Finward Bancorp Announces Earnings for the Quarter and Twelve Months Ended December 31, 2021

Munster, Indiana, UNITED STATES


MUNSTER, Ind., Jan. 26, 2022 (GLOBE NEWSWIRE) -- Finward Bancorp (Nasdaq: FNWD) (the “Bancorp”), the holding company for Peoples Bank (the “Bank”), reported net income of $15.0 million, or $4.30 per share, for the twelve months ended December 31, 2021. Net income for the twelve months ended December 31, 2021, decreased by $969 thousand (6.1%), from the twelve months ended December 31, 2020, primarily due to higher noninterest expense and lower noninterest income. For the twelve months ended December 31, 2021, the return on average assets (ROA) was 0.95% and the return on average equity (ROE) was 9.61%. In connection with the acquisition of Royal Financial, Inc. (OTCQX: RYFL) (“Royal”), which will close in the first quarter of 2022, the Bancorp incurred one-time expenses of approximately $838 thousand in the year ending 2021.

Excluding the one-time Royal acquisition costs, the Bancorp’s net income, as adjusted, was $15.7 million, or $4.52 per share, for the twelve months ended December 31, 2021. Excluding these same one-time Royal acquisition costs, the Bancorp’s ROA, as adjusted, was 1.00% and its ROE, as adjusted, was 10.11% for 2021. See Table 1 below for a reconciliation of these non-GAAP figures to the Bancorp’s GAAP figures.

For the quarter ended December 31, 2021, the Bancorp’s net income totaled $3.3 million, or $0.95 per share. Net income for the quarter ended December 31, 2021, increased by $550 thousand (19.9%), from the quarter ended December 31, 2020, primarily due to higher net interest income and lower income tax expense. For the fourth quarter of 2021, the ROA was 0.83% and the ROE was 8.56%.

During the twelve months ended December 31, 2021, total assets increased by $124.5 million (8.3%), with interest-earning assets increasing by $125.1 million (8.9%). On December 31, 2021, interest-earning assets totaled $1.5 billion compared to $1.4 billion at December 31, 2020. Earning assets represented 94.0% of total assets at December 31, 2021, and 93.5% of total assets at December 31, 2020. The increase in total assets and interest earning assets for the twelve months was primarily the result of increased securities and interest-bearing cash balances related to strong core deposit growth.

“2021 was a strong year coming off the record earnings we saw in 2020. We made significant investments in the future of the business in 2021, including a rebranding of Peoples Bank and investments in implementing Salesforce and nCino. Fourth quarter earnings were also impacted by roughly $838 thousand in one-time expenses related to the closing and integration of our pending Royal Financial acquisition. The merger is on track to close by the end of January, and we anticipate the significant portion of the remaining one-time expenses to be recognized in the first quarter. We will also benefit from initiatives related to our branch network and look to expand on our pilot branch closure in 2022,” said Benjamin Bochnowski, CEO.

“Asset quality was significantly improved as we were able to resolve a long-standing problem loan. We had an excellent opportunity to improve asset quality and have positioned the Bank for stability in the credit portfolio heading into 2022, with a strong allowance that we believe keeps us well reserved against any unexpected problems related to larger macroeconomic forces. Wage inflation, interest rates, and COVID all are headwinds for 2022, but we are actively managing the balance sheet and we continue to actively manage expenses to thrive in this uncertain environment,” he continued. “I remain extremely proud of our team and our dedication to our mission and our future as we navigate the next phase of the pandemic together.”

Net Interest Income
Net interest income was $48.6 million for the twelve months ended December 31, 2021, an increase of $2.7 million (5.9%), compared to $45.9 million for the twelve months ended December 31, 2020. The Bancorp’s net interest margin on a tax-adjusted basis was 3.51% for the twelve months ended December 31, 2021, compared to 3.63% for the twelve months ended December 31, 2020. Net interest income was $12.5 million for the quarter ended December 31, 2021, an increase of $350 thousand (2.9%), compared to $12.1 million for the quarter ended December 31, 2020. The Bancorp’s net interest margin on a tax-adjusted basis was 3.58% for the quarter ended December 31, 2021, compared to 3.68% for the quarter ended December 31, 2020. The increased net interest income for the quarter and the twelve months was primarily the result of lower interest expense attributable to the Bancorp’s ability to manage through the current historically low interest rate cycle and higher securities income from additional investments in the securities portfolio. The decrease in the net interest margin is a result of lower reinvestment rates on the Bancorp’s loan and securities portfolios. Management has adjusted deposit pricing to align with the current interest rate cycle and remains prepared to adjust rates paid on interest bearing deposits as the rate cycle shifts.

Noninterest Income
Noninterest income from banking activities totaled $15.9 million for the twelve months ended December 31, 2021, compared to $18.1 million for the twelve months ended December 31, 2020, a decrease of $2.2 million or 12.1%. Noninterest income from banking activities totaled $3.8 million for the quarter ended December 31, 2021, compared to $4.7 million for the quarter ended December 31, 2020, a decrease of $893 thousand or 19.0%. The decrease in gain on sale of loans for the current quarter and twelve-month period is the result of significant refinance activity in the prior year due to the economic and rate environment, which resulted in more loans originated and sold. The increase in fees and service charges for the twelve-month period is primarily the result of the Bancorp’s efforts to provide products and services to help customers be more successful, including debit card and ATM services. The increase in wealth management income for the current quarter and twelve-month period is the result of the Bancorp’s continued focus on expanding its wealth management line of business. The decrease in gains on the sale of securities for the current quarter and twelve-month period is a result of current market conditions and actively managing the portfolio.

