		551		1,101		1,652		255,636		257,288
Installment		1,014		972		1,986		54,345		56,331
Consumer		7,489		2,117		9,606		649,899		659,505
Leases		5		-		5		2,380		2,385
Total loans	$	44,234	$	207,495	$	251,729	$	4,516,746	$	4,768,475

* Includes $2.2 million of loans past due 90 days or more and accruing.

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	December 31, 2010
	Accruing loans past due 30-89 days		Past due nonaccrual loans and loans past due 90 days or more and accruing*		Total past due		Total current		Total recorded investment
(In thousands)
Commercial, financial and agricultural	$	2,247	$	15,622	$	17,869	$	722,919	$	740,788
Commercial real estate		9,521		53,269		62,790		1,168,630		1,231,420
Construction real estate:
Vision commercial land and development		2,406		65,130		67,536		104,080		171,616
Remaining commercial		141		19,687		19,828		176,487		196,315
Mortgage		479		148		627		25,794		26,421
Installment		235		399		634		12,547		13,181
Residential real estate
Commercial		3,281		26,845		30,126		436,180		466,306
Mortgage		17,460		24,422		41,882		867,555		909,437
HELOC		1,396		667		2,063		259,414		261,477
Installment		1,018		892		1,910		58,540		60,450
Consumer		11,204		2,465		13,669		656,447		670,116
Leases		5		-		5		2,658		2,663
Total loans	$	49,393	$	209,546	$	258,939	$	4,491,251	$	4,750,190

* Includes $3.6 million of loans past due 90 days or more and accruing.

Management’s policy is to initially place all renegotiated loans (troubled debt restructurings) on nonaccrual status.  At March 31, 2011 and December 31, 2010, there were $81.1 million and $80.7 million, respectively, of troubled debt restructurings included in nonaccrual loan totals.  Many of these troubled debt restructurings are performing under the renegotiated terms.  At March 31, 2011 and December 31, 2010, $42.3 million and $50.3 million of the total troubled debt restructurings were included within current loans above.  Management will continue to review the renegotiated loans and may determine it appropriate to move certain of the loans back to accrual status in the future.  At March 31, 2011 and December 31, 2010, Park had commitments to lend $289,000 and $434,000, respectively, of additional funds to borrowers whose terms had been modified in a troubled debt restructuring.

Management utilizes past due information as a credit quality indicator across the loan portfolio.  The past due information is the primary credit quality indicator within the following classes of loans: (1) mortgage loans and installment loans in the construction real estate segment; (2) mortgage loans, HELOC and installment loans in the residential real estate segment; and (3) throughout the consumer loan segment.  The primary credit indicator for commercial loans is based on an internal grading system that grades all commercial loans from 1 to 8.  Credit grades are continuously monitored by the respective loan officer and adjustments are made when appropriate.  A grade of 1 indicates little or no credit risk and a grade of 8 is considered a loss.  Commercial loans with grades of 1 to 4 (pass-rated) are considered to be of acceptable credit risk.  Commercial loans graded a 5 (special mention) are considered to be watch list credits and a higher loan loss reserve percentage is allocated to these loans.  Loans classified as special mention have potential weaknesses that deserve management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loans or of the institution’s credit position at some future date.  Commercial loans graded 6 (substandard), also considered watch list credits, are considered to represent higher credit risk and, as a result, a higher loan loss reserve percentage is allocated to these loans.  Loans classified as substandard loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any.  Loans so classified have a well defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.  Commercial loans that are graded a 7 (doubtful) are shown as nonperforming and Park generally charges these loans down to their fair value by taking a partial charge-off or recording a specific reserve.  Loans classified as doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.  Any commercial loan graded an 8 (loss) is completely charged-off.  The tables below present the recorded investment by loan grade at March 31, 2011 and December 31, 2010 for all commercial loans.

- 17 -

	March 31, 2011
(in thousands)	5 Rated		6 Rated		Nonaccrual		Pass Rated		Recorded Investment
Commercial, financial and agricultural:	$	23,616	$	11,122	$	19,464	$	676,758	$	730,960
Commercial real estate:		72,684		23,943		53,259		1,109,706		1,259,592
Construction real estate:
Vision commercial land and development		13,394		7,399		82,799		57,838		161,430
Remaining commercial		15,147		39,159		26,126		111,975		192,407
Residential real estate:
Commercial		27,311		17,948		58,123		361,371		464,753
Leases		-		-		-		2,385		2,385
Total Commercial Loans	$	152,152	$	99,571	$	239,771	$	2,320,033	$	2,811,527

	December 31, 2010
(in thousands)	5 Rated		6 Rated		Nonaccrual		Pass Rated		Recorded Investment
Commercial, financial and agricultural:	$	26,322	$	11,447	$	19,276	$	683,743	$	740,788
Commercial real estate:		57,394		26,992		57,941		1,089,093		1,231,420
Construction real estate:
Vision commercial land and development		10,220		7,941		87,424		66,031		171,616
Remaining commercial		14,021		39,062		27,080		116,152		196,315
Residential real estate:
Commercial		29,206		18,117		60,227		358,756		466,306
Leases		-		-		-		2,663		2,663
Total Commercial Loans	$	137,163	$	103,559	$	251,948	$	2,316,438	$	2,809,108

- 18 -

Note 5 – Allowance for Loan Losses

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 Note 1 of Park’s 2010 Annual Report.

The activity in the allowance for loan losses for the three months ended March 31, 2011 and March 31, 2010 is summarized. As noted below, management included a reallocation of the beginning allowance for credit losses balance, which primarily impacted the commercial loan segments of the loan portfolio. At December 31, 2010, management’s allowance calculation was performed in the aggregate for all commercial loans and then allocated across each segment of the commercial loan portfolio on a pro rata basis. During the first quarter of 2011, management determined that it would be more appropriate to perform the allowance calculation at the segment level and has provided an adjusted beginning balance for the allowance for credit losses in the table below.

	Three months ended March 31, 2011
	Commercial, financial and agricultural			Commercial real estate			Construction real estate		Residential  real estate		Consumer			Leases			Total
(In thousands)
Allowance for credit losses:
Beginning balance:	$	13,584		$	28,515		$	46,194	$	25,845	$	7,228		$	31		$	121,397
Reallocation of allowance		(1,888	)		(6,604	)		5,759		2,948		(189	)		(26	)		-
Adjusted beginning balance:		11,696			21,911			51,953		28,793		7,039			5			121,397
Charge-offs		734			1,785			3,420		2,487		1,973			-			10,399
Recoveries		569			802			96		501		390			3			2,361
Net Charge-offs		165			983			3,324		1,986		1,583			(3	)		8,038
Provision		260			1,646			5,043		4,746		1,809			(4	)		13,500
Ending balance:	$	11,791		$	22,574		$	53,672	$	31,553	$	7,265		$	4		$	126,859

The activity in the allowance for loan losses for the three months ended March 31, 2010 is summarized as follows:

(In thousands)	March 31, 2010
Allowance for credit losses:
Beginning balance:	$	116,717
Charge-offs		15,578
Recoveries		1,985
Net Charge-offs		13,593
Provision		16,550
Ending balance:	$	119,674

- 19 -

The composition of the allowance for loan losses at March 31, 2011 and December 31, 2010 was as follows:

	March 31, 2011
	Commercial, financial and agricultural			Commercial real estate			Construction real estate			Residential real estate			Consumer			Leases			Total
(In thousands)
Allowance for loan losses:
Ending allowance balance attributed to loans
Individually evaluated for impairment	$	2,980		$	9,760		$	28,385		$	6,162		$	-		$	-		$	47,287
Collectively evaluated for impairment		8,811			12,814			25,287			25,391			7,265			4			79,572
Total ending allowance balance	$	11,791		$	22,574		$	53,672		$	31,553		$	7,265		$	4		$	126,859
Loan Balance:
Loans individually evaluated for impairment	$	19,391		$	53,259		$	108,186		$	58,123		$	-		$	-		$	238,959
Loans collectively evaluated for impairment		708,602			1,201,377			281,147			1,661,931			656,618			2,341			4,512,016
Total ending loan balance	$	727,993		$	1,254,636		$	389,333		$	1,720,054		$	656,618		$	2,341		$	4,750,975
Allowance for loan losses as a percentage of loan balance:
Loans individually evaluated for impairment		15.37	%		18.33	%		26.24	%		10.60	%		-			-			19.79	%
Loans collectively evaluated for impairment		1.24	%		1.07	%		8.99	%		1.53	%		1.11	%		0.17	%		1.76	%
Total ending loan balance		1.62	%		1.80	%		13.79	%		1.83	%		1.11	%		0.17	%		2.67	%
Recorded Investment:
Loans individually evaluated for impairment	$	19,391		$	53,259		$	108,186		$	58,123		$	-		$	-		$	238,959
Loans collectively evaluated for impairment		711,569			1,206,333			282,211			1,667,513			659,505			2,385			4,529,516
Total ending loan balance	$	730,960		$	1,259,592		$	390,397		$	1,725,636		$	659,505		$	2,385		$	4,768,475

- 20 -

	December 31, 2010
	Commercial, financial and agricultural			Commercial real estate			Construction real estate			Residential real estate			Consumer			Leases			Total
(In thousands)
Allowance for loan losses:
Ending allowance balance attributed to loans
Individually evaluated for impairment	$	3,028		$	10,001		$	26,387		$	4,043		$	-		$	-		$	43,459
Collectively evaluated for impairment		10,556			18,514			19,807			21,802			7,228			31			77,938
Total ending allowance balance	$	13,584		$	28,515		$	46,194		$	25,845		$	7,228		$	31		$	121,397
Reallocated allowance for loan losses:
Ending allowance balance attributed to loans
Individually evaluated for impairment	$	3,028		$	10,001		$	26,387		$	4,043		$	-		$	-		$	43,459
Collectively evaluated for impairment		8,668			11,910			25,566			24,750			7,039			5			77,938
Total ending allowance balance	$	11,696		$	21,911		$	51,953		$	28,793		$	7,039		$	5		$	121,397
Loan Balance:
Loans individually evaluated for impairment	$	19,205		$	57,930		$	113,571		$	60,227		$	-		$	-		$	250,933
Loans collectively evaluated for impairment		718,697			1,168,686			292,909			1,631,982			666,871			2,607			4,481,752
Total ending loan balance	$	737,902		$	1,226,616		$	406,480		$	1,692,209		$	666,871		$	2,607		$	4,732,685
Reallocated allowance for loan losses as a percentage of loan balance:
Loans individually evaluated for impairment		15.77	%		17.26	%		23.23	%		6.71	%		-			-			17.32	%
Loans collectively evaluated for impairment		1.21	%		1.02	%		8.73	%		1.52	%		1.06	%		0.19	%		1.74	%
Total ending loan balance		1.59	%		1.79	%		12.78	%		1.70	%		1.06	%		0.19	%		2.57	%
Recorded Investment:
Loans individually evaluated for impairment	$	19,205		$	57,930		$	113,571		$	60,227		$	-		$	-		$	250,933
Loans collectively evaluated for impairment		721,583			1,173,490			293,962			1,637,443			670,116			2,663			4,499,257
Total ending loan balance	$	740,788		$	1,231,420		$	407,533		$	1,697,670		$	670,116		$	2,663		$	4,750,190

- 21 -

Loans collectively evaluated for impairment above include all performing loans at March 31, 2011 and December 31, 2010, as well as nonperforming loans internally classified as consumer loans.  Nonperforming consumer loans are not typically individually evaluated for impairment, but receive a portion of the statistical allocation of the allowance for loan losses.  Loans individually evaluated for impairment include all impaired loans internally classified as commercial loans at March 31, 2011 and December 31, 2010, which are evaluated for impairment in accordance with GAAP (see Note 1 of Park’s 2010 Annual Report).

Note 6 – Earnings Per Common Share

The following table sets forth the computation of basic and diluted earnings per common share for the three months ended March 31, 2011 and 2010.

(in thousands, except share and per share data)	Three months ended March 31,
	2011		2010
Numerator:
Income available to common shareholders	$	19,914	$	19,327
Denominator:
Denominator for basic earnings per share (weighted average common shares outstanding)		15,398,930		14,882,774
Effect of dilutive options and warrants		4,490		-
Denominator for diluted earnings per share (weighted average common shares outstanding adjusted for the effect of dilutive options and warrants)		15,403,420		14,882,774
Earnings per common share:
Basic earnings per common share	$	1.29	$	1.30
Diluted earnings per common share	$	1.29	$	1.30

As of March 31, 2011 and 2010, options to purchase 75,895 and 254,120 common shares, respectively, were outstanding under the Park National Corporation 2005 Incentive Stock Option Plan (the “2005 Plan”). A warrant to purchase 227,376 common shares was outstanding at both March 31, 2011 and 2010 as a result of Park’s participation in the U.S. Treasury’s Capital Purchase Program (the “CPP”). Warrants to purchase an aggregate of 71,984 common shares were outstanding at March 31, 2011 as a result of the issuance of common stock and warrants on December 10, 2010.  In addition, warrants to purchase an aggregate of 500,000 common shares were outstanding at March 31, 2010 as a result of the issuance of common stock and warrants on October 30, 2009.  All warrants issued on October 30, 2009 were exercised or expired as of October 30, 2010 and thus had no impact on the period ended March 31, 2011.

The common shares represented by the options and the warrants at March 31, 2011 and 2010, totaling a weighted average of 149,591 and 981,852, 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. The warrant to purchase 227,376 common shares pertaining to the CPP was not included in the 149,591 at March 31, 2011, as the dilutive effect of this warrant was 4,490 shares of common stock at March 31, 2011.  The exercise price of the CPP warrant to purchase 227,376 common shares is $65.97.

- 22 -

Note 7 – 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) (“VB”). 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.

Operating Results for the three months ended March 31, 2011
(in thousands)	PNB		VB			All Other			Total
Net interest income	$	60,236	$	6,755		$	2,322		$	69,313
Provision for loan losses		4,975		8,000			525			13,500
Other income (loss) and security gains		22,897		(3,177	)		86			19,806
Other expense		36,321		7,425			2,600			46,346
Net income (loss)		29,030		(7,664	)		12			21,378
Balance at March 31, 2011
Assets	$	6,573,541	$	802,154		$	(37,292	)	$	7,338,403

Operating Results for the three months ended March 31, 2010
(in thousands)	PNB		VB			All Other			Total
Net interest income	$	58,399	$	6,891		$	2,090		$	67,380
Provision for loan losses		4,750		11,300			500			16,550
Other income and security gains		24,778		151			85			25,014
Other expense		36,802		7,854			3,234			47,890
Net income (loss)		28,335		(7,456	)		(100	)		20,779
Balance at March 31, 2010
Assets	$	6,310,720	$	881,705		$	(16,338	)	$	7,176,087

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 month periods ended March 31, 2011 and 2010. The reconciling amounts for consolidated total assets for the three month periods ended March 31, 2011 and 2010, consist of the elimination of intersegment borrowings and the assets of the Parent Company and GFC which are not eliminated.

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Note 8 – Stock Option Plan

Park did not grant any stock options during the three month periods ended March 31, 2011 and 2010. Additionally, no stock options vested during the first three months of 2011 or 2010.

The following table summarizes stock option activity during the first three months of 2011.

