EX-99.1 2 ex_436324.htm EXHIBIT 99.1 ex_436324.htm

Exhibit 99.1.

 

FOR IMMEDIATE RELEASE                                    

OCTOBER 25, 2022                                             

FOR FURTHER INFORMATION

CONTACT SHAREHOLDER SERVICES

(219) 853-7575

 

FINWARD BANCORP

ANNOUNCES EARNINGS FOR THE QUARTER AND NINE MONTHS ENDED

SEPTEMBER 30, 2022

 

Munster, Indiana - Finward Bancorp (Nasdaq: FNWD) (the “Bancorp”), the holding company for Peoples Bank (the “Bank”), today announced that net income available to common stockholders was $11.1 million, or $2.67 per diluted share, for the nine months ended September 30, 2022, as compared to $11.7 million, or $3.35 per diluted share, for the corresponding prior year period. For the quarter ended September 30, 2022, the Bancorp’s net income totaled $4.6 million, or $1.07 per diluted share, as compared to $3.5 million, or $1.02 per diluted share, for the quarter ending September 30, 2021. Selected performance metrics are as follows for the periods presented:

 

Performance Ratios

 

Quarter ended,

     

Nine months ended,

 
   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

     

(Unaudited)

   

(Unaudited)

 
   

September 30,

   

June 30,

   

March 31,

   

December 31,

   

September 30,

     

September 30,

   

September 30,

 
   

2022

   

2022

   

2022

   

2021

   

2021

     

2022

   

2021

 

Return on equity

    13.65 %     12.45 %     5.01 %     8.56 %     8.90 %       9.98 %     9.96 %

Return on assets

    0.88 %     0.85 %     0.44 %     0.83 %     0.87 %       0.73 %     0.98 %

Noninterest income / average assets

    0.51 %     0.56 %     0.64 %     0.95 %     1.02 %       0.57 %     1.02 %

Noninterest expense / average assets

    2.90 %     2.91 %     3.33 %     3.18 %     3.04 %       3.04 %     2.85 %

Efficiency ratio

    74.54 %     75.15 %     87.10 %     78.28 %     75.87 %       78.72 %     70.26 %

 

Core net income for the nine months ended September 30, 2022, amounted to $12.7 million, or $3.04 per diluted share, compared to $10.5 million, or $3.03 per diluted share for the nine months ended September 30, 2021. Core net income for the quarter ended September 30, 2022, amounted to $4.7 million, or $1.10 per diluted share, compared to $3.1 million, or $0.88 per diluted share for the quarter ended September 30, 2021. Core net income is a non-GAAP measure. For the periods presented, the core net income measure excludes merger related expenses, net (gain) loss on securities, net loss recognized on the sale of premises and equipment, core deposit accretion, certificate of deposit purchase premium amortization, purchase discount amortization, and related tax benefit/(cost). Selected non-GAAP performance metrics are as follows for the periods presented:

 

Non-GAAP Performance Ratios

 

Quarter ended,

   

Nine Months Ended

 
   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

 
   

September 30,

   

June 30,

   

March 31,

   

December 31,

   

September 30,

   

September 30,

   

September 30,

 
   

2022

   

2022

   

2022

   

2021

   

2021

   

2022

   

2021

 

Core return on equity

    17.75 %     13.78 %     11.32 %     7.83 %     8.46 %     13.96 %     9.96 %

Core return on assets

    0.90 %     0.75 %     0.83 %     0.71 %     0.75 %     0.83 %     0.89 %

Core noninterest expense / average assets

    2.78 %     2.83 %     2.67 %     3.12 %     2.98 %     2.76 %     2.81 %

Core efficiency ratio

    73.10 %     77.12 %     72.87 %     81.01 %     78.48 %     74.39 %     72.49 %

Net interest margin - tax equivalent

    3.84 %     3.78 %     3.63 %     3.58 %     3.46 %     3.75 %     3.49 %

 

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 year-to-date period include:

 

 

Core net income benefiting from acquisition and internal growth: GAAP net income for the nine months ended September 30, 2022, decreased $530 thousand compared to the nine months ended September 30, 2021. However, core net income for the nine months ended September 30, 2022, increased by $2.1 million, as compared to the nine months ended September 30, 2021, primarily relating to the increase in interest-earning assets acquired from the acquisition of Royal Financial, Inc. (“Royal”), organic loan growth, and the continued ability to manage the net interest margin.

 

Net interest margin continuing to improve: The net interest margin for the nine months ended September 30, 2022, was 3.56%, compared to 3.29% for the nine months ended September 30, 2021. The tax-adjusted net interest margin (a non-GAAP measure) for the nine months ended September 30, 2022, was 3.75%, compared to 3.49% for the nine months ended September 30, 2021. The increased net interest margin and tax-adjusted margin is primarily related to increased loan balances from acquired and internally generated growth and the ability to manage deposit and borrowing costs to support earning asset growth. Internally generated loan growth (separate from the acquisition) totaled $81.2 million or 8.4%. Leading the internally generated loan growth was commercial real estate loans of $63.6 million or 6.5%. See Table 1 at the end of this press release for a reconciliation of the tax-adjusted net interest margin to the GAAP net interest margin. Despite the continued improvement to the net interest margin, the overall interest rate environment will likely make maintaining and improving this metric more difficult into next year.

 

 

 

 

Unrealized losses on the securities portfolio: Accumulated other comprehensive losses were $79.8 million as of September 30, 2022. However, during the quarter, securities portfolio cashflows from sales and regular paydowns of the portfolio of $17 million were used to fund internally generated loan growth. Furthermore, a year-to-date total of $67 million of cashflows have been redirected from the securities portfolio to fund internal loan growth. The yield on the securities portfolio improved on a year-to-date basis to 2.17% at September 30, 2022, up from 1.97% at September 30, 2021. The securities portfolio also generated gains of $662 thousand from the sale of securities for the nine months ended September 30, 2022. The effective duration of the securities portfolio was 6.9 years as of September 30, 2022. Management continues to actively manage the securities portfolio and does not currently anticipate the need to realize losses from the securities portfolio. Further, it remains unlikely the Bancorp will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity.

 

Gain on sale of loans: Increases in mortgage rates have dampened demand and slowed the sale of fixed rate mortgage loans into the secondary market. As a result, gains from the sale of loans for the nine-months ended September 30, 2022, totaled $1.2 million, down from $4.4 million for the nine-months ended September 30, 2021. During the nine months ended September 30, 2022, the Bancorp originated $40.8 million in new fixed rate mortgage loans for sale, compared to $120.1 million during the nine months ended September 30, 2021. During the nine months ended September 30, 2022, the Bancorp originated $78.8 million in new mortgage loans retained in its portfolio, compared to $34.7 million during the nine months ended September 30, 2021. These retained loans are primarily construction loans and adjustable-rate loans with duration of 5 years or less, and the Bank continues to sell longer-duration fixed rate mortgages into the secondary market.

 

Building a digital-forward foundation: Primary focus remains on enhancing the customer experience and managing risk through our digital platforms. The Bank transitioned to a new tech-enabled customer contact platform during October and is in process of transitioning all customer calls to the platform. The Bank is also planning further enhancements to customer acquisition, onboarding, and servicing platforms to enhance customer experience and drive efficiency in these areas.

