MOFG - Earnings call transcript Q1 2024 | MidWestOne Financial Group, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, ladies and gentlemen, and welcome to the MidWestOne Financial Group, Inc.

First Quarter 2024 Earnings Call. [Operator Instructions].

As a reminder, this call is being recorded. And I would now like to turn the call over to Barry Ray, Chief Financial Officer of MidWestOne Financial Group.

proceed. may You

Barry Ray

Executive for Chief in everyone, me today. appreciate and our We on and our Thank Operating Officer. Chief earnings joining conference participation Officer; Chief Reeves, Chip our call Sims, With Len call your Devaisher, the President our you, Gary are us Officer; Credit this here morning.

of be available will the of Following call conclusion today's this conference, our a website. replay on

our Investor website. today's complement presentation also Relations to section deck the of slide a Additionally, available is on

let contains the statements business condition, begin, Group, Before that related call operations Financial of financial on we Inc. everyone remind me the this and forward-looking presentation MidWestOne results of to

from believes, Forward-looking anticipates results similar and those statements other materially Actual indicated. include generally such as expects, expressions. differ words could

important and actual business, detailed risk are Exchange mix factors differ materially in cause Securities the conditions rates, company's in Commission. of statements company's the reports that and economic to the could interest general and results changes registration the periodic filed factors with the pressures, Among competitive the

the would Chip. or like Group, date revise to of publicly after to these presentation. or forward-looking no statements this I obligation Financial Inc. reflect turn the to undertakes to events MidWestOne call update over circumstances now

Charles Reeves

quarter significant conclude you, update the then of with and an of progress provide morning. results. lines provide in our plan will Thank first Barry, our Len an On our detailed overview will on good executing a I'll a review of first and Barry high-level and today's call, our update quarter initiatives. on results more business, financial strategic

quarterly low-cost Denver which closing to existing deposit our added highlights, scale operations. pleased I'm seamless of a with Bankshares, Denver and franchise our and integration Looking the at

now franchise $XXX and million. has $XXX of Denver loans million Our deposits of

this previously, and in our critical the Denver stated in for our our speak future. objective franchise progress us Len the to for be further $X about plans a is billion market. As will market we've

sheet trends. Turning balance to our

acquired as high-touch of customer Denver we delivered major delivered the balances, fashion. first loan larger value quarter continue boutique X% our we benefit teams our emphasizing Bank a proposition, from annualized expertise the bank and banking of in Excluding to market growth for expansion

Additionally, in quarter, slow grow optimistic, and a core deposits remain through ahead. what's normally deposit were stable seasonally will we franchise the year our cautiously

sheet interest the acquisition slow of a balance cuts rising Importantly, points loan income. our Bankshares in our to we occur margin rate quarter, the anticipate basis leading first remainder for XXXX XXXX, Denver of expanded and actions, and X% year. in Even increase our net strategic interest if net XX because in in quarter, growth, margin continued no a the quarterly build the of the

specifically a market Wealth of ] increase. and investment regarding XX% and in our was We as Denver revenue as enjoyed Iowa, quarterly XX% valuations platform [ and businesses loan the $X.X quarter our Management and in continue our first to metro and our Management solid Wealth under Commercial markets, growth Metro and the both major management and expand Banking million, up-tier assets Twin well year-over-year business, talent Cities,

new double-digit achieve in EVP look we this years business annual Wealth revenue we in his under January, segment and come. our and In leadership, of to Heimermann, Steve to welcomed growth Management, Head the

reallocating of we and profitable into investments markets funded management the these treasury with acquisition and and credit these discipline second strategic by in to our with The administration, our operations of mature seen commercial across continue beginning marketing bank expense we expand quarter XXXX, investments, platform talent management, the with investments. our expense Even and more These senior and of first we has and talent pleased banking, as departments. majority quarter reductions wealth hires our remain the plan. productive significant are as consistent

is the conclude, we've future power what of the our than and very optimistic and holds substantial strategic for in made The I returns. improved on employees shareholders. initiatives remain expected, for the better execution To our earnings of MidwestOne, positioning progressing transformation bank we've progress and

their employees company, our This I'd to for communities. like their journey not thank continued to their hard support. and expertise their without possible would be work and customers commitment our unwavering

over I'd Now the call to turn like Len. to

Len Devaisher

like and results the color our wealth I'd commercial Chip. business on you, Thank line. deposit, seeing to in some we're provide

