U.S. Markets closed
  • S&P 500

    3,465.39
    +11.90 (+0.34%)
     
  • Dow 30

    28,335.57
    -28.09 (-0.10%)
     
  • Nasdaq

    11,548.28
    +42.28 (+0.37%)
     
  • Russell 2000

    1,640.50
    +10.25 (+0.63%)
     
  • Crude Oil

    39.78
    -0.86 (-2.12%)
     
  • Gold

    1,903.40
    -1.20 (-0.06%)
     
  • Silver

    24.70
    -0.01 (-0.04%)
     
  • EUR/USD

    1.1868
    +0.0042 (+0.3560%)
     
  • 10-Yr Bond

    0.8410
    -0.0070 (-0.83%)
     
  • Vix

    27.55
    -0.56 (-1.99%)
     
  • GBP/USD

    1.3038
    -0.0042 (-0.3207%)
     
  • USD/JPY

    104.7200
    -0.1200 (-0.1145%)
     
  • BTC-USD

    12,964.79
    -347.33 (-2.61%)
     
  • CMC Crypto 200

    260.05
    -1.40 (-0.54%)
     
  • FTSE 100

    5,860.28
    +74.63 (+1.29%)
     
  • Nikkei 225

    23,516.59
    +42.32 (+0.18%)
     

MidWestOne Financial Group, Inc. Reports Financial Results for the Third Quarter of 2019

IOWA CITY, Iowa, Oct. 25, 2019 (GLOBE NEWSWIRE) -- MidWestOne Financial Group, Inc. (Nasdaq - MOFG) (“we”, “our”, or “the Company”) today reported its financial results for the third quarter of 2019. Charles Funk, President and Chief Executive Officer commented, “We are beginning to realize the operational efficiencies stemming from the ATBancorp acquisition. The continued improvement in our financial results reflected the hard work put in by so many to make that transaction a reality.”

Net income for the third quarter of 2019 was $12.3 million, or $0.76 per diluted common share, compared to net income of $10.7 million, or $0.72 per diluted common share, for the second quarter of 2019 (the “linked quarter”). Mr. Funk continued, “This was the best quarter in our history. Notably, merger-related expenses of $2.5 million lowered our third quarter earnings per share by $0.12.”

FINANCIAL HIGHLIGHTS

As of or For the Nine Months Ended

As of or For the Three Months Ended

September 30,

June 30,

September 30,

September 30,

September 30,

2019

2019

2018

2019

2018

(Dollars in thousands, except per share amounts)

Net income

$

12,300

$

10,674

$

6,778

$

30,259

$

22,727

Earnings per common share, diluted

$

0.76

$

0.72

$

0.55

$

2.09

$

1.86

Return on average assets

1.06

%

1.01

%

0.83

%

1.00

%

0.94

%

Return on average equity

9.92

%

9.66

%

7.72

%

9.37

%

8.84

%

Return on average tangible equity (1)

15.57

%

13.30

%

10.42

%

13.48

%

11.96

%

Net interest margin, tax equivalent(1)

4.15

%

3.68

%

3.55

%

3.83

%

3.61

%

Yield on loans, tax equivalent(1)

5.59

%

5.10

%

4.74

%

5.25

%

4.74

%

Cost of total deposits

0.89

%

0.92

%

0.70

%

0.89

%

0.63

%

Efficiency ratio(1)

50.46

%

56.24

%

65.86

%

55.45

%

62.36

%

Total assets

$

4,648,287

$

4,662,463

$

3,267,965

$

4,648,287

$

3,267,965

Loans held for investment, net of unearned income

$

3,524,728

$

3,536,503

$

2,377,649

$

3,524,728

$

2,377,649

Total deposits

$

3,709,712

$

3,725,472

$

2,632,259

$

3,709,712

$

2,632,259

Equity to assets ratio

10.71

%

10.47

%

10.69

%

10.71

%

10.69

%

Tangible common equity ratio(1)

8.21

%

7.91

%

8.59

%

8.21

%

8.59

%

Book value per share

$

30.77

$

30.11

$

28.57

$

30.77

$

28.57

Tangible book value per share(1)

$

22.93

$

22.09

$

22.43

$

22.93

$

22.43

Gross loans held for investment to deposit ratio

95.59

%

95.81

%

90.59

%

95.59

%

90.59

%

(1) Non-GAAP measure. See pages 14-15 for a detailed explanation.

Acquisition of ATBancorp

On May 1, 2019, we acquired ATBancorp. The table below summarizes the amounts recognized at the acquisition date for each major class of assets acquired and liabilities assumed:

May 01, 2019

(in thousands)

Merger consideration

$

148,443

Identifiable net assets acquired, at fair value

Assets acquired

Cash and due from banks

$

71,820

Debt securities available for sale

99,056

Loans

1,138,928

Premises and equipment

18,623

Core deposit intangible

23,539

Trust customer list intangible

4,285

Bank-owned life insurance

18,759

Foreclosed assets

3,091

Other assets

20,677

Total assets acquired

1,398,778

Liabilities assumed

Deposits

1,079,094

Short-term borrowings

100,761

Long-term debt

71,234

Other liabilities

27,850

Total liabilities assumed

1,278,939

Total identifiable net assets acquired, at fair value

$

119,839

Goodwill

$

28,604

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income increased in the third quarter of 2019 to $43.3 million from $34.8 million in the linked quarter due to both higher average earning asset volumes and higher tax equivalent net interest margin (“NIM”). Average earning assets increased $334.7 million as the linked quarter balances reflected only two months of acquired ATBancorp assets. Further, discount accretion from acquired loans added $7.2 million to net interest income in the current quarter compared to $2.2 million in the linked quarter. Acquired loan prepayment and renewal activity added approximately $2.3 million to discount accretion this quarter.

