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MidWestOne Financial Group, Inc. Reports Financial Results for the Second Quarter of 2023
Source: Nasdaq GlobeNewswire / 01 Aug 2023 08:00:05 America/New_York
IOWA CITY, Iowa, Aug. 01, 2023 (GLOBE NEWSWIRE) -- MidWestOne Financial Group, Inc. (Nasdaq: MOFG) (“we”, “our”, or the "Company”) today reported results for the second quarter of 2023.
Second Quarter 2023 Highlights1
- Net income of $7.6 million, or $0.48 per diluted common share, compared to net income of $1.4 million, or $0.09 per diluted common share, for the linked quarter.
- Annualized loan growth of 10.6%.
- Expenses of $34.9 million included $1.4 million of costs stemming from a voluntary early retirement program and executive relocation.
- Nonperforming assets ratio improved 1 basis point (“bps”) to 0.22%; net charge-off ratio was 0.09%.
Subsequent Events
- On July 25, 2023, the Board of Directors declared a cash dividend of $0.2425 per common share.
CEO COMMENTARY
Charles (Chip) Reeves, Chief Executive Officer of the Company, commented, “On our first quarter earnings call, we introduced a comprehensive strategic plan designed to transform our operations and become a higher performing bank over the medium term. Though we are facing a challenging operating environment driven by rising interest rates, we have made solid progress across the five pillars of our plan highlighted by 10% loan growth, annualized, that we achieved in the quarter. We have been adding bankers in our major markets of the Twin Cities, Denver, and Metro Iowa, which has been a major factor in this strong loan growth. So far this year, we have added bankers in the Twin Cities and we will continue to add bankers in our major markets as we continue to build scale and take market share. Late in the second quarter, as part of our specialty commercial loan growth initiative, we recruited an established agribusiness team from a regional bank as we strive to ‘up-tier’ in this attractive segment of the market. This team has already started to bring full relationship business to MidWestOne. We are also starting to see momentum in our governmental lending group, where we have improved our focus and execution. Lastly, we are seeing a nice increase in our wealth management assets under management and revenues, as compared to the first quarter, driven by the teams recruited in 2021 and 2022.”
Mr. Reeves concluded, “I’m very pleased with the early results that we are achieving as we execute our strategic plan. We are beginning to make investments in talent and our platform to drive growth, while keeping our noninterest expense relatively steady from the first quarter. We are driving significant change across our organization, and I would like to thank our employees for their hard work and dedication to our Company, customers, and communities. Our results would not be possible without their tireless efforts. I remain confident that we are on a strong path to significantly improved financial results.”
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1 Second Quarter Summary compares to the first quarter of 2023 (the “linked quarter”) unless noted.As of or for the quarter ended Six Months Ended (Dollars in thousands, except per share amounts and as noted) June 30, March 31, June 30, June 30, June 30, 2023 2023 2022 2023 2022 Financial Results Revenue $ 45,708 $ 36,030 $ 52,072 $ 81,738 $ 101,052 Credit loss expense 1,597 933 3,282 2,530 3,282 Noninterest expense 34,919 33,319 32,082 68,238 63,725 Net income 7,594 1,397 12,621 8,991 26,516 Per Common Share Diluted earnings per share $ 0.48 $ 0.09 $ 0.80 $ 0.57 $ 1.69 Book value 31.96 31.94 31.26 31.96 31.26 Tangible book value(1) 26.26 26.13 25.10 26.26 25.10 Balance Sheet & Credit Quality Loans In millions $ 4,018.6 $ 3,919.4 $ 3,611.2 $ 4,018.6 $ 3,611.2 Investment securities In millions 2,003.1 2,071.8 2,402.8 2,003.1 2,402.8 Deposits In millions 5,445.4 5,555.2 5,537.4 5,445.4 5,537.4 Net loan charge-offs In millions 0.9 0.3 0.3 1.2 2.5 Allowance for credit losses ratio 1.25 % 1.27 % 1.45 % 1.25 % 1.45 % Selected Ratios Return on average assets 0.47 % 0.09 % 0.83 % 0.28 % 0.89 % Net interest margin, tax equivalent(1) 2.52 % 2.75 % 2.87 % 2.63 % 2.83 % Return on average equity 6.03 % 1.14 % 10.14 % 3.61 % 10.44 % Return on average tangible equity(1) 8.50 % 2.70 % 13.13 % 5.65 % 13.35 % Efficiency ratio(1) 71.13 % 62.32 % 56.57 % 66.56 % 58.46 % (1) Non-GAAP measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
REVENUE REVIEWRevenue Change Change 2Q23 vs 2Q23 vs (Dollars in thousands) 2Q23 1Q23 2Q22 1Q23 2Q22 Net interest income $ 36,962 $ 40,076 $ 39,725 (8 )% (7 )% Noninterest income (loss) 8,746 (4,046 ) 12,347 n / m (29 )% Total revenue, net of interest expense $ 45,708 $ 36,030 $ 52,072 27 % (12 )% Results are not meaningful (n/m)
Total revenue for the second quarter of 2023 increased $9.7 million from the first quarter of 2023 as a result of increased noninterest income, partially offset by lower net interest income. Compared to the second quarter of 2022, total revenue decreased $6.4 million due to lower net interest income and noninterest income.Net interest income of $37.0 million for the second quarter of 2023 decreased from $40.1 million in the first quarter of 2023, due primarily to higher funding costs and volumes and lower interest earning asset volumes, partially offset by higher interest earning asset yields. Compared to the second quarter of 2022, net interest income decreased $2.8 million as a result of higher funding costs and volumes, partially offset by higher interest earning asset yields and volumes.
