10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

S	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 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
incorporation or organization)	Identification No.)
50 North Third Street, P.O. Box 3500, Newark, Ohio	43058-3500
(Address of principal executive offices)	(Zip Code)

(740) 349-8451

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Shares, without par value	NYSE Amex LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

S Yes £ No

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

£ Yes S No

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.

S Yes £ 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 during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).

S Yes £ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. S

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 S	Accelerated filer £
Non-accelerated filer £	Smaller reporting company £
(Do not check if a smaller reporting company)

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

£Yes S No

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the Registrant’s most recently completed second fiscal quarter: As of June 30, 2011, the aggregate market value of the Registrant’s common shares (the only common equity of the Registrant) held by non-affiliates of the Registrant was $973,488,186 based on the closing sale price as reported on NYSE Amex LLC. For this purpose, executive officers and directors of the Registrant are considered affiliates.

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.

Class	Outstanding at February 24, 2012
Common Shares, without par value	15,405,908 common shares

DOCUMENTS INCORPORATED BY REFERENCE

Document	Parts Into Which Incorporated
Portions of the Registrant’s 2011 Annual Report	Parts I and II
Portions of the Registrant’s Definitive Proxy Statement for the Annual Meeting of Shareholders to be held on April 23, 2012	Part III

Exhibit Index on Page E-1

PART I

ITEM 1. BUSINESS.

General

Park National Corporation (“Park”) is a bank holding company registered under the Bank Holding Company Act of 1956, as amended (the “Bank Holding Company Act”). Park was incorporated under Ohio law in 1992. Park’s principal executive offices are located at 50 North Third Street, Newark, Ohio 43055, and its telephone number is (740) 349-8451. Park’s common shares, each without par value (“Common Shares”), are listed on NYSE Amex LLC (“NYSE Amex”), under the symbol “PRK.”

Park maintains an Internet site which can be accessed at http://www.parknationalcorp.com. Information contained in Park’s Internet site does not constitute part of, and is not incorporated into, this Annual Report on Form 10-K. Park makes available free of charge on or through its Internet site Park’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as well as Park’s definitive proxy statements filed pursuant to Section 14 of the Exchange Act, as soon as reasonably practicable after Park electronically files such material with, or furnishes it to, the Securities and Exchange Commission (the “SEC”).

Park’s principal business consists of owning and supervising its subsidiaries. Although Park directs the overall policies of its subsidiaries, including lending policies and financial resources, most day-to-day affairs are managed by the respective officers of Park’s subsidiaries.

Subsidiary Banks

Throughout the fiscal year ended December 31, 2011 (“Fiscal 2011”) and until February 16, 2012, Park’s banking operations were conducted through two subsidiary banks:

· The Park National Bank (“Park National Bank”), a national banking association with its main office in Newark, Ohio and financial service offices in Ashland, Athens, Butler, Champaign, Clark, Clermont, Coshocton, Crawford, Darke, Fairfield, Fayette, Franklin, Greene, Hamilton, Hocking, Holmes, Knox, Licking, Madison, Marion, Mercer, Miami, Morrow, Muskingum, Perry, Richland, Tuscarawas and Warren Counties in Ohio and Boone County in Kentucky; and

· Vision Bank (“Vision Bank”), a Florida state-chartered bank with its main office in Panama City, Florida and financial service offices in Baldwin County, Alabama and in Bay, Gulf, Okaloosa, Santa Rosa and Walton Counties in the panhandle of Florida.

As described in more detail later in this Item 1 under the caption “Recent Developments -- Transactions Involving Vision Bank,” on February 16, 2012, Vision Bank sold substantially all of its performing loans as well as all of the deposit accounts/liabilities and real estate, leases and assets associated with Vision Bank’s financial service offices to Centennial Bank, an Alabama state-chartered bank (“Centennial Bank”). In connection with that sale, Vision Bank surrendered its bank charter to the Florida Office of Financial Regulation (the “Florida OFR”) for cancellation and requested termination of its insured status by the Federal Deposit Insurance Corporation (the “FDIC”), which termination was effective February 16, 2012. Subsequently, on February 16, 2012, Vision Bank merged into Park’s wholly-owned non-bank subsidiary SE Property Holdings, LLC. (“SE LLC”).

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Park National Bank engages in the commercial banking and trust business primarily in small and medium population Ohio communities. Prior to the consummation of the transactions described below under the caption “Recent Developments – Transactions Involving Vision Bank”, Vision Bank also had engaged in the commercial banking and trust business primarily in Gulf Coast communities in Alabama and the Florida panhandle.

Park National Bank operates 124 financial service offices in Ohio and Northern Kentucky through eleven banking divisions with: (i) the Park National Bank Division headquartered in Newark, Ohio; (ii) the Fairfield National Bank Division headquartered in Lancaster, Ohio; (iii) The Park National Bank of Southwest Ohio & Northern Kentucky Division headquartered in Cincinnati, Ohio; (iv) the Century National Bank Division headquartered in Zanesville, Ohio; (v) the Second National Bank Division headquartered in Greenville, Ohio; (vi) the Richland Bank Division headquartered in Mansfield, Ohio; (vii) the United Bank Division headquartered in Bucyrus, Ohio; (viii) the First-Knox National Bank Division headquartered in Mount Vernon, Ohio; (ix) the Farmers Bank Division headquartered in Loudonville, Ohio; (x) the Security National Bank Division headquartered in Springfield, Ohio; and (xi) the Unity National Bank Division headquartered in Piqua, Ohio.

As of February 16, 2012, Vision Bank operated 17 financial service offices in Gulf Coast communities in Baldwin County, Alabama and the Florida panhandle. Vision Bank operated through two banking divisions – Vision Bank headquartered in Panama City, Florida and the Vision Bank Division of Gulf Shores, Alabama.

During Fiscal 2011 and through February 16, 2012, Park National Bank and Vision Bank comprised Park’s reportable operating segments. All other operating segments were combined and disclosed in the “All Other” category. After February 16, 2012, the Vision Bank operating segment was replaced with a new segment, that of SE LLC. Financial information about Park’s reportable operating segments as of December 31, 2011 is included in Note 23 of the Notes to Consolidated Financial Statements in Park’s 2011 Annual Report. That financial information is incorporated herein by reference.

As of the date of this Annual Report on Form 10-K, Park National Bank operated 124 financial service offices and a network of 143 automated teller machines.

Consumer Finance Subsidiary

Guardian Financial Services Company (“Guardian Finance”), an Ohio consumer finance company based in Hilliard, Ohio, also operates as a separate subsidiary of Park. Guardian Finance provides consumer finance services in the central Ohio area. As of the date of this Annual Report on Form 10-K, Guardian Finance had six financial service offices spanning six counties in Ohio: Clark, Fairfield, Franklin, Licking, Montgomery and Richland. Financial information about Guardian Finance is included in the “All Other” category for purposes of the reportable segment information included in Note 23 of the Notes to Consolidated Financial Statements in Park’s 2011 Annual Report. This financial information was immaterial for purposes of separate disclosure.

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SE Property Holdings, LLC

During the first quarter of Fiscal 2011, Park formed a limited liability company, organized under the laws of the State of Ohio, called SE Property Holdings, LLC (“SE LLC”), as a direct subsidiary of Park. The initial purpose of SE LLC was to purchase other real estate owned (“OREO”) from Vision Bank and continue to market such properties for sale. As of December 31, 2011, approximately $29.0 million of OREO was held by SE LLC, which had been purchased from Vision Bank (at the then current fair market value) during Fiscal 2011. Management plans to continue marketing the properties held by SE LLC and sell such properties in as effective a manner as possible.

By letter dated January 30, 2012, the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) authorized Park to engage in the business of extending credit through SE LLC. As a result, SE LLC is permitted to engage in lending activities and was able to succeed to the rights and obligations of Vision Bank in respect of the loans held by Vision Bank when Vision Bank merged into SE LLC.

As of the date of this Annual Report on Form 10-K, SE LLC is considered a separate operating segment of Park. On February 16, 2012, approximately $110 million in loans ($88 million non-performing and $22 million performing) remained at Vision Bank following the transaction with Centennial. As a result of the merger of Vision Bank into SE LLC, SE LLC held total assets of approximately $168 million as February 16, 2012. As stated previously, in addition to performing loans and non-performing loans that remained at Vision Bank and were transferred to SE LLC by operation of law as a result of the merger of Vision Bank into SE LLC , SE LLC held approximately $29.0 million of OREO at December 31, 2011 and at February 16, 2012. SE LLC also had other assets of approximately $29.0 million at February 16, 2012, primarily related to cash, federal deferred tax assets and other receivables. SE LLC will have operations in Ohio, Alabama, and Florida, with the sole purpose of such operations being to sell OREO in an effective and efficient manner and work out problem loan situations with the respective borrowers.

Leasing Subsidiary

Scope Leasing, Inc. (which does business as “Scope Aircraft Finance”), a subsidiary of Park National Bank, specializes in aircraft financing. The customers of Scope Aircraft Finance include small businesses and entrepreneurs intending to use the aircraft for business or pleasure. Scope Aircraft Finance serves customers throughout the United States of America (the “United States”) and Canada.

Title Agency Subsidiary

As of the date of this Annual Report on Form 10-K, Park National Bank held 49% of the ownership interest of Park Title Agency, LLC (“Park Title Agency”). Park Title Agency is a traditional title agency serving the central Ohio area.

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Vision Bancshares Trust I

In connection with the merger of Vision Bancshares, Inc. (“Vision”) into Park in March of 2007 (the “Vision Merger”), Park entered into a First Supplemental Indenture, dated as of the effective time of the Vision Merger (the “First Supplemental Indenture”), with Vision and Wilmington Trust Company, a Delaware banking corporation, as Trustee. Under the terms of the First Supplemental Indenture, Park assumed all of the payment and performance obligations of Vision under the Junior Subordinated Indenture, dated as of December 5, 2005 (the “Indenture”), pursuant to which Vision issued $15.5 million of junior subordinated debentures to Vision Bancshares Trust I, a Delaware statutory trust (the “Vision Trust”). The junior subordinated debentures were issued by Vision in connection with the sale by the Vision Trust of $15.0 million of floating rate preferred securities to institutional investors on December 5, 2005.

Under the terms of the First Supplemental Indenture, Park also succeeded to and was substituted for Vision with the same effect as if Park had originally been named (i) as “Depositor” in the Amended and Restated Trust Agreement of the Vision Trust, dated as of December 5, 2005 (the “Trust Agreement”), among Vision, Wilmington Trust Company, as Property Trustee and as Delaware Trustee, and the Administrative Trustees named therein and (ii) as “Guarantor” in the Guarantee Agreement, dated as of December 5, 2005 (the “Guarantee Agreement”), between Vision and Wilmington Trust Company, as Guarantee Trustee. Through these contractual obligations, Park has fully and unconditionally guaranteed all of the Vision Trust’s obligations with respect to the floating rate preferred securities.

Both the junior subordinated debentures and the floating rate preferred securities mature on December 30, 2035 (which maturity may be shortened), and carry a floating interest rate per annum, reset quarterly, equal to the sum of three-month LIBOR plus 148 basis points. Payment of interest on the junior subordinated debentures, and payment of cash distributions on the floating rate preferred securities, may be deferred at any time or from time to time for a period not to exceed twenty consecutive quarters, subject to specified conditions.

Under the terms of the Indenture and the related Guarantee Agreement, Park, as successor to Vision in accordance with the First Supplemental Indenture, is prohibited, subject to limited exceptions, from declaring or paying dividends or distributions on, or redeeming, repurchasing, acquiring or making any liquidation payments with respect to, any shares of Park’s capital stock (i) if an event of default under the Indenture has occurred and continues; (ii) if Park is in default with respect to the payment of any obligations under the Guarantee Agreement; or (iii) during any period in which the payment of interest on the junior subordinated debentures by Park (and the payment of cash distributions on the floating rate preferred securities by the Vision Trust) is being deferred. The floating rate preferred securities are considered Tier 1 Capital under regulatory capital standards.

Other Subsidiaries

Park Investments, Inc., which is a subsidiary of Park National Bank, operates as an asset management company. Its operations are not significant to the consolidated entity.

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The following subsidiaries operate as capital management companies: (i) Park Capital Investments, Inc. (“Park Capital”), a subsidiary of Park; (ii) Park National Capital LLC, whose members are Park Capital and Park National Bank; (iii) First-Knox National Capital LLC, whose members are Park Capital and Park National Bank (as successor by merger to The First-Knox National Bank of Mount Vernon); (iv) Security National Capital LLC, whose members are Park Capital and Park National Bank (as successor by merger to The Security National Bank and Trust Co.); and (v) Century National Capital LLC, whose members are Park Capital and Park National Bank (as successor by merger to Century National Bank). The operations of these subsidiaries are also not significant to the consolidated entity.

Recent Developments

Formation of SE Property Holdings, LLC

During the first quarter of Fiscal 2011, Park formed SE LLC. Please see the description of SE LLC in the section of this Item 1 captioned “General -- SE Property Holdings.”

Transactions Involving Vision Bank

Purchase and Assumption Agreement with Centennial Bank

On November 16, 2011, Park and Vision Bank entered into a Purchase and Assumption Agreement (as amended by the First Amendment to Purchase and Assumption Agreement, dated as of January 25, 2012, the “Centennial Bank P&A Agreement”) with Home BancShares, Inc., an Arkansas corporation (“Home”), and its wholly-owned subsidiary, Centennial Bank, to sell substantially all of the operating assets and liabilities associated with Vision Bank to Centennial Bank for a purchase price of $27.9 million.

On February 16, 2012, the parties closed the transactions contemplated by the Centennial Bank P&A Agreement. Centennial Bank purchased the real estate and fixed assets used in and/or related to the business conducted at the 17 Vision Bank financial service offices. In addition, Centennial Bank acquired the safe deposit business conducted at the Vision Bank financial service offices, cash on hand, prepaid expenses and Vision Bank’s rights under contracts related to the Vision Bank financial service offices.

Centennial Bank also purchased performing loans with an aggregate unpaid principal balance of $354 million as of February 16, 2012. These loans were sold at an aggregate discount of $13.1 million. Centennial Bank also has a put option whereby it will be entitled to put back to Vision Bank (or its successor) up to $7.5 million in the aggregate of purchased loans for a period of up to six months after the closing date.

Centennial Bank also assumed: (i) Vision Bank’s obligations related to approximately $520 million of deposit accounts/liabilities at the 17 financial service offices; and (ii) the liabilities and obligations of Vision Bank with respect to the safe deposit business, the assumed contracts, third-party leases for the real estate leased by Vision Bank and equipment and operating leases related to the 17 Vision Bank financial service offices.

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In conjunction with the transactions contemplated by the Centennial Bank P&A Agreement and as permitted by 12 C.F.R. § 327.12(f), Vision Bank transferred to Centennial Bank the $3.4 million balance of the prepaid assessment paid by Vision Bank to the FDIC.

Following the closing, Vision Bank retained non-performing loans, which had an aggregate book balance, as of February 16, 2012, of $88 million and performing loans, which had a book balance, as of February 16, 2012, of $22 million, which loans Centennial Bank had determined not to purchase as a result of its credit due diligence.

Sale of Loans by Vision Bank to Park National Bank

Pursuant to a Loan Sale and Purchase Agreement, dated as of December 27, 2011, with Park National Bank, on December 28, 2011, Vision Bank sold to Park National Bank performing loans which had an aggregate book balance of $7.6 million as of December 28. 2011.

Resignation of Vision Bank as Trustee and Surrender of Trust Powers by Vision Bank

In connection with the transactions contemplated by the Centennial Bank P&A Agreement, Vision Bank resigned as trustee under each of the 42 trust relationships as to which Vision Bank then exercised fiduciary or trust powers and surrendered the fiduciary/trust powers granted to Vision Bank by the Florida OFR. Park National Bank was appointed to serve as successor trustee under 27 of these trust relationships, Centennial was appointed to serve as successor trustee under six of these trust relationships and nine trust relationships were either closed or transferred to a different fiduciary besides Park National Bank or Centennial.

Surrender of Bank Charter by Vision Bank and Termination of FDIC Insured Status

After the consummation of the transactions contemplated by the Centennial Bank P&A Agreement, Vision Bank no longer carried on a banking business, held no deposit accounts/liabilities and had no offices; and, as a result, on February 16, 2012, Vision Bank surrendered its bank charter to the Florida OFR for cancellation as required by applicable Florida banking regulations and became a Florida corporation without any authority to conduct a banking business. In addition, Vision Bank requested termination of its insured status by the FDIC, which termination was effective February 16, 2012.

Merger of Vision Bank into SE Property Holdings

Following the consummation of the transactions contemplated by the Centennial Bank P&A Agreement, the surrender by Vision Bank of the fiduciary/trust powers granted to Vision Bank by the Florida OFR, the surrender by Vision Bank of its bank charter to the Florida OFR and the termination of Vision Bank’s insured status by the FDIC, on February 16, 2012, Vision Bank merged with and into SE LLC (the “Vision Bank – SE LLC Merger”) pursuant to an Agreement and Plan of Merger, dated as of January 25, 2012. SE LLC was the surviving entity in the merger and the separate existence of Vision Bank ceased.

As a result of the Vision Bank – SE LLC Merger, title to all of the assets and other property, and any interests therein, owned by Vision Bank transferred to SE LLC by operation of law. SE LLC became responsible for all of the liabilities and obligations of Vision Bank, also by operation of law.

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As of December 31, 2011, Park reported the following within assets held for sale and liabilities held for sale on Park’s Consolidated Balance Sheet in anticipation of the closing of the transactions contemplated by the Centennial Bank P&A Agreement. Further information about these assets and liabilities is included in Note 3 of the Notes to the Consolidated Financial Statements in Park’s 2011 Annual Report.

Assets held for sale	2011
Cash and due from banks	$	6,766
Loans		369,044
Allowance for loan losses (purchase discount)		(13,100	)
Net loans		355,944
Fixed assets		14,861
Other assets		4,891
Total assets held for sale	$	382,462
Liabilities held for sale		2011
Deposits	$	532,598
Other liabilities		3,588
Total liabilities held for sale	$	536,186

The above is included for reference for SE LLC and Vision Bank commentary within this Annual Report on Form 10-K.

Services Provided by Park’s Subsidiaries

Park National Bank and its divisions provide, and prior to February 16, 2012, Vision Bank and its divisions provided, the following principal services:

· the acceptance of deposits for demand, savings and time accounts and the servicing of those accounts;

· commercial, industrial, consumer and real estate lending, including installment loans, credit cards (which, except for home-equity-based credit cards, are offered through a third party), home equity lines of credit and commercial leasing;

· trust and wealth management services;

· cash management;

· safe deposit operations;

· electronic funds transfers;

· online Internet banking with bill pay service; and

· a variety of additional banking-related services tailored to the needs of individual customers.

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Park believes that the deposit mix of Park National Bank and its divisions is currently such that no material portion has been obtained from a single customer and, consequently, the loss of any one customer of Park National Bank (or its divisions) would not have a materially adverse effect on the business of Park National Bank (or the relevant division).

Guardian Finance also provides consumer finance services.

Lending Activities

Park National Bank deals with consumers as well as with a wide cross-section of businesses and corporations located primarily in the 28 Ohio counties and one Kentucky county served by the financial service offices of Park National Bank. Relatively few loans are made to borrowers outside these counties. As a result of the Vision Bank – SE LLC Merger, SE LLC holds loans originated by Vision Bank located in the five Florida counties and one Alabama county previously serviced by the financial service offices of Vision Bank. It is expected that SE LLC will originate loans only to further the collection efforts with respect to the loans transferred to SE LLC by operation of law as a result of the Vision Bank - SE LLC Merger. Such origination (or modification) volume is expected to be insignificant to the consolidated Park entity.

Park National Bank makes lending decisions in accordance with the written loan policy adopted by Park which is designed to maintain acceptable loan quality. Park National Bank originates and retains for its own portfolio commercial and commercial real estate loans, variable rate residential real estate loans, home equity lines of credit, and installment loans. Park National Bank also generates fixed rate residential real estate loans for sale to the secondary market.

Guardian Finance originates and retains for its own portfolio consumer installment loans. Guardian Finance makes lending decisions in accordance with the written loan policy adopted and approved by the Guardian Finance Board of Directors.

There are certain risks inherent in making loans. These risks include interest rate changes over the time period in which the loans may be repaid, risks resulting from changes in the national and local economies, risks inherent in dealing with borrowers and, in the case of loans secured by collateral, risks resulting from uncertainties about the future value of the collateral.

Commercial Loans

At December 31, 2011, Park’s subsidiaries (including Scope Aircraft Finance) had approximately $1,854 million in commercial loans (commercial, financial and agricultural loans and commercial real estate loans) and commercial leases outstanding, representing approximately 43% of their total aggregate loan portfolio as of that date. Of this amount, approximately $744 million represented commercial, financial and agricultural loans, $1,108 million represented commercial real estate loans and $2 million represented commercial leases.

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Vision Bank had approximately $42 million in commercial loans outstanding at December 31, 2011, representing approximately 34.2% of Vision Bank’s aggregate loan portfolio at that date, which were not included within assets held for sale. Of this amount, approximately $20 million represented commercial, financial and agricultural loans and approximately $22 million represented commercial real estate loans.

Included within assets held for sale at December 31, 2011, there were approximately $156 million of Vision Bank commercial loans (commercial, financial, and agricultural loans and commercial real estate loans). These were purchased by Centennial Bank pursuant to the Centennial Bank P&A Agreement.

Commercial loans are made for a wide variety of general corporate purposes, including financing for industrial and commercial properties, financing for equipment, inventories and accounts receivable, acquisition financing and commercial leasing. The term of each commercial loan varies by its purpose. Repayment terms are structured such that commercial loans will be repaid within the economic useful life of the underlying asset. Information concerning the loan maturity distribution within the commercial loan portfolio is provided in Table 13 included in the section of Park’s 2011 Annual Report captioned “FINANCIAL REVIEW,” and is incorporated herein by reference.

The commercial loan portfolio of Park’s current subsidiaries includes loans to a wide variety of corporations and businesses across many industrial classifications in (i) the 28 Ohio counties and one Kentucky county where Park National Bank operates and (ii) the five Florida counties and one Alabama county where Vision Bank operated. The primary industries represented by these customers include commercial real estate leasing, manufacturing, retail trade, health care and other services.

Commercial loans are evaluated for the adequacy of repayment sources at the time of approval and are regularly reviewed for any possible deterioration in the ability of the borrower to repay the loan. The credit information required generally includes, depending on the amount of money lent, fully completed financial statements, third-party prepared financial statements, two years of federal income tax returns and a current credit report. Loan terms include amortization schedules commensurate with the purpose of each loan, the source of each repayment and the risk involved. In most instances, collateral is required to provide an additional source of repayment in the event of default by a commercial borrower. The structure of the collateral package, including the type and amount of the collateral, varies from loan to loan depending on the financial strength of the borrower, the amount and terms of the loan and the collateral available to be pledged by the borrower. Most often, the collateral is inventory, machinery, accounts receivable or real estate. The guarantee of the principals is generally required on loans made to closely-held business entities.

Commercial real estate loans (“CRE loans”) include mortgage loans to developers and owners of commercial real estate. The lending policy for CRE loans is designed to address the unique risk attributes of CRE lending. The collateral for these CRE loans is the underlying commercial real estate. Park National Bank generally requires that the CRE loan amount be no more than 85% of the purchase price or the appraised value of the commercial real estate securing the CRE loan, whichever is less. CRE loans made for Park National Bank’s portfolio generally have a variable interest rate. For more information concerning the loan maturity distribution in the CRE loan portfolio, please see Table 13 included in the section of Park’s 2011 Annual Report captioned “FINANCIAL REVIEW,” which is incorporated herein by reference.

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The regulatory limit for loans made to one borrower by Park National Bank was $78.2 million at December 31, 2011. Participations in a loan by Park National Bank in an amount larger than $20.0 million are generally sold to third-party banks or financial institutions based on an internal Park loan policy. While Park National Bank has a loan limit of $78.2 million, total indebtedness of the largest single borrower within the commercial portfolio was $23.8 million at December 31, 2011.

Park has a loan review program which annually evaluates substantially all (generally, about 90%) of the loans with an outstanding balance greater than $250,000. Since February 16, 2012, loans held by SE LLC have been included within the scope of Park’s loan review program. If deterioration has occurred, the lending subsidiary takes prompt action designed to increase the likelihood of payment of the loan. Upon detection of the reduced ability of a borrower to service interest and/or principal on a loan, the subsidiary may downgrade the loan and, under certain circumstances, place the loan on nonaccrual status. The subsidiary then works with the borrower to develop a payment schedule which the subsidiary anticipates will permit service of the principal and interest on the loan by the borrower. Loans which deteriorate and show the inability of a borrower to repay principal and do not meet the subsidiary’s standards are charged off. A work-out officer is available to assist each subsidiary when a credit deteriorates. Information about Park’s policy for placing loans on nonaccrual status is included under the caption “Loans” in Note 1 of the Notes to Consolidated Financial Statements in Park’s 2011 Annual Report, and is incorporated herein by reference.

Commercial loans are generally viewed as having a higher credit risk than consumer loans because commercial loans usually involve larger loan balances to a single borrower and are more susceptible to a risk of default during an economic downturn. Commercial loans generally have variable interest rates. The Park pricing strategy generally does not include low introductory or “teaser” rates. Park uses several indices for commercial loans. However, the national prime rate is the most common index Park uses. Credit risk for commercial loans arises from borrowers lacking the ability or willingness to pay principal or interest and, in the case of secured loans, by a shortfall in the collateral value in relation to the outstanding loan balance in the event of a default and subsequent liquidation of collateral. The underwriting of all commercial loans, regardless of type, includes cash flow analyses with rates shocked 400 basis points. In the case of commercial loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of each borrower to collect amounts due from its customers. Other collateral securing commercial loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the borrower’s business. Information concerning the loan loss experience and allowance for loan losses related to the commercial, financial and agricultural loan portfolio and the commercial real estate portfolio is provided in Tables 25 and 26 included in the section of Park’s 2011 Annual Report captioned “FINANCIAL REVIEW,” and is incorporated herein by reference.

Aircraft Financing

Scope Aircraft Finance specializes in aircraft financing. The customers of Scope Aircraft Finance include small businesses and entrepreneurs intending to use the aircraft for business or pleasure. The customers of Scope Aircraft Finance are located throughout the United States. The lending officers of Scope Aircraft Finance are experienced in the aircraft financing industry and rely upon that experience and industry guides in determining whether to grant an aircraft loan or lease. At December 31, 2011, Scope Aircraft Finance had outstanding approximately $168 million in loans primarily secured by aircraft (which are included in the commercial loan portfolio).

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Consumer Loans

At December 31, 2011, Park’s subsidiary banks, together with Guardian Finance, had outstanding consumer loans (including automobile leases and home-equity-based credit cards) in an aggregate amount of approximately $617 million, constituting approximately 14.3% of their aggregate total loan portfolio. These subsidiaries make installment credit available to customers and prospective customers in their primary market areas of (i) central and southern Ohio and Northern Kentucky for Park National Bank and (ii) prior to February 16, 2012 the Gulf Coast communities in Baldwin County, Alabama and the Florida panhandle for Vision Bank. Assets held for sale at December 31, 2011 included approximately $4.0 million of consumer loans from Vision Bank, which were sold to Centennial Bank pursuant to the Centennial Bank P&A Agreement.

Credit approval for consumer loans requires income sufficient to repay principal and interest due, stability of employment, an established credit record and sufficient collateral for secured loans. It is the policy of Park’s subsidiaries to adhere strictly to all laws and regulations governing consumer lending. A compliance officer is responsible for monitoring each subsidiary’s performance and advising and updating loan personnel in this area. Each subsidiary reviews its consumer loan portfolio monthly and charges off loans which do not meet Park’s standards. Information about Park’s policy for placing loans on nonaccrual status is included under the caption “Loans” in Note 1 of the Notes to Consolidated Financial Statements in Park’s 2011 Annual Report, and is incorporated herein by reference. Park National Bank and its divisions (other than The Park National Bank of Southwest Ohio & Northern Kentucky division of Park National Bank) also offer home-equity-based credit card accounts through the consumer lending department. These accounts are administered under the same standards as other consumer loans and leases.

Consumer loans typically have shorter terms and lower balances with higher yields as compared to real estate mortgage loans, but generally carry higher risks of default. Consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount that can be recovered on these loans. Information concerning the loan loss experience and allowance for loan losses related to the consumer loan portfolio is provided in Tables 25 and 26 included in the section of Park’s 2011 Annual Report captioned “FINANCIAL REVIEW,” and is incorporated herein by reference.

