MidWestOne Financial Group, Inc. Reports Financial Results for the Third Quarter of 2023
MidWestOne Financial Group, Inc. reports Q3 2023 results with net income of $9.1 million and annualized loan growth of 4.8%. Company announces sale of Florida operations and acquisition of Denver Bankshares, Inc. CEO confident in strategic plan execution.
Positive
Net income of $9.1 million, or $0.58 per diluted common share, compared to $7.6 million, or $0.48 per diluted common share, for the previous quarter. Annualized loan growth of 4.8%. Core deposits increased $83.2 million or 2%. Efficiency ratio improved to 66.06%. Declared cash dividend of $0.2425 per common share.
Negative
Difficult interest rate environment continues to compress net interest margin. Asset quality metrics affected by one senior living credit moving to non-accrual.
10/26/2023 - 04:15 PM
IOWA CITY, Iowa, Oct. 26, 2023 (GLOBE NEWSWIRE) -- MidWestOne Financial Group, Inc. (Nasdaq: MOFG) (“we”, “our”, or the "Company”) today reported results for the third quarter of 2023.
Third Quarter 2023 Highlights 1
Net income of $9.1 million , or $0.58 per diluted common share, compared to net income of $7.6 million , or $0.48 per diluted common share, for the linked quarter. Annualized loan growth of 4.8% . Core deposits increased $83.2 million or 2% . Nonperforming assets ratio of 0.45% ; net charge-off ratio was 0.04% . Efficiency ratio improved to 66.06% . Announced sale of Florida operations and acquisition of Denver Bankshares, Inc. ("Denver Bankshares") in strategic geographic repositioning. Subsequent Events
On October 24, 2023, the Board of Directors declared a cash dividend of $0.24 25 per common share. CEO COMMENTARY
Charles (Chip) Reeves, Chief Executive Officer of the Company, commented, “Despite the difficult interest rate environment, which continues to compress our net interest margin, we had another strong quarter of strategic plan execution, highlighted by the September announcement of the sale of our Florida operations, with the proceeds reinvested into the acquisition of Denver Bankshares. These two transactions align our geographic footprint with our Strategic Plan, while accelerating our Denver market growth by three to four years. We are confident in our ability to integrate this low-risk merger, while continuing our growth trajectory in the attractive Denver MSA. Also, in the third quarter of 2023, our Treasury Management initiatives and client acquisition strategies resulted in balanced loan and deposit growth, providing ample flexibility for future, selective loan growth. Asset quality metrics were affected by one senior living credit moving to non-accrual, however, charge-offs and 30-89 day past dues remain at historically low levels. We remain diligent as uncertain economic conditions begin to normalize asset quality migration.”
Mr. Reeves continued, “While we continue to invest for growth, we are also laser focused on improving our operational effectiveness. Expenses in the quarter were well-controlled and our cost savings initiative to reduce noninterest expense by 2.5% is well underway. To conclude, we've made substantial progress executing our strategic initiatives over the last two quarters, and while we have more to do, I could not be more pleased with our team and the execution of our strategic initiatives.”
_______________1 Third Quarter Summary compares to the second quarter of 2023 (the "linked quarter") unless noted.
As of or for the quarter ended Nine Months Ended (Dollars in thousands, except per share amounts and as noted) September 30, June 30, September 30, September 30, September 30, 2023 2023 2022 2023 2022 Financial Results Revenue $ 44,436 $ 45,708 $ 58,321 $ 126,174 $ 159,373 Credit loss expense 1,551 1,597 638 4,081 3,920 Noninterest expense 31,544 34,919 34,623 99,782 98,348 Net income 9,138 7,594 18,317 18,129 44,833 Per Common Share Diluted earnings per share $ 0.58 $ 0.48 $ 1.17 $ 1.15 $ 2.86 Book value 32.21 31.96 30.23 32.21 30.23 Tangible book value( 1) 26.60 26.26 24.17 26.60 24.17 Balance Sheet & Credit Quality Loans In millions $ 4,066.0 $ 4,018.6 $ 3,746.3 $ 4,066.0 $ 3,746.3 Investment securities In millions 1,958.5 2,003.1 2,299.9 1,958.5 2,299.9 Deposits In millions 5,363.3 5,445.4 5,476.8 5,363.3 5,476.8 Net loan charge-offs In millions 0.5 0.9 0.6 1.7 3.1 Allowance for credit losses ratio 1.27 % 1.25 % 1.39 % 1.27 % 1.39 % Selected Ratios Return on average assets 0.56 % 0.47 % 1.13 % 0.37 % 0.97 % Net interest margin, tax equivalent( 1) 2.35 % 2.52 % 3.08 % 2.54 % 2.92 % Return on average equity 7.14 % 6.03 % 14.56 % 4.81 % 11.81 % Return on average tangible equity( 1) 9.68 % 8.50 % 19.32 % 7.03 % 15.28 % Efficiency ratio( 1) 66.06 % 71.13 % 53.67 % 66.40 % 56.70 %
(1) Non-GAAP measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
REVENUE REVIEW
Revenue Change Change 3Q23 vs 3Q23 vs (Dollars in thousands) 3Q23 2Q23 3Q22 2Q23 3Q22 Net interest income $ 34,575 $ 36,962 $ 45,733 (6 )% (24 )% Noninterest income 9,861 8,746 12,588 13 % (22 )% Total revenue, net of interest expense $ 44,436 $ 45,708 $ 58,321 (3 )% (24 )%
Total revenue for the third quarter of 2023 decreased $1.3 million from the second quarter of 2023 as a result of lower net interest income, partially offset by higher noninterest income. Compared to the third quarter of 2022, total revenue decreased $13.9 million due to lower net interest income and noninterest income.
Net interest income of $34.6 million for the third quarter of 2023 decreased $2.4 million from the second quarter of 2023 and $11.2 million from the third quarter of 2022 as a result of higher funding costs and volumes and lower interest earning asset volumes, partially offset by higher interest earning asset yields.
