MidWestOne Financial Group, Inc. Reports Financial Results for the Fourth Quarter and Full Year of 2022

Rhea-AI Summary

MidWestOne Financial Group reported a net income of $16.0 million for Q4 2022, or $1.02 per diluted share, down from $18.3 million ($1.17/share) in Q3 2022. Full-year net income fell to $60.8 million ($3.87/share) from $69.5 million ($4.37/share) in 2021. Revenue for Q4 was $54.5 million, including a $2.5 million bargain purchase gain from the IOFB acquisition. The nonperforming assets ratio improved to 0.24%, with annualized loan growth at 10.36%. Efficiency ratio was 57.79% for the quarter, increasing from 53.67%. Despite rising funding costs affecting net interest income, the company remains optimistic about its position amidst macroeconomic uncertainties.

Positive

• Annualized loan growth of 10.36% in Q4 2022.
• Nonperforming assets ratio improved 16 bps to 0.24%.
• Recognition as Iowa's Best Small Bank by Newsweek for two consecutive years.

Negative

• Q4 net interest income declined to $43.6 million from $45.7 million in Q3 2022.
• Full-year net income decreased by $8.7 million from 2021 to 2022.
• Efficiency ratio increased to 57.79% from 53.67% in the linked quarter.

Fourth Quarter Summary¹

• Net income for the fourth quarter was $16.0 million, or $1.02 per diluted common share.
  • Revenue was $54.5 million, which included $2.5 million, or $0.16 per diluted common share, of additional bargain purchase gain stemming from the Iowa First Bancshares Corp. ("IOFB") acquisition.
  • Credit loss expense was $0.6 million.
  • Noninterest expense was $34.4 million, which included $0.4 million of merger-related expenses.
• Annualized loan growth was 10.36%.
• Nonperforming assets ratio improved 16 basis points ("bps") to 0.24%.
• Efficiency ratio was 57.79%².
  

Full Year 2022 Summary¹

• Net income for the full year was $60.8 million, or $3.87 per diluted common share.       
• Adjusted core loan growth (excluding PPP and IOFB acquired loans) was 10.73%².
• Nonperforming assets ratio fell 29 bps to 0.24%; net charge-off ratio was 0.19%.
• Efficiency ratio was 56.98%².

IOWA CITY, Iowa, Jan. 26, 2023 (GLOBE NEWSWIRE) -- MidWestOne Financial Group, Inc. (Nasdaq: MOFG) (“we”, “our”, or the "Company”) today reported net income for the fourth quarter of 2022 of $16.0 million, or $1.02 per diluted common share, compared to net income of $18.3 million, or $1.17 per diluted common share, for the linked quarter. Net income for the full year of 2022 was $60.8 million, or $3.87 per diluted common share, compared to net income for the full year of 2021 of $69.5 million, or $4.37 per diluted common share.

^{——————————————
1 Fourth Quarter Summary compares to the third quarter of 2022 (the "linked quarter") unless noted. Full Year 2022 Summary compares to the full year 2021 unless noted.
2 Non-GAAP measure. See the separate Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.}

CEO COMMENTARY

Charles (Chip) Reeves, Chief Executive Officer of the Company, commented, "We are pleased with our strong loan growth and greatly improved asset quality for the quarter and for the full year ended December 31, 2022. Annualized loan growth was 10.36% for the fourth quarter of 2022, reflecting strong momentum in our key metro markets of the Twin Cities, Denver and Metro Iowa. This represents the third consecutive quarter of double digit loan growth, a true testament to our relationship banking model and the talent acquisition that has occurred the past eighteen months. Asset quality metrics improved as we took strategic action to resolve legacy credit issues. As a result, the nonperforming assets ratio declined 16 bps to 0.24%. The allowance for credit losses ratio stands at 1.28% and 30-89 day delinquencies continue to be low. We believe we are positioned well for the possible macroeconomic uncertainties of 2023.

We continue our balanced approach to deposit costs and retention efforts and measure our cycle-to-date interest bearing deposit beta as 15%. The quarter-over-quarter beta accelerated in the fourth quarter of 2022 to 25% and we expect continued deposit competition in 2023. We will be vigilant in defending our core, relationship deposit franchise. Due to rising funding costs and our earning asset composition, net interest income and net interest margin declined in the fourth quarter of 2022, partially offset by the aforementioned strong loan growth.

During the fourth quarter of 2022, we were pleased to be recognized by Newsweek as Iowa's Best Small Bank for the second year in a row; an outstanding honor for our team members who live our operating principles each and every day."

FINANCIAL HIGHLIGHTS		Three Months Ended												Year Ended
		December 31,				September 30,				December 31,				December 31,				December 31,
(Dollars in thousands, except per share amounts)			2022				2022				2021				2022				2021
Net interest income		$	43,564			$	45,733			$	38,819			$	166,358			$	156,281
Noninterest income			10,940				12,588				11,229				47,519				42,453
Total revenue, net of interest expense			54,504				58,321				50,048				213,877				198,734
Credit loss expense (benefit)			572				638				622				4,492				(7,336	)
Noninterest expense			34,440				34,623				30,444				132,788				116,592
Income before income tax expense			19,492				23,060				18,982				76,597				89,478
Income tax expense			3,490				4,743				4,726				15,762				19,992
Net income		$	16,002			$	18,317			$	14,256			$	60,835			$	69,486
Diluted earnings per share		$	1.02			$	1.17			$	0.91			$	3.87			$	4.37
Return on average assets			0.97	%			1.13	%			0.95	%			0.97	%			1.20	%
Return on average equity			13.26	%			14.56	%			10.68	%			12.16	%			13.18	%
Return on average tangible equity(1)			17.85	%			19.32	%			13.50	%			15.89	%			16.63	%
Efficiency ratio(1)			57.79	%			53.67	%			56.74	%			56.98	%			54.65	%

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

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Linked Quarter

Net interest income decreased to $43.6 million in the fourth quarter of 2022 from $45.7 million in the third quarter of 2022, due primarily to higher funding costs from the general increase in interest rates and volumes, partially offset by higher interest earning asset yields and volumes.

The Company's tax equivalent net interest margin was 2.93% in the fourth quarter of 2022 compared to 3.08% in the linked quarter, driven by higher funding costs, partially offset by higher interest earning asset yields. The cost of interest bearing liabilities increased 44 bps to 1.08%, due to interest bearing deposits costs of 0.83%, short-term borrowing costs of 2.54%, and long-term debt costs of 5.54%, which increased 37 bps, 120 bps and 84 bps respectively, from the linked quarter. Total interest earning asset yields increased 20 bps from the linked quarter, primarily as a result of an increase in loan and securities yields of 22 bps and 8 bps, respectively.

Average interest bearing liabilities increased $83.2 million to $4.84 billion in the fourth quarter of 2022 from the linked quarter, primarily as a result of increased short-term borrowings. Average interest bearing deposits were up slightly and reflected $48.5 million in average brokered time deposit volumes purchased during the fourth quarter of 2022. Average interest earning assets increased $34.2 million to $6.09 billion in the fourth quarter of 2022 when compared to the linked quarter. This increase reflected growth in the organic loan portfolio, partially offset by lower volumes of debt securities.

Full Year

When compared to the prior year, net interest income increased to $166.4 million from $156.3 million, due primarily to a higher interest earning asset yields and volumes, partially offset by higher funding costs and volumes.

