Third Quarter Summary(1)

  • Net loss for the third quarter of $19.8 million, or a loss of $1.23 per diluted common share, driven by goodwill write-down of $31.5 million.
  • Excluding goodwill write-down, core earnings(2) were stable at $11.7 million, or $0.73 per diluted common share.
  • Mortgage banking revenues drove $1.3 million, or 16%, increase in noninterest income.
  • Tax equivalent net interest margin(2) of 3.14% down from 3.38%.
  • Average deposit balances increased $151.6 million, or 4%, while cost of average total deposits declined 13 basis points ("bps") to 49 bps.
  • COVID-19 loan modifications declined 75% to $116.0 million, which represents 3% of loans held for investment, net of unearned income.

IOWA CITY, Iowa, Oct. 29, 2020 (GLOBE NEWSWIRE) -- MidWestOne Financial Group, Inc. (Nasdaq - MOFG) (“we”, “our”, or the "Company”) today reported a net loss for the third quarter of 2020 of $19.8 million, or a loss of $1.23 per diluted common share, compared to net income of $11.7 million, or $0.73 per diluted common share, for the second quarter of 2020 (the “linked quarter”). The decrease in net income in the third quarter was due primarily to a $31.5 million goodwill impairment charge. The goodwill impairment charge in the third quarter of 2020 reduced diluted earnings per common share by approximately $1.96.

Charles Funk, Chief Executive Officer of the Company, commented, “In March of this year, the COVID-19 pandemic caused a significant decline in stock market valuations. Subsequently, bank valuations, including our stock price, have generally not experienced a rebound similar to the broader markets. As a result, at September 30, 2020, we recorded a goodwill impairment charge as our estimated fair value was less than our book value on that date. This non-cash charge has no impact on our regulatory capital ratios, cash flows or liquidity position. Our underlying operations remain strong as the Company delivered a return on average tangible equity of 12.56%(2) and an efficiency ratio of 55.37%(2) in the third quarter of 2020. We also continued to build our allowance for credit losses ratio during the quarter to 1.82%(2), excluding PPP loans, while our level of non-performing assets declined from the linked second quarter."

_______________
1Third Quarter summary compares to the linked quarter unless noted.
2Non-GAAP measure. See the separate Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.

FINANCIAL HIGHLIGHTSThree Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
 2020 2020 2019 2020 2019
 (Dollars in thousands, except per share amounts)
Net interest income$37,809  $38,712  $43,258  $113,927  $104,066 
Noninterest income9,570  8,269  8,004  27,994  22,210 
Total revenue, net of interest expense47,379  46,981  51,262  141,921  126,276 
Credit loss expense4,992  4,685  4,264  31,410  6,554 
Noninterest expense59,939  28,038  31,442  117,978  81,099 
(Loss) income before income tax (benefit) expense(17,552) 14,258  15,556  (7,467) 38,623 
Income tax expense2,272  2,546  3,256  2,620  8,364 
Net (loss) income$(19,824) $11,712  $12,300  $(10,087) $30,259 
Diluted (loss) earnings per share$(1.23) $0.73  $0.76  $(0.63) $2.09 
          
Return on average assets(1.48)% 0.92% 1.06% (0.27)% 1.00%
Return on average equity(14.88)% 9.21% 9.92% (2.60)% 9.37%
Return on average tangible equity(1)12.56 % 13.50% 15.57% 8.58 % 13.48%
Efficiency ratio(1)55.37 % 54.80% 50.46% 55.95 % 55.45%
          
(1) Non-GAAP measure. See the separate Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.

COVID-19 UPDATE

Loan Modifications

As of September 30, 2020, COVID-19 pandemic related loan modifications totaled $116.0 million, a decline of 75% from $468.6 million at June 30, 2020. Of those modified loans at September 30, 2020, $41.2 million are in their first deferral period while $74.8 million are in or being processed for a second deferral.

"We have been pleased that the level of deferrals has fallen to 3% of net loans held for investment at the end of the third quarter, and we expect this number to continue to fall as first deferrals expire," stated Mr. Funk.

Small Business Administration ("SBA") Paycheck Protection Program ("PPP") Loans

The SBA PPP program closed on August 8, 2020, and the SBA is no longer accepting PPP applications from participating lenders. At September 30, 2020, the Company had 2,664 PPP loans totaling $331.7 million, including $8.1 million of unamortized net fees. As of September 30, 2020, certain of the Company's PPP loan customers had initiated the loan forgiveness process, but no PPP loans had been submitted to the SBA for forgiveness.

On October 8, 2020, the SBA, in conjunction with the U.S. Department of the Treasury, issued new guidelines regarding a simplified forgiveness program for PPP loans of $50,000 or less. As of September 30, 2020, the Company had 1,579 PPP loans totaling $27.8 million, including unamortized net fees of $0.4 million, that would qualify for the simplified forgiveness program.

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income decreased in the third quarter of 2020 to $37.8 million from $38.7 million in the linked quarter, reflecting net interest margin compression and lower loan purchase discount accretion. The tax equivalent net interest margin decreased 24 bps to 3.14% for the third quarter of 2020 from 3.38% in the linked quarter. Interest earning asset and loan yields decreased 34 bps and 20 bps, respectively, from the linked quarter. Approximately 4 bps of the loan yield decrease was attributable to PPP loans. The cost of interest bearing liabilities decreased 11 bps to 0.76% as a 15 bps decline in interest bearing deposit costs to 0.62% was only partially offset by the effects of the Company's recent $65.0 million subordinated debt offering. Loan purchase discount accretion added $1.9 million to net interest income in the third quarter compared to $2.6 million in the linked quarter. Net fee accretion for PPP loans in the third quarter of 2020 was $1.3 million compared to $1.1 million in the linked quarter.