Noninterest Expense
Noninterest expense totaled $46.6 million for the twelve months ended December 31, 2021, compared to $41.6 million for the twelve months ended December 31, 2020, an increase of $5.0 million or 12.0%. Noninterest expense totaled $12.7 million for the quarter ended December 31, 2021, compared to $11.5 million for the quarter ended December 31, 2020, an increase of $1.2 million or 10.8%. The increase in compensation and benefits for the current quarter and twelve-month period is primarily the result of management’s continued focus on talent management and retention. The increase in occupancy and equipment for the current quarter and twelve-month period is primarily related to facilities improvement efforts aimed at enhancing technology and efficiency. The increase in data processing expense for the current quarter and twelve-month period is primarily the result of increased system utilization and investment in technological advancements such as Salesforce and nCino. The increase in marketing expense for the current quarter and twelve-month period is the result of increased marketing and rebranding initiatives. The increase in other operating expenses for the current quarter and twelve-month period is primarily the result of investments in strategic initiatives focusing on growth of the organization, such as the planned acquisition of Royal Financial.

The Bancorp’s efficiency ratio was 78.28% for the quarter ended December 31, 2021, compared to 68.40% for the quarter ended December 31, 2020. The Bancorp’s efficiency ratio was 72.28% for the twelve months ended December 31, 2021, compared to 65.03% for the twelve months ended December 31, 2020. The increase in the efficiency ratio is the result of lower noninterest income and higher noninterest expense. Excluding the one-time acquisition expenses associated with the Royal transaction, the efficiency ratio would have decreased to 70.98% for the twelve months ended December 31, 2021. See Table 1 below for a reconciliation of the non-GAAP figure to the Bancorp’s GAAP efficiency ratio. The efficiency ratio is determined by dividing total noninterest expense by the sum of net interest income and total noninterest income for the period.

Lending
The Bancorp’s loan portfolio totaled $966.7 million at December 31, 2021, compared to $965.1 million at December 31, 2020, an increase of $1.6 million or 0.2%. The increase in loan balances is primarily the result of organic loan growth offset against loan paydowns and forgiveness within the PPP portfolio. During the twelve months ended December 31, 2021, the Bancorp originated $339.9 million in new commercial loans, compared to $333.3 million during the twelve months ended December 31, 2020. During the twelve months ended December 31, 2021, the Bancorp originated $153.1 million in new fixed rate mortgage loans for sale, compared to $224.9 million during the twelve months ended December 31, 2020. The loan portfolio is 63.4% of earning assets and is comprised of 64.4% commercial related credits.

In addition, the Bancorp participates in the U.S. Small Business Administration’s Paycheck Protection Program (“PPP”), a program initiated to help small businesses maintain their workforces during the pandemic. As of December 31, 2021, the Bancorp approved 782 applications totaling $91.5 million for the first round, with an average loan size of approximately $117 thousand. These loans helped local business owners retain 10,758 employees based on the borrowers’ applications. The Bancorp’s SBA lender fee is averaging approximately 3.80% for the first round of the program, and fees will be earned over the life of the associated loans. The first round of PPP closed in August of 2020. On December 21, 2020, Congress passed the Consolidated Appropriations Act, 2021, which included provisions for a second round of PPP funding in 2021. As of December 31, 2021, the Bancorp approved 420 applications totaling $37.5 million for the second round, with an average loan size of approximately $89 thousand. These loans will help local business owners retain 4,410 employees based on the borrowers’ applications. The Bancorp’s SBA lender fee is averaging approximately 5.32% for this program, and fees will be earned over the life of the associated loans. As of December 31, 2021, the Bancorp had remaining loan balances under the Paycheck Protection Program totaling $22.1 million.

Investing
The Bancorp’s securities portfolio totaled $526.9 million at December 31, 2021, compared to $410.7 million at December 31, 2020, an increase of $116.2 million or 28.3%. The increase is attributable to the investment of additional liquidity from the growth in core deposits. The securities portfolio represents 34.6% of earning assets and provides a consistent source of liquidity and earnings to the Bancorp. Cash and cash equivalents totaled $33.2 million at December 31, 2021, compared to $19.9 million at December 31, 2020, an increase of $13.3 million or 66.5%. The increase in cash and cash equivalents is primarily the result of the timing of investments in interest earnings assets relative to the inflow of deposits and repurchase agreements.

Funding
At December 31, 2021, core deposits totaled $1.2 billion, compared to $1.0 billion at December 31, 2020, an increase of $177.5 million or 17.4%. The increase is the result of the Bancorp’s efforts to maintain and grow core deposits. Core deposits include checking, savings, and money market accounts and represented 83.3% of the Bancorp’s total deposits at December 31, 2021. During the twelve months ended December 31, 2021, balances for noninterest bearing checking, interest bearing checking, savings, and money market accounts increased. The increase in these core deposits is a result of management’s sales efforts along with customer preferences for competitively priced short-term liquid investments. At December 31, 2021, balances for certificates of deposit totaled $239.2 million, compared to $284.8 million at December 31, 2020, a decrease of $45.6 million or 16.0%. The decrease in certificate of deposits was the result of product pricing strategies to lower excess liquidity on the balance sheet. In addition, at December 31, 2021, borrowings and repurchase agreements totaled $14.6 million, compared to $19.9 million at December 31, 2020, a decrease of $5.3 million or 26.6%. The decrease in borrowings was a result of the availability of deposits to fund growth in the Bancorp’s asset base.

