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8-K - FORM 8-K - MidWestOne Financial Group, Inc.a6-30x11earningsrelease.htm
Exhibit 99.1

 
 
 
 
NEWS RELEASE

 
 
 
 
 
 
 
 
 
 
FOR IMMEDIATE RELEASE

 
 
 
Contact:
 
 
 
 
 
 
Charles N. Funk
 
Gary J. Ortale
 
Steven Carr
 
 
President & CEO
 
EVP & CFO
 
Dresner Corporate Services
 
 
319.356.5800
 
319.356.5800
 
312.726.3600
 

MIDWESTONE FINANCIAL GROUP, INC.
REPORTS SECOND-QUARTER 2011 FINANCIAL RESULTS


Iowa City, Iowa, July 28, 2011 - MidWestOne Financial Group, Inc. (NASDAQ - MOFG), today reported results for its three and six months ended June 30, 2011.
Net income for the second quarter of 2011 rose to $3.2 million, compared with $2.6 million for the same period last year. After dividends and discount accretion on the Company's preferred stock, net income available to common shareholders rose to $3.0 million, or $0.35 per diluted share, compared with net income available to common shareholders of $2.4 million, or $0.27 per diluted share, in the second quarter of 2010.
Net income for the second quarter was higher than in the same period in 2010 primarily due to:
a 40.0% decrease in the provision for loan losses; and
a 3.4% decrease in noninterest expense, highlighted by a 49.5% decrease in FDIC Insurance expense.
President and Chief Executive Officer Charles N. Funk stated, "Several factors underscore our solid second quarter performance.  Quarter-end loans in the bank portfolio are more than $20 million higher than at year-end 2010, and we've worked diligently to find good lending opportunities in our geographic footprint.  Our deposits have risen as well, particularly in the 'core' deposit category. Additionally, expense control continues to be a focus of each MidWestOne team member, indicative of our 'work as one team' operating principle."
Net income for the first half of 2011 was $6.1 million, which is a $1.5 million, or 33.0% increase compared to the $4.6 million of net income for the first six months of 2010. Earnings per diluted share of $0.66 and $0.48 for the comparative year-to-date periods are based on net income available to common shareholders of $5.7 million and $4.2 million, respectively. The increase in net income was due primarily to lower provision for loan loss expense and decreased noninterest expense.
Results of Operations
Net interest income for the second quarter of 2011 improved $0.1 million, or 0.7%, from $12.2 million for the second quarter of 2010. Loan interest income decreased $0.8 million, or 5.7%, to $13.0 million for the second quarter of 2011, compared to $13.8 million for the second quarter of 2010. Income from loan pool participations decreased to $0.4 million for the second quarter of 2011, compared to $0.9 million for the same period a year ago on a much lower level of investment. The continuing low interest rate environment's impact on loan yields and interest income on loan pool participations was greater than the beneficial effect of low interest rates on the Company's interest expense.
Net interest income for the first six months of 2011 decreased $0.1 million to $23.8 million compared with the six months ended June 30, 2010. The continuing low interest rate environment's impact on loan yields and interest income on loan pool participations offset the beneficial effect of low interest rates on the Company's interest expense, despite an increase in income on investment securities of $1.0 million. Loan interest income decreased $1.7 million, or 6.1%, to $25.8 million for the first six

