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MidWestOne(MOFG) - 2020 Q2 - Earnings Call Transcript
2020-07-31 21:20
MidWestOne Financial Group, Inc. (NASDAQ:MOFG) Q2 2020 Earnings Conference Call July 31, 2020 12:00 PM ET Company Participants Charlie Funk - CEO Barry Ray - CFO Gary Sims - CCO Jim Cantrell - Treasurer & CIO Len Devaisher - President & COO Conference Call Participants Brendan Nosal - Piper Sandler Jeff Rulis - D.A. Davidson Terry McEvoy - Stephens Damon Delmonte - KBW Brian Martin - Janney Montgomery Operator Good day and welcome to the MidWestOne Financial Group's Second Quarter 2020 Earnings Conference C ...
MidWestOne(MOFG) - 2020 Q2 - Earnings Call Presentation
2020-07-31 19:58
COVID-19 RESPONSE AND SUPPLEMENTAL FINANCIAL INFORMATION SECOND QUARTER 2020 June 30, 2020 COVID-19 Response t One™ Mi FINANCIAL GROUP, INC. 2 Providing Support During COVID-19 Pandemic | --- | --- | --- | --- | --- | --- | |-------|-----------------------------------------------------------------------------------------------------------------------------------|-------|-----------------------------------------------------------------------------------------------------------------------------------------|- ...
MidWestOne(MOFG) - 2020 Q1 - Quarterly Report
2020-05-08 16:42
Financial Performance - Net loss for the three months ended March 31, 2020, was $1,975 thousand, compared to a net income of $7,285 thousand for the same period in 2019, marking a shift from profit to loss[13]. - Credit loss expense surged to $21,733 thousand in Q1 2020, compared to $1,594 thousand in Q1 2019, indicating a significant increase of 1265.5%[13]. - Noninterest expense rose to $30,001 thousand in Q1 2020, compared to $20,617 thousand in Q1 2019, representing an increase of 45.5%[13]. - The company incurred a net loss of $2.0 million for the quarter ended March 31, 2020, a decrease of $9.3 million from a net income of $7.3 million for the same period in 2019[204]. - Credit loss expenses increased by $20.1 million, significantly impacting the company's financial results[204]. - Noninterest expense rose by $9.4 million, or 45.5%, compared to the previous year, while net interest income increased by $11.4 million, or 44.0%[204]. Asset and Liability Management - Total assets increased to $4,763,909 thousand as of March 31, 2020, compared to $4,653,573 thousand as of December 31, 2019, reflecting a growth of 2.37%[11]. - Total deposits rose to $3,859,844 thousand as of March 31, 2020, up from $3,728,655 thousand as of December 31, 2019, an increase of 3.5%[11]. - The allowance for credit losses increased to $51,187 thousand as of March 31, 2020, compared to $29,079 thousand as of March 31, 2019, indicating an increase of 75.9%[11]. - The total loans held for investment, net of unearned income, amounted to $3.43 billion as of March 31, 2020[105]. - The total allowance for credit losses was $51.2 million, an increase from $47.3 million as of December 31, 2019, reflecting a rise of approximately 4.1%[105]. Credit Quality and Risk Management - The company uses a risk rating system to classify loans, including categories such as Special Mention/Watch, Substandard, Doubtful, and Loss[94][95][96][97]. - The company analyzes loans individually to assess credit risk, particularly for non-homogenous loans like agricultural and commercial real estate[94]. - The total nonaccrual loans increased from $41,483,000 to $43,973,000, with $28,418,000 classified as losses[93]. - The company reported zero TDRs that redefaulted within 12 months for both the three months ended March 31, 2020, and March 31, 2019[108]. - The company recorded a liability for off-balance-sheet credit exposures of $5.8 million as of March 31, 2020, with a total amount recorded within credit loss expense of $2.4 million[154]. Economic Environment and Impact - The economic forecast indicates a significant increase in Midwest unemployment and a decline in national retail sales, CRE index, and US GDP due to the COVID-19 pandemic[102]. - The company anticipates a complex and significant adverse impact on its financial condition and results of operations due to the COVID-19 pandemic[179]. - Unemployment insurance claims increased significantly, with Colorado at 701%, Florida at 389%, and Iowa at 335% from January 4, 2020, to April 18, 2020[181]. - The Federal Reserve decreased the federal funds target rate to a range of 0.0 – 0.25% on March 16, 2020[184]. - The CARES Act established a $2.0 trillion economic stimulus package, including a $349 billion loan program through the SBA for the PPP[184]. Operational Adjustments - The company is actively working with COVID-19 affected borrowers to defer payments, which may impact future interest income[36]. - As of March 31, 2020, the company executed 842 loan payment deferrals on outstanding balances totaling $398.1 million due to COVID-19[194]. - The company closed or approved 2,327 PPP loans representing $334.5 million in funding, with expectations that most will be forgiven by the SBA[195]. - The company discontinued stock repurchases in mid-March 2020 and has no near-term plans to resume until there is more clarity on the economic outlook[199]. Capital and Regulatory Compliance - As of March 31, 2020, the company's total capital to risk-weighted assets ratio was 11.48%, exceeding the minimum regulatory requirement of 10.50%[148]. - The company's Tier 1 capital to risk-weighted assets ratio was 10.25%, above the required minimum of 8.50%[148]. - The bank's total capital to risk-weighted assets ratio was 12.03% as of March 31, 2020, also exceeding the well-capitalized requirement of 10.00%[148]. - Commitments to extend credit as of March 31, 2020, totaled $840,090,000, a decrease from $859,212,000 as of December 31, 2019[151].
