MidWestOne Financial Group, Inc. Reports Financial Results for the First Quarter of 2021

Thursday, 22. April 2021 22:34

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 IncomeMarch 31, December 31, March 31,
(In thousands)2021 2020 2020
Investment services and trust activities$2,836  $2,518  $2,536 
Service charges and fees1,487  1,571  1,826 
Card revenue1,536  1,517  1,365 
Loan revenue4,730  3,900  1,123 
Bank-owned life insurance542  541  520 
Investment securities gains, net27  30  42 
Other666  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 ExpenseMarch 31, December 31, March 31,
(In thousands)2021 2020 2020
Compensation and employee benefits$16,917  $17,638  $16,617 
Occupancy expense of premises, net2,318  2,476  2,341 
Equipment1,793  2,040  1,880 
Legal and professional783  2,052  1,535 
Data processing1,252  1,460  1,354 
Marketing1,006  986  1,062 
Amortization of intangibles1,507  1,569  2,028 
FDIC insurance512  495  448 
Communications409  412  457 
Foreclosed assets, net47  (35) 138 
Other1,156  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 income3,358.2  3,482.2  3,425.8 
Total securities held for investment1,896.9  1,657.4  881.9 
Total deposits4,794.6  4,547.0  3,859.8 
Average Balance Sheet     
Average total assets$5,520.3  $5,457.9  $4,669.7 
Average total loans3,429.7  3,560.6  3,436.3 
Average total deposits4,573.9  4,490.0  3,760.0 
Funding and Liquidity     
Short-term borrowings$175.8  $230.8  $129.5 
Long-term debt201.7  208.7  209.9 
Loans to deposits ratio70.04% 76.58% 88.75%
Equity     
Total shareholders' equity$511.3  $515.3  $500.6 
Common equity ratio8.91% 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 InvestmentMarch 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 %
Agricultural117,099  3.5  116,392  3.3  145,435  4.2  
Commercial real estate            
Construction and development164,927  4.9  181,291  5.2  282,921  8.3  
Farmland138,199  4.1  144,970  4.2  168,777  4.9  
Multifamily261,806  7.8  256,525  7.4  217,108  6.3  
Other1,128,660  33.6  1,149,575  33.0  1,111,640  32.5  
Total commercial real estate1,693,592  50.4  1,732,361  49.8  1,780,446  52.0  
Residential real estate            
One-to-four family first liens337,408  10.0  355,684  10.2  389,055  11.4  
One-to-four family junior liens137,025  4.1  143,422  4.1  165,235  4.8  
Total residential real estate474,433  14.1  499,106  14.3  554,290  16.2  
Consumer79,267  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 ForwardMarch 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)
Recoveries687  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 CompositionMarch 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 deposits1,406,070  29.4  1,351,641  29.7  995,762  25.8  
Money market deposits950,300  19.8  918,654  20.2  793,482  20.6  
Savings deposits580,862  12.1  529,751  11.7  404,100  10.5  
Total non-maturity deposits3,895,758  81.3  3,710,701  81.6  2,830,471  73.4  
Time deposits of $250,000 and under558,338  11.6  581,471  12.8  688,409  17.8  
Time deposits over $250,000340,467  7.1  254,877  5.6  340,964  8.8  
Total time deposits898,805  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
HighlightsMarch 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 / Watch130,052   157,213   117,301 
Classified115,381   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 more508   739   303 
Total nonperforming loans44,382   42,689   44,276 
Foreclosed assets, net1,487   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 accruing5,521  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 Ratios2021 (1) 2020 2020
MidWestOne Financial Group, Inc. Consolidated     
Tier 1 leverage ratio8.78% 8.50% 9.39%
Common equity tier 1 capital ratio10.16% 9.72% 9.25%
Tier 1 capital ratio11.13% 10.70% 10.25%
Total capital ratio13.75% 13.41% 11.48%
MidWestOne Bank     
Tier 1 leverage ratio9.60% 9.35% 10.03%
Common equity tier 1 capital ratio12.19% 11.79% 10.95%
Tier 1 capital ratio12.19% 11.79% 10.95%
Total capital ratio13.19% 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 banks80,924  17,409  55,421  45,018  58,319 
Federal funds sold7,691  172  7,540  6,329  6,830 
Total cash and cash equivalents145,769  82,659  134,862  117,210  125,545 
Debt securities available for sale at fair value1,896,894  1,657,381  1,366,344  1,187,455  881,859 
Loans held for sale58,333  59,956  13,096  12,048  9,483 
Gross loans held for investment3,374,076  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 income3,358,161  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, net3,307,511  3,426,723  3,478,932  3,541,395  3,374,575 
Premises and equipment, net85,581  86,401  87,955  88,929  89,860 
Goodwill62,477  62,477  62,477  93,977  93,977 
Other intangible assets, net23,735  25,242  26,811  28,443  30,190 
Foreclosed assets, net1,487  2,316  724  965  968 
Other assets155,525  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 deposits3,836,037  3,636,394  3,469,137  3,397,798  3,222,717 
Total deposits4,794,563  4,547,049  4,333,641  4,265,435  3,859,844 
Short-term borrowings175,785  230,789  183,893  162,224  129,489 
Long-term debt201,696  208,691  245,481  189,973  209,874 
