Fair Value Measurements and Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2021

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

For financial assets and liabilities measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used as of March 31, 2021 and December 31, 2020 are as follows:

				March 31, 2021
				Fair Value Measurements at Reporting Date Using
	Total Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
(dollars in thousands)
Recurring fair value measurements:
Assets
Investment securities:
Available-for-sale:
Federal agency obligations	$	41,301		$	-	$	41,301		$	-
Residential mortgage pass-through securities		240,354			-		240,354			-
Commercial mortgage pass-through securities		6,414			-		6,414			-
Obligations of U.S. states and political subdivision		130,503			-		121,729			8,774
Corporate bonds and notes		17,665			-		17,665			-
Asset-backed securities		3,359			-		3,359			-
Certificates of deposit		150			-		150			-
Other securities		2,277			2,277		-			-
Total available-for-sale		442,023			2,277		430,972			8,774

Equity securities		13,200			13,200		-			-
Total assets	$	455,223		$	15,477	$	430,972		$	8,774

Liabilities
Derivatives	$	(1,464	)	$	-	$	(1,464	)	$	-
Total liabilities	$	(1,464	)	$	-	$	(1,464	)	$	-

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 6. Fair Value Measurements and Fair Value of Financial Instruments – (continued)

			December 31, 2020
			Fair Value Measurements at Reporting Date Using
	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
(dollars in thousands)
Recurring fair value measurements:
Assets
Investment securities:
Available-for-sale:
Federal agency obligations	$	38,458	$	-	$	38,458	$	-
Residential mortgage pass-through securities		270,884		-		270,884		-
Commercial mortgage pass-through securities		6,922		-		6,922		-
Obligations of U.S. states and political subdivision		142,808		-		133,964		8,844
Corporate bonds and notes		25,095		-		25,095		-
Asset-backed securities		3,480		-		3,480		-
Certificates of deposit		151		-		151		-
Other securities		157		157		-		-
Total available-for-sale	$	487,955	$	157	$	478,954	$	8,844

Equity securities		13,387		13,387		-		-
Total assets	$	501,342	$	13,544	$	478,954	$	8,844

Liabilities
Derivatives	$	(2,119)	$	-	$	(2,119)	$	-
Total liabilities	$	(2,119)	$	-	$	(2,119)	$	-

Fair Value, Assets and Liabilities Measured on Nonrecurring Basis, Valuation Techniques [Table Text Block]

For assets measured at fair value on a nonrecurring basis, the fair value measurements as of March 31, 2021 and December 31, 2020 are as follows:

			Fair Value Measurements at Reporting Date Using
			Quoted
			Prices
			in Active		Significant
	Carrying		Markets for		Other		Significant
	Value as of		Identical		Observable		Unobservable
Assets measured at fair value on a nonrecurring	March 31,		Assets		Inputs		Inputs
basis:	2021		(Level 1)		(Level 2)		(Level 3)
Collateral dependent loans:			(dollars in thousands)
Commercial	$	12,890	$	-	$	-	$	12,890
Commercial real estate		2,283		-		-		2,283
Commercial construction		2,500		-		-		2,500
Residential real estate		2,089		-		-		2,089

			Fair Value Measurements at Reporting Date Using
			Quoted
			Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
Assets measured at fair value on a nonrecurring	December 31,		Assets		Inputs		Inputs
basis:	2020		(Level 1)		(Level 2)		(Level 3)
Impaired loans:			(dollars in thousands)
Commercial	$	10,751	$	-	$	-	$	10,751
Commercial real estate		1,393		-		-		1,393

Fair Value, Recurring basis [Table Text Block]

The tables below present a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2021 and for the year ended December 31, 2020:

	Municipal
	Securities
	(dollars in thousands)
Beginning balance, December 31, 2020	$	8,844
Principal paydowns		(70	)
Ending balance, March 31, 2021	$	8,774

	Municipal
	Securities
	(dollars in thousands)
Beginning balance, December 31, 2019	$	9,114
Principal paydowns		(270)
Ending balance, December 31, 2020	$	8,844

Significant unobservable inputs used in fair value measurements [Table Text Block]

The following methods and assumptions were used to estimate the fair values of the Company’s assets measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020. The table below provides quantitative information about significant unobservable inputs used in fair value measurements within Level 3 hierarchy.

