Park National Corp. Annual Report 2016

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FY2016 Annual Report · Park National Corp.

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PARKNATIO NAL

C O R P O R A T I O N

2016

ANNUAL REPORT

PARKNAT IONAL

C O R P O R A T I O N

FAIRFIELD
NATIONAL
BANK

DIVISION OF THE PARK NATIONAL BANK

GUARDIAN

FINANCE C OMPANY

PARK

NATIONAL BANK

CRAWFORD

ASHLAND

WAYNE

RICHLAND

MERCER

MARION

MORROW

HOLMES

KNOX

TUSCARAWAS

COSHOCTON

DARKE

CHAMPAIGN

MIAMI

CLARK

MADISON

LICKING

FRANKLIN

MUSKINGUM

MONTGOMERY

GREENE

FAIRFIELD

PERRY

BUTLER

WARREN

HAMILTON

CLERMONT

HOCKING

ATHENS

Century National Bank

Park National Bank

Second National Bank

Fairfield National Bank

Farmers Bank

First-Knox National Bank

Guardian Finance Company

Park National Bank
Southwest Ohio & Northern Kentucky

Security National Bank

Richland Bank

Scope Aircraft Finance

United Bank

Unity National Bank

ParkNationalCorp.com

REV 01/17

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

To Our Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

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

Shareholders’ Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

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

Directors and Officers of Affiliates:

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

Fairfield National Bank Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Farmers Bank Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

First-Knox National Bank Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

The Park National Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Park National Bank of Southwest Ohio & Northern Kentucky Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Richland Bank Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Second National Bank Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Security National Bank Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

United Bank Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Unity National Bank Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Guardian Finance Company & Scope Aircraft Finance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Management’s Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Management’s Report on Internal Control Over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Financial Statements:

Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Consolidated Statements of Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

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

Consolidated Statements of Changes in Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

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

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T O O U R S H A R E H O L D E R S

The World Turned Upside Down
Lovers of theatre (and anyone who watched the Tony Awards)
will know this line from the play, Hamilton. In the play, the
characters sing the phrase, “The world turned upside down,”
in response to the colonies’ victory at Yorktown over the British.
Some have claimed that our recent presidential election holds at
one time the same eagerness or trepidation (depending on your
perspective of the results) expressed by this line.

Our bank and our affiliate divisions have been around 100+ years.
Thus, we have operated under 19 U.S. presidents and are now on
the 20th. As we’ve done with every other administration, we will
honor the office, hope the best for the individual holding it and
work within the guardrails we see at the time.

Favorite Numbers
We track a long list of numbers; these are our favorites:

Favorite Number

Net Income (000’s)

Return on Equity (ROE)

Return on Assets (ROA)

Net Interest Margin (NIM)

Efficiency Ratio

2016

$86,135

11.68%

1.16%

3.52%

62.34%

2015

$81,012

11.40%

1.11%

3.39%

60.98%

2014

$83,957

12.34%

1.22%

3.55%

62.21%

We like to see the first four numbers increase every year. They did,
over last year.

How did we do what we did?
We have three primary operating segments in Park National
Corporation (PRK)—Park National Bank (PNB), Guardian
Financial Services Company (GFSC) and SE Property Holdings,
LLC (SEPH). To understand how we generated our favorite
numbers above, let’s review how these segments have
performed over the past three years:

Net Income (loss) by segment (000’s)

(In thousands)

PNB

GFSC

Parent Company

Ongoing operations

SEPH

2016

2015

2014

$84,451

$84,345

$82,907

(307)

(4,557)

1,423

(4,549)

1,175

(5,050)

$79,587

$81,219

$79,032

6,548

(207)

4,925

Total Park Net Income

$86,135

$81,012

$83,957

SEPH is the entity charged with maximizing the value of legacy
Vision Bank problem assets. Bryan Campolo and Jennifer Corbitt
have persisted with an unwavering focus on collections, with
excellent results. The good news is that they are nearing the
end of their work on this task.

Our Annual Report offers more detail on all our financial results.

Community
It has become fashionable to state a corporate mission to “support
our community,” or “buy local.” This has been a way of life for us
for decades. Our late Chairman John W. Alford, who served your
institution for 61 years, was unrelenting in reminding us, “If we
take care of our communities, our communities will take care of
us.” And so we do—with time, talent and treasure. We don’t talk
about this much, but we have learned from focus groups that
a) the focus group participants valued community support and
b) they were largely unaware of how, where and why we support
our communities. Hence, our affiliate divisions have been a bit
more open about the depth and breadth of our involvement.

A number of our communities are enjoying something of a
renaissance. Public/Private partnerships, animated by energy
and imagination, are transforming downtowns and squares into
commercial, cultural and educational destinations. People,
businesses and schools are moving into newly renovated buildings
that used to house feed mills, manufacturing facilities and garages.
The energy in our communities is palpable.

Home Loans
Perhaps nothing is more personal than one’s home. For years,
we have worked with many fine, local realtors who join us in the
privilege of helping people acquire their homes. Realtors and
clients alike value our lenders’ candor, urgency and
professionalism.

Few things ignite a community’s economy like home construction.
Economists suggest that for every dollar spent on home con -
struction, three to four dollars are generated in additional activity.
We’ve had the privilege of working with excellent local builders and
contractors helping make new home owners’ dreams materialize.

Of the $506 million in home loans we made last year in our
communities, roughly half were for construction or purchase.

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T O O U R S H A R E H O L D E R S

Stock Price

Date

November 8, 2016

November 11, 2016

December 30, 2016*

*The last trading day of the year

PRK Stock Closing Price

$ 97.11

110.14

119.66

On-line deposit account application: When we reconfigured
the websites, we also introduced the possibility of opening certain
deposit accounts on-line. While not yet an avalanche, we have
found new friends through this channel and they tell us they are
thrilled with the convenience of on-line account opening coupled
with access to helpful humans if they hit a snag.

What changed from November 8th to December 30th? Not our
devotion to our customers. Not our interest in our communities.
Not our quest for excellence in process and execution. Rather,
we believe that as a result of the election, expectations changed
about three things that might affect the banking industry’s collective
net income: regulation, taxes and interest rates. It appears that
operating expenses may decline as a result of reduced regulation;
that corporate taxes may be reduced; and that the yield curve
might steepen, as rates rise on the long end (a steeper yield curve
generally implies higher net interest margins). We will believe all
of this when we see it. Until then, we will continue to fertilize the
seeds we’ve planted for excellence in customer service, operational
execution and community support. Daily excellence breeds long-
term excellence, and we intend to be around for a long time.

Customer experience—New and Old
We think a lot about how to improve our customers’ experiences
with us. Customers engage us in person, on the phone, through our
websites, through mobile devices or some combination of all four.
What are we doing to improve our work in these areas?

New Things
Affiliate Division Websites: We reconfigured our websites* in
the fourth quarter. After speaking to a number of customers and
associates, we gave the website designers a nearly impossible task:
translate the warmth and compassion of our in-person interactions
into an on-line website experience. The tone is set from the
opening line on each site:

This website isn’t here so we can talk about ourselves.
So, let’s narrow it down to the things you care about.

The visitor then can select from a menu of possibilities that are
specific to their situation, so they can customize their experience.
Of course, they can always chat with, call or e-mail someone or
find the location of the nearest branch and ATM.

Customer Care Center: As we write this on February 13, 2017,
our Customer Care Center (it’s much more than a call center) has
been open continuously for 1,001 hours. We have been answering
calls, corresponding through on-line chats and resetting passwords
during all hours of the day and night since January 2, 2017.
Friendly, helpful bankers available 24x7...pretty cool.

Dealer Direct Financing: Our dedicated team of lenders serve
over 500 auto, boat and RV dealers throughout Ohio with urgency,
professionalism and personal attention. Our commitment to service
excellence begins with operating hours that are aligned to support
our dealer partners when they are open for business—including
evenings, weekends and holidays. We value our relationships with
them and work hard to remain a lender of choice.

Systems/Processes: We have spent millions of dollars and
thousands of hours upgrading our systems and processes to take
advantage of new software solutions, abide by new regulatory
requirements and offer a better experience for our customers.
This activity is largely transparent to the outside world, which is
how we prefer it. But it profoundly affects our people, who have
invested many hours before and after typical business hours
installing new hardware/software and training on new methods.
We are grateful for their dedication and perseverance.

Old Fashioned Things
Affiliate Divisions: Our affiliate divisions are vital members of
their respective communities. Local social service organizations,
school districts, sports teams and chambers of commerce turn
to them for leadership, volunteer support and dollars. And our
colleagues supply all three. Why? Because it’s their community,
their schools, their United Way. It’s fun and it’s the right thing
to do.

People: Our people make this place. Each day we marvel at their
skill and dedication. What separates them is their mindset. Our
colleagues start with, “How can I help this situation, this person,
this organization, this community?” Then they act upon their sense
of what to do. They become known as “go to” people, who get
things done. We are grateful for their devotion and are humbled
to serve with them.

*See our affiliate divisions’ profile pages in the Annual Report for their respective websites

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T O O U R S H A R E H O L D E R S

Phones: If someone calls us directly (and they can), we still
attempt to answer our phones personally. Kind of old-fashioned,
but we like it.

Freedom Years™: This year we celebrated 25 years of our
Freedom Years™ program. The program has grown as the
result of enthusiastic, energetic colleagues across all our affiliate
divisions. They offer expert advice with a friendly smile. In addition
to excellent financial counsel, our Freedom Years™ colleagues
offer a wide range of social activities and travel opportunities.
These include:
(cid:0) escorting people on trips (2017 plans include The Panama

Canal, Victoria, B.C., Grand Teton National Park and Hawaii)
(cid:0) hosting events like euchre parties (which were pretty spirited

until we adopted a common set of rules...we didn’t even know
what it meant to “stick the dealer,” much less how important
it was to employ or not employ this rule)

(cid:0) conducting classes (such as “Avoiding Consumer Scams” and

“Roth IRA Conversion”)

We are grateful for our Freedom Years™ members’ loyalty and look
forward to another 25 years of serving them and inviting others to
join the fun!

Our Culture and Contact Management
We have hundreds of threads in our cultural fabric. Some are
foundation threads; others support and add color to our cultural
quilt. One of the foundation threads is what we call “contact
management.” The rest of the world calls this sales.

Contact management starts with the premise that people
need things we provide—checking and savings accounts,
car/home/commercial loans, and estate planning/investment
management. But they don’t need them until they need them.
We can’t feel good about pushing products/services on someone
who doesn’t need them. But we are relentless about finding out
when and how our offerings might help a customer/prospect
thrive. So we contact people—as often as they permit us, so
they know we are interested, but not so often we are a pest.
(Our marketing colleagues reminded us that we wrote this
last year—but it still holds true.) Each person has a different
frequency and we honor their wishes.

Player Moves
On May 1, 2016, former Richland Bank division president John
A. Brown became president of our Security National division upon
Bill Fralick’s retirement. Christopher R. Hiner replaced John as
President at Richland. John and Chris bring enthusiasm, talent and
experience to their new roles. They have spent their professional
careers at Park and each balances a burning desire for excellence
with a passion for service. We are looking forward to great things
from both.

Federal Home Loan Bank of Cincinnati (FHLB)
We have enjoyed a long relationship with the FHLB. It is staffed by
bright people and has an engaged board of excellent leaders. We
are pleased to report that the FHLB board now includes Park’s
CFO, Brady T. Burt. He joins Park and PNB director James R.
DeRoberts, who has served on the FHLB board since 2008.

Fond Farewells
Maureen Buchwald
Maureen joined the First-Knox board July 19, 1988. Since 1997,
when First-Knox joined Park, she has served on the Park board as
well. She retired from the Park board April 26, 2016, but continues
as a First-Knox advisory board member. We are grateful for her
service on the Park board and are delighted that she’s still serving
First-Knox. We miss her wise counsel, but know we still have her
unwavering support.

The following individuals ended their service on our affiliate
advisory boards last year. Each brought unique talent, judgment
and perspective to their respective affiliate divisions. All were
unswerving in their support of their affiliate division and Park.
We are grateful for their service and we will miss their candor,
wit and wisdom.

Board Member

Patricia A. Byerly

Rick Cole

Wesley M. Jetter

R. Daniel Snyder

Marvin J. Stammen

Anne C. Steele

Affiliate Division

Years of Service

Farmers

Security National

Second National

First-Knox

Second National

Century National

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T O O U R S H A R E H O L D E R S

Final thoughts
We hear from many quarters about things that divide people.
Our past leaders taught us to look for the common humanity in
all. Thus, we focus on what connects us. Let us know how we may
connect with you.

“The more one forgets himself—by giving himself to
a cause to serve or another person to love—the more
human he is.”

—Viktor E. Frankl

“Spread love everywhere you go. Let no one ever come
to you without leaving happier.”

—Saint Teresa of Calcutta

C. Daniel DeLawder
Chairman of the Board

David L. Trautman
Chief Executive Officer and President

Warm Welcomes
As some of our affiliate division advisory board members
have departed, others have joined. In February, Century
National welcomed Scott D. Eickelberger and Julie A. Brown.
Mr. Eickelberger is a partner with Kincaid, Taylor & Geyer
attorneys in Zanesville. Ms. Brown is active in her family’s
local businesses in and around Zanesville.

In June, Jeanne Golliher joined the PNB Southwest advisory board.
Ms. Golliher is president and CEO of the Cincinnati Development
Fund.

In December, Second National added Travis L. Fliehman and
Michael J. Pax to their advisory board. Mr. Fliehman is a partner
with Detling, Harlan & Fliehman, Ltd.; Mr. Pax is President of Pax
Machine Works, Inc.

Mssrs. Eickelberger, Fliehman and Pax and Mses. Brown and
Golliher are excellent, local leaders. We are glad they’ve brought
their talents to our team.

The Power of Why
Simon Sinek, in a popular TED Talk, discusses the difference
between good and great companies. He suggests that good
companies know what they do and how they do it. But great
companies not only know what they do and how they do it,
but also why they do it. As Mr. Sinek states, “Customers don’t
buy what you do or how you do it—they buy why you do it.”

What is our Why?
In The Power of Full Engagement, authors Jim Loehr and Tony
Schwartz describe four dimensions of energy: Physical, Emotional,
Mental and Spiritual. They discuss how each is like a bucket: it
can be drained or filled. We like to help people fill their energy
buckets; we want to add to their reservoirs. If we help people
flourish in this way, they are pleased and we are delighted. If they
then think of us when they have some type of financial need, great.
If not, still great. We have been here for 100+ years, and we are
patient. We can control the degree to which we help people
fill their energy buckets; we cannot compel their need for
a loan, deposit or investment account. But when they do need
one, maybe, just maybe, they will turn to someone who helped
them in the rest of their life.

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

(In thousands, except per share data)

Earnings:

Total interest income

Total interest expense

Net interest income

Net income

Per Share:

Net income – basic

Net income – diluted

Cash dividends declared

Common book value (end of period)

At Year-End:
Total assets

Deposits

Loans

Investment securities

Total borrowings

Total shareholders’ equity

Ratios:

Return on average equity

Return on average assets

Efficiency ratio

2016

$276,258

38,172

238,086

86,135

5.62

5.59

3.76

48.38

$7,467,586

5,521,956

5,271,857

1,579,783

1,134,076

742,240

11.68%

1.16%

62.34%

2015

$ 265,074

37,442

227,632

81,012

5.27

5.26

3.76

46.53

$7,311,354

5,347,642

5,068,085

1,643,879

1,177,347

713,355

11.40%

1.11%

60.98%

Percent
Change

4.22%

1.95%

4.59%

6.32%

6.64%

6.27%

—

3.98%

2.14%

3.26%

4.02%

–3.90%

–3.68%

4.05%

2.46%

4.50%

2.23%

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S H A R E H O L D E R S ’

I N F O R M A T I O N

STOCK LISTING:

NYSE MKT Symbol – PRK
CUSIP #700658107

GENERAL SHAREHOLDER INQUIRIES:

Park National Corporation
Brady T. Burt, Secretary
50 North Third Street
Post Office Box 3500
Newark, Ohio 43058-3500
740/349-3927

DIVIDEND REINVESTMENT PLAN:

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

DIRECT DEPOSIT OF DIVIDENDS:

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

STOCK TRANSFER AGENT AND REGISTRAR:

The Park National Bank Shareholder Services
located at First-Knox National Bank,
Division of The Park National Bank
Post Office Box 1270
One South Main Street
Mount Vernon, Ohio 43050-1270
740/399-5208, 800/837-5266 Ext. 5208
shareholderservices@firstknox.com

FORM 10-K:

All forms filed by the Corporation with the SEC (including our Form 10-K for 2016) are
available on our website by clicking on the “SEC Filing” section and then the “Documents/
SEC Filings” section of the “Investor Relations” page. These forms may also be obtained,
without charge, by contacting the Secretary as indicated above.

INTERNET ADDRESS:

www.parknationalcorp.com

E-MAIL:

Brady T. Burt
bburt@parknationalbank.com

PARKNATIONAL

C O R P O R A T I O N

Total Financial Service Centers: 112
Total ATMs: 138
Website: ParkNationalCorp.com
Asset Size: $7.4 billion
Headquarters: Newark, Ohio
NYSE MKT: PRK

Donna M. Alvarado
President
AGUILA International

Brady T. Burt
Chief Financial Officer
The Park National
Corporation

C. Daniel DeLawder
Chairman
The Park National
Corporation

James R. DeRoberts
Partner
Gardiner, Allen,
DeRoberts Insurance

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

Alicia Sweet Hupp
President and CEO
Sweet Manufacturing
Company

Stephen J. Kambeitz
Entrepreneur

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

Robert E. O’Neill
President
Southgate Corporation

Julia A. Sloat
President and COO
AEP Ohio

William T. McConnell
Director Emeritus

J. Gilbert Reese
Director Emeritus

Rick R. Taylor
President
Jay Industries, Inc.

David L. Trautman
President
The Park National
Corporation

Leon Zazworsky
President
Mid State Systems, Inc.

Executive Officer Listing
Chairman
President
C. Daniel DeLawder
David L. Trautman

Chief Financial Officer
Brady T. Burt

Offices: 16 ATMs: 14

Website: CenturyNationalBank.com

Phone: 740.454.2521 or 800.321.7061

Chairman: Thomas M. Lyall

President: Patrick L. Nash

Counties Served: Athens, Coshocton,

Hocking, Muskingum, Perry, Tuscarawas

Zanesville - East*

80 Sunrise Center Drive

Zanesville, Ohio 43701

740.455.7305

Zanesville - Kroger*

3387 Maple Avenue

Zanesville, Ohio 43701

740.455.7326

Zanesville - Lending Center*

505 Market Street

Zanesville, Ohio 43701

740.454.6892

Zanesville - North*

1201 Brandywine Boulevard

Zanesville, Ohio 43701

740.455.7285

Zanesville - North Military*

990 Military Road

Zanesville, Ohio 43701

740.454.8505

Zanesville - South*

2127 Maysville Avenue

Zanesville, Ohio 43701

740.455.7301

Zanesville - South Maysville*

2810 Maysville Pike

Zanesville, Ohio 43701

740.455.3169

*Includes Automated Teller Machine

New Philadelphia

Tuscarawas

County

Coshocton

County

Coshocton

Newcomerstown

Dresden

New Concord

Zanesville [8]

Muskingum

County

Perry

County

New

Lexington

Logan

Hocking

County

Athens

County

Main Office - Zanesville

14 South Fifth Street

Post Office Box 1515

Zanesville, Ohio 43702

740.454.2521

Athens*

898 East State Street

Athens, Ohio 45701

740.593.7756

Coshocton*

100 Downtowner Plaza

Coshocton, Ohio 43812

740.623.0114

Dresden*

91 West Dave Longaberger Avenue

Dresden, Ohio 43821

740.754.2265

Logan*

61 North Market Street

Logan, Ohio 43138

740.385.5621

New Concord*

1 West Main Street

New Concord, Ohio 43762

740.826.7676

New Lexington*

206 North Main Street

New Lexington, Ohio 43764

740.342.4103

New Philadelphia Lending Center

1309 Fourth Street N.W., Suite B

New Philadelphia, Ohio 44663

330.681.7000

Newcomerstown*

220 East State Street

Newcomerstown, Ohio 43832

740.498.4103

PARKNATIONAL

C O R P O R A T I O N

Total Financial Service Centers: 122

Total ATMs: 141

Website: ParkNationalCorp.com

Asset Size: $7.3 billion

Headquarters: Newark, Ohio

NYSE MKT: PRK

Offices: 16 ATMs: 14
Website: CenturyNationalBank.com
Phone: 740.454.2521 or 800.321.7061
Chairman: Thomas M. Lyall
President: Patrick L. Nash
Counties Served: Athens, Coshocton,
Hocking, Muskingum, Perry, Tuscarawas

Donna M. Alvarado

Maureen H. Buchwald

Brady T. Burt

C. Daniel DeLawder

James R. DeRoberts

President

Owner

Chief Financial Officer

Chairman

Partner

AGUILA International

Glen Hill Orchards, Ltd.

Park National Corporation

Gardiner, Allen,

DeRoberts Insurance

F.W. Englefield, IV

President

Alicia Sweet Hupp

President and CEO

Englefield, Inc.

Sweet Manufacturing

Stephen J. Kambeitz

Timothy S. McLain

Robert E. O’Neill

President and CFO

R.C. Olmstead, Inc.

Vice President

President

McLain, Hill, Rugg &

Southgate Corporation

Company

Associates, Inc.

William T. McConnell

Director Emeritus

J. Gilbert Reese

Director Emeritus

American Electric

Jay Industries, Inc.

Park National Corporation

Mid State Systems, Inc.

Rick R. Taylor

President

David L. Trautman

Leon Zazworsky

President

Julia A. Sloat

Treasurer

Power

Officer Listing

Chairman

C. Daniel DeLawder

President

David L. Trautman

Chief Financial Officer

Brady T. Burt

Brady T. Burt is the Chief Financial Officer and not a member of the board of directors.

New Philadelphia

Tuscarawas
County

Coshocton
County

Coshocton

Newcomerstown

Dresden

New Concord

Zanesville [8]

Muskingum
County

Perry
County

New
Lexington

Logan

Hocking
County

Athens

Athens
County

Zanesville - East*
80 Sunrise Center Drive
Zanesville, Ohio 43701
740.455.7305

Zanesville - Kroger*
3387 Maple Avenue
Zanesville, Ohio 43701
740.455.7326

Zanesville - Lending Center*
505 Market Street
Zanesville, Ohio 43701
740.454.6892

Zanesville - North*
1201 Brandywine Boulevard
Zanesville, Ohio 43701
740.455.7285

Zanesville - North Military*
990 Military Road
Zanesville, Ohio 43701
740.454.8505

Zanesville - South*
2127 Maysville Avenue
Zanesville, Ohio 43701
740.455.7301

Zanesville - South Maysville*
2810 Maysville Pike
Zanesville, Ohio 43701
740.455.3169

*Includes Automated Teller Machine

Main Office - Zanesville
14 South Fifth Street
Post Office Box 1515
Zanesville, Ohio 43702
740.454.2521

Athens*
898 East State Street
Athens, Ohio 45701
740.593.7756

Coshocton*
100 Downtowner Plaza
Coshocton, Ohio 43812
740.623.0114

Dresden*
91 West Dave Longaberger Avenue
Dresden, Ohio 43821
740.754.2265

Logan*
61 North Market Street
Logan, Ohio 43138
740.385.5621

New Concord*
1 West Main Street
New Concord, Ohio 43762
740.826.7676

New Lexington*
206 North Main Street
New Lexington, Ohio 43764
740.342.4103

New Philadelphia Lending Center
1309 Fourth Street N.W., Suite B
New Philadelphia, Ohio 44663
330.681.7000

Newcomerstown*
220 East State Street
Newcomerstown, Ohio 43832
740.498.4103

Franklin

County

Reynoldsburg

Pickerington

Canal Winchester

Baltimore

Fairfield

County

Lancaster [6]

FAIRFIELD

NATIONAL

BANK

DIVISION OF THE PARK NATIONAL BANK

Offices: 10 ATMs: 14

Website: FairfieldNationalBank.com

Phone: 740.653.7242 or 800.324.7353

President: Stephen G. Wells

Counties Served: Fairfield, Franklin

Canal Winchester, Ohio 43110

401 North Ewing Street

Lancaster - West Fair*

1001 West Fair Avenue

Lancaster, Ohio 43130

740.653.1199

Pickerington*

1274 Hill Road North

Pickerington, Ohio 43147

614.759.1522

Reynoldsburg - Slate Ridge*

1988 Baltimore-Reynoldsburg Road

(Route 256)

Reynoldsburg, Ohio 43068

614.868.1988

Off-Site ATM Locations

Lancaster - Fairfield Medical Center (2)

Lancaster - Ohio University - Lancaster

1570 Granville Pike

*Includes Automated Teller Machine

Main Office - Lancaster*

143 West Main Street

Post Office Box 607

Lancaster, Ohio 43130

740.653.7242

Main Office Drive-Thru*

150 West Wheeling Street

Lancaster, Ohio 43130

740.653.7242

Baltimore*

1301 West Market Street

Baltimore, Ohio 43105

740.862.4104

Canal Winchester*

6195 Gender Road

614.920.2454

Lancaster - East Main*

1001 East Main Street

Lancaster, Ohio 43130

740.653.5598

Lancaster - East Main Street - Kroger*

1141 East Main Street

Lancaster, Ohio 43130

740.653.9375

Lancaster - Meijer*

2900 Columbus-Lancaster Road

Lancaster, Ohio 43130

740.687.1000

Lancaster - Memorial Drive*

1280 North Memorial Drive

Lancaster, Ohio 43130

740.653.1422

Advisory Board

Michael L. Bennett
Second Capital Consulting, LLC

Ward D. Coffman, III
Coffman Law Offices

Henry C. Littick, II
Southeastern Ohio Broadcasting
Systems, Inc.

Patrick L. Nash
President, Century
National Bank

Julie A. Brown
Fink’s Harley-Davidson, Southside
Collision, Fink’s Quality Cars and
Fink’s Custom Vans

Clinton W. Cameron
Cameron Drilling Company

Scott D. Eickelberger
Kincaid, Taylor and Geyer

Robert D. Goodrich, II
Retired, Wendy’s Management
Group, Inc.

Patrick L. Hennessey
P&D Transportation, Inc.

Thomas M. Lyall
Chairman, Century
National Bank

Timothy S. McLain, CPA
McLain, Hill, Rugg and
Associates, Inc.

Dr. Anne C. Steele
Muskingum University

Dr. Robert J. Thompson
Retired, Neurological Associates
of Southeastern Ohio, Inc.

Bruce D. Kolopajlo
Rebecca R. Porteus
Thomas N. Sulens
Alton P. Thompson

Assistant Vice Presidents
Ann M. Gildow
Susan A. Lasure
Paula L. Meadows
Martin L. Merryman
Jeremy A. Morrow
William J. Murphy*
Jodi C. Pagath
Amy M. Pinson
Terri L. Sidwell
Victoria M. Thomas
Jennifer L. Thompson

Banking Officers
Darin S. Alexander
Jessica L. Cranz
Susan T. Edwards
Lynn M. Garrison
Noelle K. Jarrett
Alaina J. Joseph
Kim S. Kang
William E. Rinehart
Paula J. Stewart
Beth A. Stillwell
Susan L. Summers
Jason L. Wilhelm

Administrative Officers
Molly J. Allen
Jana R. Brandon
John D. DalPonte

Sonya R. Denny
Aaron W. Frick
Amber M. Gibson
Diana L. McHenry
Saundra S. Pritchard
Kayla M. Renner
Christy S. Robinson
Gary R. Russell II
Kandy M. Sampsel
Emila S. Smith
Brittany J. Stubbs
Elaine L. White

*Trust Officer

Officer Listing

Chairman
Thomas M. Lyall

President
Patrick L. Nash

Senior Vice Presidents
James C. Blythe
Barbara A. Gibbs
Jody D. Spencer*

Vice Presidents
Robert W. Bigrigg
Derek A. Boothe
Theresa M. Gilligan
Stephen A. Haren
Jeffrey C. Jordan
Brian G. Kaufman

Advisory Board

Michael L. Bennett

Second Capital Consulting, LLC

Ward D. Coffman, III

Coffman Law Offices

Henry C. Littick, II

Patrick L. Nash

Southeastern Ohio Broadcasting

President, Century

Systems, Inc.

National Bank

Julie A. Brown

Fink’s Harley-Davidson, Southside

Collision, Fink’s Quality Cars and

Fink’s Custom Vans

Clinton W. Cameron

Cameron Drilling Company

Scott D. Eickelberger

Kincaid, Taylor and Geyer

Robert D. Goodrich, II

Retired, Wendy’s Management

Group, Inc.

Patrick L. Hennessey

P&D Transportation, Inc.

Thomas M. Lyall

Chairman, Century

National Bank

Timothy S. McLain, CPA

McLain, Hill, Rugg and

Associates, Inc.

Dr. Anne C. Steele

Muskingum University

Dr. Robert J. Thompson

Retired, Neurological Associates

of Southeastern Ohio, Inc.

Officer Listing

Chairman

Thomas M. Lyall

President

Patrick L. Nash

Senior Vice Presidents

James C. Blythe

Barbara A. Gibbs

Jody D. Spencer*

Vice Presidents

Robert W. Bigrigg

Derek A. Boothe

Theresa M. Gilligan

Stephen A. Haren

Jeffrey C. Jordan

Brian G. Kaufman

Assistant Vice Presidents

Bruce D. Kolopajlo

Rebecca R. Porteus

Thomas N. Sulens

Alton P. Thompson

Ann M. Gildow

Susan A. Lasure

Paula L. Meadows

Martin L. Merryman

Jeremy A. Morrow

William J. Murphy*

Jodi C. Pagath

Amy M. Pinson

Terri L. Sidwell

Victoria M. Thomas

Jennifer L. Thompson

Banking Officers

Darin S. Alexander

Jessica L. Cranz

Susan T. Edwards

Lynn M. Garrison

Noelle K. Jarrett

Alaina J. Joseph

Kim S. Kang

William E. Rinehart

Paula J. Stewart

Beth A. Stillwell

Susan L. Summers

Jason L. Wilhelm

Molly J. Allen

Jana R. Brandon

John D. DalPonte

Sonya R. Denny

Aaron W. Frick

Amber M. Gibson

Diana L. McHenry

Saundra S. Pritchard

Kayla M. Renner

Christy S. Robinson

Gary R. Russell II

Kandy M. Sampsel

Emila S. Smith

Brittany J. Stubbs

Elaine L. White

Administrative Officers

*Trust Officer

FAIRFIELD
NATIONAL
BANK

DIVISION OF THE PARK NATIONAL BANK

Offices: 10 ATMs: 14
Website: FairfieldNationalBank.com
Phone: 740.653.7242 or 800.324.7353
President: Stephen G. Wells
Counties Served: Fairfield, Franklin

Lancaster - West Fair*
1001 West Fair Avenue
Lancaster, Ohio 43130
740.653.1199

Pickerington*
1274 Hill Road North
Pickerington, Ohio 43147
614.759.1522

Reynoldsburg - Slate Ridge*
1988 Baltimore-Reynoldsburg Road
(Route 256)
Reynoldsburg, Ohio 43068
614.868.1988

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

Lancaster - Ohio University - Lancaster
1570 Granville Pike

*Includes Automated Teller Machine

Main Office - Lancaster*
143 West Main Street
Post Office Box 607
Lancaster, Ohio 43130
740.653.7242

Main Office Drive-Thru*
150 West Wheeling Street
Lancaster, Ohio 43130
740.653.7242

Baltimore*
1301 West Market Street
Baltimore, Ohio 43105
740.862.4104

Canal Winchester*
6195 Gender Road
Canal Winchester, Ohio 43110
614.920.2454

Lancaster - East Main*
1001 East Main Street
Lancaster, Ohio 43130
740.653.5598

Lancaster - East Main Street - Kroger*
1141 East Main Street
Lancaster, Ohio 43130
740.653.9375

Lancaster - Meijer*
2900 Columbus-Lancaster Road
Lancaster, Ohio 43130
740.687.1000

Lancaster - Memorial Drive*
1280 North Memorial Drive
Lancaster, Ohio 43130
740.653.1422

Franklin
County

Reynoldsburg

Pickerington

Canal Winchester

Baltimore

Fairfield
County

Lancaster [6]

Offices: 3 ATMs: 4

Website: FarmersandSavings.com

Phone: 419.994.4115 or 855.345.0899

President: Brian R. Hinkle

County Served: Ashland

Off-Site ATM Location

Loudonville - Stake’s Short Stop

3052 State Route 3

*Includes Automated Teller Machine

Ashland

County

Ashland

Perrysville

Loudonville

Main Office - Loudonville*

120 North Water Street

Post Office Box 179

Loudonville, Ohio 44842-0179

419.994.4115

Ashland*

1161 East Main Street

Ashland, Ohio 44805-2831

419.281.1590

Perrysville*

112 North Bridge Street

Post Office Box 156

Perrysville, Ohio 44864-0156

419.938.5622

FAIRFIELD
NATIONAL
BANK

DIVISION OF THE PARK NATIONAL BANK

Advisory Board

Charles P. Bird, Ph.D.
Retired, Ohio University

Leonard F. Gorsuch
Fairfield Homes, Inc.

Jonathan W. Nusbaum, M.D.
Retired, Surgeon

Stephen G. Wells
President, Fairfield
National Bank

Dean DeRolph
Kumler Collision and Automotive

Eleanor V. Hood
The Lancaster Festival

S. Alan Risch
Risch Drug Stores, Inc.

Jennifer Johns Friel
Midwest Fabricating Company

James L. McLain, II
McLain, Hill, Rugg and
Associates, Inc.

Officer Listing

President
Stephen G. Wells

Vice Presidents
Daniel R. Bates
Jamey L. Binkley
Scott A. Reed
Laura F. Tussing*

Assistant Vice Presidents
Molly S. Bates
Michael D. Mitchell*
Sean P. Murnane
Trudy M. Reeb
Jason A. Saul
Kim I. Sheldon
Luann K. Snyder*

Administrative Officers
Scott M. Gray
Katherine A. Smiley Parker

*Trust Officer

Banking Officers
Vincent E. Carpico*
Grace R. Cline
Andrew J. Connell
Eric W. Croft
Daniel J. Fawcett*
Edward J. Gurile, III
Cynthia A. Moore
Tiffany J. Ruckman
Brenda S. Shamblin
Allison G. Spangler*
Tina L. Taley

Advisory Board

Patricia A. Byerly

Retired, Byerly-Lindsey

Funeral Home

Timothy R. Cowen

Cowen Truck Line, Inc.

Brian R. Hinkle

President, Farmers Bank

Roger E. Stitzlein

Loudonville Farmers Equity

Chris D. Tuttle

Amish Oak Furniture

Company, Inc.

Gordon E. Yance

Retired President,

First-Knox National Bank

Officer Listing

President

Brian R. Hinkle

Vice President

Sharon E. Blubaugh

Assistant Vice President

Gregory A. Henley

Banking Officer

Todd A. Geren

Administrative Officers

Melissa A. Caudill

Brenda S. Mitchell

Charles P. Bird, Ph.D.

Retired, Ohio University

Leonard F. Gorsuch

Fairfield Homes, Inc.

Jonathan W. Nusbaum, M.D.

Retired, Surgeon

Stephen G. Wells

President, Fairfield

National Bank

Dean DeRolph

Eleanor V. Hood

S. Alan Risch

Kumler Collision and Automotive

The Lancaster Festival

Risch Drug Stores, Inc.

FAIRFIELD

NATIONAL

BANK

DIVISION OF THE PARK NATIONAL BANK

Advisory Board

Jennifer Johns Friel

Midwest Fabricating Company

James L. McLain, II

McLain, Hill, Rugg and

Associates, Inc.

Officer Listing

President

Stephen G. Wells

Vice Presidents

Daniel R. Bates

Jamey L. Binkley

Scott A. Reed

Laura F. Tussing*

Assistant Vice Presidents

Molly S. Bates

Michael D. Mitchell*

Sean P. Murnane

Trudy M. Reeb

Jason A. Saul

Kim I. Sheldon

Luann K. Snyder*

Offices: 3 ATMs: 4
Website: FarmersandSavings.com
Phone: 419.994.4115 or 855.345.0899
President: Brian R. Hinkle
County Served: Ashland

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

*Includes Automated Teller Machine

Ashland
County

Ashland

Perrysville

Loudonville

Main Office - Loudonville*
120 North Water Street
Post Office Box 179
Loudonville, Ohio 44842-0179
419.994.4115

Ashland*
1161 East Main Street
Ashland, Ohio 44805-2831
419.281.1590

Perrysville*
112 North Bridge Street
Post Office Box 156
Perrysville, Ohio 44864-0156
419.938.5622

Administrative Officers

Scott M. Gray

Katherine A. Smiley Parker

*Trust Officer

Banking Officers

Vincent E. Carpico*

Grace R. Cline

Andrew J. Connell

Eric W. Croft

Daniel J. Fawcett*

Edward J. Gurile, III

Cynthia A. Moore

Tiffany J. Ruckman

Brenda S. Shamblin

Allison G. Spangler*

Tina L. Taley

Advisory Board

Patricia A. Byerly
Retired, Byerly-Lindsey
Funeral Home

Timothy R. Cowen
Cowen Truck Line, Inc.

Brian R. Hinkle
President, Farmers Bank

Roger E. Stitzlein
Loudonville Farmers Equity

Chris D. Tuttle
Amish Oak Furniture
Company, Inc.

Gordon E. Yance
Retired President,
First-Knox National Bank

Officer Listing

President
Brian R. Hinkle

Vice President
Sharon E. Blubaugh

Assistant Vice President
Gregory A. Henley

Banking Officer
Todd A. Geren

Administrative Officers
Melissa A. Caudill
Brenda S. Mitchell

Offices: 10 ATMs: 17
Website: FirstKnox.com
Phone: 740.399.5500 or 800.837.5266
President: Vickie A. Sant
Counties Served: Holmes, Knox, Morrow,
Richland, Wayne

Main Office - Mount Vernon*
One South Main Street
Post Office Box 1270
Mount Vernon, Ohio 43050
740.399.5500

Mount Vernon - Operations Center
105 West Vine Street
Post Office Box 1270
Mount Vernon, Ohio 43050
740.399.5500

Richland
County

Wayne
County

Wooster

Advisory Board

Wooster
2148 Eagle Pass, Suite G
Wooster, Ohio 44691
330.462.7030

Off-Site ATM Locations
Gambier - Kenyon College Bookstore
106 Gaskin Avenue

Mount Gilead

Morrow
County

Bellville

Fredericktown

Danville

Mount Vernon [3]

Centerburg

Knox
County

Holmes
County

Millersburg

Howard - Apple Valley
21973 Coshocton Road

Millersburg - BAGS
88 East Jackson Street

Mount Gilead - Morrow County Hospital
651 West Marion Road

Mount Vernon - Colonial City Lanes
110 Mount Vernon Avenue

Mount Vernon - COTC - Ariel Hall
236 South Main Street

Mount Vernon - Knox Community Hospital
1330 Coshocton Road

Mount Vernon - Mount Vernon Nazarene
University
800 Martinsburg Road

Mount Vernon
11 West Vine Street

*Includes Automated Teller Machine

Robert E. Boss

Executive Vice President,

First-Knox National Bank

Daniel L. Mathie

Critchfield, Critchfield &

Johnston, Ltd.

Vickie A. Sant

President and Chairwoman,

First-Knox National Bank

Maureen H. Buchwald

Glen Hill Orchards, Ltd.

Noel C. Parrish

NOE, Inc.

Roger E. Stitzlein

Loudonville Farmers Equity

William B. Levering

Mark R. Ramser

Levering Management, Inc.

Ohio Cumberland Gas Co.

Gordon E. Yance

Retired President,

First-Knox National Bank

Officer Listing

President
Vickie A. Sant

Executive Vice President
Robert E. Boss

Senior Vice Presidents
Cheri L. Butcher*
Julie A. Leonard

Vice Presidents
Cynthia L. Higgs
James W. Hobson
Jerry D. Simon
Todd P. Vermilya

Assistant Vice Presidents

Timothy H. Bahler

Heather A. Brayshaw

Phyllis D. Colopy

Rachelle E. Dallas

Wendi M. Fowler*

Todd M. Hawkins*

Debra E. Holiday

Jason B. Hummel

R. Edward Kline

Mary A. Loyd*

James S. Meyer

Banking Officers

Gabriel J. Aufrance

Nicholas R. Blanchard

Levi D. Curry

Lance E. Dill

Krystal E. Drye

Brandon D. Hayes

Kassandra L. Hoeflich

David E. Humphrey

Darrell E. Lee

Sherry L. Snyder

Steven A. Waers

Administrative Officers

Katherine M. Bartlebaugh**

Kimberly A. Burgess

Deborah J. Daniels**

Laurie P. Gallwitz

Heather L. Hankins

Cynthia K. Hogle

Jeffrey A. Kinney

Matia M. Mathews

Paul J. Mayville

Douglas R. McCann

Paulina S. McQuigg

Monique A. Milligan

Fawn J. Mollenkopf

Tiffany D. Stefano

*Trust Officer

**Assistant Trust Officer

Bellville*
154 Main Street
Bellville, Ohio 44813
419.886.3711

Centerburg*
35 West Main Street
Post Office Box F
Centerburg, Ohio 43011
740.625.6136

Danville*
4 South Market Street
Post Office Box 29
Danville, Ohio 43014
740.599.6686

Fredericktown*
137 North Main Street
Fredericktown, Ohio 43019
740.694.2035

Millersburg
225 North Clay Street
Millersburg, Ohio 44654
330.674.2610

Mount Gilead*
504 West High Street
Mount Gilead, Ohio 43338
419.946.9010

Mount Vernon - Blackjack Road*
8641 Blackjack Road
Mount Vernon, Ohio 43050
740.399.5260

Mount Vernon - Coshocton Avenue*
810 Coshocton Avenue
Mount Vernon, Ohio 43050
740.397.5551

Offices: 10 ATMs: 17

Website: FirstKnox.com

Phone: 740.399.5500 or 800.837.5266

President: Vickie A. Sant

Counties Served: Holmes, Knox, Morrow,

Richland, Wayne

Bellville*

154 Main Street

Bellville, Ohio 44813

419.886.3711

Centerburg*

35 West Main Street

Post Office Box F

Centerburg, Ohio 43011

740.625.6136

Danville*

4 South Market Street

Post Office Box 29

Danville, Ohio 43014

740.599.6686

Fredericktown*

137 North Main Street

Fredericktown, Ohio 43019

740.694.2035

Millersburg

225 North Clay Street

Millersburg, Ohio 44654

330.674.2610

Mount Gilead*

504 West High Street

Mount Gilead, Ohio 43338

419.946.9010

Mount Vernon - Blackjack Road*

8641 Blackjack Road

Mount Vernon, Ohio 43050

740.399.5260

Mount Vernon - Coshocton Avenue*

810 Coshocton Avenue

Mount Vernon, Ohio 43050

740.397.5551

Howard - Apple Valley

21973 Coshocton Road

Millersburg - BAGS

88 East Jackson Street

Mount Gilead - Morrow County Hospital

651 West Marion Road

Mount Vernon - Colonial City Lanes

110 Mount Vernon Avenue

Mount Vernon - COTC - Ariel Hall

236 South Main Street

Mount Vernon - Knox Community Hospital

1330 Coshocton Road

Mount Vernon - Mount Vernon Nazarene

University

800 Martinsburg Road

Mount Vernon

11 West Vine Street

*Includes Automated Teller Machine

Main Office - Mount Vernon*

One South Main Street

Post Office Box 1270

Mount Vernon, Ohio 43050

740.399.5500

Mount Vernon - Operations Center

105 West Vine Street

Post Office Box 1270

Mount Vernon, Ohio 43050

740.399.5500

Richland

County

Wayne

County

Wooster

Advisory Board

Wooster

2148 Eagle Pass, Suite G

Wooster, Ohio 44691

330.462.7030

Off-Site ATM Locations

Gambier - Kenyon College Bookstore

106 Gaskin Avenue

Mount Gilead

Morrow

County

Bellville

Fredericktown

Danville

Mount Vernon [3]

Centerburg

Knox

County

Holmes

County

Millersburg

Robert E. Boss
Executive Vice President,
First-Knox National Bank

Daniel L. Mathie
Critchfield, Critchfield &
Johnston, Ltd.