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Residential Real Estate and Construction Loans

At December 31, 2011, Park’s subsidiary banks had outstanding approximately $1,846 million in construction real estate and residential real estate, representing approximately 42.9% of total loans outstanding. Of the $1,846 million, approximately $1,629 million was included within the residential real estate loan segment, which included $396 million of commercial loans, $954 million of mortgage loans, $228 million of home equity lines of credit and $51 million of installment loans. The remaining $217 million was included within the construction real estate loan segment, which included $188 million of commercial land and development (“CL&D”) loans and $29 million of 1-4 family residential construction loans. The market area for real estate lending by Park National Bank is concentrated in central and southern Ohio and Northern Kentucky. The market area for real estate lending by Vision Bank was concentrated in the Gulf Coast communities in Baldwin County, Alabama and the Florida panhandle. Park had approximately $62.7 million of net charge-offs resulting from construction loans ($4.3 million related to 1-4 family residential construction loans and $58.4 million related to CL&D loans) during Fiscal 2011. Vision Bank accounted for approximately $46.4 million ($3.9 million related to 1-4 family residential construction loans and $42.5 million related to CL&D loans), or 74%, of this total. At December 31, 2011, Vision Bank had approximately $33.6 million outstanding in construction loans ($2 million of 1-4 family residential construction loans and $31.6 million of CL&D loans), or 15.4% of Park’s consolidated total at the end of Fiscal 2011. In addition to construction loans, Vision Bank had approximately $1.8 million of home equity lines of credit. None of these Vision Bank loans were included within assets held for sale as of December 31, 2011.

Excluded from amounts disclosed above, but included within assets held for sale at December 31, 2011 were approximately $210.0 million in construction real estate and residential real estate loans at Vision Bank, which were sold to Centennial Bank pursuant to the Centennial Bank P&A Agreement.

Credit approval for residential real estate loans requires demonstration of sufficient income to repay the principal and interest and the real estate taxes and insurance, stability of employment, an established credit record and the appropriate appraised value of the real estate securing the loan. All loans are sent through automated underwriting to determine a risk classification. All loans receiving a risk classification of caution require review by a senior lender and generally require additional documentation if the loan is approved.

Park National Bank generally requires, and Vision Bank generally required, that the residential real estate loan amount be no more than 80% of the purchase price or the appraised value of the real estate securing the loan, whichever is less, unless private mortgage insurance is obtained by the borrower. Loans in this lending category which are made to be held in the bank’s portfolio are generally adjustable rate, fully amortized mortgages. The rates used are generally fully-indexed rates. Park generally does not price residential loans using low introductory “teaser” rates. Park National Bank also originates fixed rate real estate loans for the secondary market. These loans are generally sold immediately after closing. However, beginning in 2010, Park’s management made a decision to retain 15-year fixed-rate residential mortgage loans, which previously would have been sold in the secondary market. At December 31, 2011 and 2010, Park reported $329 million and $176 million, respectively, of these loans on the Consolidated Balance Sheets. All real estate loans are secured by first mortgages with evidence of title in favor of the lender in the form of an attorney’s opinion of title or a title insurance policy. Each of Park National Bank and Vision Bank has also required proof of hazard insurance with lender named as the mortgagee and as the loss payee. Independent appraisals are generally obtained for consumer real estate loans.

Home equity lines of credit are generally made as second mortgages by Park National Bank. The maximum amount of a home equity line of credit is generally limited to 85% of the appraised value of the property less the balance of the first mortgage. The home equity lines of credit are written with ten-year terms. A variable interest rate is generally charged on the home equity lines of credit.

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Vision Bank also made home equity lines of credit available in the form of second mortgages. The maximum amount of a Vision Bank home equity line of credit could be as high as 89.9% of the appraised value of the property less the balance of the first mortgage, depending on the credit score and debt-to-income ratio of the borrower. The home equity lines of credit written by Vision Bank generally had 25-year terms and a variable interest rate.

Information concerning the loan loss experience and allowance for loan losses related to the residential real estate portfolio is provided in Tables 25 and 26 included in the section of Park’s 2011 Annual Report captioned “FINANCIAL REVIEW,” and is incorporated herein by reference.

Construction loans include commercial construction loans as well as residential construction loans. Construction loans may be in the form of a permanent loan or a short-term construction loan, depending on the needs of the individual borrower. Generally, the permanent construction loans have a variable interest rate although a permanent construction loan may be made with a fixed interest rate for a term generally not exceeding five years. Short-term construction loans are made with variable interest rates. Information concerning the loan maturity distribution within the construction financing portfolio is provided in Table 13 included in the section of Park’s 2011 Annual Report captioned “FINANCIAL REVIEW,” and is incorporated herein by reference.

Construction financing is generally considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the property’s value at completion of construction and the estimated cost (including interest) of construction. If the estimate of construction cost proves to be inaccurate, the subsidiary holding the loan may be required to advance funds beyond the amount originally committed to permit completion of the project. If the estimate of value proves inaccurate, the subsidiary holding the loan may be confronted, at or prior to the maturity of the loan, with a project having a value insufficient to assure full repayment, should the borrower default. In the event a default on a construction loan occurs and foreclosure follows, the subsidiary holding the loan must take control of the project and attempt either to arrange for completion of construction or to dispose of the unfinished project. Additional risk exists with respect to loans made to developers who do not have a buyer for the property, as the developer may lack funds to pay the loan if the property is not sold upon completion. Park National Bank attempts, and Vision Bank attempted, to reduce such risks on loans to developers by requiring personal guarantees and reviewing current personal financial statements and tax returns as well as other projects undertaken by the developer. For additional information concerning the loan loss experience, please see “ITEM 1A. RISK FACTORS – 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.” and “– Our allowance for loan losses may prove to be insufficient to absorb potential losses in our loan portfolio.” in this Annual Report on Form 10-K. Information concerning the loan loss experience and allowance for loan losses related to the construction financing portfolio is provided in Tables 25 and 26 included in the section of Park’s 2011 Annual Report captioned “FINANCIAL REVIEW,” and is incorporated herein by reference.

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SE Property Holdings, LLC

SE LLC is a non-bank subsidiary of Park, holding OREO property, non-performing loans and small number of performing loans. The loans are of higher risk as they are either on nonaccrual status or are accruing, but may have been classified by Park management. In addition to approximately $29 million in OREO property, SE LLC also held approximately $110 million in loans as of February 16, 2012 following the Vision Bank - SE LLC Merger. SE LLC has its main office in Licking County, Ohio, one office in Alabama (Baldwin County) and one office in Florida (Bay County). The employees of these offices are dedicated solely to working with a third-party work-out specialist to ensure effective and efficient resolution to the non-performing loans and OREO, while working closely with the borrowers of the performing loans to maximize collection efforts. It is expected that the loans and OREO will reduce over time and result in cash in-flow to Park in the future.

Title Agency

Park Title Agency is a traditional title agency serving residential and commercial customers in the central Ohio area who are seeking title insurance for purchases, construction and refinancing of real estate. Park Title Agency’s customers include current customers of Park National Bank and other residents primarily in the 28 Ohio counties and one Kentucky County served by Park National Bank.

Competition

The financial services industry is highly competitive. Park’s subsidiaries compete with other local, regional and national service providers, including banks, savings associations, credit unions and other types of financial institutions, finance companies, insurance agencies and title agencies. Other competitors include securities dealers, brokers, mortgage bankers, investment advisors, insurance companies and financial services subsidiaries of commercial and manufacturing companies. Competition within the financial service industry continues to increase as a result of mergers between, and expansion of, financial service providers within and outside Park’s primary market area.

The primary factors in competing for loans are interest rates charged and overall services provided to borrowers. The primary factors in competing for deposits are interest rates paid on deposits, account liquidity, convenience and hours of office locations and having trained and competent staff to deliver services. However, some competitors of Park’s subsidiaries may have greater resources and, as such, higher lending limits, which may adversely affect the ability of Park’s subsidiaries to compete. In addition, some of the financial service providers with which Park’s subsidiaries compete enjoy the benefits of fewer regulatory constraints and lower cost structures.

Employees

At December 31, 2011, Park and its subsidiaries had 1,920 full-time equivalent employees. Of this number, 184 were employees of Vision Bank. Centennial Bank hired 116 employees that were previously employees of Vision Bank as of December 31, 2011. As of the date of this Annual Report on Form 10-K, SE LLC has 37 employees, all of which were formerly employees of Vision Bank at December 31, 2011. These employees will assist in transitional operations until such time that core operating systems have been converted, after which time, the services of most of them will be terminated by SE LLC.

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Supervision and Regulation of Park and its Subsidiaries

Park, Park National Bank and many of Park’s other subsidiaries are subject to extensive regulation by federal and state agencies. The regulation of bank holding companies and their subsidiaries is intended primarily for the protection of consumers, depositors, borrowers, the FDIC’s Deposit Insurance Fund and the banking system as a whole and not for the protection of shareholders. Applicable laws and regulations restrict permissible activities and investments and require actions to protect loan, deposit, brokerage, fiduciary and other customers, as well as the FDIC’s Deposit Insurance Fund. They also may restrict Park’s ability to repurchase its Common Shares or to receive dividends from Park National Bank and impose capital adequacy and liquidity requirements.

Park is registered with the Federal Reserve Board as a bank holding company under the Bank Holding Company Act. As a bank holding company, Park is subject to regulation under the Bank Holding Company Act and to inspection, examination and supervision by the Federal Reserve Board. Park is also subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended (the “Securities Act”), and the Exchange Act, as administered by the SEC. Park’s Common Shares are listed on NYSE Amex under the trading symbol “PRK,” which subjects Park to the NYSE Amex Company Guide for listed companies. As a result of Park’s participation in the U.S. Treasury’s Capital Purchase Program enacted as part of the Troubled Assets Relief Program (“TARP”) under the Emergency Economic Stabilization Act of 2008 (“EESA”), Park is also subject to the regulatory authority granted to the United States Department of the Treasury (the “U.S. Treasury”) and the Special Inspector General for TARP under EESA and the American Recovery and Reinvestment Act of 2009 (“ARRA”), as discussed below under the caption “Capital Purchase Program.”

Park National Bank, as a national banking association, is subject to regulation, supervision and examination primarily by the Office of the Comptroller of the Company (the “OCC”) and secondarily by the FDIC.

Guardian Finance, as an Ohio state-chartered consumer finance company, is subject to regulation, supervision and examination by the Ohio Division of Financial Institutions.

As a subsidiary of Park, SE LLC is subject to inspection, examination and supervision by the Federal Reserve Board.

Park Title Agency, as an Ohio state-chartered title agency, is subject to regulation, supervision and examination by the Ohio Department of Insurance.

The following information describes selected federal and state statutory and regulatory provisions and is qualified in its entirety by reference to the full text of the particular statutory or regulatory provisions. These statutes and regulations are continually under review by the United States Congress and state legislatures and federal and state regulatory agencies. A change in statutes, regulations or regulatory policies applicable to Park and its subsidiaries could have a material effect on their respective businesses.

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Regulation of Bank Holding Companies

As a bank holding company, Park’s activities are subject to extensive regulation by the Federal Reserve Board. Park is required to file reports with the Federal Reserve Board and such additional information as the Federal Reserve Board may require, and is subject to regular examinations by the Federal Reserve Board.

The Federal Reserve Board also has extensive enforcement authority over bank holding companies, including, among other things, the ability to:

· assess civil money penalties;

· issue cease and desist or removal orders; and

· require that a bank holding company divest subsidiaries (including a subsidiary bank).

In general, the Federal Reserve Board may initiate enforcement actions for violations of laws and regulations and unsafe or unsound practices.

Under Federal Reserve Board policy, a bank holding company is expected to act as a source of financial strength to each subsidiary bank and to commit resources to support such subsidiary bank. Under this policy, the Federal Reserve Board may require a bank holding company to contribute additional capital to an undercapitalized subsidiary bank and may disapprove of the payment of dividends to the shareholders if the Federal Reserve Board believes the payment of such dividends would be an unsafe or unsound practice.

The Bank Holding Company Act requires the prior approval of the Federal Reserve Board in any case where a bank holding company proposes to:

· acquire direct or indirect ownership or control of more than 5% of the voting shares of any bank that is not already majority-owned by it;

· acquire all or substantially all of the assets of another bank or another financial or bank holding company; or

· merge or consolidate with any other financial or bank holding company.

The Gramm-Leach-Bliley Act of 1999 (“GLBA”) permits a qualifying bank holding company to become a financial holding company and thereby affiliate with securities firms and insurance companies and engage in other activities that are financial in nature and not otherwise permissible for a bank holding company. Although Park was a financial holding company effective in December 2007, Park ceased to be a financial holding company effective June 30, 2008, and neither Park nor any of its subsidiaries engage in any of the activities permitted for a financial holding company but not a bank holding company.

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Each subsidiary bank of a bank holding company is subject to certain restrictions imposed by the Federal Reserve Act on the maintenance of reserves against deposits, extensions of credit to the bank holding company or any of its subsidiaries, investments in the stock or other securities of the bank holding company or its subsidiaries and the taking of such stock or securities as collateral for loans to any borrower. Further, a bank holding company and its subsidiaries are prohibited from engaging in certain tying arrangements in connection with any extension of credit, lease or sale of property or furnishing of any services. Various consumer laws and regulations also affect the operations of these subsidiaries.

Transactions with Affiliates, Directors, Executive Officers and Shareholders

Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Board Regulation W generally:

· limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with any one affiliate;

· limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with all affiliates; and

· require that all such transactions be on terms substantially the same, or at least as favorable to the bank or subsidiary, as those provided to a non-affiliate.

An affiliate of a bank is any company or entity which controls, is controlled by or is under common control with the bank. The term “covered transaction” includes the making of loans to the affiliate, the purchase of assets from the affiliate, the issuance of a guarantee on behalf of the affiliate, the purchase of securities issued by the affiliate and other similar types of transactions.

A bank’s authority to extend credit to executive officers, directors and greater than 10% shareholders, as well as entities such persons control, is subject to Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O promulgated thereunder by the Federal Reserve Board. Among other things, these loans must be made on terms (including interest rates charged and collateral required) substantially the same as those offered to unaffiliated individuals or be made as part of a benefit or compensation program and on terms widely available to employees, and must not involve a greater than normal risk of repayment. In addition, the amount of loans a bank may make to these persons is based, in part, on the bank’s capital position, and specified approval procedures must be followed in making loans which exceed specified amounts.

Regulation of Nationally-Chartered Banks

As a national banking association, Park National Bank is subject to regulation under the National Banking Act and is periodically examined by the OCC. OCC regulations govern permissible activities, capital requirements, dividend limitations, investments, loans and other matters. Furthermore, Park National Bank is subject, as a member bank, to certain rules and regulations of the Federal Reserve Board, many of which restrict activities and prescribe documentation to protect consumers. Park National Bank is an insured depository institution as a member of the Deposit Insurance Fund. As a result, it is subject to regulation and deposit insurance assessments by the FDIC. In addition, the establishment of branches by Park National Bank is subject to prior approval of the OCC. The OCC has broad enforcement powers over national banks, including the power to impose fines and other civil and criminal penalties and to appoint a conservator or receiver if any of a number of conditions are met.

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Regulation of Consumer Finance Companies

As a consumer finance company incorporated under Ohio law, Guardian Finance is subject to regulation and supervision by the Ohio Division of Financial Institutions. Division regulation and supervision designed to protect consumers affect the lending activities of Guardian Finance, including interest rates and certain loan terms, advertising and record retention. If grounds provided by law exist, the Ohio Division of Financial Institutions may suspend or revoke an Ohio consumer finance company’s ability to make loans.

Federal Deposit Insurance Corporation

The FDIC is an independent federal agency which insures the deposits, up to prescribed statutory limits, of federally-insured banks and savings associations and safeguards the safety and soundness of the financial institution industry.

Insurance Premiums

Insurance premiums for each insured depository institution are determined based upon the institution’s capital level and supervisory rating provided to the FDIC by the institution’s primary federal regulator and other information the FDIC determines to be relevant to the risk posed to the Deposit Insurance Fund by the institution. The assessment rate determined by considering such information is then applied to the amount of the institution’s average assets minus average tangible equity to determine the institution’s insurance premium. An increase in the assessment rate could have a material adverse effect on the earnings of the affected institution(s), depending on the amount of the increase.

Insurance of deposits may be terminated by the FDIC upon a finding that the insured depository institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition enacted or imposed by the institution’s regulatory agency.

Federal Home Loan Bank

The Federal Home Loan Banks (“FHLBs”) provide credit to their members in the form of advances. Park National Bank is a member of the FHLB of Cincinnati. Prior to February 17, 2012, Vision Bank was a member of the FHLB of Atlanta. As FHLB members, Park National Bank and Vision Bank must maintain an investment in the capital stock of their respective FHLBs. Effective February 16, 2012, Vision Bank’s investment in the capital stock of the FHLB of Atlanta was transferred to SE LLC.

Upon the origination or renewal of a loan or advance, each FHLB is required by law to obtain and maintain a security interest in certain types of collateral. Each FHLB is required to establish standards of community investment or service that its members must maintain for continued access to long-term advances from the FHLB. The standards take into account a member’s performance under the Community Reinvestment Act and the member’s record of lending to first-time home buyers.

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Regulatory Capital

The Federal Reserve Board has adopted risk-based capital guidelines for bank holding companies and state member banks. The OCC and the FDIC have adopted risk-based capital guidelines for national banks and state non-member banks, respectively. The guidelines provide a systematic analytical framework which makes regulatory capital requirements sensitive to differences in risk profiles among banking organizations, takes off-balance sheet exposures expressly into account in evaluating capital adequacy, and minimizes disincentives to holding liquid, low-risk assets. Capital levels as measured by these standards are also used to categorize financial institutions for purposes of certain prompt corrective action regulatory provisions.

The minimum guideline for the ratio of total capital to risk-weighted assets (including certain off-balance sheet items such as standby letters of credit) is 8%. At least half of the minimum total risk-based capital ratio (4%) must be composed of common shareholders’ equity, minority interests in certain equity accounts of consolidated subsidiaries and a limited amount of qualifying preferred stock and qualified trust preferred securities, less goodwill and certain other intangible assets, including the unrealized net gains and losses, after applicable taxes, on available-for-sale securities carried at fair value (commonly known as “Tier 1” risk-based capital). The remainder of total risk-based capital (commonly known as “Tier 2” risk-based capital) may consist of certain types and amounts of each of hybrid capital instruments, mandatory convertible debt, subordinated debt, preferred stock not qualifying as Tier 1 capital, allowance for loan losses and net unrealized gains on available-for-sale equity securities.

Under the guidelines, capital is compared to the relative risk related to the balance sheet. To derive the risk included in the balance sheet, one of four risk weights (0%, 20%, 50% and 100%) is applied to different balance sheet and off-balance sheet assets, primarily based on the relative credit risk of the counterparty. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

The Federal Reserve Board has established minimum leverage ratio guidelines for bank holding companies. The Federal Reserve Board guidelines provide for a minimum ratio of Tier 1 capital to average assets (excluding the allowance for loan losses, goodwill and certain other intangibles), or “leverage ratio,” of 3% for bank holding companies that meet certain criteria, including having the highest regulatory rating, and 4% for all other bank holding companies. The guidelines further provide that bank holding companies making acquisitions will be expected to maintain strong capital positions substantially above the minimum levels. The OCC and the FDIC have each also adopted minimum leverage ratio guidelines for national banks and for state non-member banks, respectively.

The federal banking agencies have established a system of prompt corrective action to resolve certain of the problems of undercapitalized institutions. This system is based on five capital level categories for insured depository institutions: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.”

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The federal banking agencies may (or in some cases must) take certain supervisory actions depending upon a bank’s capital level. For example, the banking agencies must appoint a receiver or conservator for a bank within 90 days after it becomes “critically undercapitalized” unless the bank’s primary regulator determines, with the concurrence of the FDIC, that other action would better achieve regulatory purposes. Banking operations otherwise may be significantly affected depending on a bank’s capital category. For example, a bank that is not “well capitalized” generally is prohibited from accepting brokered deposits and offering interest rates on deposits higher than the prevailing rate in its market, and the holding company of any undercapitalized depository institution must guarantee, in part, specific aspects of the bank’s capital plan for the plan to be acceptable.

In order to be “well-capitalized,” a bank or bank holding company must have total risk-based capital of at least 10%, Tier 1 risk-based capital of at least 6% and a leverage ratio of at least 5%, and the bank or bank holding company must not be subject to any written agreement, order, capital directive or prompt corrective action directive to meet and maintain a specific capital level for any capital measure. Park’s management believes that both Park National Bank and Park meet, and prior to February 17, 2012, Vision Bank met, the ratio requirements to be deemed “well-capitalized” according to the guidelines described above. See Note 22 of the Notes to Consolidated Financial Statements located on page 88 of Park’s 2011 Annual Report, which is incorporated herein by reference.

The risk-based capital guidelines adopted by the federal banking agencies are based on the “International Convergence of Capital Measurement and Capital Standards” (Basel I), published by the Basel Committee on Banking Supervision (the “Basel Committee”) in 1988. In 2004, the Basel Committee published a new capital adequacy framework (Basel II) for large, internationally active banking organizations and in December 2010 and January 2011, the Basel Committee issued an update to Basel II (“Basel III”). The Basel Committee frameworks become applicable to banks supervised in the United States only when adopted into United States law or regulation. The United States banking regulators have not yet imposed any of the Basel II or Basel III rules on banks with less than $250 billion in assets or $10 billion of on-balance sheet foreign exposure. It is likely, however, that the Basel Committee provisions will be considered by the United States banking regulators in developing capital regulations that will apply to other United States banks, including Park National Bank.

Fiscal and Monetary Policies

The business and earnings of Park and its subsidiaries are affected significantly by the fiscal and monetary policies of the United States government and its agencies. Park National Bank is particularly affected by the policies of the Federal Reserve Board, which regulates the supply of money and credit in the United States. These policies are used in varying degrees and combinations to directly affect the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits.

Limits on Dividends and Other Payments

There are various legal limitations on the extent to which a subsidiary bank may finance or otherwise supply funds to its parent holding company. Under applicable federal and state laws, a subsidiary bank may not, subject to certain limited exceptions, make loans or extensions of credit to, or investments in the securities of, its bank holding company. A subsidiary bank is also subject to collateral security requirements for any loan or extension of credit permitted by such exceptions.

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Park National Bank may not pay dividends out of its surplus if, after paying these dividends, it would fail to meet the required minimum levels under the risk-based capital guidelines and minimum leverage ratio requirements established by the OCC. In addition, Park National Bank must have the approval of the OCC if a dividend in any year would cause the total dividends for that year to exceed the sum of Park National Bank’s current year’s net income and the retained net income for the preceding two years, less required transfers to surplus. Payment of dividends by Park National Bank may be restricted at any time at the discretion of its regulatory authorities, if such regulatory authorities deem such dividends to constitute unsafe and/or unsound banking practices or if necessary to maintain adequate capital.

The ability of Park to obtain funds for the payment of dividends and for other cash requirements is largely dependent on the amount of dividends which may be declared by Park National Bank. However, the Federal Reserve Board expects Park to serve as a source of strength to Park National Bank, which may require Park to retain capital for further investment in Park National Bank, rather than pay dividends to the Park shareholders. Payment of dividends by Park National Bank may be restricted at any time at the discretion of the OCC if the OCC deems such dividends to constitute an unsafe and/or unsound banking practice. These provisions could have the effect of limiting Park’s ability to pay dividends on its Common Shares.

At December 31, 2011, approximately $51.3 million of the total stockholders’ equity of Park National Bank was available for payment to Park without the approval of the OCC. See Note 17 of the Notes to Consolidated Financial Statements located on page 76 of Park’s 2011 Annual Report.

The Federal Reserve Board has issued a policy statement with regard to the payment of cash dividends by bank holding companies. The policy statement provides that, as a matter of prudent banking, a bank holding company should not maintain a rate of cash dividends unless its net income available to common shareholders has been sufficient to fully fund the dividends, and the prospective rate of earnings retention appears to be consistent with the bank holding company’s capital needs, asset quality, and overall financial condition. Accordingly, a bank holding company should not pay cash dividends that exceed its net income or can only be funded in ways that weaken the bank holding company’s financial health, such as by borrowing.

Under the terms of the Indenture governing the $15.5 million of junior subordinated debentures issued by Vision to the Vision Trust and the related Guarantee Agreement, Park, as successor to Vision in accordance with the First Supplemental Indenture, is prohibited, subject to limited exceptions, from declaring or paying any dividends or distributions on any shares of its capital stock (i) if an event of default under the Indenture has occurred and continues, (ii) if Park is in default with respect to the payment of any obligations under the Guarantee Agreement or (iii) during any period in which the payment of interest on the junior subordinated debentures by Park (and the payment of cash distributions on the floating rate preferred securities of the Vision Trust) is being deferred.

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The Note Purchase Agreement entered into by Park on December 23, 2009 (the “Note Purchase Agreement”) governs the 10% Subordinated Notes due December 23, 2019 issued by Park in December 2009. If an event of default has occurred under the Note Purchase Agreement and is continuing, Park’s ability to declare or pay dividends on any of its capital stock will be restricted.

The dividend rights of holders of Park common shares are also qualified and subject to the dividend rights of holders of Park Series A Preferred Shares held by the U.S. Treasury as described below under the caption “Capital Purchase Program.”

Privacy Provisions of Gramm-Leach-Bliley Act

Under the GLBA, federal banking regulators were required to adopt rules that limit the ability of banks and other financial institutions to disclose non-public information about consumers to nonaffiliated third parties. These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party.

Patriot Act

In response to the terrorist events of September 11, 2001, the Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “Patriot Act”) was signed into law in October 2001. The Patriot Act gives the United States government powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements. Title III of the Patriot Act takes measures intended to encourage information sharing among bank regulatory agencies and law enforcement bodies. Further, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions. Among other requirements, Title III and related regulations require regulated financial institutions to establish a program specifying procedures for obtaining identifying information from customers seeking to open new accounts and establish enhanced due diligence policies, procedures and controls designed to detect and report suspicious activity. Park National Bank has, and Vision Bank had, established policies and procedures that are believed to be compliant with the requirements of the Patriot Act.

Corporate Governance

As mandated by the Sarbanes-Oxley Act of 2002, the SEC has adopted rules and regulations governing, among other issues, corporate governance, auditing and accounting, executive compensation and enhanced and timely disclosure of corporate information. NYSE Amex has also adopted corporate governance rules. The Board of Directors of Park has taken a series of actions to strengthen and improve Park’s already strong corporate governance practices in light of the rules of the SEC and NYSE Amex. The Board of Directors has adopted charters for the Audit Committee, the Compensation Committee, the Nominating Committee and the Risk Committee as well as a Code of Business Conduct and Ethics governing the directors, officers and associates of Park and its affiliates.

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Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) into law. The Dodd-Frank Act is significantly changing the regulation of financial institutions and the financial services industry. The Dodd-Frank Act requires various federal agencies to adopt a broad range of regulations with significant discretion. Although some of the regulations have been adopted, the effects they will have on Park and its subsidiaries will not be known for months or even years.

Among the provisions already implemented that have or may have an effect on Park or its subsidiaries are the following:

· the Consumer Financial Protection Bureau has been formed, which has broad powers to adopt and enforce consumer protection regulations;

· the federal law prohibiting the payment of interest on commercial demand deposit accounts was eliminated effective July 21, 2011;

· the standard maximum amount of deposit insurance per customer was permanently increased to $250,000, and non-interest bearing transaction accounts have unlimited insurance through December 31, 2012;

· the assessment base for determining deposit insurance premiums has been expanded from domestic deposits to average assets minus average tangible equity;

· public companies in all industries are now required to provide shareholders the opportunity to cast a non-binding advisory vote on executive compensation; and

· the Federal Reserve Board has imposed on financial institutions with assets of $10 billion or more a cap on the debit card interchange fees the financial institutions may charge. Although the cap is not applicable to Park National Bank, it may have an adverse effect on Park National Bank as the debit cards issued by Park National Bank and other smaller banks, which have higher interchange fees, may become less competitive.

Additional provisions not yet implemented that may have an effect on Park or its subsidiaries are the following:

· new capital regulations for bank holding companies will be adopted, which may impose stricter requirements; and trust preferred securities issued after May 19, 2010 will no longer constitute Tier I capital; and

· new corporate governance requirements applicable generally to all public companies in all industries will require other new compensation practices and disclosure requirements, including requiring companies to “claw back” incentive compensation under certain circumstances, to consider the independence of compensation advisors and to make additional disclosures in proxy statements with respect to compensation matters.

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As many provisions of the Dodd-Frank Act have not yet been implemented and will require interpretation and rule making, the ultimate effect on Park and its subsidiaries cannot yet be determined. However, it is likely that the implementation of these provisions will increase compliance costs and fees paid to regulators, along with possibly restricting the operations of Park and its subsidiaries.

Capital Purchase Program

In response to the financial crisis affecting the banking system and financial markets, EESA was signed into law on October 3, 2008 creating TARP. The U.S. Treasury created the Capital Purchase Program to stabilize the financial system by providing capital to viable financial institutions of all sizes throughout the United States. Under the Capital Purchase Program, the U.S. Treasury provided $250 billion of capital to 707 financial institutions through the purchase of senior preferred shares on standardized terms, which included warrants for future U.S. Treasury purchases of common stock. The Capital Purchase Program is now closed.

