UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2007

OR

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

For the transition period from                      to                     

Park National Corporation

(Exact name of registrant as specified in its charter)

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

50 North Third Street, Newark, Ohio 43055

(Address of principal executive offices) (Zip Code)

(740) 349-8451

(Registrant’s telephone number, including area code)

N/A

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

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

Yes þ      No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ     Accelerated filer o      Non-accelerated filer o

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

Yes o      No þ

14,588,263 Common shares, no par value per share, outstanding at April 30, 2007.

 

 

PARK NATIONAL CORPORATION

CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements			3-17
Consolidated Condensed Balance Sheets as of March 31, 2007 and December 31, 2006 (unaudited)			3
Consolidated Condensed Statements of Income for the Three Months Ended March 31, 2007 and 2006 (unaudited)			4-5
Consolidated Condensed Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2007 and 2006 (unaudited)			6
Consolidated Condensed Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2006 (unaudited)			7-8
Notes to Consolidated Financial Statements			9-17
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			18-30
Item 3. Quantitative and Qualitative Disclosures About Market Risk			30-31
Item 4. Controls and Procedures			31
PART II. OTHER INFORMATION			32-48
Item 1. Legal Proceedings			32
Item 1A. Risk Factors			32-33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			33-34
Item 3. Defaults Upon Senior Securities			35
Item 4. Submission of Matters to a Vote of Security Holders			35
Item 5. Other Information			36-41
Item 6. Exhibits			41-47
SIGNATURES			48
EX-10.6
EX-10.7
EX-10.8
EX-10.9
EX-10.10
EX-10.11
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PARK NATIONAL CORPORATION

(dollars in thousands)

		March 31,				December 31,
		2007				2006
Assets:
Cash and due from banks		$	169,192			$	177,990
Money market instruments			28,938				8,266
Cash and cash equivalents			198,130				186,256
Interest bearing deposits			1				1
Securities available-for-sale, at fair value (amortized cost of $1,372,873 and $1,299,686 at March 31, 2007 and December 31, 2006)			1,353,973				1,275,079
Securities held-to-maturity, at amortized cost (fair value approximates $167,717 and $169,786 at March 31, 2007 and December 31, 2006)			173,630				176,485
Other investment securities			63,345				61,934
Loans (net of unearned interest and fees)			4,088,683				3,480,702
Allowance for loan losses			79,839				70,500
Net loans			4,008,844				3,410,202
Bank premises and equipment, net			64,946				47,554
Bank owned life insurance			117,025				113,101
Goodwill and other intangible assets			198,828				78,003
Other assets			129,333				122,261
Total assets		$	6,308,055			$	5,470,876
Liabilities and Stockholders’ Equity:
Deposits:
Noninterest bearing		$	718,829			$	664,962
Interest bearing			3,833,647				3,160,572
Total deposits			4,552,476				3,825,534
Short-term borrowings			388,781				375,773
Long-term debt			607,189				604,140
Junior Subordinated Debentures			15,000				—
Other liabilities			83,719				94,990
Total liabilities			5,647,165				4,900,437
COMMITMENTS AND CONTINGENCIES
Stockholders’ Equity:
Common stock (No par value; 20,000,000 shares authorized; 16,151,243 shares issued in 2007 and 15,358,323 shares issued in 2006)			300,324				217,067
Retained earnings			527,677				519,563
Treasury stock (1,486,382 shares in 2007 and 1,436,794 shares in 2006)			(148,000	)			(143,371	)
Accumulated other comprehensive income (loss), net of taxes			(19,111	)			(22,820	)
Total stockholders’ equity			660,890				570,439
Total liabilities and stockholders’ equity		$	6,308,055			$	5,470,876

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PARK NATIONAL CORPORATION

(dollars in thousands, except per share data)

		Three Months Ended
		March 31,
		2007				2006
Interest and dividends income:
Interest and fees on loans		$	71,182			$	59,933
Interest and dividends on:
Obligations of U.S. Government, its agencies and other securities			18,547				19,564
Obligations of states and political subdivisions			813				977
Other interest income			294				122
Total interest and dividends income			90,836				80,596
Interest expense:
Interest on deposits:
Demand and savings deposits			8,097				5,004
Time deposits			17,581				12,316
Interest on borrowings:
Short-term borrowings			3,918				3,125
Long-term debt			6,342				6,732
Total interest expense			35,938				27,177
Net interest income			54,898				53,419
Provision for loan losses			2,205				—
Net interest income after provision for loan losses			52,693				53,419
Other income:
Income from fiduciary activities			3,504				3,276
Service charges on deposit accounts			4,847				4,463
Other service income			2,505				2,727
Other			5,318				4,927
Total other income			16,174				15,393
Gain (loss) on sale of securities			—				—

