Finward Bancorp
For the period ended Dec 31, 2025. Filed Mar 25, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Mar 25, 2026
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-K
Period ended 2024-12-31; filed 2025-03-31.
0001437749-25-010182
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-03-25.
0001628280-26-021073
Item 7. 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 77 previous paragraphs and 81 current paragraphs.
19 unchanged; 26 reworded; 35 added; 32 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 19 previous and 18 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 (35)
Current report
On July 4, 2025, President Trump signed into law the legislation commonly referred to as the One Big Beautiful Bill Act, 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 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. 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
General
Current report
During the year ended December 31, 2025, total assets decreased by $39.5 million (1.9%), with interest-earning assets decreasing by $27.2 million (1.4%). At both December 31, 2025 and December 31, 2024, interest-earning assets totaled $1.9 billion. Earning assets represented 92.7% of total assets at December 31, 2025 and 92.3% December 31, 2024.
Current report
Loan Portfolio
Current report
Loans receivable, net of deferred fees and costs totaled $1.45 billion at December 31, 2025 and $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 report
The Company’s end-of-period loan balances were as follows:
Current report
Asset Quality
Current report
Non-performing loans include those loans that are 90 days or more past due and those loans that have been placed on nonaccrual 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.
Current report
The Company's non-performing loans are summarized below:
Current report
The Company's substandard loans are summarized below:
Current report
The Company's provision for (benefit from) credit losses for the period ended are summarized below:
Current report
The Company's charge-off and recovery information is summarized below:
Current report
Investment Portfolio
Current report
Deposits
Current report
As of December 31, 2025, deposits totaled $1.7 billion, a decrease of $33.6 million or 1.9% compared to December 31, 2024. Core deposits totaled $1.2 billion at December 31, 2025 and on December 31, 2024. Core deposits include checking, savings, and money market accounts and represented 71.1% of the Company’s total deposits at December 31, 2025. On December 31, 2025, balances for certificates of deposit totaled $499.6 million, compared to $560.3 million on December 31, 2024, a decrease of $60.7 million or 10.8%. The decrease in deposits is primarily related to a reduction in certificate of deposit activity and planned adjustments to deposit pricing.
Current report
Checking account balances increased $727 thousand and interest bearing savings account balances decreased $21.1 million from year end primarily due to decreases in personal statement savings account balances. Money market account balances increased by $47.4 million from year end due to business and retail consumer preferences. Certificates of deposits decreased by $60.7 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.
Current report
Non-interest bearing demand accounts comprised 15.5% of total deposits at December 31, 2025 and 15.0% of total deposits at December 31, 2024. Interest bearing demand accounts, including money market and savings accounts, comprised 55.6% of total deposits December 31, 2025 and 53.2% at December 31, 2024. Time accounts as a percentage of total deposits were 28.9% at December 31, 2025 and 31.8% at December 31, 2024.
Current report
Borrowed Funds
Current report
Total borrowed funds were $84.7 million at December 31, 2025 compared to $105.1 million at December 31, 2024, a decrease of $20.4 million or 19.4%. The decrease in borrowings from December 31, 2024, was the result of the maturity of FHLB advances. As of December 31, 2025, 72% of our deposits are fully FDIC insured, and another 7% 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 December 31, 2025, the Company had available liquidity of $673.9 million including borrowing capacity from the FHLB and Federal Reserve facilities (excluding brokered deposit capacity).
Current report
Other assets totaled $34.9 million at December 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 and a reduction in the deferred tax asset. Accrued expenses and other liabilities totaled $34.8 million at December 31, 2025, compared to $43.6 million at December 31, 2024. The decrease in accrued expenses and other liabilities is primarily the result of a reduction in the fair value of the Company's interest rate swap liability and the related collateral received as well as lower wire transfer settlement balances at December 31, 2025.
Current report
Our primary sources of liquidity are deposits, principal and interest payments on loans and securities, and proceeds from calls, maturities, and sales of securities, subject to market conditions. While maturities and scheduled amortization of loans and securities are predictable sources of liquidity, deposit flows and loan and securities prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are unencumbered cash and due from banks and unpledged securities classified as available for sale, which could be liquidated, subject to market conditions. In the future, our liquidity position will be affected by the level of customer deposits and payments, as well as acquisitions, dividends, and share repurchases in which we may engage. For the next twelve months, we believe that our existing cash resources will be sufficient to meet the liquidity and capital requirements of our operations.
