MidWestOne Financial Group, Inc. Reports Financial Results for the Fourth Quarter and Full Year of 2024

IOWA CITY, Iowa, Jan. 23, 2025 (GLOBE NEWSWIRE) -- MidWestOne Financial Group, Inc. (Nasdaq: MOFG) (“we”, “our”, or the "Company”) today reported results for the fourth quarter and full year of 2024.

Fourth Quarter 2024 Summary¹

• Net income of $16.3 million, or $0.78 per diluted common share.
  • Return on average assets of 1.03%.
  • Net interest margin (tax equivalent) was 3.43%;² Core net interest margin expanded 85 bps to 3.26%.²
  • Efficiency ratio improved to 59.06%² from 70.32%² in the linked quarter.
• Noninterest bearing deposits and core deposits increased 3.7% and 2.3%, respectively.
• Classified loan ratio improved 54 bps to 2.57%; nonperforming assets ratio remained stable at 0.40%; net charge-off ratio was 0.06%.
• Common equity tier 1 ("CET1") ratio improved 82 bps to 10.73%.

Full Year 2024 Summary¹

• Noninterest bearing deposits and core deposits increased 6.1% and 3.9%, respectively. 
• Investment services and trust activities revenue increased 15.9% to $14.2 million.
• CET1 ratio improved 114 bps to 10.73%.
• Classified loan ratio improved 150 bps to 2.57%; nonperforming assets ratio improved 7 bps to 0.40%; net charge-off ratio was 0.07%.
• Completed a common equity capital raise, resulting in net proceeds to the Company of $118.6 million to facilitate a balance sheet repositioning.

CEO Commentary

Charles (Chip) Reeves, Chief Executive Officer of the Company, commented, “We are pleased with our fourth quarter results which highlight the successful execution of our balance sheet repositioning, as well as the continued momentum of our strategic initiatives. Return on average assets eclipsed the 1.0% threshold, driven by significant expansion of our net interest margin, thus net interest income. Our core deposit franchise expanded, with noninterest bearing deposits increasing for the second consecutive quarter, reflecting our Treasury Management initiatives and strong branch network. Our Wealth Management focus, including our Investment Services and Private Wealth teams, continues to bear fruit as revenue increased 16% year-over-year. In addition, asset quality metrics improved from the third quarter, as the classified loans ratio improved 54 bps and the charge-off ratio was only 0.06%."

Mr. Reeves continued, "2024 was an outstanding year of transformation and execution for MidWestOne. As we enter 2025, we are well positioned to become a consistent, high performing organization for the benefit of our stakeholders.” 

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_{¹ Fourth Quarter Summary compares to the third quarter of 2024 (the "linked quarter") unless noted. Full Year 2024 Summary compares to the full year 2023 unless noted.
² Non-GAAP measure. See the separate Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.}

REVENUE REVIEW

Total revenue for the fourth quarter of 2024 increased $152.6 million from the third quarter of 2024 and increased $23.4 million compared to the fourth quarter of 2023, due to higher net interest income and higher noninterest income. Excluding the pre-tax securities loss of $140.4 million that was recorded in the third quarter of 2024 in connection with balance sheet repositioning efforts, total revenue increased $12.3 million from the linked quarter. 

Net interest income of $48.9 million for the fourth quarter of 2024 increased $11.4 million from the third quarter of 2024, due to higher earning asset yields and lower funding volumes and costs, partially offset by lower earning asset volumes. When compared to the fourth quarter of 2023, net interest income increased $16.4 million, due to higher earning asset yields and lower funding volumes and costs, partially offset by lower earning asset volumes.

The Company's tax equivalent net interest margin was 3.43%³ in the fourth quarter of 2024, compared to 2.51%³ in the third quarter of 2024, driven by higher earning asset yields and lower funding costs. Total earning assets yield during the fourth quarter of 2024 increased 60 bps from the third quarter of 2024 due primarily to an increase of 171 bps in total investment securities yields. Funding costs during the fourth quarter of 2024 decreased 35 bps to 2.52%, due to reductions of 43 bps, 23 bps and 17 bps in long-term debt, short-term borrowings and interest bearing deposit costs, to 6.48%, 4.53% and  2.41%, respectively, from the third quarter of 2024.

The Company's tax equivalent net interest margin was 3.43%³ in the fourth quarter of 2024, compared to 2.22%³ in the fourth quarter of 2023, driven by higher earning asset yields and lower funding costs. Total earning assets yield increased 106 bps from the fourth quarter of 2023, primarily due to increases of 172 bps and 52 bps in total investment securities and loan yields, respectively. Funding costs decreased 13 bps to 2.52%, due to short-term borrowing costs of 4.53% and long-term debt costs of 6.48%, which decreased 38 bps and 31 bps, respectively, from the fourth quarter of 2023.

