First Quarter Summary1
- Net income for the first quarter was $13.9 million, or $0.88 per diluted common share.
- Total revenue, net of interest expense, of $49.0 million.
- Noninterest expense of $31.6 million.
- Core commercial annualized loan growth of 5.4% to $2.71 billion2.
- No credit loss expense in the first quarter 2022 and the allowance for credit losses ratio declined to 1.42%.
- Nonperforming assets ratio remained stable at 0.53% and the annualized net charge-off ratio was 28 bps.
- Efficiency ratio was 60.46%2.
IOWA CITY, Iowa, April 28, 2022 (GLOBE NEWSWIRE) -- MidWestOne Financial Group, Inc. (Nasdaq: MOFG) (“we”, “our”, or the "Company”) today reported net income for the first quarter of 2022 of $13.9 million, or $0.88 per diluted common share, compared to net income of $14.3 million, or $0.91 per diluted common share, for the linked quarter.
CEO COMMENTARY
Charles Funk, Chief Executive Officer of the Company, commented, "We are pleased with the first quarter results; especially with our return on average tangible equity of 13.56%2. Despite the first quarter historically being a softer quarter for loan growth, we showed positive momentum and have a strong pipeline of construction loans that will continue to fund as the year progresses. Further, asset quality was generally stable to improving with a 36 bps decline in the nonperforming loans ratio and a 30 bps decline in the classified loans ratio when compared to the prior year period. In addition, the 25 bps increase in March 2022 to the federal funds target rate had little impact to net interest income in the first quarter of 2022 results. Finally, we expect to close the Iowa First acquisition in the second quarter and believe this will add to our earnings per share during the remainder of 2022 and beyond."
_________________
1 First Quarter Summary compares to the fourth quarter of 2021 (the "linked quarter") unless noted.
2 Non-GAAP measure. See the separate Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
| FINANCIAL HIGHLIGHTS | Three Months Ended | |||||||||||
| March 31, | December 31, | March 31, | ||||||||||
| (Dollars in thousands, except per share amounts) | 2022 | 2021 | 2021 | |||||||||
| Net interest income | $ | 37,336 | $ | 38,819 | $ | 38,617 | ||||||
| Noninterest income | 11,644 | 11,229 | 11,824 | |||||||||
| Total revenue, net of interest expense | 48,980 | 50,048 | 50,441 | |||||||||
| Credit loss expense (benefit) | — | 622 | (4,734 | ) | ||||||||
| Noninterest expense | 31,643 | 30,444 | 27,700 | |||||||||
| Income before income tax expense | 17,337 | 18,982 | 27,475 | |||||||||
| Income tax expense | 3,442 | 4,726 | 5,827 | |||||||||
| Net income | $ | 13,895 | $ | 14,256 | $ | 21,648 | ||||||
| Diluted earnings per share | $ | 0.88 | $ | 0.91 | $ | 1.35 | ||||||
| Return on average assets | 0.95 | % | 0.95 | % | 1.59 | % | ||||||
| Return on average equity | 10.74 | % | 10.68 | % | 17.01 | % | ||||||
| Return on average tangible equity(1) | 13.56 | % | 13.50 | % | 21.52 | % | ||||||
| Efficiency ratio(1) | 60.46 | % | 56.74 | % | 50.77 | % | ||||||
| (1) Non-GAAP measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure. | ||||||||||||
INCOME STATEMENT HIGHLIGHTS
Net Interest Income
Net interest income decreased to $37.3 million in the first quarter of 2022 from $38.8 million in the fourth quarter of 2021 due primarily to decreased Paycheck Protection Program ("PPP") loan fee accretion stemming from loan forgiveness. Net PPP loan fee accretion was $0.8 million in the first quarter of 2022 compared to $2.0 million in the linked quarter.
Average interest earning assets decreased $19.1 million to $5.59 billion in the first quarter of 2022, when compared to the fourth quarter of 2021. When adjusting for the $37.6 million reduction in average PPP loan balances due to forgiveness, average interest earning assets increased $18.5 million due to the increased volume of debt securities, coupled with non-PPP loan growth, which included an increase in the revolving line of credit utilization.
The Company's tax equivalent net interest margin was 2.79% in the first quarter of 2022 compared to 2.83% in the linked quarter due to a decrease in total interest earning assets yield, partially offset by a slight reduction in funding costs. Total interest earning assets yield decreased 4 bps from the linked quarter primarily as a result of the reduced benefit from net PPP loan fee accretion described above. The cost of interest bearing liabilities decreased 1 bp to 0.42%, primarily as a result of interest bearing deposits costs of 0.29%, which declined 1 bp from the linked quarter.
Noninterest Income
Noninterest income for the first quarter of 2022 increased $0.4 million, or 3.7%, from the linked quarter. The increase was due to an increase of $1.2 million in loan revenue, which stemmed primarily from the $2.7 million increase in the fair value of our mortgage servicing rights, as compared to a $0.9 million increase in the fourth quarter of 2021. Partially offsetting the increase identified above, was a decline of $0.8 million in mortgage origination fee income. The decline in 'Other' noninterest income was primarily due to a decrease of $0.5 million in income received from our commercial loan back-to-back swap program.
The following table presents details of noninterest income for the periods indicated:
| Three Months Ended | ||||||||
| Noninterest Income | March 31, | December 31, | March 31, | |||||
| (In thousands) | 2022 | 2021 | 2021 | |||||
| Investment services and trust activities | $ | 3,011 | $ | 3,115 | $ | 2,836 | ||
| Service charges and fees | 1,657 | 1,684 | 1,487 | |||||
| Card revenue | 1,650 | 1,746 | 1,536 | |||||
| Loan revenue | 4,293 | 3,132 | 4,730 | |||||
| Bank-owned life insurance | 531 | 550 | 542 | |||||
| Investment securities gains, net | 40 | 137 | 27 | |||||
| Other | 462 | 865 | 666 | |||||
| Total noninterest income | $ | 11,644 | $ | 11,229 | $ | 11,824 | ||
Noninterest Expense
Noninterest expense for the first quarter of 2022 increased $1.2 million, or 3.9%, from the linked quarter primarily due to increases of $0.6 million in occupancy expense of premises, net, $0.5 million in legal and professional, and $0.4 million in compensation and employee benefits. The increase in occupancy expense was primarily attributable to a write-down of fixed assets totaling $0.4 million. The increase in legal and professional expenses was primarily attributable to executive recruitment, as well as elevated legal expenses related to litigation. The increase in compensation and employee benefits was primarily due to normal annual salary increases. Offsetting these increases was a decline of $0.3 million in equipment expense.
The decline in net interest income and the increase in noninterest expense, partially offset by the increase in noninterest income noted above, were the primary drivers of the increase in the efficiency ratio, which increased 3.72 percentage points to 60.46% from 56.74% in the linked quarter.