Current report
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 December 31, 2025, we had four outstanding advances totaling $45 million and the ability to borrow up to $436.0 million from the FHLB. We also have the ability to borrow from the Federal Reserve Bank of Chicago. At December 31, 2025, we had no outstanding balance from the Federal Reserve Bank of Chicago. At December 31, 2025, cash and cash equivalents were $119.6 million and secured borrowing capacity at the Federal Reserve Bank totaled $252.2 million, providing total additional liquidity sources of $673.9 million (excluding brokered deposit capacity).
Current report
At December 31, 2025, outstanding commitments to fund loans totaled $269.2 million. Approximately 60.1% 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 $15.2 million at December 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 report
Management strongly believes that maintaining a high level of capital enhances safety and soundness. During the year ended December 31, 2025, stockholders' equity increased by $23.2 million or 15.4%. During the year ended December 31, 2025, stockholders’ equity was primarily increased by net income of $8.1 million and other comprehensive income as the result of market value changes within the securities portfolio of $16.4 million offset by dividends declared of $1.6 million. 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 year of 2025 or 2024. During 2025, 17,722 restricted stock shares vested under the Plan outlined in Note 10 of the consolidated financial statements, of which 5,439 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 report
For the year ended December 31, 2025, the Company reported net income of $8.1 million, a decrease of $4.0 million (33.3%) compared to $12.1 million for the year ended December 31, 2024. For the year ended December 31, 2025, the ROA was 0.39%, compared to 0.58% for the year ended December 31, 2024. The ROE was 5.10% for the year ended December 31, 2025, compared to 8.06% for the year ended December 31, 2024. The decrease in net income and rates of return as compared to 2024 was primarily due to a strategic initiative involving a sale-leaseback transaction completed in 2024 which resulted in a pre-tax non-interest income gain of approximately $11.8 million.
Current report
Net interest income for the year ended December 31, 2025, was $56.7 million, an increase of $8.3 million (17.1%), compared to $48.4 million for the year ended December 31, 2024. The weighted-average yield on interest-earning assets was 4.85% for the year ended December 31, 2025 compared to 4.67% for the year ended December 31, 2024. The weighted-average cost of interest-bearing liabilities for the year ended December 31, 2025, was 2.23% compared to 2.56% for the year ended December 31, 2024. The impact of the 4.85% return on interest-earning assets and the 2.23% cost of interest-bearing liabilities resulted in an interest rate spread of 2.62% for the year ended December 31, 2025, an increase from the 2.11% spread for the year ended December 31, 2024. The Company’s net interest margin on a tax-equivalent basis was 3.14% for the year ended December 31, 2025, compared to 2.68% for the year ended December 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 report
The increased net interest income and net interest margin for the year ended December 31, 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.
Current report
The decrease in non-interest income was primarily due to 2025 and 2024 strategic initiatives. On February 22, 2024, a sale-leaseback transaction was completed and resulted in a pre-tax non-interest income gain of approximately $11.8 million. In the fourth quarter of 2025, the Bank incurred $1.6 million in securities losses due to the sale of securities with a market value of $26.6 million 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 year ended December 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 now terminated Consent Order and sale leaseback transaction, as well as lower other costs in 2025 due to the decrease in core deposit intangible expense. This decrease in non-interest expense was primarily offset by increases in compensation and benefit expense driven by annual merit-based increases.
Current report
The provision for income taxes was $23 thousand for the year ended December 31, 2025 as compared to the provision of $1.3 million for the year ended December 31, 2024. The effective tax rate was 0.3% for the year ended December 31, 2025, as compared to 9.8% for the year ended December 31, 2024. The Company's year-to-date effective tax rate for the year ended December 31, 2025 decreased primarily due to a decrease in pre-tax income.
Current report
Non-GAAP Financial Measures
Current report
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.
Current report
Although these non-GAAP financial measures are frequently used by investors to evaluate a financial institution’s business and performance, they have limitations as analytical tools and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP. In addition, these non-GAAP financial measures may differ from those used by other financial institutions to assess their business operations and performance.
