Finward Bancorp
For the period ended Jun 30, 2025. Filed Aug 13, 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.
Jun 30, 2025 · Filed Aug 13, 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 2025-03-31; filed 2025-05-15.
0001437749-25-017176
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-08-13.
0001628280-25-040138
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 108 previous paragraphs and 115 current paragraphs.
67 unchanged; 32 reworded; 11 added; 9 removed; 0 previous and 5 current paragraphs rearranged.
Tables are not compared: 24 previous and 30 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 (11)
Current report
On July 4, 2025, President Trump signed into law the legislation commonly referred to as the One Big Beautiful Bill Act (“OBBBA”), which is a sweeping federal reconciliation package that permanently extends and expands key provisions of the 2017 Tax Cuts and Jobs Act, introduces new tax benefits (including elevated standard deductions, higher state-and-local tax (SALT) caps, and no taxation on tips and overtime income for certain workers), and enacts broad reductions in government spending. The OBBBA is a complex revision to the U.S. federal income tax laws with potentially far-reaching consequences. The OBBBA will require subsequent rulemaking in a number of areas. The long-term impact of the OBBBA on the Company, the Bank, our shareholders, and the banking industry in general cannot be reliably predicted at this early stage of the new law’s implementation. Shareholders are urged to consult with their own tax advisors regarding the impact of the OBBBA to them and their acquisition, ownership, and disposition of the Company's common stock. The Company's management continues to evaluate the impact of the OBBBA on the Company, the Bank, and its business, financial condition, and results of operations.
Current report
Termination of Consent Order
Current report
On August 6, 2025, the FDIC and the Indiana Department of Financial Institutions ("DFI") terminated the Consent Order issued to the Bank that was effective on November 7, 2023 relating to the Bank's compliance with the Bank Secrecy Act and its implementing regulations (collectively, the "BSA"). The termination of the Consent Order follows the Bank's successful resolution of the deficiencies in the Bank's BSA compliance and anti-money laundering compliance program which was the subject of the Consent Order.
Current report
The Company's non-performing loans are summarized below:
Current report
The following table shows the change in non-interest income for the quarter ending June 30, 2025, and June 30, 2024.
Current report
The increase non-interest income is primarily the result of higher income from fees and service charges and increased gains on sale of loans.
Current report
Increases in non-interest expenses during the quarter ended June 30, 2025 were primarily attributable to higher compensation and benefits expenses and higher data processing expenses offset by lower occupancy and equipment expenses and professional and outside services fees.
Current report
For the six months ended June 30, 2025, the Company reported net income of $2.6 million, a decrease of $6.8 million (72.3%) compared to $9.4 million for the six months ended June 30, 2024. For the six months ended June 30, 2025, the ROA was 0.25%, compared to 0.91% for the six months ended June 30, 2024. The ROE was 3.39% for the six months ended June 30, 2025, compared to 12.81% for the six months ended June 30, 2024.
Current report
The following table shows the change in non-interest income for the six months ended June 30, 2025, and June 30, 2024.
Current report
The following table shows the change in non-interest expense for the six months ended June 30, 2025, and June 30, 2024.
Current report
The provision for income taxes was $126 thousand for the six months ended June 30, 2025 as compared to the provision of $963 thousand for the six months ended June 30, 2024. The effective tax rate was 4.6% for the six months ended June 30, 2025, as compared to 9.3% for the six months ended June 30, 2024. The Company’s year-to-date effective tax rate for the six months ended June 30, 2025, decreased primarily due to a decrease in estimated full year 2025 tax accrual based on updated projected earnings levels.
