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MidWestOne Financial Group, Inc. Reports Financial Results for the First Quarter of 2022
Источник: Nasdaq GlobeNewswire / 28 апр 2022 07:30:51 America/Chicago
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."
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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 Income March 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 Expense March 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 Investment March 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 Forward March 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 Composition March 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 Highlights March 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 ratio 8.85 % 8.67 % 8.78 % Common equity tier 1 capital to risk-weighted assets ratio 9.81 % 9.94 % 10.16 % Tier 1 capital to risk-weighted assets ratio 10.68 % 10.83 % 11.13 % Total capital to risk-weighted assets ratio 12.89 % 13.09 % 13.75 % MidWestOne Bank Tier 1 leverage to average assets ratio 9.30 % 9.25 % 9.60 % Common equity tier 1 capital to risk-weighted assets ratio 11.25 % 11.58 % 12.19 % Tier 1 capital to risk-weighted assets ratio 11.25 % 11.58 % 12.19 % Total capital to risk-weighted assets ratio 12.12 % 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 SHEETSMarch 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 INCOMEThree 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 STATISTICSAs 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 ANALYSISThree Months Ended March 31,
2022December 31,
2021March 31,
2021(Dollars in thousands) Average
BalanceInterest
Income/
ExpenseAverage
Yield/
CostAverage
BalanceInterest
Income/
ExpenseAverage
Yield/
CostAverage Balance Interest
Income/
ExpenseAverage
Yield/
CostASSETS 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 MeasuresThis 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,
2022December 31,
2021September 30,
2021June 30,
2021March 31,
2021Total 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 MarginThree 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,
2022December 31,
2021September 30,
2021June 30,
2021March 31,
2021Loans 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 
- Net income for the first quarter was $13.9 million, or $0.88 per diluted common share.