UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20172022
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number001-35968
Commission file number 001-35968
MIDWESTONEMIDWESTONE FINANCIAL GROUP, INC.
(Exact name of Registrant as specified in its charter)
Iowa42-1206172
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
102 South Clinton Street
Iowa City, IA 52240
(Address of principal executive offices, including zip code)
319-356-5800
(Registrant’s telephone number, including area code)
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)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $1.00 par valueMOFGThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒x  Yes    ☐  No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ☒x  Yes    ☐  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer☐Accelerated filer☒x
Non-accelerated filer☐  (Do not check if a smaller reporting company)Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     ☐  Yes    ☒x  No


As of October 31, 2017,November 1, 2022, there were 12,219,02815,623,530 shares of common stock, $1.00 par value per share, outstanding.


Table of Contents
MIDWESTONE FINANCIAL GROUP, INC.
Form 10-Q Quarterly Report
Table of Contents
Page No.
PART I
Item 1.
1

MIDWESTONE FINANCIAL GROUP, INC.
Form 10-Q Quarterly Report
Table of Contents
Page No.
PART I
Item 1.
1
Consolidated Balance Sheets
1
2
3
4
5
7
Item 2.
3533
Item 3.
5954
Item 4.
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Part II
Item 1.
6358
Item 1A.
6358
Item 2.
6358
Item 3.
6358
Item 4.
6358
Item 5.
6358
Item 6.
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6560




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."
ACLAllowance for Credit LossesFHLBCFederal Home Loan Bank of Chicago
AFSAvailable for SaleFHLBDMFederal Home Loan Bank of Des Moines
AOCIAccumulated Other Comprehensive IncomeFHLMCFederal Home Loan Mortgage Corporation
ASCAccounting Standards CodificationFNBFFirst National Bank in Fairfield
ASUAccounting Standards UpdateFNBMFirst National Bank of Muscatine
ATMAutomated Teller MachineFNMAFederal National Mortgage Association
Basel III RulesA comprehensive capital framework and rules for U.S. banking organizations approved by the FRB and the FDIC in 2013FRBBoard of Governors of the Federal Reserve System
BHCABank Holding Company Act of 1956, as amendedGAAPU.S. Generally Accepted Accounting Principles
BOLIBank Owned Life InsuranceGLBAGramm-Leach-Bliley Act of 1999
CAAConsolidated Appropriations Act, 2021GNMAGovernment National Mortgage Association
CARES ActCoronavirus Aid, Relief and Economic Security ActICSInsured Cash Sweep
CDARSCertificate of Deposit Account Registry ServiceIOFBIowa First Bancshares Corp.
CECLCurrent Expected Credit LossLIBORThe London Inter-bank Offered Rate
CMOCollateralized Mortgage ObligationsMBSMortgage-Backed Securities
COVID-19Coronavirus Disease 2019PCDPurchase Credit Deteriorated
CRACommunity Reinvestment ActPPPPaycheck Protection Program
CRECommercial Real EstateROURight-of-Use
DCFDiscounted Cash FlowsRPACredit Risk Participation Agreement
Dodd-Frank ActDodd-Frank Wall Street Reform and Consumer Protection ActRREResidential Real Estate
ECLExpected Credit LossesSBAU.S. Small Business Administration
EVEEconomic Value of EquitySECU.S. Securities and Exchange Commission
FASBFinancial Accounting Standards BoardSOFRSecured Overnight Financing Rate
FDICFederal Deposit Insurance CorporationTDRTroubled Debt Restructuring
FHLBFederal Home Loan Bank


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 banks2,988
 1,764
Cash and cash equivalents42,101
 43,228
Investment securities:   
Available for sale427,241
 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 sale612
 4,241
Loans2,263,811
 2,165,143
Allowance for loan losses(26,510) (21,850)
Net loans2,237,301
 2,143,293
Premises and equipment, net75,036
 75,043
Accrued interest receivable13,871
 13,871
Goodwill64,654
 64,654
Other intangible assets, net12,759
 15,171
Bank-owned life insurance59,432
 47,231
Other real estate owned1,343
 2,097
Deferred income taxes6,008
 6,523
Other assets20,537
 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 checking1,137,592
 1,136,282
Savings203,506
 197,698
Certificates of deposit under $100,000324,024
 326,832
Certificates of deposit $100,000 and over347,917
 325,050
Total deposits2,490,415
 2,480,448
Federal funds purchased16,708
 35,684
Securities sold under agreements to repurchase87,964
 82,187
Federal Home Loan Bank borrowings145,000
 115,000
Junior subordinated notes issued to capital trusts23,768
 23,692
Long-term debt13,750
 17,500
Deferred compensation liability5,158
 5,180
Accrued interest payable1,449
 1,472
Other liabilities13,424
 12,956
Total liabilities2,797,636
 2,774,119
Shareholders' equity:   
Preferred stock, no par value; authorized 500,000 shares; no shares issued and outstanding at September 30, 2017 and December 31, 2016$—
 $—
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, 201612,463
 11,713
Additional paid-in capital187,296
 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 earnings151,280
 136,975
Accumulated other comprehensive income (loss)665
 (1,133)
Total shareholders' equity346,563
 305,456
Total liabilities and shareholders' equity$3,144,199
 $3,079,575
 September 30, 2022 December 31, 2021
(unaudited) (dollars in thousands, except per share amounts) 
ASSETS
Cash and due from banks$77,513 $42,949 
Interest earning deposits in banks1,001 160,881 
Total cash and cash equivalents78,514 203,830 
Debt securities available for sale at fair value1,153,304 2,288,110 
Held to maturity securities at amortized cost1,146,583 — 
Total securities2,299,887 2,288,110 
Loans held for sale2,320 12,917 
Gross loans held for investment3,761,664 3,252,194 
Unearned income, net(15,375)(7,182)
Loans held for investment, net of unearned income3,746,289 3,245,012 
Allowance for credit losses(52,100)(48,700)
Total loans held for investment, net3,694,189 3,196,312 
Premises and equipment, net87,732 83,492 
Goodwill62,477 62,477 
Other intangible assets, net32,086 19,885 
Foreclosed assets, net103 357 
Other assets233,753 157,748 
Total assets$6,491,061 $6,025,128 
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits$1,139,694 $1,005,369 
Interest-bearing deposits4,337,088 4,109,150 
Total deposits5,476,782 5,114,519 
Short-term borrowings304,536 181,368 
Long-term debt154,190 154,879 
Other liabilities83,324 46,887 
Total liabilities6,018,832 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 15,622,825 and 15,671,14716,581 16,581 
Additional paid-in capital301,418 300,940 
Retained earnings276,998 243,365 
Treasury stock at cost, 958,192 and 909,870 shares(26,145)(24,546)
Accumulated other comprehensive loss(96,623)(8,865)
Total shareholders' equity472,229 527,475 
Total liabilities and shareholders' equity$6,491,061 $6,025,128 
See accompanying notes to consolidated financial statements.  

1
Table of Contents
MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONSINCOME
Three Months EndedNine Months Ended
September 30,September 30,
(unaudited) (dollars in thousands, except per share amounts)2022 202120222021
Interest income 
Loans, including fees$40,451  $36,115 $104,515 $107,393 
Taxable investment securities10,635  6,655 28,334 18,231 
Tax-exempt investment securities2,326  2,428 7,076 7,532 
Other9 21 77 54 
Total interest income53,421  45,219 140,002 133,210 
Interest expense 
Deposits5,035  3,150 11,118 10,167 
Short-term borrowings767  132 1,115 421 
Long-term debt1,886  1,597 4,975 5,160 
Total interest expense7,688  4,879 17,208  15,748 
Net interest income45,733  40,340 122,794 117,462 
Credit loss expense (benefit)638  (1,080)3,920 (7,958)
Net interest income after credit loss expense (benefit)45,095  41,420 118,874 125,420 
Noninterest income 
Investment services and trust activities2,876  2,915 8,557 8,560 
Service charges and fees2,075  1,613 5,449 4,575 
Card revenue1,898  1,820 5,426 5,269 
Loan revenue1,722  1,935 9,538 9,816 
Bank-owned life insurance579  532 1,668 1,612 
Investment securities gains, net(163) 36 272 105 
Other3,601 331 5,669 1,287 
Total noninterest income12,588  9,182 36,579 31,224 
Noninterest expense 
Compensation and employee benefits20,046  17,350 57,665 51,671 
Occupancy expense of premises, net2,577  2,547 7,609 7,063 
Equipment2,358 1,973 6,366 5,627 
Legal and professional2,012 1,272 6,800 3,430 
Data processing1,731 1,406 4,199 4,005 
Marketing1,139 1,022 3,325 2,901 
Amortization of intangibles1,789  1,264 4,299 4,112 
FDIC insurance415  435 1,255 1,192 
Communications302  275 840 1,055 
Foreclosed assets, net42 43 (66)226 
Other2,212  2,191 6,056 4,866 
Total noninterest expense34,623  29,778 98,348 86,148 
Income before income tax expense23,060  20,824 57,105 70,496 
Income tax expense4,743  4,513 12,272 15,266 
Net income$18,317  $16,311 $44,833 $55,230 
Per common share information 
Earnings - basic$1.17  $1.03 $2.86 $3.47 
Earnings - diluted$1.17  $1.03 $2.86 $3.46 
Dividends paid$0.2375  $0.2250 $0.7125 $0.6750 
(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.

2
Table of Contents
MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three Months EndedNine Months Ended
September 30,September 30,
(unaudited) (dollars in thousands)2022202120222021
Net income$18,317 $16,311 $44,833 $55,230 
Other comprehensive loss, net of tax:
Unrealized loss from available for sale debt securities:
Unrealized net holding loss on debt securities available for sale arising during the period(42,935)(8,591)(121,179)(28,501)
Reclassification adjustment for losses (gains) included in net income163 (36)(272)(105)
Income tax benefit10,823 2,251 31,358 7,466 
Unrealized net loss on available for sale debt securities, net of reclassification adjustments(31,949)(6,376)(90,093)(21,140)
Reclassification of available for sale debt securities to held to maturity:
Amortization of the net unrealized loss from the reclassification of available for sale debt securities to held to maturity746 — 3,152 — 
Income tax expense(189)— (817)— 
Amortization of net unrealized loss from the reclassification of available for sale debt securities to held to maturity, net557 — 2,335 — 
Other comprehensive loss, net of tax(31,392)(6,376)(87,758)(21,140)
Comprehensive (loss) income$(13,075)$9,935 $(42,925)$34,090 
(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.



3
Table of Contents
MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY


Three Months Ended September 30,
Common Stock
(unaudited)
(dollars in thousands, except per share amounts)
Par Value
Additional
Paid-in
Capital
Retained EarningsTreasury Stock
Accumulated
Other
Comprehensive
Income (Loss)
Total
Balance at June 30, 2021$16,581 $299,888 $219,884 $(15,888)$9,828 $530,293 
Net Income— — 16,311 — — 16,311 
Other comprehensive loss— — — — (6,376)(6,376)
Release/lapse of restriction on RSUs (1,260 shares, net)— (32)(1)33 — — 
Repurchase of common stock (235,277 shares)— — — (6,880)— (6,880)
Share-based compensation— 471 — — — 471 
Dividends paid on common stock ($0.2250 per share)— — (3,555)— — (3,555)
Balance at September 30, 2021$16,581 $300,327 $232,639 $(22,735)$3,452 $530,264 
Balance at June 30, 2022$16,581 $300,859 $262,395 $(25,772)$(65,231)$488,832 
Net Income— — 18,317 — — 18,317 
Other comprehensive loss— — — — (31,392)(31,392)
Release/lapse of restriction on RSUs (2,280 shares, net)— (81)(4)58 — (27)
Repurchase of common stock (14,586 shares)— — — (431)— (431)
Share-based compensation— 640 — — — 640 
Dividends paid on common stock ($0.2375 per share)— — (3,710)— — (3,710)
Balance at September 30, 2022$16,581 $301,418 $276,998 $(26,145)$(96,623)$472,229 
Nine Months Ended September 30,
Common Stock
(unaudited)
(dollars in thousands, except per share amounts)
Par Value
Additional
Paid-in
Capital
Retained EarningsTreasury 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— — 55,230 — — 55,230 
Other comprehensive loss— — — — (21,140)(21,140)
Release/lapse of restriction on RSUs (49,311 shares, net)— (1,332)(29)1,243 — (118)
Repurchase of common stock (336,640 shares)— — — (9,727)— (9,727)
Share-based compensation— 1,522 — — — 1,522 
Dividends paid on common stock ($0.6750 per share)— — (10,753)— — (10,753)
Balance at September 30, 2021$16,581 $300,327 $232,639 $(22,735)$3,452 $530,264 
Balance at December 31, 2021$16,581 $300,940 $243,365 $(24,546)$(8,865)$527,475 
Net income— — 44,833 — — 44,833 
Other comprehensive loss— — — — (87,758)(87,758)
Release/lapse of restriction on RSUs (43,079 shares, net)— (1,359)(42)1,131 — (270)
Repurchase of common stock (91,401 shares)— — — (2,730)— (2,730)
Share-based compensation— 1,837 — — — 1,837 
Dividends paid on common stock ($0.7125 per share)— — (11,158)— — (11,158)
Balance at September 30, 2022$16,581 $301,418 $276,998 $(26,145)$(96,623)$472,229 

4
(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
Nine Months Ended September 30,
(unaudited) (dollars in thousands)2022 2021
Cash flows from operating activities:
Net income$44,833  $55,230 
Adjustments to reconcile net income to net cash provided by operating activities: 
Credit loss expense (benefit)3,920  (7,958)
Depreciation, amortization, and accretion7,511  71 
         Net change in premises and equipment due to writedown or sale500 295 
Share-based compensation1,837  1,522 
Net gain on sale or call of debt securities available for sale(272) (105)
Net change in foreclosed assets due to writedown or sale(71)163 
Net gain on sale of loans held for sale(1,705)(6,696)
Origination of loans held for sale(81,490) (236,326)
Proceeds from sales of loans held for sale93,792 244,299 
Increase in cash surrender value of bank-owned life insurance(1,668)(1,339)
Decrease in deferred income taxes, net4,082 2,013 
         Bargain purchase gain(1,257)— 
Change in:
Other assets(34,484) 7,514 
Other liabilities36,791 (11,494)
Net cash provided by operating activities$72,319  $47,189 
Cash flows from investing activities: 
Purchases of equity securities$(1,250)$— 
Proceeds from sales of debt securities available for sale129,823  42,193 
Proceeds from maturities and calls of debt securities available for sale133,018  304,443 
Purchases of debt securities available for sale(386,278) (856,739)
Proceeds from maturities and calls of debt securities held to maturity108,180  — 
Net (increase) decrease in loans held for investment(215,738) 225,479 
Purchases of premises and equipment(1,980) (1,477)
Proceeds from sale of foreclosed assets345 1,983 
Proceeds from sale of premises and equipment23  16 
         Net cash acquired in business acquisition31,375 — 
Net cash used in investing activities$(202,482) $(284,102)
Cash flows from financing activities: 
Net (decrease) increase in:
Deposits$(101,501) $410,598 
Short-term borrowings121,627 (43,281)
         Payments of subordinated debt issuance costs— (9)
         Redemption of subordinated debentures— (10,835)
         Payments on finance lease liability(121)(107)
Payments of Federal Home Loan Bank borrowings(21,000)(43,000)
Proceeds from other long-term debt25,000 — 
Payments of other long-term debt(5,000)— 
Taxes paid relating to the release/lapse of restriction on RSUs(270)(118)
Dividends paid(11,158) (10,753)
Repurchase of common stock(2,730)(9,727)
Net cash provided by financing activities$4,847  $292,768 
Net (decrease) increase in cash and cash equivalents$(125,316) $55,855 
Cash and cash equivalents:
        Beginning of Period203,830  82,659 
        Ending balance$78,514  $138,514 
5
Table of Contents
Nine Months Ended September 30,
(unaudited) (dollars in thousands)2022 2021
Supplemental disclosures of cash flow information: 
Cash paid during the period for interest$17,628  $17,500 
Cash paid during the period for income taxes8,229  14,300 
Supplemental schedule of non-cash investing and financing activities:
Transfer of loans to foreclosed assets, net$20  $284 
Investment securities purchased but not settled— 1,835 
Transfer of premises and equipment to assets held for sale1,349 — 
Transfer of debt securities available for sale to debt securities held to maturity    1,253,179 — 
Supplemental schedule of non-cash investing activities from acquisition:
Non-cash assets acquired:
      Investment securities$119,820 $— 
      Total loans held for investment, net281,326 — 
      Premises and equipment7,363 — 
      Core deposit intangible16,500 — 
      Bank-owned life insurance7,862 — 
      Other assets3,766 — 
              Total non-cash assets acquired$436,637 $— 
Liabilities assumed:
      Deposits$463,638 $— 
      Short-term borrowings1,541 — 
      FHLB borrowings250 — 
      Other liabilities1,326 — 
             Total liabilities assumed$466,755 $— 
See accompanying notes to consolidated financial statements.

MIDWESTONE FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
6
(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 losses6,665
 3,241
Depreciation of premises and equipment3,088
 3,436
Amortization of other intangibles2,412
 3,046
Amortization of premiums and discounts on investment securities, net913
 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 compensation660
 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 owned23
 546
Origination of loans held for sale(65,078) (89,005)
Proceeds from sales of loans held for sale70,044
 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 liabilities445
 2,960
Net cash provided by operating activities33,957
 32,113
Cash flows from investing activities:   
Proceeds from sales of available for sale securities22,546
 23,384
Proceeds from maturities and calls of available for sale securities53,171
 68,180
Purchases of available for sale securities(23,045) (98,108)
Proceeds from sales of held to maturity securities1,153
 —
Proceeds from maturities and calls of held to maturity securities12,370
 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 owned983
 7,369
Proceeds from sale of premises and equipment32
 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 deposits9,967
 (17,589)
Increase (decrease) in federal funds purchased(18,976) 17,809
Increase (decrease) in securities sold under agreements to repurchase5,777
 (3,994)
Proceeds from Federal Home Loan Bank borrowings145,000
 30,000
Repayment of Federal Home Loan Bank borrowings(115,000) (17,000)
Proceeds from stock options exercised1
 38
Excess tax benefit from share-based award activity91
 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 stock25,688
 —
Payment of stock issuance costs(1,328) —
Net cash provided by (used in) financing activities41,378
 2
Net increase (decrease) in cash and cash equivalents(1,127) 4,861
Cash and cash equivalents at beginning of period43,228
 47,097
Cash and cash equivalents at end of period$42,101
 $51,958

Table of Contents
(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.    PrinciplesNature of ConsolidationBusiness 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 incorporatedformed 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,subsidiary.
On June 9, 2022, the Company acquired Iowa First Bancshares Corp., a bank holding company whose wholly-owned banking subsidiaries were First National Bank of Muscatine and MidWestOne Insurance Services, Inc., our wholly-owned subsidiary that operates an insurance agency business through six officesFirst National Bank in Fairfield, community banks located in centralMuscatine and east-central Iowa.
On May 1, 2015,Fairfield, Iowa, respectively. Immediately following the Company completed its merger with Central Bancshares, Inc. (“Central”), pursuant to which Central wascompletion of the acquisition, First National Bank of Muscatine and First National Bank in Fairfield were merged with and into the Company. In connection withBank. As consideration for the merger, Central Bank, a Minnesota-chartered commercial bank and wholly-owned subsidiarywe paid cash in the amount of Central, became a wholly-owned subsidiary$46.7 million.
Basis of the Company. On April 1, 2016, Central Bank merged with and into MidWestOne Bank.Presentation
The accompanying unauditedinterim condensed consolidated financial statements have beenare prepared in accordance with GAAP for interim financial information and pursuant to the instructions torequirements for reporting on Form 10-Q and therefore, do not include allArticle 10 of Regulation S-X of the information and notes necessary for completeSecurities 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, 20172022 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 policies related to held to maturity debt securities and acquired loans.
InHeld to Maturity Debt Securities - Certain debt securities that the consolidated statements of cash flows, cashCompany has the positive intent and cash equivalents include cashability 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 madeThe Company evaluates debt securities held to prior periods’ consolidated financial statements to present themmaturity for current expected credit losses. Held-to-maturity securities are evaluated on a quarterly basis comparableusing 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.
7
Table of Contents
Acquired Loans - Acquired loans are separated into two categories based on the credit risk characteristics of the underlying borrowers as either PCD, for loans which have experienced more than insignificant credit deterioration since origination, or loans with no credit deterioration (non-PCD). At the current period’sdate of acquisition, an ACL on PCD loans is determined and added to the amortized cost basis of the individual loans. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. The ACL on PCD loans is recorded in the acquisition accounting and no provision for credit losses is recognized at the acquisition date. Subsequent changes to the ACL are recorded through provision expense. For non-PCD loans, an ACL is established immediately after the acquisition through a charge to the provision for credit losses.

