Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 11-K
 
 
(Mark One)
 
ý
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2017
  
OR
 
q
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _____________ to ___________
 
 
Commission file number 333-91178
 
  
A.
Full title of the plan and the address of the plan, if different from that of the issuer named below:
 
 
Park National Corporation
Employees Stock Ownership Plan
 
  
B.
Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
 
 
Park National Corporation
50 North Third Street
Newark, Ohio 43055
 






REQUIRED INFORMATION
 
The following financial statements and supplemental schedules for the Park National Corporation Employees Stock Ownership Plan are being filed herewith:
 
Audited Financial Statements:
 
Report of Independent Registered Public Accounting Firm - Crowe Horwath LLP
 
Statements of Net Assets Available for Benefits at December 31, 2017 and 2016
 
Statements of Changes in Net Assets Available for Benefits for the Years Ended December 31, 2017 and 2016
 
Notes to Financial Statements - December 31, 2017 and 2016
 
Supplemental Schedules:
 
Schedule of Assets Held for Investment Purposes, Schedule H, Line 4(i) - December 31, 2017
 
Schedule of Reportable Transactions, Schedule H, Line 4(j) - December 31, 2017
 
 
The following exhibit is being filed herewith:
 
Exhibit No.
Description
 
 
23.1
Consent of Independent Registered Public Accounting Firm – Crowe Horwath LLP
 






SIGNATURES
 
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
 

 
PARK NATIONAL CORPORATION
EMPLOYEES STOCK OWNERSHIP PLAN
 
 
 
 
 
By THE PARK NATIONAL BANK, Trustee
 
 
 
 
Date: June 22, 2018
By: /s/ Brady T. Burt
 
 
 
Printed Name: Brady T. Burt
 
 
 
Title: Chief Financial Officer

 






PARK NATIONAL CORPORATION
EMPLOYEES STOCK OWNERSHIP PLAN

 
ANNUAL REPORT ON FORM 11-K
FOR FISCAL YEAR ENDED DECEMBER 31, 2017
 
INDEX TO EXHIBITS
 
 
Exhibit No.
Description
 
 
Consent of Independent Registered Public Accounting Firm – Crowe Horwath LLP
  



 
 










Financial Statements and Supplemental Schedules
 
Park National Corporation
Employees Stock Ownership Plan
Years Ended December 31, 2017 and 2016
With Report of Independent Registered Public Accounting Firm






 

Park National Corporation
Employees Stock Ownership Plan
 
Financial Statements and Supplemental Schedules
 
Years Ended December 31, 2017 and 2016
 
 
  
Contents
 

Audited Financial Statements
 
 
 
Report of Independent Registered Public Accounting Firm

Statements of Net Assets Available for Benefits
2

Statements of Changes in Net Assets Available for Benefits
3

Notes to Financial Statements

 
 
Supplemental Schedules
 
 
 
Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

Schedule H, Line 4j – Schedule of Reportable Transactions









REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Plan Participants and Plan Administrator of the
Park National Corporation Employees Stock Ownership Plan
Newark, Ohio

Opinion on the Financial Statements

We have audited the accompanying statements of net assets available for benefits of Park National Corporation Employee Stock Ownership Plan (the "Plan") as of December 31, 2017 and 2016, the related statement of changes in net assets available for benefits for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion,the financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2017 and 2016, and the changes in net assets available for benefits for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on the Plan's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting in accordance with the standards of the PCAOB. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Plan's internal control over financial reporting. Accordingly, we express no such opinion in accordance with the standards of the PCAOB.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Supplemental Information

The supplemental Schedule H, Line 4i - Schedule of Assets (Held at End of Year) and Schedule H, Line 4j - Schedule of Reportable Transactions as of December 31, 2017 and for the year then ended have been subjected to audit procedures performed in conjunction with the audit of Park National Corporation Employee Stock Ownership Plan's financial statements. The supplemental schedules are the responsibility of the Plan's management. Our audit procedures included determining whether the information presented in the supplemental schedules reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental schedules. In forming our opinion on the supplemental schedules, we evaluated whether the supplemental schedules, including their form and content, are presented in conformity with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental schedules are fairly stated in all material respects in relation to the financial statements as a whole.
 
