GlobeNewswire Inc | Nov 9, 2021 09:02AM EST

November 09, 2021

MUNSTER, Ind., Nov. 09, 2021 (GLOBE NEWSWIRE) -- Finward Bancorp (Nasdaq: FNWD) (the Bancorp), the holding company for Peoples Bank (the Bank), reported net income of $11.7 million, or $3.35 per share, for the nine months ended September 30, 2021. Net income for the nine months ended September 30, 2021, decreased by $999 thousand (7.9%), from the nine months ended September 30, 2020, primarily due to higher noninterest expense and lower noninterest income. For the nine months ended September 30, 2021, the return on average assets (ROA) was 0.98% and the return on average equity (ROE) was 9.96%.

For the quarter ended September 30, 2021, the Bancorps net income totaled $3.5 million, or $1.02 per share. Net income for the quarter ended September 30, 2021, decreased by $1.1 million (24.5%), from the quarter ended September 30, 2020, primarily due to higher noninterest expense and lower noninterest income. For the third quarter of 2021, the ROA was 0.87% and the ROE was 8.90%.

During the nine months ended September 30, 2021, total assets increased by $113.6 million (7.6%), with interest-earning assets increasing by $110.6 million (7.9%). On September 30, 2021, interest-earning assets totaled $1.5 billion compared to $1.4 billion at December 31, 2020. Earning assets represented 93.8% of total assets at September 30, 2021, and 93.5% of total assets at December 31, 2020. The increase in total assets and interest earning assets for the nine months was primarily the result of increased securities and interest-bearing cash balances related to strong core deposit growth.

The third quarter was another strong quarter for Finward Bancorp, with earnings steady from the prior quarter. Commercial loan demand is healthy, and mortgage lending activity was stable from the prior quarter. Nearly 85% of our employees have been vaccinated, allowing us to focus on our customers and our business strategy. Overall, economic conditions remain strong locally, and we are well positioned to take advantage of opportunities in the market, said Benjamin Bochnowski, President & CEO. PPP fees continue to come in to support income, and interest expense saw further reduction. Other bank services such as Wealth Management are outperforming last years levels. Credit is healthy, with another quarter of net recoveries and normalized provision levels.

We are also focusing on the best ways to serve our customers as we work on closing and integrating our pending merger with Royal Financial. We recently announced the consolidation of our three Orland Park branches down to two in response to shifting customer preferences, and executed a pilot project with Purdue University Northwest. In this innovative partnership, we were able to enter into a donation-leaseback arrangement with the University. The University will have space to help build out their economic corridor, and we will maintain a branch presence while reducing operating costs for the branch by over 60%. We expect to find similar opportunities to optimize our delivery channels in the coming quarters, said Bochnowski. The regulatory applications for our pending acquisition of Royal Financial have been filed, and efforts remain on track for close in the early first quarter 2022. Integration remains on track for the second quarter of 2022. Additionally, our listing application was also approved late in October, and I am proud to say that our first day of trading on the NASDAQ Capital Market was November 3, 2021. This is an important milestone in our evolution as a company and am incredibly proud of the work that our team put in to get us here, he continued.

Net Interest IncomeNet interest income was $36.1 million for the nine months ended September 30, 2021, an increase of $2.3 million (6.9%), compared to $33.8 million for the nine months ended September 30, 2020. The Bancorps net interest margin on a tax-adjusted basis was 3.49% for the nine months ended September 30, 2021, compared to 3.62% for the nine months ended September 30, 2020. Net interest income was $12.2 million for the quarter ended September 30, 2021, an increase of $512 thousand (4.4%), compared to $11.7 million for the quarter ended September 30, 2020. The Bancorps net interest margin on a tax-adjusted basis was 3.46% for the quarter ended September 30, 2021, compared to 3.58% for the quarter ended September 30, 2020. The increased net interest income for the quarter and the nine months was primarily the result of lower interest expense attributable to the Bancorps ability to manage through the current historically low interest rate cycle. The decrease in the net interest margin is a result of lower reinvestment rates on the Bancorps loan and securities portfolios. Management has adjusted deposit pricing to align with the current interest rate cycle and remains prepared to adjust rates paid on interest bearing deposits.

Noninterest IncomeNoninterest income from banking activities totaled $12.1 million for the nine months ended September 30, 2021, compared to $13.4 million for the nine months ended September 30, 2020, a decrease of $1.3 million or 9.7%. Noninterest income from banking activities totaled $4.1 million for the quarter ended September 30, 2021, compared to $4.9 million for the quarter ended September 30, 2020, a decrease of $709 thousand or 14.6%. The decrease in gain on sale of loans for the current quarter and nine-month period is the result of significant refinance activity in the prior year due to the economic and rate environment, which resulted in more loans originated and sold. The increase in fees and service charges for the nine-month period is primarily the result of changes in customer usage of bank services as our community recovers from the pandemic. The increase in wealth management income for the current quarter and nine-month period is the result of the Bancorps continued focus on expanding its wealth management line of business. The increase in gains on the sale of securities for the current quarter is a result of current market conditions and actively managing the portfolio.

