• MidWestOne Financial Group, Inc. Reports Financial Results For the Second Quarter of 2022

    Source: Nasdaq GlobeNewswire / 28 Jul 2022 15:32:36   America/Chicago

    Second Quarter Summary1

    • Completed acquisition of Iowa First Bancshares Corp ("IOFB").
    • Annualized adjusted core loan growth (excluding IOFB and PPP) of 10.53%2.
    • Nonperforming assets ratio improved 10 basis points (bps) to 0.43%; net charge-off ratio improved 25 bps to 0.03%.
    • Net interest margin (tax equivalent) expanded 8 bps to 2.87%2.
    • Net income for the second quarter was $12.6 million, or $0.80 per diluted common share.
      • Total revenue, net of interest expense, of $52.1 million, including a $1.4 million bargain purchase gain recognized in connection with the IOFB acquisition.
      • Credit loss expense of $3.3 million stemming from the acquired IOFB loan portfolio.
      • Noninterest expense of $32.1 million, including $0.9 million of merger-related expenses.
      • Effective tax rate of 24.5%, reflecting a $0.8 million charge related to an Iowa tax law change.
    • Efficiency ratio improved to 56.57%2.

    IOWA CITY, Iowa, July 28, 2022 (GLOBE NEWSWIRE) -- MidWestOne Financial Group, Inc. (Nasdaq: MOFG) (“we”, “our”, or the "Company”) today reported net income for the second quarter of 2022 of $12.6 million, or $0.80 per diluted common share, compared to net income of $13.9 million, or $0.88 per diluted common share, for the linked quarter.

    CEO COMMENTARY

    Charles Funk, Chief Executive Officer of the Company, commented, "This was a quarter of solid progress for MidWestOne. Annualized adjusted core loan growth of 10.53%, which excludes the impact from the acquisition of IOFB and PPP, represents strong work by our bankers. Our asset quality continues to show improvement, with total non-performing loans falling to 0.76% of total loans and net charge-offs falling to 0.03% of total loans. The 8 bps increase in our tax equivalent net interest margin was also a key to the Company's performance this past quarter.

    We were pleased to enter the Muscatine, Iowa market and expand our Fairfield presence with the close of the Iowa First Bancshares transaction."

    ________________
    1 Second Quarter Summary compares to the first quarter of 2022 (the "linked quarter") unless noted.
    2 Non-GAAP measure. See the separate Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.

    FINANCIAL HIGHLIGHTS

    		 Three Months Ended Six Months Ended
     June 30, March 31, June 30, June 30, June 30,
    (Dollars in thousands, except per share amounts)  2022   2022   2021   2022   2021 
    Net interest income $39,725  $37,336  $38,505  $77,061  $77,122 
    Noninterest income  12,347   11,644   10,218   23,991   22,042 
    Total revenue, net of interest expense  52,072   48,980   48,723   101,052   99,164 
    Credit loss expense (benefit)  3,282   —   (2,144)  3,282   (6,878)
    Noninterest expense  32,082   31,643   28,670   63,725   56,370 
    Income before income tax expense  16,708   17,337   22,197   34,045   49,672 
    Income tax expense  4,087   3,442   4,926   7,529   10,753 
    Net income $12,621  $13,895  $17,271  $26,516  $38,919 
    Diluted earnings per share $0.80  $0.88  $1.08  $1.69  $2.43 
               
    Return on average assets  0.83%  0.95%  1.18%  0.89%  1.38%
    Return on average equity  10.14%  10.74%  13.24%  10.44%  15.10%
    Return on average tangible equity(1)  13.13%  13.56%  16.75%  13.35%  19.10%
    Efficiency ratio(1)  56.57%  60.46%  54.83%  58.46%  52.76%
    (1) Non-GAAP measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
     

    IOWA FIRST BANCSHARES CORP. ACQUISITION

    On June 9, 2022, we completed our acquisition of IOFB, the parent company of First National Bank of Muscatine (“FNBM”) and First National Bank in Fairfield (“FNBF”). The assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting. The assets and liabilities, both tangible and intangible, were recorded at their fair values as of the June 9, 2022 acquisition date, net of any applicable tax effects. The Company considers all purchase accounting estimates provisional and fair values are subject to refinement for up to one year after the close date.

    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
    Merger consideration    
    Cash consideration   $46,672 
    Identifiable net assets acquired, at fair value    
    Assets acquired    
    Cash and due from banks $10,192   
    Interest earning deposits in banks  67,855   
    Debt securities  119,230   
    Loans held for investment  281,470   
    Premises and equipment  7,363   
    Core deposit intangible  16,500   
    Other assets  12,218   
    Total assets acquired    514,828 
    Liabilities assumed    
    Deposits  (463,638)  
    Other liabilities  (3,117)  
    Total liabilities assumed    (466,755)
    Identifiable net assets acquired, at fair value    48,073 
    Bargain purchase gain (reported in Other noninterest income)   $1,401 

    INCOME STATEMENT HIGHLIGHTS

    Net Interest Income

    Net interest income increased to $39.7 million in the second quarter of 2022 from $37.3 million in the first quarter of 2022, due primarily to a higher volume of interest earning assets in addition to an expansion in the net interest margin. These increases were partially offset by decreased Paycheck Protection Program ("PPP") loan fee accretion stemming from loan forgiveness. Net PPP loan fee accretion was $0.1 million in the second quarter of 2022 compared to $0.8 million in the linked quarter, and we expect this amount to continue to be negligible as remaining PPP loans are forgiven.

    Average interest earning assets increased $130.8 million to $5.72 billion in the second quarter of 2022, when compared to the first quarter of 2022. This increase reflected average earning assets acquired in the IOFB acquisition coupled with higher volumes of debt securities and growth in the legacy MidWestOne loan portfolio.