ARRA was signed into law on February 17, 2009. ARRA includes a wide array of programs intended to stimulate the economy and provide for extensive infrastructure, energy, health and education needs. In addition, ARRA imposes certain executive compensation and corporate expenditure limits on all recipients of funds under the Capital Purchase Program, including Park, as long as any obligation arising from the financial assistance provided to the recipient under the Capital Purchase Program remains outstanding, excluding any period during which the U.S. Treasury holds only warrants to purchase common stock of a TARP participant. ARRA permits TARP recipients, subject to consultation with the appropriate federal banking agency, to repay to the U.S. Treasury any financial assistance received under the Capital Purchase Program without penalty, delay or the need to raise additional replacement capital.

On December 23, 2008, Park completed the sale to the U.S. Treasury of $100.0 million of newly-issued Park non-voting preferred shares as part of the Capital Purchase Program. To finalize Park’s participation in the Capital Purchase Program, Park and the U.S. Treasury entered into a Letter Agreement, dated December 23, 2008 (the “Letter Agreement”), including the related Securities Purchase Agreement – Standard Terms attached thereto (the “Securities Purchase Agreement” and together with the Letter Agreement, the “UST Agreement”). Pursuant to the UST Agreement, Park issued and sold to the U.S. Treasury (i) 100,000 of Park’s Fixed Rate Cumulative Perpetual Preferred Shares, Series A, each without par value and having a liquidation preference of $1,000 per share (the “Series A Preferred Shares”), and (ii) a warrant (the “Warrant”) to purchase 227,376 Park Common Shares, at an exercise price of $65.97 per share (subject to certain anti-dilution and other adjustments), for an aggregate purchase price of $100.0 million in cash.

As part of participation in the Capital Purchase Program, Park agreed to various requirements and restrictions imposed on all participants in the Capital Purchase Program. Among the terms of participation was a provision that the U.S. Treasury could change the terms of participation at any time. The current terms of participation in the Capital Purchase Program include the following:

· Park must file with the SEC a registration statement under the Securities Act, registering for resale the Series A Preferred Shares or, in the event the Series A Preferred Shares are deposited with a depository at the request of the U.S. Treasury, depository shares evidencing fractional interests in the Series A Preferred Shares; the Warrant to purchase 227,376 Common Shares; and any Common Shares issuable from time to time upon exercise of the Warrant. On January 22, 2009, Park filed a Registration Statement on Form S-3 (the “Initial Registration Statement”) to register these securities, which Initial Registration Statement became effective on filing. The securities registered on the Initial Registration Statement may be offered and sold if not more than three years have lapsed since the effective date of the Initial Registration Statement. As a result, Park must file a new registration statement under the Securities Act covering these securities. The U.S. Treasury has permitted Park to delay the filing of the new registration statement until March 15, 2012.

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· As long as the Series A Preferred Shares remain outstanding, unless all accrued and unpaid dividends for all past dividend periods on the Series A Preferred Shares are fully paid, Park will not be permitted to declare or pay dividends on any Common Shares (other than dividends payable solely in Common Shares), any junior preferred shares or, generally, any preferred shares ranking pari passu with the Series A Preferred Shares (other than in the case of pari passu preferred shares, dividends on a pro rata basis with the Series A Preferred Shares), nor will Park be permitted to repurchase or redeem any Common Shares or preferred shares other than the Series A Preferred Shares.

· As a recipient of government funding under the Capital Purchase Program, Park, together with its subsidiaries, must comply with the executive compensation and corporate governance standards established by the U.S. Treasury under ARRA for so long as the U.S. Treasury holds any securities acquired from Park pursuant to the Securities Purchase Agreement or upon exercise of the Warrant, excluding any period during which the U.S. Treasury holds only the Warrant (the “Covered Period”). On June 15, 2009, the U.S. Treasury published executive compensation and corporate governance standards, which were amended effective December 7, 2009, applicable to TARP recipients, including Park, and their subsidiaries. ARRA and the Interim Final Rule impose limitations on Park’s executive compensation practices by, among other things: (i) limiting the deductibility, for United States federal income tax purposes, of compensation paid to any of our Senior Executive Officers (as defined in the Interim Final Rule) to $500,000 per year; (ii) prohibiting the payment or accrual of any bonus, retention award or incentive compensation to the five most highly-compensated employees of Park and its subsidiaries, except in the form and under the limited circumstances permitted by the Interim Final Rule; (iii) prohibiting the payment of golden parachute payments (as defined in the Interim Final Rule) to Park’s Senior Executive Officers or any of the next five most highly-compensated employees of Park and its subsidiaries, upon a departure from Park and its subsidiaries or due to a change in control of Park, except for payments for services performed or benefits accrued; (iv) requiring Park or the applicable subsidiary to “claw back” any bonus, retention award or incentive compensation paid (or under a legally binding obligation to be paid) to a Senior Executive Officer or any of the next 20 most highly-compensated employees of Park and its subsidiaries if the payment was based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria; (v) prohibiting Park and its subsidiaries from maintaining any Employee Compensation Plan (as defined in the Interim Final Rule) that would encourage the manipulation of Park’s reported earnings to enhance the compensation of any of the employees of Park or its subsidiaries; (vi) prohibiting Park and its subsidiaries from maintaining compensation plans and arrangements for Park’s Senior Executive Officers that encourage Park’s Senior Executive Officers to take unnecessary and excessive risks that threaten the value of Park; (vii) requiring Park and its subsidiaries to limit any Employee Compensation Plan that unnecessarily exposes Park to risk; (viii) prohibiting Park and its subsidiaries from providing (formally or informally) “gross-ups” to any of Park’s Senior Executive Officers or the 20 next most highly-compensated employees of Park and its subsidiaries; (ix) requiring that Park disclose to the U.S. Treasury and Park’s primary regulator the amount, nature and justification for offering to any of the five most highly-compensated employees of Park and its subsidiaries any perquisites whose total value exceeds $25,000; (x) requiring that Park disclose to the U.S. Treasury and Park’s primary regulator whether Park, the Park Board of Directors or the Compensation Committee engaged a compensation consultant and the services performed by that compensation consultant and any of its affiliates; (xi) requiring that Park disclose to the U.S. Treasury the identity of Park’s Senior Executive Officers and the 20 next most highly-compensated employees of Park and its subsidiaries, identified by name and title and ranked in descending order of annual compensation; and (xii) subjecting any bonus, retention award or other compensation paid before February 17, 2009 to Park’s Senior Executive Officers or the 20 next most highly-compensated employees of Park and its subsidiaries to retroactive review by the U.S. Treasury to determine whether any such payments were inconsistent with the purposes of TARP or otherwise contrary to the public interest. ARRA and the Interim Final Rule also required that the Park Board of Directors adopt a Company-wide policy regarding “excessive or luxury expenditures,” which was adopted on September 4, 2009, and post this policy on Park’s Internet site. Park must also permit in its proxy statements for annual meetings of shareholders a non-binding advisory “say on pay” shareholder vote on the compensation of executives, as disclosed pursuant to the compensation disclosure rules of the SEC.

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The U.S. Treasury has certain supervisory and oversight duties and responsibilities under EESA, the Capital Purchase Program and ARRA. Also, the Special Inspector General for TARP (“SIGTARP”), which position was established pursuant to Section 121 of EESA, has the duty, among other things, to conduct, supervise and coordinate audits and investigations of the purchase, management and sale of assets by the U.S. Treasury under TARP and the Capital Purchase Program, including the Series A Preferred Shares purchased by the U.S. Treasury from Park.

Executive and Incentive Compensation

In June 2010, the Federal Reserve Board, the OCC and the FDIC issued joint interagency guidance on incentive compensation policies (the “Joint Guidance”) intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking. This principles-based guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key principles that a banking organization’s incentive compensation arrangements should: (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks; (ii) be compatible with effective internal controls and risk management; and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.

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Pursuant to the Joint Guidance, the Federal Reserve Board will review as part of a regular, risk-focused examination process, the incentive compensation arrangements of financial institutions such as Park and Park National Bank. Such reviews will be tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements. The findings of the supervisory initiatives will be included in reports of examination and deficiencies will be incorporated into the institution’s supervisory ratings, which can affect the institution’s ability to make acquisitions and take other actions. Enforcement actions may be taken against an institution if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the organization’s safety and soundness and prompt and effective measures are not being taken to correct the deficiencies.

On February 7, 2011, federal banking regulatory agencies jointly issued proposed rules on incentive-based compensation arrangements under applicable provisions of the Dodd-Frank Act (the “Proposed Joint Rules”). The Proposed Joint Rules generally apply to financial institutions with $1.0 billion or more in assets that maintain incentive-based compensation arrangements for certain covered employees. The Proposed Joint Rules: (i) prohibit covered financial institutions from maintaining incentive-based compensation arrangements that encourage covered persons to expose the institution to inappropriate risk by providing the covered person with “excessive” compensation; (ii) prohibit covered financial institutions from establishing or maintaining incentive-based compensation arrangements for covered persons that encourage inappropriate risks that could lead to a material financial loss; (iii) require covered financial institutions to maintain policies and procedures appropriate to their size, complexity and use of incentive-based compensation to help ensure compliance with the Proposed Joint Rules; and (iv) require covered financial institutions to provide enhanced disclosure to regulators regarding their incentive-based compensation arrangements for covered persons within 90 days following the end of the fiscal year. Final rules related to incentive-based compensation arrangements are excepted to be issued in the latter half of 2012.

Public companies will also be required, once stock exchanges impose additional listing requirements under the Dodd-Frank Act, to implement “clawback” procedures for incentive compensation payments and to disclose the details of the procedures which allow recovery of incentive compensation that was paid on the basis of erroneous financial information necessitating a restatement due to material noncompliance with financial reporting requirements. This clawback policy is intended to apply to compensation paid within a three-year look-back window of the restatement and would cover all executives who received incentive awards.

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Future Legislation

Various and significant legislation affecting financial institutions and the financial industry is from time to time introduced by the United States Congress, as evidenced by the sweeping reforms in the Dodd-Frank Act adopted in 2010. Such legislation may continue to change banking statutes and the operating environment of Park and its subsidiaries in substantial and unpredictable ways, and could significantly increase or decrease costs of doing business, limit or expand permissible activities or affect the competitive balance among financial institutions. With the enactment of the Dodd-Frank Act and the continuing implementation of final rules and regulations thereunder, the nature and extent of future legislative and regulatory changes affecting financial institutions remains very unpredictable.

Statistical Disclosure

The statistical disclosure relating to Park and its subsidiaries required under the SEC’s Industry Guide 3, “Statistical Disclosure by Bank Holding Companies,” is included in the section of Park’s 2011 Annual Report captioned “FINANCIAL REVIEW” and in Note 1 of the Notes to Consolidated Financial Statements in Park’s 2011 Annual Report, Note 4 of the Notes to Consolidated Financial Statements in Park’s 2011 Annual Report, Note 5 of the Notes to Consolidated Financial Statements in Park’s 2011 Annual Report, Note 8 of the Notes to Consolidated Financial Statements in Park’s 2011 Annual Report and Note 9 of the Notes to Consolidated Financial Statements in Park’s 2011 Annual Report. This statistical disclosure is incorporated herein by reference.

Effect of Environmental Regulation

Compliance with federal, state and local provisions regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has not had a material effect upon the capital expenditures, earnings or competitive position of Park and its subsidiaries. Park believes the nature of the operations of its subsidiaries has little, if any, environmental impact. Park, therefore, anticipates no material capital expenditures for environmental control facilities for its current fiscal year or for the foreseeable future.

Park believes its primary exposure to environmental risk is through the lending activities of its subsidiaries. In cases where management believes environmental risk potentially exists, Park’s subsidiaries mitigate their environmental risk exposures by requiring environmental site assessments at the time of loan origination to confirm collateral quality as to commercial real estate parcels posing higher than normal potential for environmental impact, as determined by reference to present and past uses of the subject property and adjacent sites. In addition, environmental assessments are typically required prior to any foreclosure activity involving non-residential real estate collateral.

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ITEM 1A. RISK FACTORS.

Cautionary Statement Regarding Forward-Looking Information

Certain statements contained in this Annual Report on Form 10-K which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, the statements specifically identified as forward-looking statements within this document. In addition, certain statements in future filings by Park with the SEC, in press releases, and in oral and written statements made by or with the approval of Park which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include: (i) projections of income or expense, earnings per share, the payment or non-payment of dividends, capital structure and other financial items; (ii) statements of plans and objectives of Park or our management or Board of Directors, including those relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying those statements.

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the forward-looking statements. We desire to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve risks and uncertainties. Actual results may differ materially from those predicted by the forward-looking statements because of various factors and possible events, including those factors and events identified below. There is also the risk that Park’s management or Board of Directors incorrectly analyzes these risks and uncertainties or that the strategies Park develops to address them are unsuccessful.

Forward-looking statements speak only as of the date on which they are made, and, except as may be required by law, Park undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made to reflect unanticipated events. All subsequent written and oral forward-looking statements attributable to Park or any person acting on Park’s behalf are qualified in their entirety by the following cautionary statements.

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, fiscal and monetary policy 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, although we continue to hold certain loans made, and real estate located, 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.

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While substantially all of the operating assets and liabilities of Vision Bank were sold to Centennial Bank on February 16, 2012, Vision Bank retained non-performing loans, which had a book balance as of February 16, 2012 of $88 million and performing loans which had a book balance of $22 million as of February 16, 2012, both balances being net of any loan loss allowances that existed prior to the close of the transactions between Vision Bank and Centennial Bank.These retained loans were transferred by operation of law to SE LLC as a result of the Vision Bank-SE LLC Merger. As a result, Park’s future earnings continue to be susceptible to further declining credit conditions in the markets in which the borrowers under these retained loans operate or declining credit conditions in the markets served by Park National Bank and its divisions.

Legislative or regulatory changes or actions could adversely impact us or the businesses in which we are engaged.

The financial services industry is extensively regulated. We are subject to extensive state and federal regulation, supervision and legislation that govern almost all aspects of our operations. Laws and regulations may change from time to time and are primarily intended for the protection of consumers, depositors, borrowers, the FDIC’s Deposit Insurance Fund and the banking system as a whole, and not to benefit our shareholders. Regulations affecting banks and financial services businesses are undergoing continuous changes, and management cannot predict the effect of these changes. The impact of any changes to laws and regulations or other actions by regulatory agencies may negatively impact us or our ability to increase the value of our business. Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of an institution, the classification of assets held by an institution and the adequacy of an institution’s allowance for loan losses. Additionally, actions by regulatory agencies against us could cause us to devote significant time and resources to defending our business and may lead to penalties that materially affect us and our shareholders.

In light of current conditions in the global financial markets and the global economy, regulators have increased their focus on the regulation of the financial services industry. Most recently, the United States Congress and the federal agencies regulating the financial services industry have acted on an unprecedented scale in responding to the stresses experienced in the global financial markets. Some of the laws enacted by the United States Congress and regulations promulgated by federal regulatory agencies subject us, and other financial institutions to which such laws and regulations apply, to additional restrictions, oversight and costs that may have an impact on our business, results of operations or the trading price of our Common Shares.

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The recently enacted Dodd-Frank Act may adversely impact Park’s results of operations, financial condition or liquidity.

On July 21, 2010, the Dodd-Frank Act was signed into law. The Dodd-Frank Act represents a comprehensive overhaul of the financial services industry within the United States. There are a number of reform provisions that are likely to significantly impact the ways in which banks and bank holding companies, including Park and Park National Bank, do business. A detailed discussion regarding the Dodd-Frank Act can be found under the caption “Supervision and Regulation of Park and its Subsidiaries” in “Item 1 – Business” of this Form 10-K.

Many provisions of the Dodd-Frank Act will not be implemented immediately and will require interpretation and rule making by federal regulators. Park is closely monitoring all relevant sections of the Dodd-Frank Act to ensure continued compliance with laws and regulations. While the ultimate effect of the Dodd-Frank Act on Park and our subsidiaries cannot currently be determined, the law and its implemented rules and regulations are likely to result in increased compliance costs and fees paid to regulators, along with possible restrictions on the operations of Park and our subsidiaries, all of which may have a material adverse affect on Park’s operating results and financial condition.

Deposit insurance premiums assessed on Park may increase and have a negative effect on Park’s results of operations.

The Deposit Insurance Fund (the “DIF”) maintained by the FDIC to resolve banks failures is funded by fees assessed on insured depository institutions. The costs of resolving bank failures has increased during the last few years and decreased the DIF. The FDIC collected a special assessment in 2009 to replenish the DIF and also required a prepayment of an estimated amount of future deposit insurance premiums. If the costs of future bank failures increase, deposit insurance premiums may also increase.

A default by another larger financial institution could adversely affect financial markets generally.

The commercial soundness of many financial institutions may be closely interrelated as a result of relationships between and among the institutions. As a result, concerns about, or a default or threatened default by, one institution could lead to significant marketwide liquidity and credit problems, losses or defaults by other institutions. This is sometimes referred to as “systemic risk” and may adversely affect our business.

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Changes in the general economic conditions and real estate valuations in our primary market areas could adversely impact results of operations, financial condition and cash flows.

Our lending and deposit gathering activities are concentrated primarily in Ohio and, prior to February 17, 2012, in markets served through Vision Bank operations in Alabama and Florida and our success depends on the general economic conditions of these areas, particularly given that a significant portion of our lending relates to real estate located in these regions. Real estate values in these Ohio and, more dramatically, Gulf Coast communities have been negatively impacted by the ongoing economic crisis. Additional adverse changes in the regional and general economic conditions could reduce our growth rate, impair our ability to collect payments on loans, increase loan delinquencies, increase problem assets and foreclosures, increase claims and lawsuits, increase devaluations recognized within our OREO portfolio, decrease the demand for our products and services and decrease the value of collateral for loans, especially real estate values, which could have a material adverse effect on our financial condition, results of operations and cash flows.

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

We participate in the Capital Purchase Program. For more information regarding our participation in the Capital Purchase Program, see the discussion under the caption “Supervision and Regulation of Park and its Subsidiaries – Capital Purchase Program” in “Item 1 – Business” of Part I of this Annual Report on Form 10-K.

To finalize Park’s participation in the Capital Purchase Program, Park and the U.S. Treasury entered into the Securities Purchase Agreement. Pursuant to the Securities Purchase Agreement, Park issued and sold to the U.S. Treasury (i) 100,000 Series A Preferred Shares and (ii) the Warrant, for an aggregate purchase price of $100.0 million in cash. The Securities Purchase Agreement limits our ability to declare or pay dividends on any of our shares. Specifically, we are unable to declare dividend payments on Common Shares, junior preferred shares or pari passu preferred shares if we are in arrears on the payment of dividends on the Series A Preferred Shares. Common Shares, junior preferred shares or pari passu preferred shares may not be repurchased if we are in arrears on the payment of Series A Preferred Share dividends. 

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As a recipient of government funding under the Capital Purchase Program, we, together with our subsidiaries, must comply with the executive compensation and corporate governance standards imposed by ARRA and the standards established by the Secretary of the Treasury under ARRA (including the Interim Final Rule) for so long as the U.S. Treasury holds any securities acquired from us pursuant to the Securities Purchase Agreement or upon exercise of the Warrant, excluding any period during which the U.S. Treasury holds only the Warrant (the “Covered Period”). ARRA and the Interim Final Rule impose limitations on our executive compensation practices by, among other things: (i) limiting the deductibility, for United States federal income tax purposes, of compensation paid to any of our Senior Executive Officers (as defined in the Interim Final Rule) to $500,000 per year; (ii) prohibiting the payment or accrual of any bonus, retention award or incentive compensation to the five most highly-compensated employees of Park and our subsidiaries, except in the form and under the limited circumstances permitted by the Interim Final Rule; (iii) prohibiting the payment of golden parachute payments (as defined in the Interim Final Rule) to Park’s Senior Executive Officers or any of the next five most highly-compensated employees of Park and our subsidiaries upon a departure from Park and our subsidiaries or due to a change in control of Park, except for payments for services performed or benefits accrued; (iv) requiring Park or the applicable subsidiary to “claw back” any bonus, retention award or incentive compensation paid (or under a legally binding obligation to be paid) to a Senior Executive Officer or any of the next 20 most highly-compensated employees of Park and our subsidiaries if the payment was based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria; (v) prohibiting Park and our subsidiaries from maintaining any employee compensation plan (as defined in the Interim Final Rule) that would encourage the manipulation of our reported earnings to enhance the compensation of any of the employees of Park and our subsidiaries; (vi) prohibiting Park and our subsidiaries from maintaining compensation plans and arrangements for Park’s Senior Executive Officers that encourage Park’s Senior Executive Officers to take unnecessary and excessive risks that threaten the value of Park; (vii) requiring Park and our subsidiaries to limit any employee compensation plan that unnecessarily exposes Park to risk; (viii) prohibiting Park and our subsidiaries from providing (formally or informally) “gross-ups” to any of Park’s Senior Executive Officers or the 20 next most highly-compensated employees of Park and our subsidiaries; (ix) requiring that Park disclose to the U.S. Treasury and Park’s primary regulator the amount, nature and justification for offering to any of the five most highly-compensated employees of Park and our subsidiaries any perquisites whose total value exceeds $25,000; (x) requiring that Park disclose to the U.S. Treasury and Park’s primary regulator whether Park, the Park Board of Directors or the Compensation Committee engaged a compensation consultant and the services performed by that compensation consultant and any of its affiliates; (xi) requiring that Park disclose to the U.S. Treasury the identity of Park’s Senior Executive Officers and the 20 next most highly-compensated employees of Park and our subsidiaries, identified by name and title and ranked in descending order of annual compensation; and (xii) subjecting any bonus, retention award or other compensation paid before February 17, 2009 to Park’s Senior Executive Officers or the 20 next most highly-compensated employees of Park and our subsidiaries to retroactive review by the U.S. Treasury to determine whether any such payments were inconsistent with the purposes of TARP or otherwise contrary to the public interest. ARRA and the Interim Final Rule also required that the Park Board of Directors adopt a Company-wide policy regarding “excessive or luxury expenditures,” which was adopted on September 4, 2009 and is posted on Park’s Internet site.

Restrictions on compensation may make it more difficult for us to hire or retain personnel, which might adversely affect our financial condition or results of operations.

Changes in interest rates could have a material adverse effect on our financial condition, results of operations and cash flows.

Our earnings and cash flows depend substantially on our interest rate spread, which is the difference between (i) the rates we earn on loans, investment securities and other interest earning assets and (ii) the interest rates we pay on deposits and our borrowings. These rates are highly sensitive to many factors beyond our control, including general economic conditions and the policies of various governmental and regulatory authorities. Changes in monetary policy influence the origination of loans, the prepayment speed of loans, the purchase of investments, the generation of deposits and rates of interest received and paid. While we have taken measures intended to manage the risks of operating in a changing interest rate environment, there can be no assurance that such measures will be effective in avoiding undue interest rate risk. Information pertaining to the impact changes in interest rates could have on our net income is included in Table 30 in the section of Park’s 2011 Annual Report captioned “FINANCIAL REVIEW,” is incorporated herein by reference.  

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We extend credit to a variety of customers based on internally set standards and the judgment of our loan officers and bank division presidents. We manage the credit risk through a program of underwriting standards, the review of certain credit decisions and an on-going process of assessing the quality of the credit already extended. Our credit standards and on-going process of credit assessment might not protect us from significant credit losses.

We take credit risk by virtue of making loans and leases, extending loan commitments and letters of credit and, to a lesser degree, purchasing non-governmental securities. Our exposure to credit risk is managed through the use of consistent underwriting standards that emphasize “in-market” lending while avoiding highly leveraged transactions as well as excessive industry and other concentrations. Our credit administration function employs risk management techniques to ensure that loans and leases adhere to corporate policy and problem loans and leases are promptly identified. While these procedures are designed to provide us with the information needed to implement policy adjustments where necessary, and to take proactive corrective actions, there can be no assurance that such measures will be effective in avoiding undue credit risk.

We may elect or be compelled to seek additional capital in the future, but that capital may not be available when it is needed.

We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations. As we experience loan losses, additional capital may need to be infused. In addition, we may elect to raise additional capital to support our business or to finance acquisitions, if any, or we may otherwise elect or be required to raise additional capital. Our ability to raise additional capital, if needed, will depend on our financial performance, conditions in the capital markets, economic conditions and a number of other factors, many of which are outside our control. Accordingly, there can be no assurance that we can raise additional capital if needed or on terms acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our financial condition, results of operations and prospects.

Our allowance for loan losses may prove to be insufficient to absorb potential losses in our loan portfolio.

Lending money is a substantial part of our business. However, every loan we make carries a risk of non-payment. This risk is affected by, among other things: the cash flow of the borrower and/or the project being financed; in the case of a collateralized loan, the changes and uncertainties as to the future value of the collateral; the credit history of a particular borrower; changes in economic and industry conditions; and the duration of the loan.

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make significant estimates that affect the financial statements. One of our most critical estimates is the level of the allowance for loan losses. Due to the inherent nature of these estimates, we cannot provide absolute assurance that we will not be required to charge earnings for significant unexpected loan losses.

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We maintain an allowance for loan losses that we believe is a reasonable estimate of known and inherent losses within the loan portfolio. We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans. Through a periodic review and consideration of the loan portfolio, management determines the amount of the allowance for loan losses by considering general market conditions, the credit quality of the loan portfolio, the collateral supporting the loans and the performance of customers relative to their financial obligations with us. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, which may be beyond our control, and these losses may exceed current estimates. We cannot fully predict the amount or timing of losses or whether the loan loss allowance will be adequate in the future. If our assumptions prove to be incorrect, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to the allowance. Excessive loan losses and significant additions to our allowance for loan losses could have a material adverse impact on our financial condition and results of operations.

In addition, bank regulators periodically review our allowance for loan losses and may require us to increase our provision for loan losses or recognize further loan charge-offs. Any increase in our allowance for loan losses or loan charge-offs as required by these regulatory authorities might have a material adverse effect on our financial condition and results of operations.

If we are unable to redeem the Series A Preferred Shares after five years, the cost of this capital to us will increase substantially.

If we are unable to redeem our Series A Preferred Shares prior to February 15, 2014, the cost of this capital to us will increase substantially on that date, from 5.0% per annum to 9.0% per annum. Depending on our financial condition at the time, this increase in the annual dividend rate on the Series A Preferred Shares could have a material negative effect on our liquidity and cash flows.

We are exposed to operational risk.

Similar to any large organization, we are exposed to many types of operational risk, including reputational risk, legal and compliance risk, the risk of fraud or theft by employees or outsiders, unauthorized transactions by employees or operational errors, including clerical or record-keeping errors or those resulting from faulty or disabled computer or telecommunications systems.

Negative public opinion can result from our actual or alleged conduct in any number of activities, including lending practices, corporate governance and acquisitions, and from actions taken by governmental regulators and community organizations in response to those activities. Negative public opinion can adversely affect our ability to attract and keep customers and can expose us to potential litigation and regulatory action.

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Given the volume of transactions we process, certain errors may be repeated or compounded before they are discovered and successfully rectified. Our necessary dependence upon automated systems to record and process our transaction volume may further increase the risk that technical system flaws or employee tampering or manipulation of those systems will result in losses that are difficult to detect. We may also be subject to disruptions of our operating systems arising from events that are wholly or partially beyond our control (for example, computer viruses or electrical or telecommunications outages), which may give rise to disruption of service to customers and to financial loss or liability. We are further exposed to the risk that our external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees as we are) and to the risk that our (or our vendors’) business continuity and data security systems prove to be inadequate.

We depend upon the accuracy and completeness of information about customers and counterparties.

In deciding whether to extend credit or enter into other transactions with customers and counterparties, we may rely on information provided to us by customers and counterparties, including financial statements and other financial information. We may also rely on representations of customers and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit to a business, we may assume that the customer’s audited financial statements conform with GAAP and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. We may also rely on the audit report covering those financial statements. Our financial condition, results of operations and cash flows could be negatively impacted to the extent that we rely on financial statements that do not comply with GAAP or on financial statements and other financial information that are materially misleading.

Changes in accounting standards, policies, estimates or procedures could impact Park’s reported financial condition or results of operations.

The accounting standard setters, including the Financial Accounting Standards Board, the Public Company Accounting Oversight Board, the SEC and other regulatory bodies, periodically change the financial accounting and reporting guidance that governs the preparation of our consolidated financial statements. The pace of change continues to accelerate and changes in accounting standards can be hard to predict and could materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply new or revised guidance retroactively, resulting in the restatement of prior period financial statements.

The preparation of consolidated financial statements in conformity with GAAP requires management to make significant estimates that affect the financial statements. Due to the inherent nature of these estimates, actual results may vary materially from management’s estimates. Additional information regarding Park’s critical accounting policies and the sensitivity of estimates can be found in the section captioned “FINANCIAL REVIEW - CRITICAL ACCOUNTING POLICIES” in Park’s 2011 Annual Report.

We may be a defendant from time to time in the future in a variety of litigation and other actions, which could have a material adverse effect on our financial condition, results of operations and cash flows.

We and our subsidiaries may be involved from time to time in the future in a variety of litigation arising out of our business. The risk of litigation increases in times of increased troubled loan collection activity. Our insurance may not cover all claims that may be asserted against us, and any claims asserted against us, regardless of merit or eventual outcome, may harm our reputation. Should the ultimate judgments or settlements in any litigation exceed our insurance coverage, they could have a material adverse effect on our financial condition, results of operations and cash flows. In addition, we may not be able to obtain appropriate types or levels of insurance in the future, nor may we be able to obtain adequate replacement policies with acceptable terms, if at all.