The Company's tax equivalent net interest margin was 2.35% in the third quarter of 2023 compared to 2.52% in the second quarter of 2023, as higher earning asset yields were more than offset by increased funding costs. The cost of interest bearing liabilities increased 35 basis points ("bps") to 2.33% , due to interest bearing deposit costs of 2.05% , short-term borrowing costs of 4.29% , and long-term debt costs of 6.78% , which increased 26 bps, 138 bps and 40 bps, respectively from the second quarter of 2023. Total interest earning assets yield increased 12 bps from the second quarter of 2023, as a result of an increase in loan and securities yields of 14 bps and 1 bp, respectively. Our cycle-to-date interest bearing deposit beta was 34% .
The tax equivalent net interest margin was 2.35% in the third quarter of 2023 compared to 3.08% in the third quarter of 2022, driven by higher funding costs and volumes, partially offset by higher interest earning asset yields. The cost of interest bearing liabilities increased 169 bps to 2.33% , due to interest bearing deposit costs of 2.05% , short-term borrowing costs of 4.29% , and long-term debt costs of 6.78% , which increased 159 bps, 295 bps and 208 bps, respectively from the third quarter of 2022. Total interest earning assets yield increased 67 bps from the third quarter of 2022, primarily as a result of an increase in loan and securities yields of 75 bps and 9 bps, respectively.
Noninterest Income Change Change 3Q23 vs 3Q23 vs (In thousands) 3Q23 2Q23 3Q22 2Q23 3Q22 Investment services and trust activities $ 3,004 $ 3,119 $ 2,876 (4 )% 4 % Service charges and fees 2,146 2,047 2,075 5 % 3 % Card revenue 1,817 1,847 1,898 (2 )% (4 )% Loan revenue 1,462 909 1,722 61 % (15 )% Bank-owned life insurance 626 616 579 2 % 8 % Investment securities gains (losses), net 79 (2 ) (163 ) n / m (148 )% Other 727 210 3,601 246 % (80 )% Total noninterest income $ 9,861 $ 8,746 $ 12,588 13 % (22 )% Results are not meaningful (n/m)
Noninterest income for the third quarter of 2023 increased $1.1 million from the linked quarter due primarily to a $0.6 million favorable change in loan revenue, coupled with a $0.5 million increase in other revenue. Loan revenue reflected a favorable quarter-over quarter change in the fair value of our mortgage servicing rights of $0.9 million , partially offset by a decrease in loan sale gains generated by our governmental lending business and a decrease in revenue in our mortgage origination business. Other revenue reflected an increase of $0.6 million in swap origination fee income. Noninterest income decreased $2.7 million from the third quarter of 2022, primarily due to the decline of $2.9 million in other revenue stemming from a one-time settlement recognized in the third quarter of 2022.
EXPENSE REVIEW
Noninterest Expense Change Change 3Q23 vs 2Q23 vs (In thousands) 3Q23 2Q23 3Q22 2Q23 3Q22 Compensation and employee benefits $ 18,558 $ 20,386 $ 20,046 (9 )% (7 )% Occupancy expense of premises, net 2,405 2,574 2,577 (7 )% (7 )% Equipment 2,123 2,435 2,358 (13 )% (10 )% Legal and professional 1,678 1,682 2,012 — % (17 )% Data processing 1,504 1,521 1,731 (1 )% (13 )% Marketing 782 1,142 1,139 (32 )% (31 )% Amortization of intangibles 1,460 1,594 1,789 (8 )% (18 )% FDIC insurance 783 862 415 (9 )% 89 % Communications 206 260 302 (21 )% (32 )% Foreclosed assets, net 2 (6 ) 42 (133 )% (95 )% Other 2,043 2,469 2,212 (17 )% (8 )% Total noninterest expense $ 31,544 $ 34,919 $ 34,623 (10 )% (9 )%
Merger-related Expenses (In thousands) 3Q23 2Q23 3Q22 Compensation and employee benefits $ — $ — $ 132 Equipment — — 14 Legal and professional 11 — 193 Data processing — — 304 Marketing — — 90 Other — — 30 Total merger-related expenses $ 11 $ — $ 763
Noninterest expense for the third quarter of 2023 decreased $3.4 million , or 9.7% , from the linked quarter with overall decreases in all noninterest expense categories except foreclosed assets, net. The decrease in compensation and employee benefits reflected a reduction of $1.1 million in severance expense, as well as a reduction of $1.1 million in medical insurance benefit expense, driven primarily by accrual adjustments. The $0.4 million decline in other noninterest expense was driven by various changes, including $0.2 million of executive relocation expense recognized in the linked quarter that did not recur and reduced loan expenses by $0.2 million . The $0.4 million decrease in marketing reflected a decline in advertising and sponsorships.
Noninterest expense for the third quarter of 2023 decreased $3.1 million , or 8.9% , from the third quarter of 2022, with overall decreases in all noninterest expense categories except FDIC insurance. These decreases primarily reflected a $1.8 million decline in employee benefits and incentives and commission expense, coupled with a $0.8 million decrease in merger-related expenses.
The Company's effective income tax rate increased to 19.4% in the third quarter of 2023 compared to 17.4% in the linked quarter. The higher effective income tax rate reflected an adjustment to the full-year 2023 estimated taxable income in the Company's annual effective tax rate calculation. The effective income tax rate for the full year 2023 is expected to be in the range of 18% - 20% .
BALANCE SHEET REVIEW
Total assets were $6.47 billion at September 30, 2023, compared to $6.52 billion at June 30, 2023 and $6.49 billion at September 30, 2022. The decrease from June 30, 2023 was driven by lower cash and securities balances, partially offset by higher loan balances. Compared to September 30, 2022, the decrease was due primarily to lower securities balances resulting from the balance sheet repositioning executed in the first quarter of 2023 as well as lower cash balances, partially offset by higher loan balances.
