SecProbe.io

CORRESP
1
filename1.htm

CORRESP

Park National Corporation

50 North Third Street

Post Office Box 3500

Newark, Ohio 43058-3500

(740) 349-8451

April 28, 2009

Via EDGAR Transmission

Mr. Mark Webb

Branch Chief

Division of Corporation Finance

United States Securities and Exchange Commission

Washington, D.C. 20549

Mail Stop 4561

RE: Response to follow-up phone request on April 23, 2009 concerning the review of Park National
Corporation’s Form 10-K for the fiscal year ended December 31, 2008, filed February 25, 2009, File
No. 001-13006

Dear Mr. Webb:

Management of Park National Corporation (“Park,” “we” or “our”) has reviewed the above-referenced
request and offers the following example of our enhancements that we will make in the Annual Report
for the fiscal year ending December 31, 2009 (the “2009 Annual Report”) concerning our disclosure
pertaining to the allowance for loan losses:

The following disclosures are consistent with those included in our 2008 Annual Report:

Provision for Loan Losses

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

The provision for loan losses was $XX.X million in 2009, $70.5 million in 2008 and $29.5 million in
2007. Net loan charge-offs were $XX.X million in 2009, $57.5 million in 2008 and $22.2 million in
2007. The ratio of net loan charge-offs to average loans was X.XX% in 2009, 1.32% in 2008 and 0.55%
in 2007.

The loan loss provision for Vision Bank was $XX.X million in 2009, $47.0 million in 2008 and $19.4
million in 2007. Net loan charge-offs for Vision Bank were $XX.X million in 2009, $38.5 million in
2008 and $8.6 million in 2007. Vision Bank’s ratio of net loan charge-offs to average loans was
X.XX% in 2009, 5.69% in 2008 and an annualized 1.71% in 2007.

Park’s Ohio-based subsidiaries had a combined loan loss provision of $XX.X million in 2009, $23.5
million in 2008 and $10.1 million in 2007. Net loan charge-offs for Park’s Ohio-based operations
were $XX.X million in 2009, $19.0 million in 2008 and $13.6 million in 2007. The net loan
charge-off ratio for Park’s Ohio-based subsidiaries was X.XX% for 2009, 0.52% for 2008 and 0.39%
for 2007.

1

At year-end 2009, the allowance for loan losses was $XXX.X million or X.XX% of total loans
outstanding, compared to $100.1 million or 2.23% of total loans outstanding at year-end 2008 and
$87.1 million or 2.06% of total loans outstanding at year-end 2007. In 2007, the loan loss reserve
for Vision, $9.3 million, was added to Park’s allowance for loan losses.

Management believes that the allowance for loan losses at year-end 2009 is adequate to absorb
probable incurred credit losses in the loan portfolio. See Note 1 of the Notes to Consolidated
Financial Statements and the discussion under the heading “Critical Accounting Policies” earlier in
the “Financial Review” section for additional information on management’s evaluation of the
adequacy of the allowance for loan losses.

Management expects the loan loss provision for 2010 will be approximately $XX million and the
annualized net loan charge-off ratio will be approximately X.XX%. This estimate could change
significantly as circumstances for individual loans and economic conditions change.

A year ago, management projected the provision for loan losses would be $45 million in 2009 and the
net loan charge-off ratio would be approximately 1.00%.

Table 7 — Summary of Loan Loss Experience (refer to Table 7 included in Park’s 2008 Annual Report,
which will be updated for the 2009 Annual Report)

Table 8 — Allocation of Allowance for Loan Losses (refer to Table 8 included in Park’s 2008 Annual
Report, which will be updated for the 2009 Annual Report)

As of December 31, 2009, Park had no significant concentrations of loans to borrowers engaged in
the same or similar industries nor did Park have any loans to foreign governments.

Nonperforming Assets: Nonperforming loans include: 1) loans whose interest is accounted for on a
nonaccrual basis; 2) loans whose terms have been renegotiated; and 3) loans which are contractually
past due 90 days or more as to principal or interest payments but whose interest continues to
accrue. Other real estate owned results from taking title to property used as collateral for a
defaulted loan.

The percentage of nonperforming loans to total loans was X.XX% at year-end 2009, 3.74% at year-end
2008 and 2.57% at year-end 2007. The percentage of nonperforming assets to total loans was X.XX% at
year-end 2009, 4.31% at year-end 2008 and 2.89% at year-end 2007.

Vision Bank had $XX.X million of nonperforming loans or XX.X% of its total loans at year-end 2009,
compared to $94.7 million of nonperforming loans or 13.7% of its total loans at year-end 2008 and
$63.5 million of nonperforming loans or 9.9% of its total loans at year-end 2007. Nonperforming
assets totaled $XXX.X million for Vision Bank at year-end 2009, compared to $114.4 million at
year-end 2008 and $70.5 million at year-end 2007. As a percentage of year-end loans, Vision Bank’s
nonperforming assets were XX.X%, 16.6% and 11.0% for 2009, 2008 and 2007, respectively.

Park’s Ohio-based subsidiaries had $XX.X million of nonperforming loans at year-end 2009, compared
to $73.1 million at year-end 2008. Nonperforming loans were X.X% and 1.9% of total loans for Park’s
Ohio-based operations at year-end 2009 and 2008, respectively. Total nonperforming assets for
Park’s Ohio-based subsidiaries were $XX.X million or X.X% of loans at year-end 2009 and $79.2
million or 2.1% of loans at year-end 2008.

