# EDGAR Filing Document

**Accession Number:** 0000919864
**File Stem:** 0001437749-23-001715
**Filing Date:** 2023-1
**Character Count:** 74575
**Document Hash:** c5846cf7294ba2c14500f986716706d8
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001437749-23-001715.hdr.sgml**: 20230125

**ACCESSION NUMBER**: 0001437749-23-001715

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 14

**CONFORMED PERIOD OF REPORT**: 20230125

**ITEM INFORMATION**: Results of Operations and Financial Condition

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230125

**DATE AS OF CHANGE**: 20230125

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Finward Bancorp
- **CENTRAL INDEX KEY:** 0000919864
- **STANDARD INDUSTRIAL CLASSIFICATION:** SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035]
- **IRS NUMBER:** 351927981
- **STATE OF INCORPORATION:** IN
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-40999
- **FILM NUMBER:** 23549948

**BUSINESS ADDRESS:**
- **STREET 1:** 9204 COLUMBIA AVE
- **CITY:** MUNSTER
- **STATE:** IN
- **ZIP:** 46321
- **BUSINESS PHONE:** 219 836-9690

**MAIL ADDRESS:**
- **STREET 1:** 9204 COLUMBIA AVE
- **CITY:** MUNSTER
- **STATE:** IN
- **ZIP:** 46321

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** NORTHWEST INDIANA BANCORP
- **DATE OF NAME CHANGE:** 19940307

fnwd20230124_8k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

------

**FORM **8-K**

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 25, 2023

**FINWARD BANCORP**

(Exact name of registrant as specified in its charter)

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| | | |
|:---|:---|:---|
| Indiana | 001-40999 | 35-1927981 |
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |

---

9204 Columbia Avenue

Munster, Indiana 46321

(Address of principal executive offices) (Zip Code)

(219) 836-4400

(Registrant's telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

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| | | |
|:---|:---|:---|
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common stock, no par value | FNWD | The NASDAQ Stock Market, LLC |

---

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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| | |
|:---|:---|
| **Item 2.02.** | **Results of Operations and Financial Condition** |

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On January 25, 2023, Finward Bancorp (the "Bancorp") issued a press release reporting its unaudited financial results for the quarter and twelve months ending December 31, 2022. A copy of the press release is filed as Exhibit 99.1 to this report and is incorporated herein by reference.

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| | |
|:---|:---|
| **Item 9.01.**  | **Financial Statements and Exhibits.** |

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(d) <u>Exhibits</u>.<br>

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| | |
|:---|:---|
| 99.1 | [Earnings release for the quarter and twelve months ended December 31, 2022, and Unaudited Consolidated Condensed Balance Sheets as of December 31, 2022, and Consolidated Condensed Statements of Income and Selected Financial Data for the quarter and twelve months ended December 31, 2022.](ex_467437.htm) |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |

---

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: January 25, 2023

---

| | |
|:---|:---|
| FINWARD BANCORP | FINWARD BANCORP |
| By:  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; /s/ Peymon S. Torabi |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Name: Peymon S. Torabi |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Title: Executive Vice President, Chief<br> Financial Officer and Treasurer |

---

## Exhibit 99.1

**Exhibit 99.1**

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| | |
|:---|:---|
| **FOR IMMEDIATE RELEASE** | **FOR FURTHER INFORMATION** |
| **JANUARY 25, 2023** | **CONTACT SHAREHOLDER SERVICES** |
|  | **(219) 853-7575** |

---

**FINWARD BANCORP**

**ANNOUNCES EARNINGS FOR THE QUARTER AND TWELVE MONTHS ENDED**

**DECEMBER 31, 2022** 

Munster, Indiana - Finward Bancorp (Nasdaq: FNWD) (the "Bancorp"), the holding company for Peoples Bank (the "Bank"), today announced that net income available to common shareholders was $15.1 million, or $3.60 per diluted share, for the twelve months ended December 31, 2022, as compared to $15.0 million, or $4.30 per diluted share, for the corresponding prior year period. For the quarter ended December 31, 2022, the Bancorp's net income totaled $4.0 million, or $0.93 per diluted share, as compared to $3.3 million, or $0.95 per diluted share, for the quarter ending December 31, 2021. Selected performance metrics are as follows for the periods presented:

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Performance Ratios** | Quarter ended, | Quarter ended, | Quarter ended, | Quarter ended, | Quarter ended, | Twelve months ended, | Twelve months ended, |
|  | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) |
|  | December 31, | September 30, | June 30, | March 31, | December 31, | December 31, | December 31, |
|  | 2022 | 2022 | 2022 | 2022 | 2021 | 2022 | 2021 |
| Return on equity | 12.96% | 13.65% | 12.45% | 5.01% | 8.56% | 10.47% | 9.61% |
| Return on assets | 0.78% | 0.88% | 0.85% | 0.44% | 0.83% | 0.74% | 0.95% |
| Noninterest income / average assets | 0.56% | 0.51% | 0.56% | 0.64% | 0.95% | 0.56% | 1.01% |
| Noninterest expense / average assets | 3.07% | 2.90% | 2.91% | 3.33% | 3.18% | 3.05% | 2.96% |
| Efficiency ratio | 79.63% | 74.54% | 75.15% | 87.10% | 78.28% | 78.95% | 72.28% |

---

Core net income for the twelve months ended December 31, 2022, amounted to $17.3 million, or $4.12 per diluted share, compared to $13.4 million, or $3.84 per diluted share for the twelve months ended December 31, 2021. Core net income for the quarter ended December 31, 2022, amounted to $4.6 million, or $1.08 per diluted share, compared to $2.8 million, or $0.81 per diluted share for the quarter ended December 31, 2021. Core net income is a non-GAAP measure. For the periods presented, the core net income measure excludes merger related expenses, net gain on securities, net loss recognized on the sale of premises and equipment, impairment charges on assets held for sale, core deposit accretion, certificate of deposit purchase premium amortization, purchase discount amortization, and related tax benefit/(cost). Selected non-GAAP performance metrics are as follows for the periods presented:

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Non-GAAP Performance Ratios** | Quarter ended, | Quarter ended, | Quarter ended, | Quarter ended, | Quarter ended, | Twelve Months Ended | Twelve Months Ended |
|  | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) |
|  | December 31, | September 30, | June 30, | March 31, | December 31, | December 31, | December 31, |
|  | 2022 | 2022 | 2022 | 2022 | 2021 | 2022 | 2021 |
| Core return on equity | 19.47% | 17.75% | 13.78% | 11.32% | 7.83% | 14.83% | 9.44% |
| Core return on assets | 0.90% | 0.90% | 0.75% | 0.83% | 0.71% | 0.85% | 0.85% |
| Core noninterest expense / average assets | 2.75% | 2.78% | 2.83% | 2.67% | 3.12% | 2.76% | 2.90% |
| Core efficiency ratio | 74.36% | 73.10% | 77.12% | 72.87% | 81.01% | 74.38% | 74.22% |
| Net interest margin - tax equivalent | 3.73% | 3.84% | 3.78% | 3.63% | 3.58% | 3.74% | 3.51% |

---

Refer to "Disclosure Regarding Non-GAAP Measures" and the "Reconciliation of the Non-GAAP Performance Ratios" table below for additional information regarding our non-GAAP measures and impact per period by operation.

Highlights of the twelve-month period include:

● **Core net income benefiting from acquisition and internal growth:** Net income for the twelve months ended December 31, 2022, increased $117 thousand compared to the twelve months ended December 31, 2021. Additionally, core net income for the twelve months ended December 31, 2022, increased by $3.9 million, as compared to the twelve months ended December 31, 2021, primarily relating to the increase in interest-earning assets acquired from the acquisition of Royal Financial, Inc. ("Royal"), organic loan growth, and the overall improvement to the net interest margin during the year.

● **Net interest margin:** The net interest margin for the twelve months ended December 31, 2022, was 3.56%, compared to 3.29% for the twelve months ended December 31, 2021. The tax-adjusted net interest margin (a non-GAAP measure) for the twelve months ended December 31, 2022, was 3.74%, compared to 3.51% for the twelve months ended December 31, 2021. The increased net interest margin and tax-adjusted margin is primarily related to increased loan balances from the acquisition of Royal, organic loan growth, and the ability to manage deposit and borrowing costs to support earning asset growth. Organic loan growth (separate from the Royal acquisition) totaled $96.5 million or 10.0%. See Table 1 at the end of this press release for a reconciliation of the tax-adjusted net interest margin to the GAAP net interest margin. Despite the improvement to the net interest margin during the year, the overall increasing interest rate environment caused a contraction in the margin during the fourth quarter that will likely continue into 2023.

