Loans and the Allowance for Loan Losses (Tables)

12 Months Ended

Dec. 31, 2020

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

Loans Receivable: The following table sets forth the composition of the Company’s loan portfolio segments, including net deferred fees, as of December 31, 2020 and December 31, 2019:

	2020		2019
	(dollars in thousands)
Commercial (1)	$	1,521,967	$	1,129,661
Commercial real estate		3,783,550		3,041,959
Commercial construction		617,747		623,326
Residential real estate		322,564		320,020
Consumer		1,853		3,328
Gross loans		6,247,681		5,118,294
Net deferred fees		(11,374)		(4,767)
Loans receivable	$	6,236,307	$	5,113,527

Loans held for sale [Table Text Block]

Loans Held-For-Sale: The following table presents loans held-for-sale by loan segment as of December 31, 2020 and December 31, 2019:

	2020		2019
	(dollars in thousands)
Commercial	$	-	$	2,285
Commercial real estate		1,990		30,965
Residential mortgage		2,720		-
Total carrying amount	$	4,710	$	33,250

Loans and Leases Receivable Purchase Credit Impaired Loans [Table Text Block]

Purchased Credit-Impaired Loans: The Company holds purchased loans for which there was, at their acquisition date, evidence of deterioration of credit quality since their origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of those loans is as follows as of December 31, 2020 and December 31, 2019.

	2020		2019
	(dollars in thousands)
Commercial	$	3,878	$	5,452
Commercial real estate		5,555		1,101
Residential real estate		4,084		-
Total carrying amount	$	13,517	$	6,553

Loans and Leases Receivable Purchased Loans [Table Text Block]

The accretable yield, or income expected to be collected, on the purchased credit-impaired loans above is as follows for the years presented:

	2020		2019		2018
	(dollars in thousands)
Balance as of January 1,	$	1,301	$	1,134	$	1,387
New loans purchased		605		1,286		-
Accretion of income		(796)		(1,119)		(253)
Balance as of December 31,	$	1,110	$	1,301	$	1,134

Schedule of Financing Receivables, Non Accrual Status [Table Text Block]

Loans Receivable on Nonaccrual Status: The following tables present nonaccrual loans included in loans receivable by loan class as of December 31, 2020 and December 31, 2019:

	2020		2019
	(dollars in thousands)
Commercial	$	33,019	$	31,455
Commercial real estate		10,111		8,338
Commercial construction		14,015		6,773
Residential real estate		4,551		2,915
Consumer		-		-
Total loans receivable on nonaccrual status	$	61,696	$	49,481

Financing Receivable Credit Quality Indicators [Table Text Block]

The following table presents information about the loan credit quality by loan class of gross loans (which exclude net deferred fees) as of December 31, 2020 and December 31, 2019:

	December 31, 2020
	Pass		Special Mention		Substandard		Doubtful		Total
	(dollars in thousands)
Commercial	$	1,447,097	$	30,725	$	43,930	$	215	$	1,521,967
Commercial real estate		3,700,498		49,143		33,909		-		3,783,550
Commercial construction		587,266		-		30,481		-		617,747
Residential real estate		311,174		-		11,390		-		322,564
Consumer		1,853		-		-		-		1,853
Gross loans	$	6,047,888	$	79,868	$	119,710	$	215	$	6,247,681

	December 31, 2019
	Pass		Special Mention		Substandard		Doubtful		Total
	(dollars in thousands)
Commercial	$	1,059,852	$	22,159	$	47,650	$	-	$	1,129,661
Commercial real estate		3,014,956		10,301		16,702		-		3,041,959
Commercial construction		604,298		4,609		14,419		-		623,326
Residential real estate		316,476		-		3,544		-		320,020
Consumer		3,328		-		-		-		3,328
Gross loans	$	4,998,910	$	37,069	$	82,315	$	-	$	5,118,294

Impaired Financing Receivables [Table Text Block]

The following table provides an analysis of the impaired loans by class as of and for the years ended December 31, 2020, 2019 and 2018.

