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

Annual report pursuant to Section 13 and 15(d)

Fair Values of Financial Instruments (Tables)

Fair Values of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2012

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

The table below shows the credit loss roll forward 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-
	temporarily impaired
Ending balance - December 31, 2011	$	265
Additions not previously recognized		6
Ending balance - December 31, 2012	$	271

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

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		249,184			246,509			568,650			327,289
Unrealized gains/(losses)		(1,007,788	)		(1,049,569	)		(733,886	)		(1,024,614	)
Lowest credit rating assigned		Ca			C			Ba2			C
Number of performing banks		48			27			53			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		15			6			11			10
Defaults & deferrals as a % of performing collateral		51.28	%		36.26	%		21.05	%		39.86	%
Subordination:
As a % of performing collateral		-7.37	%		-19.48	%		33.21	%		-12.77	%
As a % of performing collateral - adjusted for projected future defaults		-14.22	%		-27.93	%		28.49	%		-24.33	%
Other-than-temporary impairment model assumptions:
Defaults:
Year 1 - issuer average		2.00	%		2.20	%		2.20	%		3.10	%
Year 2 - issuer average		2.00	%		2.20	%		2.20	%		3.10	%
Year 3 - issuer average		2.00	%		2.20	%		2.20	%		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

(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]

	(Dollars in thousands)
	Estimated Fair Value Measurements at December 31, 2012 Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
	2012		(Level 1)		(Level 2)		(Level 3)
Assets:
Available-for-sale securities
U.S. government sponsored entities	$	23,096	$	-	$	23,096	$	-
CMO and residential mortgage-backed securities		99,914		-		99,914		-
Municipal securities		63,073		-		63,073		-
Collateralized debt obligations		1,392		-		-		1,392
Total available-for-sale securities	$	187,475	$	-	$	186,083	$	1,392

	(Dollars in thousands)
	Estimated Fair Value Measurements at December 31, 2011 Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
	2011		(Level 1)		(Level 2)		(Level 3)
Assets:
Available-for-sale securities
U.S. government sponsored entities	$	15,648	$	-	$	15,648	$	-
CMO and residential mortgage-backed securities		111,197		-		111,197		-
Municipal securities		58,756		-		58,756		-
Collateralized debt obligations		1,361		-		-		1,361
Total available-for-sale securities	$	186,962	$	-	$	185,601	$	1,361

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

Reconciliation of available-for-sale securities, which require significant adjustment based on unobservable data, are presented below:

	(Dollars in thousands)
	Estimated Fair Value
	Measurements Using
	Significant Unobservable
	Inputs
	(Level 3)
	Available-for-sale
	securities
Total realized/unrealized (losses)/gains, January 1, 2011		1,379
Included in earnings		(1	)
Included in other comprehensive income		(17	)
Transfers in and/or (out) of Level 3		-
Ending balance, December 31, 2011		1,361

Total realized/unrealized (losses)/gains
Included in earnings		(6	)
Included in other comprehensive income		37
Transfers in and/or (out) of Level 3		-
Ending balance, December 31, 2012	$	1,392

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

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

(Dollars in thousands)

Estimated Fair Value Measurements at December 31, 2012 Using

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

December 31,

Assets

Inputs

2012

(Level 1)

(Level 2)

(Level 3)

Assets:

Impaired loans

17,879

Foreclosed real estate

425

(Dollars in thousands)

Estimated Fair Value Measurements at December 31, 2011 Using

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

December 31,

Assets

Inputs

2011

(Level 1)

(Level 2)

(Level 3)

Assets:

Impaired loans

20,064

Foreclosed real estate

2,457

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)				Estimated Fair Value Measurements at
	December 31, 2012				December 31, 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	$	33,751	$	33,751	$	33,751	$	-	$	-
Securities available-for-sale		187,475		187,475		-		186,083		1,392
Loans held-for-sale		323		332		332		-		-
Loans receivable, net		428,560		429,733		-		-		429,733
Federal Home Loan Bank stock		3,086		3,086		-		3,086		-
Accrued interest receivable		2,483		2,483		-		2,483		-

Financial liabilities:
Non-interest bearing deposits		75,228		75,228		75,228		-		-
Interest bearing deposits		491,181		491,295		319,520		171,775		-
Repurchase agreements		16,298		16,310		10,131		6,179		-
Borrowed funds		33,207		33,658		207		33,451		-
Accrued interest payable		52		52		-		52		-

	(Dollars in thousands)				Estimated Fair Value Measurements at
	December 31, 2011				December 31, 2011 Using
					Quoted Prices in		Significant		Significant
					Active Markets for		Other Observable		Unobservable
	Carrying		Estimated		Identical Assets		Inputs		Inputs
	Value		Fair Value		(Level 1)		(Level 2)		(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.

+ References + Details

- 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.

+ References + Details