------

● **Unrealized losses on the securities portfolio:** Accumulated other comprehensive losses were $64.3 million as of December 31, 2022. However, during the fourth quarter, securities portfolio cashflows from sales and regular paydowns of the portfolio of $8.5 million were used to fund internally generated loan originations. Furthermore, during full-year 2022, a total of $74.6 million of cashflows were redirected from the securities portfolio to fund internal loan growth. The yield on the securities portfolio improved to 2.22% for the twelve months ended December 31, 2022, up from 1.96% for the twelve months ended December 31, 2021. The securities portfolio also generated gains of $662 thousand from the sale of securities for the twelve months ended December 31, 2022. The effective duration of the securities portfolio was 6.6 years as of December 31, 2022. Management continues to actively manage the securities portfolio and does not currently anticipate the need to realize losses from the securities portfolio, as losses are currently driven by the interest rate environment and management feels are fully recoverable. Further, it remains unlikely the Bancorp will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity.

● **Gain on sale of loans:** Increases in mortgage rates have dampened demand and slowed the sale of fixed rate mortgage loans into the secondary market. As a result, gains from the sale of loans for the twelve months ended December 31, 2022, totaled $1.4 million, down from $5.3 million for the twelve months ended December 31, 2021. During the twelve months ended December 31, 2022, the Bancorp originated $44.9 million in new fixed rate mortgage loans for sale, compared to $153.1 million during the twelve months ended December 31, 2021. During the twelve months ended December 31, 2022, the Bancorp originated $105.4 million in new mortgage loans retained in its portfolio, compared to $45.1 million during the twelve months ended December 31, 2021. These retained loans are primarily construction loans and adjustable-rate loans with a fixed-rate period of 7 years or less, and the Bank continues to sell longer-duration fixed rate mortgages into the secondary market.

● **Building a digital-forward foundation:** Primary focus remains on enhancing the customer experience and managing risk through our digital platforms. The Bank transitioned to a new tech-enabled customer contact platform during October and is in process of transitioning all customer calls to the platform. In the first quarter, management is prioritizing the digitization and automation of back-office tasks to drive efficiency and improve the foundation for a digital-first banking experience. The Bank is also planning further enhancements to customer acquisition, onboarding, and servicing platforms to enhance customer experience and drive efficiency in these areas.

● **Optimizing the banking center footprint:** Following the successful closure of one banking center and the donation and leaseback of another during 2021, we have successfully closed five branches during 2022, a reduction of 16%. Each branch closure and sale is expected to result in approximately $250 thousand in operational expense reduction, excluding personnel expenses. Impairment charges recorded on closed branches during the twelve-months ended 2022, totaled $1.2 million. The Bank's remaining 26 locations are being analyzed for footprint optimization opportunities, with additional locations showing the potential for reducing operating overhead over the next 12 months. These efforts are reducing fixed costs and allowing for redeployment of a portion of occupancy expenses into building a digital-forward foundation to better meet the needs of the customers and communities the Bancorp serves.

● **Asset quality:** At December 31, 2022, the allowance for loan losses totaled $12.9 million and is considered adequate by management. For the twelve months ended December 31, 2022, charge-offs, net of recoveries, totaled $446 thousand. The allowance for loan losses as a percentage of total loans was 0.85% at December 31, 2022, and the allowance for loan losses as a percentage of non-performing loans, or coverage ratio, was 127.3% at December 31, 2022. Management also considers reserves that are not part of the ALL that have been established from acquisition activity. When these additional reserves are included on a non-GAAP basis, the allowance for loan losses as a percentage of total loans was 1.31% at December 31, 2022, and the allowance for loan losses as a percentage of non-performing loans, or coverage ratio, was 195.9% at December 31, 2022. See Table 1 at the end of this press release for a reconciliation of the adjusted allowance for loan losses to total loans and coverage ratio to the related GAAP ratios.

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● **Personnel**: A headcount freeze, and attrition plan remains in place, and has netted a reduction of 12 full time equivalents, or 4%, during the three months ended December 31, 2022.

● **Capital Adequacy**: As of December 31, 2022, the Bancorp's tier 1 capital to adjusted average assets ratio totaled 7.7%, and under all regulatory capital requirements, continues to be considered well capitalized. Tangible book value per share was $25.40 at December 31, 2022, up from $20.99 as of September 30, 2022 (a non-GAAP measure). The increase is due to recoveries of accumulated other comprehensive losses from the unrealized loss position on the securities portfolio as noted above. Excluding accumulated other comprehensive losses, tangible book value per share increased to $40.36 as of December 31, 2022, from $39.57 as of September 30, 2022 (a non-GAAP measure). Tangible capital represented 5.3% of tangible assets at December 31, 2022 (a non-GAAP measure). Tangible capital, excluding accumulated other comprehensive losses, was 8.5% at December 31, 2022 (a non-GAAP measure). See Table 1 at the end of this press release for a reconciliation of the tangible book value per share, tangible book value per share adjusted for accumulated other losses, tangible capital as a percentage of tangible assets, and tangible capital as a percentage of tangible assets adjusted for accumulated other comprehensive losses to the related GAAP ratios.

"Expense management has been a focus for 2022, and we took steps to further reduce fixed costs in the fourth quarter in anticipation of changing economic conditions in 2023. The Bank is healthy from a credit standpoint, which reflects our ability to originate high-quality, relationship-based assets in our footprint. We did see some contraction in our net interest margin in the 4th quarter, primarily due to increasing funding costs as we saw seasonal outflows of core funds in the month of December. Loan demand continues to be strong on the commercial side, supporting higher yields. Funding is a key lever to support the margin in 2023, and we are working to maintain core relationships and using on-balance sheet liquidity to reduce wholesale funding whenever possible," said Benjamin Bochnowski, chief executive officer. "As yields have moved in, our unrealized losses have abated. As opportunities arise to reposition our securities portfolio to provide liquidity to fund loan growth, we will continue to do so throughout the year to maximize our margin and profitability during the year."

**<u>Net Interest Income</u>**

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| Year-to-Date |  |  |  |  |  |  |
| *(Dollars in thousands)* | Average Balances, Interest, and Rates | Average Balances, Interest, and Rates | Average Balances, Interest, and Rates | Average Balances, Interest, and Rates | Average Balances, Interest, and Rates | Average Balances, Interest, and Rates |
| *(unaudited)* | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2021 | December 31, 2021 | December 31, 2021 |
|  | Average<br> Balance | Interest | Rate (%) | Average<br> Balance | Interest | Rate (%) |
| *ASSETS* |  | ` |  |  |  |  |
| Interest bearing deposits in other financial institutions | $21685 | $287 | 1.32 | $43375 | $36 | 0.08 |
| Federal funds sold | 3025 | 11 | 0.36 | 1058 |  |  |
| Certificates of deposit in other financial institutions | 1868 | 28 | 1.50 | 1509 | 25 | 1.66 |
| Securities available-for-sale | 427291 | 9492 | 2.22 | 456783 | 8951 | 1.96 |
| Loans receivable | 1431017 | 62133 | 4.34 | 968185 | 41573 | 4.29 |
| Federal Home Loan Bank stock | 3675 | 84 | 2.29 | 3462 | 70 | 2.02 |
| Total interest earning assets | 1888561 | $72035 | 3.81 | 1474372 | $50655 | 3.44 |
| Cash and non-interest bearing deposits in other financial institutions | 16820 |  |  | 14829 |  |  |
| Allowance for loan losses | (13385) |  |  | (13353) |  |  |
| Other noninterest bearing assets | 146259 |  |  | 98133 |  |  |
| &nbsp;&nbsp;&nbsp; Total assets | $2038255 |  |  | $1573981 |  |  |
| *LIABILITIES AND STOCKHOLDERS' EQUITY* | | | | | | |
| Total deposits | $1823598 | $3604 | 0.20 | $1381101 | $2002 | 0.14 |
| Repurchase agreements | 20649 | 195 | 0.94 | 17789 | 47 | 0.26 |
| Borrowed funds | 26806 | 1087 | 4.06 | 2448 | 31 | 1.27 |
| Total interest bearing liabilities | 1871053 | $4886 | 0.26 | 1401338 | $2080 | 0.15 |
| Other noninterest bearing liabilities | 23132 |  |  | 16996 |  |  |
| &nbsp;&nbsp;&nbsp; Total liabilities | 1894185 |  |  | 1418334 |  |  |
| &nbsp;&nbsp;&nbsp; Total stockholders' equity | 144070 |  |  | 155647 |  |  |
| &nbsp;&nbsp;&nbsp; Total liabilities and stockholders' equity | $2038255 |  |  | $1573981 |  |  |

