Allowance for credit losses ratio increased to 1.50% due to a single $24 million CRE office loan moving to nonaccrual, significantly increasing quarterly credit loss expense.
Loan growth was solid at 7.4%, with commercial loan production of $215 million, the highest in the last 6 quarters.
MidWestOne reported net income of $10 million or $0.48 per diluted common share for Q2 2025.
Net interest income increased by $2.5 million to $50 million compared to the linked quarter, driven by higher earning asset volumes and yields and lower funding costs.
Noninterest income was $10.2 million, slightly up from $10.1 million in the linked quarter, driven by wealth management, card revenue, mortgage origination fees, and SBA gain on sale revenue.
Outside the single loan, asset quality improved with a 32 basis point decrease in criticized asset ratio and net charge-offs of only 2 basis points.
Tax equivalent net interest margin and core net interest margin both expanded 13 basis points to 3.57% and 3.49%, respectively.
Total noninterest expense was $35.8 million, a decrease of $0.5 million from the linked quarter, helped by $1.1 million in tax credit funds and a $200,000 decrease in core data processing expense.
Adjusted EBITDA for Q2 was $1.5 million, slightly higher than $1.4 million in Q2 2024, despite near-term profitability pressures.
Net loss for Q2 was $11 million or $0.28 per share, compared to a net loss of $5.5 million or $0.14 per share in the prior year, impacted by a $7.3 million tax expense due to a change in tax methodology.
Operating expenses increased to $181 million in Q2 from $166 million last year, driven by higher cost of services and one-time reorganization expenses.
The company remains well-capitalized with no debt and $333 million in cash and equivalents, returning $190 million to shareholders over the past three years.
Total revenue for Q2 2025 was $172 million, up 8.8% year-over-year, driven by 4% growth in brokerage revenue and a 44% increase in financing revenue.
Year-to-date revenue was $317 million, up 10.4% from $287 million last year, with brokerage commissions accounting for 84% of revenue.
Strategic Focus on Balance Sheet Remixing and Loan Composition Shift
The company is actively shifting its asset base from lower-yielding residential mortgages to higher-yielding commercial and C&I loans, with over $700 million in C&I growth in H1 2025.
This mix shift is driving record net interest income of $300 million in Q2, the strongest in company history.
The ongoing asset remixing is expected to support profitability and margin expansion, with net interest margin climbing above 3%.
Impact of Rising Interest Rates on Mortgage Portfolio and Earnings
Management highlighted that higher interest rates have positively influenced investment income and mortgage persistency, contributing to strong earnings despite a slight decline in net income from $204 million to $195 million year-over-year.
The company benefits from a high-quality insured portfolio with embedded equity, which reduces default-to-claim transition probability, providing a buffer against potential credit deterioration.
The second quarter saw a 3% increase in U.S. mortgage insurance in force to $247 billion, with a stable weighted average FICO score of 746, indicating maintained credit quality amid rising rates.
Persistency remained high at 86%, supported by nearly half of the portfolio having a note rate of 5% or lower, which is expected to sustain elevated levels in the near term.
Management emphasized that the macroeconomic environment, including interest rates, is favorable for the company's buy, manage, and distribute operating model, enabling high-quality earnings.
Asia segment earnings were $350 million, down 22%, driven by less favorable investment and underwriting margins despite strong sales growth.
Corporate and Other segment reported an adjusted loss of $233 million, slightly worse than prior year.
EMEA segment earnings were $100 million, up 30%, reflecting strong volume and sales growth.
Group Benefits adjusted earnings were $400 million, down 25% from the prior year, impacted by less favorable life and non-medical health underwriting.
Latin America posted $233 million in adjusted earnings, up 3% and 15% on a constant currency basis, driven by volume growth and favorable Chilean encaje returns.
MetLife Holdings earnings were $144 million, down 6%, reflecting lower variable investment income and runoff of the business.
MetLife reported adjusted earnings of $1.4 billion or $2.02 per share for Q2 2025, down 16% year-over-year primarily due to less favorable underwriting and lower investment margins.
Retirement and Income Solutions (RIS) segment earnings were $368 million, down 10% due to lower recurring interest margins.
Dafinchi