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

3 Months Ended

Mar. 31, 2020

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 March 31, 2020 and December 31, 2019 are as follows:

				March 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	$	38,448		$	-	$	38,448		$	-
Residential mortgage pass-through securities		238,620			-		238,620			-
Commercial mortgage pass-through securities		2,192			-		2,192			-
Obligations of U.S. states and political subdivision		136,895			-		127,858			9,037
Corporate bonds and notes		24,738			-		24,736			-
Asset-backed securities		5,363			-		5,363			-
Certificates of deposit		147			-		147			-
Other securities		335			335		-			-
Total available-for-sale		446,738			335		437,366			9,037

Equity securities		13,363			13,363		-			-
Total assets	$	460,101		$	13,698	$	437,366		$	9,037

Liabilities
Derivatives	$	(3,029	)	$	-	$	(3,029	)	$	-
Total liabilities	$	(3,029	)	$	-	$	(3,029	)	$	-

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, 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	$	28,237	$	-	$	28,237	$	-
Residential mortgage pass-through securities		200,496		-		200,496		-
Commercial mortgage pass-through securities		4,997		-		4,997		-
Obligations of U.S. states and political subdivision		136,519		-		127,405		9,114
Corporate bonds and notes		28,382		-		28,382		-
Asset-backed securities		5,780		-		5,780		-
Certificates of deposit		150		-		150		-
Other securities		140		140		-		-
Total available-for-sale		404,701		140		395,447		9,114

Equity securities		11,185		11,185		-		-
Total assets	$	415,886	$	11,325	$	395,447	$	9,114

Liabilities
Derivatives	$	(273)	$	-	$	(273)	$	-
Total liabilities	$	(273)	$	-	$	(273)	$	-

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 March 31, 2020 and December 31, 2019 are as follows:

			Fair Value Measurements at Reporting Date Using
			Quoted
			Prices
			in Active		Significant
	Carrying		Markets for		Other		Significant
	Value at		Identical		Observable		Unobservable
Assets measured at fair value on a nonrecurring	March 31,		Assets		Inputs		Inputs
basis:	2020		(Level 1)		(Level 2)		(Level 3)
Impaired loans:			(dollars in thousands)
Commercial construction		4,661		-		-		4,661
Residential real estate		215		-		-		215

			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:	2019		(Level 1)		(Level 2)		(Level 3)
Impaired loans:			(dollars in thousands)
Commercial construction	$	2,286	$	-	$	-	$	2,286
Residential		240		-		-		240

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, 2020 and for the year ended December 31, 2019:

	Municipal
	Securities
	(dollars in thousands)
Beginning balance, January 1, 2020	$	9,114
Principal paydowns		(77	)
Ending balance, March 31, 2020	$	9,037

	Municipal
	Securities
	(dollars in thousands)
Beginning balance, January 1, 2019	$	9.377
Principal paydowns		(263	)
Ending balance, December 31, 2020	$	9,114

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 March 31, 2020 and December 31, 2019. The table below provides quantitative information about significant unobservable inputs used in fair value measurements within Level 3 hierarchy.

March 31, 2020
			Valuation	Unobservable
	Fair Value		Techniques	Input	Rate
Securities available-for-sale:			(dollars in thousands)
Municipal securities	$	9,037	Discounted cash flows	Discount rate	2.9	%

December 31, 2019
			Valuation	Unobservable
	Fair Value		Techniques	Input	Rate
Securities available-for-sale:			(dollars in thousands)
Municipal securities	$	9,114	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, 2020

			Valuation	Unobservable
(dollars in thousands)	Fair Value		Techniques	Input	Range (weighted average)
Impaired loans:
Commercial construction	$	4,661	Appraisals of collateral value	Comparable sales	0% - 5% (3%)

Residential	$	215	Appraisals of collateral value	Comparable sales	2% - 14% (9%)

December 31, 2019

			Valuation	Unobservable
(dollars in thousands)	Fair Value		Techniques	Input	Range (weighted average)
Impaired loans:
Commercial construction	$	2,286	Appraisals of collateral value	Comparable sales	0% - 5% (3%)

Residential	$	240	Appraisals of collateral value	Comparable sales	2% - 14% (9%)

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

As of March 31, 2020 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, 2020 and December 31, 2019:

					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, 2020
Financial assets:
Cash and due from banks	$	282,809	$	282,809	$	282,809	$	-	$	-
Securities available-for-sale		446,738		446,738		335		437,366		9,037
Investment in restricted stocks		32,425		n/a		n/a		n/a		n/a
Equity securities		13,363		13,363		13,363		-		-
Net loans		5,955,141		5,939,925		-		-		5,939,925
Accrued interest receivable		24,317		24,317		-		2,177		22,140

Financial liabilities:
Noninterest-bearing deposits		979,778		979,778		979,778		-		-
Interest-bearing deposits		4,529,414		4,554,078		2,555,014		1,999,064		-
Borrowings		726,856		731,057		-		731,057		-
Subordinated debentures		128,967		136,366		-		136,366		-
Derivatives		3,029		3,029		-		3,029		-
Accrued interest payable		7,913		7,913		-		7,913		-

December 31, 2019
Financial assets:
Cash and due from banks	$	201,483	$	201,483	$	201,483	$	-	$	-
Investment securities available-for-sale		404,701		404,701		140		395,447		9,114
Restricted investment in bank stocks		27,397		n/a		n/a		n/a		n/a
Equity securities		11,185		11,185		11,185		-		-
Net loans		5,075,234		5,096,669		-		-		5,096,669
Accrued interest receivable		20,949		20,949		-		2,187		18,762

Financial liabilities:
Noninterest-bearing deposits		861,728		861,728		861,728		-		-
Interest-bearing deposits		3,905,814		3,917,405		2,352,093		1,565,312		-
Borrowings		500,293		502,026		-		502,026		-
Subordinated debentures		128,885		134,973		-		134,973		-
Derivatives		273		273		-		273		-
Accrued interest payable		4,018		4,018		-		4,018		-