IOWA CITY, Iowa, Jan. 24, 2019 (GLOBE NEWSWIRE) -- MidWestOne Financial Group, Inc. (Nasdaq - MOFG) (“we”, “our”, or “the Company”) today reported its financial results for the fourth quarter and full year 2018. Net income for the fourth quarter of 2018 was $7.6 million, or $0.62 per diluted common share, compared to net income of $6.8 million, or $0.55 per diluted common share, for the third quarter of 2018 (the “linked quarter”). Net income for the full year 2018 was $30.4 million, or $2.48 per diluted common share, compared to net income for the full year 2017 of $18.7 million, or $1.55 per diluted common share. Merger-related costs reduced earnings per share by $0.02 for the fourth quarter of 2018, $0.05 for the linked quarter, and $0.06 for the full year 2018.
FINANCIAL HIGHLIGHTS
| As of or For the Three Months Ended | As of or For the Years Ended | ||||||||||||||
| December 31, | September 30, | December 31, | December 31, | ||||||||||||
| 2018 | 2018 | 2018 | 2017 | ||||||||||||
| (Dollars in thousands, except per share amounts) | |||||||||||||||
| Net income | $ | 7,624 | $ | 6,778 | $ | 30,351 | $ | 18,699 | |||||||
| Diluted earnings per share | $ | 0.62 | $ | 0.55 | $ | 2.48 | $ | 1.55 | |||||||
| Return on average assets | 0.92 | % | 0.83 | % | 0.93 | % | 0.60 | % | |||||||
| Return on average equity | 8.61 | % | 7.72 | % | 8.78 | % | 5.58 | % | |||||||
| Return on average tangible equity (1) | 11.47 | % | 10.45 | % | 11.86 | % | 8.00 | % | |||||||
| Net interest margin (tax equivalent)(1) | 3.59 | % | 3.56 | % | 3.62 | % | 3.83 | % | |||||||
| Yield on average loans (tax equivalent)(1) | 4.85 | % | 4.74 | % | 4.77 | % | 4.73 | % | |||||||
| Cost of average total deposits | 0.78 | % | 0.70 | % | 0.66 | % | 0.46 | % | |||||||
| Efficiency ratio(1) | 58.33 | % | 68.58 | % | 62.05 | % | 58.64 | % | |||||||
| Total assets | $ | 3,291,480 | $ | 3,267,965 | $ | 3,291,480 | $ | 3,212,271 | |||||||
| Loans held for investment | $ | 2,398,779 | $ | 2,377,649 | $ | 2,398,779 | $ | 2,286,695 | |||||||
| Total deposits | $ | 2,612,929 | $ | 2,632,259 | $ | 2,612,929 | $ | 2,605,319 | |||||||
| Equity to assets ratio | 10.85 | % | 10.69 | % | 10.85 | % | 10.59 | % | |||||||
| Tangible equity/tangible assets(1) | 8.80 | % | 8.61 | % | 8.80 | % | 8.44 | % | |||||||
| Book value per share | $ | 29.32 | $ | 28.57 | $ | 29.32 | $ | 27.85 | |||||||
| Tangible book value per share(1) | $ | 23.25 | $ | 22.50 | $ | 23.25 | $ | 21.67 | |||||||
| Loan to deposit ratio | 91.80 | % | 90.33 | % | 91.80 | % | 87.77 | % | |||||||
| (1) Non-GAAP measure. See pages 14-15 for a detailed explanation. | |||||||||||||||
Charles Funk, President and CEO, commented, “The year of 2018 represents the best net income and earnings per share performance in our Company’s history. While we are pleased with the Company’s progress, we are far from satisfied and are confident that 2019 will be another year of tangible improvement.”
INCOME STATEMENT HIGHLIGHTS
Net Interest Income
Net interest income increased in the fourth quarter of 2018 to $26.7 million from $26.4 million in the linked quarter due primarily to a higher average loan yields. The loan yield was 4.85% for the fourth quarter of 2018 compared to 4.74% for the linked quarter. The increased loan yield reflected higher coupon interest partially offset by a decrease in discount accretion on acquired loans. Discount accretion on acquired loans decreased to $454 thousand in the current quarter from $605 thousand in the linked quarter. The total remaining acquired loan discount as of December 31, 2018 was $5.8 million. The linked quarter also included $313 thousand in interest reversals from nonaccrual loans compared to $89 thousand in the fourth quarter of 2018.
The tax equivalent net interest margin (NIM) increased to 3.59% for the fourth quarter of 2018 from 3.56% in the linked quarter. The increase in the NIM was due primarily to higher yields on average loans, partially offset by higher deposit and borrowing costs. Loan purchase discount accretion added 6 bps to the NIM in the current quarter compared to 8 bps in the linked quarter.
The cost of average total deposits in the fourth quarter of 2018 was 0.78% compared to 0.70% in the linked quarter. The increase reflects the higher rates paid to attract and retain deposits in light of recent market rate increases and the competitive market for deposits.
“The flat yield curve and increased competition for deposits is a headwind for the net interest margin,” stated Mr. Funk. “However, our year-over-year quarterly margin, excluding loan purchase discount accretion and the effects of tax reform, was basically flat and we are pleased with this performance.”
Noninterest Income
Noninterest income for the fourth quarter of 2018 decreased $339 thousand, or 6%, from the linked quarter. The decrease was primarily due to $190 thousand in foreclosed asset gains, $146 thousand of income from customer derivative contracts, and $192 thousand of investment security gains, all in the linked quarter. The investment security gains in the linked quarter were recognized in connection with the sales of certain tax-exempt municipal securities. Those sales were completed to take advantage of favorable market pricing for those securities. Other service charges and fees in the fourth quarter of 2018 were up mainly due to a $211 thousand recovery related to an acquired asset.
The following table presents details of noninterest income for the periods indicated:
| Three Months Ended | |||||||
| December 31, | September 30, | ||||||
| Noninterest Income | 2018 | 2018 | |||||
| (In thousands) | |||||||
| Trust, investment, and insurance fees | $ | 1,534 | $ | 1,526 | |||
| Service charges and fees on deposit accounts | 1,175 | 1,148 | |||||
| Loan origination and servicing fees | 884 | 891 | |||||
| Other service charges and fees | 1,751 | 1,502 | |||||
| Bank-owned life insurance | 381 | 399 | |||||
| Investment securities gains (losses), net | (4 | ) | 192 | ||||
| Other | (76 | ) | 326 | ||||
| Total noninterest income | $ | 5,645 | $ | 5,984 | |||
Noninterest Expense
Noninterest expense for the fourth quarter of 2018 decreased $3.0 million, or 13.2%, from the linked quarter. The decrease was driven by occupancy charges, salaries and employee benefits, and professional fees. Occupancy and equipment, net, decreased $1.4 million, as the linked quarter included a $585 thousand write-down of a former Minnesota banking center, whereas the current quarter included a $743 gain on the sale of a former bank administration building. Salaries and employee benefits decreased $940 thousand primarily from decreased benefits expenses of $438 thousand in the fourth quarter of 2018 due to expense accrual adjustments, and approximately $274 thousand of expenses in the linked quarter related to the retirement of the Company’s former Chief Credit Officer. Professional fees decreased $834 thousand, mainly due to a decrease of $499 thousand of costs related to our planned merger with ATBancorp as well as decreased credit-related legal fees.
