FNWD 10-Q Quarterly Report June 30, 2025

FINWARD BANCORP

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


x			Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

			For the quarterly period ended June 30, 2025 or

o			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

			For the transition period from ______ to ______

			Commission File Number: 001-40999

Finward Bancorp

(Exact name of registrant as specified in its charter)


Indiana			35-1927981
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)

9204 Columbia Avenue Munster , Indiana			46321
(Address of principal executive offices)			(ZIP code)

Registrant's telephone number, including area code: ( 219 ) 836‑4400


			N/A
			(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, no par value	FNWD	The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer o Accelerated filer o Non-accelerated filer x

Smaller Reporting Company x Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

There were 4,324,889 shares of the registrant’s Common Stock, without par value, outstanding at August 11, 2025.

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Finward Bancorp

Index


			Page Number
PART I. Financial Information

Item 1. Unaudited Financial Statements and Notes			1

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			38

Item 3. Quantitative and Qualitative Disclosures about Market Risk			57

Item 4. Controls and Procedures			57

PART II. Other Information			57

SIGNATURES			60

EXHIBITS
31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1 Section 1350 Certifications
101 XBRL Interactive Data File

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PART I. Financial Information

Item 1. Financial Statements and Notes (unaudited)

Finward Bancorp

Condensed Consolidated Balance Sheets



	(unaudited)
(Dollars in thousands)	June 30, 2025		December 31, 2024
ASSETS
Cash and non-interest bearing deposits in other financial institutions	$	23,027	$	17,883
Interest bearing deposits in other financial institutions	79,976		52,047
Federal funds sold	411		654
Total cash and cash equivalents	103,414		70,584
Securities available-for-sale	327,845		333,554
Loans held-for-sale	834		1,253
Loans receivable, net of deferred fees and costs	1,484,278		1,508,976
Less: Allowance for credit losses	( 18,184 )		( 16,911 )
Net loans receivable	1,466,094		1,492,065
Federal Home Loan Bank stock	6,547		6,547
Accrued interest receivable	7,651		7,721
Premises and equipment	46,179		47,259

Cash value of bank owned life insurance	33,932		33,514
Goodwill	22,395		22,395
Other intangible assets	1,414		1,860
Other assets	41,606		43,947
Total assets	$	2,057,911	$	2,060,699

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing	$	271,172	$	263,324
Interest bearing	1,483,678		1,497,242
Total	1,754,850		1,760,566
Repurchase agreements	48,331		40,116
Borrowed funds	65,000		65,000
Accrued expenses and other liabilities	35,477		43,603
Total liabilities	1,903,658		1,909,285
Commitments and contingencies


Stockholders' Equity:
Preferred stock, no par or stated value; 10,000,000 shares authorized, none outstanding	-		-
Common stock, no par or stated value; 10,000,000 shares authorized; shares issued and outstanding: June 30, 2025 - 4,324,889 December 31, 2024 - 4,313,698	-		-
Additional paid-in capital	70,263		70,034
Accumulated other comprehensive loss	( 57,560 )		( 58,084 )
Retained earnings	141,550		139,464
Total stockholders' equity	154,253		151,414
Total liabilities and stockholders' equity	$	2,057,911	$	2,060,699

See accompanying notes to condensed consolidated financial statements.

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Finward Bancorp

Consolidated Statements of Income

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands, except per share data)	2025		2024		2025		2024
Interest income:
Loans receivable	$	19,940	$	19,174	$	39,595	$	38,053
Securities	2,108		2,143		4,241		4,386
Other interest earning assets	622		810		1,175		1,672
Total interest income	22,670		22,127		45,011		44,111
Interest expense:
Deposits	7,780		8,610		15,825		17,404
Repurchase agreements	370		399		718		769
Borrowed funds	575		1,064		1,210		2,104
Total interest expense	8,725		10,073		17,753		20,277
Net interest income	13,945		12,054		27,258		23,834
Provision for (benefit from) credit losses	( 274 )		76		180		76
Net interest income after provision for credit losses	14,219		11,978		27,078		23,758
Non-interest income:
Fees and service charges	1,330		1,257		2,439		2,410
Wealth management operations	696		763		1,315		1,396
Gain on tax credit investment	-		-		67		-
Gain on sale of loans held-for-sale, net	378		320		608		472
Loss on sale of securities, net	-		-		-		( 531 )
Increase in cash value of bank owned life insurance	220		212		418		405
Gain on sale of real estate	-		15		-		11,873
Other	59		6		65		24
Total non-interest income	2,683		2,573		4,912		16,049
Non-interest expense:
Compensation and benefits	7,313		7,037		14,685		14,146
Occupancy and equipment	1,935		2,116		4,046		4,024
Data processing	1,341		1,135		2,380		2,305
Marketing	214		212		300		370
Federal deposit insurance premiums	471		397		904		898
Professional and outside services	1,115		1,257		2,375		2,814
Technology	545		507		999		1,132
Other	1,852		1,756		3,569		3,732
Total non-interest expense	14,786		14,417		29,258		29,421
Income before income tax expense	2,116		134		2,732		10,386
Income tax expense (benefit)	( 35 )		( 9 )		126		963
Net income	$	2,151	$	143	$	2,606	$	9,423

Earnings per common share:
Basic	$	0.50	$	0.03	$	0.61	$	2.21
Diluted	$	0.50	$	0.03	$	0.61	$	2.21

Dividends declared per common share	$	0.12	$	0.12	$	0.12	$	0.24

See accompanying notes to condensed consolidated financial statements.

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Finward Bancorp

Consolidated Statements of Comprehensive Income (Loss)

(unaudited)


	Three Months Ended June 30				Six Months Ended June 30
(Dollars in thousands)	2025		2024		2025		2024
Net income	$	2,151	$	143	$	2,606	$	9,423

Net change in net unrealized gains and losses on securities available-for-sale:
Unrealized gain (loss) arising during the period	899		( 3,338 )		689		( 10,050 )
Less: reclassification adjustment for losses included in net income	-		-		-		531
Net securities gain (loss) during the period	899		( 3,338 )		689		( 9,519 )
Tax effect	( 215 )		712		( 165 )		2,193
Other comprehensive income (loss), net of tax	684		( 2,626 )		524		( 7,326 )
Comprehensive income (loss) net of tax	$	2,835	$	( 2,483 )	$	3,130	$	2,097

See accompanying notes to condensed consolidated financial statements.

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Finward Bancorp

Consolidated Statements of Changes in Stockholder's Equity

(unaudited)


(Dollars in thousands, except per share data)	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive (Loss)/Income		Retained Earnings		Total Stockholders' Equity
Balance at March 31, 2024	$	-	$	69,727	$	( 56,313 )	$	138,167	$	151,581
Net income	-		-		-		143		143
Other comprehensive loss, net of tax	-		-		( 2,626 )		-		( 2,626 )
Net surrender value of 3,364 restricted stock awards	-		( 82 )		-		-		( 82 )
Stock-based compensation expense	-		133		-		-		133
Cash dividends, $ 0.12 per share	-		-		-		( 518 )		( 518 )
Balance at June 30, 2024	$	-	$	69,778	$	( 58,939 )	$	137,792	$	148,631

Balance at January 1, 2024	$	-	$	69,555	$	( 51,613 )	$	129,403	$	147,345

Net income	-		-		-		9,423		9,423
Other comprehensive loss, net of tax	-		-		( 7,326 )		-		( 7,326 )
Net surrender value of 3,364 restricted stock awards	-		( 82 )		-		-		( 82 )
Stock-based compensation expense	-		305		-		-		305
Cash dividends, $ 0.24 per share	-		-		-		( 1,034 )		( 1,034 )
Balance at June 30, 2024	$	-	$	69,778	$	( 58,939 )	$	137,792	$	148,631


Balance at March 31, 2025	$	-	$	70,132	$	( 58,244 )	$	139,919	$	151,807
Net income	-		-		-		2,151		2,151
Other comprehensive income, net of tax	-		-		684		-		684
Stock-based compensation expense	-		131		-		-		131
Cash dividend, $ 0.12 per share	-		-		-		( 520 )		( 520 )
Balance at June 30, 2025	$	-	$	70,263	$	( 57,560 )	$	141,550	$	154,253

Balance at January 1, 2025	$	-	$	70,034	$	( 58,084 )	$	139,464	$	151,414
Net income	-		-		-		2,606		2,606
Other comprehensive income, net of tax	-		-		524		-		524

Stock-based compensation expense	-		229		-		-		229
Cash dividends, $ 0.12 per share	-		-		-		( 520 )		( 520 )
Balance at June 30, 2025	$	-	$	70,263	$	( 57,560 )	$	141,550	$	154,253

See accompanying notes to condensed consolidated financial statements.

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Finward Bancorp

Consolidated Statements of Cash Flows

(unaudited)


	Six months ended June 30,
(Dollars in thousands)	2025		2024
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	2,606	$	9,423
Adjustments to reconcile net income to net cash provided by operating activities:
Origination of loans for sale	( 18,141 )		( 10,594 )
Sale of loans originated for sale	19,178		10,217
Depreciation and amortization, net of accretion	3,231		3,436
Stock based compensation expense	229		305
Cash payments for lease liabilities	( 800 )		( 570 )
Loss on sale of securities, net	-		531
Gain on sale of loans held-for-sale, net	( 624 )		( 470 )
Gain on sale of real estate	-		( 11,873 )
Gain on sale of foreclosed real estate	-		( 1 )
Increase of cash value of bank owned life insurance	( 418 )		( 405 )
Gain on derivatives	16		( 2 )
Provision for credit losses	180		76
Change in:
Interest receivable	70		350
Interest payable	( 34 )		( 1,543 )
Other assets	2,136		2,855
Accrued expenses and other liabilities	( 6,669 )		990
Total adjustments	( 1,646 )		( 6,698 )
Net cash provided by operating activities	960		2,725
CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from maturities and pay downs of securities available-for-sale	5,687		6,326
Proceeds from sales of securities available-for-sale	-		14,697

Net change in loans receivable	24,593		5,976
Purchase of premises and equipment	( 461 )		( 2,344 )
Proceeds from sale of premises and equipment	-		17,677
Proceeds from sale of foreclosed real estate	72		72
Net cash provided by investing activities	29,891		42,404
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in deposits	( 5,716 )		( 56,667 )
Proceeds from borrowed funds	40,000		90,000
Repayment of borrowed funds	( 40,000 )		( 85,000 )
Net surrender value of restricted stock awards	-		( 82 )
Change in repurchase agreements	8,215		4,849
Dividends paid	( 520 )		( 1,030 )
Net cash provided by (used in) financing activities	1,979		( 47,930 )
Net change in cash and cash equivalents	32,830		( 2,801 )
Cash and cash equivalents at beginning of period	70,584		86,008
Cash and cash equivalents at end of period	$	103,414	$	83,207
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	17,718	$	21,779
Income taxes	-		160
Noncash activities:

Dividends declared not paid	-		515


Right-of-use asset obtained in exchange for lease liability	-		16,140

See accompanying notes to condensed consolidated financial statements.

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Finward Bancorp

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 1 - Basis of Presentation

Organization and Description of Business

The condensed consolidated financial statements include the accounts of Finward Bancorp (the “Company” or “FNWD”) and Peoples Bank (the “Bank”), and the Bank’s wholly-owned subsidiaries, Peoples Service Corporation, NWIN, LLC, NWIN Funding, Incorporated, and Columbia Development Company, LLC. The Company has no other business activity other than being a holding company for the Bank and the Company’s earnings are primarily dependent upon the earnings of the Bank. The accompanying unaudited condensed consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include all disclosures required by U.S. generally accepted accounting principles ("GAAP") for complete presentation of condensed consolidated financial statements. In the opinion of management, the condensed consolidated financial statements contain all adjustments necessary to present fairly the condensed consolidated balance sheets of the Company as of June 30, 2025, and December 31, 2024, and the condensed consolidated statements of income, comprehensive income (loss), and changes in stockholders’ equity for the three and six months ended June 30, 2025, and 2024, and condensed consolidated statements of cash flows for the six months ended June 30, 2025, and 2024. The income reported for the six months ended June 30, 2025, is not necessarily indicative of the results to be expected for the full year.

The Company's revenue is primarily derived from the business of banking. The Company's financial performance is monitored on a consolidated basis by the CEO, who is considered to be the Company's Chief Operating Decision Maker ("CODM"). This review is supported by the Chief Financial Officer, Chief Revenue Officer, and Chief Operating Officer. Financial performance is reported to the CODM monthly. The presentation of financial performance to the CODM is consistent with amounts and financial statement line items shown in the Company's consolidated balance sheets and consolidated statements of income. Additionally, the Company's significant expenses are adequately segmented by category and amount in the consolidated statements of income to include all significant items when considering both qualitative and quantitative factors. Significant expenses of the Company include compensation and benefits, net occupancy expense, equipment costs, data processing fees, and professional fees.

All of the Company’s financial results are similar and considered by management to be aggregated into one reportable operating segment. The Company's revenue is primarily derived from the business of banking and the Company’s CODM evaluates financial performance on a company-wide basis. Accordingly, all of the Company’s operations are considered by management to be aggregated in one reportable operating segment.

The Notes to the Condensed Consolidated Financial Statements appearing in Finward Bancorp’s Annual Report on Form 10-K (2024 Annual Report), which include descriptions of significant accounting policies, should be read in conjunction with these interim financial statements. The Condensed Consolidated Balance Sheet at December 31, 2024, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for condensed financial statements.

Note 2 - Use of Estimates

Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period, as well as the disclosures provided. Actual results could differ from those estimates. Estimates associated with the allowance for credit losses are particularly susceptible to material change in the near term.

Note 3 – Accounting Pronouncements Recently Adopted or Issued

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendment in Response to the SEC’s Disclosure Update and Simplification Initiative. The ASU incorporates several disclosure and presentation requirements currently residing in the SEC Regulations S-X and S-K. The amendments will be applied prospectively and are effective when the SEC removes the related requirements from Regulations S-X or S-K. Any amendments the SEC

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does not remove by June 30, 2027 will not be effective. As we are currently subject to these SEC requirements, this ASU is not expected to have a material impact on our condensed consolidated financial statements or related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid and to improve the effectiveness of income tax disclosures. This accounting standards update will be effective for us for fiscal year 2025, with early adoption permitted. We are currently evaluating the impact of this accounting standard, but do not expect it to have a material impact on our condensed consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures, which requires public business entities to disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating the impact of this accounting standard, but we do not expect it to have a material impact on our condensed consolidated financial statements.

In November 2024, the FASB issued ASU 2024-04, Debt-Debt With Conversion and Other Options, which clarifies the requirements for determining whether certain settlements of convertible debt instruments, including convertible debt instruments with cash conversion features or convertible debt instruments that are not currently convertible, should be accounted for as an induced conversion. The amendments are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods beginning after December 15, 2025. Early adoption is permitted. We are currently evaluating the impact of this accounting standard, but we do not expect it to have a material impact on our condensed consolidated financial statements.

Note 4 - Securities

The estimated fair value of available-for-sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income were as follows:


	(Dollars in thousands)
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
June 30, 2025
U.S. government sponsored entities	$	8,884	$	-	$	( 577 )	$	8,307
Collateralized mortgage obligations and residential mortgage-backed securities	130,260		-		( 22,288 )		107,972
Municipal securities	262,277		-		( 52,327 )		209,950
Collateralized debt obligations	2,149		-		( 533 )		1,616
Total securities available-for-sale	$	403,570	$	-	$	( 75,725 )	$	327,845


	(Dollars in thousands)
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
December 31, 2024
U.S. government sponsored entities	$	8,884	$	-	$	( 823 )	$	8,061
Collateralized mortgage obligations and residential mortgage-backed securities	135,974		-		( 26,649 )		109,325
Municipal securities	262,954		-		( 48,205 )		214,749
Collateralized debt obligations	2,156		-		( 737 )		1,419
Total securities available-for-sale	$	409,968	$	-	$	( 76,414 )	$	333,554

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The cost basis and estimated fair value of available-for-sale debt securities at June 30, 2025, by contractual maturity, were as follows. Securities not due at a single maturity date, primarily collateralized mortgage obligations and residential mortgage-backed securities, are shown separately.


	(Dollars in thousands)
	Available-for-sale
June 30, 2025	Cost Basis		Estimated Fair Value
Due in one year or less	$	-	$	-
Due from one to five years	12,438		11,590
Due from five to ten years	41,642		36,578
Due over ten years	219,230		171,705

Collateralized mortgage obligations and residential mortgage-backed securities	130,260		107,972
Total	$	403,570	$	327,845

Sales of available-for-sale securities were as follows for the quarter ended:


	Three Months Ended June 30				Six Months Ended June 30
	2025		2024		2025		2024

Proceeds	$	-	$	-	$	-	$	14,697
Gross gains	-		-		-		-
Gross losses	-		-		-		( 531 )

Accumulated other comprehensive income/(loss) balances, net of tax, related to available-for-sale securities, were as follows:


	(Dollars in thousands)
	Unrealized loss
Beginning balance, April 1, 2025	$	( 58,244 )
Period change	684
Ending balance, June 30, 2025	$	( 57,560 )


	(Dollars in thousands)
	Unrealized loss
Beginning balance, April 1, 2024	$	( 56,313 )
Current period change	( 2,626 )
Ending balance, June 30, 2024	$	( 58,939 )


	(Dollars in thousands)
	Unrealized loss
Beginning Balance, January 1, 2025	$	( 58,084 )
Period change	524
Ending Balance, June 30, 2025	$	( 57,560 )

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	(Dollars in thousands)
	Unrealized loss
Beginning balance, January 1, 2024	$	( 51,613 )
Current period change	( 7,326 )
Ending balance, June 30, 2024	$	( 58,939 )

Securities with market values of approximately $ 327.1 million and $ 326.5 million were pledged as of June 30, 2025 and December 31, 2024, respectively, as collateral for repurchase agreements, public funds, and for other purposes as permitted or required by law.