Loans Held for Investment September 30, 2023 June 30, 2023 September 30, 2022 (Dollars in thousands) Balance % of Total Balance % of Total Balance % of Total Commercial and industrial $ 1,078,773 26.5 % $ 1,089,269 27.1 % $ 1,041,662 27.8 % Agricultural 111,950 2.8 106,148 2.6 116,229 3.1 Commercial real estate Construction and development 331,868 8.2 313,836 7.8 276,941 7.4 Farmland 182,621 4.5 183,378 4.6 183,581 4.9 Multifamily 337,509 8.3 305,519 7.6 222,592 5.9 Other 1,324,019 32.5 1,331,886 33.1 1,226,983 32.8 Total commercial real estate 2,176,017 53.5 2,134,619 53.1 1,910,097 51.0 Residential real estate One-to-four family first liens 456,771 11.2 448,096 11.2 446,373 11.9 One-to-four family junior liens 173,275 4.3 168,755 4.2 157,276 4.2 Total residential real estate 630,046 15.5 616,851 15.4 603,649 16.1 Consumer 69,183 1.7 71,762 1.8 74,652 2.0 Loans held for investment, net of unearned income $ 4,065,969 100.0 % $ 4,018,649 100.0 % $ 3,746,289 100.0 % Total commitments to extend credit $ 1,251,345 $ 1,296,719 $ 1,159,323
Loans held for investment, net of unearned income, increased $47.3 million , or 1.2% , to $4.07 billion from $4.02 billion at June 30, 2023. This increase was driven by new loan production in the third quarter of 2023.
Investment Securities September 30, 2023 June 30, 2023 September 30, 2022 (Dollars in thousands) Balance % of Total Balance % of Total Balance % of Total Available for sale $ 872,770 44.6 % $ 903,520 45.1 % $ 1,153,304 50.1 % Held to maturity 1,085,751 55.4 % 1,099,569 54.9 % 1,146,583 49.9 % Total investment securities $ 1,958,521 $ 2,003,089 $ 2,299,887
Investment securities at September 30, 2023 were $1.96 billion , decreasing $44.6 million from June 30, 2023 and $341.4 million from September 30, 2022. The decrease from the second quarter of 2023 was due primarily to paydowns, calls, and maturities. The decrease from the third quarter of 2022 was due primarily to the balance sheet repositioning executed in the first quarter of 2023.
Deposits September 30, 2023 June 30, 2023 September 30, 2022 (Dollars in thousands) Balance % of Total Balance % of Total Balance % of Total Noninterest bearing deposits $ 924,213 17.2 % $ 897,923 16.5 % $ 1,139,694 20.8 % Interest checking deposits 1,334,481 24.9 1,397,276 25.7 1,705,289 31.2 Money market deposits 1,127,287 21.0 1,096,432 20.1 991,783 18.1 Savings deposits 619,805 11.6 585,967 10.8 700,843 12.8 Time deposits of $250 and under 703,646 13.1 648,586 11.9 537,616 9.8 Total core deposits 4,709,432 87.8 4,626,184 85.0 5,075,225 92.7 Brokered time deposits 220,063 4.1 365,623 6.7 — — Time deposits over $250 433,829 8.1 453,640 8.3 401,557 7.3 Total deposits $ 5,363,324 100.0 % $ 5,445,447 100.0 % $ 5,476,782 100.0 %
Total deposits declined $82.1 million , or 1.5% , to $5.36 billion from $5.45 billion at June 30, 2023. Brokered deposits decreased $145.6 million from $365.6 million at June 30, 2023. Core deposits increased $83.2 million from June 30, 2023.
Borrowed Funds September 30, 2023 June 30, 2023 September 30, 2022 (Dollars in thousands) Balance % of Total Balance % of Total Balance % of Total Short-term borrowings $ 373,956 75.0 % $ 362,054 74.2 % $ 304,536 66.4 % Long-term debt 124,526 25.0 % 125,752 25.8 % 154,190 33.6 % Total borrowed funds $ 498,482 $ 487,806 $ 458,726
Total borrowed funds were $498.5 million at September 30, 2023 an increase of $10.7 million from June 30, 2023 and an increase of $39.8 million from September 30, 2022. The increase when compared to the linked quarter was due to increased Federal Home Loan Bank overnight borrowings, partially offset by a reduction in securities sold under agreements to repurchase. The increase when compared to September 30, 2022 was primarily due to Bank Term Funding Program borrowings of $225 million , as compared to no such borrowings in the prior year, partially offset by a reduction in securities sold under agreements to repurchase and Federal Home Loan Bank overnight borrowings.
Capital September 30, June 30, September 30, (Dollars in thousands) 2023 (1) 2023 2022 Total shareholders' equity $ 505,411 $ 501,341 $ 472,229 Accumulated other comprehensive loss (84,606 ) (82,704 ) (96,623 ) MidWest One Financial Group, Inc. Consolidated Tier 1 leverage to average assets ratio 8.58 % 8.47 % 8.24 % Common equity tier 1 capital to risk-weighted assets ratio 9.52 % 9.36 % 9.18 % Tier 1 capital to risk-weighted assets ratio 10.31 % 10.15 % 9.97 % Total capital to risk-weighted assets ratio 12.45 % 12.26 % 12.10 % MidWest One Bank Tier 1 leverage to average assets ratio 9.51 % 9.42 % 9.31 % Common equity tier 1 capital to risk-weighted assets ratio 11.43 % 11.31 % 11.26 % Tier 1 capital to risk-weighted assets ratio 11.43 % 11.31 % 11.26 % Total capital to risk-weighted assets ratio 12.36 % 12.22 % 12.17 %
(1) Regulatory capital ratios for September 30, 2023 are preliminary
Total shareholders' equity at September 30, 2023 increased $4.1 million from June 30, 2023, driven by the benefit of third quarter net income, partially offset by an increase in accumulated other comprehensive loss and dividends paid during the third quarter of 2023.
Accumulated other comprehensive loss at September 30, 2023 increased $1.9 million compared to June 30, 2023, primarily due to a decrease in available for sale securities valuations. Accumulated other comprehensive loss decreased $12.0 million from September 30, 2022.
On October 24, 2023, the Board of Directors of the Company declared a cash dividend of $0.24 25 per common share. The dividend is payable December 15, 2023, to shareholders of record at the close of business on December 1, 2023.
