MidWestOne Financial Group, Inc. Reports Financial Results for the Fourth Quarter and Full Year of 2023

Rhea-AI Summary

MidWestOne Financial Group, Inc. (MOFG) reported a net income of $2.7 million for Q4 2023, or $0.17 per diluted common share. The company sold $115.2 million of securities, with an annualized loan growth of 6.1% and an increase in deposits. The full year 2023 net income was $20.9 million, or $1.33 per diluted common share. The company received all regulatory approvals for the acquisition of Denver Bankshares, Inc. The CEO commented on the balance sheet trends, core deposit growth, and strategic initiatives to improve performance.

Positive

• Annualized loan growth of 6.1% in Q4 2023
• Net income for full year 2023 was $20.9 million
• Received all regulatory approvals for the acquisition of Denver Bankshares, Inc
• Tangible book value increased by $2.30 or 9%
• Declared a cash dividend of $0.2425 per common share

Negative

• Net interest income and noninterest income decreased in Q4 2023
• Noninterest expense increased in Q4 2023
• Investment securities losses of $5.7 million in Q4 2023
• Total revenue for Q4 2023 decreased by $8.0 million from Q3 2023

Insights

Financial Analyst

The reported net income of MidWestOne Financial Group for Q4 2023 shows a significant decrease compared to the same quarter in the previous year. This decline from $16.0 million to $2.7 million is a red flag for investors as it indicates a substantial drop in profitability. The sale of securities worth $115.2 million as part of balance sheet repositioning is a strategic move to optimize asset allocation, but it also led to securities net losses of $5.7 million. The reduction in short-term borrowings, however, could improve the company's interest expense in the future, potentially enhancing net interest margin over time.

Loan growth at an annualized rate of 6.1% is positive, suggesting robust business activity and potential for future interest income. However, the net interest margin has compressed from 2.93% in Q4 2022 to 2.22% in Q4 2023, reflecting the impact of rising funding costs which could continue to pressure margins if not managed effectively. The dividend declaration may be seen as a sign of confidence in the company's liquidity and profit distribution policy.

Investors should monitor the closure of the Denver Bankshares acquisition for its integration effectiveness and potential synergies. This expansion strategy could enhance MidWestOne's market presence and revenue streams in the long term, but it also carries execution risks that need to be managed.

Market Research Analyst

The banking sector is currently navigating a challenging interest rate environment, which is evident in MidWestOne's report. The company's strategic initiatives, such as the Denver Bankshares merger and geographic repositioning, indicate a focus on growth and diversification. The hiring of a new executive to lead wealth management and the expansion into agri-business are forward-looking steps that could open new revenue channels and improve the bank's competitive positioning.

The bank's efficiency ratio, a measure of noninterest expense to revenue, has worsened from 57.79% in Q4 2022 to 70.16% in Q4 2023, which could be a concern for operational efficiency. Investors may value the bank's efforts to control costs and the slight increase in tangible book value, which is a positive indicator of the bank's intrinsic value.

Given the bank's asset repositioning and the expected increase in FDIC insurance expense, stakeholders should be aware of potential volatility in earnings and the importance of cost management in sustaining profitability.

Economist

The reported data reflects broader economic trends, such as the impact of rising interest rates on funding costs and net interest margins for banks. MidWestOne's increased cost of interest-bearing liabilities and the decrease in net interest income year-over-year are consistent with a tightening monetary policy environment. The bank's interest-bearing deposit beta of 40% indicates the sensitivity of deposit costs to changes in interest rates, which is crucial for forecasting future profitability in a changing rate environment.

The bank's strategic repositioning, including the sale of securities and the reduction of short-term borrowings, suggests a proactive approach to asset-liability management. The bank's growth strategy through mergers and acquisitions, despite a challenging economic landscape, demonstrates an aggressive approach to expanding its market share.

Overall, the bank's performance must be contextualized within the current economic climate, where interest rate movements and economic policy decisions will have significant implications for the banking industry's profitability and stability.

IOWA CITY, Iowa, Jan. 25, 2024 (GLOBE NEWSWIRE) -- MidWestOne Financial Group, Inc. (Nasdaq: MOFG) (“we”, “our”, or the "Company”) today reported results for the fourth quarter and full year of 2023.

Fourth Quarter 2023 Summary¹

• Net income of $2.7 million, or $0.17 per diluted common share, including, on a pre-tax basis, securities net losses of $5.7 million, merger-related costs of $245 thousand, voluntary early retirement program costs of $438 thousand, and a negative mortgage servicing right valuation adjustment of $105 thousand.
• Sold $115.2 million of securities in a balance sheet repositioning, proceeds were utilized to purchase higher yielding debt securities and reduce short-term borrowings.
• Annualized loan growth of 6.1%.
• Deposits, excluding brokered deposits, increased $31.4 million, or 0.6%, the second sequential quarter of deposit growth.
• Nonperforming assets ratio remained stable at 0.47%; net charge-off ratio was 0.20%.
• Received all regulatory approvals for the previously announced acquisition of Denver Bankshares, Inc, which is expected to close early in the first quarter of 2024.

Full Year 2023 Summary¹

• Net income for the full year was $20.9 million, or $1.33 per diluted common share.
• Sold $346.9 million of securities to reposition the balance sheet, proceeds were utilized to purchase higher yielding debt securities and reduce short-term borrowings.
• Net charge-off ratio declined 10 basis points ("bps") to 0.09%.
• Tangible book value of $27.90², an increase of $2.30 or 9%.

Subsequent Events

• On January 23, 2024, the Board of Directors declared a cash dividend of $0.2425 per common share, payable on March 15, 2024 to shareholders of record as of the close of business on March 1, 2024.
  

CEO Commentary

Charles (Chip) Reeves, Chief Executive Officer of the Company, commented, “I'm pleased with our balance sheet trends, as we delivered 6.1% annualized loan growth during the fourth quarter of 2023, and continue to benefit from the expansion of our major market banking teams. We also achieved core deposit growth in the quarter, and remain cautiously optimistic that we can grow our core deposit franchise through the year ahead. That said, we remain liability sensitive, and funding cost pressure continued to impact our margins and earnings through the fourth quarter, though that pressure has been moderating.”

Mr. Reeves concluded, "More importantly, we are well ahead of plan in executing our strategic initiatives designed to improve our performance and position the Bank to deliver financial results at the median of our peer group by the end of 2025. Highlights from 2023 include outstanding expense discipline and re-allocation, our geographic repositioning with the Denver Bankshares merger expected to close on January 31st, key new hires in our Iowa Metro and Twin Cities markets, the hiring of a talented executive to lead our wealth management business, and the expansion of our specialty business lines with the recruitment of an agri-business team. We are rapidly scaling in our core markets while adding new business lines, which taken together, provide visibility to improved growth and returns."

