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, 2008

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, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

13,964,560 Common shares, no par value per share, outstanding at April 30, 2008.

Page 1 of 46

PARK NATIONAL CORPORATION

 

 

CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements		3-22
Consolidated Condensed Balance Sheets as of March 31, 2008 and December 31, 2007 (unaudited)		3
Consolidated Condensed Statements of Income for the Three Months Ended March 31, 2008 and 2007 (unaudited)		4-5
Consolidated Condensed Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2008 and 2007 (unaudited)		6
Consolidated Condensed Statements of Cash Flows for the Three Months Ended March 31, 2008 and 2007 (unaudited)		7-8
Notes to Consolidated Condensed Financial Statements		9-22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		23-37
Item 3. Quantitative and Qualitative Disclosures About Market Risk		38
Item 4. Controls and Procedures		39
PART II. OTHER INFORMATION		40-45
Item 1. Legal Proceedings		40
Item 1A. Risk Factors		40-41
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		42-43
Item 5. Other Information		43
Item 6. Exhibits		44
SIGNATURES		46
EX-3.2(D)
EX-3.2(E)
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PARK NATIONAL CORPORATION

Consolidated Condensed Balance Sheets (Unaudited)
(dollars in thousands)

		March 31,				December 31,
		2008				2007
Assets:
Cash and due from banks		$	176,350			$	183,165
Money market instruments			8,546				10,232
Cash and cash equivalents			184,896				193,397
Interest bearing deposits			1				1
Securities available-for-sale, at fair value (amortized cost of $1,661,576 and $1,473,052 at March 31, 2008 and December 31, 2007)			1,684,276				1,474,517
Securities held-to-maturity, at amortized cost (fair value approximates $205,805 and $161,414 at March 31, 2008 and December 31, 2007)			207,139				165,421
Other investment securities			64,620				63,165
Loans			4,253,363				4,224,134
Allowance for loan losses			85,848				87,102
Net loans			4,167,515				4,137,032
Bank premises and equipment, net			68,816				66,634
Bank owned life insurance			128,726				119,472
Goodwill and other intangible assets			143,550				144,556
Other assets			131,826				136,907
Total assets		$	6,781,365			$	6,501,102
Liabilities and Stockholders’ Equity:
Deposits:
Noninterest bearing		$	711,151			$	695,466
Interest bearing			3,808,605				3,743,773
Total deposits			4,519,756				4,439,239
Short-term borrowings			753,953				759,318
Long-term debt			787,512				590,409
Subordinated Debentures			40,000				40,000
Other liabilities			88,965				92,124
Total liabilities			6,190,186				5,921,090
COMMITMENTS AND CONTINGENCIES
Stockholders’ Equity:
Common stock (No par value; 20,000,000 shares authorized; 16,151,188 shares issued at 2008 and 16,151,200 shares issued at 2007)			301,213				301,213
Retained earnings			487,443				489,511
Treasury stock (2,186,624 shares at 2008 and 2,186,624 shares at 2007)			(208,104	)			(208,104	)
Accumulated other comprehensive income (loss), net of taxes			10,627				(2,608	)
Total stockholders’ equity			591,179				580,012
Total liabilities and stockholders’ equity		$	6,781,365			$	6,501,102

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
		March 31,
		2008				2007
Interest and dividends income:
Interest and fees on loans		$	79,010			$	71,182
Interest and dividends on:
Obligations of U.S. Government, its agencies and other securities			20,705				18,547
Obligations of states and political subdivisions			654				813
Other interest income			99				294
Total interest and dividends income			100,468				90,836
Interest expense:
Interest on deposits:
Demand and savings deposits			7,358				8,097
Time deposits			19,199				17,581
Interest on borrowings:
Short-term borrowings			4,751				3,918
Long-term debt			7,676				6,342
Total interest expense			38,984				35,938
Net interest income			61,484				54,898
Provision for loan losses			7,394				2,205
Net interest income after provision for loan losses			54,090				52,693
Other income:
Income from fiduciary activities			3,573				3,504
Service charges on deposit accounts			5,784				4,847
Other service income			3,077				2,505
Other			8,605				5,318
Total other income			21,039				16,174
Gain on sale of securities			309				—

Continued

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

		Three Months Ended
		March 31,
		2008				2007
Other expense:
Salaries and employee benefits		$	24,671			$	23,061
Occupancy expense			3,025				2,560
Furniture and equipment expense			2,317				2,176
Other expense			13,264				11,512
Total other expense			43,277				39,309
Income before income taxes			32,161				29,558
Income taxes			9,183				8,495
Net income		$	22,978			$	21,063
Per Share:
Net income:
Basic		$	1.65			$	1.49
Diluted		$	1.65			$	1.49
Weighted average
Basic			13,964,572				14,121,331
Diluted			13,964,572				14,138,517
Cash dividends declared		$	0.94			$	0.93

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
Three Months ended March 31, 2008 and 2007		Stock				Earnings				at Cost				Income (loss)				Income
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	)
BALANCE AT DECEMBER 31, 2007		$	301,213			$	489,511				($208,104	)			($2,608	)
Net Income							22,978											$	22,978
Other comprehensive income (loss), net of tax:
Unrealized net holding (loss) on cash flow hedge, net of taxes ($306)															(568	)			(568	)
Unrealized net holding gain on securities available-for-sale, net of taxes $7,432															13,803				13,803
Total comprehensive income																		$	36,213
Cash dividends on common stock at $.94 per share							(13,081	)
Postretirement benefit pertaining to endorsement split-dollar life insurance							(11,634	)
FAS 158 measurement date adjustment, net of taxes ($178)							(331	)
BALANCE AT MARCH 31, 2008		$	301,213			$	487,443				($208,104	)		$	10,627

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PARK NATIONAL CORPORATION

Consolidated Condensed Statements of Cash Flows (Unaudited)
(dollars in thousands)

		Three Months Ended
		March 31,
		2008				2007
Operating activities:
Net income		$	22,978			$	21,063
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, accretion and amortization			(128	)			(569	)
Provision for loan losses			7,394				2,205
Stock dividends on Federal Home Loan Bank stock			(725	)			—
Realized net investment security (gains)			(309	)			—
Amortization of core deposit intangibles			1,006				684
Changes in assets and liabilities:
Increase in other assets			(7,908	)			(6,172	)
Increase (decrease) in other liabilities			1,884				(671	)
Net cash provided from operating activities			24,192				16,540
Investing activities:
Proceeds from sales of available-for-sale securities			25,309				—
Proceeds from maturity of:
Available-for-sale securities			106,059				195,424
Held-to-maturity securities			164				2,853
Purchases of:
Available-for-sale securities			(319,139	)			(239,330	)
Held-to-maturity securities			(41,882	)			—
Net (increase) in other investments			(730	)			—
Net (increase) in loans			(36,299	)			(13,530	)
Cash paid for acquisition, net			—				(44,993	)
Purchases of bank owned life insurance, net			(8,100	)			—
Purchases of premises and equipment, net			(4,076	)			(10,508	)
Net cash used by investing activities			(278,694	)			(110,084	)

