First Quarter Summary(1)
- Net income for the first quarter was a record $21.6 million, or $1.35 per diluted common share.
- Total revenue, net of interest expense, increased to $50.4 million.
- Credit loss benefit increased to $4.7 million.
- Noninterest expense decreased to $27.7 million.
- Efficiency ratio improved to 50.8%.
- Average total interest earning assets grew 6.6% annualized.
- Average total deposits grew 7.8% annualized.
- Allowance for credit losses ratio declined to 1.5% given the improving economic outlook.
- Nonperforming assets increased 1.9% and the net charge-off ratio was 4 bps.
IOWA CITY, Iowa, April 22, 2021 (GLOBE NEWSWIRE) -- MidWestOne Financial Group, Inc. (Nasdaq: MOFG) (“we”, “our”, or the "Company”) today reported net income for the first quarter of 2021 of $21.6 million, or $1.35 per diluted common share, compared to net income of $16.7 million, or $1.04 per diluted common share, for the linked quarter.
Charles Funk, Chief Executive Officer of the Company, commented, "This is the highest earnings quarter in our Company's history. We have seen our asset quality stabilize as the economy improves. Further, our credit loss estimate has declined from peak 2020 levels that stemmed from economic uncertainty driven by the COVID-19 pandemic. We also note our expenses are well-controlled, which is important given this period of soft loan demand."
1First Quarter Summary compares to the linked quarter unless noted.
2Non-GAAP measure. See the 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) | 2021 | 2020 | 2020 | ||||||||||||
| Net interest income | $ | 38,617 | $ | 39,037 | $ | 37,406 | |||||||||
| Noninterest income | 11,824 | 10,626 | 10,155 | ||||||||||||
| Total revenue, net of interest expense | 50,441 | 49,663 | 47,561 | ||||||||||||
| Credit loss (benefit) expense | (4,734 | ) | (3,041 | ) | 21,733 | ||||||||||
| Noninterest expense | 27,700 | 31,915 | 30,001 | ||||||||||||
| Income (loss) before income tax expense (benefit) | 27,475 | 20,789 | (4,173 | ) | |||||||||||
| Income tax expense (benefit) | 5,827 | 4,079 | (2,198 | ) | |||||||||||
| Net income (loss) | $ | 21,648 | $ | 16,710 | $ | (1,975 | ) | ||||||||
| Diluted earnings (loss) per share | $ | 1.35 | $ | 1.04 | $ | (0.12 | ) | ||||||||
| Return on average assets | 1.59 | % | 1.22 | % | (0.17 | ) | % | ||||||||
| Return on average equity | 17.01 | % | 13.15 | % | (1.54 | ) | % | ||||||||
| Return on average tangible equity(1) | 21.52 | % | 17.07 | % | (0.47 | ) | % | ||||||||
| Efficiency ratio(1) | 50.77 | % | 59.69 | % | 57.67 | % | |||||||||
| (1) Non-GAAP measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure. | |||||||||||||||
COVID-19 UPDATE
Loan Modifications
As of March 31, 2021, the outstanding balance of loans modified as a result of the COVID-19 pandemic totaled $16.7 million, a decline of 62% from $44.1 million at December 31, 2020. Of those modified loans at March 31, 2021, $3.2 million were in their first deferral period while $13.5 million are in, or being processed for, an additional deferral.
SBA PPP Loans
On March 30, 2021, President Biden signed into law the PPP Extension Act of 2021, which provided an extension to May 31, 2021 for qualifying businesses to apply for a PPP loan and provided an additional 30 days for the SBA to process pending PPP loan applications. We expect the Company's volume of PPP loan originations will decline after March 31, 2021 compared to the level of originations during the first quarter of 2021.
The following table presents PPP loan measures as of the dates indicated:
| Total PPP Loans Funded | Outstanding PPP Loans(1) | |||||||||||||||
| (Dollars in millions) | # | $ | # | $ | Unearned income | |||||||||||
| March 31, 2021 | 4,304 | $ | 474.2 | 2,577 | $ | 248.7 | $ | 6.9 | ||||||||
| December 31, 2020 | 2,681 | $ | 348.5 | 2,410 | $ | 259.3 | $ | 5.3 | ||||||||
| (1) Outstanding loans are presented net of unearned income. | ||||||||||||||||
Vulnerable Industries
We believe loans to certain industries are uniquely vulnerable to credit deterioration stemming from the COVID-19 pandemic. The following table presents our exposure to those industries as of the dates indicated.
| March 31, 2021 | December 31, 2020 | |||||||||||||||
| (Dollars in millions) | Balance | % of Total Loans | Balance | % of Total Loans | ||||||||||||
| Non-essential Retail | $ | 88.0 | 2.6 | % | $ | 95.0 | 2.7 | % | ||||||||
| Restaurants | 56.1 | 1.7 | 49.9 | 1.4 | ||||||||||||
| Hotels | 114.4 | 3.4 | 117.0 | 3.4 | ||||||||||||
| CRE-Retail | 191.1 | 5.7 | 203.7 | 5.8 | ||||||||||||
| Arts, Entertainment & Gaming | 23.5 | 0.7 | 26.9 | 0.8 | ||||||||||||
| Total Vulnerable Industries Loan Portfolio | $ | 473.1 | 14.1 | % | $ | 492.5 | 14.1 | % | ||||||||
INCOME STATEMENT HIGHLIGHTS
Net Interest Income
Net interest income decreased to $38.6 million in the first quarter of 2021 from $39.0 million in the fourth quarter of 2020 as higher average earning asset volumes were offset by a 3 basis point decline in the net interest margin. In addition, net PPP loan fee income added $4.4 million in the first quarter of 2021 compared to $3.1 million in the linked quarter, whereas loan purchase discount accretion was $1.1 million in the first quarter of 2021, down from $1.5 million in the linked quarter.
Average interest earning assets increased $81.1 million to $5.2 billion in the first quarter of 2021, compared to the fourth quarter of 2020, as cash on hand and cash inflows from net loan pay-downs and deposit activity was used to purchase debt securities. The mix of interest earning assets shifted further to debt securities as non-PPP loan demand continued to be soft and line utilization was low.
The Company's tax equivalent net interest margin was 3.10% in the first quarter of 2021 compared to 3.13% in the linked quarter, as lower earning asset yields were only partially offset by a reduction in average funding costs. Total earning asset yields decreased 9 bps from the linked quarter, reflecting the aforementioned shift in earning asset mix to debt securities that generally have lower yields than our loan portfolio. The cost of interest bearing liabilities decreased 8 bps to 0.56%, primarily as a result of interest bearing deposit costs of 0.40%, which declined 7 bps from the linked quarter.
"Although our balance sheet continues to grow thanks to higher deposit balances, thus generating more net interest income, low loan demand has necessitated purchasing investment securities with these deposits. We were helped in the quarter by a slightly steeper yield curve, but this yield spread remains historically narrow," stated Mr. Funk.