Continued

PARK NATIONAL CORPORATION
Consolidated Condensed Statements of Income (Unaudited)
(Continued)
(dollars in thousands, except per share data)

		Three Months Ended
		March 31,
		2007				2006
Other expense:
Salaries and employee benefits		$	22,460			$	20,046
Occupancy expense			2,538				2,262
Furniture and equipment expense			1,392				1,336
Other expense			12,919				11,368
Total other expense			39,309				35,012
Income before income taxes			29,558				33,800
Income taxes			8,495				9,993
Net income		$	21,063			$	23,807
Per Share:
Net income:
Basic		$	1.49			$	1.70
Diluted		$	1.49			$	1.69
Weighted average
Basic			14,121,331				14,034,360
Diluted			14,138,517				14,095,895
Cash dividends declared		$	0.93			$	0.92

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PARK NATIONAL CORPORATION

(dollars in thousands, except share data)

														Accumulated
										Treasury				Other
		Common				Retained				Stock				Comprehensive				Comprehensive
Three Months ended March 31, 2007 and 2006		Stock				Earnings				at Cost				Income (loss)				Income
BALANCE AT DECEMBER 31, 2005		$	208,365			$	476,889				($116,681	)			($10,143	)
Net Income							23,807											$	23,807
Other comprehensive income (loss), net of tax:
Unrealized net holding loss on securities available-for-sale, net of taxes ($8,151)															(15,137	)			(15,137	)
Total comprehensive income																		$	8,670
Cash dividends on common stock at $.92 per share							(12,880	)
Cash payment for fractional shares in dividend reinvestment plan			(2	)
Shares issued for stock options - 684			24
Tax benefit from exercise of stock options			18
Treasury stock purchased - 96,427 shares											(10,231	)
Treasury stock reissued for stock options - 12,036 shares											932
BALANCE AT MARCH 31, 2006		$	208,405			$	487,816				($125,980	)			($25,280	)
BALANCE AT DECEMBER 31, 2006		$	217,067			$	519,563				($143,371	)			($22,820	)
Net Income							21,063											$	21,063
Other comprehensive income (loss), net of tax:
Unrealized net holding gain on securities available-for-sale, net of taxes $1,997															3,709				3,709
Total comprehensive income																		$	24,772
Cash dividends on common stock at $.93 per share							(12,949	)
Cash payment for fractional shares in dividend reinvestment plan			(1	)
Treasury stock purchased - 52,434 shares											(4,862	)
Treasury stock reissued for stock options - 2,846 shares											233
Shares issued for Vision Bancshares purchase - 792,937 shares			83,258
BALANCE AT MARCH 31, 2007		$	300,324			$	527,677				($148,000	)			($19,111	)

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PARK NATIONAL CORPORATION

(dollars in thousands)

		Three Months Ended
		March 31,
		2007				2006
Operating activities:
Net income		$	21,063			$	23,807
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, accretion and amortization			(569	)			58
Provision for loan losses			2,205				—
Stock dividends on Federal Home Loan Bank stock			—				(739	)
Amortization of core deposit intangibles			684				637
Changes in assets and liabilities:
Increase in other assets			(6,172	)			(8,305	)
Decrease in other liabilities			(671	)			(1,770	)
Net cash provided from operating activities			16,540				13,688
Investing activities:
Proceeds from maturity of:
Available-for-sale securities			195,424				79,787
Held-to-maturity securities			2,853				4,782
Purchases of:
Available-for-sale securities			(239,330	)			(126,527	)
Net (increase) decrease in loans			(13,530	)			10,639
Cash paid for acquisition, net			(44,993	)			—
Purchases of premises and equipment, net			(10,508	)			(1,399	)
Net cash used by investing activities			(110,084	)			(32,718	)

Continued

PARK NATIONAL CORPORATION

(dollars in thousands)

