Park National Corp. Annual Report 2010

FY2010 Annual Report · Park National Corp.

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T A B L E O F C O N T E N T S

To Our Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Stockholders’ Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Park National Corporation Directors & Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Directors:

Century National Bank Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Fairfield National Bank Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Farmers and Savings Bank Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

First-Knox National Bank Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

The Park National Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Park National Bank of Southwest Ohio & Northern Kentucky Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Richland Bank Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Second National Bank Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Security National Bank Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

United Bank Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Unity National Bank Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Vision Bank – Alabama Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Vision Bank – Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Officers of Corporation & Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Financial Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Management’s Report on Internal Control Over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Financial Statements:

Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Consolidated Statements of Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Consolidated Statements of Changes in Stockholders’ Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

T O O U R S T O C K H O L D E R S

Park National Corporation (Park or PRK) 2010 net income was
$74.2 million, the same amount we reported one year ago. Net
income available to common shareholders, after deduction of
preferred stock dividends and the related accretion, was $68.4
million in both 2010 and 2009.

We maintained dividends on Park common stock last year during
a time when most large banking companies previously reduced,
substantially in many cases, dividends paid to their stockholders.
Park’s board of directors declared the first quarter dividend of
$0.94 per common share payable on March 10, 2011 for
shareholders of record on February 25, 2011, continuing
a pattern we expect to follow in 2011.

Diluted earnings per common share were $4.51 for 2010 and
$4.82 for 2009, a decrease of 6.4%. Common shares outstanding
were 15,398,934 at December 31, 2010 compared to 14,882,780
at December 31, 2009, an increase of 3.5%.

We raised more capital last year, after successfully doing the same
in 2009. In 2010 we added $33.5 million in Tier 1 capital from the
sale of 509,184 shares of common stock.

The sales price of the shares sold in 2010, net of all expenses,
was $65.79 per share, or approximately 1.6 times the Park
common stock value of $41.71 at December 31, 2009. It was
uncommon for banking companies to sell common stock at a
price significantly above common book value during 2009 and
2010, so we are very pleased with the results.

As stockholders, our preference is to refrain from raising capital
by selling common stock. Being masters of the obvious, issuing
more common stock causes ownership dilution and typically
reduces earnings per share, neither being attractive alternatives.
But general economic conditions, the state of the banking industry
and our desire to fortify our capital position, caused us, for the
second consecutive year, to conclude we should raise additional
capital, if it could be done at a reasonable price. And the net price
we received was very reasonable compared to industry peers.

The additional common equity (approximately $87 million in
total for 2009 and 2010) provides Park with a critically important
level of additional safety. Below is a brief summary of common
shareholders’ equity since December 31, 2008, including the
additional capital:

The additional capital discussed above increased our capital
ratios to be well beyond regulatory standards considered to be
well capitalized. We continue to monitor banking conditions
carefully as we move into 2011.

While we don’t have current plans to raise additional capital,
we think it’s important to be able to react in an efficient and timely
manner should the occasion arise. For that reason, our board is
recommending that stockholders approve a change to our bylaws
that eliminates preemptive rights. You will find more detail of this
request in the proxy statement for this year’s annual meeting.

We believe preemptive rights made great sense for our
stockholders several years ago when we were more closely
held and our stock traded infrequently. Daily trading activity in
PRK has improved from years ago, although our volume remains
modest compared to many publicly traded companies. Yet it is very
clear that should your board of directors approve a new issue of
common stock, and if we as stockholders wish to maintain our
relative ownership position, we can simply call a broker and the
necessary additional PRK stock can be purchased, leaving our
relative ownership in PRK intact. Preemptive rights for our
stockholders in the current environment has outlived its usefulness.

Eliminating preemptive rights will provide your board of directors
with greater flexibility to manage capital. Importantly though,
eliminating preemptive rights does not alter the approval process
that requires formal action by your board of directors. We
encourage your support of this recommendation and as always,
are available to answer questions on this topic as well as other
matters of importance.

An ongoing challenge for us since mid-2007 has been addressing
conditions within markets served by our Vision Bank subsidiary,
operating in Baldwin County, Alabama and the panhandle of
Florida.

The oil spill in the Gulf of Mexico in April, 2010 significantly
delayed an economic recovery in these markets. The oil spill
exacerbated an already poor economy in the Gulf area. The
Horizon deep water well was successfully capped late in the
summer last year, but unfortunately, not until after the most
significant part of the tourism season concluded. Tourism
expenditures within the Gulf coast areas were greatly curtailed
last year.

December 31,
(dollars in millions)

Park common shareholders’

equity

2010

$649

2009

$621

2008

$547

Businesses dependent upon tourism suffered considerably. While
many businesses were aided in part by BP relief funds, the simple
fact is that markets served by Vision Bank remain significantly
challenged and recovery is not expected to occur until 2011,

T O O U R S T O C K H O L D E R S

2012 or even longer. We continue to explore a number of
alternatives to lower our exposure to inordinately high levels of
troubled assets, the majority of which are held within the Vision
Bank portfolios.

We continue to experience high levels of net charge-offs and
provisions for loan losses, primarily related to the exposure at our
Vision Bank subsidiary, where property values have experienced
significant devaluations as a result of the recent recession and the
oil spill in the Gulf of Mexico. That said, provisions for loan losses
experienced a moderate decline in 2010, a trend that we expect
will continue in 2011. Here is a useful historical comparison:

(dollars in millions)

2010

2009

2008

2007

2006

Annual provision for

loan losses

Allowance for loan losses

as a percentage
of loans

$64.9

$68.8

$70.5

$29.5

$3.9

2.57%

2.52%

2.23%

2.06%

2.03%

We remain committed to doing all within our power to reduce
the level of troubled assets on our balance sheet. Do we expect
a return to 2006 when we had minimal losses? No. But we know
improvements in asset quality are possible, necessary and
ultimately inevitable.

We are extremely pleased with the efforts of our associates
coupled with the exceptional work being done by Southeast
Property Solutions, LLC. (SPS), a firm we engaged to bolster our
collection efforts at Vision Bank. Troubled assets increased for the
third consecutive year at Vision Bank but still we made progress
by getting many problems resolved in both Florida and Alabama.
Unfortunately, more problem assets came on the books than went
off last year, a trend that will reverse itself in the future.

The operating results of our Ohio-based subsidiaries continue
to be superb.

Our collective Ohio banking divisions of The Park National
Bank (PNB) generated over $100 million in net income last
year, producing ratios that continue to compare very favorably
to our peers. The Uniform Bank Performance Report, produced
by the federal government, compares key operating ratios of PNB,
including all of our 11 community bank divisions in Ohio and
northern Kentucky, against median performance results for all
other commercial banks in the country having assets greater than
$3 billion. Below is a key ratio from the report that demonstrates
superior performance over the past 3 years:

December 31,
(dollars in millions)

2010

2009

2008

PNB

Peers

PNB

Peers

PNB

Peers

Return on average assets 1.66% .50%

1.65% –.24%

1.60% –.16%

PNB finished in the 92nd, 91st and 95th percentile ranking
compared to peers in the previous 3 years respectively, beginning
with 2010. Performing in the top 10% in the country is very special.

Our other Ohio-based subsidiary is Guardian Financial Services
Company, headquartered in Hilliard, Ohio. Last year Guardian’s net
income exceeded $2 million for the first time. Earl Osborne, Matt
Marsh and all the associates at Guardian are clearly contributing to
Park’s success.

On a larger scale, an economic recovery, while modest, continues
at the national level. But stubbornly high unemployment continues.
In many markets served by our affiliates, unemployment is at
double-digit levels with little promise of relief in the near term.

The national economy is awash in liquidity, but there is only
modest loan demand, largely due to reduced levels of consumer
spending which in turn, causes business and industry to maintain
a conservative posture. New commercial construction, additions
to manufacturing facilities and improvements to existing facilities
(including equipment replacement) is occurring at a very slow
pace. The single family housing inventory in each of the markets we
serve has significant excess supply causing new home construction
to remain at historically low levels.

A positive note is that long term interest rates remain very
attractive for borrowers. There were periods during 2010 where
we experienced interest rates for single family home loans that
were the lowest in over 50 years. Accordingly, our single family
home loan refinance volume was the 3rd highest in the past
10 years.

We are proud of our associates who were able to originate,
process and service such a high volume of loans for customers in
2010. A nice story within this robust activity was that 1 in 5 of our
new mortgage loans paid off other lenders. Thus, we were pleased
to welcome many new customers to the Park affiliate family last
year. Since our associates were able to maintain pace with the
exceptionally strong refinance demand, our affiliate banks typically
led mortgage production levels in their headquarter counties.

On another front, we took advantage of three very unusual
conditions that existed last year, and already once in the first
quarter of 2011, resulting in the sale of securities at significant
gains. The pre-tax gains were approximately $11.9 million last year
and $6.6 million in February of this year.

It is rare for us to take gains in the investment portfolio. Gains are
typically little more than accelerating the recognition of income and
corresponding income taxes. But certain events, such as Federal
Reserve actions regarding monetary policy implementation, created
opportunities with certain securities. Rather than risk the chance

T O O U R S T O C K H O L D E R S

that the gains would vanish, we decided to take the gains and
reinvest the proceeds into other investments that fit within our
policies dealing with sound asset and liability management.

standards, sharing stories of great and not-so-great service.
We learn from each other and we begin each day with great
service in mind. We hope you notice...

In our view, 2010 may be remembered as the “year of technology”
for Park. We prefer that label instead of the “year of problem
assets.”

As a result of a revised technology strategic plan adopted in late
2008, we embarked on a program to significantly improve our
core operating systems, to dramatically improve our disaster
recovery capability and to change the way we process and handle
paper items at the teller counter and with our commercial
customers in their place of business.

The result was a highly successful upgrade in our teller operations
while offering commercial customers ways to gain credit for their
paper check deposits without making a trip to the bank. Electronic
imaging is here to stay, and we now offer commercial and
consumer electronic banking services that are competitive
within our markets.

Further improvements in our technology related services will
occur this year. Web sites at each of our banking divisions will
see “makeovers”, the end result of which will be a cleaner, more
logical and user-friendly online experience. We soon will have a
new fully integrated disaster recovery site that is redundant to our
main frame and operating system. We are far more comfortable
knowing that, in the event of equipment failure, a natural disaster
or for some other reason we lose use of the main frame at our
operations center, our customers will continue to be served in
a near seamless fashion on new main frame equipment.

All the technology in the world is a poor substitute for high
quality service delivery that distinguishes Park from our
competition. As we frequently remind our associates, the color
of money is green for everyone. It’s the way we handle the money
that allows a customer or prospective customer to appreciate
and value our service.

We think about service a lot...how we deliver service, how we can
improve and what lessons we can learn from our experiences and
from others. Last year we embarked on a systematic analysis of
our service culture. We enlisted the help of an expert who has
world-class experience helping other companies standardize
and markedly improve their service quality.

The result is what we call “Service Excellence” and it is our
attempt to elevate service to higher levels. We will implement a
standardized set of best practices throughout our organization
by mid-2011. Each day, you will find us reviewing our service

We are fortunate to have a dedicated board of directors providing
counsel and support during challenging economic times. We were
pleased last year when Steve Kambeitz assumed leadership of the
Audit Committee and equally pleased in early 2011 when Sarah
Reese Wallace agreed to assume leadership of the Nominating
Committee. Sarah’s father, of course, is J. Gilbert Reese, the son
of Everett D. Reese, and Sarah provides family continuity and
judgment to Park dating back to 1921 when Everett first joined the
Park bank. Since becoming an emeritus board member in 2009,
Gib attends board meetings occasionally making sure we do not
stray too much.

As we close this letter, we want to recognize Bill McConnell.
The Ohio Bankers League (OBL) recognized Bill as a “Pioneer
in Banking” last October at their annual meeting in Columbus.
In the OBL’s decades-long history, he is only the second banker
so honored. Bill has brought recognition and honor once again
to Park. Only Ev Reese and Bill McConnell served, from the same
bank in the state of Ohio, as the chairman of the American Bankers
Association in the 20th Century. Bill’s dedication to the profession,
to the industry, and to leadership within our bank and to our
communities is legendary. We were so proud when Bill was
recognized by the OBL.

As always, we close with a commitment to do all we can to improve
the performance of Park. We cannot control outside events like the
economy, the weather and political winds. But we can control our
effort, our dedication and our perseverance. Our customers, our
communities, our colleagues and our stockholders deserve the
best efforts on all fronts—and they’ll get them. You can help by
sending folks our way. We will provide them with service that will
make you look good for the referral.

C. Daniel DeLawder
Chairman

David L. Trautman
President

F I N A N C I A L H I G H L I G H T S

(In thousands, except per share data)

2010

2009

Earnings:

Total interest income

Total interest expense

Net interest income

Net income available to common shareholders (x)

Per Share:

Net income per common share – basic (x)

Net income per common share – diluted (x)

Cash dividends declared

Common book value (end of period)

At Year-End:
Total assets

Deposits

Loans

Investment securities

Total borrowings

Total stockholders’ equity

Ratios:

Return on average common equity (x)

Return on average assets (x)

Texas ratio (a)

Efficiency ratio

$ 345,517

$ 367,690

71,473

274,044

68,410

4.51

3.76

42.12

$7,298,377

5,095,420

4,732,685

2,039,791

1,375,652

745,824

10.53%

0.97%

48.76%

54.75%

94,199

273,491

68,430

4.82

3.76

41.71

$7,040,329

5,188,052

4,640,432

1,863,560

1,053,850

717,264

11.81%

0.97%

44.18%

54.01%

(x) Reported measure uses net income available to common shareholders. Net income available to common

shareholders is calculated as net income less preferred stock dividends and accretion, associated with the
preferred stock issued to the U.S. Treasury under the Capital Purchase Program.

(a) Reported measure is calculated as nonperforming assets divided by the sum of tangible common equity
plus the allowance for loan losses. Tangible common equity equals stockholders’ equity less preferred
stock and goodwill and other intangibles, in each case at the end of the period.

Percent
Change

–6.03%

–24.13%

0.20%

–0.03%

–6.43%

—

0.98%

3.67%

–1.79%

1.99%

9.46%

30.54%

3.98%

—

S T O C K H O L D E R S ’

I N F O R M A T I O N

STOCK LISTING:

NYSE Amex Symbol – PRK
CUSIP #700658107

GENERAL STOCKHOLDER INQUIRIES:

Park National Corporation
David L. Trautman, Secretary
50 North Third Street
Post Office Box 3500
Newark, Ohio 43058-3500
740/349-3927

DIVIDEND REINVESTMENT PLAN:

The Corporation offers a plan whereby participating stockholders can purchase additional
shares of Park National Corporation common stock through automatic reinvestment of their
regular quarterly cash dividends. All commissions and fees connected with the purchase and
safekeeping of the shares are paid by the Corporation. Details of the plan and an enrollment
card can be obtained by contacting the Corporation’s Stock Transfer Agent and Registrar as
indicated below.

DIRECT DEPOSIT OF DIVIDENDS:

The Corporation’s stockholders may have their dividend payments directly deposited into
their checking, savings or money market account. This direct deposit of dividends is free for
all stock holders. If you have any questions or need an enrollment form, please contact the
Corporation’s Stock Transfer Agent and Registrar as indicated below.

STOCK TRANSFER AGENT AND REGISTRAR:

First-Knox National Bank, Division of The Park National Bank
Post Office Box 1270
One South Main Street
Mount Vernon, Ohio 43050-1270
800/837-5266 Ext. 5208

FORM 10-K:

All forms filed by the Corporation with the SEC (including our Form 10-K for 2010) are
available on our website by clicking on the Documents/SEC Filings section of the Investor
Relations page. These forms may also be obtained, without charge, by contacting the
Secretary as indicated above.

INTERNET ADDRESS:

www.parknationalcorp.com

E-MAIL:

David L. Trautman
dtrautman@parknationalbank.com

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Total Banking Oﬃces: 141
Total Banking Oﬃces: 141
Total ATMs: 171
Total ATMs: 171
Total Financial Service Centers: 149
Asset Size: $7.3 Billion
Headquarters: Newark, Ohio

NYSE Amex: PRK

Website: ParkNationalCorp.com

Maureen H. Buchwald
Owner, Glen Hill
Orchards, LLC

James J. Cullers
Sole Proprietor,
Mediation and
Arbitration Services

C. Daniel DeLawder
Chairman

Harry O. Egger
Vice Chairman

F.W. Engleﬁeld, IV
President,
Engleﬁeld, Inc.

Stephen J. Kambeitz
President and CFO,
RC Olmstead

John W. Kozak
Chief Financial Oﬃcer

William T. McConnell
Chairman of the
Executive Committee

Timothy S. McLain
Vice President,
McLain, Hill, Rugg &
Associates Inc.

John J. O’Neill
Chairman,
Southgate Corporation

William A. Phillips
Chairman,
Century National Bank

Rick R. Taylor
President,
Jay Industries, Inc.

David L. Trautman
President

Sarah R. Wallace
Chairman of the
Board, First Federal
Savings and Loan
Association of Newark

Lee Zazworsky
President, Mid State
Systems, Inc.

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Oﬃces: 15 ATMs: 17
Oﬃces: 15 ATMs: 17
Website: CenturyNationalBank.com
Website: CenturyNationalBank.com
President: Thomas M. Lyall

Counties Served: Athens, Coshocton,
Hocking, Muskingum, Perry, Tuscarawas

Main Oﬃce - Zanesville
14 South Fifth Street
Post Oﬃce Box 1515
Zanesville, Ohio 43702-1515

Athens*
898 East State Street
Athens, Ohio 45701-2115

Newcomerstown*
220 East State Street
Newcomerstown, Ohio 43832

Zanesville - Consumer Lending
and Collections Center
33 South Fifth Street
Zanesville, Ohio 43701

Zanesville - South*
2127 Maysville Avenue
Zanesville, Ohio 43701-5748

Zanesville - South Maysville*
2810 Maysville Pike
Zanesville, Ohio 43701

Coshocton**
100 Downtowner Plaza
Coshocton, Ohio 43812-1921

Zanesville - East*
1705 East Pike
Zanesville, Ohio 43701-6601

Dresden*
91 West Dave Longaberger Avenue
Dresden, Ohio 43821-9726

Zanesville - Kroger*
3387 Maple Avenue
Zanesville, Ohio 43701

Logan*
61 North Market Street
Logan, Ohio 43138

Zanesville - Lending Center*
505 Market Street
Zanesville, Ohio 43701

New Concord*
1 West Main Street
New Concord, Ohio 43762-1218

Zanesville - North*
1201 Brandywine Boulevard
Zanesville, Ohio 43701-1086

Oﬀ-Site ATM Locations
Zanesville - Genesis HealthCare System
Bethesda Campus
2951 Maple Avenue

Zanesville - Genesis HealthCare System
Good Samaritan Campus
800 Forest Avenue

New Lexington*
206 North Main Street
New Lexington, Ohio 43764-1263

Zanesville - North Military*
990 Military Road
Zanesville, Ohio 43701

*Includes Automated Teller Machine
**Includes Automated Teller Machine
Drive-up and Walk-up

Top Row: Michael L. Bennett - The Longaberger Company; Ronald A. Bucci - Stoneware Properties and General Graphics Co. Inc.;
Ward D. Coﬀman, III - Coﬀman Law Oﬃces; Robert D. Goodrich, II - Retired, Wendy’s Management Group, Inc.; Patrick L. Hennessey -
P&D Transportation, Inc.; Robert D. Kessler - Kessler Sign Company; Henry C. Littick, II - Southeastern Ohio Broadcasting
Systems, Inc.

Bottom Row: Thomas M. Lyall - President; Timothy S. McLain, CPA - McLain, Hill, Rugg and Associates, Inc.; Don R. Parkhill - Jacobs,
Vanaman Agency, Inc.; William A. Phillips - Chairman; James L. Shipley - Miller-Lynn Insurance Service and Smith-Brogan Insurance
Agency; Thomas L. Sieber - Retired, Hospital Administrator; Dr. Anne C. Steele - Muskingum University; Dr. Robert J. Thompson -
Neurological Associates of Southeastern Ohio, Inc.

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Main Oﬃce - Lancaster
143 West Main Street
Post Oﬃce Box 607
Lancaster, Ohio 43130-0607

Main Oﬃce Drive-Thru*
150 West Wheeling Street
Lancaster, Ohio 43130-3707

Baltimore*
1301 West Market Street
Baltimore, Ohio 43105-1044

Canal Winchester - Kroger*
6095 Gender Road
Canal Winchester, Ohio 43110

Lancaster - East Main*
1001 East Main Street
Lancaster, Ohio 43130

Oﬃces: 12 ATMs: 17
Oﬃces: 12 ATMs: 17
Website: FairﬁeldNationalBank.com
Website: FairﬁeldNationalBank.com
President: Stephen G. Wells

Counties Served: Fairﬁeld, Franklin

Lancaster - Meijer*
2900 Columbus-Lancaster Road
Post Oﬃce Box 607
Lancaster, Ohio 43130-0607

Reynoldsburg - Slate Ridge*
1988 Baltimore-Reynoldsburg Road
(Route 256)
Reynoldsburg, Ohio 43068

Lancaster - Memorial Drive*
1280 North Memorial Drive
Post Oﬃce Box 607
Lancaster, Ohio 43130-0607

Lancaster - Memorial Drive - Kroger*
1735 North Memorial Drive
Lancaster, Ohio 43130-0607

Lancaster - West Fair*
1001 West Fair Avenue
Lancaster, Ohio 43130

Pickerington - Central - Kroger*
1045 Hill Road North
Pickerington, Ohio 43147

Oﬀ-Site ATM Locations
Lancaster - Fairﬁeld Medical Center (2)
401 North Ewing Street

Lancaster - Ohio University - Lancaster
1570 Granville Pike

Lancaster - River View Surgery Center
2401 North Columbus Street

Lancaster - East Main Street - Kroger*
1141 East Main Street
Post Oﬃce Box 607
Lancaster, Ohio 43130-0607

Pickerington - North - Kroger**
7833 Refugee Road NW
Pickerington, Ohio 43147

*Includes Automated Teller Machine
**Includes Automated Teller Machine
Drive-up and Inside

Charles P. Bird, Ph.D. - Retired, Ohio University; Leonard F. Gorsuch - Fairﬁeld Homes, Inc.; Eleanor V. Hood - The Lancaster Festival;
Jonathan W. Nusbaum, M.D. - Retired, Surgeon; S. Alan Risch - Risch Drug Stores, Inc.; Mina H. Ubbing - Fairﬁeld Medical Center;
Paul Van Camp - P.V.C. Limited; Stephen G. Wells - President

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Oﬃces: 3 ATMs: 4
Oﬃces: 3 ATMs: 4
Website: FarmersandSavings.com
Website: FarmersandSavings.com
President: James S. Lingenfelter

County Served: Ashland

Main Oﬃce - Loudonville*
120 North Water Street
Post Oﬃce Box 179
Loudonville, Ohio 44842-0179

Ashland*
1161 East Main Street
Ashland, Ohio 44805-2831

Perrysville*
112 North Bridge Street
Post Oﬃce Box 156
Perrysville, Ohio 44864-0156

Oﬀ-Site ATM Location
Loudonville - Stake’s Short Stop
3052 State Route 3

*Includes Automated Teller Machine

Patricia A. Byerly - Retired, Byerly-Lindsey Funeral Home; Timothy R. Cowen - Cowen Truck Line, Inc.; James S. Lingenfelter - President;
Roger E. Stitzlein - Loudonville Farmers Equity; Chris D. Tuttle - Amish Oak Furniture Company, Inc.; Gordon E. Yance - First-Knox
National Bank

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Oﬃces: 11 ATMs: 18
Oﬃces: 11 ATMs: 18
Website: FirstKnox.com
Website: FirstKnox.com
President: Gordon E. Yance

Counties Served: Holmes, Knox,
Morrow, Southern Richland

Main Oﬃce - Mount Vernon
One South Main Street
Post Oﬃce Box 1270
Mount Vernon, Ohio 43050-1270

Bellville*
154 Main Street
Bellville, Ohio 44813-1237

Centerburg*
35 West Main Street, Drawer F
Centerburg, Ohio 43011-0806

Danville*
4 South Market Street
Post Oﬃce Box 29
Danville, Ohio 43014-0029

Fredericktown*
137 North Main Street
Fredericktown, Ohio 43019-1109

Mount Gilead
17 West High Street
Mount Gilead, Ohio 43338-1212

Mount Gilead - Edison*
504 West High Street
Mount Gilead, Ohio 43338-1004

Mount Vernon - Blackjack Road*
8641 Blackjack Road
Mount Vernon, Ohio 43050-9051

Mount Vernon - Coshocton Avenue*
810 Coshocton Avenue
Mount Vernon, Ohio 43050-1931

Mount Vernon - Operations Center
105 West Vine Street
Post Oﬃce Box 1270
Mount Vernon, Ohio 43050-1270

Howard - Apple Valley
21973 Coshocton Road

Mount Gilead - ATD Enterprises
Marathon
6154 State Route 95

Mount Gilead - Morrow County Hospital
651 West Marion Road

Mount Vernon - Colonial City Lanes
110 Mount Vernon Avenue

Mount Vernon - Knox Community Hospital
1330 Coshocton Road

Mount Vernon - Mount Vernon
Nazarene University
800 Martinsburg Road

Mount Vernon
11 West Vine Street

Millersburg*
225 North Clay Street
Millersburg, Ohio 44654-1302

Oﬀ-Site ATM Locations
Fredericktown - Fast Freddies
89 South Main Street

Millersburg - Walmart*
1640 South Washington Street
Millersburg, Ohio 44654-8901

Gambier - Kenyon College Bookstore
106 Gaskin Avenue

*Includes Automated Teller Machine

Top Row: Maureen Buchwald - Glen Hill Orchards, LLC; James J. Cullers - Mediation and Arbitration Services; Ronald J. Hawk - Danville
Feed and Supply, Inc.; William B. Levering - Levering Management, Inc.; Daniel L. Mathie - Critchﬁeld, Critchﬁeld & Johnston, Ltd.

Bottom Row: Noel C. Parrish - NOE, Inc.; Mark R. Ramser - Ohio Cumberland Gas Co.; Vickie A. Sant - Executive Vice President;
R. Daniel Snyder - Retired Director, Snyder Funeral Homes, Inc.; Roger E. Stitzlein - Loudonville Farmers Equity;
Gordon E. Yance - President

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Main Oﬃce - Newark*
50 North Third Street
Post Oﬃce Box 3500
Newark, Ohio 43058-3500

Columbus
140 East Town Street, Suite 1400
Columbus, Ohio 43215

Gahanna - Kroger*
1365 Stoneridge Drive
Gahanna, Ohio 43230

Granville*
119 East Broadway
Granville, Ohio 43023

Heath - Southgate*
567 Hebron Road
Heath, Ohio 43056

Heath - 30th Street*
800 South 30th Street
Heath, Ohio 43056

Hebron*
103 East Main Street
Post Oﬃce Box 268
Hebron, Ohio 43025-0268

Johnstown*
60 West Coshocton Street
Post Oﬃce Box 446
Johnstown, Ohio 43031-0446

Oﬃces: 18 ATMs: 24
Oﬃces: 18 ATMs: 24
Website: ParkNationalBank.com
Website: ParkNationalBank.com
Chairman: C. Daniel DeLawder

President: David L. Trautman

Counties Served: Franklin, Licking

Utica*
33 South Main Street
Post Oﬃce Box 486
Utica, Ohio 43080-0486

Worthington*
7140 North High Street
Worthington, Ohio 43085

Operations Centers
21 South First Street*
and 22 South First Street
Post Oﬃce Box 3500
Newark, Ohio 43058-3500

Oﬀ-Site ATM Locations
Granville - Denison University
Slayter Hall

Granville -Kendal at Granville
2158 Columbus Road

Hebron - Kroger
600 East Main Street

Newark - Licking Memorial Hospital
1320 West Main Street

Newark - OSU-N/COTC
1179 University Drive

Reynoldsburg - Kroger
6962 East Main Street
*Includes Automated Teller Machine
**Includes Automated Teller Machine
Drive-up and Inside

Kirkersville
177 East Main Street
Post Oﬃce Box 38
Kirkersville, Ohio 43033-0038

Newark - Deo Drive - Kroger*
245 Deo Drive, Suite A
Post Oﬃce Box 3500
Newark, Ohio 43058-3500

Newark - Dugway*
1495 Granville Road
Newark, Ohio 43055

Newark - Eastland*
1008 East Main Street
Newark, Ohio 43055

Newark - McMillen*
1633 West Main Street
Newark, Ohio 43055

Newark - 21st Street*
990 North 21st Street
Newark, Ohio 43055

Pataskala - Kroger**
350 East Broad Street
Pataskala, Ohio 43062

Reynoldsburg - Kroger*
8460 Main Street
Reynoldsburg, Ohio 43068

Top Row: Donna M. Alvarado - AGUILA International; C. Daniel DeLawder - Chairman; F.W. Engleﬁeld IV - Engleﬁeld, Inc.;
Stephen J. Kambietz - RC Olmstead; John W. Kozak - Chief Financial Oﬃcer; William T. McConnell - Chairman of the Executive
Committee

Bottom Row: Dr. Charles Noble, Sr. - Shiloh Missionary Baptist Church; John J. O’Neill - Southgate Corporation; Robert E. O’Neill -
Southgate Corporation; J. Gilbert Reese - Director Emeritus; David L. Trautman - President; Sarah R. Wallace - First Federal Savings;
Lee Zazworsky - Mid State Systems, Inc.

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Oﬃces: 10 ATMs: 9
Oﬃces: 10 ATMs: 9
Website: BankWithPark.com
Website: BankWithPark.com
Counties Served: Boone (KY), Butler,
Clermont, Hamilton, Warren

Main Oﬃce - West Chester*
8366 Princeton-Glendale Road
Post Oﬃce Box 1130
West Chester, Ohio 45071-1130

Amelia - Main Street*
5 West Main Street
Amelia, Ohio 45102

Amelia - Ohio Pike*
1187 Ohio Pike
Amelia, Ohio 45102

Anderson*
1075 Nimitzview Drive
Cincinnati, Ohio 45230

Eastgate*
4550 Eastgate Boulevard
Cincinnati, Ohio 45245

Florence
600 Meijer Drive, Suite 303
Florence, Kentucky 41042

Milford*
25 Main Street
Milford, Ohio 45150

New Richmond
100 Western Avenue
New Richmond, Ohio 45157

Owensville*
5100 State Route 132
Owensville, Ohio 45160

Springboro*
720 Gardner Road
Springboro, Ohio 45066

Oﬀ-Site ATM Location
New Richmond - Berry Pharmacy
1041 Old US 52

*Includes Automated Teller Machine

Nicholas L. Berning - Retired, Berning Financial Consulting; Thomas J. Button - The Park National Bank; Daniel L. Earley - Retired
President, Chairman; Martin J. Grunder, Jr. - Grunder Landscaping Co.; Richard W. Holmes - Retired, PricewaterhouseCoopers LLP;
Larry H. Maxey - Synchronic Business Solutions

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ATMs: 15
Oﬃces: 12 ATMs: 15
Oﬃces: 12
Website: RichlandBank.com
Website: RichlandBank.com
President: David J. Gooch

County Served: Richland

Main Oﬃce - Mansﬁeld*
3 North Main Street
Post Oﬃce Box 355
Mansﬁeld, Ohio 44901-0355

Butler*
85 Main Street
Butler, Ohio 44822-9618

Lexington*
276 East Main Street
Lexington, Ohio 44904-1300

Mansﬁeld - Ashland Road*
797 Ashland Road
Mansﬁeld, Ohio 44905-2075

Mansﬁeld - Cook Road*
460 West Cook Road
Mansﬁeld, Ohio 44907-2395

Mansﬁeld - Lexington Avenue - Kroger*
1500 Lexington Avenue
Mansﬁeld, Ohio 44907

Ontario*
325 North Lexington-Springmill Road
Ontario, Ohio 44906-1218

Mansﬁeld - Madison - Kroger*
1060 Ashland Road
Mansﬁeld, Ohio 44905-8797

Shelby - Mansﬁeld Avenue*
155 Mansﬁeld Avenue
Shelby, Ohio 44875-1832

Mansﬁeld - Marion Avenue*
50 Marion Avenue
Mansﬁeld, Ohio 44903-2302

Mansﬁeld - Springmill*
889 North Trimble Road
Mansﬁeld, Ohio 44906-2009

Mansﬁeld - West Park*
1255 Park Avenue West
Mansﬁeld, Ohio 44906-2810

Oﬀ-Site ATM Locations
Mansﬁeld - Kroger
1240 Park Avenue West

Mansﬁeld - McDonalds Restaurant
State Route 13 and I-71
25 West Hanley Road

Mansﬁeld - StarTek, Inc.
850 West Fourth Street

*Includes Automated Teller Machine

Top Row: Ronald L. Adams - Retired, DAI Emulsions, Inc.; Mark Breitinger - Milark Industries; Michael L. Chambers - J&B Acoustical;
Benjamin A. Goldman - Retired, Superior Building Services

Bottom Row: David J. Gooch - President; Timothy J. Lehman - Chairman of the Board; Grant E. Milliron - Milliron Industries;
Shirley Monica - S.S.M. Inc.; Linda H. Smith - Ashwood LLC; Rick R. Taylor - Jay Industries, Inc.

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Oﬃces: 9 ATMs: 7
Oﬃces: 9 ATMs: 7
Website: SecondNational.com
Website: SecondNational.com
President: John E. Swallow

Counties Served: Darke, Mercer

Main Oﬃce - Greenville
499 South Broadway
Post Oﬃce Box 130
Greenville, Ohio 45331-0130

Arcanum - Downtown
1 West George Street
Arcanum, Ohio 45304

Arcanum - North*
603 North Main Street
Arcanum, Ohio 45304

Ft. Recovery*
117 North Wayne Street
Ft. Recovery, Ohio 45846

Greenville - North*
1302 Wagner Avenue
Greenville, Ohio 45331

Versailles*
101 West Main Street
Versailles, Ohio 45380

Greenville - South
Located inside the Brethren
Retirement Community
750 Chestnut Street
Greenville, Ohio 45331

Greenville - Third and Walnut*
175 East Third Street
Greenville, Ohio 45331

Greenville - Walmart*
1501 Wagner Avenue
Greenville, Ohio 45331

Oﬀ-Site ATM Locations
Greenville - Whirlpool Corporation
1701 KitchenAid Way

*Includes Automated Teller Machine

Tyeis Baker-Baumann - Rebsco, Inc.; Wayne G. Deschambeau - Wayne HealthCare; Neil J. Diller - Cooper Farms, Inc.; Jeﬀrey E. Hittle -
Hittle Buick GMC, Inc.; Wesley M. Jetter - Ft. Recovery Industries; Marvin J. Stammen - Retired President, Second National Bank;
John E. Swallow - President

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Main Oﬃce - Springﬁeld*
40 South Limestone Street
Springﬁeld, Ohio 45502

Beavercreek - Lending Center
1427 Research Park Drive
Beavercreek, Ohio 45410

Enon*
3680 Marion Drive
Enon, Ohio 45323

Jamestown*
82 West Washington Street
Jamestown, Ohio 45335

Jeﬀersonville*
2 South Main Street
Jeﬀersonville, Ohio 43128

Mechanicsburg*
2 South Main Street
Mechanicsburg, Ohio 43044

Medway*
130 West Main Street
Medway, Ohio 45341

New Carlisle*
201 North Main Street
New Carlisle, Ohio 45344

New Carlisle - Park Layne*
2035 South Dayton-Lakeview Road
New Carlisle, Ohio 45344

North Lewisburg*
8 West Maple Street
North Lewisburg, Ohio 43060

Plain City
105 West Main Street
Plain City, Ohio 43064

South Charleston*
102 South Chillicothe Street
South Charleston, Ohio 45368

Springﬁeld - Derr Road - Kroger*
2989 Derr Road
Springﬁeld, Ohio 45503

Springﬁeld - East Main*
2730 East Main Street
Springﬁeld, Ohio 45503

Springﬁeld - North Limestone*
1756 North Limestone Street
Springﬁeld, Ohio 45503

Springﬁeld - Northridge*
1600 Mooreﬁeld Road
Springﬁeld, Ohio 45503

Springﬁeld - Western*
920 West Main Street
Springﬁeld, Ohio 45504

Urbana*
1 Monument Square
Urbana, Ohio 43078

Urbana - Scioto Street*
828 Scioto Street
Urbana, Ohio 43078

Xenia Downtown*
161 East Main Street
Xenia, Ohio 45385

Oﬃces: 21 ATMs: 26
Oﬃces: 21 ATMs: 26
Website: SecurityNationalBank.com
Website: SecurityNationalBank.com
President: William C. Fralick

Counties Served: Champaign, Clark,
Fayette, Greene, Madison

Xenia Plaza*
82 North Allison Avenue
Xenia, Ohio 45385

Oﬀ-Site ATM Locations
Plain City - Shell
440 South Jeﬀerson Street

Springﬁeld
2051 North Bechtle Avenue

Springﬁeld - Clark State
Community College
570 East Leﬀel Lane

Springﬁeld - Wittenberg University -
Student Center
738 Woodlawn Avenue

Springﬁeld - Wittenberg University -
HPER Center
250 Bill Edwards Drive

Urbana - Champaign County
Community Center
1512 South US Highway 68

Yellow Springs - Young’s Jersey Dairy
6880 Springﬁeld-Xenia Road

*Includes Automated Teller Machine

Top Row: R. Andrew Bell - Consolidated Insurance Company; Rick D. Cole - Colepak, Inc.; Harry O. Egger - Chairman, Retired President;
William C. Fralick - President

Bottom Row: Larry E. Kaﬀenbarger - Kaﬀenbarger Truck Equipment Company; Thomas P. Loftis - Midland Properties, Inc.;
Scott D. Michael - Michael Farms, Inc.; Dr. Karen E. Raﬁnski - Clark State Community College; Chester L. Walthall - Heat-Treating, Inc.;
Robert A. Warren - Hauck Bros., Inc.