Continued

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

		Three Months Ended
		March 31,
		2008				2007
Financing activities:
Net increase in deposits		$	80,517			$	149,848
Net (decrease) in short-term borrowings			(5,365	)			(11,324	)
Proceeds from exercise of stock options			—				233
Purchase of treasury stock			—				(4,862	)
Cash payment for fractional shares in dividend reinvestment plan			—				(1	)
Long-term debt issued			200,000				75,100
Repayment of long-term debt			(2,897	)			(77,680	)
Cash dividends paid			(26,254	)			(25,896	)
Net cash provided from financing activities			246,001				105,418
(Decrease) increase in cash and cash equivalents			(8,501	)			11,874
Cash and cash equivalents at beginning of year			193,397				186,256
Cash and cash equivalents at end of period		$	184,896			$	198,130
Supplemental disclosures of cash flow information:
Cash paid for:
Interest		$	38,396			$	35,829
Income taxes		$	1,000			$	2,600
Summary of business acquisition:
Fair value of assets acquired			—			$	686,512
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			—				($109,021	)

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PARK NATIONAL CORPORATION

For the Three Months Ended March 31, 2008 and 2007.

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, 2008 are not necessarily indicative of the operating results to be anticipated for the fiscal year ending December 31, 2008.

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, 2007 from Park’s 2007 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 2007 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.

Note 2 — Acquisitions and Intangible Assets

On March 9, 2007, Park acquired all of the stock and outstanding stock options of Vision Bancshares, Inc. 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. Substantially, none of the goodwill is tax deductible. Management continues to expect that the acquisition of Vision will improve the future growth rate for Park’s loans and deposits. 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.

During the first quarter of 2008, loans at Vision Bank have grown by $26 million to $666 million at March 31, 2008. For the twelve months ended March 31, 2008, Vision Bank had loan growth of $67 million or 11.3%, while the Ohio-based banks had loan growth of $97 million or 2.8% for the same period.

Additional information pertaining to Park’s acquisitions made during 2007 is discussed in Note 2 of the Notes to Consolidated Financial Statements included in Park’s 2007 Annual Report to Shareholders.

The following table shows the activity in goodwill and core deposit intangibles during the first three months of 2008.

						Core Deposit
(In Thousands)		Goodwill				Intangibles				Total
December 31, 2007		$	127,320			$	17,236			$	144,556
Amortization			—				<1,006>				<1,006>
March 31, 2008		$	127,320			$	16,230			$	143,550

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 Bank and the Millersburg branch purchase core deposit intangibles is six years. Management expects that the core deposit amortization expense will be $1.0 million for the second, third and fourth quarters of 2008.

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

		Annual
(In Thousands)		Amortization
2008		$	4,025
2009		$	3,746
2010		$	3,422
2011		$	2,677
2012		$	2,677
Total		$	16,547

Goodwill is evaluated on an annual basis for impairment and otherwise when circumstances warrant. During the fourth quarter of 2007, Park’s management determined that the goodwill from the Vision Bank acquisition on March 9, 2007 could possibly be impaired due to the significant deterioration in the credit condition of Vision Bank. Nonperforming loans at Vision Bank increased from $26.3 million at September 30, 2007 to $63.5 million at December 31, 2007 or 9.9% of year-end loan balances. Net loan charge-offs were $6.4 million for the fourth quarter or an annualized 3.99% of average loan balances. Management determined that due to these severe credit conditions, a valuation of the fair value of Vision Bank be computed to determine if the goodwill of $109.0 million was impaired. Management determined that an impairment charge of $54.0 million was appropriate; therefore, the current carrying value of goodwill resulting from the Vision acquisition is $55.0 million at March 31, 2008.

Goodwill for the Ohio-based banks was evaluated during the first quarter of 2008, 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 months ended March 31, 2008 and 2007.

		Three Months Ended
		March 31,
(In Thousands)		2008				2007
Average Loans		$	4,229,423			$	3,631,168
Allowance for Loan Losses:
Beginning Balance		$	87,102			$	70,500
Charge-Offs:
Commercial, Financial and Agricultural			421				1,117
Real Estate — Construction			2,611				56
Real Estate — Residential			3,599				961
Real Estate — Commercial			1,100				53
Consumer			2,270				1,777
Lease Financing			—				—
Total Charge-Offs			10,001				3,964
Recoveries:
Commercial, Financial and Agricultural			216				314
Real Estate — Construction			—				—
Real Estate — Residential			64				145
Real Estate — Commercial			17				250
Consumer			1,050				1,034
Lease Financing			6				21
Total Recoveries			1,353				1,764
Net Charge-Offs			8,648				2,200
Provision for Loan Losses			7,394				2,205
Allowance for Loan Losses of Acquired Banks			—				9,334
Ending Balance		$	85,848			$	79,839
Annualized Ratio of Net Charge-Offs to Average Loans			.82	%			.25	%
Ratio of Allowance for Loan Losses to End of Period Loans			2.02	%			1.95	%

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, 2008 and 2007.

(Dollars in Thousands, Except Per Share Data)
		Three Months Ended
		March 31,
		2008				2007
Numerator:
Net Income		$	22,978			$	21,063
Denominator:
Denominator for Basic Earnings Per Share (Weighted Average Shares Outstanding)			13,964,572				14,121,331
Effect of Dilutive Securities			—				17,186
Denominator for Diluted Earnings Per Share (Weighted Average Shares Outstanding Adjusted for the Dilutive Securities)			13,964,572				14,138,517
Earnings per Share:
Basic Earnings Per Share		$	1.65			$	1.49
Diluted Earnings Per Share		$	1.65			$	1.49

For the three months ended March 31, 2008, options to purchase 601,919 shares of common stock 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 601,919 represented all outstanding options at March 31, 2008. For the three months ended March 31, 2007, options to purchase 652,224 shares of common stock 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 months ended March 31, 2008.

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).