Asset Quality
At December 31, 2021, non-performing loans totaled $7.3 million, compared to $14.4 million at December 31, 2020, a decrease of $7.1 million or 49.5%. The Bancorp’s ratio of non-performing loans to total loans was 0.75% at December 31, 2021, compared to 1.49% at December 31, 2020. The Bancorp’s ratio of non-performing assets to total assets was 0.51% at December 31, 2021, compared to 1.06% at December 31, 2020. The improvement in both ratios is the result of the strategic sale of one large impaired commercial hotel loan that had a carrying balance of $5.1 million at the time of the sale.

For the twelve months ended December 31, 2021, $1.5 million in provisions to the allowance for loan losses were required, compared to $3.7 million for the twelve months ended December 31, 2020, a decrease of $2.2 million or 59.1%. For the twelve months ended December 31, 2021, charge-offs, net of recoveries, totaled $624 thousand. At December 31, 2021, the allowance for loan losses is considered adequate by management and totaled $13.3 million. The allowance for loan losses as a percentage of total loans was 1.38% at December 31, 2021, compared to 1.29% at December 31, 2020. The allowance for loan losses as a percentage of non-performing loans, or coverage ratio, was 183.76% at December 31, 2021, compared to 86.72% at December 31, 2020. The improvement in the coverage ratio as of December 31, 2021 is the result of the strategic sale of one large impaired commercial hotel loan that had a carrying balance of $5.1 million at the time of the sale.

Management also considers reserves on loans from acquisition activity that are not part of the allowance for loan losses. The Bancorp acquired loans for which there was evidence of credit quality deterioration since origination and it was determined that it was probable that the Bancorp would be unable to collect all contractually required principal and interest payments. At December 31, 2021, total purchased credit impaired loan reserves totaled $1.4 million compared to $2.1 million at December 31, 2020. Additionally, the Bancorp has acquired loans without evidence of credit quality deterioration since origination and has marked these loans to their fair values. As part of the fair value of loans receivable, there was a net fair value discount for loans acquired of $1.1 million at December 31, 2021, compared to $2.0 million at December 31, 2020. When these additional reserves are included on a pro forma basis, the allowance for loan losses as a percentage of total loans was 1.63% at December 31, 2021, and the allowance for loan losses as a percentage of non-performing loans, or coverage ratio, was 217.20% at December 31, 2021. See Table 1 below for a reconciliation of these non-GAAP figures to the Bancorp’s GAAP figures.

The Bancorp continues to prudently help borrowers who are or may be unable to meet their contractual payment obligations because of the effects of COVID-19. Consistent with regulatory guidance, the Bancorp will consider deferring or modifying a loan customer’s repayment obligation if the customer’s cash flow has been negatively impacted by the pandemic. Outstanding borrower deferrals and modifications continue to decline. Loans modified to interest only payment or full payment deferral as part of the effects of COVID-19 as of December 31, 2021 and September 30, 2021, are as follows:

(Dollars in thousands) (Unaudited)
As of December 31, 2021 Mortgage loans Commercial Loans
  Number of Loans Recorded Investment Number of Loans Recorded Investment
Interest only 6 $874 - $-
Full payment deferral 2  53 -  -
Total $ 8 $927 - $-
         
         
(Dollars in thousands) (Unaudited)
As of September 30, 2021 Mortgage loans Commercial Loans
  Number of Loans Recorded Investment Number of Loans Recorded Investment
Interest only 11 $1,485 - $-
Total $ 11 $1,485 - $-
         

As the Bancorp continues to monitor the borrowers that are in and outside of deferral status, some loan relationships may be deemed non-performing. As of December 31, 2021, a total of 242 loans have come out of COVID-19 related deferral status with carrying balances of $86.6 million. All of these loans continue to be performing, except two commercial real estate loans with total carrying balances of $1.8 million and several residential real estate loans with total carrying balances of $1.1 million. 

Capital Adequacy
At December 31, 2021, shareholders’ equity stood at $156.6 million, and tangible capital represented 8.8% of total assets. The Bancorp’s regulatory capital ratios at December 31, 2021, were 14.2% for total capital to risk-weighted assets, 13.0% for both common equity tier 1 capital to risk-weighted assets and tier 1 capital to risk-weighted assets, and 8.6% for tier 1 leverage capital to adjusted average assets. Under all regulatory capital requirements, the Bancorp is considered well capitalized. The tangible book value of the Bancorp’s stock stood at $40.91 per share at December 31, 2021.

About Finward Bancorp
Finward Bancorp is a locally managed and independent financial holding company headquartered in Munster, Indiana, whose activities are primarily limited to holding the stock of Peoples Bank. Peoples Bank provides a wide range of personal, business, electronic and wealth management financial services from its 21 locations in Lake and Porter Counties in Northwest Indiana and South Chicagoland. Finward Bancorp’s common stock is listed on the Nasdaq Capital Market under the symbol FNWD. The website ibankpeoples.com provides information on Peoples Bank’s products and services, and Finward Bancorp’s investor relations.