---

------

Net interest income was $67.1 million for the twelve months ended December 31, 2022, an increase of $18.6 million (38.2%), compared to $48.6 million for the twelve months ended December 31, 2021. The Bancorp's net interest margin on a tax-adjusted basis (non-GAAP) was 3.74% for the twelve months ended December 31, 2022, compared to 3.51% for the twelve months ended December 31, 2021.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| Quarter Ended |  |  |  |  |  |  |
| *(Dollars in thousands)* | Average Balances, Interest, and Rates | Average Balances, Interest, and Rates | Average Balances, Interest, and Rates | Average Balances, Interest, and Rates | Average Balances, Interest, and Rates | Average Balances, Interest, and Rates |
| *(unaudited)* | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2021 | December 31, 2021 | December 31, 2021 |
|  | Average<br> Balance | Interest | Rate (%) | Average<br> Balance | Interest | Rate (%) |
| *ASSETS* | | | | | | |
| Interest bearing deposits in other financial institutions | $13914 | $124 | 3.56 | $12516 | $3 | 0.10 |
| Federal funds sold | 1460 | 3 | 0.82 | 1039 |  |  |
| Certificates of deposit in other financial institutions | 2218 | 13 | 2.34 | 1706 | 4 | 0.94 |
| Securities available-for-sale | 360865 | 2197 | 2.44 | 521069 | 2523 | 1.94 |
| Loans receivable | 1503543 | 17504 | 4.66 | 960606 | 10282 | 4.28 |
| Federal Home Loan Bank stock | 4596 | 21 | 1.83 | 3247 | 15 | 1.85 |
| Total interest earning assets | 1886596 | $19862 | 4.21 | 1500183 | $12827 | 3.42 |
| Cash and non-interest bearing deposits in other financial institutions | 3240 |  |  | 14810 |  |  |
| Allowance for loan losses | (13289) |  |  | (13790) |  |  |
| Other noninterest bearing assets | 158812 |  |  | 99837 |  |  |
| &nbsp;&nbsp;&nbsp; Total assets | $2035359 |  |  | $1601040 |  |  |
| *LIABILITIES AND STOCKHOLDERS' EQUITY* | | | | | | |
| Total deposits | $1793583 | $2007 | 0.45 | $1403559 | $350 | 0.10 |
| Repurchase agreements | 19799 | 102 | 2.06 | 18771 | 12 | 0.26 |
| Borrowed funds | 72772 | 944 | 5.19 | 6769 | 8 | 0.47 |
| Total interest bearing liabilities | 1886154 | $3053 | 0.65 | 1429099 | $370 | 0.10 |
| Other noninterest bearing liabilities | 27055 |  |  | 17177 |  |  |
| &nbsp;&nbsp;&nbsp; Total liabilities | 1913209 |  |  | 1446276 |  |  |
| &nbsp;&nbsp;&nbsp; Total stockholders' equity | 122150 |  |  | 154764 |  |  |
| &nbsp;&nbsp;&nbsp; Total liabilities and stockholders' equity | $2035359 |  |  | $1601040 |  |  |

---

Net interest income was $16.8 million for the quarter ended December 31, 2022, an increase of $4.4 million (34.9%), compared to $12.5 million for the quarter ended December 31, 2021. The Bancorp's net interest margin was 3.56% for the quarter ended December 31, 2022, compared to 3.32% for the quarter ended December 31, 2021. The Bancorp's net interest margin on a tax-adjusted basis (non-GAAP) was 3.73% for the quarter ended December 31, 2022, compared to 3.58% for the quarter ended December 31, 2021. The increased net interest income and net interest margin for the quarter and the twelve months was primarily the result of the increased earning assets acquired through the Royal acquisition, the reallocation of securities cashflows into organic loan growth, and managing interest expense.

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**<u>Noninterest Income</u>**

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| | | | | |
|:---|:---|:---|:---|:---|
| *(Dollars in thousands, except per share data)* | Twelve Months Ended December 31, | Twelve Months Ended December 31, | 12/31/2022 vs. 12/31/2021 | 12/31/2022 vs. 12/31/2021 |
|  | 2022 | 2021 | $ Change | % Change |
| Noninterest income: |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Fees and service charges | 6257 | 5388 | 869 | 16.1% |
| &nbsp;&nbsp;&nbsp; Wealth management operations | 2113 | 2375 | (262) | -11.0% |
| &nbsp;&nbsp;&nbsp; Gain on sale of loans held-for-sale, net | 1368 | 5296 | (3928) | -74.2% |
| &nbsp;&nbsp;&nbsp; Gain on sale of securities, net | 662 | 1987 | (1325) | -66.7% |
| &nbsp;&nbsp;&nbsp; Increase in cash value of bank owned life insurance | 810 | 715 | 95 | 13.3% |
| &nbsp;&nbsp;&nbsp; Gain on sale of foreclosed real estate | 16 | 47 | (31) | -66.0% |
| &nbsp;&nbsp;&nbsp; Other | 283 | 139 | 144 | 103.6% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total noninterest income | 11509 | 15947 | (4438) | -27.8% |

---

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| | | | | |
|:---|:---|:---|:---|:---|
| *(Dollars in thousands, except per share data)* | Quarter Ended December 31, | Quarter Ended December 31, | 12/31/2022 vs. 12/31/2021 | 12/31/2022 vs. 12/31/2021 |
|  | 2022 | 2021 | $ Change | % Change |
| Noninterest income: |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Fees and service charges | 1823 | 1378 | 445 | 32.3% |
| &nbsp;&nbsp;&nbsp; Wealth management operations | 523 | 588 | (65) | -11.1% |
| &nbsp;&nbsp;&nbsp; Gain on sale of loans held-for-sale, net | 126 | 902 | (776) | -86.0% |
| &nbsp;&nbsp;&nbsp; Gain on sale of securities, net |  | 711 | (711) | -100.0% |
| &nbsp;&nbsp;&nbsp; Increase in cash value of bank owned life insurance | 182 | 178 | 4 | 2.2% |
| &nbsp;&nbsp;&nbsp; Gain on sale of foreclosed real estate | 16 | 20 | (4) | -20.0% |
| &nbsp;&nbsp;&nbsp; Other | 169 | 31 | 138 | 445.2% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total noninterest income | 2839 | 3808 | (969) | -25.4% |

---

The increase in fees and service charges, for the quarter and the twelve months ended December 31, 2022, is primarily the result of the acquisition of Royal and the resulting increase in our customer base. The decrease in wealth management operations, for the quarter and the twelve-month periods, is the result of lower fee income year over year due to market conditions. The decrease in gain on sale of loans, for the quarter and the twelve-month periods, is the result of significant refinance activity in 2021 due to the economic and low-rate environment, which resulted in more loans originated and sold in 2021 compared to 2022. We expect demand for fixed rate mortgage loans held-for-sale in the secondary market to be lower as borrowing rates on loans increase. The decrease in gains on the sale of securities, for the quarter and the year-to-date periods, is a result of current market conditions and actively repositioning the portfolio.