The following table presents details of noninterest expense for the periods indicated:
| Three Months Ended | |||||||||
| Noninterest Expense | March 31, | December 31, | March 31, | ||||||
| (In thousands) | 2022 | 2021 | 2021 | ||||||
| Compensation and employee benefits | $ | 18,664 | $ | 18,266 | $ | 16,917 | |||
| Occupancy expense of premises, net | 2,779 | 2,211 | 2,318 | ||||||
| Equipment | 1,901 | 2,189 | 1,793 | ||||||
| Legal and professional | 2,353 | 1,826 | 783 | ||||||
| Data processing | 1,231 | 1,211 | 1,252 | ||||||
| Marketing | 1,029 | 1,121 | 1,006 | ||||||
| Amortization of intangibles | 1,227 | 1,245 | 1,507 | ||||||
| FDIC insurance | 420 | 380 | 512 | ||||||
| Communications | 272 | 277 | 409 | ||||||
| Foreclosed assets, net | (112 | ) | 7 | 47 | |||||
| Other | 1,879 | 1,711 | 1,156 | ||||||
| Total noninterest expense | $ | 31,643 | $ | 30,444 | $ | 27,700 | |||
The following table presents details of merger-related expenses for the periods indicated:
| Three Months Ended | ||||||||
| March 31, | December 31, | March 31, | ||||||
| Merger-related Expenses | 2022 | 2021 | 2021 | |||||
| (In thousands) | ||||||||
| Equipment | $ | 5 | $ | 18 | $ | — | ||
| Legal and professional | 63 | 202 | — | |||||
| Data processing | 38 | — | — | |||||
| Marketing | 7 | 2 | — | |||||
| Communications | 1 | — | — | |||||
| Other | 14 | 2 | — | |||||
| Total merger-related expenses | $ | 128 | $ | 224 | $ | — | ||
Income Taxes
The Company's effective income tax rate decreased to 19.9% in the first quarter of 2022 compared to 24.9% in the linked quarter. The lower effective income tax rate in the first quarter of 2022 reflected income tax expense based on the statutory rate and state income taxes, net of federal income tax benefits, primarily due to net income earned during the quarter, offset by benefits related to tax-exempt interest and bank-owned life insurance. The effective income tax rate for the full year 2022 is expected to be in the range of 19.5-21.5%.
| BALANCE SHEET, LIQUIDITY AND CAPITAL HIGHLIGHTS | As of or for the Three Months Ended | ||||||||||
| March 31, | December 31, | March 31, | |||||||||
| (Dollars in millions, except per share amounts) | 2022 | 2021 | 2021 | ||||||||
| Ending Balance Sheet | |||||||||||
| Total assets | $ | 5,960.2 | $ | 6,025.1 | $ | 5,737.3 | |||||
| Loans held for investment, net of unearned income | 3,250.0 | 3,245.0 | 3,358.2 | ||||||||
| Total securities | 2,349.8 | 2,288.1 | 1,896.9 | ||||||||
| Total deposits | 5,077.7 | 5,114.5 | 4,794.6 | ||||||||
| Average Balance Sheet | |||||||||||
| Average total assets | $ | 5,914.6 | $ | 5,934.1 | $ | 5,520.3 | |||||
| Average total loans | 3,245.4 | 3,268.8 | 3,429.7 | ||||||||
| Average total deposits | 5,044.0 | 5,015.5 | 4,573.9 | ||||||||
| Funding and Liquidity | |||||||||||
| Short-term borrowings | $ | 181.2 | $ | 181.4 | $ | 175.8 | |||||
| Long-term debt | 139.9 | 154.9 | 201.7 | ||||||||
| Loans to deposits ratio | 64.01 | % | 63.45 | % | 70.04 | % | |||||
| Equity | |||||||||||
| Total shareholders' equity | $ | 504.5 | $ | 527.5 | $ | 511.3 | |||||
| Common equity ratio | 8.46 | % | 8.75 | % | 8.91 | % | |||||
| Tangible common equity(1) | 423.3 | 445.1 | 425.1 | ||||||||
| Tangible common equity ratio(1) | 7.20 | % | 7.49 | % | 7.52 | % | |||||
| Per Share Data | |||||||||||
| Book value | $ | 32.15 | $ | 33.66 | $ | 32.00 | |||||
| Tangible book value(1) | $ | 26.98 | $ | 28.40 | $ | 26.60 | |||||
| (1) Non-GAAP Measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure. | |||||||||||
On January 1, 2022, the Company transferred, at fair value, $1.25 billion of mortgage-backed securities, collateralized mortgage obligations, and securities issued by state and political subdivisions from the available for sale classification to the held to maturity classification. The net unrealized after tax loss of $11.5 million associated with those re-classified securities remained in accumulated other comprehensive loss and will be amortized over the remaining life of the securities. No gains or losses were recognized in earnings at the time of the transfer.
Loans Held for Investment
Loans held for investment, net of unearned income, increased $5.0 million, or 0.2%, to $3.25 billion from December 31, 2021, driven primarily by new loan production in the first quarter of 2022 and increased revolving line of credit utilization and partially offset by PPP loan forgiveness. The revolving line of credit utilization was 35% in the first quarter of 2022, an increase of 3 percentage points from the linked quarter.
The following table presents the composition of loans held for investment, net of unearned income, as of the dates indicated:
| Loans Held for Investment | March 31, 2022 | December 31, 2021 | March 31, 2021 | ||||||||||||
| (dollars in thousands) | Balance | % of Total | Balance | % of Total | Balance | % of Total | |||||||||
| Commercial and industrial | $ | 898,942 | 27.7 | % | $ | 902,314 | 27.8 | % | $ | 993,770 | 29.6 | % | |||
| Agricultural | 94,649 | 2.9 | 103,417 | 3.2 | 117,099 | 3.5 | |||||||||
| Commercial real estate | |||||||||||||||
| Construction and development | 193,130 | 5.9 | 172,160 | 5.3 | 164,927 | 4.9 | |||||||||
| Farmland | 140,846 | 4.3 | 144,673 | 4.5 | 138,199 | 4.1 | |||||||||
| Multifamily | 259,609 | 8.0 | 244,503 | 7.5 | 261,806 | 7.8 | |||||||||
| Other | 1,130,306 | 34.8 | 1,143,205 | 35.2 | 1,128,660 | 33.6 | |||||||||
| Total commercial real estate | 1,723,891 | 53.0 | 1,704,541 | 52.5 | 1,693,592 | 50.4 | |||||||||
| Residential real estate | |||||||||||||||
| One-to-four family first liens | 331,883 | 10.2 | 333,308 | 10.3 | 337,408 | 10.0 | |||||||||
| One-to-four family junior liens | 131,793 | 4.1 | 133,014 | 4.1 | 137,025 | 4.1 | |||||||||
| Total residential real estate | 463,676 | 14.3 | 466,322 | 14.4 | 474,433 | 14.1 | |||||||||
| Consumer | 68,877 | 2.1 | 68,418 | 2.1 | 79,267 | 2.4 | |||||||||
| Loans held for investment, net of unearned income | $ | 3,250,035 | 100.0 | % | $ | 3,245,012 | 100.0 | % | $ | 3,358,161 | 100.0 | % | |||
| Total commitments to extend credit | $ | 1,034,843 | $ | 1,014,397 | $ | 920,493 | |||||||||
PPP Loans
The following table presents PPP loan measures as of the dates indicated:
| March 31, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||
| Round 1(3) | Round 2(3) | Total | Round 1(3) | Round 2(3) | Total | |||||||||||||||||||||||||
| (Dollars in millions) | # | $ | # | $ | # | $ | # | $ | # | $ | # | $ | ||||||||||||||||||
| Total PPP Loans Funded | 2,681 | 348.5 | 2,175 | 149.3 | 4,856 | 497.8 | 2,681 | 348.5 | 2,175 | 149.3 | 4,856 | 497.8 | ||||||||||||||||||
| PPP Loan Forgiveness(1) | 2,657 | 339.0 | 2,160 | 146.2 | 4,817 | 485.2 | 2,609 | 334.2 | 2,009 | 122.4 | 4,618 | 456.6 | ||||||||||||||||||
| Outstanding PPP Loans(2) | 5 | 0.7 | 15 | 2.3 | 20 | 3.0 | 53 | 5.6 | 164 | 25.2 | 217 | 30.8 | ||||||||||||||||||
| Unearned Income | $— | $0.1 | $0.1 | $— | $0.9 | $0.9 | ||||||||||||||||||||||||
| (1) Excluded from the PPP Loan Forgiveness is $9.3 million as of March 31, 2022 and December 31, 2021 of PPP loans that were paid off by the borrower prior to forgiveness or through the SBA PPP loan guarantee. | ||||||||||||||||||||||||||||||
| (2) Outstanding loans are presented net of unearned income. | ||||||||||||||||||||||||||||||
| (3) Round 1 refers to PPP loan applications from the first wave of funding made available through the CARES Act, which was signed into law by President Trump in March 2020. Round 2 refers to the second wave of PPP funding made available through the Consolidated Appropriations Act, 2021, which was signed into law by President Trump in December 2020 and extended by the PPP Extension Act of 2021, which was signed into law by President Biden in March 2021. | ||||||||||||||||||||||||||||||
Credit Loss Expense & Allowance for Credit Losses
The following table shows the activity in the allowance for credit losses for the periods indicated:
| Three Months Ended | |||||||||||
| Allowance for Credit Losses Roll Forward | March 31, | December 31, | March 31, | ||||||||
| (In thousands) | 2022 | 2021 | 2021 | ||||||||
| Beginning balance | $ | 48,700 | $ | 47,900 | $ | 55,500 | |||||
| Charge-offs | (2,631 | ) | (255 | ) | (1,003 | ) | |||||
| Recoveries | 409 | 533 | 687 | ||||||||
| Net recoveries (charge-offs) | (2,222 | ) | 278 | (316 | ) | ||||||
| Credit loss (benefit) expense related to loans | (278 | ) | 522 | (4,534 | ) | ||||||
| Ending balance | $ | 46,200 | $ | 48,700 | $ | 50,650 | |||||
As of March 31, 2022, the allowance for credit losses ("ACL") was $46.2 million, or 1.42% of loans held for investment, net of unearned income, compared with $48.7 million, or 1.50% of loans held for investment, net of unearned income, at December 31, 2021. After excluding net PPP loans, the ACL as a percentage of loans held for investment, net of unearned income, remained consistent at 1.42%(1) as of March 31, 2022, compared to 1.52%(1) at December 31, 2021. There was no credit loss expense for the first quarter of 2022 compared to a credit loss expense of $0.6 million for the fourth quarter of 2021. In the first quarter of 2022, the $0.3 million credit loss benefit related to loans, which reflected continued improvement in overall asset quality and improvement in forecasted economic conditions, was offset by the $0.3 million credit loss expense needed for growth in unfunded loan commitments.
