Table of Contents

Page No.

PART I

Item 1.

Financial Statements (unaudited)

~~MIDWESTONE~~ ~~FINANCIAL GROUP, INC.~~

~~Form 10-Q Quarterly Report~~

~~Table of Contents~~

Table of Contents

PART I – FINANCIAL INFORMATION

Glossary of Acronyms, Abbreviations, and Terms

As used in this report, references to "MidWestOne", "we", "our", "us", the "Company", and similar terms refer to the consolidated entity consisting of MidWestOne Financial Group, Inc. and its wholly-owned subsidiaries. MidWestOne Bank or the "Bank" refers to MidWestOne's bank subsidiary, MidWestOne Bank.

The acronyms, abbreviations, and terms listed below are used in various sections of this Form 10-Q, including "Item 1. Financial Statements" and "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations."


ACL	Allowance for Credit Losses	FHLB	Federal Home Loan Bank
AFS	Available for Sale	FHLBC	Federal Home Loan Bank of Chicago
AOCI	Accumulated Other Comprehensive Income	FHLBDM	Federal Home Loan Bank of Des Moines
ASC	Accounting Standards Codification	FHLMC	Federal Home Loan Mortgage Corporation
ASU	Accounting Standards Update	FNBF	First National Bank in Fairfield
ATM	Automated Teller Machine	FNBM	First National Bank of Muscatine
Basel III Rules	A comprehensive capital framework and rules for U.S. banking organizations approved by the FRB and the FDIC in 2013	FNMA	Federal National Mortgage Association
BHCA	Bank Holding Company Act of 1956, as amended	FRB	Board of Governors of the Federal Reserve System
BOLI	Bank Owned Life Insurance	GAAP	U.S. Generally Accepted Accounting Principles
CAA	Consolidated Appropriations Act, 2021	GLBA	Gramm-Leach-Bliley Act of 1999
CARES Act	Coronavirus Aid, Relief and Economic Security Act	GNMA	Government National Mortgage Association
CDARS	Certificate of Deposit Account Registry Service	ICS	Insured Cash Sweep
CECL	Current Expected Credit Loss	IOFB	Iowa First Bancshares Corp.
CMO	Collateralized Mortgage Obligations	LIBOR	The London Inter-bank Offered Rate
COVID-19	Coronavirus Disease 2019	MBS	Mortgage-Backed Securities
CRA	Community Reinvestment Act	PPP	Paycheck Protection Program
CRE	Commercial Real Estate	ROU	Right-of-Use
DCF	Discounted Cash Flows	RPA	Credit Risk Participation Agreement
Dodd-Frank Act	Dodd-Frank Wall Street Reform and Consumer Protection Act	RRE	Residential Real Estate
ECL	Expected Credit Losses	SBA	U.S. Small Business Administration
EVE	Economic Value of Equity	SEC	U.S. Securities and Exchange Commission
FASB	Financial Accounting Standards Board	SOFR	Secured Overnight Financing Rate
FDIC	Federal Deposit Insurance Corporation	TDR	Troubled Debt Restructuring

Table of Contents

Item 1. Financial ~~Statements.~~Statements (unaudited).

MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30, 2017 December 31, 2016
(dollars in thousands, except per share amounts) (unaudited)
ASSETS
Cash and due from banks $ 39,113
$ 41,464
Interest-bearing deposits in banks 2,988
1,764
Cash and cash equivalents 42,101
43,228
Investment securities:
Available for sale 427,241
477,518
Held to maturity (fair value of $183,946 as of September 30, 2017 and $164,792 as of December 31, 2016) 183,304
168,392
Loans held for sale 612
4,241
Loans 2,263,811
2,165,143
Allowance for loan losses (26,510 ) (21,850 )
Net loans 2,237,301
2,143,293
Premises and equipment, net 75,036
75,043
Accrued interest receivable 13,871
13,871
Goodwill 64,654
64,654
Other intangible assets, net 12,759
15,171
Bank-owned life insurance 59,432
47,231
Other real estate owned 1,343
2,097
Deferred income taxes 6,008
6,523
Other assets 20,537
18,313
Total assets $ 3,144,199
$ 3,079,575
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest-bearing demand $ 477,376
$ 494,586
Interest-bearing checking 1,137,592
1,136,282
Savings 203,506
197,698
Certificates of deposit under $100,000 324,024
326,832
Certificates of deposit $100,000 and over 347,917
325,050
Total deposits 2,490,415
2,480,448
Federal funds purchased 16,708
35,684
Securities sold under agreements to repurchase 87,964
82,187
Federal Home Loan Bank borrowings 145,000
115,000
Junior subordinated notes issued to capital trusts 23,768
23,692
Long-term debt 13,750
17,500
Deferred compensation liability 5,158
5,180
Accrued interest payable 1,449
1,472
Other liabilities 13,424
12,956
Total liabilities 2,797,636
2,774,119
Shareholders' equity:
Preferred stock, no par value; authorized 500,000 shares; no shares issued and outstanding at September 30, 2017 and December 31, 2016 $ —
$ —
Common stock, $1.00 par value; authorized 30,000,000 shares at September 30, 2017 and 15,000,000 shares at December 31, 2016; issued 12,463,481 shares at September 30, 2017 and 11,713,481 shares at December 31, 2016; outstanding 12,218,528 shares at September 30, 2017 and 11,436,360 shares at December 31, 2016 12,463
11,713
Additional paid-in capital 187,296
163,667
Treasury stock at cost, 244,953 shares as of September 30, 2017 and 277,121 shares as of December 31, 2016 (5,141 ) (5,766 )
Retained earnings 151,280
136,975
Accumulated other comprehensive income (loss) 665
(1,133 )
Total shareholders' equity 346,563
305,456
Total liabilities and shareholders' equity $ 3,144,199
$ 3,079,575


	March 31, 2022		December 31, 2021
(unaudited) (dollars in thousands, except per share amounts)
ASSETS
Cash and due from banks	$	47,677	$	42,949
Interest earning deposits in banks	12,152		160,881

Total cash and cash equivalents	59,829		203,830
Debt securities available for sale at fair value	1,145,638		2,288,110
Held to maturity securities at amortized cost	1,204,212		—
Total securities	2,349,850		2,288,110
Loans held for sale	6,466		12,917
Gross loans held for investment	3,256,294		3,252,194
Unearned income, net	(6,259)		(7,182)
Loans held for investment, net of unearned income	3,250,035		3,245,012
Allowance for credit losses	(46,200)		(48,700)
Total loans held for investment, net	3,203,835		3,196,312
Premises and equipment, net	82,603		83,492
Goodwill	62,477		62,477
Other intangible assets, net	18,658		19,885
Foreclosed assets, net	273		357
Other assets	176,223		157,748
Total assets	$	5,960,214	$	6,025,128

LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest bearing deposits	$	1,002,415	$	1,005,369
Interest bearing deposits	4,075,310		4,109,150
Total deposits	5,077,725		5,114,519
Short-term borrowings	181,193		181,368
Long-term debt	139,898		154,879
Other liabilities	56,941		46,887
Total liabilities	5,455,757		5,497,653

Shareholders' equity
Preferred stock, no par value; authorized 500,000 shares; no shares issued and outstanding	—		—
Common stock, $1.00 par value; authorized 30,000,000 shares; issued shares of 16,581,017 and 16,581,017; outstanding shares of 15,690,125 and 15,671,147	16,581		16,581
Additional paid-in capital	300,505		300,940
Retained earnings	253,500		243,365
Treasury stock at cost, 890,892 and 909,870 shares	(24,113)		(24,546)
Accumulated other comprehensive loss	(42,016)		(8,865)
Total shareholders' equity	504,457		527,475
Total liabilities and shareholders' equity	$	5,960,214	$	6,025,128

See accompanying notes to consolidated financial statements.

Table of Contents

MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~INCOME


	Three Months Ended
	March 31,
(unaudited) (dollars in thousands, except per share amounts)	2022		2021
Interest income
Loans, including fees	$	31,318	$	36,542
Taxable investment securities	8,123		5,093
Tax-exempt investment securities	2,383		2,555
Other	28		14
Total interest income	41,852		44,204
Interest expense
Deposits	2,910		3,608
Short-term borrowings	119		128
Long-term debt	1,487		1,851
Total interest expense	4,516		5,587
Net interest income	37,336		38,617
Credit loss (benefit) expense	—		(4,734)
Net interest income after credit loss (benefit) expense	37,336		43,351
Noninterest income
Investment services and trust activities	3,011		2,836
Service charges and fees	1,657		1,487
Card revenue	1,650		1,536
Loan revenue	4,293		4,730
Bank-owned life insurance	531		542


Investment securities gains, net	40		27
Other	462		666
Total noninterest income	11,644		11,824
Noninterest expense
Compensation and employee benefits	18,664		16,917
Occupancy expense of premises, net	2,779		2,318
Equipment	1,901		1,793
Legal and professional	2,353		783
Data processing	1,231		1,252
Marketing	1,029		1,006
Amortization of intangibles	1,227		1,507
FDIC insurance	420		512
Communications	272		409
Foreclosed assets, net	(112)		47

Other	1,879		1,156
Total noninterest expense	31,643		27,700
Income before income tax expense	17,337		27,475
Income tax expense	3,442		5,827
Net income	$	13,895	$	21,648

Per common share information
Earnings - basic	$	0.89	$	1.35
Earnings - diluted	$	0.88	$	1.35
Dividends paid	$	0.2375	$	0.2250

(unaudited) (dollars in thousands, except per share amounts) Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Interest income:
Interest and fees on loans $ 26,206
$ 24,343
$ 76,135
$ 74,094
Interest on bank deposits 19
63
50
141
Interest on federal funds sold —
3
1
4
Interest on investment securities:
Taxable securities 2,589
2,088
7,897
5,924
Tax-exempt securities 1,547
1,394
4,699
4,251
Total interest income 30,361
27,891
88,782
84,414
Interest expense:
Interest on deposits:
Interest-bearing checking 913
810
2,623
2,346
Savings 53
50
155
216
Certificates of deposit under $100,000 893
801
2,638
2,089
Certificates of deposit $100,000 and over 1,041
813
2,953
2,171
Total interest expense on deposits 2,900
2,474
8,369
6,822
Interest on federal funds purchased 81
5
152
30
Interest on securities sold under agreements to repurchase 53
36
125
121
Interest on Federal Home Loan Bank borrowings 474
469
1,321
1,387
Interest on other borrowings 3
4
9
16
Interest on junior subordinated notes issued to capital trusts 243
215
704
608
Interest on long-term debt 115
107
338
354
Total interest expense 3,869
3,310
11,018
9,338
Net interest income 26,492
24,581
77,764
75,076
Provision for loan losses 4,384
1,005
6,665
3,241
Net interest income after provision for loan losses 22,108
23,576
71,099
71,835
Noninterest income:
Trust, investment, and insurance fees 1,454
1,306
4,594
4,244
Service charges and fees on deposit accounts 1,295
1,346
3,835
3,887
Loan origination and servicing fees 1,012
1,332
2,532
2,806
Other service charges and fees 1,625
1,307
4,580
4,115
Bank-owned life insurance income 344
324
990
1,040
Gain on sale or call of available for sale securities 176
—
196
467
Gain on sale of held to maturity securities —
—
43
—
Gain (loss) on sale of premises and equipment (4 ) (211 ) 2
(462 )
Other gain 14
310
64
1,617
Total noninterest income 5,916
5,714
16,836
17,714
Noninterest expense:
Salaries and employee benefits 12,039
11,641
35,712
37,607
Net occupancy and equipment expense 2,986
3,293
9,323
9,870
Professional fees 933
1,014
2,991
3,181
Data processing expense 723
599
1,982
3,981
FDIC insurance expense 238
412
957
1,231
Amortization of intangible assets 759
970
2,412
3,046
Other operating expense 2,066
2,510
6,666
7,784
Total noninterest expense 19,744
20,439
60,043
66,700
Income before income tax expense 8,280
8,851
27,892
22,849
Income tax expense 1,938
2,629
7,603
6,328
Net income $ 6,342
$ 6,222
$ 20,289
$ 16,521
Share and per share information:
Ending number of shares outstanding 12,218,528
11,435,860
12,218,528
11,435,860
Average number of shares outstanding 12,218,528
11,435,860
11,977,579
11,428,063
Diluted average number of shares 12,238,991
11,461,108
11,999,608
11,451,958
Earnings per common share - basic $ 0.52
$ 0.54
$ 1.69
$ 1.45
Earnings per common share - diluted 0.52
0.54
1.69
1.44
Dividends paid per common share 0.17
0.16
0.50
0.48

See accompanying notes to consolidated financial statements.

Table of Contents

MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three Months Ended
	March 31,
(unaudited) (dollars in thousands)	2022		2021
Net income	$	13,895	$	21,648

Other comprehensive loss, net of tax:
Unrealized gain (loss) from available for sale debt securities:
Unrealized net holding loss on debt securities available for sale arising during the period	(46,221)		(27,784)
Reclassification adjustment for gains included in net income	(40)		(27)
Income tax benefit	12,074		7,259
Unrealized net loss on available for sale debt securities, net of reclassification adjustments	(34,187)		(20,552)
Reclassification of available for sale debt securities to held to maturity:
Amortization of the net unrealized loss from the reclassification of available for sale debt securities to held to maturity	1,402		—
Income tax expense	(366)		—
Amortization of net unrealized loss from the reclassification of available for sale debt securities to held to maturity, net	1,036		—





Other comprehensive loss, net of tax	(33,151)		(20,552)
Comprehensive (loss) income	$	(19,256)	$	1,096

(unaudited) (dollars in thousands) Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net income $ 6,342
$ 6,222
$ 20,289
$ 16,521

Other comprehensive income, available for sale securities:
Unrealized holding gains (losses) arising during period (1,158 ) (304 ) 3,154
3,565
Reclassification adjustment for gains included in net income (176 ) —
(196 ) (467 )
Income tax (expense) benefit 526
119
(1,160 ) (1,286 )
Other comprehensive income on available for sale securities (808 ) (185 ) 1,798
1,812
Other comprehensive income (loss), net of tax (808 ) (185 ) 1,798
1,812
Comprehensive income $ 5,534
$ 6,037
$ 22,087
$ 18,333

See accompanying notes to consolidated financial statements.

Table of Contents

MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY


Three Months Ended March 31,
	Common Stock
(unaudited) (dollars in thousands, except per share amounts)	Par Value		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Total
Balance at December 31, 2020	$	16,581	$	300,137	$	188,191	$	(14,251)	$	24,592	$	515,250
Net income	—		—		21,648		—		—		21,648
Other comprehensive loss	—		—		—		—		(20,552)		(20,552)
Release/lapse of restriction on RSUs (26,896 shares)	—		(774)		(11)		672		—		(113)
Repurchase of common stock (62,588 shares)	—		—		—		(1,699)		—		(1,699)
Share-based compensation	—		384		—		—		—		384
Dividends paid on common stock ($0.2250 per share)	—		—		(3,598)		—		—		(3,598)
Balance at March 31, 2021	$	16,581	$	299,747	$	206,230	$	(15,278)	$	4,040	$	511,320















Balance at December 31, 2021	$	16,581	$	300,940	$	243,365	$	(24,546)	$	(8,865)	$	527,475
Net income	—		—		13,895		—		—		13,895
Other comprehensive loss	—		—		—		—		(33,151)		(33,151)
Release/lapse of restriction on RSUs (30,478 shares, net)	—		(995)		(31)		789		—		(237)
Repurchase of common stock (11,500 shares)	—		—		—		(356)		—		(356)
Share-based compensation	—		560		—		—		—		560
Dividends paid on common stock ($0.2375 per share)	—		—		(3,729)		—		—		(3,729)
Balance at March 31, 2022	$	16,581	$	300,505	$	253,500	$	(24,113)	$	(42,016)	504,457

(unaudited)
(dollars in thousands, except per share amounts)

Preferred
Stock

Common
Stock

Additional
Paid-in
Capital

Treasury
Stock

Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)
Total
Balance at December 31, 2015 $ —

$ 11,713

$ 163,487

$ (6,331 )
$ 123,901

$ 3,408

$ 296,178
Net income —

—

—

—

16,521

—

16,521
Dividends paid on common stock ($0.48 per share) —
—
—
—
(5,487 ) —

(5,487 )
Stock options exercised (2,900 shares) —
—
(22 ) 60
—
—
38
Release/lapse of restriction on RSUs (25,633 shares) —
—
(520 ) 495
—
—

(25 )
Stock compensation —
—
547
—
—

547
Other comprehensive income, net of tax —
—
—
—
—
1,812
1,812
Balance at September 30, 2016 $ —
$ 11,713
$ 163,492
$ (5,776 ) $ 134,935
$ 5,220

$ 309,584
Balance at December 31, 2016 $ —
$ 11,713
$ 163,667
$ (5,766 ) $ 136,975
$ (1,133 ) $ 305,456
Net income —
—
—
—
20,289
—
20,289
Issuance of common stock (750,000 shares), net of expenses of $1,328,000 —
750
23,610
—
—
—
24,360
Dividends paid on common stock ($0.50 per share) —
—
—
—
(5,984 ) —
(5,984 )
Stock options exercised (8,250 shares) —
—
(81 ) 172
—
—
91
Release/lapse of restriction on RSUs (26,875 shares) —
—
(560 ) 453
—
—
(107 )
Stock compensation —
—
660
—
—
—
660
Other comprehensive income, net of tax —
—
—
—
—
1,798
1,798
Balance at September 30, 2017 $ —
$ 12,463
$ 187,296
$ (5,141 ) $ 151,280
$ 665
$ 346,563

Table of Contents

MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended March 31,
(unaudited) (dollars in thousands)	2022		2021
Cash flows from operating activities:
Net income	$	13,895	$	21,648
Adjustments to reconcile net income to net cash provided by operating activities:
Credit loss (benefit) expense	—		(4,734)

Depreciation, amortization, and accretion	2,469		(342)


Net change in premises and equipment due to writedown or sale	410		—
Share-based compensation	560		384
Net gain on sale or call of debt securities available for sale	(40)		(27)



Net change in foreclosed assets due to writedown or sale	(112)		(1)
Net gain on sale of loans held for sale	(817)		(3,089)
Origination of loans held for sale	(32,564)		(82,898)
Proceeds from sales of loans held for sale	43,232		87,610
Increase in cash surrender value of bank-owned life insurance	(531)		(541)
Decrease in deferred income taxes, net	1,441		810
Change in:
Other assets	(7,514)		4,871
Other liabilities	5,747		(8,666)
Net cash provided by operating activities	$	26,176	$	15,025
Cash flows from investing activities:



Proceeds from maturities and calls of debt securities available for sale	$	45,174	$	109,003
Purchases of debt securities available for sale	(198,857)		(369,754)

Proceeds from maturities and calls of debt securities held to maturity	49,839		—
Net (increase) decrease in loans held for investment	(9,239)		128,164
Purchases of premises and equipment	(938)		(349)
Proceeds from sale of foreclosed assets	196		1,010
Proceeds from sale of premises and equipment	8		—



Net cash used in investing activities	$	(113,817)	$	(131,926)
Cash flows from financing activities:
Net (decrease) increase in:
Deposits	$	(36,825)	$	247,469
Short-term borrowings	(175)		(55,004)


Payments of subordinated debt issuance costs	—		(9)
Payments on finance lease liability	(39)		(35)

Payments of Federal Home Loan Bank borrowings	(15,000)		(7,000)



Taxes paid relating to the release/lapse of restriction on RSUs	(236)		(113)
Dividends paid	(3,729)		(3,598)


Repurchase of common stock	(356)		(1,699)
Net cash used in (provided by) financing activities	$	(56,360)	$	180,011
Net (decrease) increase in cash and cash equivalents	$	(144,001)	$	63,110
Cash and cash equivalents:
Beginning of Period	203,830		82,659
Ending balance	$	59,829	$	145,769

Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	5,466	$	6,835

Supplemental schedule of non-cash investing and financing activities:
Transfer of loans to foreclosed assets, net	$	—	$	180
Transfer of loans held for investment to loans held for sale	3,400		—
Investment securities purchased but not settled	6,509		7,945
Transfer of premises and equipment to assets held for sale	628		—
Transfer of debt securities available for sale to debt securities held to maturity	1,253,179		—

See accompanying notes to consolidated financial statements.

~~MIDWESTONE~~ ~~FINANCIAL GROUP, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

(unaudited) (dollars in thousands) Nine Months Ended September 30,
2017 2016
Cash flows from operating activities:
Net income $ 20,289
$ 16,521
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 6,665
3,241
Depreciation of premises and equipment 3,088
3,436
Amortization of other intangibles 2,412
3,046
Amortization of premiums and discounts on investment securities, net 913
1,244
(Gain) loss on sale of premises and equipment (2 ) 462
Deferred income taxes (554 ) (1,663 )
Excess tax benefit from share-based award activity (91 ) (13 )
Stock-based compensation 660
547
Net gain on sale or call of available for sale securities (196 ) (467 )
Net gain on sale or call of held to maturity securities (43 ) —
Net gain on sale of other real estate owned (45 ) (750 )
Net gain on sale of loans held for sale (1,337 ) (2,160 )
Writedown of other real estate owned 23
546
Origination of loans held for sale (65,078 ) (89,005 )
Proceeds from sales of loans held for sale 70,044
91,610
Decrease in accrued interest receivable —
597
Increase in cash surrender value of bank-owned life insurance (990 ) (1,040 )
(Increase) decrease in other assets (2,224 ) 2,924
Increase (decrease) in deferred compensation liability (22 ) 77
Increase in accrued interest payable, accounts payable, accrued expenses, and other liabilities 445
2,960
Net cash provided by operating activities 33,957
32,113
Cash flows from investing activities:
Proceeds from sales of available for sale securities 22,546
23,384
Proceeds from maturities and calls of available for sale securities 53,171
68,180
Purchases of available for sale securities (23,045 ) (98,108 )
Proceeds from sales of held to maturity securities 1,153
—
Proceeds from maturities and calls of held to maturity securities 12,370
10,662
Purchase of held to maturity securities (28,546 ) (43,482 )
Net (increase) decrease in loans (100,880 ) 7,054
Purchases of premises and equipment (3,035 ) (4,594 )
Proceeds from sale of other real estate owned 983
7,369
Proceeds from sale of premises and equipment 32
1,851
Proceeds of principal and earnings from bank-owned life insurance —
430
Purchases of bank owned life insurance (11,211 ) —
Net cash used in investing activities (76,462 ) (27,254 )
Cash flows from financing activities:
Net increase (decrease) in deposits 9,967
(17,589 )
Increase (decrease) in federal funds purchased (18,976 ) 17,809
Increase (decrease) in securities sold under agreements to repurchase 5,777
(3,994 )
Proceeds from Federal Home Loan Bank borrowings 145,000
30,000
Repayment of Federal Home Loan Bank borrowings (115,000 ) (17,000 )
Proceeds from stock options exercised 1
38
Excess tax benefit from share-based award activity 91
13
Taxes paid relating to net share settlement of equity awards (108 ) (38 )
Payments on long-term debt (3,750 ) (3,750 )
Dividends paid (5,984 ) (5,487 )
Proceeds from issuance of common stock 25,688
—
Payment of stock issuance costs (1,328 ) —
Net cash provided by (used in) financing activities 41,378
2
Net increase (decrease) in cash and cash equivalents (1,127 ) 4,861
Cash and cash equivalents at beginning of period 43,228
47,097
Cash and cash equivalents at end of period $ 42,101
$ 51,958

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(unaudited) (dollars in thousands) Nine Months Ended September 30,
2017 2016
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 11,041
$ 9,293
Cash paid during the period for income taxes $ 8,460
$ 5,965
Supplemental schedule of non-cash investing activities:
Transfer of loans to other real estate owned $ 207
$ 1,783

~~See accompanying notes to consolidated financial statements.~~

MidWestOne Financial Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

1. ~~Principles~~Nature of ~~Consolidation~~Business and ~~Presentation~~ Significant Accounting Policies

Nature of Business

MidWestOne Financial Group, Inc. (the ~~“Company,” which is also referred to herein as “we,” “our” or “us”~~"Company") is, an Iowa corporation ~~incorporated~~formed in 1983, is a bank holding company under the ~~Bank Holding Company Act of 1956, as amended,~~BHCA and a financial holding company under the ~~Gramm-Leach-Bliley Act of 1999.~~GLBA. Our principal executive offices are located at 102 South Clinton Street, Iowa City, Iowa 52240.

The Company owns all of the outstanding common stock of MidWestOne Bank, an Iowa state non-member bank chartered in 1934 with its main office in Iowa City, ~~Iowa (the “Bank”), and all of the common stock of MidWestOne~~ ~~Insurance Services, Inc., Oskaloosa,~~ Iowa. We operate primarily through MidWestOne Bank, our bank ~~subsidiary, and MidWestOne~~ ~~Insurance Services, Inc., our wholly-owned subsidiary that operates an insurance agency business through six offices located in central and east-central Iowa.~~subsidiary.

On May 1, 2015, the Company completed its merger with Central Bancshares, Inc. (“Central”), pursuant to which Central was merged with and into the Company. In connection with the merger, Central Bank, a Minnesota-chartered commercial bank and wholly-owned subsidiaryBasis of ~~Central, became a wholly-owned subsidiary of the Company. On April 1, 2016, Central Bank merged with and into MidWestOne~~ ~~Bank.~~Presentation

The accompanying ~~unaudited~~interim condensed consolidated financial statements ~~have been~~are prepared in accordance with GAAP for interim financial information and pursuant to the ~~instructions to~~requirements for reporting on Form 10-Q and ~~therefore, do not include all~~Article 10 of Regulation S-X of the ~~information and notes necessary for complete~~Securities Exchange Act of 1934. Accordingly, certain disclosures accompanying annual consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”). The information in this Quarterly Report on Form 10-Q is written with the presumption that the users of the interim financial statements have read or have access to the most recent Annual Report on Form 10-K of the Company, which contains the latest audited financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations as of ~~December 31, 2016~~ ~~and for the year then ended. Management believes that the disclosures in this Form 10-Q~~ are ~~adequate to make the information presented not misleading.~~omitted. In the opinion of management, ~~the accompanying consolidated financial statements contain~~ all ~~adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company’s financial position as of~~ ~~September 30, 2017, and the results of operations and cash flows for the~~ ~~three and nine months~~ ~~ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016. All~~ significant intercompany accounts and transactions have been eliminated and adjustments, consisting solely of normal recurring accruals and considered necessary for the fair presentation of financial statements for the interim periods, have been included. The current period's results of operations are not necessarily indicative of the results that ultimately may be achieved for the year. The interim condensed consolidated financial statements and notes thereto should be read in ~~consolidation.~~conjunction with the audited consolidated financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2021, filed with the SEC on March 10, 2022.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect: (1) the reported amounts of assets and liabilities, (2) the disclosure of contingent assets and liabilities at the date of the financial statements, and (3) the reported amounts of revenues and expenses during the reporting period. These estimates are based on information available to management at the time the estimates are made. Actual results could differ from those estimates. The results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 may not be indicative of results for the year ending December 31, ~~2017,~~2022, or for any other period.

~~The Company adopted ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting~~," on January 1, 2017. The Company elected to account for forfeitures when they occur and recognize them in compensation cost at that time. There was no effect due to this accounting policy election on the Company’s consolidated financial statements.

~~The Company adopted ASU 2017-08, “Premium Amortization on Purchased Callable Debt Securities~~” during the second quarter of 2017. Since the Company was already amortizing premiums on callable investment securities between the date of purchase and the first call date, there was no cumulative effect adjustment necessary to the Company’s consolidated financial statements.

~~The Company adopted ASU 2017-12 “Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities” in the third quarter of 2017. Since the Company currently has no hedging arrangements, there was no cumulative effect adjustment necessary to the Company’s consolidated financial statements.~~

All significant accounting policies followed in the preparation of the quarterly financial statements are disclosed in the Annual Report on Form 10-K for the year ended December 31, ~~2016~~.2021, filed with the SEC on March 10, 2022, except for the policy related to held to maturity debt securities.

InHeld to Maturity Debt Securities - Certain debt securities that the ~~consolidated statements of cash flows, cash~~Company has the positive intent and ~~cash equivalents include cash~~ability to hold to maturity are classified as held to maturity and ~~due from banks, interest-bearing deposits in banks, and federal funds sold.~~recorded at amortized cost.

A debt security is placed on nonaccrual status at the time any principal or interest payments become 90 days delinquent. Interest accrued but not received for a security placed on nonaccrual is reversed against interest income.

~~Certain reclassifications have been made~~The Company evaluates debt securities held to ~~prior periods’ consolidated financial statements to present them~~maturity for current expected credit losses. Held-to-maturity securities are evaluated on a quarterly basis ~~comparable~~using historical probability of default and loss given default information specific to the investment category. If this evaluation determines that credit losses exist, an allowance for credit loss is recorded and included in earnings as a component of credit loss expense. The Company's mortgage-backed securities and collateralized mortgage obligations are issued by U.S. government agencies and U.S. government-sponsored enterprises and are implicitly guaranteed by the U.S. government, and as such are excluded from the credit loss evaluation.

Accrued interest receivable on held to maturity debt securities is recorded within 'Other Assets,' and is excluded from the estimate of credit losses.

Segment Reporting

The Company’s activities are considered to be 1 reportable segment for financial reporting purposes. The Company is engaged in the business of commercial and retail banking and trust and investment management services with operations throughout central and eastern Iowa, the ~~current period’s~~Minneapolis/St. Paul metropolitan area of Minnesota, southwestern Wisconsin, Naples

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and Fort Myers, Florida, and Denver, Colorado. Substantially all income is derived from a diverse base of commercial, mortgage and retail lending activities, and investments.

Effect of New Financial Accounting Standards

Accounting Guidance Pending Adoption at March 31, 2022

On March 12, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (ASC 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASC 848 contains optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. Certain optional expedients and exceptions for contract modifications and hedging relationships were amended in ASU 2021-01, Reference Rate Reform (Topic 848): Scope Refinement, issued on January 7, 2021.Entities may apply the provision as of the beginning of the reporting period when the election is made and are available until December 31, 2022. The adoption of ASU ASU 2020-04 is not expected to have a material impact on the Company’s consolidated financial statements.

On March 31, 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. For creditors that have adoptedthe CECL accounting guidance within ASU 2016-13, the amendments eliminate the accounting guidance for TDRs within ASC 310-40, while also enhancing the disclosure requirements for certain loan refinancings and restructurings when a borrower is experiencing financial difficulty. In addition, public business entities must also disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of ASC 326-20. The amendments are effective for fiscal years beginning after December 15, 2022 and should be applied prospectively, with an option to apply a modified retrospective transition approach for the recognition and measurement of TDRs. The Company is currently evaluating the impact of ASU 2022-02.

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2. ~~Shareholders’ Equity~~Debt Securities

~~Preferred Stock:~~ ~~The number of authorized shares of preferred stock for~~On January 1, 2022, the Company is ~~500,000. As of~~ ~~September 30, 2017~~, ~~none~~ ~~were issued or outstanding.~~

~~Common Stock: As of~~ ~~September 30, 2017, the number of authorized shares of common stock for the Company was~~ ~~30,000,000~~. At the Company’s 2017 annual meeting of shareholders, the Company’s shareholders approved an increase in the number of authorized shares of common stock to 30,000,000, which became effective on April 21, 2017. As of ~~September 30, 2017, 12,218,528 shares were outstanding.~~

On March 17, 2017, the Company entered into an underwriting agreement to offer and sell, through an underwriter, up to 750,000 newly issued shares of the Company’s common stock, $1.00 par value per share,transferred, at a public purchase price of $34.25 per share. This included 250,000 shares of the Company’s common stock granted as a 30-day option to purchase to cover over-allotments, if any. On April 6, 2017, the underwriter purchased the full amount of its over-allotment option of 250,000 shares.

On July 21, 2016, the board of directors of the Company approved a share repurchase program, allowing for the repurchase of up to $5.0 million of stock through December 31, 2018. During the third quarter of 2017 the Company repurchased no common stock. Of the $5.0 million of stock authorized under the repurchase plan, $5.0 million remained available for possible future repurchases as of September 30, 2017.

~~3. Earnings per Share~~

Basic per-share amounts are computed by dividing net income (the numerator) by the weighted-average number of common shares outstanding (the denominator). Diluted per-share amounts assume issuance of all common stock issuable upon conversion or exercise of other securities, unless the effect is to reduce the loss or increase the income per common share from continuing operations.

~~The following table presents the computation of earnings per common share for the respective periods:~~

Three Months Ended September 30, Nine Months Ended September 30,
(dollars in thousands, except per share amounts) 2017 2016 2017 2016
Basic earnings per common share computation
Numerator:
Net income $ 6,342
$ 6,222
$ 20,289
$ 16,521
Denominator:
Weighted average shares outstanding 12,218,528
11,435,860
11,977,579
11,428,063
Basic earnings per common share $ 0.52
$ 0.54
$ 1.69
$ 1.45

Diluted earnings per common share computation
Numerator:
Net income $ 6,342
$ 6,222
$ 20,289
$ 16,521
Denominator:
Weighted average shares outstanding, including all dilutive potential shares 12,238,991
11,461,108
11,999,608
11,451,958
Diluted earnings per common share $ 0.52
$ 0.54
$ 1.69
$ 1.44

~~4. Investment Securities~~

~~The amortized cost and~~ fair value, $1.25 billion of ~~investment~~mortgage-backed securities, collateralized mortgage obligations, and securities issued by state and political subdivisions from the available for sale classification to the held to maturity classification. The net unrealized after tax loss of $11.5 million associated with those re-classified securities remained in accumulated other comprehensive loss and will be amortized over the remaining life of the securities. No gains or losses were recognized in earnings at the time of the transfer.

The following tables summarize the amortized cost, gross unrealized gains and losses ~~are as follows:~~

As of September 30, 2017

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair Value
(in thousands)
U.S. Government agencies and corporations $ 5,714
$ 3
$ 3
$ 5,714
State and political subdivisions 145,843
3,798
29
149,612
Mortgage-backed securities 50,939
403
42
51,300
Collateralized mortgage obligations 169,662
109
3,339
166,432
Corporate debt securities 51,731
196
98
51,829
Total debt securities 423,889
4,509
3,511
424,887
Other equity securities 2,266
120
32
2,354
Total $ 426,155
$ 4,629
$ 3,543
$ 427,241

As of December 31, 2016

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair Value
(in thousands)
U.S. Government agencies and corporations $ 5,895
$ 10
$ —
$ 5,905
State and political subdivisions 162,145
3,545
418
165,272
Mortgage-backed securities 61,606
315
567
61,354
Collateralized mortgage obligations 175,506
148
4,387
171,267
Corporate debt securities 72,979
76
602
72,453
Total debt securities 478,131
4,094
5,974
476,251
Other equity securities 1,259
66
58
1,267
Total $ 479,390
$ 4,160
$ 6,032
$ 477,518

~~The amortized cost~~ and the resulting fair value of ~~investment~~debt securities for the periods indicated. There were no held to maturity ~~with gross unrealized gains and losses, are~~debt securities as ~~follows:~~of December 31, 2021.


	As of March 31, 2022
(in thousands)	Amortized Cost (1)		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Loss related to Debt Securities		Fair Value
Available for Sale

State and political subdivisions	$	294,697	$	1,019	$	6,728	$	—	$	288,988
Mortgage-backed securities	7,059		49		7		—		7,101
Collateralized mortgage obligations	180,229		66		8,798		—		171,497
Corporate debt securities	706,373		2,002		30,323		—		678,052
Total available for sale debt securities	$	1,188,358	$	3,136	$	45,856	$	—	$	1,145,638

Held to Maturity

State and political subdivisions	$	541,801	$	1	$	52,139	$	—	$	489,663
Mortgage-backed securities	88,281		—		5,901		—		82,380
Collateralized mortgage obligations	574,130		—		40,359		—		533,771

Total held to maturity debt securities	$	1,204,212	$	1	$	98,399	$	—	$	1,105,814
(1) Amortized cost for the held to maturity securities includes $0.3 million of unamortized gain in state and political subdivisions, $22 thousand of unamortized losses in mortgage-backed securities and $14.4 million of unamortized losses in collateralized mortgage obligations related to the re-classification of securities from from available for sale to held to maturity on January 1, 2022.

As of September 30, 2017

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair Value
(in thousands)
State and political subdivisions $ 123,753
$ 1,486
$ 715
$ 124,524
Mortgage-backed securities 2,093
7
5
2,095
Collateralized mortgage obligations 23,063
—
419
22,644
Corporate debt securities 34,395
638
350
34,683
Total $ 183,304
$ 2,131
$ 1,489
$ 183,946


	As of December 31, 2021
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Loss related to Debt Securities		Fair Value
Available for Sale
U.S. Government agencies and corporations	$	265	$	1	$	—	$	—	$	266
State and political subdivisions	760,894		10,484		5,636		—		765,742
Mortgage-backed securities	100,325		932		631		—		100,626
Collateralized mortgage obligations	785,945		1,274		18,320		—		768,899
Corporate debt securities	652,677		6,305		6,405		—		652,577
Total debt securities	$	2,300,106	$	18,996	$	30,992	$	—	$	2,288,110

As of December 31, 2016

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair Value
(in thousands)
State and political subdivisions $ 107,941
$ 156
$ 2,713
$ 105,384
Mortgage-backed securities 2,398
5
34
2,369
Collateralized mortgage obligations 26,036
—
598
25,438
Corporate debt securities 32,017
149
565
31,601
Total $ 168,392
$ 310
$ 3,910
$ 164,792

Investment securities with a ~~carrying~~fair value of ~~$190.4~~$519.1 million and ~~$212.1~~$582.2 million at ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016~~,2021, respectively, were pledged on public deposits, securities sold under agreements to repurchase and for other purposes, as required or permitted by law.

~~The summary of investment securities shows that some of the securities in the~~

Accrued interest receivable on available for sale debt securities and held to maturity ~~investment portfolios had unrealized losses, or were temporarily impaired, as~~debt securities is recorded within 'Other Assets,' and is excluded from the estimate of ~~September 30, 2017~~credit losses. At March 31, 2022 the accrued interest receivable on available for sale debt securities and held to maturity debt securities totaled $6.4 million and $3.8 million, respectively. At December 31, ~~2016. This temporary impairment represents~~2021 the ~~estimated amount~~accrued interest receivable on available for sale debt securities totaled $9.5 million. There was 0 accrued interest receivable on held to maturity debt security at December 31, 2021.

Table of ~~loss that would be realized if the securities were sold on the valuation date.~~ Contents

The following ~~tables present information pertaining to~~table presents debt securities ~~with gross~~AFS in an unrealized loss position for which an allowance for credit losses ~~as of~~ ~~September 30, 2017~~ ~~and~~ ~~December~~has not been recorded at March 31, ~~2016~~,2022, aggregated by investment category and length of time ~~that individual securities have been~~ in a continuous loss position:


		As of March 31, 2022
	Number of Securities	Less than 12 Months				12 Months or More				Total
Available for Sale		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
(in thousands, except number of securities)


State and political subdivisions	228	$	181,805	$	6,176	$	5,364	$	552	$	187,169	$	6,728
Mortgage-backed securities	4	4,531		7		48		—		4,579		7
Collateralized mortgage obligations	16	116,360		6,774		17,973		2,024		134,333		8,798
Corporate debt securities	99	419,928		22,041		84,621		8,282		504,549		30,323
Total	347	$	722,624	$	34,998	$	108,006	$	10,858	$	830,630	$	45,856

As of September 30, 2017

Number
of
Securities
Less than 12 Months 12 Months or More Total
Available for Sale
Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses
(in thousands, except number of securities)
U.S. Government agencies and corporations 1
$ 5,018
$ 3
$ —
$ —
$ 5,018
$ 3
State and political subdivisions 13
5,625
27
451
2
6,076
29
Mortgage-backed securities 10
10,271
40
40
2
10,311
42
Collateralized mortgage obligations 29
46,717
465
91,673
2,874
138,390
3,339
Corporate debt securities 4
10,910
11
7,014
87
17,924
98
Other equity securities 1
—
—
1,968
32
1,968
32
Total 58
$ 78,541
$ 546
$ 101,146
$ 2,997
$ 179,687
$ 3,543

As of December 31, 2016

Number
of
Securities
Less than 12 Months 12 Months or More Total

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses
(in thousands, except number of securities)
State and political subdivisions 63
$ 24,574
$ 389
$ 427
$ 29
$ 25,001
$ 418
Mortgage-backed securities 20
   40,752
   566
   23
   1
   40,775
   567
Collateralized mortgage obligations 29
140,698
3,544
16,776
843
157,474
4,387
Corporate debt securities 11
54,891
602
—
—
54,891
602
Other equity securities 1
—
—
942
58
942
58
Total 124
$ 260,915
$ 5,101
$ 18,168
$ 931
$ 279,083
$ 6,032

As of September 30, 2017

Number
of
Securities
Less than 12 Months 12 Months or More Total
Held to Maturity
Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses
(in thousands, except number of securities)
State and political subdivisions 95
$ 23,086
$ 230
$ 13,978
$ 485
$ 37,064
$ 715
Mortgage-backed securities 3
1,060
5
—
—
1,060
5
Collateralized mortgage obligations 7
16,735
267
5,883
152
22,618
419
Corporate debt securities 3
1,030
4
2,547
346
3,577
350
Total 108
$ 41,911
$ 506
$ 22,408
$ 983
$ 64,319
$ 1,489

As of December 31, 2016

Number
of
Securities
Less than 12 Months 12 Months or More Total

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses
(in thousands, except number of securities)
State and political subdivisions 180
$ 65,174
$ 2,713
$ —
$ —
$ 65,174
$ 2,713
Mortgage-backed securities 5
2,246
34
—
—
2,246
34
Collateralized mortgage obligations 7
18,964
369
6,435
229
25,399
598
Corporate debt securities 11
19,198
187
2,512
378
21,710
565
Total 203
$ 105,582
$ 3,303
$ 8,947
$ 607
$ 114,529
$ 3,910

~~The Company's assessment~~As of ~~other-than-temporary impairment ("OTTI") is based on its reasonable judgment~~March 31, 2022, 228 state and political subdivisions securities with total unrealized losses of $6.7 million were held by the ~~specific facts~~Company. Management evaluated these securities through a process that included consideration of credit agency ratings and ~~circumstances impacting each individual security at~~payment history. In addition, management may evaluate securities by considering the time such assessments are made. The Company reviews and considers factual information, including expected cash flows, the structure of the security, the creditworthiness of the issuer, the type of underlying assetsyield spread to treasury securities and the ~~current and anticipated market conditions.~~most recent financial information available. Based on this evaluation, management concluded that the decline in fair value was not attributable to credit losses.

~~At September 30, 2017 and December~~As of March 31, ~~2016, the Company’s~~2022, 4 mortgage-backed securities and 16 collateralized mortgage obligations portfolios consisted of securities predominantly backed by one- to four-family mortgage loans and underwritten to the standards of and guaranteed by the following government-sponsored agencies: the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, and the Government National Mortgage Association. The receipt of principal, at par, and interest on mortgage-backed securities is guaranteed by the respective government-sponsored agency guarantor, such that the Company believes that its mortgage-backed securities and collateralized mortgage obligations do not expose the Company to credit-related losses.

