Finward Bancorp
For the period ended Mar 31, 2025. Filed May 15, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 15, 2025
FNWD$43.74+0.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001437749-24-035334
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-15.
0001437749-25-017176
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 124 previous paragraphs and 108 current paragraphs.
48 unchanged; 52 reworded; 8 added; 18 removed; 6 previous and 0 current paragraphs rearranged.
Tables are not compared: 32 previous and 24 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
The Bank has incurred and will continue to incur additional non-interest expenses associated with the implementation of the corrective actions set forth in the Order. However, these expenses are not expected to have a material impact on the results of operations or financial condition of the Company or the Bank.
Current report
The Company's nonperforming loans are summarized below:
Current report
The Company's substandard loans are summarized below:
Current report
The Company's provision for credit losses on loans are summarized below:
Current report
For the quarter ended March 31, 2025, the Company reported net income of $455 thousand, compared to net income of $9.3 million for the quarter ended March 31, 2024, a decrease of $8.8 million (95.1%). The decrease in net income for the quarter ended March 31, 2025 is primarily attributable to the $11.8 million pre-tax gain associated with the sale leaseback transaction occurring during the quarter ended March 31, 2024. For the quarter ended March 31, 2025, the return on average assets was 0.09%, compared to 1.77 % for the quarter ended March 31, 2024. The return on average equity was 1.17% for the quarter ended March 31, 2025, compared to 24.97% for the quarter ended March 31, 2024.
Current report
The increased net interest income and net interest margin for the quarter ended March 31, 2025, was primarily the result of reduced deposit and borrowing costs as a result of the Federal Reserve reduction of federal funds rates year over year and increased loan yields as commercial loans mature and/or reprice.
Current report
The decrease in noninterest income was primarily caused by two special first quarter 2024 strategic initiatives involving the pre-tax non-interest income gain of approximately $11.8 million from a sale-leaseback transaction completed on February 22, 2024. This 2024 noninterest income real estate gain was also partially offset by a $531 thousand loss from the sale of $15.1 million in securities, a transaction also completed during first quarter 2024 to improve future profitability, deleverage the balance sheet through a reduction in borrowings outstanding, and further benefit regulatory capital ratios in subsequent periods.
Current report
Decreases in non-interest expenses during the quarter ended March 31, 2025, were primarily attributable to non-recurring professional and outside service expenses occurring during 2024 which were associated with the implementation of the corrective actions set forth in the consent order and sale leaseback transaction, as well as lower data processing and technology costs during 2025. This decrease in non-interest expense was primarily offset by increases in compensation and benefit expense driven by annual merit-based increases, as well as increased ongoing occupancy and equipment expenses associated with the sale leaseback transaction.
Removed paragraphs (18)
Previous report
The Order is expected to result in additional non-interest BSA compliance expenses for the Bank and the Bancorp. It also may have the effect of limiting or delaying the Bank’s and the Bancorp’s ability to obtain regulatory approval for certain expansionary activities, to the extent desired by the Bancorp. Our failure to comply with the Order or MOU may result in additional regulatory action, including civil money penalties against the Bank and its officers and directors or enforcement through court proceedings, which could have a material and adverse effect on our business, results of operations, financial condition, cash flows, and stock price.
Previous report
North American Industry Classification System (NAICS) classification coding for CRE loans began in 2023, similar NAICS 2022 proforma was not available to report.
Previous report
The Bancorp's nonperforming loans are summarized below:
Previous report
The Bancorp's substandard loans are summarized below:
Previous report
The Bancorp's (release of) provision for credit losses for the period ended are summarized below:
Previous report
The Bancorp's provision for credit losses for the period ended are summarized below:
Previous report
For the quarter ended September 30, 2024, the Bancorp reported net income of $606 thousand, compared to net income of $2.2 million for the quarter ended September 30, 2023, a decrease of $1.6 million (72.3%). For the quarter ended September 30, 2024, the ROA was 0.12%, compared to 0.42 % for the quarter ended September 30, 2023. The ROE was 1.60% for the quarter ended September 30, 2024, compared to 6.55% for the quarter ended September 30, 2023.
Previous report
In the third quarter 2024 earnings release on October 29, 2024, we reported a September 30, 2024 quarterly average balance in interest bearing deposits in other financial institutions of $44.4 million with an associated rate of 6.00%, quarterly interest earning asset rate of 4.73%, quarterly average balance in cash and non-interest bearing deposits in other financial institutions of $32.2 million, quarterly net interest margin of 2.53%, quarterly net interest margin (tax equivalent) of 2.67%, and net interest spread of 2.10%. Each of these amounts have been revised to reflect the actual average balance and associated yields during the quarter ended September 30, 2024.
Previous report
The decreased net interest income and net interest margin for the quarter ended September 30, 2024, was primarily the result of higher cost of interest-bearing liabilities resulting from the higher rate environment year over year. We anticipate that year over year compression in net interest margin may continue, however recent Federal Reserve target rate reductions may reduce or reverse such compression, as our interest-bearing liabilities are able to reprice at lower rates.
Previous report
The increase noninterest income is primarily the result of higher income from fees and service charges, Wealth management operations, and increased gains on sale of loans.
Previous report
Increases in non-interest expenses during the quarter ended September 30, 2024 were primarily attributable to higher operating cost in occupancy and equipment, higher compensation and benefits expenses, higher data processing, and non-recurring consulting fees and legal expenses offset by lower marketing expenses and federal deposit insurance premiums. Management also continues to maintain discipline in staffing.