Operating Results for the Three Months Ended March 31, 2008																						Balances at
(In Thousands)																						March 31, 2008
										Other Income
										and
		Net Interest				Provision for				Gain on Sale				Other				Net Income
		Income				Loan Losses				of Securities				Expense				(Loss)				Assets
PNB		$	19,451			$	764			$	9,159			$	12,708			$	9,906			$	2,491,954
RTC			4,628				75				1,640				2,612				2,354				537,398
CNB			6,689				50				2,184				4,044				3,159				725,039
FKNB			8,127				575				2,729				4,635				3,719				792,063
UB			1,915				—				689				1,433				789				204,195
SNB			3,441				290				721				1,953				1,318				447,380
SEC			6,991				340				2,897				5,413				2,851				826,673
CIT			1,211				—				405				1,032				399				143,508
VIS			6,846				4,800				1,082				6,128				<1,832>				917,869
All Other			2,185				500				<158>				3,319				315				<304,714>
TOTAL		$	61,484			$	7,394			$	21,348			$	43,277			$	22,978			$	6,781,365

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
VIS			2,075				—				266				1,405				581				813,074
All Other			2,638				230				135				3,341				662				<179,829>
TOTAL		$	54,898			$	2,205			$	16,174			$	39,309			$	21,063			$	6,308,055

The operating results of the Parent Company and Guardian Financial Services 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 March 31, 2008 and 2007. The reconciling amounts for consolidated total assets for both of the periods ended March 31, 2008 and 2007 consist of the elimination of intersegment borrowings, and the assets of the Parent Company and GFC which are not eliminated. The results for Vision Bank for March 31, 2007 are from the acquisition date of March 9, 2007 through March 31, 2007.

Note 7 — Stock Option Plans

Park did not grant any stock options during the first quarter of 2008 or the first quarter of 2007. Additionally, no stock options became vested during the first quarter of 2008 or 2007.

The following table summarizes stock option activity during the first three months of 2008.

						Weighted
						Average Exercise
		Stock Options				Price Per Share
Outstanding at December 31, 2007			615,191			$	100.63
Granted			—				—
Exercised			—				—
Forfeited/Expired			<13,272>				100.60
Outstanding at March 31, 2008			601,919			$	100.63

All of the stock options outstanding at March 31, 2008 were exercisable. The aggregate intrinsic value of the outstanding stock options at March 31, 2008 was $0.

No options were exercised during the first quarter of 2008. The intrinsic value of the stock options exercised during the first quarter of 2007 was $47,000. The weighted average contractual remaining term was 1.8 years for the stock options outstanding at March 31, 2008.

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 March 31, 2008, incentive stock options (granted under both the 2005 Plan and 1995 Plan) covering 590,254 common shares were outstanding. The remaining outstanding stock options at March 31, 2008 covering 11,665 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 March 31, 2008, Park held 1,008,681 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:

		March 31,				December 31,
(In Thousands)		2008				2007
Commercial, Financial and Agricultural		$	616,844			$	613,282
Real Estate:
Construction			531,657				536,389
Residential			1,504,305				1,481,174
Commercial			997,026				993,101
Consumer			596,847				593,388
Leases			6,684				6,800
Total Loans		$	4,253,363			$	4,224,134

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 2008 or 2007. The unrealized losses on debt securities 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, 2008						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		$	157,847			$	3,698			$	—			$	161,545
Obligation of States and Political Subdivisions			40,519				749				20				41,248
U.S. Government Sponsored Entities’ Asset-Backed Securities and Other Asset-Backed Securities			1,460,769				18,837				423				1,479,183
Equity Securities			2,441				393				534				2,300
Total		$	1,661,576			$	23,677			$	977			$	1,684,276

						Gross				Gross
March 31, 2008						Unrecognized				Unrecognized				Estimated
Securities Held-to-Maturity		Amortized Cost				Holding Gains				Holding Losses				Fair Value
Obligations of States and Political Subdivisions		$	13,546			$	152			$	—			$	13,698
U.S. Government Sponsored Entities’ Asset-Backed Securities and Other Asset-Backed Securities			193,593				96				1,582				192,107
Total		$	207,139			$	248			$	1,582			$	205,805

(In Thousands)
						Gross				Gross
December 31, 2007						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		$	200,996			$	2,562			$	—			$	203,558
Obligation of States and Political Subdivisions			44,805				716				20				45,501
U.S. Government Sponsored Entities’ Asset-Backed Securities and Other Asset-Backed Securities			1,224,958				6,292				8,115				1,223,135
Equity Securities			2,293				420				390				2,323
Total		$	1,473,052			$	9,990			$	8,525			$	1,474,517

						Gross				Gross
December 31, 2007						Unrecognized				Unrecognized				Estimated
Securities Held-to-Maturity		Amortized Cost				Holding Gains				Holding Losses				Fair Value
Obligations of States and Political Subdivisions		$	13,551			$	127			$	—			$	13,678
U.S. Government Sponsored Entities’ Asset-Backed Securities and Other Asset-Backed Securities			151,870				2				4,136				147,736
Total		$	165,421			$	129			$	4,136			$	161,414

For the first quarter ended March 31, 2008, the tax equivalent yield on the total investment portfolio was 5.07% and the average maturity was 3.4 years. U.S. Government Sponsored Entities’ asset-backed securities comprised approximately 86% of the total investment portfolio at the end of the first quarter of 2008. 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 4.5 years with a 100 basis point increase in long-term interest rates and to 5.0 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 2.2 years and 1.4 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.

		March 31,				December 31,
(In Thousands)		2008				2007
Federal Home Loan Bank Stock		$	58,209			$	56,754
Federal Reserve Bank Stock			6,411				6,411
Total		$	64,620			$	63,165

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 in 2008.

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

		Three Months Ended
		March 31,
(In Thousands)		2008				2007
Service Cost		$	863			$	810
Interest Cost			789				776
Expected Return on Plan Assets			<1,152>				<1,066>
Amortization of Prior Service Cost			8				8
Recognized Net Actuarial Loss			—				138
Benefit Expense		$	508			$	666

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106 and 132R.” This statement requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multi-employer plan) as an asset or liability in its balance sheet, beginning with fiscal year-end December 31, 2006, and to recognize changes in the funded status in the year in which the changes occur through comprehensive income beginning in 2007. Additionally, defined benefit plan assets and obligations are to be measured as of the date of the employer’s fiscal year-end, starting in 2008. Park had a pension asset and liability valuation performed as of September 30, 2007, and as a result of the SFAS No. 158 measurement date provisions, Park was required to adjust retained earnings for three-fifteenths (20%) of the estimated expense for 2008. Therefore, Park has charged approximately $0.3 million to retained earnings on January 1, 2008 (net of taxes) to reflect the expense pertaining to three months of pension plan expense.