		Three Months Ended
		March 31,
		2007				2006
Financing activities:
Net increase in deposits		$	149,848			$	76,182
Net (decrease) increase in short-term borrowings			(11,324	)			96,366
Proceeds from exercise of stock options			233				974
Purchase of treasury stock			(4,862	)			(10,231	)
Cash payment for fractional shares in dividend reinvestment plan			(1	)			(2	)
Long-term debt issued			75,100				—
Repayment of long-term debt			(77,680	)			(135,912	)
Cash dividends paid			(25,896	)			(25,879	)
Net cash provided from financing activities			105,418				1,498
Increase (decrease) in cash and cash equivalents			11,874				(17,532	)
Cash and cash equivalents at beginning of year			186,256				173,973
Cash and cash equivalents at end of period		$	198,130			$	156,441
Supplemental disclosures of cash flow information:
Cash paid for:
Interest		$	35,829			$	26,859
Income taxes		$	2,600			$	0
Summary of business acquisition:
Fair value of assets acquired		$	686,744				—
Cash paid for purchase of Vision Bancshares			(87,843	)			—
Stock issued for purchase of Vision Bancshares			(83,258	)			—
Fair value of liabilities assumed			(624,432	)			—
Goodwill recognized			($108,789	)			—

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PARK NATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2007 and 2006.

Note 1 — Basis of Presentation

The consolidated financial statements included in this report have been prepared by Park National Corporation (the “Registrant”, “Corporation”, “Company”, or “Park”) without audit. In the opinion of management, all adjustments (consisting solely of normal recurring accruals) necessary for a fair presentation of results of operations for the interim periods included herein have been made. The results of operations for the quarter ended March 31, 2007 are not necessarily indicative of the operating results to be anticipated for the fiscal year ending December 31, 2007.

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q, and therefore, do not include all information and footnotes necessary for a fair presentation of the condensed balance sheets, condensed statements of income, condensed statements of changes in stockholders’ equity and condensed statements of cash flows in conformity with U.S. generally accepted accounting principles. These financial statements should be read in conjunction with the financial statements incorporated by reference in the Annual Report on Form 10-K of Park for the fiscal year ended December 31, 2006 from Park’s 2006 Annual Report to Shareholders.

Park’s significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements included in Park’s 2006 Annual Report to Shareholders. For interim reporting purposes, Park follows the same basic accounting policies and considers each interim period as an integral part of an annual period.

Park does not have any derivative financial instruments such as interest-rate swap agreements.

Note 2 — Acquisition and Intangible Assets

On March 9, 2007, Park acquired all of the stock and outstanding stock options of Vision Bancshares, Inc. (“Vision”) for $87.8 million in cash and 792,937 shares of Park common stock valued at $83.3 million or $105.00 per share. The goodwill recognized as a result of this acquisition was $108.8 million. The fair value of the acquired assets of Vision was $686.7 million and the fair value of the liabilities assumed was $624.4 million at March 9, 2007.

Vision operated two bank subsidiaries (both named Vision Bank) which became bank subsidiaries of Park on March 9, 2007. One bank is headquartered in Gulf Shores, Alabama and the other in Panama City, Florida. These banks operate fifteen branch locations in the Gulf Coast communities in Alabama and in the Florida panhandle. The markets that the two Vision Banks operate in are expected to grow much faster than many of the non-metro markets in which Park’s subsidiary banks operate in Ohio. Management expects that the acquisition of the two Vision Banks will improve the future growth rate for Park’s loans and deposits.

The following table shows the activity in goodwill and core deposit intangibles during the first quarter of 2007.

						Core Deposit
(In Thousands)		Goodwill				Intangibles				Total
December 31, 2006		$	72,334			$	5,669			$	78,003
Vision Acquisition			108,789				12,720				121,509
Amortization			—				<684>				<684>
March 31, 2007		$	181,123			$	17,705			$	198,828

The core deposit intangibles are being amortized to expense principally on the straight-line method, over periods ranging from six to ten years. The amortization period for the Vision core deposit intangibles is six years. One month of core deposit amortization expense of $176,000 was recognized from the Vision acquisition during the quarter. Management expects that the core deposit amortization expense will be $1.04 million for the second and third quarter of 2007 and $975,000 for the fourth quarter of 2007.

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

		Annual
(In Thousands)		Amortization
2007		$	3,735
2008			3,576
2009			3,297
2010			2,973
2011			2,228
Total		$	15,809

Goodwill is evaluated on an annual basis for impairment and otherwise when circumstances warrant. Goodwill was evaluated during the first quarter of 2007, and no impairment charge was necessary.

Note 3 — Allowance for Loan Losses

The allowance for loan losses is that amount believed adequate to absorb probable incurred credit losses in the loan portfolio based on management’s evaluation of various factors including overall growth in the loan portfolio, an analysis of individual loans, prior and current loss experience, and current economic conditions. A provision for loan losses is charged to operations based on management’s periodic evaluation of these and other pertinent factors.

Commercial loans are individually risk graded. Where appropriate, reserves are allocated to individual loans based on management’s estimate of the borrower’s ability to repay the loan given the availability of collateral and other sources of cash flow. Homogenous loans, such as consumer installment loans, residential mortgage loans and automobile leases are not individually risk graded. Reserves are established for each pool of loans based on historical loan loss experience, current economic conditions and loan delinquency.