Previous report
For the nine months ended September 30, 2024, the Bancorp reported net income of $10.0 million, an increase of $3.2 million (46.0%) compared the nine months ended September 30, 2023. For the nine months ended September 30, 2024, the ROA was 0.64%, compared to 0.44% for the nine months ended September 30, 2023. The ROE was 4.50% for the nine months ended September 30, 2024, compared to 6.68% for the nine months ended September 30, 2023.
Previous report
In the third quarter 2024 earnings release on October 29, 2024, we reported a September 30, 2024 nine months ended average balance in interest bearing deposits in other financial institutions of $51.5 million with an associated rate of 6.00%, quarterly interest earning asset rate of 4.64%, quarterly average balance in cash and non-interest bearing deposits in other financial institutions of $29.2 million, quarterly net interest margin of 2.50%, quarterly net interest margin (tax equivalent) of 2.64%, and net interest spread of 2.07%. Each of these amounts have been revised to reflect the actual average balance and associated yields during the nine months ended September 30, 2024.
Previous report
The decreased net interest income and net interest margin for the nine months ended September 30, 2024, was primarily the result of higher cost of funds resulting from the higher rate environment year over year. We anticipate that year over year compression in net interest margin may continue, however recent Federal Reserve target rate reductions may reduce or reverse such compression, as our interest-bearing liabilities are able to reprice at lower rates.
Previous report
The following table shows the change in noninterest income for the nine months ending September 30, 2024, and September 30, 2023.
Previous report
The increase in noninterest income was due primarily to the gain on the sale-leaseback transaction executed on February 22, 2024 with MountainSeed, Real Estate Services, LLC (the “Buyer”). The decrease in fees and service charges is primarily the result of decreased fee income from interest rate swap transactions occurring during the nine month period. The increase in gain on sale of loans, for the nine-month period, is the result of higher consumer demand for fixed-rate mortgage products in the lower-rate environment. The increase in the loss on the sale of securities, net for the nine-month period related to management election to sell certain securities for interest rate risk purposes and redeploy proceeds into higher yielding assets.
Previous report
Increases in non-interest expenses during the nine months ended September 30, 2024, were primarily attributable to higher non-recurring consulting and legal expenses. The increase in occupancy and equipment expenses for the nine months ended September 30, 2024, is primarily related to higher operating costs and additional lease expense associated with sale leaseback transaction. Management also continues to maintain discipline in staffing. Compensation and benefits expense declined by 1.2% for the nine months ended September 30, 2024, compared to September 30, 2023.
Previous report
The provision for income taxes was $756 thousand for the nine months ended September 30, 2024, as compared to the provision of $21 thousand for the nine months ended September 30, 2023. The effective tax rate was 7.0% for the nine months ended September 30, 2024, as compared to 0.30% for the nine months ended September 30, 2023. The Bancorp’s year-to-date effective tax rate for the nine months ended September 30, 2024, was increased primarily due to an increase in pre tax income along with a reduction in the overall tax benefits recognized during the period.
Reworded paragraphs (52)
Previous wording
Finward Bancorp (the “Bancorp”) is a financial holding company registered with the Board of Governors of the Federal Reserve System. Peoples Bank (“the Bank”), an Indiana commercial bank, is a wholly-owned subsidiary of the Bancorp. The Bancorp has no other business activity other than being a holding company for the Bank. The following management’s discussion and analysis presents information concerning our financial condition as of September 30, 2024 and December 31, 2023, and the results of operations for the three and nine months ending September 30, 2024, and September 30, 2023. This discussion should be read in conjunction with the consolidated financial statements and other financial data presented elsewhere herein and with the financial statements and other financial data, as well as the Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2023.
Current wording
Finward Bancorp (the “Company”) is a financial holding company registered with the Board of Governors of the Federal Reserve System. Peoples Bank (“the Bank”), an Indiana commercial bank, is a wholly-owned subsidiary of the Company. The Company has no other business activity other than being a holding company for the Bank. The following management’s discussion and analysis presents information concerning our financial condition as of March 31, 2025, as compared to December 31, 2024, and the results of operations for the quarter ending March 31, 2025, and March 31, 2024. This discussion should be read in conjunction with the condensed consolidated financial statements and other financial data presented elsewhere herein and with the financial statements and other financial data, as well as the Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
Previous wording
At September 30, 2024, the Bancorp had total assets of $2.1 billion, loans receivable, net of deferred fees and costs, of $1.5 billion and total deposits of $1.7 billion. Stockholders' equity totaled $159.6 million or 7.7% of total assets, with a book value per share of $36.99. Net income for the quarter ended September 30, 2024, was $606 thousand, or $0.14 earnings per diluted common share. For the quarter ended September 30, 2024, the return on average assets (ROA) was 0.12%, while the return on average stockholders’ equity (ROE) was 1.60%. Net income for the nine months ended September 30, 2024, was $10.0 million, or $2.35 earnings per diluted common share. For the nine months ended September 30, 2024, the ROA was 0.64%, while the ROE was 4.50%.
Current wording
On March 31, 2025, the Company had total assets of $2.0 billion, loans receivable, net of deferred fees and costs, of $1.5 billion and total deposits of $1.8 billion. Stockholders' equity totaled $151.8 million or 7.4% of total assets, with a book value per share of $35.10. Net income for the quarter ended March 31, 2025, was $455 thousand, or $0.11 earnings per diluted common share. For the quarter ended March 31, 2025, the return on average assets (ROA) was 0.09%, while the return on average stockholders’ equity (ROE) was 1.17%.
