MidWestOne(MOFG) - 2020 Q3 - Quarterly Report

Financial Performance - Net (loss) income for the three months ended September 30, 2020, was $(19,824) thousand, compared to net income of $12,300 thousand for the same period in 2019, indicating a decline of 261.5%[14] - The company reported a basic loss per share of $(1.23) for the three months ended September 30, 2020, compared to earnings of $0.76 per share in the same period of 2019[14] - Comprehensive (loss) income for the three months ended September 30, 2020, was $(18,556) thousand, compared to $13,763 thousand for the same period in 2019, a decline of 234.0%[16] - Net income for the nine months ended September 30, 2020, was a loss of $10,087 thousand compared to a profit of $30,259 thousand for the same period in 2019[25] - Annualized return on average shareholders' equity was (14.88)% for the three months ended September 30, 2020, compared with 9.92% for the same period in 2019[208] - Annualized return on average tangible equity was 12.56% for the three months ended September 30, 2020, compared with 15.57% for the same period in 2019[208] Asset and Liability Management - Total assets increased to $5,330,708 thousand as of September 30, 2020, compared to $4,653,573 thousand as of December 31, 2019, representing a growth of 14.5%[11] - The total shareholders' equity decreased to $499,081 thousand as of September 30, 2020, from $508,982 thousand as of December 31, 2019, a decrease of 1.8%[11] - Total deposits rose to $4,333,641 thousand as of September 30, 2020, from $3,728,655 thousand as of December 31, 2019, marking an increase of 16.2%[11] - The company had short-term borrowings of $183.9 million as of September 30, 2020, with a weighted average rate of 0.35%[134] - As of September 30, 2020, total long-term borrowings amounted to $129.1 million, with a weighted average interest rate of 1.96%, down from $179.2 million and 2.51% as of December 31, 2019[142] Credit Losses and Allowances - The allowance for credit losses increased to $58,500 thousand as of September 30, 2020, compared to $29,079 thousand as of December 31, 2019, reflecting a significant increase of 100.5%[11] - Credit loss expense increased significantly to $31,410 thousand in 2020 from $6,554 thousand in 2019[25] - The credit loss expense for the three months ended September 30, 2020, was $4.7 million, compared to $4.3 million for the same period in 2019, indicating a year-over-year increase[101] - The ending balance of the allowance for credit losses for the nine months ended September 30, 2020, was $58.5 million, reflecting a significant increase from the prior year[101] Noninterest Income and Expenses - Noninterest income for the nine months ended September 30, 2020, was $27,994 thousand, up from $22,210 thousand in the same period of 2019, an increase of 26.1%[14] - Total noninterest expense for the three months ended September 30, 2020, was $59,939 thousand, compared to $31,442 thousand in the same period of 2019, an increase of 90.3%[14] - Noninterest expense increased by $28.5 million, or 90.6%, primarily due to a $31.5 million goodwill impairment recorded in Q3 2020[208] Goodwill and Impairment - Goodwill impairment recorded was $31,500 thousand, indicating a significant adjustment in asset valuation[25] - The Company recorded a goodwill impairment charge of $31.5 million due to a decline in macroeconomic conditions and a decrease in share price[42] - Total goodwill decreased from $91.9 million at the beginning of the period to $62.5 million at the end of the period[130] Loan Portfolio and Quality - As of September 30, 2020, total debt securities amounted to $1,338.7 million, with an estimated fair value of $1,366.3 million, reflecting gross unrealized gains of $30.2 million and unrealized losses of $2.5 million[75] - The company reported a total of $3.54 billion in loans held for investment, with $1.41 million individually evaluated for impairment and $57.27 million collectively evaluated for impairment as of September 30, 2020[102] - Total loans by credit quality indicator for 2020 reached $3,537,432,000, with $1,545,799,000 classified as Pass loans[97] - Nonaccrual loans totaled $39,071,000, with $22,864,000 classified as accruing and past due 90 days or more[89] - The company classifies loans into risk categories, with special mention/watch assets indicating potential weaknesses that require management's attention[90] COVID-19 Impact and Response - The Company is actively working with COVID-19 affected borrowers to defer payments, which may impact future interest income[37] - The Company granted short-term payment deferrals on $115.3 million of loans as part of its response to the COVID-19 pandemic[108] - The Company anticipates that approximately 14% of its loan portfolio, which includes non-essential retail, restaurants, hotels, CRE-retail, and arts, entertainment & gaming industries, will face significant economic distress due to COVID-19[192] - The Company expects its financial condition, capital levels, and results of operations to be significantly adversely affected by the ongoing economic conditions related to COVID-19[192] Shareholder Actions - The board of directors declared a cash dividend of $0.22 per share payable on December 15, 2020, to shareholders of record as of December 1, 2020[174] - The Company has resumed share repurchases under its share repurchase program as of October 20, 2020, after a temporary suspension due to COVID-19[173]