No common shares were repurchased by the Company during the period June 30, 2023 through September 30, 2023 or for the subsequent period through October 26, 2023. The current share repurchase program allows for the repurchase of up to $15.0 million of the Company's common shares.
CREDIT QUALITY REVIEW
Credit Quality As of or For the Three Months Ended September 30, June 30, September 30, (Dollars in thousands) 2023 2023 2022 Credit loss expense related to loans $ 1,651 $ 1,497 $ 338 Net charge-offs 451 897 588 Allowance for credit losses 51,600 50,400 52,100 Pass $ 3,785,908 $ 3,769,309 $ 3,550,695 Special Mention / Watch 163,222 133,904 101,255 Classified 116,839 115,436 94,339 Loans greater than 30 days past due and accruing $ 6,449 $ 6,201 $ 5,960 Nonperforming loans $ 28,987 $ 14,448 $ 25,963 Nonperforming assets 28,987 14,448 26,066 Net charge-off ratio( 1) 0.04 % 0.09 % 0.06 % Classified loans ratio( 2) 2.87 % 2.87 % 2.52 % Nonperforming loans ratio( 3) 0.71 % 0.36 % 0.69 % Nonperforming assets ratio( 4) 0.45 % 0.22 % 0.40 % Allowance for credit losses ratio( 5) 1.27 % 1.25 % 1.39 % Allowance for credit losses to nonaccrual loans ratio( 6) 178.63 % 355.03 % 208.18 %
(1) Net charge-off ratio is calculated as annualized net charge-offs 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 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 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) 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.
Compared to the linked quarter, nonperforming loans and assets ratios increased 35 bps and 23 bps, respectively, and when compared to the prior year increased 2 bps and 5 bps, respectively, to 0.71% and 0.45% , primarily due to the downgrade of a single commercial relationship.
As of September 30, 2023, the allowance for credit losses was $51.6 million , or 1.27% of loans held for investment, net of unearned income, compared with $50.4 million , or 1.25% of loans held for investment, net of unearned income, at June 30, 2023. Credit loss expense of $1.6 million in the third quarter of 2023 was primarily attributable to loan growth.
Nonperforming Loans Roll Forward Nonaccrual 90+ Days Past Due & Still Accruing Total Balance at June 30, 2023 $ 14,196 $ 252 $ 14,448 Loans placed on nonaccrual or 90+ days past due & still accruing 16,394 140 16,534 Proceeds related to repayment or sale (799 ) (1 ) (800 ) Loans returned to accrual status or no longer past due (298 ) (252 ) (550 ) Charge-offs (603 ) (39 ) (642 ) Transfers to foreclosed assets (3 ) — (3 ) Balance at September 30, 2023 $ 28,887 $ 100 $ 28,987
CONFERENCE CALL DETAILS
The Company will host a conference call for investors at 11:00 a.m. CT on Friday, October 27, 2023. To participate, you may pre-register for this call utilizing the following link: https://www.netroadshow.com/events/login?show=03182047&confId=56188. 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 1-833-470-1428 using an access code of 146099 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 25, 2024 by calling 1-866-813-9403 and using the replay access code of 205972. 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 MIDWEST ONE 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) t he risks of mergers or branch sales (including with Iowa First Bancshares Corp. and Denver Bankshares, Inc.) , 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 recent and potential additional 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; (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 and any changes in response to the recent failures of other banks; (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, including the risk of a recession; (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 Israeli-Palestinian conflict and the Russian invasion of 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 occurrence of fraudulent activity, breaches, or failures of our information security controls or cyber-security related incidents, including as a result of sophisticated attacks using artificial intelligence and similar tools; (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; (25) the concentration of large deposits from certain clients who have balances above current FDIC insurance limits; (26) the effects of recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time at other banks that resulted in failure of those institutions; and (27) other risk factors detailed from time to time in Securities and Exchange Commission filings made by the Company.
MIDWEST ONE FINANCIAL GROUP, INC. AND SUBSIDIARIES FIVE QUARTER CONSOLIDATED BALANCE SHEETS
