SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

PARK NATIONAL CORPORATION

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

(in thousands, except per share data)

Three Months ended March 31, 2012 and 2011 Preferred
Stock Common
Stock Retained
Earnings Treasury
Stock at
Cost Accumulated
Other
Comprehensive
Income

Balance at December 31, 2010 $ 97,290 $ 305,677 $ 406,342 $ (77,733 ) $ (1,868 )
Net Income 22,196
Other comprehensive loss, net of tax:
Unrealized net holding gain on cash flow hedge, net of income taxes of $71 133
Unrealized net holding (loss) on securities available-for-sale, net of income tax benefit of $(3,431) (6,371 )
Cash dividends on common stock at $0.94 per share (14,475 )
Cash payment for fractional shares in dividend reinvestment plan (1 )
Accretion of discount on preferred stock 214 (214 )
Preferred stock dividends (1,250 )
Balance at March 31, 2011 $ 97,504 $ 305,676 $ 412,599 $ (77,733 ) $ (8,106 )

Balance at December 31, 2011 $ 98,146 $ 305,499 $ 424,557 $ (77,007 ) $ (8,831 )
Net Income 31,475
Other comprehensive loss, net of tax:
Change in funded status of pension plan, net of income taxes of $222 412
Unrealized net holding gain on cash flow hedge, net of income taxes of $60 113
Unrealized net holding (loss) on securities available-for-sale, net of income tax benefit of $(1,188) (2,202 )
Cash dividends on common stock at $0.94 per share (14,481 )
Cash payment for fractional shares in dividend reinvestment plan (1 )
Accretion of discount on preferred stock 226 (227 )
Preferred stock dividends (1,250 )
Balance at March 31, 2012 $ 98,372 $ 305,498 $ 440,074 $ (77,007 ) $ (10,508 )



Three Months ended March 31, 2013 and 2012	Preferred Shares		Common Shares			Retained Earnings			Treasury Shares			Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2011	$	98,146	$	305,499		$	424,557		$	(77,007	)	$	(8,831	)
Net Income						31,475
Other comprehensive income (loss), net of tax:
Change in funded status of pension plan, net of income taxes of $222												412
Unrealized net holding gain on cash flow hedge, net of income taxes of $60												113
Unrealized net holding loss on securities available-for-sale, net of income tax benefit of $(1,188)												(2,202		)
Cash dividends on common stock at $0.94 per share						(14,481		)
Cash payment for fractional shares in dividend reinvestment plan			(1		)
Accretion of discount on preferred stock	226					(227		)
Preferred stock dividends						(1,250		)
Balance at March 31, 2012	$	98,372	$	305,498		$	440,074		$	(77,007	)	$	(10,508	)

Balance at December 31, 2012	$	—	$	302,654		$	441,605		$	(76,375	)	$	(17,518	)
Net Income						20,710
Other comprehensive (loss), net of tax:
Unrealized net holding loss on securities available-for-sale, net of income tax benefit of $(1,282)												(2,379		)
Cash dividends on common stock at $0.94 per share						(14,486		)
Cash payment for fractional shares in dividend reinvestment plan			(1		)
Balance at March 31, 2013	$	—	$	302,653		$	447,829		$	(76,375	)	$	(19,897	)

SEE ACCOMPANYING NOTES TO ~~THE~~ UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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PARK NATIONAL CORPORATION

Consolidated Condensed Statements of Cash Flows (Unaudited)

(in thousands)

Three Months Ended
March 31,
2012 2011

Operating activities:
Net income $ 31,475 $ 22,196

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, accretion and amortization 1,470 2,784
Provision for loan losses 9,000 14,100
Amortization of core deposit intangibles 1,754 669
Realized net investment security gains - (6,635 )
OREO devaluations 1,359 2,535
Bank owned life insurance income (1,202 ) (1,229 )

Changes in assets and liabilities:
(Increase) in other assets (19,773 ) (19,547 )
Increase (Decrease) in other liabilities 2,854 (6,539 )

Net cash provided by operating activities $ 26,937 $ 8,334

Investing activities:

Proceeds from sales of available-for-sale securities $ - $ 113,105
Proceeds from maturity of:
Available-for-sale securities 229,878 75,071
Held-to-maturity securities 157,101 59,506
Purchases of:
Available-for-sale securities (419,998 ) (231,714 )
Held-to-maturity securities (119,127 ) -
Net (increase) in loans (23,339 ) (25,403 )
Sale of assets/liabilities related to Vision Bank (153,724 ) -
Purchases of bank owned life insurance (2,213 ) (3,000 )
Purchases of premises and equipment, net (125 ) (1,990 )

Net cash (used in) investing activities $ (331,547 ) $ (14,425 )

Financing activities:

Net increase in deposits $ 352,274 $ 219,258
Net (decrease) in short-term borrowings (26,907 ) (346,950 )
Proceeds from issuance of long-term debt - 150,000
Repayment of long-term debt (1,381 ) (24 )
Cash payment for fractional shares in dividend reinvestment plan (1 ) (1 )
Cash dividends paid on common and preferred stock (15,731 ) (15,725 )

Net cash provided by financing activities $ 308,254 $ 6,558

Increase in cash and cash equivalents 3,644 467

Cash and cash equivalents at beginning of year 157,486 133,780

Cash and cash equivalents at end of period $ 161,130 $ 134,247

Supplemental disclosures of cash flow information:

Cash paid for:
Interest $ 12,992 $ 15,217

Income taxes $ - $ -

Non cash activities:
Securities acquired through payable $ - $ 25,000



	Three Months Ended March 31,
	2013			2012
Operating activities:
Net income	$	20,710		$	31,475

Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	329			8,338
Loan put provision	—			662
Amortization (accretion) of loan fees and costs, net	728			(134		)
Provision for depreciation	1,773			1,709
Amortization of core deposit intangibles	112			1,754
Amortization/(accretion) of investment securities	42			(105		)
Amortization of prepayment penalty on long-term debt	1,202			—
Loan originations to be sold in secondary market	(140,704		)	(77,203		)
Proceeds from sale of loans in secondary market	156,212			77,628
Gain on sale of loans in secondary market	1,511			1,182
OREO valuation adjustments	(401		)	1,359
Bank owned life insurance income	(1,202		)	(1,202		)

Changes in assets and liabilities:
Increase in other assets	(13,816		)	(30,906		)
(Decrease) increase in other liabilities	(1,022		)	2,854

Net cash provided by operating activities	$	25,474		$	17,411

Investing activities:
Proceeds from calls and maturity of:
Available-for-sale securities	309,212			229,878
Held-to-maturity securities	116,140			157,101
Purchases of:
Available-for-sale securities	(199,711		)	(419,998		)
Held-to-maturity securities	—			(119,127		)
Net loan originations, portfolio loans	(8,403		)	(23,102		)
Sale of assets/liabilities related to Vision Bank	—			(144,436		)
Purchases of bank owned life insurance, net	(4,600		)	(2,213		)
Purchases of premises and equipment, net	(4,747		)	(125		)

Net cash provided by (used in) investing activities	$	207,891		$	(322,022	)

Financing activities:
Net increase in deposits	$	200,509		$	352,274
Net decrease in short-term borrowings	(100,166		)	(26,907		)
Repayment of long-term debt	(15		)	(1,381		)

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Cash dividends paid on common stock and preferred stock	(14,486		)	(15,731		)

Net cash provided by financing activities	$	85,842		$	308,255

Increase in cash and cash equivalents	319,207			3,644

Cash and cash equivalents at beginning of year	201,305			157,486

Cash and cash equivalents at end of period	$	520,512		$	161,130

Supplemental disclosures of cash flow information:

Cash paid for:
Interest	$	10,795		$	12,992

Income taxes	$	—		$	—

Transfers to OREO	$	7,103		$	4,448

SEE ACCOMPANYING ~~NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS~~

~~PARK NATIONAL CORPORATION~~

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Table of Contents

PARK NATIONAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Note 1 –Basis of Presentation

The accompanying unaudited consolidated condensed financial statements included in this report have been prepared for Park National Corporation ~~(the~~(sometimes also referred to as the “Registrant”) and its subsidiaries. Unless the context otherwise requires, references to "Park", ~~“Corporation”, “Company”,~~the "Corporation" or ~~“Park”)~~the "Company" and similar terms mean Park National Corporation and its subsidiaries. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of results of operations for the interim periods included herein have been made. The results of operations for the ~~three month~~three-month period ended March 31, ~~2012~~2013 are not necessarily indicative of the operating results to be anticipated for the fiscal year ending December 31, ~~2012.~~

2013.

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and footnotes necessary for a fair presentation of the condensed balance sheets, condensed statements of income, condensed statements of comprehensive income, condensed statements of changes in stockholders’ equity and condensed statements of cash flows in conformity with U.S. generally accepted accounting principles (“GAAP”). These financial statements should be read in conjunction with the consolidated financial statements incorporated by reference in the Annual Report on Form 10-K of Park for the fiscal year ended December 31, ~~2011~~2012 from Park’s ~~2011~~2012 Annual Report to Shareholders (“~~2011~~2012 Annual Report”).

Park’s significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements included in Park’s ~~2011~~2012 Annual Report. For interim reporting purposes, Park follows the same basic accounting policies, as updated by the information contained in this report, and considers each interim period an integral part of an annual period. Management has evaluated events occurring subsequent to the balance sheet date, determining no events require additional disclosure in these consolidated condensed financial ~~statements, with the exception of the subsequent events discussed in Note 20 of these Notes to Consolidated Condensed Financial Statements.~~

statements.

Note 2 –Recent Accounting Pronouncements

Adoption of New Accounting Pronouncements:

No. ~~2011-04 – Fair Value Measurement (Topic 820) Amendments to Achieve Common Fair Value Measurement and Disclosure Requirement in U.S. GAAP and IFRSs:~~2012-02 Testing Indefinite-Lived Intangible Assets for Impairment: In ~~May 2011,~~July 2012, FASB issued Accounting Standards Update ~~2011-04,~~~~Amendments to Achieve Common Fair Value Measurement and Disclosure Requirement in U.S. GAAP and IFRSs~~~~(ASU 2011-04~~). The new guidance in this ASU results in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Certain amendments clarify FASB’s intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement2012-02, Testing Indefinite-Lived Intangible Assets for measuring fair value or for disclosing information about fair value measurements. These amendments also enhance disclosure requirements surrounding fair value measurement. Most significantly, an entity is required to disclose additional information regarding Level 3 fair value measurements including quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements. The new guidance is effective for interim and annual periods beginning on or after December 15, 2011. The adoption of the new guidance on January 1, 2012 impacted the fair value disclosures in Note 16.

~~No. 2011-05 – Presentation of Comprehensive Income~~~~: In June 2011, FASB issued Accounting Standards Update 2011-05,~~~~Presentation of Comprehensive Income~~Impairment (ASU 2011-05). The ASU eliminates the option to report other comprehensive income and its components in the statement of changes in equity. An entity can elect to present the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The ASU does not change the items that must be reported in other comprehensive income, when an item of other comprehensive income must be reclassified to net income, or how earnings per share is calculated or presented. The new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 and must be applied retrospectively. The adoption of the new guidance impacted the presentation of the consolidated financial statements.

~~No. 2011-08 –~~~~Intangibles – Goodwill and Other~~~~: In September 2011, FASB issued Accounting Standards Update 2011-08,~~~~Intangibles – Goodwill and Other~~ ~~(ASU 2011-08)~~2012-02). The ASU allows an entity to first assess qualitative factors to determine whether the existence of events or circumstances ~~leads to a determination~~indicate that it is more likely than not that the ~~fair value of a reporting unit~~indefinite-lived intangible asset is ~~less than its carrying amount.~~impaired. The new guidance is effective for annual and interim ~~goodwill~~ impairment tests performed for fiscal years beginning after ~~December~~September 15, ~~2011. Management does not expect the~~2012. The adoption of this guidance ~~will~~did not have an impact on the consolidated financial statements.

No. ~~2011-12 Deferral~~2013-02 Reporting of ~~the Effective Date for Amendments to the Presentation~~Amounts Reclassified Out of ~~Reclassifications~~Accumulated Other Comprehensive Income: In February 2013, FASB issued Accounting Standards Update 2013-02,Reporting of ~~Items~~Amounts Reclassified Out of Accumulated Other Comprehensive Income ~~in Accounting Standards Update No. 2011-05:~~ ~~In December 2011,FASB issued Accounting Standards Update 2011-12,~~~~Deferral of~~(ASU 2013-02). The ASU requires an entity to provide information about the ~~Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05~~ ~~(ASU 2011-12). This ASU defers only those changes in ASU 2011-05 that relate to the presentation of reclassification adjustments. Entities are to continue to report reclassifications~~amounts reclassified out of accumulated other comprehensive income ~~consistent with~~by component. In addition, an entity is required to present, either on the ~~presentation requirements~~face of the statement where net income is presented or in ~~effect before ASU 2011-05. The~~the notes, significant amounts reclassified out of accumulated other ~~requirements~~comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in ~~ASU 2011-05~~its entirety in the same reporting period. For other amounts that are not ~~affected by this ASU.~~

required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about these amounts. The new guidance is effective prospectively for reporting periods beginning after December 15, 2012. The adoption of the new guidance on January 1, 2013 impacted the other comprehensive income (loss) disclosures in Note 17.

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Note 3 –Sale of Vision Bank Business

On February 16, 2012, Park and its wholly-owned subsidiary, Vision Bank (“Vision”), a Florida state-chartered bank, completed their sale of substantially all of the performing loans, operating assets and liabilities associated with Vision to Centennial Bank (“Centennial”), an Arkansas state-chartered bank which is a wholly-owned subsidiary of Home BancShares, Inc. (“Home”), an Arkansas corporation, as contemplated by the previously announced Purchase and Assumption Agreement by and between Park, Vision, Home and Centennial, dated as of November 16, 2011, as amended by the First Amendment to Purchase and Assumption Agreement, dated as of January 25, 2012, ~~(the “Agreement”~~and the Second Amendment to Purchase and Assumption Agreement, dated as of April 30, 2012 (collectively, the “Vision Agreement”) for a purchase price of ~~$27.9 million.~~

~~The assets purchased and liabilities assumed by Centennial as of February 16, 2012, included the following:~~

(in thousands) February 16, 2012
Assets sold
Cash and due from banks $ 20,711
Loans 355,750
Allowance for loan losses (13,100 )
Net loans 342,650
Fixed assets 12,496
Other assets 4,612
Total assets sold $ 380,469
Liabilities sold
Deposits $ 522,856
Other liabilities 2,049
Total liabilities sold $ 524,905

$27.9 million.

Subsequent to the transactions contemplated by the Vision Agreement, Vision was left with approximately ~~$22~~$22 million of performing loans (including mortgage loans held for sale) and non-performing loans with a fair value of ~~$88 million.~~$88 million. Park recorded a pre-tax gain, net of expenses directly related to the sale, of ~~$22.2~~approximately $22.2 million, resulting from the transactions contemplated by the Vision Agreement. The pre-tax gain, net of expense is ~~provided~~summarized in the table below:



(in thousands)
Premium paid	$	27,913
One-time gains	298
Loss on sale of fixed assets	(2,434		)
Employment and severance agreements	(1,610		)
Other one-time charges, including estimates	(2,000		)
Pre-tax gain	$	22,167

Promptly following the closing of the transactions contemplated by the Vision Agreement, Vision surrendered its Florida banking charter to the Florida Office of Financial Regulation and became a non-bank Florida corporation (the “Florida Corporation”). The Florida Corporation merged with and into a wholly-owned, non-bank subsidiary of Park, SE Property Holdings, LLC (“~~SE LLC”~~SEPH”), with ~~SE LLC~~SEPH being the surviving entity.

As part of the transaction between Vision and Centennial, Park agreed to allow Centennial to “put back” up to $7.5 million aggregate principal amount of loans, which were originally included within the loans sold in the transaction. The ~~balance sheet~~loan put option expired on August 16, 2012, 180 days after the closing of ~~SE LLC as~~the transaction, which was February 16, 2012. Prior to August 16, 2012, Centennial notified Park of ~~March 31,~~its intent to put back approximately $7.5 million aggregate principal amount of loans. During 2012, Centennial put back forty-four loans, totaling approximately $7.5 million. These forty-four loans were recorded on the books at a fair value of $4.2 million. The difference of $3.3 millionwas ~~as follows:~~

(in thousands) March 31, 2012
Assets
Cash $ 16,049
Performing loans 16,123
Nonperforming loans 82,326
OREO 28,578
Other assets 18,417
Total assets $ 161,493

Liabilities and equity
Intercompany borrowings $ 140,000
Other liabilities 4,623
Equity 16,870
Total liabilities and equity $ 161,493
written off against the loan put liability that had previously been established in the first half of 2012.

Note 4 –Goodwill and Intangible Assets

The following table shows the activity in goodwill and core deposit intangibles for the first three months of ~~2012.~~

(in thousands) Goodwill Core Deposit
Intangibles Total
December 31, 2011 $ 72,334 $ 2,509 $ 74,843
Amortization - 1,754 1,754
March 31, 2012 $ 72,334 $ 755 $ 73,089

2013.



(in thousands)	Goodwill		Core Deposit Intangibles		Total
December 31, 2012	$	72,334	$	337	$	72,671
Amortization	—		112		112
March 31, 2013	$	72,334	$	225	$	72,559

The core deposit intangibles are being amortized to expense principally on the straight-line method, over a period of six years. ~~The amortization period for the core deposit intangibles related to Vision was accelerated due to the February 16, 2012 acquisition of Vision branches by Centennial Bank.~~ Management expects that the core deposit intangibles amortization expense will be approximately ~~$139,000~~$113,000 for ~~each of~~ the ~~remaining~~second and third quarters of ~~2012.~~

~~Core deposit intangibles amortization expense is projected~~2013. Following the third quarter of 2013, there will be no remaining intangible asset subject to ~~be as follows for the remainder~~amortization.

Table of ~~2012 and for each of the following years:~~

(in thousands) Annual
Amortization
Remainder of 2012 $ 418
2013 337
2014 -
Total $ 755

Contents

Note 5 –Loans

The composition of the loan portfolio, by class of loan, as of March 31, ~~2012~~2013 and December 31, ~~2011~~2012 was as follows:

March 31, 2012 December 31, 2011
Loan
balance Accrued
interest
receivable Recorded
investment Loan
balance Accrued
interest
receivable Recorded
investment
(In thousands)
Commercial, financial and agricultural * $ 752,392 $ 3,439 $ 755,831 $ 743,797 $ 3,121 $ 746,918

Commercial real estate * 1,088,348 3,795 1,092,143 1,108,574 4,235 1,112,809
Construction real estate:
Vision/SE LLC commercial land and development * 26,081 39 26,120 31,603 31 31,634
Remaining commercial 148,922 425 149,347 156,053 394 156,447
Mortgage 19,628 65 19,693 20,039 64 20,103
Installment 9,184 44 9,228 9,851 61 9,912
Residential real estate
Commercial 392,552 1,120 393,672 395,824 1,105 396,929
Mortgage 1,004,957 1,540 1,006,497 953,758 1,522 955,280
HELOC 221,780 884 222,664 227,682 942 228,624
Installment 48,410 217 48,627 51,354 236 51,590
Consumer 610,180 2,580 612,760 616,505 2,930 619,435
Leases 1,949 52 2,001 2,059 43 2,102
Total loans $ 4,324,383 $ 14,200 $ 4,338,583 $ 4,317,099 $ 14,684 $ 4,331,783



	March 31, 2013						December 31, 2012
(In thousands)	Loan balance		Accrued interest receivable		Recorded investment		Loan balance		Accrued interest receivable		Recorded investment
Commercial, financial and agricultural *	$	796,449	$	3,431	$	799,880	$	823,927	$	2,976	$	826,903
Commercial real estate *	1,108,915		4,084		1,112,999		1,092,164		3,839		1,096,003
Construction real estate:
SEPH commercial land and development *	12,285		26		12,311		15,105		37		15,142
Remaining commercial	115,589		285		115,874		115,473		331		115,804
Mortgage	24,522		74		24,596		26,373		81		26,454
Installment	8,055		31		8,086		8,577		33		8,610
Residential real estate:
Commercial	400,400		1,008		401,408		392,203		959		393,162
Mortgage	1,064,006		1,884		1,065,890		1,064,787		1,399		1,066,186
HELOC	210,981		861		211,842		212,905		892		213,797
Installment	41,204		163		41,367		43,750		176		43,926
Consumer	657,697		2,643		660,340		651,930		2,835		654,765
Leases	3,420		51		3,471		3,128		29		3,157
Total loans	$	4,443,523	$	14,541	$	4,458,064	$	4,450,322	$	13,587	$	4,463,909

* Included within commercial, financial and agricultural loans, commercial real estate loans, and ~~Vision/SE LLC~~SEPH commercial land and development loans is an immaterial amount of consumer loans that are not broken out by class.

Table of Contents

Credit Quality

The following tables present the recorded investment in nonaccrual, accruing restructured, and loans past due 90 days or more and still accruing by class of ~~loans~~loan as of March 31, ~~2012~~2013 and December 31, ~~2011:~~

March 31, 2012
(In thousands) Nonaccrual
loans Accruing
restructured
loans Loans past due
90 days or more
and accruing Total
nonperforming
loans
Commercial, financial and agricultural $ 36,164 $ 4,100 $ 12 $ 40,276
Commercial real estate 36,754 6,551 - �� 43,305
Construction real estate:
SE LLC commercial land and development 20,518 - - 20,518
Remaining commercial 14,724 17,949 - 32,673
Mortgage 66 - - 66
Installment 182 - 16 198
Residential real estate:
Commercial 43,211 541 - 43,752
Mortgage 26,374 5,421 1,523 33,318
HELOC 2,043 - - 2,043
Installment 1,147 22 221 1,390
Consumer 2,044 - 567 2,611
Leases - - - -
Total loans $ 183,227 $ 34,584 $ 2,339 $ 220,150

December 31, 2011
(In thousands) Nonaccrual
loans Accruing
restructured
loans Loans past due
90 days or more
and accruing Total
nonperforming
loans
Commercial, financial and agricultural $ 37,797 $ 2,848 $ - $ 40,645
Commercial real estate 43,704 8,274 - 51,978
Construction real estate:
Vision commercial land and development 25,761 - - 25,761
Remaining commercial 14,021 11,891 - 25,912
Mortgage 66 - - 66
Installment 30 - - 30
Residential real estate:
Commercial 43,461 815 - 44,276
Mortgage 25,201 4,757 2,610 32,568
HELOC 1,412 - - 1,412
Installment 1,777 98 58 1,933
Consumer 1,876 - 893 2,769
Leases - - - -
Total loans $ 195,106 $ 28,683 $ 3,561 $ 227,350

2012:



	March 31, 2013
(In thousands)	Nonaccrual loans		Accruing troubled debt restructurings		Loans past due 90 days or more and accruing		Total nonperforming loans
Commercial, financial and agricultural	$	20,339	$	1,414	$	—	$	21,753
Commercial real estate	36,724		3,351		—		40,075
Construction real estate:
SEPH commercial land and development	11,133		—		—		11,133
Remaining commercial	16,900		3,583		—		20,483
Mortgage	146		99		44		289
Installment	128		172		—		300
Residential real estate:
Commercial	35,469		1,253		—		36,722
Mortgage	23,938		11,126		544		35,608
HELOC	1,864		753		—		2,617
Installment	1,404		817		33		2,254
Consumer	3,494		1,789		768		6,051
Total loans	$	151,539	$	24,357	$	1,389	$	177,285



	December 31, 2012
(In thousands)	Nonaccrual loans		Accruing troubled debt restructurings		Loans past due 90 days or more and accruing		Total nonperforming loans
Commercial, financial and agricultural	$	17,324	$	5,277	$	37	$	22,638
Commercial real estate	40,983		3,295		1,007		45,285
Construction real estate:
SEPH commercial land and development	13,939		—		—		13,939
Remaining commercial	14,977		6,597		—		21,574
Mortgage	158		100		—		258
Installment	149		175		—		324
Residential real estate:
Commercial	33,961		1,661		94		35,716
Mortgage	28,260		9,425		950		38,635
HELOC	1,689		736		—		2,425
Installment	1,670		780		54		2,504
Consumer	2,426		1,900		888		5,214
Total loans	$	155,536	$	29,946	$	3,030	$	188,512

Table of Contents

The following table provides additional information regarding those nonaccrual and accruing troubled debt restructured loans that were individually evaluated for impairment and those collectively evaluated for impairment as of March 31, ~~2012~~2013 and December 31, ~~2011.~~

March 31, 2012 December 31, 2011
(In thousands) Nonaccrual
and accruing
restructured
loans Loans
individually
evaluated for
impairment Loans
collectively
evaluated for
impairment Nonaccrual
and accruing
restructured
loans Loans
individually
evaluated for
impairment Loans
collectively
evaluated for
impairment
Commercial, financial and agricultural $ 40,264 $ 40,241 $ 23 $ 40,645 $ 40,621 $ 24
Commercial real estate 43,305 43,305 - 51,978 51,978 -
Construction real estate:
Vision/SE LLC commercial land and development 20,518 19,433 1,085 25,761 24,328 1,433
Remaining commercial 32,673 32,673 - 25,912 25,912 -
Mortgage 66 - 66 66 - 66
Installment 182 - 182 30 - 30
Residential real estate:
Commercial 43,752 43,752 - 44,276 44,276 -
Mortgage 31,795 - 31,795 29,958 - 29,958
HELOC 2,043 - 2,043 1,412 - 1,412
Installment 1,169 - 1,169 1,875 - 1,875
Consumer 2,044 20 2,024 1,876 20 1,856
Leases - - - - - -
Total loans $ 217,811 $ 179,424 $ 38,387 $ 223,789 $ 187,135 $ 36,654

2012.



	March 31, 2013						December 31, 2012
(In thousands)	Nonaccrual and accruing restructured loans		Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Nonaccrual and accruing restructured loans		Loans individually evaluated for impairment		Loans collectively evaluated for impairment
Commercial, financial and agricultural	$	21,753	$	21,742	$	11	$	22,601	$	22,587	$	14
Commercial real estate	40,075		40,075		—		44,278		44,278		—
Construction real estate:
SEPH commercial land and development	11,133		10,482		651		13,939		13,260		679
Remaining commercial	20,483		20,483		—		21,574		21,574		—
Mortgage	245		—		245		258		—		258
Installment	300		—		300		324		—		324
Residential real estate:
Commercial	36,722		36,722		—		35,622		35,622		—
Mortgage	35,064		—		35,064		37,685		—		37,685
HELOC	2,617		—		2,617		2,425		—		2,425
Installment	2,221		—		2,221		2,450		—		2,450
Consumer	5,283		799		4,484		4,326		18		4,308
Total loans	$	175,896	$	130,303	$	45,593	$	185,482	$	137,339	$	48,143

All 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.

The following table presents loans individually evaluated for impairment by class of ~~loans~~loan as of March 31, ~~2012~~2013 and December 31, ~~2011.~~

March 31, 2012 December 31, 2011
Unpaid
principal
balance Recorded
investment Allowance
for loan
losses
allocated Unpaid
principal
balance Recorded
investment Allowance
for loan
losses
allocated
(in thousands)
With no related allowance recorded
Commercial, financial and agricultural $ 33,769 $ 26,956 $ - $ 23,164 $ 18,098 $ -
Commercial real estate 55,974 35,236 - 58,242 41,506 -
Construction real estate:
Vision /SE LLC commercial land and development 68,297 19,433 - 54,032 17,786 -
Remaining commercial 28,851 24,604 - 33,319 18,372 -
Residential real estate:
Commercial 52,550 39,483 - 49,341 38,686 -
Consumer 20 20 - 20 20 -

With an allowance recorded
Commercial, financial and agricultural 14,597 13,285 4,704 23,719 22,523 5,819
Commercial real estate 9,831 8,069 1,506 12,183 10,472 4,431
Construction real estate:
Vision/SE LLC commercial land and development - - - 20,775 6,542 1,540
Remaining commercial 20,927 8,069 2,096 9,711 7,540 1,874
Residential real estate:
Commercial 5,642 4,269 1,199 6,402 5,590 2,271
Consumer - - - - - -

Total $ 290,458 $ 179,424 $ 9,505 $ 290,908 $ 187,135 $ 15,935

2012.



	March 31, 2013						December 31, 2012
(In thousands)	Unpaid principal balance		Recorded investment		Allowance for loan losses allocated		Unpaid principal balance		Recorded investment		Allowance for loan losses allocated
With no related allowance recorded:
Commercial, financial and agricultural	$	22,392	$	13,403	$	—	$	23,782	$	14,683	$	—
Commercial real estate	58,637		34,750		—		56,258		35,097		—
Construction real estate:
SEPH commercial land and development	53,287		10,482		—		56,075		12,740		—
Remaining commercial	24,614		11,209		—		29,328		14,093		—
Residential real estate:
Commercial	40,341		32,566		—		39,918		31,957		—
Consumer	799		799		—		18		18		—

With an allowance recorded:
Commercial, financial and agricultural	12,924		8,339		3,519		12,268		7,904		3,180
Commercial real estate	5,667		5,325		648		11,412		9,181		1,540
Construction real estate:
SEPH commercial land and development	—		—		—		1,271		520		—
Remaining commercial	9,984		9,274		2,939		8,071		7,481		2,277
Residential real estate:
Commercial	4,498		4,156		1,154		3,944		3,665		1,279
Consumer	—		—		—		—		—		—
Total	$	233,143	$	130,303	$	8,260	$	242,345	$	137,339	$	8,276

Table of Contents

Management’s general practice is to proactively charge down loans individually evaluated for impairment to the fair value of the underlying collateral. At both March 31, ~~2012~~2013 and December 31, ~~2011,~~2012, there were ~~$91.0~~$96.9 million ~~and $83.7 million, respectively,~~ of partial charge-offs on loans individually evaluated for impairment with no related allowance recorded and ~~$17.3~~$6.0 million and ~~$20.1~~$8.2 million, respectively, 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 of $8.3 millionrelated to loans individually evaluated for impairment at both March 31, ~~2012~~2013 and December 31, ~~2011, of $9.5 million and $15.9 million, respectively, related to~~2012. These loans with specific reserves had a recorded investment of ~~$33.7~~$27.1 million and ~~$52.7 million.~~

$28.8 million as of March 31, 2013 and December 31, 2012, respectively.

