- Earnings call transcript Q3 2022

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Operator

Good morning. Thank you for attending today's MidWestOne Financial Group, Inc.

Third Quarter 2022 Earnings Call. My name is Hannah, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. contains operations relating Financial and presentation condition, the Group, This of results business Instructions] forward-looking to statements financial Inc. [Operator of MidWestOne

statements and anticipates general results presentation. Interim Actual the proceed. company's Exchange generally events risk update other in reflect the from registration no change would CEO the Please important pass statements include to in could such I Devaisher, mix economic these materially Group, Among beliefs, over Forward-looking and obligation business, filed MidWestOne the undertakes cause Group. this our to statements or that reports actual rates words now our of with like those circumstances the indicated. the similar differ and Inc. detailed competitive host, conference could results periodic expects, expressions. or Financial Len conditions forward-looking the Commission. after Securities to factors differ to the pressures, materially MidWestOne to of revise publicly of factors Financial as company's and interest date

Len Devaisher

thanks Officer, all Treasurer, Cantrell; Hannah, our turn and Kevin Board, this that, and pleased Barry over Chairman with by I'm us Chief I'm joined to call to our it you, of in call joining you Kevin. CFO, our of our Ray; for Gary Thank Sims; the Credit for today. the Jim Monson. And to

Kevin Monson

in And has also company to Iowa have continue He's the you, participate during with long to bank this know until continue for start have joining leadership week starting CEO, November and thank Xst. broad-based It's Good special will our new well able us, to experience and XX-year our City our introduction. happy joined is doesn't to several company that for staff. morning adviser our of we're to him the exciting who leadership the to the as brings Charles and new the this Chip afternoon, work excited to of as good Funk (Chip) today very announcement he been Len, I call in as Chip to Xst, Reeves, everyone, period. November jump be Charlie become part very I'm transition team. start and a a was getting meetings even a though and get and

word MidWestOne to So the make growth celebrate I'm bring service continued all as forward all we Len wanted sure of are will with like our Chip with opportunity aware last also I that, Group. it, and you in serious you just to for well. were bike Charlie's Financial today and that wish sure thank one to which Devaisher future and to CEO accident his the best this Charlie I'd time And as difficult interim between moving

here. So Len, from take it

Len Devaisher

Kevin. Thanks,

Chip As think, are I well and a particular, we're background, that I was on significant you momentum is added the time equipped a We commercial this forward. to spend tell experiencing. excitement us Chip's team It clear Kevin be good will able fit the to In is that week. take commercial ahead. And he lot can see an things great accelerant already energy and shared, of the already MidWestOne with is contagious. the just

We the place retaining attracting heard and the It our investor metrics. is third you've and and and improving we places combined of several the core strategic our As look third a we've quarters. our on outcomes witness is The initiatives credit at focus last gratified deposit people of with a it on feature customer of across our the employees, accelerating earning leads right in the the sheet, business, talented focus loan you right the it It's on productive results, strong fruit of quarter, in doing with prior mix in see franchise. commercial balance foundation that the right growth, we're quarter built improving heart asset to in the about put calls. presentation, relationships, things. the of what

next our I'll minutes, highlight For color a provide few interest will our Barry key the Ray, then drivers expenses some and business of capital. few additional our net on CFO, our and margin,

linked quality clearly that commercial we traction by of even begin Let's but quarter more gained volume, strong with expectations. growth. After the just most loans. only second the What's gratifying these highlighting how feel is about exceeding XX% lending quarter, the third quarter is annualized in not a we

several to last commercial banking quarters, actions line For very we've mature business. our deliberate taken the of

to really it's from those fewer that Southwest resulted utilization. what's we're quarter, talent growth process, efforts. production from exciting This said, the payoffs we've and of broad-based Denver to loan line solid And increased Twin is a and the is Cities the seeing and City Dubuque, Florida. really As to us Iowa production about fruit to