September 30, June 30, March 31, December 31, September 30, (In thousands) 2023 2023 2023 2022 2022 ASSETS Cash and due from banks $ 71,015 $ 75,955 $ 63,945 $ 83,990 $ 77,513 Interest earning deposits in banks 3,773 68,603 5,273 2,445 1,001 Total cash and cash equivalents 74,788 144,558 69,218 86,435 78,514 Debt securities available for sale at fair value 872,770 903,520 954,074 1,153,547 1,153,304 Held to maturity securities at amortized cost 1,085,751 1,099,569 1,117,709 1,129,421 1,146,583 Total securities 1,958,521 2,003,089 2,071,783 2,282,968 2,299,887 Loans held for sale 2,528 2,821 2,553 612 2,320 Gross loans held for investment 4,078,060 4,031,377 3,932,900 3,854,791 3,761,664 Unearned income, net (12,091 ) (12,728 ) (13,535 ) (14,267 ) (15,375 ) Loans held for investment, net of unearned income 4,065,969 4,018,649 3,919,365 3,840,524 3,746,289 Allowance for credit losses (51,600 ) (50,400 ) (49,800 ) (49,200 ) (52,100 ) Total loans held for investment, net 4,014,369 3,968,249 3,869,565 3,791,324 3,694,189 Premises and equipment, net 85,589 85,831 86,208 87,125 87,732 Goodwill 62,477 62,477 62,477 62,477 62,477 Other intangible assets, net 25,510 26,969 28,563 30,315 32,086 Foreclosed assets, net — — — 103 103 Other assets 244,036 227,495 219,585 236,517 233,753 Total assets $ 6,467,818 $ 6,521,489 $ 6,409,952 $ 6,577,876 $ 6,491,061 LIABILITIES Noninterest bearing deposits $ 924,213 $ 897,923 $ 989,469 $ 1,053,450 $ 1,139,694 Interest bearing deposits 4,439,111 4,547,524 4,565,684 4,415,492 4,337,088 Total deposits 5,363,324 5,445,447 5,555,153 5,468,942 5,476,782 Short-term borrowings 373,956 362,054 143,981 391,873 304,536 Long-term debt 124,526 125,752 137,981 139,210 154,190 Other liabilities 100,601 86,895 72,187 85,058 83,324 Total liabilities 5,962,407 6,020,148 5,909,302 6,085,083 6,018,832 SHAREHOLDERS' EQUITY Common stock 16,581 16,581 16,581 16,581 16,581 Additional paid-in capital 301,889 301,424 300,966 302,085 301,418 Retained earnings 295,862 290,548 286,767 289,289 276,998 Treasury stock (24,315 ) (24,508 ) (24,779 ) (26,115 ) (26,145 ) Accumulated other comprehensive loss (84,606 ) (82,704 ) (78,885 ) (89,047 ) (96,623 ) Total shareholders' equity 505,411 501,341 500,650 492,793 472,229 Total liabilities and shareholders' equity $ 6,467,818 $ 6,521,489 $ 6,409,952 $ 6,577,876 $ 6,491,061
MIDWEST ONE FINANCIAL GROUP, INC. AND SUBSIDIARIES FIVE QUARTER AND YEAR TO DATE CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended September 30, June 30, March 31, December 31, September 30, September 30, September 30, (In thousands, except per share data) 2023 2023 2023 2022 2022 2023 2022 Interest income Loans, including fees $ 51,870 $ 49,726 $ 46,490 $ 43,769 $ 40,451 $ 148,086 $ 104,515 Taxable investment securities 9,526 9,734 10,444 10,685 10,635 29,704 28,334 Tax-exempt investment securities 1,802 1,822 2,127 2,303 2,326 5,751 7,076 Other 374 68 244 — 9 686 77 Total interest income 63,572 61,350 59,305 56,757 53,421 184,227 140,002 Interest expense Deposits 23,128 20,117 15,319 9,127 5,035 58,564 11,118 Short-term borrowings 3,719 2,118 1,786 1,955 767 7,623 1,115 Long-term debt 2,150 2,153 2,124 2,111 1,886 6,427 4,975 Total interest expense 28,997 24,388 19,229 13,193 7,688 72,614 17,208 Net interest income 34,575 36,962 40,076 43,564 45,733 111,613 122,794 Credit loss expense 1,551 1,597 933 572 638 4,081 3,920 Net interest income after credit loss expense 33,024 35,365 39,143 42,992 45,095 107,532 118,874 Noninterest income (loss) Investment services and trust activities 3,004 3,119 2,933 2,666 2,876 9,056 8,557 Service charges and fees 2,146 2,047 2,008 2,028 2,075 6,201 5,449 Card revenue 1,817 1,847 1,748 1,784 1,898 5,412 5,426 Loan revenue 1,462 909 1,420 966 1,722 3,791 9,538 Bank-owned life insurance 626 616 602 637 579 1,844 1,668 Investment securities (losses) gains, net 79 (2 ) (13,170 ) (1 ) (163 ) (13,093 ) 272 Other 727 210 413 2,860 3,601 1,350 5,669 Total noninterest income (loss) 9,861 8,746 (4,046 ) 10,940 12,588 14,561 36,579 Noninterest expense Compensation and employee benefits 18,558 20,386 19,607 20,438 20,046 58,551 57,665 Occupancy expense of premises, net 2,405 2,574 2,746 2,663 2,577 7,725 7,609 Equipment 2,123 2,435 2,171 2,327 2,358 6,729 6,366 Legal and professional 1,678 1,682 1,736 1,846 2,012 5,096 6,800 Data processing 1,504 1,521 1,363 1,375 1,731 4,388 4,199 Marketing 782 1,142 986 947 1,139 2,910 3,325 Amortization of intangibles 1,460 1,594 1,752 1,770 1,789 4,806 4,299 FDIC insurance 783 862 749 405 415 2,394 1,255 Communications 206 260 261 285 302 727 840 Foreclosed assets, net 2 (6 ) (28 ) 48 42 (32 ) (66 ) Other 2,043 2,469 1,976 2,336 2,212 6,488 6,056 Total noninterest expense 31,544 34,919 33,319 34,440 34,623 99,782 98,348 Income before income tax expense 11,341 9,192 1,778 19,492 23,060 22,311 57,105 Income tax expense 2,203 1,598 381 3,490 4,743 4,182 12,272 Net income $ 9,138 $ 7,594 $ 1,397 $ 16,002 $ 18,317 $ 18,129 $ 44,833 Earnings per common share Basic $ 0.58 $ 0.48 $ 0.09 $ 1.02 $ 1.17 $ 1.16 $ 2.86 Diluted $ 0.58 $ 0.48 $ 0.09 $ 1.02 $ 1.17 $ 1.15 $ 2.86 Weighted average basic common shares outstanding 15,689 15,680 15,650 15,624 15,623 15,673 15,658 Weighted average diluted common shares outstanding 15,711 15,689 15,691 15,693 15,654 15,696 15,686 Dividends paid per common share $ 0.2425 $ 0.2425 $ 0.2425 $ 0.2375 $ 0.2375 $ 0.7275 $ 0.7125
MIDWEST ONE FINANCIAL GROUP, INC. AND SUBSIDIARIES FINANCIAL STATISTICS