/s/ Crowe Horwath LLP
 
 
 
Crowe Horwath LLP

We have served as the Plan's auditor since 2006.

Columbus, Ohio
June 21, 2018





Park National Corporation
Employees Stock Ownership Plan
Statements of Net Assets Available for Benefits
December 31, 2017 and 2016
 



 
 
2017
 
2016
ASSETS
 
 

 
 

 
 
 
 
 
Investments, at fair value:
 
 

 
 

Park National Corporation Common Stock
 
$
92,696,448

 
$
106,551,726

Mutual Funds
 
46,124,133

 
36,132,476

Interest-bearing account, issued by
 
 

 
 

The Park National Bank
 
2,600,489

 
3,544,541

 
 
 
 
 
Total Investments
 
141,421,070

 
146,228,743

 
 
 
 
 
Accrued interest and dividends
 
11,369

 
19,440

 
 
 
 
 
TOTAL ASSETS AND NET ASSETS AVAILABLE FOR BENEFITS
 
$
141,432,439

 
$
146,248,183


 
 
 
 
 


 

See accompanying notes to financial statements
2






Park National Corporation
Employees Stock Ownership Plan
Statements of Changes in Net Assets Available for Benefits
For the years ended December 31, 2017 and 2016



 
 
2017
 
2016
Investment income (loss):
 
 

 
 

Net realized and unrealized (depreciation) appreciation
 
 

 
 

in fair value of investments
 
$
(7,860,511
)
 
$
28,771,380

Interest and dividends
 
4,228,724

 
4,215,712

Total investment (loss) income
 
(3,631,787
)
 
32,987,092

 
 
 
 
 
Contributions:
 
 

 
 

Employer
 
1,286,222

 
1,286,409

Employee
 
5,468,965

 
5,381,755

Rollover
 
318,104

 
673,901

Total contributions
 
7,073,291

 
7,342,065

 
 
 
 
 
Benefit payments to participants
 
(8,257,248
)
 
(9,305,417
)
 
 
 
 
 
Net (decrease) increase in net assets available for benefits
 
(4,815,744
)
 
31,023,740

 
 
 
 
 
Net assets available for benefits at beginning of year
 
146,248,183

 
115,224,443

 
 
 
 
 
Net assets available for benefits at end of year
 
$
141,432,439

 
$
146,248,183


 
 
 
 
 



See accompanying notes to financial statements
3



Park National Corporation
Employees Stock Ownership Plan
Notes to Financial Statements
December 31, 2017 and 2016
_____________________________________________________________________________________



1. Description of the Plan

The following description of the Park National Corporation Employees Stock Ownership Plan (the “Plan”) provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions.

General

The Plan is a defined contribution plan covering full-time or part-time employees of Park National Corporation and subsidiaries (“Park”) who have completed 30 days of service, and are age eighteen or older. In the event that a Participant fails to make a new affirmative deferral election, such Participant shall be deemed to have made a pre-tax deferral election equal to 3% of compensation per pay period. Auto enrollment is only applicable for employees who became participants on or after January 1, 2014. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).

Contributions

Each year, participants may contribute up to 25% of their pretax annual compensation, as defined in the Plan. Beginning January 1, 2014 the Plan introduced a Roth investment option which allows for after tax contributions. Participants may also contribute rollover amounts representing distributions from other qualified defined contribution plans. The maximum salary deferral permitted by the Internal Revenue Code (“Code”) was $18,000 for both 2017 and 2016. The Plan also permits participants who are age 50 or older to make catch-up contributions in accordance with Code Section 414(v).

Park provides a matching contribution at a level established annually by Park. For both 2016 and 2017, Park’s employer matching contribution was 25% of all employee KSOP contributions, excluding any catch-up contributions.

Participant Accounts

Each participant’s account is credited with the participant’s salary deferral, an allocation of Park’s contribution and Plan earnings, and charged with participant withdrawals. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s account.

Vesting

Participants’ accounts are 100% vested at all times.


