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Fair Value | 9 Months Ended
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Sep. 30, 2020
Fair Value Disclosures [Abstract] |
Fair Value | Fair Value The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that Park uses to measure fair value are as follows: •Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that Park has the ability to access as of the measurement date. •Level 2: Level 1 inputs for assets or liabilities that are not actively traded. Also consists of an observable market price for a similar asset or liability. This includes the use of “matrix pricing” to value debt securities absent the exclusive use of quoted prices. •Level 3: Consists of unobservable inputs that are used to measure fair value when observable market inputs are not available. This could include the use of internally developed models, financial forecasting and similar inputs. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction 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 in accordance with Park's valuation requirements under its commercial and real estate loan policies. Assets and Liabilities Measured at Fair Value on a Recurring Basis: The following table presents assets and liabilities measured at fair value on a recurring basis:
Fair Value Measurements at September 30, 2020 using:
(In thousands) |  | Level 1 |  | Level 2 |  | Level 3 |  | Balance at September 30, 2020
Assets |  |  |  |  |  |  |  |
Investment securities: |  |  |  |  |  |  |  |
Obligations of states and political subdivisions |  | — |  |  | 304,506 |  |  |  |  | 304,506 |
U.S. Government sponsored entities’ asset-backed securities |  | — |  |  | 726,297 |  |  | — |  |  | 726,297 |
Corporate debt securities |  | — |  |  | 2,011 |  |  | — |  |  | 2,011 |
Equity securities |  | 1,558 |  |  | — |  |  | 484 |  |  | 2,042 |
Mortgage loans held for sale |  | — |  |  | 48,265 |  |  | — |  |  | 48,265 |
Mortgage IRLCs |  | — |  |  | 2,878 |  |  | — |  |  | 2,878 |
Loan interest rate swaps |  | — |  |  | 4,503 |  |  | — |  |  | 4,503 |
Liabilities |  |  |  |  |  |  |  |
Fair value swap |  | $ | — |  |  | $ | — |  |  | $ | 226 |  |  | $ | 226 |
Borrowing interest rate swap |  | — |  |  | 1,026 |  |  | — |  |  | 1,026 |
Loan interest rate swaps |  | — |  |  | 4,503 |  |  | — |  |  | 4,503 |
Fair Value Measurements at December 31, 2019 using:
(In thousands) |  | Level 1 |  | Level 2 |  | Level 3 |  | Balance at December 31, 2019
Assets |  |  |  |  |  |  |  |
Investment securities: |  |  |  |  |  |  |  |
Obligations of states and political subdivisions |  | $ | — |  |  | $ | 320,491 |  |  | $ | — |  |  | $ | 320,491 |
U.S. Government sponsored entities’ asset-backed securities |  | — |  |  | 889,210 |  |  | — |  |  | 889,210 |
Equity securities |  | 1,537 |  |  | — |  |  | 456 |  |  | 1,993 |
Mortgage loans held for sale |  | — |  |  | 12,278 |  |  | — |  |  | 12,278 |
Mortgage IRLCs |  | — |  |  | 221 |  |  | — |  |  | 221 |
Loan interest rate swaps |  | — |  |  | 1,870 |  |  | — |  |  | 1,870 |
Liabilities |  |  |  |  |  |  |  |
Fair value swap |  | $ | — |  |  | $ | — |  |  | $ | 226 |  |  | $ | 226 |
Borrowing interest rate swap |  | — |  |  | 575 |  |  | — |  |  | 575 |
Loan interest rate swaps |  | — |  |  | 1,870 |  |  | — |  |  | 1,870 |
The following methods and assumptions were used by the Company in determining the fair value of the financial assets and liabilities discussed above: Interest rate swaps: The fair values of interest rate swaps are based on valuation models using observable market data as of the measurement date (Level 2). Investment securities: Fair values for investment securities are based on quoted market prices, where available (Level 1). If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows (Level 3). 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: Mortgage 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 market prices for similar product types and, therefore, are classified in Level 2. The tables below present a reconciliation of the beginning and ending balances of the Level 3 inputs for the three months and nine months ended September 30, 2020 and 2019, for financial instruments measured on a recurring basis and classified as Level 3: Level 3 Fair Value Measurements Three months ended September 30, 2020 and 2019
(In thousands) |  | Equity Securities |  | Fair value swap
Balance at July 1, 2020 |  | $ | 471 |  |  | $ | (226) |
Total gains |  |  |  |
Included in other income |  | 13 |  |  | — |
Balance at September 30, 2020 |  | $ | 484 |  |  | $ | (226) |
Balance at July 1, 2019 |  | $ | 433 |  |  | $ | (226) |
Total gains |  |  |  |
Included in other income |  | 5 |  |  | — |
Balance at September 30, 2019 |  | $ | 438 |  |  | $ | (226) |
Level 3 Fair Value Measurements Nine months ended September 30, 2020 and 2019
(In thousands) |  | Equity Securities |  | Fair value swap
Balance at January 1, 2020 |  | $ | 456 |  |  | $ | (226) |
Total gains |  |  |  |
Included in other income |  | 28 |  |  | — |
Balance at September 30, 2020 |  | $ | 484 |  |  | $ | (226) |