 

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 which closed on July 1st, as well as the announcement of plans to close three additional banking centers by the end of the current year. Each branch closure is expected to result in approximately $250 thousand in operational expense reduction, excluding personnel expenses. The remaining 26 locations are being analyzed for footprint optimization opportunities, with additional locations showing the potential for reducing operating overhead over the next 12 months. These efforts are reducing fixed costs and allowing for redeployment of a portion of occupancy expenses into building a digital-forward foundation to better meet the needs of the communities Finward serves. By the end of 2022, the Bank expects to have reduced its overall branch count by nearly 20% over a 12-month period and management will continue to evaluate branch operations as circumstances permit.

 

Asset Quality: At September 30, 2022, the allowance for loan losses totaled $13.4 million and is considered adequate by management. For the nine months ended September 30, 2022, recoveries, net of charge-offs, totaled $56 thousand. The allowance for loan losses as a percentage of total loans was 0.89% at September 30, 2022, and the allowance for loan losses as a percentage of non-performing loans, or coverage ratio, was 122.6% at September 30, 2022. Management also considers reserves that are not part of the ALL that have been established from acquisition activity. When these additional reserves are included on a non-GAAP basis, the allowance for loan losses as a percentage of total loans was 1.40% at September 30, 2022, and the allowance for loan losses as a percentage of non-performing loans, or coverage ratio, was 193.2% at September 30, 2022. See Table 1 at the end of this press release for a reconciliation of the adjusted allowance for loan losses to total loans and coverage ratio to the related GAAP ratios.

 

 

 

 

Personnel: The Bank has had a headcount freeze in place through the end of the third quarter, with an attrition program further managing headcount going forward. A total 10% reduction in retail staff is also targeted from current levels through the end of 2023.

 

Capital Adequacy: As of September 30, 2022, the Bancorp’s tier 1 capital to adjusted average assets ratio totaled 8.1%, and under all regulatory capital requirements, continues to be considered well capitalized. Tangible book value per share was $20.99 at September 30, 2022, down from $25.24 as of June 30, 2022 (a non-GAAP measure). The decrease is due to continued accumulated other comprehensive losses from unrealized losses on the securities portfolio as noted above. Excluding accumulated other comprehensive losses, tangible book value per share increased to $39.57 as of September 30, 2022, from $38.69 as of June 30, 2022 (a non-GAAP measure). Tangible capital represented 4.5% of tangible assets at September 30, 2022 (a non-GAAP measure). Tangible capital, excluding accumulated other comprehensive losses, was 8.4% at September 30, 2022 (a non-GAAP measure). See Table 1 at the end of this press release for a reconciliation of the tangible book value per share, tangible book value per share adjusted for accumulated other losses, tangible capital as a percentage of tangible assets, and tangible capital as a percentage of tangible assets adjusted for accumulated other comprehensive losses to the related GAAP ratios.

 

“During the quarter, we continued to improve our core net income and managed our net interest margin to new highs on the year, while making progress in rebalancing our earning assets. Changes in consumer demand for fixed-rate mortgages has slowed our ability to generate gains from the sales of loans; however, we continue to grow our residential real estate loan portfolio. Cashflows from our securities portfolio, along with securities sales in a volatile market and growth in core deposits, have supported strong commercial loan growth with commercial real estate loans increasing by 8.4% year-to-date. We are actively managing our expense base to achieve greater economies of scale and continue to perform at levels that accrete capital and allow for the ongoing investments in the digital transformation process for Peoples Bank and Finward Bancorp,” said Benjamin Bochnowski, president and chief executive officer. “With economic conditions in mind, we are focused on running the bank efficiently, managing credit and underwriting, and continuing to rebalance our securities portfolio in order to recoup unrealized losses back into tangible book value.”

 

Net Interest Income

Year-to-Date

                                               

(Dollars in thousands)

 

Average Balances, Interest, and Rates

 

(unaudited)

 

September 30, 2022

   

September 30, 2021

 
   

Average
Balance

   

Interest

   

Rate (%)

   

Average
Balance

   

Interest

   

Rate (%)

 

ASSETS

         

`

                                 

Interest bearing deposits in other financial institutions

  $ 24,268     $ 163       0.90     $ 53,774     $ 33       0.08  

Federal funds sold

    3,561       8       0.30       1,064       -       -  

Certificates of deposit in other financial institutions

    1,750       15       1.14       1,443       21       1.94  

Securities available-for-sale

    447,319       7,295       2.17       435,119       6,428       1.97  

Loans receivable*

    1,406,591       44,629       4.23       970,740       31,291       4.30  

Federal Home Loan Bank stock

    3,364       63       2.50       3,535       55       2.07  

Total interest earning assets

    1,886,853     $ 52,173       3.69       1,465,675     $ 37,828       3.44  

Cash and non-interest bearing deposits in other financial institutions

    21,279                       37,186                  

Allowance for loan losses

    (13,418 )                     (13,205 )                

Other noninterest bearing assets

    142,254                       97,674                  

Total assets

  $ 2,036,968                     $ 1,587,330                  
                                                 

LIABILITIES AND STOCKHOLDERS' EQUITY

                                               

Total deposits

  $ 1,833,712     $ 1,597       0.12     $ 1,395,883     $ 1,652       0.16  

Repurchase agreements

    20,935       93       0.59       17,458       35       0.27  

Borrowed funds

    11,175       143       1.71       992       23       3.09  

Total interest bearing liabilities

    1,865,822     $ 1,833       0.13       1,414,333     $ 1,710       0.16  

Other noninterest bearing liabilities

    22,510                       17,052                  

Total liabilities

    1,888,332                       1,431,385                  

Total stockholders' equity

    148,636                       155,945                  

Total liabilities and stockholders' equity

  $ 2,036,968                     $ 1,587,330                  

 

Net interest income was $50.3 million for the nine months ended September 30, 2022, an increase of $14.2 million (39.4%), compared to $36.1 million for the nine months ended September 30, 2021. The Bancorp’s net interest margin on a tax-adjusted basis was 3.75% for the nine months ended September 30, 2022, compared to 3.49% for the nine months ended September 30, 2021.

 

 

 

(Dollars in thousands)

 

Average Balances, Interest, and Rates

 

(unaudited)

 

September 30, 2022

   

September 30, 2021

 
   

Average
Balance

   

Interest

   

Rate (%)

   

Average
Balance

   

Interest

   

Rate (%)

 

ASSETS

                                               

Interest bearing deposits in other financial institutions

  $ 24,732     $ 110       1.78     $ 53,786     $ 12       0.09  

Federal funds sold

    1,579       6       1.52       1,112       -       -  

Certificates of deposit in other financial institutions

    1,899       9       1.90       1,262       6       1.90  

Securities available-for-sale

    394,796       2,271       2.30       486,993       2,363       1.94  

Loans receivable*

    1,484,678       16,122       4.34       960,274       10,270       4.28  

Federal Home Loan Bank stock

    3,038       21       2.76       3,247       15       1.85  

Total interest earning assets

    1,910,722     $ 18,539       3.88       1,506,674     $ 12,666       3.36  

Cash and non-interest bearing deposits in other financial institutions

    21,954                       41,378                  

Allowance for loan losses

    (13,487 )                     (13,688 )                