Forward Looking Statements
This press release may contain forward-looking statements regarding the financial performance, business prospects, growth and operating strategies of the Bancorp. For these statements, the Bancorp claims the protections of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Statements in this communication should be considered in conjunction with the other information available about the Bancorp, including the information in the filings the Bancorp makes with the SEC. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. Forward-looking statements are typically identified by using words such as “anticipate,” “estimate,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance.

Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include: the ability to meet the closing conditions to the merger; delay in closing the merger; difficulties and delays in integrating Finward’s and Royal’s businesses or fully realizing cost savings and other benefits; business disruption following the merger; the significant risks and uncertainties for our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios and other regulatory requirements caused by the COVID-19 pandemic, which will depend on several factors, including the scope and duration of the pandemic, its influence on financial markets, the effectiveness of our remote work arrangements and staffing levels in branches and other operational facilities, and actions taken by governmental authorities and other third parties in response to the pandemic; changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates, market liquidity, and capital markets, as well as the magnitude of such changes, which may reduce net interest margins; inflation; customer acceptance of the Finward’s and Royal’s products and services; customer borrowing, repayment, investment, and deposit practices; customer disintermediation; the introduction, withdrawal, success, and timing of business initiatives; competitive conditions; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with mergers, acquisitions, and divestitures; economic conditions; and the impact, extent, and timing of technological changes, capital management activities, and other actions of the Federal Reserve Board and legislative and regulatory actions and reforms. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in Finward’s reports (such as the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K) filed with the SEC and available at the SEC’s Internet website (www.sec.gov). All subsequent written and oral forward-looking statements concerning the proposed transaction or other matters attributable to Finward or Royal Financial or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. Except as required by law, Finward does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statement is made.

In addition to the above factors, we also caution that the actual amounts and timing of any future common stock dividends or share repurchases will be subject to various factors, including our capital position, financial performance, capital impacts of strategic initiatives, market conditions, and regulatory and accounting considerations, as well as any other factors that our Board of Directors deems relevant in making such a determination. Therefore, there can be no assurance that we will repurchase shares or pay any dividends to holders of our common stock, or as to the amount of any such repurchases or dividends. Further, statements about the effects of the COVID-19 pandemic on our business, operations, financial performance, and prospects may constitute forward-looking statements and are subject to the risk that the actual impacts may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable, and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, third parties, and us.

Disclosure Regarding Non-GAAP Measures

This press release includes certain financial measures that are identified as non-GAAP. However, certain non-GAAP performance measures are used by management to evaluate and measure the Bancorp’s performance. Although these non-GAAP financial measures are frequently used by investors to evaluate a financial institution, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP. This supplemental information should not be considered in isolation or as a substitute for the related GAAP measures. See the attached Table 1 at the end of this press release for a reconciliation of the non-GAAP earnings measures identified herein and their most comparable GAAP measures.


Finward Bancorp 
Quarterly Financial Report 
                    
Key Ratios  Three months ended,  Twelve months ended, 
     (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)  (Unaudited) (Unaudited) 
     December 31, September 30, June 30, March 31, December 31,  December 31, December 31, 
     2021 2021 2021 2021 2020  2021 2020 
Return on equity  8.56%  8.90%  9.17%  11.94%  8.59%   9.61%  11.04% 
Return on assets  0.83%  0.87%  0.90%  1.18%  0.88%   0.95%  1.12% 
Basic earnings per share $0.95 $1.02 $1.03 $1.30 $1.00  $4.30 $4.60 
Diluted earnings per share $0.95 $1.02 $1.03 $1.30 $1.00  $4.30 $4.60 
Yield on loans   4.28%  4.28%  4.21%  4.41%  4.61%   4.29%  4.67% 
Yield on security investments  1.94%  1.94%  1.96%  2.02%  1.81%   1.96%  2.03% 
Total yield on earning assets  3.42%  3.36%  3.38%  3.59%  3.77%   3.44%  3.91% 
Cost of deposits  0.10%  0.13%  0.16%  0.19%  0.26%   0.14%  0.43% 
Cost of repurchase agreements  0.26%  0.25%  0.28%  0.28%  0.33%   0.26%  0.58% 
Cost of borrowed funds  0.47%  9.76%  0.47%  2.70%  2.74%   1.27%  2.70% 
Total cost of funds  0.10%  0.13%  0.16%  0.20%  0.27%   0.15%  0.45% 
Net interest margin - tax equivalent  3.58%  3.46%  3.42%  3.58%  3.68%   3.51%  3.63% 
Noninterest income / average assets  0.95%  1.02%  0.92%  1.12%  1.27%   1.01%  1.27% 
Noninterest expense / average assets  3.18%  3.04%  2.76%  2.73%  3.09%   2.96%  2.92% 
Net noninterest margin / average assets  -2.23%  -2.02%  -1.84%  -1.61%  -1.83%   -1.95%  -1.65% 
Efficiency ratio   78.28%  75.87%  70.79%  64.14%  68.40%   72.28%  65.03% 
Effective tax rate  0.18%  7.04%  9.96%  14.09%  6.15%   8.63%  14.83% 
                    
