UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2007

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 incorporation or organization)		(I.R.S. Employer Identification No.)

50 North Third Street, Newark, Ohio 43055

(740) 349-8451

N/A

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

14,062,044 Common shares, no par value per share, outstanding at October 31, 2007.

 

 

PARK NATIONAL CORPORATION

CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements			3-19
Consolidated Condensed Balance Sheets as of September 30, 2007 and December 31, 2006 (unaudited)			3
Consolidated Condensed Statements of Income for the Three and Nine Months Ended September 30, 2007 and 2006 (unaudited)			4-5
Consolidated Condensed Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2007 and 2006 (unaudited)			6
Consolidated Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2007 and 2006 (unaudited)			7-8
Notes to Consolidated Condensed Financial Statements			9-19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			20-37
Item 3. Quantitative and Qualitative Disclosures About Market Risk			37
Item 4. Controls and Procedures			38
PART II. OTHER INFORMATION			38-45
Item 1. Legal Proceedings			38
Item 1A. Risk Factors			39-41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			41-42
Item 3. Defaults Upon Senior Securities			42
Item 4. Submission of Matters to a Vote of Security Holders			42
Item 5. Other Information			42
Item 6. Exhibits			43-44
SIGNATURES			45
EX-10.1
EX-10.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PARK NATIONAL CORPORATION

Consolidated Condensed Balance Sheets (Unaudited)

(dollars in thousands)

		September 30,				December 31,
		2007				2006
Assets:
Cash and due from banks		$	154,472			$	177,990
Money market instruments			11,991				8,266
Cash and cash equivalents		$	166,463			$	186,256
Interest bearing deposits			1				1
Securities available-for-sale, at fair value (amortized cost of $1,525,351 and $1,299,686 at September 30, 2007 and December 31, 2006)			1,505,168				1,275,079
Securities held-to-maturity, at amortized cost (fair value approximates $160,597 and $169,786 at September 30, 2007 and December 31, 2006)			166,632				176,485
Other investment securities			63,345				61,934
Loans (net of unearned income)			4,174,652				3,480,702
Allowance for loan losses			79,846				70,500
Net loans			4,094,806				3,410,202
Bank premises and equipment, net			66,527				47,554
Bank owned life insurance			119,206				113,101
Goodwill and other intangible assets			199,679				78,003
Other assets			129,309				122,261
Total assets		$	6,511,136			$	5,470,876
Liabilities and Stockholders’ Equity:
Deposits:
Noninterest bearing		$	692,749			$	664,962
Interest bearing			3,842,423				3,160,572
Total deposits			4,535,172				3,825,534
Short-term borrowings			711,123				375,773
Long-term debt			550,198				604,140
Junior Subordinated Debentures			15,000				—
Other liabilities			71,305				94,990
Total liabilities			5,882,798				4,900,437
COMMITMENTS AND CONTINGENCIES
Stockholders’ Equity:
Common stock (No par value; 20,000,000 shares authorized; 16,151,213 shares issued in 2007 and 15,358,323 shares issued in 2006)			300,321				217,067
Retained earnings			545,854				519,563
Treasury stock (2,053,764 shares in 2007 and 1,436,794 shares in 2006)			(197,892	)			(143,371	)
Accumulated other comprehensive (loss), net of taxes			(19,945	)			(22,820	)
Total stockholders’ equity			628,338				570,439
Total liabilities and stockholders’ equity		$	6,511,136			$	5,470,876

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PARK NATIONAL CORPORATION

Consolidated Condensed Statements of Income (Unaudited)

