MidWestOne Financial Group, Inc. Reports Financial Results For the Second Quarter of 2022
*Second* *Quarter Summary*^*1*· Completed acquisition of Iowa First Bancshares Corp ("IOFB").
· Annualized adjusted core loan growth (excluding IOFB and PPP) of 10.53%^2.
· Nonperforming assets ratio improved 10 basis points (bps) to 0.43%; net charge-off ratio improved 25 bps to 0.03%.
· Net interest margin (tax equivalent) expanded 8 bps to 2.87%^2.
· Net income for the second quarter was $12.6 million, or $0.80 per diluted common share.
· Total revenue, net of interest expense, of $52.1 million, including a $1.4 million bargain purchase gain recognized in connection with the IOFB acquisition.
· Credit loss expense of $3.3 million stemming from the acquired IOFB loan portfolio.
· Noninterest expense of $32.1 million, including $0.9 million of merger-related expenses.
· Effective tax rate of 24.5%, reflecting a $0.8 million charge related to an Iowa tax law change.
· Efficiency ratio improved to 56.57%^2.
IOWA CITY, Iowa, July 28, 2022 (GLOBE NEWSWIRE) -- MidWestOne Financial Group, Inc. (Nasdaq: MOFG) (“we”, “our”, or the "Company”) today reported net income for the second quarter of 2022 of $12.6 million, or $0.80 per diluted common share, compared to net income of $13.9 million, or $0.88 per diluted common share, for the linked quarter.
*CEO COMMENTARY*
Charles Funk, Chief Executive Officer of the Company, commented, "This was a quarter of solid progress for MidWestOne. Annualized adjusted core loan growth of 10.53%, which excludes the impact from the acquisition of IOFB and PPP, represents strong work by our bankers. Our asset quality continues to show improvement, with total non-performing loans falling to 0.76% of total loans and net charge-offs falling to 0.03% of total loans. The 8 bps increase in our tax equivalent net interest margin was also a key to the Company's performance this past quarter.
We were pleased to enter the Muscatine, Iowa market and expand our Fairfield presence with the close of the Iowa First Bancshares transaction."
________________
[^1 Second Quarter Summary compares to the first quarter of 2022 (the "linked quarter") unless noted.]
[^2 Non-GAAP measure. See the separate Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.]
*FINANCIAL HIGHLIGHTS*
*Three Months Ended* *Six Months Ended* *June 30,* March 31, June 30, *June 30,* June 30,
*(Dollars in thousands, except per share amounts)* *2022* 2022 2021 *2022* 2021
Net interest income *$* *39,725* $ 37,336 $ 38,505 *$* *77,061* $ 77,122
Noninterest income *12,347* 11,644 10,218 *23,991* 22,042
Total revenue, net of interest expense *52,072* 48,980 48,723 *101,052* 99,164
Credit loss expense (benefit) *3,282* — (2,144 ) *3,282* (6,878 )
Noninterest expense *32,082* 31,643 28,670 *63,725* 56,370
Income before income tax expense *16,708* 17,337 22,197 *34,045* 49,672
Income tax expense *4,087* 3,442 4,926 *7,529* 10,753
Net income *$* *12,621* $ 13,895 $ 17,271 *$* *26,516* $ 38,919
Diluted earnings per share *$* *0.80* $ 0.88 $ 1.08 *$* *1.69* $ 2.43
Return on average assets *0.83* *%* 0.95 % 1.18 % *0.89* *%* 1.38 %
Return on average equity *10.14* *%* 10.74 % 13.24 % *10.44* *%* 15.10 %
Return on average tangible equity^(1) *13.13* *%* 13.56 % 16.75 % *13.35* *%* 19.10 %
Efficiency ratio^(1) *56.57* *%* 60.46 % 54.83 % *58.46* *%* 52.76 %
^(1) Non-GAAP measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
*IOWA FIRST BANCSHARES CORP. ACQUISITION*
On June 9, 2022, we completed our acquisition of IOFB, the parent company of First National Bank of Muscatine (“FNBM”) and First National Bank in Fairfield (“FNBF”). The assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting. The assets and liabilities, both tangible and intangible, were recorded at their fair values as of the June 9, 2022 acquisition date, net of any applicable tax effects. The Company considers all purchase accounting estimates provisional and fair values are subject to refinement for up to one year after the close date.
The table below summarizes the amounts recognized at the acquisition date for each major class of assets acquired and liabilities assumed:
*(In thousands)* *As of June 9, 2022*
*Merger consideration*
Cash consideration $ 46,672
*Identifiable net assets acquired, at fair value*
Assets acquired
Cash and due from banks $ 10,192
Interest earning deposits in banks 67,855
Debt securities 119,230
Loans held for investment 281,470
Premises and equipment 7,363
Core deposit intangible 16,500
Other assets 12,218
Total assets acquired 514,828
Liabilities assumed
Deposits (463,638 )
Other liabilities (3,117 )
Total liabilities assumed (466,755 )
Identifiable net assets acquired, at fair value 48,073
*Bargain purchase gain (reported in Other noninterest income)* $ 1,401
*INCOME STATEMENT HIGHLIGHTS *
*Net Interest Income*
Net interest income increased to $39.7 million in the second quarter of 2022 from $37.3 million in the first quarter of 2022, due primarily to a higher volume of interest earning assets in addition to an expansion in the net interest margin. These increases were partially offset by decreased Paycheck Protection Program ("PPP") loan fee accretion stemming from loan forgiveness. Net PPP loan fee accretion was $0.1 million in the second quarter of 2022 compared to $0.8 million in the linked quarter, and we expect this amount to continue to be negligible as remaining PPP loans are forgiven.
Average interest earning assets increased $130.8 million to $5.72 billion in the second quarter of 2022, when compared to the first quarter of 2022. This increase reflected average earning assets acquired in the IOFB acquisition coupled with higher volumes of debt securities and growth in the legacy MidWestOne loan portfolio.
The Company's tax equivalent net interest margin was 2.87% in the second quarter of 2022 compared to 2.79% in the linked quarter due to an increase in total interest earning asset yields, partially offset by a slight increase in funding costs. Total interest earning assets yield increased 10 bps from the linked quarter primarily as a result of an increase in the loan yield, which was partially offset by a decrease in PPP fee accretion, and an increase in the yield on taxable investment securities. The cost of interest bearing liabilities increased 3 bps to 0.45%, primarily as a result of interest bearing deposits costs of 0.31% and long-term debt costs of 4.45%, which increased 2 bps and 15 bps respectively, from the linked quarter.
