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MidWestOne Financial Group, Inc. Reports Financial Results for the Second Quarter of 2021

Company Release -
7/22/2021 4:28 PM ET

Second Quarter Summary (1)

  • Net income for the second quarter was $17.3 million, or $1.08 per diluted common share.
    • Total revenue, net of interest expense, of $48.7 million.
    • Credit loss benefit of $2.1 million.
    • Noninterest expense of $28.7 million.
  • Excluding PPP loans, commercial loans were $2.61 billion,(2) as compared to $2.56 billion(2) for the first quarter of 2021 (the "linked quarter"), an increase of 2.2%.
  • Average total deposits were $4.88 billion, as compared to $4.57 billion for the linked quarter, an increase of 6.6%, while cost of average total deposits decreased to 0.28%.
  • Efficiency ratio of 54.83%(2).
  • Nonperforming assets declined 8.0% and the net charge-off ratio was 5 bps.

IOWA CITY, Iowa, July 22, 2021 (GLOBE NEWSWIRE) -- MidWestOne Financial Group, Inc. (Nasdaq: MOFG) (“we”, “our”, or the "Company”) today reported net income for the second quarter of 2021 of $17.3 million, or $1.08 per diluted common share, compared to net income of $21.6 million, or $1.35 per diluted common share, for the linked quarter.

CEO COMMENTARY

Charles Funk, Chief Executive Officer of the Company, commented, "This was another solid quarter for our Company with good core loan growth, improved asset quality, and a nice build in our tangible book value. Despite the continuation of very low credit line usage, our commercial bankers were able to produce a quarter of respectable core loan growth although potential headwinds remain."

"The low interest rate environment continues to pressure commercial bank margins, and we are not immune. Our noninterest income results reflect a decrease in mortgage gain on sale margins; however, we continue to be running at an 'above normal' rate of mortgage originations. Our wealth management group continues to produce good results as well."

"With respect to capital, we believe our stock currently represents a compelling value, and we are selectively repurchasing our stock at opportune moments. We returned $4.7 million of capital to shareholders during the second quarter of 2021, including $1.1 million from such stock repurchases."

"Finally, we commend our fine staff for closing nearly one-half of a billion dollars of PPP loans. For some borrowers, these funds were literally the difference between survival and failure. Our bankers deserve much credit for their long hours and perseverance over the past twelve months."

1Second Quarter Summary compares to the linked quarter unless noted.
2Non-GAAP measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.

  

FINANCIAL HIGHLIGHTS
  Three Months Ended   Six Months Ended
    June 30,   March 31,   June 30,   June 30,   June 30,
(Dollars in thousands, except per share amounts)   2021   2021   2020   2021   2020
Net interest income   $ 38,505       $ 38,617       $ 38,712     $ 77,122       $ 76,118  
Noninterest income   10,218       11,824       8,269     22,042       18,424  
Total revenue, net of interest expense   48,723       50,441       46,981     99,164       94,542  
Credit loss (benefit) expense   (2,144 )     (4,734 )     4,685     (6,878 )     26,418  
Noninterest expense   28,670       27,700       28,038     56,370       58,039  
Income before income tax expense   22,197       27,475       14,258     49,672       10,085  
Income tax expense   4,926       5,827       2,546     10,753       348  
Net income   $ 17,271       $ 21,648       $ 11,712     $ 38,919       $ 9,737  
Diluted earnings per share   $ 1.08       $ 1.35       $ 0.73     $ 2.43       $ 0.60  
Return on average assets   1.18   %   1.59   %   0.92 %   1.38   %   0.40 %
Return on average equity   13.24   %   17.01   %   9.21 %   15.10   %   3.82 %
Return on average tangible equity(1)   16.75   %   21.52   %   13.50 %   19.10   %   6.48 %
Efficiency ratio(1)   54.83   %   50.77   %   54.80 %   52.76   %   56.24 %
(1) Non-GAAP measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.


COVID-19 UPDATE

Loan Modifications

As of June 30, 2021, the outstanding balance of loans modified as a result of the COVID-19 pandemic totaled $21.0 million, an increase of 26% from $16.7 million at March 31, 2021. The increase from the end of the first quarter of 2021 was due to an additional deferral that was granted for one large commercial real estate loan. Of those modified loans at June 30, 2021, $0.7 million were in their first deferral period while $20.3 million were in a second deferral period.

SBA Paycheck Protection Program (PPP) Loans

The PPP Extension Act of 2021 set a deadline for PPP applications of May 31, 2021. The following table presents PPP loan measures as of the dates indicated:

    June 30, 2021   March 31, 2021
    Round 1   Round 2   Total   Round 1   Round 2   Total
(Dollars in millions)   #   $   #   $   #   $   #   $   #   $   #   $
Total PPP Loans Funded   2,681   348.5   2,175   149.3   4,856   497.8   2,681   348.5   1,623   125.7   4,304   474.2
PPP Loan Forgiveness(1)   2,247   285.7   441   12.3   2,688   298.0   1,709   210.3       1,709   210.3
Outstanding PPP Loans(2)   416   53.9   1,734   130.5   2,150   184.4   954   128.2   1,623   120.5   2,577   248.7
Unearned Income   $ 0.5   $ 6.0   $ 6.5   $1.7   $5.2   $6.9
(1) Excluded from the PPP Loan Forgiveness is $8.9 million as of June 30, 2021 and March 31, 2021 of PPP loans that were paid off by the borrower prior to forgiveness.
(2) Outstanding loans are presented net of unearned income.

Vulnerable Industries

We believe loans to certain industries are uniquely vulnerable to credit deterioration stemming from the COVID-19 pandemic. The following table presents our exposure to those industries as of the dates indicated.