The Company's tax equivalent net interest margin was 2.92% for the year ended 2022 compared to 2.95% in the prior year, driven by higher funding costs, partially offset by higher interest earning asset yields. The cost of interest bearing liabilities increased 18 bps to 0.66%, due to interest bearing deposit costs of 0.48%, short-term borrowing costs of 1.38%, and long-term debt costs of 4.76%, which increased 14 bps, 109 bps and 98 bps, respectively from the prior year end. Total interest earning assets yield increased 12 bps primarily as a result of an increase in securities and loan yields of 31 bps and 3 bps, respectively. Paycheck Protection Program ("PPP") loan fee accretion and interest increased 2021 loan yields by 17 bps compared to 2 bps in 2022.

Average interest bearing liabilities increased $370.9 million to $4.61 billion for the year ended 2022 compared to the prior year, primarily as a result of increased interest bearing deposits and short-term borrowings. The increase reflected liabilities assumed in the IOFB acquisition and higher wholesale funding in 2022. Average interest earning assets increased $403.4 million to $5.86 billion for the year ended 2022 when compared to the prior year. This increase reflected interest-earning assets acquired in the IOFB acquisition, organic loan growth, and a higher volume of debt securities.

Noninterest Income

Noninterest income for the fourth quarter of 2022 decreased $1.6 million, or 13.1%, from the linked quarter. The decrease was primarily due to decreases of $0.8 million and $0.7 million in loan revenue and other income, respectively. The decrease in loan revenue reflected a smaller increase in the fair value of our mortgage servicing rights, coupled with a decline in the gain on sale from residential mortgage loans as a result of lower mortgage origination volumes. The decrease in other noninterest income stemmed primarily from a one-time settlement that was recorded in the third quarter of 2022, which was partially offset by an increase of $2.5 million in the bargain purchase gain recorded related to the IOFB acquisition.

Noninterest income for the year ended 2022 increased $5.1 million, or 11.9%, from the prior year. The increase was primarily due to increases of $6.4 million and $1.2 million in other revenue and service charges and fees, respectively. The increase in other noninterest income was primarily due to a one-time settlement and a $3.8 million bargain purchase gain recognized in connection with the IOFB acquisition. The increase in service charges and fees was primarily attributable to the additional operations of IOFB since acquisition. The largest offset to the increases above was a $2.4 million reduction in loan revenue, which reflected a decline in the gain on sale of residential mortgage loans as a result of lower mortgage origination volumes, partially offset by an increase in the fair value of our mortgage servicing rights.

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

	Three Months Ended											Year Ended
Noninterest Income	December 31,				September 30,				December 31,			December 31,			December 31,
(In thousands)		2022				2022				2021			2022			2021
Investment services and trust activities	$	2,666			$	2,876			$	3,115		$	11,223		$	11,675
Service charges and fees		2,028				2,075				1,684			7,477			6,259
Card revenue		1,784				1,898				1,746			7,210			7,015
Loan revenue		966				1,722				3,132			10,504			12,948
Bank-owned life insurance		637				579				550			2,305			2,162
Investment securities gains, net		(1	)			(163	)			137			271			242
Other		2,860				3,601				865			8,529			2,152
Total noninterest income	$	10,940			$	12,588			$	11,229		$	47,519		$	42,453

Noninterest Expense

Noninterest expense for the fourth quarter of 2022 decreased $0.2 million, or 0.5%, from the linked quarter, primarily due to decreases of $0.4 million, $0.2 million, and $0.2 million in data processing, marketing, and legal and professional, respectively. These decreases primarily reflected the overall decline in merger-related expenses. Partially offsetting the decreases above was an increase of $0.4 million in compensation and employee benefits stemming from an increase in incentive compensation expense.

Noninterest expense for the year ended 2022 increased $16.2 million, or 13.89%, from the prior year. The increase in noninterest expense was due to an overall increase in all noninterest expense categories, except communications and foreclosed assets, net. These increases primarily reflected costs associated with the acquired operations of IOFB, including merger-related expenses of $2.2 million. Also contributing to the increase in compensation and employee benefits was normal annual salary and employee benefit increases, coupled with a decline of $1.6 million in the benefit from loan origination costs, which are deferred and amortized over the life of the loan to which they relate and were elevated in the prior year due to PPP loans. In addition to the identified increases above, occupancy expense also reflected an increase of $0.6 million from the write-down of fixed assets transferred to held for sale, while legal and professional expense reflected elevated legal expenses related to litigation, loan legal expenses, and executive recruitment.

The decreases in net interest income and noninterest income noted above were the primary drivers of the increase in the efficiency ratio, which increased 4.12 percentage points to 57.79% from 53.67% in the linked quarter. The full year of 2022 increase in noninterest expense more than offset the increases in net interest income and noninterest income, and was the primary driver of the increase in the efficiency ratio, which increased 2.33 percentage points to 56.98% from 54.65% in the prior year.

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

	Three Months Ended									Year Ended
Noninterest Expense	December 31,			September 30,			December 31,			December 31,				December 31,
(In thousands)		2022			2022			2021			2022				2021
Compensation and employee benefits	$	20,438		$	20,046		$	18,266		$	78,103			$	69,937
Occupancy expense of premises, net		2,663			2,577			2,211			10,272				9,274
Equipment		2,327			2,358			2,189			8,693				7,816
Legal and professional		1,846			2,012			1,826			8,646				5,256
Data processing		1,375			1,731			1,211			5,574				5,216
Marketing		947			1,139			1,121			4,272				4,022
Amortization of intangibles		1,770			1,789			1,245			6,069				5,357
FDIC insurance		405			415			380			1,660				1,572
Communications		285			302			277			1,125				1,332
Foreclosed assets, net		48			42			7			(18	)			233
Other		2,336			2,212			1,711			8,392				6,577
Total noninterest expense	$	34,440		$	34,623		$	30,444		$	132,788			$	116,592

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

	Three Months Ended									Year Ended
	December 31,			September 30,			December 31,			December 31,			December 31,
Merger-related Expenses		2022			2022			2021			2022			2021
(In thousands)
Compensation and employee benefits	$	189		$	132		$	—		$	471		$	—
Occupancy expense of premises, net		—			—			—			1			—
Equipment		4			14			18			29			18
Legal and professional		54			193			202			948			202
Data processing		131			304			—			511			—
Marketing		2			90			2			164			2
Communications		—			—			—			3			—
Other		29			30			2			74			2
Total merger-related expenses	$	409		$	763		$	224		$	2,201		$	224

Income Taxes

The Company's effective income tax rate decreased to 17.9% in the fourth quarter of 2022 compared to 20.6% in the linked quarter. The decrease was primarily due to the increase to the bargain purchase gain that was recorded related to the IOFB acquisition. The effective income tax rate for the full year 2022 was 20.6%, as compared to 22.3% in the prior year.

