MOFG - Earnings call transcript Q4 2024 | MidWestOne Financial Group, Inc.

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Operator

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

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

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

in expects, generally and could statements include indicated. that Forward-looking words from pressures, Commission. to mix business, reports such risk actual materially similar the and the and company's results the the Among as believes, differ general Exchange Actual cause with detailed important are factors could anticipates filed conditions Securities expressions. changes in company's competitive factors of the those other and differ results materially registration interest the periodic economic rates, statements

Financial revise statements or obligation or presentation. update to of Group, publicly circumstances this forward-looking reflect events to no these Inc. MidWestOne the after date undertakes

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

Charles Reeves

Today, appreciate overview Thank morning, Good and quarter's we a of provide joining you, for this truly call. our fourth Barry. results. I'll high-level everyone quarter

highlights the of of of and review Barry business and as of our with an lines our more balance strategic quarter continued detailed October's well regarding As execution repositioning. the provide will the on initiatives. Len sheet update will fourth a impact conclude

actions, a on leading of net and strategic in XX% of our on with to initiatives, focus in repositioning continued higher net point the average bond with interest our $XX.X X.XX%. increase a to million deposit led results, exhibited impact dramatic of cost combined and fourth improvement income. return costs lower paydown portfolio basis income assets This, quarter drove along the net pleased very with XX of our margin, quarter-over-quarter borrowings. Those We're the interest which a

Turning continued execution our strategic of initiatives. to the

X% strategic Our showed grew the premium basis, franchise linked quarter. of deposit management. its we X% vertical. increasing emphasis establishing in importantly, aided linked results. discuss by Which results deposits investments with And initiatives and on April a are of XXXX, a In wealth financial in will out quarter comments. total compared to deposits year-long quarter our treasury year on driving plan in strength noninterest-bearing an laid and with further The management seen his our fourth SBA full Len these

growth many resolutions, with on MidWestOne to quarter, XXXX focused the the become a high-performing of our pleased resolutions growth to to and loan For strategy. loan forward Thank our you metrics and quality in we who resolute of classified disciplined our and while we look decreased team have been we've loan assets problem members payoffs, consistent, Together, was the XXXX company, beyond. you primarily flat, see the in positioned with transformation their customers. commitment opportunities in to bank to remain which were that and We're elevated due asset our continue substantially. and

turn over the call Len. I'll Now to

Len Devaisher

Thank Chip. you,

on a consumer We are mix, improving true public with linked strength deposits in X% of assume our pleased power continued to the conservative total in deposit more display an pricing was with allowed funds. increase commercial from the on segments franchise quarter. our and has us The deposit posture

improvement This CDs were strategy Meanwhile, public were and the X% XX%, down down to in optimize reflects up funding fund balances X%. were consumer mix while commercial up total our intentional an funds For base. public year, balances XX%. were

in consecutive all this This was and quarter. customer quarter increase out, X% pointed increased Chip is across of segments. the noninterest-bearing deposits second As category the important in the increase

where focus, in year, commercial increased the treasury deposits fees were XXXX prior noninterest-bearing year. in commercial growth The X%. reflects XX% the up For management noninterest-bearing from our

September X% third activity annualized originations While balances sentiment We balances and we pleased that position mid-single-digit the growing flat by X%. fourth pass-rated us at grew pipeline first for quarter. quarter quarter were quarter originations in borrower loan commercial from rate. XXXX. linked exceeded XX, loan And Favorable reported were growth a loan that our well anticipate

capital As vigilant Chip a Congruent from ] decline XXX on XX pointed out, with our asset loans focus and past XXX% ago, initiatives. quality. basis strategic point point ratio, modest a in ratio decline loan at basis in improvement year due the a reflect of our classified our plan [ CRE a

on revenue than million in acquiring strong SBA $XXX,XXX $X.X business XXXX. in with XXXX, this quarter. Our of the enter fourth momentum remains sale as SBA more in generated we gain team The

focus wealth investment on from linked over Another demonstrate over strategic and and increase the The period a teams. last initiative same quarter services XX% the year momentum the our wealth increase management. is plan private continued XX%

growth Our treasury an we our team-based we with into and particularly with markets. as our wealth, of XXXX. MidWestOne's Indeed, momentum planning-driven Deposit shoots capacity management. runway demand mix. Green is approach lines launch growth in working. businesses, including positioned and business, SBA well plenty in improving business loan in see fee that And are