The Company’s tax equivalent net interest margin was 2.52% in the second quarter of 2023 compared to 2.75% in the first quarter of 2023, as higher earning asset yields were more than offset by increased funding costs. The cost of interest bearing liabilities increased 39 bps to 1.98%, due to interest bearing deposit costs of 1.79%, short-term borrowing costs of 2.91%, and long-term debt costs of 6.38%, which increased 41 bps, 9 bps and 19 bps, respectively from the first quarter of 2023. Total interest earning assets yield increased 12 bps primarily as a result of an increase in loan yield of 10 bps, partially offset by a decrease in investment security yield of 5 bps, respectively. Our cycle-to-date interest bearing deposit beta was 31%.
The tax equivalent net interest margin was 2.52% in the second quarter of 2023 compared to 2.87% in the second 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 153 bps to 1.98%, due to interest bearing deposit costs of 1.79%, short-term borrowing costs of 2.91%, and long-term debt costs of 6.38%, which increased 148 bps, 244 bps and 193 bps, respectively from the second quarter of 2022. Total interest earning assets yield increased 92 bps primarily as a result of an increase in loan and securities yields of 103 bps and 22 bps, respectively.
Noninterest Income (Loss) Change Change 2Q23 vs 2Q23 vs (In thousands) 2Q23 1Q23 2Q22 1Q23 2Q22 Investment services and trust activities $ 3,119 $ 2,933 $ 2,670 6 % 17 % Service charges and fees 2,047 2,008 1,717 2 % 19 % Card revenue 1,847 1,748 1,878 6 % (2 )% Loan revenue 909 1,420 3,523 (36 )% (74 )% Bank-owned life insurance 616 602 558 2 % 10 % Investment securities (losses) gains, net (2 ) (13,170 ) 395 n / m (101 )% Other 210 413 1,606 (49 )% (87 )% Total noninterest income (loss) $ 8,746 $ (4,046 ) $ 12,347 n / m (29 )% Noninterest income for the second quarter of 2023 increased $12.8 million from the linked quarter due primarily to $13.2 million of investment security losses recognized in the linked quarter, partially offset by a $0.5 million unfavorable change in loan revenue. Loan revenue reflected an unfavorable quarter-over-quarter change in the fair value of our mortgage servicing rights of $0.9 million, partially offset by a $0.5 million favorable change in loan sale gains generated by our governmental lending and mortgage origination businesses. Noninterest income decreased $3.6 million from the second quarter of 2022. The largest driver was a $0.6 million decrease in the fair value of our mortgage servicing rights in the current quarter compared to a $2.4 million increase in the second quarter of 2022.
EXPENSE REVIEW
Noninterest Expense Change Change 2Q23 vs 2Q23 vs (In thousands) 2Q23 1Q23 2Q22 1Q23 2Q22 Compensation and employee benefits $ 20,386 $ 19,607 $ 18,955 4 % 8 % Occupancy expense of premises, net 2,574 2,746 2,253 (6 )% 14 % Equipment 2,435 2,171 2,107 12 % 16 % Legal and professional 1,682 1,736 2,435 (3 )% (31 )% Data processing 1,521 1,363 1,237 12 % 23 % Marketing 1,142 986 1,157 16 % (1 )% Amortization of intangibles 1,594 1,752 1,283 (9 )% 24 % FDIC insurance 862 749 420 15 % 105 % Communications 260 261 266 — % (2 )% Foreclosed assets, net (6 ) (28 ) 4 (79 )% (250 )% Other 2,469 1,976 1,965 25 % 26 % Total noninterest expense $ 34,919 $ 33,319 $ 32,082 5 % 9 % Merger-related Expenses (In thousands) 2Q23 1Q23 2Q22 Compensation and employee benefits $ — $ 70 $ 150 Occupancy expense of premises, net — — 1 Equipment — — 6 Legal and professional — — 638 Data processing — 65 38 Marketing — — 65 Communications — — 2 Other — 1 1 Total merger-related expenses $ — $ 136 $ 901
Noninterest expense for the second quarter of 2023 increased $1.6 million, or 4.8%, from the linked quarter with overall increases in all noninterest expense categories except occupancy, legal and professional, amortization of intangibles, and communications. The increase in compensation and employee benefits reflected severance expense of $1.2 million in the current period, as compared to $0.1 million in the first quarter of 2023. The largest driver in the increase in ’other’ noninterest expense was executive relocation expenses of $0.2 million.Noninterest expense for the second quarter of 2023 increased $2.8 million, or 8.8%, from the second quarter of 2022. The increase primarily reflected costs associated with the acquired operations of Iowa First Bancshares Corp. ("IOFB"), which closed in the second quarter of 2022. Partially offsetting the increases above was a decline of $0.8 million in legal and professional expenses, primarily due to a decrease in legal and professional merger-related expenses.
The Company’s effective income tax rate decreased to 17.4% in the second quarter of 2023 compared to 21.4% in the linked quarter. The decrease reflected an adjustment to 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 $6.52 billion at June 30, 2023 compared to $6.41 billion at March 31, 2023 and $6.44 billion at June 30, 2022. The increase from March 31, 2023 was driven by higher loan balances from organic growth and an increase in cash and cash equivalents, partially offset by lower investment security balances. In comparison to June 30, 2022, the increase was primarily due to higher loan balances from organic growth and an increase in cash and cash equivalents, partially offset by lower security balances as a result of the balance sheet repositioning executed in the first quarter of 2023.
