MOFG - Earnings call transcript Q2 2024 | MidWestOne Financial Group, Inc.

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Operator

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

Second Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the call over to Barry Ray, Chief Financial Officer of MidWestOne Financial Group.

Barry Ray

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

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

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

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

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

the Among statements events and of periodic revise materially Group, business, obligation undertakes detailed the registration no the filed results and this forward-looking company's reports to and these company's actual rates, with the in Financial that pressures, the mix MidWestOne the to Exchange cause date general economic of Inc. circumstances risk are after competitive update important factors statements conditions differ changes factors publicly could Commission. to presentation. interest Securities in or or reflect the

now call the I to over Chip. to like would turn

Charles Reeves

plan joining strategic second Barry. Barry an provide of our provide will of results. and truly you, update update lines us Len review execution with conclude results will an and Today, initiatives. a of on second we Thank financial as our continued business, call. for our more the quarter of on detailed quarter a appreciate morning, quarter's our everyone this overview Good I'll high-level well as

their these and our customer months engagement. XXXX. first team flat employee out strategic first members so I'm and work Our proud relates X of hard to of expertise for pillar

USA. again September deposit announced institution continue for and successful and to premium. with once Workplace quarter divestiture significant of the completion geographic transform named attractive to this operations realignment was last our change. our to of net in by be a MidWestOne Iowa Top The Florida highlighted was even honored XXXX a We admits the an

our trends. to balance Turning sheet

delivered Excluding many classified of balances, This growth. was significant we were Florida loan or divested X% accomplished criticized paydowns, with even loans. including which annualized

to continue banking and major customer value teams unique our of expansion market from our proposition. We the benefit

were Additionally, stable controlled. and were deposits deposit costs well

remain half grow core that optimistic We cautiously our franchise we deposit the XXXX. will in of latter

quarter, our and Importantly, that net Len costs, of opportunities quarterly interest our commercial due X well-priced expanded income. just business, pleased lines a both simply in interest X% trajectory with additional I'll repricing of controlled an the net will businesses. to banking progress results in our growth, and leading loan increase and so margin basis points deposit wealth notate to discuss I'm in very the

reduced Regarding NPAs charge-offs, significantly credit, asset metrics positively limited and with assets. for lower quarter quality the trended classified

significant has The our first expand our across acquisition and talent mature we our strategic seen XXXX operations with half bank to plan. as of continue consistent

Officer, Leader. new This hires Marketing Chief Commercial quarter, Banking new our Chief include and Officer Information our Cedar senior new our Rapids

All from institutions. critical of joined regional hires financial leading these

the holds very optimistic bank we conclude, these for remain investments, what departments. and MidwestOne, I people, expense we substantial and majority the made of earnings remain reallocating the pleased future shareholders. funded investments platform To in discipline Even and and we've our transformation power of and profitable markets with into employees with reductions significant talent progress positioning and improved productive expense our returns, on more for by as the

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

Len Devaisher

Chip. Thanks,

in we outflows. and not increases see deposit offset to update were those on an It's both at balance were to On June. business. core deposit May look most provide helpful Florida increases the April's our divestiture. to I'll basis, deposits, enough the First, excluding that pleased Unfortunately,

saw deposits Perhaps, are growth importantly, and account positive we So the customer across our net quarter. well account quarter segments. account and the net consumer accounts result checking as holds in commercial all is types. our most as year-to-date metrics flat positive commercial across that Encouragingly, an for new trend new essentially net

the franchise Our asset growth. banking continues earning commercial to drive

was While the up The in [ to a assets for C&I modest double showing it sheet, and in commercial annualized engine linked quarter approach ] while a is growth headline are remains rates. balance growth our business our that commercial X%, risk loan CRE balances second important engaged. pass X% disciplined that risk on profile the grew the a rates remains by at the classified mix. engine and growth criticized growth That management quarter note firmly reductions improved number is our grade of of than in loan strong basis. our growth a more rate

