Finward Bancorp Reports Strong Third Quarter 2026 Financial Results

Finward Bancorp Reports Third Quarter 2026 Financial Results as Net Interest Margin Strengthens

Finward Bancorp (Nasdaq: FNWD), the parent company of Peoples Bank, has announced its financial results for the third quarter ended September 30, 2026, reporting net income available to common shareholders of $1.4 million, or $0.31 per diluted share. The results compare with net income of $2.1 million, or $0.48 per diluted share, recorded during the second quarter of 2026.

The company’s latest quarterly performance reflects improvements in net interest margin, growth in customer deposits, stable lending activity, and continued attention to asset quality. However, profitability was affected by additional expenses associated with Finward Bancorp’s pending merger with First Financial, which was announced earlier in the quarter.

Despite the decline in quarterly earnings, Finward Bancorp maintained a solid liquidity position, strengthened its core deposit base, and continued generating higher yields from its loan portfolio.

The company also reported that its regulatory capital ratios remained above applicable requirements, providing financial support as it progresses toward the proposed merger.

Finward Bancorp Reports $1.4 Million in Third Quarter Net Income

Finward Bancorp generated net income available to common stockholders of $1.4 million during the third quarter of 2026, compared with $2.1 million in the preceding quarter.

Diluted earnings per share declined to $0.31 from $0.48 during the second quarter.

The decline in profitability was primarily associated with merger-related expenses, including employee compensation adjustments and professional service costs.

Benjamin Bochnowski, Chief Executive Officer of Finward Bancorp, explained that the company’s third-quarter results were influenced by costs connected to the proposed merger with First Financial.

According to management, the transaction required additional expenditures related to employee compensation, benefits, and third-party advisory services.

Bochnowski emphasized that the company’s underlying banking operations remained stable throughout the quarter, supported by established customer relationships and continued attention to credit quality.

He also highlighted the positive impact of higher interest rates on loan yields and net interest margin.

Although rising rates contributed to improved lending returns, they also increased unrealized losses within the company’s investment securities portfolio.

Management remains focused on completing the merger while maintaining customer service standards and supporting a smooth organizational transition.

Key Financial Performance Indicators for Third Quarter 2026

Finward Bancorp reported several important financial and operating developments during the quarter.

The results show that Finward Bancorp experienced stronger interest margins while absorbing higher operating expenses.

The increase in the efficiency ratio indicates that noninterest expenses represented a larger proportion of operating revenue during the quarter.

Management attributed much of this increase to costs associated with the pending merger rather than a deterioration in the company’s core banking activities.

Net Interest Margin Expands to 3.39%

One of the most significant developments during the third quarter was the improvement in Finward Bancorp’s net interest margin.

The company reported a net interest margin of 3.39% for the quarter ended September 30, 2026, compared with 3.25% during the second quarter.

This represents an improvement of 14 basis points.

On a fully tax-equivalent basis, net interest margin increased to 3.51%, compared with 3.37% in the preceding quarter.

The tax-equivalent margin also improved from 3.18% in the third quarter of 2025, representing year-over-year growth of 33 basis points.

The improvement was primarily driven by continued loan repricing and the maturity of existing loans carrying lower interest rates.

As older loans mature or reset, the company has opportunities to reflect current market interest rates in its lending portfolio.

Additionally, new loans originated during the second quarter contributed a full quarter of interest income during the third quarter.

These developments supported stronger lending yields and improved the company’s ability to generate interest income from its earning assets.

Management indicated that the rising interest rate environment contributed positively to loan portfolio returns.

However, the company also acknowledged that higher interest rates affected the market valuation of its securities holdings.

Customer Deposits Increase to $1.76 Billion

Finward Bancorp continued strengthening its funding position during the third quarter.

Total deposits reached $1.76 billion as of September 30, 2026, representing an increase of $25.9 million, or 1.5%, compared with $1.73 billion at June 30, 2026.

The increase was supported by seasonal deposit activity and continued adjustments to deposit pricing.

