Finward Bancorp Announces Earnings for The Three and Six Months Ended June 30, 2022

Jul 27th, 2022 13:00 EST

MUNSTER, Ind., July 27, 2022 (GLOBE NEWSWIRE) -- Finward Bancorp (Nasdaq: FNWD) (“Finward” or the “Bancorp”), the holding company for Peoples Bank (the “Bank”), today announced that net income available to common stockholders was $6.6 million, or $1.58 per diluted share, for the six months ended June 30, 2022, as compared to $8.1 million, or $2.33 per share, for the corresponding prior year period. For the three months ended June 30, 2022, the Bancorp’s net income totaled $4.4 million, or $1.03 per diluted share, as compared to $3.6 million, or $1.03 per share, for the three months ending June 30, 2021. Selected performance metrics are as follows for the periods presented:

Performance Ratios Three months ended,  Six months ended,
  (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)  (Unaudited) (Unaudited)
  June 30, March 31, December 31, September 30, June 30,  June 30, June 30,
  2022 2022 2021 2021 2021  2022 2021
Return on equity  12.45% 5.01% 8.56% 8.90% 9.17%  8.40% 10.54%
Return on assets  0.85% 0.44% 0.83% 0.87% 0.90%  0.65% 1.04%
Net interest margin - tax equivalent  3.78% 3.63% 3.58% 3.46% 3.42%  3.70% 3.51%
Noninterest income / average assets 0.56% 0.64% 0.95% 1.02% 0.92%  0.60% 1.02%
Noninterest expense / average assets 2.91% 3.33% 3.18% 3.04% 2.76%  3.11% 2.75%
Efficiency ratio 75.15% 87.10% 78.28% 75.87% 70.79%  80.89% 67.38%
                

Core net income for the six months ended June 30, 2022, amounted to $8.0 million, or $1.92 per diluted share, compared to $7.5 million, or $2.15 per diluted share for the six months ended June 30, 2021. Core net income for the three months ended June 30, 2022, amounted to $3.9 million, or $0.91 per diluted share, compared to $3.3 million, or $0.95 per diluted share for the three months ended June 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, 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    Three months ended,  Six Months Ended
  (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)  (Unaudited) (Unaudited)
  June 30, March 31, December 31, September 30, June 30,  June 30, June 30,
  2022 2022 2021 2021 2021  2022 2021
Core return on equity  13.78% 11.32% 7.83% 8.46% 9.42%  12.43% 10.75%
Core return on assets  0.75% 0.83% 0.71% 0.75% 0.83%  0.79% 0.95%
Core noninterest expense / average assets 2.83% 2.67% 3.12% 2.98% 2.70%  2.76% 2.68%
Core efficiency ratio 77.12% 72.87% 81.01% 78.48% 71.82%  75.06% 68.65%

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 six months ended June 30, 2022, decreased $1.5 million compared to the six months ended June 30, 2021. However, core net income for the six months ended June 30, 2022, increased by $533 thousand, as compared to the six months ended June 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 improved: The net interest margin for the six months ended June 30, 2022, was 3.50%, compared to 3.31% for the six months ended June 30, 2021. The tax-adjusted net interest margin (a non-GAAP measure) for the six months ended June 30, 2022, was 3.70%, compared to 3.51% for the six months ended June 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 reducing investment in the securities portfolio to fund increased loan demand. Internally generated loan growth (separate from the acquisition) totaled $57.2 million or 5.9%. Leading the internally generated loan growth was commercial real estate loans of $60.3 million or 12.6%. Additionally, interest expense continued to decrease during the quarter due to the Bancorp’s ability to manage the mix of deposits to fund the balance sheet with additional core deposits, while reducing reliance on certificates of deposits, and tax benefits from the investment in municipal securities. 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.
  • Unrealized losses on the securities portfolio: Accumulated other comprehensive losses increased to $57.8 million during the quarter. However, during the quarter, securities portfolio cashflows from sales and regular amortization of the portfolio of $50 million were used to fund internally generated loan growth. The yield on the securities portfolio improved on a year-to-date basis to 2.12% at June 30, 2022, up from 1.99% at June 30, 2021. The securities portfolio also generated gains of $638 thousand from the sale of securities for the six months ended June 30, 2022. The effective duration of the securities portfolio was 6.8 years on June 30, 2022. Management continues to actively monitor the securities portfolio and does not currently anticipate the need to realize losses from the securities portfolio, and it is unlikely the Bancorp will be required to sell the investments before recovery of their amortized cost bases, 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 six-months ended June 30, 2022, totaled $898 thousand, down from $3.2 million for the six-months ended June 30, 2021. During the six months ended June 30, 2022, the Bancorp originated $29.2 million in new fixed rate mortgage loans for sale, compared to $85.9 million during the six months ended June 30, 2021. During the six months ended June 30, 2022, the Bancorp originated $50.0 million in new mortgage loans retained in its portfolio, compared to $33.7 million during the six months ended June 30, 2021.
  • Building a digital-forward foundation: Primary focus remains on enhancing the customer experience and managing risk through our digital platforms. The Bank is planning 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. The remaining 29 locations are being analyzed for footprint optimization opportunities, with additional locations showing the potential for reducing operating overhead. These efforts are reducing fixed costs, and allowing for redeployment of a portion of occupancy expenses into building a digital-forward foundation to meet customer expectations will continue Finward’s digital-first future.
  • Asset Quality: At June 30, 2022, the allowance for loan losses totaled $13.4 million and is considered adequate by management. For the six months ended June 30, 2022, recoveries, net of charge-offs, totaled $63 thousand. On a non-GAAP basis, the allowance for loan losses as a percentage of total loans was 1.45% at June 30, 2022, and the allowance for loan losses as a percentage of non-performing loans, or coverage ratio, was 212.7% at June 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.
  • Capital Adequacy: As of June 30, 2022, the Bancorp’s tier 1 leverage capital to adjusted average assets ratio totaled 7.8%, and under all regulatory capital requirements, continues to be considered well capitalized. Tangible book value per share decreased to $25.24 at June 30, 2022, from $30.01 as of March 31, 2022 (a non-GAAP measure). The decrease is due to continued accumulated other comprehensive losses on the security portfolio as noted above. Excluding accumulated other comprehensive losses, tangible book value per share increased to $38.69 as of June 30, 2022, from $37.80 as of March 31, 2022 (a non-GAAP measure). Tangible capital represented 5.2% of tangible assets at June 30, 2022 (a non-GAAP measure). Tangible capital, excluding accumulated other comprehensive losses, was 8.0% at June 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.