(dollars in thousands, except per share data)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2007				2006				2007				2006
Interest and dividend income:
Interest and fees on loans		$	83,964			$	65,843			$	238,625			$	188,991
Interest and dividends on:
Obligations of U.S. Government, its agencies and other securities			18,826				18,430				55,651				57,032
Obligations of states and political subdivisions			754				893				2,349				2,815
Other interest income			222				124				802				346
Total interest and dividend income			103,766				85,290				297,427				249,184
Interest expense:
Interest on deposits:
Demand and savings deposits			11,309				7,397				29,936				18,645
Time deposits			21,440				14,914				60,249				40,628
Interest on borrowings:
Short-term borrowings			6,479				4,284				14,651				11,513
Long-term debt			5,122				5,133				17,867				17,595
Total interest expense			44,350				31,728				122,703				88,381
Net interest income			59,416				53,562				174,724				160,803
Provision for loan losses			5,793				935				10,879				2,402
Net interest income after provision for loan losses			53,623				52,627				163,845				158,401
Other income:
Income from fiduciary activities		$	3,614			$	3,319			$	10,689			$	10,027
Service charges on deposit accounts			6,544				5,317				17,338				14,764
Other service income			3,231				2,685				8,665				8,212
Other			5,671				5,033				17,004				15,072
Total other income			19,060				16,354				53,696				48,075
Gain on sale of securities			—				97				—				97

Continued

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

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2007				2006				2007				2006
Other expense:
Salaries and employee benefits		$	24,386			$	20,268			$	71,014			$	59,834
Occupancy expense			2,678				2,275				7,991				6,719
Furniture and equipment expense			1,587				1,273				4,503				3,964
Other expense			14,166				11,673				41,098				34,840
Total other expense			42,817				35,489				124,606				105,357
Income before income taxes			29,866				33,589				92,935				101,216
Income taxes			8,562				9,784				27,058				29,718
Net income		$	21,304			$	23,805			$	65,877			$	71,498
Per Share:
Net income:
Basic		$	1.50			$	1.72			$	4.62			$	5.12
Diluted		$	1.50			$	1.71			$	4.61			$	5.11
Weighted average shares
Basic			14,193,019				13,859,498				14,273,759				13,957,097
Diluted			14,193,019				13,888,458				14,279,810				13,998,253
Cash dividends declared		$	0.93			$	0.92			$	2.79			$	2.76

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PARK NATIONAL CORPORATION

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

(dollars in thousands, except share data)

														Accumulated
										Treasury				Other
		Common				Retained				Stock				Comprehensive				Comprehensive
Nine Months ended September 30, 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							71,498											$	71,498
Accumulated other comprehensive income (loss), net of tax:
Unrealized net holding loss on securities available-for-sale, net of taxes ($3,184)															(5,913	)			(5,913	)
Total comprehensive income																		$	65,585
Cash dividends on common stock at $2.76 per share							(38,470	)
Cash payment for fractional shares in dividend reinvestment plan			(4	)
Shares issued for stock options - 684			24
Tax benefit from exercise of stock options			18
Treasury stock purchased - 302,786 shares											(30,508	)
Treasury stock reissued for stock options - 37,945 shares											3,131
BALANCE AT SEPTEMBER 30, 2006		$	208,403			$	509,917			$	(144,058	)		$	(16,056	)
BALANCE AT DECEMBER 31, 2006		$	217,067			$	519,563			$	(143,371	)		$	(22,820	)
Net Income							65,877											$	65,877
Accumulated other comprehensive income (loss), net of tax:
Unrealized net holding gain on securities available-for-sale, net of taxes $1,548															2,875				2,875
Total comprehensive income																		$	68,752
Cash dividends on common stock at $2.79 per share							(39,586	)
Cash payment for fractional shares in dividend reinvestment plan			(4	)
Treasury stock purchased - 620,531 shares											(54,817	)
Treasury stock reissued for stock options - 3,561 shares											296
Shares issued for Vision Bancshare, Inc. purchase - 792,937			83,258
BALANCE AT SEPTEMBER 30, 2007		$	300,321			$	545,854			$	(197,892	)		$	(19,945	)

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PARK NATIONAL CORPORATION

Consolidated Condensed Statements of Cash Flows (Unaudited)

(dollars in thousands)