As of or for the Three Months Ended As of or for the Nine Months Ended September 30, June 30, September 30, September 30, September 30, (Dollars in thousands, except per share amounts) 2023 2023 2022 2023 2022 Earnings: Net interest income $ 34,575 $ 36,962 $ 45,733 $ 111,613 $ 122,794 Noninterest income 9,861 8,746 12,588 14,561 36,579 Total revenue, net of interest expense 44,436 45,708 58,321 126,174 159,373 Credit loss expense 1,551 1,597 638 4,081 3,920 Noninterest expense 31,544 34,919 34,623 99,782 98,348 Income before income tax expense 11,341 9,192 23,060 22,311 57,105 Income tax expense 2,203 1,598 4,743 4,182 12,272 Net income $ 9,138 $ 7,594 $ 18,317 $ 18,129 $ 44,833 Per Share Data: Diluted earnings $ 0.58 $ 0.48 $ 1.17 $ 1.15 $ 2.86 Book value 32.21 31.96 30.23 32.21 30.23 Tangible book value( 1) 26.60 26.26 24.17 26.60 24.17 Ending Balance Sheet: Total assets $ 6,467,818 $ 6,521,489 $ 6,491,061 $ 6,467,818 $ 6,491,061 Loans held for investment, net of unearned income 4,065,969 4,018,649 3,746,289 4,065,969 3,746,289 Total securities 1,958,521 2,003,089 2,299,887 1,958,521 2,299,887 Total deposits 5,363,324 5,445,447 5,476,782 5,363,324 5,476,782 Short-term borrowings 373,956 362,054 304,536 373,956 304,536 Long-term debt 124,526 125,752 154,190 124,526 154,190 Total shareholders' equity 505,411 501,341 472,229 505,411 472,229 Average Balance Sheet: Average total assets $ 6,452,815 $ 6,465,810 $ 6,457,647 $ 6,480,636 $ 6,152,390 Average total loans 4,019,852 4,003,717 3,673,379 3,964,119 3,416,600 Average total deposits 5,379,871 5,454,517 5,507,482 5,459,749 5,246,183 Financial Ratios: Return on average assets 0.56 % 0.47 % 1.13 % 0.37 % 0.97 % Return on average equity 7.14 % 6.03 % 14.56 % 4.81 % 11.81 % Return on average tangible equity( 1) 9.68 % 8.50 % 19.32 % 7.03 % 15.28 % Efficiency ratio( 1) 66.06 % 71.13 % 53.67 % 66.40 % 56.70 % Net interest margin, tax equivalent( 1) 2.35 % 2.52 % 3.08 % 2.54 % 2.92 % Loans to deposits ratio 75.81 % 73.80 % 68.40 % 75.81 % 68.40 % Common equity ratio 7.81 % 7.69 % 7.28 % 7.81 % 7.28 % Tangible common equity ratio( 1) 6.54 % 6.40 % 5.90 % 6.54 % 5.90 % Credit Risk Profile: Total nonperforming loans $ 28,987 $ 14,448 $ 25,963 $ 28,987 $ 25,963 Nonperforming loans ratio 0.71 % 0.36 % 0.69 % 0.71 % 0.69 % Total nonperforming assets $ 28,987 $ 14,448 $ 26,066 $ 28,987 $ 26,066 Nonperforming assets ratio 0.45 % 0.22 % 0.40 % 0.45 % 0.40 % Net charge-offs $ 451 $ 897 $ 588 $ 1,681 $ 3,091 Net charge-off ratio 0.04 % 0.09 % 0.06 % 0.06 % 0.12 % Allowance for credit losses $ 51,600 $ 50,400 $ 52,100 $ 51,600 $ 52,100 Allowance for credit losses ratio 1.27 % 1.25 % 1.39 % 1.27 % 1.39 % Allowance for credit losses to nonaccrual ratio 178.63 % 355.03 % 208.18 % 178.63 % 208.18 %
(1) Non-GAAP measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
MIDWEST ONE FINANCIAL GROUP, INC. AND SUBSIDIARIES AVERAGE BALANCE SHEET AND YIELD ANALYSIS
Three Months Ended September 30, 2023 June 30, 2023 September 30, 2022 (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) $ 4,019,852 $ 52,605 5.19 % $ 4,003,717 $ 50,439 5.05 % $ 3,673,379 $ 41,124 4.44 % Taxable investment securities 1,637,259 9,526 2.31 % 1,698,003 9,734 2.30 % 1,939,517 10,635 2.18 % Tax-exempt investment securities (2)(4) 341,330 2,234 2.60 % 345,934 2,253 2.61 % 431,898 2,922 2.68 % Total securities held for investment( 2) 1,978,589 11,760 2.36 % 2,043,937 11,987 2.35 % 2,371,415 13,557 2.27 % Other 34,195 374 4.34 % 9,078 68 3.00 % 6,070 9 0.59 % Total interest earning assets( 2) $ 6,032,636 $ 64,739 4.26 % $ 6,056,732 $ 62,494 4.14 % $ 6,050,864 $ 54,690 3.59 % Other assets 420,179 409,078 406,783 Total assets $ 6,452,815 $ 6,465,810 $ 6,457,647 LIABILITIES AND SHAREHOLDERS’ EQUITY Interest checking deposits $ 1,354,597 $ 2,179 0.64 % $ 1,420,741 $ 1,971 0.56 % $ 1,725,000 $ 1,463 0.34 % Money market deposits 1,112,149 7,402 2.64 % 999,436 5,299 2.13 % 1,016,005 1,268 0.50 % Savings deposits 603,628 749 0.49 % 603,905 288 0.19 % 710,836 297 0.17 % Time deposits 1,403,504 12,798 3.62 % 1,490,332 12,559 3.38 % 913,307 2,007 0.87 % Total interest bearing deposits 4,473,878 23,128 2.05 % 4,514,414 20,117 1.79 % 4,365,148 5,035 0.46 % Securities sold under agreements to repurchase 66,020 85 0.51 % 159,583 423 1.06 % 144,628 228 0.63 % Other short-term borrowings 277,713 3,634 5.19 % 132,495 1,695 5.13 % 83,086 539 2.57 % Short-term borrowings 343,733 3,719 4.29 % 292,078 2,118 2.91 % 227,714 767 1.34 % Long-term debt 125,737 2,150 6.78 % 135,329 2,153 6.38 % 159,125 1,886 4.70 % Total borrowed funds 469,470 5,869 4.96 % 427,407 4,271 4.01 % 386,839 2,653 2.72 % Total interest bearing liabilities $ 4,943,348 $ 28,997 2.33 % $ 4,941,821 $ 24,388 1.98 % $ 4,751,987 $ 7,688 0.64 % Noninterest bearing deposits 905,993 940,103 1,142,334 Other liabilities 95,408 78,898 64,063 Shareholders’ equity 508,066 504,988 499,263 Total liabilities and shareholders’ equity $ 6,452,815 $ 6,465,810 $ 6,457,647 Net interest income( 2) $ 35,742 $ 38,106 $ 47,002 Net interest spread( 2) 1.93 % 2.16 % 2.95 % Net interest margin( 2) 2.35 % 2.52 % 3.08 % Total deposits( 5) $ 5,379,871 $ 23,128 1.71 % $ 5,454,517 $ 20,117 1.48 % $ 5,507,482 $ 5,035 0.36 % Cost of funds( 6) 1.97 % 1.66 % 0.52 %
(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 $141 thousand , $79 thousand , and $35 thousand for the three months ended September 30, 2023, June 30, 2023, and September 30, 2022, respectively. Loan purchase discount accretion was $791 thousand , $1.0 million , and $2.0 million for the three months ended September 30, 2023, June 30, 2023, and September 30, 2022, respectively. Tax equivalent adjustments were $735 thousand , $713 thousand , and $673 thousand for the three months ended September 30, 2023, June 30, 2023, and September 30, 2022, respectively. The federal statutory tax rate utilized was 21% . (4) Interest income includes tax equivalent adjustments of $432 thousand , $431 thousand , and $596 thousand for the three months ended September 30, 2023, June 30, 2023, and September 30, 2022, 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.