(1)Non-GAAP Measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
Deposits
The following table presents the composition of our deposit portfolio as of the dates indicated:
| Deposit Composition | March 31, 2022 | December 31, 2021 | March 31, 2021 | ||||||||||||
| (Dollars in thousands) | Balance | % of Total | Balance | % of Total | Balance | % of Total | |||||||||
| Noninterest bearing deposits | $ | 1,002,415 | 19.7 | % | $ | 1,005,369 | 19.6 | % | $ | 958,526 | 20.0 | % | |||
| Interest checking deposits | 1,601,249 | 31.5 | 1,619,136 | 31.6 | 1,406,070 | 29.4 | |||||||||
| Money market deposits | 983,709 | 19.4 | 939,523 | 18.4 | 950,300 | 19.8 | |||||||||
| Savings deposits | 650,314 | 12.8 | 628,242 | 12.3 | 580,862 | 12.1 | |||||||||
| Total non-maturity deposits | 4,237,687 | 83.4 | 4,192,270 | 81.9 | 3,895,758 | 81.3 | |||||||||
| Time deposits of $250 and under | 501,904 | 9.9 | 505,392 | 9.9 | 558,338 | 11.6 | |||||||||
| Time deposits over $250 | 338,134 | 6.7 | 416,857 | 8.2 | 340,467 | 7.1 | |||||||||
| Total time deposits | 840,038 | 16.6 | 922,249 | 18.1 | 898,805 | 18.7 | |||||||||
| Total deposits | $ | 5,077,725 | 100.0 | % | $ | 5,114,519 | 100.0 | % | $ | 4,794,563 | 100.0 | % | |||
CREDIT RISK PROFILE
| As of or For the Three Months Ended | |||||||||||
| Highlights | March 31, | December 31, | March 31, | ||||||||
| (Dollars in thousands) | 2022 | 2021 | 2021 | ||||||||
| Credit loss (benefit) expense related to loans | $ | (278 | ) | $ | 522 | $ | (4,534 | ) | |||
| Net charge-offs (recoveries) | $ | 2,222 | $ | (278 | ) | $ | 316 | ||||
| Net charge-off (recovery) ratio(1) | 0.28 | % | (0.03)% | 0.04 | % | ||||||
| At period-end | |||||||||||
| Pass | $ | 3,041,649 | $ | 3,013,917 | $ | 3,112,728 | |||||
| Special Mention / Watch | 106,241 | 117,401 | 130,052 | ||||||||
| Classified | 102,145 | 113,694 | 115,381 | ||||||||
| Total loans held for investment, net | $ | 3,250,035 | $ | 3,245,012 | $ | 3,358,161 | |||||
| Classified loans ratio(2) | 3.14 | % | 3.50 | % | 3.44 | % | |||||
| Nonaccrual loans held for investment | $ | 31,182 | $ | 31,540 | $ | 43,874 | |||||
| Accruing loans contractually past due 90 days or more | — | — | 508 | ||||||||
| Total nonperforming loans | 31,182 | 31,540 | 44,382 | ||||||||
| Foreclosed assets, net | 273 | 357 | 1,487 | ||||||||
| Total nonperforming assets | $ | 31,455 | $ | 31,897 | $ | 45,869 | |||||
| Nonperforming loans ratio(3) | 0.96 | % | 0.97 | % | 1.32 | % | |||||
| Nonperforming assets ratio(4) | 0.53 | % | 0.53 | % | 0.80 | % | |||||
| Allowance for credit losses | $ | 46,200 | $ | 48,700 | $ | 50,650 | |||||
| Allowance for credit losses ratio(5) | 1.42 | % | 1.50 | % | 1.51 | % | |||||
| Adjusted allowance for credit losses ratio(6) | 1.42 | % | 1.52 | % | 1.63 | % | |||||
| Allowance for credit losses to nonaccrual loans ratio(7) | 148.16 | % | 154.41 | % | 115.44 | % | |||||
| (1) Net (recovery) charge-off ratio is calculated as annualized net (recoveries) charge-offs divided by average loans held for investment, net of unearned income, during the period. | |||||||||||
| (2) Classified loans ratio is calculated as classified loans divided by loans held for investment, net of unearned income, at the end of the period. | |||||||||||
| (3) Nonperforming loans ratio is calculated as total nonperforming loans divided by loans held for investment, net of unearned income, at the end of the period. | |||||||||||
| (4) Nonperforming assets ratio is calculated as total nonperforming assets divided by total assets at the end of the period. | |||||||||||
| (5) Allowance for credit losses ratio is calculated as allowance for credit losses divided by loans held for investment, net of unearned income, at the end of the period. | |||||||||||
| (6) Non-GAAP Measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure. | |||||||||||
| (7) Allowance for credit losses to nonaccrual loans ratio is calculated as allowance for credit losses divided by nonaccrual loans at the end of the period. | |||||||||||
During the first quarter of 2022, overall asset quality was generally stable to improving. The nonperforming loans ratio declined 1 bp from the linked quarter and 36 bps from the prior year to 0.96%. In addition, the classified loans ratio declined 36 bps from the linked quarter and 30 bps from the prior year to 3.14%. However, net charge-offs increased $2.5 million from the linked quarter due to our proactive credit monitoring processes.