Balance at January 1, 2019 |  | $ | 424 |  |  | $ | (226) |
Total gains |  |  |  |
Included in other income |  | 14 |  |  | — |
Balance at September 30, 2019 |  | $ | 438 |  |  | $ | (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. Collateral dependent 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 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. 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 the client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly. Additionally, updated independent valuations are obtained annually for all impaired loans in accordance with Company policy. OREO: Assets acquired through or in lieu of loan foreclosure are initially recorded at fair value less costs to sell when acquired. The carrying value of OREO is not re-measured to fair value on a recurring basis, but is subject to fair value adjustments when the carrying value exceeds the fair value, less estimated selling costs. Fair value is based on recent real estate appraisals and is updated at least annually. These appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales approach and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments result in a Level 3 classification of the inputs for determining fair value. Appraisals for both collateral dependent impaired loans and OREO are performed by licensed appraisers. Appraisals are generally obtained to support the fair value of collateral. In general, there are three types of appraisals received by the Company: real estate appraisals, income approach appraisals, and lot development loan appraisals. These are discussed below: •Real estate appraisals typically incorporate measures such as recent sales prices for comparable properties. Appraisers may make adjustments to the sales prices of the comparable properties as deemed appropriate based on the age, condition or general characteristics of the subject property. Management generally applies a 15% discount to real estate appraised values which management expects will cover all disposition costs (including selling costs). This 15% discount is based on historical discounts to appraised values on sold OREO properties. •Income approach appraisals typically incorporate the annual net operating 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). •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. Other repossessed assets: Other repossessed assets are initially recorded at fair value less costs to sell when acquired. The carrying value of other repossessed assets 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. As of September 30, 2020 and December 31, 2019, other repossessed assets primarily consisted of aircraft acquired as part of a loan workout. Fair value is based on Aircraft Bluebook and VREF Aircraft Value Reference values based on the model of aircraft and adjustments for flight hours, features and other variables. Such adjustments result in a Level 3 classification of the inputs for determining fair value. 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. 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. As of September 30, 2020, there were no PCI loans carried at fair value. 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 with respect to the property's value subsequent to the initial measurement.
Fair Value Measurements at September 30, 2020 using:
(In thousands) |  | Level 1 |  | Level 2 |  | Level 3 |  | Balance at September 30, 2020
Impaired loans recorded at fair value: |  |  |  |  |  |  |  |
Commercial real estate |  | $ | — |  |  | $ | — |  |  | $ | 16,054 |  |  | $ | 16,054 |
Residential real estate |  | — |  |  | — |  |  | 172 |  |  | 172 |
Total impaired loans recorded at fair value |  | $ | — |  |  | $ | — |  |  | $ | 16,226 |  |  | $ | 16,226 |
MSRs |  | $ | — |  |  | $ | 11,029 |  |  | $ | — |  |  | $ | 11,029 |
OREO recorded at fair value: |  |  |  |  |  |  |  |
Residential real estate |  | — |  |  | — |  |  | 767 |  |  | 767 |
Total OREO recorded at fair value |  | $ | — |  |  | $ | — |  |  | $ | 767 |  |  | $ | 767 |
Other repossessed assets |  | $ | — |  |  | $ | — |  |  | $ | 3,392 |  |  | $ | 3,392 |
Fair Value Measurements at December 31, 2019 using:
(In thousands) |  | Level 1 |  | Level 2 |  | Level 3 |  | Balance at December 31, 2019
Impaired loans recorded at fair value: |  |  |  |  |  |  |  |
Commercial real estate |  | $ | — |  |  | $ | — |  |  | $ | 1,873 |  |  | $ | 1,873 |
Residential real estate |  | — |  |  | — |  |  | 217 |  |  | 217 |
Total impaired loans recorded at fair value |  | $ | — |  |  | $ | — |  |  | $ | 2,090 |  |  | $ | 2,090 |
MSRs |  | $ | — |  |  | $ | 5,797 |  |  | $ | — |  |  | $ | 5,797 |
OREO recorded at fair value: |  |  |  |  |  |  |  |
Commercial real estate |  | — |  |  | — |  |  | 2,295 |  |  | 2,295 |
Residential real estate |  | — |  |  | — |  |  | 738 |  |  | 738 |
Total OREO recorded at fair value |  | $ | — |  |  | $ | — |  |  | $ | 3,033 |  |  | $ | 3,033 |
Other repossessed assets |  | $ | — |  |  | $ | — |  |  | $ | 3,599 |  |  | $ | 3,599 |
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.
