Finward Bancorp Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Commitments and Contingencies

Commitments and Contingencies

12 Months Ended

Dec. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Note 15 Commitments and Contingencies

The Bancorp is a party to financial instruments in the normal course of business to meet the financing needs of its customers. These financial instruments, which include commitments to make loans and standby letters of credit, are not reflected in the accompanying consolidated financial statements. Such financial instruments are recorded when they are funded.

The Bancorp’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to originate loans and standby letters of credit is represented by the contractual amount of those instruments. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. The Bancorp uses the same credit policy to make such commitments as it uses for on-balance sheet items. Since commitments to make loans may expire without being used, the amount does not necessarily represent future cash commitments.

The Bancorp had outstanding commitments to originate loans as follows:

	(Dollars in thousands)
	Fixed		Variable
	Rate		Rate		Total
December 31, 2016:
Residential real estate, including home equity	$	32,147	$	10,715	$	42,862
Consumer loans		15,332		-		15,332
Commercial real estate, construction & land development and other dwellings		7,263		13,084		20,347
Commercial participations purchased		83		917		1,000
Commercial business		1,005		41,474		42,479
Total	$	55,830	$	66,190	$	122,020

December 31, 2015:
Residential real estate, including home equity	$	21,638	$	6,590	$	28,228
Consumer loans		11,796		-		11,796
Commercial real estate, construction & land development and other dwellings		12,619		18,170		30,789
Commercial participations purchased		83		-		83
Commercial business		1,095		39,613		40,708
Total	$	47,231	$	64,373	$	111,604

The approximately $55.8 million in fixed rate commitments outstanding at December 31, 2016 had interest rates ranging from 2.99% to 10.00%, for a period not to exceed forty-five days. At December 31, 2015, fixed rate commitments outstanding of approximately $47.2 million had interest rates ranging from 2.75% to 10.00%, for a period not to exceed forty-five days. Mortgage interest rate locks with borrowers which are included with real estate commitments, were treated as derivative transactions, and valued accordingly at year-end.

Standby letters of credit are conditional commitments issued by the Bancorp to guarantee the performance of a customer to a third party. At December 31, 2016 and 2015, the Bancorp had standby letters of credit totaling approximately $7.8 million and $8.4 million, respectively which are not included in the tables above. The Bancorp evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bancorp upon extension of credit, is based on management’s credit evaluation of the borrower. Collateral obtained may include accounts receivable, inventory, property, land or other assets.