Noninterest Income
Noninterest income for the first quarter of 2021 increased $1.2 million, or 11%, from the linked quarter. The increase was due primarily to a $0.8 million increase in loan revenue and an increase of $0.3 million in investment services and trust activities revenue. The increase in loan revenue was due primarily to a $0.9 million increase in the fair value of our mortgage servicing rights partially offset by a $0.2 million decrease in loan sale gains. Investment services and trust activities revenue reflected the earnings benefit from increased equity market valuations and fees collected in the normal course of those lines of business.
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) | 2021 | 2020 | 2020 | ||||||||
| Investment services and trust activities | $ | 2,836 | $ | 2,518 | $ | 2,536 | |||||
| Service charges and fees | 1,487 | 1,571 | 1,826 | ||||||||
| Card revenue | 1,536 | 1,517 | 1,365 | ||||||||
| Loan revenue | 4,730 | 3,900 | 1,123 | ||||||||
| Bank-owned life insurance | 542 | 541 | 520 | ||||||||
| Investment securities gains, net | 27 | 30 | 42 | ||||||||
| Other | 666 | 549 | 2,743 | ||||||||
| Total noninterest income | $ | 11,824 | $ | 10,626 | $ | 10,155 | |||||
Noninterest Expense
Noninterest expense for the first quarter of 2021 decreased $4.2 million, or 13.2%, from the linked quarter due primarily to decreases in other, legal and professional, and compensation and employee benefits of $1.7 million, $1.3 million, and $0.7 million, respectively. The decrease in other noninterest expense was primarily due to a $0.8 million loss on the termination of our cash flow hedge that was recorded in the fourth quarter of 2020, which did not recur in the first quarter of 2021, coupled with a reduction in tax credit partnership investment amortization of $0.6 million. The decrease in legal and professional expenses was primarily due to a $0.6 million fee incurred during the fourth quarter of 2020 related to a large contract renewal, which did not recur in the first quarter of 2021, coupled with an overall decline in legal and professional fees paid for regulatory, personnel and other services. The decrease in compensation and employee benefits reflected a $0.9 million benefit from SBA PPP loan origination costs which are deferred and amortized over the life of the loan to which they relate, coupled with a decline of $0.5 million in commission and incentive expense. Partially offsetting these decreases in compensation and employee benefits were increased salary and benefit costs of $0.7 million which stemmed from normal annual increases. Expense control was the primary driver to improvement in the Company's efficiency ratio, which decreased 8.92% to 50.77%, as compared to the linked quarter efficiency ratio of 59.69%.
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) | 2021 | 2020 | 2020 | ||||||||
| Compensation and employee benefits | $ | 16,917 | $ | 17,638 | $ | 16,617 | |||||
| Occupancy expense of premises, net | 2,318 | 2,476 | 2,341 | ||||||||
| Equipment | 1,793 | 2,040 | 1,880 | ||||||||
| Legal and professional | 783 | 2,052 | 1,535 | ||||||||
| Data processing | 1,252 | 1,460 | 1,354 | ||||||||
| Marketing | 1,006 | 986 | 1,062 | ||||||||
| Amortization of intangibles | 1,507 | 1,569 | 2,028 | ||||||||
| FDIC insurance | 512 | 495 | 448 | ||||||||
| Communications | 409 | 412 | 457 | ||||||||
| Foreclosed assets, net | 47 | (35 | ) | 138 | |||||||
| Other | 1,156 | 2,822 | 2,141 | ||||||||
| Total noninterest expense | $ | 27,700 | $ | 31,915 | $ | 30,001 | |||||
Income Taxes
The effective income tax rate was 21.2% in the first quarter of 2021 compared to 19.6% in the linked quarter. The effective income tax rate in the first quarter of 2021 reflected an increase in income taxes based on the statutory rate and state income taxes, net of federal income tax benefits primarily due to the 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 2021 is expected to be in the range of 20-22%.
| 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) | 2021 | 2020 | 2020 | ||||||||
| Ending Balance Sheet | |||||||||||
| Total assets | $ | 5,737.3 | $ | 5,556.6 | $ | 4,763.9 | |||||
| Loans held for investment, net of unearned income | 3,358.2 | 3,482.2 | 3,425.8 | ||||||||
| Total securities held for investment | 1,896.9 | 1,657.4 | 881.9 | ||||||||
| Total deposits | 4,794.6 | 4,547.0 | 3,859.8 | ||||||||
| Average Balance Sheet | |||||||||||
| Average total assets | $ | 5,520.3 | $ | 5,457.9 | $ | 4,669.7 | |||||
| Average total loans | 3,429.7 | 3,560.6 | 3,436.3 | ||||||||
| Average total deposits | 4,573.9 | 4,490.0 | 3,760.0 | ||||||||
| Funding and Liquidity | |||||||||||
| Short-term borrowings | $ | 175.8 | $ | 230.8 | $ | 129.5 | |||||
| Long-term debt | 201.7 | 208.7 | 209.9 | ||||||||
| Loans to deposits ratio | 70.04 | % | 76.58 | % | 88.75 | % | |||||
| Equity | |||||||||||
| Total shareholders' equity | $ | 511.3 | $ | 515.3 | $ | 500.6 | |||||
| Common equity ratio | 8.91 | % | 9.27 | % | 10.51 | % | |||||
| Tangible common equity(1) | 425.1 | 427.5 | 376.4 | ||||||||
| Tangible common equity ratio(1) | 7.52 | % | 7.82 | % | 8.11 | % | |||||
| Per Share Data | |||||||||||
| Book value | $ | 32.00 | $ | 32.17 | $ | 31.11 | |||||
| Tangible book value(1) | $ | 26.60 | $ | 26.69 | $ | 23.39 | |||||
| (1) Non-GAAP Measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure. | |||||||||||
Loans Held for Investment
Loans held for investment, net of unearned income, decreased $124.1 million, or 4%, to $3.36 billion from December 31, 2020, driven primarily by net loan pay-downs and lower line utilization.
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, 2021 | December 31, 2020 | March 31, 2020 | ||||||||||||||||||
| (dollars in thousands) | Balance | % of Total | Balance | % of Total | Balance | % of Total | |||||||||||||||
| Commercial and industrial | $ | 993,770 | 29.6 | % | $ | 1,055,488 | 30.3 | % | $ | 864,702 | 25.2 | % | |||||||||
| Agricultural | 117,099 | 3.5 | 116,392 | 3.3 | 145,435 | 4.2 | |||||||||||||||
| Commercial real estate | |||||||||||||||||||||
| Construction and development | 164,927 | 4.9 | 181,291 | 5.2 | 282,921 | 8.3 | |||||||||||||||
| Farmland | 138,199 | 4.1 | 144,970 | 4.2 | 168,777 | 4.9 | |||||||||||||||
| Multifamily | 261,806 | 7.8 | 256,525 | 7.4 | 217,108 | 6.3 | |||||||||||||||
| Other | 1,128,660 | 33.6 | 1,149,575 | 33.0 | 1,111,640 | 32.5 | |||||||||||||||
| Total commercial real estate | 1,693,592 | 50.4 | 1,732,361 | 49.8 | 1,780,446 | 52.0 | |||||||||||||||
| Residential real estate | |||||||||||||||||||||
| One-to-four family first liens | 337,408 | 10.0 | 355,684 | 10.2 | 389,055 | 11.4 | |||||||||||||||
| One-to-four family junior liens | 137,025 | 4.1 | 143,422 | 4.1 | 165,235 | 4.8 | |||||||||||||||
| Total residential real estate | 474,433 | 14.1 | 499,106 | 14.3 | 554,290 | 16.2 | |||||||||||||||
| Consumer | 79,267 | 2.4 | 78,876 | 2.3 | 80,889 | 2.4 | |||||||||||||||
| Loans held for investment, net of unearned income | $ | 3,358,161 | 100.0 | % | $ | 3,482,223 | 100.0 | % | $ | 3,425,762 | 100.0 | % | |||||||||
Mr. Funk noted, "Loan demand remains weak in most areas of our geographic footprint. This is evidenced by credit line utilization of only 32% during the quarter compared to 46% in the first quarter of 2020. We believe loan demand will improve as the national economy opens up."
