MidWestOne posts higher profit, lower loan losses

IOWA CITY - Higher second-quarter net income and a lower provision for loan losses have been reported by MidWestOne Financial Group, corporate parent of MidWestOne Bank.

Net income rose to $3.5 million, or 41 cents per share, in the quarter that ended on June 30, up from $3 million, or 35 cents per share, in the second quarter of 2011.

Adjusted earnings for the second quarter were 56 cents per share, excluding a $4 million gain on the sale of MidWestOne Financial's Home Mortgage Center location and a $6.1 million expense related to the termination and liquidation of the company's defined benefit pension plan.

"It is good to put the pension plan situation behind us," said Charles Funk, president and chief executive officer of MidWestOne Financial Group. "Even though it was frozen at the end of 2007, it continued to be a significant item to be dealt with. We move forward having fully funded our obligations to current retirees and all other plan participants.

"To see quarterly earnings above last year's, even with the $2.1 million net charge to earnings, is very satisfying."

The higher second-quarter net income was primarily due to an 8.1 percent increase in net interest income, a 36.1 percent decrease in the provision for loan losses, and a 148.6 percent jump in non-interest income.

Nonperforming loans declined from $18.1 million, or 1.84 percent of total loans on Dec. 31, to $12.2 million, or 1.22 percent of total loans on June 30. The nonperforming loans on June 30 involved $4.5 million of loans not accruing interest, $7.3 million in troubled debt restructures and $300,000 in loans 90 days or more past due and still accruing interest.

The provision for loan losses was $600,000 in the second quarter, down $300,000 from $900,000 in the second quarter of 2011.

Income from loan pool participations was $400,000 for the second quarter, equal to the same period a year ago. MidWestOne Bank's predecessor purchased interests in performing, sub-performing and non-performing loans owned by various non-affiliated banking organizations.

MidWestOne Bank is getting out of that line of business as balances pay down.