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, 2014

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, 2013	$	271
Additions not previously recognized		-
Ending balance, September 30, 2014	$	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, 2014:

(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	$	530		$	517		$	832		$	552
Unrealized gains/(losses)	$	(727)		$	(779)		$	(471)		$	(800)
Lowest credit rating assigned		CC			C			BB			CC
Number of performing banks		53			30			55			46
Number of performing insurance companies		13			7			10			n/a
Number of issuers in default		17			9			1			3
Number of issuers in deferral		10			3			10			7
Defaults & deferrals as a % of performing collateral		40.78	%		25.75	%		17.22	%		22.89	%
Subordination:
As a % of performing collateral		6.62	%		-2.47	%		41.15	%		22.09	%
As a % of performing collateral - adjusted for projected future defaults		-0.95	%		-11.86	%		37.39	%		17.38	%
Other-than-temporary impairment model assumptions:
Defaults:
Year 1 - issuer average		2.50	%		2.80	%		2.00	%		1.90	%
Year 2 - issuer average		2.50	%		2.80	%		2.00	%		1.90	%
Year 3 - issuer average		2.50	%		2.80	%		2.00	%		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, 2014. Assets measured at fair value on a recurring basis are summarized below:

			Fair Value Measurements at September 30, 2014 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	$	187	$	187	$	-	$	-
U.S. government sponsored entities		12,304		-		12,304		-
Collateralized mortgage obligations and residential mortgage-backed securities		118,162		-		118,162		-
Municipal securities		83,392		-		83,392		-
Collateralized debt obligations		2,431		-		-		2,431
Total securities available-for-sale	$	216,476	$	187	$	213,858	$	2,431

			Fair Value Measurements at December 31, 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	$	18,360	$	-	$	18,360	$	-
Collateralized mortgage obligations and residential mortgage-backed securities		100,315		-		100,315		-
Municipal securities		73,653		-		73,653		-
Collateralized debt obligations		1,968		-		-		1,968
Total securities available-for-sale	$	194,296	$	-	$	192,328	$	1,968

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 Using Significant Unobservable Inputs (Level 3)
	Available-for-sale securities
Beginning balance, December 31, 2013	$	1,968
Transfers in and/or (out) of Level 3		-
Total gains or (losses)
Included in earnings		-
Included in other comprehensive income		463
Purchases, issuances, sales, and settlements
Purchases		-
Issuances		-
Sales		-
Settlements		-
Ending balance, September 30, 2014	$	2,431

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, 2014 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	$	7,024	$	-	$	-	$	7,024
Foreclosed real estate		1,814		-		-		1,814

			Fair Value Measurements at December 31, 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	$	8,164	$	-	$	-	$	8,164
Foreclosed real estate		1,084		-		-		1,084

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, 2014				Estimated Fair Value Measurements at September 30, 2014 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	$	27,991	$	27,991	$	27,991	$	-	$	-
Securities available-for-sale		216,476		216,476		-		214,045		2,431
Loans held-for-sale		2,082		2,125		2,125		-		-
Loans receivable, net		485,407		481,910		-		-		481,910
Federal Home Loan Bank stock		4,392		4,392		-		4,392		-
Accrued interest receivable		2,663		2,663		-		2,663		-

Financial liabilities:
Non-interest bearing deposits		86,348		86,348		86,348		-		-
Interest bearing deposits		544,897		544,933		355,493		189,440		-
Repurchase agreements		25,540		25,548		20,028		5,520		-
Borrowed funds		38,683		38,649		582		38,067		-
Accrued interest payable		43		43		-		43		-

	December 31, 2013				Estimated Fair Value Measurements at December 31, 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	$	21,124	$	21,124	$	21,124	$	-	$	-
Securities available-for-sale		194,296		194,296		-		192,328		1,968
Loans held-for-sale		136		138		138		-		-
Loans receivable, net		430,632		427,719		-		-		427,719
Federal Home Loan Bank stock		3,086		3,086		-		3,086		-
Accrued interest receivable		2,480		2,480		-		2,480		-

Financial liabilities:
Non-interest bearing deposits		73,430		73,430		73,430		-		-
Interest bearing deposits		499,463		499,470		343,847		155,623		-
Repurchase agreements		14,031		14,043		8,042		6,001		-
Borrowed funds		30,898		30,956		799		30,157		-
Accrued interest payable		47		47		-		47		-

- 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 fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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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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