MidWest One Financial (NASDAQ:MOFG) maintained its Neutral rating and a price target of $30.00, as Piper Sandler acknowledged the bank's recent announcement of a significant common stock offering and a potential balance sheet restructuring.
The financial institution unveiled plans for a $94 million net common stock offering, which could increase to $108 million if the additional 15% option is exercised. This offering is expected to be priced at $25.00 per share, a 10% discount to Thursday's closing price of $27.82.
MidWest One also disclosed that it is considering a balance sheet restructuring that would involve selling approximately $1.05 billion in securities, which constitutes about 58% of its total securities, at a yield of approximately 1.73%.
This sale would result in a pre-tax loss of around $160 million, equating to a 13.5% loss. Additionally, the bank plans to reduce its borrowings by $418 million and reinvest roughly $616 million into securities with an estimated yield of 4.54%.
The anticipated restructuring actions are projected to dilute the tangible book value (TBV) by 27%-30%, bringing it down to approximately $20-$21. However, these changes are expected to increase the annualized net interest income (NII) by $25.6 million, or 18% of the last twelve months' NII.
The bank also expects that the earnings per share (EPS) accretion for 2025 will likely exceed 25%, with the remaining excess liquidity potentially being reinvested to support MidWest One's robust loan growth prospects.
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