Finward Bancorp Announces Earnings for the Quarter and Twelve Months Ended December 31, 2022
01/25/2023 - 09:00 AM
MUNSTER, Ind., Jan. 25, 2023 (GLOBE NEWSWIRE) -- Finward Bancorp (Nasdaq: FNWD) (the “Bancorp”), the holding company for Peoples Bank (the “Bank”), today announced that net income available to common shareholders was $15.1 million , or $3.60 per diluted share, for the twelve months ended December 31, 2022, as compared to $15.0 million , or $4.30 per diluted share, for the corresponding prior year period. For the quarter ended December 31, 2022, the Bancorp’s net income totaled $4.0 million , or $0.93 per diluted share, as compared to $3.3 million , or $0.95 per diluted share, for the quarter ending December 31, 2021. Selected performance metrics are as follows for the periods presented:
Finward Bancorp Quarterly Financial Report Performance Ratios Quarter ended, Twelve months ended, (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) December 31, September 30, June 30, March 31, December 31, December 31, December 31, 2022 2022 2022 2022 2021 2022 2021 Return on equity 12.96 % 13.65 % 12.45 % 5.01 % 8.56 % 10.47 % 9.61 % Return on assets 0.78 % 0.88 % 0.85 % 0.44 % 0.83 % 0.74 % 0.95 % Noninterest income / average assets 0.56 % 0.51 % 0.56 % 0.64 % 0.95 % 0.56 % 1.01 % Noninterest expense / average assets 3.07 % 2.90 % 2.91 % 3.33 % 3.18 % 3.05 % 2.96 % Efficiency ratio 79.63 % 74.54 % 75.15 % 87.10 % 78.28 % 78.95 % 72.28 %
Core net income for the twelve months ended December 31, 2022, amounted to $17.3 million , or $4.12 per diluted share, compared to $13.4 million , or $3.84 per diluted share for the twelve months ended December 31, 2021. Core net income for the quarter ended December 31, 2022, amounted to $4.6 million , or $1.08 per diluted share, compared to $2.8 million , or $0.81 per diluted share for the quarter ended December 31, 2021. Core net income is a non-GAAP measure. For the periods presented, the core net income measure excludes merger related expenses, net gain on securities, net loss recognized on the sale of premises and equipment, impairment charges on assets held for sale, 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:
Finward Bancorp Quarterly Financial Report Non-GAAP Performance Ratios Quarter ended, Twelve Months Ended (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) December 31, September 30, June 30, March 31, December 31, December 31, December 31, 2022 2022 2022 2022 2021 2022 2021 Core return on equity 19.47 % 17.75 % 13.78 % 11.32 % 7.83 % 14.83 % 9.44 % Core return on assets 0.90 % 0.90 % 0.75 % 0.83 % 0.71 % 0.85 % 0.85 % Core noninterest expense / average assets 2.75 % 2.78 % 2.83 % 2.67 % 3.12 % 2.76 % 2.90 % Core efficiency ratio 74.36 % 73.10 % 77.12 % 72.87 % 81.01 % 74.38 % 74.22 % Net interest margin - tax equivalent 3.73 % 3.84 % 3.78 % 3.63 % 3.58 % 3.74 % 3.51 %
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 twelve-month period include:
Core net income benefiting from acquisition and internal growth: Net income for the twelve months ended December 31, 2022, increased $117 thousand compared to the twelve months ended December 31, 2021. Additionally, core net income for the twelve months ended December 31, 2022, increased by $3.9 million , as compared to the twelve months ended December 31, 2021, primarily relating to the increase in interest-earning assets acquired from the acquisition of Royal Financial, Inc. (“Royal”), organic loan growth, and the overall improvement to the net interest margin during the year.Net interest margin: The net interest margin for the twelve months ended December 31, 2022, was 3.56% , compared to 3.29% for the twelve months ended December 31, 2021. The tax-adjusted net interest margin (a non-GAAP measure) for the twelve months ended December 31, 2022, was 3.74% , compared to 3.51% for the twelve months ended December 31, 2021. The increased net interest margin and tax-adjusted margin is primarily related to increased loan balances from the acquisition of Royal, organic loan growth, and the ability to manage deposit and borrowing costs to support earning asset growth. Organic loan growth (separate from the Royal acquisition) totaled $96.5 million or 10.0% . 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 improvement to the net interest margin during the year, the overall increasing interest rate environment caused a contraction in the margin during the fourth quarter that will likely continue into 2023.Unrealized losses on the securities portfolio: Accumulated other comprehensive losses were $64.3 million as of December 31, 2022. However, during the fourth quarter, securities portfolio cashflows from sales and regular paydowns of the portfolio of $8.5 million were used to fund internally generated loan originations. Furthermore, during full-year 2022, a total of $74.6 million of cashflows were redirected from the securities portfolio to fund internal loan growth. The yield on the securities portfolio improved to 2.22% for the twelve months ended December 31, 2022, up from 1.96% for the twelve months ended December 31, 2021. The securities portfolio also generated gains of $662 thousand from the sale of securities for the twelve months ended December 31, 2022. The effective duration of the securities portfolio was 6.6 years as of December 31, 2022. Management continues to actively manage the securities portfolio and does not currently anticipate the need to realize losses from the securities portfolio, as losses are currently driven by the interest rate environment and management feels are fully recoverable. 