|  | September 30, 2020
(In thousands) |  | Recorded Investment |  | Prior Charge-Offs |  | Specific Valuation Allowance |  | Carrying Balance
Impaired loans recorded at fair value |  | $ | 19,395 |  |  | $ | 247 |  |  | $ | 3,169 |  |  | $ | 16,226 |
Remaining impaired loans |  | 96,785 |  |  | 316 |  |  | 5,497 |  |  | 91,288 |
Total impaired loans |  | $ | 116,180 |  |  | $ | 563 |  |  | $ | 8,666 |  |  | $ | 107,514 |
|  | December 31, 2019
(In thousands) |  | Recorded Investment |  | Prior Charge-Offs |  | Specific Valuation Allowance |  | Carrying Balance
Impaired loans recorded at fair value |  | $ | 2,167 |  |  | $ | 313 |  |  | $ | 77 |  |  | $ | 2,090 |
Remaining impaired loans |  | 75,324 |  |  | 406 |  |  | 5,153 |  |  | 70,171 |
Total impaired loans |  | $ | 77,491 |  |  | $ | 719 |  |  | $ | 5,230 |  |  | $ | 72,261 |
The expense from credit adjustments related to impaired loans carried at fair value was $3.1 million and $135,000 for the three-month periods ended September 30, 2020 and 2019, respectively, and was $3.5 million and $174,000 for the nine-month periods ended September 30, 2020 and 2019, respectively. MSRs totaled $11.0 million at September 30, 2020. Of this $11.0 million MSR carrying balance, $11.0 million was recorded at fair value and included a valuation allowance of $2.8 million. The remaining $11,000 was recorded at cost, as the fair value exceeded cost at September 30, 2020. At December 31, 2019, MSRs totaled $10.1 million. Of this $10.1 million MSR carrying balance, $5.8 million was recorded at fair value and included a valuation allowance of $825,000. The remaining $4.3 million was recorded at cost, as the fair value exceeded cost at December 31, 2019. The expense related to MSRs carried at fair value during the three months ended September 30, 2020 and 2019 was $198,000 and $332,000, respectively, and was $2.0 million and $421,000 for the nine months ended September 30, 2020 and 2019, respectively. Total OREO held by Park at September 30, 2020 and December 31, 2019 was $836,000 and $4.0 million, respectively. Approximately 92% and 75% of OREO held by Park at September 30, 2020 and December 31, 2019, respectively, was carried at fair value due to fair value adjustments made subsequent to the initial OREO measurement. At September 30, 2020 and December 31, 2019, OREO held at fair value, less estimated selling costs, amounted to $767,000 and $3.0 million, respectively. The net income (expense) related to OREO fair value adjustments was $115,000 and $(41,000) for the three-month periods ended September 30, 2020 and 2019, respectively, and was $80,000 and $(123,000) for the nine-month periods ended September 30, 2020 and 2019, respectively. Other repossessed assets totaled $3.6 million at September 30, 2020, of which $3.4 million was recorded at fair value. Other repossessed assets totaled $4.2 million at December 31, 2019, of which $3.6 million was recorded at fair value. Expense related to fair value adjustments on other repossessed assets for each of the three-month periods and nine-month periods ended September 30, 2020 was $207,000. There was no expense related to fair value adjustments on other repossessed assets for either of the three-month periods or nine-month periods ended September 30, 2019. The following tables present qualitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at September 30, 2020 and December 31, 2019:
September 30, 2020
(In thousands) |  | Fair Value |  | Valuation Technique |  | Unobservable Input(s) |  | Range (Weighted Average) (1)
Impaired loans: |  |  |  |  |  |  |  |
Commercial real estate |  | $ | 16,054 |  |  | Sales comparison approach |  | Adj to comparables |  | 0.0% - 139.0% (20.6%)
|  |  |  | Income approach |  | Capitalization rate |  | 9.0% - 20.0% (9.6%)
Residential real estate |  | $ | 172 |  |  | Sales comparison approach |  | Adj to comparables |  | 2.7% - 47.8% (10.6%)
Other real estate owned: |  |  |  |  |  |  |  |
Residential real estate |  | $ | 767 |  |  | Sales comparison approach |  | Adj to comparables |  | 7.6% - 11.2% (8.9%)
Balance at December 31, 2019
(In thousands) |  | Fair Value |  | Valuation Technique |  | Unobservable Input(s) |  | Range (Weighted Average) (1)