The following table presents a roll forward of nonperforming loans for the period:
| Nonperforming Loans | Nonaccrual | 90+ Days Past Due & Still Accruing | Total | ||||||||
| (Dollars in thousands) | |||||||||||
| Balance at December 31, 2021 | $ | 31,540 | $ | — | $ | 31,540 | |||||
| Loans placed on nonaccrual or 90+ days past due & still accruing | 9,334 | 23 | 9,357 | ||||||||
| Repayments (including interest applied to principal) | (1,879 | ) | — | (1,879 | ) | ||||||
| Loans returned to accrual status or no longer past due | (1,918 | ) | — | (1,918 | ) | ||||||
| Charge-offs | (2,495 | ) | (23 | ) | (2,518 | ) | |||||
| Transfer to held for sale | (3,400 | ) | — | (3,400 | ) | ||||||
| Balance at March 31, 2022 | $ | 31,182 | $ | — | $ | 31,182 | |||||
CAPITAL
Effective March 31, 2020, we elected the 5-year phase-in option allowed under the interim final rule (IFR) issued by the federal banking regulatory agencies that delays the estimated impact on regulatory capital stemming from the implementation of the current expected credit losses (CECL) accounting standard. The IFR allows the add back of 100% of the capital effect from the day one CECL transition adjustment and 25% of the capital effect from subsequent increases in the allowance for credit losses through the two-year period ending December 31, 2021. The modified CECL transitional amount of $9.4 million will then be reduced from capital over the subsequent three-year period.
| Regulatory Capital Ratios | March 31, | December 31, | March 31, | |||||
| 2022 (1) | 2021 | 2021 | ||||||
| MidWestOne Financial Group, Inc. Consolidated | ||||||||
| Tier 1 leverage to average assets ratio | 8.85 | % | 8.67 | % | 8.78 | % | ||
| Common equity tier 1 capital to risk-weighted assets ratio | 9.81 | % | 9.94 | % | 10.16 | % | ||
| Tier 1 capital to risk-weighted assets ratio | 10.68 | % | 10.83 | % | 11.13 | % | ||
| Total capital to risk-weighted assets ratio | 12.89 | % | 13.09 | % | 13.75 | % | ||
| MidWestOne Bank | ||||||||
| Tier 1 leverage to average assets ratio | 9.30 | % | 9.25 | % | 9.60 | % | ||
| Common equity tier 1 capital to risk-weighted assets ratio | 11.25 | % | 11.58 | % | 12.19 | % | ||
| Tier 1 capital to risk-weighted assets ratio | 11.25 | % | 11.58 | % | 12.19 | % | ||
| Total capital to risk-weighted assets ratio | 12.12 | % | 12.46 | % | 13.19 | % | ||
| (1) Capital ratios for March 31, 2022 are preliminary | ||||||||
CORPORATE UPDATE
Share Repurchase Program
Under our current repurchase program, the Company repurchased 11,500 shares of its common stock at an average price of $30.98 per share and a total cost of $356 thousand in the first quarter of 2022. At March 31, 2022, the total amount available under the Company's current share repurchase program was $5.4 million.
CONFERENCE CALL DETAILS
The Company will host a conference call for investors at 11:00 a.m. CT on Friday, April 29, 2022. To participate, you may pre-register for this call utilizing the following link: https://www.incommglobalevents.com/registration/q4inc/10493/midwestone-financial-group-inc-1st-quarter-2022-earnings-call/. After pre-registering for this event you will receive your access details via email. You are also able to on the day of the call dial 1-844-200-6205, using an access code of 329438 at least fifteen minutes before the call start time. If you are unable to participate on the call, a replay will be available until July 28, 2022, by calling 1-866-813-9403 and using the replay access code of 310793. A transcript of the call will also be available on the Company’s web site (www.midwestonefinancial.com) within three business days of the call.
ABOUT MIDWESTONE FINANCIAL GROUP, INC.
MidWestOne Financial Group, Inc. is a financial holding company headquartered in Iowa City, Iowa. MidWestOne is the parent company of MidWestOne Bank, which operates banking offices in Iowa, Minnesota, Wisconsin, Florida, and Colorado. MidWestOne provides electronic delivery of financial services through its website, MidWestOne.bank. MidWestOne Financial Group, Inc. trades on the Nasdaq Global Select Market under the symbol “MOFG”.
Cautionary Note Regarding Forward-Looking Statements
This release contains certain “forward-looking statements” within the meaning of such term in the Private Securities Litigation Reform Act of 1995. We and our representatives may, from time to time, make written or oral statements that are “forward-looking” and provide information other than historical information. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement. These factors include, among other things, the factors listed below. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of our management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “should,” “could,” “would,” “plans,” “goals,” “intend,” “project,” “estimate,” “forecast,” “may” or similar expressions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, these statements. Readers are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Additionally, we undertake no obligation to update any statement in light of new information or future events, except as required under federal securities law.
Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors that could have an impact on our ability to achieve operating results, growth plan goals and future prospects include, but are not limited to, the following: (1) effects of the COVID-19 pandemic, including its effects on the economic environment, our customers and our operations, including due to supply chain disruptions, as well as any changes to federal, state, or local government laws, regulations, or orders in connection with the pandemic; (2) government intervention in the U.S. financial system in response to the COVID-19 pandemic, including the effects of recent legislative, tax, accounting and regulatory actions and reforms; (3) the impact of the COVID-19 pandemic on our financial results, including possible lost revenue and increased expenses (including the cost of capital), as well as possible goodwill impairment charges; (4) the risks of mergers (including with IOFB), including, without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and possible failures to achieve expected gains, revenue growth and/or expense savings from such transactions; (5) credit quality deterioration or pronounced and sustained reduction in real estate market values causing an increase in the allowance for credit losses, an increase in the credit loss expense, and a reduction in net earnings; (6) the effects of interest rates, including on our net income and the value of our securities portfolio; (7) changes in the economic environment, competition, or other factors that may affect our ability to acquire loans or influence the anticipated growth rate of loans and deposits and the quality of the loan portfolio and loan and deposit pricing; (8) fluctuations in the value of our investment securities; (9) governmental monetary and fiscal policies; (10) changes in and uncertainty related to benchmark interest rates used to price loans and deposits, including the expected elimination of LIBOR and the adoption of a substitute; (11) legislative and regulatory changes, including changes in banking, securities, trade, and tax laws and regulations and their application by our regulators; (12) the ability to attract and retain key executives and employees experienced in banking and financial services; (13) the sufficiency of the allowance for credit losses to absorb the amount of actual losses inherent in our existing loan portfolio; (14) our ability to adapt successfully to technological changes to compete effectively in the marketplace; (15) credit risks and risks from concentrations (by geographic area and by industry) within our loan portfolio; (16) the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds, financial technology companies, and other financial institutions operating in our markets or elsewhere or providing similar services; (17) the failure of assumptions underlying the establishment of allowances for credit losses and estimation of values of collateral and various financial assets and liabilities; (18) volatility of rate-sensitive deposits; (19) operational risks, including data processing system failures or fraud; (20) asset/liability matching risks and liquidity risks; (21) the costs, effects and outcomes of existing or future litigation; (22) changes in general economic, political, or industry conditions, nationally, internationally or in the communities in which we conduct business; (23) changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the Financial Accounting Standards Board; (24) war or terrorist activities, widespread disease or pandemic, or other adverse external events, which may cause deterioration in the economy or cause instability in credit markets; (25) the effects of cyber-attacks; (26) the imposition of tariffs or other domestic or international governmental policies impacting the value of the agricultural or other products of our borrowers; and (27) other risk factors detailed from time to time in Securities and Exchange Commission filings made by the Company.
MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
FIVE QUARTER CONSOLIDATED BALANCE SHEETS
| March 31 | December 31, | September 30, | June 30, | March 31, | |||||||||||||||
| (In thousands) | 2022 | 2021 | 2021 | 2021 | 2021 | ||||||||||||||
| ASSETS | |||||||||||||||||||
| Cash and due from banks | $ | 47,677 | $ | 42,949 | $ | 53,562 | $ | 52,297 | $ | 57,154 | |||||||||
| Interest earning deposits in banks | 12,152 | 160,881 | 84,952 | 11,124 | 80,924 | ||||||||||||||
| Federal funds sold | — | — | — | 13 | 7,691 | ||||||||||||||
| Total cash and cash equivalents | 59,829 | 203,830 | 138,514 | 63,434 | 145,769 | ||||||||||||||
| Debt securities available for sale at fair value | 1,145,638 | 2,288,110 | 2,136,902 | 2,072,452 | 1,896,894 | ||||||||||||||
| Held to maturity securities at amortized cost | 1,204,212 | — | — | — | — | ||||||||||||||
| Total securities | 2,349,850 | 2,288,110 | 2,136,902 | 2,072,452 | 1,896,894 | ||||||||||||||
| Loans held for sale | 6,466 | 12,917 | 58,679 | 6,149 | 58,333 | ||||||||||||||
| Gross loans held for investment | 3,256,294 | 3,252,194 | 3,278,150 | 3,344,156 | 3,374,076 | ||||||||||||||
| Unearned income, net | (6,259 | ) | (7,182 | ) | (9,506 | ) | (14,000 | ) | (15,915 | ) | |||||||||
| Loans held for investment, net of unearned income | 3,250,035 | 3,245,012 | 3,268,644 | 3,330,156 | 3,358,161 | ||||||||||||||
| Allowance for credit losses | (46,200 | ) | (48,700 | ) | (47,900 | ) | (48,000 | ) | (50,650 | ) | |||||||||
| Total loans held for investment, net | 3,203,835 | 3,196,312 | 3,220,744 | 3,282,156 | 3,307,511 | ||||||||||||||
| Premises and equipment, net | 82,603 | 83,492 | 84,130 | 84,667 | 85,581 | ||||||||||||||
| Goodwill | 62,477 | 62,477 | 62,477 | 62,477 | 62,477 | ||||||||||||||
| Other intangible assets, net | 18,658 | 19,885 | 21,130 | 22,394 | 23,735 | ||||||||||||||
| Foreclosed assets, net | 273 | 357 | 454 | 755 | 1,487 | ||||||||||||||
| Other assets | 176,223 | 157,748 | 152,393 | 154,731 | 155,525 | ||||||||||||||
| Total assets | $ | 5,960,214 | $ | 6,025,128 | $ | 5,875,423 | $ | 5,749,215 | $ | 5,737,312 | |||||||||
| LIABILITIES | |||||||||||||||||||
| Noninterest bearing deposits | $ | 1,002,415 | $ | 1,005,369 | $ | 999,887 | $ | 952,764 | $ | 958,526 | |||||||||
| Interest bearing deposits | 4,075,310 | 4,109,150 | 3,957,894 | 3,839,902 | 3,836,037 | ||||||||||||||
| Total deposits | 5,077,725 | 5,114,519 | 4,957,781 | 4,792,666 | 4,794,563 | ||||||||||||||
| Short-term borrowings | 181,193 | 181,368 | 187,508 | 212,261 | 175,785 | ||||||||||||||
| Long-term debt | 139,898 | 154,879 | 154,860 | 169,839 | 201,696 | ||||||||||||||
| Other liabilities | 56,941 | 46,887 | 45,010 | 44,156 | 53,948 | ||||||||||||||
| Total liabilities | 5,455,757 | 5,497,653 | 5,345,159 | 5,218,922 | 5,225,992 | ||||||||||||||
| SHAREHOLDERS' EQUITY | |||||||||||||||||||
| Common stock | 16,581 | 16,581 | 16,581 | 16,581 | 16,581 | ||||||||||||||
| Additional paid-in capital | 300,505 | 300,940 | 300,327 | 299,888 | 299,747 | ||||||||||||||
| Retained earnings | 253,500 | 243,365 | 232,639 | 219,884 | 206,230 | ||||||||||||||
| Treasury stock | (24,113 | ) | (24,546 | ) | (22,735 | ) | (15,888 | ) | (15,278 | ) | |||||||||
| Accumulated other comprehensive (loss) income | (42,016 | ) | (8,865 | ) | 3,452 | 9,828 | 4,040 | ||||||||||||
| Total shareholders' equity | 504,457 | 527,475 | 530,264 | 530,293 | 511,320 | ||||||||||||||
| Total liabilities and shareholders' equity | $ | 5,960,214 | $ | 6,025,128 | $ | 5,875,423 | $ | 5,749,215 | $ | 5,737,312 | |||||||||
MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
FIVE QUARTER CONSOLIDATED STATEMENTS OF INCOME
| Three Months Ended | ||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||
| (In thousands, except per share data) | 2022 | 2021 | 2021 | 2021 | 2021 | |||||||||||||
| Interest income | ||||||||||||||||||
| Loans, including fees | $ | 31,318 | $ | 33,643 | $ | 36,115 | $ | 34,736 | $ | 36,542 | ||||||||
| Taxable investment securities | 8,123 | 7,461 | 6,655 | 6,483 | 5,093 | |||||||||||||
| Tax-exempt investment securities | 2,383 | 2,415 | 2,428 | 2,549 | 2,555 | |||||||||||||
| Other | 28 | 37 | 21 | 19 | 14 | |||||||||||||
| Total interest income | 41,852 | 43,556 | 45,219 | 43,787 | 44,204 | |||||||||||||
| Interest expense | ||||||||||||||||||
| Deposits | 2,910 | 3,031 | 3,150 | 3,409 | 3,608 | |||||||||||||
| Short-term borrowings | 119 | 130 | 132 | 161 | 128 | |||||||||||||
| Long-term debt | 1,487 | 1,576 | 1,597 | 1,712 | 1,851 | |||||||||||||
| Total interest expense | 4,516 | 4,737 | 4,879 | 5,282 | 5,587 | |||||||||||||
| Net interest income | 37,336 | 38,819 | 40,340 | 38,505 | 38,617 | |||||||||||||
| Credit loss expense (benefit) | — | 622 | (1,080 | ) | (2,144 | ) | (4,734 | ) | ||||||||||
| Net interest income after credit loss expense (benefit) | 37,336 | 38,197 | 41,420 | 40,649 | 43,351 | |||||||||||||
| Noninterest income | ||||||||||||||||||
| Investment services and trust activities | 3,011 | 3,115 | 2,915 | 2,809 | 2,836 | |||||||||||||
| Service charges and fees | 1,657 | 1,684 | 1,613 | 1,475 | 1,487 | |||||||||||||
| Card revenue | 1,650 | 1,746 | 1,820 | 1,913 | 1,536 | |||||||||||||
| Loan revenue | 4,293 | 3,132 | 1,935 | 3,151 | 4,730 | |||||||||||||
| Bank-owned life insurance | 531 | 550 | 532 | 538 | 542 | |||||||||||||
| Investment securities gains, net | 40 | 137 | 36 | 42 | 27 | |||||||||||||
| Other | 462 | 865 | 331 | 290 | 666 | |||||||||||||
| Total noninterest income | 11,644 | 11,229 | 9,182 | 10,218 | 11,824 | |||||||||||||
| Noninterest expense | ||||||||||||||||||
| Compensation and employee benefits | 18,664 | 18,266 | 17,350 | 17,404 | 16,917 | |||||||||||||
| Occupancy expense of premises, net | 2,779 | 2,211 | 2,547 | 2,198 | 2,318 | |||||||||||||
| Equipment | 1,901 | 2,189 | 1,973 | 1,861 | 1,793 | |||||||||||||
| Legal and professional | 2,353 | 1,826 | 1,272 | 1,375 | 783 | |||||||||||||
| Data processing | 1,231 | 1,211 | 1,406 | 1,347 | 1,252 | |||||||||||||
| Marketing | 1,029 | 1,121 | 1,022 | 873 | 1,006 | |||||||||||||
| Amortization of intangibles | 1,227 | 1,245 | 1,264 | 1,341 | 1,507 | |||||||||||||
| FDIC insurance | 420 | 380 | 435 | 245 | 512 | |||||||||||||
| Communications | 272 | 277 | 275 | 371 | 409 | |||||||||||||
| Foreclosed assets, net | (112 | ) | 7 | 43 | 136 | 47 | ||||||||||||