pipeline in our to commercial we quarter on discipline our on maintaining business the Looking we to prudent in strong focus Like depending out of rate is XXXX, conditions. and and strong could proactive continue we growth another economic a moderate ahead, the close development. enjoy client many, XXXX. selection, structure see suspect But

and we points basis assets of continue six about credit down progress XXX With basis has lines, line charge good of only the in our classified contributor ratio the up quality. of realize bulk mortgage XX the points. HELOC growth, While loans, sheet. good real well our offs, in only loan both to non-performing ratio the has of terms on both a net our show loans which, our as franchise of balance commercial been driven in points residential basis and thinking portfolio the year-over-year, And consumer estate over

our with pleased how are We is performing. portfolio

accounts leading we're in deposit of of pleased at Just flat. are time. to we as this continue and the XX-day seeing remain we not to overdraft important are that And indicators, as these trailing closely monitoring report weakness. credit decline delinquencies number that indicators weakness

power the of In franchise. granular our deposit levers pleased these, and On which times deposit we gathering pricing pull. the of we footprint, strength other our more diverse like of the side virtues the provides balance see with are sheet to more market

traction Our also the rate growth up showing X%. annualized in a with increased exceeding quarter linked in balances is growth non-interest-bearing commercial

well we While On both is pleased deposit to date, are to over card seeing momentum a our are slightly, improving. a growth the with a deposit in third fee we down we to non-interest in report pleased Shifting as balances in slightly very service solid from income unit charges income, revenue. And wealth and basis, up from XX% as core are quarter total the beta quarter end. were quarter. fourth deposits

release, As moderated adjustment a revenue with more much mortgage servicing in loan our right noted modest this quarter.

you the line noise With lot XXXX to closer turn create income did line pleased we to other approximation I'm our the run of of so first item. that, for to quarter, and rate of Ray. this quarter Barry The call a would a of direct over this

Barry Ray

basis X.XX% quarter the The XXXX. originations former, increased to respect well liabilities higher a as to you, the Thank the yielding company's favorable yields the of Earning higher only Len. XX third expanded improved reflected on basis asset tax points bearing improvement equivalent as of cost margin to while interest and for XX XX net points, loans loan points. coupons shift basis With repricing. interest

yield and up loans X.XX% from which X.XX%. higher quarter New an average overall XXXX, portfolio the at in brought coupon of the than of were on of was second X.XX%,

margin deposit of rose obviously future sheet, points, of several net side but The cycle-to-date liability on factors, basis the be as the levels betas interest company's direction betas steady will XX which while interest-bearing On balance beta previous muted experience depend the asset the upgrade expansion deposit X%. hold cycle. reflected in of costs increased margin may

Bancshares we subsidiary Moving non-interest the the the to former of in merger are system third Iowa Adjusting XXXX, of reflected banking previously XXXX. full the quarter expenses acquired Iowa and expense that X, expense June for with quarter, increase $X.X up on $XX.X was each third $XXX,XXX related million. million. quarter announced in the expenses, of expenses track conversion the in First the associated with First Corp., we savings a now million quarter second total former in non-interest recognize two for to This Having increased transaction. core to cost which completed $X.X on connection of $XXX,XXX

Looking budget sight we'll expenses and process better XXXX line middle have the in on of XXXX we're of our later forward, this year.

in sell, Moving results to The rate our a value capital. accumulated fair accounting is income. comprehensive which debt in for mark on negative in available other interest rise continued classified as reflected securities

questions. those at with XX, risk-based it September ratio a from with primarily adjustments, pleased that, ratios you, common XXXX, for company Hannah, in subsidiary. back the and turn tangible the its to to we the increase both bank at regulatory were AOCI While any capital declined And I'll X.XX% equity

Operator

is question Sandler. first The Nosal line Brendan proceed. Instructions] the [Operator Please Piper of Certainly. from with

Brendan Nosal

are How folks. morning good Hey, you?

Len Devaisher

Good morning, Brendan.