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_{³ Non-GAAP measure. See the separate Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.}

Noninterest income for the fourth quarter of 2024 increased $141.2 million from the linked quarter, due primarily to the securities impairment of $140.4 million recognized in the linked quarter related to the Company's balance sheet repositioning, and increases of $1.1 million and $0.4 million in loan revenue and investment services and trust activities revenue, respectively. The increase in loan revenue stemmed from a favorable quarter-over-quarter change in the fair value of our mortgage servicing rights. The increase in investment services and trust activities revenue was driven by growth in assets under administration and transaction fees. Partially offsetting these increases in noninterest income was a decrease of $0.3 million in other revenue.

Noninterest income for the fourth quarter of 2024 increased $7.0 million from the fourth quarter of 2023, primarily due to an increases of $5.9 million, $0.9 million and $0.6 million in investment securities gains (losses), net, loan revenue, and investment services and trust activities revenue, respectively. The increase in investment securities gains (losses), net stemmed primarily from a balance sheet repositioning loss recognized in the fourth quarter of 2023. The increase in loan revenue was driven by an increase of $0.6 million in SBA gain on sale, coupled with a favorable year-over-year change in the fair value of our mortgage servicing rights. The increase in investment services and trust activities revenue was driven by growth in assets under administration and transaction fees. Partially offsetting these increases in noninterest income was a decrease of $0.5 million in other revenue, due primarily to a $0.3 million decline in swap origination fee income.

EXPENSE REVIEW

Noninterest expense for the fourth quarter of 2024 increased $1.6 million from the linked quarter, primarily due to increases in compensation and employee benefits and occupancy expense of premises, net, which increased $0.7 million and $0.3 million, respectively. The increase in compensation and employee benefits was primarily due to a $0.6 million increase in medical benefit expense compared to the linked quarter, as well as an increase in incentives and commissions. The increase in occupancy expense of premises, net was primarily driven by elevated property tax expense and building maintenance expense.

Noninterest expense for the fourth quarter of 2024 increased $5.2 million from the fourth quarter of 2023. The largest contributors to the increase in noninterest expense were compensation and employee benefits, other expense, and occupancy expense of premises, net, which increased $2.8 million, $1.0 million, and $0.5 million, respectively. The increase in compensation and employee benefits expense was primarily driven by an increase in headcount, annual compensation adjustments, incentive expense due to improved performance, and medical benefit expense. The increase in other expense was driven by an increase of $1.0 million in customer deposit expense. The increase in occupancy expense of premises, net was primarily driven by higher property tax expense, partially offset by a reduction in building rental expense, which stemmed from the sale of our Florida banking operations and the consolidation of our legacy Denver branch.

The Company's effective tax rate was 22.7% in the fourth quarter of 2024, compared to 26.5% in the linked quarter. The decrease in the effective tax rate reflected the impact of the investment security impairments that were recorded in the third quarter of 2024 related to the balance sheet repositioning. The effective income tax rate for the full year 2025 is expected to be 22-24%.

BALANCE SHEET REVIEW

Total assets were $6.24 billion at December 31, 2024, compared to $6.55 billion at September 30, 2024 and $6.43 billion at December 31, 2023. The decrease from September 30, 2024 was primarily driven by lower securities balances due to the sale of securities, with the proceeds from the sale being used to pay-off Bank Term Funding Program ("BTFP") borrowings and purchase higher yielding securities, as part of balance sheet repositioning efforts. Compared to December 31, 2023, the decrease was primarily driven by the sale of assets associated with our Florida banking operations and lower securities balances due to balance sheet repositioning transactions, partially offset by the assets acquired in the Denver Bankshares, Inc ("DNVB") acquisition, as well as higher cash and loan balances.

Loans held for investment, net of unearned income, remained stable, reflecting a slight decrease of $13.1 million, or 0.3%, to $4.32 billion from $4.33 billion at September 30, 2024, primarily due to payoffs during the quarter.  

Loans held for investment, net of unearned income, increased $188.7 million, or 4.6%, to $4.32 billion from $4.13 billion at December 31, 2023. The increase from the fourth quarter of 2023 was driven primarily by loans acquired in the DNVB transaction, organic loan growth, and higher line of credit usage. Partially offsetting these identified increases was a decline stemming from the sale of loans associated with our Florida banking operations. 

Investment securities at December 31, 2024 were $1.33 billion, decreasing $294.7 million from September 30, 2024 and $541.9 million from December 31, 2023. The decrease from each prior period stemmed primarily from the sale of debt securities as part of the balance sheet repositioning, as well as principal cash flows received from scheduled payments, calls, and maturities. 

Total deposits increased $109.3 million, or 2.0%, to $5.48 billion, from $5.37 billion at September 30, 2024. Core deposits increased $111.5 million, while noninterest bearing deposits increased $33.7 million from September 30, 2024. Total deposits increased $82.3 million, or 1.5%, from $5.40 billion at December 31, 2023, primarily due to $224.2 million of deposits assumed in the DNVB acquisition, partially offset by $133.3 million of deposits divested as part of the sale of our Florida banking operations and a decline of $21.0 million in brokered deposits.