| Other | 1,879 | 1,711 | 2,191 | 1,519 | 1,156 | |||||||||||||
| Total noninterest expense | 31,643 | 30,444 | 29,778 | 28,670 | 27,700 | |||||||||||||
| Income before income tax expense | 17,337 | 18,982 | 20,824 | 22,197 | 27,475 | |||||||||||||
| Income tax expense | 3,442 | 4,726 | 4,513 | 4,926 | 5,827 | |||||||||||||
| Net income | $ | 13,895 | $ | 14,256 | $ | 16,311 | $ | 17,271 | $ | 21,648 | ||||||||
| Earnings per common share | ||||||||||||||||||
| Basic | $ | 0.89 | $ | 0.91 | $ | 1.03 | $ | 1.08 | $ | 1.35 | ||||||||
| Diluted | $ | 0.88 | $ | 0.91 | $ | 1.03 | $ | 1.08 | $ | 1.35 | ||||||||
| Weighted average basic common shares outstanding | 15,683 | 15,692 | 15,841 | 15,987 | 15,991 | |||||||||||||
| Weighted average diluted common shares outstanding | 15,718 | 15,734 | 15,863 | 16,012 | 16,021 | |||||||||||||
| Dividends paid per common share | $ | 0.2375 | $ | 0.2250 | $ | 0.2250 | $ | 0.2250 | $ | 0.2250 | ||||||||
MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
FINANCIAL STATISTICS
| As of or for the Three Months Ended | |||||||||||
| March 31, | December 31, | March 31, | |||||||||
| (Dollars in thousands, except per share amounts) | 2022 | 2021 | 2021 | ||||||||
| Earnings: | |||||||||||
| Net interest income | $ | 37,336 | $ | 38,819 | $ | 38,617 | |||||
| Noninterest income | 11,644 | 11,229 | 11,824 | ||||||||
| Total revenue, net of interest expense | 48,980 | 50,048 | 50,441 | ||||||||
| Credit loss expense (benefit) | — | 622 | (4,734 | ) | |||||||
| Noninterest expense | 31,643 | 30,444 | 27,700 | ||||||||
| Income before income tax expense | 17,337 | 18,982 | 27,475 | ||||||||
| Income tax expense | 3,442 | 4,726 | 5,827 | ||||||||
| Net income | $ | 13,895 | $ | 14,256 | $ | 21,648 | |||||
| Per Share Data: | |||||||||||
| Diluted earnings | $ | 0.88 | $ | 0.91 | $ | 1.35 | |||||
| Book value | 32.15 | 33.66 | 32.00 | ||||||||
| Tangible book value(1) | 26.98 | 28.40 | 26.60 | ||||||||
| Ending Balance Sheet: | |||||||||||
| Total assets | $ | 5,960,214 | $ | 6,025,128 | $ | 5,737,312 | |||||
| Loans held for investment, net of unearned income | 3,250,035 | 3,245,012 | 3,358,161 | ||||||||
| Total securities | 2,349,850 | 2,288,110 | 1,896,894 | ||||||||
| Total deposits | 5,077,725 | 5,114,519 | 4,794,563 | ||||||||
| Short-term borrowings | 181,193 | 181,368 | 175,785 | ||||||||
| Long-term debt | 139,898 | 154,879 | 201,696 | ||||||||
| Total shareholders' equity | 504,457 | 527,475 | 511,320 | ||||||||
| Average Balance Sheet: | |||||||||||
| Average total assets | $ | 5,914,604 | $ | 5,934,076 | $ | 5,520,304 | |||||
| Average total loans | 3,245,449 | 3,268,783 | 3,429,746 | ||||||||
| Average total deposits | 5,044,046 | 5,015,506 | 4,573,898 | ||||||||
| Financial Ratios: | |||||||||||
| Return on average assets | 0.95 | % | 0.95 | % | 1.59 | % | |||||
| Return on average equity | 10.74 | % | 10.68 | % | 17.01 | % | |||||
| Return on average tangible equity(1) | 13.56 | % | 13.50 | % | 21.52 | % | |||||
| Efficiency ratio(1) | 60.46 | % | 56.74 | % | 50.77 | % | |||||
| Net interest margin, tax equivalent(1) | 2.79 | % | 2.83 | % | 3.10 | % | |||||
| Loans to deposits ratio | 64.01 | % | 63.45 | % | 70.04 | % | |||||
| Common equity ratio | 8.46 | % | 8.75 | % | 8.91 | % | |||||
| Tangible common equity ratio(1) | 7.20 | % | 7.49 | % | 7.52 | % | |||||
| Credit Risk Profile: | |||||||||||
| Total nonperforming loans | $ | 31,182 | $ | 31,540 | $ | 44,382 | |||||
| Nonperforming loans ratio | 0.96 | % | 0.97 | % | 1.32 | % | |||||
| Total nonperforming assets | $ | 31,455 | $ | 31,897 | $ | 45,869 | |||||
| Nonperforming assets ratio | 0.53 | % | 0.53 | % | 0.80 | % | |||||
| Net (recoveries) charge-offs | $ | 2,222 | $ | (278 | ) | $ | 316 | ||||
| Net (recovery) charge-off ratio | 0.28 | % | (0.03 | )% | 0.04 | % | |||||
| Allowance for credit losses | $ | 46,200 | $ | 48,700 | $ | 50,650 | |||||
| Allowance for credit losses ratio | 1.42 | % | 1.50 | % | 1.51 | % | |||||
| Adjusted allowance for credit losses ratio(1) | 1.42 | % | 1.52 | % | 1.63 | % | |||||
| Allowance for credit losses to nonaccrual ratio | 148.16 | % | 154.41 | % | 115.44 | % | |||||
| PPP Loans: | |||||||||||
| Average PPP loans | $ | 14,975 | $ | 52,564 | $ | 236,231 | |||||
| Fee Income | 797 | 1,996 | 3,674 | ||||||||
| (1) Non-GAAP measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure. | |||||||||||
MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET AND YIELD ANALYSIS
| Three Months Ended | ||||||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | March 31, 2021 | ||||||||||||||||||||||||
| (Dollars in thousands) | Average Balance | Interest Income/ Expense | Average Yield/ Cost | Average Balance | Interest Income/ Expense | Average Yield/ Cost | Average Balance | Interest Income/ Expense | Average Yield/ Cost | |||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||
| Loans, including fees (1)(2)(3) | $ | 3,245,449 | $ | 31,858 | 3.98 | % | $ | 3,268,783 | $ | 34,191 | 4.15 | % | $ | 3,429,746 | $ | 37,073 | 4.38 | % | ||||||||
| Taxable investment securities | 1,835,911 | 8,123 | 1.79 | % | 1,802,349 | 7,461 | 1.64 | % | 1,266,714 | 5,093 | 1.63 | % | ||||||||||||||
| Tax-exempt investment securities (2)(4) | 450,547 | 2,998 | 2.70 | % | 455,570 | 3,026 | 2.64 | % | 465,793 | 3,203 | 2.79 | % | ||||||||||||||
| Total securities held for investment(2) | 2,286,458 | 11,121 | 1.97 | % | 2,257,919 | 10,487 | 1.84 | % | 1,732,507 | 8,296 | 1.94 | % | ||||||||||||||
| Other | 56,094 | 28 | 0.20 | % | 80,415 | 37 | 0.18 | % | 36,536 | 14 | 0.16 | % | ||||||||||||||
| Total interest earning assets(2) | $ | 5,588,001 | 43,007 | 3.12 | % | $ | 5,607,117 | 44,715 | 3.16 | % | $ | 5,198,789 | 45,383 | 3.54 | % | |||||||||||
| Other assets | 326,603 | 326,959 | 321,515 | |||||||||||||||||||||||
| Total assets | $ | 5,914,604 | $ | 5,934,076 | $ | 5,520,304 | ||||||||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||||
| Interest checking deposits | $ | 1,560,402 | $ | 1,061 | 0.28 | % | $ | 1,506,600 | $ | 1,065 | 0.28 | % | $ | 1,349,671 | $ | 991 | 0.30 | % | ||||||||
| Money market deposits | 953,943 | 499 | 0.21 | % | 976,018 | 520 | 0.21 | % | 913,087 | 478 | 0.21 | % | ||||||||||||||
| Savings deposits | 641,703 | 279 | 0.18 | % | 621,871 | 285 | 0.18 | % | 553,824 | 286 | 0.21 | % | ||||||||||||||