*Noninterest Income*
Noninterest income for the second quarter of 2022 increased $0.7 million, or 6.0%, from the linked quarter. The increase was primarily due to the bargain purchase gain of $1.4 million recorded related to the IOFB acquisition, in addition to an increase of $0.2 million in card revenue. Partially offsetting the increases identified above was a decline of $0.8 million in loan revenue and a decline of $0.3 million in investment services and trust activities income. The decline in loan revenue was due to a $0.4 million decrease in mortgage origination income and a $0.3 million decline in the fair value adjustment of our mortgage servicing rights, from $2.7 million in the first quarter of 2022 to $2.4 million in the second quarter of 2022.
The following table presents details of noninterest income for the periods indicated:
*Three Months Ended*
*Noninterest Income* *June 30,* March 31, June 30,
*(In thousands)* *2022* 2022 2021
Investment services and trust activities *$* *2,670* $ 3,011 $ 2,809
Service charges and fees *1,717* 1,657 1,475
Card revenue *1,878* 1,650 1,913
Loan revenue *3,523* 4,293 3,151
Bank-owned life insurance *558* 531 538
Investment securities gains, net *395* 40 42
Other *1,606* 462 290
Total noninterest income *$* *12,347* $ 11,644 $ 10,218
*Noninterest Expense*
Noninterest expense for the second quarter of 2022 increased $0.4 million, or 1.4%, from the linked quarter primarily due to an increase of $0.3 million in compensation and employee benefits and an increase of $0.2 million in equipment costs. The increase in compensation and employee benefits was primarily due to increased salary costs from the IOFB acquisition. The increase in equipment expense was primarily attributable to increased maintenance costs. Offsetting these increases identified above was a decline of $0.5 million in occupancy expense, which declined primarily due to a nonrecurring write-down expense in the first quarter of 2022 that did not recur in the second quarter of 2022.
The increase in net interest income and noninterest income noted above, were the primary drivers of the improvement in the efficiency ratio, which decreased 3.89 percentage points to 56.57% from 60.46% in the linked quarter.
The following table presents details of noninterest expense for the periods indicated:
*Three Months Ended*
*Noninterest Expense* *June 30,* March 31, June 30,
*(In thousands)* *2022* 2022 2021
Compensation and employee benefits *$* *18,955* $ 18,664 $ 17,404
Occupancy expense of premises, net *2,253* 2,779 2,198
Equipment *2,107* 1,901 1,861
Legal and professional *2,435* 2,353 1,375
Data processing *1,237* 1,231 1,347
Marketing *1,157* 1,029 873
Amortization of intangibles *1,283* 1,227 1,341
FDIC insurance *420* 420 245
Communications *266* 272 371
Foreclosed assets, net *4* (112 ) 136
Other *1,965* 1,879 1,519
Total noninterest expense *$* *32,082* $ 31,643 $ 28,670
The following table presents details of merger-related expenses for the periods indicated:
*Three Months Ended* *June 30,* March 31, June 30,
*Merger-related Expenses* *2022* 2022 2021
*(In thousands)*
Compensation and employee benefits *$* *150* $ — $ —
Occupancy expense of premises, net *1* — —
Equipment *6* 5 —
Legal and professional *638* 63 —
Data processing *38* 38 —
Marketing *65* 7 —
Communications *2* 1 —
Other *1* 14 —
Total merger-related expenses *$* *901* $ 128 $ —
*Income Taxes*
The Company's effective income tax rate increased to 24.5% in the second quarter of 2022 compared to 19.9% in the linked quarter. The higher effective income tax rate in the second quarter of 2022 was due to a change in tax law in the state of Iowa, which resulted in a one-time income tax expense of $0.8 million stemming from the re-measurement of our deferred tax assets and liabilities. The effective income tax rate for the full year 2022 is expected to be in the range of 20-22%.
*BALANCE SHEET, LIQUIDITY AND CAPITAL HIGHLIGHTS*
*As of or for the Three Months Ended*
*June 30,* March 31, June 30,
*(Dollars in millions, except per share amounts)* *2022* 2022 2021
*Ending Balance Sheet*
Total assets *$* *6,442.5* $ 5,960.2 $ 5,749.2
Loans held for investment, net of unearned income *3,611.2* 3,250.0 3,330.2
Total securities *2,402.8* 2,349.8 2,072.5
Total deposits *5,537.4* 5,077.7 4,792.7
*Average Balance Sheet*
Average total assets *$* *6,079.0* $ 5,914.6 $ 5,851.7
Average total loans *3,326.3* 3,245.4 3,396.6
Average total deposits *5,181.9* 5,044.0 4,875.3
*Funding and Liquidity*
Short-term borrowings *$* *193.9* $ 181.2 $ 212.3
Long-term debt *159.2* 139.9 169.8
Loans to deposits ratio *65.21* *%* 64.01 % 69.48 %
*Equity*
Total shareholders' equity *$* *488.8* $ 504.5 $ 530.3
Common equity ratio *7.59* *%* 8.46 % 9.22 %
Tangible common equity^(1) *392.5* 423.3 445.4
Tangible common equity ratio^(1) *6.18* *%* 7.20 % 7.86 %
*Per Share Data*
Book value *$* *31.26* $ 32.15 $ 33.22
Tangible book value^(1) *$* *25.10* $ 26.98 $ 27.90
(1) Non-GAAP Measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
*Loans Held for Investment*
Loans held for investment, net of unearned income, increased $361.1 million, or 11.1%, to $3.61 billion from March 31, 2022. This increase reflected loans acquired in the IOFB acquisition, coupled with growth in the legacy MidWestOne loan portfolio during the second quarter of 2022.