Mr. Funk noted, "Generally, the banking industry's net interest margins have been impacted by the Federal Reserve's zero interest rate policy instituted in response to the COVID-19 pandemic, and we expect this to continue in subsequent quarters."

Noninterest Income

Noninterest income for the third quarter of 2020 increased $1.3 million, or 16%, from the linked quarter. The increase was primarily due to a $1.3 million increase in loan revenue, which was driven by mortgage banking, and a $0.4 million increase in card revenue. These increases were partially offset by a decrease in 'Other' noninterest income of $0.7 million, which was due primarily to a decline of $0.5 million in income received from our commercial loan back-to-back swap program.

"Our Home Mortgage Center continues to work hard to process increased volumes of home mortgage loans, largely driven by low market interest rates. Our staff have been working long hours to serve our customers," noted Mr. Funk.

The following table presents details of noninterest income for the periods indicated:

 Three Months Ended
 September 30, June 30, September 30,
Noninterest Income2020 2020 2019
 (In thousands)
Investment services and trust activities$2,361  $2,217  $2,339 
Service charges and fees1,491  1,290  2,068 
Card revenue1,600  1,237  1,655 
Loan revenue3,252  1,910  991 
Bank-owned life insurance530  635  514 
Investment securities gains, net106  6  23 
Other230  974  414 
Total noninterest income$9,570  $8,269  $8,004 
            

Noninterest Expense

Noninterest expense for the third quarter of 2020 increased $31.9 million, or 113.8%, from the linked quarter due primarily to a $31.5 million goodwill impairment charge. Excluding the goodwill impairment charge, core noninterest expense increased $0.4 million, due primarily to an increase in compensation and employee benefits of $0.8 million. The increase in compensation and employee benefits reflected a $1.4 million expense benefit from SBA PPP loan origination costs that was recognized in the linked quarter.

"Expense management will continue to be critical to our success as we attempt to combat low margins in future quarters," stated Mr. Funk.

The following table presents details of noninterest expense for the periods indicated:

 Three Months Ended
 September 30, June 30, September 30,
Noninterest Expense2020 2020 2019
 (In thousands)
Compensation and employee benefits$16,460  $15,682  $17,426 
Occupancy expense of premises, net2,278  2,253  2,294 
Equipment1,935  2,010  2,181 
Legal and professional1,184  1,382  1,996 
Data processing1,308  1,240  1,234 
Marketing857  910  1,167 
Amortization of intangibles1,631  1,748  2,583 
FDIC insurance470  445  (42)
Communications428  449  489 
Foreclosed assets, net13  34  265 
Other1,875  1,885  1,849 
Total core noninterest expense$28,439  $28,038  $31,442 
Goodwill impairment31,500  $  $ 
Total noninterest expense$59,939  $28,038  $31,442 
            

The Company's noninterest expense for the third quarter of 2020 compared to the third quarter of 2019 is impacted by merger-related costs that were incurred in the third quarter of 2019. The following table presents details of merger-related costs for the periods indicated:

 Three Months Ended
 September 30, June 30, September 30,
Merger-related Expenses2020 2020 2019
 (In thousands)
Compensation and employee benefits$  $  $1,584 
Equipment  7   
Legal and professional    163 
Data processing    567 
Other    233 
Total merger-related costs$  $7  $2,547 
            

Income Taxes

The effective income tax rate was (12.9)% in the third quarter of 2020 compared to 17.9% in the linked quarter. Excluding non-deductible goodwill impairment, the effective income tax rate in the third quarter of 2020 was 16.3%, reflecting benefits related to tax-exempt interest and renewable energy tax credits. Excluding the non-deductible goodwill impairment, the effective tax rate for the full year 2020 is currently expected to be in the range of 14-16%.

BALANCE SHEET, LIQUIDITY AND CAPITAL HIGHLIGHTSAs of or For the Three Months Ended
September 30, June 30, September 30,
2020 2020 2019
 (Dollars in millions, except per share amounts)
Ending Balance Sheet     
Total assets$5,330.7  $5,231.0  $4,648.3 
Loans held for investment, net of unearned income3,537.4  3,597.0  3,524.7 
Total securities held for investment1,366.3  1,187.5  693.6 
Total deposits4,333.6  4,265.4  3,709.7 
Average Balance Sheet     
Average total assets$5,311.4  $5,098.8  $4,620.5 
Average total loans3,576.6  3,633.7  3,526.1 
Average total deposits4,317.2  4,165.6  3,692.5 
Funding and Liquidity     
Short-term borrowings$183.9  $162.2  $155.1 
Long-term debt245.5  190.0  244.7 
Loans to deposits ratio81.63% 84.33% 95.01%
Equity     
Total shareholders' equity$499.1  $520.8  $497.9 
Equity to assets ratio9.36% 9.96% 10.71%
Tangible common equity(1)409.8  398.4  371.0 
Tangible common equity ratio(1)7.82% 7.80% 8.21%
Per Share Data     
Book value$31.00  $32.35  $30.77 
Tangible book value(1)$25.45  $24.74  $22.93 
(1) Non-GAAP Measure. See the separate 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 $59.6 million, or 2%, to $3.54 billion from June 30, 2020, due primarily to loan pay downs, including pay downs of $8.8 million of PPP loans, and lower line utilization. At September 30, 2020, commercial real estate loans comprised approximately 48% of the loan portfolio. Commercial and industrial loans were the next largest category at 31%, followed by residential real estate loans at 15%, agricultural loans at 4%, and consumer loans at 2% of total loans.