The following table shows the activity in the allowance for loan losses for the three months ended March 31, 2007 and 2006.

		Three Months Ended
		March 31,
(In Thousands)		2007				2006
Average Loans (Net of Unearned Interest)		$	3,631,168			$	3,311,576
Allowance for Loan Losses:
Beginning Balance		$	70,500			$	69,694
Charge-Offs:
Commercial, Financial and Agricultural			1,117				302
Real Estate — Construction			56				300
Real Estate — Residential			961				413
Real Estate — Commercial			53				147
Consumer			1,777				1,418
Lease Financing			—				16
Total Charge-Offs			3,964				2,596
Recoveries:
Commercial, Financial and Agricultural			314				361
Real Estate — Construction			—				—
Real Estate — Residential			145				223
Real Estate — Commercial			250				1,065
Consumer			1,034				911
Lease Financing			21				37
Total Recoveries			1,764				2,597
Net Charge-Offs			2,200				<1>
Provision Charged to Earnings			2,205				—
Allowance for Loan Losses of Acquired Banks			9,334				—
Ending Balance		$	79,839			$	69,695
Annualized Ratio of Net Charge-Offs to Average Loans			.25	%			—
Ratio of Allowance for Loan Losses to End of Period Loans, Net of Unearned Interest			1.95	%			2.10	%

Note 4 — Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31, 2007 and 2006.

(Dollars in Thousands, Except Per Share Data)
		Three Months Ended
		March 31,
		2007				2006
Numerator:
Net Income		$	21,063			$	23,807
Denominator:
Denominator for Basic Earnings Per Share (Weighted Average Shares Outstanding)			14,121,331				14,034,360
Effect of Dilutive Securities			17,186				61,535
Denominator for Diluted Earnings Per Share (Weighted Average Shares Outstanding Adjusted for the Dilutive Securities)			14,138,517				14,095,895
Earnings per Share:
Basic Earnings Per Share		$	1.49			$	1.70
Diluted Earnings Per Share		$	1.49			$	1.69

Note 5 — Segment Information

The Corporation is a multi-bank holding company headquartered in Newark, Ohio. The operating segments for the Corporation are its financial institution subsidiaries. The Corporation’s financial institution subsidiaries are The Park National Bank (PNB), The Richland Trust Company (RTC), Century National Bank (CNB), The First-Knox National Bank of Mount Vernon (FKNB), United Bank, N.A. (UB), Second National Bank (SNB), The Security National Bank and Trust Co. (SEC), The Citizens National Bank of Urbana (CIT), Vision Bank (Alabama) (VAL) and Vision Bank (Florida) (VFL).

Operating Results for the Three Months Ended March 31, 2007																						Balances at
(In Thousands)																						March 31, 2007
		Net Interest				Provision for								Other
		Income				Loan Losses				Other Income				Expense				Net Income				Assets
PNB		$	18,136			$	620			$	6,871			$	12,869			$	7,795			$	2,037,618
RTC			4,276				420				1,223				2,867				1,467				548,437
CNB			6,213				440				1,951				4,205				2,341				719,702
FKNB			7,713				255				1,904				4,635				3,121				761,678
UB			1,871				20				588				1,678				522				209,681
SNB			3,071				40				599				2,051				1,105				392,537
SEC			7,596				140				2,243				5,200				3,057				850,713
CIT			1,309				40				394				1,058				412				154,444
VAL			1,294				—				166				776				424				480,980
VFL			781				—				101				629				157				331,494
All Other			2,638				230				134				3,341				662				<179,829>
TOTAL		$	54,898			$	2,205			$	16,174			$	39,309			$	21,063			$	6,307,455

Operating Results for the Three Months Ended March 31, 2006																						Balances at
(In Thousands)																						March 31, 2006
		Net Interest				Provision for								Other
		Income				Loan Losses				Other Income				Expense				Net Income				Assets
PNB		$	17,791			$	<88>			$	6,644			$	11,408			$	8,835			$	1,999,911
RTC			4,721				100				1,097				2,709				1,991				499,115
CNB			6,479				<30>				1,929				4,234				2,790				719,476
FKNB			7,461				5				2,067				4,345				3,428				775,333
UB			1,951				<200>				501				1,591				717				213,584
SNB			3,081				<25>				558				1,937				1,211				383,218
SEC			7,535				50				2,036				5,138				2,963				914,425
CIT			1,386				—				418				1,069				499				173,431
VAL			—				—				—				—				—				—
VFL			—				—				—				—				—				—
All Other			3,014				188				143				2,581				1,373				<234,048>
TOTAL		$	53,419			$	—			$	15,393			$	35,012			$	23,807			$	5,444,445

The operating results of the Parent Company and Guardian Finance Company (GFC) in the “All Other” column are used to reconcile the segment totals to the consolidated income statements for the periods ended March 31, 2007 and 2006. The reconciling amounts for consolidated total assets for both of the periods ended March 31, 2007 and 2006 consist of the elimination of intersegment borrowings, and the assets of the Parent Company and GFC which are not eliminated.