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

Barry Ray

to declined primarily early million repositioning XXXX, sheet balance you, XX, Thank XX. deleveraging with quarter. sheet the due executed our on assets fourth from Starting Len. the balance the Slide of the $XXX in from Total September

had were borrowings that primarily used pay $XXX funding from in and were included to CMO Agency Federal yield of reminder, securities, munis, Proceeds pass-through sales for X.XX% the that CMOs yielding As X.XX%. X.XX%. full corporates, sale of Bank of $XXX.X million of purchase and $X to that costing the securities term a a program of and book million repositioning Reserve billion

touch shareholders' XXXX, Len and deposit loan which million decreased from changes, I'll so $X.X on the to covered equity, XX, $XXX million. September

up adjustment balance XXXX, sheet XX million benefits year-end company's $XX from unfavorable partially basis retained consolidated increase was only from points XX.XX% to XX, an in the loss accumulated As reflecting in repositioning. offset earnings. by other ratio part comprehensive September was million $XX at The CETX XXXX,

the income on $XX.X income the $XX.X increased asset to higher reported per million million to net and Turning earning by lower costs, funding Net lower the as offset yields and partially common income XX. million $XX.X primarily We of to asset linked compared quarter statement to fourth interest volumes due share. quarter or in $X.XX diluted Slide volumes. earning

linked the Loan included interest quarter $X.X of income accretion, discount of XXXX purchase in million fourth compared in quarter. $X.X loan to million the

expect closer We discount $X accretion million. in purchase be XXXX quarterly to to loan

basis Our interest the cost tax yields asset quarter points points increased to basis fourth X.XX% as the XX basis in the declined the of average X.XX%, and on portfolio The linked quarter loan in X.XX%. for yield the fourth earning originations during quarter the liabilities points. while XX XX linked was loan equivalent was fourth X.XX% to yield quarter compared interest-bearing quarter, average margin net the flat increased from

of basis quarter liability points linked from interest-bearing side, X.XX%. cost deposits the the the decreased to XX On

add XX we to We points were our to the quarter, balance repositioning which sheet to pleased fourth core than basis expected X.XX% expectation the points interest interest discount exceed about margin, as margin, for would XX quarter. that excludes basis and accretion, linked expanded greater the purchase our net loan

Adjusting loss Management down business $XXX,XXX by quarter of income our other offset XXXX revenue. card losses compared mortgage and right of outperformance more fourth Wealth for quarter. servicing and declines the loan was the as from securities a in was linked was income $XXX.X to gains million evaluations and than million in in Noninterest $XX.X noninterest BOLI

$XXX,XXX increase costs a Total of the $XXX,XXX will quarter. costs linked range tax Finishing XXXX unfavorable million expenses. paid up $XXX,XXX the $XXX $XXX be XXXX and was Driving was in the in in noninterest increase will with million variance quarter of at legal million accruals. claims We a increase expenses a $X.X to in in and do non-merger-related expense $XX.X not those believe property fourth continue million. from in annual the levels expect medical our thus, such

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

Operator

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

Brendan Nosal

capital. off start to here Maybe on

Now is balance you, clip the behind to here. at capital a restructuring pretty you're sheet decent back that building

of options how So the over the course year. just thinking deployment wondering you're about

Barry Ray

Yes, with Barry. about like Brendan. of capital talk I'd waterfall. This I'll that, use the start is to

the repurchase share loan starting sheet with growth to So dividend supporting growth, then M&A. shareholders, finally, cash and balance supporting

-- target of kind XX% or we're at that CETX. approaching of are approaching We

the where We to our see a profile how with for through walked we it. just thinking forward organization. build we'll as -- I respect good opportunities, we that example, waterfall think as dividend Obviously, and with the the to do year. quarter for ratio what of is the we about capital risk this through flat go kept we that capital -- land And that's year the throughout kept I deployment want and we're expect move we but we

Brendan Nosal

Got it.

your in noted you as to which we expansion bit was mean, I margin. remarks, the expecting, to you moving than a Maybe or see. Okay. quite were prepared great more

Just especially was pull-through kind rate have year? to more XXXX this more persist wondering the cut if of in eased we off quarter of if move through less throughout And as the or curious a expansion little there's as margin or left bit. had a expected here, from about you the path expectations tank