“Despite the rapidly changing economic environment, we improved our core net income and net interest margin during the second quarter and made significant progress in rebalancing our earning assets. Changes in consumer demands 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 12.6% year-to-date. We are actively managing our expense base to achieve greater economies of scale, and continue to perform at levels that generate 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.

Net Interest Income

Year-to-Date 
(Dollars in thousands)Average Balances, Interest, and Rates           
(unaudited)June 30, 2022 June 30, 2021
 Average Balance  Interest Rate (%) Average Balance  Interest Rate (%)
ASSETS   `         
Interest bearing deposits in other financial institutions$            24,032  $            53 0.44 $            54,195  $            21 0.08
Federal funds sold4,683  2 0.09 1,040  - -
Certificates of deposit in other financial institutions1,674  6 0.72 1,535  15 1.95
Securities available-for-sale474,016  5,024 2.12 408,753  4,065 1.99
Loans receivable*1,366,900  28,507 4.17 976,059  21,021 4.31
Federal Home Loan Bank stock3,530  42 2.38 3,681  40 2.17
Total interest earning assets1,874,835  $     33,634 3.59 1,445,263  $     25,162 3.48
Cash and non-interest bearing deposits in other financial institutions20,821      35,055     
Allowance for loan losses(13,383)     (12,960)    
Other noninterest bearing assets138,343      97,967     
Total assets$        2,020,616      $        1,565,325     
              
LIABILITIES AND STOCKHOLDERS' EQUITY             
Total deposits$        1,813,254  $          726 0.08 $        1,375,429  $       1,200 0.17
Repurchase agreements21,013  42 0.40 15,674  22 0.28
Borrowed funds7,982  33 0.83 1,903  22 2.31
Total interest bearing liabilities1,842,249  $          801 0.09 1,393,006  $       1,244 0.18
Other noninterest bearing liabilities22,029      18,295     
    Total liabilities1,864,278      1,411,301     
    Total stockholders' equity156,338      154,024     
    Total liabilities and stockholders' equity$        2,020,616      $        1,565,325     
              

Net interest income was $32.8 million for the six months ended June 30, 2022, an increase of $8.9 million (37.3%), compared to $23.9 million for the six months ended June 30, 2021. The Bancorp’s net interest margin on a tax-adjusted basis was 3.70% for the six months ended June 30, 2022, compared to 3.51% for the six months ended June 30, 2021.

Quarter-to-Date 
(Dollars in thousands)Average Balances, Interest, and Rates           
(unaudited)June 30, 2022 June 30, 2021
 Average Balance  Interest Rate (%) Average Balance  Interest Rate (%)
ASSETS             
Interest bearing deposits in other financial institutions$            25,679  $            45 0.70 $            57,543  $              9       0.06
Federal funds sold1,388  2 0.58 1,288  -          -  
Certificates of deposit in other financial institutions1,625  3 0.74 1,473  7       1.90
Securities available-for-sale438,309  2,449 2.23 433,355  2,124       1.96
Loans receivable1,457,625  15,221 4.18 976,520  10,275       4.21
Federal Home Loan Bank stock3,038  20 2.63 3,446  20       2.32
Total interest earning assets1,927,664  $     17,740 3.68 1,473,625  $     12,435       3.38
Cash and non-interest bearing deposits in other financial institutions21,435      36,377     
Allowance for loan losses(13,399)     (13,255)    
Other noninterest bearing assets149,339      97,863     
    Total assets$        2,085,039      $        1,594,610     
              
LIABILITIES AND STOCKHOLDERS' EQUITY             
Total deposits$        1,884,712  $          389 0.08 $        1,402,398  $          549       0.16
Repurchase agreements22,618  26 0.46 16,855  12       0.28
Borrowed funds9,851  27 1.10 1,720  2       0.47
Total interest bearing liabilities1,917,181  $          442 0.09 1,420,973  $          563       0.16
Other noninterest bearing liabilities25,443      17,787     
    Total liabilities1,942,624      1,438,760     
    Total stockholders' equity142,415      155,850     
    Total liabilities and stockholders' equity$2,085,039      $1,594,610     

Net interest income was $17.3 million for the quarter ended June 30, 2022, an increase of $5.4 million (45.7%), compared to $11.9 million for the quarter ended June 30, 2021. The Bancorp’s net interest margin was 3.59% for the quarter ended June 30, 2022, compared to 3.22% for the quarter ended June 30, 2021. The Bancorp’s net interest margin on a tax-adjusted basis was 3.78% for the quarter ended June 30, 2022, compared to 3.42% for the quarter ended June 30, 2021. The increased net interest income and net interest margin for the three and the six months was primarily the result of the increased earnings assets acquired through the Royal acquisition, the ability to reallocate securities cashflows into organic loan growth, and maintaining lower interest expense.