Vickie A. Sant
President and Chairwoman,
First-Knox National Bank

Maureen H. Buchwald
Glen Hill Orchards, Ltd.

Noel C. Parrish
NOE, Inc.

Roger E. Stitzlein
Loudonville Farmers Equity

William B. Levering
Levering Management, Inc.

Mark R. Ramser
Ohio Cumberland Gas Co.

Gordon E. Yance
Retired President,
First-Knox National Bank

Officer Listing

President
Vickie A. Sant

Executive Vice President
Robert E. Boss

Senior Vice Presidents
Cheri L. Butcher*
Julie A. Leonard

Vice Presidents
Cynthia L. Higgs
James W. Hobson
Jerry D. Simon
Todd P. Vermilya

Assistant Vice Presidents
Timothy H. Bahler
Heather A. Brayshaw
Phyllis D. Colopy
Rachelle E. Dallas
Wendi M. Fowler*
Todd M. Hawkins*
Debra E. Holiday
Jason B. Hummel
R. Edward Kline
Mary A. Loyd*
James S. Meyer

Banking Officers
Gabriel J. Aufrance
Nicholas R. Blanchard
Levi D. Curry
Lance E. Dill
Krystal E. Drye
Brandon D. Hayes
Kassandra L. Hoeflich
David E. Humphrey
Darrell E. Lee
Sherry L. Snyder
Steven A. Waers

Administrative Officers
Katherine M. Bartlebaugh**
Kimberly A. Burgess
Deborah J. Daniels**
Laurie P. Gallwitz
Heather L. Hankins
Cynthia K. Hogle
Jeffrey A. Kinney
Matia M. Mathews
Paul J. Mayville
Douglas R. McCann
Paulina S. McQuigg
Monique A. Milligan
Fawn J. Mollenkopf
Tiffany D. Stefano

*Trust Officer
**Assistant Trust Officer

PARK

NATIONAL BANK

Offices: 16 ATMs: 22
Website: ParkNationalBank.com
Phone: 740.349.8451 or 888.545.4762
Chairman: C. Daniel DeLawder
President: David L. Trautman
Counties Served: Franklin, Licking

Johnstown

Utica

Licking
County

Granville

Pataskala

Newark [6]

Heath [2]

Hebron

Worthington

Gahanna

Franklin
County

Columbus

Off-Site ATM Locations
Granville - Denison University, Slayter Hall
200 Ridge Road

Granville - Kendal at Granville
2158 Columbus Road

Hebron - Kroger
600 East Main Street

Newark - Licking Memorial Hospital
1320 West Main Street

Newark - OSU-N/COTC Campus
1179 University Drive

Reynoldsburg - Kroger
6962 East Main Street

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

Newark - Eastland*
1008 East Main Street
Newark, Ohio 43055
740.349.3942

Newark - Kroger Marketplace*
1155 North 21st Street
Newark, Ohio 43055
740.349.3946

Newark - McMillen*
1633 West Main Street
Newark, Ohio 43055
740.349.3944

Newark - 21st Street*
990 North 21st Street
Newark, Ohio 43055
740.349.3943

Newark - Operations Centers
21 South First Street
22 South First Street
51 North Third Street
Newark, Ohio 43055
740.349.8633

Pataskala - Kroger**
350 East Broad Street
Pataskala, Ohio 43062
740.927.8113

Utica*
33 South Main Street
Post Office Box 486
Utica, Ohio 43080
740.892.3841

Worthington*
7140 North High Street
Worthington, Ohio 43085
614.841.0123

Main Office - Newark*
50 North Third Street
Post Office Box 3500
Newark, Ohio 43055
740.349.8451

Columbus
140 East Town Street, Suite 1400
Columbus, Ohio 43215
614.228.0063

Gahanna - Kroger*
1365 Stoneridge Drive
Gahanna, Ohio 43230
614.475.5213

Granville*
119 East Broadway
Granville, Ohio 43023
740.587.0238

Heath - Southgate*
567 Hebron Road
Heath, Ohio 43056
740.522.3176

Heath - 30th Street*
800 South 30th Street
Heath, Ohio 43056
740.522.5693

Hebron*
103 East Main Street
Post Office Box 268
Hebron, Ohio 43025
740.928.2691

Johnstown*
60 West Coshocton Street
Post Office Box 446
Johnstown, Ohio 43031
740.967.1831

Newark - Dugway*
1495 Granville Road
Newark, Ohio 43055
740.349.3947

PARK

NATIONAL BANK

Board of Directors

C. Daniel DeLawder

Chairman,

The Park National Bank

James R. DeRoberts

Gardiner, Allen, DeRoberts

Insurance

Officer Listing

Chairman

C. Daniel DeLawder

President

David L. Trautman

Senior Vice Presidents

Adrienne M. Brokaw

Brady T. Burt

Thomas J. Button

Thomas M. Cummiskey*

Robert N. Kent, Jr.

Timothy J. Lehman

Laura B. Lewis

Matthew R. Miller

Jason L. Painley

Cheryl L. Snyder

Paul E. Turner

Jeffrey A. Wilson

Vice Presidents

Linda K. Ampadu

Alan G. Anderson

Gail A. Blizzard

Edward L. Brady

Jill A. Brewer

Alice M. Browning

James M. Buskirk*

Bryan M. Campolo

Peter G. Cassanos

Cynthia L. Crane

Kathleen O. Crowley

Jaqueline L. Davis

Lori T. Drake

April R. Dusthimer

Kelly A. Edds

Brian J. Elder

Jill S. Evans

Andrew J. Fackler

Joan L. Franks

Donna M. Alvarado

AGUILA International

F.W. Englefield, IV

Englefield, Inc.

Robert E. O’Neill

Southgate Corporation

Stephen J. Kambietz

Entrepreneur

William T. McConnell

Director Emeritus

J. Gilbert Reese

Director Emeritus

Julia A. Sloat

AEP Ohio

David L. Trautman

President,

The Park National Bank

Leon Zazworsky

Mid State Systems, Inc.

Jerrod F. Gambs

John S. Gard*

Jeffrey C. Gluntz

Scott C. Green

Frederick G. Hadley

Linda M. Harris

Cheri L. Hottinger

Damon P. Howarth*

Daniel L. Hunt

Teresa M. Kroll*

Craig M. Larson

Candy J. Lehman

Bethany B. Lewis

Mark A. Longstreth

Kelly M. Maloney

Carl H. Mayer

Lydia E. Miller

Mark H. Miller

Jennifer L. Morehead

Cynthia A. Neely

Kathy A. Patton

Gregory M. Rhoads

Karen K. Rice

Scott R. Robertson

David J. Rohde

Ralph H. Root, III

Christine S. Schneider

Eric M. Sideri

Robert G. Springer

Linda M. Staubach

Julie L. Strohacker*

Peggy A. Tidwell

Sandra S. Travis

Angie D. Treadway

Berkley C. Tuggle, Jr.

Daniel H. Turben

Stanley A. Uchida

John B. Uible*

Monte J. VanDeusen

Bradden E. Waltz

Barbara A. Wilson

Christa D. Wright

J. Bradley Zellar*

Assistant Vice Presidents

Corey S. Alton

Lindsay M. Alton

Kevin J. Andrew

Angela J. Arnett-Corson

Clinton G. Bailey

Eric M. Baker*

Renee L. Baker

Brent A. Barnes

Sharon L. Bolen

Stephen E. Buchanan

Erica L. Chance

Jennifer S. Coates

Jennifer G. Corbitt

Amber L. Cummins*

Aaron T. Dunifon

Amanda K. Evans

Catherine J. Evans

Brenda M. Frakes

David W. Hardy*

Louise A. Harvey

Teresa A. Hennessy

Cynthia L. Kissel

Steven J. Klein

Daniel K. Maloney

Julia E. McCormack

William L. Nelson

Karen L. Pavone

Tracey E. Ramsey

Steven E. Ritzer

Jessica L. Royster

Mareion A. Royster*

Leda J. Rutledge

Ruth Y. Sawyer

Jeffrey L. Shellhaas

James O. Spichiger

John A. Stevens

Lisa E. Stranger

Lori B. Tabler

Scott A. VanHorn

Ginger R. Varner

Jenny L. Ward

Megan C. Warman*

Heather N. Wiley

D. Bradley Wilkins

John C. Wolters

Ryan D. Wood

Banking Officers

Ellen P. Akey

Stephanie J. Allen

Robert S. Allison

Jessica J. Altman

Jordi Arimany

Michelle L. Arnold

Thomas E. Ballard

Renae M. Buchanan

Jill E. Burnworth

Tara L. Craaybeek

Michael D. Dudgeon

Kathryn S. Firestone

Maxwell M. Fischer

Allen S. Fish

Adrienne L. Fisher

Abigail C. Hobbs

Candy L. Holbrook

Cynthia R. Hollis

Amber L. Keirns

Lisa A. Keller

Lauren M. Kellett*

Diann M. Langwasser

Kimberly G. McDonough

April D. Milby

Kathy K. Myers*

Richard J. Patellos, Jr.*

Sherri L. Pembrook

Lacie M. Priest

Jennifer L. Shanaberg

Diane M. Oberfield*

Paul P. Ragias

Joyce A. Reaser

Michelle A. Rood

Rose M. Wilson

Barry H. Winters

Laura S. Wright

Administrative Officers

Brandon M. Akey

Jack E. Arthur

Kimberly K. Ballmann

Janell K. Bame

Andrea N. Bardsley

Jennifer F. Bobb**

Laura A. Clevenger

Belinda L. Cole

Regina B. Cullison

John T. Erickson

Teresa K. Faris

Andrea J. Ford

Darcy D. Grossett

Adam S. Hoar**

Asher D. Hunter

Timothy A. Keith

Jessica M. McPeek

Jamie G. Norckauer**

Shannon C. O’Dea-Miller

Rodger D. Orr

Scott D. Parks

Jeffrey A. Pillow

Abigail R. Rehbeck**

Zachary A. Reuscher

Jessica L. Schorger

Melissa N. Spain

Michelle M. Tipton

Andrew S. Wear

Christopher J. Wohlheter*

David S. Zambo

*Trust Officer

**Assistant Trust Officer

PARK

NATIONAL BANK

Offices: 16 ATMs: 22

Website: ParkNationalBank.com

Phone: 740.349.8451 or 888.545.4762

Chairman: C. Daniel DeLawder

President: David L. Trautman

Counties Served: Franklin, Licking

PARK

NATIONAL BANK

Board of Directors

Donna M. Alvarado
AGUILA International

F.W. Englefield, IV
Englefield, Inc.

Robert E. O’Neill
Southgate Corporation

Main Office - Newark*

50 North Third Street

Post Office Box 3500

Newark, Ohio 43055

740.349.8451

Columbus

140 East Town Street, Suite 1400

Columbus, Ohio 43215

614.228.0063

Gahanna - Kroger*

1365 Stoneridge Drive

Gahanna, Ohio 43230

614.475.5213

Granville*

119 East Broadway

Granville, Ohio 43023

740.587.0238

Heath - Southgate*

567 Hebron Road

Heath, Ohio 43056

740.522.3176

Heath - 30th Street*

800 South 30th Street

Heath, Ohio 43056

740.522.5693

Hebron*

103 East Main Street

Post Office Box 268

Hebron, Ohio 43025

740.928.2691

Johnstown*

60 West Coshocton Street

Post Office Box 446

Johnstown, Ohio 43031

740.967.1831

Newark - Dugway*

1495 Granville Road

Newark, Ohio 43055

740.349.3947

Johnstown

Utica

Licking

County

Granville

Pataskala

Newark [6]

Heath [2]

Hebron

Worthington

Gahanna

Franklin

County

Columbus

Off-Site ATM Locations

Granville - Denison University, Slayter Hall

200 Ridge Road

Granville - Kendal at Granville

2158 Columbus Road

Hebron - Kroger

600 East Main Street

Newark - Licking Memorial Hospital

1320 West Main Street

Newark - OSU-N/COTC Campus

1179 University Drive

Reynoldsburg - Kroger

6962 East Main Street

*Includes Automated Teller Machine

**Includes Automated Teller Machine

Drive-up and Inside

Newark - Kroger Marketplace*

Newark - Operations Centers

Newark - Eastland*

1008 East Main Street

Newark, Ohio 43055

740.349.3942

1155 North 21st Street

Newark, Ohio 43055

740.349.3946

Newark - McMillen*

1633 West Main Street

Newark, Ohio 43055

740.349.3944

Newark - 21st Street*

990 North 21st Street

Newark, Ohio 43055

740.349.3943

21 South First Street

22 South First Street

51 North Third Street

Newark, Ohio 43055

740.349.8633

Pataskala - Kroger**

350 East Broad Street

Pataskala, Ohio 43062

740.927.8113

Utica*

33 South Main Street

Post Office Box 486

Utica, Ohio 43080

740.892.3841

Worthington*

7140 North High Street

Worthington, Ohio 43085

614.841.0123

C. Daniel DeLawder
Chairman,
The Park National Bank

James R. DeRoberts
Gardiner, Allen, DeRoberts
Insurance

Officer Listing

Chairman
C. Daniel DeLawder

President
David L. Trautman

Senior Vice Presidents
Adrienne M. Brokaw
Brady T. Burt
Thomas J. Button
Thomas M. Cummiskey*
Robert N. Kent, Jr.
Timothy J. Lehman
Laura B. Lewis
Matthew R. Miller
Jason L. Painley
Cheryl L. Snyder
Paul E. Turner
Jeffrey A. Wilson

Vice Presidents
Linda K. Ampadu
Alan G. Anderson
Gail A. Blizzard
Edward L. Brady
Jill A. Brewer
Alice M. Browning
James M. Buskirk*
Bryan M. Campolo
Peter G. Cassanos
Cynthia L. Crane
Kathleen O. Crowley
Jaqueline L. Davis
Lori T. Drake
April R. Dusthimer
Kelly A. Edds
Brian J. Elder
Jill S. Evans
Andrew J. Fackler
Joan L. Franks

Stephen J. Kambietz
Entrepreneur

William T. McConnell
Director Emeritus

J. Gilbert Reese
Director Emeritus

Julia A. Sloat
AEP Ohio

David L. Trautman
President,
The Park National Bank

Leon Zazworsky
Mid State Systems, Inc.

Jerrod F. Gambs
John S. Gard*
Jeffrey C. Gluntz
Scott C. Green
Frederick G. Hadley
Linda M. Harris
Cheri L. Hottinger
Damon P. Howarth*
Daniel L. Hunt
Teresa M. Kroll*
Craig M. Larson
Candy J. Lehman
Bethany B. Lewis
Mark A. Longstreth
Kelly M. Maloney
Carl H. Mayer
Lydia E. Miller
Mark H. Miller
Jennifer L. Morehead
Cynthia A. Neely
Kathy A. Patton
Gregory M. Rhoads
Karen K. Rice
Scott R. Robertson
David J. Rohde
Ralph H. Root, III
Christine S. Schneider
Eric M. Sideri
Robert G. Springer
Linda M. Staubach
Julie L. Strohacker*
Peggy A. Tidwell
Sandra S. Travis
Angie D. Treadway
Berkley C. Tuggle, Jr.
Daniel H. Turben
Stanley A. Uchida
John B. Uible*
Monte J. VanDeusen
Bradden E. Waltz
Barbara A. Wilson

Christa D. Wright
J. Bradley Zellar*

Assistant Vice Presidents
Corey S. Alton
Lindsay M. Alton
Kevin J. Andrew
Angela J. Arnett-Corson
Clinton G. Bailey
Eric M. Baker*
Renee L. Baker
Brent A. Barnes
Sharon L. Bolen
Stephen E. Buchanan
Erica L. Chance
Jennifer S. Coates
Jennifer G. Corbitt
Amber L. Cummins*
Aaron T. Dunifon
Amanda K. Evans
Catherine J. Evans
Brenda M. Frakes
David W. Hardy*
Louise A. Harvey
Teresa A. Hennessy
Cynthia L. Kissel
Steven J. Klein
Daniel K. Maloney
Julia E. McCormack
William L. Nelson
Karen L. Pavone
Tracey E. Ramsey
Steven E. Ritzer
Jessica L. Royster
Mareion A. Royster*
Leda J. Rutledge
Ruth Y. Sawyer
Jennifer L. Shanaberg
Jeffrey L. Shellhaas
James O. Spichiger
John A. Stevens

Lisa E. Stranger
Lori B. Tabler
Scott A. VanHorn
Ginger R. Varner
Jenny L. Ward
Megan C. Warman*
Heather N. Wiley
D. Bradley Wilkins
John C. Wolters
Ryan D. Wood

Banking Officers
Ellen P. Akey
Stephanie J. Allen
Robert S. Allison
Jessica J. Altman
Jordi Arimany
Michelle L. Arnold
Thomas E. Ballard
Renae M. Buchanan
Jill E. Burnworth
Tara L. Craaybeek
Michael D. Dudgeon
Kathryn S. Firestone
Maxwell M. Fischer
Allen S. Fish
Adrienne L. Fisher
Abigail C. Hobbs
Candy L. Holbrook
Cynthia R. Hollis
Amber L. Keirns
Lisa A. Keller
Lauren M. Kellett*
Diann M. Langwasser
Kimberly G. McDonough
April D. Milby
Kathy K. Myers*
Diane M. Oberfield*
Richard J. Patellos, Jr.*
Sherri L. Pembrook
Lacie M. Priest

Paul P. Ragias
Joyce A. Reaser
Michelle A. Rood
Rose M. Wilson
Barry H. Winters
Laura S. Wright

Administrative Officers
Brandon M. Akey
Jack E. Arthur
Kimberly K. Ballmann
Janell K. Bame
Andrea N. Bardsley
Jennifer F. Bobb**
Laura A. Clevenger
Belinda L. Cole
Regina B. Cullison
John T. Erickson
Teresa K. Faris
Andrea J. Ford
Darcy D. Grossett
Adam S. Hoar**
Asher D. Hunter
Timothy A. Keith
Jessica M. McPeek
Jamie G. Norckauer**
Shannon C. O’Dea-Miller
Rodger D. Orr
Scott D. Parks
Jeffrey A. Pillow
Abigail R. Rehbeck**
Zachary A. Reuscher
Jessica L. Schorger
Melissa N. Spain
Michelle M. Tipton
Andrew S. Wear
Christopher J. Wohlheter*
David S. Zambo

*Trust Officer
**Assistant Trust Officer

Offices: 11 ATMs: 11

Website: RichlandBank.com

Phone: 419.525.8700 or 800.525.8702

President: Chris R. Hiner

County Served: Richland

Main Office - Mansfield*

3 North Main Street

Post Office Box 355

Mansfield, Ohio 44901

419.525.8700

Butler*

85 Main Street

Butler, Ohio 44822

419.883.3291

Lexington*

276 East Main Street

Lexington, Ohio 44904

419.884.1054

Mansfield - Ashland Road*

797 Ashland Road

Mansfield, Ohio 44905

419.589.6321

Mansfield - Cook Road*

460 West Cook Road

Mansfield, Ohio 44907

419.756.3696

Mansfield - Lexington Avenue - Kroger*

1500 Lexington Avenue

Mansfield, Ohio 44907

419.756.3587

Mansfield - Marion Avenue*

50 Marion Avenue

Mansfield, Ohio 44903

419.524.3310

Mansfield - Springmill*

889 North Trimble Road

Mansfield, Ohio 44906

419.747.4821

Mansfield - West Park*

1255 Park Avenue West

Mansfield, Ohio 44906

419.529.5822

Ontario*

325 North Lexington-Springmill Road

Ontario, Ohio 44906

419.529.4112

Shelby - Mansfield Avenue*

155 Mansfield Avenue

Shelby, Ohio 44875

419.347.3111

*Includes Automated Teller Machine

Richland

County

Shelby

Ontario

Mansfield [7]

Lexington

Butler

Offices: 8 ATMs: 8
Website: ParkNationalBank.com
Phone: 513.576.0600 or 888.474.7275
President: David J. Gooch
Counties Served: Butler, Clermont,
Hamilton

New Richmond*
100 Western Avenue
New Richmond, Ohio 45157
513.553.3131

Owensville*
5100 State Route 132
Owensville, Ohio 45160
513.732.2131

Rookwood*
3825 Edwards Road, Suite 520
Cincinnati, Ohio 45209
513.718.6040

West Chester*
8366 Princeton-Glendale Road
West Chester, Ohio 45069
513.346.2000

*Includes Automated Teller Machine

Butler
County

West Chester

Hamilton
County

Milford

Rookwood

Eastgate

Anderson

Owensville

Amelia
Clermont
County
New Richmond

Jeanne M. Golliher
Cincinnati Development Fund

Martin J. Grunder, Jr.
Grunder Landscaping Co.

Larry H. Maxey
Synchronic Business Solutions

Main Office - Eastgate*
4550 Eastgate Boulevard
Cincinnati, Ohio 45245
513.753.0900

Amelia - Ohio Pike*
1187 Ohio Pike
Amelia, Ohio 45102
513.753.7283

Anderson*
1075 Nimitzview Drive
Cincinnati, Ohio 45230
513.232.9599

Milford*
25 Main Street
Milford, Ohio 45150
513.831.4400

Advisory Board

Thomas J. Button
Senior Vice President,
The Park National Bank

Daniel L. Earley
Chairman, Retired President,
Park National Bank of Southwest
Ohio and Northern Kentucky

David J. Gooch
President,
Park National Bank of Southwest
Ohio and Northern Kentucky

Richard W. Holmes
Retired, Pricewaterhouse
Coopers, LLP

Thomas E. Niehaus
Vorys Advisors LLC

Officer Listing

President
David J. Gooch

Senior Vice Presidents
Jennifer K. Fischer
William M. Schumacker*
Adam T. Stypula

Vice Presidents
Jay F. Berliner

Jason D. Hughes
Timothy A. Kemper
Louis J. Prabell
Ginger L. Vining
Joseph A. Wagner

Assistant Vice Presidents
Matthew M. Bauer
Matthew D. Colwell
Edward K. Cunningham
Kim J. Cunningham

Sam J. DeBonis
James E. Hyson
William K. Wright

Banking Officers
Jana M. Beal
Michelle R. Hamilton
Jason O. Verhoff
Cyndy H. Wright

Administrative Officers
James P. Beck
Tosha D. Leimberger
Rachael L. Rice
Michelle M. Sandlin
Kevin M. Shellberg
Danielle N. Thiel

*Trust Officer

Offices: 8 ATMs: 8

Website: ParkNationalBank.com

Phone: 513.576.0600 or 888.474.7275

President: David J. Gooch

Counties Served: Butler, Clermont,

Hamilton

New Richmond*

100 Western Avenue

New Richmond, Ohio 45157

513.553.3131

Owensville*

5100 State Route 132

Owensville, Ohio 45160

513.732.2131

Rookwood*

3825 Edwards Road, Suite 520

Cincinnati, Ohio 45209

513.718.6040

West Chester*

8366 Princeton-Glendale Road

West Chester, Ohio 45069

513.346.2000

*Includes Automated Teller Machine

Butler

County

West Chester

Hamilton

County

Rookwood

Eastgate

Anderson

Owensville

Milford

Amelia

Clermont

County

New Richmond

Main Office - Eastgate*

4550 Eastgate Boulevard

Cincinnati, Ohio 45245

513.753.0900

Amelia - Ohio Pike*

1187 Ohio Pike

Amelia, Ohio 45102

513.753.7283

Anderson*

1075 Nimitzview Drive

Cincinnati, Ohio 45230

513.232.9599

Milford*

25 Main Street

Milford, Ohio 45150

513.831.4400

Advisory Board

Thomas J. Button

Senior Vice President,

The Park National Bank

Jeanne M. Golliher

Cincinnati Development Fund

Martin J. Grunder, Jr.

Grunder Landscaping Co.

Larry H. Maxey

Synchronic Business Solutions

Daniel L. Earley

Chairman, Retired President,

Park National Bank of Southwest

Ohio and Northern Kentucky

David J. Gooch

President,

Park National Bank of Southwest

Ohio and Northern Kentucky

Richard W. Holmes

Retired, Pricewaterhouse

Coopers, LLP

Thomas E. Niehaus

Vorys Advisors LLC

Officer Listing

President

David J. Gooch

Senior Vice Presidents

Jennifer K. Fischer

William M. Schumacker*

Adam T. Stypula

Vice Presidents

Jay F. Berliner

Jason D. Hughes

Timothy A. Kemper

Louis J. Prabell

Ginger L. Vining

Joseph A. Wagner

Matthew M. Bauer

Matthew D. Colwell

Edward K. Cunningham

Kim J. Cunningham

Assistant Vice Presidents

Michelle R. Hamilton

Sam J. DeBonis

James E. Hyson

William K. Wright

Banking Officers

Jana M. Beal

Jason O. Verhoff

Cyndy H. Wright

Administrative Officers

James P. Beck

Tosha D. Leimberger

Rachael L. Rice

Michelle M. Sandlin

Kevin M. Shellberg

Danielle N. Thiel

*Trust Officer

Offices: 11 ATMs: 11
Website: RichlandBank.com
Phone: 419.525.8700 or 800.525.8702
President: Chris R. Hiner
County Served: Richland

Main Office - Mansfield*
3 North Main Street
Post Office Box 355
Mansfield, Ohio 44901
419.525.8700

Butler*
85 Main Street
Butler, Ohio 44822
419.883.3291

Lexington*
276 East Main Street
Lexington, Ohio 44904
419.884.1054

Mansfield - Ashland Road*
797 Ashland Road
Mansfield, Ohio 44905
419.589.6321

Mansfield - Cook Road*
460 West Cook Road
Mansfield, Ohio 44907
419.756.3696

Mansfield - Lexington Avenue - Kroger*
1500 Lexington Avenue
Mansfield, Ohio 44907
419.756.3587

Mansfield - Marion Avenue*
50 Marion Avenue
Mansfield, Ohio 44903
419.524.3310

Mansfield - Springmill*
889 North Trimble Road
Mansfield, Ohio 44906
419.747.4821

Mansfield - West Park*
1255 Park Avenue West
Mansfield, Ohio 44906
419.529.5822

Ontario*
325 North Lexington-Springmill Road
Ontario, Ohio 44906
419.529.4112

Shelby - Mansfield Avenue*
155 Mansfield Avenue
Shelby, Ohio 44875
419.347.3111

*Includes Automated Teller Machine

Richland
County

Shelby

Ontario

Mansfield [7]

Lexington

Butler

Offices: 8 ATMs: 7

Website: SecondNational.com

Phone: 937.548.2122 or 855.548.2122

President: John E. Swallow

Counties Served: Darke, Mercer

Greenville - Third and Walnut*

Greenville - North*

1302 Wagner Avenue

Greenville, Ohio 45331

937.548.5068

175 East Third Street

Greenville, Ohio 45331

937.547.2555

Greenville - Walmart*

1501 Wagner Avenue

Greenville, Ohio 45331

937.548.4563

Versailles*

101 West Main Street

Versailles, Ohio 45380

937.526.3287

*Includes Automated Teller Machine

Mercer

County

Celina

Fort Recovery

Darke

County

Versailles

Greenville [4]

Arcanum

Advisory Board

Mark Breitinger
Milark Industries, Inc.

Benjamin A. Goldman
Retired, Superior Building
Services

Timothy J. Lehman
Senior Vice President,
The Park National Bank

Linda H. Smith
Ashwood, LLC

Michael L. Chambers
J&B Acoustical, Inc.

Chris R. Hiner
President, Richland Bank

Jeffrey S. Monica
McDonald’s

Rick R. Taylor
Jay Industries, Inc.

Officer Listing

President
Chris R. Hiner

Executive Vice President
Frank W. Wagner, II

Senior Vice President
Donald R. Harris, Jr.

Vice Presidents
Charla A. Irvin*
Jeffrey A. Parton
Rebecca J. Toomey

Administrative Officers
Lisa S. Clingan
Vicky L. Garcia
Janis L. Hoover
Kristie L. Massa

*Trust Officer

Assistant Vice Presidents
Edward A. Brauchler
Jimmy D. Burton
John Q. Cleland
Edward E. Duffey
Susan A. Fanello
Ralph J. Kelsay
Barbara A. Miller
Sheryl L. Smith
Linda M. Whited

Banking Officers
Carol L. Davis
Clayton J. Herold
Beth K. Malaska
Barbara L. Schopp-Miller
Ryan D. Smith
Deborah A. Sweet

Main Office - Greenville

499 South Broadway

Post Office Box 130

Greenville, Ohio 45331

937.548.2122

Arcanum*

603 North Main Street

Arcanum, Ohio 45304

937.692.5191

Celina*

800 North Main Street

Celina, Ohio 45822

419.268.0049

Fort Recovery*

117 North Wayne Street

Fort Recovery, Ohio 45846

419.375.4101

Advisory Board

Second National Bank

Tyeis Baker-Baumann

Rebsco, Inc.

Officer Listing

President

John E. Swallow

Vice Presidents

C. Russell Badgett

D. Todd Durham*

Joy D. Greer

Thomas J. Lawson

Eric J. McKee

Daniel G. Schmitz

Steven C. Badgett

Wayne G. Deschambeau

Retired Executive Vice President,

Wayne HealthCare

Philip M. Fullenkamp

Celina Insurance Group

Michael J. Pax

Pax Machine Works, Inc.

Travis L. Fliehman

Jeffrey E. Hittle

Detling, Harlan & Fliehman, Ltd.

Hittle Buick GMC, Inc.

John E. Swallow

President,

Second National Bank

Brian A. Wagner

Assistant Vice Presidents

Kimberly A. Baker

Gerald O. Beatty

Alexa J. Clark

Debby J. Folkerth

Vicki L. Neff

Shane D. Stonebraker

Banking Officer

Stephen C. Schulte

Administrative Officers

Antonia T. Baker**

Melanie A. Smith

*Trust Officer

**Assistant Trust Officer

Advisory Board

Mark Breitinger

Milark Industries, Inc.

Benjamin A. Goldman

Retired, Superior Building

Services

Timothy J. Lehman

Senior Vice President,

The Park National Bank

Linda H. Smith

Ashwood, LLC

Michael L. Chambers

J&B Acoustical, Inc.

Chris R. Hiner

Jeffrey S. Monica

President, Richland Bank

McDonald’s

Rick R. Taylor

Jay Industries, Inc.

President

Chris R. Hiner

Assistant Vice Presidents

Administrative Officers

Edward A. Brauchler

Officer Listing

Executive Vice President

Frank W. Wagner, II

Senior Vice President

Donald R. Harris, Jr.

Vice Presidents

Charla A. Irvin*

Jeffrey A. Parton

Rebecca J. Toomey

Lisa S. Clingan

Vicky L. Garcia

Janis L. Hoover

Kristie L. Massa

*Trust Officer

Jimmy D. Burton

John Q. Cleland

Edward E. Duffey

Susan A. Fanello

Ralph J. Kelsay

Barbara A. Miller

Sheryl L. Smith

Linda M. Whited

Banking Officers

Carol L. Davis

Clayton J. Herold

Beth K. Malaska

Barbara L. Schopp-Miller

Ryan D. Smith

Deborah A. Sweet

Offices: 8 ATMs: 7
Website: SecondNational.com
Phone: 937.548.2122 or 855.548.2122
President: John E. Swallow
Counties Served: Darke, Mercer

Greenville - North*
1302 Wagner Avenue
Greenville, Ohio 45331
937.548.5068

Greenville - Third and Walnut*
175 East Third Street
Greenville, Ohio 45331
937.547.2555

Greenville - Walmart*
1501 Wagner Avenue
Greenville, Ohio 45331
937.548.4563

Versailles*
101 West Main Street
Versailles, Ohio 45380
937.526.3287

*Includes Automated Teller Machine

Mercer
County

Celina

Fort Recovery

Darke
County

Versailles

Greenville [4]

Arcanum

Wayne G. Deschambeau
Wayne HealthCare

Philip M. Fullenkamp
Celina Insurance Group

Michael J. Pax
Pax Machine Works, Inc.

Travis L. Fliehman
Detling, Harlan & Fliehman, Ltd.

Jeffrey E. Hittle
Hittle Buick GMC, Inc.

John E. Swallow
President,
Second National Bank

Brian A. Wagner

Assistant Vice Presidents
Kimberly A. Baker
Gerald O. Beatty
Alexa J. Clark
Debby J. Folkerth
Vicki L. Neff
Shane D. Stonebraker

Banking Officer
Stephen C. Schulte

Administrative Officers
Antonia T. Baker**
Melanie A. Smith

*Trust Officer
**Assistant Trust Officer

Main Office - Greenville
499 South Broadway
Post Office Box 130
Greenville, Ohio 45331
937.548.2122

Arcanum*
603 North Main Street
Arcanum, Ohio 45304
937.692.5191

Celina*
800 North Main Street
Celina, Ohio 45822
419.268.0049

Fort Recovery*
117 North Wayne Street
Fort Recovery, Ohio 45846
419.375.4101

Advisory Board

Steven C. Badgett
Retired Executive Vice President,
Second National Bank

Tyeis Baker-Baumann
Rebsco, Inc.

Officer Listing

President
John E. Swallow

Vice Presidents
C. Russell Badgett
D. Todd Durham*
Joy D. Greer
Thomas J. Lawson
Eric J. McKee
Daniel G. Schmitz

Offices: 20 ATMs: 27
Website: SecurityNationalBank.com
Phone: 937.324.6800 or 800.836.1557
Chairwoman: Alicia Sweet Hupp
President: John A. Brown
Counties Served: Champaign, Clark,
Greene, Madison, Warren

Springboro*
720 Gardner Road
Springboro, Ohio 45066
937.748.6700

Springfield - Derr Road - Kroger*
2989 Derr Road
Springfield, Ohio 45503
937.342.9411

Springfield - East Main*
2730 East Main Street
Springfield, Ohio 45503
937.325.0351

Springfield - North Limestone*
1756 North Limestone Street
Springfield, Ohio 45503
937.390.3688

Springfield - Northridge*
1600 Moorefield Road
Springfield, Ohio 45503
937.390.3088

Springfield - Western*
920 West Main Street
Springfield, Ohio 45504
937.322.0152

Urbana - Monument Square*
1 Monument Square
Urbana, Ohio 43078
937.653.1226

Urbana - Scioto Street*
828 Scioto Street
Urbana, Ohio 43078
937.653.1290

Xenia Downtown*
161 East Main Street
Xenia, Ohio 45385
937.372.9211

Xenia Plaza*
82 North Allison Avenue
Xenia, Ohio 45385
937.372.9214

North
Lewisburg

Champaign
County
Urbana [2]

Mechanicsburg

Plain City

New Carlisle

Park Layne

Medway

Enon

Greene
County

Northridge

Springfield [5]
Clark
County
South
Charleston

Madison
County

Xenia [2]

Jamestown

Springboro

Warren
County

Off-Site ATM Locations
Plain City - Shell Gas Station
440 South Jefferson Avenue

Springfield
2051 North Bechtle Avenue

Springfield - Clark State
Community College
570 East Leffel Lane

Springfield - Regional Medical Center
222 West North Street

Springfield - Wittenberg University -
Student Center
738 Woodlawn Avenue

Springfield - Wittenberg University -
HPER Center
250 Bill Edwards Drive

Urbana - Champaign County
Community Center
1512 South US Highway 68

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

*Includes Automated Teller Machine

Main Office - Springfield*
40 South Limestone Street
Springfield, Ohio 45502
937.324.6800

Enon*
3680 Marion Drive
Enon, Ohio 45323
937.864.7318

Jamestown*
82 West Washington Street
Jamestown, Ohio 45335
937.675.7311

Mechanicsburg*
2 South Main Street
Mechanicsburg, Ohio 43044
937.834.3387

Medway*
130 West Main Street
Medway, Ohio 45341
937.849.1393

New Carlisle*
201 North Main Street
New Carlisle, Ohio 45344
937.845.3811

New Carlisle - Park Layne*
2035 South Dayton-Lakeview Road
New Carlisle, Ohio 45344
937.849.1331

North Lewisburg*
8 West Maple Street
North Lewisburg, Ohio 43060
937.747.2911

Plain City
105 West Main Street
Plain City, Ohio 43064
614.873.5521

South Charleston*
102 South Chillicothe Street
South Charleston, Ohio 45368
937.462.8368

Advisory Board

R. Andrew Bell

Marsh & McLennan Agency

John A. Brown

President,

Security National Bank

Larry E. Kaffenbarger

Kaffenbarger Truck

Equipment Company

Thomas P. Loftis

Midland Properties, Inc.

Alicia Sweet Hupp

John McKinnon

Sweet Manufacturing Company

Clark Schaffer Hackett & Co.

Officer Listing

President

John A. Brown

Executive Vice President

Jeffrey A. Darding

Senior Vice Presidents

Thomas A. Goodfellow

Andrew J. Irick

Vice Presidents

Timothy L. Bunnell

Connie P. Craig

Margaret L. Foley*

Thomas B. Keehner

James A. Kreckman*

James E. Leathley

Patrick K. Rastatter

David A. Snyder

Michael B. Warnecke

Darlene S. Williams

Assistant Vice Presidents

Denise N. Antrobus

Rachel M. Brewer*

Margaret A. Chapman

Mary M. Demaree

Bradley R. Ditto

Scott D. Michael

Michael Farms, Inc.

Dr. Karen E. Rafinski

The Registry

Chester L. Walthall

Walthall Holding Co. Inc.

Robert A. Warren

Hauck Bros., Inc.

Catherine L. Hill*

Andrew S. Peyton

Gary J. Seitz

Banking Officers

Teresa L. Belliveau*

Benjamin L. Kitchen

Jeffrey S. Williams

Administrative Officers

Jacqueline S. Folck

Jason G. Hill

Mark D. Klingler

Brian M. Nott

Dawn R. Poole

Rita A. Riley

Mary T. Vallery

*Trust Officer

Offices: 20 ATMs: 27

Website: SecurityNationalBank.com

Phone: 937.324.6800 or 800.836.1557

Chairwoman: Alicia Sweet Hupp

President: John A. Brown

Counties Served: Champaign, Clark,

Greene, Madison, Warren

Main Office - Springfield*

40 South Limestone Street

Springfield, Ohio 45502

937.324.6800

Enon*

3680 Marion Drive

Enon, Ohio 45323

937.864.7318

Jamestown*

82 West Washington Street

Jamestown, Ohio 45335

937.675.7311

Mechanicsburg*

2 South Main Street

Mechanicsburg, Ohio 43044

937.834.3387

Medway*

130 West Main Street

Medway, Ohio 45341

937.849.1393

New Carlisle*

201 North Main Street

New Carlisle, Ohio 45344

937.845.3811

New Carlisle - Park Layne*

2035 South Dayton-Lakeview Road

New Carlisle, Ohio 45344

937.849.1331

North Lewisburg*

8 West Maple Street

North Lewisburg, Ohio 43060

937.747.2911

Plain City

105 West Main Street

Plain City, Ohio 43064

614.873.5521

South Charleston*

102 South Chillicothe Street

South Charleston, Ohio 45368

937.462.8368

Springfield - Derr Road - Kroger*

Springboro*

720 Gardner Road

Springboro, Ohio 45066

937.748.6700

2989 Derr Road

Springfield, Ohio 45503

937.342.9411

Springfield - East Main*

2730 East Main Street

Springfield, Ohio 45503

937.325.0351

Springfield - North Limestone*

1756 North Limestone Street

Springfield, Ohio 45503

937.390.3688

Springfield - Northridge*

1600 Moorefield Road

Springfield, Ohio 45503

937.390.3088

Springfield - Western*

920 West Main Street

Springfield, Ohio 45504

937.322.0152

Urbana - Monument Square*

1 Monument Square

Urbana, Ohio 43078

937.653.1226

Urbana - Scioto Street*

828 Scioto Street

Urbana, Ohio 43078

937.653.1290

Xenia Downtown*

161 East Main Street

Xenia, Ohio 45385

937.372.9211

Xenia Plaza*

82 North Allison Avenue

Xenia, Ohio 45385

937.372.9214

Champaign

Lewisburg

North

County

Urbana [2]

Mechanicsburg

Northridge

Springfield [5]

Clark

County

South

Charleston

New Carlisle

Park Layne

Medway

Enon

Greene

County

Xenia [2]

Jamestown

Plain City

Madison

County

Springboro

Warren

County

Off-Site ATM Locations

Plain City - Shell Gas Station

440 South Jefferson Avenue

Springfield

2051 North Bechtle Avenue

Springfield - Clark State

Community College

570 East Leffel Lane

Springfield - Regional Medical Center

222 West North Street

Springfield - Wittenberg University -

Student Center

738 Woodlawn Avenue

Springfield - Wittenberg University -

HPER Center

250 Bill Edwards Drive

Urbana - Champaign County

Community Center

1512 South US Highway 68

Yellow Springs - Young’s Jersey Dairy

6880 Springfield-Xenia Road

*Includes Automated Teller Machine

Advisory Board

R. Andrew Bell
Marsh & McLennan Agency

John A. Brown
President,
Security National Bank

Larry E. Kaffenbarger
Kaffenbarger Truck
Equipment Company

Thomas P. Loftis
Midland Properties, Inc.