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**<u>Noninterest Expense</u>**

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| | | | | |
|:---|:---|:---|:---|:---|
| *(Dollars in thousands, except per share data)* | Twelve Months Ended December 31, | Twelve Months Ended December 31, | 12/31/2022 vs. 12/31/2021 | 12/31/2022 vs. 12/31/2021 |
|  | 2022 | 2021 | $ Change | % Change |
| Noninterest expense: |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Compensation and benefits | 28990 | 24241 | 4749 | 19.6% |
| &nbsp;&nbsp;&nbsp; Occupancy and equipment | 6785 | 5537 | 1248 | 22.5% |
| &nbsp;&nbsp;&nbsp; Data processing | 6750 | 3648 | 3102 | 85.0% |
| &nbsp;&nbsp;&nbsp; Marketing | 1907 | 1085 | 822 | 75.8% |
| &nbsp;&nbsp;&nbsp; Impairment charge on assets held for sale | 1232 |  | 1232 | 0.0% |
| &nbsp;&nbsp;&nbsp; Federal deposit insurance premiums | 1228 | 861 | 367 | 42.6% |
| &nbsp;&nbsp;&nbsp; Professional services | 1211 | 1205 | 6 | 0.5% |
| &nbsp;&nbsp;&nbsp; Net loss recognized on sale of premises and equipment | 303 |  | 303 | 0.0% |
| &nbsp;&nbsp;&nbsp; Other | 13694 | 10059 | 3635 | 36.1% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total noninterest expense | 62100 | 46636 | 15464 | 33.2% |

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| | | | | |
|:---|:---|:---|:---|:---|
| *(Dollars in thousands, except per share data)* | Quarter Ended December 31, | Quarter Ended December 31, | 12/31/2022 vs. 12/31/2021 | 12/31/2022 vs. 12/31/2021 |
|  | 2022 | 2021 | $ Change | % Change |
| Noninterest expense: |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Compensation and benefits | 6587 | 6617 | (30) | -0.5% |
| &nbsp;&nbsp;&nbsp; Occupancy and equipment | 1752 | 1461 | 291 | 19.9% |
| &nbsp;&nbsp;&nbsp; Data processing | 1238 | 1651 | (413) | -25.0% |
| &nbsp;&nbsp;&nbsp; Marketing | 284 | 357 | (73) | -20.4% |
| &nbsp;&nbsp;&nbsp; Impairment charge on assets held for sale | 1232 |  | 1232 | 0.0% |
| &nbsp;&nbsp;&nbsp; Federal deposit insurance premiums | 279 | 241 | 38 | 15.8% |
| &nbsp;&nbsp;&nbsp; Professional services | 393 | 250 | 143 | 57.2% |
| &nbsp;&nbsp;&nbsp; Net loss recognized on sale of premises and equipment | 49 |  | 49 | 0.0% |
| &nbsp;&nbsp;&nbsp; Other | 3831 | 2155 | 1676 | 77.8% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total noninterest expense | 15645 | 12732 | 2913 | 22.9% |

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The increase in compensation and benefits, for the twelve months ended December 31, 2022, is primarily the result of the Royal acquisition, management's continued focus on talent management, and wage inflation. The increase in data processing expense for the twelve-month period ending December 31, 2022, is primarily the result of data conversion expenses related to the acquisition of Royal, increased system utilization due to growth of the Bank, and continued investment in technological advancements such as Salesforce and nCino. The increase in data processing expense, for the quarter ending December 31, 2022, is due to increased system utilization due to growth of the Bank, and continued investment in technological advancements such as Salesforce and nCino. The increase in occupancy and equipment expense, for the quarter and the twelve-month periods, is primarily related to the Royal acquisition and higher operating costs. Marketing expenses, for the twelve-month period ended December 31, 2022, have increased to enhance brand recognition in new markets and gain more wallet share. The increase in impairment charge on assets held for sale, for the quarter and twelve-month periods, is the result of impairment on the carrying value of branches held for sale. The increase in federal deposit insurance premiums, for the quarter and the twelve-month periods, is primarily the result of growth of the bank's average assets. The increase in net loss recognized on sale of premises and equipment, for the quarter and twelve-month periods, is the result of the sale of a branch to reduce future fixed costs, allowing for redeployment of a portion of occupancy expenses into building a digital-forward foundation so that Finward can better serve its customers. The increase in other operating expenses for the twelve-month period ending December 31, 2022, is primarily the result of one-time expenses related to the acquisition of Royal, continued investments in strategic initiatives focusing on growth of the organization, and inflationary pressures. The increase in other operating expenses for the quarter ending December 31, 2022, is primarily due to higher utilization of outside consultants related to bank initiatives during the quarter.

**<u>Income Tax Expense</u>**

The provision for income taxes was $1.5 million for the twelve months ended December 31, 2022, as compared to $1.4 million for the twelve months ended December 31, 2021. The effective tax rate was 8.9% for the twelve months ended December 31, 2022, as compared to 8.6% for the twelve months ended December 31, 2021. The provision for income taxes was $45 thousand for the quarter ended December 31, 2022, as compared to $6 thousand for the quarter ended December 31, 2021. The effective tax rate was 1.1% for the quarter ended December 31, 2022, as compared to 0.2% for the quarter ended December 31, 2021. The Bancorp's higher current effective tax rate for the twelve months ended 31, 2022, is a result of higher earnings relative to tax preferred income. The decrease in effective tax rate quarter-over-quarter is due to tax benefits resulting from the recognition of impairment on assets held for sale.

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**<u>Lending</u>**

The Bancorp's loan portfolio totaled $1.5 billion on December 31, 2022, compared to $966.7 million on December 31, 2021, an increase of $546.9 million or 56.6%. The increase is primarily the result of the Royal acquisition, as well as organic loan portfolio growth. During the first twelve months of 2022 the Bancorp originated $376.0 million in new commercial loans, compared to $339.9 million during the twelve months ended December 31, 2021. During the twelve months ended December 31, 2022, the Bancorp originated $44.9 million in new fixed rate mortgage loans for sale, compared to $153.1 million during the twelve months ended December 31, 2021. During the twelve months ended December 31, 2022, the Bancorp originated $105.4 million in new mortgage loans retained in its portfolio, compared to $45.1 million during the twelve months ended December 31, 2021. The loan portfolio represents 73.1% of earning assets and is comprised of 62.1% commercial related credits.

**<u>Asset Quality</u>**

At December 31, 2022, non-performing loans totaled $10.1 million, compared to $7.3 million at December 31, 2021, an increase of $2.9 million or 39.6%. The Bancorp's ratio of non-performing loans to total loans was 0.67% at December 31, 2022, compared to 0.76% at December 31, 2021. The Bancorp's ratio of non-performing assets to total assets was 0.54% at December 31, 2022, compared to 0.51% at December 31, 2021.

For the twelve months ended December 31, 2022, no provisions to the ALL were required, compared to $1.5 million for the twelve months ended December 31, 2021, a decrease of $1.5 million. For the quarter ended December 31, 2022, no provisions to the ALL were required, compared to $216 thousand for the quarter ended December 31, 2021, a decrease of $216 thousand. For the twelve months ended December 31, 2022, charge-offs, net of recoveries, totaled $446 thousand. For the quarter ended December 31, 2022, charge-offs, net of recoveries, totaled $483 thousand. At December 31, 2022, the allowance for loan losses totaled $12.9 million and is considered adequate by management. The allowance for loan losses as a percentage of total loans was 0.85% at December 31, 2022, compared to 1.38% at December 31, 2021. The allowance for loan losses as a percentage of non-performing loans, or coverage ratio, was 127.3% at December 31, 2022, compared to 183.8% at December 31, 2021.

Management also considers reserves that are not part of the ALL that have been established from acquisition activity. The Bancorp acquired loans for which there was evidence of credit quality deterioration since origination, and it was determined that it was probable that the Bancorp would be unable to collect all contractually required principal and interest payments. Additionally, the Bancorp has acquired loans where there was no evidence of credit quality deterioration since origination and has marked these loans to their fair values. When these additional reserves are included on a non-GAAP basis, the allowance for loan losses as a percentage of total loans was 1.31% at December 31, 2022, and the allowance for loan losses as a percentage of non-performing loans, or coverage ratio, was 195.9% at December 31, 2022. See Table 1 below for a reconciliation of these non-GAAP figures to the Bancorp's GAAP figures.

**<u>Investing</u>**

The Bancorp's securities portfolio totaled $370.9 million at December 31, 2022, compared to $526.9 million at December 31, 2021, a decrease of $156.0 million or 29.6%. The decrease is attributable to increased unrealized losses within the portfolio and the use of cashflows from the securities portfolio to fund loan growth. The securities portfolio represents 19.5% of earning assets and provides a consistent source of liquidity and earnings to the Bancorp. Cash and cash equivalents totaled $31.3 million on December 31, 2022, compared to $33.2 million on December 31, 2021, a decrease of $1.9 million or 5.7%. The decrease in cash and cash equivalents is primarily the result of the timing of investments in interest earning assets relative to the inflow and outflow of deposits and repurchase agreements.