Other noninterest bearing assets

    149,950                       97,290                  

Total assets

  $ 2,069,139                     $ 1,631,654                  
                                                 

LIABILITIES AND STOCKHOLDERS' EQUITY

                                               

Total deposits

  $ 1,873,962     $ 871       0.19     $ 1,436,125     $ 452       0.13  

Repurchase agreements

    20,781       51       0.98       20,970       13       0.25  

Borrowed funds

    17,456       110       2.52       41       1       9.76  

Total interest bearing liabilities

    1,912,199     $ 1,032       0.22       1,457,136     $ 466       0.13  

Other noninterest bearing liabilities

    23,458                       15,508                  

Total liabilities

    1,935,657                       1,472,644                  

Total stockholders' equity

    133,482                       159,010                  

Total liabilities and stockholders' equity

  $ 2,069,139                     $ 1,631,654                  

 

Net interest income was $17.5 million for the quarter ended September 30, 2022, an increase of $5.4 million (43.5%), compared to $12.2 million for the quarter ended September 30, 2021. The Bancorp’s net interest margin was 3.67% for the quarter ended September 30, 2022, compared to 3.24% for the quarter ended September 30, 2021. The Bancorp’s net interest margin on a tax-adjusted basis was 3.84% for the quarter ended September 30, 2022, compared to 3.46% for the quarter ended September 30, 2021. The increased net interest income and net interest margin for the quarter and the nine months was primarily the result of the increased earning assets acquired through the Royal acquisition, the reallocation of securities cashflows into organic loan growth, and managing interest expense.

 

Noninterest Income

(Dollars in thousands)

 

Nine Months Ended September 30,

   

9/30/2022 vs. 9/30/2021

 

(Unaudited)

 

2022

   

2021

   

$ Change

   

% Change

 

Noninterest income:

                               

Fees and service charges

    4,434       4,010       424       10.6 %

Wealth management operations

    1,590       1,787       (197 )     -11.0 %

Gain on sale of loans held-for-sale, net

    1,242       4,394       (3,152 )     -71.7 %

Gain on sale of securities, net

    662       1,276       (614 )     -48.1 %

Increase in cash value of bank owned life insurance

    628       537       91       16.9 %

Gain on sale of foreclosed real estate

    -       27       (27 )     -100.0 %

Other

    114       108       6       5.6 %
                                 

Total noninterest income

    8,670       12,139       (3,469 )     -28.6 %

 

(Dollars in thousands)

 

Quarter Ended September 30,

   

9/30/2022 vs. 9/30/2021

 

(Unaudited)

 

2022

   

2021

   

$ Change

   

% Change

 

Noninterest income:

                               

Fees and service charges

    1,570       1,473       97       6.6 %

Wealth management operations

    407       604       (197 )     -32.6 %

Gain on sale of loans held-for-sale, net

    344       1,229       (885 )     -72.0 %

Gain on sale of securities, net

    23       590       (567 )     -96.1 %

Increase in cash value of bank owned life insurance

    183       180       3       1.7 %

Gain on sale of foreclosed real estate

    -       -       -       0.0 %

Other

    103       70       33       47.1 %
                                 

Total noninterest income

    2,630       4,146       (1,516 )     -36.6 %

 

 

 

The increase in fees and service charges, for the quarter and the year-to-date periods, is primarily the result of the acquisition of Royal and the resultant increase in our customer base. The decrease in wealth management operations, for the quarter and the year-to-date periods, is result of lower fee income year over year due to market conditions. The decrease in gain on sale of loans, for the quarter and the year-to-date periods, is the result of significant refinance activity which started in 2020 and continued into 2021 due to the economic and low-rate environment, which resulted in more loans originated and sold. We expect demand for fixed rate mortgage loans held-for-sale in the secondary market to be lower as borrowing rates on loans increase. The decrease in gains on the sale of securities, for the quarter and the year-to-date periods, is a result of current market conditions and actively repositioning the portfolio.

 

Noninterest Expense

(Dollars in thousands)

 

Nine Months Ended September 30,

   

9/30/2022 vs. 9/30/2021

 

(Unaudited)

 

2022

   

2021

   

$ Change

   

% Change

 

Noninterest expense:

                               

Compensation and benefits

    22,403       17,624       4,779       27.1 %

Data processing

    5,512       1,997       3,515       176.0 %

Occupancy and equipment

    5,033       4,076       957       23.5 %

Marketing

    1,623       728       895       122.9 %

Federal deposit insurance premiums

    949       620       329       53.1 %

Net loss recognized on sale of premises and equipment

    254       -       254       0.0 %

Other

    10,681       8,859       1,822       20.6 %
                                 

Total noninterest expense

    46,455       33,904       12,551       37.0 %

 

(Dollars in thousands)

 

Quarter Ended September 30,

   

9/30/2022 vs. 9/30/2021

 

(Unaudited)

 

2022

   

2021

   

$ Change

   

% Change

 

Noninterest expense:

                               

Compensation and benefits

    7,498       6,042       1,456       24.1 %

Data processing

    1,212       872       340       39.0 %

Occupancy and equipment

    1,804       1,380       424       30.7 %

Marketing

    587       334       253       75.7 %

Federal deposit insurance premiums

    350       236       114       48.3 %

Net loss recognized on sale of premises and equipment

    254       -       254       0.0 %

Other

    3,305       3,537       (232 )     -6.6 %
                                 

Total noninterest expense

    15,010       12,401       2,609       21.0 %

 

The increase in compensation and benefits, for the quarter and year-to-date periods, is primarily the result of the Royal acquisition, management’s continued focus on talent management, and wage inflation. The increase in occupancy and equipment expense, for the quarter and the year-to-date periods, is primarily related to the Royal acquisition and higher operating costs. Marketing expenses, for the quarter and the year-to-date periods, have increased to enhance brand recognition in new markets and gain more wallet share. The increase in federal deposit insurance premiums, for the quarter and the year-to-date periods, is primarily the result of growth of the bank’s average assets. The increase in data processing expense for the nine-month period ending September 30, 2022, is 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 data processing expense for the quarter ending September 30, 2022, is due to increased system utilization due to growth of the Bank, and continued investment in technological advancements such as Salesforce and nCino. The increase in net loss recognized on sale of premises and equipment, for the quarter and year-to-date periods, is the result of the sale of a branch to reduce future fixed costs, allowing for redeployment of a portion of occupancy expenses into building a digital-forward foundation so that Finward can better serve its customers. The increase in other operating expenses for the nine-month period ending September 30, 2022, is primarily the result of one-time expenses related to the acquisition of Royal, continued investments in strategic initiatives focusing on growth of the organization, and inflationary pressures. The decrease in other operating expenses for the quarter ending September 30, 2022, is primarily due to lower utilization of outside consultants related to bank initiatives during the quarter.

 

Income Tax Expense

The provision for income taxes was $1.4 million for the nine months ended September 30, 2022, as compared to $1.4 million for the nine months ended September 30, 2021. The effective tax rate was 11.4% for the nine months ended September 30, 2022, as compared to 10.8% for the nine months ended September 30, 2021. The provision for income taxes was $571 thousand for the quarter ended September 30, 2022, as compared to $268 thousand for the quarter ended September 30, 2021. The effective tax rate was 11.1% for the quarter ended September 30, 2022, as compared to 7.0% for the quarter ended September 30, 2021. The Bancorp’s higher current effective tax rate, for the quarter and year-to-date periods, is a result of higher earnings relative to tax preferred income.