Alicia Sweet Hupp
Sweet Manufacturing Company

John McKinnon
Clark Schaffer Hackett & Co.

Officer Listing

President
John A. Brown

Executive Vice President
Jeffrey A. Darding

Senior Vice Presidents
Thomas A. Goodfellow
Andrew J. Irick

Vice Presidents
Timothy L. Bunnell
Connie P. Craig
Margaret L. Foley*

Thomas B. Keehner
James A. Kreckman*
James E. Leathley
Patrick K. Rastatter
David A. Snyder
Michael B. Warnecke
Darlene S. Williams

Assistant Vice Presidents
Denise N. Antrobus
Rachel M. Brewer*
Margaret A. Chapman
Mary M. Demaree
Bradley R. Ditto

Scott D. Michael
Michael Farms, Inc.

Dr. Karen E. Rafinski
The Registry

Chester L. Walthall
Walthall Holding Co. Inc.

Robert A. Warren
Hauck Bros., Inc.

Catherine L. Hill*
Andrew S. Peyton
Gary J. Seitz

Banking Officers
Teresa L. Belliveau*
Benjamin L. Kitchen
Jeffrey S. Williams

Administrative Officers
Jacqueline S. Folck
Jason G. Hill
Mark D. Klingler
Brian M. Nott
Dawn R. Poole
Rita A. Riley
Mary T. Vallery

*Trust Officer

Offices: 6 ATMs: 7
Website: UnitedBankOhio.com
Phone: 419.562.3040 or 800.589.3040
President: Donald R. Stone
Counties Served: Crawford, Marion

Offices: 4 ATMs: 5

Website: UnityNationalBk.com

Phone: 937.615.1042 or 800.778.3342

President: Brett A. Baumeister

County Served: Miami

Main Office - Bucyrus*
401 South Sandusky Avenue
Post Office Box 568
Bucyrus, Ohio 44820
419.562.3040

Caledonia*
140 East Marion Street
Caledonia, Ohio 43314
419.845.2721

Crestline*
245 North Seltzer Street
Post Office Box 186
Crestline, Ohio 44827
419.683.1010

Advisory Board

Lois J. Fisher
Lois J. Fisher & Assoc.

Galion*
8 Public Square
Galion, Ohio 44833
419.468.2231

Marion - Barks Road*
129 Barks Road East
Marion, Ohio 43302
740.383.3355

Prospect*
105 North Main Street
Prospect, Ohio 43342
740.494.2131

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

*Includes Automated Teller Machine

Crawford
County

Bucyrus

Crestline

Galion

Marion
County

Caledonia

Marion

Prospect

Kenneth A. Parr, Jr.
Retired, Parr Insurance Agency,
Inc.

Donald R. Stone
President, United Bank

Michele M. McElligott
Certified Public Accountant,
Avita Health System

Douglas M. Schilling
Schilling Graphics, Inc.

Douglas Wilson
Realtor, Craig A. Miley Realty &
Auction, Ltd.

Officer Listing

President
Donald R. Stone

Senior Vice President
Anne S. Cole

Vice Presidents
Scott E. Bennett
John T. Herring

Assistant Vice President
Jennifer J. Kuns

Banking Officers
David J. Lauthers
J. Stephen McDonald*
Shawneeta D. Shuff

Administrative Officers
James A. DeSimone
Vickey L. Martin
Heidi L. Ray

*Trust Officer

Main Office - Piqua*

215 North Wayne Street

Piqua, Ohio 45356

937.615.1042

212 North Main Street

Post Office Box 913

Piqua, Ohio 45356

937.773.0752

Piqua - Sunset*

1603 Covington Avenue

Piqua, Ohio 45356

937.778.4617

Advisory Board

Dr. Richard N. Adams

Retired, Representative

of Ohio General Assembly

Tamara L. Baird-Ganley

Baird Funeral Home

Officer Listing

President

Brett A. Baumeister

Senior Vice President

Scott E. Rasor

Vice Presidents

G. Dwayne Cooper

Nathan E. Counts

Lisa L. McGraw

Administrative Office - Piqua

Troy*

Miami

County

Piqua [2]

Troy

Tipp City

Tipp City*

1176 West Main Street

Tipp City, Ohio 45371

937.667.4888

1314 West Main Street

Troy, Ohio 45373

937.339.6626

Off-Site ATM Location

Troy - Upper Valley Medical Center

3130 North Dixie Highway

*Includes Automated Teller Machine

Michael C. Bardo

Retired, Hartzell Industries, Inc.

Rick M. Heinl

Repacorp, Inc.

Timothy Johnston

Retired, Consultant

Brett A. Baumeister

Dr. Douglas D. Hulme

President, Unity National Bank

Oakview Veterinary Hospital

W. Samuel Robinson

Murray, Wells, Wendeln &

Robinson CPAs, Inc.

Assistant Vice Presidents

Administrative Officers

Dean F. Brewer

Kyle M. Cooper

Chuck B. Jones

Banking Officers

Mary E. Clevenger

Kenneth S. Magoteaux

Vicki L. Burke**

Bryant W. Fox

Angela L. Schultz

Kathleen M. Sherman

**Assistant Trust Officer

Offices: 6 ATMs: 7

Website: UnitedBankOhio.com

Phone: 419.562.3040 or 800.589.3040

President: Donald R. Stone

Counties Served: Crawford, Marion

Offices: 4 ATMs: 5
Website: UnityNationalBk.com
Phone: 937.615.1042 or 800.778.3342
President: Brett A. Baumeister
County Served: Miami

Main Office - Bucyrus*

401 South Sandusky Avenue

Post Office Box 568

Bucyrus, Ohio 44820

419.562.3040

Caledonia*

140 East Marion Street

Caledonia, Ohio 43314

419.845.2721

Crestline*

245 North Seltzer Street

Post Office Box 186

Crestline, Ohio 44827

419.683.1010

Advisory Board

Officer Listing

President

Donald R. Stone

Senior Vice President

Anne S. Cole

Galion*

8 Public Square

Galion, Ohio 44833

419.468.2231

Marion - Barks Road*

129 Barks Road East

Marion, Ohio 43302

740.383.3355

Prospect*

105 North Main Street

Prospect, Ohio 43342

740.494.2131

Off-Site ATM Location

Bucyrus - East Pointe Shopping Center

211 Stetzer Road South

*Includes Automated Teller Machine

Crawford

County

Bucyrus

Crestline

Galion

Marion

County

Caledonia

Marion

Prospect

Lois J. Fisher

Lois J. Fisher & Assoc.

Kenneth A. Parr, Jr.

Donald R. Stone

Retired, Parr Insurance Agency,

President, United Bank

Michele M. McElligott

Certified Public Accountant,

Avita Health System

Inc.

Douglas M. Schilling

Schilling Graphics, Inc.

Douglas Wilson

Realtor, Craig A. Miley Realty &

Auction, Ltd.

Vice Presidents

Scott E. Bennett

John T. Herring

Assistant Vice President

Jennifer J. Kuns

Banking Officers

David J. Lauthers

J. Stephen McDonald*

Shawneeta D. Shuff

Administrative Officers

James A. DeSimone

Vickey L. Martin

Heidi L. Ray

*Trust Officer

Main Office - Piqua*
215 North Wayne Street
Piqua, Ohio 45356
937.615.1042

Administrative Office - Piqua
212 North Main Street
Post Office Box 913
Piqua, Ohio 45356
937.773.0752

Piqua - Sunset*
1603 Covington Avenue
Piqua, Ohio 45356
937.778.4617

Advisory Board

Dr. Richard N. Adams
Retired, Representative
of Ohio General Assembly

Tamara L. Baird-Ganley
Baird Funeral Home

Officer Listing

President
Brett A. Baumeister

Senior Vice President
Scott E. Rasor

Vice Presidents
G. Dwayne Cooper
Nathan E. Counts
Lisa L. McGraw

Miami
County

Piqua [2]

Troy

Tipp City

Tipp City*
1176 West Main Street
Tipp City, Ohio 45371
937.667.4888

Troy*
1314 West Main Street
Troy, Ohio 45373
937.339.6626

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

*Includes Automated Teller Machine

Michael C. Bardo
Retired, Hartzell Industries, Inc.

Rick M. Heinl
Repacorp, Inc.

Timothy Johnston
Retired, Consultant

Brett A. Baumeister
President, Unity National Bank

Dr. Douglas D. Hulme
Oakview Veterinary Hospital

W. Samuel Robinson
Murray, Wells, Wendeln &
Robinson CPAs, Inc.

Assistant Vice Presidents
Dean F. Brewer
Kyle M. Cooper
Chuck B. Jones

Banking Officers
Mary E. Clevenger
Kenneth S. Magoteaux

Administrative Officers
Vicki L. Burke**
Bryant W. Fox
Angela L. Schultz
Kathleen M. Sherman

**Assistant Trust Officer

GUARDIAN

FINANCE C OMPANY

Offices: 5
Website: GuardianFinanceCompany.com
Phone: 877.277.0345
Chairman: Earl W. Osborne
President: Matthew R. Marsh
County Served: Clark, Fairfield, Franklin

Home Office - Hilliard
3812 Fishinger Boulevard
Hilliard, Ohio 43026
877.277.0345

Lancaster
137 West Main Street
Lancaster, Ohio 43130
740.654.6959

Springfield
1017 North Bechtle Avenue
Springfield, Ohio 45504
937.323.1011

Springfield

Clark
County

Montgomery
County

Centerville

Centerville
687 Lyons Road
Centerville, Ohio 45459
937.434.2773

Heath
619 Hebron Road
Heath, Ohio 43056
740.788.8766

Officer Listing

President and CEO
Matthew R. Marsh

Assistant Vice President
April D. Storie

Banking Officer
Mary E. Parsell

Franklin
County

Hilliard

Licking
County

Heath

Fairfield
County

Lancaster

Administrative Officers
Charles L. Harris
Valerie J. Morgan
Misty A. Tipple

Office: 1
Website: ScopeAir.com
Phone: 614.221.5773 or 800.357.5773
President: Robert N. Kent, Jr.

Columbus
140 East Town Street, Suite 1400
Columbus, Ohio 43215
614.221.5773

Officer Listing

President
Robert N. Kent, Jr.

Vice President
Andrew H. Knoesel

Assistant Vice Presidents
Pamela J. Cooksey
Michael J. Smith

Administrative Officer
Emily P. Cox

Executive Vice President
Charles W. Sauter

PNC_AR2016_K+PMS286_PressFinal.qxp 2/21/17 3:27 PM Page 8

M A N A G E M E N T ’ S D I S C U S S I O N & A N A L Y S I S

and other U.S. government-backed debt, as well as issues surrounding the
levels of U.S., European and Asian government debt and concerns regarding
the creditworthiness of certain sovereign governments, supranationals and
financial institutions in Europe and Asia; the uncertainty surrounding the United
Kingdom’s exit from the European Union and its consequences; our litigation
and regulatory compliance exposure, including any adverse developments in
legal proceedings or other claims and unfavorable resolution of regulatory and
other governmental examinations or other inquiries; the adequacy of our risk
management program; the ability to secure confidential information and deliver
products and services through the use of computer systems and telecommuni-
cations networks; 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; fraud, scams and schemes of
third parties; the impact of widespread natural and other disasters, pandemics,
dislocations, terrorist activities or international hostilities on the economy and
financial markets generally or on us or our counterparties specifically; demand
for loans in the respective market areas served by Park and our subsidiaries;
and other risk factors relating to the banking industry as detailed from time to
time in Park’s reports filed with the 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, 2016. Park does not undertake, and specifically disclaims
any obligation, to publicly release the results of any revisions that may be made
to update any forward-looking statement to reflect the events or circumstances
after the date on which the forward-looking statement was made, or reflect the
occurrence of unanticipated events, except to the extent required by law.

OVERVIEW

Financial Results by Segment

The table below reflects the net income (loss) by segment for the fiscal years
ended December 31, 2016, 2015, and 2014. Park’s segments include The Park
National Bank (“PNB”), Guardian Financial Services Company (“GFSC”), SE
Property Holdings, LLC (“SEPH”) and all other which primarily consists of
Park as the “Parent Company.”

Table 1 – Net Income (Loss) by Segment

(In thousands)

2016

2015

2014

PNB

GFSC

Parent Company

Ongoing operations

SEPH

Total Park

$84,451

$84,345

$82,907

(307)

(4,557)

$79,587

6,548

$86,135

1,423

(4,549)

1,175

(5,050)

$81,219

$79,032

(207)

4,925

$81,012

$83,957

The category “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, which exclude
the results of SEPH, to reflect the business of Park and our subsidiaries going
forward. The following discussion below provides additional information
regarding the segments that make up the “Ongoing operations”, followed
by additional information regarding SEPH.

Management’s discussion and analysis addresses the financial condition and
results of operations for Park National Corporation and our subsidiaries
(unless the context otherwise requires, collectively, “Park” or the
“Corporation”). This discussion should be read in conjunction with the
consolidated financial statements and related notes and the five-year summary
of selected financial data. Management’s discussion and analysis contains
forward-looking statements that are provided to assist in the understanding of
anticipated future financial performance. Forward-looking statements provide
current expectations or forecasts of future events and are not guarantees of
future performance. The forward-looking statements are based on manage-
ment’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 our business plan successfully and within the expected time-
frame; general economic and financial market conditions, specifically in the
real estate markets and the credit markets, either nationally or in the states
in which Park and our subsidiaries do business, may experience a slowing or
reversal of the recent economic expansion in addition to continuing residual
effects of recessionary conditions and an uneven spread of positive impacts of
recovery on the economy and our counterparties, including adverse impacts
on the demand for loan, deposit and other financial services, delinquencies,
defaults and counterparties’ ability to meet credit and other obligations;
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 as well as reduce interest margins
and impact loan demand; changes in consumer spending, borrowing and
saving habits, whether due to changing business and economic conditions,
legislative and regulatory initiatives, or other factors; changes in unemployment;
changes in customers’, suppliers’, and other counterparties’ performance and
creditworthiness; asset/liability repricing risks and liquidity risks; our liquidity
requirements could be adversely affected by changes to regulations governing
bank and bank holding company capital and liquidity standards as well as by
changes in our assets and liabilities; competitive factors among financial
services organizations could increase significantly, including product and
pricing pressures, changes to third-party relationships and our ability to
attract, develop and retain qualified bank professionals; clients could pursue
alternatives to bank deposits, causing us to lose a relatively inexpensive source
of funding; uncertainty regarding the nature, timing and effect of changes in
banking regulations or other regulatory or legislative requirements affecting the
respective businesses of Park and our subsidiaries, including major reform of
the regulatory oversight structure of the financial services industry and changes
in laws and regulations concerning taxes, pensions, bankruptcy, consumer pro-
tection, accounting, bank products and services, fiduciary standards, securities
and other aspects of the financial services industry, specifically the reforms pro-
vided for in the Dodd-Frank Wall Street Reform and Consumer Protection Act
of 2010 (the “Dodd-Frank Act”) and the Basel III regulatory capital reforms, as
well as regulations already adopted and which may be adopted in the future by
the relevant regulatory agencies, including the Consumer Financial Protection
Bureau, the OCC, the FDIC, and the Federal Reserve Board, to implement the
Dodd-Frank Act’s provisions, the Budget Control Act of 2011, the American
Taxpayer Relief Act of 2012, the JOBS Act, the FAST Act and the Basel III regula-
tory capital reforms; 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 finan-
cial statements; the effect of trade, monetary, fiscal and other governmental
policies of the U.S. federal government, including money supply and interest
rate policies of the Federal Reserve Board; disruption in the liquidity and other
functioning of U.S. financial markets; the impact on financial markets and the
economy of any changes in the credit ratings of the U.S. Treasury obligations

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Net interest
income

Provision for

(recovery of)
loan losses

Other income

PNB’s results for the fiscal years ended December 31, 2016, 2015, and 2014,
included income and expense related to participations in legacy Vision assets.
The impact of these participations on particular items within PNB’s income and
expense for these periods is detailed in the table below:

Table 3 – PNB Adjusted for Vision Participations

2016

2015

2014

PNB
as

(In thousands)

Reported Adjustments(1) Adjusted

$227,576

$ 801

$226,775

$220,879

$ 241

$220,638

$218,641

$ 309

$218,332

2,611

74,803

(3,118)

194

662

5,729

74,609

7,665

(1,453)

3,517

(6,198)

9,118

73,963

69,384

1,256

2,032

9,715

68,128

161,609

75,188

1,225

700

Other expense

177,562

176,900

167,476

166,776

163,641

Income before
income taxes

Federal income

taxes

$122,206

$ 3,451

$118,755

$120,926

$ 2,219

$118,707

$120,867

$ 5,731

$115,136

37,755

1,066

36,689

36,581

671

35,910

37,960

1,800

36,160

Net income

$ 84,451

$ 2,385

$ 82,066

$ 84,345

$ 1,548

$ 82,797

$ 82,907

$ 3,931

$ 78,976

(1) Adjustments consist of the impact on the particular items reported in PNB’s income statement

of PNB participations in legacy Vision assets.

The table below provides certain balance sheet information and financial ratios
for PNB as of December 31, 2016 and 2015.

Table 4 – PNB Balance Sheet Information

(In thousands)

Loans

Allowance for loan losses

Net loans

Investment securities

Total assets

Average assets(1)

Efficiency ratio

Return on average assets

December 31,
2016

December 31,
2015

% Change
from 12/31/15

$5,234,828

$5,029,072

48,782

5,186,046

1,573,320

7,389,538

7,337,438

58.26%

1.15%

54,453

4,974,619

1,641,539

7,229,764

7,219,898

56.40%

1.17%

4.09%

(10.41)%

4.25%

(4.16)%

2.21%

1.63%

3.30%

(1.71)%

(1) Average assets for the fiscal years ended December 31, 2016 and 2015, respectively.

Loans outstanding at December 31, 2016 were $5.23 billion, compared to
$5.03 billion at December 31, 2015, an increase of $206 million for the fiscal
year ended December 31, 2016, or 4.1%. The loan growth in 2016 consisted
of commercial loan growth of $82.2 million (3.2%), consumer loan growth
of $152.5 million (15.6%), and HELOC loan growth of $1.1 million (0.5%),
offset by a reduction in residential loan balances of $28.9 million (2.3%).

PNB’s allowance for loan losses decreased by $5.7 million, or 10.4%, to $48.8
million at December 31, 2016, compared to $54.5 million at December 31,
2015. The decrease was the result of a $3.7 million decrease in specific
reserves and a $2.0 million decrease in general reserves. Net charge-offs
were $8.3 million, or 0.16% of total average loans, for the fiscal year ended
December 31, 2016. During the fourth quarter of 2016, PNB charged off $3.1
million in specific reserves for which provision expense had already been rec-
ognized. Refer to the “CREDIT EXPERIENCE: (Recovery of) Provision for Loan
Losses” section for additional information regarding PNB’s loan portfolio and
the level of (recovery of) provision for loan losses recognized in each period
presented.

The Park National Bank (PNB)

The table below reflects PNB’s net income for the fiscal years ended December
31, 2016, 2015, and 2014.

Table 2 – PNB Summary Income Statement

(In thousands)

Net interest income

Provision for loan losses

Other income

Other expense

2016

2015

2014

$227,576

$220,879

$218,641

2,611

74,803

7,665

75,188

3,517

69,384

177,562

167,476

163,641

Income before income taxes

$122,206

$120,926

$120,867

Federal income taxes

Net income

37,755

36,581

37,960

$ 84,451

$ 84,345

$ 82,907

Net interest income of $227.6 million for the fiscal year ended December 31,
2016 represented a $6.7 million, or 3.0% increase, compared to $220.9
million for the fiscal year ended December 31, 2015. The increase was the
result of a $7.4 million increase in interest income offset by a $697,000
increase in interest expense.

The $7.4 million increase in interest income was due to a $10.3 million
increase in interest income on loans, offset by a $2.9 million decrease in
interest income on investments. The increase in interest income on loans
was largely the result of a $216 million, or 4.4%, increase in average loans
from $4.9 billion for the fiscal year ended December 31, 2015, to $5.1 billion
for the fiscal year ended December 31, 2016. Included in interest income for
the fiscal year ended December 31, 2016 was $801,000 in income related to
PNB participations in legacy Vision Bank (“Vision”) assets, compared to
$241,000 for the fiscal year ended December 31, 2015.

The $697,000 increase in interest expense was due to a $1.1 million increase in
interest expense on deposits, offset by a $393,000 decrease in interest expense
on borrowings.

The provision for loan losses of $2.6 million for the fiscal year ended December
31, 2016 represented an improvement of $5.1 million, compared to a provision
of loan losses of $7.7 million for the fiscal year ended December 31, 2015.
Refer to the “CREDIT EXPERIENCE: (Recovery of) Provision for Loan Losses”
section for additional details regarding the level of the (recovery of) provision
for loan losses recognized in each period presented above.

Other expense of $177.6 million for the fiscal year ended December 31, 2016
represented an increase of $10.1 million, or 6.0%, compared to $167.5 million
for the fiscal year ended December 31, 2015. The $10.1 million increase was
primarily related to a $5.6 million borrowing prepayment penalty in 2016 com-
pared to $532,000 in 2015, a $2.0 million increase in furniture and equipment
expense, a $2.0 million increase in contribution expense, a $1.7 million
increase in professional fees and services, and a $1.0 million increase in non-
loan related losses. Increases were offset by a decrease of $2.1 million related
to employee benefits expense, largely related to a decline in medical expenses.

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Guardian Financial Services Company (GFSC)

The table below reflects GFSC’s net (loss) income for the fiscal years ended
December 31, 2016, 2015, and 2014.

Table 5 – GFSC Summary Income Statement

(In thousands)

Net interest income

Provision for loan losses

Other (loss) income

Other expense

(Loss) income before income taxes

Federal income (benefit) taxes

Net (loss) income

2016

$5,874

1,887

(1)

4,457

$ (471)

(164)

$ (307)

2015

$6,588

1,415

2,984

$2,191

768

$1,423

2014

$7,457

1,544

(1)

4,103

$1,809

634

$1,175

issued by Park to accredited investors on April 20, 2012. Results for the fiscal
year ended December 31, 2014 included, in addition to the items previously
discussed, interest expense related to the $35.25 million of 10% Subordinated
Notes due December 23, 2019 issued by Park to accredited investors on
December 23, 2009. Park paid off the $35.25 million outstanding principal
amount of the 10% Subordinated Notes due December 23, 2019, plus accrued
interest, on December 24, 2014, the earliest redemption date allowable under
the related note purchase agreement dated December 23, 2009.

Other income of $955,000 for the fiscal year ended December 31, 2016 repre-
sented an increase of $442,000, or 86.2%, compared to $513,000 for the same
period in 2015. This increase was due to $461,000 in income from an equity
investment.

SE Property Holdings, LLC (“SEPH”)

The provision for loan losses of $1.9 million for the fiscal year ended December
31, 2016 represented an increase of $472,000, compared to $1.4 million for
the fiscal year ended December 31, 2015. Refer to the “CREDIT EXPERIENCE:
(Recovery of) Provision for Loan Losses” section for additional information
regarding Guardian’s loan portfolio and the level of (recovery of) provision
for loan losses recognized in each period presented.

The table below reflects SEPH’s net income (loss) for the fiscal years ended
December 31, 2016, 2015, and 2014. SEPH holds the remaining assets and
liabilities retained by Vision subsequent to the sale of the Vision business on
February 16, 2012. Prior to holding the remaining Vision assets, SEPH held
OREO assets that were transferred from Vision to SEPH. This segment repre-
sents a run-off portfolio of the legacy Vision assets.

Other expense of $4.5 million for the fiscal year ended December 31, 2016
represented a $1.5 million increase, compared to $3.0 million for the fiscal
year ended December 31, 2015. This increase was primarily related to the
evaluation of litigation accruals.

The table below provides certain balance sheet information and financial ratios
for GFSC as of December 31, 2016 and 2015.

Other income

Other expense

Table 6 – GFSC Balance Sheet Information

(In thousands)

Loans

Allowance for loan losses

Net loans

Total assets

Average assets(1)

Return on average assets

December 31,
2016

December 31,
2015

% Change
from 12/31/15

$32,661

$35,469

1,842

30,819

32,268

33,370

(0.92)%

2,041

33,428

35,793

37,675

3.78%

(7.92)%

(9.75)%

(7.80)%

(9.85)%

(11.43)%

N.M.

(1) Average assets for the fiscal years ended December 31, 2016 and 2015, respectively.
N.M. – Not meaningful

Park Parent Company

The table below reflects the Park Parent Company net loss for the fiscal years
ended December 31, 2016, 2015, and 2014.

Table 7 – Park Parent Company Income Statement

(In thousands)

2016

2015

2014

Net interest (expense) income

$ (138)

$ 239

$(2,012)

Provision for loan losses

Other income

Other expense

Loss before income tax benefit

Federal income tax benefit

Net loss

—

955

9,731

$(8,914)

(4,357)

$(4,557)

—

513

9,972

$(9,220)

(4,671)

$(4,549)

—

175

8,000

$(9,837)

(4,787)

$(5,050)

The net interest (expense) income for Park’s parent company included, for all
periods presented, interest income on loans to SEPH (paid off on December
14, 2016) and on subordinated debt investments in PNB, which were elimi-
nated in the consolidated Park National Corporation totals. Additionally, net
interest (expense) income included, for all periods presented, interest expense
related to the $30.00 million of 7% Subordinated Notes due April 20, 2022

Table 8 – SEPH Summary Income Statement

(In thousands)

2016

2015

2014

Net interest income (expense)

Recovery of loan losses

Income (loss) before income taxes

Federal income tax expense (benefit)

Net income (loss)

$ 4,774

(9,599)

2,974

7,273

$10,074

3,526

$ 6,548

(74)

$ 958

(4,090)

(12,394)

1,848

6,182

5,991

11,766

$ (318)

$ 7,577

(111)

2,652

$ (207)

$ 4,925

Net interest income increased to $4.8 million for the fiscal year ended
December 31, 2016 from net interest expense of $74,000 for the fiscal year
ended December 31, 2015. The increase was largely the result of payments
received from certain SEPH impaired loan relationships.

For the fiscal year ended December 31, 2016, SEPH had net recoveries of loan
losses of $9.6 million. The net recoveries during 2016 consisted of $447,000 in
charge-offs offset by recoveries from loans previously charged off of $10.0
million.

The $1.1 million increase in other income for the fiscal year ended December
31, 2016, compared to the fiscal year ended December 31, 2015, was primarily
the result of the recovery of fees from certain SEPH impaired loan relationships.

The $1.1 million increase in other expense for the fiscal year ended December
31, 2016, compared to the fiscal year ended December 31, 2015, was primarily
the result of a $1.0 million decrease in expense related to reserves established
for potential mortgage loan repurchases, offset by increases in legal fees of
$390,000 and management and consulting services of $2.1 million.

In the aggregate, for the fiscal year ended December 31, 2016, SEPH realized
$18.0 million in operating income items, consisting of interest income, recover-
ies from loans previously charged off, and other income, offset by operating
expense items totaling $7.9 million, consisting of interest expense and other
expense.

Legacy Vision assets at SEPH totaled $20.3 million as of December 31, 2016
compared to $26.3 million as of December 31, 2015. In addition to these
SEPH assets, PNB participations in legacy Vision assets totaled $9.6 million
at December 31, 2016 compared to $9.8 million at December 31, 2015.

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Park National Corporation

The table below reflects Park’s net income for the fiscal years ended December
31, 2016, 2015, and 2014.

Table 9 – Park Summary Income Statement

(In thousands)

Net interest income

(Recovery of) provision for loan losses

Other income

Other expense

2016

2015

2014

$238,086

$227,632

$225,044

(5,101)

78,731

4,990

77,551

(7,333)

75,549

199,023

186,614

187,510

Income before income taxes

$122,895

$113,579

$120,416

Federal income taxes

Net income

36,760

32,567

36,459

$ 86,135

$ 81,012

$ 83,957

DIVIDENDS ON COMMON SHARES
Cash dividends declared on Park’s common shares were $3.76 in 2016, 2015
and 2014. The quarterly cash dividend on Park’s common shares was $0.94
per share for each quarter of 2016, 2015 and 2014.

CRITICAL ACCOUNTING POLICIES
The significant accounting policies used in the development and presentation
of Park’s consolidated financial statements are listed in Note 1 of the Notes to
Consolidated Financial Statements. The accounting and reporting policies of
Park conform with U.S. generally accepted accounting principles (“GAAP”)
and general practices within the financial services industry. The preparation
of financial statements in conformity with 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.

Allowance for Loan and Lease Losses (“ALLL”): The determination of
the ALLL involves a higher degree of judgment and complexity than Park’s other
significant accounting policies. The ALLL 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 determi -
nation of the adequacy of the ALLL is based on periodic evaluations of the loan
portfolio and of current economic conditions. However, this evaluation is
inherently subjective as it requires material estimates, including expected
default probabilities, the loss given default, the amounts and timing of expected
future cash flows on impaired loans, and estimated losses based on historical
loss experience and current economic conditions. All of these factors may be
susceptible to significant change. To the extent that actual results differ from
management estimates, additional loan loss provisions may be required that
would adversely impact earnings for future periods.

Other Real Estate Owned (“OREO”): 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 of the OREO, the difference is charged off
against the ALLL. 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 within other income on the date of sale.
At December 31, 2016, OREO totaled $13.9 million, a decrease of 25.3%,
compared to $18.7 million at December 31, 2015.

Fair Value: In accordance with GAAP, management utilizes the fair value
hierarchy, which has the objective of maximizing the use of observable market
inputs. The accounting guidance also requires disclosures regarding the inputs
used to calculate fair value. These inputs are classified as Level 1, 2, and 3.
Level 3 inputs are those with significant unobservable inputs that reflect a
company’s own assumptions about the market for a particular instrument.

Some of the inputs could be based on internal models and/or cash flow
analyses. The large majority of Park’s financial assets valued using Level 2
inputs consist of available-for-sale (“AFS”) securities. The fair value of these
AFS securities is obtained largely by the use of matrix pricing, which is a mathe-
matical 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 bench-
mark quoted securities.

Goodwill: The accounting for goodwill also involves a higher degree of
judgment than most other significant accounting policies. GAAP establishes
standards for 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
PNB, Park’s national bank subsidiary, 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. Under GAAP, goodwill is no longer amortized but is subject to an
annual evaluation for impairment, or more frequently if events or changes in
circumstances indicate that the asset might be impaired by assessing qualitative
factors to determine whether it is more likely than not that the fair value of a
reporting unit is less than its carrying amount. If after assessing these events
or circumstances, it is concluded that it is more likely than not that the fair
value of a reporting unit is less than its carrying amount, then the performance
of the second step of the impairment test is required. If the carrying amount of
the goodwill exceeds the fair value, an impairment charge must be recorded in
an amount equal to the excess. At December 31, 2016, on a consolidated basis,
Park had $72.3 million of goodwill, all of which is recorded at PNB.

Pension Plan: The determination of pension plan obligations and related
expenses requires the use of assumptions to estimate the amount of benefits
that employees earn while working, as well as the present value of those bene-
fits. Annual pension expense is principally based on four components: (1) the
value of benefits earned by employees for working during the year (service
cost), (2) the increase in the liability due to the passage of time (interest cost),
and (3) other gains and losses, reduced by (4) the expected return on plan
assets for our pension plan.

Significant assumptions used to measure our annual pension expense include:

(cid:0) the interest rate used to determine the present value of liabilities

(discount rate);

(cid:0) certain employee-related factors, such as turnover, retirement age

and mortality;

(cid:0) the expected return on assets in our funded plans; and
(cid:0) the rate of salary increases

Our assumptions reflect our historical experience and management’s best
judgment regarding future expectations. Due to the significant management
judgment involved, our assumptions could have a material impact on the
measurement of our pension plan expense and obligation.

ABOUT OUR BUSINESS
Through our Ohio-based banking divisions, Park is engaged in the commercial
banking and trust business, generally in small to medium population Ohio
communities. Management believes there are a significant number of con-
sumers and businesses which seek long-term relationships with community-
based financial institutions of quality and strength. While not engaging in
activities such as foreign lending, nationally syndicated loans or investment
banking, Park attempts to meet the needs of our customers for commercial,
real estate and consumer loans, and investment, fiduciary and deposit services.

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Park’s subsidiaries compete for deposits and loans with other banks,
savings associations, credit unions and other types of financial institutions.
At December 31, 2016, Park operated 117 financial service offices (including
those of PNB, Scope Leasing, Inc. (“Scope Aircraft Finance”), and GFSC) and
a network of 138 automated teller machines in 29 Ohio counties. Park also
operated one office for SEPH, located in Newark, Ohio.

A summary of average loans and average deposits for Park’s subsidiaries,
including its bank subsidiary, PNB, and PNB’s divisions and subsidiary Scope
Aircraft Finance for 2016, 2015 and 2014 is shown in Table 10. See Note 27
of the Notes to Consolidated Financial Statements for additional financial infor-
mation for the Corporation’s operating segments. Please note that the financial
statements for the divisions of PNB are not prepared on a separate basis and,
therefore, net income is not included in the summary financial data in Table 10.

Table 10 – Park Affiliate Financial Data

(In thousands)

Park National Bank:
Park National
Bank Division

Security National
Bank Division

First-Knox National
Bank Division

Century National
Bank Division

Richland
Bank Division

Fairfield National
Bank Division

Second National
Bank Division

Park National SW &
N KY Bank Division

United Bank,
N.A. Division

Unity National
Bank Division

Farmers
Bank Division

Scope Aircraft
Finance

SEPH

GFSC

Parent Company,

other

Consolidated
Totals

2016

2015

2014

Average
Loans

Average
Deposits

Average
Loans

Average
Deposits

Average
Loans

Average
Deposits

$1,623,565

$1,526,438

$1,465,586

$1,473,906

$1,383,686

$1,426,645

459,172

798,809

462,681

802,061

454,680

774,716

591,807

638,338

591,948

632,810

571,519

563,275

649,645

574,171

655,682

556,543

638,314

493,449

231,884

501,678

240,622

483,673

242,788

451,304

269,805

399,174

260,281

406,940

255,280

401,255

382,555

356,913

374,385

337,181

355,379

317,208

421,873

219,603

384,788

210,066

363,735

208,784

109,727

203,613

103,301

198,162

92,427

190,082

183,985

187,088

180,034

172,658

174,950

162,074

131,501

99,446

123,875

96,782

108,397

89,328

238,464

14,434

33,370

1,471

—

4,174

198,475

17,910

37,686

465

—

5,595

178,194

31,836

43,165

—

6,610

(218,925)

69,888

(187,675)

89,982

(177,053)

(67,185)

$5,122,862

$5,580,804

$4,909,579

$5,466,824

$4,717,297

$5,017,553

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

Average total deposits were $5,581 million in 2016, compared to $5,467
million in 2015 and $5,018 million in 2014. Table 11 provides a summary of
deposit balances as of December 31, 2016 and 2015, along with the change
over the past year.

Table 11 – Year-End Deposits

December 31,
(In thousands)

2016

2015

Non-interest bearing checking

$1,523,417

$1,404,032

Interest bearing transaction

accounts

Savings

All other time deposits

Other

Total

1,174,448

1,704,920

1,117,870

1,301

1,107,200

1,544,708

1,290,412

1,290

Change

$ 119,385

67,248

160,212

(172,542)

$5,521,956

$5,347,642

$ 174,314

The average interest rate paid on interest bearing deposits was 0.32% in 2016,
compared to 0.30% in 2015, and 0.29% in 2014. The average cost of interest
bearing deposits for each quarter of 2016 was 0.34% for the fourth quarter,
0.32% for the third quarter, 0.32% for the second quarter and 0.31% for the
first quarter.

Maturities of time deposits over $100,000 as of December 31, 2016 and
2015 were:

Table 12 – Maturities of Time Deposits

December 31 (In thousands)

3 months or less

Over 3 months through 6 months

Over 6 months through 12 months

Over 12 months

Total

Over $100,000

2016

2015

$174,503

$197,871

78,455

97,551

86,589

96,132

117,249

97,242

$437,098

$508,494

Short-Term Borrowings: Short-term borrowings consist of securities sold
under agreements to repurchase, Federal Home Loan Bank advances, Federal
Funds purchased and other borrowings. These funds are used to manage the
Corporation’s liquidity needs and interest rate sensitivity risk. The average rate
paid on short-term borrowings generally moves closely with changes in market
interest rates for short-term investments. The average rate paid on short-term
borrowings was 0.19% in 2016, compared to 0.18% in 2015, and 0.20% in
2014. The year-end balance for short-term borrowings was $395 million at
December 31, 2016, compared to $394 million at December 31, 2015, and
$277 million at December 31, 2014.

Long-Term Debt: Long-term debt primarily consists of borrowings from the
Federal Home Loan Bank and repurchase agreements with investment banking
firms. The average balance of long-term debt and the average cost of long-term
debt include the subordinated notes discussed in the following section. In 2016,
average long-term debt was $776 million, compared to $793 million in 2015,
and $868 million in 2014. The average interest rate paid on long-term debt was
3.13% for 2016, compared to 3.10% for 2015, and 3.29% for 2014. Average
total debt (long-term and short-term) was $1,017 million in 2016, compared
to $1,052 million in 2015, and $1,131 million in 2014. Average total debt
decreased by $35 million or 3.3% in 2016 compared to 2015, and decreased
by $79 million or 7.0% in 2015 compared to 2014. Average long-term debt was
76% of average total debt in 2016, compared to 75% of average total debt in
2015, and 77% of average total debt in 2014.

Subordinated Notes: Park assumed, with the 2007 acquisition of Vision’s
parent holding company, $15.5 million of floating rate junior subordinated
notes. The $15.5 million of junior subordinated notes were purchased by
Vision Bancshares Trust I (“Trust I”) following the issuance of Trust I’s $15.0
million of floating rate preferred securities. The interest rate on these junior
subordinated notes adjusts every quarter at 148 basis points above the three-
month LIBOR interest rate. The maturity date for the junior subordinated notes
is December 30, 2035 and the junior subordinated notes may be prepaid after
December 30, 2010. These junior subordinated notes qualify as Tier 1 capital
under current Federal Reserve Board guidelines.

On December 23, 2009, Park issued an aggregate principal amount of $35.25
million of subordinated notes to 38 purchasers. These subordinated notes
had a fixed annual interest rate of 10% with quarterly interest payments. The
maturity date of these subordinated notes was December 23, 2019 and the
subordinated notes were eligible to be prepaid after December 23, 2014. The
subordinated notes qualified as Tier 2 capital under applicable Federal Reserve
Board guidelines. Each subordinated note was purchased at a purchase price
of 100% of the principal amount by an accredited investor. Park paid in full
the $35.25 million outstanding principal amount, plus accrued interest, on
December 24, 2014, the earliest redemption date allowable under the related
note purchase agreement.

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On April 20, 2012, Park issued an aggregate principal amount of $30.0 million
of subordinated notes to 56 purchasers. These subordinated notes have a fixed
annual interest rate of 7% with quarterly interest payments. The maturity date
of these subordinated notes is April 20, 2022 and the subordinated notes are
eligible to be prepaid after April 20, 2017. The subordinated notes qualify as
Tier 2 capital under applicable Federal Reserve Board guidelines. Each sub -
ordinated note was purchased at a purchase price of 100% of the principal
amount by an accredited investor.

See Note 15 of the Notes to Consolidated Financial Statements for additional
information about the subordinated notes.

Shareholders’ Equity: The ratio of total shareholders’ equity to total assets
was 9.94% at December 31, 2016, compared to 9.76% at December 31, 2015
and 9.95% at December 31, 2014. The ratio of tangible shareholders’ equity
[share holders’ equity ($742.2 million) less goodwill ($72.3 million)] to
tangible assets [total assets ($7,468 million) less goodwill ($72.3 million)]
was 9.06% at December 31, 2016, compared to 8.86% at December 31,
2015, and 9.04% at December 31, 2014.

In accordance with GAAP, Park reflects any unrealized holding gain or loss
on AFS securities or change in the funded status of Park’s pension plan, net
of income taxes, as accumulated other comprehensive income (loss) which
is part of Park’s shareholders’ equity.

The unrealized net holding loss, net of income taxes, on AFS securities was $3.0
million at year-end 2016, compared to the unrealized net holding loss, net of
income taxes, of $292,000 at year-end 2015, and compared to the unrealized
net holding gain, net of income taxes, of $1.3 million at year-end 2014.

In accordance with GAAP, Park adjusts accumulated other comprehensive
income (loss) to recognize the net actuarial gain or loss reflected in the
funding status of Park’s pension plan. See Note 18 of the Notes to Consolidated
Financial Statements for information on the accounting for Park’s pension plan.
Pertaining to the funding status of the pension plan, Park recognized a net
comprehensive gain of $0.6 million in 2016, a net comprehensive loss of $0.5
million in 2015, and a net comprehensive loss of $9.3 million in 2014. The
net comprehensive gain in 2016 was due to changes in actuarial assumptions
combined with increased investment returns on pension plan assets. The net
comprehensive loss in 2015 was due to changes in actuarial assumptions
combined with lower investment returns on pension plan assets. The net com-
prehensive loss in 2014 was due to changes in actuarial assumptions, primarily
a decrease in the discount rate from 5.30% at December 31, 2013 to 4.42% at
December 31, 2014. The actuarial loss more than offset the positive investment
returns with respect to the pension plan’s assets in 2014.

At year-end 2016, the balance in accumulated other comprehensive loss per-
taining to the pension plan was $(14.7) million, compared to $(15.4) million
at December 31, 2015, and $(14.9) million at December 31, 2014.