Impaired loans: |  |  |  |  |  |  |  |
Commercial real estate |  | $ | 1,873 |  |  | Sales comparison approach |  | Adj to comparables |  | 0.0% - 56.0% (26.5%)
|  |  |  | Cost approach |  | Accumulated depreciation |  | 93.1% (93.1%)
Residential real estate |  | $ | 217 |  |  | Sales comparison approach |  | Adj to comparables |  | 0.0% - 53.5% (10.8%)
Other real estate owned: |  |  |  |  |  |  |  |
Commercial real estate |  | $ | 2,295 |  |  | Sales comparison approach |  | Adj to comparables |  | 0.9% - 68.4% (34.7%)
|  |  |  | Income approach |  | Capitalization rate |  | 13.0% (13.0%)
Residential real estate |  | $ | 738 |  |  | Sales comparison approach |  | Adj to comparables |  | 4.6% - 54.6% (39.2%)
(1) Unobservable inputs were weighted by the relative fair value of the instruments. Assets Measured at Net Asset Value: Park's portfolio of equity investments in limited partnerships which provide mezzanine funding ("Partnership Investments") are valued using the NAV practical expedient in accordance with ASC 820. At September 30, 2020 and December 31, 2019, Park had Partnership Investments with a NAV of $14.0 million and $11.9 million, respectively. At September 30, 2020 and December 31, 2019, Park had $7.0 million and $8.5 million, respectively, in unfunded commitments related to these Partnership Investments. For the three-month periods ended September 30, 2020 and 2019, Park recognized income of $1.3 million and $3.3 million, respectively, and for the nine-month periods ended September 30, 2020 and 2019, Park recognized a loss of $41,000 and income of $5.1 million, respectively, related to these Partnership Investments. The fair value of certain financial instruments at September 30, 2020 and December 31, 2019, was as follows:
|  | September 30, 2020
|  |  |  | Fair Value Measurements
(In thousands) |  | Carrying value |  | Level 1 |  | Level 2 |  | Level 3 |  | Total fair value
Financial assets: |  |  |  |  |  |  |  |  |  |
Cash and money market instruments |  | $ | 246,709 |  |  | $ | 246,709 |  |  | $ | — |  |  | $ | — |  |  | $ | 246,709 |
Investment securities (1) |  | 1,032,814 |  |  | — |  |  | 1,032,814 |  |  | — |  |  | 1,032,814 |
Other investment securities (2) |  | 2,042 |  |  | 1,558 |  |  | — |  |  | 484 |  |  | 2,042 |
Loans held for sale |  | 48,265 |  |  | — |  |  | 48,265 |  |  | — |  |  | 48,265 |
Mortgage IRLCs |  | 2,878 |  |  | — |  |  | 2,878 |  |  | — |  |  | 2,878 |
Impaired loans carried at fair value |  | 16,226 |  |  | — |  |  | — |  |  | 16,226 |  |  | 16,226 |
Other loans, net |  | 7,124,139 |  |  | — |  |  | — |  |  | 7,168,180 |  |  | 7,168,180 |
Loans receivable, net |  | $ | 7,191,508 |  |  | $ | — |  |  | $ | 51,143 |  |  | $ | 7,184,406 |  |  | $ | 7,235,549 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |
Time deposits |  | $ | 931,201 |  |  | $ | — |  |  | $ | 938,492 |  |  | $ | — |  |  | $ | 938,492 |
Other |  | 5,374 |  |  | 5,374 |  |  | — |  |  | — |  |  | 5,374 |
Deposits (excluding demand deposits) |  | $ | 936,575 |  |  | $ | 5,374 |  |  | $ | 938,492 |  |  | $ | — |  |  | $ | 943,866 |
Short-term borrowings |  | $ | 320,435 |  |  | $ | — |  |  | $ | 320,435 |  |  | $ | — |  |  | $ | 320,435 |
Long-term debt |  | 135,000 |  |  | — |  |  | 142,849 |  |  | — |  |  | 142,849 |
Subordinated notes |  | 187,668 |  |  | — |  |  | 180,209 |  |  | — |  |  | 180,209 |
Derivative financial instruments - assets: |  |  |  |  |  |  |  |  |  |
Loan interest rate swaps |  | $ | 4,503 |  |  | $ | — |  |  | $ | 4,503 |  |  | $ | — |  |  | $ | 4,503 |
Derivative financial instruments - liabilities: |  |  |  |  |  |  |  |  |  |
Fair value swap |  | $ | 226 |  |  | $ | — |  |  | $ | — |  |  | $ | 226 |  |  | $ | 226 |
Borrowing interest rate swap |  | 1,026 |  |  | — |  |  | 1,026 |  |  | — |  |  | 1,026 |
Loan interest rate swaps |  | 4,503 |  |  | — |  |  | 4,503 |  |  | — |  |  | 4,503 |
(1) Includes AFS debt securities. (2) Excludes FHLB stock and FRB stock which are carried at their respective redemption values, investment securities accounted for at modified cost as these investments do not have a readily determinable fair value, and Partnership Investments valued using the NAV practical expedient.