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Oﬃces: 7 ATMs: 8
Oﬃces: 7 ATMs: 8
Website: UnitedBankOhio.com
Website: UnitedBankOhio.com
President: Donald R. Stone

Counties Served: Crawford, Marion

Main Oﬃce - Bucyrus*
401 South Sandusky Avenue
Post Oﬃce Box 568
Bucyrus, Ohio 44820

Caledonia*
140 East Marion Street
Caledonia, Ohio 43314

Crestline*
245 North Seltzer Street
Post Oﬃce Box 186
Crestline, Ohio 44827-0186

Galion*
8 Public Square
Galion, Ohio 44833

Marion - Barks Road*
129 Barks Road East
Marion, Ohio 43302

Marion - Walmart Super Center*
1546 Marion-Mt. Gilead Road
Marion, Ohio 43302

Prospect*
105 North Main Street
Prospect, Ohio 43342

Oﬀ-Site ATM Location
Bucyrus - East Pointe Shopping Center
211 Stetzer Road South

*Includes Automated Teller Machine

Lois J. Fisher - Lois J. Fisher & Assoc.; Michele McElligott - Pigman, Brown, McElligott Ltd.; Kenneth A. Parr, Jr. - Parr Insurance Agency,
Inc.; Douglas M. Schilling - Schilling Graphics, Inc.; Donald R. Stone - President; Douglas Wilson - Owner, Doug’s Toggery Realtor,
Craig A. Miley Realty & Auction, Ltd.

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Oﬃces: 6 ATMs: 6
Oﬃces: 6 ATMs: 6
Website: UnityNationalBk.com
Website: UnityNationalBk.com
President: John A. Brown

County Served: Miami

Main Oﬃce - Piqua*
215 North Wayne Street
Piqua, Ohio 45356

Administrative Oﬃce - Piqua
212 North Main Street
Post Oﬃce Box 913
Piqua, Ohio 45356

Piqua - Sunset*
1603 Covington Avenue
Piqua, Ohio 45356

Piqua - Walmart*
1300 East Ash Street
Piqua, Ohio 45356

Tipp City*
1176 West Main Street
Tipp City, Ohio 45371

Troy
1314 West Main Street
Troy, Ohio 45373

Troy - Walmart*
1801 West Main Street
Troy, Ohio 45373

Oﬀ-Site ATM Location
Troy - Upper Valley Medical Center
3130 North Dixie Highway

*Includes Automated Teller Machine

Dr. Richard N. Adams - Representative of Ohio General Assembly; Tamara Baird-Ganley - Baird Funeral Home; Michael C. Bardo -
Hartzell Industries, Inc.; John A. Brown - President; Thomas E. Dysinger - Dysinger & Associates, LLC; Dr. Douglas D. Hulme - Oakview
Veterinary Hospital; Timothy Johnston - Self-employed Consultant; W. Samuel Robinson - Murray, Wells, Wendeln & Robinson CPAs, Inc.

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Oﬃces: 8 ATMs: 11
Oﬃces: 8 ATMs: 11
Website: VisionBank.net
Website: VisionBank.net
Chairman: Joey W. Ginn

President: Diane Anderson

County Served: Baldwin

Main Oﬃce - Gulf Shores*
2201 West First Street
Post Oﬃce Box 4649
Gulf Shores, Alabama 36547

Daphne*
28720 US Highway 98
Post Oﬃce Box 1144
Daphne, Alabama 36526

Elberta*
24989 State Street
Post Oﬃce Box 337
Elberta, Alabama 36530

Fairhope*
218 North Greeno Road
Post Oﬃce Box 1786
Fairhope, Alabama 36533

Foley*
501 South McKenzie Street
Foley, Alabama 36535

Oﬀ-Site ATM Locations
Foley - McDonald’s
1010 South McKenzie Street

Orange Beach*
25051 Canal Road
Post Oﬃce Box 919
Orange Beach, Alabama 36561

Point Clear*
17008 Scenic Highway 98
Post Oﬃce Box 1347
Point Clear, Alabama 36564

Robertsdale
22245-3A Highway 59
Post Oﬃce Box 606
Robertsdale, Alabama 36567

Orange Beach - Sam’s
27123 Canal Road

Point Clear - Grand Hotel
One Grand Boulevard

Saraland - Microtel Inns & Suites
1124 Shelton Beach Road

*Includes Automated Teller Machine

Top Row: Gordon Barnhill - Barnhill Land & Real Estate; Brett Baumeister - Vision Bank; B.J. Blanchard - Real Estate Developer;
C. Daniel DeLawder - Park National Corporation; Charles J. Ebert, III - Ebert Insurance Agency; Joey W. Ginn - Chairman

Bottom Row: Kevin Leeser, CPA - O’Sullivan Creel, LLP; Henry N. Lyda, III - Retired, University of Alabama; Robert S. McKean - Retired
President, Vision Bank Alabama; Christopher S. McManus D.M.D. - Baldwin County Endodontics, PC; Katharine A. Monroe - Wells
Fargo Advisors; James R. Owen, Jr. - Gulf Shores Title Co., Inc.; Clark J. Stewart - Stewart Broadcasting, Inc.

(cid:21)(cid:18)(cid:21)(cid:23)(cid:18)(cid:20)(cid:20)(cid:3)(cid:3)(cid:3)(cid:21)(cid:29)(cid:23)(cid:24)(cid:3)(cid:51)(cid:48)

Oﬃces: 9 ATMs: 9
Oﬃces: 9 ATMs: 9
Website: VisionBank.net
Website: VisionBank.net
Chairman: Joey W. Ginn

President: John D. Whitlock

County Served: Bay, Gulf, Okaloosa,
Santa Rosa, Walton

Main Oﬃce - Panama City*
2200 Stanford Road
Panama City, Florida 32405

Panama City Beach - Edgewater*
559 Richard Jackson Boulevard
Panama City Beach, Florida 32407

Wewahitchka*
125 North Highway 71
Wewahitchka, Florida 32465

Destin
1021 Highway 98 East, Suite A
Destin, Florida 32541

Port St. Joe*
529 Cecil G Costin, Sr. Boulevard
Port St. Joe, Florida 32456

Navarre*
8524 Navarre Parkway
Navarre, Florida 32566

St. Joe Beach*
8134 West Highway 98
Port St. Joe Beach, Florida 32456

Oﬀ-Site ATM Location
Wewahitchka - Rich’s IGA
201 West River Road

Panama City Beach*
16901 Panama City Beach Parkway
Panama City Beach, Florida 32413

Santa Rosa Beach*
1598 South County Highway 393, Suite 106
Santa Rosa Beach, Florida 32459

*Includes Automated Teller Machine

Top Row: Dr. James D. Campbell, Sr. - James D. Campbell, D.D.S., M.S.; William A. Cathey - Cathey’s Hardware; C. Daniel DeLawder
- Park National Corporation; Joey W. Ginn - Chairman; Patrick Koehnemann - Koehnemann Construction, Inc.; Lana Jane Lewis-Brent -
Paul Brent Designer, Inc.

Bottom Row: Robert S. McKean - Retired President, Vision Bank Alabama; Jimmy Patronis, Jr. - Captain Anderson’s Restaurant;
Jack B. Prescott - Retired, Smurﬁtt-Stone Container; John S. Robbins - Vision Bank; Jerry F. Sowell, Jr., CPA - Segers, Sowell, Stewart,
Johnson & Brill, PA; Dr. James Strohmenger - Bay Radiology Associates; Kim Styles-DiBacco - Styles Designs

(cid:21)(cid:18)(cid:21)(cid:23)(cid:18)(cid:20)(cid:20)(cid:3)(cid:3)(cid:3)(cid:21)(cid:29)(cid:23)(cid:24)(cid:3)(cid:51)(cid:48)

Officer Listing

Park National Corporation

C. Daniel DeLawder
Chairman

Harry O. Egger
Vice Chairman

John W. Kozak
Chief Financial Officer

David L. Trautman
President

William T. McConnell
Chairman of the Executive Committee

Century National Bank

William A. Phillips
Chairman

Bruce D. Kolopajlo
Vice President

Karen D. Lowe
Assistant Vice President

Molly J. Allen
Administrative Officer

Thomas M. Lyall
President

Mark A. Longstreth
Vice President

Terri L. Sidwell
Assistant Vice President

Patrick L. Nash
Executive Vice President

James R. Merry
Vice President

Cynthia J. Snider
Assistant Vice President

James C. Blythe
Senior Vice President

Rebecca R. Porteus
Vice President

Stephen A. Haren
Banking Officer

Barbara A. Gibbs
Senior Vice President

Michael F. Whiteman
Senior Vice President

Brian E. Hall
Vice President

Janice A. Hutchison
Vice President

John W. Imes
Vice President

Jeffrey C. Jordan
Vice President

Brian G. Kaufman
Vice President

Jody D. Spencer
Vice President and
Trust Officer

Thomas N. Sulens
Vice President

Joseph P. Allen
Assistant Vice President

Ann M. Gildow
Assistant Vice President

Theresa M. Gilligan
Assistant Vice President

Susan A. Lasure
Assistant Vice President

Diana F. McCloy
Banking Officer

Rebecca A. Palmerton
Banking Officer

Jodi C. Pagath
Banking Officer

Amy M. Pinson
Banking Officer

Jesse M. Rollins
Banking Officer

Douglas J. Wells
Banking Officer

Fairfield National Bank

Stephen G. Wells
President

Timothy D. Hall
Senior Vice President

Richard E. Baker
Vice President

Daniel R. Bates
Vice President

Linda M. Harris
Vice President

Laura F. Tussing
Vice President and
Trust Officer

Sabrena L. McClure
Assistant Vice President

Scott A. Reed
Assistant Vice President

Sandra S. Uhl
Assistant Vice President

Molly S. Bates
Banking Officer

Linda B. Boch
Banking Officer

Janet K. Cochenour
Banking Officer

Tara L. Craaybeek
Banking Officer

Melissa J. McMullen
Banking Officer

Michael D. Mitchell
Banking Officer

Katherine M. Barclay
Administrative Officer
and Trust Officer

Amber M. Gibson
Administrative Officer

Noelle K. Jarrett
Administrative Officer

Paula L. Meadows
Administrative Officer

Saundra W. Pritchard
Administrative Officer

Emila S. Smith
Administrative Officer

Beth A. Stillwell
Administrative Officer

Susan L. Summers
Administrative Officer

Deloris A. Tom
Administrative Officer

Cynthia A. Moore
Banking Officer

Trudy M. Reeb
Banking Officer

Mareion A. Royster
Banking Officer
and Trust Officer

Kim I. Sheldon
Banking Officer

Tina L. Taley
Banking Officer

189323_text_08_29.indd 15

2/24/11 2:45 PM

Officer Listing

Heather N. Wiley
Banking Officer

Grace R. Cline
Administrative Officer

Sean P. Murnane
Administrative Officer

Loretta J. Swyers
Administrative Officer

Fairfield National Bank (continued)

Jamey L. Binkley
Administrative Officer

Andrew J. Connell
Administrative Officer

Jason A. Saul
Administrative Officer

Donna K. Bruce
Administrative Officer

Daniel J. Fawcett
Administrative Officer

Allison G. Spangler
Administrative Officer

Farmers and Savings Bank

James S. Lingenfelter
President

Hal D. Sheaffer
Vice President

Barbara J. Young
Assistant Vice President

Kenneth G. Gosche
Senior Vice President

Wayne D. Young
Vice President

Todd A. Geren
Banking Officer

Sharon E. Blubaugh
Vice President

Gregory A. Henley
Assistant Vice President

Brian R. Hinkle
Banking Officer

Michael C. Bandy
Administrative Officer
and Trust Officer

Ronald D. Flowers
Administrative Officer

First-Knox National Bank

Gordon E. Yance
President

Barbara A. Barry
Assistant Vice President

Vickie A. Sant
Executive Vice President

Deborah S. Dove
Assistant Vice President

Mark P. Leonard
Senior Vice President

James W. Hobson
Assistant Vice President

W. Douglas Leonard
Senior Vice President

Debra E. Holiday
Assistant Vice President

Robert E. Boss
Vice President

Cheri L. Butcher
Vice President and
Trust Officer

Cynthia L. Higgs
Vice President

Julie A. Leonard
Vice President

Jesse L. Marlow
Vice President

Jerry D. Simon
Vice President

Todd P. Vermilya
Vice President

R. Edward Kline
Assistant Vice President

Gregory M. Roy
Assistant Vice President

Joan M. Stout
Assistant Vice President

Mark D. Blanchard
Banking Officer

Heather A. Brayshaw
Banking Officer

Phyllis D. Colopy
Banking Officer

Rachelle E. Dallas
Banking Officer

Wendi M. Fowler
Banking Officer and
Trust Officer

Patti J. Frazee
Banking Officer

James S. Meyer
Banking Officer

Sherry L. Snyder
Banking Officer

Rea D. Wirt
Banking Officer

Dusty C. Au
Administrative Officer

Nicholas R. Blanchard
Administrative Officer

Robert T. Brooke
Administrative Officer

Deborah J. Daniels
Administrative Officer

Lance E. Dill
Administrative Officer

Todd M. Hawkins
Administrative Officer

Monica L. Hiller
Administrative Officer

Kassandra L. Hoeflich
Administrative Officer

Dave E. Humphrey
Administrative Officer

Erin C. Kelty
Administrative Officer

Jeffrey A. Kinney
Administrative Officer

Carol A. Lewis
Administrative Officer

Mary A. Loyd
Administrative Officer

Nicole L. Mack
Administrative Officer

Paulina S. McQuigg
Administrative Officer

189323_text_08_29.indd 16

2/24/11 2:45 PM

Officer Listing

Guardian Finance Company

Earl W. Osborne
Chairman

Tracy L. Morgan
Banking Officer

Valerie J. Morgan
Administrative Officer

Matthew R. Marsh
President

Charles L. Harris
Administrative Officer

Mary E. Parsell
Administrative Officer

The Park National Bank

C. Daniel DeLawder
Chairman

David L. Trautman
President

William T. McConnell
Chairman of the
Executive Committee

Thomas J. Button
Senior Vice President

Thomas M. Cummiskey
Senior Vice President
and Trust Officer

Lynn B. Fawcett
Senior Vice President

John W. Kozak
Senior Vice President and
Chief Financial Officer

Timothy J. Lehman
Senior Vice President

Laura B. Lewis
Senior Vice President

Cheryl L. Snyder
Senior Vice President

Jeffrey A. Wilson
Senior Vice President and
Auditor

William R. Wilson
Senior Vice President

Edward L. Brady
Vice President

Alice M. Browning
Vice President

Brady T. Burt
Vice President

James M. Buskirk
Vice President and
Trust Officer

Peter G. Cassanos
Vice President

Cynthia H. Crane
Vice President

Kathleen O. Crowley
Vice President and
Auditor

Joan L. Franks
Vice President

John S. Gard
Vice President and
Trust Officer

Jeffrey C. Gluntz
Vice President

Scott C. Green
Vice President

Damon P. Howarth
Vice President and
Trust Officer

Daniel L. Hunt
Vice President

Steven J. Klein
Vice President

Teresa M. Kroll
Vice President and
Trust Officer

Carl H. Mayer
Vice President

Lydia E. Miller
Vice President

Matthew R. Miller
Vice President

Terry C. Myers
Vice President and
Trust Officer

Gregory M. Rhoads
Vice President

Karen K. Rice
Vice President

David J. Rohde
Vice President

David F. Romes
Vice President

Ralph H. Root III
Vice President

Alan C. Rothweiler
Vice President

Christine S. Schneider
Vice President

Michael R. Shannon
Vice President

Robert G. Springer
Vice President

Robin L. Stein
Vice President

Julie L. Strohacker
Vice President and
Trust Officer

Adam T. Stypula
Vice President

Erin E. Tschanen
Vice President

Daniel H. Turben
Vice President

Paul E. Turner
Vice President

Stanley A. Uchida
Vice President

John B. Uible
Vice President and
Trust Officer

Brian S. Urquhart
Vice President

Bradden E. Waltz
Vice President

Barbara A. Wilson
Vice President

Christa D. Wright
Vice President

Renee Baker
Assistant Vice President

Brent A. Barnes
Assistant Vice President
and Auditor

Gail A. Blizzard
Assistant Vice President

Sharon L. Bolen
Assistant Vice President

Rebecca A. Brownfield
Assistant Vice President

Beverly Clark
Assistant Vice President
and Trust Officer

Amber L. Cummins
Assistant Vice President
and Trust Officer

April R. Dusthimer
Assistant Vice President

Kelly A. Edds
Assistant Vice President

189323_text_08_29.indd 17

2/24/11 2:45 PM

Officer Listing

Amanda K. Evans
Assistant Vice President

Brian E. Smith
Assistant Vice President

Teresa A. Hennessy
Banking Officer

Brad G. Chance
Administrative Officer

The Park National Bank (continued)

Catherine J. Evans
Assistant Vice President

Melinda S. Smith
Assistant Vice President

Cynthia Hollis
Banking Officer

Jill S. Evans
Assistant Vice President

Maryann Thornton
Assistant Vice President

Alice M. Keefe
Banking Officer

Brenda Frakes
Assistant Vice President

Sandra S. Travis
Assistant Vice President

George C. Klepec
Banking Officer

Judith A. Franklin
Assistant Vice President

Angie D. Treadway
Assistant Vice President

Bethany B. Lewis
Banking Officer

David W. Hardy
Assistant Vice President
and Trust Officer

Louise A. Harvey
Assistant Vice President

Anthony L. Kendziorski
Assistant Vice President

Brenda L. Kutan
Assistant Vice President

Berkley C. Tuggle Jr.
Assistant Vice President

Kimberly G. McDonough
Banking Officer

Monte J. VanDeusen
Assistant Vice President

Cynthia A. Neely
Banking Officer

Scott A. VanHorn
Assistant Vice President

Diane M. Oberfield
Banking Officer

Carol S. Whetstone
Assistant Vice President
and Trust Officer

Richard H. Langley
Assistant Vice President

Rose M. Wilson
Assistant Vice President

Craig M. Larson
Assistant Vice President

Candy J. Lehman
Assistant Vice President and
Trust Officer

Kelly M. Maloney
Assistant Vice President

Julia E. McCormack
Assistant Vice President

Michael D. McDonald
Assistant Vice President

Ronald C. McLeish
Assistant Vice President

Ryan E. Mills
Assistant Vice President

Jennifer L. Morehead
Assistant Vice President

Rebecca K. Rodeniser
Assistant Vice President

J. Bradley Zellar
Assistant Vice President
and Trust Officer

Kathy L. Allen
Banking Officer

Eric M. Baker
Banking Officer

Thomas E. Ballard
Banking Officer

Dixie C. Brown
Banking Officer

Danielle A.M. Burns
Banking Officer

Dirk J. Dusthimer
Banking Officer

Trudi L. Fisher
Banking Officer
and IT Auditor

Kristie L. Green
Trust Officer

189323_text_08_29.indd 18

Sherri L. Pembrook
Banking Officer

Leda J. Rutledge
Banking Officer

Charles F. Schultz
Banking Officer

Lori B. Tabler
Banking Officer

Lori L. Torrens
Banking Officer
and Assistant Auditor

Jenny L. Ward
Banking Officer
and Auditor

D. Bradley Wilkins
Banking Officer

David B. Armstrong
Administrative Officer

Michelle L. Arnold
Administrative Officer

Larry M. Bailey
Administrative Officer

Patricia S. Carr
Administrative Officer

Nathan T. Cook
Administrative Officer

Andrew J. Fackler
Administrative Officer
and Assistant Auditor

Jerrod F. Gambs
Administrative Officer

Bradley D. Gard
Administrative Officer

Tammy L. Gast
Administrative Officer

Tracy A. Grimm
Administrative Officer

Ellen P. Hempleman
Administrative Officer

Chris R. Hiner
Administrative Officer

Asher D. Hunter
Administrative Officer

Cynthia L. Kissel
Administrative Officer

Andrew H. Knoesel
Administrative Officer

Natasha D. McKee
Administrative Officer

Angela J. Muncie
Administrative Officer

Jeffrey A. Pillow
Administrative Officer

Mark D. Ridenbaugh
Administrative Officer

Ruth Y. Sawyer
Administrative Officer

Alice M. Schlaegel
Administrative Officer

Kathryn S. Schumm
Administrative Officer

2/24/11 2:45 PM

Officer Listing

The Park National Bank (continued)

Jennifer L. Shanaberg
Administrative Officer

Ginger R. Varner
Administrative Officer

Judy L. Young
Administrative Officer

Lisa E. Stranger
Administrative Officer

Ronda M. Welsh
Administrative Officer

Park National Bank of Southwest Ohio & Northern Kentucky

Jennifer K. Fischer
Senior Vice President

Michael J. Jacunski
Senior Vice President

Jason D. Hughes
Vice President

John R. Nienaber
Vice President

Ginger L. Vining
Vice President

Joseph A. Wagner
Vice President

Richland Bank
David J. Gooch
President

John F. Winkler II
Vice President and
Trust Officer

Peggy A. Beckett
Assistant Vice President

Jay F. Berliner
Assistant Vice President

Jill A. Brewer
Assistant Vice President

Kim J. Cunningham
Assistant Vice President

Mary M. Demaree
Assistant Vice President

James E. Hyson
Assistant Vice President

Jason O. Verhoff
Administrative Officer

R. Kathy Johnson
Assistant Vice President

Cyndy H. Wright
Administrative Officer

Louis J. Prabell
Assistant Vice President

John L. Schuermann
Assistant Vice President

Sam DeBonis
Banking Officer

Michelle M. Sandlin
Administrative Officer

Edward A. Brauchler
Assistant Vice President

Linda M. Whited
Assistant Vice President

Clayton J. Herold
Administrative Officer

Donald R. Harris Jr.
Senior Vice President

Jimmy D. Burton
Assistant Vice President

John Q. Cleland
Banking Officer

Charla A. Irvin
Vice President and
Trust Officer

Michael A. Jefferson
Vice President

Rebecca J. Toomey
Vice President

Michael D. Volz
Vice President

Edward F. Adams
Assistant Vice President

Edward E. Duffey
Assistant Vice President

Susan A. Fanello
Assistant Vice President

Barbara A. Miller
Assistant Vice President

Jeffrey A. Parton
Assistant Vice President

Sheryl L. Smith
Assistant Vice President

J. Stephen McDonald
Banking Officer and
Trust Officer

Alexander M. Rocks
Banking Officer

Barbara L. Schopp
Banking Officer

Andrew C. Waldruff
Banking Officer

Carol L. Davis
Administrative Officer

Janis L. Hoover
Administrative Officer

Beth K. Malaska
Administrative Officer

Kristie L. Massa
Administrative Officer

Elizabeth A. Myers
Administrative Officer

Kathleen A. Spidel
Administrative Officer

Deborah A. Sweet
Administrative Officer

Robert N. Kent Jr.
President

Charles W. Sauter
Vice President

Linda M. Staubach
Administrative Officer

Scope Aircraft Finance

189323_text_08_29.indd 19

2/24/11 2:45 PM

Officer Listing

John E. Swallow
President

Eric J. McKee
Vice President

Joy D. Greer
Assistant Vice President

Second National Bank
Harvey B. Hole III
Banking Officer

Steven C. Badgett
Executive Vice President

Gene A. Rismiller
Vice President

Vicki L. Neff
Assistant Vice President

Michael R. Henry
Administrative Officer

C. Russell Badgett
Vice President

Daniel G. Schmitz
Vice President

Cynthia J. Riffle
Assistant Vice President

Zachary L. Newbauer
Administrative Officer

Marie A. Boas
Vice President

D. Todd Durham
Vice President and
Trust Officer

Thomas J. Lawson
Vice President

Kimberly A. Baker
Assistant Vice President

Alexa J. Roth
Assistant Vice President

Gregory P. Schwartz
Administrative Officer

Gerald O. Beatty
Assistant Vice President

Shane D. Stonebraker
Assistant Vice President

Deborah A. Smith
Administrative Officer

Debby J. Folkerth
Assistant Vice President

Brian A. Wagner
Assistant Vice President

Security National Bank

William C. Fralick
President

James E. Leathley
Vice President

Rick L. McCain
Assistant Vice President

Thomas B. Keehner
Banking Officer

Jeffrey A. Darding
Executive Vice President

Thomas C. Ruetenik
Vice President

Mark B. Robertson
Assistant Vice President

Patrick K. Rastatter
Banking Officer

Thomas A. Goodfellow
Senior Vice President

David A. Snyder
Vice President

Gary J. Seitz
Assistant Vice President

Rachel M. Brewer
Trust Officer

Andrew J. Irick
Senior Vice President

Michael B. Warnecke
Vice President

Darlene S. Williams
Assistant Vice President

Margaret A. Horstman
Administrative Officer

Timothy L. Bunnell
Vice President

Margaret L. Foley
Vice President and
Trust Officer

Mary L. Goddard
Vice President and
Trust Officer

James A. Kreckman
Vice President and
Trust Officer

Simmie Annandale-King
Assistant Vice President

Sharon K. Boysel
Assistant Vice President

Margaret A. Chapman
Assistant Vice President

Connie P. Craig
Assistant Vice President

Steven B. Duelley
Assistant Vice President

Terri L. Wyatt
Assistant Vice President and
Trust Officer

Tamara L. Augustine
Trust Officer

Teresa L. Belliveau
Banking Officer

William T. Evans
Banking Officer

Catherine L. Hill
Trust Officer

JoAnna S. Jaques
Administrative Officer

Mark D. Klingler
Administrative Officer

Rita A. Riley
Administrative Officer

Anne M. Robinette
Administrative Officer

189323_text_08_29.indd 20

2/24/11 2:45 PM

Officer Listing

United Bank
Donald R. Stone
President

Scott E. Bennett
Assistant Vice President

Floyd J. Farmer
Assistant Vice President

James A. DeSimone
Administrative Officer

James A. Carr
Senior Vice President

Matthew E. Bickert
Assistant Vice President

Anne K. Spreng
Vice President

James W. Chapman
Assistant Vice President

Richard D. Hancock
Assistant Vice President and
Trust Officer

David J. Lauthers
Banking Officer

Jennifer J. Kuns
Administrative Officer

Kriste A. Slagle
Administrative Officer

Unity National Bank

John A. Brown
President

G. Dwayne Cooper
Vice President

Nathan E. Counts
Vice President

Stephen W. Vallo
Vice President

Carol L. Van Culin
Assistant Vice President

Douglas R. Eakin
Administrative Officer

Dean F. Brewer
Assistant Vice President

Vicki L. Burke
Trust Officer

James R. Stubbs
Assistant Vice President

Lisa L. Feeser
Banking Officer

Kathy M. Sherman
Administrative Officer

Jonathan A. Waldo
Administrative Officer

Vision Bank - Alabama

Joey W. Ginn
Chairman

Patricia H. Campbell
Vice President

Judy R. Smith
Vice President

Diane C. Anderson
President

D. Rick Conway
Vice President

Mark S. Stejskal
Vice President

Wendy V. Stacks
Assistant Vice President

Alodia A. Wimpee
Assistant Vice President

Brett A. Baumeister
Executive Vice President

Robin B. Fly
Vice President

Elizabeth O. Stone
Vice President

Michelle B. Baldwin
Banking Officer

Christie G. Barkley
Senior Vice President

Bernard A. Fogarty
Vice President

Tracie A. Sweat
Vice President

Beverly E. Billingsley
Banking Officer

Karen J. Harmon
Senior Vice President

Gregory G. Gontarski
Vice President

Rhonda L. Willis
Vice President

Erica N. Duncan
Banking Officer

George L. Hawthorne
Senior Vice President

Joel S. Hardee
Vice President

Deborah D. Ard
Assistant Vice President

Alisha N. Mason
Auditor and Banking Officer

Lyndsay P. Job
Senior Vice President

Michelle L. Kinne
Vice President

Lauren S. Dango
Assistant Vice President

Mary Alice Neyhart
Banking Officer

James E. Kirkland
Senior Vice President

William R. Legrone
Vice President

Janet J. Ellis
Assistant Vice President

Cynthia M. Paul
Banking Officer

Debra M. Schmidt
Senior Vice President

Ken N. Neyman
Vice President

Holly L. Floyd
Assistant Vice President

Paige S. Shoemaker
Banking Officer

Frank W. Wagner II
Senior Vice President

Geneie S. Scheer
Vice President

Joshua C. Mims
Assistant Vice President

Alina M. Smith
Banking Officer

Patricia R. Burrell
Vice President

Doug J. Sizemore
Vice President

Jessica Y. Morace
Assistant Vice President

189323_text_08_29.indd 21

2/24/11 2:45 PM

Officer Listing

Vision Bank - Florida

Joey W. Ginn
Chairman

John D. Whitlock
President

Scott R. Robertson
Senior Vice President

Terri A. Hugghins
Vice President

Tami J. Smith
Assistant Vice President

Owen W. Ayers
Vice President

Joe M. Pelter
Vice President

Donald S. Summers
Assistant Vice President

Jerry D. Gaskin
Executive Vice President

Jeremy S. Bennett
Vice President

Cindy L. Stephens
Vice President

Debbie C. Thompson
Assistant Vice President

Carolyn M. Husband
Executive Vice President

Bryan Campolo
Vice President

Diane E. Floyd
Senior Vice President

Joan A. Cleckley
Vice President

Colleen Y. Friesen
Senior Vice President

Debbie H. Driskell
Vice President

Anita M. Mayer
Senior Vice President

Jim P. Norton
Senior Vice President
and Trust Officer

John S. Robbins
Senior Vice President

Jim M. Haag
Vice President

Laura V. Helms
Vice President

Jim L. Hood
Vice President

Leslie L. Welsch
Vice President

Johanna L. White
Vice President

Jennifer J. Woods
Vice President

Linda Jo Chumney
Banking Officer

Amber M. Golden
Banking Officer

Terri B. Little
Banking Officer

Karen P. Fontaine
Assistant Vice President

Katie McPartland
Banking Officer

Chelly E. Picone
Assistant Vice President

Shawn B. Pitts
Assistant Vice President

189323_text_08_29.indd 22

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F I N A N C I A L R E V I E W

This financial review presents management’s discussion and analysis of the
financial condition and results of operations for Park National Corporation and
its subsidiaries (“Park” or the “Corporation”). This discussion should be read
in conjunction with the consolidated financial statements and related notes and
the five-year summary of selected financial data. Management’s discussion and
analysis contains forward-looking statements that are provided to assist in the
understanding of anticipated future financial performance. Forward-looking
statements provide current expectations or forecasts of future events and are
not guarantees of future performance. The forward-looking statements are
based on management’s expectations and are subject to a number of risks
and uncertainties. Although management believes that the expectations reflected
in such forward-looking statements are reasonable, actual results may differ
materially from those expressed or implied in such statements. Risks and
uncertainties that could cause actual results to differ materially include, without
limitation: Park’s ability to execute its business plan successfully and within the
expected timeframe; deterioration in the asset value of our loan portfolio may
be worse than expected due to a number of factors, such as adverse changes
in economic conditions that impair the ability of borrowers to repay their loans,
the underlying collateral could prove less valuable than assumed and cash flows
may be worse than expected; changes in general economic and financial
market conditions, and weakening in the economy, specifically the real estate
market and credit markets, either nationally or in the states in which Park and
its subsidiaries do business, may be worse than expected which could decrease
the demand for loan, deposit and other financial services and increase loan
delinquencies and defaults; the effects of the Gulf of Mexico oil spill; changes
in interest rates and prices may adversely impact the value of securities, loans,
deposits and other financial instruments and the interest rate sensitivity of our
consolidated balance sheet; changes in consumer spending, borrowing and
saving habits; our liquidity requirements could be adversely affected by changes
in our assets and liabilities; competitive factors among financial institutions may
increase significantly, including product and pricing pressures and Park’s ability
to attract, develop and retain qualified bank professionals; the nature, timing
and effect of changes in banking regulations or other regulatory or legislative
requirements affecting the respective businesses of Park and its subsidiaries,
including changes in laws and regulations concerning taxes, accounting,
banking, securities and other aspects of the financial services industry,
specifically the Dodd-Frank Wall Street Reform and Consumer Protection
Act of 2010; the effect of fiscal and governmental policies of the United States
federal government; and other risk factors relating to our industry as detailed
from time to time in Park’s reports filed with the Securities and Exchange
Commission (“SEC”) including those described in “Item 1A. Risk Factors”
of Part I of Park’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2010. Undue reliance should not be placed on the forward-
looking statements, which speak only as of the date of this Annual Report.
Park does not undertake, and specifically disclaims any obligation, to publicly
release the result of any revisions that may be made to update any forward-
looking statement to reflect the events or circumstances after the date on
which the forward-looking statement was made, or reflect the occurrence
of unanticipated events, except to the extent required by law.

ACQUISITION OF VISION BANCSHARES, INC.
AND GOODWILL IMPAIRMENT CHARGES
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 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 as of 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 con-
solidated under a single charter through the merger of the Vision Bank
headquartered in Gulf Shores, Alabama with and into the Vision Bank
headquartered in Panama City, Florida. Vision Bank operates under a Florida
banking charter and has 18 branch locations in Baldwin County, Alabama and
in the panhandle of Florida. The acquisition of Vision had a significant negative
impact on Park’s net income in 2007, 2008, 2009 and 2010.

Vision Bank began experiencing credit problems during the second half of
2007 as nonperforming loans increased from $6.5 million at June 30, 2007 to
$63.5 million or 9.9% of loan balances at December 31, 2007. As a result of
these credit problems at Vision Bank, Park’s management concluded that the
goodwill of $109.0 million recorded at the time of acquisition was possibly
impaired. A goodwill impairment analysis was completed during the fourth
quarter of 2007 and the conclusion was reached that a goodwill impairment
charge of $54.0 million be recorded at Vision Bank at year-end 2007 to reduce
the goodwill balance to $55.0 million.

Credit problems continued to plague Vision Bank in 2008. Net loan charge-offs
for Vision Bank were $5.5 million during the first quarter or an annualized
3.37% of average loans and increased to $10.8 million during the second
quarter or an annualized 6.41% of average loans. Based primarily on the
increased level of net loan charge-offs at Vision Bank during 2008, management
determined that it would be prudent to test for additional goodwill impairment.
A goodwill impairment analysis was completed during the third quarter of
2008 and the conclusion was reached that a goodwill impairment charge of
$55.0 million be recorded at Vision Bank during the third quarter of 2008 to
eliminate the goodwill balance pertaining to Vision Bank. Refer to “Overview”
section below for 2008, 2009 and 2010 impact of Vision Bank results on Park.

OVERVIEW
Net income was $74.2 million for both 2010 and 2009, compared to net
income of $13.7 million in 2008. The primary reason for the large change in
net income between 2009 and 2008 was the change in the net loss at Vision
Bank. The net loss at Vision Bank was $29.3 million in 2010, $30.1 million
in 2009 and $81.2 million in 2008. As previously discussed, Vision Bank
recognized a goodwill impairment charge of $55.0 million in 2008 to
write-off the remaining goodwill asset.

Diluted earnings per common share were $4.51, $4.82 and $0.97 for 2010,
2009 and 2008, respectively. Diluted earnings per common share decreased by
$0.31 or 6.4% in 2010 compared to 2009 and increased by $3.85 or 396.9%
in 2009 compared to 2008. While net income and net income available to
common shareholders was effectively unchanged in 2010 from 2009, the
issuance of common shares during 2010 resulted in a decline in diluted
earnings per common share compared to last year.

The following tables show the components of net income for 2010, 2009 and
2008. This information is provided for Park, Vision Bank and Park excluding
Vision Bank.

Table 1 – Park – Summary Income Statements
For the years ended December 31,

(In thousands)

Net interest income

Provision for loan losses

Other income

Other expense

Goodwill impairment charge

Income before taxes

Income taxes

Net income

2010

2009

2008

$274,044

$273,491

$255,873

64,902

77,496

68,821

81,190

70,487

84,834

187,107

188,725

179,515

—

99,531

25,314

—

97,135

22,943

54,986

35,719

22,011

$ 74,217

$ 74,192

$ 13,708

F I N A N C I A L R E V I E W

Table 2 – Vision Bank – Summary Income Statements
For the years ended December 31,

(In thousands)

Net interest income

Provision for loan losses

Other income (loss)

Other expense

Goodwill impairment charge

Loss before taxes

Income tax benefit

Net loss

2010

2009

2008

$ 27,867

$ 25,634

$ 27,065

39,229

(3,407)

31,623

—

(46,392)

(17,095)

44,430

(2,047)

28,091

—

(48,934)

(18,824)

46,963

3,014

27,149

54,986

(99,019)

(17,832)

$(29,297)

$ (30,110)

$(81,187)

Vision Bank continued to have severe credit problems in 2010. Vision Bank’s
net loan charge-offs were $36.6 million in 2010, compared to $28.9 million
in 2009 and $38.5 million in 2008. As a percentage of average loans, net
loan charge-offs were 5.48% in 2010, 4.18% in 2009 and 5.69% in 2008.
As previously discussed, Vision Bank recognized a goodwill impairment
charge of $55.0 million in 2008.

Table 3 – Park, Excluding Vision Bank – Summary Income Statements
For the years ended December 31,

(In thousands)

Net interest income

Provision for loan losses

Other income

Other expense

Goodwill impairment charge

Income before taxes

Income taxes

Net income

2010

2009

2008

$246,177

$247,857

$228,808

25,673

80,903

24,391

83,237

23,524

81,820

155,484

160,634

152,366

—

145,923

42,409

—

146,069

41,767

—

134,738

39,843

$103,514

$104,302

$ 94,895

Net income for Park excluding Vision Bank decreased by $788,000 or .8% to
$103.5 million in 2010 compared to 2009 and increased by $9.4 million or
9.9% to $104.3 million in 2009 compared to 2008.