Removed paragraphs (9)
Previous report
Consent Order
Previous report
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 report
Under the terms of the Order, the Bank or its board of directors is required to take certain affirmative actions to comply with the Bank’s obligations under the BSA. These affirmative actions include, but are not limited to, the following: strengthening the board of directors’ oversight of the Bank’s BSA activities; developing, adopting, and implementing a revised BSA compliance program; developing a revised system of internal controls designed to ensure full compliance with the BSA; retaining management qualified to oversee the Bank’s BSA compliance program, including retaining a qualified BSA officer; assessing BSA staffing needs and identifying staff positions and personnel for BSA compliance; developing, adopting, and implementing a revised BSA training program; developing, adopting, and implementing a revised suspicious activity reporting program; implementing a board-approved customer due diligence program, and reviewing and enforcing enhanced customer due diligence and risk assessment procedures; eliminating or correcting certain violations of BSA law and regulations, and correcting BSA program weaknesses; ensuring that all reports required by the BSA are accurately and properly filed; and developing and implementing a written plan to review past account and transaction activity to determine whether suspicious activity was properly identified and reported.
Previous report
Prior to implementation, certain of the actions required by the Order are subject to review by, and approval or non-objection from, the FDIC and the DFI. The Order will remain in effect and enforceable until it is modified, terminated, suspended, or set aside by the FDIC and DFI.
Previous report
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 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.
Previous report
The Company's nonperforming loans are summarized below:
Previous report
The following table shows the change in noninterest income for the quarter ending March 31, 2025, and March 31, 2024.
Previous report
The following table shows the change in noninterest expense for the quarter ending March 31, 2025, and March 31, 2024.
Reworded paragraphs (32)
Previous 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.
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 June 30, 2025 and December 31, 2024, and the results of operations for the three and six months ending June 30, 2025 and June 30, 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
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%.
Current wording
At June 30, 2025, the Company had total assets of $2.1 billion, loans receivable, net of deferred fees and costs, of $1.5 billion and total deposits of $1.8 billion. Stockholders' equity totaled $154.3 million or 7.5% of total assets, with a book value per share of $35.67. Net income for the three months ended June 30, 2025, was $2.2 million, or $0.50 earnings per diluted common share. For the three months ended June 30, 2025, the return on average assets (ROA) was 0.42%, while the return on average stockholders’ equity (ROE) was 5.66%. Net income for the six months ended June 30, 2025, was $2.6 million, or $0.61 earnings per diluted common share. For the six months ended June 30, 2025, the ROA was 0.25%, while the ROE was 3.39%.
Previous wording
Regulatory Developments Regarding the Company and the Bank
Current wording
Recent Developments Regarding the Company and the Bank
Previous 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.*** ***
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 Bancorp’s or the Bank’s ability or plans to expand and engage in business acquisitions.
Previous 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.
Current wording
During the six months ended June 30, 2025, total assets decreased by $2.8 million (0.14%), with interest-earning assets decreasing by $2.7 million (0.14%). At both June 30, 2025 and December 31, 2024, interest-earning assets totaled $1.9 billion. Earning assets represented 92.3% of total assets at both June 30, 2025 and December 31, 2024.
Previous 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.
Current wording
Loans receivable, net of deferred fees and costs totaled $1.5 billion at both June 30, 2025 and 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
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.
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 $551.1 million as of June 30, 2025, compared to $551.7 million as of December 31, 2024. Given prevailing market conditions such as continued elevated interest rate levels, 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
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.
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 six months June 30, 2025, the Company originated $18.1 million in new fixed rate mortgage loans for sale, compared to $10.6 million during the six months ended June 30, 2024. Net gains realized from the mortgage loan sales totaled $608 thousand for the six months ended June 30, 2025, compared to $472 thousand for the six months ended June 30, 2024. At June 30, 2025, the Company had $834 thousand in loans that were classified as held for sale, compared to $1.3 million at December 31, 2024.
Previous wording
The Company's provision for credit losses on loans are summarized below:
Current wording
The Company's provision for (benefit from) credit losses for the period ended are summarized below:
Previous 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.
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 $327.8 million at June 30, 2025, compared to $333.6 million at December 31, 2024, a decrease of $5.7 million (1.7%). The decrease in securities available for sale from year end, was primarily due to payoffs of collateralized mortgage obligations and residential mortgage-backed securities within the portfolio. The yield on the securities portfolio was 2.40% for both the six months ended June 30, 2025 and the six months ended June 30, 2024. Management did not execute any securities sale transactions during the quarter. At June 30, 2025, the securities portfolio represented 17.3% of interest-earning assets and 15.9% of total assets compared to 17.5% of interest-earning assets and 16.2% of total assets at December 31, 2024.