Interest income on loans individually evaluated for impairment is recognized on a cash basis. The following table presents the average recorded investment and interest income recognized on loans individually evaluated for impairment as of and for the three months ended March 31, 2013 and March 31, 2012 ~~and March 31, 2011:~~

Three months ended March 31, 2012 Three months ended March 31, 2011
(in thousands) Recorded
investment as of
March 31, 2012 Average
recorded
investment Interest
income
recognized Recorded
investment as of
March 31, 2011 Average
recorded
investment Interest
income
recognized

Commercial, financial and agricultural $ 40,241 $ 40,135 $ 105 $ 19,391 $ 19,515 $ 65
Commercial real estate 43,305 48,214 207 53,259 55,076 70
Construction real estate:
Vision/SE LLC commercial land and development 19,433 21,974 - 82,060 84,272 -
Remaining commercial 32,673 27,314 251 26,126 26,789 78
Residential real estate:
Commercial 43,752 43,276 40 58,123 59,465 139
Consumer 20 20 - - 22 -

Total $ 179,424 $ 180,933 $ 603 $ 238,959 $ 245,139 $ 352



	Three Months Ended March 31, 2013						Three Months Ended March 31, 2012
(In thousands)	Recorded investment as of March 31, 2013		Average recorded investment		Interest income recognized		Recorded investment as of March 31, 2012		Average recorded investment		Interest income recognized
Commercial, financial and agricultural	$	21,742	$	21,479	$	128	$	40,241	$	40,135	$	105
Commercial real estate	40,075		43,191		256		43,305		48,214		207
Construction real estate:
SEPH commercial land and development	10,482		12,082		—		19,433		21,974		—
Remaining commercial	20,483		20,912		220		32,673		27,314		251
Residential real estate:
Commercial	36,722		35,859		130		43,752		43,276		40
Consumer	799		204		—		20		20		—
Total	$	130,303	$	133,727	$	734	$	179,424	$	180,933	$	603

The following tables present the aging of the recorded investment in past due loans as of March 31, ~~2012~~2013 and December 31, ~~2011~~2012 by class of ~~loans.~~

March 31, 2012
(in thousands) Accruing loans
past due 30-89
days Past due nonaccrual
loans and loans past
due 90 days or
more and accruing* Total past due Total current Total recorded
investment

Commercial, financial and agricultural $ 3,935 $ 28,225 $ 32,160 $ 723,671 $ 755,831
Commercial real estate 1,062 23,067 24,129 1,068,014 1,092,143
Construction real estate:
SE LLC commercial land and development 337 16,587 16,924 9,196 26,120
Remaining commercial - 7,702 7,702 141,645 149,347
Mortgage 173 - 173 19,520 19,693
Installment 61 75 136 9,092 9,228
Residential real estate:
Commercial 502 13,261 13,763 379,909 393,672
Mortgage 13,174 18,840 32,014 974,483 1,006,497
HELOC 331 297 628 222,036 222,664
Installment 611 510 1,121 47,506 48,627
Consumer 7,302 1,807 9,109 603,651 612,760
Leases - - - 2,001 2,001
Total loans $ 27,488 $ 110,371 $ 137,859 $ 4,200,724 $ 4,338,583

loan.



	March 31, 2013
(In thousands)	Accruing loans past due 30-89 days		Past due nonaccrual loans and loans past due 90 days or more and accruing*		Total past due		Total current		Total recorded investment
Commercial, financial and agricultural	$	3,891	$	16,030	$	19,921	$	779,959	$	799,880
Commercial real estate	2,502		23,275		25,777		1,087,222		1,112,999
Construction real estate:
SEPH commercial land and development	773		9,041		9,814		2,497		12,311
Remaining commercial	334		4,221		4,555		111,319		115,874
Mortgage	356		129		485		24,111		24,596
Installment	77		—		77		8,009		8,086
Residential real estate:
Commercial	937		4,628		5,565		395,843		401,408
Mortgage	11,165		13,366		24,531		1,041,359		1,065,890
HELOC	344		732		1,076		210,766		211,842
Installment	444		683		1,127		40,240		41,367
Consumer	8,313		3,706		12,019		648,321		660,340
Leases	—		—		—		3,471		3,471
Total loans	$	29,136	$	75,811	$	104,947	$	4,353,117	$	4,458,064

* Includes ~~$2.4~~$1.4 million of loans past due 90 days or more and accruing.

December 31, 2011
(in thousands) Accruing loans
past due 30-89
days Past due
nonaccrual loans
and loans past
due 90 days or
more and
accruing* Total past due Total current Total recorded
investment

Commercial, financial and agricultural $ 3,106 $ 11,308 $ 14,414 $ 732,504 $ 746,918
Commercial real estate 2,632 21,798 24,430 1,088,379 1,112,809
Construction real estate:
Vision commercial land and development - 19,235 19,235 12,399 31,634
Remaining commercial 99 7,839 7,938 148,509 156,447
Mortgage 76 - 76 20,027 20,103
Installment 421 8 429 9,483 9,912
Residential real estate:
Commercial 1,545 10,097 11,642 385,287 396,929
Mortgage 15,879 20,614 36,493 918,787 955,280
HELOC 1,015 436 1,451 227,173 228,624
Installment 1,549 1,136 2,685 48,905 51,590
Consumer 11,195 2,192 13,387 606,048 619,435
Leases - - - 2,102 2,102
Total loans $ 37,517 $ 94,663 $ 132,180 $ 4,199,603 $ 4,331,783

The remaining are past due, nonaccrual loans and accruing TDRs.

Table of Contents



	December 31, 2012
(in thousands)	Accruing loans past due 30-89 days		Past due nonaccrual loans and loans past due 90 days or more and accruing*		Total past due		Total current		Total recorded investment
Commercial, financial and agricultural	$	6,251	$	11,811	$	18,062	$	808,841	$	826,903
Commercial real estate	2,212		26,355		28,567		1,067,436		1,096,003
Construction real estate:
SEPH commercial land and development	686		11,314		12,000		3,142		15,142
Remaining commercial	3,652		5,838		9,490		106,314		115,804
Mortgage	171		85		256		26,198		26,454
Installment	135		40		175		8,435		8,610
Residential real estate:
Commercial	1,163		5,917		7,080		386,082		393,162
Mortgage	11,948		17,370		29,318		1,036,868		1,066,186
HELOC	620		309		929		212,868		213,797
Installment	563		787		1,350		42,576		43,926
Consumer	12,924		2,688		15,612		639,153		654,765
Leases	—		—		—		3,157		3,157
Total loans	$	40,325	$	82,514	$	122,839	$	4,341,070	$	4,463,909

* Includes ~~$3.6~~$3.0 million of loans past due 90 days or more and accruing.

The remaining are past due, nonaccrual loans and accruing TDRs.

Credit Quality Indicators

Management utilizes past due information as a credit quality indicator across the loan portfolio. Past due information as of March 31, 2013 and December 31, 2012 is included in the tables above. 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 44.5 (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 require 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 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 characterized 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 nonaccrual and Park generally charges these loans down to their fair value by taking a partial charge-off or recording a specific reserve. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Certain 6-rated loans and all 7-rated loans are included within the impaired category. A loan is deemed impaired when management determines the borrower's ability to perform in accordance with the contractual loan agreement is in doubt. Any commercial loan graded an 8 (loss) is completely charged-off.

Table of Contents

The tables below present the recorded investment by loan grade at March 31, ~~2012~~2013 and December 31, ~~2011~~2012 for all commercial loans:

March 31, 2012
(in thousands) 5 Rated 6 Rated Impaired Pass Rated Recorded
Investment
Commercial, financial and agricultural $ 10,458 $ 5,217 $ 40,264 $ 699,892 $ 755,831

Commercial real estate 30,257 10,798 43,305 1,007,783 1,092,143

Construction real estate:
SE LLC commercial land and development 2,801 - 20,518 2,801 26,120
Remaining commercial 6,748 232 32,673 109,694 149,347

Residential real estate:
Commercial 16,793 1,469 43,752 331,658 393,672

Leases - - - 2,001 2,001

Total Commercial Loans $ 67,057 $ 17,716 $ 180,512 $ 2,153,829 $ 2,419,114

December 31, 2011
(in thousands) 5 Rated 6 Rated Impaired Pass Rated Recorded
Investment
Commercial, financial and agricultural $ 11,785 $ 7,628 $ 40,645 $ 686,860 $ 746,918

Commercial real estate 37,445 10,460 51,978 1,012,926 1,112,809

Construction real estate:
Vision commercial land and development 3,102 - 25,761 2,771 31,634
Remaining commercial 6,982 8,311 25,912 115,242 156,447

Residential real estate:
Commercial 17,120 3,785 44,276 331,748 396,929
Leases - - - 2,102 2,102

Total Commercial Loans $ 76,434 $ 30,184 $ 188,572 $ 2,151,649 $ 2,446,839



	March 31, 2013
(In thousands)	5 Rated		6 Rated		Impaired		Pass Rated		Recorded Investment
Commercial, financial and agricultural *	$	8,233	$	9,797	$	21,753	$	760,097	$	799,880
Commercial real estate *	25,402		3,136		40,075		1,044,386		1,112,999
Construction real estate:
SEPH commercial land and development *	400		—		11,133		778		12,311
Remaining commercial	6,556		—		20,483		88,835		115,874
Residential real estate:
Commercial	8,676		1,231		36,722		354,779		401,408
Leases	—		—		—		3,471		3,471
Total Commercial Loans	$	49,267	$	14,164	$	130,166	$	2,252,346	$	2,445,943

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



	December 31, 2012
(In thousands)	5 Rated		6 Rated		Impaired		Pass Rated		Recorded Investment
Commercial, financial and agricultural *	$	9,537	$	10,874	$	22,601	$	783,891	$	826,903
Commercial real estate *	25,616		3,960		44,278		1,022,149		1,096,003
Construction real estate:
SEPH commercial land and development *	411		—		13,939		792		15,142
Remaining commercial	6,734		—		21,574		87,496		115,804
Residential real estate:
Commercial	8,994		2,053		35,622		346,493		393,162
Leases	—		—		—		3,157		3,157
Total Commercial Loans	$	51,292	$	16,887	$	138,014	$	2,243,978	$	2,450,171

Troubled Debt Restructurings (TDRs)

Management classifies loans as TDRs when a borrower is experiencing financial difficulties and Park has granted a ~~concession.~~concession to the borrower as part of a modification or in the loan renewal process. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of ~~its~~the borrower's debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy. Management’s policy is to modify loans by extending the term or by granting a temporary or permanent contractual interest rate below the market rate, not by forgiving debt. Certain loans which were modified during the period ended March 31, ~~2012~~2013 did not meet the definition of a TDR as the modification was a delay in a payment that was considered to be insignificant. Management considers a forbearance period of up to three months or a delay in payment of up to 30 days to be insignificant. TDRs may be classified as accruing if the borrower has been current for a period of at least six months with respect to loan payments and management expects that the borrower will be able to continue to make payments in accordance with the terms of the restructured note. Management reviews all accruing TDRs quarterly to ensure payments continue to be made in accordance with the modified terms.

At March 31, ~~2012~~2013 and December 31, ~~2011,~~2012, there were ~~$98.6~~$84.3 million and ~~$100.4~~$84.7 million, respectively, of TDRs included in nonaccrual loan totals. At March 31, 2013 and December 31, 2012, $54.8 million and $52.6 million of these nonaccrual TDRs were performing in accordance with the terms of the restructured note. As of March 31, ~~2012~~2013 and December 31, ~~2011,~~2012, there were ~~$34.6~~$24.4 million and ~~$28.7~~$29.9 million, respectively, of TDRs included in accruing loan totals. ~~At March 31, 2012 and December 31, 2011, $52.8 million and $79.9 million of the nonaccrual TDRs were current.~~ Management will continue to review the restructured loans and may determine it appropriate to move certain of the loans back to accrual status in the future.

Table of Contents

At March 31, ~~2012~~2013 and December 31, ~~2011,~~2012, Park had commitments to lend ~~$5.1~~$4.4 million and ~~$4.0~~$5.0 million, respectively, of additional funds to borrowers whose terms had been modified in a TDR.

The specific reserve related to TDRs at both March 31, ~~2012~~2013 and December 31, ~~2011~~2012 was ~~$4.4~~$5.6 million ~~and $9.1 million, respectively.~~. Modifications made in ~~2011~~2012 and ~~2012~~2013 were largely the result of renewals, extending the maturity date of the loan, at terms consistent with the original note. These modifications were deemed to be TDRs primarily due to Park’s conclusion that the borrower would likely not have qualified for similar terms through another lender. Many of the modifications deemed to be TDRs were previously identified as impaired loans, and thus were also previously evaluated for impairment under ASC 310. Additional specific reserves of ~~$252,000~~$238,000 and $252,000 were recorded during the ~~period~~three-month periods endingMarch 31, 2013 and March 31, 2012, respectively, as a result of TDRs identified in the ~~2012~~respective year.

The terms of certain other loans were modified during the ~~three month~~three-month period ended March 31, ~~2012~~2013 that did not meet the definition of a TDR. Modified substandard commercial loans which did not meet the definition of a TDR had a total recorded investment as of March 31, ~~2012~~2013 of ~~$3.6 million.~~$0.8 million. The modification of these loans: (1) involved a modification of the terms of a loan to a borrower who was not experiencing financial difficulties, (2) resulted in a delay in a payment that was considered to be insignificant, or (3) resulted in Park obtaining additional collateral or guarantees that improved the likelihood of the ultimate collection of the loan such that the modification was deemed to be at market terms. Modified consumer loans which did not meet the definition of a TDR had a total recorded investment as of March 31, ~~2012~~2013 of ~~$6.3 million.~~$6.6 million. Many of these loans were ~~modified as a lower cost option than a full refinancing~~ to borrowers who were not experiencing financial ~~difficulties.~~

difficulties but who were looking to reduce their cost of funds.

The following ~~table details~~tables detail the number of contracts modified as TDRs during the ~~three month period~~three-month periods endedMarch 31, 2013 and March 31, 2012, as well as the ~~period end~~ recorded investment of these ~~contracts.~~contracts at March 31, 2013 and March 31, 2012. The recorded investment pre- and post-modification is generally the same.

Three months ended
March 31, 2012
Number of
Contracts Accruing Nonaccrual Total
Recorded
Investment
(In thousands)
Commercial, financial and agricultural 5 $ 1,289 $ 750 $ 2,039
Commercial real estate 16 2,212 2,967 5,179
Construction real estate:
SE LLC commercial land and development 4 - 894 894
Remaining commercial 9 8,641 1,565 10,206
Mortgage - - - -
Installment - - - -
Residential real estate:
Commercial 3 - 318 318
Mortgage 9 111 1,170 1,281
HELOC - - - -
Installment - - - -
Consumer 1 - 91 91
Leases - - -
Total loans 47 $ 12,253 $ 7,755 $ 20,008



	Three Months Ended March 31, 2013
(In thousands)	Number of Contracts	Accruing		Nonaccrual		Total Recorded Investment
Commercial, financial and agricultural	7	$	—	$	320	$	320
Commercial real estate	2	25		152		177
Construction real estate:
SEPH commercial land and development	—	—		—		—
Remaining commercial	1	37		—		37
Mortgage	—	—		—		—
Installment	2	—		26		26
Residential real estate:
Commercial	6	493		1,561		2,054
Mortgage	12	880		242		1,122
HELOC	4	54		—		54
Installment	4	40		9		49
Consumer	72	332		137		469
Total loans	110	$	1,861	$	2,447	$	4,308

Table of ~~December 31, 2011, $6.2 million of~~Contents



	Three Months Ended March 31, 2012
(In thousands)	Number of Contracts	Accruing		Nonaccrual		Total Recorded Investment
Commercial, financial and agricultural	5	$	1,289	$	750	$	2,039
Commercial real estate	16	2,212		2,967		5,179
Construction real estate:
SEPH commercial land and development	4	—		894		894
Remaining commercial	9	8,641		1,565		10,206
Mortgage	—	—		—		—
Installment	—	—		—		—
Residential real estate:
Commercial	3	—		318		318
Mortgage	9	111		1,170		1,281
HELOC	—	—		—		—
Installment	—	—		—		—
Consumer	1	—		91		91
Total loans	47	$	12,253	$	7,755	$	20,008

Of those loans listed in the tables above which were modified during the ~~three month~~three-month period ended March 31, 2013, $0.3 million were on nonaccrual status as of December 31, 2012, but were not classified as TDRs. Of those loans which were modified during the three-month period ended March 31, 2012, $6.2 millionwere on nonaccrual ~~status.~~

status as of December 31, 2011, but were not classified as TDRs.

The following table presents the recorded investment in financing receivables which were modified as ~~troubled debt restructurings~~TDRs within the previous 12 months and for which there was a payment default during the ~~three month~~three-month period ended March 31, ~~2012.~~2013 and March 31, 2012, respectively. For this table, a loan is considered to be in default when it becomes 30 days contractually past due under the modified terms.

Three months ended
March 31, 2012
Number of
Contracts Recorded
Investment
(In thousands)
Commercial, financial and agricultural 15 $ 8,469
Commercial real estate 8 3,201
Construction real estate:
SE LLC commercial land and development 3 659
Remaining commercial 8 4,155
Mortgage - -
Installment - -
Residential real estate:
Commercial 6 3,948
Mortgage 5 684
HELOC 1 48
Installment - -
Consumer - -
Leases - -
Total loans 46 $ 21,164

The additional allowance for loan loss resulting from the defaults on TDR loans was immaterial.



	Three Months Ended March 31, 2013			Three Months Ended March 31, 2012
(In thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Commercial, financial and agricultural	10	$	979	15	$	8,469
Commercial real estate	2	198		8	3,201
Construction real estate:
SEPH commercial land and development	2	45		3	659
Remaining commercial	3	506		8	4,155
Mortgage	1	85		—	—
Installment	1	12		—	—
Residential real estate:
Commercial	2	857		6	3,948
Mortgage	34	3,430		5	684
HELOC	2	77		1	48
Installment	10	273		—	—
Consumer	100	617		—	—
Leases	—	—		—	—
Total loans	167	$	7,079	46	$	21,164

Table of Contents

Of the ~~$21.2~~$7.1 million in modified ~~trouble debt restructurings~~TDRs which defaulted during the ~~period~~three months ended March 31, 2013, $768,000 were accruing loans and $6.3 million were nonaccrual loans. Of the $21.2 million in modified TDRs which defaulted during the three months ended March 31, 2012, ~~$205,000~~$205,000 were accruing loans and ~~$20.0~~$21.0 million were nonaccrual loans.

Note 6 –Allowance for Loan Losses

The allowance for loan losses is that amount management believes is adequate to absorb probable incurred credit losses in the loan portfolio based on management’s evaluation of various factors including overall growth in the loan portfolio, an analysis of individual loans, prior and current loss experience, and current economic conditions. A provision for loan losses is charged to operations based on management’s periodic evaluation of these and other pertinent factors as discussed within Note 1 of the Notes to Consolidated Financial Statements included in Park’s ~~2011~~2012 Annual Report.

The activity in the allowance for loan losses for the three months ended March 31, 2013 and March 31, 2012 ~~and March 31, 2011~~ is summarized below.

Three months ended March 31, 2012
Commercial,
financial and
agricultural Commercial
real estate Construction
real estate Residential
real estate Consumer Leases Centennial
loan put Total
(In thousands)

Allowance for credit losses:
Beginning balance $ 16,950 $ 15,539 $ 14,433 $ 15,692 $ 5,830 $ - $ - $ 68,444
Charge-offs 4,538 4,934 4,320 3,922 1,253 - - 18,967
Recoveries 468 92 67 609 707 - - 1,943
Net Charge-offs 4,070 4,842 4,253 3,313 546 - - 17,024
Provision 5,448 1,309 (433 ) 1,489 525 - - 8,338
Ending balance $ 18,328 $ 12,006 $ 9,747 $ 13,868 $ 5,809 $ - - $ 59,758
Provision for Centennial loan put - - - - - - 662 662
Allowance for Credit Losses $ 18,328 $ 12,006 $ 9,747 $ 13,868 $ 5,809 $ - $ 662 $ 60,420

Three months ended March 31, 2011
Commercial,
financial and
agricultural Commercial
real estate Construction
real estate Residential
real estate Consumer Leases Total
(In thousands)

Allowance for credit losses:
Beginning balance $ 11,555 $ 24,369 $ 70,462 $ 30,259 $ 6,925 $ 5 $ 143,575
Charge-offs 1,841 1,785 3,420 2,487 1,973 - 11,506
Recoveries 569 802 96 501 390 3 2,361
Net Charge-offs 1,272 983 3,324 1,986 1,583 (3 ) 9,145
Provision 1,508 1,834 4,697 4,142 1,923 (4 ) 14,100
Ending balance $ 11,791 $ 25,220 $ 71,835 $ 32,415 $ 7,265 $ 4 $ 148,530

~~The composition of the allowance for loan losses at March 31, 2012 and December 31, 2011 was as follows:~~

March 31, 2012
Commercial,
financial and
agricultural Commercial
real estate Construction
real estate Residential
real estate Consumer Leases Total
(In thousands)
Allowance for loan losses:
Ending allowance balance attributed to loans:
Individually evaluated for impairment $ 4,704 $ 1,506 $ 2,096 $ 1,199 $ - $ - $ 9,505
Collectively evaluated for impairment 13,624 10,500 7,651 12,669 5,809 - 50,253
Total ending allowance balance $ 18,328 $ 12,006 $ 9,747 $ 13,868 $ 5,809 $ - $ 59,758

Loan balance:
Loans individually evaluated for impairment $ 40,210 $ 43,265 $ 52,046 $ 43,752 $ 20 $ - $ 179,293
Loans collectively evaluated for impairment 712,182 1,045,083 151,769 1,623,947 610,160 1,949 4,145,090
Total ending loan balance $ 752,392 $ 1,088,348 $ 203,815 $ 1,667,699 $ 610,180 $ 1,949 $ 4,324,383

Allowance for loan losses as a percentage of loan balance:
Loans individually evaluated for impairment 11.70 % 3.48 % 4.03 % 2.74 % -% -% 5.30 %
Loans collectively evaluated for impairment 1.91 % 1.00 % 5.04 % 0.78 % 0.95 % -% 1.21 %
Total ending loan balance 2.44 % 1.10 % 4.78 % 0.83 % 0.95 % -% 1.38 %

Recorded investment:
Loans individually evaluated for impairment $ 40,241 $ 43,305 $ 52,106 $ 43,752 $ 20 $ - $ 179,424
Loans collectively evaluated for impairment 715,590 1,048,838 152,282 1,627,708 612,740 2,001 4,159,159
Total ending loan balance $ 755,831 $ 1,092,143 $ 204,388 $ 1,671,460 $ 612,760 $ 2,001 $ 4,338,583
December 31, 2011
(In thousands) Commercial,
financial and
agricultural Commercial
real estate Construction
real estate Residential
real estate Consumer Leases Total

Allowance for loan losses:
Ending allowance balance attributed to loans:
Individually evaluated for impairment $ 5,819 $ 4,431 $ 3,414 $ 2,271 $ - $ - $ 15,935
Collectively evaluated for impairment 11,131 11,108 11,019 13,421 5,830 - 52,509
Total ending allowance balance $ 16,950 $ 15,539 $ 14,433 $ 15,692 $ 5,830 $ - $ 68,444

Loan balance:
Loans individually evaluated for impairment $ 40,621 $ 51,978 $ 50,240 $ 44,276 $ 20 $ - $ 187,135
Loans collectively evaluated for impairment 703,176 1,056,596 167,306 1,584,342 616,485 2,059 4,129,964
Total ending loan balance $ 743,797 $ 1,108,574 $ 217,546 $ 1,628,618 $ 616,505 $ 2,059 $ 4,317,099

Allowance for loan losses as a percentage of loan balance:
Loans individually evaluated for impairment 14.33 % 8.52 % 6.80 % 5.13 % -% -% 8.52 %
Loans collectively evaluated for impairment 1.58 % 1.05 % 6.59 % 0.85 % 0.95 % -% 1.27 %
Total ending loan balance 2.28 % 1.40 % 6.63 % 0.96 % 0.95 % -% 1.59 %

Recorded investment:
Loans individually evaluated for impairment $ 40,621 $ 51,978 $ 50,240 $ 44,276 $ 20 $ - $ 187,135
Loans collectively evaluated for impairment 706,297 1,060,831 167,856 1,588,147 619,415 2,102 4,144,648
Total ending loan balance $ 746,918 $ 1,112,809 $ 218,096 $ 1,632,423 $ 619,435 $ 2,102 $ 4,331,783



	Three Months Ended March 31, 2013
(In thousands)	Commercial, financial and agricultural		Commercial real estate			Construction real estate		Residential real estate			Consumer		Leases		Total
Allowance for loan losses:
Beginning balance	$	15,635	$	11,736		$	6,841	$	14,759		$	6,566	$	—	$	55,537
Charge-offs	2,708		334			1,518		674			1,274		—		6,508
Recoveries	189		40			1,427		3,498			803		—		5,957
Net charge-offs/(recoveries)	2,519		294			91		(2,824		)	471		—		551
Provision	2,301		(372		)	806		(2,949		)	543		—		329
Ending balance	$	15,417	$	11,070		$	7,556	$	14,634		$	6,638	$	—	$	55,315



	Three Months Ended March 31, 2012
(In thousands)	Commercial, financial and agricultural		Commercial real estate		Construction real estate			Residential real estate		Consumer		Leases		Total
Allowance for loan losses:
Beginning balance	$	16,950	$	15,539	$	14,433		$	15,692	$	5,830	$	—	$	68,444
Charge-offs	4,538		4,934		4,320			3,922		1,253		—		18,967
Recoveries	468		92		67			609		707		—		1,943
Net charge-offs	4,070		4,842		4,253			3,313		546		—		17,024
Provision	5,448		1,309		(433		)	1,489		525		—		8,338
Ending balance	$	18,328	$	12,006	$	9,747		$	13,868	$	5,809	$	—	$	59,758

Loans collectively evaluated for impairment ~~above~~in the following tables include all performing loans at March 31, ~~2012~~2013 and December 31, ~~2011,~~2012, as well as nonperforming loans internally classified as consumer loans. Nonperforming consumer loans are not typically individually evaluated for impairment, but receive a portion of the statistical allocation of the allowance for loan losses. Loans individually evaluated for impairment include all impaired loans internally classified as commercial loans at March 31, ~~2012~~2013 and December 31, ~~2011,~~2012, which are evaluated for impairment in accordance with U.S. GAAP (see Note 1 of the Notes to Consolidated Financial Statements included in Park’s ~~2011~~2012 Annual Report).