Barry Ray

Brendan. morning, Good

Brendan Nosal

start the third to do here, I’m in off amount of quarter, think, was the I you the last quarter third for benefit just which, the quarter Maybe million, like value $X.X curious number? have MSR just fair

Barry Ray

Yes, it's Brendan. $XXX,XXX

Brendan Nosal

$XXX,XXX?

Barry Ray

Correct.

Brendan Nosal

Perfect.

All Okay. great. me. maybe one more then from right, And

the not maybe growth, remarks Should front. your year. for help for similar quarter quarter's strong? to we you prepared put perhaps think on an certainly a loan And that? good, on the something to or Could finish I as pace exceptional folks Just third on finer but growth you point still strong a the you in expectations expect noted quite

Len Devaisher

is question. midst several good the a of – Brendan, There several competing There deals it's size that right is of in Len. this for Yes, now. we're is

think and So, today. quarter what is we see would something the my third I'll saw would range That's of expectation say in quarter. I I second between would and the what it we

Brendan Nosal

Got it. it. Got

pressure, be Okay. across there markets, the less you Maybe Could pressure? is pressures, deposit of the one more where may talk there just more minute is pricing some where for various be a me. about may just kind

Len Devaisher

the right, of of But couple comment comments. have changes, as I'll say, that. Jim well. and is see I mix what Barry A we would evidence

interest-bearing see of market and which the part money those deposit shifting we savings increasing, our time with accounts, set base. checking, been defend to tool has So

to pressure, further. of have I’d Jim happy terms market In or comment Barry be

Barry Ray

that some think we very to deposit a Iowa to markets. with the likely to the start Eastern here of respect has Brendan, be what talked say pressure credit highest I’ll Yes, story our and pricing probably various very presence. I pressure deposit it’s given what union about I in common believe obviously

would we to competition. and rational If markets, with our helpful? call think we respect to their those say it’s fair other price to more I that’s bit a go that

Brendan Nosal

right. for questions. the Yes, taking yes. Certainly All yes. you Thank

Len Devaisher

you. Thank

Operator

with Thank you. of the is D.A. line The Rulis proceed. from Please Davidson. question Jeff next

Jeff Rulis

Thanks. morning. Good

Len Devaisher

Jeff. morning, Good

Jeff Rulis

and out to a with the Just more acquired of the of and back here. come to, kind there conversion Can we poke question kind couple we expense speaking, of visibility get of here? just merger linked of banks of But settle where maybe again, on I of costs, understand expense around where branch in outlook, kind sort that a are the broadly or – kind quarter closures. we if

Barry Ray

this if some that, I million, of Jeff, we I adjustments Barry. say that in quarter would could just think in also this would comp that I the million have is say as probably, pipe I that items, I fourth XXXX, so say somewhere quarter, about $XX it, would but perhaps range somewhere what range. knowing look think. inside $XX.X year-end I is

Jeff Rulis

imagine Okay. tailwinds cost words, said that And increases in there sort – achieved to expect that on cost with XXXX? assume of would you’re there saves. – still saves in is Safe for to cost XXXX, track Is well, any you be other would – you recognizing you to offset into savings? the any

Barry Ray

I cost pretty I get, the going achieved think to Jeff. we’ve we’re saves that think much

so say cost further to to XXXX. saves And tailwind hesitant a there’s I’m for

Len Devaisher

but go-forward from a don’t to Len. differential the just Yes. I This would I say, differential I those, QX reflect QX after QX. see think is would

Jeff Rulis

Got it.

if quicker Okay. I there lag, getting didn’t you helpful. you’re a had but That’s than maybe know was assumed. them

pressures? earning you Or may I think, momentum of switching decent be what Barry, at just Can funding pricing margin. kind muted see from down? was here, outstripped yet a expected asset some that on gears nail do So, from the here? stable just margin of perhaps I mute expansion. to still are not Again, yield least looking deposit kind mentioned So we by you