Previous wording
The carrying value of the Company’s end-of-period investment portfolio and other short-term investments and stock balances were as follows:
Current wording
The Company’s end-of-period investment portfolio and other short-term investments and stock balances were as follows:
Previous 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.
Current 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.
Previous 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.
Current wording
As of June 30, 2025, deposits totaled $1.8 billion, a decrease of $5.7 million or 0.32% compared to December 31, 2024. Core deposits totaled $1.2 billion at June 30, 2025 compared to $1.2 billion on December 31, 2024, an increase of $11.8 million or 1.0%. Core deposits include checking, savings, and money market accounts and represented 69.1% of the Company’s total deposits at June 30, 2025. On June 30, 2025, balances for certificates of deposit totaled $542.7 million, compared to $560.3 million on December 31, 2024, a decrease of $17.6 million or 3.1%. The decrease in deposits is primarily related to a reduction in depositor certificate of deposit activity and planned adjustments to deposit pricing.
Previous 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.
Current wording
Checking account balances increased $2.0 million and interest bearing savings account balances decreased $9.1 million from year end primarily due to decreases in personal passbook savings account balances. Money market account balances increased by $18.9 million from year end due to business and retail consumer preferences. Certificates of deposits decreased by $17.6 million 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 16.1% 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.
Current wording
Non-interest bearing demand accounts comprised 16.0% of total deposits at June 30, 2025 and 15.0% of total deposits at December 31, 2024. Interest bearing demand accounts, including money market and savings accounts, comprised 53.0% of total deposits at June 30, 2025 and 53.2% at December 31, 2024. Time accounts as a percentage of total deposits were 31.0% at June 30, 2025 and 31.8% at December 31, 2024.
Previous 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.
Current wording
Deposit rates decreased in the three and six months ended June 30, 2025 compared to same periods in 2024, primarily driven by a decrease in short-term market interest rates.
Previous 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.
Current wording
Borrowings and repurchase agreements totaled $113.3 million at June 30, 2025 compared to $105.1 million at December 31, 2024, an increase of $8.2 million or 7.8%. The increase in borrowings from December 31, 2024, was the result of additional repurchase agreement activity. As of June 30, 2025, 72% of our deposits are fully FDIC insured, and another 8% 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 June 30, 2025, the Company had available liquidity of $728.5 million including borrowing capacity from the FHLB and Federal Reserve facilities.
Previous 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.
Current wording
Other assets totaled $41.6 million at June 30, 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 $35.5 million at June 30, 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 such as a decrease in other collateral balances and ACH prefunding balances.
Previous 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.
Current wording
If interest rates across the yield curve were to uniformly decrease, this analysis suggests 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
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.
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 June 30, 2025, we had five outstanding advances totaling $65 million and the ability to borrow up to $433.7 million from the FHLB. We also have the ability to borrow from the Federal Reserve Bank of Chicago. At June 30, 2025, we had no outstanding balance from the Federal Reserve Bank of Chicago. At June 30, 2025, cash and cash equivalents were $103.4 million and secured borrowing capacity at the Federal Reserve Bank totaled $253.8 million, providing total liquidity sources of $728.5 million (excluding brokered deposit capacity).
Previous wording
During the three months ended March 31, 2025, cash and cash equivalents increased by $1.7 million compared to a $14.2 million decrease for the three months ended March 31, 2024. The primary sources of cash and cash equivalents were changes in other borrowings, sales of loans originated for sale, proceeds from the maturity of securities, and change in repurchase agreements. The primary uses of cash and cash equivalents were loan originations. Cash used in operating activities totaled $3.8 million for the three months ended March 31, 2025, compared to cash used of $25 thousand for the three months ended March 31, 2024. Cash used in operating activities was primarily a result of net income and sale of loans originated for sale, offset by loans originated for sale and net change in accrued expenses and other liabilities. Cash provided by investing activities totaled $19.7 million for the current period, compared to cash provided in investing activities of $39.2 million for the three months ended March 31, 2024. Cash provided by investing activities for the current three month period was primarily related to net change in loans receivable, and proceeds from maturity of securities. Cash used in financing activities totaled $14.1 million during the current period compared to net cash used in financing activities of $53.4 million for the three months ended March 31, 2024. The net cash used in financing activities was primarily the result of net change in deposits and change in other borrowed funds, offset against a change in repurchase agreement balances. On a cash basis, the Company paid dividends on common stock of $518 thousand for the three months ended March 31, 2025, and $515 thousand for the three months ended March 31, 2024.
