MidWestOne Financial Group, Inc. Reports Financial Results for the Fourth Quarter and Full Year of 2022


Fourth Quarter Summary1

  • Net income for the fourth quarter was $16.0 million, or $1.02 per diluted common share.
    • Revenue was $54.5 million, which included $2.5 million, or $0.16 per diluted common share, of additional bargain purchase gain stemming from the Iowa First Bancshares Corp. ("IOFB") acquisition.
    • Credit loss expense was $0.6 million.
    • Noninterest expense was $34.4 million, which included $0.4 million of merger-related expenses.
  • Annualized loan growth was 10.36%.
  • Nonperforming assets ratio improved 16 basis points ("bps") to 0.24%.
  • Efficiency ratio was 57.79%2.

Full Year 2022 Summary1

  • Net income for the full year was $60.8 million, or $3.87 per diluted common share.       
  • Adjusted core loan growth (excluding PPP and IOFB acquired loans) was 10.73%2.
  • Nonperforming assets ratio fell 29 bps to 0.24%; net charge-off ratio was 0.19%.
  • Efficiency ratio was 56.98%2.

IOWA CITY, Iowa, Jan. 26, 2023 (GLOBE NEWSWIRE) -- MidWestOne Financial Group, Inc. (Nasdaq: MOFG) (“we”, “our”, or the "Company”) today reported net income for the fourth quarter of 2022 of $16.0 million, or $1.02 per diluted common share, compared to net income of $18.3 million, or $1.17 per diluted common share, for the linked quarter. Net income for the full year of 2022 was $60.8 million, or $3.87 per diluted common share, compared to net income for the full year of 2021 of $69.5 million, or $4.37 per diluted common share.

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1 Fourth Quarter Summary compares to the third quarter of 2022 (the "linked quarter") unless noted. Full Year 2022 Summary compares to the full year 2021 unless noted.

2 Non-GAAP measure. See the separate Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.

CEO COMMENTARY

Charles (Chip) Reeves, Chief Executive Officer of the Company, commented, "We are pleased with our strong loan growth and greatly improved asset quality for the quarter and for the full year ended December 31, 2022. Annualized loan growth was 10.36% for the fourth quarter of 2022, reflecting strong momentum in our key metro markets of the Twin Cities, Denver and Metro Iowa. This represents the third consecutive quarter of double digit loan growth, a true testament to our relationship banking model and the talent acquisition that has occurred the past eighteen months. Asset quality metrics improved as we took strategic action to resolve legacy credit issues. As a result, the nonperforming assets ratio declined 16 bps to 0.24%. The allowance for credit losses ratio stands at 1.28% and 30-89 day delinquencies continue to be low. We believe we are positioned well for the possible macroeconomic uncertainties of 2023.

We continue our balanced approach to deposit costs and retention efforts and measure our cycle-to-date interest bearing deposit beta as 15%. The quarter-over-quarter beta accelerated in the fourth quarter of 2022 to 25% and we expect continued deposit competition in 2023. We will be vigilant in defending our core, relationship deposit franchise. Due to rising funding costs and our earning asset composition, net interest income and net interest margin declined in the fourth quarter of 2022, partially offset by the aforementioned strong loan growth.

During the fourth quarter of 2022, we were pleased to be recognized by Newsweek as Iowa's Best Small Bank for the second year in a row; an outstanding honor for our team members who live our operating principles each and every day."


FINANCIAL HIGHLIGHTS

 Three Months Ended Year Ended
 December 31, September 30, December 31, December 31, December 31,
(Dollars in thousands, except per share amounts)  2022   2022   2021   2022   2021 
Net interest income $43,564  $45,733  $38,819  $166,358  $156,281 
Noninterest income  10,940   12,588   11,229   47,519   42,453 
Total revenue, net of interest expense  54,504   58,321   50,048   213,877   198,734 
Credit loss expense (benefit)  572   638   622   4,492   (7,336)
Noninterest expense  34,440   34,623   30,444   132,788   116,592 
Income before income tax expense  19,492   23,060   18,982   76,597   89,478 
Income tax expense  3,490   4,743   4,726   15,762   19,992 
Net income $16,002  $18,317  $14,256  $60,835  $69,486 
Diluted earnings per share $1.02  $1.17  $0.91  $3.87  $4.37 
           
Return on average assets  0.97%  1.13%  0.95%  0.97%  1.20%
Return on average equity  13.26%  14.56%  10.68%  12.16%  13.18%
Return on average tangible equity(1)  17.85%  19.32%  13.50%  15.89%  16.63%
Efficiency ratio(1)  57.79%  53.67%  56.74%  56.98%  54.65%

(1) Non-GAAP measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Linked Quarter

Net interest income decreased to $43.6 million in the fourth quarter of 2022 from $45.7 million in the third quarter of 2022, due primarily to higher funding costs from the general increase in interest rates and volumes, partially offset by higher interest earning asset yields and volumes.

The Company's tax equivalent net interest margin was 2.93% in the fourth quarter of 2022 compared to 3.08% in the linked quarter, driven by higher funding costs, partially offset by higher interest earning asset yields. The cost of interest bearing liabilities increased 44 bps to 1.08%, due to interest bearing deposits costs of 0.83%, short-term borrowing costs of 2.54%, and long-term debt costs of 5.54%, which increased 37 bps, 120 bps and 84 bps respectively, from the linked quarter. Total interest earning asset yields increased 20 bps from the linked quarter, primarily as a result of an increase in loan and securities yields of 22 bps and 8 bps, respectively.

Average interest bearing liabilities increased $83.2 million to $4.84 billion in the fourth quarter of 2022 from the linked quarter, primarily as a result of increased short-term borrowings. Average interest bearing deposits were up slightly and reflected $48.5 million in average brokered time deposit volumes purchased during the fourth quarter of 2022. Average interest earning assets increased $34.2 million to $6.09 billion in the fourth quarter of 2022 when compared to the linked quarter. This increase reflected growth in the organic loan portfolio, partially offset by lower volumes of debt securities.

Full Year

When compared to the prior year, net interest income increased to $166.4 million from $156.3 million, due primarily to a higher interest earning asset yields and volumes, partially offset by higher funding costs and volumes.

The Company's tax equivalent net interest margin was 2.92% for the year ended 2022 compared to 2.95% in the prior year, driven by higher funding costs, partially offset by higher interest earning asset yields. The cost of interest bearing liabilities increased 18 bps to 0.66%, due to interest bearing deposit costs of 0.48%, short-term borrowing costs of 1.38%, and long-term debt costs of 4.76%, which increased 14 bps, 109 bps and 98 bps, respectively from the prior year end. Total interest earning assets yield increased 12 bps primarily as a result of an increase in securities and loan yields of 31 bps and 3 bps, respectively. Paycheck Protection Program ("PPP") loan fee accretion and interest increased 2021 loan yields by 17 bps compared to 2 bps in 2022.