Noninterest ExpenseNoninterest expense totaled $33.9 million for the nine months ended September 30, 2021, compared to $30.1 million for the nine months ended September 30, 2020, an increase of $3.8 million or 12.5%. Noninterest expense totaled $12.4 million for the quarter ended September 30, 2021, compared to $10.0 million for the quarter ended September 30, 2020, an increase of $2.4 million or 23.6%. The increase in compensation and benefits for the current quarter and nine-month period is primarily the result of managements continued focus on talent management and retention. The increase in occupancy and equipment for the current quarter and nine-month period is primarily related to facilities improvement efforts aimed at enhancing technology and efficiency. The increase in data processing expense for the current quarter and nine-month period is primarily the result of increased system utilization. The increase in marketing expense for the current quarter and nine-month period is the result of increased marketing and rebranding initiatives. The increase in other operating expenses for the current quarter and nine-month period is primarily the result of investments in strategic initiatives focusing on technological advancements and growth of the organization.

The Bancorps efficiency ratio was 75.87% for the quarter ended September 30, 2021, compared to 60.66% for the quarter ended September 30, 2020. The Bancorps efficiency ratio was 70.26% for the nine months ended September 30, 2021, compared to 63.83% for the nine months ended September 30, 2020. The increase in the efficiency ratio is the result of lower noninterest income and higher noninterest expense. The efficiency ratio is determined by dividing total noninterest expense by the sum of net interest income and total noninterest income for the period.

LendingThe Bancorps loan portfolio totaled $956.4 million at September 30, 2021, compared to $965.1 million at December 31, 2020, a decrease of $8.8 million or 0.9%. The decrease in loan balances is primarily the result of forgiveness and payoff of Paycheck Protection Program loans, and runoff of the 1-4 family residential first lien portfolio due to continued refinance activity due to continued historically low lending rates. During the nine months ended September 30, 2021, the Bancorp originated $258.1 million in new commercial loans, compared to $269.5 million during the nine months ended September 30, 2020. During the nine months ended September 30, 2021, the Bancorp originated $120.1 million in new fixed rate mortgage loans for sale, compared to $171.2 million during the nine months ended September 30, 2020. The loan portfolio is 63.4% of earning assets and is comprised of 63.4% commercial related credits.

InvestingThe Bancorps securities portfolio totaled $531.0 million at September 30, 2021, compared to $410.7 million at December 31, 2020, an increase of $120.3 million or 29.3%. The increase is attributable to increased investment in the securities portfolio. The securities portfolio represents 35.2% of earning assets and provides a consistent source of liquidity and earnings to the Bancorp. Cash and cash equivalents totaled $31.8 million at September 30, 2021, compared to $19.9 million at December 31, 2020, an increase of $11.8 million or 59.4%. The increase in cash and cash equivalents is primarily the result of customers continued preference toward security and liquidity of assets.

FundingAt September 30, 2021, core deposits totaled $1.1 billion, compared to $1.0 billion at December 31, 2020, an increase of $124.8 million or 12.3%. The increase is the result of the Bancorps efforts to maintain and grow core deposits. Core deposits include checking, savings, and money market accounts and represented 81.2% of the Bancorps total deposits at September 30, 2021. During the nine months ended September 30, 2021, balances for noninterest bearing checking, interest bearing checking, savings, and money market accounts increased. The increase in these core deposits is a result of managements sales efforts along with customer preferences for competitively priced short-term liquid investments. At September 30, 2021, balances for certificates of deposit totaled $263.9 million, compared to $284.8 million at December 31, 2020, a decrease of $20.9 million or 7.3%. The decrease in certificate of deposits was the result of product pricing strategies to lower excess liquidity on the balance sheet. In addition, at September 30, 2021, borrowings and repurchase agreements totaled $23.8 million, compared to $19.9 million at December 31, 2020, an increase of $4.0 million or 20.1%. The increase in short-term borrowings was a result of cyclical inflows of repurchase agreement balances.

Asset QualityAt September 30, 2021, non-performing loans totaled $13.5 million, compared to $14.4 million at December 31, 2020, a decrease of $822 thousand or 5.7%. The Bancorps ratio of non-performing loans to total loans was 1.42% at September 30, 2021, compared to 1.49% at December 31, 2020. The Bancorps ratio of non-performing assets to total assets was 0.91% at September 30, 2021, compared to 1.06% at December 31, 2020.

For the nine months ended September 30, 2021, $1.3 million in provisions to the allowance for loan losses were required, compared to $1.9 million for the nine months ended September 30, 2020, a decrease of $578 thousand or 30.9%. For the nine months ended September 30, 2021, recoveries, net of charge-offs, totaled $23 thousand. At September 30, 2021, the allowance for loan losses is considered adequate by management and totaled $13.8 million. The allowance for loan losses as a percentage of total loans was 1.44% at September 30, 2021, compared to 1.29% at December 31, 2020. The allowance for loan losses as a percentage of non-performing loans, or coverage ratio, was 101.71% at September 30, 2021, compared to 86.72% at December 31, 2020.