Current wording
During the six months ended June 30, 2025, cash and cash equivalents increased by $32.8 million compared to a $2.8 million decrease for the six months ended June 30, 2024. The primary sources of cash and cash equivalents were sales of loans originated for sale and the net change in loans receivable. The primary uses of cash and cash equivalents were loan originations and the net change in accrued expenses and other liabilities. Cash provided by operating activities totaled $1.0 million for the six months ended June 30, 2025, compared to cash provided of $2.7 million for the six months ended June 30, 2024. Cash used in operating activities was primarily a result of net income and sale of loans originated for sale offset by loans originated for sale and net change in accrued expenses and other liabilities. Cash provided by investing activities totaled $29.9 million for the current period, compared to cash provided in investing activities of $42.4 million for the six months ended June 30, 2024. Cash provided by investing activities for the current six-month period was primarily related to net change in loans receivable and proceeds from maturities of securities. Cash provided by financing activities totaled $2.0 million during the current period compared to net cash used in financing activities of $47.9 million for the six months ended June 30, 2024. The net cash used in financing activities was primarily the result of net change in deposits offset by the change in repurchase agreements. On a cash basis, the Company paid dividends on common stock of $520 thousand for the six months ended June 30, 2025, and $1.0 million for the six months ended June 30, 2024.
Previous wording
At March 31, 2025, outstanding commitments to fund loans totaled $254.0 million. Approximately 53.8% of the commitments were at variable rates. Standby letters of credit, which are conditional commitments issued by the Company to guarantee the performance of a customer to a third-party, totaled $7.9 million at March 31, 2025. Management believes that the Company has sufficient cash flow and borrowing capacity to fund all outstanding commitments and letters of credit, while maintaining proper levels of liquidity.
Current wording
At June 30, 2025, outstanding commitments to fund loans totaled $239.4 million. Approximately 60.2% of the commitments were at variable rates. Standby letters of credit, which are conditional commitments issued by the Company to guarantee the performance of a customer to a third-party, totaled $15.8 million at June 30, 2025. Management believes that the Company has sufficient cash flow and borrowing capacity to fund all outstanding commitments and letters of credit, while maintaining proper levels of liquidity.
Previous wording
Management strongly believes that maintaining a high level of capital enhances safety and soundness. During the three months ended March 31, 2025, stockholders' equity increased by $393 thousand (0.3%). During the three months ended March 31, 2025, stockholders’ equity was primarily increased by net income of $455 thousand, offset by other comprehensive losses as the result of market value changes within the securities portfolio of $160 thousand. On April 24, 2014, the Company’s Board of Directors authorized a stock repurchase program to repurchase up to 50,000 shares of the Company’s outstanding common stock, from time to time and subject to market conditions, on the open market or in privately negotiated transactions. The stock repurchase program does not expire and is only limited by the number of shares that can be purchased. The stock repurchase program will be reviewed annually by the Board of Directors. No shares were repurchased under the program during the first three months of 2025 or 2024. During 2025, 12,609 restricted stock shares vested under the Incentive Plan outlined in Note 10 of the financial statements, of which 3,930 of these shares were withheld in the form of a net surrender to cover the withholding tax obligations of the vesting employees. The repurchase of these surrendered shares is considered outside of the scope of the formal board approved stock repurchase program.