So let us with deposits. start

gains and transaction. seasonal gains Denver February These we deposit decline are in deposits Bank March saw We exclude assumed pleased January. of experienced mitigating both the that customer from

and that X it shows terms Colorado as of Banking, Commercial to our balanced Metro, Cities growth. Iowa was Twin In slide contributors largest

C&I The nice as drawdowns with and a loans in agribusiness drivers new by a includes manufacturer team, an well existing include a primary full in acceleration This production. win construction we as our on brought management. including new both CRE treasury across, new relationship,

a We as Speaking business driver fee continues business our gain see of on-sale that commercial, SBA income. government momentum. our to of growing gain guarantee

In last we that all or quarters And the saw will strong start. believe months We $XXX,XXX of year. what in X next the of XXXX. we outpace of first recognized of XX% couple

only shows, Slide stable, XX basis and X respectively. basis XX-day XX- quality quarter for to X net delinquency As asset were metrics points, points including the charge-offs of and

X.XX% X grew assets to points, nonperforming of a loans. slight while saw of increase basis our total ratio allowance Our

our classified linked in the release, assets quarter. noted ratio As basis declined XX from our points

to an balance. mention loan the two increase large migrated our in special relationships quarter, from criticized in past driving However, trucking

Turning from period momentum to Slide ago. up year in Management continues Wealth assets XX% same under up The with X XX% administration revenue XX. the and

are business, a this XXXX. as for opportunity of and attraction continuing We line in us that talent see in efforts by we encouraged new

that want Denver the our in in yet. Finally, from having team settling was the can From to our and I acquisition. smoothest learning commend with development, exceptional by to newest and I to conversion work Bank Denver on ambassadors retail the of the tell And IT, are colleagues nicely. operations been it very ground you

continued Denver. see As in mentioned,we Chip upside

our our and C&I senior period the announcement, Denver a commercial since Treasury referenced Officer, banker, have in Bank as to I'm acquisition SBA turn new of discuss new CFO, Development recruited talent to that, Business call to a we Management financial pleased a in in to fact, markets our Barry strategic the Ray, a plan new results. continues be our our target selective over In Officer focus. updates, With

Barry Ray

X% with Thank you, beginning million linked billion. on financial Slide the walk our to $X.XX sheet loans from $XXX.X XX. statements Len. the increased I'll assets, through or with quarter balance Starting

first acquired by loans, commercial linked was from in annualized annualized the $XX.X from which Excluding $XXX.X million was and loans growth in the or the million of the quarter or increased led of industrial $XX.X X% quarter. acquisition, Strength the loan million Denver quarter. Bank XX% linked

from held point at basis credit XX. The was The yield of for reflected increase of allowance million losses portfolio in March million loan to $X.X well X.XX% for the establish acquisition for as a expense The in additional allowance quarter. the X.XX%, as growth. for losses $X.X investment or linked with credit overall loans allowance to the for credit $XX.X increased day XX improvement Bank X losses Denver loss connection credit organic million

December Total deposits. XX. at billion $XXX.X Turning to XX deposits $X.XX compared as March to million to increased

equity common ratio XX decrease XXXX X.XX% primarily XXXX, XX, a The basis $XX.X acquisition, Excluding deposits down million, the accumulated Denver increased in million deposits Finishing $XXX.X in XXXX. by the Bank other million comprehensive driven points of $XXX the loss. from equity $X.X of year-end million was due Total March were assumed balance tangible to the shareholders' to Denver Bankshares from primarily acquisition. down year-end sheet. all-cash

per share. the or diluted income Turning to income net million On XX, Slide $X.XX we statement. earned of $X.X

the completed During the acquisition X of quarter, day expenses in a million million. of Denver merger-related $X.X Bankshares and expense $X.X of loss credit we resulting

diluted a million of incurred $XXX,XXX negative of costs Adjusting income valuation right mortgage was recorded net servicing $X.XX and these nonmerger-related or for common share. $X.X we addition, severance items, adjusted $XXX,XXX. per In