_{_________________________________________
¹ Fourth Quarter Summary compares to the third quarter of 2023 (the "linked quarter") unless noted. Full Year 2023 Summary compares to the full year 2022 unless noted.
² Non-GAAP measure. See the separate Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.}

		As of or for the quarter ended												Year Ended
(Dollars in thousands, except per share amounts and as noted)		December 31,				September 30,				December 31,				December 31,				December 31,
		2023				2023				2022				2023				2022
Financial Results
Revenue		$	36,421			$	44,436			$	54,504			$	162,595			$	213,877
Credit loss expense			1,768				1,551				572				5,849				4,492
Noninterest expense			32,131				31,544				34,440				131,913				132,788
Net income			2,730				9,138				16,002				20,859				60,835
Per Common Share
Diluted earnings per share		$	0.17			$	0.58			$	1.02			$	1.33			$	3.87
Book value			33.41				32.21				31.54				33.41				31.54
Tangible book value(1)			27.90				26.60				25.60				27.90				25.60
Balance Sheet & Credit Quality
Loans In millions		$	4,126.9			$	4,066.0			$	3,840.5			$	4,126.9			$	3,840.5
Investment securities In millions			1,870.3				1,958.5				2,283.0				1,870.3				2,283.0
Deposits In millions			5,395.7				5,363.3				5,468.9				5,395.7				5,468.9
Net loan charge-offs In millions			2.1				0.5				3.5				3.7				6.6
Allowance for credit losses ratio			1.25	%			1.27	%			1.28	%			1.25	%			1.28	%
Selected Ratios
Return on average assets			0.17	%			0.56	%			0.97	%			0.32	%			0.97	%
Net interest margin, tax equivalent(1)			2.22	%			2.35	%			2.93	%			2.46	%			2.92	%
Return on average equity			2.12	%			7.14	%			13.26	%			4.12	%			12.16	%
Return on average tangible equity(1)			3.57	%			9.68	%			17.85	%			6.14	%			15.89	%
Efficiency ratio(1)			70.16	%			66.06	%			57.79	%			67.28	%			56.98	%
(1)Non-GAAP measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.

REVENUE REVIEW

Revenue											Change			Change
											4Q23 vs			4Q23 vs
(Dollars in thousands)		4Q23			3Q23			4Q22			3Q23			4Q22
Net interest income		$	32,559		$	34,575		$	43,564		(6	)%		(25	)%
Noninterest income			3,862			9,861			10,940		(61	)%		(65	)%
Total revenue, net of interest expense		$	36,421		$	44,436		$	54,504		(18	)%		(33	)%

Total revenue for the fourth quarter of 2023 decreased $8.0 million from the third quarter of 2023 and decreased $18.1 million from the fourth quarter of 2022 due to lower net interest income and noninterest income.

Net interest income of $32.6 million for the fourth quarter of 2023 decreased $2.0 million from the third quarter of 2023 primarily due to higher funding costs, partially offset by lower volumes of interest bearing liabilities, higher volumes of interest earning assets, and higher interest earning asset yields. When compared to the fourth quarter of 2022, net interest income decreased $11.0 million primarily due to higher funding costs and volumes and lower interest earning asset volumes, partially offset by higher interest earning asset yields.

The Company's tax equivalent net interest margin was 2.22% in the fourth quarter of 2023, compared to 2.35% in the third quarter of 2023, as higher earning asset yields were more than offset by increased funding costs. The cost of interest bearing liabilities increased 32 bps, to 2.65%, due primarily to interest bearing deposit costs of 2.39% and short-term borrowing costs of 4.91%, which increased 34 bps and 62 bps, respectively from the third quarter of 2023. Total interest earning assets yield increased 12 bps from the third quarter of 2023, as a result of an increase in loan yield of 15 bps. Our cycle-to-date interest bearing deposit beta was 40%.

The tax equivalent net interest margin was 2.22% in the fourth quarter of 2023, compared to 2.93% in the fourth quarter of 2022, driven by higher funding costs and volumes and lower interest earning asset volumes, partially offset by higher interest earning asset yields. The cost of interest bearing liabilities increased 157 bps to 2.65%, due to interest bearing deposit costs of 2.39%, short-term borrowing costs of 4.91%, and long-term debt costs of 6.79%, which increased 156 bps, 237 bps and 125 bps, respectively from the fourth quarter of 2022. Total interest earning assets yield increased 59 bps from the fourth quarter of 2022, primarily as a result of an increase in loan yields of 68 bps.

Noninterest Income												Change			Change
												4Q23 vs			4Q23 vs
(In thousands)	4Q23				3Q23			4Q22				3Q23			4Q22
Investment services and trust activities	$	3,193			$	3,004		$	2,666			6	%		20	%
Service charges and fees		2,148				2,146			2,028			—	%		6	%
Card revenue		1,802				1,817			1,784			(1	)%		1	%
Loan revenue		909				1,462			966			(38	)%		(6	)%
Bank-owned life insurance		656				626			637			5	%		3	%
Investment securities gains (losses), net		(5,696	)			79			(1	)		n/m			n/m
Other		850				727			2,860			17	%		(70	)%
Total noninterest income	$	3,862			$	9,861		$	10,940			(61	)%		(65	)%
Results are not meaningful (n/m)

Noninterest income for the fourth quarter of 2023 decreased $6.0 million from the linked quarter, primarily due to investment securities losses, net, of $5.7 million in the fourth quarter of 2023, coupled with a $0.6 million unfavorable change in loan revenue. Investment securities losses stemmed from a balance sheet repositioning in the fourth quarter of 2023, in which $115.2 million of securities, yielding 2.26%, were sold and sale proceeds of $109.5 million were utilized to purchase $63.3 million of securities, yielding 5.62%, with the balance utilized to reduce short-term borrowings. Loan revenue primarily reflected an unfavorable quarter-over quarter change in the fair value of our mortgage servicing rights of $0.4 million and a decline of $0.1 million in revenue from our mortgage origination business.

Noninterest income for the fourth quarter of 2023 decreased $7.1 million from the fourth quarter of 2022 due to investment securities losses, net, of $5.7 million and a $2.0 million decline in other revenue, partially offset by an increase of $0.5 million in investment services and trust activities revenue. Investment securities losses stemmed from the balance sheet repositioning previously described. Other revenue in the fourth quarter of 2022 benefited from a nonrecurring bargain purchase gain of $2.5 million recognized in connection with the acquisition of Iowa First Bancshares Corp., which was partially offset by an increase of $0.5 million in swap origination fee income. The increase in investment services and trust activities revenue was driven by higher assets under management.