Table of Contents

The composition of the allowance for loan losses at March 31, 2013 and December 31, 2012 was as follows:



	March 31, 2013
(In thousands)	Commercial, financial and agricultural			Commercial real estate			Construction real estate			Residential real estate			Consumer			Leases			Total
Allowance for loan losses:
Ending allowance balance attributed to loans:
Individually evaluated for impairment	$	3,519		$	648		$	2,939		$	1,154		$	—		$	—		$	8,260
Collectively evaluated for impairment	11,898			10,422			4,617			13,480			6,638			—			47,055
Total ending allowance balance	$	15,417		$	11,070		$	7,556		$	14,634		$	6,638		$	—		$	55,315

Loan balance:
Loans individually evaluated for impairment	$	21,736		$	40,063		$	30,955		$	36,717		$	799		$	—		$	130,270
Loans collectively evaluated for impairment	774,713			1,068,852			129,496			1,679,874			656,898			3,420			4,313,253
Total ending loan balance	$	796,449		$	1,108,915		$	160,451		$	1,716,591		$	657,697		$	3,420		$	4,443,523

Allowance for loan losses as a percentage of loan balance:
Loans individually evaluated for impairment	16.19		%	1.62		%	9.49		%	3.14		%	—		%	—		%	6.34		%
Loans collectively evaluated for impairment	1.54		%	0.98		%	3.57		%	0.80		%	1.01		%	—		%	1.09		%
Total ending loan balance	1.94		%	1.00		%	4.71		%	0.85		%	1.01		%	—		%	1.24		%

Recorded investment:
Loans individually evaluated for impairment	$	21,742		$	40,075		$	30,965		$	36,722		$	799		$	—		$	130,303
Loans collectively evaluated for impairment	778,138			1,072,924			129,902			1,683,785			659,541			3,471			4,327,761
Total ending loan balance	$	799,880		$	1,112,999		$	160,867		$	1,720,507		$	660,340		$	3,471		$	4,458,064

Table of Contents



	December 31, 2012
(In thousands)	Commercial, financial and agricultural			Commercial real estate			Construction real estate			Residential real estate			Consumer			Leases			Total
Allowance for loan losses:
Ending allowance balance attributed to loans:
Individually evaluated for impairment	$	3,180		$	1,540		$	2,277		$	1,279		$	—		$	—		$	8,276
Collectively evaluated for impairment	12,455			10,196			4,564			13,480			6,566			—			47,261
Total ending allowance balance	$	15,635		$	11,736		$	6,841		$	14,759		$	6,566		$	—		$	55,537

Loan balance:
Loans individually evaluated for impairment	$	22,523		$	44,267		$	34,814		$	35,616		$	18		$	—		$	137,238
Loans collectively evaluated for impairment	801,404			1,047,897			130,714			1,678,029			651,912			3,128			4,313,084
Total ending loan balance	$	823,927		$	1,092,164		$	165,528		$	1,713,645		$	651,930		$	3,128		$	4,450,322

Allowance for loan losses as a percentage of loan balance:
Loans individually evaluated for impairment	14.12		%	3.48		%	6.54		%	3.59		%	—		%	—		%	6.03		%
Loans collectively evaluated for impairment	1.55		%	0.97		%	3.49		%	0.80		%	1.01		%	—		%	1.10		%
Total ending loan balance	1.90		%	1.07		%	4.13		%	0.86		%	1.01		%	—		%	1.25		%

Recorded investment:
Loans individually evaluated for impairment	$	22,587		$	44,278		$	34,834		$	35,622		$	18		$	—		$	137,339
Loans collectively evaluated for impairment	804,316			1,051,725			131,176			1,681,449			654,747			3,157			4,326,570
Total ending loan balance	$	826,903		$	1,096,003		$	166,010		$	1,717,071		$	654,765		$	3,157		$	4,463,909

Note 7 –Earnings Per Common Share

The following table sets forth the computation of basic and diluted earnings per common share for the three months ended March 31, ~~2012~~2013 and ~~2011.~~

(in thousands, except share and per share data) Three months ended
March 31,
2012 2011
Numerator:
Income available to common shareholders $ 29,998 $ 20,732
Denominator:
Denominator for basic earnings per share (weighted average common shares outstanding) 15,405,910 15,398,930
Effect of dilutive options and warrants 11,835 4,490
Denominator for diluted earnings per share (weighted average common shares outstanding adjusted for the effect of dilutive options and warrants) 15,417,745 15,403,420
Earnings per common share:
Basic earnings per common share $ 1.95 $ 1.35
Diluted earnings per common share $ 1.95 $ 1.35

2012.



	Three Months Ended March 31,
(In thousands, except share and per share data)	2013		2012
Numerator:
Income available to common shareholders	$	20,710	$	29,998
Denominator:
Denominator for basic earnings per share (weighted average common shares outstanding)	15,411,990		15,405,910
Effect of dilutive options and warrants	—		11,835
Denominator for diluted earnings per share (weighted average common shares outstanding adjusted for the effect of dilutive options and warrants)	15,411,990		15,417,745
Earnings per common share:
Basic earnings per common share	$	1.34	$	1.95
Diluted earnings per common share	$	1.34	$	1.95

Table of Contents

As of March 31, 2012 ~~and 2011,~~, options to purchase 66,625 ~~and 75,895~~ common shares ~~respectively,~~ were outstanding under Park’s 2005 Incentive Stock ~~Opion~~Option Plan. All options had expired as of March 31, 2013. A warrant to purchase 227,376 common shares was outstanding at ~~both~~ March 31, 2012 ~~and 2011~~ as a result of Park’s participation in the U.S. Treasury Capital Purchase Program (“~~CPP.”~~CPP”) ~~In addition, warrants to purchase an aggregate of 71,984 common shares were outstanding at March 31, 2011 as a result of~~. Park repurchased the ~~issuance of common shares and warrants to purchase common shares~~CPP warrant on ~~December 10, 2010 (the “December 2010 Warrants”). The December 2010 Warrants expired in 2011, with no warrants being exercised.~~

May 2, 2012.

The common shares represented by the options ~~and the December 2010 Warrants~~ totaling a weighted average of 73,683 ~~and 149,591~~ were not included in the computation of diluted earnings per common share for the three months ended March 31, 2012 ~~and 2011, respectively,~~, because the ~~respective~~ exercise ~~prices~~price 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 issued under the CPP was ~~not~~ included in the ~~three month weighted average~~computation of ~~73,683~~diluted earnings per common share for the three months ended March 31, 2012 ~~or 149,591 for 2011,~~, as the dilutive effect of this warrant was 11,835 ~~and 4,490~~ common shares for ~~the three month periods ended March 31, 2012 and March 31, 2011, respectively.~~this period. The exercise price of the CPP warrant to purchase 227,376 common shares ~~is $65.97.~~

was $65.97. There were no dilutive options or warrants included in the calculation of diluted earnings per share for the three months ended March 31, 2013.

Note 8 –Segment Information

The Corporation is a bank holding company headquartered in Newark, Ohio. ~~Prior to February 16, 2012 the~~The operating segments for the Corporation ~~were~~are its ~~two~~ chartered bank ~~subsidiaries,~~subsidiary, The Park National Bank (headquartered in Newark, Ohio) (“PNB”) and Vision Bank (“VB” or “Vision”) (headquartered in Panama City, Florida). On February 16, 2012, Vision sold certain assets and liabilities to Centennial Bank (see Note 3). Promptly following the closing of the transaction, Vision surrendered its Florida banking charter to the Florida Office of Financial Regulation and became a non-bank Florida corporation (the “Florida Corporation”). The Florida Corporation merged with and into a wholly-owned non-bank subsidiary of Park,, SE Property Holdings, LLC (“~~SE LLC”~~SEPH”), ~~with SE LLC being the surviving entity. The closing of this transaction prompted Park to add SE LLC as a reportable segment. Additionally, due to the increased significance of the entity,~~and Guardian Financial Services Company (“GFSC”) ~~was added as a reportable segment during the first quarter of 2012.~~

Management is required 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 the company’s performance, better understand the potential for future cash flows, and make more informed judgments about the company as a whole. Park has three operating segments, as: (i) discrete financial information is available for each operating segment and (ii) the segments are aligned with internal reporting to Park’s Chairman and Chief Executive Officer, who is the chief operating decision maker.

Operating Results for the three months ended March 31, 2012
(in thousands) PNB VB GFSC SE LLC All Other Total
Net interest income $ 55,846 $ - $ 2,211 $ 2,610 $ 1,061 $ 61,728
Provision for loan losses 4,672 - 250 4,078 - 9,000
Other income and security gains 16,661 - - 22,891 68 39,620
Other expense 38,056 - 721 7,503 1,528 47,808
Net income 21,561 - 806 9,059 49 31,475

Assets (as of March 31, 2012) $ 6,587,773 $ - $ 47,380 $ 161,493 $ (19,795 ) $ 6,776,851

Operating Results for the three months ended March 31, 2011
(in thousands) PNB VB GFSC SE LLC All Other Total
Net interest income $ 60,236 $ 6,755 $ 2,025 $ - $ 297 $ 69,313
Provision for loan losses 4,975 8,600 525 - - 14,100
Other income (loss) and security gains 22,897 (1,318 ) - - 86 21,665
Other expense 36,321 7,425 577 - 2,023 46,346
Net income (loss) 29,030 (6,846 ) 600 - (588 ) 22,196

Assets (as of March 31, 2011) $ 6,573,541 $ 786,856 $ 45,366 $ 20,000 $ (102,658 ) $ 7,323,105



	Operating Results for the three months ended March 31, 2013
(In thousands)	PNB		GFSC		SEPH			All Other			Total
Net interest income (loss)	$	52,735	$	2,133	$	(655	)	$	1,240		$	55,453
Provision for (recovery of) loan losses	3,130		210		(3,011		)	—			329
Other income	17,872		2		831			100			18,805
Other expense	40,324		786		3,344			1,644			46,098
Income (loss) before income taxes	$	27,153	$	1,139	$	(157	)	$	(304	)	$	27,831
Federal income taxes (benefit)	7,213		399		(55		)	(436		)	7,121
Net income (loss)	$	19,940	$	740	$	(102	)	$	132		$	20,710

Assets (as of March 31, 2013)	$	6,611,802	$	49,555	$	89,240		$	(3,442	)	$	6,747,155



	Operating Results for the three months ended March 31, 2012
(In thousands)	PNB		GFSC		SEPH		All Other			Total
Net interest income	$	55,846	$	2,211	$	2,610	$	1,061		$	61,728
Provision for loan losses	4,672		250		3,416		—			8,338
Other income	16,661		—		724		68			17,453
Gain on sale of Vision business					22,167					22,167
Other expense	38,056		721		8,165		1,528			48,470
Income (loss) before income taxes	$	29,779	$	1,240	$	13,920	$	(399	)	$	44,540
Federal income taxes (benefit)	8,218		434		4,861		(448		)	13,065
Net income	$	21,561	$	806	$	9,059	$	49		$	31,475

Assets (as of March 31, 2012)	$	6,587,773	$	47,380	$	161,493	$	(19,795	)	$	6,776,851

Table of Contents

The operating results of the Parent Company in the “All Other” column are used to reconcile the segment totals to the consolidated condensed statements of income for the ~~three month~~three-month periods ended March 31, ~~2012~~2013 and ~~2011.~~2012. The reconciling amounts for consolidated total assets for the periods ended March 31, ~~2012~~2013 and ~~2011~~2012 consisted of the elimination of intersegment borrowings and the assets of the Parent Company which were not eliminated.

~~Note 9 –Stock Option Plan~~

~~Park did not grant any stock options during the three month periods ended March 31, 2012 and 2011.~~

~~The following table summarizes stock option activity during the first three months of 2012.~~

Stock Options Weighted
Average Exercise
Price Per Share
Outstanding at December 31, 2011 74,020 $ 74.96
Granted - -
Exercised - -
Forfeited/Expired 7,395 74.96
Outstanding at March 31 ,2012 66,625 $ 74.96

All of the stock options outstanding at March 31, 2012 were exercisable. The aggregate intrinsic value of the outstanding stock options at March 31, 2012 was $0. In addition, no stock options were exercised during the first three months of 2012 or 2011. The weighted average contractual remaining term was 0.69 years for the stock options outstanding at March 31, 2012.

All of the common shares delivered upon the exercise of incentive stock options granted under the Park National Corporation 2005 Incentive Stock Option Plan (the “2005 Plan”) are to be treasury shares. At March 31, 2012, incentive stock options granted under the 2005 Plan covering 66,625 common shares were outstanding. At March 31, 2012, Park held 517,733 treasury shares that were available for issuance under the 2005 Plan.

Note 109 –Mortgage Loans Held For Sale

Mortgage loans held for sale are carried at their fair value. At March 31, ~~2012~~2013 and December 31, ~~2011,~~2012, respectively, Park had approximately ~~$11.1~~$10.2 million and ~~$11.5~~$25.7 million in mortgage loans held for sale. These amounts are included in loans on the consolidated condensed balance sheets and in the residential real estate loan segments in Notes 5 and 6. The contractual balance was ~~$10.9~~$10.1 million and ~~$11.4~~$25.2 million at March 31, ~~2012~~2013 and December 31, ~~2011.~~2012, respectively. The gain expected upon sale was ~~$163,000~~$147,000 and ~~$182,000~~$568,000 at March 31, ~~2012~~2013 and December 31, ~~2011.~~2012, respectively. None of these loans ~~are~~were 90 days or more past due or on nonaccrual status as of March 31, ~~2012~~2013 or December 31, ~~2011.~~

2012.

Note 1110 –Investment Securities

The amortized cost and fair values of investment securities are shown in the following table. Management performs a quarterly evaluation of investment securities for any other-than-temporary impairment. For the three months ended March 31, ~~2012~~2013 and ~~2011,~~2012, there were no investment securities deemed to be other-than-temporarily impaired.

Investment securities at March 31, ~~2012,~~2013, were as follows:

(in thousands)
Securities Available-for-Sale Amortized
Cost Gross
Unrealized
Holding Gains Gross
Unrealized
Holding Losses Estimated Fair
Value
Obligations of U.S. Treasury and other U.S. Government sponsored entities $ 599,125 $ 478 $ 2,128 $ 597,475
Obligations of states and political subdivisions 2,616 39 - 2,655
U.S. Government sponsored entities asset-backed securities 388,444 16,734 - 405,178
Other equity securities 1,188 1,014 29 2,173
Total $ 991,373 $ 18,265 $ 2,157 $ 1,007,481

Securities Held-to-Maturity Amortized
Cost Gross
Unrecognized
Holding Gains Gross
Unrecognized
Holding Losses Estimated
Fair Value
Obligations of states and political subdivisions $ 1,427 $ 3 $ - $ 1,430
U.S. Government sponsored entities asset-backed securities 780,823 13,102 280 793,645
Total $ 782,250 $ 13,105 $ 280 $ 795,075



Securities Available-for-Sale (In thousands)	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Estimated Fair Value
Obligations of U.S. Treasury and other U.S. Government sponsored entities	$	570,639	$	338	$	2,957	$	568,020
Obligations of states and political subdivisions	984		11		—		995
U.S. Government sponsored entities' asset-backed securities	417,356		12,869		358		429,867
Other equity securities	1,137		1,232		—		2,369
Total	$	990,116	$	14,450	$	3,315	$	1,001,251



Securities Held-to-Maturity (In thousands)	Amortized Cost		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses		Estimated Fair Value
Obligations of states and political subdivisions	$	485	$	1	$	—	$	486
U.S. Government sponsored entities' asset-backed securities	284,765		9,063		—		293,828
Total	$	285,250	$	9,064	$	—	$	294,314

Securities with unrealized losses at March 31, 2013, were as follows:



	Less than 12 months				12 months or longer				Total
(In thousands)	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Securities Available-for-Sale
Obligations of U.S. Treasury and other U.S. Government agencies	$	387,683	$	2,957	$	—	$	—	$	387,683	$	2,957
U.S. Government agencies' asset-backed securities	$	171,450	$	358	$	—	$	—	$	171,450	$	358
Total	$	559,133	$	3,315	$	—	$	—	$	559,133	$	3,315

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Investment securities at December 31, 2012, were as follows:



Securities Available-for-Sale (In thousands)	Amortized cost		Gross unrealized holding gains		Gross unrealized holding losses		Estimated fair value
Obligations of U.S. Treasury and other U.S. Government sponsored entities	$	695,655	$	1,352	$	1,280	$	695,727
Obligations of states and political subdivisions	984		19		—		1,003
U.S. Government sponsored entities' asset-backed securities	401,882		14,067		447		415,502
Other equity securities	1,137		1,085		—		2,222
Total	$	1,099,658	$	16,523	$	1,727	$	1,114,454



Securities Held-to-Maturity (In thousands)	Amortized cost		Gross unrecognized holding gains		Gross unrecognized holding losses		Estimated fair value
Obligations of states and political subdivisions	$	570	$	2	$	—	$	572
U.S. Government sponsored entities' asset-backed securities	400,820		9,351		38		410,133
Total	$	401,390	$	9,353	$	38	$	410,705

Securities with unrealized losses at December 31, 2012, were as follows:



	Less than 12 months				12 months or longer				Total
(In thousands)	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Securities Available-for-Sale
Obligations of U.S. Treasury and other U.S. Government sponsored entities	$	177,470	$	1,280	$	—	$	—	$	177,470	$	1,280
U.S. Government sponsored entities' asset-backed securities	$	123,631	$	447	$	—	$	—	$	123,631	$	447
Total	$	301,101	$	1,727	$	—	$	—	$	301,101	$	1,727
Securities Held-to-Maturity
U.S. Government sponsored entities' asset-backed securities	$	10,120	$	38	$	—	$	—	$	10,120	$	38

Management does not believe any of the unrealized losses at March 31, ~~2012~~2013 or December 31, ~~2011~~2012 represent an other-than-temporary impairment. 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 recognized within net income in the period the other-than-temporary impairment is identified.

~~Securities with unrealized losses at March 31, 2012, were as follows:~~

(in thousands) Less than 12 months 12 months or longer Total
Securities Available-for-Sale Fair value Unrealized
losses Fair value Unrealized
losses Fair
value Unrealized
losses
Obligations of U.S. Treasury and other U.S. Government agencies $ 347,872 $ 2,128 $ - $ - $ 347,872 $ 2,128
Other equity securities - - 74 29 74 29
Total $ 347,872 $ 2,128 $ 74 $ 29 $ 347,946 $ 2,157

Securities Held-to-Maturity
U.S. Government sponsored entities asset-backed securities $ 62,420 $ 280 $ - $ - $ 62,420 $ 280

~~Investment securities at December 31, 2011, were as follows:~~

(in thousands)
Securities Available-for-Sale Amortized cost Gross
unrealized
holding gains Gross
unrealized
holding losses Estimated
fair value
Obligations of U.S. Treasury and other U.S. Government sponsored entities $ 370,043 $ 1,614 $ - $ 371,657
Obligations of states and political subdivisions 2,616 44 - 2,660
U.S. Government sponsored entities asset-backed securities 427,300 16,995 - 444,295
Other equity securities 1,188 877 32 2,033
Total $ 801,147 $ 19,530 $ 32 $ 820,645

Securities Held-to-Maturity Amortized cost Gross
unrecognized
holding gains Gross
unrecognized
holding losses Estimated
fair value
Obligations of states and political subdivisions $ 1,992 $ 5 $ - $ 1,997
U.S. Government sponsored entities asset-backed securities 818,232 14,377 32 832,577
Total $ 820,224 $ 14,382 $ 32 $ 834,574

~~Securities with unrealized losses at December 31, 2011, were as follows:~~

(in thousands) Less than 12 months 12 months or longer Total
Securities Available-for-Sale Fair value Unrealized
losses Fair value Unrealized
losses Fair value Unrealized
losses
Other equity securities $ - $ - $ 80 $ 32 $ 80 $ 32

Securities Held-to-Maturity
U.S. Government sponsored entities asset-backed securities $ - $ - $ 38,775 $ 32 $ 38,775 $ 32

Park’s U.S. Government sponsored entities asset-backed securities consist primarily of ~~15-year~~15-year residential mortgage-backed securities and collateralized mortgage obligations.

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The amortized cost and estimated fair value of investments in debt securities at March 31, ~~2012,~~2013, 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 inof principal repayments.

(in thousands) Amortized
cost Fair value
Securities Available-for-Sale
U.S. Treasury and sponsored entities notes:
Due within one year $ 249,125 $ 249,604
Due one through five years 275,000 273,532
Due five through ten years 75,000 74,339
Total $ 599,125 $ 597,475

Obligations of states and political subdivisions:
Due within one year $ 2,121 $ 2,130
Due one through five years 495 525
$ 2,616 $ 2,655

U.S. Government sponsored entities asset-backed securities:
Total $ 388,444 $ 405,178

(in thousands) Amortized
cost Fair value
Securities Held-to-Maturity
Obligations of state and political subdivisions:
Due within one year $ 1,427 $ 1,430
Total $ 1,427 $ 1,430

U.S. Government sponsored entities asset-backed securities:
Total $ 780,823 $ 793,645



Securities Available-for-Sale (In thousands)	Amortized cost		Fair value
U.S. Treasury and sponsored entities' obligations:
Due within one year	$	180,000	$	180,338
Due one through five years	173,750		171,548
Due five through ten years	216,889		216,134
Total	$	570,639	$	568,020

Obligations of states and political subdivisions:
Due within one year	$	984	$	995

U.S. Government sponsored entities' asset-backed securities:	$	417,356	$	429,867



Securities Held-to-Maturity (In thousands)	Amortized cost		Fair value
Obligations of state and political subdivisions:
Due within one year	$	485	$	486

U.S. Government sponsored entities' asset-backed securities:	$	284,765	$	293,828

The ~~$599.1~~$570.6 million 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 9~~Of the $570.6 million reported, $303.8 million are expected to ~~15 years, but~~be called and are shown in the table at their expected call date.

These callable securities have a final maturity in 10 to 14 years.

There were no sales of investment securities during the three-month periods ended March 31, 2013 or 2012.

Note 1211 –Other Investment Securities

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

March 31, December 31,
(in thousands) 2012 2011
Federal Home Loan Bank stock $ 60,728 $ 60,728
Federal Reserve Bank stock 6,876 6,876
Total $ 67,604 $ 67,604



	March 31, 2013		December 31, 2012
(In thousands)	March 31, 2013		December 31, 2012
Federal Home Loan Bank stock	$	59,032	$	59,032
Federal Reserve Bank stock	6,875		6,875
Total	$	65,907	$	65,907

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Note 1312 –Pension Plan

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

Park’s funding policy is to contribute annually an amount that can be deducted for federal income tax purposes using a different actuarial cost method and different assumptions from those used for financial reporting purposes. Pension plan contributions were ~~$15.9~~$12.6 million and ~~$14.0~~$15.9 million for the three ~~month~~-month periods ended March 31, ~~2012~~2013 and ~~2011,~~2012, respectively.

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

(in thousands) Three months ended
March 31,
2012 2011
Service cost $ 1,068 $ 1,139
Interest cost 1,012 992
Expected return on plan assets (2,186 ) (1,886 )
Amortization of prior service cost 5 5
Recognized net actuarial loss 427 353
Benefit expense $ 326 $ 603



	Three Months Ended March 31,
(In thousands)	2013			2012
Service cost	$	1,204		$	1,068
Interest cost	1,056			1,012
Expected return on plan assets	(2,384		)	(2,186		)
Amortization of prior service cost	5			5
Recognized net actuarial loss	676			427
Benefit expense	$	557		$	326

As a result of the February 16, 2012 acquisition of certain Vision assets and liabilities by Centennial Bank, during the first quarter of 2012, it was necessary to re-measure ~~the~~pension plan assets and liabilities resulting in a reduction to the unrecognized net loss account, within Accumulated Other Comprehensive ~~(loss)~~(Loss), of ~~$412,000~~$412,000 (net of tax of ~~$222,000)~~$222,000).

Note 1413 –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 U.S. GAAP, the Company records all derivatives on the consolidated condensed balance ~~sheet~~sheets at fair value. The accounting for changes in the fair value of ~~derivatives~~a derivative depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings) and subsequently reclassified into earnings when the hedged transaction affects earnings, 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~~

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

At March 31, 2012, the interest rate swap’s fair value of $(700,000) was included in other liabilities. No hedge ineffectiveness on the cash flow hedge was recognized during the three months ended March 31, 2012. At March 31, 2012, the variable rate on the $25 million subordinated note was 2.47% (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 three months ended March 31, 2012, the change in the fair value of the interest rate swap reported in other comprehensive income was a gain of $113,000 (net of taxes of $60,000). 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 March 31, 2012,~~2013, no derivatives were designated as cash flow hedges, 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 March 31, ~~2012,~~2013, Park had mortgage loan interest rate lock commitments outstanding of approximately ~~$16.0 million.~~$19.6 million. Park has specific ~~forward~~ contracts to sell each of these loans to a third-party investor. These loan commitments represent derivative instruments, which are required to be carried at fair value. The derivative instruments used are not designated as hedges under U.S. GAAP. At March 31, ~~2012,~~2013, the fair value of the derivative instruments was approximately ~~$169,000.~~$251,000. 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.

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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 March 31, ~~2012,~~2013, the fair value of the swap liability of ~~$135,000 is~~$135,000 was an estimate of the exposure based upon probability-weighted potential Visa litigation ~~losses.~~

losses and consideration of the Visa settlement agreement announced on July 13, 2012 to resolve the Federal Multi-District Interchange Litigation.

Note 1514 –Loan Servicing

Park serviced sold mortgage loans of ~~$1.30~~$1.40 billion at March 31, 2013, compared to $1.31 billion at December 31, 2012 and $1.30 billion at March 31, 2012 ~~compared to $1.35 billion at December 31, 2011 and $1.44 billion at~~ . At March 31, ~~2011. At March 31, 2012, $22.6~~2013, $14.6 million of the sold mortgage loans were sold with recourse compared to ~~$34.1~~$22.6 million at March 31, ~~2011.~~2012. Management closely monitors the delinquency rates on the mortgage loans sold with recourse. At March 31, ~~2012,~~2013, management ~~determined that no liability was deemed necessary~~had established a $268,000 reserve to account for ~~these loans.~~

future loan repurchases.

When Park sells mortgage loans with servicing rights retained, servicing rights are initially recorded at fair value. Park selected the “amortization method” as permissible within GAAP, whereby the servicing rights capitalized are amortized in proportion to and over the period of estimated future servicing income of the underlying loan. At the end of each reporting period, the carrying value of mortgage servicing rights (“MSRs”) is assessed for impairment with a comparison to fair value. MSRs are carried at the lower of their amortized cost or fair value.

Activity for MSRs and the related valuation allowance follows:

(in thousands) Three months ended
March 31, 2012 Three months ended
March 31, 2011
Mortgage servicing rights:
Carrying amount, net, beginning of period $ 9,301 $ 10,488
Additions 562 330
Amortization (888 ) (521 )
Changes in valuation inputs & assumptions - 68

Carrying amount, net, end of period $ 8,975 $ 10,365

Valuation allowance:
Beginning of period $ 1,021 $ 748
Changes due to fair value adjustments - (68 )
End of period $ 1,021 $ 680



	Three Months Ended March 31,
(In thousands)	2013			2012
Mortgage servicing rights:
Carrying amount, net, beginning of period	$	7,763		$	9,301
Additions	1,111			562
Amortization	(815		)	(888		)
Changes in valuation allowance	62			—
Carrying amount, net, end of period	$	8,121		$	8,975

Valuation allowance:
Beginning of period	$	2,324		$	1,021
Changes in valuation allowance	(62		)	—
End of period	$	2,262		$	1,021

Servicing fees included in other service income were ~~$1.2~~$0.9 million for the three months ended March 31, ~~2012. For the three months ended March 31, 2011, servicing fees included in other service income were $1.4 million.~~

2013 and 2012, respectively.

Note 1615 –Fair Value

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” 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.

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.

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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 typically 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 at Fair Value on a Recurring Basis:

The following table presents assets and liabilities measured at fair value on a recurring basis:

Fair Value Measurements at March 31, 2012 using:
(in thousands) Level 1 Level 2 Level 3 Balance at
March 31, 2012
Assets
Investment securities
Obligations of U.S. Treasury and other U.S. Government sponsored entities $ - $ 597,475 $ - $ 597,475
Obligations of states and political subdivisions - 2,655 - 2,655
U.S. Government sponsored entities’ asset-backed securities - 405,178 - 405,178
Equity securities 1,417 - 756 2,173
Mortgage loans held for sale - 11,110 - 11,110
Mortgage IRLCs - 169 - 169

Liabilities
Interest rate swap $ - $ 673 $ - $ 673
Fair value swap - - 135 135

Fair Value Measurements at December 31, 2011 using:
(in thousands) Level 1 Level 2 Level 3 Balance at
December 31,
2011
Assets
Investment securities
Obligations of U.S. Treasury and other U.S. Government sponsored entities $ - $ 371,657 $ - $ 371,657
Obligations of states and political subdivisions - 2,660 - 2,660
U.S. Government sponsored entities’ asset-backed securities - 444,295 - 444,295
Equity securities 1,270 - 763 2,033
Mortgage loans held for sale - 11,535 - 11,535
Mortgage IRLCs - 251 - 251

Liabilities
Interest rate swap $ - $ 846 $ - $ 846
Fair value swap - - 700 700



Fair Value Measurements at March 31, 2013 using:
(In thousands)	Level 1		Level 2		Level 3		Balance at March 31, 2013
Assets
Investment securities:
Obligations of U.S. Treasury and other U.S. Government sponsored entities	$	—	$	568,020	$	—	$	568,020
Obligations of states and political subdivisions	—		995		—		995
U.S. Government sponsored entities’ asset-backed securities	—		429,867		—		429,867
Equity securities	1,593		—		776		2,369
Mortgage loans held for sale	—		10,235		—		10,235
Mortgage IRLCs	—		251		—		251

Liabilities
Fair value swap	$	—	$	—	$	135	$	135



Fair Value Measurements at December 31, 2012 using:
(In thousands)	Level 1		Level 2		Level 3		Balance at December 31, 2012
Assets
Investment securities:
Obligations of U.S. Treasury and other U.S. Government sponsored entities	$	—	$	695,727	$	—	$	695,727
Obligations of states and political subdivisions	—		1,003		—		1,003
U.S. Government sponsored entities’ asset-backed securities	—		415,502		—		415,502
Equity securities	1,442		—		780		2,222
Mortgage loans held for sale	—		25,743		—		25,743
Mortgage IRLCs	—		372		—		372

Liabilities
Fair value swap	$	—	$	—	$	135	$	135

There were no transfers between Level 1 and Level 2 during ~~2012~~2013 or ~~2011.~~2012. Management’s policy is to transfer assets or liabilities from one level to another when the methodology to obtain the fair value changes such that there are more or fewer unobservable ~~inputs.~~

inputs as of the end of the reporting period.

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The following methods and assumptions were used by the Company 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 available, 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 respective 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.

Mortgage Interest Rate Lock Commitments (IRLCs):IRLCs are based on current secondary 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~~value. Mortgage loans held for sale are estimated using security prices for similar product types and, therefore, are classified in Level 2.

