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

6 Months Ended

Jun. 30, 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 June 30, 2021 and December 31, 2020 are as follows:

				June 30, 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	$	35,773		$	-	$	35,773		$	-
Residential mortgage pass-through securities		263,158			-		263,158			-
Commercial mortgage pass-through securities		8,795			-		8,795			-
Obligations of U.S. states and political subdivision		136,388			-		127,683			8,705
Corporate bonds and notes		11,621			-		11,621			-
Asset-backed securities		2,880			-		2,880			-
Certificates of deposit		151			-		151			-
Other securities		167			167		-			-
Total available-for-sale	$	458,933		$	167	$	450,061		$	8,705

Equity securities		13,223			11,243		1,980			-
Total assets	$	472,156		$	11,410	$	452,041		$	8,705

Liabilities
Derivatives	$	(922	)	$	-	$	(922	)	$	-
Total liabilities	$	(922	)	$	-	$	(922	)	$	-

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 June 30, 2021 and December 31, 2020 are as follows:

			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	June 30,		Assets		Inputs		Inputs
basis:	2021		(Level 1)		(Level 2)		(Level 3)
Collateral dependent loans:			(dollars in thousands)
Commercial	$	12,928	$	-	$	-	$	12,928
Commercial real estate		1,902		-		-		1,902
Commercial construction		2,500		-		-		2,500
Residential real estate		2,033		-		-		2,033

			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 six months ended June 30, 2021 and for the year ended December 31, 2020:

	Municipal
	Securities
	(dollars in thousands)
Balance as of December 31, 2020	$	8,844
Principal paydowns		(139	)
Balance as of June 30, 2021	$	8,705

	Municipal
	Securities
	(dollars in thousands)
Balance as of December 31, 2019	$	9,114
Principal paydowns		(270)
Balance as of 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 June 30, 2021 and December 31, 2020. The table below provides quantitative information about significant unobservable inputs used in fair value measurements within Level 3 hierarchy.

June 30, 2021
			Valuation	Unobservable
	Fair Value		Techniques	Input	Rate
Securities available-for-sale:	(dollars in thousands)
Municipal securities	$	8,705	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.

June 30, 2021

			Valuation	Unobservable
(dollars in thousands)	Fair Value		Techniques	Input	Range (weighted average)
Collateral dependent:
Commercial	$	750	Appraisals of collateral value	Comparable sales	0% - 5% (2%)

Commercial	$	12,178	Market approach (100)	Average transfer price as a price to unpaid principal balance	48 – 53 (49)

Commercial real estate	$	1,902	Appraisals of collateral value	Comparable sales	0% - 25% (8%)

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

Residential	$	2,033	Appraisals of collateral value	Comparable sales	1% - 15% (6%)

December 31, 2020

			Valuation	Unobservable
(dollars in thousands)	Fair Value		Techniques	Input	Range (weighed 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 June 30, 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 June 30, 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)
June 30, 2021
Financial assets:
Cash and due from banks	$	349,417	$	349,417	$	349,417	$	-	$	-
Securities available-for-sale		458,933		458,933		167		450,061		8,705
Investment in restricted stocks		22,563		n/a		n/a		n/a		n/a
Equity securities		13,223		13,223		11,243		1,980		-
Net loans		6,329,220		6,391,465		-		-		6,391,465
Accrued interest receivable		34,001		34,001		-		1,444		32,557

Financial liabilities:
Noninterest-bearing deposits		1,485,952		1,485,952		1,485,952		-		-
Interest-bearing deposits		4,706,561		4,710,337		3,404,754		1,305,583		-
Borrowings		353,462		355,783		-		355,783		-
Subordinated debentures		152,800		164,757		-		164,757		-
Derivatives		922		922		-		922		-
Accrued interest payable		3,083		3,083		-		3,083		-

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		-