The following table presents the composition of loans held for investment, net of unearned income, as of the dates indicated:
*Loans Held for Investment* *June 30, 2022* March 31, 2022 June 30, 2021 *Balance*
*% of Total*
Balance
% of Total
Balance
% of Total
*(dollars in thousands)*
Commercial and industrial *$* *986,137* *27.3* *%* $ 898,942 27.7 % $ 982,092 29.5 %
Agricultural *110,263* *3.1* 94,649 2.9 107,834 3.2
Commercial real estate
Construction and development *224,470* *6.2* 193,130 5.9 168,070 5.0
Farmland *181,820* *5.0* 140,846 4.3 134,877 4.1
Multifamily *239,676* *6.6* 259,609 8.0 255,826 7.7
Other *1,213,974* *33.7* 1,130,306 34.8 1,147,016 34.4 Total commercial real estate *1,859,940* *51.5* 1,723,891 53.0 1,705,789 51.2
Residential real estate
One-to-four family first liens *430,157* *11.9* 331,883 10.2 332,117 10.0
One-to-four family junior liens *148,647* *4.1* 131,793 4.1 136,464 4.1 Total residential real estate *578,804* *16.0* 463,676 14.3 468,581 14.1
Consumer *76,008* *2.1* 68,877 2.1 65,860 2.0 Loans held for investment, net of unearned income *$* *3,611,152* *100.0* *%* $ 3,250,035 100.0 % $ 3,330,156 100.0 %
Total commitments to extend credit *$* *1,117,754* $ 1,034,843 $ 959,696
*Credit Loss Expense & Allowance for Credit Losses*
The following table shows the activity in the allowance for credit losses for the periods indicated:
*Three Months Ended* *Six Months Ended*
*Allowance for Credit Losses Roll Forward* *June 30,* March 31, June 30, *June 30,* June 30,
*(In thousands)* *2022* 2022 2021 *2022* 2021
Beginning balance *$* *46,200* $ 48,700 $ 50,650 *$* *48,700* $ 55,500
PCD allowance established in acquisition *3,371* — — *3,371* —
Charge-offs *(440* *)* (2,631 ) (840 ) *(3,071* *)* (1,843 )
Recoveries *159* 409 434 *568* 1,121
Net charge-offs *(281* *)* (2,222 ) (406 ) *(2,503* *)* (722 )
Credit loss (benefit) expense related to loans *3,060* (278 ) (2,244 ) *2,782* (6,778 )
Ending balance *$* *52,350* $ 46,200 $ 48,000 *$* *52,350* $ 48,000
As of June 30, 2022, the allowance for credit losses ("ACL") was $52.4 million, or 1.45% of loans held for investment, net of unearned income, compared with $46.2 million, or 1.42% of loans held for investment, net of unearned income, at March 31, 2022. Credit loss expense for the second quarter of 2022 was $3.3 million. No credit loss expense was recorded in the first quarter of 2022. Credit loss expense in the current quarter reflected $3.1 million related to the acquired non-purchase credit deteriorated (PCD) loans and $0.2 million related to unfunded loan commitments established in the acquisition. The allowance for credit losses also included the initial allowance for credit losses of $3.4 million recorded for the PCD loans acquired.
*Deposits*
The following table presents the composition of our deposit portfolio as of the dates indicated:
*Deposit Composition* *June 30, 2022* March 31, 2022 June 30, 2021
*(Dollars in thousands)* *Balance* *% of Total* Balance % of Total Balance % of Total
Noninterest bearing deposits *$* *1,114,825* *20.1* *%* $ 1,002,415 19.7 % $ 952,764 19.9 %
Interest checking deposits *1,749,748* *31.7* 1,601,249 31.5 1,414,942 29.6
Money market deposits *1,070,912* *19.3* 983,709 19.4 936,683 19.5
Savings deposits *715,829* *12.9* 650,314 12.8 596,199 12.4
Total non-maturity deposits *4,651,314* *84.0* 4,237,687 83.4 3,900,588 81.4
Time deposits of $250 and under *547,427* *9.9* 501,904 9.9 538,331 11.2
Time deposits over $250 *338,700* *6.1* 338,134 6.7 353,747 7.4
Total time deposits *886,127* *16.0* 840,038 16.6 892,078 18.6
Total deposits *$* *5,537,441* *100.0* *%* $ 5,077,725 100.0 % $ 4,792,666 100.0 %
*CREDIT RISK PROFILE*
*As of or For the Three Months Ended*
*Highlights* *June 30,* March 31, June 30,
*(Dollars in thousands)* *2022* 2022 2021
Credit loss expense (benefit) related to loans *$* *3,060* $ (278 ) $ (2,244 )
Net charge-offs *$* *281* $ 2,222 $ 406
Net charge-off ratio^(1) *0.03* *%* 0.28 % 0.05 %
*At period-end*
Pass *$* *3,402,508* $ 3,041,649 $ 3,102,688
Special Mention / Watch *111,893* 106,241 115,414
Classified *96,751* 102,145 112,054
Total loans held for investment, net *$* *3,611,152* $ 3,250,035 $ 3,330,156
Classified loans ratio^(2) *2.68* *%* 3.14 % 3.36 %
Nonaccrual loans held for investment *$* *25,978* $ 31,182 $ 40,764
Accruing loans contractually past due 90 days or more *1,359* — 665
Total nonperforming loans *27,337* 31,182 41,429
Foreclosed assets, net *284* 273 755
Total nonperforming assets *$* *27,621* $ 31,455 $ 42,184
Nonperforming loans ratio^(3) *0.76* *%* 0.96 % 1.24 %
Nonperforming assets ratio^(4) *0.43* *%* 0.53 % 0.73 %
Allowance for credit losses *$* *52,350* $ 46,200 $ 48,000
Allowance for credit losses ratio^(5) *1.45* *%* 1.42 % 1.44 %
Adjusted allowance for credit losses ratio^(6) *1.45* *%* 1.42 % 1.53 %
Allowance for credit losses to nonaccrual loans ratio^(7) *201.52* *%* 148.16 % 117.75 %
^(1) Net charge-off ratio is calculated as annualized net charge-offs divided by average loans held for investment, net of unearned income, during the period.
^(2) Classified loans ratio is calculated as classified loans divided by loans held for investment, net of unearned income, at the end of the period.
^(3) Nonperforming loans ratio is calculated as total nonperforming loans divided by loans held for investment, net of unearned income, at the end of the period.
^(4) Nonperforming assets ratio is calculated as total nonperforming assets divided by total assets at the end of the period.
^(5) Allowance for credit losses ratio is calculated as allowance for credit losses divided by loans held for investment, net of unearned income, at the end of the period.
^(6) Non-GAAP Measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
^(7)Allowance for credit losses to nonaccrual loans ratio is calculated as allowance for credit losses divided by nonaccrual loans at the end of the period.
During the second quarter of 2022, overall asset quality was improved. The nonperforming loans ratio declined 20 bps from the linked quarter and 48 bps from the prior year to 0.76%. In addition, the classified loans ratio declined 46 bps from the linked quarter and 68 bps from the prior year to 2.68%. Further, net charge-offs declined $1.9 million from the linked quarter.
The following table presents a roll forward of nonperforming loans for the period:
*Nonperforming Loans* *Nonaccrual*
*90+ Days Past Due & Still Accruing*
*Total**(Dollars in thousands)*
*Balance at March 31, 2022* *$* *31,182* *$* *—* *$* *31,182*
Loans placed on nonaccrual or 90+ days past due & still accruing 1,679 1,243 2,922
Acquired loan portfolio 3,963 152 4,115
Proceeds related to repayment or sale (9,814 ) — (9,814 )
Loans returned to accrual status or no longer past due (693 ) (1 ) (694 )
Charge-offs (328 ) (35 ) (363 )
Transfers to foreclosed assets (11 ) — (11 )
*Balance at June 30, 2022* *$* *25,978* *$* *1,359* *$* *27,337*
*CAPITAL*
Effective March 31, 2020, we elected the 5-year phase-in option allowed under the interim final rule (IFR) issued by the federal banking regulatory agencies that delays the estimated impact on regulatory capital stemming from the implementation of the current expected credit losses (CECL) accounting standard. The IFR allows the add back of 100% of the capital effect from the day one CECL transition adjustment and 25% of the capital effect from subsequent increases in the allowance for credit losses through the two-year period ending December 31, 2021. The modified CECL transitional amount of $9.4 million is then reduced from capital over the subsequent three-year period.