Removed paragraphs (32)
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; 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
During the year ended December 31, 2024, total assets decreased by $47.6 million (2.3%), to $2.1 billion, with interest-earning assets decreasing by $55.8 million (2.9%). At December 31, 2024, interest-earning assets totaled $2.0 billion and represented 92.3% of total assets. Loans totaled $1.5 billion and represented 79.3% of interest-earning assets, 73.2% of total assets and 85.7% of total deposits. The loan portfolio, which is the Company’s largest asset, is a significant source of both interest and fee income.
Previous report
North American Industry Classification System (NAICS) classification coding for CRE loans began in 2023.
Previous report
Non-performing loans include those loans that are 90 days or more past due and accruing and those loans that have been placed on non-accrual status. At December 31, 2024, all non-performing loans are also accounted for on a non-accrual basis, except for twenty-nine residential real estate loans totaling $8 thousand which represent loans serviced by third parties that remained accruing and more than 90 days past due.
Previous report
The Bancorp's nonperforming loans are summarized below:
Previous report
The Bancorp's substandard loans are summarized below:
Previous report
A loan is considered collateral dependent when, based on current information and events, it is probable that a borrower will be unable to pay all amounts due according to the contractual terms of the loan agreement.
Previous report
Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date. Purchased loans with evidence of credit quality deterioration since origination are considered purchased credit impaired. Expected future cash flows at the purchase date in excess of the fair value of loans are recorded as interest income over the life of the loans if the timing and amount of the future cash flows is reasonably estimable (“accretable yield”). The difference between contractually required payments and the cash flows expected to be collected at acquisition is referred to as the non-accretable difference and represents probable losses in the portfolio. In determining the acquisition date fair value of purchased credit impaired loans, and in subsequent accounting, the Company aggregates these purchased loans into pools of loans by common risk characteristics, such as credit risk rating and loan type. Subsequent to the purchase date, increases in cash flows over those expected at the purchase date are recognized as interest income prospectively. Subsequent decreases to the expected cash flows will generally result in a provision for credit losses.
Previous report
At times, the Company will modify the terms of a loan to forego a portion of interest or principal or reduce the interest rate on the loan to a rate materially less than market rates, or materially extend the maturity date of a loan as part of a concession to a borrower experiencing financial difficulty. The valuation basis for these modified loans is based on the present value of expected future cash flows; unless consistent cash flows are not present, then the fair value of the collateral securing the loan is the basis for valuation.
Previous report
The following table shows the amortized cost of loans at December 31, 2024, that were both experiencing financial difficulty and modified during the year ended December 31, 2024, segregated by portfolio segment and type of modification. The percentage of the amortized cost of loans that were modified to borrowers in financial distress as compared to the amortized cost of each segment of financial receivable is also presented below.
Previous report
There were no commitments to lend additional amounts to the borrowers included in the previous table.
Previous report
The Company closely monitors the performance of loans and leases that have been modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table shows the performance of such modified loans is presented below.
Previous report
The borrowers with term extensions have had their maturity dates extended and as a result their monthly payments were reduced.
Previous report
Upon the Company’s determination that a modified loan has subsequently been deemed uncollectible, the loan or lease is written off. Therefore, the amortized cost of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.
Previous report
A deferred cost reserve is maintained for the portfolio of manufactured home loans that have been purchased. This reserve is available for use for manufactured home loan nonperformance and costs associated with nonperformance. If the segment performs in line with expectations, the deferred cost reserve is paid as a premium to the third party originator of the loan. The unamortized balance of the deferred cost reserve totaled $2.9 million and $3.5 million as of December 31, 2024, and 2023, respectively, and is included in net deferred loan origination cost.
Previous report
The December 31, 2024, balance in the ACL account is considered adequate by management after evaluation of the loan portfolio, past experience and current economic and market conditions. While management may periodically allocate portions of the allowance for specific problem loans, the whole allowance is available for any loan charge offs that occur. The allocation of the ACL reflects performance and growth trends within the various loan categories, as well as consideration of the facts and circumstances that affect the repayment of individual loans, and loans which have been pooled as of the evaluation date, with particular attention given to non-performing loans and loans which have been classified as substandard, doubtful or loss. Management has allocated reserves to both performing and non-performing loans based on current information available.
Previous report
During 2024, net sales of foreclosed real estate totaled $72 thousand and net gain from the 2024 sales totaled $1 thousand.