The tax equivalent net interest margin increased to 4.15% for the third quarter of 2019 from 3.68% in the linked quarter as increased loan yields, driven by loan purchase discount accretion, and marginally lower funding costs. The loan yield was 5.59% for the third quarter of 2019 compared to 5.10% for the linked quarter. Loan purchase discount accretion added 81 bps to loan yields and 69 bps to the NIM in the current quarter compared to 28 bps and 23 bps, respectively, in the linked quarter. The cost of average total deposits in the third quarter of 2019 was 0.89% compared to 0.92% in the linked quarter. The decrease reflects the 4 basis point reduction attributable to deposit purchase accounting accretion related to the merger.

Mr. Funk continued, “While loan discount accretion income boosted our margin in the quarter, our 'core margin' also held up very well, aided by the asset mix change after acquiring ATBancorp.”

Noninterest Income

Noninterest income for the third quarter of 2019 decreased $0.8 million, or 9%, from the linked quarter. The decrease was due primarily to ‘Other’ income in the linked quarter reflecting a gain of $1.1 million from the sale of assets of MidWestOne Insurance Services, Inc. In addition, ‘Loan revenue’ included a $657 thousand negative valuation adjustment to the Company’s mortgage servicing right this quarter compared to a $507 thousand adjustment in the linked quarter. Partially offsetting these decreases, ‘Investment services and trust activities’ increased $449 thousand due to increased trust income following the full integration of the ATBancorp operations.

“Trust and investment services are having very good years and we are also benefiting from increased mortgage loan activity,” said Mr. Funk.

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

Three Months Ended

September 30,

June 30,

September 30,

Noninterest Income

2019

2019

2018

(In thousands)

Investment services and trust activities

$

2,339

$

1,890

$

1,222

Service charges and fees

2,068

1,870

1,512

Card revenue

1,655

1,799

1,069

Loan revenue

991

648

891

Bank-owned life insurance

514

470

399

Insurance commissions

314

304

Investment securities gains, net

23

32

192

Other

414

1,773

456

Total noninterest income

$

8,004

$

8,796

$

6,045

Noninterest Expense

Noninterest expense for the third quarter of 2019 increased $2.4 million, or 8.27%, from the linked quarter as the linked quarter reflected only two months of ATBancorp results. Pre-tax merger-related expenses were $2.5 million for the third quarter of 2019 compared to $3.1 million in the linked quarter.

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

Three Months Ended

September 30,

June 30,

September 30,

Noninterest Expense

2019

2019

2018

(In thousands)

Compensation and employee benefits

$

17,426

$

16,409

$

13,051

Occupancy expense of premises, net

2,294

2,127

2,643

Equipment

2,181

1,914

1,341

Legal and professional

1,996

3,291

1,861

Data processing

1,234

1,008

697

Marketing

1,167

869

672

Amortization of intangibles

2,583

930

547

FDIC insurance

(42

)

434

393

Communications

489

377

341

Foreclosed assets, net

265

84

(131

)

Other

1,849

1,597

1,207

Total noninterest expense

$

31,442

$

29,040

$

22,622

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

Three Months Ended

September 30,

June 30,

September 30,

Merger-related Expenses

2019

2019

2018

(In thousands)

Compensation and employee benefits

$

1,584

$

1,020

$

Legal and professional

163

1,826

571

Data processing

567

240

17

Other

233

48

16

Total merger-related costs

$

2,547

$

3,134

$

604

Income Taxes

The effective income tax rate was 20.9% for the third quarter of 2019 and 23.2% for the linked quarter. The effective tax rate for the third quarter of 2019 was lower due primarily to the impact from certain non-deductible merger related expenses and other merger-related items in the second quarter of 2019.

BALANCE SHEET HIGHLIGHTS

Loans Held for Investment

Loans held for investment, net of unearned income, increased $1.13 billion, or 46.9%, to $3.52 billion, from December 31, 2018, primarily due to the merger. At September 30, 2019, commercial real estate loans comprised approximately 52% of the loan portfolio. Commercial and industrial loans was the next largest category at 25% of total loans, followed by residential real estate loans at 17%, agricultural loans at 4%, and consumer loans at 2%.

“Our loan portfolio has continued to experience higher than expected pay downs in 2019, and this continued in the third quarter,” stated Mr. Funk.

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

September 30,

June 30,

December 31,

September 30,

Loans Held for Investment

2019

2019

2018

2018

(In thousands)

Commercial and industrial

$

871,192

$

866,023

$

533,188

$

523,333

Agricultural

151,984

152,491

96,956

103,207

Commercial real estate

Construction and development

296,586

273,149

217,617

223,324

Farmland

188,394

187,393

88,807

85,735

Multifamily

236,145

243,928

134,741

126,663

Other

1,102,744

1,114,039

826,163

818,068

Total commercial real estate

1,823,869

1,818,509

1,267,328

1,253,790

Residential real estate

One-to-four family first liens

416,194

423,625

341,830

342,755

One-to-four family junior liens

176,162

176,685

120,049

115,768

Total residential real estate

592,356

600,310

461,879

458,523

Consumer

85,327

99,170

39,428

38,796

Loans held for investment, net of unearned income

$

3,524,728

$

3,536,503

$

2,398,779

$

2,377,649

Provision and Allowance for Loan Losses

For the third quarter of 2019, the provision for loan losses was $4.3 million, an increase of $3.6 million from the linked quarter. The increased provision in the third quarter of 2019 was primarily due to the application of the Company’s standard loss reserve factors to the agricultural portfolio loans and renewal of non-agricultural loans acquired in the merger.

“At the beginning of 2019 we gave guidance of a $4 to $6 million provision for loan losses at legacy MidWestOne. We believe the Company will be well within that range at year-end,” said Mr. Funk.