EXPENSE REVIEW

Noninterest Expense										Change			Change
										4Q23 vs			2Q23 vs
(In thousands)	4Q23			3Q23			4Q22			3Q23			4Q22
Compensation and employee benefits	$	17,859		$	18,558		$	20,438		(4	)%		(13	)%
Occupancy expense of premises, net		2,309			2,405			2,663		(4	)%		(13	)%
Equipment		2,466			2,123			2,327		16	%		6	%
Legal and professional		2,269			1,678			1,846		35	%		23	%
Data processing		1,411			1,504			1,375		(6	)%		3	%
Marketing		700			782			947		(10	)%		(26	)%
Amortization of intangibles		1,441			1,460			1,770		(1	)%		(19	)%
FDIC insurance		900			783			405		15	%		122	%
Communications		183			206			285		(11	)%		(36	)%
Foreclosed assets, net		45			2			48		2150	%		(6	)%
Other		2,548			2,043			2,336		25	%		9	%
Total noninterest expense	$	32,131		$	31,544		$	34,440		2	%		(7	)%

Merger-related Expenses
(In thousands)	4Q23			3Q23			4Q22
Compensation and employee benefits	$	—		$	—		$	189
Equipment		—			—			4
Legal and professional		180			11			54
Data processing		—			—			131
Marketing		38			—			2
Other		27			—			29
Total merger-related expenses	$	245		$	11		$	409

Noninterest expense for the fourth quarter of 2023 increased $0.6 million from the linked quarter primarily as a result of increases of $0.6 million and $0.5 million in legal and professional and other, respectively. The largest offset to increases in noninterest expense was a decline of $0.7 million in compensation and employee benefits. The increase in legal and professional expenses stemmed primarily from higher executive recruitment and merger-related expenses. The increase in other noninterest expense was driven by various changes, including increases in loan expenses, travel, meals and entertainment, and operating losses. The largest driver in the decrease in compensation and employee benefits was a reduction in incentive and commission expense.

Noninterest expense for the fourth quarter of 2023 decreased $2.3 million from the fourth quarter of 2022 due primarily to a $2.6 million decline in compensation and employee benefits, which reflected a $1.6 million reduction in incentives and commissions, and a $0.6 million decline in employee benefits. The $0.3 million decrease in occupancy expense reflected a write-down of assets held for sale in the fourth quarter of 2022, which did not recur in the fourth quarter of 2023. Partially offsetting the decreases in noninterest expense was an increase of $0.5 million in FDIC insurance expense and an increase of $0.4 million in legal and professional expense, which stemmed primarily from higher recruitment and merger-related expenses.

The Company recognized a tax benefit in the fourth quarter of 2023 to reduce the full-year 2023 effective income tax rate to 16.0%, as compared to 20.6% in the prior year. The decrease in the 2023 annual effective income tax rate reflected lower taxable income and a larger benefit from tax exempt investment income. The effective income tax rate for 2024 is expected to be 20-22%.

BALANCE SHEET REVIEW

Total assets were $6.43 billion at December 31, 2023, compared to $6.47 billion at September 30, 2023 and $6.58 billion at December 31, 2022. The decrease from September 30, 2023 was primarily driven by lower securities balances as a result of the balance sheet repositioning, partially offset by higher loan balances. Compared to December 31, 2022, the decrease was primarily due to lower securities balances resulting from balance sheet repositioning in the first and fourth quarters of 2023, partially offset by higher loan balances.

Loans Held for Investment	December 31, 2023					September 30, 2023					December 31, 2022
(Dollars in thousands)	Balance			% of Total		Balance			% of Total		Balance			% of Total
Commercial and industrial	$	1,075,003		26.0	%	$	1,078,773		26.5	%	$	1,055,162		27.5	%
Agricultural		118,414		2.9			111,950		2.8			115,320		3.0
Commercial real estate
Construction and development		323,195		7.8			331,868		8.2			270,991		7.1
Farmland		184,955		4.5			182,621		4.5			183,913		4.8
Multifamily		383,178		9.3			337,509		8.3			252,129		6.6
Other		1,333,982		32.4			1,324,019		32.5			1,272,985		33.1
Total commercial real estate		2,225,310		54.0			2,176,017		53.5			1,980,018		51.6
Residential real estate
One-to-four family first liens		459,798		11.1			456,771		11.2			451,210		11.7
One-to-four family junior liens		180,639		4.4			173,275		4.3			163,218		4.2
Total residential real estate		640,437		15.5			630,046		15.5			614,428		15.9
Consumer		67,783		1.6			69,183		1.7			75,596		2.0
Loans held for investment, net of unearned income	$	4,126,947		100.0	%	$	4,065,969		100.0	%	$	3,840,524		100.0	%
Total commitments to extend credit	$	1,210,796				$	1,251,345				$	1,190,607

Loans held for investment, net of unearned income, increased $61.0 million, or 1.5%, to $4.13 billion from $4.07 billion at September 30, 2023 and $286.4 million, or 7.5%, from December 31, 2022. This increase from the third quarter of 2023 was driven by new loan production in the fourth quarter of 2023 and higher line of credit usage. The increase from the fourth quarter of 2022 was due to new loan production.

Investment Securities	December 31, 2023					September 30, 2023					December 31, 2022
(Dollars in thousands)	Balance			% of Total		Balance			% of Total		Balance			% of Total
Available for sale	$	795,134		42.5	%	$	872,770		44.6	%	$	1,153,547		50.5	%
Held to maturity		1,075,190		57.5	%		1,085,751		55.4	%		1,129,421		49.5	%
Total investment securities	$	1,870,324				$	1,958,521				$	2,282,968

Investment securities at December 31, 2023 were $1.87 billion, decreasing $88.2 million from September 30, 2023 and $412.6 million from December 31, 2022. The decrease from the third quarter of 2023 was primarily due to the balance sheet repositioning previously discussed, as well as principal cash flows received from scheduled payments, calls, and maturities. The decrease from the fourth quarter of 2022 was primarily due to balance sheet repositioning in the first and fourth quarters of 2023.

Deposits	December 31, 2023					September 30, 2023					December 31, 2022
(Dollars in thousands)	Balance			% of Total		Balance			% of Total		Balance			% of Total
Noninterest bearing deposits	$	897,053		16.6	%	$	924,213		17.2	%	$	1,053,450		19.3	%
Interest checking deposits		1,320,435		24.5			1,334,481		24.9			1,624,278		29.8
Money market deposits		1,105,493		20.5			1,127,287		21.0			937,340		17.1
Savings deposits		650,655		12.1			619,805		11.6			664,169		12.1
Time deposits of $250 and under		752,214		13.9			703,646		13.1			559,466		10.2
Total core deposits		4,725,850		87.6			4,709,432		87.8			4,838,703		88.5
Brokered time deposits		221,039		4.1			220,063		4.1			126,767		2.3
Time deposits over $250		448,784		8.3			433,829		8.1			503,472		9.2
Total deposits	$	5,395,673		100.0	%	$	5,363,324		100.0	%	$	5,468,942		100.0	%

Total deposits increased $32.3 million, or 0.6%, to $5.40 billion from $5.36 billion at September 30, 2023. Core deposits increased $16.4 million from September 30, 2023. Total deposits decreased $73.3 million, or 1.3%, from $5.47 billion at December 31, 2022. Brokered deposits increased $94.3 million from $126.8 million at December 31, 2022, with core deposits declining $112.9 million from December 31, 2022.