Note 6 — Stock Option Plans

Park did not grant any stock options during the first quarter of 2007 or the first quarter of 2006. Additionally, no stock options became vested during the first quarter of 2007 or the first quarter of 2006.

The following table summarizes stock option activity during the first quarter of 2007.

						Weighted
						Average Exercise
		Stock Options				Price Per Share
Outstanding at December 31, 2006			686,024			$	101.89
Granted			—				—
Exercised			<2,846>				81.83
Forfeited/Expired			<13,768>				95.35
Outstanding at March 31, 2007			669,410			$	102.11

All of the stock options outstanding at March 31, 2007 were exercisable. The aggregate intrinsic value of the outstanding stock options at March 31, 2007 was $1,200,000.

The intrinsic value of the stock options exercised during the first quarter of 2007 was $47,000 and the intrinsic value of the stock options exercised during the first quarter of 2006 was $400,000. The weighted average contractual remaining term was 1.9 years for the stock options outstanding at March 31, 2007.

All of the common shares delivered upon exercise of incentive stock options granted under the Park National Corporation 2005 and 1995 Incentive Stock Option Plans are to be treasury shares. At March 31, 2007, incentive stock options (granted under both the 2005 Plan and 1995 Plan) covering 657,403 common shares were outstanding. The remaining outstanding stock options at March 31, 2007 of 12,007 pertain to a stock option plan assumed by Park in the acquisition of Security Banc Corporation in 2001. At March 31, 2007, Park held 918,871 treasury shares that are allocated for the stock option plans (including the Security Plan). Management anticipates that few, if any, additional shares of Park common stock will be repurchased within the next twelve months for the stock option plans.

Note 7 — Loans

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

		March 31,				December 31,
(In Thousands)		2007				2006
Commercial, Financial and Agricultural		$	608,751			$	548,254
Real Estate:
Construction			530,609				234,988
Residential			1,434,262				1,300,294
Commercial			957,863				854,869
Consumer			548,828				532,092
Leases			8,370				10,205
Total Loans		$	4,088,683			$	3,480,702

Note 8 — Investment Securities

The amortized cost and fair values of investment securities are shown in the following table. Management evaluates investment securities on a quarterly basis for other-than-temporary impairment. No impairment charges have been deemed necessary in 2007 or 2006. The unrealized losses are primarily the result of changes in interest rates and will not prohibit Park from receiving its contractual principal and interest payments.

(In Thousands)
						Gross				Gross
March 31, 2007						Unrealized				Unrealized				Estimated Fair
Securities Available-for-Sale		Amortized Cost				Holding Gains				Holding Losses				Value
Obligations of U.S. Treasury and Other U.S. Government Sponsored Entities		$	205,325			$	365			$	195			$	205,495
Obligation of States and Political Subdivisions			54,791				883				25				55,649
U.S. Government Sponsored Entities’ Asset-Backed Securities and Other Asset-Backed Securities			1,110,864				981				21,439				1,090,406
Equity Securities			1,893				573				43				2,423
Total
Total		$	1,372,873			$	2,802			$	21,702			$	1,353,973
Total

						Gross				Gross
March 31, 2007						Unrecognized				Unrecognized				Estimated
Securities Held-to-Maturity		Amortized Cost				Holding Gains				Holding Losses				Fair Value
Obligations of States and Political Subdivisions		$	14,710			$	147			$	—			$	14,857
U.S. Government Sponsored Entities’ Asset-Backed Securities and Other Asset-Backed Securities			158,920				4				6,064				152,860
Total
Total		$	173,630			$	151			$	6,064			$	167,717
Total

(In Thousands)
						Gross				Gross
December 31, 2006						Unrealized				Unrealized				Estimated
Securities Available-for-Sale		Amortized Cost				Holding Gains				Holding Losses				Fair Value
Obligations of U.S. Treasury and Other U.S. Government Sponsored Entities		$	90,988			$	140			$	419			$	90,709
Obligation of States and Political Subdivisions			53,947				1,006				3				54,950
U.S. Government Sponsored Entities’ Asset-Backed Securities and Other Asset-Backed Securities			1,153,515				932				26,823				1,127,624
Equity Securities			1,236				595				35				1,796
Total
Total		$	1,299,686			$	2,673			$	27,280			$	1,275,079
Total