Average interest bearing liabilities increased $370.9 million to $4.61 billion for the year ended 2022 compared to the prior year, primarily as a result of increased interest bearing deposits and short-term borrowings. The increase reflected liabilities assumed in the IOFB acquisition and higher wholesale funding in 2022. Average interest earning assets increased $403.4 million to $5.86 billion for the year ended 2022 when compared to the prior year. This increase reflected interest-earning assets acquired in the IOFB acquisition, organic loan growth, and a higher volume of debt securities.

Noninterest Income

Noninterest income for the fourth quarter of 2022 decreased $1.6 million, or 13.1%, from the linked quarter. The decrease was primarily due to decreases of $0.8 million and $0.7 million in loan revenue and other income, respectively. The decrease in loan revenue reflected a smaller increase in the fair value of our mortgage servicing rights, coupled with a decline in the gain on sale from residential mortgage loans as a result of lower mortgage origination volumes. The decrease in other noninterest income stemmed primarily from a one-time settlement that was recorded in the third quarter of 2022, which was partially offset by an increase of $2.5 million in the bargain purchase gain recorded related to the IOFB acquisition.

Noninterest income for the year ended 2022 increased $5.1 million, or 11.9%, from the prior year. The increase was primarily due to increases of $6.4 million and $1.2 million in other revenue and service charges and fees, respectively. The increase in other noninterest income was primarily due to a one-time settlement and a $3.8 million bargain purchase gain recognized in connection with the IOFB acquisition. The increase in service charges and fees was primarily attributable to the additional operations of IOFB since acquisition. The largest offset to the increases above was a $2.4 million reduction in loan revenue, which reflected a decline in the gain on sale of residential mortgage loans as a result of lower mortgage origination volumes, partially offset by an increase in the fair value of our mortgage servicing rights.

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

 Three Months Ended Year Ended
Noninterest IncomeDecember 31, September 30, December 31, December 31, December 31,
(In thousands) 2022   2022   2021  2022  2021
Investment services and trust activities$2,666  $2,876  $3,115 $11,223 $11,675
Service charges and fees 2,028   2,075   1,684  7,477  6,259
Card revenue 1,784   1,898   1,746  7,210  7,015
Loan revenue 966   1,722   3,132  10,504  12,948
Bank-owned life insurance 637   579   550  2,305  2,162
Investment securities gains, net (1)  (163)  137  271  242
Other 2,860   3,601   865  8,529  2,152
Total noninterest income$10,940  $12,588  $11,229 $47,519 $42,453


Noninterest Expense

Noninterest expense for the fourth quarter of 2022 decreased $0.2 million, or 0.5%, from the linked quarter, primarily due to decreases of $0.4 million, $0.2 million, and $0.2 million in data processing, marketing, and legal and professional, respectively. These decreases primarily reflected the overall decline in merger-related expenses. Partially offsetting the decreases above was an increase of $0.4 million in compensation and employee benefits stemming from an increase in incentive compensation expense.

Noninterest expense for the year ended 2022 increased $16.2 million, or 13.89%, from the prior year. The increase in noninterest expense was due to an overall increase in all noninterest expense categories, except communications and foreclosed assets, net. These increases primarily reflected costs associated with the acquired operations of IOFB, including merger-related expenses of $2.2 million. Also contributing to the increase in compensation and employee benefits was normal annual salary and employee benefit increases, coupled with a decline of $1.6 million in the benefit from loan origination costs, which are deferred and amortized over the life of the loan to which they relate and were elevated in the prior year due to PPP loans. In addition to the identified increases above, occupancy expense also reflected an increase of $0.6 million from the write-down of fixed assets transferred to held for sale, while legal and professional expense reflected elevated legal expenses related to litigation, loan legal expenses, and executive recruitment.

The decreases in net interest income and noninterest income noted above were the primary drivers of the increase in the efficiency ratio, which increased 4.12 percentage points to 57.79% from 53.67% in the linked quarter. The full year of 2022 increase in noninterest expense more than offset the increases in net interest income and noninterest income, and was the primary driver of the increase in the efficiency ratio, which increased 2.33 percentage points to 56.98% from 54.65% in the prior year.

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

 Three Months Ended Year Ended
Noninterest ExpenseDecember 31, September 30, December 31, December 31, December 31,
(In thousands) 2022  2022  2021  2022   2021
Compensation and employee benefits$20,438 $20,046 $18,266 $78,103  $69,937
Occupancy expense of premises, net 2,663  2,577  2,211  10,272   9,274
Equipment 2,327  2,358  2,189  8,693   7,816
Legal and professional 1,846  2,012  1,826  8,646   5,256
Data processing 1,375  1,731  1,211  5,574   5,216
Marketing 947  1,139  1,121  4,272   4,022
Amortization of intangibles 1,770  1,789  1,245  6,069   5,357
FDIC insurance 405  415  380  1,660   1,572
Communications 285  302  277  1,125   1,332
Foreclosed assets, net 48  42  7  (18)  233
Other 2,336  2,212  1,711  8,392   6,577
Total noninterest expense$34,440 $34,623 $30,444 $132,788  $116,592


The following table presents details of merger-related expenses for the periods indicated:

 Three Months Ended Year Ended
 December 31, September 30, December 31, December 31, December 31,
Merger-related Expenses 2022  2022  2021  2022  2021
(In thousands)         
Compensation and employee benefits$189 $132 $ $471 $
Occupancy expense of premises, net       1  
Equipment 4  14  18  29  18
Legal and professional 54  193  202  948  202
Data processing 131  304    511  
Marketing 2  90  2  164  2
Communications       3  
Other 29  30  2  74  2
Total merger-related expenses$409 $763 $224 $2,201 $224


Income Taxes

The Company's effective income tax rate decreased to 17.9% in the fourth quarter of 2022 compared to 20.6% in the linked quarter. The decrease was primarily due to the increase to the bargain purchase gain that was recorded related to the IOFB acquisition. The effective income tax rate for the full year 2022 was 20.6%, as compared to 22.3% in the prior year.