Mr. Funk noted, "We saw sluggish loan demand in the quarter due to borrowers' uncertainty related to COVID-19. Line of credit usage was at 36% as of September 30, 2020 compared to 38% at June 30, 2020 and 47% at September 30, 2019."

The following table presents the composition of loans held for investment, net of unearned income, as of the dates indicated:

 September 30, June 30, September 30,
Loans Held for Investment2020 2020 2019
 (In thousands)
Commercial and industrial$1,103,102  $1,084,527  $871,192 
Agricultural129,453  140,837  151,984 
Commercial real estate     
Construction and development191,423  199,950  296,586 
Farmland152,362  161,897  188,394 
Multifamily235,241  247,403  236,145 
Other1,128,009  1,155,489  1,102,744 
Total commercial real estate1,707,035  1,764,739  1,823,869 
Residential real estate     
One-to-four family first liens371,390  377,100  416,194 
One-to-four family junior liens150,180  155,814  176,162 
Total residential real estate521,570  532,914  592,356 
Consumer76,272  74,022  85,327 
Loans held for investment, net of unearned income$3,537,432  $3,597,039  $3,524,728 
            

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 Nine Months Ended
 September 30, June 30, September 30, September 30, September 30,
Allowance for Credit Losses Roll Forward2020 2020 2019 2020 2019
 (In thousands)
Beginning balance$55,644  $51,187  $28,691  $29,079  $29,307 
Cumulative effect of change in accounting principle - CECL      3,984   
Charge-offs(2,188) (2,103) (1,635) (5,788) (5,178)
Recoveries347  236  212  882  849 
Net charge-offs(1,841) (1,867) (1,423) (4,906) (4,329)
Credit loss expense related to loans4,697  6,324  4,264  30,343  6,554 
Ending balance$58,500  $55,644  $31,532  $58,500  $31,532 
                    

Effective January 1, 2020, the Company adopted the Financial Instruments - Credit Losses (CECL) accounting guidance. The adoption of this guidance established a single allowance framework for all financial assets carried at amortized cost and certain off-balance sheet credit exposures. The framework requires that management's estimate reflects credit losses over the full remaining expected life of each credit and considers expected future changes in macroeconomic conditions. The adoption resulted in the recognition on January 1, 2020, of cumulative effect adjustments of $4.0 million related to the allowance for credit losses (ACL) and $3.4 million related to the liability for off-balance sheet credit exposures.

As of September 30, 2020, the ACL was $58.5 million, or 1.65% of loans held for investment, net of unearned income, compared with $55.6 million, or 1.55%, at June 30, 2020. After excluding $331.7 million of net PPP loans, the ACL as a percentage of loans held for investment, net of unearned income increased to 1.82% as of September 30, 2020. The increase in the ACL during the third quarter was attributable to changes in the economic forecast and changes to modeling assumptions. 

Deposits

The following table presents the composition of our deposit portfolio as of the dates indicated:

 September 30, June 30, September 30,
Deposit Composition2020 2020 2019
 (In thousands)
Noninterest bearing deposits$864,504  $867,637   $673,777  
Interest checking deposits1,230,146  1,153,697   924,861  
Money market deposits871,336  811,368   763,661  
Savings deposits486,876  463,262   389,606  
Total non-maturity deposits3,452,862  3,295,964   2,751,905  
Time deposits of $250,000 and under617,229  656,723   685,409  
Time deposits over $250,000263,550  312,748   272,398  
Total time deposits880,779  969,471   957,807  
Total deposits$4,333,641  $4,265,435   $3,709,712  
            

CREDIT QUALITY

 Three Months Ended
 September 30, June 30, September 30,
Highlights2020 2020 2019
 (dollars in thousands)
Credit loss expense related to loans$4,697  $6,324  $4,264 
Net charge-offs$1,841  $1,867  $1,423 
Net charge-off ratio(1)0.20% 0.21% 0.16%
      
At period-end     
Nonaccrual loans held for investment$39,071  $41,303  $31,968 
Accruing loans contractually past due 90 days or more2,593  3,238  236 
Foreclosed assets, net724  965  4,366 
Total nonperforming assets (2)$42,388  $45,506  $36,570 
Nonperforming assets ratio(3)1.20% 1.26% 1.04%
Allowance for credit losses58,500  55,644  31,532 
Allowance for credit losses ratio(4)1.65% 1.55% 0.89%
Adjusted allowance for credit losses ratio(5)1.82% 1.70% 0.89%
      
Performing troubled debt restructured loans held for investment2,355  2,550  4,701 
      
(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) 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.
(3) Nonperforming assets ratio is calculated as total nonperforming assets divided by the sum of loans held for investment, net of unearned income and foreclosed assets, net at the end of the period.
(4) 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.
(5) Non-GAAP Measure. See the separate Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
 

"Monitoring of our loan portfolio remains critical, and we believe our ACL ratio, at 1.65% (1.82% excluding PPP loans), sits in a strong position. We are taking a cautious approach as we build our reserves, in light of the uncertainty related to COVID-19 and its impact on our borrowers," stated Mr. Funk.

CAPITAL

Effective March 31, 2020, we elected the 5-year phase-in option allowed under the interim final rule (IFR) recently 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.