MidWestOne(MOFG) - 2020 Q1 - Earnings Call Transcript
2020-05-01 20:31
Financial Data and Key Metrics Changes - The loan loss provision for the quarter was $21.7 million, a significant line item in the income statement, reflecting an aggressive approach due to uncertain future conditions [12] - The loan loss reserve to total loans was 1.49%, which increases to 2.11% when including purchase discounts, indicating a cautious stance on potential losses [13] - Total non-performing assets remained virtually unchanged from year-end at $49.6 million, with net charge-offs at 14 basis points, which is considered acceptable [14] Business Line Data and Key Metrics Changes - The company experienced a reduction of approximately $25 million in the loan portfolio, primarily due to a $28 million decrease in one-to-four family loans attributed to refinancing activity [23] - Commercial and industrial (C&I) loans increased by more than $29 million, while agricultural loans saw a slight increase as operating lines were utilized during the planning season [23] Market Data and Key Metrics Changes - The agricultural portfolio represented 9.2% of the total loan portfolio, amounting to $314.3 million, with 9.6% rated as substandard, showing slight improvement from previous periods [17][18] - The company identified six vulnerable industries that comprise 20% of the portfolio, indicating a focus on monitoring these sectors closely [15] Company Strategy and Development Direction - The company has committed to maintaining technology spending as a future investment, despite the economic challenges posed by the pandemic [30] - A temporary discontinuation of share repurchase was noted, with plans to maintain the current dividend, reflecting a cautious approach to capital management [33] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the unprecedented times due to the pandemic and emphasized the importance of supporting employees, customers, and communities [5][11] - The company expects to see improvement in the core margin in the second quarter, despite acknowledging potential volatility due to the Paycheck Protection Program (PPP) [26] Other Important Information - The company reported a significant increase in digital banking activity, with online banking sessions up 26% and online account openings up 34% since closing lobbies [8] - An unbudgeted pledge of $150,000 was made to support local organizations, demonstrating a commitment to community support during challenging times [11] Q&A Session Summary Question: Fee income and future expectations - Management expects mortgage fees to be strong in the second quarter due to robust activity, while swap income is anticipated to decrease [38] Question: Deferral activity and economic forecasts - Deferral activity saw a good pace in April and is expected to continue into May, with the provision for credit losses based on Moody's baseline forecast as of March 27 [46][49] Question: Participation in PPP and expected fees - The company expects to realize approximately $10 million in net fees from the PPP, including participation in the second round [54][56] Question: Vulnerable industries and loan sizes - Hotel loans typically range from $5 million to $10 million, while the restaurant sector includes a mix of larger franchisees and smaller local businesses [60] Question: Impact of COVID-19 on fee income - Management anticipates downward pressure on investment services, trust activities, and service charges due to the pandemic [74]
MidWestOne(MOFG) - 2020 Q1 - Earnings Call Presentation
2020-05-01 14:14
COVID-19 RESPONSE AND SUPPLEMENTAL FINANCIAL INFORMATION FIRST QUARTER 2020 APRIL 30, 2020 SUPPORTING OUR EMPLOYEES • Focus on safety: • implemented social distancing throughout our locations • servicing customers via drive-up and closure of bank lobbies • significant expansion of work from home capabilities • increased cleaning services • business travel restrictions • Employee assistance: pandemic pay benefits for employees impacted by COVID-19, accommodations for employees with pre-existing health condit ...
