NorthWest Indiana Bancorp
Financial Highlights
(Dollars in thousands, except for per share and ratios data)
Earnings:
December 31,
2016
December 31,
2015
Net revenue (a)
Noninterest expense
Pre-provision profit
Provision for loan losses
Net income
Earnings per common share data:
Net income per share:
Basic
Diluted
Cash dividends declared
Book value
Selected balance sheet data (period-end):
Total assets
Loans
Deposits
Total stockholders' equity
Selected ratios:
Return on Equity
Return on Assets
Common equity tier 1 capital to risk-weighted assets
Tier 1 capital to risk-weighted assets
Total capital to risk-weighted assets
Tier 1 capital to adjusted average assets
37,667
24,709
12,958
1,268
9,142
3.20
3.20
1.11
29.41
913,626
583,650
779,771
84,108
10.65%
1.03%
13.1%
13.1%
14.3%
9.2%
34,220
23,616
10,604
954
7,852
2.75
2.75
1.06
28.37
864,893
571,898
714,875
80,909
9.90%
0.96%
12.4%
12.4%
13.5%
9.0%
(a) Net revenue represents the Bancorp's net interest income, plus noninterest income.
2016 Annual Report
Dear Shareholder:
In 2013, Northwest Indiana Bancorp and Peoples Bank
began to implement a five-year strategic plan. The
aftermath of the Great Recession was still chaotic, and the
vision at that time was to harness all of the Bank’s
strengths to take advantage of that chaos. At a time when
banks were still struggling throughout the country, our
Board and Management Team saw opportunity. We set out
to grow Peoples Bank in order to create more value for all
of our stakeholders – our customers, our employees, our
community and our shareholders. Today, we can point at
the Bank’s strong operating results as the successful
implementation of that plan.
Over the years, we have developed our culture and brand – You First Banking – to deliver a
consistent exceptional customer experience that focuses on the individual needs of our
customers. We also know that there is no good customer experience without a strong
underlying employee experience. One of the ways we honor the dedication of the Bank’s
employees to our brand is by creating a work environment that fosters their success. The Bank
has made a commitment to such a workplace, and we have been named a Best Place to Work
in Indiana for the past five years. For the first time in 2016, the Bank was also named one of the
Best Banks to Work For by American Banker magazine.
That culture and commitment to our employees has driven incredible results. For the 12th
consecutive year, Peoples Bank was named a Top 200 Community Bank in 2016, and the
overall performance for 2016 was extremely solid. Last year’s 16.4% earnings increase was the
capstone on a well-executed plan that since the beginning of 2013 has resulted in 33%
increased earnings, 32% increased assets and 30 additional employees at the Bank. The value
for our shareholders is also tangible – in that time, NWIN’s stock price has doubled, and the
total return to shareholders has been 135%.
All this has positioned the Bank for continued success. The banking landscape and our core
markets continue to change, but we have the strength and resources to thrive into the future.
NWIN Performance
The underlying fundamentals of NWIN’s stock price have been extremely strong. Price
appreciation was 26% for the year, and the total return was roughly 30% for the calendar year.
These strong figures were driven by another dividend increase, as the annual dividend rate was
increased by $0.04 per share, or 4%, in 2016. The stock’s price went from $30.80 to $38.85
throughout the year, dividend yield was at 2.9% for year-end.
NWIN’s financial performance and resulting stock performance continue to compare extremely
well to peer banks. In its most recent quarterly banking summary, Monroe Securities reported
an average ROA of 0.77% nationally and 0.83% in the Midwest region; they also reported
average ROE at 7.38% nationally and 7.75% in the Midwest. NWIN again outperformed both
with an ROA of 1.03% and a ROE of 10.65%; furthermore, ROA grew by 7 basis points and
ROE grew by 75 basis points in 2016. Average price-to-book ratios were at 104% nationally and
98% in the Midwest, and NWIN was trading at 132% of book value at year-end.