Current wording
Management strongly believes that maintaining a high level of capital enhances safety and soundness. During the six months ended June 30, 2024, stockholders' equity increased by $2.8 million (1.9%). During the six months ended June 30, 2024, stockholders’ equity was primarily increased by net income of $2.6 million and other comprehensive income as the result of market value changes within the securities portfolio of $524 thousand offset by dividends declared of $520 thousand. On April 24, 2014, the Company’s Board of Directors authorized a stock repurchase program to repurchase up to 50,000 shares of the Company’s outstanding common stock, from time to time and subject to market conditions, on the open market or in privately negotiated transactions. The stock repurchase program does not expire and is only limited by the number of shares that can be purchased. The stock repurchase program will be reviewed annually by the Board of Directors. No shares were repurchased under the program during the first six months of 2025 or 2024. During 2025, 16,469 restricted stock shares vested under the Incentive Plan outlined in Note 10 of the financial statements, of which 5,105 of these shares were withheld in the form of a net surrender to cover the withholding tax obligations of the vesting employees. The repurchase of these surrendered shares is considered outside of the scope of the formal board approved stock repurchase program.
Previous wording
During the three months ended March 31, 2025, the Company’s and Bank’s risk weighted assets continued to be negatively impacted by regulatory requirements regarding collateralized debt obligations. The regulatory requirements state that for collateralized debt obligations that have been downgraded below investment grade by the rating agencies, increased risk-based asset weightings are required. The Company currently holds pooled collateralized debt obligations with a cost basis of $2.2 million. These investments currently have ratings that are below investment grade. As a result, approximately $7.9 million of risk-based assets are generated by the collateralized debt obligations in the Company’s and Bank’s total risk based capital calculation.
Current wording
During the six months ended June 30, 2025, the Company’s and Bank’s risk weighted assets continued to be negatively impacted by regulatory requirements regarding collateralized debt obligations. The regulatory requirements state that for collateralized debt obligations that have been downgraded below investment grade by the rating agencies, increased risk-based asset weightings are required. The Company currently holds pooled collateralized debt obligations with a cost basis of $2.1 million. These investments currently have ratings that are below investment grade. As a result, approximately $1.6 million of risk-based assets are generated by the collateralized debt obligations in the Company’s and Bank’s total risk based capital calculation.
Previous wording
The Company’s ability to pay dividends to its shareholders is largely dependent upon the Bank’s ability to pay dividends to the Company. Under Indiana law, the Bank may pay dividends from its undivided profits (generally, earnings less losses, bad debts, taxes and other operating expenses) as is considered expedient by the Bank’s Board of Directors. However, the Bank must obtain the approval of the Indiana Department of Financial Institutions (DFI) if the total of all dividends declared by the Bank during the current year, including the proposed dividend, would exceed the sum of retained net income for the year to date plus its retained net income for the previous two years. For this purpose, “retained net income,” means net income as calculated for call report purposes, less all dividends declared for the applicable period. An exemption from DFI approval would require that the Bank have been assigned a composite uniform financial institutions rating of 1 or 2 as a result of the most recent federal or state examination; the proposed dividend would not result in a Tier 1 leverage ratio below 7.5%; and that the Bank not be subject to any corrective action, supervisory order, supervisory agreement, or board approved operating agreement. In addition, under the terms of the MOU, the Bank must seek regulatory approval prior to paying cash dividends. See “– Regulatory Developments Regarding the Company and the Bank – Memorandum of Understanding” above. Moreover, the FDIC and the Federal Reserve Board may prohibit the payment of dividends if it determines that the payment of dividends would constitute an unsafe or unsound practice in light of the financial condition of the Bank. Assuming receipt of regulatory approval for all cash dividends declared by the Bank under the terms of the MOU, the aggregate amount of dividends that the Bank is eligible to declare in 2025, without the need for qualifying for a further exemption or prior DFI approval under the terms of Indiana law described above, is its 2025 net income. On April 9, 2025, the Board of Directors of the Company declared its most recent quarterly dividend of $0.12 per share. The Company’s quarterly dividend was paid to shareholders on May 12, 2025 to shareholders of record on April 22, 2025.