Notably, analysis management in management is line including other with C&I X.X% too, our wealth year-over-year between segment despite efforts places, up are this our and in partnership decline on small our treasury C&I This relationships. fees full reflects a and growth business. efforts Those strong a growing at showing usage. concentrated growing emphasis commercial an

pleased us private In another of competitor. the XXXX large, the in Cedar same to of increase prior we see we're under as compared assets in from relationship year period very XX.X% continue to regional joined wealth the half who wealth to the a first added manager Speaking management, second administration the climb. Rapids, for in quarter, revenues

continue talent business year. in this to strong leader We pipeline recruited of remain wealth line. activity we And under focused the January adding see on this we across

the handsome to and who team capital. generating our Finally, operations my thanks a our premium seamless of to delivered bolster a divestiture branches, IT deposit Florida

that, to the With Barry. over turn call pleased I'm to

Barry Ray

results, Beginning some XX, The to million our Len. from past the to created I quarter will loans $X.XX to in attempt results. Slide of or sheet $XXX.X turn the linked our financial noise so Florida X% quarterly decreased sale operations second our core you, billion. balance quarter on Thank with

was Strength and industrial from or million the which annualized from or led growth and quarter; quarter. increased $XX.X million Excluding of $XX.X million increased was quarter. $XX.X from quarter the commercial estate, in which divestiture, annualized X% X% the linked Florida $XXX.X by the annualized commercial second loans, linked million linked X% real or the loans sold the loan in

for $X loans allowance annualized credit gain of X.XX% Florida charge-offs allowance with decrease points the loan basis reflected connection or on decreased credit increased million allowance $X.X $XXX,XXX $XXX,XXX of net sale reduction and net X in recognized The related The to operations million partially $XX.X for or $X.X offset expense. quarter, sale. the by XX. reductions held sale from million at loss The in Florida the our linked of million losses June investment of the loan to

XXXX. amount. from write-off the the reflected with reduced associated decrease our $X.X on That net Florida operations million March related goodwill sale decreased and that the Goodwill gain by XX, $X.X million

Total declined XX. on Turning deposits June to to billion $X.XX deposits.

in Excluding as of from million growth net million April. deposit in in was March offset month $XX.X and the deposits outflows more the transferred Florida the $XXX.X down deposit than by XX period-end June were divestiture, balances May of deposit net

loss. the a Total due million Slide average remain primarily focused quarter-over-quarter, that $XX.X to earnings illustrates sheet. presentation and franchise. decrease increased deposit to our the equity million increased balances on balance comprehensive $XXX.X $XX.X and Finishing deposit shareholders' million XX accumulated of other growing retained in our bankers

tangible up X.XX% at asset from ratio equity growth. The outpaced points tangible basis tangible XXXX, June XXXX, equity growth March XX, common was as XX XX,

positive Slide $XX.X statement expenses servicing or results basis income on right on income mortgage to common per Florida share. XX. $X million a million a an merger-related We included gain $XXX,XXX from diluted and Turning earned of pretax the $XX.X of of $XXX,XXX. net Those adjustment the net sale,

million per common quarter, accretion earning Adjusting $XX.X volumes million of costs income for $X.X in in income net adjusted to of $X.X higher increased share. the quarter and partially the funding diluted linked offset million the Net Loan linked as by primarily to to second yields, interest asset $X.XX items, of included liabilities. due these interest-bearing XXXX income loan purchase discount $X.X or quarter. compared million million volumes was quarter and compared to in the second higher interest $X.X

liability the The the point second to during basis increase to average by interest quarter X.XX% only in XX in X points point was the quarter quarter second as Our yields tax linked for X.XX%, portfolio asset points equivalent quarter. improvement the compared net basis average in quarter. basis from a in basis loan quarter yield earning basis partially a from The margin XX was loan was X.XX%, XX an the interest-bearing X.XX% up yield originations increase costs. point increased on XX linked linked the second new offset

to side, liability from cost linked the the costs pressures quarter X.XX% as basis points total On X persist. increased funding deposit

of second equivalent was on quarter the X.XX% loan due million average net right and X.XX%, and $XX.X X.XX%. margin to income of in gain the Noninterest the total Florida tax valuation interest the average June were XXXX servicing For XXXX, primarily yields increased deposit mortgage the were costs quarter month $XX.X first $XXX,XXX the XXXX from adjustments. sale million swing in of the

an change, an expenses the quarter million, was first connection nonmerger-related quarter-over-quarter costs Also costs. increase deeper back-to-back increase and in from ] $XXX,XXX in in was contributing quarter-over-quarter an to expense our program. Finishing additional Total million with $X.X expenses. in of swap with million increase customer the recognized noninterest $X.X was X% the $XXX,XXX core in a quarter. a severance offset into reduction [ $XXX,XXX or linked Digging reduction partially that merger-related $XX.X by

former to a of full was including of increase expenses operations, Bank additional associated and coupled expense core the Denver loan legal and losses. $XXX,XXX professional primarily quarter The operating with with and due expenses, other costs costs