Loans Held for Investment June 30, 2023 March 31, 2023 June 30, 2022 (Dollars in thousands) Balance % of Total Balance % of Total Balance % of Total Commercial and industrial $ 1,089,269 27.1 % $ 1,080,514 27.6 % $ 986,137 27.3 % Agricultural 106,148 2.6 106,641 2.7 110,263 3.1 Commercial real estate Construction and development 313,836 7.8 320,924 8.2 224,470 6.2 Farmland 183,378 4.6 182,528 4.7 181,820 5.0 Multifamily 305,519 7.6 255,065 6.5 239,676 6.6 Other 1,331,886 33.1 1,290,454 33.0 1,213,974 33.7 Total commercial real estate 2,134,619 53.1 2,048,971 52.4 1,859,940 51.5 Residential real estate One-to-four family first liens 448,096 11.2 448,459 11.4 430,157 11.9 One-to-four family junior liens 168,755 4.2 162,403 4.1 148,647 4.1 Total residential real estate 616,851 15.4 610,862 15.5 578,804 16.0 Consumer 71,762 1.8 72,377 1.8 76,008 2.1 Loans held for investment, net of unearned income $ 4,018,649 100.0 % $ 3,919,365 100.0 % $ 3,611,152 100.0 % Total commitments to extend credit $ 1,296,719 $ 1,205,902 $ 1,117,754
Loans held for investment, net of unearned income, increased $99.3 million, or 2.5%, to $4.02 billion from $3.92 billion at March 31, 2023. This increase was driven by new loan production in the second quarter of 2023.Investment Securities June 30, 2023 March 31, 2023 June 30, 2022 (Dollars in thousands) Balance % of Total Balance % of Total Balance % of Total Available for sale $ 903,520 45.1 % $ 954,074 46.1 % $ 1,234,789 51.4 % Held to maturity 1,099,569 54.9 % 1,117,709 53.9 % 1,168,042 48.6 % Total investment securities $ 2,003,089 $ 2,071,783 $ 2,402,831
Investment securities at June 30, 2023 were $2.00 billion, decreasing $68.7 million from March 31, 2023 and $399.7 million from June 30, 2022. The decrease from the first quarter of 2023 was primarily due to paydowns, calls, and maturities. The decrease from the second quarter of 2022 was primarily due to the balance sheet repositioning completed in the first quarter of 2023.Deposits June 30, 2023 March 31, 2023 June 30, 2022 (Dollars in thousands) Balance % of Total Balance % of Total Balance % of Total Noninterest bearing deposits $ 897,923 16.5 % $ 989,469 17.8 % $ 1,114,825 20.1 % Interest checking deposits 1,397,276 25.7 1,476,948 26.6 1,749,748 31.7 Money market deposits 1,096,432 20.1 969,238 17.4 1,070,912 19.3 Savings deposits 585,967 10.8 631,811 11.4 715,829 12.9 Time deposits of $250 and under 648,586 11.9 599,302 10.8 547,427 9.9 Total core deposits 4,626,184 85.0 4,666,768 84.0 5,198,741 93.9 Brokered time deposits 365,623 6.7 366,539 6.6 — — Time deposits over $250 453,640 8.3 521,846 9.4 338,700 6.1 Total deposits $ 5,445,447 100.0 % $ 5,555,153 100.0 % $ 5,537,441 100.0 %
Total deposits declined $109.7 million, or 2.0%, to $5.45 billion from $5.56 billion at March 31, 2023. Brokered deposits decreased $0.9 million from $366.5 million at March 31, 2023. Total uninsured deposits were estimated to be $1.68 billion, which included $591.8 million of collateralized municipal deposits at June 30, 2023. Total uninsured deposits, excluding collateralized municipal deposits, represented approximately 20.0% of total deposits.Borrowed Funds June 30, 2023 March 31, 2023 June 30, 2022 (Dollars in thousands) Balance % of Total Balance % of Total Balance % of Total Short-term borrowings $ 362,054 74.2 % $ 143,981 51.1 % $ 193,894 54.9 % Long-term debt 125,752 25.8 % 137,981 48.9 % 159,168 45.1 % Total borrowed funds $ 487,806 $ 281,962 $ 353,062
Total borrowed funds were $487.8 million at June 30, 2023 an increase of $205.8 million from March 31, 2023 and $134.7 million from June 30, 2022. The increase was primarily due to Bank Term Funding Program borrowings of $225 million, as compared to no borrowings in the prior periods, and increased Federal Home Loan Bank overnight borrowings.Capital June 30, March 31, June 30, (Dollars in thousands) 2023 (1) 2023 2022 Total shareholders’ equity $ 501,341 $ 500,650 $ 488,832 Accumulated other comprehensive loss (82,704 ) (78,885 ) (65,231 ) MidWestOne Financial Group, Inc. Consolidated Tier 1 leverage to average assets ratio 8.47 % 8.30 % 8.51 % Common equity tier 1 capital to risk-weighted assets ratio 9.36 % 9.39 % 8.82 % Tier 1 capital to risk-weighted assets ratio 10.15 % 10.18 % 9.61 % Total capital to risk-weighted assets ratio 12.26 % 12.31 % 11.73 % MidWestOne Bank Tier 1 leverage to average assets ratio 9.42 % 9.28 % 9.70 % Common equity tier 1 capital to risk-weighted assets ratio 11.31 % 11.40 % 10.99 % Tier 1 capital to risk-weighted assets ratio 11.31 % 11.40 % 10.99 % Total capital to risk-weighted assets ratio 12.22 % 12.31 % 11.90 % (1) Regulatory capital ratios for June 30, 2023 are preliminary
Total shareholders’ equity at June 30, 2023 increased $0.7 million from March 31, 2023, driven by the benefit of second quarter net income, partially offset by an increase in accumulated other comprehensive loss and dividends paid during the second quarter of 2023.Accumulated other comprehensive loss at June 30, 2023 increased $3.8 million compared to March 31, 2023, primarily due to a decrease in available for sale securities valuations. Accumulated other comprehensive loss increased $17.5 million from June 30, 2022, driven by the impact of higher interest rates on available for sale securities valuations.
On July 25, 2023, the Board of Directors of the Company declared a cash dividend of $0.2425 per common share. The dividend is payable September 15, 2023, to shareholders of record at the close of business on September 1, 2023.
No common shares were repurchased by the Company during the period March 31, 2023 through June 30, 2023 or for the subsequent period through August 1, 2023. The current share repurchase program allows for the repurchase of up to $15.0 million.