SUMMARY DISCUSSION OF OPERATING RESULTS FOR PARK
A year ago, Park’s management projected that net interest income would
be $265 million to $275 million in 2010. The actual results in 2010 were
$274.0 million, which were very close to the top of the estimated range. Park’s
management projected that the average interest earning assets for 2010 would
be approximately $6,550 million. The actual average interest earning assets for
the year were $6,482 million, 1.0% lower than the projected balance. However,
Park’s net interest margin for 2010 of 4.26% exceeded management’s estimated
range of 4.15% to 4.20%. This positive variance was largely due to an improve-
ment in the net interest rate spread (the difference between rates received for
interest earning assets and the rates paid for interest bearing liabilities.) The net
interest rate spread improved by 7 basis points to 4.01% for 2010 from 3.94%
for 2009. Management had not projected an improvement in the net interest
rate spread for 2010.

Park’s management also projected a year ago that the provision for loan losses
would be $45 million to $55 million in 2010. The actual provision for loan
losses in 2010 of $64.9 million exceeded the top of the estimated range by $9.9
million. The primary reason that the actual provision for loan losses exceeded
management’s estimated range in 2010 was due to the large number of new
nonaccrual loans during the year, as well as continued devaluations of property
values (primarily related to impaired loans at Vision Bank that are considered
to be collateral dependent). New nonperforming loans were $175.2 million
in 2010, compared to $184.2 million in 2009 and $141.8 million in 2008.
Park’s management had projected a significant decrease in the amount of
new nonperforming loans in 2010 and accordingly had forecast a significant
decrease in the loan loss provision for 2010.

Other income for 2010 was $77.5 million, which includes gains from the sale
of investment securities of $11.9 million. A year ago, Park’s management
projected that total other income would be $75.3 million, which included
estimated gains from the sale of investment securities of $7.3 million.
Management sold more investment securities in 2010 than anticipated which
resulted in total other income being $2.2 million larger than projected.

A year ago, Park’s management projected that total other expense would be
approximately $191 million in 2010. Total other expense for 2010 was $187.1
million and was below management’s estimate by $3.9 million or 2.0%.

A year ago, Park’s management projected that income before income taxes for
2010 would be approximately $104.3 million (using the midpoint of ranges
where applicable) based on the forecast for net interest income, provision for
loan losses, other income and other expense. The actual income before income
taxes for 2010 was $99.5 million, $4.8 million or 4.6% below the estimate. In
summary, the actual results for net interest income, other income and other
expense were a little better than the forecast for 2010, but the provision for
loan losses was $9.9 million higher than the estimated range.

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

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

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

F I N A N C I A L R E V I E W

shareholders”. The dividends and accretion on the Series A Preferred Shares
totaled $5,807,000 for 2010, $5,762,000 for 2009 and $142,000 for 2008.
The accretion of the discount was $807,000 in 2010, $762,000 in 2009 and
$18,000 in 2008. Management expects the accretion of the discount in 2011
will be $856,000.

Income available to common shareholders is net income minus the preferred
stock dividends and accretion. Income available to common shareholders was
$68.4 million for both 2010 and 2009, and $13.6 million for 2008.

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

DIVIDENDS ON COMMON SHARES
Park declared quarterly cash dividends on common shares in 2010 that totaled
$3.76 per share. The quarterly cash dividend on common shares was $0.94 per
share for each quarter of 2010.

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

Cash dividends declared on common shares were $3.76 in both 2010 and
2009 and $3.77 in 2008. Park’s management expects to pay a quarterly cash
dividend on its common shares of $0.94 per share in 2011. This expectation
is based on management’s current forecast that earnings will be sufficient to
maintain historic dividend levels.

CRITICAL ACCOUNTING POLICIES
The significant accounting policies used in the development and presentation
of Park’s consolidated financial statements are listed in Note 1 of the Notes to
Consolidated Financial Statements. The accounting and reporting policies of
Park conform with U.S. GAAP and general practices within the financial services
industry. The preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and the accompanying notes.
Actual results could differ from those estimates.

Park believes the determination of the allowance for loan losses involves a
higher degree of judgment and complexity than its other significant accounting
policies. The allowance for loan losses is calculated with the objective of
maintaining a reserve level believed by management to be sufficient to
absorb probable incurred credit losses in the loan portfolio. Management’s
determination of the adequacy of the allowance for loan losses is based on
periodic evaluations of the loan portfolio and of current economic conditions.
However, this evaluation is inherently subjective as it requires material
estimates, including expected default probabilities, the loss given default,
the amounts and timing of expected future cash flows on impaired loans, and
estimated losses on consumer loans and residential mortgage loans based on
historical loss experience and current economic conditions. All of these factors
may be susceptible to significant change. To the extent that actual results differ
from management estimates, additional loan loss provisions may be required
that would adversely impact earnings for future periods. (Refer to the “Credit
Experience-Provision for Loan Losses” section within this Financial Review for
additional discussion.)

Other real estate owned (“OREO”), property acquired through foreclosure,
is recorded at estimated fair value less anticipated selling costs (net realizable
value). If the net realizable value is below the carrying value of the loan on
the date of transfer, the difference is charged to the allowance for loan losses.
Subsequent declines in value, OREO devaluations, are reported as adjustments
to the carrying amount of OREO and are expensed within other income. Gains
or losses not previously recognized, resulting from the sale of OREO, are
recognized in other income on the date of sale. At December 31, 2010, OREO
totaled $44.3 million, representing a 7.5% increase compared to $41.2 million
at December 31, 2009.

Effective January 1, 2008, management implemented the fair value hierarchy,
which has the objective of maximizing the use of observable market inputs.
The related accounting guidance also requires enhanced disclosures regarding
the inputs used to calculate fair value. These inputs are classified as Level 1, 2,
and 3. Level 3 inputs are those with significant unobservable inputs that reflect
a company’s own assumptions about the market for a particular instrument.
Some of the inputs could be based on internal models and cash flow analysis.
At December 31, 2010, financial assets valued using Level 3 inputs for Park had
an aggregate fair value of approximately $158.9 million. This was 10.8% of the
total amount of assets measured at fair value as of the end of the year. The fair
value of impaired loans was approximately $111.3 million (or 70.0%) of the
total amount of Level 3 inputs. Additionally, there were $96.2 million of loans
that were impaired and carried at cost, as fair value exceeded book value for
each individual credit. The large majority of Park’s financial assets valued using
Level 2 inputs consist of available-for-sale (“AFS”) securities. The fair value of
these AFS securities is obtained largely by the use of matrix pricing, which is
a mathematical technique widely used in the financial services industry to
value debt securities without relying exclusively on quoted market prices for
the specific securities but rather by relying on the securities’ relationship to
other benchmark quoted securities.

Management believes that the accounting for goodwill and other intangible
assets also involves a higher degree of judgment than most other significant
accounting policies. GAAP establishes standards for the amortization of
acquired intangible assets and the impairment assessment of goodwill.
Goodwill arising from business combinations represents the value attributable
to unidentifiable intangible assets in the business acquired. Park’s goodwill
relates to the value inherent in the banking industry and that value is dependent
upon the ability of Park’s banking subsidiaries to provide quality, cost-effective
banking services in a competitive marketplace. The goodwill value is supported
by revenue that is in part driven by the volume of business transacted. A
decrease in earnings resulting from a decline in the customer base, the inability
to deliver cost-effective services over sustained periods or significant credit
problems can lead to impairment of goodwill that could adversely impact
earnings in future periods. GAAP requires an annual evaluation of goodwill for
impairment, or more frequently if events or changes in circumstances indicate
that the asset might be impaired. The fair value of the goodwill, which resides
on the books of Park’s subsidiary banks, is estimated by reviewing the past
and projected operating results for the Park subsidiary banks, deposit and
loan totals for the Park subsidiary banks and banking industry comparable
information. Park recognized a goodwill impairment charge of $55.0 million
in the third quarter of 2008 to eliminate the goodwill balance pertaining to
Vision Bank. At December 31, 2010, on a consolidated basis, Park had core
deposit intangibles of $6.0 million subject to amortization and $72.3 million
of goodwill, which was not subject to periodic amortization. The core deposit
intangibles recorded on the balance sheet of PNB totaled $1.4 million and
the core deposit intangibles at Vision Bank were $4.6 million. The goodwill
asset of $72.3 million is carried on the balance sheet of PNB.

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

F I N A N C I A L R E V I E W

Park’s subsidiaries compete for deposits and loans with other banks,
savings associations, credit unions and other types of financial institutions.
At December 31, 2010, Park and its Ohio-based banking divisions operated
124 banking offices and a network of 151 automatic teller machines in 28
Ohio counties and one county in northern Kentucky. Vision Bank operated
17 banking offices and a network of 20 automatic teller machines in Baldwin
County, Alabama and in five counties in the panhandle of Florida.

A table of financial data for Park’s banking subsidiaries and their divisions
for 2010, 2009 and 2008 is shown in Table 4. See Note 23 of the Notes to
Consolidated Financial Statements for additional financial information for the
Corporation’s subsidiaries. Please note that the financial statements for various
divisions of PNB are not maintained on a separate basis and, therefore, net
income is only an estimate by management.

Table 4 – Park National Corporation Affiliate Financial Data

2010

2009

2008

Average
Assets

Net
Income

Average
Assets

Net
Income

Average
Assets

Net
Income

$1,973,443 $25,903 $1,798,814 $26,991

$1,839,012 $25,445

770,319

14,603

825,481

14,316

820,571

13,001

647,798

9,860

650,488

11,387

711,162

12,995

642,343

14,374

633,260

12,411

658,151

12,718

519,102

9,754

563,776

9,954

526,989

8,946

459,050

9,695

484,849

9,368

337,355

7,332

405,889

2,590

416,502

1,841

416,398

1,506

(In thousands)

Park National Bank:
Park National
Division

Security National
Division

Century National
Division

First-Knox National
Division

Richland Trust
Division

Fairfield National
Division

Park National SW &
N KY Division

Second National
Division

United Bank Division

243,909

385,534

7,570

4,344

371,079

242,166

6,926

4,300

423,062

214,074

5,752

3,467

Unity National
Division

Farmers & Savings
Division

Vision Bank

Parent Company,

including consolidating
entries

185,003

2,918

182,373

2,251

190,739

2,061

103,121

1,337

107,437

1,713

119,014

2,042

859,491 (29,297)

904,897

(30,110)

904,420 (81,187)

(152,252)

566

(145,591)

2,844

(452,861)

(370)

Consolidated
Totals

$7,042,750 $74,217 $7,035,531 $74,192

$6,708,086 $13,708

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

Total year-end deposits decreased by $92.6 million or 1.8% to $5,095 million
at December 31, 2010. Certificates of deposits, excluding brokered deposits,
declined by $358.7 million or 16% in 2010. Brokered time deposits were $110
million at December 31, 2010. All other deposits increased by $156 million or
5% in 2010. The following table provides information on the change in deposits
in 2010.

Table 5 – Year-End Deposits

December 31,
(In thousands)

2010

2009

Noninterest bearing checking

$ 937,719

$ 897,243

Interest bearing transaction

accounts

Savings

Brokered time deposits

All other time deposits

Other

Total

1,283,158

899,288

110,065

1,863,838

1,352

$5,095,420

1,193,845

873,137

—

2,222,537

1,290

$5,188,052

Change

$ 40,476

89,313

26,151

110,065

(358,699)

$ (92,632)

In 2010, total year-end deposits at Vision Bank decreased by $55.5 million
or 8.0% and decreased by $37.1 million or 0.8% for Park’s Ohio-based
operations.

Total year-end deposits increased by $426 million or 9.0% in 2009. Excluding
a $236 million decline in brokered deposits in 2009, deposits increased by
$662 million or 14.6% in 2009. In 2009, Vision Bank’s year-end total deposits
increased by $52 million or 8.2% and Park’s Ohio-based operations increased
deposits by $374 million or 9.1%.

Average total deposits were $5,182 million in 2010, compared to $5,051
million in 2009 and $4,603 million in 2008. Average noninterest bearing
deposits were $908 million in 2010, compared to $818 million in 2009
and $740 million in 2008.

Management expects that total deposits (exclusive of brokered deposits) will
modestly increase in 2011 by 1%. Excluding brokered deposits, total year-end
deposits decreased by 3.9% in 2010, which was in line with the guidance of a
3% to 5% decline that was provided a year ago by Park’s management.

The Federal Open Market Committee (“FOMC”) of the Federal Reserve Board
decreased the federal funds rate from 4.25% at December 31, 2007 to a range
of 0% to 0.25% at year-end 2008. The FOMC aggressively lowered the federal
funds rate during 2008 as the severity of the economic recession increased. The
FOMC maintained the targeted federal funds rate in the 0% to 0.25% range for
all of 2009 and 2010, as the U.S. economy gradually recovered from the severe
recession. The average federal funds rate was 0.18% for 2010, compared to an
average rate of 0.16% for 2009 and 1.93% in 2008.

The average interest rate paid on interest bearing deposits was 0.98% in 2010,
compared to 1.53% in 2009 and 2.33% in 2008. The average cost of interest
bearing deposits for each quarter of 2010 was 0.82% for the fourth quarter,
0.91% for the third quarter, 1.04% for the second quarter and 1.15% for the
first quarter.

Park’s management expects that due to the uncertainty of future economic
growth following the economic recession, the FOMC will maintain the federal
funds interest rate at approximately 0.25% for most of 2011. As a result, Park’s
management expects a slight decline in the average interest rate paid on interest
bearing deposits in 2011.

Short-Term Borrowings: Short-term borrowings consist of securities sold
under agreements to repurchase, Federal Home Loan Bank advances, federal
funds purchased and other borrowings. These funds are used to manage the
Corporation’s liquidity needs and interest rate sensitivity risk. The average rate
paid on short-term borrowings generally moves closely with changes in market
interest rates for short-term investments. The average rate paid on short-term
borrowings was 0.39% in 2010 compared to 0.76% in 2009 and 2.38% in
2008.

The average cost of short-term borrowings for each quarter of 2010 was
0.32% for the fourth quarter, 0.37% for the third quarter, 0.43% for the
second quarter and 0.46% for the first quarter. Management expects the
average rate paid on short-term borrowings in 2011 will be down slightly
compared to 2010.

Average short-term borrowings were $301 million in 2010 compared to $420
million in 2009 and $609 million in 2008. The decrease in average short-term
borrowings in 2010 compared to 2009, as well as 2009 compared to 2008,
was primarily due to the increase in average deposit balances in both 2010
and 2009. While average short-term borrowings declined in 2010 compared
to 2009, the short-term borrowing balance at December 31, 2010 was $663.7
million compared to $324.2 million at December 31, 2009, as Park increased
its investment portfolio at year-end 2010 and temporarily funded the increase
in assets through short-term borrowings.

Long-Term Debt: Long-term debt primarily consists of borrowings from the
Federal Home Loan Bank and repurchase agreements with investment banking
firms. (The average balance of long-term debt and the average cost of long-term
debt includes the subordinated debentures discussed in the following section.)

F I N A N C I A L R E V I E W

In 2010, average long-term debt was $725 million compared to $780 million in
2009 and $836 million in 2008. Average total debt (long-term and short-term)
was $1,026 million in 2010 compared to $1,200 million in 2009 and $1,445
million in 2008. Average total debt decreased by $174 million or 14.5% in
2010 compared to 2009 and decreased by $245 million or 16.9% in 2009
compared to 2008. The decrease in average total debt in 2010 compared to
2009, as well as compared to 2008, was primarily due to the increase in
average deposits. Average long-term debt was 71% of average total debt in
2010 compared to 65% in 2009 and 58% in 2008.

The average rate paid on long-term debt was 3.91% for 2010, compared to
3.38% for 2009 and 3.72% for 2008. In 2010, the average cost of long-term
debt for each quarter was 3.87% for the fourth quarter, 3.91% for the third
quarter, 3.92% for the second quarter and 3.92% for the first quarter.

Management expects the average long-term debt balance will be approximately
$850 million in 2011, as management increased long-term borrowings in
January 2011 by $150 million and used the proceeds to repay short-term
borrowings. Additionally, management expects that the average rate paid
on long-term debt will be approximately 3.50% in 2011.

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

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

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

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

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

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

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

Stockholders’ Equity: Tangible stockholders’ equity (stockholders’ equity
less goodwill and other intangible assets) to tangible assets (total assets less
goodwill and other intangible assets) was 9.24% at December 31, 2010
compared to 9.13% at December 31, 2009 and 7.98% at December 31, 2008.

The ratio of tangible stockholders’ equity to tangible assets for each of the past
three years includes the issuance of $100 million of Park Series A Preferred
Shares to the U.S. Treasury on December 23, 2008. In 2009, Park’s tangible
stockholders’ equity to tangible assets ratio increased largely as a result of the
sale of common stock which increased equity by $53.5 million. In 2010, Park’s
tangible stockholders’ equity to tangible assets further increased largely as a
result of the sale of common stock which increased equity by $33.5 million.
Excluding the $100.0 million of Series A Preferred Shares, the ratio of tangible
stockholders’ equity to tangible assets was 7.86% at December 31, 2010, 7.69%
at December 31, 2009 and 6.54% at December 31, 2008.

In accordance with GAAP, Park reflects any unrealized holding gain or loss
on AFS securities, net of income taxes, as accumulated other comprehensive
income (loss) which is part of Park’s stockholders’ equity. The unrealized
holding gain on AFS securities, net of income taxes, was $15.1 million at year-
end 2010, compared to $30.1 million at year-end 2009 and $31.6 million at
year-end 2008. Long-term and short-term interest rates decreased sharply
during the fourth quarter of 2008 which caused the market value of Park’s
investment securities to increase and produced the large unrealized holding
gain on AFS securities, net of income taxes, at December 31, 2009 and 2008.
The net unrealized holding gains on AFS securities, net of taxes, decreased by
$18.4 million in the fourth quarter of 2010 as interest rates increased in
November and December.

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

Pertaining to the Pension Plan, Park recognized a net comprehensive loss of
$2.4 million in 2010, a net comprehensive gain of $6.3 million in 2009 and a
net comprehensive loss of $16.2 million in 2008. The comprehensive loss in
2010 was primarily due to a change in actuarial assumptions, specifically the
discount rate. This actuarial loss more than offset the positive investment
returns and contributions to the Pension Plan in 2010. The comprehensive gain
in 2009 was due to positive investment returns and contributions to the Pension
Plan. The large comprehensive loss in 2008 was primarily due to the negative
investment return on Pension Plan assets in 2008, as a result of the poor
performance of stock investments in 2008. At year-end 2010, the balance in
accumulated other comprehensive income/(loss) pertaining to the Pension
Plan was ($15.9) million, compared to ($13.5) million at December 31, 2009
and ($19.8) million at December 31, 2008.

Park also recognized net comprehensive income/(loss) of ($0.1) million,
$0.3 million and ($1.3) million for the years ended December 31, 2010, 2009
and 2008, respectively, due to the mark-to-market of the $25 million cash
flow hedge. See Note 19 of the Notes to Consolidated Financial Statements
for information on the accounting for Park’s derivative instruments.

F I N A N C I A L R E V I E W

INVESTMENT OF FUNDS
Loans: Average loans were $4,642 million in 2010 compared to $4,594
million in 2009 and $4,355 million in 2008. The average yield on loans was
5.80% in 2010 compared to 6.03% in 2009 and 6.93% in 2008. The average
prime lending rate in 2010 and 2009 was 3.25% compared to 5.09% in 2008.
Approximately 62% of Park’s loan balances mature or reprice within one year
(see Table 23). The yield on average loan balances for each quarter of 2010
was 5.73% for the fourth quarter, compared to 5.76% for the third quarter,
5.84% for the second quarter and 5.87% for the first quarter. Management
expects that the yield on the loan portfolio will decrease modestly in 2011
compared to the average yield of 5.80% for 2010. Year-end loan balances
increased by $92 million or 2.0% in 2010 compared to 2009. Park’s Ohio-
based subsidiaries increased loans by $129 million or 3.2% during 2010.
Vision Bank had a decline in loans of $37 million or 5.4% during 2010.

In 2009, year-end loan balances increased by $149 million or 3.3%. Park’s
Ohio-based subsidiaries increased loans by $162 million or 4.3% during 2009.
Vision Bank had a small decline in loans of $13 million or 1.9% in 2009.

In 2008, year-end loan balances increased by $267 million or 6.3%. During the
fourth quarter of 2008, Park’s Ohio-based banking divisions sold $31 million
of unsecured credit card balances. Exclusive of the sale of the credit card
balances, year-end loan balances grew by $298 million or 7.0%. At Vision Bank,
year-end loan balances increased by $51 million or 8.0% during 2008 to $690
million. Park’s Ohio-based subsidiaries increased loans by $216 million or
6.0% during 2008. Excluding the sale of the credit card balances, Park’s
Ohio-based subsidiaries increased loans by $247 million or 6.9% in 2008.

A year ago, management projected that year-end loan balances would grow
approximately 1% to 3% in 2010. The actual loan growth of 2.0% was consis-
tent with this guidance. Management expects that loan growth for 2011 will
continue to be in the 1% to 3% range as the demand for loans continues to
be moderate as the economy recovers slowly from the recent recession.

Year-end residential real estate loans were $1,692 million, $1,555 million and
$1,560 million in 2010, 2009 and 2008, respectively. Residential real estate
loans increased by $137 million or 8.8% in 2010, decreased by $5 million or
0.3% in 2009 and increased by $79 million or 5.3% during 2008. The increase
of $137 million in 2010 was primarily due to management’s decision to retain
15-year, fixed-rate residential mortgage loans that were previously sold in the
secondary market. The balance of loans for this new product was $176 million
at December 31, 2010, with a weighted average interest rate of 3.82%.
Management expects these loans will be held to maturity. Management does not
expect any growth in residential real estate loans in 2011, as Park’s customers
will continue to favor 30-year, fixed-rate residential mortgage loans.

The long-term fixed rate residential mortgage loans that Park originates are
sold in the secondary market and Park typically retains the servicing on these
loans. As mentioned above, during 2010, Park began to retain 15-year, fixed-
rate mortgage loans. The balance of sold fixed-rate residential mortgage loans
decreased by $47 million or 3.1% to $1,471 million at year-end 2010, com-
pared to $1,518 million at year-end 2009 and $1,369 million at year-end 2008.
Due to low long-term interest rates in 2009 and 2010, the demand for fixed-
rate residential mortgage loans was extraordinary. Park originated and sold
$358 million of fixed-rate residential mortgage loans in 2010 compared to
$615 million in 2009, and $161 million in 2008. Additionally, as previously
discussed, Park originated and retained $176 million of 15-year, fixed-rate
residential mortgages in 2010. During 2009, Park originated and retained $8
million of fixed-rate residential mortgage loans. Management expects that the
loan origination volume of fixed-rate mortgage loans could decrease by 50%
or more in 2011. The balance of sold fixed-rate residential mortgage loans
is expected to increase by 1% to 3% in 2011.

Year-end consumer loans were $667 million, $704 million and $643 million in
2010, 2009 and 2008, respectively. Consumer loans decreased by $37 million
or 5.3% in 2010, primarily due to a decline in automobile loans originated in
Ohio, as competition for automobile loans increased throughout the year.

Consumer loans increased by $61 million or 9.5% in 2009 and increased by
$50 million or 8.4% in 2008. The increases in consumer loans for 2009 and
2008 were primarily due to an increase in automobile loans originated through
automobile dealers in Ohio. Management expects that consumer loans will
decrease by 1% to 3% in 2011.

On a combined basis, year-end commercial, financial and agricultural loans,
real estate construction loans and commercial real estate loans totaled $2,371
million, $2,377 million and $2,284 million at year-end 2010, 2009 and 2008,
respectively. These combined loan totals declined by $6 million or 0.3% in
2010, increased by $93 million or 4.1% in 2009 and increased by $141
million or 6.6% in 2008. Management expects that commercial, financial
and agricultural loans, real estate construction loans and commercial real
estate loans will grow by 1% to 3% in 2010.

Year-end lease balances were $3 million in both 2010 and 2009 and $4
million in 2008. Management continues to de-emphasize leasing and expects
the balance to further decline in 2011.

Table 6 reports year-end loan balances by type of loan for the past five years.
Table 6 – Loans by Type

December 31,
(In thousands)

Commercial, financial
and agricultural

Real estate –
construction
Real estate –
residential
Real estate –
commercial

Consumer
Leases

2010

2009

2008

2007

2006

$ 737,902

$ 751,277

$ 714,296

$ 613,282

$ 548,254

406,480

495,518

533,788

536,389

234,988

1,692,209

1,555,390

1,560,198

1,481,174

1,300,294

1,226,616
666,871
2,607

1,130,672
704,430
3,145

1,035,725
643,507
3,823

993,101
593,388
6,800

854,869
532,092
10,205

Total Loans

$4,732,685

$4,640,432

$4,491,337

$4,224,134

$3,480,702

Table 7 – Selected Loan Maturity Distribution

December 31, 2010
(In thousands)

Commercial, financial and

agricultural

Real estate – construction
Real estate – commercial

One Year
or Less (1)

Over One
Through
Five Years

Over
Five
Years

Total

$ 325,895
230,426
200,549

$263,847
96,599
235,700

$ 148,160
79,455
790,367

$ 737,902
406,480
1,226,616

Total

$ 756,870

$596,146

$1,017,982

$2,370,998

Total of these selected loans due

after one year with:
Fixed interest rate
Floating interest rate

$ 553,098
$1,061,030

(1) Nonaccrual loans of $192,492 are included within the one year or less classification above.

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

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

Generally, Park classifies U.S. Government Agency collateralized mortgage
obligations (“CMOs”) that it purchases as held-to-maturity. A classification of
held-to-maturity means that Park has the positive intent and the ability to hold
these securities until maturity. Park classifies CMOs as held-to-maturity because
these securities are generally not as liquid as the U.S. Government Agency

F I N A N C I A L R E V I E W

mortgage-backed securities and U.S. Government Agency notes that Park
classifies as AFS. At year-end 2010, Park’s held-to-maturity securities portfolio
was $674 million, compared to $507 million at year-end 2009 and $428
million at year-end 2008. Park purchased $314 million of CMOs in 2010,
$119 million of CMOs in 2009 and $270 million of CMOs in 2008. All of the
mortgage-backed securities and CMOs in Park’s investment portfolio were
issued by a U.S. Government Agency.

Average taxable investment securities were $1,730 million in 2010, compared
to $1,848 million in 2009 and $1,756 million in 2008. The average yield on
taxable securities was 4.44% in 2010, compared to 4.90% in 2009 and 5.00%
in 2008. Average tax-exempt investment securities were $17 million in 2010,
compared to $30 million in 2009 and $45 million in 2008. The average tax-
equivalent yield on tax-exempt investment securities was 7.24% in 2010,
compared to 7.45% in 2009 and 6.90% in 2008.

Year-end total investment securities (at amortized cost) were $2,017 million
in 2010, $1,817 million in 2009 and $2,010 million in 2008. Management
purchased investment securities totaling $3,033 million in 2010, $469 million
in 2009 and $693 million in 2008. The significant increase in purchases
during 2010 was largely due to the purchase of $1,319 million of 28-day
U.S. Government Agency discount notes and $823 million of U.S. Government
Agency callable notes. Proceeds from repayments and maturities of investment
securities were $2,385 million in 2010, $467 million in 2009 and $310 million
in 2008. The increase in proceeds from repayments and maturities in 2010
was primarily due to the 28-day U.S. Government Agency discount notes and
U.S. Government Agency callable notes, which had repayments or maturities of
$1,319 million and $710 million, respectively during the year. Proceeds from
sales of AFS securities were $460 million in 2010, $204 million in 2009 and
$81 million in 2008. Park realized net security gains on a pre-tax basis of
$11.9 million in 2010, $7.3 million in 2009 and $1.1 million in 2008.

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

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

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

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

During the second quarter of 2009, Park sold U.S. Government Agency
mortgage-backed securities with a book value of $197 million, for proceeds
of $204.3 million and a pre-tax gain of $7.3 million. These securities had a
book yield of 4.70% and a weighted average remaining life of about 3 years.
These mortgage-backed securities were sold at a price of approximately
103.2% of par with an estimated yield to the buyer of 3.33%.

During the first quarter of 2011, Park sold approximately $105 million of
U.S. Government Agency mortgage-backed securities for a pre-tax gain of $6.6
million. These securities were sold at a price of approximately 106.2% of par
with an estimated yield to the buyer of 2.10%. The book yield on these mort-
gage-backed securities is approximately 5.02%. Management expects to reinvest
the proceeds from the sale of the mortgage-backed securities late in the first
quarter of 2011.

At year-end 2010 and 2009, the average tax-equivalent yield on the total invest-
ment portfolio was 4.01% and 4.87%, respectively. The weighted average
remaining maturity was 3.6 years at December 31, 2010 and 3.5 years at
December 31, 2009. U.S. Government Agency asset-backed securities were
approximately 82% of the total investment portfolio at year-end 2010 and were
approximately 76% of the total investment portfolio at year-end 2009. This
segment of the investment portfolio consists of 15-year mortgage-backed
securities and CMOs.

The average maturity of the investment portfolio would lengthen if long-term
interest rates would increase as the principal repayments from mortgage-
backed securities and CMOs would be reduced and callable U.S. Government
Agency notes would extend to their maturity dates. At year-end 2010, manage-
ment estimated that the average maturity of the investment portfolio would
lengthen to 6.0 years with a 100 basis point increase in long-term interest rates
and to 6.6 years with a 200 basis point increase in long-term interest rates.
Likewise, the average maturity of the investment portfolio would shorten
if long-term interest rates would decrease as the principal repayments from
mortgage-backed securities and CMOs would increase as borrowers would
refinance their mortgage loans and the callable U.S. Government Agency notes
would shorten to their call dates. At year-end 2010, management estimated that
the average maturity of the investment portfolio would decrease to 2.2 years
with a 100 basis point decrease in long-term interest rates and to 1.6 years
with a 200 basis point decrease in long-term interest rates.

Table 8 sets forth the carrying value of investment securities, as well as the
percentage held within each category at year-end 2010, 2009 and 2008:

Table 8 – Investment Securities

December 31,
(In thousands)

Obligations of U.S. Treasury and other
U.S. Government sponsored entities

2010

2009

2008

$ 273,313

$ 347,595

$ 128,688

Obligations of states and political subdivisions

14,211

20,123

37,188

U.S. Government asset-backed securities

1,681,815

1,425,361

1,822,587

Federal Home Loan Bank stock

Federal Reserve Bank stock

Equities

Total

Investments by category as a percentage of

total investment securities

Obligations of U.S. Treasury and other
U.S. Government sponsored entities

Obligations of states and political subdivisions

U.S. Government asset-backed securities

Federal Home Loan Bank stock

Federal Reserve Bank stock

Equities

Total

61,823

62,044

61,928

6,876

1,753

6,875

1,562

6,876

1,784

$2,039,791

$1,863,560

$2,059,051

13.4%

0.7%

82.5%

3.0%

0.3%

0.1%

18.6%

1.1%

76.5%

3.3%

0.4%

0.1%

6.2%

1.8%

88.5%

3.0%

0.4%

0.1%

100.0%

ANALYSIS OF EARNINGS
Park’s principal source of earnings is net interest income, the difference
between total interest income and total interest expense. Net interest income
results from average balances outstanding for interest earning assets and
interest bearing liabilities in conjunction with the average rates earned and
paid on them. (See Table 9 for three years of history on the average balances
of the balance sheet categories and the average rates earned on interest earning
assets and the average rates paid on interest bearing liabilities.)

F I N A N C I A L R E V I E W

Table 9 – Distribution of Assets, Liabilities and Stockholders’ Equity

December 31,
(In thousands)

ASSETS
Interest earning assets:

Loans (1) (2)

Taxable investment securities

Tax-exempt investment securities (3)

Money market instruments

Total interest earning assets

Noninterest earning assets:
Allowance for loan losses

Cash and due from banks

Premises and equipment, net

Other assets

TOTAL

LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest bearing liabilities:
Transaction accounts

Savings deposits

Time deposits

Total interest bearing deposits

Short-term borrowings
Long-term debt (4)

Total interest bearing liabilities

Noninterest bearing liabilities:

Demand deposits

Other

Total noninterest bearing liabilities

Stockholders’ equity

TOTAL

Net interest earnings
Net interest spread
Net yield on interest earning assets

Daily
Average

2010

Interest

Average
Rate

Daily
Average

2009

Interest

Average
Rate

Daily
Average

2008

Interest

Average
Rate

$4,642,478

$269,306

1,729,511

16,845

93,009

76,838

1,220

200

6,481,843

347,564

5.80%

4.44%

7.24%

0.22%

5.36%

$4,594,436

$276,893

1,847,706

29,597

52,658

90,558

2,205

116

6,524,397

369,772

6.03%

4.90%

7.45%

0.22%

5.67%

$4,354,520

$301,926

1,755,879

45,420

15,502

87,711

3,134

295

6,171,321

393,066

6.93%

5.00%

6.90%

1.90%

6.37%

(119,639)

116,961

69,839

493,746

$7,042,750

$1,354,392

891,021

2,029,088

4,274,501

300,939
725,356

5,300,796

907,514

87,885

995,399

746,555

$7,042,750

$4,450

1,303

36,212

41,965

1,181
28,327

71,473

0.33%

0.15%

1.78%

0.98%

0.39%
3.91%

1.35%

(103,683)

110,227

67,944

436,646

$7,035,531

$1,229,553

$ 7,889

2,926

53,805

64,620

3,209
26,370

94,199

805,783

2,197,055

4,232,391

419,733
780,435

5,432,559

818,243

109,415

927,658

675,314

$7,035,531

(86,485)

143,151

69,278

410,821

$6,708,086

0.64%

0.36%

2.45%

1.53%

0.76%
3.38%

1.73%

$1,364,635

$ 19,509

585,505

1,912,640

3,862,780

609,219
835,522

3,124

67,259

89,892

14,469
31,105

5,307,521

135,466

1.43%

0.53%

3.52%

2.33%

2.38%
3.72%

2.55%

739,993

92,607

832,600

567,965

$6,708,086

$276,091

$275,573

$257,600

4.01%
4.26%

3.94%
4.22%

3.82%
4.16%

(1) Loan income includes loan related fee income of $9 in 2010, $1,372 in 2009 and $4,650 in 2008. Loan income also includes the effects of taxable equivalent adjustments using a 35% tax rate in 2010,

2009 and 2008. The taxable equivalent adjustment was $1,614 in 2010, $1,294 in 2009 and $763 in 2008.

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

(3)

Interest income on tax-exempt investment securities includes the effects of taxable equivalent adjustments using a 35% tax rate in 2010, 2009 and 2008. The taxable equivalent adjustments were $434 in
2010, $788 in 2009 and $964 in 2008.

(4)

Includes subordinated debenture and subordinated notes.

Net interest income increased slightly by $553,000 or 0.2% to $274.0 million
for 2010 compared to an increase of $17.6 million or 6.9% to $273.5 million
for 2009. The tax equivalent net yield on interest earning assets was 4.26% for
2010 compared to 4.22% for 2009 and 4.16% for 2008. The net interest rate
spread (the difference between rates received for interest earning assets and
the rates paid for interest bearing liabilities) was 4.01% for 2010, compared to
3.94% for 2009 and 3.82% for 2008. The small increase in net interest income
in 2010 was due to the increase in the net interest spread to 4.01% from
3.94%. The average balance of interest earning assets decreased slightly by $42
million or 0.7% to $6,482 million in 2010. In 2009, the increase in net interest
income was primarily due to the increase in average interest earning assets of
$353 million or 5.7% to $6,524 million and to an increase in the net interest
spread to 3.94% from 3.82% in 2008.

The average yield on interest earning assets was 5.36% in 2010 compared to
5.67% in 2009 and 6.37% in 2008. The average federal funds rate for 2010
was 0.18%, compared to an average rate of 0.16% in 2009 and 1.93% in 2008.
On a quarterly basis for 2010, the average yield on interest earning assets was
5.23% for the fourth quarter, 5.34% for the third quarter, 5.44% for the second
quarter and 5.45% for the first quarter. Management expects that the average
yield on interest earning assets will also slightly decrease in 2011, similar to
the decrease in 2010.

The average rate paid on interest bearing liabilities was 1.35% in 2010,
compared to 1.73% in 2009 and 2.55% in 2008. On a quarterly basis for
2010, the average rate paid on interest bearing liabilities was 1.21% for the
fourth quarter, 1.29% for the third quarter, 1.40% for the second quarter
and 1.49% for the first quarter. Management expects that the average rate
paid on interest bearing liabilities will modestly decrease in 2011, similar
to the decrease in 2010.

F I N A N C I A L R E V I E W

The following table displays (for each quarter of 2010) the average balance of
interest earning assets, net interest income and the tax equivalent net interest
margin.

Table 10 – Quarterly Net Interest Margin

(In thousands)

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

2010

Average Interest
Earning Assets

$6,528,149

6,468,094

6,484,941

6,447,046

Net Interest
Income

$ 67,380

68,721

69,445

68,498

$6,481,843

$274,044

Tax Equivalent
Net Interest Margin

4.22%

4.29%

4.28%

4.25%

4.26%

Management expects that average interest earnings assets will be approximately
$6,550 million for 2011. Management expects that net interest income will be
$268 to $278 million in 2011 and that the tax equivalent net interest margin
will be approximately 4.10% to 4.20% in 2011. (Please see the “Summary
Discussion of Operating Results for Park” section of this Financial Review for
a comparison of 2010 results to management’s projections from a year ago.)