BALANCE SHEET, LIQUIDITY AND CAPITAL HIGHLIGHTS

As of or for the Three Months Ended
December 31, September 30, December 31,
(Dollars in millions, except per share amounts) 2022   2022   2021 
Ending Balance Sheet     
Total assets$6,577.9  $6,491.1  $6,025.1 
Loans held for investment, net of unearned income 3,840.5   3,746.3   3,245.0 
Total securities 2,282.9   2,299.9   2,288.1 
Total deposits 5,468.9   5,476.8   5,114.5 
Average Balance Sheet     
Average total assets$6,517.0  $6,457.6  $5,934.1 
Average total loans 3,791.9   3,673.4   3,268.8 
Average total deposits 5,495.6   5,507.5   5,015.5 
Funding and Liquidity     
Short-term borrowings$391.9  $304.5  $181.4 
Long-term debt 139.2   154.2   154.9 
Loans to deposits ratio 70.22%  68.40%  63.45%
Equity     
Total shareholders' equity$492.8  $472.2  $527.5 
Common equity ratio 7.49%  7.28%  8.75%
Tangible common equity(1) 400.0   377.7   445.1 
Tangible common equity ratio(1) 6.17%  5.90%  7.49%
Per Share Data     
Book value$31.54  $30.23  $33.66 
Tangible book value(1)$25.60  $24.17  $28.40 

(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, increased $94.2 million, or 2.5%, to $3.84 billion from September 30, 2022. This increase was driven by new loan production and higher volumes of line of credit usage during the fourth quarter of 2022.

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

Loans Held for InvestmentDecember 31, 2022 September 30, 2022 December 31, 2021 
 Balance
 % of Total
 Balance
 % of Total
 Balance
 % of Total
 
(dollars in thousands)      
Commercial and industrial$1,055,162 27.5%$1,041,662 27.8%$902,314 27.8%
Agricultural 115,320 3.0  116,229 3.1  103,417 3.2 
Commercial real estate            
Construction and development 270,991 7.1  276,941 7.4  172,160 5.3 
Farmland 183,913 4.8  183,581 4.9  144,673 4.5 
Multifamily 252,129 6.6  222,592 5.9  244,503 7.5 
Other 1,272,985 33.1  1,226,983 32.8  1,143,205 35.2 
Total commercial real estate 1,980,018 51.6  1,910,097 51.0  1,704,541 52.5 
Residential real estate            
One-to-four family first liens 451,210 11.7  446,373 11.9  333,308 10.3 
One-to-four family junior liens 163,218 4.2  157,276 4.2  133,014 4.1 
Total residential real estate 614,428 15.9  603,649 16.1  466,322 14.4 
Consumer 75,596 2.0  74,652 2.0  68,418 2.1 
Loans held for investment, net of unearned income$3,840,524 100.0%$3,746,289 100.0%$3,245,012 100.0%
             
Total commitments to extend credit$1,190,607   $1,159,323   $1,014,397   


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 Year Ended
Allowance for Credit Losses Roll ForwardDecember 31, September 30, December 31, December 31, December 31,
(In thousands) 2022   2022   2021   2022   2021 
Beginning balance$52,100  $52,350  $47,900  $48,700  $55,500 
PCD allowance established in acquisition          3,371    
Charge-offs (3,615)  (970)  (255)  (7,656)  (2,332)
Recoveries 143   382   533   1,093   2,768 
Net charge-offs (3,472)  (588)  278   (6,563)  436 
Credit loss expense (benefit) related to loans 572   338   522   3,692   (7,236)
Ending balance$49,200  $52,100  $48,700  $49,200  $48,700 


As of December 31, 2022, the allowance for credit losses ("ACL") was $49.2 million, or 1.28% of loans held for investment, net of unearned income, compared with $52.1 million, or 1.39% of loans held for investment, net of unearned income, at September 30, 2022. The change in the ACL between September 30, 2022 and December 31, 2022 included charge-offs of $1.6 million, related to the resolution of credit issues totaling $8.0 million of notes. Credit loss expense of $0.6 million in the fourth quarter of 2022 was consistent with the linked quarter and was primarily attributable to a reserve taken to support loan growth.

Deposits

Total deposits declined $7.8 million, or 0.1%, to $5.47 billion from September 30, 2022. This decline reflected the competitive market for deposits driven by the rapid rate of increase in the federal funds target rate over the course of this year. Brokered deposits increased $126.8 million from September 30, 2022.

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

Deposit CompositionDecember 31, 2022 September 30, 2022 December 31, 2021 
(Dollars in thousands)Balance % of Total Balance % of Total Balance % of Total 
Noninterest bearing deposits$1,053,450 19.3%$1,139,694 20.8%$1,005,369 19.6%
Interest checking deposits 1,624,278 29.8  1,705,289 31.2  1,619,136 31.6 
Money market deposits 937,340 17.1  991,783 18.1  939,523 18.4 
Savings deposits 664,169 12.1  700,843 12.8  628,242 12.3 
Total non-maturity deposits 4,279,237 78.3  4,537,609 82.9  4,192,270 81.9 
Time deposits of $250 and under 559,466 10.2  537,616 9.8  505,392 9.9 
Time deposits over $250 630,239 11.5  401,557 7.3  416,857 8.2 
Total time deposits 1,189,705 21.7  939,173 17.1  922,249 18.1 
Total deposits$5,468,942 100.0%$5,476,782 100.0%$5,114,519 100.0%


CREDIT RISK PROFILE

 As of or For the Three Months Ended
HighlightsDecember 31, September 30, December 31,
(Dollars in thousands) 2022   2022   2021 
Credit loss expense (benefit) related to loans$572  $338  $522 
Net charge-offs (recoveries)$3,472  $588  $(278)
Net charge-off (recovery) ratio(1) 0.36%  0.06% (0.03)%
      
At period-end     
Pass$3,635,766  $3,550,695  $3,013,917 
Special Mention / Watch 108,064   101,255   117,401 
Classified 96,694   94,339   113,694 
Total loans held for investment, net$3,840,524  $3,746,289  $3,245,012 
Classified loans ratio(2) 2.52%  2.52%  3.50%
      
Nonaccrual loans held for investment$15,256  $25,027  $31,540 
Accruing loans contractually past due 90 days or more 565   936    
Total nonperforming loans 15,821   25,963   31,540 
Foreclosed assets, net 103   103   357 
Total nonperforming assets$15,924  $26,066  $31,897 
Nonperforming loans ratio(3) 0.41%  0.69%  0.97%
Nonperforming assets ratio(4) 0.24%  0.40%  0.53%
Allowance for credit losses$49,200  $52,100  $48,700 
Allowance for credit losses ratio(5) 1.28%  1.39%  1.50%
Adjusted allowance for credit losses ratio(6) 1.28%  1.39%  1.52%
Allowance for credit losses to nonaccrual loans ratio(7) 322.50%  208.18%  154.41%

(1) Net charge-off (recovery) ratio is calculated as annualized net charge-offs (recoveries) divided by the sum of average loans held for investment, net of unearned income and average loans held for sale, during the period.
(2) Classified loans ratio is calculated as classified loans divided by loans held for investment, net of unearned income, at the end of the period.
(3) Nonperforming loans ratio is calculated as total nonperforming loans divided by loans held for investment, net of unearned income, at the end of the period.
(4) Nonperforming assets ratio is calculated as total nonperforming assets divided by total assets at the end of the period.
(5) Allowance for credit losses ratio is calculated as allowance for credit losses divided by loans held for investment, net of unearned income, at the end of the period.
(6) Non-GAAP Measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
(7) Allowance for credit losses to nonaccrual loans ratio is calculated as allowance for credit losses divided by nonaccrual loans at the end of the period.

