Finward Bancorp Announces Second Quarter 2025 Results

Finward Bancorp (NASDAQ:FNWD) (the "Bancorp"), the holding company for Peoples Bank (the "Bank"), today announced that net income available to common stockholders was $2.2 million, or $0.50 per diluted share, for the quarter ended June 30, 2025, as compared to $455 thousand, or $0.11 per diluted share, for the quarter ended March 31, 2025. Selected performance metrics are as follows for the periods presented:

"Our team has been focused on improving core operating results over the past several quarters, and this quarter has begun to show the results of those efforts. Net interest margin expanded for another consecutive quarter and is above 3% on a tax-equivalent basis. Importantly, we have moved Tier 1 capital up above key internal targets, and asset quality has remained relatively stable. Net recoveries were a strong point, and supported overall profitability and credit quality. Seasonal and timing factors impacted operating expense and non-interest income, and we see continued opportunity in both areas as the year moves forward," said Benjamin Bochnowski, CEO.

Highlights of the current period include:

• Net Interest Margin - The net interest margin for the quarter ended June 30, 2025 was 2.97% compared to 2.81% for the quarter ended March 31, 2025. Net interest margin on a tax-equivalent basis (a non-GAAP measure) for the quarter ended June 30, 2025 was 3.11%, as compared to 2.95% for the quarter ended March 31, 2025. The increased net interest margin from the prior quarter is primarily the result of increased loan yields from repricing, as well as improved funding costs and mix.

• Funding - As of June 30, 2025, deposits totaled $1.8 billion, an increase of $4.5 million, or 0.3% compared with March 31, 2025 balances, which also totaled $1.8 billion. As of June 30, 2025, non-interest-bearing deposits totaled $271.2 million, a decrease of $10.3 million. Core deposits totaled $1.2 billion at June 30, 2025 and March 31, 2025. Core deposits include checking, savings, and money market accounts and represented 69.1% of the Bancorp's total deposits at June 30, 2025. As of June 30, 2025, balances for certificates of deposit totaled $542.7 million, compared to $544.8 million on March 31, 2025, a decrease of $2.1 million or 0.4%. The increase in total portfolio deposits is primarily related to cyclical flows and continued adjustments to deposit pricing. In addition, as of June 30, 2025, borrowings and repurchase agreements totaled $113.3 million, an increase of $11.6 million or 11.4%, compared to March 31, 2025. The increase in short-term borrowings was the result of cyclical inflows and outflows of interest-earning assets and interest-bearing liabilities.
  
  
  
  As of June 30, 2025, 71.7% of our deposits are fully FDIC insured, and another 8.0% are further backed by the Indiana Public Deposit Insurance Fund. The Bancorp's liquidity position remains strong with solid core deposit customer relationships, excess cash, debt securities, contractual loan repayments, and access to diversified borrowing sources. As of June 30, 2025, the Bancorp had available liquidity of $728 million including borrowing capacity from the FHLB and Federal Reserve facilities.

• Securities Portfolio - Securities available for sale balances decreased by $2.3 million to $327.8 million as of June 30, 2025, compared to $330.1 million as of March 31, 2025. The decrease in securities available for sale was primarily due to payoffs of collateralized mortgage obligations and residential mortgage-backed securities within the portfolio. The yield on the securities portfolio increased to 2.42% for the three months ended June 30, 2025 from 2.38% for the three months ended March 31, 2025. Management did not execute any securities sale transactions during the quarter.

• Lending - The Bank's aggregate loan portfolio totaled $1.5 billion on both June 30, 2025 and March 31, 2025. During the three months ended June 30, 2025, the Bank originated $46.1 million in new commercial loans, compared to $36.7 million during the three months ended March 31, 2025. At June 30, 2025, the Bancorp's portfolio loan balances in commercial real estate owner occupied properties totaled $251.0 million or 16.9% of total loan balances and commercial real estate non-owner occupied properties totaled $299.9 million or 20.1% of total loan balances. Of the $299.9 million in commercial real estate non-owner occupied properties balances, loans collateralized by office buildings represented $42.1 million or 2.8% of total loan balances.

• Asset Quality - At June 30, 2025, non-performing loans totaled $13.5 million, compared to $12.5 million at March 31, 2025, an increase of $1.0 million or 8.4%. The Bank's ratio of non-performing loans to total loans was 0.91% at June 30, 2025, compared to 0.84% at March 31, 2025. The Bank's ratio of non-performing assets to total assets increased to 0.74% at June 30, 2025 from 0.69% at March 31, 2025. Management maintains a vigilant oversight of nonperforming loans through proactive relationship management.
  
  
  
  The allowance for credit losses (ACL) on loans totaled $18.2 million at June 30, 2025, or 1.22% of total loans receivable, compared to $17.9 million at March 31, 2025, or 1.20% of total loans receivable, an increase of $229 thousand or 1.3%. The Bank's unused commitment reserve, included in other liabilities, totaled $2.0 million at June 30, 2025, compared to $2.1 million at March 31, 2025, a decrease of $89 thousand or 4.2%.
  