~~At September 30, 2017, approximately 57% of the municipal bonds~~with unrealized losses totaling $8.8 million were held by the ~~Company were Iowa-based,~~Company. Management evaluated the payment history of these securities. In addition, management considered the implied U.S. government guarantee of these agency securities and ~~approximately 22% were Minnesota-based. The Company does not intend to sell these municipal obligations, and it is more likely than not~~the level of credit enhancement for non-agency securities. Based on this evaluation, management concluded that the Company will not be required to sell them until the recovery of their cost. Due to the issuers’ continued satisfaction of their obligations under the securities in accordance with their contractual terms and the expectation that they will continue to do so, management’s intent and ability to hold these securities for a period of time sufficient to allow for any anticipated recoverydecline in fair value as well as the evaluation of the fundamentals of the issuers’ financial conditions and other objective evidence, the Company believed that the municipal obligations identified in the tables above were temporarily impaired as of September 30, 2017 and December 31, 2016.

At September 30, 2017 and December 31, 2016, all but one of the Company’s corporate bonds held an investment grade rating from Moody’s, S&P or Kroll, or carried a guarantee from an agency of the US government. We have evaluated financial statements of the company issuing the non-investment grade bond and found the company’s earnings and equity positionwas not attributable to be satisfactory and in line with industry norms. Therefore, we expect to receive all contractual payments. The internal evaluation of the non-investment grade bond along with the investment grade ratings on the remainder of the corporate portfolio lead us to conclude that all of the corporate bonds in our portfolio will continue to pay according to their contractual terms. Since the Company has the ability and intent to hold securities until price recovery, we believe that there is no other-than-temporary-impairment in the corporate bond portfolio.credit losses.

As of ~~September 30, 2017, the Company also owned $0.4 million of equity securities in banks and financial service-related companies, and $2.0 million of mutual funds invested in~~March 31, 2022, 99 corporate debt securities with total unrealized losses of $30.3 million were held by the Company. Management evaluated these securities by considering credit agency ratings and ~~other~~payment history. In addition, management may evaluate securities by considering the yield spread to treasury securities and the most recent financial information available. Based on this evaluation, management concluded that the decline in fair value was not attributable to credit losses.

The following table presents debt ~~instruments that will cause units~~securities AFS in an unrealized loss position for which an allowance for credit losses has not been recorded at December 31, 2021, aggregated by investment category and length of ~~the fund to be deemed to be qualified under the Community Reinvestment Act. Equity securities are considered to have OTTI whenever they have been~~time in a continuous loss ~~position, compared to current book value, for twelve consecutive months, and the~~position:


		As of December 31, 2021
Available for Sale	Number of Securities	Less than 12 Months				12 Months or More				Total
		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
(in thousands, except number of securities)


State and political subdivisions	136	$	311,960	$	5,216	$	15,343	$	420	$	327,303	$	5,636
Mortgage-backed securities	6	43,319		631		80		—		43,399		631
Collateralized mortgage obligations	44	605,729		15,693		61,984		2,627		667,713		18,320
Corporate debt securities	52	303,750		4,567		27,071		1,838		330,821		6,405
Total	238	$	1,264,758	$	26,107	$	104,478	$	4,885	$	1,369,236	$	30,992

The Company ~~does not expect them to recover to their original cost basis. For the nine months ended September 30, 2017 and the full year of 2016, no impairment charges were recorded, as the affected equity~~evaluates debt securities ~~were not deemed impaired due to stabilized market prices in relation to the Company’s original purchase price.~~

~~During the first quarter of 2017 as part of the Company’s annual review and analysis of municipal investments, $1.2 million of municipal bonds from a single issuer in the~~ held to maturity ~~portfolio, which did not carry a~~for current expected credit ~~rating from one of the major statistical rating agencies,~~losses. There were identified as having an elevated level of credit risk. While the instruments were currently making payments as agreed, certain financial trends were identified that provided material doubt as to the ability of the entity to continue to service theno debt ~~in the future. The investment~~ securities were classified as “watch,” and the Company’s asset and liability management committee were notified of the situation. In early March 2017 the Company learned of a potential buyer for the investments and a bid to purchase was received and accepted. Investment securities designated as held to maturity ~~may generally not be sold without calling into question~~classified as nonaccrual or past due as of March 31, 2022. Held-to-maturity securities are evaluated on a quarterly basis using historical probability of default and loss given default information specific to the ~~Company’s stated intention to hold other~~investment category. If this evaluation determines that credit losses exist, an allowance for credit loss is recorded and included in earnings as a component of credit loss expense. Based on this evaluation, management concluded that no allowance for credit loss for these securities was required.

Table of Contents

There were no sales of debt securities ~~to maturity in the future (“tainting”), unless certain conditions are met that provide~~

available for ~~an exception to accounting policy. One of these exceptions, as outlined under Accounting Standards Codification (“ASC”) 320-10-25-6(a), allows~~sale, and therefore no realized gains or losses on sales, for the sale of an investment that is classified as held to maturity due to significant deterioration of the issuer’s creditworthiness. Since the bonds had been internally classified as “watch” due to credit deterioration, the Company believes that the sale was in accordance with the allowable provisions of ASC 320-10-25-6(a),three months ended March 31, 2022 and ~~as such, does not “taint” the remainder of the held to maturity portfolio. A small gain was realized on the sale.~~2021.

It is reasonably possible that the fair values of the Company’s investment securities could decline in the future if interest rates increase or the overall economy or the financial conditions of the issuers deteriorate. As a result, there is a risk that OTTI may be recognized in the future, and any such amounts could be material to the Company’s consolidated statements of operations.

The contractual maturity distribution of investment debt securities at ~~September 30, 2017~~,March 31, 2022, is ~~summarized as follows:~~

Available For Sale Held to Maturity

Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
(in thousands)
Due in one year or less $ 19,882
$ 20,098
$ 1,181
$ 1,186
Due after one year through five years 109,135
110,492
18,911
19,128
Due after five years through ten years 69,074
71,267
84,641
86,961
Due after ten years 5,197
5,298
53,415
51,932
Debt securities without a single maturity date 220,601
217,732
25,156
24,739
Total $ 423,889
$ 424,887
$ 183,304
$ 183,946

~~Mortgage-backed~~shown below. Expected maturities of MBS and CMO may differ from contractual maturities because the mortgages underlying the securities ~~and collateralized mortgage obligations are collateralized by mortgage loans and guaranteed by U.S. government agencies. Our experience has indicated that principal payments will~~may be ~~collected sooner than scheduled because of prepayments.~~called or prepaid without any penalties. Therefore, these securities are not ~~scheduled~~included in the maturity categories ~~indicated above. Equity securities available for sale with an amortized cost of~~ ~~$2.3 million~~ ~~and a fair value of~~ ~~$2.4 million~~ ~~are also excluded from this table.~~in the following summary.

~~Proceeds from the sales of investment securities available for sale during the nine months ended September 30, 2017 and September 30, 2016 were $22.5 million and $23.4 million, respectively.~~


	Available for Sale				Held to Maturity
(in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	59,984	$	60,555	$	1,513	$	1,507
Due after one year through five years	530,381		512,427		39,918		38,131
Due after five years through ten years	355,802		340,809		240,528		222,477
Due after ten years	54,903		53,249		259,842		227,548
	$	1,001,070	$	967,040	$	541,801	$	489,663
Mortgage-backed securities	7,059		7,101		88,281		82,380
Collateralized mortgage obligations	180,229		171,497		574,130		533,771
Total	$	1,188,358	$	1,145,638	$	1,204,212	$	1,105,814

Realized gains and losses on sales are determined on the basis of specific identification of investments based on the trade date. Realized gains (losses) on investments, including impairment losses for the three months ended September 30, 2017 and 2016, were as follows:

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(in thousands)
Available for sale fixed maturity securities:
Gross realized gains $ 179
$ —
$ 199
$ 467
Gross realized losses (3 ) —
(3 ) —
176
—
196
467

Held to maturity fixed maturity securities:
Gross realized gains $ —
$ —
$ 43
$ —
Total net realized gain $ 176
$ —
$ 239
$ 467

5.3. Loans Receivable and the Allowance for ~~Loan~~Credit Losses

The composition of ~~allowance for loan losses and~~ loans by ~~portfolio segment and based on impairment method are~~class of receivable was as follows:


	As of
(in thousands)	March 31, 2022		December 31, 2021
Agricultural	$	94,649	$	103,417
Commercial and industrial	898,942		902,314
Commercial real estate:
Construction & development	193,130		172,160
Farmland	140,846		144,673
Multifamily	259,609		244,503
Commercial real estate-other	1,130,306		1,143,205
Total commercial real estate	1,723,891		1,704,541
Residential real estate:
One- to four- family first liens	331,883		333,308
One- to four- family junior liens	131,793		133,014
Total residential real estate	463,676		466,322
Consumer	68,877		68,418
Loans held for investment, net of unearned income	3,250,035		3,245,012
Allowance for credit losses	(46,200)		(48,700)
Total loans held for investment, net	$	3,203,835	$	3,196,312

Allowance for Loan Losses and Recorded Investment in Loan Receivables
As of September 30, 2017 and December 31, 2016
(in thousands) Agricultural Commercial and Industrial Commercial Real Estate Residential Real Estate Consumer Total
September 30, 2017
Allowance for loan losses:
Individually evaluated for impairment $ 150
$ 3,446
$ 1,388
$ 226
$ —
$ 5,210
Collectively evaluated for impairment 2,415
6,249
8,648
3,002
254
20,568
Purchased credit impaired loans —
—
344
388
—
732
Total $ 2,565
$ 9,695
$ 10,380
$ 3,616
$ 254
$ 26,510
Loans receivable
Individually evaluated for impairment $ 2,967
$ 11,231
$ 16,332
$ 3,528
$ —
$ 34,058
Collectively evaluated for impairment 105,221
500,772
1,097,495
469,452
37,042
2,209,982
Purchased credit impaired loans —
31
14,275
5,465
—
19,771
Total $ 108,188
$ 512,034
$ 1,128,102
$ 478,445
$ 37,042
$ 2,263,811

(in thousands) Agricultural Commercial and Industrial Commercial Real Estate Residential Real Estate Consumer Total
December 31, 2016
Allowance for loan losses:
Individually evaluated for impairment $ 62
$ 2,066
$ 1,924
$ 299
$ —
$ 4,351
Collectively evaluated for impairment 1,941
4,199
7,692
2,791
255
16,878
Purchased credit impaired loans —
9
244
368
—
621
Total $ 2,003
$ 6,274
$ 9,860
$ 3,458
$ 255
$ 21,850
Loans receivable
Individually evaluated for impairment $ 5,339
$ 11,434
$ 11,450
$ 3,955
$ —
$ 32,178
Collectively evaluated for impairment 108,004
449,380
1,036,049
480,143
36,591
2,110,167
Purchased credit impaired loans —
156
16,744
5,898
—
22,798
Total $ 113,343
$ 460,970
$ 1,064,243
$ 489,996
$ 36,591
$ 2,165,143

~~As of September 30, 2017, the gross purchased credit impaired loans included above were $22.0 million, with a discount of $2.2 million.~~

Loans with unpaid principal in the amount of ~~$478.5~~$830.4 million and ~~$498.3~~$816.0 million at ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016~~,2021, respectively, were pledged to the ~~Federal Home Loan Bank (the “FHLB”)~~FHLB as collateral for borrowings.

~~The changes~~Non-accrual and Delinquent Status

Loans are placed on non-accrual when (1) payment in full of principal and interest is no longer expected or (2) principal or interest has been in default for 90 days or more unless the loan is both well secured with marketable collateral and in the ~~allowance for~~process of collection. All loans rated doubtful or worse, and certain loans rated substandard, are placed on non-accrual.

A non-accrual loan ~~losses by portfolio segment were as follows:~~

Allowance for Loan Loss Activity
For the Three Months Ended September 30, 2017 and 2016
(in thousands) Agricultural Commercial and Industrial Commercial Real Estate Residential Real Estate Consumer Unallocated Total
2017
Beginning balance $ 2,666
$ 7,959
$ 9,013
$ 2,650
$ 222
$ —
$ 22,510
Charge-offs (318 ) (534 ) —
(75 ) (51 ) —
(978 )
Recoveries 150
113
201
126
4
—
594
Provision 67
2,157
1,166
915
79
—
4,384
Ending balance $ 2,565
$ 9,695
$ 10,380
$ 3,616
$ 254
$ —
$ 26,510
2016
Beginning balance $ 2,354
$ 5,385
$ 10,628
$ 2,463
$ 367
$ —
$ 21,197
Charge-offs (140 ) (520 ) (29 ) (195 ) (42 ) —
(926 )
Recoveries 20
19
8
69
3
—
119
Provision 268
427
(584 ) 857
37
—
1,005
Ending balance $ 2,502
$ 5,311
$ 10,023
$ 3,194
$ 365
$ —
$ 21,395

Allowance for Loan Loss Activity
For the Nine Months Ended September 30, 2017 and 2016
(in thousands) Agricultural Commercial and Industrial Commercial Real Estate Residential Real Estate Consumer Unallocated Total
2017
Beginning balance $ 2,003
$ 6,274
$ 9,860
$ 3,458
$ 255
$ —
$ 21,850
Charge-offs (1,202 ) (1,063 ) (106 ) (155 ) (211 ) —
(2,737 )
Recoveries 164
215
216
126
11
—
732
Provision 1,600
4,269
410
187
199
—
6,665
Ending balance $ 2,565
$ 9,695
$ 10,380
$ 3,616
$ 254
$ —
$ 26,510
2016
Beginning balance $ 1,417
$ 5,451
$ 8,556
$ 3,968
$ 409
$ (374 ) $ 19,427
Charge-offs (265 ) (530 ) (70 ) (708 ) (169 ) —
(1,742 )
Recoveries 27
91
188
146
17
—
469
Provision 1,323
299
1,349
(212 ) 108
374
3,241
Ending balance $ 2,502
$ 5,311
$ 10,023
$ 3,194
$ 365
$ —
$ 21,395

~~Loan Portfolio Segment Risk Characteristics~~

~~Agricultural~~ - Agricultural loans, most of which are secured by crops, livestock, and machinery, are provided to finance capital improvements and farm operations as well as acquisitions of livestock and machinery. The ability of the borrower to repay may be ~~affected by many factors outside~~restored to an accrual status when (1) all past due principal and interest has been paid (excluding renewals and modifications that involve the capitalizing of ~~the borrower’s control including adverse weather conditions, loss of livestock due to disease~~interest) or other factors, declines in market prices for agricultural products and the impact of government regulations. The ultimate repayment of agricultural loans is dependent upon the profitable operation or management of the agricultural entity. Collateral for these loans generally includes accounts receivable, inventory, equipment and real estate. However, depending on the overall financial condition of the borrower, some loans are made on an unsecured basis. The collateral securing these loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business.

~~Commercial and Industrial~~ - Commercial and industrial loans are primarily made based on the reported cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. The collateral support provided by the borrower for most of these loans and the probability of repayment are based on the liquidation of the pledged collateral and enforcement of a personal guarantee, if any exists. The primary repayment risks of commercial and industrial loans are that the cash flows of the borrower may be unpredictable, and the collateral securing these loans may fluctuate in value. The size of the loans the Company can offer to commercial customers is less than the size of the loans that competitors with larger lending limits can offer. This may limit the Company’s ability to establish relationships with the largest businesses in the areas in which the Company operates. As a result, the Company may assume greater lending risks than financial institutions that have a lesser concentration of such loans and tend to make loans to larger businesses. Collateral for these loans generally includes accounts receivable, inventory, equipment and real estate. However, depending on the overall financial condition of the borrower, some loans are made on an unsecured basis. The collateral securing these loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business. In addition, a decline in the U.S. economy could harm or continue to harm the businesses of the Company’s commercial and industrial customers and reduce the value of the collateral securing these loans.

~~Commercial Real Estate~~ - The Company offers mortgage loans to commercial and agricultural customers for the acquisition of real estate used in their businesses, such as offices, warehouses and production facilities, and to real estate investors for the acquisition of apartment buildings, retail centers, office buildings and other commercial buildings. The market value of real estate securing commercial real estate loans can fluctuate significantly in a short period of time as a result of market conditions in the geographic area in which the real estate is located. Adverse developments affecting real estate values in one or more of the Company’s markets could increase the credit risk associated with its loan portfolio. Additionally, real estate lending typically involves higher loan principal amounts than other loans, and the repayment of the loans generally is dependent, in large part, on sufficient income from the properties securing the loans to cover operating expenses and debt service. Economic events or governmental regulations outside of the Company’s control or that of the borrower could negatively impact the future cash flow and market values of the affected properties.

~~Residential Real Estate~~ - The Company generally retains short-term residential mortgage loans that are originated for its own portfolio but sells most long-term loans to other parties while retaining servicing rights on the majority of those loans. The market value of real estate securing residential real estate loans can fluctuate as a result of market conditions in the geographic area in which the real estate is located. Adverse developments affecting real estate values in one or more of the Company’s markets could increase the credit risk associated with its loan portfolio. Additionally, real estate lending typically involves higher loan principal amounts than other loans, and the repayment of the loans generally is dependent, in large part, on the borrower’s continuing financial stability, and is therefore more likely to be affected by adverse personal circumstances.

~~Consumer~~ - Consumer loans typically have shorter terms, lower balances, higher yields and higher risks of default than real estate-related loans. Consumer loan collections are dependent on the borrower’s continuing financial stability, and are therefore more likely to be affected by adverse personal circumstances. Collateral for these loans generally includes automobiles, boats, recreational vehicles, mobile homes, and real estate. However, depending on the overall financial condition of the borrower, some loans are made on an unsecured basis. The collateral securing these loans may depreciate over time, may be difficult to recover and may fluctuate in value based on condition. In addition, a decline in the United States economy could result in reduced employment, impacting the ability of customers to repay their obligations.

~~Purchased Loans Policy~~

All purchased loans (nonimpaired and impaired) are initially measured at fair value as of the acquisition date in accordance with applicable authoritative accounting guidance. Credit discounts are included in the determination of fair value. An allowance for loan losses is not recorded at the acquisition date for loans purchased.

Individual loans acquired through the completion of a transfer, including loans that have evidence of deterioration of credit quality since origination and for which it is probable, at acquisition, that the Company will be unable to collect all contractually required payments receivable, are referred to herein as “purchased credit impaired loans.” In determining the acquisition date fair value and estimated credit losses of purchased credit impaired loans, and in subsequent accounting, the Company accounts for loans individually. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition, or the “nonaccretable difference,” are not recognized as a yield adjustment or as a loss accrual or valuation allowance. Expected cash flows at the purchase date in excess of the fair value of loans, if any, are recorded as interest income over the expected life of the loans if the timing and amount of future cash flows are reasonably estimable. Subsequent to the purchase date, increases in cash flows over those expected at the purchase date are recognized as interest income prospectively. The present value of any decreases in expected cash flows after the purchase date is recognized by recording an allowance for loan losses and a provision for loan losses. If the Company does not have the information necessary to reasonably estimate cash flows to be expected, it may use the cost-recovery method or cash-basis method of income recognition.

~~Charge-off Policy~~

The Company requires a loan to be charged-off, in whole or in part, as soon as it becomes apparent that some loss will be incurred, or when its collectability is sufficiently questionable that it no longer is considered a bankable asset. The primary considerations when determining if and how much of a loan should be charged-off are as follows: (1) the potential for future cash flows; (2) the ~~value of any collateral;~~loan becomes well secured with marketable collateral and ~~(3) the strength of any co-makers or guarantors.~~

When it is determined that a loan requires a partial or full charge-off, a request for approval of a charge-off is submitted to the Company's President, Executive Vice President and Chief Credit Officer, and the Senior Regional Loan officer. The Bank's board of directors formally approves all loan charge-offs. Once a loan is charged-off, it cannot be restructured and returned to the Company's books.

~~Allowance for Loan and Lease Losses~~

The Company requires the maintenance of an adequate allowance for loan and lease losses (“ALLL”) in order to cover estimated probable losses without eroding the Company’s capital base. Calculations are done at each quarter end, or more frequently if warranted, to analyze the collectability of loans and to ensure the adequacy of the allowance. In line with FDIC directives, the ALLL calculation does not include consideration of loans held for sale or off-balance-sheet credit exposures (such as unfunded letters of credit). Determining the appropriate level for the ALLL relies on the informed judgment of management, and as such, is subject to inexactness. Given the inherently imprecise nature of calculating the necessary ALLL, the Company’s policy permits the actual ALLL to be between 20% above and 5% below the “indicated reserve.”

~~As part of the merger between MidWestOne~~ Bank and Central Bank, management developed a single methodology for determining the amount of the ALLL that would be needed at the combined bank. The new methodology is a hybrid of the methods used at MidWest~~One~~ Bank and Central Bank prior to the bank merger, and the results from the new ALLL model are consistent with the results that the two banks calculated individually. The refined allowance calculation allocates the portion of allowance that was previously deemed to be unallocated to instead be included in management’s determination of appropriate qualitative factors.

~~Loans Reviewed Individually for Impairment~~

The Company identifies loans to be reviewed and evaluated individually for impairment based on current information and events and the probability that the borrower will be unable to repay all amounts due according to the contractual terms of the loan agreement. Specific areas of consideration include: size of credit exposure, risk rating, delinquency, nonaccrual status, and loan classification.

The level of individual impairment is measured using one of the following methods: (1) the fair value of the collateral less costs to sell; (2) the present value of expected future cash flows, discounted at the loan's effective interest rate; or (3) the loan's observable market price. Loans that are deemed fully collateralized or have been charged down to a level corresponding with any of the three measurements require no assignment of reserves from the ALLL.

A loan modification is a change in an existing loan contract that has been agreed to by the borrower and the Bank, which may or may not be a troubled debt restructure or “TDR.” All loans deemed TDR are considered impaired. A loan is considered a TDR when, for economic or legal reasons related to a borrower’s financial difficulties, a concession is granted to the borrower that would not otherwise be considered. Both financial distress on the part of the borrower and the Bank’s granting of a concession, which are detailed further below, must be present in order for the loan to be considered a TDR.

~~All of the following factors are indicators that the debtor is experiencing financial difficulties (one or more items may be present):~~

~~The debtor is currently in default on any of its debt.~~

~~The debtor has declared or~~ is in the process of ~~declaring bankruptcy.~~collection. An established track record of performance is also considered when determining accrual status.

~~There is significant doubt as to whether~~

Loans are considered past due or delinquent when the ~~debtor will continue to be a going concern.~~

~~Currently, the debtor has securities being held as collateral that have been delisted, are in the process of being delisted,~~contractual principal or ~~are under threat of being delisted from an exchange.~~

~~Based on estimates and projections that only encompass the current business capabilities, the debtor forecasts that its entity-specific cash flows will be insufficient to service the debt (both~~ interest ~~and principal)~~due in accordance with the ~~contractual~~ terms of the ~~existing~~loan agreement ~~through maturity.~~

~~Absent~~or any portion thereof remains unpaid after the current modification, the debtor cannot obtain funds from sources other than the existing creditors at an effective interest rate equal to the current market interest rate for similar debt for a non-troubled debtor.

~~The following factors are potential indicators that a concession has been granted (one or multiple items may be present):~~

~~The borrower receives a reduction~~due date of the ~~stated interest rate for the remaining original life~~scheduled payment.

Table of ~~the debt.~~Contents

~~The borrower receives an extension of the maturity date or dates at a stated interest rate lower that the current market interest rate for new debt with similar risk characteristics.~~

~~The borrower receives a reduction of the face amount or maturity amount of the debt as stated in the instrument or other agreement.~~

~~The borrower receives a deferral of required payments (principal and/or interest).~~

~~The borrower receives a reduction of the accrued interest.~~

The following table ~~sets forth information~~presents the amortized cost basis of loans based on delinquency status:


			Age Analysis of Past-Due Financial Assets								90 Days or More Past Due And Accruing
(in thousands)	Current		30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total
March 31, 2022
Agricultural	$	93,002	$	970	$	5	$	672	$	94,649	$	—
Commercial and industrial	896,143		677		54		2,068		898,942		—
Commercial real estate:
Construction and development	192,185		—		—		945		193,130		—
Farmland	138,496		1,053		—		1,297		140,846		—
Multifamily	258,224		—		1,385		—		259,609		—
Commercial real estate-other	1,110,690		2,250		128		17,238		1,130,306		—
Total commercial real estate	1,699,595		3,303		1,513		19,480		1,723,891		—
Residential real estate:
One- to four- family first liens	329,465		2,147		27		244		331,883		—
One- to four- family junior liens	130,955		467		88		283		131,793		—
Total residential real estate	460,420		2,614		115		527		463,676		—
Consumer	68,744		58		58		17		68,877		—
Total	$	3,217,904	$	7,622	$	1,745	$	22,764	$	3,250,035	$	—

December 31, 2021
Agricultural	$	102,352	$	244	$	—	$	821	$	103,417	$	—
Commercial and industrial	899,423		529		134		2,228		902,314		—
Commercial real estate:
Construction and development	171,169		396		—		595		172,160		—
Farmland	141,814		116		—		2,743		144,673		—
Multifamily	243,117		—		1,386		—		244,503		—
Commercial real estate-other	1,129,073		8,417		306		5,409		1,143,205		—
Total commercial real estate	1,685,173		8,929		1,692		8,747		1,704,541		—
Residential real estate:
One- to four- family first liens	330,992		1,057		1,057		202		333,308		—
One- to four- family junior liens	132,392		261		135		226		133,014		—
Total residential real estate	463,384		1,318		1,192		428		466,322		—
Consumer	68,326		66		14		12		68,418		—
Total	$	3,218,658	$	11,086	$	3,032	$	12,236	$	3,245,012	$	—

The following table presents the ~~Company’s TDRs~~amortized cost basis of loans on non-accrual status, amortized cost basis of loans on non-accrual status with no allowance for credit losses recorded, and loans past due 90 days or more and still accruing by class of ~~loan occurring during~~loan:


	Nonaccrual				Nonaccrual with no Allowance for Credit Losses				90 Days or More Past Due And Accruing
(in thousands)	March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021

Agricultural	$	1,238	$	2,090	$	804	$	1,341	$	—	$	—
Commercial and industrial	3,344		3,803		1,749		1,341		—		—
Commercial real estate:
Construction and development	945		595		945		595		—		—
Farmland	4,448		5,499		3,978		4,156		—		—
Multifamily	973		987		318		323		—		—
Commercial real estate-other	18,593		16,544		14,602		1,063		—		—
Total commercial real estate	24,959		23,625		19,843		6,137		—		—
Residential real estate:
One- to four- family first liens	947		1,275		80		345		—		—
One- to four- family junior liens	659		713		—		—		—		—
Total residential real estate	1,606		1,988		80		345		—		—
Consumer	35		34		—		—		—		—
Total	$	31,182	$	31,540	$	22,476	$	9,164	$	—	$	—

The interest income recognized on loans that were on nonaccrual for the ~~stated periods:~~three months ended March 31, 2022 and March 31, 2021 was $70 thousand and $90 thousand, respectively.

Table of Contents

Three Months Ended September 30,
2017 2016
Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment
(dollars in thousands)

Troubled Debt Restructurings⁽¹⁾:

Commercial real estate:
Commercial real estate-other
Other —
$ —
$ —
1
$ 1,000
$ 700
Residential real estate:
Interest rate reduction —
—
—
1
290
290
Total —
$ —
$ —
2
$ 1,290
$ 990

Credit Quality Information

Nine Months Ended September 30,
2017 2016
Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment
(dollars in thousands)

Troubled Debt Restructurings⁽¹⁾:

Agricultural
Extended maturity date —
$ —
$ —
1
$ 25
$ 25
Commercial and industrial
Extended maturity date 6
2,037
2,083
—
—
—
Farmland
Extended maturity date 2
176
176
—
—
—
Commercial real estate-other
Extended maturity date 1
968
968
—
—
—
Other 1
10,546
10,923
1
1,000
700
Residential real estate:
One- to four- family first liens
Interest rate reduction —
—
—
2
394
394
One- to four- family junior liens
Interest rate reduction —
—
—
1
71
71
Total 10
$ 13,727
$ 14,150
5
$ 1,490
$ 1,190

~~(1) TDRs may include multiple concessions, and the disclosure classifications are~~The Company aggregates loans into risk categories based on relevant information about the ~~primary concession provided~~ability of borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, and other factors. The Company analyzes loans individually to classify the ~~borrower.~~

~~Loans by class modified~~loans as ~~TDRs within 12 months of modification and for which there was a payment default during the stated periods were as follows:~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Number of Contracts Recorded Investment Number of Contracts Recorded Investment Number of Contracts Recorded Investment Number of Contracts Recorded Investment
(dollars in thousands)

Troubled Debt Restructurings⁽¹⁾ That Subsequently Defaulted:

Commercial and industrial
Extended maturity date —
$ —
—
$ —
4
$ 1,504
—
$ —
Commercial real estate-other
Extended maturity date —
—
—
—
1
968
—
—
Total —
$ —
—
$ —
5
$ 2,472
—
$ —

~~(1) TDRs may include multiple concessions, and the disclosure classifications are based on the primary concession provided~~ to ~~the borrower.~~

~~Loans Reviewed Collectively for Impairment~~

All loans not evaluated individually for impairment will be separated into homogeneous pools to be collectively evaluated. Loans will be first grouped into the various loan types (i.e. commercial, agricultural, consumer, etc.) and further segmented within each subset by risk classification (i.e. pass, special mention/watch, and substandard). Homogeneous loans past due 60-89 days and 90 days and over are classified special mention/watch and substandard, respectively, for allocation purposes.

The Company’s historical loss experience for each group segmented by loan type is calculated for the prior 20 quarters as a starting point for estimating losses. In addition, other prevailing qualitative or environmental factors likely to cause probable losses to vary from historical data are incorporated in the form of adjustments to increase or decrease the loss rate applied to each group. These adjustments are documented and fully explain how the current information, events, circumstances, and conditions impact the historical loss measurement assumptions.

~~Although not a comprehensive list, the following are considered key factors and are evaluated with each calculation of the ALLL to determine if adjustments to historical loss rates are warranted:~~

~~Changes in national and local economic and business conditions and developments that affect the collectability of the portfolio, including the condition of various market segments.~~

~~Changes in the quality and experience of lending staff and management.~~

~~Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating~~ credit ~~losses.~~

~~Changes in the volume and severity of past due loans, classified loans and non-performing loans.~~

~~The existence and potential impact of any concentrations of credit.~~

~~Changes in the nature and terms of~~risk. This analysis includes non-homogenous loans, such as ~~growth rates and utilization rates.~~

~~Changes in the value of underlying collateral for collateral-dependent loans, considering the Company’s disposition bias.~~

~~The effect of other external factors such as the legal and regulatory environment.~~

The Company may also consider other qualitative factors for additional allowance allocations, including changes in the Company’s loan review process. Changes in the criteria used in this evaluation or the availability of new information could cause the allowance to be increased or decreased in future periods. In addition, bank regulatory agencies, as part of their examination process, may require adjustments to the allowance for loan losses based on their judgments and estimates.

The items listed above are used to determine the pass percentage for loans evaluated under ASC 450, and as such, are applied to the loans risk rated pass. Due to the inherent risks associated with special mention/watch risk-rated loans (i.e. early stages of financial deterioration, technical exceptions, etc.), this subset is reserved at a level that will cover losses above a pass allocation for loans that had a loss in the last 20 quarters in which the loan was risk-rated special mention/watch at the time of the loss. Substandard loans carry greater risk than special mention/watch loans, and as such, this subset is reserved at a level that will cover losses above a pass allocation for loans that had a loss in the last 20 quarters in which the loan was risk-rated substandard at the time of the loss. Ongoing analysis is performed to support these factor multiples.

~~The following tables set forth the risk category of loans by class of loans and credit quality indicator based on the most recent analysis performed, as of September 30, 2017 and December 31, 2016:~~

Pass Special Mention/ Watch Substandard Doubtful Loss Total
(in thousands)
September 30, 2017
Agricultural $ 84,594
$ 22,265
$ 1,329
$ —
$ —
$ 108,188

Commercial and industrial⁽¹⁾
468,161
25,836
18,030
7
—
512,034
Commercial real estate:
Construction and development 140,547
1,066
2,136
—
—
143,749
Farmland 77,020
10,098
411
—
—
87,529
Multifamily 134,451
1,777
496
—
—
136,724
Commercial real estate-other 698,941
32,235
28,924
—
—
760,100
Total commercial real estate 1,050,959
45,176
31,967
—
—
1,128,102
Residential real estate:
One- to four- family first liens 349,582
2,978
10,135
—
—
362,695
One- to four- family junior liens 112,808
1,124
1,818
—
—
115,750
Total residential real estate 462,390
4,102
11,953
—
—
478,445
Consumer 36,930
—
79
33
—
37,042
Total $ 2,103,034
$ 97,379
$ 63,358
$ 40
$ —
$ 2,263,811

Pass Special Mention/ Watch Substandard Doubtful Loss Total
(in thousands)
December 31, 2016
Agricultural $ 95,103
$ 14,089
$ 4,151
$ —
$ —
$ 113,343
Commercial and industrial 429,392
11,065
19,016
8
—
459,481
Credit cards 1,489
—
—
—
—
1,489
Commercial real estate:
Construction and development 121,982
2,732
1,971
—
—
126,685
Farmland 83,563
8,986
2,430
—
—
94,979
Multifamily 134,975
548
480
—
—
136,003
Commercial real estate-other 666,767
20,955
18,854
—
—
706,576
Total commercial real estate 1,007,287
33,221
23,735
—
—
1,064,243
Residential real estate:
One- to four- family first liens 359,029
2,202
11,002
—
—
372,233
One- to four- family junior liens 114,233
1,628
1,902
—
—
117,763
Total residential real estate 473,262
3,830
12,904
—
—
489,996
Consumer 36,419
1
134
37
—
36,591
Total $ 2,042,952
$ 62,206
$ 59,940
$ 45
$ —
$ 2,165,143

~~(1) As of the first quarter of 2017, the Company no longer considered credit cards a separate class of loans, and these balances are now included in~~agricultural, commercial and industrial, and commercial real estate loans. Loans not meeting the criteria described below that are analyzed individually are considered to be pass-rated. The Company uses the following definitions for risk ratings:

Included within the special mention/watch, substandard, and doubtful categories at September 30, 2017 and December 31, 2016 are purchased credit impaired loans totaling $13.5 million and $15.3 million, respectively.

~~Below are descriptions of the risk classifications of our loan portfolio.~~

Special Mention/Watch - A special mention/watch asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date. Special mention/watch assets are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

Substandard - Substandard loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable.

Loss - Loans classified as loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be ~~effected~~affected in the future.

~~The following table presents~~Homogenous loans, including residential real estate and consumer loans, are not individually ~~evaluated for impairment, excluding purchased credit impaired~~risk rated. Instead, these loans ~~by class of loan, as of September 30, 2017~~are categorized based on performance: performing and ~~December 31, 2016:~~

September 30, 2017 December 31, 2016
Recorded Investment Unpaid Principal Balance Related Allowance Recorded Investment Unpaid Principal Balance Related Allowance
(in thousands)
With no related allowance recorded:
Agricultural $ 1,521
$ 2,799
$ —
$ 3,673
$ 4,952
$ —
Commercial and industrial 2,818
2,818
—
6,211
6,259
—
Commercial real estate:
Construction and development 402
402
—
445
1,170
—
Farmland 287
287
—
2,230
2,380
—
Multifamily —
—
—
—
—
—
Commercial real estate-other 2,178
2,179
—
2,224
2,384
—
Total commercial real estate 2,867
2,868
—
4,899
5,934
—
Residential real estate:
One- to four- family first liens 2,205
2,210
—
2,429
2,442
—
One- to four- family junior liens 13
13
—
—
—
—
Total residential real estate 2,218
2,223
—
2,429
2,442
—
Consumer —
—
—
—
—
—
Total $ 9,424
$ 10,708
$ —
$ 17,212
$ 19,587
$ —
With an allowance recorded:
Agricultural $ 1,446
$ 1,446
$ 150
$ 1,666
$ 1,669
�� $ 62
Commercial and industrial 8,413
8,640
3,446
5,223
5,223
2,066
Commercial real estate:
Construction and development 609
1,334
324
263
270
21
Farmland —
—
—
—
—
—
Multifamily —
—
—
—
—
—
Commercial real estate-other 12,856
13,017
1,064
6,288
6,344
1,903
Total commercial real estate 13,465
14,351
1,388
6,551
6,614
1,924
Residential real estate:
One- to four- family first liens 1,310
1,317
226
1,526
1,526
299
One- to four- family junior liens —
—
—
—
—
—
Total residential real estate 1,310
1,317
226
1,526
1,526
299
Consumer —
—
—
—
—
—
Total $ 24,634
$ 25,754
$ 5,210
$ 14,966
$ 15,032
$ 4,351
Total:
Agricultural $ 2,967
$ 4,245
$ 150
$ 5,339
$ 6,621
$ 62
Commercial and industrial 11,231
11,458
3,446
11,434
11,482
2,066
Commercial real estate:
Construction and development 1,011
1,736
324
708
1,440
21
Farmland 287
287
—
2,230
2,380
—
Multifamily —
—
—
—
—
—
Commercial real estate-other 15,034
15,196
1,064
8,512
8,728
1,903
Total commercial real estate 16,332
17,219
1,388
11,450
12,548
1,924
Residential real estate:
One- to four- family first liens 3,515
3,527
226
3,955
3,968
299
One- to four- family junior liens 13
13
—
—
—
—
Total residential real estate 3,528
3,540
226
3,955
3,968
299
Consumer —
—
—
—
—
—
Total $ 34,058
$ 36,462
$ 5,210
$ 32,178
$ 34,619
$ 4,351

~~The following table presents the average recorded investment~~nonperforming. Nonperforming loans include those loans on nonaccrual and ~~interest income recognized for~~ loans ~~individually evaluated for impairment, excluding purchased credit impaired loans, by class of loan, during the stated periods:~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized
(in thousands)
With no related allowance recorded:
Agricultural $ 881
$ 17
$ 1,266
$ 14
$ 674
$ 50
$ 1,285
$ 41
Commercial and industrial 2,878
77
5,115
34
2,899
124
5,233
39
Commercial real estate:
Construction and development 423
—
—
—
434
2
—
—
Farmland 212
—
2,414
29
1,193
58
2,426
78
Multifamily —
—
—
—
—
—
—
—
Commercial real estate-other 2,148
18
2,594
9
1,894
63
2,865
8
Total commercial real estate 2,783
18
5,008
38
3,521
123
5,291
86
Residential real estate:
One- to four- family first liens 2,183
23
2,843
32
2,197
69
2,867
88
One- to four- family junior liens 13
—
—
—
13
—
—
—
Total residential real estate 2,196
23
2,843
32
2,210
69
2,867
88
Consumer —
—
—
—
—
—
—
—
Total $ 8,738
$ 135
$ 14,232
$ 118
$ 9,304
$ 366
$ 14,676
$ 254
With an allowance recorded:
Agricultural $ 1,446
$ 11
$ 1,854
$ 12
$ 1,460
$ 33
$ 1,870
$ 32
Commercial and industrial 8,458
85
3,988
16
8,423
163
3,789
26
Commercial real estate:
Construction and development 311
—
270
—
232
—
271
3
Farmland —
—
—
—
—
—
—
—
Multifamily —
—
159
—
—
—
158
—
Commercial real estate-other 12,863
—
5,416
—
12,881
44
5,416
—
Total commercial real estate 13,174
—
5,845
—
13,113
44
5,845
3
Residential real estate:
One- to four- family first liens 1,361
9
1,118
8
1,392
26
1,123
22
One- to four- family junior liens —
—
—
—
—
—
—
—
Total residential real estate 1,361
9
1,118
8
1,392
26
1,123
22
Consumer —
—
—
—
—
—
—
—
Total $ 24,439
$ 105
$ 12,805
$ 36
$ 24,388
$ 266
$ 12,627
$ 83
Total:
Agricultural $ 2,327
$ 28
$ 3,120
$ 26
$ 2,134
$ 83
$ 3,155
$ 73
Commercial and industrial 11,336
162
9,103
50
11,322
287
9,022
65
Commercial real estate:
Construction and development 734
—
270
—
666
2
271
3
Farmland 212
—
2,414
29
1,193
58
2,426
78
Multifamily —
—
159
—
—
—
158
—
Commercial real estate-other 15,011
18
8,010
9
14,775
107
8,281
8
Total commercial real estate 15,957
18
10,853
38
16,634
167
11,136
89
Residential real estate:
One- to four- family first liens 3,544
32
3,961
40
3,589
95
3,990
110
One- to four- family junior liens 13
—
—
—
13
—
—
—
Total residential real estate 3,557
32
3,961
40
3,602
95
3,990
110
Consumer —
—
—
—
—
—
—
—
Total $ 33,177
$ 240
$ 27,037
$ 154
$ 33,692
$ 632
$ 27,303
$ 337

~~The following table presents the contractual aging of the recorded investment in~~greater than 90 days past due ~~loans by class~~and on accrual.

Table of ~~loans at September 30, 2017 and December 31, 2016:~~Contents

30 - 59 Days Past Due 60 - 89 Days Past Due 90 Days or More Past Due Total Past Due Current Total Loans Receivable
(in thousands)
September 30, 2017
Agricultural $ 195
$ —
$ 517
$ 712
$ 107,476
$ 108,188

Commercial and industrial⁽¹⁾
872
434
2,710
4,016
508,018
512,034
Commercial real estate:
Construction and development —
—
966
966
142,783
143,749
Farmland —
—
378
378
87,151
87,529
Multifamily —
—
—
—
136,724
136,724
Commercial real estate-other 811
—
2,749
3,560
756,540
760,100
Total commercial real estate 811
—
4,093
4,904
1,123,198
1,128,102
Residential real estate:
One- to four- family first liens 2,439
814
1,201
4,454
358,241
362,695
One- to four- family junior liens 508
148
75
731
115,019
115,750
Total residential real estate 2,947
962
1,276
5,185
473,260
478,445
Consumer 55
31
11
97
36,945
37,042
Total $ 4,880
$ 1,427
$ 8,607
$ 14,914
$ 2,248,897
$ 2,263,811

Included in the totals above are the following purchased credit impaired loans $ 523
$ 267
$ 227
$ 1,017
$ 18,754
$ 19,771

December 31, 2016
Agricultural $ 44
$ —
$ 399
$ 443
$ 112,900
$ 113,343
Commercial and industrial 2,615
293
9,654
12,562
446,919
459,481
Credit cards —
—
—
—
1,489
1,489
Commercial real estate:
Construction and development 630
—
297
927
125,758
126,685
Farmland 373
—
91
464
94,515
94,979
Multifamily —
129
—
129
135,874
136,003
Commercial real estate-other 1,238
763
6,655
8,656
697,920
706,576
Total commercial real estate 2,241
892
7,043
10,176
1,054,067
1,064,243
Residential real estate:
One- to four- family first liens 2,851
1,143
1,328
5,322
366,911
372,233
One- to four- family junior liens 437
151
150
738
117,025
117,763
Total residential real estate 3,288
1,294
1,478
6,060
483,936
489,996
Consumer 50
23
33
106
36,485
36,591
Total $ 8,238
$ 2,502
$ 18,607
$ 29,347
$ 2,135,796
$ 2,165,143

Included in the totals above are the following purchased credit impaired loans $ 965
$ 489
$ 549
$ 2,003
$ 20,795
$ 22,798

~~(1) As of the first quarter of 2017, the Company no longer considered credit cards a separate class of loans, and these balances are now included in commercial and industrial loans.~~

~~Non-accrual and Delinquent Loans~~

Loans are placed on non-accrual when (1) payment in full of principal and interest is no longer expected or (2) principal or interest has been in default for 90 days or more (unless the loan is both well secured with marketable collateral and in the process of collection). All loans rated doubtful or worse, and certain loans rated substandard, are placed on non-accrual.