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We are a holding company and depend on our subsidiaries for dividends, distributions and other payments.

As a bank holding company, we are a legal entity separate and distinct from our subsidiaries and affiliates. Our principal source of funds to pay dividends on our Common Shares and service our debt is dividends from these subsidiaries. In the event our subsidiaries become unable to pay dividends to us, we may not be able to service our debt, pay our other obligations or pay dividends on the Series A Preferred Shares or our Common Shares. Accordingly, our inability to receive dividends from our subsidiaries could also have a material adverse effect on our business, financial condition and results of operations.

Various federal and state statutory provisions and regulations limit the amount of dividends that Park National Bank and our other subsidiaries may pay to us without regulatory approval. Park National Bank generally may not, without prior regulatory approval, pay a dividend in an amount greater than its undivided profits. In addition, the prior approval of the OCC is required for the payment of a dividend by Park National Bank if the total of all dividends declared in a calendar year would exceed the total of its net income for the year combined with its retained net income for the two preceding years. The Federal Reserve Board and the OCC have issued policy statements that provide that insured banks and bank holding companies should generally only pay dividends out of current operating earnings. Thus, the ability of Park National Bank to pay dividends in the future is currently influenced, and could be further influenced, by bank regulatory policies and capital guidelines and may restrict our ability to declare and pay dividends.

Payment of dividends could also be subject to regulatory limitations if Park National Bank were to become “under-capitalized” for purposes of the applicable “prompt corrective action” regulations. “Under-capitalized” is currently defined as having a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 4.0%, or a core capital, or leverage, ratio of less than 4.0%. Throughout 2011 and 2012 to date, Park National Bank has been in compliance with all regulatory capital requirements and had sufficient capital under the “prompt corrective action” regulations to be deemed “well-capitalized.”

If any of our subsidiaries becomes insolvent, the direct creditors of that subsidiary will have a prior claim on that subsidiary’s assets. Our rights and the rights of our creditors will be subject to that prior claim, unless we are also a direct creditor of that subsidiary.

Unauthorized disclosure of sensitive or confidential client or customer information, whether through a breach of our computer systems or otherwise, could severely harm our business.

As part of our financial institution business, we collect, process and retain sensitive and confidential client and customer information on behalf of our subsidiaries and other third parties. Despite the security measures we have in place, our facilities and systems, and those of our third-party service providers, may be vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human errors or other similar events. If information security is breached, information can be lost or misappropriated, resulting in financial loss or costs to us. Any security breach involving confidential customer information, whether by us or by our vendors, could severely damage our reputation, expose us to the risks of litigation and liability or disrupt our operations and have a material adverse effect on our business.

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Derivative transactions may expose us to unexpected risk and potential losses.

We are party to a number of derivative transactions. Many of these derivative instruments are individually negotiated and non-standardized, which can make exiting, transferring or settling the position difficult. We carry borrowings which contain embedded derivatives. These borrowing arrangements require that we deliver underlying securities to the counterparty as collateral. If market interest rates were to decline, we may be required to deliver more securities to the counterparty. We are dependent on the creditworthiness of the counterparties and are therefore susceptible to credit and operational risk in these situations.

Derivative contracts and other transactions entered into with third parties are not always confirmed by the counterparties on a timely basis. While the transaction remains unconfirmed, we are subject to heightened credit and operational risk and, in the event of a default, may find it more difficult to enforce the contract. In addition, as new and more complex derivative products are created, covering a wider array of underlying credit and other instruments, disputes about the terms of the underlying contracts could arise, which could impair our ability to effectively manage our risk exposures from these products and subject us to increased costs. Any regulatory effort to create an exchange or trading platform for credit derivatives and other over-the-counter derivative contracts, or a market shift toward standardized derivatives, could reduce the risk associated with such transactions, but under certain circumstances could also limit our ability to develop derivatives that best suit the needs of our clients and ourselves and adversely affect our profitability.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

No response required.

ITEM 2. PROPERTIES.

Park’s principal executive offices are located at 50 North Third Street, Newark, Ohio 43055.

Park National Bank

As of the date of this Annual Report on Form 10-K, Park National Bank, its divisions and its subsidiary Scope Leasing, Inc. have a total of 124 financial service offices in Ohio and one in Kentucky. Park National Bank has six financial service offices (including its main office) and its operations center in Newark in Licking County. In addition, within Ohio, Park National Bank has:

· financial service offices in Ashland, Loudonville and Perrysville in Ashland County;

· a financial service office in Athens in Athens County;

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· a financial service office in West Chester in Butler County;

· financial service offices in Urbana (two offices), Mechanicsburg and North Lewisburg in Champaign County;

· financial service offices in Springfield (six offices), Enon, Medway, New Carlisle (two offices) and South Charleston in Clark County;

· financial service offices in Amelia (two offices), Cincinnati, Milford, New Richmond and Owensville in Clermont County;

· a financial service office in Coshocton in Coshocton County;

· financial service offices in Bucyrus, Crestline and Galion in Crawford County;

· financial service offices in Greenville (five offices), Arcanum and Versailles in Darke County;

· financial service offices in Baltimore, Pickerington (two offices) and Lancaster (six offices) in Fairfield County;

· a financial service office in Jeffersonville in Fayette County;

· financial service offices in Canal Winchester, Columbus (two offices), Gahanna, Reynoldsburg and Worthington in Franklin County;

· financial service offices in Beavercreek, Jamestown and Xenia (two offices) in Greene County;

· a financial service office in Cincinnati in Hamilton County;

· a financial service office in Logan in Hocking County;

· financial service offices in Millersburg (two offices) in Holmes County;

· financial service offices (3 offices) and an operations center in Mount Vernon as well as financial service offices in Centerburg, Danville and Fredericktown, all in Knox County;

· financial service offices in Granville, Heath (two offices), Hebron, Johnstown, Kirkersville, Pataskala, Reynoldsburg and Utica in Licking County;

· a financial service office in Plain City in Madison County;

· financial service offices in Caledonia, Marion (two offices) and Prospect in Marion County;

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· a financial service office in Fort Recovery in Mercer County;

· financial service offices (three offices) and an operations center in Piqua as well as financial service offices in Tipp City and Troy (two offices), all in Miami County;

· financial service offices in Mount Gilead (two offices) in Morrow County;

· financial service offices in Zanesville (nine offices), New Concord and Dresden in Muskingum County;

· a financial service office in New Lexington in Perry County;

· financial service offices in Bellville, Mansfield (eight offices), Butler, Lexington, Ontario and Shelby in Richland County;

· a financial service office in Newcomerstown in Tuscarawas County; and

· a financial service office in Springboro in Warren County.

Park National Bank also has one financial service office in Florence (Boone County), Kentucky.

The financial service offices in Athens, Coshocton, Hocking, Muskingum, Perry and Tuscarawas Counties comprise the Century National Bank Division. The financial service offices in Canal Winchester and Reynoldsburg in Franklin County and Fairfield County comprise the Fairfield National Bank Division. The financial service offices in Ashland County comprise the Farmers Bank Division. The financial service offices in Bellville in Richland County and in Holmes, Knox and Morrow Counties comprise the First-Knox National Bank Division. The financial service offices in Butler, Clermont and Hamilton Counties in Ohio and in Boone County, Kentucky comprise The Park National Bank of Southwest Ohio & Northern Kentucky Division. The financial service offices in Richland County (except the Bellville office) comprise the Richland Bank Division. The financial service offices in Darke and Mercer Counties comprise the Second National Bank Division. The financial service offices in Champaign, Clark, Fayette, Greene, Madison and Warren Counties comprise the Security National Bank Division. The financial service offices in Crawford and Marion Counties comprise the United Bank Division. The financial service offices in Miami County comprise the Unity National Bank Division. Of the financial service offices described above, 30 are leased and the remainder are owned. Park National Bank also operates 31 off-site automated teller machines.

Scope Leasing, Inc. has an office located in Columbus in Franklin County, Ohio.

Guardian Finance

As of the date of this Annual Report on Form 10-K, Guardian Finance has a total of six financial service offices, all of which are located in Ohio. Guardian Finance has its main office in Hilliard in Franklin County, a financial service office in Springfield in Clark County, a financial service office in Lancaster in Fairfield County where it leases space from the Fairfield National Bank division of Park National Bank, a financial service office in Heath in Licking County, a financial service office in Centerville in Montgomery County and a financial service office in Mansfield in Richland County where it leases space from the Richland Bank Division of Park National Bank. All of Guardian Finance’s financial service offices are leased.

SE Property Holdings, LLC

As of the date of this Annual Report on Form 10-K, SE LLC has a total of 3 offices, one in Licking County, Ohio, one in Baldwin County, Alabama, and one in Bay County, Florida. One office is leased and two are owned.

ITEM 3. 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 4. MINE SAFETY DISCLOSURES.

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

The information called for in this Item 5 by Items 201(a) through 201(c) of SEC Regulation S-K is incorporated herein by reference from “Table 35 – Market and Dividend Information” and the accompanying disclosure in the section of Park’s 2011 Annual Report captioned “FINANCIAL REVIEW,” on page 48.

No purchases of Park’s Common Shares were made by or on behalf of Park or any “affiliated purchaser” of Park, as defined in Rule 10b-18(a)(3) under the Exchange Act during the fiscal quarter ended December 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 stock repurchase authorization to fund the Park National Corporation 2005 Incentive Stock Option Plan as a result of the forfeiture of previously outstanding incentive stock options.

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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)
October 1 through October 31, 2011		–		–		–		1,018,259
November 1 through November 30, 2011		–		–		–		1,018,259
December 1 through December 31, 2011		–		–		–		982,267
Total		–		–		–		982,267

___________________

(1) The number shown represents, as of the end of each period, the maximum number of Common Shares that may yet be purchased under 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. During Fiscal 2011, Park did not purchase any Common Shares to be held as treasury shares and delivered upon exercise of incentive stock options granted under the 2005 Plan. As of December 31, 2011, incentive stock options covering 74,020 Common Shares were outstanding and 1,425,980 Common Shares were available for future grants under the 2005 Plan.

With 443,713 Common Shares held as treasury shares for purposes of the 2005 Plan at December 31, 2011, an additional 982,267 Common Shares remained authorized for repurchase for purposes of funding the 2005 Plan.

ITEM 6. SELECTED FINANCIAL DATA.

The information called for in this Item 6 is incorporated herein by reference from “Table 32 – Consolidated Five-Year Selected Financial Data” and the accompanying disclosure in the section of Park’s 2011 Annual Report captioned “FINANCIAL REVIEW.”

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The information called for in this Item 7 is incorporated herein by reference from the section of Park’s 2011 Annual Report captioned “FINANCIAL REVIEW.”

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As noted in Table 15 and Table 30 included in the section of Park’s 2011 Annual Report captioned “FINANCIAL REVIEW,” Park’s tax equivalent net interest margin has remained fairly stable over each of the three fiscal years ended December 31, 2011, 2010 and 2009. Consistently, over the last several years, Park’s earnings simulation model has projected that changes in interest rates would have only a small impact on net income and the tax equivalent net interest margin. The tax equivalent net interest margin was 4.14%, 4.26% and 4.22% for each of the fiscal years ended December 31, 2011, 2010 and 2009, respectively. As noted in Note 21 of the Notes to Consolidated Financial Statements under the caption “Fair Values” in Park’s 2011 Annual Report, on January 2, 2008, Park entered into a “pay fixed-receive floating” interest rate swap agreement for a notional amount of $25 million, which matures on December 28, 2012. This interest rate swap agreement was designed as a cash flow hedge against the variability of cash flows related to the Subordinated Debenture in the principal amount of $25 million issued by Park National Bank on December 28, 2007. The discussion of this interest rate swap agreement included in the section of Park’s 2011 Annual Report captioned “FINANCIAL REVIEW – SOURCE OF FUNDS – Subordinated Debentures/Notes,” and in Note 19 of the Notes to Consolidated Financial Statements of Park’s 2011 Annual Report and Note 21 of the Notes to Consolidated Financial Statements of Park’s 2011 Annual Report is incorporated herein by reference. The discussion of interest rate sensitivity included in the section of Park’s 2011 Annual Report captioned “FINANCIAL REVIEW – CAPITAL RESOURCES – Liquidity and Interest Rate Sensitivity Management,” is incorporated herein by reference. In addition, the discussion of Park’s commitments, contingent liabilities and off-balance sheet arrangements included in Park’s 2011 Annual Report under the caption “FINANCIAL REVIEW – CONTRACTUAL OBLIGATIONS – Commitments, Contingent Liabilities, and Off-Balance Sheet Arrangements,” and in Note 18 of the Notes to Consolidated Financial Statements included in Park’s 2011 Annual Report, is incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The Consolidated Balance Sheets of Park and its subsidiaries at December 31, 2011 and 2010, the related Consolidated Statements of Income, of Changes in Stockholders’ Equity and of Cash Flows for the years ended December 31, 2011, 2010 and 2009, the related Notes to Consolidated Financial Statements and the Report of Independent Registered Public Accounting Firm (Crowe Horwath LLP) in Park’s 2011 Annual Report, are incorporated herein by reference. Quarterly Financial Data provided in “Table 33 – Quarterly Financial Data” and the accompanying disclosure included in the section of Park’s 2011 Annual Report captioned “FINANCIAL REVIEW,” is also incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

No response required.

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ITEM 9A. 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 Exchange Act) as of the end of the fiscal year covered by this Annual Report on Form 10-K. 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 Annual Report on Form 10-K and the 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 Annual Report on Form 10-K 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 fiscal year covered by this Annual Report on Form 10-K.

Management’s Annual Report on Internal Control over Financial Reporting

The “MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING” included in Park’s 2011 Annual Report is incorporated herein by reference.

Attestation Report of the Registered Public Accounting Firm

The “REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM” included in Park’s 2011 Annual Report is incorporated herein by reference.

Changes in Internal Control over Financial Reporting

Park reviews its disclosure controls and procedures, which may include its internal control over financial reporting, on an ongoing basis and may from time to time make changes aimed at enhancing their effectiveness. Park’s management made process improvements throughout 2011 in an effort to address the material weakness related to guarantor support and as of the date of this Annual Report on Form 10-K, when calculating impairment under ASC 310, management no longer relies on expected cash flows from guarantors where litigation is required to collect those cash flows. Additionally, Park’s management made process improvements throughout 2011 in an effort to address the material weakness related to the OREO devaluations and loan loss provisions that are not related to guarantor support. These process improvements included:

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· Management has discontinued the use of value-related information received from a third-party contractor, who is not a licensed appraiser. While management continues to consult with this third-party contractor on the current status of loan workouts and progress related to the pursuit of legally bound borrowers and guarantors, management no longer utilizes the third-party contractor’s estimates of value to determine the specific reserves that should be established on impaired loans.

· Management has discontinued the use of information received from the third-party contractor to value OREO properties. Currently, OREO properties are valued based on external appraisals that are no more than 12 months old and were prepared by external licensed appraisers.

· Management has discontinued the use of retail lot values (discounted by management’s standard bulk sale discount) on lot development projects and is now utilizing the bulk sale value provided by external licensed appraisers, which in certain cases applies a larger discount.

· In addition to the real estate appraisal policy in place as of December 31, 2010, management has enhanced its commercial loan policy to formalize the requirements for the frequency and dollar threshold for which updated real estate appraisals are to be obtained from qualified licensed appraisers with respect to impaired loans and OREO properties. This enhancement to the commercial loan policy also discusses those situations where internally prepared valuations (“IPV”) are considered appropriate, the documentation that should accompany IPVs and the frequency of evaluating the accuracy of the assumptions and data used in the IPV estimates.

The enhancements to Park’s internal control processes have resolved the material weaknesses that existed as of December 31, 2010.

ITEM 9B. OTHER INFORMATION.

No response required.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Directors, Executive Officers and Persons Nominated or Chosen to Become Directors or Executive Officers

The information required by Item 401 of SEC Regulation S-K concerning the directors of Park and the nominees for re-election as directors of Park at the Annual Meeting of Shareholders to be held on April 23, 2012 (the “2012 Annual Meeting”) is incorporated herein by reference from the disclosure to be included under the caption “PROPOSAL 1 – ELECTION OF DIRECTORS” in Park’s definitive Proxy Statement relating to the 2012 Annual Meeting to be filed pursuant to SEC Regulation 14A (“Park’s 2012 Proxy Statement”).

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The information required by Item 401 of SEC Regulation S-K concerning the executive officers of Park is incorporated herein by reference from the disclosure to be included under the caption “EXECUTIVE OFFICERS” in Park’s 2012 Proxy Statement.

Compliance with Section 16(a) of the Exchange Act

The information required by Item 405 of SEC Regulation S-K is incorporated herein by reference from the disclosure to be included under the caption “BENEFICIAL OWNERSHIP OF PARK COMMON SHARES – Section 16(a) Beneficial Ownership Reporting Compliance” in Park’s 2012 Proxy Statement.

Committee Charters; Code of Business Conduct and Ethics

Park’s Board of Directors has adopted charters for each of the Audit Committee, the Compensation Committee, the Nominating Committee and the Risk Committee.

In accordance with the requirements of Section 807 of the NYSE Amex Company Guide, the Board of Directors of Park has adopted a Code of Business Conduct and Ethics covering the directors, officers and employees of Park and its affiliates, including Park’s Chairman of the Board and Chief Executive Officer (the principal executive officer), Park’s President and Secretary, Park’s Chief Financial Officer (the principal financial officer) and Park’s Chief Accounting Officer (the principal accounting officer). Park intends to disclose the following events, if they occur, in a current report on Form 8-K within four business days following their occurrence: (A) the date and nature of any amendment to a provision of Park’s Code of Business Conduct and Ethics that (i) applies to Park’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, (ii) relates to any element of the code of ethics definition enumerated in Item 406(b) of SEC Regulation S-K, and (iii) is not a technical, administrative or other non-substantive amendment; and (B) a description of any waiver (including the nature of the waiver, the name of the person to whom the waiver was granted and the date of the waiver), including an implicit waiver, from a provision of the Code of Business Conduct and Ethics granted to Park’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions that relates to one or more of the elements of the code of ethics definition set forth in Item 406(b) of SEC Regulation S-K. In addition, Park will disclose any waivers from the provisions of the Code of Business Conduct and Ethics granted to a director or executive officer of Park in a current report on Form 8-K within four business days following their occurrence in accordance with the requirements of Section 807 of the NYSE Annex Company Guide.

The text of each of the Code of Business Conduct and Ethics, the Audit Committee Charter, the Compensation Committee Charter, the Nominating Committee Charter and the Risk Committee Charter is posted on the “Governance Documents” section of the “Investor Relations” page of Park’s Internet site located at http://www.parknationalcorp.com. Interested persons may also obtain copies of the Code of Business Conduct and Ethics, the Audit Committee Charter, the Compensation Committee Charter, the Nominating Committee Charter and the Risk Committee Charter, without charge, by writing to the President of Park at Park National Corporation, 50 North Third Street, P.O. Box 3500, Newark, Ohio 43058-3500, Attention: David L. Trautman.

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Procedures for Recommending Director Nominees

Information concerning the procedures by which shareholders of Park may recommend nominees to Park’s Board of Directors is incorporated herein by reference from the disclosure to be included under the caption “CORPORATE GOVERNANCE – Nominating Procedures” in Park’s 2012 Proxy Statement. These procedures have not materially changed from those described in Park’s definitive Proxy Statement for the 2011 Annual Meeting of Shareholders held on April 18, 2011.

Audit Committee

The information required by Items 407(d)(4) and 407(d)(5) of SEC Regulation S-K is incorporated herein by reference from the disclosure to be included under the caption “BOARD OF DIRECTORS STRUCTURE AND MEETINGS – Committees of the Board – Audit Committee” in Park’s 2012 Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION.

The information required by Item 402 of SEC Regulation S-K is incorporated herein by reference from the disclosure to be included under the captions “EXECUTIVE COMPENSATION” and “DIRECTOR COMPENSATION” in Park’s 2012 Proxy Statement.

The information required by Item 407(e)(4) of SEC Regulation S-K is incorporated herein by reference from the disclosure to be included under the caption “COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION” in Park’s 2012 Proxy Statement.

The information required by Item 407(e)(5) of SEC Regulation S-K is incorporated herein by reference from the disclosure to be included under the caption “EXECUTIVE COMPENSATION – Compensation Committee Report” in Park’s 2012 Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Beneficial Ownership of Common Shares of Park

The information required by Item 403 of SEC Regulation S-K is incorporated herein by reference from the disclosure to be included under the caption “BENEFICIAL OWNERSHIP OF PARK COMMON SHARES” in Park’s 2012 Proxy Statement.

Equity Compensation Plan Information

Park has two compensation plans under which Common Shares of Park are authorized for issuance to directors, officers or employees of Park and Park’s subsidiaries in exchange for consideration in the form of goods or services – the Park National Corporation 2005 Incentive Stock Option Plan (the “2005 Plan”) and the Park National Corporation Stock Plan for Non-Employee Directors of Park National Corporation and Subsidiaries (the “Directors’ Stock Plan”). In addition, Park maintains the Park National Corporation Employees Stock Ownership Plan (the “Park KSOP”), which is intended to meet the qualification requirements of Section 401(a) of the Internal Revenue Code of 1986, as amended. The 2005 Plan and the Directors’ Stock Plan have been approved by Park’s shareholders.

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The following table shows the number of Common Shares issuable upon exercise of incentive stock options (“ISOs”) granted under the 2005 Plan outstanding at December 31, 2011, the weighted-average exercise price of those ISOs and the number of Common Shares remaining available for future issuance under the 2005 Plan and the Directors’ Stock Plan at December 31, 2011, excluding Common Shares issuable upon exercise of outstanding ISOs granted under the 2005 Plan.

Plan category	Number of Common Shares to be issued upon exercise of outstanding options, warrants and rights                (a)		Weighted-average exercise price of outstanding options, warrants and rights               (b)		Number of Common Shares remaining available for future issuance under equity compensation plans (excluding Common Shares reflected in column (a))                (c)
Equity compensation plans approved by shareholders		74,020	$	74.96		1,472,340	(1)
Equity compensation plans not approved by shareholders		--		--		--
Total		74,020	$	74.96		1,472,340	(1)

__________________

(1) Includes 1,425,980 Common Shares remaining available for future issuance under the 2005 Plan and 46,360 Common Shares remaining available for future issuance under the Directors’ Stock Plan.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Certain Relationships and Related Person Transactions

The information required by Item 404 of SEC Regulation S-K is incorporated herein by reference from the disclosure to be included under the captions “CORPORATE GOVERNANCE – Transactions with Related Persons” and “COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION” in Park’s 2012 Proxy Statement.

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Director Independence

The information required by Item 407(a) of SEC Regulation S-K is incorporated herein by reference from the disclosure to be included under the caption “CORPORATE GOVERNANCE – Independence of Directors” in Park’s 2012 Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information called for in this Item 14 is incorporated herein by reference from the disclosure to be included under the captions “AUDIT COMMITTEE MATTERS – Pre-Approval of Services Performed by Independent Registered Public Accounting Firm” and “AUDIT COMMITTEE MATTERS – Fees of Independent Registered Public Accounting Firm” in Park’s 2012 Proxy Statement.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)(1) Financial Statements.

The consolidated financial statements (and report thereon) listed below are incorporated herein by reference from Park’s 2011 Annual Report as noted:

Report of Independent Registered Public Accounting Firm (Crowe Horwath LLP) -- Incorporated by reference from Park’s 2011 Annual Report

Consolidated Balance Sheets at December 31, 2011 and 2010 --
Incorporated by reference from Park’s 2011 Annual Report

Consolidated Statements of Income for the years ended December 31, 2011, 2010 and 2009 -- Incorporated by reference from Park’s 2011 Annual Report

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2011, 2010 and 2009 -- Incorporated by reference from Park’s 2011 Annual Report

Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009 -- Incorporated by reference from Park’s 2011 Annual Report

Notes to Consolidated Financial Statements -- Incorporated by reference from Park’s 2011 Annual Report

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(a)(2)	Financial Statement Schedules.
	All schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are inapplicable and have been omitted.

(a)(3)	Exhibits.
	The documents listed below are filed/furnished with this Annual Report on Form 10-K as exhibits or incorporated into this Annual Report on Form 10-K by reference as noted:

Exhibit No. Description of Exhibit

2.1(a) Purchase and Assumption Agreement, made and entered into on November 16, 2011, by and between Vision Bank and Park National Corporation (collectively, “Seller”) and Centennial Bank and Home BancShares, Inc. (collectively, “Buyer”) (incorporated herein by reference to Exhibit 2.1 to Park National Corporation’s Current Report on Form 8-K, dated and filed November 17, 2011 (File No. 1-13006))

Note: The disclosure schedules and other schedules (with the exception of Schedule S) referenced in the Purchase and Assumption Agreement have been omitted pursuant to Item 601(b)(2) of SEC Regulation S-K. Park National Corporation hereby undertakes to furnish a copy of the omitted disclosure schedules and other schedules upon request by the SEC.

2.1(b) First Amendment to Purchase and Assumption Agreement by and between Vision Bank and Park National Corporation and Centennial Bank and Home BancShares, Inc., effective as of January 25, 2012 (incorporated herein by reference to Exhibit 2.1(b) to Park National Corporation’s Current Report on Form 8-K, dated and filed February 16, 2012 (File No. 1-13006))

2.2 Agreement and Plan of Merger, entered into as of January 25, 2012, by and between Vision Bank and SE Property Holdings, LLC (filed herewith)

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))

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

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

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

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] (incorporated herein by reference to Exhibit 3.1(h) to Park National Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011 (File No. 1-13006))

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

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

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

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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 (“Park’s March 31, 2008 Form 10-Q”) (File No. 1-13006))

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)

4.1(a) Junior Subordinated Indenture, dated as of December 5, 2005, between Vision Bancshares, Inc. and Wilmington Trust Company, as Trustee (incorporated herein by reference to Exhibit 10.16 to Vision Bancshares, Inc.’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005 (File No. 000-50719))

4.1(b) First Supplemental Indenture, dated to be effective as of 6:00 p.m., Eastern Standard Time, on March 9, 2007, among Wilmington Trust Company, as Trustee; Park National Corporation; and Vision Bancshares, Inc. (incorporated herein by reference to Exhibit 4.1(b) to Park National Corporation’s Current Report on Form 8-K dated and filed March 15, 2007 (File No. 1-13006) (“Park’s March 15, 2007 Form 8-K”))

4.2(a) Amended and Restated Trust Agreement, dated as of December 5, 2005, among Vision Bancshares, Inc., as Depositor; Wilmington Trust Company, as Property Trustee and as Delaware Trustee; and the Administrative Trustees named therein, in respect of Vision Bancshares Trust I (incorporated herein by reference to Exhibit 10.15 to Vision Bancshares, Inc.’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005 (File No. 000-50719))

Note: Pursuant to the First Supplemental Indenture, dated to be effective as of 6:00 p.m., Eastern Standard Time, on March 9, 2007, among Wilmington Trust Company, as Trustee; Park National Corporation; and Vision Bancshares, Inc., Park National Corporation succeeded to and was substituted for Vision Bancshares, Inc. as “Depositor”

4.2(b) Notice of Resignation of Administrative Trustees and Appointment of Successors, dated March 9, 2007, delivered to Wilmington Trust Company by the Resigning Administrative Trustees named therein, the Successor Administrative Trustees named therein and Park National Corporation (incorporated herein by reference to Exhibit 4.2(b) to Park’s March 15, 2007 Form 8-K)

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4.3 Guarantee Agreement, dated as of December 5, 2005, between Vision Bancshares, Inc., as Guarantor, and Wilmington Trust Company, as Guarantee Trustee, in respect of Vision Bancshares Trust I (incorporated herein by reference to Exhibit 10.17 to Vision Bancshares, Inc.’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005 (File No. 000-50719))

Note: Pursuant to the First Supplemental Indenture, dated to be effective as of 6:00 p.m., Eastern Standard Time, on March 9, 2007, among Wilmington Trust Company, as Trustee; Park National Corporation; and Vision Bancshares, Inc., Park National Corporation succeeded to and was substituted for Vision Bancshares, Inc. as “Guarantor”

4.4 Subordinated Debenture, dated December 28, 2007, in the principal amount of $25,000,000, issued by The Park National Bank to USB Capital Funding Corp. (incorporated herein by reference to Park National Corporation’s Current Report on Form 8-K dated and filed on January 2, 2008 (“Park’s January 2, 2008 Form 8-K”))

4.5 Warrant to Purchase 227,376 Shares of Common Stock (Common Shares) of Park National Corporation issued to the United States Department of the Treasury on December 23, 2008 (incorporated herein by reference to Exhibit 4.1 to Park’s December 23, 2008 Form 8-K)

4.6 Letter Agreement, dated December 23, 2008, including Securities Purchase Agreement – Standard Terms attached thereto as Exhibit A, between Park National Corporation and the United States Department of the Treasury (incorporated herein by reference to Exhibit 10.1 to Park’s December 23, 2008 Form 8-K) [NOTE: Annex A to Securities Purchase Agreement is not included therewith; filed as Exhibit 3.1 to Park’s December 23, 2008 Form 8-K and incorporated by reference at Exhibit 3.1(f) of this Annual Report on Form 10-K]

4.7 Note Purchase Agreement, dated December 23, 2009, between Park National Corporation and 38 accredited investors (incorporated herein by reference to Exhibit 4.1 to Park National Corporation’s Current Report on Form 8-K dated and filed on December 28, 2009 (File No. 1-13006) (“Park’s December 28, 2009 Form 8-K”))

4.8 Form of 10% Subordinated Note due December 23, 2019 (incorporated herein by reference to Exhibit 4.2 to Park’s December 28, 2009 Form 8-K)

4.9 Form of Series A/Series B Common Share Warrant issued by Park National Corporation on December 10, 2010 (incorporated herein by reference to Exhibit 4.1 to Park National Corporation’s Current Report on Form 8-K dated and filed on December 8, 2010 (File No. 1-13006) (“Park’s December 8, 2010 Form 8-K”))

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Note: The Series A Common Share Warrant expired on June 10, 2011 without being exercised and the Series B Common Share Warrant expired on December 10, 2011 without being exercised.