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

Table 11 – Volume/Rate Variance Analysis

Change from 2009 to 2010
Total
Rate
Volume

Change from 2008 to 2009
Total
Rate
Volume

(In thousands)

Increase (decrease) in:
Interest income:

Total loans

$ 2,915 $(10,502)

$(7,587) $15,891 $(40,924) $(25,033)

Taxable investments

(5,560)

(8,160)

(13,720)

4,600

(1,753)

2,847

Tax-exempt investments

(925)

(60)

(985)

(1,163)

234

(929)

Money market
instruments

Total interest
income

Interest expense:

—

250

(429)

(179)

(3,486)

(18,722)

(22,208)

19,578

(42,872)

(23,294)

Transaction accounts

$ 725 $ (4,164)

$(3,439) $ (1,766) $ (9,854) $(11,620)

Savings accounts

270

(1,893)

(1,623)

968

(1,166)

(198)

Time deposits

(3,844)

(13,749)

(17,593)

9,026

(22,480)

(13,454)

Short-term borrowings

(746)

(1,282)

(2,028)

(3,536)

(7,724)

(11,260)

Long-term debt

(1,960)

3,917

1,957

(1,985)

(2,750)

(4,735)

Total interest
expense

(5,555)

(17,171)

(22,726)

2,707

(43,974)

(41,267)

Net variance

$ 2,069 $ (1,551)

$ 518

$16,871 $ 1,102 $ 17,973

Other Income: Total other income decreased by $3.7 million or 4.5% to
$77.5 million in 2010 compared to a decrease of $3.6 million or 4.3% to
$81.2 million in 2009. Park’s total other income in 2008 was positively
impacted by two “one-time” items totaling $14.9 million. The “one-time”
positive items in 2008 were $3.1 million of revenue recognized as a result
of the initial public offering of Visa, Inc. and an aggregate of $11.8 million of
revenue which resulted from the sale of the unsecured credit card balances
and the sale of the merchant processing business. In 2009, Park’s total other
income included a “one-time” positive item of $3.0 million from the sale of all
the Class B shares of stock that Park received from the initial public offering of
Visa, Inc.

The following table displays total other income for Park in 2010, 2009
and 2008.

Table 12 – Other Income

Year Ended December 31
(In thousands)

Income from fiduciary activities

Service charges on deposits

Net gains on sales of securities

Other service income

Checkcard fee income

Bank owned life insurance income

ATM fees

OREO devaluations

Other

2010

2009

$13,874

$12,468

19,717

11,864

13,816

11,177

4,978

2,951

(10,590)

9,709

21,985

7,340

18,767

9,339

5,050

3,082

(6,818)

9,977

2008

$13,937

24,296

1,115

8,882

8,695

5,102

3,063

(2,948)

22,692

Total other income

$77,496

$81,190

$84,834

Income from fiduciary activities increased by $1.4 million or 11.3% to $13.9
million in 2010 and decreased by $1.5 million or 10.5% to $12.5 million in
2009. The increase in fiduciary fee income in 2010 was primarily due to the
improvement in the equity markets during the year compared to 2009 and also
due to an increase in the total accounts served by Park’s Trust department. Park
charges fiduciary fees based on the market value of the assets being managed.
The Dow Jones Industrial Average stock index annual average was 11,244 for
calendar 2008, 8,885 for calendar year 2009, and 10,669 for calendar year
2010. The market value of the assets that Park manages was $3.3 billion
at December 31, 2010 compared to $3.1 billion at December 31, 2009
and $2.7 billion at December 31, 2008. Management expects an increase
of approximately 5% in fee income from fiduciary activities in 2011.
Service charges on deposit accounts decreased by $2.3 million or 10.3% to
$19.7 million in 2010 and decreased by $2.3 million or 9.5% to $22.0 million
in 2009. The decrease in service charge income in 2010 was primarily due to
a decrease in fee income from overdraft charges and other non-sufficient funds
(NSF) charges. Park’s customers did not use our courtesy overdraft program as
frequently in 2010 and, as a result, this fee income decreased by $2.0 million
or 11.6% in 2010 compared to 2009. Management expects that revenue from
service charges on deposits in 2011 will be within a range of $18 million to
$20 million.
Fee income earned from origination and sale into the secondary market of
long-term fixed-rate mortgage loans is included within other non-yield related
fees in the subcategory “Other service income”. Other service income
decreased by $5.0 million, or 26.4%, to $13.8 million in 2010. This large
decrease was due to a decline in the volume of fixed-rate residential mortgage
loans that Park originated and sold into the secondary market in 2010 com-
pared to 2009. The amount of fixed-rate mortgage loans originated and sold in
2010 was $358 million, compared to $615 million in 2009 and $161 million
in 2008. Additionally, as previously discussed, Park originated and retained
$176 million of 15-year, fixed-rate residential mortgages in 2010. During 2009,
Park originated and retained $8 million of fixed-rate residential mortgage
loans. In 2009, other service income increased by $9.9 million or 111.3%
to $18.8 million, which was related to the aforementioned increase in fixed-rate
mortgage loans originated and sold in 2009. Park’s management expects that
the volume of fixed-rate residential mortgage loans will continue to decline
in 2011 and as a result expects that other service income will decrease by
approximately $2 million or 14% in 2011.
Checkcard fee income, which is generated from debit card transactions
increased $1.8 million or 19.7% to $11.2 million in 2010. During 2009,
checkcard fee income increased $644,000 or 7.4% to $9.3 million. The
increases in both 2010 and 2009 were attributable to continued increases in
the volume of debit card transactions. Park’s management expects checkcard
fee income will decline by approximately $2 million or 18% in 2011, as all
banks are likely to experience some impact related to the Durbin Amendment
that became a part of the Dodd-Frank Wall Street Reform and Consumer
Protection Act.

F I N A N C I A L R E V I E W

OREO devaluations, which result from declines in the fair value (less
anticipated selling costs) of property acquired through foreclosure, increased
$3.8 million or 55.3% to $10.6 million in 2010. The increase in OREO
devaluations was primarily due to devaluations of other real estate owned at
Vision Bank. These devaluations were $8.8 million in 2010 compared to $6.1
million in 2009. Park’s management expects that OREO devaluations will be
less significant in 2011 as property values throughout Park’s footprint are
expected to stabilize throughout the 2011 year.

The subcategory of “Other” income includes fees earned from the sale of
official checks and printed checks, rental fee income from safe deposit boxes
and other miscellaneous income. Total other income decreased by $268,000
or 2.7% to $9.7 million in 2010 and decreased by $12.7 million or 56.0% to
$10.0 million in 2009. The large decrease in 2009 was primarily due to the
two “one-time” revenue items in 2008 which totaled $14.9 million. Park also
had a $3.0 million positive “one-time” revenue item in 2009. Park’s manage-
ment expects 2011 revenue within the subcategory of other income will be
consistent with the results experienced in 2010.

Park recognized net gains from the sale of investment securities of $11.9
million in 2010, $7.3 million in 2009 and $1.1 million in 2008. As previously
discussed, Park expects to recognize a gain of approximately $6.6 million from
the sale of securities in the first quarter of 2011.

A year ago, Park’s management forecast that total other income, excluding gains
from the sale of securities, would be approximately $68 million for 2010. The
actual performance was below our estimate by $2.4 million or 3.5% at $65.6
million. For 2011, Park’s management expects that total other income, exclud-
ing gains from the sale of securities, will be approximately $63 million to $67
million.

Other Expense: Total other expense was $187.1 million in 2010, compared to
$188.7 million in 2009 and $234.5 million in 2008. Total other expense
included a goodwill impairment charge of $55.0 million in 2008. Total other
expense decreased by $1.6 million, or 0.9%, to $187.1 million in 2010.
Excluding the goodwill impairment charge in 2008, total other expense
increased by $9.2 million or 5.1% to $188.7 million in 2009.

The following table displays total other expense for Park in 2010, 2009 and
2008.

Table 13 – Other Expense

Year Ended December 31,
(In thousands)

2010

2009

2008

Salaries and employee benefits

$98,315

$101,225

$ 99,018

Goodwill impairment charge

Data processing fees

Fees and service charges

Net occupancy expense of bank premises

Amortization of intangibles

Furniture and equipment expense

Insurance

Marketing

Postage and telephone

State taxes

Other

—

5,728

19,972

11,510

3,422

10,435

8,983

3,656

6,648

3,171

—

5,674

15,935

11,552

3,746

9,734

12,072

3,775

6,903

3,206

54,986

7,121

12,801

11,534

4,025

9,756

2,322

4,525

7,167

2,989

15,267

14,903

18,257

Total other expense

$187,107

$188,725

$234,501

Salaries and employee benefits expense decreased by $2.9 million or 2.9% to
$98.3 million in 2010 and increased by $2.2 million or 2.2% to $101.2 million
in 2009. The decrease in 2010 was primarily related to lower employee benefit
costs, as pension plan expense decreased approximately $2.4 million. Full-time
equivalent employees at year-end 2010 were 1,969, compared to 2,024 at
year-end 2009 and 2,051 at year-end 2008. A year ago, Park’s management
projected that salaries and benefit expense would be $102 million for 2010.

The actual performance for the year was $3.7 million or 3.6% lower than the
estimate. For 2011, management is projecting salaries and employee benefits
expense to increase by $3.7 million or 3.7% to $102 million for the year.

Vision Bank recorded goodwill impairment charges of $55.0 million in 2008.
See Note 1 of the Notes to Consolidated Financial Statements for a discussion
of the goodwill impairment charges. Vision Bank did not have any remaining
goodwill at year-end 2008.

Fees and service charges increased by $4.0 million or 25.3% to $20.0 million
in 2010 and increased by $3.1 million or 24.5% to $15.9 million in 2009. This
subcategory of total other expense includes legal fees, management consulting
fees, director fees, audit fees, regulatory examination fees and memberships in
industry associations. The large increase in fees and service charges expense in
both 2009 and 2010 was primarily due to an increase in legal fees and consult-
ing fees. This additional expense was primarily related to an increase in costs
associated with the workout of problem loans at Park’s Vision Bank subsidiary.
Park’s management expects that fees and service charges will be approximately
$17 million to $19 million in 2011.

Insurance expense decreased by $3.1 million or 25.6% to $9.0 million in
2010 and increased by $9.8 million or 419% to $12.1 million in 2009. The
decrease in 2010 and the increase in insurance expense in 2009 were primarily
due to changes in FDIC insurance expense. In 2010, FDIC insurance expense
decreased by $3.0 million to $8.0 million and in 2009, FDIC insurance expense
increased by $9.5 million to $11.0 million. Park’s management expects that
insurance expense will be between $6 million to $8 million in 2011.

The subcategory “other” expense includes expenses for supplies, travel,
charitable contributions, amortization of low income housing tax investments,
expenses pertaining to other real estate owned and other miscellaneous
expenses. The subcategory other expense increased by $364,000 or 2.4% to
$15.3 million in 2010 and decreased by $3.4 million or 18.4% to $14.9 million
in 2009. The decrease in the subcategory other expense in 2009 was primarily
due to a $1.9 million decrease to $2.2 million in other real estate owned
expense.

A year ago, Park’s management projected that total other expense would be
approximately $191 million in 2010. The actual expense for the year of $187.1
million was $3.9 million or 2.0% lower than the estimate. This variance was
primarily due to lower than anticipated employee benefit costs. Management
expects that total other expense for 2011 will be approximately $183 million
to $187 million.

Income Taxes: Federal income tax expense was $26.5 million in 2010,
compared to $25.4 million in 2009 and $24.3 million in 2008. State income
tax expense was a credit for each of the past three years of $(1.2) million in
2010, $(2.5) million in 2009 and $(2.3) million in 2008. State income tax
expense was a credit in 2010, 2009 and 2008, because Vision Bank had
losses in all three years. Park performs an analysis to determine if a valuation
allowance against deferred tax assets is required in accordance with GAAP.
Vision Bank is subject to state income tax in Alabama and Florida. In 2010,
a state tax benefit of $1.16 million was recorded by Vision Bank, consisting
of a gross benefit of $2.26 million and a valuation allowance of $1.10 million
($712,000 net of the federal income tax benefit). Management has determined
that the likelihood of realizing the full deferred tax asset on state net operating
loss carryforwards fails to meet the “more likely than not” level. The net
operating loss carryforward period for the states of Alabama and Florida are
8 years and 20 years, respectively. A merger of Vision Bank into Park National
Bank would ensure the future utilization of the state net operating loss carry -
forward at Vision Bank. However, management is not certain when a merger
of Vision Bank into Park National Bank can take place and as a result has
decided not to record the additional state tax benefit of losses at Vision Bank
until management has a better understanding of the timing and likelihood of
a merger of Vision Bank into Park National Bank. Park and its Ohio-based

F I N A N C I A L R E V I E W

subsidiaries do not pay state income tax to the state of Ohio, but pay a franchise
tax based on year-end equity. The franchise tax expense is included in “state
taxes” as part of total other expense on Park’s Consolidated Statements of
Income.

Federal income tax expense as a percentage of income before taxes was
26.6% in 2010, compared to 26.2% in 2009 and 68.1% in 2008. The goodwill
impairment charge of $55.0 million in 2008 reduced income tax expense by
approximately $1 million. For 2008, the percentage of federal income tax
expense to income before taxes (adjusted for the goodwill impairment charges)
was 26.8%.

A lower federal effective tax rate than the statutory rate of 35% is primarily due
to tax-exempt interest income from state and municipal investments and loans,
low income housing tax credits and income from bank owned life insurance.
Park’s management expects that the federal effective income tax rate for 2011
will be approximately 26% to 28%.

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

The provision for loan losses was $64.9 million in 2010, $68.8 million in 2009
and $70.5 million in 2008. Net loan charge-offs were $60.2 million in 2010,
$52.2 million in 2009 and $57.5 million in 2008. The ratio of net loan charge-
offs to average loans was 1.30% in 2010, 1.14% in 2009 and 1.32% in 2008.

The loan loss provision for Vision Bank was $39.2 million in 2010, $44.4
million in 2009 and $47.0 million in 2008. Net loan charge-offs for Vision Bank
were $36.6 million in 2010, $28.9 million in 2009 and $38.5 million in 2008.
Vision Bank’s ratio of net loan charge-offs to average loans was 5.48% in 2010,
4.18% in 2009 and 5.69% in 2008.

Park’s Ohio-based subsidiaries had a combined loan loss provision of $25.7
million in 2010, $24.4 million in 2009 and $23.5 million in 2008. Net loan
charge-offs for Park’s Ohio-based subsidiaries were $23.6 million in 2010,
$23.3 million in 2009 and $19.0 million in 2008. The net loan charge-off ratio
for Park’s Ohio-based subsidiaries was 0.60% for both 2010 and 2009 and
0.52% for 2008.

At year-end 2010, the allowance for loan losses was $121.4 million or 2.57%
of total loans outstanding, compared to $116.7 million or 2.52% of total loans
outstanding at year-end 2009 and $100.1 million or 2.23% of total loans out-
standing at year-end 2008. The increase in the allowance for loan losses as a
percentage of total loans outstanding over the past three years is primarily due
to an increase in specific reserves established for impaired commercial loans.
As these impaired loans are resolved, management expects the allowance for
loan losses as a percentage of total loans will return to historic levels. The table
below provides additional information related to specific reserves on impaired
commercial loans and general reserves for all other loans in Park’s portfolio
at December 31, 2010, 2009 and 2008.

Table 14 – General Reserve Trends

Year Ended December 31,
(In thousands)

2010

2009

2008

Allowance for loan losses, end of period

$ 121,397

$ 116,717

$ 100,088

Specific reserves

General reserves

Total loans

Impaired commercial loans

Non-impaired loans

Allowance for loan losses as a percentage

of period end loans

General reserves as a percentage

of non-impaired loans

43,459

$77,938

36,721

$79,996

8,875

$91,213

$4,732,685

$4,640,432

$4,491,337

250,933

201,143

141,343

$4,481,752

$4,439,289

$4,349,994

2.57%

2.52%

2.23%

1.74%

1.80%

2.10%

Management believes that the allowance for loan losses at year-end 2010 is
adequate to absorb probable incurred credit losses in the loan portfolio. See
Note 1 of the Notes to Consolidated Financial Statements and the discussion
under the heading “Critical Accounting Policies” earlier in this Financial Review
for additional information on management’s evaluation of the adequacy of the
allowance for loan losses.

Management expects the loan loss provision for 2011 will be approximately
$47 million to $57 million. This estimate reflects management’s expectation
that: (1) future declines in collateral values will be moderate as the economy
continues to improve and pricing stabilizes throughout 2011 and (2) new
nonperforming loans, specifically new nonperforming commercial land and
development (“CL&D”) loans at Vision Bank, will continue to decline in 2011.
As discussed within the remainder of the credit experience section, Vision
Bank’s performing CL&D loan portfolio has declined significantly over the past
three years. This estimated range could change significantly as circumstances
for individual loans and economic conditions change.

A year ago, management projected the provision for loan losses would be $45
million to $55 million in 2010. As discussed throughout the remainder of this
“Credit Experience” section, the primary reasons that the provision for loan
losses was greater than management’s projection were declines in collateral
values for those loans that are collateral dependent and higher than anticipated
new nonperforming loans. The table below provides a summary of the loan loss
experience over the past five years:

Table 15 – Summary of Loan Loss Experience

(In thousands)

2010

2009

2008

2007

2006

Average loans

(net of unearned
interest)
Allowance for
loan losses:

Beginning balance
Charge-offs:

Commercial, financial
and agricultural

Real estate –
construction

Real estate –
residential
Real estate –
commercial

Consumer

Leases

$4,642,478 $4,594,436 $4,354,520 $4,011,307 $3,357,278

116,717

100,088

87,102

70,500

69,694

8,484

10,047

2,953

4,170

23,308

21,956

34,052

7,899

853

718

18,401

11,765

12,600

5,785

1,915

7,748

8,373

—

5,662

9,583

4,126

9,181

1,899

8,020

556

6,673

Total charge-offs

66,314

59,022

62,916

27,776

10,772

Recoveries:

Commercial, financial
and agricultural

Real estate –

construction

Real estate –
residential

Real estate –
commercial

Consumer

Leases

Total recoveries

Net charge-offs

Provision charged
to earnings

Allowance for loan
losses of acquired bank

1,237 $

1,010 $

861 $

1,011 $

842

813

1,322

137

1,429

1,723

1,128

850

1,763

—

6,092

60,222

771

2,001

6,830

52,192

451

2,807

5,415

57,501

180

718

560

3,035

5,568

22,208

—

1,017

1,646

3,198

150

6,853

3,919

64,902

68,821

70,487

29,476

3,927

—

9,334

798

Ending balance

$ 121,397 $ 116,717 $ 100,088 $

87,102 $

70,500

Ratio of net charge-offs

to average loans

Ratio of allowance for
loan losses to end of
year loans, net of
unearned interest

1.30%

1.14%

1.32%

0.55%

0.12%

2.57%

2.52%

2.23%

2.06%

2.03%

F I N A N C I A L R E V I E W

$ 13,584

15.59% $ 14,725

16.19% $ 14,286

15.90% $14,557

14.52% $16,985

15.75%

46,194

8.59%

47,521

10.68%

24,794

11.88%

20,007

12.70%

4,425

6.75%

Total nonperforming assets

$207,757

$194,827

$114,394

$70,546

The following table summarizes the allocation of the allowance for loan losses
for the past five years:

Table 16 – Allocation of Allowance for Loan Losses

December 31,

2010

2009

2008

2007

2006

Percent of
Loans Per
(In thousands) Allowance Category Allowance Category Allowance Category Allowance Category

Percent of
Loans Per

Percent of
Loans Per
Allowance Category

Commercial,
financial
and
agricultural
Real estate –
construction
Real estate –
residential
Real estate –
commercial

Consumer
Leases

25,845

35.75%

19,753

33.51%

22,077

34.74%

15,997

35.06%

10,402

37.36%

28,515
7,228
31

25.92%
14.09%
0.06%

23,970
10,713
35

24.37%
15.18%
0.07%

15,498
23,391
42

23.06%
14.33%
0.09%

15,989
20,477
75

23.51%
14.05%
0.16%

17,097
21,285
306

24.56%
15.29%
0.29%

Total

$121,397 100.00% $116,717 100.00% $100,088 100.00% $87,102 100.00% $70,500 100.00%

As of December 31, 2010, Park had no significant concentrations of loans to
borrowers engaged in the same or similar industries nor did Park have any
loans to foreign governments.

Nonperforming Assets: Nonperforming loans include: 1) loans whose
interest is accounted for on a nonaccrual basis; 2) renegotiated loans not
currently on nonaccrual; and 3) loans which are contractually past due 90
days or more as to principal or interest payments but whose interest continues
to accrue. Management’s policy is to place all renegotiated loans (troubled
debt restructurings) on nonaccrual status. At December 31, 2010, there were
$80.7 million of troubled debt restructurings included in nonaccrual loan
totals. Many of these troubled debt restructurings are performing under the
renegotiated terms. Management will continue to review the renegotiated
loans and may determine it appropriate to move certain of these loans back
to accrual status in the second half of 2011 if the loans perform in accordance
with their restructured terms. Other real estate owned results from taking
possession of property used as collateral for a defaulted loan.

The following is a summary of Park National Corporation’s nonaccrual loans,
renegotiated loans not currently on nonaccrual, loans past due 90 days or more
and still accruing and other real estate owned for the last five years:

Table 17 – Nonperforming Assets

December 31,
(In thousands)

Nonaccrual loans
Renegotiated loans
Loans past due 90 days

or more

Total nonperforming

loans

2010

2009

2008

2007

2006

$289,268
—

$233,544
142

$159,512
2,845

$101,128
2,804

$16,004
9,113

3,590

14,773

5,421

4,545

7,832

292,858

248,459

167,778

108,477

32,949

Other real estate owned

44,325

41,240

25,848

13,443

3,351

Total nonperforming

assets

Percentage of

nonperforming loans
to loans
Percentage of

nonperforming assets
to loans
Percentage of

nonperforming assets
to total assets

$337,183

$289,699

$193,626

$121,920

$36,300

6.19%

5.35%

3.74%

2.57%

0.95%

7.12%

6.24%

4.31%

2.89%

1.04%

4.62%

4.11%

2.74%

1.88%

0.66%

Tax equivalent interest income from loans for 2010 was $269.3 million.
Park has forgone interest income of approximately $19.5 million from non -
accrual loans as of December 31, 2010 that would have been earned during
the year if all loans had performed in accordance with their original terms.

Vision Bank nonperforming assets for the last four years were as follows:

Table 18 – Vision Bank – Nonperforming Assets

December 31,
(In thousands)

Nonaccrual loans
Renegotiated loans
Loans past due 90 days or more

Total nonperforming loans

Other real estate owned

2010

2009

2008

2007

$171,453
—
364

$148,347
—
11,277

171,817

159,624

35,940

35,203

$91,206
2,845
644

94,695

19,699

$63,015
—
457

63,472

7,074

Percentage of nonperforming loans

to loans

Percentage of nonperforming assets

to loans

Percentage of nonperforming assets

to total assets

26.82%

23.58%

13.71%

9.93%

32.43%

28.78%

16.57%

11.04%

25.71%

21.70%

12.47%

8.24%

Nonperforming assets for Park, excluding Vision Bank for the last five years
were as follows:

Table 19 – Park Excluding Vision Bank – Nonperforming Assets

December 31,
(In thousands)

Nonaccrual loans
Renegotiated loans
Loans past due 90 days

or more

Total nonperforming

loans

2010

2009

2008

2007

2006

$117,815
—

$85,197
142

$68,306
—

$38,113
2,804

$16,004
9,113

3,226

3,496

4,777

4,088

7,832

121,041

88,835

73,083

45,005

32,949

Other real estate owned

8,385

6,037

6,149

6,369

3,351

Total nonperforming

assets

Percentage of

nonperforming loans
to loans
Percentage of

nonperforming assets
to loans
Percentage of

nonperforming assets
to total assets

$129,426

$94,872

$79,232

$51,374

$36,300

2.96%

2.24%

1.92%

1.26%

0.95%

3.16%

2.39%

2.08%

1.43%

1.04%

1.99%

1.54%

1.29%

0.91%

0.66%

Economic conditions began deteriorating during the second half of 2007
and continued throughout 2008 and 2009. While conditions across the U.S.
improved slightly in 2010, the economic recovery continues to be a slow
process. Park and many other financial institutions throughout the country
experienced a sharp increase in net loan charge-offs and nonperforming
loans over the past three years. Financial institutions operating in Florida and
Alabama (including Vision Bank) have been particularly hard hit by the severe
recession as the demand for real estate and the price of real estate have sharply
decreased.

Park had $238.7 million of commercial loans included on the watch list of
potential problem commercial loans at December 31, 2010 compared to
$277.7 million at year-end 2009 and $243.2 million at year-end 2008.
Commercial loans include: (1) commercial, financial and agricultural loans;
(2) commercial real estate loans; (3) certain real estate construction loans;
and (4) certain residential real estate loans. Park’s watch list includes all
criticized and classified commercial loans, defined by Park as loans rated
special mention or worse, less those commercial loans currently considered
to be impaired. As a percentage of year-end total loans, Park’s watch list of
potential problem loans was 5.0% in 2010, 6.0% in 2009 and 5.4% in 2008.
The existing conditions of these loans do not warrant classification as non -
accrual. However, these loans have shown some weakness and management
performs additional analyses regarding a borrower’s ability to comply with
payment terms for watch list loans.

F I N A N C I A L R E V I E W

Park’s allowance for loan losses includes an allocation for loans specifically
identified as impaired under GAAP. At December 31, 2010, loans considered to
be impaired consisted substantially of commercial loans graded as “doubtful”
and placed on non-accrual status. During 2009, management made a change
in accounting estimate (as defined under GAAP) for the estimation of allowance
for loan losses. Based on escalating losses within the Vision Bank CL&D loan
portfolio, management determined that it was necessary to segregate this
portion of the portfolio for both impaired CL&D credits, as well as performing
CL&D loans. Management continued to utilize this methodology throughout
2010. From the date Park acquired Vision (March 9, 2007) through December
31, 2010, Vision had cumulative charge-offs within the CL&D loan portfolio of
$71.0 million. Additionally, at December 31, 2010, management had estab-
lished a specific reserve of $23.6 million related to those CL&D loans at Vision
Bank that are deemed to be impaired. The aggregate of charge-offs in the CL&D
loan portfolio since acquisition, along with the specific reserves on impaired
CL&D loans at December 31, 2010, totaled $94.6 million, compared to $73.0
million at December 31, 2009. Total provision expense for Vision Bank since
the date of acquisition through December 31, 2010 has been $150.0 million,
compared to $110.8 million through December 31, 2009. The magnitude of the
losses coming from the CL&D loan portfolio at Vision, along with the continued
run-off of performing CL&D loans, led to the change in accounting estimate
made by management during 2009. The following table summarizes the CL&D
loan portfolio at Vision Bank:

Table 20 – Vision Bank CL&D Loan Portfolio

Year Ended December 31
(In thousands)

2010

2009

2008

CL&D loans, period end

$170,989

$218,263

$251,443

Performing CL&D loans, period end

Impaired CL&D loans

Specific reserve on impaired CL&D loans

Cumulative charge-offs on impaired CL&D loans

84,498

86,491

23,585

28,652

132,380

191,712

85,883

21,802

24,931

59,731

3,134

18,839

Specific reserve plus cumulative charge-offs

$ 52,237

$ 46,733

$ 21,973

Specific reserves plus net charge-offs as a
percentage of impaired CL&D loans plus
cumulative charge-offs

45.4%

42.2%

28.0%

At December 31, 2010, loans considered to be impaired under GAAP totaled
$250.9 million, after charge-offs of $53.6 million. At December 31, 2009,
impaired loans totaled $201.1 million, after charge-offs of $43.9 million.
The specific allowance for loan losses related to these impaired loans was
$43.5 million at December 31, 2010 and $36.7 million at December 31, 2009.
At December 31, 2010, the impaired loans and related specific reserves are
summarized as follows:

Table 21 – Summary of Impaired Commercial Loans and Specific Reserves

December 31, 2010
(In thousands)

Impaired loan type:

Vision Bank impaired CL&D loans

Other impaired commercial loans

Vision other impaired commercial

less than $250,000

Total

Principal Balance

Specific Reserve

$ 86,491

159,599

4,843

$250,933

$23,585

19,050

824

$43,459

The specific reserves discussed above are typically based on management’s
best estimate of the fair value of collateral securing these loans or based on
projected future cash flows from the sale of the underlying collateral and
payments from borrowers and guarantors. The amount ultimately charged-
off for these loans may be different from the specific reserve as the ultimate
liquidation of the collateral and/or projected cash flows may be for amounts
different from management’s estimates.

We have listed in the table below the year-end 2009 and the quarterly and
year-end 2010 information pertaining to the provision for loan losses, net
loan charge-offs, nonperforming loans and the allowance for loan losses:

Table 22 – Additional Allowance for Loan Losses Data

(In thousands)

Year-end 2009

March 2010

June 2010

September 2010
December 2010

Year-end 2010

Provision
for Loan
Losses

$68,821

$16,550

13,250

14,654
20,448

$64,902

Net Loan
Charge-Offs

Nonperforming
Loans

Allowance
for Loan
Losses

$52,192

$13,593

12,248

17,925
16,456

$248,459

$116,717

$242,411

$119,674

255,137

247,894
292,858

120,676

117,405
121,397

$60,222

$292,858

$121,397

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

As of December 31, 2010, management had taken partial charge-offs of
approximately $53.6 million ($37.3 million for Vision Bank) related to the
$250.9 million of commercial loans considered to be impaired, compared
to charge-offs of approximately $43.9 million ($30.2 million for Vision Bank)
related to the $201.1 million of impaired commercial loans at December 31,
2009. Historically, Park’s management has been quick to recognize charge-offs
on problem loans. However, there is a higher level of uncertainty when valuing
collateral or projecting cash flows in Vision Bank’s Florida and Alabama
markets due to the illiquid nature of the collateral. In April 2009, Park
engaged a third-party specialist to assist in the resolution of impaired loans at
Vision Bank. Management is pleased with the success this third-party specialist
experienced in the second half of 2009 and throughout 2010, as they have
helped maximize the value of the impaired loans at Vision Bank. We expect to
continue utilizing this third-party specialist through 2011 and thereafter, until
such point in time that Vision Bank’s impaired loan portfolio shows sustained
improvement.

A significant portion of Park’s allowance for loan losses is allocated to
commercial loans classified as “special mention” or “substandard.” “Special
mention” loans are loans that have potential weaknesses that may result in loss
exposure to Park. “Substandard” loans are those that exhibit a well defined
weakness, jeopardizing repayment of the loan, resulting in a higher probability
that Park will suffer a loss on the loan unless the weakness is corrected. As
previously discussed, during 2009, management segregated the Vision Bank
CL&D loans from other commercial loans that are still accruing. The Vision
CL&D loans that are still accruing at December 31, 2010 totaled $84.5 million
compared to $132.4 million at December 31, 2009. Park’s loss experience,
defined as charge-offs plus changes in specific reserves, on CL&D loans for
the last 36 months was an annual rate of 12.16%. Management has allocated an
allowance for loan losses to the $84.5 million of accruing CL&D loans based on
this historical loss experience, judgmentally increased to cover approximately
1.25 years of probable incurred losses, for a total reserve of $12.6 million or

F I N A N C I A L R E V I E W

14.92%. Further, we have allocated 14.92% to the $84.5 million of CL&D loans,
regardless of the current loan grade, as this portion of the loan portfolio has
experienced significant declines in collateral values, and thus if management
determines that borrowers are unable to pay in accordance with the contractual
terms of the loan agreement, significant specific reserves have typically been
necessary. Park’s 36-month loss experience, defined as charge-offs plus
changes in specific reserves, within the remaining commercial loan portfolio
(excluding Vision Bank’s CL&D loans) has been 1.13% of the principal balance
of these loans. Park’s management believes it is appropriate to cover approxi-
mately 1.5 years worth of probable incurred losses within the other commercial
loan portfolio, thus the total reserve for loan losses is $43.6 million or 1.77%
of the outstanding principal balance of other accruing commercial loans at
December 31, 2010. The overall reserve of 1.77% for other accruing commer-
cial loans breaks down as follows: pass-rated commercial loans are reserved
at 1.18%; special mention commercial loans are reserved at 4.16%; and sub-
standard commercial loans are reserved at 12.48%.

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

The judgmental increases discussed above incorporates management’s
evaluation of the impact of environmental qualitative factors which pose
additional risks and assigns a component of the allowance for loan losses
in consideration of these factors. Such environmental factors include: national
and local economic trends and conditions; experience, ability and depth of
lending management and staff; effects of any changes in lending policies and
procedures; levels of, and trends in, consumer bankruptcies, delinquencies,
impaired loans and charge-offs and recoveries. The determination of this
component of the allowance for loan losses requires considerable management
judgment. As always, management is working to address weaknesses in those
loans that may result in future loss. Actual loss experience may be more or less
than the amount allocated.

CAPITAL RESOURCES
Liquidity and Interest Rate Sensitivity Management: Park’s objective in
managing its liquidity is to maintain the ability to continuously meet the cash
flow needs of customers, such as borrowings or deposit withdrawals, while at
the same time seeking higher yields from longer-term lending and investing
activities.

Cash and cash equivalents decreased by $25.3 million during 2010 to $133.8
million at year-end. Cash provided by operating activities was $126.1 million in
2010, $72.3 million in 2009 and $91.1 million in 2008. Net income (adjusted
for the goodwill impairment charge in 2008) was the primary source of cash
for operating activities during each year. The goodwill impairment charge
of $55 million in 2008 did not impact cash or cash provided by operating
activities.

Cash used in investing activities was $352.1 million in 2010, $5.3 million in
2009 and $635.0 million in 2008. Investment security transactions are the
major use or source of cash in investing activities. Proceeds from the sale,
repayment or maturity of securities provide cash and purchases of securities
use cash. Net security transactions used cash of $187.7 million in 2010, pro-
vided cash of $202.6 million in 2009 and used cash of $304.8 million in 2008.
Another major use or source of cash in investing activities is the net increase
or decrease in the loan portfolio. Cash used by the net increase in the loan
portfolio, including proceeds from the sale of loans, was $152.5 million in
2010, $199.9 million in 2009 and $351.3 million in 2008.

Cash provided by financing activities was $200.6 million in 2010 and $521.8
million in 2008. For 2009, financing activities used cash of $79.2 million.
A major source of cash for financing activities is the net change in deposits.
In 2010, deposits decreased and used $92.6 million of cash. In 2009 and 2008,
deposits increased and provided cash of $426.3 million and $322.5 million,
respectively. Another major source of cash for financing activities is short-term
borrowings and long-term debt. In 2010, net short-term borrowings provided
$339.5 million in cash and net long-term borrowings used $17.6 million in
cash. In 2009, net short-term borrowings used $335.0 million in cash and net
long-term borrowings used $201.2 million in cash. In 2008, net short-term
borrowings used $100.1 million in cash and net long-term borrowings pro-
vided $265.1 million in cash. Park’s management generated cash in both 2010
and 2009 from the sale of common stock previously held as treasury shares.
The sale of common stock in 2010 provided cash of $33.5 million in 2010 and
$53.5 million in 2009. Additionally, $35.3 million of cash was provided in 2009
from the issuance of subordinated notes and in 2008, cash of $100 million was
provided from the issuance of Series A Preferred Shares.

Funds are available from a number of sources, including the securities
portfolio, the core deposit base, Federal Home Loan Bank borrowings and the
capability to securitize or package loans for sale. The present funding sources
provide more than adequate liquidity for Park to meet its cash flow needs.

The following table shows interest rate sensitivity data for five different time
intervals as of December 31, 2010:

Table 23 – Interest Rate Sensitivity

(In thousands)

Interest earning

assets:
Investment

securities (1)
Money market
instruments

Loans (1)

Total interest
earning
assets

Interest bearing
liabilities:
Interest bearing
transaction
accounts (2)

Savings

accounts (2)
Time deposits
Other

0-3
Months

3-12
Months

1-3
Years

3-5
Years

Over 5
Years

Total

$ 208,588 $ 476,738 $ 510,001 $ 259,940 $ 584,524 $2,039,791

24,722
1,387,774

—
1,550,775

—
1,420,010

—
235,936

—
138,190

24,722
4,732,685

1,621,084

2,027,513

1,930,011

495,876

722,714

6,797,198

665,726

— 617,432

—

— 1,283,158

214,298
566,761
1,351

— 684,990
404,053
—

857,573
—

—
143,147
—

— 899,288
1,973,904
1,351

2,370
—

Total deposits 1,448,136

857,573

1,706,475

143,147

2,370

4,157,701

$ 663,669 $

— $

—

16,460

16,000

— $
500

— $ 663,669
636,733

603,773

15,000

—

25,000

35,250

—

75,250

Short-term

borrowings
Long-term debt
Subordinated
debentures/
notes

Total interest
bearing
liabilities

Interest rate

sensitivity gap
Cumulative rate
sensitivity gap
Cumulative gap as
a percentage of
total interest
earning assets

2,126,805

874,033

1,747,475

178,897

606,143

5,533,353

(505,721) 1,153,480

182,536

316,979

116,571

1,263,845

(505,721)

647,759

830,295

1,147,274

1,263,845

–7.44%

9.53%

12.22%

16.88%

18.59%

(1)

Investment securities and loans that are subject to prepayment are shown in the table by the
earlier of their repricing date or their expected repayment dates and not by their contractual
maturity. Nonaccrual loans of $289.3 million are included within the three to twelve month
maturity.

(2) Management considers interest bearing transaction accounts and savings accounts to be core

deposits and, therefore, not as rate sensitive as other deposit accounts and borrowed money.
Accordingly, only 52% of interest bearing transaction accounts and 24% of savings accounts
are considered to reprice within one year. If all of the interest bearing checking accounts and
savings accounts were considered to reprice within one year, the one year cumulative gap
would change from a positive 9.53% to a negative 9.63%.

F I N A N C I A L R E V I E W

The interest rate sensitivity gap analysis provides a good overall picture of
Park’s static interest rate risk position. Park’s policy is that the twelve month
cumulative gap position should not exceed fifteen percent of interest earning
assets for three consecutive quarters. At December 31, 2010, the cumulative
interest earning assets maturing or repricing within twelve months were
$3,649 million compared to the cumulative interest bearing liabilities maturing
or repricing within twelve months of $3,001 million. For the twelve-month
cumulative gap position, rate sensitive assets exceed rate sensitive liabilities
by $648 million or 9.5% of interest earning assets.

A positive twelve month cumulative rate sensitivity gap (assets exceed liabilities)
would suggest that Park’s net interest margin would increase if interest rates
were to increase. Conversely, a negative twelve month cumulative rate sensitivity
gap would suggest that Park’s net interest margin would decrease if interest
rates were to decrease. However, the usefulness of the interest sensitivity gap
analysis as a forecasting tool in projecting net interest income is limited. The
gap analysis does not consider the magnitude, timing or frequency by which
assets or liabilities will reprice during a period and also contains assumptions
as to the repricing of transaction and savings accounts that may not prove to
be correct.