Noninterest-bearing deposits totaled $281.5 million, increasing by $10.8 million during the quarter.

Growth in noninterest-bearing deposits is particularly important for banks because these balances provide funding without requiring interest payments to depositors.

Core deposits also increased during the period.

Finward Bancorp reported approximately $1.3 billion in core deposits at September 30, 2026, compared with approximately $1.2 billion at the end of June.

Core deposits, which include checking, savings, and money market accounts, represented 71.9% of total deposits at the end of the third quarter.

The composition of the deposit base reflects the company’s continued focus on maintaining customer relationships and stable funding sources.

Meanwhile, certificates of deposit declined slightly.

Certificate of deposit balances totaled $493.3 million at September 30, 2026, compared with $497.4 million at June 30, 2026.

The $4.1 million reduction represents a quarterly decline of 0.8%.

Borrowings Decline 37.2% as Deposit Funding Improves

Finward Bancorp substantially reduced its reliance on wholesale borrowings during the third quarter.

Borrowings, federal funds purchased, and repurchase agreements totaled $59.8 million as of September 30, 2026.

This compares with $95.3 million at June 30, 2026, representing a decline of $35.5 million, or 37.2%.

The reduction was primarily attributable to lower Federal Home Loan Bank advances.

Stronger customer deposit balances allowed the company to reduce its dependence on external borrowing arrangements.

This development demonstrates the importance of deposit growth in supporting the company’s funding requirements.

A reduction in borrowings can also provide flexibility in managing interest expenses and liquidity needs.

Finward Bancorp continues to maintain access to multiple funding sources, including Federal Home Loan Bank facilities and Federal Reserve borrowing arrangements.

These resources support the company’s ability to respond to changing liquidity requirements and customer demand.

Liquidity Position Remains Strong at $623 Million

Finward Bancorp reported available liquidity of approximately $623 million as of September 30, 2026.

The figure includes available borrowing capacity through the Federal Home Loan Bank and Federal Reserve facilities.

The company also maintains liquidity resources through cash balances, debt securities, contractual loan repayments, and established customer deposit relationships.

Deposit insurance coverage remains another important element of the company’s funding profile.

As of September 30, 2026, approximately 71.7% of deposits were fully insured by the Federal Deposit Insurance Corporation.

An additional 8.3% of deposits were supported by the Indiana Public Deposit Insurance Fund.

Together, these arrangements provided federal insurance or additional state fund backing for a substantial proportion of the company’s deposits.

Management believes the combination of insured deposits, available liquidity, and diversified funding arrangements supports the company’s financial stability.

Investment Securities Portfolio Declines to $279.9 Million

Finward Bancorp reported a decrease in its available-for-sale securities portfolio during the third quarter.

Available-for-sale securities totaled $279.9 million as of September 30, 2026, compared with $310.2 million at June 30, 2026.

The $30.3 million reduction was primarily associated with an increase in negative fair value adjustments.

Higher market interest rates generally reduce the market value of existing fixed-rate securities, particularly when those securities carry yields below prevailing market rates.

This relationship contributed to the decline in the reported value of Finward Bancorp’s available-for-sale securities portfolio.

Despite the reduction in market value, the yield on the securities portfolio improved.

The portfolio generated a yield of 2.33% during the third quarter of 2026, compared with 2.27% during the second quarter.

The company reported that no securities were sold during the quarter.

Consequently, the reduction in the available-for-sale portfolio was not driven by securities sales.

The valuation changes nevertheless affected certain capital-related measures, including tangible book value per share.

Loan Portfolio Remains Stable at $1.50 Billion

Finward Bancorp maintained a relatively stable lending portfolio during the third quarter.

Total loans stood at approximately $1.50 billion as of September 30, 2026, broadly unchanged from June 30, 2026.

The company originated $69.7 million in new commercial loans during the third quarter.

This compares with $81.3 million in commercial loan originations during the second quarter.

