MOFG MidWestOne Financial

Charles Funk CEO & Director
Barry Ray CFO & Senior Executive VP
Gary Sims SVP & Chief Credit Officer
Len Devaisher President & COO
James Cantrell CIO, Senior Executive VP & Treasurer
Brendan Nosal Piper Sandler & Co.
Jeffrey Rulis D.A. Davidson & Co.
Terence McEvoy Stephens Inc.
Damon DelMonte KBW
Brian Martin Janney Montgomery Scott
Call transcript
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Good morning, and welcome to the MidWestOne Financial Group, Inc.

Second Quarter 2021 Earnings Call. [Operator Instructions]. Please note, this event is being recorded. This presentation contains forward-looking statements relating to the financial condition, results of operations and business of MidWestOne Financial Group, Inc.

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

Charles Funk

numbers to quarter just that comments of see period-to-period our are was quarter just loan would generation, pretty interesting Credit have the company. did Sims, Len you joining make Officer; that green other joined I Investment Officer; terms Ray, an think good overall, of general And we us Gary and welcome I you're much, our certainly that, Jim the or a our We the highlights the for morning I introductory and really you and if a afternoon, Officer; thank quarter time by beginning demand one it say Thank our in this flat. of Chief eastern we're And very footprint. Cantrell, President in am Barry financially. Financial of today a everyone, few shoots say Chief and in few I Eiley, would the comments. Devaisher, few and And the Chief deposit A continued although is zone. decent

industry, stable during large for our that I Net a that few I think challenge the parked a I quarter. report quality pleased deposits think temporary challenge to us a left asset margin Very and for have just of think company. bank is asset MidWestOne. were remains not interest on And that that's quality terms our large -- to momentum we in positive to in very in X/XX the a due improving.

very common than the our been for would tangible of terms X.X% decade, for ratio equity more range. tangible years, our remind to capital, near we feel common And In target in the back good I many all a of listeners X%. about that equity X% has

stand So we're where very comfortable with now. we right

usage we of as although well see normally, to our line credit our would mid-XXs. be our of positive X.X% talk continues City the also quarter. and market say on the our PPP Specifically, in the release, growth the The sheet Denver has linked PPP, XX And put grew loan say Cities, do Twin earnings we at bit that forgiveness producers Southwest ex low of this ramped came little the Iowa just lines it a of probably as would our primary or and in days in the balance in about be past momentum And the market. so, the range. the Florida from from up as totals year, the loan out that portfolio XX% time in

lot. noted a don't quoted of I So we to we Xs not X high out on bit, as years But week, are seeing on rates for the able. X this longer compromise perhaps the We yield," that don't about will lot for down of we for see in years Xs. asset but in little than and occasionally said are quality, lot a in And see Competition economist the to "stooping we stretching. a a report it as that X/X, brutal. really good changing and and categorize watch near continue loans, as There's term. would one

rates difficult to into a to very very, maintaining space, a the very most but in really that the quarter. we've we one competition compete still the most competing we the when see strong the tough in in we in Xs of to. bit paydowns, does businesses. right Farm footprint, ag rate and is on from that And region are Services another, in we little the category, Overall, we and coming sale paydowns third it's our as with need And of a paydowns as we competitor, fixed feel there margin, remains that in offering continuing or -- think good long-term said but not very, are make that. of are of now Credit seeing calls, seem I and it past be

for In a terms it a sparse, reasonable to would robust, loan in July terms off we're pipeline. in but production. start not it's that our good say not loan pipeline I'd And of call I of the quarter, third it's

left to again, Our deposits, I a flat at that to of were reflective that's customers our as X/XX during throughout and continue X/XX, quarter, sheet good actively core the footprint. large said, deposit ones we X/XX on but our balance very pursue few

for the the new a bonds yield a asset when to duration did sheet this well slightly There comment a increase I we this end longer challenged, the need the growth for continue of environment. terms of the curve we our quarters, think margins comment. is steeper on sensitivity greatly. growth, rate loan stated, as margin, really balance sell interest In helps to We And that Loan net We did not prior as and next can in mitigate the loans couple and to it I've help feel appropriate. PPP be will reasons. made on What calls. of yield X-year curve, pressure large will to to margin, and of X-month it which fees quarter. a X the the continue long-duration the net some is, addition open loss. as that's proactively area did a in or interest of in of we are gain number that room at is flow on a challenge wasn't in also

rate a a sold Some approach proactive were a abundance out loss. bonds really caution We some to that at did management. at risk taking and of interest an of gain,