						Gross				Gross
December 31, 2006						Unrecognized				Unrecognized				Estimated
Securities Held-to-Maturity		Amortized Cost				Holding Gains				Holding Losses				Fair Value
Obligations of States and Political Subdivisions		$	15,140			$	169			$	—			$	15,309
Total
U.S. Government Sponsored Entities’ Asset-Backed Securities and Other Asset-Backed Securities			161,345				1				6,869				154,477
Total
Total		$	176,485			$	170			$	6,869			$	169,786
Total

Note 9 — Other Investment Securities

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

		March 31,				December 31,
(In Thousands)		2007				2006
Federal Home Loan Bank Stock		$	56,934			$	55,523
Federal Reserve Bank Stock			6,411				6,411
Total		$	63,345			$	61,934

Note 10 — Benefit Plans

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

Park’s funding policy is to contribute annually an amount that can be deducted for federal income tax purposes using a different actuarial cost method and different assumptions from those used for financial reporting purposes. Management does not expect to make a pension plan contribution in 2007. A pension plan contribution of $9,117,417 was paid during the first quarter of 2006.

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

		Three Months Ended
		March 31,
(In Thousands)		2007				2006
Service Cost		$	810			$	795
Interest Cost			776				722
Expected Return on Plan Assets			<1,066>				<994>
Amortization of Prior Service Cost			8				3
Recognized Net Actuarial Loss			138				139
Benefit Expense		$	666			$	665

Note 11 — Income Taxes

In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of Statement of Financial Standard (“SFAS”) No. 109 (FIN 48),” which prescribes a recognition threshold of more-likely-than-not, and a measurement attribute for all tax positions taken or expected to be taken on a tax return, in order for those tax positions to be recognized in the financial statements. The benefit recognized for a tax position that meets the more-likely-than-not criteria is measured based on the largest benefit that is more than 50 percent likely to be realized, taking into consideration the amounts and probabilities of the outcome upon settlement. FIN 48 also provides guidance on disclosures and other issues. Effective January 1, 2007, Park adopted the provisions of FIN 48 and there was no material effect on the financial statements. As a result, there was no cumulative effect related to adopting FIN 48. As of January 1, 2007, Park had provided a liability of $789,000 for unrecognized tax benefits related to various federal and state income tax matters. Park recognizes interest and penalties through the income tax provision. The total amount of interest and penalties on the date of adoption was $76,000. Management does not expect the total amount of unrecognized tax benefits to significantly increase in the next three quarters. Park is no longer subject to examination by federal taxing authorities for the year 2002 and the years prior.

Note 12 — Recent Accounting Pronouncements

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”. SFAS No. 159 gives entities the option to measure eligible financial assets and financial liabilities at fair value on an instrument by instrument basis, that are otherwise not permitted to be accounted for at fair value under other accounting standards. The election to use the fair value option is available when an entity first recognizes a financial asset or financial liability. Subsequent changes in fair value must be reported in earnings. SFAS No. 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. Management does not expect that the adoption of this standard on January 1, 2008 will have a material impact on Park’s financial statements.

In September 2006, FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. Management does not expect that the adoption of this standard on January 1, 2008 will have a material impact on Park’s financial statements.

In July 2006, the Emerging Issues Task Force (“EITF”) of FASB issued a draft abstract for EITF Issue No. 06-04, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements”. This draft abstract from EITF reached a consensus that for an endorsement split-dollar life insurance arrangement within the scope of this Issue, an employer should recognize a liability for future benefits in accordance with SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions”. The Task Force concluded that a liability for the benefit obligation under SFAS No. 106 has not been settled through the purchase of an endorsement type life insurance policy. In September 2006, FASB agreed to ratify the consensus reached in EITF Issue No. 06-04. This new accounting standard will be effective for fiscal years beginning after December 15, 2007. At March 31, 2007, Park and its subsidiary banks owned $117 million of bank owned life insurance policies. These life insurance policies are generally subject to endorsement split-dollar life insurance arrangements. These arrangements were designed to provide a pre-and postretirement benefit for senior officers and directors of Park and its subsidiary banks. Park’s management has not completed its evaluation of the impact of the adoption of EITF Issue No. 06-4 on Park’s financial statements. Without an adjustment to the postretirement benefits provided by the endorsement split-dollar life insurance agreements, Park’s management has concluded that the adoption of EITF Issue No. 06-4 may have a material impact on Park’s financial statements.

