MidWestOne(MOFG) - 2019 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements 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] - On June 30, 2019, the Company sold MidWestOne Insurance Services, Inc., recognizing a pre-tax gain of $1.1 million[30] Notes to Consolidated Financial Statements 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][290] - 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] - 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][160] Management's Discussion and Analysis of Financial Condition and Results of Operations 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][205] 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] - 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] Quantitative and Qualitative Disclosures about Market Risk 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][321] - 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][316][317] Controls and Procedures 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] - There were no material changes in internal control over financial reporting during the quarter[330] PART II – OTHER INFORMATION Legal Proceedings 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] Risk Factors 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] Unregistered Sales of Equity Securities and Use of Proceeds 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] Defaults Upon Senior Securities The company reported no defaults upon its senior securities during the period - None[335] Mine Safety Disclosures This item is not applicable to the company - Not Applicable[336] Other Information The company reported no other information for this item - None[337] Exhibits 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]