		Nine Months Ended
		September 30,
		2007				2006
Operating activities:
Net income		$	65,877			$	71,498
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, (accretion) and amortization, net			(2,154	)			(85	)
Stock dividends on Federal Home Loan Bank stock			—				(2,274	)
Provision for loan losses			10,879				2,402
Amortization of core deposit intangibles			2,759				1,911
Realized investment security gains			—				(97	)
Changes in assets and liabilities:
Increase in other assets			(7,639	)			(12,265	)
Decrease in other liabilities			(13,138	)			(3,651	)
Net cash provided by operating activities			56,584				57,439
Investing activities:
Proceeds from sales of:
Available-for-sale securities			—				304
Proceeds from maturity of:
Available-for-sale securities			646,918				244,528
Held-to-maturity securities			9,852				15,926
Purchases of:
Available-for-sale securities			(841,746	)			(166,518	)
Net decrease in interest bearing deposits with other banks			—				299
Net increase in loans			(66,742	)			(61,780	)
Loans acquired — Ohio Legacy Bank, N.A. Branch			(38,348	)			—
Cash paid for branch acquistion, Ohio Legacy Bank, N.A.			(2,693	)			—
Cash paid for bank acquisition, Vision Bancshares, Inc.			(44,993	)			—
Purchases of premises and equipment, net			(14,461	)			(3,730	)
Premises and equipment acquired — Ohio Legacy Bank, N.A. Branch			(1,150	)			—
Net cash (used in) provided by investing activities			(353,363	)			29,029

Continued

PARK NATIONAL CORPORATION
Consolidated Condensed Statements of Cash Flows (Unaudited)
(Continued)
(dollars in thousands)

		Nine Months Ended
		September 30,
		2007				2006
Financing activities:
Net increase in deposits		$	109,131			$	131,682
Deposits acquired, Ohio Legacy Bank, N.A. Branch			23,466				—
Net increase in short-term borrowings			311,018				99,531
Proceeds from exercise of stock options			296				3,173
Purchase of treasury stock			(54,817	)			(30,508	)
Cash payment for fractional shares in dividend reinvestment plan			(4	)			(4	)
Long-term debt issued			225,100				—
Repayment of long-term debt			(284,671	)			(257,053	)
Cash dividends paid			(52,533	)			(51,470	)
Net cash provided by (used in) financing activities			276,986				(104,649	)
Decrease in cash and cash equivalents			(19,793	)			(18,181	)
Cash and cash equivalents at beginning of year			186,256				173,973
Cash and cash equivalents at end of period		$	166,463			$	155,792
Supplemental disclosures of cash flow information:
Cash paid for:
Interest		$	122,739			$	86,744
Income taxes		$	29,655			$	25,033
Summary of business acquisitions:
Fair value of assets acquired — Vision Bancshares, Inc.		$	686,512
Cash paid for purchase — Vision Bancshares, Inc.			(87,843	)
Stock issued for purchase — Vision Bancshares, Inc.			(83,258	)
Fair value of liabilities assumed — Vision Bancshares, Inc.			(624,432	)
Goodwill recognized		$	(109,021	)

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PARK NATIONAL CORPORATION

For the Three and Nine Months Ended September 30, 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 periods ended September 30, 2007 are not necessarily indicative of the operating results to be anticipated for the fiscal year ending December 31, 2007.

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and footnotes necessary for a fair presentation of the condensed balance sheets, condensed statements of income, condensed statements of changes in stockholders’ equity and condensed statements of cash flows in conformity with U.S. generally accepted accounting principles. These financial statements should be read in conjunction with the consolidated financial statements incorporated by reference in the Annual Report on Form 10-K of Park for the fiscal year ended December 31, 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 — Acquisitions 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 $109.0 million. The fair value of the acquired assets of Vision was $686.5 million and the fair value of the liabilities assumed was $624.4 million at March 9, 2007.