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) | 2021 | 2020 | 2020 | ||||||||
| Beginning balance | $ | 55,500 | $ | 58,500 | $ | 29,079 | |||||
| Cumulative effect of change in accounting principle - CECL | — | — | 3,984 | ||||||||
| Charge-offs | (1,003 | ) | (1,005 | ) | (1,497 | ) | |||||
| Recoveries | 687 | 646 | 299 | ||||||||
| Net charge-offs | (316 | ) | (359 | ) | (1,198 | ) | |||||
| Credit loss (benefit) expense related to loans | (4,534 | ) | (2,641 | ) | 19,322 | ||||||
| Ending balance | $ | 50,650 | $ | 55,500 | $ | 51,187 | |||||
As of March 31, 2021, the allowance for credit losses ("ACL") was $50.7 million, or 1.51% of loans held for investment, net of unearned income, compared with $55.5 million, or 1.59%, at December 31, 2020. After excluding net PPP loans, the ACL as a percentage of loans held for investment, net of unearned income, decreased to 1.63%(1) as of March 31, 2021, from 1.72%(1) at December 31, 2020. The decline in the ACL during the first quarter reflected overall improvements in the economic forecast and an improved credit profile outlook when compared to the linked quarter.
(1)Non-GAAP Measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
"We believe that our ACL is sufficient to weather the challenges that lie ahead," stated Mr. Funk.
Deposits
The following table presents the composition of our deposit portfolio as of the dates indicated:
| Deposit Composition | March 31, 2021 | December 31, 2020 | March 31, 2020 | ||||||||||||||||||
| (In thousands) | Balance | % of Total | Balance | % of Total | Balance | % of Total | |||||||||||||||
| Noninterest bearing deposits | $ | 958,526 | 20.0 | % | $ | 910,655 | 20.0 | % | $ | 637,127 | 16.5 | % | |||||||||
| Interest checking deposits | 1,406,070 | 29.4 | 1,351,641 | 29.7 | 995,762 | 25.8 | |||||||||||||||
| Money market deposits | 950,300 | 19.8 | 918,654 | 20.2 | 793,482 | 20.6 | |||||||||||||||
| Savings deposits | 580,862 | 12.1 | 529,751 | 11.7 | 404,100 | 10.5 | |||||||||||||||
| Total non-maturity deposits | 3,895,758 | 81.3 | 3,710,701 | 81.6 | 2,830,471 | 73.4 | |||||||||||||||
| Time deposits of $250,000 and under | 558,338 | 11.6 | 581,471 | 12.8 | 688,409 | 17.8 | |||||||||||||||
| Time deposits over $250,000 | 340,467 | 7.1 | 254,877 | 5.6 | 340,964 | 8.8 | |||||||||||||||
| Total time deposits | 898,805 | 18.7 | 836,348 | 18.4 | 1,029,373 | 26.6 | |||||||||||||||
| Total deposits | $ | 4,794,563 | 100.0 | % | $ | 4,547,049 | 100.0 | % | $ | 3,859,844 | 100.0 | % | |||||||||
CREDIT RISK PROFILE
| As of or For the Three Months Ended | |||||||||||||
| Highlights | March 31, | December 31, | March 31, | ||||||||||
| (dollars in thousands) | 2021 | 2020 | 2020 | ||||||||||
| Credit loss (benefit) expense related to loans | $ | (4,534 | ) | $ | (2,641 | ) | $ | 19,322 | |||||
| Net charge-offs | $ | 316 | $ | 359 | $ | 1,198 | |||||||
| Net charge-off ratio(1) | 0.04 | % | 0.04 | % | 0.14 | % | |||||||
| At period-end | |||||||||||||
| Pass | $ | 3,112,728 | $ | 3,202,704 | $ | 3,231,725 | |||||||
| Special Mention / Watch | 130,052 | 157,213 | 117,301 | ||||||||||
| Classified | 115,381 | 122,306 | 76,736 | ||||||||||
| Total loans held for investment, net | $ | 3,358,161 | $ | 3,482,223 | $ | 3,425,762 | |||||||
| Classified loans ratio(2) | 3.44 | % | 3.51 | % | 2.24 | % | |||||||
| Nonaccrual loans held for investment | $ | 43,874 | $ | 41,950 | $ | 43,973 | |||||||
| Accruing loans contractually past due 90 days or more | 508 | 739 | 303 | ||||||||||
| Total nonperforming loans | 44,382 | 42,689 | 44,276 | ||||||||||
| Foreclosed assets, net | 1,487 | 2,316 | 968 | ||||||||||
| Total nonperforming assets (3) | $ | 45,869 | $ | 45,005 | $ | 45,244 | |||||||
| Nonperforming loans ratio(4) | 1.32 | % | 1.23 | % | 1.29 | % | |||||||
| Nonperforming assets ratio(5) | 0.80 | % | 0.81 | % | 0.95 | % | |||||||
| Allowance for credit losses | $ | 50,650 | $ | 55,500 | $ | 51,187 | |||||||
| Allowance for credit losses ratio(6) | 1.51 | % | 1.59 | % | 1.49 | % | |||||||
| Adjusted allowance for credit losses ratio(7) | 1.63 | % | 1.72 | % | 1.49 | % | |||||||
| Performing troubled debt restructured loans held for investment | $ | 2,230 | $ | 2,630 | $ | 4,359 | |||||||
| (1) Net charge-off ratio is calculated as annualized net 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) Starting in the second quarter of 2020, performing troubled debt restructured loans held for investment are no longer included in nonperforming assets. Prior period credit quality metrics have been adjusted to exclude these loans. | |||||||||||||
| (4) 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. | |||||||||||||
| (5) Nonperforming assets ratio is calculated as total nonperforming assets divided by total assets at the end of the period. | |||||||||||||
| (6) 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. | |||||||||||||
| (7) Non-GAAP Measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure. | |||||||||||||
The following table presents a roll forward of nonperforming loans for the period indicated:
| Nonperforming Loans | |||||||||||
| (dollars in thousands) | Nonaccrual | 90+ Days Past Due & Still Accruing | Total | ||||||||
| Balance at December 31, 2020 | $ | 41,950 | $ | 739 | $ | 42,689 | |||||
| Loans placed on nonaccrual or 90+ days past due & still accruing | 5,521 | 228 | 5,749 | ||||||||
| Repayments (including interest applied to principal) | (2,514 | ) | 1 | (2,513 | ) | ||||||
| Loans returned to accrual status or no longer past due | (268 | ) | (330 | ) | (598 | ) | |||||
| Charge-offs | (715 | ) | (130 | ) | (845 | ) | |||||
| Transfers to foreclosed assets | (100 | ) | — | (100 | ) | ||||||
| Balance at March 31, 2021 | $ | 43,874 | $ | 508 | $ | 44,382 | |||||
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 CECL. 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. This cumulative amount will then be reduced from capital over the subsequent three-year period.