Other liabilities53,948  54,869  68,612  92,550  64,138 
Total liabilities5,225,992  5,041,398  4,831,627  4,710,182  4,263,345 
SHAREHOLDERS' EQUITY          
Common stock16,581  16,581  16,581  16,581  16,581 
Additional paid-in capital299,747  300,137  299,939  299,542  299,412 
Retained earnings206,230  188,191  175,017  198,382  190,212 
Treasury stock(15,278) (14,251) (12,272) (12,272) (12,518)
Accumulated other comprehensive income4,040  24,592  19,816  18,548  6,877 
Total shareholders' equity511,320  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 securities5,093  4,673  4,574  4,646  3,717 
Tax-exempt investment securities2,555  2,529  2,360  1,858  1,512 
Other14  29  29  40  164 
Total interest income44,204  45,470  45,154  46,758  47,405 
Interest expense         
Deposits3,608  4,265  5,296  6,409  7,949 
Short-term borrowings128  142  175  263  334 
Long-term debt1,851  2,026  1,874  1,374  1,716 
Total interest expense5,587  6,433  7,345  8,046  9,999 
Net interest income38,617  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) expense43,351  42,078  32,817  34,027  15,673 
Noninterest income         
Investment services and trust activities2,836  2,518  2,361  2,217  2,536 
Service charges and fees1,487  1,571  1,491  1,290  1,826 
Card revenue1,536  1,517  1,600  1,237  1,365 
Loan revenue4,730  3,900  3,252  1,910  1,123 
Bank-owned life insurance542  541  530  635  520 
Investment securities gains, net27  30  106  6  42 
Other666  549  230  974  2,743 
Total noninterest income11,824  10,626  9,570  8,269  10,155 
Noninterest expense         
Compensation and employee benefits16,917  17,638  16,460  15,682  16,617 
Occupancy expense of premises, net2,318  2,476  2,278  2,253  2,341 
Equipment1,793  2,040  1,935  2,010  1,880 
Legal and professional783  2,052  1,184  1,382  1,535 
Data processing1,252  1,460  1,308  1,240  1,354 
Marketing1,006  986  857  910  1,062 
Amortization of intangibles1,507  1,569  1,631  1,748  2,028 
FDIC insurance512  495  470  445  448 
Communications409  412  428  449  457 
Foreclosed assets, net47  (35) 13  34  138 
Goodwill impairment    31,500     
Other1,156  2,822  1,875  1,885  2,141 
Total noninterest expense27,700  31,915  59,939  28,038  30,001 
Income (loss) before income tax expense27,475  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 outstanding15,991  16,074  16,099  16,094  16,142 
Weighted average diluted common shares outstanding16,021  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 income11,824   10,626   10,155  
Total revenue, net of interest expense50,441   49,663   47,561  
Credit loss (benefit) expense(4,734)  (3,041)  21,733  
Noninterest expense27,700   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 value32.00   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 income3,358,161   3,482,223   3,425,762  
Total securities held for investment1,896,894   1,657,381   881,859  
Total deposits4,794,563   4,547,049   3,859,844  
Short-term borrowings175,785   230,789   129,489  
Long-term debt201,696   208,691   209,874  
Total shareholders' equity511,320   515,250   500,564  
Average Balance Sheet:     
Average total assets$5,520,304   $5,457,939   $4,669,724  
Average total loans3,429,746   3,560,632   3,436,263  
Average total deposits4,573,898   4,490,048   3,760,016  
Financial Ratios:     
Return on average assets1.59 % 1.22 % (0.17)%
Return on average equity17.01 % 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 ratio70.04 % 76.58 % 88.75 %
Common equity ratio8.91 % 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 ratio1.32 % 1.23 % 1.29 %
Total nonperforming assets$45,869   $45,005   $45,244  
Nonperforming assets ratio0.80 % 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 ratio0.04 % 0.04 % 0.14 %
Allowance for credit losses$50,650   $55,500   $51,187  
Allowance for credit losses ratio1.51 % 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 Income4,377   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 securities1,266,714  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%
Other36,536  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 assets321,515      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 deposits913,087  478  0.21% 931,900  544  0.23% 766,766  1,645  0.86%
Savings deposits553,824  286  0.21% 508,763  279  0.22% 393,833  391  0.40%
Time deposits837,460  1,853  0.90% 862,408  2,484  1.15% 997,136  4,597  1.85%
Total interest bearing deposits3,654,042  3,608  0.40% 3,579,391  4,265  0.47% 3,122,812  7,949  1.02%
Short-term borrowings175,193  128  0.30% 182,080  142  0.31% 121,942  334  1.10%
Long-term debt205,971  1,851  3.64% 223,407  2,026  3.61% 225,587  1,716  3.06%
Total borrowed funds381,164  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 deposits919,856      910,657      637,204     
Other liabilities49,003      56,898      47,010     
Shareholders’ equity516,239      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

Related Links: 
Author:
Copyright GlobeNewswire, Inc. 2016. All rights reserved.
You can register yourself on the website to receive press releases directly via e-mail to your own e-mail account.