	Stock Options		Weighted  Average Exercise Price Per Share
Outstanding at December 31, 2010		78,075	$	74.96
Granted		-		-
Exercised		-		-
Forfeited/Expired		2,180	$	74.96
Outstanding at March 31, 2011		75,895	$	74.96

All of the stock options outstanding at March 31, 2011 were exercisable. The aggregate intrinsic value of the outstanding stock options at March 31, 2011 was $0.  No stock options were exercised during the first three months of 2011 or 2010. The weighted average contractual remaining term was 1.7 years for the stock options outstanding at March 31, 2011.

All of the common shares delivered upon exercise of incentive stock options granted under the 2005 Plan are to be treasury shares. At March 31, 2011, incentive stock options granted under the 2005 Plan covering 75,895 common shares were outstanding. At March 31, 2011, Park held 452,769 treasury shares that are available for the 2005 Plan.

Note 9 – Mortgage Loans Held For Sale

Mortgage loans held for sale are carried at their fair value. At March 31, 2011 and December 31, 2010 respectively, Park had approximately $4.7 million and $8.3 million in mortgage loans held for sale.  These amounts are included in loans on the consolidated condensed balance sheets and in the residential real estate segments in Notes 4 and 5.

- 24 -

Note 10 – 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. For the three months ended March 31, 2011 and 2010, there were no investment securities deemed to be other-than-temporarily impaired.

Investment securities at March 31, 2011, were as follows:

(in thousands)
March 31, 2011 Securities Available-for-Sale	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Estimated Fair Value
Obligations of U.S. Treasury and other U.S. Government sponsored entities	$	317,301	$	1,870	$	2,688	$	316,483
Obligations of states and political subdivisions		8,977		111		-		9,088
U.S. Government sponsored entities asset-backed securities		1,022,215		23,550		10,160		1,035,605
Other equity securities		938		826		47		1,717
Total	$	1,349,431	$	26,357	$	12,895	$	1,362,893
March 31, 2011 Securities Held-to-Maturity	Amortized Cost		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses		Estimated Fair Value
Obligations of states and political subdivisions	$	2,867	$	9	$	-	$	2,876
U.S. Government sponsored entities asset-backed securities		611,197		15,452		4,191		622,458
Total	$	614,064	$	15,461	$	4,191	$	625,334

Management does not believe any individual unrealized loss as of March 31, 2011 or December 31, 2010, represents an 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 within net income in the period the other-than-temporary impairment is identified.

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Securities with unrealized losses at March 31, 2011, were as follows:

(in thousands)	Less than 12 months				12 months or longer				Total
March 31, 2011 Securities Available-for-Sale	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Obligations of U.S. Treasury and other U.S. Government sponsored entities	$	144,627	$	2,688	$	-	$	-	$	144,627	$	2,688
U.S. Government sponsored entities asset-backed securities		409,981		10,160		-		-		409,981		10,160
Other equity securities		80		30		211		17		291		47
Total	$	554,688	$	12,878	$	211	$	17	$	554,899	$	12,895
March 31, 2011 Securities Held-to-Maturity
U.S. Government sponsored entities asset-backed securities	$	285,106	$	4,191	$	-	$	-	$	285,106	$	4,191

Investment securities at December 31, 2010, were as follows:

(in thousands)
December 31, 2010 Securities Available-for-Sale	Amortized cost		Gross unrealized holding gains		Gross unrealized holding losses		Estimated fair value
Obligations of U.S. Treasury and other U.S. Government sponsored entities	$	272,301	$	2,968	$	1,956	$	273,313
Obligations of states and political subdivisions		10,815		281		52		11,044
U.S. Government sponsored entities asset-backed securities		990,204		30,633		9,425		1,011,412
Other equity securities		938		858		43		1,753
Total	$	1,274,258	$	34,740	$	11,476	$	1,297,522
December 31, 2010 Securities Held-to-Maturity	Amortized cost		Gross unrealized holding gains		Gross unrealized holding losses		Estimated fair value
Obligations of states and political subdivisions	$	3,167	$	7	$	-	$	3,174
U.S. Government sponsored entities asset-backed securities		670,403		17,157		4,620		682,940
Total	$	673,570	$	17,164	$	4,620	$	686,114

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Securities with unrealized losses at December 31, 2010, were as follows:

(in thousands)	Less than 12 months				12 months or longer				Total
December 31, 2010 Securities Available-for-Sale	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Obligations of U.S. Treasury and other U.S. Government sponsored entities	$	74,379	$	1,956	$	-	$	-	$	74,379	$	1,956
Obligations of states and political   subdivisions		1,459		52						1,459		52
U.S. Government sponsored entities asset-backed securities		418,156		9,425		-		-		418,156		9,425
Other equity securities		74		29		221		14		295		43
Total	$	494,068	$	11,462	$	221	$	14	$	494,289	$	11,476
December 31, 2010 Securities Held-to-Maturity
U.S. Government sponsored entities asset-backed securities	$	297,584	$	4,620	$	-	$	-	$	297,584	$	4,620

Park’s U.S. Government sponsored entities asset-backed securities consist primarily of 15-year residential mortgage-backed securities and collateralized mortgage obligations.

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The amortized cost and estimated fair value of investments in debt securities at March 31, 2011, 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.

(in thousands)	Amortized cost		Fair value
Securities Available-for-Sale
U.S. Treasury and sponsored entities notes:
Due within one year	$	124,986	$	126,762
Due one through five years		25,000		25,000
Due five through ten years		142,980		141,326
Due over ten years		24,335		23,395
Total	$	317,301	$	316,483
Obligations of states and political subdivisions:
Due within one year	$	7,674	$	7,699
Due one through five years		1,303		1,389
Total	$	8,977	$	9,088
U.S. Government sponsored entities asset-backed securities:
Total	$	1,022,215	$	1,035,605
(in thousands)	Amortized cost		Fair value
Securities Held-to-Maturity
Obligations of state and political subdivisions:
Due within one year	$	2,867	$	2,876
Total	$	2,867	$	2,876
U.S. Government sponsored entities asset-backed securities:
Total	$	611,197	$	622,458

All of Park’s securities shown in the above table as U.S. Treasury and sponsored entities notes are callable notes.  These callable securities have a final maturity in 8 to 12 years, but are shown in the table at their expected call date.

Note 11 – 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.

	March 31,		December 31,
(in thousands)	2011		2010
Federal Home Loan Bank stock	$	61,823	$	61,823
Federal Reserve Bank stock		6,876		6,876
Total	$	68,699	$	68,699

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Note 12 – 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. Pension plan contributions were $14 million and zero for the three month periods ended March 31, 2011 and 2010, respectively.

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

(in thousands)	Three months ended March 31,
	2011			2010
Service cost	$	1,139		$	918
Interest cost		992			896
Expected return on plan assets		(1,886	)		(1,457	)
Amortization of prior service cost		5			5
Recognized net actuarial loss		353			270
Benefit expense	$	603		$	632

Note 13 – 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.

At March 31, 2011, the interest rate swap’s fair value of $(1.4) million was included in other liabilities. No hedge ineffectiveness on the cash flow hedge was recognized during the three months ended March 31, 2011. At March 31, 2011, the variable rate on the $25 million subordinated note was 2.30% (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).

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For the three months ended March 31, 2011, the change in the fair value of the interest rate swap reported in other comprehensive income was a gain of $133,000 (net of taxes of $71,000). Amounts reported in accumulated other comprehensive income related to the interest rate swap will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.

As of March 31, 2011, 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.

As of March 31, 2011, Park had mortgage loan interest rate lock commitments outstanding of approximately $6.0 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 March 31, 2011, the fair value of the derivative instruments was approximately $85,000.  The fair value of the derivative instruments is included within loans held for sale and the corresponding income is included within non-yield loan fee 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.

In connection with the sale of Park’s Class B Visa shares during the 2009 year, Park entered into a swap agreement with the purchaser of the shares. The swap agreement adjusts for dilution in the conversion ratio of Class B Visa shares resulting from certain Visa litigation. At March 31, 2011, the fair value of the swap liability of $60,000 is an estimate of the exposure based upon probability-weighted potential Visa litigation losses.

Note 14 – Loan Servicing

Park serviced sold mortgage loans of $1.44 billion at March 31, 2011, compared to $1.47 billion at December 31, 2010 and $1.53 billion at March 31, 2010.  At March 31, 2011, $34.1 million of the sold mortgage loans were sold with recourse compared to $50.5 million at March 31, 2010.  Management closely monitors the delinquency rates on the mortgage loans sold with recourse.  At March 31, 2011, 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.

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Activity for MSRs and the related valuation allowance follows:

(in thousands)	Three Months Ended March 31,
	2011			2010
Mortgage servicing rights:
Carrying amount, net, beginning of period	$	10,488			10,780
Additions		330			575
Amortization		(521	)		(496	)
Change in valuation allowance		68			-
Carrying amount, net, end of period	$	10,365		$	10,859
Valuation allowance:
Beginning of period	$	748		$	574
Change in valuation allowance		(68	)		-
End of period	$	680		$	574

Servicing fees included in other service income were $1.4 million for the three months ended March 31, 2011.  For the three months ended March 31, 2010, servicing fees included in other service income were $1.3 million.

Note 15 – 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 Park 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” 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 and similar inputs.

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.

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Assets and Liabilities Measured at Fair Value on a Recurring Basis:

The following table presents assets and liabilities measured at fair value on a recurring basis:

Fair Value Measurements at March 31, 2011 using:
(in thousands)	Level 1		Level 2		Level 3		Balance at March 31, 2011
Assets
Investment securities
Obligations of U.S. Treasury and other U.S. Government sponsored entities	$	-	$	316,483	$	-	$	316,483
Obligations of states and political subdivisions		-		6,618		2,470		9,088
U.S. Government sponsored entities’ asset-backed securities		-		1,035,605		-		1,035,605
Equity securities		977		-		740		1,717
Mortgage loans held for sale		-		4,656		-		4,656
Mortgage IRLCs		-		85		-		85
Liabilities
Interest rate swap	$	-	$	1,430	$	-	$	1,430
Fair value swap		-		-		60		60

Fair Value Measurements at December 31, 2010 using:
(in thousands)	Level 1		Level 2		Level 3		Balance at December 31, 2010
Assets
Investment securities
Obligations of U.S. Treasury and other U.S. Government sponsored entities	$	-	$	273,313	$	-	$	273,313
Obligations of states and political subdivisions		-		8,446		2,598		11,044
U.S. Government sponsored entities’ asset-backed securities		-		1,011,412		-		1,011,412
Equity securities		1,008		-		745		1,753
Mortgage loans held for sale		-		8,340		-		8,340
Mortgage IRLCs		-		166		-		166
Liabilities
Interest rate swap	$	-	$	1,634	$	-	$	1,634
Fair value swap		-		-		60		60

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

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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 Fair Value Measurements tables exclude Park’s Federal Home Loan Bank stock and Federal Reserve Bank stock.  These assets are carried at their respective redemption values, 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 swap:  The fair value of the interest rate swap represents the estimated amount Park would pay or receive to terminate the agreement, considering current interest rates and the current creditworthiness of the counterparty.

Fair value swap:  The fair value of the swap agreement entered into with the purchaser of the Visa Class B shares represents an internally developed estimate of the exposure based upon probability-weighted potential Visa litigation losses.

Mortgage 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.Mortgage loans held for sale are estimated using security prices for similar product types and, therefore, are classified in Level 2.

The table below is a reconciliation of the beginning and ending balances of the Level 3 inputs for the three months ended March 31, 2011 and 2010, for financial instruments measured on a recurring basis and classified as Level 3:

Level 3 Fair Value Measurements Three months ended March 31, 2011 and 2010
(in thousands)	Obligations of states and political subdivisions			Equity Securities			Fair value swap
Balance, at January 1, 2011	$	2,598		$	745		$	(60	)
Total gains/(losses)
Included in earnings – realized		-						-
Included in earnings – unrealized		-						-
Included in other comprehensive income		(128	)		(5	)		-
Purchases, sales, issuances and settlements, other, net		-						-
Other		-						-
Balance March 31, 2011	$	2,470		$	740		$	(60	)
Balance, at January 1, 2010	$	2,751		$	-		$	(500	)
Total gains/(losses)
Included in earnings – realized		-			-			-
Included in earnings – unrealized		-			-			-
Included in other comprehensive income		(7	)		-			-
Purchases, sales, issuances and settlements, other, net		-			-			-
Other		-			-			-
Balance March 31, 2010	$	2,744		$	-		$	(500	)

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Assets and liabilities measured at fair value on a nonrecurring basis:

The following table presents assets and liabilities measured at fair value on a nonrecurring basis:

Fair Value Measurements at March 31, 2011 using:
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Balance at March 31, 2011
Impaired loans:
Commercial, financial and agricultural	$	-	$	-	$	10,418	$	10,418
Commercial real estate		-		-		29,306		29,306
Construction real estate:
Vision commercial land and development		-		-		49,061		49,061
Remaining commercial		-		-		12,219		12,219
Residential real estate		-		-		16,618		16,618
Total impaired loans	$	-	$	-	$	117,622	$	117,622
Mortgage servicing rights		-		2,668		-		2,668
Other real estate owned		-		-		47,133		47,133

Fair Value Measurements at December 31, 2010 Using:
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Balance at December 31, 2010
Impaired loans:
Commercial, financial and  agricultural	$	-	$	-	$	8,276	$	8,276
Commercial real estate						32,354		32,354
Construction real estate:
Vision commercial land and development						45,121		45,121
Remaining commercial						10,202		10,202
Residential real estate						15,304		15,304
Total impaired loans	$	-	$	-	$	111,257	$	111,257
Mortgage servicing rights		-		3,813		-		3,813
Other real estate owned		-		-		44,325		44,325

Impaired loans, which are measured for impairment using the fair value of the underlying collateral or the present value of expected future cash flows, had a book value of $239.0 million at March 31, 2011, after partial charge-offs of $55.4 million.  In addition, these loans had a specific valuation allowance of $47.3 million. Of the $239.0 million impaired loan portfolio, loans with a book value of $164.9 million were carried at their fair value of $117.6 million, as a result of the aforementioned charge-offs and specific valuation allowance.  The remaining $74.1 million of impaired loans are carried at cost, as the fair value of the underlying collateral or present value of expected future cash flows on these loans exceeds the book value for each individual credit.  At December 31, 2010, impaired loans had a book value of $250.9 million.  Of these, $111.3 million were carried at fair value, as a result of partial charge-offs of $53.6 million and a specific valuation allowance of $43.5 million.  The remaining $96.2 million of impaired loans at December 31, 2010 were carried at cost.

MSRs, which are carried at the lower of cost or fair value, were recorded at $10.4 million at March 31, 2011. Of the $10.4 million MSR carrying balance at March 31, 2011, $2.7 million was recorded at fair value and included a valuation allowance of $680,000.  The remaining $7.7 million was recorded at cost, as the fair value exceeds cost at March 31, 2011.  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.  As such, management, with the assistance of a third party specialist, determined fair value based on the discounted value of the future cash flows estimated to be received.  Significant inputs include the discount rate and assumed prepayment speeds utilized.  The calculated fair value was then compared to market values where possible to ascertain the reasonableness of the valuation in relation to current market expectations for similar products. Accordingly, MSRs are classified Level 2.  At December 31, 2010, MSRs were recorded at $10.5 million, including a valuation allowance of $748,000.

