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MidWestOne Financial Group, Inc. Reports Financial Results For the First Quarter of 2025

IOWA CITY, Iowa, April 24, 2025 (GLOBE NEWSWIRE) -- MidWestOne Financial Group, Inc. (Nasdaq: MOFG) ("we," "our," or the "Company") today reported results for the first quarter of 2025.

First Quarter 2025 Summary¹

• Net income of $15.1 million, or $0.73 per diluted common share.
  • Net interest margin (tax equivalent) was 3.44%;² core net interest margin expanded 10 basis points ("bps") to 3.36%.²
  • Noninterest expenses were $36.3 million; efficiency ratio was 59.38%.²
  • Return on average assets of 1.00%.
• Criticized loans ratio improved 54 bps to 5.47%; nonperforming assets ratio improved 7 bps to 0.33%.
• Tangible book value per share of $23.36,² an increase of 4.4%.
• Common equity tier 1 ("CET1") capital ratio improved 24 bps to 10.97%.

CEO Commentary

Charles (Chip) Reeves, Chief Executive Officer of the Company, commented, "We are pleased with the continued execution of our strategic plan initiatives despite a more uncertain economic environment. Our return on average assets eclipsed 1% for the second straight quarter driven by disciplined balance sheet management, core net interest margin expansion of 10 bps² and solid expense control. Loan growth was flat in the quarter, somewhat softer than anticipated, due to pay-offs and latter quarter market volatility. The majority of our asset quality metrics improved significantly, led by reductions in nonperforming assets and criticized loans. Net charge-offs increased to 29 basis points, with the majority of the increase due to a partial charge-off on a previously reserved CRE loan as we prepare for resolution. Driven by earnings and lower accumulated other comprehensive loss, tangible book value per share increased 4.4% to $23.36² and the CET1 ratio grew to 10.97%, edging closer to our target range of 11.0%-11.50%.

Thank you to our team members who continued to execute well and serve our customers amidst market volatility. We are pleased with the transformation of our company and our solid foundation of increased capital, earnings power, asset quality, and a premium core deposit franchise position us well for uncertain economic times and the remainder of 2025.鈥�

¹ First Quarter Summary compares to the fourth quarter of 2024 (the "linked quarter") unless noted.
² Non-GAAP measure. See the separate Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.

REVENUE REVIEW

Total revenue for the first quarter of 2025 decreased $2.2 million from the fourth quarter of 2024 due to lower net interest income and noninterest income during the quarter. When compared to the first quarter of 2024, total revenue increased $13.1 million, due to higher net interest income and higher noninterest income.

Net interest income of $47.4 million for the first quarter of 2025 decreased $1.5 million from the fourth quarter of 2024, due to lower earning asset volumes and yields, partially offset by lower funding volumes and costs. When compared to the first quarter of 2024, net interest income increased $12.7 million, due to higher earning asset yields and lower funding volumes and costs, partially offset by lower earning asset volumes.

The Company's tax equivalent net interest margin was 3.44%³ in the first quarter of 2025, compared to 3.43%³ in the fourth quarter of 2024, driven by lower funding costs, partially offset by a decline in earning asset yields. Interest bearing liability costs during the first quarter of 2025 decreased 11 bps to 2.41%, due to reductions of short-term borrowings, interest bearing deposits, and long-term debt costs of 78 bps, 10 bps, and 7 bps, to 3.75%, 2.31%, and 6.41%, respectively, from the fourth quarter of 2024.

The Company's tax equivalent net interest margin was 3.44%³ in the first quarter of 2025, compared to 2.33%³ in the first quarter of 2024, driven by higher earning asset yields and lower interest-bearing liability costs. Total earning assets yield increased 79 bps from the first quarter of 2024, primarily due to increases of 192 bps and 20 bps in total investment securities and loan yields, respectively. Interest bearing liability costs decreased 34 bps to 2.41%, due to short-term borrowing costs of 3.75%, long-term debt costs of 6.41%, and interest-bearing deposit costs of 2.31%, which decreased 107 bps, 45 bps, and 14 bps, respectively, from the first quarter of 2024.

³ Non-GAAP measure. See the separate Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.

Noninterest income for the first quarter of 2025 decreased $0.7 million from the linked quarter, primarily due to declines of $0.6 million and $0.2 million in loan revenue and investment services and trust activities revenue, respectively. The decrease in loan revenue was reflective of an unfavorable change in the fair value of our mortgage servicing rights of $0.4 million, coupled with a decrease in Small Business Administration ("SBA") gain on sale revenue of $0.3 million. The decrease in investment services and trust activities revenue was driven by a decline in assets under administration due to market volatility. Partially offsetting these decreases was an increase of $0.3 million in bank-owned life insurance revenue, due primarily to $0.4 million of death benefit recognized in the first quarter of 2025.