Noninterest Income

(Dollars in thousands) Six Months Ended June 30, 6/30/2022 vs. 6/30/2021  
(unaudited)  2022 2021 $ Change  % Change
Noninterest income:         
  Fees and service charges 2,864 2,537 327  12.9%
  Wealth management operations 1,183 1,183 0  0.0%
  Gain on sale of loans held-for-sale, net 898 3,165 (2,267) -71.6%
  Gain on sale of securities, net 639 686 (47) -6.9%
  Increase in cash value of bank owned life insurance              445              357 88  24.6%
  Gain (loss) on sale of foreclosed real estate                -               27 (27) -100.0%
  Other 11 38 (27) -71.1%
          
      Total noninterest income 6,040 7,993 (1,953) -24.4%

(Dollars in thousands) Three Months Ended June 30, 6/30/2022 vs. 6/30/2021  
(unaudited)  2022 2021 $ Change  % Change
Noninterest income:         
  Fees and service charges 1,560 1,471 89  6.1%
  Wealth management operations 588 576 12  2.1%
  Gain on sale of loans held-for-sale, net 291 1,116 (825) -73.9%
  Gain on sale of securities, net 258 269 (11) -4.1%
  Increase in cash value of bank owned life insurance              193              188 5  2.7%
  Gain (loss) on sale of foreclosed real estate                -                 36 (36) -100.0%
  Other 6 24 (18) -75.0%
          
      Total noninterest income 2,896 3,680 (784) -21.3%

The decrease in gain on sale of loans 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 increase in fees and service charges is primarily the result of the acquisition of Royal and the resultant increase in our customer base.

Noninterest Expense

(Dollars in thousands) Six Months Ended June 30, 6/30/2022 vs. 6/30/2021  
(unaudited) 2022 2021 $ Change % Change
Noninterest expense:        
  Compensation and benefits 14,905 11,582 3,323 28.7%
  Data processing 4,300 1,125 3,175 282.2%
  Occupancy and equipment 3,229 2,696 533 19.8%
  Marketing 1,036 394 642 162.9%
  Federal deposit insurance premiums 599 384 215 56.0%
  Other 7,376 5,322 2,054 38.6%
         
      Total noninterest expense 31,445 21,503 9,942 46.2%
         

(Dollars in thousands) Three Months Ended June 30, 6/30/2022 vs. 6/30/2021  
(unaudited) 2022 2021 $ Change  % Change
Noninterest expense:         
  Compensation and benefits 7,538 5,897 1,641  27.8%
  Data processing 1,246 1,324 (78) -5.9%
  Occupancy and equipment 1,729 597 1,132  189.6%
  Marketing 385 195 190  97.4%
  Federal deposit insurance premiums 380 204 176  86.3%
  Other 3,898 2,793 1,105  39.6%
          
      Total noninterest expense 15,176 11,010 4,166  37.8%
          

The increase in compensation and benefits 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 is primarily related to the Royal acquisition and higher operating costs. Marketing expenses have increased to enhance brand recognition in new markets and gain more wallet share. The increase in federal deposit insurance premiums is primarily the result of growth of the bank’s average assets. The increase in data processing expense for the six-month period ending June 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 other operating expenses 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.

Income Tax ExpenseThe provision for income taxes was $862 thousand for the six months ended June 30, 2022, as compared to $1.1 million for the six months ended June 30, 2021. The effective tax rate was 11.6% for the six months ended June 30, 2022, as compared to 12.3% for the quarter ended June 30, 2021. The Bancorp’s lower current period effective tax rate is a result of a greater increase in tax preferred income relative to earnings. The provision for income taxes was $587 thousand for the three months ended June 30, 2022, as compared to $395 thousand for the three months ended June 30, 2021. The effective tax rate was 11.7% for the three months ended June 30, 2022, as compared to 10.0% for the three months ended June 30, 2021. The Bancorp’s higher current quarter effective tax rate is a result of higher earnings relative to tax preferred income.

LendingThe Bancorp’s loan portfolio totaled $1.5 billion on June 30, 2022, compared to $966.7 million on December 31, 2021, an increase of $507.7 million or 52.5%. The increase is primarily the result of the Royal acquisition, as well as organic loan portfolio growth. During the first six months of 2022 the Bancorp originated $196.9 million in new commercial loans, compared to $178.1 million during the six months ended June 30, 2021. During the six months ended June 30, 2022, the Bancorp originated $29.2 million in new fixed rate mortgage loans for sale, compared to $85.9 million during the six months ended June 30, 2021. During the six months ended June 30, 2022, the Bancorp originated $50.0 million in new mortgage loans retained in its portfolio, compared to $33.7 million during the six months ended June 30, 2021. The loan portfolio represents 76.0% of earning assets and is comprised of 63.1% commercial related credits.

Asset QualityAt June 30, 2022, non-performing loans totaled $10.0 million, compared to $7.3 million at December 31, 2021, an increase of $2.8 million or 38.0%. The Bancorp’s ratio of non-performing loans to total loans was 0.68% at June 30, 2022, compared to 0.76% at December 31, 2021. The Bancorp’s ratio of non-performing assets to total assets was 0.53% at June 30, 2022, compared to 0.51% at December 31, 2021.

For the six months ended June 30, 2022, no provisions to the ALL were required, compared to $1.2 million for the six months ended June 30, 2021, a decrease of $1.2 million. For the three months ended June 30, 2022, no provisions to the ALL were required, compared to $576 thousand for the three months ended June 30, 2021, a decrease of $576 thousand. For the six months ended June 30, 2022, recoveries, net of charge-offs, totaled $63 thousand. For the three months ended June 30, 2022, recoveries, net of charge-offs, totaled $19 thousand. At June 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 0.91% at June 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 133.8% at June 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 1.45% at June 30, 2022, and the allowance for loan losses as a percentage of non-performing loans, or coverage ratio, was 212.7% at June 30, 2022. See Table 1 below for a reconciliation of these non-GAAP figures to the Bancorp’s GAAP figures.

