MidWestOne Financial Group, Inc. Reports Financial Results for the Fourth Quarter and Full Year of 2020

January 28, 2021 4:15 PM EST

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Fourth Quarter Summary(1)

  • Net income for the fourth quarter was $16.7 million, or $1.04 per diluted common share.-- Revenue, net of interest expense, increased $2.3 million, or 5%, to $49.7 million.-- Credit loss expense decreased $8.0 million, or 161%, from improved economic forecasts.-- Noninterest expense decreased $28.0 million, or 47%, to $31.9 million due to the $31.5 million goodwill impairment charge recorded in the third quarter of 2020 (the “linked quarter”).
  • Net charge-off ratio was 4 basis points ("bps"), a decline of 16 bps from the linked quarter.
  • COVID-19 loan modifications declined to $44.1 million, which represented 1.3% of loans held for investment, net of unearned income.
  • Average deposits increased $172.9 million, or 17% annualized, while cost of total deposits declined 11 bps to 38 bps.

Full Year 2020 Summary(1)

  • Net income for the full year was $6.6 million, or $0.41 per diluted common share.
  • Core earnings(2) were $38.1 million, a decline of $5.5 million, or 13%, due primarily to pandemic-related credit loss expenses recognized in 2020.
  • Net charge-off ratio improved 8 bps to 15 bps.
  • Book value and tangible book value per share(2) grew 2% and 12%, respectively.

IOWA CITY, Iowa, Jan. 28, 2021 (GLOBE NEWSWIRE) -- MidWestOne Financial Group, Inc. (Nasdaq: MOFG) (“we”, “our”, or the "Company”) today reported net income for the fourth quarter of 2020 of $16.7 million, or $1.04 per diluted common share, compared to net loss of $19.8 million, or a loss of $1.23 per diluted common share, for the linked quarter. Net income for the full year of 2020 was $6.6 million, or $0.41 per diluted common share, compared to net income for the full year of 2019 of $43.6 million, or $2.93 per diluted common share.

Charles Funk, Chief Executive Officer of the Company, commented, "This was an excellent quarter for MidWestOne. Earnings were strong at $1.04 per diluted common share and a 1.22% return on average assets, 13.15% return on average equity, and 17.07% return on average tangible equity(2). Among the most positive elements of the quarter was a nice increase in noninterest income driven by our residential mortgage and wealth management operations. We also benefited from credit loss expense recapture, which was driven by stability in loan credit quality and improved economic forecasts. Finally, in a tough operating environment, we achieved core commercial loan(2) growth in the fourth quarter of 6% annualized."

1Fourth Quarter Summary compares to the linked quarter unless noted. Full Year 2020 Summary compares to the full year 2019 unless noted. 2Non-GAAP measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.

     
FINANCIAL HIGHLIGHTS Three Months Ended Year Ended
 December 31, September 30, December 31, December 31, December 31,
(Dollars in thousands, except per share amounts) 2020 2020 2019 2020 2019
Net interest income $39,037   $37,809   $39,584   $152,964   $143,650 
Noninterest income 10,626   9,570   9,036   38,620   31,246 
Total revenue, net of interest expense 49,663   47,379   48,620   191,584   174,896 
Credit loss (benefit) expense (3,041)  4,992   604   28,369   7,158 
Noninterest expense 31,915   59,939   36,436   149,893   117,535 
Income (loss) before income tax expense (benefit) 20,789   (17,552)  11,580   13,322   50,203 
Income tax expense (benefit) 4,079   2,272   (1,791)  6,699   6,573 
Net income (loss) $16,710   $(19,824)  $13,371   $6,623   $43,630 
Diluted earnings (loss) per share $1.04   $(1.23)  $0.83   $0.41   $2.93 
           
Return on average assets 1.22 % (1.48)% 1.14 % 0.13 % 1.04%
Return on average equity 13.15 % (14.88)% 10.55 % 1.28 % 9.65%
Return on average tangible equity(1) 17.07 % 12.56 % 15.60 % 10.80 % 13.98%
Efficiency ratio(1) 59.69 % 55.37 % 63.05 % 56.92 % 57.56%
           
(1) Non-GAAP measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
 

COVID-19 UPDATE

Loan Modifications

As of December 31, 2020, loans modified as a result of the COVID-19 pandemic totaled $44.1 million, a decline of 62% from $116.0 million at September 30, 2020. Of those modified loans at December 31, 2020, $24.6 million are in their first deferral period while $19.5 million are in or being processed for an additional deferral.

Small Business Administration ("SBA") Paycheck Protection Program ("PPP") Loans

On December 27, 2020, a new COVID-19 relief bill was signed into law by President Trump, which includes as part of the bill up to $284.5 billion of a second wave of PPP funding. On January 8, 2021, the SBA issued guidance that amended the threshold for loans that qualify for the simplified forgiveness application from $50,000 or less to $150,000 or less.

During the first wave of the PPP, the Company funded 2,681 loans totaling $348.5 million. As of December 31, 2020, 2,410 loans totaling $259.3 million, including $5.3 million of unamortized net fees, were outstanding. Of those remaining loans, 2,189 loans totaling $72.9 million, including unamortized net fees of $1.7 million, qualified for the simplified forgiveness application described above.

Mr. Funk stated, "The Company remains committed to supporting our customers and communities, and we intend to participate in this next wave of the PPP. We expect the volume of second wave funding will be lower than the first round."

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income increased to $39.0 million in the fourth quarter of 2020 from $37.8 million in the third quarter of 2020 due mainly to accelerated PPP loan fee accretion stemming from loan forgiveness, higher volume of average interest earning assets, and a stable net interest margin. Net PPP loan fee accretion was $3.1 million in the fourth quarter of 2020 compared to $1.3 million in the linked quarter. Loan purchase discount accretion was $1.5 million in the fourth quarter of 2020, down from $1.9 million in the linked quarter. Average interest earning assets increased $182.5 million to $5.1 billion in the fourth quarter of 2020, compared to the third quarter of 2020, as net loan pay-downs and deposit inflows were re-invested into debt securities.

The Company's tax equivalent net interest margin was 3.13% in the fourth quarter of 2020 compared to 3.14% in the linked quarter as lower average funding costs were more than offset by lower average earning asset yields. The cost of interest bearing liabilities decreased 12 bps to 0.64%, primarily as a result of interest bearing deposit costs of 0.47%, which declined 15 bps from the linked quarter. Total earning asset yields decreased 10 bps from the linked quarter, reflecting the origination and re-pricing of loans at, generally, lower coupon rates compared to existing portfolio coupon rates as well as a shift in earning asset mix to a greater proportion of investment securities, which generally have lower yields than loans.