Borrowed Funds	December 31, 2023					September 30, 2023					December 31, 2022
(Dollars in thousands)	Balance			% of Total		Balance			% of Total		Balance			% of Total
Short-term borrowings	$	300,264		70.9	%	$	373,956		75.0	%	$	391,873		73.8	%
Long-term debt		123,296		29.1	%		124,526		25.0	%		139,210		26.2	%
Total borrowed funds	$	423,560				$	498,482				$	531,083

Total borrowed funds were $423.6 million at December 31, 2023, a decrease of $74.9 million from September 30, 2023 and a decrease of $107.5 million from December 31, 2022. The decrease when compared to the linked quarter was due to lower Federal Home Loan Bank overnight borrowings and securities sold under agreements to repurchase, partially offset by higher Bank Term Funding Program borrowings. The decrease when compared to December 31, 2022 was primarily due to lower Federal Home Loan Bank overnight borrowings and securities sold under agreements to repurchase, partially offset by Bank Term Funding Program borrowings of $285 million, as compared to no such borrowings in the prior year.

Capital	December 31,				September 30,				December 31,
(Dollars in thousands)	2023(1)				2023				2022
Total shareholders' equity	$	524,378			$	505,411			$	492,793
Accumulated other comprehensive loss		(64,899	)			(84,606	)			(89,047	)
MidWestOne Financial Group, Inc. Consolidated
Tier 1 leverage to average assets ratio		8.58	%			8.58	%			8.35	%
Common equity tier 1 capital to risk-weighted assets ratio		9.59	%			9.52	%			9.28	%
Tier 1 capital to risk-weighted assets ratio		10.38	%			10.31	%			10.05	%
Total capital to risk-weighted assets ratio		12.53	%			12.45	%			12.07	%
MidWestOne Bank
Tier 1 leverage to average assets ratio		9.39	%			9.51	%			9.36	%
Common equity tier 1 capital to risk-weighted assets ratio		11.54	%			11.43	%			11.29	%
Tier 1 capital to risk-weighted assets ratio		11.54	%			11.43	%			11.29	%
Total capital to risk-weighted assets ratio		12.49	%			12.36	%			12.10	%
(1) Regulatory capital ratios for December 31, 2023 are preliminary

Total shareholders' equity at December 31, 2023 increased $19.0 million from September 30, 2023, driven by a decrease in accumulated other comprehensive loss. Total shareholders' equity at December 31, 2023 increased $31.6 million from December 31, 2022, driven by a decrease in accumulated other comprehensive loss and an increase in retained earnings.

Accumulated other comprehensive loss at December 31, 2023 decreased $19.7 million compared to September 30, 2023, primarily due to an increase in available for sale securities valuations and the recognition of the loss from the fourth quarter sale of securities. Accumulated other comprehensive loss decreased $24.1 million from December 31, 2022.

On January 23, 2024, the Board of Directors of the Company declared a cash dividend of $0.2425 per common share. The dividend is payable March 15, 2024, to shareholders of record at the close of business on March 1, 2024.

No common shares were repurchased by the Company during the period September 30, 2023 through December 31, 2023 or for the subsequent period through January 25, 2024. The current share repurchase program allows for the repurchase of up to $15.0 million of the Company's common shares.

CREDIT QUALITY REVIEW

Credit Quality	As of or For the Three Months Ended
	December 31,				September 30,				December 31,
(Dollars in thousands)	2023				2023				2022
Credit loss expense related to loans	$	1,968			$	1,651			$	572
Net charge-offs		2,068				451				3,472
Allowance for credit losses		51,500				51,600				49,200
Pass	$	3,846,012			$	3,785,908			$	3,635,766
Special Mention / Watch		113,029				163,222				108,064
Classified		167,906				116,839				96,694
Loans greater than 30 days past due and accruing	$	10,778			$	6,449			$	6,680
Nonperforming loans	$	26,359			$	28,987			$	15,821
Nonperforming assets		30,288				28,987				15,924
Net charge-off ratio(1)		0.20	%			0.04	%			0.36	%
Classified loans ratio(2)		4.07	%			2.87	%			2.52	%
Nonperforming loans ratio(3)		0.64	%			0.71	%			0.41	%
Nonperforming assets ratio(4)		0.47	%			0.45	%			0.24	%
Allowance for credit losses ratio(5)		1.25	%			1.27	%			1.28	%
Allowance for credit losses to nonaccrual loans ratio(6)		198.91	%			178.63	%			322.50	%
(1) Net charge-off ratio is calculated as annualized net charge-offs divided by the sum of average loans held for investment, net of unearned income and average loans held for sale, during the period.
(2) Classified loans ratio is calculated as classified loans divided by loans held for investment, net of unearned income, at the end of the period.
(3) Nonperforming loans ratio is calculated as nonperforming loans divided by loans held for investment, net of unearned income, at the end of the period.
(4) Nonperforming assets ratio is calculated as nonperforming assets divided by total assets at the end of the period.
(5) Allowance for credit losses ratio is calculated as allowance for credit losses divided by loans held for investment, net of unearned income, at the end of the period.
(6) Allowance for credit losses to nonaccrual loans ratio is calculated as allowance for credit losses divided by nonaccrual loans at the end of the period.

Compared to the linked quarter, the nonperforming loans ratio declined 7 bps and the nonperforming assets ratio increased 2 bps. The classified loans ratio increased 120 bps from the linked quarter, primarily due to the downgrade of three larger commercial relationships. When compared to the prior year, the nonperforming loans and assets ratios both increased 23 bps, to 0.64% and 0.47%.

As of December 31, 2023, the allowance for credit losses was $51.5 million and the allowance for credit losses ratio was 1.25%, compared with $51.6 million and 1.27% at September 30, 2023. When compared to the linked quarter, credit loss expense of $1.8 million in the fourth quarter of 2023 was primarily attributable to loan growth, with the increase compared to the prior year stemming from loan growth and individually evaluated loans.