INVESTMENT OF FUNDS
Loans: Average loans were $5,123 million in 2016, compared to $4,910
million in 2015, and $4,717 million in 2014. The actual yield on average loan
balances was 4.74% in 2016, compared to 4.66% in 2015, and 4.84% in 2014.
Approximately 50% of Park’s loan balances mature or reprice within one year
(see Table 35). The actual yield on average loan balances for each quarter
of 2016 was 4.87% for the fourth quarter, 4.66% for the third quarter, 4.64%
for the second quarter and 4.80% for the first quarter.

Loan interest income for 2016 included $5.1 million related to payments
received on certain SEPH impaired loan relationships, some of which are
participated with PNB. Excluding this income, the actual yield on average loan
balances was 4.64% for the year ended December 31, 2016 and 4.62% for the
fourth quarter, 4.66% for the third quarter, 4.64% for the second quarter and
4.67% for the first quarter.

At December 31, 2016, loan balances were $5,272 million, compared to
$5,068 million at year-end 2015, an increase of $204 million or 4.0%. The
loan growth of $204 million in 2016 was largely due to increases in loans
of $206 million at PNB, offset by declines at GFSC and SEPH.

Table 13 reports year-end loan balances by type of loan for the past five years.

Table 13 – Loans by Type

December 31,
(In thousands)

Commercial, financial
and agricultural

Construction
real estate

Residential

real estate

Commercial
real estate

Consumer

Leases

2016

2015

2014

2013

2012

$ 994,619

$ 955,727

$ 856,535

$ 825,432

$ 823,927

188,945

173,345

155,804

156,116

165,528

1,808,497

1,855,443

1,851,375

1,799,547

1,713,645

1,155,703

1,113,603

1,069,637

1,112,273

1,092,164

1,120,850

967,111

893,160

723,733

651,930

3,243

2,856

3,171

3,404

3,128

Total loans

$5,271,857

$5,068,085

$4,829,682

$4,620,505

$4,450,322

Loan growth was experienced within the commercial, financial and agricultural,
construction real estate, commercial real estate, and consumer loan types in
2016.

On a combined basis, year-end commercial, financial and agricultural loans,
construction real estate loans and commercial real estate loans increased by
$97 million, or 4.3% in 2016 and increased by $161 million or 7.7% in 2015.
The increase in 2016 was due to increases in commercial real estate loans of
$42.1 million, in commercial, financial and agricultural loans of $38.9 million,
and in construction real estate loans of $15.6 million. The increase in 2015
was due to increases in commercial, financial and agricultural loans of $99.2
million, in commercial real estate loans of $44.0 million, and in construction
real estate loans of $17.5 million.

Consumer loans increased by $154 million or 15.9% in 2016 and increased by
$74 million or 8.3% in 2015. The increase in consumer loans in each of 2016
and 2015 was primarily due to an increase in automobile lending in Ohio.

The long-term, fixed-rate residential mortgage loans that Park originates are
generally sold in the secondary market and Park typically retains servicing on
these loans. The balance of sold fixed-rate residential mortgage loans, in which
Park has maintained the servicing rights, was $1,330 million at year-end 2016,
compared to $1,276 million at year-end 2015 and $1,265 million at year-end
2014.

Table 14 – Selected Loan Maturity Distribution

December 31, 2016
(In thousands)

Commercial, financial
and agricultural

Construction real estate

Commercial real estate

One Year
or Less(1)

Over One
Through
Five Years

Over
Five
Years

Total

$102,822

$351,183

$ 540,614

$ 994,619

39,583

56,261

29,767

92,539

119,595

188,945

1,006,903

1,155,703

Total

$198,666

$473,489

$1,667,112

$2,339,267

Total of these selected loans due

after one year with:

Fixed interest rate

Floating interest rate

$272,722

$ 468,114

$ 740,836

200,767

1,198,998

1,399,765

(1) Nonaccrual loans of $41.1 million are included within the one year or less classification above.

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

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

Park classifies certain types of U.S. Government sponsored entity collateralized
mortgage obligations (“CMOs”) that it purchases as Held-To-Maturity (“HTM”).
In addition, starting in 2015, Park began to purchase tax-exempt municipal
securities, also classified as HTM. These securities are classified as HTM
because they are generally not as liquid as the investment securities that Park
classifies as AFS. A classification of HTM means that Park has the positive intent
and the ability to hold these securities until maturity. At year-end 2016, Park’s
HTM securities portfolio was $260 million, compared to $149 million at year-
end 2015, and $141 million at year-end 2014. Included in the HTM securities
portfolio as of December 31, 2016 are $189 million of tax-exempt municipal
securities. All of the CMOs, mortgage-backed securities, and callable notes in
Park’s investment portfolio were issued by U.S. Government sponsored entities.

Average taxable investment securities were $1,413 million in 2016, compared
to $1,472 million in 2015, and $1,433 million in 2014. The average yield
on taxable investment securities was 2.17% in 2016, compared to 2.45% in
2015, and 2.58% in 2014. Average tax-exempt investment securities were
$91 million in 2016, compared to $6 million in 2015, and $65,000 in 2014.
The average tax-equivalent yield on tax-exempt investment securities
was 4.43% in 2016, compared to 4.72% in 2015, and 6.97% in 2014.

Total investment securities (at amortized cost) were $1,584 million at
December 31, 2016, compared to $1,644 million at December 31, 2015, and
$1,499 million at December 31, 2014. Management purchased investment
securities totaling $724 million in 2016, $506 million in 2015, and $352
million in 2014. Proceeds from repayments and maturities of investment
securities were $783 million in 2016, $357 million in 2015, and $140
million in 2014.

Proceeds from sales of investment securities were $3.1 million in 2015. These
investment securities had a book value of $3.1 million and resulted in a gain
on sale of $88,000. Proceeds from sales of investment securities were $173.1
million in 2014. Of the investment securities sold in 2014, a small portion
with a book value of $187,000 was sold for a gain of $22,000. The remaining
investment securities sold in 2014, with a book value of $174.1 million, were
sold at a loss of $1.2 million. There were no sales of investment securities in
2016.

At year-end 2016, 2015, and 2014, the average tax-equivalent yield on the
total investment portfolio was 2.30%, 2.28%, and 2.47%, respectively. The
weighted average remaining maturity of the total investment portfolio was
4.4 years at December 31, 2016, 4.8 years at December 31, 2015, and 5.2
years at December 31, 2014. Obligations of the U.S. Treasury and other U.S.
Government sponsored entities and U.S. Government sponsored entities’ asset-
backed securities were approximately 83.9% of the total investment portfolio
at year-end 2016, approximately 93.3% of the total investment portfolio at year-
end 2015, and approximately 96.0% of the total investment portfolio at year-end
2014.

The average maturity of the investment portfolio would lengthen if long-term
interest rates were to increase as principal repayments from mortgage-backed
securities and CMOs would decline and callable U.S. Government sponsored
entity notes would extend to their maturity dates. At year-end 2016, manage-
ment estimated that the average maturity of the investment portfolio would
lengthen to 5.1 years with a 100 basis point increase in long-term interest
rates and to 5.4 years with a 200 basis point increase in long-term interest
rates. Likewise, the average maturity of the investment portfolio would shorten
if long-term interest rates were to decrease as the principal repayments from
mortgage-backed securities and CMOs would increase as borrowers would
refinance their mortgage loans and the callable U.S. Government sponsored
entity notes would shorten to their call dates. At year-end 2016, management
estimated that the average maturity of the investment portfolio would decrease
to 3.4 years with a 100 basis point decrease in long-term interest rates and to
2.8 years with a 200 basis point decrease in long-term interest rates.

Table 15 sets forth the carrying value of investment securities, as well as the
percentage held within each category at year-end 2016, 2015 and 2014:

Table 15 – Investment Securities

December 31,
(In thousands)

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

Obligations of states and political subdivisions
U.S. Government asset-backed securities
Federal Home Loan Bank stock
Federal Reserve Bank stock
Equities

Total

Investments by category as a percentage

of total investment securities
Obligations of U.S. Treasury and other
U.S. Government sponsored entities

Obligations of states and political subdivisions
U.S. Government asset-backed securities
Federal Home Loan Bank stock
Federal Reserve Bank stock
Equities

2016

2015

2014

$ 267,533
188,622
1,058,383
50,086
8,225
6,934

$ 522,063
48,190
1,012,605
50,086
8,225
2,710

$ 538,064
—
901,715
50,086
8,225
2,698

$1,579,783

$1,643,879

$1,500,788

16.9%
11.9%
67.0%
3.2%
0.5%
0.5%

31.8%
2.9%
61.6%
3.0%
0.5%
0.2%

35.9%
—%
60.1%
3.3%
0.5%
0.2%

Total

100.0%

ANALYSIS OF EARNINGS
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 results from average balances outstanding for interest
earning assets and interest bearing liabilities in conjunction with the average
rates earned and paid on them. (See Table 16 for three years of history on the
average balances of the balance sheet categories as well as the average rates
earned on interest earning assets and the average rates paid on interest bearing
liabilities.)

Average interest earning assets for 2016 increased by $95 million, or 1.4%,
to $6,826 million, compared to $6,731 million for 2015. Average interest
earning assets of $6,731 million for 2015 represented an increase of $376
million, or 5.9%, compared to $6,355 for 2014. The average yield on interest
earning assets increased by 13 basis points to 4.08% for 2016, compared to
3.95% for 2015. The average yield on interest earning assets of 3.95% for 2015
represented a decrease of 24 basis points compared to 4.19% for 2014.

Interest income for 2016 included $5.1 million related to payments received on
certain SEPH impaired loan relationships, some of which are participated with
PNB. Excluding this income, the yield on loans was 4.64%, the yield on interest
earning assets was 4.01%, and the net interest margin was 3.45%.

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Table 16 – Distribution of Assets, Liabilities and Shareholders’ Equity

December 31,
(In thousands)

ASSETS
Interest earning assets:

Loans(1) (2)
Taxable investment securities
Tax-exempt investment securities(3)
Money market instruments

Total interest earning assets

Non-interest earning assets:
Allowance for loan losses
Cash and due from banks
Premises and equipment, net
Other assets

TOTAL

LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest bearing liabilities:
Transaction accounts
Savings deposits
Time deposits

Total interest bearing deposits

Short-term borrowings
Long-term debt(4)

Total interest bearing liabilities

Non-interest bearing liabilities:

Demand deposits
Other

Total non-interest bearing liabilities

Shareholders’ equity

TOTAL

Daily
Average

2016

Interest

Average
Rate

Daily
Average

2015

Interest

Average
Rate

Daily
Average

2014

Interest

Average
Rate

$5,122,862
1,413,324
91,343
198,197

$242,978
30,627
4,050
1,020

6,825,726

278,675

4.74%
2.17%
4.43%
0.51%

4.08%

$4,909,579
1,472,285
5,923
342,997

$228,746
36,026
279
888

6,730,784

265,939

4.66%
2.45%
4.72%
0.26%

3.95%

$4,717,297
1,432,627
65
204,874

$228,487
36,981
5
515

6,354,863

265,988

4.84%
2.58%
6.97%
0.25%

4.19%

(56,890)
115,779
59,104
472,800

$7,416,519

$1,244,646
1,705,592
1,215,681

4,165,919

240,457
776,465

5,182,841

1,414,885
81,056

1,495,941

737,737

$7,416,519

$ 1,358
2,721
9,337

13,416

456
24,300

38,172

0.11%
0.16%
0.77%

0.32%

0.19%
3.13%

0.74%

(56,947)
117,286
58,377
456,960

$7,306,460

$1,257,681
1,544,316
1,353,199

4,155,196

258,717
793,469

5,207,382

1,311,628
77,123

1,388,751

710,327

$7,306,460

816
1,413
10,125

12,354

469
24,619

37,442

0.06%
0.09%
0.75%

0.30%

0.18%
3.10%

0.72%

(58,917)
112,113
55,407
429,836

$6,893,302

$1,291,310
1,216,750
1,312,868

3,820,928

263,270
867,615

4,951,813

1,196,625
64,415

1,261,040

680,449

$6,893,302

825
852
9,323

11,000

517
28,582

40,099

0.06%
0.07%
0.71%

0.29%

0.20%
3.29%

0.81%

Tax equivalent net interest income
Net interest spread
Net yield on interest earning assets (net interest margin)

$240,503

$228,497

$225,889

3.34%
3.52%

3.23%
3.39%

3.38%
3.55%

(1) Loan income includes net loan related fee income and origination costs (expense) of ($1.6 million) in 2016, ($1.0 million) in 2015, and $1.3 million in 2014. Loan income also includes the effects

of taxable equivalent adjustments using a 35% tax rate in 2016, 2015 and 2014. The taxable equivalent adjustment was $1.0 million in 2016, $767,000 in 2015, and $843,000 in 2014.

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

(3)

Interest income on tax-exempt investment securities includes the effects of taxable equivalent adjustments using a 35% tax rate in 2016, 2015 and 2014. The taxable equivalent adjustments
were $1.4 million in 2016, $98,000 in 2015, and $2,000 in 2014.

(4)

Includes subordinated notes.

Table 17 – Quarterly Net Interest Margin

Average
Interest
Earning Assets

Net
Interest
Income

Tax Equivalent
Net Interest
Income

Tax Equivalent
Net Interest
Margin

(In thousands)

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

$6,818,281

$ 59,819

$ 60,263

6,800,436

6,871,661

6,812,168

57,485

58,533

62,249

58,040

59,152

63,048

2016

$6,825,726

$238,086

$240,503

3.55%

3.43%

3.42%

3.68%

3.52%

Average interest bearing liabilities for 2016 decreased by $24 million, or
0.05%, to $5,183 million, compared to $5,207 million for 2015. Average
interest bearing liabilities of $5,207 million for 2015 represented an increase
of $255 million, or 5.2%, compared to $4,952 million for 2014. The average
cost of interest bearing liabilities increased by 2 basis points to 0.74% for
2016, compared to 0.72% for 2015. The cost of interest bearing liabilities
of 0.72% for 2015 was a decrease of 9 basis points compared to 0.81%
for 2014.

The following table displays (for each quarter of 2016) the average balance
of interest earning assets, the net interest income and the tax equivalent net
interest income and net interest margin.

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In the following table, the change in tax equivalent interest due to both volume
and rate has been allocated to volume and rate changes in proportion to the
relationship of the absolute dollar amounts of the change in each.

Table 18 – Volume/Rate Variance Analysis

The following table breaks out the change in total other income for the year
ended December 31, 2016 compared to the year ended December 31, 2015,
and for the year ended December 31, 2015 compared to the year ended
December 31, 2014 between Park’s Ohio-based operations and SEPH.

Change from 2015 to 2016

Change from 2014 to 2015

Table 20 – Other Income Breakout

(In thousands)

Volume

Rate

Total

Volume

Rate

Total

Increase (decrease) in:
Interest income:

Total loans

$10,065

$ 4,167

$14,232

$ 9,016 $ (8,757)

$ 259

Taxable investments

(1,400)

(3,999)

(5,399)

Tax-exempt investments 3,789

(18)

3,771

(486)

618

132

982

276

352

(1,937)

(2)

(955)

274

373

11,968

768

12,736

10,626

(10,675)

(49)

Money market
instruments

Total interest
income

Interest expense:

Transaction accounts

(8)

$ 550

542

(9) $ — $

(9)

Savings accounts

162

1,146

1,308

(1,051)

(34)

(531)

263

212

(788)

(13)

(319)

273

283

(7)

289

519

(41)

562

802

(48)

(2,365)

(1,599)

(3,964)

Time deposits

Short-term borrowings

Long-term debt

Total interest
expense

(1,462)

2,192

730

(1,825)

(832)

(2,657)

Net variance

$13,430

$(1,424) $12,006

$12,451 $ (9,843)

$ 2,608

Other Income: Other income was $78.7 million in 2016, compared to $77.6
million in 2015, and $75.5 million in 2014.

The following table displays total other income for Park in 2016, 2015 and
2014.

Table 19 – Other Income

Year Ended December 31,
(In thousands)

2016

2015

2014

Income from fiduciary activities

$21,400

$20,195

$19,150

Service charges on deposits

Other service income

Checkcard fee income

Bank owned life insurance income

ATM fees

Gain on the sale of OREO, net

OREO valuation adjustments

Gain on the sale of commercial

loans held for sale

Gain (loss) on sale of investment securities

Miscellaneous

Total other income

14,259

14,419

15,057

4,338

2,268

1,323

(601)

—

6,268

14,751

11,438

14,561

5,783

2,428

1,604

15,423

10,459

13,570

4,861

2,467

5,503

(1,592)

(2,406)

756

7,539

1,867

(1,158)

5,813

$78,731

$77,551

$75,549

(In thousands)

Income from fiduciary

activities

Service charges
on deposits

Other service income

Checkcard fee income

Bank owned life

insurance income

ATM fees

Gain on the sale
of OREO, net

OREO valuation
adjustments

Gain on sale of

commercial loans
held for sale

Gain (loss) on sale of

investment securities

Miscellaneous

Change from 2015 to 2016

Change from 2014 to 2015

Ohio-based
Operations

SEPH

Total

Ohio-based
Operations

SEPH

Total

$ 1,205

$ — $ 1,205

$ 1,045

$ — $ 1,045

(492)

1,596

496

(1,445)

(160)

(764)

658

—

1,385

—

(492)

2,981

496

— (1,445)

—

(160)

(672)

—

2,011

(1,032)

991

922

(39)

—

(672)

979

991

922

(39)

483

333

(281)

(1,220)

(2,679)

(3,899)

991

335

479

814

(34)

(722)

(756)

363

(1,474)

(1,111)

(88)

(918)

—

(88)

(353)

(1,271)

1,246

1,163

—

563

1,246

1,726

Total other income

$ 54

$1,126

$ 1,180

$ 6,145

$(4,143)

$ 2,002

Income from fiduciary activities increased by $1.2 million, or 6.0%, to $21.4
million in 2016, compared to $20.2 million in 2015. The $20.2 million in
2015 was an increase of $1.0 million, or 5.5%, compared to $19.2 million in
2014. The increases in fiduciary fee income in 2016 and 2015 were primarily
due to improvements in the equity markets and also due to an increase in the
total account balances serviced by PNB’s Trust Department. PNB charges
fiduciary fees largely based on the market value of the assets being managed.
The average market value of the trust assets managed by PNB was $4.56 billion
in 2016, compared to $4.38 billion in 2015, and $4.26 billion in 2014.

Service charges on deposit accounts decreased by $492,000, or 3.3%, to
$14.3 million in 2016, compared to $14.8 million in 2015. The $14.8 million
in 2015 was a decrease of $672,000, or 4.4%, compared to $15.4 million
in 2014. The declines in 2016 and 2015 were related to declines in service
charges on deposits within Park’s Ohio-based operations, largely as a result
of a decline in fee income from overdraft charges and other non-sufficient
funds (NSF) charges. Park’s customers did not use our courtesy overdraft
program as frequently in 2015 and 2016.

Fee income earned from the origination and sale into the secondary market of
long-term, fixed-rate mortgage loans is included within “Other service income.”
Other service income increased by $3.0 million, or 26.1%, to $14.4 million
in 2016, compared to $11.4 million in 2015. The $11.4 million in 2015 was
an increase of $979,000, or 9.4%, compared to $10.5 million in 2014. The
increase at PNB during 2016 and 2015 was primarily due to a corresponding
increase in the amount of mortgage loans originated for sale in the secondary
market which increased by $66.9 million for 2016 compared to 2015 and
$84.7 million for 2015 compared to 2014. The $1.4 million increase in other
service income at SEPH for 2016 compared to 2015 was primarily the result
of the recovery of fees from certain SEPH impaired loan relationships

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Gain on the sale of commercial loans held for sale was $756,000 for 2015.
This was related to certain commercial loans, which had a book balance of
$144,000, that were sold in the first quarter of 2015. Gain on sale of commer-
cial loans held for sale was $1.9 million in 2014. PNB sold $12.7 million of
commercial loans held for sale in 2014, which resulted in a $328,000 loss on
sale. SEPH sold $6.4 million of commercial loans held for sale in 2014, which
resulted in a $2.2 million gain on sale. No commercial loans held for sale were
sold in 2016.

Other miscellaneous income decreased by $1.3 million, or 16.9%, to $6.3
million in 2016, compared to $7.5 million in 2015. Other miscellaneous
income increased by $1.7 million, or 29.7%, to $7.5 million in 2015, com-
pared to $5.8 million in 2014. The decrease in 2016, compared to 2015, was
related to a $329,000 decrease in brokerage income and a $805,000 decline
in income from the operation of OREO properties, and a $711,000 decrease
in gains from the sale of repossessed and other assets. These decreases
were offset by $461,000 in income from an equity investment during 2016.
The increase in 2015, compared to 2014, was primarily due to a $1.2 million
increase in income from the operation of OREO properties and a $468,000
increase in gains from the sale of assets.

Other Expense: Other expense was $199.0 million in 2016, compared to
$186.6 million in 2015, and $187.5 million in 2014. Other expense increased
by $12.4 million, or 6.6%, in 2016, and decreased by $896,000, or 0.5% in
2015. The following table displays total other expense for Park for 2016, 2015
and 2014.

Table 22 – Other Expense

Year Ended December 31,
(In thousands)

Salaries

Employee benefits

Data processing fees

Professional fees and services

Occupancy expense

Furniture and equipment expense

Insurance

Marketing

Communication

State tax expense

OREO expense

Borrowing prepayment penalty

Miscellaneous

2016

2015

2014

$ 87,034

$ 86,189

$ 81,977

19,262

5,608

27,181

10,239

13,766

5,825

4,523

4,985

3,560

1,021

5,554

10,465

21,296

5,037

23,452

9,686

11,806

5,629

3,983

5,130

3,566

1,446

532

8,862

19,991

4,712

29,580

10,006

11,571

5,723

4,371

5,268

2,290

2,063

—

9,958

Total other expense

$199,023

$186,614

$187,510

Full-time equivalent employees

1,726

1,798

1,801

Checkcard fee income, which is generated from debit card transactions,
increased $496,000, or 3.4%, to $15.1 million in 2016, compared to $14.6
million in 2015. The $14.6 million in 2015 was an increase of $991,000, or
7.3%, compared to $13.6 million in 2014. The increases in 2016 and 2015
were attributable to continued increases in the volume of debit card trans -
actions. Debit card transactions for 2016 were 30.6 million compared to
29.9 million for 2015 and 28.4 million for 2014.

Bank owned life insurance income decreased by $1.4 million, or 25%, to $4.3
million in 2016, compared to $5.8 million in 2015. Bank owned life insurance
income increased by $922,000, or 19.0%, to $5.8 million in 2015, compared
to $4.9 million in 2014. The decrease of $1.4 million from 2015 to 2016 and
the increase of $922,000 from 2014 to 2015 was primarily related to fluctua-
tions in income from death benefits paid on policies. Park recorded $40,000
of income from death benefits paid on policies during 2016 compared to
$1.3 million of income from death benefits paid on policies during 2015,
and $383,000 of income from death benefits paid on policies in 2014.

Gain on the sale of OREO, net, totaled $1.3 million in 2016, a decrease of
$281,000, compared to $1.6 million in 2015. The $1.6 million in 2015 was
a decrease of $3.9 million, compared to $5.5 million in 2014. The table below
provides details on the OREO sales at PNB and SEPH in 2016, 2015, and 2014.

Table 21 – Sales of OREO

(In thousands)

2016:
PNB
PNB participations
in Vision assets

SEPH

Total

2015:
PNB
PNB participations
in Vision assets

SEPH

Total

2014:
PNB
PNB participations
in Vision assets

SEPH

Total

OREO
Properties
Sold

Book
Balance of
OREO Sold

Net
Proceeds of
OREO Sold

Gain on
Sale(1)

1
13

3
20

1
114

205

$ 3,199

$ 3,400

$ 201

157
4,007

231
5,073

$ 7,363

$ 8,704

74
1,066

$1,341

$ 6,853

$ 7,332

$ 479

521
8,158

984
8,742

463
584

$15,532

$17,058

$1,526

$ 7,271

$ 8,191

$ 920

1,826
13,258

$22,355

3,085
16,522

$27,798

1,259
3,264

$5,443

(1) The gain on sale amounts above exclude any deferred gain on sale.

OREO assets, property acquired through foreclosure, are initially recorded at
fair value less anticipated selling costs (net realizable value), establishing a new
cost basis. These assets are subsequently accounted for at the lower of cost or
fair value less costs to sell. Subsequent changes in the value of real estate are
classified as OREO valuation adjustments. OREO valuation adjustments totaled
$601,000 in 2016, a decrease of $991,000, or 62.2%, compared to $1.6
million in 2015. The $1.6 million in 2015 was a decrease of $814,000,
or 33.8%, compared to $2.4 million in 2014.

Of the $601,000 in OREO valuation adjustments in 2016, $582,000 were
related to valuation adjustments at PNB, of the $1.6 million in OREO valuation
adjustments in 2015, $1.2 million were related to valuation adjustments at PNB,
and of the $2.4 million in OREO valuation adjustment in 2014, $1.6 million
were related to PNB. The decline in OREO valuation adjustments is consistent
with the trend of lower OREO balances across the Park organization, which
totaled $13.9 million, $18.7 million, and $22.6 million at December 31, 2016,
2015 and 2014, respectively.

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The following table breaks out the change in other expense for the year ended
December 31, 2016, compared to the year ended December 31, 2015, and for
the year ended December 31, 2015 compared to the year ended December 31,
2014 in each of Park’s Ohio-based operations and SEPH.

Table 23 – Other Expense Breakout

Change from 2015 to 2016

Change from 2014 to 2015

(In thousands)

Ohio-based
Operations

SEPH

Total

Ohio-based
Operations

SEPH

Total

Salaries

943

(98) $

845

$ 4,556

$ (344)

$ 4,212

Employee benefits

Data processing fees

Professional fees
and services

Occupancy expense

Furniture and

(2,235)

571

1,216

553

equipment expense

1,960

Insurance

Marketing

Communication

State tax expense

OREO expense

Borrowing prepayment

penalty

Miscellaneous

Total other
expense

196

537

(147)

(69)

(373)

5,022

3,144

201

—

(2,034)

571

1,510

325

(205)

1,305

—

325

2,513

—

(52)

—

(1,541)

3,729

553

1,960

196

540

(145)

(6)

(425)

5,022

1,603

(780)

(320)

236

(88)

(388)

(135)

1,351

(428)

532

(1,683)

(5,348)

(6,128)

—

(320)

(1)

(6)

—

(3)

(75)

(189)

—

587

235

(94)

(388)

(138)

1,276

(617)

532

(1,096)

$11,318

$ 1,091

$12,409

$ 4,688

$(5,584)

$ (896)

Salaries expense increased $845,000, or 1.0%, to $87.0 million in 2016,
and increased by $4.2 million, or 5.1%, to $86.2 million in 2015. The
increase in 2016 was primarily due to an increase of $1.0 million in share-
based compensation expense related to the Park 2013 Long-Term Incentive
Plan (the “2013 Incentive Plan”) offset by a $374,000 decrease in incentive
compensation. The increase in 2015 was due to an increase in salaries of $2.9
million, an increase in incentive compensation of $937,000, and an increase
in share-based compensation expense related to the Park 2013 Incentive Plan
of $407,000 compared to 2014. Park had 1,726 full-time equivalent employees
at year-end 2016, compared to 1,798 full-time equivalent employees at year-end
2015, and 1,801 full-time equivalent employees at year-end 2014.

Employee benefits expense decreased $2.0 million, or 9.6%, to $19.3 million
in 2016, and increased by $1.3 million, or 6.5%, to $21.3 million in 2015.
The decrease in 2016 was due to a $3.9 million decrease in group insurance
costs, offset by a $1.1 million increase in other employee benefits. The increase
in 2015 was primarily due to a $1.3 million increase in pension and salary
deferral plan expense, compared to 2014.

Professional fees and services increased $3.7 million, or 15.9%, to $27.2
million in 2016, compared to $23.5 million in 2015. The $23.5 million in
2015 was a decrease of $6.1 million, or 20.7%, compared to $29.6 million in
2014. This subcategory of total other expense includes legal fees, management
consulting fees, director fees, audit fees, regulatory examination fees and mem-
berships in industry associations. The increase in professional fees and services
expense in 2016 was primarily due to an increase in consulting fees at SEPH
and increases in third-party credit related expense at PNB. The decrease in
professional fees and services expense in 2015 was largely related to declines
in legal expenses associated with PNB participations in Vision loans and other
loan relationships at SEPH.

Furniture and equipment expense increased $2.0 million, or 16.6%, to $13.8
million in 2016, compared to $11.8 million in 2015. The increase in furniture
and equipment expense in 2016 was primarily due to a $1.0 million increase
in depreciation expense and a $1.0 million increase in maintenance expense.

OREO expense declined $425,000, or 29.4%, to $1.0 million in 2016,
compared to $1.4 million in 2015. The $1.4 million in 2015 was a decline
of $617,000, or 29.9%, compared to $2.1 million in 2014. The decline in
OREO expense was consistent with the trend of lower OREO balances across
the Park organization, which totaled $13.9 million, $18.7 million, and $22.6
million at December 31, 2016, 2015 and 2014, respectively.

Borrowing prepayment penalties increased by $5.0 million, to $5.6 million in
2016, compared to $532,000 in 2015. During 2016, Park prepaid $50 million
of Federal Home Loan Bank (“FHLB”) advances, incurring a $5.6 million pre-
payment penalty. These advances had an interest rate of 3.15% and a maturity
date of November 13, 2023.

The subcategory “Miscellaneous” other expense includes expenses for
supplies, travel, charitable contributions, and other miscellaneous expense.
The subcategory miscellaneous other expense increased by $1.6 million, or
18.1%, to $10.5 million in 2016, compared to $8.9 million in 2015. The $8.9
million in 2015 was a decrease of $1.1 million, or 11.0%, compared to $10.0
million in 2014. The $1.6 million increase in 2016 was primarily due to a
$1.7 million increase in accruals due to the ongoing evaluation of litigation
and other proceedings impacting the GFSC subsidiary and the Parent Company,
a $2.0 million increase in contribution expense and an $883,000 increase in
fraud losses, offset by a reduction in expenses as $0.6 million was recognized
in 2015 related to a contract termination fee, a $1.0 million reduction in
expense related to reserves established for potential mortgage loan repur-
chases, and a decrease of $996,000 related to the amortization of historic
tax credits.

The $1.1 million decrease in 2015 was primarily due to a $1.5 million decrease
in contribution expense, a $1.0 million decrease in expense due to the ongoing
evaluation of litigation and other proceedings impacting the GFSC subsidiary,
and a decrease of $1.3 million due to a reduction in contract termination fees,
offset by a $1.2 million increase related to reserves established for potential
mortgage loan repurchases and a $996,000 increase related to the amortization
of historic tax credits.

Income Taxes: Federal income tax expense was $36.8 million in 2016, com-
pared to $32.6 million in 2015, and $36.5 million in 2014. Federal income tax
expense as a percentage of income before taxes was 29.9% in 2016, 28.7% in
2015, and 30.3% in 2014. The difference between the statutory federal income
tax rate of 35% and Park’s effective tax rate reflects permanent tax differences,
primarily consisting of tax-exempt interest income from municipal investments
and loans, qualified affordable housing and historical tax credits, bank owned
life insurance income, and dividends paid on common shares held within
Park’s salary deferral plan. Park’s permanent tax differences for 2016 were
approximately $6.3 million compared to $7.2 million for 2015.

CREDIT EXPERIENCE
(Recovery of) Provision for Loan Losses: The (recovery of) provision for
loan losses is the amount added to the allowance for loan losses to ensure the
allowance is sufficient to absorb probable, incurred credit losses. The amount
of the (recovery of) provision for loan losses is determined by management
after reviewing the risk characteristics of the loan portfolio, historic and
current loan loss experience and current economic conditions.

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The table below provides additional information on the provision for loan
losses and the ALLL for Park for 2016, 2015 and 2014.

Table 24 – ALLL Information, Park

SEPH, as a non-bank subsidiary of Park, does not carry an ALLL balance,
but recognizes a provision for loan losses when a charge-off is taken and
recognizes a recovery of loan losses when a recovery is received.

(In thousands)

2016

2015

2014

Table 26 – ALLL Information, SEPH

ALLL, beginning balance

56,494

54,352

59,468

(In thousands)

2016

2015

2014

Charge-offs

Recoveries

Net charge-offs (recoveries)

(Recovery of) provision for loan losses

20,799

(20,030)

769

(5,101)

14,290

(11,442)

2,848

4,990

24,780

(26,997)

(2,217)

(7,333)

ALLL, ending balance

50,624

56,494

54,352

Average loans

$5,122,862

$4,909,579

$4,717,297

Net charge-offs (recoveries)

as a percentage of average loans

0.02%

0.06%

(0.05)%

For the year ended December 31, 2016, gross income of $6.8 million would
have been recognized on loans that were nonaccrual as of December 31, 2016
had these loans been current in accordance with their original terms. Interest
income on nonaccrual loans may be recorded on a cash basis and be included
in earnings only when Park expects to receive the entire recorded investment of
the loan. Of the $6.8 million that would have been recognized, approximately
$6.0 million was included in interest income for the year ended December 31,
2016.

Park’s Ohio-based subsidiaries, PNB and GFSC, are the only subsidiaries that
carry an ALLL balance. The table below provides additional information on the
provision for loan losses and the ALLL for Park’s Ohio-based subsidiaries for
2016, 2015 and 2014.

ALLL, beginning balance

$ —

Charge-offs

Recoveries

Net recoveries

Recovery of loan losses

ALLL, ending balance

Average loans

447

(10,046)

(9,599)

$ —

$ 14,434

127

(4,217)

(4,090)

$ —

$17,910

1,125

(13,519)

(12,394)

$ —

$ 31,836

At year-end 2016, the allowance for loan losses was $50.6 million, or 0.96%
of total loans outstanding, compared to $56.5 million, or 1.11% of total loans
outstanding at year-end 2015, and $54.4 million, or 1.13% of total loans out-
standing at year-end 2014. The table below provides additional information
related to specific reserves on impaired commercial loans and general reserves
for all other loans in Park’s portfolio at December 31, 2016, 2015 and 2014.

Table 27 – Park General Reserve Trends

Year Ended December 31,
(In thousands)

Allowance for loan losses, end of period

Specific reserves

General reserves

Total loans

2016

2015

50,624

56,494

548

4,191

50,076

52,303

2014

54,352

3,660

50,692

$5,271,857

$5,068,085

$4,829,682

Table 25 – ALLL Information, Park’s Ohio-based Subsidiaries

Impaired commercial loans

70,415

80,599

73,676

Non-impaired loans

$5,201,442

$4,987,486

$4,756,006

Allowance for loan losses as a percentage

of year-end loans

General reserves as a percentage

of non-impaired loans

0.96%

1.11%

1.13%

0.96%

1.05%

1.07%

Specific reserves decreased $3.6 million to $548,000 at December 31, 2016,
compared to $4.2 million at December 31, 2015. The decrease is largely due to
the fourth quarter 2016 charge-off of $3.1 million in specific reserves. General
reserves decreased $2.2 million, or 4.3%, to $50.1 million at December 31,
2016, compared to $52.3 million at December 31, 2015. The decrease in
general reserves was due to the ongoing evaluation of the required allowance
for loan losses to cover probable incurred losses in the Park loan portfolio.

Management believes that the allowance for loan losses at year-end 2016
is adequate to absorb probable, incurred credit losses in the loan portfolio.
See Note 1 of the Notes to Consolidated Financial Statements and the discussion
under the heading “CRITICAL ACCOUNTING POLICIES” earlier in this
Management’s Discussion and Analysis for additional information on
management’s evaluation of the adequacy of the allowance for loan losses.

(In thousands)

2016

2015

2014

ALLL, beginning balance

56,494

$ 54,352

59,468

Charge-offs:

Ohio-based subsidiaries loans

PNB participations in Vision loans

Total charge-offs

Recoveries:

Ohio-based subsidiaries loans

PNB participations in Vision loans

Total recoveries

Net charge-offs

Provision for (recovery of) loan losses:

Ohio-based subsidiaries loans

PNB participations in Vision loans

Total provision for loan losses

20,274

20,352

(6,788)

(3,196)

(9,984)

10,368

7,616

(3,118)

4,498

14,143

14,163

(5,770)

(1,455)

(7,225)

6,938

10,515

(1,435)

9,080

22,988

667

23,655

(6,613)

(6,865)

(13,478)

10,177

11,259

(6,198)

5,061

ALLL, ending balance

50,624

56,494

54,352

Average loans, Ohio-based subsidiaries

$5,108,428

$4,891,670

$4,685,461

Net charge-offs as a percentage of

average loans

Net charge-offs as a percentage of
average loans — excluding PNB
participations in Vision loans

0.20%

0.14%

0.22%

0.26%

0.17%

0.35%

Charge-offs for 2016 include the charge-off of $2.2 million in specific reserves
for which provision expense had been recognized in a prior year compared to
$412,000 for 2015 and $6.4 million for 2014. Net charge-offs adjusted for
changes in specific reserves as a percentage of average loans for the years
ended December 31, 2016, 2015, and 2014 were 0.13%, 0.15%, and 0.07%,
respectively.

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The table below provides a summary of Park’s loan loss experience over the
past five years:

Table 28 – Summary of Loan Loss Experience

(In thousands)

2016

2015

2014

2013

2012

Average loans

(net of unearned
interest)

Allowance for
loan losses:

$5,122,862 $4,909,579 $4,717,297 $4,514,781 $4,410,661

Beginning balance

56,494

54,352

59,468

55,537

68,444

Charge-offs:

Commercial, financial
and agricultural

Real estate –
construction

Real estate –
residential

Real estate –
commercial

Consumer

Leases

5,786

2,478

3,779

6,160

26,847

1,436

470

1,316

1,791

9,985

3,014

2,352

3,944

3,207

8,607

412

10,151

—

348

8,642

—

8,003

7,738

—

1,832

6,163

—

10,454

5,375

—

Total charge-offs $

20,799 $

14,290 $

24,780 $

19,153 $

61,268

Recoveries:

Commercial, financial
and agricultural

Real estate –

construction

Real estate –
residential

Real estate –
commercial

Consumer

Leases

Total recoveries

Net charge-offs
(recoveries)

(Recovery) provision

included in earnings

1,259 $

1,373 $

1,003 $

1,314 $

1,066

8,559

2,092

12,572

9,378

2,979

2,446

2,438

2,985

6,000

5,559

3,671

4,094

2,241

3,295

7,759

2,671

726

2,249

783

2,555

—

20,030 $ 11,442 $

26,997 $

19,669 $

12,942

769 $

2,848 $

(2,217) $

(516) $

48,326

(5,101)

4,990

(7,333)

3,415

35,419

Ending balance

50,624 $ 56,494 $

54,352 $

59,468 $

55,537

Ratio of net charge-offs

(recoveries) to
average loans

Ratio of allowance for
loan losses to end
of year loans

0.02%

0.06%

(0.05)%

(0.01)%

1.10%

0.96%

1.11%

1.13%

1.29%

1.25%

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

Table 29 – Allocation of Allowance for Loan Losses

December 31,

2016

2015

2014

2013

2012

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

Percent of
Loans Per

Percent of
Loans Per
Allowance Category

Nonperforming Assets: Nonperforming loans include: 1) loans whose
interest is accounted for on a nonaccrual basis; 2) troubled debt restructurings
(TDRs) on accrual status; and 3) loans which are contractually past due 90
days or more as to principal or interest payments, where interest continues
to accrue. Park’s management continues to evaluate TDRs to determine those
that may be appropriate to return to accrual status. Specifically, if the restruc-
tured 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. Nonperforming assets include non-
performing loans and OREO. OREO results from taking possession of property
that served as collateral for a defaulted loan.

Generally, management obtains updated appraisal information for non -
performing loans and OREO annually. As new appraisal information is
received, management performs an evaluation of the appraisal and applies
a discount for anticipated disposition costs to determine the net realizable
value of the collateral, which is compared to the outstanding principal balance
to determine if additional write-downs are necessary.

The following is a summary of Park’s nonaccrual loans, accruing TDRs, loans
past due 90 days or more and still accruing, and OREO for the last five years:

Table 30 – Park Nonperforming Assets

December 31,
(In thousands)

Nonaccrual loans

Accruing TDRs

Loans past due 90 days
or more and accruing

Total nonperforming

loans

OREO – PNB

OREO – SEPH

Total nonperforming

assets

Percentage of

nonperforming loans
to total loans

Percentage of

nonperforming assets
to total loans

Percentage of

nonperforming assets
to total assets

2016

2015

2014

2013

2012

$ 87,822

$ 95,887

$100,393

$135,216

$155,536

18,175

24,979

16,254

18,747

29,800

2,086

1,921

2,641

1,677

2,970

$108,083

$122,787

$119,288

$155,640

$188,306

6,025

7,901

7,456

11,195

10,687

11,918

11,412

23,224

14,715

21,003

$122,009

$141,438

$141,893

$190,276

$224,024

2.05%

2.42%

2.47%

3.37%

4.23%

2.31%

2.79%

2.94%

4.12%

5.03%

1.63%

1.93%

2.03%

2.87%

3.37%

SEPH nonperforming assets for the last five years were as follows:

Table 31 – SEPH Nonperforming Assets

December 31,
(In thousands)

Nonaccrual loans

Accruing TDRs

Loans past due 90 days
or more and accruing

2016

2015

2014

2013

2012

$11,738

$14,419

$22,916

$36,108

$55,292

—

Commercial,
financial
and
agricultural

Real estate –
construction

Real estate –
residential

Real estate –
commercial

$13,434

18.87% $13,694

18.86% $10,719

17.73% $14,218

17.87% $15,635

18.51%

Total nonperforming loans

$11,738

$14,419

$23,013

$36,108

$55,292

5,247

3.58%

8,564

3.42%

8,652

3.23%

6,855

3.38%

6,841

3.72%

OREO – SEPH

7,901

11,195

11,918

23,224

21,003

10,958

34.31%

13,514

36.61%

14,772

38.33%

14,251

38.95%

14,759

38.51%

10,432

21.92%

9,197

21.97%

8,808

22.15%

15,899

24.07%

11,736

24.54%

Total nonperforming assets

$19,639

$25,614

$34,931

$59,332

$76,295

Consumer

10,553

21.26%

11,524

19.08%

11,401

18.49%

8,245

15.66%

6,566

14.65%

Leases

— 0.06%

0.06%

— 0.07%

Total

$50,624 100.00% $56,494 100.00% $54,352 100.00% $59,468 100.00% $55,537 100.00%

As of December 31, 2016, Park had no concentrations of loans exceeding 10%
to borrowers engaged in the same or similar industries nor did Park have any
loans to foreign governments.