Management also considers reserves on loans from acquisition activity that are not part of the allowance for loan losses. The Bancorp acquired loans for which there was evidence of credit quality deterioration since origination and it was determined that it was probable that the Bancorp would be unable to collect all contractually required principal and interest payments. At September 30, 2021, total purchased credit impaired loan reserves totaled $1.3 million compared to $2.1 million at December 31, 2020. Additionally, the Bancorp has acquired loans without evidence of credit quality deterioration since origination and has marked these loans to their fair values. As part of the fair value of loans receivable, there was a net fair value discount for loans acquired of $1.2 million at September 30, 2021, compared to $2.0 million at December 31, 2020. When these additional reserves are included on a pro forma basis, the allowance for loan losses as a percentage of total loans was 1.71% at September 30, 2021, and the allowance for loan losses as a percentage of non-performing loans, or coverage ratio, was 120.70% at September 30, 2021. See Table 1 below for a reconciliation of these non-GAAP figures to the Bancorps GAAP figures.

Capital Adequacy At September 30, 2021, shareholders equity stood at $152.6 million, and tangible capital represented 8.6% of total assets. The Bancorps regulatory capital ratios at September 30, 2021, were 14.4% for total capital to risk-weighted assets, 13.1% for both common equity tier 1 capital to risk-weighted assets and tier 1 capital to risk-weighted assets, and 8.4% for tier 1 leverage capital to adjusted average assets. Under all regulatory capital requirements, the Bancorp is considered well capitalized. The book value of the Bancorps stock stood at $43.85 per share at September 30, 2021.

Impacts of COVID-19The COVID-19 pandemic began to affect the Bancorps operations during March 2020, and as of the date of this release, continues to influence operating decisions. In response to the pandemic, the Bancorps management implemented the following policy actions:

-- Participating in the U.S. Small Business Administrations Paycheck Protection Program (PPP), a program initiated to help small businesses maintain their workforces during the pandemic. As of September 30, 2021, the Bancorp approved 782 applications totaling $91.5 million for the first round, with an average loan size of approximately $117 thousand. These loans helped local business owners retain 10,758 employees based on the borrowers applications. The Bancorps SBA lender fee is averaging approximately 3.80% for the first round of the program, and fees will be earned over the life of the associated loans. The first round of PPP closed in August of 2020. On December 21, 2020, Congress passed the Consolidated Appropriations Act, 2021, which included provisions for a second round of PPP funding in 2021. As of September 30, 2021, the Bancorp approved 420 applications totaling $37.5 million for the second round, with an average loan size of approximately $89 thousand. These loans will help local business owners retain 4,410 employees based on the borrowers applications. The Bancorps SBA lender fee is averaging approximately 5.32% for this program, and fees will be earned over the life of the associated loans. As of September 30, 2021, the Bancorp had remaining loan balances under the Paycheck Protection Program totaling $32.9 million. -- Prudently helping borrowers who are or may be unable to meet their contractual payment obligations because of the effects of COVID-19. Consistent with regulatory guidance, the Bancorp will consider deferring or modifying a loan customers repayment obligation if the customers cash flow has been negatively impacted by the pandemic. Outstanding borrower deferrals and modifications continue to decline. Loans modified to interest only payment or full payment deferral as part of the effects of COVID-19 as of September 30, 2021 and June 30, 2021, are as follows:

(Dollars in (Unaudited) thousands) As of September Mortgage loans Commercial Loans 30, 2021 Number Recorded Number Recorded of Loans Investment of Loans Investment Interest only 11 $ 1,485 - $ - Total $ 11 $ 1,485 - $ - (Dollars in (Unaudited) thousands) As of June 30, Mortgage loans Commercial Loans 2021 Number Recorded Number Recorded of Loans Investment of Loans Investment Interest only 15 $ 1,656 1 $ 2,973 Full interest, partial - - 2 1,021 principal Full payment 1 98 - - deferral Total $ 16 $ 1,754 3 $ 3,994

-- As the Bancorp continues to monitor the borrowers that are in and outside of deferral status, some loan relationships may be deemed non-performing. As of September 30, 2021, a single large commercial real estate loan relationship, which operates a hotel, with a carrying balance of $5.0 million, continued to be deemed non-performing after COVID-19 pandemic stresses negatively impacted weak operating performance which occurred prior to the pandemic. Through managements review of the loan relationship, a specific reserve within the allowance for loan losses was allocated as of September 30, 2021. As of September 30, 2021, the customer is currently in compliance with all modified loan terms. No other material COVID-19 impacted loans that are in deferral status have been deemed non-performing at this time. As of September 30, 2021, a total of 236 loans have come out of COVID-19 related deferral status with carrying balances of $85.9 million. All of these loans continue to be performing, except one commercial real estate loan with a carrying balance of $835 thousand and several residential real estate loans with total carrying balances of $964 thousand.

About Finward BancorpFinward Bancorp is a locally managed and independent financial holding company headquartered in Munster, Indiana, whose activities are primarily limited to holding the stock of Peoples Bank. Peoples Bank provides a wide range of personal, business, electronic and wealth management financial services from its 22 locations in Lake and Porter Counties in Northwest Indiana and South Chicagoland. Finward Bancorps common stock is quoted on the NASDAQ Stock Market, LLC under the symbol FNWD. The website ibankpeoples.com provides information on Peoples Banks products and services, and Finward Bancorps investor relations.