Previous report
As of December 31, 2024, the Company’s two investments in collateralized debt obligations were in “payment in kind” status. Payment in kind status results in a temporary delay in the payment of interest. As a result of a delay in the collection of the interest payments, management placed these securities on non-accrual status. At December 31, 2024, the cost basis of the two collateralized debt obligations on non-accrual status totaled $2.2 million.
Previous report
On December 31, 2024, balances for certificates of deposit totaled $560.3 million, compared to $532.1 million on December 31, 2023, an increase of $28.1 million or 5.3%. The decrease in core deposits and increase in certificate of deposit balances is generally related to customer preferences for higher yielding deposits.
Previous report
Repurchase agreements increased as part of normal account fluctuations within that product line. Borrowed funds decreased due to cyclical inflows and outflows of interest-earning assets and interest-bearing liabilities.
Previous report
Management strongly believes that safety and soundness is enhanced by maintaining a high level of capital. Stockholders' equity totaled $151.4 million at December 31, 2024, compared to $147.3 million at December 31, 2023, an increase of $4.1 million (2.8%). The increase was primarily the result of net income of $12.1 million and a decrease in net unrealized losses on available for sale securities of $6.5 million and cash dividends of $2.1 million. At December 31, 2024, book value per share was $35.10 compared to $34.28 for 2023.
Previous report
Comparison of 2024 to 2023
Previous report
Net income for 2024 was $12.1 million, compared to $8.4 million for 2023, an increase of $3.8 million (44.8%). The increase was primarily due to higher noninterest income, which was driven by a one-time gain on the sale-leaseback transaction and a one-time gain on tax credit investment and also a decrease in the provision expense for credit losses. This earnings increase was offset by lower net interest income and higher non-interest expense. The earnings represent a return on average assets of 0.58% for 2024, compared to 0.40% for 2023. The return on average equity was 8.06% for 2024, compared to 6.28% for 2023.
Previous report
The increase in interest earning asset income for the year ended December 31, 2024, compared to the year ended December 31, 2023, is primarily related to increased reinvestment rates in 2024 for loans, securities, and excess cash balances, as a result of the Federal Reserve’s elevated Federal Funds rate levels and increasing long term market rates throughout most of 2024. The increase in interest bearing liability expense is primarily the result of the Company adjusting deposit and repurchase agreement pricing to align with the current interest rate cycle, along with increased borrowing costs as a result of the Federal Reserve rate increases and long term market rates.
Previous report
The decrease in fees and service charges is primarily the result of decreased FHA mortgage fees, debit card income, and swap fees earned resulting from the current economic and rate environment. The increase in wealth management operations is the result of higher fee income year over year due to customer base growth and market conditions. We expect demand for fixed rate mortgage loans held-for-sale in the secondary market to be lower as borrowing rates on loans remain elevated. The gain on sale of real estate in 2024 was the result of an announced sale leaseback transaction executed on February 22, 2024 involving five of the Bank’s branch locations. The gain on tax credit investment was the result of a long term, non-controlling interest in a partnership established to facilitate tax credit investments. The increase in total noninterest income in 2024 was primarily due to the gain on the sale-leaseback transaction and the gain on tax credit investment.
Previous report
The increase in noninterest expense is primarily the result of increased occupancy and equipment driven by the Bank’s sale leaseback transaction and professional and outside service expenses associated with BSA resolution and other ongoing improvements made to ongoing bank operations.
Previous report
Income tax expense for the year ended December 31, 2024, totaled $1.3 million, compared to income tax benefit of $335 thousand for the year ended December 31, 2023, an increase of $1.7 million (495.5%). The combined effective federal and state tax rates for the Company was 9.85% for the year ended December 31, 2024, compared to (4.16%) for the year ended December 31, 2023. The Company's higher current effective tax rate is a result of higher earnings relative to tax preferred income.
Reworded paragraphs (26)
Previous wording
The Company's earnings are dependent upon the earnings of the Bank. The Bank's earnings are primarily dependent upon net interest margin. The net interest margin is the difference between interest income earned on loans and investments and interest expense paid on deposits and borrowings stated as a percentage of average interest earning assets. The net interest margin is perhaps the clearest indicator of a financial institution's ability to generate core earnings. Fees and service charges, wealth management operations income, gains and losses from the sale of assets, provisions for credit losses, income taxes and operating expenses also affect the Company's profitability.