March 31, 2021
			Valuation	Unobservable
	Fair Value		Techniques	Input	Rate
Securities available-for-sale:	(dollars in thousands)
Municipal securities	$	8,774	Discounted cash flows	Discount rate	2.9	%

December 31, 2020
			Valuation	Unobservable
	Fair Value		Techniques	Input	Rate
Securities available-for-sale:	(dollars in thousands)
Municipal securities	$	8,844	Discounted cash flows	Discount rate	2.9	%

Fair Value Measurements, Nonrecurring [Table Text Block]

Nonrecurring basis: The following methods and assumptions were used to estimate the fair values of the Company’s assets measured at fair value on a nonrecurring basis for the periods presented. The tables below provide quantitative information about significant unobservable inputs used in fair value measurements within Level 3 hierarchy.

March 31, 2021

			Valuation	Unobservable
(dollars in thousands)	Fair Value		Techniques	Input	Range (weighted average)
Collateral dependent:
Commercial	$	722	Appraisals of collateral value	Comparable sales	0% - 5% (2%)

Commercial	$	12,168	Market approach (100)	Average transfer price as a price to unpaid principal balance	48 – 53 (49)

Commercial real estate	$	2,283	Appraisals of collateral value	Comparable sales	0% - 25% (8%)

Construction	$	2,500	Appraisals of collateral value	Comparable sales	15%

Residential	$	2,089	Appraisals of collateral value	Comparable sales	1% - 15% (6%)

December 31, 2020

			Valuation	Unobservable
(dollars in thousands)	Fair Value		Techniques	Input	Range (weighted average)
Impaired loans:
Commercial	$	10,524	Market approach (100%)	Average transfer price as a price to unpaid principal balance	48 - 53 (49)

Commercial	$	227	Appraisals of collateral value	Adjustment for comparable sales	1% to + 5% (+2%)

Commercial real estate	$	1,393	Appraisals of collateral value	Adjustment for comparable sales	-25% to +20% (-8%)

Fair Value, by Balance Sheet Grouping [Table Text Block]

As of March 31, 2021 the fair value measurements presented are consistent with Topic 820, Fair Value Measurement, in which fair value represents exit price. The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of March 31, 2021 and December 31, 2020:

					Fair Value Measurements
					Quoted
					Prices in
					Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying		Fair		Assets		Inputs		Inputs
	Amount		Value		(Level 1)		(Level 2)		(Level 3)
	(dollars in thousands)
March 31, 2021
Financial assets:
Cash and due from banks	$	260,092	$	260,092	$	260,092	$	-	$	-
Securities available-for-sale		442,023		442,023		2,277		442,023		8,774
Investment in restricted stocks		22,483		n/a		n/a		n/a		n/a
Equity securities		13,200		13,200		13,200		-		-
Net loans		6,196,623		6,267,519		-		-		6,267,519
Accrued interest receivable		35,249		35,249		-		1,598		33,651

Financial liabilities:
Noninterest-bearing deposits		1,384,961		1,384,961		1,384,961		-		-
Interest-bearing deposits		4,566,373		4,573,673		3,209,774		1,363,899		-
Borrowings		359,710		362,497		-		362,497		-
Subordinated debentures		152,724		163,868		-		163,868		-
Derivatives		1,464		1,464		-		1,464		-
Accrued interest payable		3,598		3,598		-		3,598		-

December 31, 2020
Financial assets:
Cash and due from banks	$	303,756	$	303,756	$	303,756	$	-	$	-
Investment securities available-for-sale		487,955		487,955		157		478,954		8,844
Restricted investment in bank stocks		25,099		n/a		n/a		n/a		n/a
Equity securities		13,387		13,387		13,387		-		-
Net loans		6,157,081		6,244,037		-		-		6,244,037
Accrued interest receivable		35,317		35,317		-		1,764		33,553

Financial liabilities:
Noninterest-bearing deposits		1,339,108		1,339,108		1,339,108		-		-
Interest-bearing deposits		4,620,116		4,633,961		3,155,983		1,477,978		-
Borrowings		425,954		429,671		-		429,671		-
Subordinated debentures		202,648		214,113		-		214,113		-
Derivatives		2,119		2,119		-		2,119		-
Accrued interest payable		3,687		3,687		-		3,687		-