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

Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include: the significant risks and uncertainties for our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios and other regulatory requirements caused by the COVID-19 pandemic, which will depend on several factors, including the scope and duration of the pandemic, its influence on financial markets, the effectiveness of our remote work arrangements and staffing levels in branches and other operational facilities, and actions taken by governmental authorities and other third parties in response to the pandemic; changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates, market liquidity, and capital markets, as well as the magnitude of such changes, which may reduce net interest margins; inflation; customer acceptance of the Bancorps products and services; customer borrowing, repayment, investment, and deposit practices; customer disintermediation; the introduction, withdrawal, success, and timing of business initiatives; competitive conditions; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with mergers, acquisitions, and divestitures; economic conditions; and the impact, extent, and timing of technological changes, capital management activities, and other actions of the Federal Reserve Board and legislative and regulatory actions and reforms.

In addition to the above factors, we also caution that the actual amounts and timing of any future common stock dividends or share repurchases will be subject to various factors, including our capital position, financial performance, capital impacts of strategic initiatives, market conditions, and regulatory and accounting considerations, as well as any other factors that our Board of Directors deems relevant in making such a determination. Therefore, there can be no assurance that we will repurchase shares or pay any dividends to holders of our common stock, or as to the amount of any such repurchases or dividends. Further, statements about the effects of theCOVID-19pandemic on our business, operations, financial performance, and prospects may constitute forward-looking statements and are subject to the risk that the actual impacts may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable, and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, third parties, and us.

Important Additional Information for Shareholders and Where to Find It

In connection with the proposed merger between the Bancorp and Royal Financial, Inc. (RYFL), the Bancorp has filed with the SEC a Registration Statement on FormS-4that includes a Joint Proxy Statement of the Bancorp and RYFL and a Prospectus of the Bancorp (the Joint Proxy Statement/Prospectus), as well as other relevant documents concerning the proposed transaction. SHAREHOLDERS AND INVESTORS ARE URGED TO READ THE REGISTRATION STATEMENT AND THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE MERGER AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY CONTAIN IMPORTANT INFORMATION.

The Joint Proxy Statement/Prospectus and other relevant materials, and any other documents the Bancorp has filed with the SEC, may be obtained free of charge at the SECs website at www.sec.gov. In addition, investors and security holders may obtain copies of the documents the Bancorp has filed with the SEC, free of charge, from the Bancorp at www.ibankpeoples.com under the tab Investor Relations SEC Filings. Alternatively, these documents can be obtained free of charge from the Bancorp upon written request to Finward Bancorp, Attn: Shareholder Services, 9204 Columbia Avenue, Munster, Indiana 46321, or by calling (219)836-4400,and from RYFL upon written request to Royal Financial, Inc., Attn: Corporate Secretary, 9226 South Commercial Avenue, Chicago, Illinois 60617, or by calling (773)768-4800.The information available through the Bancorps website is not and shall not be deemed part of this press release or incorporated by reference into other filings the Bancorp makes with the SEC.

The Bancorp and RYFL and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of the Bancorp and RYFL in connection with the proposed merger. Information about the directors and executive officers of the Bancorp is set forth in the Bancorps Annual Report on Form10-Kfiled with the SEC on March22, 2021, and in the proxy statement for the Bancorps 2021 annual meeting of shareholders, as filed with the SEC on Schedule 14A on March31, 2021. Additional information regarding the interests of these participants and any other persons who may be deemed participants in the transaction may be obtained by reading the Joint Proxy Statement/Prospectus regarding the proposed merger. Free copies of this document may be obtained as described in the preceding paragraph.

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval.

Disclosure Regarding Non-GAAP Measures

This press release includes certain financial measures that are identified as non-GAAP. However, certain non-GAAP performance measures are used by management to evaluate and measure the Bancorps performance. Although these non-GAAP financial measures are frequently used by investors to evaluate a financial institution, 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. This supplemental information should not be considered in isolation or as a substitute for the related GAAP measures. See the attached Table 1 at the end of this press release for a reconciliation of the non-GAAP earnings measures identified herein and their most comparable GAAP measures.