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months of 2011, compared to $27.5 million for the first six months of 2010. Income from loan pool participations decreased to $0.8 million for the first half of 2011, compared to $1.8 million for the same period a year ago on a much lower level of investment. Total interest expense for the first half of 2011 decreased $1.6 million, or 13.4%, compared with the same period in 2010.
The net interest margin for the second quarter of 2011, calculated on a fully tax-equivalent basis, was 3.33% or 15 basis points lower than the 3.48% net interest margin for the second quarter of 2010. For the first six months of 2011, the net interest margin was 3.32%, down 17 basis points from 3.49% for the same period the year before.
The provision for loan losses for the second quarter of 2011 was $0.9 million, a decrease of $0.6 million, or 40.0%, from $1.5 million in the second quarter of 2010. The provision for loan losses for the 2011 first half was $1.8 million, compared with $3.0 million for the same period in 2010. The Company continued to increase its loan loss allowance in the second quarter by maintaining a provision for loan losses that was greater than its net charge-off activity.
Noninterest income for the quarter declined to $3.3 million, down $0.2 million, or 6.8%, from $3.5 million in the second quarter of 2010, primarily due to decreased net gains on the sale of available for sale securities combined with lower mortgage origination and loan servicing fees. Net gains on the sale of securities available for sale for the second quarter of 2011 were $0.1 million, a decrease of 63.5% from the same period last year. Mortgage origination and loan servicing fees were $0.4 million for the second quarter of 2011, down 27.2% from $0.5 million for the same period last year. The decrease in mortgage origination and loan servicing fees was attributable to lower refinancing activity in single family residential loans during the second quarter of 2011 compared to the same period of 2010. These declines were partially offset by increased other service charges, commissions and fees of $0.1 million, or 17.5%, to $0.7 million for the second quarter of 2011, compared with $0.6 million for the same period of 2010.
For the first half of 2011, noninterest income rose to $7.1 million, an increase of $0.3 million, or 4.4%, from $6.8 million during the same period in 2010. The primary reason for this increase was the rise in mortgage origination and loan servicing fees to $1.3 million for the first six months of 2011 from $1.0 million for the same period of 2010, combined with increased other service charges, commissions and fees of $1.4 million in the first half of 2011, which was an increase of $0.2 million from $1.2 million recognized for year-to-date 2010. These improvements were partially offset by lower net gains on the sale of securities available for sale of $0.1 million in the first six months of 2011, down $0.4 million, or 81.9%, from $0.5 million for the comparable period in 2010.
Second quarter noninterest expense was $10.3 million, a decrease of $0.4 million, or 3.4%, from the $10.7 million for the second quarter of 2010. Noninterest expense includes salaries and employee benefits, occupancy and equipment expense, FDIC insurance premiums, professional fees, data processing expense, and other operating expenses. The primary reasons for the decrease in noninterest expense were a decrease in FDIC insurance expense to $0.4 million for the second quarter of 2011 from $0.7 million in the second quarter of 2010, and a decrease in net occupancy and equipment expense to $1.5 million for the second quarter of 2011 from $1.6 million for the same period of 2010. The decrease in FDIC insurance expense was primarily due to the lower assessment rates, while the reduced net occupancy and equipment expenses were the result of management's cost control and efficiency efforts, notably the closing of three branches in late 2010. All remaining noninterest expense categories showed slight increases.
For the first six months of 2011, all noninterest expense categories decreased compared with the same period of 2010, with the exception of small increases in salaries and employee benefits and data processing expenses. Most notably, first half 2011 FDIC insurance expense declined $0.4 million to $1.0 million compared with $1.4 million, and net occupancy and equipment expense decreased to $3.1 million from $3.4 million, both compared to the first six months of 2010.
Income tax expense was $1.1 million for the second quarter compared with $0.9 million for the same period in 2010, and was $2.1 million for the six months ended June 30, 2011 compared to $1.4 million for the same period in 2010. The higher provision for both the three and six months was primarily due to increased income for both periods.
Balance Sheet and Asset Quality
Total assets rose to $1.65 billion at June 30, 2011 from $1.58 billion at December 31, 2010, resulting primarily from increased investment in securities, cash and cash equivalents and bank loans, partially offset by a decrease in loan pool participation balances. The asset growth was funded by an increase in deposit balances and Federal Home Loan Bank borrowings, partially offset by a decrease in repurchase agreements. Total deposits at June 30, 2011 rose to $1.26 billion, an increase of $37.0 million, or 3.0%, from December 31, 2010, and FHLB advances increased $17.8 million to $145.0 million at June 30, 2011, from $127.2 million at December 31, 2010.