MIDWEST ONE FINANCIAL GROUP, INC. AND SUBSIDIARIES AVERAGE BALANCE SHEET AND YIELD ANALYSIS
Nine Months Ended September 30, 2023 September 30, 2022 (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) $ 3,964,119 $ 150,250 5.07 % $ 3,416,600 $ 106,297 4.16 % Taxable investment securities 1,714,912 29,704 2.32 % 1,899,907 28,334 1.99 % Tax-exempt investment securities (2)(4) 361,254 7,136 2.64 % 440,542 8,895 2.70 % Total securities held for investment( 2) 2,076,166 36,840 2.37 % 2,340,449 37,229 2.13 % Other 22,741 686 4.03 % 25,972 77 0.40 % Total interest earning assets( 2) $ 6,063,026 $ 187,776 4.14 % $ 5,783,021 $ 143,603 3.32 % Other assets 417,610 369,369 Total assets $ 6,480,636 $ 6,152,390 LIABILITIES AND SHAREHOLDERS’ EQUITY Interest checking deposits $ 1,429,804 $ 5,999 0.56 % $ 1,642,849 $ 3,713 0.30 % Money market deposits 1,014,708 15,970 2.10 % 991,338 2,338 0.32 % Savings deposits 620,011 1,309 0.28 % 671,917 863 0.17 % Time deposits 1,437,122 35,286 3.28 % 877,923 4,204 0.64 % Total interest bearing deposits 4,501,645 58,564 1.74 % 4,184,027 11,118 0.36 % Securities sold under agreements to repurchase 123,512 958 1.04 % 152,663 435 0.38 % Other short-term borrowings 174,448 6,665 5.11 % 42,952 680 2.12 % Short-term borrowings 297,960 7,623 3.42 % 195,615 1,115 0.76 % Long-term debt 133,375 6,427 6.44 % 148,053 4,975 4.49 % Total borrowed funds 431,335 14,050 4.36 % 343,668 6,090 2.37 % Total interest bearing liabilities $ 4,932,980 $ 72,614 1.97 % $ 4,527,695 $ 17,208 0.51 % Noninterest bearing deposits 958,104 1,062,156 Other liabilities 85,650 54,775 Shareholders’ equity 503,902 507,764 Total liabilities and shareholders’ equity $ 6,480,636 $ 6,152,390 Net interest income( 2) $ 115,162 $ 126,395 Net interest spread( 2) 2.17 % 2.81 % Net interest margin( 2) 2.54 % 2.92 % Total deposits( 5) $ 5,459,749 $ 58,564 1.43 % $ 5,246,183 $ 11,118 0.28 % Cost of funds( 6) 1.65 % 0.41 %
(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 $315 thousand and $678 thousand for the nine months ended September 30, 2023 and September 30, 2022, respectively. Loan purchase discount accretion was $3.0 million and $3.3 million for the nine months ended September 30, 2023 and September 30, 2022, respectively. Tax equivalent adjustments were $2.2 million and $1.8 million for the nine months ended September 30, 2023 and September 30, 2022, respectively. The federal statutory tax rate utilized was 21% . (4) Interest income includes tax equivalent adjustments of $1.4 million and $1.8 million for the nine months ended September 30, 2023 and September 30, 2022, 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, and adjusted earnings. 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 September 30, June 30, March 31, December 31, September 30, (Dollars in thousands, except per share data) 2023 2023 2023 2022 2022 Total shareholders’ equity $ 505,411 $ 501,341 $ 500,650 $ 492,793 $ 472,229 Intangible assets, net (87,987 ) (89,446 ) (91,040 ) (92,792 ) (94,563 ) Tangible common equity $ 417,424 $ 411,895 $ 409,610 $ 400,001 $ 377,666 Total assets $ 6,467,818 $ 6,521,489 $ 6,409,952 $ 6,577,876 $ 6,491,061 Intangible assets, net (87,987 ) (89,446 ) (91,040 ) (92,792 ) (94,563 ) Tangible assets $ 6,379,831 $ 6,432,043 $ 6,318,912 $ 6,485,084 $ 6,396,498 Book value per share $ 32.21 $ 31.96 $ 31.94 $ 31.54 $ 30.23 Tangible book value per share( 1) $ 26.60 $ 26.26 $ 26.13 $ 25.60 $ 24.17 Shares outstanding 15,691,738 15,685,123 15,675,325 15,623,977 15,622,825 Common equity ratio 7.81 % 7.69 % 7.81 % 7.49 % 7.28 % Tangible common equity ratio( 2) 6.54 % 6.40 % 6.48 % 6.17 % 5.90 %
(1) Tangible common equity divided by shares outstanding. (2) Tangible common equity divided by tangible assets.