| Time deposits | 883,997 | 1,071 | 0.49 | % | 903,765 | 1,161 | 0.51 | % | 837,460 | 1,853 | 0.90 | % | ||||||||||||||
| Total interest bearing deposits | 4,040,045 | 2,910 | 0.29 | % | 4,008,254 | 3,031 | 0.30 | % | 3,654,042 | 3,608 | 0.40 | % | ||||||||||||||
| Securities sold under agreements to repurchase | 159,417 | 96 | 0.24 | % | 190,725 | 115 | 0.24 | % | 165,858 | 101 | 0.25 | % | ||||||||||||||
| Federal funds purchased | — | — | — | % | 33 | — | — | % | — | — | — | % | ||||||||||||||
| Other short-term borrowings | 3,029 | 23 | 3.08 | % | 30 | 15 | 198.37 | % | 9,335 | 27 | 1.17 | % | ||||||||||||||
| Short-term borrowings | 162,446 | 119 | 0.30 | % | 190,788 | 130 | 0.27 | % | 175,193 | 128 | 0.30 | % | ||||||||||||||
| Long-term debt | 140,389 | 1,487 | 4.30 | % | 154,870 | 1,576 | 4.04 | % | 205,971 | 1,851 | 3.64 | % | ||||||||||||||
| Total borrowed funds | 302,835 | 1,606 | 2.15 | % | 345,658 | 1,706 | 1.96 | % | 381,164 | 1,979 | 2.11 | % | ||||||||||||||
| Total interest bearing liabilities | $ | 4,342,880 | $ | 4,516 | 0.42 | % | $ | 4,353,912 | $ | 4,737 | 0.43 | % | $ | 4,035,206 | $ | 5,587 | 0.56 | % | ||||||||
| Noninterest bearing deposits | 1,004,001 | 1,007,252 | 919,856 | |||||||||||||||||||||||
| Other liabilities | 42,872 | 43,576 | 49,003 | |||||||||||||||||||||||
| Shareholders’ equity | 524,851 | 529,336 | 516,239 | |||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 5,914,604 | $ | 5,934,076 | $ | 5,520,304 | ||||||||||||||||||||
| Net interest income(2) | $ | 38,491 | $ | 39,978 | $ | 39,796 | ||||||||||||||||||||
| Net interest spread(2) | 2.70 | % | 2.73 | % | 2.98 | % | ||||||||||||||||||||
| Net interest margin(2) | 2.79 | % | 2.83 | % | 3.10 | % | ||||||||||||||||||||
| Total deposits(5) | $ | 5,044,046 | $ | 2,910 | 0.23 | % | $ | 5,015,506 | $ | 3,031 | 0.24 | % | $ | 4,573,898 | $ | 3,608 | 0.32 | % | ||||||||
| Cost of funds(6) | 0.34 | % | 0.35 | % | 0.46 | % | ||||||||||||||||||||
(1) Average balance includes nonaccrual loans.
(2) Tax equivalent. The federal statutory tax rate utilized was 21%.
(3) Interest income includes net loan fees, loan purchase discount accretion and tax equivalent adjustments. Net loan fees were $674 thousand, $1.9 million, and $3.5 million for the three months ended March 31, 2022, December 31, 2021, and March 31, 2021, respectively. Loan purchase discount accretion was $732 thousand, $599 thousand, and $1.1 million for the three months ended March 31, 2022, December 31, 2021, and March 31, 2021, respectively. Tax equivalent adjustments were $540 thousand, $548 thousand, and $531 thousand for the three months ended March 31, 2022, December 31, 2021, and March 31, 2021, respectively. The federal statutory tax rate utilized was 21%.
(4) Interest income includes tax equivalent adjustments of $615 thousand, $611 thousand, and $648 thousand for the three months ended March 31, 2022, December 31, 2021, and March 31, 2021, respectively. The federal statutory tax rate utilized was 21%.
(5) Total deposits is the sum of total interest-bearing deposits and noninterest bearing deposits. The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits.
(6) Cost of funds is calculated as annualized total interest expense divided by the sum of average total deposits and borrowed funds.
Non-GAAP Measures
This earnings release contains non-GAAP measures for tangible common equity, tangible book value per share, tangible common equity ratio, return on average tangible equity, net interest margin (tax equivalent), core net interest margin, loan yield (tax equivalent), core yield on loans, efficiency ratio, adjusted allowance for credit losses ratio, core loans, and core commercial loans. Management believes these measures provide investors with useful information regarding the Company’s profitability, financial condition and capital adequacy, consistent with how management evaluates the Company’s financial performance. The following tables provide a reconciliation of each non-GAAP measure to the most comparable GAAP measure.
| Tangible Common Equity/Tangible Book Value | ||||||||||||||||||||
| per Share/Tangible Common Equity Ratio | ||||||||||||||||||||
| (Dollars in thousands, except per share data) | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | |||||||||||||||
| Total shareholders’ equity | $ | 504,457 | $ | 527,475 | $ | 530,264 | $ | 530,293 | $ | 511,320 | ||||||||||
| Intangible assets, net | (81,135 | ) | (82,362 | ) | (83,607 | ) | (84,871 | ) | (86,212 | ) | ||||||||||
| Tangible common equity | $ | 423,322 | $ | 445,113 | $ | 446,657 | $ | 445,422 | $ | 425,108 | ||||||||||
| Total assets | $ | 5,960,214 | $ | 6,025,128 | $ | 5,875,423 | $ | 5,749,215 | $ | 5,737,312 | ||||||||||
| Intangible assets, net | (81,135 | ) | (82,362 | ) | (83,607 | ) | (84,871 | ) | (86,212 | ) | ||||||||||
| Tangible assets | $ | 5,879,079 | $ | 5,942,766 | $ | 5,791,816 | $ | 5,664,344 | $ | 5,651,100 | ||||||||||
| Book value per share | $ | 32.15 | $ | 33.66 | $ | 33.71 | $ | 33.22 | $ | 32.00 | ||||||||||
| Tangible book value per share(1) | $ | 26.98 | $ | 28.40 | $ | 28.40 | $ | 27.90 | $ | 26.60 | ||||||||||
| Shares outstanding | 15,690,125 | 15,671,147 | 15,729,451 | 15,963,468 | 15,981,088 | |||||||||||||||
| Common equity ratio | 8.46 | % | 8.75 | % | 9.03 | % | 9.22 | % | 8.91 | % | ||||||||||
| Tangible common equity ratio(2) | 7.20 | % | 7.49 | % | 7.71 | % | 7.86 | % | 7.52 | % | ||||||||||
(1) Tangible common equity divided by shares outstanding.
(2) Tangible common equity divided by tangible assets.
| Three Months Ended | ||||||||||||
| Return on Average Tangible Equity | March 31, | December 31, | March 31, | |||||||||
| (Dollars in thousands) | 2022 | 2021 | 2021 | |||||||||
| Net income | $ | 13,895 | $ | 14,256 | $ | 21,648 | ||||||
| Intangible amortization, net of tax(1) | 920 | 934 | 1,130 | |||||||||
| Tangible net income | $ | 14,815 | $ | 15,190 | $ | 22,778 | ||||||
| Average shareholders’ equity | $ | 524,851 | $ | 529,336 | $ | 516,239 | ||||||
| Average intangible assets, net | (81,763 | ) | (82,990 | ) | (86,961 | ) | ||||||
| Average tangible equity | $ | 443,088 | $ | 446,346 | $ | 429,278 | ||||||
| Return on average equity | 10.74 | % | 10.68 | % | 17.01 | % | ||||||
| Return on average tangible equity(2) | 13.56 | % | 13.50 | % | 21.52 | % | ||||||
(1) The combined income tax rate utilized was 25%.