Previous wording
Regulatory Developments Regarding the Bancorp and the Bank
Current wording
Regulatory Developments Regarding the Company and the Bank
Previous wording
On November 7, 2023, the Bank entered into a Stipulation and Consent to the Issuance of a Consent Order (the “Stipulation”) with the FDIC and the Indiana Department of Financial Institutions (“DFI”), consenting to the issuance of a consent order (the “Order”) relating to the Bank’s compliance with the Bank Secrecy Act and its implementing regulations (collectively, the “BSA”). In consenting to the issuance of the Order, the Bank did not admit or deny any charges of unsafe or unsound banking practices or violations of law or regulation relating to its BSA compliance. The Order is based on findings of the FDIC and DFI during their joint examination commencing in February 2023 (the “Examination”). Since the completion of the Examination, the board of directors and management of the Bancorp and the Bank have aggressively taken an active role in working to address the findings contained in the Examination and have proactively taken steps to comply with the requirements of the Order prior to its effectiveness, as further discussed below.
Current wording
On November 7, 2023, the Bank entered into a Stipulation and Consent to the Issuance of a Consent Order (the “Stipulation”) with the FDIC and the Indiana Department of Financial Institutions (“DFI”), consenting to the issuance of a consent order (the “Order”) relating to the Bank’s compliance with the Bank Secrecy Act and its implementing regulations (collectively, the “BSA”). In consenting to the issuance of the Order, the Bank did not admit or deny any charges of unsafe or unsound banking practices or violations of law or regulation relating to its BSA compliance. The Order is based on findings of the FDIC and DFI during their joint examination commencing in February 2023 (the “Examination”). Since the completion of the Examination, the board of directors and management of the Company and the Bank have aggressively taken an active role in working to address the findings contained in the Examination and have proactively taken steps to comply with the requirements of the Order prior to its effectiveness, as further discussed below.
Previous wording
Numerous actions have been taken to date by the Bank to strengthen its BSA and anti-money laundering compliance practices, policies, procedures, and controls. In this regard, the Bank began developing corrective actions prior to the entry of the Order and expects that it will be able to undertake and implement all required actions within the time periods specified in the Order. These actions include, without limitation, the formation of a Risk Management and Compliance Committee of the board of directors, consisting solely of independent directors, to assist the board in overseeing compliance efforts; enhancing the Bank’s risk management and compliance programs through restructuring reporting lines; improving technology and increasing BSA compliance staff, including hiring senior personnel; making additional investments into processes and system upgrades to strengthen anti-money laundering controls; enhancing education and training of the Bank’s employees responsible for BSA and anti-money laundering compliance; and conducting a look-back review of accounts and transaction activity to identify and properly report suspicious activity and appointing a new Senior Vice President, General Counsel, Corporate Secretary, and Chief Risk Officer of the Bancorp and the Bank with oversight responsibility over the Bank’s enhanced risk management infrastructure, including BSA compliance.
Current wording
Numerous actions have been taken to date by the Bank to strengthen its BSA and anti-money laundering compliance practices, policies, procedures, and controls. In this regard, the Bank began developing corrective actions prior to the entry of the Order and expects that it will be able to undertake and implement all required actions within the time periods specified in the Order. These actions include, without limitation, the formation of a Risk Management and Compliance Committee of the board of directors, consisting solely of independent directors, to assist the board in overseeing compliance efforts; enhancing the Bank’s risk management and compliance programs through restructuring reporting lines; improving technology and increasing BSA compliance staff, including hiring senior personnel; making additional investments into processes and system upgrades to strengthen anti-money laundering controls; enhancing education and training of the Bank’s employees responsible for BSA and anti-money laundering compliance; and conducting a look-back review of accounts and transaction activity to identify and properly report suspicious activity and appointing a new Senior Vice President, General Counsel, Corporate Secretary, and Chief Risk Officer of the Company and the Bank with oversight responsibility over the Bank’s enhanced risk management infrastructure, including BSA compliance.
Previous wording
Management does not expect the actions called for by these regulatory actions to have a substantial impact on the Bancorp’s or the Bank’s ongoing day-to-day operations, although they may have the effect of limiting or delaying the Bancorp’s or the Bank’s ability or plans to expand and engage in business combinations.*** ***
Current wording
Management does not expect the actions called for by these regulatory actions to have a substantial impact on the Company’s or the Bank’s ongoing day-to-day operations, although they may have the effect of limiting or delaying the Company’s or the Bank’s ability or plans to expand and engage in business acquisitions.*** ***
Previous wording
During the nine months ended September 30, 2024, total assets decreased by $33.6 million (1.6%), with interest-earning assets decreasing by $43.0 million (2.2%). At September 30, 2024, interest-earning assets totaled $1.92 billion compared to $1.96 billion at December 31, 2023. Earning assets represented 92.4% of total assets at September 30, 2024 and 92.9% of total assets at December 31, 2023.
Current wording
During the quarter ended March 31, 2025, total assets decreased by $21.0 million (1.0%), with interest-earning assets decreasing by $18.0 million (0.9%). At March 31, 2025, interest-earning assets totaled $1.89 billion compared to $1.90 billion at December 31, 2024. Earning assets represented 92.4% of total assets at March 31, 2025, and 92.3% of total assets at December 31, 2024.
Previous wording
Net loans receivable totaled $1.51 billion at both September 30, 2024 and December 31, 2023. The loan portfolio, which is the Bancorp’s largest asset, is the primary source of both interest and fee income. The Bancorp’s lending strategy emphasizes quality loan growth, product diversification, and competitive and profitable pricing.