Barry Ray

expect there’s quantify funds yield rate. to the is up side pricing we asset on think Fed going be terminal I what the reaches that piece as certainly FOMC momentum. The betas on ramp the earning its the deposit difficult are deposit to and will side pricing

And lag that. to so continue we will

comments increase my expect I i.e., your of my experienced that not. would in Probably response were So, as rate outlook, at look we to type of in is, quarter? next guess the increase Jeff, the if muted, probably margin this that question I quarter, we

Jeff Rulis

growth. wanted remarkable quarter, pretty couple significant. see a of in one, last anything just there wasn’t addressed this I the And to just know then And Okay. really the but you a times, that I

payoffs, utilization. you mentioned increased think fewer I line

sort a pull if net all know third you of of or didn’t pretty kind I So forward significant quarter was coming there together. any increase. just had

it as a wanted double rates? big run like Just a number historical seems back because to relative

Len Devaisher

is, It the And I of, think, Jeff. is. it’s a It have really moves that key some function talent made. we of

relationships folks it, as MidWestOne. commercial income is the production quarters But And almost that versus I up they had is look so XXXX, of of XX% years XX%, we – three those to quarters about at over XXXX than bringing production, first look at fee the up three see XX%. I the more first if have

and the we’re people matter the a I of better of just right results fishing that are, that. it’s seeing places, think, So in

Jeff Rulis

Thanks. Great.

Operator

next proceed. The Terry question from Rulis. Mr. Stephens. you, is McEvoy Please with Thank

Terry McEvoy

everyone. Hi good morning

Barry Ray

Good morning, Terry.

Terry McEvoy

just Maybe with start question. the Hi.

securities talk the reinvested portfolio near that growth? flow whether the in the cash managing what the to over term, Just used was about portfolio you’re will the support off portfolio loan and or how be

Jim Cantrell

Terry, my had is expectation has substantial this our that of that is loan And trend is to. been reinvestment result Len curtailing will much the purchases. been as really I’ll demand continue. We’ve a for really take quarter, growth likely since second bit and that. securities not runoff We’ve deposit the tiny and a alluded Jim.

going so out. expectation a in see mode my of to that for kind again, we'll So is be plays next we’re quarter how the or and runoff

Terry McEvoy

the next Len, given of remarks talked prepared interim think where bit stand you up, in and CEO kind banking a then will – I'm whether people of and Chip importance you Thank your as a follow your the hiring do whether that about bringing how pick if and little hiring a whether pause culture. of so, you. on just you year? and up and being and And there's month, with last named wondering, teams the been

Len Devaisher

the and Terry, No. continued add I of that here got up we opportunity bring we've it corridor most characterize to culture. performance a development a to ago, can, continued the ongoing Cities we've folks Twin I in tell would mentioned add again, sales and and that recently to a to pieces our pause, as dial not moment conversations footprint relationships see different business And would the talent areas. you in continue I over as in proactive

Terry McEvoy

was to Good other call this I maybe Then in it quantified The one missed hear. prepared at and good. remarks. last settlement question yet? in That's one-time in that income was all –

Barry Ray

may year items, did Terry, this confidentiality non-interest is settlements. line in quarter these go-forward the he a and There's that quantify the you point related typical actual Barry. number of did to measure comments other for a as is good to run of income of We provision recall the the Len's number first this some rate. not in as

Terry McEvoy

Perfect. Thanks again. that. I appreciate

Barry Ray

Thank Terry. you

Len Devaisher

Terry. you, Thank

Operator

Mr. you, Thank McEvoy.

Damon DelMonte line from is the with of KBW. next question Our Please proceed.

Damon DelMonte

you are today. all doing Hope guys. morning good well Hey, guys

Len Devaisher

We Thanks Damon. are.

Damon DelMonte

Great. Great hear. to

the back quarter you this a of dialed missed But I a classes I talk standpoint, loan stuff? footprint growth within kind about where a could like in you, apologize I just from bit and growth asset this circling could little just type if geographically the because minutes both couple coming on was composition the So late.

