What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-30 compared with 2021-03-22 · 454 added, 503 removed, 1835 unchanged (34% of the section changed)

Financial Statements

Report of Independent Registered

Public Accounting Firm

To the Stockholders and Board of Directors 

NorthWest Indiana Bancorp and Subsidiaries

Report of Independent Registered Public Accounting Firm

To the Stockholders, Board of Directors and Audit Committee

Finward Bancorp

Munster, Indiana

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Finward Bancorp (the “Company”) as of December 31, 2021, the related consolidated statements of income, comprehensive income, changes in stockholders’

equity and cash flows for the year ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Page 58 of 108

Allowances for Loan Losses

Description of the Matter

As described in Note 4 to the financial statements, the Company’s loan portfolio totaled $966.7 million and associated allowance for loan losses (ALLL) was $13.3 million at December 31, 2021.

The Company also describes in Note 1 of the financial statements the accounting policy around this estimate.

The ALLL is an estimate of losses inherent in the loan and lease portfolio.

The determination of the reserve requires significant judgment reflecting the Company’s best estimate of probable loan losses.

The estimate consists of several key elements, which include:

specific reserves for impaired loans, general reserves for each business lending division portfolio including percentage allocations for special attention loans not deemed impaired, and reserves for pooled homogenous loans, among others.

The Company’s evaluation is based upon a continuing review of these portfolios, estimates of customer performance, collateral values and dispositions, and assessments of economic and geopolitical events, all of which are subject to judgment and change.

We identified the valuation of the ALLL as a critical audit matter.

Auditing the ALLL involves a high degree of subjectivity in evaluating management’s estimates, such as evaluating management’s assessment of economic conditions and other environmental factors used to adjust historical loss rates, evaluating the adequacy of specific reserves associated with impaired loans and assessing the appropriateness of loan grades.

How We Addressed the Matter in Our Audit

Our audit procedures related to the estimated allowance for loan losses included:

Testing the design of internal controls, including those related to technology, over the ALLL including data completeness and accuracy, classifications of loans by loan segment, historical loss data, the calculation of a loss rate, the establishment of qualitative adjustments, grading and risk classification of loans and establishment of specific reserves on impaired loans and management’s review controls over the ALLL balance.

Testing clerical and computational accuracy of the formulas within the ALLL model.

Testing the completeness and accuracy of the information and reports utilized in the ALLL, including reports used in management review controls over the ALLL.

Evaluating the qualitative adjustments to the historical loss rates, including assessing the basis for the adjustments and the reasonableness of the significant assumptions.

Testing of the loan review function and the accuracy of loan grades determined.

Specifically, utilizing internal and external loan grading professionals to assist us in evaluating the appropriateness of loan grades and to assess the reasonableness of specific impairments on loans.

Evaluating the overall reasonableness of qualitative factors and the appropriateness of their direction and magnitude, compared to previous years and the Company’s support for the direction and magnitude of the change.

We have served as the Company’s auditor since 2021.

Indianapolis, Indiana

March 30, 2022

Page 59 of 108

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Finward Bancorp and Subsidiaries

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of NorthWest Indiana Bancorp and Subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for each of the years in the two-year period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheet of Finward Bancorp (formerly known as NorthWest Indiana Bancorp) and Subsidiaries (the “Company”) as of December 31, 2020;

the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for the year ended December 31, 2020;

and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

The Company's management is responsible for these consolidated financial statements.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Page 66 of 117

Qualitative Factors used in the Allowance for Loan Losses –

Refer to Notes 1 and 4 to the Consolidated Financial Statements

Critical Audit Matter Description

As described in Notes 1 and 4 to the Company’s consolidated financial statements, the Company had a gross loan portfolio of approximately $966.6 million and related allowance for loan losses of approximately $12.5 million as of December 31, 2020.

The allowance for loan losses includes a reserve for loans collectively evaluated for impairment of approximately $10.7 million and loans individually evaluated for impairment of approximately $1.8 million.

The estimate of the collectively evaluated component of the allowance for loan losses considers the Company’s historical loss experience by loan segment, adjusted for qualitative factors based on general economic conditions and other qualitative risk factors.

These qualitative factors include changes in trends in volume and terms of loans, changes in loan concentrations, changes in the trends and severity of problem loans, current local and national economic conditions and trends including unemployment, changes in the banking industry including legal and regulatory requirements, changes in lending staff, policies and procedures, changes in the trends and severity of findings and downgrades from independent loan reviews.

These qualitative factors serve to compensate for additional areas of uncertainty inherent in the portfolio that are not reflected in the Company’s historic loss experience.

We identified the qualitative factors used in the allowance for loan losses as a critical audit matter because of the necessary judgement applied by us to evaluate management’s significant estimates and subjective assumptions in determining qualitative adjustments. 

How the Critical Audit Matter was Addressed in the Audit

Our audit procedures related to the qualitative factors used in the allowance for loan losses included the following, among others:

We obtained an understanding of management’s processes for identifying relevant qualitative factors and quantifying related adjustments.

We evaluated the design of controls over management’s evaluation of the allowance related to the qualitative factors used in the allowance for loan losses, including controls addressing management’s review of the qualitative and quantitative analysis related to the qualitative risk factors.

We evaluated the of reasonableness of management’s judgments related to qualitative adjustments in comparison to management’s policies.

We considered whether qualitative factors were consistently applied period over period, where applicable.

We evaluated whether management factors were supported by evidence from internal and external sources and loan portfolio performance.

We analytically evaluated the allowance related to loans collectively evaluated for impairment by loan segment year over year for reasonableness against overall trends in the economy, industry, and loan portfolio performance.

Goodwill Impairment Analysis –

Refer to Notes 1 and 7 to the Consolidated Financial Statements

Critical Audit Matter Description

The Company’s goodwill totaled $11.1 million as of December 31, 2020.

As described in Note 1 and 7 to the Company’s consolidated financial statements, goodwill is evaluated for impairment on an annual basis, or more often if events or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

During 2020 the Company’s market value fell below book value and the Company performed a quantitative assessment of goodwill for impairment with the assistance of a third-party valuation specialist as of June 30, 2020.

This evaluation resulted in the conclusion that the Company’s fair value exceeded the carrying value and no goodwill impairment was recorded.

With the assistance of another third-party valuation specialist, the Company performed another quantitative assessment as of December 31, 2020, the Company’s annual goodwill impairment evaluation date, which reached the same conclusion.

Page 67 of 117

We identified the evaluation of goodwill for impairment as a critical audit matter due to the subjective nature of the assumptions used to estimate the Company’s fair value.

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of the Company to its carrying value.

The Company, with the assistance of its third-party valuation specialists, determines its fair value using a blend of the income approach (discounted cash flow model) and market approach (guideline public company method or guideline transaction method).

The determination of the fair value using the discounted cash flow model requires management to make significant estimates and assumptions related to forecasts of future income, provision for credit losses, and discount rates, which are sensitive to changes in expectations about future market or economic conditions, including uncertainty resulting from the COVID-19 pandemic.

The determination of the fair value using the guideline public company method requires management to make significant assumptions related to price to tangible book value multiples and price to earnings multiples, as well as significant assumptions related to control premiums.

The determination of the fair value using the guideline transaction method requires management to review the value of the business based on pricing multiples derived from the sale of companies that are similar to the Company.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the estimated fair value of the Company, with the support of our internal valuation specialists, included the following, among others:

We obtained an understanding of the controls over management’s goodwill impairment evaluation

We evaluated the reasonableness of management’s forecasts by comparing the forecasts to (1) historical results, (2) internal communications to management and the Board of Directors, and (3) external information.

We assessed the appropriateness of methodologies selected by management and tested the reasonableness of significant assumptions by comparing to external sources.

We performed sensitivity analysis of significant assumptions to evaluate changes in the fair value estimate of the Company resulting from changes in the related assumptions.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Plante Moran, PLLC

Plante & Moran, PLLC

We have served as the Company’s auditor since 2009.

We served as the Company’s auditor from 2009 to 2021.

