IOWA CITY, Iowa, Oct. 26, 2023 (GLOBE NEWSWIRE) -- MidWestOne Financial Group, Inc. (Nasdaq: MOFG) ("we", "our", or the "Company") today reported results for the third quarter of 2023.
Third Quarter 2023 Highlights1
- Net income of $9.1 million, or $0.58 per diluted common share, compared to net income of $7.6 million, or $0.48 per diluted common share, for the linked quarter.
- Annualized loan growth of 4.8%.
- Core deposits increased $83.2 million or 2%.
- Nonperforming assets ratio of 0.45%; net charge-off ratio was 0.04%.
- Efficiency ratio improved to 66.06%.
- Announced sale of Florida operations and acquisition of Denver Bankshares, Inc. ("Denver Bankshares") in strategic geographic repositioning.
Subsequent Events
- On October 24, 2023, the Board of Directors declared a cash dividend of $0.2425 per common share.
CEO COMMENTARY
Charles (Chip) Reeves, Chief Executive Officer of the Company, commented, "Despite the difficult interest rate environment, which continues to compress our net interest margin, we had another strong quarter of strategic plan execution, highlighted by the September announcement of the sale of our Florida operations, with the proceeds reinvested into the acquisition of Denver Bankshares. These two transactions align our geographic footprint with our Strategic Plan, while accelerating our Denver market growth by three to four years. We are confident in our ability to integrate this low-risk merger, while continuing our growth trajectory in the attractive Denver MSA. Also, in the third quarter of 2023, our Treasury Management initiatives and client acquisition strategies resulted in balanced loan and deposit growth, providing ample flexibility for future, selective loan growth. Asset quality metrics were affected by one senior living credit moving to non-accrual, however, charge-offs and 30-89 day past dues remain at historically low levels. We remain diligent as uncertain economic conditions begin to normalize asset quality migration."
Mr. Reeves continued, "While we continue to invest for growth, we are also laser focused on improving our operational effectiveness. Expenses in the quarter were well-controlled and our cost savings initiative to reduce noninterest expense by 2.5% is well underway. To conclude, we've made substantial progress executing our strategic initiatives over the last two quarters, and while we have more to do, I could not be more pleased with our team and the execution of our strategic initiatives."
_______________
1 Third Quarter Summary compares to the second quarter of 2023 (the "linked quarter") unless noted.
| As of or for the quarter ended | Nine Months Ended | |||||||||||||||||||
| (Dollars in thousands, except per share amounts and as noted) | September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||||||
| 2023 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||
| Financial Results | ||||||||||||||||||||
| Revenue | $ | 44,436 | $ | 45,708 | $ | 58,321 | $ | 126,174 | $ | 159,373 | ||||||||||
| Credit loss expense | 1,551 | 1,597 | 638 | 4,081 | 3,920 | |||||||||||||||
| Noninterest expense | 31,544 | 34,919 | 34,623 | 99,782 | 98,348 | |||||||||||||||
| Net income | 9,138 | 7,594 | 18,317 | 18,129 | 44,833 | |||||||||||||||
| Per Common Share | ||||||||||||||||||||
| Diluted earnings per share | $ | 0.58 | $ | 0.48 | $ | 1.17 | $ | 1.15 | $ | 2.86 | ||||||||||
| Book value | 32.21 | 31.96 | 30.23 | 32.21 | 30.23 | |||||||||||||||
| Tangible book value(1) | 26.60 | 26.26 | 24.17 | 26.60 | 24.17 | |||||||||||||||
| Balance Sheet & Credit Quality | ||||||||||||||||||||
| Loans In millions | $ | 4,066.0 | $ | 4,018.6 | $ | 3,746.3 | $ | 4,066.0 | $ | 3,746.3 | ||||||||||
| Investment securities In millions | 1,958.5 | 2,003.1 | 2,299.9 | 1,958.5 | 2,299.9 | |||||||||||||||
| Deposits In millions | 5,363.3 | 5,445.4 | 5,476.8 | 5,363.3 | 5,476.8 | |||||||||||||||
| Net loan charge-offs In millions | 0.5 | 0.9 | 0.6 | 1.7 | 3.1 | |||||||||||||||
| Allowance for credit losses ratio | 1.27 | % | 1.25 | % | 1.39 | % | 1.27 | % | 1.39 | % | ||||||||||
| Selected Ratios | ||||||||||||||||||||
| Return on average assets | 0.56 | % | 0.47 | % | 1.13 | % | 0.37 | % | 0.97 | % | ||||||||||
| Net interest margin, tax equivalent(1) | 2.35 | % | 2.52 | % | 3.08 | % | 2.54 | % | 2.92 | % | ||||||||||
| Return on average equity | 7.14 | % | 6.03 | % | 14.56 | % | 4.81 | % | 11.81 | % | ||||||||||
| Return on average tangible equity(1) | 9.68 | % | 8.50 | % | 19.32 | % | 7.03 | % | 15.28 | % | ||||||||||
| Efficiency ratio(1) | 66.06 | % | 71.13 | % | 53.67 | % | 66.40 | % | 56.70 | % | ||||||||||
(1) Non-GAAP measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
REVENUE REVIEW
| Revenue | Change | Change | ||||||||||||||||||
| 3Q23 vs | 3Q23 vs | |||||||||||||||||||
| (Dollars in thousands) | 3Q23 | 2Q23 | 3Q22 | 2Q23 | 3Q22 | |||||||||||||||
| Net interest income | $ | 34,575 | $ | 36,962 | $ | 45,733 | (6 | )% | (24 | )% | ||||||||||
| Noninterest income | 9,861 | 8,746 | 12,588 | 13 | % | (22 | )% | |||||||||||||
| Total revenue, net of interest expense | $ | 44,436 | $ | 45,708 | $ | 58,321 | (3 | )% | (24 | )% | ||||||||||
Total revenue for the third quarter of 2023 decreased $1.3 million from the second quarter of 2023 as a result of lower net interest income, partially offset by higher noninterest income. Compared to the third quarter of 2022, total revenue decreased $13.9 million due to lower net interest income and noninterest income.
Net interest income of $34.6 million for the third quarter of 2023 decreased $2.4 million from the second quarter of 2023 and $11.2 million from the third quarter of 2022 as a result of higher funding costs and volumes and lower interest earning asset volumes, partially offset by higher interest earning asset yields.
The Company's tax equivalent net interest margin was 2.35% in the third quarter of 2023 compared to 2.52% in the second quarter of 2023, as higher earning asset yields were more than offset by increased funding costs. The cost of interest bearing liabilities increased 35 basis points ("bps") to 2.33%, due to interest bearing deposit costs of 2.05%, short-term borrowing costs of 4.29%, and long-term debt costs of 6.78%, which increased 26 bps, 138 bps and 40 bps, respectively from the second quarter of 2023. Total interest earning assets yield increased 12 bps from the second quarter of 2023, as a result of an increase in loan and securities yields of 14 bps and 1 bp, respectively. Our cycle-to-date interest bearing deposit beta was 34%.
The tax equivalent net interest margin was 2.35% in the third quarter of 2023 compared to 3.08% in the third quarter of 2022, driven by higher funding costs and volumes, partially offset by higher interest earning asset yields. The cost of interest bearing liabilities increased 169 bps to 2.33%, due to interest bearing deposit costs of 2.05%, short-term borrowing costs of 4.29%, and long-term debt costs of 6.78%, which increased 159 bps, 295 bps and 208 bps, respectively from the third quarter of 2022. Total interest earning assets yield increased 67 bps from the third quarter of 2022, primarily as a result of an increase in loan and securities yields of 75 bps and 9 bps, respectively.
| Noninterest Income | Change | Change | |||||||||||||||||
| 3Q23 vs | 3Q23 vs | ||||||||||||||||||
| (In thousands) | 3Q23 | 2Q23 | 3Q22 | 2Q23 | 3Q22 | ||||||||||||||
| Investment services and trust activities | $ | 3,004 | $ | 3,119 | $ | 2,876 | (4 | )% | 4 | % | |||||||||
| Service charges and fees | 2,146 | 2,047 | 2,075 | 5 | % | 3 | % | ||||||||||||
| Card revenue | 1,817 | 1,847 | 1,898 | (2 | )% | (4 | )% | ||||||||||||
| Loan revenue | 1,462 | 909 | 1,722 | 61 | % | (15 | )% | ||||||||||||
| Bank-owned life insurance | 626 | 616 | 579 | 2 | % | 8 | % | ||||||||||||
| Investment securities gains (losses), net | 79 | (2 | ) | (163 | ) | n / m | (148 | )% | |||||||||||
| Other | 727 | 210 | 3,601 | 246 | % | (80 | )% | ||||||||||||
| Total noninterest income | $ | 9,861 | $ | 8,746 | $ | 12,588 | 13 | % | (22 | )% | |||||||||
| Results are not meaningful (n/m) | |||||||||||||||||||
Noninterest income for the third quarter of 2023 increased $1.1 million from the linked quarter due primarily to a $0.6 million favorable change in loan revenue, coupled with a $0.5 million increase in other revenue. Loan revenue reflected a favorable quarter-over quarter change in the fair value of our mortgage servicing rights of $0.9 million, partially offset by a decrease in loan sale gains generated by our governmental lending business and a decrease in revenue in our mortgage origination business. Other revenue reflected an increase of $0.6 million in swap origination fee income. Noninterest income decreased $2.7 million from the third quarter of 2022, primarily due to the decline of $2.9 million in other revenue stemming from a one-time settlement recognized in the third quarter of 2022.