Finward Bancorp Quarterly Financial Report Key Ratios Three months ended, Nine months ended, (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) September 30, June 30, March 31, December 31, September 30, September 30, September 30, 2021 2021 2021 2020 2020 2021 2020 Return on equity 8.90 % 9.17 % 11.94 % 8.59 % 12.83 % 9.96 % 11.96 % Return on assets 0.87 % 0.90 % 1.18 % 0.88 % 1.27 % 0.98 % 1.20 % Basic earnings per $ 1.02 $ 1.03 $ 1.30 $ 1.00 $ 1.35 $ 3.35 $ 3.65 share Diluted earnings per $ 1.02 $ 1.03 $ 1.30 $ 1.00 $ 1.35 $ 3.35 $ 3.65 share Yield on loans 4.28 % 4.21 % 4.41 % 4.61 % 4.62 % 4.30 % 4.69 % Yield on security 1.94 % 1.96 % 2.02 % 1.81 % 1.91 % 1.97 % 2.13 % investments Total yield on earning 3.36 % 3.38 % 3.59 % 3.77 % 3.75 % 3.44 % 3.96 % assets Cost of deposits 0.13 % 0.16 % 0.19 % 0.26 % 0.33 % 0.16 % 0.49 % Cost of repurchase 0.25 % 0.28 % 0.28 % 0.33 % 0.37 % 0.27 % 0.69 % agreements Cost of borrowed 9.76 % 0.47 % 2.70 % 2.74 % 2.77 % 3.09 % 2.69 % funds Total cost of funds 0.13 % 0.16 % 0.20 % 0.27 % 0.35 % 0.16 % 0.52 % Net interest margin - 3.46 % 3.42 % 3.58 % 3.66 % 3.58 % 3.49 % 3.62 % tax equivalent Noninterest income / 1.02 % 0.92 % 1.12 % 1.27 % 1.32 % 1.02 % 1.27 % average assets Noninterest expense / 3.04 % 2.76 % 2.73 % 3.09 % 2.72 % 2.85 % 2.86 % average assets Net noninterest margin / -2.02 % -1.84 % -1.61 % -1.83 % -1.40 % -1.83 % -1.58 % average assets Efficiency ratio 75.87 % 70.79 % 64.14 % 68.40 % 60.66 % 70.26 % 63.83 % Effective tax 7.04 % 9.96 % 14.09 % 6.15 % 17.18 % 10.78 % 16.82 % rate Dividend declared per $ 0.31 $ 0.31 $ 0.31 $ 0.31 $ 0.31 $ 0.93 $ 0.93 common share (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) September 30, June 30, March 31, December 31, September 30, 2021 2021 2021 2020 2020 Net worth / total 9.47 % 9.70 % 9.57 % 10.14 % 9.99 % assets Book value per share $ 43.85 $ 44.71 $ 42.76 $ 43.80 $ 42.70 Non-performing assets to 0.91 % 0.85 % 0.92 % 1.06 % 1.11 % total assets Non-performing loans to 1.42 % 1.27 % 1.32 % 1.49 % 1.54 % total loans Allowance for loan losses to 101.71 % 111.13 % 101.49 % 86.72 % 71.14 % non-performing loans Allowance for loan losses to 1.44 % 1.42 % 1.34 % 1.29 % 1.10 % loans outstanding Foreclosed real estate to 0.01 % 0.02 % 0.03 % 0.04 % 0.03 % total assets

Finward Bancorp Quarterly Financial Report Balance Sheet Data(Dollars in (Unaudited) (Unaudited) (Unaudited) (Unaudited) thousands) September 30, June 30, March 31, December 31, September 30, 2021 2021 2021 2020 2020 Total $ 1,609,924 $ 1,603,513 $ 1,555,348 $ 1,496,292 $ 1,479,954 assetsCash & cash equivalents 31,765 68,625 68,009 19,922 84,447 Certificates of deposit inother financial 977 1,471 1,474 1,897 1,901 institutionsSecurities - available for 531,010 473,927 422,868 410,669 324,181 sale Loans receivable: Commercial real $ 309,905 $ 315,087 $ 304,851 $ 298,257 $ 285,701 estate Residential real 268,798 268,649 276,728 286,048 284,381 estate Commercial business 125,922 149,414 163,896 158,140 184,406 Construction and land 110,289 104,154 97,400 93,562 89,176 development Multifamily 56,869 53,639 51,933 50,571 50,701 Home equity 35,652 36,684 36,222 39,233 42,127 Manufactured Homes 32,857 26,453 26,260 24,232 21,991 Government 9,841 8,462 9,372 10,142 13,205 Consumer 650 544 438 1,025 467 Farmland 205 309 315 215 218 Total loans $ 950,988 $ 963,395 $ 967,415 $ 961,425 $ 972,373 Deposits: Core deposits: Noninterest $ 287,376 $ 275,819 $ 286,969 $ 241,620 $ 258,170 bearing checking Interest bearing 315,575 307,148 279,984 274,867 258,734 checking Savings 284,681 277,944 271,910 254,108 240,215 Money market 254,671 253,427 245,750 246,916 238,098 Total core 1,142,303 1,114,338 1,084,613 1,017,511 995,217 deposits Certificates of 263,897 280,758 282,081 284,828 285,439 deposit Total $ 1,406,200 $ 1,395,096 $ 1,366,694 $ 1,302,339 $ 1,280,656 deposits Borrowings and repurchase $ 23,844 $ 24,399 $ 15,917 $ 19,860 $ 31,145 agreementsStockholder's 152,569 155,569 148,770 151,689 147,873 equity