Note 12 — Recent Accounting Pronouncements

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” (“EITF Issue No. 06-04”). 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 EITF 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 was effective for Park beginning January 1, 2008.

At March 31, 2008, Park and its subsidiary banks owned $128.7 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 evaluation of the impact of the adoption of EITF Issue No. 06-4 on Park’s consolidated financial statements. On January 1, 2008, Park charged approximately $11.6 million to retained earnings and recorded a corresponding liability for the same amount.

In Note 1 to Park’s 2007 Annual Report, Park reported that the EITF 06-04 charge to retained earnings would be approximately $7.5 million, net of deferred tax and that a corresponding liability of $11.6 million would be recorded. During the first quarter of 2008, management came to the conclusion that the book liability of $11.6 million would be a permanent tax item and the company would not receive a tax deduction. As such, no deferred tax asset was recognized.

Fair Value Measurements

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 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. The Company did not elect the fair value option for any financial assets or financial liabilities as of January 1, 2008.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in U.S. generally accepted accounting principles and expands disclosures about fair value measurements. This Statement establishes a fair value hierarchy about the assumptions used to measure fair value and clarifies assumptions about risk and the effect of a restriction on the sale or use of an asset. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. Management believes that the impact of adoption resulted in enhanced footnote disclosures; however, the adoption did not materially impact the Consolidated Balance Sheets, the Consolidated Statements of Income, the Consolidated Statements of Changes in Stockholders’ Equity, or the Consolidated Statements of Cash Flows. (See Note 15 to these unaudited consolidated financial statements).

At the February 12, 2008 FASB meeting, the Board decided to defer the effective date of Statement 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). SFAS No. 157 is effective for certain non-financial assets and liabilities for fiscal years beginning after November 15, 2008. Non-financial assets and liabilities may include (but are not limited to); (i) non-financial assets and liabilities initially measured at fair value in a business combination, but not measured at fair value in subsequent periods, (ii) reporting units measured at fair value in the first step of a goodwill impairment test described in SFAS No. 142, and (iii) non-financial assets and liabilities measured at fair value in the second step of a goodwill impairment test described in SFAS No. 142.

Accounting for Written Loan Commitments Recorded at Fair Value

On November 5, 2007, the SEC issued Staff Accounting Bulletin No. 109, “Written Loan Commitments Recorded at Fair Value through Earnings” (“SAB 109”). Previously, SAB 105, “Application of Accounting Principles to Loan Commitments”, stated that in measuring the fair value of a derivative loan commitment, a company should not incorporate the expected net future cash flows related to the associated servicing of the loan. SAB 109 supercedes SAB 105 and indicates that the expected net future cash flows related to the associated servicing of the loan should be included in measuring fair value for all written loan commitments that are accounted for at fair value through earnings. SAB 105 also indicated that internally-developed intangible assets should not be recorded as part of the fair value of a derivative loan commitment, and SAB 109 retains that view. SAB 109 is effective for derivative loan commitments issued or modified in fiscal quarters beginning after December 15, 2007. The impact of adoption of this standard was not material.

Accounting for Business Combinations

On December 4, 2007, the FASB issued Statement No. 141(R), “Business Combinations” (“SFAS No. 141(R)”), with the objective to improve the comparability of information that a company provides in its financial statements related to a business combination and its effects. SFAS No. 141(R) establishes principles and requirements for how the acquirer (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, (ii) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and (iii) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The Statement does not apply to combinations between entities under common control. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.

Note 13 — Derivative Instruments

Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”), as amended and interpreted, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. As required by SFAS No. 133, the Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

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

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

As of March 31, 2008, no derivatives were designated as fair value hedges or hedges of net investments in foreign operations. Additionally, the Company does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedges.

At March 31, 2008, the derivative’s fair value of ($874,000) was included in other liabilities. No hedge ineffectiveness on the cash flow hedge was recognized during the quarter. At March 31, 2008, the variable rate on the $25 million subordinated note was 4.67% (LIBOR plus 200 basis points) and Park was paying 6.01% (4.01% fixed rate on the interest rate swap plus 200 basis points).

For the quarter ended March 31, 2008, the change in the fair value of the derivative designated as a cash flow hedge reported other comprehensive income was $568,000 (net of taxes of $306,000). Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.

Note 14 — Guarantees

Pursuant to the requirements of Financial Accounting Standards Board (“FASB”) Interpretation 45 (“FIN 45”), Park recorded a contingent legal liability of $.9 million during the fourth quarter of 2007. This was a result of an announcement Visa made in the fourth quarter of 2007 that it was establishing litigation reserves for the settlement of a lawsuit and for additional potential settlements with other parties. Park recorded the contingent legal liability based on Visa’s announcements and Park’s membership interest in Visa. Visa had a successful initial public offering (“IPO”) during the first quarter of 2008. Visa used a portion of the IPO proceeds to fund an escrow account that will be used to pay litigation settlements. As a result of the IPO, Park was able to reverse the entire litigation liability and recognize as income $.9 million during the first quarter of 2008. This is reflected in other income within the unaudited consolidated condensed statement of income.

At the time of the IPO, Park held 132,876 Class B Common Shares of Visa. During the first quarter of 2008, Visa redeemed 51,373 of these shares and paid Park $2.2 million, which was recognized as income in other income within the unaudited consolidated condensed statement of income. The unredeemed shares are recorded at their original cost basis of zero.

Note 15 — Fair Value

SFAS No. 157 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. SFAS No. 157 describes three levels of inputs that Park uses to measure fair value:

	•		Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
	•		Level 2: Level 1 inputs for assets or liabilities that are not actively traded. Also consists of an observable market price for a similar asset or liability. This includes the use of “matrix pricing” used to value debt securities absent the exclusive use of quoted prices.
	•		Level 3: Consists of unobservable inputs that are used to measure fair value when observable market inputs are not available. This could include the use of internally developed models, financial forecasting, etc.