As previously announced, on July 28, 2020, the Company completed a private placement of $65.0 million aggregate principal amount of 5.75% fixed-to-floating rate subordinated notes. The subordinated notes are intended to qualify as Tier 2 capital for regulatory purposes, and the Company is using the net proceeds from the offering for general corporate purposes and to support its organic growth plans, including maintaining its regulatory capital ratios. The following table presents the regulatory capital ratios of the Company and its banking subsidiary as of the dates indicated:

 September 30, June 30, September 30,
Regulatory Capital Ratios2020 (1) 2020 2019
MidWestOne Financial Group, Inc. Consolidated     
Common equity tier 1 capital ratio9.72% 9.48% 8.79%
Tier 1 capital ratio10.73% 10.48% 9.76%
Total capital ratio13.56% 11.72% 10.65%
Tier 1 leverage ratio8.52% 8.72% 9.26%
MidWestOne Bank     
Common equity tier 1 capital ratio11.75% 11.34% 10.26%
Tier 1 capital ratio11.75% 11.34% 10.26%
Total capital ratio12.95% 12.47% 11.00%
Tier 1 leverage ratio9.26% 9.39% 9.72%
(1) Capital ratios for September 30, 2020 are preliminary     
      

CORPORATE UPDATE

Share Repurchase Program

At September 30, 2020, the total amount available under the Company's current share repurchase program was $6.4 million. Subsequent to September 30, 2020, the Company's board of directors authorized resuming repurchases under the Company's share repurchase program. The Company previously announced the temporary suspension of its share repurchase program in light of market conditions associated with the COVID-19 pandemic.

Cash Dividend Announcement

On October 28, 2020, the Company’s board of directors declared a quarterly cash dividend of $0.22 per common share. The dividend is payable December 15, 2020, to shareholders of record at the close of business on December 1, 2020.

CONFERENCE CALL DETAILS

The Company will host a conference call for investors at 11:00 a.m. CT on Friday, October 30, 2020. 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 January 30, 2021, by calling 877-344-7529 and using the replay access code of 10136666. 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.

EARNINGS CALL PRESENTATION

The Company has prepared presentation materials that management intends to use during its third quarter 2020 conference call on October 30, 2020. These materials have been furnished to the U.S. Securities and Exchange Commission in a Form 8-K concurrently with this press release, and are also available on the Company's website at www.midwestonefinancial.com.

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; (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
CONSOLIDATED BALANCE SHEETS

 September 30, June 30, December 31,
 2020 2020 2019
 (In thousands)
ASSETS     
Cash and due from banks$71,901  $65,863  $67,174 
Interest earning deposits in banks55,421  45,018  6,112 
Federal funds sold7,540  6,329  198 
Total cash and cash equivalents134,862  117,210  73,484 
Debt securities available for sale at fair value1,366,344  1,187,455  785,977 
Loans held for sale13,096  12,048  5,400 
Gross loans held for investment3,555,969  3,618,675  3,469,236 
Unearned income, net(18,537) (21,636) (17,970)
Loans held for investment, net of unearned income3,537,432  3,597,039  3,451,266 
Allowance for credit losses(58,500) (55,644) (29,079)
Total loans held for investment, net3,478,932  3,541,395  3,422,187 
Premises and equipment, net87,955  88,929  90,723 
Goodwill62,477  93,977  91,918 
Other intangible assets, net26,811  28,443  32,218 
Foreclosed assets, net724  965  3,706 
Other assets159,507  160,541  147,960 
Total assets$5,330,708  $5,230,963  $4,653,573 
LIABILITIES     
Noninterest bearing deposits$864,504  $867,637  $662,209 
Interest bearing deposits3,469,137  3,397,798  3,066,446 
Total deposits4,333,641  4,265,435  3,728,655 
Short-term borrowings183,893  162,224  139,349 
Long-term debt245,481  189,973  231,660 
Other liabilities68,612  92,550  44,927 
Total liabilities4,831,627  4,710,182  4,144,591 
SHAREHOLDERS' EQUITY     
Common stock16,581  16,581  16,581 
Additional paid-in capital299,939  299,542  297,390 
Retained earnings175,017  198,382  201,105 
Treasury stock(12,272) (12,272) (10,466)
Accumulated other comprehensive income19,816  18,548  4,372 
Total shareholders' equity499,081  520,781  508,982 
Total liabilities and shareholders' equity$5,330,708  $5,230,963  $4,653,573 
            

MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

 Three Months Ended Nine Months Ended
 September 30, June 30, September 30, September 30,
 2020 2020 2019 2020 2019
 (In thousands, except per share data)
Interest income         
Loans, including fees$38,191  $40,214  $49,169  $120,417  $118,257 
Taxable investment securities4,574  4,646  3,376  12,937  9,592 
Tax-exempt investment securities2,360  1,858  1,401  5,730  4,231 
Other29  40  130  233  335 
Total interest income45,154  46,758  54,076  139,317  132,415 
Interest expense         
Deposits5,296  6,409  8,238  19,654  21,676 
Short-term borrowings175  263  522  772  1,479 
Long-term debt1,874  1,374  2,058  4,964  5,194 
Total interest expense7,345  8,046  10,818  25,390  28,349 
Net interest income37,809  38,712  43,258  113,927  104,066 
Credit loss expense4,992  4,685  4,264  31,410  6,554 
Net interest income after credit loss expense32,817  34,027  38,994  82,517  97,512 
Noninterest income         
Investment services and trust activities2,361  2,217  2,339  7,114  5,619 
Service charges and fees1,491  1,290  2,068  4,607  5,380 
Card revenue1,600  1,237  1,655  4,202  4,452 
Loan revenue3,252  1,910  991  6,285  2,032 
Bank-owned life insurance530  635  514  1,685  1,376 
Insurance commissions        734 
Investment securities gains, net106  6  23  154  72 
Other230  974  414  3,947  2,545 
Total noninterest income9,570  8,269  8,004  27,994  22,210 
Noninterest expense         
Compensation and employee benefits16,460  15,682  17,426  48,759  46,414 
Occupancy expense of premises, net2,278  2,253  2,294  6,872  6,300 
Equipment1,935  2,010  2,181  5,825  5,466 
Legal and professional1,184  1,382  1,996  4,101  6,252 
Data processing1,308  1,240  1,234  3,902  3,087 
Marketing857  910  1,167  2,829  2,642 
Amortization of intangibles1,631  1,748  2,583  5,407  3,965 
FDIC insurance470  445  (42) 1,363  762 
Communications428  449  489  1,334  1,208 
Foreclosed assets, net13  34  265  185  407 
Goodwill impairment31,500      31,500   
Other1,875  1,885  1,849  5,901  4,596 
Total noninterest expense59,939  28,038  31,442  117,978  81,099 
(Loss) income before income tax expense (benefit)(17,552) 14,258  15,556  (7,467) 38,623 
Income tax expense (benefit)2,272  2,546  3,256  2,620  8,364 
Net (loss) income$(19,824) $11,712  $12,300  $(10,087) $30,259 
          
Earnings (loss) per common share         
Basic$(1.23) $0.73  $0.76  $(0.63) $2.10 
Diluted$(1.23) $0.73  $0.76  $(0.63) $2.09 
Weighted average basic common shares outstanding16,099  16,094  16,201  16,112  14,434 
Weighted average diluted common shares outstanding16,099  16,100  16,215  16,112  14,445 
Dividends paid per common share$0.2200  $0.2200  $0.2025  $0.6600  $0.6075 
                    

MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
FIVE QUARTER CONSOLIDATED BALANCE SHEETS

 September 30, June 30, March 31, December 31, September 30,
 2020 2020 2020 2019 2019
 (In thousands)
ASSETS         
Cash and due from banks$71,901  $65,863  $60,396  $67,174  $79,776 
Interest earning deposits in banks55,421  45,018  58,319  6,112  6,413 
Federal funds sold7,540  6,329  6,830  198  478 
Total cash and cash equivalents134,862  117,210  125,545  73,484  86,667 
Debt securities available for sale at fair value1,366,344  1,187,455  881,859  785,977  503,278 
Held to maturity securities at amortized cost        190,309 
Total securities held for investment1,366,344  1,187,455  881,859  785,977  693,587 
Loans held for sale13,096  12,048  9,483  5,400  7,906 
Gross loans held for investment3,555,969  3,618,675  3,440,907  3,469,236  3,545,993 
Unearned income, net(18,537) (21,636) (15,145) (17,970) (21,265)
Loans held for investment, net of unearned income3,537,432  3,597,039  3,425,762  3,451,266  3,524,728 
Allowance for credit losses(58,500) (55,644) (51,187) (29,079) (31,532)
Total loans held for investment, net3,478,932  3,541,395  3,374,575  3,422,187  3,493,196 
Premises and equipment, net87,955  88,929  89,860  90,723  91,190 
Goodwill62,477  93,977  93,977  91,918  93,258 
Other intangible assets, net26,811  28,443  30,190  32,218  33,635 
Foreclosed assets, net724  965  968  3,706  4,366 
Other assets159,507  160,541  157,452  147,960  144,482 
Total assets$5,330,708  $5,230,963  $4,763,909  $4,653,573  $4,648,287 
LIABILITIES          
Noninterest bearing deposits$864,504  $867,637  $637,127  $662,209  $673,777 
Interest bearing deposits3,469,137  3,397,798  3,222,717  3,066,446  3,035,935 
Total deposits4,333,641  4,265,435  3,859,844  3,728,655  3,709,712 
Short-term borrowings183,893  162,224  129,489  139,349  155,101 
Long-term debt245,481  189,973  209,874  231,660  244,677 
Other liabilities68,612  92,550  64,138  44,927  40,912 
Total liabilities4,831,627  4,710,182  4,263,345  4,144,591  4,150,402 
SHAREHOLDERS' EQUITY         
Common stock16,581  16,581  16,581  16,581  16,581 
Additional paid-in capital299,939  299,542  299,412  297,390  297,144 
Retained earnings175,017  198,382  190,212  201,105  191,007 
Treasury stock(12,272) (12,272) (12,518) (10,466) (9,933)
Accumulated other comprehensive income19,816  18,548  6,877  4,372  3,086 
Total shareholders' equity499,081  520,781  500,564  508,982  497,885 
Total liabilities and shareholders' equity$5,330,708  $5,230,963  $4,763,909  $4,653,573  $4,648,287 
                    

MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
FIVE QUARTER CONSOLIDATED STATEMENTS OF INCOME

 Three Months Ended
 September 30, June 30, March 31, December 31, September 30,
 2020 2020 2020 2019 2019
 (In thousands, except per share data)
Interest income         
Loans, including fees$38,191  $40,214  $42,012  $44,906  $49,169 
Taxable investment securities4,574  4,646  3,717  3,540  3,376 
Tax-exempt investment securities2,360  1,858  1,512  1,465  1,401 
Other29  40  164  115  130 
Total interest income45,154  46,758  47,405  50,026  54,076 
Interest expense         
Deposits5,296  6,409  7,949  8,251  8,238 
Short-term borrowings175  263  334  368  522 
Long-term debt1,874  1,374  1,716  1,823  2,058 
Total interest expense7,345  8,046  9,999  10,442  10,818 
Net interest income37,809  38,712  37,406  39,584  43,258 
Credit loss expense4,992  4,685  21,733  604  4,264 
Net interest income after credit loss expense32,817  34,027  15,673  38,980  38,994 
Noninterest income         
Investment services and trust activities2,361  2,217  2,536  2,421  2,339 
Service charges and fees1,491  1,290  1,826  2,072  2,068 
Card revenue1,600  1,237  1,365  1,142  1,655 
Loan revenue3,252  1,910  1,123  1,757  991 
Bank-owned life insurance530  635  520  501  514 
Investment securities gains, net106  6  42  18  23 
Other230  974  2,743  1,125  414 
Total noninterest income9,570  8,269  10,155  9,036  8,004 
Noninterest expense         
Compensation and employee benefits16,460  15,682  16,617  19,246  17,426 
Occupancy expense of premises, net2,278  2,253  2,341  2,347  2,294 
Equipment1,935  2,010  1,880  2,251  2,181 
Legal and professional1,184  1,382  1,535  1,797  1,996 
Data processing1,308  1,240  1,354  1,492  1,234 
Marketing857  910  1,062  1,147  1,167 
Amortization of intangibles1,631  1,748  2,028  1,941  2,583 
FDIC insurance470  445  448  (72) (42)
Communications428  449  457  493  489 
Foreclosed assets, net13  34  138  173  265 
Goodwill impairment31,500         
Other1,875  1,885  2,141  5,621  1,849 
Total noninterest expense59,939  28,038  30,001  36,436  31,442 
(Loss) income before income tax expense (benefit)(17,552) 14,258  (4,173) 11,580  15,556 
Income tax expense (benefit)2,272  2,546  (2,198) (1,791) 3,256 
Net (loss) income$(19,824) $11,712  $(1,975) $13,371  $12,300 
          
(Loss) earnings per common share         
Basic$(1.23) $0.73  $(0.12) $0.83  $0.76 
Diluted$(1.23) $0.73  $(0.12) $0.83  $0.76 
Weighted average basic common shares outstanding16,099  16,094  16,142  16,162  16,201 
Weighted average diluted common shares outstanding16,099  16,100  16,142  16,193  16,215 
Dividends paid per common share$0.2200  $0.2200  $0.2200  $0.2025  $0.2025 
                    

MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET AND YIELD ANALYSIS

 Three Months Ended
 September 30, 2020 June 30, 2020 September 30, 2019
 Average
Balance
 Interest
Income/
Expense
 Average
Yield/
Cost
 Average
Balance
 Interest
Income/
Expense
 Average
Yield/
Cost
 Average Balance Interest
Income/
Expense
 Average
Yield/
Cost
 (Dollars in thousands)
ASSETS                 
Loans, including fees (1)(2)(3)$3,576,642  $38,727  4.31% $3,633,695  $40,721  4.51% $3,526,149  $49,712  5.59%
Taxable investment securities864,864  4,574  2.10% 731,699  4,646  2.55% 471,180  3,376  2.84%
Tax-exempt investment securities (2)(4)405,517  2,968  2.91% 285,758  2,340  3.29% 200,533  1,765  3.49%
Total securities held for investment(2)1,270,381  7,542  2.36% 1,017,457  6,986  2.76% 671,713  5,141  3.04%
Other88,152  29  0.13% 67,429  40  0.24% 17,609  130  2.93%
Total interest earning assets(2)$4,935,175  46,298  3.73% $4,718,581  47,747  4.07% $4,215,471  54,983  5.17%
Other assets376,211      380,266      405,060     
Total assets$5,311,386      $5,098,847      $4,620,531     
LIABILITIES AND SHAREHOLDERS’ EQUITY                 
Interest checking deposits$1,174,033  $1,049  0.36% $1,091,565  $1,113  0.41% $877,470  $1,398  0.63%
Money market deposits847,059  622  0.29% 829,826  885  0.43% 809,264  1,904  0.93%
Savings deposits473,000  351  0.30% 439,592  365  0.33% 392,298  463  0.47%
Time deposits931,655  3,274  1.40% 990,797  4,046  1.64% 939,480  4,473  1.89%
Total interest bearing deposits3,425,747  5,296  0.62% 3,351,780  6,409  0.77% 3,018,512  8,238  1.08%
Short-term borrowings165,840  175  0.42% 159,157  263  0.66% 139,458  522  1.49%
Long-term debt231,406  1,874  3.22% 201,240  1,374  2.75% 249,226  2,058  3.28%
Total borrowed funds397,246  2,049  2.05% 360,397  1,637  1.83% 388,684  2,580  2.63%
Total interest bearing liabilities$3,822,993  $7,345  0.76% $3,712,177  $8,046  0.87% $3,407,196  $10,818  1.26%
Noninterest bearing deposits891,425      813,794      674,003     
Other liabilities67,111      61,637      47,582     
Shareholders’ equity529,857      511,239      491,750     
Total liabilities and shareholders’ equity$5,311,386      $5,098,847      $4,620,531     
Net interest income(2)  $38,953      $39,701      $44,165   
Net interest spread(2)    2.97%     3.20%     3.91%
Net interest margin(2)    3.14%     3.38%     4.15%
                  
Total deposits(5)$4,317,172  $5,296  0.49% $4,165,574  $6,409  0.62% $3,692,515  $8,238  0.89%
Cost of funds(6)    0.62%     0.72%     1.05%
                     

(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 $1.1 million, $748 thousand, and $(353) thousand for the three months ended September 30, 2020, June 30, 2020, and September 30, 2019, respectively. Loan purchase discount accretion was $1.9 million, $2.6 million, and $7.2 million for the three months ended September 30, 2020, June 30, 2020, and September 30, 2019, respectively. Tax equivalent adjustments were $536 thousand, $507 thousand, and $543 thousand for the three months ended September 30, 2020, June 30, 2020, and September 30, 2019, respectively. The federal statutory tax rate utilized was 21%.
(4) Interest income includes tax equivalent adjustments of $608 thousand, $482 thousand, and $364 thousand for the three months ended September 30, 2020, June 30, 2020, and September 30, 2019, 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.

