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NEWS RELEASE
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FOR IMMEDIATE RELEASE
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| 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 FOURTH QUARTER 2012 FINANCIAL RESULTS
Iowa City, Iowa, January 24, 2013 - MidWestOne Financial Group, Inc. (NASDAQ - MOFG), today reported results for its fourth quarter and year ended December 31, 2012. Net income and net income available to common shareholders for the fourth quarter of 2012 rose to $4.4 million, or $0.51 per diluted share, compared with $3.4 million, or $0.39 per diluted share, for the same period last year.
Net income for the fourth quarter of 2012 was higher than the same period in 2011 primarily due to:
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| • | a 4.7% increase in net interest income; |
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| • | an increase of 13.2% in noninterest income; and |
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| • | an 18.8% decrease in the provision for loan losses. |
Net income for the year of 2012 was $16.8 million, a $3.4 million, or 25.8%, increase compared to $13.3 million of net income for 2011. Earnings per diluted share of $1.96 and $1.47 for 2012 and 2011, respectively, are based on net income available to common shareholders of $16.8 million and $12.7 million, respectively. The increase in net income was primarily the result of higher net interest income, lower provision for loan loss expense, and increased noninterest income, the latter of which was mainly due to the gain on the sale of the Company's Home Mortgage Center location realized in the second quarter of 2012. These increases were partially offset by a $6.1 million loss on the termination of the Company's pension plan, reflected in salaries and employee benefits, which was also recognized in the second quarter of 2012. After excluding the $4.0 million gain on the sale of the Home Mortgage Center and the $6.1 million loss on the termination of the pension, net of tax effects, adjusted diluted earnings per share for the year of 2012 were $2.12.
"Our company was founded in 1934 in Iowa City, and earnings of $1.96 per share represent an all-time record for MidWestOne," stated President and Chief Executive Officer Charles N. Funk. "The previous high in EPS was for 2011, when we reported earnings of $1.47 per share. We've come a long way from the first days after our merger of equals in 2008 and we thank our committed group of employees for working together to build a terrific banking company."
Results of Operations
Net interest income for the fourth quarter of 2012 improved $0.6 million, or 4.7%, from $12.6 million for the fourth quarter of 2011, to $13.2 million. Income from loan pool participations was $0.2 million for the fourth quarter of 2012, an increase of $0.2 million compared to the same period a year ago, on a much lower level of investment in 2012, as the Company continues to exit this line of business as balances pay down. Despite increases in loan balances, loan interest income decreased $0.5 million, or 4.1%, to $12.7 million for the fourth quarter of 2012, compared to $13.3 million for the same period of 2011, due to lower interest rates. Income from investment securities increased $0.1 million, or 3.4%, to $3.9 million for the fourth quarter of 2012 compared to the fourth quarter of 2011. Interest expense decreased $0.8 million, or 16.8%, to $3.8 million for the fourth quarter of 2012, compared to $4.5 million for the same period of 2011, primarily due to lower expense on deposit accounts resulting from lower interest rates.
Net interest income for the year of 2012 increased $4.6 million to $53.4 million compared with the year ended December 31, 2011. Comparing 2012 to 2011, income from loan pool participations increased $0.9 million, or 78.5%, to $2.0
million, while loan interest income decreased $0.8 million, or 1.5%, to $51.4 million. Interest expense decreased $3.8 million, or 19.4%, to $16.0 million for the year ended December 31, 2012, compared with $19.8 million for the year ended December 31, 2012.
The net interest margin for the fourth quarter of 2012, calculated on a fully tax-equivalent basis, was 3.31% or 3 basis points lower than the 3.34% net interest margin for the fourth quarter of 2011. The decrease was due primarily to the average yield earned on interest-earning assets decreasing more significantly than the average rate paid on interest-bearing liabilities. The Company posted a net interest margin of 3.46% for the year of 2012, up 12 basis points from 3.34% for 2011, due to the average rate paid on interest-bearing liabilities decreasing more significantly than the average yield earned on interest-earning assets.
"There is no doubt that the low interest rate policy enacted by the Federal Reserve is continuing to challenge our ability to maintain a solid net interest margin," stated Mr. Funk. "This is a problem that is generally being faced by banking organizations of all sizes. We believe that the longer this policy is kept in place, the more challenges it will present to our industry."
The provision for loan losses for the fourth quarter of 2012 was $0.7 million, a decrease of $0.1 million, or 18.8%, from $0.8 million in the fourth quarter of 2011. The provision for loan losses for 2012 was $2.4 million, compared with $3.4 million for 2011. The decreased provision reflects the continued improvement in the Company's loan portfolio credit quality indicators and management's belief that the regional economy has generally stabilized.
Noninterest income for the fourth quarter of 2012 increased to $4.1 million, up $0.5 million, or 13.2%, from $3.6 million in the fourth quarter of 2011. The increase was primarily due to an increase of $0.3 million, or 29.4%, in trust, investment, and insurance fees to $1.2 million during the fourth quarter of 2012, compared with $0.9 million in the fourth quarter of 2011. In addition, mortgage origination and loan servicing fees increased $0.2 million, or 18.1%, to $1.1 million for the fourth quarter of 2012, compared to $0.9 million for the same quarter of 2011. The increase was due to a higher volume of loans originated and sold on the secondary market. These increases were partially offset by a $0.1 million decrease in service charges and fees on deposit accounts.
