Finward Bancorp Announces Earnings For The Three Months Ended March 31, 2022

Munster, Indiana, UNITED STATES


MUNSTER, Ind., April 27, 2022 (GLOBE NEWSWIRE) -- Finward Bancorp (Nasdaq: FNWD) (“Finward” or the “Bancorp”), the holding company for Peoples Bank (the “Bank”), today announced that net income available to common stockholders was $2.1 million, or $0.53 per share, for the quarter ended March 31, 2022, as compared to $4.5 million, or $1.31 per share, for the corresponding prior year period. Selected performance metrics are as follows for the periods presented:

Performance Ratios Three months ended, 
  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited) 
  March 31,  December 31,  September 30,  June 30,  March 31, 
  2022  2021  2021  2021  2021 
Return on equity  5.01%  8.56%  8.90%  9.17%  11.94%
Return on assets  0.44%  0.83%  0.87%  0.90%  1.18%
Net interest margin - tax equivalent  3.63%  3.58%  3.46%  3.42%  3.59%
Noninterest income / average assets  0.64%  0.95%  1.02%  0.92%  1.12%
Noninterest expense / average assets  3.33%  3.18%  3.04%  2.76%  2.73%
Efficiency ratio  87.10%  78.28%  75.87%  70.79%  64.14%
                     

 

The successful closing of the acquisition of Royal Financial, Inc. (“Royal”) in the first quarter of 2022, resulted in one-time expenses of approximately $2.5 million. Core earnings for the quarter ended March 31, 2022, amounted to $4.1 million, or $1.01 per share, compared to $4.1 million, or $1.19 per share for the quarter ended March 31, 2021. Core earnings is a non-GAAP measure. For the periods presented they exclude merger related expenses, net (gain) loss on securities, core deposit accretion, certificate of deposit purchase premium amortization, purchase discount amortization, and related tax benefit/(cost). Selected non-GAAP (“generally accepted accounting principles”) performance metrics are as follows for the periods presented:

Non-GAAP Performance Ratios Three months ended,      
     (Unaudited)  (Unaudited)(Unaudited)(Unaudited)
     March 31,December 31,September 30,June 30,March 31,
     20222021202120212021
Core return on equity  11.32%7.83%8.46%9.42%12.04%
Core return on assets  0.83%0.71%0.75%0.83%1.07%
Core noninterest expense / average assets2.67%3.12%2.98%2.70%2.67%
Core efficiency ratio  72.87%81.01%78.48%71.82%65.74%

Refer to “Disclosure Regarding Non-GAAP Measures” and the “Reconciliation of the Non-GAAP Performance Ratios” table below for additional information regarding our non-GAAP measures and impact per period by operation.

Highlights of the recent quarter include:

  • Completion of Royal Financial acquisition: As of March 31, 2022, loans on the Finward balance sheet net of associated purchase discount related to the Royal merger totaled $437.3 million. Additionally, deposits on the Finward balance sheet related to the Royal merger totaled $432.8 million. Goodwill associated with the transaction totaled $11.7 million. Initially reported projections related to the Royal acquisition had an aggregate value of $52.9 million based on a closing stock price of $44.00. However, the actual aggregate value of the transaction totaled approximately $56.6 million due to a closing stock price of $47.65.
  • Core earnings stable: Net income for the three months ended March 31, 2022 decreased $2.4 million compared to the three months ended March 31, 2021. However, core earnings for the three months ended March 31, 2022, decreased by $51 thousand, as compared to the three months ended March 31, 2021, primarily relating to the increase in interest-earning assets acquired from the Royal acquisition and organic loan growth and continued ability to price deposit accounts appropriately to manage through the interest rate cycle.
  • Net interest margin steady: The net interest margin for the quarter ended March 31, 2022, was 3.41%, compared to 3.40% for the quarter ended March 31, 2021. The tax-adjusted net interest margin for the quarter ended March 31, 2022, was 3.63%, compared to 3.59% for the quarter ended March 31, 2021. The increased tax-equivalent margin is primarily related to decreased interest expense due to the Bancorp’s ability to manage through the interest rate cycle and tax benefits from the investment in municipal securities.
  • Building a digital-forward foundation: Progress continued to build on the Salesforce platform during the quarter. Our primary focus for this quarter and the next continues to be the deployment of nCino to fully leverage the digital integration between credit and lending while improving the customer experience and overall risk management of the loan portfolios. Expenses related to these initiatives were approximately $259 thousand for the quarter ended March 31, 2022, and approximately $146 thousand for the quarter ended March 31, 2021.
  • Optimizing the banking center footprint: Following the previous year’s successful closure of one banking center and the donation and leaseback of another, progress during the quarter continued towards the closure of two additional banking centers from the 30 current locations. Once those closures are complete, the remaining 28 locations are being analyzed for footprint optimization opportunities, with four additional locations showing the potential for reducing operating overhead. The redeployment of occupancy expenses into building a digital-forward foundation to meet customer expectations will continue Finward’s digital-first future.