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 twelve months ended December 31, 2022, totaled $1.4 million , down from $5.3 million for the twelve months ended December 31, 2021. During the twelve months ended December 31, 2022, the Bancorp originated $44.9 million in new fixed rate mortgage loans for sale, compared to $153.1 million during the twelve months ended December 31, 2021. During the twelve months ended December 31, 2022, the Bancorp originated $105.4 million in new mortgage loans retained in its portfolio, compared to $45.1 million during the twelve months ended December 31, 2021. These retained loans are primarily construction loans and adjustable-rate loans with a fixed-rate period of 7 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. In the first quarter, management is prioritizing the digitization and automation of back-office tasks to drive efficiency and improve the foundation for a digital-first banking experience. 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 successful closure of one banking center and the donation and leaseback of another during 2021, we have successfully closed five branches during 2022, a reduction of 16% . Each branch closure and sale is expected to result in approximately $250 thousand in operational expense reduction, excluding personnel expenses. Impairment charges recorded on closed branches during the twelve-months ended 2022, totaled $1.2 million . The Bank’s 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 customers and communities the Bancorp serves.Asset quality: At December 31, 2022, the allowance for loan losses totaled $12.9 million and is considered adequate by management. For the twelve months ended December 31, 2022, charge-offs, net of recoveries, totaled $446 thousand . The allowance for loan losses as a percentage of total loans was 0.85% at December 31, 2022, and the allowance for loan losses as a percentage of non-performing loans, or coverage ratio, was 127.3% at December 31, 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 1.31% at December 31, 2022, and the allowance for loan losses as a percentage of non-performing loans, or coverage ratio, was 195.9% at December 31, 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 : A headcount freeze, and attrition plan remains in place, and has netted a reduction of 12 full time equivalents, or 4% , during the three months ended December 31, 2022.Capital Adequacy : As of December 31, 2022, the Bancorp’s tier 1 capital to adjusted average assets ratio totaled 7.7% , and under all regulatory capital requirements, continues to be considered well capitalized. Tangible book value per share was $25.40 at December 31, 2022, up from $20.99 as of September 30, 2022 (a non-GAAP measure). The increase is due to recoveries of accumulated other comprehensive losses from the unrealized loss position on the securities portfolio as noted above. Excluding accumulated other comprehensive losses, tangible book value per share increased to $40.36 as of December 31, 2022, from $39.57 as of September 30, 2022 (a non-GAAP measure). Tangible capital represented 5.3% of tangible assets at December 31, 2022 (a non-GAAP measure). Tangible capital, excluding accumulated other comprehensive losses, was 8.5% at December 31, 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.“Expense management has been a focus for 2022, and we took steps to further reduce fixed costs in the fourth quarter in anticipation of changing economic conditions in 2023. The Bank is healthy from a credit standpoint, which reflects our ability to originate high-quality, relationship-based assets in our footprint. We did see some contraction in our net interest margin in the 4th quarter, primarily due to increasing funding costs as we saw seasonal outflows of core funds in the month of December. Loan demand continues to be strong on the commercial side, supporting higher yields. Funding is a key lever to support the margin in 2023, and we are working to maintain core relationships and using on-balance sheet liquidity to reduce wholesale funding whenever possible,” said Benjamin Bochnowski, chief executive officer. “As yields have moved in, our unrealized losses have abated. As opportunities arise to reposition our securities portfolio to provide liquidity to fund loan growth, we will continue to do so throughout the year to maximize our margin and profitability during the year.”
Net Interest Income
Year-to-Date (Dollars in thousands) Average Balances, Interest, and Rates (unaudited) December 31, 2022 December 31, 2021 Average Balance Interest Rate (%) Average Balance Interest Rate (%) ASSETS Interest bearing deposits in other financial institutions $ 21,685 $ 287 1.32 $ 43,375 $ 36 0.08 Federal funds sold 3,025 11 0.36 1,058 - - Certificates of deposit in other financial institutions 1,868 28 1.50 1,509 25 1.66 Securities available-for-sale 427,291 9,492 2.22 456,783 8,951 1.96 Loans receivable 1,431,017 62,133 4.34 968,185 41,573 4.29 Federal Home Loan Bank stock 3,675 84 2.29 3,462 70 2.02 Total interest earning assets 1,888,561 $ 72,035 3.81 1,474,372 $ 50,655 3.44 Cash and non-interest bearing deposits in other financial institutions 16,820 14,829 Allowance for loan losses (13,385 ) (13,353 ) Other noninterest bearing assets 146,259 98,133 Total assets $ 2,038,255 $ 1,573,981 LIABILITIES AND STOCKHOLDERS' EQUITY Total deposits $ 1,823,598 $ 3,604 0.20 $ 1,381,101 $ 2,002 0.14 Repurchase agreements 20,649 195 0.94 17,789 47 0.26 Borrowed funds 26,806 1,087 4.06 2,448 31 1.27 Total interest bearing liabilities 1,871,053 $ 4,886 0.26 1,401,338 $ 2,080 0.15 Other noninterest bearing liabilities 23,132 16,996 Total liabilities 1,894,185 1,418,334 Total stockholders' equity 144,070 155,647 Total liabilities and stockholders' equity $ 2,038,255 $ 1,573,981
Net interest income was $67.1 million for the twelve months ended December 31, 2022, an increase of $18.6 million (38.2% ), compared to $48.6 million for the twelve months ended December 31, 2021. The Bancorp’s net interest margin on a tax-adjusted basis (non-GAAP) was 3.74% for the twelve months ended December 31, 2022, compared to 3.51% for the twelve months ended December 31, 2021.