Chicago, Illinois

9 unchanged sentences

Federal funds sold

15,544  

Total cash and cash equivalents

7 unchanged sentences

11,329  

Loans receivable

Loans receivable, net of deferred fees and costs

966,720  

16 unchanged sentences

11,109  

Other intangible assets

14,854  

15 unchanged sentences

Borrowed funds

14,000  

Accrued expenses and other liabilities

4 unchanged sentences

1,344,603  

Commitments and contingencies

Stockholders' Equity:

26 unchanged sentences

Loans receivable

Real estate loans

$ 41,573  

$ 44,867  

Commercial loans

Consumer loans

Total loan interest

44,867  

44,455  

Other interest earning assets

14 unchanged sentences

Noninterest income:

Gain on sale of loans held-for-sale, net

Fees and service charges

Gain on sale of securities, net

Gain on sale of loans held-for-sale, net

Wealth management operations

Gain on sale of securities, net

Increase in cash value of bank owned life insurance

Gain on sale of foreclosed real estate

Benefit from bank owned life insurance

Total noninterest income

9 unchanged sentences

Professional services

10,059  

Total noninterest expense

17 unchanged sentences

Page 62 of 108

Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive Income

(Dollars in thousands)

3 unchanged sentences

Net change in net unrealized gains and losses on securities available-for-sale:

Unrealized gain arising during the period

Unrealized (loss) gain arising during the period

( 5,816 )  

10,169  

reclassification adjustment for gains included in net income

2 unchanged sentences

( 7,803 )  

Net of tax amount

Other comprehensive income (loss), net of tax  

( 6,165 )  

Comprehensive income, net of tax

11 unchanged sentences

$ 133,542  

Comprehensive income:

15,932  

Net unrealized loss on securities available-for- sale, net of reclassification and tax effects

Comprehensive income

19,154  

Other comprehensive income, net of tax

Net surrender value of 1,904 restricted stock awards

1 unchanged sentence

Stock-based compensation expense

Issuance of 416,478 shares at $42.00 per share, for acquisition of AJS Bancorp, Inc

17,492  

Cash dividends, $1.24 per share

5 unchanged sentences

$ 151,689  

Comprehensive income:

14,963  

Net unrealized gain on securities available-for- sale, net of reclassification and tax effects

Comprehensive income

Other comprehensive loss, net of tax

( 6,165 )  

12 unchanged sentences

Consolidated Statements of Cash Flows

NorthWest Indiana Bancorp

Consolidated Statements of Cash Flows

(Dollars in thousands)

11 unchanged sentences

Deferred tax expense

Amortization of mortgage servicing rights

Stock based compensation expense

Net surrender value of restricted stock awards

( 85 )  

Gain on sale of securities, net

2 unchanged sentences

( 5,529 )  

Gain on sale of premises and equipment, net

Gain on sale of foreclosed real estate

( 47 )  

Gain on derivatives

Gain on cash value of bank owned life insurance

( 715 )  

Benefit from bank owned life insurance

Loss (gain) on derivatives

Provision for loan losses

2 unchanged sentences

( 731 )  

( 1,817 )  

Accrued expenses and other liabilities

Total adjustments

Net cash - operating activities

( 8,828 )  

Net cash provided by operating activities

17,043  

19,736  

CASH FLOWS FROM INVESTING ACTIVITIES:

11 unchanged sentences

Loan participations purchased

( 9,054 )  

Net change in loans receivable

12,345  

Proceeds of Federal Home Loan Bank Stock

Purchase of Federal Home Loan Bank Stock

Purchase of loans receivable

( 14,543 )  

Purchase of premises and equipment, net

( 3,128 )  

Proceeds from sale of premises and equipment

Proceeds from sale of foreclosed real estate

Write down of foreclosed real estate

Cash and cash equivalents from acquisition activity, net

52,560  

Change in cash value of bank owned life insurance

( 708 )  

Net cash - investing activities

Net cash used in investing activities

( 125,931 )  

3 unchanged sentences

148,003  

Proceeds from FHLB advances

Repayment of FHLB advances

( 6,000 )  

Repayment of trust preferred security related to First Personal Merger

Net surrender value of restricted stock awards

( 131 )  

Change in other borrowed funds

1 unchanged sentence

( 4,310 )  

Net cash - financing activities

Net cash provided by financing activities

122,142  

2 unchanged sentences

13,254  

30,119  

Cash and cash equivalents at beginning of period

8 unchanged sentences

$ 5,865  

Acquisition activity:

Fair value of assets acquired, including cash and cash equivalents

$ 172,925  

Value of goodwill and other intangible assets

Fair value of liabilities assumed

145,546  

Cash paid for acquisition

15,743  

Issuance of common stock for acquisition

17,492  

Noncash activities:

Transfers from loans to foreclosed real estate

Dividends declared not paid

Securities purchased not settled

See accompanying notes to consolidated financial statements.

4 unchanged sentences

Principles of Consolidation –

The consolidated financial statements include NorthWest Indiana Bancorp (the “Bancorp”

or “NWIN”), its wholly-owned subsidiaries NWIN Risk Management, Inc.

The consolidated financial statements include Finward Bancorp (the “Bancorp”

or “Finward”), its wholly-owned subsidiaries NWIN Risk Management, Inc.

(a captive insurance subsidiary) 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.

14 unchanged sentences

Actual results could differ from those estimates.

Estimates associated with the allowance for loan losses, fair values of foreclosed real estate, loan servicing rights, investment securities, deferred tax assets, goodwill, and the status of contingencies are particularly susceptible to material change in the near term.

Estimates associated with the allowance for loan losses are particularly susceptible to material change in the near term.

Concentrations of Credit Risk –

26 unchanged sentences

Loans Held-for-Sale –

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair market value, as determined by outstanding commitments from investors.

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by outstanding commitments from investors.

Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings.

5 unchanged sentences

Interest income is accrued on the unpaid principal balance.

Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.

Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level‑yield method without anticipating prepayments.

The accrual of interest income on mortgage and commercial loans is discontinued at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection.

3 unchanged sentences

Generally, interest accrued but not received for loans placed on non-accrual status is reversed against interest income.

Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.

Interest received on such loans is accounted for on the cash-basis or cost‑recovery method, until qualifying for return to accrual.

Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

4 unchanged sentences

Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors.

Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged-off.

Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged‑off.

A loan is considered impaired when, based on current information and events, it is probable that the Bancorp will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.

16 unchanged sentences

The Company chose to apply this relief to eligible loan and lease modifications.

At December 31, 2020, loan and lease modification balances related to the COVID- 19 pandemic were $ 14.9 million.

At December 31, 2021, loan and lease modification balances related to the COVID- 19 pandemic were $ 927 thousand.

Some of the factors considered by management when determining whether a borrower is experiencing financial difficulties are:

30 unchanged sentences

Repurchase Agreements –

Substantially, all repurchase agreement liabilities represent amounts advanced by various customers that are not covered by federal deposit insurance and are secured by securities owned by the Bancorp.

Income Taxes –

18 unchanged sentences

Comprehensive income consists of net income and other comprehensive income.

Other comprehensive income includes unrealized gains and losses on securities available-for-sale and the unrecognized gains and losses on postretirement benefits.

Other comprehensive income includes unrealized gains and losses on securities available-for-sale.

Loss Contingencies –

2 unchanged sentences

Restrictions on Cash ––

Cash on hand or on deposit with the Federal Reserve Bank of $2.2 million was required to meet regulatory reserve and clearing requirements at December 31, 2019.

As of March 26, 2020, the Federal Reserve Bank eliminated reserve requirements for certain depository institutions, including the Bank.

As such, there was no reserve requirement at December 31, 2021.

These balances do not earn interest.

As part of derivative contracts entered into by the Bancorp, $ 3.9 million and $ 2.3 million was pledged as collateral at December 31, 2020 and 2019, respectively.

As part of derivative contracts entered into by the Bancorp, $ 3.9 million was pledged as collateral at December 31, 2021 and 2020.