“With the successful integration of the Royal Financial franchise, we are now delivering a better experience to our new Royal customers with Finward platforms and services. With integration expenses largely behind us, we will continue to tackle big technology investments and expenses to improve our digital user experience and operating environment throughout 2022. Despite the rapidly-changing environment, we continue to deliver financial performance that allows for the ongoing investments in the digital transformation process for Peoples Bank and Finward Bancorp,” said Benjamin Bochnowski, president and chief executive officer. 

Net Interest Income

 Year-to-Date           
 (Dollars in thousands)Average Balances, Interest, and Rates
 (unaudited)March 31, 2022 March 31, 2021
  Average Balance Interest Rate (%) Average Balance Interest Rate (%)
 ASSETS           
 Interest bearing deposits in other financial institutions$22,295  $8 0.14 $51,688  $12 0.09
 Federal funds sold 8,015   - -  788   - -
 Certificates of deposit in other financial institutions 1,725   3 0.70  1,598   8 2.00
 Securities available-for-sale 510,119   2,575 2.02  383,877   1,941 2.02
 Loans receivable 1,274,407   13,286 4.17  975,593   10,746 4.41
 Federal Home Loan Bank stock 4,027   22 2.19  3,918   20 2.04
 Total interest earning assets 1,820,588  $15,894 3.49  1,417,462  $12,727 3.59
 Cash and non-interest bearing deposits in other financial institutions 20,183       33,719     
 Allowance for loan losses (13,367)      (12,662)    
 Other noninterest bearing assets 127,943       98,316     
     Total assets$1,955,347      $1,536,835     
             
 LIABILITIES AND STOCKHOLDERS' EQUITY           
 Total deposits$1,737,620  $337 0.08 $1,348,160  $651 0.19
 Repurchase agreements 19,390   16 0.33  14,479   10 0.28
 Borrowed funds 6,091   6 0.39  2,967   20 2.70
 Total interest bearing liabilities 1,763,101  $359 0.08  1,365,606  $681 0.20
 Other noninterest bearing liabilities 21,872       19,049     
     Total liabilities 1,784,973       1,384,655     
     Total stockholders' equity 170,374       152,180     
     Total liabilities and stockholders' equity$1,955,347      $1,536,835     
             

Net interest income for the quarter ended March 31, 2022, increased to $15.9 million, as compared to $12.7 million for the quarter ended March 31, 2021, reflecting increased interest earning assets primarily as a result of the Royal acquisition and an improvement in net interest margin. Average interest-earning assets increased by $419.1 million for the quarter ended March 31, 2022, as compared to December 31, 2022, primarily concentrated in loans receivable as a result of the Royal acquisition, and organic loan growth. Average loans receivable, net of allowance for loan losses, increased by $298.1 million for the quarter ended March 31, 2022, as compared to the same prior year period. Net interest margin for the quarter ended March 31, 2022 increased to 3.41% from 3.40% for the same prior year period. The net interest margin improvement was primarily due to lower interest expense attributable to the Bancorp’s ability to manage through the interest rate cycle. For the quarter ended March 31, 2022, the cost of average interest-bearing liabilities decreased to 0.08%, from 0.20% for the quarter ended March 31, 2021. The total cost of deposits (including noninterest bearing deposits) was 0.08% for the quarter ended March 31, 2022, compared to 0.19% for the quarter ended March 31, 2021.