Quarter Ended (Dollars in thousands) Average Balances, Interest, and Rates (unaudited) December 31, 2022 December 31, 2021 Average Balance Interest Rate (%) Average Balance Interest Rate (%) ASSETS Interest bearing deposits in other financial institutions $ 13,914 $ 124 3.56 $ 12,516 $ 3 0.10 Federal funds sold 1,460 3 0.82 1,039 - - Certificates of deposit in other financial institutions 2,218 13 2.34 1,706 4 0.94 Securities available-for-sale 360,865 2,197 2.44 521,069 2,523 1.94 Loans receivable 1,503,543 17,504 4.66 960,606 10,282 4.28 Federal Home Loan Bank stock 4,596 21 1.83 3,247 15 1.85 Total interest earning assets 1,886,596 $ 19,862 4.21 1,500,183 $ 12,827 3.42 Cash and non-interest bearing deposits in other financial institutions 3,240 14,810 Allowance for loan losses (13,289 ) (13,790 ) Other noninterest bearing assets 158,812 99,837 Total assets $ 2,035,359 $ 1,601,040 LIABILITIES AND STOCKHOLDERS' EQUITY Total deposits $ 1,793,583 $ 2,007 0.45 $ 1,403,559 $ 350 0.10 Repurchase agreements 19,799 102 2.06 18,771 12 0.26 Borrowed funds 72,772 944 5.19 6,769 8 0.47 Total interest bearing liabilities 1,886,154 $ 3,053 0.65 1,429,099 $ 370 0.10 Other noninterest bearing liabilities 27,055 17,177 Total liabilities 1,913,209 1,446,276 Total stockholders' equity 122,150 154,764 Total liabilities and stockholders' equity $ 2,035,359 $ 1,601,040
Net interest income was $16.8 million for the quarter ended December 31, 2022, an increase of $4.4 million (34.9% ), compared to $12.5 million for the quarter ended December 31, 2021. The Bancorp’s net interest margin was 3.56% for the quarter ended December 31, 2022, compared to 3.32% for the quarter ended December 31, 2021. The Bancorp’s net interest margin on a tax-adjusted basis (non-GAAP) was 3.73% for the quarter ended December 31, 2022, compared to 3.58% for the quarter ended December 31, 2021. The increased net interest income and net interest margin for the quarter and the twelve 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, except per share data) Twelve Months Ended December 31, 12/31/2022 vs. 12/31/2021 2022 2021 $ Change % Change Noninterest income: Fees and service charges 6,257 5,388 869 16.1 % Wealth management operations 2,113 2,375 (262 ) -11.0 % Gain on sale of loans held-for-sale, net 1,368 5,296 (3,928 ) -74.2 % Gain on sale of securities, net 662 1,987 (1,325 ) -66.7 % Increase in cash value of bank owned life insurance 810 715 95 13.3 % Gain on sale of foreclosed real estate 16 47 (31 ) -66.0 % Other 283 139 144 103.6 % Total noninterest income 11,509 15,947 (4,438 ) -27.8 %
(Dollars in thousands, except per share data) Quarter Ended December 31, 12/31/2022 vs. 12/31/2021 2022 2021 $ Change % Change Noninterest income: Fees and service charges 1,823 1,378 445 32.3 % Wealth management operations 523 588 (65 ) -11.1 % Gain on sale of loans held-for-sale, net 126 902 (776 ) -86.0 % Gain on sale of securities, net - 711 (711 ) -100.0 % Increase in cash value of bank owned life insurance 182 178 4 2.2 % Gain on sale of foreclosed real estate 16 20 (4 ) -20.0 % Other 169 31 138 445.2 % Total noninterest income 2,839 3,808 (969 ) -25.4 %
The increase in fees and service charges, for the quarter and the twelve months ended December 31, 2022, is primarily the result of the acquisition of Royal and the resulting increase in our customer base. The decrease in wealth management operations, for the quarter and the twelve-month periods, is the 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 twelve-month periods, is the result of significant refinance activity in 2021 due to the economic and low-rate environment, which resulted in more loans originated and sold in 2021 compared to 2022. 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, except per share data) Twelve Months Ended December 31, 12/31/2022 vs. 12/31/2021 2022 2021 $ Change % Change Noninterest expense: Compensation and benefits 28,990 24,241 4,749 19.6 % Occupancy and equipment 6,785 5,537 1,248 22.5 % Data processing 6,750 3,648 3,102 85.0 % Marketing 1,907 1,085 822 75.8 % Impairment charge on assets held for sale 1,232 - 1,232 0.0 % Federal deposit insurance premiums 1,228 861 367 42.6 % Professional services 1,211 1,205 6 0.5 % Net loss recognized on sale of premises and equipment 303 - 303 0.0 % Other 13,694 10,059 3,635 36.1 % Total noninterest expense 62,100 46,636 15,464 33.2 %
(Dollars in thousands, except per share data) Quarter Ended December 31, 12/31/2022 vs. 12/31/2021 2022 2021 $ Change % Change Noninterest expense: Compensation and benefits 6,587 6,617 (30 ) -0.5 % Occupancy and equipment 1,752 1,461 291 19.9 % Data processing 1,238 1,651 (413 ) -25.0 % Marketing 284 357 (73 ) -20.4 % Impairment charge on assets held for sale 1,232 - 1,232 0.0 % Federal deposit insurance premiums 279 241 38 15.8 % Professional services 393 250 143 57.2 % Net loss recognized on sale of premises and equipment 49 - 49 0.0 % Other 3,831 2,155 1,676 77.8 % Total noninterest expense 15,645 12,732 2,913 22.9 %
The increase in compensation and benefits, for the twelve months ended December 31, 2022, is primarily the result of the Royal acquisition, management’s continued focus on talent management, and wage inflation. The increase in data processing expense for the twelve-month period ending December 31, 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 December 31, 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 occupancy and equipment expense, for the quarter and the twelve-month periods, is primarily related to the Royal acquisition and higher operating costs. Marketing expenses, for the twelve-month period ended December 31, 2022, have increased to enhance brand recognition in new markets and gain more wallet share. The increase in impairment charge on assets held for sale, for the quarter and twelve-month periods, is the result of impairment on the carrying value of branches held for sale. The increase in federal deposit insurance premiums, for the quarter and the twelve-month periods, is primarily the result of growth of the bank’s average assets. The increase in net loss recognized on sale of premises and equipment, for the quarter and twelve-month 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 twelve-month period ending December 31, 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 increase in other operating expenses for the quarter ending December 31, 2022, is primarily due to higher utilization of outside consultants related to bank initiatives during the quarter.
Income Tax Expense $1.5 million for the twelve months ended December 31, 2022, as compared to $1.4 million for the twelve months ended December 31, 2021. The effective tax rate was 8.9% for the twelve months ended December 31, 2022, as compared to 8.6% for the twelve months ended December 31, 2021. The provision for income taxes was $45 thousand for the quarter ended December 31, 2022, as compared to $6 thousand for the quarter ended December 31, 2021. The effective tax rate was 1.1% for the quarter ended December 31, 2022, as compared to 0.2% for the quarter ended December 31, 2021. The Bancorp’s higher current effective tax rate for the twelve months ended 31, 2022, is a result of higher earnings relative to tax preferred income. The decrease in effective tax rate quarter-over-quarter is due to tax benefits resulting from the recognition of impairment on assets held for sale.