The table below is a reconciliation of the beginning and ending balances of the Level 3 inputs for the three months ended March 31, ~~2012~~2013 and ~~2011,~~2012, for financial instruments measured on a recurring basis and classified as Level 3:

Level 3 Fair Value Measurements

Three months ended March 31, ~~2012~~2013 and ~~2011~~

(in thousands) Obligations of states
and political
subdivisions Equity
Securities Fair value
swap
Balance, at January 1, 2012 $ - $ 763 $ (700 )
Total gains/(losses)
Included in earnings – realized - - -
Included in earnings – unrealized - - -
Included in other comprehensive income - (7 ) -
Purchases, sales, issuances and settlements, other - - -
Periodic settlement of fair value swap - - (565 )
Balance March 31, 2012 $ - $ 756 $ (135 )

Balance, at January 1, 2011 $ 2,598 $ 745 $ (60 )
Total gains/(losses)
Included in earnings – realized - - -
Included in earnings – unrealized - - -
Included in other comprehensive income (128 ) (5 ) -
Purchases, sales, issuances and settlements, other - - -
Re-evaluation of fair value swap - - -
Balance March 31, 2011 $ 2,470 $ 740 $ (60 )

2012



(In thousands)	Equity Securities			Fair value swap
Balance, at January 1, 2013	$	780		$	(135	)
Total gains/(losses)
Included in earnings – realized	—			—
Included in earnings – unrealized	—			—
Included in other comprehensive income	(4		)	—
Purchases, sales, issuances and settlements, other	—			—
Periodic settlement of fair value swap	—			—
Balance at March 31, 2013	$	776		$	(135	)

Balance, at January 1, 2012	$	763		$	(700	)
Total gains/(losses)
Included in earnings – realized	—			—
Included in earnings – unrealized	—			—
Included in other comprehensive income	(7		)	—
Purchases, sales, issuances and settlements, other	—			—
Periodic settlement of fair value swap	—			565
Balance at March 31, 2012	$	756		$	(135	)

Assets and liabilities measured at fair value on a nonrecurring basis:

The following methods and assumptions were used by the Company in determining the fair value of assets and liabilities measured at fair value on a nonrecurring basis described below:

Impaired Loans: At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Impaired loans carried at fair value have been partially charged-off or receive specific allocations of the allowance for loan losses. For collateral dependent loans, fair value is ~~commonly~~generally based on real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments result in a Level 3 classification of the inputs for determining fair value. ~~Non-real estate collateral may be valued using, (1) an appraisal, (2) net book value per the borrower’s financial statements, or (3) aging reports.~~ Collateral is then adjusted

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or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly. Additionally, updated valuations are obtained annually for all impaired loans in accordance with Company policy.

Other Real Estate Owned (OREO): Assets acquired through or in lieu of loan foreclosure are initially recorded at fair value less costs to sell when acquired. 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. Fair value is based on recent real estate appraisals and is updated at least annually. These appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales approach and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral dependent impaired loans and ~~other real estate owned~~OREO are performed by licensed appraisers. Appraisals are generally obtained to support the fair value of collateral. In general, there are two types of appraisals, real estate appraisals and lot development loan appraisals, received by the Company. These are discussed below:

Real estate appraisals typically incorporate measures such as recent sales prices for comparable properties. Appraisers may make adjustments to the sales prices of the comparable properties as deemed appropriate based on the age, condition or general characteristics of the subject property. Management generally applies a 15% discount to real estate appraised values which management expects will cover all disposition costs (including selling costs). This 15% discount is based on historical discounts to appraised values on sold OREO properties.

Lot development loan appraisals are typically performed using a discounted cash flow analysis. Appraisers determine an anticipated absorption period and a discount rate that takes into account an investor’s required rate of return based on recent comparable sales. Management generally applies a 6% discount to lot development appraised values, which is an additional discount above the net present value calculation included in the appraisal, to account for selling costs.

MSRs:MSRs are carried at the lower of cost or fair ~~value.MSRs~~value. 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, determines 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 is then compared to market values where possible to ascertain the reasonableness of the valuation in relation to current market expectations for similar products. Accordingly, MSRs are classified as Level 2.

The following ~~table presents~~tables present assets and liabilities measured at fair value on a nonrecurring ~~basis:~~

Fair Value Measurements at March 31, 2012 using:
(in thousands) Level 1 Level 2 Level 3 Balance at
March 31, 2012
Impaired loans:
Commercial, financial and agricultural $ - $ - $ 18,476 $ 18,476
Commercial real estate - - 25,445 25,445
Construction real estate:
SE LLC commercial land and development - - 18,468 18,468
Remaining commercial - - 8,665 8,665
Residential real estate - - 12,270 12,270
Total impaired loans $ - $ - $ 83,324 $ 83,324
Mortgage servicing rights - 7,138 7,138
Other real estate owned - - 41,965 41,965

Fair Value Measurements at December 31, 2011 using:
(in thousands) Level 1 Level 2 Level 3 Balance at
December 31, 2011
Impaired loans:
Commercial, financial and agricultural $ - $ - $ 19,931 $ 19,931
Commercial real estate - - 24,859 24,859
Construction real estate:
Vision commercial land and development - - 21,228 21,228
Remaining commercial - - 8,860 8,860
Residential real estate - - 12,935 12,935
Total impaired loans $ - $ - $ 87,813 $ 87,813
Mortgage servicing rights - 5,815 - 5,815
Other real estate owned - - 42,272 42,272

basis. Collateral dependent impaired loans are carried at fair value if they have been charged down to fair value or if a specific valuation allowance has been established. A new cost basis is established at the time a property is initially recorded in OREO. OREO properties are carried at fair value if a devaluation has been taken to the property's value subsequent to the initial measurement.

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Fair Value Measurements at March 31, 2013 using:
(In thousands)	Level 1		Level 2		Level 3		Balance at March 31, 2013
Impaired loans:
Commercial real estate	$	—	$	—	$	25,093	$	25,093
Construction real estate:
SEPH commercial land and development	—		—		10,482		10,482
Remaining commercial	—		—		8,657		8,657
Residential real estate	—		—		7,039		7,039
Total impaired loans	$	—	$	—	$	51,271	$	51,271

Mortgage servicing rights	—		5,896		—		5,896

OREO:
Commercial real estate	—		—		4,838		4,838
Construction real estate	—		—		10,345		10,345
Residential real estate	—		—		3,166		3,166
Total OREO	$	—	$	—	$	18,349	$	18,349



Fair Value Measurements at December 31, 2012 using:
(In thousands)	Level 1		Level 2		Level 3		Balance at December 31, 2012
Impaired loans:
Commercial real estate	$	—	$	—	$	25,997	$	25,997
Construction real estate:
SEPH commercial land and development	—		—		12,832		12,832
Remaining commercial	—		—		8,113		8,113
Residential real estate	—		—		6,990		6,990
Total impaired loans	$	—	$	—	$	53,932	$	53,932

Mortgage servicing rights	—		6,642		—		6,642

OREO:
Commercial real estate	—		—		3,485		3,485
Construction real estate	—		—		12,134		12,134
Residential real estate	—		—		4,307		4,307
Total OREO	$	—	$	—	$	19,926	$	19,926

Impaired loans had a book value of ~~$179.3~~$130.3 million at March 31, ~~2012,~~2013, after partial charge-offs of ~~$108.3 million. In addition,~~$102.9 million. Additionally, these impaired loans had a specific valuation allowance of ~~$9.5 million.~~$8.3 million. Of the ~~$179.3~~$130.3 million impaired loan portfolio at March 31, 2013, loans with a book value of ~~$92.8~~$56.0 million were carried at their fair value of ~~$83.3~~$51.3 million, as a result of ~~the aforementioned~~ charge-offs of $89.3 millionand a specific valuation ~~allowance.~~allowance of $4.7 million. An additional specific valuation allowance of $3.6 million at March 31, 2013 related to loans which are not collateral dependent. The remaining ~~$86.5~~$74.3 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 each of these loans exceeded the book value for each individual credit. At December 31, ~~2011,~~2012, impaired loans had a book value of ~~$187.1 million.~~$137.2 million, after partial charge-offs of $105.1 million. Additionally, these impaired loans had a specific valuation allowance of $8.3 million. Of ~~these, $87.8~~the $137.2 million impaired loan portfolio at December 31, 2012, loans with a book value of $59.0 million were carried at their fair value of $53.9 million as a result of partial charge-offs of ~~$103.8~~$91.6 million and a specific valuation allowance for those loans carried at fair value of ~~$15.9 million.~~$5.1 million. An additional specific valuation allowance of $3.2 million at December 31, 2012 related to loans which are not collateral dependent. The remaining ~~$83.4~~$78.2 million of impaired loans at December 31, ~~2011~~2012 were carried at cost.

The financial impact of credit adjustments related to impaired loans carried at fair value during the three months ended March 31, 2013 and 2012 was $2.3 million and $4.4 million, respectively.

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MSRs, which are carried at the lower of cost or fair value, were recorded at ~~$9.0~~$8.1 million at March 31, ~~2012.~~2013. Of the ~~$9.0~~$8.1 million MSR carrying balance at March 31, ~~2012, $7.1~~2013, $5.9 million was recorded at fair value and included a valuation allowance of ~~$1.0 million.~~$2.3 million. The remaining ~~$1.9~~$2.2 million was recorded at cost, as the fair value exceeded cost at March 31, ~~2012.~~2013. At December 31, ~~2011,~~2012, MSRs were recorded at ~~$9.3~~$7.8 million, including a valuation allowance of ~~$1.0 million.~~

At $2.3 million. Expense related to MSRs carried at fair value during the three-month periods ended March 31, 2013 and 2012 was $(62,000)and $0, respectively.

At March 31, 2013 and December 31, ~~2011,~~2012, the estimated fair value of OREO, less estimated selling costs, amounted to ~~$42.0~~$18.3 million and ~~$42.3~~$19.9 million, respectively. The financial impact of OREO ~~devaluation~~fair value adjustments for the three month ~~period~~periods ended March 31, 2013 and 2012 was ~~$1.4 million.~~

$(0.4) million and $1.4 million, respectively.

The following tables present qualitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at March 31, 2013 and December 31, 2012:

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March 31, 2013
(In thousands)	Fair Value		Valuation Technique	Unobservable Input(s)		Range (Weighted Average)
Impaired loans:
Commercial real estate	$	25,093	Sales comparison approach	Adj to comparables		0.0% - 111.0% (21.7%)
			Income approach	Capitalization rate		7.5% - 20.9% (9.7%)
			Cost approach	Accumulated depreciation		38.0% - 65.0% (53.1%)

Construction real estate:					��
SEPH commercial land and development	$	10,482	Sales comparison approach	Adj to comparables		0.0% - 218.0% (23.3%)
			Bulk sale approach	Discount rate		11.0% - 55.0% (25.4%)

Remaining commercial	$	8,657	Sales comparison approach	Adj to comparables		0.0% - 75.0% (27.7%)
			Bulk sale approach	Discount rate		11.0% - 55.0% (17.9%)

Residential real estate	$	7,039	Sales comparison approach	Adj to comparables		0.0% - 178.0% (17.5%)
			Income approach	Capitalization rate		7.8% - 10.5% (8.2%)

Other real estate owned:
Commercial real estate	$	4,838	Sales comparison approach	Adj to comparables		0.0% - 85.0% (35.8%)
			Income approach	Capitalization rate		8.5% - 11.5% (9.9%)
			Bulk sale approach	Discount rate		10.0% - 13.0% (2.1%)
			Cost approach	Accumulated depreciation		40.0% - 90.0% (65.0%)

Construction real estate	$	10,345	Sales comparison approach	Adj to comparables		0.0% - 312.0% (30.4%)
			Bulk sale approach	Discount rate		13.0% (13.0%)

Residential real estate	$	3,166	Sales comparison approach	Adj to comparables		0.0% - 173.7% (19.0%)
			Income approach	Capitalization rate		7.9% - 9.3% (8.5%)
			Cost approach	Accumulated depreciation		6.0% (6.0%)

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December 31, 2012
(In thousands)	Fair Value		Valuation Technique	Unobservable Input(s)	Range (Weighted Average)
Impaired loans:
Commercial real estate	$	25,997	Sales comparison approach	Adj to comparables	0.0% - 116.0% (22.3%)
			Income approach	Capitalization rate	7.5% - 20.9% (10.1%)
			Cost approach	Accumulated depreciation	23.0% - 63.0% (50.4%)

Construction real estate:
SEPH commercial land and development	$	12,832	Sales comparison approach	Adj to comparables	0.0% - 218.0% (31.9%)
			Bulk sale approach	Discount rate	11.0% - 55.0% (23.4%)

Remaining commercial	$	8,113	Sales comparison approach	Adj to comparables	0.0% - 75.0% (26.2%)
			Bulk sale approach	Discount rate	10.0% - 55.0% (18.3%)

Residential real estate	$	6,990	Sales comparison approach	Adj to comparables	0.0% - 178.0% (17.9%)

Other real estate owned:
Commercial real estate	$	3,485	Sales comparison approach	Adj to comparables	0.0% - 67.0% (25.8%)
			Income approach	Capitalization rate	11.0% (11.0%)
			Bulk sale approach	Discount rate	13.0% (13.0%)
			Cost approach	Accumulated depreciation	40.9% - 90.0% (65.0%)

Construction real estate	$	12,134	Sales comparison approach	Adj to comparables	0.0% - 273.0% (34.0%)
			Income approach	Capitalization rate	8.5% (8.5%)
			Bulk sale approach	Discount rate	10.0% - 12.0% (10.8%)

Residential real estate	$	4,307	Sales comparison approach	Adj to comparables	1.0% - 61.0% (18.0%)
			Income approach	Capitalization rate	7.9% - 9.3% (8.7%)
			Cost approach	Accumulated depreciation	6.0% (6.0%)

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 condensed ~~balancesheets~~balancesheets for cash and short-term instruments 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.

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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 are 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~~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 and 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 March 31, ~~2012~~2013 and December 31, ~~2011,~~2012, was as follows:

(in thousands) March 31, 2012
Fair Value Measurements

Financial assets: Carrying value Level 1 Level 2 Level 3 Total fair value
Cash and money market instruments $ 161,130 $ 161,130 $ - $ - $ 161,130
Investment securities 1,789,731 1,417 1,800,383 756 1,802,556
Accrued interest receivable - securities 7,027 - 7,027 - 7,027
Accrued interest receivable - loans 14,200 - 1 14,199 14,200
Mortgage loans held for sale 11,110 - 11,110 - 11,110
Impaired loans carried at fair value 83,324 - - 83,324 83,324
Other loans 4,170,191 - - 4,188,265 4,188,265
Loans receivable, net $ 4,264,625 $ - $ 11,110 $ 4,271,589 $ 4,282,699

Financial liabilities:
Noninterest bearing checking accounts $ 1,055,745 $ 1,055,745 $ - $ $ 1,055,745
Interest bearing transactions accounts 1,215,562 1,215,562 - - 1,215,562
Savings accounts 1,001,789 1,001,789 - 1,001,789
Time deposits 1,541,374 - 1,547,748 - 1,547,748
Other 2,918 2,918 - - 2,918
Total deposits $ 4,817,388 $ 3,276,014 $ 1,547,748 $ - $ 4,823,762

Short-term borrowings $ 236,687 $ - $ 236,687 $ - $ 236,687
Long-term debt 821,801 - 907,995 - 907,995
Subordinated debentures/notes 75,250 - 68,475 - 68,475
Accrued interest payable – deposits 2,824 36 2,788 - 2,824
Accrued interest payable – debt/borrowings 2,210 - 2,210 - 2,210

Derivative financial instruments:
Interest rate swap $ 673 $ - $ 673 $ - $ 673
Fair value swap 135 - - 135 135

(in thousands) December 31, 2011
Carrying
value Fair value
Financial assets:
Cash and money market instruments $ 157,486 $ 157,486
Investment securities 1,640,869 1,655,219
Accrued interest receivable 19,697 19,697
Mortgage loans held for sale 11,535 11,535
Impaired loans carried at fair value 87,813 87,813
Other loans 4,149,307 4,167,224
Loans receivable, net $ 4,248,655 $ 4,266,572
Assets held for sale $ 382,462 $ 382,462

Financial liabilities:
Noninterest bearing checking accounts $ 995,733 $ 995,733
Interest bearing transactions accounts 1,037,385 1,037,385
Savings accounts 931,526 931,526
Time deposits 1,499,105 1,506,075
Other 1,365 1,365
Total deposits $ 4,465,114 $ 4,472,084

Short-term borrowings $ 263,594 $ 263,594
Long-term debt 823,182 915,274
Subordinated debentures/notes 75,250 68,601
Accrued interest payable 4,916 4,916
Liabilities held for sale 536,186 536,991

Derivative financial instruments:
Interest rate swap $ 846 $ 846
Fair value swap 700 700



	March 31, 2013
			Fair Value Measurements
(In thousands)	Carrying value		Level 1		Level 2		Level 3		Total fair value
Financial assets:
Cash and money market instruments	$	520,512	$	520,512	$	—	$	—	$	520,512
Investment securities	1,286,501		1,593		1,293,196		776		1,295,565
Accrued interest receivable - securities	4,030		—		4,030		—		4,030
Accrued interest receivable - loans	14,541		—		—		14,541		14,541
Mortgage loans held for sale	10,235		—		10,235		—		10,235
Mortgage IRLCs	251		—		251		—		251
Impaired loans carried at fair value	51,271		—		—		51,271		51,271
Other loans	4,326,451		—		—		4,344,928		4,344,928
Loans receivable, net	$	4,388,208	$	—	$	10,486	$	4,396,199	$	4,406,685

Financial liabilities:
Noninterest bearing checking accounts	$	1,119,902	$	1,119,902	$	—	$	—	$	1,119,902
Interest bearing transactions accounts	1,290,108		1,290,108		—		—		1,290,108
Savings accounts	1,091,381		1,091,381		—		—		1,091,381
Time deposits	1,412,354		—		1,418,673		—		1,418,673
Other	2,796		2,796		—		—		2,796
Total deposits	$	4,916,541	$	3,504,187	$	1,418,673	$	—	$	4,922,860

Short-term borrowings	$	244,002	$	—	$	244,002	$	—	$	244,002
Long-term debt	782,845		—		859,396		—		859,396
Subordinated debentures/notes	80,250		—		79,380		—		79,380
Accrued interest payable – deposits	1,895		32		1,863		—		1,895
Accrued interest payable – debt/borrowings	1,508		15		1,493		—		1,508

Derivative financial instruments:
Fair value swap	$	135	$	—	$	—	$	135	$	135

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	December 31, 2012
			Fair Value Measurements
(In thousands)	Carrying value		Level 1		Level 2		Level 3		Total fair value
Financial assets:
Cash and money market instruments	$	201,305	$	201,305	$	—	$	—	$	201,305
Investment securities	1,515,844		1,442		1,522,937		780		1,525,159
Accrued interest receivable - securities	6,122		—		6,122		—		6,122
Accrued interest receivable - loans	13,588		—		2		13,586		13,588
Mortgage loans held for sale	25,743		—		25,743		—		25,743
Mortgage IRLCs	372		—		372		—		372
Impaired loans carried at fair value	53,932		—		—		53,932		53,932
Other loans	4,314,738		—		—		4,348,705		4,348,705
Loans receivable, net	$	4,394,785	$	—	$	26,115	$	4,402,637	$	4,428,752

Financial liabilities:
Noninterest bearing checking accounts	$	1,137,290	$	1,137,290	$	—	—		$	1,137,290
Interest bearing transactions accounts	1,088,617		1,088,617		—		—		1,088,617
Savings accounts	1,038,356		1,038,356		—		—		1,038,356
Time deposits	1,450,424		—		1,458,793		—		1,458,793
Other	1,345		1,345		—		—		1,345
Total deposits	$	4,716,032	$	3,265,608	$	1,458,793	$	—	$	4,724,401

Short-term borrowings	$	344,168	$	—	$	344,168	$	—	$	344,168
Long-term debt	781,658		—		861,466		—		861,466
Subordinated debentures/notes	80,250		—		79,503		—		79,503
Accrued interest payable – deposits	1,960		21		1,939		—		1,960
Accrued interest payable – debt/borrowings	1,499		8		1,491		—		1,499

Derivative financial instruments:
Fair value swap	135		—		—		135		135

Note 1716 –Participation in the U.S. Treasury Capital Purchase Program (CPP)

On December 23, 2008, Park issued ~~$100~~$100 million of ~~cumulative perpetual preferred shares,~~Fixed-Rate Cumulative Perpetual Preferred Shares, Series A, with a liquidation preference of ~~$1,000~~$1,000 per share (the ~~“Senior~~“Series A Preferred Shares”). The Senior Preferred Shares constituted Tier 1 capital and ranked senior to Park’s common shares. The Senior Preferred Shares were to pay cumulative dividends at a rate of 5% per annum through February 14, 2014 and reset to a rate of 9% per annum thereafter. For the three month period ended March 31, 2012, Park recognized a charge to retained earnings of $1.5 million representing the preferred stock dividend and accretion of the discount on the preferred stock,, associated with ~~Park’s~~Park's 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 (the “Warrant”), which was 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 U.S. Department of the Treasury (calculated on a 20-day trailing average). The Warrant has a term of 10 years.

As a participant in the CPP, the Company was required to 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 was partially restricted until December 23, 2011 as a result of its participation in the CPP. Please refer to Note 20 – Subsequent Events, which discusses the Company’s repurchase of the Senior Preferred Shares and of the Warrant.

~~Note 18 –Other Comprehensive Income (Loss)~~

~~Other comprehensive income (loss) components and related tax effect are shown in the following table for the three month periods ended March 31, 2012 and 2011:~~

Three months ended March 31,
(in thousands) Before-tax
amount Tax effect Net-of-tax
amount

2012:
Change in pension plan assets and benefit obligations $ 634 $ 222 $ 412
Unrealized losses on available-for-sale securities (3,390 ) (1,188 ) (2,202 )
Unrealized net holding gain on cash flow hedge 173 60 113
Other comprehensive loss $ (2,583 ) $ (906 ) $ (1,677 )

2011:
Unrealized (losses) on available-for-sale securities $ (3,166 ) $ (1,108 ) $ (2,058 )
Reclassification adjustment for gains realized in net income (6,635 ) (2,322 ) (4,313 )
Unrealized net holding gain on cash flow hedge 204 71 133
Other comprehensive loss $ (9,597 ) $ (3,359 ) $ (6,238 )

~~The ending balance of each component of accumulated other comprehensive income (loss) was as follows:~~

(in thousands) Before-tax
amount Tax effect Net-of-tax
amount

March 31, 2012:
Changes in pension plan assets and benefit obligations $ (31,603 ) $ (11,061 ) $ (20,542 )
Unrealized gains on available-for-sale securities 16,108 5,637 10,471
Unrealized net holding loss on cash flow hedge (673 ) (236 ) (437 )
Total accumulated other comprehensive loss $ (16,168 ) $ (5,660 ) $ (10,508 )

December 31, 2011:
Changes in pension plan assets and benefit obligations $ (32,237 ) $ (11,283 ) $ (20,954 )
Unrealized gains on available-for-sale securities 19,498 6,825 12,673
Unrealized net holding loss on cash flow hedge (846 ) (296 ) (550 )
Total accumulated other comprehensive loss $ (13,585 ) $ (4,754 ) $ (8,831 )

March 31, 2011:
Changes in pension plan assets and benefit obligations $ (24,503 ) $ (8,576 ) $ (15,927 )
Unrealized gains on available-for-sale securities 13,462 4,712 8,750
Unrealized net holding loss on cash flow hedge (1,430 ) (501 ) (929 )
Total accumulated other comprehensive loss $ (12,471 ) $ (4,365 ) $ (8,106 )

~~Note 19 —Sale of Common Shares and Issuance of Common Stock Warrants~~

There were no sales of common shares or issuance of common stock warrants during the three months ended March 31, 2012 or March 31, 2011. Outstanding as of March 31, 2011 were 35,992 Series A Common Share Warrants and 35,992 Series B Common Share Warrants which were issued as part of the registered direct public offering completed on December 10, 2010. The Series A and Series B Common Share Warrants had an exercise price of $76.41. The Series A Common Share Warrants were not exercised and expired on June 10, 2011. The Series B Common Share Warrants were not exercised and expired on December 20, 2011.

~~Note 20 -Subsequent Events~~

In connection with the application submitted by Park to the U.S. Treasury for approval to repurchase from the U.S. Treasury the 100,000 Series A Preferred Shares, Park provided a proposed capital plan which included the issuance of an aggregate principal amount of $30 million of subordinated notes, which 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”).

On April 20, 2012, Park entered into a Note Purchase Agreement, dated April 20, 2012 (the “Purchase Agreement”), with 56 purchasers (each, a “Purchaser” and collectively, the “Purchasers”). Each Purchaser represented that such Purchaser qualified as an “accredited investor” within the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act”). Under the terms of the Purchase Agreement, the Purchasers purchased from Park an aggregate principal amount of $30,000,000 of 7% Subordinated Notes due April 20, 2022 (individually, a “Note” and collectively, the “Notes”). The Notes are intended to qualify as Tier 2 Capital under applicable rules and regulations of the Federal Reserve Board. Each Note was purchased at a purchase price of 100% of the principal amount thereof.

On April 19, 2012, Park received the approval from the U.S. Treasury to repurchase the 100,000 Series A Preferred Shares, which were issued by Park to the U.S. Treasury on December 23, 2008 as part of the CPP.

On April 25, 2012, Park entered into a Letter Agreement with the U.S. Treasury pursuant to which Park repurchased the 100,000 Series A Preferred Shares for a purchase price of ~~$100~~$100 million plus a pro rata accrued and unpaid dividend. Total consideration of ~~$100,972,222~~$101.0 million included accrued and unpaid dividends of ~~$972,222.~~$1.0 million. In addition to the accrued and unpaid dividends of ~~$972,222,~~$1.0 million, the charge to retained earnings, resulting from the repurchase of the Series A Preferred Shares, was ~~$1.6~~$1.6 million on April 25, 2012.

On May 2, 2012, Park entered into a Letter Agreement (the “Warrant Repurchase Letter Agreement”) pursuant to which Park repurchased from the U.S. Treasury the Warrant to purchase 227,376 Park common shares ~~(the “Warrant Repurchase Letter Agreement”)~~in full for consideration of ~~$2,842,400,~~$2.8 million, or ~~$12.50~~$12.50 per Park common share.

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Note 17 – Other Comprehensive Income (Loss)

Other comprehensive income (loss) components, net of tax, are shown in the following table for the three-month periods ended March 31, 2013 and 2012:



(in thousands)		Changes in pension plan assets and benefit obligations			Unrealized gains and losses on available for sale securities			Unrealized net holding loss on cash flow hedge			Total
Beginning balance at December 31, 2012		$	(27,134	)	$	9,616		$	—		$	(17,518	)
	Other comprehensive loss before reclassifications	—			(2,379		)	—			(2,379		)
	Amounts reclassified from accumulated other comprehensive income	—			—			—			—
Net current period other comprehensive loss		—			(2,379		)	—			(2,379		)
Ending balance at March 31, 2013		$	(27,134	)	$	7,237		$	—		$	(19,897	)

Beginning balance at December 31, 2011		$	(20,954	)	$	12,673		$	(550	)	$	(8,831	)
Net current period other comprehensive income (loss)		412			(2,202		)	113			(1,677		)
Ending balance at March 31, 2012		$	(20,542	)	$	10,471		$	(437	)	$	(10,508	)

During the three-month period ended March 31, 2013, there were no reclassifications out of accumulated other comprehensive income.

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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis (“MD&A”) 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. We have tried, whenever possible, to identify such statements by using words such as “anticipate,” “estimate,” “expect,” “forecast,” “project,” “intend,” “plan,” “believe,” and similar expressions in connection with any discussion of future operating or financial performance. The forward-looking statements are based on management’s current 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: deterioration in the asset value of Park's 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 value of the collateral could prove less valuable than assumed and cash flows may be worse than expected; Park's ability to sell OREO properties at prices as favorable as anticipated; Park's ability to execute its business plan successfully and within the expected timeframe; general economic and financial market conditions, and weakening in the economy, specifically the real estate market and the credit market, 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; deterioration in the asset value of Park's 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 value of the collateral could prove less valuable than assumed and cash flows may be worse than expected; Park's ability to sell OREO properties at prices as favorable as anticipated; 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; changes in unemployment; asset/liability repricing risks and liquidity risks; our liquidity requirements could be adversely affected by changes to regulations governing bank capital and liquidity standards as well as by changes in our assets and liabilities; competitive factors among financial service organizations increase significantly, including product and pricing pressures and our 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 “Dodd-Frank Act”), as well as future regulations which will be adopted by the relevant regulatory agencies, including the Consumer Financial Protection Bureau, to implement the Dodd-Frank Act’s ~~provisions;~~provisions, the Budget Control Act of 2011 and the American Taxpayer Relief Act of 2012; the effect of changes in accounting policies and practices, as may be adopted by the Financial Accounting Standards Board, the SEC, the Public Company Accounting Oversight Board and other regulatory agencies, and the accuracy of our assumptions and estimates used to prepare our financial statements; the effect of fiscal and governmental policies of the United States federal government; the costs and effects of regulatory and legal developments, including the outcome of potential regulatory or other governmental inquiries and legal proceedings and results of regulatory examinations; the adequacy of our risk management program; a failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors and other service providers, including as a result of cyber attacks; demand for loans in the respective market areas served by Park and its subsidiaries; and other risk factors relating to the banking 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, ~~2011.~~2012. Undue reliance should not be placed on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Park does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to update any forward-looking statement to reflect the events or circumstances after the date on which the forward-looking statement is made, or reflect the occurrence of unanticipated events, except to the extent required by law.