Although quarterly commercial loan originations declined, the company continued generating lending activity across its commercial banking operations.

Commercial real estate remained an important component of the loan portfolio.

Owner-occupied commercial real estate loans totaled $263.5 million, representing 17.6% of total loans receivable.

Non-owner-occupied commercial real estate loans totaled $332.4 million, accounting for 22.2% of the portfolio.

Within the non-owner-occupied commercial real estate category, loans secured by office buildings represented $31.5 million.

This amounted to approximately 2.1% of total loan balances.

The relatively limited office property exposure is an important consideration when evaluating the company’s commercial real estate portfolio.

Management continues monitoring lending relationships and credit conditions across its business segments.

Credit Quality Remains Relatively Stable

Finward Bancorp reported a modest increase in nonperforming loans during the third quarter.

Nonperforming loans totaled $16.8 million as of September 30, 2026, compared with $16.5 million at June 30, 2026.

The increase of approximately $239,000 represented quarterly growth of 1.4%.

The ratio of nonperforming loans to total loans increased slightly to 1.12%, compared with 1.10% at the end of the second quarter.

Meanwhile, the ratio of nonperforming assets to total assets increased to 0.92%, compared with 0.90% at June 30, 2026.

The increase in nonperforming loans included the addition of a $1.1 million residential real estate loan.

Eight additional smaller loans, averaging approximately $89,000 each, also entered nonperforming status.

These additions were partly offset by the removal of 13 loans totaling approximately $1.2 million from nonperforming classifications.

The removed loans were associated with commercial real estate, commercial business, and residential real estate lending.

Management stated that the bank continues actively monitoring nonperforming relationships and addressing credit issues through proactive customer engagement.

The company also reported no known credit exposure to non-depository financial institutions at the end of the quarter.

Allowance for Credit Losses Totals $17.5 Million

Finward Bancorp maintained an allowance for credit losses on loans of $17.5 million at September 30, 2026.

This represented 1.17% of total loans receivable.

At June 30, 2026, the allowance totaled $17.7 million, or 1.18% of total loans.

The allowance decreased by approximately $257,000, representing a decline of 1.49%.

The company also maintained a reserve for unused lending commitments.

This reserve totaled approximately $2.0 million at September 30, 2026, compared with $1.9 million at June 30, 2026.

The increase was approximately $36,000, or 1.8%.

During the third quarter, Finward Bancorp recorded a net provision for credit losses of $124,000.

The provision included $88,000 related to loans and $36,000 associated with unused lending commitments.

The company attributed the provision to changes in certain loan segment balances and other factors incorporated into its credit loss modeling.

Net loan charge-offs totaled $240,000 during the third quarter, compared with net loan recoveries of $31,000 during the second quarter.

The allowance for credit losses represented 104.5% of nonperforming loans at September 30, 2026, compared with 106.9% at June 30, 2026.

These figures indicate that the company maintained allowance coverage exceeding its reported nonperforming loan balances, although the coverage ratio declined modestly during the quarter.

Noninterest Income Benefits From Branch Sale

Finward Bancorp reported an improvement in noninterest income relative to average assets during the third quarter.

The ratio increased to 0.52%, compared with 0.48% during the second quarter.

The improvement was primarily attributable to a $182,000 gain associated with the sale of one of the company’s branch locations.

The transaction provided an additional contribution to quarterly noninterest income.

Noninterest income is an important component of banking revenue because it includes earnings generated outside traditional lending and deposit activities.

Such income may include service charges, fees, gains on asset sales, and other banking-related revenue sources.

However, the branch sale gain was transaction-related and should not be interpreted as recurring operating income.

The company continued balancing revenue generation with expense management as it prepared for its pending merger.

Merger-Related Expenses Increase Operating Costs

Finward Bancorp experienced higher operating expenses during the third quarter, primarily because of costs associated with its proposed merger with First Financial.

Noninterest expenses represented 3.35% of average assets, compared with 2.95% during the second quarter.