Current wording
Net loans receivable totaled $1.49 billion at March 31, 2025, compared to $1.51 billion at December 31, 2024. The loan portfolio, which is the Company’s largest asset, is the primary source of both interest and fee income. The Company’s lending strategy emphasizes quality loan growth, product diversification, and competitive and profitable pricing.
Previous wording
The Bancorp’s end-of-period loan balances were as follows:
Current wording
The Company’s end-of-period loan balances were as follows:
Previous wording
Our total commercial real estate portfolio (which is comprised of loans secured by office space, medical office space, and mixed-use retail/office space) totaled $540.0 million as of September 30, 2024, compared to $503.2 million as of December 31, 2023. Given prevailing market conditions such as continued elevated interest rate levels, reduced occupancy as a result of the increase in hybrid work arrangements, and lower commercial real estate valuations, we are carefully monitoring these loans for signs of deterioration in credit quality.
Current wording
Our total commercial real estate portfolio (which includes but is not limited to loans secured by office space, medical office space, and mixed-use retail/office space) totaled $554.9 million as of March 31, 2025, compared to $551.7 million as of December 31, 2024. Given prevailing market conditions such as continued elevated interest rate levels and reduced occupancy as a result of the increase in hybrid work arrangements, we are carefully monitoring these loans for signs of deterioration in credit quality.
Previous wording
Commercial real estate loans remained our largest loan segment and accounted for 35.8% of the total loan portfolio at September 30, 2024 and 33.4% at December 31, 2023. A further breakdown of the composition of the commercial real estate loan portfolio as of September 30, 2024 and December 31, 2023 is shown in the table below:
Current wording
Commercial real estate loans remained our largest loan segment and accounted for 37.2% of the total loan portfolio at March 31, 2025, and 36.6% at December 31, 2024. A further breakdown of the composition of the commercial real estate loan portfolio as of March 31, 2025, and December 31, 2024 is shown in the table below:
Previous wording
The following table sets forth certain information at September 30, 2024, regarding the dollar amount of loans in the Bancorp’s portfolio based on their contractual terms to maturity. Demand loans, loans having no schedule of repayment and no stated maturity, and overdrafts are reported as due in one year or less. Contractual principal repayments of loans do not necessarily reflect the actual term of the loan portfolio. The average life of mortgage loans is substantially less than their contractual terms because of loan prepayments and because of enforcement of due-on-sale clauses, which give the Bancorp the right to declare a loan immediately due and payable in the event, among other things, that the borrower sells the property subject to the mortgage. The amounts are stated in thousands (000’s).
Current wording
The following table sets forth certain information at March 31, 2025, regarding the dollar amount of loans in the Company’s portfolio based on their contractual terms to maturity. Demand loans, loans having no schedule of repayment and no stated maturity, and overdrafts are reported as due in one year or less. Contractual principal repayments of loans do not necessarily reflect the actual term of the loan portfolio. The average life of mortgage loans is substantially less than their contractual terms because of loan prepayments and because of enforcement of due-on-sale clauses, which give the Company the right to declare a loan immediately due and payable in the event, among other things, that the borrower sells the property subject to the mortgage. The amounts are stated in thousands (000’s).
Previous wording
The Bancorp primarily focuses on originating fixed-rate residential real estate loans for sale on the secondary markets. These loans are identified as held for sale when originated and sold, on a loan-by-loan basis, in the secondary market. The Bancorp will also retain mortgages, which are primarily construction loans and adjustable-rate loans with a fixed-rate period of 7 years or less. During the nine months September 30, 2024, the Bancorp originated $22.5 million in new fixed rate mortgage loans for sale, compared to $30.4 million during the nine months ended September 30, 2023. Net gains realized from the mortgage loan sales totaled $810 thousand for the nine months ended September 30, 2024, compared to $729 thousand for the nine months ended September 30, 2023. The decline in originations and increase in net gains realized from mortgage loan sales for the nine months ended September 30, 2024, compared to the prior year period is due to the receipt of additional gain on sale. based on loan performance. from loans sold to Federal Home Loan Bank of Indianapolis in previous years. At September 30, 2024, the Bancorp had $2.6 million in loans that were classified as held for sale, compared to $340 thousand at December 31, 2023.
Current wording
The Company is primarily a portfolio lender. Mortgage banking activities historically have been limited to the sale of fixed rate mortgage loans with contractual maturities greater than 15 years. These loans are identified as held for sale when originated and sold, on a loan-by-loan basis, in the secondary market. The Company will also retain fixed rate mortgage loans with a contractual maturity greater than 15 years on a limited basis. During the three months ended March 31, 2025, the Company originated $9.6 million in new fixed rate mortgage loans for sale, compared to $3.8 million during the three months ended March 31, 2024. Net gains realized from the mortgage loan sales totaled $230 thousand for the three months ended March 31, 2025, compared to $152 thousand for the three months ended March 31, 2024. The increase in originations and increase in net gains realized from mortgage loan sales for the three months ended March 31, 2025, compared to the prior year period is due to the receipt of additional gain on sale based on loan performance from loans sold to Federal Home Loan Bank of Indianapolis in previous years. At March 31, 2025, the Company had $2.8 million in loans that were classified as held for sale, compared to $1.3 million at December 31, 2024.
Previous wording
Non-performing loans include those loans that are 90 days or more past due and those loans that have been placed on non-accrual status. The Bancorp will at times maintain certain loans on accrual status, despite being over 90 days past due, for short periods of time when management has reason to believe payments are in the process of being received.
Current wording
Non-performing loans include those loans that are 90 days or more past due and those loans that have been placed on non-accrual status. The Company will at times maintain certain loans on accrual status, despite being over 90 days past due, for short periods of time when management has reason to believe payments are in the process of being received.