The following table shows the activity in the allowance for loan losses for the periods indicated:

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

September 30,

Allowance for Loan Losses Roll Forward

2019

2019

2018

2019

2018

(In thousands)

Beginning balance

$

28,691

$

29,652

$

30,800

$

29,307

$

28,059

Charge-offs

(1,635

)

(2,187

)

(817

)

(5,178

)

(1,584

)

Recoveries

212

530

345

849

753

Net charge-offs

(1,423

)

(1,657

)

(472

)

(4,329

)

(831

)

Provision for loan losses

4,264

696

950

6,554

4,050

Ending balance

$

31,532

$

28,691

$

31,278

$

31,532

$

31,278

Deposits

Total deposits at September 30, 2019, were $3.71 billion, an increase of $1.10 billion from December 31, 2018, due primarily to the merger. The mix of deposits reflected increases between December 31, 2018 and September 30, 2019 of $241.0 million, or 35.2%, in interest checking deposits, $234.6 million, or 53.4%, in noninterest bearing deposits, $234.2 million, or 32.4%, in time deposits, $207.8 million, or 37.4% in money market deposits, and $179.2 million, or 85.2%, in savings deposits.

Mr. Funk noted, “The decline in deposits from the linked quarter stemmed principally from net runoff experienced in the legacy ATBancorp footprint. That net runoff reflected, in part, our efforts at rationalizing our deposit costs in those markets to defend our net interest margin. Notably, that net runoff was partially offset by excellent net deposit growth elsewhere in the Company. Thus, we were generally pleased with our deposit performance through the first nine months of 2019.”

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

September 30,

June 30,

December 31,

September 30,

Deposit Composition

2019

2019

2018

2018

(In thousands)

Noninterest bearing deposits

$

673,777

$

647,078

$

439,133

$

458,576

Interest checking deposits

924,861

762,530

683,894

691,743

Money market deposits

763,661

1,019,886

555,839

545,179

Savings deposits

389,606

356,328

210,416

211,591

Total non-maturity deposits

2,751,905

2,785,822

1,889,282

1,907,089

Time deposits of $250,000 and under

685,409

678,752

532,395

522,558

Time deposits of $250,000 and over

272,398

260,898

191,252

202,612

Total time deposits

957,807

939,650

723,647

725,170

Total deposits

$

3,709,712

$

3,725,472

$

2,612,929

$

2,632,259

CREDIT QUALITY

The following table presents a roll forward of nonperforming loans as of the dates indicated:

90+ Days Past Due & Still

Performing Troubled Debt

Nonperforming Loans

Nonaccrual

Accruing

Restructured

Total

(In thousands)

Balance at December 31, 2018

$

19,924

$

365

$

5,284

$

25,573

Loans placed on nonaccrual, restructured or 90+ days past due & still accruing

14,236

1,265

215

15,716

Established through acquisition

12,116

12,116

Repayments (including interest applied to principal)

(7,420

)

(18

)

(244

)

(7,682

)

Loans returned to accrual status or no longer past due

(1,243

)

(962

)

(2,205

)

Charge-offs

(3,972

)

(3,972

)

Transfers to foreclosed assets

(1,673

)

(1,673

)

Transfers to nonaccrual

(414

)

(554

)

(968

)

Balance at September 30, 2019

$

31,968

$

236

$

4,701

$

36,905

At September 30, 2019, net foreclosed assets totaled $4.4 million, up from $535 thousand at December 31, 2018, primarily due to the merger. As of September 30, 2019, the allowance for loan losses was $31.5 million, or 0.89% of loans held for investment, net of unearned income, compared with $29.3 million, or 1.22% at December 31, 2018.

“We recorded a $4.3 million provision for loan losses this quarter, $3.0 million of which was related to the acquired ATBancorp loan portfolio. Notably, the provision related to the ATBancorp loans was not the result of deterioration in the overall quality of that portfolio, but rather a function of transitioning from the initial measurement of the acquired loans to our standard allowance methodology. We continue to make progress in identifying and resolving our problem loans,” concluded Mr. Funk.

The following table presents selected loan credit quality metrics as of the dates indicated:

September 30,

June 30,

December 31,

September 30,

Credit Quality Metrics

2019

2019

2018

2018

(dollars in thousands)

Nonaccrual loans held for investment

$

31,968

$

30,875

$

19,924

$

20,929

Performing troubled debt restructured loans held for investment

4,701

4,593

5,284

7,354

Accruing loans contractually past due 90 days or more

236

947

365

171

Total nonperforming loans

36,905

36,415

25,573

28,454

Foreclosed assets, net

4,366

4,922

535

549

Total nonperforming assets

$

41,271

$

41,337

$

26,108

$

29,003

Allowance for loan losses

31,532

28,691

29,307

31,278

Provision for loan losses (for the quarter)

4,264

696

3,250

950

Net charge-offs (for the quarter)

1,423

1,657

5,221

472

Net charge-offs to average loans held for investment (for the quarter)

0.16

%

0.21

%

0.86

%

0.08

%

Allowance for loan losses to loans held for investment, net of unearned income

0.89

%

0.81

%

1.22

%

1.32

%

Allowance for loan losses to nonaccrual loans held for investment, net of unearned income

98.64

%

92.93

%

147.09

%

149.45

%

Nonaccrual loans held for investment to loans held for investment

0.91

%

0.87

%

0.83

%

0.88

%


CORPORATE UPDATE

Share Repurchase Program

During the third quarter of 2019 the Company repurchased 41,426 shares at an average price of $29.37 and a total cost of $1.2 million. At September 30, 2019, $4.5 million remained available to repurchase shares under the Company’s current share repurchase program.