Securities with unrealized losses at June 30, 2025, and December 31, 2024 not recognized in income are as follows:


					(Dollars in thousands)
	Less than 12 months				12 months or longer				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Percentage of Total Portfolio in Loss Position
June 30, 2025
U.S. government sponsored entities	$	-	$	-	$	8,307	$	( 577 )	$	8,307	$	( 577 )	100.0	%
Collateralized mortgage obligations and residential mortgage-backed securities	-		-		107,972		( 22,288 )		107,972		( 22,288 )		100.0	%
Municipal securities	-		-		209,950		( 52,327 )		209,950		( 52,327 )		100.0	%
Collateralized debt obligations	-		-		1,616		( 533 )		1,616		( 533 )		100.0	%
Total temporarily impaired	$	-	$	-	$	327,845	$	( 75,725 )	$	327,845	$	( 75,725 )	100.0	%
Number of securities			-				411				411


					(Dollars in thousands)
	Less than 12 months				12 months or longer				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Percentage of Total Portfolio in Loss Position
December 31, 2024
U.S. government sponsored entities	$	-	$	-	$	8,061	$	( 823 )	$	8,061	$	( 823 )	100.0	%
Collateralized mortgage obligations and residential mortgage-backed securities	-		-		109,325		( 26,649 )		109,325		( 26,649 )		100.0	%
Municipal securities	3,310		( 156 )		211,439		( 48,049 )		214,749		( 48,205 )		100.0	%
Collateralized debt obligations	-		-		1,419		( 737 )		1,419		( 737 )		100.0	%
Total temporarily impaired	$	3,310	$	( 156 )	$	330,244	$	( 76,258 )	$	333,554	$	( 76,414 )	100.0	%
Number of securities			4				409				413

Unrealized losses on securities have not been recognized into income because the securities are of high credit quality or have undisrupted cash flows. Management has the intent and ability to hold these securities for the foreseeable future, and the decline in fair value is largely due to changes in interest rates and volatility in securities markets. The fair values are expected to recover as the securities approach maturity.

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Collateralized debt obligations with a cost basis of $ 2.1 million and fair value of $ 1.6 million at June 30, 2025 and $ 1.4 million million at December 31, 2024, had previously recorded impairment of $ 173 thousand, which will not be recoverable until maturity of the security.

Accrued interest receivable on AFS debt securities totaled $ 2.1 million at June 30, 2025, and $ 2.3 million at December 31, 2024. These amounts are excluded from the estimate of credit losses. The Company made the policy election to exclude accrued interest from the amortized cost basis of AFS debt securities and report accrued interest separately on the condensed consolidated balance sheet.

Note 5 - Loans Receivable

The Company’s current lending programs are described below:

Residential Real Estate. A primary lending activity of the Company has been the granting of conventional mortgage loans to enable borrowers to purchase existing homes, refinance existing homes, or construct new homes. Conventional loans are made up to a maximum of 97 % of the purchase price or appraised value, whichever is less. For loans made in excess of 80 % of value, private mortgage insurance is generally required in an amount sufficient to reduce the Company’s exposure to 80 % or less of the appraised value of the property. Loans insured by private mortgage insurance companies can be made for up to 97 % of value.

Fixed rate loans generally conform to Freddie Mac guidelines for loans purchased under the 1-4 family program. Loan interest rates are determined based on secondary market yield requirements and local market conditions. Fixed rate mortgage loans may be sold and/or classified as held for sale to control exposure to interest rate risk.

The Company’s Adjustable-Rate Mortgage Loans (“ARMs”) include offerings that have a three , five , seven or ten year fixed period. The ability of the Company to successfully market ARM’s depends upon loan demand, prevailing interest rates, volatility of interest rates, and terms offered by competitors.

Home Equity Line of Credit. The Company offers a fixed and variable rate revolving line of credit secured by the equity in the borrower’s home. Both products offer an interest only option where the borrower pays interest only on the outstanding balance each month. Equity lines will typically require a second mortgage appraisal and a second mortgage lender’s title insurance policy. Loans are generally made up to a maximum of 89 % of the appraised value of the property less any outstanding liens.

Fixed-term home improvement and equity loans are made up to a maximum of 85 % of the appraised value of the improved property, less any outstanding liens. These loans are offered on both a fixed and variable rate basis with a maximum term of 240 months. All home equity loans are made on a direct basis to borrowers.

Commercial Real Estate and Multifamily Loans. Commercial real estate loans are typically made to a maximum of 80 % of the appraised value. Such loans are generally made on an adjustable-rate basis. These loans are typically made for terms of 15 to 25 years. Loans with an amortizing term exceeding 15 years normally have a balloon feature calling for a full repayment within seven to ten years from the date of the loan. The balloon feature affords the Company the opportunity to restructure the loan if economic conditions warrant. Commercial real estate loans include loans secured by commercial rental units, apartments, condominium developments, small shopping centers, owner occupied commercial/industrial properties, hospitality units and other retail and commercial developments.

While commercial real estate lending is generally considered to involve a higher degree of risk than single family residential lending due to the concentration of principal in a limited number of loans and the effects of general economic conditions on real estate developers and managers, the Company has endeavored to reduce this risk in several ways. In originating commercial real estate loans, the Company considers the feasibility of the project, the financial strength of the borrowers and lessees, the managerial ability of the borrowers, the location of the project and the economic environment. Management evaluates the debt coverage ratio and analyzes the reliability of cash flows, as well as the quality of earnings. All such loans are made in accordance with well-defined underwriting standards and are generally supported by personal guarantees, which represent a secondary source of repayment.

Loans for the construction of commercial properties are generally located within an area permitting physical inspection and regular review of business records. Projects financed outside of the Company’s primary lending area generally involve borrowers and guarantors who are or were previous customers of the Company or projects that are underwritten according to the Bank’s underwriting standards.

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Construction and Land Development. Construction loans on residential properties are made primarily to individuals who are under contract with a general contractor. The maximum loan-to-value ratio is 89 % of either the current appraised value or the cost of construction, whichever is less. Residential construction loans are typically made for a period of one year .

Loans are also made for the construction of commercial properties. All such loans are made in accordance with well-defined underwriting standards. Generally if the loans are not owner occupied, these types of loans require proof of intent to lease and a confirmed end-loan takeout. In general, loans made do not exceed 80 % of the appraised value of the property. Commercial construction loans are typically made for periods not to exceed two years or date of occupancy, whichever is less.

Commercial Business and Farmland Loans. Although the Company’s priority in extending various types of commercial business loans changes from time to time, the basic considerations in determining the makeup of the commercial business loan portfolio are economic factors, regulatory requirements and money market conditions. The Company seeks commercial loan relationships from the local business community and from its present customers. Prudent lending policies based upon sound credit analysis governs the extension of commercial credit. The following loans, although not inclusive, are considered preferable for the Company’s commercial loan portfolio: loans collateralized by liquid assets; loans secured by general use machinery and equipment; secured short-term working capital loans to established businesses secured by business assets; short-term loans with established sources of repayment and secured by sufficient equity and real estate; and unsecured loans to customers whose character and capacity to repay are firmly established.

Consumer Loans. The Company offers consumer loans to individuals for personal, household or family purposes. Consumer loans are either secured by adequate collateral, or unsecured. Unsecured loans are based on the strength of the applicant’s financial condition. All borrowers must meet current underwriting standards. The consumer loan program includes both fixed and variable rate products.

Manufactured Homes. The Company has purchased fixed rate closed loans from a third-party that are subject to the Company’s underwriting requirements and secured by manufactured homes. The maturity date on these loans can range up to 25 years. In addition, these loans are partially secured by a reserve account held at the Company.

Government Loans. The Company is permitted to purchase non-rated municipal securities, tax anticipation notes and warrants within the local market area.

Loans consist of the following as of June 30, 2025, and December 31, 2024:


(Dollars in thousands)	June 30, 2025		December 31, 2024
Loans secured by real estate:
Residential real estate	$	457,248	$	467,293
Home equity	51,112		49,758
Commercial real estate	551,091		551,674
Construction and land development	74,795		82,874
Multifamily	200,440		212,455
Total loans secured by real estate	1,334,686		1,364,054
Commercial business	105,636		104,246
Consumer	2,347		551
Manufactured homes	25,146		26,708
Government	14,628		11,024
Loans receivable	1,482,443		1,506,583
Add:
Net deferred loan origination costs	2,012		2,439
Loan clearing funds	( 177 )		( 46 )
Loans receivable, net of deferred fees and costs	$	1,484,278	$	1,508,976

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The Company's age analysis of past due loans is summarized below:


(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due and Accruing		Current		Accruing Loans		Non-accrual Loans		Total Loans Receivable
June 30, 2025
Residential real estate	$	5,841	$	499	$	-	$	6,340	$	445,275	$	451,615	$	5,633	$	457,248
Home equity	536		78		145		759		49,370		50,129		983		51,112
Commercial real estate	6,473		2,328		-		8,801		541,111		549,912		1,179		551,091
Construction and land development	471		458		-		929		73,140		74,069		726		74,795
Multifamily	178		753		-		931		197,348		198,279		2,161		200,440
Commercial business	991		118		-		1,109		101,683		102,792		2,844		105,636
Consumer	-		2		-		2		2,345		2,347		-		2,347
Manufactured homes	234		95		-		329		24,817		25,146		-		25,146
Government	-		-		-		-		14,628		14,628		-		14,628
Total	$	14,724	$	4,331	$	145	$	19,200	$	1,449,717	$	1,468,917	$	13,526	$	1,482,443

December 31, 2024
Residential real estate	$	4,423	$	1,184	$	-	$	5,607	$	457,021	$	462,628	$	4,665	$	467,293
Home equity	1,002		123		-		1,125		48,150		49,275		483		49,758
Commercial real estate	4,556		571		-		5,127		545,267		550,394		1,280		551,674
Construction and land development	2,039		-		-		2,039		80,177		82,216		658		82,874
Multifamily	1,961		359		-		2,320		206,773		209,093		3,362		212,455
Commercial business	493		508		-		1,001		99,955		100,956		3,290		104,246
Consumer	5		-		-		5		546		551		-		551
Manufactured homes	428		54		-		482		26,226		26,708		-		26,708
Government	-		-		-		-		11,024		11,024		-		11,024
Total	$	14,907	$	2,799	$	-	$	17,706	$	1,475,139	$	1,492,845	$	13,738	$	1,506,583

The following table shows the amortized cost of loans, segregated by portfolio segment, credit quality rating and year of origination as of June 30, 2025, and December 31, 2024, and gross charge-offs for the six months ended June 30, 2025, and for the year ended December 31, 2024.


June 30, 2025	2025		2024		2023		2022		2021		Prior		Revolving		Revolving Converted to Term		Total
Total Loans Receivable	$	64,475	$	124,957	$	132,229	$	278,903	$	278,031	$	493,164	$	109,206	$	1,478	$	1,482,443
Total current period gross charge-off	$	( 21 )	$	-	$	-	$	-	$	-	$	( 107 )	$	-	$	-	$	( 128 )

Residential real estate
Pass (1-6)	$	6,569	$	15,780	$	29,417	$	85,492	$	96,842	$	208,120	$	4,020	$	-	$	446,240

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Special Mention (7)	-		-		200		1,173		1,195		2,721		-		-		5,289
Substandard (8)	-		-		875		1,498		586		2,760		-		-		5,719
Total	$	6,569	$	15,780	$	30,492	$	88,163	$	98,623	$	213,601	$	4,020	$	-	$	457,248
Current period gross charge-off	-		-		-		-		-		-		-		-		-

Home equity
Pass (1-6)	$	455	$	125	$	45	$	98	$	52	$	2,680	$	45,199	$	891	$	49,545
Special Mention (7)	-		-		8		-		20		76		275		199		578
Substandard (8)	-		26		-		124		-		228		223		388		989
Total	$	455	$	151	$	53	$	222	$	72	$	2,984	$	45,697	$	1,478	$	51,112
Current period gross charge-off	-		-		-		-		-		-		-		-		-

Commercial real estate
Pass (1-6)	$	31,473	$	53,648	$	62,290	$	115,973	$	87,245	$	184,384	$	3,444	$	-	$	538,457
Special Mention (7)	-		923		827		1,958		2,345		5,375		25		-		11,453
Substandard (8)	-		-		-		830		-		351		-		-		1,181
Total	$	31,473	$	54,571	$	63,117	$	118,761	$	89,590	$	190,110	$	3,469	$	-	$	551,091
Current period gross charge-off	-		-		-		-		-		-		-		-		-

Construction and land development
Pass (1-6)	$	9,721	$	31,082	$	20,411	$	3,218	$	1,444	$	1,021	$	4,989	$	-	$	71,886
Special Mention (7)	-		-		458		-		122		-		-		-		580
Substandard (8)	-		-		1,011		67		1,251		-		-		-		2,329
Total	$	9,721	$	31,082	$	21,880	$	3,285	$	2,817	$	1,021	$	4,989	$	-	$	74,795
Current period gross charge-off	-		-		-		-		-		-		-		-		-

Multifamily
Pass (1-6)	$	4,191	$	6,343	$	8,332	$	55,381	$	68,889	$	52,332	$	466	$	-	$	195,934
Special Mention (7)	-		-		-		763		378		1,204		-		-		2,345
Substandard (8)	-		-		214		430		-		1,517		-		-		2,161
Total	$	4,191	$	6,343	$	8,546	$	56,574	$	69,267	$	55,053	$	466	$	-	$	200,440
Current period gross charge-off	-		-		-		-		-		( 46 )		-		-		( 46 )

Commercial business
Pass (1-6)	$	4,606	$	13,421	$	6,953	$	8,655	$	5,346	$	13,145	$	49,545	$	-	$	101,671
Special Mention (7)	-		87		75		-		31		-		928		-		1,121
Substandard (8)	-		-		1,004		191		147		1,410		92		-		2,844
Total	$	4,606	$	13,508	$	8,032	$	8,846	$	5,524	$	14,555	$	50,565	$	-	$	105,636
Current period gross charge-off	-		-		-		-		-		( 61 )		-		-		( 61 )

Consumer
Pass (1-6)	$	2,110	$	72	$	109	$	25	$	29	$	-	$	-	$	-	$	2,345

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Substandard (8)	-		-		-		-		2		-		-		-		2
Total	$	2,110	$	72	$	109	$	25	$	31	$	-	$	-	$	-	$	2,347
Current period gross charge-off	( 21 )		-		-		-		-		-		-		-		( 21 )

Manufactured homes
Pass (1-6)	$	-	$	-	$	-	$	1,782	$	10,879	$	12,390	$	-	$	-	$	25,051
Substandard (8)	-		-		-		-		61		34		-		-		95
Total	$	-	$	-	$	-	$	1,782	$	10,940	$	12,424	$	-	$	-	$	25,146
Current period gross charge-off	-		-		-		-		-		-		-		-		-

Government
Pass (1-6)	$	5,350	$	3,450	$	-	$	1,245	$	1,166	$	3,417	$	-	$	-	$	14,628
Total	$	5,350	$	3,450	$	-	$	1,245	$	1,166	$	3,417	$	-	$	-	$	14,628
Current period gross charge-off	-		-		-		-		-		-		-		-		-


December 31, 2024	2024		2023		2022		2021		2020		Prior		Revolving		Revolving Converted to Term		Total
Total Loans Receivable	$	124,670	$	143,098	$	291,855	$	308,352	$	211,268	$	324,738	$	102,602	$	-	$	1,506,583
Total current period gross charge-off	$	( 64 )	$	-	$	( 1,010 )	$	( 125 )	$	( 2 )	$	( 1,267 )	$	-	$	-	( 2,468 )

Residential real estate
Pass (1-6)	$	13,118	$	30,947	$	90,324	$	99,390	$	102,552	$	119,449	$	2,468	$	-	$	458,248
Special Mention (7)	-		371		365		1,064		554		1,937		-		-		4,291
Substandard (8)	-		539		1,161		601		510		1,943		-		-		4,754
Total	$	13,118	$	31,857	$	91,850	$	101,055	$	103,616	$	123,329	$	2,468	$	-	$	467,293
Current period gross charge-off	-		-		-		-		-		( 28 )		-		-		( 28 )

Home equity
Pass (1-6)	$	193	$	68	$	153	$	110	$	-	$	3,342	$	44,943	$	-	$	48,809
Special Mention (7)	-		132		-		-		3		15		309		-		459
Substandard (8)	26		-		138		-		-		218		108		-		490
Total	$	219	$	200	$	291	$	110	$	3	$	3,575	$	45,360	$	-	$	49,758
Current period gross charge-off	-		-		-		-		-		-		-		-		-

Commercial real estate
Pass (1-6)	$	49,861	$	67,290	$	123,342	$	96,206	$	53,864	$	148,529	$	2,976	$	-	$	542,068
Special Mention (7)	974		-		1,036		2,375		668		2,930		25		-		8,008
Substandard (8)	-		-		-		-		202		1,396		-		-		1,598
Total	$	50,835	$	67,290	$	124,378	$	98,581	$	54,734	$	152,855	$	3,001	$	-	$	551,674
Current period gross charge-off	-		-		-		-		-		-		-		-		-