Previous wording
The Bancorp's special mention loans are summarized below:
Current wording
The Company's special mention loans are summarized below:
Previous wording
The allowance for credit losses (ACL) is a valuation allowance for expected losses over the estimated life of loan portfolio, increased by the provision for credit losses, and decreased by charge-offs net of recoveries. A loan is charged off against the allowance by management as a loss when deemed uncollectible, although collection efforts continue and future recoveries may occur. The determination of the amounts of the ACL and provisions for credit losses is based on management’s current judgments about the credit quality of the loan portfolio with consideration given to all known relevant internal and external factors that affect loan collectability and reasonable and supportable forecasts as of the reporting date. The appropriateness of the current period provision and the overall adequacy of the ACL are determined through a disciplined and consistently applied quarterly process that reviews the Bancorp’s current credit risk within the loan portfolio and identifies the required allowance for credit losses given the current risk estimates.
Current wording
The allowance for credit losses (ACL) is a valuation allowance for expected losses over the estimated life of loan portfolio, increased by the provision for credit losses, and decreased by charge-offs net of recoveries. A loan is charged off against the allowance by management as a loss when deemed uncollectible, although collection efforts continue and future recoveries may occur. The determination of the amounts of the ACL and provisions for credit losses is based on management’s current judgments about the credit quality of the loan portfolio with consideration given to all known relevant internal and external factors that affect loan collectability and reasonable and supportable forecasts as of the reporting date. The appropriateness of the current period provision and the overall adequacy of the ACL are determined through a disciplined and consistently applied quarterly process that reviews the Company’s current credit risk within the loan portfolio and identifies the required allowance for credit losses given the current risk estimates.
Previous wording
The Bancorp's charge-off and recovery information is summarized below:
Current wording
The Company's charge-off and recovery information is summarized below:
Previous wording
The Bancorp's allowance to total loans and non-performing loans are summarized below:
Current wording
The Company's allowance to total loans and non-performing loans are summarized below:
Previous wording
The primary objective of the Bancorp’s investment portfolio is to provide for the liquidity needs of the Bancorp and to contribute to profitability by providing a stable flow of dependable earnings. Funds are generally invested in federal funds, interest bearing balances in other financial institutions, U.S. government securities, federal agency obligations, obligations of state and local municipalities, and corporate securities. The securities portfolio, all of which is designated as available-for-sale, totaled $350.0 million at September 30, 2024, compared to $371.4 million at December 31, 2023, a decrease of $21.3 million (5.7%). The decrease in securities available for sale on a year to date basis was due to a combination of a sale of $15.1 million in securities and portfolio runoff. Unrealized losses were $63.5 million as of September 30, 2024, compared to $67.9 million on December 31, 2023, a decrease of $4.4 million or 6.5%. The yield on the securities portfolio was 2.39% for both the nine months ended September 30, 2024 and the nine months ended September 30, 2023. Management did not execute any securities sale transactions during the quarter but will continue to monitor the securities portfolio for additional restructuring opportunities. At September 30, 2024, the securities portfolio represented 18.3% of interest-earning assets and 16.9% of total assets compared to 19.0% of interest-earning assets and 17.6% of total assets at December 31, 2023.
Current wording
The primary objective of the Company’s investment portfolio is to provide for the liquidity needs of the Company and to contribute to profitability by providing a stable flow of dependable earnings. Funds are generally invested in federal funds, interest bearing balances in other financial institutions, U.S. government securities, U.S. treasury securities, federal agency obligations, obligations of state and local municipalities, and corporate securities. The securities portfolio, all of which is designated as available-for-sale, totaled $330.1 million at March 31, 2025, compared to $333.6 million at December 31, 2024, a decrease of $3.5 million (1.0%). The decrease in securities available for sale for the quarter was primarily due to continued portfolio runoff. Accumulated other comprehensive loss ("AOCL") was $58.2 million as of March 31, 2025, compared to $58.1 million on December 31, 2024, a decline of $160 thousand, or 0.3%. The yield on the securities portfolio increased to 2.38% for the three months ended March 31, 2025 from 2.34% for the three months ended December 31, 2024. Management did not execute any securities sale transactions during the quarter. At March 31, 2025, the securities portfolio represented 17.5% of interest-earning assets and 16.2% of total assets compared to 17.5% of interest-earning assets and 16.2% of total assets at December 31, 2024.
Previous wording
The Bancorp’s end-of-period investment portfolio and other short-term investments and stock balances were as follows:
Current wording
The carrying value of the Company’s end-of-period investment portfolio and other short-term investments and stock balances were as follows:
Previous wording
The decrease in interest bearing deposits in other financial institutions is the result of the timing of cash flows.
Current wording
The increase in interest bearing deposits in other financial institutions is the result of the timing of loan fundings and payoffs, inflow and outflow of deposits, repurchase agreements and borrowed funds.
Previous wording
The weighted average yields were calculated by multiplying each carrying value by its yield and dividing the sum of these results by the total carrying values. Yields presented are not on a tax-equivalent basis.
Current wording
The weighted average yields were calculated by multiplying each carrying value by its annualized yield and dividing the sum of these results by the total carrying values. Yields presented are not on a tax-equivalent basis.
Previous wording
Deposits are a fundamental and cost-effective source of funds for lending and other investment purposes. The Bancorp offers a variety of products designed to attract and retain customers, with the primary focus on building and expanding relationships.
Current wording
Deposits are a fundamental and cost-effective source of funds for lending and other investment purposes. The Company offers a variety of products designed to attract and retain customers, with the primary focus on building and expanding relationships.