A non-accrual asset may be restored to an accrual status when (1) all past due principal and interest has been paid (excluding renewals and modifications that involve the capitalizing of interest) or (2) the loan becomes well secured with marketable collateral and is in the process of collection. An established track record of performance is also considered when determining accrual status.

Delinquency status of a loan is determined by the number of days that have elapsed past the loan’s payment due date, using the following classification groupings: 30-59 days, 60-89 days and 90 days or more. Once a TDR has gone 90 days or more past due or is placed on nonaccrual status, it is included in the 90 days or more past due or nonaccrual totals.

The following table sets forth the ~~composition~~amortized cost basis of ~~the Company’s recorded investment in~~ loans ~~on nonaccrual status and past due 90 days or more and still accruing~~ by class of ~~loans, excluding purchased~~receivable by credit ~~impaired loans,~~quality indicator and vintage based on the most recent analysis performed, as of ~~September 30, 2017~~March 31, 2022. As of March 31, 2022, there were no 'loss' rated credits.


	Term Loans by Origination Year												Revolving Loans
March 31, 2022 (in thousands)	2022		2021		2020		2019		2018		Prior				Total
Agricultural
Pass	$	8,413	$	15,512	$	6,747	$	3,742	$	926	$	1,043	$	51,051		$	87,434
Special mention / watch	107		958		133		173		—		909		1,485			3,765
Substandard	—		302		699		18		191		274		1,966			3,450
Doubtful	—		—		—		—		—		—		—			—
Total	$	8,520	$	16,772	$	7,579	$	3,933	$	1,117	$	2,226	$	54,502		$	94,649
Commercial and industrial
Pass	$	38,246	$	263,108	$	173,340	$	55,961	$	33,094	$	127,574	$	160,281		$	851,604
Special mention / watch	3,011		1,119		3,309		693		444		18,277		8,169			35,022
Substandard	—		6		1,260		1,171		725		2,856		6,298			12,316
Doubtful	—		—		—		—		—		—		—			—
Total	$	41,257	$	264,233	$	177,909	$	57,825	$	34,263	$	148,707	$	174,748		$	898,942
CRE - Construction and development
Pass	$	12,980	$	102,092	$	37,967	$	1,907	$	1,552	$	2,205	$	31,925		$	190,628
Special mention / watch	—		867		—		167		—		—		—			1,034
Substandard	—		—		863		595		—		10		—			1,468
Doubtful	—		—		—		—		—		—		—			—
Total	$	12,980	$	102,959	$	38,830	$	2,669	$	1,552	$	2,215	$	31,925		$	193,130
CRE - Farmland
Pass	$	17,486	$	50,457	$	26,514	$	11,994	$	4,906	$	13,945	$	1,074		$	126,376
Special mention / watch	450		817		3,664		—		715		352		—			5,998
Substandard	29		1,473		1,901		1,209		1,797		2,063		—			8,472
Doubtful	—		—		—		—		—		—		—			—
Total	$	17,965	$	52,747	$	32,079	$	13,203	$	7,418	$	16,360	$	1,074		$	140,846
CRE - Multifamily
Pass	$	18,941	$	99,165	$	96,159	$	18,912	$	2,680	$	4,823	$	26		$	240,706
Special mention / watch	17		7,834		—		—		6,000		2,357		—			16,208
Substandard	—		654		2,041		—		—		—		—			2,695
Doubtful	—		—		—		—		—		—		—			—
Total	$	18,958	$	107,653	$	98,200	$	18,912	$	8,680	$	7,180	$	26		$	259,609
CRE - other
Pass	$	53,917	$	324,261	$	353,204	$	86,320	$	40,417	$	92,908	$	62,962		$	1,013,989
Special mention / watch	10,589		2,535		10,980		4,174		10,769		3,520		1,647			44,214
Substandard	757		2,753		46,538		12,426		1,635		7,994		—			72,103
Doubtful	—		—		—		—		—		—		—			—
Total	$	65,263	$	329,549	$	410,722	$	102,920	$	52,821	$	104,422	$	64,609		$	1,130,306
RRE - One- to four- family first liens
Performing	$	35,714	$	101,835	$	67,237	$	25,627	$	22,357	$	73,556	$	4,611		$	330,937
Nonperforming	—		83		5		45		184		629		—			946
Total	$	35,714	$	101,918	$	67,242	$	25,672	$	22,541	$	74,185	$	4,611		$	331,883
RRE - One- to four- family junior liens
Performing	$	9,889	$	27,499	$	10,933	$	3,746	$	4,479	$	8,286	$	66,302		$	131,134
Nonperforming	—		82		—		226		190		161		—			659
Total	$	9,889	$	27,581	$	10,933	$	3,972	$	4,669	$	8,447	$	66,302		$	131,793
Consumer
Performing	$	9,907	$	28,639	$	11,968	$	4,985	$	3,301	$	6,985	$	3,056		$	68,841
Nonperforming	—		—		1		15		5		15		—			36
Total	$	9,907	$	28,639	$	11,969	$	5,000	$	3,306	$	7,000	$	3,056		$	68,877

Total by Credit Quality Indicator Category
Pass	$	149,983	$	854,595	$	693,931	$	178,836	$	83,575	$	242,498	$	307,319		$	2,510,737
Special mention / watch	14,174		14,130		18,086		5,207		17,928		25,415		11,301			106,241
Substandard	786		5,188		53,302		15,419		4,348		13,197		8,264			100,504
Doubtful	—		—		—		—		—		—		—			—
Performing	55,510		157,973		90,138		34,358		30,137		88,827		73,969			530,912
Nonperforming	—		165		6		286		379		805		—			1,641
Total	$	220,453	$	1,032,051	$	855,463	$	234,106	$	136,367	$	370,742	$	400,853		$	3,250,035

Table of Contents

The following table sets forth the amortized cost basis of loans by class of receivable by credit quality indicator and vintage based on the most recent analysis performed, as of December 31, 2021. As of December 31, 2021, there were no 'loss' rated credits.


	Term Loans by Origination Year												Revolving Loans
December 31, 2021 (in thousands)	2021		2020		2019		2018		2017		Prior				Total
Agricultural
Pass	$	20,145	$	8,604	$	4,367	$	1,260	$	885	$	947	$	58,119		$	94,327
Special mention / watch	1,255		148		245		—		17		993		1,685			4,343
Substandard	649		827		126		221		4		278		2,642			4,747
Doubtful	—		—		—		—		—		—		—			—
Total	$	22,049	$	9,579	$	4,738	$	1,481	$	906	$	2,218	$	62,446		$	103,417
Commercial and industrial
Pass	$	297,285	$	199,324	$	56,258	$	35,522	$	60,294	$	75,342	$	132,323		$	856,348
Special mention / watch	4,268		2,342		781		470		4,304		14,274		6,938			33,377
Substandard	8		1,772		1,255		772		37		2,922		5,823			12,589
Doubtful	—		—		—		—		—		—		—			—
Total	$	301,561	$	203,438	$	58,294	$	36,764	$	64,635	$	92,538	$	145,084		$	902,314
CRE - Construction and development
Pass	$	90,662	$	37,098	$	4,942	$	1,611	$	1,543	$	578	$	33,197		$	169,631
Special mention / watch	874		—		169		—		—		—		—			1,043
Substandard	—		879		596		—		—		11		—			1,486
Doubtful	—		—		—		—		—		—		—			—
Total	$	91,536	$	37,977	$	5,707	$	1,611	$	1,543	$	589	$	33,197		$	172,160
CRE - Farmland
Pass	$	51,682	$	33,870	$	18,674	$	5,105	$	5,060	$	10,240	$	1,812		$	126,443
Special mention / watch	3,105		3,824		—		734		292		223		—			8,178
Substandard	1,580		2,004		1,681		2,562		1,667		558		—			10,052
Doubtful	—		—		—		—		—		—		—			—
Total	$	56,367	$	39,698	$	20,355	$	8,401	$	7,019	$	11,021	$	1,812		$	144,673
CRE - Multifamily
Pass	$	97,188	$	96,389	$	19,234	$	2,754	$	4,555	$	3,813	$	273		$	224,206
Special mention / watch	7,871		—		—		6,000		1,859		544		—			16,274
Substandard	663		2,049		—		—		—		1,311		—			4,023
Doubtful	—		—		—		—		—		—		—			—
Total	$	105,722	$	98,438	$	19,234	$	8,754	$	6,414	$	5,668	$	273		$	244,503
CRE - other
Pass	$	325,902	$	384,591	$	94,449	$	37,960	$	60,890	$	60,543	$	45,910		$	1,010,245
Special mention / watch	5,302		26,239		5,172		11,243		2,557		1,905		1,768			54,186
Substandard	4,182		48,885		12,497		5,401		973		6,836		—			78,774
Doubtful	—		—		—		—		—		—		—			—
Total	$	335,386	$	459,715	$	112,118	$	54,604	$	64,420	$	69,284	$	47,678		$	1,143,205
RRE - One- to four- family first liens
Performing	$	115,539	$	77,086	$	27,279	$	24,697	$	16,425	$	65,676	$	5,331		$	332,033
Nonperforming	352		20		45		295		—		563		—			1,275
Total	$	115,891	$	77,106	$	27,324	$	24,992	$	16,425	$	66,239	$	5,331		$	333,308
RRE - One- to four- family junior liens
Performing	$	29,904	$	13,335	$	4,295	$	5,109	$	3,574	$	5,104	$	70,980		$	132,301
Nonperforming	31		—		156		198		16		207		105			713
Total	$	29,935	$	13,335	$	4,451	$	5,307	$	3,590	$	5,311	$	71,085		$	133,014
Consumer
Performing	$	33,124	$	14,386	$	5,917	$	4,080	$	1,686	$	5,778	$	3,412		$	68,383
Nonperforming	—		—		15		—		13		7		—			35
Total	$	33,124	$	14,386	$	5,932	$	4,080	$	1,699	$	5,785	$	3,412		$	68,418

Total by Credit Quality Indicator Category
Pass	$	882,864	$	759,876	$	197,924	$	84,212	$	133,227	$	151,463	$	271,634		$	2,481,200
Special mention / watch	22,675		32,553		6,367		18,447		9,029		17,939		10,391			117,401
Substandard	7,082		56,416		16,155		8,956		2,681		11,916		8,465			111,671
Doubtful	—		—		—		—		—		—		—			—
Performing	178,567		104,807		37,491		33,886		21,685		76,558		79,723			532,717
Nonperforming	383		20		216		493		29		777		105			2,023
Total	$	1,091,571	$	953,672	$	258,153	$	145,994	$	166,651	$	258,653	$	370,318		$	3,245,012

Table of Contents

Allowance for Credit Losses

At March 31, 2022, the economic forecast used by the Company showed the following: (1) Midwest unemployment – decreases over the next four forecasted quarters; (2) Year-to-year change in national retail sales - increases over the next four forecasted quarters; (3) Year-to-year change in CRE Index - increases over the next four forecasted quarters; (4) Year-to-year change in U.S. GDP - increases over the next four forecasted quarters; (5) Year-to-year change in National Home Price Index – increases over the next four forecasted quarters; and (6) Rental Vacancy - increases over the next four forecasted quarters. The decline in the ACL between the three-months ended ended March 31, 2021 and the three-months ended March 31, 2022 is reflective of overall improvements in forecasted economic conditions and the continued improvement in overall asset quality. Net loan charge-offs were $2.2 million for the three-months ended March 31, 2022 as compared to net loan charge-offs of $0.3 million for the three-months ended ended March 31, 2021.

We have made a policy election to report interest receivable as a separate line on the balance sheet. Accrued interest receivable, which is recorded within 'Other Assets', totaled $9.3 million at March 31, 2022 and $10.4 million at December 31, 2021 and is excluded from the estimate of credit losses. The changes in the allowance for credit losses by portfolio segment were as follows:



	For the Three Months Ended March 31, 2022 and 2021
(in thousands)	Agricultural		Commercial and Industrial		Commercial Real Estate		Residential Real Estate		Consumer		Total
For the Three Months Ended March 31, 2022
Beginning balance	$	667	$	17,294	$	26,120	$	4,010	$	609	$	48,700
Charge-offs	—		(233)		(2,184)		(30)		(184)		(2,631)
Recoveries	7		225		117		16		44		409
Credit loss (benefit) expense(1)	(294)		(11)		4		(88)		111		(278)
Ending balance	$	380	$	17,275	$	24,057	$	3,908	$	580	$	46,200

For the Three Months Ended March 31, 2021
Beginning balance	$	1,346	$	15,689	$	32,640	$	4,882	$	943	$	55,500

Charge-offs	(41)		(666)		(66)		(35)		(195)		(1,003)
Recoveries	27		292		306		9		53		687
Credit loss (benefit) expense(1)	(222)		(1,671)		(2,455)		(201)		15		(4,534)
Ending balance	$	1,110	$	13,644	$	30,425	$	4,655	$	816	$	50,650
(1) The difference in the credit loss expense reported herein as compared to the Consolidated Statements of Income is associated with the credit loss (benefit) expense of $0.3 million and $(0.2) million related to off-balance sheet credit exposures for the three months ended March 31, 2022 and March 31, 2021, respectively.

The composition of allowance for credit losses by portfolio segment based on evaluation method were as follows:


	As of March 31, 2022
(in thousands)	Agricultural		Commercial and Industrial		Commercial Real Estate		Residential Real Estate		Consumer		Total
Loans held for investment, net of unearned income
Individually evaluated for impairment	$	804	$	2,846	$	24,646	$	290	$	—	$	28,586
Collectively evaluated for impairment	93,845		896,096		1,699,245		463,386		68,877		3,221,449
Total	$	94,649	$	898,942	$	1,723,891	$	463,676	$	68,877	$	3,250,035
Allowance for credit losses:
Individually evaluated for impairment	$	—	$	420	$	1,762	$	209	$	—	$	2,391
Collectively evaluated for impairment	380		16,855		22,295		3,699		580		43,809
Total	$	380	$	17,275	$	24,057	$	3,908	$	580	$	46,200


	As of December 31, 2021
(in thousands)	Agricultural		Commercial and Industrial		Commercial Real Estate		Residential Real Estate		Consumer		Total
Loans held for investment, net of unearned income
Individually evaluated for impairment	$	1,341	$	3,005	$	23,118	$	570	$	—	$	28,034
Collectively evaluated for impairment	102,076		899,309		1,681,423		465,752		68,418		3,216,978

Total	$	103,417	$	902,314	$	1,704,541	$	466,322	$	68,418	$	3,245,012
Allowance for credit losses:
Individually evaluated for impairment	$	—	$	681	$	2,193	$	224	$	—	$	3,098
Collectively evaluated for impairment	667		16,613		23,927		3,786		609		45,602

Total	$	667	$	17,294	$	26,120	$	4,010	$	609	$	48,700

Table of Contents

The following table presents the amortized cost basis of collateral dependent loans, by the primary collateral type, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans:


	As of March 31, 2022
(in thousands)	Primary Type of Collateral
	Real Estate		Equipment		Other		Total		ACL Allocation
Agricultural	$	591	$	213	$	—	$	804	$	—
Commercial and industrial	408		514		1,924		2,846		420
Commercial real estate:
Construction and development	945		—		—		945		—
Farmland	4,323		—		—		4,323		6
Multifamily	972		—		—		972		375
Commercial real estate-other	16,761		—		1,645		18,406		1,381
Residential real estate:
One- to four- family first liens	145		—		—		145		65
One- to four- family junior liens	—		—		145		145		144
Consumer	—		—		—		—		—
Total	$	24,145	$	727	$	3,714	$	28,586	$	2,391


	As of December 31, 2021
(in thousands)	Primary Type of Collateral
	Real Estate		Equipment		Other		Total		ACL Allocation
Agricultural	$	916	$	425	$	—	$	1,341	$	—
Commercial and industrial	408		374		2,223		3,005		681
Commercial real estate:
Construction and development	595		—		—		595		—
Farmland	5,185		—		—		5,185		22
Multifamily	987		—		—		987		387
Commercial real estate-other	16,130		—		221		16,351		1,784
Residential real estate:
One- to four- family first liens	410		—		—		410		64
One- to four- family junior liens	—		—		160		160		160
Consumer	—		—		—		—		—
Total	$	24,631	$	799	$	2,604	$	28,034	$	3,098

Troubled Debt Restructurings

TDRs totaled $18.9 million and $20.0 million as of March 31, 2022 and December 31, ~~2016:~~

September 30, 2017 December 31, 2016
Non-Accrual Loans Past Due 90 Days or More and Still Accruing Non-Accrual Loans Past Due 90 Days or More and Still Accruing
(in thousands)
Agricultural $ 517
$ —
$ 2,690
$ —
Commercial and industrial 3,072
190
8,358
—
Commercial real estate:
Construction and development 1,060
—
780
95
Farmland 393
—
227
—
Multifamily —
—
—
—
Commercial real estate-other 13,285
—
7,360
—
Total commercial real estate 14,738
—
8,367
95
Residential real estate:
One- to four- family first liens 1,357
262
1,127
375
One- to four- family junior liens 143
34
116
15
Total residential real estate 1,500
296
1,243
390
Consumer 44
—
10
—
Total $ 19,871
$ 486
$ 20,668
$ 485

Not included in the loans above as of September 30, 2017 and December 31, 2016 were purchased credit impaired loans with an outstanding balance of $0.5 million and $2.6 million, net of a discount of $0.1 million and $0.5 million,2021, respectively.

As of ~~September 30, 2017,~~March 31, 2022, the Company had no$8 thousand of commitments to lend additional funds to ~~any~~ borrowers ~~who have had a~~with loans classified as TDR.

~~Purchased Loans~~The following table sets forth information on the Company's TDRs by class of financing receivable occurring during the stated periods. TDRs include multiple concessions, and the disclosure classifications in the table are based on the primary concession provided to the borrower.

~~Purchased loans acquired in a business combination are recorded~~


	Three Months Ended March 31,
	2022					2021
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
(dollars in thousands)











CONCESSION - Extended maturity date






One- to four- family first liens	—	$	—	$	—	1	$	93	$	93



CONCESSION - Other
Agricultural	1	140		140		—	—		—


Farmland	3	1,529		1,529		—	—		—

Commercial real estate-other	—	—		—		1	44		44
One- to four- family first liens	—	—		—		1	150		150


Total	4	$	1,669	$	1,669	3	$	287	$	287

Table of Contents

Loans by class of financing receivable modified as TDRs that redefaulted within 12 months subsequent to restructure during the stated periods were as follows:


	Three Months Ended March 31,
	2022			2021
	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
(dollars in thousands)











CONCESSION - Extended maturity date





Commercial real estate-other	1	$	7,388	—	$	—














Total	1	$	7,388	—	$	—

4. Derivatives, Hedging Activities and ~~initially measured at their estimated~~Balance Sheet Offsetting

The following table presents the total notional amounts and gross fair ~~value~~values of the Company’s derivatives as of the ~~acquisition date. Credit discounts~~dates indicated. The derivative asset and liability balances are presented on a gross basis, prior to the application of master netting agreements, as included in other assets and other liabilities, respectively, on the ~~determination~~consolidated balance sheets.

The fair values of the Company's derivative instrument assets and liabilities are summarized as follows:


	As of March 31, 2022						As of December 31, 2021
	Notional Amount		Fair Value				Notional Amount		Fair Value
(in thousands)			Assets		Liabilities				Assets		Liabilities
Designated as hedging instruments:
Fair value hedges:
Interest rate swaps	$	24,610	$	1,037	$	458	$	24,802	$	424	$	1,400


Total	$	24,610	$	1,037	$	458	$	24,802	$	424	$	1,400

Not designated as hedging instruments:
Interest rate swaps	$	353,581	$	8,998	$	9,004	$	356,636	$	5,352	$	5,363
RPAs - protection sold	4,167		—		—		4,229		—		—
RPAs - protection purchased	9,579		—		—		9,629		—		2
Interest rate lock commitments	12,582		—		51		17,438		330		—
Interest rate forward loan sales contracts	15,271		334		—		22,710		—		(24)
Total	$	395,180	$	9,332	$	9,055	$	410,642	$	5,682	$	5,341

Derivatives Designated as Hedging Instruments

The Company uses derivative instruments to hedge its exposure to economic risks, including interest rate, liquidity, and credit risk. Certain hedging relationships are formally designated and qualify for hedge accounting under GAAP as fair value or cash flow hedges.

Fair Value Hedges - Derivatives are designated as fair value hedges to limit the Company's exposure to changes in the fair value of assets or liabilities due to movements in interest rates. The Company entered into pay-fixed receive-floating interest rate swaps to manage its exposure to changes in fair value in certain fixed-rate assets. The gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in interest income.

Table of Contents

The table below presents the effect of the Company’s derivative financial instruments designated as hedging instruments on the consolidated statements of income for the periods indicated:


	Location and Amount of Gain or Loss Recognized in Income on Fair Value Hedging Relationships
	For the Three Months Ended March 31,
	2022				2021
(in thousands)	Interest Income		Other Income		Interest Income		Other Income
Total amounts of income and expense line items presented in the consolidated statements of income in which the effects of fair value hedges are recorded	$	(104)	$	—	$	(108)	$	—

Gain (loss) on fair value hedging relationships in subtopic 815-20:
Interest contracts:
Hedged items	(1,553)		—		(1,633)		—
Derivative designated as hedging instruments	942		—		1,123		—

As of March 31, 2022, the following amounts were recorded on the balance sheet related to cumulative basis adjustment for fair value hedges:


Line Item in the Balance Sheet in Which the Hedged Item is Included	Carrying Amount of the Hedged Assets		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Asset
(in thousands)
Loans	$	24,058	$	(574)

Derivatives Not Designated as Hedging Instruments

Interest Rate Swaps - The Company periodically enters into commercial loan interest rate swap agreements in order to provide commercial loan customers with the ability to convert from variable to fixed interest rates. These derivative contracts relate to transactions in which the Company enters into an interest rate swap with a customer, while simultaneously entering into an offsetting interest rate swap with an institutional counterparty.

Credit Risk Participation Agreements -The Company enters into RPAs to manage the credit exposure on interest rate contracts associated with a syndicated loan. The Company may enter into protection purchased RPAs with institutional counterparties to decrease or increase its exposure to a borrower. Under the RPA, the Company will receive or make payment if a borrower defaults on the related interest rate contract. The notional amount of the RPAs reflects the Company’s pro-rata share of the derivative instrument.

Interest Rate Forward Loan Sales Contracts & Interest Rate Lock Commitments - The Company enters into forward delivery contracts to sell residential mortgage loans at specific prices and dates in order to hedge the interest rate risk in its portfolio of mortgage loans held for sale and its residential mortgage interest rate lock commitments.

The following table presents the net gains (losses) recognized on the consolidated statements of income related to the derivatives not designated as hedging instruments for the periods indicated:


	Location in the Consolidated Statements of Income	For the Three Months Ended March 31,
(in thousands)		2022		2021
Interest rate swaps	Other income	$	(5)	$	(34)
RPAs	Other income	(1)		—
Interest rate lock commitments	Loan revenue	381		—
Interest rate forward loan sales contracts	Loan revenue	(311)		—
Total		$	64	$	(34)

Offsetting of Derivatives

The Company has entered into agreements with certain counterparty financial institutions, which include master netting agreements. However, the Company has elected to account for all derivatives with counterparty institutions on a gross basis. The Company manages the risk of default by its borrower counterparties through its normal loan underwriting and credit monitoring policies and procedures.

Table of Contents

The table below presents gross derivatives and the respective collateral received or pledged in the form of other financial instruments as of March 31, 2022 and December 31, 2021, which are generally marketable securities and/or cash. The collateral amounts in the table below are limited to the outstanding balances of the related asset or liability (after netting is applied); thus instances of over-collateralization are not shown. Further, the net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. ~~An allowance for loan losses is not carried over. These purchased loans~~The tabular disclosure of fair value provides the location that derivative assets and liabilities are ~~segregated into two types: purchased credit impaired loans and purchased non-credit impaired loans.~~presented on the consolidated balance sheets.


							Gross Amounts Not Offset in the Balance Sheet
(in thousands)	Gross Amounts of Recognized Assets (Liabilities)		Gross Amounts Offset in the Balance Sheet		Net Amounts of Assets (Liabilities) presented in the Balance Sheet		Financial Instruments		Cash Collateral Received (Paid)		Net Assets (Liabilities)
As of March 31, 2022
Asset Derivatives	$	10,369	$	—	$	10,369	$	—	$	8,310	$	2,059
Liability Derivatives	(9,513)		—		(9,513)		—		1,100		(10,613)

As of December 31, 2021
Asset Derivatives	$	6,106	$	—	$	6,106	$	—	$	—	$	6,106
Liability Derivatives	(6,741)		—		(6,741)		—		(3,250)		(3,491)

~~Purchased non-credit impaired loans are accounted for in accordance~~Credit-risk-related Contingent Features

The Company has an unsecured federal funds line with ~~ASC 310-20 “Nonrefundable Fees and Other Costs” as these loans do not have evidence~~its institutional derivative counterparty. The Company has an agreement with its institutional derivative counterparty that contains a provision under which if the Company defaults on any of ~~significant credit deterioration since origination and it is probable all contractually required payments will be received from the borrower.~~

~~Purchased credit impaired loans are accounted for in accordance with ASC 310-30 “Loans and Debt Securities Acquired with Deteriorated Credit Quality” as they display significant credit deterioration since origination and it is probable, as~~its indebtedness, including default where repayment of the ~~acquisition date, that~~indebtedness has not been accelerated by the lender, then the Company ~~will~~could also be ~~unable to collect all contractually required payments from~~declared in default on its derivative obligations. The Company also has an agreement with its derivative counterparty that contains a provision under which the ~~borrower.~~

~~For purchased non-credit impaired loans~~Company could be declared in default on its derivative obligations if repayment of the ~~accretable discount~~underlying indebtedness is accelerated by the ~~discount applied~~lender due to the ~~expected cash flows~~Company’s default on the indebtedness.

As of March 31, 2022, the portfolio to account for the differences between the interest rates at acquisition and rates currently expected on similar portfolios in the marketplace. As the accretable discount is accreted to interest income over the expected average life of the portfolio, the result will be interest income on loans at the estimated current market rate. We record a provision for the acquired portfolio as the former Central loans renew and the discount is accreted.

For purchased credit impaired loans the difference between contractually required payments at acquisition and the cash flows expected to be collected is referred to as the non-accretable difference. Further, any excess of cash flows expected at acquisition over the estimated fair value ~~is referred~~of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to asthese agreements was $0.7 million. As of March 31, 2022, the ~~accretable yield~~Company had minimum collateral posting thresholds with certain of its derivative counterparties and ~~is recognized into interest income over~~had posted $1.1 million of collateral related to these agreements. If the ~~expected remaining life~~Company had breached any of these provisions at March 31, 2022, it could have been required to settle its obligations under the ~~loan if the timing and amount of the future cash flows are reasonably estimable.~~

~~This discount includes an adjustment on loans that are not accruing or paying contractual interest so that interest income will be recognized~~agreements at ~~the estimated current market rate.~~

~~Subsequent to the purchase date, increases in cash flows over those expected at the purchase date are recognized as interest income prospectively. The present~~their termination value of ~~any decreases in expected cash flows after the purchase date is recognized by recording an allowance for credit losses and a provision for loan losses.~~$0.7 million.

~~Changes in the accretable yield for loans acquired and accounted for under ASC 310-30 were as follows for the three and nine months ended September 30, 2017 and 2016:~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(in thousands)
Balance at beginning of period $ 1,371
$ 3,544
$ 1,961
$ 1,446
Accretion (350 ) (1,167 ) (1,241 ) (2,277 )
Reclassification from nonaccretable difference 63
595
364
3,803
Balance at end of period $ 1,084
$ 2,972
$ 1,084
$ 2,972

6.5. Goodwill and Intangible Assets

The excess of the cost of an acquisition over the fair value of the net assets acquired, including core deposit, trade name, and client relationship intangibles, consists of goodwill. Under ASC Topic 350, goodwill and the non-amortizing portion of the trade name intangible are subject to at least annual assessments for impairment by applying a fair value based test. The Company reviews goodwill and the non-amortizing portion of the trade name intangible at the reporting unit level to determine potential impairment annually on October 1, or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable, by comparing the carrying value of the reporting unit with the fair value of the reporting unit. No impairment was recorded on either the goodwill or the trade name intangible assets during the nine months ended September 30, 2017. The carrying amount of goodwill was ~~$64.7~~$62.5 million at ~~September 30, 2017, the same as at~~March 31, 2022 and December 31, ~~2016.~~2021.

The following table presents the ~~changes in the carrying amount of intangibles (excluding goodwill),~~ gross carrying amount, accumulated amortization, and net ~~book value as~~carrying amount of ~~and~~other intangible assets at the dates indicated:


	As of March 31, 2022						As of December 31, 2021
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Core deposit intangible	$	41,745	$	(31,610)	$	10,135	$	41,745	$	(30,629)	$	11,116
Customer relationship intangible	5,265		(3,916)		1,349		5,265		(3,692)		1,573
Other	2,700		(2,566)		134		2,700		(2,544)		156
	$	49,710	$	(38,092)	$	11,618	$	49,710	$	(36,865)	$	12,845

Indefinite-lived trade name intangible	$	7,040					$	7,040

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The following table provides the estimated future amortization expense for the remaining nine months ~~ended September 30, 2017:~~ending December 31, 2022 and the succeeding annual periods:


(in thousands)	Core Deposit Intangible		Customer Relationship Intangible		Other		Total

2022	$	2,506	$	573	$	57	$	3,136
2023	2,833		518		51		3,402
2024	2,180		239		24		2,443
2025	1,526		19		2		1,547
2026	872		—		—		872
Thereafter	218		—		—		218
Total	$	10,135	$	1,349	$	134	$	11,618

Insurance Agency Intangible Core Deposit Intangible Indefinite-Lived Trade Name Intangible Finite-Lived Trade Name Intangible Customer List Intangible Total
(in thousands)
September 30, 2017
Balance, beginning of period $ 203
$ 6,846
$ 7,040
$ 960
$ 122
$ 15,171
Amortization expense (41 ) (2,193 ) —
(164 ) (14 ) (2,412 )
Balance at end of period $ 162
$ 4,653
$ 7,040
$ 796
$ 108
$ 12,759

Gross carrying amount $ 1,320
$ 18,206
$ 7,040
$ 1,380
$ 330
$ 28,276
Accumulated amortizations (1,158 ) (13,553 ) —
(584 ) (222 ) (15,517 )
Net book value $ 162
$ 4,653
$ 7,040
$ 796
$ 108
$ 12,759

7.6. Other Assets

The components of the ~~Company’s~~Company's other assets as of March 31, 2022 and December 31, 2021 were as follows:


(in thousands)	March 31, 2022		December 31, 2021

Bank-owned life insurance	$	85,903	$	85,372
Interest receivable	19,649		20,117
FHLB stock	11,302		10,157
Mortgage servicing rights	9,276		6,532
Operating lease right-of-use assets, net	2,589		2,840
Federal and state income taxes, current	—		178
Federal and state income taxes, deferred	24,160		13,893
Derivative assets	10,369		6,106
Other receivables/assets	12,975		12,553
	$	176,223	$	157,748

7. Deposits

September 30, 2017 December 31, 2016
(in thousands)
Federal Home Loan Bank Stock $ 13,025
$ 12,800
FDIC indemnification asset, net —
479
Prepaid expenses 1,910
1,760
Mortgage servicing rights 2,132
1,951
Accounts receivable & other miscellaneous assets 3,470
1,323
$ 20,537
$ 18,313

The~~Bank is a member~~ following table presents the composition of our deposits as of the ~~FHLB~~dates indicated:


(in thousands)	March 31, 2022		December 31, 2021
Noninterest bearing deposits	$	1,002,415	$	1,005,369
Interest checking deposits	1,601,249		1,619,136
Money market deposits	983,709		939,523
Savings deposits	650,314		628,242
Time deposits under $250	501,903		505,392
Time deposits of $250 or more	338,135		416,857
Total deposits	$	5,077,725	$	5,114,519

The Company had $5.0 million and $3.4 million in reciprocal time deposits as of ~~Des Moines,~~March 31, 2022 and ownership of FHLB stock is a requirement for such membership. The amount of FHLB stock the Bank is required to hold is directly related to the amount of FHLB advances borrowed. Because this security is not readily marketable and there are no available market values, this security is carried at cost and evaluated for potential impairment each quarter. Redemption of this investment is at the option of the FHLB. No impairment was recorded on FHLB stock in the nine months ended September 30, 2017 or in the year ended December 31, ~~2016.~~

As2021, respectively. Included in interest-bearing checking and money market deposits at March 31, 2022 and December 31, 2021 were $34.9 million and $35.4 million, respectively, of reciprocal deposits. These reciprocal deposits are part of the ~~Central merger,~~IntraFi Network Deposits program, which is used by financial institutions to spread deposits that exceed the FDIC insurance coverage limits out to numerous institutions in order to provide insurance coverage for all participating deposits.

As of March 31, 2022 and December 31, 2021, the Company ~~became a party to certain loss-share agreements with the FDIC from previous Central-related acquisitions. These agreements cover realized losses on loans~~had public entity deposits that were collateralized by investment securities of $268.0 million and foreclosed real estate for specified periods. These loss-share assets are measured separately from the loan portfolios because they are not contractually embedded in the loans and are not transferable with the loans should the Company choose to dispose$303.3 million, respectively.

Table of them. Fair values at the acquisition dates were estimated based on projected cash flows available for loss-share based on the credit adjustments estimated for each loan. The loss-share assets are recorded within other assets on the balance sheet. On July 14, 2017, the Bank, entered into an agreement with the FDIC that terminated all of the Bank's loss sharing agreements related to the former Central Bank.Contents

Mortgage servicing rights are recorded at fair value based on assumptions provided by a third-party valuation service. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the servicing cost per loan, the discount rate, the escrow float rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses.

8. Short-Term Borrowings

~~Short-term~~The following table summarizes our short-term borrowings ~~were as follows~~ as of ~~September 30, 2017 and December 31, 2016:~~the dates indicated:


	March 31, 2022				December 31, 2021
(in thousands)	Weighted Average Rate		Balance		Weighted Average Rate		Balance
Securities sold under agreements to repurchase	0.24	%	$	148,293	0.24	%	$	181,368
Federal Home Loan Bank advances	0.54		32,900		—		—



Total	0.30	%	$	181,193	0.24	%	$	181,368

September 30, 2017 December 31, 2016
(in thousands) Weighted Average Cost Balance Weighted Average Cost Balance
Federal funds purchased 1.34 % $ 16,708
0.83 % $ 35,684
Securities sold under agreements to repurchase 0.36
87,964
0.22
82,187
Total 0.52 % $ 104,672
0.40 % $ 117,871

At September 30, 2017 and December 31, 2016, the Company had no borrowings through the Federal Reserve Discount Window, while the borrowing capacity was $11.7 million as of September 30, 2017, the same as of December 31, 2016. As of both September 30, 2017 and December 31, 2016, the Bank had municipal securities pledged with a market value of $13.0 million,Securities Sold Under an Agreement to the Federal Reserve to secure potential borrowings. The Company also has various other unsecured federal funds agreements with correspondent banks. As of September 30, 2017 and December 31, 2016, there were $16.7 million and $35.7 million of borrowings through these correspondent bank federal funds agreements, respectively.

Repurchase - Securities sold under agreements to repurchase are agreements in which the Company acquires funds by selling assets to another party under a simultaneous agreement to repurchase the same assets at a specified price and date. The Company enters into repurchase agreements and also offers a demand deposit account product to customers that sweeps their balances in excess of an agreed upon target amount into overnight repurchase agreements. All securities sold under agreements to repurchase are recorded on the face of the balance sheet.

~~On April 30, 2015, the Company entered into~~Federal Home Loan Bank Advances - The Bank has a ~~$5.0 million unsecured~~secured line of credit with the FHLBDM. Advances from the FHLBDM are collateralized primarily by one- to four-family residential, commercial and agricultural real estate first mortgages equal to various percentages of the total outstanding notes. See Note 3. Loans Receivable and the Allowance for Credit Losses of the notes to the consolidated financial statements.

Federal Funds Purchased - The Bank has unsecured federal funds lines totaling $155.0 million from multiple correspondent banking relationships. There were no borrowings from such lines at either March 31, 2022 or December 31, 2021.

Other - At March 31, 2022 and December 31, 2021, the Company had no Federal Reserve Discount Window borrowings, while the financing capacity was $56.8 million as of March 31, 2022 and $60.2 million as of December 31, 2021. As of March 31, 2022 and December 31, 2021, the Bank had municipal securities with a market value of $61.3 million and $65.2 million, respectively, pledged to the Federal Reserve Bank of Chicago to secure potential borrowings.

The Company has a credit agreement with a correspondent ~~bank.~~bank with a revolving commitment of $25.0 million. Interest is payable on the $25.0 million revolving commitment at aan annual rate equal to the monthly reset term SOFR rate plus 1.70%. Fees are paid on the average daily unused revolving commitment in the amount of ~~one-month LIBOR plus 2.00%.~~0.30% per annum. The ~~line was renewed in May 2017, and is now scheduled to mature~~agreement matures on ~~April 28, 2018.~~September 30, 2022. The Company had no balance outstanding under this ~~agreement~~revolving credit facility as of ~~September 30, 2017.~~both March 31, 2022 and December 31, 2021.

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9. Long-Term Debt

Junior Subordinated Notes ~~Payable~~Issued to Capital Trusts

The Company has established three statutory business trusts under the laws of the state of Delaware: Central Bancshares Capital Trust II, Barron Investment Capital Trust I, and MidWestOne Statutory Trust II. The trusts exist for the exclusive purposes of (i) issuing trust securities representing undivided beneficial interests in the assets of the respective trust; (ii) investing the gross proceeds of the trust securities in junior subordinated deferrable interest debentures (junior subordinated notes); and (iii) engaging in only those activities necessary or incidental thereto. For regulatory capital purposes, these trust securities qualify as a component of Tier 1 capital.

The table below summarizes the ~~outstanding~~terms of each issuance of junior subordinated notes ~~and the related trust preferred securities issued by each trust~~outstanding as of ~~September 30, 2017 and December 31, 2016:~~

Face Value Book Value Interest Rate Interest Rate at Maturity Date Callable Date
(in thousands) 9/30/2017
September 30, 2017

Central Bancshares Capital Trust II^{(1) (2)}
$ 7,217
$ 6,659
Three-month LIBOR + 3.50% 4.82 % 03/15/2038 03/15/2013

Barron Investment Capital Trust I^{(1) (2)}
2,062
1,645
Three-month LIBOR + 2.15% 3.48 % 09/23/2036 09/23/2011

MidWestOne Statutory Trust II⁽¹⁾
15,464
15,464
Three-month LIBOR + 1.59% 2.91 % 12/15/2037 12/15/2012
Total $ 24,743
$ 23,768

Face Value Book Value Interest Rate Interest Rate at Maturity Date Callable Date
(in thousands) 12/31/2016
December 31, 2016

Central Bancshares Capital Trust II^{(1) (2)}
$ 7,217
$ 6,614
Three-month LIBOR + 3.50% 4.46 % 03/15/2038 03/15/2013

Barron Investment Capital Trust I^{(1) (2)}
2,062
1,614
Three-month LIBOR + 2.15% 3.15 % 09/23/2036 09/23/2011

MidWestOne Statutory Trust II⁽¹⁾
15,464
15,464
Three-month LIBOR + 1.59% 2.55 % 12/15/2037 12/15/2012
Total $ 24,743
$ 23,692

~~(1) All distributions are cumulative and paid in cash quarterly.~~

~~(2) Central Bancshares Capital Trust II and Barron Investment Capital Trust I were established by Central prior to~~ the ~~Company’s merger with Central, and the junior subordinated notes issued by Central were assumed by the Company.~~dates indicated:


(in thousands)	Face Value		Book Value		Interest Rate	Rate		Maturity Date	Callable Date
March 31, 2022
ATBancorp Statutory Trust I	$	7,732	$	6,898	Three-month LIBOR + 1.68%	2.51	%	06/15/2036	06/15/2011
ATBancorp Statutory Trust II	12,372		10,923		Three-month LIBOR + 1.65%	2.48	%	09/15/2037	06/15/2012
Barron Investment Capital Trust I	2,062		1,808		Three-month LIBOR + 2.15%	3.11	%	09/23/2036	09/23/2011
Central Bancshares Capital Trust II	7,217		6,891		Three-month LIBOR + 3.50%	4.33	%	03/15/2038	03/15/2013
MidWestOne Statutory Trust II	15,464		15,464		Three-month LIBOR + 1.59%	2.42	%	12/15/2037	12/15/2012
Total	$	44,847	$	41,984

December 31, 2021
ATBancorp Statutory Trust I	$	7,732	$	6,888	Three-month LIBOR + 1.68%	1.88	%	06/15/2036	06/15/2011
ATBancorp Statutory Trust II	12,372		10,908		Three-month LIBOR + 1.65%	1.85	%	09/15/2037	06/15/2012
Barron Investment Capital Trust I	2,062		1,800		Three-month LIBOR + 2.15%	2.37	%	09/23/2036	09/23/2011
Central Bancshares Capital Trust II	7,217		6,880		Three-month LIBOR + 3.50%	3.70	%	03/15/2038	03/15/2013
MidWestOne Statutory Trust II	15,464		15,464		Three-month LIBOR + 1.59%	1.79	%	12/15/2037	12/15/2012
Total	$	44,847	$	41,940

The trust preferred securities are subject to mandatory redemption, in whole or in part, upon repayment of the junior subordinated notes at the stated maturity date or upon redemption of the junior subordinated notes. Each trust’s ability to pay amounts due on the trust preferred securities is solely dependent upon the Company making payment on the related junior subordinated notes. The Company’s obligation under the junior subordinated notes and other relevant trust agreements, in aggregate, constitutes a full and unconditional guarantee by the Company of each trust’s obligations under the trust preferred securities issued by each trust. The Company has the right to defer payment of interest on the junior subordinated notes and, therefore, distributions on the trust preferred securities, for up to five years, but not beyond the stated maturity date in the table above. During any such deferral period the Company may not pay cash dividends on its stock and generally may not repurchase its stock.

Subordinated Debentures

~~10.~~On July 28, 2020, the Company completed the private placement offering of $65.0 million of its subordinated notes, of which $63.75 million have been exchanged for subordinated notes registered under the Securities Act of 1933. The 5.75% fixed-to-floating rate subordinated notes are due July 30, 2030. At March 31, 2022, 100% of the subordinated notes qualified as Tier 2 capital. Per applicable Federal Reserve rules and regulations, the amount of the subordinated notes qualifying as Tier 2 regulatory capital will be phased-out by 20% of the amount of the subordinated notes in each of the five years beginning on the fifth anniversary preceding the maturity date of the subordinated notes.