| March 31, | December 31, | March 31, | ||||||
| Regulatory Capital Ratios | 2021 (1) | 2020 | 2020 | |||||
| MidWestOne Financial Group, Inc. Consolidated | ||||||||
| Tier 1 leverage ratio | 8.78 | % | 8.50 | % | 9.39 | % | ||
| Common equity tier 1 capital ratio | 10.16 | % | 9.72 | % | 9.25 | % | ||
| Tier 1 capital ratio | 11.13 | % | 10.70 | % | 10.25 | % | ||
| Total capital ratio | 13.75 | % | 13.41 | % | 11.48 | % | ||
| MidWestOne Bank | ||||||||
| Tier 1 leverage ratio | 9.60 | % | 9.35 | % | 10.03 | % | ||
| Common equity tier 1 capital ratio | 12.19 | % | 11.79 | % | 10.95 | % | ||
| Tier 1 capital ratio | 12.19 | % | 11.79 | % | 10.95 | % | ||
| Total capital ratio | 13.19 | % | 12.89 | % | 12.03 | % | ||
| (1) Capital ratios for March 31, 2021 are preliminary | ||||||||
CORPORATE UPDATE
Share Repurchase Program
During the first quarter of 2021, the Company repurchased 62,588 shares of its common stock at an average price of $27.14 per share and a total cost of $1.7 million. At March 31, 2021, $2.7 million remained available to repurchase shares under the Company’s current share repurchase program.
CONFERENCE CALL DETAILS
The Company will host a conference call for investors at 11:00 a.m. CT on Friday, April 23, 2021. 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 July 29, 2021, by calling 877-344-7529 and using the replay access code of 10153549. 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 potential effects on the economic environment, our customers and our operations, 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, including the Coronavirus Aid, Relief, and Economic Security Act, the Consolidated Appropriations Act, 2021 and the American Rescue Plan; (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) 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; (5) the effects of interest rates, including on our net income and the value of our securities portfolio; (6) 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; (7) fluctuations in the value of our investment securities; (8) governmental monetary and fiscal policies; (9) changes in and uncertainty related to benchmark interest rates used to price loans and deposits, including the expected elimination of LIBOR; (10) legislative and regulatory changes, including changes in banking, securities, trade, and tax laws and regulations and their application by our regulators; (11) the ability to attract and retain key executives and employees experienced in banking and financial services; (12) the sufficiency of the allowance for credit losses to absorb the amount of actual losses inherent in our existing loan portfolio; (13) our ability to adapt successfully to technological changes to compete effectively in the marketplace; (14) credit risks and risks from concentrations (by geographic area and by industry) within our loan portfolio; (15) 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; (16) the failure of assumptions underlying the establishment of allowances for credit losses and estimation of values of collateral and various financial assets and liabilities; (17) the risks of mergers, 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; (18) volatility of rate-sensitive deposits; (19) operational risks, including data processing system failures or fraud; (20) asset/liability matching risks and liquidity risks; (21) the costs, effects and outcomes of existing or future litigation; (22) changes in general economic, political, or industry conditions, nationally, internationally or in the communities in which we conduct business; (23) changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the Financial Accounting Standards Board; (24) war or terrorist activities, widespread disease or pandemic, or other adverse external events, which may cause deterioration in the economy or cause instability in credit markets; (25) the effects of cyber-attacks; (26) the imposition of tariffs or other domestic or international governmental policies impacting the value of the agricultural or other products of our borrowers; and (27) other risk factors detailed from time to time in Securities and Exchange Commission filings made by the Company.
| MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES FIVE QUARTER CONSOLIDATED BALANCE SHEETS | |||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||
| (In thousands) | 2021 | 2020 | 2020 | 2020 | 2020 | ||||||||||||||
| ASSETS | |||||||||||||||||||
| Cash and due from banks | $ | 57,154 | $ | 65,078 | $ | 71,901 | $ | 65,863 | $ | 60,396 | |||||||||
| Interest earning deposits in banks | 80,924 | 17,409 | 55,421 | 45,018 | 58,319 | ||||||||||||||
| Federal funds sold | 7,691 | 172 | 7,540 | 6,329 | 6,830 | ||||||||||||||
| Total cash and cash equivalents | 145,769 | 82,659 | 134,862 | 117,210 | 125,545 | ||||||||||||||
| Debt securities available for sale at fair value | 1,896,894 | 1,657,381 | 1,366,344 | 1,187,455 | 881,859 | ||||||||||||||
| Loans held for sale | 58,333 | 59,956 | 13,096 | 12,048 | 9,483 | ||||||||||||||
| Gross loans held for investment | 3,374,076 | 3,496,790 | 3,555,969 | 3,618,675 | 3,440,907 | ||||||||||||||
| Unearned income, net | (15,915 | ) | (14,567 | ) | (18,537 | ) | (21,636 | ) | (15,145 | ) | |||||||||
| Loans held for investment, net of unearned income | 3,358,161 | 3,482,223 | 3,537,432 | 3,597,039 | 3,425,762 | ||||||||||||||
| Allowance for credit losses | (50,650 | ) | (55,500 | ) | (58,500 | ) | (55,644 | ) | (51,187 | ) | |||||||||
| Total loans held for investment, net | 3,307,511 | 3,426,723 | 3,478,932 | 3,541,395 | 3,374,575 | ||||||||||||||
| Premises and equipment, net | 85,581 | 86,401 | 87,955 | 88,929 | 89,860 | ||||||||||||||
| Goodwill | 62,477 | 62,477 | 62,477 | 93,977 | 93,977 | ||||||||||||||