Previous wording
The Bancorp’s end-of-period deposit portfolio balances were as follows:
Current wording
The Company’s end-of-period deposit portfolio balances were as follows:
Previous wording
As of September 30, 2024, deposits totaled $1.7 billion, compared to $1.8 billion on December 31, 2023 a decrease of $64.6 million or 3.6%. Core deposits totaled $1.2 billion at September 30, 2024 compared to $1.3 billion on December 31, 2023, a decrease of $94.7 million or 7.4%. Core deposits include checking, savings, and money market accounts and represented 67.9% of the Bancorp’s total deposits at September 30, 2024. On September 30, 2024, balances for certificates of deposit totaled $562.2 million, compared to $532.1 million on December 31, 2023, an increase of $30.1 million or 5.7%. The decrease in deposits is primarily related to cyclical inflows and outflows related to a number of municipality depositors and planned adjustments to deposit pricing.
Current wording
As of March 31, 2025, deposits totaled $1.8 billion, a decrease of $10.2 million or 0.6% compared to December 31, 2024. Core deposits totaled $1.2 billion at March 31, 2025, compared to $1.2 billion on December 31, 2024, a slight increase of $5.2 million or 0.4%. Core deposits include checking, savings, and money market accounts and represented 68.9% of the Company’s total deposits at March 31, 2025. On March 31, 2025, balances for certificates of deposit totaled $544.8 million, compared to $560.3 million on December 31, 2024, a decrease of $15.4 million or 2.7%. The decrease in deposits is primarily related to cyclical inflows and outflows related to a number of municipality depositors and planned adjustments to deposit pricing.
Previous wording
Non-interest checking account balances decreased $74.4 million and interest bearing savings account balances decreased $23.7 million in the first nine months of 2024 as municipal and non-interest bearing customers deployed their excess cash balances. Money market account balances increased by $3.3 million during the first nine months of 2024 due to consumer preferences. Certificates of deposits increased by $30.1 million in the first nine months of 2024 reflecting our increases in offered interest rates. We strive to maintain balances of personal and business checking and savings accounts through our focus on quality customer service, the desire of customers to deal with a local bank, the convenience of our branch network and the breadth and depth of our product line.
Current wording
Checking account balances decreased $2.1 million and interest bearing savings account balances decreased $1.1 million in the first three months of 2025 primarily due to decreases in not-for-profit and public funds balances, offset by increases in business and retail customers preferences. Money market account balances increased by $8.4 million during the first three months of 2025 due to business and retail consumer preferences. Certificates of deposits declined by $15.4 million in the first three months of 2025 primarily reflecting customer prioritization of more liquid deposit products. We strive to maintain balances of personal and business checking and savings accounts through our focus on quality customer service, the desire of customers to deal with a local bank, the convenience of our branch network and the breadth and depth of our product line.
Previous wording
Noninterest bearing demand accounts comprised 16.7% of total deposits at September 30, 2024 and 18.6% of total deposits at December 31, 2023. Interest bearing demand accounts, including money market and savings accounts, comprised 51.2% of total deposits at September 30, 2024 and 52.0% at December 31, 2023. Time accounts as a percentage of total deposits were 32.1% at September 30, 2024 and 29.3% at December 31, 2023.
Current wording
Noninterest bearing demand accounts comprised 16.1% of total deposits at March 31, 2025, and 15.0% of total deposits at December 31, 2024. Interest bearing demand accounts, including money market and savings accounts, comprised 52.8% of total deposits at March 31, 2025, and 53.2% at December 31, 2024. Time accounts as a percentage of total deposits were 31.1% at March 31, 2025, and 31.8% at December 31, 2024.
Previous wording
The increase in deposit rates in the nine months ended September 30, 2024 as compared to full year ending December 31, 2023 is primarily the result of the increase in short-term market interest rates and deposit product migration experienced throughout 2023 and continuing in the first nine months of 2024.
Current wording
The decrease in deposit rates in the three months ended March 31, 2025, as compared to three months ending December 31, 2024, is primarily the result of the decrease in short-term market interest rates.
Previous wording
The Bancorp’s borrowed funds are primarily used to fund asset growth not supported by deposit generation. The Bancorp’s end-of-period borrowing balances were as follows:
Current wording
The Company’s borrowed funds are primarily used to fund asset growth not supported by deposit generation. The Company’s end-of-period borrowing balances were as follows:
Previous wording
Borrowings and repurchase agreements totaled $128.0 million at September 30, 2024 compared to $118.1 million at December 31, 2023, an increase of $9.9 million or 8.4%. The change in short-term borrowings from December 31, 2023 was the result of cyclical inflows and outflows of interest-earning assets and interest-bearing liabilities. During the quarter ending September 30, 2024, the Bancorp terminated its involvement in the Bank Term Funding Program (the “BTFP”) and paid off its outstanding balance of $60 million, in full, through a utilization of excess liquidity and FHLB advances. As of September 30, 2024, 72% of our deposits are fully FDIC insured, and another 7% are further backed by the Indiana Public Deposit Insurance Fund. The Bancorp’s liquidity position remains strong with solid core deposit customer relationships, excess cash, debt securities, and access to diversified borrowing sources. As of September 30, 2024, the Bancorp had available liquidity of $686 million including borrowing capacity from the FHLB and Federal Reserve facilities.