"The transitory benefit to our net interest margin from PPP loan forgiveness will continue over the next few quarters. The margin was negatively impacted in the fourth quarter by a reversal of $0.4 million of interest income from a loan relationship placed on nonaccrual. The low interest rate environment continues to challenge our margin management," stated Mr. Funk.

Noninterest Income

Noninterest income for the fourth quarter of 2020 increased $1.1 million, or 11%, from the linked quarter. The increase was due primarily to a $0.6 million increase in loan revenue, an increase in 'Other' noninterest income of $0.3 million, and an increase of $0.2 million in investment services and trust activities revenue. The increase in loan revenue reflected robust production from the Company's residential mortgage business as low interest rates continued to drive new purchase and refinance volumes.

Mr. Funk noted, "Both our home mortgage center and investment services group had record years in 2020. Our trust department also contributed despite being challenged by additional delays in the Iowa court system due to the pandemic. We are very positive about the future direction of these three areas of our Company. During the quarter, we added two wealth management professionals to our trust department serving the Twin Cities metro. We believe this will enhance wealth management revenue in 2021 and beyond."

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

 Three Months Ended
Noninterest IncomeDecember 31, September 30, December 31,
(In thousands)2020 2020 2019
Investment services and trust activities$2,518   $2,361  $2,421 
Service charges and fees1,571   1,491  2,072 
Card revenue1,517   1,600  1,142 
Loan revenue3,900   3,252  1,757 
Bank-owned life insurance541   530  501 
Investment securities gains, net30   106  18 
Other549   230  1,125 
Total noninterest income$10,626   $9,570  $9,036 
            

Noninterest Expense

Noninterest expense for the fourth quarter of 2020 decreased $28.0 million, or 46.8%, from the linked quarter due primarily to a $31.5 million goodwill impairment charge that was recorded in the linked quarter. Excluding the goodwill impairment charge, noninterest expense increased $3.5 million, due primarily to increases in compensation and employee benefits of $1.2 million, $0.9 million in legal and professional expenses and $0.9 million in 'Other' noninterest expense. The increase in compensation and employee benefits was due mainly to an increase of $1.0 million related to incentive compensation expense and commissions. The increase in legal and professional expenses was primarily driven by $0.6 million of consulting fees incurred as part of a large contract renewal where the consultant earned a fee based on life-of-contract savings. The increase in 'Other' noninterest expense was primarily attributable to a $0.8 million loss from the termination of our cash flow hedge in the fourth quarter of 2020. The increased noninterest expenses noted above were the primary drivers in the increase in the efficiency ratio, which increased 4.32% to 59.69%, as compared to the linked quarter efficiency ratio of 55.37%.

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

 Three Months Ended
Noninterest ExpenseDecember 31, September 30, December 31,
(In thousands)2020 2020 2019
Compensation and employee benefits$17,638   $16,460  $19,246 
Occupancy expense of premises, net2,476   2,278  2,347 
Equipment2,040   1,935  2,251 
Legal and professional2,052   1,184  1,797 
Data processing1,460   1,308  1,492 
Marketing986   857  1,147 
Amortization of intangibles1,569   1,631  1,941 
FDIC insurance495   470  (72)
Communications412   428  493 
Foreclosed assets, net(35)  13  173 
Other2,822   1,875  5,621 
Total core noninterest expense$31,915   $28,439  $36,436 
Goodwill impairment$   $31,500  $ 
Total noninterest expense$31,915   $59,939  $36,436 
             

The Company incurred no merger-related costs in either the fourth quarter of 2020 or in the linked quarter, whereas a total amount of $3.3 million of merger-related costs were incurred in the fourth quarter of 2019.

Income Taxes

The effective income tax rate was 19.6% in the fourth quarter of 2020 compared to (12.9)% in the linked quarter. Excluding non-deductible goodwill impairment, the effective income tax rate in the linked quarter was 16.3%. The effective income tax rate in the fourth quarter of 2020 reflected an increase in income taxes based on the statutory rate and state income taxes, net of federal income tax benefits primarily due to the net income earned during the quarter, offset by benefits related to tax-exempt interest and renewable energy tax credits.The effective tax rate for the year ended December 31, 2020 was 50.3%. Excluding the impact of the non-deductible goodwill impairment, the effective income tax rate was 14.9%. The effective income tax rate for the full year 2021 is expected to be in the range of 19-21%.

  
BALANCE SHEET, LIQUIDITY AND CAPITAL HIGHLIGHTSAs of or For the Three Months Ended
December 31, September 30, December 31,
(Dollars in millions, except per share amounts)2020 2020 2019
Ending Balance Sheet     
Total assets$5,556.6   $5,330.7  $4,653.6 
Loans held for investment, net of unearned income3,482.2   3,537.4  3,451.3 
Total securities held for investment1,657.4   1,366.3  786.0 
Total deposits4,547.0   4,333.6  3,728.7 
Average Balance Sheet     
Average total assets$5,457.9   $5,311.4  $4,634.6 
Average total loans3,560.6   3,576.6  3,493.5 
Average total deposits4,490.0   4,317.2  3,723.9 
Funding and Liquidity     
Short-term borrowings$230.8   $183.9  $139.3 
Long-term debt208.7   245.5  231.7 
Loans to deposits ratio76.58 % 81.63% 92.56%
Equity     
Total shareholders' equity$515.3   $499.1  $509.0 
Equity to assets ratio9.27 % 9.36% 10.94%
Tangible common equity(1)427.5   409.8  384.8 
Tangible common equity ratio(1)7.82 % 7.82% 8.50%
Per Share Data     
Book value$32.17   $31.00  $31.49 
Tangible book value(1)$26.69   $25.45  $23.81 
(1) Non-GAAP Measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
 

Loans Held for Investment

Loans held for investment, net of unearned income, decreased $55.2 million, or 2%, to $3.48 billion from September 30, 2020, driven primarily by PPP loan forgiveness and pay downs totaling $79.0 million and lower line utilization.