 Nine Months Ended
 September 30, 2020 September 30, 2019
 Average
Balance
 Interest
Income/
Expense
 Average
Yield/
Cost
 Average
Balance
 Interest
Income/
Expense
 Average
Yield/
Cost
 (Dollars in thousands)
ASSETS           
Loans, including fees (1)(2)(3)$3,548,968  $121,957  4.59% $3,043,772  $119,519  5.25%
Taxable investment securities721,266  12,937  2.40% 448,407  9,592  2.86%
Tax-exempt investment securities (2)(4)305,514  7,215  3.15% 201,908  5,331  3.53%
Total securities held for investment(2)1,026,780  20,152  2.62% 650,315  14,923  3.07%
Other70,983  233  0.44% 18,951  335  2.36%
Total interest earning assets(2)$4,646,731  142,342  4.09% $3,713,038  134,777  4.85%
Other assets380,961      341,693     
Total assets$5,027,692      $4,054,731     
LIABILITIES AND SHAREHOLDERS’ EQUITY           
Interest checking deposits$1,052,816  $3,477  0.44% $766,343  $3,329  0.58%
Money market deposits814,669  3,152  0.52% 760,115  5,729  1.01%
Savings deposits435,612  1,107  0.34% 309,270  703  0.30%
Time deposits973,044  11,918  1.64% 847,077  11,915  1.88%
Total interest bearing deposits3,276,141  19,654  0.80% 2,682,805  21,676  1.08%
Short-term borrowings149,041  772  0.69% 124,433  1,479  1.59%
Long-term debt219,455  4,964  3.02% 219,553  5,194  3.16%
Total borrowed funds368,496  5,736  2.08% 343,986  6,673  2.59%
Total interest bearing liabilities$3,644,637  $25,390  0.93% $3,026,791  $28,349  1.25%
Noninterest bearing deposits805,641      557,708     
Other liabilities58,618      38,325     
Shareholders’ equity518,796      431,907     
Total liabilities and shareholders’ equity$5,027,692      $4,054,731     
Net interest income(2)  $116,952      $106,428   
Net interest spread(2)    3.16%     3.60%
Net interest margin(2)    3.36%     3.83%
            
Total deposits(5)$4,081,782  $19,654  0.64% $3,240,513  $21,676  0.89%
Cost of funds(6)    0.76%     1.06%
              

(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 $1.8 million and $(670) thousand for the nine months ended September 30, 2020 and September 30, 2019, respectively. Loan purchase discount accretion was $7.6 million and $10.0 million for the nine months ended September 30, 2020 and September 30, 2019, respectively. Tax equivalent adjustments were $1.5 million and $1.3 million for the nine months ended September 30, 2020 and September 30, 2019, respectively. The federal statutory tax rate utilized was 21%.
(4) Interest income includes tax equivalent adjustments of $1.5 million and $1.1 million for the nine months ended September 30, 2020 and September 30, 2019, 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), efficiency ratio, core earnings, and adjusted allowance for credit losses ratio. 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 September 30, June 30, March 31, December 31, September 30,
per Share/Tangible Common Equity Ratio 2020 2020 2020 2019 2019
  (Dollars in thousands, except per share data)
Total shareholders’ equity $499,081  $520,781  $500,564  $508,982  $497,885 
Intangible assets, net (89,288) (122,420) (124,167) (124,136) (126,893)
Tangible common equity $409,793  $398,361  $376,397  $384,846  $370,992 
           
Total assets $5,330,708  $5,230,963  $4,763,909  $4,653,573  $4,648,287 
Intangible assets, net (89,288) (122,420) (124,167) (124,136) (126,893)
Tangible assets $5,241,420  $5,108,543  $4,639,742  $4,529,437  $4,521,394 
           
Book value per share $31.00  $32.35  $31.11  $31.49  $30.77 
Tangible book value per share(1) $25.45  $24.74  $23.39  $23.81  $22.93 
Shares outstanding 16,099,324  16,099,324  16,089,782  16,162,176  16,179,734 
           
Equity to assets ratio 9.36% 9.96% 10.51% 10.94% 10.71%
Tangible common equity ratio(2) 7.82% 7.80% 8.11% 8.50% 8.21%
                

(1) Tangible common equity divided by shares outstanding.
(2) Tangible common equity divided by tangible assets.