CREDIT QUALITY REVIEW
Credit Quality As of or For the Three Months Ended June 30, March 31, June 30, (Dollars in thousands) 2023 2023 2022 Credit loss expense related to loans $ 1,497 $ 933 $ 3,060 Net charge-offs 897 333 281 Allowance for credit losses 50,400 49,800 52,350 Pass $ 3,769,309 $ 3,728,522 $ 3,402,508 Special Mention / Watch 133,904 92,075 111,893 Classified 115,436 98,768 96,751 Loans greater than 30 days past due and accruing $ 6,201 $ 4,932 $ 12,349 Nonperforming loans $ 14,448 $ 14,442 $ 27,337 Nonperforming assets 14,448 14,442 27,621 Net charge-off ratio(1) 0.09 % 0.03 % 0.03 % Classified loans ratio(2) 2.87 % 2.52 % 2.68 % Nonperforming loans ratio(3) 0.36 % 0.37 % 0.76 % Nonperforming assets ratio(4) 0.22 % 0.23 % 0.43 % Allowance for credit losses ratio(5) 1.25 % 1.27 % 1.45 % Allowance for credit losses to nonaccrual loans ratio(6) 355.03 % 344.88 % 201.52 % (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 nonperforming assets ratios remained stable and improved from the prior year period. The nonperforming loans ratio declined 1 bps from the linked quarter and 40 bps from the prior year to 0.36%. The classified loans ratio increased 35 bps from the linked quarter and 19 bps from the prior year. The linked quarter increase in classified loans was primarily due to the deterioration of two non-owner occupied commercial real estate loans. Further, the net charge-off ratio increased 6 bps from the linked quarter and 6 bps from the prior year.
As of June 30, 2023, the allowance for credit losses was $50.4 million, or 1.25% of loans held for investment, net of unearned income, compared with $49.8 million, or 1.27% of loans held for investment, net of unearned income, at March 31, 2023. Credit loss expense of $1.6 million in the second quarter of 2023 was primarily attributable to loan growth.
Nonperforming Loans Roll Forward (Dollars in thousands) Nonaccrual 90+ Days Past Due & Still Accruing Total Balance at March 31, 2023 $ 14,440 $ 2 $ 14,442 Loans placed on nonaccrual or 90+ days past due & still accruing 1,828 333 2,161 Proceeds related to repayment or sale (1,054 ) — (1,054 ) Loans returned to accrual status or no longer past due (45 ) — (45 ) Charge-offs (973 ) (80 ) (1,053 ) Transfer to nonaccrual — (3 ) (3 ) Balance at June 30, 2023 $ 14,196 $ 252 $ 14,448
CONFERENCE CALL DETAILSThe Company will host a conference call for investors at 11:00 a.m. CT on Tuesday, August 1, 2023. To participate, you may pre-register for this call utilizing the following link: https://www.netroadshow.com/events/login?show=c7140c96&confId=51647. 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 231141 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 26, 2023, by calling 1-866-813-9403 and using the replay access code of 868948. A transcript of the call will also be available on the Company’s web site (www.midwestonefinancial.com) within three business days of the call.
ABOUT MIDWESTONE FINANCIAL GROUP, INC.
MidWestOne Financial Group, Inc. is a financial holding company headquartered in Iowa City, Iowa. MidWestOne is the parent company of MidWestOne Bank, which operates banking offices in Iowa, Minnesota, Wisconsin, Florida, and Colorado. MidWestOne provides electronic delivery of financial services through its website, MidWestOne.bank. MidWestOne Financial Group, Inc. trades on the Nasdaq Global Select Market under the symbol “MOFG”.
Cautionary Note Regarding Forward-Looking Statements
This release contains certain “forward-looking statements” within the meaning of such term in the Private Securities Litigation Reform Act of 1995. We and our representatives may, from time to time, make written or oral statements that are “forward-looking” and provide information other than historical information. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement. These factors include, among other things, the factors listed below. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of our management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “should,” “could,” “would,” “plans,” “goals,” “intend,” “project,” “estimate,” “forecast,” “may” or similar expressions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, these statements. Readers are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Additionally, we undertake no obligation to update any statement in light of new information or future events, except as required under federal securities law.
Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors that could have an impact on our ability to achieve operating results, growth plan goals and future prospects include, but are not limited to, the following: (1) the risks of mergers (including with IOFB), including, without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and possible failures to achieve expected gains, revenue growth and/or expense savings from such transactions; (2) credit quality deterioration, pronounced and sustained reduction in real estate market values, or other uncertainties, including the impact of inflationary pressures on economic conditions and our business, resulting in an increase in the allowance for credit losses, an increase in the credit loss expense, and a reduction in net earnings; (3) the effects of actual and expected increases in inflation and interest rates, including on our net income and the value of our securities portfolio; (4) changes in the economic environment, competition, or other factors that may affect our ability to acquire loans or influence the anticipated growth rate of loans and deposits and the quality of the loan portfolio and loan and deposit pricing; (5) fluctuations in the value of our investment securities; (6) governmental monetary and fiscal policies; (7) changes in and uncertainty related to benchmark interest rates used to price loans and deposits; (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 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 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.
MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
FIVE QUARTER CONSOLIDATED BALANCE SHEETSJune 30, March 31, December 31, September 30, June 30, (In thousands) 2023 2023 2022 2022 2022 ASSETS Cash and due from banks $ 75,955 $ 63,945 $ 83,990 $ 77,513 $ 60,622 Interest earning deposits in banks 68,603 5,273 2,445 1,001 23,242 Total cash and cash equivalents 144,558 69,218 86,435 78,514 83,864 Debt securities available for sale at fair value 903,520 954,074 1,153,547 1,153,304 1,234,789 Held to maturity securities at amortized cost 1,099,569 1,117,709 1,129,421 1,146,583 1,168,042 Total securities 2,003,089 2,071,783 2,282,968 2,299,887 2,402,831 Loans held for sale 2,821 2,553 612 2,320 4,991 Gross loans held for investment 4,031,377 3,932,900 3,854,791 3,761,664 3,627,728 Unearned income, net (12,728 ) (13,535 ) (14,267 ) (15,375 ) (16,576 ) Loans held for investment, net of unearned income 4,018,649 3,919,365 3,840,524 3,746,289 3,611,152 Allowance for credit losses (50,400 ) (49,800 ) (49,200 ) (52,100 ) (52,350 ) Total loans held for investment, net 3,968,249 3,869,565 3,791,324 3,694,189 3,558,802 Premises and equipment, net 85,831 86,208 87,125 87,732 89,048 Goodwill 62,477 62,477 62,477 62,477 62,477 Other intangible assets, net 26,969 28,563 30,315 32,086 33,874 Foreclosed assets, net — — 103 103 284 Other assets 227,495 219,585 236,517 233,753 206,320 Total assets $ 6,521,489 $ 6,409,952 $ 6,577,876 $ 6,491,061 $ 6,442,491 LIABILITIES Noninterest bearing deposits $ 897,923 $ 989,469 $ 1,053,450 $ 1,139,694 $ 1,114,825 Interest bearing deposits 4,547,524 4,565,684 4,415,492 4,337,088 4,422,616 Total deposits 5,445,447 5,555,153 5,468,942 5,476,782 5,537,441 Short-term borrowings 362,054 143,981 391,873 304,536 193,894 Long-term debt 125,752 137,981 139,210 154,190 159,168 Other liabilities 86,895 72,187 85,058 83,324 63,156 Total liabilities 6,020,148 5,909,302 6,085,083 6,018,832 5,953,659 SHAREHOLDERS’ EQUITY Common stock 16,581 16,581 16,581 16,581 16,581 Additional paid-in capital 301,424 300,966 302,085 301,418 300,859 Retained earnings 290,548 286,767 289,289 276,998 262,395 Treasury stock (24,508 ) (24,779 ) (26,115 ) (26,145 ) (25,772 ) Accumulated other comprehensive loss (82,704 ) (78,885 ) (89,047 ) (96,623 ) (65,231 ) Total shareholders’ equity 501,341 500,650 492,793 472,229 488,832 Total liabilities and shareholders’ equity $ 6,521,489 $ 6,409,952 $ 6,577,876 $ 6,491,061 $ 6,442,491 MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
FIVE QUARTER AND YEAR TO DATE CONSOLIDATED STATEMENTS OF INCOMEThree 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) 2023 2023 2022 2022 2022 2023 2022 Interest income Loans, including fees $ 49,726 $ 46,490 $ 43,769 $ 40,451 $ 32,746 $ 96,216 $ 64,064 Taxable investment securities 9,734 10,444 10,685 10,635 9,576 20,178 17,699 Tax-exempt investment securities 1,822 2,127 2,303 2,326 2,367 3,949 4,750 Other 68 244 — 9 40 312 68 Total interest income 61,350 59,305 56,757 53,421 44,729 120,655 86,581 Interest expense Deposits 20,117 15,319 9,127 5,035 3,173 35,436 6,083 Short-term borrowings 2,118 1,786 1,955 767 229 3,904 348 Long-term debt 2,153 2,124 2,111 1,886 1,602 4,277 3,089 Total interest expense 24,388 19,229 13,193 7,688 5,004 43,617 9,520 Net interest income 36,962 40,076 43,564 45,733 39,725 77,038 77,061 Credit loss expense 1,597 933 572 638 3,282 2,530 3,282 Net interest income after credit loss expense 35,365 39,143 42,992 45,095 36,443 74,508 73,779 Noninterest income (loss) Investment services and trust activities 3,119 2,933 2,666 2,876 2,670 6,052 5,681 Service charges and fees 2,047 2,008 2,028 2,075 1,717 4,055 3,374 Card revenue 1,847 1,748 1,784 1,898 1,878 3,595 3,528 Loan revenue 909 1,420 966 1,722 3,523 2,329 7,816 Bank-owned life insurance 616 602 637 579 558 1,218 1,089 Investment securities (losses) gains, net (2 ) (13,170 ) (1 ) (163 ) 395 (13,172 ) 435 Other 210 413 2,860 3,601 1,606 623 2,068 Total noninterest income (loss) 8,746 (4,046 ) 10,940 12,588 12,347 4,700 23,991 Noninterest expense Compensation and employee benefits 20,386 19,607 20,438 20,046 18,955 39,993 37,619 Occupancy expense of premises, net 2,574 2,746 2,663 2,577 2,253 5,320 5,032 Equipment 2,435 2,171 2,327 2,358 2,107 4,606 4,008 Legal and professional 1,682 1,736 1,846 2,012 2,435 3,418 4,788 Data processing 1,521 1,363 1,375 1,731 1,237 2,884 2,468 Marketing 1,142 986 947 1,139 1,157 2,128 2,186 Amortization of intangibles 1,594 1,752 1,770 1,789 1,283 3,346 2,510 FDIC insurance 862 749 405 415 420 1,611 840 Communications 260 261 285 302 266 521 538 Foreclosed assets, net (6 ) (28 ) 48 42 4 (34 ) (108 ) Other 2,469 1,976 2,336 2,212 1,965 4,445 3,844 Total noninterest expense 34,919 33,319 34,440 34,623 32,082 68,238 63,725 Income before income tax expense 9,192 1,778 19,492 23,060 16,708 10,970 34,045 Income tax expense 1,598 381 3,490 4,743 4,087 1,979 7,529 Net income $ 7,594 $ 1,397 $ 16,002 $ 18,317 $ 12,621 $ 8,991 $ 26,516 Earnings per common share Basic $ 0.48 $ 0.09 $ 1.02 $ 1.17 $ 0.81 $ 0.57 $ 1.69 Diluted $ 0.48 $ 0.09 $ 1.02 $ 1.17 $ 0.80 $ 0.57 $ 1.69 Weighted average basic common shares outstanding 15,680 15,650 15,624 15,623 15,668 15,665 15,675 Weighted average diluted common shares outstanding 15,689 15,691 15,693 15,654 15,688 15,688 15,703 Dividends paid per common share $ 0.2425 $ 0.2425 $ 0.2375 $ 0.2375 $ 0.2375 $ 0.4850 $ 0.4750 MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