InvestingThe Bancorp’s securities portfolio totaled $400.5 million at June 30, 2022, compared to $526.9 million at December 31, 2021, a decrease of $126.4 million or 24.0%. 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 20.6% of earning assets and provides a consistent source of liquidity and earnings to the Bancorp. Cash and cash equivalents totaled $79.3 million on June 30, 2022, compared to $33.2 million on December 31, 2021, an increase of $46.1 million or 139.0%. The increase in cash and cash equivalents is primarily the result of the timing of investments in interest earnings assets relative to the inflow and outflow of deposits and repurchase agreements.

FundingOn June 30, 2022, core deposits totaled $1.5 billion, compared to $1.2 billion on December 31, 2021, an increase of $323.8 million or 27.1%. The increase is the result of the Royal 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 79.2% of the Bancorp’s total deposits at June 30, 2022. During the first six 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 June 30, 2022, balances for certificates of deposit totaled $398.4 million, compared to $239.2 million on December 31, 2021, an increase of $159.2 million or 66.5%. 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 June 30, 2022, borrowings and repurchase agreements totaled $24.5 million, compared to $14.6 million at December 31, 2021, an increase of $10.0 million or 68.3%. The increase in short-term borrowings was the result of cyclical inflows and outflows of interest-earning assets and interest-bearing liabilities.

Capital Adequacy At June 30, 2022, shareholders’ equity stood at $136.7 million, a decrease of $20.0 million, or 12.7% 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 $57.8 million at June 30, 2022. The Bank’s regulatory capital ratios at June 30, 2022, were 11.4% for total capital to risk-weighted assets, 10.5% for both common equity tier 1 capital to risk-weighted assets and tier 1 capital to risk-weighted assets, and 7.8% for tier 1 leverage capital to adjusted average assets. Under all regulatory capital requirements, the Bank is considered well capitalized. Tangible capital represented 5.2% of tangible assets at June 30, 2022.The tangible book value of the Bancorp’s stock stood at $25.24 per share at June 30, 2022, compared to $40.91 at December 31, 2021, a decrease of $15.67 or 38.3%. 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 monitor 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 MeasuresReported 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 BancorpFinward 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 StatementsThis 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.

FOR FURTHER INFORMATIONCONTACT SHAREHOLDER SERVICES(219) 853-7575

                
Finward Bancorp
Quarterly Financial Report
                
Performance Ratios    Three months ended,  Six months ended,
  (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)  (Unaudited) (Unaudited)
  June 30, March 31, December 31, September 30, June 30,  June 30, June 30,
  2022 2022 2021 2021 2021  2022 2021
Return on equity  12.45% 5.01% 8.56% 8.90% 9.17%  8.40% 10.54%
Return on assets  0.85% 0.44% 0.83% 0.87% 0.90%  0.65% 1.04%
Yield on loans 4.18% 4.17% 4.28% 4.28% 4.21%  4.17% 4.31%
Yield on security investments 2.23% 2.02% 1.94% 1.94% 1.96%  2.12% 1.99%
Total yield on earning assets 3.68% 3.49% 3.42% 3.36% 3.38%  3.59% 3.48%
Cost of deposits 0.08% 0.08% 0.10% 0.13% 0.16%  0.08% 0.17%
Cost of repurchase agreements 0.46% 0.33% 0.26% 0.25% 0.28%  0.40% 0.28%
Cost of borrowed funds 1.10% 0.39% 0.47% 9.76% 0.47%  0.83% 2.31%
Total cost of funds 0.09% 0.08% 0.10% 0.13% 0.16%  0.09% 0.18%
Net interest margin - tax equivalent  3.78% 3.63% 3.58% 3.46% 3.42%  3.70% 3.51%
Noninterest income / average assets 0.56% 0.64% 0.95% 1.02% 0.92%  0.60% 1.02%
Noninterest expense / average assets 2.91% 3.33% 3.18% 3.04% 2.76%  3.11% 2.75%
Net noninterest margin / average assets -2.36% -2.68% -2.23% -2.02% -1.84%  -2.51% -1.73%
Efficiency ratio 75.15% 87.10% 78.28% 75.87% 70.79%  80.89% 67.38%
Effective tax rate 11.70% 11.41% 0.18% 7.04% 9.96%  11.60% 12.32%
                
Non-performing assets to total assets  0.53% 0.47% 0.51% 0.91% 0.85%  0.53% 0.85%
Non-performing loans to total loans 0.68% 0.62% 0.76% 1.42% 1.27%  0.68% 1.27%
Allowance for loan losses to non-performing loans 133.78% 150.28% 183.76% 101.71% 111.13%  133.78% 111.13%
Allowance for loan losses to loans outstanding 0.91% 0.93% 1.38% 1.44% 1.42%  0.91% 1.42%
Foreclosed real estate to total assets 0.00% 0.00% 0.00% 0.01% 0.02%  0.00% 0.02%
                
Basic earnings per share $1.04 $0.53 $0.95 $1.02 $1.03  $1.60 $2.33
Diluted earnings per share  $1.03 $0.53 $0.95 $1.02 $1.03  $1.58 $2.33
Net worth / total assets 6.50% 7.51% 9.66% 9.48% 9.70%  6.50% 9.70%
Book value per share  $31.80 $36.71 $45.00 $43.85 $44.71  $31.80 $44.71
Tangible book value per share $25.24 $30.01 $40.91 $39.69 $40.48  $25.24 $40.48
Closing stock price $37.49 $46.21 $45.88 $41.05 $44.14  $37.49 $44.14
Price per earnings per share $8.97 $21.76 $12.07 $10.06 $10.71  $11.73 $9.47
Dividend declared per common share $0.31 $0.31 $0.31 $0.31 $0.31  $0.62 $0.62
                