EXPENSE REVIEW
| Noninterest Expense | Change | Change | |||||||||||||||
| 3Q23 vs | 2Q23 vs | ||||||||||||||||
| (In thousands) | 3Q23 | 2Q23 | 3Q22 | 2Q23 | 3Q22 | ||||||||||||
| Compensation and employee benefits | $ | 18,558 | $ | 20,386 | $ | 20,046 | (9 | )% | (7 | )% | |||||||
| Occupancy expense of premises, net | 2,405 | 2,574 | 2,577 | (7 | )% | (7 | )% | ||||||||||
| Equipment | 2,123 | 2,435 | 2,358 | (13 | )% | (10 | )% | ||||||||||
| Legal and professional | 1,678 | 1,682 | 2,012 | - | % | (17 | )% | ||||||||||
| Data processing | 1,504 | 1,521 | 1,731 | (1 | )% | (13 | )% | ||||||||||
| Marketing | 782 | 1,142 | 1,139 | (32 | )% | (31 | )% | ||||||||||
| Amortization of intangibles | 1,460 | 1,594 | 1,789 | (8 | )% | (18 | )% | ||||||||||
| FDIC insurance | 783 | 862 | 415 | (9 | )% | 89 | % | ||||||||||
| Communications | 206 | 260 | 302 | (21 | )% | (32 | )% | ||||||||||
| Foreclosed assets, net | 2 | (6 | ) | 42 | (133 | )% | (95 | )% | |||||||||
| Other | 2,043 | 2,469 | 2,212 | (17 | )% | (8 | )% | ||||||||||
| Total noninterest expense | $ | 31,544 | $ | 34,919 | $ | 34,623 | (10 | )% | (9 | )% | |||||||
| Merger-related Expenses | |||||||||||
| (In thousands) | 3Q23 | 2Q23 | 3Q22 | ||||||||
| Compensation and employee benefits | $ | - | $ | - | $ | 132 | |||||
| Equipment | - | - | 14 | ||||||||
| Legal and professional | 11 | - | 193 | ||||||||
| Data processing | - | - | 304 | ||||||||
| Marketing | - | - | 90 | ||||||||
| Other | - | - | 30 | ||||||||
| Total merger-related expenses | $ | 11 | $ | - | $ | 763 | |||||
Noninterest expense for the third quarter of 2023 decreased $3.4 million, or 9.7%, from the linked quarter with overall decreases in all noninterest expense categories except foreclosed assets, net. The decrease in compensation and employee benefits reflected a reduction of $1.1 million in severance expense, as well as a reduction of $1.1 million in medical insurance benefit expense, driven primarily by accrual adjustments. The $0.4 million decline in other noninterest expense was driven by various changes, including $0.2 million of executive relocation expense recognized in the linked quarter that did not recur and reduced loan expenses by $0.2 million. The $0.4 million decrease in marketing reflected a decline in advertising and sponsorships.
Noninterest expense for the third quarter of 2023 decreased $3.1 million, or 8.9%, from the third quarter of 2022, with overall decreases in all noninterest expense categories except FDIC insurance. These decreases primarily reflected a $1.8 million decline in employee benefits and incentives and commission expense, coupled with a $0.8 million decrease in merger-related expenses.
The Company's effective income tax rate increased to 19.4% in the third quarter of 2023 compared to 17.4% in the linked quarter. The higher effective income tax rate reflected an adjustment to the full-year 2023 estimated taxable income in the Company's annual effective tax rate calculation. The effective income tax rate for the full year 2023 is expected to be in the range of 18% - 20%.
BALANCE SHEET REVIEW
Total assets were $6.47 billion at September 30, 2023, compared to $6.52 billion at June 30, 2023 and $6.49 billion at September 30, 2022. The decrease from June 30, 2023 was driven by lower cash and securities balances, partially offset by higher loan balances. Compared to September 30, 2022, the decrease was due primarily to lower securities balances resulting from the balance sheet repositioning executed in the first quarter of 2023 as well as lower cash balances, partially offset by higher loan balances.
| Loans Held for Investment | September 30, 2023 | June 30, 2023 | September 30, 2022 | ||||||||||||||||||||
| (Dollars in thousands) | Balance | % of Total | Balance | % of Total | Balance | % of Total | |||||||||||||||||
| Commercial and industrial | $ | 1,078,773 | 26.5 | % | $ | 1,089,269 | 27.1 | % | $ | 1,041,662 | 27.8 | % | |||||||||||
| Agricultural | 111,950 | 2.8 | 106,148 | 2.6 | 116,229 | 3.1 | |||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||
| Construction and development | 331,868 | 8.2 | 313,836 | 7.8 | 276,941 | 7.4 | |||||||||||||||||
| Farmland | 182,621 | 4.5 | 183,378 | 4.6 | 183,581 | 4.9 | |||||||||||||||||
| Multifamily | 337,509 | 8.3 | 305,519 | 7.6 | 222,592 | 5.9 | |||||||||||||||||
| Other | 1,324,019 | 32.5 | 1,331,886 | 33.1 | 1,226,983 | 32.8 | |||||||||||||||||
| Total commercial real estate | 2,176,017 | 53.5 | 2,134,619 | 53.1 | 1,910,097 | 51.0 | |||||||||||||||||
| Residential real estate | |||||||||||||||||||||||
| One-to-four family first liens | 456,771 | 11.2 | 448,096 | 11.2 | 446,373 | 11.9 | |||||||||||||||||
| One-to-four family junior liens | 173,275 | 4.3 | 168,755 | 4.2 | 157,276 | 4.2 | |||||||||||||||||
| Total residential real estate | 630,046 | 15.5 | 616,851 | 15.4 | 603,649 | 16.1 | |||||||||||||||||
| Consumer | 69,183 | 1.7 | 71,762 | 1.8 | 74,652 | 2.0 | |||||||||||||||||
| Loans held for investment, net of unearned income | $ | 4,065,969 | 100.0 | % | $ | 4,018,649 | 100.0 | % | $ | 3,746,289 | 100.0 | % | |||||||||||
| Total commitments to extend credit | $ | 1,251,345 | $ | 1,296,719 | $ | 1,159,323 | |||||||||||||||||
Loans held for investment, net of unearned income, increased $47.3 million, or 1.2%, to $4.07 billion from $4.02 billion at June 30, 2023. This increase was driven by new loan production in the third quarter of 2023.
| Investment Securities | September 30, 2023 | June 30, 2023 | September 30, 2022 | ||||||||||||||||||||
| (Dollars in thousands) | Balance | % of Total | Balance | % of Total | Balance | % of Total | |||||||||||||||||
| Available for sale | $ | 872,770 | 44.6 | % | $ | 903,520 | 45.1 | % | $ | 1,153,304 | 50.1 | % | |||||||||||
| Held to maturity | 1,085,751 | 55.4 | % | 1,099,569 | 54.9 | % | 1,146,583 | 49.9 | % | ||||||||||||||
| Total investment securities | $ | 1,958,521 | $ | 2,003,089 | $ | 2,299,887 | |||||||||||||||||
Investment securities at September 30, 2023 were $1.96 billion, decreasing $44.6 million from June 30, 2023 and $341.4 million from September 30, 2022. The decrease from the second quarter of 2023 was due primarily to paydowns, calls, and maturities. The decrease from the third quarter of 2022 was due primarily to the balance sheet repositioning executed in the first quarter of 2023.