 

Lending

The Bancorp’s loan portfolio totaled $1.5 billion on September 30, 2022, compared to $966.7 million on December 31, 2021, an increase of $536.0 million or 55.4%. The increase is primarily the result of the Royal acquisition, as well as organic loan portfolio growth. During the first nine months of 2022 the Bancorp originated $296.8 million in new commercial loans, compared to $258.1 million during the nine months ended September 30, 2021. During the nine months ended September 30, 2022, the Bancorp originated $40.8 million in new fixed rate mortgage loans for sale, compared to $120.1 million during the nine months ended September 30, 2021. During the nine months ended September 30, 2022, the Bancorp originated $78.8 million in new mortgage loans retained in its portfolio, compared to $34.7 million during the nine months ended September 30, 2021. The loan portfolio represents 79.9% of earning assets and is comprised of 62.6% commercial related credits.

 

 

 

Asset Quality

At September 30, 2022, non-performing loans totaled $10.9 million, compared to $7.3 million at December 31, 2021, an increase of $3.7 million or 50.5%. The Bancorp’s ratio of non-performing loans to total loans was 0.73% at September 30, 2022, compared to 0.76% at December 31, 2021. The Bancorp’s ratio of non-performing assets to total assets was 0.58% at September 30, 2022, compared to 0.51% at December 31, 2021.

 

For the nine months ended September 30, 2022, no provisions to the ALL were required, compared to $1.2 million for the nine months ended September 30, 2021, a decrease of $1.2 million. For the quarter ended September 30, 2022, no provisions to the ALL were required, compared to $139 thousand for the quarter ended September 30, 2021, a decrease of $139 thousand. For the nine months ended September 30, 2022, recoveries, net of charge-offs, totaled $56 thousand. For the quarter ended September 30, 2022, charge-offs, net of recoveries, totaled $7 thousand. At September 30, 2022, the allowance for loan losses totaled $13.4 million and is considered adequate by management. The allowance for loan losses as a percentage of total loans was 0.89% at September 30, 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 122.6% at September 30, 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 1.40% at September 30, 2022, and the allowance for loan losses as a percentage of non-performing loans, or coverage ratio, was 193.2% at September 30, 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 $359.0 million at September 30, 2022, compared to $526.9 million at December 31, 2021, a decrease of $167.9 million or 31.9%. The decrease is attributable to increased unrealized losses within the portfolio and the use of cashflows from the securities portfolio to fund loan growth. The securities portfolio represents 19.1% of earning assets and provides a consistent source of liquidity and earnings to the Bancorp. Cash and cash equivalents totaled $38.3 million on September 30, 2022, compared to $33.2 million on December 31, 2021, an increase of $5.1 million or 15.4%. The increase in cash and cash equivalents is primarily the result of the timing of investments in interest earning assets relative to the inflow and outflow of deposits and repurchase agreements.

 

Funding

On September 30, 2022, core deposits totaled $1.5 billion, compared to $1.2 billion on December 31, 2021, an increase of $310.3 million or 26.0%. The increase is the result of the Royal acquisition, which added $279.9 million of core deposits at the time of acquisition, as well as the Bancorp’s efforts to maintain and grow core deposits. Core deposits include checking, savings, and money market accounts and represented 82.1% of the Bancorp’s total deposits at September 30, 2022. During the first nine 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 September 30, 2022, balances for certificates of deposit totaled $327.7 million, compared to $239.2 million on December 31, 2021, an increase of $88.4 million or 37.0%. The increase related to certificate of deposits is related to the Royal acquisition, which added $195.2 million of certificates at the time of acquisition. In addition, on September 30, 2022, borrowings and repurchase agreements totaled $78.1 million, compared to $14.6 million at December 31, 2021, an increase of $63.6 million or 435.9%. The increase in short-term borrowings was the result of cyclical inflows and outflows of interest-earning assets and interest-bearing liabilities.

 

 

 

Capital Adequacy

At September 30, 2022, shareholders’ equity stood at $118.0 million, a decrease of $38.6 million, or 24.6% from December 31, 2021. This decrease is the result of net unrealized losses in the securities portfolio which resulted in an accumulated comprehensive loss of $79.8 million at September 30, 2022. The Bank’s regulatory capital ratios at September 30, 2022, were 12.8% for total capital to risk-weighted assets, 11.8% for both common equity tier 1 capital to risk-weighted assets and tier 1 capital to risk-weighted assets, and 8.1% for tier 1 capital to adjusted average assets. Under all regulatory capital requirements, the Bank is considered well capitalized. Tangible capital represented 4.5% of tangible assets at September 30, 2022.The tangible book value of the Bancorp’s stock stood at $20.99 per share at September 30, 2022, compared to $40.91 at December 31, 2021. This is primarily the result of increased net unrealized loss on securities available-for-sale, net of reclassification and tax effects. Management continues to actively manage the securities portfolio and does not currently anticipate the need to realize losses from the securities portfolio that would result in reductions to retained earnings.

 

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 net income, core diluted earnings per share, core return on equity, core return on assets, core pre-provision net revenue, core pre-provision net revenue/average assets, tangible assets (excluding PPP), tangible common equity, tangible common equity/tangible assets (excluding PPP), average tangible common equity, core yield on loans, core noninterest expense, 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, adjusted allowance for loan loss to total loans (excluding PPP), core revenue, adjusted net interest margin, 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 29 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; further deterioration in the market value of securities held in the Bancorp’s investment securities portfolio, whether as a result of macroeconomic factors or otherwise; 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.

 

 

 

 

Finward Bancorp

 

Quarterly Financial Report

 
                                                           

Performance Ratios

 

Quarter ended,

     

Nine months ended,

 
   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

     

(Unaudited)

   

(Unaudited)

 
   

September 30,

   

June 30,

   

March 31,

   

December 31,

   

September 30,

     

September 30,

   

September 30,

 
   

2022

   

2022

   

2022

   

2021

   

2021

     

2022

   

2021

 

Return on equity

    13.65 %     12.45 %     5.01 %     8.56 %     8.90 %       9.98 %     9.96 %

Return on assets

    0.88 %     0.85 %     0.44 %     0.83 %     0.87 %       0.73 %     0.98 %

Yield on loans

    4.34 %     4.18 %     4.17 %     4.28 %     4.28 %       4.23 %     4.30 %

Yield on security investments

    2.30 %     2.23 %     2.02 %     1.94 %     1.94 %       2.17 %     1.97 %

Total yield on earning assets

    3.88 %     3.68 %     3.49 %     3.42 %     3.36 %       3.69 %     3.44 %

Cost of deposits

    0.19 %     0.08 %     0.08 %     0.10 %     0.13 %       0.12 %     0.16 %

Cost of repurchase agreements

    0.98 %     0.46 %     0.33 %     0.26 %     0.25 %       0.59 %     0.27 %

Cost of borrowed funds

    2.52 %     1.10 %     0.39 %     0.47 %     9.76 %       1.71 %     3.09 %

Total cost of funds

    0.22 %     0.09 %     0.08 %     0.10 %     0.13 %       0.13 %     0.16 %

Noninterest income / average assets

    0.51 %     0.56 %     0.64 %     0.95 %     1.02 %       0.57 %     1.02 %

Noninterest expense / average assets

    2.90 %     2.91 %     3.33 %     3.18 %     3.04 %       3.04 %     2.85 %

Net noninterest margin / average assets

    -2.39 %     -2.36 %     -2.68 %     -2.23 %     -2.02 %       -2.47 %     -1.83 %

