The company’s consolidated CET1 ratio was somewhat muted due to higher credit loss expense recognized during the second quarter.

Asset quality metrics generally improved outside of a single large loan issue, with a criticized asset ratio decreasing by 32 basis points and net charge-offs of only 2 basis points.

Significant new commercial banker hires in the Twin Cities and Denver, as well as wealth management hires, are expected to positively impact organizational growth.

The company’s relationship-focused fee income businesses performed well, with wealth management revenues up 5% and SBA originations and gain on sale exceeding expectations.

MidWestOne Financial Group Inc ( NASDAQ:MOFG ) achieved solid loan growth of 7.4% in the second quarter, contributing to a 13-basis-point expansion in their tax equivalent net interest margin.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .

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Q & A Highlights

Q: Could you unpack this quarter’s C&I growth, whether it was new credits or line draws, any noteworthy industries? And then what regions were really contributing to that? A: Len Devaisher, President and COO: We saw contributions across our footprint, including Denver, Twin Cities, and Iowa metro markets. Industries like distribution and manufacturing, both B2B and B2C segments, were significant. The growth was a mix of existing and new nameplates. CRE production was softer, with some multifamily and hotel loans paying off and moving to the secondary market.

Q: What are your updated thoughts on the net interest margin for the back half of the year? A: Barry Ray, CFO: We were pleased with the 13 basis points expansion in the second quarter. We expect continued opportunities for margin expansion driven by new loan originations at higher coupons and back-book repricing, primarily on the asset side, with some benefit from lower-cost time deposits.

Q: The market was surprised by the $24 million loan issue. Could you explain what happened and discuss any other larger credits within CRE? A: Gary Sims, Chief Credit Officer: The loan is a non-owner-occupied office in suburban Minneapolis, originated in 2022. It was cash flowing but moved to non-accrual due to non-payment. We’ve initiated legal actions to gain control. The next largest asset is a $12 million downtown Minneapolis office, which is performing well.

Q: Can you discuss the impact of recent hires on the franchise’s long-term growth outlook? A: Len Devaisher, President and COO: The hires are seasoned bankers with strong relationships, allowing them to start producing immediately. They are in commercial and wealth segments, which have longer sales cycles, so the impact will be more significant in 2026 than in 2025.

Q: What is the outlook for credit provisioning going forward? A: Barry Ray, CFO: We expect provision expenses to normalize in the back half of the year. The allowance coverage ratio should return to historical levels as we resolve the large CRE credit issue.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.