4


Park National Corporation
Employees Stock Ownership Plan
Notes to Financial Statements
December 31, 2017 and 2016
_____________________________________________________________________________________



Payments of Benefits

Upon termination or after age 59½, a participant may elect lump sum, rollover, or installments over a period not to exceed the participant’s (and their designated beneficiary’s) life expectancy in an amount equal to the value of his or her account. A participant can elect to take a distribution of their account balance in cash or shares of Park National Corporation Common Stock.

Employees Stock Ownership Plans (“ESOP”)

Effective January 1, 2002, the Plan was amended and restated to become an ESOP that invests in shares of Park National Corporation Common Stock. The Plan is not leveraged and all new contributions (both employer and employee) will be used to purchase only Park National Corporation Common Stock. Participants are permitted to diversify their investments on a quarterly basis. The Plan’s investments are held in trust by The Park National Bank, a wholly owned subsidiary of Park National Corporation.

2. Summary of Accounting Policies

Basis of Presentation

The financial statements of the Plan are prepared on the accrual basis and are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Valuation of Investments

The Plan’s investments are reported at fair value. Refer to Note 9 - Fair Values. Purchases and sales of securities are recorded on a trade‑date basis.

Investment Income

Dividends are recorded as of their ex-dividend date. Interest income is recorded on an accrual basis when earned. Net appreciation (depreciation) includes the Plan’s gains and losses on investments bought and sold as well as held during the year.

Administrative Expenses

All administrative expenses charged to the Plan are borne by Park. Park also provides other accounting and administrative services to the Plan. Investment management fees and operating
expenses charged to the Plan for investments in mutual funds are deducted from income earned on a daily basis and are not separately reflected. Consequently, management fees and operating expenses are reflected as a reduction of the investment return for such investments.


5


Park National Corporation
Employees Stock Ownership Plan
Notes to Financial Statements
December 31, 2017 and 2016
_____________________________________________________________________________________



Payment of Benefits

Benefits are recorded when paid.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of investment income and expenses during the reporting period. Actual results could differ from those estimates.

Concentration of Credit Risk

At December 31, 2017 and 2016, approximately 66% and 73%, respectively, of the Plan’s assets were invested in Park National Corporation Common Stock.

3. Plan Termination

Although Park has not expressed any intent to do so, it has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA.

4. Nonparticipant-Directed Investments

The following information represents the assets and the significant components of changes in assets related to the Plan’s investment in Park National Corporation Common Stock, an undetermined portion of which is nonparticipant directed based upon Plan provisions. Initial contributions are deposited into the Plan in the form of cash with shares of Park National Corporation Common Stock purchased on a delayed basis.
 
 
December 31,
 
 
2017
 
2016
Investment, at fair value:
 
 

 
 

Park National Corporation Common Stock
 
$
92,696,448

 
$
106,551,726

The Park National Bank FDIC Account
 
234,629

 
184,624

 
 
$
92,931,077

 
$
106,736,350

 
 
 
 
 
Changes in assets:
 
 

 
 

Employer and employee contributions
 
$
6,755,187

 
$
6,668,164

Rollover contributions
 
56,939

 
239,900

Interest and dividend income
 
3,370,640

 
3,444,423

Distributions to participants
 
(6,211,146
)
 
(6,917,699
)
Net transfers to participant directed investments
 
(3,876,016
)
 
(5,650,652
)
Net (depreciation) appreciation in fair value of investments
 
(13,900,877
)
 
26,672,162

(Decrease) increase in assets
 
$
(13,805,273
)
 
$
24,456,298



6


Park National Corporation
Employees Stock Ownership Plan
Notes to Financial Statements
December 31, 2017 and 2016
_____________________________________________________________________________________



5. Income Tax Status

The Plan has received a determination letter from the Internal Revenue Service dated August 19, 2014, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the “Code”) and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification.

GAAP requires plan management to evaluate tax positions taken by the Plan. The Plan administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2017 and 2016, there are no uncertain tax positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. The Plan is subject to routine audits by taxing authorities; however there are currently no audits for any tax periods in progress. The Plan administrator believes it is no longer subject to income tax examinations for years prior to 2014.