Critical Accounting Policies

Note 1 of the Notes to Consolidated Financial Statements included in Park’s ~~2011~~2012 Annual Report to Shareholders (“~~2011~~the 2012 Annual Report”) lists significant accounting policies used in the development and presentation of Park’s consolidated financial statements. The accounting and reporting policies of Park conform with U.S. generally accepted accounting principles (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

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current economic conditions. However, this evaluation ~~is inherently~~has subjective ~~as it requires~~components requiring 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 in future periods. (Refer to the ~~“Provision~~“Credit Metrics and Provision for (Recovery of) Loan Losses” section within this MD&A 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 March 31, ~~2012,~~2013, OREO totaled ~~$42.0~~$36.3 million, representing a ~~0.7% decrease~~1.7% increase, compared to ~~$42.3~~$35.7 million at December 31, ~~2011. The $300,000 net decrease in OREO during the first three months of 2012 was a result of $5.0 million in new OREO offset by sales of $3.9 million and devaluations of $1.4 million.~~

2012.

U.S. GAAP requires management to establish a fair value hierarchy, which has the objective of maximizing the use of observable market inputs. U.S. GAAP also requires enhanced disclosures regarding the inputs used to calculate fair value. These are classified as Level 1, 2, and 3. Level 3 inputs are those with significant unobservable inputs that reflect a company’s own assumptions about the market for a particular instrument. Some of these inputs could be based on internal models and cash flow analyses. At March 31, 2012, the fair value of assets based on Level 3 inputs for Park was approximately $126.0 million. This was 11.0% of the total amount of assets measured at fair value as of the end of the first quarter. The fair value of impaired loans was approximately $83.3 million (or 66.1%) of the total amount of Level 3 inputs. Additionally, there were $86.5 million of loans that were impaired and carried at cost, as fair value exceeded book value for each individual credit.analysis. The large majority of Park’s assets whose fair value is determined using Level 2 inputs consist of available-for-sale (“AFS”) securities. The fair value of these AFS securities is obtained largely through 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.

Please see Note 15- Fair Value of the Notes to Unaudited Consolidated Condensed Financial Statements in this Quarterly Report on Form 10-Q for additional information on fair value.

Management believes that the accounting for goodwill and other intangible assets also involves a higher degree of judgment than most other significant accounting policies. U.S. 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 Ohio-based banking subsidiary, The Park National Bank (“PNB”) 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. U.S. 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. Park’s most recent evaluation was completed during the second quarter of ~~2011~~2012 and resulted in no impairment of goodwill. The fair value of the goodwill, which resides on the books of PNB, is estimated by reviewing the past and projected operating results for PNB, deposit and loan totals for PNB and banking industry comparable information. ~~At March 31, 2012, on a consolidated basis, Park had core deposit intangibles of $755,000 subject to amortization and $72.3 million of goodwill, which was not subject to periodic amortization.~~ Please see Note 4 –Goodwill and Intangible Assets of the Notes to Unaudited Consolidated Condensed Financial Statements in this Quarterly Report on Form 10-Q for additional information on intangible assets.

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Comparison of Results of Operations

For the Three Months Ended March 31, ~~2012~~2013 and ~~2011~~

2012

Summary Discussion of Results

Net income for the three months ended March 31, ~~2012~~2013 was ~~$31.5~~$20.7 million, compared to ~~$22.2~~$31.5 million for the first quarter of ~~2011, an increase of $9.3 million or 41.9%.~~2012. Net income available to common shareholders was $20.7 million for the first quarter of 2013 compared to $30.0 million (which is net of preferred stock dividends and accretion) ~~was $30.0 million for the first quarter of 2012 compared to $20.7 million~~ for the three months ended March 31, ~~2011, an increase of $9.3 million or 44.9%.~~2012. Preferred stock dividends and the related accretion of the discount on the preferred stock, pertaining to the Fixed Rate Cumulative Perpetual Preferred Shares, Series A, each without par value and with a liquidation preference of $1,000 per share (the “Series A Preferred Shares”) issued to the U.S. Treasury on December 23, 2008, ~~were~~was $1.48 million for the first quarter ofin 2012. On April 25, 2012, ~~and $1.46~~Park repurchased the $100 million ~~for~~in Series A Preferred Shares issued to the ~~same quarter in 2011. The results for the first quarter of 2012 and 2011 include the gain from the sale~~U.S. Treasury as part of the ~~Vision Bank business of $22.2 million ($14.4 million after-tax)~~Capital Purchase Program.

Net income and ~~the gains resulting from the sale of investment securities of $6.6 million ($4.3 million after-tax), respectively.~~

~~Diluted earnings per~~net income available to common share were $1.95 for the first quarter of 2012 compared to $1.35 for the first quarter of 2011, an increase of $0.60 per share or 44.4%. Weighted average diluted common shares outstanding were 15,417,745shareholders for the three months ended March 31, 2012 included a gain of $22.2 million ($14.4 million after-tax) from the sale of substantially all of the performing loans, operating assets and the liabilities of Vision Bank ("Vision"). Excluding the gain on sale of the Vision business, net income and net income available to common shareholders was $17.1 million and $15.6 million, respectively, for the period ended March 31, 2012.

Diluted earnings per common share were $1.34 for the first quarter of 2013 compared to ~~15,403,420~~$1.95 for the first quarter of 2012. Excluding the gain on sale of the Vision business in the first quarter of 2012, diluted earnings per common share were $1.01. Weighted average diluted common shares outstanding were 15,411,990 for the three months ended March 31, 2013, compared to 15,417,745 diluted common shares for the first quarter of ~~2011, an increase~~2012.

Projection of ~~14,325 diluted common shares or 0.09%.~~

~~Included~~Fiscal 2013 Results - By Operating Segment

The information below begins with Park's projected consolidated pre-tax, pre-provision income and incorporates a projected range for provision for loan losses, income before income tax, income taxes and net income for Park on a consolidated basis in 2013.



Projected Net Income
(In thousands)	Original projection for 2013				25% of midpoint		Q1 2013		Current projection for 2013
Pre-tax, pre-provision income	$	113,000	$	131,000	$	30,500	$	28,160	$	106,000	$	118,000
Provision for loan losses	20,000		15,000		4,375		329		14,000		10,000
Income before income tax	$	93,000	$	116,000	$	26,125	$	27,831	$	92,000	$	108,000
Federal income taxes	23,250		30,160		6,676		7,121		22,000		27,600
Net income	$	69,750	$	85,840	$	19,449	$	20,710	$	70,000	$	80,400

The decline in the current projections of pre-tax, pre-provision income (from management's original projection) results ~~discussed above~~from the continued low interest rate environment, resulting in lower than previously projected net interest income. Conversely, management currently projects that the provision for loan losses will be lower than originally projected as a result of positive credit experience at both PNB and SEPH through the first quarter of 2013. See detailed segment information below.

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First Quarter Financial Results - By Operating Segment

The table below reflects the net income (loss) by segment for the first quarter of 2013, for the first quarter of 2012 ~~are~~and for each of the ~~operating results for SE~~fiscal years ended December 31, 2012 and 2011. Park's segments include The Park National Bank ("PNB"), Guardian Financial Services Company (“GFSC”), Southeast Property Holdings, LLC ~~(“SE LLC”~~("SEPH") and "All Other" which primarily consists of Park as the "Parent Company."



(In thousands)	Q1 2013			Q1 2012		2012			2011
PNB	$	19,940		$	21,561	$	87,106		$	106,851
GFSC	740			806		3,550			2,721
Park Parent Company	132			49		195			(1,595		)
Ongoing operations	$	20,812		$	22,416	$	90,851		$	107,977
Vision Bank	—			—		—			(22,526		)
SEPH	(102		)	9,059		(12,221		)	(3,311		)
Total Park	$	20,710		$	31,475	$	78,630		$	82,140

The “Park Parent Company” above excludes the results for SEPH, an entity which is winding down commensurate with the disposition of its problem assets. Management considers the “Ongoing operations” results to be reflective of the business of Park and its subsidiaries on a going forward basis. The discussion below provides additional information regarding the segments that make up the “Ongoing operations”, followed by additional information on SEPH.

Vision merged with and into SEPH, a non-bank subsidiary of ~~Park. The~~Park, following the sale of the Vision business to Centennial Bank (“Centennial”) on February 16, 2012. As previously discussed, the sale of the Vision business in the first quarter of 2012 resulted in a pre-tax gain of $22.2 million ($14.4 million after-tax), which is included in the SEPH Q1 2012 and the 2012 fiscal year results presented in the table above. SEPH holds the remaining assets and liabilities retained by Vision ~~Bank (“Vision”)~~ subsequent to the sale. SEPH assets consist primarily of performing and nonperforming loans and OREO. This segment represents a run-off portfolio of the legacy Vision assets.

The Park National Bank (PNB)

The table below reflects the results for PNB for the first quarter of 2013, the first quarter of 2012 and for the prior two fiscal years ended December 31, 2012 and 2011.



(In thousands)	Q1 2013		Q1 2012		2012		2011
Net interest income	$	52,735	$	55,846	$	221,758	$	236,282
Provision for loan losses	3,130		4,672		16,678		30,220
Fee income	17,872		16,661		70,739		67,348
Security gains	—		—		—		23,634
Total other expense	40,324		38,056		156,516		146,235
Income before income taxes	$	27,153	$	29,779	$	119,303	$	150,809
Federal income taxes	7,213		8,218		32,197		43,958
Net income	$	19,940	$	21,561	$	87,106	$	106,851
Net income excluding security gains	$	19,940	$	21,561	$	87,106	$	91,489

The table below provides certain balance sheet information and financial ratios for PNB as of March 31, 2013, December 31, 2012 and March 31, 2012.

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(In thousands)	March 31, 2013			Dec. 31, 2012			March 31, 2012			% change from 12/31/12		% change from 3/31/12
Loans	$	4,368,446		$	4,369,173		$	4,203,435		(0.02	)%	3.93	%
Allowance for loan losses	52,901			53,131			57,408			(0.43	)%	(7.85	)%
Net loans	4,315,545			4,316,042			4,146,027			(0.01	)%	4.09	%
Total assets	6,611,802			6,502,579			6,587,773			1.68	%	0.36	%
Average assets (YTD)	6,555,952			6,532,683			6,451,704			0.36	%	1.62	%
Deposits	5,005,238			4,814,107			4,961,121			3.97	%	0.89	%
Return on average assets *	1.23		%	1.33		%	1.34		%	(7.52	)%	(8.21	)%
* Annualized for the three months ended March 31, 2013 and 2012.

Loan balances were largely stable in the first quarter of 2013, declining $727,000, or 0.02%. Loans outstanding at March 31, 2013 of $4.37 billion represented an increase of $165 million, or 3.93%, compared to the loans outstanding of $4.20 billion at March 31, 2012. The $165 million increase in loans experienced at PNB over the last twelve months is primarily related to continued growth in the 15-year, fixed-rate mortgage loan portfolio of approximately $52 million, growth in the consumer loan portfolio of approximately $45 million and increases in the commercial loan portfolio of approximately $70 million. As noted above, PNB's allowance for loan losses has declined by $4.5 million, or 7.85%, to $52.9 million at March 31, 2013, compared to $57.4 million at March 31, 2012. The decline in PNB's allowance for loan losses is due to continued improvement in the credit metrics across the PNB loan portfolio. Refer to the “Credit Metrics and Provision for (Recovery of) Loan Losses” section below for additional information regarding the improvement in the credit metrics of PNB's loan portfolio.

Guardian Financial Services Company (GFSC)

The table below reflects the results for GFSC for the first quarter of 2013, the first quarter of 2012 and for the prior two fiscal years ended December 31, 2012 and 2011.



(In thousands)	Q1 2013		Q1 2012		2012		2011
Net interest income	$	2,133	$	2,211	$	9,156	$	8,693
Provision for loan losses	210		250		859		2,000
Fee income	2		—		—		—
Total other expense	786		721		2,835		2,506
Income before income taxes	$	1,139	$	1,240	$	5,462	$	4,187
Federal income taxes	399		434		1,912		1,466
Net income	$	740	$	806	$	3,550	$	2,721

The table below provides certain balance sheet information and financial ratios for GFSC as of March 31, 2013, for the year ended December 31, 2012 and as of March 31, 2012.



(In thousands)	March 31, 2013			Dec. 31, 2012			March 31, 2012			% change from 12/31/12		% change from 3/31/12
Loans	$	49,961		$	50,082		$	48,044		(0.24	)%	3.99	%
Allowance for loan losses	2,414			2,406			2,350			0.33	%	2.72	%
Net loans	47,547			47,676			45,694			(0.27	)%	4.06	%
Total assets	49,555			49,926			47,380			(0.74	)%	4.59	%
Average assets (YTD)	49,172			48,381			46,362			1.63	%	6.06	%
Return on average assets *	6.10		%	7.34		%	6.99		%	(16.89	)%	(12.73	)%
* Annualized for the three months ended March 31, 2013 and 2012.

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Park Parent Company

The table below reflects the results for Park's Parent Company for the first quarter of 2013, the first quarter of 2012 and for the prior two fiscal years ended December 31, 2012 and 2011.



(In thousands)	Q1 2013			Q1 2012			2012			2011
Net interest income	$	1,240		$	1,061		$	4,742		$	2,155
Provision for loan losses	—			—			—			—
Fee income	100			68			233			350
Total other expense	1,644			1,528			6,585			7,115
Loss before income taxes	$	(304	)	$	(399	)	$	(1,610	)	$	(4,610	)
Federal income tax benefit	(436		)	(448		)	(1,805		)	(3,015		)
Net income (loss)	$	132		$	49		$	195		$	(1,595	)

The net interest income for Park's parent company includes interest income on loans to SEPH and on subordinated debt investments with PNB, which are eliminated in the consolidated Park National Corporation totals. Additionally, net interest income includes interest expense related to the $35.25 million and $30 million of subordinated notes issued by Park in December 2009 and April 2012, respectively.

SEPH / Vision

Vision merged with and into SEPH following the sale of the Vision business to Centennial ~~Bank (refer~~on February 16, 2012. SEPH holds the remaining assets and liabilities retained by Vision subsequent to ~~additional discussion~~the sale. SEPH's assets consist primarily of performing and nonperforming loans and OREO. This segment represents a run off portfolio of the legacy Vision assets.

The table below reflects the results for SEPH for the first quarter of 2013 and the first quarter of 2012. Also included below are the results for SEPH for the fiscal years ended December 31, 2012 and 2011. SEPH was formed in March 2011. Prior to holding the remaining Vision assets, SEPH held OREO assets that were transferred from Vision to SEPH. Also included below are the results for Vision for the fiscal year ended December 31, 2011.



(In thousands)	Q1 2013			Q1 2012		2012			SEPH 2011			Vision 2011
Net interest income (expense)	$	(655	)	$	2,610	$	(341	)	$	(974	)	$	27,078
Provision for (recovery of) loan losses	(3,011		)	3,416		17,882			—			31,052
Fee income	831			724		(736		)	(3,039		)	1,422
Security gains	—			—		—			—			5,195
Gain on sale of Vision business	—			22,167		22,167			—			—
Total other expense	3,344			8,165		22,032			1,082			31,379
Income (loss) before income taxes	$	(157	)	$	13,920	$	(18,824	)	$	(5,095	)	$	(28,736	)
Federal income taxes (benefit)	(55		)	4,861		(6,603		)	(1,784		)	(6,210		)
Net income (loss)	$	(102	)	$	9,059	$	(12,221	)	$	(3,311	)	$	(22,526	)
Net income (loss) excluding security gains	$	(102	)	$	9,059	$	(12,221	)	$	(3,311	)	$	(25,903	)

SEPH financial results for the first quarter of 2013 included net recoveries of $3.0 million, resulting in a recovery of loan losses for the quarter. The net recoveries during the first quarter consisted of recoveries of $4.4 million offset by charge-offs of $1.4 million. Fee income at SEPH of $831,000 was primarily related to gains on the sale of OREO in the ~~“Sale~~first quarter.

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On February 16, 2012, when Vision ~~Bank Business” section below)~~merged with and into SEPH, the loans then held by Vision were ~~subsequently~~ transferred to ~~SE LLC through~~SEPH by operation of law at their fair market value and no allowance for loan loss is carried at SEPH. The loans included in both the ~~merger~~performing and nonperforming portfolios have been charged down to their fair value. The table below provides additional information regarding charge-offs as a percentage of unpaid principal balance, as of March 31, 2013.



SEPH - Retained Vision Loan Portfolio

(In thousands)	Unpaid Principal Balance		Charge-Offs		Net Book Balance		Charge-off Percentage
Nonperforming loans - retained by SEPH	$	116,605	$	68,312	$	48,293	58.58	%
Performing loans - retained by SEPH	3,470		209		3,261		6.02	%
Total SEPH loan exposure	$	120,075	$	68,521	$	51,554	57.07	%

The table below provides an overview of SEPH loans and OREO, representing the legacy Vision ~~into SE LLC. SE LLC also holds other real estate owned (“OREO”) that had previously been transferred to SE LLC from Vision. Net income~~assets. This information is provided as of March 31, 2013 and December 31, 2012, showing the decline in legacy Vision assets at SEPH over the past quarter.



(In thousands)	SEPH 03/31/13		SEPH 12/31/2012		Change from last quarter
Nonperforming loans - retained by SEPH	$	48,293	$	55,292	$	(6,999	)
OREO - retained by SEPH	21,705		21,003		702
Total nonperforming assets	$	69,998	$	76,295	$	(6,297	)
Performing loans - retained by SEPH	3,261		3,886		(625		)
Total Legacy Vision assets - retained by SEPH	$	73,259	$	80,181	$	(6,922	)

Park National Corporation

The table below reflects the results for ~~SE LLC~~Park on a consolidated basis for the first quarter of 2013, the first quarter of 2012 and for the prior two fiscal years ended December 31, 2012 and 2011.



(In thousands)	Q1 2013		Q1 2012		2012		2011
Net interest income	$	55,453	$	61,728	$	235,315	$	273,234
Provision for loan losses	329		8,338		35,419		63,272
Fee income	18,805		17,453		70,236		66,081
Security gains	—		—		—		28,829
Gain on sale of Vision business	—		22,167		22,167		—
Total other expense	46,098		48,470		187,968		188,317
Income before income taxes	$	27,831	$	44,540	$	104,331	$	116,555
Federal income taxes	7,121		13,065		25,701		34,415
Net income	$	20,710	$	31,475	$	78,630	$	82,140
Net income excluding gains (1)	$	20,710	$	17,066	$	64,221	$	63,401

(1) Excludes the gain on sale of the Vision business for the first quarter of 2012 ~~was $9.1 million, which included the gain on the sale of the Vision business.~~

~~Sale of Vision Bank Business~~

~~On February 16, 2012, Park completed the purchase~~ and assumption transaction between Park, Home BancShares, Inc. (“Home”) and their respective subsidiary banks. Home subsidiary Centennial Bank (“Centennial”) purchased certain assets and liabilities of Vision for a purchase price of $27.9 million. Centennial purchased performing loans with an unpaid principal balance of approximately $354 million, assumed ownership or operation of all 17 Vision office locations, and assumed deposit liabilities of approximately $520 million. Certain other miscellaneous assets and liabilities were also purchased by Centennial. The remaining assets and liabilities were retained by Vision.

As a result of the transaction, Park recorded a pre-tax gain of $22.2 million (after actual expenses directly related to the transaction). The transaction also decreased Park’s total assets during the first quarter of 2012. As of March 31, 2012, Park had total assets of $6.8 billion, compared to $7.0 billion at December 31, 2011 and $7.3 billion at March 31, 2011.

~~The following tables compare the components of net income~~ for the ~~three month period~~year ended March 31, 2012 with the components of net income for the three month period ended March 31, 2011. This information is provided for Park, PNB, Guardian Financial Services Company (“Guardian”), and SE LLC.

Table - Park – Summary Income Statement
Three months ended March 31,
(In thousands) 2012 2011 % Change
Net interest income $ 61,728 $ 69,313 -10.94 %
Provision for loan losses 9,000 14,100 -36.17 %
Other income 17,453 15,030 16.12 %
Gain on sale of Vision business 22,167 - N.M.
Security gains - 6,635 N.M.
Operating expenses 47,808 46,346 3.15 %
Income before taxes $ 44,540 $ 30,532 45.88 %
Income taxes 13,065 8,336 56.73 %
Net income $ 31,475 $ 22,196 41.80 %

Table - PNB – Summary Income Statement
Three months ended March 31,
(In thousands) 2012 2011 % Change
Net interest income $ 55,846 $ 60,236 -7.29 %
Provision for loan losses 4,672 4,975 -6.09 %
Other income 16,661 16,262 2.45 %
Security gains - 6,635 N.M.
Operating expenses 38,056 36,321 4.78 %
Income before taxes $ 29,779 $ 41,837 -28.82 %
Income taxes 8,218 12,808 -35.84 %
Net income $ 21,561 $ 29,029 -25.73 %

Table - Guardian – Summary Income Statement
Three months ended March 31,
(In thousands) 2012 2011 % Change
Net interest income $ 2,211 $ 2,025 9.19 %
Provision for loan losses 250 525 -52.38 %
Other income - - -
Security gains - - -
Operating expenses 721 577 24.96 %
Income before taxes $ 1,240 $ 923 34.34 %
Income taxes 434 323 34.37 %
Net income $ 806 $ 600 34.33 %
Table - SE LLC – Summary Income Statement
Three months ended March 31,
(In thousands) 2012 2011 % Change
Net interest income $ 2,610 - N.M.
Provision for loan losses 4,078 - N.M.
Other income 724 - N.M.
Gain on sale of Vision business 22,167 - N.M.
Security gains - - N.M.
Operating expenses 7,503 - N.M.
Income before taxes $ 13,920 - N.M.
Income taxes 4,861 - N.M.
Net income $ 9,059 - N.M.

The following table compares the guidance for 2012 that management provided in Park’s 2011 Annual Report with the actual results for the three month period ended March 31, 2012. This guidance was included in Park’s 2011 Annual Report in the “Financial Review” section on pages 38 through 40.

(in thousands) Projected results for
2012 25% of annual projection Actual results
for the first three months
of 2012
Net interest income $ 240,000 to $250,000 $ 60,000 - $62,500 $ 61,728
Provision for loan losses $ 20,000 to $27,000 $ 5,000 - $6,750 $ 9,000
Total other income $ 62,000 to $66,000 $ 15,500 - $16,500 $ 17,453
Total other expense $ 170,000 to $175,000 $ 42,500- $43,750 $ 47,808

Park’s management believes that the guidance previously provided for total other income and total other expense continue to be good estimates for 2012. While each of total other income and total other expense were above 25% of the annual projection during the first quarter of 2012, management expects the performance over the remaining nine months of 2012 will bring these back in line with our original projections. The amounts above 25% of the annual projection during the first quarter of 2012 were largely related to (1) other income at Vision through February 16, 2012 and (2) other expense associated with the sale of the Vision business.

~~Net interest income for the first quarter of 2012 was within 25% of the annual projection for 2012; however, management’s most recent projection for the twelve months ending~~ December 31, 2012 ~~is for net interest income to be within~~and the ~~range of $235 million to $245 million. See more information in the section called “Guidance on Net Interest Income for 2012”.~~

~~The provision for loan losses~~security gains for the ~~first quarter~~year ended December 31, 2011.

Table of ~~2012 was $9.0 million. The loan loss provision for the first three months of 2012 was $2.3 million above 25% of the annual projection provided in the 2011 Annual Report.~~The provision for loan losses was $4.1 million at SE LLC, which was higher than management anticipated for the first quarter of 2012. During the first quarter of 2012, management reappraised approximately half of the collateral related to nonperforming loans held at SE LLC, which led to some charge-offs and a corresponding increase in the loan loss provision. See the section called “Provision for Loan Losses” for more information.

Contents

Net Interest Income Comparison for the First Quarter of ~~2012~~2013 and ~~2011~~

2012

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. Net interest income decreased by ~~$7.6~~$6.2 million, or ~~11.0%~~10.0%, to $55.5 million for the first quarter of 2013, compared to $61.7 million for the first quarter of ~~2012 compared to $69.3 million for the first quarter of 2011.~~2012. The ~~$7.6~~$6.2 million decrease iswas primarily due to the sale of the Vision business during the first quarter of ~~2012. Vision’s net~~2012, as well as the continued low interest rate environment. Net interest income (expense) for SEPH/Vision for the three months ended March 31, 2013 and 2012 was $(655,000) and $2.6 million, ~~a $4.1 million decline from $6.7 million for the same period in 2011.~~

respectively.

The following table compares the average balance and tax equivalent yield on interest earning assets and the average balance and cost of interest bearing liabilities for the first quarter of ~~2012~~2013 with the same quarter in ~~2011.~~

Three months ended March 31,
2012 2011
(in thousands) Average
balance Tax
equivalent % Average
balance Tax
equivalent %
Loans (1) $ 4,485,074 5.52 % $ 4,743,075 5.63 %
Taxable investments 1,639,775 3.33 % 1,939,873 3.98 %
Tax exempt investments 4,043 7.05 % 12,240 7.63 %
Money market instruments 168,880 0.25 % 26,948 0.10 %
Interest earning assets $ 6,297,772 4.81 % $ 6,722,136 5.14 %

Interest bearing deposits $ 3,891,482 0.56 % $ 4,245,255 0.74 %
Short-term borrowings 241,329 0.29 % 391,366 0.28 %
Long-term debt 897,699 3.38 % 847,800 3.52 %
Interest bearing liabilities $ 5,030,510 1.05 % $ 5,484,421 1.14 %
Excess interest earning assets $ 1,267,262 $ 1,237,715
Net interest spread 3.76 % 4.00 %
Net interest margin 3.97 % 4.21 %

2012.



	Three months ended March 31, 2013				Three months ended March 31, 2012
(In thousands)	Average balance		Tax equivalent %		Average balance		Tax equivalent %
Loans (1)	$	4,438,308	5.13	%	$	4,485,074	5.52	%
Taxable investments	1,425,903		2.91	%	1,639,775		3.33	%
Tax exempt investments	1,469		7.15	%	4,043		7.05	%
Money market instruments	259,723		0.25	%	168,880		0.25	%
Interest earning assets	$	6,125,403	4.41	%	$	6,297,772	4.81	%

Interest bearing deposits (2)	$	3,747,633	0.39	%	$	3,891,482	0.56	%
Short-term borrowings	245,695		0.24	%	241,329		0.29	%
Long-term debt	862,610		3.29	%	897,699		3.38	%
Interest bearing liabilities	$	4,855,938	0.90	%	$	5,030,510	1.05	%
Excess interest earning assets	$	1,269,465			$	1,267,262
Net interest spread			3.51	%			3.76	%
Net interest margin			3.70	%			3.97	%

(1) For purposes of the computation, nonaccrual loans and Vision loans held for sale through February 16, 2012 are included in the average balance.

Vision loans sold to Centennial on February 16, 2012 totaled approximately $356 million.

(2) For purposes of the computation, interest bearing deposits held by Vision through February 16, 2012 are included in the average balance. Vision deposits assumed by Centennial on February 16, 2012 totaled approximately $523 million.

Average interest earning assets for the first quarter of ~~2012~~2013 decreased by ~~$424~~$173 million or ~~6.3%~~2.7% to ~~$6,298~~$6,125 million, compared to ~~$6,722~~$6,298 million for the first quarter of ~~2011.~~2012. The average yield on interest earning assets decreased by 3340 basis points to 4.41% for the first quarter of 2013, compared to 4.81% for the first quarter of ~~2012 compared to 5.14% for the first quarter of 2011.~~

2012.

Average interest bearing liabilities for the first quarter of ~~2012~~2013 decreased by ~~$453~~$175 million or ~~8.3%~~3.5% to ~~$5,031~~$4,856 million, compared to ~~$5,484~~$5,031 million for the first quarter of ~~2011.~~2012. The average cost of interest bearing liabilities decreased by 915 basis points to 0.90% for the first quarter of 2013, compared to 1.05% for the first quarter of ~~2012 compared to 1.14% for the first quarter of 2011.~~

2012.

Interest Rates

Short-term interest rates continue to be extremely low. The average federal funds rate was ~~0.10%~~0.14% for the first quarter of ~~2012,~~2013, after being 0.11% for the ~~same as all~~first quarter of ~~2011.~~

2012. Additionally, the ten-year treasury rate averaged 1.95% for the first quarter of 2013, and 2.02% for the first quarter of 2012.

In December 2008, the Federal Open Market Committee (“FOMC”) of the Federal Reserve lowered the targeted federal funds rate to a range of 0% to 0.25% in response to a severe recession in the U.S. economy. Economic conditions began to improve in the second half of 2009 and continued to improve modestly throughout 2010 and 2011. The modest economic recovery ~~has~~had continued during 2012, but uncertainty regarding the ~~first three months~~U.S. "fiscal cliff", overseas sovereign debt crisis and financial industry regulations continue to hold back any kind of meaningful recovery. The Federal Reserve implemented a third round of

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quantitative easing during the third quarter of 2012 ~~but the~~to further reduce long term interest rates and help support a still significantly distressed U.S. housing ~~market continues to be significantly depressed and the U.S. unemployment rate continues to be relatively high at 8.2% as of March 31, 2012.~~

~~Park’s management expects that the FOMC will continue to maintain the targeted federal funds interest rate in the range of 0% to 0.25% during 2012.~~market. The annual average federal funds rate was 0.16% for 2009, 0.18% for 2010, ~~and~~ 0.10% for ~~2011.~~

~~Discussion of~~ 2011, and 0.15% for 2012.