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Construction and land development
Pass (1-6)	$	34,599	$	24,360	$	3,732	$	7,867	$	224	$	820	$	5,312			$	76,914
Special Mention (7)	-		-		-		1,207		2,468		-		-		-		3,675
Substandard (8)	-		1,018		-		1,267		-		-		-		-		2,285
Total	$	34,599	$	25,378	$	3,732	$	10,341	$	2,692	$	820	$	5,312			$	82,874
Current period gross charge-off	-		-		-		-		-		-		-		-		-

Multifamily
Pass (1-6)	$	6,398	$	8,923	$	56,771	$	74,716	$	36,075	$	20,066	$	627	$	-	$	203,576
Special Mention (7)	-		-		780		3,332		1,217		-		-		-		5,329
Substandard (8)	-		-		446		1,219		1,516		369		-		-		3,550
Total	$	6,398	$	8,923	$	57,997	$	79,267	$	38,808	$	20,435	$	627	$	-	$	212,455
Current period gross charge-off	-		-		-		( 125 )		-		-		-		-		( 125 )

Commercial business
Pass (1-6)	$	14,655	$	8,123	$	9,441	$	6,094	$	3,653	$	11,416	$	44,046	$	-	$	97,428
Special Mention (7)	-		25		978		39		-		800		1,686		-		3,528
Substandard (8)	-		1,139		80		171		177		1,621		102		-		3,290
Total	$	14,655	$	9,287	$	10,499	$	6,304	$	3,830	$	13,837	$	45,834	$	-	$	104,246
Current period gross charge-off	-		-		( 1,010 )		-		-		( 1,239 )		-		-		( 2,249 )

Consumer
Pass (1-6)	$	301	$	163	$	34	$	51	$	-	$	2	$	-	$	-	$	551
Substandard (8)	-		-		-		-		-		-		-		-		-
Total	$	301	$	163	$	34	$	51	$	-	$	2	$	-	$	-	$	551
Current period gross charge-off	( 64 )		-		-		-		( 2 )		-		-		-		( 66 )

Manufactured homes
Pass (1-6)	$	-	$	-	$	1,634	$	11,360	$	7,559	$	6,101	$	-	$	-	$	26,654
Substandard (8)	-		-		-		28		26		-		-		-		54
Total	$	-	$	-	$	1,634	$	11,388	$	7,585	$	6,101	$	-	$	-	$	26,708
Current period gross charge-off	-		-		-		-		-		-		-		-		-

Government
Pass (1-6)	$	4,545	$	-	$	1,440	$	1,255	$	-	$	3,784	$	-	$	-	$	11,024
Total	$	4,545	$	-	$	1,440	$	1,255	$	-	$	3,784	$	-	$	-	$	11,024
Current period gross charge-off	-		-		-		-		-		-		-		-		-

The Company has established a standard loan grading system to assist management, lenders and review personnel in their analysis and supervision of the loan portfolio. The use and application of these grades by the Company is uniform and conforms to regulatory definitions. The loan grading system is as follows:

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1 – Superior Quality

Loans in this category are substantially risk free. Loans fully collateralized by a Bank certificate of deposit or Bank deposits with a hold are substantially risk free.

2 – Excellent Quality

The borrower generates excellent and consistent cash flow for debt coverage, excellent average credit scores, excellent liquidity and net worth and are reputable operators with over 15 years' experience. Current and debt to tangible net worth ratios are excellent. Loan to value is substantially below policy and collateral condition is excellent.

3 – Great Quality

The borrower generates more than sufficient cash flow to fund debt service and cash flow is improving. Average credit scores are very strong. Operators are reputable with significant years of experience. Liquidity, net worth, current and debt to tangible net worth ratios are very strong. Loan to value is significantly below policy and collateral condition is significantly above average.

4 – Above Average Quality

The borrower generates more than sufficient cash flow to fund debt service, but cash flow trends may be stable or slightly declining. Average credit scores are strong. The borrower is a reputable operator with many years of experience. Liquidity, net worth, current and debt to tangible net worth ratios are strong. Loan to value is below policy and collateral condition is above average.

5 – Average Quality

Borrowers are considered creditworthy and can repay the debt in the normal course of business, however, cash flow trends may be inconsistent or fluctuating. Average credit scores are satisfactory, and years of experience is acceptable. Liquidity and net worth are satisfactory. Current and debt to tangible net worth ratios are average. Loan to value is slightly below policy and the collateral condition is slightly above average.

6 – Pass

Borrowers are considered creditworthy, but financial condition may show signs of weakness due to internal or external factors. Cash flow trends may be declining annually. Average credit scores may be low but remain acceptable. The borrower has limited years of experience. Liquidity, net worth, current and debt to tangible net worth ratios are below average. Loan to value is nearing policy limits and collateral condition is average.

7 – Special Mention

A special mention asset has identified weaknesses that deserve Management’s close attention. If left uncorrected, these weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date. Special mention assets are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. There is still adequate protection by the current sound worth and paying capacity of the obligor or of the collateral pledged. The Special Mention rating is viewed as transitional and will be monitored closely.

Loans in this category may exhibit some of the following risk factors. Cash flow trends may be consistently declining or may be questionable. Debt coverage ratios may be at or near 1:1. Average credit scores may be very weak, or the borrower may have minimal years of experience. Liquidity, net worth, current and debt to tangible net worth ratios may be very weak. Loan to value may be at policy limits or may exceed policy limits. Collateral condition may be below average.

8 – Substandard

This classification consists of loans which are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged. Financial statements normally reveal some or all of the following: poor trends, lack of earnings and cash flow, excessive debt, lack of liquidity, and the absence of creditor protection. Loans are still considered collectible, but due to increased risks and defined weaknesses of the credit, some loss could be incurred in collection if the deficiencies are not corrected.

9 – Doubtful

Such loans have been placed on non-accrual status and may be heavily dependent upon collateral possessing a value that is difficult to determine or based upon some near-term event which lacks clear certainty. These loans have all of the weaknesses of those classified as Substandard; however, based on existing conditions, these weaknesses make full collection of the principal balance highly improbable.

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10 – Loss

Loans that are considered uncollectible and of such little value that continuing to carry them as assets is not warranted.

Loans with risk classifications of pass and special mention were part of the pooled loan ACL analysis. Loans classified as substandard or worse were individually evaluated for impairment and specific reserves were established, if applicable. Risk gradings for loans with balances greater than $ 1 million are updated every 12 months through analysis during origination, renewals, modifications, or regular annual review. Risk gradings for loans with balances less than $ 1 million are updated primarily through analysis during origination, renewals, modifications, or periodic review. Risk gradings are also downgraded due to delinquency at month end. In particular, 60 days past due are downgraded to Special Mention, while 90 days past due are further downgraded to Substandard.

Modifications to Borrowers Experiencing Financial Difficulty

The allowance of credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination. The starting point to estimate such credit losses is historical loss information. The Company uses a probability of default/loss given default model to determine the allowance for credit losses recorded at origination. Occasionally, the Company subsequently modifies loans to borrowers experiencing financial difficulty by providing the following terms of relief: principal forgiveness, term extension, payment delay, or interest rate reduction. In some cases, the Bank provides multiple types of modifications on one loan. Because the effect of most modifications to borrowers experiencing financial difficulty is already included in the allowance for credit losses, no change to the allowance for credit losses is generally recorded for these modifications.

The following table shows the amortized cost basis of loans at June 30, 2025, that were both experiencing financial difficulty and modified during the three and six months ended June 30, 2025, 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 financing receivable is also presented below.


	For the three months ended June 30, 2025
(Dollars in thousands)	Payment Delay		Term Extension		Interest Rate Reduction		Combination Term Extension and Interest Rate Reduction		% of Total Segment Financing Receivables
Commercial business	$	1,851	$	-	$	-	$	-	1.75	%
Total	$	1,851	$	-	$	-	$	-	0.12	%


	For the three months ended June 30, 2024
(Dollars in thousands)	Payment Delay		Term Extension		Interest Rate Reduction		Combination Term Extension and Interest Rate Reduction		% of Total Segment Financing Receivables
Residential real estate	$	132	$	241	$	-	$	-	0.08	%
Total	$	132	$	241	$	-	$	-	0.02	%

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	For the six months ended June 30, 2025
(Dollars in thousands)	Payment Delay		Term Extension		Interest Rate Reduction		Combination Term Extension and Interest Rate Reduction		% of Total Segment Financing Receivables
Residential real estate	$	-	$	168	$	-	$	-	0.04	%

Commercial business	$	1,851	$	-	$	-	$	-	1.75	%
Total	$	1,851	$	168	$	-	$	-	0.14	%


	For the six months ended June 30, 2024
(Dollars in thousands)	Payment Delay		Term Extension		Interest Rate Reduction		Combination Term Extension and Interest Rate Reduction		% of Total Segment Financing Receivables
Residential real estate	$	132	$	1,491	$	-	$	-	0.34	%
Total	$	132	$	1,491	$	-	$	-	0.11	%

The financial effects of payment delay modifications and term extension modifications had a forbearance average of five months and six months weighted average extension to life of loan, respectively. There were no commitments to lend additional amounts to the borrowers included in the previous tables.

The borrowers with term extension have had their maturity dates extended and as a result their monthly payments were reduced or had payments added to the end of the loan which resulted in payment relief.


	For the three months ended June 30, 2025
(Dollars in thousands)	Principal Forgiveness		Weighted average interest rate reduction		Weighted average term extension (months)	Payment delay (months)

Commercial business	$	-	—	%	-	5


	For the three months ended June 30, 2024
(Dollars in thousands)	Principal Forgiveness		Weighted average interest rate reduction		Weighted average term extension (months)	Payment delay (months)
Residential real estate	$	-	—	%	4	3


	For the six months ended June 30, 2025
(Dollars in thousands)	Principal Forgiveness		Weighted average interest rate reduction		Weighted average term extension (months)	Payment delay (months)
Residential real estate	$	-	—	%	6	-
Commercial business	$	-	—	%	-	5

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	For the six months ended June 30, 2024
(Dollars in thousands)	Principal Forgiveness		Weighted average interest rate reduction		Weighted average term extension (months)	Payment delay (months)
Residential real estate	$	-	—	%	4	3

The Company closely monitors the performance of loans that have been modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following tables present the performance of such loans in the twelve months following modification.


	June 30, 2025
(Dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due
Residential real estate	$	197	$	53	$	461	$	316
Home equity	33		-		-		-
Commercial business	4		-		-		1,847
Total	$	234	$	53	$	461	$	2,163


	June 30, 2024
(Dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due
Residential real estate	$	774	$	194	$	121	$	132
Total	$	774	$	194	$	121	$	132

Upon the Company’s determination that a modified loan has subsequently been deemed uncollectible, the loan 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. All modified loans are deemed collectible.

Foreclosures

As part of the normal course of business, the Company had $ 181 thousand in loans involved in the foreclosure process at June 30, 2025 compared to $ 700 thousand at December 31, 2024. The Company had no other real estate owned as of June 30, 2025 and December 31, 2024.

Acquired Loan Purchase Discounts

As part of the fair value of loans receivable, there was a net fair value discount for loans acquired of $ 3.9 million at June 30, 2025, compared to $ 4.4 million at December 31, 2024.

Accretable yield, or income recorded for the six months ended June 30, is as follows:


(Dollars in thousands)	Total
2024	$	431
2025	439

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Accretable yield, or income expected to be recorded in the future is as follows:


(Dollars in thousands)	Total
Remainder of 2025	$	296
2026	451
2027	300
2028	281
2029	247
2030 and thereafter	2,315
Total	$	3,890

Allowance for Credit Losses

The allowance for credit losses is established for current expected credit losses on the Company’s loan portfolio utilizing guidance in Accounting Standards Codification (ASC) Topic 326.

The determination of the allowance requires significant judgment to estimate credit losses measured on a collective pool basis when similar risk characteristics exist, and for loans evaluated individually. In determining the allowance, the Company estimates expected future losses for the loan’s entire contractual term adjusted for expected payments when appropriate. The allowance estimate considers relevant available information, from internal and external sources relating to the historical loss experience, current conditions, and reasonable and supportable forecasts for the Company’s outstanding loan balances. The allowance is an estimation that reflects management’s evaluation of expected losses related to the Company’s financial assets measured at amortized cost. To ensure that the allowance is maintained at an adequate level, a detailed analysis is performed on a quarterly basis and an appropriate provision is made to adjust the allowance.

The Company categorizes the loan portfolio into nine segments based on similar risk characteristics. Loans within each segment are collectively evaluated using the probability of default (“PD”)/loss given default (“LGD”) methodology (PD/LGD). In creating the “current expected credit loss (CECL)” model as required under ASC 326, the Company has established a two-year reasonable and supportable forecast period with a two-year straight line reversion to the long-term historical average. Due to its minimal loss history, the Company elected to use peer data for a more reasonable calculation. The following tables show the changes in the allowance for credit losses, segregated by portfolio segment, for the three and six months ended June 30, 2025, and 2024.

The Company's activity in the allowance for credit losses, by loan segment, is summarized below for the three months ended June 30, 2025:


(Dollars in thousands)	Beginning Balance		Charge-offs		Recoveries		Provisions		Ending Balance
Allowance for credit losses:
Residential real estate	$	2,442	$	-	$	19	$	294	$	2,755
Home equity	622		-		-		116		738
Commercial real estate	9,657		-		-		( 507 )		9,150
Construction and land development	1,644		-		-		( 149 )		1,495
Multifamily	2,192		-		-		109		2,301
Commercial business	1,234		-		404		( 35 )		1,603
Consumer	3		( 10 )		1		8		2
Manufactured homes	129		-		-		( 4 )		125
Government	32		-		-		( 17 )		15
Total	$	17,955	$	( 10 )	$	424	$	( 185 )	$	18,184

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The Company's activity in the allowance for credit losses, by loan segment, is summarized below for the three months ended June 30, 2024:


(Dollars in thousands)	Beginning Balance		Charge-offs		Recoveries		Provisions		Ending Balance
Allowance for credit losses:
Residential real estate	$	4,017	$	-	$	10	$	270	$	4,297
Home equity	737		-		-		( 10 )		727
Commercial real estate	7,256		-		2		( 355 )		6,903
Construction and land development	3,456		-		-		( 389 )		3,067
Multifamily	957		( 65 )		31		( 44 )		879
Commercial business	2,135		-		7		63		2,205
Consumer	6		( 26 )		5		20		5
Manufactured homes	173		-		-		( 16 )		157
Government	68		-		-		22		90
Total	$	18,805	$	( 91 )	$	55	$	( 439 )	$	18,330

The Company's activity in the allowance for credit losses, by loan segment, is summarized below for the six months ended June 30, 2025:


(Dollars in thousands)	Beginning Balance		Charge-offs		Recoveries		Provisions		Ending Balance

Allowance for credit losses:
Residential real estate	$	4,481	$	-	$	35	$	( 1,761 )	$	2,755
Home equity	835		-		-		( 97 )		738
Commercial real estate	6,444		-		4		2,702		9,150
Construction and land development	2,651		-		-		( 1,156 )		1,495
Multifamily	1,003		( 46 )		10		1,334		2,301
Commercial business	1,185		( 61 )		460		19		1,603
Consumer	5		( 21 )		1		17		2
Manufactured homes	252		-		-		( 127 )		125
Government	55		-		-		( 40 )		15
Total	$	16,911	$	( 128 )	$	510	$	891	$	18,184

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The Company's activity in the allowance for credit losses, by loan segment, is summarized below for the six months ended June 30, 2024:


(Dollars in thousands)	Beginning Balance		Charge-offs		Recoveries		Provisions		Ending Balance

Allowance for credit losses:
Residential real estate	$	3,984	$	-	$	20	$	293	$	4,297
Home equity	698		-		-		29		727
Commercial real estate	7,045		-		2		( 144 )		6,903
Construction and land development	4,206		-		-		( 1,139 )		3,067
Multifamily	933		( 65 )		31		( 20 )		879
Commercial business	1,649		-		9		548		2,206
Consumer	7		( 44 )		6		36		5
Manufactured homes	181		-		-		( 24 )		157
Government	65		-		-		25		90
Total	$	18,768	$	( 109 )	$	68	$	( 396 )	$	18,331

A collateral dependent financial loan relies solely on the operation or sale of the collateral for repayment. In evaluating the overall risk associated with the loan, the Company considers character, overall financial condition and resources, and payment record of the borrower; the prospects for support from any financially responsible guarantors; and the nature and degree of protection provided by the cash flow and value of any underlying collateral. However, as other sources of repayment become inadequate over time, the significance of the collateral's value increases and the loan may become collateral-dependent.

The table below presents the amortized cost basis and allowance for credit losses (“ACL”) allocated for collateral dependent loans in accordance with ASC 326, which are individually evaluated to determine expected credit losses.


(Dollars in thousands)	June 30, 2025

	Real Estate		Equipment/Inventory		Accounts Receivable		Vehicles		Total		ACL Allocation
Residential real estate	$	2,709	$	-	$	-	$	-	$	2,709	$	28
Home equity	192		-		-		-		192		-
Commercial real estate	1,181		-		-		-		1,181		62

Construction and land development	2,329		-		-		-		2,329		-
Multifamily	2,161		-		-		-		2,161		-
Commercial business	-		1,489		1,238		117		2,844		480

Total	$	8,572	$	1,489	$	1,238	$	117	$	11,416	$	570

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(Dollars in thousands)	December 31, 2024

	Real Estate		Equipment/Inventory		Accounts Receivable		Vehicles		Total		ACL Allocation
Residential real estate	$	3,012	$	-	$	-	$	-	$	3,012	$	50

Home equity	-
Commercial real estate	1,598		-		-		-		1,598		43
Construction and land development	2,285		-		-		-		2,285		-
Multifamily	3,550		-		-		-		3,550		-
Commercial business	1		1		1		-		4		-
Total	$	11,376	$	1,399	$	1,428	$	144	$	14,347	$	284

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 $ 3.0 million and $ 2.9 million as of June 30, 2025, and December 31, 2024, respectively, and is included in net deferred loan origination cost.