  June 30, 2021     March 31, 2021  
(Dollars in millions)   Balance   % of Total
Loans
      Balance   % of Total
Loans
 
Non-essential Retail   $ 78.4     2.4   %     $ 88.0     2.6   %
Restaurants   51.3     1.5         56.1     1.7    
Hotels   108.2     3.2         114.4     3.4    
CRE-Retail   202.6     6.1         191.1     5.7    
Arts, Entertainment & Gaming   23.0     0.7         23.5     0.7    
Total Vulnerable Industries Loan Portfolio   $ 463.5     13.9   %     $ 473.1     14.1   %


INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income of $38.5 million in the second quarter of 2021 was relatively flat compared to $38.6 million in the first quarter of 2021 and reflected the income benefit from higher average earning asset balances in the second quarter of 2021 offset by lower PPP loan fee income and loan purchase discount accretion. Average interest earning assets increased $323.6 million to $5.52 billion in the second quarter of 2021, compared to the first quarter of 2021, as cash on hand and cash inflows from deposit activity was used to purchase debt securities and fund loan originations. Net PPP loan fee accretion was $2.5 million in the second quarter of 2021 compared to $3.7 million in the linked quarter. Loan purchase discount accretion was $0.9 million in the second quarter of 2021, down from $1.1 million in the linked quarter.

The Company's tax equivalent net interest margin was 2.88% in the second quarter of 2021 compared to 3.10% in the linked quarter as lower earning asset yields more than offset reduced funding costs. Total earning asset yields decreased 28 bps from the linked quarter due primarily to the decline in PPP loan fee income described above. The cost of interest bearing liabilities decreased 7 bps to 0.49%, primarily as a result of interest bearing deposit costs of 0.35%, which declined 5 bps from the linked quarter.

Noninterest Income

Noninterest income for the second quarter of 2021 decreased $1.6 million, or 14%, from the linked quarter. The decrease was primarily due to a $1.6 million decrease in loan revenue, coupled with a decrease of $0.4 million in other noninterest income. The decline in loan revenue included a $0.6 million reduction in mortgage origination fees from lower gain on sale margins as well as a $0.6 million decrease stemming from the fair value of our mortgage servicing rights. These decreases were partially offset by a $0.4 million increase in card revenue, which was primarily due to increased transaction volumes.

The following table presents details of noninterest income for the periods indicated:

  Three Months Ended
Noninterest Income June 30,   March 31,   June 30,
(In thousands) 2021   2021   2020
Investment services and trust activities $ 2,809     $ 2,836     $ 2,217  
Service charges and fees 1,475     1,487     1,290  
Card revenue 1,913     1,536     1,237  
Loan revenue 3,151     4,730     1,910  
Bank-owned life insurance 538     542     635  
Investment securities gains, net 42     27     6  
Other 290     666     974  
Total noninterest income $ 10,218     $ 11,824     $ 8,269  

Noninterest Expense

Noninterest expense for the second quarter of 2021 increased $1.0 million, or 3.5%, from the linked quarter primarily due to increases in legal and professional, compensation and employee benefits, and other noninterest expenses of $0.6 million, $0.5 million, and $0.4 million, respectively. The increase in legal and professional expenses was due primarily to a legal insurance recovery of $0.4 million in the first quarter of 2021 that did not recur in the second quarter of 2021. The increase in compensation and employee benefits was due primarily to a $0.6 million reduction in the benefit from SBA PPP loan origination costs which are deferred and amortized over the life of the loan to which they relate. The increased noninterest expenses, as well as the decline in noninterest income noted above, were the primary drivers of the increase in the efficiency ratio, which increased 4.06 percentage points to 54.83%, as compared to the linked quarter efficiency ratio of 50.77%.

The following table presents details of noninterest expense for the periods indicated:

  Three Months Ended
Noninterest Expense June 30,   March 31,   June 30,
(In thousands) 2021   2021   2020
Compensation and employee benefits $ 17,404     $ 16,917     $ 15,682  
Occupancy expense of premises, net 2,198     2,318     2,253  
Equipment 1,861     1,793     2,010  
Legal and professional 1,375     783     1,382  
Data processing 1,347     1,252     1,240  
Marketing 873     1,006     910  
Amortization of intangibles 1,341     1,507     1,748  
FDIC insurance 245     512     445  
Communications 371     409     449  
Foreclosed assets, net 136     47     34  
Other 1,519     1,156     1,885  
Total noninterest expense $ 28,670     $ 27,700     $ 28,038  

Income Taxes

The effective income tax rate was 22.2% in the second quarter of 2021 compared to 21.2% in the linked quarter. The effective income tax rate in the second quarter of 2021 reflected an increase in income taxes based on the statutory rate and state income taxes, net of federal income tax benefits, primarily due to the net income earned during the quarter, offset by benefits related to tax-exempt interest and bank-owned life insurance. The effective income tax rate for the full year 2021 is expected to be in the range of 20-22%.

BALANCE SHEET, LIQUIDITY AND CAPITAL HIGHLIGHTS

As of or for the Three Months Ended
June 30,   March 31,   June 30,
(Dollars in millions, except per share amounts) 2021   2021   2020
Ending Balance Sheet          
Total assets $ 5,749.2     $ 5,737.3     $ 5,231.0  
Loans held for investment, net of unearned income 3,330.2     3,358.2     3,597.0  
Total securities held for investment 2,072.5     1,896.9     1,187.5  
Total deposits 4,792.7     4,794.6     4,265.4  
Average Balance Sheet          
Average total assets $ 5,851.7     $ 5,520.3     $ 5,098.8  
Average total loans 3,396.6     3,429.7     3,633.7  
Average total deposits 4,875.3     4,573.9     4,165.6  
Funding and Liquidity          
Short-term borrowings $ 212.3     $ 175.8     $ 162.2  
Long-term debt 169.8     201.7     190.0  
Loans to deposits ratio 69.48 %   70.04 %   84.33 %
Equity          
Total shareholders' equity $ 530.3     $ 511.3     $ 520.8  
Common equity ratio 9.22 %   8.91 %   9.96 %
Tangible common equity(1) 445.4     425.1     398.4  
Tangible common equity ratio(1) 7.86 %   7.52 %   7.80 %
Per Share Data          
Book value $ 33.22     $ 32.00     $ 32.35  
Tangible book value(1) $ 27.90     $ 26.60     $ 24.74  
(1) Non-GAAP Measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.

Loans Held for Investment

Loans held for investment, net of unearned income, decreased $28.0 million, or 1%, to $3.33 billion from March 31, 2021, driven primarily by PPP loan forgiveness and lower line utilization.

