MidWestOne Financial posts record annual earnings per share

IOWA CITY -- MidWestOne Financial Group, corporate parent of MidWestOne Bank, reported higher fourth-quarter and annual earnings as it reduced its provision for loan losses and generated higher net interest income.

Net income for the fourth quarter that ended on Dec. 31 rose to $3.4 million from $2.7 million for the final three months of 2010. Net income available to common shareholders also rose to $3.4 million, or 39 cents per diluted share, compared with $2.5 million, or 29 cents per diluted share, in the same period of 2010.

Iowa City-based MidWestOne Financial Group attributed the higher fourth-quarter net earnings to a 52.9 percent decline in the bank's reserve for loan losses and a 5.9 percent increase in net interest income, primarily due to a 16.9 percent decrease in interest expense.

For all of 2011, MidWestOne generated net income of $13.3 million, up $3.2 million, or 31.5 percent, from $10.1 million in 2010. Net income available to common shareholders rose to $12.7 million, or a record $1.47 per diluted share, compared with $9.3 million, or $1.07 per diluted share, for 2010.

Charles Funk, president and chief executive officer of MidWestOne, said there are a number of reasons to be pleased with the bank holding company's fourth-quarter and annual financial results.

"Foremost among them is the fact that annual earnings of $1.47 per share is an all-time high for the company, reflecting the positive results we expected from our 2008 merger," Funk said, referring to the combination of ISB Financial and the former MidWestOne Financial of Oskaloosa.

MidWestOne's provision for loan losses for the fourth quarter of 2011 was $800,000, down $900,000 or 52.9 percent, from $1.7 million in the final three months of 2010.  For the year, the company's loan loss provision was $3.4 million, compared with $6 million in 2010, down $2.6 million, or 43.7 percent.

Although MidWestOne's loan loss reserve declined, the company continued to increase its loan loss allowance by recording a provision for loan losses that is greater than its net charge-off activity.

On Dec. 31, MidWestOne's nonperforming loans totaled $18.1 million, or 1.84 percent of total bank loans, compared with $19.8 million on Dec. 31, 2010, or 2.11 percent of total loans. The decline was primarily attributable to the fourth quarter net decrease in nonperforming loans, which was the net effect of a commercial real estate loan and four one- to four-family real estate loans being classified as "Other Real Estate Owned," combined with write-downs and collections of various other nonperforming loans.

"We continue to be happy with the relative credit quality of our loan portfolio," Funk said. "A net charge-off rate of 0.30 percent of loans for 2011 speaks for itself. Furthermore, our loan loss allowance coverage of 86.6 percent of nonperforming loans puts us in a strong position for the future."

Loan pool participations (involvement in the purchase of performing, subperforming and nonperforming loans from various nonaffiliated banking organizations) totaled $52.2 million on Dec. 31, down from $68 million at the end of 2010. The company became involved with loan pool participations when it completed its merger in March 2008 with the former MidWestOne.

MidWestOne previously announced that it will no longer be involved with loan pool participations when the current balances are paid off.