The following table presents non–accrual loans and loans past due over 90 days still on accrual by class of loans:


As of June 30, 2025	Nonaccrual with No Allowance for Credit Loss		Nonaccrual with Allowance for Credit Loss		Nonaccrual Loans in Total		Loans Past Due over 90 Days Still Accruing
Residential real estate	$	1,431	$	4,202	$	5,633	$	-
Home equity	157		826		983		145
Commercial real estate	987		192		1,179		-
Construction and land development	726		-		726		-
Multifamily	2,161		-		2,161		-
Commercial business	2,125		719		2,844		-



Total	$	7,587	$	5,939	$	13,526	$	145


As of December 31, 2024	Nonaccrual with No Allowance for Credit Loss		Nonaccrual with Allowance for Credit Loss		Nonaccrual Loans in Total		Loans Past Due over 90 Days Still Accruing
Residential real estate	$	1,514	$	3,150	$	4,664	$	-
Home equity	179		304		483		-
Commercial real estate	1,078		202		1,280		-
Construction and land development	659		-		659		-
Multifamily	3,362		-		3,362		-
Commercial business	3,099		191		3,290		-



Total	$	9,891	$	3,847	$	13,738	$	-

Accrued interest receivable on loans totaled $ 5.4 million on June 30, 2025, and $ 5.3 million on December 31, 2024, and is excluded from the estimate of credit losses. The Company made the accounting policy election to not measure an ACL for accrued interest receivable. Accrued interest deemed uncollectible will be written off through interest income.

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Liability for Credit Losses on Unfunded Loan Commitments

The liability for credit losses inherent in unfunded loan commitments is included in accrued expenses and other liabilities on the Condensed Consolidated Balance Sheet. The adequacy of the reserve for unfunded commitments is determined quarterly based on methodology similar to the methodology for determining the ACL. The following table shows the changes in the liability for credit losses on unfunded loan commitments.


(Dollars in thousands)	Three months ended, June 30, 2025		Three months ended, June 30, 2024
Balance, beginning of period	$	2,116	$	3,399

Provision for (benefit from) unfunded loan commitments	( 89 )		515
Balance, end of period	$	2,027	$	3,914


(Dollars in thousands)	Six months ended, June 30, 2025		Six months ended, June 30, 2024
Balance, beginning of period	$	2,739	$	3,441

Provision for (benefit from) unfunded loan commitments	( 712 )		473
Balance, end of period	$	2,027	$	3,914

Note 6 – Intangibles and Acquisition-Related Accounting


(Dollars in thousands)	2025		2024
Goodwill balance January 1,	$	22,395	$	22,395
Goodwill balance June 30,	$	22,395	$	22,395

Goodwill arising from business combinations represents the value attributable to unidentifiable intangible assets in the business acquired. The Company’s goodwill relates to the value inherent in the banking industry and that value is dependent upon the ability of the Company to provide quality, cost effective banking services in a competitive marketplace. Goodwill is tested periodically for impairment. If the implied fair value of goodwill is lower than its carrying amount, goodwill impairment is indicated, and goodwill is written down to its implied fair value. There has not been any impairment of goodwill identified or recorded.

In addition to goodwill, a core deposit intangible was established from previous acquisitions. The Company had core deposit intangible balances of $ 1.4 million and $ 1.9 million as of June 30, 2025, and December 31, 2024, respectively. The table below summarizes the intangibles amortization:

The amortization recorded for the quarter ended June 30, is as follows:


(Dollars in thousands)	Total
2024	$	356
2025	$	221

The amortization recorded for the six months ended June 30, is as follows:


(Dollars in thousands)	Total
2024	$	717
2025	$	446

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Amortization to be recorded in future periods, is as follows:


(Dollars in thousands)	Total
Remainder of 2025	$	242
2026	360
2027	294
2028	228
2029	162
Thereafter	128
Total	$	1,414

Note 7 – Deposits

The Company’s end-of-period deposit portfolio balances were as follows:


(Dollars in thousands)	June 30, 2025		December 31, 2024
Checking	$	593,471	$	591,487
Savings	266,070		275,121
Money market	352,616		333,705
Certificates of deposit	542,693		560,253
Total deposits	$	1,754,850	$	1,760,566

The aggregate amount of retail and brokered certificates of deposit with a balance of $250 thousand or more was approximately $ 134.3 million at June 30, 2025 and $ 141.4 million at December 31, 2024.

At June 30, 2025, selected maturities of retail and brokered certificate of deposits were as follows:


	(Dollars in thousands)
2025	$	418,263
2026	118,422
2027	4,931
2028	875
2029 and thereafter	202
Total	$	542,693

Note 8 - Concentrations of Credit Risk

The Company grants residential, commercial real estate, commercial business, and installment loans to customers primarily in Lake County in northwest Indiana and Cook County in northeast Illinois. The Company is also an active lender in Porter County, and to a lesser extent, LaPorte, Newton and Jasper counties in Indiana; and DuPage, Lake, and Will counties in Illinois. Substantially all loans are secured by specific items of collateral including residences, commercial real estate, land development, business assets and consumer assets.

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Note 9 - Earnings per Share

Earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding. A reconciliation of the numerators and denominators of the basic and diluted earnings per common share computations for the three and six months ended June 30, 2025 and 2024, are as follows:


	Three months ended June 30,				Six months ended June 30,
(dollars in thousands except per share data)	2025		2024		2025		2024
Basic earnings per common share:
Net income as reported	$	2,151	$	143	$	2,606	$	9,423
Weighted average common shares outstanding—basic	4,271,952		4,259,695		4,269,478		4,258,181
Basic earnings per common share	$	0.50	$	0.03	$	0.61	$	2.21

Diluted earnings per common share:
Net income as reported	$	2,151	$	143	$	2,606	$	9,423
Weighted average common shares outstanding	4,271,952		4,259,695		4,269,478		4,258,181
Add: Dilutive effect of unvested restricted stock awards	24,466		11,357		19,238		8,234
Weighted average common shares outstanding—diluted	4,296,418		4,271,052		4,288,716		4,266,415
Diluted earnings per common share	$	0.50	$	0.03	$	0.61	$	2.21

Note 10 - Stock Based Compensation

The Company replaced its expired 2015 Stock Option and Incentive Plan with a new equity incentive plan named the Finward Bancorp 2025 Omnibus Equity Incentive Plan (the “Plan”), which was adopted by the Company’s Board of Directors on March 21, 2025, and approved by the Company’s shareholders on May 22, 2025. The maximum number of shares of common stock cumulatively available for issuance under the 2025 Omnibus Plan is 265,174 shares. Awards granted under the Plan may be in the form of incentive stock options, non-qualified stock options, restricted stock, unrestricted stock, restricted stock units, performance shares, stock appreciation rights, or any combination thereof, as provided in the Plan. Unvested awards granted under the prior plan will continue to be governed by the terms of the award agreements entered into with the participants under the prior plan. Shares of common stock underlying awards granted under the prior plan that expire, terminate, or are canceled or forfeited under the terms of the prior plan will be available for issuance under the new plan.

As required by the Stock Compensation Topic, companies are required to record compensation cost for stock options and awards provided to employees in return for employment service. For the three months ended June 30, 2025, stock based compensation expense of $ 131 thousand was recorded, compared to $ 133 thousand for the three months ended June 30, 2024. For the six months ended June 30, 2025, stock based compensation expense of $ 229 thousand was recorded, compared to $ 306 thousand for the six months ended June 30, 2024. It is anticipated that current outstanding unvested awards will result in additional compensation expense of approximately $ 0.7 million with a weighted average life of 2.0 years.

Restricted stock awards are issued with an award price equal to the market price of the Company’s common stock on the award date and vest one year after the grant date for independent directors and three years after the grant date for employees. Forfeiture provisions exist for personnel that separate employment before the vesting period expires. A summary of restricted stock activity under the Company’s Plan described above for the six months ended June 30, 2025, follows:

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Non-vested Shares	Shares	Weighted Average Grant Date Fair Value
Non-vested at January 1, 2025	44,570	$	36.74
Granted	16,415	26.95
Vested	( 16,469 )	27.33
Forfeited	( 611 )	25.92
Non-vested at June 30, 2025	43,905	$	36.76

Note 11 – Derivative Financial Instruments

The Company uses derivative financial instruments to help manage exposure to interest rate risk and the effects that changes in interest rates may have on net income and the fair value of assets and liabilities. The Company has certain interest rate derivative positions that are not designated as hedging instruments. Derivative assets and liabilities are recorded at fair value on the Condensed Consolidated Balance Sheet and do not take into account the effects of master netting agreements. Master netting agreements allow the Company to settle all derivative contracts held with a single counterparty on a net basis, and to offset net derivative positions with related collateral, where applicable. These derivative positions relate to transactions in which the Company enters into an interest rate swap with a client while at the same time entering into an offsetting interest rate swap with another financial institution. In connection with each transaction, the Company agrees to pay interest to the client on a notional amount at a variable interest rate and receive interest from the client on the same notional amount at a fixed interest rate. At the same time, the Company agrees to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows the client to effectively convert a variable rate loan to a fixed rate. Because the terms of the swaps with the customers and the other financial institutions offset each other, with the only difference being counterparty credit risk, changes in the fair value of the underlying derivative contracts are not materially different and do not significantly impact the Company’s results of operations.

The Company enters into commitments to originate loans whereby the interest rate on the loan is determined prior to funding (i.e., interest rate lock commitment). The interest rate lock commitments are considered derivatives and are recorded on the accompanying condensed consolidated balance sheets at fair value in accordance with FASB ASC 815, Derivatives and Hedging.

The following table shows the amounts of non-hedging derivative financial instruments:


June 30, 2025
	Asset derivatives			Liability derivatives
(Dollars in thousands)	Statement of Financial Condition classification	Fair value		Statement of Financial Condition classification	Fair value
Interest rate swap contracts	Other assets	$	4,074	Other liabilities	$	4,074
Interest rate lock commitments	Other assets	66		N/A	-
Total		$	4,140		$	4,074

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December 31, 2024
	Asset derivatives			Liability derivatives
(Dollars in thousands)	Statement of Financial Condition classification	Fair value		Statement of Financial Condition classification	Fair value
Interest rate swap contracts	Other assets	$	5,486	Other liabilities	$	5,486
Interest rate lock commitments	Other assets	24		N/A	-
Total		$	5,510		$	5,486

The following table shows the amounts included in the Statements of Income for non-hedging derivative financial instruments:


		Three Months Ended June 30,
(Dollars in thousands)	Statement of Income Classification	2025		2024
Interest rate swap contracts	Fees and service charges	$	-	$	-
Interest rate lock commitments	Gain on sale of loans held-for-sale, net	19		( 6 )
Total		$	19	$	( 6 )


		Six Months Ended June 30,
(Dollars in thousands)	Statement of Income Classification	2025		2024
Interest rate swap contracts	Fees and service charges	$	( 30 )	$	( 30 )
Interest rate lock commitments	Gain on sale of loans held-for-sale, net	( 16 )		2
Total		$	( 46 )	$	( 28 )

The following table shows the offsetting of financial assets and derivative assets:


							Gross Amounts not Offset in the Statement of Financial Condition
(Dollars in thousands)	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Condition		Net Amounts of Assets Presented in the Statement of Financial Condition		Financial Instruments		Cash Collateral Received		Net Amount
June 30, 2025
Interest rate swap contracts	$	4,074	$	-	$	4,074	$	-	$	2,620	$	1,454
Interest rate lock commitments	66		-		66		-		-		66
Total	$	4,140	$	-	$	4,140	$	-	$	2,620	$	1,520

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							Gross Amounts not Offset in the Statement of Financial Condition
(Dollars in thousands)	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Condition		Net Amounts of Assets Presented in the Statement of Financial Condition		Financial Instruments		Cash Collateral Received		Net Amount
December 31, 2024
Interest rate swap contracts	$	5,486	$	-	$	5,486	$	-	$	5,120	$	366
Interest rate lock commitments	82		-		82		-		-		82
Total	$	5,568	$	-	$	5,568	$	-	$	5,120	$	448

The following table shows the offsetting of financial liabilities and derivative liabilities:


							Gross Amounts not Offset in the Statement of Financial Condition
(Dollars in thousands)	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Condition		Net Amounts of Assets Presented in the Statement of Financial Condition		Financial Instruments		Cash Collateral Pledged		Net Amount
June 30, 2025
Interest rate swap contracts	$	4,074	$	-	$	4,074	$	-	$	-	$	4,074


							Gross Amounts not Offset in the Statement of Financial Condition
(Dollars in thousands)	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Condition		Net Amounts of Assets Presented in the Statement of Financial Condition		Financial Instruments		Cash Collateral Pledged		Net Amount
December 31, 2024
Interest rate swap contracts	$	5,486	$	-	$	5,486	$	-	$	-	$	5,486

Note 12 - Fair Value

The Fair Value Measurements Topic establishes a hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Topic describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

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Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair values of securities available-for-sale are determined on a recurring basis by obtaining quoted prices on nationally recognized securities exchanges or pricing models utilizing significant observable inputs such as matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities. Different judgments and assumptions used in pricing could result in different estimates of value. In certain cases where market data is not readily available because of a lack of market activity or little public disclosure, values may be based on unobservable inputs and classified in Level 3 of the fair value hierarchy.

The Company evaluates AFS security impairment on a quarterly basis. This allows the Company to maintain the same amortized cost basis of the securities before and after adoption date. The Company has $ 173 thousand of previously recorded credit impairment on collateralized debt obligations. The Company believes this continues to represent the expected credit losses of the amortized cost basis, therefore, has established an ACL for AFS debt securities. The ACL is monitored quarterly and is measured by evaluating the present value of cash flows as compared to the amortized cost basis of the security. To the extent that there are improvements in credit related to these securities, the ACL will be reduced to account for the improvements. If any improvements in credit exceed the amount of previously reduced amortized cost bases, recoveries will be recorded through the income statement in the period received. The allowance for collateralized debt credit losses was at $ 173 thousand at June 30, 2025 and December 31, 2024.

The Company’s subordination for each collateralized debt obligation is calculated by taking the total performing collateral and subtracting the sum of the total collateral within the Company’s class and the total collateral within all senior classes, and then stating this result as a percentage of the total performing collateral. This measure is an indicator of the level of collateral that can default before potential cash flow disruptions may occur. In addition, management calculates subordination assuming future collateral defaults by utilizing the default/deferral assumptions in the Company’s impairment analysis. Subordination assuming future default/deferral assumptions is calculated by deducting future defaults from the current performing collateral. At June 30, 2025 and December 31, 2024, management reviewed the subordination levels for each security in context of the level of current collateral defaults and deferrals within each security; the potential for additional defaults and deferrals within each security; the length of time that the security has been in “payment in kind” status; and the Company’s class position within each security.

At June 30, 2025 and December 31, 2024, the collateralized debt obligations with a cost basis of $ 2.1 million and $ 2.2 million have been placed in “payment in kind” status. The Company’s securities that are classified as “payment in kind” are a result of not receiving the scheduled quarterly interest payments. For the securities in “payment in kind” status, management anticipates to receive the unpaid contractual interest payments from the issuer, because of the self- correcting cash flow waterfall provisions within the structure of the securities. When a tranche senior to the Company’s position fails the coverage test, the Company’s interest cash flows are paid to the senior tranche and recorded as a reduction of principal. The coverage test represents an over collateralization target by stating the balance of the performing collateral as a percentage of the balance of the Company’s tranche, plus the balance of all senior tranches. The principal reduction in the senior tranche continues until the appropriate coverage test is passed. As a result of the principal reduction in the senior tranche, more cash is available for future payments to the Company’s tranche. Management will not capitalize the “payment in kind” interest payments to the book value of the securities and will keep these securities in non-accrual status until the quarterly interest payments resume.

The fair value of the Company’s interest rate swap contracts, both assets and liabilities, are valued by a third- party pricing agent using an income approach and are classified within Level 2 of the valuation hierarchy.

The fair value of the Company’s interest rate lock commitments is based on the price of the underlying loans expected to be sold to an investor while taking into consideration the probability the rate lock commitments will close and are classified within Level 2 of the valuation hierarchy. The Company utilized a third-party pricing service for classifying and valuing the fair value of collateralized debt obligations held. These securities were categorized as unobservable Level 3 and priced using an Option-Adjusted Discounted Cash flow model to value these securities. The significant inputs to this model include yield, prepayment speed, default rate, and loss severity.