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

       
Loans Held for InvestmentDecember 31, 2020 September 30, 2020 December 31, 2019 
(dollars in thousands) Balance  % ofTotal   Balance  % ofTotal   Balance  % ofTotal  
Commercial and industrial$1,055,488   30.3 %$1,103,102  31.2 %$835,236  24.2 %
Agricultural116,392   3.3  129,453  3.7  140,446  4.1  
Commercial real estate            
Construction and development181,291   5.2  191,423  5.4  298,077  8.6  
Farmland144,970   4.2  152,362  4.2  181,885  5.3  
Multifamily256,525   7.4  235,241  6.7  227,407  6.6  
Other1,149,575   33.0  1,128,009  31.9  1,107,490  32.1  
Total commercial real estate1,732,361   49.8  1,707,035  48.2  1,814,859  52.6  
Residential real estate            
One-to-four family first liens355,684   10.2  371,390  10.5  407,418  11.8  
One-to-four family junior liens143,422   4.1  150,180  4.2  170,381  4.9  
Total residential real estate499,106   14.3  521,570  14.7  577,799  16.7  
Consumer78,876   2.3  76,272  2.2  82,926  2.4  
Loans held for investment, net of unearned income$3,482,223   100.0 %$3,537,432  100.0 %$3,451,266  100.0 %
                      

Credit Loss Expense & Allowance for Credit Losses

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

    
 Three Months Ended Year Ended
Allowance for Credit Losses Roll ForwardDecember 31, September 30, December 31, December 31, December 31,
(In thousands)2020 2020 2019 2020 2019
Beginning balance$58,500  $55,644  $31,532  $29,079  $29,307 
Cumulative effect of change in accounting principle - CECL      3,984   
Charge-offs(1,005) (2,188) (3,212) (6,793) (8,390)
Recoveries646  347  155  1,528  1,004 
Net charge-offs(359) (1,841) (3,057) (5,265) (7,386)
Credit loss (benefit) expense related to loans(2,641) 4,697  604  27,702  7,158 
Ending balance$55,500  $58,500  $29,079  $55,500  $29,079 
                    

Effective January 1, 2020, the Company adopted the Financial Instruments - Credit Losses (CECL) accounting guidance. The adoption of this guidance established a single allowance framework for all financial assets carried at amortized cost and certain off-balance sheet credit exposures. The framework requires that management's estimate reflects credit losses over the full remaining expected life of each credit and considers expected future changes in macroeconomic conditions. The adoption resulted in the recognition on January 1, 2020 of cumulative effect adjustments of $4.0 million related to the allowance for credit losses (ACL) and $3.4 million related to the liability for off-balance sheet credit exposures.

As of December 31, 2020, the ACL was $55.5 million, or 1.59% of loans held for investment, net of unearned income, compared with $58.5 million, or 1.65%, at September 30, 2020. After excluding $259.3 million of net PPP loans, the ACL as a percentage of loans held for investment, net of unearned income decreased to 1.72%(1) as of December 31, 2020, from 1.82%(1) at September 30, 2020. The decline in the ACL during the fourth quarter reflected overall improvements in the economic forecast when compared to the linked quarter and the overall stability in the credit quality of our loan portfolio.

Mr. Funk noted, "At 1.59%, or 1.72%(1) excluding the impact of PPP, we believe our allowance for credit losses ratios remain strong."

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

Deposits

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

       
Deposit CompositionDecember 31, 2020 September 30, 2020 December 31, 2019 
(In thousands)Balance % of Total Balance % of Total Balance % of Total 
Noninterest bearing deposits$910,655   20.0 %$864,504  19.9 %$662,209  17.8 %
Interest checking deposits1,351,641   29.7  1,230,146  28.5  962,830  25.7  
Money market deposits918,654   20.2  871,336  20.1  763,028  20.5  
Savings deposits529,751   11.7  486,876  11.2  387,142  10.4  
Total non-maturity deposits3,710,701   81.6  3,452,862  79.7  2,775,209  74.4  
Time deposits of $250,000 and under581,471   12.8  617,229  14.2  682,232  18.3  
Time deposits over $250,000254,877   5.6  263,550  6.1  271,214  7.3  
Total time deposits836,348   18.4  880,779  20.3  953,446  25.6  
Total deposits$4,547,049   100.0 %$4,333,641  100.0 %$3,728,655  100.0 %
                      

CREDIT RISK PROFILE

 As of or For the Three Months Ended
HighlightsDecember 31, September 30, December 31,
(dollars in thousands)2020 2020 2019
Credit loss (benefit) expense related to loans$(2,641)  $4,697  $604 
Net charge-offs$359   $1,841  $3,057 
Net charge-off ratio(1)0.04 % 0.20% 0.35%
      
At period-end     
Pass$3,202,704   $3,230,611  $3,246,524 
Special Mention / Watch157,213   176,702  121,709 
Classified122,306    130,119  83,033 
Total loans held for investment, net$3,482,223   $3,537,432  $3,451,266 
Classified loans ratio(2)3.51 % 3.68% 2.41%
      
Nonaccrual loans held for investment$41,950   $39,071  $41,483 
Accruing loans contractually past due 90 days or more739   2,593  136 
Foreclosed assets, net2,316   724  3,706 
Total nonperforming assets (3)$45,005   $42,388  $45,325 
Nonperforming assets ratio(4)1.29 % 1.20% 1.31%
Allowance for credit losses55,500   58,500  29,079 
Allowance for credit losses ratio(5)1.59 % 1.65% 0.84%
Adjusted allowance for credit losses ratio(6)1.72 % 1.82% 0.84%
      
Performing troubled debt restructured loans held for investment2,630   2,355  4,372 
(1) Net charge-off ratio is calculated as annualized net charge-offs divided by average loans held for investment, net of unearned income during the period.
(2) Classified loans ratio is calculated as classified loans divided by loans held for investment, net of unearned income at the end of the period.
(3) Starting in the second quarter of 2020, performing troubled debt restructured loans held for investment are no longer included in nonperforming assets. Prior period credit quality metrics have been adjusted to exclude these loans.
(4) Nonperforming assets ratio is calculated as total nonperforming assets divided by the sum of loans held for investment, net of unearned income and foreclosed assets, net at the end of the period.
(5) Allowance for credit losses ratio is calculated as allowance for credit losses divided by loans held for investment, net of unearned income at the end of the period.
(6) Non-GAAP Measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
 

"We were pleased with the relative stability in the credit risk profile of the loan portfolio and have continued to proactively work problem credits to resolution. However, we did place one large $9.5 million hotel loan on nonaccrual at year-end. Conditions in the agricultural economy have brightened considerably with the recent rise in corn and soybean prices combined with government payments combining to make 2020 the best year in many years for our agricultural customers," stated Mr. Funk.