2016 Overview
The Bank continues to generate capital as a means to grow. With 9.0% Tier 1 capital at year-
end, driven almost exclusively through retained earnings, there is ample capital available to
pursue both organic and inorganic growth strategies.
We have put this capital to work organically as we strategically have moved the loan portfolio
towards high quality, short-duration, local commercial loans. Commercial loan originations were
strong in 2016 at $239mn; these loans have driven continued growth of the Bank’s margin
despite a relatively flat rate environment. The portfolio itself is well diversified and represents
over 60% of the Bank’s total loan portfolio. Asset quality is also strong, with non-performing
loans ending the year at 1.05% of total loans.
Mortgage lending had another record year, the result of a multi-year focus on growing the
mortgage team and enhancing the origination platform. The team originated $83mn in mortgage
loans during the year. Of that, $60mn in fixed rate mortgages were sold in the secondary
market, resulting in a gain on sale of $1.6mn.
Low-cost deposits have been a key performance driver since the Great Recession, and the
Bank’s customer focus has provided the funding needed to grow the Bank profitably and
sustainably. Core deposits grew again by over $70mn, and the Bank ended the year with close
to 80% core funds. During the year, the Bank focused on engaging customers from every
segment, which resulted in strong growth despite not adding any new Banking Centers.
Wealth Management remains an important revenue driver as well. While income from Wealth
Management operations was roughly flat in 2016, the result added $1.7mn in Non-Interest
Income. Peoples invested significant time and effort into enhancing Wealth Management
platforms and Assets under Management increased by 14% to a total of $319mn at year-end,
with expected benefits in the coming years.
Vision for the Future
As we wrap up our current strategic cycle and begin planning for the future, there are many
unknowns. New non-bank players use innovative technology to compete for our customers
every day. Bank consolidation also continues to shape the banking landscape, and today, there
are fewer banks in the United States than at any time since the 1890’s – when the founder of
Peoples Bank, John Bochnowski, immigrated to this country.
Customer preferences also continue to change, and the way they interact with banks has
completely changed in the past decade. However, in a complex world, our customers count on
us more than ever to help them achieve their financial goals. Our brand promise is as relevant
as ever, and delivering on that promise will remain at the core of our growth strategy.
Peoples Bank still sees opportunity in its core markets, and still sees the value in the community
banking business model. To that end, we are reshaping the customer experience in the Banking
Center. Our new Highland location, opening in early 2017, is completely focused on engaging
our customers to help better partner with them in reaching their financial goals. The experience
of You First Banking is about understanding the customer perspective, and we have changed
our physical spaces to make those interactions as impactful as possible. We plan to further
expand our physical footprint, and see great potential in the Porter County market.
Disruption in the banking industry has created an entirely new set of opportunities for Peoples
Bank. Your Company has the talent, culture, resources, and determination to take advantage of
those opportunities. The success of 2016 is only the beginning. Thank you for your continued
confidence in our company as we look forward to 2017.
Sincerely,
David A. Bochnowski
Executive Chairman
Benjamin Bochnowski
President & Chief Executive Officer
Market Information
Book Value per Share
The Bancorp’s Common Stock is traded in the
over-the-counter market and quoted on the OTC
Bulletin Board. The Bancorp’s stock is not actively
traded. As of February 24, 2017, the Bancorp had
2,864,732 shares of common stock outstanding and
413 stockholders of record. This does not reflect the
number of persons or entities who may hold their
stock in nominee or “street” name through brokerage
firms. Set forth below are the high and low bid prices
during each quarter for the years ended December
31, 2016 and December 31, 2015. The bid prices
reflect inter-dealer prices without retail mark-up,
mark-down or commission and may not necessarily
represent actual transactions. Also set forth is
information concerning the dividends declared by
the Bancorp during the periods reported. Note 11 to
the Financial Statements describes regulatory limits
on the Bancorp’s ability to pay dividends.
