Finward Bancorp(FNWD) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Financial Results Overview The Bancorp reported a significant increase in net income and diluted EPS for Q2 2025, reflecting improved core operating results and key performance ratios Executive Summary Finward Bancorp announced a significant increase in net income available to common stockholders for the quarter ended June 30, 2025, reaching $2.2 million, or $0.50 per diluted share, compared to $455 thousand, or $0.11 per diluted share, in the prior quarter Net Income Available to Common Stockholders | Period | Amount | Diluted EPS | | :--- | :--- | :--- | | Quarter ended June 30, 2025 | $2.2 million | $0.50 | | Quarter ended March 31, 2025 | $455 thousand | $0.11 | CEO Commentary CEO Benjamin Bochnowski highlighted the positive outcomes of efforts to improve core operating results, noting expanded net interest margin above 3% (tax-equivalent), strengthened Tier 1 capital, stable asset quality, and strong net recoveries - Focused on improving core operating results, with Q2 2025 showing positive outcomes[2] - Net interest margin expanded for another consecutive quarter, now above 3% on a tax-equivalent basis[2] - Tier 1 capital moved above key internal targets, and asset quality remained relatively stable, supported by strong net recoveries[2] Key Performance Ratios The Bancorp demonstrated improved profitability and efficiency in Q2 2025, with Return on Equity rising to 5.66% and Return on Assets to 0.42%, while the net interest margin (tax-equivalent) expanded to 3.11% and the efficiency ratio improved to 88.92% Selected Performance Ratios (Quarter Ended) | Metric | 6/30/2025 | 3/31/2025 | 12/31/2024 | 9/30/2024 | 6/30/2024 | | :--- | :--- | :--- | :--- | :--- | :--- | | Return on equity | 5.66% | 1.17% | 5.39% | 1.60% | 0.39% | | Return on assets | 0.42% | 0.09% | 0.41% | 0.12% | 0.03% | | Net interest margin, tax-equivalent (non-GAAP) | 3.11% | 2.95% | 2.79% | 2.66% | 2.67% | | Non-interest income/average assets | 0.53% | 0.43% | 0.72% | 0.55% | 0.50% | | Non-interest expense/average assets | 2.90% | 2.81% | 2.75% | 2.80% | 2.79% | | Efficiency ratio | 88.92% | 93.11% | 87.20% | 97.32% | 98.56% | Operational Highlights The Bancorp demonstrated robust liquidity, improved net interest margin, stable loan portfolio, and strengthened capital adequacy while managing asset quality and operating expenses Liquidity and Deposits Finward Bancorp maintained a robust liquidity position as of June 30, 2025, with a significant portion of its deposits being FDIC insured and further backed by the Indiana Public Deposit Insurance Fund, reporting $728 million in available liquidity - 71.7% of deposits are fully FDIC insured, with an additional 8.0% backed by the Indiana Public Deposit Insurance Fund[4] - Available liquidity totaled $728 million as of June 30, 2025, including borrowing capacity from FHLB and Federal Reserve facilities[4] Securities Portfolio The securities available for sale balance slightly decreased to $327.8 million as of June 30, 2025, primarily due to payoffs of mortgage-related securities, while the yield on the securities portfolio improved to 2.42% for the quarter - Securities available for sale decreased by $2.3 million to $327.8 million as of June 30, 2025, primarily due to payoffs of collateralized mortgage obligations and residential mortgage-backed securities[5] - Yield on the securities portfolio increased to 2.42% for Q2 2025 from 2.38% for Q1 2025[6] - No securities sale transactions were executed during the quarter[6] Net Interest Margin The net interest margin (NIM) increased to 2.97% in Q2 2025, reaching 3.11% on a tax-equivalent basis, primarily driven by higher loan yields from repricing and improved funding costs and mix Net Interest Margin | Period | GAAP NIM | Tax-Equivalent NIM (non-GAAP) | | :--- | :--- | :--- | | Quarter ended June 30, 2025 | 2.97% | 3.11% | | Quarter ended March 31, 2025 | 2.81% | 2.95% | - The increase in net interest margin was primarily due to increased loan yields from repricing and improved funding costs and mix[5] Funding Total deposits experienced a modest