Noninterest Income

(Dollars in thousands)                
(Unaudited) Quarter Ended March 31,  3/31/2022 vs. 3/31/2021 
  2022  2021  $ Change  % Change 
Noninterest income:                
Fees and service charges  $1,304   $1,066   $238   22.3%
Gain on sale of loans held-for-sale, net  607   2,049   (1,442)  -70.4%
Wealth management operations  595   607   (12)  -2.0%
Gain on sale of securities, net  381   417   (36)  -8.6%
Increase in cash value of bank owned life insurance  252   169   83   49.1%
Gain (loss) on sale of foreclosed real estate  -   (9)  9   -100.0%
Other  5   14   (9)  -64.3%
                 
Total noninterest income  $3,144   $4,313   $(1,169)  -27.1%

The decrease in gain on sale of loans is the result of significant refinance activity which started in 2020 and continued into the prior year due to the economic and low rate environment, which resulted in more loans originated and sold. We anticipate the demand for mortgage loans will continue to revert to normal levels as borrowing rates on loans increase. The increase in fees and service charges for the three-month period is primarily the result of changes in customer usage of bank services.

Noninterest Expense

(Dollars in thousands)                
(Unaudited) Quarter Ended March 31,  3/31/2022 vs. 3/31/2021 
  2022  2021  $ Change  % Change 
Noninterest expense:                
Compensation and benefits $7,367   $5,685  $1,682   29.6%
Data processing  3,054   674   2,380   353.1%
Occupancy and equipment  1,500   1,372   128   9.3%
Marketing  651   199   452   227.1%
Federal deposit insurance premiums  219   180   39   21.7%
Other  3,478   2,383   1,095   46.0%
                 
Total noninterest expense $16,269  $10,493  $5,776   55.0%
                 

For the three months ended March 31, 2022, the increase in compensation and benefits is primarily the result of the Royal acquisition and management’s continued focus on talent management and retention. The increase in data processing expense in primarily the result of data conversion expenses related to the acquisition of Royal, increased system utilization due to growth of the Bank, and continued investment in technological advancements such as Salesforce and nCino. The increase in occupancy and equipment expense is primarily related to the Royal acquisition and related assets brought over. The increase in marketing expense is primarily the result of the Royal acquisition. The increase in other operating expenses is primarily the result of one-time expenses related to the acquisition of Royal and continued investments in strategic initiatives focusing on growth of the organization.

Income Tax Expense
The provision for income taxes was $275 thousand for the quarter ended March 31, 2022, as compared to $745 thousand for the quarter ended March 31, 2021. The effective tax rate was 11.4% for the quarter ended March 31, 2022, as compared to 14.1% for the quarter ended March 31, 2021. The Bancorp’s lower current period effective tax rate is a result of a greater increase to tax preferred income relative to earnings.

Lending
The Bancorp’s loan portfolio totaled $1.4 billion on March 31, 2022, compared to $966.7 million on December 31, 2021, an increase of $473.0 million or 48.9%. The increase is primarily the result of the Royal acquisition, as well as organic loan portfolio growth. During the first three months of 2022 the Bancorp originated $98.0 million in new commercial loans, compared to $94.9 million during the three months ended March 31, 2021. During the three months ended March 31, 2022, the Bancorp originated $15.7 million in new fixed rate mortgage loans for sale, compared to $49.1 million during the three months ended March 31, 2021. The loan portfolio represents 74.1% of earning assets and is comprised of 63.2% commercial related credits.

Asset Quality
At March 31, 2022, non-performing loans totaled $7.7 million, compared to $7.3 million at December 31, 2021, an increase of $433 thousand or 6.0%. The Bancorp’s ratio of non-performing loans to total loans was 0.54% at March 31, 2022, compared to 0.76% at December 31, 2021. The Bancorp’s ratio of non-performing assets to total assets was 0.41% at March 31, 2022, compared to 0.51% at December 31, 2021.  

For the three months ended March 31, 2022, no provisions to the ALL were required, compared to $578 thousand for the three months ended March 31, 2021, a decrease of $578 thousand. For the three months ended March 31, 2022, recoveries, net of charge-offs, totaled $44 thousand. At March 31, 2022, the allowance for loan losses totaled $13.4 million and is considered adequate by management. Non-performing loans totaled $7.7 million at March 31, 2022, as compared to $7.3 million at December 31, 2021.The allowance for loan losses as a percentage of total loans was 0.93% at March 31, 2022, compared to 1.38% at December 31, 2021. The allowance for loan losses as a percentage of non-performing loans, or coverage ratio, was 174.0% at March 31, 2022, compared to 183.8% at December 31, 2021.