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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 March 31, 2011 and December 31, 2010, the estimated fair value of OREO, less estimated selling costs amounted to $47.1 million and $44.3 million, respectively.  The financial impact of OREO devaluation adjustments for the three months ended March 31, 2011 was $4.4 million.

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 consolidated condensed 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 consolidated condensed 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 debentures and notes: Fair values for subordinated debentures and notes 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.

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The fair value of financial instruments at March 31, 2011 and December 31, 2010, is as follows:

(in thousands)	March 31, 2011				December 31, 2010
	Carrying value		Fair value		Carrying value		Fair value
Financial assets:
Cash and money market instruments	$	134,247	$	134,247	$	133,780	$	133,780
Investment securities		1,976,957		1,988,227		1,971,092		1,983,636
Accrued interest receivable		25,083		25,083		24,137		24,137
Mortgage loans held for sale		4,656		4,656		8,340		8,340
Impaired loans carried at fair value		117,622		117,622		111,257		111,257
Other loans		4,501,838		4,513,284		4,491,691		4,511,419
Loans receivable, net	$	4,624,116	$	4,635,562	$	4,611,288	$	4,631,016
Financial liabilities:
Noninterest bearing checking accounts	$	955,005	$	955,005	$	937,719	$	937,719
Interest bearing transactions accounts		1,459,934		1,459,934		1,283,159		1,283,159
Savings accounts		938,585		938,585		899,288		899,288
Time deposits		1,958,301		1,970,493		1,973,903		1,990,163
Other		2,853		2,853		1,351		1,351
Total deposits	$	5,314,678	$	5,326,870	$	5,095,420	$	5,111,680
Short-term borrowings	$	316,719	$	316,719	$	663,669	$	663,669
Long-term debt		786,709		841,797		636,733		699,080
Subordinated debentures/notes		75,250		63,292		75,250		63,099
Accrued interest payable		6,255		6,255		6,123		6,123
Derivative financial instruments:
Interest rate swap	$	1,430	$	1,430	$	1,634	$	1,634
Fair value swap		60		60		60		60

Note 16 –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 months ended March 31, 2011, Park recognized a charge to retained earnings of $1.5 million representing the preferred stock dividend and accretion of the discount on the preferred stock, associated with Park’s 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, which is equal to 15% of the aggregate amount of the Senior Preferred Shares purchased by the U.S. Treasury, having an exercise price of $65.97. 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 CPP was approved by the U.S. 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.

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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 March 31, 2011 and 2010:

Three months ended March 31, (in thousands)	Before-tax amount			Tax expense (benefit)			Net-of-tax amount
2011:
Unrealized losses on available-for-sale securities	$	(3,166	)	$	(1,108	)	$	(2,058	)
Reclassification adjustment for gains realized in net income		(6,635	)		(2,322	)		(4,313	)
Unrealized net holding gain on cash flow hedge		204			71			133
Other comprehensive loss	$	(9,597	)	$	(3,359	)	$	(6,238	)
2010:
Unrealized gains on available-for-sale securities	$	5,545		$	1,940		$	3,605
Reclassification adjustment for gains realized in net income		(8,304	)		(2,906	)		(5,398	)
Unrealized net holding loss on cash flow hedge		(171	)		(60	)		(111	)
Other comprehensive loss	$	(2,930	)	$	(1,026	)	$	(1,904	)

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

(in thousands)	Before-tax amount			Tax expense (benefit)			Net-of-tax amount
March 31, 2011:
Changes in pension plan assets and benefit obligations	$	(24,503	)	$	(8,576	)	$	(15,927	)
Unrealized gains on available-for-sale securities		13,462			4,712			8,750
Unrealized net holding loss on cash flow hedge		(1,430	)		(501	)		(929	)
Total accumulated other comprehensive loss	$	(12,471	)	$	(4,365	)	$	(8,106	)
December 31, 2010:
Changes in pension plan assets and benefit obligations	$	(24,503	)	$	(8,576	)	$	(15,927	)
Unrealized gains on available-for-sale securities		23,263			8,142			15,121
Unrealized net holding loss on cash flow hedge		(1,634	)		(572	)		(1,062	)
Total accumulated other comprehensive loss	$	(2,874	)	$	(1,006	)	$	(1,868	)
March 31, 2010:
Changes in pension plan assets and benefit obligations	$	(20,769	)	$	(7,269	)	$	(13,500	)
Unrealized gains on available-for-sale securities		43,588			15,256			28,332
Unrealized net holding loss on cash flow hedge		(1,654	)		(579	)		(1,075	)
Total accumulated other comprehensive income	$	21,165		$	7,408		$	13,757

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Note 18 — Sale of Common Shares and Issuance of Common Stock Warrants

No additional shares of common stock were issued during the three months ended March 31, 2011.  Outstanding as of March 31, 2011 were 35,992 Series A Common Share Warrants and 35,992 Series B Common Share Warrants which were issued as part of the registered direct public offering completed on December 10, 2010.  The Series A and Series B Common Share Warrants have an exercise price of $76.41 and expiration dates of June 10, 2011 and December 10, 2011, respectively.

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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. We have tried, whenever possible, to identify such statements by using words such as “anticipate,” “estimate,” “expect,” “forecast,” “project,” “intend,” “plan,” “believe,” and similar expressions in connection with any discussion of future operating or financial performance. The forward-looking statements are based on management’s current 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: Park’s ability to execute its business plan successfully and within the expected timeframe; deterioration in the asset value of our loan portfolio may be worse than expected due to a number of factors, such as adverse changes in economic conditions that impair the ability of borrowers to repay their loans, the underlying value of the collateral could prove less valuable than assumed and cash flows may be worse than expected; Park’s ability to sell OREO properties at prices as favorable as anticipated; changes in general economic and financial market conditions, and weakening in the economy, specifically the real estate market and credit markets, either nationally 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; the effects of the Gulf of Mexico oil spill; changes in interest 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; 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 Park’s 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 and regulations concerning taxes, accounting, banking, securities and other aspects of the financial services industry, specifically the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; 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 (“SEC”) 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, 2010 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.

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Critical Accounting Policies

Note 1 of the Notes to Consolidated Financial Statements included in Park’s 2010 Annual Report to Shareholders (“2010 Annual Report”) 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 (GAAP) and general practices within the financial services industry. The preparation of financial statements in conformity with U.S. GAAP 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 believes 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 expected default probabilities, the loss given default, 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 current economic conditions. All of these 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. (Refer to the “Provision for Loan Losses” section within this MD&A for additional discussion.)

Other real estate owned (“OREO”), property acquired through foreclosure, is recorded at estimated fair value less anticipated selling costs (net realizable value). If the net realizable value is below the carrying value of the loan on the date of transfer, the difference is charged to the allowance for loan losses. Subsequent declines in value, OREO devaluations, are reported as adjustments to the carrying amount of OREO and are expensed within other income. Gains or losses not previously recognized, resulting from the sale of OREO, are recognized in other income on the date of sale. At March 31, 2011, OREO totaled $47.1 million, representing a 6.3% increase compared to $44.3 million at December 31, 2010.  The $2.8 million net increase in OREO during the first quarter of 2011 was a result of $10.3 million in new OREO offset by sales of $3.1 million and devaluations of $4.4 million.

U.S. GAAP requires management to establish a fair value hierarchy, which has the objective of maximizing the use of observable market inputs. U.S. 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 those with significant 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 March 31, 2011, the fair value of assets based on Level 3 inputs for Park was approximately $168.0 million. This was 10.9% of the total amount of assets measured at fair value as of the end of the first quarter. The fair value of impaired loans was approximately $117.6 million (or 70.0%) of the total amount of Level 3 inputs. Additionally, there were $74.1 million of loans that were impaired and carried at cost, as fair value exceeded book value for each individual credit. 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 through 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.

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Management believes that the accounting for goodwill and other intangible assets also involves a higher degree of judgment than most other significant accounting policies. GAAP establishes standards for the amortization of acquired intangible assets and the impairment assessment of goodwill. 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 banking subsidiaries 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 subsidiary banks, is estimated by reviewing the past and projected operating results for the Park subsidiary banks, deposit and loan totals for the Park subsidiary banks and banking industry comparable information. At March 31, 2011, on a consolidated basis, Park had core deposit intangibles of $5.4 million subject to amortization and $72.3 million of goodwill, which was not subject to periodic amortization. The core deposit intangibles recorded on the balance sheet of PNB totaled $1.3 million and the core deposit intangibles at Vision Bank were $4.1 million. The goodwill asset of $72.3 million is carried on the balance sheet of PNB.  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.

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Comparison of Results of Operations

For the Three Months Ended March 31, 2011 and 2010

Summary Discussion of Results

Net income for the three months ended March 31, 2011 was $21.4 million compared to $20.8 million for the first quarter of 2010, an increase of $599,000 or 2.9%.  Net income available to common shareholders (which is net of the preferred stock dividends and the related accretion) was $19.9 million for the first quarter of 2011 compared to $19.3 million for the three months ended March 31, 2010, an increase of $587,000 or 3.0%.  Preferred stock dividends and the related accretion of the discount on the preferred stock, pertaining to the $100 million of preferred stock issued to the U.S. Treasury on December 23, 2008, were $1.46 million for the first quarter of 2011 and $1.45 million for the same quarter in 2010.

Diluted earnings per common share were $1.29 for the first quarter of 2011 compared to $1.30 for the first quarter of 2010, a decrease of $0.01 per share or 0.8%.  Weighted average common shares outstanding were 15,398,930 for the three months ended March 31, 2011 compared to 14,882,774 common shares for the first quarter of 2010, an increase of 516,156 common shares or 3.5%.  Park sold a total of 509,184 common shares, issued from treasury shares, during the last three quarters of 2010. Most of the sales of common shares (437,200) resulted from the exercise of Series A and Series B Common Share Warrants issued in connection with the registered direct public offering which closed on October 30, 2009. In addition, Park sold 71,984 common shares, out of treasury shares, in connection with a registered direct public offering which closed on December 10, 2010.

The following tables compare the components of net income for the three month period ended March 31, 2011 with the components of net income for the three month period ended March 31, 2010.  This information is provided for Park, Vision Bank and Park excluding Vision Bank (“Park’s Ohio-based operations”).  In general for 2011, the operating results for Park’s Ohio-based operations were a little stronger than management projected, but the results for Vision Bank were weaker than anticipated.

Park – Summary Income Statement
	Three months ended March 31,
(in thousands)	2011		2010		% Change
Net interest income	$	69,313	$	67,380		2.87	%
Provision for loan losses		13,500		16,550		-18.43	%
Total other income		13,171		16,710		-21.18	%
Gain on sale of securities		6,635		8,304		-20.10	%
Total other expense		46,346		47,890		-3.22	%
Income before taxes	$	29,273	$	27,954		4.72	%
Income taxes		7,895		7,175		10.03	%
Net income	$	21,378	$	20,779		2.88	%

For the three months ended March 31, 2011, the operating results for net interest income, provision for loan losses, and total other expense were consistent with management’s forecast for the projected operating results for 2011. The operating results for total other income were below management’s forecast for 2011. This guidance was included in Park’s 2010 Annual Report in the “Financial Review” section on pages 38 through 40.

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The following table compares the guidance for 2011 that management had provided in the 2010 Annual Report with the actual results for the three month period ended March 31, 2011.

(in thousands)	Projected results for  2011		25% of annual projection		Actual results  for the first quarter of 2011
Net interest income	$	268,000 to $278,000	$	67,000 - $69,500	$	69,313
Provision for loan losses	$	47,000 to $57,000	$	11,750 - $14,250	$	13,500
Total other income	$	63,000 to $67,000	$	15,750 - $16,750	$	13,171
Total other expense	$	183,000 to $187,000	$	45,750 - $46,750	$	46,346

Park’s management believes that the guidance previously provided for net interest income, provision for loan losses and total other expense continues to be a good estimate for 2011.  Management’s latest projection for total other income is a range of $60 million to $64 million for 2011.  This adjustment in our guidance for total other income in 2011 is primarily due to the net $4.1 million charge during the first quarter of 2011 for devaluations and gains and losses on the sale of other real estate owned, which was an increase from management’s original projection.

Park’s management sold approximately $105 million of U. S. Government sponsored entity mortgage-backed securities during the first quarter of 2011 for a pre-tax gain of $6.6 million. These securities were sold at a price of approximately 106.2% of par with an estimated yield to the buyer of 2.10%.  The book yield on these mortgage-backed securities was approximately 5.02%.  Management reinvested the proceeds from the sale of the mortgage-backed securities during the month of March in 15 year U.S. Government sponsored entity mortgage-backed securities at a purchase yield of approximately 3.60%.  Management does not currently forecast the sale of additional securities in 2011. However, the sale of additional securities for a gain in 2011 is possible.  At March 31, 2011, Park owned approximately $267 million of U.S. Government sponsored entity mortgage-backed securities with a coupon interest rate of 5.00% or higher.  This portion of the investment portfolio has a weighted average book yield of 5.33% and an unrealized gain of $21 million.

The following table provides a summary income statement for Vision Bank.

Vision Bank – Summary Statement of Operations
	Three Months Ended March 31,
(in thousands)	2011			2010			% Change
Net interest income	$	6,755		$	6,891			-1.97	%
Provision for loan losses		8,000			11,300			-29.20	%
Other income		(3,177	)		151		N.M.
Gain on sale of securities		—			—			—
Other expense		7,425			7,854			-5.46	%
Loss before taxes	$	(11,847	)	$	(12,112	)		2.19	%
Income tax credits		(4,183	)		(4,656	)		10.16	%
Net loss	$	(7,664	)	$	(7,456	)		-2.79	%
N.M. – Not Meaningful

The operating results for Vision Bank for the first quarter of 2011 were worse than management forecast.  This negative variance was primarily due to the recognized losses from devaluations of other real estate owned of $4.3 million which resulted in a loss in total other income of $3.2 million for the three months ended March 31, 2011.  Management expects that the devaluations of other real estate owned will not be as significant over the next three quarters at Vision Bank.

The following table provides a summary income statement for Park excluding Vision Bank.

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Park Excluding Vision Bank – Summary Income Statement
	Three Months Ended March 31,
(in thousands)	2011		2010		% Change
Net interest income	$	62,558	$	60,489		3.42	%
Provision for loan losses		5,500		5,250		4.76	%
Other income		16,348		16,559		-1.27	%
Gain on sale of securities		6,635		8,304		-20.10	%
Other expense		38,921		40,036		-2.78	%
Income before taxes	$	41,120	$	40,066		2.63	%
Income taxes		12,078		11,831		2.09	%
Net income	$	29,042	$	28,235		2.86	%

As previously mentioned, the operating results for Park’s Ohio-based banking divisions for the three month period ended March 31, 2011 were very solid and better than management’s forecast.

Net Interest Income Comparison for the First Quarter of 2011 and 2010

Park’s principal source of earnings is net interest income, the difference between total interest income and total interest expense.  Net interest income results from average balances outstanding for interest earning assets and interest bearing liabilities in conjunction with the average rates earned and paid on them.  Net interest income increased by $1.9 million or 2.9% to $69.3 million for the first quarter of 2011 compared to $67.4 million for the first quarter of 2010.