                
Non-GAAP Performance Ratios Three months ended,  Six Months Ended
  (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)  (Unaudited) (Unaudited)
  June 30, March 31, December 31, September 30, June 30,  June 30, June 30,
  2022 2022 2021 2021 2021  2022 2021
Core return on equity  13.78% 11.32% 7.83% 8.46% 9.42%  12.43% 10.75%
Core return on assets  0.75% 0.83% 0.71% 0.75% 0.83%  0.79% 0.95%
Core noninterest expense / average assets 2.83% 2.67% 3.12% 2.98% 2.70%  2.76% 2.68%
Core efficiency ratio 77.12% 72.87% 81.01% 78.48% 71.82%  75.06% 68.65%
                

 

           
Finward Bancorp
Quarterly Financial Report
           
Balance Sheet Data          
(Dollars in thousands) (Unaudited) (Unaudited)   (Unaudited) (Unaudited)
  June 30, March 31, December 31, September 30, June 30,
  2022 2022 2021 2021 2021
Total assets  $    2,101,485 $    2,097,845 $    1,620,743 $    1,609,924 $    1,603,513
Cash & cash equivalents            79,302           54,501           33,176           31,765           68,625
Certificates of deposit in other financial institutions             1,482             1,731             1,709                977             1,471
Securities - available for sale           400,466          464,320          526,889          531,010          473,927
           
Loans receivable:          
 Commercial real estate $       420,735 $       408,375 $       317,145 $       309,905 $       315,087
 Residential real estate          459,151          444,753          260,134          268,798          268,649
 Commercial business          103,649          112,396          115,772          125,922          149,414
 Construction and land development          153,422          150,810          123,822          110,289          104,154
 Multifamily          248,495          234,267           61,194           56,869           53,639
 Home equity           35,672           34,284           34,612           35,652           36,684
 Manufactured homes           37,693           38,636           37,887           32,857           26,453
 Government             8,081             8,176             8,991             9,841             8,462
 Consumer             1,673                924                582                650                544
 Farmland                  -                    -                    -                  205                309
       Total loans $    1,468,571 $    1,432,621 $       960,139 $       950,988 $       963,395
           
Deposits:          
 Core deposits:          
      Noninterest bearing checking $       370,567 $       380,515 $       295,294 $       287,376 $       275,819
      Interest bearing checking          384,689          350,825          333,744          315,575          307,148
      Savings          436,203          425,634          293,976          284,681          277,944
      Money market          327,360          307,850          271,970          254,671          253,427
          Total core deposits       1,518,819       1,464,824       1,194,984       1,142,303       1,114,338
 Certificates of deposit          398,396          430,387          239,217          263,897          280,758
          Total deposits $    1,917,215 $    1,895,211 $    1,434,201 $    1,406,200 $    1,395,096
           
Borrowings and repurchase agreements $         24,536 $         23,244 $         14,581 $         23,844 $         24,399
Stockholder's equity           136,654          157,637          156,615          152,569          155,569
           

                  
Finward Bancorp
Quarterly Financial Report
                  
Consolidated Statements of Income Three months ended,  Six months ended,
(Dollars in thousands) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)  (Unaudited) (Unaudited)
    June 30, March 31, December 31, September 30, June 30,  June 30, June 30,
    2022 2022 2021 2021 2021  2022 2021
Interest income:               
Loans $        15,221 $        13,286 $        10,282 $        10,270 $        10,275  $        28,507 $        21,021
Securities & short-term investments 2,519 2,608 2,545 2,396 2,160  5,127 4,141
Total interest income 17,740 15,894 12,827 12,666 12,435  33,634 25,162
Interest expense:               
Deposits 389 337 350 452 549  726 1,200
Borrowings 53 22 20 14 14  75 44
Total interest expense 442 359 370 466 563  801 1,244
Net interest income 17,298 15,535 12,457 12,200 11,872  32,833 23,918
Provision for loan losses - - 216 139 576  - 1,154
Net interest income after provision for loan losses 17,298 15,535 12,241 12,061 11,296  32,833 22,764
Noninterest income:               
Fees and service charges 1,560 1,304 1,378 1,473 1,471  2,864 2,537
Wealth management operations 588 595 588 604 576  1,183 1,183
Gain on sale of loans held-for-sale, net 291 607 902 1,229 1,116  898 3,165
Gain on sale of securities, net 258 381 711 590 269  639 686
Increase in cash value of bank owned life insurance 193 252 178 180 188  445 357
Gain on sale of foreclosed real estate, net - - 20 - 36  - 27
Other 6 5 31 70 24  11 38
Total noninterest income 2,896 3,144 3,808 4,146 3,680  6,040 7,993
Noninterest expense:               
Compensation and benefits 7,538 7,367 6,617 6,042 5,897  14,905 11,582
Data processing 1,729 1,500 1,119 1,076 597  4,300 1,125
Occupancy and equipment 1,246 3,054 1,461 1,380 1,324  3,229 2,696
Marketing 380 219 357 334 195  1,036 394
Federal deposit insurance premiums 385 651 241 236 204  599 384
Other 3,898 3,478 2,937 3,741 2,793  7,376 5,322
Total noninterest expense 15,176 16,269 12,732 12,401 11,010  31,445 21,503
Income before income taxes 5,018 2,410 3,317 3,806 3,966  7,428 9,254
Income tax expenses 587 275 6 268 395  862 1,140
Net income $         4,431 $         2,135 $         3,311 $         3,538 $         3,571  $         6,566 $         8,114
                  
                  