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

Table 32 – Park Excluding SEPH Nonperforming Assets

December 31,
(In thousands)

Nonaccrual loans
Accruing TDRs
Loans past due 90 days
or more and accruing

Total nonperforming

loans

OREO – PNB

Total nonperforming

assets(1)

Percentage of

nonperforming loans
to total loans
Percentage of

nonperforming assets
to total loans
Percentage of

nonperforming assets
to total assets

2016

2015

2014

2013

2012

$ 76,084
18,175

$ 81,468
24,979

$ 77,477
16,157

$ 99,108
18,747

$100,244
29,800

2,086

1,921

2,641

1,677

2,970

$ 96,345

$108,368

$ 96,275

$119,532

$133,014

6,025

7,456

10,687

11,412

14,715

$102,370

$115,824

$106,962

$130,944

$147,729

1.83%

2.14%

2.00%

2.61%

3.03%

1.95%

2.29%

2.23%

2.86%

3.36%

1.38%

1.60%

1.55%

2.00%

2.26%

(1)

Includes PNB participations in loans originated by Vision and related OREO totaling $9.6
million, $9.8 million, $11.5 million, $12.3 million, and $19.0 million for the years ended
December 31, 2016, 2015, 2014, 2013 and 2012, respectively.

Park’s allowance for loan losses includes an allocation for loans specifically
identified as impaired under GAAP. At December 31, 2016, loans considered
to be impaired consisted substantially of commercial loans graded as “sub -
standard” or “doubtful” and placed on non-accrual status. Specific reserves
on impaired commercial loans are typically based on management’s best esti-
mate of the fair value of collateral securing these loans. The amount ultimately
charged off for these loans may be different from the specific reserve as the
ultimate liquidation of the collateral may be for amounts different from
management’s estimates.

When determining the quarterly and annual 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 that are 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 a 6 (substandard), also considered
watch list credits, are considered to represent higher credit risk and, as
a result, a higher loan loss reserve percentage is allocated to these loans.
Generally, commercial loans that are graded a 6 are considered for partial
charge-off or have been charged down to the net realizable value of the
underlying collateral. Commercial loans graded a 7 (doubtful) are shown
as nonperforming and Park 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.

The following table highlights the credit trends within the commercial loan
portfolio of Park’s Ohio-based operations.

Table 33 – Park Ohio Commercial Credit Trends

Year Ended December 31,
(In thousands)

2016

2015

2014

Commercial loans*

Pass rated
Special mention
Substandard
Impaired

Total

$2,601,607
14,644
441
58,676

$2,493,518
24,223
4,268
66,232

$2,360,689
15,946
3,553
51,323

$2,675,368

$2,588,241

$2,431,511

*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.

Delinquencies have remained low for Park’s Ohio-based operations over the
past 24 months. Delinquent and accruing loans were $27.8 million, or 0.53%
of total loans at December 31, 2016, compared to $25.7 million, or 0.51% of
total loans at December 31, 2015 and $33.0 million, or 0.69% of total loans
at December 31, 2014.

Impaired commercial loans for Park’s Ohio-based operations were $58.7
million at December 31, 2016, a decrease of $7.6 million, compared to $66.2
million as of December 31, 2015. The $58.7 million of impaired commercial
loans at December 31, 2016 included $6.4 million of loans modified in a
troubled debt restructuring which are currently on accrual status and per -
forming in accordance with the restructured terms, down from $12.4 million
at December 31, 2015. Impaired commercial loans are individually evaluated
for impairment and specific reserves are established to cover any probable,
incurred losses for those loans that have not been charged down to the net
realizable value of the underlying collateral or to the net present value of
expected cash flows.

Park had $15.1 million of non-impaired commercial loans included on the
watch list at December 31, 2016, compared to $28.5 million of non-impaired
commercial loans at year-end 2015, and $19.5 million of non-impaired com-
mercial loans at year-end 2014. Commercial loans include: (1) commercial,
financial and agricultural loans; (2) commercial real estate loans; (3) certain
real estate construction loans; and (4) certain residential real estate loans.
Park’s watch list includes all criticized and classified commercial loans, defined
by Park as loans rated special mention or worse, less those commercial loans
currently considered to be impaired. As a percentage of year-end total commer-
cial loans, Park’s watch list of potential problem commercial loans was 0.6% in
2016, 1.1% in 2015, and 0.8% in 2014. 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 each
borrower’s ability to comply with payment terms.

As of December 31, 2016, management had taken partial charge-offs of approx-
imately $24.9 million related to the $70.4 million of commercial loans
considered to be impaired, compared to charge-offs of approximately $28.7
million related to the $80.6 million of impaired commercial loans at December
31, 2015. The table below provides additional information related to Park’s
impaired commercial loans at December 31, 2016, including those impaired
commercial loans at PNB, PNB participations in impaired Vision loans and
those impaired Vision commercial loans retained at SEPH.

Table 34 – Park Impaired Commercial Loans

December 31, 2016
(In thousands)

PNB
PNB participations
in Vision loans

SEPH

Unpaid
Principal
Balance
(UPB)

Prior
Charge-
offs

Total
Impaired
Loans

Specific
Reserve

Carrying
Balance

Carrying
Balance
as a
% of UPB

$64,529

$10,772

$53,757

$548

$53,209

82.46%

8,372
22,457

3,453
10,718

4,919
11,739

—
—

4,919
11,739

58.76%
52.27%

Total Park

$95,358

$24,943

$70,415

$548

$69,867

73.27%

Allowance for Loan Losses: Loss factors are reviewed quarterly and updated
at least annually to reflect recent loan loss history and incorporate current risk
and trends which may not be recognized in historical data. Several enhance-
ments were made in the third quarter of 2016 as a result of management’s
quarterly review.

(cid:0) Management updated the historical loss calculation during the third

quarter of 2016, incorporating annualized net charge-offs plus changes
in specific reserves through September 30, 2016. Additionally, manage-
ment removed from the historical loss calculation net charge-offs plus
changes in specific reserves for the year ended December 31, 2009.
Management’s belief has been that historical losses should encompass
the complete economic cycle. However, given the extended length of the
economic recovery, management determined that 2009 loss data was

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no longer reflective of the current portfolio. Management has taken
the look-back period into consideration in the quarterly evaluation
of environmental loss factors.

(cid:0) As part of the 2016 mid-year historical loss update, management deter-
mined that it was no longer appropriate to more heavily weight those
years with higher losses in the historical loss calculation and applied
equal per centages to each of the years in this calculation. The trends that
existed resulting in management applying different weightings to the years
within the historical loss calculation no longer appeared to exist, resulting
in the adjustment back to equal weightings.

(cid:0) As part of the normal quarterly process, management reviewed and
updated the environmental loss factors applied to the commercial
portfolio in order to incorporate changes in the macroeconomic
environment. Additionally, management updated the calculation
of the loss emergence period utilizing a more granular process.

The impact of the changes described above resulted in a decrease of $3.8
million in the ALLL at September 30, 2016, compared to what the ALLL would
have been had the calculation, and related assumptions, used at June 30, 2016
remained constant.

The historical loss factors were updated again in the fourth quarter of 2016
to incorporate losses through December 31, 2016.

A significant portion of Park’s allowance for loan losses is allocated to com -
mercial loans. “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 loans, resulting
in a higher probability that Park will suffer a loss on the loans unless the
weakness is corrected. The allowance for loan losses related to performing
commercial loans was $32.8 million or 1.25% of the outstanding principal
balance of other accruing commercial loans at December 31, 2016. At
December 31, 2016, the coverage level within the commercial loan portfolio
was approximately 3.20 years compared to 2.37 years at December 31,
2015. Historical loss experience, defined as charge-offs plus changes in
specific reserves, over the past 84 months for the commercial loan portfolio
was 0.39% for 2016 and 0.53% for 2015. This 84-month loss experience
includes only the performance of the PNB loan portfolio and includes the
impact of PNB participations in Vision loans.

The overall reserve of 1.25% for other accruing commercial loans breaks down
as follows: pass-rated commercial loans are reserved at 1.24%; special mention
commercial loans are reserved at 3.82%; and substandard commercial loans
are reserved at 12.88%. The reserve levels for pass-rated, special mention
and substandard commercial loans in excess of the annualized 84-month loss
experience of 0.39% are due to the following factors which management
reviews on a quarterly or annual basis:

(cid:0) Loss Emergence Period Factor: At least annually, 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 from the probable occurrence of a loss event to the credit
being moved to nonaccrual. If the loss emergence period for any commer-
cial loan segment is greater than one year, management applies additional
general reserves to all performing loans within that segment of the com-
mercial loan portfolio. The loss emergence period was last updated in
the fourth quarter of 2016.

(cid:0) 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 substan-
dard. 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 period of time a loan takes to migrate
from pass-rated to impaired. The loss migration factor was last updated in
the fourth quarter of 2016.

(cid:0) 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 the adjustments made to the environmental loss factor
impacting each segment in the performing commercial loan portfolio
correlate 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 84 months, through December 31,
2016. 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, borrower bankruptcy status, improving or deteriorating eco-
nomic conditions, changes in lending management and underwriting standards,
etc.). At December 31, 2016, the coverage level within the consumer loan
portfolio was approximately 1.95 years compared to 1.99 years at December
31, 2015. Historical loss experience over the past 84 months for the consumer
loan portfolio was 0.34% for 2016 and 0.42% for 2015.

The judgmental increases discussed above incorporate management’s evalua-
tion of the impact of environmental qualitative factors which pose additional
risks and assignment of a component of the allowance for loan losses in con -
sideration 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 pro -
cedures; and levels of, and trends in, consumer bankruptcies, delinquencies,
impaired loans, and charge-offs and recoveries. The determination of this
component of the allowance for loan losses requires considerable management
judgment. Management is working to address weaknesses in those loans that
may result in future loss. Actual loss experience may be more or less than the
amount allocated.

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

Cash and cash equivalents decreased by $3.0 million during 2016 to $146.4
million at year end. Cash provided by operating activities was $87.9 million in
2016, $89.2 million in 2015, and $71.7 million in 2014. Net income was the
primary source of cash from operating activities during each year.

Cash used in investing activities was $152.6 million in 2016, $395.5 million
in 2015, and $229.6 million in 2014. Investment security transactions and
loan originations/repayments are the major use or source of cash in investing
activities. Proceeds from the sale, repayment or maturity of investment securi-
ties provide cash and purchases of investment securities use cash. Net security
transactions provided cash of $59.7 million in 2016, used cash of $145.2
million in 2015, and used cash of $29.7 million in 2014. Cash used by the
net increase in the loan portfolio was $199.5 million in 2016, $247.9 million
in 2015, and $234.0 million in 2014.

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Cash provided by financing activities was $61.7 million in 2016, $218.0 million
in 2015, and $248.5 million in 2014. A major source of cash for financing
activities is the net change in deposits. Deposits increased and provided $174.3
million of cash in 2016, $219.6 million of cash in 2015, and $338.0 million
of cash in 2014. Of the $338.0 million deposit increase in 2014, $200 million
was related to the settlement of brokered deposits in September 2014. Another
major source of cash for financing activities is short-term borrowings and long-
term debt. In 2016, net long-term borrowings decreased and used $55.6
million in cash. In 2015, net short-term borrowings increased and provided
$117.3 million in cash, and net long-term borrowings decreased and used
$55.1 million in cash. In 2014, net short-term borrowings increased and
provided $35.0 million in cash, and net long-term borrowings decreased and
used $64.2 million in cash. Finally, cash declined by $57.7 million in 2016,
$57.8 million in 2015, and $57.9 million in 2014, from the payment of cash
dividends.

Funds are available from a number of sources, including the capital markets,
the investment securities portfolio, the core deposit base, Federal Home Loan
Bank borrowings, the capability to securitize or package loans for sale, and
a $10.0 million revolving line of credit with another financial institution, which
did not have an outstanding balance as of December 31, 2016. In the opinion
of Park’s management, the present funding sources provide more than ade-
quate liquidity for Park to meet our cash flow needs.

The following table shows interest rate sensitivity data for five different time
intervals as of December 31, 2016:

Table 35 – Interest Rate Sensitivity

(In thousands)

Interest earning

assets:
Investment

securities(1)
Money market
instruments

Loans(1)

Total interest
earning
assets

Interest bearing
liabilities:
Interest bearing
transaction
accounts(2)

Savings

accounts(2)
Time deposits
Other

0-3
Months

3-12
Months

1-3
Years

3-5
Years

Over 5
Years

Total

$ 108,523 $ 174,350

$ 521,948 $ 238,808 $ 540,776 $1,584,405

23,635

—
1,400,192 1,254,926

—
1,769,078

—
679,532

—
168,129

23,635
5,271,857

1,532,350 1,429,276

2,291,026

918,340

708,905

6,879,897

$ 596,867 $

— $ 577,582 $

— $

— $1,174,449

659,943
282,067
—

— 1,044,977
281,491
—

438,813
1,301

—
115,003
—

— 1,704,920
1,117,869
495
1,301
—

Total deposits

1,538,877

440,114

1,904,050

115,003

495

3,998,539

Short-term

borrowings
Long-term debt
Subordinated

notes

Total interest
bearing
liabilities

Interest rate

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

$ 394,795 $

— $

— 344,281

225,000

25,000

— $ 394,795
694,281

100,000

15,000

30,000

—

45,000

1,948,672

814,395

2,129,050

140,003

100,495

5,132,615

(416,322)

614,881

161,976

778,337

608,410

1,747,282

(416,322)

198,559

360,535 1,138,872

1,747,282

(6.05)%

2.89%

5.24% 16.55%

25.40%

(1)

Investment securities and loans that are subject to prepayment are shown in the table by the
earlier of their re-pricing date or their expected repayment date and not by their contractual
maturity date. Nonaccrual loans of $87.8 million are included within the three-month to
twelve-month maturity category.

(2) Management considers interest bearing transaction accounts and savings accounts to be
core deposits and, therefore, not as rate sensitive as other deposit accounts and borrowed
money. Accordingly, only 51% of interest bearing transaction accounts and 39% of savings
accounts are considered to re-price within one year. If all of the interest bearing transaction
accounts and savings accounts were considered to re-price within one year, the one-year
cumulative gap would change from a positive 2.89% to a negative 20.70%.

The interest rate sensitivity gap analysis provides an overall picture of Park’s
static interest rate risk position. At December 31, 2016, the cumulative interest
earning assets maturing or repricing within twelve months were $2,962 million
compared to the cumulative interest bearing liabilities maturing or repricing
within twelve months of $2,763 million. For the twelve-month cumulative inter-
est rate sensitivity gap position, rate sensitive assets exceeded rate sensitive
liabilities by $199 million or 2.89% of interest earning assets.

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

The cumulative twelve-month interest rate sensitivity gap position at year-end
2015 was a positive $407 million or 6.03% of total interest earning assets. The
percentage of interest earning assets maturing or repricing within one year was
43.0% at year-end 2016, compared to 40.8% at year-end 2015. The percentage
of interest bearing liabilities maturing or repricing within one year was 53.8%
at year-end 2016, compared to 45.8% at year-end 2015.

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

Management uses a 50 basis point change in market interest rates per quarter
for a total of 200 basis points per year in evaluating the impact of changing
interest rates on net interest income and net income over a twelve-month
horizon. At December 31, 2016, the earnings simulation model projected that
net income would decrease by 1.9% using a rising interest rate scenario and
decrease by 6.3% using a declining interest rate scenario over the next year.
At December 31, 2015, the earnings simulation model projected that net
income would decrease by 0.4% using a rising interest rate scenario and
decrease by 10.9% using a declining interest rate scenario over the next year.
At December 31, 2014, the earnings simulation model projected that net
income would increase by 1.3% using a rising interest rate scenario and
decrease by 7.1% using a declining interest rate scenario over the following
year. Consistently, over the past several years, Park’s earnings simulation model
has projected that changes in interest rates would have only a small impact on
net income and the net interest margin. Park’s net interest margin was 3.52%
in 2016, 3.39% in 2015 and 3.55% in 2014.

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M A N A G E M E N T ’ S D I S C U S S I O N & A N A L Y S I S

CONTRACTUAL OBLIGATIONS
In the ordinary course of operations, Park enters into certain contractual
obligations. The following table summarizes Park’s significant and determinable
obligations by payment date at December 31, 2016.

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

Table 36 – Contractual Obligations

December 31, 2016

Payments Due In

(In thousands)

Note

0–1
Years

1–3
Years

3– 5
Years

Over 5
Years

Total

Deposits without
stated maturity
Certificates of deposit
Short-term borrowings
Long-term debt
Subordinated notes
Operating leases
Defined benefit pension

plan(1)

Purchase obligations

Total contractual
obligations

11
11
13
14
15
9

— $

$4,404,086 $
717,879
394,795
350,000
—
1,508

284,493
—
225,000
—
2,447

115,003
—
25,000

— $

— $4,404,086
1,117,870
495
394,795
—
700,000
100,000
45,000
— 45,000
5,698
700

1,043

6,924
22

15,519
—

17,896
—

48,058
—

88,397
22

$5,875,214 $527,459

$158,942 $194,253

$6,755,868

(1) Pension payments reflect 10 years of payments, through 2027.

As of December 31, 2016, Park had $14.3 million in unfunded commitments
related to investments in qualified affordable housing projects which are not
included in Table 36. Commitments are funded when capital calls are made by
the general partner. Park expects that the current commitments will be funded
between 2017 and 2027.

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

Commitments, Contingent Liabilities, and Off-Balance Sheet
Arrangements: In order to meet the financing needs of our customers,
the Corporation issues loan commitments and standby letters of credit. At
December 31, 2016, the Corporation had $912.0 million of loan commitments
for commercial, commercial real estate, and residential real estate loans and
had $13.7 million of standby letters of credit. At December 31, 2015, the
Corporation had $888.4 million of loan commitments for commercial,
commercial real estate, and residential real estate loans and had $12.3
million of standby letters of credit.

Commitments to extend credit under loan commitments and standby letters
of credit do not necessarily represent future cash requirements. These
commitments often expire without being drawn upon. However, all of the
loan commitments and standby letters of credit were permitted to be drawn
upon in 2016. See Note 23 of the Notes to Consolidated Financial Statements
for additional information on loan commitments and standby letters of credit.

The Corporation did not have any unrecorded significant contingent liabilities
at December 31, 2016.

Capital: Park’s primary means of maintaining capital adequacy is through
retained earnings. At December 31, 2016, the Corporation’s total shareholders’
equity was $742.2 million, compared to $713.4 million at December 31, 2015.
Total shareholders’ equity at December 31, 2016 was 9.94% of total assets,
compared to 9.76% of total assets at December 31, 2015.

Tangible shareholders’ equity was $669.9 million [total shareholders’ equity
($742.2 million) less goodwill ($72.3 million)] at December 31, 2016 and
was $641.0 million [total shareholders’ equity ($713.4 million) less goodwill
($72.3 million)] at December 31, 2015. At December 31, 2016, tangible
shareholders’ equity was 9.06% of total tangible assets [total assets ($7,468

million) less goodwill ($72.3 million)], compared to 8.86% of total tangible
assets [total assets ($7,311 million) less goodwill ($72.3 million)] at
December 31, 2015.

Net income was $86.1 million in 2016, $81.0 million in 2015 and $84.0 million
in 2014.

Cash dividends declared for Park’s common shares were $58.0 million in 2016
and $57.9 million in each of 2015 and 2014. On a per share basis, the cash
dividends declared were $3.76 per share in each of 2016, 2015 and 2014.

The table below shows the repurchases and issuances of treasury shares for
2014 through 2016.

Table 37

(In thousands, except share data)

Balance at January 1, 2014

Cash payment for fractional shares
in dividend reinvestment plan

Treasury shares repurchased
Treasury shares reissued for director grants

Balance at December 31, 2014

Cash payment for fractional shares
in dividend reinvestment plan

Treasury shares repurchased
Treasury shares reissued for director grants

Balance at December 31, 2015

Cash payment for fractional shares
in dividend reinvestment plan

Treasury shares repurchased
Treasury shares reissued for director grants

Treasury
Shares

(76,128)

—
(2,355)
1,044

(77,439)

—
(6,058)
1,024

(82,473)

—
—
1,001

Number of
Common Shares

15,411,952

(53)
(29,700)
10,200

15,392,399

(34)
(71,700)
10,150

15,330,815

(47)
—
9,950

Balance at December 31, 2016

(81,472)

15,340,718

Park did not issue any new common shares, which it had not already held as
treasury shares, in any of 2016, 2015 or 2014. Common shares had a balance
of $305.8 million, $304.0 million, and $303.1 million at December 31, 2016,
2015, and 2014, respectively.

Accumulated other comprehensive loss (net) was $17.7 million at December
31, 2016, compared to $15.6 million at December 31, 2015, and $13.6 million
at December 31, 2014. During the 2016 year, the change in net unrealized
holding gain (loss) on securities available for sale, net of income tax, was
a loss of $2.7 million. During the 2015 year, the change in net unrealized
holding gain (loss) on securities available for sale, net of income tax, was
a loss of $1.5 million. During the 2014 year, the change in net unrealized
holding gain (loss) on securities available for sale, net of income tax, was
a gain of $31.1 million. Finally, Park recognized an other comprehensive gain
of $611,000, net of income tax, related to the change in pension plan assets
and benefit obligations in 2016, compared to an other comprehensive loss
of $486,000, net of income tax, in 2015, and an other comprehensive loss
of $9.3 million, net of income tax, in 2014.

Financial institution regulators have established guidelines for minimum capital
ratios for banks, thrifts and bank holding companies. Park has elected not to
include the net unrealized gain or loss on available-for-sale securities in com-
puting regulatory capital. During the first quarter of 2015, Park adopted the
Basel III regulatory capital framework as approved by the federal banking
agencies. The adoption of this framework modified the calculation of the
various capital ratios, added an additional ratio, common equity tier 1, and
revised the adequately and well capitalized thresholds. Additionally, under
this framework, in order to avoid limitations on capital distributions, including
dividend payments, Park must hold a capital conservation buffer above the
adequately capitalized risk-based capital ratios. The capital conservation buffer
is being phased in from 0.0% for 2015 to 2.50% by 2019. The capital conserva-
tion buffer was 0.625% for 2016. The amounts shown below as the adequately
capitalized ratio plus capital conservation buffer includes the fully phased-in
2.50% buffer.

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M A N A G E M E N T ’ S D I S C U S S I O N & A N A L Y S I S

PNB met each of the well-capitalized ratio guidelines at December 31, 2016.
The following table indicates the capital ratios for PNB and Park at December
31, 2016 and December 31, 2015.

Table 38 – PNB and Park Capital Ratios

Leverage

Tier 1
Risk-Based

Common
Equity Tier 1

Total
Risk-Based

As of December 31, 2016:
The Park National Bank
Park National Corporation
Adequately capitalized

ratio

Adequately capitalized
ratio plus capital
conservation buffer
Well-capitalized ratio

(PNB only)

As of December 31, 2015:
The Park National Bank
Park National Corporation
Adequately capitalized

ratio

Adequately capitalized
ratio plus capital
conservation buffer
Well-capitalized ratio

(PNB only)

7.34%
9.56%

4.00%

5.00%

7.06%
9.22%

4.00%

5.00%

9.87%
12.83%

6.00%

8.50%

8.00%

9.83%
12.82%

6.00%

8.50%

8.00%

9.87%
12.55%

11.24%
14.32%

4.50%

8.00%

7.00%

6.50%

9.83%
12.54%

4.50%

7.00%

6.50%

10.50%

10.00%

11.37%
14.49%

8.00%

10.50%

10.00%

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

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

SELECTED FINANCIAL DATA
Table 39 – Consolidated Five-Year Selected Financial Data

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

Results of operations:

2016

2015

2014

2013

2012

$ 276,258 $ 265,074 $ 265,143 $ 262,947 $ 285,735
50,420
235,315

41,922
221,025

37,442
227,632

40,099
225,044

38,172
238,086

Interest income
Interest expense
Net interest income
(Recovery of)
provision for
loan losses

Net interest income

after (recovery of)
provision for
loan losses
Gain on sale of

Vision business(1)
Non-interest income
Non-interest expense
Net income
Net income available

to common
shareholders
Per common share:

Net income per common

share – basic

Net income per common

share – diluted

Cash dividends declared

(5,101)

4,990

(7,333)

3,415

35,419

243,187

222,642

232,377

217,610

199,896

—
78,731
199,023
86,135

—
77,551
186,614
81,012

—
75,549
187,510
83,957

—
73,277
181,515
76,869

22,167
70,236
181,127
78,480

86,135

81,012

83,957

76,869

75,055

5.62

5.59
3.76

5.27

5.26
3.76

5.45

5.45
3.76

4.99

4.99
3.76

4.87

4.87
3.76

Table 39 – Consolidated Five-Year Selected Financial Data (continued)

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

Average balances:

Loans
Investment securities
Money market

2016

2015

2014

2013

2012

$5,122,862 $4,909,579 $4,717,297 $4,514,781 $4,410,661
1,613,131
1,432,692
1,504,667

1,377,887

1,478,208

instruments and other

198,197

342,997

204,874

272,851

166,319

Total earning

assets

Non-interest bearing

deposits

Interest bearing

deposits

6,825,726

6,730,784

6,354,863

6,165,519

6,190,111

1,414,885

1,311,628

1,196,625

1,117,379

1,048,796

4,165,919

4,155,196

3,820,928

3,742,361

3,786,601

Total deposits

5,580,804

5,466,824

5,017,553

4,859,740

4,835,397

Short-term borrowings $ 240,457 $ 258,717 $ 263,270 $ 253,123 $ 258,661
907,704
793,469
Long-term debt
Shareholders’ equity
688,166
710,327
Common shareholders’

867,615
680,449

776,465
737,737

870,538
643,609

equity
Total assets

Ratios:

Return on average

assets(x)

Return on average
common equity(x)
Net interest margin(2)
Efficiency ratio(2)
Dividend payout ratio(3)
Average shareholders’
equity to average
total assets
Common equity
tier 1 capital
Leverage capital
Tier 1 capital
Risk-based capital

737,737
7,416,519

710,327
7,306,460

680,449
6,893,302

643,609
6,701,049

657,289
6,765,240

1.16%

1.11%

1.22%

1.15%

1.11%

11.68%
3.52%
62.34%
67.29%

11.40%
3.39%
60.98%
71.51%

12.34%
3.55%
62.21%
69.02%

11.94%
3.61%
61.40%
75.39%

11.42%
3.83%
55.00%
73.82%

9.95%

9.72%

9.87%

9.60%

10.17%

12.55%
9.56%
12.83%
14.32%

12.54%
9.22%
12.82%
14.49%

N/A
9.25%
13.39%
15.14%

N/A
9.48%
13.27%
15.91%

N/A
9.17%
13.12%
15.77%

(1) The Vision business was sold on February 16, 2012 for a gain on sale of $22.2 million.
(2) Calculated utilizing fully taxable equivalent net interest income which includes the effects of
taxable equivalent adjustments using a 35% tax rate. The taxable equivalent adjustment was
$2.4 million for 2016, $865,000 for 2015, $845,000 for 2014, $1.3 million for 2013 and $1.6
million for 2012.

(3) Cash dividends paid divided by net income.
(x) Reported measure uses net income available to common shareholders.

The following table is a summary of selected quarterly results of operations for
the years ended December 31, 2016 and 2015.

Table 40 – Quarterly Financial Data

(Dollars in thousands,
except share data)

March 31

Three Months Ended
Sept. 30
June 30

Dec. 31

2016:

Interest income

Interest expense

Net interest income

Provision for (recovery of)

loan losses

Income before
income taxes

Net income

Per common share data:

Net income per common

share – basic

Net income per common

share – diluted

Weighted-average common
shares outstanding – basic

Weighted-average common
shares equivalent – diluted

$69,308

$67,011

$68,242

$71,697

9,489

59,819

9,526

57,485

9,709

58,533

9,448

62,249

910

2,637

(7,366)

(1,282)

26,399

18,686

28,278

19,998

39,678

27,449

28,540

20,002

1.22

1.21

1.30

1.79

1.78

1.30

15,330,813

15,330,802

15,330,791

15,337,806

15,406,508

15,399,283

15,399,707

15,415,132

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M A N A G E M E N T ’ S D I S C U S S I O N & A N A L Y S I S

Table 40 – Quarterly Financial Data (continued)

(Dollars in thousands,
except share data)

March 31

Three Months Ended
Sept. 30
June 30

Dec. 31

2015:

Interest income

Interest expense

Net interest income

Provision for (recovery of)

loan losses

Income before
income taxes

Net income

Per common share data:

Net income per common

share – basic

Net income per common

share – diluted

Weighted-average common
shares outstanding – basic

Weighted-average common
shares equivalent – diluted

$65,018

$65,804

$67,087

$67,165

9,483

55,535

9,289

56,515

9,372

57,715

9,298

57,867

1,632

1,612

2,404

(658)

27,056

19,044

29,427

21,039

28,073

20,040

29,023

20,889

1.24

1.23

1.37

1.30

1.36

15,379,170

15,370,882

15,361,087

15,345,986

15,421,928

15,407,881

15,401,808

15,384,451

Park’s common shares (symbol: PRK) are traded on NYSE MKT. At
December 31, 2016, Park had 3,648 shareholders of record. The
following table sets forth the high, low and closing sale prices of, and
dividends declared on the common shares for each quarterly period
for the years ended December 31, 2016 and 2015, as reported by
NYSE MKT.

Table 41 – Market and Dividend Information

2016:

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

2015:

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

High

Low

Last
Price

$ 91.80

$ 79.01

$ 90.00

95.45

97.20

122.88

85.35

87.55

94.05

91.78

96.00

119.66

$ 88.39

$ 79.46

$ 85.56

90.00

90.92

99.68

81.01

80.15

84.27

87.37

90.22

90.48

Cash
Dividend
Declared
Per Share

$0.94

0.94

$0.94

0.94

PERFORMANCE GRAPH
Table 42 compares the total return performance for Park’s common shares
with the Amex Composite, the NASDAQ Bank Stocks Index, SNL Financial Bank
and Thrift Index, NYSE MKT Composite Index, and the SNL U.S. Bank NYSE
Index for the five-year period from December 31, 2011 to December 31, 2016.
The Amex Composite Index is a market capitalization-weighted index made up
of stocks that represent the NYSE Amex equities market. The NASDAQ Bank
Stocks Index is comprised of all depository institutions, holding companies
and other investment companies that are traded on The NASDAQ Global Select,
Global, and Capital Markets. Park considers a number of bank holding compa-
nies traded on The NASDAQ Global Select Market to be within our peer group.
The SNL Financial Bank and Thrift Index is comprised of all publicly-traded
bank holding company and thrift holding company stocks researched by SNL
Financial. The NYSE MKT Composite Index is a market capitalization-weighted
index of the stocks listed on NYSE MKT. The SNL U.S. Bank NYSE Index is com-
prised of all publicly-traded U.S. bank holding company stocks listed on NYSE
MKT researched by SNL Financial.

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

The annual compound total return on Park’s common shares for the past five
years was a positive 18.5%. By comparison, the annual compound total returns
for the past five years on the Amex Composite, the NASDAQ Bank Stocks Index,
the SNL Financial Bank and Thrift Index, the NYSE MKT Composite Index, and
the SNL U.S. Bank NYSE Index were a positive 3.4%, a positive 21.5%, a positive
21.5%, a positive 11.0% and a positive 21.6%, respectively.

e
u
a
V
x
e
d
n
I

280

260

240

220

200

180

160

140

120

100

12/31/11

12/31/12

12/31/13

12/31/14

12/31/15

12/31/16

Table 42 – Total Return Performance

PERIOD ENDING

Index

12/31/11

12/31/12

12/31/13

12/31/14

12/31/15

12/31/16

Park National Corporation

Amex Composite

NASDAQ Bank Stocks

SNL Bank and Thrift Index

NYSE MKT Composite

SNL U.S. Bank NYSE

100.00

105.06

106.61

118.69

134.28

116.15

137.95

145.44

113.71

168.21

183.86

146.80

187.96

158.85

117.99

176.48

205.25

156.87

212.91

169.56

106.95

192.08

209.39

150.64

214.19

233.37

118.33

265.02

264.35

168.63

265.45

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

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

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

To the Board of Directors and Shareholders
Park National Corporation

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

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

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

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

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

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

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

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

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

With the participation of our Chairman of the Board, our Chief Executive Officer and President and our Chief Financial
Officer, management evaluated the effectiveness of the Corporation’s internal control over financial reporting as of
December 31, 2016, the end of the Corporation’s fiscal year. In making this assessment, management used the criteria
set forth for effective internal control over financial reporting by the Committee of Sponsoring Organizations of the
Treadway Commission’s (COSO) 2013 Internal Control – Integrated Framework.

Based on our assessment under the criteria described in the immediately preceding paragraph, management concluded
that the Corporation maintained effective internal control over financial reporting as of December 31, 2016.

The Corporation’s independent registered public accounting firm, Crowe Horwath LLP, has audited the Corporation’s
2016 and 2015 consolidated financial statements included in this Annual Report and the Corporation’s internal control
over financial reporting as of December 31, 2016, and has issued their Report of Independent Registered Public
Accounting Firm, which appears in this Annual Report.

David L. Trautman
Chief Executive Officer and President

Brady T. Burt
Chief Financial Officer, Secretary and Treasurer

February 21, 2017

PNC_AR2016_K+PMS286_PressFinal.qxp 2/21/17 3:27 PM Page 28

R E P O R T O F

I N D E P E N D E N T

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

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

We have audited the accompanying consolidated balance sheets of Park National Corporation and subsidiaries as of
December 31, 2016 and 2015 and the related consolidated statements of income, comprehensive income, changes in
shareholders’ equity and cash flows for each of the years in the three year period ended December 31, 2016. We also have
audited Park National Corporation’s internal control over financial reporting as of December 31, 2016, based on criteria
established in the 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). Park National Corporation’s management is responsible for these financial statements,
for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.
Our responsibility is to express an opinion on these financial statements and an opinion on the company’s internal control
over financial reporting based on our audits.

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

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

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Park National Corporation and subsidiaries as of December 31, 2016 and 2015, and the results of their operations
and their cash flows for each of the years in the three year period ended December 31, 2016, in conformity with accounting
principles generally accepted in the United States of America. Also in our opinion, Park National Corporation maintained, in
all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established
in the 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).

Crowe Horwath LLP

Columbus, Ohio
February 21, 2017

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

PARK NATIONAL CORPORATION AND SUBSIDIARIES
at December 31, 2016 and 2015 (In thousands, except share and per share data)

ASSETS

Cash and due from banks

Money market instruments

Cash and cash equivalents

Investment securities:

Securities available-for-sale, at fair value (amortized cost of $1,262,761

and $1,436,714 at December 31, 2016 and 2015, respectively)

Securities held-to-maturity, at amortized cost (fair value of $256,672
and $151,428 at December 31, 2016 and 2015, respectively)

Other investment securities

Total investment securities

Total loans

Allowance for loan losses

Net loans

Other assets:

Bank owned life insurance

Prepaid assets

Goodwill

Premises and equipment, net

Affordable housing tax credit investments

Accrued interest receivable

Other real estate owned

Mortgage loan servicing rights

Other

Total other assets

Total assets

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

2016

$ 122,811

23,635

146,446

1,258,139

259,833

61,811

1,579,783

5,271,857

(50,624)

5,221,233

185,234

88,874

72,334

57,971

52,947

18,822

13,926

9,266

20,750

520,124

$7,467,586

2015

$ 119,412

30,047

149,459

1,436,266

149,302

58,311

1,643,879

5,068,085

(56,494)

5,011,591

181,684

80,635

72,334

59,493

51,247

18,675

18,651

9,008

14,698

506,425

$7,311,354

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

(CONTINUED)

PARK NATIONAL CORPORATION AND SUBSIDIARIES
at December 31, 2016 and 2015 (In thousands, except share and per share data)

LIABILITIES AND SHAREHOLDERS’ EQUITY

Deposits:

Non-interest bearing

Interest bearing

Total deposits

Short-term borrowings

Long-term debt

Subordinated notes

Total borrowings

Other liabilities:

Accrued interest payable

Unfunded commitments in affordable housing tax credit investments

Other

Total other liabilities

Total liabilities

Shareholders’ equity:

Preferred shares (200,000 shares authorized; no shares outstanding

at December 31, 2016 and 2015)

Common shares, no par value (20,000,000 shares authorized;

16,150,807 and 16,150,854 shares issued at
December 31, 2016 and 2015, respectively)

Accumulated other comprehensive loss, net

Retained earnings

Less: Treasury shares (810,089 and 820,039 shares
at December 31, 2016 and 2015, respectively)

Total shareholders’ equity

2016

$1,523,417

3,998,539

5,521,956

394,795

694,281

45,000

1,134,076

2,151

14,282

52,881

69,314

6,725,346

—

305,826

(17,745)

535,631

(81,472)

742,240

2015

$1,404,032

3,943,610

5,347,642

394,242

738,105

45,000

1,177,347

2,338

20,311

50,361

73,010

6,597,999

—

303,966

(15,643)

507,505

(82,473)

713,355

Total liabilities and shareholders’ equity

$7,467,586

$7,311,354

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

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

I N C O M E

PARK NATIONAL CORPORATION AND SUBSIDIARIES
for the years ended December 31, 2016, 2015 and 2014 (In thousands, except per share data)

Interest and dividend income:
Interest and fees on loans

Interest and dividends on:

Obligations of U.S. Government, its agencies

and other securities

Obligations of states and political subdivisions

Other interest income

Total interest and dividend income

Interest expense:

Interest on deposits:

Demand and savings deposits

Time deposits

Interest on short-term borrowings

Interest on long-term debt

Total interest expense

Net interest income

(Recovery of) provision for loan losses

Net interest income after (recovery of)

provision for loan losses

Other income:

Income from fiduciary activities

Service charges on deposit accounts

Other service income

Checkcard fee income

Bank owned life insurance income

ATM fees

Gain on sale of OREO, net

OREO valuation adjustments

Gain on commercial loans held for sale

Gain (loss) on sale of investment securities

Miscellaneous

Total other income

2016

2015

2014

$241,979

$227,979

$227,644

30,267

2,632

1,020

276,258

4,079

9,337

456

24,300

38,172

238,086

(5,101)

243,187

21,400

14,259

14,419

15,057

4,338

2,268

1,323

(601)

—

6,268

$ 78,731

36,025

182

888

265,074

2,229

10,125

469

24,619

37,442

227,632

4,990

222,642

20,195

14,751

11,438

14,561

5,783

2,428

1,604

(1,592)

756

7,539

36,981

515

265,143

1,677

9,323

517

28,582

40,099

225,044

(7,333)

232,377

19,150

15,423

10,459

13,570

4,861

2,467

5,503

(2,406)

1,867

(1,158)

5,813

$ 77,551

$ 75,549

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

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

I N C O M E

(CONTINUED)

PARK NATIONAL CORPORATION AND SUBSIDIARIES
for the years ended December 31, 2016, 2015 and 2014 (In thousands, except per share data)

Other expense:

Salaries

Employee benefits

Data processing fees

Professional fees and services

Occupancy expense

Furniture and equipment expense

Insurance

Marketing

Communication

State tax expense

OREO expense

Borrowing prepayment fee

Miscellaneous

Total other expense

Income before income taxes

Federal income taxes

Net income

Earnings per common share:

Basic

Diluted

2016

2015

2014

$ 87,034

$ 86,189

$ 81,977

19,262

5,608

27,181

10,239

13,766

5,825

4,523

4,985

3,560

1,021

5,554

10,465

199,023

122,895

36,760

$ 86,135

$5.62

$5.59

21,296

5,037

23,452

9,686

11,806

5,629

3,983

5,130

3,566

1,446

532

8,862

186,614

113,579

32,567

$ 81,012

$5.27

$5.26

19,991

4,712

29,580

10,006

11,571

5,723

4,371

5,268

2,290

2,063

—

9,958

187,510

120,416

36,459

$ 83,957

$5.45

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

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

C O M P R E H E N S I V E

I N C O M E

2016

$86,135

2015

$81,012

2014

$ 83,957

424

(910)

(486)

—

(1,549)

$ (2,035)

$78,977

(9,279)

(9,267)

753

30,325

31,078

$ 21,811

$105,768

PARK NATIONAL CORPORATION AND SUBSIDIARIES
for the years ended December 31, 2016, 2015 and 2014 (In thousands)

Net income

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

Defined benefit pension plan:

Amortization of net loss and prior service costs,
net of income taxes of $271, $228 and $7 for
the years ended December 31, 2016, 2015 and
2014, respectively

Unrealized net actuarial gain (loss), net of income tax

expense (benefit) of $59, $(490) and $(4,997) for the
years ended December 31, 2016, 2015 and 2014, respectively

Change in funded status of pension plan, net of income tax

expense (benefit)

Securities available-for-sale:

502

109

611

Net loss realized on sale of securities, net of income tax

expense (benefit) of $405 for the year ended December 31, 2014

—

Change in unrealized securities holding (loss) gain, net of income
tax (benefit) expense of $(1,461), $(834) and $16,329 for the
years ended December 31, 2016, 2015 and 2014, respectively

Unrealized net holding (loss) gain on securities available-for-sale,

net of income tax (benefit) expense

Other comprehensive (loss) income

Comprehensive income

(2,713)

$ (2,102)

$84,033

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

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

C H A N G E S

I N S H A R E H O L D E R S ’

E Q U I T Y

PARK NATIONAL CORPORATION AND SUBSIDIARIES
for the years ended December 31, 2016, 2015 and 2014 (In thousands, except share and per share data)

Balance, January 1, 2014

Net income
Other comprehensive income, net of income tax
Cash dividends, $3.76 per share
Cash payment for fractional shares
in dividend reinvestment plan
Share-based compensation expense
Treasury shares repurchased
Treasury shares reissued for director grants

Preferred Shares

Common Shares

Shares
Outstanding

—

Amount

—

Shares
Outstanding

15,411,952

Amount

$302,651

—

(53)

(29,700)
10,200

—

(5)
458

Balance, December 31, 2014

—

15,392,399

$303,104

Net income
Other comprehensive loss, net of income tax
Cash dividends, $3.76 per share
Cash payment for fractional shares
in dividend reinvestment plan
Share-based compensation expense
Treasury shares repurchased
Treasury shares reissued for director grants

—

(34)

(71,700)
10,150

—

(3)
865

Balance, December 31, 2015

—

15,330,815

$303,966

—

(47)

9,950

—

(4)
1,864

Retained
Earnings

$458,719

83,957

(57,949)

—

(243)

$484,484

81,012

(57,930)

—

(61)

$507,505

86,135

(57,958)

—

(51)

Accumulated
Other
Comprehensive
(Loss) Income

Treasury
Shares

$ (76,128)

$ (35,419)

—
21,811
—

—

(2,355)
1,044

$ (77,439)

$ (13,608)

—
(2,035)
—

—

(6,058)
1,024

$ (82,473)

$ (15,643)

—
(2,102)
—

—

1,001

Balance, December 31, 2016

—

15,340,718

$305,826

$535,631

$ (81,472)

$ (17,745)

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

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

O F C A S H F L O W S

PARK NATIONAL CORPORATION AND SUBSIDIARIES
for the years ended December 31, 2016, 2015 and 2014 (In thousands)

Operating activities:

Net income

Adjustments to reconcile net income to net cash

provided by operating activities:

(Recovery of) provision for loan losses

Amortization of loan fees and costs, net

Provision for depreciation

Amortization (accretion) of investment securities, net

Amortization of prepayment penalty on long-term debt

Prepayment penalty on long-term debt

Deferred income tax

Realized net investment security (gains) losses

Share-based compensation expense

Loan originations to be sold in secondary market

Proceeds from sale of loans in secondary market

Gain on sale of loans in secondary market

Gain on sale of commercial loans held for sale

OREO valuation adjustments

Gain on sale of OREO, net

Bank owned life insurance income

Changes in assets and liabilities:

Increase in other assets

Increase in other liabilities

Net cash provided by operating activities

2016

2015

2014

$ 86,135

$ 81,012

$ 83,957

(5,101)

7,332

8,396

247

6,176

5,554

581

—

2,814

(287,722)

290,132

(5,517)

—

601

(1,323)

(4,338)

(18,086)

2,006

87,887

4,990

6,440

7,347

(226)

6,047

532

(250)

(88)

1,828

(220,800)

222,785

(4,027)

(756)

1,592

(1,604)

(5,783)

(10,978)

1,173

89,234

(7,333)

4,160

7,243

(213)

5,031

—

2,528

1,158

1,259

(136,125)

135,209

(2,682)

(1,867)

2,406

(5,503)

(4,861)

(18,313)

5,689

71,743

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

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

O F C A S H F L O W S

(CONTINUED)

PARK NATIONAL CORPORATION AND SUBSIDIARIES
for the years ended December 31, 2016, 2015 and 2014 (In thousands)

Investing activities:

Proceeds from redemption of Federal Home Loan Bank stock

Proceeds from sales of securities

Proceeds from calls and maturities of securities:

2016

2015

$ —

—

$ —

3,144

Held-to-maturity

Available-for-sale

Purchase of securities:
Held-to-maturity

Available-for-sale

Net increase in other investments

Net loan originations, portfolio loans

Proceeds from sale of commercial loans held for sale

Proceeds from the sale of OREO

Life insurance death benefits

Investment in qualified affordable housing projects

Purchases of bank owned life insurance, net

Purchases of premises and equipment, net

Net cash used in investing activities

Financing activities:

Net increase in deposits

Net increase in short-term borrowings

Proceeds from issuance of long-term debt

Repayment of subordinated notes

Repayment of long-term debt

Repurchase of treasury shares

Cash dividends paid

Net cash provided by financing activities

(Decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Cash paid for:
Interest

Income taxes

Non cash items:

Loans transferred to OREO

Transfers from loans to commercial loans held for sale

New commitments in affordable housing tax credit investments

29,901

753,325

(141,045)

(579,006)

(3,500)

(199,494)

—

8,704

1,050

(15,029)

—

(7,466)

(152,560)

174,314

553

—

(55,554)

—

(57,653)

61,660

(3,013)

149,459

$ 146,446

$ 38,359

$ 27,260

3,339

—

9,000

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

36,393

321,146

(48,226)

(457,617)

—

(247,882)

900

17,058

6,340

(5,318)

(10,045)

(11,361)

(395,468)

219,642

117,262

25,000

—

(80,076)

(6,058)

(57,776)

217,994

(88,240)

237,699

$ 149,459

$ 37,655

$ 26,140

$ 13,447

$ 144

9,000

2014

8,946

173,123

41,436

99,092

—

(350,934)

(1,350)

(234,017)

20,966

27,798

2,221

(9,417)

—

(7,444)

(229,580)

338,006

34,951

125,000

(35,250)

(153,970)

(2,355)

(57,876)

248,506

90,669

147,030

$ 237,699

$ 40,449

$ 27,810

$ 12,780

$ 21,985

8,000

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

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

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

Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles (“GAAP”) requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates.

