Finward Bancorp(US:FNWD)2019-03-05 21:08Financial Performance - The Bancorp's net income for 2018 was $9.3 million, translating to basic and diluted earnings of $3.17 per common share, with a return on average assets of 0.93% and return on average stockholders' equity of 9.88%[175]. - Net income for 2018 was $9.3 million, an increase of $376 thousand (4.2%) compared to $9.0 million for 2017, driven by strong loan originations and the merger with First Personal[216]. - Net interest income for 2018 was $34.4 million, an increase of $3.6 million (11.7%) from $30.8 million for 2017, with a net interest margin of 3.67% compared to 3.61% for 2017[217]. - Noninterest income for 2018 was $9.1 million, an increase of $1.3 million (17.4%) from $7.8 million for 2017, with gains from loan sales increasing by $419 thousand (34.9%)[220]. - Noninterest expense for 2018 was $31.4 million, up $5.9 million (23.1%) from $25.5 million for 2017, primarily due to the acquisition of First Personal[221]. - The Bancorp's effective tax rate decreased to 13.3% for 2018 from 24.3% for 2017, resulting in a tax expense of $1.4 million, down $1.4 million (50.2%) from the previous year[222]. - The efficiency ratio for 2018 was 72.21%, compared to 66.17% for 2017, impacted by one-time costs associated with the acquisition of First Personal[221]. Asset and Deposit Growth - As of December 31, 2018, the Bancorp reported total assets of $1.1 billion, with total deposits of $929.8 million[175]. - Total assets increased by $168.9 million (18.2%) during the year ended December 31, 2018, with interest-earning assets rising by $146.9 million (16.9%)[182]. - Total deposits increased by $136.8 million (17.2%) in 2018, reaching $929.8 million, primarily due to the First Personal acquisition[207]. - Total deposit balances averaged $839.5 million for 2018, an increase of $69.3 million (9.0%) from $770.2 million for 2017, with interest expense for deposits rising by $1.7 million (84.5%)[219]. Loan Portfolio and Performance - The Bancorp's loan portfolio totaled $764.4 million, representing 75.1% of interest-earning assets and 82.2% of total deposits[182]. - The Bancorp originated $55.5 million in new fixed-rate mortgage loans for sale during the twelve months ended December 31, 2018, compared to $42.2 million in the previous year[182]. - The Bancorp's impaired loans totaled $5.8 million as of December 31, 2018, an increase from $2.5 million in 2017[191]. - The Bancorp's troubled debt restructured loans increased to $2,031 thousand in 2018 from $535 thousand in 2017, reflecting a significant rise in commercial and residential loans[194]. - The provision for loan losses for 2018 totaled $1,308 thousand, an increase from $1,200 thousand in 2017, with notable contributions from commercial real estate and commercial business segments[200]. - Non-performing loans as of December 31, 2018, totaled $6.9 million, representing 0.90% of total loans and 0.63% of total assets[184]. - Non-performing loans rose to $6,916 thousand at December 31, 2018, compared to $5,223 thousand in 2017, driven by the acquisition of First Personal and other commercial relationships[203]. - The allowance for loan losses (ALL) was $7,962 thousand at December 31, 2018, representing 1.04% of total loans, down from 1.21% in 2017[203]. Capital and Regulatory Compliance - Stockholders' equity rose to $101.5 million at December 31, 2018, a 10.2% increase from $92.1 million in 2017, mainly due to net income and the issuance of shares related to the First Personal acquisition[212]. - The Bancorp's capital ratios exceeded all regulatory requirements, with common equity tier 1 capital at 11.6% and total capital at 12.6% as of December 31, 2018[214]. - The Bancorp's total capital to risk-weighted assets ratio was 12.2% as of December 31, 2018, exceeding the minimum required ratio of 10.0%[215]. Acquisitions and Expansion - The Bancorp completed the acquisition of First Personal Financial Corp. on July 26, 2018, expanding its retail banking network to 19 banking centers[176]. - The acquisition of AJS Bancorp, Inc. was completed on January 24, 2019, further increasing the number of full-service banking centers to 22[179]. - The Bancorp issued a total of 161,875 shares of common stock to former First Personal stockholders, with cash consideration of approximately $8.7 million, resulting in an implied valuation of about $15.6 million for the transaction[178]. Investment and Market Conditions - The Bancorp's investment portfolio totaled $241.8 million, with a 1.1% decrease during 2018 due to market value adjustments and reallocations to support loan growth[205]. - Foreclosed real estate decreased to $1.6 million at December 31, 2018, from $1.7 million in 2017, with net sales totaling $1.6 million during the year[204]. Risk Management - Management has allocated general reserves to both performing and non-performing loans based on historical data and current information available[228]. - Risk factors for non-performing loans are based on projected discounted cash flows or estimated collateral liquidation values, with deficiencies stated as a percentage of total substandard balances[229]. - Historical risk factors for performing loans are calculated as a percentage of average loans over the most recent three years, adjusted for current subjective risks[230]. - Management believes that the Allowance for Loan Losses (ALL) is currently adequate, reflecting current conditions and delinquency trends[231]. Accounting and Forward-Looking Statements - The financial statements are prepared in accordance with U.S. GAAP, measuring financial position in historical dollars without considering inflation impacts[232]. - Forward-looking statements regarding future business prospects and financial performance are subject to risks and uncertainties that could cause actual results to differ materially[233].