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)

6 Months Ended

Jun. 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, June 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 June 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	$	351		$	303		$	659		$	403
Unrealized gains/(losses)	$	(906)		$	(993)		$	(644)		$	(949)
Lowest credit rating assigned		CC			C			BB			C
Number of performing banks		50			28			53			44
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			10
Defaults & deferrals as a % of performing collateral		49.14	%		33.47	%		19.11	%		32.67	%
Subordination:
As a % of performing collateral		-2.91	%		-10.74	%		34.99	%		14.10	%
As a % of performing collateral - adjusted for projected future defaults		-10.19	%		-19.33	%		30.61	%		9.48	%
Other-than-temporary impairment model assumptions:
Defaults:
Year 1 - issuer average		2.20	%		2.40	%		2.10	%		1.70	%
Year 2 - issuer average		2.20	%		2.40	%		2.10	%		1.70	%
Year 3 - issuer average		2.20	%		2.40	%		2.10	%		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:

			Fair Value Measurements at June 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	$	19,915	$	-	$	19,915	$	-
Collateralized mortgage obligations and residential mortgage-backed securities		96,956		-		96,956		-
Municipal securities		66,204		-		66,204		-
Collateralized debt obligations		1,716		-		-		1,716
Total securities available-for-sale	$	184,791	$	-	$	183,075	$	1,716

			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 June 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		324
Purchases, issuances, sales, and settlements
Purchases		-
Issuances		-
Sales		-
Settlements		-
Ending balance, June 30, 2013	$	1,716

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 June 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	$	16,530	$	-	$	-	$	16,530
Foreclosed real estate		415		-		-		415

			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.

	June 30, 2013				Estimated Fair Value Measurements at June 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	$	42,766	$	42,766	$	42,766	$	-	$	-
Securities available-for-sale		184,791		184,791		-		183,075		1,716
Loans held-for-sale		522		528		528		-		-
Loans receivable, net		426,376		425,346		-		-		425,346
Federal Home Loan Bank stock		3,086		3,086		-		3,086		-
Accrued interest receivable		2,334		2,334		-		2,334		-

Financial liabilities:
Non-interest bearing deposits		72,182		72,182		72,182		-		-
Interest bearing deposits		500,546		500,573		339,582		160,991		-
Repurchase agreements		19,360		19,368		13,332		6,036		-
Borrowed funds		33,406		33,428		406		33,022		-
Accrued interest payable		45		45		-		45		-

	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