MidWestOne(US:MOFG)2023-03-13 21:04PART I Business MidWestOne Financial Group, Inc is a bank holding company providing commercial and personal banking services across several US states Financial Snapshot as of December 31, 2022 | Metric | Value (USD) | | :--- | :--- | | Total Assets | $6.58 billion | | Total Loans, net | $3.84 billion | | Total Deposits | $5.47 billion | | Shareholders' Equity | $492.8 million | - On June 9, 2022, the Company completed the acquisition of Iowa First Bancshares Corp (IOFB) for cash consideration of $46.7 million, merging IOFB's subsidiary banks into MidWestOne Bank20 Loan Portfolio Composition (December 31, 2022) | Loan Category | Percentage of Total Portfolio | | :--- | :--- | | Commercial Real Estate | 51.6% | | Commercial and Industrial | 27.5% | | Residential Real Estate | 15.9% | | Agricultural Loans | 3.0% | | Consumer Lending | 2.0% | - As of December 31, 2022, the company employed 811 full and part-time employees across its geographical regions40 - The company and its bank subsidiary are extensively regulated by federal and state agencies, including the Iowa Division of Banking, the Federal Reserve, the FDIC, and the CFPB, which affects business operations, capital levels, and growth4849 Risk Factors The company faces significant economic, credit, operational, and regulatory risks, including interest rate fluctuations and cybersecurity threats - The company's business is heavily concentrated in the Iowa and Minneapolis/St Paul markets, making its financial condition highly dependent on the economic health of these specific areas107 - Rising interest rates have negatively impacted the value of the company's securities portfolio, which had $108.2 million in net unrealized losses from available-for-sale investment securities at December 31, 2022115 - A significant portion of the loan portfolio consists of commercial real estate loans, which comprised approximately 51.6% of the total loan portfolio as of December 31, 2022, creating a concentration risk tied to real estate market values127 - The company faces intense competition from a wide range of financial institutions, including large regional banks, community banks, credit unions, and emerging fintech and digital asset service providers148149 - As a financial institution, the company is susceptible to fraudulent activity and cybersecurity incidents and relies on third-party vendors for critical systems, where failures could adversely affect operations162168 Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None186 Properties The company operates 57 banking offices across five states, with its corporate headquarters located in Iowa City, Iowa Number of Banking Offices by State (as of Dec 31, 2022) | State | Number of Offices | | :--- | :--- | | Iowa | 35 | | Minnesota | 12 | | Wisconsin | 7 | | Florida | 2 | | Colorado | 1 | | Total | 57 | Legal Proceedings The company is involved in routine legal actions that are not expected to materially impact its financial condition - The Company is party to various legal actions in the normal course of business but believes none are expected to have a material adverse effect on its consolidated financial condition188 Mine Safety Disclosures This item is not applicable to the company - Not applicable189 PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's stock trades on Nasdaq (MOFG), with an active share repurchase program in place through 2023 - The company's common stock is listed on the Nasdaq Global Select Market under the symbol "MOFG" with 15,675,325 shares outstanding as of March 1, 2023192 - A share repurchase program authorized for up to $15.0 million through December 31, 2023 had $3.0 million remaining available as of December 31, 2022193 Selected Financial Data This item is not applicable to the company - Not applicable197 Management's Discussion and Analysis of Financial Condition and Results of Operations Net income decreased in 2022 due to higher credit loss and noninterest expenses, despite growth in assets and net interest income Key Financial Results Comparison (2022 vs 2021) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net Income | $60.8 million | $69.5 million | | Diluted EPS | $3.87 | $4.37 | | Total Assets | $6.58 billion | $6.03 billion | | Gross Loans Held for Investment | $3.85 billion | $3.25 billion | | Total Deposits | $5.47 billion | $5.11 billion | - Net interest income increased by $10.1 million to $166.4 million in 2022, driven by higher interest income from investments and loans207238 - The company recorded a credit loss expense of $4.5 million in 2022, a significant shift from a credit loss benefit of $7.3 million in 2021, primarily due to loan growth207240 - Noninterest income rose by $5.1 million to $47.5 million in 2022, largely due to a $3.8 million bargain purchase gain from the IOFB acquisition207243 - Noninterest expense increased by $16.2 million to $132.8 million in 2022, driven by costs associated with the IOFB acquisition and higher operating