4.10 Agreement to furnish instruments and agreements defining rights of holders of long-term debt (filed herewith)

10.1† Summary of Base Salaries for Executive Officers of Park National Corporation (filed herewith)

10.2(a)† Split-Dollar Agreement, dated May 17, 1993, between William T. McConnell and The Park National Bank (incorporated herein by reference to Exhibit 10(f) to Park National Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (File No. 0-18772))

10.2(b)† Schedule identifying Split-Dollar Agreements covering executive officers or employees of The Park National Bank or one of its divisions who are also directors or executive officers of Park National Corporation, which Split-Dollar Agreements are identical to the Split-Dollar Agreement, dated May 17, 1993, between William T. McConnell and The Park National Bank (incorporated herein by reference to Exhibit 10.3(b) to Park National Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (File No. 1-13006) (“Park’s 2008 Form 10-K”))

10.3(a)† Description of Park National Corporation Supplemental Executive Retirement Benefits as in effect from and after February 18, 2008 (incorporated herein by reference to Exhibit 10.7(a) to Park’s 2008 Form 10-K)

10.3(b)† Supplemental Executive Retirement Benefits Agreement, made as of February 18, 2008, between Park National Corporation and David L. Trautman (incorporated herein by reference to Exhibit 10.1 to Park National Corporation’s Current Report on Form 8-K dated and filed February 19, 2008 (File No. 1-13006) (“Park’s February 19, 2008 Form 8-K”))

10.3(c)† Form of Amended and Restated Supplemental Executive Retirement Benefits Agreement, made as of February 18, 2008, between Park National Corporation and each of C. Daniel DeLawder, John W. Kozak and William T. McConnell (incorporated herein by reference to Exhibit 10.2 to Park’s February 19, 2008 Form 8-K)

10.4† Employment Agreement, made and entered into as of December 22, 1999, and the Amendment thereto, dated March 23, 2001, between The Security National Bank and Trust Co. (also known as Security National Bank and Trust Co.) and Harry O. Egger (incorporated herein by reference to Exhibit 10(e) to Park National Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2001 (File No. 1-13006))

10.5† Park National Corporation Stock Plan for Non-Employee Directors of Park National Corporation and Subsidiaries (incorporated herein by reference to Exhibit 10 to Park National Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2004 (File No. 1-13006))

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10.6† Summary of Certain Compensation for Directors of Park National Corporation (filed herewith)

10.7† Park National Corporation 2005 Incentive Stock Option Plan (incorporated herein by reference to Exhibit 10.1 to Park National Corporation’s Current Report on Form 8-K dated and filed on April 20, 2005 (File No. 1-13006) (“Park’s April 20, 2005 Form 8-K”))

10.8† Form of Stock Option Agreement to be used in connection with the grant of incentive stock options under the Park National Corporation 2005 Incentive Stock Option Plan (incorporated herein by reference to Exhibit 10.2 to Park’s April 20, 2005 Form 8-K)

10.9 Subordinated Debenture Purchase Agreement, dated as of December 28, 2007, between The Park National Bank, as “Borrower,” and USB Capital Funding Corp., as “Lender” (incorporated herein by reference to Exhibit 10.1 to Park’s January 2, 2008 Form 8-K)

10.10(a)† Form of Split-Dollar Agreement, made and entered into effective as of December 28, 2007, covering Non-Employee Directors of Park National Corporation (incorporated herein by reference to Exhibit 10.2(a) to Park’s January 2, 2008 Form 8-K)

10.10(b)† Schedule identifying Non-Employee Directors of Park National Corporation covered by form of Split-Dollar Agreement, made and entered into effective as of December 28, 2007 (filed herewith)

10.11† Split-Dollar Agreement, made and entered into effective as of May 19, 2008, between The Park National Bank and David L. Trautman (incorporated herein by reference to Exhibit 10.1 to Park National Corporation’s Current Report on Form 8-K dated and filed on May 20, 2008 (File No. 1-13006))

10.12(a)† Letter Agreement, dated July 20, 2009, between Park National Corporation and C. Daniel DeLawder (incorporated herein by reference to Exhibit 10.1 to Park National Corporation’s Current Report on Form 8-K dated and filed on July 20, 2009 (File No. 1-13006) (“Park’s July 20, 2009 Form 8-K”))

10.12(b)† Letter Agreement, dated July 20, 2009, between Park National Corporation and David L. Trautman (incorporated herein by reference to Exhibit 10.2 to Park’s July 20, 2009 Form 8-K)

10.12(c)† Letter Agreement, dated July 20, 2009, between Park National Corporation and John W. Kozak (incorporated herein by reference to Exhibit 10.3 to Park’s July 20, 2009 Form 8-K)

10.13 Letter Agreement, dated December 7, 2010, by and between Park National Corporation and Rodman & Renshaw, LLC (incorporated herein by reference to Exhibit 10.1 to Park’s December 8, 2010 Form 8-K)

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10.14 Form of Securities Purchase Agreement – Common Shares and Warrants (incorporated herein by reference to Exhibit 10.2 to Park’s December 8, 2010 Form 8-K)

12 Computation of Ratios of Earnings to Fixed Charges and of Earnings to Fixed Charges and Preferred Share Dividends (filed herewith)

13 2011 Annual Report (not deemed filed except for portions thereof which are specifically incorporated by reference in this Annual Report on Form 10-K) (specified portions filed herewith)

14 Code of Business Conduct and Ethics, as amended January 23, 2012 and updated January 24, 2012 (filed herewith)

21 Subsidiaries of Park National Corporation (filed herewith)

23 Consent of Crowe Horwath LLP (filed herewith)

24 Powers of Attorney of Directors and Executive Officers of Park National Corporation (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 Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code – Principal Executive Officer and Principal Financial Officer (furnished herewith)

99.1 Certification Pursuant to Section 111(b)(4) of the Emergency Economic Stabilization Act of 2008 and 31 CFR § 30.15 -- Principal Executive Officer (filed herewith)

99.2 Certification Pursuant to Section 111(b)(4) of the Emergency Economic Stabilization Act of 2008 and 31 CFR § 30.15 -- Principal Financial Officer (filed herewith)

101 The following materials from Park National Corporation’s 2011 Annual Report and incorporated therefrom into Park National Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, formatted in XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of December 31, 2011 and December 31, 2010; (ii) the Consolidated Statements of Income for the years ended December 31, 2011, 2010 and 2009; (iii) the Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2011, 2010 and 2009; (iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009; and (v) the Notes to Consolidated Financial Statements (furnished herewith)*

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* 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.

† Management contract or compensatory plan or arrangement.

(b)	Exhibits.
	The documents listed in Item 15(a)(3) are filed/furnished with this Annual Report on Form 10-K as exhibits or incorporated into this Annual Report on Form 10-K by reference.

(c)	Financial Statement Schedules.
	None

[Remainder of page intentionally left blank; signatures on following page]

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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: February 29, 2012	By:	/s/ C. Daniel DeLawder
		C. Daniel DeLawder,
		Chairman of the Board and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on the 29^th day of February, 2012.

Name	Capacity
/s/ C. Daniel DeLawder C. Daniel DeLawder	Chairman of the Board, Chief Executive Officer and Director
/s/ David L. Trautman David L. Trautman	President, Secretary and Director
/s/ John W. Kozak John W. Kozak	Chief Financial Officer
/s/ Brady T. Burt Brady T. Burt	Chief Accounting Officer
/s/ Maureen Buchwald* Maureen Buchwald	Director
/s/ James J. Cullers* James J. Cullers	Director
/s/ Harry O. Egger* Harry O. Egger	Director
/s/ F. William Englefield IV* F. William Englefield IV	Director

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Name	Capacity
/s/ Stephen J. Kambeitz* Stephen J. Kambeitz	Director
/s/ William T. McConnell* William T. McConnell	Director
/s/ Timothy S. McLain* Timothy S. McLain	Director
/s/ John J. O’Neill* John J. O’Neill	Director
/s/ William A. Phillips* William A. Phillips	Director
/s/ Rick R. Taylor* Rick R. Taylor	Director
/s/ Sarah Reese Wallace* Sarah Reese Wallace	Director
/s/ Leon Zazworsky* Leon Zazworsky	Director

__________________________

* The above-named directors of the Registrant sign this Annual Report on Form 10-K by C. Daniel DeLawder, their attorney-in-fact, pursuant to Powers of Attorney signed by the above-named directors, which Powers of Attorney are filed with this Annual Report on Form 10-K as exhibits, in the capacities indicated and on the 29^th day of February, 2012.

By:	/s/ C. Daniel DeLawder
	C. Daniel DeLawder
	Chairman of the Board and Chief Executive Officer

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EX-2.2

Exhibit 2.2

Agreement and Plan of Merger

by and between

Vision Bank

and

SE Property Holdings, LLC

This Agreement and Plan of Merger (this “Plan of Merger”) is entered into as of this 25^th day of January, 2012, by and between Vision Bank, a Florida state-chartered banking corporation (“Vision Bank”), which has its principal office located at 2200 Stanford Road, Panama City, Florida 32405, and SE Property Holdings, LLC, a member-managed Ohio limited liability company (“SE LLC”), which has its principal office located at 50 North Third Street, Newark, Ohio 43055. In this Plan of Merger, Vision Bank and SE LLC are sometimes individually referred to as a “Constituent Entity” and collectively referred to as the “Constituent Entities.”

WHEREAS, each of Vision Bank and SE LLC is a wholly-owned subsidiary of Park National Corporation, an Ohio corporation (“Park”), which has its principal office located at 50 North Third Street, Newark, Ohio 43055; and

WHEREAS, Vision Bank has entered into that certain Purchase and Assumption Agreement, dated as of November 16, 2011 (the “Centennial P&A Agreement”), by and between Vision Bank and Park, on the one hand as “Seller”, and Home Bancshares, Inc. (“Home”) and its wholly-owned subsidiary Centennial Bank, an Arkansas state-chartered bank (“Centennial”), on the other hand as “Buyer”, pursuant to which Vision Bank is to sell substantially all of the operating assets and liabilities associated with Vision Bank to Centennial for a purchase price of $27.9 million; and

WHEREAS, under the terms of the Centennial P&A Agreement, Centennial will acquire all branch locations of Vision Bank including all real estate, leases and fixed assets associated with such offices; and Centennial will assume all of Vision Bank’s deposit accounts/liabilities; and

WHEREAS, under the terms of the Centennial P&A Agreement, Centennial will also purchase substantially all of Vision Bank’s performing loans, while Vision Bank is to retain all non-performing loans as well as an additional $56.5 million of loans (principal balance as of October 31, 2011) which Centennial did not wish to purchase as a result of their credit due diligence; and

WHEREAS, pursuant to that certain Loan Sale and Purchase Agreement, dated as of December 27, 2011 (the “PNB Agreement”), with The Park National Bank, the wholly-owned national bank subsidiary of Park (“PNB”), on December 28, 2011, Vision Bank sold, assigned, transferred and conveyed to PNB, and PNB purchased and accepted, all rights, title and interests of Vision Bank, as of December 28, 2011, in, to and under the “Loan Documents” (as defined in the PNB Agreement) set forth in Schedule A through Schedule F of the PNB Agreement for an aggregate purchase price of $7,467,293.04; and

WHEREAS, in conjunction with the transactions contemplated by the Centennial P&A Agreement and as permitted by 12 C.F.R. § 327.12(f), Vision Bank will transfer to Centennial the then current balance of the prepaid assessment paid by Vision Bank to the Federal Deposit Insurance Corporation (the “FDIC”) pursuant to 12 C.F.R. § 327.12 (the “FDIC Prepaid Assessment Balance”); and

WHEREAS, in connection with the consummation of the transactions contemplated by the Centennial P&A Agreement, Vision Bank proposes to resign as trustee under each of the trust relationships as to which Vision Bank exercises fiduciary or trust powers (the “Trust Relationships”) and it is contemplated that the person(s) having the power to appoint a successor trustee under each such Trust Relationship will appoint PNB to serve as successor trustee under such Trust Relationship; and

WHEREAS, as a result of Vision Bank’s resignation as trustee under each of the Trust Relationships in connection with the consummation of the transactions contemplated by the Centennial P&A Agreement, Vision Bank will no longer carry on any business as a fiduciary or trustee and will surrender, in accordance with Section 660.47 of Title XXXVIII of the Florida Statutes, the fiduciary/trust powers granted to Vision Bank by the Florida Office of Financial Regulation (the “Florida OFR”); and

WHEREAS, after the consummation of the transactions contemplated by the Centennial P&A Agreement, Vision Bank will no longer carry on a banking business, will not hold any deposit accounts/liabilities and will not have any offices; and, as a result, Vision Bank will relinquish the charter certificate of Vision Bank to the Florida OFR for cancellation as required by Florida OFR Regulation 69U-105.708 and become a Florida corporation without any authority to conduct a banking business; and

WHEREAS, upon consummation of the transactions contemplated by the Centennial P&A Agreement, Centennial will assume all of Vision Bank’s deposit accounts/liabilities and the insured status of Vision Bank will be terminated in accordance with the provisions of 12 C.F.R. § 307.2 on the date of the receipt by the FDIC of a Certificate of Total Assumption of Deposits from Vision Bank evidencing the assumption by Centennial of all of Vision Bank’s deposit accounts/liabilities; and

WHEREAS, following the consummation of the transactions contemplated by the Centennial P&A Agreement, the transfer by Vision Bank to Centennial of the FDIC Prepaid Assessment Balance, the resignation by Vision Bank as trustee under each of the Trust Relationships, the surrender by Vision Bank of the fiduciary/trust powers granted to Vision Bank by the Florida OFR, the relinquishment by Vision Bank of the charter certificate of Vision Bank to the Florida OFR and the certification to the FDIC that Centennial has assumed all of Vision Bank’s deposit accounts/liabilities and termination of Vision Bank’s insured status (collectively, the “Pre-Merger Events”), Vision Bank and SE LLC propose to merge, with SE LLC to be the surviving entity in the merger; and

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WHEREAS, as of January 18, 2012, Vision Bank is authorized to issue 50,000 shares of capital stock, each with a par value of $5.00, and had 23,200 shares of capital stock outstanding, all of which are held of record and beneficially by Park; and

WHEREAS, Park holds of record and beneficially all of the membership interest in SE LLC; and

WHEREAS, the Board of Directors of Vision Bank, by resolutions duly authorized and adopted by the vote of its members, has determined and declared it advisable and in the best interest of Vision Bank that Vision Bank merge with and into SE LLC in accordance with the terms and subject to the conditions set forth in this Plan of Merger; and

WHEREAS, the Board of Directors of Vision Bank has adopted this Plan of Merger on behalf of Vision Bank and recommended to Park, as the sole shareholder of Vision Bank, that this Plan of Merger be approved; and

WHEREAS, Park, in its capacity as the sole member of SE LLC, has, by resolutions duly authorized and adopted, determined and declared it advisable and in the best interest of SE LLC that Vision Bank merge with and into SE LLC in accordance with the terms and subject to the conditions set forth in this Plan of Merger and has adopted and approved this Plan of Merger on behalf of SE LLC;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements of the Constituent Entities contained herein, it is hereby agreed by and between Vision Bank and SE LLC that the terms of the merger of Vision Bank with and into SE LLC contemplated by this Plan of Merger and the mode of carrying such merger into effect shall be as follows:

Section 1. Merger of Vision Bank with and into SE LLC. At the Effective Time of the Merger (as defined in Section 11 of this Plan of Merger), Vision Bank shall be merged with and into SE LLC (the “Merger”). SE LLC shall be the surviving entity in the Merger (the “Surviving Entity”) and shall continue to exist as a limited liability company under the laws of the State of Ohio. At the Effective Time of the Merger, the separate existence of Vision Bank shall cease.

Section 2. Name of the Surviving Entity. The name of the Surviving Entity in the Merger shall be SE Property Holdings, LLC.

Section 3. Business and Location of Principal Office of Surviving Entity. The Surviving Entity shall be permitted to engage in any lawful act or activity for which limited liability companies may be formed under Chapter 1705 of the Ohio Revised Code (the “Ohio LLC Act”) and in which subsidiaries of a registered bank holding company may engage under the Federal Reserve Act and the regulations promulgated by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) thereunder and under the applicable laws, rules and regulations of each of the states in which the Surviving Entity proposes to conduct business. The Surviving Entity’s principal office shall be located at 50 North Third Street, City of Newark, County of Licking, State of Ohio 43055.

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Section 4. Effects of the Merger.

(a) At the Effective Time of the Merger, the Merger shall have the effects prescribed by the applicable provisions of the Florida Statutes and the applicable provisions of the Ohio LLC Act.

(b) The Constituent Entities intend that the Merger be treated as a tax-free liquidation in accordance with Sections 332 and 337 of the Internal Revenue Code of 1986, as amended, and the United States Treasury Department regulations promulgated thereunder.

(c) The title to all assets and real estate and other property, or any interest therein, owned by Vision Bank or by SE LLC shall, by virtue of the Merger and without any deed or other transfer, be vested in the Surviving Entity without reversion or impairment. From and after the Effective Time of the Merger, the Surviving Entity shall be responsible and liable for all the liabilities and obligations of Vision Bank and SE LLC, including liabilities, if any, arising out of appraisal rights with respect to the Merger under applicable laws, rules and regulations. Any claim existing or action or proceeding pending by or against Vision Bank or SE LLC may be continued and prosecuted to judgment with right of appeal as if the Merger did not occur or the Surviving Entity may be substituted in the action or proceeding for Vision Bank or SE LLC, as appropriate. Neither the rights of creditors nor any liens upon the property of Vision Bank or SE LLC shall be impaired by the Merger.

(d) If, at any time after the Effective Time of the Merger, the Surviving Entity shall consider or be advised that any further conveyances, assignments, transfers, deeds or other instruments or any other acts are necessary or desirable (i) to vest, perfect, confirm or record, in the Surviving Entity, title to and possession of any property or right of Vision Bank or SE LLC, acquired as a result of the Merger, or (ii) otherwise to carry out the purposes of this Plan of Merger, Vision Bank, SE LLC and their respective officers, directors and member, as appropriate, shall execute and deliver all such proper conveyances, assignments, transfers, deeds and other instruments and do all such acts as are necessary or proper to vest, perfect or confirm title to, and possession of, such property or right in the Surviving Entity and otherwise to carry out the purposes of this Plan of Merger; and the proper officers and the member of the Surviving Entity are fully authorized in the name of Vision Bank or SE LLC, or otherwise, to take any and all such action.

Section 5. Conversion of Shares and Membership Interests.

(a) At the Effective Time of the Merger, each of the 22,300 shares of capital stock, each with a par value of $5.00, of Vision Bank, issued and outstanding and held by Park as the sole shareholder of Vision Bank immediately prior to the Effective Time of the Merger shall, by virtue of the Merger and without any action on the part of Vision Bank or Park, be extinguished and shall cease to exist, and shall not be converted into interests (membership or otherwise) in or obligations of the Surviving Entity or the right to receive evidences of indebtedness, other securities, cash, rights or any other property.

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(b) At the Effective Time of the Merger, all of the membership interest in SE LLC held by Park immediately prior to the Merger shall, by virtue of the Merger and without any action on the part of Park or SE LLC, be converted into and constitute all of the membership interest in the Surviving Entity.

Section 6. Articles of Organization. The Articles of Organization of SE LLC, as in effect immediately prior to the Effective Time of the Merger, shall be the articles of organization of the Surviving Entity until amended in accordance with applicable law.

Section 7. Operating Agreement. The Operating Agreement of SE LLC, as in effect immediately prior to the Effective Time of the Merger, shall be the operating agreement of the Surviving Entity until amended in accordance with applicable law and the provisions of the articles of organization of the Surviving Entity.

Section 8. Officers. The officers of SE LLC immediately prior to the Effective Time of the Merger shall continue to serve as the officers of the Surviving Entity from and after the Effective Time of the Merger, each to hold office until changed in accordance with applicable law and the provisions of the articles of organization or the operating agreement of the Surviving Entity.

Section 9. Termination. This Plan of Merger may be terminated by the mutual consent of: (a) the Board of Directors of Vision Bank; and (b) Park, in its capacity as the sole member of SE LLC.

Section 10. Vision Bank Shareholder Vote. This Plan of Merger shall be approved by Park, in its capacity as the sole shareholder of Vision Bank.

Section 11. Effective Time of Merger. The Merger shall become effective on the date that the appropriate Certificate of Merger is filed with the Secretary of State of the State of Ohio and appropriate Articles of Merger are filed with the Florida Department of State, all in accordance with the applicable provisions of the Ohio LLC Act and the applicable provisions of the Florida Statutes (the “Effective Time of the Merger”).

Section 12. Service of Process. SE LLC, as the Surviving Entity in the Merger, hereby consents to be sued and served with process in the State of Florida in any proceeding in the State of Florida to enforce against the Surviving Entity any obligation of Vision Bank, or any obligation of the Surviving Entity arising from the Merger, and hereby agrees to the irrevocable appointment of the Secretary of State of the State of Florida as the agent of the Surviving Entity for service of process in any such proceeding.

Section 13. Counterparts. This Plan of Merger may be executed in multiple counterparts, each of which shall be deemed to be a duplicate original, but all of which taken together shall be deemed to constitute a single agreement and plan of merger.

-5-

IN WITNESS WHEREOF, Vision Bank and SE Property Holdings, LLC have caused this Agreement and Plan of Merger to be executed by their duly authorized officers this 25th day of January, 2012.

ATTEST:	VISION BANK
By:/s/ Nancy McCoy	By:/s/ Joey W. Ginn
Printed Name: Nancy McCoy	Printed Name: Joey W. Ginn
Title: Executive Assistant	Title: Chairman & CEO
ATTEST:	SE PROPERTY HOLDINGS, LLC
By: /s/ Brady Burt	By: /s/ John W. Kozak
Printed Name: Brady Burt	Printed Name: John W. Kozak
Title:Secretary	Title: VP and Treasurer

-6-

STATE OF FLORIDA	)
	) SS:
COUNTY OF BAY	)

BE IT REMEMBERED that on this 25^th day of January, 2012, personally came before me, the undersigned, Notary Public in and for the county and state aforesaid, Joey W. Ginn and ______________, the Chairman and CEO and the __________, respectively, of Vision Bank, a Florida corporation and one of the entities described in and which executed the foregoing Agreement and Plan of Merger, and they duly executed said Agreement and Plan of Merger before me and acknowledged said Agreement and Plan of Merger to be the agreement and plan of merger of said entity.

IN WITNESS WHEREOF, the above individuals have signed these presents and I have hereunto affixed my official hand and seal, on the day and date first hereinabove written.

	/s/ Nancy McCoy
	NOTARY PUBLIC
(NOTARIAL SEAL)

-7-

STATE OF OHIO	)
	) SS:
COUNTY OF LICKING	)

BE IT REMEMBERED that on this 25^th day of January, 2012, personally came before me, the undersigned, Notary Public in and for the county and state aforesaid, John Kozak and Brady Burt, the VP/Treasurer and the Secretary, respectively, of SE Property Holdings, LLC, an Ohio limited liability company and one of the entities described in and which executed the foregoing Agreement and Plan of Merger, and they duly executed said Agreement and Plan of Merger before me and acknowledged said Agreement and Plan of Merger to be the agreement and plan of merger of said entity.

IN WITNESS WHEREOF, the above individuals have signed these presents and I have hereunto affixed my official hand and seal, on the day and date first hereinabove written.

	/s/ Amy M. Adams
	NOTARY PUBLIC
(NOTARIAL SEAL)

-8-

EX-4.10

Exhibit 4.10

PARK NATIONAL CORPORATION

50 North Third Street

Post Office Box 3500

Newark, Ohio 43058-3500

(740) 349-8451

www.parknationalcorp.com

February 29, 2012

United States Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

Re:	Park National Corporation
	Commission File Number: 1-13006
	Annual Report on Form 10-K for the Fiscal Year
	Ended December 31, 2011

Ladies and Gentlemen:

Park National Corporation, an Ohio corporation (“Park”), is today filing with the Securities and Exchange Commission (the “SEC”) the Annual Report on Form 10-K of Park for the fiscal year ended December 31, 2011 (“Park’s 2011 Form 10-K”).

Neither (i) Park nor (ii) any of Park’s consolidated subsidiaries has outstanding any instrument or agreement with respect to its long-term debt under which the total amount of long-term debt authorized exceeds 10% of the total assets of Park and Park’s subsidiaries on a consolidated basis. In accordance with the provisions of Item 601(b)(4)(iii) of SEC Regulation S-K, Park hereby agrees to furnish to the SEC, upon request, a copy of each instrument or agreement defining (i) the rights of holders of long-term debt of Park or (ii) the rights of holders of long-term debt of a consolidated subsidiary of Park, in each case which is not being filed or incorporated by reference as an exhibit to Park’s 2011 Form 10-K.

Very truly yours,

PARK NATIONAL CORPORATION

/s/ John W. Kozak

John W. Kozak

Chief Financial Officer

EX-10.1

Exhibit 10.1

Summary of Base Salaries

for

Executive Officers of Park National Corporation

On December 16, 2011, the Compensation Committee of the Board of Directors of Park National Corporation (“Park”) approved the base salaries for the fiscal year ending December 31, 2012, for each of the executive officers of Park: (a) C. Daniel DeLawder, Chairman of the Board and Chief Executive Officer of Park and The Park National Bank, a subsidiary of Park; (b) David L. Trautman, President and Secretary of Park and President of The Park National Bank; and (c) John W. Kozak, Chief Financial Officer of Park and Senior Vice President and Chief Financial Officer of The Park National Bank. Those base salaries are:

* C. Daniel DeLawder -- $773,525

* David L. Trautman -- $563,250

* John W. Kozak -- $414,455

EX-10.6

Exhibit 10.6

Summary of Certain Compensation for

Directors of Park National Corporation

Annual Retainers and Meeting Fees

Each director of Park National Corporation (“Park”) who is not an employee of Park or one of Park’s subsidiaries (a “non-employee director”) receives, on the date of the regular meeting of the Park Board of Directors held during the fourth fiscal quarter, an annual retainer in the form of 120 common shares of Park awarded under the Park National Corporation Stock Plan for Non-Employee Directors of Park National Corporation and Subsidiaries (the “Directors’ Stock Plan”).

Each non-employee director receives $1,000 for each meeting of the Park Board of Directors attended and $400 for each meeting of a committee of the Park Board of Directors attended. If the date of a meeting of the full Board of Directors is changed from that provided for by resolution of the Board and a non-employee director is not able to attend the rescheduled meeting, he or she receives the meeting fee as though he or she attended the meeting.

In addition, each member of the Executive Committee of the Park Board of Directors receives a $2,500 annual cash retainer and each member of the Audit Committee of the Park Board of Directors (other than the Chair) receives a $2,000 annual cash retainer. The Chair of the Audit Committee receives a $5,000 annual cash retainer.

Each non-employee director of Park also serves on the board of directors of The Park National Bank, the national bank subsidiary of Park (“PNB”), or on the advisory board of one of PNB’s divisions, and receives, on the date of the regular meeting of the Park Board of Directors held during the fourth fiscal quarter, an annual retainer in the form of 60 common shares of Park awarded under the Directors’ Stock Plan and, in some cases, a specified amount of cash for such service as well as fees for attendance at meetings of the board of directors of PNB or the advisory board of the applicable division of PNB (and committees of the respective boards).

In addition to the annual retainers and meeting fees discussed above, non-employee directors also receive reimbursement of all reasonable travel and other expenses of attending board and committee meetings.

C. Daniel DeLawder, Harry O. Egger, William T. McConnell, William A. Phillips and David L. Trautman receive no compensation for: (a) serving as a member of the Board of Directors of Park; (b) serving as a member of the board of directors of PNB or the advisory board of one of its divisions; or (c) serving as a member of any committee of the respective boards.

Other Compensation

William T. McConnell is employed by PNB in a non-executive officer capacity. In such capacity, he received the amount of $33,000 during the fiscal year ended December 31, 2011 (the “2011 fiscal year”). William A. Phillips is employed by the Century National Bank Division of PNB, in a non-executive officer capacity. In such capacity, he received the amount of $33,000 during the 2011 fiscal year. Harry O. Egger is employed by the Security National Bank Division of PNB in a non-executive officer capacity. In such capacity, Mr. Egger received $33,000 during the 2011 fiscal year.