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Total bank loans (excluding loan pool participations and loans held for sale) were $20.2 million higher at $958.2 million at June 30, 2011, compared with $938.0 million as of December 31, 2010. This was primarily due to an increase in commercial and financial and other commercial real estate (not construction, farmland or multifamily) loans, partially offset by decreases in farmland and agricultural loans. At the end of the second quarter of 2011, the largest category of bank loans was commercial real estate, comprising 42% of the portfolio, of which 8% was construction, 7% farmland, and 4% multifamily. Commercial and financial loans was the next largest category at 24%, followed by residential real estate loans at 24%, agricultural loans at 8%, and consumer loans at 2%.
Nonperforming loans increased from December 31, 2010, although this asset class did show a decline of $1.6 million from March 31, 2011. Specifically, nonperforming loans were $21.8 million at June 30, 2011, or 2.28% of total bank loans, compared with $19.8 million at December 31, 2010, or 2.11% of total bank loans. This increase is primarily attributable to one construction and development loan and two commercial real estate loans with combined balances of $2.2 million having been added to nonaccrual loans during the period. At June 30, 2011, nonperforming loans consisted of $14.9 million in nonaccrual loans, $6.0 million in troubled debt restructures and $0.9 million in loans past due 90 days or more and still accruing. Loans past due 30 to 89 days and still accruing interest (not included in the nonperforming loan totals) were $7.6 million at June 30, 2011, compared with $10.5 million at December 31, 2010. While nonperforming loan levels increased during the first six months of 2011, the increase has been primarily in credits that the Company's management had already identified as weak. At June 30, 2011, other real estate owned (not included in nonperforming loans) was $3.4 million, a decrease of $0.4 million from December 31, 2010.
Mr. Funk continued, "At June 30, our nonperforming loans decreased from the end of the first quarter levels, as almost all of our large nonperforming loans had already been identified as weak. Additionally, we are appreciative of the continued good work being done by our commercial bankers and by our loan review staff, which has resulted in an annualized net charge-off ratio of 0.29% in the bank loan portfolio. We continue to provide more to our loan loss reserve than we charge off."
As of June 30, 2011, the allowance for bank loan losses was $15.6 million, or 1.63% of total bank loans, compared with $15.2 million, or 1.62% of total bank loans at December 31, 2010. The allowance for loan losses represented 71.56% of nonperforming loans at June 30, 2011, compared with 76.67% of nonperforming loans at December 31, 2010. Due to the early identification of potential problem loans, the decline in the ratio of the allowance for loan losses to nonperforming loans was not unexpected. The bank had net loan charge-offs of $1.4 million in the first six months of 2011, or an annualized 0.29% of average bank loans outstanding.
Loan pool participations (participation interests in performing, sub-performing and nonperforming loans that have been purchased from various nonaffiliated banking organizations) were $58.8 million at June 30, 2011, down from $68.0 million at December 31, 2010, and $79.0 million at the end of the second quarter last year. The Company entered into this business upon consummation of its merger with the Former MidWestOne in March 2008. As previously announced, the Company has decided to exit this line of business as current balances pay down.
The Company has minimal exposure in loan pools to consumer real estate, subprime credit or construction and real estate development loans. The net “all-in” yield (after all expenses) on loan pool participations was 2.83% for the second quarter of 2011, down from 4.47% for the second quarter of 2010. Yields were 2.49% and 4.40% for the first six months of 2011 and 2010, respectively. The net yield was lower in the second quarter of 2011 due to an increase in the level of charge-offs and decreased payment collections in the portfolio. Including loan pool participations, the loan to deposit ratio was 81.0% as of June 30, 2011, compared with 82.5% as of December 31, 2010.
Investment securities totaled $503.7 million at June 30, 2011, or 30.6% of total assets, up from $466.0 million, or 29.5% of total assets, as of December 31, 2010. A total of $501.2 million of the investment securities were classified as available for sale. The portfolio consisted mainly of U.S. government agencies (13.6%), mortgage-backed securities (44.9%), and obligations of states and political subdivisions (39.8%).
Capital Adequacy
Total shareholders' equity (including $16.0 million of senior preferred stock issued to the U.S. Treasury pursuant to the Capital Purchase Program) was $168.6 million as of June 30, 2011. As announced, on July 6, 2011, the Company completed redemption of the 16,000 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A issued to the U.S. Treasury in conjunction with MidWestOne's participation in the Capital Purchase Program for $16.1 million, consisting of $16.0 million of principal and $0.1 million of accrued and unpaid dividends. On July 27, 2011, the Company announced that it had repurchased for $1.0 million the common stock warrant issued to the U.S. Treasury as part of the Capital Purchase Program. The warrant had allowed Treasury to purchase 198,675 shares of MidWestOne common stock at $12.08 per share. Total shareholders' equity to