**<u>Funding</u>**

On December 31, 2022, core deposits totaled $1.4 billion, compared to $1.2 billion on December 31, 2021, an increase of $216.9 million or 18.2%. The increase is the result of the Royal acquisition, which added $279.9 million of core deposits at the time of acquisition, as well as the Bancorp's efforts to maintain and grow core deposits. Core deposits include checking, savings, and money market accounts and represented 79.5% of the Bancorp's total deposits at December 31, 2022. During the twelve months of 2022, balances for checking, and savings accounts increased. The increase in these core deposits is a result of the Royal acquisition, as well as management's sales efforts along with customer preferences for competitively priced short-term liquid investments. On December 31, 2022, balances for certificates of deposit totaled $363.1 million, compared to $239.2 million on December 31, 2021, an increase of $123.9 million or 51.8%. The increase in certificate of deposit balances is related to the Royal acquisition, which added $195.2 million of certificates at the time of acquisition, along with efforts by the bank to maintain lower cost of deposits in the future. In addition, on December 31, 2022, borrowings and repurchase agreements totaled $135.5 million, compared to $14.6 million at December 31, 2021, an increase of $120.9 million or 829.3%. The increase in short-term borrowings was the result of cyclical inflows and outflows of interest-earning assets and interest-bearing liabilities.

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**<u>Capital Adequacy</u>**

At December 31, 2022, shareholders' equity stood at $136.4 million, a decrease of $20.2 million, or 12.9% from December 31, 2021. This decrease is the result of net unrealized losses in the securities portfolio which resulted in an accumulated comprehensive loss of $64.3 million at December 31, 2022. The Bank's regulatory capital ratios at December 31, 2022, were 12.1% for total capital to risk-weighted assets, 11.2% for both common equity tier 1 capital to risk-weighted assets and tier 1 capital to risk-weighted assets, and 7.7% for tier 1 capital to adjusted average assets. Under all regulatory capital requirements, the Bank is considered well capitalized. Tangible capital represented 5.3% of tangible assets at December 31, 2022. The tangible book value of the Bancorp's stock stood at $25.40 per share at December 31, 2022, compared to $40.91 at December 31, 2021. This is primarily the result of increased net unrealized loss on securities available-for-sale, net of reclassification and tax effects. Management continues to actively manage the securities portfolio and does not currently anticipate the need to realize losses from the securities portfolio that would result in reductions to retained earnings.

**<u>Disclosures Regarding Non-GAAP Financial Measures</u>**

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.

**<u>About Finward Bancorp</u>**

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.

**<u>Forward Looking Statements</u>**

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.

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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.

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| |
|:---|
| **Finward Bancorp** |
| Quarterly Financial Report |

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Performance Ratios** | Quarter ended, | Quarter ended, | Quarter ended, | Quarter ended, | Quarter ended, | Twelve months ended, | Twelve months ended, |
|  | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) |
|  | December 31, | September 30, | June 30, | March 31, | December 31, | December 31, | December 31, |
|  | 2022 | 2022 | 2022 | 2022 | 2021 | 2022 | 2021 |
| Return on equity | 12.96% | 13.65% | 12.45% | 5.01% | 8.56% | 10.47% | 9.61% |
| Return on assets | 0.78% | 0.88% | 0.85% | 0.44% | 0.83% | 0.74% | 0.95% |
| Yield on loans | 4.66% | 4.34% | 4.18% | 4.17% | 4.28% | 4.34% | 4.29% |
| Yield on security investments | 2.44% | 2.30% | 2.23% | 2.02% | 1.94% | 2.22% | 1.96% |
| Total yield on earning assets | 4.21% | 3.88% | 3.68% | 3.49% | 3.42% | 3.81% | 3.44% |
| Cost of deposits | 0.45% | 0.19% | 0.08% | 0.08% | 0.10% | 0.20% | 0.14% |
| Cost of repurchase agreements | 2.06% | 0.98% | 0.46% | 0.33% | 0.26% | 0.94% | 0.26% |
| Cost of borrowed funds | 5.19% | 2.52% | 1.10% | 0.39% | 0.47% | 4.06% | 1.27% |
| Total cost of funds | 0.65% | 0.22% | 0.09% | 0.08% | 0.10% | 0.26% | 0.15% |
| Noninterest income / average assets | 0.56% | 0.51% | 0.56% | 0.64% | 0.95% | 0.56% | 1.01% |
| Noninterest expense / average assets | 3.07% | 2.90% | 2.91% | 3.33% | 3.18% | 3.05% | 2.96% |
| Net noninterest margin / average assets | -2.52% | -2.39% | -2.36% | -2.68% | -2.23% | -2.48% | -1.95% |
| Efficiency ratio | 79.63% | 74.54% | 75.15% | 87.10% | 78.28% | 78.95% | 72.28% |
| Effective tax rate | 1.12% | 11.14% | 11.70% | 11.41% | 0.18% | 8.93% | 8.63% |
| Non-performing assets to total assets | 0.54% | 0.58% | 0.53% | 0.47% | 0.51% | 0.54% | 0.51% |
| Non-performing loans to total loans | 0.67% | 0.73% | 0.68% | 0.62% | 0.76% | 0.67% | 0.76% |
| Allowance for loan losses to non-performing loans | 127.26% | 122.64% | 133.78% | 150.28% | 183.76% | 127.26% | 183.76% |
| Allowance for loan losses to loans outstanding | 0.85% | 0.89% | 0.91% | 0.93% | 1.38% | 0.85% | 1.38% |
| Foreclosed real estate to total assets | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Basic earnings per share | $0.93 | $1.07 | $1.04 | $0.53 | $0.95 | $3.61 | $4.30 |
| Diluted earnings per share | $0.93 | $1.07 | $1.04 | $0.53 | $0.95 | $3.60 | $4.30 |
| Net worth / total assets | 6.59% | 5.75% | 6.50% | 7.51% | 9.66% | 6.59% | 9.66% |
| Book value per share | $31.73 | $27.46 | $31.80 | $36.71 | $45.00 | $31.73 | $45.00 |
| Closing stock price | $36.20 | $34.01 | $37.49 | $46.21 | $45.88 | $36.20 | $45.88 |
| Price per earnings per share | $9.70 | $7.92 | $8.97 | $21.76 | $12.07 | $10.02 | $10.66 |
| Dividend declared per common share | $0.31 | $0.31 | $0.31 | $0.31 | $0.31 | $1.24 | $1.24 |

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Non-GAAP Performance Ratios** | Quarter ended, | Quarter ended, | Quarter ended, | Quarter ended, | Quarter ended, | Twelve Months Ended | Twelve Months Ended |
|  | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) |
|  | December 31, | September 30, | June 30, | March 31, | December 31, | December 31, | December 31, |
|  | 2022 | 2022 | 2022 | 2022 | 2021 | 2022 | 2021 |
| Core return on equity | 19.47% | 17.75% | 13.78% | 11.32% | 7.83% | 14.83% | 9.44% |
| Core return on assets | 0.90% | 0.90% | 0.75% | 0.83% | 0.71% | 0.85% | 0.85% |
| Core noninterest expense / average assets | 2.75% | 2.78% | 2.83% | 2.67% | 3.12% | 2.76% | 2.90% |
| Core efficiency ratio | 74.36% | 73.10% | 77.12% | 72.87% | 81.01% | 74.38% | 74.22% |
| Net interest margin - tax equivalent | 3.73% | 3.84% | 3.78% | 3.63% | 3.58% | 3.74% | 3.51% |
| Tangible book value per diluted share | $25.41 | $20.99 | $25.24 | $30.01 | $40.91 | $25.41 | $40.91 |
| Tangible book value per diluted share adjusted for AOCI | $40.36 | $39.57 | $38.69 | $37.80 | $39.68 | $40.36 | $39.68 |

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| |
|:---|
| **Finward Bancorp** |
| Quarterly Financial Report |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Balance Sheet Data** |  |  |  |  |  |
| (Dollars in thousands) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) |  |
|  | December 31, | September 30, | June 30, | March 31, | December 31, |
|  | 2022 | 2022 | 2022 | 2022 | 2021 |
| Total assets | $2070339 | $2052986 | $2101485 | $2097845 | $1620743 |
| Cash & cash equivalents | 31282 | 38296 | 79302 | 54501 | 33176 |
| Certificates of deposit in other financial institutions | 2456 | 2214 | 1482 | 1731 | 1709 |
| Securities - available for sale | 370896 | 359035 | 400466 | 464320 | 526889 |
| Loans receivable: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Commercial real estate | $486431 | $452852 | $420735 | $408375 | $317145 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Residential real estate | 484595 | 471565 | 459151 | 444753 | 260134 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Commercial business | 93278 | 95372 | 103649 | 112396 | 115772 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Construction and land development | 108926 | 134301 | 153422 | 150810 | 123822 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Multifamily | 251014 | 258377 | 248495 | 234267 | 61194 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Home equity | 38978 | 37578 | 35672 | 34284 | 34612 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Manufactured homes | 34882 | 35866 | 37693 | 38636 | 37887 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Government | 9549 | 9649 | 8081 | 8176 | 8991 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Consumer | 918 | 827 | 1673 | 924 | 582 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Farmland |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total loans | $1508571 | $1496387 | $1468571 | $1432621 | $960139 |
| Deposits: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Core deposits: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Noninterest bearing checking | $359092 | $386137 | $370567 | $380515 | $295294 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest bearing checking | 396285 | 422559 | 384689 | 350825 | 333744 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Savings | 402365 | 427505 | 436203 | 425634 | 293976 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Money market | 254157 | 269110 | 327360 | 307850 | 271970 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total core deposits | 1411899 | 1505311 | 1518819 | 1464824 | 1194984 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Certificates of deposit | 363118 | 327653 | 398396 | 430387 | 239217 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total deposits | $1775017 | $1832964 | $1917215 | $1895211 | $1434201 |
| Borrowings and repurchase agreements | $135503 | $78140 | $24536 | $23244 | $14581 |
| Stockholder's equity | 136393 | 118023 | 136654 | 157637 | 156615 |

