MidWestOne Financial Group, Inc. reported a tax equivalent net interest margin (NIM) of 3.57% for the second quarter of 2025, an increase of 13 basis points from the prior quarter. Net interest income grew by $2.5 million from Q1 2025 to $50.0 million, driven by higher earning asset volumes and yields and lower funding costs.
Loans held for investment increased by $77.0 million, or 1.8%, from the previous quarter, reaching $4.38 billion. This represents a 7.4% annualized loan growth, fueled by organic expansion and increased line of credit usage. Fee income businesses, including Wealth Management, SBA, and residential mortgage, also saw quarter-over-quarter revenue increases.
However, the company's asset quality metrics were unfavorably impacted by a single $24.0 million Twin Cities suburban commercial real estate (CRE) office loan, originated in June 2022, which moved to nonaccrual status. This led to a $19.7 million increase in nonperforming loans and nonperforming assets compared to the linked quarter.
A specific reserve was established for this CRE credit, contributing to an increase in the allowance for credit losses (ACL) to $65.8 million, or 1.50% of total loans, up from 1.25% in Q1 2025. Credit loss expense for the quarter was $11.9 million, primarily reflecting this specific reserve.
MidWestOne also announced its intent to redeem all $65.0 million aggregate principal of its 5.75% fixed-to-floating rate subordinated notes due 2030, expecting to use cash and proceeds from a new $50.0 million senior term note. Additionally, the company repurchased 63,402 shares of its common stock for $1.8 million during the quarter, with $13.2 million remaining under the current repurchase program. The Board declared a cash dividend of $0.2425 per common share, payable on September 16, 2025.
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