    The Company's tax equivalent net interest margin was 2.87% in the second quarter of 2022 compared to 2.79% in the linked quarter due to an increase in total interest earning asset yields, partially offset by a slight increase in funding costs. Total interest earning assets yield increased 10 bps from the linked quarter primarily as a result of an increase in the loan yield, which was partially offset by a decrease in PPP fee accretion, and an increase in the yield on taxable investment securities. The cost of interest bearing liabilities increased 3 bps to 0.45%, primarily as a result of interest bearing deposits costs of 0.31% and long-term debt costs of 4.45%, which increased 2 bps and 15 bps respectively, from the linked quarter.

    Noninterest Income

    Noninterest income for the second quarter of 2022 increased $0.7 million, or 6.0%, from the linked quarter. The increase was primarily due to the bargain purchase gain of $1.4 million recorded related to the IOFB acquisition, in addition to an increase of $0.2 million in card revenue. Partially offsetting the increases identified above was a decline of $0.8 million in loan revenue and a decline of $0.3 million in investment services and trust activities income. The decline in loan revenue was due to a $0.4 million decrease in mortgage origination income and a $0.3 million decline in the fair value adjustment of our mortgage servicing rights, from $2.7 million in the first quarter of 2022 to $2.4 million in the second quarter of 2022.

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

     Three Months Ended
    Noninterest IncomeJune 30, March 31, June 30,
    (In thousands)2022 2022 2021
    Investment services and trust activities$2,670 $3,011 $2,809
    Service charges and fees 1,717  1,657  1,475
    Card revenue 1,878  1,650  1,913
    Loan revenue 3,523  4,293  3,151
    Bank-owned life insurance 558  531  538
    Investment securities gains, net 395  40  42
    Other 1,606  462  290
    Total noninterest income$12,347 $11,644 $10,218

    Noninterest Expense

    Noninterest expense for the second quarter of 2022 increased $0.4 million, or 1.4%, from the linked quarter primarily due to an increase of $0.3 million in compensation and employee benefits and an increase of $0.2 million in equipment costs. The increase in compensation and employee benefits was primarily due to increased salary costs from the IOFB acquisition. The increase in equipment expense was primarily attributable to increased maintenance costs. Offsetting these increases identified above was a decline of $0.5 million in occupancy expense, which declined primarily due to a nonrecurring write-down expense in the first quarter of 2022 that did not recur in the second quarter of 2022.

    The increase in net interest income and noninterest income noted above, were the primary drivers of the improvement in the efficiency ratio, which decreased 3.89 percentage points to 56.57% from 60.46% in the linked quarter.

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

     Three Months Ended
    Noninterest ExpenseJune 30, March 31, June 30,
    (In thousands)2022 2022  2021
    Compensation and employee benefits$18,955 $18,664  $17,404
    Occupancy expense of premises, net 2,253  2,779   2,198
    Equipment 2,107  1,901   1,861
    Legal and professional 2,435  2,353   1,375
    Data processing 1,237  1,231   1,347
    Marketing 1,157  1,029   873
    Amortization of intangibles 1,283  1,227   1,341
    FDIC insurance 420  420   245
    Communications 266  272   371
    Foreclosed assets, net 4  (112)  136
    Other 1,965  1,879   1,519
    Total noninterest expense$32,082 $31,643  $28,670

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

     Three Months Ended
     June 30, March 31, June 30,
    Merger-related Expenses2022 2022 2021
    (In thousands)     
    Compensation and employee benefits$150 $— $—
    Occupancy expense of premises, net 1  —  —
    Equipment 6  5  —
    Legal and professional 638  63  —
    Data processing 38  38  —
    Marketing 65  7  —
    Communications 2  1  —
    Other 1  14  —
    Total merger-related expenses$901 $128 $—

    Income Taxes

    The Company's effective income tax rate increased to 24.5% in the second quarter of 2022 compared to 19.9% in the linked quarter. The higher effective income tax rate in the second quarter of 2022 was due to a change in tax law in the state of Iowa, which resulted in a one-time income tax expense of $0.8 million stemming from the re-measurement of our deferred tax assets and liabilities. The effective income tax rate for the full year 2022 is expected to be in the range of 20-22%.

    BALANCE SHEET, LIQUIDITY AND CAPITAL HIGHLIGHTS

    		As of or for the Three Months Ended
    June 30, March 31, June 30,
    (Dollars in millions, except per share amounts) 2022   2022   2021 
    Ending Balance Sheet     
    Total assets$6,442.5  $5,960.2  $5,749.2 
    Loans held for investment, net of unearned income 3,611.2   3,250.0   3,330.2 
    Total securities 2,402.8   2,349.8   2,072.5 
    Total deposits 5,537.4   5,077.7   4,792.7 
    Average Balance Sheet     
    Average total assets$6,079.0  $5,914.6  $5,851.7 
    Average total loans 3,326.3   3,245.4   3,396.6 
    Average total deposits 5,181.9   5,044.0   4,875.3 
    Funding and Liquidity     
    Short-term borrowings$193.9  $181.2  $212.3 
    Long-term debt 159.2   139.9   169.8 
    Loans to deposits ratio 65.21%  64.01%  69.48%
    Equity     
    Total shareholders' equity$488.8  $504.5  $530.3 
    Common equity ratio 7.59%  8.46%  9.22%
    Tangible common equity(1) 392.5   423.3   445.4 
    Tangible common equity ratio(1) 6.18%  7.20%  7.86%
    Per Share Data     
    Book value$31.26  $32.15  $33.22 
    Tangible book value(1)$25.10  $26.98  $27.90 
    (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 $361.1 million, or 11.1%, to $3.61 billion from March 31, 2022. This increase reflected loans acquired in the IOFB acquisition, coupled with growth in the legacy MidWestOne loan portfolio during the second 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 InvestmentJune 30, 2022  March 31, 2022  June 30, 2021 
     Balance
    		 % of Total
    		  Balance
    		 % of Total
    		  Balance
    		 % of Total
    		 