	December 31, 2020
No Related Allowance Recorded	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(dollars in thousands)
Commercial	$	11,325	$	11,835			$	11,627	$	203
Commercial real estate		13,105		13,449				13,215		287
Commercial construction		24,284		24,907				21,279		377
Residential real estate		5,378		5,723				4,733		104
Consumer		-		-				-		-
Total	$	54,092	$	55,914			$	50,854	$	971
With An Allowance Recorded
Commercial	$	23,736	$	69,122	$	12,985	$	23,625	$	-
Commercial real estate		2,722		2,722		1,329		2,722		-
Total	$	26,458	$	71,844	$	14,314	$	26,347	$	-
Total
Commercial	$	35,061	$	80,957	$	12,985	$	35,252	$	203
Commercial real estate		15,827		16,171		1,329		15,937		287
Commercial construction		24,284		24,907		-		21,279		377
Residential real estate		5,378		5,723		-		4,733		104
Consumer		-		-		-		-		-
Total (including related allowance)	$	80,550	$	127,758	$	14,314	$	77,201	$	971

	December 31, 2019
No Related Allowance Recorded	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(dollars in thousands)
Commercial	$	37,984	$	83,225			$	39,801	$	815
Commercial real estate		15,249		15,467				15,421		428
Commercial construction		8,649		8,649				8,394		332
Residential real estate		1,311		1,463				1,311		-
Consumer		-		-				-		-
Total	$	63,193	$	108,804			$	64,927	$	1,575
With An Allowance Recorded
Commercial construction	$	3,530	$	3,530	$	1,244	$	3,530	$	91
Residential real estate		263		263		23		257		11
Total	$	3,793	$	3,793	$	1,267	$	3,787	$	102
Total
Commercial	$	37,984	$	83,225	$	-	$	39,801	$	815
Commercial real estate		15,249		15,467		-		15,421		428
Commercial construction		12,179		12,179		1,244		11,924		423
Residential real estate		1,574		1,726		23		1,568		11
Consumer		-		-		-		-		-
Total (including related allowance)	$	66,986	$	112,597	$	1,267	$	68,714	$	1,677

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CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5 – Loans and the Allowance for Loan Losses – (continued)

	December 31, 2018
No Related Allowance Recorded	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(dollars in thousands)
Commercial	$	29,896	$	83,596			$	31,721	$	66
Commercial real estate		16,839		17,935				17,676		149
Commercial construction		9,240		9,240				11,215		493
Residential real estate		2,209		2,521				2,284		-
Consumer		-		-				-		-
Total	$	58,184	$	113,292			$	62,896	$	708
With An Allowance Recorded
Commercial real estate	$	1,488	$	1,488	$	7	$	1,511	$	46
Residential real estate		260		266		29		265		-
Total	$	1,748	$	1,754	$	36	$	1,776	$	46
Total
Commercial	$	29,896	$	83,596	$	-	$	31,721	$	66
Commercial real estate		18,327		19,423		7		19,187		195
Commercial construction		9,240		9,240		-		11,215		493
Residential real estate		2,469		2,787		29		2,549		-
Consumer		-		-		-		-		-
Total (including related allowance)	$	59,932	$	115,046	$	36	$	64,672	$	754

Past Due Financing Receivables [Table Text Block]

Aging Analysis: The following table provides an analysis of the aging of the loans by class, excluding net deferred fees, that are past due as of December 31, 2020 and December 31, 2019 (dollars in thousands):

	December 31, 2020
	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due and Still Accruing		Nonaccrual		Total Past Due and Nonaccrual		Current		Total Loans Receivable
Commercial	$	1,445	$	558	$	3,182	$	33,019	$	38,204	$	1,483,763	$	1,521,967
Commercial real estate		13,258		4,140		5,555		10,111		33,064		3,750,486		3,783,550
Commercial construction		2,472		-		-		14,015		16,487		601,260		617,747
Residential real estate		1,367		241		4,084		4,551		10,243		312,321		322,564
Consumer		2		-		-		-		2		1,851		1,853
Total	$	18,544	$	4,939	$	12,821	$	61,696	$	98,000	$	6,149,681	$	6,247,681

Included in the 90 days or greater past due and still accruing category as of December 31, 2020 are purchased credit-impaired loans, net of fair value marks, which accretes income per the valuation at date of acquisition.

