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, 2016

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)
	Collateralized debt obligations
	other-than-temporary impairment
Ending balance, December 31, 2015	$	271
Additions not previously recognized		-
Ending balance, September 30, 2016	$	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 impairment evaluation as of June 30, 2016:

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			CC			BB			CCC
Number of performing banks		57			32			61			48
Number of performing insurance companies		13			7			10			n/a
Number of issuers in default		19			7			2			4
Number of issuers in deferral		4			3			3			4
Defaults & deferrals as a % of performing collateral		35.76	%		23.23	%		4.38	%		15.27	%
Subordination:
As a % of performing collateral		9.98	%		-0.36	%		47.59	%		26.92	%
As a % of performing collateral - adjusted for projected future defaults		4.84	%		-8.15	%		43.89	%		22.99	%
Other-than-temporary impairment model assumptions:
Defaults:
Year 1 - issuer average		1.80	%		2.40	%		2.20	%		1.70	%
Year 2 - issuer average		1.80	%		2.40	%		2.20	%		1.70	%
Year 3 - issuer average		1.80	%		2.40	%		2.20	%		1.70	%
> 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]

Assets measured at fair value on a recurring basis are summarized below:

			(Dollars in thousands)
			Fair Value Measurements at September 30, 2016 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	$	2,808	$	2,808	$	-	$	-
U.S. government sponsored entities		25,154		-		25,154		-
Collateralized mortgage obligations and residential mortgage-backed securities		112,783		-		112,783		-
Municipal securities		97,228		-		97,228		-
Collateralized debt obligations		2,077		-		-		2,077
Total securities available-for-sale	$	240,050	$	2,808	$	235,165	$	2,077

			(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

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)
	Estimated Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Available-for- sale securities
Beginning balance, January 1, 2015	$	2,432
Included in earnings (or changes in net assets)		(44	)
Total unrealized gains, included in other comprehensive income		346
Transfers in and/or (out) of Level 3		-
Ending balance, December 31, 2015	$	2,734

Beginning balance, January 1, 2016	$	2,734
Included in earnings (or changes in net assets)		(58	)
Total unrealized losses, included in other comprehensive income		(599	)
Transfers in and/or (out) of Level 3		-
Ending balance, September 30, 2016	$	2,077

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:

			(Dollars in thousands)
			Fair Value Measurements at September 30, 2016 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	$	3,748	$	-	$	-	$	3,748
Foreclosed real estate		1,123		-		-		1,123

			(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

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, 2016				Estimated Fair Value Measurements at September 30, 2016 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	$	16,561	$	16,561	$	16,561	$	-	$	-
Securities available-for-sale		240,050		240,050		2,808		235,165		2,077
Loans held-for-sale		3,633		3,695		3,695		-		-
Loans receivable, net		587,127		584,537		-		-		584,537
Federal Home Loan Bank stock		3,000		3,000		-		3,000		-
Accrued interest receivable		2,903		2,903		-		2,903		-

Financial liabilities:
Non-interest bearing deposits		107,917		107,917		107,917		-		-
Interest bearing deposits		640,443		640,104		447,867		192,237		-
Repurchase agreements		20,807		20,804		17,668		3,136		-
Borrowed funds		33,488		32,658		388		32,270		-
Accrued interest payable		41		41		-		41		-


	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		-