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

Quarterly report pursuant to Section 13 or 15(d)

Securities

Securities

6 Months Ended

Jun. 30, 2019

Note 4 – Securities

The estimated fair value of available-for-sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income were as follows:


	(Dollars in thousands)
			Gross		Gross		Estimated
	Cost		Unrealized		Unrealized		Fair
June 30, 2019	Basis		Gains		Losses		Value
Money market fund	$	5,598	$	—	$	—	$	5,598
U.S. government sponsored entities		12,986		96		—		13,082
U.S. treasury securities		599		—		—		599
Collateralized mortgage obligations and residential mortgage-backed securities		144,079		1,368		(273)		145,174
Municipal securities		88,451		3,819		(28)		92,242
Collateralized debt obligations		3,455		—		(1,408)		2,047
Total securities available-for-sale	$	255,168	$	5,283	$	(1,709)	$	258,742


	(Dollars in thousands)
			Gross		Gross		Estimated
	Cost		Unrealized		Unrealized		Fair
December 31, 2018	Basis		Gains		Losses		Value
Money market fund	$	2,480	$	—	$	—	$	2,480
U.S. government sponsored entities		7,997		28		(131)		7,894
U.S. treasury securities		—		—		—		—
Collateralized mortgage obligations and residential mortgage-backed securities		137,834		135		(2,688)		135,281
Municipal securities		93,516		1,072		(524)		94,064
Collateralized debt obligations		3,481		—		(1,432)		2,049
Total securities available-for-sale	$	245,308	$	1,235	$	(4,775)	$	241,768

The estimated fair value of available-for-sale debt securities at June 30, 2019, by contractual maturity, were as follows. Securities not due at a single maturity date, primarily collateralized mortgage obligations and residential mortgage-backed securities, are shown separately.


	(Dollars in thousands)
	Available-for-sale
	Estimated
	Fair		Tax- Equivalent
June 30, 2019	Value		Yield (%)
Due in one year or less	$	9,263	2.71
Due from one to five years		3,311	4.91
Due from five to ten years		17,524	3.79
Due over ten years		83,470	4.06

Collateralized mortgage obligations and residential mortgage-backed securities		145,174	2.69
Total	$	258,742	3.24

Sales of available-for-sale securities were as follows for the six months ended:


	(Dollars in thousands)
	June 30,		June 30,
	2019		2018

Proceeds	$	30,281	$	22,545
Gross gains		733		1,004
Gross losses		(81)		—

Accumulated other comprehensive income/(loss) balances, net of tax, related to available-for-sale securities, were as follows:


	(Dollars in thousands)
	Unrealized
	gain/(loss)
Ending balance, December 31, 2018	$	(2,796)
Current period change		5,626
Ending balance, June 30, 2019	$	2,830

Securities with carrying values of approximately $76.2 million and $16.3 million were pledged as of June 30, 2019 and December 31, 2018, respectively, as collateral for repurchase agreements, public funds, and for other purposes as permitted or required by law. The increase in pledged securities for June 30, 2019, was the result of new pledging requirements for Indiana public funds deposits.

Securities with gross unrealized losses at June 30, 2019 and December 31, 2018 not recognized in income are as follows:


					(Dollars in thousands)
	Less than 12 months				12 months or longer				Total
	Estimated				Estimated				Estimated
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
June 30, 2019	Value		Losses		Value		Losses		Value		Losses
U.S. government sponsored entities	$	—	$	—	$	—	$	—	$	—	$	—
Collateralized mortgage obligations and residential mortgage-backed securities		—		—		34,364		(273)		34,364		(273)
Municipal securities		—		—		607		(28)		607		(28)
Collateralized debt obligations		—		—		2,047		(1,408)		2,047		(1,408)
Total temporarily impaired	$	—	$	—	$	37,018	$	(1,709)	$	37,018	$	(1,709)
Number of securities				0				31				31


					(Dollars in thousands)
	Less than 12 months				12 months or longer				Total
	Estimated				Estimated				Estimated
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2018	Value		Losses		Value		Losses		Value		Losses
U.S. government sponsored entities	$	—	$	—	$	3,866	$	(131)	$	3,866	$	(131)
Collateralized mortgage obligations and residential mortgage-backed securities		28,388		(304)		89,234		(2,384)		117,622		(2,688)
Municipal securities		22,678		(367)		3,495		(157)		26,173		(524)
Collateralized debt obligations		—		—		2,049		(1,432)		2,049		(1,432)
Total temporarily impaired	$	51,066	$	(671)	$	98,644	$	(4,104)	$	149,710	$	(4,775)
Number of securities				52				75				127

Unrealized losses on securities have not been recognized into income because the securities are of high credit quality or have undisrupted cash flows. Management has the intent and ability to hold those securities for the foreseeable future, and the decline in fair value is largely due to changes in interest rates and volatility in securities markets. The fair values are expected to recover as the securities approach maturity.