expenses207247 - Subsequent to year-end 2022, the company executed a balance sheet repositioning, selling approximately $231 million in securities for an estimated pre-tax loss of $13.2 million257 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate and liquidity risk, managed through diverse funding sources and sensitivity analysis - The company's most significant market risk is interest rate risk, which affects earnings and capital, alongside prevalent liquidity risk308309 - Key liquidity sources include $155.0 million in unsecured federal funds lines and $405.1 million in available FHLB advances as of December 31, 2022313314315 Net Interest Income Sensitivity Analysis (as of Dec 31, 2022) | Immediate Change in Rates | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | | +200 bps | $(13,921) | (8.7)% | | +100 bps | $(6,738) | (4.2)% | | -100 bps | $5,637 | 3.5% | | -200 bps | $8,398 | 5.2% | Financial Statements and Supplementary Data This section contains the company's audited consolidated financial statements, notes, and the independent auditor's unqualified opinion - The independent registered public accounting firm, RSM US LLP, issued an unqualified opinion on the Company's consolidated financial statements for the period ended December 31, 2022331 - The auditor identified the qualitative factors applied to the allowance for credit losses as a critical audit matter due to the highly subjective nature of management's inputs337 Consolidated Balance Sheet Summary | (in thousands) | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | $6,577,876 | $6,025,128 | | Total Loans, net | $3,791,324 | $3,196,312 | | Total Securities | $2,282,968 | $2,288,110 | | Total Liabilities | $6,085,083 | $5,497,653 | | Total Deposits | $5,468,942 | $5,114,519 | | Total Shareholders' Equity | $492,793 | $527,475 | Consolidated Income Statement Summary | (in thousands) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net Interest Income | $166,358 | $156,281 | $152,964 | | Credit Loss Expense (Benefit) | $4,492 | $(7,336) | $28,369 | | Noninterest Income | $47,519 | $42,453 | $38,620 | | Noninterest Expense | $132,788 | $116,592 | $149,893 | | Net Income | $60,835 | $69,486 | $6,623 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants - None634 Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of year-end 2022 - Management concluded that the Company's disclosure controls and procedures were effective as of December 31, 2022636 - Management asserted that the Company maintained effective internal control over financial reporting as of December 31, 2022, based on the COSO framework (2013)640 - The assessment of internal control over financial reporting excluded Iowa First Bancshares Corporation, which was acquired on June 9, 2022639 Other Information The company reports no other information for this item - None652 Disclosure Regarding Foreign Jurisdictions That Prevent Inspections This item is not applicable to the company - Not Applicable653 PART III Directors, Executive Officers and Corporate Governance Required information is incorporated by reference from the company's 2023 Definitive Proxy Statement - The information required by this item will be included in the Company's Definitive Proxy Statement for the 2023 Annual Meeting of Shareholders and is incorporated by reference655 Executive Compensation Required information is incorporated by reference from the company's 2023 Definitive Proxy Statement - The information required by this item will be included in the Company's Definitive Proxy Statement for the 2023 Annual Meeting of Shareholders and is incorporated by reference656 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Required information is incorporated by reference from the company's 2023 Definitive Proxy Statement - The information required by this item will be included in the Company's Definitive Proxy Statement for the 2023 Annual Meeting of Shareholders and is incorporated by reference657 Certain Relationships and Related Transactions, and Director Independence Required information is incorporated by reference from the company's 2023 Definitive Proxy Statement - The information required by this item will be included in the Company's Definitive Proxy Statement for the 2023 Annual Meeting of Shareholders and is incorporated by reference658 Principal Accountant Fees and Services Required information is incorporated by reference from the company's 2023 Definitive Proxy Statement - The information required by this item will be included in the Company's Definitive Proxy Statement for the 2023 Annual Meeting of Shareholders and is incorporated by reference659 PART IV Exhibits and Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed as part of the Form 10-K report - This section lists all financial statements, schedules, and exhibits filed with the report, including certifications from the Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer661662664 Form 10-K Summary The company provides no summary for this item - None666