A year ago, the cumulative twelve month interest rate sensitivity gap position at
year-end 2009 was a positive $525 million or 8.0% of interest earning assets.
The percentage of interest earning assets maturing or repricing within one
year was 53.7% at year-end 2010 compared to 51.7% at year-end 2009. The
percentage of interest bearing liabilities maturing or repricing within one year
was 54.2% at year-end 2010 compared to 53.4% at year-end 2009.

Management supplements the interest rate sensitivity gap analysis with periodic
simulations of balance sheet sensitivity under various interest rate and what-if
scenarios to better forecast and manage the net interest margin. Park’s
management uses an earnings simulation model to analyze net interest income
sensitivity to movements in interest rates. This model is based on actual cash
flows and repricing characteristics for balance sheet instruments and incorpo-
rates market-based assumptions regarding the impact of changing interest rates
on the prepayment rate of certain assets and liabilities. This model also includes
management’s projections for activity levels of various balance sheet instru-
ments and noninterest fee income and operating expense. Assumptions based
on the historical behavior of deposit rates and balances in relation to changes
in interest rates are also incorporated into this earnings simulation model.
These assumptions are inherently uncertain and, as a result, the model cannot
precisely measure net interest income and net income. Actual results will differ
from simulated results due to timing, magnitude, and frequency of interest rate
changes as well as changes in market conditions and management strategies.

Management uses a 50 basis point change in market interest rates per quarter
for a total of 200 basis points per year in evaluating the impact of changing
interest rates on net interest income and net income over a twelve month
horizon. At December 31, 2010, the earnings simulation model projected that
net income would increase by 2.4% using a rising interest rate scenario and
decrease by 1.4% using a declining interest rate scenario over the next year.
At December 31, 2009, the earnings simulation model projected that net
income would increase by 2.2% using a rising interest rate scenario and
decrease by 0.1% using a declining interest rate scenario over the next year
and at December 31, 2008, the earnings simulation model projected that net
income would increase by 0.6% using a rising interest rate scenario and
decrease by 3.3% using a declining interest rate scenario over the next year.
Consistently, over the past several years, Park’s earnings simulation model has
projected that changes in interest rates would have only a small impact on net
income and the net interest margin. Park’s net interest margin has been rela-
tively stable over the past three years at 4.26% in 2010, 4.22% in 2009, and
4.16% in 2008. A major goal of Park’s asset/liability committee is to maintain
a relatively stable net interest margin regardless of the level of interest rates.
Management expects that the net interest margin will be approximately 4.10%
to 4.20% in 2011.

CONTRACTUAL OBLIGATIONS
In the ordinary course of operations, Park enters into certain contractual
obligations. Such obligations include the funding of operations through debt
issuances as well as leases for premises. The following table summarizes Park’s
significant and determinable obligations by payment date at December 31,
2010.

Further discussion of the nature of each specified obligation is included in the
referenced Note to the Consolidated Financial Statements.

Table 24 – Contractual Obligations

December 31, 2010

Payments Due In

(In thousands)

Note

Deposits without
stated maturity

Certificates of deposit

Short-term borrowings

Long-term debt

Subordinated debentures/

notes

Operating leases

Purchase obligations

Total contractual
obligations

0–1
Years

1–3
Years

3– 5
Years

Over 5
Years

Total

$3,121,517

— $

— $3,121,517

1,421,463

406,924

143,147

2,369

1,973,903

663,669

—

— 663,669

16,523

16,143

668

603,399

636,733

—

1,987

2,310

—

— 75,250

3,415

2,577

4,103

—

75,250

12,082

2,310

$5,227,469 $426,482

$146,392 $685,121 $6,485,464

The Corporation’s operating lease obligations represent short-term and
long-term lease and rental payments for facilities and equipment. Purchase
obligations represent obligations under agreements to purchase goods or
services that are enforceable and legally binding on the Corporation.

Commitments, Contingent Liabilities, and Off-Balance Sheet
Arrangements: In order to meet the financing needs of its customers,
the Corporation issues loan commitments and standby letters of credit.
At December 31, 2010, the Corporation had $716.6 million of loan commit-
ments for commercial, commercial real estate, and residential real estate loans
and had $24.5 million of standby letters of credit. At December 31, 2009, the
Corporation had $955.3 million of loan commitments for commercial, com-
mercial real estate and residential real estate loans and had $36.3 million of
standby letters of credit.

Commitments to extend credit under loan commitments and standby letters
of credit do not necessarily represent future cash requirements. These
commitments often expire without being drawn upon. However, all of the
loan commitments and standby letters of credit are permitted to be drawn
upon in 2011. See Note 18 of the Notes to Consolidated Financial Statements
for additional information on loan commitments and standby letters of credit.

The Corporation did not have any unrecorded significant contingent liabilities
at December 31, 2010.

Capital: Park’s primary means of maintaining capital adequacy is through
net retained earnings. At December 31, 2010, the Corporation’s stockholders’
equity was $745.8 million, compared to $717.3 million at December 31, 2009.
Stockholders’ equity at December 31, 2010 was 10.22% of total assets com-
pared to 10.19% of total assets at December 31, 2009. During 2010, Park
issued an aggregate of 509,184 common shares previously held as treasury
shares, at a weighted average purchase price per share of $67.99, for net
proceeds of $33.5 million.

Tangible stockholders’ equity (stockholders’ equity less goodwill and other
intangible assets) was $667.4 million at December 31, 2010 and was $635.5
million at December 31, 2009. At December 31, 2010, tangible stockholders’
equity was 9.24% of total tangible assets (total assets less goodwill and other
intangible assets), compared to 9.13% at December 31, 2009.

F I N A N C I A L R E V I E W

Tangible common equity (tangible stockholders’ equity less $100 million
related to the Series A Preferred Shares and warrant issued to the U.S. Treasury)
was $567.4 million at December 31, 2010 compared to $535.5 million at
December 31, 2009. At December 31, 2010, tangible common equity was
7.86% of tangible assets, compared to 7.69% at December 31, 2009.

Net income for 2010 and 2009 was $74.2 million and was $13.7 million in
2008. The net income for 2008 includes a goodwill impairment charge at
Vision Bank of $55.0 million. Excluding the goodwill impairment charge at
Vision Bank, net income for 2008 would have been $68.7 million.

Preferred stock dividends paid as a result of Park’s participation in the CPP
were $5.0 million in both 2010 and 2009, and $124,000 in 2008. Accretion of
the discount on the Series A Preferred Shares was $807,000 in 2010, $762,000
in 2009 and $18,000 in 2008. Income available to common shareholders is net
income less the preferred stock dividends and accretion. Income available to
common shareholders was $68.4 million for both 2010 and 2009, and $13.6
million in 2008 ($68.6 million excluding the goodwill impairment charge).

Cash dividends declared for common shares were $57.1 million in 2010,
$53.6 million in 2009, and $52.6 million in 2008. On a per share basis, the
cash dividends declared were $3.76 per share in both 2010 and 2009, and
$3.77 per share in 2008.

Park did not purchase any treasury stock during 2010, 2009 or 2008. Treasury
stock had a balance in stockholders’ equity of $77.7 million at December 31,
2010, $125.3 million at December 31, 2009, and $207.7 million at December
31, 2008. During 2010, Park issued 437,200 shares of common stock as a
result of the exercise of warrants that were originally issued in 2009. Also
during 2010, Park issued 71,984 shares of common stock resulting in a total
of 509,184 shares of common stock issued in 2010, which reduced the amount
of treasury stock available. The issuance of these shares out of treasury stock
reduced the value of treasury stock by the weighted average cost of $47.0
million. Additionally, the value of treasury stock was reduced by $634,000
as a result of the issuance of an aggregate of 7,020 common shares to the
Board of Directors of Park and Park’s bank subsidiaries (and their divisions).
During 2009, Park issued 904,072 shares of common stock out of treasury
stock. The issuance of these shares out of treasury stock during 2009 resulted
in a reduction in treasury stock by the weighted average cost of $81.7 million.
Additionally, the value of treasury stock was reduced by $634,000 as a result of
the issuance of an aggregate of 7,020 common shares to directors of the Board
of Directors of Park and Park’s bank subsidiaries (and their divisions).

Park did not issue any new common shares (that were not already held in
treasury stock, as discussed above) in either 2010 or 2009. However, in 2010,
Park recorded $0.2 million for the warrants that were issued as part of the
issuance of the 71,984 common shares discussed above and also recorded a
reduction of $1.1 million as warrants were either exercised or cancelled during
2010. In 2009, Park recorded $1.1 million for the common stock warrants that
were issued as part of the issuance of the 904,072 shares discussed above. In
2008, Park recorded $4.3 million for the common stock warrant as part of
the issuance of $100 million of Series A Preferred Shares (see Note 1 and Note
25 of the Notes to Consolidated Financial Statements). Common stock had a
balance in stockholders’ equity of $301.2 million at each of the years ended
December 31, 2010, 2009, and 2008.

Accumulated other comprehensive income (loss) was ($1.9) million at
December 31, 2010 compared to $15.7 million at December 31, 2009 and
$10.6 million at December 31, 2008. Long-term interest rates declined signifi-
cantly in the fourth quarter of 2007, continued declining in 2008 and remained
low throughout 2009. In 2010, long-term interest rates remained low through
the first three quarters, but then increased fairly significantly during the fourth
quarter. The net unrealized gain from investment securities was $31.6 million at
December 31, 2008. During the 2009 year, the change in net unrealized gains,
net of tax, was an increase of $3.3 million and Park realized after-tax gains of
$4.8 million, resulting in an unrealized gain of $30.1 million at December 31,
2009. During the 2010 year, the change in net unrealized gains, net of tax, was
a loss of $7.3 million and Park realized after-tax gains of $7.7 million, resulting
in an unrealized gain of $15.1 million at December 31, 2010. In addition, Park
recognized other comprehensive loss of $2.4 million related to the change in
Pension Plan assets and benefit obligations in 2010 compared to income of
$6.3 million in 2009 and a loss of $16.2 million in 2008. Finally, Park has
recognized other comprehensive loss of $0.1 million in 2010 due to the mark-
to-market of a cash flow hedge at December 31, 2010 compared to a $0.3
million increase in comprehensive income for the year ended December 31,
2009 and a $1.3 million comprehensive loss for 2008.

Financial institution regulators have established guidelines for minimum capital
ratios for banks, thrifts, and bank holding companies. Park’s accumulated other
comprehensive income (loss) is not included in computing regulatory capital.
The minimum leverage capital ratio (defined as stockholders’ equity less
intangible assets divided by tangible assets) is 4% and the well capitalized ratio
is greater than or equal to 5%. Park’s leverage ratio was 9.77% at December
31, 2010 and exceeded the minimum capital required by $401 million. The
minimum Tier 1 risk-based capital ratio (defined as leverage capital divided
by risk-adjusted assets) is 4% and the well capitalized ratio is greater than or
equal to 6%. Park’s Tier 1 risk-based capital ratio was 13.52% at December
31, 2010 and exceeded the minimum capital required by $478 million. The
minimum total risk-based capital ratio (defined as leverage capital plus supple-
mental capital divided by risk-adjusted assets) is 8% and the well capitalized
ratio is greater than or equal to 10%. Park’s total risk-based capital ratio was
15.98% at December 31, 2010 and exceeded the minimum capital required
by $401 million.

At December 31, 2010, Park exceeded the well capitalized regulatory guidelines
for bank holding companies. Park exceeded the well capitalized leverage capital
ratio of 5% by $331 million, exceeded the well capitalized Tier 1 risk-based
capital ratio of 6% by $377 million and exceeded the well capitalized total
risk-based capital ratio of 10% by $300 million.

The two financial institution subsidiaries of Park each met the well
capitalized ratio guidelines at December 31, 2010. See Note 22 of the Notes
to Consolidated Financial Statements for the capital ratios for Park and its
two financial institution subsidiaries.

Effects of Inflation: Balance sheets of financial institutions typically contain
assets and liabilities that are monetary in nature and, therefore, differ greatly
from most commercial and industrial companies which have significant
investments in premises, equipment and inventory. During periods of inflation,
financial institutions that are in a net positive monetary position will experience
a decline in purchasing power, which does have an impact on growth. Another
significant effect on internal equity growth is other expenses, which tend to rise
during periods of inflation.

Management believes the most significant impact on financial results is the
Corporation’s ability to align its asset/liability management program to react
to changes in interest rates.

F I N A N C I A L R E V I E W

SELECTED FINANCIAL DATA
The following table summarizes five-year financial information.

Table 25 – Consolidated Five-Year Selected Financial Data

The following table is a summary of selected quarterly results of operations for
the years ended December 31, 2010 and 2009. Certain quarterly amounts have
been reclassified to conform to the year-end financial statement presentation.

2010

2009

2008

2007

2006

Table 26 – Quarterly Financial Data

(Dollars in thousands,
except per share data)

March 31

Three Months Ended
Sept. 30
June 30

Dec. 31

December 31,
(Dollars in thousands,
except per share data)

Results of Operations:

Interest income
Interest expense
Net interest income
Provision for loan

losses

Net interest income
after provision for
loan losses
Net gains on sale
of securities
Noninterest income
Noninterest expense
Net income
Net income available

to common
shareholders
Per common share:

Net income per common

share – basic

Net income per common

share – diluted

Cash dividends declared

Average Balances:

Loans
Investment securities
Money market

instruments and other

$ 345,517 $ 367,690 $ 391,339 $ 401,824 $ 334,559
121,315
213,244

71,473
274,044

135,466
255,873

167,147
234,677

94,199
273,491

64,902

68,821

70,487

29,476

3,927

209,142

204,670

185,386

205,201

209,317

11,864
65,632
187,107
74,217

7,340
73,850
188,725
74,192

1,115
83,719
234,501
13,708

—
71,640
224,164
22,707

97
64,665
141,002
94,091

68,410

68,430

13,566

22,707

94,091

4.51

4.51
3.76

4.82

4.82
3.76

0.97

0.97
3.77

1.60

1.60
3.73

6.75

6.74
3.69

4,642,478
1,746,356

4,594,436
1,877,303

4,354,520
1,801,299

4,011,307
1,596,205

3,357,278
1,610,639

93,009

52,658

15,502

17,838

8,723

Total earning assets 6,481,843

6,524,397

6,171,321

5,625,350

4,976,640

Noninterest bearing

deposits

Interest bearing

deposits

907,514

818,243

739,993

697,247

662,077

4,274,501

4,232,391

3,862,780

3,706,231

3,162,867

Total deposits

5,182,015

5,050,634

4,602,773

4,403,478

3,824,944

Short-term borrowings $ 300,939 $ 419,733 $ 609,219 $ 494,160 $ 375,332
553,307
780,435
Long-term debt
545,074
675,314
Stockholders’ equity
Common stockholders’

835,522
567,965

568,575
618,758

725,356
746,555

equity
Total assets

649,682
7,042,750

579,224
7,035,531

565,612
6,708,086

618,758
6,169,156

545,074
5,380,623

Ratios:

Return on average

assets (x)

Return on average

common equity (x)
Net interest margin (1)
Dividend payout ratio
Average stockholders’
equity to average
total assets
Leverage capital
Tier 1 capital
Risk-based capital

0.97%

0.20%

0.37%

1.75%

10.53%
4.26%
83.43%

10.60%
9.77%
13.50%
15.96%

11.81%
4.22%
78.27%

2.40%
4.16%
387.79%

3.67%
4.20%
232.35%

9.60%
9.04%
12.45%
14.89%

8.47%
8.36%
11.69%
13.47%

10.03%
7.10%
10.16%
11.97%

17.26%
4.33%
54.65%

10.13%
9.96%
14.72%
15.98%

(1) Computed on a fully taxable equivalent basis.

(x) Reported measure uses net income available to common stockholders.

2010:

Interest income

Interest expense

Net interest income

Provision for loan losses

Gain on sale of securities

Income before
income taxes

Net income

Net income available

to common shareholders

Per common share data:

Net income per common

share – basic (x)

Net income per common
share – diluted (x)

Weighted-average common
stock outstanding – basic

Weighted-average common
stock equivalent – diluted

2009:

Interest income

Interest expense

Net interest income

Provision for loan losses

Gain on sale of securities

Income before
income taxes

Net income

Net income available

to common shareholders

Per common share data:

Net income per common

share – basic (x)

Net income per common
share – diluted (x)

Weighted-average common
stock outstanding – basic

Weighted-average common
stock equivalent – diluted

$87,202

$87,242

$86,682

$84,391

19,822

67,380

16,550

8,304

27,954

20,779

18,521

68,721

13,250

3,515

28,632

21,166

17,237

69,445

14,654

—

26,625

19,577

15,893

68,498

20,448

16,320

12,695

19,327

19,715

18,125

11,243

1.30

1.19

0.73

14,882,774

15,114,846

15,272,720

15,340,427

14,882,774

15,114,846

15,272,720

15,352,600

$93,365

$92,092

$91,868

$90,365

25,132

68,233

12,287

—

29,294

21,390

24,098

67,994

15,856

7,340

29,084

21,307

23,406

68,462

14,958

—

25,617

19,199

21,563

68,802

25,720

—

13,140

12,296

19,950

19,866

17,759

10,855

1.43

1.42

1.25

0.74

13,971,720

14,001,608

14,193,411

14,658,601

13,971,720

14,001,608

14,193,411

14,658,601

(x) Reported measure uses net income available to common shareholders.

Non-GAAP Financial Measures: Park’s management uses certain non-GAAP
(generally accepted accounting principles) financial measures to evaluate
Park’s performance. Specifically, management reviews (i) net income available
to common shareholders before impairment charge, (ii) net income available
to common shareholders before impairment charge per common share-
diluted, (iii) return on average assets before impairment charge, (iv) return
on average common equity before impairment charge, and (v) the ratio of
noninterest expense excluding impairment charge to net revenue (collectively,
the “adjusted performance metrics”) and has included in this annual report
information relating to the adjusted performance metrics for the twelve-month
period ended December 31, 2008 and 2007. Management believes the adjusted
performance metrics present a more reasonable view of Park’s operating
performance and ensures comparability of operating performance from
period to period while eliminating the one-time non-recurring impairment
charges. Park has provided reconciliations of the GAAP measures to the
adjusted performance metrics solely for the purpose of complying with SEC
Regulation G and not as an indication that the adjusted performance metrics
are a substitute for other measures determined by GAAP.

0.97%

1.02%

1.24%

1.75%

12/31/05

12/31/06

12/31/07

12/31/08

12/31/09

12/31/10

F I N A N C I A L R E V I E W

The following table displays net income available to common shareholders
and related performance metrics after excluding the 2007 and 2008 goodwill
impairment charges related to the Vision Bank acquisition.

2010

2009

2008

2007

2006

$68,410

$68,430

$68,552

$76,742

$94,091

4.51

4.82

4.91

5.40

6.74

200

180

160

140

120

100

e
u
a
V
x
e
d
n
I

Table 27

December 31,
(Dollars in thousands,
except per share data)

Results of Operations:
Net income available

to common
shareholders
excluding
impairment
charge (a)
Per common share:
Net income per

common share
excluding
impairment
charge –
diluted (a)

Ratios:

Return on average
assets excluding
impairment
charge (a)(b)
Return on average
common equity
excluding
impairment
charge (a)(x)

Noninterest expense

excluding
impairment
charge to
net revenue (1)

10.53%

11.81%

12.12%

12.40%

17.26%

54.75%

54.01%

52.59%

55.21%

50.35%

(1) Computed on a fully taxable equivalent basis.

(x) Reported measure uses net income available to common stockholders.

(a) Net income for the year has been adjusted for the impairment charge to goodwill. Net income
before impairment charge equals net income for the year plus the impairment charge to
goodwill of $54,986 and $54,035 for 2008 and 2007, respectively.

(b) Net income for the year available to common shareholders.

The Corporation’s common stock (symbol: PRK) is traded on the NYSE Amex.
At December 31, 2010, the Corporation had 4,457 stockholders of record. The
following table sets forth the high, low and closing sale prices of, and dividends
declared on the common stock for each quarterly period for the years ended
December 31, 2010 and 2009, as reported by NYSE Amex.

Table 28 – Market and Dividend Information

2010:

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

2009:

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

High

Low

Last
Price

$ 64.70

$ 52.58

$ 62.31

70.25

67.54

74.39

61.50

59.35

62.66

65.04

64.04

72.67

$ 70.10

$ 39.90

$ 55.75

70.00

66.59

62.55

53.88

54.01

56.35

56.48

58.34

58.88

Cash
Dividend
Declared
Per Share

$0.94

0.94

$0.94

0.94

Table 29 – Total Return Performance

PERIOD ENDING

Index

12/31/05

12/31/06

12/31/07

12/31/08

12/31/09

12/31/10

Park National Corporation

NYSE Amex Composite

NASDAQ Bank Stocks

SNL Bank and Thrift Index

100.00

100.03

119.94

113.82

116.85

68.13

145.36

91.16

89.10

80.20

86.56

71.52

51.24

70.09

91.85

117.36

147.40

59.87

50.55

68.34

56.44

PERFORMANCE GRAPH
Table 29 compares the total return performance for Park common
shares with the NYSE Amex Composite Index, the NASDAQ Bank Stocks
Index and the SNL Financial Bank and Thrift Index for the five-year period
from December 31, 2005 to December 31, 2010. The NYSE Amex Composite
Index is a market capitalization-weighted index of the stocks listed on NYSE
Amex. The NASDAQ Bank Stocks Index is comprised of all depository institu-
tions, holding com panies and other investment companies that are traded on
The NASDAQ Global Select and Global Markets. Park considers a number of
bank holding companies traded on The NASDAQ Global Select to be within
its peer group. The SNL Financial Bank and Thrift Index is comprised of all
publicly traded bank and thrift stocks researched by SNL Financial.

The NYSE Amex Financial Stocks Index includes the stocks of banks,
thrifts, finance companies and securities broker-dealers. Park believes that
the NASDAQ Bank Stocks Index and the SNL Financial Bank and Thrift Index
are more appropriate industry indices for Park to use for the five-year total
return performance comparison.

The total return for Park’s common shares has underperformed the total return
of the NYSE Amex Composite Index in the five-year comparison as indicated in
Table 29, but outperformed both the NASDAQ Bank Stocks Index and the SNL
Bank and Thrift Index for the same five-year period. The annual compound
total return on Park’s common shares for the past five years was a negative
1.7%. By comparison, the annual compound total returns for the past five years
on the NYSE Amex Composite Index, the NASDAQ Bank Stocks Index and the
SNL Bank and Thrift Index were positive 8.1%, negative 7.3% and negative
10.8%, respectively.

M A N A G E M E N T ’ S R E P O R T O N

I N T E R N A L C O N T R O L

O V E R F I N A N C I A L R E P O R T I N G

To the Board of Directors and Stockholders
Park National Corporation

The management of Park National Corporation (the “Corporation”) is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rules 13a – 15(f) and 15d – 15(f) under the Securities
Exchange Act of 1934. The Corporation’s internal control over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with U.S. generally accepted accounting principles. The Corporation’s internal control over financial
reporting includes those policies and procedures that:

a.) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and

dispositions of the assets of the Corporation and its consolidated subsidiaries;

b.) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial

statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures
of the Corporation and its consolidated subsidiaries are being made only in accordance with authorizations of
management and directors of the Corporation; and

c.) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or

disposition of the assets of the Corporation and its consolidated subsidiaries that could have a material effect
on the financial statements.

The Corporation’s internal control over financial reporting as it relates to the financial statements is evaluated for
effectiveness by management and tested for reliability through a program of internal audits. Actions are taken to
correct potential deficiencies as they are identified.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluations of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate. Accordingly, even an effective system of internal control over financial reporting will provide only reasonable
assurance with respect to financial statement preparation.

With the participation of our Chairman of the Board and Chief Executive Officer, our President and our Chief Financial
Officer, management evaluated the effectiveness of the Corporation’s internal control over financial reporting as of
December 31, 2010, the end of the Corporation’s fiscal year. In making this assessment, management used the criteria set
forth for effective internal control over financial reporting by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control-Integrated Framework.

Based on our assessment under the criteria described in the preceding paragraph, management concluded that the
Corporation maintained effective internal control over financial reporting as of December 31, 2010.

The Corporation’s independent registered public accounting firm, Crowe Horwath LLP, has audited the Corporation’s
2010 and 2009 consolidated financial statements included in this Annual Report and the Corporation’s internal control
over financial reporting as of December 31, 2010, and has issued their Report of Independent Registered Public
Accounting Firm, which appears in this Annual Report.

C. Daniel DeLawder
Chairman and Chief Executive Officer

David L. Trautman
President

John W. Kozak
Chief Financial Officer

February 28 , 2011

R E P O R T O F

I N D E P E N D E N T

R E G I S T E R E D P U B L I C A C C O U N T I N G F I R M

To the Board of Directors and Shareholders
Park National Corporation
Newark, Ohio

We have audited the accompanying consolidated balance sheets of Park National Corporation as of December 31, 2010 and 2009
and the related consolidated statements of income, changes in stockholders’ equity and cash flows for each of the three years in
the period ended December 31, 2010. We also have audited Park National Corporation’s internal control over financial reporting
as of December 31, 2010, based on criteria established in Internal Control – Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). Park National Corporation’s management is responsible
for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal
Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion
on the company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement and whether effective internal control over financial
reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances.
We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Park National Corporation as of December 31, 2010 and 2009, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted
in the United States of America. Also in our opinion, Park National Corporation maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control –
Integrated Framework issued by the COSO.

Columbus, Ohio
February 28 , 2011

C O N S O L I D A T E D B A L A N C E S H E E T S

PARK NATIONAL CORPORATION AND SUBSIDIARIES
at December 31, 2010 and 2009 (In thousands, except share and per share data)

ASSETS

Cash and due from banks

Money market instruments

Cash and cash equivalents

Investment securities:

Securities available-for-sale, at fair value (amortized cost of $1,274,258 and

$1,241,381 at December 31, 2010 and 2009, respectively)

Securities held-to-maturity, at amortized cost (fair value of $686,114 and

$523,450 at December 31, 2010 and 2009, respectively)

Other investment securities

Total investment securities

Total loans

Allowance for loan losses

Net loans

Other assets:

Bank owned life insurance

Goodwill

Other intangibles

Premises and equipment, net

Accrued interest receivable

Other real estate owned

Mortgage loan servicing rights

Other

Total other assets

Total assets

The accompanying notes are an integral part of the consolidated financial statements.

2010

$ 109,058

24,722

133,780

1,297,522

673,570

68,699

2,039,791

4,732,685

(121,397)

4,611,288

146,450

72,334

6,043

69,567

24,137

44,325

10,488

140,174

513,518

$7,298,377

2009

$ 116,802

42,289

159,091

1,287,727

506,914

68,919

1,863,560

4,640,432

(116,717)

4,523,715

137,133

72,334

9,465

69,091

24,354

41,240

10,780

129,566

493,963

$7,040,329

C O N S O L I D A T E D B A L A N C E S H E E T S

(CONTINUED)

PARK NATIONAL CORPORATION AND SUBSIDIARIES
at December 31, 2010 and 2009 (In thousands, except share and per share data)

LIABILITIES AND STOCKHOLDERS’ EQUITY

Deposits:

Noninterest bearing

Interest bearing

Total deposits

Short-term borrowings

Long-term debt

Subordinated debentures

Total borrowings

Other liabilities:

Accrued interest payable

Other

Total other liabilities

Total liabilities

COMMITMENTS AND CONTINGENCIES

Stockholders’ equity:

Preferred stock (200,000 shares authorized;

100,000 shares issued with $1,000 per share
liquidation preference)

Common stock, no par value (20,000,000 shares authorized;
16,151,062 shares issued at December 31, 2010 and
16,151,112 issued at December 31, 2009)

Common stock warrants

Accumulated other comprehensive income (loss), net

Retained earnings

Less: Treasury stock (752,128 shares at December 31, 2010 and

1,268,332 shares at December 31, 2009)

Total stockholders’ equity

2010

$ 937,719

4,157,701

5,095,420

663,669

636,733

75,250

1,375,652

6,123

75,358

81,481

6,552,553

97,290

301,204

4,473

(1,868)

422,458

(77,733)

745,824

Total liabilities and stockholders’ equity

$7,298,377

The accompanying notes are an integral part of the consolidated financial statements.

2009

$ 897,243

4,290,809

5,188,052

324,219

654,381

75,250

1,053,850

9,330

71,833

81,163

6,323,065

96,483

301,208

5,361

15,661

423,872

(125,321)

717,264

$7,040,329

C O N S O L I D A T E D S T A T E M E N T S O F

I N C O M E

PARK NATIONAL CORPORATION AND SUBSIDIARIES
for the years ended December 31, 2010, 2009 and 2008 (In thousands, except per share data)

Interest and dividend income:
Interest and fees on loans

Interest and dividends on:

Obligations of U.S. Government, its agencies

and other securities

Obligations of states and political subdivisions

Other interest income

Total interest and dividend income

Interest expense:

Interest on deposits:

Demand and savings deposits

Time deposits

Interest on short-term borrowings

Interest on long-term debt

Total interest expense

Net interest income

Provision for loan losses

Net interest income after provision for loan losses

Other income:

Income from fiduciary activities

Service charges on deposit accounts

Net gains on sales of securities

Other service income

Checkcard fee income

Bank owned life insurance income

ATM fees

OREO devaluations

Net gain on sale of credit card portfolio

Income from sale of merchant processing

Other

Total other income

2010

2009

2008

$267,692

$275,599

$301,163

76,839

786

200

345,517

5,753

36,212

1,181

28,327

71,473

274,044

64,902

209,142

13,874

19,717

11,864

13,816

11,177

4,978

2,951

(10,590)

—

9,709

$ 77,496

90,558

1,417

116

367,690

10,815

53,805

3,209

26,370

94,199

273,491

68,821

204,670

12,468

21,985

7,340

18,767

9,339

5,050

3,082

(6,818)

—

9,977

$ 81,190

87,711

2,171

294

391,339

22,633

67,259

14,469

31,105

135,466

255,873

70,487

185,386

13,937

24,296

1,115

8,882

8,695

5,102

3,063

(2,948)

7,618

4,200

10,874

$ 84,834

The accompanying notes are an integral part of the consolidated financial statements.

C O N S O L I D A T E D S T A T E M E N T S O F

I N C O M E

(CONTINUED)

PARK NATIONAL CORPORATION AND SUBSIDIARIES
for the years ended December 31, 2010 2009 and 2008 (In thousands, except per share data)

Other expense:

Salaries and employee benefits

Goodwill impairment charge

Data processing fees

Professional fees and services

Net occupancy expense of bank premises

Amortization of intangibles

Furniture and equipment expense

Insurance

Marketing

Postage and telephone

State taxes

Other

Total other expense

Income before income taxes

Income taxes

Net income

Preferred stock dividends and accretion

Income available to common shareholders

Earnings per common share:

Basic

Diluted

2010

2009

2008

$ 98,315

$101,225

$ 99,018

—

5,728

19,972

11,510

3,422

10,435

8,983

3,656

6,648

3,171

15,267

187,107

99,531

25,314

$ 74,217

5,807

$ 68,410

$4.51

—

5,674

15,935

11,552

3,746

9,734

12,072

3,775

6,903

3,206

14,903

188,725

97,135

22,943

$ 74,192

5,762

$ 68,430

$4.82

54,986

7,121

12,801

11,534

4,025

9,756

2,322

4,525

7,167

2,989

18,257

234,501

35,719

22,011

$ 13,708

142

$ 13,566

$0.97

The accompanying notes are an integral part of the consolidated financial statements.

C O N S O L I D A T E D S T A T E M E N T S O F

C H A N G E S

I N S T O C K H O L D E R S ’

E Q U I T Y

PARK NATIONAL CORPORATION AND SUBSIDIARIES
for the years ended December 31, 2010, 2009 and 2008 (In thousands, except share and per share data)

Balance, January 1, 2008

Net income
Other comprehensive income (loss), net of tax:

Change in funded status of pension plan, net of

income taxes of $(8,735)
Unrealized net holding loss on
cash flow hedge, net of
income taxes of $(678)
Unrealized net holding gain on

securities available-for-sale,
net of income taxes of $16,522

Total comprehensive income
Cash dividends, $3.77 per share
Cash payment for fractional shares
in dividend reinvestment plan
Cumulative effect of new accounting
pronouncement pertaining to
endorsement split-dollar life insurance

SFAS No. 158 measurement date

adjustment, net of taxes of $(178)

Preferred stock issued
Discount on preferred stock issued
Accretion of discount on preferred stock
Common stock warrant issued
Preferred stock dividends
Treasury stock reissued for

director grants

Preferred Stock

Common Stock

Shares
Outstanding

—

Amount
—
$

Shares
Outstanding

Amount

13,964,576

$301,213

Retained
Earnings

$489,511
13,708

Treasury
Stock

$(208,104)
—

Accumulated
Other
Comprehensive
Income (Loss)

$ (2,608)
—

Total

$580,012
13,708

Comprehensive
Income

$ 13,708

(16,223)

(1,259)

30,686

$ 26,912

—

(49)

—

(3)

100,000

100,000
(4,297)
18

—

4,297

—

(52,608)

—

(11,634)

(331)

(18)

(124)

7,200

13,971,727
—

$305,507
—

$438,504
74,192

$(207,665)
—

$ 10,596
—

439

(52,608)

(3)

(11,634)

(331)
100,000
(4,297)
—
4,297
(124)

439

$642,663
74,192

$ 74,192

Balance, December 31, 2008

100,000

$ 95,721

Net income
Other comprehensive income (loss), net of tax:

Change in funded status of pension plan, net of

income taxes of $3,383
Unrealized net holding gain on
cash flow hedge, net of
income taxes of $159
Unrealized net holding loss on

securities available-for-sale,
net of income taxes of $(815)

Total comprehensive income
Cash dividends, $3.76 per share
Cash payment for fractional shares
in dividend reinvestment plan

Reissuance of common stock
from treasury shares held

Accretion of discount on preferred stock
Common stock warrants issued
Preferred stock dividends
Treasury stock reissued for

director grants

6,283

295

(1,513)

$ 79,257

—

(39)

904,072

—

(2)

—

762

—

1,064

(53,563)

—

(29,299)
(762)

(5,000)

—

81,710

—

7,020

14,882,780
—

(200)

634

$306,569
—

$423,872
74,217

$(125,321)
—

$ 15,661
—

(53,563)

(2)

52,411
—
1,064
(5,000)

434

$717,264
74,217

$ 74,217

Balance, December 31, 2009

100,000

$ 96,483

Net income
Other comprehensive income (loss), net of tax:

Change in funded status of pension plan, net of

income taxes of $(1,307)
Unrealized net holding loss on
cash flow hedge, net of
income taxes of $(53)
Unrealized net holding loss on

securities available-for-sale,
net of income taxes of $(8,078)

Total comprehensive income
Cash dividends, $3.76 per share
Cash payment for fractional shares
in dividend reinvestment plan

Reissuance of common stock
from treasury shares held

Accretion of discount on preferred stock
Common stock warrants issued
Common stock warrants cancelled
Preferred stock dividends
Treasury stock reissued for

director grants

(2,427)

(98)

(15,004)

$ 56,688

—

(50)

509,184

—

807

—

(4)

(898)

176
(166)

(57,076)

—

(12,729)
(807)

166
(5,000)

—

46,954

—

7,020

(185)

634

(57,076)

(4)

33,327
—
176
—
(5,000)

449

Balance, December 31, 2010

100,000

$ 97,290

15,398,934

$305,677

$422,458

$ (77,733)

$ (1,868)

$745,824

The accompanying notes are an integral part of the consolidated financial statements.

C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S

PARK NATIONAL CORPORATION AND SUBSIDIARIES
for the years ended December 31, 2010, 2009 and 2008 (In thousands)

Operating activities:

Net income
Adjustments to reconcile net income to net cash

provided by operating activities:

Provision for loan losses
Amortization of loan fees and costs, net
Provision for depreciation
Other than temporary impairment on investment securities
Goodwill impairment charge
Amortization of intangible assets
Accretion of investment securities
Gain on sale of credit card portfolio
Deferred income tax (benefit)
Realized net investment security gains
Stock dividends on Federal Home Loan Bank stock
Compensation expense for issuance of treasury stock to directors
Changes in assets and liabilities:

Increase in other assets
Increase (decrease) in other liabilities

Net cash provided by operating activities

Investing activities:

Proceeds from sales of available-for-sale securities
Proceeds from maturities of securities:

Held-to-maturity
Available-for-sale
Purchase of securities:
Held-to-maturity
Available-for-sale

Proceeds from sale of credit card portfolio
Net decrease (increase) in other investments
Net loan originations, excluding loan sales
Proceeds from sale of loans
Purchases of bank owned life insurance, net
Purchases of premises and equipment, net

Net cash used in investing activities

Financing activities:

Net (decrease) increase in deposits
Net increase (decrease) in short-term borrowings
Issuance of preferred stock
Issuance of treasury stock, net
Proceeds from issuance of subordinated notes
Proceeds from long-term debt
Repayment of long-term debt
Cash dividends paid

Net cash provided by (used in) financing activities

Decrease in cash and cash equivalents

Cash and cash equivalents at beginning of year

2010

2009

2008

$ 74,217

$ 74,192

$ 13,708

64,902
(9)
7,126
23
—
3,422
(2,413)
—
(925)
(11,864)
—
449

(8,974)
180

126,134

460,192

146,986
2,238,059

(313,642)
(2,719,265)
—
220
(510,495)
358,029
(4,562)
(7,602)

(352,080)

(92,632)
339,450
—
33,541
—
—
(17,648)
(62,076)

200,635

(25,311)
159,091

68,821
(1,378)
7,473
613
—
3,746
(2,682)
—
(8,932)
(7,340)
—
434

(31,987)
(30,622)

72,338

204,304

40,105
426,841

(118,667)
(349,895)
—
(114)
(814,981)
615,072
—
(8,011)

(5,346)

426,302
(334,977)
—
53,475
35,250
60,100
(261,278)
(58,035)

(79,163)

(12,171)
171,262

70,487
(4,650)
7,517
980
54,986
4,025
(1,592)
(7,618)
(1,590)
(1,115)
(2,269)
439

(42,409)
239

91,138

80,894

7,116
303,160

(270,045)
(422,512)
38,841
(3,371)
(512,752)
161,475
(8,401)
(9,436)

(635,031)

322,511
(100,122)
100,000
—
—
690,100
(424,951)
(65,781)

521,757

(22,136)
193,398

Cash and cash equivalents at end of year

$ 133,780

$ 159,091

$ 171,262

The accompanying notes are an integral part of the consolidated financial statements.