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

Assets and Liabilities Measured on a Recurring Basis:

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

Fair Value Measurements at Reporting Date Using
(In Thousands)

						Quoted Prices in
						Active Markets For				Significant Other				Significant
						Identical Assets				Observable Inputs				Unobservable Inputs
Description		03/31/08				(Level 1)				(Level 2)				(Level 3)
Available for Sale Securities		$	1,684,276			$	987			$	1,680,427			$	2,862
Interest Rate Swap			<874>				—				<874>
Total		$	1,683,402			$	987			$	1,679,553			$	2,862

The table below is a reconciliation of the beginning and ending balances of the Level 3 inputs:

Fair Value Measurements at Reporting Date Using
Significant Unobservable Inputs (Level 3)
(In Thousands)

		AFS Securities
Beginning Balance		$	2,969
Total Unrealized (Losses)/Gains Included in Other Comprehensive Income			<107>
Ending Balance		$	2,862

Assets and Liabilities Measured on a Nonrecurring Basis:

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

Fair Value Measurements at Reporting Date Using
(In Thousands)

Quoted Prices in

Active Markets For

Significant Other

Significant

Identical Assets

Observable Inputs

Unobservable Inputs

Description

03/31/08

(Level 1)

(Level 2)

(Level 3)

FAS 114 Impaired Loans

$

87,642

—

—

$

87,642

Impaired loans, which are measured for impairment using the fair value of the collateral, had a carrying amount of $92.4 million, with a valuation allowance of $4.8 million, resulting in an additional provision for loan losses of $1.4 million for the period.

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: deterioration in the asset value of Vision Bank’s loan portfolio may be worse than expected; Park’s ability to execute its business plan successfully and within the expected timeframe; 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 convert its Ohio-based community banking subsidiaries and divisions to one operating system and combine their charters; deterioration in credit conditions in the markets in which Park’s subsidiary banks operate; changes in the interest rate environment reduce net interest margins; 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, 2007 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 2007 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’s assessment of the adequacy of the allowance for loan losses considers individual impaired loans, pools of homogeneous loans with similar risk characteristics and other environmental risk factors. This assessment is updated on a quarterly basis. The allowance established for individual impaired loans reflects expected losses resulting from analyses developed through specific credit allocations for individual loans. The specific credit allocations are based on regular analyses of commercial, commercial real estate and construction loans where the internal credit rating is at or below a predetermined classification. These analyses involve a high degree of judgement in estimating the amount of loss associated with specific impaired loans.

Pools of homogeneous loans with similar risk characteristics are also assessed for probable losses. A loss migration analysis is performed on certain commercial, commercial real estate and construction loans. These are loans above a fixed dollar amount that are assigned an internal credit rating. Generally, residential real estate loans and consumer loans are not individually graded. The amount of loan loss reserve assigned to these loans is dependent on their net charge-off history.

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

Park’s recent adoption of SFAS No. 157 (See Note 15 to this Form 10-Q) on January 1, 2008 required management to establish a fair value hierarchy, which has the objective of maximizing the use of observable market inputs. This statement also requires enhanced disclosures regarding the inputs used to calculate fair value. These are classified as Level 1, 2, and 3. Level 3 inputs are those with significant unobservable inputs that reflect a company’s own assumptions about the market for a particular instrument. Some of this could be based on internal models and cash flow analysis. At March 31, 2008, the Level 3 inputs for Park had an aggregate fair value of approximately $91 million. This was 5.11% of the total amount of assets measured at fair value as of the end of the first quarter. The fair value of impaired loans was approximately $88 million (or 97%) of the total amount of Level 3 inputs. The large majority of Park’s Level 2 inputs consist of available for sale (“AFS”) securities. The fair value of these AFS securities is obtained largely by the use of matrix pricing, which is a mathematical technique widely used in the financial services industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities.

Management believes that the accounting for goodwill and other intangible assets also involves a higher degree of 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 the impairment assessment of goodwill. Goodwill arising from business combinations represents the value attributable to unidentifiable intangible assets in the business acquired. Park’s goodwill relates to the value inherent in the banking industry and that value is dependent upon the ability of Park’s banking subsidiaries to provide quality, cost-effective banking services in a competitive marketplace. The goodwill value is supported by revenue that is in part driven by the volume of business transacted. A decrease in earnings resulting from a decline in the customer base, the inability to deliver cost effective services over sustained periods or significant credit problems can lead to impairment of goodwill that could adversely impact earnings in future periods. SFAS No. 142 requires an annual evaluation of goodwill for impairment, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The fair value of the goodwill, which resides on the books of Park’s subsidiary banks, is estimated by reviewing the past and projected operating results for the Park subsidiary banks and banking industry comparable information.

During the fourth quarter of 2007, Park’s management determined that Vision Bank had significant credit problems and concluded that an impairment analysis needed to be done on the goodwill balance at Vision Bank. As a result of this impairment analysis, Vision Bank recorded a goodwill impairment charge of $54.0 million during the fourth quarter of 2007. This impairment charge reduced the goodwill balance carried on the books of Vision Bank to $55.0 from $109.0 million.

At March 31, 2008, on a consolidated basis, Park had core deposit intangibles of $16.2 million subject to amortization and $127.3 million of goodwill, which was not subject to periodic amortization. The core deposit intangibles recorded on the balance sheets of Park’s Ohio-based banks totaled $5.8 million and the core deposit intangibles at Vision Bank were $10.4 million. The goodwill assets carried on the balance sheets of Park’s Ohio-based banks totaled $72.3 million and the goodwill balance at Vision Bank was $55.0 million. During the first quarter of 2008, Park’s management evaluated the goodwill for Park’s Ohio-based banks for impairment and concluded that the fair value of the goodwill for Park’s Ohio-based banks exceeded the carrying value and accordingly was not impaired. An impairment analysis was not performed on the goodwill at Vision Bank during the first quarter of 2008 because the impairment analysis was completed for Vision Bank at year-end 2007. Park’s management will review the goodwill at Vision Bank for impairment during the fourth quarter of 2008.

Comparison of Results of Operations
For the Three Months Ended March 31, 2008 and 2007

Summary Discussion of Results

Net income for the first quarter of 2008 increased by $1.9 million or 9.1% to $23.0 million compared to $21.1 million for the first three months of 2007. Diluted earnings per share increased by $.16 or 10.7% to $1.65 for the first quarter of 2008 compared to $1.49 for the same period in 2007.

The annualized net income to average asset ratio (ROA) was 1.42% for the first quarter of 2008 and was 1.51% for the same period in 2007. The annualized net income to average equity ratio (ROE) was 16.02% for the first three months of 2008 and was 14.58% for the first quarter of 2007.

Park’s management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate Park’s performance. Specifically, management reviews return on average tangible realized equity (ROTRE) and has included in this Quarterly Report on Form 10-Q information relating to ROTRE for the three-month periods ended March 31, 2008 and 2007. For purposes of calculating the non-GAAP financial measure of ROTRE, annualized net income for each period is divided by average tangible realized equity during the period. Average tangible realized equity equals average stockholders’ equity during the applicable period less (i) average goodwill and other intangible assets during the period and (ii) average accumulated other comprehensive income (loss), net of taxes, during the period. Management believes that ROTRE presents a meaningful view of Park’s operating performance and ensures comparability of operating performance from period to period while eliminating certain non-operational effects of acquisitions and unrealized gains and losses arising from mark-to-market accounting for the fair market value of investment securities.