These balances are included in interest bearing deposits.

At December 31, 2021, the Company’s correspondent cash accounts exceeded federally insured limits by $ 7.1 million.

Additionally, the Company had approximately $ 13.0 million of cash held by the FRB and the FHLB, which is not federally insured.

Fair Value of Financial Instruments –

21 unchanged sentences

Finally, this ASU amends the Overview and Background sections of the Accounting Standards Codification as part of the FASB’s initiative to unify and improve such sections across Topics and Subtopics.

The new guidance is effective for the Company’s year ending December 31, 2020, and was adopted on January 1, 2020.

The adoption of this ASU has not had a material impact on the consolidated financial statements, and the Bancorp has not recorded goodwill impairment to date related to their acquisition activity.

In March 2017, the FASB issued ASU 2017 - 08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310 - 20 ):

Premium Amortization on Purchased Callable Debt Securities.

This Standard amends the amortization period for certain purchased callable debt securities held at a premium.

In particular, the amendments in this ASU require the premium to be amortized to the earliest call date.

The amendments do not, however, require an accounting change for securities held at a discount;

instead, the discount continues to be amortized to maturity.

The amendments in this ASU more closely align the amortization period of premiums and discounts to expectations incorporated in market pricing on the underlying securities.

In fact, in most cases, market participants price securities to the call date that produces the worst yield when the coupon is above current market rates (i.e., the security is trading at a premium), and price securities to maturity when the coupon is below market rates (i.e., the security is trading at a discount), in anticipation that the borrower will act in its economic best interest.

The new guidance was effective for the Company’s year ending December 31, 2019, and was adopted on January 1, 2019.

The adoption of this ASU has not had a material impact on the consolidated financial statements, management has recognized amortization expense as dictated by the amount of premiums and the differences between maturity and call dates at the time of adoption.

The new guidance was effective for the Bancorp’s year ending December 31, 2020, and was adopted on January 1, 2020.

The adoption of this ASU has not had a material impact on the consolidated financial statements, and the Bancorp has not recorded goodwill impairment to date as part of their acquisition activity.

On January 1, 2020, the Bancorp adopted the provision of ASU 2018–13, which modifies the disclosure requirements on fair value measurements.

The amendment removes certain disclosures required by Topic 820 related to transfers between Level 1 and Level 2 of the fair value hierarchy;

the policy for timing of transfers between levels;

and the valuation processes for Level 3 fair value measurements.

The update also adds certain disclosure requirements related to changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.

For certain unobservable inputs, the Bancorp may disclose other quantitative information in lieu of the weighted average if we determine that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements.

The adoption of this new guidance did not have a material impact on our consolidated financial statements

In December 2019, the FASB issued ASU 2019 - 12 which remove specific exceptions to the general principles in Topic 740 in GAAP.

It eliminates the need for an organization to analyze whether the following apply in a given period:

exception to the incremental approach for intraperiod tax allocation;

exceptions to accounting for basis differences where there are ownership changes in foreign investments;

and exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses.

It also improves financial statement preparers’

application of income tax-related guidance and simplifies GAAP for:

franchise taxes that are partially based on income;

transactions with a government that result in a step up in the tax basis of goodwill;

separate financial statements of legal entities that are not subject to tax;

and enacts changes in tax laws in interim periods.

The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

Early adoption is permitted.

The Bancorp adopted ASU 2019 - 12 on January 1, 2021 and it did not have a material impact on its accounting and disclosures.

Upcoming Accounting Pronouncements -

7 unchanged sentences

The approval changed the effective date of the ASU to fiscal years beginning after December 15, 2022, including interim periods within those fiscal periods.

The new credit loss guidance will be effective for the Bancorp's year ending December 31, 2023.

The new credit loss guidance will be effective for the Bancorp's as of January 1, 2023.

Upon adoption, the ASU will be applied using a modified retrospective transition method to the beginning of the first reporting period in which the guidance is effective.

6 unchanged sentences

Management plans on running parallel calculations and finalizing a method or methods of adoption in time for the effective date.

NOTE 2 –

Acquisition Activity

On January 24, 2019, the Bancorp completed its previously announced acquisition of AJS Bancorp, Inc., a Maryland corporation (“AJSB”), pursuant to an Agreement and Plan of Merger dated July 30, 2018 between the Bancorp and AJSB (the “AJSB Merger Agreement”).

Pursuant to the terms of the AJSB Merger Agreement, AJSB merged with and into the Bancorp, with the Bancorp as the surviving corporation.

Simultaneously with the AJSB Merger, A.J.

Smith Federal Savings Bank, a federally chartered savings bank and wholly-owned subsidiary of AJSB, merged with and into Peoples Bank, with Peoples Bank as the surviving bank.

In connection with the AJSB Merger, each AJSB stockholder holding 100 or more shares of AJSB common stock received fixed consideration of (i) 0.2030 shares of Bancorp common stock, and (ii) $ 7.20 per share in cash for each outstanding share of AJSB’s common stock.

Stockholders holding less than 100 shares of AJSB common stock received $ 16.00 in cash and no stock consideration for each outstanding share of AJSB common stock.

Any fractional shares of Bancorp common stock that an AJSB stockholder would have otherwise received in the AJSB Merger were cashed out in the amount of such fraction multiplied by $ 43.01 .

The Bancorp issued 416,478 shares of Bancorp common stock to the former AJSB stockholders, and paid cash consideration of approximately $ 15.7 million.

Based upon the closing price of the Bancorp’s common stock on January 23, 2019, the transaction had an implied valuation of approximately $ 33.2 million, which includes unallocated shares held by the AJSB Employee Stock Ownership Plan (“ESOP”), some of which were cancelled in connection with the closing to satisfy the ESOP’s outstanding loan balance.

Acquisition costs incurred in 2019 related to the AJSB Merger were approximately $ 2.1 million.

The acquisition further expanded the Bank’s banking center network in Cook County, Illinois, expanding the Bank’s full-service retail banking network to 22 banking centers.

Under the acquisition method of accounting, the total purchase price is allocated to net tangible and intangible assets based on their current estimated fair values on the date of the acquisition.

Based on the valuations of the fair value of tangible and intangible assets acquired and liabilities assumed, the final purchase price for the AJSB acquisition is allocated as follows:

Cash and due from banks

In March 2020, the FASB issued ASU No.

2020 - 04 “Reference Rate Reform (Topic 848 ):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.”

These amendments provide temporary optional guidance to ease the potential burden in accounting for reference rate reform.

The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued.

It is intended to help stakeholders during the global market-wide reference rate transition period.

In January 2021, the FASB issued ASU 2021 - 01 which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

The guidance is effective for all entities as of March 12, 2020, through December 31, 2022.

The Bancorp is implementing a transition plan to identify and modify its loans and other financial instruments with attributes that are either directly or indirectly influenced by LIBOR.

The Bancorp believes the adoption of this guidance on activities after December 31, 2020, through December 31, 2022, will not have a material impact on the consolidated financial statements.

Revision of Previously Issued Financial Statements –

We have revised amounts reported in previously issued financial statements for the periods presented in this Annual Report on Form 10 -K related to immaterial errors discovered during the second quarter of 2021.

The errors relate to certain deferred costs recognized related to our manufactured home loan product, which resulted in increased assets and understatements of expense in prior periods.

We evaluated the aggregate effects of the errors to our previously issued financial statements in accordance with SEC Staff Accounting Bulletins No.

108 and, based upon quantitative and qualitative factors, determined that the errors were not material to the previously issued financial statements and disclosures included in our Annual Report on Form 10 -K for the year ended December 31, 2020.