Segment Reporting
The Company’s activities are considered to be one 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 Minneapolis/St. Paul metropolitan area of Minnesota, southwestern Wisconsin, Naples 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 September 30, 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.


2.    Shareholders’ EquityBusiness Combinations
Preferred Stock:On June 9, 2022, the Company acquired 100% of the equity of IOFB through a merger and acquired its wholly-owned subsidiaries FNBM and FNBF for cash consideration of $46.7 million. The number of authorized shares of preferred stockprimary reasons for the Company is 500,000acquisition were to enter the Muscatine, Iowa market and increase our presence in Fairfield, Iowa. Immediately following the completion of the acquisition, First National Bank of Muscatine and First National Bank in Fairfield were merged with and into the Bank.
The assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting. The assets and liabilities, both tangible and intangible, were recorded at their fair values as of the June 9, 2022 acquisition date net of any applicable tax effects using a methodology similar to the Company's legacy assets and liabilities (refer to Note 14. Fair Value of Financial Instruments and Fair Value Measurements for additional information regarding the fair value methodology). As of Initial accounting for the assets acquired and liabilities assumed was incomplete at September 30, 2017, none were issued or outstanding.
Common Stock: As2022. Thus, such amounts recognized in the financial statements have been determined to be provisional. The bargain purchase gain, which is recorded in 'Other' noninterest income, was generated as a result of the estimated fair value of identifiable net assets acquired exceeding the merger consideration, based on provisional fair values. The revenue and earnings amount specific to IOFB since the acquisition date that are included in the consolidated results for the three and nine months ended September 30, 2017,2022 are not readily determinable. The disclosures of these amounts are impracticable due to the numbermerging of authorized sharescertain processes and systems at the acquisition date.
8
Table of common stock forContents
The table below summarizes 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 sharesamounts recognized as of the Company’s common stock, $1.00 paracquisition date for each major class of assets acquired and liabilities assumed, including the fair value per share, 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. Duringaccounting adjustments that were recorded in the third quarter of 20172022, as the accounting for the assets acquired and liabilities assumed was incomplete.
(in thousands)June 9, 2022
As Reported at June 30, 2022Fair Value AdjustmentsAs Reported at September 30, 2022
Merger consideration
Cash consideration46,672 — 46,672 
Identifiable net assets acquired, at fair value
Assets acquired
Cash and due from banks10,192 — 10,192 
Interest earning deposits in banks67,855 — 67,855 
Debt securities119,230 590 119,820 
Loans held for investment281,470 (143)281,326 
Premises and equipment7,363 — 7,363 
Core deposit intangible16,500 — 16,500 
Other assets12,218 (590)11,628 
Total assets acquired514,828 (143)514,684 
Liabilities assumed
Deposits(463,638)— (463,638)
Other liabilities(3,117)— (3,117)
Total liabilities assumed(466,755)— (466,755)
Identifiable net assets acquired, at fair value48,073 47,929 
Bargain Purchase Gain1,401 (143)1,257 

Of the $281.3 million net loans acquired, $11.0 million exhibited credit deterioration on the date of purchase. The following table provides a summary of these PCD loans at acquisition:
(in thousands)June 9, 2022
Par value of PCD loans acquired$15,396 
PCD ACL at acquisition(3,371)
Non-credit discount on PCD loans(1,005)
Purchase price of PCD loans$11,020 
For illustrative purposes only, the following table presents certain unaudited pro forma information for the three and nine months ended September 30, 2022 and 2021. This unaudited, estimated pro forma information was calculated as if IOFB had been acquired as of the beginning of the year prior to the date of acquisition. This unaudited pro forma information combines the historical results of IOFB and the Company repurchased no common stock. Ofand includes adjustments for the $5.0estimated impact of certain fair value purchase accounting, interest expense, acquisition-related expenses, and income tax expense for the respective periods. The pro forma information is not indicative of what would have occurred had the acquisition occurred as of the beginning of the year prior to the acquisition. Additionally, MidWestOne expects to achieve further operating cost savings and other business synergies, including revenue growth as a result of the acquisition, which are not reflected in the pro forma amounts that follow. As a result, actual amounts would have differed from the unaudited pro forma information presented.
Three Months EndedNine Months Ended
September 30,September 30,
(in thousands, except per share amounts)2022202120222021
Total revenues$55,954 $56,205 $165,053 $165,616 
Net Income$17,111 $17,723 $46,663 $55,356 
EPS - basic$1.10 $1.12 $2.98 $3.47 
EPS - diluted$1.09 $1.12 $2.97 $3.47 
9
Table of Contents
The following table summarizes the IOFB acquisition-related expenses, which are included in the respective income statement line items, for the periods indicated:
Three Months EndedNine Months Ended
September 30,September 30,
(in thousands)2022202120222021
Noninterest Expense
Compensation and employee benefits$132 $— $282 $— 
Occupancy expense of premises, net— — 1 — 
Equipment14 — 25 — 
Legal and professional193 — 894 — 
Data processing304 — 380 — 
Marketing90 — 162 — 
Communications— — 3 — 
Other30 — 45 — 
Total IOFB acquisition-related expenses$763 $— $1,792 $— 

3.    Debt Securities
On January 1, 2022, the Company transferred, at fair value, $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 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. At September 30, 2022, there was $9.1 million of stock authorized undernet unrealized after tax loss remaining in accumulated other comprehensive loss. No gains or losses were recognized in earnings at the repurchase plan, $5.0 million remained available for possible future repurchases astime of September 30, 2017.the transfer.

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 presentstables summarize 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 of investment securities available for sale, with 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 subdivisions145,843
 3,798
 29
 149,612
 Mortgage-backed securities50,939
 403
 42
 51,300
 Collateralized mortgage obligations169,662
 109
 3,339
 166,432
 Corporate debt securities51,731
 196
 98
 51,829
 Total debt securities423,889
 4,509
 3,511
 424,887
 Other equity securities2,266
 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 subdivisions162,145
 3,545
 418
 165,272
 Mortgage-backed securities61,606
 315
 567
 61,354
 Collateralized mortgage obligations175,506
 148
 4,387
 171,267
 Corporate debt securities72,979
 76
 602
 72,453
 Total debt securities478,131
 4,094
 5,974
 476,251
 Other equity securities1,259
 66
 58
 1,267
 Total$479,390
 $4,160
 $6,032
 $477,518
The amortized cost and the resulting fair value of investmentdebt securities for the periods indicated. There were no held to maturity with gross unrealized gains and losses, aredebt securities as follows:of December 31, 2021.
 As of September 30, 2022
(in thousands)
Amortized
Cost (1)
Gross
Unrealized
Gains		Gross
Unrealized
Losses		Allowance for Credit Loss related to Debt SecuritiesFair Value
Available for Sale
U.S. Government agencies and corporations$7,560 $— $221 $— $7,339 
State and political subdivisions307,415 4 23,906 — 283,513 
Mortgage-backed securities6,320 9 246 — 6,083 
Collateralized mortgage obligations177,474 — 24,386 — 153,088 
Corporate debt securities772,241 262 69,222 — 703,281 
Total available for sale debt securities$1,271,010 $275 $117,981 $— $1,153,304 
Held to Maturity
State and political subdivisions$540,221 $— $106,460 $— $433,761 
Mortgage-backed securities82,858 — 14,118 — 68,740 
Collateralized mortgage obligations523,504 — 100,434 — 423,070 
Total held to maturity debt securities$1,146,583 $— $221,012 $— $925,571 
(1) Amortized cost for the held to maturity securities includes $0.3 million of unamortized gain in state and political subdivisions, $29 thousand of unamortized losses in mortgage-backed securities and $12.6 million of unamortized losses in collateralized mortgage obligations related to the re-classification of securities from available for sale to held to maturity on January 1, 2022.
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  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 securities2,093
 7
 5
 2,095
 Collateralized mortgage obligations23,063
 —
 419
 22,644
 Corporate debt securities34,395
 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 subdivisions760,894 10,484 5,636 — 765,742 
Mortgage-backed securities100,325 932 631 — 100,626 
Collateralized mortgage obligations785,945 1,274 18,320 — 768,899 
Corporate debt securities652,677 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 securities2,398
 5
 34
 2,369
 Collateralized mortgage obligations26,036
 —
 598
 25,438
 Corporate debt securities32,017
 149
 565
 31,601
 Total$168,392
 $310
 $3,910
 $164,792

Investment securities with a carryingfair value of $190.4$649.6 million and $212.1$582.2 million at September 30, 20172022 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, asdebt securities is recorded within 'Other Assets,' and is excluded from the estimate of credit losses. At September 30, 20172022 the accrued interest receivable on available for sale debt securities and held to maturity debt securities totaled $7.9 million and $3.8 million, respectively. At December 31, 2016. This temporary impairment represents2021 the estimated amount of loss that would be realized if theaccrued interest receivable on available for sale debt securities were soldtotaled $9.5 million. There was no accrued interest receivable on the valuation date. held to maturity debt securities at December 31, 2021.
The following tables present information pertaining totable presents debt securities with grossAFS in an unrealized loss position for which an allowance for credit losses as of has not been recorded at September 30, 2017 and December 31, 2016,2022, aggregated by investment category and length of time that individual securities have been in a continuous loss position:
  As of September 30, 2022
Number
of
Securities
Less than 12 Months12 Months or MoreTotal
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 corporations8 $7,339 $221 $— $— $7,339 $221 
State and political subdivisions421 266,471 21,464 11,000 2,442 277,471 23,906 
Mortgage-backed securities25 5,503 245 46 1 5,549 246 
Collateralized mortgage obligations20 82,403 6,497 70,685 17,889 153,088 24,386 
Corporate debt securities158 533,326 48,999 123,017 20,223 656,343 69,222 
Total632 $895,042 $77,426 $204,748 $40,555 $1,099,790 $117,981 
    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 corporations1
 $5,018
 $3
 $—
 $—
 $5,018
 $3
 State and political subdivisions13
 5,625
 27
 451
 2
 6,076
 29
 Mortgage-backed securities10
 10,271
 40
 40
 2
 10,311
 42
 Collateralized mortgage obligations29
 46,717
 465
 91,673
 2,874
 138,390
 3,339
 Corporate debt securities4
 10,910
 11
 7,014
 87
 17,924
 98
 Other equity securities1
 —
 —
 1,968
 32
 1,968
 32
 Total58
 $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 subdivisions63
 $24,574
 $389
 $427
 $29
 $25,001
 $418
 Mortgage-backed securities20
  40,752
  566
  23
  1
  40,775
  567
 Collateralized mortgage obligations29
 140,698
 3,544
 16,776
 843
 157,474
 4,387
 Corporate debt securities11
 54,891
 602
 —
 —
 54,891
 602
 Other equity securities1
 —
 —
 942
 58
 942
 58
 Total124
 $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 subdivisions95
 $23,086
 $230
 $13,978
 $485
 $37,064
 $715
 Mortgage-backed securities3
 1,060
 5
 —
 —
 1,060
 5
 Collateralized mortgage obligations7
 16,735
 267
 5,883
 152
 22,618
 419
 Corporate debt securities3
 1,030
 4
 2,547
 346
 3,577
 350
 Total108
 $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 subdivisions180
 $65,174
 $2,713
 $—
 $—
 $65,174
 $2,713
 Mortgage-backed securities5
 2,246
 34
 —
 —
  2,246
  34
 Collateralized mortgage obligations7
 18,964
 369
 6,435
 229
 25,399
 598
 Corporate debt securities11
 19,198
 187
 2,512
 378
 21,710
 565
 Total203
 $105,582
 $3,303
 $8,947
 $607
 $114,529
 $3,910
The Company's assessment of other-than-temporary impairment ("OTTI") is based on its reasonable judgment of the specific facts and circumstances impacting each individual security at 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 assets and the current and anticipated market conditions.
At September 30, 2017 and December 31, 2016, the Company’s mortgage-backed securities and 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 held by the Company were Iowa-based, and approximately 22% were Minnesota-based. The Company does not intend to sell these municipal obligations, and it is more likely than not 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 recovery 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 position 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.
As of September 30, 2017,2022, 8 U.S. Government agencies and corporations securities with total unrealized losses of $0.2 million were held by the Company also owned $0.4Company. Management considered the implied U.S. government guarantee of these agency and corporation securities. 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.
As of September 30, 2022, 421 state and political subdivisions securities with total unrealized losses of $23.9 million were held by the Company. Management evaluated these securities through a process that included consideration of equitycredit agency ratings and 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 banksfair value was not attributable to credit losses.
As of September 30, 2022, 25 mortgage-backed securities and financial service-related companies,20 collateralized mortgage obligations with unrealized losses totaling $24.6 million were held by the Company. Management evaluated the payment history of these securities. In addition, management considered the implied U.S. government guarantee of these agency securities and $2.0 millionthe level of mutual funds investedcredit enhancement for non-agency securities. Based on this evaluation, management concluded that the decline in fair value was not attributable to credit losses.
As of September 30, 2022, 158 corporate debt securities with total unrealized losses of $69.2 million were held by the Company. Management evaluated these securities by considering credit agency ratings and otherpayment history. In addition, management may evaluate securities by considering the yield spread to treasury securities and the most recent financial
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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 unitssecurities 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 fundtime in a continuous loss position:
  As of December 31, 2021
Available for Sale
Number
of
Securities
Less than 12 Months12 Months or MoreTotal
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
(in thousands, except number of securities) 
State and political subdivisions136 $311,960 $5,216 $15,343 $420 $327,303 $5,636 
Mortgage-backed securities6 43,319 631 80 — 43,399 631 
Collateralized mortgage obligations44 605,729 15,693 61,984 2,627 667,713 18,320 
Corporate debt securities52 303,750 4,567 27,071 1,838 330,821 6,405 
Total238 $1,264,758 $26,107 $104,478 $4,885 $1,369,236 $30,992 

The Company evaluates debt securities held to be deemedmaturity for current expected credit losses. There were no debt securities held to be qualified under the Community Reinvestment Act. Equitymaturity classified as nonaccrual or past due as of September 30, 2022. Held-to-maturity securities are consideredevaluated on a quarterly basis using historical probability of default and loss given default information specific to have OTTI whenever they have beenthe 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 position, compared to current book value,expense. Based on this evaluation, management concluded that no allowance for twelve consecutive months,credit loss for these securities was required.
Proceeds and gross realized gains and losses on debt securities available for sale for the Company does not expect them to recover to their original cost basis. For thethree and nine months ended September 30, 20172022 and the full year of 2016, no impairment charges2021, were recorded, as the affected equity securities were not deemed impaired due to stabilized market prices in relation to the Company’s original purchase price.follows:
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 credit rating from one of the major statistical rating agencies, 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 the 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 the Company’s stated intention to hold other debt securities to maturity in the future (“tainting”), unless certain conditions are met that provide
Three Months EndedNine Months Ended
(in thousands)September 30, 2022September 30, 2021September 30, 2022September 30, 2021
Proceeds from sales of debt securities available for sale$17,570 $782 $129,823 $42,193 
Gross realized gains from sales of debt securities available for sale— 32 — 856 
Gross realized losses from sales of debt securities available for sale(167)— (167)(791)
Net realized gain from sales of debt securities available for sale(1)
$(167)$32 $(167)$65 
(1) The difference in investment security gains, net reported herein as compared to the Consolidated Statements of Income is associated with the net realized gain from the call or maturity of debt securities of $4 thousand and $439 thousand for the three and nine months ended September 30, 2022, respectively, and $4 thousand and $40 thousand for the three and nine months ended September 30, 2021, respectively.

for an exception to accounting policy. One of these exceptions, as outlined under Accounting Standards Codification (“ASC”) 320-10-25-6(a), allows 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), and as such, does not “taint” the remainder of the held to maturity portfolio. A small gain was realized on the sale.
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, 2017,2022, 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 years109,135
 110,492
 18,911
 19,128
 Due after five years through ten years69,074
 71,267
 84,641
 86,961
 Due after ten years5,197
 5,298
 53,415
 51,932
 Debt securities without a single maturity date220,601
 217,732
 25,156
 24,739
 Total$423,889
 $424,887
 $183,304
 $183,946
Mortgage-backedshown 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 willmay be collected sooner than scheduled because of prepayments.called or prepaid without any penalties. Therefore, these securities are not scheduledincluded in the maturity categories indicated above. Equity securities available for sale with an amortized costin the following summary.
 Available for SaleHeld to Maturity
(in thousands)Amortized CostFair ValueAmortized CostFair Value
Due in one year or less$60,695 $60,639 $5,423 $5,332 
Due after one year through five years717,493 658,337 88,646 78,298 
Due after five years through ten years262,787 235,708 212,757 175,456 
Due after ten years46,241 39,449 233,395 174,675 
$1,087,216 $994,133 $540,221 $433,761 
Mortgage-backed securities6,320 6,083 82,858 68,740 
Collateralized mortgage obligations177,474 153,088 523,504 423,070 
Total$1,271,010 $1,153,304 $1,146,583 $925,571 

12
Table of $2.3 million and a fair value of $2.4 million are also excluded from this table.
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.
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:
Contents
  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


5.4.    Loans Receivable and the Allowance for LoanCredit Losses
The composition of allowance for loan losses and loans by portfolio segment and based on impairment method areclass of receivable was as follows:
As of
(in thousands)September 30, 2022December 31, 2021
Agricultural$116,229 $103,417 
Commercial and industrial1,041,662 902,314
Commercial real estate:
Construction & development276,941 172,160
Farmland183,581 144,673
Multifamily222,592 244,503
Commercial real estate-other1,226,983 1,143,205
Total commercial real estate1,910,097 1,704,541
Residential real estate:
One- to four- family first liens446,373 333,308
One- to four- family junior liens157,276 133,014
Total residential real estate603,649 466,322
Consumer74,652 68,418
Loans held for investment, net of unearned income3,746,289 3,245,012
Allowance for credit losses(52,100)(48,700)
Total loans held for investment, net$3,694,189 $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 impairment2,415
 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 impairment105,221
 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 impairment1,941
 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 impairment108,004
 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$843.9 million and $498.3$816.0 million at September 30, 20172022 and December 31, 2016,2021, respectively, were pledged to the Federal Home Loan Bank (the “FHLB”)FHLB as collateral for borrowings.