Efficiency ratio

    74.54 %     75.15 %     87.10 %     78.28 %     75.87 %       78.72 %     70.26 %

Effective tax rate

    11.14 %     11.70 %     11.41 %     0.18 %     7.04 %       11.41 %     10.78 %
                                                           

Non-performing assets to total assets

    0.58 %     0.53 %     0.47 %     0.51 %     0.91 %       0.58 %     0.91 %

Non-performing loans to total loans

    0.73 %     0.68 %     0.62 %     0.76 %     1.42 %       0.73 %     1.42 %

Allowance for loan losses to non-performing loans

    122.64 %     133.78 %     150.28 %     183.76 %     101.71 %       122.64 %     101.71 %

Allowance for loan losses to loans outstanding

    0.89 %     0.91 %     0.93 %     1.38 %     1.44 %       0.89 %     1.44 %

Foreclosed real estate to total assets

    0.00 %     0.00 %     0.00 %     0.00 %     0.01 %       0.00 %     0.01 %
                                                           

Basic earnings per share

  $ 1.07     $ 1.04     $ 0.53     $ 0.95     $ 1.02       $ 2.68     $ 3.35  

Diluted earnings per share

  $ 1.07     $ 1.04     $ 0.53     $ 0.95     $ 1.02       $ 2.67     $ 3.35  

Net worth / total assets

    5.75 %     6.50 %     7.51 %     9.66 %     9.48 %       5.75 %     9.48 %

Book value per share

  $ 27.46     $ 31.80     $ 36.71     $ 45.00     $ 43.85       $ 27.46     $ 43.85  

Closing stock price

  $ 34.01     $ 37.49     $ 46.21     $ 45.88     $ 41.05       $ 34.01     $ 41.05  

Price per earnings per share

  $ 7.92     $ 8.97     $ 21.76     $ 12.07     $ 10.06       $ 4.23     $ 4.08  

Dividend declared per common share

  $ 0.31     $ 0.31     $ 0.31     $ 0.31     $ 0.31       $ 0.93     $ 0.93  

 

Non-GAAP Performance Ratios

 

Quarter ended,

   

Nine Months Ended

 
   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

 
   

September 30,

   

June 30,

   

March 31,

   

December 31,

   

September 30,

   

September 30,

   

September 30,

 
   

2022

   

2022

   

2022

   

2021

   

2021

   

2022

   

2021

 

Core return on equity

    17.75 %     13.78 %     11.32 %     7.83 %     8.46 %     13.96 %     9.96 %

Core return on assets

    0.90 %     0.75 %     0.83 %     0.71 %     0.75 %     0.83 %     0.89 %

Core noninterest expense / average assets

    2.78 %     2.83 %     2.67 %     3.12 %     2.98 %     2.76 %     2.81 %

Core efficiency ratio

    73.10 %     77.12 %     72.87 %     81.01 %     78.48 %     74.39 %     72.49 %

Net interest margin - tax equivalent

    3.84 %     3.78 %     3.63 %     3.58 %     3.46 %     3.75 %     3.49 %

Tangible book value per diluted share

  $ 20.99     $ 25.24     $ 30.01     $ 40.91     $ 39.69     $ 20.99     $ 39.69  

Tangible book value per diluted share adjusted for AOCI

  $ 39.57     $ 38.69     $ 37.80     $ 39.68     $ 38.94     $ 39.57     $ 38.94  

 

 

 

Finward Bancorp

 

Quarterly Financial Report

 
                                         

Balance Sheet Data

                                       

(Dollars in thousands)

 

(Unaudited)

   

(Unaudited)

   

(Unaudited)

           

(Unaudited)

 
   

September 30,

   

June 30,

   

March 31,

   

December 31,

   

September 30,

 
   

2022

   

2022

   

2022

   

2021

   

2021

 

Total assets

  $ 2,052,986     $ 2,101,485     $ 2,097,845     $ 1,620,743     $ 1,609,924  

Cash & cash equivalents

    38,296       79,302       54,501       33,176       31,765  

Certificates of deposit in other financial institutions

    2,214       1,482       1,731       1,709       977  

Securities - available for sale

    359,035       400,466       464,320       526,889       531,010  
                                         

Loans receivable:

                                       

Commercial real estate

  $ 452,852     $ 420,735     $ 408,375     $ 317,145     $ 309,905  

Residential real estate

    471,565       459,151       444,753       260,134       268,798  

Commercial business

    95,372       103,649       112,396       115,772       125,922  

Construction and land development

    134,301       153,422       150,810       123,822       110,289  

Multifamily

    258,377       248,495       234,267       61,194       56,869  

Home equity

    37,578       35,672       34,284       34,612       35,652  

Manufactured homes

    35,866       37,693       38,636       37,887       32,857  

Government

    9,649       8,081       8,176       8,991       9,841  

Consumer

    827       1,673       924       582       650  

Farmland

    -       -       -       -       205  

Total loans

  $ 1,496,387     $ 1,468,571     $ 1,432,621     $ 960,139     $ 950,988  
                                         

Deposits:

                                       

Core deposits:

                                       

Noninterest bearing checking

  $ 386,137     $ 370,567     $ 380,515     $ 295,294     $ 287,376  

Interest bearing checking

    422,559       384,689       350,825       333,744       315,575  

Savings

    427,505       436,203       425,634       293,976       284,681  

Money market

    269,110       327,360       307,850       271,970       254,671  
Total core deposits     1,505,311       1,518,819       1,464,824       1,194,984       1,142,303  

Certificates of deposit

    327,653       398,396       430,387       239,217       263,897  
Total deposits   $ 1,832,964     $ 1,917,215     $ 1,895,211     $ 1,434,201     $ 1,406,200  
                                         

Borrowings and repurchase agreements

  $ 78,140     $ 24,536     $ 23,244     $ 14,581     $ 23,844  

Stockholder's equity

    118,023       136,654       157,637       156,615       152,569  

 

 

 

Finward Bancorp

 

Quarterly Financial Report

 
                                                           

Consolidated Statements of Income

 

Quarter ended,

     

Nine months ended,

 

(Dollars in thousands)

 

(Unaudited)

   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

     

(Unaudited)

   

(Unaudited)

 
   

September 30,

   

June 30,

   

March 31,

   

December 31,

   

September 30,

     

September 30,

   

September 30,

 
   

2022

   

2022

   

2022

   

2021

   

2021

     

2022

   

2021

 

Interest income:

                                                         

Loans

  $ 16,122     $ 15,221     $ 13,286     $ 10,282     $ 10,270       $ 44,629     $ 31,291  

Securities & short-term investments

    2,417       2,519       2,608       2,545       2,396         7,544       6,537  

Total interest income

    18,539       17,740       15,894       12,827       12,666         52,173       37,828  

Interest expense:

                                                         

Deposits

    871       389       337       350       452         1,597       1,652  

Borrowings

    161       53       22       20       14         236       58  

Total interest expense

    1,032       442       359       370       466         1,833       1,710  

Net interest income

    17,507       17,298       15,535       12,457       12,200         50,340       36,118  

Provision for loan losses

    -       -       -       216       139         -       1,293  

Net interest income after provision for loan losses

    17,507       17,298       15,535       12,241       12,061         50,340       34,825  

Noninterest income:

                                                         

Fees and service charges

    1,570       1,560       1,304       1,378       1,473         4,434       4,010  

Wealth management operations

    407       588       595       588       604         1,590       1,787  

Gain on sale of loans held-for-sale, net

    344       291       607       902       1,229         1,242       4,394  

Gain on sale of securities, net

    23       258       381       711       590         662       1,276  

Increase in cash value of bank owned life insurance

    183       193       252       178       180         628       537  

Gain on sale of foreclosed real estate, net

    -       -       -       20       -         -       27  

Other

    103       6       5       31       70         114       108  

Total noninterest income

    2,630       2,896       3,144       3,808       4,146         8,670       12,139  

Noninterest expense:

                                                         

Compensation and benefits

    7,498       7,538       7,367       6,617       6,042         22,403       17,624  

Data processing

    1,804       1,729       1,500       1,651       872         5,512       1,997  

Occupancy and equipment

    1,212       1,246       3,054       1,461       1,380         5,033       4,076  

Marketing

    587       385       651       357       334         1,623       728  

Federal deposit insurance premiums

    350       380       219       241       236         949       620  

Net loss recognized on sale of premises and equipment

    254       -       -       -       -         254       -  

Other

    3,305       3,898       3,478       2,405       3,537         10,681       8,859  

Total noninterest expense

    15,010       15,176       16,269       12,732       12,401         46,455       33,904  

Income before income taxes

    5,127       5,018       2,410       3,317       3,806         12,555       13,060  

Income tax expenses

    571       587       275       6       268         1,433       1,408  

Net income

  $ 4,556     $ 4,431     $ 2,135     $ 3,311     $ 3,538       $ 11,122     $ 11,652  

 

 

 

Finward Bancorp

 

Quarterly Financial Report

 
                                         

Asset Quality

 

(Unaudited)

   

(Unaudited)

   

(Unaudited)

           

(Unaudited)

 

(Dollars in thousands)

 

September 30,

   

June 30,

   

March 31,

   

December 31,

   

September 30,

 
   

2022

   

2022

   

2022

   

2021

   

2021

 

Nonaccruing loans

  $ 8,943     $ 8,813     $ 8,414     $ 7,056     $ 11,027  

Accruing loans delinquent more than 90 days

    1,982       1,208       494       205       2,516  

Securities in non-accrual

    1,027       1,030       972       992       1,011  

Foreclosed real estate

    -       -       -       -       81  

Total nonperforming assets

  $ 11,952     $ 11,051     $ 9,880     $ 8,253     $ 14,635  
                                         

Allowance for loan losses (ALL):

                                       

ALL specific allowances for impaired loans

  $ 749     $ 731     $ 716     $ 684     $ 1,904  

ALL general allowances for loan portfolio

    12,649       12,675       12,671       12,659       11,870  

Total ALL

  $ 13,398     $ 13,406     $ 13,387     $ 13,343     $ 13,774  
                                         

Troubled Debt Restructurings:

                                       

Nonaccruing troubled debt restructurings, non-compliant (1) (2)

  $ 452     $ 308     $ 300     $ 1,122     $ 1,126  

Nonaccruing troubled debt restructurings, compliant (2)

    542       657       265       306       102  

Accruing troubled debt restructurings

    3,480       1,484       1,379       1,421       1,427  

Total troubled debt restructurings

  $ 4,474     $ 2,449     $ 1,944     $ 2,849     $ 2,655  

 

(1) "non-compliant" refers to not being within the guidelines of the restructuring agreement

(2) included in nonaccruing loan balances presented above

 


 

   

(Unaudited)

         
   

September 30,

   

Required

 
   

2022

   

To Be Well

 
   

Actual Ratio

   

Capitalized

 

Capital Adequacy Bank

               

Common equity tier 1 capital to risk-weighted assets

    11.8 %     6.5 %

Tier 1 capital to risk-weighted assets

    11.8 %     8.0 %

Total capital to risk-weighted assets

    12.8 %     10.0 %

Tier 1 capital to adjusted average assets

    8.1 %     5.0 %

 

 

 

 

Table 1 - Reconciliation of the Non-GAAP Performance Measures

 
                                                           
 

(Dollars in thousands)

 

Quarter Ended

   

Nine Months Ended

 
 

(unaudited)

 

September 30, 2022

   

June 30, 2022

   

March 31, 2022

   

December 31, 2021

   

September 31, 2021

   

September 30, 2022

   

September 30, 2021

 
 

Calculation of core net income

                                                       
 

Net income

  $ 4,556     $ 4,431     $ 2,135     $ 3,311     $ 3,538     $ 11,122     $ 11,652  
 

Realized loss/(gain) on securities

    (23 )     (258 )     (381 )     (771 )     (590 )     (662 )     (1,276 )
 

Net loss recognized on sale of premises and equipment

    254       -       -       -       -       254       -  
 

Merger related expenses

    -       -       2,852       -       -       2,852       -  
 

CD premium amortization

    (134 )     (175 )     (129 )     -       -       (438 )     -  
 

Core deposit amortization

    400       410       347       249       249       1,157       497  
 

Purchase discount amortization

    (342 )     (613 )     (234 )     (144 )     (271 )     (1,189 )     (626 )
 

Related tax benefit/(cost)

    (33 )     134       (516 )     127       129       (415 )     295  

(A)

Core net income

  $ 4,678     $ 3,929     $ 4,074     $ 2,772     $ 3,055     $ 12,681     $ 10,542  
                                                           
 

Calculation of core diluted earnings per share

                                                       

(A)

Core net income

  $ 4,678     $ 3,929     $ 4,074     $ 2,832     $ 3,055     $ 12,681     $ 10,542  
 

Diluted average common shares outstanding

    4,260,596       4,258,503       4,020,815       3,479,988       3,479,139       4,170,537       3,476,406  
 

Core diluted earnings per share

  $ 1.10     $ 0.92     $ 1.01     $ 0.81     $ 0.88     $ 3.04     $ 3.03  
                                                           
 

Calculation of core return on average assets

                                                       

(A)

Core net income

  $ 4,678     $ 3,929     $ 4,074     $ 2,832     $ 3,055     $ 12,681     $ 10,542  
 

Average total assets

    2,069,139       2,085,039       1,955,347       1,601,040       1,631,654       2,036,968       1,587,330  
 

Core return on average assets

    0.90 %     0.75 %     0.83 %     0.71 %     0.75 %     0.83 %     0.89 %
                                                           
 

Calculation of core pre-provision net revenue

                                                       
 

Net interest income

  $ 17,507     $ 17,298     $ 15,535     $ 12,457     $ 12,200     $ 50,340     $ 36,118  
 