The following table presents the composition of loans held for investment, net of unearned income, as of the dates indicated:

Loans Held for Investment June 30, 2021   March 31, 2021   June 30, 2020  
  Balance
  % of
Total

  Balance   % of
Total
  Balance   % of
Total
 
(dollars in thousands)            
Commercial and industrial $ 982,092     29.5   % $ 993,770     29.6   % $ 1,084,527     30.2   %
Agricultural 107,834     3.2     117,099     3.5     140,837     3.9    
Commercial real estate                        
Construction and development 168,070     5.0     164,927     4.9     199,950     5.6    
Farmland 134,877     4.1     138,199     4.1     161,897     4.5    
Multifamily 255,826     7.7     261,806     7.8     247,403     6.9    
Other 1,147,016     34.4     1,128,660     33.6     1,155,489     32.0    
Total commercial real estate 1,705,789     51.2     1,693,592     50.4     1,764,739     49.0    
Residential real estate                        
One-to-four family first liens 332,117     10.0     337,408     10.0     377,100     10.5    
One-to-four family junior liens 136,464     4.1     137,025     4.1     155,814     4.3    
Total residential real estate 468,581     14.1     474,433     14.1     532,914     14.8    
Consumer 65,860     2.0     79,267     2.4     74,022     2.1    
   Loans held for investment, net of unearned
   income
$ 3,330,156     100.0   % $ 3,358,161     100.0   % $ 3,597,039     100.0   %

Credit Loss Expense & Allowance for Credit Losses

The following table shows the activity in the allowance for credit losses for the periods indicated:

  Three Months Ended   Six Months Ended
Allowance for Credit Losses Roll Forward June 30,   March 31,   June 30,   June 30,   June 30,
(In thousands) 2021   2021   2020   2021   2020
Beginning balance $ 50,650       $ 55,500       $ 51,187       $ 55,500       $ 29,079    
Cumulative effect of change in accounting principle - CECL                         3,984    
Charge-offs (840 )     (1,003 )     (2,103 )     (1,843 )     (3,600 )  
Recoveries 434       687       236       1,121       535    
Net charge-offs (406 )     (316 )     (1,867 )     (722 )     (3,065 )  
Credit loss (benefit) expense related to loans (2,244 )     (4,534 )     6,324       (6,778 )     25,646    
Ending balance $ 48,000       $ 50,650       $ 55,644       $ 48,000       $ 55,644    

As of June 30, 2021, the allowance for credit losses ("ACL") was $48.0 million, or 1.44% of loans held for investment, net of unearned income, compared with $50.7 million, or 1.51%, at March 31, 2021. After excluding net PPP loans, the ACL as a percentage of loans held for investment, net of unearned income, decreased to 1.53%(1) as of June 30, 2021, from 1.63%(1) at March 31, 2021. The decline in the ACL during the second quarter reflected overall improvements in the economic forecast and an improved credit profile outlook when compared to the linked quarter.

(1)Non-GAAP Measure. See the Non-GAAPMeasures section for a reconciliation to the most directly comparable GAAP measure.

Deposits

The following table presents the composition of our deposit portfolio as of the dates indicated:

Deposit Composition June 30, 2021   March 31, 2021   June 30, 2020  
(In thousands) Balance   % of
Total
  Balance   % of
Total
  Balance   % of
Total
 
Noninterest bearing deposits $ 952,764     19.9   % $ 958,526     20.0   % $ 867,637     20.3   %
Interest checking deposits 1,414,942     29.6     1,406,070     29.4     1,153,697     27.1    
Money market deposits 936,683     19.5     950,300     19.8     811,368     19.0    
Savings deposits 596,199     12.4     580,862     12.1     463,262     10.9    
Total non-maturity deposits 3,900,588     81.4     3,895,758     81.3     3,295,964     77.3    
Time deposits of $250 and under 538,331     11.2     558,338     11.6     656,723     15.4    
Time deposits over $250 353,747     7.4     340,467     7.1     312,748     7.3    
Total time deposits 892,078     18.6      898,805     18.7     969,471     22.7    
Total deposits $ 4,792,666     100.0   % $ 4,794,563     100.0   % $ 4,265,435     100.0   %


CREDIT RISK PROFILE

  As of or For the Three Months Ended
Highlights June 30,   March 31,   June 30,
(dollars in thousands) 2021   2021   2020
Credit loss (benefit) expense related to loans $ (2,244 )     $ (4,534 )     $ 6,324  
Net charge-offs $ 406       $ 316       $ 1,867  
Net charge-off ratio(1) 0.05   %   0.04   %   0.21 %
           
At period-end          
Pass $ 3,102,688       $ 3,112,728       $ 3,301,353  
Special Mention / Watch 115,414       130,052       204,442  
Classified 112,054       115,381       91,244  
Total loans held for investment, net $ 3,330,156       $ 3,358,161       $ 3,597,039  
Classified loans ratio(2) 3.36   %   3.44   %   2.54 %
Nonaccrual loans held for investment $ 40,764       $ 43,874       $ 41,303  
Accruing loans contractually past due 90 days or more 665       508       3,238  
Total nonperforming loans 41,429       44,382       44,541  
Foreclosed assets, net 755       1,487       965  
Total nonperforming assets $ 42,184       $ 45,869       $ 45,506  
Nonperforming loans ratio(3) 1.24   %   1.32   %   1.24 %
Nonperforming assets ratio(4) 0.73   %   0.80   %   0.87 %
Allowance for credit losses $ 48,000       $ 50,650       $ 55,644  
Allowance for credit losses ratio(5) 1.44   %   1.51   %   1.55 %
Adjusted allowance for credit losses ratio(6) 1.53   %   1.63   %   1.70 %
(1) Net charge-off ratio is calculated as annualized net charge-offs divided by average loans held for investment, net of unearned income, during the period.
(2) Classified loans ratio is calculated as classified loans divided by loans held for investment, net of unearned income, at the end of the period.
(3) Nonperforming loans ratio is calculated as total nonperforming loans divided by loans held for investment, net of unearned income, at the end of the period.
(4) Nonperforming assets ratio is calculated as total nonperforming assets divided by total assets at the end of the period.
(5) Allowance for credit losses ratio is calculated as allowance for credit losses divided by loans held for investment, net of unearned income, at the end of the period.
(6) Non-GAAP Measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.

