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MidWestOne Financial Gp Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 5, 2011 04:29PM

MidWestOne Financial Gp (MOFG) filed Quarterly Report for the period ended 2011-03-31. Midwestone Financial Gp has a market cap of $122.1 million; its shares were traded at around $14.15 with a P/E ratio of 13.2 and P/S ratio of 1.4. The dividend yield of Midwestone Financial Gp stocks is 1.4%.



Highlight of Business Operations:

For the quarter ended March 31, 2011 we earned net income of $2.9 million, of which $2.7 million was available to common shareholders, compared with $2.0 million, of which $1.8 million was available to common shareholders, for the quarter ended March 31, 2010, an increase of 45.0% and 50.4%, respectively. Basic and diluted earnings per common share for the first quarter of 2011 were $0.31 versus $0.21 for the first quarter of 2010. Our return on average assets for the first quarter of 2011 was 0.74% compared with a return of 0.53% for the same period in 2010. Our return on average shareholders' equity was 7.41% for the quarter ended March 31, 2011 versus 5.28% for the quarter ended March 31, 2010. The return on average tangible common equity was 8.26% for the first quarter of 2011 compared with 5.76% for the same period in 2010.

Our net interest income for the quarter ended March 31, 2011 decreased $0.2 million to $11.6 million compared with $11.8 million for the quarter ended March 31, 2010. Our total interest income of $16.9 million was $0.9 million lower in the first quarter of 2011 compared with the same period in 2010. Most of the decrease in interest income was due to reduced interest on loans and interest income on loan pool participations, due primarily to lower average rates. The decrease in interest income was partially offset by reduced interest expense on deposits and FHLB advances. Total interest expense for the first quarter of 2011 decreased $0.8 million, or 12.7%, compared with the same period in 2010, due primarily to lower average interest rates in 2011. Our net interest margin on a tax-equivalent basis for the first quarter of 2011 decreased to 3.31% compared with 3.50% in the first quarter of 2010. Net interest margin is a measure of the net return on interest-earning assets and is computed by dividing annualized net interest income on a tax-equivalent basis by the average of total interest-earning assets for the period. Our overall yield on earning assets declined to 4.75% for the first quarter of 2011 from 5.22% for the first quarter of 2010. This decline was due primarily to lower rates being received on newly originated loans and purchases of investment securities, and decreased income from the loan pool participations. The average cost of interest-bearing liabilities decreased in the first quarter of 2011 to 1.67% from 2.01% for the first quarter of 2010, due to the continued repricing of new time certificates and FHLB advances at lower interest rates. We expect to continue battling margin compression as 2011 unfolds with short term interest rates at generational lows.

Interest and discount income on loan pool participations was $0.4 million for the first quarter of 2011 compared with $0.9 million for the first quarter of 2010, a decrease of $0.5 million. The Company entered into this business upon consummation of its merger with the Former MidWestOne in March 2008. These loan pool participations are pools of performing, sub-performing and nonperforming loans purchased at varying discounts from the aggregate outstanding principal amount of the underlying loans. The loan pools are held and serviced by a third-party independent servicing corporation. As previously announced, the Company has decided to exit this line of business as current balances pay down. We have very minimal exposure in the loan pools to consumer real estate, subprime credit or construction and real estate development loans. Average loans pools were $17.9 million, or 21.3%, lower in the first quarter of 2011 compared with 2010. The decrease in average loan pool volume was due to loan pay downs.

Interest income on investment securities on a tax-equivalent basis totaled $4.3 million in the first quarter of 2011 compared with $3.7 million for the same period of 2010. The average balance of investments in the first quarter of 2011 was $485.0 million compared with $378.6 million in the first quarter of 2010, an increase of $106.3 million, or 28.1%. The increase in average balance resulted from excess liquidity provided by a combination of decreasing loan balances and increasing deposits. The tax-equivalent yield on our investment portfolio in the first quarter of 2011 decreased to 3.56% from 4.01% in the comparable period of 2010 reflecting reinvestment of maturing securities and purchases of new securities at lower market interest rates.

We recorded a provision for loan losses of $0.9 million in the first quarter of 2011 compared with a $1.5 million provision in the first quarter of 2010. Net loans charged off in the first quarter of 2011 totaled $0.7 million compared with net loans charged off of $0.9 million in the first quarter of 2010. We continue to increase our loan loss allowance by maintaining a provision for loan losses that is greater than our net charge-off activity. We determine an appropriate provision based on our evaluation of the adequacy of the allowance for loan losses in relationship to a continuing review of problem loans, current economic conditions, actual loss experience and industry trends. We believe that the allowance for loan losses was adequate based on the inherent risk in the portfolio as of March 31, 2011; however, there is no assurance losses will not exceed the allowance and any growth in the loan portfolio, and the uncertainty of the general economy, may require that management continue to evaluate the adequacy of the allowance for loan losses and make additional provisions in future periods as deemed necessary.

Total noninterest income increased $0.5 million for the first quarter of 2011 compared with the same period for 2010. The increase in 2011 is primarily due to increased mortgage origination and loan servicing fees combined with the absence of any impairment charges on our investment securities portfolio. Mortgage origination and loan servicing fees totaled $0.9 million for the first quarter of 2011, up from $0.5 million for the same period last year. We did not recognize any impairment losses on our investment securities portfolio during the first quarter compared with a $0.2 million loss for the first quarter a year ago. The increase in mortgage origination and loan servicing fees was attributable to higher refinancing activity in single-family residential loans during the first quarter of 2011 compared to the same period of 2010. Decreasing levels of refinancing activity has occurred since the beginning of 2011, and we expect this trend to continue.

Read the The complete Report



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