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

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 sold 4,683     2   0.09   1,040      
Certificates of deposit in other financial institutions 1,674     6   0.72   1,535     15   1.95
Securities available-for-sale 474,016     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 stock 3,530     42   2.38   3,681     40   2.17
Total interest earning assets 1,874,835     $      33,634   3.59   1,445,263     $      25,162   3.48
Cash and non-interest bearing deposits in other financial institutions 20,821             35,055          
Allowance for loan losses (13,383 )           (12,960 )        
Other noninterest bearing assets 138,343             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 agreements 21,013     42   0.40   15,674     22   0.28
Borrowed funds 7,982     33   0.83   1,903     22   2.31
Total interest bearing liabilities 1,842,249     $           801   0.09   1,393,006     $        1,244   0.18
Other noninterest bearing liabilities 22,029             18,295          
    Total liabilities 1,864,278             1,411,301          
    Total stockholders’ equity 156,338             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 sold 1,388     2   0.58   1,288                –  
Certificates of deposit in other financial institutions 1,625     3   0.74   1,473     7         1.90
Securities available-for-sale 438,309     2,449   2.23   433,355     2,124         1.96
Loans receivable 1,457,625     15,221   4.18   976,520     10,275         4.21
Federal Home Loan Bank stock 3,038     20   2.63   3,446     20         2.32
Total interest earning assets 1,927,664     $      17,740   3.68   1,473,625     $      12,435         3.38
Cash and non-interest bearing deposits in other financial institutions 21,435             36,377          
Allowance for loan losses (13,399 )           (13,255 )        
Other noninterest bearing assets 149,339             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 agreements 22,618     26   0.46   16,855     12         0.28
Borrowed funds 9,851     27   1.10   1,720     2         0.47
Total interest bearing liabilities 1,917,181     $           442   0.09   1,420,973     $           563         0.16
Other noninterest bearing liabilities 25,443             17,787          
    Total liabilities 1,942,624             1,438,760          
    Total stockholders’ equity 142,415             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 Expense
The 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.

Lending
The 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 Quality
At 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.

Investing
The 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.

Funding
On 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 Measures
Reported amounts are presented in accordance with GAAP. In this press release the Bancorp also is providing certain financial measures that are identified as non-GAAP. The Bancorp’s management believes that the non-GAAP information, which consists of core net income, core diluted earnings per share, core return on equity, core return on assets, core pre-provision net revenue, core pre-provision net revenue/average assets, tangible assets (excluding PPP), tangible common equity, tangible common equity/tangible assets (excluding PPP), average tangible common equity, core yield on loans, core noninterest expense, core noninterest expense/average assets, core efficiency ratio, core earnings, adjusted allowance for loan loss to total loans, adjusted allowance for loan loss to nonperforming loans, adjusted allowance for loan loss to total loans (excluding PPP), core revenue, adjusted net interest margin, and reported net income excluding non-core operations, which can vary from period to period, provides a better comparison of period to period operating performance. Additionally, the Bancorp believes this information is utilized by regulators and market analysts to evaluate a company’s financial condition and, therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies. Refer to Table 1 – Reconciliation of Non-GAAP Financial Measures at the end of this document for a reconciliation of the non-GAAP measures identified herein and their most comparable GAAP measures.

About Finward Bancorp
Finward Bancorp is a locally managed and independent financial holding company headquartered in Munster, Indiana, whose activities are primarily limited to holding the stock of Peoples Bank. Peoples Bank provides a wide range of personal, business, electronic and wealth management financial services from its 29 locations in Lake and Porter Counties in Northwest Indiana and Chicagoland. Finward Bancorp’s common stock is quoted on the NASDAQ Stock Market, LLC under the symbol FNWD. The website ibankpeoples.com provides information on Peoples Bank’s products and services, and Finward Bancorp’s investor relations.

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

Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include: difficulties and delays in integrating Finward’s and Royal’s businesses or fully realizing cost savings and other benefits; business disruption following the merger; any continuing risks and uncertainties for our business, results of operations, and financial condition relating to the COVID-19 pandemic; changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates, market liquidity, and capital markets, as well as the magnitude of such changes, which may reduce net interest margins; inflation; further deterioration in the market value of securities held in the Bancorp’s investment securities portfolio, whether as a result of macroeconomic factors or otherwise; customer acceptance of the Bancorp’s products and services; customer borrowing, repayment, investment, and deposit practices; customer disintermediation; the introduction, withdrawal, success, and timing of business initiatives; competitive conditions; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with mergers, acquisitions, and divestitures; economic conditions; and the impact, extent, and timing of technological changes, capital management activities, and other actions of the Federal Reserve Board and legislative and regulatory actions and reforms. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in Finward’s reports (such as the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K) filed with the SEC and available at the SEC’s Internet website (www.sec.gov). All subsequent written and oral forward-looking statements concerning matters attributable to Finward or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. Except as required by law, Finward does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statement is made.

In addition to the above factors, we also caution that the actual amounts and timing of any future common stock dividends or share repurchases will be subject to various factors, including our capital position, financial performance, capital impacts of strategic initiatives, market conditions, and regulatory and accounting considerations, as well as any other factors that our Board of Directors deems relevant in making such a determination. Therefore, there can be no assurance that we will repurchase shares or pay any dividends to holders of our common stock, or as to the amount of any such repurchases or dividends.

FOR FURTHER INFORMATION
CONTACT 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 amortization 410     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 outstanding 4,295,742     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 assets 2,085,039     1,955,347                                   1,601,040                    1,631,654                      1,594,610                    2,020,616                    1,565,325  
  Core return on average assets 0.75%     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 income 2,896     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 revenue 5,018     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 amortization 410     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 assets 0.87%     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 assets 5.23%     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 assets 8.02%     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 equity 13.78%     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 loans 14,608     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 loans 4.01%     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 )    
nbsp; 
(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 loans 1.45%     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 PPP 1.45%     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 expenses 0                         (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 ratio 77.12%     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 assets 2.91%     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 assets 2.83%     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 income 18,228     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 margin 3.78%     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 ratio 75.15%     87.10%     78.28%     75.87%     70.79%     80.89%     67.38%  
                                           

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