Other Long-Term ~~Borrowings~~Debt

Long-term borrowings were as follows as of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016:~~2021:


	March 31, 2022				December 31, 2021
(in thousands)	Weighted Average Rate		Balance		Weighted Average Rate		Balance
Finance lease payable	8.89	%	$	912	8.89	%	$	951
FHLB borrowings	2.74		33,094		2.76		48,113

Total	2.90	%	$	34,006	2.88	%	$	49,064

September 30, 2017 December 31, 2016
(in thousands) Weighted Average Cost Balance Weighted Average Cost Balance
FHLB Borrowings 1.45 % $ 145,000
1.56 % $ 115,000
Note payable to unaffiliated bank 2.99
13,750
2.52
17,500
Total 1.58 % $ 158,750
1.69 % $ 132,500

~~The Company utilizes FHLB borrowings as a supplement to customer deposits to fund interest-earning assets and to assist in managing interest rate risk.~~ As a member of the ~~Federal Home Loan Bank of Des Moines,~~FHLBDM, the Bank may borrow funds from the FHLB in amounts up to ~~35%~~45% of the Bank’s total assets, provided the Bank is able to pledge an adequate amount of qualified assets to secure the borrowings. Advances from the FHLB are collateralized primarily by one- to four-family residential, commercial and agricultural real estate first mortgages equal to various percentages of the total outstanding notes. See Note ~~5 “Loans~~3. Loans Receivable and the Allowance for ~~Loan Losses”~~Credit Losses of the notes to the unaudited consolidated financial statements. At March 31, 2022, FHLB long-term borrowings included advances from the FHLBC, which were collateralized by investment securities. See Note 2. Debt Securities of the notes to the unaudited consolidated financial statements.

~~On April 30, 2015,~~

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As of March 31, 2022, FHLB borrowings were as follows:


(in thousands)	Weighted Average Rate		Amount
Due in 2022	2.56	%	$	16,000
Due in 2023	2.79	%	11,000
Due in 2024	3.15	%	6,000



Total			33,000
Valuation adjustment from acquisition accounting			94
Total			$	33,094

10. Earnings per Share

The following table presents the computation of basic and diluted earnings per common share for the periods indicated:


	Three Months Ended March 31,
(dollars in thousands, except per share amounts)	2022		2021
Basic Earnings Per Share:
Net income	$	13,895	$	21,648
Weighted average shares outstanding	15,683,136		15,990,724
Basic earnings per common share	$	0.89	$	1.35

Diluted Earnings Per Share:
Net income	$	13,895	$	21,648
Weighted average shares outstanding, including all dilutive potential shares	15,717,960		16,020,920
Diluted earnings per common share	$	0.88	$	1.35

11. Regulatory Capital Requirements and Restrictions on Subsidiary Cash

Regulatory Capital and Reserve Requirement - The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's consolidated financial statements. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

As of March 31, 2022 and December 31, 2021, the Bank was not required to maintain reserve balances in cash on hand or on deposit with Federal Reserve Banks, and therefore the total amount held in reserve for each of these periods was zero dollars.

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A comparison of the Company's and the Bank's capital with the corresponding minimum regulatory requirements in effect as of March 31, 2022 and December 31, 2021, is presented below:


	Actual		For Capital Adequacy Purposes With Capital Conservation Buffer(1)		To Be Well Capitalized Under Prompt Corrective Action Provisions
(dollars in thousands)	Amount	Ratio	Amount	Ratio	Amount	Ratio
At March 31, 2022
Consolidated:
Total capital/risk weighted assets	$624,401	12.89%	$508,653	10.50%	N/A	N/A
Tier 1 capital/risk weighted assets	517,418	10.68	411,767	8.50	N/A	N/A
Common equity tier 1 capital/risk weighted assets	475,434	9.81	339,102	7.00	N/A	N/A
Tier 1 leverage capital/average assets	517,418	8.85	233,833	4.00	N/A	N/A
MidWestOne Bank:
Total capital/risk weighted assets	$585,720	12.12%	$507,416	10.50%	$483,253	10.00%
Tier 1 capital/risk weighted assets	543,737	11.25	410,765	8.50	386,603	8.00
Common equity tier 1 capital/risk weighted assets	543,737	11.25	338,277	7.00	314,115	6.50
Tier 1 leverage capital/average assets	543,737	9.30	233,765	4.00	292,206	5.00

At December 31, 2021
Consolidated:
Total capital/risk weighted assets	$615,060	13.09%	$493,283	10.50%	N/A	N/A
Tier 1 capital/risk weighted assets	508,687	10.83	399,324	8.50	N/A	N/A
Common equity tier 1 capital/risk weighted assets	466,747	9.94	328,855	7.00	N/A	N/A
Tier 1 leverage capital/average assets	508,687	8.67	234,745	4.00	N/A	N/A
MidWestOne Bank:
Total capital/risk weighted assets	$584,348	12.46%	$492,436	10.50%	$468,987	10.00%
Tier 1 capital/risk weighted assets	542,975	11.58	398,639	8.50	375,189	8.00
Common equity tier 1 capital/risk weighted assets	542,975	11.58	328,291	7.00	304,841	6.50
Tier 1 leverage capital/average assets	542,975	9.25	234,686	4.00	293,358	5.00

(1) Includes a capital conservation buffer of 2.50%.

Subordinated Notes - The Company completed a private placement of $65.0 million aggregate principal amount of 5.75% fixed-to-floating rate subordinated notes on July 28, 2020. The subordinated notes are intended to qualify as Tier 2 capital for regulatory purposes.

12. Commitments and Contingencies

Credit-related financial instruments - The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, commitments to sell loans, and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheets.

The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. The following table summarizes the Bank’s commitments as of the dates indicated:


	March 31, 2022		December 31, 2021
(in thousands)
Commitments to extend credit	$	1,034,843	$	1,014,397
Commitments to sell loans	6,466		12,917
Standby letters of credit	16,757		16,342
Total	$	1,058,066	$	1,043,656

The Bank’s exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the party. Collateral held varies, but may include accounts receivable, crops, livestock, inventory, property and equipment, residential real estate and income-producing commercial properties.

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Commitments to sell loans are agreements to sell loans held for sale to third parties at an agreed upon price.

Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements and, generally, have terms of one year or less. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank holds collateral, which may include accounts receivable, inventory, property, equipment and income-producing properties, that support those commitments, if deemed necessary. In the event the customer does not perform in accordance with the terms of the agreement with the third party, the Bank would be required to fund the commitment. The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above. If the commitment is funded, the Bank would be entitled to seek recovery from the customer.

Liability for Off-Balance Sheet Credit Losses - The Company records a liability for off-balance sheet credit losses through a charge to credit loss expense (or a reversal of credit loss expense) on the Company's consolidated statements of income and other liabilities on the Company's consolidated balance sheets. At March 31, 2022, the liability for off-balance-sheet credit losses totaled $4.3 million, whereas the total amount of the liability as of December 31, 2021 was $4.0 million. The total amount recorded in credit loss expense (benefit) for the three-months ended March 31, 2022 was an expense of $0.3 million, while a credit loss benefit of $0.2 million was recorded for the three-months ended March 31, 2021.

Litigation - In the normal course of business, the Company ~~entered into~~and its subsidiaries have been named, from time to time, as defendants in various legal actions. Certain of the actual or threatened legal actions may include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. Management, after consulting with legal counsel, is of the opinion that the ultimate liability, if any, resulting from these pending or threatened actions and proceedings will not have a ~~$35.0 million unsecured note payable with a correspondent bank with a maturity date of June 30, 2020. The Company drew $25.0 million~~material effect on the ~~note prior to June 30, 2015, at which time the~~

ability to obtain additional advances ceased. Payments of principal and interest are payable quarterly, which began on September 30, 2015. As of September 30, 2017, $13.8 million of that note was outstanding.

~~11. Income Taxes~~

~~The income tax provisions for the~~ ~~three and nine months~~ ~~ended September 30, 2017 and~~ ~~2016~~ ~~were less than the amounts computed by applying the maximum effective federal income tax rate of 35% to the income before income taxes, because~~financial statements of the ~~following items:~~Company.

Concentrations of credit risk - Substantially all of the Bank’s loans, commitments to extend credit and standby letters of credit have been granted to customers in the Bank’s market areas. Although the loan portfolio of the Bank is diversified, approximately 63% of the loans are real estate loans, excluding farmland, and approximately 7% are agriculturally related. The concentrations of credit by type of loan are set forth in Note 3. Loans Receivable and the Allowance for Credit Losses. Commitments to extend credit are primarily related to commercial loans and home equity loans. Standby letters of credit were granted primarily to commercial borrowers. Investments in securities issued by state and political subdivisions involve certain governmental entities within Iowa and Minnesota. The carrying value of investment securities of Iowa and Minnesota political subdivisions totaled 15% and 11%, respectively, as of March 31, 2022.

For the Three Months Ended September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016
(in thousands) Amount % of Pretax Income Amount % of Pretax Income Amount % of Pretax Income Amount % of Pretax Income
Expected provision $ 2,898
35.0 % $ 3,098
35.0 % $ 9,762
35.0 % $ 7,997
35.0 %
Tax-exempt interest (808 ) (9.7 ) (761 ) (8.6 ) (2,389 ) (8.6 ) (2,260 ) (9.9 )
Bank-owned life insurance (121 ) (1.5 ) (114 ) (1.3 ) (346 ) (1.2 ) (363 ) (1.6 )
State income taxes, net of federal income tax benefit 366
4.4
398
4.5
1,214
4.4
1,045
4.6
Non-deductible acquisition expenses —
—
18
0.2
—
—
71
0.3
General business credits (405 ) (4.9 ) (15 ) (0.2 ) (445 ) (1.6 ) (168 ) (0.7 )
Other 8
0.1
5
0.1
(193 ) (0.7 ) 6
—
Total income tax provision $ 1,938
23.4 % $ 2,629
29.7 % $ 7,603
27.3 % $ 6,328
27.7 %

~~12.~~ ~~Estimated~~13. Fair Value of Financial Instruments and Fair Value Measurements

Fair value is the exchange price that would be received ~~in selling~~for an asset or paid to transfer a liability (exit price) in ~~transferring a~~the principal or most advantageous market for the asset or liability in an orderly transaction between market ~~participants. A fair value~~participants on the measurement ~~assumes~~date. There are three levels of inputs that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) marketmay be used to measure ~~the~~ fair value of the asset or liability is not adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (1) independent, (2) knowledgeable, (3) able to transact, and (4) willing to transact.values:

GAAP requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, GAAP establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

•Level 1 ~~Inputs~~– ~~Unadjusted quoted~~Quoted prices (unadjusted) for identical assets or liabilities in active markets that the ~~reporting~~ entity has the ability to access atas of the measurement date.

•Level 2 ~~Inputs~~– ~~Inputs~~Significant other observable inputs other than ~~quoted prices included in~~ Level 1 ~~that are observable for the asset or liability, either directly or indirectly. These might include~~prices, such as quoted prices for similar assets or liabilities, ~~in active markets,~~ quoted prices ~~for identical or similar assets or liabilities~~ in markets that are not active, ~~inputs~~or other ~~than quoted prices~~inputs that are observable ~~for the asset (such as interest rates, volatilities, prepayment speeds, credit risks, etc.)~~ or can be corroborated by observable market data.

•Level 3 – Significant unobservable inputs that ~~are derived principally from or corroborated by market data by correlation or other means.~~

~~Level 3 Inputs~~ ~~– Unobservable inputs for determining the fair values of assets or liabilities that~~ reflect ~~an entity’s~~a company’s own assumptions about the assumptions that market participants would use in pricing ~~the assets~~an asset or ~~liabilities.~~

liability.

It is the Company’s policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements. The Company is required to use observable inputs, to the extent available, in the fair value estimation process unless that data results from forced liquidations or distressed sales. A description ofFor additional information regarding the valuation methodologies used ~~for instruments measured~~to measure the Company's assets recorded at fair value, ~~as well as the general classification of such~~and for estimating fair value for financial instruments ~~pursuant to the valuation hierarchy, is set forth below.~~

V~~aluation methods for instruments measured~~not recorded at fair value, see Note 1. Nature of Business and Significant Accounting Policies and Note 20. Estimated Fair Value of Financial Instruments and Fair Value Measurements to the consolidated financial statements in the Company's 2021 Annual Report on Form 10-K, filed with the SEC on March 10, 2022.

The Company uses fair value to measure certain assets and liabilities on a recurring ~~basis.~~

~~Securities Available for Sale~~ ~~- The Company’s investment securities classified as~~basis, primarily available for sale ~~include:~~ debt securities, ~~issued by~~derivatives and mortgage servicing rights. For assets measured at the U.S. Treasury and other U.S. Government agencies and corporations, debt securities issued by state and political subdivisions, mortgage-backed securities, collateralized mortgage obligations, corporate debt securities, and equity securities. Quoted exchange prices are available for equity securities, which are classified as Level 1. The Company utilizes an independent pricing service to obtainlower of cost or fair value, the fair value measurement criteria may or may not be met during a reporting period, and such measurements are therefore considered "nonrecurring" for purposes of ~~debt securities. On~~disclosing the Company's fair value measurements. Fair value is used on a ~~quarterly~~nonrecurring basis ~~the Company selects a sample of 30 securities from its primary pricing service and compares them~~ to ~~a secondary independent pricing service to validate value. In addition, the Company periodically reviews the pricing methodology utilized by the primary independent service~~adjust carrying values for ~~reasonableness. Debt securities issued by the U.S. Treasury~~collateral dependent individually analyzed loans and other U.S. Government agencies and corporations, mortgage-backed securities, and collateralized mortgage obligations are priced utilizing industry-standard models that consider various assumptions, including time value, yield curves, volatility factors, prepayment speeds, default rates, loss severity, current market and contractual prices for the underlying financial instruments, as well as other relevant economic measures. Substantially allreal estate owned.

Table of these assumptions are observable in the marketplace, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace and are classified as Level 2. Municipal securities are valued using a type of matrix, or grid, pricing in which securities are benchmarked against the treasury rate based on credit rating. These model and matrix measurements are classified as Level 2 in the fair value hierarchy. On an annual basis, a group of selected municipal securities have their credit rating evaluated by a securities dealer and that information is used to verify the primary independent service’s rating and pricing.Contents

Recurring Basis

The following table summarizes assets and liabilities measured at fair value on a recurring basis as of ~~September 30, 2017 and December 31, 2016. There were no liabilities subject to fair value measurement as of these dates. The assets are segregated~~the dates indicated, by ~~the~~ level ~~of valuation inputs~~ within the fair value ~~hierarchy utilized to measure fair value:~~hierarchy:


	Fair Value Measurement at March 31, 2022 Using
(in thousands)	Total		Level 1		Level 2		Level 3
Assets:
Available for sale debt securities:

State and political subdivisions	$	288,988	$	—	$	288,988	$	—
Mortgage-backed securities	7,101		—		7,101		—
Collateralized mortgage obligations	171,497		—		171,497		—
Corporate debt securities	678,052		—		678,052		—
Derivative assets	10,369		—		10,369		—
Mortgage servicing rights	9,276		—		9,276		—

Liabilities:
Derivative liabilities	$	9,513	$	—	$	9,462	$	51

Fair Value Measurement at September 30, 2017 Using
(in thousands) Total
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Assets:
Available for sale debt securities:
U.S. Government agencies and corporations $ 5,714
$ —
$ 5,714
$ —
State and political subdivisions 149,612
—
149,612
—
Mortgage-backed securities 51,300
—
51,300
—
Collateralized mortgage obligations 166,432
—
166,432
—
Corporate debt securities 51,829
—
51,829
—
Total available for sale debt securities 424,887
—
424,887
—
Other equity securities 2,354
2,354
—
—
Total securities available for sale $ 427,241
$ 2,354
$ 424,887
$ —


	Fair Value Measurement at December 31, 2021 Using
(in thousands)	Total		Level 1		Level 2		Level 3
Assets:
Debt securities available for sale:
U.S. Government agencies and corporations	$	266	$	—	$	266	$	—
State and political subdivisions	765,742		—		765,742		—
Mortgage-backed securities	100,626		—		100,626		—
Collateralized mortgage obligations	768,899		—		768,899		—
Corporate debt securities	652,577		—		652,577		—
Derivative assets	6,106		—		5,776		330
Mortgage servicing rights	6,532		—		6,532		—

Liabilities:
Derivative liabilities	$	6,741	$	—	$	6,741	$	—

Fair Value Measurement at December 31, 2016 Using
(in thousands) Total
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Assets:
Available for sale debt securities:
U.S. Government agencies and corporations $ 5,905
$ —
$ 5,905
$ —
State and political subdivisions 165,272
—
165,272
—
Mortgage-backed securities 61,354
—
61,354
—
Collateralized mortgage obligations 171,267
—
171,267
—
Corporate debt securities 72,453
—
72,453
—
Total available for sale debt securities 476,251
—
476,251
—
Other equity securities 1,267
1,267
—
—
Total securities available for sale $ 477,518
$ 1,267
$ 476,251
$ —

There were no transfers of assets between Level 3 and other levels of the fair value hierarchy during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 or the year ended December 31, ~~2016.~~

~~There have been no changes in valuation techniques used for any assets measured at fair value during the~~ ~~three and nine months~~ ~~ended September 30, 2017 or the year ended December 31, 2016.~~2021.

Changes in the fair value of available for sale debt securities are included in other comprehensive ~~income to~~income.

The following table presents the ~~extent~~valuation technique, significant unobservable inputs, and quantitative information about the ~~changes are not considered OTTI. OTTI tests are performed on a quarterly basis~~unobservable inputs used for fair value measurements of the financial instruments held by the Company and ~~any decline in~~categorized within Level 3 of the fair value hierarchy as of ~~an individual security below its cost that is deemed to be other-than-temporary results in a write-down that is reflected directly in~~ the ~~Company’s consolidated statements~~dates indicated:


	Fair Value at
(dollars in thousands)	March 31, 2022		December 31, 2021		Valuation Techniques(s)	Unobservable Input	Range of Inputs					Weighted Average
Interest rate lock commitments	$	(51)	$	330	Quoted or published market prices of similar instruments, adjusted for factors such as pull-through rate assumptions	Pull-through rate	70	%	-	100	%	91	%

Table of ~~operations.~~Contents

~~Valuation methods for instruments~~Nonrecurring Basis

The following table presents assets measured at fair value on a nonrecurring basis

~~Collateral Dependent Impaired Loans~~ ~~- From time to time, a loan is considered impaired and an allowance for credit losses is established. The specific reserves for collateral dependent impaired loans are based on the fair value~~ as of the collateral less estimated costs to sell. The fair value of collateral is determined based on appraisals. In some cases, adjustments are made to the appraised values due to various factors, including age of the appraisal, age of comparables included in the appraisal, and known changes in the market and in the collateral. Because many of these inputs are unobservable, the valuations are classified as Level 3.dates indicated:

~~Other Real Estate Owned (“OREO”)~~ - OREO represents property acquired through foreclosures and settlements of loans. Property acquired through or in lieu of foreclosure are initially recorded at fair value less estimated selling cost at the date of foreclosure, establishing a new cost basis. The Company considers third party appraisals as well as independent fair value assessments from real estate brokers or persons involved in selling OREO in determining the fair value of particular properties. Accordingly, the valuation of OREO is subject to significant external and internal judgment. The Company also periodically reviews OREO to determine whether the property continues to be carried at the lower of its recorded book value or fair value of the property, less disposal costs. Because many of these inputs are unobservable, the valuations are classified as Level 3.


	Fair Value Measurement at March 31, 2022 Using
(in thousands)	Total		Level 1		Level 2		Level 3
Collateral dependent individually analyzed loans	$	3,721	$	—	$	—	$	3,721
Foreclosed assets, net	273		—		—		273


	Fair Value Measurement at December 31, 2021 Using
(in thousands)	Total		Level 1		Level 2		Level 3
Collateral dependent individually analyzed loans	$	15,772	$	—	$	—	$	15,772
Foreclosed assets, net	357		—		—		357

The following table discloses the Company’s estimated fair value amounts of its assets recorded at fair value on a nonrecurring basis. It is management’s belief that the fair values presented below are reasonable based on the valuation techniques and data available to the Company as of ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016, as more fully described above.~~

Fair Value Measurement at September 30, 2017 Using
(in thousands) Total
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Assets:
Collateral dependent impaired loans $ 6,369
$ —
$ —
$ 6,369
Other real estate owned $ 1,343
$ —
$ —
$ 1,343

Fair Value Measurement at December 31, 2016 Using
(in thousands) Total
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Assets:
Collateral dependent impaired loans $ 8,774
$ —
$ —
$ 8,774
Other real estate owned $ 2,097
$ —
$ —
$ 2,097

~~The following presents the carrying amount and estimated fair value of the financial instruments held by the Company at~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016~~. The information presented is subject to change over time based on a variety of factors. The operations of the Company are managed on a going concern basis and not a liquidation basis. As a result, the ultimate value realized from the financial instruments presented could be substantially different when actually recognized over time through the normal course of operations. Additionally, a substantial portion of the Company’s inherent value is the capitalization and franchise value of the Bank. Neither of these components has been given consideration in the presentation of fair values below.

September 30, 2017

Carrying
Amount

Estimated
Fair Value
Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs
(Level 3)
(in thousands)
Financial assets:
Cash and cash equivalents $ 42,101
$ 42,101
$ 42,101
$ —
$ —
Investment securities:
Available for sale 427,241
427,241
2,354
424,887
—
Held to maturity 183,304
183,946
—
183,946
—
Total investment securities 610,545
611,187
2,354
608,833
—
Loans held for sale 612
625
—
—
625
Loans, net 2,237,301
2,235,820
—
2,235,820
—
Accrued interest receivable 13,871
13,871
13,871
—
—
Federal Home Loan Bank stock 13,025
13,025
—
13,025
—
Financial liabilities:
Deposits:
Non-interest bearing demand 477,376
477,376
477,376
—
—
Interest-bearing checking 1,137,592
1,137,592
1,137,592
—
—
Savings 203,506
203,506
203,506
—
—
Certificates of deposit under $100,000 324,024
322,071
—
322,071
—
Certificates of deposit $100,000 and over 347,917
346,866
—
346,866
—
Total deposits 2,490,415
2,487,411
1,818,474
668,937
—
Federal funds purchased and securities sold under agreements to repurchase 104,672
104,672
104,672
—
—
Federal Home Loan Bank borrowings 145,000
144,381
—
144,381
—
Junior subordinated notes issued to capital trusts 23,768
19,514
—
19,514
—
Long-term debt 13,750
13,750
—
13,750
—
Accrued interest payable 1,449
1,449
1,449
—
—

December 31, 2016

Carrying
Amount

Estimated
Fair Value
Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs
(Level 3)
(in thousands)
Financial assets:
Cash and cash equivalents $ 43,228
$ 43,228
$ 43,228
$ —
$ —
Investment securities:
Available for sale 477,518
477,518
1,267
476,251
—
Held to maturity 168,392
164,792
—
164,792
—
Total investment securities 645,910
642,310
1,267
641,043
—
Loans held for sale 4,241
4,286
—
—
4,286
Loans, net 2,143,293
2,138,252
—
2,138,252
—
Accrued interest receivable 13,871
13,871
13,871
—
—
Federal Home Loan Bank stock 12,800
12,800
—
12,800
—
Financial liabilities:
Deposits:
Non-interest bearing demand 494,586
494,586
494,586
—
—
Interest-bearing checking 1,136,282
1,136,282
1,136,282
—
—
Savings 197,698
197,698
197,698
—
—
Certificates of deposit under $100,000 326,832
324,978
—
324,978
—
Certificates of deposit $100,000 and over 325,050
324,060
—
324,060
—
Total deposits 2,480,448
2,477,604
1,828,566
649,038
—
Federal funds purchased and securities sold under agreements to repurchase 117,871
117,871
117,871
—
—
Federal Home Loan Bank borrowings 115,000
114,590
—
114,590
—
Junior subordinated notes issued to capital trusts 23,692
19,248
—
19,248
—
Long-term debt 17,500
17,500
—
17,500
—
Accrued interest payable 1,472
1,472
1,472
—
—

~~Cash and cash equivalents, federal funds purchased, securities sold under repurchase agreements, and accrued interest are instruments with carrying values that approximate fair value.~~

Investment securities available for sale are measured at fair value on a recurring basis. Held to maturity securities are carried at amortized cost. Fair value is based upon quoted prices, if available. If a quoted price is not available, the fair value is obtained from benchmarking the security against similar securities by using a third-party pricing service.

Loans held for sale are carried at the lower of cost or fair value, with fair value being based on recent observable loan sales. The portfolio has historically consisted primarily of residential real estate loans.

For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair values for other loans are determined using estimated future cash flows, discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality. The Company does record nonrecurring fair value adjustments to loans to reflect (1) partial write-downs and allowances that are based on the observable market price or appraised value of the collateral or (2) the full charge-off of the loan carrying value.

~~The fair value of FHLB stock is estimated at its carrying value and redemption price of $100 per share.~~

Deposit liabilities are carried at historical cost. The fair value of non-interest bearing demand deposits, savings accounts and certain interest-bearing checking deposits is the amount payable on demand at the reporting date. The fair value of fixed maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. If the fair value of the fixed maturity certificates of deposit is calculated at less than the carrying amount, the carrying value of these deposits is reported as the fair value.

FHLB borrowings, junior subordinated notes issued to capital trusts, and long-term debt are recorded at historical cost. The fair value of these items is estimated using discounted cash flow analysis, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements.

~~The following~~ presents the valuation technique(s), unobservable inputs, and quantitative information about the unobservable inputs used for fair value measurements of the financial instruments held by the Company at ~~September 30, 2017~~,and categorized within Level 3 of the fair value ~~hierarchy:~~

Quantitative Information About Level 3 Fair Value Measurements
(dollars in thousands) Fair Value at June 30, 2017 Valuation Techniques(s) Unobservable Input Range of Inputs Weighted Average
Collateral dependent impaired loans $ 6,369
Modified appraised value Third party appraisal NM * NM * NM *
Appraisal discount NM * NM * NM *
Other real estate owned $ 1,343
Modified appraised value Third party appraisal NM * NM * NM *
Appraisal discount NM * NM * NM *

* Not Meaningful. Third party appraisals are obtainedhierarchy as ~~to the value~~ of the underlying asset, but disclosure of this information would not provide meaningful information, as the range will vary widely from loan to loan. Types of discounts considered include age of the appraisal, local market conditions, current condition of the property, and estimated sales costs. These discounts will also vary from loan to loan, thus providing a range would not be meaningful.dates indicated:


	Fair Value at
(dollars in thousands)	March 31, 2022		December 31, 2021		Valuation Techniques(s)	Unobservable Input	Range of Inputs					Weighted Average
Collateral dependent individually analyzed loans	$	3,721	$	15,772	Fair value of collateral	Valuation adjustments	—	%	-	60	%	25	%
Foreclosed assets, net	$	273	$	357	Fair value of collateral	Valuation adjustments	8	%	-	12	%	10	%

Changes in assumptions or estimation methodologies may have a material effect on these estimated fair values.

Table of Contents

~~13. Operating Segments~~Carrying Amount and Estimated Fair Value of Financial Instruments

The ~~Company’s activities are considered to be a single industry segment for financial reporting purposes. The Company is engaged in the business of commercial~~carrying amount and retail banking, investment management and insurance services with operations throughout central and eastern Iowa, the Twin Cities area of Minnesota and Wisconsin, Florida, and Denver, Colorado. Substantially all income is derived from a diverse base of commercial, mortgage and retail lending activities, and investments.

~~14. Effect of New Financial Accounting Standards~~

~~In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2014-09,~~ ~~Revenue from Contract with Customers (Topic 606).~~ The guidance in this update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following five steps: 1) identify the contracts(s) with the customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations in the contract; and 5) recognize revenue when (or as) the entity satisfies a performance obligation. The guidance also specifies the accounting for some costs to obtain or fulfill a contract with a customer. For a public entity, the amendments in this update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. In July 2015, the FASB announced a delay to the effective date of Accounting Standards Update No. 2015-09, ~~Revenue from Contract with Customers (Topic 606).~~ Reporting entities may choose to adopt the standard as of the original date, or take advantage of a one-year delay. For a public entity, the revised effective date is for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is not permitted prior to the original effective date. The Company’s revenue is comprised of interest income on financial assets, which is excluded from the scope of this new guidance, and noninterest income. The Company expects this new guidance will potentially require it to change how certain recurring revenue streams are recognized within trust and asset management fees, sales of other real estate, and debit card interchange fees. The Company is finalizing analysis of the expected areas of impact, and currently does not expect the effect on the Company’s consolidated financial statements to be material. The Company has determined that it will not early-adopt this standard, and plans to utilize the modified retrospective transition method, if material.

~~In August 2014, the FASB issued Accounting Standards Update No. 2014-15,~~ ~~Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.~~ The amendments in this update provide guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. In doing so, the amendment should reduce diversity in the timing and content of footnote disclosures. Disclosures are required if it is probable an entity will be unable to meet its obligations within the look-forward period of twelve months after the financial statements are made available. Incremental substantial doubt disclosure is required if the probability is not mitigated by management’s plans. The new standard applies to all entities for the first annual period ending after

~~December 15, 2016, and interim periods thereafter. The adoption of this standard did not have a material effect on the Company’s consolidated financial statements.~~

~~In January 2016, the FASB issued Accounting Standards Update No. 2016-01,~~ ~~Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.~~ The guidance in this update makes changes to the current GAAP model primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The accounting for other financial instruments, such as loans, investments in debt securities, and financial liabilities is largely unchanged. The treatment of gains and losses for all equity securities, including those without a readily determinable market value, is expected to result in additional volatility in the income statement, with the loss of mark to market via equity for these investments. Additionally, changes in the allowable method for determining theestimated fair value of financial instruments at March 31, 2022 and December 31, 2021 were as follows:


	March 31, 2022
(in thousands)	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	59,829	$	59,829	$	59,829	$	—	$	—
Debt securities available for sale	1,145,638		1,145,638		—		1,145,638		—
Debt securities held to maturity	1,204,212		1,105,814		—		1,105,814		—
Loans held for sale	6,466		6,361		—		6,361		—
Loans held for investment, net	3,203,835		3,212,334		—		—		3,212,334
Interest receivable	19,649		19,649		—		19,649		—
FHLB stock	11,302		11,302		—		11,302		—
Derivative assets	10,369		10,369		—		10,369		—
Financial liabilities:
Noninterest bearing deposits	1,002,415		1,002,415		1,002,415		—		—
Interest bearing deposits	4,075,310		4,063,299		3,235,272		828,027		—
Short-term borrowings	181,193		181,193		181,193		—		—
Finance leases payable	912		912		—		912		—
FHLB borrowings	33,094		33,088		—		33,088		—
Junior subordinated notes issued to capital trusts	41,984		37,208		—		37,208		—
Subordinated debentures	63,908		67,485		—		67,485		—

Derivative liabilities	9,513		9,513		—		9,462		51


	December 31, 2021
(in thousands)	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	203,830	$	203,830	$	203,830	$	—	$	—

Debt securities available for sale	2,288,110		2,288,110		—		2,288,110		—

Debt securities held to maturity	—		—		—		—		—
Loans held for sale	12,917		12,970		—		12,970		—
Loans held for investment, net	3,196,312		3,207,314		—		—		3,207,314
Interest receivable	20,117		20,117		—		20,117		—
FHLB stock	10,157		10,157		—		10,157		—
Derivative assets	6,106		6,106		—		5,776		330
Financial liabilities:
Noninterest bearing deposits	1,005,369		1,005,369		1,005,369		—		—
Interest bearing deposits	4,109,150		4,105,858		3,186,901		918,957		—
Short-term borrowings	181,368		181,368		181,368		—		—
Finance leases payable	951		951		—		951		—
FHLB borrowings	48,113		48,947		—		48,947		—
Junior subordinated notes issued to capital trusts	41,940		35,545		—		35,545		—
Subordinated debentures	63,875		68,207		—		68,207		—

Derivative liabilities	6,741		6,741		—		6,741		—

14. Leases

Substantially all of the leases in which the ~~financial statement footnotes (“exit price” only) will likely require changes~~Company is the lessee are comprised of real estate property for banking offices and office space. We do not have any subleased properties. Substantially all of our leases are classified as operating leases, with the Company only holding 1 existing finance lease for a banking office location with a lease term through 2025.

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Supplemental balance sheet information related to ~~current methodologies~~leases was as follows:


(in thousands)	Classification	March 31, 2022			December 31, 2021
Operating lease right-of-use assets	Other assets	$	2,589		$	2,840
Finance lease right-of-use asset	Premises and equipment, net	422			446
Total right-of-use assets		$	3,011		$	3,286

Operating lease liability	Other liabilities	$	3,496		$	3,778
Finance lease liability	Long-term debt	912			951
Total lease liabilities		$	4,408		$	4,729

Weighted-average remaining lease term
Operating leases		9.41 years			9.13 years
Finance lease		4.42 years			4.67 years
Weighted-average discount rate
Operating leases		4.20		%	4.13		%
Finance lease		8.89		%	8.89		%

The following table represents lease costs and other lease information. As the Company elected, for all classes of ~~determining these vales,~~underlying assets, not to separate lease and ~~how they are disclosed in the financial statement footnotes. The new standard applies~~non-lease components and instead to public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. The Company has formed a working group to evaluate the changes requiredaccount for them as a ~~result of~~single lease component, the ~~adoption of this ASU and is engaged in discussions with a third party to assist with the calculation of fair value information, particularly for fair value disclosures of the Company's loan portfolio.~~

~~In February 2016, the FASB issued Accounting Standards Update No. 2016-02,~~ ~~Leases (Topic 842). The guidance in this update is meant to increase transparency and comparability among organizations by recognizing~~variable lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. All leases create an asset and a liability for the lessee in accordance with FASB Concepts Statement No. 6, ~~Elements of Financial Statements, and, therefore, recognition of those lease assets and lease liabilities~~cost primarily represents an improvement over previous GAAP, which did not require lease assets and lease liabilities to be recognized for most leases. Disclosures are required by lessees and lessors to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. To meet that objective, qualitative disclosures along with specific quantitative disclosures are required. The new standard applies to public business entities in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The Company has several lease agreements,variable payments such as ~~branch locations, which are currently considered operating leases,~~common area maintenance and ~~therefore not recognized on~~utilities.


	Three Months Ended
	March 31,
(in thousands)	2022		2021
Lease Costs
Operating lease cost	$	296	$	299
Variable lease cost	21		72

Interest on lease liabilities(1)	20		23
Amortization of right-of-use assets	24		24
Net lease cost	$	361	$	418

Other Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	596	$	572
Operating cash flows from finance lease	20		23
Finance cash flows from finance lease	39		35

(1)Included in long-term debt interest expense in the Company’s consolidated ~~balance sheets. The Company expects~~statements of income. All other lease costs in this table are included in occupancy expense of premises, net.

Future minimum payments for finance leases and operating leases with initial or remaining terms of one year or more for the new guidance will require these lease agreements to now be recognized on the consolidated balance sheets as right-of-use assets and a corresponding lease liability. However, the Company continues to evaluate the extent of the potential impact the new guidance will have on the Company’s consolidated financial statementsremaining nine-months ending December 31, 2022 and the ~~availability of outside vendor products to assist in the implementation, and does not expect to early adopt the standard.~~

~~In March 2016, the FASB issued Accounting Standards Update No. 2016-09,~~ ~~Compensation - Stock Compensation (Topic 718)~~. The guidance involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The new standard applies to public business entities forsucceeding annual periods beginning after December 15, 2016, including interim periods within those annual periods, with early adoption permitted. An entity that elects early adoption must adopt all of the amendments in the same period. The amendments were ~~effective January 1, 2017. The Company elected to account for forfeitures~~ as ~~they occur. The effect of this election and other amendments did not have an effect on the Company’s consolidated financial statements.~~follows:


(in thousands)	Finance Leases		Operating Leases

December 31, 2022	$	180	$	746
December 31, 2023	245		947
December 31, 2024	250		717
December 31, 2025	255		247
December 31, 2026	171		153
Thereafter	—		1,820
Total undiscounted lease payment	$	1,101	$	4,630
Amounts representing interest	(189)		(1,134)
Lease liability	$	912	$	3,496

~~In June 2016, the FASB issued Accounting Standards Update No. 2016-13,~~ ~~Financial Instruments-Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model~~

for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The amendment requires the use of a new model covering current expected credit losses (CECL), which will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures. Upon initial recognition of the exposure, the CECL model requires an entity to estimate the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses (ECL) should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments. The new guidance also amends the current available for sale (AFS) security OTTI model for debt securities. The new model will require an estimate of ECL only when the fair value is below the amortized cost of the asset. The length of time the fair value of an AFS debt security has been below the amortized cost will no longer impact the determination of whether a credit loss exists. As such, it is no longer an other-than-temporary model.

Finally, the purchased financial assets with credit deterioration (PCD) model applies to purchased financial assets (measured at amortized cost or AFS) that have experienced more than insignificant credit deterioration since origination. This represents a change from the scope of what are considered purchased credit-impaired assets under today’s model. Different than the accounting for originated or purchased assets that do not qualify as PCD, the initial estimate of expected credit losses for a PCD would be recognized through an allowance for loan and lease losses with an offset to the cost basis of the related financial asset at acquisition. The new standard applies to public business entities that are SEC filers in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted for fiscal years beginning after December 31, 2018, including interim periods within those fiscal years, and is expected to increase the allowance for loan losses upon adoption. The Company has formed a working group to evaluate the impact of the standard’s adoption on the Company’s consolidated financial statements, and has completed viewing demonstrations of the capabilities of outside vendor software systems, and is currently evaluating the ability of these systems to meet the processing necessary to support the data collection, retention, and disclosure requirements of the Company in implementation of the new standard.

~~In January 2017, the FASB issued Accounting Standards Update No. 2017-04,~~ ~~Intangibles-Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment.~~ The new guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. The update applies to public business entities that are SEC filers in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company early adopted this amendment during the second quarter of 2017, and adoption did not have a significant effect on the Company’s consolidated financial statements.

~~In March 2017, the FASB issued Accounting Standards Update No. 2017-08,~~ ~~Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20) - Premium Amortization on Purchased Callable Debt Securities.~~ The new guidance requires that the premium amortization period on non-contingently callable securities, end at the earliest call date, rather than the contractual maturity date. The shorter amortization period means that interest income would generally be lower in the periods before the earliest call date and higher thereafter (if the security is not called) compared to current GAAP. The update applies to public business entities in fiscal years beginning after December 15, 2018. Early adoption is permitted. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company adopted this update during the second quarter of 2017. Since the Company was already amortizing premiums on callable investment securities between the date of purchase and the first call date, there was no effect on the Company’s consolidated financial statements.

~~In August 2017, the FASB issued Accounting Standards Update No. 2017-12,~~ ~~Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities~~. The amendments in this update more closely align the results of cash flow and fair value hedge accounting with risk management activities through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results in the financial statements. The amendments address specific limitations in current GAAP by expanding hedge accounting for both nonfinancial and financial risk components and by refining the measurement of hedge results to better reflect the hedging strategies. Thus, the amendments will enable more faithful reporting of the economic results of hedging activities for certain fair value and cash flow hedges and will avoid mismatches in earnings by allowing for greater precision when measuring changes in fair value of the hedged item for certain fair value hedges. Additionally, by aligning the timing of recognition of hedge results with the earnings effect of the hedged item for cash flow and net investment hedges, and by including the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is presented, the results of a hedging program and the cost of executing that program will be more visible to users of financial statements. The new standard applies to public business entities that are SEC filers for annual or any interim periods beginning after December 15, 2018. Early adoption is permitted with cumulative effect adjustment being reflected as of the beginning of the fiscal year, generally through an adjustment to AOCI and retained earnings. The Company adopted this update during the third quarter of 2017. Since the Company currently has no hedging arrangements, there was no cumulative effect adjustment necessary to the Company’s consolidated financial statements.

15. Subsequent Events

~~Management~~The Company has evaluated events that have occurred subsequent to March 31, 2022 and has concluded there are no other subsequent events ~~through~~that would require recognition in the ~~date the~~accompanying consolidated financial ~~statements were issued. Events or transactions occurring after~~ ~~September 30, 2017, but prior to the date the consolidated financial statements were issued, that provided additional evidence about conditions that existed at~~ ~~September 30, 2017~~ ~~have been recognized in the consolidated financial statements for the three and nine months ended~~ ~~September 30, 2017. Events or transactions that provided evidence about conditions that did not exist at~~ ~~September 30, 2017, but arose before the consolidated financial~~statements.

~~statements were issued, have not been recognized in the consolidated financial statements for the three and nine months ended~~ ~~September 30, 2017~~.

On ~~October 10, 2017~~,April 28, 2022, the board of directors of the Company declared a cash dividend of ~~$0.17~~$0.2375 per share payable on ~~December~~June 15, ~~2017~~2022 to shareholders of record as of the close of business on ~~December~~June 1, ~~2017~~.2022.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q contains certain “forward-looking statements” within the meaning of such term in the Private Securities Litigation Reform Act of 1995. We and our representatives may, from time to time, make written or oral statements that are “forward-looking” and provide information other than historical information. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement. These factors include, among other things, the factors listed below. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of our management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “should,” “could,” “would,” “plans,” “intend,” “project,” “estimate,” “forecast,” “may” or similar expressions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, these statements. Readers are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Additionally, we undertake no obligation to update any statement in light of new information or future events, except as required under federal securities law.

Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors that could have an impact on our ability to achieve operating results, growth plan goals and future prospects include, but are not limited to, the following:

•the effects of the COVID-19 pandemic, including its effects on the economic environment, our customers and our operations, including due to supply chain disruptions, as well as any changes to federal, state, or local government laws, regulations, or orders in connection with the pandemic;

•government intervention in the U.S. financial system in response to the COVID-19 pandemic, including the effects of recent legislative, tax, accounting and regulatory actions and reforms;

•the impact of the COVID-19 pandemic on our financial results, including possible lost revenue and increased expenses (including the cost of capital), as well as possible goodwill impairment charges;

•the risks of mergers (including with IOFB), including, without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and possible failures to achieve expected gains, revenue growth and/or expense savings from such transactions;

•credit quality deterioration or pronounced and sustained reduction in real estate market values causing an increase in the allowance for credit losses, an increase in the credit loss expense, and a reduction in net earnings;

•the effects of interest rates, including on our net income and the value of our securities portfolio, and including the effects of anticipated rate increases by the Federal Reserve;

•changes in the economic environment, competition, or other factors that may affect our ability to acquire loans or influence the anticipated growth rate of loans and deposits and the quality of the loan portfolio and loan and deposit pricing;

•fluctuations in the value of our investment securities;

•governmental monetary and fiscal policies;

•changes in and uncertainty related to benchmark interest rates used to price loans and deposits, including the expected elimination of LIBOR, and the adoption of a substitute;

•legislative and regulatory changes, including changes in banking, securities, trade, and tax laws and regulations and their application by our regulators;

•labor shortages, employee turnover, and the ability to attract and retain key executives and employees experienced in banking and financial services;

•the sufficiency of the allowance for credit losses to absorb the amount of actual losses inherent in our existing loan portfolio;

•our ability to adapt successfully to technological changes to compete effectively in the marketplace;

•credit risks and risks from concentrations (by geographic area and by industry) within our loan portfolio;

•the effects of competition from other commercial banks and other financial institutions operating in our markets or elsewhere or providing similar services;

•the failure of assumptions underlying the establishment of allowances for credit losses and estimation of values of collateral and various financial assets and liabilities;

•volatility of rate-sensitive deposits;

•operational risks, including data processing system failures or fraud;

•asset/liability matching risks and liquidity risks;

•the costs, effects and outcomes of existing or future litigation;

•changes in general economic, political, or industry conditions, nationally, internationally or in the communities in which we conduct business;

•changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the FASB;

•war or terrorist activities, including the Russian invasion of Ukraine, widespread disease or pandemic, or other adverse external events, which may cause deterioration in the economy or cause instability in credit markets;

•the effects of cyber-attacks;

•the imposition of tariffs or other domestic or international governmental policies impacting the value of the agricultural or other products of our borrowers; and

•other factors and risks described under “Risk Factors” in this Form 10-Q and in other reports we file with the SEC.