During the fourth quarter of 2022, overall asset quality improved when compared to the linked quarter and the corresponding period in the prior year. The nonperforming assets ratio declined 16 bps from the linked quarter and 29 bps from the prior year to 0.41%. In addition, the classified loans ratio was consistent with the linked quarter at 2.52%, and declined 98 bps from the prior year.

The following table presents a roll forward of nonperforming loans for the period:

Nonperforming LoansNonaccrual
 90+ Days Past Due & Still Accruing
 Total
(Dollars in thousands)  
Balance at September 30, 2022$25,027  $936  $25,963 
Loans placed on nonaccrual or 90+ days past due & still accruing 2,347   68   2,415 
Proceeds related to repayment or sale (8,141)  (3)  (8,144)
Loans returned to accrual status or no longer past due (205)  (107)  (312)
Charge-offs (3,460)  (18)  (3,478)
Transfers to foreclosed assets (312)     (312)
Transfer to nonaccrual    (311)  (311)
Balance at December 31, 2022$15,256  $565  $15,821 


CAPITAL

Effective March 31, 2020, we elected the 5-year phase-in option allowed under the interim final rule (IFR) issued by the federal banking regulatory agencies that delays the estimated impact on regulatory capital stemming from the implementation of the current expected credit losses (CECL) accounting standard. The IFR allows the add back of 100% of the capital effect from the day one CECL transition adjustment and 25% of the capital effect from subsequent increases in the allowance for credit losses through the two-year period ending December 31, 2021. The modified CECL transitional amount of $9.4 million is then reduced from capital over the subsequent three-year period.

Regulatory Capital Ratios

December 31, September 30, December 31,
2022 (1) 2022  2021 
MidWestOne Financial Group, Inc. Consolidated     
Tier 1 leverage to average assets ratio8.35% 8.24% 8.67%
Common equity tier 1 capital to risk-weighted assets ratio9.28% 9.18% 9.94%
Tier 1 capital to risk-weighted assets ratio10.05% 9.97% 10.83%
Total capital to risk-weighted assets ratio12.07% 12.10% 13.09%
MidWestOne Bank     
Tier 1 leverage to average assets ratio9.36% 9.31% 9.25%
Common equity tier 1 capital to risk-weighted assets ratio11.29% 11.26% 11.58%
Tier 1 capital to risk-weighted assets ratio11.29% 11.26% 11.58%
Total capital to risk-weighted assets ratio12.10% 12.17% 12.46%

(1) Capital ratios for December 31, 2022 are preliminary

IOWA FIRST BANCSHARES CORP. ACQUISITION

On June 9, 2022, we acquired Iowa First Bancshares Corp ("IOFB"). The table below summarizes the amounts recognized at the acquisition date for each major class of assets acquired and liabilities assumed:

(In thousands) As of June 9, 2022
  As Reported at
September 30, 2022
 Fourth Quarter of 2022
Fair Value Adjustments
 As Reported at
December 31, 2022
Merger consideration      
Cash consideration $46,672  $ $46,672 
Identifiable net assets acquired, at fair value      
Assets acquired      
Cash and due from banks  10,192     10,192 
Interest earning deposits in banks  67,855     67,855 
Debt securities  119,820     119,820 
Loans held for investment  281,326     281,326 
Premises and equipment  7,363     7,363 
Core deposit intangible  16,500     16,500 
Other assets  11,628   2,512  14,140 
Total assets acquired  514,684   2,512  517,196 
Liabilities assumed      
Deposits  (463,638)    (463,638)
Other liabilities  (3,117)    (3,117)
Total liabilities assumed  (466,755)    (466,755)
Identifiable net assets acquired, at fair value  47,929   2,512  50,441 
Bargain purchase gain (reported in other noninterest income) $1,257  $2,512 $3,769 


CORPORATE UPDATE

Share Repurchase Program

Under our current repurchase program, no common shares were repurchased by the Company during the fourth quarter of 2022. At December 31, 2022, the total amount available under the Company's current share repurchase program was $3.0 million.

Cash Dividend Announcement

The Board of Directors of the Company declared a cash dividend of $0.2425 per common share on January 24, 2023. The dividend is payable March 15, 2023, to shareholders of record at the close of business on March 1, 2023.

CONFERENCE CALL DETAILS

The Company will host a conference call for investors at 11:00 a.m. CT on January 27, 2023. To participate, you may pre-register for this call utilizing the following link: https://www.netroadshow.com/events/login?show=6ffe77d3&confId=45498. After pre-registering for this event you will receive your access details via email. On the day of the call, you are also able to dial 1-844-200-6205 using an access code of 022797 at least fifteen minutes before the call start time. If you are unable to participate on the call, a replay will be available until April 27, 2023, by calling 1-866-813-9403 and using the replay access code of 058978. 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) the risks of mergers (including with IOFB), including, without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and possible failures to achieve expected gains, revenue growth and/or expense savings from such transactions; (2) credit quality deterioration, pronounced and sustained reduction in real estate market values, or other uncertainties, including the impact of inflationary pressures on economic conditions and our business, resulting in an increase in the allowance for credit losses, an increase in the credit loss expense, and a reduction in net earnings; (3) the effects of actual and expected increases in inflation and interest rates, including on our net income and the value of our securities portfolio; (4) changes in the economic environment, competition, or other factors that may affect our ability to acquire loans or influence the anticipated growth rate of loans and deposits and the quality of the loan portfolio and loan and deposit pricing; (5) fluctuations in the value of our investment securities; (6) governmental monetary and fiscal policies; (7) changes in and uncertainty related to benchmark interest rates used to price loans and deposits, including the expected elimination of LIBOR and the adoption of a substitute; (8) legislative and regulatory changes, including changes in banking, securities, trade, and tax laws and regulations and their application by our regulators, including the new 1.0% excise tax on stock buybacks by publicly traded companies; (9) the ability to attract and retain key executives and employees experienced in banking and financial services; (10) the sufficiency of the allowance for credit losses to absorb the amount of actual losses inherent in our existing loan portfolio; (11) our ability to adapt successfully to technological changes to compete effectively in the marketplace; (12) credit risks and risks from concentrations (by geographic area and by industry) within our loan portfolio; (13) 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; (14) the failure of assumptions underlying the establishment of allowances for credit losses and estimation of values of collateral and various financial assets and liabilities; (15) volatility of rate-sensitive deposits; (16) operational risks, including data processing system failures or fraud; (17) asset/liability matching risks and liquidity risks; (18) the costs, effects and outcomes of existing or future litigation; (19) changes in general economic, political, or industry conditions, nationally, internationally or in the communities in which we conduct business; (20) changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the Financial Accounting Standards Board; (21) war or terrorist activities, including the war in Ukraine, widespread disease or pandemic, or other adverse external events, which may cause deterioration in the economy or cause instability in credit markets; (22) the effects of cyber-attacks; (23) the imposition of tariffs or other domestic or international governmental policies impacting the value of the agricultural or other products of our borrowers; (24) effects of the ongoing COVID-19 pandemic, including its effects on the economic environment, our customers, employees and supply chain; and (25) 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