*Regulatory Capital Ratios*
*June 30,* March 31, June 30,
*2022*^* (1)* 2022 2021
*MidWest**One** Financial Group, Inc. Consolidated*
Tier 1 leverage to average assets ratio *8.51* *%* 8.85 % 8.50 %
Common equity tier 1 capital to risk-weighted assets ratio *8.82* *%* 9.81 % 10.26 %
Tier 1 capital to risk-weighted assets ratio *9.61* *%* 10.68 % 11.21 %
Total capital to risk-weighted assets ratio *11.73* *%* 12.89 % 13.63 %
*MidWest**One** Bank*
Tier 1 leverage to average assets ratio *9.70* *%* 9.30 % 9.15 %
Common equity tier 1 capital to risk-weighted assets ratio *10.99* *%* 11.25 % 12.09 %
Tier 1 capital to risk-weighted assets ratio *10.99* *%* 11.25 % 12.09 %
Total capital to risk-weighted assets ratio *11.90* *%* 12.12 % 13.02 %
(1) Capital ratios for June 30, 2022 are preliminary
*CORPORATE UPDATE*
*Share Repurchase Program*
Under our current repurchase program, the Company repurchased 65,315 shares of its common stock at an average price of $29.67 per share and a total cost of $1.9 million in the second quarter of 2022. At June 30, 2022, the total amount available under the Company's current share repurchase program was $3.5 million.
*CONFERENCE CALL DETAILS*
The Company will host a conference call for investors at 11:00 a.m. CT on Friday, July 29, 2022. To participate, you may pre-register for this call utilizing the following link: https://ige.netroadshow.com/registration/q4inc/11244/midwestone-financial-group-inc-2nd-quarter-2022/. 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 1-844-200-6205, using an access code of 952429 at least fifteen minutes before the call start time. If you are unable to participate on the call, a replay will be available until October 27, 2022, by calling 1-866-813-9403 and using the replay access code of 413921. A transcript of the call will also be available on the Company’s web site (www.midwestonefinancial.com) within three business days of the call.
*ABOUT MIDWEST**ONE** 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, Florida, and Colorado. MidWestOne provides electronic delivery of financial services through its website, MidWestOne.bank. MidWestOne Financial Group, Inc. trades on the Nasdaq Global Select Market under the symbol “MOFG”.
*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 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,” “goals,” “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.
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 risks of mergers (including with IOFB), 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; (2) credit quality deterioration or pronounced and sustained reduction in real estate market values causing an increase in the allowance for credit losses, an increase in the credit loss expense, and a reduction in net earnings; (3) the effects of actual and expected increases in interest rates, including on our net income and the value of our securities portfolio; (4) 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; (5) fluctuations in the value of our investment securities; (6) governmental monetary and fiscal policies; (7) changes in and uncertainty related to benchmark interest rates used to price loans and deposits, including the expected elimination of LIBOR and the adoption of a substitute; (8) legislative and regulatory changes, including changes in banking, securities, trade, and tax laws and regulations and their application by our regulators; (9) the ability to attract and retain key executives and employees experienced in banking and financial services; (10) the sufficiency of the allowance for credit losses to absorb the amount of actual losses inherent in our existing loan portfolio; (11) our ability to adapt successfully to technological changes to compete effectively in the marketplace; (12) credit risks and risks from concentrations (by geographic area and by industry) within our loan portfolio; (13) 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; (14) the failure of assumptions underlying the establishment of allowances for credit losses and estimation of values of collateral and various financial assets and liabilities; (15) volatility of rate-sensitive deposits; (16) operational risks, including data processing system failures or fraud; (17) asset/liability matching risks and liquidity risks; (18) the costs, effects and outcomes of existing or future litigation; (19) changes in general economic, political, or industry conditions, nationally, internationally or in the communities in which we conduct business; (20) changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the Financial Accounting Standards Board; (21) war or terrorist activities, including the war in Ukraine, widespread disease or pandemic, or other adverse external events, which may cause deterioration in the economy or cause instability in credit markets; (22) the effects of cyber-attacks; (23) the imposition of tariffs or other domestic or international governmental policies impacting the value of the agricultural or other products of our borrowers; (24) effects of the ongoing COVID-19 pandemic, including its effects on the economic environment, our customers, employees and supply chain; and (25) other risk factors detailed from time to time in Securities and Exchange Commission filings made by the Company.