increase of 0.3% to $1.8 billion, with core deposits remaining stable at $1.2 billion, while non-interest-bearing deposits decreased and borrowings and repurchase agreements saw an 11.4% increase Funding Overview (as of June 30, 2025) | Metric | Amount (June 30, 2025) | Change from March 31, 2025 | Percentage Change | | :--- | :--- | :--- | :--- | | Total deposits | $1.8 billion | +$4.5 million | +0.3% | | Non-interest-bearing deposits | $271.2 million | -$10.3 million | N/A | | Core deposits | $1.2 billion | Stable | N/A | | Core deposits as % of total deposits | 69.1% | N/A | N/A | | Certificates of deposit | $542.7 million | -$2.1 million | -0.4% | | Borrowings and repurchase agreements | $113.3 million | +$11.6 million | +11.4% | Allowance for Credit Losses The Allowance for Credit Losses (ACL) on loans increased by 1.3% to $18.2 million, representing 1.22% of total loans receivable, with the Bank recording a net benefit from credit loss of $274 thousand, largely due to $414 thousand in net loan recoveries Allowance for Credit Losses (ACL) on Loans | Metric | June 30, 2025 | March 31, 2025 | Change | Percentage Change | | :--- | :--- | :--- | :--- | :--- | | Total ACL on loans | $18.2 million | $17.9 million | +$229 thousand | +1.3% | | ACL as % of total loans receivable | 1.22% | 1.20% | +0.02% | N/A | - The Bank recorded a net benefit from credit loss totaling $274 thousand in Q2 2025, consisting of a $185 thousand reversal for credit losses on loans and an $89 thousand reversal of credit losses on unused commitments[8] - Net loan recoveries totaled $414 thousand in Q2 2025, compared to net charge-offs of $33 thousand in Q1 2025[8] Lending The aggregate loan portfolio remained stable at $1.5 billion, with new commercial loan originations increasing to $46.1 million in Q2 2025, and commercial real estate (CRE) owner-occupied and non-owner occupied properties constituting significant portions of total loan balances - The Bank's aggregate loan portfolio remained stable at $1.5 billion as of June 30, 2025[10] - New commercial loan originations increased to $46.1 million in Q2 2025, up from $36.7 million in Q1 2025[10] - Commercial real estate owner-occupied properties totaled $251.0 million (16.9% of total loans), and non-owner occupied properties totaled $299.9 million (20.1% of total loans), with office buildings representing $42.1 million (2.8%)[10] Asset Quality Asset quality metrics showed a slight deterioration, with non-performing loans increasing by 8.4% to $13.5 million, leading to a rise in non-performing loans to total loans to 0.91% and non-performing assets to total assets to 0.74% Asset Quality Metrics (Quarter Ended) | Metric | June 30, 2025 | March 31, 2025 | Change | Percentage Change | | :--- | :--- | :--- | :--- | :--- | | Non-performing loans | $13.5 million | $12.5 million | +$1.0 million | +8.4% | | Non-performing loans to total loans | 0.91% | 0.84% | +0.07% | N/A | | Non-performing assets to total assets | 0.74% | 0.69% | +0.05% | N/A | - Management maintains vigilant oversight of nonperforming loans through proactive relationship management[10] Operating Expenses Non-interest expense as a percentage of average assets increased to 2.90% in Q2 2025, primarily driven by higher data processing and marketing expenses, as the Bank continues its focus on identifying and implementing operating efficiencies Non-Interest Expense as a Percentage of Average Assets | Period | Ratio | | :--- | :--- | | Quarter ended June 30, 2025 | 2.90% | | Quarter ended March 31, 2025 | 2.81% | - The increase in non-interest expenses was primarily due to higher data processing and marketing expenses[11] - The Bank remains focused on identifying additional operating efficiencies and third-party expense reductions[11] Capital Adequacy The Bank's capital position strengthened, with the Tier 1 leverage ratio improving to 8.69% and exceeding all regulatory requirements, while tangible book value per share and tangible common equity to total assets also saw increases Capital Adequacy Metrics (as of Quarter End) | Metric | June 30, 2025 | March 31, 2025 | Change | | :--- | :--- | :--- | :--- | | Tier 