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We qualify all of our forward-looking statements by the foregoing cautionary statements. Because of these risks and other uncertainties, our actual future results, performance or achievement, or industry results, may be materially different from the results indicated by these forward-looking statements. In addition, our past results of operations are not necessarily indicative of our future results.

OVERVIEW

The Company provides financial services to individuals, businesses, governmental units and institutional customers located primarily in the upper Midwest through its bank subsidiary, MidWestOne Bank. The Bank has ~~office~~ locations inthroughout central and ~~east-central~~eastern Iowa, the ~~Twin Cities~~Minneapolis/St. Paul metropolitan area of Minnesota, southwestern Wisconsin, Naples and Fort Myers, Florida, and Denver, Colorado.

On November 1, 2021, the Company and IOFB, a bank holding company headquartered in Muscatine, Iowa, jointly announced the signing of a definitive agreement pursuant to which the Company will acquire IOFB and its wholly-owned banking subsidiaries, FNBM and FNBF in a transaction valued at approximately $47.6 million. The acquisition will add to the Company's existing presence in Fairfield, Iowa and will expand the Company's footprint into Muscatine, Iowa. The combined Company will have approximately $6.5 billion in total assets. The acquisition is expected to close in the second quarter of 2022.

The Bank is ~~actively engaged in many areas of~~focused on delivering relationship-based business and personal banking products and services. The Bank provides commercial ~~banking, including: acceptance of~~loans, real estate loans, agricultural loans, credit card loans, and consumer loans. The Bank also provides deposit products including demand and interest checking accounts, savings accounts, money market accounts, and time ~~deposits; making commercial, real estate, agricultural~~deposits. Complementary to our loan and ~~consumer loans;~~deposit products, the Bank also provides products and ~~other~~services including treasury management, Zelle, online and mobile banking, credit and debit cards, ATMs, and safe deposit boxes. The Bank also has a trust department through which it offers services ~~tailored for its individual customers. The Wealth Management Division~~including the administration of ~~theBank administers~~ estates, personal trusts, and conservatorships and ~~pension~~the management of real property. Finally, the Bank’s investment services department offers financial planning, investment advisory, and ~~profit-sharing accounts along~~retail securities brokerage services (the latter of which is provided through an agreement with ~~providing brokerage and other investment management services to customers. MidWestOne~~ ~~Insurance Services, Inc., also~~ a ~~wholly-owned subsidiary of the Company, provides personal and business insurance services in Iowa.~~

We operate as an independent community bank that offers a broad range of customer-focused financial services as an alternative to large regional banks in our market areas. Management has invested in infrastructure and staffing to support our strategy of serving the financial needs of businesses, individuals and municipalities in our market areas. We focus our efforts on core deposit generation, especially transaction accounts, and quality loan growth with an emphasis on growing commercial loan balances. We seek to maintain a disciplined pricing strategy on deposit generation that will allow us to compete for high quality loans while maintaining an appropriate spread over funding costs.third-party registered broker-dealer).

Our results of operations ~~depend primarily on~~are significantly affected by our net interest ~~income, which is the difference between the interest income on our earning assets, such as loans and securities, and the interest expense paid on our deposits and borrowings.~~income. Results of operations are also affected by ~~non-interest~~noninterest income and expense, ~~the provision for loan losses~~credit loss expense and income tax expense. Significant external factors that impact our results of operations include general economic and competitive conditions, as well as changes in market interest rates, government policies, and actions of regulatory authorities.

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes and the statistical information and financial data appearing in this report as well as our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021, filed with the SEC on March 10, 2022. Results of operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 are not necessarily indicative of results to be attained for any other period.

~~Critical Accounting Policies~~FINANCIAL SUMMARY

~~Critical accounting estimates are those which are both most important~~The Company reported net income for the three months ended March 31, 2022 of $13.9 million, a decrease of $7.8 million, compared to $21.6 million of net income for the three months ended March 31, 2021, with diluted earnings per share of $0.88 and $1.35 for the respective annual periods.

The period as of and for the three months ended March 31, 2022 was also highlighted by the following results:

Balance Sheet:

•Total assets decreased to $5.96 billion at March 31, 2022 from $6.03 billion at December 31, 2021.

•On January 1, 2022 the Company transferred $1.25 billion of mortgage-backed securities, collateralized mortgage obligations, and securities issued by state and political subdivisions from the available for sale classification to the ~~portrayal~~held to maturity classification. At March 31, 2022 the total amount of ~~our~~the held to maturity debt securities was $1.20 billion and the total amount of the debt securities available for sale was $1.15 billion. There were no held to maturity debt securities at December 31, 2021, while the total amount of the debt securities available for sale was $2.29 billion.

•Gross loans held for investment increased $4.1 million, from $3.25 billion at December 31, 2021, to $3.26 billion at March 31, 2022.

•The allowance for credit losses was $46.2 million, or 1.42% of total loans as of March 31, 2022, compared with $48.7 million, or 1.50% of total loans, at December 31, 2021.

•Nonperforming assets declined $0.4 million, from $31.9 million at December 31, 2021, to $31.5 million at March 31, 2022.

•Total deposits decreased $36.8 million from $5.11 billion at December 31, 2021, to $5.08 billion at March 31, 2022.

•Short-term borrowings of $181.2 million at March 31, 2022 were consistent with the $181.4 million of short-term borrowings at December 31, 2021, while long-term debt decreased to $139.9 million at March 31, 2022 from $154.9 million at December 31, 2021.

•The Company is well-capitalized with a total risk-based capital ratio of 12.89% at March 31, 2022.

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Income Statement:

•Tax equivalent net interest income (a non-GAAP financial ~~condition~~measure - see the "Non-GAAP Presentations" section for a reconciliation to the most comparable GAAP equivalent) was $38.5 million for the first quarter of 2022, a decrease of $1.3 million, from $39.8 million in the the first quarter of 2021. This decrease in tax equivalent net interest income was primarily due to a decline of $5.2 million in loan interest income due to reduced net PPP fee accretion, reduced loan volumes and ~~results~~lower loan purchase discount accretion. Partially offsetting the lower loan interest income was an increase of ~~operations,~~$2.8 million million in interest income earned from investment securities, which reflected the larger volume of securities held for investment and ~~require our management's most difficult, subjective or complex judgments, often~~an increase in yield on such securities, coupled with a decline in interest expense on interest-bearing deposits of $0.7 million as a result of lower rates paid on such deposits that more than offset the ~~need~~increase in the volume of deposits.

•No credit loss expense was recorded during the first quarter of 2022, as compared to ~~make estimates about~~credit loss benefit of $4.7 million during the ~~effect~~first quarter of ~~matters that are inherently uncertain. Our critical~~2021. In the first quarter of 2022, the $0.3 million credit loss benefit related to loans, which reflected continued stabilization in overall asset quality and improvement in forecasted economic conditions, was offset by the $0.3 million credit loss expense needed for growth in unfunded loan commitments.

•Noninterest income decreased $0.2 million, from $11.8 million in the first quarter of 2021, to $11.6 million in the the first quarter of 2022. The largest drivers of the decline were loan revenue and 'Other' noninterest income, partially offset by cumulative increases in all other sources of noninterest income, excluding investment securities gains, net.

•Noninterest expense increased $3.9 million, from $27.7 million in the first quarter of 2021, to $31.6 million in the the first quarter of 2022 primarily due to increased compensation and employee benefits and legal and professional expenses.

Critical Accounting Estimates

Management has identified the accounting ~~estimates relate~~policies related to the ~~allowance for loan losses, application of purchase accounting, goodwill and intangible assets, and~~ACL, fair value of ~~available for sale investment securities, all~~assets acquired and liabilities assumed in a business combination, and the annual impairment testing of ~~which involve significant judgment by our management.~~goodwill and other intangible assets to be critical accounting policies. Information about our critical accounting estimates is included under Item 7, "~~Management's~~“Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations~~"Operations” in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021, filed with the SEC on March 10, 2022, and there have been no material changes in these critical accounting policies since December 31, 2021.

RESULTS OF OPERATIONS

Comparison of Operating Results for the Three Months Ended ~~September 30, 2017~~March 31, 2022 and ~~September 30, 2016~~March 31, 2021

Summary

~~For the quarter ended September 30, 2017, we earned net income~~


	As of or for the Three Months Ended March 31,
(dollars in thousands, except per share amounts)	2022			2021
Net Interest Income	$	37,336		$	38,617
Noninterest Income	11,644			11,824
Total Revenue, Net of Interest Expense	48,980			50,441
Credit Loss (Benefit) Expense	—			(4,734)
Noninterest Expense	31,643			27,700
Income Before Income Tax Expense	17,337			27,475
Income Tax Expense	3,442			5,827
Net Income	13,895			21,648
Diluted Earnings Per Share	$	0.88		$	1.35




Return on Average Assets	0.95		%	1.59		%
Return on Average Equity	10.74			17.01
Return on Average Tangible Equity(1)	13.56			21.52
Efficiency Ratio(1)	60.46			50.77
Dividend Payout Ratio	26.69			16.67

Common Equity Ratio	8.46			8.91
Tangible Common Equity Ratio(1)	7.20			7.52
Book Value per Share	$	32.15		$	32.00
Tangible Book Value per Share(1)	26.98			26.60
(1) A non-GAAP financial measure. See "Non-GAAP Financial Measures" for a reconciliation to the most comparable GAAP equivalents.

Table of $6.3 million, which was an increase of $0.1 million from $6.2 million for the quarter ended September 30, 2016. The increase in net income was due primarily to a $1.9 million, or 7.8%, increase in net interest income, due primarily to a $1.2 million increase in core loan interest income and a $0.7 million increase in discount accretion and investment income, partially offset by a $0.3 million increase in core interest expense and a $0.2 million decrease in interest expense purchase accounting. Noninterest expense saw a decrease of $0.7 million, or 3.4%, due primarily to a $0.4 million decrease in other operating expenses mainly attributable to a sizable wire fraud loss that occurred in the third quarter of 2016 and a $0.3 million decrease in occupancy and equipment expense, and noninterest income experienced a $0.2 million, or 3.5%, increase, driven by increased other service charges and fees of $0.3 million, specifically card income of $0.3 million, partially offset by a decrease in loan origination and servicing fees due to decreased secondary market fee income.Contents

These were partially offset by an increase of $3.4 million, or 336.2%, in the provision for loan losses. Both basic and diluted earnings per common share for the third quarter of 2017 were $0.52, versus $0.54 for the third quarter of 2016. Our annualized return on average assets for the third quarter of 2017 was 0.81% compared with 0.83% for the same period in 2016. Our annualized return on average shareholders’ equity was 7.29% for the three months ended September 30, 2017 compared with 8.06% for the three months ended September 30, 2016. The annualized return on average tangible equity was 10.06% for the third quarter of 2017 compared with 11.88% for the same period in 2016.

~~The following table presents selected financial results and measures as of and for the quarters ended September 30, 2017 and 2016.~~

As of and for the Three Months Ended September 30,
(dollars in thousands) 2017 2016
Net Income $ 6,342
$ 6,222
Average Assets 3,102,348
2,995,521
Average Shareholders’ Equity 344,961
307,005
Return on Average Assets* 0.81 % 0.83 %
Return on Average Shareholders’ Equity* 7.29
8.06
Return on Average Tangible Equity* 10.06
11.88
Total Equity to Assets (end of period) 11.02
10.31
Tangible Equity to Tangible Assets (end of period) 8.84
7.94
Tangible Book Value per Share $ 22.20
$ 20.31
* Annualized

We have traditionally disclosed certain non-GAAP ratios, including our return on average tangible equity and the ratio of our tangible equity to tangible assets, as well as diluted earnings per common share exclusive of merger-related expenses, adjusted noninterest income as a percentage of total revenue, and tangible book value per share. We believe these ratios provide investors with information regarding our financial condition and results of operations and how we evaluate them internally.

~~The following tables provide a reconciliation of the non-GAAP measures to the most comparable GAAP equivalents.~~

For the Three Months Ended September 30,
(dollars in thousands, except per share amounts) 2017 2016
Net Income:
Net income $ 6,342
$ 6,222
Plus: Intangible amortization, net of tax ⁽¹⁾
493
631
Adjusted net income $ 6,835
$ 6,853
Average Tangible Equity:
Average total shareholders’ equity $ 344,961
$ 307,005
Less: Average intangibles, net of amortization (77,775 ) (81,212 )
Plus: Average deferred tax liability associated with intangibles 2,282
3,676
Average tangible equity $ 269,468
$ 229,469
Return on Average Tangible Equity (annualized) 10.06 % 11.88 %
Net Income:
Net income $ 6,342
$ 6,222
Plus: Merger-related expenses —
182
Net tax effect of merger-related expenses⁽²⁾
—
(51 )
Net income exclusive of merger-related expenses $ 6,342
$ 6,353
Diluted average number of shares 12,238,991
11,461,108
Earnings Per Common Share-Diluted $ 0.52
$ 0.54
Earnings Per Common Share-Diluted, exclusive of merger-related expenses $ 0.52
$ 0.55
(1) Computed on a tax-equivalent basis, assuming a federal income tax rate of 35%.
(2) Computed based on qualifying tax deductible expenses, assuming a federal income tax rate of 35%.
Adjusted Noninterest Income:
Noninterest income $ 5,916
$ 5,714
Less: Gain on sale of available for sale securities (176 ) —
Loss on sale of premises and equipment 4
211
Other gain (14 ) (310 )
Adjusted noninterest income $ 5,730
$ 5,615
Total Revenue:
Net interest income $ 26,492
$ 24,581
Plus: Noninterest income 5,916
5,714
Less: Gain on sale of available for sale securities (176 ) —
Loss on sale of premises and equipment 4
211
Other gain (14 ) (310 )
Total Revenue $ 32,222
$ 30,196
Adjusted Noninterest Income as a Percentage of Total Revenue 17.8 % 18.6 %

As of September 30,
(dollars in thousands) 2017 2016
Tangible Equity:
Total shareholders’ equity $ 346,563
$ 309,584
Plus: Deferred tax liability associated with intangibles 2,141
3,422
Less: Intangible assets, net (77,413 ) (80,749 )
Tangible equity $ 271,291
$ 232,257
Tangible Assets:
Total assets $ 3,144,199
$ 3,001,974
Plus: Deferred tax liability associated with intangibles 2,141
3,422
Less: Intangible assets, net (77,413 ) (80,749 )
Tangible assets $ 3,068,927
$ 2,924,647
Common shares outstanding 12,218,528
11,435,860
Tangible Book Value Per Share $ 22.20
$ 20.31
Tangible Equity/Tangible Assets 8.84 % 7.94 %

Net Interest Income

Net interest income is the difference between interest income and fees earned on earning assets and interest expense incurred on interest-bearing liabilities. Interest rate levels and volume fluctuations within earning assets and interest-bearing liabilities impact net interest income. Net interest margin is net interest income as a percentage of average earning assets.

Certain assets with tax favorable treatment are evaluated on a tax-equivalent basis. Tax-equivalent basis assumes a federal income tax rate of 35%. Tax favorable assets generally have lower contractual yields than fully taxable assets. A tax-equivalent analysis is performed by adding the tax savings to the earnings on tax-favorable assets. After factoring in the tax-favorable effects of these assets, the yields may be more appropriately evaluated against alternative earning assets. In addition to yield, various other risks are factored into the evaluation process.

~~Net interest income of $26.5 million for the~~ ~~third~~ ~~quarter of 2017 increased $1.9 million, or 7.8%, from $24.6 million for the~~ ~~third~~ ~~quarter of 2016, primarily due to an increase of $2.5 million, or 8.9%, in interest income. An increase in the merger-related discount accretion of $0.7 million, to $1.3 million for the~~ ~~third~~ ~~quarter of 2017 compared to $0.6 million for the~~ ~~third~~ ~~quarter of 2016, assisted by an increase in average loan balances of $69.2 million, resulted in loan interest income increasing $1.9 million, or 7.7%, to $26.2 million for the~~ ~~third~~ ~~quarter of 2017 compared to the third quarter of 2016. Income from investment securities was $4.1 million for the~~ ~~third~~ ~~quarter of 2017, up from $3.5 million for the~~ ~~third~~ quarter of 2016, which resulted from an increase of $83.6 million in the average balance, was enhanced by an increase of 5 basis points in the yield of investment securities between the two comparable periods.

~~Interest expense increased $0.6 million, or 16.9%, to $3.9 million for the~~ ~~third quarter~~ of 2017, compared to $3.3 million for the same period in 2016 primarily due to an increase in the cost of interest-bearing deposits of 6 basis points on increased average balances of $75.6 million between the ~~third~~ quarter of 2017 and the same period in 2016. The merger-related amortization of the purchase accounting premium on certificates of deposit, which acts to reduce interest expense, declined from $0.2 million for the ~~third~~ quarter of 2016, to zero for the same period of 2017. Additionally, the increase in the average balance of Federal Home Loan Bank (“FHLB”) borrowings was offset by a decrease in the average rate paid of 7 basis points, resulting in virtually no change in expense between the comparable periods.

~~Our net interest margin for the~~ ~~third~~ ~~quarter of 2017, calculated on a fully tax-equivalent basis, was 3.85%, or 13 basis points higher than the net interest margin of 3.72% for the~~ ~~third~~ quarter of 2016. A higher discount accretion resulted in a 18 basis point increase in overall loan yield. This increase was assisted by a 5 basis point increase in the yield on investment securities, resulting in a 19 basis point increase in yield on interest-earning assets for the ~~third~~ ~~quarter of 2017 compared to the~~ ~~third~~ quarter of 2016. The cost of deposits increased 6 basis points, due primarily to the absence of purchase premium amortization in 2017, while the average cost of borrowings edged higher by 4 basis points.

The following table shows consolidated average balance sheets, detailing the major categories of assets and liabilities, the interest income earned on earning assets, the interest expense paid for interest-bearing liabilities, and the related yields and interest rates for the quarters ended September 30, 2017 and 2016. Dividing annualized income or expense by the average balances of assets or liabilities results in average yields or rates. Average information is provided on a daily average basis.

Three Months Ended September 30,
2017 2016

Average
Balance

Interest
Income/
Expense

Average
Rate/
Yield

Average
Balance

Interest
Income/
Expense

Average
Rate/
Yield
(dollars in thousands)
Average Earning Assets:
Loans ^(1)(2)(3)
$ 2,219,355
$ 26,652
4.76 % $ 2,150,195
$ 24,775
4.58 %
Investment securities:
Taxable investments 417,896
2,589
2.46
360,550
2,088
2.30
Tax exempt investments ⁽²⁾
217,535
2,367
4.32
191,253
2,133
4.44
Total investment securities 635,431
4,956
3.09
551,803
4,221
3.04
Federal funds sold and interest-bearing balances 3,929
19
1.92
52,121
66
0.50
Total interest-earning assets $ 2,858,715
$ 31,627
4.39 % $ 2,754,119
$ 29,062
4.20 %

Cash and due from banks 35,774
35,287

Premises and equipment 74,962
75,882

Allowance for loan losses (23,054 ) (21,609 )
Other assets 155,951
151,842

Total assets $ 3,102,348
$ 2,995,521

Average Interest-Bearing Liabilities:
Savings and interest-bearing demand deposits $ 1,345,525
$ 966
0.28 % $ 1,292,623
$ 860
0.26 %
Certificates of deposit 676,143
1,934
1.13
653,462
1,614
0.98
Total deposits 2,021,668
2,900
0.57
1,946,085
2,474
0.51
Federal funds purchased and repurchase agreements 95,387
134
0.56
67,591
41
0.24
Federal Home Loan Bank borrowings 111,576
474
1.69
106,239
469
1.76
Long-term debt and other 40,057
361
3.58
45,127
326
2.87
Total borrowed funds 247,020
969
1.56
218,957
836
1.52
Total interest-bearing liabilities $ 2,268,688
$ 3,869
0.68 % $ 2,165,042
$ 3,310
0.61 %

Net interest spread⁽²⁾
3.71 % 3.59 %

Demand deposits 466,485
502,611

Other liabilities 22,214
20,863

Shareholders’ equity 344,961
307,005

Total liabilities and shareholders’ equity $ 3,102,348
$ 2,995,521

Interest income/earning assets ⁽²⁾
$ 2,858,715
$ 31,627
4.39 % $ 2,754,119
$ 29,062
4.20 %
Interest expense/earning assets $ 2,858,715
$ 3,869
0.54 % $ 2,754,119
$ 3,310
0.48 %
Net interest margin ⁽²⁾⁽⁴⁾
$ 27,758
3.85 % $ 25,752
3.72 %

Non-GAAP to GAAP Reconciliation:
Tax Equivalent Adjustment:
Loans $ 446
$ 432

Securities 820
739

Total tax equivalent adjustment 1,266
1,171

Net Interest Income $ 26,492
$ 24,581



	~~(1)~~	~~Loan fees included in interest income are not material.~~
	~~(2)~~	~~Computed on a tax-equivalent basis, assuming a federal income tax rate of 35%.~~
	~~(3)~~	~~Non-accrual loans have been included in average loans, net of unearned discount.~~
	~~(4)~~	~~Net interest margin is tax-equivalent net interest income as a percentage of average earning assets.~~

The following table sets forth an analysis of volume and rate changes in interest income and interest expense on our average earning assets and average interest-bearing liabilities during the three months ended September 30, 2017, compared to the same period in 2016, reported on a fully tax-equivalent basis assuming a 35% tax rate. The table distinguishes between the changes related to average outstanding balances (changes in volume holding the initial interest rate constant) and the changes related to average interest rates (changes in average rate holding the initial outstanding balance constant). The change in interest due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.

Three Months Ended September 30,
2017 Compared to 2016 Change due to
Volume Rate/Yield Net
(in thousands)
Increase (decrease) in interest income:
Loans, tax equivalent $ 845
$ 1,032
$ 1,877
Investment securities:
Taxable investments 349
152
501
Tax exempt investments 579
(345 ) 234
Total investment securities 928
(193 ) 735
Federal funds sold and interest-bearing balances (375 ) 328
(47 )
Change in interest income 1,398
1,167
2,565
Increase (decrease) in interest expense:
Savings and interest-bearing demand deposits 37
69
106
Certificates of deposit 59
261
320
Total deposits 96
330
426
Federal funds purchased and repurchase agreements 22
71
93
Federal Home Loan Bank borrowings 86
(81 ) 5
Other long-term debt (189 ) 224
35
Total borrowed funds (81 ) 214
133
Change in interest expense 15
544
559
Increase in net interest income $ 1,383
$ 623
$ 2,006
Percentage change in net interest income over prior period 7.8 %

~~Interest income and fees on loans~~ on a tax-equivalent basis in the third quarter of 2017 increased $1.9 million, or 7.6%, compared with the same period in 2016. This increase includes the effect of the merger-related discount accretion of $1.3 million on loans for the third quarter of 2017 compared to $0.6 million of merger-related discount accretion for the third quarter of 2016. Average loans were $69.2 million, or 3.2%, higher in the third quarter of 2017 compared with the third quarter of 2016, primarily resulting from new loan originations exceeding loan payments and payoffs. In addition to purchase accounting adjustments, the yield on our loan portfolio is affected by the amount of nonaccrual loans (which do not earn interest income), the mix of the portfolio (real estate loans generally have a lower overall yield than commercial and agricultural loans), the effects of competition and the interest rate environment on the amounts and volumes of new loan originations, and the mix of variable-rate versus fixed-rate loans in our portfolio. The increase in interest income on loans was primarily the result of a increase in the average yield on loans from 4.58% in the third quarter of 2016 to 4.76% in the third quarter of 2017, which was primarily attributable to purchase accounting adjustments and the general increase in interest rates, enhanced by the higher average balances in the loan portfolio.

~~Interest income on investment securities~~ on a tax-equivalent basis totaled $5.0 million in the third quarter of 2017 compared with $4.2 million for the same period of 2016, including $0.1 million of purchase accounting premium amortization expense in both the 2016 and 2017 periods. The tax-equivalent yield on our investment portfolio in the third quarter of 2017 increased to 3.09% from 3.04% in the comparable period of 2016. The average balance of investments in the third quarter of 2017 was $635.4 million compared with $551.8 million in the third quarter of 2016, an increase of $83.6 million, or 15.2%. The increase in average balance resulted primarily from the investment of the proceeds from the sale of newly issued common stock at the end of the first quarter and beginning of the second quarter of 2017.

~~Interest expense on deposits~~ increased $0.4 million, or 17.2%, to $2.9 million in the third quarter of 2017 compared with$2.5 million in the same period of 2016. The increased interest expense on deposits was primarily due to an increase of 6 basis points in the weighted average rate paid on interest-bearing deposits to 0.57% in the third quarter of 2017, compared with 0.51% in the third quarter of 2016. This includes the effect of no merger-related premium amortization on certificates of deposit for the third quarter of 2017 compared with $0.2 million for the same period in 2016. The premium amortization acted to decrease deposit interest expense. An increase in average balances of interest-bearing deposits for the third quarter of 2017 of $75.6 million compared

with the same period in 2016, also contributed to increased expense. We expect to see some upward movement in deposit rates in future periods, as overall interest rate increases begin to take hold in our market footprint.

~~Interest expense on borrowed funds~~ of $1.0 million in the third quarter of 2017 was an increase of $0.1 million, or 15.9%, from $0.8 million in same period of 2016. Average borrowed funds for the third quarter of 2017 were $28.1 million higher compared with the same period in 2016. A higher level of borrowed funds, primarily due to the $27.8 million increase in the average level of federal funds purchased, repurchase agreements, and other short-term borrowings for the third quarter of 2017 compared to the same period in 2016, was enhanced by an increase in the weighted average rate on borrowed funds to 1.56% for the third quarter of 2017 compared with 1.52% for the third quarter of 2016.

~~Provision for Loan Losses~~

The provision for loan losses is a current charge against income and represents an amount which management believes is sufficient to maintain an adequate allowance for known and probable losses in the loan portfolio. In assessing the adequacy of the allowance for loan losses, management considers the size and quality of the loan portfolio measured against prevailing economic conditions, regulatory guidelines, and historical loan loss experience. When a determination is made by management to charge off a loan balance, such write-off is charged against the allowance for loan losses.

We recorded a provision for loan losses of $4.4 million in the third quarter of 2017, an increase of $3.4 million, from $1.0 million in the third quarter of 2016. Net loans charged off in the third quarter of 2017 totaled $0.4 million, compared to $0.8 million net loans charged off in the third quarter of 2016. Loan growth was $66.3 million for the ~~third~~ quarter of 2017 compared to an increase in loan balances in the third quarter of last year of $26.3. During the first nine months of 2017 approximately $35.0 million of loans have moved from a pass rating to a watch, and $3.0 million have moved to substandard rating, primarily in commercial, commercial real estate-other, and agricultural loans. During the same time period in 2016 there was a decrease in watch and classified loan balances of approximately $7.0 million. In addition, a loan identified as a substandard loan at December 31, 2016 and renewed as a troubled debt restructuring in the first quarter of 2017 required an additional allocation of approximately $1.8 million during the quarter. The Company’s additional provision in the third quarter of 2017 increased the allowance for loan losses to total non-acquired loans ratio to 1.34%. We determined an appropriate provision based on our evaluation of the adequacy of the allowance for loan losses in relationship to a continuing review of problem loans, current economic conditions, actual loss experience and industry trends. We believed that the allowance for loan losses was adequate based on the inherent risk in the portfolio as of September 30, 2017; however, there is no assurance losses will not exceed the allowance, and any growth in the loan portfolio and the uncertainty of the general economy may require additional provisions in future periods as deemed necessary.

Sensitive assets include nonaccrual loans, loans on the Bank’s watch loan reports and other loans identified as having higher potential for loss. We review sensitive assets on at least a quarterly basis for changes in the customers’ ability to pay and changes in the valuation of underlying collateral in order to estimate probable losses. We also periodically review a watch loan list which is comprised of loans that have been restructured or involve customers in industries which have been adversely affected by market conditions. The majority of these loans are being repaid in conformance with their contracts.

~~Noninterest Income~~

Three Months Ended September 30,
2017 2016 $ Change % Change
(dollars in thousands)
Trust, investment, and insurance fees $ 1,454
$ 1,306
$ 148
11.3 %
Service charges and fees on deposit accounts 1,295
1,346
(51 ) (3.8 )
Loan origination and servicing fees 1,012
1,332
(320 ) (24.0 )
Other service charges and fees 1,625
1,307
318
24.3
Bank-owned life insurance income 344
324
20
6.2
Gain on sale or call of available for sale securities 176
—
176
NM
Gain (loss) on sale of premises and equipment (4 ) (211 ) 207
(98.1 )
Other gain 14
310
(296 ) (95.5 )
Total noninterest income $ 5,916
$ 5,714
$ 202
3.5 %
Noninterest income as a % of total revenue* 17.8 % 18.6 %
* See the non-GAAP reconciliation at the beginning of this section for the reconciliation of this non-GAAP measure to its most directly comparable GAAP financial measures.

~~Total noninterest income for the the~~ ~~third~~ ~~quarter of 2017 increased $0.2 million, or 3.5%, to $5.9 million from $5.7 million in the~~ ~~third~~ quarter of 2016. The greatest increase was in other service charges and fees, which increased $0.3 million, or 24.3%, from $1.3 million in the third quarter of 2016 to $1.6 million for the third quarter of 2017, due to a change in how electronic

transaction expenses are classified. In prior periods these expenses were netted against revenues generated from electronic transactions, but now these expenses have been reassigned to the data processing expense line of noninterest expense for presentation purposes. Gain on sale of available for sale securities increased to $0.2 million for the third quarter of 2017, compared to no gain for the third quarter of 2016, while trust, investment and insurance fees increased $0.1 million, or 11.3%, to $1.4 million for the third quarter of 2017 compared to $1.3 million, for the third quarter of 2016. Loan origination and servicing fees decreased $0.3 million, or 24.0%, from $1.3 million for the third quarter of 2016 to $1.0 million for the third quarter of 2017. This decrease was due to a lower level of loans originated and sold on the secondary market in the third quarter of 2017 compared to the third quarter of 2016, a result of the general decrease in mortgage activity in our markets. Other gain decreased $0.3 million, or 95.5%, between the third quarter of 2017 and the third quarter of 2016 comparable periods, due primarily to the 2016 amount including a $0.7 million gain on the sale of our Davenport, Iowa branch office, partially offset by higher write downs of other real estate owned in the 2016 quarter. Other gain (loss) represents gains and losses on the sale of branch banking offices, other real estate owned, and other assets.

Management’s strategic goal is for noninterest income to constitute 25% of total revenues (net interest income plus noninterest income excluding gain/loss on securities and premises and equipment and impairment of investment securities) over time. For the three months ended September 30, 2017, noninterest income comprised 17.8% of total revenues, compared with 18.6% for the same period in 2016. Despite recent downward trends in this ratio, management expects to see gradual improvement in future periods due to the implementation of new management strategies in the origination of residential real estate loans.

~~Noninterest Expense~~

Three Months Ended September 30,
2017 2016 $ Change % Change
(dollars in thousands)
Salaries and employee benefits $ 12,039
$ 11,641
$ 398
3.4 %
Net occupancy and equipment expense 2,986
3,293
(307 ) (9.3 )
Professional fees 933
1,014
(81 ) (8.0 )
Data processing expense 723
599
124
20.7
FDIC insurance expense 238
412
(174 ) (42.2 )
Amortization of intangible assets 759
970
(211 ) (21.8 )
Other operating expense 2,066
2,510
(444 ) (17.7 )
Total noninterest expense $ 19,744
$ 20,439
$ (695 ) (3.4 )%

~~Noninterest expense for the~~ ~~third~~ quarter of 2017 was $19.7 million, a decrease of $0.7 million, or 3.4%, from the third quarter of 2016. Other operating expense for the third quarter of 2017 decreased $0.4 million, or 17.7%, compared with the third quarter of 2016, primarily due to lower losses and deposit charge-offs, as 2016 included a sizable wire fraud loss. Net occupancy and equipment expense decreased $0.3 million, or 9.3%, to $3.0 million for the third quarter of 2017 compared to $3.3 million for the third quarter of 2016, and FDIC insurance expense and intangible amortization each showed a $0.2 million decline for the quarter ended September 30, 2017 compared to the quarter ended September 30, 2016. Salaries and employee benefits increased $0.4 million, or 3.4%, from $11.6 million for the third quarter of 2016 to $12.0 million for the third quarter of 2017, due to normal annual salary increases and the addition of the Company’s Denver, Colorado location. Data processing expense experienced an increase of $0.1 million, or 20.7%, for the quarter ended September 30, 2017 compared to the quarter ended September 30, 2016 due to the change in financial reporting presentation noted above.

~~Income Tax Expense~~

Our effective income tax rate, or income taxes divided by income before taxes, was 23.4% for the third quarter of 2017, which was lower than the effective tax rate of 29.7% for the third quarter of 2016. Income tax expense was $1.9 million in the third quarter of 2017 compared to $2.6 million for the same period of 2016. The primary reason for the decrease in income tax expense was the realization of $0.4 million of historic tax credits related to the remodel and restoration of the Company’s headquarters building in the third quarter of 2017, and the decrease in the level of taxable income between the two periods.

~~Comparison of Operating Results for the~~ ~~Nine~~ ~~Months Ended September 30, 2017 and September 30, 2016~~

~~Summary~~

~~For the~~ ~~nine months~~ ~~ended September 30, 2017, we earned net income of~~ ~~$20.3 million,~~ ~~compared with~~ ~~$16.5 million~~ ~~for the~~ ~~nine months~~ ~~ended September 30, 2016, an increase of~~ ~~22.8%~~. The increase in net income was due primarily to a $6.7 million, or 10.0%, decrease in noninterest expense driven by a $4.2 million decrease in merger-related expenses, mainly in data processing ($1.9 million) and salaries and employee benefits expense ($1.5 million), attributable to the merger of Central Bank into MidWest~~One~~ ~~Bank. Net interest income increased $2.7 million, or 3.6%, the provision for loans losses increased $3.5 million, or~~

105.6%, and noninterest income decreased $0.9 million, or 5.0%. Basic and diluted earnings per common share for the first nine months of 2017 were both $1.69, compared with $1.45 and $1.44, respectively, for the first nine months of 2016. Our annualized return on average assets for the ~~first nine months~~ of ~~2017~~ ~~was 0.88% compared with 0.74% for the same period in~~ ~~2016. Our annualized return on average shareholders’ equity was 8.20% for the~~ ~~nine months~~ ~~ended September 30, 2017 versus 7.28% for the~~ ~~nine months~~ ~~ended September 30, 2016. The annualized return on average tangible equity was 11.47% for the~~ ~~first nine months~~ of ~~2017~~ ~~compared with 10.98% for the same period in~~ ~~2016~~.

~~The following table presents selected financial results and measures as of and for the nine months ended September 30, 2017 and 2016.~~

As of and for the Nine Months Ended September 30,
(dollars in thousands, except per share amounts) 2017 2016
Net Income $ 20,289
$ 16,521
Average Assets 3,072,998
2,984,220
Average Shareholders’ Equity 330,682
303,146
Return on Average Assets* 0.88 % 0.74 %
Return on Average Shareholders’ Equity* 8.20
7.28
Return on Average Tangible Equity* 11.47
10.98
Total Equity to Assets (end of period) 11.02
10.31
Tangible Equity to Tangible Assets (end of period) 8.84
7.94
Tangible Book Value per Share $ 22.20
$ 20.31
* Annualized

~~The following tables provide a reconciliation of the non-GAAP measures to the most comparable GAAP equivalents.~~

For the Nine Months Ended September 30,
(dollars in thousands, except per share amounts) 2017 2016
Net Income:
Net income $ 20,289
$ 16,521
Plus: Intangible amortization, net of tax ⁽¹⁾
1,568
1,980
Adjusted net income $ 21,857
$ 18,501
Average Tangible Equity:
Average total shareholders’ equity $ 330,682
$ 303,146
Less: Average intangibles, net of amortization (78,550 ) (82,237 )
Plus: Average deferred tax liability associated with intangibles 2,585
4,134
Average tangible equity $ 254,717
$ 225,043
Return on Average Tangible Equity (annualized) 11.47 % 10.98 %
Net Income:
Net income $ 20,289
$ 16,521
Plus: Merger-related expenses —
4,162
Net tax effect of merger-related expenses⁽²⁾
—
(1,544 )
Net income exclusive of merger-related expenses $ 20,289
$ 19,139
Diluted average number of shares 11,999,608
11,451,958
Earnings Per Common Share-Diluted $ 1.69
$ 1.44
Earnings Per Common Share-Diluted, exclusive of merger-related expenses $ 1.69
$ 1.67
(1) Computed on a tax-equivalent basis, assuming a federal income tax rate of 35%.
(2) Computed based on qualifying tax deductible expenses, assuming a federal income tax rate of 35%.

Adjusted Noninterest Income:
Noninterest income $ 16,836
$ 17,714
Less: Gain on sale of available for sale securities (196 ) (467 )
Gain on sale of held to maturity securities (43 ) —
(Gain) loss on sale of premises and equipment (2 ) 462
Other gain (64 ) (1,617 )
Adjusted noninterest income $ 16,531
$ 16,092
Total Revenue:
Net interest income $ 77,764
$ 75,076
Plus: Noninterest income 16,836
17,714
Less: Gain on sale of available for sale securities (196 ) (467 )
Gain on sale of held to maturity securities (43 ) —
(Gain) loss on sale of premises and equipment (2 ) 462
Other gain (64 ) (1,617 )
Total Revenue $ 94,295
$ 91,168
Adjusted Noninterest Income as a Percentage of Total Revenue 17.5 % 17.7 %

As of September 30,
(dollars in thousands, except per share amounts) 2017 2016
Tangible Equity:
Total shareholders’ equity $ 346,563
$ 309,584
Plus: Deferred tax liability associated with intangibles 2,141
3,422
Less: Intangible assets, net (77,413 ) (80,749 )
Tangible equity $ 271,291
$ 232,257
Tangible Assets:
Total assets $ 3,144,199
$ 3,001,974
Plus: Deferred tax liability associated with intangibles 2,141
3,422
Less: Intangible assets, net (77,413 ) (80,749 )
Tangible assets $ 3,068,927
$ 2,924,647
Common shares outstanding 12,218,528
11,435,860
Tangible Book Value Per Share $ 22.20
$ 20.31
Tangible Equity/Tangible Assets 8.84 % 7.94 %

~~Net Interest Income~~

Our net interest income for the nine months ended September 30, 2017, was $77.8 million, up $2.7 million, or 3.6%, from $75.1 million for the nine months ended September 30, 2016, primarily due to an increase of $4.4 million, or 5.2%, in interest income. Interest income on investment securities rose $2.4 million, or 23.8%, to $12.6 million for the first nine months of 2017 compared to the first nine months of 2016 primarily due to an increase of $112.6 million in the average balance between the comparative periods, as investment securities yields remained constant. Loan interest income increased $2.0 million, or 2.8%, to $76.1 million for the first nine months of 2017 compared to the first nine months of 2016, primarily due to the 9 basis point increase in average loan yield between the two periods, which included the effect of an increase in the discount accretion related to the 2016 merger of the Company with Central, to $3.8 million for the nine months ended September 30, 2017, compared to $2.4 million for the nine months ended September 30, 2016. The increased loan yield was enhanced by an $17.5 million, or 0.8%, increase in the average balance of loans between the comparative periods. These income increases were partially offset by an increase of $1.7 million, or 18.0%, in interest expense, to $11.0 million for the nine months ended September 30, 2017, compared to $9.3 million for the first nine months of 2016. Interest expense on deposits increased $1.5 million, or 22.7%, to $8.4 million for the nine months ended September 30, 2017 compared to $6.8 million for the nine months ended September 30, 2016, primarily due to the interest expense on deposits for the nine months ended September 30, 2017 including no merger-related amortization of the purchase accounting premium on certificates of deposit, and the interest expense on deposits for the nine months ended September 30, 2016 including $0.8 million in merger-related amortization. Interest expense related to borrowings rose slightly between the two periods.

The Company posted a net interest margin of 3.85% for the first nine months of 2017, up 2 basis points from the net interest margin of 3.83% for the same period in 2016. For the first nine months of 2017 compared with the same period in 2016, a 9 basis point increase in loan yields and a higher volume of average loans, coupled with a higher average balance of investment securities, which generally have a lower yield compared to loans, resulted in an 8 basis point increase in the yield on earning assets. This increase in income was mostly offset by a 22 basis point increase in the cost of certificates of deposit due primarily to the aforementioned decrease in deposit premium amortization, and was the primary factor in an 8 basis point increase in the cost of interest-bearing liabilities.

The following table shows consolidated average balance sheets, detailing the major categories of assets and liabilities, the interest income earned on interest-earning assets, the interest expense paid for interest-bearing liabilities, and the related yields and ~~interest rates~~costs for the ~~nine months~~ ~~ended September 30, 2017 and~~ ~~2016. Dividing annualized income or expense by the average balances of assets or liabilities results in average yields or costs. Average information is provided on a daily average basis.~~periods indicated.