*MIDWEST**ONE** FINANCIAL GROUP, INC. AND SUBSIDIARIES *
*FIVE QUARTER CONSOLIDATED BALANCE SHEETS *
*June 30,* March 31, December 31, September 30, June 30,
*(In thousands)* *2022* 2022 2021 2021 2021
*ASSETS*
Cash and due from banks *$* *60,622* $ 47,677 $ 42,949 $ 53,562 $ 52,297
Interest earning deposits in banks *23,242* 12,152 160,881 84,952 11,124
Federal funds sold *—* — — — 13
Total cash and cash equivalents *83,864* 59,829 203,830 138,514 63,434
Debt securities available for sale at fair value *1,234,789* 1,145,638 2,288,110 2,136,902 2,072,452
Held to maturity securities at amortized cost *1,168,042* 1,204,212 — — —
Total securities *2,402,831* 2,349,850 2,288,110 2,136,902 2,072,452
Loans held for sale *4,991* 6,466 12,917 58,679 6,149
Gross loans held for investment *3,627,728* 3,256,294 3,252,194 3,278,150 3,344,156
Unearned income, net *(16,576* *)* (6,259 ) (7,182 ) (9,506 ) (14,000 )
Loans held for investment, net of unearned income *3,611,152* 3,250,035 3,245,012 3,268,644 3,330,156
Allowance for credit losses *(52,350* *)* (46,200 ) (48,700 ) (47,900 ) (48,000 )
Total loans held for investment, net *3,558,802* 3,203,835 3,196,312 3,220,744 3,282,156
Premises and equipment, net *89,048* 82,603 83,492 84,130 84,667
Goodwill *62,477* 62,477 62,477 62,477 62,477
Other intangible assets, net *33,874* 18,658 19,885 21,130 22,394
Foreclosed assets, net *284* 273 357 454 755
Other assets *206,320* 176,223 157,748 152,393 154,731
Total assets *$* *6,442,491* $ 5,960,214 $ 6,025,128 $ 5,875,423 $ 5,749,215
*LIABILITIES*
Noninterest bearing deposits *$* *1,114,825* $ 1,002,415 $ 1,005,369 $ 999,887 $ 952,764
Interest bearing deposits *4,422,616* 4,075,310 4,109,150 3,957,894 3,839,902
Total deposits *5,537,441* 5,077,725 5,114,519 4,957,781 4,792,666
Short-term borrowings *193,894* 181,193 181,368 187,508 212,261
Long-term debt *159,168* 139,898 154,879 154,860 169,839
Other liabilities *63,156* 56,941 46,887 45,010 44,156
Total liabilities *5,953,659* 5,455,757 5,497,653 5,345,159 5,218,922
*SHAREHOLDERS' EQUITY*
Common stock *16,581* 16,581 16,581 16,581 16,581
Additional paid-in capital *300,859* 300,505 300,940 300,327 299,888
Retained earnings *262,395* 253,500 243,365 232,639 219,884
Treasury stock *(25,772* *)* (24,113 ) (24,546 ) (22,735 ) (15,888 )
Accumulated other comprehensive (loss) income *(65,231* *)* (42,016 ) (8,865 ) 3,452 9,828
Total shareholders' equity *488,832* 504,457 527,475 530,264 530,293
Total liabilities and shareholders' equity *$* *6,442,491* $ 5,960,214 $ 6,025,128 $ 5,875,423 $ 5,749,215
*MIDWEST**ONE** FINANCIAL GROUP, INC. AND SUBSIDIARIES *
*FIVE QUARTER AND YEAR TO DATE CONSOLIDATED STATEMENTS OF INCOME *
*Three Months Ended* *Six Months Ended* *June 30,* March 31, December 31, September 30, June 30, *June 30,* June 30,
*(In thousands, except per share data)* *2022* 2022 2021 2021 2021 *2022* 2021
Interest income
Loans, including fees *$* *32,746* $ 31,318 $ 33,643 $ 36,115 $ 34,736 *$* *64,064* $ 71,278
Taxable investment securities *9,576* 8,123 7,461 6,655 6,483 *17,699* 11,576
Tax-exempt investment securities *2,367* 2,383 2,415 2,428 2,549 *4,750* 5,104
Other *40* 28 37 21 19 *68* 33
*Total interest income* *44,729* 41,852 43,556 45,219 43,787 *86,581* 87,991
Interest expense
Deposits *3,173* 2,910 3,031 3,150 3,409 *6,083* 7,017
Short-term borrowings *229* 119 130 132 161 *348* 289
Long-term debt *1,602* 1,487 1,576 1,597 1,712 *3,089* 3,563
*Total interest expense* *5,004* 4,516 4,737 4,879 5,282 *9,520* 10,869
*Net interest income* *39,725* 37,336 38,819 40,340 38,505 *77,061* 77,122
Credit loss expense (benefit) *3,282* — 622 (1,080 ) (2,144 ) *3,282* (6,878 )
*Net interest income after credit loss expense (benefit)* *36,443* 37,336 38,197 41,420 40,649 *73,779* 84,000
Noninterest income
Investment services and trust activities *2,670* 3,011 3,115 2,915 2,809 *5,681* 5,645
Service charges and fees *1,717* 1,657 1,684 1,613 1,475 *3,374* 2,962
Card revenue *1,878* 1,650 1,746 1,820 1,913 *3,528* 3,449
Loan revenue *3,523* 4,293 3,132 1,935 3,151 *7,816* 7,881
Bank-owned life insurance *558* 531 550 532 538 *1,089* 1,080
Investment securities gains, net *395* 40 137 36 42 *435* 69
Other *1,606* 462 865 331 290 *2,068* 956
*Total noninterest income* *12,347* 11,644 11,229 9,182 10,218 *23,991* 22,042
Noninterest expense
Compensation and employee benefits *18,955* 18,664 18,266 17,350 17,404 *37,619* 34,321
Occupancy expense of premises, net *2,253* 2,779 2,211 2,547 2,198 *5,032* 4,516
Equipment *2,107* 1,901 2,189 1,973 1,861 *4,008* 3,654
Legal and professional *2,435* 2,353 1,826 1,272 1,375 *4,788* 2,158
Data processing *1,237* 1,231 1,211 1,406 1,347 *2,468* 2,599
Marketing *1,157* 1,029 1,121 1,022 873 *2,186* 1,879
Amortization of intangibles *1,283* 1,227 1,245 1,264 1,341 *2,510* 2,848
FDIC insurance *420* 420 380 435 245 *840* 757
Communications *266* 272 277 275 371 *538* 780
Foreclosed assets, net *4* (112 ) 7 43 136 *(108* *)* 183
Other *1,965* 1,879 1,711 2,191 1,519 *3,844* 2,675
*Total noninterest expense* *32,082* 31,643 30,444 29,778 28,670 *63,725* 56,370
*Income before income tax expense* *16,708* 17,337 18,982 20,824 22,197 *34,045* 49,672
Income tax expense *4,087* 3,442 4,726 4,513 4,926 *7,529* 10,753
*Net income * *$* *12,621* $ 13,895 $ 14,256 $ 16,311 $ 17,271 *$* *26,516* $ 38,919
Earnings per common share
Basic *$* *0.81* $ 0.89 $ 0.91 $ 1.03 $ 1.08 *$* *1.69* $ 2.43
Diluted *$* *0.80* $ 0.88 $ 0.91 $ 1.03 $ 1.08 *$* *1.69* $ 2.43
Weighted average basic common shares outstanding *15,668* 15,683 15,692 15,841 15,987 *15,675* 15,989
Weighted average diluted common shares outstanding *15,688* 15,718 15,734 15,863 16,012 *15,703* 16,016
Dividends paid per common share *$* *0.2375* $ 0.2375 $ 0.2250 $ 0.2250 $ 0.2250 *$* *0.4750* $ 0.4500
*MIDWEST**ONE** FINANCIAL GROUP, INC. AND SUBSIDIARIES *
*FINANCIAL STATISTICS*
*As of or for the Three Months Ended* *As of or for the Six Months Ended* *June 30,* March 31, June 30, *June 30,* June 30,
*(Dollars in thousands, except per share amounts)* *2022* 2022 2021 *2022* 2021