Year Ended
December 31, 2016
Year Ended
December 31, 2015
Per Share Prices
High
Low
Dividends
Declared Per
Common Share
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
$
31.05
30.00
32.50
39.87
$
27.75
27.35
31.99
31.10
$
29.30
28.35
29.00
33.00
$
26.50
26.40
26.25
29.26
$
0.27
0.28
0.28
0.28
$
0.25
0.27
0.27
0.27
$28.37
$29.41
$26.78
$23.83
$23.50
2012
2013
2014
2015
2016
Basic Earnings per Share
$2.41
$2.50
$2.60
$2.75
$3.20
2012
2013
2014
2015
2016
Dividends per Share
$1.06
$1.11
$0.97
$0.85
$0.72
2012
2013
2014
2015
2016
2016 Board of Directors
2016 Board Committees
David A. Bochnowski, Director since 1977
Executive Chairman of the Bancorp
James L. Wieser, Director since 1999
Attorney and Senior Partner, Wieser & Wyllie, LLP
Edward J. Furticella, Director since 2000
Former Executive Vice President and CFO of the
Bancorp; currently Clinical Professor, Department Head
of Quantitative Business Studies and Director of the
Masters of Accountancy Program at Purdue University
Northwest
Joel Gorelick, Director since 2000
Director, Indiana Economic Development Corporation;
Past Chairman/Director Lake County Economic Alliance
Kenneth V. Krupinski, Director since 2003
Retired Certified Public Accountant, Swartz Retson &
Co., P.C.
Anthony M. Puntillo, D.D.S., M.S.D., Director since
2004
Orthodontist, CEO of Puntillo and Crane Orthodontics,
P.C.
Donald P. Fesko, Director since 2005
President, Chief Executive Officer, Community
Foundation of Northwest Indiana
Amy W. Han, Ph.D., Director since 2008
Indiana University School of Medicine – Northwest
Danette Garza, Director since 2013
Attorney At Law, Certified Public Accountant,
Owner of Continental Languages, LLC, Owner of Jack
Gray Transport, Inc.
Benjamin J. Bochnowski, Director since 2014
President, Chief Executive Officer of the Bancorp
Robert E. Johnson III, Director since 2016
President, Chief Executive Officer, Cimcor Inc.
Leroy F. Cataldi, P.D., Director Emeritus
Lourdes M. Dennison, Director Emeritus
Martin A. Dybel, Director Emeritus
John Freyek, Director Emeritus
Stanley E. Mize, Director Emeritus
Gloria C. Gray Weissman, Director Emeritus
Executive Team
David A. Bochnowski
Executive Chairman
Benjamin J. Bochnowski
President, Chief Executive Officer
John J. Diederich
Executive Vice President, Chief Banking Officer
Robert T. Lowry
Executive Vice President, Chief Financial Officer
and Treasurer
Compensation and Benefits
Amy W. Han, Chairwoman
Donald P. Fesko
Edward J. Furticella
Anthony M. Puntillo
Executive Committee
David A. Bochnowski, Chairman
Edward J. Furticella
Joel Gorelick
Kenneth V. Krupinski
James L. Wieser
Nominating and Corporate Governance
James L. Wieser, Chairman
Donald P. Fesko
Edward J. Furticella
Danette Garza
Amy W. Han
Robert E. Johnson III
Kenneth V. Krupinski
Anthony M. Puntillo
Risk Management
Anthony M. Puntillo, Chairman
Edward J. Furticella
Danette Garza
Joel Gorelick
Robert E. Johnson III
Kenneth V. Krupinski
Strategic Planning
Edward J. Furticella, Chairman
Danette Garza
Joel Gorelick
Robert E. Johnson III
Kenneth V. Krupinski
Anthony M. Puntillo
James L. Wieser
Wealth Management
Danette Garza, Chairwoman
Donald P. Fesko
Amy W. Han
Kenneth V. Krupinski
Leane E. Cerven
Executive Vice President, General Counsel
and Corporate Secretary
Tanya A. Leetz
Executive Vice President, Chief Information
and Technology Officer
Todd M. Scheub
Executive Vice President, Chief Lending Officer