FINANCIAL STATISTICSAs 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) 2023 2023 2022 2023 2022 Earnings: Net interest income $ 36,962 $ 40,076 $ 39,725 $ 77,038 $ 77,061 Noninterest (loss) income 8,746 (4,046 ) 12,347 4,700 23,991 Total revenue, net of interest expense 45,708 36,030 52,072 81,738 101,052 Credit loss expense 1,597 933 3,282 2,530 3,282 Noninterest expense 34,919 33,319 32,082 68,238 63,725 Income before income tax expense 9,192 1,778 16,708 10,970 34,045 Income tax expense 1,598 381 4,087 1,979 7,529 Net income $ 7,594 $ 1,397 $ 12,621 $ 8,991 $ 26,516 Per Share Data: Diluted earnings $ 0.48 $ 0.09 $ 0.80 $ 0.57 $ 1.69 Book value 31.96 31.94 31.26 31.96 31.26 Tangible book value(1) 26.26 26.13 25.10 26.26 25.10 Ending Balance Sheet: Total assets $ 6,521,489 $ 6,409,952 $ 6,442,491 $ 6,521,489 $ 6,442,491 Loans held for investment, net of unearned income 4,018,649 3,919,365 3,611,152 4,018,649 3,611,152 Total securities 2,003,089 2,071,783 2,402,831 2,003,089 2,402,831 Total deposits 5,445,447 5,555,153 5,537,441 5,445,447 5,537,441 Short-term borrowings 362,054 143,981 193,894 362,054 193,894 Long-term debt 125,752 137,981 159,168 125,752 159,168 Total shareholders’ equity 501,341 500,650 488,832 501,341 488,832 Average Balance Sheet: Average total assets $ 6,465,810 $ 6,524,065 $ 6,078,950 $ 6,494,777 $ 5,997,231 Average total loans 4,003,717 3,867,110 3,326,269 3,935,791 3,286,083 Average total deposits 5,454,517 5,546,694 5,181,927 5,500,350 5,113,368 Financial Ratios: Return on average assets 0.47 % 0.09 % 0.83 % 0.28 % 0.89 % Return on average equity 6.03 % 1.14 % 10.14 % 3.61 % 10.44 % Return on average tangible equity(1) 8.50 % 2.70 % 13.13 % 5.65 % 13.35 % Efficiency ratio(1) 71.13 % 62.32 % 56.57 % 66.56 % 58.46 % Net interest margin, tax equivalent(1) 2.52 % 2.75 % 2.87 % 2.63 % 2.83 % Loans to deposits ratio 73.80 % 70.55 % 65.21 % 73.80 % 65.21 % Uninsured deposits excluding collateralized municipal deposits ratio 20.05 % 18.54 % 24.11 % 20.05 % 24.11 % Common equity ratio 7.69 % 7.81 % 7.59 % 7.69 % 7.59 % Tangible common equity ratio(1) 6.40 % 6.48 % 6.18 % 6.40 % 6.18 % Credit Risk Profile: Total nonperforming loans $ 14,448 $ 14,442 $ 27,337 $ 14,448 $ 27,337 Nonperforming loans ratio 0.36 % 0.37 % 0.76 % 0.36 % 0.76 % Total nonperforming assets $ 14,448 $ 14,442 $ 27,621 $ 14,448 $ 27,621 Nonperforming assets ratio 0.22 % 0.23 % 0.43 % 0.22 % 0.43 % Net charge-offs $ 897 $ 333 $ 281 $ 1,230 $ 2,503 Net charge-off ratio 0.09 % 0.03 % 0.03 % 0.06 % 0.15 % Allowance for credit losses $ 50,400 $ 49,800 $ 52,350 $ 50,400 $ 52,350 Allowance for credit losses ratio 1.25 % 1.27 % 1.45 % 1.25 % 1.45 % Allowance for credit losses to nonaccrual ratio 355.03 % 344.88 % 201.52 % 355.03 % 201.52 % (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 ANALYSISThree Months Ended June 30, 2023 March 31, 2023 June 30, 2022 (Dollars in thousands) Average
BalanceInterest
Income/
ExpenseAverage
Yield/
CostAverage
BalanceInterest
Income/
ExpenseAverage
Yield/
CostAverage Balance Interest
Income/
ExpenseAverage
Yield/
CostASSETS Loans, including fees (1)(2)(3) $ 4,003,717 $ 50,439 5.05 % $ 3,867,110 $ 47,206 4.95 % $ 3,326,269 $ 33,315 4.02 % Taxable investment securities 1,698,003 9,734 2.30 % 1,811,388 10,444 2.34 % 1,923,155 9,576 2.00 % Tax-exempt investment securities (2)(4) 345,934 2,253 2.61 % 397,110 2,649 2.71 % 439,385 2,975 2.72 % Total securities held for investment(2) 2,043,937 11,987 2.35 % 2,208,498 13,093 2.40 % 2,362,540 12,551 2.13 % Other 9,078 68 3.00 % 24,848 244 3.98 % 30,016 40 0.53 % Total interest earning assets(2) $ 6,056,732 $ 62,494 4.14 % $ 6,100,456 $ 60,543 4.02 % $ 5,718,825 $ 45,906 3.22 % Other assets 409,078 423,609 360,125 Total assets $ 6,465,810 $ 6,524,065 $ 6,078,950 LIABILITIES AND SHAREHOLDERS’ EQUITY Interest checking deposits $ 1,420,741 $ 1,971 0.56 % $ 1,515,845 $ 1,849 0.49 % $ 1,641,337 $ 1,189 0.29 % Money market deposits 999,436 5,299 2.13 % 930,543 3,269 1.42 % 1,003,386 571 0.23 % Savings deposits 603,905 288 