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| |
|:---|
| **Finward Bancorp** |
| Quarterly Financial Report |

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Consolidated Statements of Income** | Quarter ended, | Quarter ended, | Quarter ended, | Quarter ended, | Quarter ended, | Twelve months ended, | Twelve months ended, |
| (Dollars in thousands) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) |
|  | December 31, | September 30, | June 30, | March 31, | December 31, | December 31, | December 31, |
|  | 2022 | 2022 | 2022 | 2022 | 2021 | 2022 | 2021 |
| Interest income: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loans | $17504 | $16122 | $15221 | $13286 | $10282 | $62133 | $41573 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Securities & short-term investments | 2358 | 2417 | 2519 | 2608 | 2545 | 9902 | 9082 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest income | 19862 | 18539 | 17740 | 15894 | 12827 | 72035 | 50655 |
| Interest expense: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deposits | 2007 | 871 | 389 | 337 | 350 | 3604 | 2002 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Borrowings | 1046 | 161 | 53 | 22 | 20 | 1282 | 78 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest expense | 3053 | 1032 | 442 | 359 | 370 | 4886 | 2080 |
| Net interest income | 16809 | 17507 | 17298 | 15535 | 12457 | 67149 | 48575 |
| Provision for loan losses |  |  |  |  | 216 |  | 1509 |
| Net interest income after provision for loan losses | 16809 | 17507 | 17298 | 15535 | 12241 | 67149 | 47066 |
| Noninterest income: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fees and service charges | 1823 | 1570 | 1560 | 1304 | 1378 | 6257 | 5388 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Wealth management operations | 523 | 407 | 588 | 595 | 588 | 2113 | 2375 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Gain on sale of loans held-for-sale, net | 126 | 344 | 291 | 607 | 902 | 1368 | 5296 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Gain on sale of securities, net |  | 23 | 258 | 381 | 711 | 662 | 1987 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Increase in cash value of bank owned life insurance | 182 | 183 | 193 | 252 | 178 | 810 | 715 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Gain on sale of foreclosed real estate, net | 16 |  |  |  | 20 | 16 | 47 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other | 169 | 103 | 6 | 5 | 31 | 283 | 139 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total noninterest income | 2839 | 2630 | 2896 | 3144 | 3808 | 11509 | 15947 |
| Noninterest expense: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Compensation and benefits | 6587 | 7498 | 7538 | 7367 | 6617 | 28990 | 24241 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Occupancy and equipment | 1752 | 1804 | 1729 | 1500 | 1461 | 6785 | 5537 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Data processing | 1238 | 1212 | 1246 | 3054 | 1651 | 6750 | 3648 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Marketing | 284 | 587 | 385 | 651 | 357 | 1907 | 1085 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Impairment charge on assets held for sale | 1232 |  |  |  |  | 1232 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Federal deposit insurance premiums | 279 | 350 | 380 | 219 | 241 | 1228 | 861 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net loss recognized on sale of premises and equipment | 49 | 254 |  |  |  | 303 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other | 4224 | 3305 | 3898 | 3478 | 2405 | 14905 | 11264 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total noninterest expense | 15645 | 15010 | 15176 | 16269 | 12732 | 62100 | 46636 |
| Income before income taxes | 4003 | 5127 | 5018 | 2410 | 3317 | 16558 | 16377 |
| Income tax expenses | 45 | 571 | 587 | 275 | 6 | 1478 | 1414 |
| Net income | $3958 | $4556 | $4431 | $2135 | $3311 | $15080 | $14963 |

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------

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| |
|:---|
| **Finward Bancorp** |
| Quarterly Financial Report |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Asset Quality** | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) |  |
| (Dollars in thousands) | December 31, | September 30, | June 30, | March 31, | December 31, |
|  | 2022 | 2022 | 2022 | 2022 | 2021 |
| Nonaccruing loans | $9886 | $8943 | $8813 | $8414 | $7056 |
| Accruing loans delinquent more than 90 days | 248 | 1982 | 1208 | 494 | 205 |
| Securities in non-accrual | 1048 | 1027 | 1030 | 972 | 992 |
| Foreclosed real estate |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Total nonperforming assets | $11182 | $11952 | $11051 | $9880 | $8253 |
| Allowance for loan losses (ALL): |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; ALL specific allowances for impaired loans | $338 | $749 | $731 | $716 | $684 |
| &nbsp;&nbsp;&nbsp; ALL general allowances for loan portfolio | 12559 | 12649 | 12675 | 12671 | 12659 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total ALL | $12897 | $13398 | $13406 | $13387 | $13343 |
| Troubled Debt Restructurings: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Nonaccruing troubled debt restructurings, non-compliant (1) (2) | $343 | $452 | $308 | $300 | $1122 |
| &nbsp;&nbsp;&nbsp; Nonaccruing troubled debt restructurings, compliant (2) | 815 | 542 | 657 | 265 | 306 |
| &nbsp;&nbsp;&nbsp; Accruing troubled debt restructurings | 2753 | 3480 | 1484 | 1379 | 1421 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total troubled debt restructurings | $3911 | $4474 | $2449 | $1944 | $2849 |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) "non-compliant" refers to not being within the guidelines of the restructuring agreement <br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) included in nonaccruing loan balances presented above <br>  

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| | | |
|:---|:---|:---|
|  | (Unaudited) |  |
|  | December 31, | Required |
|  | 2022 | To Be Well |
|  | Actual Ratio | Capitalized |
| **Capital Adequacy Bank** |  |  |
| Common equity tier 1 capital to risk-weighted assets | 11.2% | 6.5% |
| Tier 1 capital to risk-weighted assets | 11.2% | 8.0% |
| Total capital to risk-weighted assets | 12.1% | 10.0% |
| Tier 1 capital to adjusted average assets | 7.7% | 5.0% |