Non-performing assets to total assets  0.51%  0.91%  0.85%  0.92%  1.06%   0.51%  1.06% 
Non-performing loans to total loans  0.76%  1.42%  1.27%  1.32%  1.49%   0.76%  1.49% 
Allowance for loan losses to non-performing loans  183.76%  101.71%  111.13%  101.49%  86.72%   183.76%  86.72% 
Allowance for loan losses to loans outstanding  1.38%  1.44%  1.42%  1.34%  1.29%   1.38%  1.29% 
Foreclosed real estate to total assets  0.00%  0.01%  0.02%  0.03%  0.04%   0.00%  0.04% 
                    
Net worth / total assets  9.66%  9.48%  9.70%  9.57%  10.14%   9.66%  10.14% 
Book value per share $45.00 $43.85 $44.71 $42.76 $43.80  $45.00 $43.80 
Tangible book value per share $40.91 $39.69 $40.48 $38.48 $39.41  $40.91 $39.41 
Closing stock price $45.88 $41.05 $44.14 $41.82 $35.10  $45.88 $35.10 
Price per earnings per share  $12.07  $10.06  $10.71  $8.04  $8.78   $10.67  $7.63 
Dividend declared per common share $0.31 $0.31 $0.31 $0.31 $0.31  $1.24 $1.24 


Finward Bancorp
Quarterly Financial Report
              
Balance Sheet Data          
(Dollars in thousands) (Unaudited) (Unaudited) (Unaudited) (Unaudited)  
     December 31, September 30, June 30, March 31, December 31,
     2021 2021 2021 2021 2020
Total assets $1,620,743 $1,609,924 $1,603,513 $1,555,348 $1,496,292
Cash & cash equivalents  33,176  31,765  68,625  68,009  19,922
Certificates of deposit in other financial institutions     1,709  977  1,471  1,474  1,897
Securities - available for sale  526,889  531,010  473,927  422,868  410,669
              
Loans receivable:          
Commercial real estate $317,145 $309,905 $315,087 $304,851 $298,257
Residential real estate  260,134  268,798  268,649  276,728  286,048
Commercial business  115,772  125,922  149,414  163,896  158,140
Construction and land development  123,822  110,289  104,154  97,400  93,562
Multifamily  61,194  56,869  53,639  51,933  50,571
Home equity  34,612  35,652  36,684  36,222  39,233
Manufactured Homes  37,887  32,857  26,453  26,260  24,232
Government  8,991  9,841  8,462  9,372  10,142
Consumer  582  650  544  438  1,025
Farmland  -  205  309  315  215
Total loans $960,139 $950,988 $963,395 $967,415 $961,425
              
Deposits:           
Core deposits:          
Noninterest bearing checking $295,294 $287,376 $275,819 $286,969 $241,620
Interest bearing checking  333,744  315,575  307,148  279,984  274,867
Savings  293,976  284,681  277,944  271,910  254,108
Money market  271,970  254,671  253,427  245,750  246,916
Total core deposits  1,194,984  1,142,303  1,114,338  1,084,613  1,017,511
Certificates of deposit  239,217  263,897  280,758  282,081  284,828
Total deposits $1,434,201 $1,406,200 $1,395,096 $1,366,694 $1,302,339
              
Borrowings and repurchase agreements $14,581 $23,844 $24,399 $15,917 $19,860
Stockholder's equity  156,615  152,569  155,569  148,770  151,689


Finward Bancorp
Quarterly Financial Report
                   
Consolidated Statements of Income Three months ended,  Twelve months ended,
(Dollars in thousands) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)  (Unaudited) (Unaudited)
     December 31, September 30, June 30, March 31, December 31,  December 31, December 31,
     2021 2021 2021 2021 2020  2021 2020
Interest income:               
Loans   $10,282 $10,270 $10,275 $10,746  $11,278   $41,573 $44,867
Securities & short-term investments  2,545  2,396  2,160  1,981   1,733    9,082  6,754
Total interest income  12,827  12,666  12,435  12,727   13,011    50,655  51,621
Interest expense:               
Deposits   350  452  549  651   827    2,002  5,321
Borrowings   20  14  14  30   77    78  419
Total interest expense  370  466  563  681   904    2,080  5,740
Net interest income  12,457  12,200  11,872  12,046   12,107    48,575  45,881
Provision for loan losses  216  139  576  578   1,816    1,509  3,687
Net interest income after provision for loan losses  12,241  12,061  11,296  11,468   10,291    47,066  42,194
Noninterest income:               
Gain on sale of loans held-for-sale, net     902  1,229  1,116  2,049   1,551    5,296  7,588
Fees and service charges     1,378  1,473  1,471  1,066   1,488    5,388  5,161
Wealth management operations     588  604  576  607   533    2,375  2,138
Gain on sale of securities, net     711  590  269  417   974    1,987  2,348
Increase in cash value of bank owned life insurance     178  180  188  169   174    715  708
Gain on sale of foreclosed real estate, net     20  -  36  (9)  (49)   47  78
Other     31  70  24  14   30    139  127
Total noninterest income  3,808  4,146  3,680  4,313   4,701    15,947  18,148
Noninterest expense:                   
Compensation and benefits     6,617  6,042  5,897  5,685   6,408    24,241  22,855
Occupancy and equipment     1,461  1,380  1,324  1,372   1,079    5,537  4,933
Data processing     1,651  872  597  528   596    3,648  2,267
Marketing     357  334  195  199   168    1,085  732
Federal deposit insurance premiums     241  236  204  180   217    861  788
Other     2,405  3,537  2,793  2,529   3,028    11,264  10,061
Total noninterest expense  12,732  12,401  11,010  10,493   11,496    46,636  41,636
Income before income taxes  3,317  3,806  3,966  5,288   3,496    16,377  18,706
Income tax expenses  6  268  395  745   735    1,414  2,774
Net income  $3,311 $3,538 $3,571 $4,543  $2,761   $14,963 $15,932