Management also considers reserves that are not part of the ALL that have been established from acquisition activity. 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. Additionally, the Bancorp has acquired loans where there was no evidence of credit quality deterioration since origination and has marked these loans to their fair values. When these additional reserves are included on a non-GAAP basis, the allowance for loan losses as a percentage of total loans was 1.55% at March 31, 2022, and the allowance for loan losses as a percentage of non-performing loans, or coverage ratio, was 287.7% at March 31, 2022. See Table 1 below for a reconciliation of these non-GAAP figures to the Bancorp’s GAAP figures.

Investing
The Bancorp’s securities portfolio totaled $464.3 million at March 31, 2022, compared to $526.9 million at December 31, 2021, a decrease of $62.6 million or 11.9%. The decrease is attributable to increased unrealized losses within the portfolio and a return of liquidity from the securities portfolio. The securities portfolio represents 23.9% of earning assets and provides a consistent source of liquidity and earnings to the Bancorp. Cash and cash equivalents totaled $54.5 million on March 31, 2022, compared to $33.2 million on December 31, 2021, an increase of $21.3 million or 64.3%. 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
On March 31, 2022, core deposits totaled $1.5 billion, compared to $1.2 billion on December 31, 2021, an increase of $269.8 million or 22.6%. The increase is the result of the Royal acquisition, as well as Bancorp’s efforts to maintain and grow core deposits. Core deposits include checking, savings, and money market accounts and represented 77.3% of the Bancorp’s total deposits at March 31, 2022. During the first three months of 2022, balances for checking, savings, and money market accounts increased. The increase in these core deposits is a result of the Royal acquisition, as well as management’s sales efforts along with customer preferences for competitively priced short-term liquid investments. On March 31, 2022, balances for certificates of deposit totaled $430.4 million, compared to $239.2 million on December 31, 2021, an increase of $191.2 million or 79.9%. The increase related to certificate of deposits is primarily related to the Royal acquisition. In addition, on March 31, 2022, borrowings and repurchase agreements totaled $23.2 million, compared to $14.6 million at December 31, 2021, an increase of $8.7 million or 59.4%. The increase in short-term borrowings was the result of cyclical inflows of repurchase agreement balances.

Capital Adequacy
At March 31, 2022, shareholders’ equity stood at $157.6 million, and tangible capital represented 6.3% of tangible assets. The Bank’s regulatory capital ratios at March 31, 2022, were 11.8% for total capital to risk-weighted assets, 10.9% for both common equity tier 1 capital to risk-weighted assets and tier 1 capital to risk-weighted assets, and 8.2% for tier 1 leverage capital to adjusted average assets. Under all regulatory capital requirements, the Bank is considered well capitalized. The tangible book value of the Bancorp’s stock stood at $29.99 per share at March 31, 2022, compared to $40.91 at December 31, 2021, a decrease of $10.91 or 26.7%. Primarily as a result of increased net unrealized loss on securities available-for-sale, net of reclassification and tax effects.

Disclosures Regarding Non-GAAP Financial Measures
Reported amounts are presented in accordance with GAAP. In this press release the Bancorp also is providing certain financial measures that are identified as non-GAAP. The Bancorp’s management believes that the non-GAAP information, which consists of core return on equity, core return on assets, core noninterest expense/average assets, core efficiency ratio, core earnings, adjusted allowance for loan loss to total loans, adjusted allowance for loan loss to nonperforming loans, and reported net income excluding non-core operations, which can vary from period to period, provides a better comparison of period to period operating performance. Additionally, the Bancorp believes this information is utilized by regulators and market analysts to evaluate a company’s financial condition and, therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies. Refer to Table 1 – Reconciliation of Non-GAAP Financial Measures at the end of this document for a reconciliation of the non-GAAP measures identified herein and their most comparable GAAP measures.

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 30 locations in Lake and Porter Counties in Northwest Indiana and Chicagoland. Finward Bancorp’s common stock is quoted on the NASDAQ Stock Market, LLC 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: difficulties and delays in integrating Finward’s and Royal’s businesses or fully realizing cost savings and other benefits; business disruption following the merger; any continuing risks and uncertainties for our business, results of operations, and financial condition relating to the COVID-19 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 Bancorp’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 matters attributable to Finward or any person acting on its 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.