For the year of 2012, noninterest income rose to $20.1 million, an increase of $5.4 million, or 36.5%, from $14.7 million during 2011. The primary reason for this increase was the $4.0 million gain on the sale of the Home Mortgage Center location realized during the second quarter of 2012. Absent this gain, the increase in noninterest income for the period was $1.3 million, or 9.0%. Mortgage origination and loan servicing fees increased by $0.9 million, or 33.0%, to $3.6 million for 2012, compared to $2.7 million for 2011. Additionally, trust, investment, and insurance fees increased $0.5 million, or 10.1%, to $5.0 million for 2012, compared with $4.5 million for 2011. These increases were partially offset by decreased service charges and fees on deposit accounts of $3.2 million for the year ended December 31, 2012, a decline of $0.5 million, or 12.3%, from $3.7 million for 2011. This decline was primarily attributable to lower NSF fees being received between the comparable periods. We expect this decline to stabilize in the coming year, as the regulatory changes resulting in the decrease will be reflected in both comparable periods.
"Our Wealth Management and Home Mortgage Center units performed at high levels not only in the fourth quarter but throughout 2012. The progress made in each of these business units over the past three years is substantial," said Mr. Funk.
Fourth quarter 2012 noninterest expense was $10.9 million, a decrease of $0.1 million, or 1.2%, from $11.0 million for the fourth quarter of 2011. Net occupancy and equipment expenses declined $0.4 million or 20.2%, to $1.5 million for the fourth quarter of 2012, compared with $1.9 million in the fourth quarter of 2011. In addition, other operating expenses decreased to $1.3 million for the fourth quarter of 2012, down $0.3 million, or 19.4%, from $1.6 million in the fourth quarter of 2011, due mainly to lower repossessed asset and advertising expenses. Partially offsetting these decreases was an increase in salaries and employee benefits of $0.6 million, or 10.8%, primarily due to annual salary increases for employees that were effective at the beginning of 2012 and increased benefit costs.
Noninterest expense increased to $49.0 million for the year of 2012 from $42.2 million for 2011, mainly due to the $6.1 million loss related to the termination and liquidation of the Company's defined benefit pension plan in the second quarter of 2012, recorded in salaries and employee benefits expense. Absent that event, noninterest expense for the period increased $0.6 million, or 1.5%. Excluding the pension loss, salaries and employee benefits increased $1.4 million, or 6.0%, primarily due to annual salary and benefit rate increases for employees that were effective at the beginning of 2012. This increase was partially offset by a decrease in FDIC expense of $0.4 million, or 24.1%, to $1.2 million for the year of 2012, compared with $1.6 million for 2011. Net occupancy and equipment also experienced a decline of $0.3 million, or 4.5%, to $6.2 million for the twelve months of 2012, compared with $6.5 million for 2011.
Income tax expense was $1.4 million for the fourth quarter of 2012 compared with $1.1 million for the same period in 2011, and was $5.3 million for the year ended December 31, 2012, compared to $4.6 million for the year ended December 31,
2011. The expense variations for both the three- and twelve-month periods were primarily the result of changes in the levels of taxable income, increased investment in tax-free municipal securities, and realization of a tax benefit from the partial release of a valuation allowance on capital losses during the second quarter of 2012.
Balance Sheet and Asset Quality
Total assets rose to $1.79 billion at December 31, 2012, from $1.70 billion at December 31, 2011, resulting primarily from increased investment securities and loans, and partially offset by a decrease in loan pool participations and deferred income taxes. The asset growth was funded by an increase in deposit balances and repurchase agreements, partially offset by a decrease in Federal Home Loan Bank (FHLB) borrowings and Federal Funds purchased. Total deposits at December 31, 2012, rose to $1.40 billion, an increase of $93.1 million, or 7.1%, from December 31, 2011, and repurchase agreements increased $20.5 million to $68.8 million at December 31, 2012, from $48.3 million at December 31, 2011. Deposit growth was primarily concentrated in business and individual, partnership and non-profit accounts.
Total bank loans (excluding loan pool participations and loans held for sale) increased $49.1 million to $1.04 billion at December 31, 2012, compared with $986.2 million as of December 31, 2011. This increase was primarily due to increases in one- to four- family first liens, construction and development, and multifamily loans. These increases were partially offset by decreases in one- to four- family junior liens, agriculture, and commercial and industrial loans. At December 31, 2012, the largest category of bank loans was commercial real estate, comprising 42% of the portfolio, of which 8% was construction and development, 8% was farmland, and 4% was multifamily residential mortgages. Residential real estate loans was the next largest category at 24%, followed by commercial and industrial loans at 23%, agricultural loans at 8%, and consumer loans at 2%.
Nonperforming bank loans decreased from $18.1 million, or 1.84% of total bank loans at December 31, 2011, to $10.7 million, or 1.03% of total bank loans at December 31, 2012. At December 31, 2012, nonperforming loans consisted of $2.9 million in nonaccrual loans, $7.1 million in troubled debt restructures and $0.6 million in loans past due 90 days or more and still accruing. This compares to nonaccrual loans of $10.9 million, troubled debt restructures of $6.1 million, and loans past due 90 days or more and still accruing of $1.1 million at December 31, 2011. The decrease in nonperforming loans is primarily due to the payoff of two agricultural credits totaling $1.8 million, the pay-down of a development loan of $1.1 million, and the reduction of 15 residential real estate loans totaling $1.5 million, all of which had been on nonaccrual. The change in troubled debt restructure is primarily attributable to the movement of a $1.0 million commercial real estate credit out of troubled debt restructure due to continued positive performance, combined with a $2.5 million nonaccrual farmland credit being reclassified as a troubled debt restructure due to a court ordered interest rate reduction in connection with a Chapter 12 bankruptcy. Bank loans past due 30 to 89 days and still accruing interest (not included in the nonperforming loan totals) were $6.1 million at December 31, 2012, compared with $7.0 million at December 31, 2011. At December 31, 2012, other real estate owned (not included in nonperforming loans) was $3.3 million, down from $4.0 million at December 31, 2011. During 2012 the Company added 26 properties to other real estate owned, while at the same time selling 31 properties, excluding lot sales from existing development properties. As of December 31, 2012, the allowance for bank loan losses was $16.0 million, or 1.54% of total bank loans, compared with $15.7 million, or 1.59% of total bank loans, at December 31, 2011. The allowance for loan losses represented 149.77% of nonperforming loans at December 31, 2012, compared with 86.58% of nonperforming loans at December 31, 2011. The bank had net bank loan charge-offs of $2.1 million in 2012, or 0.21% of average bank loans outstanding, compared to $2.8 million and 0.30% for 2011.