The following table presents a roll forward of nonperforming loans for the period indicated:

Nonperforming Loans          
(dollars in thousands) Nonaccrual   90+ Days Past Due
& Still Accruing
  Total
Balance at March 31, 2021 $ 43,874       $ 508       $ 44,382    
Loans placed on nonaccrual or 90+ days past due & still accruing 455       688       1,143    
Repayments (including interest applied to principal) (2,669 )           (2,669 )  
Loans returned to accrual status or no longer past due       (503 )     (503 )  
Charge-offs (766 )     (28 )     (794 )  
Transfers to foreclosed assets (130 )           (130 )  
Balance at June 30, 2021 $ 40,764       $ 665       $ 41,429    


CAPITAL

Effective March 31, 2020, we elected the 5-year phase-in option allowed under the interim final rule (IFR) issued by the federal banking regulatory agencies that delays the estimated impact on regulatory capital stemming from the implementation of the current expected credit losses (CECL) accounting standard. The IFR allows the add back of 100% of the capital effect from the day one CECL transition adjustment and 25% of the capital effect from subsequent increases in the allowance for credit losses through the two-year period ending December 31, 2021. This cumulative amount will then be reduced from capital over the subsequent three-year period.

Regulatory Capital Ratios

June 30,   March 31,   June 30,
2021 (1)   2021   2020
MidWest One Financial Group, Inc. Consolidated          
Tier 1 leverage ratio 8.50 %   8.78 %   8.72 %
Common equity tier 1 capital ratio 10.26 %   10.16 %   9.48 %
Tier 1 capital ratio 11.21 %   11.13 %   10.48 %
Total capital ratio 13.63 %   13.75 %   11.72 %
MidWest One Bank          
Tier 1 leverage ratio 9.15 %   9.60 %   9.39 %
Common equity tier 1 capital ratio 12.09 %   12.19 %   11.34 %
Tier 1 capital ratio 12.09 %   12.19 %   11.34 %
Total capital ratio 13.02 %   13.19 %   12.47 %
(1) Capital ratios for June 30, 2021 are preliminary          


CORPORATE UPDATE

Share Repurchase Program

For the period April 1, 2021 through June 22, 2021, under the prior repurchase program that was announced on August 20, 2019, which allowed for the repurchase of up to $10.0 million of common stock, the Company repurchased 20,985 shares of its common stock at an average price of $29.66 per share and a total cost of $0.6 million, leaving $2.1 million of shares that were available to be repurchased under that repurchase program.

On June 22, 2021, the Board of Directors of the Company approved a new share repurchase program which replaced the prior repurchase program, allowing for the repurchase of up to $15.0 million of the Company's common stock through December 31, 2023. For the period June 23, 2021 through June 30, 2021, the Company repurchased 17,790 shares of its common stock at an average price of $29.53 per share and a total cost of $0.5 million. At June 30, 2021, $14.5 million remained available to repurchase shares under the Company's new share repurchase program.

Cash Dividend Announcement

The Board of Directors of the Company declared a cash dividend of $0.2250 per common share on July 20, 2021. The dividend is payable September 15, 2021, to shareholders of record at the close of business on September 1, 2021.

Subordinated Debenture Redemption

On May 31, 2021, the Company exercised its option to redeem, in whole, $10.8 million of outstanding subordinated debentures (the "ATB Debentures") that were assumed upon the Company's acquisition of ATBancorp. The ATB Debentures had a stated maturity of May 31, 2023 and bore interest at a fixed annual rate of 6.5%. The amount of ATB Debentures qualifying as tier 2 regulatory capital would have been phased-out completely starting in the second quarter of 2022.

CONFERENCE CALL DETAILS

The Company will host a conference call for investors at 11:00 a.m. CT on Friday, July 23, 2021. To participate, please dial 866-233-3483 at least fifteen minutes before the call start time. If you are unable to participate on the call, a replay will be available until November 4, 2021, by calling 877-344-7529 and using the replay access code of 10157115. A transcript of the call will also be available on the Company’s web site (www.midwestonefinancial.com) within three business days of the call.

ABOUT MIDWEST ONE FINANCIAL GROUP, INC.

MidWestOne Financial Group, Inc. is a financial holding company headquartered in Iowa City, Iowa. MidWestOne is the parent company of MidWestOne Bank, which operates banking offices in Iowa, Minnesota, Wisconsin, Florida, and Colorado. MidWestOne provides electronic delivery of financial services through its website, MidWestOne.bank. MidWestOne Financial Group, Inc. trades on the Nasdaq Global Select Market under the symbol “MOFG”.

Cautionary Note Regarding Forward-Looking Statements

This release contains certain “forward-looking statements” within the meaning of such term in the Private Securities Litigation Reform Act of 1995. We and our representatives may, from time to time, make written or oral statements that are “forward-looking” and provide information other than historical information. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement. These factors include, among other things, the factors listed below. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of our management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “should,” “could,” “would,” “plans,” “goals,” “intend,” “project,” “estimate,” “forecast,” “may” or similar expressions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, these statements. Readers are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Additionally, we undertake no obligation to update any statement in light of new information or future events, except as required under federal securities law.

Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors that could have an impact on our ability to achieve operating results, growth plan goals and future prospects include, but are not limited to, the following: (1) effects of the COVID-19 pandemic, including its effects on the economic environment, our customers and our operations, as well as any changes to federal, state, or local government laws, regulations, or orders in connection with the pandemic; (2) government intervention in the U.S. financial system in response to the COVID-19 pandemic, including the effects of recent legislative, tax, accounting and regulatory actions and reforms, including the Coronavirus Aid, Relief, and Economic Security Act, the Consolidated Appropriations Act, 2021 and the American Rescue Plan; (3) the impact of the COVID-19 pandemic on our financial results, including possible lost revenue and increased expenses (including the cost of capital), as well as possible goodwill impairment charges; (4) credit quality deterioration or pronounced and sustained reduction in real estate market values causing an increase in the allowance for credit losses, an increase in the credit loss expense, and a reduction in net earnings; (5) the effects of interest rates, including on our net income and the value of our securities portfolio; (6) changes in the economic environment, competition, or other factors that may affect our ability to acquire loans or influence the anticipated growth rate of loans and deposits and the quality of the loan portfolio and loan and deposit pricing; (7) fluctuations in the value of our investment securities; (8) governmental monetary and fiscal policies; (9) changes in and uncertainty related to benchmark interest rates used to price loans and deposits, including the expected elimination of LIBOR and the adoption of a substitute; (10) legislative and regulatory changes, including changes in banking, securities, trade, and tax laws and regulations and their application by our regulators; (11) the ability to attract and retain key executives and employees experienced in banking and financial services; (12) the sufficiency of the allowance for credit losses to absorb the amount of actual losses inherent in our existing loan portfolio; (13) our ability to adapt successfully to technological changes to compete effectively in the marketplace; (14) credit risks and risks from concentrations (by geographic area and by industry) within our loan portfolio; (15) the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds, financial technology companies, and other financial institutions operating in our markets or elsewhere or providing similar services; (16) the failure of assumptions underlying the establishment of allowances for credit losses and estimation of values of collateral and various financial assets and liabilities; (17) the risks of mergers, including, without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and possible failures to achieve expected gains, revenue growth and/or expense savings from such transactions; (18) volatility of rate-sensitive deposits; (19) operational risks, including data processing system failures or fraud; (20) asset/liability matching risks and liquidity risks; (21) the costs, effects and outcomes of existing or future litigation; (22) changes in general economic, political, or industry conditions, nationally, internationally or in the communities in which we conduct business; (23) changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the Financial Accounting Standards Board; (24) war or terrorist activities, widespread disease or pandemic, or other adverse external events, which may cause deterioration in the economy or cause instability in credit markets; (25) the effects of cyber-attacks; (26) the imposition of tariffs or other domestic or international governmental policies impacting the value of the agricultural or other products of our borrowers; and (27) other risk factors detailed from time to time in Securities and Exchange Commission filings made by the Company.



MIDWEST ONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
FIVE QUARTER CONSOLIDATED BALANCE SHEETS

  June 30,   March 31,   December 31,   September 30,   June 30,
(In thousands) 2021   2021   2020   2020   2020
ASSETS                  
Cash and due from banks $ 52,297       $ 57,154       $ 65,078       $ 71,901       $ 65,863    
Interest earning deposits in banks 11,124       80,924       17,409       55,421       45,018    
Federal funds sold 13       7,691       172       7,540       6,329    
Total cash and cash equivalents 63,434       145,769       82,659       134,862       117,210    
Debt securities available for sale at fair value 2,072,452       1,896,894       1,657,381       1,366,344       1,187,455    
Loans held for sale 6,149       58,333       59,956       13,096       12,048    
Gross loans held for investment 3,344,156       3,374,076       3,496,790       3,555,969       3,618,675    
Unearned income, net (14,000 )     (15,915 )     (14,567 )     (18,537 )     (21,636 )  
Loans held for investment, net of unearned income 3,330,156       3,358,161       3,482,223       3,537,432       3,597,039    
Allowance for credit losses (48,000 )     (50,650 )     (55,500 )     (58,500 )     (55,644 )  
Total loans held for investment, net 3,282,156       3,307,511       3,426,723       3,478,932       3,541,395    
Premises and equipment, net 84,667       85,581       86,401       87,955       88,929    
Goodwill 62,477       62,477       62,477       62,477       93,977    
Other intangible assets, net 22,394       23,735       25,242       26,811       28,443    
Foreclosed assets, net 755       1,487       2,316       724       965    
Other assets 154,731       155,525       153,493       159,507       160,541    
Total assets $ 5,749,215       $ 5,737,312       $ 5,556,648       $ 5,330,708       $ 5,230,963    
LIABILITIES                  
Noninterest bearing deposits $ 952,764       $ 958,526       $ 910,655       $ 864,504       $ 867,637    
Interest bearing deposits 3,839,902       3,836,037       3,636,394       3,469,137       3,397,798    
Total deposits 4,792,666       4,794,563       4,547,049       4,333,641       4,265,435    
Short-term borrowings 212,261       175,785       230,789       183,893       162,224    
Long-term debt 169,839       201,696       208,691       245,481       189,973    
Other liabilities 44,156       53,948       54,869       68,612       92,550    
Total liabilities 5,218,922       5,225,992       5,041,398       4,831,627       4,710,182    
SHAREHOLDERS' EQUITY                  
Common stock 16,581       16,581       16,581       16,581       16,581    
Additional paid-in capital 299,888       299,747       300,137       299,939       299,542    
Retained earnings 219,884       206,230       188,191       175,017       198,382    
Treasury stock (15,888 )     (15,278 )     (14,251 )     (12,272 )     (12,272 )  
Accumulated other comprehensive income 9,828       4,040       24,592       19,816       18,548    
Total shareholders' equity 530,293       511,320       515,250       499,081       520,781    
Total liabilities and shareholders' equity $ 5,749,215       $ 5,737,312       $ 5,556,648       $ 5,330,708       $ 5,230,963    



MIDWEST ONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
FIVE QUARTER AND YEAR TO DATE CONSOLIDATED STATEMENTS OF INCOME