CAPITAL

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

      
 December 31, September 30, December 31,
Regulatory Capital Ratios2020 (1) 2020 2019
MidWestOne Financial Group, Inc. Consolidated     
Tier 1 leverage ratio8.50 % 8.52% 9.48%
Common equity tier 1 capital ratio9.72 % 9.72% 9.46%
Tier 1 capital ratio10.70 % 10.73% 10.47%
Total capital ratio13.41 % 13.56% 11.34%
MidWestOne Bank     
Tier 1 leverage ratio9.35 % 9.26% 10.06%
Common equity tier 1 capital ratio11.79 % 11.75% 11.12%
Tier 1 capital ratio11.79 % 11.75% 11.12%
Total capital ratio12.89 % 12.95% 11.83%
(1) Capital ratios for December 31, 2020 are preliminary     
      

CORPORATE UPDATE

Share Repurchase Program

In the fourth quarter of 2020, the Company's board of directors authorized resuming repurchases under the Company's share repurchase program. The Company repurchased 84,088 shares of its common stock at an average price of $24.02 per share and a total cost of $2.0 million in the fourth quarter of 2020. At December 31, 2020, $4.4 million remained available to repurchase shares under the Company’s current share repurchase program.

Cash Dividend Announcement

On January 20, 2021, the Company’s board of directors declared a quarterly cash dividend of $0.2250 per common share. The dividend is payable March 15, 2021, to shareholders of record at the close of business on March 1, 2021.

Mr. Funk noted, "The board's confidence in our future operations was ratified with an increase in our quarterly dividend. Importantly, we were able to take advantage of market conditions to buy back our common stock during the quarter at levels we believe were very attractive."

CONFERENCE CALL DETAILS

The Company will host a conference call for investors at 11:00 a.m. CT on Friday, January 29, 2021. 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 April 29, 2021, by calling 877-344-7529 and using the replay access code of 10150413. 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.

EARNINGS CALL PRESENTATION

The Company has prepared presentation materials that management intends to use during its fourth quarter 2020 conference call on January 29, 2021. These materials have been furnished to the U.S. Securities and Exchange Commission in a Form 8-K concurrently with this press release, and are also available on the Company's website at www.midwestonefinancial.com.

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) effects of the COVID-19 pandemic, including its potential effects on the economic environment, our customers and our operations, as well as any changes to federal, state, or local government laws, regulations, or orders in connection with the pandemic; (2) government intervention in the U.S. financial system in response to the COVID-19 pandemic, including the effects of recent legislative, tax, accounting and regulatory actions and reforms, including the Coronavirus Aid, Relief, and Economic Security Act and the Consolidated Appropriations Act, 2021; (3) the impact of the COVID-19 pandemic on our financial results, including possible lost revenue and increased expenses (including the cost of capital), as well as possible goodwill impairment charges; (4) credit quality deterioration or pronounced and sustained reduction in real estate market values causing an increase in the allowance for credit losses, an increase in the credit loss expense, and a reduction in net earnings; (5) the effects of interest rates, including on our net income and the value of our securities portfolio; (6) 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; (7) fluctuations in the value of our investment securities; (8) governmental monetary and fiscal policies; (9) changes in and uncertainty related to benchmark interest rates used to price loans and deposits, including the expected elimination of LIBOR; (10) legislative and regulatory changes, including changes in banking, securities, trade, and tax laws and regulations and their application by our regulators; (11) the ability to attract and retain key executives and employees experienced in banking and financial services; (12) the sufficiency of the allowance for credit losses to absorb the amount of actual losses inherent in our existing loan portfolio; (13) our ability to adapt successfully to technological changes to compete effectively in the marketplace; (14) credit risks and risks from concentrations (by geographic area and by industry) within our loan portfolio; (15) 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; (16) the failure of assumptions underlying the establishment of allowances for credit losses and estimation of values of collateral and various financial assets and liabilities; (17) the risks of mergers, 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; (18) volatility of rate-sensitive deposits; (19) operational risks, including data processing system failures or fraud; (20) asset/liability matching risks and liquidity risks; (21) the costs, effects and outcomes of existing or future litigation; (22) changes in general economic, political, or industry conditions, nationally, internationally or in the communities in which we conduct business; (23) changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the Financial Accounting Standards Board; (24) war or terrorist activities, widespread disease or pandemic, or other adverse external events, which may cause deterioration in the economy or cause instability in credit markets; (25) the effects of cyber-attacks; (26) the imposition of tariffs or other domestic or international governmental policies impacting the value of the agricultural or other products of our borrowers; 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 CONSOLIDATED BALANCE SHEETS

 December 31, September 30, December 31,
(In thousands)2020 2020 2019
ASSETS     
Cash and due from banks$65,078  $71,901  $67,174 
Interest earning deposits in banks17,409  55,421  6,112 
Federal funds sold172  7,540  198 
Total cash and cash equivalents82,659  134,862  73,484 
Debt securities available for sale at fair value1,657,381  1,366,344  785,977 
Loans held for sale59,956  13,096  5,400 
Gross loans held for investment3,496,790  3,555,969  3,469,236 
Unearned income, net(14,567) (18,537) (17,970)
Loans held for investment, net of unearned income3,482,223  3,537,432  3,451,266 
Allowance for credit losses(55,500) (58,500) (29,079)
Total loans held for investment, net3,426,723  3,478,932  3,422,187 
Premises and equipment, net86,401  87,955  90,723 
Goodwill62,477  62,477  91,918 
Other intangible assets, net25,242  26,811  32,218 
Foreclosed assets, net2,316  724  3,706 
Other assets153,493  159,507  147,960 
Total assets$5,556,648  $5,330,708  $4,653,573 
LIABILITIES      
Noninterest bearing deposits$910,655  $864,504  $662,209 
Interest bearing deposits3,636,394  3,469,137  3,066,446 
Total deposits4,547,049  4,333,641  3,728,655 
Short-term borrowings230,789  183,893  139,349 
Long-term debt208,691  245,481  231,660 
Other liabilities54,869  68,612  44,927 
Total liabilities5,041,398  4,831,627  4,144,591 
SHAREHOLDERS' EQUITY     
Common stock16,581  16,581  16,581 
Additional paid-in capital300,137  299,939  297,390 
Retained earnings188,191  175,017  201,105 
Treasury stock(14,251) (12,272) (10,466)
Accumulated other comprehensive income24,592  19,816  4,372 
Total shareholders' equity515,250  499,081  508,982 
Total liabilities and shareholders' equity$5,556,648  $5,330,708  $4,653,573 
            

MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME

 Three Months Ended Year Ended
 December 31, September 30, December 31, December 31,
(In thousands, except per share data)2020 2020 2019 2020 2019
Interest income         
Loans, including fees$38,239  $38,191  $44,906  $158,656   $163,163 
Taxable investment securities4,673  4,574  3,540  17,610   13,132 
Tax-exempt investment securities2,529  2,360  1,465  8,259   5,696 
Other29  29  115  262   450 
Total interest income45,470  45,154  50,026  184,787   182,441 
Interest expense         
Deposits4,265  5,296  8,251  23,919   29,927 
Short-term borrowings142  175  368  914   1,847 
Long-term debt2,026  1,874  1,823  6,990   7,017 
Total interest expense6,433  7,345  10,442  31,823   38,791 
Net interest income39,037  37,809  39,584  152,964   143,650 
Credit loss (benefit) expense(3,041) 4,992  604  28,369   7,158 
Net interest income after credit loss (benefit) expense42,078  32,817  38,980  124,595   136,492 
Noninterest income         
Investment services and trust activities2,518  2,361  2,421  9,632   8,040 
Service charges and fees1,571  1,491  2,072  6,178   7,452 
Card revenue1,517  1,600  1,142  5,719   5,594 
Loan revenue3,900  3,252  1,757  10,185   3,789 
Bank-owned life insurance541  530  501  2,226   1,877 
Insurance commissions      —   734 
Investment securities gains, net30  106  18  184   90 
Other549  230  1,125  4,496   3,670 
Total noninterest income10,626  9,570  9,036  38,620   31,246 
Noninterest expense         
Compensation and employee benefits17,638  16,460  19,246  66,397   65,660 
Occupancy expense of premises, net2,476  2,278  2,347  9,348   8,647 
Equipment2,040  1,935  2,251  7,865   7,717 
Legal and professional2,052  1,184  1,797  6,153   8,049 
Data processing1,460  1,308  1,492  5,362   4,579 
Marketing986  857  1,147  3,815   3,789 
Amortization of intangibles1,569  1,631  1,941  6,976   5,906 
FDIC insurance495  470  (72) 1,858   690 
Communications412  428  493  1,746   1,701 
Foreclosed assets, net(35) 13  173  150   580 
Goodwill impairment  31,500    31,500    
Other2,822  1,875  5,621  8,723   10,217 
Total noninterest expense31,915  59,939  36,436  149,893   117,535 
Income (loss) before income tax expense20,789  (17,552) 11,580  13,322   50,203 
Income tax expense (benefit)4,079  2,272  (1,791) 6,699   6,573 
Net income (loss)$16,710  $(19,824) $13,371  $6,623   $43,630 
          
Earnings (loss) per common share         
Basic$1.04   $(1.23) $0.83  $0.41   $2.93 
Diluted$1.04   $(1.23) $0.83  $0.41   $2.93 
Weighted average basic common shares outstanding16,074   16,099  16,162  16,102   14,870 
Weighted average diluted common shares outstanding16,092   16,099  16,193  16,110   14,885 
Dividends paid per common share$0.2200   $0.2200  $0.2025  $0.8800   $0.8100 
                    

MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES FIVE QUARTER CONSOLIDATED BALANCE SHEETS

 December 31, September 30, June 30, March 31, December 31,
(In thousands)2020 2020 2020 2020 2019
ASSETS         
Cash and due from banks$65,078  $71,901  $65,863  $60,396  $67,174 
Interest earning deposits in banks17,409  55,421  45,018  58,319  6,112 
Federal funds sold172  7,540  6,329  6,830  198 
Total cash and cash equivalents82,659  134,862  117,210  125,545  73,484 
Debt securities available for sale at fair value1,657,381  1,366,344  1,187,455  881,859  785,977 
Loans held for sale59,956  13,096  12,048  9,483  5,400 
Gross loans held for investment3,496,790  3,555,969  3,618,675  3,440,907  3,469,236 
Unearned income, net(14,567) (18,537) (21,636) (15,145) (17,970)
Loans held for investment, net of unearned income3,482,223  3,537,432  3,597,039  3,425,762  3,451,266 
Allowance for credit losses(55,500) (58,500) (55,644) (51,187) (29,079)
Total loans held for investment, net3,426,723  3,478,932  3,541,395  3,374,575  3,422,187 
Premises and equipment, net86,401  87,955  88,929  89,860  90,723 
Goodwill62,477  62,477  93,977  93,977  91,918 
Other intangible assets, net25,242  26,811  28,443  30,190  32,218 
Foreclosed assets, net2,316  724  965  968  3,706 
Other assets153,493  159,507  160,541  157,452  147,960 
Total assets$5,556,648  $5,330,708  $5,230,963  $4,763,909  $4,653,573 
LIABILITIES          
Noninterest bearing deposits$910,655  $864,504  $867,637  $637,127  $662,209 
Interest bearing deposits3,636,394  3,469,137  3,397,798  3,222,717  3,066,446 
Total deposits4,547,049  4,333,641  4,265,435  3,859,844  3,728,655 
Short-term borrowings230,789  183,893  162,224  129,489  139,349 
Long-term debt208,691  245,481  189,973  209,874  231,660 
Other liabilities54,869  68,612  92,550  64,138  44,927 
Total liabilities5,041,398  4,831,627  4,710,182  4,263,345  4,144,591 
SHAREHOLDERS' EQUITY          
Common stock16,581  16,581  16,581  16,581  16,581 
Additional paid-in capital300,137  299,939  299,542  299,412  297,390 
Retained earnings188,191  175,017  198,382  190,212  201,105 
Treasury stock(14,251) (12,272) (12,272) (12,518) (10,466)
Accumulated other comprehensive income24,592  19,816  18,548  6,877  4,372 
Total shareholders' equity515,250  499,081  520,781  500,564  508,982 
Total liabilities and shareholders' equity$5,556,648  $5,330,708  $5,230,963  $4,763,909  $4,653,573 
                    