At the time of the acquisition, Vision operated two bank subsidiaries (both named Vision Bank) which became bank subsidiaries of Park on March 9, 2007. On July 20, 2007, the bank operations of the two Vision Banks were consolidated under a single charter through the merger of the Vision bank headquartered in Gulf Shores, Alabama (“Vision Alabama”) with and into the Vision bank headquartered in Panama City, Florida (“Vision Florida”, “Vision”, or “Vision Bank”), under the charter of Vision Florida. Vision Florida operates 18 branch locations in the Gulf Coast communities, in Baldwin County, Alabama and in the Florida panhandle. The markets that Vision Florida operates in are expected to grow faster than many of the non-metro markets in which Park’s subsidiary banks operate in Ohio. Management expects that the acquisition of Vision will improve the future growth rate for Park’s loans and deposits.

On September 21, 2007, a national bank subsidiary of Park, The First-Knox National Bank of Mount Vernon (“First-Knox”), acquired the Millersburg, Ohio banking office (the “Millersburg branch”) of Ohio Legacy Bank, N.A. (“Ohio Legacy”). First-Knox acquired substantially all of the loans administered at the Millersburg branch of Ohio Legacy and assumed substantially all of the deposit liabilities relating to the deposit accounts assigned to the Millersburg branch. The fair value of loans acquired was approximately $38 million and deposit liabilities acquired were approximately $23 million.

First-Knox paid a premium of approximately $1.7 million in connection with the purchase of the deposit liabilities. First-Knox recognized a loan premium adjustment of $700,000 and a certificate of deposit adjustment of $300,000, resulting in a total increase to core deposit intangibles of $2.7 million. No goodwill was recognized as part of this transaction. In addition, First-Knox paid $900,000 for the acquisition of the branch office building that Ohio Legacy was leasing from a third party.

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

						Core Deposit
(In Thousands)		Goodwill				Intangibles				Total
December 31, 2006		$	72,334			$	5,669			$	78,003
Vision Acquisition			109,021				12,720				121,741
Millersburg Branch Acquisition			—				2,694				2,694
Amortization			—				<2,759	>			<2,759	>
September 30, 2007		$	181,355			$	18,324			$	199,679

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 acquisition and the Millersburg branch acquisition core deposit intangibles is six years. Management expects that the core deposit amortization expense will be $1.1 million 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		$	3,847
2008			4,025
2009			3,746
2010			3,422
2011			2,677
Total		$	17,717

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 and residential mortgage loans are not individually risk graded. Reserves are established for each pool of loans based on historical loan loss experience, current economic conditions, loan delinquency and other environmental factors.

The following table shows the activity in the allowance for loan losses for the three and nine months ended September 30, 2007 and 2006.

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(In Thousands)		2007				2006				2007				2006
Average Loans (Net of Unearned Income)		$	4,115,617			$	3,367,532			$	3,948,942			$	3,339,023
Allowance for Loan Losses:
Beginning Balance			79,905			$	69,698				70,500			$	69,694
Charge-Offs:
Commercial, Financial and Agricultural			1,152				279				3,267				899
Real Estate — Construction			2,267				57				2,516				557
Real Estate — Residential			1,093				422				3,104				1,206
Real Estate — Commercial			768				73				1,139				472
Consumer			1,770				1,465				5,280				4,320
Lease Financing			—				20				—				57
Total Charge-Offs			7,050				2,316				15,306				7,511
Recoveries:
Commercial, Financial and Agricultural			167				336				863				866
Real Estate — Construction			—				—				8				—
Real Estate — Residential			314				266				578				621
Real Estate — Commercial			220				78				485				1,161
Consumer			470				647				2,441				2,322
Lease Financing			27				54				64				143
Total Recoveries			1,198				1,381				4,439				5,113
Net Charge-Offs			5,852				935				10,867				2,398
Provision Charged to Earnings			5,793				935				10,879				2,402
Allowance for Loan Losses of Acquired Banks			—				—				9,334				—
Ending Balance		$	79,846			$	69,698			$	79,846			$	69,698
Annualized Ratio of Net Charge-Offs to Average Loans			.56	%			.11	%			.37	%			.10	%
Ratio of Allowance for Loan Losses to End of Period Loans, Net of Unearned Income			1.91	%			2.06	%			1.91	%			2.06	%

Note 4 — Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2007 and 2006.