"Our corporate strategic plan is a dynamic document that is discussed on a quarterly basis," continued Mr. Funk. "Asset quality has always been the first item covered in our strategic plan. We will not compromise asset quality to achieve desired loan growth. We believe that having a non-performing loan to total loan ratio of 1.03% as of year-end and net charge-offs for calendar year 2012 at 0.20% of loans outstanding is superior performance and we again thank our entire team of lenders and support personnel that made this success possible."
Loan pool participations (participation interests in performing, sub-performing and nonperforming loans that have been purchased from various nonaffiliated banking organizations) were $37.8 million at December 31, 2012, down from $52.2 million at December 31, 2011. 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 2.41% for the fourth quarter of 2012, up from 0.05% for the fourth quarter of 2011. Yields were 4.44% and 1.85% for the year of 2012 and 2011, respectively. The net yield was higher in both the fourth quarter and full year 2012 due to the sale of several foreclosed real estate properties in the portfolio at a value greater than their net book value. Including loan pool participations, the loan to deposit ratio was 76.7% as of December 31, 2012, compared with 79.5% as of December 31, 2011.
Investment securities totaled $590.2 million at December 31, 2012, or 32.9% of total assets, an increase of $54.1 million from $536.1 million, or 31.6% of total assets, as of December 31, 2011. Available for sale investment securities increased mainly due to excess liquidity, while the increase in the held to maturity classification was in anticipation of the expected impact of Basel III capital requirements on overall financial statement volatility. As of December 31, 2012, a total of $557.5 million of the investment securities were classified as available for sale, and the portfolio consisted mainly of U.S. government agencies (11.8%), mortgage-backed securities (42.9%), and obligations of states and political subdivisions (40.2%).
Capital Adequacy
Total shareholders' equity was $173.9 million as of December 31, 2012. The total shareholders' equity to total assets ratio was 9.70% at December 31, 2012, up from 9.23% at December 31, 2011. The tangible common equity to tangible assets ratio was 9.22% at December 31, 2012, compared with 8.68% at December 31, 2011. Tangible book value per share was $19.39 at December 31, 2012, up from $17.15 per share at December 31, 2011. This increase was primarily attributable to net income of $16.8 million for the twelve months of 2012.
During the fourth quarter of 2012 the Company repurchased 18,435 shares of its common stock at an average price of $19.82 per share.
Mr. Funk concluded, "We believe the strength of our balance sheet continues to afford us many opportunities. Our dividend is now 47.1% higher than it was just a year ago. In addition, we have repurchased 104,518 shares of stock in 2012 at an average per share price that is well below our tangible book value per share. Our management team is determined to prudently reward our shareholders on a long-term basis."
Quarterly Cash Dividend Declared and Repurchase Plan Announced
On January 15, 2013, the Company's board of directors declared a first quarter cash dividend of $0.125 per common share, which is a 31.6% increase from the dividend of $0.095 paid in the last two quarters of 2012, and a 47.1% increase over the$0.085 dividend paid in the first two quarters of 2012. The dividend is payable March 15, 2013, to shareholders of record at the close of business on March 1, 2013. At this quarterly rate, the indicated annual cash dividend is equal to $0.50 per common share.
Also on January 15, 2013, the Company's board of directors announced the renewal of the Company's share repurchase program, extending the expiration of the program to December 31, 2014 and increasing the remaining amount of authorized repurchases under the program to $5.0 million from the approximately $2.4 million of authorized repurchases that had previously remained. Pursuant to the program, the Company may repurchase shares from time to time in the open market, and the method, timing and amounts of repurchase will be solely in the discretion of the Company's management. The repurchase program does not require the Company to acquire a specific number of shares. Therefore, the amount of shares repurchased pursuant to the program will depend on several factors, including market conditions, capital and liquidity requirements, and alternative uses for cash available.
Conference Call Details
MidWestOne will host a conference call for investors at 11:00 a.m., CST, on Friday, January 25, 2013. To participate, dial 877-317-6789 at least fifteen minutes before the call's start time. If you are unable to participate on the call, a replay will be available until February 26, 2013 on the Company's web site: www.midwestone.com. A transcript of the call will also be available on the web site within three business days of the event.
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.”
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 and the extensive regulations to be promulgated thereunder, as well as rules jointly proposed, but recently indefinately delayed, by the Federal bank regulatory agencies concerning certain increased capital requirements), 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.
Certain non-GAAP ratios and amounts are provided to evaluate and measure the Company's operating performance and financial condition, including net interest margin, the Tier 1 capital to average assets ratio, the tangible common equity to tangible assets ratio, return on average common equity and various performance metrics excluding one-time events. Management believes this data 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.