Finward Bancorp Quarterly Financial Report Consolidated Statements Three months ended, Nine months ended, of Income(Dollars in (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) thousands) September 30, June 30, March 31, December 31, September 30, September 30, September 30, 2021 2021 2021 2020 2020 2021 2020 Interest income:Loans $ 10,270 $ 10,275 $ 10,746 $ 11,278 $ 11,263 $ 31,291 $ 33,589 Securities & short-term 2,396 2,160 1,981 1,733 1,573 6,537 5,021 investmentsTotal interest 12,666 12,435 12,727 13,011 12,836 37,828 38,610 incomeInterest expense:Deposits 452 549 651 827 1,050 1,652 4,494 Borrowings 14 14 30 77 98 58 342 Total interest 466 563 681 904 1,148 1,710 4,836 expenseNet interest 12,200 11,872 12,046 12,107 11,688 36,118 33,774 incomeProvision for loan 139 576 578 1,816 849 1,293 1,871 lossesNet interestincome afterprovision 12,061 11,296 11,468 10,291 10,839 34,825 31,903 for loanlossesNoninterest income:Gain on sale of 1,229 1,116 2,049 1,551 2,420 4,394 6,037 loans held-for-sale, netFees and service 1,473 1,471 1,066 1,488 1,473 4,010 3,673 chargesWealth management 604 576 607 533 537 1,787 1,605 operationsGain on sale of 590 269 417 974 197 1,276 1,374 securities, netIncreasein cashvalue of 180 188 169 174 177 537 534 bank ownedlifeinsuranceGain onsale offoreclosed - 36 (9 ) (49 ) 24 27 127 real estate,netOther 70 24 14 30 27 108 97 Total noninterest 4,146 3,680 4,313 4,701 4,855 12,139 13,447 incomeNoninterest expense:Compensation and 6,042 5,897 5,685 6,408 5,517 17,624 16,447 benefitsOccupancy and 1,380 1,324 1,372 1,079 1,150 4,076 3,854 equipmentData 872 597 528 596 583 1,997 1,671 processingMarketing 334 195 199 168 216 728 571 Federal deposit 236 204 180 217 176 620 564 insurance premiumsOther 3,537 2,793 2,529 3,028 2,393 8,859 7,033 Total noninterest 12,401 11,010 10,493 11,496 10,035 33,904 30,140 expenseIncome before income 3,806 3,966 5,288 3,496 5,659 13,060 15,210 taxesIncome tax 268 395 745 735 972 1,408 2,559 expensesNet income $ 3,538 $ 3,571 $ 4,543 $ 2,761 $ 4,687 $ 11,652 $ 12,651

Finward Bancorp Quarterly Financial Report Asset Quality (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Dollars in September 30, June 30, March 31, December 31, September 30,thousands) 2021 2021 2021 2020 2020 Nonaccruing loans $ 11,027 $ 12,025 $ 12,257 $ 13,799 $ 14,481 Accruing loansdelinquent more than 2,516 248 599 566 579 90 daysSecurities in 1,011 970 944 929 879 non-accrualForeclosed real 81 368 491 538 501 estate Total nonperforming $ 14,635 $ 13,611 $ 14,291 $ 15,832 $ 16,440 assets Allowance for loan losses (ALL): ALL specific allowances for $ 1,904 $ 1,770 $ 1,884 $ 1,775 $ 1,330 impaired loans ALL general allowances for 11,870 11,869 11,163 10,683 9,384 loan portfolio Total ALL $ 13,774 $ 13,639 $ 13,047 $ 12,458 $ 10,714 Troubled Debt Restructurings: Nonaccruing troubled debt restructurings, $ 1,126 $ 1,269 $ 407 $ 155 $ 441 non-compliant (1) (2) Nonaccruing troubled debt 102 - 366 383 113 restructurings, compliant (2) Accruing troubled debt 1,427 1,182 1,210 1,583 1,536 restructurings Total troubled debt $ 2,655 $ 2,451 $ 1,983 $ 2,121 $ 2,090 restructurings (1) "non-compliant" refers to not being within the guidelines of the restructuring agreement (2) included in nonaccruing loan balances presented above (Unaudited) September 30, Required 2021 To Be Well Actual Ratio Capitalized Capital Adequacy BancorpCommon equity tier 1capital to 13.1% N/A risk-weighted assetsTier 1 capital to 13.1% N/A risk-weighted assetsTotal capital to 14.4% N/A risk-weighted assetsTier 1 capital toadjusted average 8.2% N/A assets Capital Adequacy BankCommon equity tier 1capital to 12.8% 6.5% risk-weighted assetsTier 1 capital to 12.8% 8.0% risk-weighted assetsTotal capital to 14.1% 10.0% risk-weighted assetsTier 1 capital toadjusted average 8.0% 5.0% assets