| Deposits | September 30, 2023 | June 30, 2023 | September 30, 2022 | ||||||||||||||||||||
| (Dollars in thousands) | Balance | % of Total | Balance | % of Total | Balance | % of Total | |||||||||||||||||
| Noninterest bearing deposits | $ | 924,213 | 17.2 | % | $ | 897,923 | 16.5 | % | $ | 1,139,694 | 20.8 | % | |||||||||||
| Interest checking deposits | 1,334,481 | 24.9 | 1,397,276 | 25.7 | 1,705,289 | 31.2 | |||||||||||||||||
| Money market deposits | 1,127,287 | 21.0 | 1,096,432 | 20.1 | 991,783 | 18.1 | |||||||||||||||||
| Savings deposits | 619,805 | 11.6 | 585,967 | 10.8 | 700,843 | 12.8 | |||||||||||||||||
| Time deposits of $250 and under | 703,646 | 13.1 | 648,586 | 11.9 | 537,616 | 9.8 | |||||||||||||||||
| Total core deposits | 4,709,432 | 87.8 | 4,626,184 | 85.0 | 5,075,225 | 92.7 | |||||||||||||||||
| Brokered time deposits | 220,063 | 4.1 | 365,623 | 6.7 | - | - | |||||||||||||||||
| Time deposits over $250 | 433,829 | 8.1 | 453,640 | 8.3 | 401,557 | 7.3 | |||||||||||||||||
| Total deposits | $ | 5,363,324 | 100.0 | % | $ | 5,445,447 | 100.0 | % | $ | 5,476,782 | 100.0 | % | |||||||||||
Total deposits declined $82.1 million, or 1.5%, to $5.36 billion from $5.45 billion at June 30, 2023. Brokered deposits decreased $145.6 million from $365.6 million at June 30, 2023. Core deposits increased $83.2 million from June 30, 2023.
| Borrowed Funds | September 30, 2023 | June 30, 2023 | September 30, 2022 | ||||||||||||||||||||
| (Dollars in thousands) | Balance | % of Total | Balance | % of Total | Balance | % of Total | |||||||||||||||||
| Short-term borrowings | $ | 373,956 | 75.0 | % | $ | 362,054 | 74.2 | % | $ | 304,536 | 66.4 | % | |||||||||||
| Long-term debt | 124,526 | 25.0 | % | 125,752 | 25.8 | % | 154,190 | 33.6 | % | ||||||||||||||
| Total borrowed funds | $ | 498,482 | $ | 487,806 | $ | 458,726 | |||||||||||||||||
Total borrowed funds were $498.5 million at September 30, 2023 an increase of $10.7 million from June 30, 2023 and an increase of $39.8 million from September 30, 2022. The increase when compared to the linked quarter was due to increased Federal Home Loan Bank overnight borrowings, partially offset by a reduction in securities sold under agreements to repurchase. The increase when compared to September 30, 2022 was primarily due to Bank Term Funding Program borrowings of $225 million, as compared to no such borrowings in the prior year, partially offset by a reduction in securities sold under agreements to repurchase and Federal Home Loan Bank overnight borrowings.
| Capital | September 30, | June 30, | September 30, | ||||||||
| (Dollars in thousands) | 2023 (1) | 2023 | 2022 | ||||||||
| Total shareholders' equity | $ | 505,411 | $ | 501,341 | $ | 472,229 | |||||
| Accumulated other comprehensive loss | (84,606 | ) | (82,704 | ) | (96,623 | ) | |||||
| MidWestOne Financial Group, Inc. Consolidated | |||||||||||
| Tier 1 leverage to average assets ratio | 8.58 | % | 8.47 | % | 8.24 | % | |||||
| Common equity tier 1 capital to risk-weighted assets ratio | 9.52 | % | 9.36 | % | 9.18 | % | |||||
| Tier 1 capital to risk-weighted assets ratio | 10.31 | % | 10.15 | % | 9.97 | % | |||||
| Total capital to risk-weighted assets ratio | 12.45 | % | 12.26 | % | 12.10 | % | |||||
| MidWestOne Bank | |||||||||||
| Tier 1 leverage to average assets ratio | 9.51 | % | 9.42 | % | 9.31 | % | |||||
| Common equity tier 1 capital to risk-weighted assets ratio | 11.43 | % | 11.31 | % | 11.26 | % | |||||
| Tier 1 capital to risk-weighted assets ratio | 11.43 | % | 11.31 | % | 11.26 | % | |||||
| Total capital to risk-weighted assets ratio | 12.36 | % | 12.22 | % | 12.17 | % | |||||
(1) Regulatory capital ratios for September 30, 2023 are preliminary
Total shareholders' equity at September 30, 2023 increased $4.1 million from June 30, 2023, driven by the benefit of third quarter net income, partially offset by an increase in accumulated other comprehensive loss and dividends paid during the third quarter of 2023.
Accumulated other comprehensive loss at September 30, 2023 increased $1.9 million compared to June 30, 2023, primarily due to a decrease in available for sale securities valuations. Accumulated other comprehensive loss decreased $12.0 million from September 30, 2022.
On October 24, 2023, the Board of Directors of the Company declared a cash dividend of $0.2425 per common share. The dividend is payable December 15, 2023, to shareholders of record at the close of business on December 1, 2023.
No common shares were repurchased by the Company during the period June 30, 2023 through September 30, 2023 or for the subsequent period through October 26, 2023. The current share repurchase program allows for the repurchase of up to $15.0 million of the Company's common shares.
CREDIT QUALITY REVIEW
| Credit Quality | As of or For the Three Months Ended | ||||||||||
| September 30, | June 30, | September 30, | |||||||||
| (Dollars in thousands) | 2023 | 2023 | 2022 | ||||||||
| Credit loss expense related to loans | $ | 1,651 | $ | 1,497 | $ | 338 | |||||
| Net charge-offs | 451 | 897 | 588 | ||||||||
| Allowance for credit losses | 51,600 | 50,400 | 52,100 | ||||||||
| Pass | $ | 3,785,908 | $ | 3,769,309 | $ | 3,550,695 | |||||
| Special Mention / Watch | 163,222 | 133,904 | 101,255 | ||||||||
| Classified | 116,839 | 115,436 | 94,339 | ||||||||
| Loans greater than 30 days past due and accruing | $ | 6,449 | $ | 6,201 | $ | 5,960 | |||||
| Nonperforming loans | $ | 28,987 | $ | 14,448 | $ | 25,963 | |||||
| Nonperforming assets | 28,987 | 14,448 | 26,066 | ||||||||
| Net charge-off ratio(1) | 0.04 | % | 0.09 | % | 0.06 | % | |||||
| Classified loans ratio(2) | 2.87 | % | 2.87 | % | 2.52 | % | |||||
| Nonperforming loans ratio(3) | 0.71 | % | 0.36 | % | 0.69 | % | |||||
| Nonperforming assets ratio(4) | 0.45 | % | 0.22 | % | 0.40 | % | |||||
| Allowance for credit losses ratio(5) | 1.27 | % | 1.25 | % | 1.39 | % | |||||
| Allowance for credit losses to nonaccrual loans ratio(6) | 178.63 | % | 355.03 | % | 208.18 | % | |||||
(1) Net charge-off ratio is calculated as annualized net charge-offs divided by the sum of average loans held for investment, net of unearned income and average loans held for sale, during the period.
(2) Classified loans ratio is calculated as classified loans divided by loans held for investment, net of unearned income, at the end of the period.
(3) Nonperforming loans ratio is calculated as nonperforming loans divided by loans held for investment, net of unearned income, at the end of the period.
(4) Nonperforming assets ratio is calculated as nonperforming assets divided by total assets at the end of the period.
(5) Allowance for credit losses ratio is calculated as allowance for credit losses divided by loans held for investment, net of unearned income, at the end of the period.
(6) Allowance for credit losses to nonaccrual loans ratio is calculated as allowance for credit losses divided by nonaccrual loans at the end of the period.
Compared to the linked quarter, nonperforming loans and assets ratios increased 35 bps and 23 bps, respectively, and when compared to the prior year increased 2 bps and 5 bps, respectively, to 0.71% and 0.45%, primarily due to the downgrade of a single commercial relationship.
As of September 30, 2023, the allowance for credit losses was $51.6 million, or 1.27% of loans held for investment, net of unearned income, compared with $50.4 million, or 1.25% of loans held for investment, net of unearned income, at June 30, 2023. Credit loss expense of $1.6 million in the third quarter of 2023 was primarily attributable to loan growth.
| Nonperforming Loans Roll Forward (Dollars in thousands) | Nonaccrual | 90+ Days Past Due & Still Accruing | Total | ||||||||
| Balance at June 30, 2023 | $ | 14,196 | $ | 252 | $ | 14,448 | |||||
| Loans placed on nonaccrual or 90+ days past due & still accruing | 16,394 | 140 | 16,534 | ||||||||
| Proceeds related to repayment or sale | (799 | ) | (1 | ) | (800 | ) | |||||
| Loans returned to accrual status or no longer past due | (298 | ) | (252 | ) | (550 | ) | |||||
| Charge-offs | (603 | ) | (39 | ) | (642 | ) | |||||
| Transfers to foreclosed assets | (3 | ) | - | (3 | ) | ||||||
| Balance at September 30, 2023 | $ | 28,887 | $ | 100 | $ | 28,987 |
CONFERENCE CALL DETAILS
The Company will host a conference call for investors at 11:00 a.m. CT on Friday, October 27, 2023. To participate, you may pre-register for this call utilizing the following link: https://www.netroadshow.com/events/login'show=03182047&confId=56188. After pre-registering for this event you will receive your access details via email. On the day of the call, you are also able to dial 1-833-470-1428 using an access code of 146099 at least fifteen minutes before the call start time. If you are unable to participate on the call, a replay will be available until January 25, 2024 by calling 1-866-813-9403 and using the replay access code of 205972. A transcript of the call will also be available on the Company's web site (www.midwestonefinancial.com) within three business days of the call.