*Earnings:*
Net interest income *$* *39,725* $ 37,336 $ 38,505 *$* *77,061* $ 77,122
Noninterest income *12,347* 11,644 10,218 *23,991* 22,042
Total revenue, net of interest expense *52,072* 48,980 48,723 *101,052* 99,164
Credit loss expense (benefit) *3,282* — (2,144 ) *3,282* (6,878 )
Noninterest expense *32,082* 31,643 28,670 *63,725* 56,370
Income before income tax expense *16,708* 17,337 22,197 *34,045* 49,672
Income tax expense *4,087* 3,442 4,926 *7,529* 10,753
Net income *$* *12,621* $ 13,895 $ 17,271 *$* *26,516* $ 38,919
*Per Share Data:*
Diluted earnings *$* *0.80* $ 0.88 $ 1.08 *$* *1.69* $ 2.43
Book value *31.26* 32.15 33.22 *31.26* 33.22
Tangible book value^(1) *25.10* 26.98 27.90 *25.10* 27.90
*Ending Balance Sheet:*
Total assets *$* *6,442,491* $ 5,960,214 $ 5,749,215 *$* *6,442,491* $ 5,749,215
Loans held for investment, net of unearned income *3,611,152* 3,250,035 3,330,156 *3,611,152* 3,330,156
Total securities *2,402,831* 2,349,850 2,072,452 *2,402,831* 2,072,452
Total deposits *5,537,441* 5,077,725 4,792,666 *5,537,441* 4,792,666
Short-term borrowings *193,894* 181,193 212,261 *193,894* 212,261
Long-term debt *159,168* 139,898 169,839 *159,168* 169,839
Total shareholders' equity *488,832* 504,457 530,293 *488,832* 530,293
*Average Balance Sheet:*
Average total assets *$* *6,078,950* $ 5,914,604 $ 5,851,736 *$* *5,997,231* $ 5,686,936
Average total loans *3,326,269* 3,245,449 3,396,575 *3,286,083* 3,413,069
Average total deposits *5,181,927* 5,044,046 4,875,324 *5,113,368* 4,725,444
*Financial Ratios:*
Return on average assets *0.83* *%* 0.95 % 1.18 % *0.89* *%* 1.38 %
Return on average equity *10.14* *%* 10.74 % 13.24 % *10.44* *%* 15.10 %
Return on average tangible equity^(1) *13.13* *%* 13.56 % 16.75 % *13.35* *%* 19.10 %
Efficiency ratio^(1) *56.57* *%* 60.46 % 54.83 % *58.46* *%* 52.76 %
Net interest margin, tax equivalent^(1) *2.87* *%* 2.79 % 2.88 % *2.83* *%* 2.99 %
Loans to deposits ratio *65.21* *%* 64.01 % 69.48 % *65.21* *%* 69.48 %
Common equity ratio *7.59* *%* 8.46 % 9.22 % *7.59* *%* 9.22 %
Tangible common equity ratio^(1) *6.18* *%* 7.20 % 7.86 % *6.18* *%* 7.86 %
*Credit Risk Profile:*
Total nonperforming loans *$* *27,337* $ 31,182 $ 41,429 *$* *27,337* $ 41,429
Nonperforming loans ratio *0.76* *%* 0.96 % 1.24 % *0.76* *%* 1.24 %
Total nonperforming assets *$* *27,621* $ 31,455 $ 42,184 *$* *27,621* $ 42,184
Nonperforming assets ratio *0.43* *%* 0.53 % 0.73 % *0.43* *%* 0.73 %
Net charge-offs *$* *281* $ 2,222 $ 406 *$* *2,503* $ 722
Net charge-off ratio *0.03* *%* 0.28 % 0.05 % *0.15* *%* 0.04 %
Allowance for credit losses *$* *52,350* $ 46,200 $ 48,000 *$* *52,350* $ 48,000
Allowance for credit losses ratio *1.45* *%* 1.42 % 1.44 % *1.45* *%* 1.44 %
Adjusted allowance for credit losses ratio^(1) *1.45* *%* 1.42 % 1.53 % *1.45* *%* 1.53 %
Allowance for credit losses to nonaccrual ratio *201.52* *%* 148.16 % 117.75 % *201.52* *%* 117.75 %
*PPP Loans:*
Average PPP loans *$* *1,061* $ 14,975 $ 233,982 *$* *4,327* $ 234,515
Fee Income *59* 797 2,469 *856* 6,143
^(1) Non-GAAP measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
*MIDWEST**ONE** FINANCIAL GROUP, INC. AND SUBSIDIARIES*
*AVERAGE BALANCE SHEET AND YIELD ANALYSIS*
*Three Months Ended* *June 30, 2022* *March 31, 2022* *June 30, 2021*
*(Dollars in thousands)* *Average*
*Balance* *Interest*
*Income/*
*Expense* *Average*
*Yield/*
*Cost* *Average*
*Balance* *Interest*
*Income/*
*Expense* *Average*
*Yield/*
*Cost* *Average Balance* *Interest*
*Income/*
*Expense* *Average*
*Yield/*
*Cost*
*ASSETS*
Loans, including fees ^(1)(2)(3) *$* *3,326,269* *$* *33,315* *4.02* *%* $ 3,245,449 $ 31,858 3.98 % $ 3,396,575 $ 35,255 4.16 %
Taxable investment securities *1,923,155* *9,576* *2.00* *%* 1,835,911 8,123 1.79 % 1,604,463 6,483 1.62 %
Tax-exempt investment securities ^(2)(4) *439,385* *2,975* *2.72* *%* 450,547 2,998 2.70 % 473,181 3,196 2.71 %
Total securities held for investment^(2) *2,362,540* *12,551* *2.13* *%* 2,286,458 11,121 1.97 % 2,077,644 9,679 1.87 %
Other *30,016* *40* *0.53* *%* 56,094 28 0.20 % 48,208 19 0.16 %
Total interest earning assets^(2) *$* *5,718,825* *45,906* *3.22* *%* $ 5,588,001 43,007 3.12 % $ 5,522,427 44,953 3.26 %
Other assets *360,125* 326,603 329,309
Total assets *$* *6,078,950* $ 5,914,604 $ 5,851,736
*LIABILITIES AND SHAREHOLDERS’ EQUITY*
Interest checking deposits *$* *1,641,337* *$* *1,189* *0.29* *%* $ 1,560,402 $ 1,061 0.28 % $ 1,469,853 $ 1,095 0.30 %
Money market deposits *1,003,386* *571* *0.23* *%* 953,943 499 0.21 % 942,072 502 0.21 %
Savings deposits *662,449* *287* *0.17* *%* 641,703 279 0.18 % 595,150 324 0.22 %
Time deposits *836,143* *1,126* *0.54* *%* 883,997 1,071 0.49 % 896,169 1,488 0.67 %
Total interest bearing deposits *4,143,315* *3,173* *0.31* *%* 4,040,045 2,910 0.29 % 3,903,244 3,409 0.35 %
Securities sold under agreements to repurchase *154,107* *111* *0.29* *%* 159,417 96 0.24 % 179,253 116 0.26 %
Federal funds purchased *—* *—* *—* *%* — — — % — — — %
Other short-term borrowings *41,859* *118* *1.13* *%* 3,029 23 3.08 % 39,238 45 0.46 %
Short-term borrowings *195,966* *229* *0.47* *%* 162,446 119 0.30 % 218,491 161 0.30 %
Long-term debt *144,440* *1,602* *4.45* *%* 140,389 1,487 4.30 % 189,644 1,712 3.62 %
Total borrowed funds *340,406* *1,831* *2.16* *%* 302,835 1,606 2.15 % 408,135 1,873 1.84 %
Total interest bearing liabilities *$* *4,483,721* *$* *5,004* *0.45* *%* $ 4,342,880 $ 4,516 0.42 % $ 4,311,379 $ 5,282 0.49 %
Noninterest bearing deposits *1,038,612* 1,004,001 972,080
Other liabilities *57,157* 42,872 45,035
Shareholders’ equity *499,460* 524,851 523,242
Total liabilities and shareholders’ equity *$* *6,078,950* $ 5,914,604 $ 5,851,736
Net interest income^(2) *$* *40,902* $ 38,491 $ 39,671
Net interest spread^(2) *2.77* *%* 2.70 % 2.77 %
Net interest margin^(2) *2.87* *%* 2.79 % 2.88 %
Total deposits^(5) *$* *5,181,927* *$* *3,173* *0.25* *%* $ 5,044,046 $ 2,910 0.23 % $ 4,875,324 $ 3,409 0.28 %
Cost of funds^(6) *0.36* *%* 0.34 % 0.40 %
^(1) Average balance includes nonaccrual loans.