The following table presents details of noninterest expense for the periods indicated:
| Three Months Ended | |||||||
| December 31, | September 30, | ||||||
| Noninterest Expense | 2018 | 2018 | |||||
| (In thousands) | |||||||
| Salaries and employee benefits | $ | 12,111 | $ | 13,051 | |||
| Occupancy and equipment, net | 2,597 | 3,951 | |||||
| Professional fees | 1,027 | 1,861 | |||||
| Data processing | 875 | 697 | |||||
| FDIC insurance | 429 | 393 | |||||
| Amortization of intangibles | 503 | 547 | |||||
| Other | 2,261 | 2,311 | |||||
| Total noninterest expense | $ | 19,803 | $ | 22,811 | |||
The following table presents details of merger-related costs for the periods indicated:
| Three Months Ended | |||||||
| December 31, | September 30, | ||||||
| 2018 | 2018 | ||||||
| (In thousands) | |||||||
| Occupancy and equipment, net | $ | 2 | $ | — | |||
| Professional fees | 89 | 588 | |||||
| Data processing | 100 | — | |||||
| Other | 15 | — | |||||
| Total merger-related costs | $ | 206 | $ | 588 | |||
Income Taxes
The effective income tax rate was 18.2% for the fourth quarter of 2018 and 21.0% for the linked quarter. The effective tax rate for the fourth quarter of 2018 was lower due primarily to certain tax credits recognized during the period. The effective tax rate for the full year 2018 was 20.1%.
BALANCE SHEET HIGHLIGHTS
Loans Held for Investment
Loans held for investment, net of unearned income, increased $112.1 million, or 4.9%, from $2.29 billion at December 31, 2017, to $2.40 billion at December 31, 2018. Loan portfolio segments experiencing the largest increases were commercial real estate and commercial and industrial. As of December 31, 2018, commercial real estate loans comprised approximately 53% of the loan portfolio. Commercial and industrial loans was the next largest category at 22% of total loans, followed by residential real estate loans at 19%, agricultural loans at 4%, and consumer loans at 2%.
Mr. Funk continued, ”Loan growth of 4.9% represents good performance during a year in which approximately 25% of our footprint faced a challenging rural economy.”
The following table presents the composition of loans held for investment, net of unearned income, as of the dates indicated:
| December 31, | September 30, | December 31, | |||||||||
| Loans Held for Investment | 2018 | 2018 | 2017 | ||||||||
| (In thousands) | |||||||||||
| Commercial and industrial | $ | 533,188 | $ | 523,333 | $ | 503,624 | |||||
| Agricultural | 96,956 | 103,207 | 105,512 | ||||||||
| Commercial real estate | |||||||||||
| Construction and development | 217,617 | 223,324 | 165,276 | ||||||||
| Farmland | 88,807 | 85,735 | 87,868 | ||||||||
| Multifamily | 134,741 | 126,663 | 134,506 | ||||||||
| Other | 826,163 | 818,068 | 784,321 | ||||||||
| Total commercial real estate | 1,267,328 | 1,253,790 | 1,171,971 | ||||||||
| Residential real estate | |||||||||||
| One-to-four family first liens | 341,830 | 342,755 | 352,226 | ||||||||
| One-to-four family junior liens | 120,049 | 115,768 | 117,204 | ||||||||
| Total residential real estate | 461,879 | 458,523 | 469,430 | ||||||||
| Consumer | 39,428 | 38,796 | 36,158 | ||||||||
| Total loans held for investment, net of unearned income | $ | 2,398,779 | $ | 2,377,649 | $ | 2,286,695 | |||||
Provision and Allowance for Loan Losses
For the fourth quarter of 2018, the provision for loan losses was $3.3 million, an increase of $2.3 million from the linked quarter. The provision for loan losses for the fourth quarter of 2018 was mainly due to net charge-offs experienced during the period and the recognition of impairment on one credit relationship.
The following table shows the activity in the allowance for loan losses for the periods indicated:
| Three Months Ended | Years Ended | ||||||||||||||||||
| December 31, | September 30, | December 31, | December 31, | December 31, | |||||||||||||||
| Allowance for Loan Losses Roll Forward | 2018 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||
| (In thousands) | |||||||||||||||||||
| Beginning balance | $ | 31,278 | $ | 30,800 | $ | 26,510 | $ | 28,059 | $ | 21,850 | |||||||||
| Charge-offs | (5,456 | ) | (817 | ) | (9,296 | ) | (7,040 | ) | (12,033 | ) | |||||||||
| Recoveries | 235 | 345 | 176 | 988 | 908 | ||||||||||||||
| Net charge-offs | (5,221 | ) | (472 | ) | (9,120 | ) | (6,052 | ) | (11,125 | ) | |||||||||
| Provision for credit losses | 3,250 | 950 | 10,669 | 7,300 | 17,334 | ||||||||||||||
| Ending balance | $ | 29,307 | $ | 31,278 | $ | 28,059 | $ | 29,307 | $ | 28,059 | |||||||||
“$4.8 million of the net charge-offs this quarter was related to a loan that had been partially charged-off in the fourth quarter of 2017,” noted Mr. Funk. “This loan is in the process of being resolved in a bankruptcy sale. While we had reserved $3.4 million against this loan, the proceeds of the sale were lower than we anticipated, thus necessitating an additional provision for loan loss. We did not, however, see any significant deterioration in our agricultural portfolio during the quarter, and at 147.09%, our loan loss reserve more than covers our nonperforming assets.”
Deposits and Borrowings
Total deposits at December 31, 2018, were $2.61 billion, an increase of $7.6 million from December 31, 2017. The mix of deposits saw increases between December 31, 2017 and December 31, 2018 of $21.8 million, or 3.1%, in certificates of deposit, and $11.6 million, or 0.9%, in interest-bearing checking deposits. These increases were partially offset by a decrease of $22.8 million, or (4.9)%, in non-interest-bearing demand deposits, and $3.0 million, or (1.4)%, in savings deposits between the two dates.
The following table presents the composition of our deposit portfolio as of the dates indicated:
| December 31, | September 30, | December 31, | |||||||||
| Deposit Composition | 2018 | 2018 | 2017 | ||||||||
| (In thousands) | |||||||||||
| Noninterest-bearing demand | $ | 439,133 | $ | 458,576 | $ | 461,969 | |||||
| Interest checking | 683,894 | 691,743 | 687,433 | ||||||||
| Money market | 555,839 | 545,179 | 540,679 | ||||||||
| Savings | 210,416 | 211,591 | 213,430 | ||||||||
| Total non-maturity deposits | 1,889,282 | 1,907,089 | 1,903,511 | ||||||||
| Time deposits less than $100,000 | 352,631 | 348,099 | 324,681 | ||||||||
| Time deposits of $100,000 to $250,000 | 179,764 | 174,459 | 158,259 | ||||||||
| Time deposits of $250,000 and over | 191,252 | 202,612 | 218,868 | ||||||||
| Total time deposits | 723,647 | 725,170 | 701,808 | ||||||||
| Total deposits | $ | 2,612,929 | $ | 2,632,259 | $ | 2,605,319 | |||||
Between December 31, 2017 and December 31, 2018, federal funds purchased rose $55.9 million, to $56.9 million compared to $1.0 million, while securities sold under agreements to repurchase declined $21.7 million, due to normal cash need fluctuations by customers. FHLB borrowings rose $21.0 million or 18.3%, between the two dates. The overall increase in borrowings was the result of growth in the loan portfolio exceeding deposit growth. At December 31, 2018, long-term debt had an outstanding balance of $7.5 million, a decrease of $5.0 million, or 40.0%, from December 31, 2017, due to normal scheduled repayments.
