• MidWestOne Financial Group, Inc. Reports Financial Results for the First Quarter of 2022

    Source: Nasdaq GlobeNewswire / 28 Apr 2022 08:30:51   America/New_York

    First Quarter Summary1

    • Net income for the first quarter was $13.9 million, or $0.88 per diluted common share.
      • Total revenue, net of interest expense, of $49.0 million.
      • Noninterest expense of $31.6 million.
    • Core commercial annualized loan growth of 5.4% to $2.71 billion2.
    • No credit loss expense in the first quarter 2022 and the allowance for credit losses ratio declined to 1.42%.
    • Nonperforming assets ratio remained stable at 0.53% and the annualized net charge-off ratio was 28 bps.
    • Efficiency ratio was 60.46%2.

    IOWA CITY, Iowa, April 28, 2022 (GLOBE NEWSWIRE) -- MidWestOne Financial Group, Inc. (Nasdaq: MOFG) (“we”, “our”, or the "Company”) today reported net income for the first quarter of 2022 of $13.9 million, or $0.88 per diluted common share, compared to net income of $14.3 million, or $0.91 per diluted common share, for the linked quarter.

    CEO COMMENTARY

    Charles Funk, Chief Executive Officer of the Company, commented, "We are pleased with the first quarter results; especially with our return on average tangible equity of 13.56%2. Despite the first quarter historically being a softer quarter for loan growth, we showed positive momentum and have a strong pipeline of construction loans that will continue to fund as the year progresses. Further, asset quality was generally stable to improving with a 36 bps decline in the nonperforming loans ratio and a 30 bps decline in the classified loans ratio when compared to the prior year period. In addition, the 25 bps increase in March 2022 to the federal funds target rate had little impact to net interest income in the first quarter of 2022 results. Finally, we expect to close the Iowa First acquisition in the second quarter and believe this will add to our earnings per share during the remainder of 2022 and beyond."

    _________________
    1     First Quarter Summary compares to the fourth quarter of 2021 (the "linked quarter") unless noted.
    2 Non-GAAP measure. See the separate Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.

      

    FINANCIAL HIGHLIGHTS

    		 Three Months Ended
     March 31, December 31, March 31,
    (Dollars in thousands, except per share amounts)  2022   2021   2021 
    Net interest income $37,336  $38,819  $38,617 
    Noninterest income  11,644   11,229   11,824 
    Total revenue, net of interest expense  48,980   50,048   50,441 
    Credit loss expense (benefit)  —   622   (4,734)
    Noninterest expense  31,643   30,444   27,700 
    Income before income tax expense  17,337   18,982   27,475 
    Income tax expense  3,442   4,726   5,827 
    Net income $13,895  $14,256  $21,648 
    Diluted earnings per share $0.88  $0.91  $1.35 
           
    Return on average assets  0.95%  0.95%  1.59%
    Return on average equity  10.74%  10.68%  17.01%
    Return on average tangible equity(1)  13.56%  13.50%  21.52%
    Efficiency ratio(1)  60.46%  56.74%  50.77%
    (1) Non-GAAP measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
     

    INCOME STATEMENT HIGHLIGHTS

    Net Interest Income

    Net interest income decreased to $37.3 million in the first quarter of 2022 from $38.8 million in the fourth quarter of 2021 due primarily to decreased Paycheck Protection Program ("PPP") loan fee accretion stemming from loan forgiveness. Net PPP loan fee accretion was $0.8 million in the first quarter of 2022 compared to $2.0 million in the linked quarter.

    Average interest earning assets decreased $19.1 million to $5.59 billion in the first quarter of 2022, when compared to the fourth quarter of 2021. When adjusting for the $37.6 million reduction in average PPP loan balances due to forgiveness, average interest earning assets increased $18.5 million due to the increased volume of debt securities, coupled with non-PPP loan growth, which included an increase in the revolving line of credit utilization.

    The Company's tax equivalent net interest margin was 2.79% in the first quarter of 2022 compared to 2.83% in the linked quarter due to a decrease in total interest earning assets yield, partially offset by a slight reduction in funding costs. Total interest earning assets yield decreased 4 bps from the linked quarter primarily as a result of the reduced benefit from net PPP loan fee accretion described above. The cost of interest bearing liabilities decreased 1 bp to 0.42%, primarily as a result of interest bearing deposits costs of 0.29%, which declined 1 bp from the linked quarter.

    Noninterest Income

    Noninterest income for the first quarter of 2022 increased $0.4 million, or 3.7%, from the linked quarter. The increase was due to an increase of $1.2 million in loan revenue, which stemmed primarily from the $2.7 million increase in the fair value of our mortgage servicing rights, as compared to a $0.9 million increase in the fourth quarter of 2021. Partially offsetting the increase identified above, was a decline of $0.8 million in mortgage origination fee income. The decline in 'Other' noninterest income was primarily due to a decrease of $0.5 million in income received from our commercial loan back-to-back swap program.