MidWestOne(MOFG) - 2019 Q4 - Annual Report
2020-03-06 14:19
Employment and Workplace Recognition - The company had 771 full-time equivalent employees as of December 31, 2019, and was recognized as one of Des Moines Register's "Top Workplaces" for the 7th consecutive year[41]. Financial Structure and Capital Requirements - The company relies on deposits and external financing sources, employing various financing arrangements including term debt and subordinated debt[39]. - Regulatory capital requirements have become more stringent post-global financial crisis, affecting the company's earnings capabilities[49]. - The Dodd-Frank Act and Basel III establish capital standards that are significantly more stringent than previous requirements[50]. - The company must maintain minimum capital levels based on guidelines established by bank regulatory agencies, which have evolved to focus on the quality of capital[50]. - The Basel III Rules require a minimum Common Equity Tier 1 Capital ratio of 4.5% of risk-weighted assets, with an increase to 7% when including the capital conservation buffer[57]. - The minimum required amount of Tier 1 Capital has increased from 4% to 6% of risk-weighted assets[61]. - The minimum Total Capital ratio remains at 8% of risk-weighted assets[61]. - A well-capitalized banking organization must maintain a Common Equity Tier 1 Capital ratio of 6.5% or more[62]. - The capital conservation buffer requires institutions to maintain more than 2.5% in Common Equity Tier 1 Capital to avoid restrictions on capital distributions[58]. - As of December 31, 2019, the Bank was well-capitalized and met all Basel III Rules requirements[63]. - Community banks with total consolidated assets of less than $10 billion can elect a Community Bank Leverage Ratio (CBLR) framework between 8% and 10%[65]. - The Federal Reserve requires bank holding companies to be well-capitalized and well-managed to effect interstate mergers or acquisitions[67]. - The Federal Reserve has enforcement powers to restrict dividend payments if a bank holding company does not meet minimum regulatory capital adequacy ratios[74]. - The Bank is required to maintain adequate capital levels and is prohibited from paying dividends if it would become undercapitalized[88]. Risk Management and Compliance - The company faces risks from credit quality deterioration and fluctuations in interest rates, which could impact net earnings[14]. - The interagency guidance on incentive compensation emphasizes balancing risk and reward, effective controls, and strong corporate governance[76]. - The Bank did not exceed capital guidelines related to CRE concentration risk as of December 31, 2019[102]. - The CFPB has broad rulemaking authority affecting all consumer financial product providers, including the Bank, with enforcement over institutions with more than $10 billion in assets[103]. Regulatory Environment - The Economic Growth, Regulatory Relief and Consumer Protection Act provides regulatory relief for community banks, eliminating certain Dodd-Frank requirements[45]. - The Bank's deposit accounts are insured by the FDIC's Deposit Insurance Fund (DIF) up to $250,000 per insured depositor category[80]. - The reserve ratio of the DIF reached 1.36% as of September 30, 2018, exceeding the minimum required reserve ratio of 1.35%[82]. - The FDIC's total base assessment rates for deposit insurance premiums currently range from 1.5 basis points to 30 basis points[81]. - For 2020, the first $16.9 million of reservable balances are exempt from reserves, with a zero percent reserve requirement[98]. - The Dodd-Frank Act increased the minimum reserve ratio of the DIF from 1.15% to 1.35%[82]. Operational Adaptation and Community Engagement - The company is committed to adapting to technological changes to remain competitive in the marketplace[14]. - The Community Reinvestment Act requires the Bank to meet the credit needs of the entire community, including low- and moderate-income neighborhoods[99]. - The Dodd-Frank Act expanded underwriting requirements for loans secured by 1-4 family residential real property, impacting mortgage origination standards[104]. - The Regulatory Relief Act allows mortgages held in portfolio for the life of the loan to be considered qualified mortgages for banks with assets under $10 billion[104]. - The CFPB's rules have resulted in higher compliance costs for the Bank, but have not significantly impacted operations[105].
MidWestOne(MOFG) - 2019 Q4 - Earnings Call Transcript
2020-01-24 22:49
MidWestOne Financial Group, Inc. (NASDAQ:MOFG) Q4 2019 Earnings Conference Call January 24, 2020 12:00 PM ET Company Participants Charles Funk - President, CEO & Director Barry Ray - CFO, Principal Accounting Officer & SVP Gary Sims - Chief Credit Officer James Cantrell - CIO, VP & Treasurer Conference Call Participants Jeffrey Rulis - D.A. Davidson & Co. Andrew Liesch - Sandler O'Neill Damon DelMonte - KBW Brian Martin - Janney Montgomery Scott Operator Good day and welcome to the MidWestOne Financial Grou ...
MidWestOne(MOFG) - 2019 Q3 - Quarterly Report
2019-11-07 20:00
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-35968 MIDWESTONE FINANCIAL GROUP, INC. (Exact name of Registrant as specified in its charter) Iowa 42-1206172 (State or other jurisdictio ...