ABOUT MIDWESTONE FINANCIAL GROUP, INC.
MidWestOne Financial Group, Inc. is a financial holding company headquartered in Iowa City, Iowa. MidWestOne is the parent company of MidWestOne Bank, which operates banking offices in Iowa, Minnesota, Wisconsin, Florida, and Colorado. MidWestOne provides electronic delivery of financial services through its website, MidWestOne.bank. MidWestOne Financial Group, Inc. trades on the Nasdaq Global Select Market under the symbol "MOFG".
Cautionary Note Regarding Forward-Looking Statements
This release contains certain "forward-looking statements" within the meaning of such term in the Private Securities Litigation Reform Act of 1995. We and our representatives may, from time to time, make written or oral statements that are "forward-looking" and provide information other than historical information. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement. These factors include, among other things, the factors listed below. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of our management and on information currently available to management, are generally identifiable by the use of words such as "believe," "expect," "anticipate," "should," "could," "would," "plans," "goals," "intend," "project," "estimate," "forecast," "may" or similar expressions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, these statements. Readers are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Additionally, we undertake no obligation to update any statement in light of new information or future events, except as required under federal securities law.
Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors that could have an impact on our ability to achieve operating results, growth plan goals and future prospects include, but are not limited to, the following: (1) the risks of mergers or branch sales (including with Iowa First Bancshares Corp. and Denver Bankshares, Inc.), including, without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and possible failures to achieve expected gains, revenue growth and/or expense savings from such transactions; (2) credit quality deterioration, pronounced and sustained reduction in real estate market values, or other uncertainties, including the impact of inflationary pressures on economic conditions and our business, resulting in an increase in the allowance for credit losses, an increase in the credit loss expense, and a reduction in net earnings; (3) the effects of recent and potential additional increases in inflation and interest rates, including on our net income and the value of our securities portfolio; (4) changes in the economic environment, competition, or other factors that may affect our ability to acquire loans or influence the anticipated growth rate of loans and deposits and the quality of the loan portfolio and loan and deposit pricing; (5) fluctuations in the value of our investment securities; (6) governmental monetary and fiscal policies; (7) changes in and uncertainty related to benchmark interest rates used to price loans and deposits; (8) legislative and regulatory changes, including changes in banking, securities, trade, and tax laws and regulations and their application by our regulators, including the new 1.0% excise tax on stock buybacks by publicly traded companies and any changes in response to the recent failures of other banks; (9) the ability to attract and retain key executives and employees experienced in banking and financial services; (10) the sufficiency of the allowance for credit losses to absorb the amount of actual losses inherent in our existing loan portfolio; (11) our ability to adapt successfully to technological changes to compete effectively in the marketplace; (12) credit risks and risks from concentrations (by geographic area and by industry) within our loan portfolio; (13) the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds, financial technology companies, and other financial institutions operating in our markets or elsewhere or providing similar services; (14) the failure of assumptions underlying the establishment of allowances for credit losses and estimation of values of collateral and various financial assets and liabilities; (15) volatility of rate-sensitive deposits; (16) operational risks, including data processing system failures or fraud; (17) asset/liability matching risks and liquidity risks; (18) the costs, effects and outcomes of existing or future litigation; (19) changes in general economic, political, or industry conditions, nationally, internationally or in the communities in which we conduct business, including the risk of a recession; (20) changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the Financial Accounting Standards Board; (21) war or terrorist activities, including the Israeli-Palestinian conflict and the Russian invasion of Ukraine, widespread disease or pandemic, or other adverse external events, which may cause deterioration in the economy or cause instability in credit markets; (22) the occurrence of fraudulent activity, breaches, or failures of our information security controls or cyber-security related incidents, including as a result of sophisticated attacks using artificial intelligence and similar tools; (23) the imposition of tariffs or other domestic or international governmental policies impacting the value of the agricultural or other products of our borrowers; (24) effects of the ongoing COVID-19 pandemic, including its effects on the economic environment, our customers, employees and supply chain; (25) the concentration of large deposits from certain clients who have balances above current FDIC insurance limits; (26) the effects of recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time at other banks that resulted in failure of those institutions; and (27) other risk factors detailed from time to time in Securities and Exchange Commission filings made by the Company.
MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
FIVE QUARTER CONSOLIDATED BALANCE SHEETS
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||||||
| (In thousands) | 2023 | 2023 | 2023 | 2022 | 2022 | ||||||||||||||
| ASSETS | |||||||||||||||||||
| Cash and due from banks | $ | 71,015 | $ | 75,955 | $ | 63,945 | $ | 83,990 | $ | 77,513 | |||||||||
| Interest earning deposits in banks | 3,773 | 68,603 | 5,273 | 2,445 | 1,001 | ||||||||||||||
| Total cash and cash equivalents | 74,788 | 144,558 | 69,218 | 86,435 | 78,514 | ||||||||||||||
| Debt securities available for sale at fair value | 872,770 | 903,520 | 954,074 | 1,153,547 | 1,153,304 | ||||||||||||||
| Held to maturity securities at amortized cost | 1,085,751 | 1,099,569 | 1,117,709 | 1,129,421 | 1,146,583 | ||||||||||||||
| Total securities | 1,958,521 | 2,003,089 | 2,071,783 | 2,282,968 | 2,299,887 | ||||||||||||||
| Loans held for sale | 2,528 | 2,821 | 2,553 | 612 | 2,320 | ||||||||||||||
| Gross loans held for investment | 4,078,060 | 4,031,377 | 3,932,900 | 3,854,791 | 3,761,664 | ||||||||||||||
| Unearned income, net | (12,091 | ) | (12,728 | ) | (13,535 | ) | (14,267 | ) | (15,375 | ) | |||||||||
| Loans held for investment, net of unearned income | 4,065,969 | 4,018,649 | 3,919,365 | 3,840,524 | 3,746,289 | ||||||||||||||
| Allowance for credit losses | (51,600 | ) | (50,400 | ) | (49,800 | ) | (49,200 | ) | (52,100 | ) | |||||||||
| Total loans held for investment, net | 4,014,369 | 3,968,249 | 3,869,565 | 3,791,324 | 3,694,189 | ||||||||||||||