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total assets ratio was 10.25% at June 30, 2011, compared with 10.02% at December 31, 2010. The tangible common equity to tangible assets ratio was 8.69% at June 30, 2011, compared with 8.37% at December 31, 2010. Tangible common equity per share was $16.47 at June 30, 2011, up from $15.27 per share at December 31, 2010. This increase was primarily attributable to net income of $6.1 million for the six months of 2011, less the $0.4 million of dividends paid during the same period on the senior preferred stock issued to the U.S. Treasury.
Quarterly Cash Dividend Declared
On July 26, 2011, the Company's board of directors declared a third quarter cash dividend of $0.06 per common share, which is a $0.01 increase from the dividend paid in each of the first two quarters of 2011. The dividend is payable September 15, 2011, to shareholders of record at the close of business on September 1, 2011. At this quarterly rate, the indicated annual cash dividend is equal to $0.24 per common share.
About MidWestOne Financial Group, Inc.
MidWestOne Financial Group, Inc. is a financial holding company headquartered in Iowa City, Iowa. The Company's bank subsidiary MidWestOne Bank, is also headquartered in Iowa City. MidWestOne Bank has office locations in Belle Plaine, Burlington, Cedar Falls, Conrad, Coralville, Davenport, Fairfield, Fort Madison, Iowa City, Melbourne, North English, North Liberty, Oskaloosa, Ottumwa, Parkersburg, Pella, Sigourney, Waterloo and West Liberty, Iowa. MidWestOne Insurance Services, Inc. provides personal and business insurance services in Pella, Melbourne and Oskaloosa, Iowa. MidWestOne Financial Group, Inc. common stock is traded on the NASDAQ Global Select Market under the symbol “MOFG.”


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Non-GAAP Presentations:
Certain non-GAAP ratios are provided to evaluate and measure the Company's operating performance and financial condition, including net interest margin, Tier 1 capital to average assets, and tangible common equity to tangible assets ratios. Management believes these ratios provide investors with information regarding the Company's balance sheet, profitability, financial condition and capital adequacy and how management evaluates such metrics internally.  The following tables provide a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.
 
 
 
As of
 
As of
 
As of
 
As of
 
 
 
June 30,
 
March 31,
 
December 31,
 
June 30,
 
 
 
2011
 
2011
 
2010
 
2010
(in thousands)
 
 
 
 
 
 
 
 
Tangible Common Equity
 
 
 
 
 
 
 
 
Total shareholders' equity
 
$
168,637

 
$
161,315

 
$
158,466

 
$
157,387

Less: Preferred equity
 
(15,802
)
 
(15,784
)
 
(15,767
)
 
(15,733
)
         Goodwill and intangibles
 
(10,795
)
 
(11,019
)
 
(11,243
)
 
(11,761
)
Tangible common equity
 
$
142,040

 
$
134,512

 
$
131,456

 
$
129,893

Tangible Assets
 
 
 
 
 
 
 
 
Total assets
 
$
1,645,373

 
$
1,618,231

 
$
1,581,259

 
$
1,563,548

Less: Goodwill and intangibles
 
(10,795
)
 
(11,019
)
 
(11,243
)
 
(11,761
)
Tangible assets
 
$
1,634,578

 
$
1,607,212

 
$
1,570,016

 
$
1,551,787

Tangible common equity/tangible assets
 
8.69
%
 
8.37
%
 
8.37
%
 
8.37
%
 
 
 
 
 
 
 
 
 
Tier 1 Capital
 
 
 
 
 
 
 
 
Total shareholders' equity
 
168,637

 
161,315

 
158,466

 
157,387

Plus: Long term debt (qualifying restricted core capital)
 
15,464

 
15,464

 
15,464

 
15,464

Net unrealized (gains) losses on securities
      available for sale
 
(3,329
)
 
1,330

 
1,826

 
(3,259
)
Less: Disallowed goodwill and intangibles
 
(10,911
)
 
(11,138
)
 
(11,327
)
 
(11,795
)
Tier 1 Capital
 
169,861

 
166,971

 
164,429

 
157,797

Average Assets
 
 
 
 
 
 
 