 December 31, September 30, June 30, March 31, December 31,
(In thousands) 2022   2022   2022   2022   2021 
ASSETS         
Cash and due from banks$83,990  $77,513  $60,622  $47,677  $42,949 
Interest earning deposits in banks 2,445   1,001   23,242   12,152   160,881 
Total cash and cash equivalents 86,435   78,514   83,864   59,829   203,830 
Debt securities available for sale at fair value 1,153,547   1,153,304   1,234,789   1,145,638   2,288,110 
Held to maturity securities at amortized cost 1,129,421   1,146,583   1,168,042   1,204,212    
Total securities 2,282,968   2,299,887   2,402,831   2,349,850   2,288,110 
Loans held for sale 612   2,320   4,991   6,466   12,917 
Gross loans held for investment 3,854,791   3,761,664   3,627,728   3,256,294   3,252,194 
Unearned income, net (14,267)  (15,375)  (16,576)  (6,259)  (7,182)
Loans held for investment, net of unearned income 3,840,524   3,746,289   3,611,152   3,250,035   3,245,012 
Allowance for credit losses (49,200)  (52,100)  (52,350)  (46,200)  (48,700)
Total loans held for investment, net 3,791,324   3,694,189   3,558,802   3,203,835   3,196,312 
Premises and equipment, net 87,125   87,732   89,048   82,603   83,492 
Goodwill 62,477   62,477   62,477   62,477   62,477 
Other intangible assets, net 30,315   32,086   33,874   18,658   19,885 
Foreclosed assets, net 103   103   284   273   357 
Other assets 236,517   233,753   206,320   176,223   157,748 
Total assets$6,577,876  $6,491,061  $6,442,491  $5,960,214  $6,025,128 
LIABILITIES          
Noninterest bearing deposits$1,053,450  $1,139,694  $1,114,825  $1,002,415  $1,005,369 
Interest bearing deposits 4,415,492   4,337,088   4,422,616   4,075,310   4,109,150 
Total deposits 5,468,942   5,476,782   5,537,441   5,077,725   5,114,519 
Short-term borrowings 391,873   304,536   193,894   181,193   181,368 
Long-term debt 139,210   154,190   159,168   139,898   154,879 
Other liabilities 85,058   83,324   63,156   56,941   46,887 
Total liabilities 6,085,083   6,018,832   5,953,659   5,455,757   5,497,653 
SHAREHOLDERS' EQUITY          
Common stock 16,581   16,581   16,581   16,581   16,581 
Additional paid-in capital 302,085   301,418   300,859   300,505   300,940 
Retained earnings 289,289   276,998   262,395   253,500   243,365 
Treasury stock (26,115)  (26,145)  (25,772)  (24,113)  (24,546)
Accumulated other comprehensive loss (89,047)  (96,623)  (65,231)  (42,016)  (8,865)
Total shareholders' equity 492,793   472,229   488,832   504,457   527,475 
Total liabilities and shareholders' equity$6,577,876  $6,491,061  $6,442,491  $5,960,214  $6,025,128 


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

 Three Months Ended Year Ended
 December 31, September 30, June 30, March 31, December 31, December 31, December 31,
(In thousands, except per share data) 2022   2022   2022  2022   2021  2022   2021 
Interest income             
Loans, including fees$43,769  $40,451  $32,746 $31,318  $33,643 $148,284  $141,036 
Taxable investment securities 10,685   10,635   9,576  8,123   7,461  39,019   25,692 
Tax-exempt investment securities 2,303   2,326   2,367  2,383   2,415  9,379   9,947 
Other    9   40  28   37  77   91 
Total interest income 56,757   53,421   44,729  41,852   43,556  196,759   176,766 
Interest expense             
Deposits 9,127   5,035   3,173  2,910   3,031  20,245   13,198 
Short-term borrowings 1,955   767   229  119   130  3,070   551 
Long-term debt 2,111   1,886   1,602  1,487   1,576  7,086   6,736 
Total interest expense 13,193   7,688   5,004  4,516   4,737  30,401   20,485 
Net interest income 43,564   45,733   39,725  37,336   38,819  166,358   156,281 
Credit loss expense (benefit) 572   638   3,282     622  4,492   (7,336)
Net interest income after credit loss expense (benefit) 42,992   45,095   36,443  37,336   38,197  161,866   163,617 
Noninterest income             
Investment services and trust activities 2,666   2,876   2,670  3,011   3,115  11,223   11,675 
Service charges and fees 2,028   2,075   1,717  1,657   1,684  7,477   6,259 
Card revenue 1,784   1,898   1,878  1,650   1,746  7,210   7,015 
Loan revenue 966   1,722   3,523  4,293   3,132  10,504   12,948 
Bank-owned life insurance 637   579   558  531   550  2,305   2,162 
Investment securities (losses) gains, net (1)  (163)  395  40   137  271   242 
Other 2,860   3,601   1,606  462   865  8,529   2,152 
Total noninterest income 10,940   12,588   12,347  11,644   11,229  47,519   42,453 
Noninterest expense             
Compensation and employee benefits 20,438   20,046   18,955  18,664   18,266  78,103   69,937 
Occupancy expense of premises, net 2,663   2,577   2,253  2,779   2,211  10,272   9,274 
Equipment 2,327   2,358   2,107  1,901   2,189  8,693   7,816 
Legal and professional 1,846   2,012   2,435  2,353   1,826  8,646   5,256 
Data processing 1,375   1,731   1,237  1,231   1,211  5,574   5,216 
Marketing 947   1,139   1,157  1,029   1,121  4,272   4,022 
Amortization of intangibles 1,770   1,789   1,283  1,227   1,245  6,069   5,357 
FDIC insurance 405   415   420  420   380  1,660   1,572 
Communications 285   302   266  272   277  1,125   1,332 
Foreclosed assets, net 48   42   4  (112)  7  (18)  233 
Other 2,336   2,212   1,965  1,879   1,711  8,392   6,577 
Total noninterest expense 34,440   34,623   32,082  31,643   30,444  132,788   116,592 
Income before income tax expense 19,492   23,060   16,708  17,337   18,982  76,597   89,478 
Income tax expense 3,490   4,743   4,087  3,442   4,726  15,762   19,992 
Net income $16,002  $18,317  $12,621 $13,895  $14,256 $60,835  $69,486 
              