$X.X million interest-bearing million yields, costs accretion, first XXXX Net to compared and liabilities. offset to volumes bank of to volumes $XXX,XXX interest higher $XX.X by partially quarter and as primarily of of income attributable which loans. due million the earning discount linked quarter purchase of to interest the asset first loan higher the quarter, funding in required the of in Denver was increased included income $X.X Loan

Denver quarter provisionally million was loans during $X.X the for measured loans. discount purchase at first of attributable acquired the Bank or The X.X% of

in income the interest recognize weighted loan life. X.X over expect We portfolio that discount average year to

asset tax cost yield to Our increases equivalent as increased as funding X.XX% basis the points to net XX interest quarter in outpaced margin quarter X.XX% linked increases. in first the compared

improvement. to the point increase basis our interest-bearing quarter basis which was driver quarter. million primarily margin cost outcome key a fourth XX up basis only in increased experienced a XXXX, points, the Specifically, did quarter first This Noninterest the increase to income in The the funding points asset in quarter. XX partially deposits compared yields the interest recur our due our offset $X.X modestly, not costs. in on of current million X much basis net more grew in XX security loss point quarter-over-quarter sale the by of in net prior earning we increased $X.X

linked noninterest linked with $X.X In expenses. million increase $XX.X million, the expense $XXX,XXX revenue from a addition, Finishing or quarter quarter. the quarter. an Total XX% was increased management-related from in wealth of first

$XX well as for of million adjusted those costs costs expenses quarter's expense as was X% $X.X charges, Adjusting the from million or increase a linked first The noninterest included of merger-related nonmerger-related $XXX,XXX. severance quarter.

The incentive salary and costs. of accruals additional normal due Bank adjustments, was increase employee annual to Denver

divest expense beginning run which XXXX. in a our to to reminder, we in result As XXXX, about June our reduction rate a branches quarterly in expect July of Florida will $XXX,XXX

management I'll are back key The open And it a focus operator our questions. remains we control very to with the the team, and line pleased execution. for that, with our to of turn Expense

Operator

with our the is [Operator Hovde. first Instructions] line Brendan Nosal And question of from

Brendan Nosal

still and here. all of and gave opportunities front start adds Maybe to that know quite on early hope -- just weren't would deal you just that to you off to get speak able to just about now you Denver, of new some is the there. that previously? days in team you of the front I get love I it with But in commentary the hear of early appreciate closed the

Len Devaisher

to of XXXX. would this this a you is We've this Denver obviously, down to I the our of at And you starting with story where tell. looked what know, of [ the But Bank us lot is -- we had, is ] means out market with -- to partnership to as compelling us. team folks a have we've new I in tell Brendan, that talent allows with Denver, think, really growth doubling Len. show Yes, enjoyed story,

overall, that that in up say the new as I able been that achieve. on, the I showing having having we've talent we've in at that see so it since just look I only then recruitment And And the announcement balances looking Denver not customer talent the to good momentum. and acquired way we've down talent the conversations ground added feel of by of and would Bank about at

Brendan Nosal

more Perfect. this industry lagy what reserved Perhaps more like offer drove in for a the you drove one that any and point? Any loss content increase mention? you folks Can line potential to me. see the All of How details the credits on at right. trucking little special sight color migration?