Current wording
Borrowings and repurchase agreements totaled $101.7 million at March 31, 2025, compared to $105.1 million at December 31, 2024, a decrease of $3.4 million or 3.2%. The decrease in borrowings from December 31, 2024, was the result of the FHLB calling $20.0 million of the Company’s putable advances due to movement in market interest rates, as well as intentional balance sheet management during the quarter. As of March 31, 2025, 72% of our deposits are fully FDIC insured, and another 9% are further backed by the Indiana Public Deposit Insurance Fund. The Company’s liquidity position remains strong with solid core deposit customer relationships, excess cash, debt securities, and access to diversified borrowing sources. As of March 31, 2025, the Company had available liquidity of $696 million including borrowing capacity from the FHLB and Federal Reserve facilities.
Previous wording
Other assets totaled $40.9 million at September 30, 2024, compared to $45.3 million at December 31, 2023. The decrease in other assets is primarily related to decreased fair value of the Bancorp’s interest rate swap contract derivative. Other liabilities totaled $38.3 million at September 30, 2024, compared to $29.4 million at December 31, 2023. The increase in other liabilities is primarily related to the sale-leaseback transaction executed on February 22, 2024 with MountainSeed Real Estate Services, LLC (the “Buyer”). Under the Sale Agreement, the Bank also entered into lease agreements (the “Lease Agreements”) with the Buyer under which the Bank leases each of the Properties. Each of the Lease Agreements became effective upon the closing of the sale-leaseback transaction and have an initial term of 15 years.
Current wording
Other assets totaled $41.8 million at March 31, 2025, compared to $43.9 million at December 31, 2024. The decrease in other assets is primarily related to decreased fair value of the Company’s interest rate swap contract derivative. Accrued expenses and other liabilities totaled $35.8 million at March 31, 2025, compared to $43.6 million at December 31, 2024. The decrease in accrued expenses and other liabilities is primarily the result of the decreased fair value of the Company’s interest rate swap contract derivative, along with other activities.
Previous wording
Market risk represents the risk of loss due to changes in market values of assets and liabilities. The Bancorp incurs market risk in the normal course of business through exposures to market interest rates, equity prices, and credit spreads. As of September 30, 2024, the Bancorp has identified interest rate risk as our primary source of market risk.
Current wording
Market risk represents the risk of loss due to changes in market values of assets and liabilities. The Company incurs market risk in the normal course of business through exposures to market interest rates, equity prices, and credit spreads. As of March 31, 2025, the Company has identified interest rate risk as our primary source of market risk.
Previous wording
The Bancorp’s board of directors establishes broad policy limits with respect to interest rate risk. As part of this policy, the asset liability committee, or ALCO, establishes specific operating guidelines within the parameters of the board of director’s policies. In general, the ALCO focuses on ensuring a stable and steadily increasing flow of net interest income through managing the size and mix of the balance sheet. The management of interest rate risk is an active process which encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.
Current wording
The Company’s board of directors establishes broad policy limits with respect to interest rate risk. As part of this policy, the Asset Liability Committee, or ALCO, establishes specific operating guidelines within the parameters of the board of director’s policies. In general, the ALCO focuses on ensuring a stable and steadily increasing flow of net interest income through managing the size and mix of the balance sheet. The management of interest rate risk is an active process which encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.
Previous wording
There are an infinite number of potential interest rate scenarios, each of which can be accompanied by differing economic, political, and regulatory climates; can generate multiple differing behavior patterns by markets, borrowers, depositors, and other market participants; and can last for varying degrees of time. Therefore, by definition, interest rate risk sensitivity cannot be predicted with certainty. Accordingly, the Bancorp’s interest rate risk measurement philosophy focuses on maintaining an appropriate balance between theoretical and practical scenarios; especially given the primary objective of the Bancorp’s overall asset/liability management process is to facilitate meaningful strategy development and implementation.
Current wording
There are an infinite number of potential interest rate scenarios, each of which can be accompanied by differing economic, political, and regulatory climates; can generate multiple differing behavior patterns by markets, borrowers, depositors, and other market participants; and can last for varying degrees of time. Therefore, by definition, interest rate risk sensitivity cannot be predicted with certainty. Accordingly, the Company’s interest rate risk measurement philosophy focuses on maintaining an appropriate balance between theoretical and practical scenarios; especially given the primary objective of the Company’s overall asset/liability management process is to facilitate meaningful strategy development and implementation.
Previous wording
Therefore, we model a set of interest rate scenarios capturing the financial effects of a range of plausible rate scenarios, the collective impact of which will enable the Bancorp to clearly understand the nature and extent of its sensitivity to interest rate changes. Doing so necessitates an assessment of rate changes over varying time horizons and of varying/sufficient degrees such that the impact of embedded options within the balance sheet are sufficiently examined.
Current wording
Therefore, we model a set of interest rate scenarios capturing the financial effects of a range of plausible rate scenarios, the collective impact of which will enable the Company to clearly understand the nature and extent of its sensitivity to interest rate changes. Doing so necessitates an assessment of rate changes over varying time horizons and of varying/sufficient degrees such that the impact of embedded options within the balance sheet are sufficiently examined.
Previous wording
The following table shows the impact of changes in interest rates on net interest income over the next twelve months
Current wording
The following table shows the impact of changes in interest rates on net interest income over the next twelve months and EVE based on our balance sheet as of March 31, 2025 (dollars in millions):
Previous wording
If interest rates were to decrease, this analysis suggests that we are positioned for an improvement in net interest income over the next twelve months. If interest rates were to increase, this analysis suggests we would experience a reduction in net interest income over the next twelve months.
Current wording
If interest rates across the yield curve were to uniformly decrease, this analysis suggests that the Bank may be positioned for relatively neutral to positive improvements in net interest income over the next twelve months. If interest rates across the yield curve were to uniformly increase, this analysis suggests we would experience a reduction in net interest income over the next twelve months.