Borrowed funds were $116.6 million at December 31, 2024, a decrease of $409.1 million from September 30, 2024 and a decrease of $307.0 million from December 31, 2023. The decrease compared to the linked quarter was primarily due to the payoff of BTFP borrowings. The decrease compared to December 31, 2023 was primarily due to the pay-off of BTFP borrowings, coupled with lower overnight borrowings from the Federal Home Loan Bank and scheduled payments on long-term debt.

Total shareholders' equity at December 31, 2024 decreased $2.5 million from September 30, 2024, driven primarily by an increase in accumulated other comprehensive loss, partially offset by an increase in retained earnings. Total shareholders' equity at December 31, 2024 increased $35.3 million from December 31, 2023, primarily due to increases in common stock and additional paid-in-capital stemming from the common equity capital raise in the third quarter of 2024, partially offset by a decrease in retained earnings and an increase in accumulated other comprehensive loss.

On January 22, 2025, the Board of Directors of the Company declared a cash dividend of $0.2425 per common share. The dividend is payable March 17, 2025, to shareholders of record at the close of business on March 3, 2025.

No common shares were repurchased by the Company during the period September 30, 2024 through December 31, 2024 or for the subsequent period through January 23, 2025. The current share repurchase program allows for the repurchase of up to $15.0 million of the Company's common shares. As of December 31, 2024, $15.0 million remained available under this program.

CREDIT QUALITY REVIEW

Nonperforming loans and nonperforming assets ratios remained stable at 0.51% and 0.40%, respectively, compared to the linked quarter, while the classified loans ratio improved 54 bps to 2.57%. In addition, special mention loan balances decreased $28.8 million, or 16%. When compared to the same period of the prior year, the nonperforming loans and nonperforming asset ratios decreased 13 bps and 7 bps, respectively, while the classified loan ratio improved 150 bps. Special mention loan balances increased $35.4 million, or 31%. The net charge-off ratio decreased 10 bps from the linked quarter and 14 bps from the same period in the prior year.

As of December 31, 2024, the allowance for credit losses was $55.2 million and the allowance for credit losses ratio was 1.28%, compared with $54.0 million and 1.25%, respectively, at September 30, 2024. Credit loss expense of $1.3 million in the fourth quarter of 2024 reflected additional reserve primarily related to additions to nonperforming loans, offset by a reduction of $0.6 million in the reserve for unfunded loan commitments.

CONFERENCE CALL DETAILS

The Company will host a conference call for investors at 11:00 a.m. CT on Friday, January 24, 2025. To participate, you may pre-register for this call utilizing the following link: https://www.netroadshow.com/events/login?show=edad992a&confId=75837.  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 135335 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 24, 2025 by calling 1-866-813-9403 and using the replay access code of 395859. 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, 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 the sale of our Florida banking operations and the acquisition of DNVB), 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 changing 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 changes in 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) the economic impacts on the Company and its customers of climate change, natural disasters and exceptional weather occurrences, such as: tornadoes, floods and blizzards; (8) legislative and regulatory changes, including changes in banking, securities, trade, and tax laws and regulations and their application by our regulators, including changes in interpretation or prioritization, and any changes in response to the 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 type of borrower, collateral, 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 or other legal proceedings and regulatory actions; (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) new or revised 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 ongoing conflicts in the Middle East 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 or as a result of insider fraud; (23) the imposition of tariffs or other domestic or international governmental policies impacting the value of products produced by our borrowers; (24) the ability to successfully manage liquidity risk, which may increase dependence on non-core funding sources such as brokered deposits, and may negatively impact the Company's cost of funds; (25) the concentration of large deposits from certain clients, including those who have balances above current FDIC insurance limits; (26) changes in the business and economic conditions generally and in the financial services industry, and the effects of developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time that resulted in prior bank failures; and (27) other risk factors detailed from time to time in Securities and Exchange Commission filings made by the Company.

MIDWESTONE FINANCIAL GROUP, INC.
FIVE QUARTER CONSOLIDATED BALANCE SHEETS

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

MIDWESTONE FINANCIAL GROUP, INC.
FINANCIAL STATISTICS

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

_{⁽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 $456 thousand, $378 thousand, and $207 thousand for the three months ended December 31, 2024, September 30, 2024, and December 31, 2023, respectively. Loan purchase discount accretion was $2.5 million, $1.4 million, and $0.8 million for the three months ended December 31, 2024, September 30, 2024, and December 31, 2023, respectively. Tax equivalent adjustments were $985 thousand, $951 thousand, and $846 thousand for the three months ended December 31, 2024, September 30, 2024, and December 31, 2023, respectively. The federal statutory tax rate utilized was 21%.
⁽⁴⁾ Interest income includes tax equivalent adjustments of $168 thousand, $365 thousand, and $428 thousand for the three months ended December 31, 2024, September 30, 2024, and December 31, 2023, 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.
AVERAGE BALANCE SHEET AND YIELD ANALYSIS