CREDIT QUALITY
Nonaccrual loans increased $5.1 million between December 31, 2017 and December 31, 2018, primarily due to $16.1 million being added to nonaccrual status, partially offset by $2.7 million of payments, net charge-offs of $5.4 million, and $2.3 million coming out of nonaccrual status. The balance of loans modified in a troubled debt restructuring (“TDRs”) decreased $4.5 million from year-end 2017, primarily due to payments of $3.5 million. Loans 90 days or more past due and still accruing interest increased $158 thousand between December 31, 2017, and December 31, 2018. At December 31, 2018, net foreclosed assets totaled $535 thousand, down from $2.0 million at December 31, 2017. As of December 31, 2018, the allowance for loan losses was $29.3 million, or 1.22% of total loans, compared with $28.1 million, or 1.23% of total loans at December 31, 2017.
The following table presents selected loan credit quality metrics as of the dates indicated:
| December 31, | September 30, | December 31, | |||||||||
| Credit Quality Metrics | 2018 | 2018 | 2017 | ||||||||
| (dollars in thousands) | |||||||||||
| Nonaccrual loans held for investment | $ | 19,924 | $ | 20,929 | $ | 14,784 | |||||
| Performing troubled debt restructured loans held for investment | 5,284 | 7,354 | 8,870 | ||||||||
| Accruing loans contractually past due 90 days or more | 365 | 171 | 207 | ||||||||
| Foreclosed assets, net | 535 | 549 | 2,010 | ||||||||
| Total nonperforming assets | $ | 26,108 | $ | 29,003 | $ | 25,871 | |||||
| Allowance for loan losses | 29,307 | 31,278 | 28,059 | ||||||||
| Provision for loan losses (for the quarter) | 3,250 | 950 | 10,669 | ||||||||
| Net charge-offs (for the quarter) | 5,221 | 472 | 9,120 | ||||||||
| Net charge-offs to average loans held for investment (for the quarter) | 0.86 | % | 0.08 | % | 1.60 | % | |||||
| Allowance for loan losses to loans held for investment | 1.22 | % | 1.32 | % | 1.23 | % | |||||
| Allowance for loan losses to nonaccrual loans held for investment | 147.09 | % | 149.45 | % | 189.79 | % | |||||
| Nonaccrual loans held for investment to loans held for investment | 0.83 | % | 0.88 | % | 0.65 | % | |||||
CORPORATE UPDATE
Proposed Merger with ATBancorp
On January 11, 2019, the Company held a special meeting of shareholders, at which the Company’s shareholders voted on a proposal to approve and adopt the Agreement and Plan of Merger, dated August 21, 2018, by and between the Company and ATBancorp ("ATB"), pursuant to which ATB will merge with and into the Company (the "Merger Proposal"), and on a proposal to approve the issuance of approximately 4,117,541 shares of the Company’s common stock to ATB's shareholders in connection with the merger. The shareholders present in person or by proxy at the special meeting approved both the Merger Proposal and the issuance of common stock.
For further information, please refer to the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on January 11, 2019.
Mr. Funk commented, “We anticipate closing this transaction late in the first quarter of 2019 and are excited about the opportunities presented by this transaction, not the least of which is projected significant earnings accretion to our Company.”
Share Repurchase Program
During the fourth quarter of 2018 and for the year ended December 31, 2018, we repurchased 42,130 shares at an average price of $24.81 and a total cost of $1.0 million. At December 31, 2018, $4.0 million remained available to repurchase shares under the Company’s current share repurchase program.
Quarterly Cash Dividend Declared
On January 15, 2019, the Company’s board of directors declared a quarterly cash dividend of $0.2025 per common share, an increase of 3.8% from the dividend paid in the previous quarter. The dividend is payable March 15, 2019, to shareholders of record at the close of business on February 28, 2019. At this quarterly rate, the indicated annual cash dividend is equal to $0.81 per common share.
“We are pleased to raise the dividend to our shareholders in 2019. We continue to monitor opportunities to repurchase our stock,” concluded Mr. Funk.
CONFERENCE CALL DETAILS
The Company will host a conference call for investors at 11:00 a.m., CDT, on Friday, January 25, 2019. To participate, please dial 866-233-3483 at least fifteen minutes before the call start time. If you are unable to participate on the call, a replay will be available until April 25, 2019, by calling 877-344-7529 and using the replay access code of 10126188. A transcript of the call will also be available on the company’s web site (www.midwestone.com) within three business days of the event.
ABOUT MIDWESTONE FINANCIAL GROUP, INC.
MidWestOne Financial Group, Inc. is a financial holding company headquartered in Iowa City, Iowa. MidWestOne Financial 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.com. MidWestOne Financial 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) 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 provision for loan losses, and a reduction in net earnings; (2) the risk of mergers, including with ATBancorp, 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; (3) our management’s ability to reduce and effectively manage interest rate risk and the impact of interest rates in general on the volatility of our net interest income; (4) changes in the economic environment, competition, or other factors that may affect our ability to acquire loans or influence the anticipated growth rate of loans and deposits and the quality of the loan portfolio and loan and deposit pricing; (5) fluctuations in the value of our investment securities; (6) governmental monetary and fiscal policies; (7) legislative and regulatory changes, including changes in banking, securities, trade, and tax laws and regulations and their application by our regulators and changes in the scope and cost of Federal Deposit Insurance Corporation insurance and other coverages; (8) the ability to attract and retain key executives and employees experienced in banking and financial services; (9) the sufficiency of the allowance for loan losses to absorb the amount of actual losses inherent in our existing loan portfolio; (10) our ability to adapt successfully to technological changes to compete effectively in the marketplace; (11) credit risks and risks from concentrations (by geographic area and by industry) within our loan portfolio; (12) 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, and other financial institutions operating in our markets or elsewhere or providing similar services; (13) the failure of assumptions underlying the establishment of allowances for loan losses and estimation of values of collateral and various financial assets and liabilities; (14) volatility of rate-sensitive deposits; (15) operational risks, including data processing system failures or fraud; (16) asset/liability matching risks and liquidity risks; (17) the costs, effects and outcomes of existing or future litigation; (18) changes in general economic or industry conditions, nationally, internationally or in the communities in which we conduct business; (19) changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the Financial Accounting Standards Board; (20) war or terrorist activities which may cause further deterioration in the economy or cause instability in credit markets; (21) cyber-attacks; (22) the imposition of tariffs or other domestic or international governmental policies impacting the value of the agricultural or other products of our borrowers; and (23) other risk factors detailed from time to time in Securities and Exchange Commission filings made by the Company.
| MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES | |||||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||||
| December 31, | September 30, | December 31, | |||||||||
| 2018 | 2018 | 2017 | |||||||||
| (In thousands) | |||||||||||
| ASSETS | |||||||||||
| Cash and due from banks | $ | 43,787 | $ | 49,229 | $ | 44,818 | |||||
| Interest-earning deposits in banks | 1,693 | 4,150 | 5,474 | ||||||||
| Federal funds sold | — | — | 680 | ||||||||
| Total cash and cash equivalents | 45,480 | 53,379 | 50,972 | ||||||||
| Equity securities at fair value | 2,737 | 2,797 | 2,336 | ||||||||
| Debt securities available for sale at fair value | 414,101 | 407,766 | 445,324 | ||||||||
| Held to maturity securities at amortized cost | 195,822 | 191,733 | 195,619 | ||||||||
| Loans held for sale | 666 | 1,124 | 856 | ||||||||
| Loans held for investment, net of unearned income | 2,398,779 | 2,377,649 | 2,286,695 | ||||||||
| Allowance for loan losses | (29,307 | ) | (31,278 | ) | (28,059 | ) | |||||
| Loans held for investment, net | 2,369,472 | 2,346,371 | 2,258,636 | ||||||||
| Premises and equipment, net | 75,773 | 76,497 | 75,969 | ||||||||
| Goodwill | 64,654 | 64,654 | 64,654 | ||||||||
| Other intangible assets, net | 9,876 | 10,378 | 12,046 | ||||||||
| Foreclosed assets, net | 535 | 549 | 2,010 | ||||||||
| Other | 112,364 | 112,717 | 103,849 | ||||||||
| Total assets | $ | 3,291,480 | $ | 3,267,965 | $ | 3,212,271 | |||||
| LIABILITIES | |||||||||||
| Noninterest-bearing deposits | $ | 439,133 | $ | 458,576 | $ | 461,969 | |||||
| Interest-bearing deposits | 2,173,796 | 2,173,683 | 2,143,350 | ||||||||
| Total deposits | 2,612,929 | 2,632,259 | 2,605,319 | ||||||||
| Federal funds purchased | 56,900 | 19,056 | 1,000 | ||||||||
| Securities sold under agreements to repurchase | 74,522 | 68,922 | 96,229 | ||||||||
| Federal Home Loan Bank borrowings | 136,000 | 143,000 | 115,000 | ||||||||
| Junior subordinated notes issued to capital trusts | 23,888 | 23,865 | 23,793 | ||||||||
| Long-term debt | 7,500 | 8,750 | 12,500 | ||||||||
| Other | 22,674 | 22,924 | 18,126 | ||||||||
| Total liabilities | 2,934,413 | 2,918,776 | 2,871,967 | ||||||||
| SHAREHOLDERS' EQUITY | |||||||||||
| Common stock | 12,463 | 12,463 | 12,463 | ||||||||
| Additional paid-in capital | 187,813 | 187,581 | 187,486 | ||||||||
| Treasury stock | (6,499 | ) | (5,474 | ) | (5,121 | ) | |||||
| Retained earnings | 168,951 | 163,709 | 148,078 | ||||||||
| Accumulated other comprehensive loss | (5,661 | ) | (9,090 | ) | (2,602 | ) | |||||
| Total shareholders' equity | 357,067 | 349,189 | 340,304 | ||||||||
| Total liabilities and shareholders' equity | $ | 3,291,480 | $ | 3,267,965 | $ | 3,212,271 | |||||
| MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES | ||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||||
| Three Months Ended | Years Ended | |||||||||||||||||||
| December 31, | September 30, | December 31, | December 31, | |||||||||||||||||
| 2018 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||||||
| Interest income | ||||||||||||||||||||
| Loans | $ | 29,052 | $ | 28,088 | $ | 26,231 | $ | 111,193 | $ | 102,366 | ||||||||||
| Taxable securities | 2,949 | 2,965 | 2,676 | 11,742 | 10,573 | |||||||||||||||
| Tax-exempt securities | 1,375 | 1,395 | 1,540 | 5,827 | 6,239 | |||||||||||||||
| Deposits in banks and federal funds sold | 23 | 12 | 91 | 62 | 142 | |||||||||||||||
| Total interest income | 33,399 | 32,460 | 30,538 | 128,824 | 119,320 | |||||||||||||||
| Interest expense | ||||||||||||||||||||
| Deposits | 5,161 | 4,625 | 3,120 | 17,331 | 11,489 | |||||||||||||||
| Federal funds purchased | 181 | 144 | 19 | 661 | 171 | |||||||||||||||
| Securities sold under agreements to repurchase | 190 | 173 | 116 | 641 | 241 | |||||||||||||||
| Federal Home Loan Bank borrowings | 739 | 741 | 517 | 2,612 | 1,838 | |||||||||||||||
| Other borrowings | 4 | 3 | 3 | 13 | 12 | |||||||||||||||
| Junior subordinated notes issued to capital trusts | 306 | 313 | 245 | 1,184 | 949 | |||||||||||||||
| Long-term debt | 90 | 100 | 107 | 399 | 445 | |||||||||||||||
| Total interest expense | 6,671 | 6,099 | 4,127 | 22,841 | 15,145 | |||||||||||||||
| Net interest income | 26,728 | 26,361 | 26,411 | 105,983 | 104,175 | |||||||||||||||
| Provision for loan losses | 3,250 | 950 | 10,669 | 7,300 | 17,334 | |||||||||||||||
| Net interest income after provision for loan losses | 23,478 | 25,411 | 15,742 | 98,683 | 86,841 | |||||||||||||||
| Noninterest income | ||||||||||||||||||||
| Trust, investment, and insurance fees | 1,534 | 1,526 | 1,595 | 6,237 | 6,189 | |||||||||||||||
| Service charges and fees on deposit accounts | 1,175 | 1,148 | 1,291 | 4,649 | 5,126 | |||||||||||||||
| Loan origination and servicing fees | 884 | 891 | 889 | 3,622 | 3,421 | |||||||||||||||
| Other service charges and fees | 1,751 | 1,502 | 1,412 | 6,215 | 5,992 | |||||||||||||||
| Bank-owned life insurance | 381 | 399 | 398 | 1,610 | 1,388 | |||||||||||||||
| Investment securities gains (losses), net | (4 | ) | 192 | 2 | 193 | 241 | ||||||||||||||
| Other | (76 | ) | 326 | (53 | ) | 262 | 13 | |||||||||||||
| Total noninterest income | 5,645 | 5,984 | 5,534 | 22,788 | 22,370 | |||||||||||||||
| Noninterest expense | ||||||||||||||||||||
| Salaries and employee benefits | 12,111 | 13,051 | 12,152 | 49,758 | 47,864 | |||||||||||||||
| Occupancy and equipment, net | 2,597 | 3,951 | 2,982 | 13,037 | 12,305 | |||||||||||||||
| Professional fees | 1,027 | 1,861 | 971 | 4,641 | 3,962 | |||||||||||||||
| Data processing | 875 | 697 | 692 | 2,951 | 2,674 | |||||||||||||||
| FDIC insurance | 429 | 393 | 308 | 1,533 | 1,265 | |||||||||||||||
| Amortization of intangibles | 503 | 547 | 713 | 2,296 | 3,125 | |||||||||||||||
| Other | 2,261 | 2,311 | 2,275 | 9,287 | 8,941 | |||||||||||||||
| Total noninterest expense | 19,803 | 22,811 | 20,093 | 83,503 | 80,136 | |||||||||||||||
| Income before income tax expense | 9,320 | 8,584 | 1,183 | 37,968 | 29,075 | |||||||||||||||
| Income tax expense | 1,696 | 1,806 | 2,773 | 7,617 | 10,376 | |||||||||||||||
| Net income | $ | 7,624 | $ | 6,778 | $ | (1,590 | ) | $ | 30,351 | $ | 18,699 | |||||||||
| Earnings (loss) per common share | ||||||||||||||||||||
| Basic | $ | 0.62 | $ | 0.55 | $ | (0.13 | ) | $ | 2.48 | $ | 1.55 | |||||||||