The following table compares the average balance and tax equivalent yield on interest earning assets and the average balance and cost of interest bearing liabilities for the first quarter of 2011 with the same quarter in 2010.

Three months ended March 31,
	2011					2010
(in thousands)	Average balance		Tax equivalent %			Average balance		Tax  equivalent %
Loans (1)	$	4,743,075		5.63	%	$	4,617,479		5.87	%
Taxable investments		1,939,873		3.98	%		1,766,642		4.70	%
Tax exempt investments		12,240		7.63	%		18,233		7.49	%
Money market instruments		26,948		0.10	%		125,795		0.22	%
Interest earning assets	$	6,722,136		5.14	%	$	6,528,149		5.45	%
Interest bearing deposits	$	4,245,255		0.74	%	$	4,367,017		1.15	%
Short-term borrowings		391,366		0.28	%		306,266		0.46	%
Long-term debt		847,800		3.52	%		729,618		3.92	%
Interest bearing liabilities	$	5,484,421		1.14	%	$	5,402,901		1.49	%
Excess interest earning assets	$	1,237,715				$	1,125,248
Net interest spread				4.00	%				3.96	%
Net interest margin				4.21	%				4.22	%

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

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Average interest earning assets for the first quarter of 2011 increased by $194 million or 3.0% to $6,722 million compared to $6,528 million for the first quarter of 2010.  The average yield on interest earning assets decreased by 31 basis points to 5.14% for the first quarter of 2011 compared to 5.45% for the first quarter of 2010.

Average interest bearing liabilities for the first quarter of 2011 increased by $81.5 million or 1.5% to $5,484 million compared to $5,403 million for the first quarter of 2010.  The average cost of interest bearing liabilities decreased by 35 basis points to 1.14% for the first quarter of 2011 compared to 1.49% for the first quarter of 2010.

Interest Rates

Short-term interest rates continue to be extremely low. The average federal funds rate was 0.16% for the first quarter of 2011 and 0.13% for the first quarter of 2010.

In December 2008, the Federal Open Market Committee (“FOMC”) of the Federal Reserve lowered the targeted federal funds rate to a range of 0% to 0.25% in response to a severe recession in the U.S. economy.  Economic conditions began to improve in the second half of 2009 and continued to improve throughout 2010.  However, the U.S. unemployment rate continues to be relatively high at 8.8% at March 31, 2011.

Park’s management expects that the FOMC will continue to maintain the targeted federal funds interest rate in the range of 0% to 0.25% during 2011.  The annual average federal funds rate was 0.16% for 2009 and 0.18% for 2010.

Discussion of Loans, Investments, Deposits and Borrowings

Average loan balances increased by $126 million or 2.7% to $4,743 million for the three months ended March 31, 2011, compared to $4,617 million for the first quarter of 2010.  The average yield on the loan portfolio decreased by 24 basis points to 5.63% for the first quarter of 2011 compared to 5.87% for the first quarter of 2010.

Total loan balances outstanding at March 31, 2011 were $4,751 million compared to $4,733 million at December 31, 2010, an increase of $18 million or 0.4%.  Park’s management continues to forecast modest loan growth in 2011 with a projected increase of 1% to 3% for the year.

The average balance of taxable investment securities increased by $173 million or 9.8% to $1,940 million for the first quarter of 2011 compared to $1,767 million for the first quarter of 2010.  The average yield on taxable investment securities was 3.98% for the first quarter of 2011 compared to 4.70% for the first quarter of 2010.

The average balance of tax exempt investment securities decreased by $6 million or 32.9% to $12 million for the first quarter of 2011 compared to $18 million for the first quarter of 2010.  The tax equivalent yield on tax exempt investment securities was 7.63% for the first quarter of 2011 and 7.49% for the first quarter of 2010.  Park has not purchased any tax exempt investment securities for the past several quarters and does not plan to purchase tax exempt securities in 2011.

The average balance of money market instruments decreased by $99 million or 78.6% to $27 million for the first quarter of 2011 compared to $126 million for the first quarter of 2010.  The average yield on money market instruments was 0.10% for the first quarter of 2011 compared to 0.22% for the first quarter of 2010.  Park’s management plans on being fully invested in 2011 and as a result expects that the average balance of money market instruments for the last three quarters of 2011 will be similar to the average balance of money market instruments for the first quarter of 2011.

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The amortized cost of total investment securities was $2,032 million at March 31, 2011, compared to $2,017 million at December 31, 2010.  Management expects to maintain the total investment portfolio at approximately $2,000 million during the last three quarters of 2011.

At March 31, 2011, the tax equivalent yield on Park’s investment portfolio was 3.86% and the remaining average life was 4.25 years.

Average interest bearing deposit accounts decreased by $122 million or 2.8% to $4,245 million for the first quarter of 2011 compared to $4,367 million for the first quarter of 2010.  The average interest rate paid on interest bearing deposits decreased by 41 basis points to 0.74% for the first quarter of 2011 compared to 1.15% for the first quarter last year.

Average total borrowings were $1,239 million for the three months ended March 31, 2011, compared to $1,036 million for the first quarter of 2010, an increase of $203 million or 19.6%.  The average interest rate paid on total borrowings was 2.50% for the first quarter of 2011 compared to 2.90% for the first quarter of 2010.

The net interest spread (the difference between the tax equivalent yield on interest earning assets and the cost of interest bearing liabilities) increased by 4 basis points to 4.00% for the first quarter of 2011 compared to 3.96% for the first quarter last year.  The net interest margin (the annualized tax equivalent net interest income divided by average interest earning assets) was 4.21% for the first quarter of 2011 compared to 4.22% for the first quarter of 2010.

Guidance on Net Interest Income for 2011

Management provided guidance in Park’s 2010 Annual Report (page 38) that net interest income for 2011 would be approximately $268 million to $278 million, the tax equivalent net interest margin would be approximately 4.10% to 4.20% and the average interest earning assets for 2011 would be approximately $6,550 million.

The actual results for the first three months of 2011 were slightly above management’s guidance.  Net interest income for the first three months of 2011 was $69.3 million, which annualized would be approximately $281 million for 2011.  The tax equivalent net interest margin was 4.21% and average interest earning assets were $6,722 million for the first three months of 2011.

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

(in thousands)	Average interest earning assets		Net interest income		Tax equivalent net interest margin
March 2010	$	6,528,149	$	67,380		4.22	%
June 2010	$	6,468,094	$	68,721		4.29	%
September 2010	$	6,484,941	$	69,445		4.28	%
December 2010	$	6,447,046	$	68,498		4.25	%
March 2011	$	6,722,136	$	69,313		4.21	%

Management’s current forecast projects that net interest income for 2011 will be near the top of the range of $268 million to $278 million.  Management also expects that average interest earning assets will be approximately $6,750 million for the remaining three quarters of 2011 and that the tax equivalent net interest margin will be about 4.10% for the last nine months of 2011.

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Provision for Loan Losses

The provision for loan losses was $13.5 million for the three months ended March 31, 2011, compared to $16.6 million for the same period in 2010.  Net loan charge-offs were $8.0 million for the first quarter of 2011, compared to $13.6 million for the first quarter of 2010.  The annualized ratio of net loan charge-offs to average loans was 0.69% for the three months ended March 31, 2011, compared to 1.19% for the same period in 2010.

The loan loss provision for Vision Bank was $8.0 million for the three months ended March 31, 2011, compared to $11.3 million for the same quarter in 2010.  Vision Bank had net loan charge-offs of $4.0 million, or an annualized 2.53% of average loans for the first quarter of 2011, compared to net loan charge-offs of $9.1 million, or 5.40% of average loans for the same period in 2010.

Park’s Ohio-based operations had a provision for loan losses of $5.5 million for the first quarter of 2011, compared to $5.3 million for the first quarter of 2010.  Net loan charge-offs for Park’s Ohio-based operations were $4.0 million, or an annualized 0.40% of average loans for the first quarter of 2011, compared to $4.5 million, or an annualized 0.46% of average loans for the first quarter of 2010.

The following table provides additional information related to Park’s allowance for loan losses, including information related to specific reserves and general reserves, at March 31, 2011 and December 31, 2010.

Park National Corporation – Allowance for Loan & Lease Losses (ALLL)
(in thousands)	March 31,  2011			December 31, 2010
Total ALLL	$	126,859		$	121,397
Specific reserves		47,287			43,459
General reserves	$	79,572		$	77,938
Total loans	$	4,750,975		$	4,732,685
Impaired commercial loans		238,959			250,933
Non-impaired loans	$	4,512,016		$	4,481,752
Total ALLL to total loan ratio		2.67	%		2.57	%
General reserves as a % of non-impaired loans		1.76	%		1.74	%

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The following table compares Park National Corporation’s nonperforming assets at March 31, 2011, December 31, 2010 and March 31, 2010.

Park National Corporation - Nonperforming Assets
(in thousands)	March 31,  2011			December 31, 2010			March 31, 2010
Nonaccrual loans	$	278,819		$	289,268		$	230,498
Renegotiated loans		260			-			60
Loans past due 90 days or more		2,228			3,590			11,853
Total nonperforming loans	$	281,307		$	292,858		$	242,411
Other Real Estate Owned – Park National Bank		9,788			8,385			10,802
Other Real Estate Owned – S E Property Holdings		13,004			-			-
Other Real Estate Owned – Vision Bank		24,341			35,940			35,052
Total nonperforming assets	$	328,440		$	337,183		$	288,265
Percentage of nonperforming loans to total loans		5.92	%		6.19	%		5.27	%
Percentage of nonperforming assets to total loans		6.91	%		7.12	%		6.27	%
Percentage of nonperforming assets to total assets		4.48	%		4.62	%		4.02	%

During the first quarter of 2011, Park formed a limited liability company, organized under the laws of the state of Ohio, called SE Property Holdings, LLC (“SE Property Holdings”), as a direct subsidiary of Park. The purpose of SE Property Holdings is to purchase other real estate owned (“OREO”) from Vision Bank and continue to market such property for sale. As of March 31, 2011, approximately $13 million of OREO was held by SE Property Holdings, which had been purchased from Vision Bank (at the current fair market value) during the quarter. Management expects that the remaining OREO held by Vision Bank as of March 31, 2011, of $24.3 million, will be purchased by SE Property Holdings (at the then current fair market value) during the second quarter of 2011. Management plans to continue marketing the properties held by SE Property Holdings and sell such properties in an efficient manner.

Vision Bank’s nonperforming assets at March 31, 2011, December 31, 2010 and March 31, 2010, were as follows:

Vision Bank - Nonperforming Assets
(in thousands)	March 31,  2011			December 31, 2010			March 31, 2010
Nonaccrual loans	$	163,343		$	171,453		$	145,012
Renegotiated loans		-			-			-
Loans past due 90 days or more		-			364			9,052
Total nonperforming loans	$	163,343		$	171,817		$	154,064
Other Real Estate Owned		24,341			35,940			35,052
Total nonperforming assets	$	187,684		$	207,757		$	189,116
Percentage of nonperforming loans to total loans		26.06	%		26.82	%		22.84	%
Percentage of nonperforming assets to total loans		29.95	%		32.43	%		28.04	%
Percentage of nonperforming assets to total assets		23.40	%		25.71	%		21.45	%

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Nonperforming assets for Park, excluding Vision Bank at March 31, 2011, December 31, 2010 and March 31, 2010, are included in the following table:

Park, excluding Vision Bank - Nonperforming Assets
(in thousands)	March 31,  2011			December 31, 2010			March 31, 2010
Nonaccrual loans	$	115,476		$	117,815		$	85,486
Renegotiated loans		260			-			60
Loans past due 90 days or more		2,228			3,226			2,801
Total nonperforming loans	$	117,964		$	121,041		$	88,347
Other Real Estate Owned – Park National Bank		9,788			8,385			10,802
Other Real Estate Owned – SE Property Holdings		13,004			-			-
Total nonperforming assets	$	140,756		$	129,426		$	99,149
Percentage of nonperforming loans to total loans		2.86	%		2.96	%		2.25	%
Percentage of nonperforming assets to total loans		3.41	%		3.16	%		2.53	%
Percentage of nonperforming assets to total assets		2.15	%		1.99	%		1.58	%

Park’s allowance for loan losses includes an allocation for loans specifically identified as impaired under U.S. GAAP. At March 31, 2011, loans considered to be impaired consisted substantially of commercial loans graded as “doubtful” and placed on nonaccrual status. As a result of significant losses within Vision Bank’s CL&D loan portfolio over the past three years, management continues to believe it is necessary to segregate this portion of the portfolio for both impaired credits, as well as those accruing CL&D loans at March 31, 2011. Cumulative charge-offs within Vision Bank’s impaired CL&D loan portfolio at March 31, 2011 was $30.5 million. Additionally, at March 31, 2011, management had established a specific reserve of $25.5 million related to those CL&D loans at Vision Bank that were deemed to be impaired. The aggregate of cumulative prior charge-offs on impaired Vision Bank CL&D loans, along with the specific reserves at March 31, 2011, totaled $56.0 million. The following table summarizes the CL&D loan portfolio at Vision Bank:

Vision Bank CL&D Loan Portfolio
(in thousands) - end of each respective period	March 31, 2011			Dec. 31, 2010			Dec. 31, 2009			Dec. 31, 2008
CL&D loans	$	161,140		$	170,989		$	218,263		$	251,443
Performing CL&D loans		79,080			84,498			132,380			191,712
Impaired CL&D loans	$	82,060		$	86,491		$	85,883		$	59,731
Specific reserve on impaired CL&D loans		25,543			23,585			21,802			3,134
Cumulative charge-offs on impaired CL&D loans		30,538			28,652			24,931			18,839
Specific reserves plus cumulative charge-offs	$	56,081		$	52,237		$	46,733		$	21,973
Specific reserves plus cumulative charge-offs as a percentage of impaired CL&D loans plus cumulative charge-offs		49.8	%		45.4	%		42.2	%		28.0	%

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When determining the quarterly loan loss provision, Park reviews the grades of commercial loans. These loans are graded from 1 to 8. A grade of 1 indicates little or no credit risk and a grade of 8 is considered a loss. Commercial loans with grades of 1 to 4 (pass-rated) are considered to be of acceptable credit risk. Commercial loans graded a 5 (special mention) are considered to be watch list credits and a higher loan loss reserve percentage is allocated to these loans. Commercial loans graded 6 (substandard), also considered watch list credits, are considered to represent higher credit risk and, as a result, a higher loan loss reserve percentage is allocated to these loans. Generally, commercial loans that are graded a 6 are considered for partial charge-off. Commercial loans that are graded a 7 (doubtful) are shown as nonperforming and Park generally charges these loans down to their fair value by taking a partial charge-off or recording a specific reserve. Any commercial loan graded an 8 (loss) is completely charged-off.

