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, 2013

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, 2012	$	271
Additions not previously recognized		-
Ending balance, September 30, 2013	$	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, 2013:

(Dollars in thousands)
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	$	1,257		$	1,296		$	1,303		$	1,352
Fair value	$	430		$	385		$	721		$	466
Unrealized gains/(losses)	$	(827)		$	(911)		$	(582)		$	(886)
Lowest credit rating assigned		CC			C			BB			CC
Number of performing banks		50			28			53			45
Number of performing insurance companies		13			7			10			n/a
Number of issuers in default		17			9			1			2
Number of issuers in deferral		13			5			12			9
Defaults & deferrals as a % of performing collateral		49.14	%		33.47	%		19.11	%		30.51	%
Subordination:
As a % of performing collateral		-2.52	%		-9.86	%		35.32	%		16.11	%
As a % of performing collateral - adjusted for projected future defaults		-10.47	%		-18.00	%		30.97	%		9.02	%
Other-than-temporary impairment model assumptions:
Defaults:
Year 1 - issuer average		2.40	%		2.30	%		2.10	%		2.60	%
Year 2 - issuer average		2.40	%		2.30	%		2.10	%		2.60	%
Year 3 - issuer average		2.40	%		2.30	%		2.10	%		2.60	%
> 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, 2013. Assets measured at fair value on a recurring basis are summarized below:

			Fair Value Measurements at September 30, 2013 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
U.S. government sponsored entities	$	19,999	$	-	$	19,999	$	-
Collateralized mortgage obligations and residential mortgage-backed securities		91,569		-		91,569		-
Municipal securities		72,737		-		72,737		-
Collateralized debt obligations		2,002		-		-		2,002
Total securities available-for-sale	$	186,307	$	-	$	184,305	$	2,002

			Fair Value Measurements at December 31, 2012 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
U.S. government sponsored entities	$	23,096	$	-	$	23,096	$	-
Collateralized mortgage obligations and residential mortgage-backed securities		99,914		-		99,914		-
Municipal securities		63,073		-		63,073		-
Collateralized debt obligations		1,392		-		-		1,392
Total securities available-for-sale	$	187,475	$	-	$	186,083	$	1,392

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, 2013 Using Significant Unobservable Inputs (Level 3)
	Available-for- sale securities
	Collateralized Debt Obligations
Beginning balance, December 31, 2012	$	1,392
Transfers in and/or (out) of Level 3		-
Total gains or (losses)
Included in earnings		-
Included in other comprehensive income		610
Purchases, issuances, sales, and settlements
Purchases		-
Issuances		-
Sales		-
Settlements		-
Ending balance, September 30, 2013	$	2,002

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:

			Fair Value Measurements at September 30, 2013 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	$	8,607	$	-	$	-	$	8,607
Foreclosed real estate		1,657		-		-		1,657

			Fair Value Measurements at December 31, 2012 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	$	17,879	$	-	$	-	$	17,879
Foreclosed real estate		425		-		-		425

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.

	September 30, 2013				Estimated Fair Value Measurements at September 30, 2013 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	$	39,105	$	39,105	$	39,105	$	-	$	-
Securities available-for-sale		186,307		186,307		-		184,305		2,002
Loans held-for-sale		170		173		173		-		-
Loans receivable, net		421,194		418,843		-		-		418,843
Federal Home Loan Bank stock		3,086		3,086		-		3,086		-
Accrued interest receivable		2,359		2,359		-		2,359		-

Financial liabilities:
Non-interest bearing deposits		78,669		78,669		78,669		-		-
Interest bearing deposits		488,761		488,838		330,506		158,332		-
Repurchase agreements		20,543		20,553		14,530		6,023		-
Borrowed funds		31,309		31,393		309		31,084		-
Accrued interest payable		37		37		-		37		-

	December 31, 2012				Estimated Fair Value Measurements at December 31, 2012 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	$	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		-

- 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