    (dollars in thousands)        
    Commercial and industrial$986,137 27.3% $898,942 27.7% $982,092 29.5%
    Agricultural 110,263 3.1   94,649 2.9   107,834 3.2 
    Commercial real estate              
    Construction and development 224,470 6.2   193,130 5.9   168,070 5.0 
    Farmland 181,820 5.0   140,846 4.3   134,877 4.1 
    Multifamily 239,676 6.6   259,609 8.0   255,826 7.7 
    Other 1,213,974 33.7   1,130,306 34.8   1,147,016 34.4 
       Total commercial real estate 1,859,940 51.5   1,723,891 53.0   1,705,789 51.2 
    Residential real estate              
    One-to-four family first liens 430,157 11.9   331,883 10.2   332,117 10.0 
    One-to-four family junior liens 148,647 4.1   131,793 4.1   136,464 4.1 
       Total residential real estate 578,804 16.0   463,676 14.3   468,581 14.1 
    Consumer 76,008 2.1   68,877 2.1   65,860 2.0 
       Loans held for investment, net of unearned income$3,611,152 100.0% $3,250,035 100.0% $3,330,156 100.0%
                   
    Total commitments to extend credit$1,117,754    $1,034,843    $959,696   

    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 Six Months Ended
    Allowance for Credit Losses Roll ForwardJune 30, March 31, June 30, June 30, June 30,
    (In thousands) 2022   2022   2021   2022   2021 
    Beginning balance$46,200  $48,700  $50,650  $48,700  $55,500 
    PCD allowance established in acquisition 3,371   —   —   3,371   — 
    Charge-offs (440)  (2,631)  (840)  (3,071)  (1,843)
    Recoveries 159   409   434   568   1,121 
    Net charge-offs (281)  (2,222)  (406)  (2,503)  (722)
    Credit loss (benefit) expense related to loans 3,060   (278)  (2,244)  2,782   (6,778)
    Ending balance$52,350  $46,200  $48,000  $52,350  $48,000 

    As of June 30, 2022, the allowance for credit losses ("ACL") was $52.4 million, or 1.45% of loans held for investment, net of unearned income, compared with $46.2 million, or 1.42% of loans held for investment, net of unearned income, at March 31, 2022. Credit loss expense for the second quarter of 2022 was $3.3 million. No credit loss expense was recorded in the first quarter of 2022. Credit loss expense in the current quarter reflected $3.1 million related to the acquired non-purchase credit deteriorated (PCD) loans and $0.2 million related to unfunded loan commitments established in the acquisition. The allowance for credit losses also included the initial allowance for credit losses of $3.4 million recorded for the PCD loans acquired.

    Deposits

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

    Deposit CompositionJune 30, 2022  March 31, 2022  June 30, 2021 
    (Dollars in thousands)Balance % of Total  Balance % of Total  Balance % of Total 
    Noninterest bearing deposits$1,114,825 20.1% $1,002,415 19.7% $952,764 19.9%
    Interest checking deposits 1,749,748 31.7   1,601,249 31.5   1,414,942 29.6 
    Money market deposits 1,070,912 19.3   983,709 19.4   936,683 19.5 
    Savings deposits 715,829 12.9   650,314 12.8   596,199 12.4 
    Total non-maturity deposits 4,651,314 84.0   4,237,687 83.4   3,900,588 81.4 
    Time deposits of $250 and under 547,427 9.9   501,904 9.9   538,331 11.2 
    Time deposits over $250 338,700 6.1   338,134 6.7   353,747 7.4 
    Total time deposits 886,127 16.0   840,038 16.6   892,078 18.6 
    Total deposits$5,537,441 100.0% $5,077,725 100.0% $4,792,666 100.0%

    CREDIT RISK PROFILE

     As of or For the Three Months Ended
    HighlightsJune 30, March 31, June 30,
    (Dollars in thousands) 2022   2022   2021 
    Credit loss expense (benefit) related to loans$3,060  $(278) $(2,244)
    Net charge-offs$281  $2,222  $406 
    Net charge-off ratio(1) 0.03%  0.28%  0.05%
          
    At period-end     
    Pass$3,402,508  $3,041,649  $3,102,688 
    Special Mention / Watch 111,893   106,241   115,414 
    Classified 96,751   102,145   112,054 
    Total loans held for investment, net$3,611,152  $3,250,035  $3,330,156 
    Classified loans ratio(2) 2.68%  3.14%  3.36%
          
    Nonaccrual loans held for investment$25,978  $31,182  $40,764 
    Accruing loans contractually past due 90 days or more 1,359   —   665 
    Total nonperforming loans 27,337   31,182   41,429 
    Foreclosed assets, net 284   273   755 
    Total nonperforming assets$27,621  $31,455  $42,184 
    Nonperforming loans ratio(3) 0.76%  0.96%  1.24%
    Nonperforming assets ratio(4) 0.43%  0.53%  0.73%
    Allowance for credit losses$52,350  $46,200  $48,000 
    Allowance for credit losses ratio(5) 1.45%  1.42%  1.44%
    Adjusted allowance for credit losses ratio(6) 1.45%  1.42%  1.53%
    Allowance for credit losses to nonaccrual loans ratio(7) 201.52%  148.16%  117.75%
    (1) Net charge-off ratio is calculated as annualized net charge-offs divided by average loans held for investment, net of unearned income, during the period.
    (2) Classified loans ratio is calculated as classified loans divided by loans held for investment, net of unearned income, at the end of the period.
    (3) 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 second quarter of 2022, overall asset quality was improved. The nonperforming loans ratio declined 20 bps from the linked quarter and 48 bps from the prior year to 0.76%. In addition, the classified loans ratio declined 46 bps from the linked quarter and 68 bps from the prior year to 2.68%. Further, net charge-offs declined $1.9 million from the linked quarter.