| Other intangible assets, net | 23,735 | 25,242 | 26,811 | 28,443 | 30,190 | ||||||||||||||
| Foreclosed assets, net | 1,487 | 2,316 | 724 | 965 | 968 | ||||||||||||||
| Other assets | 155,525 | 153,493 | 159,507 | 160,541 | 157,452 | ||||||||||||||
| Total assets | $ | 5,737,312 | $ | 5,556,648 | $ | 5,330,708 | $ | 5,230,963 | $ | 4,763,909 | |||||||||
| LIABILITIES | |||||||||||||||||||
| Noninterest bearing deposits | $ | 958,526 | $ | 910,655 | $ | 864,504 | $ | 867,637 | $ | 637,127 | |||||||||
| Interest bearing deposits | 3,836,037 | 3,636,394 | 3,469,137 | 3,397,798 | 3,222,717 | ||||||||||||||
| Total deposits | 4,794,563 | 4,547,049 | 4,333,641 | 4,265,435 | 3,859,844 | ||||||||||||||
| Short-term borrowings | 175,785 | 230,789 | 183,893 | 162,224 | 129,489 | ||||||||||||||
| Long-term debt | 201,696 | 208,691 | 245,481 | 189,973 | 209,874 | ||||||||||||||
| Other liabilities | 53,948 | 54,869 | 68,612 | 92,550 | 64,138 | ||||||||||||||
| Total liabilities | 5,225,992 | 5,041,398 | 4,831,627 | 4,710,182 | 4,263,345 | ||||||||||||||
| SHAREHOLDERS' EQUITY | |||||||||||||||||||
| Common stock | 16,581 | 16,581 | 16,581 | 16,581 | 16,581 | ||||||||||||||
| Additional paid-in capital | 299,747 | 300,137 | 299,939 | 299,542 | 299,412 | ||||||||||||||
| Retained earnings | 206,230 | 188,191 | 175,017 | 198,382 | 190,212 | ||||||||||||||
| Treasury stock | (15,278 | ) | (14,251 | ) | (12,272 | ) | (12,272 | ) | (12,518 | ) | |||||||||
| Accumulated other comprehensive income | 4,040 | 24,592 | 19,816 | 18,548 | 6,877 | ||||||||||||||
| Total shareholders' equity | 511,320 | 515,250 | 499,081 | 520,781 | 500,564 | ||||||||||||||
| Total liabilities and shareholders' equity | $ | 5,737,312 | $ | 5,556,648 | $ | 5,330,708 | $ | 5,230,963 | $ | 4,763,909 | |||||||||
| MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES FIVE QUARTER CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||||
| Three Months Ended | |||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||
| (In thousands, except per share data) | 2021 | 2020 | 2020 | 2020 | 2020 | ||||||||||||||
| Interest income | |||||||||||||||||||
| Loans, including fees | $ | 36,542 | $ | 38,239 | $ | 38,191 | $ | 40,214 | $ | 42,012 | |||||||||
| Taxable investment securities | 5,093 | 4,673 | 4,574 | 4,646 | 3,717 | ||||||||||||||
| Tax-exempt investment securities | 2,555 | 2,529 | 2,360 | 1,858 | 1,512 | ||||||||||||||
| Other | 14 | 29 | 29 | 40 | 164 | ||||||||||||||
| Total interest income | 44,204 | 45,470 | 45,154 | 46,758 | 47,405 | ||||||||||||||
| Interest expense | |||||||||||||||||||
| Deposits | 3,608 | 4,265 | 5,296 | 6,409 | 7,949 | ||||||||||||||
| Short-term borrowings | 128 | 142 | 175 | 263 | 334 | ||||||||||||||
| Long-term debt | 1,851 | 2,026 | 1,874 | 1,374 | 1,716 | ||||||||||||||
| Total interest expense | 5,587 | 6,433 | 7,345 | 8,046 | 9,999 | ||||||||||||||
| Net interest income | 38,617 | 39,037 | 37,809 | 38,712 | 37,406 | ||||||||||||||
| Credit loss (benefit) expense | (4,734 | ) | (3,041 | ) | 4,992 | 4,685 | 21,733 | ||||||||||||
| Net interest income after credit loss (benefit) expense | 43,351 | 42,078 | 32,817 | 34,027 | 15,673 | ||||||||||||||
| Noninterest income | |||||||||||||||||||
| Investment services and trust activities | 2,836 | 2,518 | 2,361 | 2,217 | 2,536 | ||||||||||||||
| Service charges and fees | 1,487 | 1,571 | 1,491 | 1,290 | 1,826 | ||||||||||||||
| Card revenue | 1,536 | 1,517 | 1,600 | 1,237 | 1,365 | ||||||||||||||
| Loan revenue | 4,730 | 3,900 | 3,252 | 1,910 | 1,123 | ||||||||||||||
| Bank-owned life insurance | 542 | 541 | 530 | 635 | 520 | ||||||||||||||
| Investment securities gains, net | 27 | 30 | 106 | 6 | 42 | ||||||||||||||
| Other | 666 | 549 | 230 | 974 | 2,743 | ||||||||||||||
| Total noninterest income | 11,824 | 10,626 | 9,570 | 8,269 | 10,155 | ||||||||||||||
| Noninterest expense | |||||||||||||||||||
| Compensation and employee benefits | 16,917 | 17,638 | 16,460 | 15,682 | 16,617 | ||||||||||||||
| Occupancy expense of premises, net | 2,318 | 2,476 | 2,278 | 2,253 | 2,341 | ||||||||||||||
| Equipment | 1,793 | 2,040 | 1,935 | 2,010 | 1,880 | ||||||||||||||
| Legal and professional | 783 | 2,052 | 1,184 | 1,382 | 1,535 | ||||||||||||||
| Data processing | 1,252 | 1,460 | 1,308 | 1,240 | 1,354 | ||||||||||||||
| Marketing | 1,006 | 986 | 857 | 910 | 1,062 | ||||||||||||||
| Amortization of intangibles | 1,507 | 1,569 | 1,631 | 1,748 | 2,028 | ||||||||||||||
| FDIC insurance | 512 | 495 | 470 | 445 | 448 | ||||||||||||||
| Communications | 409 | 412 | 428 | 449 | 457 | ||||||||||||||
| Foreclosed assets, net | 47 | (35 | ) | 13 | 34 | 138 | |||||||||||||
| Goodwill impairment | — | — | 31,500 | — | — | ||||||||||||||
| Other | 1,156 | 2,822 | 1,875 | 1,885 | 2,141 | ||||||||||||||
| Total noninterest expense | 27,700 | 31,915 | 59,939 | 28,038 | 30,001 | ||||||||||||||
| Income (loss) before income tax expense | 27,475 | 20,789 | (17,552 | ) | 14,258 | (4,173 | ) | ||||||||||||
| Income tax expense (benefit) | 5,827 | 4,079 | 2,272 | 2,546 | (2,198 | ) | |||||||||||||
| Net income (loss) | $ | 21,648 | $ | 16,710 | $ | (19,824 | ) | $ | 11,712 | $ | (1,975 | ) | |||||||
| Earnings (loss) per common share | |||||||||||||||||||
| Basic | $ | 1.35 | $ | 1.04 | $ | (1.23 | ) | $ | 0.73 | $ | (0.12 | ) | |||||||
| Diluted | $ | 1.35 | $ | 1.04 | $ | (1.23 | ) | $ | 0.73 | $ | (0.12 | ) | |||||||
| Weighted average basic common shares outstanding | 15,991 | 16,074 | 16,099 | 16,094 | 16,142 | ||||||||||||||
| Weighted average diluted common shares outstanding | 16,021 | 16,092 | 16,099 | 16,100 | 16,142 | ||||||||||||||
| Dividends paid per common share | $ | 0.2250 | $ | 0.2200 | $ | 0.2200 | $ | 0.2200 | $ | 0.2200 | |||||||||
| MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES FINANCIAL STATISTICS | ||||||||||||||
| As of or for the three months ended | ||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||
| (Dollars in thousands, except per share amounts) | 2021 | 2020 | 2020 | |||||||||||
| Earnings: | ||||||||||||||
| Net interest income | $ | 38,617 | $ | 39,037 | $ | 37,406 | ||||||||
| Noninterest income | 11,824 | 10,626 | 10,155 | |||||||||||
| Total revenue, net of interest expense | 50,441 | 49,663 | 47,561 | |||||||||||
| Credit loss (benefit) expense | (4,734 | ) | (3,041 | ) | 21,733 | |||||||||
| Noninterest expense | 27,700 | 31,915 | 30,001 | |||||||||||
| Income (loss) before income tax expense (benefit) | 27,475 | 20,789 | (4,173 | ) | ||||||||||
| Income tax expense (benefit) | 5,827 | 4,079 | (2,198 | ) | ||||||||||
| Net income (loss) | $ | 21,648 | $ | 16,710 | $ | (1,975 | ) | |||||||
| Per Share Data: | ||||||||||||||
| Diluted earnings (loss) | $ | 1.35 | $ | 1.04 | $ | (0.12 | ) | |||||||
| Book value | 32.00 | 32.17 | 31.11 | |||||||||||
| Tangible book value(1) | 26.60 | 26.69 | 23.39 | |||||||||||
| Ending Balance Sheet: | ||||||||||||||
| Total assets | $ | 5,737,312 | $ | 5,556,648 | $ | 4,763,909 | ||||||||
| Loans held for investment, net of unearned income | 3,358,161 | 3,482,223 | 3,425,762 | |||||||||||
| Total securities held for investment | 1,896,894 | 1,657,381 | 881,859 | |||||||||||
| Total deposits | 4,794,563 | 4,547,049 | 3,859,844 | |||||||||||
| Short-term borrowings | 175,785 | 230,789 | 129,489 | |||||||||||
| Long-term debt | 201,696 | 208,691 | 209,874 | |||||||||||
| Total shareholders' equity | 511,320 | 515,250 | 500,564 | |||||||||||
| Average Balance Sheet: | ||||||||||||||
| Average total assets | $ | 5,520,304 | $ | 5,457,939 | $ | 4,669,724 | ||||||||
| Average total loans | 3,429,746 | 3,560,632 | 3,436,263 | |||||||||||
| Average total deposits | 4,573,898 | 4,490,048 | 3,760,016 | |||||||||||
| Financial Ratios: | ||||||||||||||
| Return on average assets | 1.59 | % | 1.22 | % | (0.17 | ) | % | |||||||
| Return on average equity | 17.01 | % | 13.15 | % | (1.54 | ) | % | |||||||
| Return on average tangible equity(1) | 21.52 | % | 17.07 | % | (0.47 | ) | % | |||||||
| Efficiency ratio(1) | 50.77 | % | 59.69 | % | 57.67 | % | ||||||||
| Net interest margin, tax equivalent(1) | 3.10 | % | 3.13 | % | 3.60 | % | ||||||||
| Loans to deposits ratio | 70.04 | % | 76.58 | % | 88.75 | % | ||||||||
| Common equity ratio | 8.91 | % | 9.27 | % | 10.51 | % | ||||||||
| Tangible common equity ratio(1) | 7.52 | % | 7.82 | % | 8.11 | % | ||||||||
| Credit Risk Profile: | ||||||||||||||
| Total nonperforming loans | $ | 44,382 | $ | 42,689 | $ | 44,276 | ||||||||
| Nonperforming loans ratio | 1.32 | % | 1.23 | % | 1.29 | % | ||||||||
| Total nonperforming assets | $ | 45,869 | $ | 45,005 | $ | 45,244 | ||||||||
| Nonperforming assets ratio | 0.80 | % | 0.81 | % | 0.95 | % | ||||||||
| Performing troubled debt restructured loans held for investment | $ | 2,230 | $ | 2,630 | $ | 4,359 | ||||||||
| Net charge-offs | $ | 316 | $ | 359 | $ | 1,198 | ||||||||
| Net charge-off ratio | 0.04 | % | 0.04 | % | 0.14 | % | ||||||||
| Allowance for credit losses | $ | 50,650 | $ | 55,500 | $ | 51,187 | ||||||||
| Allowance for credit losses ratio | 1.51 | % | 1.59 | % | 1.49 | % | ||||||||
| Adjusted allowance for credit losses ratio(1) | 1.63 | % | 1.72 | % | 1.49 | % | ||||||||
| PPP Loans: | ||||||||||||||
| Average PPP loans | $ | 236,231 | $ | 313,252 | — | |||||||||
| Fee Income | 4,377 | 3,059 | — | |||||||||||
| (1) Non-GAAP measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure. | ||||||||||||||
| MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES AVERAGE BALANCE SHEET AND YIELD ANALYSIS | ||||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||||||
| March 31, 2021 | December 31, 2020 | March 31, 2020 | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | Average Balance | Interest Income/ Expense | Average Yield/ Cost | Average Balance | Interest Income/ Expense | Average Yield/ Cost | Average Balance | Interest Income/ Expense | Average Yield/ Cost | |||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||
| Loans, including fees (1)(2)(3) | $ | 3,429,746 | $ | 37,073 | 4.38 | % | $ | 3,560,632 | $ | 38,795 | 4.33 | % | $ | 3,436,263 | $ | 42,509 | 4.98 | % | ||||||||||||||
| Taxable investment securities | 1,266,714 | 5,093 | 1.63 | % | 1,026,359 | 4,673 | 1.81 | % | 567,001 | 3,717 | 2.64 | % | ||||||||||||||||||||
| Tax-exempt investment securities (2)(4) | 465,793 | 3,203 | 2.79 | % | 450,659 | 3,180 | 2.81 | % | 224,171 | 1,907 | 3.42 | % | ||||||||||||||||||||
| Total securities held for investment(2) | 1,732,507 | 8,296 | 1.94 | % | 1,477,018 | 7,853 | 2.12 | % | 791,172 | 5,624 | 2.86 | % | ||||||||||||||||||||
| Other | 36,536 | 14 | 0.16 | % | 80,019 | 29 | 0.14 | % | 55,833 | 164 | 1.18 | % | ||||||||||||||||||||
| Total interest earning assets(2) | $ | 5,198,789 | 45,383 | 3.54 | % | $ | 5,117,669 | 46,677 | 3.63 | % | $ | 4,283,268 | 48,297 | 4.54 | % | |||||||||||||||||
| Other assets | 321,515 | 340,270 | 386,456 | |||||||||||||||||||||||||||||
| Total assets | $ | 5,520,304 | $ | 5,457,939 | $ | 4,669,724 | ||||||||||||||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||||||||||
| Interest checking deposits | $ | 1,349,671 | $ | 991 | 0.30 | % | $ | 1,276,320 | $ | 958 | 0.30 | % | $ | 965,077 | $ | 1,316 | 0.55 | % | ||||||||||||||
| Money market deposits | 913,087 | 478 | 0.21 | % | 931,900 | 544 | 0.23 | % | 766,766 | 1,645 | 0.86 | % | ||||||||||||||||||||
| Savings deposits | 553,824 | 286 | 0.21 | % | 508,763 | 279 | 0.22 | % | 393,833 | 391 | 0.40 | % | ||||||||||||||||||||
| Time deposits | 837,460 | 1,853 | 0.90 | % | 862,408 | 2,484 | 1.15 | % | 997,136 | 4,597 | 1.85 | % | ||||||||||||||||||||