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

There were no transfers to or from Levels 1 and 2 during the six months ended June 30, 2025 and the year ended December 31, 2024. Changes in Level 3 assets relate to the result of change in estimated fair values, payments received, and sales of securities that have been classified as Level 3 during the six months ended June 30, 2025 and all of 2024. Assets measured at fair value on a recurring basis are summarized below:


			Fair Value Measurements at June 30, 2025 Using

(Dollars in thousands)	Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Interest rate swap contracts	$	4,074	$	-	$	4,074	$	-
Interest rate lock commitments	66		-		66		-
Available-for-sale debt securities:
U.S. government sponsored entities	8,307		-		8,307		-
Collateralized mortgage obligations and residential mortgage-backed securities	107,972		-		107,972		-
Municipal securities	209,950		-		209,950		-
Collateralized debt obligations	1,616		-		-		1,616
Total securities available-for-sale	$	327,845	$	-	$	326,229	$	1,616

Liabilities:
Interest rate swap contracts	$	4,074	$	-	$	4,074	$	-


			Fair Value Measurements at December 31, 2024 Using

(Dollars in thousands)	Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Interest rate swap contracts	$	5,486	$	-	$	5,486	$	-
Interest rate lock commitments	82		-		82		-
Available-for-sale debt securities:
U.S. government sponsored entities	8,061		-		8,061		-
Collateralized mortgage obligations and residential mortgage-backed securities	109,325		-		109,325		-
Municipal securities	214,749		-		214,749		-
Collateralized debt obligations	1,419		-		-		1,419
Total securities available-for-sale	$	333,554	$	-	$	332,135	$	1,419

Liabilities:
Interest rate swap contracts	$	5,486	$	-	$	5,486	$	-

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A reconciliation of available-for-sale securities, which require significant adjustment based on unobservable data, are presented in the following table:


	(Dollars in thousands)
	Estimated Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Available-for- sale securities
Beginning balance, January 1, 2025	$	1,419
Principal payments	( 7 )
Total unrealized gains, included in other comprehensive loss	204
Ending balance, June 30, 2025	$	1,616

Beginning balance, January 1, 2024	$	1,357
Principal payments	( 7 )
Total unrealized gains, included in other comprehensive income	21
Ending balance, June 30, 2024	$	1,371

Assets measured at fair value on a non-recurring basis are summarized below:

Fair Value Measurements at June 30, 2025 Using

(Dollars in thousands)

Estimated
Fair
Value

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Collateral dependent loans


			Fair Value Measurements at December 31, 2024 Using

(Dollars in thousands)	Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Collateral dependent loans	$	1,496	$	-	$	-	$	1,496

Significant (Level 3) Inputs

The following tables present quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements.

(Dollars in thousands)

Fair Value at
June 30, 2025

Valuation
Technique

Significant Unobservable Inputs

Range

Weighted-Average
Range

Collateral dependent loans

Fair Value of Collateral

Discount for type of property and current market conditions

0 % - 0 %

—

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(Dollars in thousands)

Fair Value at
December 31, 2024

Valuation
Technique

Significant Unobservable Inputs

Range

Weighted-Average
Range

Collateral dependent loans

1,496

Fair Value of Collateral

Discount for type of property and current market conditions

0 % - 80 %

The following table shows carrying values and related estimated fair values of financial instruments not carried at fair value in the condensed consolidated balance sheets as of the dates indicated. Estimated fair values are further categorized by the inputs used to measure fair value. Items that are not financial instruments are not included.


	June 30, 2025				Estimated Fair Value Measurements at June 30, 2025 Using
(Dollars in thousands)	Carrying Value		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	103,414	$	103,414	$	103,414	$	-	$	-
Loans held-for-sale	834		869		-		869		-
Loans receivable, net	1,466,094		1,422,648		-		-		1,422,648
Federal Home Loan Bank stock	6,547		6,547		-		6,547		-
Accrued interest receivable	7,651		7,651		-		7,651		-

Financial liabilities:
Non-interest bearing deposits	271,172		271,172		271,172		-		-
Interest bearing deposits	1,483,678		1,483,674		940,985		542,689		-
Repurchase agreements	48,331		48,230		40,495		7,735		-
Borrowed funds	65,000		64,105		-		64,105		-
Accrued interest payable	711		711		-		711		-

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	December 31, 2024				Estimated Fair Value Measurements at December 31, 2024 Using
(Dollars in thousands)	Carrying Value		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	70,584	$	70,584	$	70,584	$	-	$	-
Loans held-for-sale	1,253		1,277		-		1,277		-
Loans receivable, net	1,492,065		1,435,148		-		-		1,435,148
Federal Home Loan Bank stock	6,547		6,547		-		6,547		-
Accrued interest receivable	7,721		7,721		-		7,721		-

Financial liabilities:
Non-interest bearing deposits	263,324		263,324		263,324		-		-
Interest bearing deposits	1,497,242		1,496,638		936,989		559,649		-
Repurchase agreements	40,116		39,960		32,364		7,596		-
Borrowed funds	65,000		63,432		-		63,432		-
Accrued interest payable	620		620		-		620		-

The following methods were used to estimate the fair value of financial instruments presented in the preceding table at June 30, 2025 and December 31, 2024:

Cash and cash equivalent carrying amounts approximate fair value. The fair values of securities available-for-sale are obtained from broker pricing (Level 2), with the exception of collateralized debt obligations, which are valued by a third-party specialist (Level 3). Loans held-for-sale comprise residential mortgages and are priced based on values established by the secondary mortgage markets (Level 2). The estimated fair value for net loans receivable is based on the exit price notion which is the exchange price that would be received to transfer the loans at the most advantageous market price in an orderly transaction between market participants on the measurement date (Level 3). Federal Home Loan Bank stock is estimated at book value due to restrictions that limit the sale or transfer of the security. Interest rate swap agreements, both assets and liabilities, are valued by a third-party pricing agent using an income approach (Level 2). Fair values of accrued interest receivable and payable approximate book value, as the carrying values are determined using the observable interest rate, balance, and last payment date.

Non-interest and interest bearing deposits, which include checking, savings, and money market deposits, are estimated to have fair values based on the amount payable as of the reporting date (Level 1). The fair value of fixed-maturity certificates of deposit (included in interest bearing deposits) are based on estimates of the rate the Company would pay on similar deposits, applied for the time period until maturity (Level 2). Estimated fair values for short-term repurchase agreements, which represent sweeps from demand deposits to accounts secured by pledged securities, are estimated based on the amount payable as of the reporting date (Level 1). Longer-term repurchase agreements, with contractual maturity dates of quarter or more, are based on estimates of the rate the Company would pay on similar deposits, applied for the time period until maturity (Level 2). Short-term borrowings are generally only held overnight, therefore, their carrying amount is a reasonable estimate of fair value (Level 1). The fair value of FHLB Advances are estimated by discounting the future cash flows using quoted rates from the FHLB for similar advances with similar maturities (Level 2). The estimated fair value of other financial instruments, and off-balance sheet loan commitments, approximate cost and are not considered significant to this presentation.

Note 13 - Borrowings

At June 30, 2025, and December 31, 2024, borrowed funds are summarized below:

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	(Dollars in thousands)
	June 30, 2025		December 31, 2024

FHLB Fixed rate advance with outstanding rate of 4.85 %, maturing May 16, 2025	$	-	$	10,000
FHLB Fixed rate advance with outstanding rate of 4.77 %, maturing May 19, 2025	-		10,000
FHLB Fixed rate advance with outstanding rate of 4.49 %, maturing July 3, 2025	10,000		-
FHLB Fixed rate advance with outstanding rate of 3.63 %, maturing March 7, 2028 (1)	10,000		-
FHLB Fixed rate advance with outstanding rate of 3.46 %, maturing June 26, 2028 (1)	10,000		-
FHLB Fixed rate advance with outstanding rate of 3.38 %, maturing August 7, 2028 (1)	-		10,000
FHLB Fixed rate advance with outstanding rate of 3.84 %, maturing February 28, 2029 (1)	15,000		15,000
FHLB Fixed rate advance with outstanding rate of 3.74 %, maturing February 28, 2029 (1)	10,000		10,000
FHLB Fixed rate advance with outstanding rate of 3.22 %, maturing August 7, 2029 (1)	-		10,000
FHLB Fixed rate advance with outstanding rate of 2.95 %, maturing April 29, 2030 (1)	10,000		-
Total	$	65,000	$	65,000

(1) FHLB retains putable option to call these advances after a period of time.

At June 30, 2025, scheduled maturities of borrowed funds were as follows:


	(Dollars in thousands)
2025	$	10,000
2026	-
2027	-
2028	20,000
2029	25,000
2030	10,000
Total	$	65,000

The Company has available liquidity of $ 932.0 million including borrowing capacity from the FHLB and Federal Reserve facilities and other sources. The Company also maintains a $ 25.0 million line of credit with the Federal Home Loan Bank of Indianapolis. The Company did not have a balance at June 30, 2025, or as of December 31, 2024. The Company did not have other borrowings at June 30, 2025, or as of December 31, 2024.

Note 14 - Leases

Under ASC 842, operating lease expense is generally recognized on a straight-line basis over the term of the lease. On February 22, 2024, the Bank closed its previously announced sale-leaseback transaction with MountainSeed Real Estate Services, LLC (the “Buyer”), pursuant to which the Bank sold to the Buyer five properties owned and operated as branch locations (the “Properties”) for an aggregate purchase price of $ 17.2 million, including customary closing adjustments. Under the Sale Agreement, the Bank also entered into triple net lease agreements (the “Lease Agreements”) with the Buyer under which the Bank leases each of the Properties, and pursuant to which the Bank is responsible for the insurance, real

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estate taxes, and maintenance and repairs for each of the properties. Each of the Lease Agreements became effective upon the closing of the sale-leaseback transaction and have an initial term of 15 years. The Bank’s obligations under the Lease Agreements are guaranteed by the Company.

As the rate implicit in the leases generally is not readily determinable for our operating leases, the discount rates used to determine the present value of our lease liability are based on our incremental borrowing rate at the lease commencement date and commensurate with the remaining lease term. Our incremental borrowing rate for a lease is the rate of interest we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Leases with an initial term of 12 months or less are not recorded on the balance sheet and are excluded from our weighted-average remaining lease term.

The following table summarizes supplemental cash flow and other information related to our operating leases:


(Dollars in thousands)	Six Months Ended June 30,
	2025			2024

Gain on sale-leaseback transaction, net	$	-		$	( 11,772 )

Operating cash flows
Cash paid for amounts included in the measurement of lease liabilities for leases	800			570

ROU assets obtained in the exchange for lease liabilities - operating leases (1)	-			16,140

Weighted-average remaining lease terms (in years) - operating leases	13			15

Weighted-average discount rate - operating leases	7.67		%	7.68		%

Variable lease payments	$	140		$	140

Operating lease costs	962			667

Total lease costs (2)	$	1,102		$	807

(1) Right of Use Asset included in Premises and equipment on the consolidated balance sheet

(2) Included in occupancy and equipment costs on the condensed consolidated statements of income

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The following table represents the maturity of the Company's operating lease liabilities as of June 30, 2025:


(Dollars in thousands)

Maturity Analysis
Remainder 2025	$	797
2026	1,622
2027	1,657
2028	1,692
2029	1,679
2030	1,688
Thereafter	15,110
Total	24,245
Less: Present value discount	( 9,471 )
Lease liability	$	14,774

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Summary

Finward Bancorp (the “Company”) is a financial holding company registered with the Board of Governors of the Federal Reserve System. Peoples Bank (“the Bank”), an Indiana commercial bank, is a wholly-owned subsidiary of the Company. The Company has no other business activity other than being a holding company for the Bank. The following management’s discussion and analysis presents information concerning our financial condition as of June 30, 2025 and December 31, 2024, and the results of operations for the three and six months ending June 30, 2025 and June 30, 2024. This discussion should be read in conjunction with the condensed consolidated financial statements and other financial data presented elsewhere herein and with the financial statements and other financial data, as well as the Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

At June 30, 2025, the Company had total assets of $2.1 billion, loans receivable, net of deferred fees and costs, of $1.5 billion and total deposits of $1.8 billion. Stockholders' equity totaled $154.3 million or 7.5% of total assets, with a book value per share of $35.67. Net income for the three months ended June 30, 2025, was $2.2 million, or $0.50 earnings per diluted common share. For the three months ended June 30, 2025, the return on average assets (ROA) was 0.42%, while the return on average stockholders’ equity (ROE) was 5.66%. Net income for the six months ended June 30, 2025, was $2.6 million, or $0.61 earnings per diluted common share. For the six months ended June 30, 2025, the ROA was 0.25%, while the ROE was 3.39%.

Recent Developments Regarding the Company and the Bank

On July 4, 2025, President Trump signed into law the legislation commonly referred to as the One Big Beautiful Bill Act (“OBBBA”), which is a sweeping federal reconciliation package that permanently extends and expands key provisions of the 2017 Tax Cuts and Jobs Act, introduces new tax benefits (including elevated standard deductions, higher state-and-local tax (SALT) caps, and no taxation on tips and overtime income for certain workers), and enacts broad reductions in government spending. The OBBBA is a complex revision to the U.S. federal income tax laws with potentially far-reaching consequences. The OBBBA will require subsequent rulemaking in a number of areas. The long-term impact of the OBBBA on the Company, the Bank, our shareholders, and the banking industry in general cannot be reliably predicted at this early stage of the new law’s implementation. Shareholders are urged to consult with their own tax advisors regarding the impact of the OBBBA to them and their acquisition, ownership, and disposition of the Company's common stock. The Company's management continues to evaluate the impact of the OBBBA on the Company, the Bank, and its business, financial condition, and results of operations.

Termination of Consent Order

On August 6, 2025, the FDIC and the Indiana Department of Financial Institutions ("DFI") terminated the Consent Order issued to the Bank that was effective on November 7, 2023 relating to the Bank's compliance with the Bank Secrecy Act and its implementing regulations (collectively, the "BSA"). The termination of the Consent Order follows the Bank's successful resolution of the deficiencies in the Bank's BSA compliance and anti-money laundering compliance program which was the subject of the Consent Order.

Memorandum of Understanding

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.

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.

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Financial Condition

General

During the six months ended June 30, 2025, total assets decreased by $2.8 million (0.14%), with interest-earning assets decreasing by $2.7 million (0.14%). At both June 30, 2025 and December 31, 2024, interest-earning assets totaled $1.9 billion. Earning assets represented 92.3% of total assets at both June 30, 2025 and December 31, 2024.

Loan Portfolio

Loans receivable, net of deferred fees and costs totaled $1.5 billion at both June 30, 2025 and December 31, 2024. The loan portfolio, which is the Company’s largest asset, is the primary source of both interest and fee income. The Company’s lending strategy emphasizes quality loan growth, product diversification, and competitive and profitable pricing.

The Company’s end-of-period loan balances were as follows:


	June 30, 2025				December 31, 2024
(Dollars in thousands)	Balance		% Loans		Balance		% Loans
Residential real estate	$	457,248	30.8	%	$	467,293	31.0	%
Home equity	51,112		3.4	%	49,758		3.3	%
Commercial real estate	551,091		37.2	%	551,674		36.6	%
Construction and land development	74,795		5.1	%	82,874		5.5	%
Multifamily	200,440		13.5	%	212,455		14.1	%
Commercial business	105,636		7.1	%	104,246		6.9	%
Consumer	2,347		0.2	%	551		—	%
Manufactured homes	25,146		1.7	%	26,708		1.8	%
Government	14,628		1.0	%	11,024		0.7	%
Loans receivable	1,482,443		100.0	%	1,506,583		100.0	%
Plus:
Net deferred loans origination costs	2,012				2,439
Loan clearing funds	(177)				(46)
Loans receivable, net of deferred fees and costs	$	1,484,278			$	1,508,976

Adjustable rate loans / loans receivable	$	721,921	48.7	%	$	793,920	52.7	%

Our total commercial real estate portfolio (which includes but is not limited to loans secured by office space, medical office space, and mixed-use retail/office space) totaled $551.1 million as of June 30, 2025, compared to $551.7 million as of December 31, 2024. Given prevailing market conditions such as continued elevated interest rate levels, reduced occupancy as a result of the increase in hybrid work arrangements, we are carefully monitoring these loans for signs of deterioration in credit quality.

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Commercial real estate loans remained our largest loan segment and accounted for 37.2% of the total loan portfolio at June 30, 2025 and 36.6% at December 31, 2024. A further breakdown of the composition of the commercial real estate loan portfolio as of June 30, 2025 and December 31, 2024 is shown in the table below:


Commercial Real Estate (CRE)	June 30, 2025					December 31, 2024
(Dollars in thousands)	# Loans	$ Amount		% of Total Gross Loans		# Loans	$ Amount		% of Total Gross Loans
CRE Owner Occupied (CRE OO)
Food services & drinking Places	66	$	33,165	2.2	%	65	$	30,481	2.0	%
Gasoline stations & fuel dealers	31	30,994		2.1	%	28	28,957		1.9	%
Ambulatory health care services	32	27,040		1.8	%	33	28,891		1.9	%
Repair and maintenance	40	18,020		1.2	%	34	16,050		1.1	%
Specialty trade contractors	30	12,943		0.9	%	31	13,265		0.9	%
Merchant wholesalers, durable goods	13	11,389		0.8	%	13	12,332		0.8	%
Truck transportation	15	11,417		0.8	%	12	10,350		0.7	%
Personal and laundry services	31	9,715		0.7	%	31	10,673		0.7	%
Professional, scientific, and technical services	26	10,202		0.7	%	26	10,266		0.7	%
Other	197	86,165		5.8	%	195	85,344		5.7	%
Total CRE Owner Occupied (CRE OO)	481	$	251,050	17.0	%	468	$	246,609	16.4	%

CRE Non Owner Occupied (CRE NOO)
Strip centers - lessors	167	$	134,787	9.1	%	165	$	140,360	9.3	%
Hotels	17	42,883		2.9	%	18	48,659		3.2	%
Industrial properties - lessors	62	46,426		3.1	%	60	43,581		2.9	%
Office properties - lessors	60	42,052		2.8	%	57	38,472		2.6	%
Special use - lessors	10	10,678		0.7	%	10	11,527		0.8	%
Mini Warehouses - lessors	17	8,266		0.6	%	17	8,011		0.5	%
Big box retail - lessors	2	8,025		0.5	%	2	8,201		0.5	%
Other	10	6,924		0.5	%	14	6,254		0.4	%
Total CRE Non Owner Occupied (CRE NOO)	345	$	300,041	20.2	%	343	$	305,065	20.2	%

Total Commercial Real Estate (OO & NOO)	826	$	551,091	37.2	%	811	$	551,674	36.6	%

Total Gross Loans		$	1,482,443				$	1,506,583

The Bank’s Appraisal Policy and Procedures is Board approved annually and reflects current regulatory guidelines and recommendations. As one of the primary factors in commercial loan underwriting is the quality of the asset being pledged as collateral, it is imperative that the appraisal process receive appropriate attention. Appraisals must be prepared in accordance with high professional standards, by appraisers who have the necessary training, experience and knowledge for them to provide an accurate estimate of value. With few exceptions, appraisals are assigned to fee appraisers named in the Board approved appraiser list, which includes the tracking of all required certifications, licenses and insurance. The Bank has engaged with one of the nation’s longest-standing third-party appraisal management companies for ordering, management, fulfillment and review of real estate appraisals and other valuation-related services for the properties securing the Bank’s commercial real estate loans.