Reconciliation of average stockholders’ equity to average tangible realized equity:

		Three Months Ended
		March 31,
(In Thousands)		2008				2007
Average Stockholders’ Equity		$	576,879			$	585,702
Less: Avg. Goodwill and Other Intangible Assets			<144,119>				<108,794>
Plus: Avg. Accumulated Other Comprehensive (Income) Loss, Net of Taxes			<7,306>				22,810
Average Tangible Realized Equity		$	425,454			$	499,718

The reconciliation is provided for the purpose of complying with SEC Regulations G and not as an indication that return on average tangible realized equity is a substitute for return on average equity as determined in accordance with GAAP.

The ROTRE was 21.72% for the first quarter of 2008 and was 17.09% for the first quarter of 2007.

The following tables compare the components of net income for the first quarter of 2008 and the first quarter of 2007. The summary income statements are for Park, Vision Bank and Park Excluding Vision Bank.

Park-Summary Income Statement
For the Three Months Ended March 31, 2008 and March 31, 2007

		(In Thousands)
		2008				2007				Change				% Change
Net Interest Income		$	61,484			$	54,898			$	6,586				12.0	%
Provision for Loan Losses			7,394				2,205				5,189				235.3	%
Other Income			21,039				16,174				4,865				30.1	%
Gain on Sale of Securities			309				—				309
Other Expense			43,277				39,309				3,968				10.1	%
Income Before Taxes		$	32,161			$	29,558			$	2,603				8.8	%
Income Taxes			9,183				8,495				688				8.1	%
Net Income		$	22,978			$	21,063			$	1,915				9.1	%

Park acquired Vision Bancshares Inc. on March 9, 2007 and accordingly the operating results for Vision Bank for the first quarter of 2007 only include the revenue and expense from the date of acquisition through the end of March. As a result, the percentage increases in the various components of the income statement are larger than normal.

Vision Bank-Summary Income Statement
For the Three Months Ended March 31, 2008 and March 31, 2007

		(In Thousands)
														%
		2008				2007				Change				Change
Net Interest Income		$	6,846			$	2,075			$	4,771				229.9	%
Provision for Loan Losses			4,800				—				4,800
Other Income			1,082				266				816				306.8	%
Other Expense			6,128				1,405				4,723				336.2	%
Income (Loss) Before Taxes			<$3,000>			$	936				<$3,936>				<420.5%>
Income Taxes			<1,168>				356				<1,524>				<428.1%>
Net Income (Loss)			<$1,832>			$	580				<$2,412>				<415.9%>

Vision Bank continued to have significant credit problems during the first quarter of 2008, as net loan charge-offs were $5.5 million or an annualized 3.37% of average loans. The large loan loss provision of $4.8 million generated a $1.8 million loss for the first three months of 2008.

Park Excluding Vision Bank-Summary Income Statement
For the Three Months Ended March 31, 2008 and March 31, 2007

		(In Thousands)
														%
		2008				2007				Change				Change
Net Interest Income		$	54,638			$	52,823			$	1,815				3.4	%
Provision for Loan Losses			2,594				2,205				389				17.6	%
Other Income			19,957				15,908				4,049				25.5	%
Gain on Sale of Securities			309				—				309				—
Other Expense			37,149				37,904				<755>				<2.0%>
Income Before Taxes		$	35,161			$	28,622			$	6,539				22.8	%
Income Taxes			10,351				8,139				2,212				27.2	%
Net Income		$	24,810			$	20,483			$	4,327				21.1	%

Income before taxes increased by $6.5 million or 22.8% to $35.2 million for the first quarter of 2008 compared to the same period in 2007 for Park excluding Vision Bank. Approximately $3.1 million or 48% of the increase in income before taxes was due to the successful completion of the Visa initial public offering.

Park’s Ohio-based banks recognized $3.1 million of other income during the first quarter of 2008 as a result of the Visa initial public offering. The Ohio-based banks received $2.2 million in cash from Visa and also recognized $.9 million in income due to the elimination of the contingent liability reserve for Visa litigation claims, which was established during the fourth quarter of 2007.

Net Interest Income Comparison for the First Quarter of 2008 and 2007

Net interest income (the difference between total interest income and total interest expense) is Park’s principal source of earnings, making up approximately 74.2% of total revenue for the first quarter of 2008 and 77.2% of total revenue for the first quarter of 2007. Net interest income increased by $6.6 million or 12.0% to $61.5 million for the first three months of 2008 compared to $54.9 million for the same period in 2007. The large increase in net interest income for 2008 compared to 2007 was due to the acquisition of Vision Bank. Park acquired Vision Bank on March 9, 2007 and as a result only 23 days of net interest income was included in the first quarter of 2007. Vision Bank generated net interest income of $6.85 million during the first quarter of 2008, compared to $2.1 million for the partial first quarter of 2007. Excluding Vision Bank, net interest income increased by $1.8 million or 3.4% to $54.6 million for the first quarter of 2008 compared to $52.8 million for the first quarter of 2007.

The tax equivalent net interest margin (annualized tax equivalent net interest income divided by average interest earning assets) was 4.19% for the first quarter of 2008 and 4.31% for the first quarter of 2007. The tax equivalent net interest margin for Vision Bank was 3.60% for the first quarter of 2008 compared to 5.11% for the first quarter of 2007. Excluding Vision Bank, the tax equivalent net interest margin was 4.28% for both the first quarter of 2008 and the first quarter of 2007.

The large decline in the net interest margin of Vision Bank for the first quarter of 2008 compared to the first quarter of 2007 was primarily due to the large increase in nonaccrual loans. For loans which are placed on nonaccrual status, it is Park’s policy to reverse interest previously accrued on the loan against interest income. Interest on such loans is thereafter recorded on a cash basis and is included in earnings only when actually received in cash and when full payment of principal is no longer doubtful. At March 31, 2008, Vision Bank’s nonaccrual loans were $59.0 million or 8.87% of total loans, compared to $6.9 million or 1.16% of total loans at March 31, 2007. Excluding Vision Bank, nonaccrual loans were $46.6 million or 1.30% of total loans at March 31, 2008, compared to $27.4 million or .78% of total loans at March 31, 2007.

The following table compares the average balance sheet and tax equivalent yield on interest earning assets and the cost of interest bearing liabilities for the first quarter of 2008 with the same quarter in 2007.