| Premises and equipment, net | 85,589 | 85,831 | 86,208 | 87,125 | 87,732 | ||||||||||||||
| Goodwill | 62,477 | 62,477 | 62,477 | 62,477 | 62,477 | ||||||||||||||
| Other intangible assets, net | 25,510 | 26,969 | 28,563 | 30,315 | 32,086 | ||||||||||||||
| Foreclosed assets, net | - | - | - | 103 | 103 | ||||||||||||||
| Other assets | 244,036 | 227,495 | 219,585 | 236,517 | 233,753 | ||||||||||||||
| Total assets | $ | 6,467,818 | $ | 6,521,489 | $ | 6,409,952 | $ | 6,577,876 | $ | 6,491,061 | |||||||||
| LIABILITIES | |||||||||||||||||||
| Noninterest bearing deposits | $ | 924,213 | $ | 897,923 | $ | 989,469 | $ | 1,053,450 | $ | 1,139,694 | |||||||||
| Interest bearing deposits | 4,439,111 | 4,547,524 | 4,565,684 | 4,415,492 | 4,337,088 | ||||||||||||||
| Total deposits | 5,363,324 | 5,445,447 | 5,555,153 | 5,468,942 | 5,476,782 | ||||||||||||||
| Short-term borrowings | 373,956 | 362,054 | 143,981 | 391,873 | 304,536 | ||||||||||||||
| Long-term debt | 124,526 | 125,752 | 137,981 | 139,210 | 154,190 | ||||||||||||||
| Other liabilities | 100,601 | 86,895 | 72,187 | 85,058 | 83,324 | ||||||||||||||
| Total liabilities | 5,962,407 | 6,020,148 | 5,909,302 | 6,085,083 | 6,018,832 | ||||||||||||||
| SHAREHOLDERS' EQUITY | |||||||||||||||||||
| Common stock | 16,581 | 16,581 | 16,581 | 16,581 | 16,581 | ||||||||||||||
| Additional paid-in capital | 301,889 | 301,424 | 300,966 | 302,085 | 301,418 | ||||||||||||||
| Retained earnings | 295,862 | 290,548 | 286,767 | 289,289 | 276,998 | ||||||||||||||
| Treasury stock | (24,315 | ) | (24,508 | ) | (24,779 | ) | (26,115 | ) | (26,145 | ) | |||||||||
| Accumulated other comprehensive loss | (84,606 | ) | (82,704 | ) | (78,885 | ) | (89,047 | ) | (96,623 | ) | |||||||||
| Total shareholders' equity | 505,411 | 501,341 | 500,650 | 492,793 | 472,229 | ||||||||||||||
| Total liabilities and shareholders' equity | $ | 6,467,818 | $ | 6,521,489 | $ | 6,409,952 | $ | 6,577,876 | $ | 6,491,061 | |||||||||
MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
FIVE QUARTER AND YEAR TO DATE CONSOLIDATED STATEMENTS OF INCOME
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | |||||||||||||||||||||
| (In thousands, except per share data) | 2023 | 2023 | 2023 | 2022 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Interest income | |||||||||||||||||||||||||||
| Loans, including fees | $ | 51,870 | $ | 49,726 | $ | 46,490 | $ | 43,769 | $ | 40,451 | $ | 148,086 | $ | 104,515 | |||||||||||||
| Taxable investment securities | 9,526 | 9,734 | 10,444 | 10,685 | 10,635 | 29,704 | 28,334 | ||||||||||||||||||||
| Tax-exempt investment securities | 1,802 | 1,822 | 2,127 | 2,303 | 2,326 | 5,751 | 7,076 | ||||||||||||||||||||
| Other | 374 | 68 | 244 | - | 9 | 686 | 77 | ||||||||||||||||||||
| Total interest income | 63,572 | 61,350 | 59,305 | 56,757 | 53,421 | 184,227 | 140,002 | ||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||||||
| Deposits | 23,128 | 20,117 | 15,319 | 9,127 | 5,035 | 58,564 | 11,118 | ||||||||||||||||||||
| Short-term borrowings | 3,719 | 2,118 | 1,786 | 1,955 | 767 | 7,623 | 1,115 | ||||||||||||||||||||
| Long-term debt | 2,150 | 2,153 | 2,124 | 2,111 | 1,886 | 6,427 | 4,975 | ||||||||||||||||||||
| Total interest expense | 28,997 | 24,388 | 19,229 | 13,193 | 7,688 | 72,614 | 17,208 | ||||||||||||||||||||
| Net interest income | 34,575 | 36,962 | 40,076 | 43,564 | 45,733 | 111,613 | 122,794 | ||||||||||||||||||||
| Credit loss expense | 1,551 | 1,597 | 933 | 572 | 638 | 4,081 | 3,920 | ||||||||||||||||||||
| Net interest income after credit loss expense | 33,024 | 35,365 | 39,143 | 42,992 | 45,095 | 107,532 | 118,874 | ||||||||||||||||||||
| Noninterest income (loss) | |||||||||||||||||||||||||||
| Investment services and trust activities | 3,004 | 3,119 | 2,933 | 2,666 | 2,876 | 9,056 | 8,557 | ||||||||||||||||||||
| Service charges and fees | 2,146 | 2,047 | 2,008 | 2,028 | 2,075 | 6,201 | 5,449 | ||||||||||||||||||||
| Card revenue | 1,817 | 1,847 | 1,748 | 1,784 | 1,898 | 5,412 | 5,426 | ||||||||||||||||||||
| Loan revenue | 1,462 | 909 | 1,420 | 966 | 1,722 | 3,791 | 9,538 | ||||||||||||||||||||
| Bank-owned life insurance | 626 | 616 | 602 | 637 | 579 | 1,844 | 1,668 | ||||||||||||||||||||
| Investment securities (losses) gains, net | 79 | (2 | ) | (13,170 | ) | (1 | ) | (163 | ) | (13,093 | ) | 272 | |||||||||||||||
| Other | 727 | 210 | 413 | 2,860 | 3,601 | 1,350 | 5,669 | ||||||||||||||||||||
| Total noninterest income (loss) | 9,861 | 8,746 | (4,046 | ) | 10,940 | 12,588 | 14,561 | 36,579 | |||||||||||||||||||
| Noninterest expense | |||||||||||||||||||||||||||
| Compensation and employee benefits | 18,558 | 20,386 | 19,607 | 20,438 | 20,046 | 58,551 | 57,665 | ||||||||||||||||||||
| Occupancy expense of premises, net | 2,405 | 2,574 | 2,746 | 2,663 | 2,577 | 7,725 | 7,609 | ||||||||||||||||||||
| Equipment | 2,123 | 2,435 | 2,171 | 2,327 | 2,358 | 6,729 | 6,366 | ||||||||||||||||||||
| Legal and professional | 1,678 | 1,682 | 1,736 | 1,846 | 2,012 | 5,096 | 6,800 | ||||||||||||||||||||
| Data processing | 1,504 | 1,521 | 1,363 | 1,375 | 1,731 | 4,388 | 4,199 | ||||||||||||||||||||
| Marketing | 782 | 1,142 | 986 | 947 | 1,139 | 2,910 | 3,325 | ||||||||||||||||||||
| Amortization of intangibles | 1,460 | 1,594 | 1,752 | 1,770 | 1,789 | 4,806 | 4,299 | ||||||||||||||||||||
| FDIC insurance | 783 | 862 | 749 | 405 | 415 | 2,394 | 1,255 | ||||||||||||||||||||
| Communications | 206 | 260 | 261 | 285 | 302 | 727 | 840 | ||||||||||||||||||||
| Foreclosed assets, net | 2 | (6 | ) | (28 | ) | 48 | 42 | (32 | ) | (66 | ) | ||||||||||||||||
| Other | 2,043 | 2,469 | 1,976 | 2,336 | 2,212 | 6,488 | 6,056 | ||||||||||||||||||||
| Total noninterest expense | 31,544 | 34,919 | 33,319 | 34,440 | 34,623 | 99,782 | 98,348 | ||||||||||||||||||||
| Income before income tax expense | 11,341 | 9,192 | 1,778 | 19,492 | 23,060 | 22,311 | 57,105 | ||||||||||||||||||||
| Income tax expense | 2,203 | 1,598 | 381 | 3,490 | 4,743 | 4,182 | 12,272 | ||||||||||||||||||||
| Net income | $ | 9,138 | $ | 7,594 | $ | 1,397 | $ | 16,002 | $ | 18,317 | $ | 18,129 | $ | 44,833 | |||||||||||||
| Earnings per common share | |||||||||||||||||||||||||||
| Basic | $ | 0.58 | $ | 0.48 | $ | 0.09 | $ | 1.02 | $ | 1.17 | $ | 1.16 | $ | 2.86 | |||||||||||||
| Diluted | $ | 0.58 | $ | 0.48 | $ | 0.09 | $ | 1.02 | $ | 1.17 | $ | 1.15 | $ | 2.86 | |||||||||||||
| Weighted average basic common shares outstanding | 15,689 | 15,680 | 15,650 | 15,624 | 15,623 | 15,673 | 15,658 | ||||||||||||||||||||
| Weighted average diluted common shares outstanding | 15,711 | 15,689 | 15,691 | 15,693 | 15,654 | 15,696 | 15,686 | ||||||||||||||||||||
| Dividends paid per common share | $ | 0.2425 | $ | 0.2425 | $ | 0.2425 | $ | 0.2375 | $ | 0.2375 | $ | 0.7275 | $ | 0.7125 | |||||||||||||
MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
FINANCIAL STATISTICS
| As of or for the Three Months Ended | As of or for the Nine Months Ended | ||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||||||
| (Dollars in thousands, except per share amounts) | 2023 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| Earnings: | |||||||||||||||||||
| Net interest income | $ | 34,575 | $ | 36,962 | $ | 45,733 | $ | 111,613 | $ | 122,794 | |||||||||
| Noninterest income | 9,861 | 8,746 | 12,588 | 14,561 | 36,579 | ||||||||||||||
| Total revenue, net of interest expense | 44,436 | 45,708 | 58,321 | 126,174 | 159,373 | ||||||||||||||
| Credit loss expense | 1,551 | 1,597 | 638 | 4,081 | 3,920 | ||||||||||||||