Len Devaisher

Sure.

about talk coming that the we – of Damon we're – things is I did based. it one really that is by So broad would encouraged it's

Florida at Twin I mentioned quarter I third Dubuque, Iowa look So and City, Denver, Cities, production. Southwest as

places. we lots of see So in it

projects drawing and equity construction is they you are now brought thing as into that phase we of the other seeing from phase. the graduated that some The the online we're

for and help tailwind a So that's been us. a

overly I of So any mix, just growing becoming with other as right? I the tell reliant C&I say, thing just Encouraged you, based, and I how puzzle. see broad guess in we're terms would that's piece of concordant not and would of on focused CRE being the as really one what we see well the that to

Damon DelMonte

that do then an model Barry, of quarter. disclosed Great. And value million we I margin Appreciate have fair with this you about going to it. color. of think what forward? you outlook regards $X should accretion Got guys the

Barry Ray

Damon Yes. I that probably dancer, this quarter can quarter from what a you become my juncture, but a be less we experienced – it has give next I'll rate probably and guess as little the this is, will down go bit there.

think million I original the on was – original the portfolio the mark $XX so. or around

tend accelerated basis from to four down to to we of period. So it quarter, would this it an over anticipate on whenever similar think it there a five-year we of it going being we I Damon, recognition model modeled but

Damon DelMonte

it. Got Okay.

on Okay, should that maybe provision we little the of lastly how provide great. equation? current then And into factors around more how just a and thought I think outlook bit level just provision about and that guess the Thanks. reserve kind

Gary Sims

this that is start conversation Damon, Hey Gary Sims. I'll and...

Damon DelMonte

Hi Gary.

Gary Sims

miss Good I out. please if anything, help morning. Barry, me

quarter experienced we put loan additional As you would saw to significant in a provision growth which that for did. call this aside, be pretty we

as to that reserve our noted as percent of also assets However, you down. we take continue a

As of the with our portfolio. risk comfortable more profile we get

comfortable moving coverage coverage down reserve. are XXX down you we're with We to that know number as our and

there continue based as of I and be will to will take we that on the growth think to the we to expectation provision profile our also our from of of moderate that continue for view portfolio. perspective pressure the an grow view risk

Damon DelMonte

it. Got

Appreciate I it. helpful. That's much. thank That's that all had, so Okay. Thanks. you very

Gary Sims

Damon. Thanks

Operator

Thank you DelMonte. Mr.

Brian with question line comes Please Janney. proceed next of Our Martin the from

Brian Martin

morning everyone. good Hey,

Len Devaisher

Good morning, Brian.

Barry Ray

Brian.

Brian Martin

have to the maybe quarter were other that's guys to go with one-timers just been first you of to some into When takes. if fourth into the about Say, more the first and referring and out. the give kind how little Just to going there and and level referring level, the through MSR fee think or quarter how just line? noise just this, the of other income you’re the broadly, income, you that that some as next running aggregate on guess, of just wanted called clarity, maybe puts quarter but a think line fee to Barry, it's And you how bit could you kind maybe see is just back or you to about just I the to year? of

Barry Ray

quarter to about were first bit want line pointing off clarify, start that to speak do I’ll income the noninterest other was To whenever specific rate Yes. item. ask chime Len, little really and the the Len talking to run in. we a to for about you this?

Len Devaisher

that’s Barry. Yes, right,

it’s conversation so that we’ve line because really we’ve then in And where seen today’s about as called is And obviously, the MSR. most the noise. out

So core running business the course, of focus, our the just pieces. in on is

course, about is we as then revenue group service outside, that management adjustments and would of see think control. about entirety think MSR loan call incremental steady on And and are wealth about our its plan. of So our and the charge, outlook the growth, I what we outside just think that

Brian Martin

level are kind was I today, that’s kind where are guess, – starting where getting really If Len, why In of we we from? the you – of base at.