(Dollars in Thousands, Except Per Share Data)
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2007				2006				2007				2006
Numerator:
Net Income		$	21,304			$	23,805			$	65,877			$	71,498
Denominator:
Denominator for Basic Earnings Per Share (Weighted Average Shares Outstanding)			14,193,019				13,859,498				14,273,759				13,957,097
Effect of Dilutive Securities			—				28,960				6,051				41,156
Denominator for Diluted Earnings Per Share (Weighted Average Shares Outstanding Adjusted for the Dilutive Securities)			14,193,019				13,888,458				14,279,810				13,998,253
Earnings per Share:
Basic Earnings Per Share		$	1.50			$	1.72			$	4.62			$	5.12
Diluted Earnings Per Share		$	1.50			$	1.71			$	4.61			$	5.11

For the three and nine month periods ending September 30, 2007, options to purchase 534,200 and 533,047 shares of common stock, respectively, were outstanding but not included in the computation of diluted earnings per share because the respective option exercise prices exceeded the market value of the underlying common shares such that their inclusion would have had an anti-dilutive effect. The amount of 534,200 represented all outstanding options at September 30, 2007. For the three and nine month periods ending September 30, 2006, options to purchase 430,672 and 430,142 shares of common stock, respectively, were outstanding but not included in the computation of diluted net income per share due to their having the same anti-dilutive effect as those disclosed for the three and nine month periods ending September 30, 2007.

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) and Vision Bank (VIS).

																						Balances at
Operating Results for the Three Months Ended September 30, 2007 (In Thousands)																						September 30, 2007
		Net Interest				Provision for								Other
		Income				Loan Losses				Other Income				Expense				Net Income				Assets
PNB		$	18,141			$	913			$	7,566			$	12,708			$	8,160			$	2,104,721
RTC			4,188				570				1,359				2,788				1,447				577,790
CNB			6,447				270				2,291				4,067				2,898				734,695
FKNB			7,506				380				2,221				4,397				3,269				820,836
UB			1,885				20				650				1,630				605				201,486
SNB			3,093				40				750				1,922				1,322				438,345
SEC			7,038				640				2,459				5,021				2,636				782,804
CIT			1,252				40				444				1,011				441				146,642
VIS			7,744				2,420				1,120				6,189				176				890,566
All Other			2,122				500				200				3,084				350				<186,749	>
TOTAL		$	59,416			$	5,793			$	19,060			$	42,817			$	21,304			$	6,511,136

																						Balances at
Operating Results for the Three Months Ended September 30, 2006																						September 30,
(In Thousands)																						2006
		Net Interest				Provision for								Other
		Income				Loan Losses				Other Income				Expense				Net Income				Assets
PNB		$	18,343			$	310			$	7,108			$	11,832			$	8,958			$	1,992,672
RTC			4,557				100				1,113				2,757				1,854				504,325
CNB			6,269				70				2,135				4,087				2,813				719,227
FKNB			7,634				50				1,873				4,465				3,303				765,368
UB			1,906				20				593				1,555				633				210,699
SNB			2,846				40				606				1,890				1,076				397,668
SEC			7,557				80				2,352				5,090				3,188				873,386
CIT			1,323				65				419				1,059				422				163,495
VIS			—				—				—				—				—				—
All Other			3,127				200				252				2,754				1,558				<233,507	>
TOTAL		$	53,562			$	935			$	16,451			$	35,489			$	23,805			$	5,393,333