Nine Months Ended September 30,
2017 2016

Average
Balance

Interest
Income/
Expense

Average
Rate/
Yield

Average
Balance

Interest
Income/
Expense

Average
Rate/
Yield
(dollars in thousands)
Average Earning Assets:
Loans ^(1)(2)(3)
$ 2,182,275
$ 77,386
4.74 % $ 2,164,740
$ 75,379
4.65 %
Investment securities:
Taxable investments 426,429
7,897
2.48
341,621
5,924
2.32
Tax exempt investments ⁽²⁾
217,524
7,190
4.42
189,712
6,504
4.58
Total investment securities 643,953
15,087
3.13
531,333
12,428
3.12
Federal funds sold and interest-bearing balances 5,636
51
1.21
40,813
145
0.47
Total interest-earning assets $ 2,831,864
$ 92,524
4.37 % $ 2,736,886
$ 87,952
4.29 %

Cash and due from banks 35,281
37,120

Premises and equipment 74,960
76,247

Allowance for loan losses (22,625 ) (20,736 )
Other assets 153,518
154,703

Total assets $ 3,072,998
$ 2,984,220

Average Interest-Bearing Liabilities:
Savings and interest-bearing demand deposits $ 1,340,521
$ 2,778
0.28 % $ 1,270,067
$ 2,562
0.27 %
Certificates of deposit 677,249
5,591
1.10
650,176
4,260
0.88
Total deposits 2,017,770
8,369
0.55
1,920,243
6,822
0.47
Federal funds purchased and repurchase agreements 85,197
277
0.43
74,006
151
0.27
Federal Home Loan Bank borrowings 104,579
1,321
1.69
106,909
1,387
1.73
Long-term debt and other 41,304
1,051
3.40
46,452
978
2.81
Total borrowed funds 231,080
2,649
1.53
227,367
2,516
1.48
Total interest-bearing liabilities $ 2,248,850
$ 11,018
0.66 % $ 2,147,610
$ 9,338
0.58 %

Net interest spread⁽²⁾
3.71 % 3.71 %

Demand deposits 472,482
514,991

Other liabilities 20,984
18,473

Shareholders’ equity 330,682
303,146

Total liabilities and shareholders’ equity $ 3,072,998
$ 2,984,220

Interest income/earning assets ⁽²⁾
$ 2,831,864
$ 92,524
4.37 % $ 2,736,886
$ 87,952
4.29 %
Interest expense/earning assets $ 2,831,864
$ 11,018
0.52 % $ 2,736,886
$ 9,338
0.46 %
Net interest margin ⁽²⁾⁽⁴⁾
$ 81,506
3.85 % $ 78,614
3.83 %

Non-GAAP to GAAP Reconciliation:
Tax Equivalent Adjustment:
Loans $ 1,251
$ 1,285

Securities 2,491
2,253

Total tax equivalent adjustment 3,742
3,538

Net Interest Income $ 77,764
$ 75,076


	Three Months Ended March 31,
	2022						2021
	Average Balance		Interest Income/ Expense		Average Yield/ Cost		Average Balance		Interest Income/ Expense		Average Yield/ Cost
(dollars in thousands)
ASSETS
Loans, including fees (1)(2)(3)	$	3,245,449	$	31,858	3.98	%	$	3,429,746	$	37,073	4.38	%
Taxable investment securities	1,835,911		8,123		1.79		1,266,714		5,093		1.63
Tax-exempt investment securities (2)(4)	450,547		2,998		2.70		465,793		3,203		2.79
Total securities held for investment (2)	2,286,458		11,121		1.97		1,732,507		8,296		1.94
Other	56,094		28		0.20		36,536		14		0.16
Total interest earning assets (2)	$	5,588,001	$	43,007	3.12	%	$	5,198,789	$	45,383	3.54	%
Other assets	326,603						321,515
Total assets	$	5,914,604					$	5,520,304

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest checking deposits	$	1,560,402	$	1,061	0.28	%	$	1,349,671	$	991	0.30	%
Money market deposits	953,943		499		0.21		913,087		478		0.21
Savings deposits	641,703		279		0.18		553,824		286		0.21
Time deposits	883,997		1,071		0.49		837,460		1,853		0.90
Total interest bearing deposits	4,040,045		2,910		0.29		3,654,042		3,608		0.40
Securities sold under agreements to repurchase	159,417		96		0.24		165,858		101		0.25

Other short-term borrowings	3,029		23		3.08		9,335		27		1.17
Total short-term borrowings	162,446		119		0.30		175,193		128		0.30
Long-term debt	140,389		1,487		4.30		205,971		1,851		3.64
Total borrowed funds	302,835		1,606		2.15		381,164		1,979		2.11
Total interest bearing liabilities	$	4,342,880	$	4,516	0.42	%	$	4,035,206	$	5,587	0.56	%

Noninterest bearing deposits	1,004,001						919,856
Other liabilities	42,872						49,003
Shareholders’ equity	524,851						516,239
Total liabilities and shareholders’ equity	$	5,914,604					$	5,520,304
Net interest income (2)			$	38,491					$	39,796
Net interest spread(2)					2.70	%					2.98	%
Net interest margin(2)					2.79	%					3.10	%

Total deposits(5)	$	5,044,046	$	2,910	0.23	%	$	4,573,898	$	3,608	0.32	%
Cost of funds(6)					0.34	%					0.46	%



(1)	~~(1)~~	~~Loan fees included in interest income are not material.~~Average balance includes nonaccrual loans.
(2)	~~(2)~~	~~Computed on a tax-equivalent basis, assuming a~~Tax equivalent. The federal ~~income~~statutory tax rate ~~of 35%~~utilized was 21%.
(3)	Interest income includes net loan fees, loan purchase discount accretion and tax equivalent adjustments. Net loan fees were $674 thousand and $3.5 million for the three months ended March 31, 2022 and March 31, 2021, respectively. Loan purchase discount accretion was $732 thousand and $1.1 million for the three months ended March 31, 2022 and March 31, 2021, respectively. Tax equivalent adjustments were $540 thousand and $531 thousand for the three months ended March 31, 2022 and March 31, 2021, respectively. The federal statutory tax rate utilized was 21%.
(4)	~~(3)~~	~~Non-accrual loans have been included in average loans, net~~Interest income includes tax equivalent adjustments of ~~unearned discount.~~$615 thousand and $648 thousand for the three months ended March 31, 2022 and March 31, 2021, respectively. The federal statutory tax rate utilized was 21%.
(5)	~~(4)~~Total deposits is the sum of total interest-bearing deposits and noninterest bearing deposits. The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits.
(6)	~~Net~~Cost of funds is calculated as annualized total interest ~~margin is tax-equivalent net interest income as a percentage~~expense divided by the sum of average ~~earning assets.~~total deposits and borrowed funds.

Table of Contents

The following table ~~sets forth an analysis of~~shows changes to tax equivalent net interest income attributable to (i) changes in volume and ~~rate~~(ii) changes in ~~interest income~~rate. Changes attributable to both rate and ~~interest expense on our average interest-earning assets and average interest-bearing liabilities during the~~ ~~nine~~ ~~months ended September 30, 2017, compared~~volume have been allocated proportionately to the ~~same period in~~ ~~2016~~, reported on a fully tax-equivalent basis assuming a 35% tax rate. The table distinguishes between the changes related to average outstanding balances (changes in volume holding the initial interest rate constant) and the changes related to average interest rates (changes in average rate holding the initial outstanding balance constant). The change ~~in interest~~ due ~~to both volume and rate has been allocated~~ to volume and ~~rate changes in proportion to the relationship of the absolute dollar amounts of~~ the change ~~in each.~~

Nine Months Ended September 30,
2017 Compared to 2016 Change due to
Volume Rate/Yield Net
(in thousands)
Increase (decrease) in interest income:
Loans, tax equivalent $ 592
$ 1,415
$ 2,007
Investment securities:
Taxable investments 1,544
429
1,973
Tax exempt investments 1,044
(358 ) 686
Total investment securities 2,588
71
2,659
Federal funds sold and interest-bearing balances (247 ) 153
(94 )
Change in interest income 2,933
1,639
4,572
Increase (decrease) in interest expense:
Savings and interest-bearing demand deposits 130
86
216
Certificates of deposit 190
1,141
1,331
Total deposits 320
1,227
1,547
Federal funds purchased and repurchase agreements 26
100
126
Federal Home Loan Bank borrowings (32 ) (34 ) (66 )
Other long-term debt (164 ) 237
73
Total borrowed funds (170 ) 303
133
Change in interest expense 150
1,530
1,680
Change in net interest income $ 2,783
$ 109
$ 2,892
Percentage change in net interest income over prior period 3.7 %

~~Interest income and fees on loans~~ on a tax-equivalent basis increased $2.0 million, or 2.7%, in the first nine months of 2017 compared to the same period in 2016. This increase reflects the effect of the merger-related discount accretion for loans of $3.8 million in the first nine months of 2017, compared to $2.4 million of discount accretion in the first nine months of 2016. The increased income is mainly due to a 9 basis point increase in yield on loans, from 4.65% in the first nine months of 2016 to 4.74% in the same period of 2017. The yield on our loan portfolio is affected by the amount of nonaccrual loans (which do not earnrate.


	Three Months Ended March 31,
	2022 Compared to 2021 Change due to
(in thousands)	Volume		Yield/Cost		Net
Increase (decrease) in interest income:
Loans, including fees (1)	$	(1,931)	$	(3,284)	$	(5,215)
Taxable investment securities	2,487		543		3,030
Tax-exempt investment securities (1)	(103)		(102)		(205)
Total securities held for investment (1)	2,384		441		2,825
Other	9		5		14
Change in interest income (1)	462		(2,838)		(2,376)
Increase (decrease) in interest expense:
Interest checking deposits	143		(73)		70
Money market deposits	21		—		21
Savings deposits	40		(47)		(7)
Time deposits	99		(881)		(782)
Total interest-bearing deposits	303		(1,001)		(698)
Securities sold under agreements to repurchase	(2)		(3)		(5)
Federal funds purchased	—		—		—
Other short-term borrowings	(27)		23		(4)
Total short-term borrowings	(29)		20		(9)
Long-term debt	(659)		295		(364)
Total borrowed funds	(688)		315		(373)
Change in interest expense	(385)		(686)		(1,071)
Change in net interest income	$	847	$	(2,152)	$	(1,305)
Percentage (decrease) in net interest income over prior period					(3.3)		%
(1) Tax equivalent, using a federal statutory tax rate of 21%.

Our tax equivalent net interest income), the mix of the portfolio (real estate loans generally have a lower overall yield than commercial and agricultural loans), the effects of competition and the interest rate environment on the amounts and volumes of new loan originations, and the mix of variable-rate versus fixed-rate loans in our portfolio. Average loan balances experienced an increase of $17.5 million, or 0.8%, in the first nine months of 2017 compared to the same period in 2016, primarily resulting from loan originations exceeding loan payments and payoffs. Despite the increase in overall interest rates, we expect the yield on new and renewing loans to remain relatively flat in the markets we serve due to competitive pressures for quality credits.

~~Interest~~ income ~~on investment securities~~ on a tax-equivalent basis totaled $15.1 million in the first nine months of 2017 compared with $12.4 million for the same period of 2016, reflecting $0.2 million of purchase accounting premium amortization expense in both the 2016 and 2017 periods. The tax-equivalent yield on our investment portfolio for the first ~~nine months~~quarter of ~~2017 increased to 3.13% from 3.12% in the comparable period~~2022 was $38.5 million, a decrease of ~~2016. The average balance of investments in the first nine months of 2017 was $644.0 million compared with $531.3 million in the first nine months of 2016, an increase of $112.6~~$1.3 million, or 21.2%. The increase in average balance resulted primarily from investment of the proceeds from the sale of newly issued common stock at the end of the first quarter and beginning of the second quarter of 2017.

~~Interest expense on deposits~~ ~~was $8.4~~3.3%, as compared to $39.8 million for the first ~~nine months~~quarter of 2017 compared with $6.8 million for the same period in 2016. This increase was primarily due to interest expense on deposits for the nine months ended September 30, 2017 including no merger-related amortization of the purchase accounting premium on certificates of deposit and the nine months ended September 30, 2016, including $0.8 million in merger-related amortization. Additionally, average interest-bearing deposits for the first nine months of 2017 increased $97.5 million, or 5.1%, compared with the same period in 2016, due primarily to an increased focus by the Company on gathering new deposits. The weighted average rate paid on interest-bearing deposits was 0.55% for the

first nine months of 2017 compared with 0.47% for the first nine months of 2016. This increase reflects the effect of no merger-related amortization of the purchase accounting premium on certificates of deposit for the first nine months of 2017 compared with $0.8 million for the first nine months of 2016. We expect to see some upward movement in deposit rates in future periods, as overall interest rate increases begin to take hold in our market footprint.

~~Interest expense on borrowed funds~~ in the first nine months of 2017 was $2.6 million, compared with $2.5 million for the same period in 2016, an increase of $0.1 million, or 5.3%. Average borrowed funds for the first nine months of 2017 were $3.7 million higher compared with the same period in 2016.2021. The decrease in the average level of FHLB borrowings of $2.3 million, or 2.2%, coupled with a $5.1 million, or 11.1%, decrease in long-term debt and junior subordinated notes, was partially offset by an increase in the average balance of federal funds purchased and repurchase agreements of $11.2 million, or 15.1%, all for the first nine months of 2017 compared to the first nine months of 2016. The weighted average rate on borrowed funds for the first nine months of 2017 was 1.53%, an increase of 5 basis points from 1.48% for the first nine months of 2016.

~~Provision for Loan Losses~~

We recorded a provision for loan losses of $6.7 million in the first nine months of 2017, compared to $3.2 million for the same period of 2016, an increase of $3.5 million, or 105.6%. This increase was due to loan growth (excluding loans held for sale) of $98.7 million for the nine months ended September 30, 2017 compared to a decrease of $10.1 million for the same period in 2016. In addition, the Company’s methodology requires increased reserves when a loan moves from pass to watch or substandard. During the first nine months of 2017 approximately $35.0 million of loans have moved from a pass rating to a watch, and $3.0 million have moved to substandard rating, primarily in commercial, commercial real estate-other, and agricultural loans. During the same time period in 2016 there was a decrease in watch and classified loan balances of approximately $7.0 million. Lastly, a loan identified as a substandard loan at December 31, 2016 and renewed as a troubled debt restructuringtax equivalent net interest income in the first quarter of ~~2017 required~~2022 as compared to the first quarter of 2021 was due primarily to a decline of $2.4 million, or 5.2%, in interest income, partially offset by a decline of $1.1 million, or 19.2%, in interest expense. The change in interest income was due primarily to a decline of $5.2 million, or 14.1%, in loan interest income due to a reduction of $2.9 million in net PPP fee accretion, reduced loan volumes, and lower loan purchase discount accretion, which declined $0.3 million. Partially offsetting the lower loan interest income was an ~~additional allocation~~increase of ~~approximately $1.8~~$2.8 million, or 34.1%, in interest income earned from investment securities, which reflected a larger volume of securities held for investment and an increase in yield from such securities, and a decline in interest expense on interest-bearing deposits of $0.7 million, or 19.3%, as a result of lower rates paid on such deposits that more than offset the increase in the volume of deposits.

The tax equivalent net interest margin for the first quarter of 2022 was 2.79%, or 31 basis points lower than the tax equivalent net interest margin of 3.10% for the first quarter of 2021. The tax equivalent yield on loans declined 40 basis points, which was offset by an increase of 3 basis points in the tax equivalent yield on investment securities. Combined, the resulting yield on interest-earning assets for the first quarter of 2022 was 42 basis points lower than the first quarter of 2021, which primarily reflected lower fee accretion and the shift in earning asset mix to a greater proportion of investment securities, which generally have lower yields than loans. The cost of interest-bearing deposits decreased 11 basis points, while the average cost of borrowings was 4 basis point higher for the first quarter of 2022, compared to the first quarter of 2021. Our lower deposit costs for the first quarter of 2022, compared to the first quarter of 2021, were a result of lower market interest rates as a result of the continuation of the target federal funds interest rate of 0.0% - 0.25% in response to the COVID-19 pandemic for most of the first quarter of 2022, as well as the origination and re-pricing of time deposits at lower rates than the existing portfolio.

Credit Loss (Benefit) Expense

No credit loss expense was recorded during the first quarter of 2022, as compared to a credit loss benefit of $4.7 million during the ~~quarter. The Company’s additional provision~~first quarter of 2021. In the first quarter of 2022, the $0.3 million credit loss benefit related to loans, which stemmed from the continued stabilization in the ~~third quarter of 2017 boosts~~credit risk profile and overall improvements in forecasted economic conditions, was offset by the ~~allowance for~~$0.3 million credit loss expense, which was due to growth in unfunded loan ~~losses to total non-acquired loans ratio to 1.34%.~~commitments. Net ~~loans charged off in the first nine months of 2017 totaled $2.0 million compared with $1.3~~loan charge-offs were $2.2 million in the first ~~nine months~~quarter of ~~2016.~~2022 as compared to net loan charge-offs of $0.3 million in the first quarter of 2021. The economic forecast utilized by the Company for its loan credit loss estimation process are: (1) Midwest unemployment, (2) year-to-year change in national retail sales, (3) year-to-year change in the CRE Index, (4) year-to-year change in U.S. GDP, (5) year-to-year change in the National Home Price Index, and (6) Rental Vacancy.

Table of Contents

Noninterest Income

The following table presents significant components of noninterest income and the related dollar and percentage change from period to period:

Nine Months Ended September 30,
2017 2016 $ Change % Change
(dollars in thousands)
Trust, investment, and insurance fees $ 4,594
$ 4,244
$ 350
8.2 %
Service charges and fees on deposit accounts 3,835
3,887
(52 ) (1.3 )
Loan origination and servicing fees 2,532
2,806
(274 ) (9.8 )
Other service charges and fees 4,580
4,115
465
11.3
Bank-owned life insurance income 990
1,040
(50 ) (4.8 )
Gain on sale or call of available for sale securities 196
467
(271 ) (58.0 )
Gain on sale of held to maturity securities 43
—
43
NM
Gain (loss) on sale of premises and equipment 2
(462 ) 464
(100.4 )
Other gain 64
1,617
(1,553 ) (96.0 )
Total noninterest income $ 16,836
$ 17,714
$ (878 ) (5.0 )%
Adjusted noninterest income as a % of total revenue* 17.5 % 17.7 %
NM - Percentage change not considered meaningful.
* See the non-GAAP reconciliation at the beginning of this section for the reconciliation of this non-GAAP measure to its most directly comparable GAAP financial measures.


	Three Months Ended March 31,
(dollars in thousands)	2022		2021		$ Change		% Change
Investment services and trust activities	$	3,011	$	2,836	$	175	6.2	%
Service charges and fees	1,657		1,487		170		11.4
Card revenue	1,650		1,536		114		7.4
Loan revenue	4,293		4,730		(437)		(9.2)
Bank-owned life insurance	531		542		(11)		(2.0)

Investment securities gains, net	40		27		13		48.1
Other	462		666		(204)		(30.6)
Total noninterest income	$	11,644	$	11,824	$	(180)	(1.5)	%

Total noninterest income for the first ~~nine months~~quarter of ~~2017 total noninterest income~~2022 decreased ~~$0.9~~$0.2 million, or ~~5.0%~~1.5%, to ~~$16.8~~$11.6 million from ~~$17.7~~$11.8 million ~~during~~in the ~~same period~~first quarter of ~~2016. This~~2021. The decline in noninterest income was primarily due to ~~the $1.6 million decrease~~a decline in ~~other gains for the nine months ended September 30, 2017, compared to the same period in 2016. The first nine months~~loan revenue of ~~2016 included a net gain on other real estate owned of $0.8~~$0.4 million and a ~~net gain~~decline of ~~$1.4~~$0.2 million ~~on the sale of the Barron and Rice Lake, Wisconsin and Davenport, Iowa branch offices,~~in 'Other' noninterest income, partially offset by a ~~writedown of other real estate owned~~cumulative increase of $0.5 ~~million. Gains on the sale~~million in all other sources of ~~available for sale~~noninterest income, excluding investment securities ~~decreased $0.3~~gains, net. The decline in loan revenue was primarily due to a $2.2 million ~~between the comparative 2016 and 2017 periods, and loan~~decrease in mortgage origination ~~and servicing fees decreased $0.3 million, or 9.8%, between the comparative periods. These decreases were partially~~fee income, which was offset by a ~~$0.5~~$2.7 million ~~decline~~increase in ~~loss on~~ the ~~sale~~fair value of ~~premises and equipment,~~our mortgage servicing rights in the first quarter of 2022 as compared to a $0.8 million increase in the first quarter of 2021.

Noninterest Expense

The following table presents significant components of noninterest expense and the ~~increase~~related dollar and percentage change from period to period:


	Three Months Ended March 31,
(dollars in thousands)	2022		2021		$ Change		% Change
Compensation and employee benefits	$	18,664	$	16,917	$	1,747	10.3	%
Occupancy expense of premises, net	2,779		2,318		461		19.9
Equipment	1,901		1,793		108		6.0
Legal and professional	2,353		783		1,570		200.5
Data processing	1,231		1,252		(21)		(1.7)
Marketing	1,029		1,006		23		2.3
Amortization of intangibles	1,227		1,507		(280)		(18.6)
FDIC insurance	420		512		(92)		(18.0)
Communications	272		409		(137)		(33.5)
Foreclosed assets, net	(112)		47		(159)		(338.3)
Other	1,879		1,156		723		62.5


Total noninterest expense	$	31,643	$	27,700	$	3,943	14.2	%


	Three Months Ended March 31,
Merger-related expenses:	2022		2021
(dollars in thousands)


Equipment	$	5	$	—
Legal and professional	63		—
Data processing	38		—
Marketing	7		—
Communications	1		—
Other	14		—
Total impact of merger-related expenses to noninterest expense	$	128	$	—

Noninterest expense for the first quarter of ~~$0.4~~2022 increased $3.9 million, or ~~8.2%~~14.2%, ~~in trust, investment, and insurance fees~~ to ~~$4.6~~$31.6 million from $27.7 million for the first ~~nine months~~quarter of ~~2017 compared with $4.2 million for the same period~~2021. The increase in 2016. Other service charges and fees increased $0.5 million, or 11.3%, to $4.6 million for the first nine months of 2017, from $4.1 million for the same period in 2016 due to a change in how electronic transaction expenses are classified. In prior periods these expenses were netted against

~~revenues generated from electronic transactions, but now these expenses have been reassigned to the data processing expense line of~~ noninterest expense ~~for presentation purposes.~~

Management’s strategic goal is for noninterest income to constitute 25% of total revenues (net interest income plus noninterest income excluding gain/loss on securities and premises and equipment and impairment of investment securities) over time. For the nine months ended September 30, 2017, noninterest income comprised 17.5% of total revenues, compared with 17.7% for the same period in 2016. Despite recent downward trends in this ratio, management expects to see continued gradual improvement in future periods due to the implementation of new management strategies in the origination of residential real estate loans.

~~Noninterest Expense~~

Nine Months Ended September 30,
2017 2016 $ Change % Change
(dollars in thousands)
Salaries and employee benefits $ 35,712
$ 37,607
$ (1,895 ) (5.0 )%
Net occupancy and equipment expense 9,323
9,870
(547 ) (5.5 )
Professional fees 2,991
3,181
(190 ) (6.0 )
Data processing expense 1,982
3,981
(1,999 ) (50.2 )
FDIC insurance expense 957
1,231
(274 ) (22.3 )
Amortization of intangible assets 2,412
3,046
(634 ) (20.8 )
Other operating expense 6,666
7,784
(1,118 ) (14.4 )
Total noninterest expense $ 60,043
$ 66,700
$ (6,657 ) (10.0 )%

Noninterest expense decreased to $60.0 million for the nine months ended September 30, 2017, compared with $66.7 million for the nine months ended September 30, 2016, a decrease of $6.7 million, or 10.0%, with all expense line items showing a decrease from the comparative period. The decrease was primarily due to ~~the absence~~increases of ~~merger related expenses for the nine months ended September 30, 2017, compared to $4.2~~$1.7 million, ~~for the nine months ended September 30, 2016 relating to the merger~~$1.6 million, and $0.7 million of ~~Central Bank into MidWestOne~~ ~~Bank. Salaries~~compensation and employee benefits, ~~decreased $1.9 million, or 5.0%~~legal and professional, and 'Other', from $37.6 million for the nine months ended September 30, 2016, to $35.7 million for the nine months ended September 30, 2017. This decrease included $1.6 million of merger-related expenses for the nine months ended September 30, 2016.respectively. The ~~rest of the decrease~~increase in ~~salaries~~compensation and employee benefits was primarily driven by normal annual salary increases coupled with a decline of $0.9 million in the benefit received from loan origination costs, which are deferred and amortized over the life of the loan to which they relate. The increase in legal and professional expenses was primarily attributable to elevated legal expenses related to litigation, loan legal expenses, and executive recruitment. The increase in 'Other' noninterest expense was mainly due to ~~decreased staffing levels resulting from restructuring~~higher operating losses and increased miscellaneous office and employee-related expenses. Partially offsetting the ~~sales~~identified increases in noninterest

Table of ~~branch offices during 2016. Data processing~~ Contents

expense ~~declined $2.0 million, or 50.2%, for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016, primarily due to the inclusion~~was a decline of ~~$1.9~~$0.3 million in ~~contract termination expense in connection with~~ the ~~bank merger in 2016. Other operating expenses decreased $1.1 million, or 14.4%, from $7.8 million~~amortization of intangibles, which reflected the accelerated amortization methodology utilized for ~~the nine months ended September 30, 2016, to $6.7 million for the nine months ended September 30, 2017, primarily due to lower losses and deposit charge-offs.~~certain finite-lived intangible assets

Income Tax Expense

Our effective income tax rate, or income taxes divided by income before taxes, was ~~27.3%~~19.9% for the ~~first nine~~three months ended March 31, 2022, as compared to an effective tax rate of ~~2017, and 27.7%~~21.2% for the ~~first nine~~three months ~~of 2016. Income~~ended March 31, 2021. The effective tax ~~expense increased~~rate for the full year 2022 is expected to ~~$7.6 million~~be in the ~~first nine months~~range of ~~2017 compared with $6.3 million for the same period of 2016, primarily due to the increase in the level of pre-tax income between the two periods.~~19.5-21.5%.

FINANCIAL CONDITION

Our total assets were $3.14 billion at September 30, 2017, an increase of $64.6 million, or 2.1% from December 31, 2016. Loans increased $98.7 million, or 4.6%, from $2.17 billion at December 31, 2016 to $2.26 billion at September 30, 2017, and Bank-owned life insurance increased $12.2 million, or 25.8%, between these two dates, due to a recent expansionThe table below presents the major categories of the program to include additional employees due to the Central merger. These increases were partially offset by decreases in investment securities of $35.4 million, or 5.5%, loans held for sale of $3.6 million, or 85.6%, intangible assets of $2.4 million, or 15.9%, and cash and cash equivalents of $1.1 million, or 2.6%, between December 31, 2016 and September 30, 2017. Total deposits at September 30, 2017, were $2.49 billion, an increase of $10.0 million, or 0.4%, from December 31, 2016. The mix of deposits saw increases between December 31, 2016 and September 30, 2017 of $20.1 million, or 3.1%, in certificates of deposit, $5.8 million, or 2.9%, in savings deposits, and $1.3 million, or 0.1%, in interest-bearing checking deposits. These increases were partially offset by a decrease in non-interest bearing demand deposits of $17.2 million, or 3.5% between December 31, 2016, and September 30, 2017. Between December 31, 2016 and September 30, 2017, FHLB borrowings increased $30.0 million, or 26.1% to $145.0 million, while federal funds purchased declined $19.0 million, or 53.2%, to $16.7 million compared to $35.7 million. The overall increase in borrowings was used to supplement the increase in deposits and decrease in investment securities to provide liquidity for the origination of new loans. At September 30, 2017, long-term debt had an outstandingCompany's balance of $13.8 million, a decrease of $3.8 million, or 21.4%, from December 31, 2016, due to normal scheduled repayments. Securities sold under agreements to repurchase rose $5.8 million between December 31, 2016 and September 30, 2017, due to normal cash need fluctuations by customers.

~~Investment Securities~~

~~Investment securities totaled $610.5 million at September 30, 2017, or 19.4% of total assets, a decrease of $35.4 million from $645.9 million~~sheet as of ~~December 31, 2016. A total~~the dates indicated:


(dollars in thousands)	March 31, 2022		December 31, 2021		$ Change		% Change
ASSETS
Cash and cash equivalents	$	59,829	$	203,830	$	(144,001)	(70.6)	%
Loans held for sale	6,466		12,917		(6,451)		(49.9)
Debt securities available for sale at fair value	1,145,638		2,288,110		(1,142,472)		(49.9)
Held to maturity securities at amortized cost	1,204,212		—		1,204,212		nm(1)
Loans held for investment, net of unearned income	3,250,035		3,245,012		5,023		0.2
Allowance for credit losses	(46,200)		(48,700)		2,500		(5.1)
Total loans held for investment, net	3,203,835		3,196,312		7,523		0.2
Other assets	340,234		323,959		16,275		5.0
Total assets	$	5,960,214	$	6,025,128	$	(64,914)	(1.1)	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Total deposits	$	5,077,725	$	5,114,519	$	(36,794)	(0.7)	%
Total borrowings	321,091		336,247		(15,156)		(4.5)
Other liabilities	56,941		46,887		10,054		21.4
Total shareholders' equity	504,457		527,475		(23,018)		(4.4)
Total liabilities and shareholders' equity	$	5,960,214	$	6,025,128	$	(64,914)	(1.1)	%

(1) Percentage change is not meaningful.

Debt Securities

The composition of ~~$427.2 million of the investment securities were classified as available for sale at September 30, 2017, compared to $477.5 million at December 31, 2016. This represents a decrease in investment~~debt securities available for sale and held to maturity as of ~~$50.3 million, or 10.5%,~~the dates indicated was as follows:


	March 31, 2022				December 31, 2021
(dollars in thousands)	Balance		% of Total		Balance		% of Total
Available for Sale
U.S. Government agencies and corporations	$	—	—	%	$	266	—	%
States and political subdivisions	288,988		25.2		765,742		33.5
Mortgage-backed securities	7,101		0.6		100,626		4.4
Collateralized mortgage obligations	171,497		15.0		768,899		33.6
Corporate debt securities	678,052		59.2		652,577		28.5
Fair value of debt securities available for sale	$	1,145,638	100.0	%	$	2,288,110	100.0	%

Held to Maturity

States and political subdivisions	$	541,801	45.0		$	—	—	%
Mortgage-backed securities	88,281		7.3		—		—	%
Collateralized mortgage obligations	574,130		47.7		—		—	%

Amortized cost of debt securities held to maturity	$	1,204,212	100.0	%	$	—	—	%

On January 1, 2022, the Company re-classified, at fair value, from ~~December 31, 2016~~available for sale to ~~September 30, 2017. As~~held to maturity, $1.25 billion of ~~September 30, 2017, the portfolio consisted mainly of obligations of states and political subdivisions (44.8%),~~ mortgage-backed securities, ~~and~~ collateralized mortgage obligations, ~~(39.8%),~~ and ~~corporate~~securities issued by state and political subdivisions. The net unrealized after tax loss of $11.5 million associated with those re-classified securities remained in accumulated other comprehensive loss and will be amortized over the remaining life of the securities. No gains or losses were recognized in earnings at the time of the transfer.

As of March 31, 2022, there were $3.1 million of gross unrealized gains and $45.9 million of gross unrealized losses in our debt securities ~~(14.1%). Investment securities~~available for sale portfolio for a net unrealized loss of $42.7 million. As of March 31, 2022 there was $1 thousand of gross unrealized gains and $98.4 million of gross unrealized losses in our held to maturity ~~were $183.3 million at September 30, 2017, compared to $168.4 million at December 31, 2016, an increase~~debt securities for a net unrealized loss of ~~$14.9 million, or 8.9%.~~

~~Loans~~

~~The composition of loans (before deducting the allowance for loan losses) was as follows:~~$98.4 million.

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September 30, 2017 December 31, 2016
Balance % of Total Balance % of Total
(dollars in thousands)
Agricultural $ 108,188
4.8 % $ 113,343
5.2 %
Commercial and industrial 512,034
22.6
459,481
21.2
Credit cards⁽¹⁾
—
—
1,489
0.1
Commercial real estate:
Construction and development 143,749
6.3
126,685
5.9
Farmland 87,529
3.9
94,979
4.4
Multifamily 136,724
6.0
136,003
6.3
Commercial real estate-other 760,100
33.6
706,576
32.6
Total commercial real estate 1,128,102
49.8
1,064,243
49.2
Residential real estate:
One- to four-family first liens 362,695
16.0
372,233
17.2
One- to four-family junior liens 115,750
5.1
117,763
5.4
Total residential real estate 478,445
21.1
489,996
22.6
Consumer 37,042
1.7
36,591
1.7
Total loans $ 2,263,811
100.0 % $ 2,165,143
100.0 %

~~(1) As of the first quarter of 2017, the Company no longer considered credit cards a separate class of loans, and these balances are now included in commercial and industrial loans.~~

Total loans (excluding loans held for sale) increased $98.7 million, or 4.6%, from $2.17 billion at December 31, 2016 to $2.26 billion at September 30, 2017. The mix of loans saw increases between December 31, 2016 and September 30, 2017 primarily concentrated in commercial real estate-other, commercial and industrial, construction and development, multifamily, and consumer loans. Decreases occurred in residential real estate, farmland, and agricultural loans. As of September 30, 2017, the largest category of loans was commercial real estate loans, comprising approximately 50% of the portfolio, of which 6% of total loans were multifamily residential mortgages, 6% of total loans were construction and development, and 4% of total loans were farmland. Commercial and industrial loans was the next largest category at 23% of total loans, followed by residential real estate loans at 21%, agricultural loans at 5%, and consumer loans at 2%. Included in these totals are $19.8 million, net of a discount of $2.2 million, or 0.9% of the total loan portfolio, in purchased credit impaired loans as a result of the merger between the Company and Central in 2015.

We have minimal direct exposure to subprime mortgages in our loan portfolio. Our loan policy provides a guideline that real estate mortgage borrowers have a Beacon score of 640 or greater. Exceptions to this guideline have been noted, but the overall exposure is deemed minimal by management. Mortgages we originate and sell on the secondary market are typically underwritten according to the guidelines of secondary market investors. These mortgages are sold on a non-recourse basis.

~~Premises and Equipment~~

As of September 30, 2017, premises and equipment totaled $75.0 million, substantially unchanged from December 31, 2016. Normal depreciation expense of $3.1 million was offset by ongoing capital improvement projects.

~~Deposits~~

Total deposits as of September 30, 2017 were $2.49 billion, an increase of $10.0 million, or 0.4% from December 31, 2016. Interest-bearing checking deposits were the largest category of deposits at September 30, 2017, representing approximately 45.7% of total deposits. Total interest-bearing checking deposits were $1.14 billion at September 30, 2017, unchanged from December 31, 2016. Included in interest-bearing checking deposits at September 30, 2017 were $36.5 million of brokered deposits in the Insured

Cash Sweep (ICS) program, a decrease of $2.5 million, or 6.4%, from $39.0 million at December 31, 2016. Non-interest bearing demand deposits were $477.4 million at September 30, 2017, a decrease of $17.2 million, or 3.5%, from $494.6 million at December 31, 2016. Savings deposits were $203.5 million at September 30, 2017, an increase of $5.8 million, or 2.9%, from$197.7 million at December 31, 2016. Total certificates of deposit were $671.9 million at September 30, 2017, up $20.1 million, or 3.1%, from $651.9 million at December 31, 2016. Included in total certificates of deposit at September 30, 2017 was $5.2 million of brokered deposits in the Certificate of Deposit Account Registry Service (CDARS) program, an increase of $2.5 million, or 95.4%, from December 31, 2016. Based on recent experience, management anticipates that many of the maturing certificates of deposit will be renewed upon maturity, as the interest rate environment begins to trend upward. Approximately 86.0% of our total deposits were considered “core” deposits as of September 30, 2017.

~~Goodwill and Other Intangible Assets~~

Goodwill was $64.7 million as of September 30, 2017, the same as at December 31, 2016. Other intangible assets decreased $2.4 million, or 15.9%, to $12.8 million at September 30, 2017 compared to $15.2 million at December 31, 2016, due to normal amortization. See Note ~~6. “Goodwill and Intangible Assets”~~2. Debt Securities to our consolidated financial statements for additional ~~information.~~information related to debt securities.

~~Debt~~Loans

~~Federal Home Loan Bank Borrowings~~The composition of our loan portfolio by type of loan was as follows:

~~FHLB borrowings totaled $145.0 million~~ ~~as of~~ ~~September 30, 2017, compared with$115.0 million~~


	March 31, 2022				December 31, 2021
(dollars in thousands)	Balance		% of Total		Balance		% of Total
Agricultural	$	94,649	2.9	%	$	103,417	3.2	%


Commercial and industrial	898,942		27.7		902,314		27.8







Commercial real estate	1,723,891		53.0		1,704,541		52.5



Residential real estate	463,676		14.3		466,322		14.4
Consumer	68,877		2.1		68,418		2.1
Loans held for investment, net of unearned income	$	3,250,035	100.0	%	$	3,245,012	100.0	%
Loans held for sale	$	6,466			$	12,917

The following table presents PPP loan measures as of the dates indicated:


	March 31, 2022									December 31, 2021
	Round 1			Round 2			Total			Round 1			Round 2			Total
(Dollars in millions)	#	$		#	$		#	$		#	$		#	$		#	$
Total PPP Loans Funded	2,681	$	348.5	2,175	$	149.3	4,856	$	497.8	2,681	$	348.5	2,175	$	149.3	4,856	$	497.8
PPP Loan Forgiveness	2,657	339.0		2,160	146.2		4,817	485.2		2,609	334.2		2,009	122.4		4,618	456.6
Outstanding PPP Loans(1)	5	0.7		15	2.3		20	3.0		53	5.6		164	25.2		217	30.8

Unearned Income	$—			$0.1			$0.1			$—			$0.9			$0.9

(1) Outstanding loans are presented net of unearned income.

Loans held for investment, net of unearned income at March 31, 2022, increased $5.0 million, or 0.2%, from December 31, ~~2016. We utilize FHLB borrowings as a supplement~~2021 to ~~customer deposits to fund interest-earning assets~~$3.25 billion, driven primarily by new loan production in the first quarter of 2022 and ~~to assist~~increased revolving line of credit utilization and partially offset by PPP loan forgiveness. As of March 31, 2022, PPP loan balances in ~~managing interest rate risk.~~the commercial and industrial loan portfolio segment were $3.0 million, or 0.1% of loans held for investment. At December 31, 2021, PPP loan balances in the agricultural and commercial and industrial loan portfolio segments were $30.8 million, or 1.0% of loans held for investment. See Note ~~10. “Long-Term Borrowings”~~3. Loans Receivable and the Allowance for Credit Losses to our consolidated financial statements for additional information related to our ~~FHLB borrowings.~~loan portfolio.

~~Junior Subordinated Notes Issued to Capital Trusts~~

~~Junior subordinated notes that have been issued to capital trusts that issued trust preferred securities were $23.8 million~~Commitments under standby letters of credit, unused lines of credit and other conditionally approved credit lines totaled approximately $1.1 billion and $1.0 billion as of ~~September 30, 2017, substantially unchanged from~~March 31, 2022 and December 31, ~~2016. See Note 9. “Subordinated Notes Payable”~~2021, respectively.

Our loan to ~~our consolidated financial statements for additional information related~~deposit ratio increased to ~~our junior subordinated notes.~~

~~Long-term Debt~~

Long-term debt in the form of a $35.0 million unsecured note, of which $25.0 million was drawn upon, payable to a correspondent bank was entered into on April 30, 2015 in connection with the payment of the merger consideration at the closing of the Central merger, of which $13.8 million was outstanding64.01% as of ~~September 30, 2017. See Note 10. “Long-Term Borrowings”~~March 31, 2022 as compared to ~~our consolidated financial statements for additional information related~~63.45% as of December 31, 2021. The loan to ~~our long-term debt.~~deposit ratio increased when compared to the prior year-end due to new loan production and increased revolving line of credit utilization, partially offset by PPP loan forgiveness, coupled with a decline in total deposits.

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Nonperforming Assets

The following ~~tables set~~table sets forth information concerning nonperforming loans by class of ~~loans~~receivable and our nonperforming assets at ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016~~:2021:

90 Days or More Past Due and Still Accruing Interest Restructured Nonaccrual Total
(in thousands)
September 30, 2017
Agricultural $ —
$ 2,637
$ 517
$ 3,154
Commercial and industrial⁽¹⁾
190
1,469
3,072
4,731
Commercial real estate:
Construction and development —
—
1,060
1,060
Farmland —
—
393
393
Multifamily —
—
—
—
Commercial real estate-other —
730
13,285
14,015
Total commercial real estate —
730
14,738
15,468
Residential real estate:
One- to four- family first liens 262
695
1,357
2,314
One- to four- family junior liens 34
—
143
177
Total residential real estate 296
695
1,500
2,491
Consumer —
—
44
44
Total $ 486
$ 5,531
$ 19,871
$ 25,888

~~(1) As of the first quarter of 2017, the Company no longer considered credit cards a separate class of loans, and these balances are now included in commercial and industrial loans.~~

90 Days or More Past Due and Still Accruing Interest Restructured Nonaccrual Total
(in thousands)
December 31, 2016
Agricultural $ —
$ 2,770
$ 2,690
$ 5,460
Commercial and industrial —
595
8,358
8,953
Credit cards —
—
—
—
Commercial real estate:
Construction and development 95
—
780
875
Farmland —
2,174
227
2,401
Multifamily —
—
—
—
Commercial real estate-other —
247
7,360
7,607
Total commercial real estate 95
2,421
8,367
10,883
Residential real estate:
One- to four- family first liens 375
1,501
1,127
3,003
One- to four- family junior liens 15
13
116
144
Total residential real estate 390
1,514
1,243
3,147
Consumer —
12
10
22
Total $ 485
$ 7,312
$ 20,668
$ 28,465

~~Not included in the loans above as of September 30, 2017, were purchased credit impaired loans with an outstanding balance of $0.5 million, net of a discount of $0.1 million.~~

Our nonperforming assets (which include nonperforming loans and OREO) totaled $27.2 million as of September 30, 2017, a decrease of $3.3 million, or 10.9%, from December 31, 2016. The balance of OREO at September 30, 2017 was $1.3 million, down $0.8 million, from $2.1 million of OREO at December 31, 2016. During the first nine months of 2017, the Company had a net decrease of 21 properties in other real estate owned. All of the OREO property was acquired through foreclosures, and we are actively working to sell all properties held as of September 30, 2017. OREO is carried at appraised value less estimated cost of

~~disposal at the date of acquisition. Additional discounts could be required to market and sell the properties, resulting in a write down through expense.~~

Nonperforming loans decreased from $28.5 million, or 1.31% of total loans, at December 31, 2016, to $25.9 million, or 1.14% of total loans, at September 30, 2017. At September 30, 2017, nonperforming loans consisted of $19.9 million in nonaccrual loans, $5.5 million in troubled debt restructures (“TDRs”) and $0.5 million in loans past due 90 days or more and still accruing interest. This compares to nonaccrual loans of $20.7 million, TDRs of $7.3 million, and loans past due 90 days or more and still accruing interest of $0.5 million at December 31, 2016. Nonaccrual loans decreased $0.8 million between December 31, 2016, and September 30, 2017. The balance of TDRs decreased $1.8 million between these two dates, as the addition of six loans (representing three lending relationships) totaling $1.9 million was offset by payments collected from TDR-status borrowers totaling $2.8 million, and three loans totaling $0.9 million moving to non-disclosed status. Loans 90 days past due and still accruing interest were unchanged between December 31, 2016, and September 30, 2017. Loans past due 30 to 89 days and still accruing interest (not included in the nonperforming loan totals) decreased to $5.5 million at September 30, 2017, compared with $7.8 million at December 31, 2016. As of September 30, 2017, the allowance for loan losses was $26.5 million, or 1.17% of total loans, compared with $21.9 million, or 1.01% of total loans at December 31, 2016. The allowance for loan losses represented 102.40% of nonperforming loans at September 30, 2017, compared with 76.76% of nonperforming loans at December 31, 2016. The Company had net loan charge-offs of $2.0 million in the nine months ended September 30, 2017, or an annualized 0.12% of average loans outstanding, compared to net charge-offs of $1.3 million, or an annualized 0.08% of average loans outstanding, for the same period of 2016.