---

------

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| | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Table 1 - Reconciliation of the Non-GAAP Performance Measures |  |  |  |  |  |  |  |  |  |  |  |  |
|  | *(Dollars in thousands)* | Quarter Ended | Quarter Ended | Quarter Ended | Quarter Ended | Quarter Ended | Quarter Ended | Quarter Ended | Quarter Ended | Quarter Ended | Twelve Months Ended | Twelve Months Ended | Twelve Months Ended |
|  | *(unaudited)* | December 31, 2022 |  | September 30, 2022 |  | June 30, 2022 |  | March 31, 2022 |  | December 31, 2021 | December 31, 2022 |  | December 31, 2021 |
|  | **Calculation of core net income** |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Net income | $3958 |  | $4556 |  | $4431 |  | $2135 |  | $3311 | $15080 |  | $14963 |
|  | Realized loss/(gain) on securities |  |  | (23) |  | (258) |  | (381) |  | (771) | (662) |  | (1987) |
|  | Net loss recognized on sale of premises and equipment | 49 |  | 254 |  |  |  |  |  |  | 303 |  |  |
|  | Impairment charge on assets held for sale | 1232 |  |  |  |  |  |  |  |  | 1232 |  |  |
|  | Merger related expenses |  |  |  |  |  |  | 2852 |  |  | 2852 |  |  |
|  | CD premium amortization | (103) |  | (134) |  | (175) |  | (129) |  |  | (541) |  |  |
|  | Core deposit amortization | 395 |  | 400 |  | 410 |  | 347 |  | 249 | 1552 |  | 994 |
|  | Purchase discount amortization | (760) |  | (342) |  | (613) |  | (234) |  | (144) | (1949) |  | (1041) |
|  | Related tax benefit/(cost) | (171) |  | (33) |  | 134 |  | (516) |  | 127 | (585) |  | 427 |
| (A) | Core net income | $4600 |  | $4678 |  | $3929 |  | $4074 |  | $2772 | $17282 |  | $13356 |
|  | **Calculation of core diluted earnings per share** |  |  |  |  |  |  |  |  |  |  |  |  |
| (A) | Core net income | $4600 |  | $4678 |  | $3929 |  | $4074 |  | $2832 | $17282 |  | $13356 |
|  | Diluted average common shares outstanding | 4261506 |  | 4260596 |  | 4258503 |  | 4020815 |  | 3479988 | 4193340 |  | 3477309 |
|  | Core diluted earnings per share | $1.08 |  | $1.10 |  | $0.92 |  | $1.01 |  | $0.81 | $4.12 |  | $3.84 |
|  | **Calculation of core return on average assets** |  |  |  |  |  |  |  |  |  |  |  |  |
| (A) | Core net income | $4600 |  | $4678 |  | $3929 |  | $4074 |  | $2832 | $17282 |  | $13356 |
|  | Average total assets | 2035359 |  | 2069139 |  | 2085039 |  | 1955347 |  | 1601040 | 2038255 |  | 1573981 |
|  | Core return on average assets | 0.90% |  | 0.90% |  | 0.75% |  | 0.83% |  | 0.71% | 0.85% |  | 0.85% |
|  | **Calculation of core pre-provision net revenue** |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Net interest income | $16809 |  | $17507 |  | $17298 |  | $15535 |  | $12457 | $67149 |  | $48575 |
|  | Non-interest income | 2839 |  | 2630 |  | 2896 |  | 3144 |  | 3808 | 11509 |  | 15947 |
|  | Non-interest expense | (15645) |  | (15010) |  | (15176) |  | (16269) |  | (12732) | (62100) |  | (46636) |
|  | Pre-provision net revenue | 4003 |  | 5127 |  | 5018 |  | 2410 |  | 3533 | 16558 |  | 17886 |
|  | Realized loss/(gain) on securities |  |  | (23) |  | (258) |  | (381) |  | (711) | (662.00) |  | (1987) |
|  | Core deposit amortization | 395 |  | 400 |  | 410 |  | 347 |  | 249 | 1552 |  | 994 |
|  | Purchase discount amortization | (760) |  | (342) |  | (613) |  | (234) |  | (144) | (1949) |  | (1041) |
| (B) | Core pre-provision net revenue | $3638 |  | $5162 |  | $4557 |  | $2142 |  | $2927 | $15499 |  | $15852 |
|  | **Calculation of core pre-provision net revenue to average assets** |  |  |  |  |  |  |  |  |  |  |  |  |
| (B) | Core pre-provision net revenue | $3638 |  | $5162 |  | $4557 |  | $2142 |  | $2927 | $15499 |  | $15852 |
|  | Average total assets | 2035359 |  | 2069139 |  | 2085039 |  | 1955347 |  | 1601040 | 2038255 |  | 1573981 |
|  | Core pre-provision net revenue to average assets | 0.71% |  | 1.00% |  | 0.87% |  | 0.44% |  | 0.73% | 0.76% |  | 1.01% |
|  | **Calculation of tangible assets (excluding PPP)** |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Total assets | $2070339 |  | $2052986 |  | $2101485 |  | $2097845 |  | $1620743 | $2070339 |  | $1620743 |
|  | Goodwill | (22395) |  | (22615) |  | (22615) |  | (22774) |  | (11109) | (22395) |  | (11109) |
|  | Other Intangibles | (4794) |  | (5188) |  | (5588) |  | (5998) |  | (3126) | (4794) |  | (3126) |
|  | Paycheck Protection Plan ("PPP") loans |  |  | (226) |  | (570) |  | (9983) |  | (22072) |  |  | (22072) |
| (C) | Tangible assets (excluding PPP) | $2043150 |  | $2024957 |  | $2072712 |  | $2059090 |  | $1584436 | $2043150 |  | $1584436 |
|  | **Calculation of tangible common equity** |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Total stockholder's equity | $136393 |  | $118023 |  | $136654 |  | $157637 |  | $156615 | $136393 |  | $156615 |
|  | Goodwill | (22395) |  | (22615) |  | (22615) |  | (22774) |  | (11109) | (22395) |  | (11109) |
|  | Other intangibles | (4794) |  | (5188) |  | (5588) |  | (5998) |  | (3126) | (4794) |  | (3126) |
| (D) | Tangible common equity | $109204 |  | $90220 |  | $108451 |  | $128865 |  | $142380 | $109204 |  | $142380 |
|  | **Calculation of tangible common equity adjusted for accumulated other comprehensive loss (income)** | **Calculation of tangible common equity adjusted for accumulated other comprehensive loss (income)** |  |  |  |  |  |  |  |  |  |  |  |
| (D) | Tangible common equity | $109204 |  | $90220 |  | $108451 |  | $128865 |  | $142380 | $109204 |  | $142380 |
|  | Accumulated other comprehensive loss (income) | 64300 |  | 79839 |  | 57781 |  | 33462 |  | (4276) | 64300 |  | (4276) |
| (I) | Tangible common equity adjusted for accumulated other comprehensive loss (income) | $173504 | # | $170059 | # | $166232 | # | $162327 | # | $138104 | $173504 | # | $138104 |
|  | **Calculation of tangible book value per diluted share** |  |  |  |  |  |  |  |  |  |  |  |  |
| (D) | Tangible common equity | $109204 |  | $90220 |  | $108451 |  | $128865 |  | $142380 | $109204 |  | $142380 |
|  | Shares outstanding | 4298401 |  | 4297900 |  | 4296949 |  | 4294136 |  | 3480701 | 4298401 |  | 3480701 |
|  | Tangible book value per diluted share | $25.41 |  | $20.99 |  | $25.24 |  | $30.01 |  | $40.91 | $25.41 |  | $40.91 |
|  | **Calculation of tangible book value per diluted share adjusted for accumulated other comprehensive loss (income)** | **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) | $173504 |  | $170059 |  | $166232 |  | $162327 |  | $138104 | $173504 |  | $138104 |
|  | Diluted average common shares outstanding | 4298401 |  | 4297900 |  | 4296949 |  | 4294136 |  | 3480701 | 4298401 |  | 3480701 |
|  | Tangible book value per diluted share adjusted for accumulated other comprehensive loss (income) | $40.36 |  | $39.57 |  | $38.69 |  | $37.80 |  | $39.68 | $40.36 |  | $39.68 |
|  | **Calculation of tangible common equity to tangible assets (excluding PPP)** |  |  |  |  |  |  |  |  |  |  |  |  |
| (D) | Tangible common equity | $109204 |  | $90220 |  | $108451 |  | $128865 |  | $142380 | $109204 |  | $142380 |
| (C) | Tangible assets (excluding PPP) | 2043150 |  | 2024957 |  | 2072712 |  | 2059090 |  | 1584436 | 2043150 |  | 1584436 |
|  | Tangible common equity to tangible assets | 5.34% |  | 4.46% |  | 5.23% |  | 6.26% |  | 8.99% | 5.34% |  | 8.99% |
|  | **Calculation of tangible common equity to tangible assets (excluding PPP and AOCI)** |  |  |  |  |  |  |  |  |  |  |  |  |
| (I) | Tangible common equity adjusted for accumulated other comprehensive losses (income) | $173504 |  | $170059 |  | $166232 |  | $162327 |  | $138104 | $173504 |  | $138104 |