| Diluted | $ | 0.62 | $ | 0.55 | $ | (0.13 | ) | $ | 2.48 | $ | 1.55 | |||||||||
| Weighted average basic common shares outstanding | 12,217 | 12,221 | 12,219 | 12,220 | 12,038 | |||||||||||||||
| Weighted average diluted common shares outstanding | 12,235 | 12,240 | 12,219 | 12,237 | 12,063 | |||||||||||||||
| Dividends paid per common share | $ | 0.195 | $ | 0.195 | $ | 0.17 | $ | 0.78 | $ | 0.67 | ||||||||||
| MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES | |||||||||||||||||||
| FIVE QUARTER CONSOLIDATED BALANCE SHEETS | |||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||||||
| 2018 | 2018 | 2018 | 2018 | 2017 | |||||||||||||||
| (In thousands) | |||||||||||||||||||
| ASSETS | |||||||||||||||||||
| Cash and due from banks | $ | 43,787 | $ | 49,229 | $ | 41,547 | $ | 39,929 | $ | 44,818 | |||||||||
| Interest-earning deposits in banks | 1,693 | 4,150 | 1,717 | 2,467 | 5,474 | ||||||||||||||
| Federal funds sold | — | — | — | — | 680 | ||||||||||||||
| Total cash and cash equivalents | 45,480 | 53,379 | 43,264 | 42,396 | 50,972 | ||||||||||||||
| Equity securities at fair value | 2,737 | 2,797 | 2,809 | 2,815 | 2,336 | ||||||||||||||
| Debt securities available for sale at fair value | 414,101 | 407,766 | 438,312 | 446,087 | 445,324 | ||||||||||||||
| Held to maturity securities at amortized cost | 195,822 | 191,733 | 192,896 | 194,617 | 195,619 | ||||||||||||||
| Loans held for sale | 666 | 1,124 | 1,528 | 870 | 856 | ||||||||||||||
| Loans held for investment, net of unearned income | 2,398,779 | 2,377,649 | 2,364,035 | 2,326,158 | 2,286,695 | ||||||||||||||
| Allowance for loan losses | (29,307 | ) | (31,278 | ) | (30,800 | ) | (29,671 | ) | (28,059 | ) | |||||||||
| Loans held for investment, net | 2,369,472 | 2,346,371 | 2,333,235 | 2,296,487 | 2,258,636 | ||||||||||||||
| Premises and equipment, net | 75,773 | 76,497 | 78,106 | 77,552 | 75,969 | ||||||||||||||
| Goodwill | 64,654 | 64,654 | 64,654 | 64,654 | 64,654 | ||||||||||||||
| Other intangible assets, net | 9,876 | 10,378 | 10,925 | 11,389 | 12,046 | ||||||||||||||
| Foreclosed assets, net | 535 | 549 | 676 | 1,001 | 2,010 | ||||||||||||||
| Other | 112,364 | 112,717 | 109,872 | 103,774 | 103,849 | ||||||||||||||
| Total assets | $ | 3,291,480 | $ | 3,267,965 | $ | 3,276,277 | $ | 3,241,642 | $ | 3,212,271 | |||||||||
| LIABILITIES | |||||||||||||||||||
| Non-interest-bearing deposits | $ | 439,133 | $ | 458,576 | $ | 469,862 | $ | 450,168 | $ | 461,969 | |||||||||
| Interest-bearing deposits | 2,173,796 | 2,173,683 | 2,134,339 | 2,181,753 | 2,143,350 | ||||||||||||||
| Total deposits | 2,612,929 | 2,632,259 | 2,604,201 | 2,631,921 | 2,605,319 | ||||||||||||||
| Federal funds purchased | 56,900 | 19,056 | 52,421 | 25,573 | 1,000 | ||||||||||||||
| Securities sold under agreements to repurchase | 74,522 | 68,922 | 75,046 | 67,738 | 96,229 | ||||||||||||||
| Federal Home Loan Bank borrowings | 136,000 | 143,000 | 143,000 | 123,000 | 115,000 | ||||||||||||||
| Junior subordinated notes issued to capital trusts | 23,888 | 23,865 | 23,841 | 23,817 | 23,793 | ||||||||||||||
| Long-term debt | 7,500 | 8,750 | 10,000 | 11,250 | 12,500 | ||||||||||||||
| Other | 22,674 | 22,924 | 21,567 | 16,966 | 18,126 | ||||||||||||||
| Total liabilities | 2,934,413 | 2,918,776 | 2,930,076 | 2,900,265 | 2,871,967 | ||||||||||||||
| SHAREHOLDERS' EQUITY | |||||||||||||||||||
| Common stock | 12,463 | 12,463 | 12,463 | 12,463 | 12,463 | ||||||||||||||
| Additional paid-in capital | 187,813 | 187,581 | 187,304 | 187,188 | 187,486 | ||||||||||||||
| Treasury stock | (6,499 | ) | (5,474 | ) | (5,474 | ) | (5,612 | ) | (5,121 | ) | |||||||||
| Retained earnings | 168,951 | 163,709 | 159,315 | 153,542 | 148,078 | ||||||||||||||
| Accumulated other comprehensive income (loss) | (5,661 | ) | (9,090 | ) | (7,407 | ) | (6,204 | ) | (2,602 | ) | |||||||||
| Total shareholders' equity | 357,067 | 349,189 | 346,201 | 341,377 | 340,304 | ||||||||||||||
| Total liabilities and shareholders' equity | $ | 3,291,480 | $ | 3,267,965 | $ | 3,276,277 | $ | 3,241,642 | $ | 3,212,271 | |||||||||
| MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES | |||||||||||||||||||
| FIVE QUARTER CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||||
| Three Months Ended | |||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||||||
| 2018 | 2018 | 2018 | 2018 | 2017 | |||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||
| Interest income | |||||||||||||||||||
| Loans | $ | 29,052 | $ | 28,088 | $ | 27,486 | $ | 26,567 | $ | 26,231 | |||||||||
| Taxable securities | 2,949 | 2,965 | 2,940 | 2,888 | 2,676 | ||||||||||||||
| Tax-exempt securities | 1,375 | 1,395 | 1,528 | 1,529 | 1,540 | ||||||||||||||
| Deposits in banks and federal funds sold | 23 | 12 | 19 | 8 | 91 | ||||||||||||||
| Total interest income | 33,399 | 32,460 | 31,973 | 30,992 | 30,538 | ||||||||||||||
| Interest expense | |||||||||||||||||||
| Deposits | 5,161 | 4,625 | 4,009 | 3,536 | 3,120 | ||||||||||||||
| Federal funds purchased | 181 | 144 | 211 | 125 | 19 | ||||||||||||||
| Securities sold under agreements to repurchase | 190 | 173 | 144 | 134 | 116 | ||||||||||||||
| Federal Home Loan Bank borrowings | 739 | 741 | 615 | 517 | 517 | ||||||||||||||
| Other borrowings | 4 | 3 | 4 | 2 | 3 | ||||||||||||||
| Junior subordinated notes issued to capital trusts | 306 | 313 | 307 | 258 | 245 | ||||||||||||||
| Long-term debt | 90 | 100 | 102 | 107 | 107 | ||||||||||||||
| Total interest expense | 6,671 | 6,099 | 5,392 | 4,679 | 4,127 | ||||||||||||||
| Net interest income | 26,728 | 26,361 | 26,581 | 26,313 | 26,411 | ||||||||||||||
| Provision for loan losses | 3,250 | 950 | 1,250 | 1,850 | 10,669 | ||||||||||||||
| Net interest income after provision for loan losses | 23,478 | 25,411 | 25,331 | 24,463 | 15,742 | ||||||||||||||
| Noninterest income | |||||||||||||||||||
| Trust, investment, and insurance fees | 1,534 | 1,526 | 1,537 | 1,640 | 1,595 | ||||||||||||||
| Service charges and fees on deposit accounts | 1,175 | 1,148 | 1,158 | 1,168 | 1,291 | ||||||||||||||
| Loan origination and servicing fees | 884 | 891 | 906 | 941 | 889 | ||||||||||||||
| Other service charges and fees | 1,751 | 1,502 | 1,582 | 1,380 | 1,412 | ||||||||||||||
| Bank-owned life insurance | 381 | 399 | 397 | 433 | 398 | ||||||||||||||
| Investment securities gains (losses), net | (4 | ) | 192 | (4 | ) | 9 | 2 | ||||||||||||