Gary Sims

$XX with. in and Brendan, power credits customers to the based And on markets customers, special recognize less a in Total primarily in that of to cash that is experienced as to the business through a across our getting don't our started from that is downgrade to just it we flow. exposure we're us doing of make this matter, prompted some of long-time that We had customers couple deterioration staying a financials we we is the these industry, course, believe as wherewithal downturn. exposure have than are credits mention less-than-expected our customers industry Sims. significant the -- those on do of industry. this Gary XXXX year-end focused exposure million have trucking our Both the

the from kind that It's You after-effect space capacity you in that that. trucking ask where what's driving caused the of really had pandemic to from decline. oversupply an rates did of the that's

And you've that mismatch that's got supply/demand been in so happening the industry.

closely. the were you When some that deterioration, in customers risk we're at stop. looked So really Does them. had that entire those watching I'll make portfolio sense, and downgrades that the we the saw ones we saw the we said Brendan?

Operator

the line from next question Stephens. is The with Terry McEvoy of

Terence McEvoy

is a Barry, the is Maybe, for How you you. the two positioned question for rate adjust environment. balance position sheet for longer acquisitions? for a when higher, that How

wondering kind if rate margin cuts, higher the earlier, expand could said but that. you of Chip without think I grind on

Barry Ray

balance we we of example, think get opportunity basis for the the outpace our funds yield there. believe we and position. we cost rate that loan sheet to points increase that's in getting if going that have Terry, increase cuts asset yes, that's yields, our month per something Yes. current been We're of with of of about rate been XXXX, even that's X no in where still holding

dramatically slowed We were rate the of in at down quarter. funding pleased costs the

cautiously So us. no to opportunity we holds we because if with cuts expand kind that margin optimistic in pattern that have that, feel XXXX of the of for even

the deposit, Terry. funding the So that side, risk the cost of be would

Terence McEvoy

that on some client the the Could the definitely then acquisitions nice to see revenue revenue business? talk maybe, outlook you question on full for help about had and do from XX%, thoughts And have new Wealth Management, up year any markets. you

Len Devaisher

is this Len. Terry, Yes.

to bankers. don't add tell would So of is our wealth bankers a definitely specifically, tell we new talent between client to disclose nice partnership I commercial And the have we and management what is the organization. But I -- able we you our fruit specific lot see in you the I that momentum see been acquisition don't numbers. can have we of what

think And in like investments market, the that's including a an the in of new area that really given And Moines continue that I'd in a when momentum. been at made Des business, for year. that of see full pace looking so I'm double-digit growth, we to nice hire just about I terms

Operator

Nathan Sandler. Piper question Race is line with the of next from The

Nathan Race

Friday. Happy

kind -- run wanted rate about any just once expense as closes. rate. Florida just Just to mentioned think about the well. kind of you $XXX,XXX overall the transaction of Barry, run cost of to think savings I XQ operation thoughts the But on

Barry Ray

Yes.

late May. -- don't until Florida quarter, I expect the second close still transaction we will think XQ to the be in

second it will So quarter. in the be higher

noisy it rate is to inverted through some we're laying Denver be somewhere at we divestitures, $XX we're third of for per move Bank and look run we quarter expenses. million where out these As we'll think quarter the we the around what of expecting

Nathan Race

Okay. the Great. balance just the and outlook pipeline is portfolio. it the particularly year. of see of levels, pretty I the sounds around operating on you credit still terms earlier strong the commentary trending, trucking reserve at from in time appreciate But like solid this remains the and how pretty healthy you're growth guys loan over of

light So in about of overall the quarter tied curious the thinking particularly rise the in just to reserve, this Denver. deal

Gary Sims

mean, Gary. if is in. miss This I'll start Barry, the I a from anything, and I conversation. And add basis. currently the we on go-forward see what reserve please then

experiencing course add support so So of loan the to to growth, see time. us we the we that will reserves loan are to growth over continue

that portfolio, In we terms are existing the risk and of the we the in reserved see we adequately for portfolio to believe date. risk

changes something see existing adding to portfolio. I try being in to unless the more reserves support us existing to don't So aggressive

growth loan basis, be there. go-forward will driver a on So a key

Nathan Race

growth. but last have ask relationship legacy a I just little number you guys a one I declined quarters. know last deposit balances If several the of on loan bit, Obviously, over managers one the can hired

kind curious, guys of just resume deposit over I'm the the kind for course core to outlook So of growth of some XXXX. you