    The following table presents details of noninterest income for the periods indicated:

     Three Months Ended
    Noninterest IncomeMarch 31, December 31, March 31,
    (In thousands) 2022  2021  2021
    Investment services and trust activities$3,011 $3,115 $2,836
    Service charges and fees 1,657  1,684  1,487
    Card revenue 1,650  1,746  1,536
    Loan revenue 4,293  3,132  4,730
    Bank-owned life insurance 531  550  542
    Investment securities gains, net 40  137  27
    Other 462  865  666
    Total noninterest income$11,644 $11,229 $11,824
             

    Noninterest Expense

    Noninterest expense for the first quarter of 2022 increased $1.2 million, or 3.9%, from the linked quarter primarily due to increases of $0.6 million in occupancy expense of premises, net, $0.5 million in legal and professional, and $0.4 million in compensation and employee benefits. The increase in occupancy expense was primarily attributable to a write-down of fixed assets totaling $0.4 million. The increase in legal and professional expenses was primarily attributable to executive recruitment, as well as elevated legal expenses related to litigation. The increase in compensation and employee benefits was primarily due to normal annual salary increases. Offsetting these increases was a decline of $0.3 million in equipment expense.

    The decline in net interest income and the increase in noninterest expense, partially offset by the increase in noninterest income noted above, were the primary drivers of the increase in the efficiency ratio, which increased 3.72 percentage points to 60.46% from 56.74% in the linked quarter.

    The following table presents details of noninterest expense for the periods indicated:

     Three Months Ended
    Noninterest ExpenseMarch 31, December 31, March 31,
    (In thousands) 2022   2021  2021
    Compensation and employee benefits$18,664  $18,266 $16,917
    Occupancy expense of premises, net 2,779   2,211  2,318
    Equipment 1,901   2,189  1,793
    Legal and professional 2,353   1,826  783
    Data processing 1,231   1,211  1,252
    Marketing 1,029   1,121  1,006
    Amortization of intangibles 1,227   1,245  1,507
    FDIC insurance 420   380  512
    Communications 272   277  409
    Foreclosed assets, net (112)  7  47
    Other 1,879   1,711  1,156
    Total noninterest expense$31,643  $30,444 $27,700
              

    The following table presents details of merger-related expenses for the periods indicated:

     Three Months Ended
     March 31, December 31, March 31,
    Merger-related Expenses 2022  2021  2021
    (In thousands)     
    Equipment$5 $18 $—
    Legal and professional 63  202  —
    Data processing 38  —  —
    Marketing 7  2  —
    Communications 1  —  —
    Other 14  2  —
    Total merger-related expenses$128 $224 $—
             

    Income Taxes

    The Company's effective income tax rate decreased to 19.9% in the first quarter of 2022 compared to 24.9% in the linked quarter. The lower effective income tax rate in the first quarter of 2022 reflected income tax expense based on the statutory rate and state income taxes, net of federal income tax benefits, primarily due to net income earned during the quarter, offset by benefits related to tax-exempt interest and bank-owned life insurance. The effective income tax rate for the full year 2022 is expected to be in the range of 19.5-21.5%.

    BALANCE SHEET, LIQUIDITY AND CAPITAL HIGHLIGHTS

    		As of or for the Three Months Ended
    March 31, December 31, March 31,
    (Dollars in millions, except per share amounts) 2022   2021   2021 
    Ending Balance Sheet     
    Total assets$5,960.2  $6,025.1  $5,737.3 
    Loans held for investment, net of unearned income 3,250.0   3,245.0   3,358.2 
    Total securities 2,349.8   2,288.1   1,896.9 
    Total deposits 5,077.7   5,114.5   4,794.6 
    Average Balance Sheet     
    Average total assets$5,914.6  $5,934.1  $5,520.3 
    Average total loans 3,245.4   3,268.8   3,429.7 
    Average total deposits 5,044.0   5,015.5   4,573.9 
    Funding and Liquidity     
    Short-term borrowings$181.2  $181.4  $175.8 
    Long-term debt 139.9   154.9   201.7 
    Loans to deposits ratio 64.01%  63.45%  70.04%
    Equity     
    Total shareholders' equity$504.5  $527.5  $511.3 
    Common equity ratio 8.46%  8.75%  8.91%
    Tangible common equity(1) 423.3   445.1   425.1 
    Tangible common equity ratio(1) 7.20%  7.49%  7.52%
    Per Share Data     
    Book value$32.15  $33.66  $32.00 
    Tangible book value(1)$26.98  $28.40  $26.60 
    (1) Non-GAAP Measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
     

    On January 1, 2022, the Company transferred, at fair value, $1.25 billion of mortgage-backed securities, collateralized mortgage obligations, and securities issued by state and political subdivisions from the available for sale classification to the held to maturity classification. The net unrealized after tax loss of $11.5 million associated with those re-classified securities remained in accumulated other comprehensive loss and will be amortized over the remaining life of the securities. No gains or losses were recognized in earnings at the time of the transfer.

    Loans Held for Investment

    Loans held for investment, net of unearned income, increased $5.0 million, or 0.2%, to $3.25 billion from December 31, 2021, driven primarily by new loan production in the first quarter of 2022 and increased revolving line of credit utilization and partially offset by PPP loan forgiveness. The revolving line of credit utilization was 35% in the first quarter of 2022, an increase of 3 percentage points from the linked quarter.