Barry Ray

Yes.

month margin tank, the X.XX%. I was the the core if think was kind margin that is we quarter the data left bit in the there's and in at give X.XX%, you I Brendan highlighted of the you more little December, core fourth points a our can look of

more some I gas particularly tank But which mostly So yes, shape in the I expansion, a still margin curve, getting benefit flat yield think here. really, bit with of the benefit we're have we little to some I'd from say, the we got here. think respect is

Charles Reeves

is this Brendan, Chip. And

I frankly, think repricing, the as back book well. loan continues

originating that Our X.XX%, yields low that the we're in accretion fourth Xs. some the X.XX% quarter in loan in includes are but

we believe will that So continue.

of at 'XX. amount fair still a in coming have 'XX, we so And maturities us

there's the some, expansion call it, So tank still to we margin you gas in come. believe

Operator

of Stephens. question with next line Terry from the will McEvoy today The be

Terence McEvoy

quarter, In was growth? outlook year XX% what you wealth said run management fee XXXX, for are for X% but year-over-year. full to management the commercial know loan line? specifically growth loan and first your revenue, that I rate use X%, that income good the loan a thoughts And for wealth is growth on

Len Devaisher

is this Thanks the question. Len. for Terry,

As growth of in think are wealth, overall. number how we're in the we're particular, to double-digit business. And is respect we we line year on look what that at with seeing the XXXX, mid-single-digit I continue to targeting the just based modeling

us we're So for -- strategy where there growth the and adding key is story in the and talent particularly the markets. and

Charles Reeves

is on growth loan the side, this Terry, Yes. And And Chip.

January, penciling where estate digits out increased really still belly at that real commercial with in just curve is mid-single of obviously and and fourth here quarter, today seeing relatively but not projects juncture. So the the pullbacks slight it We're this high. in

some negating moving that's of the see the comes little of is potentially higher But So now, could that a if curve system. belly down the where that's growth bit. in potential I out right the

Terence McEvoy

customers then thoughts with talk Chip. how the follow-up, a of in commodity given as portfolio holding us Thanks the you on And your prices, your ag just and volatility tariff and share could is up? some

Gary Sims

Yes. the for this question. Sims. is Terry, Gary Thanks

as a reminder, as We certainly are we thinking our ag not an portfolio, that of that through to our something And well but you as monitor. part producers. relative overwhelming

of with somewhat XXXX, were Prices As very well, we resilient that of first the And result producers. portfolio the business yields. or year look that pretty all, we a pressure some into is over solid of XXXX, X as we thing confidence of really our we good one moderated, go But the -- we pretty issues. see into but past as in for is our gained producers years, of do bunch. that X a course these

we negative in are there from pretty confident if, that it. results can we help through So manage this customers fact, feel our

Operator

KBW. the with The DelMonte next line question of be from today will Damon

Damon Del Monte

Hello, hope everybody. all today. I well you're doing

a kind I just at to there. where level start point. of touching concern. little reserve of thoughts sits sector credit on of off the And was wanted kind on there's think areas the just and on your Just about any how know Gary you the with portfolio ag of bit kind of this -- if today, But kind

I was points think basis reserve a few quarter-over-quarter. the up

at you're more bit forward? little you an need add -- level? a feel Or do do to maybe So adequate like feel you you going

Gary Sims

shifted Thanks has that much from the for And haven't XXXX. identified I'm in XXXX the Office the in portfolio terms going question, of course into today still Damon. of it. pressure we really hasn't deterioration what over and seeing points

our able third but actually were senior -- improvement asset, borrowers living deterioration, And to we're over portfolio realistically, of quarters. operational have has those living seeing liquidate Our troubled and in that fourth senior improvement the struggled. largest course we

points. with a what shift not terms So of pressure lot of I'm in seeing

the identified fourth XXXX, into move as saw XXXX, we as saw As the the we that worked and got we we for results quarter. credits, them, we resolutions, in created we through you

First that to we to those see resolutions have continue of quarter beyond, identified. going and we're assets

bit. have reserve. did that we able for and to mentioned quarter You And on resolutions, those be like We beyond the execute adequately for a are tap little we feel move up first reserved what we resolutions. to

So XXXX, continue see I in you're to think saw XXXX. in going what you to

Damon Del Monte

Got it.