Len Devaisher

this is Nathan, tell of business. you every Certainly, can Yes, I line Len.

the be we we're bankers. continues prudent business, commercial being banking So mindful banking to very to obviously, focused managing the hand-to-hand to on retail -- Everyone's about think pricing. as Obviously, of from our private combat. being

the quarter-over-quarter, mindful deposit And example, costs in so and of also for we're of the rise slowdown pleased, with balances. interest-bearing

in going balancing act balancing an that's my act be to expectation XXXX. that ongoing continues. And So is

Nathan Race

us one the margin the of as Okay. the And can you just occur? sorry. Barry, just cuts impact rate last remind one, Great.

Barry Ray

Yes.

still again, positioned without just think federal is I expansion dynamics. we some cut, to talked repricing balance earlier amount have about the it's rate we our rate margin upon the based believe sheet cuts of

expansion. in additional alluded I rate battle I -- contingent think that the the see said rate of margin upon cuts be Len get funding. that, of what would comments, also deposit the to his and for pace we would would continued have we continued be, as well we Len as kind if deposit do would the think cuts

dynamics so those And come all how together.

Nate, better answer improvement incremental can you, be improvement And I give with some I think cuts, would so to margin without some margin the and cuts. it we see is best expect a rate

Operator

The the KBW. next from with question is line David of DelMonte

Damon Del Monte

everybody Hope well is doing today.

are upcoming would maturities Just and see for commercial over on if wanted Barry, to us, you the estate the the repricing what of remind expectations those the margin kind type quarters what of have as open of well. real could

Barry Ray

Yes.

get let the -- about me data. So

And portfolio I I $XXX If in next the about course our be that -- rate, yes, that, XX% So repricing of over of Damon, million year, about out repricing. billion. XX% the estate. $X.X to would fixed of the it's if go about piece there real what's commercial then look of or fixed probably

Damon Del Monte

Okay. your with SBA like helpful. higher a And wealth kind and income, in stride of sounds you're That's management, starting regards it in as hit here driving platform bit kind to to fee then little of revenue the well. the that's

As a quarterly $XX.X a we fair lift think closer Is $XX.X call kind off bit it, it of about to kind the for this income. million maybe to to of of fee of, operating million. quarter's assume little cadence a

Charles Reeves

Len momentum than of that Damon, million, first the number other first give you this. some spoke wealth run quarter quarter And the to. of say We rather in pleased -- showing the rate. accelerated momentum this that lines their Rather $XX.X is business are of from Chip. especially I'd a were with about management areas,

quarter, guide feel to good second start the -- probably we specific trajectory. number momentum the but feel to So we're we where about a the into going we and you good the about but as move not

Damon Del Monte

lastly, you the rate. works. just on us we rate using? a what be And enough. then Barry, tax just Fair That should effective remind good can tax

Barry Ray

Yes.

statement, around where is I think the we we're think release landing XX% we included expect. for in probably I is what XXXX

Operator

next is Martin the of question Itau The from with line BBA. Brian

Brian Martin

Barry. one Just I guess question,

just to point Just full give going closing, kind is of guess the versus a trending launching idea what the of the margin I you just intra-quarter an to quarter, for where the the back margin, moment, for were is. how us March given that

Barry Ray

Yes. were around quarter. for $X.XX be Brian, $X.XX. March we the The margin, March margin, The would

basis So points a higher. few

Brian Martin

have there. would that okay, in -- that And right. most it of All

Okay. And -- guess, do how repricing, either, fixed mentioned, of total bigger the Barry, just mean then picture. much maybe or as expect is the so? far I as over side repricing XX months the you the you in on kind I rate next

over a that just piece? more you what's would to don't number or there I said in maybe of significant a next kind was other just good I else if kind XX something there's that's of that in real think think the terms XXX, estate -- months? know repricing of about be

Barry Ray

No, entire.