Criteria that may require the Bank to obtain a new appraisal or update the existing value for an existing credit include but are not limited to a change in the discount or capitalization rates for a particular location or property type; occupancy or absorption levels; market trends; and/or expense structure. Regarding the necessity of updated valuations for construction financing, factors considered are material changes in construction delays; cost overruns; or reductions in sales prices/rents. This may be done as a part of a renewal, loan workout or as a part of the usual and customary real estate review process that monitors the risks associated with the Bank’s loan portfolios.

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The following table sets forth certain information at June 30, 2025, regarding the dollar amount of loans in the Company’s portfolio based on their contractual terms to maturity. Demand loans, loans having no schedule of repayment and no stated maturity, and overdrafts are reported as due in one year or less. Contractual principal repayments of loans do not necessarily reflect the actual term of the loan portfolio. The average life of mortgage loans is substantially less than their contractual terms because of loan prepayments and because of enforcement of due-on-sale clauses, which give the Company the right to declare a loan immediately due and payable in the event, among other things, that the borrower sells the property subject to the mortgage. The amounts are stated in thousands (000’s).


	Maturing within one year		After one but within five years		After five but within fifteen years		After fifteen years		Total
Residential real estate	$	10,389	$	17,591	$	87,242	$	342,026	$	457,248
Home equity	7,582		220		5,469		37,841		51,112
Commercial real estate	48,126		127,336		375,002		627		551,091
Construction and land development	24,745		8,609		33,584		7,857		74,795
Multifamily	32,260		60,527		107,653		-		200,440
Commercial business	48,171		37,819		19,588		58		105,636
Consumer	2,120		227		-		-		2,347
Manufactured homes	3		122		9,724		15,297		25,146
Government	-		13,462		1,166		-		14,628
Total loans receivable	$	173,396	$	265,913	$	639,428	$	403,706	$	1,482,443

The Company is primarily a portfolio lender. Mortgage banking activities historically have been limited to the sale of fixed rate mortgage loans with contractual maturities greater than 15 years. These loans are identified as held for sale when originated and sold, on a loan-by-loan basis, in the secondary market. The Company will also retain fixed rate mortgage loans with a contractual maturity greater than 15 years on a limited basis. During the six months June 30, 2025, the Company originated $18.1 million in new fixed rate mortgage loans for sale, compared to $10.6 million during the six months ended June 30, 2024. Net gains realized from the mortgage loan sales totaled $608 thousand for the six months ended June 30, 2025, compared to $472 thousand for the six months ended June 30, 2024. At June 30, 2025, the Company had $834 thousand in loans that were classified as held for sale, compared to $1.3 million at December 31, 2024.

Asset Quality

Non-performing loans include those loans that are 90 days or more past due and those loans that have been placed on non-accrual 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.

The Company's non-performing loans are summarized below:


(Dollars in thousands)
Loan Segment	June 30, 2025			December 31, 2024
Residential real estate	$	5,633		$	4,665
Home equity	983			483
Commercial real estate	1,179			1,280
Construction and land development	726			658
Multifamily	2,161			3,362
Commercial business	2,844			3,290



Total	$	13,526		$	13,738
Non-performing loans to total loans	0.92		%	0.91		%
Non-performing loans to total assets	0.66		%	0.67		%

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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 June 30, 2025 or December 31, 2024.

The Company's substandard loans are summarized below:


(Dollars in thousands)
Loan Segment	June 30, 2025		December 31, 2024
Residential real estate	$	5,719	$	4,754
Home equity	989		490
Commercial real estate	1,181		1,598
Construction and land development	2,329		2,285
Multifamily	2,161		3,550
Commercial business	2,844		3,290
Consumer	2		-
Manufactured homes	95		54

Total	$	15,320	$	16,021

In addition to identifying and monitoring non-performing and other classified loans, management maintains a list of special mention loans. Special mention loans represent loans management is closely monitoring due to one or more factors that may cause the loan to become classified as substandard.

The Company's special mention loans are summarized below:


(Dollars in thousands)
Loan Segment	June 30, 2025		December 31, 2024
Residential real estate	$	5,289	$	4,291
Home equity	578		459
Commercial real estate	11,453		8,008
Construction and land development	580		3,675
Multifamily	2,345		5,329
Commercial business	1,121		3,528



Total	$	21,366	$	25,290

At June 30, 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 non-accrual. Management does not presently anticipate that any of the non-performing loans or classified loans would materially affect future operations, liquidity or capital resources.

The allowance for credit losses (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.

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The Company's provision for (benefit from) credit losses for the period ended are summarized below:


(Dollars in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
Loan Segment	2025		2024		2025		2024
Residential real estate	$	294	$	270	$	(1,761)	$	293
Home equity	116		(10)		(97)		29
Commercial real estate	(507)		(355)		2,702		(144)
Construction and land development	(149)		(389)		(1,156)		(1,139)
Multifamily	109		(44)		1,334		(20)
Commercial business	(35)		63		19		548
Consumer	8		20		17		36
Manufactured homes	(4)		(16)		(127)		(24)
Government	(17)		22		(40)		25
Total	$	(185)	$	(439)	$	891	$	(396)

The Company's charge-off and recovery information is summarized below:


(Dollars in thousands)	Three Months Ended June 30, 2025
Loan Segment	Charge-off		Recoveries		Net (Charge-offs) Recoveries
Residential real estate	$	-	$	19	$	19




Commercial business	-		404		404
Consumer	(10)		1		(9)


Total	$	(10)	$	424	$	414



(Dollars in thousands)	Three Months Ended June 30, 2024
Loan Segment	Charge-off		Recoveries		Net (Charge-offs) Recoveries
Residential real estate	$	-	$	10	$	10

Commercial real estate	-		2		2

Multifamily	(65)		31		(34)

Commercial business	-		7		7
Consumer	(26)		5		(21)


Total	$	(91)	$	55	$	(36)


(Dollars in thousands)	Six Months Ended June 30, 2025
Loan Segment	Charge-offs		Recoveries		Net (Charge-offs) Recoveries
Residential real estate	$	-	$	35	$	35

Commercial real estate	-		4		4

Multifamily	(46)		10		(36)
Commercial business	(61)		460		399
Consumer	(21)		1		(20)


Total	$	(128)	$	510	$	382

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(Dollars in thousands)	Six Months Ended June 30, 2024
Loan Segment	Charge-offs		Recoveries		Net (Charge-offs) Recoveries
Residential real estate	$	-	$	20	$	20

Commercial real estate	-		2		2

Multifamily	(65)		31		(34)
Commercial business	-		9		9
Consumer	(44)		6		(38)


Total	$	(109)	$	68	$	(41)

The ACL provisions take into consideration management’s current judgments about the credit quality of the loan portfolio, loan portfolio balances, changes in the portfolio mix, and local economic conditions. In determining the provision for credit losses for the current period, management has considered risks associated with the local economy, changes in loan balances and mix, and asset quality.

The Company's allowance to total loans and non-performing loans are summarized below:


(Dollars in thousands)	June 30, 2025			December 31, 2024
Allowance for credit losses	$	18,184		$	16,911
Total loans	$	1,484,278		$	1,508,976
Non-performing loans	$	13,526		$	13,738
ACL-to-total loans	1.23		%	1.12		%
ACL-to-non-performing loans (coverage ratio)	134.4		%	123.1		%

Investment Portfolio

The primary objective of the Company’s investment portfolio is to provide for the liquidity needs of the Company and to contribute to profitability by providing a stable flow of dependable earnings. Funds are generally invested in federal funds, interest bearing balances in other financial institutions, U.S. government securities, U.S. treasury securities, federal agency obligations, obligations of state and local municipalities, and corporate securities. The securities portfolio, all of which is designated as available-for-sale, totaled $327.8 million at June 30, 2025, compared to $333.6 million at December 31, 2024, a decrease of $5.7 million (1.7%). The decrease in securities available for sale from year end, was primarily due to payoffs of collateralized mortgage obligations and residential mortgage-backed securities within the portfolio. The yield on the securities portfolio was 2.40% for both the six months ended June 30, 2025 and the six months ended June 30, 2024. Management did not execute any securities sale transactions during the quarter. At June 30, 2025, the securities portfolio represented 17.3% of interest-earning assets and 15.9% of total assets compared to 17.5% of interest-earning assets and 16.2% of total assets at December 31, 2024.

The Company’s end-of-period investment portfolio and other short-term investments and stock balances were as follows:


	June 30, 2025				December 31, 2024
(Dollars in thousands)	Balance		% Securities		Balance		% Securities
U.S. government sponsored entities	$	8,307	2.5	%	$	8,061	2.4	%
Collateralized mortgage obligations and residential mortgage-backed securities	107,972		32.9	%	109,325		32.8	%
Municipal securities	209,950		64.1	%	214,749		64.4	%
Collateralized debt obligations	1,616		0.5	%	1,419		0.4	%
Total securities available-for-sale	$	327,845	100.0	%	$	333,554	100.0	%

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(Dollars in thousands)	June 30, 2025		December 31, 2024		$ Change		% Change
Interest bearing deposits in other financial institutions	$	79,976	$	52,047	$	27,929	53.7	%
Fed funds sold	411		654		(243)		(37.2	%)
Federal Home Loan Bank stock	6,547		6,547		-		-

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.

The contractual maturities and weighted average yields for the U.S. government agency securities, municipal securities, and collateralized debt obligations at June 30, 2025, are summarized in the table below. Securities not due at a single maturity date, such as mortgage-backed securities and collateralized mortgage obligations, are shown separately. The carrying values are stated in thousands (000’s).

The weighted average yields were calculated by multiplying each carrying value by its yield and dividing the sum of these results by the total carrying values. Yields presented are not on a tax-equivalent basis.


	Within 1 Year				1 - 5 Years				5 - 10 Years				After 10 Years				Total
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount
U.S. government sponsored entities:	$	-	—	%	$	8,307	1.00	%	$	-	—	%	$	-	—	%	$	8,307
Collateralized mortgage obligations and residential mortgage- backed securities:	-		—	%	-		—	%	-		—	%	107,972		1.55	%	$	107,972
Municipal Securities:	-		—	%	3,282		2.40	%	36,578		3.18	%	170,090		3.00	%	209,950

Securities:	-		—	%	-		—	%	-		—	%	1,616		3.33	%	1,616
Totals	$	-	—	%	$	11,589	1.40	%	$	36,578	3.18	%	$	279,678	2.44	%	$	327,845

Deposits

Deposits are a fundamental and cost-effective source of funds for lending and other investment purposes. The Company offers a variety of products designed to attract and retain customers, with the primary focus on building and expanding relationships.

The Company’s end-of-period deposit portfolio balances were as follows:


(Dollars in thousands)	June 30, 2025		December 31, 2024		$ Change		% Change
Checking	$	593,471	$	591,487	$	1,984	0.3	%
Savings	266,070		275,121		(9,051)		(3.3	%)
Money market	352,616		333,705		18,911		5.7	%
Certificates of deposit	542,693		560,253		(17,560)		(3.1	%)
Total deposits	$	1,754,850	$	1,760,566	$	(5,716)	(3.6	%)

As of June 30, 2025, deposits totaled $1.8 billion, a decrease of $5.7 million or 0.32% compared to December 31, 2024. Core deposits totaled $1.2 billion at June 30, 2025 compared to $1.2 billion on December 31, 2024, an increase of $11.8 million or 1.0%. Core deposits include checking, savings, and money market accounts and represented 69.1% of the Company’s total deposits at June 30, 2025. On June 30, 2025, balances for certificates of deposit totaled $542.7 million, compared to $560.3 million on December 31, 2024, a decrease of $17.6 million or 3.1%. The decrease in deposits is primarily related to a reduction in depositor certificate of deposit activity and planned adjustments to deposit pricing.

Checking account balances increased $2.0 million and interest bearing savings account balances decreased $9.1 million from year end primarily due to decreases in personal passbook savings account balances. Money market account balances increased by $18.9 million from year end due to business and retail consumer preferences. Certificates of deposits decreased by $17.6 million primarily reflecting customer prioritization of more liquid deposit products. We strive to maintain balances of personal and business checking and savings accounts through our focus on quality customer service,

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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.

Non-interest bearing demand accounts comprised 16.0% of total deposits at June 30, 2025 and 15.0% of total deposits at December 31, 2024. Interest bearing demand accounts, including money market and savings accounts, comprised 53.0% of total deposits at June 30, 2025 and 53.2% at December 31, 2024. Time accounts as a percentage of total deposits were 31.0% at June 30, 2025 and 31.8% at December 31, 2024.

The following table presents the average daily amount of deposits and average rates paid on such deposits for the periods indicated. The amounts are stated in thousands (000’s).


	Six Months Ended June 30,
	2025				2024
	Amount		Rate %		Amount		Rate %
Non-interest bearing demand deposits	$	278,815	-	%	$	293,008	-	%
Interest bearing demand deposits	312,100		0.74	%	322,706		0.96	%
MMDA accounts	345,490		2.98	%	317,848		3.36	%
Savings accounts	272,715		0.05	%	297,389		0.05	%
Certificates of deposit	545,466		3.47	%	533,446		3.92	%
Total deposits	$	1,754,586	2.14	%	$	1,764,397	2.37	%

Deposit rates decreased in the three and six months ended June 30, 2025 compared to same periods in 2024, primarily driven by a decrease in short-term market interest rates.

Borrowed Funds

The Company’s borrowed funds are primarily used to fund asset growth not supported by deposit generation. The Company’s end-of-period borrowing balances were as follows:


(Dollars in thousands)	June 30, 2025		December 31, 2024		$ Change		% Change
Repurchase agreements	$	48,331	$	40,116	$	8,215	20.5	%
Borrowed funds	65,000		65,000		—		—	%
Total borrowed funds	$	113,331	$	105,116	$	8,215	7.8	%

Borrowings and repurchase agreements totaled $113.3 million at June 30, 2025 compared to $105.1 million at December 31, 2024, an increase of $8.2 million or 7.8%. The increase in borrowings from December 31, 2024, was the result of additional repurchase agreement activity. As of June 30, 2025, 72% of our deposits are fully FDIC insured, and another 8% are further backed by the Indiana Public Deposit Insurance Fund. The Company’s liquidity position remains strong with solid core deposit customer relationships, excess cash, debt securities, and access to diversified borrowing sources. As of June 30, 2025, the Company had available liquidity of $728.5 million including borrowing capacity from the FHLB and Federal Reserve facilities.

Other assets totaled $41.6 million at June 30, 2025, compared to $43.9 million at December 31, 2024. The decrease in other assets is primarily related to decreased fair value of the Company’s interest rate swap contract derivative. Accrued expenses and other liabilities totaled $35.5 million at June 30, 2025, compared to $43.6 million at December 31, 2024. The decrease in accrued expenses and other liabilities is primarily the result of the decreased fair value of the Company's interest rate swap contract derivative, along with other activities such as a decrease in other collateral balances and ACH prefunding balances.

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Market Risk and Interest Rate Sensitivity

General

Market risk represents the risk of loss due to changes in market values of assets and liabilities. The Company incurs market risk in the normal course of business through exposures to market interest rates, equity prices, and credit spreads. As of June 30, 2025, the Company has identified interest rate risk as our primary source of market risk.

Interest Rate Risk

Interest rate risk is the risk to earnings and value arising from changes in market interest rates. Interest rate risk arises from timing differences in the repricings and maturities of interest-earning assets and interest-bearing liabilities (repricing risk), changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers’ ability to prepay home mortgage loans at any time and depositors’ ability to redeem certificates of deposit before maturity (option risk), changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S. Treasuries and SOFR (basis risk).

The Company’s Board of Directors establishes broad policy limits with respect to interest rate risk. As part of this policy, the Asset Liability Committee, or ALCO, establishes specific operating guidelines within the parameters of the Board of Director’s policies. In general, the ALCO focuses on ensuring a stable and steadily increasing flow of net interest income through managing the size and mix of the balance sheet. The management of interest rate risk is an active process which encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.

An asset sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate higher net interest income, as rates earned on our interest-earning assets would reprice upward more quickly than rates paid on our interest-bearing liabilities, thus expanding our net interest margin. Conversely, a liability sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate lower net interest income, as rates paid on our interest-bearing liabilities would reprice upward more quickly than rates earned on our interest-earning assets, thus compressing our net interest margin.

Interest rate risk measurement is calculated and reported to the ALCO at least quarterly. The information reported includes period-end results and identifies any policy limits exceeded, along with an assessment of the policy limit breach and the action plan and timeline for resolution, mitigation, or assumption of the risk.

Evaluation of Interest Rate Risk

We use income simulations, an analysis of core funding utilization, and economic value of equity (EVE) simulations as our primary tools in measuring and managing interest rate risk. These tools are utilized to quantify the potential earnings impact of changing interest rates over a 12-month simulation horizon (income simulations) as well as identify expected earnings trends given longer term rate cycles (long term simulations, core funding utilizations, and EVE simulation). A standard gap report and funding matrix will also be utilized to provide supporting detailed information on the expected timing of cashflow and repricing opportunities.