BALANCE SHEET, LIQUIDITY AND CAPITAL HIGHLIGHTS	As of or for the Three Months Ended
	December 31,				September 30,				December 31,
(Dollars in millions, except per share amounts)		2022				2022				2021
Ending Balance Sheet
Total assets	$	6,577.9			$	6,491.1			$	6,025.1
Loans held for investment, net of unearned income		3,840.5				3,746.3				3,245.0
Total securities		2,282.9				2,299.9				2,288.1
Total deposits		5,468.9				5,476.8				5,114.5
Average Balance Sheet
Average total assets	$	6,517.0			$	6,457.6			$	5,934.1
Average total loans		3,791.9				3,673.4				3,268.8
Average total deposits		5,495.6				5,507.5				5,015.5
Funding and Liquidity
Short-term borrowings	$	391.9			$	304.5			$	181.4
Long-term debt		139.2				154.2				154.9
Loans to deposits ratio		70.22	%			68.40	%			63.45	%
Equity
Total shareholders' equity	$	492.8			$	472.2			$	527.5
Common equity ratio		7.49	%			7.28	%			8.75	%
Tangible common equity(1)		400.0				377.7				445.1
Tangible common equity ratio(1)		6.17	%			5.90	%			7.49	%
Per Share Data
Book value	$	31.54			$	30.23			$	33.66
Tangible book value(1)	$	25.60			$	24.17			$	28.40

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

Loans Held for Investment

Loans held for investment, net of unearned income, increased $94.2 million, or 2.5%, to $3.84 billion from September 30, 2022. This increase was driven by new loan production and higher volumes of line of credit usage during the fourth quarter of 2022.

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

Loans Held for Investment	December 31, 2022					September 30, 2022					December 31, 2021
	Balance			% of Total		Balance			% of Total		Balance			% of Total
(dollars in thousands)
Commercial and industrial	$	1,055,162		27.5	%	$	1,041,662		27.8	%	$	902,314		27.8	%
Agricultural		115,320		3.0			116,229		3.1			103,417		3.2
Commercial real estate
Construction and development		270,991		7.1			276,941		7.4			172,160		5.3
Farmland		183,913		4.8			183,581		4.9			144,673		4.5
Multifamily		252,129		6.6			222,592		5.9			244,503		7.5
Other		1,272,985		33.1			1,226,983		32.8			1,143,205		35.2
Total commercial real estate		1,980,018		51.6			1,910,097		51.0			1,704,541		52.5
Residential real estate
One-to-four family first liens		451,210		11.7			446,373		11.9			333,308		10.3
One-to-four family junior liens		163,218		4.2			157,276		4.2			133,014		4.1
Total residential real estate		614,428		15.9			603,649		16.1			466,322		14.4
Consumer		75,596		2.0			74,652		2.0			68,418		2.1
Loans held for investment, net of unearned income	$	3,840,524		100.0	%	$	3,746,289		100.0	%	$	3,245,012		100.0	%
Total commitments to extend credit	$	1,190,607				$	1,159,323				$	1,014,397

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 Forward	December 31,				September 30,				December 31,				December 31,				December 31,
(In thousands)		2022				2022				2021				2022				2021
Beginning balance	$	52,100			$	52,350			$	47,900			$	48,700			$	55,500
PCD allowance established in acquisition		—				—				—				3,371				—
Charge-offs		(3,615	)			(970	)			(255	)			(7,656	)			(2,332	)
Recoveries		143				382				533				1,093				2,768
Net charge-offs		(3,472	)			(588	)			278				(6,563	)			436
Credit loss expense (benefit) related to loans		572				338				522				3,692				(7,236	)
Ending balance	$	49,200			$	52,100			$	48,700			$	49,200			$	48,700

As of December 31, 2022, the allowance for credit losses ("ACL") was $49.2 million, or 1.28% of loans held for investment, net of unearned income, compared with $52.1 million, or 1.39% of loans held for investment, net of unearned income, at September 30, 2022. The change in the ACL between September 30, 2022 and December 31, 2022 included charge-offs of $1.6 million, related to the resolution of credit issues totaling $8.0 million of notes. Credit loss expense of $0.6 million in the fourth quarter of 2022 was consistent with the linked quarter and was primarily attributable to a reserve taken to support loan growth.

Deposits

Total deposits declined $7.8 million, or 0.1%, to $5.47 billion from September 30, 2022. This decline reflected the competitive market for deposits driven by the rapid rate of increase in the federal funds target rate over the course of this year. Brokered deposits increased $126.8 million from September 30, 2022.

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

Deposit Composition	December 31, 2022					September 30, 2022					December 31, 2021
(Dollars in thousands)	Balance			% of Total		Balance			% of Total		Balance			% of Total
Noninterest bearing deposits	$	1,053,450		19.3	%	$	1,139,694		20.8	%	$	1,005,369		19.6	%
Interest checking deposits		1,624,278		29.8			1,705,289		31.2			1,619,136		31.6
Money market deposits		937,340		17.1			991,783		18.1			939,523		18.4
Savings deposits		664,169		12.1			700,843		12.8			628,242		12.3
Total non-maturity deposits		4,279,237		78.3			4,537,609		82.9			4,192,270		81.9
Time deposits of $250 and under		559,466		10.2			537,616		9.8			505,392		9.9
Time deposits over $250		630,239		11.5			401,557		7.3			416,857		8.2
Total time deposits		1,189,705		21.7			939,173		17.1			922,249		18.1
Total deposits	$	5,468,942		100.0	%	$	5,476,782		100.0	%	$	5,114,519		100.0	%

CREDIT RISK PROFILE

	As of or For the Three Months Ended
Highlights	December 31,				September 30,				December 31,
(Dollars in thousands)		2022				2022				2021
Credit loss expense (benefit) related to loans	$	572			$	338			$	522
Net charge-offs (recoveries)	$	3,472			$	588			$	(278	)
Net charge-off (recovery) ratio(1)		0.36	%			0.06	%		(0.03		)%
At period-end
Pass	$	3,635,766			$	3,550,695			$	3,013,917
Special Mention / Watch		108,064				101,255				117,401
Classified		96,694				94,339				113,694
Total loans held for investment, net	$	3,840,524			$	3,746,289			$	3,245,012
Classified loans ratio(2)		2.52	%			2.52	%			3.50	%
Nonaccrual loans held for investment	$	15,256			$	25,027			$	31,540
Accruing loans contractually past due 90 days or more		565				936				—
Total nonperforming loans		15,821				25,963				31,540
Foreclosed assets, net		103				103				357
Total nonperforming assets	$	15,924			$	26,066			$	31,897
Nonperforming loans ratio(3)		0.41	%			0.69	%			0.97	%
Nonperforming assets ratio(4)		0.24	%			0.40	%			0.53	%
Allowance for credit losses	$	49,200			$	52,100			$	48,700
Allowance for credit losses ratio(5)		1.28	%			1.39	%			1.50	%
Adjusted allowance for credit losses ratio(6)		1.28	%			1.39	%			1.52	%
Allowance for credit losses to nonaccrual loans ratio(7)		322.50	%			208.18	%			154.41	%

^{(1) Net charge-off (recovery) ratio is calculated as annualized net charge-offs (recoveries) divided by the sum of average loans held for investment, net of unearned income and average loans held for sale, during the period.
(2) Classified loans ratio is calculated as classified loans divided by loans held for investment, net of unearned income, at the end of the period.
(3) Nonperforming loans ratio is calculated as total nonperforming loans divided by loans held for investment, net of unearned income, at the end of the period.
(4) Nonperforming assets ratio is calculated as total nonperforming assets divided by total assets at the end of the period.
(5) Allowance for credit losses ratio is calculated as allowance for credit losses divided by loans held for investment, net of unearned income, at the end of the period.
(6) Non-GAAP Measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
(7) Allowance for credit losses to nonaccrual loans ratio is calculated as allowance for credit losses divided by nonaccrual loans at the end of the period.}

During the fourth quarter of 2022, overall asset quality improved when compared to the linked quarter and the corresponding period in the prior year. The nonperforming assets ratio declined 16 bps from the linked quarter and 29 bps from the prior year to 0.41%. In addition, the classified loans ratio was consistent with the linked quarter at 2.52%, and declined 98 bps from the prior year.