CONTACT INVESTOR RELATIONS
(219) 853-7575


Finward Bancorp
Quarterly Financial Report
              
Performance Ratios Three months ended,
     (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
     March 31, December 31,September 30,June 30, March 31,
      2022   2021   2021   2021   2021 
Return on equity  5.01%  8.56%  8.90%  9.17%  11.94%
Return on assets  0.44%  0.83%  0.87%  0.90%  1.18%
Yield on loans   4.17%  4.28%  4.28%  4.21%  4.41%
Yield on security investments  2.02%  1.94%  1.94%  1.96%  2.02%
Total yield on earning assets  3.49%  3.42%  3.36%  3.38%  3.59%
Cost of deposits  0.08%  0.10%  0.13%  0.16%  0.19%
Cost of repurchase agreements  0.33%  0.26%  0.25%  0.28%  0.28%
Cost of borrowed funds  0.39%  0.47%  9.76%  0.47%  2.70%
Total cost of funds  0.08%  0.10%  0.13%  0.16%  0.20%
Net interest margin - tax equivalent  3.63%  3.58%  3.46%  3.42%  3.59%
Noninterest income / average assets  0.64%  0.95%  1.02%  0.92%  1.12%
Noninterest expense / average assets  3.33%  3.18%  3.04%  2.76%  2.73%
Net noninterest margin / average assets  -2.68%  -2.23%  -2.02%  -1.84%  -1.61%
Efficiency ratio   87.10%  78.28%  75.87%  70.79%  64.14%
Effective tax rate  11.41%  0.18%  7.04%  9.96%  14.09%
              
Non-performing assets to total assets  0.41%  0.51%  0.91%  0.85%  0.92%
Non-performing loans to total loans  0.54%  0.76%  1.42%  1.27%  1.32%
Allowance for loan losses to non-performing loans 173.99%  183.76%  101.71%  111.13%  101.49%
Allowance for loan losses to loans outstanding  0.93%  1.38%  1.44%  1.42%  1.34%
Foreclosed real estate to total assets  0.00%  0.00%  0.01%  0.02%  0.03%
              
Basic earnings per share $0.53  $0.95  $1.02  $1.03  $1.31 
Diluted earnings per share $0.53  $0.95  $1.02  $1.03  $1.31 
Net worth / total assets  7.51%  9.66%  9.48%  9.70%  9.57%
Book value per share $36.71  $45.00  $43.85  $44.71  $42.76 
Tangible book value per share $29.99  $40.91  $39.69  $40.48  $38.48 
Closing stock price $46.21  $45.88  $41.05  $44.14  $41.82 
Price per earnings per share $21.76  $12.07  $10.06  $10.71  $8.04 
Dividend declared per common share $0.31  $0.31  $0.31  $0.31  $0.31 


Finward Bancorp
Quarterly Financial Report
              
Balance Sheet Data          
(Dollars in thousands) (Unaudited)   (Unaudited) (Unaudited) (Unaudited)
     March 31, December 31, September 30, June 30, March 31,
     2022 2021 2021 2021 2021
Total assets $2,097,845 $1,620,743 $1,609,924 $1,603,513 $1,555,348
Cash & cash equivalents  54,501  33,176  31,765  68,625  68,009
Certificates of deposit in other financial institutions     1,731  1,709  977  1,471  1,474
Securities - available for sale  464,321  526,889  531,010  473,927  422,868
              
Loans receivable:          
 Commercial real estate $408,375 $317,145 $309,905 $315,087 $304,851
 Residential real estate  444,758  260,134  268,798  268,649  276,728
 Commercial business  112,396  115,772  125,922  149,414  163,896
 Construction and land development  153,394  123,822  110,289  104,154  97,400
 Multifamily  231,683  61,194  56,869  53,639  51,933
 Home equity  34,284  34,612  35,652  36,684  36,222
 Manufactured homes  38,634  37,887  32,857  26,453  26,260
 Government  8,176  8,991  9,841  8,462  9,372
 Consumer  921  582  650  544  438
 Farmland  -  -  205  309  315
  Total loans $1,432,621 $960,139 $950,988 $963,395 $967,415
              
Deposits:           
 Core deposits:          
  Noninterest bearing checking $380,515 $295,294 $287,376 $275,819 $286,969
  Interest bearing checking  350,825  333,744  315,575  307,148  279,984
  Savings  425,634  293,976  284,681  277,944  271,910
  Money market   307,850  271,970  254,671  253,427  245,750
     Total core deposits  1,464,824  1,194,984  1,142,303  1,114,338  1,084,613
 Certificates of deposit  430,387  239,217  263,897  280,758  282,081
     Total deposits $1,895,211 $1,434,201 $1,406,200 $1,395,096 $1,366,694
              