(2) Annualized tangible net income divided by average tangible equity.
| Net Interest Margin, Tax Equivalent/ Core Net Interest Margin | Three Months Ended | |||||||||||
| March 31, | December 31, | March 31, | ||||||||||
| (Dollars in thousands) | 2022 | 2021 | 2021 | |||||||||
| Net interest income | $ | 37,336 | $ | 38,819 | $ | 38,617 | ||||||
| Tax equivalent adjustments: | ||||||||||||
| Loans(1) | 540 | 548 | 531 | |||||||||
| Securities(1) | 615 | 611 | 648 | |||||||||
| Net interest income, tax equivalent | $ | 38,491 | $ | 39,978 | $ | 39,796 | ||||||
| Loan purchase discount accretion | (732 | ) | (599 | ) | (1,098 | ) | ||||||
| Core net interest income | $ | 37,759 | $ | 39,379 | $ | 38,698 | ||||||
| Net interest margin | 2.71 | % | 2.75 | % | 3.01 | % | ||||||
| Net interest margin, tax equivalent(2) | 2.79 | % | 2.83 | % | 3.10 | % | ||||||
| Core net interest margin(3) | 2.74 | % | 2.79 | % | 3.02 | % | ||||||
| Average interest earning assets | $ | 5,588,001 | $ | 5,607,117 | $ | 5,198,789 | ||||||
(1) The federal statutory tax rate utilized was 21%.
(2) Annualized tax equivalent net interest income divided by average interest earning assets.
(3) Annualized core net interest income divided by average interest earning assets.
| Three Months Ended | ||||||||||||
| Loan Yield, Tax Equivalent / Core Yield on Loans | March 31, | December 31, | March 31, | |||||||||
| (Dollars in thousands) | 2022 | 2021 | 2021 | |||||||||
| Loan interest income, including fees | $ | 31,318 | $ | 33,643 | $ | 36,542 | ||||||
| Tax equivalent adjustment(1) | 540 | 548 | 531 | |||||||||
| Tax equivalent loan interest income | $ | 31,858 | $ | 34,191 | $ | 37,073 | ||||||
| Loan purchase discount accretion | (732 | ) | (599 | ) | (1,098 | ) | ||||||
| Core loan interest income | $ | 31,126 | $ | 33,592 | $ | 35,975 | ||||||
| Yield on loans | 3.91 | % | 4.08 | % | 4.32 | % | ||||||
| Yield on loans, tax equivalent(2) | 3.98 | % | 4.15 | % | 4.38 | % | ||||||
| Core yield on loans(3) | 3.89 | % | 4.08 | % | 4.25 | % | ||||||
| Average loans | $ | 3,245,449 | $ | 3,268,783 | $ | 3,429,746 | ||||||
(1) The federal statutory tax rate utilized was 21%.
(2) Annualized tax equivalent loan interest income divided by average loans.
(3) Annualized core loan interest income divided by average loans.
| Three Months Ended | ||||||||||||
| Efficiency Ratio | March 31, | December 31, | March 31, | |||||||||
| (Dollars in thousands) | 2022 | 2021 | 2021 | |||||||||
| Total noninterest expense | $ | 31,643 | $ | 30,444 | $ | 27,700 | ||||||
| Amortization of intangibles | (1,227 | ) | (1,245 | ) | (1,507 | ) | ||||||
| Merger-related expenses | (128 | ) | (224 | ) | — | |||||||
| Noninterest expense used for efficiency ratio | $ | 30,288 | $ | 28,975 | $ | 26,193 | ||||||
| Net interest income, tax equivalent(1) | $ | 38,491 | $ | 39,978 | $ | 39,796 | ||||||
| Noninterest income | 11,644 | 11,229 | 11,824 | |||||||||
| Investment securities gains, net | (40 | ) | (137 | ) | (27 | ) | ||||||
| Net revenues used for efficiency ratio | $ | 50,095 | $ | 51,070 | $ | 51,593 | ||||||
| Efficiency ratio (2) | 60.46 | % | 56.74 | % | 50.77 | % | ||||||
(1) The federal statutory tax rate utilized was 21%.
(2) Noninterest expense adjusted for amortization of intangibles and merger-related expenses divided by the sum of tax equivalent net interest income, noninterest income and net investment securities gains.
| Adjusted Allowance for Credit Losses Ratio | ||||||||||||||||||||
| (Dollars in thousands) | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | |||||||||||||||
| Loans held for investment, net of unearned income | $ | 3,250,035 | $ | 3,245,012 | $ | 3,268,644 | $ | 3,330,156 | $ | 3,358,161 | ||||||||||
| PPP loans | (3,037 | ) | (30,841 | ) | (89,354 | ) | (184,390 | ) | (248,682 | ) | ||||||||||
| Core loans | $ | 3,246,998 | $ | 3,214,171 | $ | 3,179,290 | $ | 3,145,766 | $ | 3,109,479 | ||||||||||
| Allowance for credit losses | $ | 46,200 | $ | 48,700 | $ | 47,900 | $ | 48,000 | $ | 50,650 | ||||||||||
| Allowance for credit losses ratio | 1.42 | % | 1.50 | % | 1.47 | % | 1.44 | % | 1.51 | % | ||||||||||
| Adjusted allowance for credit losses ratio(1) | 1.42 | % | 1.52 | % | 1.51 | % | 1.53 | % | 1.63 | % | ||||||||||
(1) Allowance for credit losses divided by core loans.
| Core Loans/Core Commercial Loans | March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||
| (Dollars in thousands) | 2022 | 2021 | 2021 | 2021 | 2021 | ||||||||||
| Commercial loans: | |||||||||||||||
| Commercial and industrial | $ | 898,942 | $ | 902,314 | $ | 927,258 | $ | 982,092 | $ | 993,770 | |||||
| Agricultural | 94,649 | 103,417 | 106,356 | 107,834 | 117,099 | ||||||||||
| Commercial real estate | 1,723,891 | 1,704,541 | 1,699,358 | 1,705,789 | 1,693,592 | ||||||||||
| Total commercial loans | $ | 2,717,482 | $ | 2,710,272 | $ | 2,732,972 | $ | 2,795,715 | $ | 2,804,461 | |||||
| Consumer loans: | |||||||||||||||
| Residential real estate | $ | 463,676 | $ | 466,322 | $ | 468,136 | $ | 468,581 | $ | 474,433 | |||||
| Other consumer | 68,877 | 68,418 | 67,536 | 65,860 | 79,267 | ||||||||||
| Total consumer loans | $ | 532,553 | $ | 534,740 | $ | 535,672 | $ | 534,441 | $ | 553,700 | |||||
| Loans held for investment, net of unearned income | $ | 3,250,035 | $ | 3,245,012 | $ | 3,268,644 | $ | 3,330,156 | $ | 3,358,161 | |||||
| PPP loans | $ | 3,037 | $ | 30,841 | $ | 89,354 | $ | 184,390 | $ | 248,682 | |||||
| Core loans(1) | $ | 3,246,998 | $ | 3,214,171 | $ | 3,179,290 | $ | 3,145,766 | $ | 3,109,479 | |||||
| Core commercial loans(2) | $ | 2,714,445 | $ | 2,679,431 | $ | 2,643,618 | $ | 2,611,325 | $ | 2,555,779 | |||||
(1) Core loans are calculated as loans held for investment, net of unearned income less PPP loans.
(2) Core commercial loans are calculated as total commercial loans less PPP loans.
Category: Earnings
This news release may be downloaded from https://www.midwestonefinancial.com/corporate-profile/default.aspx
Source: MidWestOne Financial Group, Inc.
Industry: Banks
| Contact: | |||
| Charles N. Funk | Barry S. Ray | ||
| Chief Executive Officer | Senior Executive Vice President and Chief Financial Officer | ||
| 319.356.5800 | 319.356.5800 | ||