Cash Dividend Announcement

On October 22, 2019, the Company’s board of directors declared a quarterly cash dividend of $0.2025 per common share. The dividend is payable December 16, 2019, to shareholders of record at the close of business on December 2, 2019. At this quarterly rate, the indicated annual cash dividend is equal to $0.81 per common share.

CONFERENCE CALL DETAILS

The Company will host a conference call for investors at 11:00 a.m., CDT, on Friday, October 25, 2019. To participate, please dial 866-233-3483 at least fifteen minutes before the call start time. If you are unable to participate on the call, a replay will be available until January 25, 2020, by calling 877-344-7529 and using the replay access code of 10126193. A transcript of the call will also be available on the company’s web site (www.midwestone.com) within three business days of the event.

ABOUT MIDWESTONE FINANCIAL GROUP, INC.

MidWestOne Financial Group, Inc. is a financial holding company headquartered in Iowa City, Iowa. MidWestOne Financial 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.com. MidWestOne Financial 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) 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 provision for loan losses, and a reduction in net earnings; (2) the risks related to mergers, including our pending merger with ATBancorp, 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; (3) our management’s ability to reduce and effectively manage interest rate risk and the impact of interest rates in general on the volatility of our net interest income; (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) legislative and regulatory changes, including changes in banking, securities, trade, and tax laws and regulations and their application by our regulators and changes in the scope and cost of Federal Deposit Insurance Corporation insurance and other coverages; (8) the ability to attract and retain key executives and employees experienced in banking and financial services; (9) the sufficiency of the allowance for loan losses to absorb the amount of actual losses inherent in our existing loan portfolio; (10) our ability to adapt successfully to technological changes to compete effectively in the marketplace; (11) credit risks and risks from concentrations (by geographic area and by industry) within our loan portfolio; (12) 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, and other financial institutions operating in our markets or elsewhere or providing services similar to ours; (13) the failure of assumptions underlying the establishment of allowances for loan losses and estimation of values of collateral and various financial assets and liabilities; (14) volatility of rate-sensitive deposits; (15) operational risks, including data processing system failures or fraud; (16) asset/liability matching risks and liquidity risks; (17) the costs, effects and outcomes of existing or future litigation; (18) changes in general economic or industry conditions, nationally, internationally or in the communities in which we conduct business; (19) changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the Financial Accounting Standards Board; (20) war or terrorist activities which may cause further deterioration in the economy or cause instability in credit markets; (21) cyber-attacks; (22) the imposition of tariffs or other domestic or international governmental policies impacting the value of the agricultural or other products of our borrowers; and (23) other risk factors detailed from time to time in Securities and Exchange Commission filings made by the Company.

MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30,

June 30,

December 31,

2019

2019

2018

(In thousands)

ASSETS

Cash and due from banks

$

79,776

$

72,801

$

43,787

Interest earning deposits in banks

6,413

47,708

1,693

Federal funds sold

478

Total cash and cash equivalents

86,667

120,509

45,480

Debt securities available for sale at fair value

503,278

460,302

414,101

Held to maturity securities at amortized cost

190,309

193,173

195,822

Total securities held for investment

693,587

653,475

609,923

Loans held for sale

7,906

4,306

666

Gross loans held for investment

3,545,993

3,569,236

2,405,001

Unearned income, net

(21,265

)

(32,733

)

(6,222

)

Loans held for investment, net of unearned income

3,524,728

3,536,503

2,398,779

Allowance for loan losses

(31,532

)

(28,691

)

(29,307

)

Total loans held for investment, net

3,493,196

3,507,812

2,369,472

Premises and equipment, net

91,190

93,395

75,773

Goodwill

93,258

93,376

64,654

Other intangible assets, net

33,635

36,624

9,875

Foreclosed assets, net

4,366

4,922

535

Other assets

144,482

148,044

115,102

Total assets

$

4,648,287

$

4,662,463

$

3,291,480

LIABILITIES

Noninterest bearing deposits

$

673,777

$

647,078

$

439,133

Interest bearing deposits

3,035,935

3,078,394

2,173,796

Total deposits

3,709,712

3,725,472

2,612,929

Short-term borrowings

155,101

153,829

131,422

Long-term debt

244,677

252,673

168,726

Other liabilities

40,912

42,138

21,336

Total liabilities

4,150,402

4,174,112

2,934,413

SHAREHOLDERS' EQUITY

Common stock

16,581

16,581

12,463

Additional paid-in capital

297,144

296,879

187,813

Retained earnings

191,007

181,984

168,951

Treasury stock

(9,933

)

(8,716

)

(6,499

)

Accumulated other comprehensive income (loss)

3,086

1,623

(5,661

)

Total shareholders' equity

497,885

488,351

357,067

Total liabilities and shareholders' equity

$

4,648,287

$

4,662,463

$

3,291,480

Certain reclassifications have been made to prior periods’ consolidated financial statements to present them on a basis comparable with the current period’s consolidated financial statements.


MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

2019

2019

2018 (1)

2019

2018

(In thousands, except per share data)

Interest income

Loans, including fees

$

49,169

$

40,053

$

28,088

$

118,257

$

82,141

Taxable investment securities

3,376

3,289

2,715

9,592

8,253

Tax-exempt investment securities

1,401

1,424

1,395

4,231

4,452

Other

130

185

12

335

39

Total interest income

54,076

44,951

32,210

132,415

94,885

Interest expense

Deposits

8,238

7,743

4,625

21,676

12,170

Short-term borrowings

522

500

321

1,479

941

Long-term debt

2,058

1,876

1,153

5,194

3,059

Total interest expense

10,818

10,119

6,099

28,349

16,170

Net interest income

43,258

34,832

26,111

104,066

78,715

Provision for loan losses

4,264

696

950

6,554

4,050

Net interest income after provision for loan losses

38,994

34,136

25,161

97,512

74,665

Noninterest income

Investment services and trust activities

2,339

1,890

1,222

5,619

3,679

Service charges and fees

2,068

1,870

1,512

5,380

4,601

Card revenue

1,655

1,799

1,069

4,452

3,128

Loan revenue

991

648

891

2,032

2,738

Bank-owned life insurance

514

470

399

1,376

1,229

Insurance commissions

314

304

734

1,024

Investment securities gains, net

23

32

192

72

197

Other

414

1,773

456

2,545

823

Total noninterest income

8,004

8,796

6,045

22,210

17,419

Noninterest expense

Compensation and employee benefits

17,426

16,409

13,051

46,414

37,647

Occupancy expense of premises, net

2,294

2,127

2,643

6,300

6,431

Equipment

2,181

1,914

1,341

5,466

4,132

Legal and professional

1,996

3,291

1,861

6,252

3,614

Data processing

1,234

1,008

697

3,087

2,076

Marketing

1,167

869

672

2,642

1,982

Amortization of intangibles

2,583

930

547

3,965

1,793

FDIC insurance

(42

)

434

393

762

1,104

Communications

489

377

341

1,208

1,011

Foreclosed assets, net

265

84

(131

)

407

(25

)

Other

1,849

1,597

1,207

4,596

3,671

Total noninterest expense

31,442

29,040

22,622

81,099

63,436

Income before income tax expense

15,556

13,892

8,584

38,623

28,648

Income tax expense

3,256

3,218

1,806

8,364

5,921

Net income

$

12,300

$

10,674

$

6,778

$

30,259

$

22,727

Earnings per common share

Basic

$

0.76

$

0.72

$

0.55

$

2.10

$

1.86

Diluted

$

0.76

$

0.72

$

0.55

$

2.09

$

1.86

Weighted average basic common shares outstanding

16,201

14,894

12,221

14,434

12,221

Weighted average diluted common shares outstanding

16,215

14,900

12,240

14,445

12,238

Dividends paid per common share

$

0.2025

$

0.2025

$

0.195

$

0.6075

$

0.585

(1) Reclassified to conform to the current period’s presentation.


MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES

FIVE QUARTER CONSOLIDATED BALANCE SHEETS

September 30,
2019

June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

(In thousands)

ASSETS

Cash and due from banks

$

79,776

$

72,801

$

40,002

$

43,787

$

49,229

Interest earning deposits in banks

6,413

47,708

2,969

1,693

4,150

Federal funds sold

478

Total cash and cash equivalents

86,667

120,509

42,971

45,480

53,379

Debt securities available for sale at fair value

503,278

460,302

432,979

414,101

407,766

Held to maturity securities at amortized cost

190,309

193,173

195,033

195,822

191,733

Total securities held for investment

693,587

653,475

628,012

609,923

599,499

Loans held for sale

7,906

4,306

309

666

1,124

Gross loans held for investment

3,545,993

3,569,236

2,409,333

2,405,001

2,384,459

Unearned income, net

(21,265

)

(32,733

)

(5,574

)

(6,222

)

(6,810

)

Loans held for investment, net of unearned income

3,524,728

3,536,503

2,403,759

2,398,779

2,377,649

Allowance for loan losses

(31,532

)

(28,691

)

(29,652

)

(29,307

)

(31,278

)

Total loans held for investment, net

3,493,196

3,507,812

2,374,107

2,369,472

2,346,371

Premises and equipment, net

91,190

93,395

75,200

75,773

76,497

Goodwill

93,258

93,376

64,654

64,654

64,654

Other intangible assets, net

33,635

36,624

9,423

9,875

10,378

Foreclosed assets, net

4,366

4,922

336

535

549

Other assets

144,482

148,044

113,963

115,102

115,514

Total assets

$

4,648,287

$

4,662,463

$

3,308,975

$

3,291,480

$

3,267,965

LIABILITIES

Noninterest bearing deposits

$

673,777

$

647,078

$

426,729

$

439,133

$

458,576

Interest bearing deposits

3,035,935

3,078,394

2,258,098

2,173,796

2,173,683

Total deposits

3,709,712

3,725,472

2,684,827

2,612,929

2,632,259

Short-term borrowings

155,101

153,829

76,066

131,422

87,978

Long-term debt

244,677

252,673

162,471

168,726

176,979

Other liabilities

40,912

42,138

21,762

21,336

21,560

Total liabilities

4,150,402

4,174,112

2,945,126

2,934,413

2,918,776

SHAREHOLDERS' EQUITY

Preferred stock

Common stock

$

16,581

$

16,581

$

12,463

$

12,463

$

12,463

Additional paid-in capital

297,144

296,879

187,535

187,813

187,581

Retained earnings

191,007

181,984

173,771

168,951

163,709

Treasury stock

(9,933

)

(8,716

)

(7,297

)

(6,499

)

(5,474

)

Accumulated other comprehensive income (loss)

3,086

1,623

(2,623

)

(5,661

)

(9,090

)

Total shareholders' equity

497,885

488,351

363,849

357,067

349,189

Total liabilities and shareholders' equity

$

4,648,287

$

4,662,463

$

3,308,975

$

3,291,480

$

3,267,965


Certain reclassifications have been made to prior periods’ consolidated financial statements to present them on a basis comparable with the current period’s consolidated financial statements.

MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES

FIVE QUARTER CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended

September 30,

June 30,

March 31,

December 31,

September 30,

2019

2019

2019

2018 (1)

2018 (1)

(In thousands, except per share data)

Interest income

Loans, including fees

$

49,169

$

40,053

$

29,035

$

29,052

$

28,088

Taxable investment securities

3,376

3,289

2,927

2,774

2,715

Tax-exempt investment securities

1,401

1,424

1,406

1,375

1,395

Other

130

185

20

23

12

Total interest income

54,076

44,951

33,388

33,224

32,210

Interest expense

Deposits

8,238

7,743

5,695

5,161

4,625

Short-term borrowings

522

500

457

374

321

Long-term debt

2,058

1,876

1,260

1,136

1,153

Total interest expense

10,818

10,119

7,412

6,671

6,099

Net interest income

43,258

34,832

25,976

26,553

26,111

Provision for loan losses

4,264

696

1,594

3,250

950

Net interest income after provision for loan losses

38,994

34,136

24,382

23,303

25,161

Noninterest income

Investment services and trust activities

2,339

1,890

1,390

1,274

1,222

Service charges and fees

2,068

1,870

1,442

1,556

1,512

Card revenue

1,655

1,799

998

1,095

1,069

Loan revenue

991

648

393

884

891

Bank-owned life insurance

514

470

392

381

399

Insurance commissions

314

420

260

304

Investment securities gains (losses), net

23

32

17

(4

)

192

Other

414

1,773

358

350

456

Total noninterest income

8,004

8,796

5,410

5,796

6,045

Noninterest expense

Compensation and employee benefits

17,426

16,409

12,579

12,111

13,051

Occupancy expense of premises, net

2,294

2,127

1,879

1,166

2,643

Equipment

2,181

1,914

1,371

1,433

1,341

Legal and professional

1,996

3,291

965

1,027

1,861

Data processing

1,234

1,008

845

875

697

Marketing

1,167

869

606

678

672

Amortization of intangibles

2,583

930

452

503

547

FDIC insurance

(42

)

434

370

429

393

Communications

489

377

342

342

341

Foreclosed assets, net

265

84

58

46

(131

)

Other

1,849

1,597

1,150

1,169

1,207

Total noninterest expense

31,442

29,040

20,617

19,779

22,622

Income before income tax expense

15,556

13,892

9,175

9,320

8,584

Income tax expense

3,256

3,218

1,890

1,696

1,806

Net income

$

12,300

$

10,674

$

7,285

$

7,624

$

6,778

Earnings per common share

Basic

$

0.76

$

0.72

$

0.60

$

0.62

$

0.55

Diluted

$

0.76

$

0.72

$

0.60

$

0.62

$

0.55

Weighted average basic common shares outstanding

16,201

14,894

12,164

12,217

12,221

Weighted average diluted common shares outstanding

16,215

14,900

12,177

12,235

12,240

Dividends paid per common share

$

0.2025

$

0.2025

$

0.2025

$

0.195

$

0.195

(1) Reclassified to conform to the current period’s presentation.


MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEET AND YIELD ANALYSIS

Three Months Ended

September 30, 2019

June 30, 2019

September 30, 2018

Average
Balance

Interest Income/
Expense

Average Yield/
Cost

Average
Balance

Interest Income/
Expense

Average Yield/
Cost

Average
Balance (7)

Interest Income/
Expense (7)

Average Yield/
Cost

(Dollars in thousands)

ASSETS

Loans, including fees (1)(2)

$

3,526,149

$

49,712

5.59

%

$

3,183,138

$

40,495

5.10

%

$

2,375,100

$

28,358

4.74

%

Taxable investment securities

471,180

3,376

2.84

%

458,438

3,289

2.88

%

409,816

2,715

2.63

%

Tax-exempt investment securities (3)

200,533

1,765

3.49

%

203,179

1,794

3.54

%

200,577

1,760

3.48

%

Total securities held for investment

671,713

5,141

3.04

%

661,617

5,083

3.08

%

610,393

4,475

2.91

%

Other

17,609

130

2.93

%

36,031

185

2.06

%

2,541

12

1.87

%

Total interest earning assets

$

4,215,471

54,983

5.17

%

$

3,880,786

45,763

4.73

%

$

2,988,034

32,845

4.36

%

Other assets

405,060

349,661

270,249

Total assets

$

4,620,531

$

4,230,447

$

3,258,283

LIABILITIES AND SHAREHOLDERS’ EQUITY

Interest checking deposits

$

877,470

$

1,398

0.63

%

$

731,973

$

1,021

0.56

%

$

672,502

$

798

0.47

%

Money market deposits

809,264

1,904

0.93

%

880,973

2,491

1.13

%

539,142

824

0.61

%

Savings deposits

392,298

463

0.47

%

328,694

182

0.22

%

214,124

63

0.12

%

Time deposits

939,480

4,473

1.89

%

874,619

4,049

1.86

%

729,795

2,940

1.60

%

Total interest bearing deposits

3,018,512

8,238

1.08

%

2,816,259

7,743

1.10

%

2,155,563

4,625

0.85

%

Short-term borrowings

139,458

522

1.49

%

123,586

500

1.62

%

99,254

321

1.28

%

Long-term debt

249,226

2,058

3.28

%

229,152

1,876

3.28

%

178,435

1,153

2.56

%

Total borrowed funds

388,684

2,580

2.63

%

352,738

2,376

2.70

%

277,689

1,474

2.11

%

Total interest bearing liabilities

$

3,407,196

$

10,818

1.26

%

$

3,168,997

$

10,119

1.28

%

$

2,433,252

$

6,099

0.99

%

Noninterest bearing deposits

674,003

574,720

453,124

Other liabilities

47,582

43,616

23,776

Shareholders’ equity

491,750

443,114

348,131

Total liabilities and shareholders’ equity

$

4,620,531

$

4,230,447

$

3,258,283

Net interest income(4)

$

44,165

$

35,644

$

26,746

Net interest spread(4)

3.91

%

3.45

%

3.37

%

Net interest margin(4)