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

Management’s discussion and analysis contains forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risk and uncertainties that could cause actual results to differ materially include without limitation, Park’s ability to execute its business plan, Park’s ability to successfully integrate acquisitions into Park’s operations, Park’s ability to achieve the anticipated cost savings and revenue synergies from acquisitions, changes in general economic and financial market conditions, changes in interest rates, changes in the competitive environment, changes in banking regulations or other regulatory or legislative requirements affecting the respective businesses of Park and its subsidiaries, changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies, demand for loans in the respective market areas served by Park and its subsidiaries, and other risk factors relating to the banking industry as detailed from time to time in Park’s reports filed with the Securities and Exchange Commission including those described in “Item 1A. Risk Factors” of Park’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006 and in “Item 1A. Risk Factors” of Part II of this Quarterly Report on Form 10-Q. Undue reliance should not be placed on the forward-looking statements, which speak only as of the date hereof. Park does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to update any forward-looking statement to reflect the events or circumstances after the date on which the forward-looking statement is made, or reflect the occurrence of unanticipated events, except to the extent required by law.

Critical Accounting Policies

Note 1 of the Notes to Consolidated Financial Statements included in Park’s 2006 Annual Report to Shareholders lists significant accounting policies used in the development and presentation of Park’s financial statements. The accounting and reporting policies of Park conform with U.S. generally accepted accounting principles and general practices within the financial services industry. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates.

Park considers that the determination of the allowance for loan losses involves a higher degree of judgement 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, 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 the current economic conditions. All of those factors may be susceptible to significant change. To the extent that actual results differ from management estimates, additional loan loss provisions may be required that would adversely impact earnings for future periods.

Management believes that the accounting for goodwill and other intangible assets also involves a higher degree of judgement than most other significant accounting policies. Statement of Financial Accounting Standards (“SFAS”) No. 142, “Accounting for Goodwill and Other Intangible Assets” establishes standards for the amortization of acquired intangible assets and impairment assessment of goodwill. At March 31, 2007, Park had core deposit intangibles of $17.7 million subject to amortization and $181.1 million of goodwill, which was not subject to periodic amortization. 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 of $181.1 million 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 or the inability to deliver cost-effective services over sustained periods can lead to impairment of goodwill that could adversely impact earnings in future periods. SFAS No. 142 requires an annual evaluation of goodwill for impairment. This evaluation was performed during the first quarter of 2007 and no impairment charge was deemed necessary.

Comparison of Results of Operations
For the Three Months Ended
March 31, 2007 and 2006

Impact of the Vision Acquisition on the First Quarter of 2007

Park acquired Vision on March 9, 2007. (See Note 2 of the Notes to Consolidated Financial Statements for information concerning this acquisition.) The following table displays (for selected balance sheet items at March 31, 2007) the consolidated balance sheet item, the total for the balance sheet item for the two Vision Banks and the total for the balance sheet item without the two Vision Banks.

Selected Balance Sheet Items
(In Thousands)
							March 31, 2007									December 31, 2006
											Park Without
			Park				Vision Banks				Vision Banks					Park
Cash and Due from Banks			$	169,192			$	26,141			$	143,051				$	177,990
Money Market Instruments			$	28,938			$	19,203			$	9,735				$	8,266
Total Investment Securities			$	1,590,948			$	29,866			$	1,561,082				$	1,513,498
Loans			$	4,088,683			$	598,006			$	3,490,677				$	3,480,702
Allowance for Loan Losses			$	79,839			$	9,336			$	70,503				$	70,500
Net Loans			$	4,008,844			$	588,670			$	3,420,174				$	3,410,202
Bank Premises and Equipment			$	64,946			$	18,247			$	46,699				$	47,554
Goodwill and Other Intangible Assets			$	198,828			$	121,333			$	77,495				$	78,003
Noninterest Bearing Deposits			$	718,829			$	78,822			$	640,007				$	664,962
Interest Bearing Deposits			$	3,833,647			$	530,719			$	3,302,928				$	3,160,572
Total Deposits			$	4,552,476			$	609,541			$	3,942,935				$	3,825,534
Total Borrowed Money			$	1,010,970			$	10,866			$	1,000,104				$	979,913
Total Assets			$	6,308,055			$	813,074			$	5,494,981				$	5,470,876

The following table compares the income statement for the first quarter of 2007 with the income statement for the first quarter of 2006. The 2007 income statement has been adjusted to display the impact of the two Vision Banks from March 9, 2007 through March 31, 2007.