Lending $1.5 billion on December 31, 2022, compared to $966.7 million on December 31, 2021, an increase of $546.9 million or 56.6% . The increase is primarily the result of the Royal acquisition, as well as organic loan portfolio growth. During the first twelve months of 2022 the Bancorp originated $376.0 million in new commercial loans, compared to $339.9 million during the twelve months ended December 31, 2021. During the twelve months ended December 31, 2022, the Bancorp originated $44.9 million in new fixed rate mortgage loans for sale, compared to $153.1 million during the twelve months ended December 31, 2021. During the twelve months ended December 31, 2022, the Bancorp originated $105.4 million in new mortgage loans retained in its portfolio, compared to $45.1 million during the twelve months ended December 31, 2021. The loan portfolio represents 73.1% of earning assets and is comprised of 62.1% commercial related credits.
Asset Quality $10.1 million , compared to $7.3 million at December 31, 2021, an increase of $2.9 million or 39.6% . The Bancorp’s ratio of non-performing loans to total loans was 0.67% at December 31, 2022, compared to 0.76% at December 31, 2021. The Bancorp’s ratio of non-performing assets to total assets was 0.54% at December 31, 2022, compared to 0.51% at December 31, 2021.
For the twelve months ended December 31, 2022, no provisions to the ALL were required, compared to $1.5 million for the twelve months ended December 31, 2021, a decrease of $1.5 million . For the quarter ended December 31, 2022, no provisions to the ALL were required, compared to $216 thousand for the quarter ended December 31, 2021, a decrease of $216 thousand . For the twelve months ended December 31, 2022, charge-offs, net of recoveries, totaled $446 thousand . For the quarter ended December 31, 2022, charge-offs, net of recoveries, totaled $483 thousand . At December 31, 2022, the allowance for loan losses totaled $12.9 million and is considered adequate by management. The allowance for loan losses as a percentage of total loans was 0.85% at December 31, 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 127.3% at December 31, 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 1.31% at December 31, 2022, and the allowance for loan losses as a percentage of non-performing loans, or coverage ratio, was 195.9% at December 31, 2022. See Table 1 below for a reconciliation of these non-GAAP figures to the Bancorp’s GAAP figures.
Investing $370.9 million at December 31, 2022, compared to $526.9 million at December 31, 2021, a decrease of $156.0 million or 29.6% . 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 19.5% of earning assets and provides a consistent source of liquidity and earnings to the Bancorp. Cash and cash equivalents totaled $31.3 million on December 31, 2022, compared to $33.2 million on December 31, 2021, a decrease of $1.9 million or 5.7% . The decrease 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 $1.4 billion , compared to $1.2 billion on December 31, 2021, an increase of $216.9 million or 18.2% . 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 79.5% of the Bancorp’s total deposits at December 31, 2022. During the twelve months of 2022, balances for checking, and savings 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 December 31, 2022, balances for certificates of deposit totaled $363.1 million , compared to $239.2 million on December 31, 2021, an increase of $123.9 million or 51.8% . The increase in certificate of deposit balances is related to the Royal acquisition, which added $195.2 million of certificates at the time of acquisition, along with efforts by the bank to maintain lower cost of deposits in the future. In addition, on December 31, 2022, borrowings and repurchase agreements totaled $135.5 million , compared to $14.6 million at December 31, 2021, an increase of $120.9 million or 829.3% . The increase in short-term borrowings was the result of cyclical inflows and outflows of interest-earning assets and interest-bearing liabilities.
Capital Adequacy $136.4 million , a decrease of $20.2 million , or 12.9% 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 $64.3 million at December 31, 2022. The Bank’s regulatory capital ratios at December 31, 2022, were 12.1% for total capital to risk-weighted assets, 11.2% for both common equity tier 1 capital to risk-weighted assets and tier 1 capital to risk-weighted assets, and 7.7% for tier 1 capital to adjusted average assets. Under all regulatory capital requirements, the Bank is considered well capitalized. Tangible capital represented 5.3% of tangible assets at December 31, 2022. The tangible book value of the Bancorp’s stock stood at $25.40 per share at December 31, 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
About Finward Bancorp
Forward Looking Statements
