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

Rhea-AI Summary

Finward Bancorp (FNWD) reported a net income of $2.1 million ($0.53 per share) for Q1 2022, a decrease from $4.5 million ($1.31 per share) in Q1 2021. Core earnings remained stable at $4.1 million, while net interest income rose to $15.9 million, reflecting growth from the Royal acquisition. The net interest margin was steady at 3.41%. However, the efficiency ratio worsened to 87.10%. The acquisition added $437.3 million in loans and $432.8 million in deposits. Despite increased expenses linked to the merger, the company aims to enhance digital integration and optimize its banking footprint.

Positive

• Net interest income increased to $15.9 million, up from $12.7 million YoY.
• Core earnings remained stable at $4.1 million, with minimal decline in EPS.
• Net interest margin held steady at 3.41%, showing effective interest rate management.
• Acquisition of Royal Financial added $437.3 million in loans and $432.8 million in deposits.

Negative

• Net income fell by $2.4 million YoY, leading to a significant decline in EPS.
• Efficiency ratio worsened to 87.10% from 64.14%, indicating rising operational costs.
• Tangible book value decreased by 26.7%, reflecting unrealized losses on securities.

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,
					2022			2021		2021		2021			2021
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 assets					2.67%			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, 2021				June 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	%

FAQ

What were Finward Bancorp's earnings for Q1 2022?

Finward Bancorp reported earnings of $2.1 million, or $0.53 per share, for Q1 2022.

How did the Royal Financial acquisition impact Finward Bancorp's financials?

The Royal Financial acquisition added approximately $437.3 million in loans and $432.8 million in deposits to Finward's balance sheet.

What is the current net interest margin for Finward Bancorp?

The net interest margin for Q1 2022 was steady at 3.41%.

Has Finward Bancorp's efficiency ratio improved?

No, the efficiency ratio worsened to 87.10% in Q1 2022, compared to 64.14% in the same quarter last year.

What is the outlook for Finward Bancorp following recent earnings?

Finward Bancorp is focused on enhancing digital integration and optimizing its banking center footprint despite rising operational expenses.