The following table presents a roll forward of nonperforming loans for the period:

Nonperforming Loans	Nonaccrual				90+ Days Past Due & Still Accruing				Total
(Dollars in thousands)
Balance at September 30, 2022	$	25,027			$	936			$	25,963
Loans placed on nonaccrual or 90+ days past due & still accruing		2,347				68				2,415
Proceeds related to repayment or sale		(8,141	)			(3	)			(8,144	)
Loans returned to accrual status or no longer past due		(205	)			(107	)			(312	)
Charge-offs		(3,460	)			(18	)			(3,478	)
Transfers to foreclosed assets		(312	)			—				(312	)
Transfer to nonaccrual		—				(311	)			(311	)
Balance at December 31, 2022	$	15,256			$	565			$	15,821

CAPITAL

Effective March 31, 2020, we elected the 5-year phase-in option allowed under the interim final rule (IFR) issued by the federal banking regulatory agencies that delays the estimated impact on regulatory capital stemming from the implementation of the current expected credit losses (CECL) accounting standard. The IFR allows the add back of 100% of the capital effect from the day one CECL transition adjustment and 25% of the capital effect from subsequent increases in the allowance for credit losses through the two-year period ending December 31, 2021. The modified CECL transitional amount of $9.4 million is then reduced from capital over the subsequent three-year period.

Regulatory Capital Ratios	December 31,			September 30,			December 31,
	2022 (1)			2022			2021
MidWestOne Financial Group, Inc. Consolidated
Tier 1 leverage to average assets ratio	8.35	%		8.24	%		8.67	%
Common equity tier 1 capital to risk-weighted assets ratio	9.28	%		9.18	%		9.94	%
Tier 1 capital to risk-weighted assets ratio	10.05	%		9.97	%		10.83	%
Total capital to risk-weighted assets ratio	12.07	%		12.10	%		13.09	%
MidWestOne Bank
Tier 1 leverage to average assets ratio	9.36	%		9.31	%		9.25	%
Common equity tier 1 capital to risk-weighted assets ratio	11.29	%		11.26	%		11.58	%
Tier 1 capital to risk-weighted assets ratio	11.29	%		11.26	%		11.58	%
Total capital to risk-weighted assets ratio	12.10	%		12.17	%		12.46	%

^{(1) Capital ratios for December 31, 2022 are preliminary}

IOWA FIRST BANCSHARES CORP. ACQUISITION

On June 9, 2022, we acquired Iowa First Bancshares Corp ("IOFB"). The table below summarizes the amounts recognized at the acquisition date for each major class of assets acquired and liabilities assumed:

(In thousands)		As of June 9, 2022
		As Reported at September 30, 2022				Fourth Quarter of 2022 Fair Value Adjustments			As Reported at December 31, 2022
Merger consideration
Cash consideration		$	46,672			$	—		$	46,672
Identifiable net assets acquired, at fair value
Assets acquired
Cash and due from banks			10,192				—			10,192
Interest earning deposits in banks			67,855				—			67,855
Debt securities			119,820				—			119,820
Loans held for investment			281,326				—			281,326
Premises and equipment			7,363				—			7,363
Core deposit intangible			16,500				—			16,500
Other assets			11,628				2,512			14,140
Total assets acquired			514,684				2,512			517,196
Liabilities assumed
Deposits			(463,638	)			—			(463,638	)
Other liabilities			(3,117	)			—			(3,117	)
Total liabilities assumed			(466,755	)			—			(466,755	)
Identifiable net assets acquired, at fair value			47,929				2,512			50,441
Bargain purchase gain (reported in other noninterest income)		$	1,257			$	2,512		$	3,769

CORPORATE UPDATE

Share Repurchase Program

Under our current repurchase program, no common shares were repurchased by the Company during the fourth quarter of 2022. At December 31, 2022, the total amount available under the Company's current share repurchase program was $3.0 million.

Cash Dividend Announcement

The Board of Directors of the Company declared a cash dividend of $0.2425 per common share on January 24, 2023. The dividend is payable March 15, 2023, to shareholders of record at the close of business on March 1, 2023.

CONFERENCE CALL DETAILS

The Company will host a conference call for investors at 11:00 a.m. CT on January 27, 2023. To participate, you may pre-register for this call utilizing the following link: https://www.netroadshow.com/events/login?show=6ffe77d3&confId=45498. After pre-registering for this event you will receive your access details via email. On the day of the call, you are also able to dial 1-844-200-6205 using an access code of 022797 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 27, 2023, by calling 1-866-813-9403 and using the replay access code of 058978. A transcript of the call will also be available on the Company’s web site (www.midwestonefinancial.com) within three business days of the call.

ABOUT MIDWESTONE FINANCIAL GROUP, INC.

MidWestOne Financial Group, Inc. is a financial holding company headquartered in Iowa City, Iowa. MidWestOne is the parent company of MidWestOne Bank, which operates banking offices in Iowa, Minnesota, Wisconsin, Florida, and Colorado. MidWestOne provides electronic delivery of financial services through its website, MidWestOne.bank. MidWestOne Financial Group, Inc. trades on the Nasdaq Global Select Market under the symbol “MOFG”.

Cautionary Note Regarding Forward-Looking Statements

This release contains certain “forward-looking statements” within the meaning of such term in the Private Securities Litigation Reform Act of 1995. We and our representatives may, from time to time, make written or oral statements that are “forward-looking” and provide information other than historical information. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement. These factors include, among other things, the factors listed below. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of our management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “should,” “could,” “would,” “plans,” “goals,” “intend,” “project,” “estimate,” “forecast,” “may” or similar expressions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, these statements. Readers are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Additionally, we undertake no obligation to update any statement in light of new information or future events, except as required under federal securities law.

Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors that could have an impact on our ability to achieve operating results, growth plan goals and future prospects include, but are not limited to, the following: (1) the risks of mergers (including with IOFB), including, without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and possible failures to achieve expected gains, revenue growth and/or expense savings from such transactions; (2) credit quality deterioration, pronounced and sustained reduction in real estate market values, or other uncertainties, including the impact of inflationary pressures on economic conditions and our business, resulting in an increase in the allowance for credit losses, an increase in the credit loss expense, and a reduction in net earnings; (3) the effects of actual and expected increases in inflation and interest rates, including on our net income and the value of our securities portfolio; (4) changes in the economic environment, competition, or other factors that may affect our ability to acquire loans or influence the anticipated growth rate of loans and deposits and the quality of the loan portfolio and loan and deposit pricing; (5) fluctuations in the value of our investment securities; (6) governmental monetary and fiscal policies; (7) changes in and uncertainty related to benchmark interest rates used to price loans and deposits, including the expected elimination of LIBOR and the adoption of a substitute; (8) legislative and regulatory changes, including changes in banking, securities, trade, and tax laws and regulations and their application by our regulators, including the new 1.0% excise tax on stock buybacks by publicly traded companies; (9) the ability to attract and retain key executives and employees experienced in banking and financial services; (10) the sufficiency of the allowance for credit losses to absorb the amount of actual losses inherent in our existing loan portfolio; (11) our ability to adapt successfully to technological changes to compete effectively in the marketplace; (12) credit risks and risks from concentrations (by geographic area and by industry) within our loan portfolio; (13) the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds, financial technology companies, and other financial institutions operating in our markets or elsewhere or providing similar services; (14) the failure of assumptions underlying the establishment of allowances for credit losses and estimation of values of collateral and various financial assets and liabilities; (15) volatility of rate-sensitive deposits; (16) operational risks, including data processing system failures or fraud; (17) asset/liability matching risks and liquidity risks; (18) the costs, effects and outcomes of existing or future litigation; (19) changes in general economic, political, or industry conditions, nationally, internationally or in the communities in which we conduct business; (20) changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the Financial Accounting Standards Board; (21) war or terrorist activities, including the war in Ukraine, widespread disease or pandemic, or other adverse external events, which may cause deterioration in the economy or cause instability in credit markets; (22) the effects of cyber-attacks; (23) the imposition of tariffs or other domestic or international governmental policies impacting the value of the agricultural or other products of our borrowers; (24) effects of the ongoing COVID-19 pandemic, including its effects on the economic environment, our customers, employees and supply chain; and (25) other risk factors detailed from time to time in Securities and Exchange Commission filings made by the Company.

 

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

	December 31,				September 30,				June 30,				March 31,				December 31,
(In thousands)		2022				2022				2022				2022				2021
ASSETS
Cash and due from banks	$	83,990			$	77,513			$	60,622			$	47,677			$	42,949
Interest earning deposits in banks		2,445				1,001				23,242				12,152				160,881
Total cash and cash equivalents		86,435				78,514				83,864				59,829				203,830
Debt securities available for sale at fair value		1,153,547				1,153,304				1,234,789				1,145,638				2,288,110
Held to maturity securities at amortized cost		1,129,421				1,146,583				1,168,042				1,204,212				—
Total securities		2,282,968				2,299,887				2,402,831				2,349,850				2,288,110
Loans held for sale		612				2,320				4,991				6,466				12,917
Gross loans held for investment		3,854,791				3,761,664				3,627,728				3,256,294				3,252,194
Unearned income, net		(14,267	)			(15,375	)			(16,576	)			(6,259	)			(7,182	)
Loans held for investment, net of unearned income		3,840,524				3,746,289				3,611,152				3,250,035				3,245,012
Allowance for credit losses		(49,200	)			(52,100	)			(52,350	)			(46,200	)			(48,700	)
Total loans held for investment, net		3,791,324				3,694,189				3,558,802				3,203,835				3,196,312
Premises and equipment, net		87,125				87,732				89,048				82,603				83,492
Goodwill		62,477				62,477				62,477				62,477				62,477
Other intangible assets, net		30,315				32,086				33,874				18,658				19,885
Foreclosed assets, net		103				103				284				273				357
Other assets		236,517				233,753				206,320				176,223				157,748
Total assets	$	6,577,876			$	6,491,061			$	6,442,491			$	5,960,214			$	6,025,128
LIABILITIES
Noninterest bearing deposits	$	1,053,450			$	1,139,694			$	1,114,825			$	1,002,415			$	1,005,369
Interest bearing deposits		4,415,492				4,337,088				4,422,616				4,075,310				4,109,150
Total deposits		5,468,942				5,476,782				5,537,441				5,077,725				5,114,519
Short-term borrowings		391,873				304,536				193,894				181,193				181,368
Long-term debt		139,210				154,190				159,168				139,898				154,879
Other liabilities		85,058				83,324				63,156				56,941				46,887
Total liabilities		6,085,083				6,018,832				5,953,659				5,455,757				5,497,653
SHAREHOLDERS' EQUITY
Common stock		16,581				16,581				16,581				16,581				16,581
Additional paid-in capital		302,085				301,418				300,859				300,505				300,940
Retained earnings		289,289				276,998				262,395				253,500				243,365
Treasury stock		(26,115	)			(26,145	)			(25,772	)			(24,113	)			(24,546	)
Accumulated other comprehensive loss		(89,047	)			(96,623	)			(65,231	)			(42,016	)			(8,865	)
Total shareholders' equity		492,793				472,229				488,832				504,457				527,475
Total liabilities and shareholders' equity	$	6,577,876			$	6,491,061			$	6,442,491			$	5,960,214			$	6,025,128

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

	Three Months Ended																		Year Ended
	December 31,				September 30,				June 30,			March 31,				December 31,			December 31,				December 31,
(In thousands, except per share data)		2022				2022				2022			2022				2021			2022				2021
Interest income
Loans, including fees	$	43,769			$	40,451			$	32,746		$	31,318			$	33,643		$	148,284			$	141,036
Taxable investment securities		10,685				10,635				9,576			8,123				7,461			39,019				25,692
Tax-exempt investment securities		2,303				2,326				2,367			2,383				2,415			9,379				9,947
Other		—				9				40			28				37			77				91
Total interest income		56,757				53,421				44,729			41,852				43,556			196,759				176,766
Interest expense
Deposits		9,127				5,035				3,173			2,910				3,031			20,245				13,198
Short-term borrowings		1,955				767				229			119				130			3,070				551
Long-term debt		2,111				1,886				1,602			1,487				1,576			7,086				6,736
Total interest expense		13,193				7,688				5,004			4,516				4,737			30,401				20,485
Net interest income		43,564				45,733				39,725			37,336				38,819			166,358				156,281
Credit loss expense (benefit)		572				638				3,282			—				622			4,492				(7,336	)
Net interest income after credit loss expense (benefit)		42,992				45,095				36,443			37,336				38,197			161,866				163,617
Noninterest income
Investment services and trust activities		2,666				2,876				2,670			3,011				3,115			11,223				11,675
Service charges and fees		2,028				2,075				1,717			1,657				1,684			7,477				6,259
Card revenue		1,784				1,898				1,878			1,650				1,746			7,210				7,015
Loan revenue		966				1,722				3,523			4,293				3,132			10,504				12,948
Bank-owned life insurance		637				579				558			531				550			2,305				2,162
Investment securities (losses) gains, net		(1	)			(163	)			395			40				137			271				242
Other		2,860				3,601				1,606			462				865			8,529				2,152
Total noninterest income		10,940				12,588				12,347			11,644				11,229			47,519				42,453
Noninterest expense
Compensation and employee benefits		20,438				20,046				18,955			18,664				18,266			78,103				69,937
Occupancy expense of premises, net		2,663				2,577				2,253			2,779				2,211			10,272				9,274
Equipment		2,327				2,358				2,107			1,901				2,189			8,693				7,816
Legal and professional		1,846				2,012				2,435			2,353				1,826			8,646				5,256
Data processing		1,375				1,731				1,237			1,231				1,211			5,574				5,216
Marketing		947				1,139				1,157			1,029				1,121			4,272				4,022
Amortization of intangibles		1,770				1,789				1,283			1,227				1,245			6,069				5,357
FDIC insurance		405				415				420			420				380			1,660				1,572
Communications		285				302				266			272				277			1,125				1,332
Foreclosed assets, net		48				42				4			(112	)			7			(18	)			233
Other		2,336				2,212				1,965			1,879				1,711			8,392				6,577
Total noninterest expense		34,440				34,623				32,082			31,643				30,444			132,788				116,592
Income before income tax expense		19,492				23,060				16,708			17,337				18,982			76,597				89,478
Income tax expense		3,490				4,743				4,087			3,442				4,726			15,762				19,992
Net income	$	16,002			$	18,317			$	12,621		$	13,895			$	14,256		$	60,835			$	69,486
Earnings per common share
Basic	$	1.02			$	1.17			$	0.81		$	0.89			$	0.91		$	3.89			$	4.38
Diluted	$	1.02			$	1.17			$	0.80		$	0.88			$	0.91		$	3.87			$	4.37
Weighted average basic common shares outstanding		15,624				15,623				15,668			15,683				15,692			15,649				15,877
Weighted average diluted common shares outstanding		15,693				15,654				15,688			15,718				15,734			15,701				15,905
Dividends paid per common share	$	0.2375			$	0.2375			$	0.2375		$	0.2375			$	0.2250		$	0.9500			$	0.9000

MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
FINANCIAL STATISTICS

	As of or for the Three Months Ended												As of or for the Year Ended
	December 31,				September 30,				December 31,				December 31,				December 31,
(Dollars in thousands, except per share amounts)		2022				2022				2021				2022				2021
Earnings:
Net interest income	$	43,564			$	45,733			$	38,819			$	166,358			$	156,281
Noninterest income		10,940				12,588				11,229				47,519				42,453
Total revenue, net of interest expense		54,504				58,321				50,048				213,877				198,734
Credit loss expense (benefit)		572				638				622				4,492				(7,336	)
Noninterest expense		34,440				34,623				30,444				132,788				116,592
Income before income tax expense		19,492				23,060				18,982				76,597				89,478
Income tax expense		3,490				4,743				4,726				15,762				19,992
Net income	$	16,002			$	18,317			$	14,256			$	60,835			$	69,486
Per Share Data:
Diluted earnings	$	1.02			$	1.17			$	0.91			$	3.87			$	4.37
Book value		31.54				30.23				33.66				31.54				33.66
Tangible book value(1)		25.60				24.17				28.40				25.60				28.40
Ending Balance Sheet:
Total assets	$	6,577,876			$	6,491,061			$	6,025,128			$	6,577,876			$	6,025,128
Loans held for investment, net of unearned income		3,840,524				3,746,289				3,245,012				3,840,524				3,245,012
Total securities		2,282,968				2,299,887				2,288,110				2,282,968				2,288,110
Total deposits		5,468,942				5,476,782				5,114,519				5,468,942				5,114,519
Short-term borrowings		391,873				304,536				181,368				391,873				181,368
Long-term debt		139,210				154,190				154,879				139,210				154,879
Total shareholders' equity		492,793				472,229				527,475				492,793				527,475
Average Balance Sheet:
Average total assets	$	6,516,969			$	6,457,647			$	5,934,076			$	6,244,284			$	5,780,556
Average total loans		3,791,880				3,673,379				3,268,783				3,511,192				3,362,488
Average total deposits		5,495,599				5,507,482				5,015,506				5,309,049				4,838,227
Financial Ratios:
Return on average assets		0.97	%			1.13	%			0.95	%			0.97	%			1.20	%
Return on average equity		13.26	%			14.56	%			10.68	%			12.16	%			13.18	%
Return on average tangible equity(1)		17.85	%			19.32	%			13.50	%			15.89	%			16.63	%
Efficiency ratio(1)		57.79	%			53.67	%			56.74	%			56.98	%			54.65	%
Net interest margin, tax equivalent(1)		2.93	%			3.08	%			2.83	%			2.92	%			2.95	%
Loans to deposits ratio		70.22	%			68.40	%			63.45	%			70.22	%			63.45	%
Common equity ratio		7.49	%			7.28	%			8.75	%			7.49	%			8.75	%
Tangible common equity ratio(1)		6.17	%			5.90	%			7.49	%			6.17	%			7.49	%
Credit Risk Profile:
Total nonperforming loans	$	15,821			$	25,963			$	31,540			$	15,821			$	31,540
Nonperforming loans ratio		0.41	%			0.69	%			0.97	%			0.41	%			0.97	%
Total nonperforming assets	$	15,924			$	26,066			$	31,897			$	15,924			$	31,897
Nonperforming assets ratio		0.24	%			0.40	%			0.53	%			0.24	%			0.53	%
Net charge-offs (recoveries)	$	3,472			$	588			$	(278	)		$	6,563			$	(436	)
Net charge-off (recovery) ratio		0.36	%			0.06	%		(0.03		)%			0.19	%		(0.01		)%
Allowance for credit losses	$	49,200			$	52,100			$	48,700			$	49,200			$	48,700
Allowance for credit losses ratio		1.28	%			1.39	%			1.50	%			1.28	%			1.50	%
Allowance for credit losses to nonaccrual ratio		322.50	%			208.18	%			154.41	%			322.50	%			154.41	%
PPP Loans:
Average PPP loans	$	134			$	373			$	52,564			$	4,294			$	186,333
Fee Income		3				8				1,996				867				11,731

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

MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET AND YIELD ANALYSIS

	Three Months Ended
	December 31, 2022									September 30, 2022									December 31, 2021
(Dollars in thousands)	Average Balance			Interest Income/ Expense			Average Yield/ Cost			Average Balance			Interest Income/ Expense			Average Yield/ Cost			Average Balance			Interest Income/ Expense			Average Yield/ Cost
ASSETS
Loans, including fees (1)(2)(3)	$	3,791,880		$	44,494		4.66	%		$	3,673,379		$	41,124		4.44	%		$	3,268,783		$	34,191		4.15	%
Taxable investment securities		1,865,494			10,685		2.27	%			1,939,517			10,635		2.18	%			1,802,349			7,461		1.64	%
Tax-exempt investment securities (2)(4)		422,156			2,893		2.72	%			431,898			2,922		2.68	%			455,570			3,026		2.64	%
Total securities held for investment(2)		2,287,650			13,578		2.35	%			2,371,415			13,557		2.27	%			2,257,919			10,487		1.84	%
Other		5,562			—		—	%			6,070			9		0.59	%			80,415			37		0.18	%
Total interest earning assets(2)	$	6,085,092		$	58,072		3.79	%		$	6,050,864		$	54,690		3.59	%		$	5,607,117		$	44,715		3.16	%
Other assets		431,877									406,783									326,959
Total assets	$	6,516,969								$	6,457,647								$	5,934,076
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest checking deposits	$	1,632,749		$	1,703		0.41	%		$	1,725,000		$	1,463		0.34	%		$	1,506,600		$	1,065		0.28	%
Money market deposits		995,512			2,369		0.94	%			1,016,005			1,268		0.50	%			976,018			520		0.21	%
Savings deposits		683,538			306		0.18	%			710,836			297		0.17	%			621,871			285		0.18	%
Time deposits		1,067,044			4,749		1.77	%			913,307			2,007		0.87	%			903,765			1,161		0.51	%
Total interest bearing deposits		4,378,843			9,127		0.83	%			4,365,148			5,035		0.46	%			4,008,254			3,031		0.30	%
Securities sold under agreements to repurchase		151,880			437		1.14	%			144,628			228		0.63	%			190,725			115		0.24	%
Federal funds purchased		940			10		4.22	%			—			—		—	%			33			—		—	%
Other short-term borrowings		152,215			1,508		3.93	%			83,086			539		2.57	%			30			15		198.37	%
Short-term borrowings		305,035			1,955		2.54	%			227,714			767		1.34	%			190,788			130		0.27	%
Long-term debt		151,266			2,111		5.54	%			159,125			1,886		4.70	%			154,870			1,576		4.04	%
Total borrowed funds		456,301			4,066		3.54	%			386,839			2,653		2.72	%			345,658			1,706		1.96	%
Total interest bearing liabilities	$	4,835,144		$	13,193		1.08	%		$	4,751,987		$	7,688		0.64	%		$	4,353,912		$	4,737		0.43	%
Noninterest bearing deposits		1,116,756									1,142,334									1,007,252
Other liabilities		86,242									64,063									43,576
Shareholders’ equity		478,827									499,263									529,336
Total liabilities and shareholders’ equity	$	6,516,969								$	6,457,647								$	5,934,076
Net interest income(2)				$	44,879								$	47,002								$	39,978
Net interest spread(2)							2.71	%								2.95	%								2.73	%
Net interest margin(2)							2.93	%								3.08	%								2.83	%
Total deposits(5)	$	5,495,599		$	9,127		0.66	%		$	5,507,482		$	5,035		0.36	%		$	5,015,506		$	3,031		0.24	%
Cost of funds(6)							0.88	%								0.52	%								0.35	%