Earnings per common share             
Basic$1.02  $1.17  $0.81 $0.89  $0.91 $3.89  $4.38 
Diluted$1.02  $1.17  $0.80 $0.88  $0.91 $3.87  $4.37 
Weighted average basic common shares outstanding 15,624   15,623   15,668  15,683   15,692  15,649   15,877 
Weighted average diluted common shares outstanding 15,693   15,654   15,688  15,718   15,734  15,701   15,905 
Dividends paid per common share$0.2375  $0.2375  $0.2375 $0.2375  $0.2250 $0.9500  $0.9000 


MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
FINANCIAL STATISTICS

 As of or for the Three Months Ended As of or for the Year Ended
 December 31, September 30, December 31, December 31, December 31,
(Dollars in thousands, except per share amounts) 2022   2022   2021   2022   2021 
Earnings:         
Net interest income$43,564  $45,733  $38,819  $166,358  $156,281 
Noninterest income 10,940   12,588   11,229   47,519   42,453 
Total revenue, net of interest expense 54,504   58,321   50,048   213,877   198,734 
Credit loss expense (benefit) 572   638   622   4,492   (7,336)
Noninterest expense 34,440   34,623   30,444   132,788   116,592 
Income before income tax expense 19,492   23,060   18,982   76,597   89,478 
Income tax expense 3,490   4,743   4,726   15,762   19,992 
Net income$16,002  $18,317  $14,256  $60,835  $69,486 
Per Share Data:         
Diluted earnings$1.02  $1.17  $0.91  $3.87  $4.37 
Book value 31.54   30.23   33.66   31.54   33.66 
Tangible book value(1) 25.60   24.17   28.40   25.60   28.40 
Ending Balance Sheet:         
Total assets$6,577,876  $6,491,061  $6,025,128  $6,577,876  $6,025,128 
Loans held for investment, net of unearned income 3,840,524   3,746,289   3,245,012   3,840,524   3,245,012 
Total securities 2,282,968   2,299,887   2,288,110   2,282,968   2,288,110 
Total deposits 5,468,942   5,476,782   5,114,519   5,468,942   5,114,519 
Short-term borrowings 391,873   304,536   181,368   391,873   181,368 
Long-term debt 139,210   154,190   154,879   139,210   154,879 
Total shareholders' equity 492,793   472,229   527,475   492,793   527,475 
Average Balance Sheet:         
Average total assets$6,516,969  $6,457,647  $5,934,076  $6,244,284  $5,780,556 
Average total loans 3,791,880   3,673,379   3,268,783   3,511,192   3,362,488 
Average total deposits 5,495,599   5,507,482   5,015,506   5,309,049   4,838,227 
Financial Ratios:         
Return on average assets 0.97%  1.13%  0.95%  0.97%  1.20%
Return on average equity 13.26%  14.56%  10.68%  12.16%  13.18%
Return on average tangible equity(1) 17.85%  19.32%  13.50%  15.89%  16.63%
Efficiency ratio(1) 57.79%  53.67%  56.74%  56.98%  54.65%
Net interest margin, tax equivalent(1) 2.93%  3.08%  2.83%  2.92%  2.95%
Loans to deposits ratio 70.22%  68.40%  63.45%  70.22%  63.45%
Common equity ratio 7.49%  7.28%  8.75%  7.49%  8.75%
Tangible common equity ratio(1) 6.17%  5.90%  7.49%  6.17%  7.49%
Credit Risk Profile:         
Total nonperforming loans$15,821  $25,963  $31,540  $15,821  $31,540 
Nonperforming loans ratio 0.41%  0.69%  0.97%  0.41%  0.97%
Total nonperforming assets$15,924  $26,066  $31,897  $15,924  $31,897 
Nonperforming assets ratio 0.24%  0.40%  0.53%  0.24%  0.53%
Net charge-offs (recoveries)$3,472  $588  $(278) $6,563  $(436)
Net charge-off (recovery) ratio 0.36%  0.06% (0.03)%  0.19% (0.01)%
Allowance for credit losses$49,200  $52,100  $48,700  $49,200  $48,700 
Allowance for credit losses ratio 1.28%  1.39%  1.50%  1.28%  1.50%
Allowance for credit losses to nonaccrual ratio 322.50%  208.18%  154.41%  322.50%  154.41%
PPP Loans:         
Average PPP loans$134  $373  $52,564  $4,294  $186,333 
Fee Income 3   8   1,996   867   11,731 

(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
 December 31, 2022 September 30, 2022 December 31, 2021
(Dollars in thousands)Average
Balance
 Interest
Income/
Expense
 Average
Yield/
Cost
 Average
Balance
 Interest
Income/
Expense
 Average
Yield/
Cost
 Average
Balance
 Interest
Income/
Expense
 Average
Yield/
Cost
ASSETS                 
Loans, including fees (1)(2)(3)$3,791,880 $44,494 4.66% $3,673,379 $41,124 4.44% $3,268,783 $34,191 4.15%
Taxable investment securities 1,865,494  10,685 2.27%  1,939,517  10,635 2.18%  1,802,349  7,461 1.64%
Tax-exempt investment securities (2)(4) 422,156  2,893 2.72%  431,898  2,922 2.68%  455,570  3,026 2.64%
Total securities held for investment(2) 2,287,650  13,578 2.35%  2,371,415  13,557 2.27%  2,257,919  10,487 1.84%
Other 5,562   %  6,070  9 0.59%  80,415  37 0.18%
Total interest earning assets(2)$6,085,092 $58,072 3.79% $6,050,864 $54,690 3.59% $5,607,117 $44,715 3.16%
Other assets 431,877      406,783      326,959    
Total assets$6,516,969     $6,457,647     $5,934,076    
LIABILITIES AND SHAREHOLDERS’ EQUITY                 
Interest checking deposits$1,632,749 $1,703 0.41% $1,725,000 $1,463 0.34% $1,506,600 $1,065 0.28%
Money market deposits 995,512  2,369 0.94%  1,016,005  1,268 0.50%  976,018  520 0.21%
Savings deposits 683,538  306 0.18%  710,836  297 0.17%  621,871  285 0.18%
Time deposits 1,067,044  4,749 1.77%  913,307  2,007 0.87%  903,765  1,161 0.51%
Total interest bearing deposits 4,378,843  9,127 0.83%  4,365,148  5,035 0.46%  4,008,254  3,031 0.30%
Securities sold under agreements to repurchase 151,880  437 1.14%  144,628  228 0.63%  190,725  115 0.24%
Federal funds purchased 940  10 4.22%     %  33   %
Other short-term borrowings 152,215  1,508 3.93%  83,086  539 2.57%  30  15 198.37%
Short-term borrowings 305,035  1,955 2.54%  227,714  767 1.34%  190,788  130 0.27%
Long-term debt 151,266  2,111 5.54%  159,125  1,886 4.70%  154,870  1,576 4.04%
Total borrowed funds 456,301  4,066 3.54%  386,839  2,653 2.72%  345,658  1,706 1.96%
Total interest bearing liabilities$4,835,144 $13,193 1.08% $4,751,987 $7,688 0.64% $4,353,912 $4,737 0.43%
Noninterest bearing deposits 1,116,756      1,142,334      1,007,252    
Other liabilities 86,242      64,063      43,576    
Shareholders’ equity 478,827      499,263      529,336    
Total liabilities and shareholders’ equity$6,516,969     $6,457,647     $5,934,076    
Net interest income(2)  $44,879     $47,002     $39,978  
Net interest spread(2)    2.71%     2.95%     2.73%
Net interest margin(2)    2.93%     3.08%     2.83%
                  