  Three Months Ended   Six Months Ended
(In thousands, except per share data) June 30,
2021
  March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
  June 30,
2021
  June 30,  
2020
Interest income                          
Loans, including fees $ 34,736     $ 36,542     $ 38,239     $ 38,191     $ 40,214     $ 71,278     $ 82,226  
Taxable investment securities 6,483     5,093     4,673     4,574     4,646     11,576     8,363  
Tax-exempt investment securities 2,549     2,555     2,529     2,360     1,858     5,104     3,370  
Other 19     14     29     29     40     33     204  
Total interest income 43,787     44,204     45,470     45,154     46,758     87,991     94,163  
Interest expense                          
Deposits 3,409     3,608     4,265     5,296     6,409     7,017     14,358  
Short-term borrowings 161     128     142     175     263     289     597  
Long-term debt 1,712     1,851     2,026     1,874     1,374     3,563     3,090  
Total interest expense 5,282     5,587     6,433     7,345     8,046     10,869     18,045  
Net interest income 38,505     38,617     39,037     37,809     38,712     77,122     76,118  
Credit loss (benefit) expense (2,144 )   (4,734 )   (3,041 )   4,992     4,685     (6,878 )   26,418  
Net interest income after credit loss (benefit) expense 40,649     43,351     42,078     32,817     34,027     84,000     49,700  
Noninterest income                          
Investment services and trust activities 2,809     2,836     2,518     2,361     2,217     5,645     4,753  
Service charges and fees 1,475     1,487     1,571     1,491     1,290     2,962     3,116  
Card revenue 1,913     1,536     1,517     1,600     1,237     3,449     2,602  
Loan revenue 3,151     4,730     3,900     3,252     1,910     7,881     3,033  
Bank-owned life insurance 538     542     541     530     635     1,080     1,155  
Investment securities gains, net 42     27     30     106     6     69     48  
Other 290     666     549     230     974     956     3,717  
Total noninterest income 10,218     11,824     10,626     9,570     8,269     22,042     18,424  
Noninterest expense                          
Compensation and employee benefits 17,404     16,917     17,638     16,460     15,682     34,321     32,299  
Occupancy expense of premises, net 2,198     2,318     2,476     2,278     2,253     4,516     4,594  
Equipment 1,861     1,793     2,040     1,935     2,010     3,654     3,890  
Legal and professional 1,375     783     2,052     1,184     1,382     2,158     2,917  
Data processing 1,347     1,252     1,460     1,308     1,240     2,599     2,594  
Marketing 873     1,006     986     857     910     1,879     1,972  
Amortization of intangibles 1,341     1,507     1,569     1,631     1,748     2,848     3,776  
FDIC insurance 245     512     495     470     445     757     893  
Communications 371     409     412     428     449     780     906  
Foreclosed assets, net 136     47     (35 )   13     34     183     172  
Goodwill impairment             31,500              
Other 1,519     1,156     2,822     1,875     1,885     2,675     4,026  
Total noninterest expense 28,670     27,700     31,915     59,939     28,038     56,370     58,039  
Income (loss) before income tax expense 22,197     27,475     20,789     (17,552 )   14,258     49,672     10,085  
Income tax expense 4,926     5,827     4,079     2,272     2,546     10,753     348  
Net income (loss) $ 17,271     $ 21,648     $ 16,710     $ (19,824 )   $ 11,712     $ 38,919     $ 9,737  
                           
Earnings (loss) per common share                          
Basic $ 1.08     $ 1.35     $ 1.04     $ (1.23 )   $ 0.73     $ 2.43     $ 0.60  
Diluted $ 1.08     $ 1.35     $ 1.04     $ (1.23 )   $ 0.73     $ 2.43     $ 0.60  
Weighted average basic common shares outstanding 15,987     15,991     16,074     16,099     16,094     15,989     16,118  
Weighted average diluted common shares outstanding 16,012     16,021     16,092     16,099     16,100     16,016     16,125  
Dividends paid per common share $ 0.2250     $ 0.2250     $ 0.2200     $ 0.2200     $ 0.2200     $ 0.4500     $ 0.4400  



MIDWEST ONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
FINANCIAL STATISTICS

  As of or for the Three Months Ended   As of or for the
Six Months Ended
  June 30,   March 31,   June 30,   June 30,   June 30,
(Dollars in thousands, except per share amounts) 2021   2021   2020   2021   2020
Earnings:                  
Net interest income $ 38,505       $ 38,617       $ 38,712     $ 77,122       $ 76,118  
Noninterest income 10,218       11,824       8,269     22,042       18,424  
Total revenue, net of interest expense 48,723       50,441       46,981     99,164       94,542  
Credit loss (benefit) expense (2,144 )     (4,734 )     4,685     (6,878 )     26,418  
Noninterest expense 28,670       27,700       28,038     56,370       58,039  
Income before income tax expense 22,197       27,475       14,258     49,672       10,085  
Income tax expense 4,926       5,827       2,546     10,753       348  
Net income $ 17,271       $ 21,648       $ 11,712     $ 38,919       $ 9,737  
Per Share Data:                  
Diluted earnings $ 1.08       $ 1.35       $ 0.73     $ 2.43       $ 0.60  
Book value 33.22       32.00       32.35     33.22       32.35  
Tangible book value(1) 27.90       26.60       24.74     27.90       24.74  
Ending Balance Sheet:                  
Total assets $ 5,749,215       $ 5,737,312       $ 5,230,963     $ 5,749,215       $ 5,230,963  
Loans held for investment, net of unearned income 3,330,156       3,358,161       3,597,039     3,330,156       3,597,039  
Total securities held for investment 2,072,452       1,896,894       1,187,455     2,072,452       1,187,455  
Total deposits 4,792,666       4,794,563       4,265,435     4,792,666       4,265,435  
Short-term borrowings 212,261       175,785       162,224     212,261       162,224  
Long-term debt 169,839       201,696       189,973     169,839       189,973  
Total shareholders' equity 530,293       511,320       520,781     530,293       520,781  
Average Balance Sheet:                  
Average total assets $ 5,851,736       $ 5,520,304       $ 5,098,847     $ 5,686,936       $ 4,884,285  
Average total loans 3,396,575       3,429,746       3,633,695     3,413,069       3,534,979  
Average total deposits 4,875,324       4,573,898       4,165,574     4,725,444       3,962,795  
Financial Ratios:                  
Return on average assets 1.18   %   1.59   %   0.92 %   1.38   %   0.40 %
Return on average equity 13.24   %   17.01   %   9.21 %   15.10   %   3.82 %
Return on average tangible equity(1) 16.75   %   21.52   %   13.50 %   19.10   %   6.48 %
Efficiency ratio(1) 54.83   %   50.77   %   54.80 %   52.76   %   56.24 %
Net interest margin, tax equivalent(1) 2.88   %   3.10   %   3.38 %   2.99   %   3.48 %
Loans to deposits ratio 69.48   %   70.04   %   84.33 %   69.48   %   84.33 %
Common equity ratio 9.22   %   8.91   %   9.96 %   9.22   %   9.96 %
Tangible common equity ratio(1) 7.86   %   7.52   %   7.80 %   7.86   %   7.80 %
Credit Risk Profile:                  
Total nonperforming loans $ 41,429       $ 44,382       $ 44,541     $ 41,429       $ 44,541  
Nonperforming loans ratio 1.24   %   1.32   %   1.24 %   1.24   %   1.24 %
Total nonperforming assets $ 42,184       $ 45,869       $ 45,506     $ 42,184       $ 45,506  
Nonperforming assets ratio 0.73   %   0.80   %   0.87 %   0.73   %   0.87 %
Net charge-offs $ 406       $ 316       $ 1,867     $ 722       $ 3,065  
Net charge-off ratio 0.05   %   0.04   %   0.21 %   0.04   %   0.17 %
Allowance for credit losses $ 48,000       $ 50,650       $ 55,644     $
48,000       $ 55,644  
Allowance for credit losses ratio 1.44   %   1.51   %   1.55 %   1.44   %   1.55 %
Adjusted allowance for credit losses ratio(1) 1.53   %   1.63   %   1.70 %   1.53   %   1.70 %
PPP Loans:                  
Average PPP loans $ 233,982       $ 236,231       $ 257,664     $
234,515       $ 66,075  
Fee Income(2) 2,469       3,674       1,054     6,143       1,054  
                   
(1) Non-GAAP measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
(2)The amount related to the first quarter of 2021 has been revised from previous disclosure.



