Finward Bancorp(FNWD) - 2019 Q4 - Annual Report

Financial Performance - The Bancorp's net income for 2019 was $12.1 million, translating to $3.53 basic and diluted earnings per common share, with a return on average assets of 0.94% and a return on average stockholders' equity of 9.54%[179] - Net income for 2019 was $12.1 million, an increase of $2.8 million (29.6%) from $9.3 million in 2018[222] - Comprehensive income for 2019 was $19,154 thousand, significantly higher than $5,857 thousand in 2018, representing an increase of 226.5%[252] - Net income for the year ended December 31, 2019, was $12,097,000, an increase of 29.8% from $9,337,000 in 2018[255] - The Bancorp reported a net income of $12.1 million for 2019, resulting in basic and diluted earnings per common share of $3.53, an increase from $3.17 in 2018[365] Asset and Deposit Growth - As of December 31, 2019, the Bancorp had total assets of $1.3 billion, total deposits of $1.2 billion, and stockholders' equity of $134.1 million, with a book value per share of $38.85[179] - Total assets increased by $232.6 million (21.2%) during the year ended December 31, 2019, with interest-earning assets rising by $204.2 million (20.1%)[187] - The Bancorp's total deposits increased by $224.6 million (24.2%) to $1.154 billion as of December 31, 2019, primarily due to the AJSB acquisition and internal growth[211] - Total deposits increased to $1,154,370 thousand in 2019, compared to $929,786 thousand in 2018, marking a growth of 24.2%[250] Loan Performance - Loans totaled $906.9 million, representing 68.3% of total assets and 78.6% of total deposits, with residential real estate loans increasing to $299.3 million (33.0% of loans)[187][188] - Total loans receivable increased to $906.9 million in 2019 from $764.4 million in 2018, representing an increase of 18.6%[310] - The allowance for loan losses (ALL) rose to $8.999 million, representing 0.99% of total loans, compared to 1.04% in 2018[205] - The provision for loan losses for 2019 was $2.584 million, significantly higher than $1.308 million in 2018, with commercial business loans contributing $1.295 million to the provision[202] - Non-performing loans totaled $7.373 million, up from $6.916 million in 2018, with the ALL covering 122.1% of non-performing loans[205] Acquisitions - The acquisition of AJSB was completed on January 24, 2019, with an implied valuation of approximately $33.2 million, expanding the Bank's network to 22 banking centers[180][182] - The Bancorp issued 416,478 shares of common stock and paid approximately $15.7 million in cash as part of the AJSB acquisition[182] - The Bancorp completed the acquisition of First Personal Financial Corp. on July 26, 2018, with an implied valuation of approximately $15.6 million[296] - The total purchase price for the AJSB acquisition was allocated as follows: total assets purchased amounted to $178.781 million, with total liabilities assumed of $145.546 million[304] - The Bancorp's banking center network expanded to 22 banking centers following the AJSB Merger, enhancing its retail banking presence in Cook County, Illinois[303] Income and Expense Analysis - Net interest income for 2019 was $43.2 million, an increase of $8.8 million (25.6%) from $34.4 million in 2018[223] - Total noninterest income increased by $1,571 thousand (17.3%) from $9,099 thousand in 2018 to $10,670 thousand in 2019, driven by higher fees and service charges, wealth management operations, and gains on loan sales[227] - Total noninterest expense increased by $6,005 thousand (19.1%) from $31,383 thousand in 2018 to $37,388 thousand in 2019, primarily due to higher compensation and benefits from increased headcount following acquisitions[229] - The efficiency ratio improved to 69.5% in 2019 from 72.2% in 2018, attributed to increased interest income[229] - Income tax expenses increased by $329 thousand (23.0%) from $1.4 million in 2018 to $1.8 million in 2019, with an effective tax rate of 12.7% compared to 13.3% in the previous year[230] Securities and Investments - The securities portfolio increased by $35.5 million (14.7%) to $277.2 million, representing 22.7% of interest-earning assets[207] - The estimated fair value of available-for-sale securities as of December 31, 2019, was $277.219 million, with gross unrealized gains of $6.653 million and losses of $1.267 million[305] - The total proceeds from the sale of available-for-sale securities in 2019 were $37.939 million, with gross gains of $888 thousand and gross losses of $267 thousand[306] - The total temporarily impaired securities amounted to $29.4 million in 2019, with unrealized losses of $1.3 million, compared to $149.7 million and $4.8 million in 2018, respectively[308] Capital and Equity - Stockholders' equity totaled $134.1 million at December 31, 2019, an increase of $32.6 million (32.2%) from $101.5 million at December 31, 2018[217] - The Bancorp's total capital to risk-weighted assets ratio was 12.7% at December 31, 2019, exceeding the minimum required ratio of 8.0%[219] - The Bancorp's common equity tier 1 capital to risk-weighted assets ratio was 11.8%, exceeding the minimum required ratio of 4.5%[355] - The total amount of dividends declared by the Bancorp in 2020 is limited to its net profits for that year[357] Risk Management and Credit Quality - The Bancorp's loan grading system includes categories ranging from minimal risk to substandard, with a focus on assessing borrower credit fundamentals and cash flow[315][316][317][318][319][320][321][322][323] - The overall credit quality indicators reflect a stable portfolio with a focus on maintaining acceptable risk levels across various loan segments[314] - The total past due loans for home equity reached $502,000, with a current loan balance of $49,181,000[328] - The total recorded investments greater than 90 days past due amounted to $5,907,000, with a total current loan balance of $892,219,000[328] Derivative Financial Instruments - Total notational amount of interest rate swap contracts increased from $8,649 thousand in 2018 to $29,466 thousand in 2019, representing a growth of 240%[374] - Total non-hedging derivative financial instruments reported in the Statement of Income increased from $110 thousand in 2018 to $557 thousand in 2019, a rise of 407%[375] - Other income from interest rate swap contracts grew from $110 thousand in 2018 to $371 thousand in 2019, an increase of 237%[375] - Overall, the company demonstrated significant growth in derivative financial instruments and related income, indicating a strategic focus on enhancing financial derivatives management[375]