 
Quarterly average assets
 
1,626,544

 
1,589,542

 
1,584,616

 
1,561,819

Less: Disallowed goodwill and intangibles
 
(10,911
)
 
(11,138
)
 
(11,327
)
 
(11,795
)
Average Assets
 
1,615,633

 
1,578,404

 
1,573,289

 
1,550,024

Tier 1 capital/average assets
 
10.51
%
 
10.58
%
 
10.45
%
 
10.18
%

 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
Year Ended December 31,
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
 
2011
 
2011
 
2010
 
2010
 
2010
(in thousands)
 
 
 
 
 
 
 
 
 
 
Net Interest Margin Tax Equivalent Adjustment
 
 
 
 
 
 
 
 
 
 
Net interest income
 
$
12,237

 
$
12,237

 
$
47,865

 
$
12,156

 
$
23,923

Plus tax equivalent adjustment:
 
 
 
 
 
 
 
 
 
 
Loans
 
83

 
166

 
324

 
80

 
165

Securities
 
434

 
966

 
2,038

 
508

 
1,041

Tax equivalent interest income (1)
 
$
12,754

 
$
13,369

 
$
50,227

 
$
12,744

 
$
25,129

Average interest earning assets
 
$
1,536,781

 
$
1,516,219

 
$
1,466,265

 
$
1,470,039

 
$
1,452,093

Net interest margin
 
3.33
%
 
3.32
%
 
3.43
%
 
3.48
%
 
3.49
%
(1) Computed on a tax-equivalent basis, assuming a federal income tax rate of 34%
 
 
 
 


5



Cautionary Note Regarding Forward-Looking Statements
This release contains certain “forward-looking statements” within the meaning of such term in the Private Securities Litigation Reform Act of 1995. We and our authorized representatives may, from time to time, make written or oral statements that are “forward-looking” and provide information other than historical information. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement. These factors include, among other things, the factors listed below. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of our management and on information currently available to management, are generally identifiable by the use of words such as “believe”, “expect”, “anticipate”, “should”, “could”, “would”, “plans”, “intend”, “project”, “estimate', “forecast”, “may” or similar expressions.  These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, these statements. Readers are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Additionally, we undertake no obligation to update any statement in light of new information or future events, except as required under federal securities law.
Factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (1) credit quality deterioration or pronounced and sustained reduction in real estate market values could cause an increase in the allowance for credit losses and a reduction in net earnings; (2) our management's ability to reduce and effectively manage interest rate risk and the impact of interest rates in general on the volatility of our net interest income; (3) changes in the economic environment, competition, or other factors that may affect our ability to acquire loans or influence the anticipated growth rate of loans and deposits and the quality of the loan portfolio and loan and deposit pricing; (4) fluctuations in the value of our investment securities; (5) governmental monetary and fiscal policies; (6) legislative and regulatory changes, including changes in banking, securities and tax laws and regulations and their application by our regulators (particularly with respect to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") and the extensive regulations to be promulgated thereunder), and changes in the scope and cost of Federal Deposit Insurance Corporation insurance and other coverages; (7) the ability to attract and retain key executives and employees experienced in banking and financial services; (8) the sufficiency of the allowance for loan losses to absorb the amount of actual losses inherent in our existing loan portfolio; (9) our ability to adapt successfully to technological changes to compete effectively in the marketplace; (10) credit risks and risks from concentrations (by geographic area and by industry) within our loan portfolio; (11) the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds, and other financial institutions operating in our markets or elsewhere or providing similar services; (12) the failure of assumptions underlying the establishment of allowances for loan losses and estimation of values of collateral and various financial assets and liabilities; (13) volatility of rate-sensitive deposits; (14) operational risks, including data processing system failures or fraud; (15) asset/liability matching risks and liquidity risks; (16) the risks of mergers, acquisitions and divestitures, including, without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and possible failures to achieve expected gains, revenue growth and/or expense savings from such transactions; (17) the costs, effects and outcomes of existing or future litigation; (18) changes in general economic or industry conditions, nationally or in the communities in which we conduct business; (19) changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the Financial Accounting Standards Board; and (20) other risk factors detailed from time to time in SEC filings made by the Company.