    The following table presents the composition of loans held for investment, net of unearned income, as of the dates indicated:

    Loans Held for InvestmentMarch 31, 2022 December 31, 2021 March 31, 2021 
    (dollars in thousands) Balance % of Total
    		  Balance % of Total
    		  Balance
    		 % of Total
    		 
    Commercial and industrial$898,942 27.7%$902,314 27.8%$993,770 29.6%
    Agricultural 94,649 2.9  103,417 3.2  117,099 3.5 
    Commercial real estate            
    Construction and development 193,130 5.9  172,160 5.3  164,927 4.9 
    Farmland 140,846 4.3  144,673 4.5  138,199 4.1 
    Multifamily 259,609 8.0  244,503 7.5  261,806 7.8 
    Other 1,130,306 34.8  1,143,205 35.2  1,128,660 33.6 
    Total commercial real estate 1,723,891 53.0  1,704,541 52.5  1,693,592 50.4 
    Residential real estate            
    One-to-four family first liens 331,883 10.2  333,308 10.3  337,408 10.0 
    One-to-four family junior liens 131,793 4.1  133,014 4.1  137,025 4.1 
    Total residential real estate 463,676 14.3  466,322 14.4  474,433 14.1 
    Consumer 68,877 2.1  68,418 2.1  79,267 2.4 
    Loans held for investment, net of unearned income$3,250,035 100.0%$3,245,012 100.0%$3,358,161 100.0%
                 
    Total commitments to extend credit$1,034,843   $1,014,397   $920,493   
                    

    PPP Loans

    The following table presents PPP loan measures as of the dates indicated:

      March 31, 2022 December 31, 2021
      Round 1(3) Round 2(3) Total Round 1(3) Round 2(3) Total
    (Dollars in millions) # $ # $ # $ # $ # $ # $
    Total PPP Loans Funded  2,681 348.5  2,175 149.3  4,856 497.8  2,681 348.5  2,175 149.3  4,856 497.8
    PPP Loan Forgiveness(1)  2,657 339.0  2,160 146.2  4,817 485.2  2,609 334.2  2,009 122.4  4,618 456.6
    Outstanding PPP Loans(2)  5 0.7  15 2.3  20 3.0  53 5.6  164 25.2  217 30.8
                             
    Unearned Income  $—  $0.1  $0.1  $—  $0.9  $0.9
    (1) Excluded from the PPP Loan Forgiveness is $9.3 million as of March 31, 2022 and December 31, 2021 of PPP loans that were paid off by the borrower prior to forgiveness or through the SBA PPP loan guarantee.
    (2) Outstanding loans are presented net of unearned income.
    (3) Round 1 refers to PPP loan applications from the first wave of funding made available through the CARES Act, which was signed into law by President Trump in March 2020. Round 2 refers to the second wave of PPP funding made available through the Consolidated Appropriations Act, 2021, which was signed into law by President Trump in December 2020 and extended by the PPP Extension Act of 2021, which was signed into law by President Biden in March 2021.
     

    Credit Loss Expense & Allowance for Credit Losses

    The following table shows the activity in the allowance for credit losses for the periods indicated:

     Three Months Ended
    Allowance for Credit Losses Roll ForwardMarch 31, December 31, March 31,
    (In thousands) 2022   2021   2021 
    Beginning balance$48,700  $47,900  $55,500 
    Charge-offs (2,631)  (255)  (1,003)
    Recoveries 409   533   687 
    Net recoveries (charge-offs) (2,222)  278   (316)
    Credit loss (benefit) expense related to loans (278)  522   (4,534)
    Ending balance$46,200  $48,700  $50,650 
                

    As of March 31, 2022, the allowance for credit losses ("ACL") was $46.2 million, or 1.42% of loans held for investment, net of unearned income, compared with $48.7 million, or 1.50% of loans held for investment, net of unearned income, at December 31, 2021. After excluding net PPP loans, the ACL as a percentage of loans held for investment, net of unearned income, remained consistent at 1.42%(1) as of March 31, 2022, compared to 1.52%(1) at December 31, 2021. There was no credit loss expense for the first quarter of 2022 compared to a credit loss expense of $0.6 million for the fourth quarter of 2021. In the first quarter of 2022, the $0.3 million credit loss benefit related to loans, which reflected continued improvement in overall asset quality and improvement in forecasted economic conditions, was offset by the $0.3 million credit loss expense needed for growth in unfunded loan commitments.

    (1)Non-GAAP Measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.

    Deposits

    The following table presents the composition of our deposit portfolio as of the dates indicated:

    Deposit CompositionMarch 31, 2022 December 31, 2021 March 31, 2021 
    (Dollars in thousands)Balance % of Total Balance % of Total Balance % of Total 
    Noninterest bearing deposits$1,002,415 19.7%$1,005,369 19.6%$958,526 20.0%
    Interest checking deposits 1,601,249 31.5  1,619,136 31.6  1,406,070 29.4 
    Money market deposits 983,709 19.4  939,523 18.4  950,300 19.8 
    Savings deposits 650,314 12.8  628,242 12.3  580,862 12.1 
    Total non-maturity deposits 4,237,687 83.4  4,192,270 81.9  3,895,758 81.3 
    Time deposits of $250 and under 501,904 9.9  505,392 9.9  558,338 11.6 
    Time deposits over $250 338,134 6.7  416,857 8.2  340,467 7.1 
    Total time deposits 840,038 16.6  922,249 18.1  898,805 18.7 
    Total deposits$5,077,725 100.0%$5,114,519 100.0%$4,794,563 100.0%
                    

    CREDIT RISK PROFILE

     As of or For the Three Months Ended
    HighlightsMarch 31, December 31, March 31,
    (Dollars in thousands) 2022   2021   2021 
    Credit loss (benefit) expense related to loans$(278) $522  $(4,534)
    Net charge-offs (recoveries)$2,222  $(278) $316 
    Net charge-off (recovery) ratio(1) 0.28% (0.03)%  0.04%
          