MIDWEST ONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET AND YIELD ANALYSIS

  Three Months Ended
  June 30, 2021   March 31, 2021   June 30, 2020
(Dollars in thousands) Average
Balance
  Interest
Income/
Expense
  Average
Yield/
Cost
  Average
Balance
  Interest
Income/
Expense
  Average
Yield/
Cost
  Average
Balance
  Interest
Income/
Expense
  Average
Yield/
Cost
ASSETS                                  
Loans, including fees (1)(2)(3) $ 3,396,575   $ 35,255   4.16 %   $ 3,429,746   $ 37,073   4.38 %   $ 3,633,695   $ 40,721   4.51 %
Taxable investment securities 1,604,463   6,483   1.62 %   1,266,714   5,093   1.63 %   731,699   4,646   2.55 %
Tax-exempt investment securities (2)(4) 473,181   3,196   2.71 %   465,793   3,203   2.79 %   285,758   2,340   3.29 %
Total securities held for investment(2) 2,077,644   9,679   1.87 %   1,732,507   8,296   1.94 %   1,017,457   6,986   2.76 %
Other 48,208   19   0.16 %   36,536   14   0.16 %   67,429   40   0.24 %
Total interest earning assets(2) $ 5,522,427   44,953   3.26 %   $ 5,198,789   45,383   3.54 %   $ 4,718,581   47,747   4.07 %
Other assets 329,309           321,515           380,266        
Total assets $ 5,851,736           $ 5,520,304           $ 5,098,847        
LIABILITIES AND SHAREHOLDERS’ EQUITY                                  
Interest checking deposits $ 1,469,853   $ 1,095   0.30 %   $ 1,349,671   $ 991   0.30 %   $ 1,091,565   $ 1,113   0.41 %
Money market deposits 942,072   502   0.21 %   913,087   478   0.21 %   829,826   885   0.43 %
Savings deposits 595,150   324   0.22 %   553,824   286   0.21 %   439,592   365   0.33 %
Time deposits 896,169   1,488   0.67 %   837,460   1,853   0.90 %   990,797   4,046   1.64 %
Total interest bearing deposits 3,903,244   3,409   0.35 %   3,654,042   3,608   0.40 %   3,351,780   6,409   0.77 %
Short-term borrowings 218,491   161   0.30 %   175,193   128   0.30 %   159,157   263   0.66 %
Long-term debt 189,644   1,712   3.62 %   205,971   1,851   3.64 %   201,240   1,374   2.75 %
Total borrowed funds 408,135   1,873   1.84 %   381,164   1,979   2.11 %   360,397   1,637   1.83 %
Total interest bearing liabilities $ 4,311,379   $ 5,282   0.49 %   $ 4,035,206   $ 5,587   0.56 %   $ 3,712,177   $ 8,046   0.87 %
Noninterest bearing deposits 972,080           919,856           813,794        
Other liabilities 45,035           49,003           61,637        
Shareholders’ equity 523,242           516,239           511,239        
Total liabilities and shareholders’ equity $ 5,851,736           $ 5,520,304           $ 5,098,847        
Net interest income(2)     $ 39,671           $ 39,796           $ 39,701    
Net interest spread(2)         2.77 %           2.98 %           3.20 %
Net interest margin(2)         2.88 %           3.10 %           3.38 %
                                   
Total deposits(5) $ 4,875,324   $ 3,409   0.28 %   $ 4,573,898   $ 3,608   0.32 %   $ 4,165,574   $ 6,409   0.62 %
Cost of funds(6)         0.40 %           0.46 %           0.72 %

(1)  Average balance includes nonaccrual loans.
(2)  Tax equivalent. The federal statutory tax rate utilized was 21%.
(3)  Interest income includes net loan fees, loan purchase discount accretion and tax equivalent adjustments. Net loan fees were $2.3 million, $3.5 million, and $748 thousand for the three months ended June 30, 2021, March 31, 2021, and June 30, 2020, respectively. Loan purchase discount accretion was $873 thousand, $1.1 million, and $2.6 million for the three months ended June 30, 2021, March 31, 2021, and June 30, 2020, respectively. Tax equivalent adjustments were $519 thousand, $531 thousand, and $507 thousand for the three months ended June 30, 2021, March 31, 2021, and June 30, 2020, respectively. The federal statutory tax rate utilized was 21%.
(4)  Interest income includes tax equivalent adjustments of $647 thousand, $648 thousand, and $482 thousand for the three months ended June 30, 2021, March 31, 2021, and June 30, 2020, respectively. The federal statutory tax rate utilized was 21%.
(5)  Total deposits is the sum of total interest-bearing deposits and noninterest bearing deposits. The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits.
(6)  Cost of funds is calculated as annualized total interest expense divided by the sum of average total deposits and borrowed funds.



