MidWestOne Financial Group, Inc.

Good morning, ladies and gentlemen, and welcome to the Midwest One Financial Group Incorporated fourth quarter and full year 2023 earnings call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions and instructions to follow at that time. As a reminder, this call is being recorded. I would now like to turn the call over to Barry Ray, Chief Financial Officer of Midwest One Financial Group.

Thank you, everyone, for joining us today. We appreciate your participation in our earnings conference call this morning. With me here on the call are Chip Reeves, our Chief Executive Officer, Lynn DeVacher, our President and Chief Operating Officer, and Gary Sims, our Chief Credit Officer. Following the conclusion of today's conference, a replay of this call will be available on our website. Additionally, a slide deck to complement today's presentation is also available on the investor relations section of our website. Before we begin, let me remind everyone on the call that this presentation contains forward-looking statements relating to the financial condition, results of operations, and business of Midwest One Financial Group Inc. Forward-looking statements generally include words such as believes, expects, anticipates, and other similar expressions. Actual results could differ materially from those indicated. Among the important factors that could cause actual results to differ materially are interest rates, changes in the mix of the company's business, competitive pressures, general economic conditions, and the risk factors detailed in the company's periodic reports and registration statements filed with the Securities and Exchange Commission. Midwest One Financial Group, Inc. undertakes no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances after the date of this presentation. I would now like to turn the call over to Chip.

Thank you, Barry, and good morning. On today's call, I'll provide a high-level overview of our fourth quarter results and an update on the significant progress that we've achieved executing our strategic plan over the last year. Len will then provide an update on our lines of business, and Barry will conclude with a more detailed review of our fourth quarter financial results. Starting on slide three of our earnings presentation, we delivered net income of $2.7 million, or earnings per diluted share of 17 cents. During the quarter, we sold $115 million of securities, resulting in a net pre-tax loss of $5.7 million as we continue to address our liability-sensitive balance sheet. We also recorded $438,000 in costs related to our previously announced voluntary early retirement program, $245,000 of merger-related costs, and $105,000 reduction to the fair value of our MSR. Adjusting for those four items, adjusted net income was $7.7 million, or 49 cents per diluted common share. Now looking deeper at our results, I'm pleased with our balance sheet trends. We delivered 6.1% annualized loan growth for the fourth quarter and 7.5% loan growth for the full year, as we continue to benefit from the expansion of our major market banking teams. Additionally, we achieved modest core deposit growth in the fourth quarter, and remain cautiously optimistic we can continue to grow our core deposit franchise through the year ahead. While our balance sheet trends are encouraging, we do remain liability sensitive and the interest rate environment continued to pressure our NIM and NII through the fourth quarter. That said, we have continued to see a moderation in the rate of our NIM decline and expect our margin will trough through the first half of 2024. Importantly, we continue to control what we can control and execute quite well on our strategic initiatives to transform Midwest One Bank and position this institution to deliver financial results at the median of our peer group by the end of 2025. As I've said on previous calls, we're working hard to become a top-performing bank and believe we're firmly on track given the substantial progress we've achieved over this past year. A key accomplishment was the realignment of our geographic footprint announced in September with the sale of our Florida operations and the proceeds to be reinvested in a highly attractive Denver MSA through our merger with Denver Bank Shares, a long-established $272 million asset bank. During the fourth quarter, in that mark, we hired an SBA officer and a treasury management officer as we continue to further expand our platform and accelerate growth in this large, commercially robust MSA. Looking forward, we've received all regulatory approvals and expect the merger to close on January 31st. At closing, we'll have approximately $640 million in loans and $400 million in deposits in the Denver marketplace and firmly believe we're on the path to building this MSA into a $1 billion-plus franchise in the coming years. We also continue to expand and up-tier our commercial banking and wealth management businesses. and have enjoyed robust loan and assets under management growth in our major metro markets of the Twin Cities, Denver, and Metro Iowa. Our plans to continue to add bankers as we target middle market companies with $20 to $150 million in revenue and individuals with investable assets of $3 to $20 million. Importantly, we're excited about the hiring of our new head of wealth management, a seasoned leader with extensive super regional experience in the Midwest. We look to achieve double-digit annual revenue growth in this business segment in the years to come. Additionally, we added two experienced commercial bankers in our Metro Iowa markets, one in Des Moines and one in Dubuque. Overall, we've made significant progress growing our product and talent capabilities in both our core markets and our specialty verticals of agribusiness and SBA. Accordingly, we expect an acceleration in loan growth to the high single digits for the full year 2024. We're also extremely pleased with our 2023 expense discipline. As part of this, we outlined a plan to reduce our operating expense base by 5% and then reallocate 2.5% into more productive, profitable markets and departments. Through 2023, we've exceeded that stated plan and remain focused on the appropriate balance of cost containment and growth reinvestment. To conclude, we've made substantial progress transforming Midwest One and positioning the bank for improved earnings power and returns for when the interest rate cycle abates. While our liability-sensitive balance sheet has challenged current earnings, the execution of our strategic initiatives is progressing better and faster than what we've expected. And I remain very optimistic on what the future holds for our employees and shareholders. At this time, I'd also like to thank our employees for the continued hard work combined with their commitment to our company, customers, and communities. This journey would not be possible without their unwavering support. Now I'd like to turn the call over to Len.