Current wording
Finward Bancorp is a financial holding company registered with the Board of Governors of the Federal Reserve System. Peoples 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 Company's earnings are dependent upon the earnings of the Bank. The Bank's earnings are primarily dependent upon net interest margin. The net interest margin is the difference between interest income earned on loans and investments and interest expense paid on deposits and borrowings stated as a percentage of average interest earning assets. The net interest margin is perhaps the clearest indicator of a financial institution's ability to generate core earnings. Fees and service charges, wealth management operations income, gains and losses from the sale of assets, provisions for credit losses, income taxes and operating expenses also affect the Company's profitability.
Previous wording
At December 31, 2024, the Company had total assets of $2.1 billion and total deposits of $1.8 billion. The Company's deposit accounts are insured up to applicable limits by the Deposit Insurance Fund (DIF) that is administered by the Federal Deposit Insurance Corporation (FDIC), an agency of the federal government. At December 31, 2024, stockholders' equity totaled $151.4 million, with book value per share at $35.10. Net income for 2024 was $12.1 million, or $2.84 diluted earnings per common share. The return on average assets was 0.58%, while the return on average stockholders’ equity was 8.06%.
Current wording
The following management’s discussion and analysis presents information concerning our financial condition as of December 31, 2025 and December 31, 2024, and the results of operations for the years ended December 31, 2025 and December 31, 2024. At December 31, 2025, the Company had total assets of $2.0 billion, loans receivable, net of deferred fees and costs, of $1.4 billion and total deposits of $1.7 billion. The Company's deposit accounts are insured up to applicable limits by the DIF that is administered by the FDIC, an agency of the federal government. Stockholders' equity totaled $174.7 million or 8.6% of total assets, with a book value per share of $40.37. Net income for the year ended December 31, 2025, was $8.1 million, or $1.88 earnings per diluted common share. For the year ended December 31, 2025, the ROA was 0.39%, while the ROE was 5.10%.
Previous wording
Regulatory Developments Regarding the Company and the Bank
Current wording
Recent Developments Regarding the Company and the Bank
Previous wording
On August 9, 2024, the Bank entered into a memorandum of understanding (“MOU”) with the FDIC and DFI. The MOU is an informal administrative agreement pursuant to which the Bank has agreed to take various actions and comply with certain requirements to enhance certain areas of the Bank’s operations. The MOU documents an understanding among the Bank, the FDIC, and DFI that, among other things, the Bank will: refrain from paying cash dividends without prior regulatory approval and develop and implement certain plans regarding the Bank’s operations, capital, and strategy. The Bank will submit written quarterly progress reports to the FDIC and DFI detailing compliance with the MOU. The MOU will remain in effect until modified or terminated by the FDIC and DFI.
Current wording
On August 9, 2024, the Bank entered into a memorandum of understanding with the FDIC and DFI. The MOU is an informal administrative agreement pursuant to which the Bank has agreed to take various actions and comply with certain requirements to enhance certain areas of the Bank’s operations. The MOU documents an understanding among the Bank, the FDIC, and DFI that, among other things, the Bank will: refrain from paying cash dividends without prior regulatory approval and develop and implement certain plans regarding the Bank’s operations, capital, and strategy. The Bank will submit written quarterly progress reports to the FDIC and DFI detailing compliance with the MOU. The MOU will remain in effect until modified or terminated by the FDIC and DFI.
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 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 Bancorp’s or the Bank’s ability or plans to expand and engage in business acquisitions.