The changesNon-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 forprocess 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)
 Recoveries150
 113
 201
 126
 4
 —
 594
 Provision67
 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)
 Recoveries20
 19
 8
 69
 3
 —
 119
 Provision268
 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)
 Recoveries164
 215
 216
 126
 11
 —
 732
 Provision1,600
 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)
 Recoveries27
 91
 188
 146
 17
 —
 469
 Provision1,323
 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 outsiderestored 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 diseaseinterest) 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 MidWestOne 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 existingloan agreement through maturity.
Absentor 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 reductiondue date of the stated interest rate for the remaining original lifescheduled payment.

13
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 informationpresents the amortized cost basis of loans based on delinquency status:
Age Analysis of Past-Due Financial Assets90 Days or More Past Due And Accruing
(in thousands)Current30 - 59 Days Past Due60 - 89 Days Past Due90 Days or More Past DueTotal
September 30, 2022
Agricultural$115,372 $150 $34 $673 $116,229 $— 
Commercial and industrial1,037,526 536 193 3,407 1,041,662 — 
Commercial real estate:
Construction and development276,918 — 23 — 276,941 — 
Farmland182,171 268 — 1,142 183,581 — 
Multifamily221,204 12 — 1,376 222,592 — 
Commercial real estate-other1,217,329 5,534 180 3,940 1,226,983 — 
Total commercial real estate1,897,622 5,814 203 6,458 1,910,097 — 
Residential real estate:
One- to four- family first liens440,206 3,684 353 2,130 446,373 936 
One- to four- family junior liens156,074 253 56 893 157,276 — 
Total residential real estate596,280 3,937 409 3,023 603,649 936 
Consumer74,443 117 67 25 74,652 — 
Total$3,721,243 $10,554 $906 $13,586 $3,746,289 $936 
December 31, 2021
Agricultural$102,352 $244 $— $821 $103,417 $— 
Commercial and industrial899,423 529 134 2,228 902,314 — 
Commercial real estate:
Construction and development171,169 396 — 595 172,160 — 
Farmland141,814 116 — 2,743 144,673 — 
Multifamily243,117 — 1,386 — 244,503 — 
Commercial real estate-other1,129,073 8,417 306 5,409 1,143,205 — 
Total commercial real estate1,685,173 8,929 1,692 8,747 1,704,541 — 
Residential real estate:
One- to four- family first liens330,992 1,057 1,057 202 333,308 — 
One- to four- family junior liens132,392 261 135 226 133,014 — 
Total residential real estate463,384 1,318 1,192 428 466,322 — 
Consumer68,326 66 14 12 68,418 — 
Total$3,218,658 $11,086 $3,032 $12,236 $3,245,012 $— 

14
Table of Contents
The following table presents the Company’s TDRsamortized 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 duringloan:
NonaccrualNonaccrual with no Allowance for Credit Losses90 Days or More Past Due And Accruing
(in thousands)September 30, 2022December 31, 2021September 30, 2022December 31, 2021September 30, 2022December 31, 2021
Agricultural$1,089 $2,090 $794 $1,341 $— $— 
Commercial and industrial4,545 3,803 408 1,341 — — 
Commercial real estate:
Construction and development— 595 — 595 — — 
Farmland3,674 5,499 3,385 4,156 — — 
Multifamily2,308 987 1,676 323 — — 
Commercial real estate-other10,019 16,544 8,487 1,063 — — 
Total commercial real estate16,001 23,625 13,548 6,137 — — 
Residential real estate:
One- to four- family first liens2,105 1,275 624 345 936 — 
One- to four- family junior liens1,201 713 — — — — 
Total residential real estate3,306 1,988 624 345 936 — 
Consumer86 34 — — — — 
Total$25,027 $31,540 $15,374 $9,164 $936 $— 
The interest income recognized on loans that were on nonaccrual for the stated periods:three months ended September 30, 2022 and September 30, 2021 was $70 thousand and $268 thousand, respectively. The interest income recognized on loans that were on nonaccrual for the nine months ended September 30, 2022 and September 30, 2021 was $345 thousand and $446 thousand, respectively.

  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 date6
 2,037
 2,083
 —
 —
 —
 Farmland           
 Extended maturity date2
 176
 176
 —
 —
 —
 Commercial real estate-other           
 Extended maturity date1
 968
 968
 —
 —
 —
 Other1
 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
 Total10
 $13,727
 $14,150
 5
 $1,490
 $1,190
(1) TDRs may include multiple concessions, and the disclosure classifications areThe Company aggregates loans into risk categories based on relevant information about the primary concession providedability 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 modifiedloans 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 ofrisk. 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 development140,547
 1,066
 2,136
 —
 —
 143,749
 Farmland77,020
 10,098
 411
 —
 —
 87,529
 Multifamily134,451
 1,777
 496
 —
 —
 136,724
 Commercial real estate-other698,941
 32,235
 28,924
 —
 —
 760,100
 Total commercial real estate1,050,959
 45,176
 31,967
 —
 —
 1,128,102
 Residential real estate:           
 One- to four- family first liens349,582
 2,978
 10,135
 —
 —
 362,695
 One- to four- family junior liens112,808
 1,124
 1,818
 —
 —
 115,750
 Total residential real estate462,390
 4,102
 11,953
 —
 —
 478,445
 Consumer36,930
 —
 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 industrial429,392
 11,065
 19,016
 8
 —
 459,481
 Credit cards1,489
 —
 —
 —
 —
 1,489
 Commercial real estate:           
 Construction and development121,982
 2,732
 1,971
 —
 —
 126,685
 Farmland83,563
 8,986
 2,430
 —
 —
 94,979
 Multifamily134,975
 548
 480
 —
 —
 136,003
 Commercial real estate-other666,767
 20,955
 18,854
 —
 —
 706,576
 Total commercial real estate1,007,287
 33,221
 23,735
 —
 —
 1,064,243
 Residential real estate:           
 One- to four- family first liens359,029
 2,202
 11,002
 —
 —
 372,233
 One- to four- family junior liens114,233
 1,628
 1,902
 —
 —
 117,763
 Total residential real estate473,262
 3,830
 12,904
 —
 —
 489,996
 Consumer36,419
 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 inagricultural, 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 effectedaffected in the future.
The following table presentsHomogenous loans, including residential real estate and consumer loans, are not individually evaluated for impairment, excluding purchased credit impairedrisk rated. Instead, these loans by class of loan, as of September 30, 2017are 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 industrial2,818
 2,818
 —
 6,211
 6,259
 —
 Commercial real estate:           
 Construction and development402
 402
 —
 445
 1,170
 —
 Farmland287
 287
 —
 2,230
 2,380
 —
 Multifamily—
 —
 —
 —
 —
 —
 Commercial real estate-other2,178
 2,179
 —
 2,224
 2,384
 —
 Total commercial real estate2,867
 2,868
 —
 4,899
 5,934
 —
 Residential real estate:           
 One- to four- family first liens2,205
 2,210
 —
 2,429
 2,442
 —
 One- to four- family junior liens13
 13
 —
 —
 —
 —
 Total residential real estate2,218
 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 industrial8,413
 8,640
 3,446
 5,223
 5,223
 2,066
 Commercial real estate:           
 Construction and development609
 1,334
 324
 263
 270
 21
 Farmland—
 —
 —
 —
 —
 —
 Multifamily—
 —
 —
 —
 —
 —
 Commercial real estate-other12,856
 13,017
 1,064
 6,288
 6,344
 1,903
 Total commercial real estate13,465
 14,351
 1,388
 6,551
 6,614
 1,924
 Residential real estate:           
 One- to four- family first liens1,310
 1,317
 226
 1,526
 1,526
 299
 One- to four- family junior liens—
 —
 —
 —
 —
 —
 Total residential real estate1,310
 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 industrial11,231
 11,458
 3,446
 11,434
 11,482
 2,066
 Commercial real estate:           
 Construction and development1,011
 1,736
 324
 708
 1,440
 21
 Farmland287
 287
 —
 2,230
 2,380
 —
 Multifamily—
 —
 —
 —
 —
 —
 Commercial real estate-other15,034
 15,196
 1,064
 8,512
 8,728
 1,903
 Total commercial real estate16,332
 17,219
 1,388
 11,450
 12,548
 1,924
 Residential real estate:           
 One- to four- family first liens3,515
 3,527
 226
 3,955
 3,968
 299
 One- to four- family junior liens13
 13
 —
 —
 —
 —
 Total residential real estate3,528
 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 investmentnonperforming. 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 industrial2,878
 77
 5,115
 34
 2,899
 124
 5,233
 39
 Commercial real estate:               
 Construction and development423
 —
 —
 —
 434
 2
 —
 —
 Farmland212
 —
 2,414
 29
 1,193
 58
 2,426
 78
 Multifamily—
 —
 —
 —
 —
 —
 —
 —
 Commercial real estate-other2,148
 18
 2,594
 9
 1,894
 63
 2,865
 8
 Total commercial real estate2,783
 18
 5,008
 38
 3,521
 123
 5,291
 86
 Residential real estate:               
 One- to four- family first liens2,183
 23
 2,843
 32
 2,197
 69
 2,867
 88
 One- to four- family junior liens13
 —
 —
 —
 13
 —
 —
 —
 Total residential real estate2,196
 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 industrial8,458
 85
 3,988
 16
 8,423
 163
 3,789
 26
 Commercial real estate:               
 Construction and development311
 —
 270
 —
 232
 —
 271
 3
 Farmland—
 —
 —
 —
 —
 —
 —
 —
 Multifamily—
 —
 159
 —
 —
 —
 158
 —
 Commercial real estate-other12,863
 —
 5,416
 —
 12,881
 44
 5,416
 —
 Total commercial real estate13,174
 —
 5,845
 —
 13,113
 44
 5,845
 3
 Residential real estate:               
 One- to four- family first liens1,361
 9
 1,118
 8
 1,392
 26
 1,123
 22
 One- to four- family junior liens—
 —
 —
 —
 —
 —
 —
 —
 Total residential real estate1,361
 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 industrial11,336
 162
 9,103
 50
 11,322
 287
 9,022
 65
 Commercial real estate:               
 Construction and development734
 —
 270
 —
 666
 2
 271
 3
 Farmland212
 —
 2,414
 29
 1,193
 58
 2,426
 78
 Multifamily—
 —
 159
 —
 —
 —
 158
 —
 Commercial real estate-other15,011
 18
 8,010
 9
 14,775
 107
 8,281
 8
 Total commercial real estate15,957
 18
 10,853
 38
 16,634
 167
 11,136
 89
 Residential real estate:               
 One- to four- family first liens3,544
 32
 3,961
 40
 3,589
 95
 3,990
 110
 One- to four- family junior liens13
 —
 —
 —
 13
 —
 —
 —
 Total residential real estate3,557
 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 ingreater than 90 days past due loans by classand on accrual.
15
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-other811
 —
 2,749
 3,560
 756,540
 760,100
 Total commercial real estate811
 —
 4,093
 4,904
 1,123,198
 1,128,102
 Residential real estate:           
 One- to four- family first liens2,439
 814
 1,201
 4,454
 358,241
 362,695
 One- to four- family junior liens508
 148
 75
 731
 115,019
 115,750
 Total residential real estate2,947
 962
 1,276
 5,185
 473,260
 478,445
 Consumer55
 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 industrial2,615
 293
 9,654
 12,562
 446,919
 459,481
 Credit cards—
 —
 —
 —
 1,489
 1,489
 Commercial real estate:           
 Construction and development630
 —
 297
 927
 125,758
 126,685
 Farmland373
 —
 91
 464
 94,515
 94,979
 Multifamily—
 129
 —
 129
 135,874
 136,003
 Commercial real estate-other1,238
 763
 6,655
 8,656
 697,920
 706,576
 Total commercial real estate2,241
 892
 7,043
 10,176
 1,054,067
 1,064,243
 Residential real estate:           
 One- to four- family first liens2,851
 1,143
 1,328
 5,322
 366,911
 372,233
 One- to four- family junior liens437
 151
 150
 738
 117,025
 117,763
 Total residential real estate3,288
 1,294
 1,478
 6,060
 483,936
 489,996
 Consumer50
 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 compositionamortized 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 purchasedreceivable by credit impaired loans,quality indicator and vintage based on the most recent analysis performed, as of September 30, 20172022. As of September 30, 2022, there were no 'loss' rated credits.
Term Loans by Origination YearRevolving Loans
September 30, 2022
(in thousands)
20222021202020192018PriorTotal
Agricultural
Pass$16,714 $14,661 $5,835 $3,097 $1,036 $1,142 $63,727 $106,212 
Special mention / watch241 905 139 163 — 607 2,419 4,474 
Substandard298 649 774 118 191 310 3,203 5,543 
Doubtful— — — — — — — — 
Total$17,253 $16,215 $6,748 $3,378 $1,227 $2,059 $69,349 $116,229 
Commercial and industrial
Pass$228,482 $238,257 $160,159 $52,391 $29,047 $121,704 $167,813 $997,853 
Special mention / watch3,338 3,512 2,846 391 3,065 17,829 1,469 32,450 
Substandard568 83 2,426 1,029 1,048 3,591 2,614 11,359 
Doubtful— — — — — — — — 
Total$232,388 $241,852 $165,431 $53,811 $33,160 $143,124 $171,896 $1,041,662 
CRE - Construction and development
Pass$108,284 $109,184 $37,144 $2,218 $1,483 $1,853 $15,031 $275,197 
Special mention / watch38 505 — — — — — 543 
Substandard1,194 — — — — 7 — 1,201 
Doubtful— — — — — — — — 
Total$109,516 $109,689 $37,144 $2,218 $1,483 $1,860 $15,031 $276,941 
CRE - Farmland
Pass$43,681 $53,774 $30,467 $8,911 $8,549 $14,414 $3,145 $162,941 
Special mention / watch2,831 2,259 1,524 — 615 84 2,335 9,648 
Substandard335 1,991 2,634 2,462 1,542 2,028 — 10,992 
Doubtful— — — — — — — — 
Total$46,847 $58,024 $34,625 $11,373 $10,706 $16,526 $5,480 $183,581 
CRE - Multifamily
Pass$23,929 $66,582 $87,045 $17,281 $2,577 $6,039 $1,369 $204,822 
Special mention / watch— — — 206 5,957 1,201 — 7,364 
Substandard300 8,395 1,711 — — — — 10,406 
Doubtful— — — — — — — — 
Total$24,229 $74,977 $88,756 $17,487 $8,534 $7,240 $1,369 $222,592 
CRE - other
Pass$245,620 $316,315 $319,946 $79,653 $32,736 $82,887 $52,542 $1,129,699 
Special mention / watch9,326 2,649 6,052 4,231 10,314 13,769 435 46,776 
Substandard610 1,080 22,733 19,472 1,738 4,778 97 50,508 
Doubtful— — — — — — — — 
Total$255,556 $320,044 $348,731 $103,356 $44,788 $101,434 $53,074 $1,226,983 
RRE - One- to four- family first liens
Performing$122,746 $107,385 $65,596 $27,284 $24,040 $84,019 $12,262 $443,332 
Nonperforming— 103 5 42 302 2,589 — 3,041 
Total$122,746 $107,488 $65,601 $27,326 $24,342 $86,608 $12,262 $446,373 
RRE - One- to four- family junior liens
Performing$29,804 $24,315 $9,618 $3,111 $4,067 $6,830 $78,329 $156,074 
Nonperforming— 24 — 204 757 117 100 1,202 
Total$29,804 $24,339 $9,618 $3,315 $4,824 $6,947 $78,429 $157,276 
Consumer
Performing$25,966 $22,714 $9,384 $4,126 $2,101 $6,462 $3,812 $74,565 
Nonperforming— — 60 12 8 7 — 87 
Total$25,966 $22,714 $9,444 $4,138 $2,109 $6,469 $3,812 $74,652 
Total by Credit Quality Indicator Category
Pass$666,710 $798,773 $640,596 $163,551 $75,428 $228,039 $303,627 $2,876,724 
Special mention / watch15,774 9,830 10,561 4,991 19,951 33,490 6,658 101,255 
Substandard3,305 12,198 30,278 23,081 4,519 10,714 5,914 90,009 
Doubtful— — — — — — — — 
Performing178,516 154,414 84,598 34,521 30,208 97,311 94,403 673,971 
Nonperforming— 127 65 258 1,067 2,713 100 4,330 
Total$864,305 $975,342 $766,098 $226,402 $131,173 $372,267 $410,702 $3,746,289 
16
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, 2016:2021. As of December 31, 2021, there were no 'loss' rated credits.
Term Loans by Origination YearRevolving Loans
December 31, 2021
(in thousands)
20212020201920182017PriorTotal
Agricultural
Pass$20,145 $8,604 $4,367 $1,260 $885 $947 $58,119 $94,327 
Special mention / watch1,255 148 245 — 17 993 1,685 4,343 
Substandard649 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 / watch4,268 2,342 781 470 4,304 14,274 6,938 33,377 
Substandard8 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 / watch874 — 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 / watch3,105 3,824 — 734 292 223 — 8,178 
Substandard1,580 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 / watch7,871 — — 6,000 1,859 544 — 16,274 
Substandard663 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 / watch5,302 26,239 5,172 11,243 2,557 1,905 1,768 54,186 
Substandard4,182 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 
Nonperforming352 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 
Nonperforming31 — 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 / watch22,675 32,553 6,367 18,447 9,029 17,939 10,391 117,401 
Substandard7,082 56,416 16,155 8,956 2,681 11,916 8,465 111,671 
Doubtful— — — — — — — — 
Performing178,567 104,807 37,491 33,886 21,685 76,558 79,723 532,717 
Nonperforming383 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 





17
Table of Contents
  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 industrial3,072
 190
 8,358
 —
 Commercial real estate:       
 Construction and development1,060
 —
 780
 95
 Farmland393
 —
 227
 —
 Multifamily—
 —
 —
 —
 Commercial real estate-other13,285
 —
 7,360
 —
 Total commercial real estate14,738
 —
 8,367
 95
 Residential real estate:       
 One- to four- family first liens1,357
 262
 1,127
 375
 One- to four- family junior liens143
 34
 116
 15
 Total residential real estate1,500
 296
 1,243
 390
 Consumer44
 —
 10
 —
 Total$19,871
 $486
 $20,668
 $485
Allowance for Credit Losses
Not includedAt September 30, 2022, the economic forecast used by the Company showed the following: (1) Midwest unemployment – increases 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 - decline in the first forecasted quarter, with increases in the next three forecasted quarters; (5) Year-to-year change in National Home Price Index – increases over the next two forecasted quarters, with a decline in the third and fourth forecasted quarter; and (6) Rental Vacancy - increases over the next four forecasted quarters. The increase in the ACL between the nine months ended September 30, 2021 and the nine months ended September 30, 2022 is primarily driven by the initial allowance for credit losses of $3.4 million recorded for the PCD loans aboveacquired, as well as $3.1 million related to the acquired non-PCD loans, coupled with the additional reserve taken to support loan growth. Net loan charge-offs were $0.6 million for the three-months ended September 30, 2022 as compared to net loan recoveries of $0.9 million for the three-months ended September 30, 2021. Net loan charge-offs were $3.1 million for the nine months ended September 30, 2022 as compared to net loan recoveries of $0.2 million for the nine months ended September 30, 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 $14.5 million at September 30, 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 September 30, 2022 and 2021
(in thousands)AgriculturalCommercial and IndustrialCommercial Real EstateResidential Real EstateConsumerTotal
For the Three Months Ended September 30, 2022
Beginning balance$987 $21,166 $24,399 $5,174 $624 $52,350 
Charge-offs(248)(280)(135)(52)(255)(970)
Recoveries1 295 6 48 32 382 
Credit loss expense (benefit)(1)
241 3,075 (3,322)138 206 338 
Ending balance$981 $24,256 $20,948 $5,308 $607 $52,100 
For the Three Months Ended September 30, 2021
Beginning balance$1,013 $13,787 $28,516 $4,076 $608 $48,000 
Charge-offs(16)(24)(37)(1)(156)(234)
Recoveries19 954 76 25 40 1,114 
Credit loss expense (benefit) (1)
44 1,058 (2,226)5 139 (980)
Ending balance$1,060 $15,775 $26,329 $4,105 $631 $47,900 
(1) The difference in the credit loss expense reported herein as compared to the Consolidated Statements of Income is associated with the credit loss expense (benefit) of $0.3 million and $(0.1) million related to off-balance sheet credit exposures for the three months ended September 30, 2022 and September 30, 2021, respectively.