    At period-end     
    Pass$3,041,649  $3,013,917  $3,112,728 
    Special Mention / Watch 106,241   117,401   130,052 
    Classified 102,145   113,694   115,381 
    Total loans held for investment, net$3,250,035  $3,245,012  $3,358,161 
    Classified loans ratio(2) 3.14%  3.50%  3.44%
          
    Nonaccrual loans held for investment$31,182  $31,540  $43,874 
    Accruing loans contractually past due 90 days or more —   —   508 
    Total nonperforming loans 31,182   31,540   44,382 
    Foreclosed assets, net 273   357   1,487 
    Total nonperforming assets$31,455  $31,897  $45,869 
    Nonperforming loans ratio(3) 0.96%  0.97%  1.32%
    Nonperforming assets ratio(4) 0.53%  0.53%  0.80%
    Allowance for credit losses$46,200  $48,700  $50,650 
    Allowance for credit losses ratio(5) 1.42%  1.50%  1.51%
    Adjusted allowance for credit losses ratio(6) 1.42%  1.52%  1.63%
    Allowance for credit losses to nonaccrual loans ratio(7) 148.16%  154.41%  115.44%
    (1) Net (recovery) charge-off ratio is calculated as annualized net (recoveries) charge-offs divided by average loans held for investment, net of unearned income, 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 total 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 total 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) Non-GAAP Measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
    (7) 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.
     

    During the first quarter of 2022, overall asset quality was generally stable to improving. The nonperforming loans ratio declined 1 bp from the linked quarter and 36 bps from the prior year to 0.96%. In addition, the classified loans ratio declined 36 bps from the linked quarter and 30 bps from the prior year to 3.14%. However, net charge-offs increased $2.5 million from the linked quarter due to our proactive credit monitoring processes.

    The following table presents a roll forward of nonperforming loans for the period:

    Nonperforming Loans Nonaccrual    90+ Days Past Due & Still Accruing
    		   Total
    		 
    (Dollars in thousands)        
    Balance at December 31, 2021$31,540  $—  $31,540 
    Loans placed on nonaccrual or 90+ days past due & still accruing 9,334   23   9,357 
    Repayments (including interest applied to principal) (1,879)  —   (1,879)
    Loans returned to accrual status or no longer past due (1,918)  —   (1,918)
    Charge-offs (2,495)  (23)  (2,518)
    Transfer to held for sale (3,400)  —   (3,400)
    Balance at March 31, 2022$31,182  $—  $31,182 
                

    CAPITAL

    Effective March 31, 2020, we elected the 5-year phase-in option allowed under the interim final rule (IFR) issued by the federal banking regulatory agencies that delays the estimated impact on regulatory capital stemming from the implementation of the current expected credit losses (CECL) accounting standard. The IFR allows the add back of 100% of the capital effect from the day one CECL transition adjustment and 25% of the capital effect from subsequent increases in the allowance for credit losses through the two-year period ending December 31, 2021. The modified CECL transitional amount of $9.4 million will then be reduced from capital over the subsequent three-year period.

    Regulatory Capital Ratios

    		March 31, December 31, March 31,
    2022 (1) 2021  2021 
    MidWestOne Financial Group, Inc. Consolidated     
    Tier 1 leverage to average assets ratio8.85% 8.67% 8.78%
    Common equity tier 1 capital to risk-weighted assets ratio9.81% 9.94% 10.16%
    Tier 1 capital to risk-weighted assets ratio10.68% 10.83% 11.13%
    Total capital to risk-weighted assets ratio12.89% 13.09% 13.75%
    MidWestOne Bank     
    Tier 1 leverage to average assets ratio9.30% 9.25% 9.60%
    Common equity tier 1 capital to risk-weighted assets ratio11.25% 11.58% 12.19%
    Tier 1 capital to risk-weighted assets ratio11.25% 11.58% 12.19%
    Total capital to risk-weighted assets ratio12.12% 12.46% 13.19%
    (1) Capital ratios for March 31, 2022 are preliminary     
          

    CORPORATE UPDATE

    Share Repurchase Program

    Under our current repurchase program, the Company repurchased 11,500 shares of its common stock at an average price of $30.98 per share and a total cost of $356 thousand in the first quarter of 2022. At March 31, 2022, the total amount available under the Company's current share repurchase program was $5.4 million.