A significant portion of Park’s 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, jeopardizing repayment of the loan, resulting in a higher probability that Park will suffer a loss on the loan unless the weakness is corrected. As previously discussed, management believes it is appropriate to segregate the Vision Bank CL&D loans from other commercial loans that are still accruing. The Vision CL&D loans that are still accruing at March 31, 2011 totaled $79.1 million compared to $84.5 million at December 31, 2010. Park’s loss experience, defined as charge-offs plus changes in specific reserves, on CL&D loans for the 36 months ended December 31, 2010 was an annual rate of 12.55%. Management has allocated an allowance for loan losses to the $79.1 million of accruing CL&D loans based on this historical loss experience, judgmentally increased to cover approximately 1.25 years of probable incurred losses, for a total reserve of $12.2 million or 15.4%. Further, we have allocated 15.4% to the $79.1 million of CL&D loans, regardless of the current loan grade, as this portion of the loan portfolio has experienced significant declines in collateral values, and thus if management determines that borrowers are unable to pay in accordance with the contractual terms of the loan agreement, significant specific reserves have typically been necessary. Park’s 36-month loss experience through the year ended December 31, 2010, defined as charge-offs plus changes in specific reserves, within the remaining commercial loan portfolio (excluding Vision Bank’s CL&D loans) was 1.14% of the principal balance of these loans. Park’s management believes it is appropriate to cover approximately 1.5 years worth of probable incurred losses within the other accruing commercial loan portfolio, thus the total reserve for loan losses is $43.8 million or 1.77% of the outstanding principal balance of other accruing commercial loans at March 31, 2011. The overall reserve of 1.77% for other accruing commercial loans breaks down as follows: pass-rated commercial loans are reserved at 1.06%; special mention commercial loans are reserved at 4.03%; and substandard commercial loans are reserved at 15.67%.

Generally, consumer loans are not individually graded. Consumer loans include: (1) mortgage and installment loans included in the construction real estate segment of the loan portfolio; (2) mortgage, home equity lines of credit (HELOC), and installment loans included in the residential real estate segment of the loan portfolio; and (3) all loans included in the consumer segment of the loan portfolio. The amount of loan loss reserve assigned to these loans is based on historical loss experience over the 36 months ended December 31, 2010, judgmentally increased to cover approximately 1.5 years of probable incurred losses.

The judgmental increases discussed above incorporate management’s evaluation of the impact of environmental qualitative factors which pose additional risks and assign a component of the allowance for loan losses in consideration of these factors. 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; and 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. As always, management is working to address weaknesses in those loans that may result in future loss. Actual loss experience may be more or less than the amount allocated.

Management provided guidance in Park’s 2010 Annual Report (page 40) that the loan loss provision for 2011 would be approximately $47 million to $57 million.  The actual results for the loan loss provision in the first three months of 2011 were consistent with management’s guidance, at $13.5 million.  Park’s most recent projection continues to indicate that the loan loss provision for 2011 will be $47 to $57 million.  However, if Park experiences a significant increase in nonperforming loans, there is a risk that management’s projected loan loss provision could be higher.

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Total Other Income

Total other income exclusive of securities gains decreased by $3.5 million or 21.2% to $13.2 million for the quarter ended March 31, 2011, compared to $16.7 million for the first quarter of 2010.

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

(in thousands)	Three months ended March 31,
	2011			2010			Change
Income from fiduciary activities	$	3,722		$	3,422		$	300
Service charges on deposits		4,245			4,746			(501	)
Other service income		2,301			2,982			(681	)
Checkcard fee income		2,976			2,444			532
Bank owned life insurance income		1,229			1,216			13
ATM fees		654			765			(111	)
OREO devaluations		(4,394	)		(1,145	)		(3,249	)
Other		2,438			2,280			158
Total other income	$	13,171		$	16,710		$	(3,539	)

Income from fiduciary activities, which represents revenue earned from Park’s trust activities, increased by $300,000, or 8.8%, to $3.7 million for the three months ended March 31, 2011, compared to $3.4 million for the same period in 2010.  Fiduciary fees are generally charged based on the market value of customer accounts.  The market value for assets under management at March 31, 2011, has increased by approximately 10.5% compared to March 31, 2010.

Service charges on deposits decreased by $501,000, or 10.6%, to $4.2 million for the three month period ended March 31, 2011, compared to $4.7 million for the same period in 2010. This decrease was primarily attributable to a decline in non-sufficient funds (“NSF”) and overdraft charges during the first quarter of 2011.

Fee income earned from origination and sale into the secondary market of long-term fixed-rate mortgage loans is included within other non-yield related fees in the subcategory “Other service income”. Other service income decreased by $681,000, or 22.8%, to $2.3 million for the three months ended March 31, 2011, compared to $3.0 million for the same period in 2010.  This decrease was due to a decline in the volume of fixed-rate residential mortgage loans that Park originated and sold into the secondary market in the first quarter of 2011 compared to the same period in 2010.

Checkcard fee income, which is generated from debit card transactions increased $532,000, or 21.8%, to $3.0 million for the three months ended March 31, 2011, compared to $2.4 million for the same period in 2010. This increase is attributable to continued increases in the volume of debit card transactions.

OREO devaluations increased by $3.2 million to $4.4 million for the three months ended March 31, 2011, compared to $1.1 million for the same period in 2010.  The increase was largely due to devaluations of other real estate owned at Vision Bank of approximately $4.3 million through the first three months of 2011, compared to $1.0 million in devaluations for the same period in 2010.  Management does not believe the devaluations for the first quarter of 2011 to be representative of the remaining three quarters of 2011, based on management’s decision to accelerate the appraisal dates for much of the OREO property at Vision Bank, in order to expedite the transfer of OREO to SE Property Holdings, LLC.

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

	Three months ended March 31, 2011
(In thousands)	Ohio-based operations			Vision  Bank			Total
Income from fiduciary activities	$	298		$	2		$	300
Service charges on deposits		(358	)		(143	)		(501	)
Non-yield loan fee income		(690	)		9			(681	)
Checkcard fee income		330			202			532
Bank owned life insurance income		18			(5	)		13
ATM fees		14			(125	)		(111	)
OREO devaluations		26			(3,275	)		(3,249	)
Other		151			7			158
Total	$	(211	)	$	(3,328	)	$	(3,539	)

Management provided guidance in Park’s 2010 Annual Report (page 39) that total other income would be approximately $63 million to $67 million for 2011. Management’s most recent projection estimates that total other income, excluding gains from the sale of securities, will be between $60 million and $64 million. The reduction in the latest projection as compared to the projection in the 2010 Annual Report is primarily a result of larger devaluations in respect of other real estate owned.

Gain on Sale of Securities

For the three months ended March 31, 2011, Park sold approximately $105 million of U.S. Government sponsored entity mortgage-backed securities for a pre-tax gain of $6.6 million. For the three months ended March 31, 2010, Park sold $201 million of U.S. Government sponsored entity mortgage backed securities, which resulted in a pre-tax gain of $8.3 million. In addition, $75 million of U.S. Government sponsored entity callable securities were sold during the first quarter of 2010 at their book value.

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Total Other Expense

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

	Three months ended March 31,
(in thousands)	2011		2010		Change
Salaries and employee benefits	$	25,064	$	25,171	$	(107	)
Occupancy expense		3,000		3,117		(117	)
Furniture and equipment expense		2,657		2,632		25
Data processing fees		1,253		1,593		(340	)
Professional fees and services		4,874		4,856		18
Amortization of intangibles		669		936		(267	)
Marketing		623		902		(279	)
Insurance		2,269		2,198		71
Communication		1,556		1,769		(213	)
State taxes		457		845		(388	)
Other		3,924		3,871		53
Total other expense	$	46,346	$	47,890	$	(1,544	)

Other expenses have decreased by $1.5 million for the three months ended March 31, 2011 compared to the same period in 2010.  This decrease was primarily due to declines in salaries and employee benefits ($107,000), occupancy expense ($117,000), data processing expenses ($340,000), marketing expense ($279,000) and communications expense ($213,000), which is the result of management’s continued efforts to reduce expenses and increase efficiency.  Additionally, amortization of intangibles declined by $267,000, as certain intangibles related to Park’s Ohio acquisitions are now fully amortized.

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

	Three months ended March 31, 2011
(in thousands)	Ohio-based operations			Vision Bank			Total
Salaries and employee benefits	$	(75	)	$	(32	)	$	(107	)
Occupancy expense		(89	)		(28	)		(117	)
Furniture and equipment expense		103			(78	)		25
Data processing fees		(216	)		(124	)		(340	)
Professional fees and services		166			(148	)		18
Amortization of intangibles		(268	)		1			(267	)
Marketing		(263	)		(16	)		(279	)
Insurance		150			(79	)		71
Communication		(200	)		(13	)		(213	)
State taxes		(390	)		2			(388	)
Other		(33	)		86			53
Total other expense	$	(1,115	)	$	(429	)	$	(1,544	)

Management provided guidance in Park’s 2010 Annual Report (page 39) that total other expense would be approximately $183 to $187 million for 2011.  The amount of total other expense for the first three months of 2011 was consistent with management’s projection. Management’s latest projection for total other expense is unchanged from the guidance in Park’s 2010 Annual Report.

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Income Tax

For the three months ended March 31, 2011, federal income tax expense was $7.9 million and no state income tax benefit was recognized, compared to federal income tax expense of $7.8 million and a state income tax benefit of $0.6 million for the first quarter of 2010.

Vision Bank is subject to state income tax in Alabama and Florida. A state income tax benefit of $578,000 and a valuation allowance for the same amount were recorded during the first quarter of 2011. Management has determined that the likelihood of realizing the full deferred tax asset on state net operating loss carryforwards at Vision Bank fails to meet the “more likely than not” level. The net operating loss carryforward period for the states of Alabama and Florida are 8 years and 20 years, respectively. A merger of Vision Bank into Park National Bank would ensure the future utilization of the state net operating loss carry-forward at Vision Bank. However, management is not certain when a merger of Vision Bank into Park National Bank can take place and as a result has decided not to record the additional state tax benefit of losses at Vision Bank until management has a better understanding of the timing and likelihood of a merger of Vision Bank into Park National Bank. Park and its Ohio-based subsidiaries 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.

Federal income tax expense as a percentage of income before taxes was 27.0% for the first quarter of 2011, compared to 27.8% for the same period in 2010.  The federal effective income 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 2010 Annual Report (page 40) that the federal effective income tax rate for 2011 will be approximately 26% to 28%.  Management’s latest projection of the federal effective income tax is consistent with the guidance in the 2010 Annual Report.

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Comparison of Financial Condition

At March 31, 2011 and December 31, 2010

Changes in Financial Condition and Liquidity

Total assets increased by $40 million or 0.5% to $7,338 million at March 31, 2011, compared to $7,298 million at December 31, 2010.  This increase in total assets was due to modest increases in total investment securities, loans, and other miscellaneous assets.

Total investment securities increased by $6 million to $2,046 million at March 31, 2011, compared to $2,040 million at December 31, 2010.  Loan balances increased by $18 million to $4,751 million at March 31, 2011 compared to $4,733 million at December 31, 2010. The increase in loans during the first three months of 2011 was primarily related to an increase in 15-year, fixed-rate real estate mortgage loans (previously sold into the secondary market) during the quarter, offset by declines in installment loans.  At March 31, 2011, there was $227 million of 15-year, fixed-rate mortgage loans compared to $176 million at December 31, 2010.

Total liabilities increased by $40 million during the first quarter of 2011 to $6,593 million at March 31, 2011 from $6,553 million at December 31, 2010.  The increase in total liabilities was due to a large increase in total deposits, which was offset by a decline in total borrowings.

Total deposits increased by $220 million or 4.3% during the first quarter of 2011 to $5,315 million at March 31, 2011 from $5,095 million at December 31, 2010.  The increase was primarily due to a $202 million increase in time deposits. Brokered CD’s increased approximately $60 million during the first quarter and the remaining increase was due to NOW and money market accounts increasing in the quarter due mostly to the seasonality of deposit gathering in our markets.

Short-term borrowings decreased by $347 million to $317 million at March 31, 2011 from $664 million at December 31, 2010.  Conversely, long-term borrowings increased by $150 million to $787 million at March 31, 2011 compared to $637 million at December 31, 2010.  The net decrease in borrowings of $197 million was a direct result of the increase in deposits during the quarter.

Other liabilities increased by $19 million to $94 million at March 31, 2011 from $75 million at December 31, 2010.  This increase in other liabilities was primarily due to a payable at March 31, 2011 for the purchase of $25 million of investment securities that settled in the month of April.

Total stockholders’ equity decreased by $600,000 to $745.2 million at March 31, 2011, from $745.8 million at December 31, 2010.  Retained earnings increased by $5.4 million during the period as a result of: net income of $21.4 million; offset by common stock dividends of $14.5 million, and accretion and dividends on the preferred stock of $1.5 million.  Preferred stock increased by $200,000 during the first three months of 2011 as a result of the accretion of the discount on preferred stock. Accumulated other comprehensive income/(loss) decreased by $6.2 million during the first quarter of 2011 to a balance of $(8.1) million at March 31, 2011.  The unrealized holding gains in the investment portfolio decreased by $6.4 million, net of taxes, as a result of the mark-to-market at March 31, 2011 and Park also recognized a $133,000 decrease in the unrealized holding loss on the cash flow hedge.

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.

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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 64.7% at March 31, 2011, compared to 64.8% at December 31, 2010 and 64.1% at March 31, 2010. Cash and cash equivalents were $134.2 million at March 31, 2011, compared to $133.8 million at December 31, 2010 and $250.1 million at March 31, 2010. Management believes that the present funding sources provide more than adequate liquidity for the Corporation to meet its cash flow needs.

On a monthly basis, Park’s Treasury Department forecasts the financial statements for the next twelve months.  The projected liquidity position for the Corporation is reviewed each month to ensure that adequate liquidity is maintained.  Management targets that the Corporation would have a minimum of $800 million of funds available to handle liquidity needs on a daily basis.  This $800 million liquidity “war chest” consists of currently available additional borrowing capacity from the Federal Home Loan Bank, federal funds sold and unpledged U.S. Government Agency securities.

Capital Resources

Total stockholders’ equity at March 31, 2011 was $745 million, or 10.2% of total assets, compared to $746 million, or 10.2% of total assets, at December 31, 2010 and $721 million, or 10.0% of total assets, at March 31, 2010.  Common equity, which is stockholders’ equity excluding the preferred stock, was $648 million at March 31, 2011, or 8.8% of total assets, compared to $649 million, or 8.9% of total assets, at December 31, 2010.

Financial institution regulators have established guidelines for minimum capital ratios for banks, thrifts and bank holding companies. The net unrealized gain or loss on available-for-sale securities is generally not included in computing regulatory capital. The minimum leverage capital ratio (defined as stockholders’ equity less intangible assets divided by tangible assets) is 4% and the well capitalized ratio is greater than or equal to 5%. Park’s leverage ratio was 9.50% at March 31, 2011 and 9.77% at December 31, 2010. 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 13.60% at March 31, 2011 and 13.52% at December 31, 2010. The minimum total risk-based capital ratio (defined as leverage capital plus supplemental capital divided by risk-adjusted assets) is 8% and the well capitalized ratio is greater than or equal to 10%. Park’s total risk-based capital ratio was 16.07% at March 31, 2011 and 15.98% at December 31, 2010.

The financial institution subsidiaries of Park each met the well capitalized ratio guidelines at March 31, 2011. The following table indicates the capital ratios for each financial institution subsidiary and Park at March 31, 2011.