For the Nine Months Ended September 30, 2022 and 2021
(in thousands)AgriculturalCommercial and IndustrialCommercial Real EstateResidential Real EstateConsumerTotal
For the Nine Months Ended September 30, 2022
Beginning balance$667 $17,294 $26,120 $4,010 $609 $48,700 
PCD allowance established in acquisition512 1,473 1,227 159 — $3,371 
Charge-offs(249)(843)(2,319)(90)(540)(4,041)
Recoveries9 613 154 68 106 950 
Credit loss expense (benefit)(1)
42 5,719 (4,234)1,161 432 3,120 
Ending balance$981 $24,256 $20,948 $5,308 $607 $52,100 
For the Nine Months Ended September 30, 2021
Beginning balance$1,346 $15,689 $32,640 $4,882 $943 $55,500 
Charge-offs(170)(885)(453)(107)(462)(2,077)
Recoveries67 1,560 391 81 136 2,235 
Credit loss (benefit) expense(1)
(183)(589)(6,249)(751)14 (7,758)
Ending balance$1,060 $15,775 $26,329 $4,105 $631 $47,900 
(1) The difference in the credit loss expense reported herein as compared to the Consolidated Statements of Income is associated with the credit loss expense (benefit) of $0.8 million and $(0.2) million related to off-balance sheet credit exposures for the nine months ended September 30, 2022 and September 30, 2021, respectively.

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Table of Contents
The composition of allowance for credit losses by portfolio segment based on evaluation method were as follows:
As of September 30, 2022
(in thousands)AgriculturalCommercial and IndustrialCommercial Real EstateResidential Real EstateConsumerTotal
Loans held for investment, net of unearned income
Individually evaluated for impairment$3,239 $3,978 $24,509 $1,898 $— $33,624 
Collectively evaluated for impairment112,990 1,037,684 1,885,588 601,751 74,652 3,712,665 
Total$116,229 $1,041,662 $1,910,097 $603,649 $74,652 $3,746,289 
Allowance for credit losses:
Individually evaluated for impairment$483 $1,998 $1,368 $244 $— $4,093 
Collectively evaluated for impairment498 22,258 19,580 5,064 607 48,007 
Total$981 $24,256 $20,948 $5,308 $607 $52,100 
As of December 31, 2021
(in thousands)AgriculturalCommercial and IndustrialCommercial Real EstateResidential Real EstateConsumerTotal
Loans held for investment, net of unearned income
Individually evaluated for impairment$1,341 $3,005 $23,118 $570 $— $28,034 
Collectively evaluated for impairment102,076 899,309 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 impairment667 16,613 23,927 3,786 609 45,602 
Total$667 $17,294 $26,120 $4,010 $609 $48,700 
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 September 30, 2022

(in thousands)		Primary Type of Collateral
Real EstateEquipmentOtherTotalACL Allocation
Agricultural$581 $2,658 $— $3,239 $483 
Commercial and industrial1,410 1,819 749 3,978 1,998 
Commercial real estate:
     Construction and development905 — — 905 268 
      Farmland6,197 — — 6,197 — 
      Multifamily2,308 — — 2,308 356 
      Commercial real estate-other14,824 — 275 15,099 744 
Residential real estate:
     One- to four- family first liens1,177 — — 1,177 64 
     One- to four- family junior liens— — 721 721 180 
Consumer— — — — — 
        Total$27,402 $4,477 $1,745 $33,624 $4,093 

As of December 31, 2021

(in thousands)		Primary Type of Collateral
Real EstateEquipmentOtherTotalACL Allocation
Agricultural$916 $425 $— $1,341 $— 
Commercial and industrial408 374 2,223 3,005 681 
Commercial real estate:
     Construction and development595 — — 595 — 
      Farmland5,185 — — 5,185 22 
      Multifamily987 — — 987 387 
      Commercial real estate-other16,130 — 221 16,351 1,784 
Residential real estate:
     One- to four- family first liens410 — — 410 64 
     One- to four- family junior liens— — 160 160 160 
Consumer— — — — — 
        Total$24,631 $799 $2,604 $28,034 $3,098 
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Troubled Debt Restructurings
TDRs totaled $9.1 million and $20.0 million as of September 30, 20172022 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, 2017,2022, the Company had no$9 thousand of commitments to lend additional funds to any borrowers who have had awith loans classified as TDR.
Purchased LoansThe 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 September 30,
20222021
Number of ContractsPre-Modification Outstanding Recorded InvestmentPost-Modification Outstanding Recorded InvestmentNumber of ContractsPre-Modification Outstanding Recorded InvestmentPost-Modification Outstanding Recorded Investment
(dollars in thousands)
CONCESSION - Extended maturity date
Commercial real estate-other3 $894 $894 2 $9,717 $9,623 
Total3$894 $894 2 $9,717 $9,623 

Nine Months Ended September 30,
20222021
Number of ContractsPre-Modification Outstanding Recorded InvestmentPost-Modification Outstanding Recorded InvestmentNumber of ContractsPre-Modification Outstanding Recorded InvestmentPost-Modification Outstanding Recorded Investment
(dollars in thousands)
CONCESSION - Interest rate reduction
Farmland—$— $— 2$1,982 $1,982 
One- to four- family first liens—— — 1171 171 
CONCESSION - Extended maturity date
Agricultural112 12 —— — 
Commercial and industrial4512 502 —— — 
Farmland4988 888 —— — 
Commercial real estate-other3894 894 29,717 9,623 
One- to four- family first liens—— — 2178 178 
CONCESSION - Other
Agricultural1140 140 —— — 
Farmland31,529 1,529 —— — 
Commercial real estate-other—— — 144 44 
One- to four- family first liens—— — 1150 150 
Total16$4,075 $3,965 9$12,242 $12,148 
Loans by class of financing receivable modified as TDRs that redefaulted within 12 months subsequent to restructure during the stated periods were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Number of ContractsRecorded InvestmentNumber of ContractsRecorded InvestmentNumber of ContractsRecorded InvestmentNumber of ContractsRecorded Investment
(dollars in thousands)
CONCESSION - Extended maturity date
Commercial and industrial—$— —$— 1$403 —$— 
Farmland—— —— 3490 —— 
Commercial real estate-other2432 —— 37,820 —— 
Total2$432 —$— 7$8,713 —$— 


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5.    Derivatives, Hedging Activities and initially measured at their estimatedBalance Sheet Offsetting
The following table presents the total notional amounts and gross fair valuevalues of the Company’s derivatives as of the acquisition date. Credit discountsdates 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 determinationconsolidated balance sheets.

The fair values of the Company's derivative instrument assets and liabilities are summarized as follows:
As of September 30, 2022As of December 31, 2021
Notional
Amount
Fair Value
Notional
Amount
Fair Value
(in thousands)AssetsLiabilitiesAssetsLiabilities
Designated as hedging instruments:
Fair value hedges:
Interest rate swaps$24,217 $2,690 $— $24,802 $424 $1,400 
Total$24,217 $2,690 $— $24,802 $424 $1,400 
Not designated as hedging instruments:
Interest rate swaps$332,073 $22,093 $22,095 $356,636 $5,352 $5,363 
RPAs - protection sold4,040 — — 4,229 — — 
RPAs - protection purchased9,474 — — 9,629 — 2 
Interest rate lock commitments3,685 — 37 17,438 330 — 
Interest rate forward loan sales contracts4,450 87 — 22,710 — (24)
Total$353,722 $22,180 $22,132 $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.
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 September 30,For the Nine Months Ended September 30,
2022202120222021
(in thousands)Interest IncomeOther IncomeInterest IncomeOther IncomeInterest IncomeOther IncomeInterest IncomeOther 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$24 $— $(110)$— $(147)$— $(329)$— 
Gain (loss) on fair value hedging relationships in subtopic 815-20:
Interest contracts:
Hedged items(1,149)— (199)— (3,665)— (1,254)— 
Derivative designated as hedging instruments1,175 — 157 — 3,519 — 910 — 


As of September 30, 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$21,557 $(2,687)

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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 IncomeFor the Three Months Ended September 30,For the Nine Months Ended September 30,
(in thousands)2022202120222021
Interest rate swapsOther income$2 $5 $10 $40 
RPAsOther income— 1 1 2 
Interest rate lock commitmentsLoan revenue(149)316 (367)316 
Interest rate forward loan sales contractsLoan revenue91 (107)63 (107)
                Total$(56)$215 $(293)$251 

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.

The table below presents gross derivatives and the respective collateral received or pledged in the form of other financial instruments as of September 30, 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 loansThe 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 RecognizedGross Amounts Offset in the Balance SheetNet Amounts presented in the Balance SheetFinancial InstrumentsCash Collateral Received / PaidNet Assets /Liabilities
As of September 30, 2022
Asset Derivatives$24,870 $— $24,870 $— $20,518 $4,352 
Liability Derivatives22,132 — 22,132 — 3,330 18,802 
As of December 31, 2021
Asset Derivatives$6,106 $— $6,106 $— $— $6,106 
Liability Derivatives6,741 — 6,741 — 3,250 3,491 

Purchased non-credit impaired loans are accounted for in accordanceCredit-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 evidenceits 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, asits indebtedness, including default where repayment of the acquisition date, thatindebtedness has not been accelerated by the lender, then the Company willcould also be unable to collect all contractually required payments fromdeclared 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 loansCompany could be declared in default on its derivative obligations if repayment of the accretable discountunderlying indebtedness is accelerated by the discount appliedlender due to the expected cash flowsCompany’s default on the indebtedness. As of September 30, 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 recordCompany had no derivatives with 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 to as the accretable yield and is recognized into interest income over the expected remaining lifein a net liability position with its institutional derivative counterparties.
22
Table of the loan if the timing and amount of the future cash flows are reasonably estimable.Contents

This discount includes an adjustment on loans that are not accruing or paying contractual interest so that interest income will be recognized 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 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.
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 difference63
 595
 364
 3,803
 Balance at end of period$1,084
 $2,972
 $1,084
 $2,972

6.    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 at2022 and December 31, 2016.2021.
As indicated in Note 2. Business Combinations, the Company acquired a core deposit intangible on June 9, 2022 with an estimated fair value of $16.5 million, which will be amortized over its estimated useful life of 10 years. The following table presents the changes in the carrying amount of intangibles (excluding goodwill), gross carrying amount, accumulated amortization, and net book value ascarrying amount of andother intangible assets at the dates indicated:
As of September 30, 2022As of December 31, 2021
(in thousands)Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Core deposit intangible$58,245 $(34,244)$24,001 $41,745 $(30,629)$11,116 
Customer relationship intangible5,265 (4,314)951 5,265 (3,692)1,573 
Other2,700 (2,606)94 2,700 (2,544)156 
$66,210 $(41,164)$25,046 $49,710 $(36,865)$12,845 
Indefinite-lived trade name intangible$7,040 $7,040 

The following table provides the estimated future amortization expense for the nineremaining three months ended September 30, 2017:ending December 31, 2022 and the succeeding annual periods:
(in thousands)Core Deposit IntangibleCustomer Relationship IntangibleOtherTotal
2022$1,578 $175 $17 $1,770 
20235,677 518 51 6,246 
20244,705 239 24 4,968 
20253,751 19 2 3,772 
20262,797 — — 2,797 
Thereafter5,493 — — 5,493 
Total$24,001 $951 $94 $25,046 
   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.    Other Assets
The components of the Company’sCompany's other assets as of September 30, 2022 and December 31, 2021 were as follows:
(in thousands)September 30, 2022December 31, 2021
Bank-owned life insurance$94,902 $85,372 
Interest receivable26,362 20,117 
FHLB stock16,961 10,157 
Mortgage servicing rights13,329 6,532 
Operating lease right-of-use assets, net2,738 2,840 
Federal and state income taxes, current— 178 
Federal and state income taxes, deferred40,862 13,893 
Derivative assets24,870 6,106 
Other receivables/assets13,729 12,553 
$233,753 $157,748 
  September 30, 2017 December 31, 2016
 (in thousands)   
 Federal Home Loan Bank Stock$13,025
 $12,800
 FDIC indemnification asset, net—
 479
 Prepaid expenses1,910
 1,760
 Mortgage servicing rights2,132
 1,951
 Accounts receivable & other miscellaneous assets3,470
 1,323
  $20,537
 $18,313



TheBank is a member acquisition of IOFB on June 9, 2022 by the Company resulted in an increase in the cash surrender value of bank-owned life insurance, the fair value of the FHLBCompany's mortgage servicing rights, and interest receivable. See Note 2. Business Combinations for further details.

23
Table of Des Moines, and ownershipContents
8.    Deposits
The following table presents the composition 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 optionour deposits as of the FHLB. No impairment was recorded on FHLB stockdates indicated:
(in thousands)September 30, 2022December 31, 2021
Noninterest bearing deposits$1,139,694 $1,005,369 
Interest checking deposits1,705,289 1,619,136 
Money market deposits991,783 939,523 
Savings deposits700,843 628,242 
Time deposits under $250537,616 505,392 
Time deposits of $250 or more401,557 416,857 
Total deposits$5,476,782 $5,114,519 

The Company had $4.0 million and $3.4 million in the nine months ended September 30, 2017 or in the year ended December 31, 2016.
As part of the Central merger, 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 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 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.
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 borrowings were as followsreciprocal time deposits as of September 30, 20172022 and December 31, 2016:
   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
At2021, respectively. Included in money market deposits at September 30, 20172022 and December 31, 2016,2021 were $39.3 million and $35.4 million, respectively, of reciprocal deposits. These reciprocal deposits are part of the Company had no borrowings throughIntraFi Network Deposits program, which is used by financial institutions to spread deposits that exceed 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,FDIC insurance coverage limits out to the Federal Reservenumerous institutions in order to secure potential borrowings. The Company also has various other unsecured federal funds agreements with correspondent banks. provide insurance coverage for all participating deposits.

As of September 30, 20172022 and December 31, 2016, there2021, the Company had public entity deposits that were $16.7collateralized by investment securities of $353.0 million and $35.7$303.3 million, of borrowings through these correspondent bank federal funds agreements, respectively.

9.    Short-Term Borrowings
The following table summarizes our short-term borrowings as of the dates indicated:
September 30, 2022December 31, 2021
(in thousands)Weighted Average RateBalanceWeighted Average RateBalance
Securities sold under agreements to repurchase0.82 %$137,536 0.24 %$181,368 
Federal Home Loan Bank advances3.29 167,000 — — 
Total2.18 %$304,536 0.24 %$181,368 

Securities Sold Under an Agreement to 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 intoFederal Home Loan Bank Advances - The Bank has a $5.0 million unsecuredsecured 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 4. 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 September 30, 2022 or December 31, 2021.
Other - At September 30, 2022 and December 31, 2021, the Company had no Federal Reserve Discount Window borrowings, while the financing capacity was $104.3 million as of September 30, 2022 and $60.2 million as of December 31, 2021. As of September 30, 2022 and December 31, 2021, the Bank had municipal securities with a market value of $113.5 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. The credit agreement was amended on September 30, 2022 such that the revolving commitment matures on September 30, 2023, with no updates made to the fee structure or the interest rates. Fees are paid on the average daily unused revolving commitment in the amount of 0.30% per annum. Interest is payable at a rate of one-month LIBORequal to the monthly reset term SOFR rate plus 2.00%1.55%. The line was renewed in May 2017, and is now scheduled to mature on April 28, 2018. The Company had no balance outstanding under this agreementrevolving credit facility as of both September 30, 2017.2022 and December 31, 2021.



9.