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| | | As of | | As of | | As of | | As of | | As of |
| | | December 31, | | September 30, | | June 30, | | March 31, | | December 31, |
| (dollars in thousands) | 2012 | | 2012 | | 2012 | | 2012 | | 2011 |
| Tangible Common Equity | | | | | | | | | |
| Total shareholders' equity | $ | 173,932 |
| | $ | 171,524 |
| | $ | 166,701 |
| | $ | 159,270 |
| | $ | 156,494 |
|
| Less: Preferred equity | — |
| | — |
| | — |
| | — |
| | — |
|
| Intangible assets, net | (9,469 | ) | | (9,663 | ) | | (9,858 | ) | | (10,053 | ) | | (10,247 | ) |
| Tangible common equity | $ | 164,463 |
| | $ | 161,861 |
| | $ | 156,843 |
| | $ | 149,217 |
| | $ | 146,247 |
|
| Tangible Assets | | | | | | | | | |
| Total assets | $ | 1,792,819 |
| | $ | 1,721,630 |
| | $ | 1,707,394 |
| | $ | 1,725,844 |
| | $ | 1,695,244 |
|
| Less: Intangible assets, net | (9,469 | ) | | (9,663 | ) | | (9,858 | ) | | (10,053 | ) | | (10,247 | ) |
| Tangible assets | $ | 1,783,350 |
| | $ | 1,711,967 |
| | $ | 1,697,536 |
| | $ | 1,715,791 |
| | $ | 1,684,997 |
|
| Tangible common equity/tangible assets | 9.22 | % | | 9.45 | % | | 9.24 | % | | 8.70 | % | | 8.68 | % |
| Tier 1 Capital | | | | | | | | | |
| Total shareholders' equity | $ | 173,932 |
| | $ | 171,524 |
| | $ | 166,701 |
| | $ | 159,270 |
| | $ | 156,494 |
|
| Plus: Long term debt (qualifying restricted core capital) | 15,464 |
| | 15,464 |
| | 15,464 |
| | 15,464 |
| | 15,464 |
|
Net unrealized (gains) losses on securities available for sale | (8,180 | ) | | (9,183 | ) | | (8,278 | ) | | (3,831 | ) | | (3,328 | ) |
| Less: Disallowed intangibles | (9,617 | ) | | (9,807 | ) | | (9,997 | ) | | (10,185 | ) | | (10,374 | ) |
| Tier 1 Capital | $ | 171,599 |
| | $ | 167,998 |
| | $ | 163,890 |
| | $ | 160,718 |
| | $ | 158,256 |
|
| Average Assets | | | | | | | | | |
| Quarterly average assets | $ | 1,757,910 |
| | $ | 1,692,759 |
| | $ | 1,710,142 |
| | $ | 1,680,189 |
| | $ | 1,658,738 |
|
| Less: Disallowed intangibles | (9,617 | ) | | (9,807 | ) | | (9,997 | ) | | (10,185 | ) | | (10,374 | ) |
| Average Assets | $ | 1,748,293 |
| | $ | 1,682,952 |
| | $ | 1,700,145 |
| | $ | 1,670,004 |
| | $ | 1,648,364 |
|
| Tier 1 capital/average assets | 9.82 | % | | 9.98 | % | | 9.64 | % | | 9.62 | % | | 9.60 | % |
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| | | | Three Months Ended December 31, | | Year Ended December 31, | | Three Months Ended December 31, | | Year Ended December 31, | |
| (dollars in thousands) | | 2012 | | 2012 | | 2011 | | 2011 | |
| Net income available to common shareholders | | $ | 4,357 |
| | $ | 16,751 |
| | $ | 3,351 |
| | $ | 12,672 |
| |
Plus: Intangible amortization, net of tax(1) | | 128 |
| | 513 |
| | 148 |
| | 591 |
| |
| Adjusted net income available to common shareholders | | $ | 4,485 |
| | $ | 17,264 |
| | $ | 3,499 |
| | $ | 13,263 |
| |
| Plus: Loss on termination of pension | | — |
| | 6,088 |
| | — |
| | — |
| |
| Less: Gain on sale of Home Mortgage Center | | — |
| | (4,047 | ) | | — |
| | — |
| |
Net tax effect on above items(2) | | — |
| | (755 | ) | | — |
| | — |
| |
| Adjusted net income available to common shareholders, exclusive of loss on termination of pension and gain on sale of Home Mortgage Center | | $ | 4,485 |
| | $ | 18,550 |
| | $ | 3,499 |
| | $ | 13,263 |
| |
| Average tangible common equity | | | | | | | | | |
| Average total shareholders' equity | | $ | 172,616 |
| | $ | 165,429 |
| | $ | 156,129 |
| | $ | 158,146 |
| |
| Less: Average preferred stock | | — |
| | — |
| | — |
| | (8,032 | ) | |
| Average intangible assets, net | | (9,546 | ) | | (9,785 | ) | | (10,337 | ) | | (10,613 | ) | |
| Average tangible common equity | | $ | 163,070 |
| | $ | 155,644 |
| | $ | 145,792 |
| | $ | 139,501 |
| |
| Return on average tangible common equity (annualized) | | 10.94 | % | | 11.09 | % | | 9.52 | % | | 9.51 | % | |
| Return on average tangible common equity, exclusive of loss on termination of pension and gain on sale of Home Mortgage Center (annualized) | | 10.94 | % | | 11.92 | % | | 9.52 | % | | 9.51 | % | |
| (1) Computed assuming a federal income tax rate of 34% | | | | |
| (2) Computed assuming a combined state and federal tax rate of 37% | | | | | | | |