Finward Bancorp
Quarterly Financial Report
              
Asset Quality (Unaudited) (Unaudited) (Unaudited) (Unaudited)  
(Dollars in thousands) December 31, September 30, June 30, March 31, December 31,
     2021 2021 2021 2021 2020
Nonaccruing loans $7,056 $11,027 $12,025 $12,257 $13,799
Accruing loans delinquent more than 90 days  205  2,516  248  599  566
Securities in non-accrual  992  1,011  970  944  929
Foreclosed real estate  -  81  368  491  538
 Total nonperforming assets $8,253 $14,635 $13,611 $14,291 $15,832
              
Allowance for loan losses (ALL):          
 ALL specific allowances for impaired loans $684 $1,904 $1,770 $1,884 $1,775
 ALL general allowances for loan portfolio  12,659  11,870  11,869  11,163  10,683
  Total ALL $13,343 $13,774 $13,639 $13,047 $12,458
              
Troubled Debt Restructurings:          
 Nonaccruing troubled debt restructurings, non-compliant (1) (2)$1,122 $1,126 $1,269 $407 $155
 Nonaccruing troubled debt restructurings, compliant (2)  306  102  -  366  383
 Accruing troubled debt restructurings  1,421  1,427  1,182  1,210  1,583
  Total troubled debt restructurings $2,849 $2,655 $2,451 $1,983 $2,121
   (1) "non-compliant" refers to not being within the guidelines of the restructuring agreement        
   (2) included in nonaccruing loan balances presented above          
              
              
     (Unaudited)       
     December 31, Required      
     2021 To Be Well      
     Actual Ratio Capitalized      
Capital Adequacy Bancorp          
Common equity tier 1 capital to risk-weighted assets  13.0% N/A      
Tier 1 capital to risk-weighted assets  13.0% N/A      
Total capital to risk-weighted assets  14.2% N/A      
Tier 1 capital to adjusted average assets  8.6% N/A      
              
Capital Adequacy Bank          
Common equity tier 1 capital to risk-weighted assets  12.7%  6.5%      
Tier 1 capital to risk-weighted assets  12.7%  8.0%      
Total capital to risk-weighted assets  14.0%  10.0%      
Tier 1 capital to adjusted average assets  8.4%  5.0%      
              


 Quarter-to-Date           
 (Dollars in thousands)Average Balances, Interest, and Rates
 (unaudited)December 31, 2021 December 31, 2020
  Average
Balance
 Interest Rate (%) Average
Balance
 Interest Rate (%)
 ASSETS           
 Interest bearing deposits in other financial institutions$12,516  $3 0.10 $24,352  $10 0.16
 Federal funds sold 1,039   - -  1,089   4 1.47
 Certificates of deposit in other financial institutions 1,706   4 0.94  1,899   10 2.11
 Securities available-for-sale 521,069   2,523 1.94  371,552   1,684 1.81
 Loans receivable 960,606   10,282 4.28  978,943   11,278 4.61
 Federal Home Loan Bank stock 3,247   15 1.85  3,918   25 2.55
 Total interest earning assets 1,500,183  $12,827 3.42  1,381,753  $13,011 3.77
 Cash and non-interest bearing deposits in other financial institutions 14,810       14,942     
 Allowance for loan losses (13,790)      (10,988)    
 Other noninterest bearing assets 99,837       100,401     
 Total assets$1,601,040      $1,486,108     
             
 LIABILITIES AND STOCKHOLDERS' EQUITY           
 Total deposits$1,403,559  $350 0.10 $1,289,401  $827 0.26
 Repurchase agreements 18,771   12 0.26  17,926   15 0.33
 Borrowed funds 6,769   8 0.47  9,059   62 2.74
 Total interest bearing liabilities 1,429,099  $370 0.10  1,316,386  $904 0.27
 Other noninterest bearing liabilities 17,177       16,905     
 Total liabilities 1,446,276       1,333,291     
 Total stockholders' equity 154,764       152,817     
 Total liabilities and stockholders' equity$1,601,040      $1,486,108     
             
             
 Return on average assets 0.83%      0.88%    
 Return on average equity 8.56%      8.59%    
 Net interest margin (average earning assets) 3.32%       3.50%     
 Net interest margin (average earning assets) - tax equivalent 3.58%      3.68%    
             
 Year-to-Date           
 (Dollars in thousands)Average Balances, Interest, and Rates
 (unaudited)December 31, 2021 December 31, 2020
  Average
Balance
 Interest Rate (%) Average
Balance
 Interest Rate (%)
 ASSETS           
 Interest bearing deposits in other financial institutions$43,375  $36 0.08 $37,582  $182 0.48
 Federal funds sold 1,058   - -  2,307   15 0.65
 Certificates of deposit in other financial institutions 1,509   25 1.66  1,869   45 2.41
 Securities available-for-sale 456,783   8,951 1.96  314,298   6,392 2.03
 Loans receivable 968,185   41,573 4.29  961,187   44,867 4.67
 Federal Home Loan Bank stock 3,462   70 2.02  3,916   120 3.06
 Total interest earning assets 1,474,372  $50,655 3.44  1,321,159  $51,621 3.91
 Cash and non-interest bearing deposits in other financial institutions 14,829       16,879     
 Allowance for loan losses (13,353)      (9,881)    
 Other noninterest bearing assets 98,133       99,019     
 Total assets$1,573,981      $1,427,176     
             