              
Finward Bancorp
Quarterly Financial Report
              
Asset Quality (Unaudited) (Unaudited)   (Unaudited) (Unaudited)
(Dollars in thousands) June 30, March 31, December 31, September 30, June 30,
     2022 2022 2021 2021 2021
Nonaccruing loans $         8,813 $         8,414 $         7,056 $        11,027 $        12,025
Accruing loans delinquent more than 90 days  1,208 494 205 2,516 248
Securities in non-accrual 1,030 972 992 1,011 970
Foreclosed real estate  - - - 81 368
 Total nonperforming assets  $        11,051 $         9,880 $         8,253 $        14,635 $        13,611
              
Allowance for loan losses (ALL):          
 ALL specific allowances for impaired loans  $            731 $            716 $            684 $         1,904 $         1,770
 ALL general allowances for loan portfolio  12,675 12,671 12,659 11,870 11,869
  Total ALL $        13,406 $        13,387 $        13,343 $        13,774 $        13,639
              
Troubled Debt Restructurings:          
 Nonaccruing troubled debt restructurings, non-compliant (1) (2) $            308 $            300 $         1,122 $         1,126 $         1,269
 Nonaccruing troubled debt restructurings, compliant (2) 657 265 306 102 -
 Accruing troubled debt restructurings 1,484 1,379 1,421 1,427 1,182
  Total troubled debt restructurings $         2,449 $         1,944 $         2,849 $         2,655 $         2,451
   (1) "non-compliant" refers to not being within the guidelines of the restructuring agreement        
   (2) included in nonaccruing loan balances presented above          
              
              
     (Unaudited)       
     June 30, Required      
     2022 To Be Well      
     Actual Ratio Capitalized      
Capital Adequacy Bank          
Common equity tier 1 capital to risk-weighted assets 10.5% 6.5%      
Tier 1 capital to risk-weighted assets 10.5% 8.0%      
Total capital to risk-weighted assets 11.4% 10.0%      
Tier 1 capital to adjusted average assets 7.8% 5.0%      
              

Table 1 - Reconciliation of the Non-GAAP Performance Measures             
                      
 (Dollars in thousands)Three Months Ended Six Months Ended
 (unaudited)June 30, 2022 March 31, 2022 December 31, 2021 September 31, 2021 June 30, 2021 June 30, 2022 June 30, 2021
 Calculation of core net income                    
 Net income$                   4,431  $                   2,135  $                                   3,311  $                    3,538  $                     3,571  $                    6,566  $                    8,114 
 Realized loss/(gain) on securities(258) (381) (771) (590) (269) (639) (686)
 Merger related expenses-  2,852                                            -                              -                                -    2,852                            -   
 CD premium amortization(175) (129)                                           -                              -                                -    (304)                           -   
 Core deposit amortization410  347  249  249  249  757  497 
 Purchase discount amortization(613) (234) (144) (271) (300) (847) (626)
 Related tax benefit/(cost)134  (516)                                        127                          129                              67                         (382)                         171 
(A)Core net income$                   3,929  $                   4,074  $                                   2,772  $                    3,055  $                     3,318  $                    8,003  $                    7,470 
                      
 Calculation of core diluted earnings per share                    
(A)Core net income$                   3,929  $                   4,074  $                                   2,832  $                    3,055  $                     3,318  $                    8,003  $                    7,470 
 Diluted average common shares outstanding4,295,742  4,020,815                                3,479,988                 3,479,139                   3,478,392                 4,159,038                 3,475,017 
 Core diluted earnings per share$                    0.91  $                    1.01  $                                     0.81  $                     0.88  $                       0.95  $                     1.92  $                     2.15 
                      
 Calculation of core return on average assets                    
(A)Core net income$                   3,929  $                   4,074  $                                   2,832  $                    3,055  $                     3,318  $                    8,003  $                    7,470 
 Average total assets2,085,039  1,955,347                                1,601,040                 1,631,654                   1,594,610                 2,020,616                 1,565,325 
 Core return on average assets0.75%  0.83%  0.71%  0.75%  0.83%  0.79%  0.95% 
                      
 Calculation of core pre-provision net revenue                    
 Net interest income$                  17,298  $                  15,535  $                                 12,457  $                  12,200  $                    11,872  $                  32,833  $                  23,918 
 Non-interest income2,896  3,144  3,808  4,146  3,680  6,040  7,993 
 Non-interest expense(15,176) (16,269) (12,732) (12,401) (11,010) (31,445) (21,503)
 Pre-provision net revenue5,018  2,410  3,533  3,945  4,542  7,428  10,408 
 Realized loss/(gain) on securities(258) (381) (711) (590) (269) (639) (686)
 Core deposit amortization410  347  249  249  249  757  497 
 Purchase discount amortization(613) (234) (144) (271) (300) (847) (626)
(B)Core pre-provision net revenue$                    4,557  $                    2,142  $                                   2,927  $                    3,333  $                     4,222  $                    6,699  $                    9,593 
                      
 Calculation of core pre-provision net revenue to average assets                    
(B)Core pre-provision net revenue$                    4,557  $                    2,142  $                                   2,927  $                    3,333  $                     4,222  $                    6,699  $                    9,593 
 Average total assets               2,085,039                 1,955,347                                1,601,040                 1,631,654                   1,594,610                 2,020,616                 1,565,325 
 Core pre-provision net revenue to average assets0.87%  0.44%  0.73%  0.82%  1.06%  0.66%  1.23% 
                      