  Three Months Ended Nine Months Ended
   September 30, June 30, September 30, September 30, September 30,
Return on Average Tangible Equity 2020 2020 2019 2020 2019
  (Dollars in thousands)
Net (loss) income $(19,824) $11,712  $12,300  $(10,087) $30,259 
Intangible amortization, net of tax(1) 1,223  1,311  1,937  4,055  2,974 
Goodwill impairment 31,500      31,500   
Tangible net income $12,899  $13,023  $14,237  $25,468  $33,233 
           
Average shareholders’ equity $529,857  $511,239  $491,750  $518,796  $431,907 
Average intangible assets, net (121,306) (123,313) (128,963) (122,518) (102,224)
Average tangible equity $408,551  $387,926  $362,787  $396,278  $329,683 
           
Return on average equity (14.88)% 9.21% 9.92% (2.60)% 9.37%
Return on average tangible equity(2) 12.56 % 13.50% 15.57% 8.58 % 13.48%
                

(1) The combined income tax rate utilized was 25%.
(2) Annualized tangible net income divided by average tangible equity.

  Three Months Ended Nine Months Ended
Net Interest Margin, Tax Equivalent/
Core Net Interest Margin
 September 30, June 30, September 30, September 30, September 30,
 2020 2020 2019 2020 2019
  (Dollars in thousands)
Net interest income $37,809  $38,712  $43,258  $113,927  $104,066 
Tax equivalent adjustments:          
Loans(1) 536  507  543  1,540  1,262 
Securities(1) 608  482  364  1,485  1,100 
Net interest income, tax equivalent $38,953  $39,701  $44,165  $116,952  $106,428 
Loan purchase discount accretion (1,923) (2,610) (7,207) (7,556) (10,040)
Core net interest income $37,030  $37,091  $36,958  $109,396  $96,388 
           
Net interest margin 3.05% 3.30% 4.07% 3.27% 3.75%
Net interest margin, tax equivalent(2) 3.14% 3.38% 4.15% 3.36% 3.83%
Core net interest margin(3) 2.99% 3.16% 3.48% 3.14% 3.47%
Average interest earning assets $4,935,175  $4,718,581  $4,215,471  $4,646,731  $3,713,038 
                     

(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 Nine Months Ended
  September 30, June 30, September 30, September 30, September 30,
Loan Yield, Tax Equivalent 2020 2020 2019 2020 2019
  (Dollars in thousands)
Loan interest income, including fees $38,191  $40,214  $49,169  $120,417  $118,257 
Tax equivalent adjustment(1) 536  507  543  1,540  1,262 
Tax equivalent loan interest income $38,727  $40,721  $49,712  $121,957  $119,519 
Loan purchase discount accretion (1,923) (2,610) (7,207) (7,556) (10,040)
Core loan interest income $36,804  $38,111  $42,505  $114,401  $109,479 
           
Yield on loans 4.25% 4.45% 5.53% 4.53% 5.19%
Yield on loans, tax equivalent(2) 4.31% 4.51% 5.59% 4.59% 5.25%
Core yield on loans(3) 4.09% 4.22% 4.78% 4.31% 4.81%
Average loans $3,576,642  $3,633,695  $3,526,149  $3,548,968  $3,043,772 
                     

(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 Nine Months Ended
  September 30, June 30, September 30, September 30, September 30,
Efficiency Ratio 2020 2020 2019 2020 2019
  (Dollars in thousands)
Total noninterest expense $59,939  $28,038  $31,442  $117,978  $81,099 
Amortization of intangibles (1,631) (1,748) (2,583) (5,407) (3,965)
Merger-related expenses   (7) (2,547) (61) (5,848)
Goodwill impairment (31,500)     (31,500)  
Noninterest expense used for efficiency ratio $26,808  $26,283  $26,312  $81,010  $71,286 
           
Net interest income, tax equivalent(1) $38,953  $39,701  $44,165  $116,952  $106,428 
Noninterest income 9,570  8,269  8,004  27,994  22,210 
Investment securities gains, net (106) (6) (23) (154) (72)
Net revenues used for efficiency ratio $48,417  $47,964  $52,146  $144,792  $128,566 
           
Efficiency ratio 55.37% 54.80% 50.46% 55.95% 55.45%
                

(1) The federal statutory tax rate utilized was 21%.

  Three Months Ended Nine Months Ended
  September 30, June 30, September 30, September 30, September 30,
Core Earnings  2020 2020 2019 2020 2019
  (Dollars in thousands, except per share data)
Net (loss) income $(19,824) $11,712  $12,300  $(10,087) $30,259 
Goodwill impairment 31,500      31,500   
Core earnings $11,676  $11,712  $12,300  $21,413  $30,259 
           
Weighted average diluted common shares outstanding 16,099  16,100  16,215  16,112  14,445 
           
Earnings (loss) per common share          
Earnings per common share - diluted $(1.23) $0.73  $0.76  $(0.63) $2.09 
Core earnings per common share - diluted (1) $0.73  $0.73  $0.76  $1.33  $2.09 
                     

(1) Core earnings divided by weighted average diluted common shares outstanding

  September 30, June 30, September 30,
Adjusted Allowance for Credit Losses Ratio 2020 2020 2019
  (Dollars in thousands)
Loans held for investment, net of unearned income $3,537,432  $3,597,039  $3,524,728 
PPP loans 331,703  327,648   
Adjusted loans held for investment, net of unearned income $3,205,729  $3,269,391  $3,524,728 
Allowance for credit losses $58,500  $55,644  $31,532 
       
Allowance for credit losses ratio 1.65% 1.55% 0.89%
Adjusted allowance for credit losses ratio(1) 1.82% 1.70% 0.89%
          

(1) Allowance for credit losses divided by adjusted loans held for investment, net of unearned income.

Contact:  
 Charles N. Funk Barry S. Ray
 Chief Executive Officer Senior Executive Vice President and Chief Financial Officer
 319.356.5800 319.356.5800