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.
FOR FURTHER INFORMATION CONTACT SHAREHOLDER SERVICES (219) 853-7575
Finward Bancorp Quarterly Financial Report Performance Ratios Quarter ended, Twelve months ended, (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) December 31, September 30, June 30, March 31, December 31, December 31, December 31, 2022 2022 2022 2022 2021 2022 2021 Return on equity 12.96 % 13.65 % 12.45 % 5.01 % 8.56 % 10.47 % 9.61 % Return on assets 0.78 % 0.88 % 0.85 % 0.44 % 0.83 % 0.74 % 0.95 % Yield on loans 4.66 % 4.34 % 4.18 % 4.17 % 4.28 % 4.34 % 4.29 % Yield on security investments 2.44 % 2.30 % 2.23 % 2.02 % 1.94 % 2.22 % 1.96 % Total yield on earning assets 4.21 % 3.88 % 3.68 % 3.49 % 3.42 % 3.81 % 3.44 % Cost of deposits 0.45 % 0.19 % 0.08 % 0.08 % 0.10 % 0.20 % 0.14 % Cost of repurchase agreements 2.06 % 0.98 % 0.46 % 0.33 % 0.26 % 0.94 % 0.26 % Cost of borrowed funds 5.19 % 2.52 % 1.10 % 0.39 % 0.47 % 4.06 % 1.27 % Total cost of funds 0.65 % 0.22 % 0.09 % 0.08 % 0.10 % 0.26 % 0.15 % Noninterest income / average assets 0.56 % 0.51 % 0.56 % 0.64 % 0.95 % 0.56 % 1.01 % Noninterest expense / average assets 3.07 % 2.90 % 2.91 % 3.33 % 3.18 % 3.05 % 2.96 % Net noninterest margin / average assets -2.52 % -2.39 % -2.36 % -2.68 % -2.23 % -2.48 % -1.95 % Efficiency ratio 79.63 % 74.54 % 75.15 % 87.10 % 78.28 % 78.95 % 72.28 % Effective tax rate 1.12 % 11.14 % 11.70 % 11.41 % 0.18 % 8.93 % 8.63 % Non-performing assets to total assets 0.54 % 0.58 % 0.53 % 0.47 % 0.51 % 0.54 % 0.51 % Non-performing loans to total loans 0.67 % 0.73 % 0.68 % 0.62 % 0.76 % 0.67 % 0.76 % Allowance for loan losses to non-performing loans 127.26 % 122.64 % 133.78 % 150.28 % 183.76 % 127.26 % 183.76 % Allowance for loan losses to loans outstanding 0.85 % 0.89 % 0.91 % 0.93 % 1.38 % 0.85 % 1.38 % Foreclosed real estate to total assets 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % Basic earnings per share $0.93 $1.07 $1.04 $0.53 $0.95 $3.61 $4.30 Diluted earnings per share $0.93 $1.07 $1.04 $0.53 $0.95 $3.60 $4.30 Net worth / total assets 6.59 % 5.75 % 6.50 % 7.51 % 9.66 % 6.59 % 9.66 % Book value per share $31.73 $27.46 $31.80 $36.71 $45.00 $31.73 $45.00 Closing stock price $36.20 $34.01 $37.49 $46.21 $45.88 $36.20 $45.88 Price per earnings per share $9.70 $7.92 $8.97 $21.76 $12.07 $10.02 $10.66 Dividend declared per common share $0.31 $0.31 $0.31 $0.31 $0.31 $1.24 $1.24 Non-GAAP Performance Ratios Quarter ended, Twelve Months Ended (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) December 31, September 30, June 30, March 31, December 31, December 31, December 31, 2022 2022 2022 2022 2021 2022 2021 Core return on equity 19.47 % 17.75 % 13.78 % 11.32 % 7.83 % 14.83 % 9.44 % Core return on assets 0.90 % 0.90 % 0.75 % 0.83 % 0.71 % 0.85 % 0.85 % Core noninterest expense / average assets 2.75 % 2.78 % 2.83 % 2.67 % 3.12 % 2.76 % 2.90 % Core efficiency ratio 74.36 % 73.10 % 77.12 % 72.87 % 81.01 % 74.38 % 74.22 % Net interest margin - tax equivalent 3.73 % 3.84 % 3.78 % 3.63 % 3.58 % 3.74 % 3.51 % Tangible book value per diluted share $25.41 $20.99 $25.24 $30.01 $40.91 $25.41 $40.91 Tangible book value per diluted share adjusted for AOCI $40.36 $39.57 $38.69 $37.80 $39.68 $40.36 $39.68
Finward Bancorp Quarterly Financial Report Balance Sheet Data (Dollars in thousands) (Unaudited) (Unaudited) (Unaudited) (Unaudited) December 31, September 30, June 30, March 31, December 31, 2022 2022 2022 2022 2021 Total assets $ 2,070,339 $ 2,052,986 $ 2,101,485 $ 2,097,845 $ 1,620,743 Cash & cash equivalents 31,282 38,296 79,302 54,501 33,176 Certificates of deposit in other financial institutions 2,456 2,214 1,482 1,731 1,709 Securities - available for sale 370,896 359,035 400,466 464,320 526,889 Loans receivable: Commercial real estate $ 486,431 $ 452,852 $ 420,735 $ 408,375 $ 317,145 Residential real estate 484,595 471,565 459,151 444,753 260,134 Commercial business 93,278 95,372 103,649 112,396 115,772 Construction and land development 108,926 134,301 153,422 150,810 123,822 Multifamily 251,014 258,377 248,495 234,267 61,194 Home equity 38,978 37,578 35,672 34,284 34,612 Manufactured homes 34,882 35,866 37,693 38,636 37,887 Government 9,549 9,649 8,081 8,176 8,991 Consumer 918 827 1,673 924 582 Farmland - - - - - Total loans $ 1,508,571 $ 1,496,387 $ 1,468,571 $ 1,432,621 $ 960,139 Deposits: Core deposits: Noninterest bearing checking $ 359,092 $ 386,137 $ 370,567 $ 380,515 $ 295,294 Interest bearing checking 396,285 422,559 384,689 350,825 333,744 Savings 402,365 427,505 436,203 425,634 293,976 Money market 254,157 269,110 327,360 307,850 271,970 Total core deposits 1,411,899 1,505,311 1,518,819 1,464,824 1,194,984 Certificates of deposit 363,118 327,653 398,396 430,387 239,217 Total deposits $ 1,775,017 $ 1,832,964 $ 1,917,215 $ 1,895,211 $ 1,434,201 Borrowings and repurchase agreements $ 135,503 $ 78,140 $ 24,536 $ 23,244 $ 14,581 Stockholder's equity 136,393 118,023 136,654 157,637 156,615