Operating Results for the Nine Months Ended September 30, 2007
(In Thousands)
		Net Interest				Provision for								Other
		Income				Loan Losses				Other Income				Expense				Net Income
PNB		$	54,229			$	2,164			$	21,214			$	38,143			$	23,709
RTC			12,706				1,470				3,939				8,444				4,452
CNB			19,094				1,065				7,277				12,361				8,555
FKNB			22,642				900				6,054				13,531				9,421
UB			5,656				45				1,832				4,885				1,748
SNB			9,238				115				2,036				5,854				3,705
SEC			22,105				1,465				7,220				15,228				8,618
CIT			3,830				65				1,253				3,118				1,294
VIS			18,078				2,505				2,377				13,301				2,917
All Other			7,146				1,085				494				9,741				1,458
TOTAL		$	174,724			$	10,879			$	53,696			$	124,606			$	65,877

Operating Results for the Nine Months Ended September 30, 2006
(In Thousands)
		Net Interest				Provision for								Other
		Income				Loan Losses				Other Income				Expense				Net Income
PNB		$	54,123			$	923			$	20,734			$	34,935			$	26,339
RTC			13,899				270				3,427				8,311				5,780
CNB			19,183				110				6,235				12,275				8,638
FKNB			22,787				205				5,836				13,047				10,174
UB			5,796				<160	>			1,665				4,739				1,966
SNB			8,884				95				1,766				5,706				3,414
SEC			22,761				280				6,745				15,166				9,473
CIT			4,082				105				1,229				3,219				1,354
VIS			—				—				—				—				—
All Other			9,288				574				535				7,959				4,360
TOTAL		$	160,803			$	2,402			$	48,172			$	105,357			$	71,498

The operating results of the Parent Company and Guardian Financial Service Company (GFC) in the “All Other” row are used to reconcile the segment totals to the consolidated condensed statements of income for the periods ended September 30, 2007 and 2006. The reconciling amounts for consolidated total assets for both of the periods ended September 30, 2007 and 2006 consist of the elimination of intersegment borrowings, and the assets of the Parent Company and GFC which are not eliminated.

Note 7 — Stock Option Plans

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

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

						Weighted
						Average Exercise
		Stock Options				Price Per Share
Outstanding at December 31, 2006			686,024			$	101.89
Granted			—				—
Exercised			<3,561	>			83.02
Forfeited/Expired			<148,263	>			91.19
Outstanding at September 30, 2007			534,200			$	104.99

All of the stock options outstanding at September 30, 2007 were exercisable. The aggregate intrinsic value of the outstanding stock options at September 30, 2007 was $0.

The intrinsic value of the stock options exercised during the third quarter of 2007 was $0 and $47,000 for the first nine months of 2007 compared to $28,000 for the third quarter of 2006 and $703,000 for the first nine months of 2006. The weighted average contractual remaining term was 1.8 years for the stock options outstanding at September 30, 2007.

All of the common shares delivered upon exercise of incentive stock options granted under the Park National Corporation 2005 Incentive Stock Option Plan (the “2005 Plan”) and the Park National Corporation 1995 Incentive Stock Option Plan (the “1995 Plan”) are to be treasury shares. At September 30, 2007, incentive stock options (granted under both the 2005 Plan and 1995 Plan) covering 522,396 common shares were outstanding. The remaining outstanding stock options at September 30, 2007 covering 11,804 common shares were granted under a stock option plan (the “Security Plan”) assumed by Park in the acquisition of Security Banc Corporation in 2001. At September 30, 2007, Park held 918,681 treasury shares that are allocated for the stock option plans (including the Security Plan).

Note 8 – Loans

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

		September 30,				December 31,
(In Thousands)		2007				2006
Commercial, Financial and Agricultural		$	599,795			$	548,254
Real Estate:
Construction			543,867				234,988
Residential			1,452,543				1,300,294
Commercial			982,587				854,869
Consumer			588,449				532,092
Leases			7,411				10,205
Total Loans		$	4,174,652			$	3,480,702

Note 9 – 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
September 30, 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		$	200,995			$	988			$	20			$	201,963
Obligation of States and Political Subdivisions			49,031				672				28				49,675
U.S. Government Sponsored Entities’ Asset-Backed Securities and Other Asset-Backed Securities			1,273,032				2,274				24,343				1,250,963
Equity Securities			2,293				508				234				2,567
Total		$	1,525,351			$	4,442			$	24,625			$	1,505,168