Summary Income Statement
(In Thousands)
			Quarter Ended													Quarter Ended
			March 31, 2007													March 31, 2006
											Park Without
			Park				Vision Banks				Vision Banks					Park
Total Interest and Dividends Income			$	90,836			$	3,632			$	87,204				$	80,596
Total Interest Expense				35,938				1,557				34,381					27,177
Net Interest Income				54,898				2,075				52,823					53,419
Provision for Loan Losses				2,205				—				2,205					—
Income from Fiduciary Activities				3,504				—				3,504					3,276
Service Charges on Deposit Accounts				4,847				106				4,741					4,463
Other Service Income				2,505				23				2,482					2,727
Other				5,318				137				5,181					4,927
Total Other Income				16,174				266				15,908					15,393
Salaries and Employee Benefits				22,460				783				21,677					20,046
Occupancy Expense				2,538				85				2,453					2,262
Furniture and Equipment Expense				1,392				68				1,324					1,336
Other Expense				12,919				469				12,450					11,368
Total Other Expense				39,309				1,405				37,904					35,012
Income Before Income Taxes				29,558				936				28,622					33,800
Income Taxes				8,495				356				8,139					9,993
Net Income			$	21,063			$	580			$	20,483				$	23,807

Summary Discussion of Results

Net income decreased by $2.7 million or 11.5% to $21.1 million for the three months ended March 31, 2007 compared to $23.8 million in net income for the first quarter of 2006. The annualized, net income to average asset ratio (ROA) was 1.51% for the first quarter of 2007 compared to 1.78% for the first quarter of 2006. The annualized, net income to average equity ratio (ROE) was 14.58% for the first three months of 2007 compared to 17.65% for the same period in 2006.

Diluted earnings per share decreased by 11.8% to $1.49 for the first quarter of 2007 compared to $1.69 for the first quarter of 2006.

For the first quarter of 2007 compared to the first quarter of 2006, income before income taxes benefited from an increase in net interest income of $1.5 million and an increase in total other income of $781,000. However, the provision for loan losses increased by $2.2 million and total other expense increased by $4.3 million. The net result was a decrease in income before income taxes of $4.2 million in 2007 compared to 2006. Income tax expense decreased by $1.5 million in 2007 compared to 2006.

Net Interest Income

Park’s principal source of earnings is net interest income, the difference between total interest income and total interest expense. Net interest income increased by $1.5 million or 2.8% to $54.9 million for the first quarter of 2007 compared to $53.4 million for the first quarter of 2006. The following table compares the average balance and tax equivalent yield/cost for interest earning assets and interest bearing liabilities for the first quarter of 2007 with the same quarter in 2006.

Three Months Ended March 31,
(In Thousands)
		2007								2006
						Tax								Tax
		Average				Equivalent				Average				Equivalent
		Balance				%				Balance				%
Loans		$	3,631,168				7.97	%		$	3,311,576				7.35	%
Taxable Investments			1,492,642				5.04	%			1,601,349				4.95	%
Tax Exempt Investments			68,641				6.78	%			82,628				6.94	%
Money Market Instruments			23,396				5.09	%			9,368				5.29	%
Interest Earning Assets		$	5,215,847				7.10	%		$	5,004,921				6.57	%
Interest Bearing Deposits		$	3,376,488				3.08	%		$	3,126,606				2.25	%
Short-Term Borrowings			357,052				4.45	%			347,697				3.65	%
Long-Term Debt			606,736				4.24	%			652,670				4.18	%
Interest Bearing Liabilities		$	4,340,276				3.36	%		$	4,126,973				2.67	%
Excess Interest Earning Assets		$	875,571				—			$	877,948				—
Net Interest Spread							3.74	%							3.90	%
Net Interest Margin							4.31	%							4.37	%

Average interest earning assets increased by $211 million or 4.2% to $5,216 million for the three months ended March 31, 2007 compared to the same quarter in 2006.

Average loan balances increased by $320 million or 9.7% to $3,631 million in the first quarter of 2007 compared to the same period in 2006. The following table shows the growth in total loans outstanding for each of the past four quarters.

		Amount
March 31, 2006		$	3,318,314
Growth in Loans			49,781
June 30, 2006			3,368,095
Growth in Loans			22,382
September 30, 2006			3,390,477
Acquisition of Anderson Bank			52,853
Growth in Loans			37,372
December 31, 2006			3,480,702
Acquisition of Vision Banks			595,565
Growth in Loans			12,416
March 31, 2007		$	4,088,683