^{(1) Average balance includes nonaccrual loans.
(2) Tax equivalent. The federal statutory tax rate utilized was 21%.
(3) Interest income includes net loan fees, loan purchase discount accretion and tax equivalent adjustments. Net loan fees were $87 thousand, $35 thousand, and $1.9 million for the three months ended December 31, 2022, September 30, 2022, and December 31, 2021, respectively. Loan purchase discount accretion was $1.3 million, $2.0 million, and $599 thousand for the three months ended December 31, 2022, September 30, 2022, and December 31, 2021, respectively. Tax equivalent adjustments were $725 thousand, $673 thousand, and $548 thousand for the three months ended December 31, 2022, September 30, 2022, and December 31, 2021, respectively. The federal statutory tax rate utilized was 21%.
(4) Interest income includes tax equivalent adjustments of $590 thousand, $596 thousand, and $611 thousand for the three months ended December 31, 2022, September 30, 2022, and December 31, 2021, respectively. The federal statutory tax rate utilized was 21%.
(5) Total deposits is the sum of total interest-bearing deposits and noninterest bearing deposits. The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits.
(6) Cost of funds is calculated as annualized total interest expense divided by the sum of average total deposits and borrowed funds.}

MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET AND YIELD ANALYSIS

	Year Ended
	December 31, 2022									December 31, 2021
(Dollars in thousands)	Average Balance			Interest Income/ Expense			Average Yield/ Cost			Average Balance			Interest Income/ Expense			Average Yield/ Cost
ASSETS
Loans, including fees (1)(2)(3)	$	3,511,192		$	150,791		4.29	%		$	3,362,488		$	143,141		4.26	%
Taxable investment securities		1,891,234			39,019		2.06	%			1,577,146			25,692		1.63	%
Tax-exempt investment securities (2)(4)		435,907			11,788		2.70	%			463,526			12,468		2.69	%
Total securities held for investment(2)		2,327,141			50,807		2.18	%			2,040,672			38,160		1.87	%
Other		20,827			77		0.37	%			52,617			91		0.17	%
Total interest earning assets(2)	$	5,859,160		$	201,675		3.44	%		$	5,455,777		$	181,392		3.32	%
Other assets		385,124									324,779
Total assets	$	6,244,284								$	5,780,556
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest checking deposits	$	1,640,303		$	5,416		0.33	%		$	1,440,585		$	4,208		0.29	%
Money market deposits		992,390			4,707		0.47	%			946,784			2,006		0.21	%
Savings deposits		674,846			1,169		0.17	%			594,543			1,210		0.20	%
Time deposits		925,592			8,953		0.97	%			882,271			5,774		0.65	%
Total interest bearing deposits		4,233,131			20,245		0.48	%			3,864,183			13,198		0.34	%
Securities sold under agreements to repurchase		152,466			872		0.57	%			176,606			436		0.25	%
Federal funds purchased		237			10		4.22	%			8			—		—	%
Other short-term borrowings		70,492			2,188		3.10	%			15,143			115		0.76	%
Short-term borrowings		223,195			3,070		1.38	%			191,757			551		0.29	%
Long-term debt		148,863			7,086		4.76	%			178,395			6,736		3.78	%
Total borrowed funds		372,058			10,156		2.73	%			370,152			7,287		1.97	%
Total interest bearing liabilities	$	4,605,189		$	30,401		0.66	%		$	4,234,335		$	20,485		0.48	%
Noninterest bearing deposits		1,075,918									974,044
Other liabilities		62,706									45,141
Shareholders’ equity		500,471									527,036
Total liabilities and shareholders’ equity	$	6,244,284								$	5,780,556
Net interest income(2)				$	171,274								$	160,907
Net interest spread(2)							2.78	%								2.84	%
Net interest margin(2)							2.92	%								2.95	%
Total deposits(5)	$	5,309,049		$	20,245		0.38	%		$	4,838,227		$	13,198		0.27	%
Cost of funds(6)							0.54	%								0.39	%

^{(1) Average balance includes nonaccrual loans.
(2) Tax equivalent. The federal statutory tax rate utilized was 21%.
(3) Interest income includes net loan fees, loan purchase discount accretion and tax equivalent adjustments. Net loan fees were $0.8 million and $11.2 million for the years ended December 31, 2022 and December 31, 2021, respectively. Loan purchase discount accretion was $4.6 million and $3.3 million for the years ended December 31, 2022 and December 31, 2021, respectively. Tax equivalent adjustments were $2.5 million and $2.1 million for the years ended December 31, 2022 and December 31, 2021, respectively. The federal statutory tax rate utilized was 21%.
(4) Interest income includes tax equivalent adjustments of $2.4 million and $2.5 million for the years ended December 31, 2022 and December 31, 2021, respectively. The federal statutory tax rate utilized was 21%.
(5) Total deposits is the sum of total interest-bearing deposits and noninterest bearing deposits. The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits.
(6) Cost of funds is calculated as annualized total interest expense divided by the sum of average total deposits and borrowed funds.}

Non-GAAP Measures

This earnings release contains non-GAAP measures for tangible common equity, tangible book value per share, tangible common equity ratio, return on average tangible equity, net interest margin (tax equivalent), core net interest margin, loan yield (tax equivalent), core yield on loans, efficiency ratio, 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)			2022				2022				2022				2022				2021
Total shareholders’ equity		$	492,793			$	472,229			$	488,832			$	504,457			$	527,475
Intangible assets, net			(92,792	)			(94,563	)			(96,351	)			(81,135	)			(82,362	)
Tangible common equity		$	400,001			$	377,666			$	392,481			$	423,322			$	445,113
Total assets		$	6,577,876			$	6,491,061			$	6,442,491			$	5,960,214			$	6,025,128
Intangible assets, net			(92,792	)			(94,563	)			(96,351	)			(81,135	)			(82,362	)
Tangible assets		$	6,485,084			$	6,396,498			$	6,346,140			$	5,879,079			$	5,942,766
Book value per share		$	31.54			$	30.23			$	31.26			$	32.15			$	33.66
Tangible book value per share(1)		$	25.60			$	24.17			$	25.10			$	26.98			$	28.40
Shares outstanding			15,623,977				15,622,825				15,635,131				15,690,125				15,671,147
Common equity ratio			7.49	%			7.28	%			7.59	%			8.46	%			8.75	%
Tangible common equity ratio(2)			6.17	%			5.90	%			6.18	%			7.20	%			7.49	%

