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MidWestOne Financial Group, Inc. (MOFG)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered a sharp inflection: net income of $16.3M ($0.78 diluted EPS), ROAA 1.03%, and tax‑equivalent NIM up 92 bps QoQ to 3.43%, driven by the October bond portfolio repositioning, lower funding costs, and improving deposit mix .
  • Efficiency ratio improved to 59.06% from 70.32% in Q3; core NIM rose 85 bps QoQ to 3.26%, exceeding internal expectations, with management indicating more margin expansion “left in the tank” into 2025 as back‑book loans reprice and CDs roll at lower rates .
  • Deposits increased 2% QoQ to $5.48B; noninterest‑bearing deposits grew 4% QoQ and core deposits +2.3%, supported by treasury management initiatives; brokered/time deposits declined in mix, and BTFP borrowings were fully repaid, cutting borrowed funds by ~$409M QoQ .
  • Asset quality improved: classified loans ratio fell 54 bps QoQ to 2.57%, NPL and NPA ratios stable at 0.51% and 0.40%, net charge‑off ratio down to 0.06%; CET1 rose 82 bps QoQ to 10.73% .
  • Forward catalysts: gradual NIM expansion, expense discipline (2025 OpEx guide $145–$147M), mid‑single‑digit loan growth, fee momentum (wealth, SBA, treasury), and deposit growth (~3% in 2025) alongside ~$200M 2025 bond cash flows and ~$386M fixed loans repricing from 4.57% coupons to low‑7% new originations .

What Went Well and What Went Wrong

  • What Went Well

    • Margin and earnings inflection: NIM (tax‑equiv) +92 bps QoQ to 3.43%; net interest income +30% QoQ to $48.9M; adjusted EPS $0.77; “we’re very pleased with our fourth quarter results” (CEO) .
    • Deposit franchise strength: total deposits +$109.3M QoQ; noninterest‑bearing +3.7% QoQ and core +2.3%; “our premium deposit franchise showed its strength” (CEO); treasury management fees +12% YoY .
    • Asset quality progress: classified loans ratio improved 54 bps QoQ to 2.57%; net charge‑off ratio fell to 0.06%; CET1 +82 bps QoQ to 10.73%; “we remain focused on problem loan resolutions” (CEO) .

  • What Went Wrong

    • Noninterest expense uptick: OpEx +$1.6M QoQ to $37.4M on higher medical claims (+$0.6M), legal (+$0.4M), and property tax accruals (+$0.3M); management does not expect these to persist at elevated levels in 2025 .
    • Prior quarter drag: Q3 included a $140.4M securities impairment from repositioning, producing a $(92.9)M “total revenue net of interest expense” and $(6.05) diluted EPS—still distorting YoY optics near term .
    • Fee line variability: Mixed noninterest income components; Q4 BOLI, loan, and card revenue declined sequentially ex MSR/securities, partially offset by wealth momentum and SBA gains .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Total revenue, net of interest expense ($000s)$57,901 $(92,867) $59,775
Net interest income ($000s)$36,347 $37,521 $48,938
Noninterest income ($000s)$21,554 $(130,388) $10,837
Noninterest expense ($000s)$35,761 $35,798 $37,372
Net income ($000s)$15,819 $(95,707) $16,330
Diluted EPS ($)$1.00 $(6.05) $0.78
NIM (tax‑equiv, %)2.41% 2.51% 3.43%
Efficiency ratio (%)56.29% 70.32% 59.06%

Noninterest income breakdown (selected):

Component ($000s)Q2 2024Q3 2024Q4 2024
Investment services & trust$3,504 $3,410 $3,779
Service charges & fees$2,156 $2,170 $2,159
Card revenue$1,907 $1,935 $1,833
Loan revenue$1,525 $760 $1,841
BOLI$668 $879 $719
Investment securities gains (losses), net$33 $(140,182) $161
Other$11,761 $640 $345
Total noninterest income$21,554 $(130,388) $10,837

Balance sheet & credit KPIs:

KPIQ2 2024Q3 2024Q4 2024
Total deposits ($000s)$5,412,419 $5,368,727 $5,477,982
Noninterest‑bearing deposits ($000s)$882,472 $917,715 $951,423
Loans HFI ($000s)$4,287,232 $4,328,756 $4,315,627
Borrowed funds ($000s)$529,523 $525,681 $116,562
CET1 (%)9.56% 9.91% 10.73%
ROAA (%)0.95% (5.78%) 1.03%
NPL ratio (%)0.59% 0.51% 0.51%
NPA ratio (%)0.47% 0.39% 0.40%
Classified loans ratio (%)3.48% 3.11% 2.57%
Net charge‑off ratio (%)0.05% 0.16% 0.06%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Effective tax rateFY 202522–23% (as of Q3) 22–24% Widened range
Operating expensesFY 2025Not provided explicitly$145–$147M (≈$36–$37M per quarter) New guidance
Net interest margin trajectoryFY 2025“NII expected to be higher going forward” post‑repositioning (Q3) Gradual margin expansion; core NIM 3.29% in Dec; more “gas in the tank” Strengthened trajectory
Loan growthFY 2025Not provided explicitlyMid‑single‑digit (Q1 mid‑single‑digit) New guidance
Deposit growthFY 2025Not provided explicitly~3% New guidance
Fee income growthFY 2025Not provided explicitlyMid‑ to high‑single digits total fee line New guidance
DividendQ1 2025$0.2425 per share (Q3) $0.2425 declared Jan 22, 2025 Maintained
Bond portfolio cash flowsFY 2025Not disclosed~$200M cash flows expected New disclosure
Fixed‑rate loan repricingNext 12 monthsNot disclosed~$386M at 4.57% to reprice; new originations ~7.1% New disclosure
Share repurchaseOngoing$15M authorization; none repurchased (Q3) $15M remains; none repurchased (Q4) Maintained availability