Three Months Ended Nine Months Ended Return on Average Tangible Equity September 30, June 30, September 30, September 30, September 30, (Dollars in thousands) 2023 2023 2022 2023 2022 Net income $ 9,138 $ 7,594 $ 18,317 $ 18,129 $ 44,833 Intangible amortization, net of tax( 1) 1,095 1,196 1,342 3,605 3,224 Tangible net income $ 10,233 $ 8,790 $ 19,659 $ 21,734 $ 48,057 Average shareholders’ equity $ 508,066 $ 504,988 $ 499,263 $ 503,902 $ 507,764 Average intangible assets, net (88,699 ) (90,258 ) (95,499 ) (90,308 ) (87,318 ) Average tangible equity $ 419,367 $ 414,730 $ 403,764 $ 413,594 $ 420,446 Return on average equity 7.14 % 6.03 % 14.56 % 4.81 % 11.81 % Return on average tangible equity( 2) 9.68 % 8.50 % 19.32 % 7.03 % 15.28 %
(1) The combined income tax rate utilized was 25% . (2) Annualized tangible net income divided by average tangible equity.
Net Interest Margin, Tax Equivalent/ Three Months Ended Nine Months Ended Core Net Interest Margin September 30, June 30, September 30, September 30, September 30, (Dollars in thousands) 2023 2023 2022 2023 2022 Net interest income $ 34,575 $ 36,962 $ 45,733 $ 111,613 $ 122,794 Tax equivalent adjustments: Loans( 1) 735 713 673 2,164 1,782 Securities( 1) 432 431 596 1,385 1,819 Net interest income, tax equivalent $ 35,742 $ 38,106 $ 47,002 $ 115,162 $ 126,395 Loan purchase discount accretion (791 ) (984 ) (2,015 ) (2,964 ) (3,275 ) Core net interest income $ 34,951 $ 37,122 $ 44,987 $ 112,198 $ 123,120 Net interest margin 2.27 % 2.45 % 3.00 % 2.46 % 2.84 % Net interest margin, tax equivalent( 2) 2.35 % 2.52 % 3.08 % 2.54 % 2.92 % Core net interest margin( 3) 2.30 % 2.46 % 2.95 % 2.47 % 2.85 % Average interest earning assets $ 6,032,636 $ 6,056,732 $ 6,050,864 $ 6,063,026 $ 5,783,021
(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 Loan Yield, Tax Equivalent / Core Yield on Loans September 30, June 30, September 30, September 30, September 30, (Dollars in thousands) 2023 2023 2022 2023 2022 Loan interest income, including fees $ 51,870 $ 49,726 $ 40,451 $ 148,086 $ 104,515 Tax equivalent adjustment( 1) 735 713 673 2,164 1,782 Tax equivalent loan interest income $ 52,605 $ 50,439 $ 41,124 $ 150,250 $ 106,297 Loan purchase discount accretion (791 ) (984 ) (2,015 ) (2,964 ) (3,275 ) Core loan interest income $ 51,814 $ 49,455 $ 39,109 $ 147,286 $ 103,022 Yield on loans 5.12 % 4.98 % 4.37 % 4.99 % 4.09 % Yield on loans, tax equivalent( 2) 5.19 % 5.05 % 4.44 % 5.07 % 4.16 % Core yield on loans( 3) 5.11 % 4.95 % 4.22 % 4.97 % 4.03 % Average loans $ 4,019,852 $ 4,003,717 $ 3,673,379 $ 3,964,119 $ 3,416,600
(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 Efficiency Ratio September 30, June 30, September 30, September 30, September 30, (Dollars in thousands) 2023 2023 2022 2023 2022 Total noninterest expense $ 31,544 $ 34,919 $ 34,623 $ 99,782 $ 98,348 Amortization of intangibles (1,460 ) (1,594 ) (1,789 ) (4,806 ) (4,299 ) Merger-related expenses (11 ) — (763 ) (147 ) (1,792 ) Noninterest expense used for efficiency ratio $ 30,073 $ 33,325 $ 32,071 $ 94,829 $ 92,257 Net interest income, tax equivalent( 1) $ 35,742 $ 38,106 $ 47,002 $ 115,162 $ 126,395 Plus: Noninterest income 9,861 8,746 12,588 14,561 36,579 Less: Investment securities (losses) gains, net 79 (2 ) (163 ) (13,093 ) 272 Net revenues used for efficiency ratio $ 45,524 $ 46,854 $ 59,753 $ 142,816 $ 162,702 Efficiency ratio (2) 66.06 % 71.13 % 53.67 % 66.40 % 56.70 %
(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.
Three Months Ended Nine Months Ended Adjusted Earnings September 30, June 30, September 30, September 30, September 30, (Dollars in thousands, except per share data) 2023 2023 2022 2023 2022 Net income $ 9,138 $ 7,594 $ 18,317 $ 18,129 $ 44,833 After tax loss on sale of debt securities( 1) — — 125 9,837 — Adjusted earnings $ 9,138 $ 7,594 $ 18,442 $ 27,966 $ 44,833 Weighted average diluted common shares outstanding 15,711 15,689 15,654 15,696 15,686 Earnings per common share Earnings per common share - diluted $ 0.58 $ 0.48 $ 1.17 $ 1.15 $ 2.86 Adjusted earnings per common share - diluted (2) $ 0.58 $ 0.48 $ 1.18 $ 1.78 $ 2.86
(1) The income tax rate utilized was 25.3% . (2) Adjusted earnings divided by weighted average diluted common shares outstanding.
Category: Earnings
This news release may be downloaded from https://www.midwestonefinancial.com/corporate-profile/default.aspx
Source: MidWestOne Financial Group, Inc.
Industry: Banks
Contact: Charles N. Reeves Barry S. Ray Chief Executive Officer Chief Financial Officer 319.356.5800 319.356.5800
The net income for Q3 2023 was $9.1 million.
The annualized loan growth for the company was 4.8%.
The efficiency ratio for the company improved to 66.06%.
The declared cash dividend per common share was $0.2425.