Florida expenses. As accounted $XXX,XXX a per quarter reminder, our former for about in operations

that we our focus go-forward management completed in team, execution. realize rate. our So very with the pleased are remains divestiture of with in control XXXX, expect and expense savings our of we to run June a Expense

operator it to to the turn I'll for back that, with questions. the line And open

Operator

Hovde from first Brendan [Operator Our Nosal with the question comes Group. of line Instructions]

Brendan Nosal

of mean lot strategic to the lifting here especially exit heavy complete. lot place done I have you or the start now, in of just top It Florida note. feels as of a more guys the with like less part I want off plan. the level are a pieces on

enthusiasm can have which what the and the make this line? at most bottom you curious, do the your initiatives impact for do Just ones think stage, areas to of you most

Charles Reeves

and both is is probably commercial banking would Yes, enterprise over well there, our our enterprise are that Len. I look management wealth we I'll the Chip. and have Brendan, this good. at go But turn trajectory to -- first as initiatives as it

We will and Len, areas, business and invest very comfortable I'm continue anything... good about to those lines. those feeling in

Len Devaisher

our good is a would I example lot our we there. investment of clearly, of held reference week our point with Denver outlook echo there and as meeting this a Colorado market for in runway. team see and a would I the the And I Yes, of that, where Board out

Brendan Nosal

back. Yes. One Perfect. Perfect. before me step I more for

the with higher. doing whether portfolio year-end wondering of the securities Just anything have else margin you guys help move might heading there's into thought that

Barry Ray

Yes, the evaluate continue do on evaluate would continue portfolio. Brendan, us that might where looking opportunities we it, I sense something it we're but quarterly to now, say, say, nothing, we right to bond -- There's at with would certainly to basis. might where make I a closely for we able be

Operator

Our next McEvoy Stephens. question of with Terry line the comes from

Terence McEvoy

maybe of just as could quarterly invest you thoughts and a earlier, expense your to last that moving lot And of rate? certain individuals in run you quarters. couple quarterly any expenses, for as Barry, about kind lines if talked start the with outlook you continue on for of parts

Barry Ray

is going quarters $XX have Denver, think a term. the I year-end near million of range to per into and higher over what $XX.X of and of couple get from invest next with months $XX land term, million think all couple the noise I then in expect. increases, million continue the probably with Terry, in that there over near the run we rate somewhere quarter And as in but next XXXX, I we're the the $XX we'll to Florida the would typical kind to to Yes, million

Terence McEvoy

necessary I I is when just Denver $XXX -- more of kind look investments type the make a question a you locations? market, need of be look market a loans, guess, you what million limited Or And X footprint? of -- to commercial the I Page X at, at yes with my but that of and to hub can really to out Do do scale? this need offices commercial get in

Charles Reeves

Terry, is Chip. this

strategy wealth be strategy a commercial Our branch-light and then will there and heavy. likely

banking calls wealth banking previous commercial stated we've add some then market, of we're also enterprise, incrementally over the next commercial quarters that So add too. to that made, to the the or additions management we've looking prior into and in couple to enterprise of begin

Terence McEvoy

at relative growth? the going would targets would financial last management? be on. like share business size or mean, to I any that And lot a lot then one. investment, slide, maybe to total or Could helpful. be just a on you you one revenue What looking wealth Anything of

Len Devaisher

that the is Sure, would And main course, with levers Len. year. pleased This first as factors. X we Terry. of or about tell of half think you you where I just the are that, at there's

So us. I one helped obviously But is the importantly, market, and net and new think that's about acquisition. new client assets when

on us to adding help latter the Chip's so. point, talent we're focused So and obviously, do to

And would we've I X less been the from more in under last a revenue target. target, number. X.X quarters, we a that with administration of pleased say, have target, at Obviously, assets the of

I see growth -- horizon, low for to would like to as that the continue business. As double-digit longer wealth we I look to medium single in high grow

Operator

Nathan with line the from Piper Sandler. comes question next of Our Race

Nathan Race

improvement credit in quarter. see some great Obviously, the to

the how like to the curious you of you're that just Does it next growth thoughts the out trajectory level couple for front guys helpful. reserve about maintain Just provide just expect be at of going on of any over quarter thinking feel and are Or would kind quarters. forward? coming the you