Quarter-to-Date (Dollars in Average Balances, Interest, and Rates thousands)(unaudited) September 30, 2021 September 30, 2020 Average Interest Rate Average Interest Rate Balance (%) Balance (%)ASSETS Interest bearingdeposits in other $ 53,786 $ 12 0.09 $ 72,920 $ 22 0.12 financialinstitutionsFederal funds sold 1,112 - - 719 7 3.89 Certificates ofdeposit in other 1,262 6 1.90 1,877 10 2.13 financialinstitutionsSecurities 486,993 2,363 1.94 315,090 1,506 1.91 available-for-saleLoans receivable 960,274 10,270 4.28 975,794 11,263 4.62 Federal Home Loan 3,247 15 1.85 3,918 28 2.86 Bank stockTotal interest 1,506,674 $ 12,666 3.36 1,370,318 $ 12,836 3.75 earning assetsCash andnon-interestbearing deposits 41,378 15,814 in other financialinstitutionsAllowance for loan (13,688 ) (9,917 ) lossesOther noninterest 97,290 98,879 bearing assetsTotal $ 1,631,654 $ 1,475,094 assets LIABILITIES ANDSTOCKHOLDERS' EQUITYTotal deposits $ 1,436,125 $ 452 0.13 $ 1,282,698 $ 1,050 0.33 Repurchase 20,970 13 0.25 16,246 15 0.37 agreementsBorrowed funds 41 1 9.76 12,000 83 2.77 Total interestbearing 1,457,136 $ 466 0.13 1,310,944 $ 1,148 0.35 liabilitiesOther noninterestbearing 15,508 18,034 liabilitiesTotal 1,472,644 1,328,978 liabilitiesTotalstockholders' 159,010 146,116 equityTotalliabilities and $ 1,631,654 $ 1,475,094 stockholders'equity Return on average 0.87 % 1.27 % assetsReturn on average 8.90 % 12.83 % equityNet interestmargin (average 3.24 % 3.41 % earning assets)Net interestmargin (average 3.46 % 3.58 % earning assets) -tax equivalent Year-to-Date (Dollars in Average Balances, Interest, and Rates thousands) September 30, 2021 September 30, 2020 Average Interest Rate Average Interest Rate Balance (%) Balance (%)ASSETS Interest bearingdeposits in other $ 53,774 $ 33 0.08 $ 42,025 $ 91 0.29 financialinstitutionsFederal funds sold 1,064 - - 2,716 92 4.52 Certificates ofdeposit in other 1,443 21 1.94 1,859 35 2.51 financialinstitutionsSecurities 435,119 6,428 1.97 295,073 4,708 2.13 available-for-saleLoans receivable 970,740 31,291 4.30 954,985 33,589 4.69 Federal Home Loan 3,535 55 2.07 3,916 95 3.23 Bank stockTotal interest 1,465,675 $ 37,828 3.44 1,300,574 $ 38,610 3.96 earning assetsCash andnon-interestbearing deposits 37,186 17,530 in other financialinstitutionsAllowance for loan (13,205 ) (9,508 ) lossesOther noninterest 97,674 98,611 bearing assetsTotal $ 1,587,330 $ 1,407,207 assets LIABILITIES ANDSTOCKHOLDERS' EQUITYTotal deposits $ 1,395,883 $ 1,652 0.16 $ 1,222,497 $ 4,494 0.49 Repurchase 17,458 35 0.27 13,959 72 0.69 agreementsBorrowed funds 992 23 3.09 13,386 270 2.69 Total interestbearing 1,414,333 $ 1,710 0.16 1,249,842 $ 4,836 0.52 liabilitiesOther noninterestbearing 17,052 16,270 liabilitiesTotal 1,431,385 1,266,112 liabilitiesTotalstockholders' 155,945 141,095 equityTotalliabilities and $ 1,587,330 $ 1,407,207 stockholders'equity Return on average 0.98 % 1.20 % assetsReturn on average 9.96 % 11.96 % equityNet interestmargin (average 3.29 % 3.46 % earning assets)Net interestmargin (average 3.49 % 3.62 % earning assets) -tax equivalent

