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

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

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 at September 30, 2019 and December 31, 2018 are as follows:

			September 30, 2019
			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	$	24,535	$	-	$	24,535	$	-
Residential mortgage pass-through securities		215,805		-		215,805		-
Commercial mortgage pass-through securities		5,090		-		5,090		-
Obligations of U.S. states and political subdivision		143,656		-		134,475		9,181
Corporate bonds and notes		28,250		-		28,250		-
Asset-backed securities		6,094		-		6,094		-
Certificates of deposit		150		-		150		-
Other securities		2,269		2,269		-		-
Total available-for-sale	$	425,849	$	2,269	$	414,399	$	9,181
Equity securities		11,231		11,231		-		-
Total assets	$	437,080	$	13,500	$	414,399	$	9,181
Liabilities
Derivatives		380		-		380		-
Total liabilities	$	380	$	-	$	380	$	-

31

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 7. Fair Value Measurements and Fair Value of Financial Instruments – (continued)

			December 31, 2018
			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	$	44,955	$	-	$	44,955	$	-
Residential mortgage pass-through securities		185,204		-		185,204		-
Commercial mortgage pass-through securities		3,874		-		3,874		-
Obligations of U.S. states and political subdivision		139,185		-		129,808		9,377
Corporate bonds and notes		25,813		-		25,813		-
Asset-backed securities		9,691		-		9,691		-
Certificates of deposit		322		-		322		-
Other securities		2,990		2,990		-		-
Total available-for-sale	$	412,034	$	2,990	$	399,667	$	9,377
Equity securities		11,460		11,460		-		-
Derivatives		1,159		-		1,159		-
Total assets	$	424,653	$	14,450	$	400,826	$	9,377

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 at September 30, 2019 and December 31, 2018 are as follows:

			Fair Value Measurements at Reporting Date Using
Assets measured at fair value on a nonrecurring basis:	Carrying Value at September 30, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans:	(dollars in thousands)
Commercial real estate	$	365	$	-	$	-	$	365
Commercial construction		5,128		-		-		5,128
Residential real estate		240		-		-		240

			Fair Value Measurements at Reporting Date Using
Assets measured at fair value on a nonrecurring basis:	Carrying Value at December 31, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans:	(dollars in thousands)
Commercial real estate	$	1,481	$	-	$	-	$	1,481
Residential real estate		231		-		-		231

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 nine months ended September 30, 2019 and for the year ended December 31, 2018:

	Municipal Securities
	(dollars in thousands)
Beginning balance, January 1, 2019	$	9,377
Principal paydowns		(196	)
Ending balance, September 30, 2019	$	9,181

	Municipal Securities
	(dollars in thousands)
Beginning balance, January 1, 2018	$	9,632
Principal paydowns		(255	)
Ending balance, December 31, 2018	$	9,377

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 at September 30, 2019 and December 31, 2018. The table below provides quantitative information about significant unobservable inputs used in fair value measurements within Level 3 hierarchy.

September 30, 2019

	Fair Value		Valuation Techniques	Unobservable Input	Range
Securities available-for-sale:			(dollars in thousands)
Municipal securities	$	9,181	Discounted cash flows	Discount rate	2.9	%

December 31, 2018

	Fair Value		Valuation Techniques	Unobservable Input	Range
Securities available-for-sale:			(dollars in thousands)
Municipal securities	$	9,377	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.

September 30, 2019	Fair Value		Valuation Techniques	Unobservable Input	Range
Impaired loans:	(dollars in thousands)
Commercial real estate	$	365	Sales comparison approach	Adjustment for differences between the comparable sales	0% to 20% [10%]
Commercial construction		5,128	Sales comparison approach	Adjustment for differences between the comparable sales	-10% to 13% [2%]
Residential real estate		240	Sales comparison approach	Adjustment for differences between the comparable sales	0% to 7% [2%]

December 31, 2018	Fair Value		Valuation Techniques	Unobservable Input	Range
Impaired loans:	(dollars in thousands)
Commercial real estate	$	1,481	Sales comparison approach	Adjustment for differences between the comparable sales	6% to 9% [8%]
Residential real estate		231	Sales comparison approach	Adjustment for differences between the comparable sales	0% to 10% [5%]

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

As of September 30, 2019 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 September 30, 2019 and December 31, 2018:

					Fair Value Measurements
	Carrying Amount		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)
September 30, 2019
Financial assets:
Cash and due from banks	$	194,009	$	194,009	$	194,009	$	-	$	-
Securities available-for-sale		425,849		425,849		2,269		414,399		9,181
Investment in restricted stocks		27,946		n/a		n/a		n/a		n/a
Equity securities		11,231		11,231		11,231		-		-
Net loans		5,071,700		5,087,076		-		-		5,087,076
Loans held-for-sale		33,245		33,245		-		1,598		31,647
Accrued interest receivable		21,024		21,024		-		2,262		18,762
Financial liabilities:
Noninterest-bearing deposits		828,190		828,190		828,190		-		-
Interest-bearing deposits		3,923,044		3,935,294		2,349,308		1,585,986		-
Borrowings		512,456		514,331		-		514,331		-
Subordinated debentures		128,802		137,790		-		137,790		-
Derivatives		380		380		-		380		-
Accrued interest payable		4,509		4,509		-		4,509		-
December 31, 2018
Financial assets:
Cash and due from banks	$	172,366	$	172,366	$	172,366	$	-	$	-
Securities available-for-sale		412,034		412,034		2,990		399,667		9,377
Investment in restricted stocks		31,136		n/a		n/a		n/a		n/a
Equity securities		11,460		11,460		11,460		-		-
Net loans		4,506,138		4,402,878		-		-		4,402,878
Derivatives		1,159		1,159		-		1,159		-
Accrued interest receivable		18,214		18,214		-		2,064		16,150
Financial liabilities:
Noninterest-bearing deposits		768,584		768,584		768,584		-		-
Interest-bearing deposits		3,323,508		3,320,640		1,957,503		1,363,137		-
Borrowings		600,001		598,598		-		598,598		-
Subordinated debentures		128,556		132,426		-		132,426		-
Accrued interest payable		6,764		6,764		-		6,764		-