						Gross				Gross
September 30, 2007						Unrecognized				Unrecognized				Estimated
Securities Held-to-Maturity		Amortized Cost				Holding Gains				Holding Losses				Fair Value
Obligations of States and Political Subdivisions		$	13,780			$	116			$	—			$	13,896
U.S. Government Sponsored Entities’ Asset-Backed Securities and Other Asset-Backed Securities			152,852				3				6,154				146,701
Total		$	166,632			$	119			$	6,154			$	160,597

(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		$	1,299,686			$	2,673			$	27,280			$	1,275,079

						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
U.S. Government Sponsored Entities’ Asset-Backed Securities and Other Asset-Backed Securities			161,345				1				6,869				154,477
Total		$	176,485			$	170			$	6,869			$	169,786

For the third quarter ended September 30, 2007, the tax equivalent yield on the total investment portfolio was 5.14% and the average maturity was 4.0 years. U.S. Government Sponsored Entities’ asset-backed securities comprised approximately 75% of the total investment portfolio at the end of the third quarter of 2007. This segment of the investment portfolio consists of fifteen-year mortgage-backed securities and fifteen-year collateralized mortgage obligations.

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 collateralized mortgage obligations would be reduced. Management estimates that the average maturity of the investment portfolio would lengthen to 5.1 years with a 100 basis point increase in long-term interest rates and to 5.2 years with a 200 basis point increase in long-term interest rates. Conversely, management estimates that repayments would increase and that the average maturity of the investment portfolio would decrease to 3.6 years and 2.6 years respectively, with a 100 basis point and 200 basis point decrease in long-term rates.

Note 10 – Other Investment Securities

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

		September 30,				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 11 – 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 during the fourth quarter of 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								Nine Months Ended
		September 30,								September 30,
(In Thousands)			2007				2006				2007				2006
Service Cost		$	810			$	795			$	2,430			$	2,385
Interest Cost			776				722				2,328				2,165
Expected Return on Plan Assets			<1,066	>			<994	>			<3,198	>			<2,982	>
Amortization of Prior Service Cost			8				3				24				10
Recognized Net Actuarial Loss			138				139				414				416
Benefit Expense		$	666			$	665			$	1,998			$	1,994

Note 12 – Income Taxes

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement 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. In the third quarter ended September 30, 2007, Park claimed a $29 million deduction related to the 1994 write-off of regulatory goodwill by one its affiliate banks by filing an amended 2003 federal income tax return. Park increased its unrecognized tax benefit by approximately $10 million related to this item. Although Park believes it is within its rights by claiming this deduction, it is highly uncertain as to whether this deduction will be allowed. Consequently, Park has not recognized a related income tax benefit. Management does not expect the total amount of unrecognized tax benefits to significantly change in the next quarter. Park is no longer subject to examination by federal taxing authorities for the tax year 2003 and the years prior.

Note 13 – Recent Accounting Pronouncements

In February 2007, the FASB issued Statement of Financial Accounting Standards (“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 fair value option permits companies to choose to measure eligible items at fair value at specified election dates. 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. We will adopt SFAS No. 159 on January 1, 2008. Management does not expect that the adoption of this standard 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 United States 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 is currently in the process of evaluating the impact of adopting this Statement on Park’s Consolidated Condensed 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 September 30, 2007, Park and its subsidiary banks owned $119.2 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 completed its initial evaluation of the impact of the adoption of EITF Issue No. 06-4 on Park’s financial statements. Based on the most recent analysis performed by management, if the post-retirement benefit for senior officers and directors of Park and its subsidiaries remain unchanged, Park believes there will be a charge of approximately $12 million to stockholders’ equity on January 1, 2008.