Loans, Investments, Deposits and Borrowings

Average loan balances decreased by ~~$258~~$47 million or ~~5.4%~~1.0% to ~~$4,485~~$4,438 million for the three months ended March 31, ~~2012,~~2013, compared to ~~$4,743~~$4,485 million for the first quarter of ~~2011.~~2012. The decline in average loan balances is due to the inclusion, in the first quarter of 2012, of the Vision loans sold to Centennial on February 16, 2012. Period end loan balances as of March 31, 2013 and 2012 were $4,444 million and $4,324 million, respectively. The average yield on the loan portfolio decreased by 1139 basis points to 5.13% for the first quarter of 2013 compared to 5.52% for the first quarter of ~~2012 compared to 5.63% for the first quarter of 2011.~~2012. The decrease in the average yield on the loan ~~balances during the first quarter of 2012~~portfolio was primarily due to interest rate changes associated with the ~~sale~~variable rate portion of ~~Vision~~the loan portfolio and management's decision to continue to retain 15-year, fixed-rate mortgage loans ~~to Centennial~~ on ~~February 16, 2012 of approximately $382 million.~~

~~Total loan balances~~the balance sheet.

Park's total loans outstanding at March 31, ~~2012~~2013 were ~~$4,324~~$4,444 million compared to ~~$4,317~~$4,450 million at December 31, ~~2011, an increase~~2012, a decrease of $7$6 million, or an annualized ~~0.7%~~0.6%. ~~The~~Loan balances at Park's Ohio-based subsidiary, PNB, have remained relatively stable, decreasing by $1 million to $4,368 million at March 31, 2013 from $4,369 million at December 31, ~~2011 amount excludes Vision loans held for sale at that date.~~

2012.

The average balance of taxable investment securities decreased by ~~$300~~$214 million, or ~~15.5%~~13.0%, to $1,426 million for the first quarter of 2013, compared to $1,640 million for the first quarter of ~~2012 compared to $1,940 million for the first quarter of 2011.~~2012. The average yield on taxable investment securities ~~was~~declined by 42 basis points to 2.91% for the first quarter of 2013, compared to 3.33% for the first quarter of ~~2012 compared to 3.98% for the first quarter of 2011.~~

2012.

The average balance of tax exempt investment securities decreased by ~~$8.2~~$2.5 million, or ~~67.2%~~62.5%, to $1.5 million for the first quarter of 2013, compared to $4.0 million for the first quarter of ~~2012 compared to $12.2 million for the first quarter of 2011.~~2012. The tax equivalent yield on tax exempt investment securities was 7.15% for the first quarter of 2013 and 7.05% for the first quarter of ~~2012 and 7.63% for the first quarter of 2011.~~2012. Park has not purchased any tax exempt investment securities for the past several ~~quarters and does not plan to purchase tax exempt securities in the second quarter of 2012.~~

quarters.

The average balance of money market instruments increased by ~~$142~~$90.8 million to $259.7 million for the first quarter of 2013 compared to $168.9 million for the first quarter of ~~2012 compared to $26.9 million for the first quarter of 2011.~~2012. The average yield on money market instruments was 0.25% for ~~the first quarter of 2012 compared to 0.10% for the first quarter of 2011.~~

both periods.

The amortized cost of total investment securities was ~~$1,841~~$1,341 million at March 31, ~~2012,~~2013, compared to ~~$1,689~~$1,567 million at December 31, ~~2011.~~2012. At March 31, ~~2012,~~2013, the tax equivalent yield on Park’s investment portfolio was ~~3.34%~~2.62% and the remaining average life was ~~2.7~~estimated to be 3.8 years.

Average interest bearing deposit accounts decreased by ~~$354~~$143 million or ~~8.3%~~3.7% to $3,748 million for the first quarter of 2013, compared to $3,891 million for the first quarter of ~~2012~~2012. The decline in deposit balances compared to ~~$4,245 million for~~prior year was due to the ~~first quarter~~assumption of ~~2011.~~Vision deposits by Centennial on February 16, 2012 of approximately $523 million. The average interest rate paid on interest bearing deposits decreased by 1817 basis points to 0.39% for the first quarter of 2013, compared to 0.56% for the first quarter ~~of 2012 compared to 0.74% for the first quarter~~ last year.

Average total borrowings were ~~$1,139~~$1,108 million for the three months ended March 31, ~~2012,~~2013, compared to ~~$1,239~~$1,139 million for the first quarter of ~~2011,~~2012, a decrease of ~~$100~~$31 million or ~~8.1%~~2.7%. The average interest rate paid on total borrowings was 2.62% for the first quarter of 2013, compared to 2.73% for the first quarter of ~~2012 compared to 2.50% for the first quarter of 2011.~~

~~The net~~2012.

Net interest spread (the difference between the tax equivalent yield on interest earning assets and the cost of interest bearing liabilities) decreased by 2425 basis points to 3.51% for the first quarter of 2013, compared to 3.76% for the first quarter ~~of 2012 compared to 4.00% for the first quarter~~ last year. ~~The net~~Net interest margin (the annualized tax equivalent net interest income divided by average interest earning assets) ~~was~~declined by 27 basis points to 3.70% for the first quarter of 2013, compared to 3.97% for the first quarter of ~~2012 compared to 4.21% for the first quarter~~2012.

Table of ~~2011.~~

~~Guidance on Net Interest Income for 2012~~

Management provided guidance in Park’s 2011 Annual Report (page 38) that net interest income for 2012 would be approximately $240 million to $250 million, tax equivalent net interest margin would be approximately 3.88% to 3.98% and average interest earning assets for 2012 would be approximately $6,200 million.

The actual results for the first three months of 2012 were in line with management’s guidance. Net interest income for the first three months of 2012 was $61.7 million, which annualized would be approximately $248.2 million for 2012. The tax equivalent net interest margin was 3.97% and average interest earning assets were $6,298 million for the first three months of 2012.

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The following table displays for the past five quarters the average balance of interest earning assets, net interest income and the tax equivalent net interest margin.

(in thousands) Average interest
earning assets Net interest
income Tax equivalent
net interest margin
March 2011 $ 6,722,136 $ 69,313 4.21 %
June 2011 $ 6,745,790 $ 70,022 4.19 %
September 2011 $ 6,610,953 $ 67,620 4.09 %
December 2011 $ 6,487,958 $ 66,279 4.08 %
March 2012 $ 6,297,772 $ 61,728 3.97 %

Management’s current forecast projects that net interest income for the second quarter of 2012 will be approximately $59 million and approximately $239 million for all of 2012. Management also expects that average interest earning assets will be approximately $6,188 million for the second quarter of 2012 and that the tax equivalent net interest margin will be about 3.82% for the quarter.



(In thousands)	Average interest earning assets		Net interest income		Tax equivalent net interest margin
March 2012	$	6,297,772	$	61,728	3.97	%
June 2012	$	6,134,797	$	58,680	3.87	%
September 2012	$	6,200,288	$	58,016	3.75	%
December 2012	$	6,128,159	$	56,891	3.72	%
March 2013	$	6,125,403	$	55,453	3.70	%

Mix of Average Interest Earning Assets and Yield on Average Interest Earning Assets

The following table shows the mix of average interest earning assets for the ~~first quarter of 2012~~three months ended March 31, 2013 and for the years ofended December 31, 2012, 2011 ~~2010~~ and ~~2009.~~

(dollars in thousands) Loans Investments Money Market
Instruments Total
2009 - year $ 4,594,436 $ 1,877,303 $ 52,658 $ 6,524,397
Percentage 70.42 % 28.77 % 0.81 % 100.00 %
2010 - year $ 4,642,478 $ 1,746,356 $ 93,009 $ 6,481,843
Percentage 71.62 % 26.94 % 1.44 % 100.00 %
2011 - year $ 4,713,511 $ 1,848,880 $ 78,593 $ 6,640,984
Percentage 70.98 % 27.84 % 1.18 % 100.00 %
2012 - first quarter $ 4,485,074 $ 1,643,818 $ 168,880 $ 6,297,772
Percentage 71.22 % 26.10 % 2.68 % 100.00 %

2010.



(Dollars in thousands)	Loans			Investments			Money Market Instruments			Total
2010 - year	$	4,642,478		$	1,746,356		$	93,009		$	6,481,843
Percentage of total earning assets	71.62		%	26.94		%	1.44		%	100.00		%
2011 - year	$	4,713,511		$	1,848,880		$	78,593		$	6,640,984
Percentage of total earning assets	70.98		%	27.84		%	1.18		%	100.00		%
2012 - year	$	4,410,661		$	1,613,131		$	166,319		$	6,190,111
Percentage of total earning assets	71.25		%	26.06		%	2.69		%	100.00		%
2013 - first quarter	$	4,438,308		$	1,427,372		$	259,723		$	6,125,403
Percentage of total earning assets	72.46		%	23.30		%	4.24		%	100.00		%

A primary financial goal for Park is to increase the amount of quality loans on its balance sheet. Management emphasizes the importance of growing quality loans on an ongoing basis to its retail and commercial lenders. The average balance of loans for the first three months of ~~2012~~2013 was ~~$4,485~~$4,438 million, compared to ~~$4,714~~$4,411 million for all of ~~2011.~~

2012.

Management actively manages the investment portfolio. The average balance of investment securities may increase as a result of attractive investment opportunities. Likewise, the average balance of investment securities may decrease if management sells investment securities or chooses not to reinvest the cash flow from maturities or investment repayments.

The following table shows the yield on average interest earning assets for the ~~first quarter of 2012~~three months ended March 31, 2013 and for the years ofended December 31, 2012, 2011 ~~2010~~ and ~~2009.~~

Loans Investments Money Market
Instruments Total
2009 - year 6.03 % 4.94 % 0.22 % 5.67 %
2010 - year 5.80 % 4.47 % 0.22 % 5.36 %
2011 - year 5.60 % 3.76 % 0.23 % 5.03 %
2012 - first quarter 5.52 % 3.34 % 0.25 % 4.81 %

2010.



	Loans		Investments		Money Market Instruments		Total
2010 - year	5.80	%	4.47	%	0.22	%	5.36	%
2011 - year	5.60	%	3.76	%	0.23	%	5.03	%
2012 - year	5.35	%	3.15	%	0.25	%	4.64	%
2013 - first quarter	5.13	%	2.92	%	0.25	%	4.41	%

The loan portfolio for Park provides a higher yield than the yield on investment securities. As stated previously, a primary financial objective of Park is to grow quality loans. ~~Our commercial and retail lenders are actively calling on current and prospective customers in an effort to generate additional loan volume.~~

Park’s net interest income and net interest margin would increase if Park were able to increase its loan portfolio with quality loans. Park has strong liquidity and would be able to easily fund ana significant increase in its loan portfolio.

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Credit Metrics and Provision for (Recovery of) Loan Losses

The provision for loan losses for Park was ~~$9.0 million~~$329,000 for the three months ended March 31, ~~2012,~~2013, compared to ~~$14.1~~$8.3 million for the same period in ~~2011.~~2012. Net loan charge-offs for Park were $551,000 for the first quarter of 2013, compared to $17.0 million for the first quarter of ~~2012, compared to $9.1 million~~2012. Net loan charge-offs for the first quarter of ~~2011.Net loan charge-offs for the three months ended March 31,~~ 2012 included the charge-off of $12.1 million related to the retained Vision loans to bring the retained Vision ~~loan~~ portfolio to fair value prior to the merger of Vision with and into ~~SE LLC~~SEPH on February 16, 2012. ~~In addition to this $12.1 million charge-off, PNB, Guardian and SE LLC recorded net charge-offs of $2.7 million, $197,000 and $2.1 million, respectively, during the first quarter of 2012.~~ ~~Park’s~~Park's annualized ratio of net loan charge-offs to average loans was ~~1.53%~~0.05% for the three months ended March 31, ~~2012,~~2013, compared to ~~0.78%~~1.53% for the same period in ~~2011.Management expects the annualized net loan charge-off ratio will decline throughout the remainder of~~ 2012.

The provision for loan losses for PNB and Guardian, Park’s two Ohio-based subsidiaries, was ~~$4.9~~$3.3 million for the three months ended March 31, ~~2012,~~2013, compared to ~~$5.5~~$4.9 million for the same period in ~~2011.~~2012. Net loan charge-offs for PNB and Guardian were $3.6 million for the first three months of 2013, compared to $2.9 million for the ~~first quarter of 2012, compared to $4.1 million for the first quarter of 2011.~~same period in 2012. The annualized ratio of net loan charge-offs to average loans for PNB and Guardian was ~~0.28%~~0.33% for the three months ended March 31, ~~2012,~~2013, compared to ~~0.40%~~0.28% for the same period in ~~2011.~~

2012.

The ~~provision for~~recovery of loan losses for ~~SE LLC, including those provisions recorded at Vision prior to the February 16, 2012 merger of Vision with and into SE LLC,~~SEPH was ~~$4.1~~$3.0 million for the three months ended March 31, 2013, compared to the provision of $3.4 million for the same period in 2012. Net loan recoveries for SEPH for the three months ended March 31, 2013 were $3.0 million. Net loan charge-offs for ~~SE LLC~~SEPH during the ~~first quarter of 2012, subsequent to~~period February 16, 2012 through March 31, 2012, were $2.1 million. ~~As previously discussed, Vision recognized charge-offs of $12.1 million to bring the loan portfolio to fair value on~~

On February 16, ~~2012.~~

~~SE LLC, as~~2012, when Vision merged with and into SEPH, the loans then held by Vision were transferred to SEPH by operation of law at their fair market value and no allowance for loan loss is carried at SEPH. As a ~~non-bank subsidiary, is not permitted to carry an ALLL, but instead must record~~result, the loans ~~on its balance sheet at fair value. Given this requirement,~~included in both the performing and nonperforming ~~retained loan~~ portfolios ~~have been~~were charged down to their fair ~~value,~~value. The table below provides additional information regarding cumulative charge-offs as ~~noted in the table below:~~

SE LLC – Retained Vision Loan Portfolio
Charge-offs as a percentage of unpaid principal balance
March 31, 2012

(In thousands) Unpaid
Principal
Balance Charge-Offs Net Book
Balance Charge-off
Percentage
Nonperforming loans - retained by SE LLC $ 160,858 $ 78,532 $ 82,326 49 %
Performing loans - retained by SE LLC 17,348 1,225 16,123 7 %
Total SE LLC loan exposure $ 178,206 $ 79,757 $ 98,449 45 %

a percentage of unpaid principal balance, as of March 31, 2013.



SEPH - Retained Vision Loan Portfolio
Charge-offs as a percentage of unpaid principal balance
(In thousands)	Unpaid Principal Balance		Charge-Offs		Net Book Balance		Charge-off Percentage
Nonperforming loans - retained by SEPH	$	116,605	$	68,312	$	48,293	58.58	%
Performing loans - retained by SEPH	3,470		209		3,261		6.02	%
Total SEPH loan exposure	$	120,075	$	68,521	$	51,554	57.07	%

Park management obtains updated appraisal information for all nonperforming loans at least annually. As ~~part~~new appraisal information is received, management performs an evaluation of the ~~transaction between Vision~~appraisal and ~~Centennial, Park agreed~~applies a discount for anticipated disposition costs to ~~allow Centennial to “put back” up to $7.5 million aggregate principal amount of loans, which were originally included within~~determine the ~~loans sold in the transaction. The loan put-back option expires 180 days after the closing~~net realizable value of the ~~transaction, on August 16, 2012. While it remains uncertain~~collateral, which is compared against the ~~total~~outstanding principal ~~amount~~balance to determine if additional write-downs are necessary.

Table of loans which may be put back by Centennial and the potential loss exposure that may be recognized in connection with any loans repurchased, Park recorded a loan loss provision of $662,000 in respect of the Centennial put-back option during the first quarter of 2012. The $662,000 is included within other liabilities on the balance sheet and when combined with Park’s ALLL balance of $59.8 million at March 31, 2012 results in a total allowance for credit losses of $60.4 million.

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The following table provides additional information related to Park’s allowance for loan losses, including information related to specific reserves and general reserves, at March 31, 2013, December 31, 2012 and ~~December~~March 31, ~~2011.~~

Park National Corporation - Allowance for Loan & Lease Losses
(In thousands) March 31,
2012 December 31,
2011
Total ALLL $ 59,758 $ 68,444
Specific reserves 9,505 15,935
General reserves $ 50,253 $ 52,509

Total loans $ 4,324,383 $ 4,317,099
Impaired commercial loans 179,293 187,074
Non-impaired loans $ 4,145,090 $ 4,130,025

Total ALLL to total loan ratio 1.38 % 1.59 %
General reserves as a % of non-impaired loans 1.21 % 1.27 %

~~During the first three months~~2012.



Park National Corporation - Allowance for Loan & Lease Losses
(In thousands)	March 31, 2013			December 31, 2012			March 31, 2012
Total ALLL	$	55,315		$	55,537		59,758
Specific reserves	8,260			8,276			9,505
General reserves	$	47,055		$	47,261		50,253

Total loans	$	4,443,523		$	4,450,322		4,324,383
Impaired commercial loans	130,270			137,238			179,293
Non-impaired loans	$	4,313,253		$	4,313,084		4,145,090

Total ALLL to total loan ratio	1.24		%	1.25		%	1.38	%
General reserves as a % of non-impaired loans	1.09		%	1.10		%	1.21	%

The decline in general reserves as a percentage of non-impaired loans from 1.21% at March 31, 2012 ~~new nonaccrual loans were $21.8 million. These new nonaccruals were down significantly from the total level of new nonaccrual loans experienced~~to 1.09% at March 31, 2013 is primarily due to improving credit trends in the ~~previous four years~~commercial loan portfolio for Park's Ohio operations (PNB and ~~management expects this will continue throughout 2012.~~GFSC). The following table shows ~~new nonaccrual~~the trends in Park's Ohio - based operations commercial loan “Watch List”.



Commercial loans * (In thousands)	March 31, 2013		December 31, 2012		March 31, 2012
Pass rated	$	2,232,747	$	2,225,702	$	2,132,391
Special Mention	47,298		49,275		57,823
Substandard	14,127		16,843		17,376
Impaired	86,411		89,365		104,181
Total	$	2,380,583	$	2,381,185	$	2,311,771

* Commercial loans include: (1) Commercial, financial and agricultural loans, (2) Commercial real estate loans, (3) Commercial related loans in the construction real estate portfolio and (4) Commercial related loans in the residential real estate portfolio.

The commercial loan table above demonstrates the improvement experienced over the last 12 months in Park's Ohio - based operations commercial portfolio. Pass rated commercial loans have grown $100.4 million, or 4.71% since March 31, 2012. Over this period, special mention loans have declined by $10.5 million, or 18.2%, and substandard loans have declined by $3.2 million, or 18.7%. These improved credit metrics in the special mention and substandard categories of the commercial loan portfolio have a significant impact on the general reserves that are established to cover incurred losses on performing commercial loans. As these credit metrics have improved over the past 12 months, general reserves have declined.

Delinquent and accruing loan trends (includes all outstanding loans, consumer and commercial) for Park's Ohio-based operations have remained at low levels. Delinquent and accruing loans were $28.9 million or 0.66% of total loans at March 31, 2013, compared to $39.6 million (0.90%) at December 31, 2012 and $28.2 million (0.67%) at March 31, 2012.

Impaired commercial loans for Park's Ohio-based operations were $86.4 million as of March 31, 2013, a decline from the ~~first quarter~~balance of impaired loans of $89.4 million and $104.2 million at December 31, 2012 and March 31, 2012, respectively. The $86.4 million of impaired commercial loans at March 31, 2013 included $9.6 million of loans modified in a troubled debt restructuring ("TDR") which are currently on accrual status and performing in accordance with the ~~four previous years.~~

New nonaccrual loan information (in thousands): March 31,
2012 2011 2010 2009 2008
Nonaccrual loans, beginning of period $ 195,106 $ 289,268 $ 233,544 $ 159,512 $ 101,128
New nonaccrual loans - Ohio-based operations 21,210 78,316 85,081 57,641 58,161
New nonaccrual loans - Vision/SE LLC 568 45,842 90,094 126,540 83,588
Resolved nonaccrual loans 33,657 218,320 119,451 110,149 83,365
Nonaccrual loans, end of period $ 183,227 $ 195,106 $ 289,268 $ 233,544 $ 159,512

restructured terms. Impaired commercial loans are individually evaluated for impairment and specific reserves are established to cover incurred losses.

Nonperforming Assets: Nonperforming loans include: 1) loans whose interest is accounted for on a nonaccrual basis; 2) TDRs on accrual status; and 3) loans which are contractually past due 90 days or more as to principal or interest payments but whose interest continues to accrue. Prior to Park’s adoption of ASU 2011-02, Park classified all TDRs as nonaccrual loans. With the adoption of ASU 2011-02, management determined it was appropriate to return certain TDRs to accrual status. Specifically, if the restructured note has been current for a period of at least six months, and management expects the borrower will remain current throughout the renegotiated contract, the loan may be returned to accrual status. OREO results from taking possession of property used as collateral for a defaulted loan.

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The following table compares Park’s nonperforming assets at March 31, ~~2012,~~2013, December 31, ~~2011~~2012 and March 31, ~~2011.~~

2012.

Park National Corporation - Nonperforming Assets

(in thousands) March 31,
2012 December 31,
2011 March 31,
2011
Nonaccrual loans $ 183,227 $ 195,106 $ 278,819
Renegotiated loans on accrual status 34,436 28,607 260
Loans past due 90 days or more 2,281 3,489 2,228
Total nonperforming loans $ 219,944 $ 227,202 $ 281,307

Other real estate owned – PNB 13,387 13,240 9,788
Other real estate owned – SE LLC 28,578 29,032 13,004
Other real estate owned – Vision - - 22,476
Total nonperforming assets $ 261,909 $ 269,474 $ 326,575

Percentage of nonaccrual loans to total loans 4.24 % 4.52 % 5.87 %
Percentage of nonperforming loans to total loans 5.09 % 5.26 % 5.92 %
Percentage of nonperforming assets to total loans 6.06 % 6.24 % 6.87 %
Percentage of nonperforming assets to total assets 3.86 % 3.86 % 4.46 %



(In thousands)	March 31, 2013			December 31, 2012			March 31, 2012
Nonaccrual loans	$	151,539		$	155,536		$	183,227
Accruing TDRs	24,274			29,800			34,436
Loans past due 90 days or more	1,350			2,970			2,281
Total nonperforming loans	$	177,163		$	188,306		$	219,944

OREO – PNB	14,587			14,715			13,387
OREO – SEPH	21,705			21,003			28,578
Total nonperforming assets	$	213,455		$	224,024		$	261,909

Percentage of nonaccrual loans to total loans	3.41		%	3.49		%	4.24		%
Percentage of nonperforming loans to total loans	3.99		%	4.23		%	5.09		%
Percentage of nonperforming assets to total loans	4.80		%	5.03		%	6.06		%
Percentage of nonperforming assets to total assets	3.16		%	3.37		%	3.86		%

Park management reviews all ~~troubled debt restructurings (TDRs)~~TDRs quarterly and may classify a TDR as accruing if the borrower has been current for a period of at least six months with respect to loan payments and management expects that the borrower will be able to continue to make payments in accordance with the terms of the restructured note. At March 31, ~~2012,~~2013, management deemed it appropriate to have ~~$34.4~~$24.3 million of TDRs on accrual status, while the remaining ~~$98.6~~$84.3 million of TDRs were on nonaccrual status. Management ~~also~~ reviews all accruing TDRs quarterly to ensure payments continue to be made in accordance with the modified terms.

Nonperforming assets for PNB and ~~Guardian~~GFSC and for ~~SE LLC/~~SEPH/Vision as of March 31, ~~2012,~~2013, December 31, ~~2011~~2012 and March 31, ~~2011~~2012 were as reported in the following two tables:

PNB and ~~Guardian~~GFSC - Nonperforming Assets

(in thousands) March 31,
2012 December 31,
2011 March 31,
2011
Nonaccrual loans $ 102,886 $ 96,113 $ 115,476
Renegotiated loans on accrual status 32,451 26,342 260
Loans past due 90 days or more 2,281 3,367 2,228
Total nonperforming loans $ 137,618 $ 125,822 $ 117,964

Other real estate owned – Park National Bank 13,387 13,240 9,788
Total nonperforming assets $ 151,005 $ 139,062 $ 127,752

Percentage of nonaccrual loans to total loans 2.43 % 2.29 % 2.78 %
Percentage of nonperforming loans to total loans 3.26 % 3.00 % 2.84 %
Percentage of nonperforming assets to total loans 3.57 % 3.32 % 3.08 %
Percentage of nonperforming assets to total assets 2.29 % 2.21 % 1.93 %

~~SE LLC/~~

(In thousands) March 31, 2013
December 31,
2012
March 31, 2012
Nonaccrual loans $ 103,246
$ 100,244
$ 102,886
Accruing TDRs 24,274
29,800
32,451
Loans past due 90 days or more 1,350
2,970
2,281
Total nonperforming loans $ 128,870
$ 133,014
$ 137,618

OREO – PNB 14,587
14,715
13,387
Total nonperforming assets $ 143,457
$ 147,729
$ 151,005

Percentage of nonaccrual loans to total loans 2.35 % 2.28 % 2.43 %
Percentage of nonperforming loans to total loans 2.93 % 3.03 % 3.26 %
Percentage of nonperforming assets to total loans 3.27 % 3.36 % 3.57 %
Percentage of nonperforming assets to total assets 2.17 % 2.27 % 2.29 %

51
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SEPH/Vision - Nonperforming Assets

(in thousands) March 31,
2012 December 31,
2011 March 31,
2011
Nonaccrual loans $ 80,341 $ 98,993 $ 163,343
Renegotiated loans on accrual status 1,985 2,265 -
Loans past due 90 days or more - 122 -
Total nonperforming loans $ 82,326 $ 101,380 $ 163,343

Other real estate owned – SE LLC 28,578 29,032 -
Other real estate owned – Vision - - 22,476
Total nonperforming assets $ 110,904 $ 130,412 $ 185,819

Percentage of nonaccrual loans to total loans N.M. N.M. 26.06 %
Percentage of nonperforming loans to total loans N.M. N.M. 26.06 %
Percentage of nonperforming assets to total loans N.M. N.M. 29.65 %
Percentage of nonperforming assets to total assets N.M. N.M. 23.62 %



(In thousands)	March 31, 2013		December 31, 2012		March 31, 2012
Nonaccrual loans	$	48,293	$	55,292	$	80,341
Accruing TDRs	—		—		1,985
Loans past due 90 days or more	—		—		—
Total nonperforming loans	$	48,293	$	55,292	$	82,326

OREO – SEPH	21,705		21,003		28,578
Total nonperforming assets	$	69,998	$	76,295	$	110,904

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 44.5 (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 than those rated special mention 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 March 31, ~~2012,~~2013, Park had taken partial charge-offs of approximately ~~$108.3~~$102.9 million related to the ~~$179.3~~$130.3 million of commercial loans considered to be impaired, compared to charge-offs of approximately ~~$103.8~~$105.1 million related to the ~~$187.1~~$137.2 million of impaired commercial loans at December 31, ~~2011.~~2012. The table below provides additional information related to the Park impaired commercial loans at March 31, ~~2012,~~2013, including those impaired commercial loans at PNB and those impaired Vision commercial loans retained at ~~SE LLC.~~

SEPH.

Park National Corporation - Impaired Commercial Loans at March 31, ~~2012~~

(In thousands) Unsold
Principal
balance (UPB) Prior charge-
offs Total
impaired
loans Specific
reserve Carrying
balance Carrying
balance as a
% of UPB
PNB $ 140,338 $ 36,157 $ 104,181 $ 9,505 $ 94,676 67.46 %
SE LLC - CL&D loans 67,545 48,112 19,433 - 19,433 28.77 %
SE LLC - Other loans 79,740 24,061 55,679 - 55,679 69.83 %
PRK totals $ 287,623 $ 108,330 $ 179,293 $ 9,505 $ 169,788 59.03 %

2013



(In thousands)	Unpaid principal balance (UPB)		Prior charge- offs		Total impaired loans		Specific reserve		Carrying balance		Carrying balance as a % of UPB
PNB	$	124,359	$	37,948	$	86,411	$	8,260	$	78,151	62.84	%
SEPH - CL&D loans	53,287		42,805		10,482		—		10,482		19.67	%
SEPH - Other loans	55,498		22,121		33,377		—		33,377		60.14	%
PRK totals	$	233,144	$	102,874	$	130,270	$	8,260	$	122,010	52.33	%

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. Park’s annualized ~~36-month~~48-month loss experience for the period ended December 31, ~~2011,~~2012, defined as charge-offs plus changes in specific reserves, within the commercial loan portfolio ~~has been 0.71%~~was 0.66% of the principal balance of these loans. This annualized ~~36-month~~48-month loss experience ~~includes~~included only the performance of the PNB loan portfolio. The allowance for loan losses related to performing commercial loans was ~~$36.4~~$31.6 million or ~~1.64%~~1.38% of the outstanding principal balance of other accruing commercial loans at March 31, ~~2012.~~

2013.