 Calculation of tangible assets (excluding PPP)                    
 Total assets$             2,101,485  $             2,097,845  $                            1,620,743  $             1,609,924  $               1,603,513  $             2,101,485  $             1,603,513 
 Goodwill                  (22,615)                   (22,774)                                  (11,109)                   (11,109)                     (11,109)                   (22,615)                   (11,109)
 Other Intangibles                    (5,588)                     (5,998)                                    (3,126)                     (3,374)                       (3,622)                     (5,588)                     (3,622)
 Paycheck Protection Plan ("PPP") loans                       (570)                     (9,983)                                  (22,072)                   (32,892)                     (50,304)                        (570)                   (50,304)
(C)Tangible assets (excluding PPP)$             2,072,712  $             2,059,090  $                            1,584,436  $             1,562,549  $               1,538,478  $             2,072,712  $             1,538,478 
                      
 Calculation of tangible common equity                    
 Total stockholder's equity$                136,654  $                157,637  $                               156,615  $                152,569  $                  155,569  $                136,654  $                155,569 
 Goodwill                  (22,615)                   (22,774)                                  (11,109)                   (11,109)                     (11,109)                   (22,615)                   (11,109)
 Other intangibles                    (5,588)                     (5,998)                                    (3,126)                     (3,374)                       (3,622)                     (5,588)                     (3,622)
(D)Tangible common equity$                108,451  $                128,865  $                               142,380  $                138,086  $                  140,838  $                108,451  $                140,838 
                      
 Calculation of tangible common equity adjusted for accumulated other comprehensive loss (income)                     
(D)Tangible common equity$                108,451  $                128,865  $                               142,380  $                138,086  $                  140,838  $                108,451  $                140,838 
 Accumulated other comprehensive loss (income)                    57,781                      33,462                                     (4,276)                     (2,608)                       (8,209)                     57,781                      (8,209)
(I)Tangible common equity adjusted for accumulated other comprehensive loss (income)$                166,232  $                162,327  $                               138,104  $                135,478  $                  132,629  $                166,232  $                132,629 
                      
 Calculation of tangible book value per diluted share                    
(D)Tangible common equity$                108,451  $                128,865  $                               142,380  $                138,086  $                  140,838  $                108,451  $                140,838 
 Shares outstanding               4,296,949                 4,294,136                                3,480,701                 3,479,139                   3,479,139                 4,296,949                 3,479,139 
 Tangible book value per diluted share$                    25.24  $                    30.01  $                                   40.91  $                    39.69  $                     40.48  $                    25.24  $                    40.48 
                      
 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)$                166,232  $                162,327  $                               138,104  $                135,478  $                  132,629  $                166,232  $                132,629 
 Diluted average common shares outstanding               4,296,949                 4,294,136                                3,480,701                 3,479,139                   3,479,139                 4,296,949                 3,479,139 
 Tangible book value per diluted share adjusted for accumulated other comprehensive loss (income)$                    38.69  $                    37.80  $                                   39.68  $                    38.94  $                     38.12  $                    38.69  $                    38.12 
                      
 Calculation of tangible common equity to tangible assets (excluding PPP)                    
(D)Tangible common equity$                108,451  $                128,865  $                               142,380  $                138,086  $                  140,838  $                108,451  $                140,838 
(C)Tangible assets (excluding PPP)               2,072,712                 2,059,090                                1,584,436                 1,562,549                   1,538,478                 2,072,712                 1,538,478 
 Tangible common equity to tangible assets5.23%  6.26%  8.99%  8.84%  9.15%  5.23%  9.15% 
 Calculation of tangible common equity to tangible assets (excluding PPP)                    
(I)Tangible common equity adjusted for accumulated other comprehensive losses (income)$                166,232  $                162,327  $                               138,104  $                135,478  $                  132,629  $                166,232  $                132,629 
(C)Tangible assets (excluding PPP)               2,072,712                 2,059,090                                1,584,436                 1,562,549                   1,538,478                 2,072,712                 1,538,478 
 Tangible common equity adjusted for accumulated other comprehensive loss (income) to tangible assets8.02%  7.88%  8.72%  8.67%  8.62%  8.02%  8.62% 
                      
 Calculation of average tangible common equity                    
 Average stockholder's common equity$                142,415  $                170,374  $                               159,010  $                159,010  $                  155,850  $                155,945  $                154,024 
 Average goodwill                  (22,543)                   (21,251)                                  (11,109)                   (11,109)                     (11,109)                   (21,691)                   (11,109)
 Average other intangibles                    (5,850)                     (5,174)                                    (3,270)                     (3,523)                       (3,770)                     (5,514)                     (3,893)
(E)Average tangible stockholders' common equity$                114,022  $                143,949  $                               144,631  $                144,378  $                  140,971  $                128,740  $                139,022 
                      
 Calculation of core return on average common equity                    
(A)Core net income$                    3,929  $                    4,074  $                                   2,832  $                    3,055  $                     3,318  $                    8,003  $                    7,470 
(E)Average tangible common equity                  114,022                    143,949                                   144,631                    144,378                      140,971                    128,740                    139,022 
 Core return on average common equity13.78%  11.32%  7.83%  8.46%  9.42%  12.43%  10.75% 
                      
 Calculation of core yield on loans                    
 Interest income on loans$                  15,221  $                  13,286  $                                 10,282  $                  10,270  $                    10,275  $                  28,507  $                  21,021 
 Loan accretion income                       (613)                        (234)                                       (144)                        (271)                          (300)                        (847)                        (626)
 Adjusted interest income on loans14,608  13,052  10,138  9,999  9,975  27,660  20,395 
 Average loan balances               1,457,625                 1,274,407                                   960,606                    960,274                      976,520                 1,366,900                    976,059 
 Core yield on loans4.01%  4.10%  4.22%  4.17%  4.09%  4.05%  4.18% 
                      