Three Months Ended March 31,
(In Thousands)		2008								2007
		Average				Tax				Average				Tax
		Balance				Equivalent %				Balance				Equivalent %
Loans		$	4,229,423				7.53	%		$	3,631,168				7.97	%
Taxable Investments			1,644,411				5.06	%			1,492,642				5.04	%
Tax Exempt Investments			56,236				6.74	%			68,641				6.78	%
Money Market Instruments			11,500				3.47	%			23,396				5.09	%
Interest Earning Assets		$	5,941,570				6.83	%		$	5,215,847				7.10	%
Interest Bearing Deposits		$	3,768,060				2.83	%		$	3,376,488				3.08	%
Short-Term Borrowings			571,553				3.34	%			357,052				4.45	%
Long-Term Debt			771,655				4.00	%			606,736				4.24	%
Interest Bearing Liabilities		$	5,111,268				3.07	%		$	4,340,276				3.36	%
Excess Interest Earning Assets		$	830,302				—			$	875,571				—
Net Interest Spread							3.76	%							3.74	%
Net Interest Margin							4.19	%							4.31	%

Average interest earning assets for the first quarter of 2008 increased by $726 million or 13.9% to $5,942 million compared to $5,216 million for the same period in 2007. Vision Bank accounted for most of the increase in average interest earning assets. Vision Bank had $768 million of average interest earning assets in the first quarter of 2008 compared to $165 million for the first quarter of 2007. The average yield on interest earning assets decreased by 27 basis points to 6.83% for the first three months of 2008 compared to 7.10% for the same period in 2007.

Average interest bearing liabilities for the first quarter of 2008 increased by $771 million or 17.8% to $5,111 million compared to $4,340 million for the first three months of 2007. Vision Bank had $680 million of average interest bearing liabilities for the first quarter of 2008 compared to $138 million for the first quarter of 2007. The average cost of interest bearing liabilities decreased by 29 basis points to 3.07% for the first three months of 2008 compared to 3.36% for the same period in 2007.

Interest Rates

The Federal Open Market Committee of the Federal Reserve aggressively lowered the targeted federal funds rate during the first quarter of 2008 by 200 basis points from 4.25% to 2.25%. The average federal funds rate was 3.18% for the first three months of 2008 compared to 5.25% for the first quarter of 2007.

The average prime lending rate was 6.21% for the first three months of 2008 compared to 8.25% for the first quarter of 2007.

The average interest rate on a five year U.S. Treasury note was 2.75% for the first quarter of 2008 compared to 4.65% for the first quarter of 2007.

Discussion of Loans, Investments, Deposits and Borrowings

Total loans outstanding at March 31, 2008 were $4,253 million compared to $4,089 million at March 31, 2007, an increase of approximately $164 million or 4.0%. Vision Bank produced an increase in loans of $67 million or 11.3% and Park’s Ohio-based banks increased loans by $97 million or 2.8% for the twelve months ended March 31, 2008.

Loan balances increased by approximately $29 million during the first quarter of 2008, with $26 million of the increase coming at Vision Bank. On an annualized basis, loans grew by 2.8% during the first quarter of 2008. In Park’s 2007 Annual Report, management projected that loans would grow by 2% to 3% during 2008. Park’s management continues to project that loans will increase by 2% to 3% in 2008.

The yield on loans decreased by 44 basis points to 7.53% for the first quarter of 2008 compared to 7.97% for the first quarter of 2007. Management expects that the yield on loans will continue to decrease in 2008 due to the 200 basis point decrease in the prime lending rate during the first quarter of 2008.

Park’s management purchased approximately $360 million of taxable investment securities during the first quarter of 2008. These investment securities were all U.S. Government Agencies* and were purchased at a yield of approximately 4.90% with an expected average life of about 3.6 years. Most of the securities were seasoned 15 year mortgage-backed securities with a weighted average maturity of about 12 years. On an amortized cost basis, the total investment portfolio increased by approximately $232 million during the first quarter of 2008 to $1,933 million at March 31, 2008. The tax equivalent yield on Park’s investment portfolio was 5.07% at March 31, 2008.

^*   Management uses U.S. Government Agencies interchangeably with U.S. Government Sponsored Entities’ Asset-Backed Securities and      Other Asset-Backed Securities.

The yield on taxable investment securities was 5.06% for the first quarter of 2008 compared to 5.04% for the same period in 2007. The tax equivalent yield on tax exempt investment securities was 6.74% for the first three months of 2008 compared to 6.78% for the same period in 2007. On a combined basis, the tax equivalent yield on total investment securities was 5.12% for both the first quarter of 2008 and the first quarter of 2007.

Management expects that the average balance of the total investment portfolio will increase to approximately $1,860 million during the second quarter of 2008 compared to the average balance for the first quarter of 2008 of $1,701 million. Management expects that the tax equivalent yield on the total investment portfolio will decrease to approximately 4.95% for the second quarter of 2008 compared to 5.12% for the first quarter of 2008.

Interest bearing deposit account balances decreased by $25 million or .7% to $3,809 million at March 31, 2008 compared to $3,834 million at March 31, 2007. The average rate paid on interest bearing deposits decreased by 25 basis points to 2.83% for the first quarter of 2008 compared to 3.08% for the first quarter of 2007. Management expects the average rate paid on deposits will continue to decrease in 2008 due to the large decrease in market interest rates in the first quarter of 2008.

Interest bearing deposit account balances increased by $65 million during the first quarter of 2008 to $3,809 million at March 31, 2008 compared to $3,744 million at December 31, 2007. Noninterest bearing deposit account balances increased by $16 million during the first quarter of 2008 to $711 million at March 31, 2008 compared to $695 million at December 31, 2007. In Park’s 2007 Annual Report, management projected that total deposit balances would increase by 1% to 2% during 2008. Park’s management continues to expect modest deposit growth of 1% to 2% during 2008.

Total borrowings increased by $570 million or 56.4% to $1,581 million at March 31, 2008 compared to $1,011 million at March 31, 2007. The average rate paid on total borrowings decreased by 60 basis points to 3.72% for the first quarter of 2008 compared to 4.32% for the first quarter of 2007. Management expects that the average interest rate paid on total borrowings will continue to decrease in 2008 as a result of the 200 basis point reduction in the federal funds rate during the first quarter of 2008.

Total borrowings increased by $191.7 million or 13.8% during the first quarter of 2008 to $1,581 million at March 31, 2008 compared to $1,390 million at December 31, 2007. This increase was primarily needed to fund the increase in the investment portfolio.

Guidance on Net Interest Income for 2008

Management provided guidance in Park’s 2007 Annual Report that net interest income for 2008 would be approximately $240 to $242 million, the tax equivalent net interest margin would be approximately 4.10% and that average interest earning assets for the year would be approximately $5,900 million.

