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, 2012

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)
	Other-than-temporary impairment
Ending balance, December 31, 2011	$	265
Additions not previously recognized		6
Ending balance, September 30, 2012	$	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 as of September 30, 2012 :

Cusip		74043CAC1			74042TAJ0			01449TAB9			01450NAC6
Deal name		PreTSL XXIV			PreTSL XXVII			Alesco IX			Alesco XVII
Class		B-1			C-1			A-2A			B
Book value	$	1,256,972		$	1,296,077		$	1,302,536		$	1,351,903
Fair value		240,065			232,824			562,650			319,538
Unrealized gains/(losses)		(1,016,907	)		(1,063,253	)		(739,886	)		(1,032,365	)
Lowest credit rating assigned		Caa3			C			B2			Ca
Number of performing banks		49			27			54			44
Number of performing insurance companies		13			7			10			n/a
Number of issuers in default		17			9			2			2
Number of issuers in deferral		14			6			10			10
Defaults & deferrals as a % of performing collateral		49.53	%		36.26	%		19.96	%		32.89	%
Subordination:
As a % of performing collateral		-6.50	%		-20.14	%		33.46	%		7.85	%
As a % of performing collateral - adjusted for projected future defaults		-13.66	%		-28.62	%		28.30	%		-1.60	%
Other-than-temporary impairment model assumptions:
Defaults:
Year 1 - issuer average		2.10	%		2.20	%		2.40	%		3.10	%
Year 2 - issuer average		2.10	%		2.20	%		2.40	%		3.10	%
Year 3 - issuer average		2.10	%		2.20	%		2.40	%		3.10	%
> 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	$	41,100		$	132,000		$	36,600		$	61,950

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, 2012. Assets measured at fair value on a recurring basis are summarized below:

			(Dollars in thousands)
			Fair Value Measurements at September 30, 2012 Using
	September 30, 2012		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
U.S. government sponsored entities	$	14,615	$	-	$	14,615	$	-
Collateralized mortgage obligations and residential mortgage-backed securities		115,329		-		115,329		-
Municipal securities		60,980		-		60,980		-
Collateralized debt obligations		1,355		-		-		1,355
Total securities available-for-sale	$	192,279	$	-	$	190,924	$	1,355

			(Dollars in thousands)
			Fair Value Measurements at December 31, 2011 Using
	December 31, 2011		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
U.S. government sponsored entities	$	15,648	$	-	$	15,648	$	-
Collateralized mortgage obligations and residential mortgage-backed securities		111,197		-		111,197		-
Municipal securities		58,756		-		58,756		-
Collateralized debt obligations		1,361		-		-		1,361
Total securities available-for-sale	$	186,962	$	-	$	185,601	$	1,361

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)	Fair Value Measurements at September 30, 2012 Using Significant Unobservable Inputs (Level 3)
	Available-for- sale securities
	Collateralized Debt Obligations
Beginning balance, December 31, 2011	$	1,361
Transfers in and/or (out) of Level 3		-
Total gains or (losses)
Included in earnings		(6	)
Included in other comprehensive income		-
Purchases, issuances, sales, and settlements
Purchases		-
Issuances		-
Sales		-
Settlements		-
Ending balance, September 30, 2012	$	1,355

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, 2012 Using
	September 30, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	17,165	$	-	$	-	$	17,165
Foreclosed real estate		768		-		-		768

			(Dollars in thousands)
			Fair Value Measurements at December 31, 2011 Using
	December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	20,064	$	-	$	-	$	20,064
Foreclosed real estate		2,217		-		-		2,217

Schedule of Carrying Amount and Fair Values of Financial Instruments [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.

	(Dollars in thousands)
	September 30, 2012				Estimated Fair Value Measurements at September 30, 2012 Using
	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	$	19,518	$	19,518	$	19,518	$	-	$	-
Securities available-for-sale		192,279		192,279		-		190,924		1,355
Loans held-for-sale		253		259		259		-		-
Loans receivable, net		423,939		425,590		-		-		425,590
Federal Home Loan Bank stock		3,086		3,086		-		3,086		-
Accrued interest receivable		2,303		2,303		-		2,303		-

Financial liabilities:
Non-interest bearing deposits		71,991		71,991		71,991		-		-
Interest bearing deposits		475,683		475,869		298,236		177,633		-
Repurchase agreements		23,290		23,299		17,003		6,296		-
Borrowed funds		34,401		34,961		401		34,560		-
Accrued interest payable		45		45		-		45		-

	(Dollars in thousands)
	December 31, 2011				Estimated Fair Value Measurements at December 31, 2011 Using
	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	$	26,367	$	26,367	$	26,367	$	-	$	-
Securities available-for-sale		186,962		186,962		-		185,601		1,361
Loans held-for-sale		-		-		-		-		-
Loans receivable, net		393,396		394,385		-		-		394,385
Federal Home Loan Bank stock		3,086		3,086		-		3,086		-
Accrued interest receivable		2,554		2,554		-		2,554		-

Financial liabilities:
Non-interest bearing deposits		55,577		55,577		55,577		-		-
Interest bearing deposits		471,304		471,622		294,382		177,240		-
Repurchase agreements		15,395		15,407		8,722		6,685		-
Borrowed funds		36,618		37,270		617		36,653		-
Accrued interest payable		67		67		-		67		-

- Definition

Tabular disclosure of assets and liabilities by class, including financial instruments measured at fair value that are classified in shareholders' equity, if any, that are measured at fair value on a nonrecurring basis in periods after initial recognition (for example, impaired assets). Disclosures may include, but are not limited to: (a) the fair value measurements recorded and the reasons for the measurements and (b) the level within the fair value hierarchy in which the fair value measurements are categorized in their entirety (levels 1, 2, 3).

+ References + Details

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the amount of other than temporary impairment (OTTI) related to credit losses recognized in earnings including: (a) the beginning balance of the amount related to credit losses on debt securities held by the investor at the beginning of the period for which a portion of an OTTI was recognized in other comprehensive income; (b) additions for the amount related to the credit loss for which an OTTI was not previously recognized; (c) reductions for securities sold during the period (realized); (d) reductions for securities for which the amount previously recognized in other comprehensive income was recognized in earnings because the investor intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis; (e) additional increases to the amount related to the credit loss for which an OTTI was previously recognized when the investor does not intend to sell the security and it is not more likely than not that the investor will be required to sell the security before recovery of its amortized cost basis; (f) reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security; and (g) the ending balance of the amount related to credit losses on debt securities held by the entity at the end of the period for which a portion of an OTTI was recognized in other comprehensive income.

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