0.19 % 653,043 272 0.17 % 662,449 287 0.17 % Time deposits 1,490,332 12,559 3.38 % 1,417,688 9,929 2.84 % 836,143 1,126 0.54 % Total interest bearing deposits 4,514,414 20,117 1.79 % 4,517,119 15,319 1.38 % 4,143,315 3,173 0.31 % Securities sold under agreements to repurchase 159,583 423 1.06 % 145,809 450 1.25 % 154,107 111 0.29 % Other short-term borrowings 132,495 1,695 5.13 % 111,306 1,336 4.87 % 41,859 118 1.13 % Short-term borrowings 292,078 2,118 2.91 % 257,115 1,786 2.82 % 195,966 229 0.47 % Long-term debt 135,329 2,153 6.38 % 139,208 2,124 6.19 % 144,440 1,602 4.45 % Total borrowed funds 427,407 4,271 4.01 % 396,323 3,910 4.00 % 340,406 1,831 2.16 % Total interest bearing liabilities $ 4,941,821 $ 24,388 1.98 % $ 4,913,442 $ 19,229 1.59 % $ 4,483,721 $ 5,004 0.45 % Noninterest bearing deposits 940,103 1,029,575 1,038,612 Other liabilities 78,898 82,501 57,157 Shareholders’ equity 504,988 498,547 499,460 Total liabilities and shareholders’ equity $ 6,465,810 $ 6,524,065 $ 6,078,950 Net interest income(2) $ 38,106 $ 41,314 $ 40,902 Net interest spread(2) 2.16 % 2.43 % 2.77 % Net interest margin(2) 2.52 % 2.75 % 2.87 % Total deposits(5) $ 5,454,517 $ 20,117 1.48 % $ 5,546,694 $ 15,319 1.12 % $ 5,181,927 $ 3,173 0.25 % Cost of funds(6) 1.66 % 1.31 % 0.36 % (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 $79 thousand, $95 thousand, and $(31) thousand for the three months ended June 30, 2023, March 31, 2023, and June 30, 2022, respectively. Loan purchase discount accretion was $1.0 million, $1.2 million, and $528 thousand for the three months ended June 30, 2023, March 31, 2023, and June 30, 2022, respectively. Tax equivalent adjustments were $713 thousand, $716 thousand, and $569 thousand for the three months ended June 30, 2023, March 31, 2023, and June 30, 2022, respectively. The federal statutory tax rate utilized was 21%.
(4) Interest income includes tax equivalent adjustments of $431 thousand, $522 thousand, and $608 thousand for the three months ended June 30, 2023, March 31, 2023, and June 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.MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET AND YIELD ANALYSISSix Months Ended June 30, 2023 June 30, 2022 (Dollars in thousands) Average
BalanceInterest
Income/
ExpenseAverage
Yield/
CostAverage
BalanceInterest
Income/
ExpenseAverage
Yield/
CostASSETS Loans, including fees (1)(2)(3) $ 3,935,791 $ 97,645 5.00 % $ 3,286,083 $ 65,173 4.00 % Taxable investment securities 1,754,382 20,178 2.32 % 1,879,773 17,699 1.90 % Tax-exempt investment securities (2)(4) 371,381 4,902 2.66 % 444,936 5,973 2.71 % Total securities held for investment(2) 2,125,763 25,080 2.38 % 2,324,709 23,672 2.05 % Other 16,919 312 3.72 % 42,983 68 0.32 % Total interest earning assets(2) $ 6,078,473 $ 123,037 4.08 % $ 5,653,775 $ 88,913 3.17 % Other assets 416,304 343,456 Total assets $ 6,494,777 $ 5,997,231 LIABILITIES AND SHAREHOLDERS’ EQUITY Interest checking deposits $ 1,468,030 $ 3,820 0.52 % $ 1,601,093 $ 2,250 0.28 % Money market deposits 965,180 8,568 1.79 % 978,801 1,070 0.22 % Savings deposits 628,338 560 0.18 % 652,134 566 0.18 % Time deposits 1,454,210 22,488 3.12 % 859,938 2,197 0.52 % Total interest bearing deposits 4,515,758 35,436 1.58 % 4,091,966 6,083 0.30 % Securities sold under agreements to repurchase 152,734 873 1.15 % 156,747 207 0.27 % Other short-term borrowings 121,959 3,031 5.01 % 22,551 141 1.26 % Short-term borrowings 274,693 3,904 2.87 % 179,298 348 0.39 % Long-term debt 137,258 4,277 6.28 % 142,426 3,089 4.37 % Total borrowed funds 411,951 8,181 4.00 % 321,724 3,437 2.15 % Total interest bearing liabilities $ 4,927,709 $ 43,617 1.78 % $ 4,413,690 $ 9,520 0.43 % Noninterest bearing deposits 984,592 1,021,402 Other liabilities 80,690 50,054 Shareholders’ equity 501,786 512,085 Total liabilities and shareholders’ equity $ 6,494,777 $ 5,997,231 Net interest income(2) $ 79,420 $ 79,393 Net interest spread(2) 2.30 % 2.74 % Net interest margin(2) 2.63 % 2.83 % Total deposits(5) $ 5,500,350 $ 35,436 1.30 % $ 5,113,368 $ 6,083 0.24 % Cost of funds(6) 1.49 % 0.35 % (1) Average balance includes nonaccrual loans.
(2) Tax equivalent. The federal statutory tax rate utilized was 21%.
(3) Interest income includes net loan fees, loan purchase discount accretion and tax equivalent adjustments. Net loan fees were $0.2 million and $0.6 million for the six months ended June 30, 2023 and June 30, 2022, respectively. Loan purchase discount accretion was $2.2 million and $1.3 million for the six months ended June 30, 2023 and June 30, 2022, respectively. Tax equivalent adjustments were $1.4 million and $1.1 million for the six months ended June 30, 2023 and June 30, 2022, respectively. The federal statutory tax rate utilized was 21%.
