Financial Data and Key Metrics Changes - The company reported a fourth consecutive quarter of loan growth at approximately 5% linked quarter annualized [3] - Net interest income was $37.3 million, down $1.3 million from the prior year period, but up $2.5 million or 7.5% when excluding PPP income and loan purchase discount accretion [20] - Non-interest income increased to $11.6 million for Q1 2022, primarily due to loan revenue [21] - Total shareholders' equity decreased by $23 million from year-end 2021 due to a $33.2 million negative valuation adjustment on the debt securities portfolio [18] Business Line Data and Key Metrics Changes - Core loans increased by $32.8 million or 4.2% annualized from the linked quarter, led by commercial loans which rose by $35 million or 5.4% [16] - Wealth Management revenue was up 6% quarter-over-quarter, with assets under management increasing by 5% [30] - The company experienced a stable wealth management performance despite negative market conditions [7] Market Data and Key Metrics Changes - Deposits were slightly down from the linked quarter but up 6% from the prior year period [18] - The company noted a significant increase in retail deposit sales, with new money from retail households up 12% compared to the same period last year [29] - Non-performing assets were $31.5 million at March 31, 2022, down slightly from year-end 2021 and down 31% from the prior year period [17] Company Strategy and Development Direction - The company is focused on driving revenue through technology investments and talent acquisition [26] - There is a strong pipeline for commercial loans, particularly in construction loans, which are expected to fund throughout the year [27] - The company is actively monitoring its branch network and adapting to changing customer behaviors, with a noted 11% decrease in branch teller transactions [10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the loan growth pipeline and the stability of asset quality, with net charge-offs at 28 basis points [11] - The company anticipates increasing revenues from its Wealth Management Group in the latter half of the year [7] - Management acknowledged the competitive landscape for loans and deposits, indicating a need for strategic adjustments [3][4] Other Important Information - The company reclassified approximately 50% of its debt securities portfolio to held to maturity to mitigate negative impacts from rising rates [19] - The Iowa FIRST transaction is still pending regulatory approval, with management expressing frustration over the delay [12][13] Q&A Session Summary Question: Inquiry about the securities portfolio and potential adjustments - Management confirmed no further adjustments to the securities portfolio are expected and provided details on the variable rate securities held [37][38] Question: Discussion on deposit pricing competition - Management indicated limited opportunities to reprice CDs lower due to local market competition and expressed optimism about maintaining core account rates [42][43] Question: Health of agricultural borrowers - Management reported that agricultural borrowers are in good shape due to favorable crop yields and locked-in input costs for 2022 [46][47] Question: Update on Iowa FIRST transaction - Management provided a positive update on the cooperation from Muscatine Bank and indicated expectations for a potential close in mid-May or June [51][53] Question: Core margin sensitivity to rate changes - Management indicated that for every 100 basis point increase, the margin may benefit by 5 to 10 basis points, assuming successful lagging of deposit increases [64][66] Question: Fee income outlook - Management projected fee income in the range of $9 million to $9.5 million per quarter, excluding the acquisition [72] Question: Impact of branch reductions on savings - Management indicated that any savings from branch reductions would likely be reinvested into technology [73][74]
MidWestOne(MOFG) - 2022 Q1 - Earnings Call Transcript