^(2) Tax equivalent. The federal statutory tax rate utilized was 21%.
^(3) Interest income includes net loan fees, loan purchase discount accretion and tax equivalent adjustments. Net loan fees were $(31) thousand, $674 thousand, and $2.3 million for the three months ended June 30, 2022, March 31, 2022, and June 30, 2021, respectively. Loan purchase discount accretion was $528 thousand, $732 thousand, and $873 thousand for the three months ended June 30, 2022, March 31, 2022, and June 30, 2021, respectively. Tax equivalent adjustments were $569 thousand, $540 thousand, and $519 thousand for the three months ended June 30, 2022, March 31, 2022, and June 30, 2021, respectively. The federal statutory tax rate utilized was 21%.
^(4) Interest income includes tax equivalent adjustments of $608 thousand, $615 thousand, and $647 thousand for the three months ended June 30, 2022, March 31, 2022, and June 30, 2021, respectively. The federal statutory tax rate utilized was 21%.
^(5) Total deposits is the sum of total interest-bearing deposits and noninterest bearing deposits. The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits.
^(6) Cost of funds is calculated as annualized total interest expense divided by the sum of average total deposits and borrowed funds.
*MIDWEST**ONE** FINANCIAL GROUP, INC. AND SUBSIDIARIES*
*AVERAGE BALANCE SHEET AND YIELD ANALYSIS*
*Six Months Ended* *June 30, 2022* *June 30, 2021*
*(Dollars in thousands)* *Average*
*Balance* *Interest*
*Income/*
*Expense* *Average*
*Yield/*
*Cost* *Average*
*Balance* *Interest*
*Income/*
*Expense* *Average*
*Yield/*
*Cost*
*ASSETS*
Loans, including fees ^(1)(2)(3) *$* *3,286,083* *$* *65,173* *4.00* *%* $ 3,413,069 $ 72,328 4.27 %
Taxable investment securities *1,879,773* *17,699* *1.90* *%* 1,436,522 11,576 1.63 %
Tax-exempt investment securities ^(2)(4) *444,936* *5,973* *2.71* *%* 469,507 6,399 2.75 %
Total securities held for investment^(2) *2,324,709* *23,672* *2.05* *%* 1,906,029 17,975 1.90 %
Other *42,983* *68* *0.32* *%* 42,404 33 0.16 %
Total interest earning assets^(2) *$* *5,653,775* *88,913* *3.17* *%* $ 5,361,502 90,336 3.40 %
Other assets *343,456* 325,434
Total assets *$* *5,997,231* $ 5,686,936
*LIABILITIES AND SHAREHOLDERS’ EQUITY*
Interest checking deposits *$* *1,601,093* *$* *2,250* *0.28* *%* $ 1,410,094 $ 2,086 0.30 %
Money market deposits *978,801* *1,070* *0.22* *%* 927,660 980 0.21 %
Savings deposits *652,134* *566* *0.18* *%* 574,602 610 0.21 %
Time deposits *859,938* *2,197* *0.52* *%* 866,976 3,341 0.78 %
Total interest bearing deposits *4,091,966* *6,083* *0.30* *%* 3,779,332 7,017 0.37 %
Securities sold under agreements to repurchase *156,747* *207* *0.27* *%* 172,592 217 0.25 %
Federal funds purchased *—* *—* *—* *%* — — — %
Other short-term borrowings *22,551* *141* *1.26* *%* 24,370 72 0.60 %
Short-term borrowings *179,298* *348* *0.39* *%* 196,962 289 0.30 %
Long-term debt *142,426* *3,089* *4.37* *%* 197,762 3,563 3.63 %
Total borrowed funds *321,724* *3,437* *2.15* *%* 394,724 3,852 1.97 %
Total interest bearing liabilities *$* *4,413,690* *$* *9,520* *0.43* *%* $ 4,174,056 $ 10,869 0.53 %
Noninterest bearing deposits *1,021,402* 946,112
Other liabilities *50,054* 47,008
Shareholders’ equity *512,085* 519,760
Total liabilities and shareholders’ equity *$* *5,997,231* $ 5,686,936
Net interest income^(2) *$* *79,393* $ 79,467
Net interest spread^(2) *2.74* *%* 2.87 %
Net interest margin^(2) *2.83* *%* 2.99 %
Total deposits^(5) *$* *5,113,368* *$* *6,083* *0.24* *%* $ 4,725,444 $ 7,017 0.30 %
Cost of funds^(6) *0.35* *%* 0.43 %
^(1) Average balance includes nonaccrual loans.
^(2) Tax equivalent. The federal statutory tax rate utilized was 21%.
^(3) Interest income includes net loan fees, loan purchase discount accretion and tax equivalent adjustments. Net loan fees were $0.6 million and $5.8 million for the six months ended June 30, 2022 and June 30, 2021, respectively. Loan purchase discount accretion was $1.3 million and $2.0 million for the six months ended June 30, 2022 and June 30, 2021, respectively. Tax equivalent adjustments were $1.1 million and $1.0 million for the six months ended June 30, 2022 and June 30, 2021, respectively. The federal statutory tax rate utilized was 21%.
^(4) Interest income includes tax equivalent adjustments of $1.2 million and $1.3 million for the six months ended June 30, 2022 and June 30, 2021, respectively. The federal statutory tax rate utilized was 21%.