There are an infinite number of potential interest rate scenarios, each of which can be accompanied by differing economic, political, and regulatory climates; can generate multiple differing behavior patterns by markets, borrowers, depositors, and other market participants; and can last for varying degrees of time. Therefore, by definition, interest rate risk sensitivity cannot be predicted with certainty. Accordingly, the Company’s interest rate risk measurement philosophy focuses on maintaining an appropriate balance between theoretical and practical scenarios; especially given the primary objective of the Company’s overall asset/liability management process is to facilitate meaningful strategy development and implementation.

Therefore, we model a set of interest rate scenarios capturing the financial effects of a range of plausible rate scenarios, the collective impact of which will enable the Company to clearly understand the nature and extent of its sensitivity to interest rate changes. Doing so necessitates an assessment of rate changes over varying time horizons and of varying/sufficient degrees such that the impact of embedded options within the balance sheet are sufficiently examined.

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We utilize a simulation model as our primary tool to assess the direction and magnitude of variations in net interest income and EVE resulting from potential changes in market interest rates. Key assumptions in the model, which we believe are reasonable but which may have a significant impact on results, include: (i) the timing of changes in interest rates; (ii) shifts or rotations in the yield curve; (iii) re-pricing characteristics for market-rate-sensitive instruments; (iv) varying loan prepayment speeds for different interest rate scenarios; and (v) the overall growth and mix of assets and liabilities.

We forecast the next twelve months of net interest income under an assumed environment of gradual changes in market interest rates under various scenarios. The resulting change in net interest income is an indication of the sensitivity of our earnings to directional changes in market interest rates. The simulation also measures the change in EVE, or the net present value of our assets and liabilities, under an immediate shift, or shock, in interest rates under various scenarios, as calculated by discounting the estimated future cash flows using market-based discount rates.

The following table shows the impact of changes in interest rates on net interest income over the next twelve months and EVE based on our balance sheet as of June 30, 2025 (dollars in millions):


Interest Rate Scenario	EVE*		Percent Change		Net interest income		Percent Change
+400 Bps	$	274	-36.5	%	$	60.8	-2.8	%
+300 Bps	$	327	-24.0	%	$	62.2	-0.6	%
+200 Bps	$	377	-12.5	%	$	62.9	0.6	%
+100 Bps	$	412	-4.4	%	$	62.9	0.6	%
No change	$	431	0.0	%	$	62.5	0.0	%
-100 Bps	$	439	1.9	%	$	62.4	-0.2	%
-200 Bps	$	434	0.7	%	$	62.1	-0.7	%
-300 Bps	$	413	-4.2	%	$	62.6	0.2	%
-400 Bps	$	378	-12.3	%	$	62.9	0.6	%

* Economic Value of Equity ("EVE") at Risk

If interest rates across the yield curve were to uniformly decrease, this analysis suggests the Bank may be positioned for relatively neutral to positive improvements in net interest income over the next twelve months. If interest rates across the yield curve were to uniformly increase, this analysis suggests we would experience a reduction in net interest income over the next twelve months.

We also forecast the impact of immediate and parallel interest rate shocks on net interest income under various scenarios to measure the sensitivity of our earnings under extreme conditions.

In addition to changes in interest rates, the level of future net interest income is also dependent on a number of other variables, including: the growth, composition and absolute levels of loans, deposits, and other earning assets and interest-bearing liabilities; economic and competitive conditions; potential changes in lending, investing and deposit gathering strategies; and client preferences.

Liquidity and Capital Resources

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.

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

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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.

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.

Although customer deposits remain our preferred funding source, maintaining additional sources of liquidity is part of our prudent liquidity risk management practices. We have the ability to borrow from the FHLB. At June 30, 2025, we had five outstanding advances totaling $65 million and the ability to borrow up to $433.7 million from the FHLB. We also have the ability to borrow from the Federal Reserve Bank of Chicago. At June 30, 2025, we had no outstanding balance from the Federal Reserve Bank of Chicago. At June 30, 2025, cash and cash equivalents were $103.4 million and secured borrowing capacity at the Federal Reserve Bank totaled $253.8 million, providing total liquidity sources of $728.5 million (excluding brokered deposit capacity).

The following table shows the Company’s sources of liquidity as of June 30, 2025 and December 31, 2024:


	Sources of Liquidity
	As of June 30, 2025				As of December 31, 2024
	Outstanding		Additional Capacity		Outstanding		Additional Capacity
FHLB Advances	$	65,000	$	433,715	$	65,000	$	459,648
Fed Discount Window	-		253,768		-		186,788
Fed Funds Lines	-		16,000		-		16,000
Other Line of Credit	-		25,000		-		25,000
Total	$	65,000	$	728,483	$	65,000	$	687,436

During the six months ended June 30, 2025, cash and cash equivalents increased by $32.8 million compared to a $2.8 million decrease for the six months ended June 30, 2024. The primary sources of cash and cash equivalents were sales of loans originated for sale and the net change in loans receivable. The primary uses of cash and cash equivalents were loan originations and the net change in accrued expenses and other liabilities. Cash provided by operating activities totaled $1.0 million for the six months ended June 30, 2025, compared to cash provided of $2.7 million for the six months ended June 30, 2024. Cash used in operating activities was primarily a result of net income and sale of loans originated for sale offset by loans originated for sale and net change in accrued expenses and other liabilities. Cash provided by investing activities totaled $29.9 million for the current period, compared to cash provided in investing activities of $42.4 million for the six months ended June 30, 2024. Cash provided by investing activities for the current six-month period was primarily related to net change in loans receivable and proceeds from maturities of securities. Cash provided by financing activities totaled $2.0 million during the current period compared to net cash used in financing activities of $47.9 million for the six months ended June 30, 2024. The net cash used in financing activities was primarily the result of net change in deposits offset by the change in repurchase agreements. On a cash basis, the Company paid dividends on common stock of $520 thousand for the six months ended June 30, 2025, and $1.0 million for the six months ended June 30, 2024.

At June 30, 2025, outstanding commitments to fund loans totaled $239.4 million. Approximately 60.2% of the commitments were at variable rates. Standby letters of credit, which are conditional commitments issued by the Company to guarantee the performance of a customer to a third-party, totaled $15.8 million at June 30, 2025. Management believes that the Company has sufficient cash flow and borrowing capacity to fund all outstanding commitments and letters of credit, while maintaining proper levels of liquidity.

Management strongly believes that maintaining a high level of capital enhances safety and soundness. During the six months ended June 30, 2024, stockholders' equity increased by $2.8 million (1.9%). During the six months ended June 30, 2024, stockholders’ equity was primarily increased by net income of $2.6 million and other comprehensive income as the result of market value changes within the securities portfolio of $524 thousand offset by dividends declared of $520 thousand. On April 24, 2014, the Company’s Board of Directors authorized a stock repurchase program to repurchase up to 50,000 shares of the Company’s outstanding common stock, from time to time and subject to market conditions, on the

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open market or in privately negotiated transactions. The stock repurchase program does not expire and is only limited by the number of shares that can be purchased. The stock repurchase program will be reviewed annually by the Board of Directors. No shares were repurchased under the program during the first six months of 2025 or 2024. During 2025, 16,469 restricted stock shares vested under the Incentive Plan outlined in Note 10 of the financial statements, of which 5,105 of these shares were withheld in the form of a net surrender to cover the withholding tax obligations of the vesting employees. The repurchase of these surrendered shares is considered outside of the scope of the formal board approved stock repurchase program.

The Bank is subject to risk-based capital guidelines adopted by the FDIC. The regulations divide capital into multiple tiers. The first tier (Common Equity Tier 1 Capital) includes common shareholders’ equity, after deductions for various items including goodwill and certain other intangible assets, and after certain other adjustments. Common Equity Tier 1 Capital also includes accumulated other comprehensive income (for organizations that do not make opt-out elections). The next tier (Tier 1 Capital) is comprised of Common Equity Tier 1 Capital plus other qualifying capital instruments such as perpetual noncumulative preferred stock and junior subordinated debt issued to trusts, and other adjustments. The third tier (Tier 2 Capital) includes instruments such as subordinated debt that have a minimum original maturity of at least five years and are subordinated to the claims of depositors and general creditors, total capital minority interest not included in Tier 1 Capital, and limited amounts of the allowance for credit losses, less applicable regulatory adjustments and deductions. Pursuant to the above capital regulations, the Bank is required to maintain a Common Equity Tier 1 Capital ratio of 4.5%, a Tier 1 Capital ratio of 6%, and a Total Capital ratio (comprised of Tier 1 Capital plus Tier 2 Capital) of 8%. In addition, the capital regulations provide for a minimum leverage ratio (Tier 1 capital to adjusted average assets) of 4%.

In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions by the institution and certain discretionary bonus payments to management if an institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 required the FRB to set minimum capital levels for bank holding companies that are as stringent as those required for insured depository subsidiaries. However, under the FRB’s “Small Bank Holding Company” exemption from consolidated bank holding company capital requirements, bank holding companies and savings and loan holding companies with less than $3 billion in consolidated assets, such as the Company, are exempt from consolidated regulatory capital requirements, unless the FRB determines otherwise in particular cases.

During the six months ended June 30, 2025, the Company’s and Bank’s risk weighted assets continued to be negatively impacted by regulatory requirements regarding collateralized debt obligations. The regulatory requirements state that for collateralized debt obligations that have been downgraded below investment grade by the rating agencies, increased risk-based asset weightings are required. The Company currently holds pooled collateralized debt obligations with a cost basis of $2.1 million. These investments currently have ratings that are below investment grade. As a result, approximately $1.6 million of risk-based assets are generated by the collateralized debt obligations in the Company’s and Bank’s total risk based capital calculation.

In addition, the following table shows that, at June 30, 2025 and December 31, 2024, the Bank’s capital exceeded all applicable regulatory capital requirements as set forth in 12 C.F.R. § 324.


(Dollars in thousands)	Actual				Minimum Required For Capital Adequacy Purposes				Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations
June 30, 2025	Amount		Ratio		Amount		Ratio		Amount		Ratio
Common equity tier 1 capital to risk-weighted assets	$	181,428	11.30	%	$	72,228	4.50	%	$	104,329	6.50	%
Tier 1 capital to risk-weighted assets	$	181,428	11.30	%	$	96,303	6.00	%	$	128,404	8.00	%
Total capital to risk-weighted assets	$	201,494	12.55	%	$	128,404	8.00	%	$	160,506	10.00	%
Tier 1 leverage ratio	$	181,428	8.69	%	$	83,548	4.00	%	$	104,435	5.00	%

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(Dollars in thousands)	Actual				Minimum Required For Capital Adequacy Purposes				Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations
December 31, 2024	Amount		Ratio		Amount		Ratio		Amount		Ratio
Common equity tier 1 capital to risk-weighted assets	$	179,625	11.26	%	$	71,771	4.50	%	$	103,670	6.50	%
Tier 1 capital to risk-weighted assets	$	179,625	11.26	%	$	95,695	6.00	%	$	127,594	8.00	%
Total capital to risk-weighted assets	$	194,499	12.19	%	$	127,594	8.00	%	$	159,492	10.00	%
Tier 1 leverage ratio	$	179,625	8.47	%	$	84,854	4.00	%	$	106,068	5.00	%

The Company’s ability to pay dividends to its shareholders is largely dependent upon the Bank’s ability to pay dividends to the Company. Under Indiana law, the Bank may pay dividends from its undivided profits (generally, earnings less losses, bad debts, taxes and other operating expenses) as is considered expedient by the Bank’s Board of Directors. However, the Bank must obtain the approval of the Indiana Department of Financial Institutions (DFI) if the total of all dividends declared by the Bank during the current year, including the proposed dividend, would exceed the sum of retained net income for the year to date plus its retained net income for the previous two years. For this purpose, “retained net income,” means net income as calculated for call report purposes, less all dividends declared for the applicable period. An exemption from DFI approval would require that the Bank have been assigned a composite uniform financial institutions rating of 1 or 2 as a result of the most recent federal or state examination; the proposed dividend would not result in a Tier 1 leverage ratio below 7.5%; and that the Bank not be subject to any corrective action, supervisory order, supervisory agreement, or board approved operating agreement. In addition, under the terms of the MOU, the Bank must seek regulatory approval prior to paying cash dividends. See “– Recent Developments Regarding the Company and the Bank – Memorandum of Understanding” above. Moreover, the FDIC and the Federal Reserve Board may prohibit the payment of dividends if it determines that the payment of dividends would constitute an unsafe or unsound practice in light of the financial condition of the Bank. Assuming receipt of regulatory approval for all cash dividends declared by the Bank under the terms of the MOU, the aggregate amount of dividends that the Bank is eligible to declare in 2025, without the need for qualifying for a further exemption or prior DFI approval under the terms of Indiana law described above, is its 2025 net income. On April 9, 2025, the Board of Directors of the Company declared the most recently quarterly dividend of $0.12 per share. The Company’s quarterly dividend was paid to shareholders on May 12, 2025 to shareholders of record on April 22, 2025.

Results of Operations - Comparison of the Three Months Ended June 30, 2025 and June 30, 2024

For the quarter ended June 30, 2025, the Company reported net income of $2.2 million, compared to net income of $143 thousand for the quarter ended June 30, 2024, an increase of $2.0 million. For the quarter ended June 30, 2025, the ROA was 0.42%, compared to 0.03 % for the quarter ended June 30, 2024. The ROE was 5.66% for the quarter ended June 30, 2025, compared to 0.39% for the quarter ended June 30, 2024.

Information relating to the average consolidated balance sheet and the yield on average earning assets and cost of average liabilities for the periods indicated are in the following table. Dividing the related interest, on an annualized basis, by the average balance of assets or liabilities drives the disclosed rates. Average balances are derived from daily balances.

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Quarter Ended
(Dollars in thousands)	Average Balances, Interest, and Rates
(unaudited)	June 30, 2025							June 30, 2024
	Average Balance			Interest		Rate (%)		Average Balance			Interest		Rate (%)
ASSETS
Interest bearing deposits in other financial institutions	$	57,749		$	614	4.25	%	$	60,378		$	800	5.30	%
Federal funds sold	868			8		3.69	%	1,263			10		3.17	%
Securities available-for-sale	327,867			1,980		2.42	%	337,226			2,047		2.43	%
Loans receivable	1,486,861			19,940		5.36	%	1,501,584			19,174		5.11	%
Federal Home Loan Bank stock	6,547			128		7.82	%	6,547			96		5.87	%
Total interest earning assets	1,879,892			$	22,670	4.82	%	1,906,998			$	22,127	4.64	%
Cash and non-interest bearing deposits in other financial institutions	27,192							18,054
Allowance for credit losses	(18,028)							(18,788)
Other non-interest bearing assets	152,880							158,358
Total assets	$	2,041,936						$	2,064,622

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits	$	1,470,225		$	7,780	2.12	%	$	1,455,007		$	8,610	2.37	%
Repurchase agreements	44,401			370		3.33	%	41,388			399		3.86	%
Borrowed funds	58,995			575		3.90	%	85,940			1,064		4.95	%
Total interest bearing liabilities	1,573,621			$	8,725	2.22	%	1,582,335			$	10,073	2.55	%
Non-interest bearing deposits	278,620							291,618
Other non-interest bearing liabilities	37,703							45,029
Total liabilities	1,889,944							1,918,982
Total stockholders' equity	151,992							145,640
Total liabilities and stockholders' equity	$	2,041,936						$	2,064,622
Net interest income				$	13,945						$	12,054

Return on average assets	0.42		%					0.03		%
Return on average equity	5.66		%					0.39		%
Net interest margin (average earning assets)	2.97		%					2.53		%
Net interest margin (average earning assets) - tax equivalent	3.11		%					2.67		%
Net interest spread	2.60		%					2.09		%
Ratio of interest-earning assets to interest-bearing liabilities	1.19x							1.21x

Net interest income for the quarter ended June 30, 2025, was $13.9 million, an increase of $1.9 million (15.7%), compared to $12.1 million for the quarter ended June 30, 2024. The weighted-average yield on interest-earning assets was 4.82% for the quarter June 30, 2025, compared to 4.64% for the quarter ended June 30, 2024. The weighted-average cost of interest-bearing liabilities for the quarter ended June 30, 2025, was 2.22% compared to 2.55% for the quarter ended June 30, 2024. The impact of the 4.82% return on interest-earning assets and the 2.22% cost of interest-bearing liabilities resulted in an interest rate spread of 2.60% for the current quarter, an increase from the 2.09% spread for the quarter ended June 30, 2024. On a tax adjusted basis, the Company’s net interest margin was 3.11% for the quarter ended June 30, 2025, compared to 2.67% for the quarter ended June 30, 2024. The Company believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully-taxable equivalent basis, as these measures provide useful information to make peer comparisons. Net interest margin on a tax-equivalent basis represents a non-GAAP financial measure. See the non-GAAP reconciliation table immediately below and the section captioned “Non-GAAP Financial Measures” for further disclosure regarding non-GAAP financial measures.

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(Dollars in thousands)	Quarter Ended,
(unaudited)	June 30, 2025			June 30, 2024
Calculation of net interest margin, tax-equivalent basis
Net interest income	$	13,945		$	12,054
Tax-equivalent adjustment on securities and loans	674			677
Net interest income (tax-equivalent basis)	$	14,619		$	12,731
Total average earning assets	$	1,879,892		$	1,906,998
Net interest margin (tax-equivalent basis)	3.11		%	2.67		%

The increased net interest income and net interest margin for the quarter ended June 30, 2025, was primarily the result of reduced deposit and borrowing costs as a result of the Federal Reserve reduction of federal funds rates year over year and increased loan yields as commercial loans mature and/or reprice.