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EX-10.10(B)

Exhibit 10.10(b)

Schedule identifying

Non-Employee Directors of Park National Corporation

covered by

Split-Dollar Agreements, made and entered into effective as of December 28, 2007

The following directors of Park National Corporation (“Park”) are covered by Split-Dollar Agreements (the “Split-Dollar Agreements”) as identified below, which Split-Dollar Agreements are identical to the form of Split-Dollar Agreement, made and entered into effective as of December 28, 2007, filed as Exhibit 10.2(a) to Park’s Current Report on Form 8-K dated and filed January 2, 2008 (File No. 1-13006):

Name of Director	Subsidiary of Park which is a Party to Split-Dollar Agreement	Date of Split- Dollar Agreement
Maureen H. Buchwald	The Park National Bank (as successor by merger to The First-Knox National Bank of Mount Vernon)	December 28, 2007
James J. Cullers	The Park National Bank (as successor by merger to The First-Knox National Bank of Mount Vernon)	December 28, 2007
F. William Englefield IV	The Park National Bank	December 28, 2007
John J. O’Neill	The Park National Bank	December 28, 2007
Rick Taylor	The Park National Bank (as successor by merger to The Richland Trust Company)	December 28, 2007
Leon Zazworsky	The Park National Bank	December 28, 2007

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 National Corporation, which includes our subsidiaries, on a consolidated basis:

	Year Ended December 31,
	2011		2010		2009		2008		2007
Ratio of earnings to fixed charges (1):
Excluding Interest on Deposits		4.65		3.47		4.20		1.77		2.12
Including Interest on Deposits		2.96		2.04		2.02		1.26		1.31

(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	$	116,555,000	$	74,737,000	$	97,135,000	$	35,719,000	$	52,677,000
Fixed Charges:
Interest on deposits		27,655,000		41,965,000		64,620,000		89,892,000		121,021,000
Borrowings and long-term debt		31,241,000		29,508,000		29,579,000		45,574,000		46,126,000
Rent expense interest factor (1/3)		662,843		721,687		794,866		801,147		731,723
Total fixed charges:
Including interest on deposits	$	59,617,687	$	72,194,687	$	94,993,866	$	136,267,147	$	167,878,723
Excluding interest on deposits	$	31,962,687	$	30,229,687	$	30,373,866	$	46,375,147	$	46,857,723

1

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 National Corporation, which includes our subsidiaries, on a consolidated basis:

	Year Ended December 31,
	2011		2010		2009		2008		2007
Ratio of earnings to fixed charges
and preferred dividends (1):
Excluding Interest on Deposits		3.89		2.94		3.52		1.77		2.12
Including Interest on Deposits		2.72		1.93		1.94		1.26		1.31

(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	$	116,555,000	$	74,737,000	$	97,135,000	$	35,719,000	$	52,677,000
Fixed Charges:
Interest on deposits		27,655,000		41,965,000		64,620,000		89,892,000		121,021,000
Borrowings and long-term debt		31,241,000		29,508,000		29,579,000		45,574,000		46,126,000
Preferred dividends and accretion		8,365,714		8,295,714		8,231,429		202,857
Rent expense interest factor (1/3)		662,843		721,687		794,866		801,147		731,723
Total fixed charges:
Including interest on deposits	$	67,924,557	$	80,490,401	$	103,225,295	$	136,470,004	$	167,878,723
Excluding interest on deposits	$	40,269,557	$	38,525,401	$	38,605,295	$	46,578,004	$	46,857,723

EX-13

FINANCIAL REVIEW

This financial review presents management's discussion and analysis of the financial condition and results of operations for Park National Corporation and its subsidiaries ("Park" or the "Corporation").  This discussion should be read in conjunction with the consolidated financial statements and related notes and the five-year summary of selected financial data.  Management’s discussion and analysis contains forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance.  The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties.  Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements.  Risks and uncertainties that could cause actual results to differ materially include, without limitation: 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 collateral could prove less valuable than assumed and cash flows may be worse than expected; Park’s ability to sell OREO properties at anticipated prices; 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; 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 may 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 changes in accounting policies and practices, as may be adopted by the Financial Accounting Standards Board (the “FASB”), the Securities and Exchange Commission (the “SEC”), the Public Company Accounting Oversight Board and other regulatory agencies, and the accuracy of our assumptions and estimates used to prepare our financial statements; the effect of fiscal and governmental policies of the United States federal government; the adequacy of our risk management program; a failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors and other service providers, including as a result of cyber attacks; demand for loans in the respective market areas served by Park and its subsidiaries; and other risk factors relating to our industry as detailed from time to time in Park’s reports filed with the 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, 2011.  Undue reliance should not be placed on the forward-looking statements, which speak only as of the date of this Annual Report.  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 was made, or reflect the occurrence of unanticipated events, except to the extent required by law.

RESTATEMENT OF FINANCIAL STATEMENTS

In a Current Report on Form 8-K filed on January 31, 2012 (the “January 31, 2012 Form 8-K”), Park announced that on January 27, 2012, management determined that (i) Park’s previously issued audited consolidated financial statements incorporated by reference in Park’s Annual Report on Form 10-K for the year ended December 31, 2010, filed on February 28, 2011, and (ii) Park’s unaudited condensed consolidated financial statements included in Park’s Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2011, June 30, 2011, and September 30, 2011 should be restated.

The accounting treatment giving rise to the restatement was the inclusion of estimated future cash flows supporting the allowance for loan losses related to certain impaired commercial loans. For the year ended December 31, 2010, as part of Park’s process to measure impairment on certain impaired commercial loans at Vision Bank, management had relied on expected future cash flows from guarantors, with some of whom we were in litigation.  Management determined that reliance on expected future cash flows, which may require protracted litigation to actually be received, is inappropriate given the difficulty in obtaining objective verifiable evidence supporting a conclusion as to the amount and timing of the expected cash flows. GAAP requires that our assumptions be “reasonable and supportable” and the facts and circumstances around the existence of protracted litigation make this assumption more difficult to support.

The restatement also reflected certain OREO devaluations and additional loan loss provisions that were not related to guarantor support.  These expense items were related to valuation issues identified at December 31, 2010, where management utilized (i) the work of a third-party contractor, which was not a licensed appraiser, when calculating the fair value of collateral for certain impaired loans and the fair value of certain OREO held by Vision Bank, and management did not have sufficient documentation to support the estimates of this third-party contractor, and (ii) internal estimates of collateral value when calculating specific reserves for certain impaired loans when, at times, such internal estimates were outdated.  The impact was to reverse provisions for loan losses and OREO devaluations originally recorded in 2011 and recognize these provisions for loan losses and OREO devaluations in the restated audited consolidated financial statements for the year ended December 31, 2010.  Please see the following tables for a summary of the impact on Park’s income statement and balance sheet for the year ended December 31, 2010 and the nine months ended September 30, 2011 from the restatement.

On February 28, 2012, Park amended its previously filed 2010 Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2011, June 30, 2011 and September 30, 2011 to report the changes set forth above. The following discussion and impact is included again to assist in understanding those changes.

1

Table 1 - Restatement Impact on Income Statement
For the year ended December 31, 2010
(in thousands)	As amended in the Form 10-K/A		As originally filed		Change
Net interest income	$	274,044	$	274,044		-----
Provision for loan losses		87,080		64,902		22,178
Fee income		63,016		65,632		(2,616	)
Security gains		11,864		11,864		-----
Operating expenses		187,107		187,107		-----
Income before taxes	$	74,737	$	99,531	$	(24,794	)
Income taxes		16,636		25,314		(8,678	)
Net income	$	58,101	$	74,217	$	(16,116	)

Table 2 - Restatement Impact on Income Statement
For the nine months ended September 30, 2011
(in thousands)	As amended in the Form 10-Q/A		As originally filed		Change
Net interest income	$	206,955	$	206,955		-----
Provision for loan losses		43,054		55,925		(12,871	)
Fee income		48,195		43,334		4,861
Security gains		25,462		25,462		-----
Operating expenses		138,952		138,952		-----
Income before taxes	$	98,606	$	80,874	$	17,732
Income taxes		27,076		20,870		6,206
Net income	$	71,530	$	60,004	$	11,526

Table 3 - Restatement Impact on Balance Sheet
at December 31, 2010
(in thousands)	As amended in the Form 10-K/A		As originally filed		Change
Allowance for loan losses	$	143,575	$	121,397	$	22,178
Net loans		4,589,110		4,611,288		(22,178	)
Other real estate owned		41,709		44,325		(2,616	)
Other assets		148,852		140,174		8,678
Total assets		7,282,261		7,298,377		(16,116	)
Retained Earnings		406,342		422,458		(16,116	)
Total stockholders' equity		729,708		745,824		(16,116	)
Total liabilities and stockholders' equity		7,282,261		7,298,377		(16,116	)

2

Table 4 - Restatement Impact on Balance Sheet
at September 30, 2011
(in thousands)	As amended in the Form 10-Q/A		As originally filed		Change
Allowance for loan losses	$	107,310	$	100,248	$	7,062
Net loans		4,573,265		4,580,327		(7,062	)
Other real estate owned		46,911		46,911		-
Other assets		163,973		161,501		2,472
Total assets		7,095,098		7,099,688		(4,590	)
Retained Earnings		430,121		434,711		(4,590	)
Total stockholders' equity		755,053		759,643		(4,590	)
Total liabilities and stockholders' equity		7,095,098		7,099,688		(4,590	)

SALE OF VISION BANK

On November 16, 2011, Park and Vision Bank (“Vision”) entered into a Purchase and Assumption Agreement (the “Purchase Agreement”) with Home BancShares, Inc (“Home”) and its wholly-owned subsidiary Centennial Bank, an Arkansas state-chartered bank (“Centennial”), to sell substantially all of the performing loans, operating assets and liabilities associated with Vision to Centennial for a purchase price of $27.9 million.

Under the terms of the Purchase Agreement, Centennial will purchase the real estate and other assets described in the Purchase Agreement which are used in the banking business conducted by Vision at its eight offices in Baldwin County, Alabama and its nine offices in the Florida panhandle counties of Bay, Gulf, Okaloosa, Santa Rosa and Walton.  Centennial will assume Vision’s obligations relating to all of Vision’s deposit accounts, which had a balance of approximately $533 million at December 31, 2011.

Centennial will purchase performing loans, which had an unpaid principal balance of about $369 million at December 31, 2011.   These loans are shown on Park’s balance sheet as assets held for sale. Vision will retain all of the non-performing loans and certain performing loans under the terms of the Purchase Agreement.  As of December 31, 2011, the nonperforming loans totaled approximately $101 million and the performing loans totaled approximately $23 million.  Under the terms of the Purchase Agreement, the loans being acquired by Centennial will be sold by Vision at a discount of $13.1 million. Prior to the transfer to assets held for sale, Vision Bank’s allowance for loan losses totaled $23.8 million at December 31, 2011.  Upon the transfer, $13.1 million was transferred out of the allowance for loan losses with the related loans that moved to assets held for sale.  Management expects that the remaining loans at Vision Bank will be charged down by the remaining balance of the allowance for loan losses of $10.7 million prior to transfer to SE Property Holdings, LLC (“SE, LLC”).  Vision Bank will be merged into SE, LLC, a wholly-owned subsidiary of Park, following the closing of the transaction and the Florida banking charter will be surrendered to the state of Florida’s Office of Financial Regulation.

On February 16, 2012, Park completed the sale of Vision Bank as contemplated in the Purchase Agreement.  Park recognized a pre-tax gain, net of expenses directly related to the sale, of approximately $22 million.

OVERVIEW

Net income for 2011 was $82.1 million compared to $58.1 million in 2010 and $74.2 million in 2009.  As previously discussed, net income for 2010 was restated and decreased by $16.1 million as a result of an additional loan loss provision of $22.2 million and an increase in OREO devaluations of $2.6 million at Vision Bank for 2010.  The improvement in net income in 2011 was primarily due to a reduction in the net loss at Vision Bank.  The net loss at Vision Bank was $22.5 million in 2011, compared to a net loss of $45.4 million in 2010 and a net loss of $30.1 million in 2009.

Diluted earnings per common share were $4.95, $3.45 and $4.82 for 2011, 2010 and 2009, respectively.  Diluted earnings per common share for 2010 was originally reported as $4.51.

3

The following tables show the components of net income for 2011, 2010 and 2009 for Park National Corporation and its wholly owned subsidiaries. The subsidiaries that will be reviewed in the tables are The Park National Bank (“PNB”), Vision Bank, Guardian Financial Services Company (“GFSC”) and the Parent Company for Park.  We have also included some summary information on the balance sheet.

Table 5 - PNB – Summary Income Statement For the years ended December 31,
(In thousands)	2011		2010		2009
Net interest income	$	236,282	$	237,281	$	236,107
Provision for loan losses		30,220		23,474		22,339
Fee income		67,348		68,648		75,430
Security gains		23,634		11,864		7,340
Operating expenses		146,235		144,051		148,048
Income before taxes		150,809		150,268		148,490
Federal income taxes		43,958		47,320		47,032
Net income	$	106,851	$	102,948	$	101,458

Balances at December 31,
(In thousands)	2011		2010		2009
Assets	$	6,281,747	$	6,495,558	$	6,182,257
Loans		4,172,424		4,074,775		3,950,599
Deposits		4,611,646		4,622,693		4,670,113

Net income for PNB exceeded $100 million for each of the past three years.  Excluding the after-tax impact of security gains, net income was $91.5 million in 2011, compared to $95.2 million in 2010 and $96.7 million in 2009.  The decrease in net income excluding the after-tax impact of security gains in 2011, compared to 2010, was primarily due to an increase in the provision for loan losses of $6.7 million or 28.7%.  This increase was largely due to an increase in the provision for loan losses pertaining to participation loans that PNB had purchased from Vision Bank in 2007 and 2008.  The loan loss provision for those participation loans was $11.1 million in 2011.  Management expects a significant reduction in the provision for loan losses at PNB in 2012 as the old participation loans with Vision Bank have largely been written down to current appraised values, less anticipated selling costs.  Management estimates that net income excluding the after-tax impact of security gains will be approximately $93 million for PNB in 2012.  The projected reduction in the provision for loan losses of about $14 million is expected to be partially offset by a decrease in net interest income of $5 million and an increase in operating expenses of about $5 million.

Table 6 - Vision Bank – Summary Income Statement For the years ended December 31,
(In thousands)	2011			2010 - Restated			2009
Net interest income	$	27,078		$	27,867		$	25,634
Provision for loan losses		31,052			61,407			44,430
Fee income		1,422			(6,024	)		(2,047	)
Security gains		5,195			-			-
Operating expenses		31,379			31,623			28,091
Loss before taxes	$	(28,736	)	$	(71,187	)	$	(48,934	)
State income taxes		6,088			(1,161	)		(2,461	)
Federal income taxes		(12,298	)		(24,612	)		(16,363	)
Net loss	$	(22,526	)	$	(45,414	)	$	(30,110	)

Balances at December 31,
(In thousands)	2011		2010 - Restated		2009
Assets	$	650,935	$	791,945	$	897,981
Assets held for sale		382,462		-		-
Loans		492,927		640,580		677,018
Deposits		532,630		633,432		688,900
Liabilities held for sale		536,186		-		-

4

The financial results for Vision Bank were very poor for each of the past three years.  Real estate values in the markets in which Vision Bank operates in Alabama and Florida experienced sharp declines in value in 2007 and 2008.  A very high percentage of the Vision Bank loan portfolio was collateralized by real estate.  Due to the sudden and sharp decline in real estate values, these real estate loans became under-collateralized and the borrowers began experiencing financial difficulties.  As a result, Vision Bank has had to record an extraordinarily high provision for loan losses in each of the past three years.  Additionally, devaluations and losses on the sale of other real estate owned are included in fee income.  Fee income was negative in 2010 and 2009.

During the fourth quarter of 2011, management recorded state income tax expense of $6.1 million at Vision Bank to write off the state tax net operating loss carryforward.  With the pending sale of Vision Bank in the first quarter of 2012, this tax asset would not be able to be realized and needed to be written off.

As previously discussed, Vision Bank is being sold during the first quarter of 2012.  We expect that the operation of Vision Bank during the first quarter of 2012 will result in a small loss of about $3 million in 2012, prior to the expected pre-tax gain resulting from the sale to Centennial.

Table 7 - GFSC –Summary Income Statement For the years ended December 31,
(In thousands)	2011		2010		2009
Net interest income	$	8,693	$	7,611	$	7,010
Provision for loan losses		2,000		2,199		2,052
Fee income		-		2		3
Security gains		-		-		-
Operating expenses		2,506		2,326		2,264
Income before taxes	$	4,187	$	3,088	$	2,697
Federal income taxes		1,466		1,082		945
Net income	$	2,721	$	2,006	$	1,752

Balances at December 31,
(In thousands)	2011		2010		2009
Assets	$	46,682	$	43,209	$	38,606
Loans		47,111		43,714		38,550
Deposits		8,013		7,062		5,100

GFSC is a small consumer finance company that was started in 1999 with a $300,000 capital investment by Park.  GFSC is very well managed and is expected to earn $3 million in 2012.

Table 8 - Parent Company - Summary Income Statement For the years ended December 31,
(In thousands)	2011			2010			2009
Net interest income	$	1,180		$	1,285		$	4,740
Provision for loan losses		-			-			-
Fee income		(2,689	)		389			464
Security gains		-			-			-
Operating expenses		8,196			9,106			10,322
Income (loss) before taxes	$	(9,705	)	$	(7,432	)	$	(5,118	)
Federal income taxes		(4,799	)		(5,993	)		(6,210	)
Net income (loss)	$	(4,906	)	$	(1,439	)	$	1,092

The above table shows the summary results for Park’s Parent Company, which includes SE, LLC, the non-banking subsidiary of Park’s Parent Company, which holds other real estate owned (“OREO”) purchased from Vision Bank since March 2011.

5

The loss at the Parent Company increased by $3.5 million in 2011 to $4.9 million, compared to a $1.4 million loss in 2010.  The increase in the loss was primarily due to devaluations and losses from the sale of OREO acquired from Vision Bank. These charges caused other fee income to be a loss of $2.7 million in 2011.

After the sale of Vision Bank was completed on February 16, 2012, Vision Bank merged into SE, LLC and become part of Park’s Parent Company.  Beginning in the first quarter of 2012, SE, LLC will become a separate segment for financial reporting purposes.  Approximately $110 million of loans became part of SE, LLC, after the sale of Vision Bank.  The servicing and collection of these loans will add additional expenses to the Parent Company.  Management estimates that the loss at the Parent Company will increase by approximately $5 million in 2012 and be about $10 million, excluding the gain from the sale of Vision Bank.  The pre-tax gain from the sale of Vision Bank is estimated to be approximately $22 million, net of anticipated expenses directly related to the sale, which results in an after-tax gain of approximately $14.3 million.  This gain will be recognized at Vision Bank immediately prior to its merger into SE, LLC.  Overall, including the gain from the sale of Vision Bank, we expect the Parent Company to earn about $4 million in 2012.

Table 9 - Park – Summary Income Statement For the years ended December 31,
(In thousands)	2011		2010 – Restated			2009
Net interest income	$	273,234	$	274,044		$	273,491
Provision for loan losses		63,272		87,080			68,821
Fee income		66,081		63,016			73,850
Security gains		28,829		11,864			7,340
Operating expenses		188,317		187,107			188,725
Income before taxes	$	116,555	$	74,737		$	97,135
State income taxes		6,088		(1,161	)		(2,461	)
Federal income taxes		28,327		17,797			25,404
Net income	$	82,140	$	58,101		$	74,192

Balances at December 31,
(In thousands)	2011		2010 – Restated		2009
Assets	$	6,972,245	$	7,282,261	$	7,040,329
Assets held for sale (1)		382,462		-		-
Loans		4,317,099		4,732,685		4,640,432
Deposits		4,465,114		5,095,420		5,188,052
Liabilities held for sale (2)		536,186		-		-
(1)The assets held for sale represent the loans and other assets at Vision Bank that will be sold in the first quarter of 2012.      (2)The liabilities held for sale represent the deposits and other liabilities at Vision Bank that will be sold in the first quarter of 2012.

Management expects a significant improvement in net income in future years, because of the sale of Vision Bank in the first quarter of 2012.  Over the past three years, Vision Bank had aggregate net losses of $98.0 million.   Management is forecasting that Park’s net income in 2012 will be approximately $97 million.  This estimate is based on projected earnings of $93 million for PNB, $3 million for GFSC, $4 million for the Parent Company and a loss of $3 million at Vision Bank, before Vision Bank is merged with and into the SE, LLC.  Forecasted net income for 2012 certainly benefits from the projected after-tax gain from the sale of Vision Bank of approximately $14.3 million. However, Park’s earnings will benefit in future years as the remaining loans from Vision Bank are collected.  Specifically, management expects Park’s Parent Company will return to break-even net income when all of the old Vision Bank assets have been disposed.

SUMMARY DISCUSSION OF OPERATING RESULTS FOR PARK

A year ago, Park’s management projected that net interest income would be $268 million to $278 million in 2011.  The actual results in 2011 were $273.2 million, right in the middle of the estimated range.  Park’s management projected that the average interest earning assets for 2011 would be approximately $6,550 million.  The actual average interest earning assets for the year were $6,641 million, 1.4% higher than the projected balance.  Park’s forecast for the net interest margin in 2011 was a range of 4.10% to 4.20%.  The actual results for the year were 4.14%, slightly below the middle of the estimated range.

Park’s management also projected a year ago that the provision for loan losses would be $47 million to $57 million in 2011.  The actual provision for loan losses in 2011 was $63.3 million, which exceeded the top of the estimated range by $6.3 million.

6

Fee income for 2011 was $66.1 million.  A year ago, Park’s management projected that fee income would be in a range of $63 million to $67 million.  The actual results were $3.1 million above the bottom of the range.

Gains from the sale of securities were $28.8 million in 2011.  Management had not forecast selling securities for gains in 2011, but decided to take advantage of market opportunities during the year.

A year ago, Park’s management projected that operating expenses would be approximately $183 million to $187 million.  Operating expenses for 2011 were $188.3 million; $1.3 million above the top of the estimated range.

ISSUANCE OF PREFERRED STOCK AND EMERGENCY ECONOMIC STABILIZATION ACT

On October 3, 2008, Congress passed the Emergency Economic Stabilization Act of 2008 (“EESA”), which created the Troubled Asset Relief Program (“TARP”) and provided the Secretary of the Treasury with broad authority to implement certain actions to help restore stability and liquidity to U.S. markets. The Capital Purchase Program (the “CPP”) was announced by the U.S. Department of the Treasury (the “U.S. Treasury”) on October 14, 2008 as part of TARP.  The CPP is voluntary and requires a participating institution to comply with a number of restrictions and provisions, including standards for executive compensation and corporate governance and limitations on share repurchases and the declaration and payment of dividends on common shares.

Park elected to apply for $100 million of funds through the CPP.  On December 23, 2008, Park completed the sale to the U.S. Treasury of $100 million of newly-issued Park non-voting preferred shares as part of the CPP.  Park entered into a Securities Purchase Agreement and a Letter Agreement with the U.S. Treasury on December 23, 2008. Pursuant to these agreements, Park issued and sold to the U.S. Treasury (i) 100,000 of Park’s Fixed Rate Cumulative Perpetual Preferred Shares, Series A, each without par value and having a liquidation preference of $1,000 per share (the “Series A Preferred Shares”), and (ii) a warrant (the “Warrant”) to purchase 227,376 Park common shares at an exercise price of $65.97 per share, for an aggregate purchase price of $100 million.  The Warrant has a ten-year term.  All of the proceeds from the sale of the Series A Preferred Shares and the Warrant by Park to the U.S. Treasury under the CPP qualify as Tier 1 capital for regulatory purposes.

U.S. Generally Accepted Accounting Principles (GAAP) require management to allocate the proceeds from the issuance of the Series A Preferred Shares between the Series A Preferred Shares and related Warrant.  The terms of the Series A Preferred Shares require Park to pay a cumulative dividend at the rate of 5 percent per annum until February 14, 2014, and 9 percent thereafter.  Management determined that the 5 percent dividend rate is below market value; therefore, the fair value of the Series A Preferred Shares would be less than the $100 million in proceeds.  Management determined that a reasonable market discount rate was 12 percent for the fair value of the Series A Preferred Shares and used the Black-Scholes model to calculate the fair value of the Warrant (and related common shares).  The allocation between the Series A Preferred Shares and the Warrant at December 23, 2008, the date of issuance, was $95.7 million and $4.3 million, respectively.  The discount on the Series A Preferred Shares of $4.3 million is being accreted through retained earnings using the level yield method over a 60-month period.  GAAP requires Park to measure earnings per share with earnings available to common shareholders.  Therefore, the Consolidated Statements of Income reflect a line item for “Preferred stock dividends and accretion” and a line item for “Income available to common shareholders”.  The dividends and accretion on the Series A Preferred Shares totaled $5,856,000 for 2011, $5,807,000 for 2010 and $5,762,000 for 2009.   The accretion of the discount was $856,000 in 2011, $807,000 in 2010 and $762,000 in 2009.  Management expects the accretion of the discount in 2012 will be $907,000.

Income available to common shareholders is net income minus the preferred stock dividends and accretion.  Income available to common shareholders was $76.3 million for 2011, $52.3 million for 2010, and $68.4 million for 2009.

See Note 1 and Note 25 of the Notes to Consolidated Financial Statements for additional information on the issuance of the Series A Preferred Shares.

DIVIDENDS ON COMMON SHARES

Park declared quarterly cash dividends on common shares in 2011 that totaled $3.76 per share.  The quarterly cash dividend on common shares was $0.94 per share for each quarter of 2011.

Under the terms of the Securities Purchase Agreement with the U.S. Treasury under the CPP, prior to December 23, 2011, Park is not permitted to increase the quarterly cash dividend on its common shares above $0.94 per share without seeking prior approval from the U.S. Treasury.  This restriction lapsed on December 23, 2011.

7

Cash dividends declared on common shares were $3.76 in 2011, 2010 and 2009.  Park’s management expects to pay a quarterly cash dividend on its common shares of $0.94 per share in 2012.  This expectation is based on management’s current forecast that earnings will be sufficient to maintain historic dividend levels.

CRITICAL ACCOUNTING POLICIES

The significant accounting policies used in the development and presentation of Park’s consolidated financial statements are listed in Note 1 of the Notes to Consolidated Financial Statements.  The accounting and reporting policies of Park conform with U.S. 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 “Credit Experience-Provision for Loan Losses” section within this Financial Review 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 December 31, 2011, OREO totaled $42.3 million, representing a 1.4% increase compared to $41.7 million at December 31, 2010.

Effective January 1, 2008, management implemented the fair value hierarchy, which has the objective of maximizing the use of observable market inputs.  The related accounting guidance also requires enhanced disclosures regarding the inputs used to calculate fair value. These inputs 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 the inputs could be based on internal models and cash flow analysis. At December 31, 2011, financial assets valued using Level 3 inputs for Park had an aggregate fair value of approximately $130.8 million. This was 13.5% of the total amount of assets measured at fair value as of the end of the year. The fair value of impaired loans was approximately $87.8 million (or 67.1%) of the total amount of Level 3 inputs.  Additionally, there were $83.4 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 financial assets valued using Level 2 inputs consist of available-for-sale (“AFS”) securities. The fair value of these AFS securities is obtained largely by the use of matrix pricing, which is a mathematical technique widely used in the financial services industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities.

Management believes that the accounting for goodwill and other intangible assets also involves a higher degree of judgment than most other significant accounting policies.  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.  Park recognized a goodwill impairment charge of $55.0 million in the third quarter of 2008 to eliminate the remaining goodwill balance pertaining to Vision Bank.  At December 31, 2011, on a consolidated basis, Park had core deposit intangibles of $2.5 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 $893,000 and the core deposit intangibles at Vision Bank were $1.6 million.  The goodwill asset of $72.3 million is carried on the balance sheet of PNB.

8

ABOUT OUR BUSINESS

Through its Ohio-based banking divisions, Park is engaged in the commercial banking and trust business, generally in small to medium population Ohio communities.  Vision Bank is primarily engaged in the commercial banking business throughout the panhandle of Florida and in Baldwin County, Alabama.  Management believes there are a significant number of consumers and businesses which seek long-term relationships with community-based financial institutions of quality and strength.  While not engaging in activities such as foreign lending, nationally syndicated loans or investment banking, Park attempts to meet the needs of its customers for commercial, real estate and consumer loans, consumer and commercial leases, and investment, fiduciary and deposit services.

Park’s subsidiaries compete for deposits and loans with other banks, savings associations, credit unions and other types of financial institutions.  At December 31, 2011, Park and its Ohio-based banking divisions operated 123 banking offices and a network of 144 automated teller machines in 28 Ohio counties and one county in northern Kentucky.  Vision Bank operated 17 banking offices and a network of 15 automated teller machines in Baldwin County, Alabama and in five counties in the panhandle of Florida.