Nonperforming Loans Roll Forward	Nonaccrual				90+ Days Past Due & Still Accruing				Total
(Dollars in thousands)
Balance at September 30, 2023	$	28,887			$	100			$	28,987
Loans placed on nonaccrual or 90+ days past due & still accruing		4,377				432				4,809
Proceeds related to repayment or sale		(1,285	)			(1	)			(1,286	)
Loans returned to accrual status or no longer past due		(289	)			1				(288	)
Charge-offs		(1,955	)			(64	)			(2,019	)
Transfers to foreclosed assets		(3,844	)			—				(3,844	)
Balance at December 31, 2023	$	25,891			$	468			$	26,359

CONFERENCE CALL DETAILS

The Company will host a conference call for investors at 11:00 a.m. CT on Friday, January 26, 2024. To participate, you may pre-register for this call utilizing the following link: https://www.netroadshow.com/events/login?show=0492f968&confId=59127. After pre-registering for this event you will receive your access details via email. On the day of the call, you are also able to dial 1-833-470-1428 using an access code of 827546 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 25, 2024 by calling 1-866-813-9403 and using the replay access code of 572754. 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 or branch sales (including with Iowa First Bancshares Corp. and Denver Bankshares, Inc.), 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 recent and potential additional increases in inflation and interest rates, including on our net income and the value of our securities portfolio; (4) changes in the economic environment, competition, or other factors that may affect our ability to acquire loans or influence the anticipated growth rate of loans and deposits and the quality of the loan portfolio and loan and deposit pricing; (5) fluctuations in the value of our investment securities; (6) governmental monetary and fiscal policies; (7) changes in and uncertainty related to benchmark interest rates used to price loans and deposits; (8) legislative and regulatory changes, including changes in banking, securities, trade, and tax laws and regulations and their application by our regulators, including the new 1.0% excise tax on stock buybacks by publicly traded companies and any changes in response to the recent failures of other banks; (9) the ability to attract and retain key executives and employees experienced in banking and financial services; (10) the sufficiency of the allowance for credit losses to absorb the amount of actual losses inherent in our existing loan portfolio; (11) our ability to adapt successfully to technological changes to compete effectively in the marketplace; (12) credit risks and risks from concentrations (by geographic area and by industry) within our loan portfolio; (13) the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds, financial technology companies, and other financial institutions operating in our markets or elsewhere or providing similar services; (14) the failure of assumptions underlying the establishment of allowances for credit losses and estimation of values of collateral and various financial assets and liabilities; (15) volatility of rate-sensitive deposits; (16) operational risks, including data processing system failures or fraud; (17) asset/liability matching risks and liquidity risks; (18) the costs, effects and outcomes of existing or future litigation; (19) changes in general economic, political, or industry conditions, nationally, internationally or in the communities in which we conduct business, including the risk of a recession; (20) changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the Financial Accounting Standards Board; (21) war or terrorist activities, including the Israeli-Palestinian conflict and the Russian invasion of Ukraine, widespread disease or pandemic, or other adverse external events, which may cause deterioration in the economy or cause instability in credit markets; (22) the occurrence of fraudulent activity, breaches, or failures of our or our third-party vendors' information security controls or cyber-security related incidents, including as a result of sophisticated attacks using artificial intelligence and similar tools; (23) the imposition of tariffs or other domestic or international governmental policies impacting the value of the agricultural or other products of our borrowers; (24) potential changes in federal policy and at regulatory agencies as a result of the upcoming 2024 presidential election; (25) the concentration of large deposits from certain clients who have balances above current FDIC insurance limits; (26) the effects of recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time at other banks that resulted in failure of those institutions; and (27) other risk factors detailed from time to time in Securities and Exchange Commission filings made by the Company.

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

	December 31,				September 30,				June 30,				March 31,				December 31,
(In thousands)	2023				2023				2023				2023				2022
ASSETS
Cash and due from banks	$	76,237			$	71,015			$	75,955			$	63,945			$	83,990
Interest earning deposits in banks		5,479				3,773				68,603				5,273				2,445
Federal funds sold		11				—				—				—				—
Total cash and cash equivalents		81,727				74,788				144,558				69,218				86,435
Debt securities available for sale at fair value		795,134				872,770				903,520				954,074				1,153,547
Held to maturity securities at amortized cost		1,075,190				1,085,751				1,099,569				1,117,709				1,129,421
Total securities		1,870,324				1,958,521				2,003,089				2,071,783				2,282,968
Loans held for sale		1,045				2,528				2,821				2,553				612
Gross loans held for investment		4,138,352				4,078,060				4,031,377				3,932,900				3,854,791
Unearned income, net		(11,405	)			(12,091	)			(12,728	)			(13,535	)			(14,267	)
Loans held for investment, net of unearned income		4,126,947				4,065,969				4,018,649				3,919,365				3,840,524
Allowance for credit losses		(51,500	)			(51,600	)			(50,400	)			(49,800	)			(49,200	)
Total loans held for investment, net		4,075,447				4,014,369				3,968,249				3,869,565				3,791,324
Premises and equipment, net		85,742				85,589				85,831				86,208				87,125
Goodwill		62,477				62,477				62,477				62,477				62,477
Other intangible assets, net		24,069				25,510				26,969				28,563				30,315
Foreclosed assets, net		3,929				—				—				—				103
Other assets		222,780				244,036				227,495				219,585				236,517
Total assets	$	6,427,540			$	6,467,818			$	6,521,489			$	6,409,952			$	6,577,876
LIABILITIES
Noninterest bearing deposits	$	897,053			$	924,213			$	897,923			$	989,469			$	1,053,450
Interest bearing deposits		4,498,620				4,439,111				4,547,524				4,565,684				4,415,492
Total deposits		5,395,673				5,363,324				5,445,447				5,555,153				5,468,942
Short-term borrowings		300,264				373,956				362,054				143,981				391,873
Long-term debt		123,296				124,526				125,752				137,981				139,210
Other liabilities		83,929				100,601				86,895				72,187				85,058
Total liabilities		5,903,162				5,962,407				6,020,148				5,909,302				6,085,083
SHAREHOLDERS' EQUITY
Common stock		16,581				16,581				16,581				16,581				16,581
Additional paid-in capital		302,157				301,889				301,424				300,966				302,085
Retained earnings		294,784				295,862				290,548				286,767				289,289
Treasury stock		(24,245	)			(24,315	)			(24,508	)			(24,779	)			(26,115	)
Accumulated other comprehensive loss		(64,899	)			(84,606	)			(82,704	)			(78,885	)			(89,047	)
Total shareholders' equity		524,378				505,411				501,341				500,650				492,793
Total liabilities and shareholders' equity	$	6,427,540			$	6,467,818			$	6,521,489			$	6,409,952			$	6,577,876