The following tables present the revisions to the line items of our previously issued financial statements as of and for the year ended December 31, 2020, to reflect the correction of the errors:

Consolidated Balance Sheet

(Dollar amounts in thousands except for per share amounts)  

As of December 31, 2020

Loans receivable

$ 966,578  

Investment securities, available for sale

Residential mortgage

$ ( 1,432 )  

$ 965,146  

Premises and equipment, net

Core deposit intangible

Interest receivable

Total assets purchased

Net loans receivable

954,120  

Common shares issued

( 1,432 )  

952,688  

Total purchase price

13,681  

Non-interest bearing

13,880  

1,497,525  

Savings and money market

( 1,233 )  

Certificates of deposits

1,496,292  

Total Deposits

Retained earnings

112,494  

Interest payable

Other liabilities

Total liabilities assumed

( 1,233 )  

111,261  

Total shareholders' equity

152,922  

( 1,233 )  

151,689  

Total liabilities and stockholders' equity

1,497,525  

( 1,233 )  

1,496,292  

Consolidated Statement of Income

For the year ending December 31, 2020

Compensation and benefits

$ 22,065  

$ 22,855  

Total noninterest expense

40,846  

41,636  

Income before income tax expense

19,496  

( 790 )  

18,706  

Income tax expenses

( 118 )  

16,604  

( 672 )  

15,932  

Earnings per common share:

( 0.20 )  

Consolidated Statements of Comprehensive Income

For the year ending December 31, 2020

$ 16,604  

$ ( 672 )  

$ 15,932  

Comprehensive income, net of tax

22,784  

( 672 )  

22,112  

Consolidated Statements of Changes in Stockholders' Equity

Balance at January 1, 2020

Retained earnings

$ 100,185  

$ ( 561 )  

$ 99,624  

134,103  

( 561 )  

133,542  

For the year ending December 31, 2020

16,604  

( 672 )  

15,932  

Retained earnings

112,494  

( 1,233 )  

111,261  

152,922  

( 1,233 )  

151,689  

Consolidated Statements of Cash Flows

Year ended December 31, 2020

$ 16,604  

$ ( 672 )  

$ 15,932  

Deferred tax expense

( 118 )  

Net cash - operating activities

20,526  

( 790 )  

19,736  

Net change in loan

( 49,196 )  

Net cash - investing activities

( 185,850 )  

NOTE 2 –

Acquisition Activity

On January 31, 2022, Finward Bancorp (“Finward”) completed its previously announced acquisition of Royal Financial, Inc., a Delaware corporation (“RYFL”), pursuant to an Agreement and Plan of Merger dated July 28, 2021 ( the “Merger Agreement”) between Finward and RYFL.

The stockholders of both Finward and RYFL approved the Merger Agreement at the respective stockholder meetings of the companies held on December 13, 2021.

Pursuant to the Merger Agreement, RYFL merged with and into Finward, with Finward as the surviving corporation (the “Merger”), and Royal Savings Bank, an Illinois state chartered savings bank and wholly-owned subsidiary of RYFL, merged with and into Peoples Bank, the wholly-owned Indiana state chartered commercial bank subsidiary of Finward, with Peoples Bank as the surviving bank.

Under the terms of the merger agreement, RYFL stockholders who owned 101 or more shares of RYFL common stock were permitted to elect to receive either 0.4609 shares of Finward common stock or $ 20.14 in cash, or a combination of both, for each share of RYFL common stock owned, subject to proration and allocation provisions such that 65 % of the shares of RYFL common stock outstanding immediately prior to the closing of the merger were converted into the right to receive shares of Finward common stock and the remaining 35 % of the outstanding RYFL shares were converted into the right to receive cash.

Stockholders holding less than 101 shares of RYFL common stock received fixed consideration of $ 20.14 in cash per share and no stock consideration.

As a result of RYFL stockholder stock and cash elections and the related allocation and proration provisions of the merger agreement, Finward issued 795,423 shares of its common stock and paid cash consideration of approximately $ 18.7 million in the Merger.

Based on the January 28, 2022 closing price of $ 47.75 per share of Finward common stock, the transaction had an implied valuation of approximately $ 56.7 million.

In connection with the acquisition, Robert W.

Youman, was appointed to the boards of directors of Finward and Peoples Bank effective as of the closing of the Merger.

RYFL had a home office and eight branch offices in Cook County, Illinois.

As of December 31, 2021, RYFL reported total assets of $ 547.1 million, total loans of $ 464.8 million, and total deposits of $ 480.9 million.

The Bancorp is in the process of determining the fair value of assets purchased and liabilities assumed.

As a result of the acquisition, the combined company has approximately $ 2.2 billion in total assets, $ 1.4 billion in total loans, and $ 1.9 billion in deposits.

The acquisition has further expanded the Bank’s banking center network in Cook County, Illinois.

NOTE 3 –

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

1 unchanged sentence

December 31, 2021

Money market fund

government sponsored entities

$ 8,883  

$ ( 214 )  

government sponsored entities

$ 8,669  

treasury securities

Collateralized mortgage obligations and residential mortgage-backed securities

20 unchanged sentences

( 24 )  

13,058  

Collateralized mortgage obligations and residential mortgage-backed securities

13 unchanged sentences

$ 410,669  

The estimated fair value of available-for-sale securities and carrying amount, if different, at December 31, 2020, by contractual maturity were as follows.

The cost basis, estimated fair value of available-for-sale securities, and carrying amount, if different, at December 31, 2021, by contractual maturity were as follows.

Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.

Tax-equivalent yields were calculated using the 2020 tax rate.

(Dollars in thousands)

Available-for-sale

Tax-Equivalent

December 31, 2021

Due in one year or less

$ 52,941  

Due from one to five years

1 unchanged sentence

28,950  

29,846  

Due over ten years

302,907  

309,985  

Collateralized mortgage obligations and residential mortgage-backed securities

1 unchanged sentence

184,701  

$ 521,485  

$ 526,889  

Sales of available-for-sale securities were as follows:

16 unchanged sentences

12 months or longer

Percentage of

Total Portfolio

in Loss Position

December 31, 2021

3 unchanged sentences

$ 8,669  

$ ( 214 )  

Collateralized mortgage obligations and residential mortgage-backed securities

2 unchanged sentences

( 364 )  

134,482  

( 3,539 )  

Municipal securities

70,309  

( 527 )  

70,309  

( 527 )  

Collateralized debt obligations

( 1,181 )  

Total temporarily impaired

3 unchanged sentences

$ ( 1,545 )  

$ 214,452  

$ ( 5,461 )  

Number of securities

2 unchanged sentences

12 months or longer

Percentage of

Total Portfolio

in Loss Position

December 31, 2020

government sponsored entities

Collateralized mortgage obligations and residential mortgage-backed securities

$ 4,975  

2 unchanged sentences

$ ( 24 )  

Municipal securities

Collateralized mortgage obligations and

residential mortgage-backed securities

11,953  

( 36 )  

11,953  

( 36 )  

Municipal securities

Collateralized debt obligations

( 1,253 )  

Total temporarily impaired

4 unchanged sentences

$ ( 1,315 )  

Number of securities

Unrealized losses on securities have not been recognized into income because the securities are of high credit quality, have undisrupted cash flows, or have been independently evaluated for other-than-temporary impairment and appropriate write downs taken.

32 unchanged sentences

10,142  

15,804  

Loans receivable

960,139  

961,425  

Net deferred loan origination fees

Net deferred loan origination costs

Undisbursed loan funds

( 229 )  

Loans receivable

Loans receivable, net of deferred fees and costs

$ 966,720  

$ 965,146  

During 2020, the Bancorp funded loans under the Paycheck Protection Program which was created and designed to provide liquidity to small businesses during the COVID- 19 pandemic.

The loans are guaranteed by the SBA and loan proceeds to borrowers are forgivable by the SBA if certain criteria are met.

The Company originated PPP loans totaling $ 91.5 million during the year.

As of December 31, 2020, there were approximately $ 67.2 million of PPP loans included in the commercial business loan segment.

PPP processing fees received from the SBA totaling $ 3.5 million were deferred along with loan origination costs and recognized as interest income using the effective yield method.

Upon forgiveness of a loan and resulting repayment by the SBA, any unrecognized net fee for a given loan is recognized as interest income.

$ 1.2 million of the fees were recognized in 2020.

As of December 31, 2021, the Bancorp had remaining loan balances under the Paycheck Protection Program totaling $ 22.1 million and the balances are included in the commercial business segment.