^(5) Total deposits is the sum of total interest-bearing deposits and noninterest bearing deposits. The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits.
^(6) Cost of funds is calculated as annualized total interest expense divided by the sum of average total deposits and borrowed funds.
Non-GAAP Measures
This earnings release contains non-GAAP measures for tangible common equity, tangible book value per share, tangible common equity ratio, return on average tangible equity, net interest margin (tax equivalent), core net interest margin, loan yield (tax equivalent), core yield on loans, efficiency ratio, adjusted allowance for credit losses ratio, core loans, and core commercial loans. Management believes these measures provide investors with useful information regarding the Company’s profitability, financial condition and capital adequacy, consistent with how management evaluates the Company’s financial performance. The following tables provide a reconciliation of each non-GAAP measure to the most comparable GAAP measure.
*Tangible Common Equity/Tangible Book Value*
*per Share/Tangible Common Equity Ratio* *June 30,* March 31, December 31, September 30, June 30,
*(Dollars in thousands, except per share data)* *2022* 2022 2021 2021 2021
Total shareholders’ equity *$* *488,832* $ 504,457 $ 527,475 $ 530,264 $ 530,293
Intangible assets, net *(96,351* *)* (81,135 ) (82,362 ) (83,607 ) (84,871 )
Tangible common equity *$* *392,481* $ 423,322 $ 445,113 $ 446,657 $ 445,422
Total assets *$* *6,442,491* $ 5,960,214 $ 6,025,128 $ 5,875,423 $ 5,749,215
Intangible assets, net *(96,351* *)* (81,135 ) (82,362 ) (83,607 ) (84,871 )
Tangible assets *$* *6,346,140* $ 5,879,079 $ 5,942,766 $ 5,791,816 $ 5,664,344
Book value per share *$* *31.26* $ 32.15 $ 33.66 $ 33.71 $ 33.22
Tangible book value per share^(1) *$* *25.10* $ 26.98 $ 28.40 $ 28.40 $ 27.90
Shares outstanding *15,635,131* 15,690,125 15,671,147 15,729,451 15,963,468
Common equity ratio *7.59* *%* 8.46 % 8.75 % 9.03 % 9.22 %
Tangible common equity ratio^(2) *6.18* *%* 7.20 % 7.49 % 7.71 % 7.86 %
^(1) Tangible common equity divided by shares outstanding.
^(2) Tangible common equity divided by tangible assets.
*Three Months Ended* *Six Months Ended*
*Return on Average Tangible Equity* *June 30,* March 31, June 30, *June 30,* June 30,
*(Dollars in thousands)* *2022* 2022 2021 *2022* 2021
Net income *$* *12,621* $ 13,895 $ 17,271 *$* *26,516* $ 38,919
Intangible amortization, net of tax^(1) *962* 920 1,006 *1,883* 2,136
Tangible net income *$* *13,583* $ 14,815 $ 18,277 *$* *28,399* $ 41,055
Average shareholders’ equity *$* *499,460* $ 524,851 $ 523,242 *$* *512,085* $ 519,760
Average intangible assets, net *(84,540* *)* (81,763 ) (85,518 ) *(83,159* *)* (86,235 )
Average tangible equity *$* *414,920* $ 443,088 $ 437,724 *$* *428,926* $ 433,525
Return on average equity *10.14* *%* 10.74 % 13.24 % *10.44* *%* 15.10 %
Return on average tangible equity^(2) *13.13* *%* 13.56 % 16.75 % *13.35* *%* 19.10 %
^(1) The combined income tax rate utilized was 25%.
^(2) Annualized tangible net income divided by average tangible equity.
*Net Interest Margin, Tax Equivalent/*
*Core Net Interest Margin
*
*Three Months Ended* *Six Months Ended* *June 30,* March 31, June 30, *June 30,* June 30,
*(Dollars in thousands)* *2022* 2022 2021 *2022* 2021
Net interest income *$* *39,725* $ 37,336 $ 38,505 *$* *77,061* $ 77,122
Tax equivalent adjustments:
Loans^(1) *569* 540 519 *1,109* 1,050
Securities^(1) *608* 615 647 *1,223* 1,295
Net interest income, tax equivalent *$* *40,902* $ 38,491 $ 39,671 *$* *79,393* $ 79,467
Loan purchase discount accretion *(528* *)* (732 ) (873 ) *(1,260* *)* (1,971 )
Core net interest income *$* *40,374* $ 37,759 $ 38,798 *$* *78,133* $ 77,496
Net interest margin *2.79* *%* 2.71 % 2.80 % *2.75* *%* 2.90 %
Net interest margin, tax equivalent^(2) *2.87* *%* 2.79 % 2.88 % *2.83* *%* 2.99 %
Core net interest margin^(3) *2.83* *%* 2.74 % 2.82 % *2.79* *%* 2.91 %
Average interest earning assets *$* *5,718,825* $ 5,588,001 $ 5,522,427 *$* *5,653,775* $ 5,361,502
^(1) The federal statutory tax rate utilized was 21%.
^(2) Annualized tax equivalent net interest income divided by average interest earning assets.
^(3) Annualized core net interest income divided by average interest earning assets.
*Three Months Ended* *Six Months Ended*
*Loan Yield, Tax Equivalent / Core Yield on Loans* *June 30,* March 31, June 30, *June 30,* June 30,
*(Dollars in thousands)* *2022* 2022 2021 *2022* 2021
Loan interest income, including fees *$* *32,746* $ 31,318 $ 34,736 *$* *64,064* $ 71,278
Tax equivalent adjustment^(1) *569* 540 519 *1,109* 1,050
Tax equivalent loan interest income *$* *33,315* $ 31,858 $ 35,255 *$* *65,173* $ 72,328
Loan purchase discount accretion *(528* *)* (732 ) (873 ) *(1,260* *)* (1,971 )
Core loan interest income *$* *32,787* $ 31,126 $ 34,382 *$* *63,913* $ 70,357
Yield on loans *3.95* *%* 3.91 % 4.10 % *3.93* *%* 4.21 %
Yield on loans, tax equivalent^(2) *4.02* *%* 3.98 % 4.16 % *4.00* *%* 4.27 %
Core yield on loans^(3) *3.95* *%* 3.89 % 4.06 % *3.92* *%* 4.16 %
Average loans *$* *3,326,269* $ 3,245,449 $ 3,396,575 *$* *3,286,083* $ 3,413,069
^(1) The federal statutory tax rate utilized was 21%.
^(2) Annualized tax equivalent loan interest income divided by average loans.
^(3) Annualized core loan interest income divided by average loans.
*Three Months Ended* *Six Months Ended*
*Efficiency Ratio* *June 30,* March 31, June 30, *June 30,* June 30,
*(Dollars in thousands)* *2022* 2