| Noninterest expense | 31,544 | 34,919 | 34,623 | 99,782 | 98,348 | ||||||||||||||
| Income before income tax expense | 11,341 | 9,192 | 23,060 | 22,311 | 57,105 | ||||||||||||||
| Income tax expense | 2,203 | 1,598 | 4,743 | 4,182 | 12,272 | ||||||||||||||
| Net income | $ | 9,138 | $ | 7,594 | $ | 18,317 | $ | 18,129 | $ | 44,833 | |||||||||
| Per Share Data: | |||||||||||||||||||
| Diluted earnings | $ | 0.58 | $ | 0.48 | $ | 1.17 | $ | 1.15 | $ | 2.86 | |||||||||
| Book value | 32.21 | 31.96 | 30.23 | 32.21 | 30.23 | ||||||||||||||
| Tangible book value(1) | 26.60 | 26.26 | 24.17 | 26.60 | 24.17 | ||||||||||||||
| Ending Balance Sheet: | |||||||||||||||||||
| Total assets | $ | 6,467,818 | $ | 6,521,489 | $ | 6,491,061 | $ | 6,467,818 | $ | 6,491,061 | |||||||||
| Loans held for investment, net of unearned income | 4,065,969 | 4,018,649 | 3,746,289 | 4,065,969 | 3,746,289 | ||||||||||||||
| Total securities | 1,958,521 | 2,003,089 | 2,299,887 | 1,958,521 | 2,299,887 | ||||||||||||||
| Total deposits | 5,363,324 | 5,445,447 | 5,476,782 | 5,363,324 | 5,476,782 | ||||||||||||||
| Short-term borrowings | 373,956 | 362,054 | 304,536 | 373,956 | 304,536 | ||||||||||||||
| Long-term debt | 124,526 | 125,752 | 154,190 | 124,526 | 154,190 | ||||||||||||||
| Total shareholders' equity | 505,411 | 501,341 | 472,229 | 505,411 | 472,229 | ||||||||||||||
| Average Balance Sheet: | |||||||||||||||||||
| Average total assets | $ | 6,452,815 | $ | 6,465,810 | $ | 6,457,647 | $ | 6,480,636 | $ | 6,152,390 | |||||||||
| Average total loans | 4,019,852 | 4,003,717 | 3,673,379 | 3,964,119 | 3,416,600 | ||||||||||||||
| Average total deposits | 5,379,871 | 5,454,517 | 5,507,482 | 5,459,749 | 5,246,183 | ||||||||||||||
| Financial Ratios: | |||||||||||||||||||
| Return on average assets | 0.56 | % | 0.47 | % | 1.13 | % | 0.37 | % | 0.97 | % | |||||||||
| Return on average equity | 7.14 | % | 6.03 | % | 14.56 | % | 4.81 | % | 11.81 | % | |||||||||
| Return on average tangible equity(1) | 9.68 | % | 8.50 | % | 19.32 | % | 7.03 | % | 15.28 | % | |||||||||
| Efficiency ratio(1) | 66.06 | % | 71.13 | % | 53.67 | % | 66.40 | % | 56.70 | % | |||||||||
| Net interest margin, tax equivalent(1) | 2.35 | % | 2.52 | % | 3.08 | % | 2.54 | % | 2.92 | % | |||||||||
| Loans to deposits ratio | 75.81 | % | 73.80 | % | 68.40 | % | 75.81 | % | 68.40 | % | |||||||||
| Common equity ratio | 7.81 | % | 7.69 | % | 7.28 | % | 7.81 | % | 7.28 | % | |||||||||
| Tangible common equity ratio(1) | 6.54 | % | 6.40 | % | 5.90 | % | 6.54 | % | 5.90 | % | |||||||||
| Credit Risk Profile: | |||||||||||||||||||
| Total nonperforming loans | $ | 28,987 | $ | 14,448 | $ | 25,963 | $ | 28,987 | $ | 25,963 | |||||||||
| Nonperforming loans ratio | 0.71 | % | 0.36 | % | 0.69 | % | 0.71 | % | 0.69 | % | |||||||||
| Total nonperforming assets | $ | 28,987 | $ | 14,448 | $ | 26,066 | $ | 28,987 | $ | 26,066 | |||||||||
| Nonperforming assets ratio | 0.45 | % | 0.22 | % | 0.40 | % | 0.45 | % | 0.40 | % | |||||||||
| Net charge-offs | $ | 451 | $ | 897 | $ | 588 | $ | 1,681 | $ | 3,091 | |||||||||
| Net charge-off ratio | 0.04 | % | 0.09 | % | 0.06 | % | 0.06 | % | 0.12 | % | |||||||||
| Allowance for credit losses | $ | 51,600 | $ | 50,400 | $ | 52,100 | $ | 51,600 | $ | 52,100 | |||||||||
| Allowance for credit losses ratio | 1.27 | % | 1.25 | % | 1.39 | % | 1.27 | % | 1.39 | % | |||||||||
| Allowance for credit losses to nonaccrual ratio | 178.63 | % | 355.03 | % | 208.18 | % | 178.63 | % | 208.18 | % | |||||||||
(1) Non-GAAP measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET AND YIELD ANALYSIS
| Three Months Ended | ||||||||||||||||||||||||||
| September 30, 2023 | June 30, 2023 | September 30, 2022 | ||||||||||||||||||||||||
| (Dollars in thousands) | Average Balance | Interest Income/ Expense | Average Yield/ Cost | Average Balance | Interest Income/ Expense | Average Yield/ Cost | Average Balance | Interest Income/ Expense | Average Yield/ Cost | |||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||
| Loans, including fees (1)(2)(3) | $ | 4,019,852 | $ | 52,605 | 5.19 | % | $ | 4,003,717 | $ | 50,439 | 5.05 | % | $ | 3,673,379 | $ | 41,124 | 4.44 | % | ||||||||
| Taxable investment securities | 1,637,259 | 9,526 | 2.31 | % | 1,698,003 | 9,734 | 2.30 | % | 1,939,517 | 10,635 | 2.18 | % | ||||||||||||||
| Tax-exempt investment securities (2)(4) | 341,330 | 2,234 | 2.60 | % | 345,934 | 2,253 | 2.61 | % | 431,898 | 2,922 | 2.68 | % | ||||||||||||||
| Total securities held for investment(2) | 1,978,589 | 11,760 | 2.36 | % | 2,043,937 | 11,987 | 2.35 | % | 2,371,415 | 13,557 | 2.27 | % | ||||||||||||||
| Other | 34,195 | 374 | 4.34 | % | 9,078 | 68 | 3.00 | % | 6,070 | 9 | 0.59 | % | ||||||||||||||
| Total interest earning assets(2) | $ | 6,032,636 | $ | 64,739 | 4.26 | % | $ | 6,056,732 | $ | 62,494 | 4.14 | % | $ | 6,050,864 | $ | 54,690 | 3.59 | % | ||||||||
| Other assets | 420,179 | 409,078 | 406,783 | |||||||||||||||||||||||
| Total assets | $ | 6,452,815 | $ | 6,465,810 | $ | 6,457,647 | ||||||||||||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||||||||||||||
| Interest checking deposits | $ | 1,354,597 | $ | 2,179 | 0.64 | % | $ | 1,420,741 | $ | 1,971 | 0.56 | % | $ | 1,725,000 | $ | 1,463 | 0.34 | % | ||||||||
| Money market deposits | 1,112,149 | 7,402 | 2.64 | % | 999,436 | 5,299 | 2.13 | % | 1,016,005 | 1,268 | 0.50 | % | ||||||||||||||
| Savings deposits | 603,628 | 749 | 0.49 | % | 603,905 | 288 | 0.19 | % | 710,836 | 297 | 0.17 | % | ||||||||||||||
| Time deposits | 1,403,504 | 12,798 | 3.62 | % | 1,490,332 | 12,559 | 3.38 | % | 913,307 | 2,007 | 0.87 | % | ||||||||||||||
| Total interest bearing deposits | 4,473,878 | 23,128 | 2.05 | % | 4,514,414 | 20,117 | 1.79 | % | 4,365,148 | 5,035 | 0.46 | % | ||||||||||||||
| Securities sold under agreements to repurchase | 66,020 | 85 | 0.51 | % | 159,583 | 423 | 1.06 | % | 144,628 | 228 | 0.63 | % | ||||||||||||||
| Other short-term borrowings | 277,713 | 3,634 | 5.19 | % | 132,495 | 1,695 | 5.13 | % | 83,086 | 539 | 2.57 | % | ||||||||||||||
| Short-term borrowings | 343,733 | 3,719 | 4.29 | % | 292,078 | 2,118 | 2.91 | % | 227,714 | 767 | 1.34 | % | ||||||||||||||
| Long-term debt | 125,737 | 2,150 | 6.78 | % | 135,329 | 2,153 | 6.38 | % | 159,125 | 1,886 | 4.70 | % | ||||||||||||||
| Total borrowed funds | 469,470 | 5,869 | 4.96 | % | 427,407 | 4,271 | 4.01 | % | 386,839 | 2,653 | 2.72 | % | ||||||||||||||
| Total interest bearing liabilities | $ | 4,943,348 | $ | 28,997 | 2.33 | % | $ | 4,941,821 | $ | 24,388 | 1.98 | % | $ | 4,751,987 | $ | 7,688 | 0.64 | % | ||||||||
| Noninterest bearing deposits | 905,993 | 940,103 | 1,142,334 | |||||||||||||||||||||||
| Other liabilities | 95,408 | 78,898 | 64,063 | |||||||||||||||||||||||
| Shareholders' equity | 508,066 | 504,988 | 499,263 | |||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 6,452,815 | $ | 6,465,810 | $ | 6,457,647 | ||||||||||||||||||||
| Net interest income(2) | $ | 35,742 | $ | 38,106 | $ | 47,002 | ||||||||||||||||||||
| Net interest spread(2) | 1.93 | % | 2.16 | % | 2.95 | % | ||||||||||||||||||||
| Net interest margin(2) | 2.35 | % | 2.52 | % | 3.08 | % | ||||||||||||||||||||
| Total deposits(5) | $ | 5,379,871 | $ | 23,128 | 1.71 | % | $ | 5,454,517 | $ | 20,117 | 1.48 | % | $ | 5,507,482 | $ | 5,035 | 0.36 | % | ||||||||
| Cost of funds(6) | 1.97 | % | 1.66 | % | 0.52 | % | ||||||||||||||||||||
(1) Average balance includes nonaccrual loans.