Finward Bancorp Quarterly Financial Report Consolidated Statements of Income Quarter ended, Twelve months ended, (Dollars in thousands) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) December 31, September 30, June 30, March 31, December 31, December 31, December 31, 2022 2022 2022 2022 2021 2022 2021 Interest income: Loans $ 17,504 $ 16,122 $ 15,221 $ 13,286 $ 10,282 $ 62,133 $ 41,573 Securities & short-term investments 2,358 2,417 2,519 2,608 2,545 9,902 9,082 Total interest income 19,862 18,539 17,740 15,894 12,827 72,035 50,655 Interest expense: Deposits 2,007 871 389 337 350 3,604 2,002 Borrowings 1,046 161 53 22 20 1,282 78 Total interest expense 3,053 1,032 442 359 370 4,886 2,080 Net interest income 16,809 17,507 17,298 15,535 12,457 67,149 48,575 Provision for loan losses - - - - 216 - 1,509 Net interest income after provision for loan losses 16,809 17,507 17,298 15,535 12,241 67,149 47,066 Noninterest income: Fees and service charges 1,823 1,570 1,560 1,304 1,378 6,257 5,388 Wealth management operations 523 407 588 595 588 2,113 2,375 Gain on sale of loans held-for-sale, net 126 344 291 607 902 1,368 5,296 Gain on sale of securities, net - 23 258 381 711 662 1,987 Increase in cash value of bank owned life insurance 182 183 193 252 178 810 715 Gain on sale of foreclosed real estate, net 16 - - - 20 16 47 Other 169 103 6 5 31 283 139 Total noninterest income 2,839 2,630 2,896 3,144 3,808 11,509 15,947 Noninterest expense: Compensation and benefits 6,587 7,498 7,538 7,367 6,617 28,990 24,241 Occupancy and equipment 1,752 1,804 1,729 1,500 1,461 6,785 5,537 Data processing 1,238 1,212 1,246 3,054 1,651 6,750 3,648 Marketing 284 587 385 651 357 1,907 1,085 Impairment charge on assets held for sale 1,232 - - - - 1,232 - Federal deposit insurance premiums 279 350 380 219 241 1,228 861 Net loss recognized on sale of premises and equipment 49 254 - - - 303 - Other 4,224 3,305 3,898 3,478 2,405 14,905 11,264 Total noninterest expense 15,645 15,010 15,176 16,269 12,732 62,100 46,636 Income before income taxes 4,003 5,127 5,018 2,410 3,317 16,558 16,377 Income tax expenses 45 571 587 275 6 1,478 1,414 Net income $ 3,958 $ 4,556 $ 4,431 $ 2,135 $ 3,311 $ 15,080 $ 14,963
Finward Bancorp Quarterly Financial Report Asset Quality (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Dollars in thousands) December 31, September 30, June 30, March 31, December 31, 2022 2022 2022 2022 2021 Nonaccruing loans $ 9,886 $ 8,943 $ 8,813 $ 8,414 $ 7,056 Accruing loans delinquent more than 90 days 248 1,982 1,208 494 205 Securities in non-accrual 1,048 1,027 1,030 972 992 Foreclosed real estate - - - - - Total nonperforming assets $ 11,182 $ 11,952 $ 11,051 $ 9,880 $ 8,253 Allowance for loan losses (ALL): ALL specific allowances for impaired loans $ 338 $ 749 $ 731 $ 716 $ 684 ALL general allowances for loan portfolio 12,559 12,649 12,675 12,671 12,659 Total ALL $ 12,897 $ 13,398 $ 13,406 $ 13,387 $ 13,343 Troubled Debt Restructurings: Nonaccruing troubled debt restructurings, non-compliant (1) (2) $ 343 $ 452 $ 308 $ 300 $ 1,122 Nonaccruing troubled debt restructurings, compliant (2) 815 542 657 265 306 Accruing troubled debt restructurings 2,753 3,480 1,484 1,379 1,421 Total troubled debt restructurings $ 3,911 $ 4,474 $ 2,449 $ 1,944 $ 2,849 (1) "non-compliant" refers to not being within the guidelines of the restructuring agreement (2) included in nonaccruing loan balances presented above (Unaudited) December 31, Required 2022 To Be Well Actual Ratio Capitalized Capital Adequacy Bank Common equity tier 1 capital to risk-weighted assets 11.2 % 6.5 % Tier 1 capital to risk-weighted assets 11.2 % 8.0 % Total capital to risk-weighted assets 12.1 % 10.0 % Tier 1 capital to adjusted average assets 7.7 % 5.0 %
Table 1 - Reconciliation of the Non-GAAP Performance Measures (Dollars in thousands) Quarter Ended Twelve Months Ended (unaudited) December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Calculation of core net income Net income $ 3,958 $ 4,556 $ 4,431 $ 2,135 $ 3,311 $ 15,080 $ 14,963 Realized loss/(gain) on securities - (23 ) (258 ) (381 ) (771 ) (662 ) (1,987 ) Net loss recognized on sale of premises and equipment 49 254 - - - 303 - Impairment charge on assets held for sale 1,232 - - - - 1,232 - Merger related expenses - - - 2,852 - 2,852 - CD premium amortization (103 ) (134 ) (175 ) (129 ) - (541 ) - Core deposit amortization 395 400 410 347 249 1,552 994 Purchase discount amortization (760 ) (342 ) (613 ) (234 ) (144 ) (1,949 ) (1,041 ) Related tax benefit/(cost) (171 ) (33 ) 134 (516 ) 127 (585 ) 427 (A) Core net income $ 4,600 $ 4,678 $ 3,929 $ 4,074 $ 2,772 $ 17,282 $ 13,356 Calculation of core diluted earnings per share (A) Core net income $ 4,600 $ 4,678 $ 3,929 $ 4,074 $ 2,832 $ 17,282 $ 13,356 Diluted average common