| Total interest bearing deposits | 3,654,042 | 3,608 | 0.40 | % | 3,579,391 | 4,265 | 0.47 | % | 3,122,812 | 7,949 | 1.02 | % | ||||||||||||||||||||
| Short-term borrowings | 175,193 | 128 | 0.30 | % | 182,080 | 142 | 0.31 | % | 121,942 | 334 | 1.10 | % | ||||||||||||||||||||
| Long-term debt | 205,971 | 1,851 | 3.64 | % | 223,407 | 2,026 | 3.61 | % | 225,587 | 1,716 | 3.06 | % | ||||||||||||||||||||
| Total borrowed funds | 381,164 | 1,979 | 2.11 | % | 405,487 | 2,168 | 2.13 | % | 347,529 | 2,050 | 2.37 | % | ||||||||||||||||||||
| Total interest bearing liabilities | $ | 4,035,206 | $ | 5,587 | 0.56 | % | $ | 3,984,878 | $ | 6,433 | 0.64 | % | $ | 3,470,341 | $ | 9,999 | 1.16 | % | ||||||||||||||
| Noninterest bearing deposits | 919,856 | 910,657 | 637,204 | |||||||||||||||||||||||||||||
| Other liabilities | 49,003 | 56,898 | 47,010 | |||||||||||||||||||||||||||||
| Shareholders’ equity | 516,239 | 505,506 | 515,169 | |||||||||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 5,520,304 | $ | 5,457,939 | $ | 4,669,724 | ||||||||||||||||||||||||||
| Net interest income(2) | $ | 39,796 | $ | 40,244 | $ | 38,298 | ||||||||||||||||||||||||||
| Net interest spread(2) | 2.98 | % | 2.99 | % | 3.38 | % | ||||||||||||||||||||||||||
| Net interest margin(2) | 3.10 | % | 3.13 | % | 3.60 | % | ||||||||||||||||||||||||||
| Total deposits(5) | $ | 4,573,898 | $ | 3,608 | 0.32 | % | $ | 4,490,048 | $ | 4,265 | 0.38 | % | $ | 3,760,016 | $ | 7,949 | 0.85 | % | ||||||||||||||
| Cost of funds(6) | 0.46 | % | 0.52 | % | 0.98 | % | ||||||||||||||||||||||||||
(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 $3.5 million, $2.5 million, and $(122) thousand for the three months ended March 31, 2021, December 31, 2020, and March 31, 2020, respectively. Loan purchase discount accretion was $1.1 million, $1.5 million, and $3.0 million for the three months ended March 31, 2021, December 31, 2020, and March 31, 2020, respectively. Tax equivalent adjustments were $531 thousand, $556 thousand, and $497 thousand for the three months ended March 31, 2021, December 31, 2020, and March 31, 2020, respectively. The federal statutory tax rate utilized was 21%.
(4) Interest income includes tax equivalent adjustments of $648 thousand, $651 thousand, and $395 thousand for the three months ended March 31, 2021, December 31, 2020, and March 31, 2020, respectively. The federal statutory tax rate utilized was 21%.
(5) Total deposits is the sum of total interest-bearing deposits and noninterest bearing deposits. The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits.
(6) Cost of funds is calculated as annualized total interest expense divided by the sum of average total deposits and borrowed funds.
Non-GAAP Measures
This earnings release contains non-GAAP measures for tangible common equity, tangible book value per share, tangible common equity ratio, return on average tangible equity, net interest margin (tax equivalent), core net interest margin, loan yield (tax equivalent), core yield on loans, efficiency ratio, adjusted allowance for credit losses ratio, core loans, and core commercial loans. Management believes these measures provide investors with useful information regarding the Company’s profitability, financial condition and capital adequacy, consistent with how management evaluates the Company’s financial performance. The following tables provide a reconciliation of each non-GAAP measure to the most comparable GAAP measure.
| Tangible Common Equity/Tangible Book Value | |||||||||||||||||||||||||
| per Share/Tangible Common Equity Ratio | March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||||||
| (Dollars in thousands, except per share data) | 2021 | 2020 | 2020 | 2020 | 2020 | ||||||||||||||||||||
| Total shareholders’ equity | $ | 511,320 | $ | 515,250 | $ | 499,081 | $ | 520,781 | $ | 500,564 | |||||||||||||||
| Intangible assets, net | (86,212 | ) | (87,719 | ) | (89,288 | ) | (122,420 | ) | (124,167 | ) | |||||||||||||||
| Tangible common equity | $ | 425,108 | $ | 427,531 | $ | 409,793 | $ | 398,361 | $ | 376,397 | |||||||||||||||
| Total assets | $ | 5,737,312 | $ | 5,556,648 | $ | 5,330,708 | $ | 5,230,963 | $ | 4,763,909 | |||||||||||||||
| Intangible assets, net | (86,212 | ) | (87,719 | ) | (89,288 | ) | (122,420 | ) | (124,167 | ) | |||||||||||||||
| Tangible assets | $ | 5,651,100 | $ | 5,468,929 | $ | 5,241,420 | $ | 5,108,543 | $ | 4,639,742 | |||||||||||||||
| Book value per share | $ | 32.00 | $ | 32.17 | $ | 31.00 | $ | 32.35 | $ | 31.11 | |||||||||||||||
| Tangible book value per share(1) | $ | 26.60 | $ | 26.69 | $ | 25.45 | $ | 24.74 | $ | 23.39 | |||||||||||||||
| Shares outstanding | 15,981,088 | 16,016,780 | 16,099,324 | 16,099,324 | 16,089,782 | ||||||||||||||||||||
| Common equity ratio | 8.91 | % | 9.27 | % | 9.36 | % | 9.96 | % | 10.51 | % | |||||||||||||||
| Tangible common equity ratio(2) | 7.52 | % | 7.82 | % | 7.82 | % | 7.80 | % | 8.11 | % | |||||||||||||||
(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) | 2021 | 2020 | 2020 | ||||||||||||
| Net income (loss) | $ | 21,648 | $ | 16,710 | $ | (1,975 | ) | ||||||||
| Intangible amortization, net of tax(1) | 1,130 | 1,177 | 1,521 | ||||||||||||
| Tangible net income (loss) | $ | 22,778 | $ | 17,887 | $ | (454 | ) | ||||||||
| Average shareholders’ equity | $ | 516,239 | $ | 505,506 | $ | 515,169 | |||||||||
| Average intangible assets, net | (86,961 | ) | (88,543 | ) | (122,948 | ) | |||||||||
| Average tangible equity | $ | 429,278 | $ | 416,963 | $ | 392,221 | |||||||||
| Return on average equity | 17.01 | % | 13.15 | % | (1.54 | ) | % | ||||||||
| Return on average tangible equity(2) | 21.52 | % | 17.07 | % | (0.47 | ) | % | ||||||||
(1) The combined income tax rate utilized was 25%.