(Dollars in thousands)

10 unchanged sentences

Construction and land development

( 17 )  

Farmland  

Commercial business

1 unchanged sentence

( 377 )  

Manufactured homes

( 29 )  

Manufactured homes

$ 12,458  

11 unchanged sentences

Construction and land development

( 17 )  

Commercial business

14 unchanged sentences

(Dollars in thousands)

Allowance for

evaluated for

Allowance for

evaluated for

5 unchanged sentences

evaluated for

for impairment

Loans collectively

evaluated for

The Bancorp's allowance for loan losses impairment evaluation and loan receivables are summarized below at December 31, 2021:

25 unchanged sentences

$ 954,331  

$ 8,455  

$ 3,366  

$ 954,757  

The Bancorp's allowance for loan losses impairment evaluation and loan receivables are summarized below at December 31, 2020:

27 unchanged sentences

$ 3,366  

$ 949,604  

The Bancorp's credit quality indicators are summarized below at December 31, 2021 and December 31, 2020:

1 unchanged sentence

December 31, 2021

(Dollars in thousands)  

Above average

(Dollars in thousands)

Special mention

7 unchanged sentences

34,612  

$ 285,651  

31,974  

39,286  

Commercial real estate

3 unchanged sentences

317,145  

298,257  

Construction and land development

4 unchanged sentences

61,194  

50,571  

Commercial business

2 unchanged sentences

115,772  

20,067  

156,965  

Manufactured homes

6 unchanged sentences

$ 960,139  

$ 136,073  

$ 22,684  

$ 16,627  

$ 966,578  

December 31, 2020

(Dollars in thousands)  

Above average

(Dollars in thousands)

Special mention

7 unchanged sentences

39,233  

40,027  

49,181  

Commercial real estate

9 unchanged sentences

50,571  

26,800  

51,286  

Commercial business

2 unchanged sentences

158,140  

20,009  

103,088  

Manufactured homes

8 unchanged sentences

$ 961,425  

$ 8,092  

$ 906,869  

The Bancorp 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 theses grades by the Bancorp is uniform and conforms to regulatory definitions.

The use and application of these grades by the Bancorp is uniform and conforms to regulatory definitions.

During the year, the Bancorp updated its risk rating naming structure, however the underlying grading system has not changed.

The loan grading system is as follows:

Borrower demonstrates exceptional credit fundamentals, including stable and predictable profit margins, strong liquidity and a conservative balance sheet with superior asset quality.

Excellent cash flow coverage of existing and projected debt service.

Historic and projected performance indicates borrower is able to meet obligations under almost any economic circumstances.

Moderate risk

Borrower consistently internally generates sufficient cash flow to fund debt service, working assets, and some capital expenditures.

Risk of default considered low.

Above average acceptable risk

Borrower generates sufficient cash flow to fund debt service and some working assets and/or capital expansion needs.

Profitability and key balance sheet ratios are at or slightly above peers.

Current trends are positive or stable.

Earnings may be level or trending down slightly or be erratic;

however, positive strengths are offsetting.

Risk of default is reasonable but may warrant collateral protection.

Acceptable risk

Borrower generates sufficient cash flow to fund debt service, but most working asset and all capital expansion needs are provided from external sources.

Profitability ratios and key balance sheet ratios are usually close to peers but one or more ratios (e.g.

leverage) may be higher than peer.

Earnings may be trending down over the last three years.

Borrower may be able to obtain similar financing from other banks with comparable or less favorable terms.

Risk of default is acceptable but requires collateral protection.

Marginally acceptable risk

Borrower may exhibit excessive growth, declining earnings, strained cash flow, increasing leverage and/or weakening market position that indicate above average risk.

Limited additional debt capacity, modest coverage, and average or below average asset quality, margins and market share.

Interim losses and/or adverse trends may occur, but not to the level that would affect the Bank’s position.

The potential for default is higher than normal but considered marginally acceptable based on prospects for improving financial performance and the strength of the collateral.

The borrower has significant weaknesses resulting from performance trends or management concerns.

The financial condition of the company has taken a negative turn and may be temporarily strained.

Cash flow may be weak but cash reserves remain adequate to meet debt service.

Management weaknesses are evident.

Borrowers in this category will warrant more than the normal level of supervision and more frequent reporting.

Special mention (watch)

Special mention credits are considered bankable assets with no apparent loss of principal or interest envisioned but requiring a high level of management attention.

Assets in this category are currently protected but are potentially weak.

These borrowers are subject to economic, industry, or management factors having an adverse impact upon their prospects for orderly service of debt.

The perceived risk in continued lending is considered to have increased beyond the level where such loans would normally be granted.

These assets constitute an undue and unwarranted credit risk, but not to the point of justifying a classification of Substandard.

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.

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.

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.

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.

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.

Borrowers are considered credit worthy 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.

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.

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 institution’s credit position at some future date.

Special mention assets are not adversely classified and do not expose an institution 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.

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.

2 unchanged sentences

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.

This classification consists of loans where the possibility of loss is high after collateral liquidation based upon existing facts, market conditions, and value.

Loss is deferred until certain important and reasonably specific pending factors which may strengthen the credit can be exactly determined.

These factors may include proposed acquisitions, liquidation procedures, capital injection and receipt of additional collateral, mergers or refinancing plans.

Performing loans are loans that are paying as agreed and are less than ninety days past due on payments of interest and principal.

Such loans have been placed on nonaccrual 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.

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

Performing loans are loans that are paying as agreed and are approximately less than ninety days past due on payments of interest and principal.

During the twelve months ending December 31, 2021, three residential real estate loans to three customer totaling $ 203 thousand were modified to include deferral of principal or interest resulting in troubled debt restructuring classification.

One commercial business loan totaling $ 601 thousand was provided a short-term renewal and a pending long term restructure resulting in troubled debt restructuring classification.

One residential real estate trouble debt restructuring loan totaling $ 37 thousand had subsequently defaulted during the twelve months ending December 31, 2021.

During the twelve months ending December 31, 2020, one residential real estate loan totaling $ 108 thousand was a new troubled debt restructuring loan.

3 unchanged sentences

The valuation basis for the Bancorp’s troubled debt restructurings is based on the present value of cash flows, unless consistent cash flows are not present, then the fair value of the collateral securing the loan is the basis for valuation.

In March of 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed into law.

Among other things, the CARES Act suspends the requirements related to accounting for TDRs for certain loan modifications related to the COVID- 19 pandemic.

As a result of the pandemic, the Company provided a modification program to borrowers that included certain concessions such as interest only or payment deferrals.

As of December 31, 2020, there were $ 14.9 million of loans that remained under a modification agreement but are not disclosed as TDRs.

Regardless of whether a modification is classified as a TDR, the Company continues to apply policies for risk rating, accruing interest, and classifying loans as impaired.

As of December 31, 2020, there were $ 6.5 million and $ 5.2 million of loans outstanding under provisions of the CARES act and rated substandard and special mention, respectively.

The Bancorp's individually evaluated impaired loans are summarized below:

5 unchanged sentences

Related Allowance

Average Recorded

Average Recorded Investment

Interest Income

22 unchanged sentences

$ 5,894  

$ 3,414  

Construction & land development

4 unchanged sentences

Manufactured homes

The Bancorp's individually evaluated impaired loans are summarized below:

For the twelve months ended

3 unchanged sentences

Unpaid Principal

Average Recorded

Related Allowance

Average Recorded Investment

Interest Income

22 unchanged sentences

$ 1,089  

$ 3,414  

Construction & land development....

22 unchanged sentences

34,612  

39,286  

Commercial real estate

18 unchanged sentences

$ 960,139  

$ 966,578  

December 31, 2020

29 unchanged sentences

$ 961,425  

$ 906,869  

The Bancorp's loans on nonaccrual status are summarized below:

(Dollars in thousands)  

December 31,   

(Dollars in thousands)

Residential real estate

10 unchanged sentences

At December 31, 2020, purchased credit impaired loans with unpaid principal balances totaled $ 5.4 million with a recorded investment of $ 3.4 million.