The increase included approximately $1.8 million in compensation and employee benefits adjustments related to the merger.

The company also recorded $536,000 in professional and outside service expenses associated with the transaction.

These expenses contributed to the decline in quarterly net income and the increase in the efficiency ratio.

The efficiency ratio reached 91.32% during the third quarter, compared with 84.52% during the preceding quarter.

The ratio measures the relationship between operating expenses and revenue, with a higher ratio generally indicating that a greater portion of revenue is being consumed by expenses.

Management indicated that the additional costs were connected to the merger process rather than a broad weakening of its underlying banking franchise.

First Financial Merger Remains a Strategic Priority

Finward Bancorp continues progressing toward its previously announced merger with First Financial.

Management believes the combination has the potential to provide benefits for shareholders, customers, employees, and the communities served by the organizations.

The transaction remains an important strategic priority as Finward Bancorp works through the necessary integration and transition activities.

Chief Executive Officer Benjamin Bochnowski emphasized the company’s commitment to maintaining customer relationships and service quality throughout the merger process.

The company is also focused on supporting employees and ensuring that operational changes are managed carefully.

While the proposed combination creates opportunities for organizational development, successful completion and integration remain important considerations.

The company has not provided additional transaction closing details in the financial information presented.

Regulatory Capital Remains Above Required Levels

Finward Bancorp maintained capital ratios above applicable regulatory requirements during the third quarter.

Peoples Bank reported a Tier 1 leverage ratio of 9.29% at September 30, 2026, compared with 9.31% at June 30, 2026.

The modest decline indicates that the bank’s leverage capital position remained relatively stable.

However, tangible book value per share decreased during the quarter.

The company’s tangible book value per share was $31.07 at September 30, 2026, compared with $35.75 at June 30, 2026.

Tangible common equity as a percentage of tangible assets declined to 6.76%, compared with 7.68% in the preceding quarter.

These changes occurred during a period of increased unrealized losses in the securities portfolio.

The company continues monitoring its capital position while preparing for the pending merger.

Understanding Finward Bancorp’s Non-GAAP Financial Measures

Finward Bancorp presents its financial results in accordance with generally accepted accounting principles, while also providing selected non-GAAP performance measures.

These measures include tangible common equity, tangible book value per share, tangible common equity to tangible assets, tax-equivalent net interest margin, and the efficiency ratio.

Management believes these additional measures provide useful information when evaluating operating performance across reporting periods.

The tax-equivalent net interest margin calculation adjusts income from tax-exempt loans and securities to reflect the economic benefit of their tax treatment.

The company uses the federal corporate income tax rate of 21% when calculating these adjustments.

Such measures are commonly used within the banking industry to support comparisons among financial institutions.

However, non-GAAP measures should be considered alongside, rather than as replacements for, financial information prepared under GAAP.

Differences in calculation methods may also affect comparisons between financial institutions.

Finward Bancorp Maintains Focus on Financial Stability and Merger Completion

Finward Bancorp’s third-quarter 2026 results reflect a period of operational stability accompanied by significant strategic developments.

Although net income declined to $1.4 million from $2.1 million in the preceding quarter, the company achieved meaningful improvements in net interest margin and customer deposit balances.

Total deposits increased to $1.76 billion, while borrowings declined substantially, strengthening the company’s funding profile.

The loan portfolio remained stable at approximately $1.50 billion, and credit quality indicators showed only modest changes.

At the same time, higher merger-related expenses affected quarterly profitability and operating efficiency.

Management continues emphasizing customer service, liquidity management, regulatory capital strength, and credit risk oversight as the organization advances toward its proposed combination with First Financial.

The company’s results illustrate the balance between maintaining day-to-day banking operations and managing the financial and operational requirements of a major corporate transaction.

As Finward Bancorp moves through the remainder of 2026, its financial performance will continue to be influenced by interest rate conditions, securities portfolio valuations, lending activity, funding costs, and progress toward completing the merger.

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