The following table shows the change in non-interest income for the quarter ending June 30, 2025, and June 30, 2024.


(Dollars in thousands)	Three Months Ended June 30,				6/30/2025 vs. 6/30/2024
	2025		2024		$ Change		% Change
Non-interest income:
Fees and service charges	$	1,330	$	1,257	$	73	5.8	%
Wealth management operations	696		763		(67)		(8.8)
Gain on sale of loans held-for-sale, net	378		320		58		18.1

Increase in cash value of bank owned life insurance	220		212		8		3.8
Gain on sale of real estate	-		15		(15)		(100.0)
Other	59		6		53		883.3
Total non-interest income	$	2,683	$	2,573	$	110	4.3	%

The increase non-interest income is primarily the result of higher income from fees and service charges and increased gains on sale of loans.

The following table shows the change in non-interest expense for the three months ending June 30, 2025 and June 30, 2024.


(Dollars in thousands)	Three Months Ended June 30,				6/30/2025 vs. 6/30/2024
	2025		2024		$ Change		% Change
Non-interest expense:
Compensation and benefits	$	7,313	$	7,037	$	276	3.9	%
Occupancy and equipment	1,935		2,116		(181)		(8.6)
Data processing	1,341		1,135		206		18.1
Marketing	214		212		2		0.9

Federal deposit insurance premiums	471		397		74		18.6
Professional and outside services	1,115		1,257		(142)		(11.3)

Technology	545		507		38		7.5
Other	1,852		1,756		96		5.5
Total non-interest expense	$	14,786	$	14,417	$	369	2.6	%

Increases in non-interest expenses during the quarter ended June 30, 2025 were primarily attributable to higher compensation and benefits expenses and higher data processing expenses offset by lower occupancy and equipment expenses and professional and outside services fees.

The benefit for income taxes was $35 thousand for the quarter ended June 30, 2025, as compared to the benefit of $9 thousand for the quarter ended June 30, 2024. The effective tax rate was negative 1.7% for the quarter ended June 30, 2025

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as compared to negative 6.7% for the quarter ended June 30, 2024. The Company’s lower current effective tax rate for the quarter ended June 30, 2025, is primarily a result of a decrease in estimated full year 2025 tax accrual based on updated projected earnings levels.

Results of Operations - Comparison of the Six Months Ended June 30, 2025 to June 30, 2024

For the six months ended June 30, 2025, the Company reported net income of $2.6 million, a decrease of $6.8 million (72.3%) compared to $9.4 million for the six months ended June 30, 2024. For the six months ended June 30, 2025, the ROA was 0.25%, compared to 0.91% for the six months ended June 30, 2024. The ROE was 3.39% for the six months ended June 30, 2025, compared to 12.81% for the six months ended June 30, 2024.

Information relating to the average consolidated balance sheet and the yield on average earning assets and cost of average liabilities for the periods indicated are in the following table. Dividing the related interest, on an annualized basis, by the average balance of assets or liabilities derives the disclosed rates. Average balances are derived from daily balances.


Year-to-Date
(Dollars in thousands)	Average Balances, Interest, and Rates
(unaudited)	June 30, 2025							June 30, 2024
	Average Balance			Interest		Rate (%)		Average Balance			Interest		Rate (%)
ASSETS				`
Interest bearing deposits in other financial institutions	$	55,663		$	1,154	4.15	%	$	64,657		$	1,652	5.11	%
Federal funds sold	1,120			21		3.75	%	1,039			20		3.85	%
Securities available-for-sale	331,941			3,977		2.40	%	351,210			4,208		2.40	%
Loans receivable	1,492,555			39,595		5.31	%	1,502,798			38,053		5.06	%
Federal Home Loan Bank stock	6,547			264		8.06	%	6,547			178		5.44	%
Total interest earning assets	1,887,826			$	45,011	4.77	%	1,926,251			$	44,111	4.58	%
Cash and non-interest bearing deposits in other financial institutions	27,553							18,142
Allowance for credit losses	(17,490)							(18,765)
Other non-interest bearing assets	153,014							155,147
Total assets	$	2,050,903						$	2,080,775

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits	$	1,475,771		$	15,825	2.14	%	$	1,471,389		$	17,404	2.37	%
Repurchase agreements	43,023			718		3.34	%	39,769			769		3.87	%
Borrowed funds	60,297			1,210		4.01	%	87,996			2,104		4.78	%
Total interest bearing liabilities	1,579,091			$	17,753	2.25	%	1,599,154			$	20,277	2.54	%
Non-interest bearing deposits	278,815							293,008
Other non-interest bearing liabilities	39,305							41,461
Total liabilities	1,897,211							1,933,623
Total stockholders' equity	153,692							147,152
Total liabilities and stockholders' equity	$	2,050,903						$	2,080,775
Net interest income				$	27,258						$	23,834

Return on average assets	0.25		%					0.91		%
Return on average equity	3.39		%					12.81		%
Net interest margin (average earning assets)	2.89		%					2.47		%
Net interest margin (average earning assets) - tax equivalent	3.03		%					2.62		%
Net interest spread	2.52		%					2.04		%
Ratio of interest-earning assets to interest-bearing liabilities	1.20x							1.20x

Net interest income for the six months ended June 30, 2025, was $27.3 million, an increase of $3.4 million (14.4%), compared to $23.8 million for the six months ended June 30, 2024. The weighted-average yield on interest-earning assets

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was 4.77% for the six months ended June 30, 2025 compared to 4.58% for the six months ended June 30, 2024. The weighted-average cost of interest-bearing liabilities for the six months ended June 30, 2025, was 2.25% compared to 2.54% for the six months ended June 30, 2024. The impact of the 4.77% return on interest-earning assets and the 2.25% cost of interest-bearing liabilities resulted in an interest rate spread of 2.52% for the six months ended June 30, 2025, an increase from the 2.04% spread for the six months ended June 30, 2024. The Company’s net interest margin on a tax-equivalent basis was 3.03% for the six months ended June 30, 2025, compared to 2.62% for the six months ended June 30, 2024. The Company believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully-taxable equivalent basis, as these measures provide useful information to make peer comparisons. Tax adjusted net interest margin represents a non-GAAP financial measure. See the non-GAAP reconciliation table immediately below and the section captioned “Non-GAAP Financial Measures” for further disclosure regarding non-GAAP financial measures.


	Six Months Ended June 30,
(Dollars in thousands)	2025			2024
Calculation of net interest margin, tax-equivalent basis
Net interest income	$	27,258		$	23,834
Tax-equivalent adjustment on securities and loans	1,344			1,376
Net interest income (tax-equivalent basis)	$	28,602		$	25,210
Total average earning assets	$	1,887,826		$	1,926,251
Net interest margin (tax-equivalent basis)	3.03		%	2.62		%

The increased net interest income and net interest margin for the six months ended June 30, 2025, was primarily the result of reduced deposit and borrowing costs as a result of the Federal Reserve's reduction of federal funds rates year over year and increased loan yields as commercial loans mature and/or reprice.

The following table shows the change in non-interest income for the six months ended June 30, 2025, and June 30, 2024.


(Dollars in thousands)	Six Months Ended June 30,				6/30/2025 vs. 6/30/2024
	2025		2024		$ Change		% Change
Non-interest income:
Fees and service charges	$	2,439	$	2,410	$	29	1.2	%
Wealth management operations	1,315		1,396		(81)		(5.8)
Gain on tax credit investment	67		-		67		—
Gain on sale of loans held-for-sale, net	608		472		136		28.8
Increase in cash value of bank owned life insurance	418		405		13		3.2
Gain on sale of real estate	-		11,873		(11,873)		(100.0)
Loss on sale of securities, net	-		(531)		531		(100.0)
Other	65		24		41		170.8
Total non-interest income	$	4,912	$	16,049	$	(11,137)	(69.4	%)

The decrease in non-interest income was primarily caused by two special first quarter 2024 strategic initiatives involving the pre-tax non-interest income gain of approximately $11.8 million from a sale-leaseback transaction completed on February 22, 2024. The 2024 non-interest income real estate gain was also partially offset by a $531 thousand loss from the sale of $15.1 million in securities, a transaction also completed during the first quarter of 2024 to improve future profitability, deleverage the balance sheet through a reduction in borrowings outstanding, and further benefit regulatory capital ratios in subsequent periods.

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The following table shows the change in non-interest expense for the six months ended June 30, 2025, and June 30, 2024.


(Dollars in thousands)	Six Months Ended June 30,				6/30/2025 vs. 6/30/2024
	2025		2024		$ Change		% Change
Non-interest expense:
Compensation and benefits	$	14,685	$	14,146	$	539	3.8	%
Occupancy and equipment	4,046		4,024		22		0.5
Data processing	2,380		2,305		75		3.3
Marketing	300		370		(70)		(18.9)
Federal deposit insurance premiums	904		898		6		0.7
Professional and outside services	2,375		2,814		(439)		(15.6)
Technology	999		1,132		(133)		(11.7)
Other	3,569		3,732		(163)		(4.4)
Total non-interest expense	$	29,258	$	29,421	$	(163)	(0.6)	%

Decreases in non-interest expenses during the six months ended June 30, 2025, were primarily attributable to non-recurring professional and outside service expenses occurring during 2024 which were associated with the implementation of the corrective actions set forth in the Consent Order and sale leaseback transaction, as well as lower technology costs in 2025. This decrease in non-interest expense was primarily offset by increases in compensation and benefit expense driven by annual merit-based increases.

The provision for income taxes was $126 thousand for the six months ended June 30, 2025 as compared to the provision of $963 thousand for the six months ended June 30, 2024. The effective tax rate was 4.6% for the six months ended June 30, 2025, as compared to 9.3% for the six months ended June 30, 2024. The Company’s year-to-date effective tax rate for the six months ended June 30, 2025, decreased primarily due to a decrease in estimated full year 2025 tax accrual based on updated projected earnings levels.

Critical Accounting Policies

The notes to the condensed consolidated financial statements included in Item 8 of the Company’s Annual Report on Form 10–K for 2024 contain a summary of the Company’s significant accounting policies. Certain of these policies are important to the portrayal of the Company’s financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain.

Forward-Looking Statements

Statements contained in this report that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words or phrases “would be,” “will allow,” “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” or similar expressions are also intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act. The Company cautions readers that forward-looking statements, including without limitation those relating to the Company’s future business prospects, merger and acquisition activities, interest income and expense, net income, liquidity, and capital needs are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements, due to, among other things, factors identified in this report, including those identified in the Company’s 2024 Form 10-K.

Non-GAAP Financial Measures

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.

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

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present net interest income and net interest margin on a fully tax-equivalent basis and that it may enhance comparability for peer comparison purposes.

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.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures.

The Company maintains disclosure controls and procedures (as defined in Sections 13a – 15(e) and 15d – 15(e)) of regulations promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”) that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. The Company's Chief Executive Officer and Chief Financial Officer evaluate the effectiveness of the Company's disclosure controls and procedures as of the end of each quarter. Based on that evaluation as of June 30, 2025, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that such disclosure controls and procedures were effective as of that date in ensuring that information required to be disclosed by the Company under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

(b) Changes in Internal Control Over Financial Reporting.

There was no change in the Company's internal control over financial reporting identified in connection with the Company’s evaluation of controls that occurred during the quarter ended June 30, 2025, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II ‑ Other Information

Item 1. Legal Proceedings

The Company and its subsidiaries, from time to time, are involved in legal proceedings in the ordinary course of business against its debtors and are defendants in legal actions arising from normal business activities. Management, after consultation with legal counsel believes that the ultimate liabilities, if any, resulting from these actions will not have a material adverse effect on the financial position of the Bank or on the consolidated financial position of the Company.

Item 1A. Risk Factors

Not Applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

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 during the quarter ended June 30, 2025 under the stock repurchase program.

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Period	Total Number of Shares Purchased (2)	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet Be Purchased Under the Program(1)



January 1, 2025 –January 31, 2025	-	N/A	-	48,828
February 1, 2025 – February 28, 2025	3,930	$26.38	-	48,828
March 1, 2025 – March 31, 2025	-	N/A	-	48,828
April 1, 2025 – April 30, 2025	485	$30.75	-	48,828
May 1, 2025 – May 31, 2025	690	$30.26	-	48,828
June 1, 2025 – June 30, 2025	-	N/A	-	48,828

(1) The stock repurchase program was announced on April 24, 2014, whereby the Company is authorized to repurchase up to 50,000 shares of the Company’s common stock outstanding. There is no express expiration date for this program.

(2) The number of shares above includes shares of common stock reacquired from the Company’s executive officers and employees to satisfy the tax withholding obligations on restricted stock awards granted under the Company’s 2015 Stock Option and Incentive Plan. For the six months ended June 30, 2025, 5,105 shares were reacquired at an average per share price of $27.32 pursuant to these tax withholding transactions.

Item 3. Defaults Upon Senior Securities

There are no matters reportable under this item.

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

During the fiscal quarter ended June 30, 2025, none of our directors or officers informed us of the adoption or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Item 408 of Regulation S-K.

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Item 6. Exhibits


Exhibit Number						Description

10.1						Finward Bancorp 2025 Omnibus Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated May 29, 2025).
10.2						Form of Incentive Stock Option Award Agreement under Finward Bancorp 2025 Omnibus Equity Incentive Plan (incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K dated May 29, 2025).
10.3						Form of Non-Qualified Stock Option Award Agreement under Finward Bancorp 2025 Omnibus Equity Incentive Plan (incorporated herein by reference to Exhibit 10.3 to the Company’s Form 8-K dated May 29, 2025).
10.4						Form of Restricted Stock Award Agreement under Finward Bancorp 2025 Omnibus Equity Incentive Plan (incorporated herein by reference to Exhibit 10.4 to the Company’s Form 8-K dated May 29, 2025).
10.5						Form of Restricted Stock Units Award Agreement under Finward Bancorp 2025 Omnibus Equity Incentive Plan (incorporated herein by reference to Exhibit 10.5 to the Company’s Form 8-K dated May 29, 2025).
10.6						Form of Performance Shares Award Agreement under Finward Bancorp 2025 Omnibus Equity Incentive Plan (incorporated herein by reference to Exhibit 10.6 to the Company’s Form 8-K dated May 29, 2025).
10.7						Form of Stock Appreciation Rights Award Agreement under Finward Bancorp 2025 Omnibus Equity Incentive Plan (incorporated herein by reference to Exhibit 10.7 to the Company’s Form 8-K dated May 29, 2025).
31.1						Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
31.2						R ule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
32.1						Section 1350 Certifications.
101						The following materials from the Company’s Form 10-Q for the quarterly period ended June 30, 2025, formatted in an XBRL Interactive Data File: (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Income; (iii) Condensed Consolidated Statements of Changes in Stockholders’ Equity; (iv) Condensed Consolidated Statement of Comprehensive Income; (v) Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated Financial Statements, with detailed tagging of notes and financial statement schedules.

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			FINWARD BANCORP


Date: August 13, 2025			/s/ Benjamin J. Bochnowski
			Benjamin J. Bochnowski
			President and Chief Executive Officer


Date: August 13, 2025			/s/ Benjamin L. Schmitt
			Benjamin L. Schmitt
			Executive Vice President, Chief Financial Officer and Treasurer

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Part I. Financial Information Item 1. Financial Statements and Notes (unaudited)Note 1 - Basis Of Presentation Note 2 - Use Of Estimates Note 3 Accounting Pronouncements Recently Adopted Or Issued Note 4 - Securities Note 5 - Loans Receivable Note 6 Intangibles and Acquisition-related Accounting Note 7 Deposits Note 8 - Concentrations Of Credit Risk Note 9 - Earnings Per Share Note 10 - Stock Based Compensation Note 11 Derivative Financial Instruments Note 12 - Fair Value Note 13 - Borrowings Note 14 - Leases Item 2. Management's Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II Other Information Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 5. Other Information Item 6. Exhibits

Exhibits

10.1 Finward Bancorp 2025 Omnibus Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Companys Form 8-K dated May 29, 2025). 10.2 Form of Incentive Stock Option Award Agreement under Finward Bancorp 2025 Omnibus Equity Incentive Plan (incorporated herein by reference to Exhibit 10.2 to the Companys Form 8-K dated May 29, 2025). 10.3 Form of Non-Qualified Stock Option Award Agreement under Finward Bancorp 2025 Omnibus Equity Incentive Plan (incorporated herein by reference to Exhibit 10.3 to the Companys Form 8-K dated May 29, 2025). 10.4 Form of Restricted Stock Award Agreement under Finward Bancorp 2025 Omnibus Equity Incentive Plan (incorporated herein by reference to Exhibit 10.4 to the Companys Form 8-K dated May 29, 2025). 10.5 Form of Restricted Stock Units Award Agreement under Finward Bancorp 2025 Omnibus Equity Incentive Plan (incorporated herein by reference to Exhibit 10.5 to the Companys Form 8-K dated May 29, 2025). 10.6 Form of Performance Shares Award Agreement under Finward Bancorp 2025 Omnibus Equity Incentive Plan (incorporated herein by reference to Exhibit 10.6 to the Companys Form 8-K dated May 29, 2025). 10.7 Form of Stock Appreciation Rights Award Agreement under Finward Bancorp 2025 Omnibus Equity Incentive Plan (incorporated herein by reference to Exhibit 10.7 to the Companys Form 8-K dated May 29, 2025). 31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. 31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. 32.1 Section 1350 Certifications.

FNWD 10-Q Quarter ended June 30, 2025

Exhibits