| Other | (76 | ) | 326 | (89 | ) | 101 | (53 | ) | |||||||||||
| Total noninterest income | 5,645 | 5,984 | 5,487 | 5,672 | 5,534 | ||||||||||||||
| Noninterest expense | |||||||||||||||||||
| Salaries and employee benefits | 12,111 | 13,051 | 12,225 | 12,371 | 12,152 | ||||||||||||||
| Occupancy and equipment, net | 2,597 | 3,951 | 3,238 | 3,251 | 2,982 | ||||||||||||||
| Professional fees | 1,027 | 1,861 | 959 | 794 | 971 | ||||||||||||||
| Data processing | 875 | 697 | 691 | 688 | 692 | ||||||||||||||
| FDIC insurance | 429 | 393 | 392 | 319 | 308 | ||||||||||||||
| Amortization of intangibles | 503 | 547 | 589 | 657 | 713 | ||||||||||||||
| Other | 2,261 | 2,311 | 2,437 | 2,278 | 2,275 | ||||||||||||||
| Total noninterest expense | 19,803 | 22,811 | 20,531 | 20,358 | 20,093 | ||||||||||||||
| Income before income tax expense | 9,320 | 8,584 | 10,287 | 9,777 | 1,183 | ||||||||||||||
| Income tax expense | 1,696 | 1,806 | 2,131 | 1,984 | 2,773 | ||||||||||||||
| Net income (loss) | $ | 7,624 | $ | 6,778 | $ | 8,156 | $ | 7,793 | $ | (1,590 | ) | ||||||||
| Earnings (loss) per common share | |||||||||||||||||||
| Basic | $ | 0.62 | $ | 0.55 | $ | 0.67 | $ | 0.64 | $ | (0.13 | ) | ||||||||
| Diluted | $ | 0.62 | $ | 0.55 | $ | 0.67 | $ | 0.64 | $ | (0.13 | ) | ||||||||
| Weighted average basic common shares outstanding | 12,217 | 12,221 | 12,218 | 12,223 | 12,219 | ||||||||||||||
| Weighted average diluted common shares outstanding | 12,235 | 12,240 | 12,230 | 12,242 | 12,219 | ||||||||||||||
| Dividends paid per common share | $ | 0.195 | $ | 0.195 | $ | 0.195 | $ | 0.20 | $ | 0.17 | |||||||||
| MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||||||||
| AVERAGE BALANCE SHEET AND YIELD ANALYSIS | ||||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||||||
| December 31, 2018 | September 30, 2018 | December 31, 2017 | ||||||||||||||||||||||||||||||
| Average Balance | Interest Income/ Expense | Average Yield/ Cost | Average Balance | Interest Income/ Expense | Average Yield/ Cost | Average Balance | Interest Income/ Expense | Average Yield/ Cost | ||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||
| Loans (1)(2) | $ | 2,398,859 | $ | 29,330 | 4.85 | % | $ | 2,375,100 | $ | 28,358 | 4.74 | % | $ | 2,258,009 | $ | 26,716 | 4.69 | % | ||||||||||||||
| Investment securities: | ||||||||||||||||||||||||||||||||
| Taxable securities | 421,203 | 2,949 | 2.78 | % | 426,674 | 2,965 | 2.76 | 415,518 | 2,676 | 2.56 | % | |||||||||||||||||||||
| Tax exempt securities (3) | 198,073 | 1,732 | 3.47 | % | 200,577 | 1,760 | 3.48 | 218,022 | 2,354 | 4.28 | % | |||||||||||||||||||||
| Total investment securities | 619,276 | 4,681 | 3.00 | % | 627,251 | 4,725 | 2.99 | 633,540 | 5,030 | 3.15 | % | |||||||||||||||||||||
| Federal funds sold and interest-earning deposits in banks | 4,243 | 23 | 2.15 | % | 2,541 | 12 | 1.87 | 27,465 | 91 | 1.31 | % | |||||||||||||||||||||
| Total interest-earning assets | $ | 3,022,378 | 34,034 | 4.47 | % | $ | 3,004,892 | 33,095 | 4.37 | % | $ | 2,919,014 | 31,837 | 4.33 | % | |||||||||||||||||
| Cash and due from banks | 37,599 | 36,759 | 37,122 | |||||||||||||||||||||||||||||
| Premises and equipment | 76,271 | 77,476 | 75,445 | |||||||||||||||||||||||||||||
| Allowance for loan losses | (31,712 | ) | (31,441 | ) | (26,321 | ) | ||||||||||||||||||||||||||
| Other assets | 173,590 | 170,597 | 165,800 | |||||||||||||||||||||||||||||
| Total assets | $ | 3,278,126 | $ | 3,258,283 | $ | 3,171,060 | ||||||||||||||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||||||||||
| Savings and interest-bearing demand deposits | $ | 1,447,599 | 1,994 | 0.55 | % | $ | 1,425,768 | 1,685 | 0.47 | % | $ | 1,408,099 | 1,085 | 0.31 | % | |||||||||||||||||
| Certificates of deposit | 724,973 | 3,167 | 1.73 | % | 729,795 | 2,940 | 1.60 | % | 667,362 | 2,035 | 1.21 | % | ||||||||||||||||||||
| Total interest-bearing deposits | 2,172,572 | 5,161 | 0.94 | % | 2,155,563 | 4,625 | 0.85 | % | 2,075,461 | 3,120 | 0.60 | % | ||||||||||||||||||||
| Federal funds purchased and securities sold under agreements to repurchase | 104,710 | 371 | 1.41 | % | 99,254 | 317 | 1.27 | % | 95,376 | 135 | 0.56 | % | ||||||||||||||||||||
| Federal Home Loan Bank borrowings | 137,065 | 739 | 2.14 | % | 143,326 | 741 | 2.05 | % | 126,087 | 517 | 1.63 | % | ||||||||||||||||||||
| Long-term debt and junior subordinated notes issued to capital trusts | 33,964 | 400 | 4.67 | % | 35,109 | 416 | 4.70 | % | 38,823 | 355 | 3.63 | % | ||||||||||||||||||||
| Total borrowed funds | 275,739 | 1,510 | 2.17 | % | 277,689 | 1,474 | 2.11 | % | 260,286 | 1,007 | 1.53 | % | ||||||||||||||||||||
| Total interest-bearing liabilities | $ | 2,448,311 | 6,671 | 1.08 | % | $ | 2,433,252 | 6,099 | 0.99 | % | $ | 2,335,747 | 4,127 | 0.70 | % | |||||||||||||||||
| Demand deposits | 454,185 | 453,124 | 467,784 | |||||||||||||||||||||||||||||
| Other liabilities | 24,232 | 23,776 | 19,851 | |||||||||||||||||||||||||||||
| Shareholders’ equity | 351,398 | 348,131 | 347,678 | |||||||||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 3,278,126 | $ | 3,258,283 | $ | 3,171,060 | ||||||||||||||||||||||||||
| Net interest income(4) | $ | 27,363 | $ | 26,996 | $ | 27,710 | ||||||||||||||||||||||||||
| Net interest spread(4) | 3.39 | % | 3.38 | % | 3.63 | % | ||||||||||||||||||||||||||
| Net interest margin(4) | 3.59 | % | 3.56 | % | 3.77 | % | ||||||||||||||||||||||||||
| Total deposits(5) | $ | 2,626,757 | $ | 5,161 | 0.78 | % | $ | 2,608,687 | $ | 4,625 | 0.70 | % | $ | 2,543,245 | $ | 3,120 | 0.49 | % | ||||||||||||||
| Funding sources(6) | $ | 2,902,496 | $ | 6,671 | 0.91 | % | $ | 2,886,376 | $ | 6,099 | 0.84 | % | $ | 2,803,531 | $ | 4,127 | 0.58 | % | ||||||||||||||
(1) Non-accrual loans have been included in average loans, net of unearned income. Amortized net deferred loans and net unearned discounts on acquired loans were included in the interest income calculations. The amortization of net deferred loans fees was $(67) thousand, $(128) thousand, and $(132) thousand for the three months ended December 31, 2018, September 30, 2018, and December 31, 2017, respectively. Accretion of unearned purchase discounts was $454 thousand, $605 thousand, and $1,088 thousand for the three months ended December 31, 2018, September 30, 2018, and December 31, 2017, respectively.