Total deposits(5)$5,495,599 $9,127 0.66% $5,507,482 $5,035 0.36% $5,015,506 $3,031 0.24%
Cost of funds(6)    0.88%     0.52%     0.35%

(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 $87 thousand, $35 thousand, and $1.9 million for the three months ended December 31, 2022, September 30, 2022, and December 31, 2021, respectively. Loan purchase discount accretion was $1.3 million, $2.0 million, and $599 thousand for the three months ended December 31, 2022, September 30, 2022, and December 31, 2021, respectively. Tax equivalent adjustments were $725 thousand, $673 thousand, and $548 thousand for the three months ended December 31, 2022, September 30, 2022, and December 31, 2021, respectively. The federal statutory tax rate utilized was 21%.
(4) Interest income includes tax equivalent adjustments of $590 thousand, $596 thousand, and $611 thousand for the three months ended December 31, 2022, September 30, 2022, and December 31, 2021, respectively. The federal statutory tax rate utilized was 21%.
(5) Total deposits is the sum of total interest-bearing deposits and noninterest bearing deposits. The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits.
(6) Cost of funds is calculated as annualized total interest expense divided by the sum of average total deposits and borrowed funds.

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

 Year Ended
 December 31, 2022 December 31, 2021
(Dollars in thousands)Average
Balance
 Interest
Income/
Expense
 Average
Yield/
Cost
 Average
Balance
 Interest
Income/
Expense
 Average
Yield/
Cost
ASSETS           
Loans, including fees (1)(2)(3)$3,511,192 $150,791 4.29% $3,362,488 $143,141 4.26%
Taxable investment securities 1,891,234  39,019 2.06%  1,577,146  25,692 1.63%
Tax-exempt investment securities (2)(4) 435,907  11,788 2.70%  463,526  12,468 2.69%
Total securities held for investment(2) 2,327,141  50,807 2.18%  2,040,672  38,160 1.87%
Other 20,827  77 0.37%  52,617  91 0.17%
Total interest earning assets(2)$5,859,160 $201,675 3.44% $5,455,777 $181,392 3.32%
Other assets 385,124      324,779    
Total assets$6,244,284     $5,780,556    
LIABILITIES AND SHAREHOLDERS’ EQUITY           
Interest checking deposits$1,640,303 $5,416 0.33% $1,440,585 $4,208 0.29%
Money market deposits 992,390  4,707 0.47%  946,784  2,006 0.21%
Savings deposits 674,846  1,169 0.17%  594,543  1,210 0.20%
Time deposits 925,592  8,953 0.97%  882,271  5,774 0.65%
Total interest bearing deposits 4,233,131  20,245 0.48%  3,864,183  13,198 0.34%
Securities sold under agreements to repurchase 152,466  872 0.57%  176,606  436 0.25%
Federal funds purchased 237  10 4.22%  8   %
Other short-term borrowings 70,492  2,188 3.10%  15,143  115 0.76%
Short-term borrowings 223,195  3,070 1.38%  191,757  551 0.29%
Long-term debt 148,863  7,086 4.76%  178,395  6,736 3.78%
Total borrowed funds 372,058  10,156 2.73%  370,152  7,287 1.97%
Total interest bearing liabilities$4,605,189 $30,401 0.66% $4,234,335 $20,485 0.48%
Noninterest bearing deposits 1,075,918      974,044    
Other liabilities 62,706      45,141    
Shareholders’ equity 500,471      527,036    
Total liabilities and shareholders’ equity$6,244,284     $5,780,556    
Net interest income(2)  $171,274     $160,907  
Net interest spread(2)    2.78%     2.84%
Net interest margin(2)    2.92%     2.95%
            
Total deposits(5)$5,309,049 $20,245 0.38% $4,838,227 $13,198 0.27%
Cost of funds(6)    0.54%     0.39%

(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 $0.8 million and $11.2 million for the years ended December 31, 2022 and December 31, 2021, respectively. Loan purchase discount accretion was $4.6 million and $3.3 million for the years ended December 31, 2022 and December 31, 2021, respectively. Tax equivalent adjustments were $2.5 million and $2.1 million for the years ended December 31, 2022 and December 31, 2021, respectively. The federal statutory tax rate utilized was 21%.
(4) Interest income includes tax equivalent adjustments of $2.4 million and $2.5 million for the years ended December 31, 2022 and December 31, 2021, respectively. The federal statutory tax rate utilized was 21%.
(5) Total deposits is the sum of total interest-bearing deposits and noninterest bearing deposits. The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits.
(6) Cost of funds is calculated as annualized total interest expense divided by the sum of average total deposits and borrowed funds.