6. Party-in-Interest

The Plan held the following party-in-interest investments (at fair value):
 
 
December 31,
 
 
2017
 
2016
 
 
 
 
 
Park National Corporation Common Stock
 
$
92,696,448

 
$
106,551,726

The Park National Bank FDIC Account
 
2,600,489

 
3,544,541

 
 
$
95,296,937

 
$
110,096,267


At December 31, 2017, the Plan held 891,312 shares of Park National Corporation Common Stock, with a fair value of $92,696,448. At December 31, 2016, the Plan held 890,454 shares of Park National Corporation Common Stock, with a fair value of $106,551,726.

During 2017 and 2016, cash dividends of $3,370,640 and $3,444,423, respectively, were paid to the Plan by Park National Corporation.

At December 31, 2017 and 2016, the Plan held a participant-directed interest bearing account issued by The Park National Bank of $2,365,860 and $3,359,917, respectively. At December 31, 2017 and 2016, the Plan held nonparticipant-directed, interest-bearing accounts issued by Park National Bank of $234,629 and $184,624, respectively. During 2017 and 2016, interest of $20,644 and $6,114, respectively, were paid to the Plan by The Park National Bank.

During 2017 and 2016, the Plan purchased 43,923 shares and 44,181 shares, respectively, of Park National Corporation Common Stock.


7


Park National Corporation
Employees Stock Ownership Plan
Notes to Financial Statements
December 31, 2017 and 2016
_____________________________________________________________________________________



7. Form 5500 Reconciliation

The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500.
 
 
December 31,
 
 
2017
 
2016
 
 
 
 
 
Net assets available for benefits per the financial statements
 
$
141,432,439

 
$
146,248,183

Less: Accrued interest and dividends
 
(11,369
)
 
(19,440
)
Net assets per the Form 5500
 
$
141,421,070

 
$
146,228,743


The following is a reconciliation of net change in net assets available for benefits per the financial statements to the Form 5500:

 
 
2017
 
 
 
Net decrease in net assets available for benefits
 
 

per the financial statements
 
$
(4,815,744
)
Less: Accrued interest and dividends
 
(11,369
)
Plus: Prior year accrued interest and dividends
 
19,440

Net loss per the Form 5500
 
$
(4,807,673
)

8. Risks and Uncertainties

The Plan invests in various investment securities including Park National Corporation Common Stock, mutual funds, and interest bearing accounts. Investment securities are exposed to various risks such as interest rate, market, liquidity and credit risks. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits.

9. Fair Values

GAAP defines fair value as the price that would be received by the Plan for an asset or paid by the Plan to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date in the Plan’s principal or most advantageous market for the asset or liability. GAAP establishes a fair value hierarchy which requires the Plan to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The hierarchy places the highest priority on unadjusted quoted market prices in active markets for identical assets or liabilities (level 1 measurements) and gives the lowest priority to unobservable inputs (level 3 measurements). The three levels of inputs within the fair value hierarchy are defined as follows:

8


Park National Corporation
Employees Stock Ownership Plan
Notes to Financial Statements
December 31, 2017 and 2016
_____________________________________________________________________________________




Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Plan has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect the Plan’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

In some cases, a valuation technique used to measure fair value may include inputs from multiple levels of the fair value hierarchy. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy.

The fair values of mutual fund investments and common stock are determined by obtaining quoted prices on nationally recognized securities exchanges (level 1 inputs). Additionally, due to their short-term nature, the fair value of interest-bearing cash balances are determined by reference to their face value (level 1 input). The fair value of all of the investments held by the Plan have been determined using Level 1 inputs (refer to the Statement of Net Assets Available for Benefits).

There were no transfers between level 1, level 2 or level 3 during 2017 or 2016. Management’s policy is to transfer assets from one level to another when the methodology to obtain the fair value changes such that there are more or fewer unobservable inputs as of the end of the reporting period.