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| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended December 31, | | Year Ended December 31, | | Three Months Ended December 31, | | Year Ended December 31, | |
| (dollars in thousands, except earnings per share) | | 2012 | | 2012 | | 2011 | | 2011 | |
| Net Interest Margin Tax Equivalent Adjustment | | | | | | | | | |
| Net interest income | | $ | 13,157 |
| | $ | 53,350 |
| | $ | 12,567 |
| | $ | 48,798 |
| |
Plus tax equivalent adjustment:(1) | | | | | | | | | |
| Loans | | 212 |
| | 827 |
| | 172 |
| | 473 |
| |
| Securities | | 597 |
| | 2,304 |
| | 548 |
| | 1,990 |
| |
Tax equivalent net interest income (1) | | $ | 13,966 |
| | $ | 56,481 |
| | $ | 13,287 |
| | $ | 51,261 |
| |
| Average interest earning assets | | $ | 1,677,356 |
| | $ | 1,630,835 |
| | $ | 1,575,372 |
| | $ | 1,536,596 |
| |
| Net interest margin | | 3.31 | % | | 3.46 | % | | 3.34 | % | | 3.34 | % | |
| (1) Computed assuming a federal income tax rate of 34% | | | | |
| Net income | | $ | 4,357 |
| | $ | 16,751 |
| | $ | 3,351 |
| | $ | 13,317 |
| |
| Net income available to common shareholders | | $ | 4,357 |
| | $ | 16,751 |
| | $ | 3,351 |
| | $ | 12,672 |
| |
| Plus: Loss on termination of pension | | — |
| | 6,088 |
| | — |
| | — |
| |
| Less: Gain on sale of Home Mortgage Center | | — |
| | (4,047 | ) | | — |
| | — |
| |
Net tax effect of above items(2) | | — |
| | (755 | ) | | — |
| | — |
| |
| Net income, exclusive of pension termination expense and gain on sale of Home Mortgage Center | | $ | 4,357 |
| | $ | 18,037 |
| | $ | 3,351 |
| | $ | 13,317 |
| |
| Net income available to common shareholders, exclusive of loss on termination of pension and gain on sale of Home Mortgage Center | | $ | 4,357 |
| | $ | 18,037 |
| | $ | 3,351 |
| | $ | 12,672 |
| |
| Return on average assets (annualized) | | 0.98 | % | | 0.97 | % | | 0.80 | % | | 0.82 | % | |
| Return on average assets, exclusive of loss on termination of pension and gain on sale of Home Mortgage Center (annualized) | | 0.98 | % | | 1.05 | % | | 0.80 | % | | 0.82 | % | |
| Return on average equity (annualized) | | 10.04 | % | | 10.13 | % | | 8.52 | % | | 8.42 | % | |
| Return on average equity, exclusive of loss on termination of pension and gain on sale of Home Mortgage Center (annualized) | | 10.04 | % | | 10.90 | % | | 8.52 | % | | 8.42 | % | |
| Earnings per common share-diluted | | $ | 0.51 |
| | $ | 1.96 |
| | $ | 0.39 |
| | $ | 1.47 |
| |
| Earnings per common share-diluted, exclusive of loss on termination of pension and gain on sale of Home Mortgage Center | | 0.51 |
| | 2.12 |
| | 0.39 |
| | 1.47 |
| |
| (1) Computed assuming a federal income tax rate of 34% | | | | |
| (2) Computed assuming a combined state and federal tax rate of 37% | | | | | | | |
|
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended December 31, | | Year Ended December 31, | | Three Months Ended December 31, | | Year Ended December 31, | |
| (dollars in thousands) | | 2012 | | 2012 | | 2011 | | 2011 | |
| Operating Expense | | | | | | | | | |
| Total noninterest expense | | 10,864 |
| | 48,960 |
| | 10,995 |
| | 42,235 |
| |
| Less: Amortization of intangibles and goodwill impairment | | (194 | ) | | (778 | ) | | (224 | ) | | (896 | ) | |
| Operating expense | | $ | 10,670 |
| | $ | 48,182 |
| | $ | 10,771 |
| | $ | 41,339 |
| |
| Less: Loss on termination of pension | | — |
| | (6,088 | ) | | — |
| | — |
| |
| Operating expense, exclusive of loss on termination of pension | | $ | 10,670 |
| | $ | 42,094 |
| | $ | 10,771 |
| | $ | 41,339 |
| |
| Operating Revenue | | | | | | | | | |
Tax equivalent net interest income (1) | | $ | 13,966 |
| | $ | 56,481 |
| | $ | 13,287 |
| | $ | 51,261 |
| |
| Plus: Noninterest income | | 4,119 |
| | 20,082 |
| | 3,639 |
| | 14,716 |
| |
| Less: Gain on sale or call of available for sale securities | | (64 | ) | | (805 | ) | | (60 | ) | | (490 | ) | |
| Gain (loss) on sale of premises and equipment | | 17 |
| | (4,188 | ) | | — |
| | 195 |
| |
| Operating revenue | | $ | 18,038 |
| | $ | 71,570 |
| | $ | 16,866 |
| | $ | 65,682 |
| |
| Efficiency ratio | | 59.15 | % | | 67.32 | % | | 63.86 | % | | 62.94 | % | |
| Efficiency ratio, exclusive of loss on termination of pension | | 59.15 | % | | 58.82 | % | | 63.86 | % | | 62.94 | % | |