Borrowings and repurchase agreements $23,244 $14,581 $23,844 $24,399 $15,917
Stockholder's equity  157,637  156,615  152,569  155,569  148,770


Finward Bancorp
Quarterly Financial Report
              
Consolidated Statements of Income Three months ended,
(Dollars in thousands) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
     March 31, December 31, September 30, June 30, March 31,
     2022 2021 2021 2021 2021 
Interest income:          
Loans   $13,286 $10,282 $10,270 $10,275 $10,746 
Securities & short-term investments  2,608  2,545  2,396  2,160  1,981 
Total interest income  15,894  12,827  12,666  12,435  12,727 
Interest expense:          
Deposits   337  350  452  549  651 
Borrowings   22  20  14  14  30 
Total interest expense  359  370  466  563  681 
Net interest income  15,535  12,457  12,200  11,872  12,046 
Provision for loan losses  -  216  139  576  578 
Net interest income after provision for loan losses  15,535  12,241  12,061  11,296  11,468 
Noninterest income:          
Fees and service charges     1,304  1,378  1,473  1,471  1,066 
Gain on sale of loans held-for-sale, net     607  902  1,229  1,116  2,049 
Wealth management operations     595  588  604  576  607 
Gain on sale of securities, net     381  711  590  269  417 
Increase in cash value of bank owned life insurance     252  178  180  188  169 
Gain on sale of foreclosed real estate, net     -  20  -  36  (9)
Other     5  31  70  24  14 
Total noninterest income  3,144  3,808  4,146  3,680  4,313 
Noninterest expense:          
Compensation and benefits     7,367  6,617  6,042  5,897  5,685 
Occupancy and equipment     3,054  1,461  1,380  1,324  1,372 
Data processing     1,500  1,119  1,076  778  674 
Federal deposit insurance premiums     651  241  236  204  180 
Marketing     219  357  334  195  199 
Other     3,478  2,937  3,741  2,612  2,383 
Total noninterest expense  16,269  12,732  12,401  11,010  10,493 
Income before income taxes  2,410  3,317  3,806  3,966  5,288 
Income tax expenses  275  6  268  395  745 
Net income  $2,135 $3,311 $3,538 $3,571 $4,543 
              



Finward Bancorp
Quarterly Financial Report
              
Asset Quality (Unaudited)   (Unaudited) (Unaudited) (Unaudited)
(Dollars in thousands) March 31, December 31, September 30, June 30, March 31,
      2022   2021  2021 2021 2021
Nonaccruing loans $7,200  $7,056  $11,027 $12,025 $12,257
Accruing loans delinquent more than 90 days  494   205   2,516  248  599
Securities in non-accrual  972   992   1,011  970  944
Foreclosed real estate  -   -   81  368  491
 Total nonperforming assets $8,666  $8,253  $14,635 $13,611 $14,291
              
Allowance for loan losses (ALL):          
 ALL specific allowances for impaired loans $716  $684  $1,904 $1,770 $1,884
 ALL general allowances for loan portfolio  12,671   12,659   11,870  11,869  11,163
  Total ALL $13,387  $13,343  $13,774 $13,639 $13,047
              
Troubled Debt Restructurings:          
 Nonaccruing troubled debt restructurings, non-compliant (1) (2)$300  $1,122  $1,126 $1,269 $407
 Nonaccruing troubled debt restructurings, compliant (2)  265   306   102  -  366
 Accruing troubled debt restructurings  1,379   1,421   1,427  1,182  1,210
  Total troubled debt restructurings $1,944  $2,849  $2,655 $2,451 $1,983
   (1) "non-compliant" refers to not being within the guidelines of the restructuring agreement        
   (2) included in nonaccruing loan balances presented above          
              
              
     (Unaudited)       
     March 31, Required      
      2022 To Be Well      
     Actual Ratio Capitalized      
Capital Adequacy Bank          
Common equity tier 1 capital to risk-weighted assets  10.9%  6.5%      
Tier 1 capital to risk-weighted assets  10.9%  8.0%      
Total capital to risk-weighted assets  11.8%  10.0%      
Tier 1 capital to adjusted average assets  8.2%  5.0%      
              



