Finward Bancorp Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Fair Value (Tables)

Fair Value (Tables)

9 Months Ended

Sep. 30, 2017

Other than Temporary Impairment, Credit Losses Recognized in Earnings [Table Text Block]

The table below shows the credit loss roll forward on a year-to-date basis for the Bancorp’s pooled trust preferred securities that have been classified with other-than-temporary impairment:

	(Dollars in thousands)
	Collateralized debt obligations
	other-than-temporary impairment
Ending balance, December 31, 2016	$	271
Additions not previously recognized		-
Ending balance, September 30, 2017	$	271

Schedule of Fair Value, Pooled Trust Preferred Securities [Table Text Block]

The following table contains information regarding the Bancorp’s pooled trust preferred securities impairment evaluation as of June 30, 2017:

Cusip		74043CAC1			74042TAJ0			01449TAB9			01450NAC6
Deal name		PreTSL XXIV			PreTSL XXVII			Alesco IX			Alesco XVII
Class		B-1			C-1			A-2A			B
Lowest credit rating assigned		CCC			CC			BB			CCC
Number of performing banks		62			33			62			51
Number of performing insurance companies		13			7			10			n/a
Number of issuers in default		16			7			2			4
Number of issuers in deferral		2			2			2			1
Defaults & deferrals as a % of performing collateral		26.56	%		20.06	%		4.22	%		8.11	%
Subordination:
As a % of performing collateral		23.55	%		8.35	%		52.53	%		35.58	%
As a % of performing collateral - adjusted for projected future defaults		18.93	%		1.24	%		49.17	%		31.69	%
Other-than-temporary impairment model assumptions:
Defaults:
Year 1 - issuer average		1.90	%		2.40	%		2.20	%		1.90	%
Year 2 - issuer average		1.90	%		2.40	%		2.20	%		1.90	%
Year 3 - issuer average		1.90	%		2.40	%		2.20	%		1.90	%
> 3 Years - issuer average			(1)			(1)			(1)			(1)
Discount rate - 3 month Libor, plus implicit yield spread at purchase		1.48	%		1.23	%		1.27	%		1.44	%
Recovery assumptions			(2)			(2)			(2)			(2)
Prepayments		0.00	%		0.00	%		0.00	%		0.00	%
Other-than-temporary impairment	$	41		$	132		$	36		$	62

(1)

- Default rates > 3 years are evaluated on a issuer by issuer basis and range from 0.25% to 5.00%.

(2)

- Recovery assumptions are evaluated on a issuer by issuer basis and range from 0% to 15% with a five year lag.

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

There were no transfers to or from Levels 1 and 2 during the nine months ended September 30, 2017. Assets measured at fair value on a recurring basis are summarized below:

			(Dollars in thousands)
			Fair Value Measurements at September 30, 2017 Using
(Dollars in thousands)	Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale debt securities:
Money market fund	$	1,711	$	1,711	$	-	$	-
U.S. government sponsored entities		3,914		-		3,914		-
Collateralized mortgage obligations and residential mortgage-backed securities		141,575		-		141,575		-
Municipal securities		93,088		-		93,088		-
Collateralized debt obligations		3,264		-		-		3,264
Total securities available-for-sale	$	243,552	$	1,711	$	238,577	$	3,264

			(Dollars in thousands)
			Fair Value Measurements at December 31, 2016 Using
(Dollars in thousands)	Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale debt securities:
Money market fund	$	222	$	222	$	-	$	-
U.S. government sponsored entities		16,274		-		16,274		-
Collateralized mortgage obligations and residential mortgage-backed securities		117,975		-		117,975		-
Municipal securities		96,745		-		96,745		-
Collateralized debt obligations		2,409		-		-		2,409
Total securities available-for-sale	$	233,625	$	222	$	230,994	$	2,409

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

A roll forward of available-for-sale securities, which require significant adjustment based on unobservable data, are presented in the following table:

	(Dollars in thousands)
	Estimated Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Available-for- sale securities
Beginning balance, January 1, 2016	$	2,734
Principal payments		(107	)
Total unrealized losses, included in other comprehensive income		(218	)
Transfers in and/or (out) of Level 3		-
Ending balance, December 31, 2016	$	2,409

Beginning balance, January 1, 2017	$	2,409
Principal payments		(136	)
Total unrealized gains, included in other comprehensive income		991
Transfers in and/or (out) of Level 3		-
Ending balance, September 30, 2017	$	3,264

Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Table Text Block]

Assets measured at fair value on a non-recurring basis are summarized below:

			(Dollars in thousands)
			Fair Value Measurements at September 30, 2017 Using
(Dollars in thousands)	Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	1,983	$	-	$	-	$	1,983
Foreclosed real estate		1,805		-		-		1,805

			(Dollars in thousands)
			Fair Value Measurements at December 31, 2016 Using
(Dollars in thousands)	Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	2,282	$	-	$	-	$	2,282
Foreclosed real estate		2,665		-		-		2,665

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

The following table shows carrying values and related estimated fair values of financial instruments as of the dates indicated. Estimated fair values are further categorized by the inputs used to measure fair value. Items that are not financial instruments are not included.

	September 30, 2017				Estimated Fair Value Measurements at September 30, 2017 Using
(Dollars in thousands)	Carrying Value		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	14,128	$	14,128	$	14,128	$	-	$	-
Securities available-for-sale		243,552		243,552		1,711		238,577		3,264
Loans held-for-sale		2,007		2,049		2,049		-		-
Loans receivable, net		600,905		594,357		-		-		594,357
Federal Home Loan Bank stock		3,000		3,000		-		3,000		-
Accrued interest receivable		3,021		3,021		-		3,021		-

Financial liabilities:
Non-interest bearing deposits		118,797		118,797		118,797		-		-
Interest bearing deposits		638,763		637,759		465,938		171,821		-
Repurchase agreements		15,946		15,942		14,191		1,751		-
Borrowed funds		41,421		41,417		283		41,134		-
Accrued interest payable		45		45		-		45		-

	December 31, 2016				Estimated Fair Value Measurements at December 31, 2016 Using
(Dollars in thousands)	Carrying Value		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	45,109	$	45,109	$	45,109	$	-	$	-
Securities available-for-sale		233,625		233,625		222		230,994		2,409
Loans held-for-sale		2,193		2,242		2,242		-		-
Loans receivable, net		575,952		568,855		-		-		568,855
Federal Home Loan Bank stock		3,000		3,000		-		3,000		-
Accrued interest receivable		3,086		3,086		-		3,086		-

Financial liabilities:
Non-interest bearing deposits		111,800		111,800		111,800		-		-
Interest bearing deposits		667,971		667,227		482,307		184,920		-
Repurchase agreements		13,998		13,995		11,439		2,556		-
Borrowed funds		25,828		25,840		700		25,140		-
Accrued interest payable		41		41		-		41		-