Table 1 - Reconciliation of the Non-GAAP Performance Ratios (Dollars in Three Months Ended Nine Months Ended thousands) (unaudited) September 30, September 30, September 30, September 30, 2021 2020 2021 2020 Calculation of core net income Net income $ 3,538 $ 4,687 $ 11,652 $ 12,651 Realized loss /(gain) on (590 ) (197 ) (1,276 ) (1,374 ) securities Core deposit 249 249 745 745 accretion Purchase discount (271 ) (398 ) (897 ) (1,430 ) amortization Related tax benefit/ 129 73 300 432 (cost)(A) Core net $ 3,055 $ 4,414 $ 10,524 $ 11,024 income Calculation of core diluted earnings per share(A) Core net $ 3,055 $ 4,414 $ 10,524 $ 11,024 income Diluted average 3,479,139 3,463,136 3,476,406 3,461,598 common shares outstanding Core diluted earnings per $ 0.88 $ 1.27 $ 3.03 $ 3.18 share Calculation of core return on average assets(A) Core net $ 3,055 $ 4,414 $ 10,524 $ 11,024 income Average total 1,631,654 1,475,094 1,587,330 1,407,207 assets Core return on average 0.75 % 1.20 % 0.88 % 1.04 % assets Calculation of core pre-provision net revenue Net interest $ 12,200 $ 11,688 $ 36,118 $ 33,774 income Non-interest 4,146 4,855 12,139 13,447 income Non-interest (12,401 ) (10,035 ) (33,904 ) (30,140 ) expense Pre-provision 3,945 6,508 14,353 17,081 net revenue Realized loss /(gain) on (590 ) (197 ) (1,276 ) (1,374 ) securities Core deposit 249 249 745 745 accretion Purchase discount (271 ) (398 ) (897 ) (1,430 ) amortization Core(B) pre-provision $ 3,333 $ 6,162 $ 12,925 $ 15,022 net revenue Calculation of core pre-provision net revenue to average assets Core(B) pre-provision $ 3,333 $ 6,162 $ 12,925 $ 15,022 net revenue Average total 1,631,654 1,475,094 1,587,330 1,407,207 assets Core pre-provision net revenue 0.82 % 1.67 % 1.09 % 1.42 % to average assets Calculation of tangible assets (excluding PPP) Total assets $ 1,609,924 $ 1,474,034 $ 1,609,924 $ 1,474,034 Goodwill (11,109 ) (11,109 ) (11,109 ) (11,109 ) Other (3,374 ) (4,368 ) (3,374 ) (4,368 ) Intangibles Paycheck Protection (32,892 ) (91,453 ) (32,892 ) (91,453 ) Plan ("PPP") loans Tangible(C) assets $ 1,562,549 $ 1,367,104 $ 1,562,549 $ 1,367,104 (excluding PPP) Calculation of tangible common equity Total stockholder's $ 152,569 $ 147,873 $ 152,569 $ 147,873 equity Goodwill (11,109 ) (11,109 ) (11,109 ) (11,109 ) Other (3,374 ) (4,368 ) (3,374 ) (4,368 ) intangibles(D) Tangible $ 138,086 $ 132,396 $ 138,086 $ 132,396 common equity Calculation of tangible common equity to tangible assets (excluding PPP)(D) Tangible $ 138,086 $ 132,396 $ 138,086 $ 132,396 common equity Tangible(C) assets 1,562,549 1,367,104 1,562,549 1,367,104 (excluding PPP) Tangible common equity 8.84 % 9.68 % 8.84 % 9.68 % to tangible assets Calculation of average tangible common equity Average stockholder's $ 159,010 $ 146,116 $ 155,945 $ 141,095 common equity Average (11,109 ) (11,109 ) (11,109 ) (11,109 ) goodwill Average other (3,523 ) (4,517 ) (3,768 ) (4,763 ) intangibles Average(E) tangible $ 144,378 $ 130,490 $ 141,068 $ 125,223 stockholders' common equity Calculation of core return on average common equity(A) Core net $ 3,055 $ 4,414 $ 10,524 $ 11,024 income Average(E) tangible 144,378 130,490 141,068 125,223 common equity Core return on average 8.46 % 13.53 % 9.95 % 11.74 % common equity Calculation of core yield on loans Interest income on $ 10,270 $ 11,263 $ 31,291 $ 33,589 loans Loan accretion (271 ) (398 ) (897 ) (1,430 ) income Adjusted interest 9,999 10,865 30,394 32,159 income on loans Average loan 960,274 975,794 970,740 954,985 balances Core yield on 4.17 % 4.45 % 4.17 % 4.49 % loans Calculation of adjusted allowance for loan loss to total loans Allowance for $ (13,774 ) $ (9,866 ) $ (13,774 ) $ (9,866 ) loan losses Additional reserves not part of the (2,572 ) (4,587 ) (2,572 ) (4,587 ) allowance for loan loss Adjusted(F) allowance for (16,346 ) (14,453 ) (16,346 ) (14,453 ) loan loss Total loans 956,352 981,902 956,352 981,902 Adjusted allowance for 1.71 % 1.47 % 1.71 % 1.47 % loan loss to total loans Calculation of adjusted allowance for loan loss to nonperforming loans Adjusted(F) allowance for $ (16,346 ) $ (14,453 ) $ (16,346 ) $ (14,453 ) loan loss Nonperforming 13,543 15,060 13,543 15,060 loans Adjusted allowance for loan loss to nonperforming 120.70 % 95.97 % 120.70 % 95.97 % loans (coverage ratios) Calculation of adjusted allowance for loan loss to total loans excluding PPP Adjusted(F) allowance for $ (16,346 ) $ (14,453 ) $ (16,346 ) $ (14,453 ) loan loss Total loans 956,352 975,794 956,352 954,985 PPP loans (32,892 ) (91,453 ) (32,892 ) (91,453 ) Total loans 923,460 884,341 923,460 863,532 excluding PPP Adjusted allowance for loan loss to 1.77 % 1.63 % 1.77 % 1.67 % total loans excluding PPP Calculation of core revenue Net interest $ 12,200 $ 11,688 $ 36,118 $ 33,774 income Non-interest 4,146 4,855 12,139 13,447 income Realized loss /(gain) on (590 ) (197 ) (1,276 ) (1,374 ) securities(G) Core revenue $ 15,756 $ 16,346 $ 46,981 $ 45,847 Calculation of core non-interest expense Non-interest $ 12,401 $ 10,035 $ 33,904 $ 30,140 expense Core deposit 249 249 745 745 accretion Purchase discount (271 ) (398 ) (897 ) (1,430 ) amortization Core(H) non-interest $ 12,379 $ 9,886 $ 33,752 $ 29,455 expense Calculation of core efficiency ratio Core(H) non-interest $ 12,379 $ 9,886 $ 33,752 $ 29,455 expense(G) Core revenue 15,756 16,346 46,981 45,847 Core efficiency 78.57 % 60.48 % 71.84 % 64.25 % ratio Calculation of core non-interest expense to total average assets Core(H) non-interest $ 12,379 $ 9,886 $ 33,752 $ 29,455 expense Average total 1,631,654 1,475,094 1,587,330 1,407,207 assets Core non-interest expense to 0.76 % 0.67 % 2.13 % 2.09 % total average assets Calculation of tax adjusted net interest margin Net interest $ 12,200 $ 11,688 $ 36,118 $ 33,774 income Tax adjusted interest on 851 567 2,273 1,497 securities and loans Adjusted net interest 13,051 12,255 38,391 35,271 income Total average earning 1,506,674 1,370,318 1,465,675 1,300,574 assets Tax adjusted net interest 3.46 % 3.58 % 3.49 % 3.62 % margin

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