    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 March 31, 2022$31,182  $—  $31,182 
    Loans placed on nonaccrual or 90+ days past due & still accruing 1,679   1,243   2,922 
    Acquired loan portfolio 3,963   152   4,115 
    Proceeds related to repayment or sale (9,814)  —   (9,814)
    Loans returned to accrual status or no longer past due (693)  (1)  (694)
    Charge-offs (328)  (35)  (363)
    Transfers to foreclosed assets (11)  —   (11)
    Balance at June 30, 2022$25,978  $1,359  $27,337 

    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

    		June 30, March 31, June 30,
    2022 (1) 2022 2021
    MidWestOne Financial Group, Inc. Consolidated     
    Tier 1 leverage to average assets ratio8.51% 8.85% 8.50%
    Common equity tier 1 capital to risk-weighted assets ratio8.82% 9.81% 10.26%
    Tier 1 capital to risk-weighted assets ratio9.61% 10.68% 11.21%
    Total capital to risk-weighted assets ratio11.73% 12.89% 13.63%
    MidWestOne Bank     
    Tier 1 leverage to average assets ratio9.70% 9.30% 9.15%
    Common equity tier 1 capital to risk-weighted assets ratio10.99% 11.25% 12.09%
    Tier 1 capital to risk-weighted assets ratio10.99% 11.25% 12.09%
    Total capital to risk-weighted assets ratio11.90% 12.12% 13.02%
    (1) Capital ratios for June 30, 2022 are preliminary     

    CORPORATE UPDATE

    Share Repurchase Program

    Under our current repurchase program, the Company repurchased 65,315 shares of its common stock at an average price of $29.67 per share and a total cost of $1.9 million in the second quarter of 2022. At June 30, 2022, the total amount available under the Company's current share repurchase program was $3.5 million.

    CONFERENCE CALL DETAILS

    The Company will host a conference call for investors at 11:00 a.m. CT on Friday, July 29, 2022. To participate, you may pre-register for this call utilizing the following link: https://ige.netroadshow.com/registration/q4inc/11244/midwestone-financial-group-inc-2nd-quarter-2022/. 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 952429 at least fifteen minutes before the call start time. If you are unable to participate on the call, a replay will be available until October 27, 2022, by calling 1-866-813-9403 and using the replay access code of 413921. 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 or pronounced and sustained reduction in real estate market values causing an increase in the allowance for credit losses, an increase in the credit loss expense, and a reduction in net earnings; (3) the effects of actual and expected increases in 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; (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

     June 30, March 31, December 31, September 30, June 30,
    (In thousands) 2022   2022   2021   2021   2021 
    ASSETS         
    Cash and due from banks$60,622  $47,677  $42,949  $53,562  $52,297 
    Interest earning deposits in banks 23,242   12,152   160,881   84,952   11,124 
    Federal funds sold —   —   —   —   13 
    Total cash and cash equivalents 83,864   59,829   203,830   138,514   63,434 
    Debt securities available for sale at fair value 1,234,789   1,145,638   2,288,110   2,136,902   2,072,452 
    Held to maturity securities at amortized cost 1,168,042   1,204,212   —   —   — 
    Total securities 2,402,831   2,349,850   2,288,110   2,136,902   2,072,452 
    Loans held for sale 4,991   6,466   12,917   58,679   6,149 
    Gross loans held for investment 3,627,728   3,256,294   3,252,194   3,278,150   3,344,156 
    Unearned income, net (16,576)  (6,259)  (7,182)  (9,506)  (14,000)
    Loans held for investment, net of unearned income 3,611,152   3,250,035   3,245,012   3,268,644   3,330,156 
    Allowance for credit losses (52,350)  (46,200)  (48,700)  (47,900)  (48,000)
    Total loans held for investment, net 3,558,802   3,203,835   3,196,312   3,220,744   3,282,156 
    Premises and equipment, net 89,048   82,603   83,492   84,130   84,667 
    Goodwill 62,477   62,477   62,477   62,477   62,477 
    Other intangible assets, net 33,874   18,658   19,885   21,130   22,394 
    Foreclosed assets, net 284   273   357   454   755 
    Other assets 206,320   176,223   157,748   152,393   154,731 
    Total assets$6,442,491  $5,960,214  $6,025,128  $5,875,423  $5,749,215 
    LIABILITIES         
    Noninterest bearing deposits$1,114,825  $1,002,415  $1,005,369  $999,887  $952,764 
    Interest bearing deposits 4,422,616   4,075,310   4,109,150   3,957,894   3,839,902 
    Total deposits 5,537,441   5,077,725   5,114,519   4,957,781   4,792,666 
    Short-term borrowings 193,894   181,193   181,368   187,508   212,261 
    Long-term debt 159,168   139,898   154,879   154,860   169,839 
    Other liabilities 63,156   56,941   46,887   45,010   44,156 
    Total liabilities 5,953,659   5,455,757   5,497,653   5,345,159   5,218,922 
    SHAREHOLDERS' EQUITY         
    Common stock 16,581   16,581   16,581   16,581   16,581 
    Additional paid-in capital 300,859   300,505   300,940   300,327   299,888 
    Retained earnings 262,395   253,500   243,365   232,639   219,884 
    Treasury stock (25,772)  (24,113)  (24,546)  (22,735)  (15,888)
    Accumulated other comprehensive (loss) income (65,231)  (42,016)  (8,865)  3,452   9,828 
    Total shareholders' equity 488,832   504,457   527,475   530,264   530,293 
    Total liabilities and shareholders' equity$6,442,491  $5,960,214  $6,025,128  $5,875,423  $5,749,215 