Very, Turning be to Center to strong. company. very noninterest the in Mortgage with pleased Home our It income. continues

were see is or the did gain declining as an slowing and AT. little revenue. past on the in that callout but competition is They interesting production, the volume continue of increased flattish market mortgage the on of I've same, that mortgage sale about was given and which revenue in narrower mortgage the loans slightly was production job XX% our reflects has of the our Dubuque What's about as a mortgage well. sale calls, to that locations, the Dyersville, part former about You on Iowa mortgage do excellent margins gain of to year-to-date. less because a originated In

of we've expect levels of QX good going from probably in XXXX We results forward and that seen the at QX mortgage booming XXXX. not

I for are So in management, Also hang company. a think very pretty good should wealth our at mortgage about in quarter, where story another least we there feel and there. good we

park in been of in a time And Our our first of out the investment comprised of new to that services part the footprint. we've results. did Southwest terms to the our in area, representative investment investment continues which rep add LPL-registered their hit representative just -- company of is and able ball in Florida, have we that's representatives, an

significant we our bankers that management. you of Minnesota, Department Twin card They've market. of Also remember assets And amount income trend really also will working which in consistent Trust they've come and I overall, in a see. They to done in growth continues hire been and Cities And did a of to nice see from gain is trust produce just revenue, to and is a think our a will component what really group continue our year the nice momentum. noninterest under You a into job. key our company. positive company in now, a

little we for market loan a more in but and interest least way What we'll take unexpected, income to just favorable for a swaps to see to our we at is noninterest right the see have that offer don't was that it, the think we it. could market continue we see now, customers, as well. momentum that and would but love rate I there better we bit

noninterest comments the few feel expense There salaries at this is here. benefits point we some were our adjustments item, In in line onetime terms particular very time. but and expense, in okay noninterest of about where

charge-offs especially the to get again lack Again, the this northern quality. as the minimal we story. last of In we problem, comments, slowly, been that, And footprint be But soybeans, ag have portfolio, the for footprint, a portfolio. although It's in a continues good. Turning a down our did good a probably right asset on little I good over ag an or portfolio keep our opening is quarter. to coming in in a of NPAs said rainfall a had the rain prices We is is eye week the good thing of pretty trend has in bit only but of so. because good gotten shape some percentage and our part dairy ag portfolio as little that for our X% parts of now. diminish Iowa, corn. the for to in are

just And look parts in extremely terms footprint some crops. of good of our

our agricultural think terms for the outlook of year pretty this So is I good in portfolio.

the year in our and been in ag the why it's If think expect of ago, to nicely a I've struggle that watch terms you a we I continue. growing the loans at jotted substandard portfolio, look ag trend from that and reasons X down have portfolio. down

problem The first of the some outstandings. worked we've diminishes one credits, which is out

million on million, Second round over and working to ag And that reason, is customers. PPP borrowers the second of that not is their $XX.X of capital $XX means fewer funds lines. loans in unlike made what did ag over we commercial draws their PPP, lines credit our were banking on available to PPP the

Farm release the year the also from beyond our then, outlook Overall, outlook, a remain for asset the insurance main course, quarters strong and Credit we think that continues reason And Services XXXX We that balances confidence ratio. some the that's quality competitor. of proceeds an be reserve last and reflects from to reserve improving in for few release. the next the continuing and is see

compelling value. per and XX have days stock we is note also been capital, In the Tangible tangible would climbed X.XX% common per that repurchasers Group value been and share $XX.XX last at Financial a in to MidWestOne our repurchasers, active quarter active that remain equity share. adamant terms end, book especially we've and of

good a So show of to loan overall, out continue heck We the performance. need the we margin. manage to net and interest continue to to need growth,

have ready back all for I we're think ahead. Q&A, And with you. challenges the I think to are for turn Eiley, the quarters we biggest and two it I that those will that,