1 leverage ratio | 8.69% | 8.48% | +0.21% | | Tangible book value per share (non-GAAP) | $30.16 | $29.55 | +$0.61 | | Tangible common equity to total assets (non-GAAP) | 6.32% | 6.26% | +0.06% | - The Bank's capital continues to exceed all applicable regulatory capital requirements[11] Consolidated Financial Statements The consolidated statements reflect improved net income for Q2 2025, driven by higher net interest income, despite a year-over-year decline in six-month net income Consolidated Balance Sheets The consolidated balance sheet as of June 30, 2025, shows a slight increase in total assets to $2,062,983 thousand from the prior quarter, with total liabilities also increasing and stockholders' equity experiencing a modest rise Consolidated Balance Sheets (Dollars in thousands) | Metric | 6/30/2025 | 3/31/2025 | 12/31/2024 | 9/30/2024 | 6/30/2024 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total assets | $2,062,983 | $2,039,714 | $2,060,699 | $2,074,662 | $2,077,067 | | Total liabilities | $1,908,730 | $1,887,907 | $1,909,285 | $1,915,107 | $1,928,436 | | Total stockholders' equity | $154,253 | $151,807 | $151,414 | $159,555 | $148,631 | Consolidated Statements of Income Net income for Q2 2025 significantly improved to $2,151 thousand, driven by higher net interest income and a benefit from credit losses, though net income for the six months ended June 30, 2025, was lower year-over-year due to a large gain on real estate sale in the prior year Consolidated Statements of Income (Dollars in thousands, Quarter Ended) | Metric | 6/30/2025 | 3/31/2025 | 12/31/2024 | 9/30/2024 | 6/30/2024 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total interest income | $22,670 | $22,341 | $22,595 | $22,472 | $22,127 | | Total interest expense | $8,725 | $9,028 | $9,988 | $10,466 | $10,073 | | Net interest income | $13,945 | $13,313 | $12,607 | $12,006 | $12,054 | | Provision for (benefit from) credit losses | $(274) | $454 | $(579) | $- | $76 | | Total non-interest income | $2,683 | $2,229 | $3,732 | $2,867 | $2,573 | | Total non-interest expense | $14,786 | $14,472 | $14,247 | $14,474 | $14,417 | | Net income | $2,151 | $455 | $2,102 | $606 | $143 | | Diluted earnings per share | $0.50 | $0.11 | $0.49 | $0.14 | $0.03 | Consolidated Statements of Income (Dollars in thousands, Six Months Ended) | Metric | 6/30/2025 | 6/30/2024 | | :--- | :--- | :--- | | Net interest income | $27,258 | $23,834 | | Provision for credit losses | $180 | $76 | | Total non-interest income | $4,912 | $16,049 | | Total non-interest expense | $29,258 | $29,421 | | Net income | $2,606 | $9,423 | | Diluted earnings per share | $0.61 | $2.21 | Average Balances, Interest, and Rates Average interest-earning assets slightly decreased in Q2 2025, but the total yield on earning assets increased to 4.82%, while the total cost of interest-bearing liabilities decreased to 2.22%, contributing to the improved net interest margin Average Balances, Interest, and Rates (Quarter Ended June 30, 2025) | Metric | Average Balance (thousands) | Interest (thousands) | Yield/Rate | | :--- | :--- | :--- | :--- | | Total interest earning assets | $1,879,892 | $22,670 | 4.82% | | Total interest bearing liabilities | $1,573,621 | $8,725 | 2.22% | | Net interest income | $13,945 | N/A | N/A | | Net interest margin | N/A | N/A | 2.97% | | Net interest margin, tax-equivalent (non-GAAP) | N/A | N/A | 3.11% | Detailed Financial Data Detailed breakdowns reveal stable loan portfolios, marginal deposit growth, and an increase in non-performing assets, alongside a rise in the allowance for credit losses Loans Portfolio The total loans receivable experienced a slight decrease both quarter-over-quarter and year-over-year, with some loan categories like residential real estate and construction seeing declines, while others such as home equity, commercial business, and government loans recorded increases Loans Receivable Breakdown (Dollars in thousands, as of June 30, 2025) | Loan Type | Amount | % of Total Loans | QoQ Change (%) | YoY Change (%) | | :--- | :--- | :--- | :--- | :--- | | Residential real estate | $456,256 | 30.7% | (0.5)% | (4.0)% | | Home