A summary of financial data for Park’s banking subsidiaries and their divisions for 2011, 2010 and 2009 is shown in Table 10.  See Note 23 of the Notes to Consolidated Financial Statements for additional financial information for the Corporation’s subsidiaries.  Please note that the financial statements for various divisions of PNB are not maintained on a separate basis and, therefore, net income is only an estimate by management.

Table 10  -  Park National Corporation Affiliate Financial Data

	2011						2010						2009
	Average			Net			Average			Net			Average			Net
(In thousands)	Assets			Income			Assets			Income			Assets			Income
							(restated)
Park National Bank:
Park National Division	$	2,092,084		$	25,563		$	1,973,443		$	25,903		$	1,798,814		$	26,991
Security National Division		795,305			16,242			770,319			14,603			825,481			14,316
First-Knox National Division		709,569			15,093			642,343			14,374			633,260			12,411
Century National Division		685,813			11,233			647,798			9,860			650,488			11,387
Richland Trust Division		501,541			10,044			519,102			9,754			563,776			9,954
Fairfield National Division		465,178			10,236			459,050			9,695			484,849			9,368
Second National Division		425,170			7,977			385,534			7,570			371,079			6,926
Park National SW & N KY Division		381,739			722			405,889			2,590			416,502			1,841
United Bank Division		233,212			4,211			243,909			4,344			242,166			4,300
Unity National Division		207,703			3,389			185,003			2,918			182,373			2,251
Farmers & Savings Division		100,577			2,141			103,121			1,337			107,437			1,713
Vision Bank		743,344			(22,526	)		859,447			(45,414	)		904,897			(30,110	)
Parent Company,
including consolidating
entries		(135,065	)		(2,185	)		(152,297	)		567			(145,591	)		2,844
Consolidated Totals	$	7,206,170		$	82,140		$	7,042,661		$	58,101		$	7,035,531		$	74,192

9

SOURCE OF FUNDS

Deposits: Park’s major source of funds is deposits from individuals, businesses and local government entities.  These deposits consist of noninterest bearing and interest bearing deposits.

Average total deposits were $5,192 million in 2011, compared to $5,182 million in 2010 and $5,051 million in 2009.

On Park’s balance sheet, total deposits were $4,465 million at December 31, 2011, compared to $5,095 million at December 31, 2010.  This represents a decrease in total deposits of $630 million or 12.4% in 2011.  The reason for the balance sheet showing a large decrease in deposits is due to the pending sale of Vision Bank.  The deposits for Vision Bank of $533 million at year-end 2011 are included on Park’s balance sheet in the category of liabilities held for sale.  At December 31, 2010, total deposits for Vision Bank were $633 million.  The deposits for Park’s Ohio-based subsidiaries increased by $3 million in 2011.  Additionally, the brokered time deposits of $110 million on Park’s balance sheet at December 31, 2010, matured in 2011 and were not renewed.  The brokered time deposits were with PNB at year-end 2010.

Table 11 - Year-End Deposits
December 31,
(In thousands)	2011		2010		Change
Noninterest bearing checking	$	995,733	$	937,719	$	58,014
Interest bearing transaction accounts		1,037,385		1,283,158		(245,773	)
Savings		931,527		899,288		32,239
Brokered time deposits		-		110,065		(110,065	)
All other time deposits		1,499,105		1,863,838		(364,734	)
Other		1,364		1,352		13
Total	$	4,465,114	$	5,095,420	$	(630,306	)

Total year-end deposits decreased by $93 million or 1.8% in 2010.  Excluding brokered deposits in 2010, certificates of deposit decreased by $359 million or 16.1% in 2010.  Vision Bank’s year-end deposits decreased by $56 million or 8.0% in 2010 and deposits for Park’s Ohio based subsidiaries decreased by $37 million or 0.8% in 2010.

A year ago, management projected that total deposits (exclusive of brokered deposits) would increase by 1% in 2011.  The actual increase in deposits for Park’s Ohio-based subsidiaries (exclusive of brokered deposits) was about $113 million or 2.6%.  Management expects total deposits (exclusive of brokered deposits) to increase by 1% to 2% in 2012.

The Federal Open Market Committee (“FOMC”) of the Federal Reserve Board decreased the federal funds rate from 4.25% at December 31, 2007 to a range of 0% to 0.25% at year-end 2008.  The FOMC aggressively lowered the federal funds rate during 2008 as the severity of the economic recession increased.  The FOMC has maintained the targeted federal funds rate in the 0% to 0.25% range for all of 2009, 2010 and 2011 as the U.S. economy has gradually recovered from the severe recession.  The average federal funds rate was 0.10% for 2011, 0.18% for 2010 and 0.16% for 2009.  Management expects that the FOMC will maintain the targeted federal funds rate in a range of 0% to 0.25% throughout 2012.

The average interest rate paid on interest bearing deposits was 0.66% in 2011, compared to 0.98% in 2010 and 1.53% in 2009.  The average cost of interest bearing deposits for each quarter of 2011 was 0.60% for the fourth quarter, 0.63% for the third quarter, 0.67% for the second quarter and 0.74% for the first quarter.  Management expects a small decrease in the average interest rate paid on interest bearing deposits in 2012.

Short-Term Borrowings: Short-term borrowings consist of securities sold under agreements to repurchase, Federal Home Loan Bank advances, federal funds purchased and other borrowings.  These funds are used to manage the Corporation’s liquidity needs and interest rate sensitivity risk.  The average rate paid on short-term borrowings generally moves closely with changes in market interest rates for short-term investments.  The average rate paid on short-term borrowings was 0.28% in 2011 compared to 0.39% in 2010 and 0.76% in 2009.

Management expects that the average interest rate paid on short-term borrowings in 2012 will be approximately the same as the average rate paid in 2011.

10

The year-end balance for short-term borrowings was $264 million at December 31, 2011, compared to $664 million at December 31, 2010 and $324 million at December 31, 2009.  The increase at December 31, 2010 compared to 2009 of $340 million was due to investment security purchases at year-end 2010 that were temporarily funded through the use of short-term borrowings.

Long-Term Debt: Long-term debt primarily consists of borrowings from the Federal Home Loan Bank and repurchase agreements with investment banking firms.  (The average balance of long-term debt and the average cost of long-term debt includes the subordinated debentures discussed in the following section.)  In 2011, average long-term debt was $882 million compared to $725 million in 2010 and $780 million in 2009.  Average total debt (long-term and short-term) was $1,179 million in 2011 compared to $1,026 million in 2010 and $1,200 million in 2009.  Average total debt increased by $153 million or 14.9% in 2011 compared to 2010 and decreased by $174 million or 14.5% in 2010 compared to 2009.  The increase in average total debt in 2011 compared to 2010 was primarily due to the increase in average loans combined with an increase in average taxable investments.  Management increased the amount of long-term debt to partially offset the interest rate risk from maintaining 15-year, fixed-rate residential mortgage loans on Park’s balance sheet.  Average long-term debt was 75% of average total debt in 2011 compared to 71% in 2010 and 65% in 2009.

The average rate paid on long-term debt was 3.42% for 2011, compared to 3.91% for 2010 and 3.38% for 2009.  Management expects that the average interest rate paid on long-term debt in 2012 will be about the same as the average interest rate paid on long-term debt in 2011.

Subordinated Debentures/Notes: Park assumed with the Vision acquisition $15 million of floating rate junior subordinated notes.  The interest rate on these subordinated notes adjusts every quarter at 148 basis points above the three-month LIBOR interest rate.  The maturity date for the junior subordinated notes is December 30, 2035 and the junior subordinated notes may be prepaid after December 30, 2010.  These junior subordinated notes qualify as Tier 1 capital under current Federal Reserve Board guidelines.

Park’s Ohio-based banking subsidiary, PNB, issued a $25 million subordinated debenture on December 28, 2007.  The interest rate on this subordinated debenture adjusts every quarter at 200 basis points above the three-month LIBOR interest rate.  The maturity date for the subordinated debenture is December 29, 2017 and the subordinated debenture may be prepaid after December 28, 2012.  On January 2, 2008, Park entered into a “pay fixed-receive floating” interest rate swap agreement for a notional amount of $25 million with a maturity date of December 28, 2012.  This interest rate swap agreement was designed to hedge the cash flows pertaining to the $25 million subordinated debenture until December 28, 2012.  Management converted the cash flows to a fixed interest rate of 6.01% through the use of the interest rate swap.  This subordinated debenture qualifies as Tier 2 capital under the applicable regulations of the Office of the Comptroller of the Currency of the United States of America (the “OCC”) and the Federal Reserve Board.

On December 23, 2009, Park issued $35.25 million of subordinated notes to 38 purchasers.  These subordinated notes have a fixed annual interest rate of 10% with quarterly interest payments.  The maturity date of these subordinated notes is December 23, 2019.  These subordinated notes may be prepaid by Park any time after December 23, 2014.  The subordinated notes qualify as Tier 2 capital under applicable rules of the Federal Reserve Board.  Each subordinated note was purchased at a purchase price of 100% of the principal amount by an accredited investor.

See Note 11 of the Notes to Consolidated Financial Statements for additional information on the subordinated debentures and subordinated notes.

Sale of Common Stock:  Park sold an aggregate of 509,184 common shares, out of treasury shares, during 2010.  Of the 509,184 common shares sold in 2010, 437,200 common shares were issued upon the exercise of warrants associated with the capital raise that closed on October 30, 2009.   As part of the capital raise that closed on December 10, 2010, Park sold 71,984 common shares and issued warrants for the purchase of 71,984 shares of common stock.  The warrants issued as part of the December 10, 2010 transaction had an exercise price of $76.41 per share.  Warrants covering the purchase of an aggregate of 35,992 common shares expired on June 10, 2011 and warrants covering the purchase of the other 35,992 common shares expired on December 10, 2011.

In total for 2010, Park sold 509,184 common shares and warrants covering 71,984 common shares at a weighted average price per share of $67.99 for gross proceeds of $34.6 million.  Net of selling expenses and professional fees, Park raised $33.5 million of common equity from capital raising activities in 2010.

During 2009, Park sold 904,072 common shares and warrants covering 500,000 common shares at a weighted average price per share of $61.20 for gross proceeds of $55.3 million.  Net of selling expenses and professional fees, Park raised $53.5 million of common equity from capital raising activities in 2009.

11

Stockholders' Equity: Tangible stockholders’ equity (stockholders’ equity less goodwill and other intangible assets) to tangible assets (total assets less goodwill and other intangible assets) was 9.68% at December 31, 2011 compared to 9.04% at December 31, 2010 and 9.13% at December 31, 2009.

The ratio of tangible stockholders’ equity to tangible assets for each of the past three years includes the issuance of $100 million of Park Series A Preferred Shares to the U.S. Treasury on December 23, 2008.  Excluding the balance of Series A Preferred Shares, the ratio of tangible common stockholders’ equity to tangible assets was 8.25% at December 31, 2011, 7.69% at December 31, 2010 and 7.75% at December 31, 2009.

In accordance with GAAP, Park reflects any unrealized holding gain or loss on AFS securities, net of income taxes, as accumulated other comprehensive income (loss) which is part of Park’s stockholders’ equity.  The unrealized holding gain on AFS securities, net of income taxes, was $12.7 million at year-end 2011, compared to $15.1 million at year-end 2010 and $30.1 million at year-end 2009.  The decrease in the amount of unrealized holding gains on AFS securities, net of income taxes, at year-end 2010 and year-end 2011 was primarily due to the sale of AFS securities in 2010 and 2011 for gains.  Park sold AFS securities with an amortized cost value of $373 million in 2010 for a gain of $11.9 million and sold AFS securities with an amortized cost value of $557 million in 2011 for a gain of $27.7 million.  The large gain from the sale of securities in 2011 was possible due to the sharp decline in long-term interest rates during the year.

In accordance with GAAP, Park adjusts accumulated other comprehensive income (loss) to recognize the net actuarial gain or loss reflected in the accounting for Park’s Pension Plan.  See Note 13 of the Notes to Consolidated Financial Statements for information on the accounting for Park’s Pension Plan.

Pertaining to the Pension Plan, Park recognized a net comprehensive loss of $5.0 million in 2011, a net comprehensive loss of $2.4 million in 2010 and a net comprehensive gain of $6.3 million in 2009.  The comprehensive loss in 2011 and 2010 was due to changes in actuarial assumptions, specifically a decrease in the discount rate.  This actuarial loss more than offset the positive investment returns and contributions to the Pension Plan in 2010 and 2011.  The comprehensive gain in 2009 was due to positive investment returns and contributions to the Pension Plan.  At year-end 2011, the balance in accumulated other comprehensive income/(loss) pertaining to the Pension Plan was $(20.9) million, compared to $(15.9) million at December 31, 2010 and $(13.5) million at December 31, 2009.

Park also recognized net comprehensive income/(loss) of $0.5 million, $(0.1) million and $0.3 million for the years ended December 31, 2011, 2010 and 2009, respectively, due to the mark-to-market of the $25 million cash flow hedge.  See Note 19 of the Notes to Consolidated Financial Statements for information on the accounting for Park’s derivative instruments.

INVESTMENT OF FUNDS

Loans:  Average loans were $4,714 million in 2011, compared to $4,642 million in 2010 and $4,594 million in 2009.  The average yield on loans was 5.61% in 2011, compared to 5.80% in 2010 and 6.03% in 2009.  The average prime lending rate was 3.25% in 2011, 2010 and 2009.  Approximately 59% of Park’s loan balances mature or reprice within one year (see Table 30).  The yield on average loan balances for each quarter of 2011 was 5.59% for both the fourth and third quarters, compared to 5.61% for the second quarter and 5.63% for the first quarter.  Management expects that the yield on the loan portfolio will decrease modestly in 2012 compared to the average yield of 5.61% for 2011.  At December 31, 2011, loan balances were $4,317 million compared to $4,733 million at year-end 2010, a decrease of $416 million or 8.8%.  The large decrease in loan balances shown on Park’s balance sheet during 2011 was primarily due to $369 million of loans at Vision Bank being shown on Park’s balance sheet as assets held for sale at December 31, 2011.  These loan balances will be included in the sale of Vision Bank during the first quarter of 2012.  Park’s Ohio-based subsidiaries increased loans by $101 million or 2.5% to $4,193 million at year-end 2011.  The remaining balance of Vision Bank loans at year-end 2011 of $110 million will become assets of SE, LLC as a result of the merger of Vision Bank into SE, LLC during the first quarter of 2012, when the sale is completed.  At December 31, 2010, Vision Bank had $641 million of loans.

In 2010, year-end loan balances increased by $92 million or 2.0%.  Park’s Ohio-based subsidiaries increased loans by $129 million or 3.2% during 2010.  Vision Bank had a decline in loans of $37 million or 5.4% in 2010.

In 2009, year-end loan balances increased by $149 million or 3.3%.  At Vision Bank, year-end loan balances decreased by $13 million or 1.9% during 2009.  Park’s Ohio-based subsidiaries increased loans by $162 million or 4.3% during 2009.

A year ago, management projected that year-end loan balances would increase by 1% to 3% in 2011.  The actual change in year-end loan balances was a decrease of 8.8% due to the pending sale of Vision Bank.  As discussed previously, year-end loan balances for Park’s Ohio-based subsidiaries increased by 2.5% in 2011.  Management expects that loan growth in 2012 will be in the 1% to 3% range.

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Year-end residential real estate loans were $1,629 million, $1,692 million and $1,555 million in 2011, 2010 and 2009, respectively.  Residential real estate loans decreased by $63.6 million or 3.8% in 2011, due to the pending sale of Vision Bank.  The residential real estate loans that will be included in the sale of Vision Bank in the first quarter of 2012 totaled $153.6 million at December 31, 2011, and were included in assets held for sale. Without the pending sale of Vision Bank, residential real estate loans would have increased by $90 million or 7.3% in 2011.  Residential real estate loans increased by $137 million or 8.8% in 2010 and decreased by $5 million or 0.3% in 2009.  The increase of $137 million in 2010 was primarily due to management’s decision to retain 15-year fixed-rate residential mortgage loans that were previously sold in the secondary market.  The balance of loans for this new product was $176 million at December 31, 2010, with a weighted average interest rate of 3.82%.  This 15-year, fixed-rate product increased by $153 million to $329 million at December 31, 2011, and has a weighted average interest rate of 3.79%.  Management expects an increase in residential real estate loans in 2012 of 3% to 5%.

The long-term fixed-rate residential mortgage loans that Park originates are generally sold in the secondary market and Park typically retains servicing on these loans.  As mentioned above, during 2010, Park began to retain on its balance sheet 15-year fixed-rate residential mortgage loans.  The balance of sold fixed-rate residential mortgage loans was $1,347 million at year-end 2011, compared to $1,471 million at year-end 2010 and $1,518 million at year-end 2009.  The decrease in Park’s sold residential mortgage loan portfolio of $171 million in the last two years was due to the retention of the 15-year fixed-rate residential mortgage loan product.  The increase in the 15-year fixed-rate residential mortgage loan product during 2010 and 2011, of $329 million, was $158 million more than the decrease in the long-term fixed-rate residential mortgage sold servicing portfolio.  Management is pleased with this performance as the 15-year fixed-rate mortgage loans retained on the balance sheet would have been sold prior to 2010 and included in the servicing portfolio.

Year-end consumer loans were $617 million, $667 million and $704 million in 2011, 2010 and 2009, respectively.  Consumer loans decreased by $50 million or 7.6% in 2011 and decreased by $37 million or 5.3% in 2010.  The consumer loans that will be included in the pending sale of Vision Bank were only $4 million at December 31, 2011.  The decrease in consumer loans in both 2011 and 2010 was primarily due to a decline in automobile loans originated in Ohio, as competition for automobile loans increased in 2010 and 2011.

Consumer loans increased by $61 million or 9.5% in 2009.  The increase in consumer loans in 2009 was primarily due to an increase in automobile loans originated through automobile dealers in Ohio.  Management expects that consumer loans will decrease by 1% to 2% in 2012.

On a combined basis, year-end commercial, financial and agricultural loans, real estate construction loans and commercial real estate loans totaled $2,070 million, $2,371 million and $2,377 million at year-end 2011, 2010 and 2009, respectively.  These combined loan totals decreased by $301 million or 12.7% in 2011.  This decrease was primarily due to the pending sale of Vision Bank as $211 million of these combined loan totals are classified as assets held for sale on Park’s balance sheet at December 31, 2011.  These combined loan totals declined by $6 million or 0.3% in 2010 and increased by $93 million or 4.1% in 2009.  Management expects that commercial, financial and agricultural loans, real estate construction loans and commercial real estate loans will grow by 1% to 3% in 2012.

Year-end lease balances were $2 million in 2011 and $3 million in both 2010 and 2009.  Management continues to de-emphasize leasing and expects the balance to further decline in 2012.

Table 12 reports year-end loan balances by type of loan for the past five years.

Table 12  -  Loans by Type
December 31,
(In thousands)	2011		2010		2009		2008		2007
Commercial, financial and agricultural	$	743,797	$	737,902	$	751,277	$	714,296	$	613,282
Real estate  -  construction		217,546		406,480		495,518		533,788		536,389
Real estate  -  residential		1,628,618		1,692,209		1,555,390		1,560,198		1,481,174
Real estate  -  commercial		1,108,574		1,226,616		1,130,672		1,035,725		993,101
Consumer		616,505		666,871		704,430		643,507		593,388
Leases		2,059		2,607		3,145		3,823		6,800
Total Loans	$	4,317,099	$	4,732,685	$	4,640,432	$	4,491,337	$	4,224,134

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Table 13 - Selected Loan Maturity Distribution
			Over One		Over
December 31, 2011	One Year		Through		Five
(In thousands)	or Less (1)		Five Years		Years		Total
Commercial, financial and agricultural	$	315,077	$	268,998	$	159,722	$	743,797
Real estate-construction		130,995		28,260		58,291		217,546
Real estate-commercial		145,748		200,627		762,199		1,108,574
Total	$	591,820	$	497,885	$	980,212	$	2,069,917
Total of these selected loans due
after one year with:
Fixed interest rate							$	529,119
Floating interest rate							$	948,978
(1) Nonaccrual loans of $121.4 million are included within the one year or less classification above.

Investment Securities: Park’s investment securities portfolio is structured to minimize credit risk, provide liquidity and contribute to earnings. Park’s investment strategy is dynamic.  As conditions change over time, Park’s overall interest rate risk, liquidity needs and potential return on the investment portfolio will change.  Management regularly evaluates the securities in the investment portfolio as circumstances evolve.  Circumstances that could result in the sale of a security include: to better manage interest rate risk; to meet liquidity needs; or to improve the overall yield in the investment portfolio.

Park classifies the majority of its securities as AFS (see Note 4 of the Notes to Consolidated Financial Statements).  These securities are carried on the books at their estimated fair value with the unrealized holding gain or loss, net of federal taxes, accounted for as accumulated other comprehensive income (loss) which is part of the Corporation’s equity.  The securities that are classified as AFS are free to be sold in future periods in carrying out Park’s investment strategies.

Generally, Park classifies U.S. Government sponsored entity collateralized mortgage obligations (“CMOs”) that it purchases as held-to-maturity.  A classification of held-to-maturity means that Park has the positive intent and the ability to hold these securities until maturity.  Park classifies CMOs as held-to-maturity because these securities are generally not as liquid as the U.S. Government sponsored entity mortgage-backed securities and U.S. Government sponsored entity notes that Park classifies as AFS.  At year-end 2011, Park’s held-to-maturity securities portfolio was $820 million, compared to $674 million at year-end 2010 and $507 million at year-end 2009.  Park purchased $628 million of CMOs in 2011, $314 million of CMOs in 2010 and $119 million of CMOs in 2009. All of the mortgage-backed securities and CMOs in Park’s investment portfolio were issued by a U.S. Government sponsored entity.

Average taxable investment securities were $1,841 million in 2011, compared to $1,730 million in 2010 and $1,848 million in 2009.  The average yield on taxable securities was 3.74% in 2011, compared to 4.44% in 2010 and 4.90% in 2009.  Average tax-exempt investment securities were $8 million in 2011, compared to $17 million in 2010 and $30 million in 2009.  The average tax-equivalent yield on tax-exempt investment securities was 7.17% in 2011, compared to 7.24% in 2010 and 7.45% in 2009.

Year-end total investment securities (at amortized cost) were $1,689 million in 2011, $2,017 million in 2010 and $1,817 million in 2009.  Management purchased investment securities totaling $1,268 million in 2011, $3,033 million in 2010 and $469 million in 2009.   The decrease in purchases during 2011 was primarily due to the reduced interest rate environment during the year and partially due to management’s decision to retain 15-year, fixed-rate residential mortgage loans on Park’s balance sheet.  The significant increase in purchases during 2010 was largely due to the purchase of $1,319 million of 28-day U.S. Government sponsored entity discount notes and $823 million of U.S. Government sponsored entity callable notes.  Proceeds from repayments and maturities of investment securities were $1,013 million in 2011, $2,385 million in 2010 and $467 million in 2009.  The decrease in proceeds from repayments and maturities in 2011 was primarily due to relative fewer holdings of 28-day U.S. Government sponsored entity discount notes during the year.  The increase in proceeds from repayments and maturities in 2010 was primarily due to the 28-day U.S. Government sponsored entity discount notes and U.S. Government sponsored entity callable notes, which had repayments or maturities of $1,319 million and $710 million, respectively, during the year.    Proceeds from sales of securities were $610 million in 2011, $460 million in 2010 and $204 million in 2009.  Park realized net security gains on a pre-tax basis of $28.8 million in 2011, $11.9 million in 2010 and $7.3 million in 2009.

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During 2011, Park sold investment securities during the first, second, third and fourth quarters.  In total, these sales resulted in proceeds of $610.0 million and a pre-tax gain of $28.8 million.

During the first quarter of 2011, Park sold $105.4 million of U.S. Government sponsored entity mortgage-backed securities for a pre-tax gain of $6.6 million.  These mortgage-backed securities had a weighted average remaining life of approximately 2 years, a weighted average book yield of 5.02% and were sold at an average price of 106.2% of the principal balance with an estimated yield to the buyer of 2.10%.  Additionally, Park sold $1.0 million of municipal securities held by Vision Bank for no gain or loss in the first quarter to reduce credit risk in the investment securities portfolio.  These securities had a weighted average tax-equivalent yield of 5.75% and a weighted average remaining life of approximately 4 years.

During the second quarter of 2011, Park sold $191.0 million of U.S. Government sponsored entity mortgage-backed securities for a pre-tax gain of $15.4 million.  These mortgage-backed securities had a weighted average remaining life of approximately 3 years, a weighted average book yield of 5.25% and were sold at an average price of 107.4% of the principal balance with an estimated yield to the buyer of 1.92%.

During the third quarter of 2011, Park sold $212.8 million of U.S. Government sponsored entity mortgage-backed securities for a pre-tax gain of $3.5 million.  These mortgage-backed securities had a weighted average book yield of 2.60% and a weighted average remaining life of approximately 3 years and were sold at an average price of 104.5% of the principal balance with an estimated yield to the buyer of 2.03%.

Late in the fourth quarter of 2011, Park liquidated Vision Bank’s securities portfolio.  These securities were sold in preparation of the sale of Vision Bank during the first quarter of 2012.  Park sold $45.7 million of U.S. Government sponsored entity mortgage-backed securities (available-for-sale securities) and $24.3 million of U.S. Government sponsored entity CMOs (held-to-maturity securities) held by Vision Bank for a pre-tax gain of $3.4 million.  While management would not normally sell held-to-maturity investment securities, the CMO’s held by Vision Bank were sold late in 2011 as management liquidated the entire Vision Bank securities portfolio in anticipation of the sale.  These securities had a weighted average book yield of 4.37% and a weighted average remaining life of approximately 3 years.  These securities were sold at an average price of approximately 104.9% of the principal balance with an estimated yield to the buyer of 2.12%.  Park also sold $896,000 of municipal securities held by Vision Bank for a pre-tax gain of $15,000.  The weighted average tax-equivalent yield on these municipal securities was 5.96% with a weighted average remaining life of approximately 2 years.  The proceeds from the sale of the Vision Bank securities were used to purchase U.S. Agency discount notes that mature during the first quarter of 2012.

During 2010, Park sold investment securities during the first, second and fourth quarters.  In total, these sales resulted in proceeds of $460.2 million and a pre-tax gain of $11.9 million.

During the first quarter of 2010, Park sold $200.7 million of U.S. Government sponsored entity mortgage-backed securities for a pre-tax gain of $8.3 million.  These mortgage-backed securities had a weighted average remaining life of approximately 3 years, a weighted average book yield of 4.75% and were sold at an average price of 103.7% of the principal balance with an estimated yield to the buyer of 2.99%.  Additionally, Park sold $75 million of U.S. Government sponsored entity callable notes for no gain or loss in the first quarter to reduce the extension risk in the investment securities portfolio in the case of interest rate increases in the future.  These securities had a book yield of 4.25% and a final maturity in approximately 9 years.

During the second quarter of 2010, Park sold $57 million of U.S. Government sponsored entity mortgage-backed securities for a pre-tax gain of $3.5 million.  These mortgage-backed securities had a weighted average remaining life of approximately 3 years, a weighted average book yield of 4.64% and were sold at an average price of 105.8% of the principal balance with an estimated yield to the buyer of 2.08%.

During the fourth quarter of 2010, Park sold $115.8 million of U.S. Government sponsored entity callable notes for a small gain of $45,000.  These securities had a book yield of 3.37% and a final maturity in approximately 10 years.

At year-end 2011 and 2010, the average tax-equivalent yield on the total investment portfolio was 3.31% and 4.01%, respectively.  The weighted average remaining maturity was 1.7 years at December 31, 2011 and 3.6 years at December 31, 2010.  U.S. Government sponsored entity asset-backed securities were approximately 74% of the total investment portfolio at year-end 2011 and were approximately 82% of the total investment portfolio at year-end 2010.  This segment of the investment portfolio consists predominantly of 15-year mortgage-backed securities and CMOs.

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The average maturity of the investment portfolio would lengthen if long-term interest rates would increase as the principal repayments from mortgage-backed securities and CMOs would be reduced and callable U.S. Government sponsored entity notes would extend to their maturity dates.  At year-end 2011, management estimated that the average maturity of the investment portfolio would lengthen to 5.3 years with a 100 basis point increase in long-term interest rates and to 7.0 years with a 200 basis point increase in long-term interest rates.  Likewise, the average maturity of the investment portfolio would shorten if long-term interest rates would decrease as the principal repayments from mortgage-backed securities and CMOs would increase as borrowers would refinance their mortgage loans and the callable U.S. Government sponsored entity notes would shorten to their call dates.  At year-end 2011, management estimated that the average maturity of the investment portfolio would decrease to 1.0 years with a 100 basis point decrease in long-term interest rates and to 0.8 years with a 200 basis point decrease in long-term interest rates.