(in thousands)	March 31, 2022			December 31, 2021

Nonaccrual loans held for investment	$	31,182		$	31,540
Accruing loans contractually past due 90 days or more	—			—
Total nonperforming loans	31,182			31,540
Foreclosed assets, net	273			357
Total nonperforming assets	31,455			31,897

Nonaccrual loans ratio (1)	0.96		%	0.97		%
Nonperforming loans ratio (2)	0.96		%	0.97		%
Nonperforming assets ratio (3)	0.53		%	0.53		%

(1) Nonaccrual loans ratio is calculated as nonaccrual loans divided by loans held for investment, net of unearned income, at the end of the period.
(2) Nonperforming loans ratio is calculated as total nonperforming loans divided by loans held for investment, net of unearned income, at the end of the period.
(3) Nonperforming assets ratio is calculated as total nonperforming assets divided by total assets at the end of the period.

Loan Review and Classification Process for Agricultural, Commercial and Industrial, and Commercial Real Estate Loans:

The Bank maintains a loan review and classification process which involves multiple officers of the Bank and is designed to assess the general quality of credit underwriting and to promote early identification of potential problem loans. All commercial and agricultural loan officers are charged with the responsibility of risk rating all loans in their portfolios and updating the ratings, positively or negatively, on an ongoing basis as conditions warrant. ~~A monthly loan officer validation worksheet documents this process.~~ Risk ratings are selected from an 8-point scale with ratings as follows: ratings 1- 4 Satisfactory (pass), rating 5 Watch (potential weakness), rating 6 Substandard (well-defined weakness), rating 7 Doubtful, and rating 8 Loss.

When a loan officer originates a new loan, based upon proper loan authorization, ~~he or she documents~~they document the credit file with an offering sheet summary, supplemental underwriting analysis, relevant financial information and collateral evaluations. ~~All of this~~This information is used in the determination of the initial loan risk rating. The Bank’s loan review department undertakes independent credit reviews of relationships based on either criteria established by loan policy, risk-focused sampling, or random sampling. ~~Loan policy requires~~Credit relationships with larger exposure may pose incrementally higher risks. As a result, the Bank's loan review department is required to review all ~~lending~~credit relationships with total exposure of $5.0 million or more ~~as well as all classified (loan grades 6 through 8) and watch (loan grade 5) rated credits over $1.0 million be reviewed no less than~~at least annually. ~~The~~In addition, the individual loan reviews consider such items as: loan type; nature, type and estimated value of collateral; borrower and/or guarantor estimated financial strength; most recently available financial information; related loans and total borrower exposure; and ~~current/~~current and anticipated performance of the loan. The results of such reviews are presented to both executive ~~management.~~management and the audit committee of the Company's board of directors.

Through the review of delinquency reports, updated financial statements or other relevant information, the lending officer and/or loan review personnel may determine that a loan relationship has weakened to the point that a watch (loan grade 5) or classified (loan grades 6 through 8) status is warranted. ~~When a~~At least quarterly, the loan ~~relationship~~strategy committee will meet to discuss loan relationships with total related exposure of $1.0 million or ~~greater is adversely graded (loan grade 5~~above that are Watch rated credits, loan relationships with total related exposure of $500 thousand and above that are Substandard or ~~above), or is classified~~worse rated credits, as ~~a TDR (regardless~~well as loan relationships with total related exposure of ~~size), the~~$250 thousand and above that are on non-accrual. Credits below these designated thresholds are reviewed upon request. The lending officer is ~~then~~ charged with preparing a loan strategy summary worksheet that outlines the background of the credit problem, current repayment status of the loans, current collateral evaluation and a workout plan of action. This plan may include goals to improve the credit rating, assist the borrower in moving the loans to another institution and/or collateral liquidation. All such reports are ~~first~~ presented ~~to regional management and then~~ to the loan strategy committee. Copies of the minutes of these committee meetings are presented to the board of directors of the Bank.

Depending upon the individual facts and circumstances and the result of the classified/watch review process, loan officers and/or loan review personnel may categorize ~~the~~a loan relationship as ~~impaired.~~requiring an individual analysis. Once that determination has occurred, the credit analyst will complete an individually analyzed worksheet that contains an evaluation of the collateral (for collateral-dependent loans) based upon the estimated collateral value, adjusting for current market conditions and other local factors that may affect collateral value. Loan review personnel may also complete an independent ~~impairment~~individual analysis when deemed necessary. These judgmental evaluations may produce an initial specific allowance for placement in the Company’s allowance for ~~loan and lease~~credit losses calculation. ~~Impairment~~An analysis for the underlying collateral value of each individually analyzed loan relationship is completed in the last month of the quarter. The ~~impairment analysis~~individually analyzed worksheets are reviewed by the Credit

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Administration department prior to quarter-end. The board of directors of the Bank on a quarterly basis reviews the classified/watch reports including changes in credit grades of 5 or higher as well as all ~~impaired~~individually analyzed loans, the related allowances and ~~OREO.~~foreclosed assets, net.

In general, once the specific allowance has been finalized, regional and executive management will consider a charge-off prior to the calendar quarter-end in which that reserve calculation is finalized.

The review process also provides for the upgrade of loans that show improvement since the last review. All requests for an upgrade of a credit are approved by the ~~loan strategy committee~~proper authority based upon the aggregate credit exposure before the rating can be changed.

~~Restructured Loans~~

Loan Modifications

We restructure loans for our customers who appear to be able to meet the terms of their loan over the long term, but who may be unable to meet the terms of the loan in the near term due to individual circumstances. We consider the customer’s past performance, previous and current credit history, the individual circumstances surrounding the current difficulties and their plan to meet the terms of the loan in the future prior to restructuring the terms of the loan. The following factors are indicators that a concession has been granted (one or multiple items may be present):

•The borrower receives a reduction of the stated interest rate for the remaining original life of the debt.

•The borrower receives an extension of the maturity date or dates at a stated interest rate lower than the current market interest rate for new debt with similar risk characteristics.

•The borrower receives a reduction of the face amount or maturity amount of the debt as stated in the instrument or other agreement.

•The borrower receives a deferral of required payments (principal and/or interest).

•The borrower receives a reduction of the accrued interest.

Generally, ~~loans are restructured through~~ short-term ~~interest rate relief, short-term principal payment relief or short-term principal and interest payment relief. Once~~deferral of required payments would not be considered a ~~restructured loan has gone 90 days or more past due or is placed on nonaccrual status, it is included in the 90 days or more past due or nonaccrual totals.~~

concession. During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, the Company ~~restructured ten~~classified four loans byas TDRs, due to the Company granting ~~concessions~~a concession to ~~borrowers~~a borrower experiencing financial ~~difficulties.~~

~~A loan~~difficulty. The aggregate post-modification outstanding recorded investment of the loans classified as a troubled debt restructuring will no longer be included in the troubled debt restructuring disclosures in the periods after the restructuring if the loan performs in accordance with the terms specified by the restructuring agreement and the interest rate specified in the restructuring agreement represents a market rate at the time of modification. The specified interest rate is considered a market rate when the interest rate is equal to or greater than the rate the Company is willing to accept at the time of restructuring for a new loan with comparable risk. If there are concerns that the borrower will not be able to meet the modified terms of the loan, the loan will continue to be included in the troubled debt restructuring disclosures.

~~We consider all~~ TDRs ~~regardless of whether they are performing in accordance with their modified terms, to be impaired loans when determining our allowance for loan losses. A summary of restructured loans as of~~ ~~September 30, 2017~~ ~~and~~ ~~December~~during three months ended March 31, ~~2016~~ ~~is as follows:~~

September 30, December 31,
2017 2016
(in thousands)
Restructured Loans (TDRs):
In compliance with modified terms $ 5,531
$ 7,312
Not in compliance with modified terms - on nonaccrual status or 90 days or more past due and still accruing interest 12,682
1,003
Total restructured loans $ 18,213
$ 8,315
2022 was $1.7 million.

Allowance for ~~Loan~~Credit Losses

The following table sets forth the allowance for credit losses by loan portfolio segments compared to the percentage of loans to total loans by loan portfolio segment for the periods indicated:


	March 31, 2022					December 31, 2021
(dollars in thousands)	Allowance for Credit Losses			% of Total		Allowance for Credit Losses			% of Total
Agricultural	$	380		2.9	%	$	667		3.2	%
Commercial and industrial	17,275			27.7	%	17,294			27.8	%
Commercial real estate	24,057			53.0	%	26,120			52.5	%
Residential real estate	3,908			14.3	%	4,010			14.4	%
Consumer	580			2.1	%	609			2.1	%
Total	$	46,200		100.0	%	$	48,700		100.0	%

Allowance for credit losses ratio(1)	1.42		%			1.50		%
Adjusted allowance for credit losses ratio(2)	1.42		%			1.52		%
Allowance for credit losses to nonaccrual loans ratio(3)	148.16		%			154.41		%

(1) Allowance for credit losses ratio is calculated as allowance for credit losses divided by loans held for investment, net of unearned income at the end of the period.
(2) Non-GAAP financial measure. See the “Non-GAAP Presentations” section for a reconciliation to the most comparable GAAP equivalent.
(3) Allowance for credit losses to nonaccrual loans ratio is calculated as allowance for credit losses divided by nonaccrual loans at the end of the period.

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The following table sets forth the net recoveries (charge-offs) by loan portfolio segments for the periods indicated:



	For the Three Months Ended March 31, 2022 and 2021
(in thousands)	Agricultural			Commercial and Industrial			Commercial Real Estate			Residential Real Estate			Consumer			Total
For the Three Months Ended March 31, 2022
Charge-offs	—			(233)			(2,184)			(30)			(184)			(2,631)
Recoveries	7			225			117			16			44			409
Net (charge-offs) recoveries	$	7		$	(8)		$	(2,067)		$	(14)		$	(140)		$	(2,222)

Net (charge-off) recovery ratio(1)	—		%	—		%	(0.26)		%	—		%	(0.02)		%	(0.28)		%

For the Three Months Ended March 31, 2021
Charge-offs	(41)			(666)			(66)			(35)			(195)			(1,003)
Recoveries	27			292			306			9			53			687
Net (charge-offs) recoveries	$	(14)		$	(374)		$	240		$	(26)		$	(142)		$	(316)

Net (charge-off) recovery ratio(1)	—		%	(0.04)		%	0.03		%	—		%	(0.02)		%	(0.04)		%

(1) Net (charge-off) recovery ratio is calculated as the annualized net (charge-offs) recoveries divided by average loans held for investment, net of unearned income during the period.

Actual Results:Our ~~ALLL~~ACL as of ~~September 30, 2017~~March 31, 2022 was ~~$26.5~~$46.2 million, which was ~~1.17%~~1.42% of ~~total~~ loans ~~and 1.34%~~held for investment, net of ~~non-acquired loans~~unearned income as of that date. This compares with an ~~ALLL~~ACL of ~~$21.9~~$48.7 million as of December 31, ~~2016,~~2021, which was ~~1.01%~~1.50% of ~~total~~ loans held for investment, net of unearned income. The ACL at March 31, 2022 and ~~1.27% of non-acquired~~December 31, 2021 does not include a reserve for the PPP loans as they are fully guaranteed by the SBA. When adjusted for the impact of ~~that date.~~PPP loans, the ratio of the ACL as a percentage of loans held for investment, net of unearned income as of March 31, 2022 was 1.42%, a decrease of 10 basis points from the ratio of 1.52% at December 31, 2021 (a non-GAAP financial measure - see "Non-GAAP Financial Measures"). The decrease in the ACL reflects overall improvements in forecasted economic conditions and continued stabilization in the credit risk profile. The liability for off-balance sheet credit exposures totaled $4.3 million as of March 31, 2022 as compared to $4.0 million at December 31, 2021 and is included in 'Other liabilities' on the balance sheet.

The Company recorded a credit loss benefit related to loans of $0.3 million for the three months ended March 31, 2022 as compared to a credit loss benefit related to loans of $4.5 million for the three months ended March 31, 2021. Gross charge-offs for the first ~~nine~~three months of ~~2017~~2022 totaled ~~$2.7~~$2.6 million, while there ~~was $0.7~~were $0.4 million in gross recoveries of previously charged-off loans. The ratio of annualized net ~~loan charge offs~~charge-offs to average loans for the first ~~nine~~three months of ~~2017~~2022 was ~~0.12%~~0.28% compared to ~~0.26%~~0.04% for the ~~year~~three months ended ~~December~~March 31, ~~2016. As of September 30, 2017,~~2021.

Economic Forecast: At March 31, 2022, the ~~ALLL was 102.4% of nonperforming loans compared with 76.8% as of December 31, 2016. Based on~~economic forecast used by the ~~inherent risk~~Company showed the following: (1) Midwest unemployment – decreases over the next four forecasted quarters; (2) Year-to-year change in national retail sales - increases over the next four forecasted quarters; (3) Year-to-year change in CRE Index - increases over the next four forecasted quarters; (4) Year-to-year change in U.S. GDP - increases over the next four forecasted quarters; (5) Year-to-year change in National Home Price Index – increases over the next four forecasted quarters; and (6) Rental Vacancy - increases over the next four forecasted quarters. The economic forecast loss driver data overall exhibited improvements in the loan portfolio, management believed that as of September 30, 2017, the ALLL was adequate; however, there is no assurance losses will not exceed the allowance, and any growth in the loan portfolio or uncertainty in the general economy will require that management continue to evaluate the adequacy of the ALLL and make additional provisions in future periods as deemed necessary.forecasted economic conditions.

~~There were no changes to our ALLL calculation methodology during the first nine months of 2017. Classified and impaired loans are reviewed per the requirements of FASB ASC Topic 310.~~

Non-acquired loans with a balance of $1.90 billion at September 30, 2017, had $25.5 million of the allowance for loan losses allocated to them, providing an allocated allowance for loan loss to non-acquired loan ratio of 1.34%, compared to balances of $1.68 billion and an an allocated allowance for loan loss to non-acquired loan ratio of 1.27% at December 31, 2016. Non-acquired loans are total loans minus those loans acquired in the Central merger. New loans and loans renewed after the merger are considered non-acquired loans.

At September 30, 2017

Gross Loans
(A)

Discount
(B)

Loans, Net of Discount
(A-B)
Allowance
(C)
Allowance/Gross Loans
(C/A)

Allowance + Discount/Gross Loans
((B+C)/A)
Total Non-Acquired Loans $ 1,900,824
$ —
$ 1,900,824
$ 25,484
1.34 % 1.34 %
Total Acquired Loans 372,549
9,562
362,987
1,026
0.28
2.84
Total Loans $ 2,273,373
$ 9,562
$ 2,263,811
$ 26,510
1.17 % 1.59 %

At December 31, 2016

Gross Loans
(A)

Discount
(B)

Loans, Net of Discount
(A-B)
Allowance
(C)
Allowance/Gross Loans
(C/A)

Allowance + Discount/Gross Loans
((B+C)/A)
Total Non-Acquired Loans $ 1,677,935
$ —
$ 1,677,935
$ 21,229
1.27 % 1.27 %
Total Acquired Loans 500,423
13,215
487,208
621
0.12
2.76
Total Loans $ 2,178,358
$ 13,215
$ 2,165,143
$ 21,850
1.01 % 1.61 %

The Bank uses a rolling 20-quarter annual average historical net charge-off component for its ALLL calculation. One qualitative factor table is used for the entire bank. Differences in regional (Iowa, Minnesota/Wisconsin, Florida and Colorado) economic and business conditions are included in the qualitative factor narrative and the risk is spread over the entire loan portfolios. All pass rated loans, regardless of size, are allocated based on delinquency status. The Bank has streamlined the ALLL process for a number of low-balance loan types that do not have a material impact on the overall calculation, which are applied a reserve amount equal to the overall reserve calculated pursuant to applicable accounting standards to total loan calculated pursuant to applicable accounting standards. The guaranteed portion of any government guaranteed loan is included in the calculation and is reserved for according to the type of loan. Special mention/watch and substandard rated credits not individually reviewed for impairment are allocated at a higher amount due to the inherent risks associated with these types of loans. Special mention/watch risk rated loans (i.e. early stages of financial deterioration, technical exceptions, etc.) are reserved at a level that will cover losses above a pass allocation for loans that had a loss in the trailing 20-quarters in which the loan was risk-rated special mention/watch at the time of the loss. Substandard loans carry a greater risk than special mention/watch loans, and as such, this subset is reserved at a level that covers losses above a pass allocation for loans that had a loss in the trailing 20-quarters in which the loans was risk-rated substandard at the time of the loss. Classified and impaired loans are reviewed per the requirements of applicable accounting standards.

We currently track the loan to value (“LTV”) ratio of loans in our portfolio, and those loans in excess of internal and supervisory guidelines are presented to the Bank’s board of directors on a quarterly basis. At September 30, 2017, there were 25 owner-occupied 1-4 family loans with a LTV ratio of 100% or greater. In addition, there were 169 home equity loans without credit enhancement that had a LTV ratio of 100% or greater. We have the first lien on 4 of these equity loans and other financial institutions have the first lien on the remaining 165. Additionally, there were 185 commercial real estate loans without credit enhancement that exceeded the supervisory LTV guidelines.

Loan Policy: We review all ~~impaired and nonperforming~~nonaccrual loans greater than $250,000 individually on a quarterly basis to ~~determine their level of impairment~~estimate the appropriate allowance due to collateral ~~deficiency or insufficient cash-flow~~deficiency. Reasonably expected TDRs and executed non-performing TDRs greater than $250,000 are evaluated individually to determine the required ACL. TDRs performing in accordance with their modified contractual terms for a reasonable period of time may be included in the Company’s existing pools based on ~~a discounted cash-flow analysis. At September 30, 2017, TDRs were not a material portion~~the underlying risk characteristics of the loan ~~portfolio.~~to measure the ACL. We review loans 90 days or more past due that are still accruing interest no less than quarterly to determine if the asset is both well secured and in the process of collection. If not, such loans are placed on non-accrual status.

Based on the inherent risk in the loan portfolio, management believed that as of March 31, 2022, the ACL was adequate; however, there is ~~a strong reason that~~no assurance losses will not exceed the ACL. In addition, growth in the loan portfolio or general economic deterioration may require the recognition of additional credit ~~should not be placed on non-accrual. The Bank’s board of directors has reviewed these credit relationships and determined that these loans~~loss expense in future periods. See Note 3. Loans Receivable and the ~~risks associated with them~~Allowance for Credit Losses to our unaudited consolidated financial statements for additional information related to the allowance for credit losses.

Table of Contents

Deposits

The composition of deposits was as follows:


	As of March 31, 2022				As of December 31, 2021
(in thousands)	Balance		% of Total		Balance		% of Total
Noninterest bearing deposits	$	1,002,415	19.7	%	$	1,005,369	19.6	%
Interest checking deposits	1,601,249		31.5		1,619,136		31.6
Money market deposits	983,709		19.4		939,523		18.4
Savings deposits	650,314		12.8		628,242		12.3
Total non-maturity deposits	4,237,687		83.4		4,192,270		81.9
Time deposits of $250 and under	501,903		9.9		505,392		9.9
Time deposits of over $250	338,135		6.7		416,857		8.2
Total time deposits	840,038		16.6		922,249		18.1
Total deposits	$	5,077,725	100.0	%	$	5,114,519	100.0	%

Deposits decreased $36.8 million from December 31, 2021, or 0.7%, reflecting a reduction in large public time deposits. Approximately 93.3% of our total deposits were ~~acceptable~~considered “core” deposits as of March 31, 2022, compared to 91.8% at December 31, 2021. We consider core deposits to be the total of all deposits other than time deposits greater than $250k and ~~did not represent any undue risk.~~non-reciprocal brokered money market deposits. See Note 7. Deposits to our consolidated financial statements for additional information related to our deposits.

Short-Term Borrowings and Long-Term Debt

The following table sets forth the composition of short-term borrowings and long-term debt for the periods presented.


(dollars in thousands)	March 31, 2022		December 31, 2021
Securities sold under agreements to repurchase	$	148,293	$	181,368
Federal home loan bank advances	32,900		—



Total short-term borrowings	$	181,193	$	181,368

Junior subordinated notes issued to capital trusts	41,984		41,940
Subordinated debentures	63,908		63,875
Finance lease payable	912		951
Federal home loan bank borrowings	33,094		48,113

Total long-term debt	$	139,898	$	154,879

See Note 8. Short-Term Borrowings and Note 9. Long-Term Debt to our unaudited consolidated financial statements for additional information related to short-term borrowings and long-term debt.

Capital Resources

Shareholder's Equity and Capital Adequacy

The following table summarizes certain equity capital ratios and book value per share amounts of the Company as of or for the periods presented:


	March 31, 2022			December 31, 2021
Total shareholders’ equity to total assets ratio	8.46		%	8.75		%
Tangible common equity ratio(1)	7.20		%	7.49		%
Total risk-based capital ratio	12.89		%	13.09		%
Tier 1 risk-based capital ratio	10.68		%	10.83		%
Common equity tier 1 risk-based capital ratio	9.81		%	9.94		%
Tier 1 leverage ratio	8.85		%	8.67		%
Book value per share	$	32.15		$	33.66
Tangible book value per share(1)	$	26.98		$	28.40
(1)A non-GAAP financial measure - see the “Non-GAAP Presentations” section for a reconciliation to the most comparable GAAP equivalent.

Table of Contents

Shareholders' Equity:Total shareholders’ equity was ~~$346.6~~$504.5 million as of ~~September 30, 2017,~~March 31, 2022, compared to ~~$305.5~~$527.5 million as of December 31, ~~2016, an increase~~2021, a decrease of ~~$41.1~~$23.0 million, or 13.5%. This increase was primarily attributable to the issuance of 750,000 shares of common stock in a public offering, resulting in $24.4 million of additional capital, net of expenses. Also contributing to the increase in capital was net income of $20.3 million for the ~~first nine months~~ ~~of 2017, a $1.8 million increase in accumulated other comprehensive~~

~~income~~4.4%, due to ~~market value adjustments on investment securities available for sale, and~~ a ~~$0.6 million~~ decrease in ~~treasury stock due to the issuance of 32,168 shares of Company common stock in connection with stock compensation plans. These increases were~~AOCI, which was partially offset by the payment of $6.0 million in common stock dividends. No shares of Company common stock were repurchased in the first nine months of 2017. The total shareholders’ equity to total assets ratio was 11.02% at September 30, 2017, up from 9.92% at December 31, 2016. The tangible equity to tangible assets ratio was 8.84% at September 30, 2017, compared with 7.62% at December 31, 2016. Tangible book value per share was $22.20 at September 30, 2017, an increase ~~from $20.00 per share at December 31, 2016.~~in retained earnings.

~~Our Tier 1 capital to risk-weighted assets ratio was 11.43% as of September 30, 2017 and was 10.73% as of December 31, 2016.~~Capital Adequacy: Risk-based capital guidelines require the classification of assets and some off-balance-sheet items in terms of credit-risk exposure and the measuring of capital as a percentage of the risk-adjusted asset totals. Management believed that, as of ~~September 30, 2017,~~March 31, 2022, the Company and the Bank met all capital adequacy requirements to which we were subject. As of that date, the Bank was “well capitalized” under regulatory prompt corrective action provisions. See Note 11. Regulatory Capital Requirements and Restrictions on Subsidiary Cash to our unaudited consolidated financial statements for additional information related to our capital.

The Company and the Bank are subject to the Basel III regulatory capital reforms (the “Basel III Rules”) and the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). The Basel III Rules are applicable to all banking organizations that are subject to minimum capital requirements, including federal and state banks and savings and loan associations, as well as to bank and savings and loan holding companies, other than “small bank holding companies” (generally bank holding companies with consolidated assets of less than $1 billion which are not publicly traded companies). In order to be a “well-capitalized” depository institution, a bank must maintain a Common Equity Tier 1 capital ratio of 6.5% or more; a Tier 1 capital ratio of 8% or more; a Total capital ratio of 10% or more; and a leverage ratio of 5% or more. A capital conservation buffer, comprised of Common Equity Tier 1 capital, is also established above the regulatory minimum capital requirements. This capital conservation buffer is being phased in, which began January 1, 2016, at 0.625% of risk-weighted assets, was 1.25% of risk-weighted assets effective January 1, 2017, and further increases each subsequent year by an additional 0.625% until reaching the final level of 2.5% on January 1, 2019. At September 30, 2017, the Company’s institution-specific capital conservation buffer necessary to avoid limitations on distributions and discretionary bonus payments was 4.46%, while the Bank’s was 4.57%.Stock Compensation

We have traditionally disclosed certain non-GAAP ratios and amounts to evaluate and measure our financial condition, including our Tier 1 capital to risk-weighted assets ratio. We believe this ratio provides investors with information regarding our financial condition and how we evaluate our financial condition internally. The following table provides a reconciliation of this non-GAAP measure to the most comparable GAAP equivalent.

At September 30, At December 31,
(in thousands) 2017 2016
Tier 1 capital
Total shareholders’ equity $ 346,563
$ 305,456
Less: Net unrealized gains on securities available for sale (665 ) 1,133
Disallowed Intangibles (73,188 ) (71,951 )
Common equity tier 1 capital $ 272,710
234,638
Plus: Junior subordinated notes issued to capital trusts (qualifying restricted core capital) 23,768
23,692
Tier 1 capital $ 296,478
$ 258,330
Risk-weighted assets $ 2,593,082
$ 2,407,661
Tier 1 capital to risk-weighted assets 11.43 % 10.73 %
Common equity tier 1 capital to risk-weighted assets 10.52 % 9.75 %

~~The following table provides the capital levels and minimum required capital levels for the Company and theBank:~~

Actual
For Capital Adequacy Purposes^*
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio Amount Ratio Amount Ratio
(dollars in thousands)
At September 30, 2017
Consolidated:
Total capital/risk based assets $ 323,049
12.46 % $ 239,860
9.250 % N/A
N/A
Tier 1 capital/risk based assets 296,499
11.43
187,998
7.250
N/A
N/A
Common equity tier 1 capital/risk based assets 272,731
10.52
149,102
5.750
N/A
N/A
Tier 1 capital/adjusted average assets 296,499
9.80
120,966
4.000
N/A
N/A
MidWestOne Bank:

Total capital/risk based assets $ 325,099
12.57 % $ 239,160
9.250 % $ 258,551
10.00 %
Tier 1 capital/risk based assets 298,589
11.55
187,450
7.250
206,841
8.00
Common equity tier 1 capital/risk based assets 298,589
11.55
148,667
5.750
168,058
6.50
Tier 1 capital/adjusted average assets 298,589
9.88
120,827
4.000
151,034
5.00
At December 31, 2016
Consolidated:
Total capital/risk based assets $ 280,396
11.65 % $ 207,661
8.625 % N/A
N/A
Tier 1 capital/risk based assets 258,304
10.73
159,508
6.625
N/A
N/A
Common equity tier 1 capital/risk based assets 234,638
9.75
123,393
5.125
N/A
N/A
Tier 1 capital/adjusted average assets 258,304
8.75
118,040
4.000
N/A
N/A
MidWestOne Bank:

Total capital/risk based assets $ 286,959
11.96 % $ 206,892
8.625 % $ 239,875
10.00 %
Tier 1 capital/risk based assets 264,871
11.04
158,917
6.625
191,900
8.00
Common equity tier 1 capital/risk based assets 264,871
11.04
122,936
5.125
155,919
6.50
Tier 1 capital/adjusted average assets 264,871
8.98
118,000
4.000
147,500
5.00
* The ratios for December 31, 2016 include a capital conservation buffer of 0.625%, and the ratios for September 30, 2017 include a capital conservation buffer of 1.25%

On ~~February 15, 2017~~, ~~25,400~~ ~~restricted~~Restricted stock units were granted to certain officers and directors of the Company ~~and~~ on ~~May~~February 15, ~~2017, 7,600 restricted stock units were granted to members~~2022 in the aggregate amount of ~~the board of directors of the Company.~~67,608. Additionally, during the first ~~nine~~three months of ~~2017~~, ~~26,875~~2022, 37,908 shares of common stock were issued in connection with the vesting of previously awarded grants of restricted stock units, of which ~~2,957~~7,430 shares were surrendered by grantees to satisfy tax requirements, and ~~no nonvested~~526 unvested restricted stock units were forfeited. ~~In the first nine months of 2017,~~ ~~8,250~~ ~~shares of common stock were issued in connection with the exercise of previously issued stock options, and no options were forfeited.~~

Liquidity

Liquidity Management

Liquidity management involves meeting the cash flow requirements of depositors and borrowers. We conduct liquidity management on both a daily and long-term basis, and adjust our investments in liquid assets based on expected loan demand, projected loan maturities and payments, expected deposit flows, yields available on interest-bearing deposits, and the objectives of our asset/liability management program. ~~We had~~Excess liquidity is invested generally in short-term U.S. government and agency securities, short- and medium-term state and political subdivision securities, and other investment securities. Our most liquid assets ~~(cash~~are cash and due from banks, interest-bearing bank deposits, and federal funds sold. The balances of these assets are dependent on our operating, investing, and financing activities during any given period.

Generally, the government’s response to the COVID-19 pandemic in the form of fiscal stimulus payments to individuals, coupled with economic uncertainty stemming from the pandemic, has resulted in increased liquidity beginning in 2020 and through the first quarter of 2022.

Cash and cash ~~equivalents) of $42.1 million as of September 30, 2017, compared with $43.2 million as of December 31, 2016. Interest-bearing deposits~~equivalents are summarized in banks at September 30, 2017, were $3.0 million, an increase of $1.2 million from $1.8 million at December 31, 2016. Investment securities classified as available for sale, totaling $427.2 million and $477.5 million as of September 30, 2017 and December 31, 2016, respectively, could be sold to meet liquidity needs if necessary. Additionally, the Bank maintains unsecured lines of credit with several correspondent banks and secured lines with the Federal Reserve Bank Discount Window and the FHLB that would allow us to borrow funds on a short-term basis, if necessary. Management believed that the Company had sufficient liquidity as of September 30, 2017 to meet the needs of borrowers and depositors.table below:

~~Our~~


(dollars in thousands)	As of March 31, 2022		As of December 31, 2021
Cash and due from banks	$	47,677	$	42,949
Interest-bearing deposits	12,152		160,881

Total	$	59,829	$	203,830

Generally, our principal sources of funds ~~between December 31, 2016 and September 30, 2017 were~~are deposits, advances from the FHLB, principal repayments on loans, proceeds from the sale of loans, proceeds from the maturity and sale of investment securities, our federal funds lines, and ~~the issuance of common stock.~~funds provided by operations. While scheduled loan amortization and maturing interest-bearing deposits ~~in banks~~ are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by economic conditions, the general level of interest rates, and competition. We ~~utilize~~utilized particular sources of funds based on comparative costs and availability. ~~This includes fixed-rate~~The Bank maintains unsecured lines of credit with several correspondent banks and secured lines with the Federal Reserve Bank of Chicago and the FHLB ~~borrowings~~ that ~~can generally be obtained at~~would allow us to borrow funds on a more favorable cost than deposits of comparable maturity. We generally manage the pricing of our deposits to maintain a steady deposit base but from time to time may decide, as we have done in the past, not to pay rates on deposits as high as our competition.

As of September 30, 2017, we had $13.8 million of long-term debt outstanding to an unaffiliated banking organization. See Note 10. “Long-Term Borrowings” to our consolidated financial statements for additional information related to our long-term debt.short-term basis, if necessary. We also ~~have $23.8~~hold debt securities classified as available for sale that could be sold to meet liquidity needs if necessary.

Net cash provided by operations was another major source of liquidity. The net cash provided by operating activities was $26.2 million of indebtedness payable under junior subordinated debentures issued to subsidiary trusts that issued trust preferred securities in pooled offerings. See Note 9. “Subordinated Notes Payable” to our consolidated financial statements for ~~additional information related to our junior subordinated notes.~~the three-months ended March 31, 2022 and $15.0 million for the three-months ended March 31, 2021.

Inflation

The effects of price changes and inflation can vary substantially for most financial institutions. While management believes that inflation affects the growth of total assets, it is difficult to assess its overall impact on the Company. The price of one or more of the components of the Consumer Price Index ~~(“CPI”)~~ may fluctuate considerably and thereby influence the overall ~~CPI~~Consumer Price Index without having a corresponding effect on interest rates or upon the cost of those goods and services normally purchased by us. In years of high inflation and high interest rates, intermediate and long-term interest rates tend to increase, thereby adversely impacting the market values of investment securities, mortgage loans and other long-term fixed rate loans held by

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financial institutions. In addition, higher short-term interest rates caused by inflation tend to increase financial institutions’ cost of funds. In other years, the reverse situation may occur.

Off-Balance-Sheet Arrangements

WeDuring the normal course of business, we are a party to financial instruments with off-balance-sheet risk in ~~the normal course of business~~order to meet the financing needs of our ~~customers, which~~customers. These financial instruments include commitments to extend credit, ~~standby~~commitments to sell loans, and ~~performance~~standby letters of credit. We follow the same credit ~~and~~policy (including requiring collateral, if deemed appropriate) to make such commitments ~~to originate residential mortgage~~as is followed for those loans ~~held for sale. Commitments to extend credit~~that are ~~agreements to lend to customers at predetermined interest rates, as long as there is no violation of any condition established~~recorded in ~~the contracts.~~ our financial statements.

Our exposure to credit ~~loss~~losses in the event of nonperformance ~~by the other party to the commitments to extend credit~~ is represented by the contractual amount of ~~those instruments. We use~~ the ~~same credit policies in making off-balance-sheet commitments as we do for on-balance-sheet instruments.~~

Commitments to extend credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts docommitments. Management does not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. As of September 30, 2017, outstanding commitments to extend credit totaled approximately $533.0 million.

~~Commitments under standby and performance letters of credit outstanding totaled $9.8 million as of September 30, 2017. We do not anticipate~~expect any significant losses as a result of these ~~transactions.~~commitments, and also expects to have sufficient liquidity available to cover these off-balance-sheet instruments. Off-balance-sheet transactions are more fully discussed in Note 12. Commitments and Contingencies to our unaudited consolidated financial statements.

~~Residential mortgage loans sold~~Contractual Obligations

There have been no material changes to ~~others are predominantly conventional residential first lien mortgages originated under our usual underwriting procedures, and are most often sold on a nonrecourse basis. At~~ ~~September 30, 2017, there were approximately~~ ~~$0.6 million~~ ~~of mandatory commitments with investors to sell not yet originated residential mortgage loans. We do not anticipate any losses~~the Company's contractual obligations existing at December 31, 2021, as ~~a result of these transactions.~~

~~Special Cautionary Note Regarding Forward-Looking Statements~~

~~This report contains certain “forward-looking statements” within the meaning of such term~~disclosed in the Private Securities Litigation Reform Act of 1995. We and our representatives may, from time to time, make written or oral statements that are “forward-looking” and provide information other than historical information. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement. These factors include, among other things, the factors listed below.

Forward-looking statements, which may be based upon beliefs, expectations and assumptions of our management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “should,” “could,” “would,” “plans,” “goals,” “intend,” “project,” “estimate,” “forecast,” “may” or similar expressions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, these statements. Readers are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Additionally, we undertake no obligation to update any statement in light of new information or future events, except as required under federal securities law.

~~credit quality deterioration or pronounced and sustained reduction in real estate market values that cause an increase in our allowance for credit losses and a reduction in net earnings;~~

~~our management’s ability to reduce and effectively manage interest rate risk and the impact of interest rates in general on the volatility of our net interest income;~~

changes in the economic environment, competition, or other factors that may affect our ability to acquire loans or influence the anticipated growth rate of loans and deposits and the quality of the loan portfolio and loan and deposit pricing;

~~fluctuations in the value of our investment securities;~~

~~governmental monetary and fiscal policies;~~

legislative and regulatory changes, including changes in banking, securities and tax laws and regulations and their application by our regulators (particularly with respect to the Basel III Rules and changes in the scope and cost of FDIC insurance and other coverages);

~~the ability to attract and retain key executives and employees experienced in banking and financial services;~~

~~the sufficiency of the allowance for loan losses to absorb the amount of actual losses inherent in our existing loan portfolio;~~

~~our ability to adapt successfully to technological changes to compete effectively in the marketplace;~~

~~credit risks and risks from concentrations (by geographic area and by industry) within our loan portfolio;~~

the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds, and other financial institutions operating in our markets or elsewhere or providing similar services;

~~the failure of assumptions underlying the establishment of allowances for loan losses and estimation of values of collateral and various financial assets and liabilities;~~

the risks of mergers, including, without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and possible failures to achieve expected gains, revenue growth and/or expense savings from such transactions;

~~volatility of rate-sensitive deposits;~~

~~operational risks, including data processing system failures or fraud;~~

~~asset/liability matching risks and liquidity risks;~~

~~the costs, effects and outcomes of existing or future litigation;~~

~~changes in general economic or industry conditions, internationally, nationally or in the communities in which we conduct business;~~

~~changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the FASB;~~

~~war or terrorist activities which may cause further deterioration in the economy or cause instability in credit markets;~~

~~the effects of cyber-attacks; and~~

~~other factors and risks described under “Risk Factors” in our~~ Annual Report on Form 10-K, ~~for the period ended December 31, 2016 and otherwise in our reports and filings~~filed with the ~~Securities~~SEC on March 10, 2022.

Non-GAAP Financial Measures

Certain ratios and ~~Exchange Commission.~~amounts not in conformity with GAAP are provided to evaluate and measure the Company’s operating performance and financial condition, including return on average tangible equity, tangible common equity, tangible book value per share, tangible common equity ratio, net interest margin (tax equivalent), core net interest margin, efficiency ratio, adjusted allowance for credit losses ratio, and core earnings. Management believes these ratios and amounts provide investors with useful information regarding the Company’s profitability, financial condition and capital adequacy, consistent with how management evaluates the Company’s financial performance. The following tables provide a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.


	Three Months Ended
Return on Average Tangible Equity	March 31, 2022			March 31, 2021
(Dollars in thousands)
Net income	$	13,895		$	21,648
Intangible amortization, net of tax (1)	920			1,130

Tangible net income	$	14,815		$	22,778

Average shareholders' equity	$	524,851		$	516,239
Average intangible assets, net	(81,763)			(86,961)
Average tangible equity	$	443,088		$	429,278

Return on average equity	10.74		%	17.01		%
Return on average tangible equity (2)	13.56		%	21.52		%

(1) Computed assuming a combined marginal income tax rate of 25%.
(2) Annualized tangible net income divided by average tangible equity.

~~We qualify all~~

Table of ~~our forward-looking statements by the foregoing cautionary statements. Because~~Contents


Tangible Common Equity/Tangible Book Value per Share / Tangible Common Equity Ratio	March 31, 2022			December 31, 2021
(Dollars in thousands, except per share data)
Total shareholders’ equity	$	504,457		$	527,475
Intangible assets, net	(81,135)			(82,362)
Tangible common equity	$	423,322		$	445,113

Total assets	$	5,960,214		$	6,025,128
Intangible assets, net	(81,135)			(82,362)
Tangible assets	$	5,879,079		$	5,942,766

Book value per share	$	32.15		$	33.66
Tangible book value per share (1)	$	26.98		$	28.40
Shares outstanding	15,690,125			15,671,147

Equity to assets ratio	8.46		%	8.75		%
Tangible common equity ratio (2)	7.20		%	7.49		%

(1) Tangible common equity divided by shares outstanding.
(2) Tangible common equity divided by tangible assets.


	Three Months Ended
Net Interest Margin, Tax Equivalent/Core Net Interest Margin	March 31, 2022			March 31, 2021
(dollars in thousands)
Net interest income	$	37,336		$	38,617
Tax equivalent adjustments:
Loans (1)	540			531
Securities (1)	615			648
Net interest income, tax equivalent	$	38,491		$	39,796
Loan purchase discount accretion	(732)			(1,098)
Core net interest income	$	37,759		$	38,698

Net interest margin	2.71		%	3.01		%
Net interest margin, tax equivalent (2)	2.79		%	3.10		%
Core net interest margin (3)	2.74		%	3.02		%
Average interest earning assets	$	5,588,001		$	5,198,789

(1) The federal statutory tax rate utilized was 21%.
(2) Annualized tax equivalent net interest income divided by average interest earning assets.
(3) Annualized core net interest income divided by average interest earning assets.

Table of these risks and other uncertainties, our actual future results, performance or achievement, or industry results, may be materially different from the results indicated by these forward-looking statements. In addition, our past results of operations are not necessarily indicative of our future results.Contents


	Three Months Ended
Efficiency Ratio	March 31, 2022			March 31, 2021
(dollars in thousands)
Total noninterest expense	$	31,643		$	27,700
Amortization of intangibles	(1,227)			(1,507)
Merger-related expenses	(128)			—

Noninterest expense used for efficiency ratio	$	30,288		$	26,193

Net interest income, tax equivalent(1)	$	38,491		$	39,796
Noninterest income	11,644			11,824
Investment security gains, net	(40)			(27)
Net revenues used for efficiency ratio	$	50,095		$	51,593

Efficiency ratio(2)	60.46		%	50.77		%
(1) The federal statutory tax rate utilized was 21%.
(2) Noninterest expense adjusted for amortization of intangibles and merger-related expenses divided by the sum of tax equivalent net interest income, noninterest income and net investment securities gains.


Adjusted Allowance for Credit Losses Ratio	March 31, 2022			December 31, 2021
(dollars in thousands)
Loans held for investment, net of unearned income	$	3,250,035		$	3,245,012
PPP loans	(3,037)			(30,841)
Core loans	$	3,246,998		$	3,214,171

Allowance for credit losses	$	46,200		$	48,700

Allowance for credit losses ratio	1.42		%	1.50		%
Adjusted allowance for credit losses ratio (1)	1.42		%	1.52		%
(1) Allowance for credit losses divided by core loans.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

In general, market risk is the risk of change in asset values due to movements in underlying market rates and prices. Interest rate risk is the risk to earnings and capital arising from movements in interest rates. Interest rate risk is the most significant market risk affecting ~~the Company~~us as other types of market risk, such as foreign currency exchange rate risk and commodity price risk, ~~play a lesser role~~do not arise in the normal course of our business activities.

In addition to interest rate risk, economic conditions in recent years have made liquidity risk ~~(in particular,~~(namely, funding liquidity risk) a more prevalent concern among financial institutions. In general, liquidity risk is the risk of being unable to fund an entity’s obligations to creditors (including, in the case of banks, obligations to depositors) as such obligations become due and/or to fund its acquisition of assets.

Liquidity Risk

Liquidity refers to our ability to fund operations, to meet depositor withdrawals, to provide for our customers’ credit needs, and to meet maturing obligations and existing commitments. Our liquidity principally depends on cash flows from operating activities, investment in and maturity of assets, changes in balances of deposits and borrowings, and our ability to borrow funds.

Net cash inflows from operating activities were ~~$34.0~~$26.2 million in the first ~~nine~~three months of ~~2017,~~2022, compared with ~~$32.1~~$15.0 million in the first ~~nine~~three months of ~~2016. Net income before depreciation, amortization, and accretion is generally the primary contributor for net cash inflows from operating activities.~~

2021. Net cash outflows from investing activities were ~~$76.5~~$113.8 million in the first ~~first nine~~three months of ~~2017,~~2022, compared to net cash outflows of ~~$27.3~~$131.9 million in the comparable ~~nine-month~~three-month period of ~~2016. In the first nine months of 2017, investment securities transactions resulted in net cash inflows of $37.6 million, compared to outflows of $39.4 million during the same period of 2016.~~2021. Net cash outflows related to the net increase in loans were $100.9 million for the first nine months of 2017, compared with $7.1 million of net cash inflows related to the net decrease in loans for the same period of 2016. Purchases of bank owned life insurance resulted in $11.2 million of cash outflows in the first nine months of 2017.