I'll So fixed give the rate.

asked over some months, then million So was we yes, that's next CRE. talking adjustable And also -- $XXX about XX around the fixed earlier specific have of Entire to I I about rate fixed was what would $XXX rate. to specific rate believe, be Damon million. that

Brian Martin

Got you.

yields the mean, what I that, And like pickup new the origination lift getting of are Okay. are you with on today? then kind

Barry Ray

Yes.

around for new yields Our origination X.XX,X.XX,X.XX.

some yields Xs. on And of look Xs so if low probably those repricing, you the in high those to at

Charles Reeves

little are. the we originations Brian, are to new bit, on a would I just where Yes. mid-Xs the add that

more not So Renewal more is but often, that in X. associated, think new always, the be to -- below tends often. renewal about rate relationships our actually you Xs, if

to book. seeing of the trends So there. the speaking we're that's commercial specifically sort I'm in

Brian Martin

Yes. Got you.

next Okay. accretion think, impact? about trend little the how given should up it quarter. mentioned, Barry, quarter you I And about guess, that a think you Is helpful. full that how I the bit That's number,

Barry Ray

a of Yes. benefit, months about of for Correct. $XXX,XXX We so X had month that, so about. XXX,XXX

to say for next attributable would Denver of call expect the -- you I would So quarter, $XXX,XXX it, Bank transaction. more

Brian Martin

you. Got

one then for Gary. All Okay. -- And one just right. maybe

just -- just and big you've those us remind picture. office you Can past, big in the then just health terms and you what portfolios those can of I can just about dollars trucking, the or you criticized portfolio. care just Gary, the are -- how outside in On are of talked think classified, of maybe the just

Gary Sims

care really, and much more -- the Yes. and not specifically, in Brian. Sure thing, the seen senior has clarify space I'll the weakness as portfolio in living. living we've really where been as senior office I'll in health

office. start So with I'll

Our That million. of nonowner-occupied X.X% represents office portfolio. is $XXX our

XX% of of to XX% is seen of terms In what is in portfolio, the getting that criticized. in we've portfolio here. deterioration of terms it that numbers classified,

is is So and $XX million million $XX classified criticized. then

that in gives of office a see idea second, the what portfolio. an stop I'll for you Brian. So we

Brian Martin

Yes, it. Yes. Yes, that makes sense. I appreciate

Gary Sims

Okay. Good deal.

portfolio. we $XXX On That the of portfolio. million in the have represents that senior X.X% living,

deterioration the XX% portfolio. of that of terms Classified In we portfolio. in have is that

-- that is portfolio is portfolio. substandard we So in And that any $XX.X or have mention don't million of rate credits special worse.

So of the the portion that is portion as the of classified portfolio criticized same the portfolio.

Brian Martin

Got of you. And those no migration and yes, migration speak this to portfolios in quarter no either of. --

Gary Sims

Yes. That's fairly this correct. those quarter. The categories stable of both portfolio in migration, terms were

Brian Martin

you. Got

on Perfect. to Barry, what don't Okay. the the number impact -- for the Florida? number, the some number the of on quarterly -- that mentioned divestiture but last haircut Florida was you was annual the I related And a expenses was a I Was expenses. one think if it know from me, on

Barry Ray

Yes, was from in the $XXX,XXX it and comments, around Brian, my quarterly it was impact was a Florida. number,

Operator

are pass to no remarks. There waiting would at I any time. additional the team Instructions]. this the over conference closing [Operator for questions like management to

Charles Reeves

for forward you, the as believe everyone, our a year. Thank XX journey to our we start together today. Chip. in to joining joining Thank calendar is you to This very execute strategic was continue We you. it look solid days plan. Great. We

Operator

Inc. That concludes Wine Midwest Group the Financial

you your Thank day. Call. the participation, Earnings rest and your for enjoy XXXX of Quarter First

MidWestOne Financial (MOFG) 26 Apr 242024 Q1 Earnings call transcript