    CONFERENCE CALL DETAILS

    The Company will host a conference call for investors at 11:00 a.m. CT on Friday, April 29, 2022. To participate, you may pre-register for this call utilizing the following link: https://www.incommglobalevents.com/registration/q4inc/10493/midwestone-financial-group-inc-1st-quarter-2022-earnings-call/. After pre-registering for this event you will receive your access details via email. You are also able to on the day of the call dial 1-844-200-6205, using an access code of 329438 at least fifteen minutes before the call start time. If you are unable to participate on the call, a replay will be available until July 28, 2022, by calling 1-866-813-9403 and using the replay access code of 310793. 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) effects of the COVID-19 pandemic, including its effects on the economic environment, our customers and our operations, including due to supply chain disruptions, as well as any changes to federal, state, or local government laws, regulations, or orders in connection with the pandemic; (2) government intervention in the U.S. financial system in response to the COVID-19 pandemic, including the effects of recent legislative, tax, accounting and regulatory actions and reforms; (3) the impact of the COVID-19 pandemic on our financial results, including possible lost revenue and increased expenses (including the cost of capital), as well as possible goodwill impairment charges; (4) the risks of mergers (including with IOFB), 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; (5) credit quality deterioration or pronounced and sustained reduction in real estate market values causing an increase in the allowance for credit losses, an increase in the credit loss expense, and a reduction in net earnings; (6) the effects of interest rates, including on our net income and the value of our securities portfolio; (7) 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; (8) fluctuations in the value of our investment securities; (9) governmental monetary and fiscal policies; (10) changes in and uncertainty related to benchmark interest rates used to price loans and deposits, including the expected elimination of LIBOR and the adoption of a substitute; (11) legislative and regulatory changes, including changes in banking, securities, trade, and tax laws and regulations and their application by our regulators; (12) the ability to attract and retain key executives and employees experienced in banking and financial services; (13) the sufficiency of the allowance for credit losses to absorb the amount of actual losses inherent in our existing loan portfolio; (14) our ability to adapt successfully to technological changes to compete effectively in the marketplace; (15) credit risks and risks from concentrations (by geographic area and by industry) within our loan portfolio; (16) 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; (17) the failure of assumptions underlying the establishment of allowances for credit losses and estimation of values of collateral and various financial assets and liabilities; (18) volatility of rate-sensitive deposits; (19) operational risks, including data processing system failures or fraud; (20) asset/liability matching risks and liquidity risks; (21) the costs, effects and outcomes of existing or future litigation; (22) changes in general economic, political, or industry conditions, nationally, internationally or in the communities in which we conduct business; (23) changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the Financial Accounting Standards Board; (24) war or terrorist activities, widespread disease or pandemic, or other adverse external events, which may cause deterioration in the economy or cause instability in credit markets; (25) the effects of cyber-attacks; (26) the imposition of tariffs or other domestic or international governmental policies impacting the value of the agricultural or other products of our borrowers; 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

     March 31 December 31, September 30, June 30, March 31,
    (In thousands) 2022   2021   2021   2021   2021 
    ASSETS         
    Cash and due from banks$47,677  $42,949  $53,562  $52,297  $57,154 
    Interest earning deposits in banks 12,152   160,881   84,952   11,124   80,924 
    Federal funds sold —   —   —   13   7,691 
    Total cash and cash equivalents 59,829   203,830   138,514   63,434   145,769 
    Debt securities available for sale at fair value 1,145,638   2,288,110   2,136,902   2,072,452   1,896,894 
    Held to maturity securities at amortized cost 1,204,212   —   —   —   — 
    Total securities 2,349,850   2,288,110   2,136,902   2,072,452   1,896,894 
    Loans held for sale 6,466   12,917   58,679   6,149   58,333 
    Gross loans held for investment 3,256,294   3,252,194   3,278,150   3,344,156   3,374,076 
    Unearned income, net (6,259)  (7,182)  (9,506)  (14,000)  (15,915)
    Loans held for investment, net of unearned income 3,250,035   3,245,012   3,268,644   3,330,156   3,358,161 
    Allowance for credit losses (46,200)  (48,700)  (47,900)  (48,000)  (50,650)
    Total loans held for investment, net 3,203,835   3,196,312   3,220,744   3,282,156   3,307,511 
    Premises and equipment, net 82,603   83,492   84,130   84,667   85,581 
    Goodwill 62,477   62,477   62,477   62,477   62,477 
    Other intangible assets, net 18,658   19,885   21,130   22,394   23,735 
    Foreclosed assets, net 273   357   454   755   1,487 
    Other assets 176,223   157,748   152,393   154,731   155,525 
    Total assets$5,960,214  $6,025,128  $5,875,423  $5,749,215  $5,737,312 
    LIABILITIES          
    Noninterest bearing deposits$1,002,415  $1,005,369  $999,887  $952,764  $958,526 
    Interest bearing deposits 4,075,310   4,109,150   3,957,894   3,839,902   3,836,037 
    Total deposits 5,077,725   5,114,519   4,957,781   4,792,666   4,794,563 
    Short-term borrowings 181,193   181,368   187,508   212,261   175,785 
    Long-term debt 139,898   154,879   154,860   169,839   201,696 
    Other liabilities 56,941   46,887   45,010   44,156   53,948 
    Total liabilities 5,455,757   5,497,653   5,345,159   5,218,922   5,225,992 
    SHAREHOLDERS' EQUITY          
    Common stock 16,581   16,581   16,581   16,581   16,581 
    Additional paid-in capital 300,505   300,940   300,327   299,888   299,747 
    Retained earnings 253,500   243,365   232,639   219,884   206,230 
    Treasury stock (24,113)  (24,546)  (22,735)  (15,888)  (15,278)
    Accumulated other comprehensive (loss) income (42,016)  (8,865)  3,452   9,828   4,040 
    Total shareholders' equity 504,457   527,475   530,264   530,293   511,320 
    Total liabilities and shareholders' equity$5,960,214  $6,025,128  $5,875,423  $5,749,215  $5,737,312 
                        

    MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
    FIVE QUARTER CONSOLIDATED STATEMENTS OF INCOME

     Three Months Ended
     March 31, December 31, September 30, June 30, March 31,
    (In thousands, except per share data) 2022   2021  2021   2021   2021 
    Interest income         
    Loans, including fees$31,318  $33,643 $36,115  $34,736  $36,542 
    Taxable investment securities 8,123   7,461  6,655   6,483   5,093 
    Tax-exempt investment securities 2,383   2,415  2,428   2,549   2,555 
    Other 28   37  21   19   14 
    Total interest income 41,852   43,556  45,219   43,787   44,204 
    Interest expense         
    Deposits 2,910   3,031  3,150   3,409   3,608 
    Short-term borrowings 119   130  132   161   128 
    Long-term debt 1,487   1,576  1,597   1,712   1,851 
    Total interest expense 4,516   4,737  4,879   5,282   5,587 
    Net interest income 37,336   38,819  40,340   38,505   38,617 
    Credit loss expense (benefit) —   622  (1,080)  (2,144)  (4,734)
    Net interest income after credit loss expense (benefit) 37,336   38,197  41,420   40,649   43,351 
    Noninterest income         
    Investment services and trust activities 3,011   3,115  2,915   2,809   2,836 
    Service charges and fees 1,657   1,684  1,613   1,475   1,487 
    Card revenue 1,650   1,746  1,820   1,913   1,536 
    Loan revenue 4,293   3,132  1,935   3,151   4,730 
    Bank-owned life insurance 531   550  532   538   542 
    Investment securities gains, net 40   137  36   42   27 
    Other 462   865  331   290   666 
    Total noninterest income 11,644   11,229  9,182   10,218   11,824 
    Noninterest expense         
    Compensation and employee benefits 18,664   18,266  17,350   17,404   16,917 
    Occupancy expense of premises, net 2,779   2,211  2,547   2,198   2,318 
    Equipment 1,901   2,189  1,973   1,861   1,793 
    Legal and professional 2,353   1,826  1,272   1,375   783 
    Data processing 1,231   1,211  1,406   1,347   1,252 
    Marketing 1,029   1,121  1,022   873   1,006 
    Amortization of intangibles 1,227   1,245  1,264   1,341   1,507 
    FDIC insurance 420   380  435   245   512 
    Communications 272   277  275   371   409 
    Foreclosed assets, net (112)  7  43   136   47 
    Other 1,879   1,711  2,191   1,519   1,156 
    Total noninterest expense 31,643   30,444  29,778   28,670   27,700 
    Income before income tax expense 17,337   18,982  20,824   22,197   27,475 
    Income tax expense 3,442   4,726  4,513   4,926   5,827 
    Net income $13,895  $14,256 $16,311  $17,271  $21,648 
              
    Earnings per common share         
    Basic$0.89  $0.91 $1.03  $1.08  $1.35 
    Diluted$0.88  $0.91 $1.03  $1.08  $1.35 
    Weighted average basic common shares outstanding 15,683   15,692  15,841   15,987   15,991 
    Weighted average diluted common shares outstanding 15,718   15,734  15,863   16,012   16,021 
    Dividends paid per common share$0.2375  $0.2250 $0.2250  $0.2250  $0.2250 
                       

    MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
    FINANCIAL STATISTICS

     As of or for the Three Months Ended
     March 31, December 31, March 31,
    (Dollars in thousands, except per share amounts) 2022   2021   2021 
    Earnings:     
    Net interest income$37,336  $38,819  $38,617 
    Noninterest income 11,644   11,229   11,824 
    Total revenue, net of interest expense 48,980   50,048   50,441 
    Credit loss expense (benefit) —   622   (4,734)
    Noninterest expense 31,643   30,444   27,700 
    Income before income tax expense 17,337   18,982   27,475 
    Income tax expense 3,442   4,726   5,827 
    Net income$13,895  $14,256  $21,648 
    Per Share Data:     
    Diluted earnings$0.88  $0.91  $1.35 
    Book value 32.15   33.66   32.00 
    Tangible book value(1) 26.98   28.40   26.60 
    Ending Balance Sheet:     
    Total assets$5,960,214  $6,025,128  $5,737,312 
    Loans held for investment, net of unearned income 3,250,035   3,245,012   3,358,161 
    Total securities 2,349,850   2,288,110   1,896,894 
    Total deposits 5,077,725   5,114,519   4,794,563 
    Short-term borrowings 181,193   181,368   175,785 
    Long-term debt 139,898   154,879   201,696 
    Total shareholders' equity 504,457   527,475   511,320 
    Average Balance Sheet:     
    Average total assets$5,914,604  $5,934,076  $5,520,304 
    Average total loans 3,245,449   3,268,783   3,429,746 
    Average total deposits 5,044,046   5,015,506   4,573,898 
    Financial Ratios:     
    Return on average assets 0.95%  0.95%  1.59%
    Return on average equity 10.74%  10.68%  17.01%
    Return on average tangible equity(1) 13.56%  13.50%  21.52%
    Efficiency ratio(1) 60.46%  56.74%  50.77%
    Net interest margin, tax equivalent(1) 2.79%  2.83%  3.10%
    Loans to deposits ratio 64.01%  63.45%  70.04%
    Common equity ratio 8.46%  8.75%  8.91%
    Tangible common equity ratio(1) 7.20%  7.49%  7.52%
    Credit Risk Profile:     
    Total nonperforming loans$31,182  $31,540  $44,382 
    Nonperforming loans ratio 0.96%  0.97%  1.32%
    Total nonperforming assets$31,455  $31,897  $45,869 
    Nonperforming assets ratio 0.53%  0.53%  0.80%
    Net (recoveries) charge-offs$2,222  $(278) $316 
    Net (recovery) charge-off ratio 0.28% (0.03)%  0.04%
    Allowance for credit losses$46,200  $48,700  $50,650 
    Allowance for credit losses ratio 1.42%  1.50%  1.51%
    Adjusted allowance for credit losses ratio(1) 1.42%  1.52%  1.63%
    Allowance for credit losses to nonaccrual ratio 148.16%  154.41%  115.44%
    PPP Loans:     
    Average PPP loans$14,975  $52,564  $236,231 
    Fee Income 797   1,996   3,674 
          