4.15

%

3.68

%

3.55

%

Total deposits(5)

$

3,692,515

$

8,238

0.89

%

$

3,390,979

$

7,743

0.92

%

$

2,608,687

$

4,625

0.70

%

Funding sources(6)

$

4,081,199

$

10,818

1.05

%

$

3,743,717

$

10,119

1.08

%

$

2,886,376

$

6,099

0.84

%

(1) Non-accrual loans have been included in average loans, net of unearned income. Amortized net deferred loans and net unearned discounts on acquired loans were included in the interest income calculations. The amortization of net deferred loans fees was $(318) thousand, $(202) thousand, and $(186) thousand for the three months ended September 30, 2019, June 30, 2019, and September 30, 2018, respectively. Accretion of unearned purchase discounts was $7.2 million, $2.2 million, and $605 thousand for the three months ended September 30, 2019, June 30, 2019, and September 30, 2018, respectively.

(2) Includes tax-equivalent adjustments of $543 thousand, $442 thousand, and $270 thousand for the three months ended September 30, 2019, June 30, 2019, and September 30, 2018, respectively. The federal statutory tax rate utilized was 21%.

(3) Includes tax-equivalent adjustments of $364 thousand, $370 thousand, and $365 thousand for the three months ended September 30, 2019, June 30, 2019, and September 30, 2018, respectively. The federal statutory tax rate utilized was 21%.

(4) Tax equivalent.

(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) Funding sources is the sum of total interest-bearing liabilities and noninterest-bearing deposits. The cost of funding sources is calculated as annualized total interest expense divided by average funding sources.

(7) Reclassified to conform to the current period’s presentation.


Nine Months Ended

September 30, 2019

September 30, 2018

Average Balance

Interest Income/ Expense

Average Yield/ Cost

Average Balance(7)

Interest Income/ Expense(7)

Average Yield/ Cost

(Dollars in thousands)

ASSETS

Loans, including fees (1)(2)

$

3,043,772

$

119,519

5.25

%

$

2,339,357

$

82,910

4.74

%

Taxable investment securities

448,407

9,592

2.86

%

434,537

8,253

2.54

%

Tax-exempt investment securities (3)

201,908

5,331

3.53

%

210,817

5,619

3.56

%

Total Investments

650,315

14,923

3.07

%

645,354

13,872

2.87

%

Other

18,951

335

2.36

%

3,078

39

1.69

%

Total interest-earning assets

$

3,713,038

134,777

4.85

%

$

2,987,789

96,821

4.33

%

Other assets

341,693

252,334

Total assets

$

4,054,731

$

3,240,123

LIABILITIES AND SHAREHOLDERS’ EQUITY

Interest checking deposits

$

766,343

3,329

0.58

%

$

669,070

2,008

0.40

%

Money market deposits

760,115

5,729

1.01

%

538,723

1,990

0.49

%

Savings deposits

309,270

703

0.30

%

215,638

189

0.12

%

Time deposits

847,077

11,915

1.88

%

722,645

7,983

1.48

%

Total interest bearing deposits

2,682,805

21,676

1.08

%

2,146,076

12,170

0.76

%

Short-term borrowings

124,433

1,479

1.59

%

105,223

941

1.20

%

Long-term debt

219,553

5,194

3.16

%

169,038

3,059

2.42

%

Total borrowed funds

343,986

6,673

2.59

%

274,261

4,000

1.95

%

Total interest bearing liabilities

$

3,026,791

28,349

1.25

%

$

2,420,337

16,170

0.89

%

Noninterest bearing deposits

557,708

455,521

Other liabilities

38,325

20,440

Shareholders’ equity

431,907

343,825

Total liabilities and shareholders’ equity

$

4,054,731

$

3,240,123

Net interest income(4)

$

106,428

$

80,651

Net interest spread(4)

3.60

%

3.44

%

Net interest margin(4)

3.83

%

3.61

%

Total deposits(5)

$

3,240,513

$

21,676

0.89

%

$

2,601,597

$

12,170

0.63

%

Funding sources(6)

$

3,584,499

$

28,349

1.06

%

$

2,875,858

$

16,170

0.75

%

(1) Non-accrual loans have been included in average loans, net of unearned income. Amortized net deferred loans and net unearned discounts on acquired loans were included in the interest income calculations. The amortization of net deferred loan fees was $(670) thousand and $(526) thousand for the nine months ended September 30, 2019 and September 30, 2018, respectively. Accretion of unearned purchase discounts was $10.0 million and $2.3 million for the nine months ended September 30, 2019 and September 30, 2018, respectively.

(2) Includes tax-equivalent adjustments of $1,262 thousand and $769 thousand for the nine months ended September 30, 2019 and September 30, 2018, respectively. The federal statutory tax rate utilized was 21%.

(3) Includes tax-equivalent adjustments of $1,100 thousand and $1,167 thousand for the nine months ended September 30, 2019 and September 30, 2018, respectively. The federal statutory tax rate utilized was 21%.

(4) Tax equivalent.

(5) Total deposits is the sum of total interest-bearing deposits and noninterest-bearing demand deposits. The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits.

(6) Funding sources is the sum of total interest-bearing liabilities and noninterest-bearing demand deposits. The cost of funding sources is calculated as annualized total interest expense divided by average funding sources.

