Positive earnings estimate revisions on the back of strong
second quarter results - including a 17.1% year-over-year earnings
growth - have helped
MidWest One Financial Group, Inc.
) achieve a Zacks #1 Rank (Strong Buy) on September 26. To date,
this retail banking service provider has increased dividend twice
in the current year.
With a solid year-to-date return of 50.8% and a history of paying
quarterly dividends throughout the financial crisis, this stock
offers an attractive investment opportunity.
The Rank Driver
Better-than-expected second quarter earnings, decent loan growth
and fundamental strength - including sturdy credit quality and
dividend increases - are the primary rank drivers for this stock.
MidWest One Financial reported its second quarter results on July
26 with earnings per share of 41 cents, beating the year-ago
earnings of 35 cents by 17.1%, though it lagged the Zacks Consensus
Estimate by a penny. Results for the reported quarter were
primarily aided by higher non-interest income, elevated net
interest income and reduced provision for loan losses.
Net interest income augmented 8.2% to $13.2 million from $12.2
million in the year-ago quarter. The rise was primarily due to
lower interest expenses. Net interest margin expanded 12 basis
points to 3.45%. The upsurge was mainly attributed to significant
decrease in average rate paid on interest-bearing liabilities.
Non-interest income more than doubled to $8.2 million from $3.3
million recorded in the prior-year quarter. Provision for loan
losses skidded 33.3% from the year-ago quarter to $0.6 million.
However, on the downside, non-interest expense escalated 61.2% year
over year to $16.6 million. Elevated salaries and benefits expense
led to the rise in non-interest expenses.
Credit quality continues to exhibit improvement. Nonperforming
loans were $12.2 million, sliding 32.6% from $18.1 million as of
June 30, 2011. Net charge-offs for the quarter were $1.1 million
compared with $1.4 million in the year-ago quarter.
As of June 30, 2012, MidWest One Financial's tangible common equity
to tangible assets was 9.2% and Tier 1 capital to average assets
was 9.6%. Book value per share came in at $19.67 versus $19.54 in
the year-ago quarter.
In July 2012, MidWest One Financial announced increased third
quarter cash dividend of 9.5 cents per share, indicating a 12%
increase from the prior dividend of 8.5 cents. The dividend was
paid on September 15, 2012 to shareholders of record at the close
of business on September 1, 2012. The current dividend rate implies
an annual dividend yield of 1.7%.
Earnings Estimate Revisions
The Zacks Consensus Estimate for 2012 increased 3.7% to $1.95 per
share over the last 60 days. The current estimate implies a
year-over-year growth of 32.7%. For 2013, over the same time frame,
the Zacks Consensus Estimate surged 4.6% to $2.05 per share,
indicating a year-over-year growth of 5.3%.
MidWest One Financial currently trades at a forward P/E of 11.4x, a
3.4% discount to the peer group average of 11.8x. On a
price-to-book basis, the shares are trading at 1.1x, in line with
the peer group average. Given the company's strong fundamentals,
the valuation looks attractive.
MidWest One Financial has a trailing 12-month ROE of 9.5%, compared
with the peer group average of 9.3%.
About the Company
Headquartered in Iowa City, Iowa, MidWest One Financial is a bank
holding company. It operates through 25 traditional branches, a
specialized home loan center in central and east-central Iowa, and
46 ATMs through its subsidiary - MidWestOne Bank, which offers an
array of retail banking services. The company has a market
capitalization of roughly $186.6 million.
1st Enterprise Bank
) is also a Zacks #1 Rank bank stock.
(FENB): ETF Research Reports
MIDWESTONE FINL (MOFG): Free Stock Analysis
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