	December 31, 2019
	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due and Still Accruing		Nonaccrual		Total Past Due and Nonaccrual		Current		Total Loans Receivable
Commercial	$	239	$	-	$	3,107	$	31,455	$	34,801	$	1,094,860	$	1,129,661
Commercial real estate		1,980		490		-		8,338		10,808		3,031,151		3,041,959
Commercial construction		-		-		-		6,773		6,773		616,553		623,326
Residential real estate		3,357		143		-		2,915		6,415		313,605		320,020
Consumer		-		-		-		-		-		3,328		3,328
Total	$	5,576	$	633	$	3,107	$	49,481	$	58,797	$	5,059,497	$	5,118,294

Schedule of Recorded Investment in Financing Receivables [Table Text Block]

The following tables detail, at the period-end presented, the amount of gross loans (excluding loans held-for-sale) that are evaluated individually, and collectively, for impairment, those acquired with deteriorated quality, and the related portion of the allowance for loan losses that are allocated to each loan portfolio segment:

	December 31, 2020
	Commercial		Commercial real estate		Commercial construction		Residential real estate		Consumer		Unallocated		Total
	(dollars in thousands)
Allowance for loan losses
Individually evaluated for impairment	$	12,985	$	1,329	$	-	$	-	$	-	$	-	$	14,314
Collectively evaluated for impairment		15,412		33,373		7,787		1,928		4		568		59,072
Acquired portfolio		46		4,628		407		759		-		-		5,840
Acquired with deteriorated credit quality		-		-		-		-		-		-		-
Total	$	28,443	$	39,330	$	8,194	$	2,687	$	4	$	568	$	79,226
Gross loans
Individually evaluated for impairment	$	35,061	$	15,827	$	24,284	$	5,378	$	-			$	80,550
Collectively evaluated for impairment		1,414,626		2,959,978		574,118		241,925		1,627				5,192,274
Acquired portfolio		68,402		802,190		19,345		71,177		226				961,340
Acquired with deteriorated credit quality		3,878		5,555		-		4,084		-				13,517
Total	$	1,521,967	$	3,783,550	$	617,747	$	322,564	$	1,853			$	6,247,681

Included in the commercial loans collectively evaluated for impaired are PPP loans of $397.5 million as of December 31, 2020. PPP loans receivable are guaranteed by the Federal government and have no allocation of the allowance for loan losses.

	December 31, 2019
	Commercial		Commercial real estate		Commercial construction		Residential real estate		Consumer		Unallocated		Total
	(dollars in thousands)
Allowance for loan losses
Individually evaluated for impairment	$	-	$	-	$	1,244	$	23	$	-	$	-	$	1,267
Collectively evaluated for impairment		8,309		19,967		5,744		1,662		3		99		35,784
Acquired portfolio		40		886		316		-		-		-		1,242
Acquired with deteriorated credit quality		-		-		-		-		-		-		-
Total	$	8,349	$	20,853	$	7,304	$	1,685	$	3	$	99	$	38,293
Gross loans
Individually evaluated for impairment	$	37,984	$	15,249	$	12,179	$	1,574	$	-			$	66,986
Collectively evaluated for impairment		1,011,708		2,669,999		578,620		276,177		3,064				4,539,568
Acquired portfolio		74,517		355,610		32,527		42,269		264				505,187
Acquired with deteriorated credit quality		5,452		1,101		-		-		-				6,553
Total	$	1,129,661	$	3,041,959	$	623,326	$	320,020	$	3,328			$	5,118,294