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

     Three Months Ended Six Months Ended
     June 30, March 31, December 31, September 30, June 30, June 30, June 30,
    (In thousands, except per share data)2022  2022  2021  2021   2021   2022   2021 
    Interest income             
    Loans, including fees$32,746 $31,318  $33,643 $36,115  $34,736  $64,064  $71,278 
    Taxable investment securities 9,576  8,123   7,461  6,655   6,483   17,699   11,576 
    Tax-exempt investment securities 2,367  2,383   2,415  2,428   2,549   4,750   5,104 
    Other 40  28   37  21   19   68   33 
    Total interest income 44,729  41,852   43,556  45,219   43,787   86,581   87,991 
    Interest expense             
    Deposits 3,173  2,910   3,031  3,150   3,409   6,083   7,017 
    Short-term borrowings 229  119   130  132   161   348   289 
    Long-term debt 1,602  1,487   1,576  1,597   1,712   3,089   3,563 
    Total interest expense 5,004  4,516   4,737  4,879   5,282   9,520   10,869 
    Net interest income 39,725  37,336   38,819  40,340   38,505   77,061   77,122 
    Credit loss expense (benefit) 3,282  —   622  (1,080)  (2,144)  3,282   (6,878)
    Net interest income after credit loss expense (benefit) 36,443  37,336   38,197  41,420   40,649   73,779   84,000 
    Noninterest income             
    Investment services and trust activities 2,670  3,011   3,115  2,915   2,809   5,681   5,645 
    Service charges and fees 1,717  1,657   1,684  1,613   1,475   3,374   2,962 
    Card revenue 1,878  1,650   1,746  1,820   1,913   3,528   3,449 
    Loan revenue 3,523  4,293   3,132  1,935   3,151   7,816   7,881 
    Bank-owned life insurance 558  531   550  532   538   1,089   1,080 
    Investment securities gains, net 395  40   137  36   42   435   69 
    Other 1,606  462   865  331   290   2,068   956 
    Total noninterest income 12,347  11,644   11,229  9,182   10,218   23,991   22,042 
    Noninterest expense             
    Compensation and employee benefits 18,955  18,664   18,266  17,350   17,404   37,619   34,321 
    Occupancy expense of premises, net 2,253  2,779   2,211  2,547   2,198   5,032   4,516 
    Equipment 2,107  1,901   2,189  1,973   1,861   4,008   3,654 
    Legal and professional 2,435  2,353   1,826  1,272   1,375   4,788   2,158 
    Data processing 1,237  1,231   1,211  1,406   1,347   2,468   2,599 
    Marketing 1,157  1,029   1,121  1,022   873   2,186   1,879 
    Amortization of intangibles 1,283  1,227   1,245  1,264   1,341   2,510   2,848 
    FDIC insurance 420  420   380  435   245   840   757 
    Communications 266  272   277  275   371   538   780 
    Foreclosed assets, net 4  (112)  7  43   136   (108)  183 
    Other 1,965  1,879   1,711  2,191   1,519   3,844   2,675 
    Total noninterest expense 32,082  31,643   30,444  29,778   28,670   63,725   56,370 
    Income before income tax expense 16,708  17,337   18,982  20,824   22,197   34,045   49,672 
    Income tax expense 4,087  3,442   4,726  4,513   4,926   7,529   10,753 
    Net income $12,621 $13,895  $14,256 $16,311  $17,271  $26,516  $38,919 
                  
    Earnings per common share             
    Basic$0.81 $0.89  $0.91 $1.03  $1.08  $1.69  $2.43 
    Diluted$0.80 $0.88  $0.91 $1.03  $1.08  $1.69  $2.43 
    Weighted average basic common shares outstanding 15,668  15,683   15,692  15,841   15,987   15,675   15,989 
    Weighted average diluted common shares outstanding 15,688  15,718   15,734  15,863   16,012   15,703   16,016 
    Dividends paid per common share$0.2375 $0.2375  $0.2250 $0.2250  $0.2250  $0.4750  $0.4500 

    MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
    FINANCIAL STATISTICS

     As of or for the Three Months Ended As of or for the Six Months Ended
     June 30, March 31, June 30, June 30, June 30,
    (Dollars in thousands, except per share amounts) 2022   2022   2021   2022   2021 
    Earnings:         
    Net interest income$39,725  $37,336  $38,505  $77,061  $77,122 
    Noninterest income 12,347   11,644   10,218   23,991   22,042 
    Total revenue, net of interest expense 52,072   48,980   48,723   101,052   99,164 
    Credit loss expense (benefit) 3,282   —   (2,144)  3,282   (6,878)
    Noninterest expense 32,082   31,643   28,670   63,725   56,370 
    Income before income tax expense 16,708   17,337   22,197   34,045   49,672 
    Income tax expense 4,087   3,442   4,926   7,529   10,753 
    Net income$12,621  $13,895  $17,271  $26,516  $38,919 
    Per Share Data:         
    Diluted earnings$0.80  $0.88  $1.08  $1.69  $2.43 
    Book value 31.26   32.15   33.22   31.26   33.22 
    Tangible book value(1) 25.10   26.98   27.90   25.10   27.90 
    Ending Balance Sheet:         
    Total assets$6,442,491  $5,960,214  $5,749,215  $6,442,491  $5,749,215 
    Loans held for investment, net of unearned income 3,611,152   3,250,035   3,330,156   3,611,152   3,330,156 
    Total securities 2,402,831   2,349,850   2,072,452   2,402,831   2,072,452 
    Total deposits 5,537,441   5,077,725   4,792,666   5,537,441   4,792,666 
    Short-term borrowings 193,894   181,193   212,261   193,894   212,261 
    Long-term debt 159,168   139,898   169,839   159,168   169,839 
    Total shareholders' equity 488,832   504,457   530,293   488,832   530,293 
    Average Balance Sheet:         
    Average total assets$6,078,950  $5,914,604  $5,851,736  $5,997,231  $5,686,936 
    Average total loans 3,326,269   3,245,449   3,396,575   3,286,083   3,413,069 
    Average total deposits 5,181,927   5,044,046   4,875,324   5,113,368   4,725,444 
    Financial Ratios:         
    Return on average assets 0.83%  0.95%  1.18%  0.89%  1.38%
    Return on average equity 10.14%  10.74%  13.24%  10.44%  15.10%
    Return on average tangible equity(1) 13.13%  13.56%  16.75%  13.35%  19.10%
    Efficiency ratio(1) 56.57%  60.46%  54.83%  58.46%  52.76%
    Net interest margin, tax equivalent(1) 2.87%  2.79%  2.88%  2.83%  2.99%
    Loans to deposits ratio 65.21%  64.01%  69.48%  65.21%  69.48%
    Common equity ratio 7.59%  8.46%  9.22%  7.59%  9.22%
    Tangible common equity ratio(1) 6.18%  7.20%  7.86%  6.18%  7.86%
    Credit Risk Profile:         
    Total nonperforming loans$27,337  $31,182  $41,429  $27,337  $41,429 
    Nonperforming loans ratio 0.76%  0.96%  1.24%  0.76%  1.24%
    Total nonperforming assets$27,621  $31,455  $42,184  $27,621  $42,184 
    Nonperforming assets ratio 0.43%  0.53%  0.73%  0.43%  0.73%
    Net charge-offs$281  $2,222  $406  $2,503  $722 
    Net charge-off ratio 0.03%  0.28%  0.05%  0.15%  0.04%
    Allowance for credit losses$52,350  $46,200  $48,000  $52,350  $48,000 
    Allowance for credit losses ratio 1.45%  1.42%  1.44%  1.45%  1.44%
    Adjusted allowance for credit losses ratio(1) 1.45%  1.42%  1.53%  1.45%  1.53%
    Allowance for credit losses to nonaccrual ratio 201.52%  148.16%  117.75%  201.52%  117.75%
    PPP Loans:         
    Average PPP loans$1,061  $14,975  $233,982  $4,327  $234,515 
    Fee Income 59   797   2,469   856   6,143 
              