shares outstanding 4,261,506 4,260,596 4,258,503 4,020,815 3,479,988 4,193,340 3,477,309 Core diluted earnings per share $ 1.08 $ 1.10 $ 0.92 $ 1.01 $ 0.81 $ 4.12 $ 3.84 Calculation of core return on average assets (A) Core net income $ 4,600 $ 4,678 $ 3,929 $ 4,074 $ 2,832 $ 17,282 $ 13,356 Average total assets 2,035,359 2,069,139 2,085,039 1,955,347 1,601,040 2,038,255 1,573,981 Core return on average assets 0.90 % 0.90 % 0.75 % 0.83 % 0.71 % 0.85 % 0.85 % Calculation of core pre-provision net revenue Net interest income $ 16,809 $ 17,507 $ 17,298 $ 15,535 $ 12,457 $ 67,149 $ 48,575 Non-interest income 2,839 2,630 2,896 3,144 3,808 11,509 15,947 Non-interest expense (15,645 ) (15,010 ) (15,176 ) (16,269 ) (12,732 ) (62,100 ) (46,636 ) Pre-provision net revenue 4,003 5,127 5,018 2,410 3,533 16,558 17,886 Realized loss/(gain) on securities - (23 ) (258 ) (381 ) (711 ) (662.00 ) (1,987 ) Core deposit amortization 395 400 410 347 249 1,552 994 Purchase discount amortization (760 ) (342 ) (613 ) (234 ) (144 ) (1,949 ) (1,041 ) (B) Core pre-provision net revenue $ 3,638 $ 5,162 $ 4,557 $ 2,142 $ 2,927 $ 15,499 $ 15,852 Calculation of core pre-provision net revenue to average assets (B) Core pre-provision net revenue $ 3,638 $ 5,162 $ 4,557 $ 2,142 $ 2,927 $ 15,499 $ 15,852 Average total assets 2,035,359 2,069,139 2,085,039 1,955,347 1,601,040 2,038,255 1,573,981 Core pre-provision net revenue to average assets 0.71 % 1.00 % 0.87 % 0.44 % 0.73 % 0.76 % 1.01 % Calculation of tangible assets (excluding PPP) Total assets $ 2,070,339 $ 2,052,986 $ 2,101,485 $ 2,097,845 $ 1,620,743 $ 2,070,339 $ 1,620,743 Goodwill (22,395 ) (22,615 ) (22,615 ) (22,774 ) (11,109 ) (22,395 ) (11,109 ) Other Intangibles (4,794 ) (5,188 ) (5,588 ) (5,998 ) (3,126 ) (4,794 ) (3,126 ) Paycheck Protection Plan ("PPP") loans - (226 ) (570 ) (9,983 ) (22,072 ) - (22,072 ) (C) Tangible assets (excluding PPP) $ 2,043,150 $ 2,024,957 $ 2,072,712 $ 2,059,090 $ 1,584,436 $ 2,043,150 $ 1,584,436 Calculation of tangible common equity Total stockholder's equity $ 136,393 $ 118,023 $ 136,654 $ 157,637 $ 156,615 $ 136,393 $ 156,615 Goodwill (22,395 ) (22,615 ) (22,615 ) (22,774 ) (11,109 ) (22,395 ) (11,109 ) Other intangibles (4,794 ) (5,188 ) (5,588 ) (5,998 ) (3,126 ) (4,794 ) (3,126 ) (D) Tangible common equity $ 109,204 $ 90,220 $ 108,451 $ 128,865 $ 142,380 $ 109,204 $ 142,380 Calculation of tangible common equity adjusted for accumulated other comprehensive loss (income) (D) Tangible common equity $ 109,204 $ 90,220 $ 108,451 $ 128,865 $ 142,380 $ 109,204 $ 142,380 Accumulated other comprehensive loss (income) 64,300 79,839 57,781 33,462 (4,276 ) 64,300 (4,276 ) (I) Tangible common equity adjusted for accumulated other comprehensive loss (income) $ 173,504 $ - $ 170,059 $ - $ 166,232 $ - $ 162,327 $ - $ 138,104 $ 173,504 $ - $ 138,104 Calculation of tangible book value per diluted share (D) Tangible common equity $ 109,204 $ 90,220 $ 108,451 $ 128,865 $ 142,380 $ 109,204 $ 142,380 Shares outstanding 4,298,401 4,297,900 4,296,949 4,294,136 3,480,701 4,298,401 3,480,701 Tangible book value per diluted share $ 25.41 $ 20.99 $ 25.24 $ 30.01 $ 40.91 $ 25.41 $ 40.91 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) $ 173,504 $ 170,059 $ 166,232 $ 162,327 $ 138,104 $ 173,504 $ 138,104 Diluted average common shares outstanding 4,298,401 4,297,900 4,296,949 4,294,136 3,480,701 4,298,401 3,480,701 Tangible book value per diluted share adjusted for accumulated other comprehensive loss (income) $ 40.36 $ 39.57 $ 38.69 $ 37.80 $ 39.68 $ 40.36 $ 39.68 Calculation of tangible common equity to tangible assets (excluding PPP) (D) Tangible common equity $ 109,204 $ 90,220 $ 108,451 $ 128,865 $ 142,380 $ 109,204 $ 142,380 (C) Tangible assets (excluding PPP) 2,043,150 2,024,957 2,072,712 2,059,090 1,584,436 2,043,150 1,584,436 Tangible common equity to tangible assets 5.34 % 4.46 % 5.23 % 6.26 % 8.99 % 5.34 % 8.99 % Calculation of tangible common equity to tangible assets (excluding PPP and AOCI) (I) Tangible common equity adjusted for accumulated other comprehensive losses (income) $ 173,504 $ 170,059 $ 166,232 $ 162,327 $ 138,104 $ 173,504 $ 138,104 (C) Tangible assets (excluding PPP) 2,043,150 2,024,957 2,072,712 2,059,090 1,584,436 2,043,150 1,584,436 Tangible common equity adjusted for accumulated other comprehensive loss (income) to tangible assets 8.49 % 8.40 % 8.02 % 7.88 % 8.72 % 8.49 % 8.72 % Calculation of average tangible common equity Average stockholder's common equity $ 122,150 $ 133,482 $ 142,415 $ 170,374 $ 159,010 $ 144,070 $ 155,647 Average goodwill (22,615 ) (22,615 ) (22,543 ) (21,251 ) (11,109 ) (22,157 ) (11,109 ) Average other intangibles (5,038 ) (5,438 ) (5,850 ) (5,174 ) (3,270 ) (5,375 ) (3,126 ) (E) Average tangible stockholders' common equity $ 94,497 $ 105,429 $ 114,022 $ 143,949 $ 144,631 $ 116,538 $ 141,412 Calculation