 Table 1 - Reconciliation of the Non-GAAP Performance Measures         
           
 (Dollars in thousands)Three Months Ended
 (unaudited)March 31, 2022 December 31, 2021 September 31, 2021June 30, 2021 March 31, 2021
 Calculation of core net income         
 Net income$2,135  $3,311  $3,538  $3,571  $4,543 
 Realized loss/(gain) on securities (381)  (771)  (590)  (269)  (417)
 Merger related expenses 2,852   -   -   -   - 
 CD premium amortization (129)  -   -   -   - 
 Core deposit amortization 347   249   249   249   248 
 Purchase discount amortization (234)  (144)  (271)  (300)  (359)
 Related tax benefit/(cost) (516)  127   129   67   111 
(A)Core net income$4,074  $2,772  $3,055  $3,318  $4,126 
           
 Calculation of core diluted earnings per share         
(A)Core net income$4,074  $2,832  $3,055  $3,318  $4,126 
 Diluted average common shares outstanding 4,020,815   3,479,988   3,479,139   3,478,392   3,471,604 
 Core diluted earnings per share$1.01  $0.81  $0.88  $0.95  $1.19 
           
 Calculation of core return on average assets         
(A)Core net income$4,074  $2,832  $3,055  $3,318  $4,126 
 Average total assets 1,955,347   1,601,040   1,631,654   1,594,610   1,536,835 
 Core return on average assets 0.83%  0.71%  0.75%  0.83%  1.07%
           
 Calculation of core pre-provision net revenue         
 Net interest income$15,535  $12,457  $12,200  $11,872  $12,046 
 Non-interest income 3,144   3,808   4,146   3,680   4,313 
 Non-interest expense (16,269)  (12,732)  (12,401)  (11,010)  (10,493)
 Pre-provision net revenue 2,410   3,533   3,945   4,542   5,866 
 Realized loss/(gain) on securities (381)  (711)  (590)  (269)  (417)
 Core deposit amortization 347   249   249   249   248 
 Purchase discount amortization (234)  (144)  (271)  (300)  (359)
(B)Core pre-provision net revenue$2,142  $2,927  $3,333  $4,222  $5,338 
           
 Calculation of core pre-provision net revenue to average assets         
(B)Core pre-provision net revenue$2,142  $2,927  $3,333  $4,222  $5,338 
 Average total assets 1,955,347   1,601,040   1,631,654   1,594,610   1,536,835 
 Core pre-provision net revenue to average assets 0.44%  0.73%  0.82%  1.06%  1.39%
           
 Calculation of tangible assets (excluding PPP)         
 Total assets$2,097,845  $1,620,743  $1,609,924  $1,603,513  $1,555,348 
 Goodwill (22,851)  (11,109)  (11,109)  (11,109)  (11,109)
 Other Intangibles (5,998)  (3,126)  (3,374)  (3,622)  (3,126)
 Paycheck Protection Plan ("PPP") loans (9,983)  (22,072)  (32,892)  (50,304)  (66,295)
(C)Tangible assets (excluding PPP)$2,059,013  $1,584,436  $1,562,549  $1,538,478  $1,474,818 
           
 Calculation of tangible common equity         
 Total stockholder's equity$157,637  $156,615  $152,569  $155,569  $156,615 
 Goodwill (22,851)  (11,109)  (11,109)  (11,109)  (11,109)
 Other intangibles (5,998)  (3,126)  (3,374)  (3,622)  (3,126)
(D)Tangible common equity$128,788  $142,380  $138,086  $140,838  $142,380 
           
 Calculation of tangible common equity to tangible assets (excluding PPP)        
(D)Tangible common equity$128,788  $142,380  $138,086  $140,838  $142,380 
(C)Tangible assets (excluding PPP) 2,059,013   1,584,436   1,562,549   1,538,478   1,474,818 
 Tangible common equity to tangible assets 6.25%  8.99%  8.84%  9.15%  9.65%
           
 Calculation of average tangible common equity         
 Average stockholder's common equity$170,374  $159,010  $159,010  $155,850  $152,180 
 Average goodwill (21,251)  (11,109)  (11,109)  (11,109)  (11,109)
 Average other intangibles (5,174)  (3,270)  (3,523)  (3,770)  (4,018)
(E)Average tangible stockholders' common equity$143,949  $144,631  $144,378  $140,971  $137,053 
           
 Calculation of core return on average common equity         
(A)Core net income$4,074  $2,832  $3,055  $3,318  $4,126 
(E)Average tangible common equity 143,949   144,631   144,378   140,971   137,053 
 Core return on average common equity 11.32%  7.83%  8.46%  9.42%  12.04%
           