Instructions]. [Operator

Piper with Nosal Our Brendan Sandler. first will question today come from

Brendan Nosal

your of appreciate you on continue I a pace the a on fact record expand probably outflows the masked liquidity little movement period-end with and there levels? see kind at that down and flows to whether they of that continuing during still Charlie, the on slowed you or deposits. little deposits some comments or what's the liquidity going not quarter Could given these larger bit bit

James Cantrell

Jim. is this Charlie guess right. I Brendan, I'll start. was

in down we -- some quarter sense of large off balance did the our we fairly down off as look we've peak to My the the month. that total ended think close probably our deposit is peak. see I hit second balances. We're quarter, out peak as I at the we large the deposits -- run

through growth of the just we're pace So the that prior seeing X quarters. we or seeing were X not

would down second third I moving the my considerably into growth, latter the negative, quarter. here part sense is slowed and not has So the in that quarter now while of deposit --

Brendan Nosal

rate on to steeper the kind going of flows But just be of on down? I quarters, a are imaginable. any the liquidity with Okay. to one over the from slowing If Great. a a there of been That's related grind the bit then couple environments defend maybe largest curve, flows your for down point? a further of the worst Or that's the is of stopping helpful. past are margin without thoughts one ability or liquidity variables given And note. slowing, this entirely, indeed margin coupled think

James Cantrell

One, Yes. X flattening had Well, a I we've that a have couple And some things what are happen curve margin is X curve on: to as help. not see last because had weeks for a the steeper probably the yield of will remaining. in still positive forgiveness the period. over mix, would or we've PPP But the certainly going curve we

that last coming I as over on shrinking those months the think there been funding the million PPP month the were or the $XXX seen we've side books. end on been at the the wholesale of quarter. with forgiven, What loans loans X.X worth with loans or is they've of books either replaced have

So X luxury. the any been in major which to over been the probably at beginning where had purchase The haven't of in we've did a quarter really to buy of second last a months, the we XX days we somewhat securities, was April. position has last new

that the to PPP securities so where margin. and forgives have And replaced if loan loan be the we portfolio is a holds have trend that add chance good see the to think going production, then I don't of defending we we with regular to


Our with Rulis D.A. comes Jeffrey next from question Davidson.

Jeffrey Rulis

bit back tool it to of on where Charlie, opportunities that that's stepped buyback allocation kind they've to like you to you been sort of and guess just a see? the I circling sit kind the of you be just we going a of up on appetite. for on late. capital spoke the revisit sidelines sounds particularly of use, and It that M&A, continue -- kind

Charles Funk

right understand stock is opportunities. them, We're levels. means our back our find buying capital, for good would a our would think have investment Even looked these so. of shareholders at We that shareholders. that the a think pay be to to it's year, able this we very as M&A slightly our we there we a still now, higher we company to We've do have good to but a and benefit a of we think also at for levels, we be our aware shareholders, benefit number may very especially would opportunities. if pursue what certainly and some And use we're

Jeffrey Rulis

I they're Okay. talked the reasonable, you of about And pipeline also loan and Charlie, you on sort that paydowns. suppose, some mentioned

So maybe expectations. sense that on and more you're slightly -- are you a tone I'm for reopen, trying it of an your but like getting it minded optimistic things to sounds less safe sort of if as just that's peg in just we Is say yet, as mid-single-digit to into given where pretty you approaching kind 'XX more of maybe expectation expectations, still quite or second the I brutal comfortable? not half credit, and said? And in are growth, competition, kind guess, year on of a there of defensively

Charles Funk

terms Well, we and far. can not to willing too price. willing compete, to stretching compete We're certainly on we're by credit compete

that experiencing seem us. would expectation portfolio the I I but loan high to helps others a think than pace. However, we businesses, grow their of does I same that sell usage pipeline. because think depends it to on continue XX% thing. I would the to that pipeline on things hope us. Again, paydowns be you. digits to some what able we've doesn't I in I measured And But based we're at probably our me, mid-single kind When are I and think it production line more think the here folks got in the produce going is on the see help help doesn't And know

Jeffrey Rulis

is? dealing have color. one kind businesses and maybe, to the kind the we're flushed drop just cash it's in the unwinds, of 'XX of one think to No, -- But have all ratio trying additional think all I'm with hugging kind do the of for some What sort Barry, range? of of we're rate how I with last you this I helpful -- but to that expectation of the 'XX, that middle did Yes. tax