6



MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

 
June 30,
2011
 
December 31, 2010
(dollars in thousands)
(unaudited)
 
 
ASSETS
 
 
 
Cash and due from banks
$
23,193

  
$
13,720

Interest-bearing deposits in banks
18,153

  
6,077

Federal funds sold
419

  
726

Cash and cash equivalents
41,765

  
20,523

Investment securities:
  
 
 
Available for sale
501,211

  
461,954

Held to maturity (fair value of $2,502 as of June 30, 2011 and $4,086 as of December 31, 2010)
2,493

  
4,032

Loans held for sale
312

  
702

Loans
958,199

  
938,035

Allowance for loan losses
(15,603
)
 
(15,167
)
Net loans
942,596

  
922,868

Loan pool participations, net
56,664

  
65,871

Premises and equipment, net
25,472

  
26,518

Accrued interest receivable
9,199

  
10,648

Other intangible assets, net
10,695

  
11,143

Bank-owned life insurance
27,227

  
26,772

Other real estate owned
3,418

  
3,850

Deferred income taxes
3,370

  
6,430

Other assets
20,951

  
19,948

Total assets
$
1,645,373

  
$
1,581,259

LIABILITIES AND SHAREHOLDERS' EQUITY
  
 
 
Deposits:
  
 
 
Non-interest-bearing demand
$
153,617

  
$
129,978

Interest-bearing checking
461,197

  
442,878

Savings
77,329

  
74,826

Certificates of deposit under $100,000
369,023

  
380,082

Certificates of deposit $100,000 and over
195,121

  
191,564

Total deposits
1,256,287

  
1,219,328

Securities sold under agreements to repurchase
48,189

  
50,194

Federal Home Loan Bank borrowings
144,961

  
127,200

Deferred compensation liability
3,681

  
3,712

Long-term debt
15,464

  
15,464

Accrued interest payable
1,777

  
1,872

Other liabilities
6,377

  
5,023

Total liabilities
1,476,736

  
1,422,793

 
 
 
 
Shareholders' equity:
  
 
 
Preferred stock, no par value, with a liquidation preference of $1,000 per share; authorized 500,000 shares; issued 16,000 shares as of June 30, 2011 and December 31, 2010
$
15,802

  
$
15,767

Common stock, $1 par value; authorized 15,000,000 shares at June 30, 2011 and December 31, 2010; issued 8,690,398 shares at June 30, 2011 and December 31, 2010; outstanding 8,628,221 shares at June 30, 2011 and 8,614,790 shares at December 31, 2010
8,690

  
8,690

Additional paid-in capital
81,232

  
81,268

Treasury stock at cost, 62,177 shares as of June 30, 2011 and 75,608 shares at December 31, 2010
(865
)
 
(1,052
)
Retained earnings
60,449

  
55,619

Accumulated other comprehensive income (loss)
3,329

  
(1,826
)
Total shareholders' equity
168,637

  
158,466

Total liabilities and shareholders' equity
$
1,645,373

  
$
1,581,259



7



MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)
(dollars in thousands, except per share amounts)
  
Three Months Ended June 30,
 
Six Months Ended June 30,
 
  
2011
 
2010
 
2011
 
2010
Interest income:
  
 
 
 
 
 
 
 
Interest and fees on loans
  
$
12,976

 
$
13,761

 
$
25,776

 
$
27,465

Interest and discount on loan pool participations
  
436

 
909

 
790

 
1,808

Interest on bank deposits
  
8

 
17

 
16

 
27

Interest on federal funds sold
  
1

 
4

 
1

 
4

Interest on investment securities:
  
  
 
 
 
 
 
 
Taxable securities
  
2,866

 
2,445

 
5,554

 
4,670

Tax-exempt securities
  
1,072

 
986

 
2,107

 
1,976

Total interest income
  
17,359

 
18,122

 
34,244

 
35,950

 
 
 
 
 
 
 
 
 
Interest expense:
  
 
 
 
 
 
 
 
Interest on deposits:
  
 
 
 
 
 
 