of core return on average common equity (A) Core net income $ 4,600 $ 4,678 $ 3,929 $ 4,074 $ 2,832 $ 17,282 $ 13,356 (E) Average tangible common equity 94,497 105,429 114,022 143,949 144,631 116,538 141,412 Core return on average common equity 19.47 % 17.75 % 13.78 % 11.32 % 7.83 % 14.83 % 9.44 % Calculation of core yield on loans Interest income on loans $ 17,504 $ 16,122 $ 15,221 $ 13,286 $ 10,282 $ 62,133 $ 41,573 Loan accretion income (760 ) (342 ) (613 ) (234 ) (144 ) (1,949 ) (1,041 ) Adjusted interest income on loans 16,744 15,780 14,608 13,052 10,138 60,184 40,532 Average loan balances 1,503,543 1,484,678 1,457,625 1,274,407 960,606 1,431,017 968,185 Core yield on loans 4.45 % 4.25 % 4.01 % 4.10 % 4.22 % 4.21 % 4.19 % Calculation of adjusted allowance for loan loss to total loans Allowance for loan losses $ (12,897 ) $ (13,398 ) $ (13,406 ) $ (13,387 ) $ (13,343 ) $ (12,897 ) $ (13,343 ) Additional reserves not part of the allowance for loan loss (6,960 ) (7,708 ) (7,908 ) (8,749 ) (2,428 ) (6,960 ) (2,428 ) (F) Adjusted allowance for loan loss (19,857 ) (21,106 ) (21,314 ) (22,136 ) (15,771 ) (19,857 ) (15,771 ) Total loans 1,513,631 1,502,696 1,474,381 1,439,728 966,720 1,513,631 966,720 Adjusted allowance for loan loss to total loans 1.31 % 1.40 % 1.45 % 1.54 % 1.63 % 1.31 % 1.63 % Calculation of adjusted allowance for loan loss to nonperforming loans (F) Adjusted allowance for loan loss $ (19,857 ) $ (21,106 ) $ (21,314 ) $ (22,136 ) $ (15,771 ) $ (19,857 ) $ (15,771 ) Nonperforming loans 10,134 10,925 10,021 8,908 7,261 10,134 7,261 Adjusted allowance for loan loss to nonperforming loans (coverage ratios) 195.94 % 193.19 % 212.69 % 248.50 % 217.20 % 195.94 % 217.20 % Calculation of adjusted allowance for loan loss to total loans excluding PPP (F) Adjusted allowance for loan loss $ (19,857 ) $ (21,106 ) $ (21,314 ) $ (22,136 ) $ (15,771 ) $ (19,857 ) $ (15,771 ) Total loans 1,513,631 1,502,696 1,474,381 1,439,728 966,720 1,513,631 966,720 PPP loans - (226 ) (570 ) (9,983 ) (22,072 ) - (22,072 ) Total loans excluding PPP 1,513,631 1,502,470 1,473,811 1,429,745 944,648 1,513,631 944,648 Adjusted allowance for loan loss to total loans excluding PPP 1.31 % 1.40 % 1.45 % 1.55 % 1.67 % 1.31 % 1.67 % Calculation of core revenue Net interest income $ 16,809 $ 17,507 $ 17,298 $ 15,535 $ 12,457 $ 67,149 $ 48,575 Non-interest income 2,839 2,630 2,896 3,144 3,808 11,509 15,947 CD premium amortization (103 ) (134 ) (175 ) (129 ) - (541 ) - Purchase discount amortization (760 ) (342 ) (613 ) (234 ) (144 ) (1,949 ) (1,041 ) Realized loss/(gain) on securities - (23 ) (258 ) (381 ) (711 ) (662 ) (1,987 ) (G) Core revenue $ 18,785 $ 19,638 $ 19,148 $ 17,935 $ 15,410 $ 75,506 $ 61,494 Calculation of core non-interest expense Non-interest expense $ 15,645 $ 15,010 $ 15,176 $ 16,269 $ 12,732 $ 62,100 $ 46,636 Impairment charge on assets held for sale (1,232 ) - - - - (1,232 ) - Net loss recognized on sale of premises and equipment (49 ) (254 ) - - - (303 ) - Merger related expenses - - - (2,852 ) - (2,852 ) - Core deposit amortization (395 ) (400 ) (410 ) (347 ) (249 ) (1,552 ) (994 ) (H) Core non-interest expense $ 13,969 $ 14,356 $ 14,766 $ 13,070 $ 12,483 $ 56,161 $ 45,642 Calculation of core efficiency ratio (H) Core non-interest expense $ 13,969 $ 14,356 $ 14,766 $ 13,070 $ 12,483 $ 56,161 $ 45,642 (G) Core revenue 18,785 19,638 19,148 17,935 15,410 75,506 61,494 Core efficiency ratio 74.36 % 73.10 % 77.12 % 72.87 % 81.01 % 74.38 % 74.22 % Calculation of non-interest expense to total average assets Non-interest expense $ 15,645 $ 15,010 $ 15,176 $ 16,269 $ 12,732 $ 62,100 $ 46,636 Average total assets 2,035,359 2,069,139 2,085,039 1,955,347 1,601,040 2,038,255 1,573,981 Non-interest expense to total average assets 3.07 % 2.90 % 2.91 % 3.33 % 3.18 % 3.05 % 2.96 % Calculation of core non-interest expense to total average assets (H) Core non-interest expense $ 13,969 $ 14,356 $ 14,766 $ 13,070 $ 12,483 $ 56,161 $ 45,642 Average total assets 2,035,359 2,069,139 2,085,039 1,955,347 1,601,040 2,038,255 1,573,981 Core non-interest expense to total average assets 2.75 % 2.78 % 2.83 % 2.67 % 3.12 % 2.76 % 2.90 % Calculation of tax adjusted net interest margin Net interest income $ 16,809 $ 17,507 $ 17,298 $ 15,535 $ 12,457 $ 67,149 $ 48,575 Tax adjusted interest on securities and loans 791 817 930 966 959 3,504 3,232 Adjusted net interest income 17,600 18,324 18,228 16,501 13,416 70,653 51,807 Total average earning assets 1,886,596 1,910,722 1,927,664 1,820,588 1,500,183 1,888,561 1,474,372 Tax adjusted net interest margin 3.73 % 3.84 % 3.78 % 3.63 % 3.58 % 3.74 % 3.51 % Efficiency Ratio Total non-interest expense $ 15,645 $ 15,010 $ 15,176 $ 16,269 $ 12,732 $ 62,100 $ 46,636 Total revenue 19,648 20,137 20,194 18,679 16,265 78,658 64,522 Efficiency ratio 79.63 % 74.54 % 75.15 % 87.10 % 78.28 % 78.95 % 72.28 %