    (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
     March 31,
    2022    		 December 31,
    2021    		 March 31,
    2021
    (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)$3,245,449 $31,858 3.98% $3,268,783 $34,191 4.15% $3,429,746 $37,073 4.38%
    Taxable investment securities 1,835,911  8,123 1.79%  1,802,349  7,461 1.64%  1,266,714  5,093 1.63%
    Tax-exempt investment securities (2)(4) 450,547  2,998 2.70%  455,570  3,026 2.64%  465,793  3,203 2.79%
    Total securities held for investment(2) 2,286,458  11,121 1.97%  2,257,919  10,487 1.84%  1,732,507  8,296 1.94%
    Other 56,094  28 0.20%  80,415  37 0.18%  36,536  14 0.16%
    Total interest earning assets(2)$5,588,001  43,007 3.12% $5,607,117  44,715 3.16% $5,198,789  45,383 3.54%
    Other assets 326,603      326,959      321,515    
    Total assets$5,914,604     $5,934,076     $5,520,304    
    LIABILITIES AND SHAREHOLDERS’ EQUITY                 
    Interest checking deposits$1,560,402 $1,061 0.28% $1,506,600 $1,065 0.28% $1,349,671 $991 0.30%
    Money market deposits 953,943  499 0.21%  976,018  520 0.21%  913,087  478 0.21%
    Savings deposits 641,703  279 0.18%  621,871  285 0.18%  553,824  286 0.21%
    Time deposits 883,997  1,071 0.49%  903,765  1,161 0.51%  837,460  1,853 0.90%
    Total interest bearing deposits 4,040,045  2,910 0.29%  4,008,254  3,031 0.30%  3,654,042  3,608 0.40%
    Securities sold under agreements to repurchase 159,417  96 0.24%  190,725  115 0.24%  165,858  101 0.25%
    Federal funds purchased —  — —%  33  — —%  —  — —%
    Other short-term borrowings 3,029  23 3.08%  30  15 198.37%  9,335  27 1.17%
    Short-term borrowings 162,446  119 0.30%  190,788  130 0.27%  175,193  128 0.30%
    Long-term debt 140,389  1,487 4.30%  154,870  1,576 4.04%  205,971  1,851 3.64%
    Total borrowed funds 302,835  1,606 2.15%  345,658  1,706 1.96%  381,164  1,979 2.11%
    Total interest bearing liabilities$4,342,880 $4,516 0.42% $4,353,912 $4,737 0.43% $4,035,206 $5,587 0.56%
    Noninterest bearing deposits 1,004,001      1,007,252      919,856    
    Other liabilities 42,872      43,576      49,003    
    Shareholders’ equity 524,851      529,336      516,239    
    Total liabilities and shareholders’ equity$5,914,604     $5,934,076     $5,520,304    
    Net interest income(2)  $38,491     $39,978     $39,796  
    Net interest spread(2)    2.70%     2.73%     2.98%
    Net interest margin(2)    2.79%     2.83%     3.10%
                      
    Total deposits(5)$5,044,046 $2,910 0.23% $5,015,506 $3,031 0.24% $4,573,898 $3,608 0.32%
    Cost of funds(6)    0.34%     0.35%     0.46%

    (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 $674 thousand, $1.9 million, and $3.5 million for the three months ended March 31, 2022, December 31, 2021, and March 31, 2021, respectively. Loan purchase discount accretion was $732 thousand, $599 thousand, and $1.1 million for the three months ended March 31, 2022, December 31, 2021, and March 31, 2021, respectively. Tax equivalent adjustments were $540 thousand, $548 thousand, and $531 thousand for the three months ended March 31, 2022, December 31, 2021, and March 31, 2021, respectively. The federal statutory tax rate utilized was 21%.
    (4) Interest income includes tax equivalent adjustments of $615 thousand, $611 thousand, and $648 thousand for the three months ended March 31, 2022, December 31, 2021, and March 31, 2021, 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, adjusted allowance for credit losses ratio, core loans, and core commercial loans. 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          
    (Dollars in thousands, except per share data)March 31,
    2022    		 December 31,
    2021    		 September 30,
    2021     		 June 30,
    2021    		 March 31,
    2021
    Total shareholders’ equity $504,457  $527,475  $530,264  $530,293  $511,320 
    Intangible assets, net  (81,135)  (82,362)  (83,607)  (84,871)  (86,212)
    Tangible common equity $423,322  $445,113  $446,657  $445,422  $425,108 
               
    Total assets $5,960,214  $6,025,128  $5,875,423  $5,749,215  $5,737,312 
    Intangible assets, net  (81,135)  (82,362)  (83,607)  (84,871)  (86,212)
    Tangible assets $5,879,079  $5,942,766  $5,791,816  $5,664,344  $5,651,100 
               
    Book value per share $32.15  $33.66  $33.71  $33.22  $32.00 
    Tangible book value per share(1) $26.98  $28.40  $28.40  $27.90  $26.60 
    Shares outstanding  15,690,125   15,671,147   15,729,451   15,963,468   15,981,088 
               
    Common equity ratio  8.46%  8.75%  9.03%  9.22%  8.91%
    Tangible common equity ratio(2)  7.20%  7.49%  7.71%  7.86%  7.52%

    (1) Tangible common equity divided by shares outstanding.
    (2) Tangible common equity divided by tangible assets.