| (C) | Tangible assets (excluding PPP) | 2043150 |  | 2024957 |  | 2072712 |  | 2059090 |  | 1584436 | 2043150 |  | 1584436 |
|  | Tangible common equity adjusted for accumulated other comprehensive loss (income) to tangible assets | 8.49% |  | 8.40% |  | 8.02% |  | 7.88% |  | 8.72% | 8.49% |  | 8.72% |
|  | **Calculation of average tangible common equity** |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Average stockholder's common equity | $122150 |  | $133482 |  | $142415 |  | $170374 |  | $159010 | $144070 |  | $155647 |
|  | Average goodwill | (22615) |  | (22615) |  | (22543) |  | (21251) |  | (11109) | (22157) |  | (11109) |
|  | Average other intangibles | (5038) |  | (5438) |  | (5850) |  | (5174) |  | (3270) | (5375) |  | (3126) |
| (E) | Average tangible stockholders' common equity | $94497 |  | $105429 |  | $114022 |  | $143949 |  | $144631 | $116538 |  | $141412 |
|  | **Calculation of core return on average common equity** |  |  |  |  |  |  |  |  |  |  |  |  |
| (A) | Core net income | $4600 |  | $4678 |  | $3929 |  | $4074 |  | $2832 | $17282 |  | $13356 |
| (E) | Average tangible common equity | 94497 |  | 105429 |  | 114022 |  | 143949 |  | 144631 | 116538 |  | 141412 |
|  | Core return on average common equity | 19.47% |  | 17.75% |  | 13.78% |  | 11.32% |  | 7.83% | 14.83% |  | 9.44% |
|  | **Calculation of core yield on loans** |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Interest income on loans | $17504 |  | $16122 |  | $15221 |  | $13286 |  | $10282 | $62133 |  | $41573 |
|  | Loan accretion income | (760) |  | (342) |  | (613) |  | (234) |  | (144) | (1949) |  | (1041) |
|  | Adjusted interest income on loans | 16744 |  | 15780 |  | 14608 |  | 13052 |  | 10138 | 60184 |  | 40532 |
|  | Average loan balances | 1503543 |  | 1484678 |  | 1457625 |  | 1274407 |  | 960606 | 1431017 |  | 968185 |
|  | Core yield on loans | 4.45% |  | 4.25% |  | 4.01% |  | 4.10% |  | 4.22% | 4.21% |  | 4.19% |
|  | **Calculation of adjusted allowance for loan loss to total loans** |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Allowance for loan losses | $(12897) |  | $(13398) |  | $(13406) |  | $(13387) |  | $(13343) | $(12897) |  | $(13343) |
|  | Additional reserves not part of the allowance for loan loss | (6960) |  | (7708) |  | (7908) |  | (8749) |  | (2428) | (6960) |  | (2428) |
| (F) | Adjusted allowance for loan loss | (19857) |  | (21106) |  | (21314) |  | (22136) |  | (15771) | (19857) |  | (15771) |
|  | Total loans | 1513631 |  | 1502696 |  | 1474381 |  | 1439728 |  | 966720 | 1513631 |  | 966720 |
|  | Adjusted allowance for loan loss to total loans | 1.31% |  | 1.40% |  | 1.45% |  | 1.54% |  | 1.63% | 1.31% |  | 1.63% |
|  | **Calculation of adjusted allowance for loan loss to nonperforming loans** |  |  |  |  |  |  |  |  |  |  |  |  |
| (F) | Adjusted allowance for loan loss | $(19857) |  | $(21106) |  | $(21314) |  | $(22136) |  | $(15771) | $(19857) |  | $(15771) |
|  | Nonperforming loans | 10134 |  | 10925 |  | 10021 |  | 8908 |  | 7261 | 10134 |  | 7261 |
|  | Adjusted allowance for loan loss to nonperforming loans (coverage ratios) | 195.94% |  | 193.19% |  | 212.69% |  | 248.50% |  | 217.20% | 195.94% |  | 217.20% |
|  | **Calculation of adjusted allowance for loan loss to total loans excluding PPP** |  |  |  |  |  |  |  |  |  |  |  |  |
| (F) | Adjusted allowance for loan loss | $(19857) |  | $(21106) |  | $(21314) |  | $(22136) |  | $(15771) | $(19857) |  | $(15771) |
|  | Total loans | 1513631 |  | 1502696 |  | 1474381 |  | 1439728 |  | 966720 | 1513631 |  | 966720 |
|  | PPP loans |  |  | (226) |  | (570) |  | (9983) |  | (22072) |  |  | (22072) |
|  | Total loans excluding PPP | 1513631 |  | 1502470 |  | 1473811 |  | 1429745 |  | 944648 | 1513631 |  | 944648 |
|  | Adjusted allowance for loan loss to total loans excluding PPP | 1.31% |  | 1.40% |  | 1.45% |  | 1.55% |  | 1.67% | 1.31% |  | 1.67% |
|  | **Calculation of core revenue** |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Net interest income | $16809 |  | $17507 |  | $17298 |  | $15535 |  | $12457 | $67149 |  | $48575 |
|  | Non-interest income | 2839 |  | 2630 |  | 2896 |  | 3144 |  | 3808 | 11509 |  | 15947 |
|  | CD premium amortization | (103) |  | (134) |  | (175) |  | (129) |  |  | (541) |  |  |
|  | Purchase discount amortization | (760) |  | (342) |  | (613) |  | (234) |  | (144) | (1949) |  | (1041) |
|  | Realized loss/(gain) on securities |  |  | (23) |  | (258) |  | (381) |  | (711) | (662) |  | (1987) |
| (G) | Core revenue | $18785 |  | $19638 |  | $19148 |  | $17935 |  | $15410 | $75506 |  | $61494 |
|  | **Calculation of core non-interest expense** |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Non-interest expense | $15645 |  | $15010 |  | $15176 |  | $16269 |  | $12732 | $62100 |  | $46636 |
|  | Impairment charge on assets held for sale | (1232) |  |  |  |  |  |  |  |  | (1232) |  |  |
|  | Net loss recognized on sale of premises and equipment | (49) |  | (254) |  |  |  |  |  |  | (303) |  |  |
|  | Merger related expenses |  |  |  |  |  |  | (2852) |  |  | (2852) |  |  |
|  | Core deposit amortization | (395) |  | (400) |  | (410) |  | (347) |  | (249) | (1552) |  | (994) |
| (H) | Core non-interest expense | $13969 |  | $14356 |  | $14766 |  | $13070 |  | $12483 | $56161 |  | $45642 |
|  | **Calculation of core efficiency ratio** |  |  |  |  |  |  |  |  |  |  |  |  |
| (H) | Core non-interest expense | $13969 |  | $14356 |  | $14766 |  | $13070 |  | $12483 | $56161 |  | $45642 |
| (G) | Core revenue | 18785 |  | 19638 |  | 19148 |  | 17935 |  | 15410 | 75506 |  | 61494 |
|  | Core efficiency ratio | 74.36% |  | 73.10% |  | 77.12% |  | 72.87% |  | 81.01% | 74.38% |  | 74.22% |
|  | **Calculation of non-interest expense to total average assets** |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Non-interest expense | $15645 |  | $15010 |  | $15176 |  | $16269 |  | $12732 | $62100 |  | $46636 |
|  | Average total assets | 2035359 |  | 2069139 |  | 2085039 |  | 1955347 |  | 1601040 | 2038255 |  | 1573981 |
|  | Non-interest expense to total average assets | 3.07% |  | 2.90% |  | 2.91% |  | 3.33% |  | 3.18% | 3.05% |  | 2.96% |
|  | **Calculation of core non-interest expense to total average assets** |  |  |  |  |  |  |  |  |  |  |  |  |
| (H) | Core non-interest expense | $13969 |  | $14356 |  | $14766 |  | $13070 |  | $12483 | $56161 |  | $45642 |
|  | Average total assets | 2035359 |  | 2069139 |  | 2085039 |  | 1955347 |  | 1601040 | 2038255 |  | 1573981 |
|  | Core non-interest expense to total average assets | 2.75% |  | 2.78% |  | 2.83% |  | 2.67% |  | 3.12% | 2.76% |  | 2.90% |
|  | **Calculation of tax adjusted net interest margin** |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Net interest income | $16809 |  | $17507 |  | $17298 |  | $15535 |  | $12457 | $67149 |  | $48575 |
|  | Tax adjusted interest on securities and loans | 791 |  | 817 |  | 930 |  | 966 |  | 959 | 3504 |  | 3232 |
|  | Adjusted net interest income | 17600 |  | 18324 |  | 18228 |  | 16501 |  | 13416 | 70653 |  | 51807 |
|  | Total average earning assets | 1886596 |  | 1910722 |  | 1927664 |  | 1820588 |  | 1500183 | 1888561 |  | 1474372 |
|  | Tax adjusted net interest margin | 3.73% |  | 3.84% |  | 3.78% |  | 3.63% |  | 3.58% | 3.74% |  | 3.51% |
|  | **Efficiency Ratio** |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Total non-interest expense | $15645 |  | $15010 |  | $15176 |  | $16269 |  | $12732 | $62100 |  | $46636 |
|  | Total revenue | 19648 |  | 20137 |  | 20194 |  | 18679 |  | 16265 | 78658 |  | 64522 |
|  | Efficiency ratio | 79.63% |  | 74.54% |  | 75.15% |  | 87.10% |  | 78.28% | 78.95% |  | 72.28% |

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