(2) Annualized tangible net income divided by average tangible equity.
| Net Interest Margin, Tax Equivalent/ | Three Months Ended | ||||||||||||||
| Core Net Interest Margin | March 31, | December 31, | March 31, | ||||||||||||
| (Dollars in thousands) | 2021 | 2020 | 2020 | ||||||||||||
| Net interest income | $ | 38,617 | $ | 39,037 | $ | 37,406 | |||||||||
| Tax equivalent adjustments: | |||||||||||||||
| Loans(1) | 531 | 556 | 497 | ||||||||||||
| Securities(1) | 648 | 651 | 395 | ||||||||||||
| Net interest income, tax equivalent | $ | 39,796 | $ | 40,244 | $ | 38,298 | |||||||||
| Loan purchase discount accretion | (1,098 | ) | (1,542 | ) | (3,023 | ) | |||||||||
| Core net interest income | $ | 38,698 | $ | 38,702 | $ | 35,275 | |||||||||
| Net interest margin | 3.01 | % | 3.03 | % | 3.51 | % | |||||||||
| Net interest margin, tax equivalent(2) | 3.10 | % | 3.13 | % | 3.60 | % | |||||||||
| Core net interest margin(3) | 3.02 | % | 3.01 | % | 3.31 | % | |||||||||
| Average interest earning assets | $ | 5,198,789 | $ | 5,117,669 | $ | 4,283,268 | |||||||||
(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) | 2021 | 2020 | 2020 | ||||||||||||
| Loan interest income, including fees | $ | 36,542 | $ | 38,239 | $ | 42,012 | |||||||||
| Tax equivalent adjustment(1) | 531 | 556 | 497 | ||||||||||||
| Tax equivalent loan interest income | $ | 37,073 | $ | 38,795 | $ | 42,509 | |||||||||
| Loan purchase discount accretion | (1,098 | ) | (1,542 | ) | (3,023 | ) | |||||||||
| Core loan interest income | $ | 35,975 | $ | 37,253 | $ | 39,486 | |||||||||
| Yield on loans | 4.32 | % | 4.27 | % | 4.92 | % | |||||||||
| Yield on loans, tax equivalent(2) | 4.38 | % | 4.33 | % | 4.98 | % | |||||||||
| Core yield on loans(3) | 4.25 | % | 4.16 | % | 4.62 | % | |||||||||
| Average loans | $ | 3,429,746 | $ | 3,560,632 | $ | 3,436,263 | |||||||||
(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) | 2021 | 2020 | 2020 | ||||||||||||
| Total noninterest expense | $ | 27,700 | $ | 31,915 | $ | 30,001 | |||||||||
| Amortization of intangibles | (1,507 | ) | (1,569 | ) | (2,028 | ) | |||||||||
| Merger-related expenses | — | — | (54 | ) | |||||||||||
| Noninterest expense used for efficiency ratio | $ | 26,193 | $ | 30,346 | $ | 27,919 | |||||||||
| Net interest income, tax equivalent(1) | $ | 39,796 | $ | 40,244 | $ | 38,298 | |||||||||
| Noninterest income | 11,824 | 10,626 | 10,155 | ||||||||||||
| Investment securities gains, net | (27 | ) | (30 | ) | (42 | ) | |||||||||
| Net revenues used for efficiency ratio | $ | 51,593 | $ | 50,840 | $ | 48,411 | |||||||||
| Efficiency ratio (2) | 50.77 | % | 59.69 | % | 57.67 | % | |||||||||
(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 | March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||||||
| (Dollars in thousands) | 2021 | 2020 | 2020 | 2020 | 2020 | |||||||||||||||||||
| Loans held for investment, net of unearned income | $ | 3,358,161 | $ | 3,482,223 | $ | 3,537,432 | $ | 3,597,039 | $ | 3,425,762 | ||||||||||||||
| PPP loans | (248,682 | ) | (259,260 | ) | (331,703 | ) | (327,648 | ) | — | |||||||||||||||
| Core loans | $ | 3,109,479 | $ | 3,222,963 | $ | 3,205,729 | $ | 3,269,391 | $ | 3,425,762 | ||||||||||||||
| Allowance for credit losses | $ | 50,650 | $ | 55,500 | $ | 58,500 | $ | 55,644 | $ | 51,187 | ||||||||||||||
| Allowance for credit losses ratio | 1.51 | % | 1.59 | % | 1.65 | % | 1.55 | % | 1.49 | % | ||||||||||||||
| Adjusted allowance for credit losses ratio(1) | 1.63 | % | 1.72 | % | 1.82 | % | 1.70 | % | 1.49 | % | ||||||||||||||
(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) | 2021 | 2020 | 2020 | 2020 | 2020 | |||||||||||||||
| Commercial loans: | ||||||||||||||||||||
| Commercial and industrial | $ | 993,770 | $ | 1,055,488 | $ | 1,103,102 | $ | 1,084,527 | $ | 864,702 | ||||||||||
| Agricultural | 117,099 | 116,392 | 129,453 | 140,837 | 145,435 | |||||||||||||||
| Commercial real estate | 1,693,592 | 1,732,361 | 1,707,035 | 1,764,739 | 1,780,446 | |||||||||||||||
| Total commercial loans | $ | 2,804,461 | $ | 2,904,241 | $ | 2,939,590 | $ | 2,990,103 | $ | 2,790,583 | ||||||||||
| Consumer loans: | ||||||||||||||||||||
| Residential real estate | $ | 474,433 | $ | 499,106 | $ | 521,570 | $ | 532,914 | $ | 554,290 | ||||||||||
| Other consumer | 79,267 | 78,876 | 76,272 | 74,022 | 80,889 | |||||||||||||||
| Total consumer loans | $ | 553,700 | $ | 577,982 | $ | 597,842 | $ | 606,936 | $ | 635,179 | ||||||||||
| Loans held for investment, net of unearned income | $ | 3,358,161 | $ | 3,482,223 | $ | 3,537,432 | $ | 3,597,039 | $ | 3,425,762 | ||||||||||
| PPP loans | $ | 248,682 | $ | 259,260 | $ | 331,703 | $ | 327,648 | $ | — | ||||||||||
| Core loans(1) | $ | 3,109,479 | $ | 3,222,963 | $ | 3,205,729 | $ | 3,269,391 | $ | 3,425,762 | ||||||||||
| Core commercial loans(2) | $ | 2,555,779 | $ | 2,644,981 | $ | 2,607,887 | $ | 2,662,455 | $ | 2,790,583 | ||||||||||
(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.
| Contact: | |||
| Charles N. Funk | Barry S. Ray | ||
| Chief Executive Officer | Senior Executive Vice President and Chief Financial Officer | ||
| 319.356.5800 | 319.356.5800 | ||