As the result of the acquisition of First Personal Financial Corp.

(“First Personal”), which closed in July 2018, an accretable discount totaling $ 424 thousand was created for the interest component of expected cash flows related to the purchase credit impaired portfolio.

The following tables summarize the accretable periods:

Accretable interest taken from the purchase credit impaired portfolio, or income recorded for the twelve months ended December 31, is as follows:

(dollars in thousands)

First Personal

Accretable interest taken from the purchase credit impaired portfolio, or income expected to be recorded in the future is as follows:

(dollars in thousands)

First Personal

For the acquisitions of First Federal Savings & Loan of Hammond (“First Federal”), Liberty Savings Bank (“Liberty Savings”), First Personal, and AJSB as part of the fair value of loans receivable, a net fair value discount was established for loans.

This discount, or accretable yield, is recognized in interest income over the remaining estimated life of the loan pools.

The net fair value discount at the acquisition date and accretable periods are summarized below:

(dollars in thousands)

First Federal

Libery Savings

First Personal

Net fair value

Accretable period

Net fair value

Accretable period

Net fair value

Accretable period

Net fair value

Accretable period

Residential real estate

$ 1,062  

$ 1,203  

$ 3,734  

Commercial real estate

Construction and land development

Commercial business

Purchased credit impaired loans

$ 1,106  

$ 1,208  

$ 2,137  

$ 3,886  

Accretable yield, or income recorded for the twelve months ended December 31, is as follows:

The accretable interest portion of the purchase credit impaired portfolio has fully amortized at December 31, 2021.

As part of the fair value of loans receivable, there was a net fair value discount for loans acquired of $ 1.1 million at December 31, 2021, compared to $ 2.0 million at December 31, 2020.

Total unpaid principal balances of acquired non-impaired loans with remaining fair value discount totaled $ 72.5 million and $ 106.6 million as of December 31, 2021, and December 31, 2020, respectively.

Accretable yield, or income recorded for the nine months ended December 31, is as follows:

(dollars in thousands)

First Federal

Libery Savings

First Personal

$ 1,820  

$ 1,824  

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

(dollars in thousands)

First Personal

$ 1,058  

$ 2,018  

Note 5 –

23 unchanged sentences

Residential real estate

Commercial real estate

Commercial business

$ 1,083  

Note 7 –

1 unchanged sentence

The Bancorp established a goodwill balance totaling $ 11.1 million from past acquisitions.

Goodwill of $ 2.9 million, $ 5.4 million, $ 2.0 million, and $ 804 thousand were established with the acquisition of AJSB, First Personal, First Federal, and Liberty Savings, respectively.

Goodwill is tested annually for impairment.

2 unchanged sentences

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.

As a result of the COVID- 19 outbreak, and its broad effects on the economy, the Bancorp deemed it necessary to perform an interim impairment test of goodwill as of June 30, 2020.

The Bancorp enlisted a third party expert to assist with the evaluation of goodwill for impairment.

The evaluation involved the comparison of the fair value of the Bancorp to its carrying value.

The Company determined its fair value using a blend of the income approach (discounted cash flow model) and market approach (guideline public company method).

The determination of the fair value using the discounted cash flow model required the Bancorp to make significant estimates and assumptions related to forecasts of future income, provision for credit losses, and discount rates.

The determination of the fair value using the guideline public company method required management to make significant assumptions related to price to tangible book value multiples and price to earnings multiples, as well as significant assumptions related to control premiums.

The Bancorp’s estimation of fair value for the quantitative goodwill impairment testing exceeded its carrying value as of June 30, 2020 and therefore, no impairment was recognized.

Additionally, as part of the Bancorp’s annual impairment test of goodwill as of December 31, 2020, the Bancorp enlisted another third party expert to assist with the evaluation of goodwill for impairment.

The evaluation involved the comparison of the fair value of the Bancorp to its carrying value.

The Company determined its fair value using a blend of the income approach (discounted cash flow model) and market approach (guideline public company method and guideline transaction method).

The determination of the fair value using the guideline transaction method required management to review the value of the business based on pricing multiples derived from the sale of companies that are similar to the Bancorp.

The Bancorp’s estimation of fair value for the quantitative goodwill impairment testing exceeded its carrying value as of December 31, 2020 and therefore, no impairment was recognized.

There has not been any impairment of goodwill identified or recorded.

Goodwill totaled $ 11.1 million as of December 31, 2020 and December 31, 2019.

In addition to goodwill, a core deposit intangible of $ 93 thousand for the acquisition of First Federal was established and is being amortized over an initial period of 7.9 years on a straight line basis.

A core deposit intangible of $ 471 thousand for the acquisition of Liberty Savings was established and is being amortized over an initial period of 8.2 years on a straight line basis.

A core deposit intangible of $ 3.0 million for the acquisition of First Personal was established and is being amortized over an initial period of 6.4 years on a straight line basis.

A core deposit intangible of $ 2.9 million for the acquisition of AJSB was established and is being amortized over an initial period of 6.5 years on a straight line basis.

Goodwill totaled $ 11.1 million as of December 31, 2021 and December 31, 2020, respectively.

In addition to goodwill, core deposit intangibles were established from past acquisitions and are subject to amortization.

As of December 31, 2021, the Bancorp had core deposit intangible balances of $ 3.1 million.

The table below summarizes the annual amortization:

1 unchanged sentence

(dollars in thousands)

First Federal

Liberty Savings

First Personal

The expected future annual amortization for the twelve months ended December 31, as follows:

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

(dollars in thousands)

First Federal

Liberty Savings

First Personal

$ 3,126  

$ 2,057  

$ 4,119  

For the First Personal acquisition, as part of the fair value of certificates of deposit, a fair value premium was established of $ 133 thousand that was being amortized over 8 months on a straight line basis.

Amortization taken into income was approximately $ 53 thousand during 2019.

The premium was fully amortized as of December 31, 2019.

For the AJSB acquisition, as part of the fair value of certificates of deposit, a fair value premium was established of $ 174 thousand that was being amortized over 14 months on a straight line basis.

Approximately $ 34 thousand and $ 140 thousand of amortization was taken as a reduction to expense during 2020 and 2019, respectively.

The fair market premium on the certificates of deposit has fully amortized as of year-ended December 31, 2020.

Note 8 –

4 unchanged sentences

Deferred, net of valuation allowance

( 17 )  

Income tax expense

16 unchanged sentences

( 415 )  

Non-deductible transaction costs

( 140 )  

Total income tax expense 

$ 1,414  

13 unchanged sentences

Accrued vacation

Impairment on land

Nondeductible transaction costs

Deferred loan costs, net of fees

Total deferred tax assets

6 unchanged sentences

( 100 )  

Deferred loan costs, net of fees

( 288 )  

Unrealized appreciation on securities available-for-sale, net

10 unchanged sentences

$ 2,845  

At December 31, 2020, the Bancorp has an Indiana net operating loss carry forward of approximately $ 1.1 million which will begin to expire in 2026 if not used.

The Bancorp also has an Indiana tax credit carry forward of approximately $ 88 thousand which began to expire in 2017 and will continue to expire if not used.

Management has concluded that the Indiana net operating loss will be fully utilized and therefore no valuation allowance is necessary on the Indiana net operating loss.

A valuation allowance remains in place on the Indiana tax credit carryforward.

A valuation allowance of $ 22 thousand and $ 92 thousand was provided at December 31, 2020 and 2019, respectively, for the Indiana tax credits.

$ 1,344  

At December 31, 2021, the Bancorp has Indiana net operating loss carry forwards of approximately $ 186 which will begin to expire in 2026 if not used.

The Bancorp also has a state tax credit carry forward of approximately $ 86 thousand which began to expire in 2017 and will continue to expire if not used.

Management has concluded that the state net operating losses will be fully utilized and therefore no valuation allowance is necessary on the state net operating loss.