	Leverage			Tier 1 Risk Based			Total  Risk-Based
The Park National Bank		6.45	%		9.44	%		11.38	%
Vision Bank		14.42	%		19.44	%		20.78	%
Park National Corporation		9.50	%		13.60	%		16.07	%
Minimum capital ratio		4.00	%		4.00	%		8.00	%
Well capitalized ratio		5.00	%		6.00	%		10.00	%

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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 44 of Park’s 2010 Annual Report (Table 24) for disclosure concerning contractual obligations and commitments at December 31, 2010. There were no significant changes in contractual obligations and commitments during the first three months of 2011.

Financial Instruments with Off-Balance Sheet Risk

Park’s subsidiary banks 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 consolidated 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)	March 31, 2011		December 31, 2010
Loan commitments	$	746,623	$	716,598
Standby letters of credit	$	22,840	$	24,462

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 43 and 44 of Park’s 2010 Annual Report.

On page 43 (Table 23) of Park’s 2010 Annual Report, management reported that Park’s twelve month cumulative rate sensitivity gap was a positive (assets exceeding liabilities) $647.8 million or 9.53% of interest earning assets at December 31, 2010. At March 31, 2011, Park’s twelve month cumulative rate sensitivity gap was a positive (assets exceeding liabilities) $499.6 million or 7.34% of interest earning assets.

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.

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On page 44 of Park’s 2010 Annual Report, management reported that at December 31, 2010, the earnings simulation model projected that net income would increase by 2.4% using a rising interest rate scenario and decrease by 1.4% using a declining interest rate scenario over the next year. At March 31, 2011, the earnings simulation model projected that net income would decrease by 0.5% using a rising interest rate scenario and would not change in a declining interest rate scenario. At March 31, 2011, 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 March 31, 2011, 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 businesses. 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, 2010 (the “2010 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 2010 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 2010 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 Gulf Coast communities in Alabama and the Florida panhandle. Consequently, a significant 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.

As disclosed earlier within this Form 10-Q, we continue to experience difficult credit conditions in the Alabama and Florida markets in which we operate. For the three month period ended March 31 2011, Vision Bank has experienced $4.0 million in net loan charge-offs, or an annualized 2.53% of average loans. For the first three months of 2010, net loan charge-offs for Vision Bank were $9.1 million, or an annualized 5.40% of average loans. The loan loss provision for Vision Bank was $8.0 million for the three months ended March 31, 2011. Park’s nonperforming loans, defined as loans that are 90 days past due, nonaccrual and renegotiated loans, were $281.3 million or 5.92% of total loans at March 31, 2011, $292.9 million or 6.19% of loans at December 31, 2010 and $242.4 million or 5.27% of total loans at March 31, 2010. At March 31, 2011, Vision Bank had non-performing loans of $163.3 million or 26.06% of total loans, compared to $171.8 million or 26.82% of total loans at December 31, 2010 and $154.1 million or 22.84% of total loans at March 31, 2010.  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 three months ended March 31, 2011, Vision Bank had a net loss of $7.7 million and Park contributed capital of $9.0 million to Vision Bank.  Given the current economic environment in Vision Bank’s market, Park’s management has agreed to maintain the leverage ratio at Vision Bank at 12% and to maintain the total risk-based capital ratio at Vision Bank at 16%.  It remains uncertain when the negative credit trends at Vision Bank 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.

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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 March 31, 2011. 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:

Period	Total number of common shares purchased		Average price paid per common share		Total number of common shares purchased as part of publicly announced plans or programs		Maximum number of common shares that may yet be purchased under the plans or programs (1)
January 1 through January 31, 2011		-		-		-		1,047,232
February 1 through February 28, 2011		-		-		-		1,047,232
March 1 through March 31, 2011		-		-		-		1,047,231
Total		-		-		-		1,047,231

(1) The number shown represents, as of the end of each period, the maximum 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 Incentive Stock Option Plan.

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 March 31, 2011, incentive stock options covering 75,895 common shares were outstanding and 1,424,105 common shares were available for future grants.

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With 452,769 common shares held as treasury shares for purposes of the 2005 Plan at March 31, 2011, an additional 1,047,231 common shares remained authorized for repurchase for purposes of funding the 2005 Plan.

Item 3.    Defaults Upon Senior Securities

Not applicable.

Item 4.    [Reserved]

Item 5.    Other Information

(a), (b) Not applicable.

Item 6.    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))

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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)	Certificate of Amendment by Shareholders or Members filed with the Secretary of State of the State of Ohio on April 18, 2011 in order to evidence the adoption by Park National Corporation’s shareholders of an amendment to Article SIXTH of Park National Corporation’s Articles of Incorporation in order to provide that shareholders do not have preemptive rights (Incorporated herein by reference to Exhibit 3.1 to Park National Corporation’s Current Report on Form 8-K dated and filed April 19, 2011 (File No. 1-13006))
3.1(h)	Articles of Incorporation of Park National Corporation (reflecting amendments through April 18, 2011) [for SEC reporting compliance purposes only – not filed with Ohio Secretary of State] (filed herewith)
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”))
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)
12	Computation of Ratios of Earnings to Fixed Charges and of Earnings to Fixed Charges and Preferred Share Dividends (filed herewith)
31.1	Rule 13a – 14(a) / 15d – 14(a) Certifications (Principal Executive Officer) (filed herewith)
31.2	Rule 13a – 14(a) / 15d – 14(a) Certifications (Principal Financial Officer) (filed herewith)
32.1	Section 1350 Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (Principal Executive Officer) (furnished herewith)

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32.2

Section 1350 Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (Principal Financial Officer) (furnished herewith)

101

The following materials from Park National Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011, formatted in XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Condensed Balance Sheets as of March 31, 2011 (unaudited) and December 31, 2010; (ii) the Consolidated Condensed Statements of Income for the three months ended March 31, 2011 and 2010 (unaudited); (iii) the Consolidated Condensed Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2011 and 2010 (unaudited); (iv) the Consolidated Condensed Statements of Cash Flows for the three months ended March 31, 2011 and 2010 (unaudited); and (v) the Notes to Unaudited Consolidated Condensed Financial Statements tagged as blocks of text (furnished herewith)* * Pursuant to Rule 406T of SEC Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are furnished and not deemed filed or part of a registration statement or prospectus for purposes of Sections 11 and 12 of the Securities Act of 1933, as amended, and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those Sections.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	PARK NATIONAL CORPORATION
DATE:   May 4, 2011	/s/ C. Daniel DeLawder
	C. Daniel DeLawder
	Chairman of the Board and Chief Executive Officer

DATE:   May 4, 2011	/s/ John W. Kozak
	John W. Kozak
	Chief Financial Officer

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EX-3.1(H)

Exhibit 3.1(h)

Articles of Incorporation of Park National Corporation

(reflecting amendments through April 18, 2011)

[For purposes of SEC reporting compliance only]

ARTICLES OF INCORPORATION

OF

PARK NATIONAL CORPORATION

(reflecting amendments through April 18, 2011)

[For purposes of SEC reporting compliance only]

FIRST:  The name of the corporation shall be Park National Corporation (the "Corporation").

SECOND:  The place in Ohio where the principal office of the Corporation is to be located is in the City of Newark, County of Licking.

THIRD:  The purpose for which the Corporation is formed is to engage in any lawful act or activity for which corporations may be formed under Sections 1701.01 to 1701.98 of the Ohio Revised Code.

FOURTH:  The authorized number of shares of the Corporation shall be Twenty Million Two Hundred Thousand (20,200,000), consisting of Twenty Million (20,000,000) common shares, each without par value (the “common shares”), and Two Hundred Thousand (200,000) preferred shares, each without par value (the “preferred shares”).

The directors of the Corporation are hereby authorized to provide for the issuance of, and to issue, one or more series of preferred shares and, in connection with the creation of any such series, to adopt an amendment or amendments to the Articles of the Corporation determining, in whole or in part, the express terms of any such series to the fullest extent now or hereafter permitted under Ohio law, including, but not limited to, determining:  the division of such shares into series and the designation and authorized number of shares of each series; dividend or distribution rights; dividend rate; liquidation rights, preferences and price; redemption rights and price; sinking fund requirements; voting rights; pre-emptive rights; conversion rights; restrictions on the issuance of shares; and other relative, participating, optional or other special rights and privileges of each such series and the qualifications, limitations or restrictions thereof.  Notwithstanding the foregoing, in no event shall the voting rights of any series of preferred shares be greater than the voting rights of the common shares, except to the extent specifically required with respect to any series of preferred shares which may be designated for issuance to the United States Department of the Treasury under the TARP Capital Purchase Program instituted under the Emergency Economic Stabilization Act of 2008.  In the event that at any time the directors of the Corporation shall have established and designated one or more series of preferred shares consisting of a number of shares which constitutes less than all of the authorized number of preferred shares, the remaining authorized preferred shares shall be deemed to be shares of an undesignated series of preferred shares until designated by the directors of the Corporation as being part of a series previously established or a new series then being established by the directors.  Without limiting the generality of the foregoing, and subject to the rights of any series of preferred shares then outstanding, the amendment providing for issuance of any series of preferred shares may provide that such series shall be superior or rank equally or be junior to the preferred shares of any other series to the extent permitted by Ohio law.

Section I of Article FOURTH —  Express Terms of Fixed Rate Cumulative Perpetual Preferred Shares,Series A

Part 1.  Designation and Number of Shares.  There is hereby created out of the authorized and unissued preferred shares of the Corporation a series of preferred shares designated as the “Fixed Rate Cumulative Perpetual Preferred Shares, Series A” (the “Designated Preferred Stock”).  The authorized number of shares of Designated Preferred Stock shall be 100,000.

Part 2.  Standard Provisions.  The Standard Provisions contained in Annex A attached hereto are incorporated herein by reference in their entirety and shall be deemed to be a part hereof to the same extent as if such provisions had been set forth in full herein.

Part 3.  Definitions.  The following terms are used in this Section I (including the Standard Provisions in Annex A hereto) as defined below:

(a)         “Common Stock” means the common shares, each without par value, of the Corporation.

(b)         “Dividend Payment Date” means February 15, May 15, August 15 and November 15 of each year.

(c)         “Junior Stock” means the Common Stock, and any other class or series of stock of the Corporation the terms of which expressly provide that it ranks junior to Designated Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Corporation.

(d)         “Liquidation Amount” means $1,000 per share of Designated Preferred Stock.

(e)         “Minimum Amount” means $25,000,000.

(f)          “Parity Stock” means any class or series of stock of the Corporation (other than Designated Preferred Stock) the terms of which do not expressly provide that such class or series will rank senior or junior to Designated Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Corporation (in each case without regard to whether dividends accrue cumulatively or non-cumulatively).

(g)         “Signing Date” means the Original Issue Date.

Part 4.  Certain Voting Matters.  Holders of shares of Designated Preferred Stock will be entitled to one vote for each such share on any matter on which holders of Designated Preferred Stock are entitled to vote, including any action by written consent.

FIFTH:  The directors of the Corporation shall have the power to cause the Corporation from time to time and at any time to purchase, hold, sell, transfer or otherwise deal with (A) shares of any class or series issued by it, (B) any security or other obligation of the Corporation which may confer upon the holder thereof the right to convert the same into shares of any class or series authorized by the Articles of the Corporation, and (C) any security or other obligation which may confer upon the holder thereof the right to purchase shares of any class or series authorized by the Articles of the Corporation.  The Corporation shall have the right to repurchase, if and when any shareholder desires to sell, or on the happening of any event is required to sell, shares of any class or series issued by the Corporation.  The authority granted in this Article FIFTH of these Articles shall not limit the plenary authority of the directors to purchase, hold, sell, transfer or otherwise deal with shares of any class or series, securities, or other obligations issued by the Corporation or authorized by its Articles.

2

SIXTH:  No holder of any share or shares of any class issued by the Corporation shall be entitled as such, as a matter of right, at any time, to subscribe for or purchase (A) shares of any class issued by the Corporation, now or hereafter authorized, (B) securities of the Corporation convertible into or exchangeable for shares of any class issued by the Corporation, now or hereafter authorized, or (C) securities of the Corporation to which shall be attached or appertain any rights or options, whether by the terms of such securities or in the contracts, warrants or other instruments (whether transferable or non-transferable or separable or inseparable from such securities) evidencing such rights or options, entitling the holders thereof to subscribe for or purchase shares of any class issued by the Corporation, now or hereafter authorized; except such rights to subscribe for or purchase, at such prices and according to such terms and conditions as the Board of Directors of the Corporation may, from time to time, approve and authorize in its discretion.

SEVENTH:  Chapter 1704 of the Ohio Revised Code does not apply to the Corporation.

EIGHTH:            (A)         In addition to any affirmative vote required by any provision of the Ohio Revised Code or by any other provision of these Articles, the affirmative vote or consent of the holders of the greater of (i) four-fifths (4/5) of the outstanding common shares of the Corporation entitled to vote thereon or (ii) that fraction of such outstanding common shares having as the numerator a number equal to the sum of (a) the number of outstanding common shares Beneficially Owned by Controlling Persons (as hereinafter defined) plus (b) two-thirds (2/3) of the remaining number of outstanding common shares, and as the denominator a number equal to the total number of outstanding common shares entitled to vote, shall be required for the adoption or authorization of a Business Combination (as hereinafter defined) unless:

(1)           The Business Combination will result in an involuntary sale, redemption, cancellation or other termination of ownership of all common shares of the Corporation owned by shareholders who do not vote in favor of, or consent in writing to, the Business Combination and the cash or fair value of other readily marketable consideration to be received by such shareholders for such common shares shall at least be equal to the Minimum Price Per Share (as hereinafter defined); and

(2)           A proxy statement responsive to the requirements of the Securities Exchange Act of 1934 shall be mailed to the shareholders of the Corporation for the purpose of soliciting shareholder approval of the proposed Business Combination.

(B)         For purposes of this Article EIGHTH, the following definitions shall apply:

(1)           "Affiliate" shall mean a Person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, another Person.

(2)           "Associate" shall mean (a) any corporation or organization of which a Person is an officer or partner or is, directly or indirectly, the Beneficial Owner of ten percent (10%) or more of any class of equity securities, (b) any trust or other estate in which a Person has a ten percent (10%) or greater individual interest of any nature or as to which a Person serves as trustee or in a similar fiduciary capacity, (c) any spouse of a Person, and (d) any relative of a Person, or any relative of a spouse of a Person, who has the same residence as such Person or spouse.

3

(3)           "Beneficial Ownership" shall include without limitation (a) all shares directly or indirectly owned by a Person, by an Affiliate of such Person or by an Associate of such Person or such Affiliate, (b) all shares which such Person, Affiliate or Associate has the right to acquire through the exercise of any option, warrant or right (whether or not currently exercisable), through the conversion of a security, pursuant to the power to revoke a trust, discretionary account or similar arrangement, or pursuant to the automatic termination of a trust, discretionary account or similar arrangement; and (c) all shares as to which such Person, Affiliate or Associate directly or indirectly through any contract, arrangement, understanding, relationship or otherwise (including without limitation any written or unwritten agreement to act in concert) has or shares voting power (which includes the power to vote or to direct the voting of such shares) or investment power (which includes the power to dispose or direct the disposition of such shares) or both.