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Balance sheet repositioningGain on branch sale drove Q2 other income; NIM 2.41% Capital raise ($118.6M) and $140.4M securities impairment; post‑quarter sale/purchase and BTFP payoff; NIM up to 2.51% Full effect in Q4: BTFP repaid, NIM 3.43%, core NIM 3.26% Improving
Deposit mix & costStable; groundwork laid for treasury management Noninterest‑bearing +4% QoQ; deposit costs rose minimally Total deposits +2% QoQ; NIB +3.7% QoQ; cost of interest‑bearing deposits down 17 bps to 2.41% Positive mix shift
Wealth managementBuilding momentum YTD wealth revenue +15% vs PY Wealth revenue +16% YoY; continued double‑digit target Accelerating
SBA verticalEarly progressSBA gain on sale increased YoY ~$630K SBA gain in Q4; $1.6M in 2024 (~4x 2023) Scaling
Credit qualityNPL 0.47%; NPA 0.45% (Q4’23) baseline NPL/NPA ratios improved; classified down; fraud loss in other expense Classified loans 2.57%; NPL 0.51%; NPA 0.40%; reserve ratio 1.28% Steady improvement
CRE/Office exposureConcentration within regulatory limits NOO CRE office 3.6% of CRE; total CRE 232% of capital NOO CRE office 3.3%; total CRE 224% of capital De‑risking
Tariffs/Ag macroNot highlightedMacro risks listed; ag commentary limited Ag producers resilient; monitoring tariffs/commodities Watchful
Capital & buybacksEquity build from raise CET1 9.91%; $15M buyback capacity CET1 10.73%; waterfall: growth, dividend, buybacks, M&A Strengthened

Management Commentary

  • CEO: “We are pleased with our fourth quarter results which highlight the successful execution of our balance sheet repositioning… Return on average assets eclipsed the 1.0% threshold, driven by significant expansion of our net interest margin” .
  • COO: “Deposit growth with an improving mix… momentum in our fee businesses, including wealth, SBA and treasury management. Indeed, MidWestOne’s business lines are well positioned as we launch into 2025” .
  • CFO: “Core margin… expanded to 3.26%… we expect quarterly loan purchase discount accretion in 2025 to be closer to $1 million… we still have some benefit here [for margin]” .

Q&A Highlights

  • Capital deployment waterfall: prioritize loan/balance sheet growth, dividend, share repurchase, then M&A; CET1 ~11% viewed appropriate for risk profile .
  • Margin path: core NIM 3.29% in December; gradual expansion expected through 2025; asset‑sensitive balance sheet in shock models, but curve flattening supports NIM .
  • Repricing and origination yields: ~$386M fixed loans at 4.57% repricing over 12 months; new loans ~7.1% in Q4 .
  • Deposits/CDs: most CD book <1 year; opportunities to lower CD and certain non‑maturity deposit costs even without Fed cuts; deposit growth ~3% in 2025 .
  • Expenses and fees: 2025 OpEx $145–$147M; fee income mid‑ to high‑single‑digit growth; SBA gain ~$1.6M in 2024 with momentum; treasury management fees +12% YoY .

Estimates Context

  • S&P Global consensus for Q4 2024 EPS and revenue was unavailable at time of writing due to data access limits. As a result, we cannot assess beats/misses versus Wall Street consensus for EPS/revenue at this time. Values were attempted to be retrieved from S&P Global but were unavailable.

Key Takeaways for Investors

  • Margin expansion is the core near‑term driver: repositioned securities and funding costs are boosting NIM; management expects further gradual expansion as CDs roll and back‑book loans reprice toward ~7% originations—supportive of NII growth in 2025 .
  • Deposit franchise improvements reduce funding risk and cost: NIB and core deposits rising while brokered/time over $250k are a smaller share; cost of interest‑bearing deposits fell 17 bps QoQ, adding NIM leverage .
  • Asset quality headwinds are contained and improving: classified loans trending down; reserve ratio ticked up; NPL/NPA stable—supports lower credit cost drag and keeps capital accretion intact .
  • Expense discipline should stabilize earnings: 2025 OpEx guide ($145–$147M) implies tighter control after Q4 one‑offs (medical claims, legal, property taxes), underpinning operating leverage if NII trends persist .
  • Fee revenue diversification gaining traction: wealth and SBA are scaling with double‑digit targets; treasury management fees growing—provides earnings ballast if loan growth is mid‑single‑digit .
  • Capital position supports optionality: CET1 10.73% with buyback capacity and waterfall prioritization; dividend maintained; M&A optionality longer term as execution and earnings improve .
  • Near‑term trading implications: watch for confirmation of margin trajectory in Q1 (core NIM launch point with lower accretion), deposit cost trends, and fee momentum; narrative of sustained NIM/OpEx discipline likely a stock driver absent macro rate shocks .

Sources: Q4 press release and 8‑K (financial supplement), Q3 press release and 8‑K, and Q4 earnings call transcript ; ; ; .