Current wording
The Company’s ability to pay dividends to its shareholders is largely dependent upon the Bank’s ability to pay dividends to the Company. Under Indiana law, the Bank may pay dividends from its undivided profits (generally, earnings less losses, bad debts, taxes and other operating expenses) as is considered expedient by the Bank’s Board of Directors. However, the Bank must obtain the approval of the Indiana Department of Financial Institutions (DFI) if the total of all dividends declared by the Bank during the current year, including the proposed dividend, would exceed the sum of retained net income for the year to date plus its retained net income for the previous two years. For this purpose, “retained net income,” means net income as calculated for call report purposes, less all dividends declared for the applicable period. An exemption from DFI approval would require that the Bank have been assigned a composite uniform financial institutions rating of 1 or 2 as a result of the most recent federal or state examination; the proposed dividend would not result in a Tier 1 leverage ratio below 7.5%; and that the Bank not be subject to any corrective action, supervisory order, supervisory agreement, or board approved operating agreement. In addition, under the terms of the MOU, the Bank must seek regulatory approval prior to paying cash dividends. See “– Recent Developments Regarding the Company and the Bank – Memorandum of Understanding” above. Moreover, the FDIC and the Federal Reserve Board may prohibit the payment of dividends if it determines that the payment of dividends would constitute an unsafe or unsound practice in light of the financial condition of the Bank. Assuming receipt of regulatory approval for all cash dividends declared by the Bank under the terms of the MOU, the aggregate amount of dividends that the Bank is eligible to declare in 2025, without the need for qualifying for a further exemption or prior DFI approval under the terms of Indiana law described above, is its 2025 net income. On April 9, 2025, the Board of Directors of the Company declared the most recently quarterly dividend of $0.12 per share. The Company’s quarterly dividend was paid to shareholders on May 12, 2025 to shareholders of record on April 22, 2025.
Previous wording
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 wording
For the quarter ended June 30, 2025, the Company reported net income of $2.2 million, compared to net income of $143 thousand for the quarter ended June 30, 2024, an increase of $2.0 million. For the quarter ended June 30, 2025, the ROA was 0.42%, compared to 0.03 % for the quarter ended June 30, 2024. The ROE was 5.66% for the quarter ended June 30, 2025, compared to 0.39% for the quarter ended June 30, 2024.
Previous wording
Net interest income for the quarter ended March 31, 2025, was $13.3 million, an increase of $1.5 million (13.0%), compared to $11.8 million for the quarter ended March 31, 2024. The weighted-average yield on interest-earning assets was 4.71% for the quarter ended March 31, 2025, compared to 4.52% for the quarter ended March 31, 2024. The weighted-average cost of interest-bearing liabilities for the quarter ended March 31, 2025, was 2.28% compared to 2.53% for the quarter ended March 31, 2024. The impact of the 4.71% return on interest-earning assets and the 2.28% cost of interest-bearing liabilities resulted in an interest rate spread of 2.43% for the current quarter, an increase from the 1.99% spread for the quarter ended March 31, 2024. On a tax adjusted basis, the Company’s net interest margin was 2.95% for the quarter ended March 31, 2025, compared to 2.57% for the quarter ended March 31, 2024. The Company 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.
Current wording
Net interest income for the quarter ended June 30, 2025, was $13.9 million, an increase of $1.9 million (15.7%), compared to $12.1 million for the quarter ended June 30, 2024. The weighted-average yield on interest-earning assets was 4.82% for the quarter June 30, 2025, compared to 4.64% for the quarter ended June 30, 2024. The weighted-average cost of interest-bearing liabilities for the quarter ended June 30, 2025, was 2.22% compared to 2.55% for the quarter ended June 30, 2024. The impact of the 4.82% return on interest-earning assets and the 2.22% cost of interest-bearing liabilities resulted in an interest rate spread of 2.60% for the current quarter, an increase from the 2.09% spread for the quarter ended June 30, 2024. On a tax adjusted basis, the Company’s net interest margin was 3.11% for the quarter ended June 30, 2025, compared to 2.67% for the quarter ended June 30, 2024. The Company 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. Net interest margin on a tax-equivalent basis 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 wording
The provision for income taxes was $161 thousand for the quarter ended March 31, 2025, as compared to $972 thousand for the quarter ended March 31, 2024. The effective tax rate was 26.1% for the quarter ended March 31, 2025, as compared to 9.5% for the quarter ended March 31, 2024. The Company’s higher current effective tax rate for the quarter ended March 31, 2025, is a result of lower tax preferred income relative to taxable income during the quarter as compared to March 31, 2024 which included a $11.8 million pre-tax gain associated with the sale leaseback transaction closed during the quarter.