(4)           "Business Combination" shall mean (a) any merger or consolidation of the Corporation with or into a Controlling Person or an Affiliate of a Controlling Person or an Associate of such Controlling Person or Affiliate, (b) any sale, lease, exchange, transfer or other disposition, including without limitation a mortgage or any other security device, of all or any Substantial Part of the assets of the Corporation, including without limitation any voting securities of a Subsidiary, or of the assets of a Subsidiary, to a Controlling Person or Affiliate of a Controlling Person or Associate of such Controlling Person or Affiliate, (c) any merger into the Corporation, or into a Subsidiary, of a Controlling Person or an Affiliate of a Controlling Person or an Associate of such Controlling Person or Affiliate, (d) any sale, lease, exchange, transfer or other disposition to the Corporation or a Subsidiary of all or any part of the assets of a Controlling Person or Affiliate of a Controlling Person or Associate of such Controlling Person or Affiliate but not including any disposition of assets which, if included with all other dispositions consummated during the same fiscal year of the Corporation by the same Controlling Person, Affiliates thereof and Associates of such Controlling Person or Affiliates, would not result in dispositions during such year by all such Persons of assets having an aggregate fair value (determined at the time of disposition of the respective assets) in excess of one percent (1%) of the total consolidated assets of the Corporation (as shown on its certified balance sheet as of the end of the fiscal year preceding the proposed disposition); provided, however, that in no event shall any disposition of assets be excepted from shareholder approval by reason of the preceding exclusion if such disposition when included with all other dispositions consummated during the same and immediately preceding four (4) fiscal years of the Corporation by the same Controlling Person, Affiliates thereof and Associates of such Controlling Person or Affiliates, would result in disposition by all such Persons of assets having an aggregate fair value (determined at the time of disposition of the respective assets) in excess of two percent (2%) of the total consolidated assets of the Corporation (as shown on its certified balance sheet as of the end of the fiscal year preceding the proposed disposition), (e) any reclassification of the common shares of the Corporation, or any recapitalization involving common shares of the Corporation, consummated within five (5) years after a Controlling Person becomes a Controlling Person, and (f) any agreement, contract or other arrangement providing for any of the transactions described in the definition of Business Combination.

(5)           "Control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

4

(6)           "Controlling Person" shall mean any Person who Beneficially Owns shares of the Corporation entitling that Person to exercise twenty percent (20%) or more of the voting power of the Corporation entitled to vote in the election of directors.

(7)           "Minimum Price Per Share" shall mean the sum of (a) the higher of either (i) the highest gross per share price paid or agreed to be paid to acquire any common shares of the Corporation Beneficially Owned by a Controlling Person, provided such payment or agreement to make payment was made within five (5) years immediately prior to the record date set to determine the shareholders entitled to vote or consent to the Business Combination in question, or (ii) the highest per share closing public market price for such common shares during such five (5) year period, plus (b) the aggregate amount, if any, by which five percent (5%) for each year, beginning on the date on which such Controlling Person became a Controlling Person, of such higher per share price exceeds the aggregate amount of all common share dividends per share paid in cash since the date on which such Person became a Controlling Person.  The calculation of the Minimum Price Per Share shall require appropriate adjustments for capital changes, including without limitation stock splits, stock dividends and reverse stock splits.

(8)           "Person" shall mean an individual, a corporation, a partnership, an association, a joint-stock company, a trust, any unincorporated organization, a government or political subdivision thereof, and any other entity.

(9)           "Securities Exchange Act of 1934" shall mean the Securities Exchange Act of 1934, as amended from time to time as well as any successor or replacement statute.

(10)         "Subsidiary" shall mean any corporation more than twenty-five percent (25%) of whose outstanding securities entitled to vote for the election of directors are Beneficially Owned by the Corporation and/or one or more Subsidiaries.

(11)         "Substantial Part" shall mean more than ten percent (10%) of the total assets of the corporation in question, as shown on its certified balance sheet as of the end of the most recent fiscal year ending prior to the time the determination is being made.

(C)          During any period in which there are one or more Controlling Persons, this Article EIGHTH shall not be altered, changed or repealed unless the amendment effecting such alteration, change or repeal shall have received, in addition to any affirmative vote required by any provision of the Ohio Revised Code or by any other provision of these Articles, the affirmative vote or consent of the holders of the greater of (i) four-fifths (4/5) of the outstanding common shares of the Corporation entitled to vote thereon or (ii) that fraction of such outstanding common shares having as the numerator a number equal to the sum of (a) the number of outstanding common shares Beneficially Owned by Controlling Persons plus (b) two-thirds (2/3) of the remaining number of outstanding common shares, and as the denominator a number equal to the total number of outstanding common shares entitled to vote.

5

ANNEX A to Section I of Article FOURTH — STANDARD PROVISIONS

Section 1.  General Matters.  Each share of Designated Preferred Stock shall be identical in all respects to every other share of Designated Preferred Stock.  The Designated Preferred Stock shall be perpetual, subject to the provisions of Section 5 of these Standard Provisions that form a part of the Certificate of Designations.  The Designated Preferred Stock shall rank equally with Parity Stock and shall rank senior to Junior Stock with respect to the payment of dividends and the distribution of assets in the event of any dissolution, liquidation or winding up of the Corporation.

Section 2.  Standard Definitions.  As used herein with respect to Designated Preferred Stock:

(a)         “Applicable Dividend Rate” means (i) during the period from the Original Issue Date to, but excluding, the first day of the first Dividend Period commencing on or after the fifth anniversary of the Original Issue Date, 5% per annum and (ii) from and after the first day of the first Dividend Period commencing on or after the fifth anniversary of the Original Issue Date, 9% per annum.

(b)         “Appropriate Federal Banking Agency” means the “appropriate Federal banking agency” with respect to the Corporation as defined in Section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. Section 1813(q)), or any successor provision.

(c)         “Business Combination” means a merger, consolidation, statutory share exchange or similar transaction that requires the approval of the Corporation’s shareholders.

(d)         “Business Day” means any day except Saturday, Sunday and any day on which banking institutions in the State of New York generally are authorized or required by law or other governmental actions to close.

(e)         “Certificate of Designations” means the Certificate of Designations or comparable instrument relating to the Designated Preferred Stock, of which these Standard Provisions form a part, as it may be amended from time to time.

(f)          “Charter” means the Corporation’s articles of incorporation, as they may be amended from time to time.

(g)         “Dividend Period” has the meaning set forth in Section 3(a).

(h)         “Dividend Record Date” has the meaning set forth in Section 3(a).

(i)          “Liquidation Preference” has the meaning set forth in Section 4(a).

(j)          “Original Issue Date” means the date on which shares of Designated Preferred Stock are first issued.

(k)         “Preferred Director” has the meaning set forth in Section 7(b).

(l)          “Preferred Stock” means any and all series of preferred stock of the Corporation, including the Designated Preferred Stock.

A-1

(m)        “Qualified Equity Offering” means the sale and issuance for cash by the Corporation to persons other than the Corporation or any of its subsidiaries after the Original Issue Date of shares of perpetual Preferred Stock, Common Stock or any combination of such stock, that, in each case, qualify as and may be included in Tier 1 capital of the Corporation at the time of issuance under the applicable risk-based capital guidelines of the Corporation’s Appropriate Federal Banking Agency (other than any such sales and issuances made pursuant to agreements or arrangements entered into, or pursuant to financing plans which were publicly announced, on or prior to October 13, 2008).

(n)         “Regulations” means the regulations of the Corporation, as they may be amended from time to time.

(o)         “Share Dilution Amount” has the meaning set forth in Section 3(b).

(p)         “Standard Provisions” mean these Standard Provisions that form a part of the Certificate of Designations relating to the Designated Preferred Stock.

(q)         “Successor Preferred Stock” has the meaning set forth in Section 5(a).

(r)          “Voting Parity Stock” means, with regard to any matter as to which the holders of Designated Preferred Stock are entitled to vote as specified in Sections 7(a) and 7(b) of these Standard Provisions that form a part of the Certificate of Designations, any and all series of Parity Stock upon which like voting rights have been conferred and are exercisable with respect to such matter.

Section 3.  Dividends.

(a)          Rate.  Holders of Designated Preferred Stock shall be entitled to receive, on each share of Designated Preferred Stock if, as and when declared by the Board of Directors or any duly authorized committee of the Board of Directors, but only out of assets legally available therefor, cumulative cash dividends with respect to each Dividend Period (as defined below) at a rate per annum equal to the Applicable Dividend Rate on (i) the Liquidation Amount per share of Designated Preferred Stock and (ii) the amount of accrued and unpaid dividends for any prior Dividend Period on such share of Designated Preferred Stock, if any.  Such dividends shall begin to accrue and be cumulative from the Original Issue Date, shall compound on each subsequent Dividend Payment Date (i.e., no dividends shall accrue on other dividends unless and until the first Dividend Payment Date for such other dividends has passed without such other dividends having been paid on such date) and shall be payable quarterly in arrears on each Dividend Payment Date, commencing with the first such Dividend Payment Date to occur at least 20 calendar days after the Original Issue Date.  In the event that any Dividend Payment Date would otherwise fall on a day that is not a Business Day, the dividend payment due on that date will be postponed to the next day that is a Business Day and no additional dividends will accrue as a result of that postponement.  The period from and including any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period”, provided that the initial Dividend Period shall be the period from and including the Original Issue Date to, but excluding, the next Dividend Payment Date.

Dividends that are payable on Designated Preferred Stock in respect of any Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months.  The amount of dividends payable on Designated Preferred Stock on any date prior to the end of a Dividend Period, and for the initial Dividend Period, shall be computed on the basis of a 360-day year consisting of twelve 30-day months, and actual days elapsed over a 30-day month.

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Dividends that are payable on Designated Preferred Stock on any Dividend Payment Date will be payable to holders of record of Designated Preferred Stock as they appear on the stock register of the Corporation on the applicable record date, which shall be the 15th calendar day immediately preceding such Dividend Payment Date or such other record date fixed by the Board of Directors or any duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”).  Any such day that is a Dividend Record Date shall be a Dividend Record Date whether or not such day is a Business Day.

Holders of Designated Preferred Stock shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on Designated Preferred Stock as specified in this Section 3 (subject to the other provisions of the Certificate of Designations).

(b)         Priority of Dividends.  So long as any share of Designated Preferred Stock remains outstanding, no dividend or distribution shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than dividends payable solely in shares of Common Stock) or Parity Stock, subject to the immediately following paragraph in the case of Parity Stock, and no Common Stock, Junior Stock or Parity Stock shall be, directly or indirectly, purchased, redeemed or otherwise acquired for consideration by the Corporation or any of its subsidiaries unless all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period (including, if applicable as provided in Section 3(a) above, dividends on such amount), on all outstanding shares of Designated Preferred Stock have been or are contemporaneously declared and paid in full (or have been declared and a sum sufficient for the payment thereof has been set aside for the benefit of the holders of shares of Designated Preferred Stock on the applicable record date).  The foregoing limitation shall not apply to (i) redemptions, purchases or other acquisitions of shares of Common Stock or other Junior Stock in connection with the administration of any employee benefit plan in the ordinary course of business (including purchases to offset the Share Dilution Amount (as defined below) pursuant to a publicly announced repurchase plan) and consistent with past practice, provided that any purchases to offset the Share Dilution Amount shall in no event exceed the Share Dilution Amount; (ii) purchases or other acquisitions by a broker-dealer subsidiary of the Corporation solely for the purpose of market-making, stabilization or customer facilitation transactions in Junior Stock or Parity Stock in the ordinary course of its business; (iii) purchases by a broker- dealer subsidiary of the Corporation of capital stock of the Corporation for resale pursuant to an offering by the Corporation of such capital stock underwritten by such broker-dealer subsidiary; (iv) any dividends or distributions of rights or Junior Stock in connection with a shareholders’ rights plan or any redemption or repurchase of rights pursuant to any shareholders’ rights plan; (v) the acquisition by the Corporation or any of its subsidiaries of record ownership in Junior Stock or Parity Stock for the beneficial ownership of any other persons (other than the Corporation or any of its subsidiaries), including as trustees or custodians; and (vi) the exchange or conversion of Junior Stock for or into other Junior Stock or of Parity Stock for or into other Parity Stock (with the same or lesser aggregate liquidation amount) or Junior Stock, in each case, solely to the extent required pursuant to binding contractual agreements entered into prior to the Signing Date or any subsequent agreement for the accelerated exercise, settlement or exchange thereof for Common Stock.  “Share Dilution Amount” means the increase in the number of diluted shares outstanding (determined in accordance with generally accepted accounting principles in the United States, and as measured from the date of the Corporation’s consolidated financial statements most recently filed with the Securities and Exchange Commission prior to the Original Issue Date) resulting from the grant, vesting or exercise of equity-based compensation to employees and equitably adjusted for any stock split, stock dividend, reverse stock split, reclassification or similar transaction.

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When dividends are not paid (or declared and a sum sufficient for payment thereof set aside for the benefit of the holders thereof on the applicable record date) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a Dividend Period related to such Dividend Payment Date) in full upon Designated Preferred Stock and any shares of Parity Stock, all dividends declared on Designated Preferred Stock and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the Dividend Period related to such Dividend Payment Date) shall be declared pro rata so that the respective amounts of such dividends declared shall bear the same ratio to each other as all accrued and unpaid dividends per share on the shares of Designated Preferred Stock (including, if applicable as provided in Section 3(a) above, dividends on such amount) and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the Dividend Period related to such Dividend Payment Date) (subject to their having been declared by the Board of Directors or a duly authorized committee of the Board of Directors out of legally available funds and including, in the case of Parity Stock that bears cumulative dividends, all accrued but unpaid dividends) bear to each other.  If the Board of Directors or a duly authorized committee of the Board of Directors determines not to pay any dividend or a full dividend on a Dividend Payment Date, the Corporation will provide written notice to the holders of Designated Preferred Stock prior to such Dividend Payment Date.

Subject to the foregoing, and not otherwise, such dividends (payable in cash, securities or other property) as may be determined by the Board of Directors or any duly authorized committee of the Board of Directors may be declared and paid on any securities, including Common Stock and other Junior Stock, from time to time out of any funds legally available for such payment, and holders of Designated Preferred Stock shall not be entitled to participate in any such dividends.

Section 4.  Liquidation Rights.

(a)         Voluntary or Involuntary Liquidation.  In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, holders of Designated Preferred Stock shall be entitled to receive for each share of Designated Preferred Stock, out of the assets of the Corporation or proceeds thereof (whether capital or surplus) available for distribution to shareholders of the Corporation, subject to the rights of any creditors of the Corporation, before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other stock of the Corporation ranking junior to Designated Preferred Stock as to such distribution, payment in full in an amount equal to the sum of (i) the Liquidation Amount per share and (ii) the amount of any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount), whether or not declared, to the date of payment (such amounts collectively, the “Liquidation  Preference”).

(b)         Partial Payment.  If in any distribution described in Section 4(a) above the assets of the Corporation or proceeds thereof are not sufficient to pay in full the amounts payable with respect to all outstanding shares of Designated Preferred Stock and the corresponding amounts payable with respect of any other stock of the Corporation ranking equally with Designated Preferred Stock as to such distribution, holders of Designated Preferred Stock and the holders of such other stock shall share ratably in any such distribution in proportion to the full respective distributions to which they are entitled.