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10.    Long-Term Debt
Junior Subordinated Notes PayableIssued 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 outstandingterms of each issuance of junior subordinated notes and the related trust preferred securities issued by each trustoutstanding as of September 30, 2017 and December 31, 2016:the dates indicated:
(in thousands)Face ValueBook ValueInterest RateRateMaturity DateCallable Date
September 30, 2022
ATBancorp Statutory Trust I$7,732 $6,918 Three-month LIBOR + 1.68%4.97 %06/15/203606/15/2011
ATBancorp Statutory Trust II12,372 10,954 Three-month LIBOR + 1.65%4.94 %09/15/203706/15/2012
Barron Investment Capital Trust I2,062 1,824 Three-month LIBOR + 2.15%5.75 %09/23/203609/23/2011
Central Bancshares Capital Trust II7,217 6,912 Three-month LIBOR + 3.50%6.79 %03/15/203803/15/2013
MidWestOne Statutory Trust II15,464 15,464 Three-month LIBOR + 1.59%4.88 %12/15/203712/15/2012
Total$44,847 $42,072 
December 31, 2021
ATBancorp Statutory Trust I$7,732 $6,888 Three-month LIBOR + 1.68%1.88 %06/15/203606/15/2011
ATBancorp Statutory Trust II12,37210,908Three-month LIBOR + 1.65%1.85 %09/15/203706/15/2012
Barron Investment Capital Trust I2,062 1,800 Three-month LIBOR + 2.15%2.37 %09/23/203609/23/2011
Central Bancshares Capital Trust II7,217 6,880 Three-month LIBOR + 3.50%3.70 %03/15/203803/15/2013
MidWestOne Statutory Trust II15,464 15,464 Three-month LIBOR + 1.59%1.79 %12/15/203712/15/2012
    Total$44,847 $41,940 
   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.
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 September 30, 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 BorrowingsDebt
Long-term
On June 7, 2022, the Company entered into an unsecured note payable with a correspondent bank with a maturity date of June 30, 2027. Payments of principal and interest are payable quarterly, and began on September 30, 2022. Interest is payable at the monthly reset term SOFR plus 1.55%. As of September 30, 2022, $20.0 million of that note was outstanding.

Other long-term borrowings were as follows as of September 30, 20172022 and December 31, 2016:2021:
September 30, 2022December 31, 2021
(in thousands)Weighted Average RateBalanceWeighted Average RateBalance
Finance lease payable8.89 %$830 8.89 %$951 
FHLB borrowings2.69 27,314 2.76 48,113 
Note payable to unaffiliated bank4.06 20,000 — — 
Total3.37 %$48,144 2.88 %$49,064 



25
Table of Contents
  September 30, 2017 December 31, 2016
 (in thousands)Weighted Average Cost Balance Weighted Average Cost Balance
 FHLB Borrowings1.45% $145,000
 1.56% $115,000
 Note payable to unaffiliated bank2.99
 13,750
 2.52
 17,500
 Total1.58% $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 “Loans4. Loans Receivable and the Allowance for Loan Losses”Credit Losses of the notes to the unaudited consolidated financial statements.
On April 30, 2015, the Company entered into 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 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 At September 30, 2015. 2022, FHLB long-term borrowings included advances from the FHLBC, which were collateralized by investment securities. See Note 3. Debt Securities of the notes to the unaudited consolidated financial statements.
As of September 30, 2017, $13.8 million of that note was outstanding.2022, FHLB borrowings were as follows:

(in thousands)Weighted Average RateAmount
Due in 20222.31 %$10,000 
Due in 20232.79 %11,000 
Due in 20243.11 %6,250 
Total27,250 
Valuation adjustment from acquisition accounting64 
Total$27,314 

11.    Income TaxesEarnings per Share
The income tax provisionsfollowing table presents the computation of basic and diluted earnings per common share for the threeperiods indicated:

Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands, except per share amounts)2022202120222021
Basic Earnings Per Share:
Net income$18,317 $16,311 $44,833 $55,230 
Weighted average shares outstanding15,623,498 15,840,769 15,657,917 15,938,889 
Basic earnings per common share$1.17 $1.03 $2.86 $3.47 
Diluted Earnings Per Share:
Net income$18,317 $16,311 $44,833 $55,230 
Weighted average shares outstanding, including all dilutive potential shares15,654,443 15,863,247 15,686,098 15,963,229 
Diluted earnings per common share$1.17 $1.03 $2.86 $3.46 


12.    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 September 30, 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.
26
Table of Contents
A comparison of the Company's and the Bank's capital with the corresponding minimum regulatory requirements in effect as of September 30, 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)AmountRatioAmountRatioAmountRatio
At September 30, 2022
Consolidated:
Total capital/risk weighted assets$643,36512.10%$558,19510.50%N/AN/A
Tier 1 capital/risk weighted assets529,9609.97451,8728.50N/AN/A
Common equity tier 1 capital/risk weighted assets487,8889.18372,1307.00N/AN/A
Tier 1 leverage capital/average assets529,9608.24257,1354.00N/AN/A
MidWestOne Bank:
Total capital/risk weighted assets$646,37212.17%$557,47710.50%$530,93110.00%
Tier 1 capital/risk weighted assets597,96711.26451,2918.50424,7448.00
Common equity tier 1 capital/risk weighted assets597,96711.26371,6517.00345,1056.50
Tier 1 leverage capital/average assets597,9679.31257,0214.00321,2765.00
At December 31, 2021
Consolidated:
Total capital/risk weighted assets$615,06013.09%$493,28310.50%N/AN/A
Tier 1 capital/risk weighted assets508,68710.83399,3248.50N/AN/A
Common equity tier 1 capital/risk weighted assets466,7479.94328,8557.00N/AN/A
Tier 1 leverage capital/average assets508,6878.67234,7454.00N/AN/A
MidWestOne Bank:
Total capital/risk weighted assets$584,34812.46%$492,43610.50%$468,98710.00%
Tier 1 capital/risk weighted assets542,97511.58398,6398.50375,1898.00
Common equity tier 1 capital/risk weighted assets542,97511.58328,2917.00304,8416.50
Tier 1 leverage capital/average assets542,9759.25234,6864.00293,3585.00
(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.

13.    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:
September 30, 2022December 31, 2021
(in thousands)
Commitments to extend credit$1,159,323 $1,014,397 
Commitments to sell loans2,320 12,917 
Standby letters of credit19,026 16,342 
Total$1,180,669 $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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Table of Contents
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 September 30, 2022, the liability for off-balance-sheet credit losses totaled $4.8 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 nine months ended September 30, 20172022 was an expense of $0.8 million, while a credit loss benefit of $0.2 million was recorded for the nine months ended September 30, 2021.
Litigation - In the normal course of business, the Company and 2016 were less than the amounts computed by applying the maximum effective federal income tax rate of 35%its subsidiaries have been named, from time to the income before income taxes, becausetime, as defendants in various legal actions. Certain of the following items: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 material effect on the financial statements of the 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 62% of the loans are real estate loans, excluding farmland, and approximately 8% are agriculturally related. The concentrations of credit by type of loan are set forth in Note 4. 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 14% and 10%, respectively, as of September 30, 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 benefit366
 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)
 Other8
 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.    Estimated14.    Fair Value of Financial Instruments and Fair Value Measurements
Fair value is the exchange price that would be received in sellingfor an asset or paid to transfer a liability (exit price) in transferring athe principal or most advantageous market for the asset or liability in an orderly transaction between market participants. A fair valueparticipants on the measurement assumesdate.  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 quotedQuoted 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– InputsSignificant 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 includeprices, 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, inputsor other than quoted pricesinputs 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’sa company’s own assumptions about the assumptions that market participants would use in pricing the assetsan 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 measuredto measure the Company's assets recorded at fair value, as well as the general classification of suchand for estimating fair value for financial instruments pursuant to the valuation hierarchy, is set forth below.
Valuation methods for instruments measurednot 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 asbasis, primarily available for sale include: debt securities, issued byderivatives 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. Ondisclosing the Company's fair value measurements. Fair value is used on a quarterlynonrecurring 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 serviceadjust carrying values for reasonableness. Debt securities issued by the U.S. Treasurycollateral 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.
28
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 segregatedthe dates indicated, by the level of valuation inputs within the fair value hierarchy utilized to measure fair value:hierarchy:
 Fair Value Measurement at September 30, 2022 Using
(in thousands)Total Level 1 Level 2 Level 3
Assets:   
Available for sale debt securities:   
U.S. Government agencies and corporations$7,339  $—  $7,339  $— 
State and political subdivisions283,513  —  283,513  — 
Mortgage-backed securities6,083  —  6,083  — 
Collateralized mortgage obligations153,088 — 153,088 — 
Corporate debt securities703,281  —  703,281  — 
Derivative assets24,870 — 24,870 — 
     Mortgage servicing rights13,329 — 13,329 — 
Liabilities:
Derivative liabilities$22,132 $— $22,095 $37 
  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 subdivisions149,612
 —
 149,612
 —
 Mortgage-backed securities51,300
 —
 51,300
 —
 Collateralized mortgage obligations166,432
 —
 166,432
 —
 Corporate debt securities51,829
 —
 51,829
 —
 Total available for sale debt securities424,887
 —
 424,887
 —
 Other equity securities2,354
 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 subdivisions765,742  —  765,742  — 
Mortgage-backed securities100,626  —  100,626  — 
Collateralized mortgage obligations768,899 — 768,899 — 
Corporate debt securities652,577  —  652,577  — 
Derivative assets6,106 — 5,776 330 
Mortgage servicing rights6,532 — 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 subdivisions165,272
 —
 165,272
 —
 Mortgage-backed securities61,354
 —
 61,354
 —
 Collateralized mortgage obligations171,267
 —
 171,267
 —
 Corporate debt securities72,453
 —
 72,453
 —
 Total available for sale debt securities476,251
 —
 476,251
 —
 Other equity securities1,267
 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, 20172022 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 toincome.
The following table presents the extentvaluation technique, significant unobservable inputs, and quantitative information about the changes are not considered OTTI. OTTI tests are performed on a quarterly basisunobservable inputs used for fair value measurements of the financial instruments held by the Company and any decline incategorized 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 of operations.dates indicated:
Valuation methods for instruments
Fair Value at
(dollars in thousands)September 30, 2022December 31, 2021Valuation Techniques(s)Unobservable InputRange of InputsWeighted Average
Interest rate lock commitments$(37)$330 Quoted or published market prices of similar instruments, adjusted for factors such as pull-through rate assumptionsPull-through rate69%-100%86%
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 valuedates indicated:
 Fair Value Measurement at September 30, 2022 Using
(in thousands)TotalLevel 1Level 2Level 3
Collateral dependent individually analyzed loans$8,912 $— $— $8,912 
Foreclosed assets, net103 — — 103 
 Fair Value Measurement at December 31, 2021 Using
(in thousands)TotalLevel 1Level 2Level 3
Collateral dependent individually analyzed loans$15,772 $— $— $15,772 
Foreclosed assets, net357 — — 357 
29
Table 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.Contents
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.
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 sale427,241
 427,241
 2,354
 424,887
 —
 Held to maturity183,304
 183,946
 —
 183,946
 —
 Total investment securities610,545
 611,187
 2,354
 608,833
 —
 Loans held for sale612
 625
 —
 —
 625
 Loans, net2,237,301
 2,235,820
 —
 2,235,820
 —
 Accrued interest receivable13,871
 13,871
 13,871
 —
 —
 Federal Home Loan Bank stock13,025
 13,025
 —
 13,025
 —
 Financial liabilities:         
 Deposits:         
 Non-interest bearing demand477,376
 477,376
 477,376
 —
 —
 Interest-bearing checking1,137,592
 1,137,592
 1,137,592
 —
 —
 Savings203,506
 203,506
 203,506
 —
 —
 Certificates of deposit under $100,000324,024
 322,071
 —
 322,071
 —
 Certificates of deposit $100,000 and over347,917
 346,866
 —
 346,866
 —
 Total deposits2,490,415
 2,487,411
 1,818,474
 668,937
 —
 Federal funds purchased and securities sold under agreements to repurchase104,672
 104,672
 104,672
 —
 —
 Federal Home Loan Bank borrowings145,000
 144,381
 —
 144,381
 —
 Junior subordinated notes issued to capital trusts23,768
 19,514
 —
 19,514
 —
 Long-term debt13,750
 13,750
 —
 13,750
 —
 Accrued interest payable1,449
 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 sale477,518
 477,518
 1,267
 476,251
 —
 Held to maturity168,392
 164,792
 —
 164,792
 —
 Total investment securities645,910
 642,310
 1,267
 641,043
 —
 Loans held for sale4,241
 4,286
 —
 —
 4,286
 Loans, net2,143,293
 2,138,252
 —
 2,138,252
 —
 Accrued interest receivable13,871
 13,871
 13,871
 —
 —
 Federal Home Loan Bank stock12,800
 12,800
 —
 12,800
 —
 Financial liabilities:         
 Deposits:         
 Non-interest bearing demand494,586
 494,586
 494,586
 —
 —
 Interest-bearing checking1,136,282
 1,136,282
 1,136,282
 —
 —
 Savings197,698
 197,698
 197,698
 —
 —
 Certificates of deposit under $100,000326,832
 324,978
 —
 324,978
 —
 Certificates of deposit $100,000 and over325,050
 324,060
 —
 324,060
 —
 Total deposits2,480,448
 2,477,604
 1,828,566
 649,038
 —
 Federal funds purchased and securities sold under agreements to repurchase117,871
 117,871
 117,871
 —
 —
 Federal Home Loan Bank borrowings115,000
 114,590
 —
 114,590
 —
 Junior subordinated notes issued to capital trusts23,692
 19,248
 —
 19,248
 —
 Long-term debt17,500
 17,500
 —
 17,500
 —
 Accrued interest payable1,472
 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)September 30, 2022December 31, 2021Valuation Techniques(s)Unobservable InputRange of InputsWeighted Average
Collateral dependent individually analyzed loans$8,912 $15,772 Fair value of collateralValuation adjustments—%-91%45%
Foreclosed assets, net$103 $357 Fair value of collateralValuation adjustments8%-8%8%
Changes in assumptions or estimation methodologies may have a material effect on these estimated fair values.

13.    Operating SegmentsCarrying 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 commercialcarrying 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 September 30, 2022 and December 31, 2021 were as follows:

 September 30, 2022
(in thousands)Carrying
Amount		Estimated
Fair Value		Level 1Level 2Level 3
Financial assets:
Cash and cash equivalents$78,514 $78,514 $78,514 $— $— 
Debt securities available for sale1,153,304 1,153,304 — 1,153,304 — 
Debt securities held to maturity1,146,583 925,571 — 925,571 — 
Loans held for sale2,320 2,014 — 2,014 — 
Loans held for investment, net3,694,189 3,671,008 — — 3,671,008 
Interest receivable26,362 26,362 — 26,362 — 
FHLB stock16,961 16,961 — 16,961 — 
Derivative assets24,870 24,870 — 24,870 — 
Financial liabilities:
Noninterest bearing deposits1,139,694 1,139,694 1,139,694 — — 
Interest bearing deposits4,337,088 4,313,894 3,397,915 915,979 — 
Short-term borrowings304,536 304,536 304,536 — — 
Finance leases payable830 830 — 830 — 
FHLB borrowings27,314 27,021 — 27,021 — 
Junior subordinated notes issued to capital trusts42,072 38,601 — 38,601 — 
Subordinated debentures63,974 63,750 — 63,750 — 
Other long-term debt20,000 20,000 — 20,000 — 
Derivative liabilities22,132 22,132 — 22,095 37 
 December 31, 2021
(in thousands)
Carrying
Amount
Estimated
Fair Value
Level 1Level 2Level 3
Financial assets:
Cash and cash equivalents$203,830 $203,830 $203,830 $— $— 
Debt securities available for sale2,288,110 2,288,110 — 2,288,110 — 
Loans held for sale12,917 12,970 — 12,970 — 
Loans held for investment, net3,196,312 3,207,314 — — 3,207,314 
Interest receivable20,117 20,117 — 20,117 — 
FHLB stock10,157 10,157 — 10,157 — 
Derivative assets6,106 6,106 — 5,776 330 
Financial liabilities:
Noninterest bearing deposits1,005,369 1,005,369 1,005,369 — — 
Interest bearing deposits4,109,150 4,105,858 3,186,901 918,957 — 
Short-term borrowings181,368 181,368 181,368 — — 
Finance leases payable951 951 — 951 — 
FHLB borrowings48,113 48,947 — 48,947 — 
Junior subordinated notes issued to capital trusts41,940 35,545 — 35,545 — 
Subordinated debentures63,875 68,207 — 68,207 — 
Derivative liabilities6,741 6,741 — 6,741 — 

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Table of Contents
15.    Leases
Substantially all of the leases in which the 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 one existing finance lease for a banking office location with a lease term through 2025.
Supplemental balance sheet information related to leases was as follows:
(in thousands)ClassificationSeptember 30, 2022December 31, 2021
Operating lease right-of-use assets
Other assets
$2,738 $2,840 
Finance lease right-of-use asset
Premises and equipment, net
374 446 
Total right-of-use assets$3,112 $3,286 
Operating lease liability
Other liabilities
$3,620 $3,778 
Finance lease liability
Long-term debt
830 951 
Total lease liabilities$4,450 $4,729 
Weighted-average remaining lease term
Operating leases8.98 years9.13 years
Finance lease3.92 years4.67 years
Weighted-average discount rate
Operating leases4.15 %4.13 %
Finance lease8.89 %8.89 %

The following table represents lease costs and other lease information. As the Company elected, for all classes of underlying assets, not to separate lease and non-lease components and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance and utilities.
Three Months EndedNine Months Ended
September 30,September 30,
(in thousands)2022 202120222021
Lease Costs
Operating lease cost$290 $301 $874 $894 
Variable lease cost7 (3)49 89 
Interest on lease liabilities(1)
19 23 58 69 
Amortization of right-of-use assets24 24 72 72 
Net lease cost$340 $345 $1,053 $1,124 
Other Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$553 $553 $1,689 $1,655 
Operating cash flows from finance lease19 23 58 69 
Finance cash flows from finance lease41 37 121 107 
     Supplemental non-cash information on lease liabilities:
           Right-of-use assets obtained in exchange for new operating lease liabilities599 232 638 232 
(1)Included in long-term debt interest expense in the financial statement footnotes (“exit price” only) will likely require changes to current methodologiesCompany’s consolidated statements of determining these vales,income. All other lease costs in this table are included in occupancy expense of premises, net.








31
Table of Contents
Future minimum payments for finance leases and how they are disclosed inoperating leases with initial or remaining terms of one year or more for the financial statement footnotes. The new standard applies to public business entities in fiscal years beginning afterremaining three-months ending December 15, 2017, including interim31, 2022 and the succeeding annual periods within those fiscal years, with early adoption permitted. were as follows:
(in thousands)Finance LeasesOperating Leases
December 31, 2022$61 $293 
December 31, 2023245 1,109 
December 31, 2024250 827 
December 31, 2025255 357 
December 31, 2026171 262 
Thereafter— 1,875 
Total undiscounted lease payment$982 $4,723 
Amounts representing interest(152)(1,103)
Lease liability$830 $3,620 


16.    Subsequent Events
The Company has formed a working groupevaluated events that have occurred subsequent to evaluateSeptember 30, 2022 and has concluded there are no other subsequent events that would require recognition in the changes required as a result of 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 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 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, such as branch locations, which are currently considered operating leases, and therefore not recognized on the Company’s consolidated balance sheets. The Company expects 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’saccompanying consolidated financial statements and the availability of outside vendor products to assist in the implementation, and does not expect to early adopt the standard.statements.

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 for 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.