| (1) Computed assuming a federal income tax rate of 34% | | | | |
MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
| | | | | | | |
| | December 31,
2012 | | December 31, 2011 |
| (dollars in thousands) | (unaudited) | | |
| ASSETS | | | |
| Cash and due from banks | $ | 30,197 |
| | $ | 28,155 |
|
| Interest-bearing deposits in banks | 16,242 |
| | 4,468 |
|
| Federal funds sold | 752 |
| | — |
|
| Cash and cash equivalents | 47,191 |
| | 32,623 |
|
| Investment securities: | | | |
| Available for sale | 557,541 |
| | 534,080 |
|
| Held to maturity (fair value 2012 $32,920; 2011 $2,042) | 32,669 |
| | 2,036 |
|
| Loans held for sale | 1,195 |
| | 1,955 |
|
| Loans | 1,035,284 |
| | 986,173 |
|
| Allowance for loan losses | (15,957 | ) | | (15,676 | ) |
| Net loans | 1,019,327 |
| | 970,497 |
|
| Loan pool participations, net | 35,650 |
| | 50,052 |
|
| Premises and equipment, net | 25,609 |
| | 26,260 |
|
| Accrued interest receivable | 10,292 |
| | 10,422 |
|
| Intangible assets, net | 9,469 |
| | 10,247 |
|
| Bank-owned life insurance | 28,676 |
| | 27,723 |
|
| Other real estate owned | 3,278 |
| | 4,033 |
|
| Assets held for sale | 764 |
| | — |
|
| Deferred income taxes | 776 |
| | 3,654 |
|
| Other assets | 20,382 |
| | 21,662 |
|
| Total assets | $ | 1,792,819 |
| | $ | 1,695,244 |
|
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | |
| Deposits: | | | |
| Non-interest-bearing demand | $ | 190,491 |
| | $ | 161,287 |
|
| Interest-bearing checking | 582,283 |
| | 499,905 |
|
| Savings | 91,603 |
| | 71,823 |
|
| Certificates of deposit under $100,000 | 312,489 |
| | 346,858 |
|
| Certificates of deposit $100,000 and over | 222,867 |
| | 226,769 |
|
| Total deposits | 1,399,733 |
| | 1,306,642 |
|
| Federal funds purchased | — |
| | 8,920 |
|
| Securities sold under agreements to repurchase | 68,823 |
| | 48,287 |
|
| Federal Home Loan Bank borrowings | 120,120 |
| | 140,014 |
|
| Deferred compensation liability | 3,555 |
| | 3,643 |
|
| Long-term debt | 15,464 |
| | 15,464 |
|
| Accrued interest payable | 1,475 |
| | 1,530 |
|
| Other liabilities | 9,717 |
| | 14,250 |
|
| Total liabilities | 1,618,887 |
| | 1,538,750 |
|
| Shareholders' equity: | | | |
| Preferred stock, no par value, with a liquidation preference of $1,000 per share; authorized 500,000 shares; no shares issued and outstanding at December 31, 2012 and December 31, 2011 | $ | — |
| | $ | — |
|
| Common stock, $1 par value; authorized 15,000,000 shares at December 31, 2012 and December 31, 2011; issued 8,690,398 shares at December 31, 2012 and December 31, 2011; outstanding 8,480,488 shares at December 31, 2012 and 8,529,530 shares at December 31, 2011 | 8,690 |
| | 8,690 |
|
| Additional paid-in capital | 80,383 |
| | 80,333 |
|
| Treasury stock at cost, 209,910 shares at December 31, 2012 and 160,868 shares at December 31, 2011 | (3,316 | ) | | (2,312 | ) |
| Retained earnings | 79,995 |
| | 66,299 |
|
| Accumulated other comprehensive income | 8,180 |
| | 3,484 |
|
| Total shareholders' equity | 173,932 |
| | 156,494 |
|
| Total liabilities and shareholders' equity | $ | 1,792,819 |
| | $ | 1,695,244 |
|
MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
|
| | | | | | | | | | | | | | | | |
| (dollars in thousands) | | Three Months Ended December 31, | | Year Ended December 31, |
| | | 2012 | | 2011 | | 2012 | | 2011 |
| | | (unaudited) | | (unaudited) | | (unaudited) | | |
| Interest income: | | | | | | | | |
| Interest and fees on loans | | $ | 12,716 |
| | $ | 13,259 |
| | $ | 51,355 |
| | $ | 52,163 |
|
| Interest and discount on loan pool participations | | 237 |
| | 7 |
| | 1,978 |
| | 1,108 |
|
| Interest on bank deposits | | 25 |
| | 11 |
| | 54 |
| | 36 |
|
| Interest on federal funds sold | | — |
| | — |
| | 1 |
| | 1 |
|
| Interest on investment securities: | | | | | | | | |
| Taxable securities | | 2,612 |
| | 2,677 |
| | 10,836 |
| | 10,934 |
|
| Tax-exempt securities | | 1,334 |
| | 1,140 |
| | 5,078 |
| | 4,339 |
|
| Total interest income | | 16,924 |
| | 17,094 |
| | 69,302 |
| | 68,581 |
|
| Interest expense: | | | | | | | | |
| Interest on deposits: | | | | | | | | |
| Interest-bearing checking | | 726 |
| | 935 |
| | 3,007 |
| | 3,891 |
|
| Savings | | 38 |