(4) Interest income includes tax equivalent adjustments of $1.0 million and $1.2 million for the six months ended June 30, 2023 and June 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 June 30, March 31, December 31, September 30, June 30, (Dollars in thousands, except per share data) 2023 2023 2022 2022 2022 Total shareholders’ equity $ 501,341 $ 500,650 $ 492,793 $ 472,229 $ 488,832 Intangible assets, net (89,446 ) (91,040 ) (92,792 ) (94,563 ) (96,351 ) Tangible common equity $ 411,895 $ 409,610 $ 400,001 $ 377,666 $ 392,481 Total assets $ 6,521,489 $ 6,409,952 $ 6,577,876 $ 6,491,061 $ 6,442,491 Intangible assets, net (89,446 ) (91,040 ) (92,792 ) (94,563 ) (96,351 ) Tangible assets $ 6,432,043 $ 6,318,912 $ 6,485,084 $ 6,396,498 $ 6,346,140 Book value per share $ 31.96 $ 31.94 $ 31.54 $ 30.23 $ 31.26 Tangible book value per share(1) $ 26.26 $ 26.13 $ 25.60 $ 24.17 $ 25.10 Shares outstanding 15,685,123 15,675,325 15,623,977 15,622,825 15,635,131 Common equity ratio 7.69 % 7.81 % 7.49 % 7.28 % 7.59 % Tangible common equity ratio(2) 6.40 % 6.48 % 6.17 % 5.90 % 6.18 % (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) 2023 2023 2022 2023 2022 Net income $ 7,594 $ 1,397 $ 12,621 $ 8,991 $ 26,516 Intangible amortization, net of tax(1) 1,196 1,314 962 2,510 1,883 Tangible net income $ 8,790 $ 2,711 $ 13,583 $ 11,501 $ 28,399 Average shareholders’ equity $ 504,988 $ 498,547 $ 499,460 $ 501,786 $ 512,085 Average intangible assets, net (90,258 ) (92,002 ) (84,540 ) (91,125 ) (83,159 ) Average tangible equity $ 414,730 $ 406,545 $ 414,920 $ 410,661 $ 428,926 Return on average equity 6.03 % 1.14 % 10.14 % 3.61 % 10.44 % Return on average tangible equity(2) 8.50 % 2.70 % 13.13 % 5.65 % 13.35 % (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 MarginThree Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, (Dollars in thousands) 2023 2023 2022 2023 2022 Net interest income $ 36,962 $ 40,076 $ 39,725 $ 77,038 $ 77,061 Tax equivalent adjustments: Loans(1) 713 716 569 1,429 1,109 Securities(1) 431 522 608 953 1,223 Net interest income, tax equivalent $ 38,106 $ 41,314 $ 40,902 $ 79,420 $ 79,393 Loan purchase discount accretion (984 ) (1,189 ) (528 ) (2,173 ) (1,260 ) Core net interest income $ 37,122 $ 40,125 $ 40,374 $ 77,247 $ 78,133 Net interest margin 2.45 % 2.66 % 2.79 % 2.56 % 2.75 % Net interest margin, tax equivalent(2) 2.52 % 2.75 % 2.87 % 2.63 % 2.83 % Core net interest margin(3) 2.46 % 2.67 % 2.83 % 2.56 % 2.79 % Average interest earning assets $ 6,056,732 $ 6,100,456 $ 5,718,825 $ 6,078,473 $ 5,653,775 (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) 2023 2023 2022 2023 2022 Loan interest income, including fees $ 49,726 $ 46,490 $ 32,746 $ 96,216 $ 64,064 Tax equivalent adjustment(1) 713 716 569 1,429 1,109 Tax equivalent loan interest income $ 50,439 $ 47,206 $ 33,315 $ 97,645 $ 65,173 Loan purchase discount accretion (984 ) (1,189 ) (528 ) (2,173 ) (1,260 ) Core loan interest income $ 49,455 $ 46,017 $ 32,787 $ 95,472 $ 63,913 Yield on loans 4.98 % 4.88 % 3.95 % 4.93 % 3.93 % Yield on loans, tax equivalent(2) 5.05 % 4.95 % 4.02 % 5.00 % 4.00 % Core yield on loans(3) 4.95 % 4.83 % 3.95 % 4.89 % 3.92 % Average loans $ 4,003,717 $ 3,867,110 $ 3,326,269 $ 3,935,791 $ 3,286,083 (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) 2023 2023 2022 2023 2022 Total noninterest expense $ 34,919 $ 33,319 $ 32,082 $ 68,238 $ 63,725 Amortization of intangibles (1,594 ) (1,752 ) (1,283 ) (3,346 ) (2,510 ) Merger-related expenses — (136 ) (901 ) (136 ) (1,029 ) Noninterest expense used for efficiency ratio $ 33,325 $ 31,431 $ 29,898 $ 64,756 $ 60,186 Net interest income, tax equivalent(1) $ 38,106 $ 41,314 $ 40,902 $ 79,420 $ 79,393 Plus: Noninterest income 8,746 (4,046 ) 12,347 4,700 23,991 Less: Investment securities (losses) gains, net (2 ) (13,170 ) 395 (13,172 ) 435 Net revenues used for efficiency ratio $ 46,854 $ 50,438 $ 52,854 $ 97,292 $ 102,949 Efficiency ratio (2) 71.13 % 62.32 % 56.57 % 66.56 % 58.46 % (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 Six Months Ended Adjusted Earnings June 30, March 31, June 30, June 30, June 30, (Dollars in thousands, except per share data) 2023 2023 2022 2023 2022 Net income $ 7,594 $ 1,397 $ 12,621 $ 8,991 $ 26,516 After tax loss on sale of debt securities(1) — 9,837 — 9,837 — Adjusted earnings $ 7,594 $ 11,234 $ 12,621 $ 18,828 $ 26,516 Weighted average diluted common shares outstanding 15,689 15,691 15,688 15,688 15,703 Earnings per common share Earnings per common share - diluted $ 0.48 $ 0.09 $ 0.80 $ 0.57 $ 1.69 Adjusted earnings per common share - diluted (2) $ 0.48 $ 0.72 $ 0.80 $ 1.20 $ 1.69 (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 