 Calculation of adjusted allowance for loan loss to total loans                    
 Allowance for loan losses$                (13,406) $                (13,387) $                                (13,343) $                (13,774)  $  (13,639) $                (13,406) $                (13,639)
 Additional reserves not part of the allowance for loan loss                    (7,908)                     (8,749)                                    (2,428)                     (2,572)                       (3,420)                     (7,908)                     (3,420)
(F)Adjusted allowance for loan loss(21,314) (22,136) (15,771) (16,346) (17,059) (21,314) (17,059)
 Total loans               1,474,381                 1,439,728                                   966,720                    956,352                      969,491                 1,474,381                    969,491 
 Adjusted allowance for loan loss to total loans1.45%  1.54%  1.63%  1.71%  1.76%  1.45%  1.76% 
                      
 Calculation of adjusted allowance for loan loss to nonperforming loans                    
(F)Adjusted allowance for loan loss$                (21,314) $                (22,136) $                                (15,771) $                (16,346) $                  (17,059) $                (21,314) $                (17,059)
 Nonperforming loans                    10,021                       8,908                                       7,261                      13,543                       12,273                      10,021                      12,273 
 Adjusted allowance for loan loss to nonperforming loans (coverage ratios)212.69%  248.50%  217.20%  120.70%  139.00%  212.69%  139.00% 
                      
 Calculation of adjusted allowance for loan loss to total loans excluding PPP                    
(F)Adjusted allowance for loan loss$                (21,314) $                (22,136) $                                (15,771) $                (16,346) $                  (17,059) $                (21,314) $                (17,059)
 Total loans               1,474,381                 1,439,728                                   966,720                    956,352                      969,491                 1,474,381                    969,491 
 PPP loans                       (570)                     (9,983)                                  (22,072)                   (32,892)                     (50,304)                        (570)                   (50,304)
 Total loans excluding PPP               1,473,811                 1,429,745                                   944,648                    923,460                      919,187                 1,473,811                    919,187 
 Adjusted allowance for loan loss to total loans excluding PPP1.45%  1.55%  1.67%  1.77%  1.86%  1.45%  1.86% 
                      
 Calculation of core revenue                     
 Net interest income$                  17,298  $                  15,535  $                                 12,457  $                  12,200  $                    11,872  $                  32,833  $                  23,918 
 Non-interest income                     2,896                       3,144                                       3,808                       4,146                         3,680                       6,040                       7,993 
 CD premium amortization(175)                        (129)                                           -                              -                                -    (304)                           -   
 Purchase discount amortization                       (613)                        (234)                                       (144)                        (271)                          (300)                        (847)                        (626)
 Realized loss/(gain) on securities                       (258)                        (381)                                       (711)                        (590)                          (269)                        (639)                        (686)
(G)Core revenue$                  19,148  $                  17,935  $                                 15,410  $                  15,485  $                    14,983  $                  37,083  $                  30,599 
                      
 Calculation of core non-interest expense                    
 Non-interest expense$                  15,176  $                  16,269  $                                 12,732  $                  12,401  $                    11,010  $                  31,445  $                  21,503 
 Merger related expenses0                      (2,852)                                           -                              -                                -    (2,852)                           -   
 Core deposit amortization(410) (347) (249) (249) (249) (757) (497)
(H)Core non-interest expense$                  14,766  $                  13,070  $                                 12,483  $                  12,152  $                    10,761  $                  27,836  $                  21,006 
                      
 Calculation of core efficiency ratio                    
(H)Core non-interest expense$                  14,766  $                  13,070  $                                 12,483  $                  12,152  $                    10,761  $                  27,836  $                  21,006 
(G)Core revenue                    19,148                      17,935                                     15,410                      15,485                       14,983                      37,083                      30,599 
 Core efficiency ratio77.12%  72.87%  81.01%  78.48%  71.82%  75.06%  68.65% 
                      
 Calculation of non-interest expense to total average assets                    
 Non-interest expense$                  15,176  $                  16,269  $                                 12,732  $                  12,401  $                    11,010  $                  31,445  $                  21,503 
 Average total assets               2,085,039                 1,955,347                                1,601,040                 1,631,654                   1,594,610                 2,020,616                 1,565,325 
 Non-interest expense to total average assets2.91%  3.33%  3.18%  3.04%  2.76%  3.11%  2.75% 
                      
 Calculation of core non-interest expense to total average assets                    
(H)Core non-interest expense$                  14,766  $                  13,070  $                                 12,483  $                  12,152  $                    10,761  $                  27,836  $                  21,006 
 Average total assets               2,085,039                 1,955,347                                1,601,040                 1,631,654                   1,594,610                 2,020,616                 1,565,325 
 Core non-interest expense to total average assets2.83%  2.67%  3.12%  2.98%  2.70%  2.76%  2.68% 
                      
 Calculation of tax adjusted net interest margin                    
 Net interest income$                  17,298  $                  15,535  $                                 12,457  $                  12,200  $                    11,872  $                  32,833  $                  23,918 
 Tax adjusted interest on securities and loans                        930                          966                                         959                          851                            745                       1,896                       1,422 
 Adjusted net interest income18,228  16,501  13,416  13,051  12,617  34,729  25,340 
 Total average earning assets               1,927,664                 1,820,588                                1,500,183                 1,506,674                   1,473,625                 1,874,835                 1,445,263 
 Tax adjusted net interest margin3.78%  3.63%  3.58%  3.46%  3.42%  3.70%  3.51% 
                      
 Efficiency Ratio                    
 Total non-interest expense$                  15,176  $                  16,269  $                                 12,732  $                  12,401  $                    11,010  $                  31,445  $                  21,503 
 Total revenue                    20,194                      18,679                                     16,265                      16,346                       15,552                      38,873                      31,911 
 Efficiency ratio75.15%  87.10%  78.28%  75.87%  70.79%  80.89%  67.38% 
                      

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