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Fair Value Measurements and Fair Value of Financial Instruments (Tables) | 9 Months Ended
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Sep. 30, 2021
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 as of September 30, 2021 and December 31, 2020 are as follows:
|  |  |  |  | September 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 |  | $ | 51,048 |  | $ | - |  | $ | 51,048 |  | $ | -
Residential mortgage pass-through securities |  |  | 256,055 |  |  | - |  |  | 256,055 |  |  | -
Commercial mortgage pass-through securities |  |  | 10,526 |  |  | - |  |  | 10,526 |  |  | -
Obligations of U.S. states and political subdivision |  |  | 130,274 |  |  | - |  |  | 121,638 |  |  | 8,636
Corporate bonds and notes |  |  | 11,089 |  |  | - |  |  | 11,089 |  |  | -
Asset-backed securities |  |  | 2,722 |  |  | - |  |  | 2,722 |  |  | -
Certificates of deposit |  |  | 150 |  |  | - |  |  | 150 |  |  | -
Other securities |  |  | 1,020 |  |  | 1,020 |  |  | - |  |  | -
Total available-for-sale |  | $ | 462,884 |  | $ | 1,020 |  | $ | 453,228 |  | $ | 8,636
Equity securities |  |  | 13,700 |  |  | 11,709 |  |  | 1,991 |  |  | -
Derivatives |  |  | 1,296 |  |  | - |  |  | 1,296 |  |  | -
Total assets |  | $ | 477,880 |  | $ | 12,729 |  | $ | 456,515 |  | $ | 8,636
34 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 September 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 |  | September 30, |  | Assets |  | Inputs |  | Inputs
basis: |  | 2021 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Collateral dependent loans: |  |  |  |  | (dollars in thousands)
Commercial |  | $ | 12,966 |  | $ | - |  | $ | - |  | $ | 12,966
Commercial real estate |  |  | 16,407 |  |  | - |  |  | - |  |  | 16,407
Residential real estate |  |  | 2,251 |  |  | - |  |  | - |  |  | 2,251
Collateral dependent loans – Collateral dependent loans as of September 30, 2021 that required a valuation allowance were $48.2 million with a related valuation allowance of $16.6 million.
|  |  |  |  | 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 nine months ended September 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 |  |  | (208 | ) |
Balance as of September 30, 2021 |  | $ | 8,636 |  |
|  | 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 September 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.
September 30, 2021 |  |  |  |  |  |  |  |  |  |
|  |  |  |  | Valuation |  | Unobservable |  |  |
|  | Fair Value |  | Techniques |  | Input |  | Rate
Securities available-for-sale: |  | (dollars in thousands)
Municipal securities |  | $ | 8,636 |  | 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. September 30, 2021
|  |  |  |  | Valuation |  | Unobservable |  |
(dollars in thousands) |  | Fair Value |  | Techniques |  | Input |  | Range (weighted average)
Collateral dependent: |  |  |  |  |  |  |  |  |
Commercial |  | $ | 780 |  | Appraisals of collateral value |  | Comparable sales |  | 0% - 5% (2%)
Commercial |  | $ | 12,186 |  | Market approach (100) |  | Average transfer price as a price to unpaid principal balance |  | 48 – 53 (49)
Commercial real estate |  | $ | 16,407 |  | Appraisals of collateral value |  | Comparable sales |  | 0% - 25% (8%)
Residential real estate |  | $ | 2,251 |  | 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 September 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 September 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)
September 30, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and due from banks |  | $ | 413,195 |  | $ | 413,195 |  | $ | 413,195 |  | $ | - |  | $ | -
Securities available-for-sale |  |  | 462,884 |  |  | 462,884 |  |  | 1,020 |  |  | 453,228 |  |  | 8,636
Investment in restricted stocks |  |  | 18,106 |  |  | n/a |  |  | n/a |  |  | n/a |  |  | n/a
Equity securities |  |  | 13,700 |  |  | 13,700 |  |  | 11,709 |  |  | 1,991 |  |  | -
Net loans |  |  | 6,498,453 |  |  | 6,567,363 |  |  | - |  |  | - |  |  | 6,567,363
Derivatives |  |  | 1,296 |  |  | 1,296 |  |  | - |  |  | 1,296 |  |  | -
Accrued interest receivable |  |  | 33,610 |  |  | 33,610 |  |  | - |  |  | 1,356 |  |  | 32,254
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Noninterest-bearing deposits |  |  | 1,500,754 |  |  | 1,500,754 |  |  | 1,500,754 |  |  | - |  |  | -
Interest-bearing deposits |  |  | 4,897,584 |  |  | 4,899,141 |  |  | 3,675,673 |  |  | 1,223,468 |  |  | -
Borrowings |  |  | 253,225 |  |  | 255,099 |  |  | - |  |  | 255,099 |  |  | -
Subordinated debentures |  |  | 152,875 |  |  | 164,378 |  |  | - |  |  | 164,378 |  |  | -
Accrued interest payable |  |  | 2,879 |  |  | 2,879 |  |  | - |  |  | 2,879 |  |  | -
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 |  |  | -

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