Barry Ray

Jeff, the utilize year, something around I would for full that yes.


comes question McEvoy Stephens. with Terry from next Our

Terence McEvoy

doing? in growth the second shoots know commercial there borrowers going forgiven, I've Were loan are are those just relationship? you was quarter? as out. of having that of among PPP loan green markets Are expand kind in, were you themes And kind mentioned Cities the on forward? Twin their you I the customers growth. and stood you seeing? they non-PPP with area of that could any what conversations an just got layering a maybe hoping consistent about And on Denver then is the I lending they when those two question

Charles Funk

want I'll in and crack let weigh the that, at may first following. our Gary to President, Len, take

Len Devaisher

in loans I response Charlie. Terry, when Thanks, say your question the forgiven. are second about to,

things the of core customers is, alongside of them relationship-focused look our that of is a course, as and -- forward one comping a bank and part those spending time ahead. So as they with process to look

So our to point -- about line right? earlier usage, that those point the a We dollars PPP as see usage. pressure online major

is, them grow where customers situated, we're outlook coming And participate on -- depending we helping but in them as obviously alongside their we their about they're -- to so how business. talk can where

And fair of Cities, City, types that and that Iowa of so yes, diversity themes the process. and not the a terms encouraged part I'm forgiveness the there's Colorado, because growth respect of Twin PPP forth, both So a active across, the thing by deals of very to also that loan amount with the in that's but Florida only seeing. markets of we're is

nonprofit I so So I there. becoming running we're CRE forth, also but not numbers. not concentration we're see a any of certainly opportunities where some those see mix deals of and kind kind I -- risk And the nice in there's of mean

as feels part that and to our see that's I me in So well. pipeline what good

Charles Funk

Terry, something I Gary add. think to have may

Terence McEvoy

Great. Perfect. Perfect.

Gary Sims

to Terry, is marketplace. the saying in I Len just what and seeing was reinforce going

credit and really the I growth. what add both saying to happening pressure could was that's really And loan to And is to the off capital. increasing. side earlier getting make people side general our Charlie I deploying of think In paydowns relative the buy on is think starting it's I'm from about utilization theme decisions a activity sidelines are words, that other around that the seeing the the and capital sell side.

are decision. that making we is what's we sell making have think have are decisions that driving buy and customers that I that's customers

the activity really marketplace. increasing it's the So in

Terence McEvoy

as just a then And follow-up. Okay.

release, mortgage environment? operating just in it, adjustment million. said a case, the lower business, still On $X run And revenue is above something think how in to, normal closer about normal. a that's expense on rate I'm the mortgage quarterly call the it's the if wondering, it do basis, I then

Barry Ray

quarter look have we the I rate respect maybe If back where year, dollars, about Barry, for running. back million -- Yes. on I this $X last With sale would is would second the say, to go Terry. been gain example, to were we of

income. big our that there that, the of most a So it on is would -- associated rata nature -- top obviously, any adjustments. is I to. And with would I with respect then cost reduction and -- servicing But right the that a business, to add reduce -- then in our the then variable you're and the to of costs probably that servicing mortgage you make alluding pro And revenue. probably that reduce wildcard


Our with KBW. from DelMonte question comes next Damon

Damon DelMonte

I is hope today. doing everybody well

well So see of second there the my enough obviously, do to of reflective these looking quarter How year? the first question, continuing? think the half about is the and you where reserve trends, quite row in Do adequate further you at trends think of a provisionary could with we credit a kind continuing capture. that back the should release given

Gary Sims

And the and managing a the criticizing going you're today. Charlie that seeing releases that continue been as think that NPA seeing our in created even the I specifically of moderate has basis. in the really classified proactiveness that positive pandemic, the the will and earlier, us What as you're with in we've the is you culmination resolutions And here. resulting see of in that positive seeing saying you're proactive portfolio you're previously towards go-forward to portfolio well. more going in call through and Gary -- in to the Damon, reserve and today is the that create credit continuing answer start how reserve we as was it I'll question bias today. to provision to to you're the trends our all seeing a really assets I'm monitored And on and trends that portfolio. increased

Damon DelMonte

guess a And just expenses, Okay. on That's Barry. I then for question quick probably helpful. here

of is going kind forward? from You a take in good this guys $XX rate here you're upper commentary, I run million range you, comfortable -- the