  
  
  For the quarter ended June 30, 2025, the Bank recorded a net benefit from credit loss totaling $274 thousand based on net loan recoveries, reduction of certain loan and unfunded commitment segment balances, and other factors within the Bank's ACL modeling. The second quarter's benefit consisted of a $185 thousand reversal for credit losses on loans, and a $89 thousand reversal of credit losses on unused commitments. For the quarter ended June 30, 2025, net loan recoveries totaled $414 thousand, compared to net charge-offs of $33 thousand for the quarter ended March 31, 2025. The allowance for credit losses as a percentage of non-performing loans, or coverage ratio, was 133.0% at June 30, 2025, compared to 143.8% at March 31, 2025.

• Operating Expenses - Non-interest expense as a percentage of average assets was 2.90% for the quarter ended June 30, 2025, as compared to 2.81% for the quarter ended March 31, 2025. The increase in non-interest expenses quarter over quarter was primarily attributable to higher data processing expenses and higher marketing expenses. The Bank remains focused on identifying additional operating efficiencies and third-party expense reductions.

• Capital Adequacy - As of June 30, 2025, the Bank's tier 1 leverage ratio was 8.69%, an improvement of 0.21% compared to 8.48% at March 31, 2025. The Bank's capital continues to exceed all applicable regulatory capital requirements as set forth in 12 C.F.R. § 324. The Bancorp's tangible book value per share (non-GAAP) was $30.16 at June 30, 2025, up from $29.55 as of March 31, 2025. Tangible common equity to total assets (non-GAAP) was 6.32% at June 30, 2025, up from 6.26% as of March 31, 2025. Excluding accumulated other comprehensive losses, tangible book value per share (non-GAAP) increased to $43.47 as of June 30, 2025, from $43.02 as of March 31, 2025.

Disclosures Regarding Non-GAAP Financial Measures

Reported amounts are presented in accordance with GAAP. In this press release, the Bancorp also provides certain financial measures identified as non-GAAP. The Bancorp's management believes that the non-GAAP information, which consists of tangible common equity, tangible common equity adjusted for accumulated other comprehensive losses, tangible book value per share, tangible book value per share adjusted for accumulated other comprehensive losses, tangible common equity/total assets, tangible common equity adjusted for other comprehensive loss/total assets, net interest margin on a tax-equivalent basis, and efficiency ratio which can vary from period to period, provides a better comparison of period to period operating performance. The net interest income and net interest margin on a tax-equivalent basis measures recognize the income tax savings when comparing taxable and tax-exempt assets. Interest income and yields on tax-exempt securities and loans are presented using the current federal corporate income tax rate of 21%. Management believes that it is standard practice in the banking industry to present net interest income and net interest margin on a fully tax-equivalent basis and that it may enhance comparability for peer comparison purposes. 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 the "Reconciliation of non-GAAP Financial Measures" below for more information.

About Finward Bancorp

Finward Bancorp is a locally managed and independent financial holding company headquartered in Munster, Indiana, whose activities are primarily limited to holding the stock of Peoples Bank. Peoples Bank provides a wide range of personal, business, electronic and wealth management financial services from its 26 locations in Lake and Porter Counties in Northwest Indiana and Chicagoland. Finward Bancorp's common stock is quoted on The NASDAQ Stock Market, LLC under the symbol FNWD. The website ibankpeoples.com provides information on Peoples Bank's products and services, and Finward Bancorp's investor relations.

Forward Looking Statements

This press release may contain forward-looking statements regarding the financial performance, business prospects, growth and operating strategies of the Bancorp. For these statements, the Bancorp claims the protections of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Statements in this communication should be considered in conjunction with the other information available about the Bancorp, including the information in the filings the Bancorp makes with the SEC. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management's expectations and are subject to a number of risks and uncertainties. Forward-looking statements are typically identified by using words such as "anticipate," "estimate," "project," "intend," "plan," "believe," "will" and similar expressions in connection with any discussion of future operating or financial performance.

Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include: changes in domestic and international trade policies, including tariffs and other non-tariff barriers, and the effects of such changes on the Bank and its customers; risks related to the development and use of artificial intelligence (AI); the Bank's ability to demonstrate compliance with the terms of the previously disclosed consent order and memorandum of understanding entered into between the Bank and the Federal Deposit Insurance Corporation ("FDIC") and Indiana Department of Financial Institutions ("DFI"), or to demonstrate compliance to the satisfaction of the FDIC and/or DFI within prescribed time frames; the Bank's agreement under the memorandum of understanding to refrain from paying cash dividends without prior regulatory approval; 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, regulatory actions by the Federal Deposit Insurance Corporation and Indiana Department of Financial Institutions, 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 the Bancorp'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 the Bancorp or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. Except as required by law, The Bancorp 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.