question a sustainable growth. Okay. That's helpful. guess driving organic I just on And broader-based for approach kind then of your

and made commercial bankers of You ventured 'XX? the looking guys other locations new to give other parts guys you for to of kind in footprint? have bankers a Are lot and business as actively add you your us lines. some plans investments of can into an Chip, physical and update just potentially still

Charles Reeves

more yes, I'll geographic -- for high Metro us Twin you. in would geographies. is see focus probably So quantify then or focus areas the And Denver of I us. Iowa think areas Damon, and are yes, one to Cities you'll from areas invest for to answer be continue the that and in those

from us from also between to as a operational right. You'll ourselves time management, we're platform infrastructure we little risk execution, being see bigger our we're to ourselves invest, that and acquisition levels, positioning platform, there 'XX I technology, for talent, to the is bit a call prepare in and organic talent, but when year growth become newfound our what frankly, our I expecting, readiness our talent, earnings believe profile, of continue capital

Operator

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

Nathan Race

guys Going of to repricing wondering much how of discussion. of terms the up you Chip, the was repricing. margin you this some mentioned I if over frame in you back of could have the back year? kind book course just of kind of loans

Charles Reeves

swing detailed going to statistics. that I'm He one Barry. has Nate, to the

Barry Ray

is over course got we've the loans the fixed of we XX $XXX coupon those expect X.XX%. Yes, that reprice months. The Nate, next of rate million to on

we expect at million $XXX what X.XX% So is to reprice.

Nathan Race

generally, then the are blended just And Okay. coming on loans today a at on new what portfolio basis.

Barry Ray

them at low we on Xs. X.X% Fourth quarter, put to Yes.

Nathan Race

at non-CD Got next or you. us over just costs that kind of gaps X? that the deposit have year, aid on products CD And through if remains kind down? of least well, on Yes. opportunities can repricing And to if continue Fed as talk this the there's pause any to pricing you you the could come quarter in lower

Barry Ray

is Yes. X less Most of year. our CD book, Nate, than

the And we And to opportunity lower to where Fed as continue remains the then there. and deposits see pause to so your non-maturity yes, that our of on cost we to second interest-bearing if even look we opportunity book of due. question, that at other part lower have comes the

the those actively pause. where And cost for pockets we looking so still at we're perhaps if on even and costs lower could remains Fed looking

Nathan Race

this Okay. sheet does Barry, cut one, in And balance just Fed each year? you us -- just one if the last of update of sensitivity can margin impact from kind and the terms

Barry Ray

models right with asset shock the as now, Well, sensitive our scenarios balance made. sheet

and minus plus parallel XXX or again, shock. so that's And --

as And asset sensitive. model so we

the if scenario. rates would that the cut, our if net that go income So down interest that -- shock in suggests

about However, actual as I flattening earlier, what yield observing the we're talked curve out. is

And think sensitive opportunity on there's sheet margin But a I for scenario. the so shock models asset as expansion. still balance

Operator

Brian will be Scott. with Montgomery Janney Instructions] [Operator question next from of the Martin the line And

Brian Martin

kind give on fourth talked you here of you we into how there? expenses, us just Did -- and expense rate apologize. kind quarter I to and head know the the I run about this, covered the 'XX of just you if Barry, takes some think but thoughts puts as about

Barry Ray

talk to range in script, rate. be million million per million the $XXX expect we $XXX the would for prepared the which for my In to did expenses to Brian, run remarks quarter about year, $XX the XXXX what suggest Yes. for I for million expense $XX

Brian Martin

Got you.

or Okay. a SBA I really like just you then income, the been kind for of give Chip, of had it kind here, of And I like there. in know, in fee mortgage side, apologize of loan sounds embedded kind traditional that. that has flattish. don't the year the I terms mortgage mean it -- the line line also nice can maybe the mortgage seems

other if areas talked guess right. just as far about understand trying the And I of just of as is the terms I'm you the So side income to real that about kind fee question fee expanding forward. initiatives thinking in on going

of year Can about lines they've business where outside talked the added and talk you of kind the kind this the -- or just year, about SBA kind just other of you've the contributed wealth items what you've of we but we next think but income covered, that line here. the is pickup just which fee SBA, potential have already as in opportunity you've outside that some wealth, get of about or other

Len Devaisher

stab Len. is this a take at Brian, I'll that.