The overall reserve of ~~1.64%~~1.38% for other accruing commercial loans breaks down as follows: pass-rated commercial loans are reserved at ~~1.35%~~1.25%; special mention commercial loans are reserved at ~~4.66%~~4.62%; and substandard commercial loans are reserved at ~~21.77%~~11.21%. The reserve levels for pass-rated, special mention and substandard commercial loans in excess of the annualized ~~36-month~~48-month loss experience of ~~0.71%~~0.66% are due to the following factors which management reviews on a quarterly or annual basis:

~~Loss Emergence Period Factor:~~Annually during the fourth quarter, management calculates the loss emergence period for each commercial loan segment. This loss emergence period is calculated based upon the average period of time it takes a credit to move from pass-rated to non - accrual. If the loss emergence period for any commercial loan segment is greater than one year, management applies additional general reserves to all performing loans within that segment of the commercial loan portfolio.

~~Loss Migration Factor:~~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. Annually, management calculates a loss migration factor for each commercial loan segment for special mention and substandard credits based on a review of losses over the past three year period, considering how each individual credit was rated at the beginning of the three year period.

~~Environmental Loss Factor:~~Management has identified certain macroeconomic factors that trend in accordance with losses in Park’s commercial loan portfolio. These macroeconomic factors are reviewed quarterly and adjustments to the environmental loss factor impacting each segment in the performing commercial loan portfolio correlates to changes in the macroeconomic environment.

Loss Emergence Period Factor: Annually during the fourth quarter, management calculates the loss emergence period for each commercial loan segment. This loss emergence period is calculated based upon the average period of time it takes a credit to move from pass-rated to nonaccrual. If the loss emergence period for any commercial loan

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segment is greater than one year, management applies additional general reserves to all performing loans within that segment of the commercial loan portfolio.

Loss Migration Factor: 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. Annually, management calculates a loss migration factor for each commercial loan segment for special mention and substandard credits based on a review of losses over the past three - year period, considering how each individual credit was rated at the beginning of the three - year period.

Environmental Loss Factor: Management has identified certain macroeconomic factors that trend in accordance with losses in Park’s commercial loan portfolio. These macroeconomic factors are reviewed quarterly and adjustments to the environmental loss factor impacting each segment in the performing commercial loan portfolio correlates to changes in the macroeconomic environment.

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 3648 months. Management generally considers a one-year coverage period (the “Historical Loss Factor”) appropriate because the probable loss on any given loan in the consumer loan pool should ordinarily become apparent in that time frame. However, management may incorporate adjustments to the Historical Loss Factor as circumstances warrant additional reserves (e.g., increased loan delinquencies, improving or deteriorating economic conditions, changes in lending management and underwriting standards, etc.). At March 31, ~~2012,~~2013, the coverage period within the consumer portfolio was approximately ~~1.34~~1.58 years.

The judgmental increases discussed above incorporate management’s evaluation of the impact of environmental qualitative factors which pose additional risks and assignment of a component of the ALLL 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; and levels of, and trends in, consumer bankruptcies, delinquencies, impaired loans and charge-offs and recoveries. The determination of this component of the ALLL requires considerable management judgment. Management continues to work to address weaknesses in those loans that may result in future loss. Actual loss experience may be more or less than the amount allocated.

On page 41 of Park’s 2011 Annual Report, management projected that the provision for loan losses would be within the range from $20 million to $27 million for 2012. While management expects that the provision for loan losses will be lower in each of the next three quarters compared to the first quarter of 2012, the projected range for the twelve months ended December 31, 2012 has been increased. Management now expects the provision for loan losses will be within the range of $23 million to $30 million for 2012.

Total O~~ther~~Other Income

Total other income ~~exclusive of securities gains increased~~decreased by ~~$24.6~~$20.8 million to ~~$39.6~~$18.8 million for the quarter ended March 31, ~~2012,~~2013, compared to ~~$15.0~~$39.6 million for the first quarter of ~~2011.~~2012. Excluding the ~~$22.2 million~~ gain on sale of the Vision business in ~~the first quarter of~~ 2012, total other income increased ~~by $2.4~~$1.4 million ~~or 16%.~~

to $18.8 million for the three months ended March 31, 2013.

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

(in thousands) Three months ended
March 31,
2012 2011 Change
Income from fiduciary activities $ 3,828 $ 3,722 $ 106
Service charges on deposits 4,071 4,245 (174 )
Other service income 2,734 2,301 433
Checkcard fee income 3,172 2,976 196
Bank owned life insurance income 1,202 1,229 (27 )
ATM fees 608 654 (46 )
OREO devaluations (1,359 ) (2,535 ) 1,176
Gain on sale of the Vision business 22,167 - 22,167
Other 3,197 2,438 759
Total other income $ 39,620 $ 15,030 $ 24,590

income.



	Three months ended March 31,
(In thousands)	2013		2012			Change
Income from fiduciary activities	$	4,076	$	3,828		$	248
Service charges on deposits	3,822		4,071			(249		)
Other service income	3,985		2,734			1,251
Checkcard fee income	2,983		3,172			(189		)
Bank owned life insurance income	1,202		1,202			—
ATM fees	627		608			19
OREO valuation adjustments	401		(1,359		)	1,760
Gain on sale of OREO, net	224		1,045			(821		)
Gain on sale of the Vision business	—		22,167			(22,167		)
Other	1,485		2,152			(667		)
Total other income	$	18,805	$	39,620		$	(20,815	)

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The following table breaks out the change in total other income for the three months ended March 31, 2013 compared to March 31, 2012 between Park’s Ohio-based operations and SEPH/Vision Bank.



	Change from 2012 to 2013
(In thousands)	Ohio based operations			SEPH/VB			Total
Income from fiduciary activities	$	251		$	(3	)	$	248
Service charges on deposits	(95		)	(154		)	(249		)
Other service income	1,359			(108		)	1,251
Checkcard fee income	(71		)	(118		)	(189		)
Bank owned life insurance income	18			(18		)	—
ATM fees	28			(9		)	19
OREO valuation adjustments	71			1,689			1,760
Gain on sale of OREO, net	(823		)	2			(821		)
Gain on sale of the Vision business	—			(22,167		)	(22,167		)
Other	507			(1,174		)	(667		)
Total other income	$	1,245		$	(22,060	)	$	(20,815	)

Income from fiduciary activities, which represents revenue earned from Park’s trust activities, increased by ~~$106,000,~~$248,000, or ~~2.8%~~6.5%, to ~~$3.8~~$4.1 million for the three months ended March 31, ~~2012,~~2013, compared to ~~$3.7~~$3.8 million for the same period in ~~2011.~~2012. Fiduciary fees are generally charged based on the market value of customer accounts. The average market value for assets under management for the three months ended March 31, ~~2012~~2013 was ~~$3,554~~$3,675 million, an increase of approximately ~~3.2%~~4.3% compared to the average for the three months ended March 31, ~~2011~~2012 of ~~$3,445~~$3,522 million.

Service charges on deposits decreased by ~~$174,000,~~$249,000, or ~~4.1%~~7.3%, to ~~$4.1~~$3.8 million for the ~~three-month period~~three months ended March 31, ~~2012,~~2013, compared to ~~$4.2~~$4.1 million for the same period in ~~2011.~~2012. This decrease was primarily attributable to a ~~modest~~ decline in non-sufficient funds (“NSF”) ~~and overdraft~~ charges during the first three months of ~~2012~~2013 compared to the same period in ~~2011.~~

2012.

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 increased by ~~$433,000,~~$1.3 million, or ~~18.8%~~48.1%, to ~~$2.7~~$4.0 million for the three months ended March 31, ~~2012,~~2013, compared to ~~$2.3~~$2.7 million for the same period in ~~2011.~~2012. This increase was primarily due to an increase in originations of mortgage ~~originations~~loans for sale into the secondary market during the first three months of ~~2012~~2013 compared to the same period in ~~2011.~~

~~Checkcard fee income, which is generated from debit card transactions, increased $196,000, or 6.6%, to $3.2 million for~~2012.

For the three months ended March 31, ~~2012,~~2013, OREO valuation adjustments, included devaluations of $253,000, which were offset by the reversal of $654,000 of the OREO valuation allowance previously established at December 31, 2012. OREO devaluations, net, thus resulted in other income of $401,000 in the first quarter of 2013, compared to ~~$3.0~~expense of $1.4 million in the first quarter of 2012.

For the three months ended March 31, 2013, gain on the sale of OREO, net, decreased by $821,000 to $224,000, compared to $1.0 million for the same period in ~~2011. This increase was attributable to continued increases in the volume of debit card transactions. For~~2012. The decrease through the first three months of ~~2012,~~2013 was largely due to fewer gains on the ~~number~~sale of ~~Visa debit card transactions increased by 7.4% compared to the same period in 2011.~~

OREO ~~devaluations decreased by $1.2 million to $1.4 million for the three months ended March 31, 2012, compared to $2.5 million for the same period in 2011. Approximately $1.1 million~~at PNB.

Table of ~~the devaluations were at SE LLC and $0.3 million were at PNB during the first quarter of 2012.~~

Management provided guidance in Park’s 2011 Annual Report (page 40) that total other income would be approximately $62 million to $66 million for 2012. Management’s latest projections remain unchanged from those in the 2011 Annual Report.

~~Gain on Sale of Securities~~

For the first quarter of 2012, Park did not sell any investment securities. 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.

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Total Other Expense

The following table is a summary of the changes in the components of total other expense:

Three months ended
March 31,
(in thousands) 2012 2011 Change
Salaries and employee benefits $ 24,823 $ 25,064 $ (241 )
Occupancy expense 2,670 3,000 (330 )
Furniture and equipment expense 2,621 2,657 (36 )
Data processing fees 1,200 1,253 (53 )
Professional fees and services 5,581 4,874 707
Amortization of intangibles 1,754 669 1,085
Marketing 843 623 220
Insurance 1,490 2,269 (779 )
Communication 1,537 1,556 (19 )
Other 5,289 4,381 908
Total other expense $ 47,808 $ 46,346 $ 1,462



	Three months ended March 31,
(In thousands)	2013		2012		Change
Salaries and employee benefits	$	24,633	$	24,823	$	(190	)
Occupancy expense	2,597		2,670		(73		)
Furniture and equipment expense	2,607		2,621		(14		)
Data processing fees	1,019		1,200		(181		)
Professional fees and services	5,864		5,581		283
Amortization of intangibles	112		1,754		(1,642		)
Marketing	848		843		5
Insurance	1,302		1,490		(188		)
Communication	1,580		1,537		43
State taxes	928		989		(61		)
Loan put provision	—		662		(662		)
OREO expense	512		723		(211		)
Other	4,096		3,577		519
Total other expense	$	46,098	$	48,470	$	(2,372	)

The following table breaks out the change in total other expense for the three months ended March 31, 2013 compared to March 31, 2012 between Park’s Ohio-based operations and SEPH/Vision.



	Three months ended March 31,
(In thousands)	Ohio based operations			SEPH/Vision			Total
Salaries and employee benefits	$	1,451		$	(1,641	)	$	(190	)
Occupancy expense	240			(313		)	(73		)
Furniture and equipment expense	56			(70		)	(14		)
Data processing fees	61			(242		)	(181		)
Professional fees and services	414			(131		)	283
Amortization of intangibles	(27		)	(1,615		)	(1,642		)
Marketing	27			(22		)	5
Insurance	(51		)	(137		)	(188		)
Communication	132			(89		)	43
State taxes	(9		)	(52		)	(61		)
Loan put provision	—			(662		)	(662		)
OREO expense	70			(281		)	(211		)
Other	85			434			519
Total other expense	$	2,449		$	(4,821	)	$	(2,372	)

Salaries and employee benefits decreased by ~~$241,000,~~$190,000, or ~~1.0%~~0.8%, to ~~$24.8~~$24.6 million for the three months ended March 31, ~~2012~~2013, compared to ~~$25.1~~$24.8 million for the same period in ~~2011.~~2012. Salaries and benefits for ~~SE LLC (and Vision for first quarter 2011)~~SEPH were ~~$2.0~~$0.4 million for the first three months of ~~2012~~2013, compared to ~~$3.1~~$2.0 million for the same period in ~~2011. Management anticipates that salaries~~2012, which included Vision through February 16, 2012. Salaries and benefits for ~~SE LLC will continue to decline in~~ the ~~second quarter of 2012 as a result of the sale of the Vision business and the completion of system conversions (both for Park and Home).~~

~~Occupancy expense declined by $330,000, or 11.0% to $2.7~~Ohio-based operations were $24.3 million for the ~~quarter~~three months ended March 31, ~~2012 compared to $3.0~~2013, a 6.4% increase from the $22.8 million for the same period in ~~2011. The reduction was due to a combination~~2012.

Table of ~~the sale of the Vision business on February 16, 2012 and a modest decline at PNB.~~

Contents

Professional fees and services increased by ~~$707,000,~~$283,000, or ~~14.5%~~5.4% to $5.9 million for the three months ended March 31, 2013, compared to $5.6 million for the first ~~three months~~quarter of ~~2012 compared to $4.9 million~~2012. Professional fees and services increased by $414,000 for the ~~first quarter of 2011. Approximately $400,000 of the increase was at PNB~~Ohio-based operations and consisted of higher legal expenses and higher title appraisal expenses ~~resulting from an~~largely due to the increase in mortgage loan originations during the ~~quarter. The remaining~~first three months of 2013. Offsetting this increase was a decline of $131,000 at SEPH, largely ~~related~~due to ~~increases in~~lower legal ~~fees associated with our continued pursuit of borrowers and guarantors at SE LLC.~~

expenses.

Amortization of intangibles ~~increased~~decreased by ~~$1.1~~$1.6 million, or ~~162%~~88.9% to $112,000 for the first quarter of 2013, compared to $1.8 million for the same period in 2012. This decrease was a result of accelerated intangible amortization in the first quarter of 2012 ~~compared to $669,000 for the same period in 2011. This increase was~~ due to the ~~acceleration of amortization expense at Vision for the period from January 1, 2012 through February 16, 2012, the closing date~~sale of the ~~transaction between~~ Vision ~~and Centennial.~~business. Management expects amortization expense will be approximately ~~$139,000 per quarter~~$225,000 for the remainder of ~~2012.~~

Insurance expense declined by $779,000 million or 34.3% to $1.5 million for the three months ended March 31, 2012 compared to $2.3 million for the same period in 2011. During the third quarter of 2011, Park began recognizing insurance expense for the premiums to be paid to the FDIC based on the new assessment methodology. This new methodology is based on a calculation using total assets less tangible equity. The new methodology will result in a decline in insurance expense going forward for the rest of 2012.

Management provided guidance in Park’s 2011 Annual Report (page 40) that total other expense would be approximately $170 to $175 million for 2012. Management’s latest projection for total other expense is unchanged from the guidance in Park’s 2011 Annual Report.

2013.

The table below provides information related to other expense atwithin each of Park's segments, which include PNB, GFSC, Vision, SEPH and "All Other" (which primarily consists of Park ~~Vision and Park less Vision~~as the "Parent Company") for each quarter in ~~2011:~~

Other Expense - Quarterly 2011
Park Vision Park, less Vision
Q1 2011 $ 46,346 $ 7,425 $ 38,921
Q2 2011 47,007 8,174 38,833
Q3 2011 45,599 7,267 38,332
Q4 2011 49,365 8,513 40,852
Total 2011 $ 188,317 $ 31,379 $ 156,938
Average quarterly expense $ 47,079 $ 7,845 $ 39,234

~~As shown in the table above, absent Vision, other expense would have been approximately $39.2 million per quarter in 2011. While SE LLC will continue~~2012 and 2013 to have other expense as Park management works through the retained loans and OREO, other expense at SE LLC is expected to be significantly lower than the average quarterly Vision expense recognized in 2011. Management currently expects total other expense will be approximately $41 to $42 million quarterly throughout the remainder of 2012.

date.



Other Expense - Quarterly 2012 and 2013
(In thousands)	PNB		GFSC		All Other		Vision		SEPH		Total PRK
Q1 2012	$	38,056	$	721	$	1,528	$	—	$	8,165	$	48,470
Q2 2012	37,260		706		1,839		—		5,999		45,804
Q3 2012	39,609		693		1,373		—		4,008		45,683
Q4 2012	41,591		715		1,845		—		3,860		48,011
Total 2012	$	156,516	$	2,835	$	6,585	$	—	$	22,032	$	187,968

Q1 2013	$	40,324	$	786	$	1,644	$	—	$	3,344	$	46,098
YTD 2013	$	40,324	$	786	$	1,644	$	—	$	3,344	$	46,098

Income Tax

Federal income ~~taxes were~~tax expense was $7.1 million for the first quarter of 2013, compared to $13.1 million for the first quarter of ~~2012 compared to $8.3 million for the first quarter of 2011.~~2012. The effective federal income tax rate for the first quarter of ~~2012~~2013 was ~~29.3%~~25.6%, compared to ~~27.3%~~29.3% for the same period in ~~2011.~~2012. The difference between the statutory federal income tax rate of 35% and Park’s effective tax rate is the permanent tax differences, primarily consisting of tax-exempt interest income from municipal investments and loans, low income housing tax credits, bank owned life insurance income, and dividends paid on shares held within Park’s salary deferral plan. Park expects permanent tax differences for ~~2012~~2013 will be approximately $10 million.

Park and its Ohio-based affiliates do not pay state income taxes 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 other expense on Park’s Consolidated Condensed Statements of Income.

Management provided guidance in the 2011 Annual Report (page 40) that the effective federal income tax rate for 2012 would be approximately 26% to 28%, which is consistent with management’s most recent projection.

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Comparison of Financial Condition

At March 31, ~~2012~~2013 and December 31, ~~2011~~

2012

Changes in Financial Condition and Liquidity

Total assets ~~decreased~~increased by ~~$195~~$104 million, or ~~2.8%~~1.6%, to ~~$6,777~~$6,747 million at March 31, ~~2012,~~2013, compared to ~~$6,972~~$6,643 million at December 31, ~~2011. This decrease in total assets was due to the sale of Vision assets to Centennial on February 16,~~ 2012. ~~At December 31, 2011, $382.5 million of assets were held for sale.~~

Total investment securities ~~increased~~decreased by ~~$149~~$230 million, or ~~8.7%~~14.5%, to ~~$1,857~~$1,352 million at March 31, ~~2012,~~2013, compared to ~~$1,708~~$1,582 million at December 31, ~~2011. Loan balances~~2012. Money market instruments, included in cash and cash equivalents, increased by $7$383 million to ~~$4,324~~$420 million at March 31, ~~2012~~2013, compared to ~~$4,317~~$37 million at December 31, ~~2011.~~

2012. Loan balances decreased by $6 million to $4,444 million at March 31, 2013, compared to $4,450 million at December 31, 2012.

Total liabilities ~~decreased~~increased by ~~$210~~$101 million, or ~~3.4%~~1.7%, during the first three months of ~~2012~~2013 to ~~$6,020~~$6,093 million at March 31, ~~2012~~2013, from ~~$6,230~~$5,992 million at December 31, ~~2011.~~2012. The increase in liabilities was due to an increase in deposits of $201 million offset by a decrease in ~~total liabilities was primarily due to the assumption~~short - term borrowings of ~~Vision liabilities by Centennial on February 16, 2012. At December 31, 2011, $536.2 million of liabilities were held for sale.~~

$100 million.

Total deposits increased by ~~$352~~$201 million, or ~~7.9% during the first three months of 2012~~4.3%, to ~~$4,817~~$4,917 million at March 31, ~~2012 from $4,465~~2013, compared to $4,716 million at December 31, ~~2011.~~2012. The increase in deposits in the first ~~quarter~~three months of ~~2012~~2013 was largely related to an increase in ~~public fund deposits. This is consistent with increases in prior years. At March 31, 2011, total deposits were $5,315 million, which included deposits at Vision of $597 million.~~

interest bearing transaction accounts and savings accounts.

Short-term borrowings decreased by ~~$27~~$100 million, or ~~10.2%~~29.1%, to ~~$237~~$244 million at March 31, ~~2012~~2013, from ~~$264~~$344 million at December 31, ~~2011.~~2012. Long-term borrowings, ~~decreased slightly~~including subordinated debentures and notes, increased by $1 million or 0.1% to ~~$897~~$863 million at March 31, ~~2012~~2013, compared to ~~$898~~$862 million at December 31, ~~2011.~~

~~Other liabilities increased by $2.7 million or 4.4% to $64.3 million at March 31, 2012 from $61.6 million at December 31, 2011.~~

2012.

Total stockholders’ equity increased by ~~$14~~$3.8 million, or ~~1.9%~~0.6%, to ~~$756.4~~$654.2 million at March 31, ~~2012,~~2013, from ~~$742.4~~$650.4 million at December 31, ~~2011.~~2012. Retained earnings increased by ~~$15.5~~$6.2 million during the period as a result of net income of ~~$31.5~~$20.7 million, offset by common share dividends of $14.5 ~~million and accretion and dividends on the preferred stock of $1.5~~ million. ~~Preferred stock increased by $226,000 during the first three months of 2012 as a result of the accretion of the discount on preferred stock.~~ Accumulated other comprehensive loss increased by ~~$1.7~~$2.4 million ~~during the first three months of 2012~~ to a loss of ~~$10.5~~$19.9 million at March 31, 2013, compared to $17.5 million at December 31, 2012. ~~The~~This $2.4 million increase ~~of $1.7 million~~ in the accumulated other comprehensive loss was related to an unrealized net holding loss in the investment portfolio of ~~$2.2~~$2.4 million, net of taxes, as a result of the mark-to-market adjustment at March 31, 2012, which was partially offset by (1) a $113,000 increase in the unrealized net holding gain on the cash flow hedge, and (2) a $412,000 (net of tax) improvement to the funded status of the pension plan as a result in the sale of the Vision business.

2013.

Increases or decreases in the investment securities portfolio, short-term borrowings and long-term debt are greatly dependent upon the growth in loans and deposits. The primary objective of management is to grow loan and deposit totals. To the extent that management is unable to grow loan totals at a desired growth rate, additional investment securities may be acquired. Likewise, both short-term borrowings and long-term debt are utilized to fund the growth in earning assets if the growth in deposits and cash flow from operations are not sufficient to do so.

Effective liquidity management ensures that the cash flow requirements of depositors and borrowers, as well as the operating cash needs of the Corporation, are met. 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 Corporation’s loan to asset ratio was 65.86% at March 31, 2013, compared to 66.99% at December 31, 2012 and 63.81% at March 31, ~~2012, compared to 61.92% at December 31, 2011 and 64.88% at March 31, 2011.~~2012. Cash and cash equivalents were $520.5 million at March 31, 2013, compared to $201.3 million at December 31, 2012 and $161.1 million at March 31, ~~2012, compared to $157.5 million at December 31, 2011 and $134.2 million at March 31, 2011.~~2012. Management believes that the present funding sources provide more than adequate liquidity for the Corporation to meet its cash flow needs.

On a monthly basis, Park’s Treasury Department forecasts the financial statements for the next twelve months. The projected liquidity position for the Corporation is reviewed each month to ensure that adequate liquidity is maintained. Management targets that the Corporation would have a minimum of ~~$800~~$900 million of funds available to handle liquidity needs on a daily basis. This ~~$800~~$900 million liquidity “war chest” consists of currently available additional borrowing capacity from the Federal Home Loan Bank, federal funds sold and unpledged U.S. Government Agency securities.

Capital Resources

Total stockholders’ equity at March 31, 2013 was $654 million, or 9.7% of total assets, compared to $650 million, or 9.8% of total assets, at December 31, 2012 ~~was~~and $756 million, or 11.2% of total assets, ~~compared to $742 million, or 10.6% of total assets, at December 31, 2011 and $730 million, or 10.0% of total assets,~~ at March 31, ~~2011.~~2012. Common equity, which is stockholders’ equity excluding the preferred stock, was ~~$658~~$654 million at March 31, ~~2012,~~2013, or 9.7% of total assets, compared to ~~$644~~$650.4 million, or ~~9.2%~~9.8% of total assets, at December 31, ~~2011.~~

2012 and $658 million, or 9.7% of total assets, at March 31, 2012.

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Financial institution regulators have established guidelines for minimum capital ratios for banks, thrifts and bank holding companies. The net unrealized gain or loss on available-for-sale securities is generally 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 (PNB only) is greater than or equal to 5%. Park’s leverage ratio was ~~10.35%~~9.26% at March 31, ~~2012~~2013 and ~~9.81%~~9.17% at December 31, ~~2011.~~2012. The minimum Tier 1 risk-based capital ratio (defined as leverage capital divided by risk-adjusted assets) is 4% and the well capitalized ratio (PNB only) is greater than or equal to 6%. Park’s Tier 1 risk-based capital ratio was ~~15.35%~~13.35% at March 31, ~~2012~~2013 and ~~14.15%~~13.12% at December 31, ~~2011.~~2012. The minimum total risk-based capital ratio (defined as leverage capital plus supplemental capital divided by risk-adjusted assets) is 8% and the well capitalized ratio (PNB only) is greater than or equal to 10%. Park’s total risk-based capital ratio was ~~17.92%~~16.01% at March 31, ~~2012~~2013 and ~~16.65%~~15.77% at December 31, ~~2011.~~

2012.

PNB met the well capitalized ratio guidelines at March 31, ~~2012.~~2013. The following table indicates the capital ratios for PNB and Park at March 31, ~~2012.~~

Leverage
Tier 1
Risk Based

Total
Risk-Based

The Park National Bank 6.53 % 9.43 % 11.37 %
Park National Corporation 10.35 % 15.35 % 17.92 %
Minimum capital ratio 4.00 % 4.00 % 8.00 %
Well capitalized ratio 5.00 % 6.00 % 10.00 %

On April 25, 2012, Park entered into a Letter Agreement with the U.S. Treasury (the “Preferred Shares Repurchase Letter Agreement”) pursuant to which Park purchased from the U.S. Treasury all 100,000 of Park’s Series A Preferred Shares for a purchase price of $100 million plus final prorated accrued and unpaid dividends of $972,000. On May 2, 2012, Park entered into a second Letter Agreement with the U.S. Treasury (the “Warrant Repurchase Letter Agreement”) pursuant to which Park purchased from the U.S. Treasury the Warrant to purchase 227,376 Park common shares (the “Warrant”) which had been issued to the U.S. Treasury on December 23, 2008 in connection with Park’s sale to the U.S. Treasury of the Series A Preferred Shares. Park repurchased the Warrant for a purchase price of $2,842,400, or $12.50 per Park common share. The table below provides Park’s capital ratios as of March 31, 2012, excluding the $100 million related to the Series A Preferred Shares.

Leverage
Tier 1
Risk Based

Total
Risk-Based

Park National Corporation 8.89 % 13.18 % 15.75 %

2013.



	Leverage		Tier 1 Risk Based		Total Risk-Based
The Park National Bank	6.72	%	9.78	%	11.67	%
Park National Corporation	9.26	%	13.35	%	16.01	%
Minimum capital ratio	4.00	%	4.00	%	8.00	%
Well capitalized ratio (PNB only)	5.00	%	6.00	%	10.00	%

Contractual Obligations and Commitments

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. See page 4642 of Park’s ~~2011~~2012 Annual Report (Table 31) for disclosure concerning contractual obligations and commitments at December 31, ~~2011.~~2012. There were no significant changes in contractual obligations and commitments during the first three months of ~~2012 other than in connection with the sale of the Vision business.~~

2013.

Financial Instruments with Off-Balance Sheet Risk

PNB is a 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 interest rate risk in excess of the amount recognized in the consolidated financial statements.

The exposure to credit loss (for PNB) 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. Park and PNB use the same credit policies in making commitments and conditional obligations as they do for on-balance sheet instruments. Since 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 total amounts of off-balance sheet financial instruments with credit risk were as follows:

(in thousands) March 31, 2012 December 31, 2011
Loan commitments $ 773,014 $ 809,140
Standby letters of credit $ 24,175 $ 18,772



(In thousands)	March 31, 2013		December 31, 2012
Loan commitments	$	857,235	$	815,585
Standby letters of credit	$	22,023	$	22,961

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ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Management reviews interest rate sensitivity on a bi-monthly basis by modeling the consolidated financial statements under various interest rate scenarios. The primary reason for these efforts is to guard Park from adverse impacts of unforeseen changes in interest rates. Management continues to believe that further changes in interest rates will have a small impact on net income, consistent with the disclosure on pages 4441 and 4542 of Park’s ~~2011~~2012 Annual Report.

On page 4541 (Table 30) of Park’s ~~2011~~2012 Annual Report, management reported that Park’s twelve month cumulative rate sensitivity gap was a positive (assets exceeding liabilities) ~~$1,376~~$1,144 million or ~~21.46%~~18.84% of interest earning assets at December 31, ~~2011.~~2012. At March 31, ~~2012,~~2013, Park’s twelve month cumulative rate sensitivity gap was a positive (assets exceeding liabilities) ~~$592~~$692 million or ~~9.5%~~11.15% of interest earning assets.

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. 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.