Non-interest income

    2,630       2,896       3,144       3,808       4,146       8,670       12,139  
 

Non-interest expense

    (15,010 )     (15,176 )     (16,269 )     (12,732 )     (12,401 )     (46,455 )     (33,904 )
 

Pre-provision net revenue

    5,127       5,018       2,410       3,533       3,945       12,555       14,353  
 

Realized loss/(gain) on securities

    (23 )     (258 )     (381 )     (711 )     (590 )     (662 )     (1,276 )
 

Core deposit amortization

    400       410       347       249       249       1,157       497  
 

Purchase discount amortization

    (342 )     (613 )     (234 )     (144 )     (271 )     (1,189 )     (626 )

(B)

Core pre-provision net revenue

  $ 5,162     $ 4,557     $ 2,142     $ 2,927     $ 3,333     $ 11,861     $ 12,948  
                                                           
 

Calculation of core pre-provision net revenue to average assets

                                                       

(B)

Core pre-provision net revenue

  $ 5,162     $ 4,557     $ 2,142     $ 2,927     $ 3,333     $ 11,861     $ 12,948  
 

Average total assets

    2,069,139       2,085,039       1,955,347       1,601,040       1,631,654       2,036,968       1,587,330  
 

Core pre-provision net revenue to average assets

    1.00 %     0.87 %     0.44 %     0.73 %     0.82 %     0.78 %     1.09 %
                                                           
 

Calculation of tangible assets (excluding PPP)

                                                       
 

Total assets

  $ 2,052,986     $ 2,101,485     $ 2,097,845     $ 1,620,743     $ 1,609,924     $ 2,052,986     $ 1,609,924  
 

Goodwill

    (22,615 )     (22,615 )     (22,774 )     (11,109 )     (11,109 )     (22,615 )     (11,109 )
 

Other Intangibles

    (5,188 )     (5,588 )     (5,998 )     (3,126 )     (3,374 )     (5,188 )     (3,374 )
 

Paycheck Protection Plan ("PPP") loans

    (226 )     (570 )     (9,983 )     (22,072 )     (32,892 )     (226 )     (32,892 )

(C)

Tangible assets (excluding PPP)

  $ 2,024,957     $ 2,072,712     $ 2,059,090     $ 1,584,436     $ 1,562,549     $ 2,024,957     $ 1,562,549  
                                                           
 

Calculation of tangible common equity

                                                       
 

Total stockholder's equity

  $ 118,023     $ 136,654     $ 157,637     $ 156,615     $ 152,569     $ 118,023     $ 152,569  
 

Goodwill

    (22,615 )     (22,615 )     (22,774 )     (11,109 )     (11,109 )     (22,615 )     (11,109 )
 

Other intangibles

    (5,188 )     (5,588 )     (5,998 )     (3,126 )     (3,374 )     (5,188 )     (3,374 )

(D)

Tangible common equity

  $ 90,220     $ 108,451     $ 128,865     $ 142,380     $ 138,086     $ 90,220     $ 138,086  
                                                           
 

Calculation of tangible common equity adjusted for accumulated other comprehensive loss (income)

                                                   

(D)

Tangible common equity

  $ 90,220     $ 108,451     $ 128,865     $ 142,380     $ 138,086     $ 90,220     $ 138,086  
 

Accumulated other comprehensive loss (income)

    79,839       57,781       33,462       (4,276 )     (2,608 )     79,839       (2,608 )

(I)

Tangible common equity adjusted for accumulated other comprehensive loss (income)

  $ 170,059     $ 166,232     $ 162,327     $ 138,104     $ 135,478     $ 170,059     $ 135,478  
                                                           
 

Calculation of tangible book value per diluted share

                                                       

(D)

Tangible common equity

  $ 90,220     $ 108,451     $ 128,865     $ 142,380     $ 138,086     $ 90,220     $ 138,086  
 

Shares outstanding

    4,297,900       4,296,949       4,294,136       3,480,701       3,479,139       4,297,900       3,479,139  
 

Tangible book value per diluted share

  $ 20.99     $ 25.24     $ 30.01     $ 40.91     $ 39.69     $ 20.99     $ 39.69  
                                                           
 

Calculation of tangible book value per diluted share adjusted for accumulated other comprehensive loss (income)

                                                   

(I)

Tangible common equity adjusted for accumulated other comprehensive loss (income)

  $ 170,059     $ 166,232     $ 162,327     $ 138,104     $ 135,478     $ 170,059     $ 135,478  
 

Diluted average common shares outstanding

    4,297,900       4,296,949       4,294,136       3,480,701       3,479,139       4,297,900       3,479,139  
 

Tangible book value per diluted share adjusted for accumulated other comprehensive loss (income)

  $ 39.57     $ 38.69     $ 37.80     $ 39.68     $ 38.94     $ 39.57     $ 38.94  
                                                           
 

Calculation of tangible common equity to tangible assets (excluding PPP)

                                                       

(D)

Tangible common equity

  $ 90,220     $ 108,451     $ 128,865     $ 142,380     $ 138,086     $ 90,220     $ 138,086  

(C)

Tangible assets (excluding PPP)

    2,024,957       2,072,712       2,059,090       1,584,436       1,562,549       2,024,957       1,562,549  
 

Tangible common equity to tangible assets

    4.46 %     5.23 %     6.26 %     8.99 %     8.84 %     4.46 %     8.84 %
 

Calculation of tangible common equity to tangible assets (excluding PPP and AOCI)

                                                       

(I)

Tangible common equity adjusted for accumulated other comprehensive losses (income)

  $ 170,059     $ 166,232     $ 162,327     $ 138,104     $ 135,478     $ 170,059     $ 135,478  

(C)

Tangible assets (excluding PPP)

    2,024,957       2,072,712       2,059,090       1,584,436       1,562,549       2,024,957       1,562,549  
 

Tangible common equity adjusted for accumulated other comprehensive loss (income) to tangible assets

    8.40 %     8.02 %     7.88 %     8.72 %     8.67 %     8.40 %     8.67 %
                                                           
 

Calculation of average tangible common equity

                                                       
 

Average stockholder's common equity

  $ 133,482     $ 142,415     $ 170,374     $ 159,010     $ 159,010     $ 148,636     $ 155,945  
 

Average goodwill

    (22,615 )     (22,543 )     (21,251 )     (11,109 )     (11,109 )     (22,003 )     (11,109 )
 

Average other intangibles

    (5,438 )     (5,850 )     (5,174 )     (3,270 )     (3,523 )     (5,488 )     (3,768 )

(E)

Average tangible stockholders' common equity

  $ 105,429     $ 114,022     $ 143,949     $ 144,631     $ 144,378     $ 121,145     $ 141,068  
                                                           
 

Calculation of core return on average common equity

                                                       

(A)

Core net income

  $ 4,678     $ 3,929     $ 4,074     $ 2,832     $ 3,055     $ 12,681     $ 10,542  

(E)

Average tangible common equity

    105,429       114,022       143,949       144,631       144,378       121,145       141,068  
 

Core return on average common equity

    17.75 %     13.78 %     11.32 %     7.83 %     8.46 %     13.96 %     9.96 %
                                                           
 

Calculation of core yield on loans

                                                       
 

Interest income on loans

  $ 16,122     $ 15,221     $ 13,286     $ 10,282     $ 10,270     $ 44,629     $ 31,291  
 