| | 36 |
| | 143 |
| | 200 |
|
| Certificates of deposit under $100,000 | | 1,366 |
| | 1,710 |
| | 5,885 |
| | 7,920 |
|
| Certificates of deposit $100,000 and over | | 687 |
| | 797 |
| | 2,929 |
| | 3,311 |
|
| Total interest expense on deposits | | 2,817 |
| | 3,478 |
| | 11,964 |
| | 15,322 |
|
| Interest on federal funds purchased | | 1 |
| | 3 |
| | 12 |
| | 8 |
|
| Interest on securities sold under agreements to repurchase | | 47 |
| | 58 |
| | 192 |
| | 264 |
|
| Interest on Federal Home Loan Bank borrowings | | 741 |
| | 812 |
| | 3,094 |
| | 3,494 |
|
| Interest on other borrowings | | 8 |
| | 9 |
| | 34 |
| | 38 |
|
| Interest on long-term debt | | 153 |
| | 167 |
| | 656 |
| | 657 |
|
| Total interest expense | | 3,767 |
| | 4,527 |
| | 15,952 |
| | 19,783 |
|
| Net interest income | | 13,157 |
| | 12,567 |
| | 53,350 |
| | 48,798 |
|
| Provision for loan losses | | 650 |
| | 800 |
| | 2,379 |
| | 3,350 |
|
| Net interest income after provision for loan losses | | 12,507 |
| | 11,767 |
| | 50,971 |
| | 45,448 |
|
| Noninterest income: | | | | | | | | |
| Trust, investment, and insurance fees | | 1,228 |
| | 949 |
| | 4,995 |
| | 4,537 |
|
| Service charges and fees on deposit accounts | | 823 |
| | 923 |
| | 3,247 |
| | 3,702 |
|
| Mortgage origination and loan servicing fees | | 1,064 |
| | 901 |
| | 3,578 |
| | 2,691 |
|
| Other service charges, commissions and fees | | 680 |
| | 536 |
| | 2,316 |
| | 2,540 |
|
| Bank-owned life insurance income | | 277 |
| | 270 |
| | 953 |
| | 951 |
|
| Gain on sale or call of available for sale securities | | 64 |
| | 60 |
| | 805 |
| | 490 |
|
| Gain (loss) on sale of premises and equipment | | (17 | ) | | — |
| | 4,188 |
| | (195 | ) |
| Total noninterest income | | 4,119 |
| | 3,639 |
| | 20,082 |
| | 14,716 |
|
| Noninterest expense: | | | | | | | | |
| Salaries and employee benefits | | 6,517 |
| | 5,882 |
| | 30,684 |
| | 23,194 |
|
| Net occupancy and equipment expense | | 1,505 |
| | 1,885 |
| | 6,246 |
| | 6,537 |
|
| Professional fees | | 621 |
| | 661 |
| | 2,758 |
| | 2,825 |
|
| Data processing expense | | 421 |
| | 388 |
| | 1,679 |
| | 1,670 |
|
| FDIC insurance expense | | 295 |
| | 328 |
| | 1,224 |
| | 1,612 |
|
| Amortization of intangible assets | | 194 |
| | 224 |
| | 778 |
| | 896 |
|
| Other operating expense | | 1,311 |
| | 1,627 |
| | 5,591 |
| | 5,501 |
|
| Total noninterest expense | | 10,864 |
| | 10,995 |
| | 48,960 |
| | 42,235 |
|
| Income before income tax expense | | 5,762 |
| | 4,411 |
| | 22,093 |
| | 17,929 |
|
| Income tax expense | | 1,405 |
| | 1,060 |
| | 5,342 |
| | 4,612 |
|
| Net income | | $ | 4,357 |
| | $ | 3,351 |
| | $ | 16,751 |
| | $ | 13,317 |
|
| Less: Preferred stock dividends and discount accretion | | $ | — |
| | $ | — |
| | $ | — |
| | $ | 645 |
|
| Net income available to common shareholders | | $ | 4,357 |
| | $ | 3,351 |
| | $ | 16,751 |
| | $ | 12,672 |
|
MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION
|
| | | | | | | | | | | | | | | | | | | |
| | December 31,
2012 | | September 30,
2012 | | June 30,
2012 | | March 31,
2012 | | December 31,
2011 |
| (unaudited, dollars in thousands, except per share amounts) | | | | | | | | | |
| Per share data: | | | | | | | | | |
| Book value per share | $ | 20.51 |
| | $ | 20.21 |
| | $ | 19.67 |
| | $ | 18.82 |
| | $ | 18.35 |
|
| Tangible book value per share | 19.39 |
| | 19.07 |
| | 18.50 |
| | 17.63 |
| | 17.15 |
|
| Financial Ratios: | | | | | | | | | |
| Tangible common equity/tangible assets | 9.22 | % | | 9.45 | % | | 9.24 | % | | 8.70 | % | | 8.68 | % |
| Total shareholders' equity/total assets | 9.70 | % | | 9.96 | % | | 9.76 | % | | 9.23 | % | | 9.23 | % |
| Tier 1 capital/average assets | 9.82 | % | | 9.98 | % | | 9.64 | % | | 9.62 | % | | 9.60 | % |
| Total bank loans/total deposits | 73.96 | % | | 76.11 | % | | 75.41 | % | | 72.97 | % | | 75.47 | % |
| Total loans + loan pool participations/total deposits | 76.66 | % | | 79.13 | % | | 78.75 | % | | 76.54 | % | | 79.47 | % |
| Asset Quality | | | | | | | | | |
| Gross bank loans | $ | 1,035,284 |
| | $ | 1,011,264 |
| | $ | 996,422 |
| | $ | 981,146 |
| | $ | 986,173 |
|
| Allowance for bank loan losses | 15,957 |
| | 15,827 |
| | 15,737 |
| | 15,679 |
| | 15,676 |
|