Reclassifications
Certain prior year amounts have been reclassified to conform with the current
year presentation. These reclassifications had no impact on net income or
shareholders’ equity.

Restrictions on Cash and Due from Banks
The Corporation’s national bank subsidiary is required to maintain average
reserve balances with the Federal Reserve Bank. The average required reserve
balance was approximately $51.6 million at December 31, 2016 and $44.2
million at December 31, 2015. No other compensating balance arrangements
were in existence at December 31, 2016.

Investment Securities
Investment securities are classified upon acquisition into one of three
categories: held-to-maturity (“HTM”), available-for-sale (“AFS”), or trading
(see Note 4 – Investment Securities).

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

AFS and HTM securities are evaluated quarterly for potential other-than-
temporary impairment. Management considers the facts related to each security
including the nature of the security, the amount and duration of the loss, the
credit quality of the issuer, the expectations for that security’s performance
and whether Park intends to sell, or it is more likely than not that Park will be
required to sell, a security in an unrealized loss position before recovery of its
amortized cost basis. Declines in the value of equity securities that are consid-
ered to be other-than-temporary are recorded as a charge to earnings in the
Consolidated Statements of Income. Declines in the value of debt securities that
are considered to be other-than-temporary are separated into (1) the amount
of the total impairment related to credit loss and (2) the amount of the total
impairment related to all other factors. The amount of the total other-than-
temporary impairment related to the credit loss is recognized in earnings.
The amount of the total other-than-temporary impairment related to all other
factors is recognized in other comprehensive income (loss), net of income tax.

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

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

Federal Home Loan Bank (“FHLB”) and
Federal Reserve Bank (“FRB”) Stock
Park’s national bank subsidiary, The Park National Bank (“PNB”) is a member
of the FHLB. Additionally, PNB is a member of the FRB. Members are required
to own a certain amount of stock based on their level of borrowings and other
factors and may invest in additional amounts. FHLB stock and FRB stock are
classified as restricted securities and are carried at their redemption value
within other investment securities on the Consolidated Balance Sheets.
Impairment is evaluated based on the ultimate recovery of par value.
Both cash and stock dividends are reported as income.

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

Loans Held for Sale
Generally, loans held for sale are carried at the lower of cost or fair value.
Park has elected the fair value option for mortgage loans held for sale, which
are carried at their fair value as of each balance sheet date.

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

Loans
Loans that management has the intent and ability to hold for the foreseeable
future or until maturity or payoff, are reported at their outstanding principal
balances adjusted for any charge-offs, any deferred fees or costs on originated
loans, and any unamortized premiums or discounts on purchased loans.
Interest income is accrued on the unpaid principal balance. Net deferred
loan origination fees and costs are deferred and recognized in interest
income using the level-yield method without anticipating prepayments.

Commercial loans include: (1) commercial, financial and agricultural loans;
(2) commercial real estate loans; (3) those commercial loans in the real estate
construction loan segment; and (4) those commercial loans in the residential
real estate loan segment. Consumer loans include: (1) mortgage and install-
ment loans included in the real estate construction segment; (2) mortgage,
home equity lines of credit (“HELOCs”), and installment loans included in the
residential real estate segment; and (3) all loans included in the consumer
segment.

Generally, commercial loans are placed on nonaccrual status at 90 days past
due and consumer and residential mortgage loans are placed on nonaccrual
status at 120 days past due. Commercial loans placed on nonaccrual status are
considered impaired (see Note 5 – Loans). For loans which are on nonaccrual
status, it is Park’s policy to reverse interest previously accrued on the loans
against interest income. Interest on such loans may be recorded on a cash
basis and be included in earnings only when Park expects to receive the entire
recorded investment of the loan. Park’s charge-off policy for commercial loans
requires management to establish a specific reserve or record a charge-off as
soon as it is apparent that the borrower is troubled and there is, or likely will
be, a collateral shortfall related to the estimated value of the collateral securing
the loan. The Company’s charge-off policy for consumer loans is dependent on
the class of the loan. Residential mortgage loans, HELOCs, and consumer loans
secured by resi dential real estate are typically charged down to the value of the
collateral, less estimated selling costs, at 180 days past due. The charge-off

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

policy for other consumer loans, primarily installment loans, requires a
monthly review of delinquent loans and a complete charge-off for any
account that reaches 120 days past due.

The delinquency status of a loan is based on contractual terms and not on how
recently payments have been received. Loans may be removed from nonaccrual
status when loan payments have been received to cure the delinquency status,
the borrower has demonstrated the ability to maintain current payment status in
accordance with the loan agreement and the loan is deemed to be well-secured
by management.

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

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

Commercial real estate: Commercial real estate (“CRE”) loans include
mortgage loans to developers and owners of commercial real estate. The
lending policy for CRE loans is designed to address the unique risk attributes
of CRE lending. The collateral for these CRE loans is the underlying commercial
real estate.

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

Residential real estate: The Company defines residential real estate loans
as first mortgages on individuals’ primary residences or second mortgages
of individuals’ primary residences in the form of HELOCs or installment loans.
Credit approval for residential real estate loans requires demonstration of
sufficient income to repay the principal and interest and the real estate taxes
and insurance, stability of employment, an established credit record and an
appraised value of the real estate securing the loan.

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

Allowance for Loan Losses (“ALLL”)
The allowance for loan losses is that amount believed adequate to absorb
probable incurred credit losses in the loan portfolio based on management’s
evaluation of various factors. The determination of the allowance requires
significant estimates, including the timing and amounts of expected cash
flows on impaired loans, consideration of current economic conditions,
and historical loss experience pertaining to pools of homogeneous loans,
all of which may be susceptible to change. The allowance is increased through
a provision for loan losses that is charged to earnings based on management’s
quarterly evaluation of the factors previously mentioned and is reduced by
charge-offs, net of recoveries.

The allowance for loan losses includes both (1) an estimate of loss based
on historical loss experience within both commercial and consumer loan
categories with similar characteristics (“statistical allocation”) and (2) an
estimate of loss based on an impairment analysis of each commercial loan
that is considered to be impaired (“specific allocation”). Included in the
statistical allocation is a reserve for troubled debt restructuring (“TDRs”)
within the consumer loan portfolio. Management performs a periodic
evaluation to ensure the reserve calculated utilizing the statistical allocation
is consistent with a reserve calculated under Accounting Standards Codification
(“ASC”) 310-10 – Receivables.

In calculating the allowance for loan losses, management believes it is
appropriate to consider historical loss rates that are comparable to the current
period being analyzed, giving consideration to losses experienced over a full
cycle. For the historical loss factor at December 31, 2016, the Company utilized
an annual loss rate (“historical loss experience”), calculated based on an
average of the net charge-offs and the annual change in specific reserves for
impaired commercial loans, experienced during 2010 through 2016 within
the individual segments of the commercial and consumer loan categories.
Management believes the 84-month historical loss experience methodology
is appropriate in the current economic conditions.

The loss factor applied to Park’s consumer loan portfolio as of December
31, 2016 was based on the historical loss experience over the past 84 months,
plus an additional judgmental reserve, increasing the total allowance for loan
loss coverage in the consumer loan portfolio to approximately 1.95 years of
historical losses. The consumer loan portfolio loss coverage ratio was 1.99
years at December 31, 2015. Historical loss experience over the past 84
months for the consumer loan portfolio was 0.34% for 2016 and 0.42%
for 2015.

The loss factor applied to Park’s commercial loan portfolio as of December 31,
2016 was based on the historical loss experience over the past 84 months,
plus additional reserves for consideration of (1) a loss emergence period
factor, (2) a loss migration factor and (3) a judgmental or environmental
loss factor. These additional reserves increased the total allowance for loan
loss coverage in the commercial loan portfolio to approximately 3.20 years
of historical losses at December 31, 2016. The commercial loan portfolio loss
coverage ratio was 2.37 years at December 31, 2015. Historical loss experience
over the past 84 months for the commercial loan portfolio was 0.39% for 2016
and 0.53% for 2015. 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 com -
mercial loans graded special mention and substandard.

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The judgmental increases discussed above incorporate management’s
evaluation of the impact of environmental qualitative factors which pose
additional risks and assign a component of the allowance for loan losses in
consideration of these factors. Such environmental factors include: national
and local economic trends and conditions; experience, ability and depth of
lending management and staff; effects of any changes in lending policies and
procedures; and levels of, and trends in, consumer bankruptcies, delinquen-
cies, impaired loans and charge-offs and recoveries.

GAAP requires a specific allocation to be established as a component of the
allowance for loan losses for certain loans when it is probable that all amounts
due pursuant to the contractual terms of the loans will not be collected, and
the recorded investment in the loans exceeds their measure of impairment.
Management considers the following related to commercial loans when
determining if a loan should be considered impaired: (1) current debt service
coverage levels of the borrowing entity; (2) payment history over the most
recent 12-month period; (3) other signs of deterioration in the borrower’s
financial situation, such as changes in credit scores; and (4) consideration of
global cash flows of financially sound guarantors that have previously supported
loan payments. The recorded investment is the carrying balance of the loan,
plus accrued interest receivable, both as of the end of the year. Impairment is
measured using either the present value of expected future cash flows based
upon the initial effective interest rate on the loan, or the fair value of the
collateral. If a loan is considered to be collateral dependent, the fair value
of collateral, less estimated selling costs, is used to measure impairment.

Troubled Debt Restructuring
Management classifies loans as TDRs when a borrower is experiencing
financial difficulty and Park has granted a concession. In order to determine
whether a borrower is experiencing financial difficulty, an evaluation is per-
formed of the probability that the borrower will be in payment default on any
of 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. A court's discharge of a borrower's debt in a Chapter 7
bankruptcy is considered a concession when the borrower does not reaffirm
the discharged debt. TDRs are separately identified for impairment disclosures
and are measured at the present value of estimated future cash flows using the
loan’s effective rate at inception. If a TDR is considered to be a collateral
dependent loan, the loan is reported, net, at the fair value of the collateral.

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

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

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

Buildings
Equipment, furniture and fixtures
Leasehold improvements

30 Years
3 to 12 Years
1 to 10 Years

Other Real Estate Owned (“OREO”)
Management transfers a loan to OREO at the time that Park takes deed/title of
the asset. OREO is initially recorded at fair value less anticipated selling costs
(net realizable value), establishing a new cost basis, and consists of property
acquired through foreclosure and real estate held for sale. If the net realizable
value is below the carrying value of the loan at the date of transfer, the differ-
ence is charged to the allowance for loan losses. These assets are subsequently
accounted for at the lower of cost or fair value less costs to sell. Subsequent
changes in the value of real estate are classified as OREO valuation adjustments,
are reported as adjustments to the carrying amount of OREO and are recorded
within “Other income.” In certain circumstances where management believes
the devaluation may not be permanent in nature, Park utilizes a valuation
allowance to record OREO devaluations, which is also expensed through
“Other income.” Costs relating to development and improvement of such
properties are capitalized (not in excess of fair value less estimated costs
to sell) and costs relating to holding the properties are charged to “Other
expense.”

Mortgage Servicing Rights (“MSR”)
When Park sells mortgage loans with servicing rights retained, servicing rights
are recorded at an amount not to exceed fair value with the income statement
effect recorded in “Other service income.” Capitalized servicing rights are
amortized in proportion to and over the period of the estimated future servicing
income of the underlying loan and are included within “Other service income”.

Mortgage servicing rights are assessed for impairment periodically, based on
fair value, with any impairment recognized through a valuation allowance. The
fair value of mortgage servicing rights is determined by discounting estimated
future cash flows from the servicing assets, using market discount rates and
expected future prepayment rates. In order to calculate fair value, the sold loan
portfolio is stratified into homogeneous pools of like categories. (See Note 24 –
Loan Servicing.)

Fees received for servicing mortgage loans owned by investors are based on a
percentage of the outstanding monthly principal balance of such loans and are
included in income as loan payments are received. The cost of servicing loans
is charged to expense as incurred.

Goodwill
Goodwill represents the excess of the purchase price over net identifiable
tangible and intangible assets acquired in a purchase business combination.
Goodwill and indefinite-lived intangible assets are not amortized to expense,
but are subject to impairment tests annually, or more frequently, if events
or changes in circumstances indicate that the asset might be impaired, by
assessing qualitative factors to determine whether the existence of events
or circumstances leads to a determination that it is more likely than not
that the fair value of a reporting unit is less than its carrying amount. If after
assessing these events or circumstances, it is concluded that it is not more likely
than not that the fair value of a reporting unit is less than its carrying amount,
then performing the two-step impairment test is unnecessary. If the carrying
amount of the goodwill exceeds the fair value, an impairment charge must
be recorded in an amount equal to the excess.

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Management considers several factors when performing the annual impairment
tests on goodwill. The factors considered include the operating results for the
particular Park segment for the past year and the operating results budgeted for
the current year (including multi-year projections), the deposit and loan totals
of the Park segment and the economic conditions in the markets served by
the Park segment. At December 31, 2016, the goodwill remaining on Park’s
Consolidated Balance Sheet consisted entirely of goodwill at PNB. (See Note
27 – Segment Information for operating segment results.)

Park evaluates goodwill for impairment on April 1 of each year, with financial
data as of March 31. Based on the analysis performed as of April 1, 2016, the
Company determined that goodwill for Park’s national bank subsidiary (PNB)
was not impaired. There have been no subsequent circumstances or events
triggering an additional evaluation.

Goodwill in the amount of $72.3 million was recorded at each of December
31, 2016, 2015, and 2014.

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

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

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

An uncertain tax position is recognized as a benefit only if it is “more-likely-
than-not” that the tax position would be sustained in a tax examination being
presumed to occur. The benefit recognized for a tax position that meets the
“more-likely-than-not” criteria is measured based on the largest benefit that
is more than 50 percent likely to be realized, taking into consideration the
amounts and probabilities of the outcome upon settlement. For tax positions
not meeting the “more-likely-than-not” test, no tax benefit is recorded. Park
recognizes any interest and penalties related to income tax matters in income
tax expense.

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

Comprehensive Income
Comprehensive income consists of net income and other comprehensive
income (loss). Other comprehensive income (loss) includes unrealized gains
and losses on securities available for sale, and changes in the funded status
of the Company’s defined benefit pension plan, which are also recognized
as separate components of equity.

Share-Based Compensation
Compensation cost is recognized for restricted stock units and stock awards
issued to employees and directors, respectively, based on the fair value of these
awards at the date of grant. The market price of Park’s common shares at the
date of grant is used to estimate the fair value of restricted stock units and stock
awards. Compensation cost is recognized over the required service period,
generally defined as the vesting period and is recorded in “Salaries” expense.
(See Note 17 – Share-Based Compensation.)

Loan Commitments and Related Financial Instruments
Financial instruments include off balance sheet credit instruments, such as
commitments to make loans and commercial letters of credit, issued to meet
customer financing needs. The face amount for these items represents the
exposure to loss, before considering customer collateral or ability to repay.
Such financial instruments are recorded when they are funded.

Fair Value Measurement
Fair values of financial instruments are estimated using relevant market infor-
mation and other assumptions, as more fully disclosed in Note 25 – Fair Value.
Fair value estimates involve uncertainties and matters of significant judgment
regarding interest rates, credit risk, prepayments, and other factors, especially
in the absence of broad markets for particular items. Changes in assumptions
or in market conditions could significantly affect the estimates.

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

Retirement Plans
Pension expense is the net of service and interest cost, return on plan assets
and amortization of gains and losses not immediately recognized. Employee
KSOP plan expense is the amount of matching contributions to Park’s employ-
ees stock ownership plan. Deferred compensation and supplemental retirement
plan expense allocates the benefits over years of service. (See Note 18 – Benefit
Plans.)

Earnings Per Common Share
Basic earnings per common share is net income available to common share-
holders divided by the weighted average number of common shares outstanding
during the period. Diluted earnings per common share includes the dilutive
effect of additional potential common shares issuable under stock awards,
stock options, warrants and convertible securities. Earnings and dividends
per common share are restated for any stock splits and stock dividends through
the date of issuance of the consolidated financial statements. (See Note 21 –
Earnings Per Common Share.)

Operating Segments
The Corporation is a financial holding company headquartered in Newark,
Ohio. The operating segments for the Corporation are its chartered national
bank subsidiary, PNB (headquartered in Newark, Ohio), SE Property Holdings,
LLC (“SEPH”), and Guardian Financial Services Company (“GFSC”).

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2. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS AND
ISSUED NOT YET EFFECTIVE ACCOUNTING STANDARDS

ASU 2014-09 – Revenue from Contracts with Customers (Topic 606):
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with
Customers (Topic 606). The ASU creates a new topic, Topic 606, to provide
guidance on revenue recognition for entities that enter into contracts with
customers to transfer goods or services or enter into contracts for the transfer
of nonfinancial assets. The core principle of the guidance is that an entity
should recognize revenue to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. Additional
disclosures are required to provide quantitative and qualitative information
regarding the nature, amount, timing, and uncertainty of revenue and cash
flows arising from contracts with customers. The new guidance is effective
for annual reporting periods, and interim reporting periods within those
annual periods, beginning after December 15, 2017. While interest income
is specifically out of scope of this standard, management is currently evaluating
the revenue streams within “Other Income” to assess the applicability of this
standard. Specifically, management is evaluating the impact of this new guid-
ance on deposit fees recorded within “Service Charges on Deposit Accounts”
and trust income within “Income from Fiduciary Activities.”

ASU 2015-02 – Consolidation (Topic 810): Amendments to the
Consolidation Analysis: In February 2015, the FASB issued ASU 2015-02,
Consolidation (Topic 810): Amendments to the Consolidation Analysis.
The ASU amends the current consolidation guidance and affect both the variable
interest entity and voting interest entity consolidation models. The new guidance
is effective for annual reporting periods and interim reporting periods within
those annual periods, beginning after December 15, 2015. The adoption of this
guidance on January 1, 2016 did not have an impact on Park’s consolidated
financial statements.

ASU 2016-01 – Financial Instruments—Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial
Liabilities. In January 2016, the FASB issued ASU 2016-01 – Financial
Instruments—Overall (Subtopic 825-10): Recognition and Measurement
of Financial Assets and Financial Liabilities. Changes to the current U.S.
GAAP model primarily affect the accounting for equity investments, financial
liabilities under the fair value option, and the presentation and disclosure
requirements for financial instruments. In addition, the ASU clarifies guidance
related to the valuation allowance assessment when recognizing deferred tax
assets resulting from unrealized losses on available-for-sale securities. The new
guidance is effective for annual reporting periods and interim reporting periods
within those annual periods, beginning after December 15, 2017. The adoption
of this guidance is not expected to have a material impact on Park’s consoli-
dated financial statements.

ASU 2016-02 – Leases (Topic 842): In February 2016, the FASB issued
ASU 2016-02 – Leases (Topic 842). The ASU will require all organizations that
lease assets to recognize on the balance sheet the assets and liabilities for the
rights and obligations created by those leases. Additional qualitative and quanti-
tative disclosures will be required so that users can understand more about the
nature of an entity’s leasing activities. The new guidance is effective for annual
reporting periods and interim reporting periods within those annual periods,
beginning after December 15, 2018. Early adoption is permitted. Management
is currently analyzing data on leased assets. The adoption of this guidance is
expected to increase both assets and liabilities, but is not expected to have
a material impact on Park's consolidated statement of income.

ASU 2016-09 – Compensation—Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accounting:
In March 2016, FASB issued ASU 2016-09 – Compensation—Stock

Compensation (Topic 718): Improvements to Employee Share-Based
Payment Accounting. The ASU provides simplification for several aspects
of accounting for share-based payment transactions, including the income
tax consequences, classification of awards as either equity or liabilities, and
classification on the statement of cash flows. The new guidance is effective for
annual reporting periods and interim reporting periods within those annual
periods, beginning after December 15, 2016. Early adoption is permitted. The
adoption of this guidance on January 1, 2017 did not have a material impact
on Park’s consolidated financial statements.

ASU 2016-13 – Financial Instruments—Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments: In June 2016,
FASB issued ASU 2016-13 – Financial Instruments—Credit Losses (Topic
326): Measurement of Credit Losses on Financial Instruments. The new
guidance replaces the incurred loss model with an expected loss model,
which is referred to as the current expected credit loss (“CECL”) model.
The CECL model is applicable to the measurement of credit losses on financial
assets measured at amortized cost, including loan receivables, HTM debt secu-
rities, and reinsurance receivables. It also applies to off-balance sheet credit
exposures not accounted for as insurance (loan commitments, standby letters
of credit, financial guarantees, and other similar instruments) and net invest-
ments in leases recognized by a lessor. The CECL model requires an entity to
estimate the credit losses over the life of an asset or off-balance sheet exposure.
The new guidance is effective for annual reporting periods and interim report-
ing periods within those annual periods, beginning after December 15, 2019.
Early adoption is permitted for annual reporting periods and interim reporting
periods within those annual periods, beginning after December 15, 2018.

Management is currently evaluating the impact of the adoption of this guidance
on Park’s consolidated financial statements. We anticipate that the adoption of
the CECL model will result in a material increase to Park’s allowance for loan
losses. Management has established a committee to oversee the implementation
of CECL. This committee is currently assessing the data and system require-
ments necessary for adoption. Management plans to run our current model
and a CECL model concurrently for 12 months prior to the adoption of this
guidance on January 1, 2020.

ASU 2016-15 – Statement of Cash Flows (Topic 203): Classification
of Certain Cash Receipts and Cash Payments (a consensus of the
Emerging Issues Task Force): In August 2016, the FASB issued ASU 2016-
15, Statement of Cash Flows (Topic 203): Classification of Certain Cash
Receipts and Cash Payments (a consensus of the Emerging Issues Task
Force). This ASU provides guidance on eight specific cash flow issues where
current GAAP is either unclear or does not include specific guidance. The
new guidance is effective for annual reporting periods, and interim reporting
periods within those annual periods, beginning after December 15, 2017. As
such transactions arise, management will utilize the updated guidance within
Park’s consolidated statements of cash flows.

ASU 2017-04 – Intangibles—Goodwill and Other (Topic 350):
Simplifying the Test for Goodwill Impairment: In January 2017, the
FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350):
Simplifying the Test for Goodwill Impairment. This ASU eliminates Step 2
from the goodwill impairment test. Instead, under the new guidance, an entity
should perform its annual goodwill impairment test by comparing the fair value
of a reporting unit with its carrying amount. An impairment charge would be
recognized for the amount by which the carrying amount exceeds the reporting
unit’s fair value. The new guidance is effective for annual reporting periods,
and interim reporting periods within those annual periods, beginning after
December 15, 2019. Early adoption is permitted for interim or annual
goodwill impairment tests performed on testing dates after January 1, 2017.
The adoption of this guidance is not expected to have an impact on Park’s
consolidated financial statements.

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3. ORGANIZATION
Park National Corporation is a financial holding company headquartered in
Newark, Ohio. Through its national bank subsidiary, PNB, Park is engaged
in a general commercial banking and trust business, primarily in Ohio. PNB
operates through eleven banking divisions with the Park National Bank Division
headquartered in Newark, Ohio, the Fairfield National Bank Division headquar-
tered in Lancaster, Ohio, The Park National Bank of Southwest Ohio & Northern
Kentucky Division headquartered in Cincinnati, Ohio, the First-Knox National
Bank Division headquartered in Mount Vernon, Ohio, the Farmers Bank
Division headquartered in Loudonville, Ohio, the Security National Bank
Division headquartered in Springfield, Ohio, the Unity National Bank Division
headquartered in Piqua, Ohio, the Richland Bank Division headquartered
in Mansfield, Ohio, the Century National Bank Division headquartered in
Zanesville, Ohio, the United Bank, N.A. Division headquartered in Bucyrus,
Ohio and the Second National Bank Division headquartered in Greenville,
Ohio. A wholly-owned subsidiary of Park, GFSC is a consumer finance
company located in Central Ohio.

Through February 16, 2012, Park operated a second banking subsidiary,
Vision Bank (“Vision”), which was engaged in a general commercial banking
business, primarily in Baldwin County, Alabama and the panhandle of Florida.
Promptly following the sale of the Vision business to Centennial Bank (a wholly-
owned subsidiary of HomeBanc Shares, Inc.), Vision surrendered its Florida
banking charter to the Florida Office of Financial Regulation and became a
non-bank Florida corporation. Vision (the Florida corporation) merged with
and into a wholly-owned, non-bank subsidiary of Park, SEPH, with SEPH being
the surviving entity. SEPH holds the remaining assets and liabilities retained by
Vision subsequent to the sale. SEPH also holds OREO that had previously been
transferred to SEPH from Vision. SEPH’s assets consist primarily of performing
and nonperforming loans and OREO. This segment represents a run off port -
folio of the legacy Vision assets.

All of the Ohio-based banking divisions provide the following principal services:
the acceptance of deposits for demand, savings and time accounts; commercial,
industrial, consumer and real estate lending, including installment loans, credit
cards, home equity lines of credit; trust services; cash management; safe deposit
operations; electronic funds transfers and a variety of additional banking-related
services. See Note 27 – Segment Information for financial information on the
Corporation’s operating segments.

4. INVESTMENT SECURITIES
The amortized cost and fair value of investment securities are shown in the
following tables. Management performs a quarterly evaluation of investment
securities for any other-than-temporary impairment. During 2016, 2015 and
2014, there were no investment securities deemed to be other-than-temporarily
impaired.

Investment securities at December 31, 2016 and December 31, 2015 were
as follows:

Gross
Unrealized/
Unrecognized
Holding
Gains

Gross
Unrealized/
Unrecognized
Holding
Losses

Amortized
Cost

Estimated
Fair Value

$ 270,000

$ —

$ 2,467

$ 267,533

991,642
1,119

5,372
2,315

9,842
—

987,172
3,434

$1,262,761

$ 7,687

$12,309

$1,258,139

$ 188,622

977

$ 5,148

$ 184,451

71,211

1,097

72,221

$ 259,833

$ 2,074

$ 5,235

$ 256,672

$ 527,605

$ —

$ 5,542

$ 522,063

907,989
1,120

8,776
1,590

5,272
—

911,493
2,710

$1,436,714

$10,366

$10,814

$1,436,266

48,190

734

$ —

48,924

(In thousands)

2016:

Securities Available-for-Sale

Obligations of U.S.

Treasury and other
U.S. Government
sponsored entities

U.S. Government

sponsored entities’
asset-backed securities

Other equity securities

Total

2016:

Securities Held-to-Maturity
Obligations of states and
political subdivisions

U.S. Government

sponsored entities’
asset-backed securities

Total

2015:

Securities Available-for-Sale

Obligations of U.S.

Treasury and other
U.S. Government
sponsored entities

U.S. Government

sponsored entities’
asset-backed securities

Other equity securities

Total

2015:

Securities Held-to-Maturity
Obligations of states and
political subdivisions

U.S. Government

sponsored entities’
asset-backed securities

Total

$ 149,302

$ 2,260

101,112

1,526

134

102,504

$ 151,428

Park’s U.S. Government sponsored entities’ asset-backed securities consisted
of 15-year mortgage-backed securities and collateralized mortgage obligations
(CMOs). At December 31, 2016, the amortized cost of Park’s available-for-sale
mortgage-backed securities was $545.1 million and there were no held-to-
maturity mortgage-backed securities within Park’s investment portfolio. At
December 31, 2016, the amortized cost of Park’s available-for-sale and held-
to-maturity CMOs was $446.5 million and $71.2 million, respectively.

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$134,909 $ 5,148

— $ — $ 134,909

$ 5,148

U.S. Government sponsored entities’

asset-backed securities

$991,642

$987,172

7,564

$ 142,473

$ 5,235

Securities Held-to-Maturity
Obligations of states and
political subdivisions

Due greater than ten years

Total

$188,622

$184,451

U.S. Government sponsored entities’

asset-backed securities

$ 71,211

$ 72,221

0.87%

1.22%

1.18%

2.10%

4.50%

3.31%

Other investment securities (as shown on the Consolidated Balance Sheets)
consist of stock investments in the FHLB, the FRB and other equities carried
at cost. The FHLB and FRB restricted stock investments are carried at their
redemption value. Park owned $50.1 million of FHLB stock and $8.2 million
of FRB stock at both December 31, 2016 and December 31, 2015. Park
owned $3.5 million of other equities carried at cost at December 31, 2016
and carried no other equities held at cost at December 31, 2015.

The amortized cost and estimated fair value of investments in debt securities at
December 31, 2016, are shown in the following table by contractual maturity,
except for asset-backed securities, which are shown as a single total, due to the
unpredictability of the timing in principal repayments.

Amortized
Cost

Estimated
Fair Value

Tax
Equivalent
Yield(1)

(In thousands)

Securities Available-for-Sale
U.S. Treasury and other U.S. Government

sponsored entities’ notes:
Due within one year

Due one through five years

Total

$ 25,000

245,000

$270,000

$ 24,933

242,600

$267,533

(1) The tax equivalent yield for obligations of states and political subdivisions includes the effects
of a taxable equivalent adjustment using a 35% rate. The taxable equivalent adjustment was
$1.4 million for the year ended December 31, 2016.

All of Park’s securities shown in the above table as U.S. Treasury and other
U.S. Government sponsored entities' notes are callable notes. These callable
securities have a final maturity of 0.9 years to 3.5 years. The remaining
weighted average life of the investment portfolio is 4.4 years.

At December 31, 2016, investment securities with an amortized cost of $343
million were pledged for government and trust department deposits, $569
million were pledged to secure repurchase agreements and $25 million were
pledged as collateral for FHLB advance borrowings. At December 31, 2015,
$429 million were pledged for government and trust department deposits,
$622 million were pledged to secure repurchase agreements and $21
million were pledged as collateral for FHLB advance borrowings.

At December 31, 2016, there were no holdings of securities of any one issuer,
other than the U.S. Government and its agencies, in an amount greater than
10% of shareholders’ equity.

During 2015, Park sold certain HTM investment securities with a book value
of $3.1 million at a gain of $88,000. These securities had been paid down
to 97.8% of the principal outstanding at acquisition. During 2014, Park sold
certain AFS investment securities with a book value of $187,000 at a gain of
$22,000. Additionally, Park sold certain AFS investment securities with a
book value of $174.1 million at a loss of $1.2 million. No securities were
sold during 2016.

The following table provides detail on investment securities with unrealized
losses aggregated by investment category and length of time the individual
securities had been in a continuous loss position at December 31, 2016 and
December 31, 2015:

Less than 12 Months

12 Months or Longer

Total

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

(In thousands)

2016:

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

Treasury and other
U.S. Government
sponsored entities $247,695 $ 2,305

$ 19,838

162

$ 267,533

$ 2,467

U.S. Government

sponsored entities’
asset-backed
securities

612,321

9,473

27,325

Total

$860,016 $11,778

$ 47,163

369

531

639,646

9,842

$ 907,179

$12,309

2016:

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

sponsored entities’
asset-backed
securities

—

7,564

Total

$134,909 $ 5,148

7,564

2015:

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

Treasury and other
U.S. Government
sponsored entities $326,973 $ 2,117

$195,090

$ 3,425

$ 522,063

$ 5,542

U.S. Government

sponsored entities’
asset-backed
securities

384,169

2,776

114,543

2,496

498,712

5,272

Total

$711,142 $ 4,893

$309,633

$ 5,921

$1,020,775

$10,814

2015:

Securities
Held-to-Maturity

U.S. Government

sponsored entities’
asset-backed
securities

$ 5,656 $

$ 7,792

124

13,448

134

Management does not believe any individual unrealized loss as of December 31,
2016 or 2015 represented an other-than-temporary impairment. The unrealized
losses on debt securities are primarily the result of interest rate changes. These
conditions will not prohibit Park from receiving its contractual principal and
interest payments on these debt securities. The fair value of these debt securities
is expected to recover as payments are received on these securities and they
approach maturity. Should the impairment of any of these securities become
other-than-temporary, the cost basis of the investment will be reduced and the
resulting loss recognized in net income in the period the other-than-temporary
impairment is identified.

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5. LOANS
The composition of the loan portfolio, by class of loan, as of December 31,
2016 and December 31, 2015 was as follows:

(In thousands)

2016:

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

Residential real estate:

Commercial
Mortgage
HELOC
Installment

Consumer
Leases

Total loans

2015:

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

Residential real estate:

Commercial
Mortgage
HELOC
Installment

Consumer
Leases

Total loans

Loan
Balance

Accrued
Interest
Receivable

$ 994,619
1,155,703

$ 3,558
4,161

—
135,343
48,699
4,903

406,687
1,169,495
212,441
19,874
1,120,850
3,243

—
398
106
17

940
1,459
853
67
3,385
29

Recorded
Investment

$ 998,177
1,159,864

—
135,741
48,805
4,920

407,627
1,170,954
213,294
19,941
1,124,235
3,272

$5,271,857

$14,973

$5,286,830

$ 955,727
1,113,603

$ 3,437
4,009

$ 959,164
1,117,612

2,044
128,046
36,722
6,533

410,571
1,210,819
211,415
22,638
967,111
2,856

—
321
75
21

1,014
1,469
769
78
3,032
14

2,044
128,367
36,797
6,554

411,585
1,212,288
212,184
22,716
970,143
2,870

$5,068,085

$14,239

$5,082,324

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

Loans are shown net of deferred origination fees, costs and unearned income
of $11.1 million at December 31, 2016 and $10.4 million at December 31,
2015, which represented a net deferred income position in both years.

Overdrawn deposit accounts of $2.9 million and $1.7 million had been
reclassified to loans at December 31, 2016 and 2015, respectively, and are
included in the commercial, financial and agricultural loan class above.

Credit Quality
The following table presents the recorded investment in nonaccrual loans,
accruing troubled debt restructurings (“TDRs”), and loans past due 90 days
or more and still accruing by class of loan as of December 31, 2016 and
December 31, 2015:

(In thousands)

2016:

Commercial, financial
and agricultural

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

Residential real estate:

Commercial
Mortgage
HELOC
Installment

Consumer

Total loans

2015:

Commercial, financial
and agricultural

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

Residential real estate:

Commercial
Mortgage
HELOC
Installment

Consumer

Total loans

Loans Past Due
90 Days
or More

Accruing
Troubled Debt
Restructurings and Accruing

Total
Nonperforming
Loans

Nonaccrual
Loans

$20,057
19,169

600
5,305

—
1,833
—
61

23,013
18,313
1,783
644
2,949

—
393
104
95

89
9,612
673
609
748

15
—

—
—
—
12

—
887
25
60
1,139

$ 20,672
24,474

—
2,226
104
168

23,102
28,812
2,481
1,313
4,836

$87,822

$18,228

$2,138

$108,188

$21,676
15,268

$ 8,947
2,757

$ —
—

$ 30,623
18,025

2,044
4,162
7
64

25,063
20,378
1,749
1,657
3,819

—
514
110
114

261
10,143
873
635
734

—
—
—
—

—
851
27
4
1,093

2,044
4,676
117
178

25,324
31,372
2,649
2,296
5,646

$95,887

$25,088

$1,975

$122,950

The following table provides additional information regarding those nonaccrual
and accruing TDR loans that are individually evaluated for impairment and
those collectively evaluated for impairment as of December 31, 2016 and
December 31, 2015.

(In thousands)

2016:

Commercial, financial and agricultural
Commercial real estate
Construction real estate:
SEPH commercial

land and development

Remaining commercial
Mortgage
Installment

Residential real estate:

Commercial
Mortgage
HELOC
Installment

Consumer

Total loans

Nonaccrual
and Accruing
Troubled Debt
Restructurings

Loans
Individually
Evaluated for
Impairment

Loans
Collectively
Evaluated for
Impairment

$ 20,657
24,474

$20,624
24,474

33
—

—
2,226
104
156

23,102
27,925
2,456
1,253
3,697

—
2,226
—
—

23,102
—
—
—
—

—
—
104
156

—
27,925
2,456
1,253
3,697

$106,050

$70,426

$35,624

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

(In thousands)

2015:

Commercial, financial and agricultural
Commercial real estate
Construction real estate:
SEPH commercial

land and development

Remaining commercial
Mortgage
Installment

Residential real estate:

Commercial
Mortgage
HELOC
Installment

Consumer

Total loans

Nonaccrual
and Accruing
Troubled Debt
Restructurings

Loans
Individually
Evaluated for
Impairment

Loans
Collectively
Evaluated for
Impairment

$ 30,623
18,025

$30,595
18,025

28
—

2,044
4,676
117
178

25,324
30,521
2,622
2,292
4,553

2,044
4,676
—
—

25,324
—
—
—
—

—
—
117
178

—
30,521
2,622
2,292
4,553

$120,975

$80,664

$40,311

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

The following table presents loans individually evaluated for impairment by
class of loan as of December 31, 2016 and December 31, 2015.

(In thousands)

2016:

With no related allowance recorded

Commercial, financial
and agricultural

Commercial real estate
Construction real estate:
SEPH commercial

land and development

Remaining commercial

Residential real estate:

Commercial

With an allowance recorded

Commercial, financial
and agricultural

Commercial real estate
Construction real estate:
Remaining commercial

Residential real estate:

Commercial

Total

2015:

With no related allowance recorded

Commercial, financial
and agricultural

Commercial real estate
Construction real estate:
SEPH commercial

land and development

Remaining commercial

Residential real estate:

Commercial

With an allowance recorded

Commercial, financial
and agricultural

Commercial real estate
Construction real estate:
Remaining commercial

Residential real estate:

Commercial

Total

Unpaid
Principal
Balance

Recorded
Investment

Allowance for
Loan Losses
Allocated

$ 41,075
23,961

—
3,662

24,409

810
1,014

—

427

$19,965
23,474

—
2,226

22,687

659
1,000

—

415

$ —
—

—
—

—

152
309

—

$ 95,358

$70,426

$ 548

$ 32,583
15,138

10,834
2,506

23,798

16,155
3,195

3,145

1,951

$109,305

$18,763
14,916

2,044
1,531

23,480

11,832
3,109

3,145

1,844

$80,664

$ —
—

—
—

—

1,904
381

1,356

550

$4,191

Management’s general practice is to proactively charge down loans
individually evaluated for impairment to the fair value of the underlying
collateral. At December 31, 2016 and December 31, 2015, there were
$24.7 million and $24.2 million, respectively, of partial charge-offs on loans
individually evaluated for impairment with no related allowance recorded
and $177,000 and $4.5 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 related to loans
individually evaluated for impairment at December 31, 2016 and 2015, of
$0.5 million and $4.2 million, respectively. These loans with specific reserves
had a recorded investment of $2.1 million and $19.9 million as of December
31, 2016 and 2015, respectively.