The actual results for the first quarter of 2008 were better than management’s guidance. Net interest income was $61.5 million, which annualized would be about $246 to $247 million for 2008. The tax equivalent net interest margin was 4.19% and average interest earning assets were $5,942 million for the first quarter of 2008. Management did not anticipate having the opportunity to purchase U.S. Government Agency securities at an average yield of 4.90% during the first quarter of 2008 and funding the purchases with a borrowing rate of below 3.00%. The most recent projection by management indicates that net interest income for 2008 will be between $247 to $250 million. The tax equivalent net interest margin is forecast to be approximately 4.15% for 2008 and average interest earning assets are projected to be approximately $6,020 million for 2008.

Provision for Loan Losses

The provision for loan losses increased by $5.2 million or 235.3% to $7.4 million for the first three months of 2008 compared to $2.2 million for the first quarter of 2007. Net loan charge-offs were $8.6 million for the first quarter of 2008 compared to $2.2 million for the first quarter of 2007. On an annualized basis, net loan charge-offs were .82% of average loans for the first three months of 2008 and .25% of average loans for the first quarter of 2007.

The provision for loan losses was $2.6 million for Park’s Ohio-based banks and $4.8 million for Vision Bank for the first quarter of 2008. Net loan charge-offs were $3.1 million for Park’s Ohio-based banks and $5.5 million for Vision Bank for the first three months of 2008. On an annualized basis, net loan charge-offs were .35% of average loans for Park’s Ohio-based banks and 3.37% of average loans for Vision Bank for the first quarter of 2008.

Park’s annualized net loan charge-off ratio for the past five years has been .55% for 2007, .12% for 2006, .18% for 2005, .28% for 2004 and .43% for 2003. For 2007, Park’s Ohio-based banks had an annualized net loan charge-off ratio of .39% and Vision Bank had an annualized net loan charge-off ratio of 1.71% for 2007.

Nonperforming loans, defined as loans that are 90 days past due, nonaccrual and renegotiated loans were $111.3 million or 2.62% of loans at March 31, 2008, $108.5 million or 2.57% of loans at December 31, 2007 and $40.6 million or .99% of loans at March 31, 2007. The nonperforming loan totals for Park’s Ohio-based banks were $51.8 million or 1.44% of loans at March 31, 2008, $45.0 million or 1.26% of loans at December 31, 2007 and $33.7 million or .97% of loans at March 31, 2007. The nonperforming loan totals for Vision Bank were $59.5 million or 8.94% of loans at March 31, 2008, $63.5 million or 9.86% of loans at December 31, 2007 and $6.9 million or 1.16% of loans at March 31, 2007. The non-performing loan totals have been written down on a timely basis by management. Partial charge-offs of $3.8 million and $9.0 million have been taken on these loans for the Ohio-based banks and Vision Bank, respectively, as of March 31, 2008.

Other real estate owned was $20.1 million at March 31, 2008, compared to $13.4 million at December 31, 2007 and $4.6 million at March 31, 2007. Vision Bank had other real estate owned of $13.7 million at March 31, 2008 compared to $0 at March 31, 2007. Management expects that other real estate owned will increase in the second and third quarters of 2008 as Vision Bank management works through their non-performing loans.

The reserve for loan losses as a percentage of outstanding loans was 2.02% at March 31, 2008, 2.06% at December 31, 2007 and 1.95% at March 31, 2007.

Management provided guidance in Park’s 2007 Annual Report that the loan loss provision for 2008 would be $20 to $25 million and that the annualized net loan charge-off ratio would be approximately .45% to .55%. The actual results for the first three months of 2008 were higher than anticipated as the loan loss provision was $7.4 million and the annualized net loan charge-off ratio was .82%. In addition, nonperforming loans increased slightly during the first quarter of 2008 to 2.62% of loans at March 31, 2008 compared to 2.57% of loans at December 31, 2007. The most current projection by Park’s management indicates that the loan loss provision for 2008 will be $25 to $30 million and that the annualized net loan charge-off percentage for 2008 will be .55% to .70%. Management expects a reduction in the annualized net loan charge-off percentage for Vision Bank for the last three quarters of 2008. The annualized net loan charge-off percentage for Park’s Ohio-based banks is expected to remain about the same for the next three quarters.

The following table compares nonperforming assets at March 31, 2008, December 31, 2007 and March 31, 2007.

		March 31,				December				March 31,
Nonperforming Assets		2008				31, 2007				2007
		(Dollars in Thousands)
Nonaccrual Loans		$	105,615			$	101,128			$	34,302
Renegotiated Loans			1,688				2,804				3,446
Loans Past Due 90 Days or More			4,032				4,545				2,881
Total Nonperforming Loans		$	111,335			$	108,477			$	40,629
Other Real Estate Owned			20,113				13,443				4,598
Total Nonperforming Assets		$	131,448			$	121,920			$	45,227
Percentage of Nonperforming Loans to Loans			2.62	%			2.57	%			.99	%
Percentage of Nonperforming Assets to Loans plus Other Real Estate Owned			3.08	%			2.88	%			1.10	%
Percentage of Nonperforming Assets to Total Assets			1.94	%			1.88	%			.72	%

Total Other Income

Total other income for the first quarter of 2008 was $21.0 million, an increase of $4.865 million or 30.1% from total other income of $16.2 million for the first quarter of 2007. The primary reason for the increase in total other income was due to $3.1 million of other income that was recognized by Park’s Ohio-based banks resulting from the successful completion of the initial public offering by Visa during March 2008. Total other income also increased as Vision Bank’s total other income in the first quarter of 2007 was only included from the date of acquisition on March 9, 2007. Total other income for Vision Bank increased by $816,000 to $1.1 million for the first quarter of 2008 compared to $.3 million for the first quarter of 2007.

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

		Three Months Ended
(In Thousands)		March 31,
		2008				2007				Change
Income from Fiduciary Activities		$	3,573			$	3,504			$	69
Service Charges on Deposits			5,784				4,847				937
Other Service Income			3,077				2,505				572
Other			8,605				5,318				3,287
Total Other Income		$	21,039			$	16,174			$	4,865

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

		Three Months Ended
		March 31, 2008
Change in Other Income		Ohio-Based				Vision
(In Thousands)		Other Income				Bank				Total
Income from Fiduciary Activities		$	64			$	5			$	69
Service Charges on Deposits			470				467				937
Other Service Income			230				342				572
Other			3,285				2				3,287
		$	4,049			$	816			$	4,865