|  | December 31, 2019
|  |  |  | Fair Value Measurements
(In thousands) |  | Carrying value |  | Level 1 |  | Level 2 |  | Level 3 |  | Total fair value
Financial assets: |  |  |  |  |  |  |  |  |  |
Cash and money market instruments |  | $ | 159,956 |  |  | $ | 159,956 |  |  | $ | — |  |  | $ | — |  |  | $ | 159,956 |
Investment securities (1) |  | 1,209,701 |  |  | — |  |  | 1,209,701 |  |  | — |  |  | 1,209,701 |
Other investment securities (2) |  | 1,993 |  |  | 1,537 |  |  | — |  |  | 456 |  |  | 1,993 |
Loans held for sale |  | 12,278 |  |  | — |  |  | 12,278 |  |  | — |  |  | 12,278 |
Mortgage IRLCs |  | 221 |  |  | — |  |  | 221 |  |  | — |  |  | 221 |
Impaired loans carried at fair value |  | 2,090 |  |  | — |  |  | — |  |  | 2,090 |  |  | 2,090 |
Other loans, net |  | 6,430,136 |  |  | — |  |  | — |  |  | 6,426,869 |  |  | 6,426,869 |
Loans receivable, net |  | $ | 6,444,725 |  |  | $ | — |  |  | $ | 12,499 |  |  | $ | 6,428,959 |  |  | $ | 6,441,458 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |
Time deposits |  | $ | 1,139,131 |  |  | $ | — |  |  | $ | 1,145,537 |  |  | — |  |  | $ | 1,145,537 |
Other |  | 1,273 |  |  | 1,273 |  |  | — |  |  | — |  |  | 1,273 |
Deposits (excluding demand deposits) |  | $ | 1,140,404 |  |  | $ | 1,273 |  |  | $ | 1,145,537 |  |  | $ | — |  |  | $ | 1,146,810 |
Short-term borrowings |  | $ | 230,657 |  |  | $ | — |  |  | $ | 230,657 |  |  | $ | — |  |  | $ | 230,657 |
Long-term debt |  | 192,500 |  |  | — |  |  | 200,726 |  |  | — |  |  | 200,726 |
Subordinated notes |  | 15,000 |  |  | — |  |  | 14,372 |  |  | — |  |  | 14,372 |
Derivative financial instruments - assets: |  |  |  |  |  |  |  |  |  |
Loan interest rate swaps |  | 1,870 |  |  | — |  |  | 1,870 |  |  | — |  |  | 1,870 |
Derivative financial instruments - liabilities: |  |  |  |  |  |  |  |  |  |
Fair value swap |  | $ | 226 |  |  | $ | — |  |  | $ | — |  |  | $ | 226 |  |  | $ | 226 |
Borrowing interest rate swap |  | 575 |  |  | — |  |  | 575 |  |  | — |  |  | 575 |
Loan interest rate swaps |  | 1,870 |  |  | — |  |  | 1,870 |  |  | — |  |  | 1,870 |
(1) Includes AFS debt securities and HTM debt securities. (2) Excludes FHLB stock and FRB stock which are carried at their respective redemption values, investment securities accounted for at modified cost as these investments do not have a readily determinable fair value, and Partnership Investments valued using the NAV practical expedient.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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