MidWestOne(MOFG) - 2019 Q3 - Earnings Call Transcript
2019-10-27 04:20
Financial Data and Key Metrics Changes - The overall theme of the report is positive, with earnings per share calculated at approximately $0.88 when excluding merger-related expenses [5][4] - The core net interest margin improved to 3.48% from 3.45% in the previous quarter, aided by a higher loan-to-deposit ratio [13][12] - The company reported a provision of $4.3 million, with $3 million not related to a deterioration in loan quality but rather a transition in measurement methodology [17][18] Business Line Data and Key Metrics Changes - The mortgage servicing rights adjustment negatively impacted noninterest income, with $657,000 recorded this quarter [15] - The wealth management unit, particularly the Trust Department, has assets under management between $1.6 billion and $1.7 billion, showing strong integration post-acquisition [15][16] - Ag loans increased by 1% during the quarter, representing 9.7% of the total portfolio, with a slight improvement in the quality of the ag portfolio [20][19] Market Data and Key Metrics Changes - The company experienced tough lending competition, particularly on pricing, but maintained reasonable credit terms [11] - Deposit growth was positive across all regions, with notable increases in Denver and Florida [12][43] - The Twin Cities region showed mixed loan growth, with two out of four areas experiencing negative growth year-to-date [8][9] Company Strategy and Development Direction - The company is focused on improving operational efficiency and leveraging the AT acquisition, with a goal of maintaining a core efficiency ratio under 60% [16] - Future growth is expected to be driven by a strong pipeline of loans, although the economic environment remains uncertain [10][36] - The company is cautious about future M&A activity, indicating a focus on internal efficiency before pursuing new acquisitions [52][53] Management's Comments on Operating Environment and Future Outlook - Management noted that the economic environment appears slower, contributing to higher-than-normal loan paydowns [6][36] - The outlook for net interest margin is dependent on the shape of the yield curve rather than solely on Federal Reserve actions [14][30] - Management expressed confidence in the company's ability to generate capital and improve tangible book value per share [22][23] Other Important Information - The company is managing high-cost deposits effectively, which has positively impacted the net interest margin [12] - There are expectations of additional expenses in the fourth quarter due to technology upgrades and fintech investments [16][28] Q&A Session Summary Question: Expectations for expenses in Q4 and 2020 - Management indicated that expenses may trend higher in Q4 due to normalizing FDIC insurance costs, with a budgeted increase in technology spending for 2020 [26][28] Question: Loan growth outlook for 2020 - Management aims for a loan growth target of 4% to 5% for 2020, contingent on economic conditions and existing pipeline activity [36] Question: Insights on investment services and trust growth - Management reported strong growth in investment services, with expectations for continued success driven by market conditions and effective integration [41] Question: Deposit growth drivers - Positive deposit growth was attributed to retail promotions and strong performance across various regions, particularly in Denver and Florida [43] Question: Accretion levels for Q4 - Management expects accretion levels to be around $3 million to $3.5 million per quarter, declining thereafter in 2020 [32][48]
MidWestOne(MOFG) - 2019 Q2 - Quarterly Report
2019-08-07 17:44
[PART I – FINANCIAL INFORMATION](index=5&type=section&id=PART%20I) [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements reflect significant growth in assets and income following the ATBancorp acquisition Consolidated Balance Sheet Highlights (As of June 30, 2019 vs. Dec 31, 2018) | Metric | June 30, 2019 (in thousands) | December 31, 2018 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Total Assets | $4,662,463 | $3,291,480 | +41.7% | | Total Loans Held for Investment, net | $3,507,812 | $2,369,472 | +48.0% | | Total Deposits | $3,725,472 | $2,612,929 | +42.6% | | Total Shareholders' Equity | $488,351 | $357,067 | +36.8% | Consolidated Income Statement Highlights | Metric (in thousands, except EPS) | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $34,832 | $26,430 | $60,808 | $52,604 | | Net Income | $10,674 | $8,156 | $17,959 | $15,949 | | Diluted EPS | $0.72 | $0.67 | $1.33 | $1.30 | - On May 1, 2019, the Company acquired ATBancorp, involving the issuance of **4,117,536 shares of common stock** valued at $116.0 million and a cash payment of **$34.8 million**[29](index=29&type=chunk) - On June 30, 2019, the Company sold MidWestOne Insurance Services, Inc., recognizing a **pre-tax gain of $1.1 million**[30](index=30&type=chunk) [Notes to Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail the financial impact of the ATBancorp acquisition, adoption of new lease standards, and strong capital ratios ATBancorp Acquisition Summary (May 1, 2019) | Item | Value (in thousands) | | :--- | :--- | | Total Merger Consideration | $148,435 | | Total Assets Acquired | $1,396,382 | | Total Liabilities Assumed | $1,276,669 | | Goodwill Recognized | $28,722 | | Core Deposit Intangible | $28,230 | - The Allowance for Loan Losses (ALLL) was **$28.7 million** at June 30, 2019, with the ratio of ALLL to total loans decreasing from **1.22% to 0.81%** due to acquisition accounting[60](index=60&type=chunk)[290](index=290&type=chunk) - The company adopted new lease accounting standard ASU 2016-02, recognizing an initial **Right-of-Use (ROU) asset and operating lease liability of $2.9 million**[187](index=187&type=chunk) - As of June 30, 2019, the Company and MidWestOne Bank were considered **'well capitalized'** with a consolidated Common Equity Tier 1 capital ratio of **8.76%**[159](index=159&type=chunk)[160](index=160&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=62&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The ATBancorp acquisition drove significant growth in net interest income and total assets, alongside increased merger-related expenses - The acquisition of ATBancorp is the primary cause of significant changes in operating results and financial condition[200](index=200&type=chunk)[205](index=205&type=chunk) Q2 2019 vs Q2 2018 Performance | Metric | Q2 2019 | Q2 2018 | Change | | :--- | :--- | :--- | :--- | | Net Income | $10.7 million | $8.2 million | +$2.5 million | | Net Interest Income | $34.8 million | $26.4 million | +31.8% | | Noninterest Income | $8.8 million | $5.7 million | +54.5% | | Noninterest Expense | $29.0 million | $20.6 million | +41.1% | - Merger-related expenses in Q2 2019 totaled **$3.1 million**, including compensation, legal, professional, and data processing fees[233](index=233&type=chunk) - The ratio of Allowance for Loan Losses to total loans decreased from **1.22% to 0.81%**, with the acquisition accounting for a **41 basis point** reduction[290](index=290&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=87&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company manages interest rate and liquidity risk through its Asset and Liability Committee, utilizing NII and EVE analysis Net Interest Income Sensitivity Analysis (as of June 30, 2019) | Immediate Rate Change | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | | +200 bps | $(1,053) | (0.7)% | | +100 bps | $(172) | (0.1)% | | -100 bps | $(1,942) | (1.3)% | | -200 bps | $(1,403) | (0.9)% | - The company's main market risks are **interest rate risk and liquidity risk**, managed by the asset and liability committee[309](index=309&type=chunk)[321](index=321&type=chunk) - The company maintains multiple liquidity sources, with **$257.8 million** available from FHLB borrowings and **$11.7 million** from the Federal Reserve Discount Window[315](index=315&type=chunk)[316](index=316&type=chunk)[317](index=317&type=chunk) [Controls and Procedures](index=89&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of June 30, 2019[327](index=327&type=chunk) - There were **no material changes** in internal control over financial reporting during the quarter[330](index=330&type=chunk) [PART II – OTHER INFORMATION](index=90&type=section&id=Part%20II) [Legal Proceedings](index=90&type=section&id=Item%201.%20Legal%20Proceedings) The company faces no material legal proceedings outside the ordinary course of business - The Company states that there are no pending or threatened legal proceedings that would have a **material adverse effect** on its business or financial condition[332](index=332&type=chunk) [Risk Factors](index=90&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors have been identified since the 2018 Annual Report - **No material changes** have occurred in the risk factors since the company's 2018 Annual Report on Form 10-K[333](index=333&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=90&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 56,985 shares in Q2 2019 under its authorized share repurchase program Share Repurchases for Q2 2019 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2019 | 9,523 | $28.14 | | May 2019 | 15,546 | $27.91 | | June 2019 | 31,916 | $28.02 | | **Total Q2** | **56,985** | **$28.01** | - The Board of Directors approved a share repurchase program for up to **$5.0 million** of common stock through December 31, 2020[334](index=334&type=chunk) [Defaults Upon Senior Securities](index=90&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon its senior securities during the period - None[335](index=335&type=chunk) [Mine Safety Disclosures](index=90&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not Applicable[336](index=336&type=chunk) [Other Information](index=90&type=section&id=Item%205.%20Other%20Information) The company reported no other information for this item - None[337](index=337&type=chunk) [Exhibits](index=91&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed, including merger agreement amendments, bylaws, officer certifications, and XBRL data - Exhibits filed include the First Amendment to the Merger Agreement with ATBancorp, an Amendment to Bylaws, CEO/CFO certifications, and XBRL data files[338](index=338&type=chunk)