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

 Three Months Ended
 December 31, September 30, June 30, March 31, December 31,
(In thousands, except per share data)2020 2020 2020 2020 2019
Interest income         
Loans, including fees$38,239  $38,191  $40,214  $42,012  $44,906 
Taxable investment securities4,673  4,574  4,646  3,717  3,540 
Tax-exempt investment securities2,529  2,360  1,858  1,512  1,465 
Other29  29  40  164  115 
Total interest income45,470  45,154  46,758  47,405  50,026 
Interest expense         
Deposits4,265  5,296  6,409  7,949  8,251 
Short-term borrowings142  175  263  334  368 
Long-term debt2,026  1,874  1,374  1,716  1,823 
Total interest expense6,433  7,345  8,046  9,999  10,442 
Net interest income39,037  37,809  38,712  37,406  39,584 
Credit loss (benefit) expense(3,041) 4,992  4,685  21,733  604 
Net interest income after credit loss (benefit) expense42,078  32,817  34,027  15,673  38,980 
Noninterest income         
Investment services and trust activities2,518  2,361  2,217  2,536  2,421 
Service charges and fees1,571  1,491  1,290  1,826  2,072 
Card revenue1,517  1,600  1,237  1,365  1,142 
Loan revenue3,900  3,252  1,910  1,123  1,757 
Bank-owned life insurance541  530  635  520  501 
Investment securities gains, net30  106  6  42  18 
Other549  230  974  2,743  1,125 
Total noninterest income10,626  9,570  8,269  10,155  9,036 
Noninterest expense         
Compensation and employee benefits17,638  16,460  15,682  16,617  19,246 
Occupancy expense of premises, net2,476  2,278  2,253  2,341  2,347 
Equipment2,040  1,935  2,010  1,880  2,251 
Legal and professional2,052  1,184  1,382  1,535  1,797 
Data processing1,460  1,308  1,240  1,354  1,492 
Marketing986  857  910  1,062  1,147 
Amortization of intangibles1,569  1,631  1,748  2,028  1,941 
FDIC insurance495  470  445  448  (72)
Communications412  428  449  457  493 
Foreclosed assets, net(35) 13  34  138  173 
Goodwill impairment  31,500       
Other2,822  1,875  1,885  2,141  5,621 
Total noninterest expense31,915  59,939  28,038  30,001  36,436 
Income (loss) before income tax expense20,789  (17,552) 14,258  (4,173) 11,580 
Income tax expense (benefit)4,079  2,272  2,546  (2,198) (1,791)
Net income (loss)$16,710  $(19,824) $11,712  $(1,975) $13,371 
          
Earnings (loss) per common share         
Basic$1.04  $(1.23) $0.73  $(0.12) $0.83 
Diluted$1.04  $(1.23) $0.73  $(0.12) $0.83 
Weighted average basic common shares outstanding16,074  16,099  16,094  16,142  16,162 
Weighted average diluted common shares outstanding16,092  16,099  16,100  16,142  16,193 
Dividends paid per common share$0.2200  $0.2200  $0.2200  $0.2200  $0.2025 
                    

MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIESAVERAGE BALANCE SHEET AND YIELD ANALYSIS

 Three Months Ended
 December 31, 2020 September 30, 2020 December 31, 2019
(Dollars in thousands)AverageBalance InterestIncome/Expense AverageYield/Cost AverageBalance InterestIncome/Expense AverageYield/Cost Average Balance InterestIncome/Expense AverageYield/Cost
ASSETS                 
Loans, including fees (1)(2)(3)$3,560,632  $38,795  4.33% $3,576,642  $38,727  4.31% $3,493,496  $45,429  5.16%
Taxable investment securities1,026,359  4,673  1.81% 864,864  4,574  2.10% 508,911  3,540  2.76%
Tax-exempt investment securities (2)(4)450,659  3,180  2.81% 405,517  2,968  2.91% 211,695  1,846  3.46%
Total securities held for investment(2)1,477,018  7,853  2.12% 1,270,381  7,542  2.36% 720,606  5,386  2.97%
Other80,019  29  0.14% 88,152  29  0.13% 28,227  115  1.62%
Total interest earning assets(2)$5,117,669  46,677  3.63% $4,935,175  46,298  3.73% $4,242,329  50,930  4.76%
Other assets340,270      376,211      392,254     
Total assets$5,457,939      $5,311,386      $4,634,583     
LIABILITIES AND SHAREHOLDERS’ EQUITY                 
Interest checking deposits$1,276,320  $958  0.30% $1,174,033  $1,049  0.36% $926,155  $1,394  0.60%
Money market deposits931,900  544  0.23% 847,059  622  0.29% 784,752  1,820  0.92%
Savings deposits508,763  279  0.22% 473,000  351  0.30% 388,338  389  0.40%
Time deposits862,408  2,484  1.15% 931,655  3,274  1.40% 953,804  4,648  1.93%
Total interest bearing deposits3,579,391  4,265  0.47% 3,425,747  5,296  0.62% 3,053,049  8,251  1.07%
Short-term borrowings182,080  142  0.31% 165,840  175  0.42% 126,508  368  1.15%
Long-term debt223,407  2,026  3.61% 231,406  1,874  3.22% 237,788  1,823  3.04%
Total borrowed funds405,487  2,168  2.13% 397,246  2,049  2.05% 364,296  2,191  2.39%
Total interest bearing liabilities$3,984,878  $6,433  0.64% $3,822,993  $7,345  0.76% $3,417,345  $10,442  1.21%
Noninterest bearing deposits910,657      891,425      670,884     
Other liabilities56,898      67,111      43,343     
Shareholders’ equity505,506      529,857      503,011     
Total liabilities and shareholders’ equity$5,457,939      $5,311,386      $4,634,583     
Net interest income(2)  $40,244      $38,953      $40,488   
Net interest spread(2)    2.99%     2.97%     3.55%
Net interest margin(2)    3.13%     3.14%     3.79%
                  
Total deposits(5)$4,490,048  $4,265  0.38% $4,317,172  $5,296  0.49% $3,723,933  $8,251  0.88%
Cost of funds(6)    0.52%     0.62%     1.01%

(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 $2.5 million, $1.1 million, and $354 thousand for the three months ended December 31, 2020, September 30, 2020, and December 31, 2019, respectively. Loan purchase discount accretion was $1.5 million, $1.9 million, and $3.9 million for the three months ended December 31, 2020, September 30, 2020, and December 31, 2019, respectively. Tax equivalent adjustments were $556 thousand, $536 thousand, and $523 thousand for the three months ended December 31, 2020, September 30, 2020, and December 31, 2019, respectively. The federal statutory tax rate utilized was 21%.(4) Interest income includes tax equivalent adjustments of $651 thousand, $608 thousand, and $381 thousand for the three months ended December 31, 2020, September 30, 2020, and December 31, 2019, 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.