Gary Sims

do the comfortable And Gary. grows, thinking that to to would we're that feel way is the a to see coverage help? about it levels is profile reserve And maintain the add we reserve with it say as of portfolio. well. portfolio I thinking Does relative about basis. you're that similar go-forward the risk the as directionally current on to this continuing the way Nate, We

Nathan Race

Gary. you, bit, of Florida quarter, little the just Thank period kind given you a in Yes, closed that obviously, gears in that's it had Changing just helpful. June. stub early

just half see what full to year are margin. of in guys light expansion about So without how some that expect quarter, the you'll just given have back quarter of growth the third you the curious thinking in prospects Florida NII the I in additional in

Barry Ray

is this Yes, Barry, Nate.

$X about was quarter NII. of Florida So a million

run And will based see improvement upon rate be to But seeing not that trends so do costs. the in I forward. net incremental think asset and obviously, expect margin of amount what we we expect, with the going some we're that yields interest

how So question? NII that answer that's forward. your kind thinking the Does going we're of about

Nathan Race

last one. one Maybe helpful. that's Yes,

stock You guys are kind The is capital. building near still trading Profitability is book. improving. tangible of

So just share how about guys curious, thinking going you repurchases are forward.

Barry Ray

we're in of capital This view it is a Barry, I Yes, build as again, mode. kind Nate. a --

repurchases be that in that will of share near doing so a will And something I don't the lot think term. necessarily be we

Operator

Our KBW. question DelMonte the line comes next from Damon of with

Damon Del Monte

the a So first question used steady I fund run growth? had was regarding the to securities portfolio. those quarters decline we Barry, we've off and pretty going flows loan forward Should to or cash seen of continue that being handful last so. of expect

Barry Ray

Damon. correct, absolutely Yes,

of the growth fund to We annual off portfolio growth. expect to continue come loan fund growth the portfolio. to run off securities can We allow to loan about X% with the the flows with that loan cash

of from X.XX. of the about For yield balance $XXX we'll repricing million XXXX, have a

portfolio portfolios $X to interest additional up that X%. X%, loan around repriced million yield at income. about of we So That's of somewhere -- loan

to to desire allow level be the the run down. continue about of assets, to portfolio would XX% So portfolio Damon. anticipate to I XX% to I

Damon Del Monte

what color. us on we here Great of and of can 'XX, you the cut And dynamic go if does the back is in margin? the just as kind Fed rates the year the especially remind into half

Barry Ray

impact whether -- model as the respect the perspective Well, continue is or and we a cut Yes. to from rate on sensitive. with not not an or to the liability ALM there's margin,

from income net and So we a the expect some cut. would rate interest margin benefit to

to would from maybe just see that basis the benefit benefit so well point as cut single deposit conditions, say. based I as competitive sensitive, repricing. we as predicated asset some would as a we we cuts, pricing dynamics benefit of be don't expect upon those and But with that think much upon rate I XX magnitude the i.e., liability model recognize would

Damon Del Monte

Got it.

new on of some and Okay. just the like lastly, to an into lending update then you agri Great. expand that SBA. you just guys the verticals are the business provide And looking can

Len Devaisher

do in this community we nice would and We see some say particular, growth at balances. is things. we look Len. new region agribusiness, On a Yes, Damon, of that. loan see couple our And I in nameplates,

And of was income upside there. And half being that really look So us where quarter-over-quarter robust as momentum are at I agribusiness. basically would I we line the see year and in most I days call the the in one the there. level it see for that I because see contribution even the back just feel fee at we the I where is early look of forward But lending government-guaranteed I business. for pipeline

So I'd as point to spots. particular in those X bright

obviously, an piece important for been CRE, has us identified, which We've historically.

might rates remain and well occupied, so right, positioned the see current expect CRE. softness take we advantage forth, XXX% you environment, we've to there capital, in As in nonetheless, But when nonowner we room. got just more given of for

take we're is advantage So when positioned right. the to deal

Charles Reeves

Damon, just is Chip. -- X this

when that's Just vertical, the the comment that more of In we vertical started a not in and of the that of to there times you're relationships that vertical. credit portfolio our here CRE spend time building some between and to CRE our we like in then wish in in obviously expertise we're be the stressed, the administration transactions to by partnership loan some that driven likely and as do quarter or and fourth really you quarter, of third and department. see frankly, this, expertise in that see loan in and are for the terms more exiting bit more that little classes lot of asset some terms of a CRE CRE management in the one well