Interest income on nonaccrual loans individually evaluated for impairment
is recognized on a cash basis only when Park expects to receive the entire
recorded investment of the loan. Interest income on accruing TDRs individually
evaluated for impairment continues to be recorded on an accrual basis. The
following tables present the average recorded investment and interest income
recognized subsequent to impairment on loans individually evaluated for
impairment as of and for the years ended December 31, 2016, 2015, and 2014:

(In thousands)

Recorded
Investment
as of
December 31, 2016

Commercial, financial and agricultural
Commercial real estate
Construction real estate:
SEPH commercial land
and development
Remaining commercial

Residential real estate:

Commercial

Consumer

Total

$ 20,624
24,474

—
2,226

23,102
—

$ 70,426

(In thousands)

Recorded
Investment
as of
December 31, 2015

Commercial, financial and agricultural
Commercial real estate
Construction real estate:
SEPH commercial land
and development
Remaining commercial

Residential real estate:

Commercial

Consumer

Total

$ 30,595
18,025

2,044
4,676

25,324
—

$ 80,664

(In thousands)

Recorded
Investment
as of
December 31, 2014

Commercial, financial and agricultural
Commercial real estate
Construction real estate:
SEPH commercial land
and development
Remaining commercial

Residential real estate:

Commercial

Consumer

Total

$ 19,106
21,989

2,078
5,609

24,930
—

$ 73,712

Year ended December 31, 2016

Average
Recorded
Investment

$ 26,821
22,828

1,597
3,906

24,341
3

$ 79,496

Interest
Income
Recognized

$ 885
884

—
66

2,942
—

$4,777

Year ended December 31, 2015

Average
Recorded
Investment

$ 20,179
17,883

2,066
5,666

24,968
—

$ 70,762

Interest
Income
Recognized

$ 340
550

21
26

1,026
—

$1,963

Year ended December 31, 2014

Average
Recorded
Investment

$ 19,518
31,945

3,658
8,784

28,306
403

$ 92,614

Interest
Income
Recognized

$ 360
1,027

146
61

1,084
—

$2,678

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The following tables present the aging of the recorded investment in past due
loans as of December 31, 2016 and December 31, 2015 by class of loan.

Past Due
Nonaccrual
Loans and Loans
Past Due 90
Days or More
and Accruing(1) Past Due

Total

Accruing
Loans
Past Due
30–89 Days

Total
Current(2)

Total
Recorded
Investment

(In thousands)

December 31, 2016:

Commercial, financial
and agricultural

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

Residential real estate:

371
355

—
—
559
223

Commercial
Mortgage
HELOC
Installment

Consumer
Leases

330
10,854
970
350
12,579
—

$ 4,113
2,499

$ 4,484 $ 993,693
1,157,010

2,854

$ 998,177
1,159,864

—
541
—
64

3,631
9,769
1,020
319
2,094
—

—
541
559
287

3,961
20,623
1,990
669
14,673
—

—
135,200
48,246
4,633

403,666
1,150,331
211,304
19,272
1,109,562
3,272

—
135,741
48,805
4,920

407,627
1,170,954
213,294
19,941
1,124,235
3,272

Total loans

$26,591

$24,050

$50,641 $5,236,189

$5,286,830

(1)

(2)

Includes an aggregate of $2.1 million of loans past due 90 days or more and accruing.
The remaining are past due, nonaccrual loans.
Includes an aggregate of $65.9 million of nonaccrual loans which are current in regards
to contractual principal and interest payments.

Past Due
Nonaccrual
Loans and Loans
Past Due 90
Days or More
and Accruing(1) Past Due

Total

Accruing
Loans
Past Due
30–89 Days

Total
Current(2)

Total
Recorded
Investment

(In thousands)

December 31, 2015:

Commercial, financial
and agricultural

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

Residential real estate:

670
142

—
165
63
200

Commercial
Mortgage
HELOC
Installment

Consumer
Leases

325
10,569
487
426
11,458
—

$ 7,536
530

$ 8,206 $ 950,958
1,116,940

672

$ 959,164
1,117,612

2,044
84
7
46

19,521
8,735
186
318
3,376
—

2,044
249
70
246

19,846
19,304
673
744
14,834
—

—
128,118
36,727
6,308

391,739
1,192,984
211,511
21,972
955,309
2,870

2,044
128,367
36,797
6,554

411,585
1,212,288
212,184
22,716
970,143
2,870

Total loans

$24,505

$42,383

$66,888 $5,015,436

$5,082,324

(1)

(2)

Includes an aggregate of $2.0 million of loans past due 90 days or more and accruing.
The remaining are past due, nonaccrual loans.
Includes an aggregate of $55.5 million of nonaccrual loans which are current in regards
to contractual principal and interest payments.

Credit Quality Indicators
Management utilizes past due information as a credit quality indicator across
the loan portfolio. Past due information as of December 31, 2016 and 2015
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 on a
scale from 1 to 8. Credit grades are continuously monitored by the responsible
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
that are pass-rated (graded a 1 through a 4) 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 Park’s credit position at some future date. Commercial loans graded a 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 allo-
cated to these loans. Loans classified as substandard are inadequately protected
by the current sound worth and paying capacity of the obligor or the value of
the collateral pledged, if any. Loans so classified have a well-defined weakness
or weaknesses that jeopardize the liquidation of the debt. They are character-
ized by the distinct possibility that Park will sustain some loss if the deficiencies
are not corrected. Commercial loans 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 liquida-
tion 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
placed on nonaccrual status and 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.

The tables below present the recorded investment by loan grade at December
31, 2016 and December 31, 2015 for all commercial loans:

(In thousands)

5 Rated

6 Rated

Impaired

Pass
Rated

Recorded
Investment

December 31, 2016:

Commercial, financial
and agricultural*

Commercial real estate*
Construction real estate:
SEPH commercial land
and development
Remaining commercial

Residential real estate:

Commercial

Leases

Total commercial

loans

December 31, 2015:

Commercial, financial
and agricultural*

Commercial real estate*
Construction real estate:
SEPH commercial land
and development
Remaining commercial

Residential real estate:

Commercial

Leases

Total commercial

loans

$ 5,826
7,548

$ —
190

$20,657
24,474

$ 971,694
1,127,652

$ 998,177
1,159,864

—
287

1,055
—

—
118

124
—

—
2,226

23,102
—

—
133,110

383,346
3,272

—
135,741

407,627
3,272

$14,716

$ 432

$70,459

$2,619,074

$2,704,681

$ 4,392
14,880

$ 347
3,417

$30,623
18,025

$ 923,802
1,081,290

$ 959,164
1,117,612

—
2,151

3,280
—

—
122

386
—

2,044
4,676

25,324
—

—
121,418

382,595
2,870

2,044
128,367

411,585
2,870

$24,703

$4,272

$80,692

$2,511,975

$2,621,642

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

Troubled Debt Restructuring
Management classifies loans as TDRs when a borrower is experiencing financial
difficulties and Park has granted a 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 the bor-
rower’s debt in the foreseeable future without the modification. This evaluation
is performed in accordance with 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. A court’s discharge of a borrower’s debt in a Chapter 7
bankruptcy is considered a concession when the borrower does not reaffirm
the discharged debt.

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Certain loans which were modified during the years ended December 31,
2016 and December 31, 2015 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.

Management reviews renewals/modifications of loans previously identified
as TDRs to consider if it is appropriate to remove the TDR classification. If the
borrower is no longer experiencing financial difficulty and the renewal/modifi-
cation does not contain a concessionary interest rate or other concessionary
terms, management considers the potential removal of the TDR classification.
If deemed appropriate, the TDR classification is removed as the borrower has
complied with the terms of the loan at the date of the renewal/modification and
there was a reasonable expectation that the borrower would continue to comply
with the terms of the loan subsequent to the date of the renewal/modification.
The majority of these TDRs were originally considered restructurings in a
prior year as a result of a renewal/modification with an interest rate that
was not commensurate with the risk of the underlying loan at the time of the
renewal/modification. During the years ended December 31, 2016 and 2015,
Park removed the TDR classification on $2.7 million and $1.2 million, respec-
tively, of loans that met the requirements discussed above.

At December 31, 2016 and 2015, there were $46.9 million and $41.1 million,
respectively, of TDRs included in the nonaccrual loan totals. At December 31,
2016 and 2015, $38.0 million and $19.1 million, respectively, of these non -
accrual TDRs were performing in accordance with the terms of the restructured
note. As of December 31, 2016 and 2015, loans with a recorded investment of
$18.2 million and $25.1 million, respectively, were included in accruing TDR
loan totals. Management will continue to review the restructured loans and may
determine it appropriate to move certain nonaccrual TDRs to accrual status in
the future.

At December 31, 2016 and 2015, Park had commitments to lend $0.7 million
and $2.3 million, respectively, of additional funds to borrowers whose outstand-
ing loan terms had been modified in a TDR.

The specific reserve related to TDRs at December 31, 2016 and 2015 was $0.2
million and $2.3 million, respectively. Modifications made in 2015 and 2016
were largely the result of renewals and 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 mod -
ifications 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 $1.0 million were recorded during the
year ended December 31, 2016, as a result of TDRs identified in the 2016
year. Additional specific reserves of $1.3 million were recorded during the
year ended December 31, 2015 as a result of TDRs identified in the 2015 year.
Additional specific reserves of $0.7 million were recorded during the year
ended December 31, 2014 as a result of TDRs identified in the 2014 year.

The terms of certain other loans were modified during the years ended
December 31, 2016 and 2015 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 December 31, 2016 and 2015
of $26,000 and $116,000, respectively. The renewal/modification of these
loans: (1) resulted in a delay in a payment that was considered to be insig -
nificant, or (2) 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 December 31, 2016 and 2015 of $7.4 million and $16.5 million, respec-
tively. Many of these loans were to borrowers who were not experiencing
financial difficulties but who were looking to reduce their cost of funds.

The following tables detail the number of contracts modified as TDRs during
the years ended December 31, 2016, 2015 and 2014 as well as the recorded
investment of these contracts at December 31, 2016, 2015, and 2014. The
recorded investment pre- and post-modification is generally the same due
to the fact that Park does not typically forgive principal.

(In thousands)

Year ended December 31, 2016:

Number of
Contracts

Accruing

Nonaccrual

Recorded
Investment

Commercial, financial
and agricultural

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

Residential real estate:

Commercial
Mortgage
HELOC
Installment

Consumer

Total loans

Year ended December 31, 2015:

Commercial, financial
and agricultural

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

Residential real estate:

Commercial
Mortgage
HELOC
Installment

Consumer

Total loans

Year ended December 31, 2014:

Commercial, financial
and agricultural

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

Residential real estate:

Commercial
Mortgage
HELOC
Installment

Consumer

Total loans

32
14

—
2
—
1

11
34
13
5
293

405

39
14

—
2
1
—

11
39
26
9
283

424

30
11

—
2
—
2

9
46
10
10
330

450

191
3,844

$ 8,450
2,537

$ 8,641
6,381

—
—
—
—

89
114
104
102
184

—
1,143
—
—

1,033
2,292
178
3
994

—
1,143
—
—

1,122
2,406
282
105
1,178

$ 4,628

$16,630

$21,258

$ 8,948
637

$ 3,640
3,523

$12,588
4,160

—
513
19
—

—
1,132
315
—
202

—
—
—
—

1,185
2,122
45
155
888

—
513
19
—

1,185
3,254
360
155
1,090

$11,766

$11,558

$23,324

292
1,184

431
1,254

723
2,438

—
—
—
—

—
32
85
109
244

—
206
—
56

866
2,325
241
12
1,058

—
206
—
56

866
2,357
326
121
1,302

$ 1,946

$ 6,449

$ 8,395

Of those loans which were modified and determined to be a TDR during the
year ended December 31, 2016, $9.4 million were on nonaccrual status as
of December 31, 2015. Of those loans which were modified and determined
to be a TDR during the year ended December 31, 2015, $0.8 million were
on nonaccrual status as of December 31, 2014. Of those loans which were
modified and determined to be a TDR during the year ended December 31,
2014, $0.7 million were on nonaccrual status as of December 31, 2013.

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The following table presents the recorded investment in financing receivables
which were modified as TDRs within the previous 12 months and for which
there was a payment default during the year ended December 31, 2016,
December 31, 2015, and December 31, 2014. For this table, a loan is con -
sidered to be in default when it becomes 30 days contractually past due under
the modified terms. The additional allowance for loan loss resulting from the
defaults on TDR loans was immaterial.

Year ended
December 31, 2016

Year ended
December 31, 2015

Year ended
December 31, 2014

Number of Recorded
Investment
Contracts

(In thousands)

Commercial, financial
and agricultural

Commercial real estate
Construction real estate:
SEPH commercial land
and development

—
Remaining commercial —
—
Mortgage
—
Installment

Residential real estate:

Commercial
Mortgage
HELOC
Installment

Consumer
Leases

Total loans

7
15
—
1
62
—

7
5

$ 419
843

—
—
—
—

848
1,201
—
3
484
—

$3,798

1
1

—
—
—
—

3
12
1
2
47
—

1
626

—
—
—
—

1,005
682
5
101
434
—

$2,854

4
1

—
—
—
—

1
14
2
2
62
—

$ 206
302

—
—
—
—

3
810
160
12
516
—

$2,009

Of the $3.8 million in modified TDRs which defaulted during the year ended
December 31, 2016, $111,000 were accruing loans and $3.7 million were
nonaccrual loans. Of the $2.9 million in modified TDRs which defaulted during
the year ended December 31, 2015, $44,000 were accruing loans and $2.8
million were nonaccrual loans. Of the $2.0 million in modified TDRs which
defaulted during the year ended December 31, 2014, $314,000 were accruing
loans and $1.7 million were nonaccrual loans.

Certain of the Corporation’s executive officers, directors and related entities
of directors are loan customers of PNB. As of December 31, 2016 and 2015,
credit exposure aggregating approximately $43.4 million and $47.0 million,
respectively, was outstanding to such parties. Of this total exposure, approxi-
mately $29.6 million and $36.0 million was outstanding at December 31,
2016 and 2015, respectively, with the remaining balance representing available
credit. During 2016, new loans and advances on existing loans were made to
these executive officers, directors and related entities of directors totaling $5.4
million and $3.5 million, respectively. These extensions of credit were offset by
principal payments of $15.3 million. During 2015, new loans and advances on
existing loans were $5.8 million and $7.1 million, respectively. These exten-
sions of credit were offset by principal payments of $12.9 million.

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 the 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 – Summary of Significant
Accounting Policies.

The activity in the allowance for loan losses for the years ended December 31, 2016, 2015, and 2014 is summarized in the following tables.

(In thousands)

December 31, 2016

Allowance for credit losses:

Beginning balance
Charge-offs
Recoveries

Net charge-offs (recoveries)

Provision (Recovery)

Ending balance

December 31, 2015

Allowance for credit losses:

Beginning balance
Charge-offs
Recoveries

Net charge-offs (recoveries)

Provision (Recovery)

Ending balance

December 31, 2014

Allowance for credit losses:

Beginning balance
Charge-offs
Recoveries

Net charge-offs (recoveries)

(Recovery) Provision

Ending balance

Commercial,
Financial and
Agricultural

Commercial
Real Estate

Construction
Real Estate

Residential
Real Estate

Consumer

Leases

Total

$13,694
5,786
(1,259)

4,527

4,267

$13,434

$10,719
2,478
(1,373)

1,105

4,080

$13,694

$14,218
3,779
(1,003)

2,776

(723)

$10,719

$ 9,197
412
(3,671)

(3,259)

(2,024)

$10,432

$ 8,808
348
(2,241)

(1,893)

(1,504)

$ 9,197

$15,899
8,003
(7,759)

244

(6,847)

$ 8,808

$ 8,564
1,436
(8,559)

(7,123)

(10,440)

$ 5,247

$ 8,652
470
(2,092)

(1,622)

(1,710)

$ 8,564

$ 6,855
1,316
(12,572)

(11,256)

(9,459)

$ 8,652

$13,514
3,014
(2,446)

568

(1,988)

$10,958

$14,772
2,352
(2,438)

(86)

(1,344)

$13,514

$14,251
3,944
(2,985)

959

1,480

$14,772

$11,524
10,151
(4,094)

6,057

5,086

$10,553

$11,401
8,642
(3,295)

5,347

5,470

$11,524

$ 8,245
7,738
(2,671)

5,067

8,223

$11,401

$ 1
—
(1)

(1)

(2)

$ —

$ —
—
(3)

(3)

(2)

$ 1

$ —
—
(7)

(7)

$ —

$ 56,494
20,799
(20,030)

769

(5,101)

$ 50,624

$ 54,352
14,290
(11,442)

2,848

4,990

$ 56,494

$ 59,468
24,780
(26,997)

(2,217)

(7,333)

$ 54,352

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Loss factors are reviewed quarterly and updated at least annually to reflect
recent loan loss history and incorporate current risk and trends which may
not be recognized in historical data. Several enhancements were made in the
third quarter of 2016 as a result of management’s quarterly review.

(cid:0) Management updated the historical loss calculation during the third

quarter of 2016, incorporating annualized net charge-offs plus changes
in specific reserves through September 30, 2016. Additionally, manage-
ment removed from the historical loss calculation net charge-offs plus
changes in specific reserves for the year ended December 31, 2009.
Management’s belief has been that historical losses should encompass
the complete economic cycle. However, given the extended length of
the economic recovery, management determined that 2009 loss data
was no longer reflective of the current portfolio. Management has taken
the look-back period into consideration in the quarterly evaluation of
environmental loss factors.

(cid:0) As part of the 2016 mid-year historical loss update, management deter-
mined that it was no longer appropriate to more heavily weight those
years with higher losses in the historical loss calculation and applied
equal per centages to each of the years in this calculation. The trends
that existed resulting in management applying different weightings to
years within the historical loss calculation no longer appeared to exist,
resulting in the adjustment back to equal weightings.

(cid:0) As part of the normal quarterly process, management reviewed and

updated the environmental loss factors applied to the commercial port -
folio in order to incorporate changes in the macroeconomic environment.
Additionally, management updated the calculation of the loss emergence
period utilizing a more granular process.

The loss factors were updated in the fourth quarter of 2016 to incorporate
losses through December 31, 2016.

Loans collectively evaluated for impairment in the following tables include all
performing loans at December 31, 2016 and 2015, 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 December 31, 2016 and 2015, which are evaluated for
impairment in accordance with GAAP (see Note 1 – Summary of Significant
Accounting Policies).

The composition of the allowance for loan losses at December 31, 2016 and 2015 was as follows:

(In thousands)

December 31, 2016

Allowance for loan losses:

Ending allowance balance attributed to loans

Individually evaluated for impairment
Collectively evaluated for impairment

Total ending allowance balance

Loan balance:

Loans individually evaluated for impairment
Loans collectively evaluated for impairment

Total ending loan balance

Allowance for loan losses as a percentage of

loan balance:

Loans individually evaluated for impairment
Loans collectively evaluated for impairment

Total

Recorded investment:

Loans individually evaluated for impairment
Loans collectively evaluated for impairment

Total ending recorded investment

December 31, 2015

Allowance for loan losses:

Ending allowance balance attributed to loans

Individually evaluated for impairment
Collectively evaluated for impairment

Total ending allowance balance

Loan balance:

Loans individually evaluated for impairment
Loans collectively evaluated for impairment

Total ending loan balance

Allowance for loan losses as a percentage of

loan balance:

Loans individually evaluated for impairment
Loans collectively evaluated for impairment

Total

Recorded investment:

Loans individually evaluated for impairment
Loans collectively evaluated for impairment

Total ending recorded investment

Commercial,
Financial and
Agricultural

Commercial
Real Estate

Construction
Real Estate

Residential
Real Estate

Consumer

Leases

Total

152
13,282

$ 13,434

$ 20,622
973,997

$994,619

0.74%
1.36%

1.35%

$ 20,624
977,553

$998,177

$ 1,904
11,790

$ 13,694

$ 30,545
925,182

$955,727

6.23%
1.27%

1.43%

$ 30,595
928,569

$959,164

309
10,123

10,432

24,465
1,131,238

$1,155,703

1.26%
0.89%

0.90%

24,474
1,135,390

$1,159,864

381
8,816

9,197

18,015
1,095,588

$1,113,603

2.11%
0.80%

0.83%

18,025
1,099,587

$1,117,612

—
5,247

5,247

2,226
186,719

$188,945

—
2.81%

2.78%

$ 2,226
187,240

$189,466

$ 1,356
7,208

$ 8,564

$ 6,716
166,629

$173,345

20.19%
4.33%

4.94%

$ 6,720
167,042

$173,762

87
10,871

10,958

23,102
1,785,395

$1,808,497

0.38%
0.61%

0.61%

$
23,102
1,788,714

$1,811,816

550
12,964

$ 13,514

$ 25,323
1,830,120

$1,855,443

2.17%
0.71%

0.73%

25,324
1,833,449

$1,858,773

—
10,553

10,553

$
—
1,120,850

$1,120,850

—
0.94%

0.94%

$
—
1,124,235

$1,124,235

—
11,524

$ 11,524

—
967,111

$ 967,111

—
1.19%

1.19%

—
970,143

$ 970,143

$ —
—

$ —

$ —
3,243

$3,243

—
—

—

$ —
3,272

$3,272

$ —
1

$ —
2,856

$2,856

—
0.04%

0.04%

$ —
2,870

$2,870

548
50,076

50,624

$
70,415
5,201,442

$5,271,857

0.78%
0.96%

0.96%

70,426
5,216,404

$5,286,830

4,191
52,303

56,494

80,599
4,987,486

$5,068,085

5.20%
1.05%

1.11%

80,664
5,001,660

$5,082,324

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

7. LOANS HELD FOR SALE
Mortgage loans held for sale are carried at their fair value. Mortgage loans held
for sale were $10.4 million and $7.3 million at December 31, 2016 and 2015,
respectively. These amounts are included in loans on the Consolidated Balance
Sheets and in the residential real estate loan segments in Note 5 – Loans and
Note 6 – Allowance for Loan Losses. The contractual balance was $10.3 million
and $7.2 million at December 31, 2016 and 2015, respectively. The gain
expected upon sale was $131,000 and $95,000 at December 31, 2016 and
2015, respectively. None of these loans were 90 days or more past due or
on nonaccrual status as of December 31, 2016 or 2015.

During 2015, Park transferred to held for sale and sold certain commercial
loans previously held for investment with a book balance of $144,000, and
recognized a gain of $756,000. During 2014, Park transferred certain com -
mercial loans held for investment, with a book balance of $22.0 million, to
the loans held for sale portfolio, and subsequently completed the sale of these
commercial loans held for sale, recognizing a net gain on sale of $1.9 million.
No commercial loans were held for sale or sold during 2016.

8. OTHER REAL ESTATE OWNED
The carrying amount of foreclosed properties held at December 31, 2016
and December 31, 2015 are listed below, as well as the recorded investment
of loans secured by residential real estate properties for which formal fore -
closure proceedings were in process at those dates.

December 31 (In thousands)

2016

2015

OREO:

Commercial real estate
Construction real estate
Residential real estate

Total OREO

Loans in process of foreclosure:

Residential real estate

$ 7,642
4,624
1,660

$13,926

$ 8,333
7,259
3,059

$18,651

$ 3,250

$ 2,021

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

December 31 (In thousands)

Land
Buildings
Equipment, furniture and fixtures
Leasehold improvements

Total

Less accumulated depreciation

Premises and equipment, net

2016

$ 19,577
75,472
52,719
3,400

$151,168

2015

$ 19,123
74,525
47,839
3,878

$145,365

(93,197)

(85,872)

$ 57,971

$ 59,493

Depreciation expense amounted to $8.4 million, $7.3 million and $7.2 million
for the years ended December 31, 2016, 2015 and 2014, respectively.

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

(In thousands)

2017
2018
2019
2020
2021
Thereafter

Total

$1,508
1,269
1,178
621
422
700

$5,698

Rent expense for Park was $2.1 million, $1.7 million and $1.7 million, for the
years ended December 31, 2016, 2015 and 2014, respectively.

10. INVESTMENT IN QUALIFIED AFFORDABLE HOUSING
Park makes certain equity investments in various limited partnerships that
sponsor affordable housing projects. The purposes of these investments are
to achieve a satisfactory return on capital, help create affordable housing
opportunities, and assist the Company to achieve our goals associated with
the Community Reinvestment Act.

As permitted by ASU 2014-01, Accounting for Investments in Qualified
Affordable Housing Projects, Park elected the proportional amortization
method of accounting. Under the proportional amortization method, amor -
tization expense and tax benefits are recognized through the provision for
income taxes.

The table below details the balances of Park’s affordable housing tax credit
investments and related unfunded commitments as of December 31, 2016
and 2015.

December 31 (In thousands)

Affordable housing tax credit investments
Unfunded commitments

2016

$52,947
14,282

2015

$51,247
20,311

Commitments are funded when capital calls are made by the general partner.
Park expects that the current commitment will be funded between 2017 and
2027.

During the years ended December 31, 2016, 2015 and 2014, Park recognized
amortization expense of $7.3 million, $6.7 million and $6.9 million, respec-
tively, which was included within the provision for income taxes. For the years
ended December 31, 2016, 2015 and 2014, Park recognized tax credits and
other benefits from its affordable housing tax credit investments of $9.4 million,
$8.9 million and $8.8 million, respectively.

11. DEPOSITS
At December 31, 2016 and 2015, non-interest bearing and interest bearing
deposits were as follows:

December 31 (In thousands)

Non-interest bearing
Interest bearing

Total

2016

$1,523,417
3,998,539

$5,521,956

2015

$1,404,032
3,943,610

$5,347,642

At December 31, 2016, the maturities of time deposits were as follows:

(In thousands)

2017
2018
2019
2020
2021
After 5 years

Total

$ 717,879
131,236
153,257
63,758
51,245
495

$1,117,870

At December 31, 2016 and 2015, respectively, Park had approximately $26.5
million and $21.6 million of deposits received from executive officers, directors
and related entities of directors.

Time deposits that exceed the FDIC Insurance limit of $250,000 at December
31, 2016 and 2015 were $43.3 million and $49.7 million, respectively.

12. REPURCHASE AGREEMENT BORROWINGS
Securities sold under agreements to repurchase (“repurchase agreements”)
with customers represent funds deposited by customers, generally on an
overnight basis, that are collateralized by investment securities owned by Park.
Repurchase agreements with customers are included in short-term borrowings
on the consolidated balance sheets. Park's repurchase agreements with a third-
party financial institution are classified as long-term debt on the Consolidated
Balance Sheets.

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All repurchase agreements are subject to terms and conditions of
repurchase/security agreements between Park and the client and are
accounted for as secured borrowings. Park’s repurchase agreements
reflected in short-term borrowings consist of customer accounts and
securities which are pledged on an individual security basis.

At December 31, 2016 and December 31, 2015, Park’s repurchase agreement
borrowings totaled $510 million and $554 million, respectively. At both
December 31, 2016 and December 31, 2015, $300 million of Park’s
repurchase agreement borrowings were classified as long-term debt with
the remaining amount being classified as short-term debt on the Consolidated
Balance Sheets. These borrowings were collateralized with U.S. government
and agency securities with a carrying value of $569 million and $622 million
at December 31, 2016 and December 31, 2015, respectively. Declines in
the value of the collateral would require Park to pledge additional securities.
As of December 31, 2016 and December 31, 2015, Park had $640 million
and $583 million, respectively, of available unpledged securities.

The following table presents the carrying value of Park’s repurchase agreements
by remaining contractual maturity and collateral pledged at December 31, 2016
and December 31, 2015:

Remaining Contractual Maturity of the Agreements

Overnight
and
Continuous

Up to
30 Days

30–90
Days

Greater
than
90 Days

Total

(In thousands)

December 31, 2016:

U.S. government and
agency securities

December 31, 2015:

U.S. government and
agency securities

During 2015 and 2016, outstanding FHLB advances were collateralized by
investment securities owned by the Corporation’s bank subsidiary and by
various loans pledged under a blanket agreement by the Corporation’s bank
subsidiary. At December 31, 2016 and 2015, $25 million and $21 million,
respectively, of investment securities were pledged as collateral for FHLB
advances. At December 31, 2016 and 2015, $1,909 million and $1,985 million,
respectively, of commercial real estate and residential mortgage loans were
pledged under a blanket agreement to the FHLB by Park’s bank subsidiary.
See Note 12 – Repurchase Agreement Borrowings for information related
to investment securities collateralizing repurchase agreements.

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

December 31,

(In thousands)

2016

2015

Outstanding
Balance

Average
Rate

Outstanding
Balance

Average
Rate

Total Federal Home Loan Bank advances

by year of maturity:

2017
2018
2019
2020
2021
Thereafter

Total

$ 50,000
150,000
75,000
25,000
—
100,000

$400,000

1.25%
2.04%
1.96%
2.14%
—
3.40%

2.27%

$ 50,000
150,000
75,000
25,000
—
150,000

$450,000

1.25%
2.04%
1.96%
2.14%
—
3.32%

2.37%

Total broker repurchase agreements

by year of maturity:

$208,691

$ —

$301,104

$509,795

2017

Total

$300,000

1.75%

$300,000

1.75%

$247,618

$2,239

$ —

$304,385

$554,242

Total combined long-term debt

by year of maturity:

See Note 13 – Short-Term Borrowings for additional information related to
repurchase agreements classified as short-term borrowings. See Note 14 –
Long-Term Debt for additional information related to repurchase agreements
classified as long-term debt.

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

December 31 (In thousands)

Securities sold under agreements to repurchase
Federal Home Loan Bank advances

Total short-term borrowings

2016

$209,795
185,000

$394,795

2015

$254,242
140,000

$394,242

The outstanding balances for all short-term borrowings as of December 31,
2016 and 2015 and the weighted-average interest rates as of and paid during
each of the years then ended were as follows:

(In thousands)

2016:

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

As of year-end
Paid during the year

2015:

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

As of year-end
Paid during the year

Repurchase
Agreements

FHLB
Advances

$209,795
248,277
224,763

0.17%
0.16%

$254,242
278,324
257,622

0.17%
0.18%

$185,000
185,000
15,694

0.80%
0.63%

$140,000
140,000
1,096

0.56%
0.59%

2017
2018
2019
2020
2021
Thereafter

Total
Prepayment penalty

Total long-term debt

$350,000
150,000
75,000
25,000
—
100,000

$700,000
(5,719)

$694,281

1.68%
2.04%
1.96%
2.14%
—
3.40%

2.05%
—

2.07%

$350,000
150,000
75,000
25,000
—
150,000

$750,000
(11,895)

$738,105

1.68%
2.04%
1.96%
2.14%
—
3.32%

2.12%
—

2.16%

On November 30, 2012, Park restructured $300 million in repurchase agree-
ments at a rate of 1.75%. As part of this restructuring, Park paid a prepayment
penalty of $25 million. The penalty is being amortized as an adjustment to
interest expense over the remaining term of the repurchase agreements using
the effective interest method, resulting in an effective interest rate of 3.55%.
Of the $25 million prepayment penalty, $4.7 million remained to be amortized
as of December 31, 2016. The remaining $4.7 million will be amortized in
2017.

On November 21, 2014, Park restructured $50 million in FHLB advances at
a rate of 1.25%. As part of this restructuring, Park paid a prepayment penalty
of $3.2 million. The penalty is being amortized as an adjustment to interest
expense over the remaining term of the advances using the effective interest
method, resulting in an effective interest rate of 3.52%. Of the $3.2 million
prepayment penalty, $1.0 million remained to be amortized as of December
31, 2016. The remaining $1.0 million will be amortized in 2017.

On March 30, 2015, Park prepaid $54.5 million of FHLB advances, with a
weighted average rate of 1.59%, resulting in a prepayment penalty of $532,000
recognized within other expense on the Consolidated Statements of Income.

On October 20, 2016, Park prepaid $50.0 million of FHLB advances, incurring
a $5.6 million prepayment penalty recognized within other expense on the
Consolidated Statements of Income. These advances had an interest rate of
3.15% and a maturity date of November 13, 2023.

Park had approximately $100.0 million of long-term debt at December 31,
2016 with a contractual maturity longer than five years. However, all of this
debt is callable by the lender in 2017.

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At December 31, 2016 and 2015, FHLB advances were collateralized by invest-
ment securities owned by PNB’s banking divisions and by various loans pledged
under a blanket agreement by PNB’s banking divisions. At December 31, 2016
and 2015, $25 million and $21 million, respectively, of investment securities
were pledged as collateral for FHLB advances. At December 31, 2016 and
2015, $1,909 million and $1,985 million, respectively, of commercial real
estate and residential mortgage loans were pledged under a blanket agreement
to the FHLB by Park's bank subsidiary. See Note 12 – Repurchase Agreement
Borrowings for information related to investment securities collateralizing
repurchase agreements.

15. SUBORDINATED NOTES
As part of the acquisition of Vision's parent bank holding company (“Vision
Parent”) on March 9, 2007, Park became the successor to Vision Parent under
(i) the Amended and Restated Trust Agreement of Vision Bancshares Trust I
(the “Trust”), dated as of December 5, 2005, (ii) the Junior Subordinated
Indenture, dated as of December 5, 2005, and (iii) the Guarantee Agreement,
also dated as of December 5, 2005.

On December 1, 2005, Vision Parent formed a wholly-owned Delaware
statutory business trust, Vision Bancshares Trust I (“Trust I”), which issued
$15.0 million of Trust I’s floating rate preferred securities (the “Trust Preferred
Securities”) to institutional investors. These Trust Preferred Securities qualify as
Tier I capital under FRB guidelines. All of the common securities of Trust I are
owned by Park. The proceeds from the issuance of the common securities and
the Trust Preferred Securities were used by Trust I to purchase $15.5 million
of junior subordinated notes, which carry a floating rate based on three-month
LIBOR plus 148 basis points. The debentures represent the sole asset of Trust I.
The Trust Preferred Securities accrue and pay distributions at a floating rate of
three-month LIBOR plus 148 basis points per annum. The Trust Preferred
Securities are mandatorily redeemable upon maturity of the notes in December
2035, or upon earlier redemption as provided in the notes. Park has the right
to redeem the notes purchased by Trust I in whole or in part, on or after
December 30, 2010. As specified in the indenture, if the notes are redeemed
prior to maturity, the redemption price will be the principal amount, plus any
unpaid accrued interest. In accordance with GAAP, Trust I is not consolidated
with Park’s financial statements, but rather the subordinated notes are reflected
as a liability.

On December 23, 2009, Park entered into a Note Purchase Agreement, dated
December 23, 2009, with 38 purchasers (the “2009 Purchasers”). Under the
terms of the Note Purchase Agreement, the 2009 Purchasers purchased from
Park an aggregate principal amount of $35.25 million of 10% Subordinated
Notes due December 23, 2019 (the “2009 Notes”). The 2009 Notes were
intended to qualify as Tier 2 capital under applicable rules and regulations
of the FRB. The 2009 Notes could not be prepaid in any amount prior to
December 23, 2014; however, subsequent to that date, Park could prepay,
without penalty, all or a portion of the principal amount outstanding. Of the
$35.25 million in 2009 Notes, $14.05 million were purchased by related
parties. The 2009 Notes were prepaid in full on December 24, 2014, together
with accrued interest.

On April 20, 2012, Park entered into a Note Purchase Agreement, dated April
20, 2012 (the “2012 Purchase Agreement”), with 56 purchasers (the “2012
Purchasers”). Under the terms of the 2012 Purchase Agreement, the 2012
Purchasers purchased from Park an aggregate principal amount of $30 million
of 7% Subordinated Notes due April 20, 2022 (the “2012 Notes”). The 2012
Notes are intended to qualify as Tier 2 capital under applicable rules and regu-
lations of the FRB. Each 2012 Note was purchased at a purchase price of 100%
of the principal amount thereof. The 2012 Notes may not be prepaid by Park
prior to April 20, 2017. From and after April 20, 2017, Park may prepay all,
or from time to time, any part of the 2012 Notes at 100% of the principal
amount (plus accrued interest) without penalty, subject to any requirement
under FRB regulations to obtain prior approval from the FRB before making
any prepayment.

16. CONTINGENT LIABILITIES
The Company is a defendant in lawsuits and other adversary proceedings arising
in the ordinary course of business. Legal costs incurred in connection with the
resolution of claims and lawsuits are generally expensed as incurred, and the
Company establishes accruals for the outcome of litigation where losses are
deemed probable and reasonably estimable. The Company’s assessment of the
current exposure could change in the event of the discovery of additional facts
with respect to legal matters pending against the Company or determinations
by judges, juries, administrative agencies or other finders of fact that are not
in accordance with the Company’s evaluation of claims.

As of December 31, 2016, the Company had accrued charges of approximately
$2.3 million for legal contingencies related to various legal and other adversary
proceedings.

17. SHARE-BASED COMPENSATION
The Park National Corporation 2013 Long-Term Incentive Plan (the “2013
Incentive Plan”) was adopted by the Board of Directors of Park on January
28, 2013 and was approved by Park’s shareholders at the Annual Meeting of
Shareholders on April 22, 2013. The 2013 Incentive Plan makes equity-based
awards and cash-based awards available for grant to participants in the form of
incentive stock options, nonqualified stock options, stock appreciation rights,
restricted common shares, restricted stock unit awards that may be settled in
common shares, cash or a combination of the two, unrestricted common
shares and cash-based awards. Under the 2013 Incentive Plan, 600,000
common shares are authorized to be issued and delivered in connection with
grants under the 2013 Incentive Plan. 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, including common shares purchased in the open market or in private
transactions. No awards may be made under the 2013 Incentive Plan after April
22, 2023. At December 31, 2016, 473,725 common shares were available for
future grants under the 2013 Incentive Plan.

During 2016, 2015, and 2014, Park granted 9,950, 10,150, and 10,200
common shares, respectively, to directors of Park and to directors of Park’s
bank subsidiary PNB (and its divisions) under the 2013 Incentive Plan. The
common shares granted to directors were not subjected to a vesting period and
resulted in expense of $950,000, $963,000, and $801,000 in 2016, 2015, and
2014, respectively, which is included in Professional fees and services on the
Consolidated Statement of Income.

During 2016, 2015 and 2014, the Compensation Committee of the Board
of Directors of Park granted awards of an aggregate of 41,550, 23,025 and
21,975, respectively, performance based restricted stock units (“PBRSUs”)
to certain employees of Park and its subsidiaries. The number of PBRSUs
earned or settled will depend on certain performance conditions and are
also subject to service based vesting. None of the PBRSUs had vested as
of December 31, 2016. As of December 31, 2016, an aggregate of 1,125
PBRSUs had been forfeited.

A summary of changes in Park’s nonvested shares for the year ended December
31, 2016 follows:

Nonvested at January 1, 2016

Granted
Vested
Forfeited

Nonvested at December 31, 2016

44,700
41,550
—
825

85,425

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Share-based compensation expense of $1.9 million, $865,000 and $458,000
was recognized for the years ended December 31, 2016, 2015 and 2014,
respectively, related to PBRSU awards to employees. The following table details
expected additional share-based compensation expense related to PBRSUs
currently outstanding:

(In thousands)

2017
2018
2019
2020

Total

$1,193
1,072
491
83

$2,839

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

There were no pension contributions in 2015 or 2016 and there is no con -
tribution expected to be made in 2017.

Using an accrual measurement date of December 31, 2016 and 2015, plan
assets and benefit obligation activity for the Pension Plan are listed below:

(In thousands)

2016

2015

Change in fair value of plan assets

Fair value at beginning of measurement period
Actual return on plan assets
Benefits paid

Fair value at end of measurement period

Change in benefit obligation

Projected benefit obligation at beginning of

measurement period

Service cost
Interest cost
Actuarial loss (gains)
Benefits paid

Projected benefit obligation at the

end of measurement period

Funded status at end of year

$153,498
19,256
(5,707)

$167,047

$102,245
5,055
4,869
7,993
(5,707)

$160,598
(58)
(7,042)

$153,498

$109,328
5,368
4,695
(10,104)
(7,042)

$114,455

$102,245

(fair value of plan assets less benefit obligation)

$ 52,592

$ 51,253

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

Asset Category

Equity securities
Fixed income and cash equivalents

Total

Target Allocation

50% – 100%
remaining balance
—

2016

84%
16%
100%

2015

85%
15%
100%

Percentage of Plan Assets

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

The expected long-term rate of return on plan assets used to measure the
benefit obligation was 7.00% as of December 31, 2016 and 7.25% as of
December 31, 2015. This return was based on the expected return of each
of the asset categories, weighted based on the median of the target allocation
for each class.

The accumulated benefit obligation for the Pension Plan was $97.2 million and
$86.1 million at December 31, 2016 and 2015, respectively.

On November 17, 2009, the Park Pension Plan completed the purchase of
115,800 common shares of Park for $7.0 million or $60.45 per share. At
December 31, 2016 and 2015, the fair value of the 115,800 common shares
held by the Pension Plan was $13.9 million, or $119.66 per share and $10.5
million, or $90.48 per share, respectively.

The weighted average assumptions used to determine benefit obligations at
December 31, 2016, 2015 and 2014 were as follows:

Discount rate
Rate of compensation increase

Under age 30
Ages 30 – 39
Ages 40 – 49
Ages 50 and over

2016

4.58%

10.00%
6.00%
4.00%
3.00%

2015

4.88%

10.00%
6.00%
3.00%
3.00%

2014

4.42%

10.00%
6.00%
3.00%
3.00%

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

2017
2018
2019
2020
2021
2022 – 2026

Total

$ 6,924
7,644
7,875
8,393
9,503
48,058

$88,397

The following table shows ending balances of accumulated other
comprehensive loss at December 31, 2016 and 2015.