Table 14 sets forth the carrying value of investment securities, as well as the percentage held within each category at year-end 2011, 2010 and 2009:

Table 14  -  Investment Securities
December 31,
(In thousands)	2011			2010			2009
Obligations of U.S. Treasury and other U.S. Government sponsored entities	$	371,657		$	273,313		$	347,595
Obligations of states and political subdivisions		4,652			14,211			20,123
U.S. Government asset-backed securities		1,262,527			1,681,815			1,425,361
Federal Home Loan Bank stock		60,728			61,823			62,044
Federal Reserve Bank stock		6,876			6,876			6,875
Equities		2,033			1,753			1,562
Total	$	1,708,473		$	2,039,791		$	1,863,560
Investments by category as a percentage of
total investment securities
Obligations of U.S. Treasury and other U.S. Government sponsored entities		21.8	%		13.4	%		18.6	%
Obligations of states and political subdivisions		0.3	%		0.7	%		1.1	%
U.S. Government asset-backed securities		73.9	%		82.5	%		76.5	%
Federal Home Loan Bank stock		3.5	%		3.0	%		3.3	%
Federal Reserve Bank stock		0.4	%		0.3	%		0.4	%
Equities		0.1	%		0.1	%		0.1	%
Total		100.0	%		100.0	%		100.0	%

ANALYSIS OF EARNINGS

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.  (See Table 15 for three years of history on the average balances of the balance sheet categories and the average rates earned on interest earning assets and the average rates paid on interest bearing liabilities.)

Net interest income decreased slightly by $810,000 or 0.3% to $273.2 million for 2011 compared to an increase of $553,000 or 0.2% to $274.0 million for 2010.  The tax equivalent net yield on interest earning assets was 4.14% for 2011 compared to 4.26% for 2010 and 4.22% for 2009.  The net interest rate spread (the difference between rates received for interest earning assets and the rates paid for interest bearing liabilities) was 3.94% for 2011, compared to 4.01% for 2010 and 3.94% for 2009.  The small decrease in net interest income in 2011 was due to the decrease in the net interest spread to 3.94% from 4.01%.  The average balance of interest earning assets increased by $159 million or 2.5% to $6,641 million in 2011.

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The average yield on interest earning assets was 5.03% in 2011 compared to 5.36% in 2010 and 5.67% in 2009.  The average federal funds rate for 2011 was 0.10%, compared to an average rate of 0.18% in 2010 and 0.16% in 2009.  On a quarterly basis for 2011, the average yield on interest earning assets was 4.93% for the fourth quarter, 4.95% for the third quarter, 5.08% for the second quarter and 5.14% for the first quarter.  Management expects that the average yield on interest earning assets will slightly decrease in 2012.

The average rate paid on interest bearing liabilities was 1.09% in 2011, compared to 1.35% in 2010 and 1.73% in 2009.  On a quarterly basis for 2011, the average rate paid on interest bearing liabilities was 1.07% for both the fourth and third quarters, 1.09% for the second quarter and 1.14% for the first quarter.  Management expects that the average rate paid on interest bearing liabilities will modestly decrease in 2012.

Table 15 - Distribution of Assets, Liabilities and Stockholders' Equity
December 31,				2011								2010								2009
(In thousands)	Daily					Average			Daily					Average			Daily					Average
	Average			Interest		Rate			Average			Interest		Rate			Average			Interest		Rate
ASSETS
Interest earning assets:
Loans (1) (2)	$	4,713,511		$	264,192		5.60	%	$	4,642,478		$	269,306		5.80	%	$	4,594,436		$	276,893		6.03	%
Taxable investment securities		1,840,842			68,873		3.74	%		1,729,511			76,838		4.44	%		1,847,706			90,558		4.90	%
Tax-exempt investment securities (3)		8,038			575		7.15	%		16,845			1,220		7.24	%		29,597			2,205		7.45	%
Money market instruments		78,593			178		0.23	%		93,009			200		0.22	%		52,658			116		0.22	%
Total interest earning assets		6,640,984			333,818		5.03	%		6,481,843			347,564		5.36	%		6,524,397			369,772		5.67	%
Noninterest earning assets:
Allowance for loan losses		(128,512	)							(119,639	)							(103,683	)
Cash and due from banks		124,649								116,961								110,227
Premises and equipment, net		69,507								69,839								67,944
Other assets		499,543								493,746								436,646
TOTAL	$	7,206,171							$	7,042,750							$	7,035,531

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing liabilities:
Transaction accounts	$	1,430,492	$	2,686	0.19	%	$	1,354,392	$	4,450	0.33	%	$	1,229,553	$	7,889	0.64	%
Savings deposits		946,406		1,126	0.12	%		891,021		1,303	0.15	%		805,783		2,926	0.36	%
Time deposits		1,816,506		23,842	1.31	%		2,029,088		36,212	1.78	%		2,197,055		53,805	2.45	%
Total interest bearing deposits		4,193,404		27,654	0.66	%		4,274,501		41,965	0.98	%		4,232,391		64,620	1.53	%
Short-term borrowings		297,537		823	0.28	%		300,939		1,181	0.39	%		419,733		3,209	0.76	%
Long-term debt (4)		881,921		30,169	3.42	%		725,356		28,327	3.91	%		780,435		26,370	3.38	%
Total interest bearing liabilities		5,372,862		58,646	1.09	%		5,300,796		71,473	1.35	%		5,432,559		94,199	1.73	%
Noninterest bearing liabilities:
Demand deposits		999,085						907,514						818,243
Other		90,351						87,885						109,415
Total noninterest bearing liabilities		1,089,436						995,399						927,658
Stockholders' equity		743,873						746,555						675,314
TOTAL	$	7,206,171					$	7,042,750					$	7,035,531
Net interest earnings			$	275,172					$	276,091					$	275,573
Net interest spread					3.94	%					4.01	%					3.94	%
Net yield on interest earning assets (net interest margin)					4.14	%					4.26	%					4.22	%

(1) Loan income includes loan related fee income of $2,381 in 2011, $238 in 2010 and $1,669 in 2009.  Loan income also includes the effects of taxable equivalent

adjustments using a 35% tax rate in 2011, 2010 and 2009.  The taxable equivalent adjustment was $1,734 in 2011, $1,614 in 2010 and $1,294 in 2009.

(2) For the purpose of the computation, nonaccrual loans are included in the daily average loans outstanding.

(3) Interest income on tax-exempt investment securities includes the effects of taxable equivalent adjustments using a 35% tax rate in 2011, 2010 and 2009.

The taxable equivalent adjustments were $204 in 2011, $434 in 2010, and $788 in 2009.

(4) Includes subordinated debenture and subordinated notes.

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The following table displays (for each quarter of 2011) the average balance of interest earning assets, net interest income and the tax equivalent net interest margin.

Table 16  - Quarterly Net Interest Margin
(In thousands)	Average Interest Earning Assets		Net Interest Income		Tax Equivalent Net Interest Margin
First Quarter	$	6,722,136	$	69,313		4.21	%
Second Quarter		6,745,790		70,022		4.19	%
Third Quarter		6,610,953		67,620		4.09	%
Fourth Quarter		6,487,958		66,279		4.08	%
2011	$	6,640,984	$	273,234		4.14	%

Management expects that average interest earning assets will decrease significantly in 2012, due to the sale of Vision Bank during the first quarter of 2012.  Management projects that average interest earning assets will be approximately $6,200 million for 2012.  Management expects that net interest income will be in a range of $240 million to $250 million in 2012 and that the tax equivalent net interest margin will be in a range of 3.88% to 3.98% in 2012.  (Please see the “Summary Discussion of Operating Results for Park” section of this Financial Review for a comparison of 2011 results to management’s projections from a year ago.)

The change in interest due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.

Table 17  -  Volume/Rate Variance Analysis

	Change from 2010 to 2011									Change from 2009 to 2010
(In thousands)	Volume			Rate			Total			Volume			Rate			Total
Increase (decrease) in:
Interest income:
Total loans	$	3,988		$	(9,102	)	$	(5,114	)	$	2,915		$	(10,502	)	$	(7,587	)
Taxable investments		4,711			(12,676	)		(7,965	)		(5,560	)		(8,160	)		(13,720	)
Tax-exempt investments		(631	)		(14	)		(645	)		(925	)		(60	)		(985	)
Money market instruments		(31	)		9			(22	)		84			-			84
Total interest income		8,037			(21,783	)		(13,746	)		(3,486	)		(18,722	)		(22,208	)
Interest expense:
Transaction accounts	$	237		$	(2,001	)	$	(1,764	)	$	725		$	(4,164	)	$	(3,439	)
Savings accounts		85			(262	)		(177	)		270			(1,893	)		(1,623	)
Time deposits		(3,514	)		(8,856	)		(12,370	)		(3,844	)		(13,749	)		(17,593	)
Short-term borrowings		(14	)		(344	)		(358	)		(746	)		(1,282	)		(2,028	)
Long-term debt		5,663			(3,821	)		1,842			(1,960	)		3,917			1,957
Total interest expense		2,457			(15,284	)		(12,827	)		(5,555	)		(17,171	)		(22,726	)
Net variance	$	5,580		$	(6,499	)	$	(919	)	$	2,069		$	(1,551	)	$	518

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Other Income:  Total other income was $94.9 million in 2011, compared to $74.9 million in 2010 and $81.2 million in 2009.  The large increase in total other income of $20.0 million in 2011 compared to 2010, was primarily due to the large increase in net gains from the sale of investment securities.  The net gain from the sale of investment securities was $28.8 million in 2011, compared to a net gain of $11.9 million in 2010.  In 2009, Park’s total other income included a “one-time” positive item of $3.0 million from the sale of all the Class B shares of stock that Park received from the initial public offering of Visa, Inc.

The following table displays total other income for Park in 2011, 2010 and 2009.

Table 18 - Other Income
Year Ended December 31,
(In thousands)	2011			2010 (restated)			2009
Income from fiduciary activities	$	14,965		$	13,874		$	12,468
Service charges on deposits		18,307			19,717			21,985
Net gains on sales of securities		28,829			11,864			7,340
Other service income		10,606			13,816			18,767
Checkcard fee income		12,496			11,177			9,339
Bank owned life insurance income		5,089			4,978			5,050
ATM fees		2,703			2,951			3,082
OREO devaluations		(8,219	)		(13,206	)		(6,818	)
Other		10,134			9,709			9,977
Total other income	$	94,910		$	74,880		$	81,190

Income from fiduciary activities increased by $1.1 million or 7.9% to $15.0 million in 2011 and increased by $1.4 million or 11.3% to $13.9 million in 2010.  The increase in fiduciary fee income in 2011 and 2010 was primarily due to improvements in the equity markets and also due to an increase in the total accounts served by Park’s Trust department.  Park charges fiduciary fees based on the market value of the assets being managed.  The Dow Jones Industrial Average stock index annual average was 8,885 for calendar year 2009, 10,669 for calendar year 2010 and 11,958 for calendar year 2011.  The market value of the assets that Park manages was $3.3 billion at December 31, 2011 and December 31, 2010, compared to $3.1 billion at December 31, 2009.  Management expects an increase of approximately 2% to 4% in fee income from fiduciary activities in 2012.

Service charges on deposit accounts decreased by $1.4 million or 7.2% to $18.3 million in 2011 and decreased by $2.3 million or 10.3% to $19.7 million in 2010.  The decrease in service charge income in 2011 was primarily due to a decrease in fee income from overdraft charges and other non-sufficient funds (NSF) charges.  Park’s customers did not use our courtesy overdraft program as frequently in 2011 and, as a result, this fee income decreased by $1.3 million or 8.7% in 2011 compared to 2010.  Management expects that revenue from service charges on deposits in 2012 will be within a range of $16 million to $18 million.

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 $3.2 million, or 23.2%, to $10.6 million in 2011, compared to $13.8 million in 2010.   The decrease in other service income was primarily due to a decline in the amount of fixed-rate mortgage loans originated and sold in 2011.  The amount of fixed-rate mortgage loans originated and sold in 2011 was $190 million, compared to $358 million in 2010 and $615 million in 2009.  As previously discussed, Park began to originate and retain 15-year, fixed-rate residential mortgages in 2010, which contributed to the decline in loans sold in the secondary market.  The balance of loans for this product was $329 million at December 31, 2011, an increase of $153 million compared to $176 million at December 31, 2010.  Management expects an increase in residential real estate loans in 2012 of 3% to 5%.  In 2010, other service income decreased by $5.0 million or 26.4% to $13.8 million, which was due to a decline in the volume of fixed-rate residential mortgage loans that Park originated and sold into the secondary market in 2010 compared to 2009. Park’s management expects that the volume of sold fixed-rate residential mortgage loans will continue to decline in 2012 and as a result expects that other service income will decrease by approximately 12% to 14% in 2012.

Checkcard fee income, which is generated from debit card transactions increased $1.3 million or 11.8% to $12.5 million in 2011.  During 2010, checkcard fee income increased $1.8 million or 19.7% to $11.2 million.  The increases in both 2011 and 2010 were attributable to continued increases in the volume of debit card transactions.  Park’s management expects checkcard fee income will decline by approximately 4% to 6% in 2012, largely due to the full year impact of the Durbin Amendment that became a part of the Dodd-Frank Wall Street Reform and Consumer Protection Act and became effective on October 1, 2011.

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OREO devaluations, which result from declines in the fair value (less anticipated selling costs) of property acquired through foreclosure, totaled $8.2 million in 2011, a decrease of $5.0 million or 37.8% compared to $13.2 million in 2010.  The OREO devaluations in 2011 related primarily to other real estate owned at Vision Bank.  As previously discussed, throughout the 2011 year, Vision Bank’s OREO property was transferred to SE, LLC.  Of the $8.2 million in OREO devaluations in 2011, $3.0 million and $4.2 million were related to devaluations recognized at Vision Bank and SE, LLC, respectively.  Park’s management expects that OREO devaluations will be less significant in 2012 as property values throughout Park’s footprint continue to stabilize.

The subcategory of “Other” income includes fees earned from the sale of official checks and printed checks, rental fee income from safe deposit boxes, gains and losses from the sale of OREO and other miscellaneous income.  Total other income increased by $425,000 or 4.4% to $10.1 million in 2011 and decreased by $268,000 or 2.7% to $9.7 million in 2010.  Park’s management expects 2012 revenue within the subcategory of other income, prior to the impact of the Vision Bank sale, will be consistent with the results experienced in 2011.  On February 16, 2012, the sale of Vision Bank closed and a pre-tax gain of $22 million, net of anticipated expenses directly related to the sale, was recognized by Park’s Parent Company.

Park recognized net gains from the sale of investment securities of $28.8 million in 2011, $11.9 million in 2010 and $7.3 million in 2009.  The majority of the investment securities sold in 2011, with an amortized cost of $579.2 million, were U.S. Government sponsored entity mortgage-backed securities. The remaining investment securities sold in 2011 were municipal securities.  The following table provides a summary of the gains realized from the sale of investment securities in 2011.  Park’s management does not expect to recognize any gains from the sale of investment securities in 2012.

Table 19 - Gain on Sale of Securities
(in thousands)	Amortized Cost		Book Yield			Sales Proceeds		Yield to buyer			Gain
Fourth Quarter	$	70,848		4.39	%	$	74,215		2.17	%	$	3,367
Third Quarter		212,799		2.60	%		216,264		2.03	%		3,465
Second Quarter		191,037		5.25	%		206,399		1.92	%		15,362
First Quarter		106,470		5.03	%		113,105		2.13	%		6,635
Total	$	581,154		4.13	%	$	609,983		2.03	%	$	28,829

A year ago, Park’s management forecast that total other income, excluding gains from the sale of securities, would be approximately $63 million to $67 million for 2011.  The actual performance for 2011 was in line with management’s original estimate, at $66.1 million.  For 2012, Park’s management expects that total other income, excluding gains from the sale of Vision Bank, will be approximately $62 million to $66 million.

20

Other Expense: Total other expense was $188.3 million in 2011, compared to $187.1 million in 2010 and $188.7 million in 2009.  Total other expense increased by $1.2 million, or 0.6%, to $188.3 million in 2011.  Total other expense decreased by $1.6 million or 0.9% to $187.1 million in 2010.  The following table displays total other expense for Park in 2011, 2010 and 2009.

Table 20 - Other Expense
Year Ended December 31,
(In thousands)	2011		2010		2009
Salaries and employee benefits	$	102,068	$	98,315	$	101,225
Data processing fees		4,965		5,728		5,674
Fees and service charges		21,119		19,972		15,935
Net occupancy expense of bank premises		11,295		11,510		11,552
Amortization of intangibles		3,534		3,422		3,746
Furniture and equipment expense		10,773		10,435		9,734
Insurance		6,821		8,983		12,072
Marketing		2,967		3,656		3,775
Postage and telephone		6,060		6,648		6,903
Other		18,715		18,438		18,109
Total other expense	$	188,317	$	187,107	$	188,725
Full time equivalent employees		1,920		1,969		2,024

Salaries and employee benefits expense increased by $3.8 million or 3.8% to $102.1 million in 2011 and decreased by $2.9 million or 2.9% to $98.3 million in 2010.  The increase in 2011 was primarily related to an increase in employee benefit costs, due to an increase in medical claims of $2.6 million.  Full-time equivalent employees at year-end 2011 were 1,920, compared to 1,969 at year-end 2010 and 2,024 at year-end 2009.  A year ago, Park’s management projected that salaries and benefit expense would be $102 million for 2011.  The actual performance for the year was consistent with this estimate.  For 2012, management is projecting a decline in salaries and employee benefits expense to $95 million to $97 million, primarily due to the sale of Vision Bank.

Fees and service charges increased by $1.1 million or 5.7% to $21.1 million in 2011 and increased by $4.0 million or 25.3% to $20.0 million in 2010.  This subcategory of total other expense includes legal fees, management consulting fees, director fees, audit fees, regulatory examination fees and memberships in industry associations.  The increase in fees and service charges expense in both 2010 and 2011 was primarily due to an increase in legal fees and consulting fees.  This additional expense was primarily related to an increase in costs associated with the workout of problem loans at Park’s Vision Bank subsidiary.  Park’s management expects that fees and service charges will be approximately $17 million to $18 million in 2012.

Insurance expense decreased by $2.2 million or 24.1% to $6.8 million in 2011 and decreased by $3.1 million or 25.6% to $9.0 million in 2010.  During the third quarter of 2011, Park began recognizing insurance expense for premiums paid to the FDIC based on a new assessment methodology utilizing total assets less tangible equity. The new methodology resulted in a decline in insurance expense in the second half of 2011 and will impact the full 2012 year.  Park’s management expects that insurance expense will be between $5 million to $6 million in 2012.

The subcategory “other” expense includes expenses for supplies, travel, charitable contributions, amortization of low income housing tax investments, state taxes, expenses pertaining to other real estate owned and other miscellaneous expenses.  The subcategory other expense increased by $276,000 or 1.5% to $18.7 million in 2011 and increased by $329,000 or 1.8% to $18.4 million in 2010.

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A year ago, Park’s management projected that total other expense would be approximately $183 million to $187 million in 2011.  The actual expense for the year of $188.3 million was $1.3 million or 0.7% higher than the upper end of management’s estimate.  Management expects that total other expense for 2012 will be approximately $170 million to $175 million.

Income Taxes: Federal income tax expense was $28.3 million in 2011, compared to $17.8 million in 2010 and $25.4 million in 2009.  Federal income tax expense as a percentage of income before taxes, adjusted for the state income tax expense or benefit, was 25.6% in 2011, compared to 23.4% in 2010 and to 25.5% in 2009.  A lower federal effective tax rate than the statutory rate of 35% is 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.  For the year ending December 31, 2012, management expects the effective federal income tax rate will be between 26% and 28%.

State income tax expense was $6.1 million in 2011, compared to state income tax benefits of $1.2 million in 2010 and $2.5 million in 2009.  All of the state income tax expense or benefit pertains to Vision Bank, as Park and its Ohio-based subsidiaries do not pay state income tax to the state of Ohio, but pay 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 Statements of Income.

Park recognized $6.1 million in state tax expense during 2011, which was the charge necessary to write off the previously reported state operating loss carryforward asset and other state deferred tax assets at Vision Bank. Prior to the execution of the Purchase Agreement with Centennial, management of Park believed that a merger of Vision Bank into The Park National Bank (the national bank subsidiary of Park) would enable Park to fully utilize the state net operating loss carryforward asset recorded at Vision Bank. The structure of the transactions contemplated by the Purchase Agreement will not allow either the buyer or the seller to benefit from the previously recorded net operating loss carryforward asset at Vision Bank to offset future taxable income; therefore, this asset was written off by Vision Bank at December 31, 2011.

State income tax expense was a credit in 2010 and 2009 as a result of losses at Vision Bank in those years.  Park performed an analysis in those years to determine if a valuation allowance against deferred tax assets was required in accordance with GAAP.  Vision Bank is subject to state income tax in Alabama and Florida.  In 2010, a state tax benefit of $1.16 million was recorded by Vision Bank, consisting of a gross benefit of $3.46 million and a valuation allowance of $2.30 million ($1.5 million net of the federal income tax benefit).

CREDIT EXPERIENCE

Provision for Loan Losses: The provision for loan losses is the amount added to the allowance for loan losses to absorb future loan charge-offs. The amount of the loan loss provision is determined by management after reviewing the risk characteristics of the loan portfolio, historic and current loan loss experience and current economic conditions.

The provision for loan losses was $63.3 million in 2011, $87.1 million in 2010 and $68.8 million in 2009. Net loan charge-offs were $125.1 million in 2011, $60.2 million in 2010 and $52.2 million in 2009. The ratio of net loan charge-offs to average loans was 2.65% in 2011, 1.30% in 2010 and 1.14% in 2009.

The loan loss provision for Vision Bank was $31.1 million in 2011, $61.4 million in 2010 and $44.4 million in 2009.  Net loan charge-offs for Vision Bank were $75.9 million in 2011, $36.6 million in 2010 and $28.9 million in 2009. Vision Bank’s ratio of net loan charge-offs to average loans was 13.04% in 2011, 5.48% in 2010 and 4.18% in 2009.

Park’s Ohio-based subsidiaries had a combined loan loss provision of $32.2 million in 2011, $25.7 million in 2010 and $24.4 million in 2009. Net loan charge-offs for Park’s Ohio-based subsidiaries were $49.2 million in 2011, $23.6 million in 2010 and $23.3 million in 2009. The net loan charge-off ratio for Park’s Ohio-based subsidiaries was 1.19% for 2011 and 0.60% for both 2010 and 2009.  Of the $49.2 million in net loan charge-offs for Park’s Ohio-based subsidiaries in 2011, $18.1 million related to participations in Vision Bank loans that PNB had purchased.  Absent the charge-offs on these Vision Bank loan participations, net charge-offs for Park’s Ohio-based operations were $31.1 million and the net loan charge-off ratio was 0.75% for 2011.

At year-end 2011, the allowance for loan losses was $68.4 million or 1.59% of total loans outstanding, compared to $143.6 million or 3.03% of total loans outstanding at year-end 2010 and $116.7 million or 2.52% of total loans outstanding at year-end 2009. The decrease in the allowance for loan losses as a percentage of total loans outstanding in 2011 is primarily due to the significant decrease in specific reserves established for impaired commercial loans.  The table below provides additional information related to specific reserves on impaired commercial loans and general reserves for all other loans in Park’s portfolio at December 31, 2011, 2010 and 2009.

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Table 21 - General Reserve Trends - Park National Corporation
Year Ended December 31,
(In thousands)	2011			2010			2009
Allowance for loan losses, end of period	$	68,444		$	143,575		$	116,717
Specific reserves		15,935			66,904			36,721
General reserves	$	52,509		$	76,671		$	79,996
Total loans	$	4,317,099		$	4,732,685		$	4,640,432
Impaired commercial loans		187,074			250,933			201,143
Non-impaired loans	$	4,130,025		$	4,481,752		$	4,439,289
Allowance for loan losses as a % of period end loans		1.59	%		3.03	%		2.52	%
General reserves as a % of non-impaired loans		1.27	%		1.71	%		1.80	%

The table below provides information related to the specific reserves on impaired commercial loans and general reserves for all other loans in the retained Vision Bank portfolio at December 31, 2011, as well as historical Vision Bank information at December 31, 2010 and 2009.  The retained portfolio at December 31, 2011 represents those loans that will remain with Vision Bank and will become assets of SE, LLC as a result of the merger of Vision Bank into SE, LLC subsequent to the close of the Vision Bank sale.

Table 22 - General Reserve Trends - Vision Bank
Year Ended December 31,	2011
(In thousands)	Retained portfolio			2010			2009
Allowance for loan losses, end of period	$	10,739		$	68,937		$	44,087
Specific reserves		8,889			53,928			29,225
General reserves	$	1,850		$	15,009		$	14,862
Total loans	$	123,883		$	640,580		$	677,018
Impaired commercial loans		91,965			160,239			139,310
Non-impaired loans	$	31,918		$	480,341		$	537,708
Allowance for loan losses as a % of period end loans		8.67	%		10.76	%		6.51	%
General reserves as a % of non-impaired loans		5.80	%		3.12	%		2.76	%

The table below provides information related to the specific reserves on impaired commercial loans and general reserves for all other loans in Park’s Ohio-based subsidiaries portfolio at December 31, 2011, 2010 and 2009.

Table 23 - General Reserve Trends - Park's Ohio-Based Subsidiaries
Year Ended December 31,
(In thousands)	2011			2010			2009
Allowance for loan losses, end of period	$	57,705		$	74,638		$	72,630
Specific reserves		7,046			12,976			7,496
General reserves	$	50,659		$	61,662		$	65,134
Total loans	$	4,193,216		$	4,092,105		$	3,963,414
Impaired commercial loans		95,109			90,694			61,833
Non-impaired loans	$	4,098,107		$	4,001,411		$	3,901,581
Allowance for loan losses as a % of period end loans		1.38	%		1.82	%		1.83	%
General reserves as a % of non-impaired loans		1.24	%		1.54	%		1.67	%

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As disclosed in Table 21 above, Park’s general reserves were $52.5 million at December 31, 2011, a decline of approximately $24.2 million in 2011 from $76.7 million at December 31, 2010.  A significant portion of the decline in general reserves is due to the impact of the sale of Vision Bank, as $13.1 million of general reserves were transferred to assets held for sale at December 31, 2011.  As such, the Vision Bank sale  results in a significant decline in non-impaired loans and the general reserves associated with those loans.  The retained Vision Bank loan portfolio, as noted in Table 22 above, had a general reserve balance of $1.85 million at December 31, 2011, a decline of $13.2 million from the general reserve balance of $15.0 million at December 31, 2010.  The remaining decline in general reserves of $11.0 million is a result of declines in new nonaccrual loans and delinquent loans throughout Park’s loan portfolio.  Management expects new nonaccrual loans in 2012 will continue to be well below levels experienced in 2009 and 2010, and as a result of the Vision Bank sale, will also decline from the levels experienced in 2011. The following table shows new nonaccrual loans for 2011 and the two previous years.

Table 24 – New nonaccrual loan information
Year Ended December 31,
(In thousands)	2011		2010		2009
Nonaccrual loans, beginning of period	$	289,268	$	233,544	$	159,512
New nonaccrual loans – Ohio-based subsidiaries		78,316		85,081		57,641
New nonaccrual loans – Vision Bank		45,842		90,094		126,540
Resolved nonaccrual loans		218,320		119,451		110,149
Nonaccrual loans, end of period	$	195,106	$	289,268	$	233,544

Management believes that the allowance for loan losses at year-end 2011 is adequate to absorb probable incurred credit losses in the loan portfolio. See Note 1 of the Notes to Consolidated Financial Statements and the discussion under the heading “Critical Accounting Policies” earlier in this Financial Review for additional information on management’s evaluation of the adequacy of the allowance for loan losses.

Management expects the loan loss provision for 2012 will be approximately $20 million to $27 million. This estimate reflects management’s expectation that: (1) future declines in collateral values will be moderate as the economy continues to improve and pricing stabilizes throughout 2012; (2) new nonperforming loans will continue to decline in 2012; and (3) loan delinquencies continue to remain at or near their current low levels.  This estimated range could change significantly as circumstances for individual loans and economic conditions change.

A year ago, management projected the provision for loan losses would be $47 million to $57 million in 2011.  The actual performance was above the high end of our expectation by $6.3 million, at $63.3 million for the 2011 year.  As previously discussed, Park restated its financial statements for the year ended December 31, 2010 and for each of the quarterly periods in 2011.  This restatement resulted in a $22.2 million increase to the provision for loan losses for the year ended December 31, 2010 and a decrease to the provision for loan losses of $12.9 million for the nine months ended September 30, 2011.  As discussed throughout the remainder of this “Credit Experience” section, the primary reasons that the provision for loan losses was greater than management’s projection were declines in collateral values for those loans that are collateral dependent.  The table below provides a summary of the loan loss experience over the past five years:

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Table 25  -  Summary of Loan Loss Experience
(In thousands)	2011		2010		2009		2008		2007
Average loans (net of unearned interest)	$	4,713,511	$	4,642,478	$	4,594,436	$	4,354,520	$	4,011,307
Allowance for loan losses:
Beginning balance		143,575		116,717		100,088		87,102		70,500
Charge-offs:
Commercial, financial
and agricultural		18,350		8,484		10,047		2,953		4,170
Real estate - construction		64,166		23,308		21,956		34,052		7,899
Real estate - residential		20,691		18,401		11,765		12,600		5,785
Real estate - commercial