Economic conditions began deteriorating during the second half of 2007 and continued throughout
2008 [and 2009]. Park and many other financial institutions throughout the country experienced a
sharp increase in net loan charge-offs and nonperforming loans. Financial institutions operating in
Florida (including Vision Bank) have been particularly hard hit by the severe recession as the
demand for real estate and the price of real estate have sharply decreased.

2

Park’s lending management has reviewed closely all of the nonperforming loans and nonperforming
assets as of December 31, 2009. Partial loan charge-offs of approximately $XX.X million have been
recognized on nonperforming loans at year-end 2009. Approximately $XX.X million of these net loan
charge-offs were recorded at Vision Bank.

Park had $XXX.X million of loans included on the watch list of potential problem loans at December
31, 2009 compared to $243.2 million at year-end 2008 and $208.8 million at year-end 2007. As a
percentage of year-end total loans, Park’s watch list of potential problem loans was X.X% in 2009,
5.4% in 2008 and 4.9% in 2007. The existing conditions of these loans do not warrant classification
as nonaccrual. However, these loans have shown some weakness and management performs additional
analyses regarding a borrower’s ability to comply with payment terms for watch list loans.

Table 9 — Nonperforming Assets (refer to Table 9 included in the Park 2008 Annual Report, which
will be updated for the 2009 Annual Report)

The following disclosures will be added to those set out above:

Our allowance for loan losses includes an allocation for loans specifically identified as impaired
under Statement of Financial Accounting Standards No. 114. At December 31, 2009, loans considered
to be impaired under this standard consisted substantially of commercial loans graded as “doubtful”
and placed on non-accrual status, and totaled $XXX.X million, compared to $142.9 million at
December 31, 2008. The specific allowance for loan losses related to these loans was $X.X million
at December 31, 2009 and $8.9 million at December 31, 2008. This specific reserve is based on
management’s best estimate of the fair value of collateral securing these loans or based on
projected cash flows from the sale of the underlying collateral and payments from the borrowers.
The amount ultimately charged-off for these loans may be different from the specific reserve as the
ultimate liquidation of the collateral and/or projected cash flows may be for amounts different
from management’s estimates.

We have listed in the table below the year-end 2008 and the quarterly and year-end 2009 information
pertaining to the provision for loan losses, net loan charge-offs, nonperforming loans and the
allowance for loan losses:

    Provision

    for Loan

    Net Loan

    Nonperforming

    Allowance for

    (In Thousands)

    Losses

    Charge-Offs

    Loans

    Loan Losses

    Year-End 2008

    $
    70,487

    $
    57,501

    $
    167,778

    $
    100,088

    March 2009

    $
    12,287

    $
    11,097

    $
    166,673

    $
    101,279

    June 2009

    Sept. 2009

    Dec. 2009

    Totals for 2009

3

When determining the quarterly loan loss provision, Park reviews the grades of commercial loans.
These loans are graded from 1 to 8. A grade of 1 indicates little or no credit risk and a grade of
8 is considered a loss. Commercial loans with grades of 1 to 4 (pass-rated) are not considered to
be of high credit risk. Commercial loans graded a 5 (special mention) are considered to be watch
credits and a higher loan loss reserve percentage is used on these loans. Commercial loans graded
6 (substandard) are considered of higher risk and, as a result, a higher loan loss reserve
percentage is used on these loans. Generally, commercial loans that are graded a 6 are considered
for partial charge-offs. 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. Any commercial loan graded an 8 (loss) is completely charged-off.

Historically, Park’s management has aggressively recorded partial charge-offs on nonperforming
loans to write-down the loans to their fair value. As of December 31, 2009, management had taken
partial charge-offs of approximately $XX.X million related to the $XXX.X million of commercial
loans considered to be impaired, compared to charge-offs of approximately $30 million related to
$142.9 million of impaired commercial loans at December 31, 2008. Park’s management has been quick
to recognize a charge-off on a problem loan; however, there is a higher level of uncertainty when
valuing collateral or projecting cash flows in Vision Bank’s Florida and Alabama markets due to
their illiquid nature.

A significant portion of our 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. Our loss experience within
the special mention and substandard categories of loans for the past five years has been X.XX% and
X.XX%, respectively, of the principal balance of these loans. However, given the challenging
economic conditions [and because our loss experience on these loans has been increasing],
management has allocated X.XX%% and XX.X%, respectively, of the principal balance of these loans in
the allowance for loan losses at December 31, 2009. This equates to an allocation of approximately
$X.X million and $XX.X million, respectively, at December 31, 2009, to special mention and
substandard loans. As always, management is working to address weaknesses in each of these loans
that may result in loss. Actual loss experience may be more or less than the amount allocated.

Certification

The undersigned, the Chief Financial Officer of Park, acknowledges the following:

    •

    Park is responsible for the adequacy and accuracy of the disclosure in the
filing;

    •

    Staff comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to the filing; and

    •

    Park may not assert staff comments as a defense in any proceeding initiated by
the Commission or any person under the federal securities law of the United States.

Please contact me at (740) 349-3792 with any questions.

Sincerely,

/s/ John W. Kozak

John W. Kozak

CFO

JWK: trm

4