    (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
     June 30, 2022 March 31, 2022 June 30, 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)$3,326,269 $33,315 4.02% $3,245,449 $31,858 3.98% $3,396,575 $35,255 4.16%
    Taxable investment securities 1,923,155  9,576 2.00%  1,835,911  8,123 1.79%  1,604,463  6,483 1.62%
    Tax-exempt investment securities (2)(4) 439,385  2,975 2.72%  450,547  2,998 2.70%  473,181  3,196 2.71%
    Total securities held for investment(2) 2,362,540  12,551 2.13%  2,286,458  11,121 1.97%  2,077,644  9,679 1.87%
    Other 30,016  40 0.53%  56,094  28 0.20%  48,208  19 0.16%
    Total interest earning assets(2)$5,718,825  45,906 3.22% $5,588,001  43,007 3.12% $5,522,427  44,953 3.26%
    Other assets 360,125      326,603      329,309    
    Total assets$6,078,950     $5,914,604     $5,851,736    
    LIABILITIES AND SHAREHOLDERS’ EQUITY                 
    Interest checking deposits$1,641,337 $1,189 0.29% $1,560,402 $1,061 0.28% $1,469,853 $1,095 0.30%
    Money market deposits 1,003,386  571 0.23%  953,943  499 0.21%  942,072  502 0.21%
    Savings deposits 662,449  287 0.17%  641,703  279 0.18%  595,150  324 0.22%
    Time deposits 836,143  1,126 0.54%  883,997  1,071 0.49%  896,169  1,488 0.67%
    Total interest bearing deposits 4,143,315  3,173 0.31%  4,040,045  2,910 0.29%  3,903,244  3,409 0.35%
    Securities sold under agreements to repurchase 154,107  111 0.29%  159,417  96 0.24%  179,253  116 0.26%
    Federal funds purchased —  — —%  —  — —%  —  — —%
    Other short-term borrowings 41,859  118 1.13%  3,029  23 3.08%  39,238  45 0.46%
    Short-term borrowings 195,966  229 0.47%  162,446  119 0.30%  218,491  161 0.30%
    Long-term debt 144,440  1,602 4.45%  140,389  1,487 4.30%  189,644  1,712 3.62%
    Total borrowed funds 340,406  1,831 2.16%  302,835  1,606 2.15%  408,135  1,873 1.84%
    Total interest bearing liabilities$4,483,721 $5,004 0.45% $4,342,880 $4,516 0.42% $4,311,379 $5,282 0.49%
    Noninterest bearing deposits 1,038,612      1,004,001      972,080    
    Other liabilities 57,157      42,872      45,035    
    Shareholders’ equity 499,460      524,851      523,242    
    Total liabilities and shareholders’ equity$6,078,950     $5,914,604     $5,851,736    
    Net interest income(2)  $40,902     $38,491     $39,671  
    Net interest spread(2)    2.77%     2.70%     2.77%
    Net interest margin(2)    2.87%     2.79%     2.88%
                      
    Total deposits(5)$5,181,927 $3,173 0.25% $5,044,046 $2,910 0.23% $4,875,324 $3,409 0.28%
    Cost of funds(6)    0.36%     0.34%     0.40%

    (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 $(31) thousand, $674 thousand, and $2.3 million for the three months ended June 30, 2022, March 31, 2022, and June 30, 2021, respectively. Loan purchase discount accretion was $528 thousand, $732 thousand, and $873 thousand for the three months ended June 30, 2022, March 31, 2022, and June 30, 2021, respectively. Tax equivalent adjustments were $569 thousand, $540 thousand, and $519 thousand for the three months ended June 30, 2022, March 31, 2022, and June 30, 2021, respectively. The federal statutory tax rate utilized was 21%.
    (4) Interest income includes tax equivalent adjustments of $608 thousand, $615 thousand, and $647 thousand for the three months ended June 30, 2022, March 31, 2022, and June 30, 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