  
 Year Ended
 December 31, 2020 December 31, 2019
(Dollars in thousands)AverageBalance InterestIncome/Expense AverageYield/Cost AverageBalance InterestIncome/Expense AverageYield/Cost
ASSETS           
Loans, including fees (1)(2)(3)$3,551,945  $160,752  4.53% $3,157,127  $164,948  5.22%
Taxable investment securities797,954  17,610  2.21% 465,484  13,132  2.82%
Tax-exempt investment securities (2)(4)342,000  10,395  3.04% 204,375  7,177  3.51%
Total securities held for investment(2)1,139,954  28,005  2.46% 669,859  20,309  3.03%
Other73,255  262  0.36% 21,289  450  2.11%
Total interest earning assets(2)$4,765,154  189,019  3.97% $3,848,275  185,707  4.83%
Other assets370,687      352,765     
Total assets$5,135,841      $4,201,040     
LIABILITIES AND SHAREHOLDERS’ EQUITY           
Interest checking deposits$1,108,997  $4,435  0.40% $806,624  $4,723  0.59%
Money market deposits844,137  3,696  0.44% 766,812  7,549  0.98%
Savings deposits454,000  1,386  0.31% 329,199  1,092  0.33%
Time deposits945,234  14,402  1.52% 873,978  16,563  1.90%
Total interest bearing deposits3,352,368  23,919  0.71% 2,776,613  29,927  1.08%
Short-term borrowings157,346  914  0.58% 124,956  1,847  1.48%
Long-term debt220,448  6,990  3.17% 224,149  7,017  3.13%
Total borrowed funds377,794  7,904  2.09% 349,105  8,864  2.54%
Total interest bearing liabilities$3,730,162  $31,823  0.85% $3,125,718  $38,791  1.24%
Noninterest bearing deposits832,038      586,100     
Other liabilities58,186      37,204     
Shareholders’ equity515,455      452,018     
Total liabilities and shareholders’ equity$5,135,841      $4,201,040     
Net interest income(2)  $157,196      $146,916   
Net interest spread(2)    3.12%     3.59%
Net interest margin(2)    3.30%     3.82%
            
Total deposits(5)$4,184,406  $23,919  0.57% $3,362,713  $29,927  0.89%
Cost of funds(6)    0.70%     1.05%

(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 $4.4 million and $(316) thousand for the year ended December 31, 2020 and December 31, 2019, respectively. Loan purchase discount accretion was $9.1 million and $14.0 million for the year ended December 31, 2020 and December 31, 2019, respectively. Tax equivalent adjustments were $2.1 million and $1.8 million for the year ended December 31, 2020 and December 31, 2019, respectively. The federal statutory tax rate utilized was 21%.

(4) Interest income includes tax equivalent adjustments of $2.1 million and $1.5 million for the year ended December 31, 2020 and December 31, 2019, 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), efficiency ratio, core earnings, adjusted allowance for credit losses ratio, core loans, and core commercial loans. Management believes these measures provide investors with useful information regarding the Company’s profitability, financial condition and capital adequacy, consistent with how management evaluates the Company’s financial performance. The following tables provide a reconciliation of each non-GAAP measure to the most comparable GAAP measure.

           
Tangible Common Equity/Tangible Book Value          
per Share/Tangible Common Equity Ratio December 31, September 30, June 30, March 31, December 31,
(Dollars in thousands, except per share data) 2020 2020 2020 2020 2019
Total shareholders’ equity $515,250   $499,081   $520,781   $500,564   $508,982  
Intangible assets, net (87,719)  (89,288)  (122,420)  (124,167)  (124,136) 
Tangible common equity $427,531   $409,793   $398,361   $376,397   $384,846  
           
Total assets $5,556,648   $5,330,708   $5,230,963   $4,763,909   $4,653,573  
Intangible assets, net (87,719)  (89,288)  (122,420)  (124,167)  (124,136) 
Tangible assets $5,468,929   $5,241,420   $5,108,543   $4,639,742   $4,529,437  
           
Book value per share $32.17   $31.00   $32.35   $31.11   $31.49  
Tangible book value per share(1) $26.69   $25.45   $24.74   $23.39   $23.81  
Shares outstanding 16,016,780   16,099,324   16,099,324   16,089,782   16,162,176  
           
Equity to assets ratio 9.27 % 9.36 % 9.96 % 10.51 % 10.94 %
Tangible common equity ratio(2) 7.82 % 7.82 % 7.80 % 8.11 % 8.50 %

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

     
  Three Months Ended Year Ended
Return on Average Tangible Equity December 31, September 30, December 31, December 31, December 31,
(Dollars in thousands) 2020 2020 2019 2020 2019
Net income (loss) $16,710   $(19,824)  $13,371   $6,623   $43,630  
Intangible amortization, net of tax(1) 1,177   1,223   1,456   5,232   4,430  
Goodwill impairment    31,500      31,500     
Tangible net income $17,887   $12,899   $14,827   $43,355   $48,060  
           
Average shareholders’ equity $505,506   $529,857   $503,011   $515,455   $452,018  
Average intangible assets, net (88,543)  (121,306)  (125,898)  (113,978)  (108,242) 
Average tangible equity $416,963   $408,551   $377,113   $401,477   $343,776  
           
Return on average equity 13.15 % (14.88)% 10.55 % 1.28 % 9.65 %
Return on average tangible equity(2) 17.07 % 12.56 % 15.60 % 10.80 % 13.98 %