A valuation allowance remains in place on the state tax credit carryforward that is not expected to be utilized before expiration.

A valuation allowance of $ 12 thousand and $ 22 thousand was provided at December 31, 2021, and 2020, respectively, for the state tax credits net of federal benefit.

The Bancorp acquired $ 3.3 million of federal net operating loss carryforwards and $ 7.2 million of Illinois net operating loss carryforwards with the acquisition of First Personal Financial Corp during 2018 of which $ 2.2 million of the federal losses expire in years ranging from 2028 to 2035, $ 1.1 million of the federal losses do not expire, and the Illinois losses expire in years ranging from 2019 to 2031.

8 unchanged sentences

The Bancorp qualified under provisions of the Internal Revenue Code, to deduct from taxable income a provision for bad debts in excess of the provision for such losses charged to income in the financial statements, if any.

Accordingly, retained earnings at December 31, 2020, and 2019, includes, approximately $ 8.4 million for which no provision for income taxes has been made.

If, in the future this portion of retained earnings is used for any purpose other than to absorb bad debt losses, income taxes would be imposed at the then applicable rates.

The unrecorded deferred income tax liability on the above amounts was approximately $ 2.2 million at December 31, 2020, and 2019.

Accordingly, retained earnings at December 31, 2021, and 2020, includes, approximately $ 8.4 million for which no provision for federal income taxes has been made.

If, in the future this portion of retained earnings is used for any purpose other than to absorb bad debt losses, federal income taxes would be imposed at the then applicable rate.

The unrecorded deferred income tax liability on the above amounts was approximately $ 2.2 million at both December 31, 2021, and 2020.

The Bancorp had no unrecognized tax benefits at any time during 2021 or 2020 and does not anticipate any significant increase or decrease in unrecognized tax benefits during 2021.

10 unchanged sentences

$ 239,217  

Note 10 –

Borrowed Funds

At December 31, 2020, and December 31, 2019, borrowed funds are summarized below:

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

(Dollars in thousands)

Fixed rate advances from the FHLB

$ 629,038  

2 unchanged sentences

254,108  

At December 31, 2020, scheduled maturities of borrowed funds were as follows:

271,970  

246,916  

Certificates of deposit

239,217  

284,828  

Total deposits

$ 1,434,201  

$ 1,302,339  

Note 10 –

Borrowed Funds

At December 31, 2021, and December 31, 2020, borrowed funds are summarized below:

(Dollars in thousands)

Fixed rate advances from the FHLB

$ 6,000  

26 unchanged sentences

(Dollars in thousands)

Fixed rate advances, maturing January 2021 through March 2021 at rates from 2.65% to 2.68%;

Fixed rate advances, none oustanding as of year ended 2021;

average rate:

2 unchanged sentences

$ 6,000  

$ 14,000  

Fixed rate advances are payable at maturity, with a prepayment penalty.

The advances were collateralized by mortgage loans with a carrying value totaling approximately $ 506.4 million and $ 340.0 million at December 31, 2020 and 2019, respectively.

The advances were collateralized by mortgage loans with a carrying value totaling approximately $ 506.4 million at December 31, 2021.

In addition to the fixed rate advances, the Bancorp maintains a $ 25.0 million line of credit with the Federal Home Loan Bank of Indianapolis.

The Bancorp did not have a balance on the line of credit at December 31, 2021 or December 31, 2020.

As of December 31, 2020, the Bancorp had outstanding federal funds purchased of $ 149 thousand, the Bancorp did not have other borrowings at December 31, 2019.

The Bancorp did not have other borrowings at December 31, 2021, as of December 31, 2020, the Bancorp had outstanding federal funds purchased of $ 149 thousand.

Note 11 –

30 unchanged sentences

Fee deferrals, including interest, totaled approximately $ 74 thousand and $ 68 thousand for 2021 and 2020, respectively.

The deferred fee liability at December 31, 2020 and 2019 was approximately $ 1.4 million and $ 1.3 million, respectively.

The deferred fee liability at December 31, 2021 and 2020 was approximately $ 1.4 million.

Note 12 –

11 unchanged sentences

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 capital conservation buffer requirement was phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and increased each year until the buffer requirement became fully effective on January 1, 2019.

The following table shows that, at December 31, 2020, and 2019, the Bancorp’s capital exceeded all applicable regulatory capital requirements.

The dollar amounts are in millions.

(Dollars in millions)

Minimum Required To Be

Minimum Required For

Well Capitalized Under Prompt

Capital Adequacy Purposes

Corrective Action Regulations

At December 31, 2020

Common equity tier 1 capital to risk-weighted assets

$ 125.3  

12.8 %  

$ 43.9  

Tier 1 capital to risk-weighted assets

$ 125.3  

12.8 %  

$ 58.6  

Total capital to risk-weighted assets

$ 137.5  

14.0 %  

$ 78.1  

Tier 1 capital to adjusted average assets

$ 125.3  

$ 59.2  

(Dollars in millions)

Minimum Required To Be

Minimum Required For

Well Capitalized Under Prompt

Capital Adequacy Purposes

Corrective Action Regulations

At December 31, 2019

Common equity tier 1 capital to risk-weighted assets

$ 110.8  

11.8 %  

$ 42.4  

Tier 1 capital to risk-weighted assets

$ 110.8  

11.8 %  

$ 56.5  

Total capital to risk-weighted assets

$ 119.8  

12.7 %  

$ 75.3  

Tier 1 capital to adjusted average assets

$ 110.8  

$ 52.3  

In addition, the following table shows that, at December 31, 2021, and 2020, the Bank’s capital exceeded all applicable regulatory capital requirements.

63 unchanged sentences

On November 19, 2021 the Board of Directors of the Bancorp declared a fourth quarter dividend of $ 0.31 per share.

The Bancorp’s fourth quarter dividend was paid to shareholders on January 8, 2021.

The Bancorp’s fourth quarter dividend totaling $ 1.1 million was paid to shareholders on January 7, 2022.

Note 13 –

3 unchanged sentences

The purposes of the Plan are (i) to align the personal interests of plan participants with those of the shareholders of the Bancorp, (ii) to encourage key individuals to accept or continue employment or service with the Bancorp and its subsidiaries, and (iii) to furnish incentives to such key individuals to improve operations and increase profits by providing such key individuals the opportunity to acquire common stock of the Bancorp or to receive monetary payments based on the value of such common stock.

Option awards are generally granted with an exercise price equal to the market price of the Bancorp’s common stock at the date of grant.

No expense was charged against income for incentive stock options during 2020 or 2019.

The fair value of each incentive stock option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model.

13 unchanged sentences

Shares were surrendered with a total value of $ 131 thousand and $ 85 thousand in 2021 and 2020, respectively.

A summary of changes in the Bancorp’s non-vested restricted stock for 2021 and 2020 follows:

4 unchanged sentences

13,243  

( 6,400 )  

( 220 )  

Non-vested at December 31, 2020

16 unchanged sentences

A reconciliation of the numerators and denominators of the basic earnings per common share and diluted earnings per common share computations for 2021 and 2020 is presented below.

(dollars in thousands except per share data)

Basic earnings per common share:

50 unchanged sentences

10,778  

16,093  

Construction and land development

35 unchanged sentences

Standby letters of credit are conditional commitments issued by the Bancorp to guarantee the performance of a customer to a third party.

At December 31, 2020 and 2019, the Bancorp had standby letters of credit totaling approximately $ 11.5 million which are not included in the tables above.

At December 31, 2021, and 2020, the Bancorp had standby letters of credit totaling approximately $ 12.3 and $ 11.5 million which are not included in the tables above, respectively.

The Bancorp evaluates each customer’s creditworthiness on a case-by-case basis.

3 unchanged sentences

Derivative Financial Instruments

The Bancorp 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 Bancorp has certain interest rate derivative positions that are not designated as hedging instruments.