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)	2023				2023				2023				2023				2022				2023				2022
Interest income
Loans, including fees	$	54,093			$	51,870			$	49,726			$	46,490			$	43,769			$	202,179			$	148,284
Taxable investment securities		9,274				9,526				9,734				10,444				10,685				38,978				39,019
Tax-exempt investment securities		1,789				1,802				1,822				2,127				2,303				7,540				9,379
Other		230				374				68				244				—				916				77
Total interest income		65,386				63,572				61,350				59,305				56,757				249,613				196,759
Interest expense
Deposits		27,200				23,128				20,117				15,319				9,127				85,764				20,245
Short-term borrowings		3,496				3,719				2,118				1,786				1,955				11,119				3,070
Long-term debt		2,131				2,150				2,153				2,124				2,111				8,558				7,086
Total interest expense		32,827				28,997				24,388				19,229				13,193				105,441				30,401
Net interest income		32,559				34,575				36,962				40,076				43,564				144,172				166,358
Credit loss expense		1,768				1,551				1,597				933				572				5,849				4,492
Net interest income after credit loss expense		30,791				33,024				35,365				39,143				42,992				138,323				161,866
Noninterest income (loss)
Investment services and trust activities		3,193				3,004				3,119				2,933				2,666				12,249				11,223
Service charges and fees		2,148				2,146				2,047				2,008				2,028				8,349				7,477
Card revenue		1,802				1,817				1,847				1,748				1,784				7,214				7,210
Loan revenue		909				1,462				909				1,420				966				4,700				10,504
Bank-owned life insurance		656				626				616				602				637				2,500				2,305
Investment securities (losses) gains, net		(5,696	)			79				(2	)			(13,170	)			(1	)			(18,789	)			271
Other		850				727				210				413				2,860				2,200				8,529
Total noninterest income (loss)		3,862				9,861				8,746				(4,046	)			10,940				18,423				47,519
Noninterest expense
Compensation and employee benefits		17,859				18,558				20,386				19,607				20,438				76,410				78,103
Occupancy expense of premises, net		2,309				2,405				2,574				2,746				2,663				10,034				10,272
Equipment		2,466				2,123				2,435				2,171				2,327				9,195				8,693
Legal and professional		2,269				1,678				1,682				1,736				1,846				7,365				8,646
Data processing		1,411				1,504				1,521				1,363				1,375				5,799				5,574
Marketing		700				782				1,142				986				947				3,610				4,272
Amortization of intangibles		1,441				1,460				1,594				1,752				1,770				6,247				6,069
FDIC insurance		900				783				862				749				405				3,294				1,660
Communications		183				206				260				261				285				910				1,125
Foreclosed assets, net		45				2				(6	)			(28	)			48				13				(18	)
Other		2,548				2,043				2,469				1,976				2,336				9,036				8,392
Total noninterest expense		32,131				31,544				34,919				33,319				34,440				131,913				132,788
Income before income tax expense		2,522				11,341				9,192				1,778				19,492				24,833				76,597
Income tax (benefit) expense		(208	)			2,203				1,598				381				3,490				3,974				15,762
Net income	$	2,730			$	9,138			$	7,594			$	1,397			$	16,002			$	20,859			$	60,835
Earnings per common share
Basic	$	0.17			$	0.58			$	0.48			$	0.09			$	1.02			$	1.33			$	3.89
Diluted	$	0.17			$	0.58			$	0.48			$	0.09			$	1.02			$	1.33			$	3.87
Weighted average basic common shares outstanding		15,693				15,689				15,680				15,650				15,624				15,678				15,649
Weighted average diluted common shares outstanding		15,756				15,711				15,689				15,691				15,693				15,725				15,701
Dividends paid per common share	$	0.2425			$	0.2425			$	0.2425			$	0.2425			$	0.2375			$	0.9700			$	0.9500