(2) Tax equivalent. The federal statutory tax rate utilized was 21%.
(3) Interest income includes net loan fees, loan purchase discount accretion and tax equivalent adjustments. Net loan fees were $141 thousand, $79 thousand, and $35 thousand for the three months ended September 30, 2023, June 30, 2023, and September 30, 2022, respectively. Loan purchase discount accretion was $791 thousand, $1.0 million, and $2.0 million for the three months ended September 30, 2023, June 30, 2023, and September 30, 2022, respectively. Tax equivalent adjustments were $735 thousand, $713 thousand, and $673 thousand for the three months ended September 30, 2023, June 30, 2023, and September 30, 2022, respectively. The federal statutory tax rate utilized was 21%.
(4) Interest income includes tax equivalent adjustments of $432 thousand, $431 thousand, and $596 thousand for the three months ended September 30, 2023, June 30, 2023, and September 30, 2022, respectively. The federal statutory tax rate utilized was 21%.
(5) Total deposits is the sum of total interest-bearing deposits and noninterest bearing deposits. The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits.
(6) Cost of funds is calculated as annualized total interest expense divided by the sum of average total deposits and borrowed funds.
MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET AND YIELD ANALYSIS
| Nine Months Ended | |||||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | ||||||||||||||||||||||
| (Dollars in thousands) | Average Balance | Interest Income/ Expense | Average Yield/ Cost | Average Balance | Interest Income/ Expense | Average Yield/ Cost | |||||||||||||||||
| ASSETS | |||||||||||||||||||||||
| Loans, including fees (1)(2)(3) | $ | 3,964,119 | $ | 150,250 | 5.07 | % | $ | 3,416,600 | $ | 106,297 | 4.16 | % | |||||||||||
| Taxable investment securities | 1,714,912 | 29,704 | 2.32 | % | 1,899,907 | 28,334 | 1.99 | % | |||||||||||||||
| Tax-exempt investment securities (2)(4) | 361,254 | 7,136 | 2.64 | % | 440,542 | 8,895 | 2.70 | % | |||||||||||||||
| Total securities held for investment(2) | 2,076,166 | 36,840 | 2.37 | % | 2,340,449 | 37,229 | 2.13 | % | |||||||||||||||
| Other | 22,741 | 686 | 4.03 | % | 25,972 | 77 | 0.40 | % | |||||||||||||||
| Total interest earning assets(2) | $ | 6,063,026 | $ | 187,776 | 4.14 | % | $ | 5,783,021 | $ | 143,603 | 3.32 | % | |||||||||||
| Other assets | 417,610 | 369,369 | |||||||||||||||||||||
| Total assets | $ | 6,480,636 | $ | 6,152,390 | |||||||||||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||||||||||
| Interest checking deposits | $ | 1,429,804 | $ | 5,999 | 0.56 | % | $ | 1,642,849 | $ | 3,713 | 0.30 | % | |||||||||||
| Money market deposits | 1,014,708 | 15,970 | 2.10 | % | 991,338 | 2,338 | 0.32 | % | |||||||||||||||
| Savings deposits | 620,011 | 1,309 | 0.28 | % | 671,917 | 863 | 0.17 | % | |||||||||||||||
| Time deposits | 1,437,122 | 35,286 | 3.28 | % | 877,923 | 4,204 | 0.64 | % | |||||||||||||||
| Total interest bearing deposits | 4,501,645 | 58,564 | 1.74 | % | 4,184,027 | 11,118 | 0.36 | % | |||||||||||||||
| Securities sold under agreements to repurchase | 123,512 | 958 | 1.04 | % | 152,663 | 435 | 0.38 | % | |||||||||||||||
| Other short-term borrowings | 174,448 | 6,665 | 5.11 | % | 42,952 | 680 | 2.12 | % | |||||||||||||||
| Short-term borrowings | 297,960 | 7,623 | 3.42 | % | 195,615 | 1,115 | 0.76 | % | |||||||||||||||
| Long-term debt | 133,375 | 6,427 | 6.44 | % | 148,053 | 4,975 | 4.49 | % | |||||||||||||||
| Total borrowed funds | 431,335 | 14,050 | 4.36 | % | 343,668 | 6,090 | 2.37 | % | |||||||||||||||
| Total interest bearing liabilities | $ | 4,932,980 | $ | 72,614 | 1.97 | % | $ | 4,527,695 | $ | 17,208 | 0.51 | % | |||||||||||
| Noninterest bearing deposits | 958,104 | 1,062,156 | |||||||||||||||||||||
| Other liabilities | 85,650 | 54,775 | |||||||||||||||||||||
| Shareholders' equity | 503,902 | 507,764 | |||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 6,480,636 | $ | 6,152,390 | |||||||||||||||||||
| Net interest income(2) | $ | 115,162 | $ | 126,395 | |||||||||||||||||||
| Net interest spread(2) | 2.17 | % | 2.81 | % | |||||||||||||||||||
| Net interest margin(2) | 2.54 | % | 2.92 | % | |||||||||||||||||||
| Total deposits(5) | $ | 5,459,749 | $ | 58,564 | 1.43 | % | $ | 5,246,183 | $ | 11,118 | 0.28 | % | |||||||||||
| Cost of funds(6) | 1.65 | % | 0.41 | % | |||||||||||||||||||
(1) Average balance includes nonaccrual loans.
(2) Tax equivalent. The federal statutory tax rate utilized was 21%.
(3) Interest income includes net loan fees, loan purchase discount accretion and tax equivalent adjustments. Net loan fees were $315 thousand and $678 thousand for the nine months ended September 30, 2023 and September 30, 2022, respectively. Loan purchase discount accretion was $3.0 million and $3.3 million for the nine months ended September 30, 2023 and September 30, 2022, respectively. Tax equivalent adjustments were $2.2 million and $1.8 million for the nine months ended September 30, 2023 and September 30, 2022, respectively. The federal statutory tax rate utilized was 21%.
(4) Interest income includes tax equivalent adjustments of $1.4 million and $1.8 million for the nine months ended September 30, 2023 and September 30, 2022, respectively. The federal statutory tax rate utilized was 21%.
(5) Total deposits is the sum of total interest-bearing deposits and noninterest bearing deposits. The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits.
(6) Cost of funds is calculated as annualized total interest expense divided by the sum of average total deposits and borrowed funds.
Non-GAAP Measures
This earnings release contains non-GAAP measures for tangible common equity, tangible book value per share, tangible common equity ratio, return on average tangible equity, net interest margin (tax equivalent), core net interest margin, loan yield (tax equivalent), core yield on loans, efficiency ratio, and adjusted earnings. Management believes these measures provide investors with useful information regarding the Company's profitability, financial condition and capital adequacy, consistent with how management evaluates the Company's financial performance. The following tables provide a reconciliation of each non-GAAP measure to the most comparable GAAP measure.
| Tangible Common Equity/Tangible Book Value per Share/Tangible Common Equity Ratio | September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||||||
| (Dollars in thousands, except per share data) | 2023 | 2023 | 2023 | 2022 | 2022 | |||||||||||||||
| Total shareholders' equity | $ | 505,411 | $ | 501,341 | $ | 500,650 | $ | 492,793 | $ | 472,229 | ||||||||||
| Intangible assets, net | (87,987 | ) | (89,446 | ) | (91,040 | ) | (92,792 | ) | (94,563 | ) | ||||||||||
| Tangible common equity | $ | 417,424 | $ | 411,895 | $ | 409,610 | $ | 400,001 | $ | 377,666 | ||||||||||
| Total assets | $ | 6,467,818 | $ | 6,521,489 | $ | 6,409,952 | $ | 6,577,876 | $ | 6,491,061 | ||||||||||
| Intangible assets, net | (87,987 | ) | (89,446 | ) | (91,040 | ) | (92,792 | ) | (94,563 | ) | ||||||||||
| Tangible assets | $ | 6,379,831 | $ | 6,432,043 | $ | 6,318,912 | $ | 6,485,084 | $ | 6,396,498 | ||||||||||
| Book value per share | $ | 32.21 | $ | 31.96 | $ | 31.94 | $ | 31.54 | $ | 30.23 | ||||||||||
| Tangible book value per share(1) | $ | 26.60 | $ | 26.26 | $ | 26.13 | $ | 25.60 | $ | 24.17 | ||||||||||
| Shares outstanding | 15,691,738 | 15,685,123 | 15,675,325 | 15,623,977 | 15,622,825 | |||||||||||||||
| Common equity ratio | 7.81 | % | 7.69 | % | 7.81 | % | 7.49 | % | 7.28 | % | ||||||||||
| Tangible common equity ratio(2) | 6.54 | % | 6.40 | % | 6.48 | % | 6.17 | % | 5.90 | % | ||||||||||
(1) Tangible common equity divided by shares outstanding.
