UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

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

For the quarterly period ended March 31, 2005

OR

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

For the transition period from ____________________ to ________________________

Commission File Number 1-13006

Park National Corporation

50 North Third Street, Newark, Ohio 43055

(740) 349-8451

N/A

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

Yes þ           No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes þ            No o

14,309,881 Common shares, no par value per share, outstanding at April 26, 2005.

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PARK NATIONAL CORPORATION

CONTENTS

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PARK NATIONAL CORPORATION

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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PARK NATIONAL CORPORATION

Continued

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

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5

PARK NATIONAL CORPORATION

Three Months ended March 31, 2005 and 2004

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6

PARK NATIONAL CORPORATION

Continued

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

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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PARK NATIONAL CORPORATION

For the Three Months Ended March 31, 2005 and 2004.

Note 1 — Basis of Presentation

The consolidated financial statements included in this report have been prepared by Park National Corporation (the “Registrant”, “Corporation”, “Company”, or “Park”) without audit. In the opinion of management, all adjustments (consisting solely of normal recurring accruals) necessary for a fair presentation of results of operations for the interim periods included herein have been made. The results of operations for the period ended March 31, 2005 are not necessarily indicative of the operating results to be anticipated for the fiscal year ended December 31, 2005.

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q, and therefore, do not include all information and footnotes necessary for a fair presentation of the condensed balance sheets, condensed statements of income, condensed statements of changes in stockholders’ equity and condensed statements of cash flows in conformity with U.S. generally accepted accounting principles. These financial statements should be read in conjunction with the financial statements incorporated by reference in the Annual Report on Form 10-K of Park for the fiscal year ended December 31, 2004 from Park’s 2004 Annual Report to Shareholders.

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

Note 2 — Acquisition, Branch Sale and Intangible Assets

On January 3, 2005, Park acquired all of the stock of First Clermont Bank (First Clermont) of Milford, Ohio for $52,500,000 in an all cash transaction accounted for as a purchase. Immediately following Park’s stock acquisition, First Clermont merged with Park’s subsidiary, The Park National Bank. First Clermont is being operated as a separate division of The Park National Bank. The goodwill recognized as a result of this acquisition was $28,369,000. The fair value of the acquired assets of First Clermont were $185,372,000 and the fair value of the liabilities assumed were $161,241,000 at January 3, 2005.

On February 11, 2005, Park’s subsidiary, Century National Bank, sold its Roseville, Ohio branch office. The Roseville branch office was acquired in connection with the acquisition of First Federal Bancorp, Inc. (First Federal) on December 31, 2004. The Federal Reserve Board required that the Roseville branch office be sold as a condition of their approval of the merger transactions involving Park and First Federal. The deposits sold with the Roseville branch office totaled $12,419,000 and the loans sold with the branch office totaled $5,273,000. Century National Bank received a premium of $1,184,000 from the sale of the deposits.

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The following table shows the activity in goodwill and the core deposit intangibles during the first quarter of 2005.

Goodwill and core deposit intangibles are included in other assets on the Consolidated Condensed Balance Sheets. Goodwill is evaluated on an annual basis for impairment. Goodwill was evaluated for impairment during the first quarter of 2005, and no impairment charge was necessary.

Core deposit intangibles are being amortized to expense, principally on the straight-line method, over periods ranging from six to eight years. Core deposit intangibles amortization expense was $637,000 for the first quarter of 2005 compared to $370,000 for the first quarter of 2004.

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Note 3- Allowance for Loan Losses

The allowance for loan losses is that amount believed adequate to absorb estimated 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.

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Note 4 — Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share for the three month periods ended March 31, 2005 and 2004.

Note 5 — Segment Information

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

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The operating results of the Parent Company and Guardian Finance Company (GFC) in the All Other column are used to reconcile the segment totals to the consolidated income statements for the quarters ended March 31, 2005 and 2004. The reconciling amounts for consolidated total assets for both of the quarters ended March 31, 2005 and 2004 consist of the elimination of intersegment borrowings, and the assets of the Parent Company and GFC which are not eliminated.

Note 6 — Stock Option Plans

Park accounts for its incentive stock option plan under the recognition and measurement principles provided in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25) and related interpretations. Under APB 25, because the exercise price of Park’s employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized.

Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation”, as amended by SFAS 148, requires pro forma disclosures of net income and earnings per share for companies not adopting its fair value accounting method for stock-based employee compensation. The pro-forma disclosures below use the fair value method of SFAS 123 to measure compensation expense for stock-based employee compensation plans.

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Park did not grant any stock options during the first quarter of 2005 and as a result there is no pro forma expense for the first quarter of 2005. The Park National Corporation 2005 Incentive Stock Option Plan was approved by shareholders at the Park Annual Meeting of Shareholders on April 18, 2005. This new plan authorizes a maximum of 1.5 million common shares with respect to which incentive stock options may be granted. Management expects to grant some incentive stock options during the second quarter of 2005.

On April 14, 2005, the Securities and Exchange Commission announced the adoption of a new rule that delays the dates for compliance with statement of Financial Accounting Standards No. 123 (revised 2004) (SFAS No. 123R). SFAS No. 123R was previously scheduled to become mandatory for public entities, such as Park, that do not file as small business issuers as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. The SEC’s new rule allows these public entities to implement SFAS No. 123R at the beginning of the next fiscal year that begins after June 15, 2005. SFAS No. 123R prohibits companies from using APB 25 for the accounting of stock options and requires that grants of stock options be charged to expense. Companies are permitted to adopt SFAS No. 123R earlier than the beginning of their next fiscal year, but the management of Park intends to adopt SFAS No. 123R on January 1, 2006 on a prospective basis.

Note 7 — Loans

The composition of the loan portfolio is as follows:

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Note 8 — Investment Securities

The amortized cost and fair values of investment securities are shown below. Management evaluates investment securities on a quarterly basis for permanent impairment. No impairment charges have been deemed necessary in 2005 and 2004. The unrealized losses are primarily the result of changes in interest rates and will not prohibit Park from receiving its contractual principal and interest payments.

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Note 9 — Benefit Plans

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

Park’s funding policy is to contribute annually an amount that can be deducted for federal income tax purposes using a different actuarial cost method and different assumptions from those used for financial reporting purposes. A pension plan contribution of $9,688,096 was made during the first quarter of 2005.

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

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Note 10 — Accounting Changes

The American Institute of Certified Public Accountants issued Statement of Position (SOP) 03-3, “Accounting for Certain Loans or Debt Securities in a Transfer”, in December 2003. SOP 03-3 addresses accounting for differences between contractual cash flows and cash flows expected to be collected from an investor’s initial investment in loans or debt securities acquired in a transfer if those differences are attributable, at least in part, to credit quality. SOP 03-3 is effective for loans acquired in fiscal years beginning after December 31, 2004. The adoption of SOP 03-3 did not have a material impact on Park’s financial statements. This SOP was considered in the accounting for the acquisition of First Clermont on January 3, 2005.

Emerging Issues Task Force 03-1 (EITF 03-1), The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments: In March 2004, FASB reached a consensus on EITF 03-1, which clarifies the application of an impairment model to determine whether investments are other-than-temporary impaired. The provisions of EITF 03-1 must be applied prospectively to all current and future investments accounted for in accordance with SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities.” On September 15, September 30, and November 15, 2004, the FASB issued proposed staff positions to provide guidance on the application and scope of certain paragraphs and to defer the effective date of the impairment measurement and recognition provisions contained in specific paragraphs of EITF 03-1. This deferral will be superseded in FASB’s final issuance of the staff position. The management of Park does not expect the revised EITF 03-1 to have a material impact on its results of operations or financial condition at the time of the adoption.

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

Management’s discussion and analysis contains forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include, without limitation, Park’s ability to execute its business plan, changes in general economic and financial market conditions, changes in banking regulations or other regulatory or legislative requirements affecting bank holding companies and changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies. Undue reliance should not be placed on the forward-looking statements, which speak only as of the date hereof. Park does not undertake any obligation to publicly update any forward-looking statement except to the extent required by law.

Park’s Board of Directors approved a 5% stock dividend in November 2004. The additional common shares resulting from the dividend were distributed on December 15, 2004 to stockholders of record as of December 1, 2004. The consolidated financial statements, notes and references to share and per share data have been retroactively restated for the stock dividend.

The operating results for the three months ended March 31, 2005 include the acquisitions of First Federal on December 31, 2004 and First Clermont on January 3, 2005. Both acquisitions were accounted for as purchases and did not have any impact on the 2004 operating results for Park.