9





























SUPPLEMENTAL SCHEDULES
 




Park National Corporation
Employees Stock Ownership Plan
Schedule H, Line 4i
Schedule of Assets (Held at End of Year)
December 31, 2017
 

 
 
 
Name of Plan Sponsor: 
 
Park National Corporation
 
 

 
 

 
 
Employer identification number: 
 
31-1179518
 
 

 
 

 
 
Three digit plan number: 
 
002
 
 

 
 

 
 
 
 
 
 
 
 
 
(a)
 
(b) 
Identity of Issue, 
Borrower, Lessor 
or Similar Party 
 
(c)
Description of Investment Including
Maturity Date, Rate of Interest,
 Collateral, Par or Maturity Value
 
(d) 
Cost
 
(e)
Current
 Value
Interest-bearing account  
 
 
 
 

 
 

 
The Park National Bank FDIC Account 
 
Interest rate of 1.02%
 
$
2,600,489

 
$
2,600,489

 
 
 
 
 
 
 
 
 
Common Stock:  
 
 
 
 

 
 

 
Park National Corporation 
 
 
 
 

 
 

 
 
Common Stock 
 
891,312 shares
 
$
49,769,452

 
$
92,696,448

 
 
 
 
 
 
 
 
 
Mutual Funds: 
 
 
 
 

 
 

 
 
Vanguard Institutional Index Fund
 
53,505 shares
 
**

 
$
13,026,240

 
 
Vanguard Developed Markets Index
 
 
 
 

 
 
 
 
Fund Admiral Shares
 
197,235 shares
 
**

 
2,842,157

 
 
Vanguard Short-Term Investment
 
 
 
 

 
 
 
 
Grade Fund Admiral Shares
 
233,737 shares
 
**

 
2,484,622

 
 
Vanguard Small-Cap Index Fund
 
 
 
 
 
 
 
 
Admiral Shares
 
25,825 shares
 
**

 
1,827,920

 
 
Vanguard Growth Index Fund
 
 
 
 
 
 
 
 
Admiral Shares
 
93,525 shares
 
**

 
6,766,508

 
 
Vanguard Extended Market Index
 
 
 
 

 
 

 
 
Fund Admiral Shares
 
51,824 shares
 
**

 
4,392,582

 
 
Vanguard Intermediate-Term Bond
 
 
 
 

 
 
 
 
Index Fund Admiral Shares
 
177,570 shares
 
**

 
2,017,199

 
 
Vanguard Balanced Index Fund
 
 
 
 
 
 
 
 
Admiral Shares
 
157,378 shares
 
**

 
5,464,173

 
 
Vanguard Target Retirement 2015 Fund
 
55,087 shares
 
**

 
844,478

 
 
Vanguard Target Retirement 2025 Fund
 
118,894 shares
 
**

 
2,199,546

 
 
Vanguard Target Retirement 2035 Fund
 
93,012 shares
 
**

 
1,924,429

 
 
Vanguard Target Retirement 2045 Fund
 
83,355 shares
 
**

 
1,875,481

 
 
Vanguard Target Retirement 2055 Fund
 
11,695 shares
 
**

 
458,798

 
 
Total Mutual Funds
 
 
 
**

 
$
46,124,133

 
 
 
 
 
 
 
 
 
Total Investments Held at End of Year 
 
 
 
 

 
$
141,421,070

*    Indicates party-in-interest to the Plan.
**    Disclosure of historical cost is not required for participant-directed investments.


11


Park National Corporation
Employees Stock Ownership Plan
Schedule H, Line 4j
Schedule of Reportable Transactions
For the year ended December 31, 2017
 



Name of Plan Sponsor: 
 
Park National Corporation 
 
 

 
 

 
 

 
 

 
 

Employer identification number: 
 
31-1179518 
 
 

 
 

 
 

 
 

 
 

Three digit plan number: 
 
002
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(b) 
 
 

 
 

 
 

 
(h)
 
 

 
 
Description of Asset Including 
 
 

 
(d) 
 
(g)
 
Current Value
 
(i)
(a) 
 
Maturity Date, Rate of Interest, 
 
(c)
 
Selling
 
Cost of
 
of Asset on
 
Net Gain
Identity or Party Involved
 
Collateral, Par or Maturity Value 
 
Cost
 
Price
 
Asset
 
Transaction Date
 
or (Loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
Category (iii) – A series of transactions in excess of 5% of plan assets
 
 

 
 

 
 

The Park National Bank
 
FDIC Account, 100 purchases 
 
$
11,299,582

 
$

 
$
11,299,582

 
$
11,299,582

 
$

The Park National Bank
 
FDIC Account, 150 sales  
 

 
12,243,634

 
12,243,634

 
12,243,634

 


 




12