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed in the
preparation of the consolidated financial statements:

Principles of Consolidation
The consolidated financial statements include the accounts of Park
National Corporation and its subsidiaries (“Park”, the “Company” or the
“Corporation”). Material intercompany accounts and transactions have
been eliminated.

Use of Estimates
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 consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates. Management has identified the allowance for loan losses, accounting
for Other Real Estate Owned (“OREO”) and accounting for goodwill as signifi-
cant estimates.

Reclassifications
Certain prior year amounts have been reclassified to conform with the current
year presentation.

Subsequent Events
Management has evaluated events occurring subsequent to the balance sheet
date, determining no events require additional disclosure in these consolidated
financial statements.

Investment Securities
Investment securities are classified upon acquisition into one of three cate-
gories: held-to-maturity, available-for-sale, or trading (see Note 4 of these
Notes to Consolidated Financial Statements).

Held-to-maturity securities are those securities that the Corporation has the
positive intent and ability to hold to maturity and are recorded at amortized
cost. Available-for-sale securities are those securities that would be available
to be sold in the future in response to the Corporation’s liquidity needs, changes
in market interest rates, and asset-liability management strategies, among other
reasons. Available-for-sale securities are reported at fair value, with unrealized
holding gains and losses excluded from earnings but included in other com -
prehensive income, net of applicable taxes. The Corporation did not hold any
trading securities during any period presented.

Available-for-sale and held-to-maturity securities are evaluated quarterly for
potential other-than-temporary impairment. Management considers the facts
related to each security including the nature of the security, the amount and
duration of the loss, the credit quality of the issuer, the expectations for that
security’s performance and Park’s intent and ability to hold the security until
recovery. Declines in equity securities that are considered to be other-than-
temporary are recorded as a charge to earnings in the Consolidated Statements
of Income. Declines in debt securities that are considered to be other-than-
temporary are separated into (1) the amount of the total impairment related
to credit loss and (2) the amount of the total impairment related to all other
factors. The amount of the total other-than-temporary impairment related to
the credit loss is recognized in earnings. The amount of the total impairment
related to all other factors is recognized in other comprehensive income.

Interest income includes amortization of purchase premium or discount.
Premiums and discounts on securities are amortized on the level-yield method
without anticipating prepayments, except for mortgage-backed securities where
prepayments are anticipated.

Gains and losses realized on the sale of investment securities are recorded on
the trade date and determined using the specific identification basis.

Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) Stock
Park’s two separately chartered banks are members of the FHLB and FRB.
Members are required to own a certain amount of stock based on their level
of borrowings and other factors and may invest in additional amounts. FHLB
and FRB stock are carried at cost, classified as restricted securities, and are
carried at their redemption value. Both cash and stock dividends are reported
as income.

Bank Owned Life Insurance
Park has purchased life insurance policies on directors and certain key officers.
Bank owned life insurance is recorded at its cash surrender value (or the
amount that can be realized).

Mortgage Loans Held for Sale
Mortgage loans held for sale are carried at their fair value. Mortgage loans held
for sale were $8.3 million and $9.6 million at December 31, 2010 and 2009,
respectively. These amounts are included in loans on the Consolidated Balance
Sheets.

Mortgage Banking Derivatives
Commitments to fund mortgage loans (interest rate locks) to be sold into the
secondary market and forward commitments for the future delivery of these
mortgage loans are accounted for as free standing derivatives. Fair values of
these mortgage derivatives are estimated based on changes in mortgage interest
rates from the date the interest on the loan is locked. The Company enters into
forward commitments for the future delivery of mortgage loans when interest
rate locks are entered into, in order to hedge the change in interest rates result-
ing from its commitments to fund the loans. Changes in the fair values of these
derivatives are included in net gains on sales of loans.

Loans
Loans that management has the intent and ability to hold for the foreseeable
future or until maturity or payoff, are reported at their outstanding principal
balances adjusted for any charge-offs, any deferred fees or costs on originated
loans, and any unamortized premiums or discounts on purchased loans.
Interest income is reported on the interest method and includes amortization
of net deferred loan origination fees and costs over the loan term. Commercial
loans include: (1) commercial, financial and agricultural loans; (2) commer-
cial real estate loans; (3) those commercial loans in the real estate construction
loan segment; and (4) those commercial loans in the residential real estate
loan segment. Consumer loans include: (1) mortgage and installment loans
included in the real estate construction segment; (2) mortgage, home equity
lines of credit (HELOC), and installment loans included in the residential real
estate segment; and (3) all loans included in the consumer segment. Generally,
commercial loans are placed on nonaccrual status at 90 days past due and
consumer and residential mortgage loans are placed on nonaccrual status at
120 days past due. Interest on these loans is considered a loss, unless the loan
is well-secured and in the process of collection. Commercial loans placed
on nonaccrual status are considered impaired (See Note 5 of these Notes to
Consolidated Financial Statements). For loans which are on nonaccrual status,
it is Park’s policy to reverse interest previously accrued on the loans 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. Park’s charge-
off policy for commercial loans requires management to establish a specific
reserve or record a charge-off as soon as it is apparent that the borrower is
troubled and there is, or likely will be, a collateral shortfall related to the
estimated value of the collateral securing the loan. The Company’s charge-off
policy for consumer loans is dependent on the class of the loan. Mortgage
loans and HELOC are typically charged down to the value of the collateral,
less estimated selling costs at 180 days past due. The charge-off policy for
other consumer loans, primarily installment loans, requires a monthly review
of delinquent loans and a complete charge-off for any account that reaches
120 days past due.

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

The delinquency status of a loan is based on contractual terms and not on how
recently payments have been received. Loans are removed from nonaccrual
status when loan payments have been received to cure the delinquency status
and the loan is deemed to be well-secured by management.

A description of each segment of the loan portfolio, along with the risk charac-
teristics of each segment, is included below:

Commercial, financial and agricultural: Commercial, financial and
agricultural loans are made for a wide variety of general corporate purposes,
including financing for industrial and commercial properties, financing for
equipment, inventories and accounts receivable, acquisition financing and
commercial leasing. The term of each commercial loan varies by its purpose.
Repayment terms are structured such that commercial loans will be repaid
within the economic useful life of the underlying asset. The commercial loan
portfolio includes loans to a wide variety of corporations and businesses across
many industrial classifications in (i) the 28 Ohio counties and one Kentucky
county where Park National Bank operates and (ii) the five Florida counties
and one Alabama county where Vision Bank operates. The primary industries
represented by these customers include commercial real estate leasing,
manufacturing, retail trade, health care and other services.

Commercial real estate: Commercial real estate loans (“CRE loans”)
include mortgage loans to developers and owners of commercial real estate.
The lending policy for CRE loans is designed to address the unique risk
attributes of CRE lending. The collateral for these CRE loans is the underlying
commercial real estate. Each subsidiary bank generally requires that the CRE
loan amount be no more than 85% of the purchase price or the appraised
value of the commercial real estate securing the CRE loan, whichever is less.
CRE loans made for each subsidiary bank’s portfolio generally have a variable
interest rate. A CRE loan may be made with a fixed interest rate for a term
generally not exceeding five years.

Construction real estate: The Company defines construction loans as both
commercial construction loans and residential construction loans where the
loan proceeds are used exclusively for the improvement of real estate as to
which the Company holds a mortgage. Construction loans may be in the form
of a permanent loan or a short-term construction loan, depending on the needs
of the individual borrower. Generally, the permanent construction loans have a
variable interest rate although a permanent construction loan may be made with
a fixed interest rate for a term generally not exceeding five years. Short-term
construction loans are made with variable interest rates. Construction financing
is generally considered to involve a higher degree of risk of loss than long-term
financing on improved, occupied real estate. Risk of loss on a construction loan
depends largely upon the accuracy of the initial estimate of the property’s value
at completion of construction and the estimated cost (including interest) of
construction. If the estimate of construction cost proves to be inaccurate, the
subsidiary bank making the loan may be required to advance funds beyond
the amount originally committed to permit completion of the project. If the
estimate of value proves inaccurate, the subsidiary bank may be confronted,
at or prior to the maturity of the loan, with a project having a value insufficient
to assure full repayment, should the borrower default. In the event a default on
a construction loan occurs and foreclosure follows, the subsidiary bank must
take control of the project and attempt either to arrange for completion of
construction or to dispose of the unfinished project. Additional risk exists with
respect to loans made to developers who do not have a buyer for the property,
as the developer may lack funds to pay the loan if the property is not sold upon
completion. Park’s subsidiary banks attempt to reduce such risks on loans to
developers by requiring personal guarantees and reviewing current personal
financial statements and tax returns as well as other projects undertaken by
the developer.

Residential real estate: The Company defines residential real estate loans
as first mortgages on individuals’ primary residence or second mortgages of
individuals’ primary residence in the form of home equity lines of credit or
installment loans. Credit approval for residential real estate loans requires

demonstration of sufficient income to repay the principal and interest and the
real estate taxes and insurance, stability of employment, an established credit
record and an appropriately appraised value of the real estate securing the
loan. Each subsidiary bank generally requires that the residential real estate
loan amount be no more than 80% of the purchase price or the appraised value
of the real estate securing the loan, whichever is less, unless private mortgage
insurance is obtained by the borrower. Loans made for each subsidiary bank’s
portfolio in this lending category are generally adjustable rate, fully amortized
mortgages. The rates used are generally fully-indexed rates. Park generally does
not price residential loans using low introductory “teaser” rates. Home equity
lines of credit are generally made as second mortgages by Park’s subsidiary
banks. The maximum amount of a home equity line of credit is generally
limited to 85% of the appraised value of the property less the balance of the
first mortgage.

Consumer: The Company originates direct and indirect consumer loans,
primarily automobile loans and home equity based credit cards to customers
and prospective customers in its primary market areas. Credit approval for
consumer loans requires income sufficient to repay principal and interest due,
stability of employment, an established credit record and sufficient collateral for
secured loans. Consumer loans typically have shorter terms and lower balances
with higher yields as compared to real estate mortgage loans, but generally
carry higher risks of default. Consumer loan collections are dependent on the
borrower’s continuing financial stability, and thus are more likely to be affected
by adverse personal circumstances.

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. The determination of the allowance requires sig-
nificant estimates, including the timing and amounts of expected cash flows on
impaired loans, consideration of current economic conditions, and historical
loss experience pertaining to pools of homogeneous loans, all of which may be
susceptible to change. The allowance is increased through a provision for loan
losses that is charged to earnings based on management’s quarterly evaluation
of the factors previously mentioned and is reduced by charge-offs, net of
recoveries.

The allowance for loan losses includes both (1) an estimate of loss based
on historical loss experience within both commercial and consumer loan
categories with similar characteristics (“statistical allocation”) and (2) an
estimate of loss based on an impairment analysis of each commercial loan
that is considered to be impaired (“specific allocation”).

In calculating the allowance for loan losses, management believes it is
appropriate to utilize historical loss rates that are comparable to the current
period being analyzed. For the historical loss factor at December 31, 2010, the
Company utilized an annual loss rate (“historical loss experience”), calculated
based on an average of the net charge-offs and the annual change in specific
reserves for impaired commercial loans, experienced during 2008, 2009
and 2010 within the commercial and consumer loan categories. Management
believes the 36-month historical loss experience methodology is appropriate
in the current economic environment, as it captures loss rates that are
comparable to the current period being analyzed. The loss factor applied
to Park’s consumer portfolio is based on the historical loss experience over
the past 36 months, plus an additional judg mental reserve, increasing the total
allowance for loan loss coverage in the consumer portfolio to approximately
1.5 years of historical loss. The loss factor applied to Park’s commercial port -
folio is based on the historical loss experience over the past 36 months, plus
an additional judgmental reserve, increasing the total allowance for loan loss
coverage in the commercial port folio to approximately 1.5 years of historical
loss. Park’s commercial loans are individually risk graded. If loan downgrades
occur, the probability of default increases, and accordingly management
allocates a higher percentage reserve to those accruing commercial loans
graded special mention and substandard.

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

U.S. generally accepted accounting principles (“GAAP”) require a specific
allocation to be established as a component of the allowance for loan losses
for certain loans when it is probable that all amounts due pursuant to the
contractual terms of the loans will not be collected, and the recorded invest-
ment in the loans exceeds fair value. Fair value is measured using either the
present value of expected future cash flows based upon the initial effective
interest rate on the loan, the observable market price of the loan or the fair
value of the collateral, if the loan is collateral dependent.

Income Recognition
Income earned by the Corporation and its subsidiaries is recognized on
the accrual basis of accounting, except for nonaccrual loans as previously
discussed, and late charges on loans which are recognized as income when
they are collected.

Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation and
amortization. Depreciation is generally provided on the straight-line method
over the estimated useful lives of the related assets. Leasehold improvements
are amortized over the shorter of the remaining lease period or the estimated
useful lives of the improvements. Upon the sale or other disposal of an asset,
the cost and related accumulated depreciation are removed from the accounts
and the resulting gain or loss is recognized. Maintenance and repairs are
charged to expense as incurred while renewals and improvements that extend
the useful life of an asset are capitalized. Premises and equipment is evaluated
for impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable.

The range of depreciable lives over which premises and equipment are being
depreciated are:

Buildings
Equipment, furniture and fixtures
Leasehold improvements

5 to 50 Years
3 to 20 Years
1 to 10 Years

Buildings that are currently placed in service are depreciated over 30 years.
Equipment, furniture and fixtures that are currently placed in service are
depreciated over 3 to 12 years. Leasehold improvements are depreciated
over the lives of the related leases which range from 1 to 10 years.

Other Real Estate Owned (OREO)
OREO is recorded at fair value less anticipated selling costs (net realizable value)
and consists of property acquired through foreclosure and real estate held for
sale. If the net realizable value is below the carrying value of the loan at the date
of transfer, the difference is charged to the allowance for loan losses.
Subsequent declines in value, OREO devaluations, are typically reported as
adjustments to the carrying amount of OREO and are expensed within “other
income”. In certain circumstances where management believes the devaluation
may not be permanent in nature, Park utilizes a valuation allowance to record
OREO devaluations, which is also expensed through “other income”. Costs
relating to development and improvement of such properties are capitalized
(not in excess of fair value less estimated costs to sell) and costs relating to
holding the properties are charged to expense.

Mortgage Loan Servicing Rights
When Park sells mortgage loans with servicing rights retained, servicing rights
are recorded at the lower of their amortized cost or fair value, with the income
statement effect recorded in gains on sale of loans. Capitalized servicing rights
are amortized in proportion to and over the period of estimated future servicing
income of the underlying loan. Capitalized mortgage servicing rights totaled
$10.5 million at December 31, 2010 and $10.8 million at December 31, 2009.
The fair value of mortgage servicing rights is determined by discounting esti-
mated future cash flows from the servicing assets, using market discount rates
and expected future prepayment rates. In order to calculate fair value, the sold
loan portfolio is stratified into homogenous pools of like categories. (See Note
20 of these Notes to Consolidated Financial Statements.)

Mortgage servicing rights are assessed for impairment periodically, based
on fair value, with any impairment recognized through a valuation allowance.
Fees received for servicing mortgage loans owned by investors are based on a
percentage of the outstanding monthly principal balance of such loans and are
included in income as loan payments are received. The cost of servicing loans
is charged to expense as incurred.

Goodwill and Other Intangible Assets
Goodwill represents the excess of the purchase price over net identifiable
tangible and intangible assets acquired in a purchase business combination.
Other intangible assets represent purchased assets that have no physical prop-
erty but represent some future economic benefit to their owner and are capable
of being sold or exchanged on their own or in combination with a related asset
or liability.

Goodwill and indefinite-lived intangible assets are not amortized to expense, but
are subject to annual impairment tests, or more frequently if events or changes
in circumstances indicate that the asset might be impaired. Intangible assets
with definitive useful lives (such as core deposit intangibles) are amortized to
expense over their estimated useful lives.

Management considers several factors when performing the annual impairment
tests on goodwill. The factors considered include the operating results for the
particular Park segment for the past year and the operating results budgeted for
the current year (including multi-year projections), the purchase prices being
paid for financial institutions in the markets served by the Park segment, the
deposit and loan totals of the Park segment and the economic conditions in
the markets served by the Park segment.

The following table reflects the activity in goodwill and other intangible assets
for the years 2010, 2009 and 2008. (See Note 2 of these Notes to Consolidated
Financial Statements for details on the acquisition of Vision Bancshares, Inc.
(“Vision”), and the recognition of impairment charges in 2008 to Vision
Bank’s goodwill.)

(In thousands)

December 31, 2007

Amortization
Impairment of Vision Goodwill

December 31, 2008

Amortization

December 31, 2009

Amortization

December 31, 2010

Goodwill

$127,320

—
(54,986)

Core Deposit
Intangibles

Total

$17,236

$144,556

(4,025)
—

(4,025)
(54,986)

$ 72,334

$13,211

$ 85,545

—

(3,746)

$ 72,334

$ 9,465

$ 81,799

—

(3,422)

$ 72,334

$ 6,043

$ 78,377

GAAP requires a company to perform an impairment test on goodwill annually,
or more frequently if events or changes in circumstances indicate that the asset
might be impaired, by comparing the fair value of such goodwill to its recorded
or carrying amount. If the carrying amount of the goodwill exceeds the fair
value, an impairment charge must be recorded in an amount equal to the
excess.

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

Park typically evaluates goodwill for impairment on April 1 of each year, with
financial data as of March 31. Based on the analysis performed as of April 1,
2010, the Company determined that goodwill for Park’s Ohio-based bank
(The Park National Bank) was not impaired.
The balance of goodwill was $127.3 million at December 31, 2007 and was
located at four subsidiary banks of Park. The subsidiary banks were Vision
Bank ($55.0 million), The Park National Bank ($39.0 million), Century
National Bank ($25.8 million) and The Security National Bank and Trust
Co. ($7.5 million). During 2008, Park completed the consolidation of the
eight banking charters of Park’s Ohio-based subsidiary banks into one national
bank charter. With this consolidation, the goodwill at The Park National Bank
was $72.3 million.
Based primarily on the increased level of net loan charge-offs at Vision
Bank, management determined that it was appropriate to test for goodwill
impairment during the third quarter of 2008. Park continued to experience
credit deterioration in Vision Bank’s market place during the third quarter
of 2008. The fair value of Vision was estimated by using the average of three
measurement methods. These included: (1) application of various metrics
from bank sale transactions for institutions comparable to Vision Bank;
(2) application of a market-derived multiple of tangible book value; and
(3) estimations of the present value of future cash flows. Park’s management
reviewed the valuation of Vision Bank with Park’s Board of Directors and
concluded that Vision Bank should recognize an impairment charge and
write down the remaining goodwill ($55.0 million), resulting in a goodwill
balance of zero with respect to the Vision Bank reporting unit.
Goodwill and other intangible assets (as shown on the Consolidated Balance
Sheets) totaled $78.4 million at December 31, 2010, $81.8 million at
December 31, 2009 and $85.5 million at December 31, 2008.
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 core deposit intangibles related to the Vision
acquisition is six years. Core deposit intangible amortization expense was
$3.4 million in 2010, $3.7 million in 2009 and $4.0 million in 2008.
The accumulated amortization of core deposit intangibles was $16.1 million as
of December 31, 2010 and $12.7 million at December 31, 2009. The expected
core deposit intangible amortization expense for each of the next five years is
as follows:

(In thousands)

2011
2012
2013
2014
2015

Total

$2,677
2,677
689
—
—

$6,043

Consolidated Statement of Cash Flows
Cash and cash equivalents include cash and cash items, amounts due from
banks and money market instruments. Generally money market instruments
are purchased and sold for one-day periods.

Net cash provided by operating activities reflects cash payments as follows:

December 31,
(In thousands)

2010

2009

2008

Interest paid on deposits and other borrowings
Income taxes paid
Transfers to OREO

$74,680
$24,600
$35,507

$96,204
$30,660
$35,902

$139,256
$ 28,365
$ 37,823

Loss Contingencies and Guarantees
Loss contingencies, including claims and legal actions arising in the ordinary
course of business, are recorded as liabilities when the likelihood of loss is
probable and an amount or range of loss can be reasonably estimated.

Income Taxes
The Corporation accounts for income taxes using the asset and liability
approach. Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be in
effect when the differences are expected to reverse. To the extent that Park does
not consider it more likely than not that a deferred tax asset will be recovered,
a valuation allowance is recorded. All positive and negative evidence is reviewed
when determining how much of a valuation allowance is recognized on a
quarterly basis. A valuation allowance, if needed, reduces deferred tax assets
to the amount expected to be realized.

An uncertain tax position is recognized as a benefit only if it is “more-likely-
than-not” that the tax position would be sustained in a tax examination being
presumed to occur. 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. For tax positions
not meeting the “more-likely-than-not” test, no tax benefit is recorded. Park
recognizes any interest and penalties related to income tax matters in income
tax expense.

Preferred Stock
On December 23, 2008, Park issued $100 million of Senior Preferred Shares
to the U.S. Department of Treasury (the “Treasury”) under the Capital Purchase
Program (CPP), consisting of 100,000 shares, each with a liquidation prefer-
ence of $1,000 per share. In addition, on December 23, 2008, Park issued a
warrant to the Treasury to purchase 227,376 common shares. These preferred
shares and related warrant are considered permanent equity for accounting
purposes. GAAP requires management to allocate the proceeds from the
issuance of the preferred stock between the preferred stock and related
warrant. The terms of the preferred shares require management to pay a
cumulative dividend at the rate of 5 percent per annum until February 14,
2014 and 9 percent thereafter. Management determined that the 5 percent
dividend rate is below market value; therefore, the fair value of the preferred
shares would be less than the $100 million in proceeds. Management
determined that a reasonable market discount rate is 12 percent for the fair
value of preferred shares. Management used the Black-Scholes model for
calculating the fair value of the warrant (and related common shares). The
allocation between the preferred shares and warrant at December 23, 2008,
the date of issuance, was $95.7 million and $4.3 million, respectively. The
discount on the preferred shares of $4.3 million is being accreted through
retained earnings over a 60 month period.

Treasury Stock
The purchase of Park’s common stock is recorded at cost. At the date of
retirement or subsequent reissuance, the treasury stock account is reduced
by the weighted average cost of the common shares retired or reissued.

Comprehensive Income
Comprehensive income consists of net income and other comprehensive
income (loss). Other comprehensive income (loss) includes unrealized gains
and losses on securities available for sale, changes in the funded status of the
Company’s Defined Benefit Pension Plan, and the unrealized net holding gains
and losses on the cash flow hedge, which are also recognized as separate
components of equity.

Stock Based Compensation
Compensation cost is recognized for stock options and stock awards issued to
employees and directors, based on the fair value of these awards at the date
of grant. A Black-Scholes model is utilized to estimate the fair value of stock
options, while the market price of Park’s common stock at the date of grant
is used for stock awards. Compensation cost is recognized over the required
service period, generally defined as the vesting period. Park did not grant any

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

stock options during 2010, 2009 or 2008. No stock options vested in 2010,
2009 or 2008. Park granted 7,020, 7,020 and 7,200 shares of common stock
to its directors in 2010, 2009 and 2008, respectively.

Derivative Instruments
At the inception of a derivative contract, the Company designates the derivative
as one of three types based on the Company’s intentions and belief as to likely
effectiveness as a hedge. These three types are: (1) a hedge of the fair value of
a recognized asset or liability or of an unrecognized firm commitment (“fair
value hedge”); (2) a hedge of a forecasted transaction or the variability of cash
flows to be received or paid related to a recognized asset or liability (“cash
flow hedge”); or (3) an instrument with no hedging designation (“stand-alone
derivative”). For a fair value hedge, the gain or loss on the derivative, as well
as the offsetting loss or gain on the hedged item, are recognized in current
earnings as fair values change. For a cash flow hedge, the gain or loss on the
derivative is reported in other comprehensive income and is reclassified into
earnings in the same periods during which the hedged transaction affects
earnings. For both types of hedges, changes in the fair value of derivatives that
are not highly effective in hedging the changes in fair value or expected cash
flows of the hedged item are recognized immediately in current earnings.
Changes in the fair value of derivatives that do not qualify for hedge accounting
are reported currently in earnings, as noninterest income.

The Company formally documents the relationship between derivatives and
hedged items, as well as the risk-management objective and the strategy for
undertaking hedge transactions at the inception of the hedging relationship.
This documentation includes linking fair value or cash flow hedges to specific
assets and liabilities on the Consolidated Balance Sheet or to specific firm
commitments or forecasted transactions. The Company also formally assesses,
both at the hedge’s inception and on an ongoing basis, whether the derivative
instruments that are used are highly effective in offsetting changes in fair values
or cash flows of the hedged items. The Company discontinues hedge accounting
when it determines that the derivative is no longer effective in offsetting changes
in the fair value or cash flows of the hedged item, the derivative is settled or
terminates, a hedged forecasted transaction is no longer probable, a hedged
firm commitment is no longer firm, or treatment of the derivative as a hedge
is no longer appropriate or intended.

When hedge accounting is discontinued, subsequent changes in fair value of
the derivative are recorded as noninterest income. When a fair value hedge is
discontinued, the hedged asset or liability is no longer adjusted for changes in
fair value and the existing basis adjustment is amortized or accreted over the
remaining life of the asset or liability. When a cash flow hedge is discontinued
but the hedged cash flows or forecasted transactions are still expected to occur,
gains or losses that were accumulated in other comprehensive income are
amortized into earnings over the same periods which the hedged transactions
will affect earnings.

Fair Value Measurement
Fair values of financial instruments are estimated using relevant market infor-
mation and other assumptions, as more fully disclosed in Note 21 of these
Notes to Consolidated Financial Statements. Fair value estimates involve
uncertainties and matters of significant judgment regarding interest rates,
credit risk, prepayments, and other factors, especially in the absence of broad
markets for particular items. Changes in assumptions or in market conditions
could significantly affect the estimates.

Transfers of Financial Assets
Transfers of financial assets are accounted for as sales, when control over
the assets has been relinquished. Control over transferred assets is deemed
to be surrendered when the assets have been isolated from the Company, the
transferee obtains the right (free of conditions that constrain it from taking
advantage of that right) to pledge or exchange the transferred assets, and the
Company does not maintain effective control over the transferred assets through
an agreement to repurchase them before their maturity.

Retirement Plans
Pension expense is the net of service and interest cost, return on plan assets
and amortization of gains and losses not immediately recognized. Employee
401(k) plan expense is the amount of matching contributions. Deferred
compensation and supplemental retirement plan expense allocates the
benefits over years of service.

Earnings Per Common Share
Basic earnings per common share is net income available to common stock-
holders divided by the weighted average number of common shares outstanding
during the period. Diluted earnings per common share includes the dilutive
effect of additional potential common shares issuable under stock options,
warrants and convertible securities. Earnings and dividends per common
share are restated for any stock splits and stock dividends through the date
of issuance of the consolidated financial statements.

Adoption of New Accounting Pronouncements:
Accounting for Transfers of Financial Assets: In June 2009, FASB issued
SFAS No. 166, “Accounting for Transfers of Financial Assets—an amend-
ment of FASB Statement No. 140.” This removes the concept of a qualifying
special-purpose entity from existing GAAP and removes the exception from
applying FASB ASC 810-10, Consolidation (FASB Interpretation No. 46 (revised
December 2003) Consolidation of Variable Interest Entities) to qualifying
special purpose entities. The objective of this new guidance is to improve the
relevance, representational faithfulness, and comparability of the information
that a reporting entity provides in its financial statements about a transfer of
financial assets (which includes loan participations); the effects of a transfer on
its financial position, financial performance, and cash flows; and a transferor’s
continuing involvement in transferred financial assets. The Company’s adoption
of this new guidance on January 1, 2010, did not have a material impact on
Park’s consolidated financial statements.

Amendments to FASB Interpretation No. 46(R): In June 2009, FASB
issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (ASC
810). The objective of this new guidance is to amend certain requirements of
FASB Interpretation No. 46 (revised December 2003), Consolidation of
Variable Interest Entities, to improve financial reporting by enterprises
involved with variable interest entities and to provide more relevant and
reliable information to users of financial statements. The Company’s adoption
of this new guidance on January 1, 2010 had no impact on Park’s consolidated
financial statements.

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

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

Disclosures about the Credit Quality of Financing Receivables and
the Allowance for Credit Losses: In July 2010, FASB issued Accounting
Standards Update 2010-20, Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses (ASU 2010-20), to address
concerns about the sufficiency, transparency, and robustness of credit risk
disclosures for finance receivables and the related allowance for credit losses.
This ASU requires new and enhanced disclosures at disaggregated levels, specif-
ically defined as “portfolio segments” and “classes”. Among other things, the
expanded disclosures include roll-forward schedules of the allowance for credit
losses and information regarding the credit quality of receivables as of the end
of a reporting period. New and enhanced disclosures are required for interim
and annual periods ending after December 15, 2010, although the disclosures
of reporting period activity are required for interim and annual periods begin-
ning after December 15, 2010. The adoption of the new guidance impacts
annual disclosures within the Annual Report for the period ended December
31, 2010 and will impact disclosures within interim financial statements in
future periods, but will not have an impact on the Company’s consolidated
financial statements.

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

2. ORGANIZATION AND ACQUISITIONS
Park National Corporation is a multi-bank holding company headquartered in
Newark, Ohio. Through its banking subsidiaries, The Park National Bank (PNB)
and Vision Bank (VB), Park is engaged in a general commercial banking and
trust business, primarily in Ohio, Baldwin County, Alabama and the panhandle
of Florida. A wholly-owned subsidiary of Park, Guardian Financial Services
Company (GFSC) began operating in May 1999. GFSC is a consumer finance
company located in Central Ohio. PNB operates through eleven banking
divisions with the Park National Division headquartered in Newark, Ohio,
the Fairfield National Division headquartered in Lancaster, Ohio, The Park
National Bank of Southwest Ohio & Northern Kentucky Division headquartered
in Milford, Ohio, the First-Knox National Division headquartered in Mount
Vernon, Ohio, the Farmers and Savings Division headquartered in Loudonville,
Ohio, the Security National Division headquartered in Springfield, Ohio, the
Unity National Division headquartered in Piqua, Ohio, the Richland Bank
Division headquartered in Mansfield, Ohio, the Century National Division
headquartered in Zanesville, Ohio, the United Bank Division headquartered in
Bucyrus, Ohio and the Second National Division headquartered in Greenville,
Ohio. VB operates through two banking divisions with the Vision Bank Florida
Division headquartered in Panama City, Florida and the Vision Bank Alabama
Division headquartered in Gulf Shores, Alabama. All of the Ohio-based banking
divisions provide the following principal services: the acceptance of deposits
for demand, savings and time accounts; commercial, industrial, consumer and
real estate lending, including installment loans, credit cards, home equity lines
of credit, commercial leasing; trust services; cash management; safe deposit
operations; electronic funds transfers and a variety of additional banking-
related services. VB, with its two banking divisions, provides the services
mentioned above, with the exception of commercial leasing. See Note 23
of these Notes to Consolidated Financial Statements for financial information
on the Corporation’s operating segments.

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.
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 fourth quarter of 2007, Park recognized a $54.0 million impairment charge
to the Vision goodwill. In addition, Park recognized an additional impairment
charge to the remaining Vision goodwill of $55.0 million during the third
quarter of 2008. The goodwill impairment charge of $55.0 million in 2008
reduced income tax expense by approximately $1 million. The goodwill impair-
ment charge of $54.0 million in 2007 had no impact on income tax expense.

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 with and into the Vision Bank head -
quartered in Panama City, Florida. Vision Bank operates under a Florida
banking charter and has 17 branch locations in Baldwin County, Alabama
and in the Florida panhandle.

3. RESTRICTIONS ON CASH AND DUE FROM BANKS
The Corporation’s two bank subsidiaries are required to maintain average
reserve balances with the Federal Reserve Bank. The average required reserve
balance was approximately $37.8 million at December 31, 2010 and $31.9
million at December 31, 2009. No other compensating balance arrangements
were in existence at December 31, 2010.

4. INVESTMENT SECURITIES
The amortized cost and fair value of investment securities are shown in the
following table. Management performs a quarterly evaluation of investment
securities for any other-than-temporary impairment.

During 2010, Park recognized an other-than-temporary impairment charge
of $23,000, related to an equity investment in a financial institution, which is
recorded in “other expenses” within the Consolidated Statements of Income.
During 2009, Park recognized impairment losses of $0.6 million related to
equity investments in several financial institutions. Since these are equity
securities, no amounts were recognized in other comprehensive income
at the time of the impairment recognition.

Investment securities at December 31, 2010 were as follows:

(In thousands)

2010:

Securities Available-for-Sale

Obligations of U.S. Treasury and

other U.S. Government
sponsored entities
Obligations of states and
political subdivisions
U.S. Government sponsored

Gross

Unrealized Unrealized

Amortized
Cost

Holding
Gains

Holding
Losses

Estimated
Fair Value

$ 272,301

$ 2,968

$ 1,956

$ 273,313

10,815

281

11,044

entities asset-backed securities

990,204

30,633

9,425

1,011,412

Other equity securities

938

858

1,753

Total

2010:

Securities Held-to-Maturity
Obligations of states and
political subdivisions
U.S. Government sponsored

$1,274,258

$34,740

$11,476

$1,297,522

3,167

$ — $

3,174

entities asset-backed securities

670,403

17,157

4,620

682,940

Total

$ 673,570

$17,164

$ 4,620

$ 686,114

Park’s U.S. Government sponsored entity asset-backed securities consisted of
15-year r esidential mortgage-backed securities and collateralized mortgage
obligations(CMOs). At December 31, 2010, the amortized cost of Park’s AFS
and held-to-maturity mortgage-backed securities was $988.5 million and
$0.1 million,respectively. At December 31, 2010, the amortized cost of
Park’s AFS and held-to-maturity CMOs was $1.7 million and $670.3
million, respectively.

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

Other investment securities (as shown on the Consolidated Balance Sheets)
consist of stock investments in the Federal Home Loan Bank and the Federal
Reserve Bank. Park owned $61.8 million of Federal Home Loan Bank stock
and $6.9 million of Federal Reserve stock at December 31, 2010. Park owned
$62.0 million of Federal Home Loan Bank stock and $6.9 million of Federal
Reserve Bank stock at December 31, 2009.

Management does not believe any individual unrealized loss as of December 31,
2010 or December 31, 2009, represents an other-than-temporary impairment.
The unrealized losses on debt securities are primarily the result of interest rate
changes. These conditions will not prohibit Park from receiving its contractual
principal and interest payments on these debt securities. The fair value of these
debt securities is expected to recover as payments are received on these securi-
ties and they approach maturity.

Should the impairment of any of these securities become other-than-temporary,
the cost basis of the investment will be reduced and the resulting loss recog-
nized in net income in the period the other-than-temporary impairment is
identified.

The following table provides detail on investment securities with unrealized
losses aggregated by investment category and length of time the individual
securities had been in a continuous loss position at December 31, 2010:

(In thousands)

2009:

Securities
Available-for-Sale
Obligations of
states and
political
subdivisions

Less than 12 Months

12 Months or Longer

Total

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

$257,206

$2,693

$ —

$—

$257,206

$2,693

U.S. Government

sponsored entities
asset-backed
securities

Other equity securities

295

—

Total

$257,501

$2,708

—

202

$202

—

$56

295

202

$257,703

$2,764

2009:

Securities
Held-to-Maturity

U.S. Government

sponsored entities
asset-backed
securities

$ —

$—

Less than 12 Months

12 Months or Longer

Total

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

The amortized cost and estimated fair value of investments in debt securities at
December 31, 2010, are shown in the following table by contractual maturity or
the expected call date, except for asset-backed securities, which are shown as a
single total, due to the unpredictability of the timing in principal repayments.

(In thousands)

2010:

Securities
Available-for-Sale

Obligations of U.S.

Obligations of
states and
political
subdivisions

U.S. Government

sponsored entities
asset-backed
securities

Treasury and other
U.S. Government
sponsored entities $ 74,379

$ 1,956

$ —

$—

$ 74,379

$ 1,956

1,459

—

1,459

418,156

9,425

Other equity securities

Total

$494,068

$11,462

$221

—

221

—

$14

418,156

9,425

295

$494,289

$11,476

2010:

Securities
Held-to-Maturity

U.S. Government

sponsored entities
asset-backed
securities

$297,584

$ 4,620

$ —

$—

$297,584

$ 4,620

Investment securities at December 31, 2009 were as follows:

(In thousands)

2009:

Securities Available-for-Sale
Obligations of U.S. Treasury

and other U.S. Government
sponsored entities
Obligations of states and
political subdivisions
U.S. Government sponsored

Gross

Unrealized Unrealized

Amortized
Cost

Holding
Gains

Holding
Losses

Estimated
Fair Value

$ 349,899

$ 389

$2,693

$ 347,595

15,189

493

—

15,667

922,903

1,562

entities asset-backed securities

875,331

47,572

Other equity securities

962

656

Total

2009:

Securities Held-to-Maturity
Obligations of states and
political subdivisions
U.S. Government sponsored

$1,241,381

$49,110

$2,764

$1,287,727

4,456

$ — $

4,481

entities asset-backed securities

502,458

16,512

Total

$ 506,914

$16,537

518,969

$ 523,450

(In thousands)

Securities Available-for-Sale
U.S. Treasury and sponsored entities notes:

Due within one year

Due one through five years

Due five through ten years

Total

Obligations of states and
political subdivisions:
Due within one year

Due one through five years

Due over ten years

Total

U.S. Government sponsored entities

asset-backed securities:

Total

Securities Held-to-Maturity
Obligations of states and
political subdivisions:
Due within one year

Due one through five years

Total

U.S. Government sponsored entities

asset-backed securities:

Amortized
Cost

Estimated
Fair Value

$149,986

54,335

67,980

$272,301

$ 152,913

52,627

67,773

$ 273,313

$ 7,999

1,805

1,011

8,195

1,879

970

$ 10,815

11,044

$990,204

$1,011,412

$ 2,382

785

$ 3,167

2,389

785

3,174

Total

$670,403

$ 682,940

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

Investment securities having a book value of $1,481 million and $1,720 million
at December 31, 2010 and 2009, respectively, were pledged to collateralize
government and trust department deposits in accordance with federal and state
requirements and to secure repurchase agreements sold, and as collateral for
Federal Home Loan Bank (FHLB) advance borrowings.