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

     
Net Interest Margin, Tax Equivalent/Core Net Interest Margin Three Months Ended Year Ended
 December 31, September 30, December 31, December 31, December 31,
(Dollars in thousands) 2020 2020 2019 2020 2019
Net interest income $39,037   $37,809   $39,584   $152,964   $143,650  
Tax equivalent adjustments:          
Loans(1) 556   536   523   2,096   1,785  
Securities(1) 651   608   381   2,136   1,481  
Net interest income, tax equivalent $40,244   $38,953   $40,488   $157,196   $146,916  
Loan purchase discount accretion (1,542)  (1,923)  (3,937)  (9,098)  (13,977) 
Core net interest income $38,702   $37,030   $36,551   $148,098   $132,939  
           
Net interest margin 3.03 % 3.05 % 3.70 % 3.21 % 3.73 %
Net interest margin, tax equivalent(2) 3.13 % 3.14 % 3.79 % 3.30 % 3.82 %
Core net interest margin(3) 3.01 % 2.99 % 3.42 % 3.11 % 3.45 %
Average interest earning assets $5,117,669   $4,935,175   $4,242,329   $4,765,154   $3,848,275  

(1) The federal statutory tax rate utilized was 21%.(2) Annualized tax equivalent net interest income divided by average interest earning assets.(3) Annualized core net interest income divided by average interest earning assets.

     
  Three Months Ended Year Ended
Loan Yield, Tax Equivalent December 31, September 30, December 31, December 31, December 31,
(Dollars in thousands) 2020 2020 2019 2020 2019
Loan interest income, including fees $38,239   $38,191   $44,906   $158,656   $163,163  
Tax equivalent adjustment(1) 556   536   523   2,096   1,785  
Tax equivalent loan interest income $38,795   $38,727   $45,429   $160,752   $164,948  
Loan purchase discount accretion (1,542)  (1,923)  (3,937)  (9,098)  (13,977) 
Core loan interest income $37,253   $36,804   $41,492   $151,654   $150,971  
           
Yield on loans 4.27 % 4.25 % 5.10 % 4.47 % 5.17 %
Yield on loans, tax equivalent(2) 4.33 % 4.31 % 5.16 % 4.53 % 5.22 %
Core yield on loans(3) 4.16 % 4.09 % 4.71 % 4.27 % 4.78 %
Average loans $3,560,632   $3,576,642   $3,493,496   $3,551,945   $3,157,127  

(1) The federal statutory tax rate utilized was 21%.(2) Annualized tax equivalent loan interest income divided by average loans.(3) Annualized core loan interest income divided by average loans.

     
  Three Months Ended Year Ended
Efficiency Ratio December 31, September 30, December 31, December 31, December 31,
(Dollars in thousands) 2020 2020 2019 2020 2019
Total noninterest expense $31,915   $59,939   $36,436   $149,893   $117,535  
Amortization of intangibles (1,569)  (1,631)  (1,941)  (6,976)  (5,906) 
Merger-related expenses —       (3,282)  (61)  (9,130) 
Goodwill impairment —    (31,500)     (31,500)    
Noninterest expense used for efficiency ratio $30,346   $26,808   $31,213   $111,356   $102,499  
           
Net interest income, tax equivalent(1) $40,244   $38,953   $40,488   $157,196   $146,916  
Noninterest income 10,626   9,570   9,036   38,620   31,246  
Investment securities gains, net (30)  (106)  (18)  (184)  (90) 
Net revenues used for efficiency ratio $50,840   $48,417   $49,506   $195,632   $178,072  
           
Efficiency ratio (2) 59.69 % 55.37 % 63.05 % 56.92  % 57.56 %

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

     
  Three Months Ended Year Ended
Core Earnings  December 31, September 30, December 31, December 31, December 31,
(Dollars in thousands, except per share data) 2020 2020 2019 2020 2019
Net income (loss) $16,710   $(19,824)  $13,371  $6,623   $43,630 
Goodwill impairment —   31,500     31,500    
Core earnings $16,710   $11,676   $13,371  $38,123   $43,630 
           
Weighted average diluted common shares outstanding 16,092   16,099   16,193  16,110   14,885 
           
Earnings (loss) per common share          
Earnings per common share - diluted $1.04   $(1.23)  $0.83  $0.41   $2.93 
Core earnings per common share - diluted (1) $1.04   $0.73   $0.83  $2.37   $2.93 

(1) Core earnings divided by weighted average diluted common shares outstanding

           
Adjusted Allowance for Credit Losses Ratio December 31, September 30, June 30, March 31, December 31,
(Dollars in thousands) 2020 2020 2020 2020 2019
Loans held for investment, net of unearned income $3,482,223   $3,537,432   $3,597,039   $3,425,762  $3,451,266 
PPP loans (259,260)  (331,703)  (327,648)     
Core loans $3,222,963   $3,205,729   $3,269,391   $3,425,762  $3,451,266 
Allowance for credit losses $55,500   $58,500   $55,644   $51,187  $29,079 
           
Allowance for credit losses ratio 1.59 % 1.65 % 1.55 % 1.49% 0.84%
Adjusted allowance for credit losses ratio(1) 1.72 % 1.82 % 1.70 % 1.49% 0.84%

(1) Allowance for credit losses divided by core loans

           
Core Loans/Core Commercial Loans December 31, September 30, June 30, March 31, December 31,
(Dollars in thousands) 2020 2020 2020 2020 2019
Commercial loans:          
Commercial and industrial $1,055,488   $1,103,102  $1,084,527  $864,702  $835,236 
Agricultural 116,392   129,453  140,837  145,435  140,446 
Commercial real estate 1,732,361   1,707,035  1,764,739  1,780,446  1,814,859 
Total commercial loans $2,904,241   $2,939,590  $2,990,103  $2,790,583  $2,790,541 
Consumer loans:          
Residential real estate $499,106   $521,570  $532,914  $554,290  $577,799 
Other consumer 78,876   76,272  74,022  80,889  82,926 
Total consumer loans $577,982   $597,842  $597,842  $597,842  $597,842 
Loans held for investment, net of unearned income $3,482,223   $3,537,432  $3,587,945  $3,388,425  $3,388,383 
           
PPP loans $259,260   $331,703  $327,648  $  $ 
           
Core loans(1) $3,222,963   $3,205,729  $3,260,297  $3,388,425  $3,388,383 
Core commercial loans(2) $2,644,981   $2,607,887  $2,662,455  $2,790,583  $2,790,541 

(1) Core loans are calculated as loans held for investment, net of unearned income less PPP loans.(2) Core commercial loans are calculated as total commercial loans less PPP loans.

Category: Earnings

Source: MidWestOne Financial Group, Inc.

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


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