10 unchanged sentences

December 31, 2021

Notational or

Notational or contractual

Asset derivatives

1 unchanged sentence

(Dollars in thousands)

contractual amount

Statement of Financial Condition classification

6 unchanged sentences

Interest rate lock commitments

26,443  

 N/A  

$ 101,991  

2 unchanged sentences

December 31, 2020

Notational or

Notational or contractual

Asset derivatives

1 unchanged sentence

(Dollars in thousands)

contractual amount

Statement of Financial Condition classification

17 unchanged sentences

Gain on sale of loans held-for-sale, net

( 233 )  

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

111 unchanged sentences

To perform the annual other-than-temporary impairment analysis, management utilizes current reports issued by the trustee, which contain principal and interest tests, waterfall distributions, note valuations, collection detail and credit ratings for each pooled trust preferred security.

In addition, a detailed review of the performing collateral (which consists of banks and thrifts) was performed.

The review of the collateral began with a review of financial information provided by SNL Financial, a comprehensive database, widely used in the industry, which gathers financial data on banks and thrifts from U.S.

GAAP financial statements for public companies (annual and quarterly reports on Forms 10 -K and 10 -Q), as well as regulatory reports for private companies, including consolidated financial statements for bank holding companies (FR Y- 9C reports) and parent company-only financial statements for bank holding companies (FR Y- 9LP reports) filed with the Federal Reserve and bank call reports filed with the FDIC and OCC.

In addition, a detailed review of the performing collateral (which consists of banks) was performed.

GAAP financial statements for public companies (annual and quarterly reports on Forms 10 -K and 10 -Q), as well as regulatory reports for private companies, including consolidated financial statements for bank holding companies (FR Y- 9C reports) and parent company-only financial statements for bank holding companies (FR Y- 9SP reports) filed with the Federal Reserve and bank call reports filed with the FDIC and OCC.

Using the information sources described above, for each bank and thrift examined, the following items were examined:

53 unchanged sentences

Observable Inputs

Available-for-sale debt securities:

Money market fund

Interest rate swap contracts

$ 2,686  

Interest rate lock commitments

Available-for-sale debt securities:

government sponsored entities

treasury securities

Collateralized mortgage obligations and residential mortgage-backed securities

8 unchanged sentences

$ 525,897  

Interest rate swap contracts

$ 2,686  

(Dollars in thousands)

1 unchanged sentence

(Dollars in thousands)

Quoted Prices in

Active Markets for

Identical Assets

Significant Other

Observable Inputs

Quoted Prices in Active Markets for Identical Assets

Significant Other Observable Inputs

Significant Unobservable Inputs

Interest rate swap contracts

$ 3,638  

Interest rate lock commitments

Available-for-sale debt securities:

3 unchanged sentences

government sponsored entities

13,058  

Collateralized mortgage obligations and residential mortgage-backed securities

9 unchanged sentences

$ 356,799  

Interest rate swap contracts

$ 3,638  

A reconciliation of available-for-sale securities, which require significant adjustment based on unobservable data, is presented below:

9 unchanged sentences

Total unrealized losses, included in other comprehensive income..

Sale out of Level 3

Ending balance, December 31, 2020

$ 1,076  

Beginning balance, January 1, 2021

$ 1,076  

Principal payments

Total unrealized gains, included in other comprehensive income

Sale out of Level 3

Ending balance, December 31, 2021

Assets and Lia bilities Measured at Fair Value on a Non-Recurring Basis

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

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

2 unchanged sentences

(Dollars in thousands)

Quoted Prices in

Active Markets for

Identical Assets

Significant Other

Observable Inputs

Quoted Prices in Active Markets for Identical Assets

Significant Other Observable Inputs

Significant Unobservable Inputs

Impaired loans

$ 10,046  

Foreclosed real estate

2 unchanged sentences

(Dollars in thousands)

Quoted Prices in

Active Markets for

Identical Assets

Significant Other

Observable Inputs

Quoted Prices in Active Markets for Identical Assets

Significant Other Observable Inputs

Significant Unobservable Inputs

Impaired loans

2 unchanged sentences

Foreclosed real estate

The fair value of impaired loans with specific allocations of the allowance for loan losses or loans for which charge-offs have been taken is generally based on the present value of future cash flows or, for collateral dependent loans, based on recent real estate appraisals.

Appraisals may utilize a single valuation approach or a combination of approaches, including comparable sales and the income approach.

The recorded investment of impaired loans was approximately $ 11.8 million and the related specific reserves totaled approximately $ 1.8 million, resulting in a fair value of impaired loans totaling approximately $ 10.0 million, at December 31, 2020.

The recorded investment of impaired loans was approximately $ 7.2 million and the related specific reserves totaled approximately $ 166 thousand, resulting in a fair value of impaired loans totaling approximately $ 7.1 million, at December 31, 2019.

Fair value is determined, where possible, using market prices derived from an appraisal or evaluation, which are considered to be Level 2 inputs.

9 unchanged sentences

Quoted Prices in

Active Markets for

Identical Assets

Active Markets for Identical Assets

Other Observable

5 unchanged sentences

Certificates of deposit in other financial institutions

Securities available-for-sale

410,669  

52,941  

356,799  

Loans held-for-sale

11,329  

11,660  

Loans receivable, net

3 unchanged sentences

Federal Home Loan Bank stock

Interest rate swap agreements

Accrued interest receivable

14 unchanged sentences

Borrowed funds

Interest rate swap agreements

Accrued interest payable

3 unchanged sentences

Quoted Prices in

Active Markets for

Identical Assets

Active Markets for Identical Assets

Other Observable

5 unchanged sentences

Certificates of deposit in other financial institutions

Securities available-for-sale

Loans held-for-sale

11,329  

1 unchanged sentence

11,660  

Loans held-for-sale

Loans receivable, net

3 unchanged sentences

Federal Home Loan Bank stock

Interest rate swap agreements

Accrued interest receivable

12 unchanged sentences

13,713  

Borrowed funds

11,976  

14,108  

Interest rate swap agreements

Borrowed funds

Accrued interest payable

18 unchanged sentences

(Dollars in thousands)

NorthWest Indiana Bancorp

Finward Bancorp

Condensed Balance Sheets

Cash on deposit with Peoples Bank

$ 1,183  

Investment in Peoples Bank

26 unchanged sentences

(Dollars in thousands)

NorthWest Indiana Bancorp

Finward Bancorp

Condensed Statements of Income

5 unchanged sentences

Income before income taxes and equity in undistributed income of Peoples Bank

18,902  

Income tax benefit

1 unchanged sentence

Income before equity in undistributed income of Peoples Bank

19,003  

Equity in undistributed (distributions in excess of income) income of Peoples Bank

4 unchanged sentences

(Dollars in thousands)

NorthWest Indiana Bancorp

Finward Bancorp

Condensed Statements of Comprehensive Income

Year Ended December 31,

$ 14,963  

$ 15,932  

Net change in net unrealized gains and losses on securities available-for-sale:

Unrealized (loss) gain arising during the period

( 5,816 )  

10,169  

reclassification adjustment for gains included in net income

( 1,987 )  

Net securities gain during the period

( 7,803 )  

Net of tax amount

( 6,165 )  

Comprehensive income, net of tax

$ 8,798  

$ 22,112  

(Dollars in thousands)

Finward Bancorp

Condensed Statements of Cash Flows

8 unchanged sentences

( 1,024 )  

Stock based compensation expense

Net surrender value of restricted stock awards

( 85 )  

Distribution from NWIN Risk Management, Inc

Stock based compensation expense  

Change in other assets

( 161 )  

Change in other liabilities

Total adjustments

( 120 )  

Net cash - operating activities

18,888  

Cash flows from investing activities:

Cash paid for acquisition

Investment in Peoples Bank

Distribution from NWIN Risk Management, Inc

( 830 )  

Net cash - investing activities

( 830 )  

Cash flows from financing activities:

1 unchanged sentence

( 4,310 )  

Proceeds from issuance of common stock

Net surrender value of restricted stock awards

( 131 )  

Net cash - financing activities

3 unchanged sentences

Cash at end of year

$ 1,183  

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the period for:

Noncash activities:

Dividends declared not paid

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data