equity | $51,112 | 3.4% | 2.7% | 5.5% | | Commercial real estate | $551,091 | 37.0% | (0.7)% | 4.1% | | Construction and land development | $74,895 | 5.0% | (13.6)% | (15.6)% | | Multifamily | $206,540 | 13.9% | 0.8% | (6.1)% | | Commercial business | $105,636 | 7.1% | 6.1% | 7.4% | | Consumer | $2,347 | 0.2% | 365.7% | 284.1% | | Manufactured homes | $25,146 | 1.7% | (2.4)% | (12.4)% | | Government | $14,628 | 1.0% | 57.6% | 4.4% | | Total Loans Receivable | $1,487,651 | 100% | (0.1)% | (1.1)% | Deposits Total deposits increased marginally quarter-over-quarter but saw a slight decrease year-over-year, with money market deposits showing notable growth while savings deposits experienced a decline Deposits Breakdown (Dollars in thousands, as of June 30, 2025) | Deposit Type | Amount | QoQ Change (%) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Checking | $593,471 | 0.7% | (1.7)% | | Savings | $266,070 | (2.9)% | (7.9)% | | Money market | $352,616 | 3.1% | 9.2% | | Certificates of deposit | $542,693 | (0.4)% | 0.3% | | Total deposits | $1,754,850 | 0.3% | (0.1)% | Asset Quality Non-performing assets increased in Q2 2025, primarily driven by a rise in non-accruing loans, while the total Allowance for Credit Losses (ACL) also saw an increase during the quarter Asset Quality (Dollars in thousands, as of Quarter Ended) | Metric | 6/30/2025 | 3/31/2025 | 12/31/2024 | 9/30/2024 | 6/30/2024 | | :--- | :--- | :--- | :--- | :--- | :--- | | Non-accruing loans | $13,526 | $12,483 | $13,738 | $13,806 | $11,079 | | Accruing loans delinquent > 90 days | $145 | $- | $- | $- | $294 | | Securities in non-accrual | $1,616 | $1,630 | $1,419 | $1,440 | $1,371 | | Total nonperforming assets | $15,287 | $14,113 | $15,157 | $15,246 | $12,744 | | ACL specific allowances for collateral dependent loans | $570 | $259 | $284 | $1,821 | $1,327 | | ACL general allowances for loan portfolio | $17,614 | $17,696 | $16,627 | $16,695 | $17,003 | | Total ACL | $18,184 | $17,955 | $16,911 | $18,516 | $18,330 | Allowance for Credit Losses Movement The allowance for credit losses increased during Q2 2025, primarily due to net recoveries and a benefit from loan losses, indicating a positive trend in managing credit risk Allowance for Credit Losses Movement (Dollars in thousands, Quarter Ended) | Metric | 6/30/2025 | 3/31/2025 | 12/31/2024 | 9/30/2024 | 6/30/2024 | | :--- | :--- | :--- | :--- | :--- | :--- | | Beginning allowance for credit losses | $17,955 | $16,911 | $18,516 | $18,330 | $18,805 | | Provision for (benefit from) loan losses | $(185) | $1,077 | $597 | $372 | $(439) | | Net (charge-offs) recoveries | $414 | $(33) | $(2,202) | $(186) | $(36) | | Ending allowance for credit losses | $18,184 | $17,955 | $16,911 | $18,516 | $18,330 | Regulatory Capital Requirements The Bank consistently exceeded all minimum regulatory capital requirements, demonstrating a strong and well-capitalized financial position Bank-Level Regulatory Capital As of June 30, 2025, the Bank's estimated capital ratios significantly surpassed all minimum regulatory requirements for both capital adequacy and well-capitalized status, demonstrating a strong and compliant capital position Bank-Level Regulatory Capital Requirements (Dollars in thousands, June 30, 2025) | Capital Ratio | Actual Amount | Actual Ratio | Minimum Required for Adequacy | Minimum Required to be Well Capitalized | | :--- | :--- | :--- | :--- | :--- | | Common equity tier 1 capital to risk weighted assets | $181,430 | 11.26% | 4.50% | 6.50% | | Tier 1 capital to risk-weighted assets | $181,430 | 11.26% | 6.00% | 8.00% | | Total capital to risk-weighted assets | $201,640 | 12.52% | 8.00% | 10.00% | | Tier 1 leverage ratio | $181,430 | 8.69% | 4.00% | 5.00% | Non-GAAP Financial Measures The report provides non-GAAP financial measures and their reconciliations to GAAP, offering enhanced insights into the Bancorp's operating performance and financial health Disclosures Finward Bancorp utilizes certain non-GAAP financial measures, such as tangible common equity and tax-equivalent net interest margin, which management believes provide a clearer comparison of operating