| Net charge-offs (YTD) | 2,098 |
| | 1,578 |
| | 1,093 |
| | 576 |
| | 2,841 |
|
| Bank loans past due 30 - 89 days | 6,141 |
| | 5,342 |
| | 7,549 |
| | 7,940 |
| | 7,001 |
|
| Other real estate owned | 3,278 |
| | 3,117 |
| | 3,869 |
| | 3,773 |
| | 4,033 |
|
| Non-performing bank loans | | | | | | | | | |
| Non-accrual loans | $ | 2,938 |
| | $ | 3,196 |
| | $ | 4,480 |
| | $ | 6,331 |
| | $ | 10,917 |
|
| Restructured loans | 7,144 |
| | 7,329 |
| | 7,349 |
| | 7,634 |
| | 6,135 |
|
| Loans 90+ days past due | 572 |
| | 1,029 |
| | 347 |
| | 540 |
| | 1,054 |
|
| Total non-performing bank loans | 10,654 |
| | 11,554 |
| | 12,176 |
| | 14,505 |
| | 18,106 |
|
| Gross loan pool participations | $ | 37,784 |
| | $ | 40,036 |
| | $ | 44,180 |
| | $ | 48,042 |
| | $ | 52,186 |
|
| Allowance for loan pool participation losses | 2,134 |
| | 2,134 |
| | 2,134 |
| | 2,134 |
| | 2,134 |
|
| Net bank loan charge-offs/average bank loans (YTD - annualized) | 0.21 | % | | 0.21 | % | | 0.22 | % | | 0.24 | % | | 0.30 | % |
| Nonperforming bank loans/total bank loans | 1.03 | % | | 1.14 | % | | 1.22 | % | | 1.48 | % | | 1.84 | % |
| Nonperforming bank loans + other real estate/total assets | 0.78 | % | | 0.85 | % | | 0.94 | % | | 1.06 | % | | 1.31 | % |
| Allowance for bank loan losses/total bank loans | 1.54 | % | | 1.57 | % | | 1.58 | % | | 1.60 | % | | 1.59 | % |
| Allowance for loan pool participation losses/total loan pool participations | 5.65 | % | | 5.33 | % | | 4.83 | % | | 4.44 | % | | 4.09 | % |
| Allowance for bank loan losses/nonperforming bank loans | 149.77 | % | | 136.98 | % | | 129.25 | % | | 108.09 | % | | 86.58 | % |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended December 31, | | Year Ended December 31, |
| | 2012 | | 2011 | | 2012 | | 2011 |
| Per share data: | | | | | | | |
| Ending number of shares outstanding | 8,480,488 |
| | 8,529,530 |
| | 8,480,488 |
| | 8,529,530 |
|
| Average number of shares outstanding | 8,486,809 |
| | 8,559,734 |
| | 8,485,008 |
| | 8,604,872 |
|
| Diluted average number of shares | 8,531,197 |
| | 8,592,152 |
| | 8,527,544 |
| | 8,632,856 |
|
| Earnings per common share - basic | $ | 0.51 |
| | $ | 0.39 |
| | $ | 1.97 |
| | $ | 1.47 |
|
| Earnings per common share - diluted | 0.51 |
| | 0.39 |
| | 1.96 |
| | 1.47 |
|
| Dividends paid per common share | 0.10 |
| | 0.06 |
| | 0.36 |
| | 0.22 |
|
| Performance Ratios: | | | | | | | |
| Return on average assets | 0.98 | % | | 0.80 | % | | 0.97 | % | | 0.82 | % |
| Return on average shareholders' equity | 10.04 | % | | 8.52 | % | | 10.13 | % | | 8.42 | % |
| Return on average tangible common equity | 10.94 | % | | 9.52 | % | | 11.09 | % | | 9.51 | % |
| Net interest margin (Fully Tax Equivalent) | 3.31 | % | | 3.34 | % | | 3.46 | % | | 3.34 | % |
| Efficiency Ratio* | 59.15 | % | | 63.86 | % | | 67.32 | % | | 62.94 | % |
| Average Balances: | | | | | | | |
| Total bank loans | $ | 1,024,124 |
| | $ | 975,539 |
| | $ | 1,001,259 |
| | $ | 953,392 |
|
| Total loan pool participations | 39,161 |
| | 54,215 |
| | 44,507 |
| | 59,972 |
|
| Interest-earning assets | 1,677,356 |
| | 1,575,372 |
| | 1,630,835 |
| | 1,536,596 |
|
| Total assets | 1,770,075 |
| | 1,668,368 |
| | 1,721,792 |
| | 1,628,253 |
|
| Interest-bearing deposits | 1,193,288 |
| | 1,135,823 |
| | 1,164,635 |
| | 1,113,672 |
|
| Interest-bearing liabilities | 1,397,496 |
| | 1,337,274 |
| | 1,370,232 |
| | 1,309,588 |
|
| Shareholders' common equity | 172,616 |
| | 156,129 |
| | 165,429 |
| | 150,114 |
|
| Total equity | 172,616 |
| | 156,129 |
| | 165,429 |
| | 158,146 |
|
| | | | | | | | |
| * - Noninterest expense minus amortization of intangibles, divided by the sum of tax-equivalent net interest income plus noninterest income minus gain/loss or impairment on securities and premises and equipment. |
MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION
Adjusted for Loss on Termination of Pension and Gain on Sale of Home Mortgage Center
|
| | | |
| | Year Ended |
| | December 31, 2012 |
| | |
| Return on average assets (annualized) | 1.05 | % |
| Return on average equity (annualized) | 10.90 | % |
| Return on average tangible common equity (annualized) | 11.92 | % |
| Efficiency ratio | 58.82 | % |
| Earnings per common share-diluted | $ | 2.12 |
|
