Finward Bancorp(FNWD) - 2024 Q4 - Annual Report

Loan Portfolio - As of December 31, 2024, total loans receivable amounted to $1,506,583,000, a slight decrease from $1,508,755,000 in 2023[30] - The company's loan portfolio includes $467,293,000 in residential real estate loans, down from $484,948,000 in 2023, representing a decrease of approximately 1.5%[30] - The company reported a total of $551,674,000 in commercial real estate loans as of December 31, 2024, an increase from $503,202,000 in 2023, reflecting a growth of approximately 9.3%[30] - Adjustable Rate Mortgage (ARM) originations totaled $7.3 million in 2024, accounting for 14.8% of total mortgage loan originations[40] - The primary lending area includes Lake County in northwest Indiana and Cook County in northeast Illinois, where the majority of loan activity is concentrated[33] - The company’s construction loans are primarily made for residential properties, with a maximum loan-to-value ratio of 89%[41] - During 2024, 75.2% of closed mortgage loans were conventional loans with borrowers having 20% or more equity, eliminating the need for private mortgage insurance[38] - The company had no concentrations of loans in any industry exceeding 10% of total loans as of December 31, 2024[27] Credit Quality - Non-performing loans increased to $13,738 thousand in 2024 from $9,608 thousand in 2023, representing a 43.5% increase[57] - The ratio of non-performing loans to total assets rose to 0.74% in 2024, up from 0.61% in 2023[57] - Total substandard loans increased to $16,021 thousand in 2024, compared to $12,264 thousand in 2023, marking a 30.3% increase[59] - Special mention loans grew to $25,290 thousand in 2024, up from $19,198 thousand in 2023, reflecting a 31.8% increase[60] - The company recorded $656 thousand in gross interest income on non-accrual loans that would have been recognized if the loans had been current throughout 2024[57] - The allowance for credit losses allocated for collateral dependent loans was $284 thousand as of December 31, 2024[65] - The total allowance for credit losses at the end of 2024 was $16,911,000, down from $18,768,000 at the end of 2023[72] - The allowance for credit losses (ACL) to loans outstanding ratio was 1.12% for 2024, compared to 1.24% in 2023[72] Interest Income and Expenses - Net interest income for the year ended December 31, 2024, was $48,447 million, down from $54,555 million in 2023[98] - Interest income from loans receivable decreased by $734 million, resulting in a total of $2,753 million for 2024[101] - Total interest-earning assets saw a net decrease of $262 million, totaling $3,395 million in 2024[101] - Net interest income experienced a decline of $1,043 million, leading to a total of $6,108 million for the year[101] - The average interest rate on total interest-earning assets increased to 4.67% in 2024 from 4.45% in 2023[98] Capital and Regulatory Compliance - The Company is subject to minimum capital standards, including a common equity Tier 1 capital ratio of 4.50%[122] - As of December 31, 2024, the Bank met all applicable capital adequacy requirements[126] - The Bank's common equity tier 1 capital to risk-weighted assets ratio was 11.26%, exceeding the minimum required ratio of 4.50%[135] - The total capital to risk-weighted assets ratio for the Bank was 12.19% as of December 31, 2024, compared to the minimum required ratio of 8.00%[135] - The Bank's tier 1 capital to adjusted average assets ratio was 8.47% as of December 31, 2024, above the minimum required ratio of 4.00%[135] - The Company is exempt from consolidated regulatory capital requirements under the "Small Bank Holding Company" exemption due to its asset size being less than $3 billion[127] Deposits and Funding - As of December 31, 2024, total deposits amounted to $1,755,547 million, reflecting a 2.40% increase from $1,784,086 million in 2023[86] - The Company had $21.7 million in brokered deposit balances at December 31, 2024, obtained through prior acquisitions[84] - The Company had $65.0 million in Federal Home Loan Bank (FHLB) fixed rate advances and $40.1 million in repurchase agreements as of December 31, 2024[83] - The weighted average rate on repurchase agreements was 3.85% in 2024, compared to 3.64% in 2023[93] Economic and Market Conditions - The monetary policies of the Federal Reserve significantly impact the Company's earnings and growth, as well as the broader banking industry[169] - Interest rate risk is identified as the primary source of market risk for the Company, arising from timing differences in repricings and maturities of interest-earning assets and interest-bearing liabilities[333] - The Company forecasts net interest income under various interest rate scenarios, indicating sensitivity to changes in market interest rates[342] - A table shows the impact of changes in interest rates on net interest income and economic value of equity (EVE), with a base EVE of $425 million and a net interest income of $61.6 million[344] Compliance and Risk Management - The Company is subject to periodic reporting and compliance requirements under the SEC and Nasdaq rules due to its public listing[165] - The Company has not discovered any material cybersecurity incidents during 2024, indicating effective risk management practices[159] - The Bank was rated "satisfactory" in its Community Reinvestment Act compliance, which is considered in expansion proposals and merger applications[150] - The final rule to strengthen CRA regulations was issued on October 24, 2023, but its implementation is currently delayed due to a preliminary injunction[152]