Noninterest income for the first quarter of 2025 increased $0.4 million from the first quarter of 2024 due primarily to increases of $0.4 million and $0.3 million in bank-owned life insurance and loan revenue, respectively. The bank-owned life insurance increase was due primarily to the death benefit noted above. The increase in loan revenue was due primarily to the mortgage servicing right valuation adjustment, coupled with higher SBA gain on sale revenue and other loan income. Partially offsetting these increases were decreases of $0.2 million in each of card revenue and other revenue.

EXPENSE REVIEW

Noninterest expense for the first quarter of 2025 decreased $1.1 million from the linked quarter, primarily due to decreases in other noninterest expense, legal and professional, equipment, and occupancy expense of premises, net, of $0.5 million, $0.3 million, $0.3 million, and $0.2 million, respectively. The primary drivers of the decrease in other noninterest expense were declines in fraud loss expense of $0.3 million and customer deposit costs of $0.1 million. The $0.3 million decrease in legal and professional expense was primarily driven by lower litigation-related legal costs. The decrease in equipment of $0.3 million was primarily driven by fewer small equipment purchases, while the decrease in occupancy expense of premises, net was due primarily to lower property tax expense. Partially offsetting these decreases was an increase of $0.5 million in compensation and employee benefits which reflected an increase in equity compensation and payroll tax expenses.

Noninterest expense for the first quarter of 2025 increased $0.7 million from the first quarter of 2024 primarily due to increases in other noninterest expense, data processing, and compensation and employee benefits of $1.0 million, $0.3 million and $0.3 million, respectively. The increase in other noninterest expense was due primarily to customer deposit costs while the increase in data processing was driven core banking system costs. The increase in compensation and employee benefits was primarily driven by medical benefits expenses, wages expense, and incentive expense due to improved performance. Partially offsetting these identified increases was a decline of $1.3 million in merger-related expenses.

The Company's effective tax rate was 22.7% in the first quarter of 2025 and the linked quarter. The effective income tax rate for the full year 2025 is expected to be 22-23%.

BALANCE SHEET REVIEW

Total assets were $6.25 billion at March听31, 2025, compared to $6.24 billion at December听31, 2024 and $6.75 billion at March听31, 2024. The increase from December听31, 2024 was primarily due to higher cash balances, partially offset by lower securities balances. Compared to March听31, 2024, the decrease was primarily driven by the sale of assets associated with our Florida banking operations in the second quarter of 2024 coupled with the pay-off of Bank Term Funding Program ("BTFP") borrowings with proceeds received from securities sales transactions in the fourth quarter of 2024.

Loans held for investment, net of unearned income, decreased $11.4 million, or 0.3%, to $4.30 billion from $4.32 billion at December听31, 2024, primarily due to the reclassification of $11.0 million of credit card receivables to loans held for sale in the first quarter of 2025. Management expects the credit card portfolio sale to close in the fourth quarter of 2025.

Loans held for investment, net of unearned income, decreased $110.5 million, or 2.5%, to $4.30 billion from $4.41 billion at March听31, 2024. The decrease from the first quarter of 2024 was driven primarily by the sale of loans associated with our Florida banking operations in the second quarter of 2024, partially offset by organic loan growth and higher line of credit usage.

Investment securities at March听31, 2025 were $1.31 billion, decreasing $22.9 million from December听31, 2024 and decreasing $556.6 million from March听31, 2024. The decrease from the fourth quarter of 2024 was primarily due to principal cash flows received from scheduled payments, calls, and maturities. The decrease from the first quarter of 2024 stemmed primarily from the sale of debt securities in connection with a balance sheet repositioning, as well as principal cash flows received from scheduled payments, calls, and maturities.听

Total deposits increased $11.2 million, or 0.2%, to $5.49 billion, from $5.48 billion at December听31, 2024. Total deposits decreased $96.1 million, or 1.7%, from $5.59 billion at March听31, 2024, primarily due to the deposits transferred in the sale of our Florida banking operations, partially offset by organic deposit growth in our targeted metropolitan markets.

Borrowed funds were $112.9 million at March听31, 2025, a decrease of $3.7 million from December听31, 2024 and a decrease of $432.2 million from March听31, 2024. The decrease compared to the linked quarter was due to lower customer repurchase agreement volumes and scheduled payments on long-term debt. The decrease compared to March听31, 2024 was primarily due to the pay-off of $405.0 million of BTFP borrowings and $13.0 million of a revolving credit facility, as well as scheduled payments on long-term debt.