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 evaluated subsequent events through the date the 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 were issued, have not been recognized in the consolidated financial statements for the three and nine months ended September 30, 2017.
On October 10, 2017,18, 2022, the board of directors of the Company declared a cash dividend of $0.17$0.2375 per share payable on December 15, 20172022 to shareholders of record as of the close of business on December 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 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, or uncertainties, including the impact of inflationary pressures on economic conditions and our business, resulting in an increase in the allowance for credit losses, an increase in the credit loss expense, and a reduction in net earnings;
•the effects of actual and expected increases in inflation and interest rates, including on our net income and the value of our securities portfolio;
•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, including the new 1.0% excise tax on stock buybacks by publicly traded companies;
•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, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds, financial technology companies, 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 war in 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;
•effects of the ongoing COVID-19 pandemic, including its effects on the economic environment, our customers, employees and supply chain; and
•other factors and risks described under “Risk Factors” in this Form 10-Q and in other reports we file with the SEC.

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.

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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-centraleastern Iowa, the Twin CitiesMinneapolis/St. Paul metropolitan area of Minnesota, southwestern Wisconsin, Naples and Fort Myers, Florida, and Denver, Colorado.
On June 9, 2022, the Company completed the acquisition of IOFB, a bank holding company headquartered in Muscatine, Iowa, and the parent company of FNBM and FNBF. Immediately following the completion of the acquisition, FNBM and FNBF were merged with and into the Bank. As consideration for the merger, we paid cash of $46.7 million. The acquisition added to the Company's existing presence in Fairfield, Iowa and expanded the Company's footprint into Muscatine, Iowa.
The Bank is actively engaged in many areas offocused on delivering relationship-based business and personal banking products and services. The Bank provides commercial banking, including: acceptance ofloans, 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, agriculturaldeposits. Complementary to our loan and consumer loans;deposit products, the Bank also provides products and otherservices 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 Divisionincluding the administration of theBank administers estates, personal trusts, and conservatorships and pensionthe management of real property. Finally, the Bank’s investment services department offers financial planning, investment advisory, and profit-sharing accounts alongretail 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 onare 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-interestnoninterest income and expense, the provision for loan lossescredit 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, 20172022 are not necessarily indicative of results to be attained for any other period.
FINANCIAL SUMMARY
The Company reported net income for the three months ended September 30, 2022 of $18.3 million, an increase of $2.0 million, compared to $16.3 million of net income for the three months ended September 30, 2021, with diluted earnings per share of $1.17 and $1.03 for the respective annual periods.
The period as of and for the three and nine months ended September 30, 2022 was also highlighted by the following results:

Balance Sheet:
•Total assets increased to $6.49 billion at September 30, 2022 from $6.03 billion at December 31, 2021, with the completion of the IOFB acquisition in the second quarter of 2022 contributing largely to this increase.
•At September 30, 2022 the total amount of the held to maturity debt securities was $1.15 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 $509.5 million, from $3.25 billion at December 31, 2021, to $3.76 billion at September 30, 2022. This increase was primarily driven by the loans acquired in the IOFB acquisition, coupled with organic loan growth and increased revolving line of credit utilization.
•The allowance for credit losses was $52.1 million, or 1.39% of total loans as of September 30, 2022, compared with $48.7 million, or 1.50% of total loans, at December 31, 2021.
•Nonperforming assets declined $5.8 million, from $31.9 million at December 31, 2021, to $26.1 million at September 30, 2022.
•Total deposits increased $362.3 million from $5.11 billion at December 31, 2021, to $5.48 billion at September 30, 2022. This increase was primarily due to the close of the IOFB acquisition during the second quarter of 2022.
•Short-term borrowings increased to $304.5 million at September 30, 2022, from $181.4 million at December 31, 2021, and long-term debt decreased to $154.2 million at September 30, 2022 from $154.9 million at December 31, 2021.
•The Company is well-capitalized with a total risk-based capital ratio of 12.10% at September 30, 2022.




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Income Statement:

Three Months Ended:

•Tax equivalent net interest income (a non-GAAP financial measure - see the "Non-GAAP Presentations" section for a reconciliation to the most comparable GAAP equivalent) was $47.0 million for the third quarter of 2022, an increase of $5.5 million, from $41.5 million in the third quarter of 2021. The increase in tax equivalent net interest income was due primarily to an increase of $4.5 million in loan interest income and an increase of $3.9 million in interest income earned from investment securities. The increase in loan interest income was reflective of a higher volume of loans, coupled with an increase of $1.2 million in loan purchase discount accretion, and partially offset by a $3.6 million reduction in net PPP fees. The increase in interest income from investment securities reflected both a larger volume of securities and an increase in yield from such securities. Partially offsetting these identified increases in tax equivalent interest income were increases in interest expense on interest-bearing deposits and borrowed funds of $1.9 million and $0.9 million, respectively.
•Credit loss expense of $0.6 million was recorded during the third quarter of 2022, as compared to a credit loss benefit of $1.1 million during the third quarter of 2021. Credit loss expense in the current quarter was primarily attributable to loan growth.
•Noninterest income increased $3.4 million, from $9.2 million in the third quarter of 2021 to $12.6 million in the third quarter of 2022. The increase was primarily due to increases of $3.3 million and $0.5 million in other income and service charges and fees, respectively. The increase in other income stemmed primarily from a one-time settlement and the increase in service charges and fees was primarily attributable to the acquisition of IOFB.
•Noninterest expense increased $4.8 million, from $29.8 million in the third quarter of 2021, to $34.6 million in the third quarter of 2022 due to an overall increase in all noninterest expense categories, except FDIC insurance and foreclosed assets, net. These increases primarily reflected a full quarter of costs associated with the acquisition of IOFB, including merger-related expenses.

Nine Months Ended:

•Tax equivalent net interest income (a non-GAAP financial measure - see the "Non-GAAP Presentations" section for a reconciliation to the most comparable GAAP equivalent) was $126.4 million for the nine months ended September 30, 2022, which was a $5.5 million increase from $120.9 million for the nine months ended September 30, 2021. The increase in tax equivalent net interest income was due primarily to an increase of $9.6 million in interest income from investment securities, which reflected both a larger volume of and increased yield from such securities. Partially offsetting such increase was a decline of $2.7 million in loan interest income that stemmed from reduced net PPP fee accretion, which more than offset the increase in loan volumes and loan purchase discount accretion, in addition to increases in interest expense on interest-bearing deposits and borrowed funds of $1.0 million and $0.5 million, respectively.
•Credit loss expense of $3.9 million was recorded in the first nine months of 2022, as compared to credit loss benefit of $8.0 million for the first nine months of 2021. Credit loss expense in the first nine months of 2022 reflected $3.1 million related to the acquired IOFB non-PCD loans, $0.2 million related to unfunded loan commitments established in the IOFB acquisition, as well as a reserve taken to support loan growth. The credit loss benefit recorded in the first nine months of 2021 was reflective of overall improvements in the forecasted economic conditions due to less economic uncertainty from the COVID-19 pandemic, as well as stabilization in the credit risk profile.
•Noninterest income increased $5.4 million, from $31.2 million for the first nine months of 2021 to $36.6 million in the first nine months of 2022. The increase was primarily due to increases of $4.4 million and $0.9 million in other noninterest income and service charges and fees, respectively. The increase in other noninterest income was primarily due to a one-time settlement and a bargain purchase gain of $1.3 million recognized in connection with the IOFB acquisition. The increase in service charges and fees was primarily attributable to the acquisition of IOFB.
•Noninterest expense increased $12.2 million, from $86.1 million for the first nine months ended September 30, 2021, to $98.3 million in the first nine months of 2022. The increase in noninterest expense was due to an overall increase in all noninterest expense categories, except communications and foreclosed assets, net. These increases primarily reflected costs associated with the acquisition of IOFB, including merger-related expenses, coupled with normal annual salary and employee benefit increases, a decline in the benefit received from loan origination costs, and elevated legal expenses related to litigation, loan legal expenses and executive recruitment.

Critical Accounting PoliciesEstimates
CriticalManagement has identified the accounting estimates are those which are both most importantpolicies related to the portrayal of our financial condition and results of operations, and require our management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting estimates relate to the allowance for loan losses, application of purchase accounting, goodwill and intangible assets, andACL, fair value of available for sale investment securities, allassets 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,

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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, 20172022 and September 30, 20162021
Summary
For the quarter ended September 30, 2017, we earned net income
As of or for the Three Months Ended September 30,
(dollars in thousands, except per share amounts)2022 2021
Net Interest Income$45,733 $40,340 
Noninterest Income12,588 9,182 
     Total Revenue, Net of Interest Expense58,321 49,522 
Credit Loss Expense (Benefit)638 (1,080)
Noninterest Expense34,623 29,778 
     Income Before Income Tax Expense23,060 20,824 
Income Tax Expense4,743 4,513 
     Net Income18,317  16,311 
Diluted Earnings Per Share$1.17 $1.03 
Return on Average Assets1.13 % 1.11 %
Return on Average Equity14.56  12.00 
Return on Average Tangible Equity(1)
19.32  15.06 
Efficiency Ratio(1)
53.67 56.34 
Dividend Payout Ratio20.30 21.84 
Common Equity Ratio7.28  9.03 
Tangible Common Equity Ratio(1)
5.90  7.71 
Book Value per Share$30.23 $33.71 
Tangible Book Value per Share(1)
24.17 28.40 
(1) A non-GAAP financial measure. See "Non-GAAP Financial Measures" for a reconciliation to the most comparable GAAP equivalents.
36
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 Assets3,102,348
 2,995,521
Average Shareholders’ Equity344,961
 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 intangibles2,282
 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 shares12,238,991
 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 equipment4
 211
Other gain(14) (310)
Adjusted noninterest income$5,730
 $5,615
Total Revenue:   
Net interest income$26,492
 $24,581
Plus: Noninterest income5,916
 5,714
Less: Gain on sale of available for sale securities(176) —
Loss on sale of premises and equipment4
 211
Other gain(14) (310)
Total Revenue$32,222
 $30,196
Adjusted Noninterest Income as a Percentage of Total Revenue17.8% 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 intangibles2,141
 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 intangibles2,141
 3,422
Less: Intangible assets, net(77,413) (80,749)
Tangible assets$3,068,927
 $2,924,647
Common shares outstanding12,218,528
 11,435,860
Tangible Book Value Per Share$22.20
 $20.31
Tangible Equity/Tangible Assets8.84% 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 investments417,896
 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 securities635,431
 4,956
 3.09
 551,803
 4,221
 3.04
Federal funds sold and interest-bearing balances3,929
 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 banks35,774
     35,287
    
Premises and equipment74,962
     75,882
    
Allowance for loan losses(23,054)     (21,609)    
Other assets155,951
     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 deposit676,143
 1,934
 1.13
 653,462
 1,614
 0.98
Total deposits2,021,668
 2,900
 0.57
 1,946,085
 2,474
 0.51
Federal funds purchased and repurchase agreements95,387
 134
 0.56
 67,591
 41
 0.24
Federal Home Loan Bank borrowings111,576
 474
 1.69
 106,239
 469
 1.76
Long-term debt and other40,057
 361
 3.58
 45,127
 326
 2.87
Total borrowed funds247,020
 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 deposits466,485
     502,611
    
Other liabilities22,214
     20,863
    
Shareholders’ equity344,961
     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 investments349
 152
 501
Tax exempt investments579
 (345) 234
Total investment securities928
 (193) 735
Federal funds sold and interest-bearing balances(375) 328
 (47)
Change in interest income1,398
 1,167
 2,565
Increase (decrease) in interest expense:     
Savings and interest-bearing demand deposits37
 69
 106
Certificates of deposit59
 261
 320
Total deposits96
 330
 426
Federal funds purchased and repurchase agreements22
 71
 93
Federal Home Loan Bank borrowings86
 (81) 5
Other long-term debt(189) 224
 35
Total borrowed funds(81) 214
 133
Change in interest expense15
 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 accounts1,295
 1,346
 (51) (3.8)
Loan origination and servicing fees1,012
 1,332
 (320) (24.0)
Other service charges and fees1,625
 1,307
 318
 24.3
Bank-owned life insurance income344
 324
 20
 6.2
Gain on sale or call of available for sale securities176
 —
 176
 NM      
Gain (loss) on sale of premises and equipment(4) (211) 207
 (98.1)
Other gain14
 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 expense2,986
 3,293
 (307) (9.3)
Professional fees933
 1,014
 (81) (8.0)
Data processing expense723
 599
 124
 20.7
FDIC insurance expense238
 412
 (174) (42.2)
Amortization of intangible assets759
 970
 (211) (21.8)
Other operating expense2,066
 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 MidWestOne 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 Assets3,072,998
 2,984,220
Average Shareholders’ Equity330,682
 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   
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 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 intangibles2,585
 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 shares11,999,608
 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 income16,836
 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 Revenue17.5% 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 intangibles2,141
 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 intangibles2,141
 3,422
Less: Intangible assets, net(77,413) (80,749)
Tangible assets$3,068,927
 $2,924,647
Common shares outstanding12,218,528
 11,435,860
Tangible Book Value Per Share$22.20
 $20.31
Tangible Equity/Tangible Assets8.84% 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 ratescosts 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 investments426,429
 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 securities643,953
 15,087
 3.13
 531,333
 12,428
 3.12
Federal funds sold and interest-bearing balances5,636
 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 banks35,281
     37,120
    
Premises and equipment74,960
     76,247
    
Allowance for loan losses(22,625)     (20,736)    
Other assets153,518
     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 deposit677,249
 5,591
 1.10
 650,176
 4,260
 0.88
Total deposits2,017,770
 8,369
 0.55
 1,920,243
 6,822
 0.47
Federal funds purchased and repurchase agreements85,197
 277
 0.43
 74,006
 151
 0.27
Federal Home Loan Bank borrowings104,579
 1,321
 1.69
 106,909
 1,387
 1.73
Long-term debt and other41,304
 1,051
 3.40
 46,452
 978
 2.81
Total borrowed funds231,080
 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 deposits472,482
     514,991
    
Other liabilities20,984
     18,473
    
Shareholders’ equity330,682
     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 September 30,
 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)
$3,673,379 $41,124  4.44 % $3,356,680 $36,622  4.33 %
Taxable investment securities1,939,517 10,635  2.18  1,628,605 6,655  1.62 
Tax-exempt investment securities (2)(4)
431,898 2,922  2.68  459,717 3,043  2.63 
Total securities held for investment (2)
2,371,415 13,557  2.27  2,088,322 9,698  1.84 
Other6,070 9  0.59  44,915 21  0.19 
Total interest earning assets (2)
$6,050,864 $54,690  3.59 % $5,489,917 $46,341  3.35 %
Other assets406,783   321,311  
Total assets$6,457,647   $5,811,228  
     
LIABILITIES AND SHAREHOLDERS' EQUITY   
Interest checking deposits$1,725,000 $1,463 0.34 %$1,434,560 $1,056 0.29 %
Money market deposits1,016,005 1,268 0.50 955,174 506 0.21 
Savings deposits710,836 297  0.17  606,449 316  0.21 
Time deposits913,307 2,007  0.87  890,866 1,272  0.57 
Total interest bearing deposits4,365,148 5,035  0.46  3,887,049 3,150  0.32 
Securities sold under agreements to repurchase144,628 228 0.63 170,384 104 0.24 
Other short-term borrowings83,086 539 2.57 12,100 28 0.92 
Total short-term borrowings227,714 767  1.34  182,484 132  0.29 
Long-term debt159,125 1,886  4.70  163,817 1,597  3.87 
Total borrowed funds386,839 2,653 2.72 346,301 1,729 1.98 
Total interest bearing liabilities$4,751,987 $7,688  0.64 % $4,233,350 $4,879  0.46 %
         
Noninterest bearing deposits1,142,334   995,786  
Other liabilities64,063   43,040  
Shareholders’ equity499,263 539,052 
Total liabilities and shareholders’ equity$6,457,647   $5,811,228  
Net interest income (2)
 $47,002    $41,462  
Net interest spread(2)
2.95 %2.89 %
Net interest margin(2)
3.08 %3.00 %
Total deposits(5)
$5,507,482 $5,035 0.36 %$4,882,835 $3,150 0.26 %
Cost of funds(6)
0.52 %0.37 %
(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 aTax equivalent. The federal incomestatutory 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 $35 thousand and $3.5 million for the three months ended September 30, 2022 and September 30, 2021, respectively. Loan purchase discount accretion was $2.0 million and $0.8 million for the three months ended September 30, 2022 and September 30, 2021, respectively. Tax equivalent adjustments were $0.7 million and $0.5 million for the three months ended September 30, 2022 and September 30, 2021, respectively. The federal statutory tax rate utilized was 21%.
(4)(3)Non-accrual loans have been included in average loans, netInterest income includes tax equivalent adjustments of unearned discount.$0.6 million and $0.6 million for the three months ended September 30, 2022 and September 30, 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)NetCost of funds is calculated as annualized total interest margin is tax-equivalent net interest income as a percentageexpense divided by the sum of average earning assets.total deposits and borrowed funds.