MIDWEST ONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET AND YIELD ANALYSIS

  Six Months Ended
  June 30, 2021   June 30, 2020
(Dollars in thousands) Average
Balance
  Interest
Income/
Expense
  Average
Yield/
Cost
  Average
Balance
  Interest
Income/
Expense
  Average
Yield/
Cost
ASSETS                      
Loans, including fees (1)(2)(3) $ 3,413,069     $ 72,328     4.27 %   $ 3,534,979     $ 83,230     4.73 %
Taxable investment securities 1,436,522     11,576     1.63 %   648,678     8,363     2.59 %
Tax-exempt investment securities (2)(4) 469,507     6,399     2.75 %   254,963     4,247     3.35 %
Total securities held for investment(2) 1,906,029     17,975     1.90 %   903,641     12,610     2.81 %
Other 42,404     33     0.16 %   62,304     204     0.66 %
Total interest earning assets(2) $ 5,361,502     90,336     3.40 %   $ 4,500,924     96,044     4.29 %
Other assets 325,434             383,361          
Total assets $ 5,686,936             $ 4,884,285          
LIABILITIES AND SHAREHOLDERS’ EQUITY                      
Interest checking deposits $ 1,410,094     $ 2,086     0.30 %   $ 1,028,321     $ 2,428     0.47 %
Money market deposits 927,660     980     0.21 %   798,296     2,530     0.64 %
Savings deposits 574,602     610     0.21 %   416,713     756     0.36 %
Time deposits 866,976     3,341     0.78 %   993,966     8,644     1.75 %
Total interest bearing deposits 3,779,332     7,017     0.37 %   3,237,296     14,358     0.89 %
Short-term borrowings 196,962     289     0.30 %   140,550     597     0.85 %
Long-term debt 197,762     3,563     3.63 %   213,413     3,090     2.91 %
Total borrowed funds 394,724     3,852     1.97 %   353,963     3,687     2.09 %
Total interest bearing liabilities $ 4,174,056     $ 10,869     0.53 %   $ 3,591,259     $ 18,045     1.01 %
Noninterest bearing deposits 946,112             725,499          
Other liabilities 47,008             54,323          
Shareholders’ equity 519,760             513,204          
Total liabilities and shareholders’ equity $ 5,686,936             $ 4,884,285          
Net interest income(2)     $ 79,467             $ 77,999      
Net interest spread(2)         2.87 %           3.28 %
Net interest margin(2)         2.99 %           3.48 %
                       
Total deposits(5) $ 4,725,444     $ 7,017     0.30 %   $ 3,962,795     $ 14,358     0.73 %
Cost of funds(6)         0.43 %           0.84 %

(1)  Average balance includes nonaccrual loans.
(2)  Tax equivalent. The federal statutory tax rate utilized was 21%.
(3)  Interest income includes net loan fees, loan purchase discount accretion and tax equivalent adjustments. Net loan fees were $5.8 million and $626 thousand for the six months ended June 30, 2021 and June 30, 2020, respectively. Loan purchase discount accretion was $2.0 million and $5.6 million for the six months ended June 30, 2021 and June 30, 2020, respectively. Tax equivalent adjustments were $1.0 million and $1.0 million for the six months ended June 30, 2021 and June 30, 2020, respectively. The federal statutory tax rate utilized was 21%.
(4)  Interest income includes tax equivalent adjustments of $1.3 million and $0.9 million for the six months ended June 30, 2021 and June 30, 2020, respectively. The federal statutory tax rate utilized was 21%.
(5)  Total deposits is the sum of total interest-bearing deposits and noninterest bearing deposits. The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits.
(6)  Cost of funds is calculated as annualized total interest expense divided by the sum of average total deposits and borrowed funds.



Non-GAAP Measures

This earnings release contains non-GAAP measures for tangible common equity, tangible book value per share, tangible common equity ratio, return on average tangible equity, net interest margin (tax equivalent), core net interest margin, loan yield (tax equivalent), core yield on loans, efficiency ratio, adjusted allowance for credit losses ratio, core loans, and core commercial loans. Management believes these measures provide investors with useful information regarding the Company’s profitability, financial condition and capital adequacy, consistent with how management evaluates the Company’s financial performance. The following tables provide a reconciliation of each non-GAAP measure to the most comparable GAAP measure.

Tangible Common Equity/Tangible Book Value per Share/Tangible Common Equity Ratio   June 30,   March 31,   December 31,   September 30,   June 30,
(Dollars in thousands, except per share data)   2021   2021   2020   2020   2020
Total shareholders’ equity   $ 530,293       $ 511,320       $ 515,250       $ 499,081       $ 520,781    
Intangible assets, net   (84,871 )     (86,212 )     (87,719 )     (89,288 )     (122,420 )  
Tangible common equity   $ 445,422       $ 425,108       $ 427,531       $ 409,793       $ 398,361    
                     
Total assets   $ 5,749,215       $ 5,737,312       $ 5,556,648       $ 5,330,708       $ 5,230,963    
Intangible assets, net   (84,871 )     (86,212 )     (87,719 )     (89,288 )     (122,420 )  
Tangible assets   $ 5,664,344       $ 5,651,100       $ 5,468,929       $ 5,241,420       $ 5,108,543    
                     
Book value per share   $ 33.22       $ 32.00       $ 32.17       $ 31.00       $ 32.35    
Tangible book value per share(1)   $ 27.90       $ 26.60       $ 26.69       $ 25.45       $ 24.74    
Shares outstanding   15,963,468       15,981,088       16,016,780       16,099,324       16,099,324    
Common equity ratio   9.22   %   8.91   %   9.27   %   9.36   %   9.96   %
Tangible common equity ratio(2)   7.86   %   7.52   %   7.82   %   7.82   %   7.80   %

(1)  Tangible common equity divided by shares outstanding.
(2)  Tangible common equity divided by tangible assets.

 

    Three Months Ended   Six Months Ended
Return on Average Tangible Equity   June 30,   March 31,   June 30,   June 30,   June 30,
(Dollars in thousands)   2021   2021   2020   2021   2020
Net income   $ 17,271       $ 21,648       $ 11,712       $ 38,919       $ 9,737    
Intangible amortization, net of tax(1)   1,006       1,130       1,311       2,136       2,832    
Tangible net income   $ 18,277       $ 22,778       $ 13,023       $ 41,055       $ 12,569    
                     
Average shareholders’ equity   $ 523,242       $ 516,239       $ 511,239       $ 519,760       $ 513,204    
Average intangible assets, net   (85,518 )     (86,961 )     (123,313 )     (86,235 )     (123,130 )  
Average tangible equity   $ 437,724       $ 429,278       $ 387,926       $ 433,525       $ 390,074    
                     
Return on average equity   13.24   %   17.01   %   9.21   %   15.10   %   3.82   %
Return on average tangible equity(2)   16.75   %   21.52   %   13.50   %   19.10   %   6.48