Total shareholders' equity at March听31, 2025 increased $19.9 million from December听31, 2024, driven primarily by an increase in retained earnings and a decrease in accumulated other comprehensive loss. Total shareholders' equity at March听31, 2025 increased $51.6 million from March听31, 2024, primarily due to increases in common stock and additional pain-in-capital stemming from the common equity capital raise in the third quarter of 2024, partially offset by a decrease in retained earnings.

On April听22, 2025, the Board of Directors of the Company declared a cash dividend of $0.2425 per common share. The dividend is payable June听16, 2025, to shareholders of record at the close of business on June听2, 2025.

No common shares were repurchased by the Company during the period December听31, 2024 through March听31, 2025 or for the subsequent period through April听24, 2025. The current share repurchase program allows for the repurchase of up to $15.0 million of the Company's common shares. As of March听31, 2025, $15.0 million remained available under this program.

CREDIT QUALITY REVIEW

Nonperforming loans and nonperforming assets ratios improved 10 bps and 7 bps, to 0.41% and 0.33%, respectively, compared to the linked quarter. In addition, special mention loan balances decreased $27.0 million, or 18%, while classified loan balances remained relatively stable with an increase of $3.2 million, or 3%. When compared to the same period of the prior year, the nonperforming loans and nonperforming asset ratios improved 25 bps and 16 bps, respectively, while the classified loan ratio improved 106 bps. Special mention loan balances decreased $31.1 million, or 20%. The net charge-off ratio increased 23 bps from the linked quarter and 27 bps from the same period in the prior year.

As of March听31, 2025, the allowance for credit losses was $53.9 million and the allowance for credit losses ratio was 1.25%, compared with $55.2 million and 1.28%, respectively, at December听31, 2024. Credit loss expense of $1.7 million in the first quarter of 2025 primarily reflected additional reserve on pooled loans, offset by a reduction of $0.1 million in the reserve for unfunded loan commitments.

CONFERENCE CALL DETAILS

The Company will host a conference call for investors at 11:00 a.m. CT on Friday, April听25, 2025. To participate, you may pre-register for this call utilizing the following link: . After pre-registering for this event you will receive your access details via email. On the day of the call, you are also able to dial 1-833-470-1428 using an access code of 527448 at least fifteen minutes before the call start time. If you are unable to participate on the call, a replay will be available until July 24, 2025 by calling 1-866-813-9403 and using the replay access code of 162684. A transcript of the call will also be available on the Company鈥檚 web site () within three business days of the call.

ABOUT MIDWESTONE FINANCIAL GROUP, INC.

MidWestOne Financial Group, Inc. is a financial holding company headquartered in Iowa City, Iowa. MidWestOne is the parent company of MidWestOne Bank, which operates banking offices in Iowa, Minnesota, Wisconsin, and Colorado. MidWestOne provides electronic delivery of financial services through its website, . MidWestOne Financial Group, Inc. trades on the Nasdaq Global Select Market under the symbol 鈥淢OFG鈥�.

Cautionary Note Regarding Forward-Looking Statements

This release contains certain 鈥渇orward-looking statements鈥� within the meaning of such term in the Private Securities Litigation Reform Act of 1995. We and our representatives may, from time to time, make written or oral statements that are 鈥渇orward-looking鈥� 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 鈥渂elieve,鈥� 鈥渆xpect,鈥� 鈥渁nticipate,鈥� 鈥渟hould,鈥� 鈥渃ould,鈥� 鈥渨ould,鈥� 鈥減lans,鈥� 鈥済oals,鈥� 鈥渋ntend,鈥� 鈥減roject,鈥� 鈥渆stimate,鈥� 鈥渇orecast,鈥� 鈥渕ay鈥� 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.

Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors that could have an impact on our ability to achieve operating results, growth plan goals and future prospects include, but are not limited to, the following: (1) the effects of changes in interest rates, including on our net income and the value of our securities portfolio; (2) fluctuations in the value of our investment securities; (3) effects on the U.S. economy resulting from the implementation of proposed policies and executive orders, including the imposition of tariffs, changes in immigration policy, changes to regulatory or other governmental agencies, changes in foreign policy and tax regulations; (4) volatility of rate-sensitive deposits; (5) asset/liability matching risks and liquidity risks; (6) the ability to successfully manage liquidity risk, which may increase dependence on non-core funding sources such as brokered deposits, and may negatively impact the Company鈥檚 cost of funds; (7) the concentration of large deposits from certain clients, including those who have balances above current FDIC insurance limits; (8) credit quality deterioration, pronounced and sustained reduction in real estate market values, or other uncertainties, including the impact of inflationary pressures and future monetary policies of the Federal Reserve in response thereto on economic conditions and our business, resulting in an increase in the allowance for credit losses, an increase in the credit loss expense, and a reduction in net earnings; (9) the sufficiency of the allowance for credit losses to absorb the amount of expected losses inherent in our existing loan portfolio; (10) the failure of assumptions underlying the establishment of allowances for credit losses and estimation of values of collateral and various financial assets and liabilities; (11) credit risks and risks from concentrations (by type of borrower, collateral, geographic area and by industry) within our loan portfolio; (12) 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; (13) governmental monetary and fiscal policies; (14) new or revised general economic, political, or industry conditions, nationally, internationally or in the communities in which we conduct business, including the risk of a recession; (15) the imposition of domestic or foreign tariffs or other governmental policies impacting the global supply chain and value of the agricultural or other products of our borrowers; (16) war or terrorist activities, including ongoing conflicts in the Middle East and the Russian invasion of Ukraine, widespread disease or pandemic, or other adverse external events, which may cause deterioration in the economy or cause instability in credit markets; (17) legislative and regulatory changes, including changes in banking, securities, trade, and tax laws and regulations and their application by our regulators, and including changes in interpretation or prioritization of such laws and regulations; (18) changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the Financial Accounting Standards Board; (19) 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, financial technology companies, and other financial institutions operating in our markets or elsewhere or providing similar services; (20) changes in the business and economic conditions generally and in the financial services industry, and the effects of recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time that resulted in prior bank failures; (21) the occurrence of fraudulent activity, breaches, or failures of our or our third party vendors' information security controls or cyber-security related incidents, including as a result of sophisticated attacks using artificial intelligence and similar tools or as a result of insider fraud; (22) the ability to attract and retain key executives and employees experienced in banking and financial services; (23) our ability to adapt successfully to technological changes to compete effectively in the marketplace; (24) operational risks, including data processing system failures and fraud; (25) the costs, effects and outcomes of existing or future litigation or other legal proceedings and regulatory actions; (26) the risks of mergers or branch sales (including the sale of our Florida banking operations and the acquisition of Denver Bankshares, Inc.), 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; (27) the economic impacts on the Company and its customers of climate change, natural disasters and exceptional weather occurrences, such as: tornadoes, floods and blizzards; and (28) other risk factors detailed from time to time in Securities and Exchange Commission filings made by the Company.

MIDWESTONE FINANCIAL GROUP, INC.
FIVE QUARTER CONSOLIDATED BALANCE SHEETS

MIDWESTONE FINANCIAL GROUP, INC.
FIVE QUARTER CONSOLIDATED STATEMENTS OF INCOME

MIDWESTONE FINANCIAL GROUP, INC.
FINANCIAL STATISTICS

MIDWESTONE FINANCIAL GROUP, INC.
AVERAGE BALANCE SHEET AND YIELD ANALYSIS

Non-GAAP Measures

This earnings release contains non-GAAP measures for tangible common equity, tangible book value per share, tangible common equity ratio, return on average tangible equity, net interest margin (tax equivalent), core net interest margin, loan yield (tax equivalent), core yield on loans, efficiency ratio, adjusted earnings and adjusted earnings per share. Management believes these measures provide investors with useful information regarding the Company鈥檚 profitability, financial condition and capital adequacy, consistent with how management evaluates the Company鈥檚 financial performance. The following tables provide a reconciliation of each non-GAAP measure to the most comparable GAAP measure.

⁽¹⁾听Tangible common equity divided by shares outstanding.听
⁽²⁾听Tangible common equity divided by tangible assets.听听

⁽¹⁾听The income tax rate utilized was the blended marginal tax rate.听听
⁽²⁾听Annualized tangible net income divided by average tangible equity.

⁽¹⁾听The federal statutory tax rate utilized was 21%.听听
⁽²⁾听Annualized tax equivalent net interest income divided by average interest earning assets.听听
⁽³⁾听Annualized core net interest income divided by average interest earning assets.听 听

⁽¹⁾听The federal statutory tax rate utilized was 21%.听听
⁽²⁾听Annualized tax equivalent loan interest income divided by average loans.听听
⁽³⁾听Annualized core loan interest income divided by average loans.听听

⁽¹⁾听The federal statutory tax rate utilized was 21%.听听 听
⁽²⁾听Noninterest expense adjusted for amortization of intangibles and merger-related expenses divided by the sum of tax equivalent net interest income, noninterest income and net investment securities gains.听听

⁽¹⁾听The income tax rate utilized was the blended marginal tax rate.听听 听 听
⁽²⁾听Adjusted earnings divided by weighted average diluted common shares outstanding.听听

Category: Earnings

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Source: MidWestOne Financial Group, Inc.

Industry: Banks

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