^{(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)			2022				2022				2021				2022				2021
Net income		$	16,002			$	18,317			$	14,256			$	60,835			$	69,486
Intangible amortization, net of tax(1)			1,328				1,342				934				4,552				4,018
Tangible net income		$	17,330			$	19,659			$	15,190			$	65,387			$	73,504
Average shareholders’ equity		$	478,827			$	499,263			$	529,336			$	500,471			$	527,036
Average intangible assets, net			(93,662	)			(95,499	)			(82,990	)			(88,917	)			(84,927	)
Average tangible equity		$	385,165			$	403,764			$	446,346			$	411,554			$	442,109
Return on average equity			13.26	%			14.56	%			10.68	%			12.16	%			13.18	%
Return on average tangible equity(2)			17.85	%			19.32	%			13.50	%			15.89	%			16.63	%

^{(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)			2022				2022				2021				2022				2021
Net interest income		$	43,564			$	45,733			$	38,819			$	166,358			$	156,281
Tax equivalent adjustments:
Loans(1)			725				673				548				2,507				2,105
Securities(1)			590				596				611				2,409				2,521
Net interest income, tax equivalent		$	44,879			$	47,002			$	39,978			$	171,274			$	160,907
Loan purchase discount accretion			(1,286	)			(2,015	)			(599	)			(4,561	)			(3,344	)
Core net interest income		$	43,593			$	44,987			$	39,379			$	166,713			$	157,563
Net interest margin			2.84	%			3.00	%			2.75	%			2.84	%			2.86	%
Net interest margin, tax equivalent(2)			2.93	%			3.08	%			2.83	%			2.92	%			2.95	%
Core net interest margin(3)			2.84	%			2.95	%			2.79	%			2.85	%			2.89	%
Average interest earning assets		$	6,085,092			$	6,050,864			$	5,607,117			$	5,859,160			$	5,455,777

^{(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 / Core Yield on Loans		December 31,				September 30,				December 31,				December 31,				December 31,
(Dollars in thousands)			2022				2022				2021				2022				2021
Loan interest income, including fees		$	43,769			$	40,451			$	33,643			$	148,284			$	141,036
Tax equivalent adjustment(1)			725				673				548				2,507				2,105
Tax equivalent loan interest income		$	44,494			$	41,124			$	34,191			$	150,791			$	143,141
Loan purchase discount accretion			(1,286	)			(2,015	)			(599	)			(4,561	)			(3,344	)
Core loan interest income		$	43,208			$	39,109			$	33,592			$	146,230			$	139,797
Yield on loans			4.58	%			4.37	%			4.08	%			4.22	%			4.19	%
Yield on loans, tax equivalent(2)			4.66	%			4.44	%			4.15	%			4.29	%			4.26	%
Core yield on loans(3)			4.52	%			4.22	%			4.08	%			4.16	%			4.16	%
Average loans		$	3,791,880			$	3,673,379			$	3,268,783			$	3,511,192			$	3,362,488

^{(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)			2022				2022				2021				2022				2021
Total noninterest expense		$	34,440			$	34,623			$	30,444			$	132,788			$	116,592
Amortization of intangibles			(1,770	)			(1,789	)			(1,245	)			(6,069	)			(5,357	)
Merger-related expenses			(409	)			(763	)			(224	)			(2,201	)			(224	)
Noninterest expense used for efficiency ratio		$	32,261			$	32,071			$	28,975			$	124,518			$	111,011
Net interest income, tax equivalent(1)		$	44,879			$	47,002			$	39,978			$	171,274			$	160,907
Plus: Noninterest income			10,940				12,588				11,229				47,519				42,453
Less: Investment securities (losses) gains, net			(1	)			(163	)			137				271				242
Net revenues used for efficiency ratio		$	55,820			$	59,753			$	51,070			$	218,522			$	203,118
Efficiency ratio (2)			57.79	%			53.67	%			56.74	%			56.98	%			54.65	%

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

Core Loans/Core Commercial Loans		December 31,			September 30,			June 30,			March 31,			December 31,
(Dollars in thousands)			2022			2022			2022			2022			2021
Commercial loans:
Commercial and industrial		$	1,055,162		$	1,041,662		$	986,137		$	898,942		$	902,314
Agricultural			115,320			116,229			110,263			94,649			103,417
Commercial real estate			1,980,018			1,910,097			1,859,940			1,723,891			1,704,541
Total commercial loans		$	3,150,500		$	3,067,988		$	2,956,340		$	2,717,482		$	2,710,272
Consumer loans:
Residential real estate		$	614,428		$	603,649		$	578,804		$	463,676		$	466,322
Other consumer			75,596			74,652			76,008			68,877			68,418
Total consumer loans		$	690,024		$	678,301		$	654,812		$	532,553		$	534,740
Loans held for investment, net of unearned income		$	3,840,524		$	3,746,289		$	3,611,152		$	3,250,035		$	3,245,012
PPP loans		$	83		$	195		$	402		$	3,037		$	30,841
Acquired IOFB loan portfolio		$	281,326		$	281,326		$	281,470		$	—		$	—
Core loans(1)		$	3,840,441		$	3,746,094		$	3,610,750		$	3,246,998		$	3,214,171
Adjusted core loans(2)		$	3,559,115		$	3,464,768		$	3,329,280		$	3,246,998		$	3,214,171
Core commercial loans(3)		$	3,150,417		$	3,067,793		$	2,955,938		$	2,714,445		$	2,679,431

^{(1) Core loans are calculated as loans held for investment, net of unearned income less PPP loans.
(2) Adjusted core loans are calculated as loans held for investment, net of unearned income, less PPP loans and the acquired IOFB loan portfolio.
(3) Core commercial loans are calculated as total commercial loans less PPP loans.}

Category: Earnings

This news release can be downloaded from https://www.midwestonefinancial.com/corporate-profile/default.aspx

Source: MidWestOne Financial Group, Inc.

Industry: Banks

Contact:
	Charles N. Reeves		Barry S. Ray
	Chief Executive Officer		Chief Financial Officer
	319.356.5800		319.356.5800

 

FAQ

What were MidWestOne Financial Group's earnings for Q4 2022?

MidWestOne Financial Group reported a net income of $16.0 million, or $1.02 per diluted share in Q4 2022.

How did the revenue for MidWestOne Financial Group perform in Q4 2022?

The revenue for Q4 2022 was $54.5 million, which included a bargain purchase gain from the IOFB acquisition.

What is the impact of the IOFB acquisition on MidWestOne Financial Group?

The IOFB acquisition contributed a $2.5 million bargain purchase gain and helped improve loan growth.

What is the current nonperforming assets ratio for MidWestOne Financial Group?

The nonperforming assets ratio improved to 0.24% as of Q4 2022.

What is the efficiency ratio for MidWestOne Financial Group in Q4 2022?

The efficiency ratio increased to 57.79% for Q4 2022 compared to 53.67% in Q3 2022.