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)	2023				2023				2022				2023				2022
Earnings:
Net interest income	$	32,559			$	34,575			$	43,564			$	144,172			$	166,358
Noninterest income		3,862				9,861				10,940				18,423				47,519
Total revenue, net of interest expense		36,421				44,436				54,504				162,595				213,877
Credit loss expense		1,768				1,551				572				5,849				4,492
Noninterest expense		32,131				31,544				34,440				131,913				132,788
Income before income tax expense		2,522				11,341				19,492				24,833				76,597
Income tax (benefit) expense		(208	)			2,203				3,490				3,974				15,762
Net income	$	2,730			$	9,138			$	16,002			$	20,859			$	60,835
Per Share Data:
Diluted earnings	$	0.17			$	0.58			$	1.02			$	1.33			$	3.87
Book value		33.41				32.21				31.54				33.41				31.54
Tangible book value(1)		27.90				26.60				25.60				27.90				25.60
Ending Balance Sheet:
Total assets	$	6,427,540			$	6,467,818			$	6,577,876			$	6,427,540			$	6,577,876
Loans held for investment, net of unearned income		4,126,947				4,065,969				3,840,524				4,126,947				3,840,524
Total securities		1,870,324				1,958,521				2,282,968				1,870,324				2,282,968
Total deposits		5,395,673				5,363,324				5,468,942				5,395,673				5,468,942
Short-term borrowings		300,264				373,956				391,873				300,264				391,873
Long-term debt		123,296				124,526				139,210				123,296				139,210
Total shareholders' equity		524,378				505,411				492,793				524,378				492,793
Average Balance Sheet:
Average total assets	$	6,459,705			$	6,452,815			$	6,516,969			$	6,475,360			$	6,244,284
Average total loans		4,080,243				4,019,852				3,791,880				3,993,389				3,511,192
Average total deposits		5,443,323				5,379,871				5,495,599				5,455,609				5,309,049
Financial Ratios:
Return on average assets		0.17	%			0.56	%			0.97	%			0.32	%			0.97	%
Return on average equity		2.12	%			7.14	%			13.26	%			4.12	%			12.16	%
Return on average tangible equity(1)		3.57	%			9.68	%			17.85	%			6.14	%			15.89	%
Efficiency ratio(1)		70.16	%			66.06	%			57.79	%			67.28	%			56.98	%
Net interest margin, tax equivalent(1)		2.22	%			2.35	%			2.93	%			2.46	%			2.92	%
Loans to deposits ratio		76.49	%			75.81	%			70.22	%			76.49	%			70.22	%
Common equity ratio		8.16	%			7.81	%			7.49	%			8.16	%			7.49	%
Tangible common equity ratio(1)		6.90	%			6.54	%			6.17	%			6.90	%			6.17	%
Credit Risk Profile:
Total nonperforming loans	$	26,359			$	28,987			$	15,821			$	26,359			$	15,821
Nonperforming loans ratio		0.64	%			0.71	%			0.41	%			0.64	%			0.41	%
Total nonperforming assets	$	30,288			$	28,987			$	15,924			$	30,288			$	15,924
Nonperforming assets ratio		0.47	%			0.45	%			0.24	%			0.47	%			0.24	%
Net charge-offs	$	2,068			$	451			$	3,472			$	3,749			$	6,563
Net charge-off ratio		0.20	%			0.04	%			0.36	%			0.09	%			0.19	%
Allowance for credit losses	$	51,500			$	51,600			$	49,200			$	51,500			$	49,200
Allowance for credit losses ratio		1.25	%			1.27	%			1.28	%			1.25	%			1.28	%
Allowance for credit losses to nonaccrual ratio		198.91	%			178.63	%			322.50	%			198.91	%			322.50	%
(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, 2023									September 30, 2023									December 31, 2022
(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)	$	4,080,243		$	54,939		5.34	%		$	4,019,852		$	52,605		5.19	%		$	3,791,880		$	44,494		4.66	%
Taxable investment securities		1,593,699			9,274		2.31	%			1,637,259			9,526		2.31	%			1,865,494			10,685		2.27	%
Tax-exempt investment securities(2)(4)		338,243			2,217		2.60	%			341,330			2,234		2.60	%			422,156			2,893		2.72	%
Total securities held for investment(2)		1,931,942			11,491		2.36	%			1,978,589			11,760		2.36	%			2,287,650			13,578		2.35	%
Other		22,937			230		3.98	%			34,195			374		4.34	%			5,562			—		—	%
Total interest earning assets(2)	$	6,035,122		$	66,660		4.38	%		$	6,032,636		$	64,739		4.26	%		$	6,085,092		$	58,072		3.79	%
Other assets		424,583									420,179									431,877
Total assets	$	6,459,705								$	6,452,815								$	6,516,969
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest checking deposits	$	1,305,759		$	2,991		0.91	%		$	1,354,597		$	2,179		0.64	%		$	1,632,749		$	1,703		0.41	%
Money market deposits		1,103,637			7,954		2.86	%			1,112,149			7,402		2.64	%			995,512			2,369		0.94	%
Savings deposits		639,766			1,493		0.93	%			603,628			749		0.49	%			683,538			306		0.18	%
Time deposits		1,463,498			14,762		4.00	%			1,403,504			12,798		3.62	%			1,067,044			4,749		1.77	%
Total interest bearing deposits		4,512,660			27,200		2.39	%			4,473,878			23,128		2.05	%			4,378,843			9,127		0.83	%
Securities sold under agreements to repurchase		8,661			17		0.78	%			66,020			85		0.51	%			151,880			437		1.14	%
Other short-term borrowings		273,963			3,479		5.04	%			277,713			3,634		5.19	%			153,155			1,518		3.93	%
Short-term borrowings		282,624			3,496		4.91	%			343,733			3,719		4.29	%			305,035			1,955		2.54	%
Long-term debt		124,495			2,131		6.79	%			125,737			2,150		6.78	%			151,266			2,111		5.54	%
Total borrowed funds		407,119			5,627		5.48	%			469,470			5,869		4.96	%			456,301			4,066		3.54	%
Total interest bearing liabilities	$	4,919,779		$	32,827		2.65	%		$	4,943,348		$	28,997		2.33	%		$	4,835,144		$	13,193		1.08	%
Noninterest bearing deposits		930,663									905,993									1,116,756
Other liabilities		98,027									95,408									86,242
Shareholders’ equity		511,236									508,066									478,827
Total liabilities and shareholders’ equity	$	6,459,705								$	6,452,815								$	6,516,969
Net interest income(2)				$	33,833								$	35,742								$	44,879
Net interest spread(2)							1.73	%								1.93	%								2.71	%
Net interest margin(2)							2.22	%								2.35	%								2.93	%
Total deposits(5)	$	5,443,323		$	27,200		1.98	%		$	5,379,871		$	23,128		1.71	%		$	5,495,599		$	9,127		0.66	%
Cost of funds(6)							2.23	%								1.97	%								0.88	%
(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 $207 thousand, $141 thousand, and $87 thousand for the three months ended December 31, 2023, September 30, 2023, and December 31, 2022, respectively. Loan purchase discount accretion was $765 thousand, $791 thousand, and $1.3 million for the three months ended December 31, 2023, September 30, 2023, and December 31, 2022, respectively. Tax equivalent adjustments were $846 thousand, $735 thousand, and $725 thousand for the three months ended December 31, 2023, September 30, 2023, and December 31, 2022, respectively. The federal statutory tax rate utilized was 21%.
(4) Interest income includes tax equivalent adjustments of $428 thousand, $432 thousand, and $590 thousand for the three months ended December 31, 2023, September 30, 2023, and December 31, 2022, respectively. The federal statutory tax rate utilized was 21%.
(5) Total deposits is the sum of total interest-bearing deposits and noninterest bearing deposits. The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits.
(6) Cost of funds is calculated as annualized total interest expense divided by the sum of average total deposits and borrowed funds.

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

	Year Ended
	December 31, 2023									December 31, 2022
(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)	$	3,993,389		$	205,189		5.14	%		$	3,511,192		$	150,791		4.29	%
Taxable investment securities		1,684,360			38,978		2.31	%			1,891,234			39,019		2.06	%
Tax-exempt investment securities(2)(4)		355,454			9,353		2.63	%			435,907			11,788		2.70	%
Total securities held for investment(2)		2,039,814			48,331		2.37	%			2,327,141			50,807		2.18	%
Other		22,791			916		4.02	%			20,827			77		0.37	%
Total interest earning assets(2)	$	6,055,994		$	254,436		4.20	%		$	5,859,160		$	201,675		3.44	%
Other assets		419,366									385,124
Total assets	$	6,475,360								$	6,244,284
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest checking deposits	$	1,398,538		$	8,990		0.64	%		$	1,640,303		$	5,416		0.33	%
Money market deposits		1,037,123			23,924		2.31	%			992,390			4,707		0.47	%
Savings deposits		624,990			2,802		0.45	%			674,846			1,169		0.17	%
Time deposits		1,443,770			50,048		3.47	%			925,592			8,953		0.97	%
Total interest bearing deposits		4,504,421			85,764		1.90	%			4,233,131			20,245		0.48	%
Securities sold under agreements to repurchase		94,563			975		1.03	%			152,466			872		0.57	%
Other short-term borrowings		199,530			10,144		5.08	%			70,729			2,198		3.11	%
Short-term borrowings		294,093			11,119		3.78	%			223,195			3,070		1.38	%
Long-term debt		131,137			8,558		6.53	%			148,863			7,086		4.76	%
Total borrowed funds		425,230			19,677		4.63	%			372,058			10,156		2.73	%
Total interest bearing liabilities	$	4,929,651		$	105,441		2.14	%		$	4,605,189		$	30,401		0.66	%
Noninterest bearing deposits		951,188									1,075,918
Other liabilities		88,770									62,706
Shareholders’ equity		505,751									500,471
Total liabilities and shareholders’ equity	$	6,475,360								$	6,244,284
Net interest income(2)				$	148,995								$	171,274
Net interest spread(2)							2.06	%								2.78	%
Net interest margin(2)							2.46	%								2.92	%
Total deposits(5)	$	5,455,609		$	85,764		1.57	%		$	5,309,049		$	20,245		0.38	%
Cost of funds(6)							1.79	%								0.54	%
(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 $522 thousand and $765 thousand for the year ended December 31, 2023 and December 31, 2022, respectively. Loan purchase discount accretion was $3.7 million and $4.6 million for the year ended December 31, 2023 and December 31, 2022, respectively. Tax equivalent adjustments were $3.0 million and $2.5 million for the year ended December 31, 2023 and December 31, 2022, respectively. The federal statutory tax rate utilized was 21%.
(4) Interest income includes tax equivalent adjustments of $1.8 million and $2.4 million for the year ended December 31, 2023 and December 31, 2022, respectively. The federal statutory tax rate utilized was 21%.
(5) Total deposits is the sum of total interest-bearing deposits and noninterest bearing deposits. The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits.
(6) Cost of funds is calculated as annualized total interest expense divided by the sum of average total deposits and borrowed funds.