Previous wording
For the Bancorp, liquidity management refers to the ability to generate sufficient cash to fund current loan demand, meet deposit withdrawals, and pay dividends and operating expenses. Because profit and liquidity are often conflicting objectives, management attempts to maximize the Bank’s net interest margin by making adequate, but not excessive, liquidity provisions. Furthermore, we seek to manage funds so that future profits will not be significantly impacted as funding costs increase. We seek to maintain diversified sources of liquidity that may be used during the ordinary course of business as well as on a contingency basis.
Current wording
For the Company, liquidity management refers to the ability to generate sufficient cash to fund current loan demand, meet deposit withdrawals, and pay dividends and operating expenses. Because profit and liquidity are often conflicting objectives, management attempts to maximize the Bank’s net interest margin by making adequate, but not excessive, liquidity provisions. Furthermore, we seek to manage funds so that future profits will not be significantly impacted as funding costs increase. We seek to maintain diversified sources of liquidity that may be used during the ordinary course of business as well as on a contingency basis.
Previous wording
Changes in the liquidity position result from operating, investing and financing activities. Cash flows from operating activities are generally the cash effects of transactions and other events that enter into the determination of net income. The primary investing activities include loan originations, loan repayments, investments in interest bearing balances in other financial institutions, and the purchase, sale, and maturity of investment securities. Financing activities focus almost entirely on the generation of customer deposits. In addition, the Bancorp utilizes borrowings (i.e., repurchase agreements, FHLB advances and federal funds purchased) as a source of funds.
Current wording
Changes in the liquidity position result from operating, investing and financing activities. Cash flows from operating activities are generally the cash effects of transactions and other events that enter into the determination of net income. The primary investing activities include loan originations, loan repayments, investments in interest bearing balances in other financial institutions, and the purchase, sale, and maturity of investment securities. Financing activities focus almost entirely on the generation of customer deposits. In addition, the Company utilizes borrowings (i.e., repurchase agreements, FHLB advances and federal funds purchased) as a source of funds.
Previous wording
Although customer deposits remain our preferred funding source, maintaining additional sources of liquidity is part of our prudent liquidity risk management practices. We have the ability to borrow from the FHLB. At September 30, 2024, we had seven outstanding advances totaling $85 million and the ability to borrow up to $398.3 million from the FHLB. We also have the ability to borrow from the Federal Reserve Bank of Chicago. At September 30, 2024, we had no outstanding balance from the Federal Reserve Bank of Chicago through the BTFP. At September 30, 2024, cash and cash equivalents were $71.6 million and secured borrowing capacity at the Federal Reserve Bank totaled $246.6 million, providing total liquidity sources of $685.9 million.
Current wording
Although customer deposits remain our preferred funding source, maintaining additional sources of liquidity is part of our prudent liquidity risk management practices. We have the ability to borrow from the FHLB. At March 31, 2025, we had five outstanding advances totaling $55 million and the ability to borrow up to $473.9 million from the FHLB. We also have the ability to borrow from the Federal Reserve Bank of Chicago. At March 31, 2025, we had $1.7 million in line of credit drawn from the FHLB and we had no outstanding balance from the Federal Reserve Bank of Chicago. At March 31, 2025, cash and cash equivalents were $72.4 million and secured borrowing capacity at the Federal Reserve Bank totaled $182.6 million, providing total liquidity sources of $695.8 million.
Showing the first 40 of 52 pairs. Open the source sections for the rest.
Rearranged previous paragraphs (6)
Previous report — wording carried elsewhere
The Bancorp's charge-off and recovery information is summarized below:
Previous report — wording carried elsewhere
and EVE based on our balance sheet as of September 30, 2024 (dollars in millions):
Previous report — wording carried elsewhere
Results of Operations - Comparison of the Nine Months Ended September 30, 2024 to the Nine Months Ended September 30, 2023
Previous report — wording carried elsewhere
Information relating to the average consolidated balance sheet and the yield on average earning assets and cost of average liabilities for the periods indicated are in the following table. Dividing the related interest, on an annualized basis, by the average balance of assets or liabilities derives the disclosed rates. Average balances are derived from daily balances.
Previous report — wording carried elsewhere
Net interest income for the nine months ended September 30, 2024, was $35.8 million, a decrease of $6.0 million (14.3%), compared to $41.8 million for the nine months ended September 30, 2023. The weighted-average yield on interest-earning assets was 4.62% for the nine months ended September 30, 2024, compared to 4.39% for the nine months ended September 30, 2023. The weighted-average cost of interest-bearing liabilities for the nine months ended September 30, 2024, was 2.57% compared to 1.82% for the nine months ended September 30, 2023. The impact of the 4.62% return on interest-earning assets and the 2.57% cost of interest-bearing liabilities resulted in an interest rate spread of 2.05% for the nine months ended September 30, 2024, a decrease from the 2.57% spread for the nine months ended September 30, 2023. On a tax adjusted basis, the Bancorp’s net interest margin was 2.63% for the nine months ended September 30, 2024, compared to 3.04% for the nine months ended September 30, 2023. The Bancorp believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully-taxable equivalent basis, as these measures provide useful information to make peer comparisons. Tax adjusted net interest margin represents a non-GAAP financial measure. See the non-GAAP reconciliation table immediately below and the section captioned “Non-GAAP Financial Measures” for further disclosure regarding non-GAAP financial measures.
Previous report — wording carried elsewhere
The following table shows the change in noninterest expense for the nine months ending September 30, 2024, and September 30, 2023.