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)

3 Months Ended

Mar. 31, 2018

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, 2017	$	271
Additions not previously recognized		-
Ending balance, March 31, 2018	$	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 December 31, 2017:

Cusip		74043CAC1			74042TAJ0			01449TAB9			01450NAC6
Deal name		PreTSLXXIV			PreTSL XXVII			Alesco IX			Alesco XVII
Class		B-1			C-1			A-2A			B
Lowest credit rating assigned		CCC			CC			BB			CCC
Number of performing banks		62			33			63			51
Number of performing insurance companies		13			7			10			n/a
Number of issuers in default		16			7			2			4
Number of issuers in deferral		2			2			1			1
Defaults & deferrals as a % of performing collateral		26.56	%		20.06	%		2.93	%		8.11	%
Subordination:
As a % of performing collateral		23.55	%		8.35	%		53.11	%		35.58	%
As a % of performing collateral-adjusted for projected future defaults		18.67	%		1.24	%		49.64	%		31.69	%
Other-than-temporary impairment model assumptions:
Defaults:
Year 1 - issuer average		2.00	%		2.40	%		2.30	%		1.90	%
Year 2 - issuer average		2.00	%		2.40	%		2.30	%		1.90	%
Year 3 - issuer average		2.00	%		2.40	%		2.30	%		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 three months ended March 31, 2018. Assets measured at fair value on a recurring basis are summarized below:

			(Dollars in thousands)
			Fair Value Measurements at March 31, 2018 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	$	924	$	924	$	-	$	-
U.S. government sponsored entities		5,838		-		5,838		-
Collateralized mortgage obligations and residential mortgage-backed securities		139,169		-		139,169		-
Municipal securities		92,085		-		92,085		-
Collateralized debt obligations		3,455		-		-		3,455
Total securities available-for-sale	$	241,471	$	924	$	237,092	$	3,455

			(Dollars in thousands)
			Fair Value Measurements at December 31, 2017 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	$	476	$	476	$	-	$	-
U.S. government sponsored entities		3,890		-		3,890		-
Collateralized mortgage obligations and residential mortgage-backed securities		132,938		-		132,938		-
Municipal securities		103,747		-		103,747		-
Collateralized debt obligations		3,439		-		-		3,439
Total securities available-for-sale	$	244,490	$	476	$	240,575	$	3,439

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, 2017	$	2,409
Principal payments		(154)
Total unrealized gains, included in other comprehensive income		1,184
Transfers in and/or (out) of Level 3		-
Ending balance, December 31, 2017	$	3,439

Beginning balance, January 1, 2018	$	3,439
Principal payments		(12)
Total unrealized gains, included in other comprehensive income		28
Transfers in and/or (out) of Level 3		-
Ending balance, March 31, 2018	$	3,455

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 March 31, 2018 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	$	1,973	$	-	$	-	$	1,973
Foreclosed real estate		1,432		-		-		1,432

			(Dollars in thousands)
			Fair Value Measurements at December 31, 2017 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	$	1,818	$	-	$	-	$	1,818
Foreclosed real estate		1,699		-		-		1,699

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.

	March 31, 2018				Estimated Fair Value Measurements at March 31, 2018 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	$	20,415	$	20,415	$	20,415	$	-	$	-
Certificates of deposit in other financial institutions		1,526		1,493		-		1,493		-
Securities available-for-sale		241,471		241,471		924		237,092		3,455
Loans held-for-sale		1,908		1,949		1,949		-		-
Loans receivable, net		617,565		602,764		-		-		602,764
Federal Home Loan Bank stock		3,000		3,000		-		3,000		-
Accrued interest receivable		3,052		3,052		-		3,052		-

Financial liabilities:
Non-interest bearing deposits		126,582		126,582		126,582		-		-
Interest bearing deposits		668,791		666,925		474,069		192,856		-
Repurchase agreements		13,396		13,387		11,642		1,745		-
Borrowed funds		30,360		30,254		260		29,994		-
Interest rate swap agreements		18		18		-		18		-
Accrued interest payable		42		42		-		42		-

	December 31, 2017				Estimated Fair Value Measurements at December 31, 2017 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	$	11,025	$	11,025	$	11,025	$	-	$	-
Certificates of deposit in other financial institutions		1,676		1,640		-		1,640		-
Securities available-for-sale		244,490		244,490		476		240,575		3,439
Loans held-for-sale		1,592		1,625		1,625		-		-
Loans receivable, net		612,729		608,506		-		-		608,506
Federal Home Loan Bank stock		3,000		3,000		-		3,000		-
Accrued interest receivable		3,262		3,262		-		3,262		-

Financial liabilities:
Non-interest bearing deposits		120,556		120,556		120,556		-		-
Interest bearing deposits		672,448		670,967		488,528		182,439		-
Repurchase agreements		11,300		11,292		9,545		1,747		-
Borrowed funds		20,881		20,818		600		20,218		-
Accrued interest payable		42		42		-		42		-