Allowance for Credit Losses on Financing Receivables [Table Text Block]

A summary of the activity in the allowance for loan losses by loan segment is as follows:

	Commercial		Commercial real estate		Commercial construction		Residential real estate		Consumer		Unallocated		Total
	(dollars in thousands)
Balance as of January 1, 2020	$	8,349	$	20,853	$	7,304	$	1,685	$	3	$	99	$	38,293
Loan charge-offs		(552)		-		-		(341)		(7)		-		(900)
Recoveries		4		802		-		23		4		-		833
Provision for loan losses		20,642		17,675		890		1,320		4		469		41,000
Balance as of December 31, 2020	$	28,443	$	39,330	$	8,194	$	2,687	$	4	$	568	$	79,226

	Commercial		Commercial real estate		Commercial construction		Residential real estate		Consumer		Unallocated		Total
	(dollars in thousands)
Balance as of January 1, 2019	$	9,875	$	18,847	$	4,519	$	1,266	$	2	$	445	$	34,954
Loan charge-offs		(1,029)		(3,470)		-		(557)		(20)		-		(5,076)
Recoveries		265		30		-		3		17		-		315
Provision for loan losses		(762)		5,446		2,785		973		4		(346)		8,100
Balance as of December 31, 2019	$	8,349	$	20,853	$	7,304	$	1,685	$	3	$	99	$	38,293

	Commercial		Commercial real estate		Commercial construction		Residential real estate		Consumer		Unallocated		Total
	(dollars in thousands)
Balance as of January 1, 2018	$	8,233	$	17,112	$	4,747	$	1,050	$	1	$	605	$	31,748
Loan charge-offs		(17,066)		(915)		-		(23)		(7)		-		(18,011)
Recoveries		109		-		-		2		6		-		117
Provision for loan losses		18,599		2,650		(228)		237		2		(160)		21,100
Balance as of December 31, 2018	$	9,875	$	18,847	$	4,519	$	1,266	$	2	$	445	$	34,954

Schedule of Debtor Troubled Debt Restructuring, Current Period [Table Text Block]

The following table presents loans by class modified as TDRs that occurred during year ended December 31, 2020:

	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	(dollars in thousands)
Troubled debt restructurings:
Commercial		1	$	188	$	188
Commercial real estate		1		93		93
Commercial construction		1		4,021		4,021
Residential real estate		2		2,184		2,184
Total		5	$	6,486	$	6,486

The five loan modifications during the year ended December 31, 2020 were maturity extensions.

The following table presents loans by class modified as TDRs that occurred during the year ended December 31, 2019

	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	(dollars in thousands)
Troubled debt restructurings:
Commercial		11	$	14,558	$	14,558
Commercial real estate		3		5,863		5,863
Commercial construction		3		5,630		5,630
Total		17	$	26,051	$	26,051

Included in the commercial loan segment of the troubled debt restructurings is one taxi medallion loan totaling $0.3 million. This taxi medallion loan was on nonaccrual status prior to modification and will remain on nonaccrual status post-modification. All loan modifications during the year ended December 31, 2019 included interest rate reductions and/or maturity extensions.

- 82 -

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5 – Loans and the Allowance for Loan Losses – (continued)

The following table presents loans by class modified as TDRs that occurred during the year ended December 31, 2018:

	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	(dollars in thousands)
TDRs
Commercial		32	$	16,017	$	16,017
Commercial real estate		3		1,422		1,422
Commercial construction		3		4,773		4,773
Residential real estate		2		454		454
Total		40	$	22,666	$	22,666

Schedule of loan segment [Table Text Block]

The following table sets forth the composition of these loans by loan segments as of December 31, 2020:

	Number of Loans		Unpaid Principal Balance
	(dollars in thousands)
Commercial		49	$	17,637
Commercial real estate		63		188,778
Residential real estate		1		666
Total		113	$	207,081