      Three Months Ended
    Return on Average Tangible Equity March 31, December 31, March 31,
    (Dollars in thousands)  2022   2021   2021 
    Net income $13,895  $14,256  $21,648 
    Intangible amortization, net of tax(1)  920   934   1,130 
    Tangible net income $14,815  $15,190  $22,778 
           
    Average shareholders’ equity $524,851  $529,336  $516,239 
    Average intangible assets, net  (81,763)  (82,990)  (86,961)
    Average tangible equity $443,088  $446,346  $429,278 
           
    Return on average equity  10.74%  10.68%  17.01%
    Return on average tangible equity(2)  13.56%  13.50%  21.52%

    (1) The combined income tax rate utilized was 25%.
    (2) Annualized tangible net income divided by average tangible equity.

    Net Interest Margin, Tax Equivalent/
    Core Net Interest Margin
    		 Three Months Ended
     March 31, December 31, March 31,
    (Dollars in thousands)  2022   2021   2021 
    Net interest income $37,336  $38,819  $38,617 
    Tax equivalent adjustments:      
    Loans(1)  540   548   531 
    Securities(1)  615   611   648 
    Net interest income, tax equivalent $38,491  $39,978  $39,796 
    Loan purchase discount accretion  (732)  (599)  (1,098)
    Core net interest income $37,759  $39,379  $38,698 
           
    Net interest margin  2.71%  2.75%  3.01%
    Net interest margin, tax equivalent(2)  2.79%  2.83%  3.10%
    Core net interest margin(3)  2.74%  2.79%  3.02%
    Average interest earning assets $5,588,001  $5,607,117  $5,198,789 

    (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
    Loan Yield, Tax Equivalent / Core Yield on Loans March 31, December 31, March 31,
    (Dollars in thousands)  2022   2021   2021 
    Loan interest income, including fees $31,318  $33,643  $36,542 
    Tax equivalent adjustment(1)  540   548   531 
    Tax equivalent loan interest income $31,858  $34,191  $37,073 
    Loan purchase discount accretion  (732)  (599)  (1,098)
    Core loan interest income $31,126  $33,592  $35,975 
           
    Yield on loans  3.91%  4.08%  4.32%
    Yield on loans, tax equivalent(2)  3.98%  4.15%  4.38%
    Core yield on loans(3)  3.89%  4.08%  4.25%
    Average loans $3,245,449  $3,268,783  $3,429,746 

    (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
    Efficiency Ratio March 31, December 31, March 31,
    (Dollars in thousands)  2022   2021   2021 
    Total noninterest expense $31,643  $30,444  $27,700 
    Amortization of intangibles  (1,227)  (1,245)  (1,507)
    Merger-related expenses  (128)  (224)  — 
    Noninterest expense used for efficiency ratio $30,288  $28,975  $26,193 
           
    Net interest income, tax equivalent(1) $38,491  $39,978  $39,796 
    Noninterest income  11,644   11,229   11,824 
    Investment securities gains, net  (40)  (137)  (27)
    Net revenues used for efficiency ratio $50,095  $51,070  $51,593 
           
    Efficiency ratio (2)  60.46%  56.74%  50.77%

    (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.

    Adjusted Allowance for Credit Losses Ratio          
    (Dollars in thousands) March 31,
     2022     		 December 31,
     2021     		 September 30,
     2021     		 June 30,
     2021     		 March 31,
     2021 
    Loans held for investment, net of unearned income $3,250,035  $3,245,012  $3,268,644  $3,330,156  $3,358,161 
    PPP loans  (3,037)  (30,841)  (89,354)  (184,390)  (248,682)
    Core loans $3,246,998  $3,214,171  $3,179,290  $3,145,766  $3,109,479 
    Allowance for credit losses $46,200  $48,700  $47,900  $48,000  $50,650 
               
    Allowance for credit losses ratio  1.42%  1.50%  1.47%  1.44%  1.51%
    Adjusted allowance for credit losses ratio(1)  1.42%  1.52%  1.51%  1.53%  1.63%

    (1) Allowance for credit losses divided by core loans.

    Core Loans/Core Commercial Loans March 31, December 31, September 30, June 30, March 31,
    (Dollars in thousands)  2022  2021  2021  2021  2021
    Commercial loans:          
    Commercial and industrial $898,942 $902,314 $927,258 $982,092 $993,770
    Agricultural  94,649  103,417  106,356  107,834  117,099
    Commercial real estate  1,723,891  1,704,541  1,699,358  1,705,789  1,693,592
    Total commercial loans $2,717,482 $2,710,272 $2,732,972 $2,795,715 $2,804,461
    Consumer loans:          
    Residential real estate $463,676 $466,322 $468,136 $468,581 $474,433
    Other consumer  68,877  68,418  67,536  65,860  79,267
    Total consumer loans $532,553 $534,740 $535,672 $534,441 $553,700
    Loans held for investment, net of unearned income $3,250,035 $3,245,012 $3,268,644 $3,330,156 $3,358,161
               
    PPP loans $3,037 $30,841 $89,354 $184,390 $248,682
               
    Core loans(1) $3,246,998 $3,214,171 $3,179,290 $3,145,766 $3,109,479
    Core commercial loans(2) $2,714,445 $2,679,431 $2,643,618 $2,611,325 $2,555,779

    (1) Core loans are calculated as loans held for investment, net of unearned income less PPP loans.
    (2) Core commercial loans are calculated as total commercial loans less PPP loans.

    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. Funk Barry S. Ray
     Chief Executive Officer Senior Executive Vice President and Chief Financial Officer
     319.356.5800 319.356.5800

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