~~Net cash inflows~~ from financing activities in the first ~~nine~~three months of ~~2017~~2022 were ~~$41.4~~$56.4 million, compared with net cash inflows of ~~$2.0 thousand~~$180.0 million for the same period of 2016. The largest financing cash inflows during the nine months ended September 30, 2017 were a net increase of $30.0 million in FHLB borrowings, $24.4 million of proceeds, net of expenses, from the issuance of common stock, and an increase of $10.0 million in deposits. Uses of cash were a decrease of $19.0 million in federal funds purchased, $6.0 million to pay dividends, and $3.8 million of payments on long-term debt.2021.

To ~~further mitigate~~manage liquidity risk, the Bank has several sources of liquidity in place to maximize funding availability and increase the diversification of funding sources. The criteria for evaluating the use of these sources include volume concentration (percentage

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of liabilities), cost, volatility, and the fit with the current asset/liability management plan. These acceptable sources of liquidity include:

•Federal Funds Lines

•~~FHLB Borrowings~~

•~~Brokered Deposits~~

•~~Brokered Repurchase Agreements~~

•Federal Reserve Bank Discount Window

•FHLB Borrowings

•Brokered Deposits

•Brokered Repurchase Agreements

Federal Funds ~~Lines:~~

Lines - Routine liquidity requirements are met by fluctuations in the federal funds position of the Bank. The principal function of these funds is to maintain short-term liquidity. Unsecured federal funds purchased lines are viewed as a volatile liability and are not used as a long-term funding solution, especially when used to fund long-term assets. ~~Multiple correspondent relationships are preferable and federal funds sold exposure to any one customer is continuously monitored.~~ The current federal funds purchased limit is 10% of total assets, or the amount of established federal funds lines, whichever is smaller. ~~Currently,~~As of March 31, 2022, the Bank ~~has~~maintains several unsecured federal funds lines totaling ~~$110.0~~$155.0 million, which lines are tested annually to ensure availability.

Federal Reserve Bank Discount Window - The Federal Reserve Bank Discount Window is another source of liquidity, particularly during periods of economic uncertainty or stress. The Bank has a borrowing capacity with the Federal Reserve Bank of Chicago limited by the amount of municipal securities pledged against the line. As of March 31, 2022, the Bank had municipal securities with an approximate market value of $61.3 million pledged for liquidity purposes, and had a borrowing capacity of $56.8 million. There were no outstanding borrowings through the FRB Discount Window at March 31, 2022.

FHLB ~~Borrowings:~~

Borrowings - FHLB borrowings provide both a source of liquidity and long-term funding for the Bank. Use of this type of funding is coordinated with both the strategic balance sheet growth projections and interest rate risk profile of the Bank. Factors that are taken into account when contemplating use of FHLB borrowings are the effective interest rate, the collateral requirements, community investment program credits, and the implications and cost of having to purchase incremental FHLB stock. The current FHLB borrowing limit is 45% of total assets. As of ~~September 30, 2017~~,March 31, 2022, the Bank had ~~$145.0~~$33.1 million in outstanding FHLB borrowings, leaving ~~$162.2~~$464.0 million available for liquidity needs, based on collateral capacity. These borrowings are secured by various real estate loans (residential, commercial and agricultural).

Brokered ~~Deposits:~~

Deposits and Reciprocal Deposits - The Bank has brokered ~~certificate of~~time deposit ~~lines~~ and non-maturity deposit relationships available to ~~help~~ diversify its ~~various~~ funding sources. Brokered deposits offer several benefits relative to other funding sources, such as: maturity structures which cannot be duplicated in the current ~~deposit~~retail market, deposit gathering which does not cannibalize the existing deposit base, the unsecured nature of these liabilities, and the ability to quickly generate funds. However, brokered deposits are often viewed as a volatile liability by banking regulators and market participants. This viewpoint, and the desire to not develop a large funding concentration in any one area outside of theThe Bank’s ~~core market area, is reflected in an~~ internal policy ~~stating that the Bank limit~~limits the use of brokered deposits as a funding source to no more than 10% of total assets. Board approval is required to exceed this limit. The Bank will also have to maintain a “well capitalized” standing to access brokered deposits, as an “adequately capitalized” rating would require an FDIC waiver to do so, and an “undercapitalized” rating would prohibit it from using brokered deposits altogether. The Company did not hold any brokered deposits at March 31, 2022.

Under a final rule that was issued by the FDIC in December 2018, financial institutions that are considered "well capitalized" qualify for the exemption of certain reciprocal deposits from being considered brokered deposits. Such exemption is limited to the lesser of 20 percent of total liabilities or $5 billion, with some exceptions for financial institutions that do not meet such criteria. At March 31, 2022, the Company had $5.0 million of reciprocal time deposits through the CDARS program and $34.9 million of reciprocal non-maturity deposits through the ICS program that qualified for the brokered deposit exemption.

Brokered Repurchase ~~Agreements:~~

Agreements - Brokered repurchase agreements may be established with approved brokerage firms and banks. Repurchase agreements create rollover risk (the risk that a broker will discontinue the relationship due to market factors) and are not used as a long-term funding solution, especially when used to fund long-term assets. Collateral requirements and availability are evaluated and monitored. The current policy limit for brokered repurchase agreements is 10% of total assets. There were no outstanding brokered repurchase agreements at ~~September 30, 2017~~.March 31, 2022.

~~Federal Reserve Bank Discount Window:~~

The Federal Reserve Bank Discount Window is another source of liquidity, particularly during difficult economic times. The Bank has a borrowing capacity with the Federal Reserve Bank of Chicago limited by the amount of municipal securities pledged against the line. As of ~~September 30, 2017, the Bank had municipal securities with an approximate market value of~~ ~~$13.0 million~~ ~~pledged for liquidity purposes, and had a borrowing capacity of $11.7 million.~~

Interest Rate Risk

Interest rate risk is defined as the exposure of net interest income and fair value of financial instruments (interest-earning assets, deposits and borrowings) to movements in interest rates. The Company’s results of operations depend to a large degree on its net interest income and its ability to manage interest rate risk. The Company considers interest rate risk to be ~~one of its more~~a significant market ~~risks.~~risk. The major sources of the ~~Company's~~Company’s interest rate risk are timing differences in the maturity and re-pricing characteristics of assets and liabilities, changes in the shape of the yield curve, changes in customer behavior and changes in relationships between rate indices (basis risk). Management measures these risks and their impact in various ways, including

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through the use of income simulation and valuation analyses. ~~The~~Multiple interest rate scenarios are used in ~~such~~this analysis ~~may~~which include ~~gradual or rapid~~ changes in interest rates, spread narrowing and widening, yield curve twists and changes in assumptions about customer behavior in various interest rate scenarios. A mismatch between maturities, interest rate sensitivities and prepayment characteristics of assets and liabilities results in interest-rate risk. Like most financial institutions, we have material interest-rate risk exposure to changes in both short-term and long-term interest rates, as well as variable interest rate indices (e.g., the prime rate, LIBOR, or ~~LIBOR)~~SOFR). There has been no material change in the Company’s interest rate profile between September 30, 2017 and December 31, 2016. The mix of earning assets and interest-bearing liabilities has remained stable over the period.

The Bank’s asset and liability committee meets regularly and is responsible for reviewing its interest rate sensitivity position and establishing policies to monitor and limit exposure to interest rate risk. Our asset and liability committee seeks to manage interest rate risk under a variety of rate environments by structuring our balance sheet and off-balance-sheet positions in such a way that changes in interest rates do not have a large negative impact. The risk is monitored and managed within approved policy limits.

We use a third-party service to model and measure our exposure to potential interest rate changes. For various assumed hypothetical changes in market interest rates, numerous other assumptions are made, such as prepayment speeds on loans and securities backed by mortgages, the slope of the Treasury yield-curve, the rates and volumes of our deposits, and the rates and volumes of our loans. There are two primary tools used to evaluate interest rate risk: net interest income simulation and economic value of equity ("EVE"). In addition, interest rate gap is reviewed to monitor asset and liability repricing over various time periods.

Net Interest Income ~~Simulation:~~

Simulation - Management utilizes net interest income simulation models to estimate the near-term effects of changing interest rates on its net interest income. Net interest income simulation involves ~~forecasting~~projecting net interest income under a variety of scenarios, which include varying the level of interest rates and shifts in the shape of the yield curve. Management exercises its best judgment in making assumptions regarding events that management can influence, such as non-contractual deposit re-pricings, and events outside ~~management's~~management’s control, such as customer behavior on loan and deposit activity and the effect that competition has on both loan and deposit pricing. These assumptions are subjective and, as a result, net interest income simulation results will differ from actual results due to the timing, magnitude and frequency of interest rate changes, changes in market conditions, customer behavior and management strategies, among other factors. We perform various sensitivity analyses on assumptions of deposit attrition and deposit re-pricing.

The following table presents the anticipated effect on net interest income over a twelve month period if short- and long-term interest rates were to sustain an immediate decrease of 100 basis points or 200 basis points (the effects of which are not meaningful as of March 31, 2022 in the current low interest rate environment), or an immediate increase of 100 basis points or 200 basis ~~points (an immediate decrease of 200 basis points was considered unlikely):~~points:

Immediate Change in Rates
-100 +100 +200
(dollars in thousands)
September 30, 2017
Dollar change $ (1,327 ) $ 258
$ 246

Percent change (1.3 )% 0.3 % 0.2 %
December 31, 2016
Dollar change $ (1,276 ) $ 157
$ 453

Percent change (1.3 )% 0.2 % 0.5 %


	Immediate Change in Rates
(dollars in thousands)	-200	-100	+100			+200
March 31, 2022
Dollar change	N/A	N/A	$	(2,682)		$	(5,467)
Percent change	N/A	N/A	(1.8)		%	(3.7)		%
December 31, 2021
Dollar change	N/A	N/A	$	(996)		$	(2,237)
Percent change	N/A	N/A	(0.7)		%	(1.5)		%

As of ~~September 30, 2017, 38.4%~~March 31, 2022, 29.8% of the Company’s earning asset balances will reprice or are expected to pay down in the next twelve months, and ~~64.8%~~51.3% of the Company’s deposit balances are low cost or no cost deposits.

Economic Value of ~~Equity:~~

Equity - Management also uses EVE to measure risk in the balance sheet that might not be taken into account in the net interest income simulation analysis. Net interest income simulation highlights exposure over a relatively short time period, while EVE analysis incorporates all cash flows over the estimated remaining life of all balance sheet positions. The valuation of the balance sheet, at a point in time, is defined as the discounted present value of asset cash flows minus the discounted present value of liability cash flows. EVE analysis addresses only the current balance sheet and does not incorporate the run-off replacement assumptions that are used in the net interest income simulation model. As with the net interest income simulation model, EVE analysis is based on key assumptions about the timing and variability of balance sheet cash flows and does not take into account any potential responses by management to anticipated changes in interest rates.

Interest Rate ~~Gap:~~

Gap - The interest rate gap is the difference between ~~earning~~interest-earning assets and interest-bearing liabilities re-pricing within a given period and represents the net asset or liability sensitivity at a point in time. An interest rate gap measure could be significantly affected by external factors such as loan prepayments, early withdrawals of deposits, changes in the correlation of various interest-bearing instruments, competition, or a rise or decline in interest rates.

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Item 4. Controls and Procedures.

Disclosure Controls and Procedures

~~Under supervision and with the participation of certain members of our~~The Company’s management, including ~~our chief executive officer~~the Chief Executive Officer and ~~chief financial officer, we completed an evaluation of~~Senior Executive Vice President and Chief Financial Officer, evaluated the effectiveness of the ~~design and operation of our~~Company’s disclosure controls and procedures (as defined in ~~Rules~~Rule 13a-15(e) ~~and~~or Rule 15d-15(e) under the ~~Securities~~Exchange Act) that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act ~~of 1934, as amended) as of~~ ~~September 30, 2017~~.is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Senior Executive Vice President and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, ~~our chief executive officer~~the Chief Executive Officer and ~~chief financial officer~~Senior Executive Vice President and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report with respect to timely communication to them and other members of management responsible for preparing periodic reports of material information required to be disclosed in this report as it relates to the Company and our consolidated subsidiaries.March 31, 2022.

The effectiveness of our or any system of disclosure controls and procedures is subject to certain limitations, including the exercise of judgment in designing, implementing, and evaluating the controls and procedures, the assumptions used in identifying the likelihood of future events, and the inability to eliminate misconduct completely. As a result, there can be no assurance that our disclosure controls and procedures will prevent all errors or fraud or ensure that all material information will be made known to appropriate management in a timely fashion. By their nature, our or any system of disclosure controls and procedures can provide only reasonable assurance regarding management’s control objectives.

Changes in Internal Control over Financial Reporting

There ~~was~~were no ~~change~~changes in ~~our~~the Company’s internal ~~control~~controls over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) that occurred during the ~~last fiscal~~ quarter ended March 31, 2022 that ~~has~~have materially affected or isare reasonably likely to materially affect ~~our~~the Company's internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

~~The Company~~We and ~~its~~our subsidiaries are from time to time parties to various legal actions arising in the normal course of business. We believe that there ~~are~~is no threatened or pending ~~proceedings,~~proceeding, other than ordinary routine litigation incidental to the Company’s business, against ~~the Company~~us or ~~its~~our subsidiaries or of which ~~any of their~~our property is the subject, which, if determined adversely, would have a material adverse effect on ~~the~~our consolidated business or financial ~~condition of the Company.~~condition.

Item 1A. Risk Factors.

There have been no material changes ~~from~~to the risk factors set forth inunder Part I, Item ~~1A. “Risk Factors” of our Annual Report on~~1A "Risk Factors" in the Company's Form 10-K for the ~~period~~fiscal year ended December 31, ~~2016~~.2021. Please refer to that section of our Form 10-K for disclosures regarding the risks and uncertainties related to our business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table sets forth information about the Company’s purchases of its common stock during the first quarter of 2022:


	Total Number of Shares Purchased(1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs(2)	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program
January 1 - 31, 2022	—	$	—	—	$	5,767,134
February 1 - 28, 2022	7,430	31.38		—	5,767,134
March 1 - 31, 2022	11,500	30.98		11,500	5,410,831
Total	18,930	$	31.14	11,500	$	5,410,831

(1) Common shares repurchased by the Company during the quarter related to 11,500 shares repurchased under the share repurchase program, as well as 7,430 shares surrendered by employees of the Company to pay withholding taxes on vesting of restricted stock awards.

(2) On June 22, 2021, the Board of Directors of the Company approved a share repurchase program, allowing for the repurchase of up to $15.0 million of the Company's common stock through December 31, 2023. This new repurchase program replaced the Company’s prior repurchase program, which was due to expire on December 31, 2021. Since June 23, 2021, the Company repurchased 323,467 shares of common stock for approximately $9.6 million, leaving $5.4 million available to be repurchased.

Pursuant to the Company’s share repurchase program approved on June 22, 2021, the Company has purchased 9,662 shares of common stock subsequent to March 31, 2022 and through May 3, 2022 for a total cost of $0.3 million inclusive of transaction costs, leaving $5.1 million available to be repurchased.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

Table of Contents

Item 6. Exhibits.

Exhibit

Number

Description

~~We did not repurchase any of our equity securities during the third quarter of 2017.~~

On July 21, 2016, the board of directors of the Company approved a new share repurchase program, allowing for the repurchase of up to $5.0 million of stock through December 31, 2018. The new repurchase program replaced the Company’s prior repurchase program, pursuant to which the Company had repurchased $1.2 million of common stock since the plan was announced in July 2014. Pursuant to the repurchase program, the Company may continue to repurchase shares from time to time in the open market, and the method, timing and amounts of repurchase will be solely in the discretion of the Company’s management. The repurchase program does not require the Company to acquire a specific number of shares. Therefore, the amount of shares repurchased pursuant to the program will depend on several factors, including market conditions, capital and liquidity requirements, and alternative uses for cash available. Of the $5.0 million of stock authorized under the repurchase plan, $5.0 million remained available for possible future repurchases as of September 30, 2017.

~~Item 3. Defaults Upon Senior Securities.~~

~~None.~~

~~Item 4. Mine Safety Disclosures.~~

~~Not Applicable.~~

~~Item 5. Other Information.~~

~~None.~~

~~Item 6. Exhibits.~~

Incorporated by Reference to:

~~Exhibit~~

~~Number~~3.1

~~Description~~

~~Incorporated by Reference to:~~

~~10.1~~

~~Employment Agreement between MidWestOne~~Amended and Restated Articles of Incorporation of MidWestOne Financial Group, Inc. filed with the Secretary of State of the State of Iowa on March 14, 2008

Exhibit 3.3 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-147628) filed with the SEC on January 14, 2008

3.2

Articles of Amendment (First Amendment) to the Amended and ~~Charles N. Funk, effective October 18, 2017~~Restated Articles of Incorporation of MidWestOne Financial Group, Inc. filed with the Secretary of State of the State of Iowa on January 23, 2009

Exhibit ~~10.1~~3.1 to the Company’s Current Report on Form 8-K filed with the SEC on ~~October 18, 2017~~January 23, 2009

~~10.2~~3.3

~~Employment Agreement between MidWestOne~~

Articles of Amendment (Second Amendment) to the Amended and Restated Articles of Incorporation of MidWestOne Financial Group, Inc. ~~and Kevin Kramer, effective October 18, 2017~~filed with the Secretary of State of the State of Iowa on February 4, 2009 (containing the Certificate of Designations for the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A)

Exhibit ~~10.2~~3.1 to the Company’s Current Report on Form 8-K filed with the SEC on ~~October 18, 2017~~February 6, 2009

~~10.3~~3.4

~~Employment Agreement between MidWestOne~~

Articles of Amendment (Third Amendment) to the Amended and Restated Articles of Incorporation of MidWestOne Financial Group, Inc., filed with the Secretary of State of the State of Iowa on April 21, 2017

Exhibit 3.1 to the Company’s Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 4, 2017

3.5

Third Amended and Restated Bylaws, as Amended of MidWestOne Financial Group, Inc. ~~and Kent L. Jehle, effective October 18, 2017~~as of January 25, 2022

Exhibit ~~10.3~~3.1 to the Company’s Current Report on Form 8-K filed with the SEC on ~~October 18, 2017~~January 27, 2022

~~10.4~~10.1

Amended and Restated Employment Agreement between ~~MidWestOne~~MidWestOne Financial Group, Inc. and ~~Katie Lorenson, effective October 18, 2017~~Len D. Devaisher, dated March 8, 2022.

Exhibit ~~10.4~~10.18 to the Company’s ~~Current~~Annual Report on Form ~~8-K~~10-K filed with the SEC on ~~October 18, 2017~~March 10, 2022

~~10.5~~31.1

~~Employment Agreement between MidWestOne Financial Group, Inc. and James M. Cantrell, effective October 18, 2017~~

~~Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on October 18, 2017~~

~~31.1~~

Certification of ~~Chief~~Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)

Filed herewith

31.2

Certification of ~~Chief~~Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)

Filed herewith

32.1

Certification of ~~Chief~~Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed herewith

32.2

Certification of ~~Chief~~Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed herewith

~~101.INS~~101

~~XBRL Instance Document~~The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Shareholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

Filed herewith

101.SCH

~~101.SCH~~

Inline XBRL Taxonomy Extension Schema Document

Filed herewith

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Filed herewith

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

Filed herewith

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

Filed herewith

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Filed herewith

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Filed herewith

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MIDWESTONE FINANCIAL GROUP, INC.

Dated:

~~November 2, 2017~~May 5, 2022

By:

/s/ C~~HARLES~~CHARLES N. F~~UNK~~

FUNK

Charles N. Funk

~~President and~~ Chief Executive Officer

(Principal Executive Officer)

By:

/s/ K~~ATIE~~ ~~A. LORENSON~~

BARRY S. RAY

~~Katie A. Lorenson~~Barry S. Ray

Senior Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

6552



Iowa						42-1206172
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)



102 South Clinton Street, Iowa City, IA 52240						(319) 356-5800
(Address of principal executive offices, including zip code)						(Registrant’s telephone number, including area code)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	September 30, 2017			December 31, 2016
(dollars in thousands, except per share amounts)	(unaudited)
ASSETS
Cash and due from banks	$	39,113		$	41,464
Interest-bearing deposits in banks	2,988			1,764
Cash and cash equivalents	42,101			43,228
Investment securities:
Available for sale	427,241			477,518
Held to maturity (fair value of $183,946 as of September 30, 2017 and $164,792 as of December 31, 2016)	183,304			168,392
Loans held for sale	612			4,241
Loans	2,263,811			2,165,143
Allowance for loan losses	(26,510		)	(21,850		)
Net loans	2,237,301			2,143,293
Premises and equipment, net	75,036			75,043
Accrued interest receivable	13,871			13,871
Goodwill	64,654			64,654
Other intangible assets, net	12,759			15,171
Bank-owned life insurance	59,432			47,231
Other real estate owned	1,343			2,097
Deferred income taxes	6,008			6,523
Other assets	20,537			18,313
Total assets	$	3,144,199		$	3,079,575
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest-bearing demand	$	477,376		$	494,586
Interest-bearing checking	1,137,592			1,136,282
Savings	203,506			197,698
Certificates of deposit under $100,000	324,024			326,832
Certificates of deposit $100,000 and over	347,917			325,050
Total deposits	2,490,415			2,480,448
Federal funds purchased	16,708			35,684
Securities sold under agreements to repurchase	87,964			82,187
Federal Home Loan Bank borrowings	145,000			115,000
Junior subordinated notes issued to capital trusts	23,768			23,692
Long-term debt	13,750			17,500
Deferred compensation liability	5,158			5,180
Accrued interest payable	1,449			1,472
Other liabilities	13,424			12,956
Total liabilities	2,797,636			2,774,119
Shareholders' equity:
Preferred stock, no par value; authorized 500,000 shares; no shares issued and outstanding at September 30, 2017 and December 31, 2016	$	—		$	—
Common stock, $1.00 par value; authorized 30,000,000 shares at September 30, 2017 and 15,000,000 shares at December 31, 2016; issued 12,463,481 shares at September 30, 2017 and 11,713,481 shares at December 31, 2016; outstanding 12,218,528 shares at September 30, 2017 and 11,436,360 shares at December 31, 2016	12,463			11,713
Additional paid-in capital	187,296			163,667
Treasury stock at cost, 244,953 shares as of September 30, 2017 and 277,121 shares as of December 31, 2016	(5,141		)	(5,766		)
Retained earnings	151,280			136,975
Accumulated other comprehensive income (loss)	665			(1,133		)
Total shareholders' equity	346,563			305,456
Total liabilities and shareholders' equity	$	3,144,199		$	3,079,575



(unaudited) (dollars in thousands, except per share amounts)	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017		2016
Interest income:
Interest and fees on loans	$	26,206		$	24,343		$	76,135	$	74,094
Interest on bank deposits	19			63			50		141
Interest on federal funds sold	—			3			1		4
Interest on investment securities:
Taxable securities	2,589			2,088			7,897		5,924
Tax-exempt securities	1,547			1,394			4,699		4,251
Total interest income	30,361			27,891			88,782		84,414
Interest expense:
Interest on deposits:
Interest-bearing checking	913			810			2,623		2,346
Savings	53			50			155		216
Certificates of deposit under $100,000	893			801			2,638		2,089
Certificates of deposit $100,000 and over	1,041			813			2,953		2,171
Total interest expense on deposits	2,900			2,474			8,369		6,822
Interest on federal funds purchased	81			5			152		30
Interest on securities sold under agreements to repurchase	53			36			125		121
Interest on Federal Home Loan Bank borrowings	474			469			1,321		1,387
Interest on other borrowings	3			4			9		16
Interest on junior subordinated notes issued to capital trusts	243			215			704		608
Interest on long-term debt	115			107			338		354
Total interest expense	3,869			3,310			11,018		9,338
Net interest income	26,492			24,581			77,764		75,076
Provision for loan losses	4,384			1,005			6,665		3,241
Net interest income after provision for loan losses	22,108			23,576			71,099		71,835
Noninterest income:
Trust, investment, and insurance fees	1,454			1,306			4,594		4,244
Service charges and fees on deposit accounts	1,295			1,346			3,835		3,887
Loan origination and servicing fees	1,012			1,332			2,532		2,806
Other service charges and fees	1,625			1,307			4,580		4,115
Bank-owned life insurance income	344			324			990		1,040
Gain on sale or call of available for sale securities	176			—			196		467
Gain on sale of held to maturity securities	—			—			43		—
Gain (loss) on sale of premises and equipment	(4		)	(211		)	2		(462		)
Other gain	14			310			64		1,617
Total noninterest income	5,916			5,714			16,836		17,714
Noninterest expense:
Salaries and employee benefits	12,039			11,641			35,712		37,607
Net occupancy and equipment expense	2,986			3,293			9,323		9,870
Professional fees	933			1,014			2,991		3,181
Data processing expense	723			599			1,982		3,981
FDIC insurance expense	238			412			957		1,231
Amortization of intangible assets	759			970			2,412		3,046
Other operating expense	2,066			2,510			6,666		7,784
Total noninterest expense	19,744			20,439			60,043		66,700
Income before income tax expense	8,280			8,851			27,892		22,849
Income tax expense	1,938			2,629			7,603		6,328
Net income	$	6,342		$	6,222		$	20,289	$	16,521
Share and per share information:
Ending number of shares outstanding	12,218,528			11,435,860			12,218,528		11,435,860
Average number of shares outstanding	12,218,528			11,435,860			11,977,579		11,428,063
Diluted average number of shares	12,238,991			11,461,108			11,999,608		11,451,958
Earnings per common share - basic	$	0.52		$	0.54		$	1.69	$	1.45
Earnings per common share - diluted	0.52			0.54			1.69		1.44
Dividends paid per common share	0.17			0.16			0.50		0.48



(unaudited) (dollars in thousands, except per share amounts)	Preferred Stock		Common Stock		Additional Paid-in Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance at December 31, 2015	$	—	$	11,713	$	163,487		$	(6,331	)	$	123,901		$	3,408		$	296,178
Net income	—		—		—			—			16,521			—			16,521
Dividends paid on common stock ($0.48 per share)	—		—		—			—			(5,487		)	—			(5,487		)
Stock options exercised (2,900 shares)	—		—		(22		)	60			—			—			38
Release/lapse of restriction on RSUs (25,633 shares)	—		—		(520		)	495			—			—			(25		)
Stock compensation	—		—		547			—			—						547
Other comprehensive income, net of tax	—		—		—			—			—			1,812			1,812
Balance at September 30, 2016	$	—	$	11,713	$	163,492		$	(5,776	)	$	134,935		$	5,220		$	309,584
Balance at December 31, 2016	$	—	$	11,713	$	163,667		$	(5,766	)	$	136,975		$	(1,133	)	$	305,456
Net income	—		—		—			—			20,289			—			20,289
Issuance of common stock (750,000 shares), net of expenses of $1,328,000	—		750		23,610			—			—			—			24,360
Dividends paid on common stock ($0.50 per share)	—		—		—			—			(5,984		)	—			(5,984		)
Stock options exercised (8,250 shares)	—		—		(81		)	172			—			—			91
Release/lapse of restriction on RSUs (26,875 shares)	—		—		(560		)	453			—			—			(107		)
Stock compensation	—		—		660			—			—			—			660
Other comprehensive income, net of tax	—		—		—			—			—			1,798			1,798
Balance at September 30, 2017	$	—	$	12,463	$	187,296		$	(5,141	)	$	151,280		$	665		$	346,563



	As of September 30, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
(in thousands)
U.S. Government agencies and corporations	$	5,714	$	3	$	3	$	5,714
State and political subdivisions	145,843		3,798		29		149,612
Mortgage-backed securities	50,939		403		42		51,300
Collateralized mortgage obligations	169,662		109		3,339		166,432
Corporate debt securities	51,731		196		98		51,829
Total debt securities	423,889		4,509		3,511		424,887
Other equity securities	2,266		120		32		2,354
Total	$	426,155	$	4,629	$	3,543	$	427,241



	As of December 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
(in thousands)
U.S. Government agencies and corporations	$	5,895	$	10	$	—	$	5,905
State and political subdivisions	162,145		3,545		418		165,272
Mortgage-backed securities	61,606		315		567		61,354
Collateralized mortgage obligations	175,506		148		4,387		171,267
Corporate debt securities	72,979		76		602		72,453
Total debt securities	478,131		4,094		5,974		476,251
Other equity securities	1,259		66		58		1,267
Total	$	479,390	$	4,160	$	6,032	$	477,518



	Allowance for Loan Losses and Recorded Investment in Loan Receivables
	As of September 30, 2017 and December 31, 2016
(in thousands)	Agricultural		Commercial and Industrial		Commercial Real Estate		Residential Real Estate		Consumer		Total
September 30, 2017
Allowance for loan losses:
Individually evaluated for impairment	$	150	$	3,446	$	1,388	$	226	$	—	$	5,210
Collectively evaluated for impairment	2,415		6,249		8,648		3,002		254		20,568
Purchased credit impaired loans	—		—		344		388		—		732
Total	$	2,565	$	9,695	$	10,380	$	3,616	$	254	$	26,510
Loans receivable
Individually evaluated for impairment	$	2,967	$	11,231	$	16,332	$	3,528	$	—	$	34,058
Collectively evaluated for impairment	105,221		500,772		1,097,495		469,452		37,042		2,209,982
Purchased credit impaired loans	—		31		14,275		5,465		—		19,771
Total	$	108,188	$	512,034	$	1,128,102	$	478,445	$	37,042	$	2,263,811




	Allowance for Loan Loss Activity
	For the Three Months Ended September 30, 2017 and 2016
(in thousands)	Agricultural			Commercial and Industrial			Commercial Real Estate			Residential Real Estate			Consumer			Unallocated		Total
2017
Beginning balance	$	2,666		$	7,959		$	9,013		$	2,650		$	222		$	—	$	22,510
Charge-offs	(318		)	(534		)	—			(75		)	(51		)	—		(978		)
Recoveries	150			113			201			126			4			—		594
Provision	67			2,157			1,166			915			79			—		4,384
Ending balance	$	2,565		$	9,695		$	10,380		$	3,616		$	254		$	—	$	26,510
2016
Beginning balance	$	2,354		$	5,385		$	10,628		$	2,463		$	367		$	—	$	21,197
Charge-offs	(140		)	(520		)	(29		)	(195		)	(42		)	—		(926		)
Recoveries	20			19			8			69			3			—		119
Provision	268			427			(584		)	857			37			—		1,005
Ending balance	$	2,502		$	5,311		$	10,023		$	3,194		$	365		$	—	$	21,395




	Allowance for Loan Loss Activity
	For the Nine Months Ended September 30, 2017 and 2016
(in thousands)	Agricultural			Commercial and Industrial			Commercial Real Estate			Residential Real Estate			Consumer			Unallocated			Total
2017
Beginning balance	$	2,003		$	6,274		$	9,860		$	3,458		$	255		$	—		$	21,850
Charge-offs	(1,202		)	(1,063		)	(106		)	(155		)	(211		)	—			(2,737		)
Recoveries	164			215			216			126			11			—			732
Provision	1,600			4,269			410			187			199			—			6,665
Ending balance	$	2,565		$	9,695		$	10,380		$	3,616		$	254		$	—		$	26,510
2016
Beginning balance	$	1,417		$	5,451		$	8,556		$	3,968		$	409		$	(374	)	$	19,427
Charge-offs	(265		)	(530		)	(70		)	(708		)	(169		)	—			(1,742		)
Recoveries	27			91			188			146			17			—			469
Provision	1,323			299			1,349			(212		)	108			374			3,241
Ending balance	$	2,502		$	5,311		$	10,023		$	3,194		$	365		$	—		$	21,395



	~~Commission file number 001-35968~~



	Pass		Special Mention/ Watch		Substandard		Doubtful		Loss		Total
(in thousands)
September 30, 2017
Agricultural	$	84,594	$	22,265	$	1,329	$	—	$	—	$	108,188
Commercial and industrial⁽¹⁾	468,161		25,836		18,030		7		—		512,034
Commercial real estate:
Construction and development	140,547		1,066		2,136		—		—		143,749
Farmland	77,020		10,098		411		—		—		87,529
Multifamily	134,451		1,777		496		—		—		136,724
Commercial real estate-other	698,941		32,235		28,924		—		—		760,100
Total commercial real estate	1,050,959		45,176		31,967		—		—		1,128,102
Residential real estate:
One- to four- family first liens	349,582		2,978		10,135		—		—		362,695
One- to four- family junior liens	112,808		1,124		1,818		—		—		115,750
Total residential real estate	462,390		4,102		11,953		—		—		478,445
Consumer	36,930		—		79		33		—		37,042
Total	$	2,103,034	$	97,379	$	63,358	$	40	$	—	$	2,263,811



	September 30, 2017				December 31, 2016
	Non-Accrual		Loans Past Due 90 Days or More and Still Accruing		Non-Accrual		Loans Past Due 90 Days or More and Still Accruing
(in thousands)
Agricultural	$	517	$	—	$	2,690	$	—
Commercial and industrial	3,072		190		8,358		—
Commercial real estate:
Construction and development	1,060		—		780		95
Farmland	393		—		227		—
Multifamily	—		—		—		—
Commercial real estate-other	13,285		—		7,360		—
Total commercial real estate	14,738		—		8,367		95
Residential real estate:
One- to four- family first liens	1,357		262		1,127		375
One- to four- family junior liens	143		34		116		15
Total residential real estate	1,500		296		1,243		390
Consumer	44		—		10		—
Total	$	19,871	$	486	$	20,668	$	485



	Insurance Agency Intangible			Core Deposit Intangible			Indefinite-Lived Trade Name Intangible		Finite-Lived Trade Name Intangible			Customer List Intangible			Total
(in thousands)
September 30, 2017
Balance, beginning of period	$	203		$	6,846		$	7,040	$	960		$	122		$	15,171
Amortization expense	(41		)	(2,193		)	—		(164		)	(14		)	(2,412		)
Balance at end of period	$	162		$	4,653		$	7,040	$	796		$	108		$	12,759

Gross carrying amount	$	1,320		$	18,206		$	7,040	$	1,380		$	330		$	28,276
Accumulated amortizations	(1,158		)	(13,553		)	—		(584		)	(222		)	(15,517		)
Net book value	$	162		$	4,653		$	7,040	$	796		$	108		$	12,759



	For the Three Months Ended September 30,										For the Nine Months Ended September 30,
	2017					2016					2017					2016
(in thousands)	Amount			% of Pretax Income		Amount			% of Pretax Income		Amount			% of Pretax Income		Amount			% of Pretax Income
Expected provision	$	2,898		35.0	%	$	3,098		35.0	%	$	9,762		35.0	%	$	7,997		35.0	%
Tax-exempt interest	(808		)	(9.7	)	(761		)	(8.6	)	(2,389		)	(8.6	)	(2,260		)	(9.9	)
Bank-owned life insurance	(121		)	(1.5	)	(114		)	(1.3	)	(346		)	(1.2	)	(363		)	(1.6	)
State income taxes, net of federal income tax benefit	366			4.4		398			4.5		1,214			4.4		1,045			4.6
Non-deductible acquisition expenses	—			—		18			0.2		—			—		71			0.3
General business credits	(405		)	(4.9	)	(15		)	(0.2	)	(445		)	(1.6	)	(168		)	(0.7	)
Other	8			0.1		5			0.1		(193		)	(0.7	)	6			—
Total income tax provision	$	1,938		23.4	%	$	2,629		29.7	%	$	7,603		27.3	%	$	6,328		27.7	%



	As of September 30,
(dollars in thousands)	2017			2016
Tangible Equity:
Total shareholders’ equity	$	346,563		$	309,584
Plus: Deferred tax liability associated with intangibles	2,141			3,422
Less: Intangible assets, net	(77,413		)	(80,749		)
Tangible equity	$	271,291		$	232,257
Tangible Assets:
Total assets	$	3,144,199		$	3,001,974
Plus: Deferred tax liability associated with intangibles	2,141			3,422
Less: Intangible assets, net	(77,413		)	(80,749		)
Tangible assets	$	3,068,927		$	2,924,647
Common shares outstanding	12,218,528			11,435,860
Tangible Book Value Per Share	$	22.20		$	20.31
Tangible Equity/Tangible Assets	8.84		%	7.94		%



	Three Months Ended September 30,
	2017 Compared to 2016 Change due to
	Volume			Rate/Yield			Net
(in thousands)
Increase (decrease) in interest income:
Loans, tax equivalent	$	845		$	1,032		$	1,877
Investment securities:
Taxable investments	349			152			501
Tax exempt investments	579			(345		)	234
Total investment securities	928			(193		)	735
Federal funds sold and interest-bearing balances	(375		)	328			(47		)
Change in interest income	1,398			1,167			2,565
Increase (decrease) in interest expense:
Savings and interest-bearing demand deposits	37			69			106
Certificates of deposit	59			261			320
Total deposits	96			330			426
Federal funds purchased and repurchase agreements	22			71			93
Federal Home Loan Bank borrowings	86			(81		)	5
Other long-term debt	(189		)	224			35
Total borrowed funds	(81		)	214			133
Change in interest expense	15			544			559
Increase in net interest income	$	1,383		$	623		$	2,006
Percentage change in net interest income over prior period							7.8		%



Adjusted Noninterest Income:
Noninterest income	$	16,836		$	17,714
Less: Gain on sale of available for sale securities	(196		)	(467		)
Gain on sale of held to maturity securities	(43		)	—
(Gain) loss on sale of premises and equipment	(2		)	462
Other gain	(64		)	(1,617		)
Adjusted noninterest income	$	16,531		$	16,092
Total Revenue:
Net interest income	$	77,764		$	75,076
Plus: Noninterest income	16,836			17,714
Less: Gain on sale of available for sale securities	(196		)	(467		)
Gain on sale of held to maturity securities	(43		)	—
(Gain) loss on sale of premises and equipment	(2		)	462
Other gain	(64		)	(1,617		)
Total Revenue	$	94,295		$	91,168
Adjusted Noninterest Income as a Percentage of Total Revenue	17.5		%	17.7		%



	90 Days or More Past Due and Still Accruing Interest		Restructured		Nonaccrual		Total
(in thousands)
September 30, 2017
Agricultural	$	—	$	2,637	$	517	$	3,154
Commercial and industrial⁽¹⁾	190		1,469		3,072		4,731
Commercial real estate:
Construction and development	—		—		1,060		1,060
Farmland	—		—		393		393
Multifamily	—		—		—		—
Commercial real estate-other	—		730		13,285		14,015
Total commercial real estate	—		730		14,738		15,468
Residential real estate:
One- to four- family first liens	262		695		1,357		2,314
One- to four- family junior liens	34		—		143		177
Total residential real estate	296		695		1,500		2,491
Consumer	—		—		44		44
Total	$	486	$	5,531	$	19,871	$	25,888



	September 30,		December 31,
	2017		2016
(in thousands)
Restructured Loans (TDRs):
In compliance with modified terms	$	5,531	$	7,312
Not in compliance with modified terms - on nonaccrual status or 90 days or more past due and still accruing interest	12,682		1,003
Total restructured loans	$	18,213	$	8,315



	At September 30, 2017
	Gross Loans (A)		Discount (B)		Loans, Net of Discount (A-B)		Allowance (C)		Allowance/Gross Loans (C/A)		Allowance + Discount/Gross Loans ((B+C)/A)
Total Non-Acquired Loans	$	1,900,824	$	—	$	1,900,824	$	25,484	1.34	%	1.34	%
Total Acquired Loans	372,549		9,562		362,987		1,026		0.28		2.84
Total Loans	$	2,273,373	$	9,562	$	2,263,811	$	26,510	1.17	%	1.59	%



	At December 31, 2016
	Gross Loans (A)		Discount (B)		Loans, Net of Discount (A-B)		Allowance (C)		Allowance/Gross Loans (C/A)		Allowance + Discount/Gross Loans ((B+C)/A)
Total Non-Acquired Loans	$	1,677,935	$	—	$	1,677,935	$	21,229	1.27	%	1.27	%
Total Acquired Loans	500,423		13,215		487,208		621		0.12		2.76
Total Loans	$	2,178,358	$	13,215	$	2,165,143	$	21,850	1.01	%	1.61	%



	At September 30,			At December 31,
(in thousands)	2017			2016
Tier 1 capital
Total shareholders’ equity	$	346,563		$	305,456
Less: Net unrealized gains on securities available for sale	(665		)	1,133
Disallowed Intangibles	(73,188		)	(71,951		)
Common equity tier 1 capital	$	272,710		234,638
Plus: Junior subordinated notes issued to capital trusts (qualifying restricted core capital)	23,768			23,692
Tier 1 capital	$	296,478		$	258,330
Risk-weighted assets	$	2,593,082		$	2,407,661
Tier 1 capital to risk-weighted assets	11.43		%	10.73		%
Common equity tier 1 capital to risk-weighted assets	10.52		%	9.75		%



	Actual				For Capital Adequacy Purposes^*				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
(dollars in thousands)
At September 30, 2017
Consolidated:
Total capital/risk based assets	$	323,049	12.46	%	$	239,860	9.250	%	N/A		N/A
Tier 1 capital/risk based assets	296,499		11.43		187,998		7.250		N/A		N/A
Common equity tier 1 capital/risk based assets	272,731		10.52		149,102		5.750		N/A		N/A
Tier 1 capital/adjusted average assets	296,499		9.80		120,966		4.000		N/A		N/A
MidWestOne Bank:
Total capital/risk based assets	$	325,099	12.57	%	$	239,160	9.250	%	$	258,551	10.00	%
Tier 1 capital/risk based assets	298,589		11.55		187,450		7.250		206,841		8.00
Common equity tier 1 capital/risk based assets	298,589		11.55		148,667		5.750		168,058		6.50
Tier 1 capital/adjusted average assets	298,589		9.88		120,827		4.000		151,034		5.00
At December 31, 2016
Consolidated:
Total capital/risk based assets	$	280,396	11.65	%	$	207,661	8.625	%	N/A		N/A
Tier 1 capital/risk based assets	258,304		10.73		159,508		6.625		N/A		N/A
Common equity tier 1 capital/risk based assets	234,638		9.75		123,393		5.125		N/A		N/A
Tier 1 capital/adjusted average assets	258,304		8.75		118,040		4.000		N/A		N/A
MidWestOne Bank:
Total capital/risk based assets	$	286,959	11.96	%	$	206,892	8.625	%	$	239,875	10.00	%
Tier 1 capital/risk based assets	264,871		11.04		158,917		6.625		191,900		8.00
Common equity tier 1 capital/risk based assets	264,871		11.04		122,936		5.125		155,919		6.50
Tier 1 capital/adjusted average assets	264,871		8.98		118,000		4.000		147,500		5.00
* The ratios for December 31, 2016 include a capital conservation buffer of 0.625%, and the ratios for September 30, 2017 include a capital conservation buffer of 1.25%