 LIABILITIES AND STOCKHOLDERS' EQUITY           
 Total deposits$1,381,101  $2,002 0.14 $1,239,314  $5,321 0.43
 Repurchase agreements 17,789   47 0.26  14,956   87 0.58
 Borrowed funds 2,448   31 1.27  12,298   332 2.70
 Total interest bearing liabilities 1,401,338  $2,080 0.15  1,266,568  $5,740 0.45
 Other noninterest bearing liabilities 16,996       16,333     
 Total liabilities 1,418,334       1,282,901     
 Total stockholders' equity 155,647       144,275     
 Total liabilities and stockholders' equity$1,573,981      $1,427,176     
             
             
 Return on average assets 0.95%      1.12%    
 Return on average equity 9.61%      11.04%    
 Net interest margin (average earning assets) 3.29%       3.47%     
 Net interest margin (average earning assets) - tax equivalent 3.51%      3.63%    


 Table 1 - Reconciliation of the Non-GAAP Performance Ratios        
          
 (Dollars in thousands)Three Months Ended Twelve Months Ended 
 (unaudited)December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020 
 Calculation of core net income        
 Net income$3,311  $2,761  $14,963  $15,932  
 Realized loss/(gain) on securities (711)  (974)  (1,987)  (2,348) 
 Core deposit accretion 249   249   994   994  
 Purchase discount amortization (144)  (489)  (1,041)  (1,919) 
 Related tax benefit/(cost) 127   255   427   687  
(A)Core net income$2,832  $1,802  $13,356  $13,346  
          
 Calculation of core diluted earnings per share        
(A)Core net income$2,832  $1,802  $13,356  $13,346  
 Diluted average common shares outstanding 3,479,988   3,462,990   3,477,309   3,461,948  
 Core diluted earnings per share$0.81  $0.52  $3.84  $3.86  
          
 Calculation of core return on average assets        
(A)Core net income$2,832  $1,802  $13,356  $13,346  
 Average total assets 1,601,040   1,486,108   1,573,981   1,427,176  
 Core return on average assets 0.71%   0.49%   0.85%   0.94%  
          
 Calculation of core pre-provision net revenue        
 Net interest income$12,457  $12,107  $48,575  $45,881  
 Non-interest income 3,808   4,701   15,947   18,148  
 Non-interest expense (12,732)  (11,496)  (46,636)  (41,636) 
 Pre-provision net revenue 3,533   5,312   17,886   22,393  
 Realized loss/(gain) on securities (711)  (974)  (1,987)  (2,348) 
 Core deposit accretion 249   249   994   994  
 Purchase discount amortization (144)  (489)  (1,041)  (1,919) 
(B)Core pre-provision net revenue$2,927  $4,098  $15,852  $19,120  
          
 Calculation of core pre-provision net revenue to average assets        
(B)Core pre-provision net revenue$2,927  $4,098  $15,852  $19,120  
 Average total assets 1,601,040   1,486,108   1,573,981   1,427,176  
 Core pre-provision net revenue to average assets 0.73%   1.10%   1.01%   1.34%  
          
 Calculation of tangible assets (excluding PPP)        
 Total assets$1,620,743  $1,496,292  $1,620,743  $1,496,292  
 Goodwill (11,109)  (11,109)  (11,109)  (11,109) 
 Other Intangibles (3,126)  (4,119)  (3,126)  (4,119) 
 Paycheck Protection Plan ("PPP") loans (22,072)  (67,175)  (22,072)  (67,175) 
(C)Tangible assets (excluding PPP)$1,584,436  $1,413,889  $1,584,436  $1,413,889  
          
 Calculation of tangible common equity        
 Total stockholder's equity$156,615  $151,689  $156,615  $151,689  
 Goodwill (11,109)  (11,109)  (11,109)  (11,109) 
 Other intangibles (3,126)  (4,119)  (3,126)  (4,119) 
(D)Tangible common equity$142,380  $136,461  $142,380  $136,461  
          
 Calculation of tangible common equity to tangible assets (excluding PPP)       
(D)Tangible common equity$142,380  $136,461  $142,380  $136,461  
(C)Tangible assets (excluding PPP) 1,584,436   1,413,889   1,584,436   1,413,889  
 Tangible common equity to tangible assets 8.99%   9.65%   8.99%   9.65%  
          
 Calculation of average tangible common equity        
 Average stockholder's common equity$159,010  $146,116  $155,945  $141,095  
 Average goodwill (11,109)  (11,109)  (11,109)  (11,109) 
 Average other intangibles (3,270)  (4,269)  (3,643)  (4,639) 
(E)Average tangible stockholders' common equity$144,631  $130,738  $141,193  $125,347  
          
 Calculation of core return on average common equity        
(A)Core net income$2,832  $1,802  $13,356  $13,346  
(E)Average tangible common equity 144,631   130,738   141,193   125,347  
 Core return on average common equity 7.83%   5.51%   9.46%   10.65%  
          