Loan accretion income

    (342 )     (613 )     (234 )     (144 )     (271 )     (1,189 )     (626 )
 

Adjusted interest income on loans

    15,780       14,608       13,052       10,138       9,999       43,440       30,665  
 

Average loan balances

    1,484,678       1,457,625       1,274,407       960,606       960,274       1,406,591       970,740  
 

Core yield on loans

    4.25 %     4.01 %     4.10 %     4.22 %     4.17 %     4.12 %     4.21 %
                                                           
 

Calculation of adjusted allowance for loan loss to total loans

                                                       
 

Allowance for loan losses

  $ (13,398 )   $ (13,406 )   $ (13,387 )   $ (13,343 )   $ (13,774 )   $ (13,398 )   $ (13,774 )
 

Additional reserves not part of the allowance for loan loss

    (7,708 )     (7,908 )     (8,749 )     (2,428 )     (2,572 )     (7,708 )     (2,572 )

(F)

Adjusted allowance for loan loss

    (21,106 )     (21,314 )     (22,136 )     (15,771 )     (16,346 )     (21,106 )     (16,346 )
 

Total loans

    1,502,696       1,474,381       1,439,728       966,720       956,352       1,502,696       956,352  
 

Adjusted allowance for loan loss to total loans

    1.40 %     1.45 %     1.54 %     1.63 %     1.71 %     1.40 %     1.71 %
                                                           
 

Calculation of adjusted allowance for loan loss to nonperforming loans

                                                       

(F)

Adjusted allowance for loan loss

  $ (21,106 )   $ (21,314 )   $ (22,136 )   $ (15,771 )   $ (16,346 )   $ (21,106 )   $ (16,346 )
 

Nonperforming loans

    10,925       10,021       8,908       7,261       13,543       10,925       13,543  
 

Adjusted allowance for loan loss to nonperforming loans (coverage ratios)

    193.19 %     212.69 %     248.50 %     217.20 %     120.70 %     193.19 %     120.70 %
                                                           
 

Calculation of adjusted allowance for loan loss to total loans excluding PPP

                                                       

(F)

Adjusted allowance for loan loss

  $ (21,106 )   $ (21,314 )   $ (22,136 )   $ (15,771 )   $ (16,346 )   $ (21,106 )   $ (16,346 )
 

Total loans

    1,502,696       1,474,381       1,439,728       966,720       956,352       1,502,696       956,352  
 

PPP loans

    (226 )     (570 )     (9,983 )     (22,072 )     (32,892 )     (226 )     (32,892 )
 

Total loans excluding PPP

    1,502,470       1,473,811       1,429,745       944,648       923,460       1,502,470       923,460  
 

Adjusted allowance for loan loss to total loans excluding PPP

    1.40 %     1.45 %     1.55 %     1.67 %     1.77 %     1.40 %     1.77 %

 

 

 

Table 1 - Reconciliation of the Non-GAAP Performance Measures

                                                           
 

(Dollars in thousands)

 

Quarter Ended

   

Nine Months Ended

 
 

(unaudited)

 

September 30, 2022

   

June 30, 2022

   

March 31, 2022

   

December 31, 2021

   

September 31, 2021

   

September 30, 2022

   

September 30, 2021

 

Calculation of core revenue

                                                       
 

Net interest income

  $ 17,507     $ 17,298     $ 15,535     $ 12,457     $ 12,200     $ 50,340     $ 36,118  
 

Non-interest income

    2,630       2,896       3,144       3,808       4,146       8,670       12,139  
 

CD premium amortization

    (134 )     (175 )     (129 )     -       -       (438 )     -  
 

Purchase discount amortization

    (342 )     (613 )     (234 )     (144 )     (271 )     (1,189 )     (897 )
 

Realized loss/(gain) on securities

    (23 )     (258 )     (381 )     (711 )     (590 )     (662 )     (1,276 )

(G)

Core revenue

  $ 19,638     $ 19,148     $ 17,935     $ 15,410     $ 15,485     $ 56,721     $ 46,084  
                                                           
 

Calculation of core non-interest expense

                                                       
 

Non-interest expense

  $ 15,010     $ 15,176     $ 16,269     $ 12,732     $ 12,401     $ 46,455     $ 33,904  
 

Net loss recognized on sale of premises and equipment

    (254 )     -       -       -       -       (254 )     -  
 

Merger related expenses

    -       -       (2,852 )     -       -       (2,852 )     -  
 

Core deposit amortization

    (400 )     (410 )     (347 )     (249 )     (249 )     (1,157 )     (497 )

(H)

Core non-interest expense

  $ 14,356     $ 14,766     $ 13,070     $ 12,483     $ 12,152     $ 42,192     $ 33,407  
                                                           
 

Calculation of core efficiency ratio

                                                       

(H)

Core non-interest expense

  $ 14,356     $ 14,766     $ 13,070     $ 12,483     $ 12,152     $ 42,192     $ 33,407  

(G)

Core revenue

    19,638       19,148       17,935       15,410       15,485       56,721       46,084  
 

Core efficiency ratio

    73.10 %     77.12 %     72.87 %     81.01 %     78.48 %     74.39 %     72.49 %
                                                           
 

Calculation of non-interest expense to total average assets

                                                       
 

Non-interest expense

  $ 15,010     $ 15,176     $ 16,269     $ 12,732     $ 12,401     $ 46,455     $ 33,904  
 

Average total assets

    2,069,139       2,085,039       1,955,347       1,601,040       1,631,654       2,036,968       1,587,330  
 

Non-interest expense to total average assets

    2.90 %     2.91 %     3.33 %     3.18 %     3.04 %     3.04 %     2.85 %
                                                           
 

Calculation of core non-interest expense to total average assets

                                                       

(H)

Core non-interest expense

  $ 14,356     $ 14,766     $ 13,070     $ 12,483     $ 12,152     $ 42,192     $ 33,407  
 

Average total assets

    2,069,139       2,085,039       1,955,347       1,601,040       1,631,654       2,036,968       1,587,330  
 

Core non-interest expense to total average assets

    2.78 %     2.83 %     2.67 %     3.12 %     2.98 %     2.76 %     2.81 %
                                                           
 

Calculation of tax adjusted net interest margin

                                                       
 

Net interest income

  $ 17,507     $ 17,298     $ 15,535     $ 12,457     $ 12,200     $ 50,340     $ 36,118  
 

Tax adjusted interest on securities and loans

    817       930       966       959       851       2,713       2,273  
 

Adjusted net interest income

    18,324       18,228       16,501       13,416       13,051       53,053       38,391  
 

Total average earning assets

    1,910,722       1,927,664       1,820,588       1,500,183       1,506,674       1,886,853       1,465,675  
 

Tax adjusted net interest margin

    3.84 %     3.78 %     3.63 %     3.58 %     3.46 %     3.75 %     3.49 %
                                                           
 

Efficiency Ratio

                                                       
 

Total non-interest expense

  $ 15,010     $ 15,176     $ 16,269     $ 12,732     $ 12,401     $ 46,455     $ 33,904  
 

Total revenue

    20,137       20,194       18,679       16,265       16,346       59,010       48,257  
 

Efficiency ratio

    74.54 %     75.15 %     87.10 %     78.28 %     75.87 %     78.72 %     70.26 %