Operator

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

Brian Martin

if within kind XX repricing the about of X you just off? the over just question, Just what margin, coming next just talk loan of then months, -- you've on. And what kind Barry, there? you and the yields already what's opportunities can And coming of book -- on kind have what's the opportunities a on the to given

Barry Ray

with those I've loan spoke Yes. securities, the about repricing The over of yield is balance respect on year. the of got earlier, the loans rate I X.XX%. to loan to book, -- $XXX to the With the book respect million about loans fixed

So to around if of it million X% interest reinvestment probably goes $X somewhere to there X% additional net opportunity income. is

Brian Martin

missed I there? was rate, Okay. rate said you fixed And that Barry, variable or what

Barry Ray

Brian. rate, fixed was That

Brian Martin

there Okay. well? And assets then as far repricing in other as do as have goes, you variable

Barry Ray

do. Yes, we

variable We quarter. have every reprices the

didn't I because it's kind rates So now, there's billion of of that that repricings. just the normal but mention kind right approaching already we of $X yield variable

Brian Martin

Okay. just in terms positive, pretty was quarter. story All perfect. the right. the this That's credit And story of then quality,

Just seeing on wondering if categories portfolio? early in terms there kind you're C&I that the within of areas of Or stress any all? of concern is any at

Gary Sims

in Brian, the this in stress is CRE Gary. the Most seen we that our book. portfolio been have has of

in did with recall, macro a you trucking If quarter, in I'd I the downgrade the some attribute our the some we transportation downgrade portfolio. believe we to credits logistics big We issues portfolio, that of did associated that trucking industry. but first really have portfolio. don't and

So example C&I. Brian? that in be portfolio. that help, not seeing in an But seen we deterioration of have overall, deterioration that the we're side would some where Does

Brian Martin

Yes. No, for sure.

it that, in piece of point. seems like kind you've this got your arms I at around know the checking Just CRE on

Chip. that the And one just anything then to more is be watch. something there's new me maybe mindful last for if wondering Just might for

be Chip, next in can you're thinking of kind of to of you've the be the kind at think about ROA, just if you quarters can as investments look terms of that of would the big where we Just get go in of kind you you where far profitability, out to And as kind X as road the quarters X map picture, scorecard here approaching. X where of all thinking given made. we kind terms

Charles Reeves

terms will the cuts, Thanks of Brian, does cuts. what and And the environment magnitude interest for be there, rate the the the the function the of in the question. of it ultimately, frequency cuts, the -- Fed of a

see next a go margin XX in a build months. over continue following slow Let's environment, the to or static the In we static environment.

We improvement in continue more noninterest see or to better income.

And profitability. I leverage. have think move positive we'll the operating we'll increased into

to, see that for a move review that a and And basis, the Board in I more couple a then every we this anything of team take it accelerate opportunistic to our years within review But do do our will to X% If the improvement. to static truly to that quarter to environment, is there's opportunities on of profit us quarterly think fall rates assets. return on of also materialize quicker. -- if pace will appropriate in much likely management to to terms securities book continue

Brian Martin

Got you.

be the fee -- the kind all kind it's key hires business Okay. of has income -- making the in you first about, you've to Are in guess. on there next talked and other you've there and your there be get place X staff now really made months? added And to the half, through kind you of is have mind? you in the I lines XX it Or to kind of that are production? the here of to there is outlined -- the Or is the expect getting hires to just more team of buildup executing

Charles Reeves

organization will I'd the But senior of continue even the the call, there, essentially Brian, instead what the level say terms revenue that, some business, in have target markets what lines I'd producers. to completed we transformation of of operating or is What of executive expand is Yes. target our in there I'd of say we and there. level,

Cedar Twin think banking, Moines, Rapids So management. think Cities, Des think, wealth think think think commercial Denver,

invest to there. continue will We

Operator

no for are There management the to are like time. your questions closing you questions back now no for currently I remarks. team [Operator no currently questions are would Instructions] the pass [Operator registered. this Thank additional conference at Instructions] registered. question. There There to

Charles Reeves

is Bye-bye. we you, forward continue everyone. track Chip progress joining today, and we Reeves. again MidwestOne to Thank for Thank you look getting that XX together Great. to days This the making. is as us in

Operator

rest day. today's participation, Thank your your for the and call. concludes enjoy That of you

MidWestOne Financial (MOFG) 26 Jul 242024 Q2 Earnings call transcript