At December 31, 2010, $736 million was pledged for government and trust
department deposits, $668 million was pledged to secure repurchase agree-
ments and $77 million was pledged as collateral for FHLB advance borrowings.

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

At December 31, 2009, $952 million was pledged for government and trust
department deposits, $658 million was pledged to secure repurchase agree-
ments and $110 million was pledged as collateral for FHLB advance
borrowings.

At December 31, 2010, there were no holdings of securities of any one issuer,
other than the U.S. Government and its sponsored entities, in an amount
greater than 10% of shareholders’ equity.

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

During the first quarter of 2010, Park sold $200.7 million of U.S. Government
sponsored entity mortgage-backed securities for a pre-tax gain of $8.3 million.
During the second quarter of 2010, Park sold $57 million of U.S. Government
sponsored entity mortgage-backed securities for a pre-tax gain of $3.5 million.
During the fourth quarter of 2010, Park sold $115.8 million of U.S. Government
sponsored entity callable notes for a small gain of $45,000.

During 2009, Park sold $204.3 million of U.S. Government sponsored entity
mortgage-backed securities, realizing a pre-tax gain of $7.3 million. No
gross losses were realized in 2010 or 2009.

5. LOANS
The composition of the loan portfolio is as follows:

December 31 (In thousands)

Commercial, financial and agricultural
Real estate:

Commercial
Construction
Residential

Consumer
Leases

Total loans

2010

$ 737,902

1,226,616
406,480
1,692,209
666,871
2,607

$4,732,685

2009

$ 751,277

1,130,672
495,518
1,555,390
704,430
3,145

$4,640,432

Nonperforming loans are summarized as follows at December 31, 2009:

December 31 (In thousands)

Impaired loans:
Nonaccrual
Restructured (accruing)

Total impaired loans

Other nonaccrual loans

Total nonaccrual and restructured loans

Loans past due 90 days or more and accruing

Total nonperforming loans

2009

$201,001
142

201,143
32,543

$233,686

14,773

$248,459

The following table presents the recorded investment in nonaccrual, restruc-
tured, and loans past due 90 days or more and still accruing by class of loans
as of December 31, 2010:

(In thousands)

Loans

Accruing

Nonaccrual Restructured

Loans Past Due
90 Days
or More
and Accruing

Total
Nonperforming
Loans

Commercial, financial
and agricultural

Commercial real estate
Construction real estate:
Vision commercial land
and development
Remaining commercial
Mortgage
Installment

Residential real estate:

Commercial
Mortgage
HELOC
Installment

Consumer
Leases

Total loans

$ 19,276
57,941

$ —
—

$ —
20

$ 19,276
57,961

87,424
27,080
354
417

60,227
32,479
964
1,195
1,911
—

—
—
—
—

—
—
—
—
—
—

—
—
—
13

—
2,175
149
277
1,059
—

87,424
27,080
354
430

60,227
34,654
1,113
1,472
2,970
—

$289,268

$ —

$3,693

$292,961

The composition of the loan portfolio, by class of loan, as of December 31,
2010 is as follows:

The following table provides additional information regarding those nonaccrual
loans that are individually evaluated for impairment and those collectively evalu-
ated for impairment at December 31, 2010.

(In thousands)

Loan
Balance

Commercial, financial and agricultural* $ 737,902
1,226,616
Commercial real estate*
Construction real estate:
Vision commercial land
and development
Remaining commercial
Mortgage
Installment

171,334
195,693
26,326
13,127

Residential real estate:

Commercial
Mortgage
HELOC
Installment

Consumer
Leases

Total loans

464,903
906,648
260,463
60,195
666,871
2,607

Accrued
Interest
Receivable

$ 2,886
4,804

Recorded
Investment

$ 740,788
1,231,420

282
622
95
54

1,403
2,789
1,014
255
3,245
56

171,616
196,315
26,421
13,181

466,306
909,437
261,477
60,450
670,116
2,663

$4,732,685

$17,505

$4,750,190

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

Loans are shown net of deferred origination fees, costs and unearned income
of $6.7 million at December 31, 2010 and $6.3 million at December 31, 2009.

Overdrawn deposit accounts of $2.6 million and $3.3 million have been
reclassified to loans at December 31, 2010 and 2009, respectively.

(In thousands)

Commercial, financial and agricultural
Commercial real estate
Construction real estate:
Vision commercial land
and development
Remaining commercial
Mortgage
Installment

Residential real estate:

Commercial
Mortgage
HELOC
Installment

Consumer
Leases

Total loans

Loans
Individually
Evaluated for
Impairment

$ 19,205
57,930

Loans
Collectively
Evaluated for
Impairment

71
11

Nonaccrual

$ 19,276
57,941

87,424
27,080
354
417

60,227
32,479
964
1,195
1,911
—

86,491
27,080
—
—

60,227
—
—
—
—
—

933
—
354
417

—
32,479
964
1,195
1,911
—

$289,268

$250,933

$38,335

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

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

Impaired loans were as follows at December 31, 2009:

December 31 (In thousands)

Year-end loans with no allocated allowance

for loan losses

Year-end loans with allocated allowance

for loan losses

Total

Amount of the allowance for loan losses allocated

2009

$ 77,487

123,656

$201,143

$ 36,721

The following table presents loans individually evaluated for impairment by
class of loans as of December 31, 2010.

(In thousands)

With no related allowance recorded

Commercial, financial
and agricultural

Commercial real estate
Construction real estate:
Vision commercial land
and development
Remaining commercial

Residential real estate:

Commercial

With an allowance recorded

Commercial, financial
and agricultural

Commercial real estate
Construction real estate:
Vision commercial land
and development
Remaining commercial

Residential real estate:

Commercial

Total

Unpaid
Principal
Balance

Recorded
Investment

Allowance for
Loan Losses
Allocated

$ 9,347
24,052

$ 8,891
19,697

$ —
—

23,021
15,192

51,261

11,801
42,263

92,122
20,676

20,162
14,630

47,009

10,314
38,233

66,329
12,450

14,799

$304,534

13,218

$250,933

—
—

—

3,028
10,001

23,585
2,802

4,043

$43,459

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

The allowance for loan losses included specific reserves related to loans
individually evaluated for impairment at December 31, 2010 and 2009, of
$43.5 million and $36.7 million, respectively, related to loans with a recorded
investment of $140.5 million and $123.7 million.

The average balance of loans individually evaluated for impairment was
$210.4 million, $184.7 million and $130.6 million for 2010, 2009 and 2008,
respectively.

Interest income on loans individually evaluated for impairment is recognized
on a cash basis after all past due and current principal payments have been
made. For the year ended December 31, 2010, the Corporation recognized
a net reversal to interest income of $1.3 million, consisting of $948,000 in
interest recognized at PNB and $2.2 million in interest reversed at Vision,
on loans that were individually evaluated for impairment as of the end of the
year. For the year ended December 31, 2009, the Corporation recognized a net
reversal to interest income of $1.3 million, consisting of $1.8 million in interest
recognized at PNB and $3.1 million in interest reversed at Vision, on loans that
were individually evaluated for impairment as of the end of the year. For the
year ended December 31, 2008, the Corporation recognized $0.9 million in
interest income, consisting of $2.8 million in interest recognized at PNB
and $1.9 million in interest reversed at Vision.

The following table presents the aging of the recorded investment in past due
loans as of December 31, 2010 by class of loans.

Past Due
Nonaccrual
Loans and Loans
Past Due 90
Days or More
and Accruing

Accruing
Loans
Past Due
30–89 Days

Total
Past Due

Total
Current

Total
Recorded
Investment

$ 2,247
9,521

$ 15,622
53,269

$ 17,869 $ 722,919 $ 740,788
1,231,420
1,168,630

62,790

2,406
141
479
235

3,281
17,460
1,396
1,018
11,204
5

65,130
19,687
148
399

26,845
24,422
667
892
2,465
—

67,536
19,828
627
634

30,126
41,882
2,063
1,910
13,669
5

104,080
176,487
25,794
12,547

436,180
867,555
259,414
58,540
656,447
2,658

171,616
196,315
26,421
13,181

466,306
909,437
261,477
60,450
670,116
2,663

(In thousands)

Commercial, financial
and agricultural

Commercial real estate
Construction real estate:
Vision commercial land
and development
Remaining commercial
Mortgage
Installment

Residential real estate:

Commercial
Mortgage
HELOC
Installment

Consumer
Leases

Total loans

$49,393

$209,546

$258,939 $4,491,251 $4,750,190

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

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

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

Loans classified as doubtful have all the weaknesses inherent in those classified
as substandard with the added characteristic that the weaknesses make collec-
tion or liquidation in full, on the basis of currently existing facts, conditions,
and values, highly questionable and improbable. Any commercial loan graded
an 8 (loss) is completely charged-off. The table below presents the recorded
investment by loan grade at December 31, 2010 for all commercial loans:

(In thousands)

5 Rated

6 Rated

Nonaccrual

Pass
Rated

Recorded
Investment

Commercial, financial
and agricultural

Commercial real estate
Construction real estate:
Vision commercial land
and development
Remaining commercial

Residential real estate:

Commercial

Leases

Total commercial

loans

$ 26,322
57,394

$ 11,447
26,992

$ 19,276
57,941

$ 683,743
1,089,093

$ 740,788
1,231,420

10,220
14,021

29,206
—

7,941
39,062

18,117
—

87,424
27,080

60,227
—

66,031
116,152

358,756
2,663

171,616
196,315

466,306
2,663

$137,163

$103,559

$251,948

$2,316,438

$2,809,108

Management transfers a loan to other real estate owned at the time that Park
takes possession of the asset. At December 31, 2010 and 2009, Park had $44.3
million and $41.2 million, respectively, of other real estate owned. Other real
estate owned at Vision Bank has increased from $35.2 million at December 31,
2009 to $35.9 million at December 31, 2010.

Certain of the Corporation’s executive officers and directors are loan customers
of the Corporation’s two banking subsidiaries. As of December 31, 2010 and
2009, loans and lines of credit aggregating approximately $53.6 million and
$56.8 million, respectively, were outstanding to such parties. During 2010,
$2.1 million of new loans were made to these executive officers and directors

and repayments totaled $5.3 million. New loans and repayments for 2009 were
$27.9 million and $9.5 million, respectively. Additionally, during 2009, $20.8
million in loans were removed from the aggregate amount reported
due to the resignation of certain directors.

6. ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses is summarized as follows:

(In thousands)

Average loans

Allowance for loan losses:

Beginning balance

Charge-offs:

Commercial, financial and agricultural
Commercial real estate
Construction real estate
Residential real estate
Consumer
Lease financing

Total charge-offs

Recoveries:

Commercial, financial and agricultural
Commercial real estate
Construction real estate
Residential real estate
Consumer
Lease financing

Total recoveries

Net charge-offs
Provision for loan losses

Ending balance

Ratio of net charge-offs to average loans
Ratio of allowance for loan losses to

end of period loans

2010

2009

2008

$4,642,478

$4,594,436

$4,354,520

$ 116,717

$ 100,088

87,102

8,484
7,748
23,308
18,401
8,373
—

66,314

1,237
850
813
1,429
1,763
—

10,047
5,662
21,956
11,765
9,583
9

59,022

1,010
771
1,322
1,723
2,001
3

2,953
4,126
34,052
12,600
9,181
4

62,916

861
451
137
1,128
2,807
31

6,092
60,222
64,902
$ 121,397

1.30%

2.57%

6,830
52,192
68,821
$ 116,717

1.14%

2.52%

5,415
57,501
70,487
$ 100,088

1.32%

2.23%

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

(In thousands)

Allowance for loan losses:

Ending allowance balance attributed to loans

Individually evaluated for impairment

Collectively evaluated for impairment

Total ending allowance balance

Loan balance:

Loans individually evaluated for impairment

Loans collectively evaluated for impairment

Total ending loan balance

Allowance for loan losses as a percentage of

loan balance:

Loans individually evaluated for impairment

Loans collectively evaluated for impairment

Total ending loan balance

Recorded investment:

Loans individually evaluated for impairment

Loans collectively evaluated for impairment

Total ending loan balance

Commercial,
Financial and
Agricultural

Commercial
Real Estate

Construction
Real Estate

Residential
Real Estate

Consumer

Leases

Total

$ 3,028

10,556

$ 13,584

$ 19,205

718,697

$737,902

15.77%

1.47%

1.84%

$ 19,205

721,583

$740,788

10,001

18,514

28,515

57,930

1,168,686

$1,226,616

17.26%

1.58%

2.32%

57,930

1,173,490

$1,231,420

$ 26,387

19,807

$ 46,194

$113,571

292,909

$406,480

23.23%

6.76%

11.36%

$113,571

293,962

$407,533

4,043

21,802

25,845

60,227

1,631,982

$1,692,209

6.71%

1.34%

1.53%

60,227

1,637,443

$1,697,670

—

7,228

$ 7,228

—

666,871

$666,871

—

1.08%

—

670,116

$670,116

$ —

2,607

$2,607

—

1.19%

$ —

2,663

$2,663

43,459

77,938

$ 121,397

$ 250,933

4,481,752

$4,732,685

17.32%

1.74%

2.57%

$ 250,933

4,499,257

$4,750,190

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

The composition of the allowance for loan losses at December 31, 2009 was
as follows:

(In thousands)

Loans collectively evaluated

for impairment

Loans indivdually evaluated

for impairment

Total loans and allowance

for loan losses

Outstanding
Loan Balance

Allowance
for Loan Losses

ALL as a % of
Loan Balance

$4,439,289

$ 79,996

1.80%

201,143

36,721

18.26%

$4,640,432

$116,717

2.52%

Loans collectively evaluated for impairment above include all performing loans
at December 31, 2010 and 2009, as well as nonperforming loans internally
classified as consumer loans. Nonperforming consumer loans are not typically
evaluated for impairment, but receive a portion of the statistical allocation of
the allowance for loan losses. Loans individually evaluated for impairment
above include all impaired loans internally classified as commercial loans
at December 31, 2010 and 2009, which are evaluated for impairment in
accordance with GAAP (see Note 1 of these Notes to Consolidated Financial
Statements).

7. PREMISES AND EQUIPMENT
The major categories of premises and equipment and accumulated
depreciation are summarized as follows:

December 31 (In thousands)

Land

Buildings

Equipment, furniture and fixtures

Leasehold improvements

Total

2010

2009

$ 23,827

$ 23,257

78,185

61,086

6,031

75,583

56,822

6,080

$169,129

$161,742

Less accumulated depreciation and amortization

(99,562)

(92,651)

Premises and equipment, net

$ 69,567

$ 69,091

Depreciation and amortization expense amounted to $7.1 million, $7.5 million
and $7.5 million for the years ended December 31, 2010, 2009 and 2008,
respectively.

The Corporation leases certain premises and equipment accounted for as
operating leases. The following is a schedule of the future minimum rental
payments required for the next five years under such leases with initial terms
in excess of one year:

(In thousands)

2011

2012

2013

2014

2015

Thereafter

Total

$ 1,987

1,786

1,629

1,416

1,161

4,103

$12,082

Rent expense was $2.6 million, $2.8 million and $2.8 million, for the years
ended December 31, 2010, 2009 and 2008, respectively.

8. DEPOSITS
At December 31, 2010 and 2009, noninterest bearing and interest bearing
deposits were as follows:

December 31 (In thousands)

Noninterest bearing

Interest bearing

Total

2010

$ 937,719

4,157,701

$5,095,420

2009

$ 897,243

4,290,809

$5,188,052

At December 31, 2010, the maturities of time deposits were as follows:

(In thousands)

2011

2012

2013

2014

2015

After 5 years

Total

$1,421,409

323,421

83,557

69,535

73,612

2,369

$1,973,903

At December 31, 2010, Park had approximately $17.2 million of deposits
received from executive officers, directors, and their related interests.

Maturities of time deposits of over $100,000 as of December 31, 2010
were:

December 31 (In thousands)

3 months or less

Over 3 months through 6 months

Over 6 months through 12 months

Over 12 months

Total

$ 344,820

162,069

212,494

180,454

$ 899,837

Note: The table above includes brokered deposits of $104.1 million that are included
within the 3 months or less maturity category.

9. SHORT-TERM BORROWINGS
Short-term borrowings were as follows:

December 31 (In thousands)

2010

2009

Securities sold under agreements to repurchase

and federal funds purchased

Federal Home Loan Bank advances

Total short-term borrowings

$279,669

384,000

$663,669

$294,219

30,000

$324,219

The outstanding balances for all short-term borrowings as of December 31,
2010 and 2009 and the weighted-average interest rates as of and paid during
each of the years then ended were as follows:

(In thousands)

2010:

Ending balance
Highest month-end balance
Average daily balance
Weighted-average interest rate:

As of year-end
Paid during the year

2009:

Ending balance
Highest month-end balance
Average daily balance
Weighted-average interest rate:

As of year-end
Paid during the year

Repurchase
Agreements
and Federal
Funds
Purchased

Federal
Home Loan
Bank
Advances

Demand
Notes
Due U.S.
Treasury
and Other

$279,669
295,467
269,260

0.32%
0.39%

$294,219
303,972
281,941

0.49%
0.82%

$384,000
384,000
31,679

0.19%
0.39%

$ 30,000
442,000
137,792

0.49%
0.66%

$ —
—
—

—
—

$ —
—
—

—
—

At December 31, 2010, 2009 and 2008, Federal Home Loan Bank
(FHLB) advances were collateralized by investment securities owned by
the Corporation’s subsidiary banks and by various loans pledged under
a blanket agreement by the Corporation’s subsidiary banks.

See Note 4 of these Notes to Consolidated Financial Statements for the
amount of investment securities that are pledged. At December 31, 2010,
$2,071 million of commercial real estate and residential mortgage loans were
pledged under a blanket agreement to the FHLB by Park’s subsidiary banks. At
December 31, 2009, $1,959 million of commercial real estate and residential
mortgage loans were pledged under a blanket agreement to the FHLB by Park’s
subsidiary banks.

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

Note 4 states that $668 million and $658 million of securities were pledged
to secure repurchase agreements as of December 31, 2010 and 2009, respec-
tively. Park’s repurchase agreements in short-term borrowings consist of
customer accounts and securities which are pledged on an individual security
basis. Park’s repurchase agreements with a third-party financial institution are
classified in long-term debt. See Note 10 of these Notes to Consolidated
Financial Statements.

10. LONG-TERM DEBT
Long-term debt is listed below:

December 31

(In thousands)

2010

2009

Outstanding
Balance

Average
Rate

Outstanding
Balance

Average
Rate

Total Federal Home Loan Bank advances

by year of maturity:

2010
2011
2012
2013
2014
2015
Thereafter

Total

—
16,460
15,500
500
500
—
302,342

$335,302

Total broker repurchase agreements

by year of maturity:

After 2015

Total

$300,000

Other borrowings by year of maturity:

2010
2011
2012
2013
2014
2015
Thereafter

Total

Total combined long-term debt

by year of maturity:

2010
2011
2012
2013
2014
2015
Thereafter

Total

—
63
69
74
81
87
1,057

$ 1,431

$ —
16,523
15,569
574
581
87
603,399

$636,733

—
1.99%
2.09%
4.03%
4.23%
0.00%
3.02%

2.93%

4.04%

—
7.97%
7.97%
7.97%
7.97%
7.97%
7.97%

7.97%

—
2.01%
2.12%
4.54%
4.75%
7.97%
3.54%

3.46%

$ 17,560
16,460
15,500
500
500
—
302,371

$352,891

$300,000

$59
63
69
74
81
87
1,057

$ 1,490

$ 17,619
16,523
15,569
574
581
87
603,428

$654,381

5.68%
1.99%
2.09%
4.03%
4.23%
—
3.02%

3.05%

4.04%

7.97%
7.97%
7.97%
7.97%
7.97%
7.97%
7.97%

7.97%

5.69%
2.01%
2.12%
4.54%
4.75%
7.97%
3.54%

3.52%

Other borrowings consist of a capital lease obligation of $1.4 million,
pertaining to an arrangement that was part of the acquisition of Vision
on March 9, 2007 and its associated minimum lease payments.

Park had approximately $603.4 million of long-term debt at December 31,
2010 with a contractual maturity longer than five years. However, approximately
$600 million of this debt is callable by the issuer in 2011.

At December 31, 2010 and 2009, Federal Home Loan Bank (FHLB) advances
were collateralized by investment securities owned by the Corporation’s sub-
sidiary banks and by various loans pledged under a blanket agreement by the
Corporation’s subsidiary banks.

See Note 4 of these Notes to Consolidated Financial Statements for the
amount of investment securities that are pledged. See Note 9 of these Notes
to Consolidated Financial Statements for the amount of commercial real
estate and residential mortgage loans that are pledged to the FHLB.

11. SUBORDINATED DEBENTURES/NOTES
As part of the acquisition of Vision on March 9, 2007, Park became the
successor to Vision under (i) the Amended and Restated Trust Agreement
of Vision Bancshares Trust I (the “Trust”), dated as of December 5, 2005,
(ii) the Junior Subordinated Indenture, dated as of December 5, 2005, and
(iii) the Guarantee Agreement, also dated as of December 5, 2005.

On December 1, 2005, Vision formed a wholly-owned Delaware statutory
business trust, Vision Bancshares Trust I (“Trust I”), which issued $15.0
million of the Trust’s floating rate preferred securities (the “Trust Preferred
Securities”) to institutional investors. These Trust Preferred Securities qualify
as Tier I capital under Federal Reserve Board guidelines. All of the common
securities of Trust I are owned by Park. The proceeds from the issuance of the
common securities and the Trust Preferred Securities were used by Trust I to
purchase $15.5 million of junior subordinated notes, which carry a floating rate
based on a three-month LIBOR plus 148 basis points. The debentures represent
the sole asset of Trust I. The Trust Preferred Securities accrue and pay distribu-
tions at a floating rate of three-month LIBOR plus 148 basis points per annum.
The Trust Preferred Securities are mandatorily redeemable upon maturity of the
notes in December 2035, or upon earlier redemption as provided in the notes.
Park has the right to redeem the notes purchased by Trust I in whole or in part,
on or after December 30, 2010. As specified in the indenture, if the notes are
redeemed prior to maturity, the redemption price will be the principal amount,
plus any unpaid accrued interest.

In accordance with GAAP, Trust I is not consolidated with Park’s financial
statements, but rather the subordinated notes are reflected as a liability.

On December 28, 2007, one of Park’s wholly-owned subsidiary banks,
The Park National Bank (“PNB”), entered into a Subordinated Debenture
Purchase Agreement with USB Capital Funding Corp. Under the terms of the
Purchase Agreement, USB Capital Funding Corp. purchased from PNB a
Subordinated Debenture dated December 28, 2007, in the principal amount
of $25 million, which matures on December 29, 2017. The Subordinated
Debenture is intended to qualify as Tier 2 capital under the applicable regula-
tions of the Office of the Comptroller of the Currency of the United States of
America (the “OCC”). The Subordinated Debenture accrues and pays interest
at a floating rate of three-month LIBOR plus 200 basis points. The Subordinated
Debenture may not be prepaid in any amount prior to December 28, 2012;
however, subsequent to that date, PNB may prepay, without penalty, all or
a portion of the principal amount outstanding in a minimum amount of $5
million or any larger multiple of $5 million. The three-month LIBOR rate
was 0.30% at December 31, 2010. On January 2, 2008, Park entered into
an interest rate swap transaction, which was designated as a cash flow hedge
against the variability of cash flows related to the Subordinated Debenture of
$25 million (see Note 19 of these Notes to Consolidated Financial Statements).

On December 23, 2009, Park entered into a Note Purchase Agreement,
dated December 23, 2009, with 38 purchasers (the “Purchasers”). Under the
terms of the Note Purchase Agreement, the Purchasers purchased from Park an
aggregate principal amount of $35.25 million of 10% Subordinated Notes due
December 23, 2019 (the “Notes”). The Notes are intended to qualify as Tier 2
Capital under applicable rules and regulations of the Board of Governors of the
Federal Reserve System (the “Federal Reserve Board”). The Notes may not be
prepaid in any amount prior to December 23, 2014; however, subsequent to
that date, Park may prepay, without penalty, all or a portion of the principal
amount outstanding. Of the $35.25 million in Notes, $14.05 million were
purchased by related parties.

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

12. STOCK OPTION PLAN
The Park National Corporation 2005 Incentive Stock Option Plan (the “2005
Plan”) was adopted by the Board of Directors of Park on January 18, 2005,
and was approved by the shareholders at the Annual Meeting of Shareholders
on April 18, 2005. Under the 2005 Plan, 1,500,000 common shares are
authorized for delivery upon the exercise of incentive stock options. All of
the common shares delivered upon the exercise of incentive stock options
granted under the 2005 Plan are to be treasury shares. At December 31, 2010,
1,421,925 common shares were available for future grants under the 2005
Plan. Under the terms of the 2005 Plan, incentive stock options may be granted
at a price not less than the fair market value at the date of the grant, and for an
option term of up to five years. No additional incentive stock options may be
granted under the 2005 Plan after January 17, 2015.

The fair value of each incentive stock option granted is estimated on the date
of grant using a closed form option valuation (Black-Scholes) model. Expected
volatilities are based on historical volatilities of Park’s common stock. The
Corporation uses historical data to estimate option exercise behavior. The
expected term of incentive stock options granted is based on historical data
and represents the period of time that options granted are expected to be
outstanding, which takes into account that the options are not transferable.
The risk-free interest rate for the expected term of the incentive stock options
is based on the U.S. Treasury yield curve in effect at the time of the grant.

The activity in the 2005 Plan is listed in the following table for 2010:

January 1, 2010

Granted
Exercised
Forfeited/Expired

December 31, 2010

Number

254,892
—
—
176,817

78,075

Exercisable at year end
Weighted-average remaining contractual life
Aggregate intrinsic value

Weighted Average
Exercise Price per Share

$ 97.78
—
—
107.85

$ 74.96

78,075
1.94 years
$0

There were no options granted or exercised in 2010, 2009 or 2008.
Additionally, no expense was recognized for 2010, 2009 or 2008.

13. BENEFIT PLANS
The Corporation has a noncontributory Defined Benefit Pension Plan (the
“Pension Plan”) covering substantially all of the employees of the Corporation
and its subsidiaries. The Pension Plan provides benefits based on an employee’s
years of service and compensation.

The Corporation’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 made a $20 million contribution in January 2009,
which was deductible on the 2008 tax return and as such was reflected as part
of the deferred tax liabilities at December 31, 2008. In addition, management
made a $10 million contribution in November 2009, which was deductible on
the 2009 tax return and as such is reflected as part of deferred tax liabilities at
December 31, 2009. Management contributed $2 million in September 2010,
which will be deductible on the 2010 tax return and is reflected in deferred tax
liabilities at December 31, 2010. In January 2011, management contributed
$14 million, of which $12.4 million will be deductible on the 2010 tax return
and $1.6 million on the 2011 tax return. The entire $12.4 million deductible
on the 2010 tax return is reflected as part of the deferred tax liabilities at
December 31, 2010. See Note 14 of these Notes to Consolidated Financial
Statements. Park does not expect to make any additional contributions to the
Pension Plan in 2011.

Using an accrual measurement date of December 31, 2010 and 2009, plan
assets and benefit obligation activity for the Pension Plan are listed below:

(In thousands)

Change in fair value of plan assets

2010

2009

Fair value at beginning of measurement period

$75,815

$38,506

Actual return on plan assets

Company contributions

Benefits paid

11,296

2,000

(3,647)

11,689

30,000

(4,380)

Fair value at end of measurement period

$85,464

$75,815

Change in benefit obligation

Projected benefit obligation at beginning of

measurement period

Service cost

Interest cost

Actuarial loss or (gain)

Benefits paid

Projected benefit obligation at the

end of measurement period

Funded status at end of year

(assets less benefit obligation)

$60,342

$57,804

3,671

3,583

10,215

(3,647)

3,813

3,432

(327)

(4,380)

$74,164

$60,342

$11,300

$15,473

The asset allocation for the Pension Plan as of the measurement date, by asset
category, was as follows:

Asset Category

Equity securities
Fixed income and cash equivalents

Total

Target Allocation

50% – 100%
remaining balance
—

2010

86%
14%
100%

2009

83%
17%
100%

Percentage of Plan Assets

The investment policy, as established by the Retirement Plan Committee, is
to invest assets according to the target allocation stated above. Assets will be
reallocated periodically based on the investment strategy of the Retirement
Plan Committee. The investment policy is reviewed periodically.

The expected long-term rate of return on plan assets was 7.75% in 2010
and 2009. This return was based on the expected return of each of the asset
categories, weighted based on the median of the target allocation for each class.

The accumulated benefit obligation for the Pension Plan was $63.5 million
and $52.6 million at December 31, 2010 and 2009, respectively.

On November 17, 2009, the Park Pension Plan completed the purchase of
115,800 common shares of Park for $7.0 million or $60.45 per share. At
December 31, 2010 and 2009, the fair value of the 115,800 common shares
held by the Pension Plan was $8.4 million, or $72.67 per share and $6.8
million, or $58.88 per share, respectively.

The weighted average assumptions used to determine benefit obligations at
December 31, 2010 and December 31, 2009 were as follows:
2010

2009

Discount rate
Rate of compensation increase

5.50%
3.00%

6.00%
3.00%

The estimated future pension benefit payments reflecting expected future
service for the next ten years are shown below in thousands:

2011
2012
2013
2014
2015
2016 – 2020

Total

$ 4,114
4,372
5,432
5,957
6,146
35,867

$61,888

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

The following table shows ending balances of accumulated other
comprehensive income (loss) at December 31, 2010 and 2009.

(In thousands)

Prior service cost
Net actuarial loss

Total

Deferred taxes

2010

$
(93)
(24,410)

(24,503)

8,576

2009

$ (115)
(20,654)

(20,769)

7,269

Accumulated other comprehensive loss

$(15,927)

$(13,500)

Using an actuarial measurement date of December 31 for 2010, 2009 and
2008, components of net periodic benefit cost and other amounts recognized in
other comprehensive income (loss) were as follows:

(In thousands)

2010

2009

2008

Components of net periodic benefit cost and

other amounts recognized in Other
Comprehensive Income (Loss)
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Recognized net actuarial loss

Net periodic benefit cost

Change to net actuarial (loss)/gain

for the period

Amortization of prior service cost
Amortization of net loss

Total recognized in other

comprehensive (loss)/income

Total recognized in net benefit cost

$(3,671)
(3,583)
5,867
(22)
(1,079)

$(2,488)

$(4,835)
22
1,079

$ (3,813)
(3,432)
4,487
(34)
(2,041)

$ (4,833)

$ 7,591
34
2,041

$ (3,451)
(3,157)
4,608
(34)
—

$ (2,034)

$(25,000)
42
—

(3,734)

9,666

(24,958)

and other comprehensive (loss)/income

$(6,222)

$ 4,833

$(26,992)

The estimated prior service costs for the Pension Plan that will be amortized
from accumulated other comprehensive income into net periodic benefit cost
over the next fiscal year is $20 thousand. The estimated net actuarial (loss)
expected to be recognized in the next fiscal year is ($1.4) million.

The weighted average assumptions used to determine net periodic benefit cost
for the years ended December 31, 2010 and 2009, are listed below:

Discount rate
Rate of compensation increase
Expected long-term return on plan assets

2010

6.00%
3.00%
7.75%

2009

6.00%
3.00%
7.75%

Management believes the 7.75% expected long-term rate of return is an
appropriate assumption given historical performance of the S&P 500 Index,
which management believes is a good indicator of future performance of
Pension Plan assets.

The Pension Plan maintains cash in a Park National Bank savings account,
with a balance of $0.7 million at December 31, 2010.

GAAP defines fair value as the price that would be received by Park for an asset
or paid by Park to transfer a liability (an exit price) in an orderly transaction
between market participants on the measurement date, using the most advan -
tageous market for the asset or liability. The fair values of equity securities,
consisting of mutual fund investments and common stock held by the Pension
Plan and the fixed income and cash equivalents, are determined by obtaining
quoted prices on nationally recognized securities exchanges (Level 1 inputs).
The market value of Pension Plan assets at December 31, 2010 was $85.5
million. At December 31, 2010, $73.5 million of equity investments in the
Pension Plan were categorized as Level 1 inputs; $12.0 million of plan invest-
ments in corporate and U.S. government agency bonds are categorized as Level
2 inputs, as fair value is based on quoted market prices of comparable instru-
ments; and no investments are categorized as Level 3 inputs. The market value
of Pension Plan assets was $75.8 million at December 31, 2009. At December
31, 2009, $63.0 million of investments in the Pension Plan were categorized as
Level 1 inputs; $12.8 million were categorized as Level 2; and no investments
were categorized as Level 3.

The Corporation has a voluntary salary deferral plan covering substantially all
of the employees of the Corporation and its subsidiaries. Eligible employees
may contribute a portion of their compensation subject to a maximum statutory
limitation. The Corporation provides a matching contribution established
annually by the Corporation. Contribution expense for the Corporation was $1.0
million, $1.5 million, and $2.0 million for 2010, 2009 and 2008, respectively.

The Corporation has a Supplemental Executive Retirement Plan (SERP) cover-
ing certain key officers of the Corporation and its subsidiaries with defined
pension benefits in excess of limits imposed by federal tax law. At December 31,
2010 and 2009, the accrued benefit cost for the SERP totaled $7.2 million and
$7.4 million, respectively. The expense for the Corporation was $0.5 million for
both 2010 and 2009 and $0.6 million for 2008.

14. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant compo-
nents of the Corporation’s deferred tax assets and liabilities are as follows:

December 31 (in thousands)

Deferred tax assets:

Allowance for loan losses
Accumulated other comprehensive loss –

interest rate swap

Accumulated other comprehensive loss –

pension plan
Intangible assets
Deferred compensation
OREO devaluations
State net operating loss carryforwards
Other
Valuation allowance

2010

2009

$43,958

$42,236

572

519

8,576
2,156
4,123
6,174
2,812
4,988
(712)

7,269
2,756
4,348
2,380
1,725
5,273
—

Total deferred tax assets

$72,647

$66,506

Deferred tax liabilities:

Accumulated other comprehensive

income – unrealized gains on securities

Deferred investment income
Pension plan
Mortgage servicing rights
Purchase accounting adjustments
Other

Total deferred tax liabilities

Net deferred tax assets

$ 8,142
10,199
16,835
3,671
2,150
2,176

$43,173

$29,474

$16,221
10,201
12,664
3,773
3,228
1,285

$47,372

$19,134

Park performs an analysis to determine if a valuation allowance againstdeferred
tax assets is required in accordance with GAAP. Vision Bank is subjectto state
income tax in Alabama and Florida. A state tax benefit of $1.16 millionwas
recorded by Vision Bank, consisting of a gross benefit of $2.26 million and a
valuation allowance of $1.10 million. In the schedule of deferred taxes,the
valuation allowance is shown net of the federal tax benefit of $384,000.
Management has determined that the likelihood of realizing the full deferred tax
asset on state net operating loss carryforwards fails to meet the more likely than
not level. The net operating loss carryforward period for the state of Alabama
and Florida are 8 years and 20 years, respectively. A merger of Vision Bank into
Park National Bank would ensure the future utilization of the state net operating
loss carryforward at Vision Bank. However, management is not certain when a
merger of Vision Bank into Park National Bank can take place and as a result
has decided to record a valuation allowance against new state tax benefit of
losses at Vision Bank until management has a better understanding of the timing
and likelihood of a merger of Vision Bank into Park National Bank.

Management has determined that it is not required to establish a valuation
allowance against remaining deferred tax assets in accordance with GAAP
since it is more likely than not that the deferred tax assets will be fully utilized
in future periods.

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

The (income)/expense related to interest and penalties recorded in the
Consolidated Statements of Income for the years ended December 31, 2010,
2009 and 2008 was $(10,500), $(18,000) and $16,000, respectively. The
amount accrued for interest and penalties at December 31, 2010, 2009 and
2008 was $60,500, $71,000 and $89,000, respectively.

Park and its subsidiaries are subject to U.S. federal income tax. Some of Park’s
subsidiaries are subject to state income tax in the following states: Alabama,
Florida, California and Kentucky. Park is no longer subject to examination by
federal or state taxing authorities for the tax year 2006 and the years prior.

The 2007 and 2008 federal income tax returns of Park National Corporation
are currently under examination by the Internal Revenue Service. Additionally,
the 2009 State of Ohio franchise tax return is currently under examination.
Park does not expect material adjustments from the examinations.