you example, if ] over number was in the Xx was it So of so for us 'XX. you X/X last that X.X Xx what [ that in -- if number in X it about look an as at look back, And 'XX, SBA was came 'XX quarters. what in

So momentum there. I see good

key a as item, out. that's loan the So you line point point on

-- is, The the mortgage has where thing obviously, environment other residential it's mortgage business headwinds been. the rate with

would we've what our through story I the at would talked tell then borrowers And as in more see 'XX, for lastly, line to us runway tell the I've the number, you 'XX. can. runway is well. I that charge line of to our service management more we're tactically talked go to drivers, look little XX% that. in you is, when us wealth, confidence little I is I over treasury management, more optimizing just leveraging you When got secondary see about, offerings make business, the XX% there, Chip market our more CRE powder. CRE, CRE stability obviously, as as for flows room huge a And was we 'XX focus right, best there. a relative treasury in think to on what get about We and which a is sure I look Then and at as one strategies product But

CRE can drive our as I swap line of been that's from I up, too for think perspective. I help can drive that these years. And that picks couple us line help because the swap line And think last the frankly modest think a fee a business

see. So drivers those I be the would would

Brian Martin

you can income, outlook be? I terms Got are talk about I color you. you fee growth went you in items for of the may terms guys momentum in I some mean, thinking in where about -- just in of Len, guess, And give some just the guess, that, terms given of how through

Len Devaisher

Yes.

going high is on what total looking I'm say the we'd at digits to income So line what single would be mid- for 'XX. fee be we for a is

Brian Martin

Got you.

if Okay. on And appreciate margin I That just we helpful. curve for steepening Barry, margin don't just If given up? trajectory is we that the here and of -- just see the little frame much the given -- moment. one back thing you've what bit throughout have. that. you the activity general in tailwind The trajectory the that of year? outlook not of kind of the the last that to a from a Is should Fed, how margin be kind to kind a see of the gradual pretty outlined maybe

Barry Ray

I course of like how that. would frame Brian, gradual the it Yes, year. That's the over up, exactly

Brian Martin

back the think if a accretion XQ heard goes a maybe right. around in that Okay. -- step quarter. to $X Is accretion of think I that million a -- you bit I I And the said down

starts give first that back So quarter?

Barry Ray

plus discount ] kind in $X million point. accretion discount so X.XX% should if of on that's first get I of [ we you interest that's -- Brian, why quarter, a the of of layer I the kind the core of quarter, that That's was -- start I of or net about and per focusing how where that kind launch about Yes. the margin, million to of kind about talked and $X accretion thinking would

Brian Martin

in Perfect. you. picture comment profitability. I Got of terms a And just know, big don't

I above quarter. the think, obviously, X% in guys on were you ROA the

the where exit on or of thinking to think proceed about ROA kind you of XXXX, you how kind that an we can is think of we we exit talk through Chip that be as year? kind just should about As about

Charles Reeves

is of XXXX. [ extremely execution $XXX terms year. as range focused, million Yes. And ] anticipate million Brian, $XXX we obviously that with ] We're to in the that, exit that we [ what the throughout to potential be has building in

Operator

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

Nathan Race

kind Yes. in if deposit to curious follow-up. you're this guys of I'm I of but expecting your you follow loans. bold are growth on expectations growth just can curious focused relationships, deposit up year. for pace adding just know you if that kind mid-single-digit frame

Barry Ray

we're around Barry. Yes. I'll been of for for we that thinking deposit deposit take we're looking is probably have Nate, kind year at as growth at is what this growth. X% expectations looking the XXXX,

Nathan Race

the Okay. helpful. bond Great. then, just cash the us in update And the following you flow of That's restructuring? amount of can book Barry, year this terms coming off

Barry Ray

Yes.

Next, $XXX get Nate. to around flows we million in expect the off XXXX, of cash of portfolio

Operator

questions in further queue at have this time. no We the

the So hand back Chip would remarks. closing CEO, now Reeves, like to to I for call

Charles Reeves

us few to that quarter All years demonstrate our high-performing everyone, share for we forward fourth over to consistent, about even and continued further Thanks, our today, spoken becoming results. call we've the last began everyone. and April Thanks, that to in our company look truly with progress right. joining

Operator

conference all you today's concludes for Thank This joining. call.

You may now your lines. disconnect

MidWestOne Financial (MOFG) 24 Jan 252024 Q4 Earnings call transcript