(2) Tangible common equity divided by tangible assets.
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| Return on Average Tangible Equity | September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||||||
| (Dollars in thousands) | 2023 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||
| Net income | $ | 9,138 | $ | 7,594 | $ | 18,317 | $ | 18,129 | $ | 44,833 | ||||||||||
| Intangible amortization, net of tax(1) | 1,095 | 1,196 | 1,342 | 3,605 | 3,224 | |||||||||||||||
| Tangible net income | $ | 10,233 | $ | 8,790 | $ | 19,659 | $ | 21,734 | $ | 48,057 | ||||||||||
| Average shareholders' equity | $ | 508,066 | $ | 504,988 | $ | 499,263 | $ | 503,902 | $ | 507,764 | ||||||||||
| Average intangible assets, net | (88,699 | ) | (90,258 | ) | (95,499 | ) | (90,308 | ) | (87,318 | ) | ||||||||||
| Average tangible equity | $ | 419,367 | $ | 414,730 | $ | 403,764 | $ | 413,594 | $ | 420,446 | ||||||||||
| Return on average equity | 7.14 | % | 6.03 | % | 14.56 | % | 4.81 | % | 11.81 | % | ||||||||||
| Return on average tangible equity(2) | 9.68 | % | 8.50 | % | 19.32 | % | 7.03 | % | 15.28 | % | ||||||||||
(1) The combined income tax rate utilized was 25%.
(2) Annualized tangible net income divided by average tangible equity.
| Net Interest Margin, Tax Equivalent/ | Three Months Ended | Nine Months Ended | ||||||||||||||||||
| Core Net Interest Margin | September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||||||
| (Dollars in thousands) | 2023 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||
| Net interest income | $ | 34,575 | $ | 36,962 | $ | 45,733 | $ | 111,613 | $ | 122,794 | ||||||||||
| Tax equivalent adjustments: | ||||||||||||||||||||
| Loans(1) | 735 | 713 | 673 | 2,164 | 1,782 | |||||||||||||||
| Securities(1) | 432 | 431 | 596 | 1,385 | 1,819 | |||||||||||||||
| Net interest income, tax equivalent | $ | 35,742 | $ | 38,106 | $ | 47,002 | $ | 115,162 | $ | 126,395 | ||||||||||
| Loan purchase discount accretion | (791 | ) | (984 | ) | (2,015 | ) | (2,964 | ) | (3,275 | ) | ||||||||||
| Core net interest income | $ | 34,951 | $ | 37,122 | $ | 44,987 | $ | 112,198 | $ | 123,120 | ||||||||||
| Net interest margin | 2.27 | % | 2.45 | % | 3.00 | % | 2.46 | % | 2.84 | % | ||||||||||
| Net interest margin, tax equivalent(2) | 2.35 | % | 2.52 | % | 3.08 | % | 2.54 | % | 2.92 | % | ||||||||||
| Core net interest margin(3) | 2.30 | % | 2.46 | % | 2.95 | % | 2.47 | % | 2.85 | % | ||||||||||
| Average interest earning assets | $ | 6,032,636 | $ | 6,056,732 | $ | 6,050,864 | $ | 6,063,026 | $ | 5,783,021 | ||||||||||
(1) The federal statutory tax rate utilized was 21%.
(2) Annualized tax equivalent net interest income divided by average interest earning assets.
(3) Annualized core net interest income divided by average interest earning assets.
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| Loan Yield, Tax Equivalent / Core Yield on Loans | September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||||||
| (Dollars in thousands) | 2023 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||
| Loan interest income, including fees | $ | 51,870 | $ | 49,726 | $ | 40,451 | $ | 148,086 | $ | 104,515 | ||||||||||
| Tax equivalent adjustment(1) | 735 | 713 | 673 | 2,164 | 1,782 | |||||||||||||||
| Tax equivalent loan interest income | $ | 52,605 | $ | 50,439 | $ | 41,124 | $ | 150,250 | $ | 106,297 | ||||||||||
| Loan purchase discount accretion | (791 | ) | (984 | ) | (2,015 | ) | (2,964 | ) | (3,275 | ) | ||||||||||
| Core loan interest income | $ | 51,814 | $ | 49,455 | $ | 39,109 | $ | 147,286 | $ | 103,022 | ||||||||||
| Yield on loans | 5.12 | % | 4.98 | % | 4.37 | % | 4.99 | % | 4.09 | % | ||||||||||
| Yield on loans, tax equivalent(2) | 5.19 | % | 5.05 | % | 4.44 | % | 5.07 | % | 4.16 | % | ||||||||||
| Core yield on loans(3) | 5.11 | % | 4.95 | % | 4.22 | % | 4.97 | % | 4.03 | % | ||||||||||
| Average loans | $ | 4,019,852 | $ | 4,003,717 | $ | 3,673,379 | $ | 3,964,119 | $ | 3,416,600 | ||||||||||
(1) The federal statutory tax rate utilized was 21%.
(2) Annualized tax equivalent loan interest income divided by average loans.
(3) Annualized core loan interest income divided by average loans.
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| Efficiency Ratio | September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||||||
| (Dollars in thousands) | 2023 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||
| Total noninterest expense | $ | 31,544 | $ | 34,919 | $ | 34,623 | $ | 99,782 | $ | 98,348 | ||||||||||
| Amortization of intangibles | (1,460 | ) | (1,594 | ) | (1,789 | ) | (4,806 | ) | (4,299 | ) | ||||||||||
| Merger-related expenses | (11 | ) | - | (763 | ) | (147 | ) | (1,792 | ) | |||||||||||
| Noninterest expense used for efficiency ratio | $ | 30,073 | $ | 33,325 | $ | 32,071 | $ | 94,829 | $ | 92,257 | ||||||||||
| Net interest income, tax equivalent(1) | $ | 35,742 | $ | 38,106 | $ | 47,002 | $ | 115,162 | $ | 126,395 | ||||||||||
| Plus: Noninterest income | 9,861 | 8,746 | 12,588 | 14,561 | 36,579 | |||||||||||||||
| Less: Investment securities (losses) gains, net | 79 | (2 | ) | (163 | ) | (13,093 | ) | 272 | ||||||||||||
| Net revenues used for efficiency ratio | $ | 45,524 | $ | 46,854 | $ | 59,753 | $ | 142,816 | $ | 162,702 | ||||||||||
| Efficiency ratio (2) | 66.06 | % | 71.13 | % | 53.67 | % | 66.40 | % | 56.70 | % | ||||||||||
(1) The federal statutory tax rate utilized was 21%.
(2) Noninterest expense adjusted for amortization of intangibles and merger-related expenses divided by the sum of tax equivalent net interest income, noninterest income and net investment securities gains.
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| Adjusted Earnings | September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||||||
| (Dollars in thousands, except per share data) | 2023 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||
| Net income | $ | 9,138 | $ | 7,594 | $ | 18,317 | $ | 18,129 | $ | 44,833 | ||||||||||
| After tax loss on sale of debt securities(1) | - | - | 125 | 9,837 | - | |||||||||||||||
| Adjusted earnings | $ | 9,138 | $ | 7,594 | $ | 18,442 | $ | 27,966 | $ | 44,833 | ||||||||||
| Weighted average diluted common shares outstanding | 15,711 | 15,689 | 15,654 | 15,696 | 15,686 | |||||||||||||||
| Earnings per common share | ||||||||||||||||||||
| Earnings per common share - diluted | $ | 0.58 | $ | 0.48 | $ | 1.17 | $ | 1.15 | $ | 2.86 | ||||||||||
| Adjusted earnings per common share - diluted (2) | $ | 0.58 | $ | 0.48 | $ | 1.18 | $ | 1.78 | $ | 2.86 | ||||||||||
(1) The income tax rate utilized was 25.3%.
(2) Adjusted earnings divided by weighted average diluted common shares outstanding.
Category: Earnings
This news release may be downloaded from https://www.midwestonefinancial.com/corporate-profile/default.aspx
Source: MidWestOne Financial Group, Inc.
Industry: Banks
| Contact: | |||
| Charles N. Reeves | Barry S. Ray | ||
| Chief Executive Officer | Chief Financial Officer | ||
| 319.356.5800 | 319.356.5800 | ||