Note 14 – Consolidation of Ohio Banking Operations

On July 30, 2007, Park announced a plan to review current processes and identify opportunities to improve efficiency by converting to one operating system. One outcome of this initiative will be the combination of the eight banking charters of Park’s Ohio-based subsidiary banks into one national bank charter, The Park National Bank. Functions to be reviewed as part of this project include, but are not limited to: compliance, regulatory reporting, accounting, product development, data processing, and loan and deposit operations. On August 21, 2007, Park signed an agreement with its data processing vendor for the system conversions of the 12 Ohio-based banking subsidiaries and divisions. The contract requires total payments of approximately $700,000; $350,000 of which was prepaid upon the signing of the agreement on August 21, 2007. The entire contract obligation will be expensed ratably, as incurred, over the 15-month period ending December 31, 2008. It is anticipated that using a common operational platform and centralizing certain functions will result in expense reduction due to having fewer operational support positions over the next two years. However, specific reductions in employment have not been determined at this time.

On October 22, 2007, the Compensation Committee of the Board of Directors of Park approved a severance plan known as the Discretionary Employment Transition Policy (“Severance Plan”). Management anticipates that as affected positions are identified in 2008 for elimination, employees will be evaluated to determine if they qualify for the severance package. Park’s Severance Policy provides for the payment of one week of salary for each year of service up to ten years. For each year of service over ten, the Severance Policy will pay out two weeks of salary. The minimum payment for a covered employee will be four weeks of salary. There is no maximum severance payment under this Severance Policy.

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; general economic and financial market conditions, either national or in the state in which Park and its subsidiaries do business, are less favorable than expected; Park’s ability to execute its plan to convert to one operating system; changes in interest rates; competitive pressures among financial institutions increase significantly; 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; the effect of critical accounting policies and judgments; demand for loans in the respective market areas served by Park and its subsidiaries, and other risk factors relating to the banking industry as detailed from time to time in Park’s reports filed with the Securities and Exchange Commission including those described in “Item 1A. Risk Factors” of Part I of Park’s Annual Report on Form 10-K for the fiscal year ended December 31, 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 consolidated financial statements. The accounting and reporting policies of Park conform with U.S. generally accepted accounting principles and general practices within the financial services industry. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates.

Park considers that the determination of the allowance for loan losses involves a higher degree of 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 September 30, 2007, Park had core deposit intangibles of $18.3 million subject to amortization and $181.4 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 $181.4 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, which is performed annually, was performed during the first quarter of 2007 and no impairment charge was deemed necessary.

Comparison of Results of Operations
For the Three and Nine Months Ended September 30, 2007 and 2006

Impact of the Vision Acquisition on Park’s Consolidated Financial Statements in 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 September 30, 2007) the consolidated condensed balance sheet item, the total for the balance sheet item for Vision Bank and the total for the balance sheet item without Vision Bank.

Selected Balance Sheet Items
		September 30, 2007												December 31, 2006
		Consolidated								Park Without
(In Thousands)		Park				Vision Bank				Vision Bank				Park
Cash and Due from Banks		$	154,472			$	15,051			$	139,421			$	177,990
Total Investment Securities		$	1,735,145			$	114,260			$	1,620,885			$	1,513,498
Loans		$	4,174,652			$	616,576			$	3,558,076			$	3,480,702
Allowance for Loan Losses		$	79,846			$	9,627			$	70,219			$	70,500
Net Loans		$	4,094,806			$	606,949			$	3,487,857			$	3,410,202
Bank Premises and Equipment		$	66,527			$	18,696			$	47,831			$	47,554
Goodwill and Other Intangible Assets		$	199,679			$	120,504			$	79,175			$	78,003
Noninterest Bearing Deposits		$	692,749			$	71,955			$	620,794			$	664,962
Interest Bearing Deposits		$	3,842,423			$	576,999			$	3,265,424			$	3,160,572
Total Deposits		$	4,535,172			$	648,954			$	3,886,218			$	3,825,534
Total Borrowed Money		$	1,276,321			$	47,606			$	1,228,715			$	979,913
Total Assets		$	6,511,136			$	890,566			$	5,620,570			$	5,470,876