Critical Accounting Policies

Note 1 of the Notes to Consolidated Financial Statements included in Park’s 2004 Annual Report lists significant accounting policies used in the development and presentation of its financial statements. The accounting and reporting policies of Park conform with U.S. generally accepted accounting principles and general practices within the financial services industry. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates.

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Park considers that the determination of the allowance for loan losses involves a higher degree of judgement and complexity than its other significant accounting policies. The allowance for loan losses is calculated with the objective of maintaining a reserve level believed by management to be sufficient to absorb estimated credit losses in the loan portfolio. Management’s determination of the adequacy of the allowance for loan losses is based on periodic evaluations of the loan portfolio and of current economic conditions. However, this evaluation is inherently subjective as it requires material estimates, including expected default probabilities, loss given default, expected commitment usage, the amounts and timing of expected future cash flows on impaired loans, and estimated losses on consumer loans and residential mortgage loans based on historical loss experience and the current economic conditions. All of those factors may be susceptible to significant change. To the extent that actual results differ from management estimates, additional loan loss provisions may be required that would adversely impact earnings for future periods.

Statement of Financial Accounting Standard (SFAS) No. 142 “Accounting for Goodwill and Other Intangible Assets” establishes standards for the amortization of acquired intangible assets and impairment assessment of goodwill. At March 31, 2005, Park had core deposit intangibles of $9.4 million subject to amortization and $61.7 million of goodwill, which was not subject to periodic amortization. Goodwill arising from business combinations represents the value attributable to unidentifiable intangible assets in the business acquired. Park’s goodwill relates to the value inherent in the banking industry and that value is dependent upon the ability of Park’s banking subsidiaries to provide quality, cost effective banking services in a competitive marketplace. The goodwill value of $61.7 million is supported by revenue that is in part driven by the volume of business transacted. A decrease in earnings resulting from a decline in the customer base or the inability to deliver cost effective services over sustained periods can lead to impairment of goodwill that could adversely impact earnings in future periods. SFAS No. 142 requires an annual evaluation of goodwill for impairment. This evaluation was performed during the first quarter of 2005 and no impairment charge was necessary.

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Comparison of Results of Operations
For the Quarters Ended
March 31, 2005 and 2004

Summary Discussion of Results

Net income increased by $364,000 or 1.6% to $23.34 million for the three months ended March 31, 2005 compared to $22.98 million for the same period in 2004. The annualized, net income to average asset ratio (ROA) was 1.70% for the first quarter of 2005 compared to 1.86% for the first quarter of 2004. The annualized net income to average equity ratio (ROE) was 16.92% for the first three months of 2005 compared to 16.99% for the same period in 2004.

Diluted earnings per share increased by 1.9% to $1.61 for the first quarter of 2005 compared to $1.58 for the same period in 2004.

Income before taxes benefited from a $1.8 million increase in net interest income, a $383,000 decrease in the provision for loan losses and a $1.2 million increase in other income. There were no gains or losses from the sale of securities in 2005 compared to a gain of $106,000 for the same period in 2004. Operating expenses increased by $2.9 million in 2005 compared to 2004.

Net Interest Income

Park’s principal source of earnings is net interest income, the difference between total interest income and total interest expense. Net interest income was $54.4 million for the first quarter of 2005 and $52.6 million for the first quarter of 2004. The following table compares the average balance and tax equivalent yield/cost for interest earning assets and interest bearing liabilities for the first quarter of 2005 with the same quarter in 2004.

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Average interest earning assets increased by $481 million or 10.3% to $5,138 million for the three months ended March 31, 2005 compared to the same quarter in 2004. This increase is primarily due to the acquisitions of First Federal and First Clermont, whose interest earning assets totaled $416 million at the time of acquisition. First Federal had $238 million of interest earning assets at December 31, 2004 and First Clermont had $178 million of interest earning assets at January 3, 2005.

The average yield on interest earning assets was 5.97% for the first quarter of 2005 compared to 5.84% for the first quarter of 2004. Management expects that the Federal Reserve Board will continue to increase the federal funds rate at a measured pace through August 2005 and that the current federal funds rate of 2.75% will increase to 3.50% and remain at that level. Management expects that the average yield on interest earning assets will increase each quarter for the remainder of 2005.

The following table shows the tax equivalent yield on interest earning assets, the cost of interest bearing liabilities and the average federal funds rate for the past five quarters.