15. OTHER COMPREHENSIVE INCOME (LOSS)
Other comprehensive income (loss) components and related taxes are shown
in the following table for the years ended December 31, 2010, 2009 and 2008.
Net-of-Tax
Amount

Year ended December 31
(In thousands)

Before-Tax
Amount

Tax
Effect

2010:

Unrealized losses on available-for-sale

securities

Reclassification adjustment for gains

realized in net income

Unrealized net holding loss on

cash flow hedge

Changes in pension plan assets and
benefit obligations recognized in
Other Comprehensive Income

Other comprehensive loss

2009:

Unrealized gains on available-for-sale

securities

Reclassification adjustment for gains

realized in net income

Unrealized net holding gain on

cash flow hedge

Changes in pension plan assets and
benefit obligations recognized in
Other Comprehensive Income

$(11,218)

$(3,926)

$ (7,292)

(11,864)

(4,152)

(7,712)

(151)

(53)

(98)

(3,734)

$(26,967)

(1,307)

$(9,438)

(2,427)

$(17,529)

5,012

$ 1,754

3,258

(7,340)

(2,569)

(4,771)

454

159

295

9,666

3,383

6,283

Other comprehensive income

7,792

$ 2,727

5,065

2008:

Unrealized gains on available-for-sale

securities

Reclassification adjustment for gains

realized in net income

Unrealized net holding loss on

cash flow hedge

Changes in pension plan assets and
benefit obligations recognized in
Other Comprehensive Income

Other comprehensive income

$ 48,324

$16,913

$ 31,411

(1,115)

(1,937)

(390)

(678)

(725)

(1,259)

(24,958)

$ 20,314

(8,735)

$ 7,110

(16,223)

$ 13,204

The ending balance of each component of accumulated other comprehensive
income (loss) was as follows as of December 31:

(In thousands)

Pension benefit adjustments
Unrealized net holding loss on cash flow hedge
Unrealized net holding gains on AFS Securities

Total accumulated other

comprehensive income (loss)

2010

$(15,927)
(1,062)
15,121

2009

$(13,500)
(964)
30,125

$ (1,868)

$ 15,661

The components of the provision for federal and state income taxes are shown
below:

December 31 (in thousands)

2010

2009

2008

Currently payable

Federal
State

Deferred
Federal
State

Valuation allowance

Federal
State

Total

$26,130
109

$32,148
(273)

$23,645
(44)

345
(2,366)

—
1,096

(6,745)
(2,187)

697
(2,287)

—
—

$25,314

$22,943

$22,011

The following is a reconciliation of federal income tax expense to the amount
computed at the statutory rate of 35% for the years ended December 31, 2010,
2009 and 2008.
December 31

2008

2009

2010

Statutory federal corporate tax rate
Changes in rates resulting from:

Tax-exempt interest income, net of

disallowed interest

Bank owned life insurance
Tax credits (low income housing)
Goodwill impairment
State income tax expense, net of

federal benefit

Valuation allowance, net of

federal benefit

Other

Effective tax rate

35.0%

(1.2)%
(1.8)%
(5.0)%
—

(1.5)%

0.7%
(0.8)%

25.4%

(1.3)%
(1.8)%
(4.8)%
—

(3.5)%
(5.0)%
(11.7)%
50.7%

(1.6)%

(4.2)%

—
(1.9)%

23.6%

—
0.3%

61.6%

Park and its Ohio-based subsidiaries do not pay state income tax to the state
of Ohio, but pay a franchise tax based on their year-end equity. The franchise
tax expense is included in the state tax expense and is shown in “state taxes”
on Park’s Consolidated Statements of Income. Vision Bank is subject to state
income tax, in the states of Alabama and Florida. State income tax benefit for
Vision Bank is included in “income taxes” on Park’s Consolidated Statements
of Income. Vision Bank’s 2010 state income tax benefit was $1.16 million, net
of the recorded valuation allowance.

Unrecognized Tax Benefits
The following is a reconciliation of the beginning and ending amount of
unrecognized tax benefits.

(In thousands)

January 1 Balance

Additions based on tax

positions related to the
current year

Additions for tax positions

of prior years

Reductions for tax positions

of prior years
Reductions due to

statute of limitations

December 31 Balance

2010

$595

(131)

(63)

$477

2009

$783

—

(189)

(63)

$595

2008

$828

102

(15)

(150)

$783

The amount of unrecognized tax benefits that, if recognized, would favorably
affect the effective income tax rate in the future periods at December 31, 2010,
2009 and 2008 was $370,000, $504,000 and $704,000, respectively. Park does
not expect the total amount of unrecognized tax benefits to significantly increase
or decrease during the next year.

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

16. EARNINGS PER COMMON SHARE
GAAP requires the reporting of basic and diluted earnings per common share.
Basic earnings per common share excludes any dilutive effects of options,
warrants and convertible securities.

many of the loan commitments may expire without being drawn upon, the total
commitment amount does not necessarily represent future cash requirements.
The credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan commitments to customers.

The following table sets forth the computation of basic and diluted earnings
per common share:

The total amounts of off-balance sheet financial instruments with credit risk
were as follows:

Year ended December 31
(in thousands, except per share data)

2010

2009

2008

Numerator:

Net income available to
common shareholders

Denominator:

Basic earnings per common share:

Weighted-average shares

Effect of dilutive securities – stock options

and warrants

Diluted earnings per common share:
Adjusted weighted-average shares
and assumed conversions

Earnings per common share:

Basic earnings per common share
Diluted earnings per common share

$68,410

$68,430

$13,566

15,152,692

14,206,335

13,965,219

3,043

—

114

15,155,735

14,206,335

13,965,333

$4.51
$4.51

$4.82
$4.82

$0.97
$0.97

As of December 31, 2010 and 2009, options to purchase 78,075 and
254,892 common shares, respectively, were outstanding under Park’s 2005
Plan. A warrant to purchase 227,376 common shares was outstanding at both
December 31, 2010 and 2009 as a result of Park’s participation in the CPP.
Warrants to purchase an aggregate of 71,984 common shares were outstanding
at December 31, 2010 as a result of the issuance of common stock and
warrants which closed on December 10, 2010. In addition, warrants to
purchase an aggregate of 500,000 common shares were outstanding at
December 31, 2009 as a result of the issuance of common stock and
warrants which closed on October 30, 2009. All warrants issued on
October 30, 2009 had been exercised or expired as of December 31, 2010.

The common shares represented by the options and the warrants at December
31, 2010 and 2009, totaling a weighted average of 382,445 and 642,405,
respectively, were not included in the computation of diluted earnings per
common share because the respective exercise prices exceeded the market
value of the underlying common shares such that their inclusion would have
had an anti-dilutive effect. The warrant to purchase 227,376 common shares is
not included in the 382,445 at December 31, 2010, as the dilutive effect of this
warrant pertaining to the CPP was 3,043 shares of common stock at December
31, 2010. The exercise price of this warrant is $65.97.

17. DIVIDEND RESTRICTIONS
Bank regulators limit the amount of dividends a subsidiary bank can declare
in any calendar year without obtaining prior approval. At December 31, 2010,
approximately $52.8 million of the total stockholders’ equity of PNB was avail-
able for the payment of dividends to the Corporation, without approval by the
applicable regulatory authorities. Vision Bank is currently not permitted to pay
dividends to the Corporation.

18. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
AND FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF
CREDIT RISK

The Corporation is party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include loan commitments and standby letters of
credit. The instruments involve, to varying degrees, elements of credit and inter-
est rate risk in excess of the amount recognized in the consolidated financial
statements.

The Corporation’s exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for loan commitments and standby
letters of credit is represented by the contractual amount of those instruments.
The Corporation uses the same credit policies in making commitments and
conditional obligations as it does for on-balance sheet instruments. Since

December 31 (in thousands)

Loan commitments

Standby letters of credit

2010

$716,598

24,462

2009

$955,257

36,340

The loan commitments are generally for variable rates of interest.

The Corporation grants retail, commercial and commercial real estate loans
to customers primarily located in Ohio, Baldwin County, Alabama and the pan-
handle of Florida. The Corporation evaluates each customer’s creditworthiness
on a case-by-case basis. The amount of collateral obtained, if deemed necessary
by the Corporation upon extension of credit, is based on management’s credit
evaluation of the customer. Collateral held varies but may include accounts
receivable, inventory, property, plant and equipment, and income-producing
commercial properties.

Although the Corporation has a diversified loan portfolio, a substantial
portion of the borrowers’ ability to honor their contracts is dependent upon
the economic conditions in each borrower’s geographic location and industry.

19. DERIVATIVE INSTRUMENTS
FASB ASC 815, Derivatives and Hedging, establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. As required by GAAP,
the Company records all derivatives on the Consolidated Balance Sheets at fair
value. The accounting for changes in the fair value of derivatives depends on
the intended use of the derivatives 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 trans -
actions, are considered cash flow hedges.

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

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

At December 31, 2010 and 2009, the interest rate swap’s fair value of ($1.6)
million and ($1.5) million, respectively, was included in other liabilities. No
hedge ineffectiveness on the cash flow hedge was recognized during the twelve
months ended December 31, 2010 or 2009. At December 31, 2010, the vari-
able rate on the $25 million subordinated note was 2.30% (3-month LIBOR
plus 200 basis points) and Park was paying 6.01% (4.01% fixed rate on the
interest rate swap plus 200 basis points).

For the twelve months ended December 31, 2010 and 2009, the change in the
fair value of the interest rate swap reported in other comprehensive income
was a loss of $98,000 (net of taxes of $53,000) and income of $295,000 (net

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

21. FAIR VALUES
The fair value hierarchy requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value.
The three levels of inputs that Park uses to measure fair value are as follows:
■ Level 1: Quoted prices (unadjusted) for identical assets or liabilities in
active markets that Park has the ability to access as of the measurement
date.

■ Level 2: Level 1 inputs for assets or liabilities that are not actively traded.
Also consists of an observable market price for a similar asset or liability.
This includes the use of “matrix pricing” 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 and similar
inputs.

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

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 December 31, 2010 Using:

(In thousands)

Level 1

Level 2

Level 3

Balance at
12/31/10

ASSETS

Investment Securities
Obligations of U.S.
Treasury and
Other U.S.
Government
sponsored
entities

Obligations of states

and political
subdivisions
U.S. Government

sponsored entities’
asset-backed
securities
Equity securities
Mortgage loans
held for sale
Mortgage IRLCs

LIABILITIES

$ —

$ 273,313

$ —

$ 273,313

—

8,446

2,598

11,044

—
$1,008

—
—

1,011,412
—

8,340
166

—
745

—
—

1,011,412
1,753

8,340
166

Interest rate swap
Fair value swap

$ —
—

(1,634)
—

$ —
(60)

(1,634)
(60)

of taxes of $159,000), respectively. Amounts reported in accumulated other
comprehensive income related to the interest rate swap will be reclassified
to interest expense as interest payments are made on the Company’s variable-
rate debt.

As of December 31, 2010 and 2009, no derivatives were designated as fair value
hedges or hedges of net investments in foreign operations. Additionally, the
Company does not use derivatives for trading or speculative purposes.

As of December 31, 2010 and December 31, 2009, Park had mortgage loan
interest rate lock commitments outstanding of approximately $14.5 million and
$17.5 million, respectively. Park has specific forward contracts to sell each of
these loans to a third party investor. These loan commitments represent deriva-
tive instruments, which are required to be carried at fair value. The derivative
instruments used are not designed as hedges under GAAP. The fair value of the
derivative instruments was approximately $166,000 at December 31, 2010 and
$214,000 at December 31, 2009. The fair value of the derivative instruments is
included within loans held for sale and the corresponding income is included
within non-yield loan fee income. Gains and losses resulting from expected
sales of mortgage loans are recognized when the respective loan contract is
entered into between the borrower, Park, and the third party investor. The fair
value of Park’s mortgage interest rate lock commitments (IRLCs) is based on
current secondary market pricing.

In connection with the sale of Park’s Class B Visa shares during the 2009 year,
Park entered into a swap agreement with the purchaser of the shares. The swap
agreement adjusts for dilution in the conversion ratio of Class B Visa shares
resulting from certain Visa litigation. At December 31, 2010 and December 31,
2009, the fair value of the swap liability of $60,000 and $500,000, respectively,
is an estimate of the exposure based upon probability-weighted potential Visa
litigation losses.

20. LOAN SERVICING
Park serviced sold mortgage loans of $1,471 million at December 31, 2010
compared to $1,518 million at December 31, 2009, and $1,369 million at
December 31, 2008. At December 31, 2010, $36.0 million of the sold mortgage
loans were sold with recourse compared to $53 million at December 31, 2009.
Management closely monitors the delinquency rates on the mortgage loans sold
with recourse. At December 31, 2010, management determined that no liability
was deemed necessary for these loans.

Park capitalized $3.1 million in mortgage servicing rights in 2010, $5.5 million
in 2009 and $1.5 million in 2008. Park’s amortization of mortgage servicing
rights was $3.2 million in 2010, $4.0 million in 2009 and $1.7 million in 2008.
The amortization of mortgage loan servicing rights is included within “Other
service income”. Generally, mortgage servicing rights are capitalized and
amortized on an individual sold loan basis. When a sold mortgage loan is
paid off, the related mortgage servicing rights are fully amortized.

Activity for mortgage servicing rights and the related valuation allowance
follows:

December 31 (In thousands)

Mortgage servicing rights:

Carrying amount, net, beginning of year
Additions
Amortization
Change in valuation allowance

Carrying amount, net, end of year

Valuation allowance:
Beginning of year
Additions/(reductions) expensed

End of year

2010

2009

$10,780
3,062
(3,180)
(174)

$10,488

574
174

748

$ 8,306
5,480
(4,077)
1,071

$10,780

$ 1,645
(1,071)

574

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

Balance at
12/31/09

The table below is a reconciliation of the beginning and ending balances of the
Level 3 inputs for the years ended December 31, 2010 and 2009, for financial
instruments measured on a recurring basis and classified as Level 3:

Level 3 Fair Value Measurements

(in thousands)

Obligations
of States and
Political
Subdivisions

Equity
Securities

Fair Value
Swap

$ —

$ 347,595

$ —

$ 347,595

Balance at December 31, 2009

$2,751

$ —

$(500)

Fair Value Measurements at December 31, 2009 Using:

(In thousands)

Level 1

Level 2

Level 3

ASSETS

Investment Securities
Obligations of U.S.
Treasury and
Other U.S.
Government
sponsored
entities

Obligations of states

and political
subdivisions
U.S. Government

sponsored entities’
asset-backed
securities
Equity securities
Mortgage loans
held for sale
Mortgage IRLCs

LIABILITIES

—

12,916

2,751

15,667

—
1,562

—
—

922,903
—

9,551
214

—
—

922,903
1,562

9,551
214

Interest rate swap
Fair value swap

$ —
—

(1,483)
—

$ —
(500)

(1,483)
(500)

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

Investment Securities: Fair values for investment securities are based on
quoted market prices, where available. If quoted market prices are not avail-
able, fair values are based on quoted market prices of comparable instruments.
The Fair Value Measurements tables exclude Park’s Federal Home Loan Bank
stock and Federal Reserve Bank stock. These assets are carried at their respec-
tive redemption values, as it is not practicable to calculate their fair values. For
securities where quoted prices or market prices of similar securities are not
available, which include municipal securities, fair values are calculated using
discounted cash flows.

Interest Rate Swap: The fair value of the interest rate swap represents the
estimated amount Park would pay or receive to terminate the agreement,
considering current interest rates and the current creditworthiness of the
counterparty.

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

Interest Rate Lock Commitments (IRLCs): IRLCs are based on current sec-
ondary market pricing and are classified as Level 2.

Mortgage Loans Held for Sale: Mortgage loans held for sale are carried at
their fair value. Mortgage loans held for sale are estimated using security prices
for similar product types and, therefore, are classified in Level 2.

Total gains/(losses)

Included in earnings – realized
Included in earnings – unrealized

Included in Other Comprehensive Income

Purchases, sales, issuances and settlements,

other, net

Other

Transfers in and/or out of Level 3

Balance at December 31, 2010

Balance at December 31, 2008

Total gains/(losses)

Included in earnings

Included in Other Comprehensive Income

Fair value swap

—
—

(43)

(110)

—

$2,598

$2,705

—

—
—

—

745

$745

$ —

—

Balance at December 31, 2009

$2,751

$ —

—
—

—

(440)

—

$ (60)

$ —

—

(500)

$(500)

The fair value for several equity securities with a fair value of $745,000 as of
December 31, 2010 was transferred out of Level 1 and into Level 3 because of
a lack of observable market data for these investments. The Company’s policy is
to recognize transfers as of the end of the reporting period. As a result, the fair
value for these equity securities was transferred on December 31, 2010.

Assets and Liabilities Measured on a Nonrecurring Basis
The following table presents financial assets and liabilities measured at fair
value on a nonrecurring basis:

Fair Value Measurements at December 31, 2010 Using:

(In thousands)

(Level 1)

(Level 2)

(Level 3)

Balance at
12/31/10

Impaired loans:

Commercial, financial
and agricultural

Commercial real estate
Construction real estate:
Vision commercial land
and development

—
Remaining commercial —
—

Residential real estate

$ —
—

$ 8,276
32,354

—
—
—

45,121
10,202
15,304

Total impaired loans

$ —

$111,257

Mortgage servicing

rights

Other real estate owned

—
—

3,813
—

—
44,325

3,813
44,325

Fair Value Measurements at December 31, 2009 Using:

(In thousands)

Impaired loans
Mortgage servicing

rights

Other real estate owned

(Level 1)

$ —

—
—

(Level 2)

$ —

10,780
—

(Level 3)

$109,818

—
41,240

Balance at
12/31/09

$109,818

10,780
41,240

Impaired loans, which are usually measured for impairment using the fair value
of collateral or present value of expected future cash flows, had a book value of
$250.9 million at December 31, 2010, after partial charge-offs of $53.6 million.
In addition, these loans had a specific valuation allowance of $43.5 million.
Of the $250.9 million impaired loan portfolio, loans with a book value of
$154.7 million were carried at their fair value of $111.3 million, as a result of
the aforementioned charge-offs and specific valuation allowance. The remaining
$96.2 million of impaired loans were carried at cost, as the fair value of the
underlying collateral or present value of expected future cash flows on these
loans exceeded the book value for each individual credit. At December 31,
2009, impaired loans had a book value of $201.1 million. Of these, $109.8
million were carried at fair value, as a result of partial charge-offs of $43.4

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

million and a specific valuation allowance of $36.7 million. The remaining
$91.3 million of impaired loans at December 31, 2009 were carried at cost.

Mortgage servicing rights (MSRs), which are carried at the lower of cost
or fair value, were recorded at $10.5 million at December 31, 2010. Of the
$10.5 million MSR carrying balance at December 31, 2010, $3.8 million was
recorded at fair value and included a valuation allowance of $748,000. The
remaining $6.7 million was recorded at cost, as the fair value exceeded the
cost at December 31, 2010. MSRs do not trade in active, open markets with
readily observable prices. For example, sales of MSRs do occur, but precise
terms and conditions typically are not readily available. As such, management,
with the assistance of a third party specialist, determined fair value based on the
discounted value of the future cash flows estimated to be received. Significant
inputs include the discount rate and assumed prepayment speeds utilized.
The calculated fair value was then compared to market vales where possible
to ascertain the reasonableness of the valuation in relation to current market
expectations for similar products. Accordingly, MSRs are classified in Level 2.
At December 31, 2009, MSRs were recorded at a fair value of $10.8 million,
including a valuation allowance of $574,000.

Other real estate owned (OREO) is recorded at fair value based on property
appraisals, less estimated selling costs, at the date of transfer. The carrying
value of OREO is not re-measured to fair value on a recurring basis, but is
subject to fair value adjustments when the carrying value exceeds the fair value,
less estimated selling costs. At December 31, 2010 and 2009, the estimated
fair value of OREO, less estimated selling costs amounted to $44.3 million and
$41.2 million, respectively. The financial impact of OREO valuation adjustments
for the year ended December 31, 2010 was $10.6 million.

The following methods and assumptions were used by the Corporation in
estimating its fair value disclosures for assets and liabilities not discussed above:

Cash and cash equivalents: The carrying amounts reported in the
Consolidated Balance Sheets for cash and short-term instruments approximate
those assets’ fair values.

Interest bearing deposits with other banks: The carrying amounts
reported in the Consolidated Balance Sheets for interest bearing deposits with
other banks approximate those assets’ fair values.

Loans receivable: For variable-rate loans that reprice frequently and with
no significant change in credit risk, fair values are based on carrying values.
The fair values for certain mortgage loans (e.g., one-to-four family residential)
are based on quoted market prices of similar loans sold in conjunction with
securitization transactions, adjusted for differences in loan characteristics.
The fair values for other loans are estimated using discounted cash flow
analyses, using interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality.

Off-balance sheet instruments: Fair values for the Corporation’s loan
commitments and standby letters of credit are based on the fees currently
charged to enter into similar agreements, taking into account the remaining
terms of the agreements and the counterparties’ credit standing. The carrying
amount and fair value were not material.

Deposit liabilities: The fair values disclosed for demand deposits (e.g.,
interest and non-interest checking, savings, and money market accounts)
are, by definition, equal to the amount payable on demand at the reporting
date (i.e., their carrying amounts). The carrying amounts for variable-rate,
fixed-term certificates of deposit approximate their fair values at the reporting
date. Fair values for fixed rate certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates currently being
offered on certificates to a schedule of aggregated expected monthly maturities
of time deposits.

Short-term borrowings: The carrying amounts of federal funds purchased,
borrowings under repurchase agreements and other short-term borrowings
approximate their fair values.

Long-term debt: Fair values for long-term debt are estimated using a
discounted cash flow calculation that applies interest rates currently being
offered on long-term debt to a schedule of monthly maturities.

Subordinated debentures/notes: Fair values for subordinated debentures
and notes are estimated using a discounted cash flow calculation that applies
interest rate spreads currently being offered on similar debt structures to a
schedule of monthly maturities.

The fair value of financial instruments at December 31, 2010 and December 31,
2009, was as follows:

December 31,
(In thousands)

Financial assets:

Cash and money market

instruments

Investment securities
Accrued interest
receivable
Mortgage loans
held for sale

Impaired loans carried

at fair value

Other loans

Loans
receivable, net

Financial liabilities:

Noninterest bearing

checking

Interest bearing

transaction accounts

Savings
Time deposits
Other

2010

2009

Carrying
Value

Fair
Value

Carrying
Value

Fair
Value

$ 133,780
1,971,092

$ 133,780
1,983,636

$ 159,091
1,794,641

$ 159,091
1,811,177

24,137

8,340

24,137

24,354

8,340

9,551

111,257
4,491,691

111,257
4,511,419

109,818
4,404,346

109,818
4,411,526

$4,611,288

$4,631,016

$4,523,715

$4,530,895

$ 937,719

$ 897,243

1,283,159
899,288
1,973,903
1,351

1,283,159
899,288
1,990,163
1,351

1,193,845
873,137
2,222,537
1,290

1,193,845
873,137
2,234,599
1,290

Total deposits

$5,095,420

$5,111,680

$5,188,052

$5,200,114

Short-term borrowings
Long-term debt
Subordinated debentures/

notes

Accrued interest payable

663,669
636,733

75,250
6,123

663,669
699,080

63,099
6,123

324,219
654,381

75,250
9,330

324,219
703,699

64,262
9,330

Derivative financial
instruments:
Interest rate swap
Fair value swap

1,634
60

1,483
500

22. CAPITAL RATIOS
At December 31, 2010 and 2009, the Corporation and each of its two separately
chartered banks had Tier 1, total risk-based capital and leverage ratios which
were well above both the required minimum levels of 4.00%, 8.00% and
4.00%, respectively, and the well-capitalized levels of 6.00%, 10.00% and
5.00%, respectively.

The following table indicates the capital ratios for Park and each subsidiary at
December 31, 2010 and December 31, 2009.

2010

Total
Risk-
Based

Tier 1
Risk-
Based

Leverage

2009

Total
Risk-
Based

Leverage

Park National Bank

9.43% 11.38% 6.68%

8.81% 10.89%

6.27%

Vision Bank

Park

18.22% 19.55% 14.05%

13.15% 14.46% 10.77%

13.52% 15.98% 9.77%

12.45% 14.89%

9.04%

Failure to meet the minimum requirements above could cause the Federal
Reserve Board to take action. Park’s bank subsidiaries are also subject to these
capital requirements by their primary regulators. As of December 31, 2010
and 2009, Park and its banking subsidiaries were well-capitalized and met all
capital requirements to which each was subject. There are no conditions or
events since the most recent regulatory report filings, by PNB or Vision Bank
(“VB”), that management believes have changed the risk categories for either
of the two banks.

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

The following table reflects various measures of capital for Park and each of PNB and VB:

(In thousands)

Actual Amount

Ratio

To Be Adequately Capitalized
Ratio
Amount

To Be Well Capitalized

Amount

Ratio

At December 31, 2010:
Total risk-based capital

(to risk-weighted assets)

PNB
VB (1)
Park

Tier 1 risk-based capital

(to risk-weighted assets)

PNB
VB
Park

Leverage ratio

(to average total assets)

PNB
VB (1)
Park

At December 31, 2009:
Total risk-based capital

(to risk-weighted assets)

PNB
VB
Park

Tier 1 risk-based capital

(to risk-weighted assets)

PNB
VB
Park
Leverage ratio

(to average total assets)

PNB
VB
Park

$495,668
122,803
802,324

$410,879
114,471
678,506

$473,694
103,819
758,291

$383,296
94,408
633,726

11.38%
19.55%
15.98%

9.43%
18.22%
13.52%

6.68%
14.05%
9.77%

10.89%
14.46%
14.89%

8.81%
13.15%
12.45%

6.27%
10.77%
9.04%

$348,452
50,249
401,590

$174,226
25,125
200,795

$246,084
32,585
277,824

$348,013
57,454
407,366

$174,006
28,727
203,683

$244,368
35,054
280,286

8.00%
8.00%
8.00%

4.00%
4.00%
4.00%

8.00%
8.00%
8.00%

4.00%
4.00%
4.00%

$435,565
62,812
501,988

$261,339
37,687
301,193

$307,605
40,732
347,280

$435,016
71,817
509,207

$261,010
43,090
305,524

$305,460
43,818
350,357

10.00%
10.00%
10.00%

6.00%
6.00%
6.00%

5.00%
5.00%
5.00%

10.00%
10.00%
10.00%

6.00%
6.00%
6.00%

5.00%
5.00%
5.00%

(1) Park management has agreed to maintain Vision Bank’s total risk-based capital at 16.00% and the leverage ratio at 12.00%.

23. SEGMENT INFORMATION
The Corporation is a multi-bank holding company headquartered in Newark,
Ohio. The operating segments for the Corporation are its two chartered bank
subsidiaries, The Park National Bank (headquartered in Newark, Ohio)
(“PNB”) and Vision Bank (headquartered in Panama City, Florida) (“VB”).
Guardian Financial Services Company (“GFSC”) is a consumer finance company
and is excluded from PNB for segment reporting purposes. GFSC is included
within the presentation of “All Other” in the segment reporting tables that
follow. During the third quarter of 2008, Park combined the eight separately
chartered Ohio-based bank subsidiaries into one national bank charter, that of
The Park National Bank. Prior to the charter mergers that were consummated
in the third quarter of 2008, Park considered each of its nine chartered bank
subsidiaries as a separate segment for financial reporting purposes. GAAP
requires management to disclose information about the different types of
business activities in which a company engages and also information on the
different economic environments in which a company operates, so that the
users of the financial statements can better understand a company’s perform-
ance, better understand the potential for future cash flows, and make more
informed judgments about the company as a whole. The change to two operat-
ing segments is in line with GAAP as there are: (i) two separate and distinct
geographic markets in which Park operates; (ii) discrete financial information
is available for each operating segment; and (iii) the segments are aligned with
internal reporting to Park’s Chief Executive Officer, who is the chief operating
decision maker.

Total
$ 274,044
64,902
77,496
187,107

99,531
25,314
$74,217

Operating Results for the year ended December 31, 2010 (In thousands)
All Other
PNB
$ 8,896
$ 237,281
2,199
23,474
391
80,512
11,433
144,051

Net interest income
Provision for loan losses
Other income (loss)
Other expense

VB
$ 27,867
39,229
(3,407)
31,623

Income (loss) before taxes
Income taxes (benefit)
Net income (loss)

150,268
47,320
$ 102,948

Balances at December 31, 2010:
Assets
Loans
Deposits

$6,495,558
4,074,775
4,622,693

(46,392)
(17,095)
$ (29,297)

(4,345)
(4,911)
$ 566

$808,061
640,580
633,432

$ (5,242)
17,330
(160,705)

$7,298,377
4,732,685
5,095,420

Operating Results for the year ended December 31, 2009 (In thousands)

Net interest income
Provision for loan losses
Other income (loss)
Other expense

Income (loss) before taxes
Income taxes (benefit)

PNB

$ 236,107
22,339
82,770
148,048

148,490
47,032

$ 25,634
44,430
(2,047)
28,091

(48,934)
(18,824)

All Other

$ 11,750
2,052
467
12,586

(2,421)
(5,265)

Total

$ 273,491
68,821
81,190
188,725

97,135
22,943

Net income (loss)

$ 101,458

$ (30,110)

$ 2,844

74,192

Balances at December 31, 2009:
Assets
Loans
Deposits

$6,182,257
3,950,599
4,670,113

$897,981
677,018
688,900

$ (39,909)
12,815
$(170,961)

$7,040,329
4,640,432
5,188,052

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

Operating Results for the year ended December 31, 2008 (In thousands)

Net interest income
Provision for loan losses
Other income
Goodwill impairment charge
Other expense

Income (loss) before taxes
Income taxes (benefit)
Net income (loss)

PNB

$ 219,843
21,512
81,310
—
137,295

142,346
47,081
95,265

Balances at December 31, 2008:
Assets
Loans
Deposits

$6,243,365
3,790,867
4,210,439

All Other

Total

$ 27,065
46,963
3,014
54,986
27,149

(99,019)
(17,832)
$ (81,187)

8,965
2,012
510
—
15,071

(7,608)
(7,238)
(370)

$ 255,873
70,487
84,834
54,986
179,515

35,719
22,011
13,708

$917,041
690,472
636,635

$ (89,686)
9,998
(85,324)

$7,070,720
4,491,337
4,761,750

Reconciliation of financial information for the reportable segments to the
Corporation’s consolidated totals:

Balance Sheets
December 31, 2010 and 2009

(In thousands)

Assets:
Cash

Investment in subsidiaries

Debentures receivable from subsidiary banks

Other investments

Other assets

Total assets

Liabilities:

Dividends payable

Subordinated notes

Other liabilities

Total liabilities

Total stockholders’ equity

2010

$160,011

617,317

5,000

1,451

69,845

$853,624

—

50,250

57,550

107,800

745,824

Net Interest Depreciation

Income

Expense

Other
Expense

Income
Taxes

Assets

Deposits

Total liabilities and stockholders’ equity

$853,624

Statements of Income
for the years ended December 31, 2010, 2009 and 2008

$265,148

$7,109 $168,565 $30,225 $7,303,619 $5,256,125

(In thousands)

2010:

Totals for reportable

segments

Elimination of

2009

$155,908

587,309

7,500

1,288

76,821

$828,826

651

50,250

60,661

111,562

717,264

$828,826

—

— (114,214)

(170,961)

Income before federal taxes and equity

(In thousands)

Income:

Dividends from subsidiaries
Interest and dividends
Other

Total income

Expense:

Other, net

Total expense

in undistributed losses
of subsidiaries

Federal income tax benefit

Income before equity in
undistributed losses
of subsidiaries

Equity in undistributed losses

of subsidiaries

Net income

2010

2009

2008

$80,000
4,789
411

85,200

12,632

$75,000
4,715
489

80,204

10,322

72,568

5,993

69,882

6,210

$ 93,850
3,639
575

98,064

14,158

83,906

8,057

78,561

76,092

91,963

(4,344)

$74,217

(1,900)

$74,192

(78,255)

$ 13,708

intersegment items

—

Parent Co. and GFC totals

– not eliminated

8,896

—

(77,876)

(160,705)

11,416

(4,911)

72,634

—

Totals

2009:

Totals for reportable

segments

Elimination of

$274,044

$7,126 $179,981 $25,314 $7,298,377 $5,095,420

$261,741

$7,451 $168,688 $28,208 $7,080,238 $5,359,013

intersegment items

—

Parent Co. and GFC totals

– not eliminated

11,750

—

12,564

(5,265)

74,305

—

Totals

2008:

Totals for reportable

segments

Elimination of

$273,491

$7,473 $181,252 $22,943 $7,040,329 $5,188,052

$246,908

$7,488 $211,942 $29,249 $7,160,406 $4,847,074

intersegment items

—

Parent Co. and GFC totals

– not eliminated

8,965

—

— (186,809)

(85,324)

15,042

(7,238)

97,123

—

Totals

$255,873

$7,517 $226,984 $22,011 $7,070,720 $4,761,750

24. PARENT COMPANY STATEMENTS
The Parent Company statements should be read in conjunction with the
consolidated financial statements and the information set forth below.

Investments in subsidiaries are accounted for using the equity method of
accounting.

The effective tax rate for the Parent Company is substantially less than the
statutory rate due principally to tax-exempt dividends from subsidiaries.

Cash represents noninterest bearing deposits with a bank subsidiary.

Net cash provided by operating activities reflects cash payments (received
from subsidiaries) for income taxes of $5.97 million, $5.22 million and
$8.23 million in 2010, 2009 and 2008, respectively.

At December 31, 2010 and 2009, stockholders’ equity reflected in the Parent
Company balance sheet includes $143 million and $125 million, respectively,
of undistributed earnings of the Corporation’s subsidiaries which are restricted
from transfer as dividends to the Corporation.

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

Statements of Cash Flows
for the years ended December 31, 2010, 2009 and 2008

(In thousands)

Operating activities:

Net income

2010

2009

2008

$ 74,217

$ 74,192

$ 13,708

Adjustments to reconcile net income to

net cash provided by operating activities:

Undistributed losses of subsidiaries

Other than temporary impairment charge,

investments

Decrease (increase) in other assets

(Decrease) increase in other liabilities

Net cash provided by
operating activities

Investing activities:

Purchase of investment securities

Capital contribution to subsidiary

Repayment of debentures receivable

from subsidiaries

Net cash used in

investing activities

Financing activities:
Cash dividends paid

Proceeds from issuance of

common stock and warrants

Proceeds from issuance of
subordinated notes

Cash payment for fractional shares

Proceeds from issuance of

preferred stock

Net cash (used in) provided by

financing activities

Increase in cash

Cash at beginning of year

Cash at end of year

4,344

1,900

78,255

7,321

(3,763)

140

(18,420)

24,178

774

9,244

2,042

82,142

81,990

104,023

—

(52,000)

(113)

(37,000)

(158)

(76,000)

2,500

—

(49,500)

(37,113)

(76,158)

$ (62,076)

$ (58,035)

$(65,781)

33,541

53,475

—

(4)

—

(28,539)

4,103

155,908

35,250

(2)

—

30,688

75,565

80,343

—

(3)

95,721

29,937

57,802

22,541

$160,011

$155,908

$ 80,343

25. PARTICIPATION IN THE U.S. TREASURY

CAPITAL PURCHASE PROGRAM

On December 23, 2008, Park issued $100 million of cumulative perpetual
preferred shares, with a liquidation preference of $1,000 per share (the
“Senior Preferred Shares”). The Senior Preferred Shares constitute Tier 1
capital and rank senior to Park’s common shares. The Senior Preferred Shares
pay cumulative dividends at a rate of 5% per annum through February 14,
2014 and will reset to a rate of 9% per annum thereafter. For the year ended
December 31, 2010, Park recognized a charge to retained earnings of $5.8
million representing the preferred stock dividend and accretion of the
discount on the preferred stock, associated with its participation in the CPP.

As part of its participation in the CPP, Park also issued a warrant to the U.S.
Treasury to purchase 227,376 common shares, which is equal to 15% of
the aggregate amount of the Senior Preferred Shares purchased by the U.S.
Treasury, having an exercise price of $65.97. The initial exercise price for the
warrant and the market price for determining the number of common shares
subject to the warrant were determined by reference to the market price of the
common shares on the date the Company’s application for participation in the
CPP was approved by the United States Department of the Treasury (calculated
on a 20-day trailing average). The warrant has a term of 10 years.

A company that participates in the CPP must adopt certain standards for
compensation and corporate governance, established under the American
Recovery and Reinvestment Act of 2009 (the “ARRA”), which amended and
replaced the executive compensation provisions of the Emergency Economic
Stabilization Act of 2008 (“EESA”) in their entirety, and the Interim Final Rule
promulgated by the Secretary of the U.S. Treasury under 31 C.F.R. Part 30
(collectively, the “Troubled Asset Relief Program (TARP) Compensation
Standards”). In addition, Park’s ability to declare or pay dividends on
or repurchase its common shares is partially restricted as a result of its
participation in the CPP.

26. SALE OF COMMON SHARES AND ISSUANCE

OF COMMON STOCK WARRANTS

During 2009, Park sold a total of 904,072 common shares, out of treasury
shares, and issued, in conjunction with the October 30, 2009 registered public
offering, 500,000 Series A/Series B Common Share Warrants. The common
shares were issued at a weighted average sales price of $61.20 with net pro-
ceeds of $53.6 million. Through December 31, 2009, there were no exercises
of the Series A/Series B Common Share Warrants.

During the year ended December 31, 2010, 437,200 common shares were
issued upon the exercise of the Series A and Series B Common Share Warrants
at a price of $67.75 per common share. Park raised $28.7 million, net of all
selling costs, from the sale of the 437,200 common shares. The remaining
portion of the Series B Common Share Warrants Park issued in October 2009
(covering 62,800 common shares) expired on October 30, 2010.

In addition, on December 10, 2010, Park sold, in a registered direct public
offering, 71,984 common shares, out of treasury shares, for gross proceeds
of $5.0 million. In addition to the common shares, Park also issued:

■ Series A Common Share Warrants, which are exercisable within six

months of the closing date, to purchase up to an aggregate of 35,992
common shares at an exercise price of $76.41.

■ Series B Common Share Warrants, which are exercisable within twelve
months of the closing date, to purchase up to an aggregate of 35,922
common shares at an exercise price of $76.41.

Net proceeds (net of all selling and legal expenses) from the December 10,
2010 sale of 71,984 Common Shares and Series A/Series B Common Share
Warrants was $4.8 million. Through December 31, 2010, there were no
exercises of the Series A/Series B Common Share Warrants issued in this
registered direct public offering.

N O T E S