Current wording
The benefit for income taxes was $35 thousand for the quarter ended June 30, 2025, as compared to the benefit of $9 thousand for the quarter ended June 30, 2024. The effective tax rate was negative 1.7% for the quarter ended June 30, 2025 as compared to negative 6.7% for the quarter ended June 30, 2024. The Company’s lower current effective tax rate for the quarter ended June 30, 2025, is primarily a result of a decrease in estimated full year 2025 tax accrual based on updated projected earnings levels.
Previous wording
Results of Operations - Comparison of the Quarter Ended March 31, 2025 to the Quarter Ended March 31, 2024
Current wording
Results of Operations - Comparison of the Six Months Ended June 30, 2025 to June 30, 2024
Previous wording
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 wording
The decrease in non-interest 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. The 2024 non-interest 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 the first quarter of 2024 to improve future profitability, deleverage the balance sheet through a reduction in borrowings outstanding, and further benefit regulatory capital ratios in subsequent periods.
Previous wording
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.
Current wording
Decreases in non-interest expenses during the six months ended June 30, 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 technology costs in 2025. This decrease in non-interest expense was primarily offset by increases in compensation and benefit expense driven by annual merit-based increases.
Previous wording
This filing includes certain financial measures that are identified as non-GAAP, including adjusted net interest income and tax adjusted net interest margin. The Company provides these non-GAAP performance measures because they are used by management to evaluate and measure the Company’s performance, which the Company believes also is useful to assist investors in assessing the Company’s operating performance. Where non-GAAP financial measures are used in this report, the most comparable GAAP measure, as well as the reconciliation to the most comparable GAAP measure, can be found in the tables referenced herein.
Current wording
This filing includes certain financial measures that are identified as non-GAAP, including adjusted net interest income and tax adjusted net interest margin. The Company's provides these non-GAAP performance measures because they are used by management to evaluate and measure the Company’s performance, which the Company believes also is useful to assist investors in assessing the Company’s operating performance. Where non-GAAP financial measures are used in this report, the most comparable GAAP measure, as well as the reconciliation to the most comparable GAAP measure, can be found in the tables referenced herein.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
Results of Operations - Comparison of the Three Months Ended June 30, 2025 and June 30, 2024
Current report — wording carried from elsewhere
The following table shows the change in non-interest expense for the three months ending June 30, 2025 and June 30, 2024.
Current report — wording carried from 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.
Current report — wording carried from elsewhere
Net interest income for the six months ended June 30, 2025, was $27.3 million, an increase of $3.4 million (14.4%), compared to $23.8 million for the six months ended June 30, 2024. The weighted-average yield on interest-earning assets was 4.77% for the six months ended June 30, 2025 compared to 4.58% for the six months ended June 30, 2024. The weighted-average cost of interest-bearing liabilities for the six months ended June 30, 2025, was 2.25% compared to 2.54% for the six months ended June 30, 2024. The impact of the 4.77% return on interest-earning assets and the 2.25% cost of interest-bearing liabilities resulted in an interest rate spread of 2.52% for the six months ended June 30, 2025, an increase from the 2.04% spread for the six months ended June 30, 2024. The Company’s net interest margin on a tax-equivalent basis was 3.03% for the six months ended June 30, 2025, compared to 2.62% for the six months ended June 30, 2024. The Company 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.
Current report — wording carried from elsewhere
The increased net interest income and net interest margin for the six months ended June 30, 2025, was primarily the result of reduced deposit and borrowing costs as a result of the Federal Reserve's reduction of federal funds rates year over year and increased loan yields as commercial loans mature and/or reprice.