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 $551.7 million as of December 31, 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 $555.6 million as of December 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 36.6% of the total loan portfolio at December 31, 2024 and 33.4% at December 31, 2023. A further breakdown of the composition of the commercial real estate loan portfolio as of December 31, 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 38.3% of the total loan portfolio at December 31, 2025 and 36.6% at December 31, 2024. A further breakdown of the composition of the commercial real estate loan portfolio as of December 31, 2025 and December 31, 2024 is shown in the table below:
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 year ended December 31, 2024, the Bank originated $36.8 million in new fixed rate mortgage loans for sale, compared to $38.0 million during the year ended December 31, 2023. During the year ended December 31, 2024, the Bank originated $27.4 million in new 1-4 family loans retained in its portfolio, compared to $41.6 million during the year ended December 31, 2023. These retained loans are primarily construction loans and adjustable-rate loans with a fixed-rate period of 7 years or less, and the Bank continues to sell longer-duration fixed rate mortgages into the secondary market. Net gains realized from the mortgage loan sales totaled $1.1 million for the year ended December 31, 2024, and 2023. At December 31, 2024, the Company had $1.3 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 year ended December 31, 2025, the Company originated $40.9 million in new fixed rate mortgage loans for sale, compared to $36.8 million during the year ended December 31, 2024. During the year ended December 31, 2025, the Bank originated $17.8 million in new 1-4 family loans retained in its portfolio, compared to $27.4 million during the year ended December 31, 2024. These retained loans are primarily construction loans and adjustable-rate loans with a fixed-rate period of 7 years or less, and the Bank continues to sell longer-duration fixed rate mortgages into the secondary market. Net gains realized from the mortgage loan sales totaled $1.2 million for the year ended December 31, 2025, compared to $1.1 million for the year ended December 31, 2024. At December 31, 2025, the Company had $1.1 million in loans that were classified as held-for-sale, compared to $1.3 million at December 31, 2024.
Previous wording
Substandard loans include non-performing loans and potential problem loans, where information about possible credit issues or other conditions causes management to question the ability of such borrowers to comply with loan covenants or repayment terms. No loans were internally classified as doubtful or loss at December 31, 2024 or December 31, 2023.
Current wording
Substandard loans include potential problem loans, where information about possible credit issues or other conditions causes management to question the ability of such borrowers to comply with loan covenants or repayment terms. No loans were internally classified as doubtful or loss at December 31, 2025 or December 31, 2024.
Previous wording
The Bancorp's special mention loans are summarized below:
Current wording
The Company's special mention loans are summarized below:
Previous wording
At December 31, 2024, management is of the opinion that there are no loans, except certain of those discussed above, where known information about possible credit problems of borrowers causes management to have serious doubts as to the ability of such borrowers to comply with the present loan repayment terms and which will imminently result in such loans being classified as past due, non-accrual or a troubled loan modification. Management does not presently anticipate that any of the non-performing loans or classified loans would materially affect future operations, liquidity or capital resources.
Current wording
At December 31, 2025, management is of the opinion that there are no loans where known information about possible credit problems of borrowers causes management to have serious doubts as to the ability of such borrowers to comply with the present loan repayment terms and which will imminently result in such loans being classified as past due or nonaccrual. Management does not presently anticipate that any of the non-performing loans or classified loans would materially affect future operations, liquidity or capital resources.
Previous wording
The provision for credit losses represents a charge to earnings necessary to establish an allowance for credit losses that, in management’s evaluation, is appropriate to provide coverage for current expected credit losses in the loan and lease portfolio. The allowance for credit losses is increased by the provision for credit losses and is decreased by charge-offs, net of recoveries on prior charge-offs. 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 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.
Current wording
The 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 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 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 totaled $333.6 million at December 31, 2024, compared to $371.4 million at December 31, 2023, an decrease of $37.8 thousand or 10.2%. The decrease is attributable to increased unrealized losses within the portfolio and a sale of $15.1 million in securities during the quarter ended March 31, 2024. At December 31, 2024, the securities portfolio represented 17.5% of interest-earning assets and 16.2% 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, mortgage-backed securities, and corporate securities. The securities portfolio, all of which is designated as available-for-sale, totaled $316.2 million at December 31, 2025, compared to $333.6 million at December 31, 2024, a decrease of $17.3 million or 5.2%. During the fourth quarter of 2025, the Bank incurred $1.6 million in securities losses, attributable to the execution of securities repositioning transactions. The Bank sold securities with a market value of $26.6 million and unadjusted book yield of 2.59%. The yield on the securities portfolio was 2.37% for the year ended December 31, 2025 and 2.39% for the year ended December 31, 2024. At December 31, 2025, the securities portfolio represented 16.9% of interest-earning assets and 15.6% 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 investment portfolio and other short-term investments and stock balances at December 31, 2024 and 2023 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 net decrease in interest bearing deposits in other financial institutions is primarily the result of the timing of investments in interest earning assets relative to the inflow and outflow of deposits, repurchase agreements and borrowed funds.