(2) Includes tax-equivalent adjustments of $278 thousand, $270 thousand, and $485 thousand for the three months ended December 31, 2018, September 30, 2018, and December 31, 2017, respectively. The federal statutory tax rate utilized was 21% for the 2018 periods and 35% for the 2017 period.
(3) Includes tax-equivalent adjustments of $357 thousand, $365 thousand, and $814 thousand for the three months ended December 31, 2018, September 30, 2018, and December 31, 2017, respectively. The federal statutory tax rate utilized was 21% for the 2018 periods and 35% for the 2017 period.
(4) Tax equivalent.
(5) Total deposits is the sum of total interest-bearing deposits and noninterest-bearing demand deposits. The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits.
(6) Funding sources is the sum of total interest-bearing liabilities and noninterest-bearing demand deposits. The cost of funding sources is calculated as annualized total interest expense divided by average funding sources.
| MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES | |||||||||||||||||||||
| AVERAGE BALANCE SHEET AND YIELD ANALYSIS | |||||||||||||||||||||
| Years Ended | |||||||||||||||||||||
| December 31, 2018 | December 31, 2017 | ||||||||||||||||||||
| Average Balance | Interest Income/ Expense | Average Yield/ Cost | Average Balance | Interest Income/ Expense | Average Yield/ Cost | ||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
| ASSETS | |||||||||||||||||||||
| Loans (1)(2) | $ | 2,354,354 | $ | 112,233 | 4.77 | % | $ | 2,201,364 | $ | 104,096 | 4.73 | % | |||||||||
| Investment securities: | |||||||||||||||||||||
| Taxable securities | 431,478 | 11,742 | 2.72 | % | 423,678 | 10,573 | 2.50 | % | |||||||||||||
| Tax exempt securities (3) | 207,605 | 7,342 | 3.54 | % | 217,650 | 9,536 | 4.38 | % | |||||||||||||
| Total investment securities | 639,083 | 19,084 | 2.99 | % | 641,328 | 20,109 | 3.14 | % | |||||||||||||
| Federal funds sold and interest-earning deposits in banks | 3,372 | 62 | 1.84 | % | 11,138 | 142 | 1.27 | % | |||||||||||||
| Total interest-earning assets | $ | 2,996,809 | 131,379 | 4.38 | % | $ | 2,853,830 | 124,347 | 4.36 | % | |||||||||||
| Cash and due from banks | 36,384 | 35,745 | |||||||||||||||||||
| Premises and equipment | 77,178 | 75,082 | |||||||||||||||||||
| Allowance for loan losses | (30,533 | ) | (23,557 | ) | |||||||||||||||||
| Other assets | 169,880 | 156,396 | |||||||||||||||||||
| Total assets | $ | 3,249,718 | $ | 3,097,496 | |||||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||||
| Savings and interest-bearing demand deposits | $ | 1,429,672 | 6,181 | 0.43 | % | $ | 1,357,554 | 3,863 | 0.28 | % | |||||||||||
| Certificates of deposit | 723,830 | 11,150 | 1.54 | % | 674,757 | 7,626 | 1.13 | % | |||||||||||||
| Total interest-bearing deposits | 2,153,502 | 17,331 | 0.80 | % | 2,032,311 | 11,489 | 0.57 | % | |||||||||||||
| Federal funds purchased and securities sold under agreements to repurchase | 105,094 | 1,302 | 1.24 | % | 87,763 | 412 | 0.47 | % | |||||||||||||
| Federal Home Loan Bank borrowings | 133,814 | 2,612 | 1.95 | % | 110,000 | 1,838 | 1.67 | % | |||||||||||||
| Long-term debt and junior subordinated notes issued to capital trusts | 35,726 | 1,596 | 4.47 | % | 40,679 | 1,406 | 3.46 | % | |||||||||||||
| Total borrowed funds | 274,634 | 5,510 | 2.01 | % | 238,442 | 3,656 | 1.53 | % | |||||||||||||
| Total interest-bearing liabilities | $ | 2,428,136 | 22,841 | 0.94 | % | $ | 2,270,753 | 15,145 | 0.67 | % | |||||||||||
| Demand deposits | 455,223 | 471,170 | |||||||||||||||||||
| Other liabilities | 20,625 | 20,607 | |||||||||||||||||||
| Shareholders’ equity | 345,734 | 334,966 | |||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 3,249,718 | $ | 3,097,496 | |||||||||||||||||
| Net interest income(4) | $ | 108,538 | $ | 109,202 | |||||||||||||||||
| Net interest spread(4) | 3.44 | % | 3.69 | % | |||||||||||||||||
| Net interest margin(4) | 3.62 | % | 3.83 | % | |||||||||||||||||
| Total deposits(5) | $ | 2,608,725 | $ | 17,331 | 0.66 | % | $ | 2,503,481 | $ | 11,489 | 0.46 | % | |||||||||
| Funding sources(6) | $ | 2,883,359 | $ | 22,841 | 0.79 | % | $ | 2,741,923 | $ | 15,145 | 0.55 | % | |||||||||
(1) Non-accrual loans have been included in average loans, net of unearned income. Amortized net deferred loans and net unearned discounts on acquired loans were included in the interest income calculations. The amortization of net deferred loans fees was $(407) thousand and $(543) thousand for the years ended ended December 31, 2018 and December 31, 2017, respectively. Accretion of unearned purchase discounts was $2.7 million and $4.8 million for the years ended ended December 31, 2018 and December 31, 2017, respectively.
(2) Includes tax-equivalent adjustments of $1.0 million and $1.7 million for the years ended ended December 31, 2018 and December 31, 2017, respectively. The federal statutory tax rate utilized was 21% for the 2018 periods and 35% for the 2017 period.
(3) Includes tax-equivalent adjustments of $1.5 million and $3.3 million for the years ended ended December 31, 2018 and December 31, 2017, respectively. The federal statutory tax rate utilized was 21% for the 2018 periods and 35% for the 2017 period.