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The following table sets forth an analysis ofshows changes to tax equivalent net interest income attributable to (i) changes in volume and (ii) changes in rate. Changes attributable to both rate changesand volume have been allocated proportionately to the change due to volume and the change due to rate.
 Three Months Ended September 30,
 2022 Compared to 2021 Change due to
(in thousands)Volume Yield/Cost Net
Increase (decrease) in interest income:  
Loans, including fees (1)
$3,547  $955  $4,502 
Taxable investment securities1,416  2,564  3,980 
Tax-exempt investment securities (1)
(180) 59  (121)
Total securities held for investment (1)
1,236  2,623  3,859 
Other(30) 18  (12)
Change in interest income (1)
4,753  3,596  8,349 
Increase (decrease) in interest expense:  
Interest checking deposits220 187 407 
Money market deposits33 729 762 
Savings deposits49  (68) (19)
Time deposits33  702  735 
Total interest-bearing deposits335  1,550  1,885 
    Securities sold under agreements to repurchase(18)142 124 
    Other short-term borrowings392 119 511 
       Total short-term borrowings374  261  635 
Long-term debt(47) 336  289 
Total borrowed funds327  597  924 
Change in interest expense662  2,147  2,809 
Change in net interest income$4,091  $1,449  $5,540 
Percentage (decrease) in net interest income over prior period  13.4 %
(1) Tax equivalent, using a federal statutory tax rate of 21%.
Our tax equivalent net interest income for the third quarter of 2022 was $47.0 million, an increase of $5.5 million, or 13.4%, as compared to $41.5 million for the third quarter of 2021. The increase in tax equivalent net interest income in the third quarter of 2022 as compared to the third quarter of 2021 was due primarily to an increase of $8.3 million, or 18.0%, in interest income, andwhich more than offset the increase of $2.8 million, or 57.6%, in interest expense on our average interest-earning assets and average interest-bearing liabilities during the nine 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).expense. 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 investments1,544
 429
 1,973
Tax exempt investments1,044
 (358) 686
Total investment securities2,588
 71
 2,659
Federal funds sold and interest-bearing balances(247) 153
 (94)
Change in interest income2,933
 1,639
 4,572
Increase (decrease) in interest expense:     
Savings and interest-bearing demand deposits130
 86
 216
Certificates of deposit190
 1,141
 1,331
Total deposits320
 1,227
 1,547
Federal funds purchased and repurchase agreements26
 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 expense150
 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 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. 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 of 2017 increased to 3.13% from 3.12% in the comparable period 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 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 million for the first nine months 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 increase of $4.5 million, or 12.3%, in loan interest income, and an increase of $3.9 million, or 39.8%, in interest income from investment securities. The increase in loan interest income reflected a higher volume of loans stemming from the IOFB acquisition and organic loan growth, coupled with an increase of $1.2 million in loan purchase discount accretion, and partially offset by a $3.6 million reduction in net PPP fees due to loan forgiveness. The increase in interest income from investment securities reflected both a larger volume of and increased focusyield from such securities. The increase in interest expense was due to increases of $1.9 million, or 59.8%, and $0.9 million, or 53.4%, in interest expense on interest-bearing deposits and borrowed funds, respectively.
The tax equivalent net interest margin for the third quarter of 2022 was 3.08%, or 8 basis points higher than the tax equivalent net interest margin of 3.00% for the third quarter of 2021 as the change in interest-earning asset yields outpaced the change in funding costs. The yield on interest-earning assets for the third quarter of 2022 was 24 basis points higher than the third quarter of 2021 as the tax equivalent yield on investment securities increased 43 basis points and the tax equivalent yield on loans increased 11 basis points. The cost of average interest-bearing deposits increased 14 basis points in the third quarter of 2022, compared to the third quarter of 2021 while the cost of average borrowed funds was 74 basis point higher for the third quarter of 2022, compared to the third quarter of 2021. The increase in the cost of average borrowed funds was a result of higher market interest rates, which reflected recent increases in the target federal funds rate.
Credit Loss Expense (Benefit)
Credit loss expense of $0.6 million was recorded during the third quarter of 2022, as compared to a credit loss benefit of $1.1 million during the third quarter of 2021. Credit loss expense in the current quarter was primarily attributable to loan growth. Net loan charge-offs were $0.6 million in the third quarter of 2022 as compared to net loan recoveries of $0.9 million in the third quarter of 2021. The economic forecast factors utilized by the Company on gathering new deposits. 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.
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Noninterest Income
The weighted average rate paid on interest-bearing deposits was 0.55%following table presents significant components of noninterest income and the related dollar and percentage change from period to period:

 Three Months Ended September 30,
(dollars in thousands)2022 2021$ Change% Change
Investment services and trust activities$2,876  $2,915 $(39)(1.3)%
Service charges and fees2,075  1,613 462 28.6 
Card revenue1,898  1,820 78 4.3 
Loan revenue1,722 1,935 (213)(11.0)
Bank-owned life insurance579  532 47 8.8 
Investment securities gains, net(163) 36 (199)(552.8)
Other3,601 331 3,270 987.9 
Total noninterest income$12,588  $9,182 $3,406 37.1 %
Total noninterest income for the

first nine months third quarter 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 $0.82022 increased $3.4 million, for the first nine months of 2016. We expector 37.1%, 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$12.6 million from $9.2 million in the first nine monthsthird quarter of 20172021. The increase in noninterest income was $2.6primarily due increases of $3.3 million compared with $2.5and $0.5 million forin other income and service charges and fees, respectively. The increase in other income stemmed primarily from a one-time settlement and the same periodincrease in 2016, an increaseservice charges and fees was primarily attributable to the acquisition of $0.1IOFB. Partially offsetting the increases above was a $0.2 million or 5.3%. Average borrowed funds for the first nine months of 2017 were $3.7 million higher compared with the same periodreduction in 2016. The decreaseloan revenue, which reflected a decline in the average levelvolume of FHLB borrowings of $2.3 million, or 2.2%, coupled with a $5.1 million, or 11.1%, decreasemortgage originations due to increased mortgage rates, which resulted in long-term debt and junior subordinated notes, wasless gain on sale revenue, partially offset by an increase in the average balancefair value of federal funds purchasedour mortgage servicing rights.
Noninterest Expense
The following table presents significant components of noninterest expense and repurchase agreements of $11.2 million, or 15.1%, allthe related dollar and percentage change from period to period:
 Three Months Ended September 30,
(dollars in thousands)20222021$ Change% Change
Compensation and employee benefits$20,046 $17,350 $2,696 15.5 %
Occupancy expense of premises, net2,577 2,547 30 1.2 
Equipment2,358 1,973 385 19.5 
Legal and professional2,012 1,272 740 58.2 
Data processing1,731 1,406 325 23.1 
Marketing1,139 1,022 117 11.4 
Amortization of intangibles1,789 1,264 525 41.5 
FDIC insurance415 435 (20)(4.6)
Communications302 275 27 9.8 
Foreclosed assets, net42 43 (1)(2.3)
Other2,212 2,191 21 1.0 
Total noninterest expense$34,623 $29,778 $4,845 16.3 %
Three Months Ended September 30,
Merger-related expenses:20222021
(dollars in thousands)
Compensation and employee benefits$132 $— 
Equipment14 — 
Legal and professional193 — 
Data processing304 — 
Marketing90 — 
Other30 — 
Total impact of merger-related expenses to noninterest expense$763 $— 
Noninterest expense 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 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 boosts the allowance for loan losses to total non-acquired loans ratio to 1.34%. Net loans charged off in the first nine months of 2017 totaled $2.0 million compared with $1.3 million in the first nine months of 2016.
Noninterest Income
 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 accounts3,835
 3,887
 (52) (1.3)
Loan origination and servicing fees2,532
 2,806
 (274) (9.8)
Other service charges and fees4,580
 4,115
 465
 11.3
Bank-owned life insurance income990
 1,040
 (50) (4.8)
Gain on sale or call of available for sale securities196
 467
 (271) (58.0)
Gain on sale of held to maturity securities43
 —
 43
 NM      
Gain (loss) on sale of premises and equipment2
 (462) 464
 (100.4)
Other gain64
 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.
In the first nine months of 2017 total noninterest income decreased $0.92022 increased $4.8 million, or 5.0%16.3%, to $16.8$34.6 million from $17.7 million during the same period of 2016. This decline was primarily due to the $1.6 million decrease in other gains for the nine months ended September 30, 2017, compared to the same period in 2016. The first nine months of 2016 included a net gain on other real estate owned of $0.8 million and a net gain of $1.4 million on the sale of the Barron and Rice Lake, Wisconsin and Davenport, Iowa branch offices, partially offset by a writedown of other real estate owned of $0.5 million. Gains on the sale of available for sale securities decreased $0.3 million between the comparative 2016 and 2017 periods, and loan origination and servicing fees decreased $0.3 million, or 9.8%, between the comparative periods. These decreases were partially offset by a $0.5 million decline in loss on the sale of premises and equipment, and the increase of $0.4 million, or 8.2%, in trust, investment, and insurance fees to $4.6$29.8 million for the first nine monthsthird quarter of 2017 compared with $4.2 million for the same period2021. 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 2016noninterest expense was due to a changean overall increase 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 reassignedall noninterest expense categories, except FDIC insurance and foreclosed assets, net. These increases primarily reflected costs associated with the acquisition of IOFB, including merger-related expenses. Also contributing 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 periodincrease 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 expense9,323
 9,870
 (547) (5.5)
Professional fees2,991
 3,181
 (190) (6.0)
Data processing expense1,982
 3,981
 (1,999) (50.2)
FDIC insurance expense957
 1,231
 (274) (22.3)
Amortization of intangible assets2,412
 3,046
 (634) (20.8)
Other operating expense6,666
 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 of merger related expenses for the nine months ended September 30, 2017, compared to $4.2 million for the nine months ended September 30, 2016 relating to the merger of Central Bank into MidWestOne Bank. Salaries and employee benefits decreased $1.9 million, or 5.0%, 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. The rest of the decrease in salariescompensation and employee benefits was primarily due to decreased staffing levels resulting from restructuringnormal annual salary and the sales of branch offices during 2016. Data processing expense declined $2.0 million, or 50.2%, for the nine months ended September 30, 2017, comparedemployee benefit increases. In addition to the nine months ended September 30, 2016, primarily dueidentified increases above, legal and professional expense reflected elevated legal expenses related to litigation, loan legal expenses, and executive recruitment. Partially offsetting the inclusionincreases identified above was a decline of $1.9$0.4 million in contract termination expenseoperating losses, which are recorded in connection with the bank merger in 2016. Other operating expenses decreased $1.1 million, or 14.4%, from $7.8 million 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.other noninterest expense.
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Income Tax Expense
Our effective income tax rate, or income taxes divided by income before taxes, was 27.3%20.6% for the three months ended September 30, 2022, as compared to an effective tax rate of 21.7% for the three months ended September 30, 2021. The effective tax rate for the full year 2022 is expected to be in the range of 20-22%.

Comparison of Operating Results for the Nine Months Ended September 30, 2022 and September 30, 2021
Summary

 As of and for the Nine Months Ended September 30,
(dollars in thousands, except per share amounts)2022 2021
Net Interest Income$122,794 $117,462 
Noninterest Income36,579 31,224 
     Total Revenue, Net of Interest Expense159,373 148,686 
Credit Loss Expense (Benefit)3,920 (7,958)
Noninterest Expense98,348 86,148 
     Income Before Income Tax Expense57,105 70,496 
Income Tax Expense12,272 15,266 
     Net Income44,833  55,230 
Diluted Earnings Per Share$2.86 $3.46 
Return on Average Assets0.97 % 1.29 %
Return on Average Equity11.81  14.03 
Return on Average Tangible Equity(1)
15.28  17.69 
Efficiency Ratio (1)
56.70 53.95 
Dividend Payout Ratio24.91 19.45 
Common Equity Ratio7.28  9.03 
Tangible Common Equity Ratio(1)
5.90  7.71 
Book Value per Share$30.23 $33.71 
Tangible Book Value per Share(1)
24.17 28.40 
(1) A non-GAAP financial measure. See "Non-GAAP Financial Measures" for a reconciliation to the most comparable GAAP equivalents.















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Net Interest Income
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 costs for the periods indicated.
 Nine Months Ended September 30,
 2022 2021
(dollars in thousands)Average
Balance		Interest
Income/
Expense		 Average
Yield/
Cost		 Average
Balance		Interest
Income/
Expense		 Average
Yield/
Cost
ASSETS   
Loans, including fees (1)(2)(3)
$3,416,600 $106,297  4.16 % $3,394,066 $108,950  4.29 %
Taxable investment securities1,899,907 28,334  1.99  1,501,252 18,231  1.62 
Tax-exempt investment securities (2)(4)
440,542 8,895  2.70  466,209 9,442  2.71 
Total securities held for investment (2)
2,340,449 37,229  2.13  1,967,461 27,673  1.88 
Other25,972 77  0.40  43,250 54  0.17 
Total interest-earning assets (2)
$5,783,021 $143,603  3.32 % $5,404,777 $136,677  3.38 %
Other assets369,369   324,045  
Total assets$6,152,390   $5,728,822  
     
LIABILITIES AND SHAREHOLDERS' EQUITY   
Interest checking deposits$1,642,849 $3,713 0.30 %$1,418,339 $3,142 0.30 %
Money market deposits991,338 2,338 0.32 936,932 1,486 0.21 
Savings deposits671,917 863  0.17  585,334 926  0.21 
Time deposits877,923 4,204  0.64  875,027 4,613  0.70 
Total interest-bearing deposits4,184,027 11,118  0.36  3,815,632 10,167  0.36 
Securities sold under agreements to repurchase152,663 435 0.38 171,848 321 0.25 
Other short-term borrowings42,952 680 2.12 20,235 100 0.66 
              Total short-term borrowings195,615 1,115  0.76  192,083 421  0.29 
Long-term debt148,053 4,975  4.49  186,323 5,160  3.70 
Total borrowed funds343,668 6,090 2.37 378,406 5,581 1.97 
Total interest-bearing liabilities$4,527,695 $17,208  0.51 % $4,194,038 $15,748  0.50 %
Noninterest bearing deposits1,062,156 962,852 
Other liabilities54,775 45,671 
Shareholders' equity507,764 526,261 
Total liabilities and shareholders' equity$6,152,390     $5,728,822    
Net interest income (2)
$126,395 $120,929 
Net interest spread(2)
 2.81 %  2.88 %
Net interest margin (2)
 2.92 %  2.99 %
Total deposits(5)
$5,246,183 $11,118 0.28 %$4,778,484 $10,167 0.28 %
Cost of funds(6)
0.41 %0.41 %
(1)Average balance includes nonaccrual loans.
(2)Tax equivalent. The federal statutory tax rate utilized was 21%.
(3)Interest income includes net loan fees, loan purchase discount accretion and tax equivalent adjustments. Net loan fees were $0.7 million and $9.3 million for the nine months ended September 30, 2022 and September 30, 2021, respectively. Loan purchase discount accretion was $3.3 million and $2.7 million for the nine months ended September 30, 2022 and September 30, 2021, respectively. Tax equivalent adjustments were $1.8 million and $1.6 million for the nine months ended September 30, 2022 and September 30, 2021, respectively. The federal statutory tax rate utilized was 21%.
(4)Interest income includes tax equivalent adjustments of $1.8 million and $1.9 million for the nine months ended September 30, 2022 and September 30, 2021, respectively. The federal statutory tax rate utilized was 21%.
(5)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)Cost of funds is calculated as annualized total interest expense divided by the sum of average total deposits and borrowed funds.




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The following table shows changes to tax equivalent net interest income attributable to (i) changes in volume and (ii) changes in rate. Changes attributable to both rate and volume have been allocated proportionately to the change due to volume and the change due to rate.
 Nine Months Ended September 30,
 2022 Compared to 2021 Change due to
(in thousands)Volume Yield/Cost Net
Increase (decrease) in interest income:  
Loans, including fees (1)
$709  $(3,362) $(2,653)
Taxable investment securities5,431  4,672  10,103 
Tax-exempt investment securities(1)
(513) (34) (547)
Total securities held for investment(1)
4,918  4,638  9,556 
Other(29) 52  23 
Change in interest income (1)
5,598  1,328  6,926 
Increase (decrease) in interest expense:  
Interest checking deposits571 — 571 
Money market deposits85 767 852 
Savings deposits126  (189) (63)
Time deposits14  (423) (409)
Total interest-bearing deposits796  155  951 
    Securities sold under agreements to repurchase(39)153 114 
    Other short-term borrowings195 385 580 
       Total short-term borrowings156  538  694 
Long-term debt(1,170) 985  (185)
Total borrowed funds(1,014) 1,523  509 
Change in interest expense(218) 1,678  1,460 
Change in net interest income$5,816  $(350) $5,466 
Percentage (decrease) increase in net interest income over prior period  4.5 %
(1) Tax equivalent, using a federal statutory tax rate of 21%.

Our tax equivalent net interest income for the nine months ended September 30, 2022 was $126.4 million, which was a $5.5 million increase from $120.9 million for the nine months ended September 30, 2021. The increase in tax equivalent net interest income during the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021, was due to the $6.9 million increase in interest income, which more than offset the increase in interest expense of $1.5 million. Contributing to the interest income increase was a $9.6 million, or 34.5%, increase in interest income from investment securities, which reflected both a larger volume of and increased yield from such securities. Partially offsetting the higher interest income from investment securities was a decline of $2.7 million, or (2.4)%, in loan interest income that stemmed primarily from the $8.8 million reduction in net PPP fee accretion that more than offset the loan volume increase and the $0.6 million increase in loan purchase discount accretion. The increase in interest expense was due to increases of $1.0 million, or 9.4%, and $0.5 million, or 9.1%, in interest expense on interest-bearing deposits and borrowed funds, respectively.

The tax equivalent net interest margin for the nine months ended September 30, 2022 was 2.92%, or 7 basis points lower than the tax equivalent net interest margin of 2.99% for the nine months ended September 30, 2021. The tax equivalent yield on loans decreased 13 basis points, which was partially offset by an increased tax equivalent yield on investment securities of 25 basis points. Combined, the resulting yield on interest-earning assets for the nine months ended September 30, 2022 was 6 basis points lower than the nine months ended September 30, 2021, which primarily reflected lower loan 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 average borrowed funds was higher by 40 basis points for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, with no change in the cost of interest-bearing deposits. The increase in the cost of average borrowed funds was a result of higher market interest rates which reflect the recent increases in the target federal funds rate, which was in the range of 3.00% - 3.25% at September 30, 2022.






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Credit Loss Expense (Benefit)
Credit loss expense of $3.9 million was recorded in the first nine months of 2022, as compared to credit loss benefit of $8.0 million for the first nine months of 2017, and 27.7% for2021, an increase of $11.9 million, or 149.1%. Credit loss expense in the first nine months of 2016. Income tax expense increased2022 reflected $3.1 million related to $7.6the acquired IOFB non-PCD loans, $0.2 million related to unfunded loan commitments established in the IOFB acquisition, as well as a reserve taken to support loan growth. The credit loss benefit recorded in the first nine months of 2021 was reflective of overall improvements in the forecasted economic conditions due to less economic uncertainty from the COVID-19 pandemic, as well as stabilization in the credit risk profile. Net loan charge-offs in the first nine months of 2022 were $3.1 million, as compared to net loan recoveries of $0.2 million in the first nine months of 2017 compared with $6.32021. The economic forecast utilized by the Company is sensitive to changes in the following loss drivers: (1) Midwest unemployment, (2) year-to-year change in national retail sales, (3) year-to-year change in the CRE Index, (4) year-to-year change in U.S. GDP, (5) year-to-year change in the National Home Price Index, and (6) Rental Vacancy.
Noninterest Income
The following table presents the significant components of noninterest income and the related dollar and percentage change from period to period:
 Nine Months Ended September 30,
(dollars in thousands)2022 2021$ Change% Change
Investment services and trust activities$8,557  $8,560 $(3)— %
Service charges and fees5,449  4,575 874 19.1 
Card revenue5,426  5,269 157 3.0 
Loan revenue9,538  9,816 (278)(2.8)
Bank-owned life insurance1,668 1,612 56 3.5 
Investment securities gains, net272  105 167 159.0 
Other5,669 1,287 4,382 340.5 
Total noninterest income$36,579  $31,224 $5,355 17.2 %
Total noninterest income for the first nine months of 2022 increased $5.4 million, foror 17.2%, to $36.6 million from $31.2 million during the same period of 2016,2021. The increase in noninterest income was primarily due to increases of $4.4 million and $0.9 million in other noninterest income and service charges and fees, respectively. The increase in other noninterest income was primarily due to a one-time settlement and a bargain purchase gain of $1.3 million recognized in connection with the IOFB acquisition. The increase in service charges and fees was primarily attributable to the acquisition of IOFB. Partially offsetting the increases above was a $0.3 million reduction in loan revenue, which reflected a decline in the volume of mortgage originations, partially offset by an increase in the fair value of our mortgage servicing rights.
Noninterest Expense
The following table presents the significant components of noninterest expense and the related dollar and percentage change from period to period:
 Nine Months Ended September 30,
(dollars in thousands)20222021$ Change% Change
Compensation and employee benefits$57,665 $51,671 $5,994 11.6 %
Occupancy expense of premises, net7,609 7,063 546 7.7 
Equipment6,366 5,627 739 13.1 
Legal and professional6,800 3,430 3,370 98.3 
Data processing4,199 4,005 194 4.8 
Marketing3,325 2,901 424 14.6 
Amortization of intangibles4,299 4,112 187 4.5 
FDIC insurance1,255 1,192 63 5.3 
Communications840 1,055 (215)(20.4)
Foreclosed assets, net(66)226 (292)(129.2)
Other6,056 4,866 1,190 24.5 
Total noninterest expense$98,348 $86,148 $12,200 14.2 %
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Nine Months Ended September 30,
Merger-related expenses:20222021
(dollars in thousands)
Compensation and employee benefits$282 $— 
Occupancy expense of premises, net1 — 
Equipment25 — 
Legal and professional894 — 
Data processing380 — 
Marketing162 — 
Communications3 — 
Other45 — 
Total impact of merger-related expenses to noninterest expense$1,792 $— 
Noninterest expense for the nine months ended September 30, 2022 was $98.3 million, an increase of $12.2 million, or 14.2%, from $86.1 million for the nine months ended September 30, 2021. The increase in noninterest expense was due to an overall increase in all noninterest expense categories, except communications and foreclosed assets, net. These increases primarily reflected costs associated with the acquisition of IOFB, including merger-related expenses. Also contributing to the increase in compensation and employee benefits was normal annual salary and employee benefit increases, coupled with a decline of $1.4 million in the levelbenefit received from loan origination costs, which are deferred and amortized over the life of pre-taxthe loan to which they relate. In addition to the identified increases above, occupancy expense also reflected an increase of $0.3 million from the write-down of fixed assets transferred to held for sale, while legal and professional expense reflected elevated legal expenses related to litigation, loan legal expenses, and executive recruitment.
Income Tax Expense
Our effective income betweentax rate, or income taxes divided by income before taxes, was 21.5% for the two periods.first nine months of 2022, as compared to an effective tax rate of 21.7% for the first nine months of 2021. The effective tax rate for the full year 2022 is expected to be in the range of 20-22%.