     Six Months Ended
     June 30, 2022 June 30, 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)$3,286,083 $65,173 4.00% $3,413,069 $72,328 4.27%
    Taxable investment securities 1,879,773  17,699 1.90%  1,436,522  11,576 1.63%
    Tax-exempt investment securities (2)(4) 444,936  5,973 2.71%  469,507  6,399 2.75%
    Total securities held for investment(2) 2,324,709  23,672 2.05%  1,906,029  17,975 1.90%
    Other 42,983  68 0.32%  42,404  33 0.16%
    Total interest earning assets(2)$5,653,775  88,913 3.17% $5,361,502  90,336 3.40%
    Other assets 343,456      325,434    
    Total assets$5,997,231     $5,686,936    
    LIABILITIES AND SHAREHOLDERS’ EQUITY           
    Interest checking deposits$1,601,093 $2,250 0.28% $1,410,094 $2,086 0.30%
    Money market deposits 978,801  1,070 0.22%  927,660  980 0.21%
    Savings deposits 652,134  566 0.18%  574,602  610 0.21%
    Time deposits 859,938  2,197 0.52%  866,976  3,341 0.78%
    Total interest bearing deposits 4,091,966  6,083 0.30%  3,779,332  7,017 0.37%
    Securities sold under agreements to repurchase 156,747  207 0.27%  172,592  217 0.25%
    Federal funds purchased —  — —%  —  — —%
    Other short-term borrowings 22,551  141 1.26%  24,370  72 0.60%
    Short-term borrowings 179,298  348 0.39%  196,962  289 0.30%
    Long-term debt 142,426  3,089 4.37%  197,762  3,563 3.63%
    Total borrowed funds 321,724  3,437 2.15%  394,724  3,852 1.97%
    Total interest bearing liabilities$4,413,690 $9,520 0.43% $4,174,056 $10,869 0.53%
    Noninterest bearing deposits 1,021,402      946,112    
    Other liabilities 50,054      47,008    
    Shareholders’ equity 512,085      519,760    
    Total liabilities and shareholders’ equity$5,997,231     $5,686,936    
    Net interest income(2)  $79,393     $79,467  
    Net interest spread(2)    2.74%     2.87%
    Net interest margin(2)    2.83%     2.99%
                
    Total deposits(5)$5,113,368 $6,083 0.24% $4,725,444 $7,017 0.30%
    Cost of funds(6)    0.35%     0.43%

    (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 $0.6 million and $5.8 million for the six months ended June 30, 2022 and June 30, 2021, respectively. Loan purchase discount accretion was $1.3 million and $2.0 million for the six months ended June 30, 2022 and June 30, 2021, respectively. Tax equivalent adjustments were $1.1 million and $1.0 million for the six months ended June 30, 2022 and June 30, 2021, respectively. The federal statutory tax rate utilized was 21%.
    (4) Interest income includes tax equivalent adjustments of $1.2 million and $1.3 million for the six months ended June 30, 2022 and June 30, 2021, respectively. The federal statutory tax rate utilized was 21%.
    (5) Total deposits is the sum of total interest-bearing deposits and noninterest bearing deposits. The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits.
    (6) Cost of funds is calculated as annualized total interest expense divided by the sum of average total deposits and borrowed funds.

    Non-GAAP Measures

    This earnings release contains non-GAAP measures for tangible common equity, tangible book value per share, tangible common equity ratio, return on average tangible equity, net interest margin (tax equivalent), core net interest margin, loan yield (tax equivalent), core yield on loans, efficiency ratio, adjusted allowance for credit losses ratio, core loans, and core commercial loans. Management believes these measures provide investors with useful information regarding the Company’s profitability, financial condition and capital adequacy, consistent with how management evaluates the Company’s financial performance. The following tables provide a reconciliation of each non-GAAP measure to the most comparable GAAP measure.

    Tangible Common Equity/Tangible Book Value          
    per Share/Tangible Common Equity Ratio June 30, March 31, December 31, September 30, June 30,
    (Dollars in thousands, except per share data)  2022   2022   2021   2021   2021 
    Total shareholders’ equity $488,832  $504,457  $527,475  $530,264  $530,293 
    Intangible assets, net  (96,351)  (81,135)  (82,362)  (83,607)  (84,871)
    Tangible common equity $392,481  $423,322  $445,113  $446,657  $445,422 
               
    Total assets $6,442,491  $5,960,214  $6,025,128  $5,875,423  $5,749,215 
    Intangible assets, net  (96,351)  (81,135)  (82,362)  (83,607)  (84,871)
    Tangible assets $6,346,140  $5,879,079  $5,942,766  $5,791,816  $5,664,344 
               
    Book value per share $31.26  $32.15  $33.66  $33.71  $33.22 
    Tangible book value per share(1) $25.10  $26.98  $28.40  $28.40  $27.90 
    Shares outstanding  15,635,131   15,690,125   15,671,147   15,729,451   15,963,468 
               
    Common equity ratio  7.59%  8.46%  8.75%  9.03%  9.22%
    Tangible common equity ratio(2)  6.18%  7.20%  7.49%  7.71%  7.86%

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

      Three Months Ended Six Months Ended
    Return on Average Tangible Equity June 30, March 31, June 30, June 30, June 30,
    (Dollars in thousands)  2022   2022   2021   2022   2021 
    Net income $12,621  $13,895  $17,271  $26,516  $38,919 
    Intangible amortization, net of tax(1)  962   920   1,006   1,883   2,136 
    Tangible net income $13,583  $14,815  $18,277  $28,399  $41,055 
               
    Average shareholders’ equity $499,460  $524,851  $523,242  $512,085  $519,760 
    Average intangible assets, net  (84,540)  (81,763)  (85,518)  (83,159)  (86,235)
    Average tangible equity $414,920  $443,088  $437,724  $428,926  $433,525 
               
    Return on average equity  10.14%  10.74%  13.24%  10.44%  15.10%
    Return on average tangible equity(2)  13.13%  13.56%  16.75%  13.35%  19.10%