(4) Tax equivalent.
(5) Total deposits is the sum of total interest-bearing deposits and noninterest-bearing demand deposits. The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits.
(6) Funding sources is the sum of total interest-bearing liabilities and noninterest-bearing demand deposits. The cost of funding sources is calculated as annualized total interest expense divided by average funding sources.
Non-GAAP Presentations:
Certain non-GAAP ratios and amounts are provided to evaluate and measure the Company’s operating performance and financial condition, including tangible book value per share, the tangible equity to tangible assets ratio, return on average tangible equity, net interest margin, and the efficiency ratio. Management believes this data provides investors with pertinent information regarding the Company’s profitability, financial condition and capital adequacy and how management evaluates such metrics internally. The following tables provide a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.
| As of | As of | As of | As of | As of | |||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||||||||
| (unaudited, dollars in thousands, except per share data) | 2018 | 2018 | 2018 | 2018 | 2017 | ||||||||||||||||
| Tangible Equity | |||||||||||||||||||||
| Total shareholders’ equity | $ | 357,067 | $ | 349,189 | $ | 346,201 | $ | 341,377 | $ | 340,304 | |||||||||||
| Plus: Deferred tax liability associated with intangibles | 660 | 786 | 924 | 1,073 | 1,241 | ||||||||||||||||
| Less: Intangible assets, net | (74,530 | ) | (75,032 | ) | (75,579 | ) | (76,043 | ) | (76,700 | ) | |||||||||||
| Tangible equity | $ | 283,197 | $ | 274,943 | $ | 271,546 | $ | 266,407 | $ | 264,845 | |||||||||||
| Tangible Assets | |||||||||||||||||||||
| Total assets | $ | 3,291,480 | $ | 3,267,965 | $ | 3,276,277 | $ | 3,241,642 | $ | 3,212,271 | |||||||||||
| Plus: Deferred tax liability associated with intangibles | 660 | 786 | 924 | 1,073 | 1,241 | ||||||||||||||||
| Less: Intangible assets, net | (74,530 | ) | (75,032 | ) | (75,579 | ) | (76,043 | ) | (76,700 | ) | |||||||||||
| Tangible assets | $ | 3,217,610 | $ | 3,193,719 | $ | 3,201,622 | $ | 3,166,672 | $ | 3,136,812 | |||||||||||
| Common shares outstanding | 12,180,015 | 12,221,107 | 12,221,107 | 12,214,942 | 12,219,611 | ||||||||||||||||
| Tangible Book Value Per Share | $ | 23.25 | $ | 22.50 | $ | 22.22 | $ | 21.81 | $ | 21.67 | |||||||||||
| Tangible Equity/Tangible Assets | 8.80 | % | 8.61 | % | 8.48 | % | 8.41 | % | 8.44 | % | |||||||||||
| For the Three Months Ended | For the Years Ended | ||||||||||||||||||||
| (unaudited, dollars in thousands) | December 31, 2018 | September 30, 2018 | December 31, 2017 | December 31, 2018 | December 31, 2017 | ||||||||||||||||
| Net Income | $ | 7,624 | $ | 6,778 | $ | (1,590 | ) | $ | 30,351 | $ | 18,699 | ||||||||||
| Plus: Intangible amortization, net of tax(1) | 397 | 432 | 463 | 1,814 | 2,031 | ||||||||||||||||
| Adjusted net income | $ | 8,021 | $ | 7,210 | $ | (1,127 | ) | $ | 32,165 | $ | 20,730 | ||||||||||
| Average Tangible Equity | |||||||||||||||||||||
| Average total shareholders’ equity | $ | 351,398 | $ | 348,131 | $ | 347,678 | $ | 345,734 | $ | 334,966 | |||||||||||
| Plus: Average deferred tax liability associated with intangibles | 720 | 852 | 1,993 | 929 | 2,436 | ||||||||||||||||
| Less: Average intangible assets, net of amortization | (74,766 | ) | (75,292 | ) | (77,037 | ) | (75,531 | ) | (78,159 | ) | |||||||||||
| Average tangible equity | $ | 277,352 | $ | 273,691 | $ | 272,634 | $ | 271,132 | $ | 259,243 | |||||||||||
| Return on Average Tangible Equity (annualized) | 11.47 | % | 10.45 | % | (1.64 | )% | 11.86 | % | 8.00 | % | |||||||||||
| Net Interest Margin Tax Equivalent Adjustment | ||||||||||||||||||||
| Net interest income | $ | 26,728 | $ | 26,361 | $ | 26,411 | $ | 105,983 | $ | 104,175 | ||||||||||
| Plus tax equivalent adjustment:(1) | ||||||||||||||||||||
| Loans | 278 | 270 | 485 | 1,040 | 1,730 | |||||||||||||||
| Securities | 357 | 365 | 814 | 1,515 | 3,297 | |||||||||||||||
| Tax equivalent net interest income (1) | $ | 27,363 | $ | 26,996 | $ | 27,710 | $ | 108,538 | $ | 109,202 | ||||||||||
| Average interest earning assets | $ | 3,022,378 | $ | 3,004,892 | $ | 2,919,014 | $ | 2,996,809 | $ | 2,853,830 | ||||||||||
| Net Interest Margin | 3.59 | % | 3.56 | % | 3.77 | % | 3.62 | % | 3.83 | % | ||||||||||
| (1) Computed on a tax-equivalent basis, assuming a federal income tax rate of 21% for 2018, and 35% for 2017. | ||||||||||||||||||||
| For the Three Months Ended | For the Years Ended | ||||||||||||||||||||
| (dollars in thousands) | December 31, 2018 | September 30, 2018 | December 31, 2017 | December 31, 2018 | December 31, 2017 | ||||||||||||||||
| Operating Expense | |||||||||||||||||||||
| Total noninterest expense | $ | 19,803 | $ | 22,811 | $ | 20,093 | $ | 83,503 | $ | 80,136 | |||||||||||
| Less: Amortization of intangibles | (503 | ) | (547 | ) | (713 | ) | (2,296 | ) | (3,125 | ) | |||||||||||
| Operating expense | $ | 19,300 | $ | 22,264 | $ | 19,380 | $ | 81,207 | $ | 77,011 | |||||||||||
| Operating Revenue | |||||||||||||||||||||
| Tax equivalent net interest income (1) | $ | 27,363 | $ | 26,996 | $ | 27,710 | $ | 108,538 | $ | 109,202 | |||||||||||
| Plus: Noninterest income | 5,645 | 5,984 | 5,534 | 22,788 | 22,370 | ||||||||||||||||
| Less: (Gain) loss on sale or call of debt securities | 4 | (192 | ) | (2 | ) | (193 | ) | (241 | ) | ||||||||||||
| Other (gain) loss | 76 | (326 | ) | 53 | (262 | ) | (13 | ) | |||||||||||||
| Operating revenue | $ | 33,088 | $ | 32,462 | $ | 33,295 | $ | 130,871 | $ | 131,318 | |||||||||||
| Efficiency Ratio | 58.33 | % | 68.58 | % | 58.21 | % | 62.05 | % | 58.64 | % | |||||||||||
| (1) Computed on a tax-equivalent basis, assuming a federal income tax rate of 21% for 2018, and 35% for 2017. | |||||||||||||||||||||
| Contact: | ||||||
| Charles N. Funk | Barry S. Ray | |||||
| President & CEO | Sr. VP & CFO | |||||
| 319.356.5800 | 319.356.5800 | |||||