On page 4542 of Park’s ~~2011~~2012 Annual Report, management reported that at December 31, ~~2011,~~2012, the earnings simulation model projected that net income would increase by ~~2.14%~~1.1% using a rising interest rate scenario and decrease by ~~3.52%~~6.6% using a declining interest rate scenario over the next year. At March 31, ~~2012,~~2013, the earnings simulation model projected that net income would increase by ~~2.0%~~0.7% using a rising interest rate scenario and would decrease by ~~3.4%~~5.2% in a declining interest rate scenario. At March 31, ~~2012,~~2013, management continues to believe that gradual changes in interest rates (50 basis points per quarter for a total of 200 basis points per year) will have a small impact on net income.

ITEM 4 – CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

With the participation of the Chairman of the Board and Chief Executive Officer (the principal executive officer) and the Chief Financial Officer and Treasurer (the principal financial officer) of Park, Park’s management has evaluated the effectiveness of Park’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the quarterly period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, Park’s Chairman of the Board and Chief Executive Officer and Park’s Chief Financial Officer and Treasurer have concluded that:

information required to be disclosed by Park in this Quarterly Report on Form 10-Q and other reports that Park files or submits under the Exchange Act would be accumulated and communicated to Park’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure;

information required to be disclosed by Park in this Quarterly Report on Form 10-Q and the other reports that Park files or submits under the Exchange Act would be recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and

~~Park’s disclosure controls and procedures were effective as of the end of the quarterly period covered by this Quarterly Report on Form 10-Q.~~

Park’s disclosure controls and procedures were effective as of the end of the quarterly period covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control Over Financial Reporting

There were no changes in Park’s internal control over financial reporting (as defined in Rule 13a – 15(f) under the Exchange Act) that occurred during Park’s fiscal quarter ended March 31, ~~2012,~~2013, that have materially affected, or are reasonably likely to materially affect, Park’s internal control over financial reporting.

~~PARK NATIONAL CORPORATION~~

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

There are no pending legal proceedings to which Park or any of its subsidiaries is a party or to which any of their property is subject, except for routine legal proceedings to which Park’s subsidiary bank, PNB, is a party to incidental to its banking ~~business. There are also certain~~business, as well as routine legal proceedings at ~~SE LLC~~SEPH which ~~are routine legal proceedings to which Vision Bank~~SEPH (and ~~SE LLC~~SEPH as the successor to Vision Bank) is a party to incidental to its business. Park considers none of those proceedings to be material.

Item 1A. Risk Factors

There are certain risks and uncertainties in our business that could cause our actual results to differ materially from those anticipated. In “ITEM 1A. RISK FACTORS” of Part I of Park’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2011~~2012 (the ~~“2011~~“2012 Form 10-K”), we included a detailed discussion of our risk factors. These risk factors should be read carefully in connection with evaluating our business and in connection with the forward-looking statements contained in this Quarterly Report on Form 10-Q. There have been no material changes from these risk factors. Any of the risks described in the ~~2011~~2012 Form 10-K could materially adversely affect our business, financial condition or future results and the actual outcome of matters as to which forward-looking statements are made. These are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

	~~(a.)~~
(a)	Not applicable

	~~(b.)~~
(b)	Not applicable

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~~(c.)~~

(c)

No purchases of Park’s common shares were made by or on behalf of Park or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended, during the three months ended March 31, ~~2012.~~2013. The following table provides information concerning the maximum number of common shares that may be purchased under Park’s previously announced stock repurchase authorization to fund the Park National Corporation 2005 Incentive Stock Option Plan:



Period	Total number of common shares purchased			Average price paid per common share			Total number of common shares purchased as part of publicly announced plans or programs		Maximum number of common shares that may yet be purchased under the plans or programs (1)
January 1 through January 31, ~~2012~~2013	—	-	—		-—	761,011		-	~~982,267~~
February 1 through February ~~29, 2012~~28, 2013	—	-	—		-—	761,011		-	~~982,267~~
March 1 through March 31, ~~2012~~2013	—	-	—		-—	761,011		-	~~982,267~~
Total	—	-	—		-—	761,011		-	~~982,267~~


(1)	The number shown represents, as of the end of each period, the maximum number of common shares that may yet be purchased as part of Park’s publicly announced stock repurchase authorization to fund the Park National Corporation 2005 Incentive Stock Option Plan (the “2005 Plan”).

The 2005 Plan was adopted by the Board of Directors of Park on January 18, 2005 and was approved by the Park shareholders at the Annual Meeting of Shareholders on April 18, 2005. Under the 2005 Plan, 1,500,000 common shares ~~are~~were authorized for delivery upon the exercise of incentive stock options granted under the 2005 Plan. All of the common shares delivered upon the exercise of incentive stock options granted under the 2005 Plan are to be treasury shares. As of March 31, ~~2012,~~2013, there were no incentive stock options ~~covering 66,625 common shares were~~ outstanding and ~~1,433,375~~1,500,000 common shares were available for future grants.

With ~~451,108~~738,989 common shares held as treasury shares at March 31, 2013 and no incentive stock options outstanding, 738,989 common shares held as treasury shares were available for purposes of funding the 2005 Plan at March 31, ~~2012,~~2013, and an additional ~~982,267~~761,011 common shares remained authorized for repurchase for purposes of funding the 2005 Plan.

At the 2013 Annual Meeting of Shareholders held on April 22, 2013, Park's shareholders approved the Park National Corporation 2013 Long-Term Incentive Plan (the “2013 Incentive Plan”). The 2013 Incentive Plan replaces the 2005 Plan as well as Park's Stock Plan for Non-Employee Directors of Park National Corporation and Subsidiaries (the “Directors' Stock Plan”), each of which terminated following the approval of the 2013 Incentive Plan by Park's shareholders. From and after April 22, 2013, no further awards will be granted by Park under the 2005 Plan or the Directors' Stock Plan.

The aggregate number of common shares with respect to which awards may be granted under the 2013 Incentive Plan will be 600,000. The common shares to be issued and delivered under the 2013 Incentive Plan may consist of either common shares currently held or common shares subsequently acquired by Park as treasury shares. No newly-issued common shares will be delivered under the 2013 Incentive Plan. On April 22, 2013, Park's Board of Directors authorized the purchase, from time to time, of up to 600,000 Park common shares to be held as treasury shares for subsequent issuance and delivery under the 2013 Incentive Plan.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

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Item 5. Other Information

(a), (b) Not applicable.

Item 6. Exhibits

~~2.1(a)~~

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

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

~~2.1(b)~~

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

~~2.1(c)~~

Second Amendment to Purchase and Assumption Agreement by and between Vision Bank and Park National Corporation and Centennial Bank and Home BancShares, Inc., effective as of April 30, 2012 (filed herewith)

~~2.2~~

Agreement and Plan of Merger, entered into as of January 25, 2012, by and between Vision Bank and SE Property Holdings, LLC (Incorporated herein by reference to Exhibit 2.2 to Park National Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 (File No. 1-13006))

3.1(a)

Articles of Incorporation of Park National Corporation as filed with the Ohio Secretary of State on March 24, 1992 (Incorporated herein by reference to Exhibit 3(a) to Park National Corporation’s Form 8-B, filed on May 20, 1992 (File No. 0-18772) (“Park’s Form 8-B”))


	3.1(b)	Certificate of Amendment to the Articles of Incorporation of Park National Corporation as filed with the Ohio Secretary of State on May 6, 1993 (Incorporated herein by reference to Exhibit 3(b) to Park National Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (File No. 0-18772))


	3.1(c)	Certificate of Amendment to the Articles of Incorporation of Park National Corporation as filed with the Ohio Secretary of State on April 16, 1996 (Incorporated herein by reference to Exhibit 3(a) to Park National Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1996 (File No. 1-13006))


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


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


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


	3.1(g)	Certificate of Amendment by Shareholders ~~or Members~~ filed with the Ohio Secretary of State on April 18, 2011 in order to evidence the adoption by Park National Corporation’s shareholders of an amendment to Article SIXTH of Park National Corporation’s Articles of Incorporation in order to provide that shareholders do not have preemptive rights (Incorporated herein by reference to Exhibit 3.1 to Park National Corporation’s Current Report on Form 8-K dated and filed April 19, 2011 (File No. 1-13006))


	3.1(h)	Articles of Incorporation of Park National Corporation (reflecting amendments through April 18, 2011) [for SEC reporting compliance purposes only – not filed with Ohio Secretary of State] (Incorporated herein by reference to Exhibit 3.1(h) to Park National Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011 (File No. 1-13006))


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


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

Table of Contents



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


	3.2(d)	Certificate Regarding Adoption by the Shareholders of Park National Corporation on April 21, 2008 of Amendment to Regulations to Add New Section 5.10 to Article Five (Incorporated herein by reference to Exhibit 3.2(d) to Park National Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2008 (File No. 1-13006) (“Park’s March 31, 2008 Form 10-Q”))


	3.2(e)	Regulations of Park National Corporation (reflecting amendments through April 21, 2008) [For purposes of SEC reporting compliance only] (Incorporated herein by reference to Exhibit 3.2(e) to Park’s March 31, 2008 Form 10-Q)

	~~4.1~~	~~Note Purchase Agreement, dated April 20, 2012, between~~
	10.1	Park National Corporation and a group of 56 accredited investors (Incorporated herein by reference to Exhibit 4.1 to Park National Corporation’s Current Report on Form 8-K, dated and filed April 20, 2012 (File No. 1-13006) (“Park’s April 20, 2012 Form 8-K”))

~~4.2~~

~~Form of 7% Subordinated Note due April 20, 2022 (Incorporated herein by reference to Exhibit 4.2 to Park’s April 20, 2012 for 8-K)~~

~~10.1~~

Letter Agreement, dated April 25, 2012, between Park National Corporation and the United States Department of the Treasury related to the repurchase of the 100,000 Fixed Rate Cumulative Perpetual Preferred Shares, Series A, issued by Park National Corporation2013 Long - Term Incentive Plan (Incorporated herein by reference to Exhibit 10.1 to ~~Park National Corporation’s~~Park's Current Report onof Form 8-K dated and filed April ~~25, 2012~~23, 2013 (File No. 1-13006))

~~10.2~~

Letter Agreement, dated May 2, 2012, between Park National Corporation and the United States Department of the Treasury related to the repurchase of the Warrant to purchase 227,376 Common Shares issued by Park National Corporation (Incorporated herein by reference to Exhibit 10.1 to Park National Corporation’s Current Report on Form 8-K, dated and filed May 2, 2012 (File No. 1-13006))

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

31.1

Rule 13a – 14(a) / 15d – 14(a) Certifications (Principal Executive Officer) (filed herewith)


	31.2	Rule 13a – 14(a) / 15d – 14(a) Certifications (Principal Financial Officer) (filed herewith)


	32.1	Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (Principal Executive Officer) (furnished herewith)


	32.2	Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (Principal Financial Officer) (furnished herewith)


	101	The following information from Park’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, ~~2012~~2013 formatted in XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Condensed Balance Sheets as of March 31, ~~2012~~2013 (unaudited) and December 31, ~~2011;~~2012; (ii) the Consolidated Condensed Statements of Income for the three months ended March 31, ~~2012~~2013 and ~~2011~~2012 (unaudited); (iii) the Consolidated Condensed Statements of Comprehensive Income for the three months ended March 31, ~~2012~~2013 and ~~2011~~2012 (unaudited); (iv) the Consolidated Condensed Statements of Changes in Stockholders’ Equity for the three months ended March 31, ~~2012~~2013 and ~~2011~~2012 (unaudited); (v) the Consolidated Condensed Statements of Cash Flows for the three months ended March 31, ~~2012~~2013 and ~~2011~~2012 (unaudited); and (vi) the Notes to Unaudited Consolidated Condensed Financial Statements ~~(furnished herewithin)~~(electronically submitted herewith).

~~Pursuant to Rule 406T~~

Table of Regulation S-T, the interactive data files included as Exhibit 101 are furnished and not deemed filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those Sections.

Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		PARK NATIONAL CORPORATION

DATE: May ~~4, 2012~~02, 2013		/s/ C. Daniel DeLawder
		C. Daniel DeLawder
		Chairman of the Board and
		Chief Executive Officer

DATE: May ~~4, 2012~~02, 2013		/s/ ~~John W. Kozak~~Brady T. Burt
		~~John W. Kozak~~Brady T. Burt
		Chief Financial Officer and

Treasurer



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



Large accelerated filer	xý	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨
(Do not check if a smaller reporting company)


	Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Condensed Balance Sheets as of March 31, ~~2012~~2013 (unaudited) and December 31, ~~2011~~2012	3

Consolidated Condensed Statements of Income for the three months ended March 31, 2013 and 2012 ~~and 2011~~ (unaudited)	4

Consolidated Condensed Statements of Comprehensive Income for the three months ended March 31, 2013 and 2012 ~~and 2011~~ (unaudited)	6

Consolidated Condensed Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2013 and 2012 ~~and 2011~~ (unaudited)	7

Consolidated Condensed Statements of Cash Flows for the three months ended March 31, 2013 and 2012 ~~and 2011~~ (unaudited)	8

Notes to Unaudited Consolidated Condensed Financial Statements	9 10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	42 38

Item 3. Quantitative and Qualitative Disclosures About Market Risk	61 59

Item 4. Controls and Procedures	61 59

PART II. OTHER INFORMATION	60

Item 1. Legal Proceedings	63 60

Item 1A. Risk Factors	63 60

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	63 60

Item 3. Defaults Upon Senior Securities	64 61

Item 4. Mine Safety Disclosures	64 61

Item 5. Other Information	64 62

Item 6. Exhibits	64 62

SIGNATURES	68 64

	March 31,			December 31,
	2012			2011

Assets:
Cash and due from banks	$	121,730		$	137,770
Money market instruments		39,400			19,716
Cash and cash equivalents		161,130			157,486
Investment securities
Securities available-for-sale, at fair value (amortized cost of $991,373 and $801,147 at March 31, 2012 and December 31, 2011)		1,007,481			820,645
Securities held-to-maturity, at amortized cost (fair value of $795,075 and $834,574 at March 31, 2012 and December 31, 2011)		782,250			820,224
Other investment securities		67,604			67,604
Total investment securities		1,857,335			1,708,473
Loans		4,324,383			4,317,099
Allowance for loan losses		(59,758	)		(68,444	)
Net loans		4,264,625			4,248,655
Bank owned life insurance		157,225			154,567
Goodwill and other intangible assets		73,089			74,843
Bank premises and equipment, net		52,157			53,741
Other real estate owned		41,965			42,272
Accrued interest receivable		21,227			19,697
Mortgage loan servicing rights		8,975			9,301
Other		139,123			120,748
Assets held for sale		-			382,462
Total assets	$	6,776,851		$	6,972,245

Liabilities and Stockholders' Equity:
Deposits:
Noninterest bearing	$	1,055,745		$	995,733
Interest bearing		3,761,643			3,469,381
Total deposits		4,817,388			4,465,114
Short-term borrowings		236,687			263,594
Long-term debt		821,801			823,182
Subordinated debentures and notes		75,250			75,250
Accrued interest payable		5,034			4,916
Other		64,262			61,639
Liabilities held for sale		-			536,186
Total liabilities		6,020,422			6,229,881
COMMITMENTS AND CONTINGENCIES
Stockholders' equity:
Preferred stock (200,000 shares authorized; 100,000 shares issued with $1,000 per share liquidation preference)		98,372			98,146
Common stock (No par value; 20,000,000 sharesauthorized; 16,151,014 shares issued at March 31, 2012 and 16,151,021 shares issued at December 31, 2011)		301,201			301,202
Common stock warrants		4,297			4,297
Retained earnings		440,074			424,557
Treasury stock (745,109 shares at March 31, 2012 and 745,109 shares at December 31,2011)		(77,007	)		(77,007	)
Accumulated other comprehensive (loss), net of taxes		(10,508	)		(8,831	)
Total stockholders' equity		756,429			742,364
Total liabilities and stockholders’ equity	$	6,776,851		$	6,972,245

	Three Months Ended
	March 31,
	2012			2011

Interest and dividend income:

Interest and fees on loans	$	61,105		$	65,454

Interest and dividends on:
Obligations of U.S. Government, its agencies and other securities		13,584			19,053
Obligations of states and political subdivisions		46			149

Other interest income		103			6
Total interest and dividend income		74,838			84,662

Interest expense:

Interest on deposits:
Demand and savings deposits		754			991
Time deposits		4,639			6,734

Interest on borrowings:
Short-term borrowings		175			267
Long-term debt		7,542			7,357

Total interest expense		13,110			15,349

Net interest income		61,728			69,313

Provision for loan losses		9,000			14,100
Net interest income after provision for loan losses		52,728			55,213

Other income:
Income from fiduciary activities		3,828			3,722
Service charges on deposit accounts		4,071			4,245
Other service income		2,734			2,301
Checkcard fee income		3,172			2,976
Bank owned life insurance income		1,202			1,229
ATM fees		608			654
OREO devaluations		(1,359	)		(2,535	)
Gain on sale of the Vision business		22,167			-
Other		3,197			2,438
Total other income		39,620			15,030

Gain on sale of securities		-			6,635

Three Months ended March 31, 2012 and 2011	Preferred Stock		Common Stock			Retained Earnings			Treasury Stock at Cost			Accumulated Other Comprehensive Income

Balance at December 31, 2010	$	97,290	$	305,677		$	406,342		$	(77,733	)	$	(1,868	)
Net Income							22,196
Other comprehensive loss, net of tax:
Unrealized net holding gain on cash flow hedge, net of income taxes of $71													133
Unrealized net holding (loss) on securities available-for-sale, net of income tax benefit of $(3,431)													(6,371	)
Cash dividends on common stock at $0.94 per share							(14,475	)
Cash payment for fractional shares in dividend reinvestment plan				(1	)
Accretion of discount on preferred stock		214					(214	)
Preferred stock dividends							(1,250	)
Balance at March 31, 2011	$	97,504	$	305,676		$	412,599		$	(77,733	)	$	(8,106	)

Balance at December 31, 2011	$	98,146	$	305,499		$	424,557		$	(77,007	)	$	(8,831	)
Net Income							31,475
Other comprehensive loss, net of tax:
Change in funded status of pension plan, net of income taxes of $222													412
Unrealized net holding gain on cash flow hedge, net of income taxes of $60													113
Unrealized net holding (loss) on securities available-for-sale, net of income tax benefit of $(1,188)													(2,202	)
Cash dividends on common stock at $0.94 per share							(14,481	)
Cash payment for fractional shares in dividend reinvestment plan				(1	)
Accretion of discount on preferred stock		226					(227	)
Preferred stock dividends							(1,250	)
Balance at March 31, 2012	$	98,372	$	305,498		$	440,074		$	(77,007	)	$	(10,508	)

(in thousands)	February 16, 2012
Assets sold
Cash and due from banks	$	20,711
Loans		355,750
Allowance for loan losses		(13,100	)
Net loans		342,650
Fixed assets		12,496
Other assets		4,612
Total assets sold	$	380,469
Liabilities sold
Deposits	$	522,856
Other liabilities		2,049
Total liabilities sold	$	524,905

(in thousands)	Annual Amortization
Remainder of 2012	$	418
2013		337
2014		-
Total	$	755

	March 31, 2012						December 31, 2011
	Loan balance		Accrued interest receivable		Recorded investment		Loan balance		Accrued interest receivable		Recorded investment
(In thousands)
Commercial, financial and agricultural *	$	752,392	$	3,439	$	755,831	$	743,797	$	3,121	$	746,918

Commercial real estate *		1,088,348		3,795		1,092,143		1,108,574		4,235		1,112,809
Construction real estate:
Vision/SE LLC commercial land and development *		26,081		39		26,120		31,603		31		31,634
Remaining commercial		148,922		425		149,347		156,053		394		156,447
Mortgage		19,628		65		19,693		20,039		64		20,103
Installment		9,184		44		9,228		9,851		61		9,912
Residential real estate
Commercial		392,552		1,120		393,672		395,824		1,105		396,929
Mortgage		1,004,957		1,540		1,006,497		953,758		1,522		955,280
HELOC		221,780		884		222,664		227,682		942		228,624
Installment		48,410		217		48,627		51,354		236		51,590
Consumer		610,180		2,580		612,760		616,505		2,930		619,435
Leases		1,949		52		2,001		2,059		43		2,102
Total loans	$	4,324,383	$	14,200	$	4,338,583	$	4,317,099	$	14,684	$	4,331,783

	Three months ended March 31, 2012						Three months ended March 31, 2011
(in thousands)	Recorded investment as of March 31, 2012		Average recorded investment		Interest income recognized		Recorded investment as of March 31, 2011		Average recorded investment		Interest income recognized

Commercial, financial and agricultural	$	40,241	$	40,135	$	105	$	19,391	$	19,515	$	65
Commercial real estate		43,305		48,214		207		53,259		55,076		70
Construction real estate:
Vision/SE LLC commercial land and development		19,433		21,974		-		82,060		84,272		-
Remaining commercial		32,673		27,314		251		26,126		26,789		78
Residential real estate:
Commercial		43,752		43,276		40		58,123		59,465		139
Consumer		20		20		-		-		22		-

Total	$	179,424	$	180,933	$	603	$	238,959	$	245,139	$	352

	Stock Options		Weighted Average Exercise Price Per Share
Outstanding at December 31, 2011		74,020	$	74.96
Granted		-		-
Exercised		-		-
Forfeited/Expired		7,395		74.96
Outstanding at March 31 ,2012		66,625	$	74.96

(in thousands)
Securities Available-for-Sale	Amortized cost		Gross unrealized holding gains		Gross unrealized holding losses		Estimated fair value
Obligations of U.S. Treasury and other U.S. Government sponsored entities	$	370,043	$	1,614	$	-	$	371,657
Obligations of states and political subdivisions		2,616		44		-		2,660
U.S. Government sponsored entities asset-backed securities		427,300		16,995		-		444,295
Other equity securities		1,188		877		32		2,033
Total	$	801,147	$	19,530	$	32	$	820,645

(in thousands)	Three months ended March 31, 2012			Three months ended March 31, 2011
Mortgage servicing rights:
Carrying amount, net, beginning of period	$	9,301		$	10,488
Additions		562			330
Amortization		(888	)		(521	)
Changes in valuation inputs & assumptions		-			68

Carrying amount, net, end of period	$	8,975		$	10,365

Valuation allowance:
Beginning of period	$	1,021		$	748
Changes due to fair value adjustments		-			(68	)
End of period	$	1,021		$	680



Commission File Number	1-13006

(in thousands)	Obligations of states and political subdivisions			Equity Securities			Fair value swap
Balance, at January 1, 2012	$	-		$	763		$	(700	)
Total gains/(losses)
Included in earnings – realized		-			-			-
Included in earnings – unrealized		-			-			-
Included in other comprehensive income		-			(7	)		-
Purchases, sales, issuances and settlements, other		-			-			-
Periodic settlement of fair value swap		-			-			(565	)
Balance March 31, 2012	$	-		$	756		$	(135	)

Balance, at January 1, 2011	$	2,598		$	745		$	(60	)
Total gains/(losses)
Included in earnings – realized		-			-			-
Included in earnings – unrealized		-			-			-
Included in other comprehensive income		(128	)		(5	)		-
Purchases, sales, issuances and settlements, other		-			-			-
Re-evaluation of fair value swap		-			-			-
Balance March 31, 2011	$	2,470		$	740		$	(60	)

(in thousands)	December 31, 2011
	Carrying value		Fair value
Financial assets:
Cash and money market instruments	$	157,486	$	157,486
Investment securities		1,640,869		1,655,219
Accrued interest receivable		19,697		19,697
Mortgage loans held for sale		11,535		11,535
Impaired loans carried at fair value		87,813		87,813
Other loans		4,149,307		4,167,224
Loans receivable, net	$	4,248,655	$	4,266,572
Assets held for sale	$	382,462	$	382,462

Financial liabilities:
Noninterest bearing checking accounts	$	995,733	$	995,733
Interest bearing transactions accounts		1,037,385		1,037,385
Savings accounts		931,526		931,526
Time deposits		1,499,105		1,506,075
Other		1,365		1,365
Total deposits	$	4,465,114	$	4,472,084

Short-term borrowings	$	263,594	$	263,594
Long-term debt		823,182		915,274
Subordinated debentures/notes		75,250		68,601
Accrued interest payable		4,916		4,916
Liabilities held for sale		536,186		536,991

Derivative financial instruments:
Interest rate swap	$	846	$	846
Fair value swap		700		700

Three months ended March 31, (in thousands)	Before-tax amount			Tax effect			Net-of-tax amount

2012:
Change in pension plan assets and benefit obligations	$	634		$	222		$	412
Unrealized losses on available-for-sale securities		(3,390	)		(1,188	)		(2,202	)
Unrealized net holding gain on cash flow hedge		173			60			113
Other comprehensive loss	$	(2,583	)	$	(906	)	$	(1,677	)

2011:
Unrealized (losses) on available-for-sale securities	$	(3,166	)	$	(1,108	)	$	(2,058	)
Reclassification adjustment for gains realized in net income		(6,635	)		(2,322	)		(4,313	)
Unrealized net holding gain on cash flow hedge		204			71			133
Other comprehensive loss	$	(9,597	)	$	(3,359	)	$	(6,238	)

Table - Park – Summary Income Statement
Three months ended March 31,
(In thousands)	2012		2011		% Change
Net interest income	$	61,728	$	69,313		-10.94	%
Provision for loan losses		9,000		14,100		-36.17	%
Other income		17,453		15,030		16.12	%
Gain on sale of Vision business		22,167		-		N.M.
Security gains		-		6,635		N.M.
Operating expenses		47,808		46,346		3.15	%
Income before taxes	$	44,540	$	30,532		45.88	%
Income taxes		13,065		8,336		56.73	%
Net income	$	31,475	$	22,196		41.80	%

Table - PNB – Summary Income Statement
Three months ended March 31,
(In thousands)	2012		2011		% Change
Net interest income	$	55,846	$	60,236		-7.29	%
Provision for loan losses		4,672		4,975		-6.09	%
Other income		16,661		16,262		2.45	%
Security gains		-		6,635		N.M.
Operating expenses		38,056		36,321		4.78	%
Income before taxes	$	29,779	$	41,837		-28.82	%
Income taxes		8,218		12,808		-35.84	%
Net income	$	21,561	$	29,029		-25.73	%

Table - SE LLC – Summary Income Statement Three months ended March 31,
(In thousands)	2012		2011		% Change
Net interest income	$	2,610	-		N.M.
Provision for loan losses		4,078		-		N.M.
Other income		724		-		N.M.
Gain on sale of Vision business		22,167		-		N.M.
Security gains		-		-		N.M.
Operating expenses		7,503		-		N.M.
Income before taxes	$	13,920		-		N.M.
Income taxes		4,861		-		N.M.
Net income	$	9,059		-		N.M.

(in thousands)	Projected results for 2012		25% of annual projection		Actual results for the first three months of 2012
Net interest income	$	240,000 to $250,000	$	60,000 - $62,500	$	61,728
Provision for loan losses	$	20,000 to $27,000	$	5,000 - $6,750	$	9,000
Total other income	$	62,000 to $66,000	$	15,500 - $16,500	$	17,453
Total other expense	$	170,000 to $175,000	$	42,500- $43,750	$	47,808

(in thousands)	Average interest earning assets		Net interest income		Tax equivalent net interest margin
March 2011	$	6,722,136	$	69,313		4.21	%
June 2011	$	6,745,790	$	70,022		4.19	%
September 2011	$	6,610,953	$	67,620		4.09	%
December 2011	$	6,487,958	$	66,279		4.08	%
March 2012	$	6,297,772	$	61,728		3.97	%

SE LLC – Retained Vision Loan Portfolio
Charge-offs as a percentage of unpaid principal balance
March 31, 2012

(In thousands)	Unpaid Principal Balance		Charge-Offs		Net Book Balance		Charge-off Percentage
Nonperforming loans - retained by SE LLC	$	160,858	$	78,532	$	82,326		49	%
Performing loans - retained by SE LLC		17,348		1,225		16,123		7	%
Total SE LLC loan exposure	$	178,206	$	79,757	$	98,449		45	%

Park National Corporation - Allowance for Loan & Lease Losses
(In thousands)	March 31, 2012			December 31, 2011
Total ALLL	$	59,758		$	68,444
Specific reserves		9,505			15,935
General reserves	$	50,253		$	52,509

Total loans	$	4,324,383		$	4,317,099
Impaired commercial loans		179,293			187,074
Non-impaired loans	$	4,145,090		$	4,130,025

Total ALLL to total loan ratio		1.38	%		1.59	%
General reserves as a % of non-impaired loans		1.21	%		1.27	%

(In thousands)	Unsold Principal balance (UPB)		Prior charge- offs		Total impaired loans		Specific reserve		Carrying balance		Carrying balance as a % of UPB
PNB	$	140,338	$	36,157	$	104,181	$	9,505	$	94,676		67.46	%
SE LLC - CL&D loans		67,545		48,112		19,433		-		19,433		28.77	%
SE LLC - Other loans		79,740		24,061		55,679		-		55,679		69.83	%
PRK totals	$	287,623	$	108,330	$	179,293	$	9,505	$	169,788		59.03	%

Other Expense - Quarterly 2011
	Park		Vision		Park, less Vision
Q1 2011	$	46,346	$	7,425	$	38,921
Q2 2011		47,007		8,174		38,833
Q3 2011		45,599		7,267		38,332
Q4 2011		49,365		8,513		40,852
Total 2011	$	188,317	$	31,379	$	156,938
Average quarterly expense	$	47,079	$	7,845	$	39,234