    (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 Six Months Ended
     June 30, March 31, June 30, June 30, June 30,
    (Dollars in thousands)  2022   2022   2021   2022   2021 
    Net interest income $39,725  $37,336  $38,505  $77,061  $77,122 
    Tax equivalent adjustments:          
    Loans(1)  569   540   519   1,109   1,050 
    Securities(1)  608   615   647   1,223   1,295 
    Net interest income, tax equivalent $40,902  $38,491  $39,671  $79,393  $79,467 
    Loan purchase discount accretion  (528)  (732)  (873)  (1,260)  (1,971)
    Core net interest income $40,374  $37,759  $38,798  $78,133  $77,496 
               
    Net interest margin  2.79%  2.71%  2.80%  2.75%  2.90%
    Net interest margin, tax equivalent(2)  2.87%  2.79%  2.88%  2.83%  2.99%
    Core net interest margin(3)  2.83%  2.74%  2.82%  2.79%  2.91%
    Average interest earning assets $5,718,825  $5,588,001  $5,522,427  $5,653,775  $5,361,502 

    (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 Six Months Ended
    Loan Yield, Tax Equivalent / Core Yield on Loans June 30, March 31, June 30, June 30, June 30,
    (Dollars in thousands)  2022   2022   2021   2022   2021 
    Loan interest income, including fees $32,746  $31,318  $34,736  $64,064  $71,278 
    Tax equivalent adjustment(1)  569   540   519   1,109   1,050 
    Tax equivalent loan interest income $33,315  $31,858  $35,255  $65,173  $72,328 
    Loan purchase discount accretion  (528)  (732)  (873)  (1,260)  (1,971)
    Core loan interest income $32,787  $31,126  $34,382  $63,913  $70,357 
               
    Yield on loans  3.95%  3.91%  4.10%  3.93%  4.21%
    Yield on loans, tax equivalent(2)  4.02%  3.98%  4.16%  4.00%  4.27%
    Core yield on loans(3)  3.95%  3.89%  4.06%  3.92%  4.16%
    Average loans $3,326,269  $3,245,449  $3,396,575  $3,286,083  $3,413,069 

    (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 Six Months Ended
    Efficiency Ratio June 30, March 31, June 30, June 30, June 30,
    (Dollars in thousands)  2022   2022   2021   2022   2021 
    Total noninterest expense $32,082  $31,643  $28,670  $63,725  $56,370 
    Amortization of intangibles  (1,283)  (1,227)  (1,341)  (2,510)  (2,848)
    Merger-related expenses  (901)  (128)  —   (1,029)  — 
    Noninterest expense used for efficiency ratio $29,898  $30,288  $27,329  $60,186  $53,522 
               
    Net interest income, tax equivalent(1) $40,902  $38,491  $39,671  $79,393  $79,467 
    Noninterest income  12,347   11,644   10,218   23,991   22,042 
    Investment securities gains, net  (395)  (40)  (42)  (435)  (69)
    Net revenues used for efficiency ratio $52,854  $50,095  $49,847  $102,949  $101,440 
               
    Efficiency ratio (2)  56.57%  60.46%  54.83%  58.46%  52.76%

    (1) The federal statutory tax rate utilized was 21%.
    (2) Noninterest expense adjusted for amortization of intangibles and merger-related expenses divided by the sum of tax equivalent net interest income, noninterest income and net investment securities gains.

    Adjusted Allowance for Credit Losses Ratio June 30, March 31, December 31, September 30, June 30,
    (Dollars in thousands)  2022   2022   2021   2022   2021 
    Loans held for investment, net of unearned income $3,611,152  $3,250,035  $3,245,012  $3,268,644  $3,330,156 
    PPP loans  (402)  (3,037)  (30,841)  (89,354)  (184,390)
    Core loans $3,610,750  $3,246,998  $3,214,171  $3,179,290  $3,145,766 
    Allowance for credit losses $52,350  $46,200  $48,700  $47,900  $48,000 
               
    Allowance for credit losses ratio  1.45%  1.42%  1.50%  1.47%  1.44%
    Adjusted allowance for credit losses ratio(1)  1.45%  1.42%  1.52%  1.51%  1.53%

    (1) Allowance for credit losses divided by core loans.

    Core Loans/Core Commercial Loans June 30, March 31, December 31, September 30, June 30,
    (Dollars in thousands)  2022  2022  2021  2022  2021
    Commercial loans:          
    Commercial and industrial $986,137 $898,942 $902,314 $927,258 $982,092
    Agricultural  110,263  94,649  103,417  106,356  107,834
    Commercial real estate  1,859,940  1,723,891  1,704,541  1,699,358  1,705,789
    Total commercial loans $2,956,340 $2,717,482 $2,710,272 $2,732,972 $2,795,715
    Consumer loans:          
    Residential real estate $578,804 $463,676 $466,322 $468,136 $468,581
    Other consumer  76,008  68,877  68,418  67,536  65,860
    Total consumer loans $654,812 $532,553 $534,740 $535,672 $534,441
    Loans held for investment, net of unearned income $3,611,152 $3,250,035 $3,245,012 $3,268,644 $3,330,156
               
    PPP loans $402 $3,037 $30,841 $89,354 $184,390
    Acquired IOFB loan portfolio $281,470 $— $— $— $—
               
    Core loans(1) $3,610,750 $3,246,998 $3,214,171 $3,179,290 $3,145,766
    Adjusted core loans(2) $3,329,280 $3,246,998 $3,214,171 $3,179,290 $3,145,766
    Core commercial loans(3) $2,955,938 $2,714,445 $2,679,431 $2,643,618 $2,611,325

    (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 may be downloaded from https://www.midwestonefinancial.com/corporate-profile/default.aspx
    Source: MidWestOne Financial Group, Inc.
    Industry: Banks

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

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