about, If view growth, that you base point is a some kind and what we what’s what one-timers, talking starting some can guys give on you here of today? of pull kind as out then can range you steady those the model of the of you’re some core level

Barry Ray

range. from we’re the million level in base probably per million today, the that think probably $XX I starting $X.X quarter somewhere Brian, is it’s to

Brian Martin

Got you.

point. starting the Perfect. That’s Okay.

margin the bit does what’s do like does short think But it to then here expect or guys kind get to one on then of is it the Fed if whomever, Or do where don’t Jim you the maybe And the we what And kind that here from follow-up how know, we’ve outlook as you of sounds assuming – there, just little drift seen. Barry. just you quarter, Thanks on much margin. bit not just or down the term, is Barry it upside about the there’s maybe guys the more a that expect Okay. – a when docket? peak? thinking fourth in but fair about in margin maybe you’re today? as I a

Barry Ray

of Brian. of all are yes, margin. is year And answer, takes really mix that happens happen going in to tailwind I be from with But to to I the, favorable have a of to would our there I’ll margin say Difficult today, think the repricing historical headwind yielding looking would the fourth Yes, and on that Obviously, forward asset and loans. then what start, higher there be the the given we we’ve things continued perhaps question this to the function peaks would closer think quarter. discussed shift equal, liabilities to lots puts perhaps would in later respect earning as the levels. I the beta due what’s

and the to trying to going best what’s the say with happen you answer the give possible, So respect to actually Brian, given difficult like takes. margin I’m it’s puts to

Brian Martin

mean then as Okay. Barry? upside sounds term, see and far like, as fair, fourth quarter takes. it I pricing some at the things the least you’ve go that there near from for Is how the kind in got of

Barry Ray

Fair, Brian.

Len Devaisher

would And our I loan third below about, how by on in as some below just mid-Xs at, color side, just that the well I July just average was example, X% our commercial September. looking weighted was the things think moved on yield quarter, in you – in and for Yes. commercial add

the to So mix comment Barry’s asset about focus. loan that’s area our key growth of a earning

Brian Martin

you. Got

as May you you the there’s opportunities kind maybe forward be lot of continued one And on the I what I just you’ve Or then whatnot. Len today? you’ve and just discussion for last us, – focused And there people the added been significantly with the opportunities can this the if of those look But really are were add on to just that – growth the had. people Okay. remind where was people? exceptional you’ve what given adding were or just areas, you talent added guess, year? where me mean, a

Len Devaisher

Sure.

contribution. Cities market, in that and both the people the attracted to of most seen definitely, number MidWestOne and So terms that’s ads Twin impactful their we’ve just of in we’ve

that leads. So of kind

We Rapids continue area. we added new the the hire that talent here to City, incremental in Denver. Iowa market. Dubuque, have region. Seattle in key a in some corridor adds really nice had We’ve

So to is and say broad-based. would posture of And one our you, is really what attitude opportunistic. it Brian, is I being

fit, a culture approach have are of are to that and business for, that mindset, who looking we in the our disciplined that and that active be credit with. continue proactive those conversations development we are folks So we folks

Brian Martin

Got you.

me Okay, taking I and question. that’s you the appreciate guys helps Thanks for the time.

Len Devaisher

Thank you.

Barry Ray

Thanks, Brian.

Operator

Mr. no Martin. There time. [Operator waiting you, at Thank Instructions] are additional this questions

So turn Mr. like call over for remarks. Devaisher to I would closing the to

Len Devaisher

much, interest Thank and you you and us all in joining your you thank Hannah, to for so again MidWestOne. of today for

please directly you. the reach If questions, day or and myself, the you the have rest we for this of and best follow-up Ray wish to Thank you weekend. Barry out

Operator

concludes Inc. MidWestOne Financial This today’s Group,

Third you Quarter for Call. Earnings Thank XXXX your participation.

now You your may disconnect lines.

MidWestOne Financial (MOFG) 28 Oct 222022 Q3 Earnings call transcript