 
Interest-bearing checking
  
994

 
1,133

 
2,002

 
2,203

Savings
  
58

 
43

 
117

 
79

Certificates of deposit under $100,000
  
2,120

 
2,455

 
4,307

 
4,998

Certificates of deposit $100,000 and over
  
839

 
918

 
1,687

 
1,885

Total interest expense on deposits
  
4,011

 
4,549

 
8,113

 
9,165

Interest on federal funds purchased
  
3

 
1

 
3

 
2

Interest on securities sold under agreements to repurchase
  
67

 
70

 
141

 
146

Interest on Federal Home Loan Bank borrowings
  
868

 
1,183

 
1,813

 
2,390

Interest on notes payable
  
10

 
11

 
20

 
24

Interest on long-term debt
  
163

 
152

 
325

 
300

Total interest expense
  
5,122

 
5,966

 
10,415

 
12,027

Net interest income
  
12,237

 
12,156

 
23,829

 
23,923

Provision for loan losses
  
900

 
1,500

 
1,800

 
3,000

Net interest income after provision for loan losses
  
11,337

 
10,656

 
22,029

 
20,923

 
 
 
 
 
 
 
 
 
Noninterest income:
  
 
 
 
 
 
 
 
Trust, investment, and insurance fees
  
1,156

 
1,214

 
2,429

 
2,448

Service charges and fees on deposit accounts
  
955

 
1,034

 
1,806

 
1,898

Mortgage origination and loan servicing fees
  
382

 
525

 
1,259

 
1,025

Other service charges, commissions and fees
  
677

 
576

 
1,356

 
1,160

Bank-owned life insurance income
  
225

 
147

 
454

 
314

Impairment losses on investment securities
  

 

 

 
(189
)
Gain on sale of available for sale securities
  
85

 
233

 
85

 
470

Loss on sale of premises and equipment
  
(195
)
 
(204
)
 
(243
)
 
(281
)
Total noninterest income
  
3,285

 
3,525

 
7,146

 
6,845

 
 
 
 
 
 
 
 
 
Noninterest expense:
  
 
 
 
 
 
 
 
Salaries and employee benefits
  
5,739

 
5,691

 
11,609

 
11,481

Net occupancy and equipment expense
  
1,498

 
1,630

 
3,115

 
3,406

Professional fees
  
688

 
659

 
1,365

 
1,408

Data processing expense
  
426

 
414

 
876

 
871

FDIC Insurance expense
  
356

 
705

 
953

 
1,397

Other operating expense
  
1,588

 
1,563

 
3,011

 
3,147

Total noninterest expense
  
10,295

 
10,662

 
20,929

 
21,710

Income before income tax expense
  
4,327

 
3,519

 
8,246

 
6,058

Income tax expense
  
1,104

 
914

 
2,118

 
1,449

Net income
  
$
3,223

 
$
2,605

 
$
6,128

 
$
4,609

Less: Preferred stock dividends and discount accretion
  
$
218

 
$
217

 
$
435

 
$
434

Net income available to common shareholders
  
$
3,005

 
$
2,388

 
$
5,693

 
$
4,175

 
  
 
 
 
 
 
 
 


8



MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION

 
June 30,
2011
 
March 31,
2011
 
December 31,
2010
 
June 30,
2010
(unaudited, dollars in thousands, except per share amounts)
 
 
 
 
 
 
 
Per share data:
 
 
 
 
 
 
 
Book value per share
$
19.54

 
$
18.70

 
18.39

 
$
18.27

Tangible common equity per share
16.47

 
15.61

 
15.27

 
15.09

Financial Ratios:
 
 
 
 
 
 
 
Tangible common equity/tangible assets
8.69
%
 
8.37
%
 
8.37
%
 
8.37
%
Total shareholders' equity/total assets
10.25
%
 
9.97
%
 
10.02
%
 
10.07
%
Tier 1 capital/average assets
10.51
%
 
10.58
%
 
10.45
%
 
10.18
%
Total bank loans/total deposits
76.27
%
 
74.30
%
 
76.93
%
 
79.98
%
Total loans + loan pools/total deposits
80.95
%
 
79.39
%
 
82.51
%
 
86.59
%
Asset Quality
 
 
 
 
 
 
 