Non-GAAP Measures

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

Tangible 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)		2023				2023				2023				2023				2022
Total shareholders’ equity		$	524,378			$	505,411			$	501,341			$	500,650			$	492,793
Intangible assets, net			(86,546	)			(87,987	)			(89,446	)			(91,040	)			(92,792	)
Tangible common equity		$	437,832			$	417,424			$	411,895			$	409,610			$	400,001
Total assets		$	6,427,540			$	6,467,818			$	6,521,489			$	6,409,952			$	6,577,876
Intangible assets, net			(86,546	)			(87,987	)			(89,446	)			(91,040	)			(92,792	)
Tangible assets		$	6,340,994			$	6,379,831			$	6,432,043			$	6,318,912			$	6,485,084
Book value per share		$	33.41			$	32.21			$	31.96			$	31.94			$	31.54
Tangible book value per share(1)		$	27.90			$	26.60			$	26.26			$	26.13			$	25.60
Shares outstanding			15,694,306				15,691,738				15,685,123				15,675,325				15,623,977
Common equity ratio			8.16	%			7.81	%			7.69	%			7.81	%			7.49	%
Tangible common equity ratio(2)			6.90	%			6.54	%			6.40	%			6.48	%			6.17	%
(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)		2023				2023				2022				2023				2022
Net income		$	2,730			$	9,138			$	16,002			$	20,859			$	60,835
Intangible amortization, net of tax(1)			1,081				1,095				1,328				4,685				4,552
Tangible net income		$	3,811			$	10,233			$	17,330			$	25,544			$	65,387
Average shareholders’ equity		$	511,236			$	508,066			$	478,827			$	505,751			$	500,471
Average intangible assets, net			(87,258	)			(88,699	)			(93,662	)			(89,539	)			(88,917	)
Average tangible equity		$	423,978			$	419,367			$	385,165			$	416,212			$	411,554
Return on average equity			2.12	%			7.14	%			13.26	%			4.12	%			12.16	%
Return on average tangible equity(2)			3.57	%			9.68	%			17.85	%			6.14	%			15.89	%
(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)		2023				2023				2022				2023				2022
Net interest income		$	32,559			$	34,575			$	43,564			$	144,172			$	166,358
Tax equivalent adjustments:
Loans(1)			846				735				725				3,010				2,507
Securities(1)			428				432				590				1,813				2,409
Net interest income, tax equivalent		$	33,833			$	35,742			$	44,879			$	148,995			$	171,274
Loan purchase discount accretion			(765	)			(791	)			(1,286	)			(3,729	)			(4,561	)
Core net interest income		$	33,068			$	34,951			$	43,593			$	145,266			$	166,713
Net interest margin			2.14	%			2.27	%			2.84	%			2.38	%			2.84	%
Net interest margin, tax equivalent(2)			2.22	%			2.35	%			2.93	%			2.46	%			2.92	%
Core net interest margin(3)			2.17	%			2.30	%			2.84	%			2.40	%			2.85	%
Average interest earning assets		$	6,035,122			$	6,032,636			$	6,085,092			$	6,055,994			$	5,859,160
(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)		2023				2023				2022				2023				2022
Loan interest income, including fees		$	54,093			$	51,870			$	43,769			$	202,179			$	148,284
Tax equivalent adjustment(1)			846				735				725				3,010				2,507
Tax equivalent loan interest income		$	54,939			$	52,605			$	44,494			$	205,189			$	150,791
Loan purchase discount accretion			(765	)			(791	)			(1,286	)			(3,729	)			(4,561	)
Core loan interest income		$	54,174			$	51,814			$	43,208			$	201,460			$	146,230
Yield on loans			5.26	%			5.12	%			4.58	%			5.06	%			4.22	%
Yield on loans, tax equivalent(2)			5.34	%			5.19	%			4.66	%			5.14	%			4.29	%
Core yield on loans(3)			5.27	%			5.11	%			4.52	%			5.04	%			4.16	%
Average loans		$	4,080,243			$	4,019,852			$	3,791,880			$	3,993,389			$	3,511,192
(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)		2023				2023				2022				2023				2022
Total noninterest expense		$	32,131			$	31,544			$	34,440			$	131,913			$	132,788
Amortization of intangibles			(1,441	)			(1,460	)			(1,770	)			(6,247	)			(6,069	)
Merger-related expenses			(245	)			(11	)			(409	)			(392	)			(2,201	)
Noninterest expense used for efficiency ratio		$	30,445			$	30,073			$	32,261			$	125,274			$	124,518
Net interest income, tax equivalent(1)		$	33,833			$	35,742			$	44,879			$	148,995			$	171,274
Plus: Noninterest income			3,862				9,861				10,940				18,423				47,519
Less: Investment securities (losses) gains, net			(5,696	)			79				(1	)			(18,789	)			271
Net revenues used for efficiency ratio		$	43,391			$	45,524			$	55,820			$	186,207			$	218,522
Efficiency ratio(2)			70.16	%			66.06	%			57.79	%			67.28	%			56.98	%
(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.

Category: Earnings

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

Source: MidWestOne Financial Group, Inc.

Industry: Banks

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

FAQ

What was the net income for Q4 2023?

The net income for Q4 2023 was $2.7 million, or $0.17 per diluted common share.

How much did the company sell in securities in Q4 2023?

The company sold $115.2 million of securities in Q4 2023.

What was the annualized loan growth in Q4 2023?

The annualized loan growth in Q4 2023 was 6.1%.

What was the net income for the full year 2023?

The net income for the full year 2023 was $20.9 million.

What was the cash dividend declared by the Board of Directors?

The Board of Directors declared a cash dividend of $0.2425 per common share.