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
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, funds are managed so that future profits will not be significantly impacted as funding costs increase.
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 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.
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
During 2024, cash and cash equivalents decreased $15.4 million compared to an increase of $54.7 million for 2023. The primary sources of cash and cash equivalents were proceeds from the sale of loans originated for sale, proceeds from a real estate sale leaseback transaction, proceeds from the sale of securities, proceeds from the maturity and paydown of securities. The primary uses of cash and cash equivalents were the payment of dividends, change in deposits, repayment of borrowed funds, and loan originations. During 2024, net cash from operating activities totaled $10.0 million, compared to $24.2 million for 2023. Cash provided from operating activities was primarily a result of net income, sale of loans originated for sale, proceeds from a real estate sale leaseback transaction, and net change in other assets, accrued expenses, and other liabilities, offset by loans originated for sale and gain on sale of loans held-for-sale. Net cash inflows from investing activities totaled $42.8 million during 2024, compared to outflows of $15.0 million during 2023. Cash inflows from investing activities were primarily related to the net change in loans receivable and purchase of securities, offset against the proceeds from the sales and maturities of securities and certificates of deposit in other financial institutions. Net cash outflows from financing activities totaled $68.0 million in 2024, compared to net cash inflows of $15.5 million in 2023. The net cash flows from financing activities were primarily a result of net change in deposits, repayment of borrowed funds, proceeds from FHLB advances and the net change in repurchase agreements.
Current wording
During the year ended December 31, 2025, cash and cash equivalents increased by $49.1 million compared to a $15.4 million decrease for the year ended December 31, 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 of loans held for sale and the net change in deposits. Cash provided by operating activities totaled $9.9 million for the year ended December 31, 2025, compared to cash provided of $10.0 million for the year ended December 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 $94.9 million for the current period, compared to cash provided in investing activities of $43.0 million for the year ended December 31, 2024. Cash provided by investing activities for the current year period was primarily related to net change in loans receivable and proceeds from the sale of securities available-for-sale. Cash used in financing activities totaled $55.7 million during the current period compared to net cash used in financing activities of $68.0 million for the year ended December 31, 2024. The net cash used in financing activities was primarily the result of net change in deposits and proceeds and repayments of borrowed funds. On a cash basis, the Company paid dividends on common stock of $1.6 million for the year ended December 31, 2025, and $2.1 million for the year ended December 31, 2024.
Previous wording
The following table shows that, at December 31, 2024, the Bank’s capital exceeded all applicable regulatory capital requirements set forth in 12 C.F.R. § 324.
Current wording
In addition, the following table shows that, at December 31, 2025 and December 31, 2024, the Bank’s capital exceeded all applicable regulatory capital requirements as set forth in 12 C.F.R. § 324.
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. The aggregate amount of dividends that the Bank was eligible to declare in 2024, without the need for qualifying for an exemption or prior DFI approval, was its 2024 net income. On December 20, 2024, the Board of Directors of the Company declared a fourth quarter dividend of $0.12 per share. The Company’s fourth quarter dividend was paid on February 3, 2025 to shareholders of record as of January 21, 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 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 was 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, was its 2025 net income. On December 3, 2025, the Board of Directors of the Company declared the most recent quarterly dividend of $0.12 per share. The Company’s quarterly dividend was paid to shareholders on December 30, 2025 to shareholders of record on December 17, 2025.
Previous wording
The following table shows the change in noninterest income for the year ending December 31, 2024, and December 31, 2023.
Current wording
The following table shows the change in non-interest income for the year ended December 31, 2025, and December 31, 2024.
Previous wording
The following table shows the change in noninterest expense for the year ending December 31, 2024, and December 31, 2023.
Current wording
The following table shows the change in non-interest expense for the year ended December 31, 2025, and December 31, 2024.
Previous wording
Allowance for credit losses – The Company maintains an Allowance for credit losses (“ACL”) to absorb probable incurred credit losses that arise from the loan portfolio. The ACL is increased by the provision for credit losses, and decreased by charge-offs net of recoveries. The determination of the amounts of the ACL and provisions for loan losses is based upon 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. The methodology used to determine the current year provision and the overall adequacy of the ACL includes a disciplined and consistently applied quarterly process that combines a review of the current position with a risk assessment worksheet. Factors that are taken into consideration in the analysis include an assessment of national and local economic trends, a review of current year loan portfolio growth and changes in portfolio mix, and an assessment of trends for loan delinquencies and loan charge-off activity. Particular attention is given to non-accruing loans and accruing loans past due 90 days or more, and loans that have been classified as substandard, doubtful, or loss. Changes in the provision are directionally consistent with changes in observable data.