performance and align with industry practices, though they are not intended to replace GAAP results - Non-GAAP measures (e.g., tangible common equity, tax-equivalent net interest margin, efficiency ratio) are provided to offer a better comparison of period-to-period operating performance[9] - Management believes presenting net interest income and net interest margin on a fully tax-equivalent basis is standard practice in the banking industry and enhances peer comparability[9][12] - These non-GAAP disclosures should not be viewed as a substitute for financial results in accordance with GAAP[12] Reconciliation of Non-GAAP Measures The report includes a comprehensive reconciliation of various non-GAAP financial measures, including tangible common equity ratios, tax-equivalent net interest margin, and the efficiency ratio, to their most directly comparable GAAP counterparts Reconciliation of Non-GAAP Performance Measures (Dollars in thousands, except per share amounts, Quarter Ended June 30, 2025) | Metric | GAAP Value | Adjustment | Non-GAAP Value | | :--- | :--- | :--- | :--- | | Stockholder's equity | $154,253 | Less: Goodwill ($22,395), Other intangibles ($1,414) | Tangible common equity: $130,444 | | Tangible common equity | $130,444 | Add: Accumulated other comprehensive loss ($57,560) | Tangible common equity adjusted for AOCI: $188,004 | | Common book value per share | $35.67 | N/A | Tangible common book value per share: $30.16 | | Tangible common book value per share | $30.16 | Add: AOCI adjustment | Tangible common book value per share adjusted for AOCI: $43.47 | | Total equity to total assets | 7.48% | N/A | Tangible common equity to total assets: 6.32% | | Tangible common equity to total assets | 6.32% | Add: AOCI adjustment | Tangible common equity adjusted for AOCI to total assets: 9.11% | | Net interest income | $13,945 | Tax-equivalent adjustment on securities and loans ($674) | Net interest income (tax-equivalent basis): $14,619 | | Net interest margin | 2.97% | N/A | Net interest margin (tax-equivalent basis): 3.11% | | Total non-interest expense | $14,786 | N/A | Efficiency ratio: 88.92% (Total revenue: $16,628) | Additional Company Information This section provides an overview of Finward Bancorp, outlines forward-looking statement disclaimers, and includes contact information for shareholder inquiries About Finward Bancorp Finward Bancorp is an independent financial holding company based in Munster, Indiana, operating Peoples Bank, which provides a broad range of financial services across 26 locations in Northwest Indiana and Chicagoland, with its common stock listed on NASDAQ under the symbol FNWD - Finward Bancorp is a locally managed and independent financial holding company headquartered in Munster, Indiana[13] - It is the holding company for Peoples Bank, which offers personal, business, electronic, and wealth management financial services[13] - Peoples Bank operates from 26 locations in Lake and Porter Counties in Northwest Indiana and Chicagoland, and Finward Bancorp's common stock trades on NASDAQ under FNWD[13] Forward-Looking Statements This section cautions that the press release contains forward-looking statements subject to various risks and uncertainties, including economic conditions, regulatory changes, and market factors, which could cause actual results to differ materially from projections, also noting that future dividends or share repurchases are not assured - The press release contains forward-looking statements subject to risks and uncertainties, and actual results may differ materially from expectations[14][15] - Key risks include changes in trade policies, AI development, compliance with regulatory orders, asset quality, interest rates, inflation, market value of securities, customer behavior, competition, economic conditions, and technological changes[15] - There is no assurance regarding the actual amounts and timing of any future common stock dividends or share repurchases[17] Contact Information Contact details for shareholder services are provided for further inquiries - For further information, contact Shareholder Services at (219) 853-7575[18]