 Calculation of core yield on loans        
 Interest income on loans$10,282  $11,278  $41,573  $44,867  
 Loan accretion income (144)  (489)  (1,041)  (1,919) 
 Adjusted interest income on loans 10,138   10,789   40,532   42,948  
 Average loan balances 960,606   978,943   968,185   961,187  
 Core yield on loans 4.22%   4.41%   4.19%   4.47%  
          
 Calculation of adjusted allowance for loan loss to total loans        
 Allowance for loan losses$(13,343) $(12,458) $(13,343) $(12,458) 
 Additional reserves not part of the allowance for loan loss (2,428)  (4,098)  (2,428)  (4,098) 
(F)Adjusted allowance for loan loss (15,771)  (16,556)  (15,771)  (16,556) 
 Total loans 966,720   981,902   966,720   981,902  
 Adjusted allowance for loan loss to total loans 1.63%   1.69%   1.63%   1.69%  
          
 Calculation of adjusted allowance for loan loss to nonperforming loans       
(F)Adjusted allowance for loan loss$(15,771) $(16,556) $(15,771) $(16,556) 
 Nonperforming loans 7,261   14,365   7,261   14,365  
 Adjusted allowance for loan loss to nonperforming loans (coverage ratios) 217.20%   115.25%   217.20%   115.25%  
          
 Calculation of adjusted allowance for loan loss to total loans excluding PPP       
(F)Adjusted allowance for loan loss$(15,771) $(16,556) $(15,771) $(16,556) 
 Total loans 966,720   978,943   966,720   961,187  
 PPP loans (22,072)  (67,175)  (22,072)  (67,175) 
 Total loans excluding PPP 944,648   911,768   944,648   894,012  
 Adjusted allowance for loan loss to total loans excluding PPP 1.67%   1.82%   1.67%   1.85%  
          
 Calculation of core revenue         
 Net interest income$12,457  $12,107  $48,575  $45,881  
 Non-interest income 3,808   4,701   15,947   18,148  
 Realized loss/(gain) on securities (711)  (974)  (1,987)  (2,348) 
(G)Core revenue$15,554  $15,834  $62,535  $61,681  
          
 Calculation of core non-interest expense        
 Non-interest expense$12,732  $11,496  $46,636  $41,636  
 Core deposit accretion 249   249   994   994  
 Purchase discount amortization (144)  (489)  (1,041)  (1,919) 
(H)Core non-interest expense$12,837  $11,256  $46,589  $40,711  
          
 Calculation of core efficiency ratio        
(H)Core non-interest expense$12,837  $11,256  $46,589  $40,711  
(G)Core revenue 15,554   15,834   62,535   61,681  
 Core efficiency ratio 82.53%   71.09%   74.50%   66.00%  
          
 Calculation of core non-interest expense to total average assets        
(H)Core non-interest expense$12,837  $11,256  $46,589  $40,711  
 Average total assets 1,601,040   1,486,108   1,573,981   1,427,176  
 Core non-interest expense to total average assets 0.80%   0.76%   2.96%   2.85%  
          
 Calculation of tax adjusted net interest margin        
 Net interest income$12,457  $12,107  $48,575  $45,881  
 Tax adjusted interest on securities and loans 959   622   3,232   2,119 -
 Adjusted net interest income 13,416   12,729   51,807   48,000  
 Total average earning assets 1,500,183   1,381,753   1,474,372   1,321,159  
 Tax adjusted net interest margin 3.58%   3.68%   3.51%   3.63%  


   Twelve Months 
   Ended  
   December 31,  
($ in thousands)  2021  
   (Unaudited)  
Net income
  $14,963   
Income tax expense   1,414   
Income before income taxes   16,377   
One-time acquisition costs   838   
Income before income taxes, net of one time acquisition expense   17,215   
Income taxes, net of one time acquisition expense
   1,486   
Net income, net of one time acquisition expense  $15,729   
Net income change, net of one time acquisition expense   -1.3%   
      
($ in thousands, except per share data)(Unaudited)
For the twelve months ended, December 31, 2021GAAP One-time
acquisition
costs - tax
effected
 Non-GAAP
Net income$14,963  $766  $15,729 
Weighted average common shares outstanding 3,477,309     3,477,309 
Earnings per share$4.30    $4.52 
      
      
($ in thousands)(Unaudited)
For the twelve months ended, December 31, 2021GAAP One-time
acquisition
costs - tax
effected
 Non-GAAP
Net income$14,963  $766  $15,729 
Average assets$1,573,981    $1,573,981 
ROA 0.95%     1.00% 
      
($ in thousands)(Unaudited)
For the twelve months ended, December 31, 2021GAAP One-time
acquisition
costs - tax
effected
 Non-GAAP
Net income$14,963  $766  $15,729 
Average equity$155,647    $155,647 
ROE 9.61%     10.11% 
      
For the twelve months ended, December 31, 2021GAAP One-time
acquisition
costs
 Non-GAAP
Noninterest expense 46,636   (838)  45,798 
Interest income 50,655     50,655 
Interest expense 2,080     2,080 
Noninterest income 15,947     15,947 
Efficiency ratio 72.28%     70.98% 
      
($ in thousands)(Unaudited)
For the twelve months ended, December 31, 2019GAAP One-time
acquisition
costs - tax
effected
 Non-GAAP
Noninterest expense$46,636  $(838) $45,798 
Average assets$1,573,981    $1,573,981 
Non-interest expense as % of average assets 2.96%     2.91% 

 

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