 Calculation of core yield on loans         
 Interest income on loans$13,286  $10,282  $10,270  $10,275  $10,746 
 Loan accretion income (234)  (144)  (271)  (300)  (359)
 Adjusted interest income on loans 13,052   10,138   9,999   9,975   10,387 
 Average loan balances 1,274,407   960,606   960,274   976,520   975,593 
 Core yield on loans 4.10%  4.22%  4.17%  4.09%  4.26%
           
 Calculation of adjusted allowance for loan loss to total loans         
 Allowance for loan losses$(13,387) $(13,343) $(13,774) $(13,639) $(13,343)
 Additional reserves not part of the allowance for loan loss (8,749)  (2,428)  (2,572)  (3,420)  (3,720)
(F)Adjusted allowance for loan loss (22,136)  (15,771)  (16,346)  (17,059)  (17,063)
 Total loans 1,439,728   966,720   956,352   969,491   981,902 
 Adjusted allowance for loan loss to total loans 1.54%  1.63%  1.71%  1.76%  1.74%
           
 Calculation of adjusted allowance for loan loss to nonperforming loans        
(F)Adjusted allowance for loan loss$(22,136) $(15,771) $(16,346) $(17,059) $(17,063)
 Nonperforming loans 7,694   7,261   13,543   12,273   12,856 
 Adjusted allowance for loan loss to nonperforming loans (coverage ratios) 287.70%  217.20%  120.70%  139.00%  132.72%
           
 Calculation of adjusted allowance for loan loss to total loans excluding PPP        
(F)Adjusted allowance for loan loss$(22,136) $(15,771) $(16,346) $(17,059) $(17,063)
 Total loans 1,439,728   966,720   956,352   969,491   975,593 
 PPP loans (9,983)  (22,072)  (32,892)  (50,304)  (66,295)
 Total loans excluding PPP 1,429,745   944,648   923,460   919,187   909,298 
 Adjusted allowance for loan loss to total loans excluding PPP 1.55%  1.67%  1.77%  1.86%  1.88%
           
 Calculation of core revenue          
 Net interest income$15,535  $12,457  $12,200  $11,872  $12,046 
 Non-interest income 3,144   3,808   4,146   3,680   4,313 
 CD premium amortization (129)  -   -   -   - 
 Purchase discount amortization (234)  (144)  (271)  (300)  (359)
 Realized loss/(gain) on securities (381)  (711)  (590)  (269)  (417)
(G)Core revenue$17,935  $15,410  $15,485  $14,983  $15,583 
           
 Calculation of core non-interest expense         
 Non-interest expense$16,269  $12,732  $12,401  $11,010  $10,493 
 Merger related expenses (2,852)  -   -   -   - 
 Core deposit amortization (347)  (249)  (249)  (249)  (248)
(H)Core non-interest expense$13,070  $12,483  $12,152  $10,761  $10,245 
           
 Calculation of core efficiency ratio         
(H)Core non-interest expense$13,070  $12,483  $12,152  $10,761  $10,245 
(G)Core revenue 17,935   15,410   15,485   14,983   15,583 
 Core efficiency ratio 72.87%  81.01%  78.48%  71.82%  65.74%
           
 Calculation of core non-interest expense to total average assets         
(H)Core non-interest expense$13,070  $12,483  $12,152  $10,761  $10,245 
 Average total assets 1,955,347   1,601,040   1,631,654   1,594,610   1,536,835 
 Core non-interest expense to total average assets 2.67%  3.12%  2.98%  2.70%  2.67%
           
 Calculation of tax adjusted net interest margin         
 Net interest income$15,535  $12,457  $12,200  $11,872  $12,046 
 Tax adjusted interest on securities and loans 966   959   851   745   677 
 Adjusted net interest income 16,501   13,416   13,051   12,617   12,723 
 Total average earning assets 1,820,588   1,500,183   1,506,674   1,473,625   1,417,462 
 Tax adjusted net interest margin 3.63%  3.58%  3.46%  3.42%  3.59%
           
 Efficiency Ratio         
 Total non-interest expense$16,269  $12,732  $12,401  $11,010  $10,493 
 Total revenue 18,679   16,265   16,346   15,552   16,359 
 Efficiency ratio 87.10%  78.28%  75.87%  70.79%  64.14%