(7) Reclassified to conform to the current period’s presentation

Non-GAAP Measures

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


Tangible Book Value Per Share/

September 30,

June 30,

March 31,

December 31,

September 30,

Tangible Common Equity Ratio

2019

2019

2019

2018

2018

(Dollars in thousands, except per share data)

Total shareholders’ equity

$

497,885

$

488,351

$

363,849

$

357,067

$

349,189

Intangible assets, net

(126,893

)

(130,000

)

(74,077

)

(74,529

)

(75,032

)

Tangible equity

$

370,992

$

358,351

$

289,772

$

282,538

$

274,157

Total assets

$

4,648,287

$

4,662,463

$

3,308,975

$

3,291,480

$

3,267,965

Intangible assets, net

(126,893

)

(130,000

)

(74,077

)

(74,529

)

(75,032

)

Tangible assets

$

4,521,394

$

4,532,463

$

3,234,898

$

3,216,951

$

3,192,933

Book value per share

$

30.77

$

30.11

$

29.94

$

29.32

$

28.57

Tangible book value per share(1)

$

22.93

$

22.09

$

23.84

$

23.20

$

22.43

Shares outstanding

16,179,734

16,221,160

12,153,045

12,180,015

12,221

Equity to assets ratio

10.71

%

10.47

%

11.00

%

10.85

%

10.69

%

Tangible common equity ratio(2)

8.21

%

7.91

%

8.96

%

8.78

%

8.59

%

(1) Tangible equity divided by shares outstanding.

(2) Tangible equity divided by tangible assets.

For the Three Months Ended

For the Nine Months Ended

September 30,

June 30,

September 30,

September 30,

September 30,

Return on Average Tangible Equity

2019

2019

2018

2019

2018

(Dollars in thousands)

Net income

$

12,300

$

10,674

$

6,778

$

30,259

$

22,727

Intangible amortization, net of tax(1)

1,937

698

410

2,974

1,345

Tangible net income

$

14,237

$

11,372

$

7,188

$

33,233

$

24,072

Average shareholders’ equity

$

491,750

$

443,114

$

348,131

$

431,907

$

343,825

Average intangible assets, net

(128,963

)

(102,919

)

(75,292

)

(102,224

)

(75,799

)

Average tangible equity

$

362,787

$

340,195

$

272,839

$

329,683

$

268,026

Return on average equity

9.92

%

9.66

%

7.72

%

9.37

%

8.84

%

Return on average tangible equity(2)

15.57

%

13.30

%

10.42

%

13.48

%

11.96

%

(1) The combined income tax rate utilized was 25%.

(2) Annualized tangible net income divided by average tangible equity.

For the Three Months Ended

For the Nine Months Ended

September 30,

June 30,

September 30,

September 30,

September 30,

Net Interest Margin, Tax Equivalent

2019

2019

2018

2019

2018

(Dollars in thousands)

Net interest income

$

43,258

$

34,832

$

26,111

$

104,066

$

78,715

Tax equivalent adjustments:

Loans(1)

543

442

270

1,262

769

Securities(1)

364

370

365

1,100

1,167

Net interest income, tax equivalent

$

44,165

$

35,644

$

26,746

$

106,428

$

80,651

Loan purchase discount accretion

(7,207

)

(2,246

)

(605

)

(10,040

)

(2,266

)

Core net interest income

$

36,958

$

33,398

$

26,141

$

96,388

$

78,385

Net interest margin

4.07

%

3.60

%

3.47

%

3.75

%

3.54

%

Net interest margin, tax equivalent(2)

4.15

%

3.68

%

3.55

%

3.83

%

3.61

%

Core net interest margin(3)

3.48

%

3.45

%

3.47

%

3.47

%

3.53

%

Average interest earning assets

$

4,215,471

$

3,880,786

$

2,988,034

$

3,713,038

$

2,987,789

(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.

For the Three Months Ended

For the Nine Months Ended

September 30,

June 30,

September 30,

September 30,

September 30,

Loan Yield, Tax Equivalent

2019

2019

2018

2019

2018

(Dollars in thousands)

Loan interest income, including fees

$

49,169

$

40,053

$

28,088

$

118,257

$

82,141

Tax equivalent adjustment(1)

543

442

270

1,262

769

Tax equivalent loan interest income

$

49,712

$

40,495

$

28,358

$

119,519

$

82,910

Loan purchase discount accretion

(7,207

)

(2,246

)

(605

)

(10,040

)

(2,266

)

Core loan interest income

$

42,505

$

38,249

$

27,753

$

109,479

$

80,644

Yield on loans

5.53

%

5.05

%

4.69

%

5.19

%

4.69

%

Yield on loans, tax equivalent(2)

5.59

%

5.10

%

4.74

%

5.25

%

4.74

%

Core yield on loans(3)

4.78

%

4.82

%

4.64

%

4.81

%

4.61

%

Average loans

$

3,526,149

$

3,183,138

$

2,375,100

$

3,043,772

$

2,339,357

(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.

For the Three Months Ended

For the Nine Months Ended

September 30,

June 30,

September 30,

September 30,

September 30,

Efficiency Ratio

2019

2019

2018

2019

2018

(Dollars in thousands)

Total noninterest expense

$

31,442

$

29,040

$

22,622

$

81,099

$

63,436

Amortization of intangibles

(2,583

)

(930

)

(547

)

(3,965

)

(1,793

)

Merger-related expenses

(2,547

)

(3,134

)

(604

)

(5,848

)

(607

)

Expenses

$

26,312

$

24,976

$

21,471

$

71,286

$

61,036

Net interest income, tax equivalent(1)

$

44,165

$

35,644

$

26,746

$

106,428

$

80,651

Noninterest income

8,004

8,796

6,045

22,210

17,419

Investment securities gain, net

(23

)

(32

)

(192

)

(72

)

(197

)

Net revenues

$

52,146

$

44,408

$

32,599

$

128,566

$

97,873

Efficiency ratio

50.46

%

56.24

%

65.86

%

55.45

%

62.36

%

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


Contact:

Charles N. Funk

Barry S. Ray

President and Chief Executive Officer

Senior Executive Vice President and Chief Financial Officer

319.356.5800

319.356.5800