Current wording
Allowance for credit losses – The Company maintains an allowance for credit losses to reflect management's estimate of expected credit losses over the contractural life of the loan portfolio. The ACL is increased by the provision for credit losses, and decreased by charge-offs net of recoveries. The determination of the ACL and provision for credit losses is based upon management’s evaluation of the credit quality of the loan portfolio, considering relevant internal and external information including past events, current conditions, and reasonable and supportable forecasts that affect collectibility. The methodology used to determine the ACL includes a disciplined and consistently applied quarterly process that combines a review of the current portfolio with a risk assessment analysis. Factors considered in the evaluation include national and local economic trends, current year loan portfolio growth and changes in portfolio mix, and trends in loan delinquencies and loan charge-off activity. Particular attention is given to non-accruing loans and accruing loans past due 90 days or more, and loans that have been classified as substandard, doubtful, or loss. Changes in the provision for credit losses are directionally consistent with changes in observable credit risk indicators.
Previous wording
Risk factors for non-performing and internally classified loans are based on an analysis of either the projected discounted cash flows or the estimated collateral liquidation value for individual loans defined as substandard or doubtful. Estimated collateral liquidation values are based on established loan underwriting standards and adjusted for current mitigating factors on a loan-by-loan basis. Aggregate substandard loan collateral deficiencies are determined for residential, commercial real estate, commercial business, and consumer loan portfolios. These deficiencies are then stated as a percentage of the total substandard balances to determine the appropriate risk factors.
Current wording
Estimated collateral liquidation values are based on established loan underwriting standards and adjusted for current mitigating factors on a loan-by-loan basis. Aggregate substandard loan collateral deficiencies are determined for residential, commercial real estate, commercial business, and consumer loan portfolios. These deficiencies are then stated as a percentage of the total substandard balances to determine the appropriate risk factors.
Previous wording
Net interest income for 2024, was $48.4 million, a decrease of $6.1 million (11.2%) from $54.6 million for 2023. The decreased net interest margin is primarily the result of elevated short-term interest rates relative to long-term interest rates as part of the Federal Reserve’s response to high inflation and other factors. The compression seen earlier in 2024 has slowed and has begun to reverse in late 2024 due to the Federal Reserve’s actions to reduce Federal Funds rates by 100 basis points, which will reprice our interest-bearing liabilities at lower rates. The weighted-average yield on interest-earning assets was 4.67% for 2024, compared to 4.45% for 2023. The weighted-average cost of funds was 2.56% for 2024, compared to 1.96% for 2023. The impact of the 4.67% return on interest earning assets and the 2.56% cost of funds resulted in a net interest spread of 2.21% for 2024, compared to a net interest spread of 2.49% for 2023. During 2024, total interest income increased by $3.4 million (4.0%) while total interest expense increased by $9.5 million (30.4%). The net interest margin was 2.54% for 2024, compared to 2.83% for 2023. The Company’s tax equivalent net interest margin for 2024, was 2.68% compared to 2.98% for 2023. Comparing the net interest margin on a tax equivalent basis more accurately compares the returns on tax-exempt loans and securities to those on taxable interest-earning assets. The adjusted net interest income and tax-adjusted net interest margin measures recognize the income tax savings when comparing taxable and tax-exempt assets. Interest income and yields on tax-exempt securities and loans are presented using the current federal income tax rate of 21%.
Current wording
The adjusted net interest income and tax-adjusted net interest margin measures recognize the income tax savings when comparing taxable and tax-exempt assets. Interest income and yields on tax-exempt securities and loans are presented using the current federal income tax rate of 21%. Management believes that it is standard practice in the banking industry to present net interest income and net interest margin on a fully tax-equivalent basis and that it may enhance comparability for peer comparison purposes.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Risk factors for non-performing and internally classified loans are based on an analysis of either the projected discounted cash flows or the estimated collateral liquidation value for individual loans defined as substandard or doubtful.