Barry Ray

is to, our Yes, had that of run Charlie a think but be. few we the for I Damon, a particular as can this is think this quarter were rate there Barry. were expense on -- representation and range really near-term run Yes, alluded there rate what good puts we takes,


Instructions]. [Operator

Martin Our Montgomery. Brian with comes next from Janney question

Brian Martin

maybe your wanted ask expectation margin, enough? not just I I the if on kind I maybe volume, current is and guess, of and little of given would to pipeline you the I for about core And back -- mean, volume, it that's comments Jim, possible, volume core that, margin margin the pipeline, mean, to a on looks comments that about minute. guess, that the kind based I like PPP enough, drift be what see could is the the Charlie's origination a replacing given on Or Guys, the your I the guess, you PPP just holding number? lower I guess? that volume not is accretion the the ex guess

James Cantrell

mechanics I the it. hit on think you've of

I pace right. money loans you're on spend little funding, maybe some a the those lot funding Like million the some quarter. have quarter said, balance way. pay the it's $XX the off along wholesale of PPP what or could got not will of we've and unfortunately, on sheet unforgiven of $XX is we -- end Depending million drift I a $XXX of to They there's wholesale the But as think we lower. of left. million a

-- it's money and production. on days, some we'll outruns that forgiveness, some offset months, PPP production. balancing the pretty that even. forgiveness loan of is a spend extent But been by for said, it's I as XX act. And last PPP So it's that, It certainly outrun loan the to on kind money possible X we'll spend

the what So basing last I'm of over is on forecast we've seen that's what couple of my sort months.

Brian Martin

Got you.

pickup for sure commentary -- Okay. who I'm just the And the the -- here. the on about I not appreciate then PPP,

the fees the collected remaining of the occurs next on and all the remaining that here fees some in the think activity there's are forgiveness bulk fair what about based half second currently? here? of that and you're think think seeing kind the of do to year? into Or you Is bleed that we still about should Just pace

Barry Ray

Barry. say. expect, you I just Brian, fact would of this The is outlined would is that pattern we kind what

very the However, to going difficult SBA us what triangulate on of to timing for it's the is do.

And X the so for PPP down I would round round whenever had X. example, forgiveness PPP slowed say they

And -- the could so of there's a be uncertainty in there timing. lot

half this perhaps We year of PPP very be expect the and latter of into to well XXXX. be a forgiveness it amount larger trickles but some could that volume completely,

Gary Sims

Yes, Gary. that's the is all half. but Most fair, This not Brian. probably in latter

Brian Martin

Perfect. if it's And Barry. maybe for know Okay. don't I

the Just -- of that fee about level kind earlier core. kind of of the comment mortgage income is the just

next does getting if maybe with of think some kind people rate as $X fair we point where kind and you've Just think benefits fair, normalize, of from Is about hired. the to then quarter maybe these you there? are after Barry, think Charlie's million to that wealth or how... a run when from you mean side, of mortgage the about is about normalize is about mortgage I it type building

Barry Ray

the X.X near have The in range to income fee that my term. mind, in is about total Brian, in Yes. I X.X for the

Brian Martin

Got you.

XXX? accretion what does think the I this to XXX just remind me, or -- remaining bring today? that quarter And where stand Barry, then the was through, Okay. amount

Barry Ray

discount? purchase loan the For

Brian Martin


Barry Ray

$X XX, left. Brian, what's is was that Yes, million June

Brian Martin

think I And how Okay. plays the timing guess? of you out, remind that me just

Barry Ray

recognized it's we've of notion -- I play pattern with respect think out. to we've out upfront, the seen is observed it's what going think fact similarly more that accretion play I quarterly the to to and

or I which it that think it then anticipate quarter, that future be amount I -- recognized this what, and will the $XXX,XXX so will And that we yes, was, quarters lower. so.


concludes any call question-and-answer turn Charlie I'd over to the session. remarks. for closing back Funk This our to like

Charles Funk

Thanks joined us who to morning. this everyone

good release, and everyone the your contact wish For you, to any who day further be we responsive that, with we'll need and a Eiley. those clarification inquiries. back good please earnings weekend, us, one of a And on and to


today's The you conference Thank has now for attending concluded. presentation.

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