Key Highlights

  • Diluted EPS was $0.31 and net income was $1.4 million, down from $0.81 and $3.5 million a year earlier.
  • Net interest income rose to $15.9 million, up 10.4% from $14.4 million a year earlier.
  • Net interest margin was 3.39%, up from 3.25% in the second quarter and 3.04% a year ago.
  • Noninterest expense was $17.0 million, including about $1.8 million of compensation adjustments and $536 thousand of professional fees tied to the merger.
  • Book value per share fell to $36.45 from $41.15 at June 30 as unrealized securities losses widened.

Finward Bancorp Earnings: Did Merger Costs Pull Third-Quarter EPS Down to $0.31?

Finward Bancorp (NASDAQ:FNWD) reported third-quarter results on Tuesday, October 27, with diluted earnings per share of $0.31 and net income of $1.4 million. That compares with $0.48 in the second quarter and $0.81 a year earlier. No guidance was issued.

The chief executive attributed the quarter to merger-related expenses tied to the pending deal with First Financial Bancorp (NASDAQ:FFBC). Pre-tax income was $1.5 million, against $2.5 million in the second quarter and $3.6 million a year earlier. Nine-month net income was $5.7 million, or $1.32 per diluted share, versus $6.1 million and $1.42.

Return on assets was 0.27% and return on equity was 3.10%.

Margin and Expenses: Why Did Revenue Improve While the Efficiency Ratio Worsened?

Finward is an Indiana-based bank holding company. Net interest income reached $15.9 million, up from $15.2 million in the second quarter. Net interest margin was 3.39% on a GAAP basis, or 3.51% on a tax-equivalent basis, as loan yields rose to 5.73% from 5.55%.

Noninterest income was $2.7 million, versus $2.4 million, helped by a $182 thousand gain on sale of property that included a branch. Noninterest expense jumped to $17.0 million from $14.9 million, with compensation and benefits at $9.7 million and professional services at $1.6 million. The non-GAAP efficiency ratio rose to 91.32% from 84.52%.

Loans, Deposits and Credit: What Does the Balance Sheet Show Before the Deal Closes?

Net loans were $1.50 billion, down 0.3% from the second quarter but up 1.7% from a year ago. Commercial real estate was the largest category at $595.9 million, and commercial originations were $69.7 million. Deposits grew 1.5% sequentially to $1.76 billion, and borrowings fell 37.2% to $59.8 million.

The provision for credit losses was $124 thousand, against a $301 thousand benefit a year earlier. Net charge-offs were $240 thousand, or 0.06% of average loans. Nonperforming loans were 1.12% of loans, up from 0.94% a year ago, and the allowance was 1.17% of loans, covering 104.49% of nonperforming loans.

Total assets were $2.01 billion. Stockholders' equity fell to $157.8 million from $178.3 million, and tangible book value per share was $31.07 versus $35.75, as the accumulated other comprehensive loss widened to $63.5 million from $41.5 million when rates rose. The bank-level common equity Tier 1 ratio was 11.74%. The dividend was $0.12 per share.

First Financial Merger: What Should Investors Watch Before the Expected January 1 Close?

First Financial's own earnings release states that it expects the Finward acquisition to close on January 1, 2027. Federal regulatory approval has been received, and closing still requires state regulatory approval and Finward shareholder approval. The proxy statement was mailed to shareholders on or about September 28.

Watch the shareholder vote, the state approval and further merger charges in the fourth quarter, along with movement in unrealized securities losses, which drive book value.