(In thousands)

Prior service cost
Net actuarial loss

Total

Deferred taxes

2016

$ —
(22,677)

(22,677)

7,937

2015

$ —
(23,618)

(23,618)

8,267

Accumulated other comprehensive loss

$(14,740)

$(15,351)

Using an actuarial measurement date of December 31 for 2016, 2015
and 2014, components of net periodic benefit income and other amounts
recognized in other comprehensive income (loss) were as follows:

(In thousands)

2016

2015

2014

Components of net periodic benefit income

and other amounts recognized in
other comprehensive income
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Recognized net actuarial loss

Net periodic benefit income

Change to net actuarial gain (loss)

for the period

Amortization of prior service cost
Amortization of net loss

Total recognized in other

comprehensive income (loss)

$ (5,055)
(4,869)
$10,950
—
(773)

253

168
—
773

941

$(5,368)
(4,695)
11,420
(15)
(637)

$ 705

$(1,400)
15
637

$ (4,331)
(4,577)
10,869
(19)
—

$ 1,942

$(14,276)
19
—

(748)

(14,257)

Total recognized in net benefit income

and other comprehensive income (loss)

$ 1,194

(43)

$(12,315)

There are no estimated prior service costs for the Pension Plan to be amortized
from accumulated other comprehensive income (loss) into net periodic benefit
cost over the next fiscal year. The estimated net actuarial loss expected to be
recognized in the next fiscal year is $576,000.

The weighted average assumptions used to determine net periodic benefit cost
for the years ended December 31, 2016, 2015 and 2014 are listed below:

Discount rate
Rate of compensation increase

Under age 30
Ages 30 – 39
Ages 40 and over

Expected long-term return on plan assets

2016

4.88%

100.0%
6.00%
3.00%
7.25%

2015

4.42%

10.00%
6.00%
3.00%
7.25%

2014

5.30%

10.00%
6.00%
3.00%
7.25%

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The Pension Plan maintains cash in a PNB savings account. The Pension Plan
cash balance was $2.5 million at December 31, 2016.

GAAP defines fair value as the price that would be received by Park for an asset
or paid by Park to transfer a liability (an exit price) in an orderly transaction
between market participants on the measurement date, using the most advan -
tageous market for the asset or liability. The fair values of equity securities,
consisting of mutual fund investments and common stock (U.S. large cap) held
by the Pension Plan and the fixed income and cash equivalents, are determined
by obtaining quoted prices on nationally recognized securities exchanges (Level
1 inputs). The fair value of Pension Plan assets at December 31, 2016 was
$167.0 million. At December 31, 2016, $149.2 million of equity investments
and cash in the Pension Plan were categorized as Level 1 inputs; $17.8 million
of plan investments in corporate (U.S. large cap) and U.S. Government spon-
sored entity bonds were categorized as Level 2 inputs, as fair value was based
on quoted market prices of comparable instruments; and no investments were
categorized as Level 3 inputs. The fair value of Pension Plan assets was $153.5
million at December 31, 2015. At December 31, 2015, $135.0 million of invest-
ments in the Pension Plan were categorized as Level 1 inputs; $18.5 million
were categorized as Level 2; and no investments were categorized as Level 3.

The Corporation has a voluntary salary deferral plan covering substantially all
of the employees of the Corporation and its subsidiaries. Eligible employees
may contribute a portion of their compensation subject to a maximum statutory
limitation. The Corporation provides a matching contribution established
annually by the Corporation. Contribution expense for the Corporation was
$1.3 million, $1.2 million, and $1.1 million for 2016, 2015 and 2014,
respectively.

The Corporation has entered into Supplemental Executive Retirement
Plan Agreements (the “SERP Agreements”) with certain key officers of the
Corporation and its subsidiaries which provide defined pension benefits in
excess of limits imposed by federal tax law. The accrued benefit cost for the
SERP Agreements totaled $8.8 million and $8.0 million for 2016 and 2015,
respectively. The expense for the Corporation was $1.5 million for 2016,
$1.1 million for 2015 and $1.5 million for 2014.

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

December 31 (in thousands)

2016

2015

Deferred tax assets:

Allowance for loan losses
Accumulated other comprehensive loss –

Pension plan

Accumulated other comprehensive loss –

unrealized losses on securities

Deferred compensation
OREO valuation adjustments
Net deferred loan fees
Deferred contract bonus
Nonvested equity-based compensation
Fixed assets
Accrued litigation
Other

Total deferred tax assets

Deferred tax liabilities:

Deferred investment income
Pension plan
Mortgage servicing rights
Partnership adjustments
Other

Total deferred tax liabilities

Net deferred tax asset (liability)

$17,719

$19,773

7,937

1,618
4,140
2,322
1,397
1,074
1,115
781
793
2,525

8,266

157
3,908
2,418
1,204
1,031
463
413
482
2,813

$41,421

$40,928

10,199
26,344
3,243
549
596

$40,931

490

10,199
26,205
3,153
560
872

$40,989

(61)

Park performs an analysis to determine if a valuation allowance against
deferred tax assets is required in accordance with GAAP. Management has deter-
mined that it is not required to establish a valuation allowance against
the December 31, 2016 or 2015 deferred tax assets in accordance with GAAP
since it is more likely than not that the deferred tax assets will be fully utilized
in future periods.

The components of the provision for federal income taxes are shown below:

December 31 (In thousands)

2016

2015

2014

Currently payable

Federal
Amortization of qualified affordable

housing projects

Deferred
Federal

Total

$28,879

$26,153

$27,062

7,300

6,664

6,869

581

$36,760

(250)

2,528

$32,567

$36,459

The following is a reconciliation of income tax expense to the amount
computed at the statutory rate of 35% for the years ended December 31,
2016, 2015 and 2014.

Statutory federal corporate tax rate
Changes in rates resulting from:

Tax-exempt interest income, net of

disallowed interest

Bank owned life insurance
Investments in qualified

affordable housing projects,
net of tax benefits

Other tax credits
KSOP dividend deduction
Other

Effective tax rate

2016

35.0%

(1.3)%
(1.2)%

(1.7)%
—
(1.0)%
0.1%

29.9%

2015

35.0%

(0.5)%
(1.8)%

(1.9)%
(0.9)%
(1.0)%
(0.2)%

28.7%

2014

35.0%

(0.5)%
(1.4)%

(1.6)%
—
(1.0)%
(0.2)%

30.3%

Park and its subsidiaries do not pay state income tax to the state of Ohio, but
pay a franchise tax based on equity. The franchise tax expense is included in
“State tax expense” on Park’s Consolidated Statements of Income.

Unrecognized Tax Benefits
The following is a reconciliation of the beginning and ending amount of
unrecognized tax benefits.

(In thousands)

January 1 Balance

Additions based on tax

positions related to the
current year

Additions for tax positions

of prior years

Reductions for tax positions

of prior years
Reductions due to

statute of limitations

December 31 Balance

2016

$558

117

—

(80)

$633

2015

$532

—

(70)

$558

2014

$518

—

(76)

$532

The amount of unrecognized tax benefits that, if recognized, would favorably
affect the effective income tax rate in the future periods at December 31, 2016,
2015 and 2014 was $482,000, $432,000 and $413,000, respectively. Park does
not expect the total amount of unrecognized tax benefits to significantly increase
or decrease during the next year.

The expense related to interest and penalties recorded on unrecognized
tax benefits in the Consolidated Statements of Income for the years ended
December 31, 2016, and 2015 was $1,500 and $2,000, respectively. There was
no expense related to interest and penalties for the year ended December 31,
2014. The amount accrued for interest and penalties at December 31, 2016,
2015 and 2014 was $70,500, $69,000 and $67,000, respectively.

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Park and its subsidiaries are subject to U.S. federal income tax and income tax
in various state jurisdictions. The Corporation is subject to routine audits of
tax returns by the Internal Revenue Service and states in which we conduct
business. No material adjustments have been made on closed federal and
state tax audits. All tax years ending prior to December 31, 2013 are closed
to examination by the federal taxing authorities. Generally, all tax years prior
to December 31, 2012 are closed to examination by state taxing authorities.

20. OTHER COMPREHENSIVE INCOME (LOSS)
Other comprehensive income (loss) components, net of income tax, are shown
in the following table for the years ended December 31, 2016, 2015 and 2014.

Changes in
Pension Plan
Assets and
Benefit
Obligations

Unrealized
Gains and
Losses on
Available-for-
Sale Securities

Total

$(15,351)

$ (292)

$(15,643)

(2,713)

(2,604)

—

502

(2,713)

(2,102)

$ (3,005)

$(17,745)

$ 1,257

$(13,608)

(1,549)

(2,459)

109

502

611

$(14,740)

$(14,865)

(910)

424

(486)

$(15,351)

$ (5,598)

(9,279)

30,325

21,046

753

765

(9,267)

$(14,865)

31,078

21,811

$ 1,257

$(13,608)

Year ended
December 31
(In thousands)

Beginning balance at
January 1, 2016
Other comprehensive
gain (loss) before
reclassifications
Amounts reclassified
from accumulated
other comprehensive
loss

Net current period

other comprehensive
income (loss)

Ending balance at

December 31, 2016

Beginning balance at
January 1, 2015
Other comprehensive

loss before
reclassifications
Amounts reclassified
from accumulated
other comprehensive
loss

Net current period

other comprehensive
loss

Ending balance at

December 31, 2015
Beginning balance at
January 1, 2014
Other comprehensive
(loss) gain before
reclassifications
Amounts reclassified
from accumulated
other comprehensive
loss

Net current period

other comprehensive
(loss) income
Ending balance at

December 31, 2014

The following table provides information concerning amounts reclassified out
of accumulated other comprehensive loss for the years ended December 31,
2016, 2015 and 2014:

December 31
(In thousands)

Amortization of defined
benefit pension items
Amortization of prior
service cost
Amortization of net loss

Income before
income taxes

Federal income taxes

Net of income tax

Unrealized gains and

losses on available for
sale securities

Loss on sale of
investment securities
Other than temporary
impairment

Income before
income taxes

Federal income taxes

Net of income tax

Amount Reclassified
from Accumulated
Other Comprehensive
Income (Loss)
2015

2014

2016

Affected Line Item
in the Consolidated
Statement of Income

$ —
773

$773

271

$502

$ 15
637

$652

228

$424

19
Employee benefits
— Employee benefits

Income before income taxes

Federal income taxes

Net of income tax

$ —

$ — $1,158

Gain (loss) on sale of
investment securities

—

— Miscellaneous expense

$ —

—

$ —

$ — $1,158

Income before income taxes

—

405

Federal income taxes

$ — $ 753

Net of income tax

21. EARNINGS PER COMMON SHARE
GAAP requires the reporting of basic and diluted earnings per common share.
Basic earnings per common share excludes any dilutive effects of restricted
stock units.

The following table sets forth the computation of basic and diluted earnings per
common share:

Weighted-average common

shares outstanding

Effect of dilutive performance-based

restricted stock units

Weighted-average common shares
outstanding adjusted for the effect
of diluted performance-based
restricted stock units
Earnings per common share:

Basic earnings per common share
Diluted earnings per common share

$86,135

$81,012

$83,957

15,332,553

15,364,281

15,394,971

72,607

40,459

18,861

15,405,160

15,404,740

15,413,832

$5.62
$5.59

$5.27
$5.26

$5.45
$5.45

Park awarded 41,550, 23,025 and 21,975 PBRSUs to certain employees during
the years ended December 31, 2016, 2015 and 2014, respectively. The PBRSUs
vest based on service and performance conditions. The dilutive effect of the
PBRSUs was the addition of 72,607, 40,459 and 18,861 common shares for
the years ended December 31, 2016, 2015 and 2014, respectively.

During the years ended December 31, 2015 and 2014, Park repurchased
71,700 and 29,700 common shares, respectively, to fund the PBRSUs and
common shares awarded to directors of Park and to directors of Park’s
subsidiary PNB (and its divisions). No common shares were repurchased
during 2016.

—

424

Year ended December 31
(in thousands, except share data)

2016

2015

2014

(1,549)

(2,035)

Numerator:

Net income available to
common shareholders

(292)

$(15,643)

Denominator:

$(29,821)

$(35,419)

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22. DIVIDEND RESTRICTIONS
Bank regulators limit the amount of dividends a subsidiary bank can declare
in any calendar year without obtaining prior approval. At December 31, 2016,
approximately $71.7 million of the total shareholders’ equity of PNB was avail-
able for the payment of dividends to the Corporation, without approval by the
applicable regulatory authorities.

23. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
AND FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF
CREDIT RISK

The Corporation is party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include loan commitments and standby letters
of credit. The instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the consolidated
financial statements.

The Corporation’s exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for loan commitments and standby letters
of credit is represented by the contractual amount of those instruments. The
Corporation uses the same credit policies in making commitments and condi-
tional obligations as it does 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:

December 31 (In thousands)

Loan commitments

Standby letters of credit

2016

$912,007

13,746

2015

$888,411

12,326

The loan commitments are generally for variable rates of interest.

The Corporation grants retail, commercial and commercial real estate
loans to customers primarily located in Ohio. The Corporation evaluates each
customer’s creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Corporation upon extension of credit, is
based on management’s credit evaluation of the customer. Collateral held varies
but may include accounts receivable, inventory, property, plant and equipment,
and income-producing commercial properties.

Although the Corporation has a diversified loan portfolio, a substantial
portion of the borrowers’ ability to honor their contracts is dependent upon
the economic conditions in each borrower’s geographic location and industry.

24. LOAN SERVICING
Park serviced sold mortgage loans of $1,330 million at December 31, 2016,
compared to $1,276 million at December 31, 2015 and $1,265 million at
December 31, 2014. At December 31, 2016, $4.1 million of the sold mortgage
loans were sold with recourse compared to $5.4 million at December 31, 2015
and $7.0 million at December 31, 2014. Management closely monitors the
delinquency rates on the mortgage loans sold with recourse. As of December
31, 2016 and 2015, management had established a reserve of $266,000 and
$454,000, respectively, to account for 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 U.S. GAAP, whereby the servicing rights capitalized are amor-
tized 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 com-
parison to fair value. MSRs are carried at the lower of their amortized cost
or fair value. The amortization of mortgage loan servicing rights is included
within “Other service income” in the Consolidated Statements of Income.

Activity for mortgage servicing rights and the related valuation allowance
follows:

December 31 (In thousands)

2016

2015

2014

Mortgage servicing rights:

Carrying amount, net, beginning of year
Additions
Amortization
Change in valuation allowance

Carrying amount, net, end of year

Valuation allowance:
Beginning of year
Change in valuation allowance

End of year

$9,008
2,286
(1,835)
(193)

$9,266

$ 542
193

$ 735

$8,613
1,748
(1,637)
284

$9,008

$ 826
(284)

$ 542

$ 9,013
1,026
(1,631)
205

$ 8,613

$ 1,031
(205)

$ 826

The fair value of mortgage servicing rights was $9.3 million and $9.6 million at
December 31, 2016 and 2015, respectively. The fair value of mortgage servicing
rights at December 31, 2016 was established using a discount rate of 13%
and constant prepayment speeds ranging from 6.2% to 16.8%. The fair value
of mortgage servicing rights at December 31, 2015 was established using
a discount rate of 10% and constant prepayment speeds ranging from 6.3%
to 22.0%.

Servicing fees included in other service income were $3.4 million, $3.4 million
and $3.5 million for the years ended December 31, 2016, 2015 and 2014,
respectively.

25. 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:
(cid:0) 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.

(cid:0) 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.

(cid:0) Level 3: Consists of unobservable inputs that are used to measure fair

value when observable market inputs are not available. This could include
the use of internally developed models, financial forecasting and similar
inputs.

Fair value is defined as the price that would be received to sell an asset or paid
to transfer a liability between market participants at the balance sheet date.
When possible, the Company looks to active and observable markets to price
identical assets or liabilities. When identical assets and liabilities are not traded
in active markets, the Company looks to observable market data for similar
assets and liabilities. However, certain assets and liabilities are not traded in
observable markets and Park must use other valuation methods to develop
a fair value. The fair value of impaired loans is typically based on the fair value
of the underlying collateral, which is estimated through third-party appraisals
or internal estimates of collateral values in accordance with Park's valuation
requirements per its commercial and real estate loan policies.

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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:

The table below is a reconciliation of the beginning and ending balances of the
Level 3 inputs for the years ended December 31, 2016 and 2015, for financial
instruments measured on a recurring basis and classified as Level 3:

Fair Value Measurements at December 31, 2016 Using:

(In thousands)

Level 1

Level 2

Level 3

Balance at
12/31/16

ASSETS

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

U.S. Government

sponsored entities’
asset-backed
securities
Equity securities
Mortgage loans
held for sale
Mortgage IRLCs

LIABILITIES

$ —

$267,533

$ —

$267,533

—
2,644

—
—

987,172
—

10,413
124

—
790

—
—

987,172
3,434

10,413
124

Fair value swap

$ —

—

$226

226

Fair Value Measurements at December 31, 2015 Using:

(In thousands)

Level 1

Level 2

Level 3

Balance at
12/31/15

ASSETS

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

U.S. Government

sponsored entities’
asset-backed
securities
Equity securities
Mortgage loans
held for sale
Mortgage IRLCs

LIABILITIES

$ —

$522,063

$ —

$522,063

—
1,941

—
—

911,493
—

7,306
165

—
769

—
—

911,493
2,710

7,306
165

Fair value swap

$ —

—

$226

226

There were no transfers between Level 1 and Level 2 during 2016 or 2015.
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 as of the end of the reporting period.

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 avail-
able, fair values are based on quoted market prices of comparable instruments.
For securities where quoted prices or market prices of similar securities are
not available, fair values are calculated using discounted cash flows.

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 loans held for sale are estimated using security prices
for similar product types and, therefore, are classified in Level 2.

Level 3 Fair Value Measurements

(In thousands)

Balance at January 1, 2016

Total gains (losses)

Included in earnings – realized
Included in earnings – unrealized
Included in other comprehensive income
Purchases, sales, issuances and settlements,

other, net

Re-evaluation of fair value swap

Balance at December 31, 2016

Balance at January 1, 2015

Total gains (losses)

Included in earnings – realized
Included in earnings – unrealized
Included in other comprehensive income
Purchases, sales, issuances and settlements,

other, net

Re-evaluation of fair value swap

Balance at December 31, 2015

Equity
Securities

$769

Fair Value
Swap

$(226)

—
—
21

—
—

$790

$776

—
—
(7)

—
—

—
—
—

—
—

$(226)

—
—
—

—
—

$769

$(226)

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 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 inde-
pendent 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. Collateral is then adjusted 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, also resulting in a Level 3 fair value classi -
fication. Impaired loans are evaluated on a quarterly basis for additional
impairment and adjusted accordingly. Additionally, updated independent
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.

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Appraisals for both collateral dependent impaired loans and OREO are per-
formed by licensed appraisers. Appraisals are generally obtained to support the
fair value of collateral. In general, there are three types of appraisals, real estate
appraisals, income approach appraisals and lot development loan appraisals,
received by the Company. These are discussed below:

(cid:0) 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% is based on historical discounts
to appraised values on sold OREO properties.

(cid:0) Income approach appraisals typically incorporate the annual net operat-
ing income of the business divided by an appropriate capitalization rate,
as determined by the appraiser. Management generally applies a 15%
discount to income approach appraised values which management
expects will cover all disposition costs (including selling costs).
(cid:0) 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 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 tables present assets and liabilities measured at fair value on
a nonrecurring 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.

Fair Value Measurements at December 31, 2016 Using:

(In thousands)

Level 1

Level 2

Level 3

Impaired loans:

Commercial real estate
$ —
Construction real estate —
—
Residential real estate

Total impaired loans

$ —

$ —
—
—

$ —

$ 3,057
541
2,385

$ 5,983

Balance at
12/31/16

$ 3,057
541
2,385

$ 5,983

Mortgage servicing

rights

$ —

$ 6,769

$ —

$ 6,769

Other real estate owned:
Commercial real estate
—
Construction real estate —
—
Residential real estate

Total other

—
—
—

2,644
3,322
931

real estate owned

$ —

$ 6,897

Fair Value Measurements at December 31, 2015 Using:

(In thousands)

Level 1

Level 2

Level 3

Balance at
12/31/15

Impaired loans:

$ —

$ 3,698

Commercial real estate
Construction real estate:
SEPH commercial land
and development

—
Remaining commercial —
—

Residential real estate

—
—
—

2,044
1,872
1,882

Total impaired loans

$ —

$ 9,496

Mortgage servicing

rights

$ —

$ 1,867

$ —

$ 1,867

Other real estate owned:
Commercial real estate
—
Construction real estate —
—
Residential real estate

Total other

—
—
—

2,796
3,387
2,332

real estate owned

$ —

$ 8,515

The table below provides additional detail on those impaired loans which
are recorded at fair value as well as the remaining impaired loan portfolio
not included above. The remaining impaired loans consist of loans which
are not collateral dependent as well as loans carried at cost as the fair value
of the underlying collateral or the present value of expected future cash flows
on each of the loans exceeded the book value for each respective credit.

(In thousands)

Year ended December 31, 2016

Impaired loans recorded

at fair value

Remaining impaired loans

Total impaired loans

Year ended December 31, 2015
Impaired loans recorded

at fair value

Remaining impaired loans

Total impaired loans

Recorded
Investment

Prior
Charge-offs

Specific
Valuation
Allowance

Carrying
Balance

$ 6,379
64,047

$70,426

$11,783
68,881

$80,664

$ 3,681
21,262

$24,943

$10,512
18,193

$28,705

$ 396
152

548

$2,287
1,904

$4,191

$ 5,983
63,895

$69,878

$ 9,496
66,977

$76,473

The income (expense) from credit adjustments related to impaired loans
carried at fair value for the years ended December 31, 2016, 2015 and 2014
was $0.9 million, $(2.1) million, and $(3.0) million, respectively.

MSRs totaled $9.3 million at December 31, 2016. Of this $9.3 million MSR
carrying balance, $6.8 million was recorded at fair value and included a
valuation allowance of $0.7 million. The remaining $2.5 million was recorded
at cost, as the fair value exceeded cost at December 31, 2016. At December 31,
2015, MSRs totaled $9.0 million. Of this $9.0 million MSR carrying balance,
$1.9 million was recorded at fair value and included a valuation allowance of
$0.5 million. The remaining $7.1 million was recorded at cost, as the fair value
exceeded cost at December 31, 2015. The (expense) income related to MSRs
carried at fair value for the years ended December 31, 2016, 2015 and 2014
was $(0.2) million, $0.3 million and $0.2 million, respectively.

Total OREO held by Park at December 31, 2016 and 2015 was $13.9 million
and $18.7 million, respectively. Approximately 50% and 46% of OREO held by
Park at December 31, 2016 and 2015, respectively, was carried at fair value
due to fair value adjustments made subsequent to the initial OREO measure-
ment. At December 31, 2016 and 2015, OREO held at fair value, less estimated
selling costs, amounted to $6.9 million and $8.5 million, respectively. The net
expense related to OREO fair value adjustments was $0.6 million, $1.6 million
and $2.4 million for the years ended December 31, 2016, 2015 and 2014,
respectively.

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The following tables present quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at
December 31, 2016 and December 31, 2015:

(In thousands)

December 31, 2016
Impaired loans:

Commercial real estate

Construction real estate

Residential real estate

Other real estate owned:
Commercial real estate

Construction real estate

Residential real estate

December 31, 2015
Impaired loans:

Commercial real estate

Construction real estate:

SEPH commercial land and development

Remaining commercial

Residential real estate

Other real estate owned:
Commercial real estate

Construction real estate

Residential real estate

Fair Value

Valuation Technique

Unobservable Input(s)

Range (Weighted Average)

$3,057

541

2,385

2,644

3,322

931

$3,698

2,044

1,872

1,882

2,796

3,387

2,332

Sales comparison approach
Income approach
Cost approach

Sales comparison approach
Bulk sale approach

Sales comparison approach
Income approach

Sales comparison approach
Bulk sale approach

Adj to comparables
Capitalization rate
Accumulated depreciation

Adj to comparables
Discount rate

Adj to comparables
Capitalization rate

Adj to comparables
Discount rate

0.0% – 90.0% (20.2%)
9.0% – 10.6% (10.1%)
17.0% – 18.0% (17.8%)

0.0% – 11.1% (1.6%)
10.0% (10.0%)

0.3% – 110.0% (17.0%)
10.0% (10.0%)

0.0% – 68.4% (26.5%)
13.0% – 14.0% (13.1%)

0.0% – 90.0% (24.7%)
15.0% (15.0%)

Sales comparison approach

Adj to comparables

3.2% – 79.7% (30.6%)

Sales comparison approach
Income approach
Cost approach

Sales comparison approach
Bulk sale approach

Sales comparison approach
Income approach
Cost approach

Sales comparison approach
Income approach

Sales comparison approach
Bulk sale approach

Adj to comparables
Capitalization rate
Accumulated depreciation

Adj to comparables
Discount rate

Adj to comparables
Capitalization rate
Accumulated depreciation

Adj to comparables
Capitalization rate

Adj to comparables
Discount rate

0.0% – 45.9% (20.3%)
7.0% – 13.3% (9.5%)
50.0% (50.0%)

5.0% – 40.0% (22.1%)
10.7% (10.7%)

0.0% – 25.3% (1.0%)
10.0% – 10.7% (10.0%)

0.0% – 96.7% (12.5%)
3.8% – 10.1% (9.1%)
33.3% – 50.0% (43.4%)

2.0% – 71.0% (26.9%)
9.5% (9.5%)

0.0% – 85.0% (24.3%)
15.0% (15.0%)

Sales comparison approach

Adj to comparables

0.1% – 61.8% (23.0%)

The following methods and assumptions were used by the Corporation in esti-
mating its fair value disclosures for assets and liabilities not discussed above:

Cash and cash equivalents: The carrying amounts reported in the
Consolidated Balance Sheets for cash and short-term instruments approximate
those assets’ fair values.

Other investments: FHLB stock and FRB stock within other investments are
carried at their respective redemption values as it is not practical to calculate
their fair values. Additional investments within this category are carried at their
cost basis as these investments do not have a readily determinable fair value and
Park does not have the ability to influence the operating or financial decisions
of the investee.

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,
based upon interest rates currently being offered for loans with similar terms
to borrowers of similar credit quality. The methods utilized to estimate fair
value do not necessarily represent an exit price.

Off-balance sheet instruments: Fair values for the Corporation’s loan com-
mitments 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 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 notes: Fair values for subordinated 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.

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

The fair value of financial instruments at December 31, 2016 and December 31, 2015, was as follows:

Fair Value Measurements at December 31, 2016:

Level 1

Level 2

Level 3

(In thousands)

Financial assets:

Cash and money market instruments
Investment securities
Accrued interest receivable – securities
Accrued interest receivable – loans
Mortgage loans held for sale
Impaired loans carried at fair value
Mortgage IRLCs
Other loans

Loans receivable, net

Financial liabilities:

Non-interest bearing checking accounts
Interest bearing transaction accounts
Savings accounts
Time deposits
Other

Total deposits

Short-term borrowings
Long-term debt
Subordinated notes
Accrued interest payable – deposits
Accrued interest payable – debt/borrowings

Derivative financial instruments:

Fair value swap

Fair Value Measurements at December 31, 2015:

(In thousands)

Financial assets:

Loans receivable, net

Financial liabilities:

Non-interest bearing checking accounts
Interest bearing transaction accounts
Savings accounts
Time deposits
Other

Total deposits

Short-term borrowings
Long-term debt
Subordinated notes
Accrued interest payable – deposits
Accrued interest payable – debt/ borrowings

Derivative financial instruments:

Fair value swap

Carrying
Value

$ 146,466
1,517,972
3,849
14,973
10,413
5,983
124
5,204,713

$5,221,233

$1,523,417
1,174,448
1,704,920
1,117,870
1,301

$5,521,956

$ 394,795
694,281
45,000
900
1,251

226

Carrying
Value

$ 149,459
1,585,568
4,436
14,239
7,306
9,496
165
4,994,624

$5,011,591

$1,404,032
1,107,200
1,544,708
1,290,412
1,290

$5,347,642

$ 394,242
738,105
45,000
987
1,351

226

$ 146,466
2,644
—
—
—
—
—
—

—

$1,523,417
1,174,448
1,704,920
—
1,301

$4,404,086

—
—
—
82
1

—

$ 149,459
1,941
—
—
—
—
—
—

—

$1,404,032
1,107,200
1,544,708
—
1,290

$4,057,230

—
—
—
66
4

—

226

Level 1

Level 2

Level 3

$
—
1,511,377
3,849
—
10,413
—
124
—

10,537

—
—
—
1,122,598
—

$1,122,598

$ 394,795
712,958
40,903
818
1,250

—
790
—
14,973
—
5,983
—
5,161,919

$5,167,902

—
—
—
—
—

—

—
—
—
—
—

$
—
1,584,984
4,436
—
7,306
—
165
—

7,471

—
—
—
1,295,329
—

$1,295,329

$ 394,242
771,420
41,596
921
1,347

—
769
—
14,239
—
9,496
—
4,997,318

$5,006,814

—
—
—
—
—

—

—
—
—
—
—

Total
Fair Value

$ 146,466
1,514,811
3,849
14,973
10,413
5,983
124
5,161,919

$5,178,439

$1,523,417
1,174,448
1,704,920
1,122,598
1,301

$5,526,684

$ 394,795
712,958
40,903
900
1,251

Total
Fair Value

$ 149,459
1,587,694
4,436
14,239
7,306
9,496
165
4,997,318

$5,014,285

$1,404,032
1,107,200
1,544,708
1,295,329
1,290

$5,352,559

$ 394,242
771,420
41,596
987
1,351

—

226

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

26. CAPITAL RATIOS
Financial institution regulators have established guidelines for minimum capital
ratios for banks, thrifts and bank holding companies. During the first quarter of
2015, Park adopted the Basel III regulatory capital framework as approved by
the federal banking agencies. The adoption of this framework modified the cal-
culation of the various capital ratios, added an additional ratio, common equity
tier 1, and revised the adequately and well capitalized thresholds. Additionally,
under this framework, in order to avoid limitations on capital distributions,
including dividend payments, Park must hold a capital conservation buffer
above the adequately capitalized risk-based capital ratios. The capital con -
servation buffer is being phased in from 0.0% for 2015 to 2.50% by 2019.
The capital conservation buffer was 0.625% for 2016. The amounts shown
below as the adequately capitalized ratio plus capital conservation buffer
includes the fully phased-in 2.50% buffer.

PNB met each of the well-capitalized ratio guidelines at December 31, 2016.
The following table indicates the capital ratios for PNB and Park at December
31, 2016 and 2015.

Leverage

Tier 1
Risk-Based

Common
Equity Tier 1

Total
Risk-Based

As of December 31, 2016:
The Park National Bank
Park National Corporation
Adequately capitalized

ratio

Adequately capitalized
ratio plus capital
conservation buffer
Well-capitalized ratio

(PNB only)

As of December 31, 2015:
The Park National Bank
Park National Corporation
Adequately capitalized

ratio

Adequately capitalized
ratio plus capital
conservation buffer
Well-capitalized ratio

(PNB only)

7.34%
9.56%

4.00%

5.00%

7.06%
9.22%

4.00%

5.00%

9.87%
12.83%

6.00%

8.50%

8.00%

9.83%
12.82%

6.00%

8.50%

8.00%

9.87%
12.55%

11.24%
14.32%

4.50%

8.00%

7.00%

6.50%

9.83%
12.54%

4.50%

7.00%

6.50%

10.50%

10.00%

11.37%
14.49%

8.00%

10.50%

10.00%

Failure to meet the minimum requirements above could cause the FRB to take
action. PNB is also subject to the capital requirements of its primary regulator,
the OCC. As of December 31, 2016 and 2015, Park and PNB were well-capital-
ized and met all capital requirements to which each was then subject. There are
no conditions or events since PNB's most recent regulatory report filings, that
management believes have changed the risk categories for PNB.

The following table reflects various measures of capital for Park and PNB:

(In thousands)

Actual Amount

Ratio

To Be Adequately Capitalized
Ratio
Amount

To Be Well Capitalized

Amount

Ratio

At December 31, 2016:
Total risk-based capital

(to risk-weighted assets)

PNB
Park

Tier 1 risk-based capital

(to risk-weighted assets)

PNB
Park
Leverage ratio

(to average total assets)

PNB
Park

Common equity Tier 1

(to risk-weighted assets)

PNB
Park

At December 31, 2015:
Total risk-based capital

(to risk-weighted assets)

PNB
Park

Tier 1 risk-based capital

(to risk-weighted assets)

PNB
Park

Leverage ratio

(to average total assets)

PNB
Park

Common equity Tier 1

(to risk-weighted assets)

PNB
Park

$607,269
784,406

$533,215
702,651

$533,215
687,651

$588,467
758,988

$508,763
671,664

$508,763
656,664

11.24%
14.32%

9.87%
12.83%

7.34%
9.56%

9.87%
12.55%

11.37%
14.49%

9.83%
12.82%

7.06%
9.22%

9.83%
12.54%

$432,153
438,231

$324,115
328,673

$290,671
293,916

$243,086
246,505

$414,079
419,080

$310,560
314,310

$288,147
291,449

$232,920
235,732

8.00%
8.00%

6.00%
6.00%

4.00%
4.00%

4.50%
4.50%

8.00%
8.00%

6.00%
6.00%

4.00%
4.00%

4.50%
4.50%

$540,192
N/A

$432,153
N/A

$363,339
N/A

$351,125
N/A

$517,599
N/A

$414,079
N/A

$360,183
N/A

$336,439
N/A

10.00%
N/A

8.00%
N/A

5.00%
N/A

6.50%
N/A

10.00%
N/A

8.00%
N/A

5.00%
N/A

6.50%
N/A

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27. SEGMENT INFORMATION
The Corporation is a financial holding company headquartered in Newark,
Ohio. The operating segments for the Corporation are its chartered national
bank subsidiary, PNB (headquartered in Newark, Ohio), SEPH and GFSC.

GAAP requires management to disclose information about the different types
of business activities in which a company engages and also information on the
different economic environments in which a company operates, so that the

users of the financial statements can better understand a company’s perform-
ance, better understand the potential for future cash flows, and make more
informed judgments about the company as a whole. Park’s current operating
segments are in line with GAAP as: (i) discrete financial information is available
for each operating segment and (ii) the segments are aligned with internal
reporting to Park’s Chief Executive Officer and President, who is the chief
operating decision-maker.

Operating results for the year ended December 31, 2016 (In thousands)

Net interest income (loss)
Provision for (recovery of) loan losses
Other income (loss)
Other expense

Income (loss) before taxes
Income taxes (benefit)

Net income (loss)

Balances at December 31, 2016:
Assets
Loans
Deposits

PNB

$ 227,576
2,611
74,803
177,562

122,206
37,755

84,451

$7,389,538
5,234,828
5,630,199

Operating results for the year ended December 31, 2015 (In thousands)

Net interest income (loss)
Provision for (recovery of) loan losses
Other income
Other expense

Income (loss) before taxes
Income taxes (benefit)
Net income (loss)

Balances at December 31, 2015:
Assets
Loans
Deposits

PNB

$ 220,879
7,665
75,188
167,476

120,926
36,581
84,345

$7,229,764
5,029,072
5,447,293

Operating results for the year ended December 31, 2014 (In thousands)

Net interest income (loss)
Provision for (recovery of) loan losses
Other income (loss)
Other expense

Income (loss) before taxes
Income taxes (benefit)
Net income (loss)

Balances at December 31, 2014:
Assets
Loans
Deposits

PNB

$ 218,641
3,517
69,384
163,641

120,867
37,960
82,907

$6,910,386
4,781,761
5,222,766

GFSC

$ 5,874
1,887
(1)
4,457

(471)
(164)

(307)

$ 32,268
32,661
3,809

GFSC

$ 6,588
1,415
2
2,984

2,191
768
$ 1,423

$ 35,793
35,469
4,627

GFSC

$ 7,457
1,544
(1)
4,103

1,809
634
$ 1,175

$ 40,308
40,645
5,883

SEPH

$ 4,774
(9,599)
2,974
7,273

10,074
3,526

$ 6,548

$ 25,342
12,354
—

SEPH

(74)
(4,090)
1,848
6,182

(318)
(111)
(207)

$ 33,541
15,153
—

SEPH

958
(12,394)
5,991
11,766

7,577
2,652
$ 4,925

$ 43,762
23,956
—

All Other

(138)
—
955
9,731

(8,914)
(4,357)

$ (4,557)

$ 20,438
(7,986)
(112,052)

All Other

239
—
513
9,972

(9,220)
(4,671)
$ (4,549)

$ 12,256
(11,609)
(104,278)

All Other

$ (2,012)
—
175
8,000

(9,837)
(4,787)
$ (5,050)

$ 6,743
(16,680)
(100,649)

Total

$ 238,086
(5,101)
78,731
199,023

122,895
36,760

86,135

$7,467,586
5,271,857
5,521,956

Total

$ 227,632
4,990
77,551
186,614

113,579
32,567
81,012

$7,311,354
5,068,085
5,347,642

Total

$ 225,044
(7,333)
75,549
187,510

120,416
36,459
83,957

$7,001,199
4,829,682
5,128,000

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The following is a reconciliation of financial information for the reportable
segments to the Corporation’s consolidated totals:

Statements of Income
for the years ended December 31, 2016, 2015 and 2014

(In thousands)

Income:

Dividends from subsidiaries

Interest and dividends

Other

Total income

Expense:

Other, net

Total expense

Income before federal taxes and
equity in undistributed income
of subsidiaries

Federal income tax benefit

Income before equity in
undistributed income
of subsidiaries

Equity in undistributed income

of subsidiaries

Net income

Other comprehensive (loss) income(1)

Comprehensive income

2016

2015

2014

$60,000

2,164

1,081

63,245

12,159

51,086

4,357

2,561

560

63,121

12,341

50,780

4,671

3,708

262

63,970

13,807

50,163

4,787

55,443

55,451

54,950

30,692

$86,135

(2,102)

84,033

25,561

$81,012

(2,035)

78,977

29,007

$83,957

21,811

105,768

(1) See Consolidated Statements of Comprehensive Income for other comprehensive (loss)

income detail.

Statements of Cash Flows
for the years ended December 31, 2016, 2015 and 2014

(In thousands)

Operating activities:

Net income

2016

2015

2014

$ 86,135

$ 81,012

$ 83,957

Adjustments to reconcile net income to

net cash provided by operating activities:

Undistributed income of subsidiaries
Compensation expense for issuance

of treasury stock to directors

Share-based compensation expense

Increase in other assets

(Decrease) increase in other liabilities

Net cash provided by
operating activities

Investing activities:

Repayment of investments in

and advances to subsidiaries

Net cash provided by
investing activities

Financing activities:
Cash dividends paid
Repayment of subordinated notes
Repurchase of treasury shares
Cash payment for fractional shares

Net cash used in

financing activities

Increase (decrease) in cash

Cash at beginning of year

(30,692)

(25,561)

(29,007)

950

1,864

(3,425)

(2,524)

963

865

(182)

485

801

458

(1,292)

298

52,308

57,582

55,215

15,000

10,000

32,000

15,000

10,000

32,000

(57,653)
—
—
(4)

(57,657)

9,651

102,416

(57,776)
—
(6,058)
(3)

(63,837)

3,745

98,671

(57,876)
(35,250)
(2,355)
(5)

(95,486)

(8,271)

106,942

Cash at end of year

$112,067

$102,416

$ 98,671

(In thousands)

2016:

Totals for reportable

segments

Elimination of

Net Interest Depreciation

Income

Expense

Other
Expense

Income
Taxes

Assets

Deposits

$238,224

$8,396 $180,896 $41,117 $7,447,148 $5,634,008

intersegment items

2,164

Parent Co. totals –
not eliminated

(2,302)

—

(9,204)

(112,052)

9,731

(4,357)

29,642

—

Totals

2015:

Totals for reportable

segments

Elimination of

$238,086

$8,396 $190,627 $36,760 $7,467,586 $5,521,956

$227,393

$7,347 $169,295 $37,238 $7,299,098 $5,451,920

intersegment items

2,561

Parent Co. totals –
not eliminated

(2,322)

—

(13,557)

(104,278)

9,972

(4,671)

25,813

—

Totals

2014:

Totals for reportable

segments

Elimination of

$227,632

$7,347 $179,267 $32,567 $7,311,354 $5,347,642

$227,056

$7,243 $172,267 $41,246 $6,994,456 $5,228,649

intersegment items

3,708

Parent Co. totals –
not eliminated

(5,720)

—

(18,556)

(100,649)

8,000

(4,787)

25,299

—

Totals

$225,044

$7,243 $180,267 $36,459 $7,001,199 $5,128,000

28. PARENT COMPANY STATEMENTS
The Parent Company statements should be read in conjunction with the
consolidated financial statements and the information set forth below.
Investments in subsidiaries are accounted for using the equity method
of accounting.

Cash represents non-interest bearing deposits with PNB. Net cash provided
by operating activities reflects cash payments (received from subsidiaries)
for income taxes of $4.4 million, $4.1 million and $5.8 million in 2016,
2015 and 2014, respectively.

At December 31, 2016 and 2015, shareholders’ equity reflected in the
Parent Company balance sheet includes $259.7 million and $199.4 million,
respectively, of undistributed earnings of the Corporation’s subsidiaries which
are restricted from transfer as dividends to the Corporation.

Balance Sheets
December 31, 2016 and 2015

(In thousands)

Assets:
Cash

Investment in subsidiaries

Debentures receivable from PNB

Other investments

Other assets

Total assets

Liabilities:

Subordinated notes

Other liabilities

Total liabilities

Total shareholders’ equity

2016

$112,067

626,569

25,000

2,962

26,651

$793,249

45,000

6,009

51,009

742,240

Total liabilities and shareholders’ equity

$793,249

2015

$102,416

613,383

25,000

2,341

23,443

$766,583

45,000

8,228

53,228

713,355

$766,583

PNC_AR2016_K+PMS286_PressFinal.qxp 2/21/17 3:27 PM Page 64

N O T E S

PNC_AR2016_K+PMS286_PressFinal.qxp 2/21/17 3:27 PM Page 65

N O T E S

PARK NATIONAL CORPORATION
Post Office Box 3500
Newark, Ohio 43058-3500
740.349.8451
ParkNationalCorp.com