Non-GAAP Measures

This earnings release contains non-GAAP measures for tangible common equity, tangible book value per share, tangible common equity ratio, return on average tangible equity, net interest margin (tax equivalent), core net interest margin, loan yield (tax equivalent), core yield on loans, efficiency ratio, 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 December 31, September 30, June 30, March 31, December 31,
(Dollars in thousands, except per share data)  2022   2022   2022   2022   2021 
Total shareholders’ equity $492,793  $472,229  $488,832  $504,457  $527,475 
Intangible assets, net  (92,792)  (94,563)  (96,351)  (81,135)  (82,362)
Tangible common equity $400,001  $377,666  $392,481  $423,322  $445,113 
           
Total assets $6,577,876  $6,491,061  $6,442,491  $5,960,214  $6,025,128 
Intangible assets, net  (92,792)  (94,563)  (96,351)  (81,135)  (82,362)
Tangible assets $6,485,084  $6,396,498  $6,346,140  $5,879,079  $5,942,766 
           
Book value per share $31.54  $30.23  $31.26  $32.15  $33.66 
Tangible book value per share(1) $25.60  $24.17  $25.10  $26.98  $28.40 
Shares outstanding  15,623,977   15,622,825   15,635,131   15,690,125   15,671,147 
           
Common equity ratio  7.49%  7.28%  7.59%  8.46%  8.75%
Tangible common equity ratio(2)  6.17%  5.90%  6.18%  7.20%  7.49%

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


  Three Months Ended Year Ended
Return on Average Tangible Equity December 31, September 30, December 31, December 31, December 31,
(Dollars in thousands)  2022   2022   2021   2022   2021 
Net income $16,002  $18,317  $14,256  $60,835  $69,486 
Intangible amortization, net of tax(1)  1,328   1,342   934   4,552   4,018 
Tangible net income $17,330  $19,659  $15,190  $65,387  $73,504 
           
Average shareholders’ equity $478,827  $499,263  $529,336  $500,471  $527,036 
Average intangible assets, net  (93,662)  (95,499)  (82,990)  (88,917)  (84,927)
Average tangible equity $385,165  $403,764  $446,346  $411,554  $442,109 
           
Return on average equity  13.26%  14.56%  10.68%  12.16%  13.18%
Return on average tangible equity(2)  17.85%  19.32%  13.50%  15.89%  16.63%

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


Net Interest Margin, Tax Equivalent/
Core Net Interest Margin

 Three Months Ended Year Ended
 December 31, September 30, December 31, December 31, December 31,
(Dollars in thousands)  2022   2022   2021   2022   2021 
Net interest income $43,564  $45,733  $38,819  $166,358  $156,281 
Tax equivalent adjustments:          
Loans(1)  725   673   548   2,507   2,105 
Securities(1)  590   596   611   2,409   2,521 
Net interest income, tax equivalent $44,879  $47,002  $39,978  $171,274  $160,907 
Loan purchase discount accretion  (1,286)  (2,015)  (599)  (4,561)  (3,344)
Core net interest income $43,593  $44,987  $39,379  $166,713  $157,563 
           
Net interest margin  2.84%  3.00%  2.75%  2.84%  2.86%
Net interest margin, tax equivalent(2)  2.93%  3.08%  2.83%  2.92%  2.95%
Core net interest margin(3)  2.84%  2.95%  2.79%  2.85%  2.89%
Average interest earning assets $6,085,092  $6,050,864  $5,607,117  $5,859,160  $5,455,777 

(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 Year Ended
Loan Yield, Tax Equivalent / Core Yield on Loans December 31, September 30, December 31, December 31, December 31,
(Dollars in thousands)  2022   2022   2021   2022   2021 
Loan interest income, including fees $43,769  $40,451  $33,643  $148,284  $141,036 
Tax equivalent adjustment(1)  725   673   548   2,507   2,105 
Tax equivalent loan interest income $44,494  $41,124  $34,191  $150,791  $143,141 
Loan purchase discount accretion  (1,286)  (2,015)  (599)  (4,561)  (3,344)
Core loan interest income $43,208  $39,109  $33,592  $146,230  $139,797 
           
Yield on loans  4.58%  4.37%  4.08%  4.22%  4.19%
Yield on loans, tax equivalent(2)  4.66%  4.44%  4.15%  4.29%  4.26%
Core yield on loans(3)  4.52%  4.22%  4.08%  4.16%  4.16%
Average loans $3,791,880  $3,673,379  $3,268,783  $3,511,192  $3,362,488 

(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 Year Ended
Efficiency Ratio December 31, September 30, December 31, December 31, December 31,
(Dollars in thousands)  2022   2022   2021   2022   2021 
Total noninterest expense $34,440  $34,623  $30,444  $132,788  $116,592 
Amortization of intangibles  (1,770)  (1,789)  (1,245)  (6,069)  (5,357)
Merger-related expenses  (409)  (763)  (224)  (2,201)  (224)
Noninterest expense used for efficiency ratio $32,261  $32,071  $28,975  $124,518  $111,011 
           
Net interest income, tax equivalent(1) $44,879  $47,002  $39,978  $171,274  $160,907 
Plus: Noninterest income  10,940   12,588   11,229   47,519   42,453 
Less: Investment securities (losses) gains, net  (1)  (163)  137   271   242 
Net revenues used for efficiency ratio $55,820  $59,753  $51,070  $218,522  $203,118 
           
Efficiency ratio (2)  57.79%  53.67%  56.74%  56.98%  54.65%

(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.


Core Loans/Core Commercial Loans December 31, September 30, June 30, March 31, December 31,
(Dollars in thousands)  2022  2022  2022  2022  2021
Commercial loans:          
Commercial and industrial $1,055,162 $1,041,662 $986,137 $898,942 $902,314
Agricultural  115,320  116,229  110,263  94,649  103,417
Commercial real estate  1,980,018  1,910,097  1,859,940  1,723,891  1,704,541
Total commercial loans $3,150,500 $3,067,988 $2,956,340 $2,717,482 $2,710,272
Consumer loans:          
Residential real estate $614,428 $603,649 $578,804 $463,676 $466,322
Other consumer  75,596  74,652  76,008  68,877  68,418
Total consumer loans $690,024 $678,301 $654,812 $532,553 $534,740
Loans held for investment, net of unearned income $3,840,524 $3,746,289 $3,611,152 $3,250,035 $3,245,012
           
PPP loans $83 $195 $402 $3,037 $30,841
Acquired IOFB loan portfolio $281,326 $281,326 $281,470 $ $
           
Core loans(1) $3,840,441 $3,746,094 $3,610,750 $3,246,998 $3,214,171
Adjusted core loans(2) $3,559,115 $3,464,768 $3,329,280 $3,246,998 $3,214,171
Core commercial loans(3) $3,150,417 $3,067,793 $2,955,938 $2,714,445 $2,679,431

(1) Core loans are calculated as loans held for investment, net of unearned income less PPP loans.
(2) Adjusted core loans are calculated as loans held for investment, net of unearned income, less PPP loans and the acquired IOFB loan portfolio.
(3) Core commercial loans are calculated as total commercial loans less PPP loans.

Category: Earnings

This news release can be downloaded from https://www.midwestonefinancial.com/corporate-profile/default.aspx

Source: MidWestOne Financial Group, Inc.

Industry: Banks

Contact:  
 Charles N. Reeves Barry S. Ray
 Chief Executive Officer Chief Financial Officer
 319.356.5800 319.356.5800