(c)         Residual Distributions.  If the Liquidation Preference has been paid in full to all holders of Designated Preferred Stock and the corresponding amounts payable with respect of any other stock of the Corporation ranking equally with Designated Preferred Stock as to such distribution has been paid in full, the holders of other stock of the Corporation shall be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according to their respective rights and preferences.

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(d)         Merger, Consolidation and Sale of Assets Not Liquidation.  For purposes of this Section 4, the merger or consolidation of the Corporation with any other corporation or other entity, including a merger or consolidation in which the holders of Designated Preferred Stock receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.

Section 5.  Redemption.

(a)          Optional Redemption.  Except as provided below, the Designated Preferred Stock may not be redeemed prior to the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date.  On or after the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date, the Corporation, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time and from time to time, out of funds legally available therefor, the shares of Designated Preferred Stock at the time outstanding, upon notice given as provided in Section 5(c) below, at a redemption price equal to the sum of (i) the Liquidation Amount per share and (ii) except as otherwise provided below, any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount) (regardless of whether any dividends are actually declared) to, but excluding, the date fixed for redemption.

Notwithstanding the foregoing, prior to the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date, the Corporation, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time and from time to time, the shares of Designated Preferred Stock at the time outstanding, upon notice given as provided in Section 5(c) below, at a redemption price equal to the sum of (i) the Liquidation Amount per share and (ii) except as otherwise provided below, any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount) (regardless of whether any dividends are actually declared) to, but excluding, the date fixed for redemption; provided that (x) the Corporation (or any successor by Business Combination) has received aggregate gross proceeds of not less than the Minimum Amount (plus the “Minimum Amount” as defined in the relevant certificate of designations for each other outstanding series of preferred stock of such successor that was originally issued to the United States Department of the Treasury (the “Successor Preferred Stock”) in connection with the Troubled Asset Relief Program Capital Purchase Program) from one or more Qualified Equity Offerings (including Qualified Equity Offerings of such successor), and (y) the aggregate redemption price of the Designated Preferred Stock (and any Successor Preferred Stock) redeemed pursuant to this paragraph may not exceed the aggregate net cash proceeds received by the Corporation (or any successor by Business Combination) from such Qualified Equity Offerings (including Qualified Equity Offerings of such successor).

The redemption price for any shares of Designated Preferred Stock shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or its agent.  Any declared but unpaid dividends payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 3 above.

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(b)         No Sinking Fund.  The Designated Preferred Stock will not be subject to any mandatory redemption, sinking fund or other similar provisions.  Holders of Designated Preferred Stock will have no right to require redemption or repurchase of any shares of Designated Preferred Stock.

(c)         Notice of Redemption.  Notice of every redemption of shares of Designated Preferred Stock shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Corporation.  Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption.  Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Designated Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Designated Preferred Stock.  Notwithstanding the foregoing, if shares of Designated Preferred Stock are issued in book-entry form through The Depository Trust Corporation or any other similar facility, notice of redemption may be given to the holders of Designated Preferred Stock at such time and in any manner permitted by such facility.  Each notice of redemption given to a holder shall state: (1) the redemption date; (2) the number of shares of Designated Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.

(d)         Partial Redemption.  In case of any redemption of part of the shares of Designated Preferred Stock at the time outstanding, the shares to be redeemed shall be selected either pro rata or in such other manner as the Board of Directors or a duly authorized committee thereof may determine to be fair and equitable.  Subject to the provisions hereof, the Board of Directors or a duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Designated Preferred Stock shall be redeemed from time to time.  If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.

(e)         Effectiveness of Redemption.  If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been deposited by the Corporation, in trust for the pro rata benefit of the holders of the shares called for redemption, with a bank or trust company doing business in the Borough of Manhattan, The City of New York, and having a capital and surplus of at least $500 million and selected by the Board of Directors, so as to be and continue to be available solely therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption from such bank or trust company, without interest.  Any funds unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released to the Corporation, after which time the holders of the shares so called for redemption shall look only to the Corporation for payment of the redemption price of such shares.

(f)          Status of Redeemed Shares.  Shares of Designated Preferred Stock that are redeemed, repurchased or otherwise acquired by the Corporation shall revert to authorized but unissued shares of Preferred Stock (provided that any such cancelled shares of Designated Preferred Stock may be reissued only as shares of any series of Preferred Stock other than Designated Preferred Stock).

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Section 6.  Conversion.  Holders of Designated Preferred Stock shares shall have no right to exchange or convert such shares into any other securities.

Section 7.  Voting Rights.

(a)          General.  The holders of Designated Preferred Stock shall not have any voting rights except as set forth below or as otherwise from time to time required by law.

(b)         Preferred Stock Directors.  Whenever, at any time or times, dividends payable on the shares of Designated Preferred Stock have not been paid for an aggregate of six quarterly Dividend Periods or more, whether or not consecutive, the authorized number of directors of the Corporation shall automatically be increased by two and the holders of the Designated Preferred Stock shall have the right, with holders of shares of any one or more other classes or series of Voting Parity Stock outstanding at the time, voting together as a class, to elect two directors (hereinafter the “Preferred Directors” and each a “Preferred Director”) to fill such newly created directorships at the Corporation’s next annual meeting of shareholders (or at a special meeting called for that purpose prior to such next annual meeting) and at each subsequent annual meeting of shareholders until all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period (including, if applicable as provided in Section 3(a) above, dividends on such amount), on all outstanding shares of Designated Preferred Stock have been declared and paid in full at which time such right shall terminate with respect to the Designated Preferred Stock, except as herein or by law expressly provided, subject to revesting in the event of each and every subsequent default of the character above mentioned; provided that it shall be a qualification for election for any Preferred Director that the election of such Preferred Director shall not cause the Corporation to violate any corporate governance requirements of any securities exchange or other trading facility on which securities of the Corporation may then be listed or traded that listed or traded companies must have a majority of independent directors.  Upon any termination of the right of the holders of shares of Designated Preferred Stock and Voting Parity Stock as a class to vote for directors as provided above, the Preferred Directors shall cease to be qualified as directors, the term of office of all Preferred Directors then in office shall terminate immediately and the authorized number of directors shall be reduced by the number of Preferred Directors elected pursuant hereto.  Any Preferred Director may be removed at any time, with or without cause, and any vacancy created thereby may be filled, only by the affirmative vote of the holders a majority of the shares of Designated Preferred Stock at the time outstanding voting separately as a class together with the holders of shares of Voting Parity Stock, to the extent the voting rights of such holders described above are then exercisable.  If the office of any Preferred Director becomes vacant for any reason other than removal from office as aforesaid, the remaining Preferred Director may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.

(c)          Class Voting Rights as to Particular Matters.  So long as any shares of Designated Preferred Stock are outstanding, in addition to any other vote or consent of shareholders required by law or by the Charter, the vote or consent of the holders of at least 66 2/3% of the shares of Designated Preferred Stock at the time outstanding, voting as a separate class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:

(i)          Authorization of Senior Stock.  Any amendment or alteration of the Certificate of Designations for the Designated Preferred Stock or the Charter to authorize or create or increase the authorized amount of, or any issuance of, any shares of, or any securities convertible into or exchangeable or exercisable for shares of, any class or series of capital stock of the Corporation ranking senior to Designated Preferred Stock with respect to either or both the payment of dividends and/or the distribution of assets on any liquidation, dissolution or winding up of the Corporation;

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(ii)         Amendment of Designated Preferred Stock.  Any amendment, alteration or repeal of any provision of the Certificate of Designations for the Designated Preferred Stock or the Charter (including, unless no vote on such merger or consolidation is required by Section 7(c)(iii) below, any amendment, alteration or repeal by means of a merger, consolidation or otherwise) so as to adversely affect the rights, preferences, privileges or voting powers of the Designated Preferred Stock; or

(iii)        Share Exchanges, Reclassifications, Mergers and Consolidations.  Any consummation of a binding share exchange or reclassification involving the Designated Preferred Stock, or of a merger or consolidation of the Corporation with another corporation or other entity, unless in each case (x) the shares of Designated Preferred Stock remain outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of Designated Preferred Stock immediately prior to such consummation, taken as a whole;

provided, however, that for all purposes of this Section 7(c), any increase in the amount of the authorized Preferred Stock, including any increase in the authorized amount of Designated Preferred Stock necessary to satisfy preemptive or similar rights granted by the Corporation to other persons prior to the Signing Date, or the creation and issuance, or an increase in the authorized or issued amount, whether pursuant to preemptive or similar rights or otherwise, of any other series of Preferred Stock, or any securities convertible into or exchangeable or exercisable for any other series of Preferred Stock, ranking equally with and/or junior to Designated Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the rights, preferences, privileges or voting powers, and shall not require the affirmative vote or consent of, the holders of outstanding shares of the Designated Preferred Stock.

(d)         Changes after Provision for Redemption.  No vote or consent of the holders of Designated Preferred Stock shall be required pursuant to Section 7(c) above if, at or prior to the time when any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of the Designated Preferred Stock shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been deposited in trust for such redemption, in each case pursuant to Section 5 above.

(e)         Procedures for Voting and Consents.  The rules and procedures for calling and conducting any meeting of the holders of Designated Preferred Stock (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules of the Board of Directors or any duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Charter, the Regulations, and applicable law and the rules of any national securities exchange or other trading facility on which Designated Preferred Stock is listed or traded at the time.

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Section 8.  Record Holders.  To the fullest extent permitted by applicable law, the Corporation and the transfer agent for Designated Preferred Stock may deem and treat the record holder of any share of Designated Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary.

Section 9.  Notices.  All notices or communications in respect of Designated Preferred Stock shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designations, in the Charter or the Regulations or by applicable law.  Notwithstanding the foregoing, if shares of Designated Preferred Stock are issued in book-entry form through The Depository Trust Corporation or any similar facility, such notices may be given to the holders of Designated Preferred Stock in any manner permitted by such facility.

Section 10.  No Preemptive Rights.  No share of Designated Preferred Stock shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.

Section 11.  Replacement Certificates.  The Corporation shall replace any mutilated certificate at the holder’s expense upon surrender of that certificate to the Corporation.  The Corporation shall replace certificates that become destroyed, stolen or lost at the holder’s expense upon delivery to the Corporation of reasonably satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be reasonably required by the Corporation.

Section 12.  Other Rights.  The shares of Designated Preferred Stock shall not have any rights, preferences, privileges or voting powers or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Charter or as provided by applicable law.

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EX-12

Exhibit 12

Computation of Ratio of Earnings to Fixed Charges

The following table shows the ratio of earnings to fixed charges for Park, which includes our subsidiaries, on a consolidated basis:

	Three Months
	Ended		Year Ended December 31,
	March 31, 2011		2010		2009		2008		2007		2006
Ratio of earnings to fixed charges (1):
Excluding Interest on Deposits		4.75		4.29		4.20		1.77		2.12		4.36
Including Interest on Deposits		2.89		2.38		2.02		1.26		1.31		2.09

(1) For purposes of computing the ratios, earnings consist of income before income taxes and fixed charges. Fixed charges consist of interest on borrowings and long-term debt, including/excluding interest on deposits, and one-third of rental expense, which Park National Corporation believes is representative of the interest factor.

Earnings:
Income before income taxes	$	29,273,000	$	99,531,000	$	97,135,000	$	35,719,000	$	52,677,000	$	133,077,000
Fixed Charges:
Interest on deposits		7,725,000		41,965,000		64,620,000		89,892,000		121,021,000		82,272,000
Borrowings and long-term debt		7,624,000		29,508,000		29,579,000		45,574,000		46,126,000		39,043,000
Rent expense interest factor (1/3)		173,119		721,687		794,866		801,147		731,723		530,030
Total fixed charges:
Including interest on deposits	$	15,522,119	$	72,194,687	$	94,993,866	$	136,267,147	$	167,878,723	$	121,845,030
Excluding interest on deposits	$	7,797,119	$	30,229,687	$	30,373,866	$	46,375,147	$	46,857,723	$	39,573,030

Computation of Ratio of Earnings to Fixed Charges and Preferred Dividends

The following table shows the ratio of earnings to fixed charges and preferred dividends for Park, which includes our subsidiaries, on a consolidated basis:

	Three Months
	Ended		Year Ended December 31,
	March 31, 2011		2010		2009		2008		2007		2006
Ratio of earnings to fixed charges and preferred dividends (1):
Excluding Interest on Deposits		3.96		3.58		3.52		1.77		2.12		4.36
Including Interest on Deposits		2.66		2.24		1.94		1.26		1.31		2.09

(1) For purposes of computing the ratios, earnings consist of income before income taxes and fixed charges. Fixed charges consist of interest on borrowings and long-term debt, including/excluding interest on deposits, preferred dividends and accretion, and one-third of rental expense, which Park National Corporation believes is representative of the interest factor.

Earnings:
Income before income taxes	$	29,273,000	$	99,531,000	$	97,135,000	$	35,719,000	$	52,677,000	$	133,077,000
Fixed Charges:
Interest on deposits		7,725,000		41,965,000		64,620,000		89,892,000		121,021,000		82,272,000
Borrowings and long-term debt		7,624,000		29,508,000		29,579,000		45,574,000		46,126,000		39,043,000
Preferred dividends and accretion		2,091,429		8,295,714		8,231,429		202,857
Rent expense interest factor (1/3)		173,119		721,687		794,866		801,147		731,723		530,030
Total fixed charges:
Including interest on deposits	$	17,613,547	$	80,490,402	$	103,225,295	$	136,470,004	$	167,878,723	$	121,845,030
Excluding interest on deposits	$	9,888,547	$	38,525,402	$	38,605,295	$	46,578,004	$	46,857,723	$	39,573,030

 

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, C. Daniel DeLawder, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011, of Park National Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))  and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  May 4, 2011	/s/ C. Daniel DeLawder
	C. Daniel DeLawder
	Chairman of the Board and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, John W. Kozak, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011, of Park National Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 4, 2011	/s/ John W. Kozak
	John W. Kozak
	Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATIONS PURSUANT TO SECTION 1350 OF

CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE*

In connection with the Quarterly Report of Park National Corporation (the “Company”) on Form 10-Q for the quarterly period ended March 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, C. Daniel DeLawder, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of the Company and its subsidiaries.

/s/ C. Daniel DeLawder

C. Daniel DeLawder

Chairman of the Board and

Chief Executive Officer

(Principal Executive Officer)

May 4, 2011

*These certifications are being furnished as required by Rule 13a – 14(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section.  These certifications shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates these certifications by reference.

EX-32.2

Exhibit 32.2

CERTIFICATIONS PURSUANT TO SECTION 1350 OF

CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE*

In connection with the Quarterly Report of Park National Corporation (the “Company”) on Form 10-Q for the quarterly period ended March 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John W. Kozak, Chief Financial Officer of the Company, certify, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of the Company and its subsidiaries.

/s/ John W. Kozak

John W. Kozak

Chief Financial Officer

(Principal Financial Officer)

May 4, 2011

*These certifications are being furnished as required by Rule 13a – 14(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section.  These certifications shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates these certifications by reference.