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, 2015

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-temporary impairment
Ending balance, December 31, 2014	$	271
Additions not previously recognized		-
Ending balance, December 31, 2015	$	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 December 31, 2015:

Cusip	74043CAC1			74042TAJ0			01449TAB9			01450NAC6
Deal name	PreTSL XXIV			PreTSL XXVII			Alesco IX			Alesco XVII
Class		B-1			C-1			A-2A			B
Lowest credit rating assigned		CC			C			BB			CCC
Number of performing banks		57			30			59			48
Number of performing insurance companies		13			7			10			n/a
Number of issuers in default		19			8			2			4
Number of issuers in deferral		4			4			5			4
Defaults & deferrals as a % of performing collateral		36.46	%		27.32	%		7.23	%		16.96	%
Subordination:
As a % of performing collateral		9.51	%		-3.69	%		46.16	%		25.85	%
As a % of performing collateral - adjusted for projected future defaults		4.35	%		-11.38	%		43.09	%		21.62	%
Other-than-temporary impairment model assumptions:
Defaults:
Year 1 - issuer average		1.80	%		2.30	%		1.80	%		1.80	%
Year 2 - issuer average		1.80	%		2.30	%		1.80	%		1.80	%
Year 3 - issuer average		1.80	%		2.30	%		1.80	%		1.80	%
> 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 year ended December 31, 2015. Changes in Level 3 assets are solely the result of changes in estimated fair values of securities that have been classified as level 3 during all of 2015 and 2014. Assets measured at fair value on a recurring basis are summarized below:

			(Dollars in thousands)
			Fair Value Measurements at December 31, 2015 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	$	525	$	525	$	-	$	-
U.S. government sponsored entities		17,431		-		17,431		-
Collateralized mortgage obligations and residential mortgage-backed securities		119,173		-		119,173		-
Municipal securities		93,487		-		93,487		-
Collateralized debt obligations		2,734		-		-		2,734
Total securities available-for-sale	$	233,350	$	525	$	230,091	$	2,734

			(Dollars in thousands)
			Fair Value Measurements at December 31, 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	$	6,453	$	6,453	$	-	$	-
U.S. government sponsored entities		12,869		-		12,869		-
Collateralized mortgage obligations and residential mortgage-backed securities		117,574		-		117,574		-
Municipal securities		80,725		-		80,725		-
Collateralized debt obligations		2,432		-		-		2,432
Total securities available-for-sale	$	220,053	$	6,453	$	211,168	$	2,432

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

A reconciliation of available-for-sale securities, which require significant adjustment based on unobservable data, is presented below:

	(Dollars in thousands)
	Estimated Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Available-for- sale securities
Beginning balance, January 1, 2014	$	1,968
Included in earnings		-
Total unrealized gains, included in other comprehensive income		464
Transfers in and/or (out) of Level 3		-
Ending balance, December 31, 2014	$	2,432

Beginning balance, January 1, 2015	$	2,432
Included in earnings		-
Total unrealized gains, included in other comprehensive income		302
Transfers in and/or (out) of Level 3		-
Ending balance, December 31, 2015	$	2,734

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

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

			(Dollars in thousands)
			Fair Value Measurements at December 31, 2015 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	$	7,048	$	-	$	-	$	7,048
Foreclosed real estate		1,590		-		-		1,590

			(Dollars in thousands)
			Fair Value Measurements at December 31, 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	$	6,930	$	-	$	-	$	6,930
Foreclosed real estate		1,745		-		-		1,745

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.

	December 31, 2015				Estimated Fair Value Measurements at December 31, 2015 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	$	11,533	$	11,533	$	11,533	$	-	$	-
Securities available-for-sale		233,350		233,350		525		230,091		2,734
Loans held-for-sale		2,435		2,504		2,504		-		-
Loans receivable, net		564,945		561,122		-		-		561,122
Federal Home Loan Bank stock		3,000		3,000		-		3,000		-
Accrued interest receivable		3,000		3,000		-		3,000		-

Financial liabilities:
Non-interest bearing deposits		100,031		100,031		100,031		-		-
Interest bearing deposits		614,844		614,226		420,354		193,872		-
Repurchase agreements		18,508		18,476		13,628		4,848		-
Borrowed funds		39,493		39,504		393		39,111		-
Accrued interest payable		45		45		-		45		-

	December 31, 2014				Estimated Fair Value Measurements at December 31, 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	$	21,963	$	21,963	$	21,963	$	-	$	-
Securities available-for-sale		220,053		220,053		6,453		211,168		2,432
Loans held-for-sale		2,913		2,983		2,983		-		-
Loans receivable, net		481,792		480,736		-		-		480,736
Federal Home Loan Bank stock		3,681		3,681		-		3,681		-
Accrued interest receivable		2,727		2,727		-		2,727		-

Financial liabilities:
Non-interest bearing deposits		80,352		80,352		80,352		-		-
Interest bearing deposits		553,594		552,872		368,501		184,371		-
Repurchase agreements		17,525		17,528		12,010		5,518		-
Borrowed funds		36,381		36,424		281		36,143		-
Accrued interest payable		49		49		-		49		-