Gross bank loans
$
958,199

 
$
938,523

 
938,035

 
$
956,187

Allowance for bank loan losses
15,603

 
15,398

 
15,167

 
14,823

Net charge-offs (YTD)
1,364

 
669

 
4,740

 
2,134

Bank loans past due 30 - 89 days
7,645

 
7,038

 
10,482

 
8,947

Other real estate owned
3,418

 
3,874

 
3,850

 
2,634

Non-performing bank loans
 
 
 
 
 
 
 
Non-accrual loans
$
14,902

 
$
14,531

 
12,405

 
$
10,525

Restructured loans
6,009

 
6,661

 
5,797

 
6,409

Loans 90+ days past due
894

 
2,244

 
1,579

 
2,954

Total non-performing bank loans
21,805

 
23,436

 
19,781

 
19,888

 
 
 
 
 
 
 
 
Gross loan pools
$
58,798

 
$
64,341

 
68,005

 
$
79,023

Allowance for loan pool losses
2,134

 
2,134

 
2,134

 
2,134

Net bank loan charge-offs/average bank loans (YTD - annualized)
0.29
%
 
0.29
%
 
0.50
%
 
0.45
%
Nonperforming bank loans/total bank loans
2.28
%
 
2.50
%
 
2.11
%
 
2.08
%
Nonperforming bank loans + other real estate/total assets
1.53
%
 
1.69
%
 
1.49
%
 
1.44
%
Allowance for bank loan losses/total bank loans
1.63
%
 
1.64
%
 
1.62
%
 
1.55
%
Allowance for loan pool losses/total loan pools
3.63
%
 
3.32
%
 
3.14
%
 
2.70
%
Allowance for bank loan losses/nonperforming bank loans
71.56
%
 
65.70
%
 
76.67
%
 
74.53
%
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
Year Ended
December 31,
 
2011
 
2010
 
2011
 
2010
 
2010
Per share data:
 
 
 
 
 
 
 
 
 
Ending number of shares outstanding
8,628,221

 
8,612,582

 
8,628,221

 
8,612,582

 
8,614,790

Average number of shares outstanding
8,627,810

 
8,612,582

 
8,624,782

 
8,610,231

 
8,612,117

Diluted average number of shares
8,674,558

 
8,643,233

 
8,678,787

 
8,628,756

 
8,637,713

Earnings per common share - basic
$
0.35

 
$
0.27

 
$
0.66

 
$
0.48

 
$
1.08

Earnings per common share - diluted
0.35

 
0.27

 
0.66

 
0.48

 
1.07

Dividends paid per common share
0.05

 
0.05

 
0.10

 
0.10

 
0.20

Performance Ratios:
 
 
 
 
 
 
 
 
 
Return on average assets
0.79
%
 
0.67
%
 
0.77
%
 
0.60
%
 
0.65
%
Return on average shareholders' equity
7.90
%
 
6.74
%
 
7.66
%
 
6.04
%
 
6.44
%
Return on average tangible common equity
8.81
%
 
7.52
%
 
8.54
%
 
6.67
%
 
7.14
%
Net interest margin (FTE)
3.33
%
 
3.48
%
 
3.32
%
 
3.49
%
 
3.43
%
Efficiency Ratio*
64.19
%
 
65.54
%
 
68.28
%
 
78.31
%
 
66.46
%
Average Balances:
 
 
 
 
 
 
 
 
 
Total bank loans
$
949,318

 
$
957,302

 
$
939,338

 
$
958,429

 
$
955,562

Total loan pools
61,885

 
81,499

 
64,104

 
82,876

 
78,150

Interest-earning assets
1,536,781

 
1,470,039

 
1,516,219

 
1,452,093

 
1,466,265

Total assets
1,626,544

 
1,561,819

 
1,608,126

 
1,544,560

 
1,559,035

Interest-bearing deposits
1,113,475

 
1,064,900

 
1,105,156

 
1,051,211

 
1,054,069

Interest-bearing liabilities
1,300,808

 
1,253,332

 
1,292,131

 
1,238,332

 
1,246,655

Stockholders' common equity
147,836

 
139,364

 
145,489

 
138,234

 
141,456

Total equity
163,627

 
155,088

 
161,272

 
153,950

 
157,190

 
 
 
 
 
 
 
 
 
 
* - Noninterest expense divided by the sum of tax equivalent net interest income plus noninterest income
 
 
 
 
 
 
 
 
 

9