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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 $645.9 millionsheet as of December 31, 2016. A totalthe dates indicated:
(dollars in thousands)September 30, 2022December 31, 2021$ Change% Change
ASSETS
Cash and cash equivalents$78,514 $203,830 $(125,316)(61.5)%
Loans held for sale2,320 12,917 (10,597)(82.0)
Debt securities available for sale at fair value1,153,304 2,288,110 (1,134,806)(49.6)
Held to maturity securities at amortized cost1,146,583 — 1,146,583 
nm(1)
Loans held for investment, net of unearned income3,746,289 3,245,012 501,277 15.4 
Allowance for credit losses(52,100)(48,700)(3,400)7.0 
Total loans held for investment, net3,694,189 3,196,312 497,877 15.6 
Other assets416,151 323,959 92,192 28.5 
Total assets$6,491,061 $6,025,128 $465,933 7.7 %
LIABILITIES AND SHAREHOLDERS' EQUITY
Total deposits$5,476,782 $5,114,519 $362,263 7.1 %
Total borrowings458,726 336,247 122,479 36.4 
Other liabilities83,324 46,887 36,437 77.7 
Total shareholders' equity472,229 527,475 (55,246)(10.5)
Total liabilities and shareholders' equity$6,491,061 $6,025,128 $465,933 7.7 %
(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 investmentdebt securities available for sale and held to maturity as of $50.3 million, or 10.5%,the dates indicated was as follows:
 September 30, 2022 December 31, 2021
(dollars in thousands)Balance% of Total Balance% of Total
Available for Sale
U.S. Government agencies and corporations$7,339 0.6 %$266 — %
States and political subdivisions283,513 24.6 765,742 33.5 
Mortgage-backed securities6,083 0.5  100,626 4.4 
Collateralized mortgage obligations153,088 13.3  768,899 33.6 
Corporate debt securities703,281 61.0 652,577 28.5 
Fair value of debt securities available for sale$1,153,304 100.0 % $2,288,110 100.0 %
Held to Maturity
States and political subdivisions$540,221 47.1 $— — %
Mortgage-backed securities82,858 7.2 — — %
Collateralized mortgage obligations523,504 45.7 — — %
Amortized cost of debt securities held to maturity$1,146,583 100.0 %$— — %
On January 1, 2022, the Company re-classified, at fair value, from December 31, 2016available for sale to September 30, 2017. Asheld 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 debt securities (14.1%). Investmentissued by state and political subdivisions. The net unrealized after tax loss of $11.5 million associated with those re-classified securities held to maturity were $183.3 million at September 30, 2017, compared to $168.4 million at December 31, 2016, an increase of $14.9 million, or 8.9%.
Loans
The composition of loans (before deductingremained in accumulated other comprehensive loss and will be amortized over the allowance for loan losses) was as follows:
 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 industrial512,034
 22.6
 459,481
 21.2
Credit cards(1)
—
 —
 1,489
 0.1
Commercial real estate:       
Construction and development143,749
 6.3
 126,685
 5.9
Farmland87,529
 3.9
 94,979
 4.4
Multifamily136,724
 6.0
 136,003
 6.3
Commercial real estate-other760,100
 33.6
 706,576
 32.6
Total commercial real estate1,128,102
 49.8
 1,064,243
 49.2
Residential real estate:       
One- to four-family first liens362,695
 16.0
 372,233
 17.2
One- to four-family junior liens115,750
 5.1
 117,763
 5.4
Total residential real estate478,445
 21.1
 489,996
 22.6
Consumer37,042
 1.7
 36,591
 1.7
Total loans$2,263,811
 100.0% $2,165,143
 100.0%
(1) Asremaining life of the first quarter of 2017,securities. No gains or losses were recognized in earnings at 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%time 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 Equipmenttransfer.
As of September 30, 2017, premises2022, there were $0.3 million of gross unrealized gains and equipment totaled $75.0$118.0 million substantially unchanged from December 31, 2016. Normal depreciation expense of $3.1 million was offset by ongoing capital improvement projects.
Deposits
Total deposits asgross unrealized losses in our debt securities available for sale portfolio for a net unrealized loss of $117.7 million. As of September 30, 20172022 there 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 $36.5no gross unrealized gains and there was $221.0 million of brokered depositsgross unrealized losses in the Insuredour held to maturity debt securities for a net unrealized loss of $221.0 million.

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”3. Debt Securities to our consolidated financial statements for additional information.information related to debt securities.
Debt
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Federal Home Loan Bank BorrowingsLoans
FHLB borrowings totaled $145.0 million The composition of our loan portfolio by type of loan was as follows:
 September 30, 2022 December 31, 2021
(dollars in thousands)Balance% of Total Balance% of Total
Agricultural$116,229 3.1 %$103,417 3.2 %
Commercial and industrial1,041,662 27.8 902,314 27.8 
Commercial real estate1,910,097 51.0  1,704,541 52.5 
Residential real estate603,649 16.1  466,322 14.4 
Consumer74,652 2.0  68,418 2.1 
     Loans held for investment, net of unearned income$3,746,289 100.0 %$3,245,012 100.0 %
     Loans held for sale$2,320 $12,917 
Loans held for investment, net of unearned income at September 30, 20172022, increased $501.3 million, or 15.4%, from December 31, 2021 to $3.75 billion, driven primarily by the loans acquired in the IOFB acquisition, coupled with organic loan growth and increased revolving line of credit utilization, partially offset by PPP loan forgiveness. As of September 30, 2022, 10 PPP loans totaling $0.2 million, including $17.0 thousand of unamortized net fees, were outstanding, as compared with$115.0to 217 PPP loans totaling, $30.8 million, including $0.9 million of unamortized net fees that were outstanding as of December 31, 2016. We utilize FHLB borrowings as a supplement to customer deposits to fund interest-earning assets2021. See Note 4. Loans Receivable and to assist in managing interest rate risk. See Note 10. “Long-Term Borrowings”the Allowance for Credit Losses to our consolidated financial statements for additional information related to our FHLB borrowings.
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 as of September 30, 2017, substantially unchanged from December 31, 2016. See loan portfolio and Note 9. “Subordinated Notes Payable” to our consolidated financial statements2. Business Combinations for additional information related to our junior subordinated notes.regarding the IOFB acquired loans.
Long-term Debt
Long-term debt in the formCommitments under standby letters of a $35.0 million unsecured note,credit, unused lines 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 outstandingcredit and other conditionally approved credit lines totaled approximately $1.2 billion and $1.0 billion as of September 30, 2017. See Note 10. “Long-Term Borrowings”2022 and December 31, 2021, respectively.
Our loan to our consolidated financial statements for additional information relateddeposit ratio increased to our long-term debt.68.40% as of September 30, 2022 as compared to 63.45% as of December 31, 2021. The loan to deposit ratio increased when compared to the prior year-end due to the loans acquired in the IOFB acquisition, organic loan growth and increased revolving line of credit utilization, which more than offset the increase in total deposits.

Nonperforming Assets
The following tables settable sets forth information concerning nonperforming loans by class of loans at September 30, 2017receivable and December 31, 2016:
 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 liens262
 695
 1,357
 2,314
One- to four- family junior liens34
 —
 143
 177
Total residential real estate296
 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 development95
 —
 780
 875
Farmland—
 2,174
 227
 2,401
Multifamily—
 —
 —
 —
Commercial real estate-other—
 247
 7,360
 7,607
Total commercial real estate95
 2,421
 8,367
 10,883
Residential real estate:       
One- to four- family first liens375
 1,501
 1,127
 3,003
One- to four- family junior liens15
 13
 116
 144
Total residential real estate390
 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.
Ourour 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 at2022 and 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 working2021:
(in thousands)September 30, 2022December 31, 2021
Nonaccrual loans held for investment$25,027 $31,540 
Accruing loans contractually past due 90 days or more936 — 
     Total nonperforming loans25,963 31,540 
Foreclosed assets, net103 357 
     Total nonperforming assets26,066 31,897 
Nonaccrual loans ratio (1)
0.67 %0.97 %
Nonperforming loans ratio (2)
0.69 %0.97 %
Nonperforming assets ratio (3)
0.40 %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.
When compared 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, 2017,2021, overall asset quality was improved. The 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 comparesratio declined 28 basis points from the prior year-end 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 in0.69%, while the nonperforming loan totals) decreasedassets ratio declined 13 basis points from the prior year-end 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 2016.0.40%.
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.
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When a loan officer originates a new loan, based upon proper loan authorization, he or she documentsthey document the credit file with an offering sheet summary, supplemental underwriting analysis, relevant financial information and collateral evaluations. All of thisThis 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 requiresCredit relationships with larger exposure may pose incrementally higher risks. As a result, the Bank's loan review department is required to review all lendingcredit 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 thanat least annually. TheIn 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 aAt least quarterly, the loan relationshipstrategy committee will meet to discuss loan relationships with total related exposure of $1.0 million or greater is adversely graded (loan grade 5above that are Watch rated credits, loan relationships with total related exposure of $500 thousand and above that are Substandard or above), or is classifiedworse rated credits, as a TDR (regardlesswell 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 thea 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 impairmentindividual analysis when deemed necessary. These judgmental evaluations may produce an initial specific allowance for placement in the Company’s allowance for loan and leasecredit losses calculation. ImpairmentAn analysis for the underlying collateral value of each individually analyzed loan relationship is completed in the last month of the quarter. The impairment analysisindividually analyzed worksheets are reviewed by the Credit 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 impairedindividually 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 committeeproper 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. Oncedeferral 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 three and nine months ended September 30, 2017,2022, the Company restructured tenclassified three and sixteen loans, byrespectively, as TDRs, due to the Company granting concessionsa concession to borrowersa borrower experiencing financial difficulties.difficulty. The aggregate post-modification outstanding recorded
A loan
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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 agreementTDRs during three 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 nine months ended September 30, 20172022 was $0.9 million and December 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 interest12,682
 1,003
Total restructured loans$18,213
 $8,315
$4.0 million, respectively.
Allowance for LoanCredit 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:
September 30, 2022December 31, 2021
(dollars in thousands)Allowance for Credit Losses% of Loans in Each Segment to Total LoansAllowance for Credit Losses% of Loans in Each Segment to Total Loans
Agricultural$981 3.1 %$667 3.2 %
Commercial and industrial24,256 27.8 %17,294 27.8 %
Commercial real estate20,948 51.0 %26,120 52.5 %
Residential real estate5,308 16.1 %4,010 14.4 %
Consumer607 2.0 %609 2.1 %
Total$52,100 100.0 %$48,700 100.0 %
Allowance for credit losses ratio(1)
1.39 %1.50 %
Adjusted allowance for credit losses ratio(2)
1.39 %1.52 %
Allowance for credit losses to nonaccrual loans ratio(3)
208.18 %154.41 %
(1) Allowance for credit losses ratio is calculated as allowance for credit losses divided by loans held for investment, net of unearned income at the end of the period.
(2) Non-GAAP financial measure. See the “Non-GAAP Presentations” section for a reconciliation to the most comparable GAAP equivalent.
(3) Allowance for credit losses to nonaccrual loans ratio is calculated as allowance for credit losses divided by nonaccrual loans at the end of the period.
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The following table sets forth the net (charge-offs) recoveries by loan portfolio segments for the periods indicated:
For the Three Months Ended September 30, 2022 and 2021
(in thousands)AgriculturalCommercial and IndustrialCommercial Real EstateResidential Real EstateConsumerTotal
For the Three Months Ended September 30, 2022
Charge-offs$(248)$(280)$(135)$(52)$(255)$(970)
Recoveries1 295 6 48 32 382 
     Net (charge-offs) recoveries$(247)$15 $(129)$(4)$(223)$(588)
Net (charge-off) recovery ratio(1)
(0.03)%— %(0.01)%— %(0.02)%(0.06)%
For the Three Months Ended September 30, 2021
Charge-offs$(16)$(24)$(37)$(1)$(156)$(234)
Recoveries19 954 76 25 40 1,114 
     Net (charge-offs) recoveries$3 $930 $39 $24 $(116)$880 
Net (charge-off) recovery ratio(1)
— %0.11 %— %— %(0.01)%0.10 %
For the Nine Months Ended September 30, 2022 and 2021
(in thousands)AgriculturalCommercial and IndustrialCommercial Real EstateResidential Real EstateConsumerTotal
For the Nine Months Ended September 30,
Charge-offs$(249)$(843)$(2,319)$(90)$(540)$(4,041)
Recoveries9 613 154 68 106 950 
Net (charge-offs) recoveries$(240)$(230)$(2,165)$(22)$(434)$(3,091)
Net (charge-off) recovery ratio(1)
(0.01)%(0.01)%(0.08)%— %(0.02)%(0.12)%
For the Nine Months Ended September 30, 2021
Charge-offs$(170)$(885)$(453)$(107)$(462)$(2,077)
Recoveries67 1,560 391 81 136 2,235 
Net (charge-offs) recoveries$(103)$675 $(62)$(26)$(326)$158 
Net (charge-off) recovery ratio(1)
— %0.03 %— %— %(0.01)%0.01 %
(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 and average loans held for sale, during the period.
Actual Results:Our ALLLACL as of September 30, 20172022 was $26.5$52.1 million, which was 1.17%1.39% of total loans and 1.34%held for investment, net of non-acquired loansunearned income as of that date. This compares with an ALLLACL 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 September 30, 2022 and 1.27% of non-acquiredDecember 31, 2021 does not include a reserve for the PPP loans as they are fully guaranteed by the SBA. The increase in the ACL primarily reflected $3.1 million of credit loss expense related to the acquired IOFB non-PCD loans, in addition to the initial allowance for credit losses of $3.4 million recorded for the IOFB PCD loans acquired, as well as a reserve taken to support loan growth. The liability for off-balance sheet credit exposures totaled $4.8 million, which included $0.2 million of unfunded loan commitments that date.were established in the IOFB acquisition, as of September 30, 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 expense related to loans of $3.1 million for the nine months ended September 30, 2022 as compared to a credit loss benefit related to loans of $7.8 million for the nine months ended September 30, 2021. Gross charge-offs for the first nine months of 20172022 totaled $2.7$4.0 million, while there was $0.7were $1.0 million in gross recoveries of previously charged-off loans. The ratio of annualized net loan charge offscharge-offs to average loans for the first nine months of 20172022 was 0.12% compared to 0.26%a net recovery ratio of 0.01% for the yearnine months ended December 31, 2016. As of September 30, 2017, the ALLL was 102.4% of nonperforming loans compared with 76.8% as of December 31, 2016. Based on the inherent risk 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.2021.

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 Loans372,549
 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 Loans500,423
 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. Economic Forecast: At September 30, 2017, there were 25 owner-occupied 1-4 family loans2022, the economic forecast used by the Company showed the following: (1) Midwest unemployment – increases 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 - decline in the first forecasted quarter, with increases in the next three forecasted quarters; (5) Year-to-year change in National Home Price Index – increases over the next two forecasted quarters, with a LTV ratiodecline in the third and fourth forecasted quarter; and (6) Rental Vacancy - increases over the next four forecasted quarters.
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Table 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.Contents
Loan Policy: We review all impaired and nonperformingnonaccrual loans greater than $250,000 individually on a quarterly basis to determine their level of impairmentestimate the appropriate allowance due to collateral deficiency or insufficient cash-flowdeficiency. In addition, PCD loans, 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 portionthe 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 September 30, 2022, the ACL was adequate; however, there is a strong reason thatno 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 loansloss expense in future periods. See Note 4. Loans Receivable and the risks associated with themAllowance for Credit Losses to our unaudited consolidated financial statements for additional information related to the allowance for credit losses.
Deposits

The composition of deposits was as follows:
As of September 30, 2022As of December 31, 2021
(in thousands)Balance% of TotalBalance% of Total
Noninterest bearing deposits$1,139,694 20.8 %$1,005,369 19.6 %
Interest checking deposits1,705,289 31.2 1,619,136 31.6 
Money market deposits991,783 18.1 939,523 18.4 
Savings deposits700,843 12.8 628,242 12.3 
    Total non-maturity deposits4,537,609 82.9 4,192,270 81.9 
Time deposits of $250 and under537,616 9.8 505,392 9.9 
Time deposits of over $250401,557 7.3 416,857 8.2 
    Total time deposits939,173 17.1 922,249 18.1 
Total deposits$5,476,782 100.0 %$5,114,519 100.0 %
Deposits increased $362.3 million from December 31, 2021, or 7.1%, reflecting growth from the acquisition of IOFB, partially offset primarily by a reduction in public time deposits greater than $250k. Approximately 92.7% of our total deposits were acceptableconsidered “core” deposits as of September 30, 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 8. Deposits to our consolidated financial statements for additional information related to our deposits and Note 2. Business Combinations for additional information related to the IOFB deposits assumed.

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)September 30, 2022December 31, 2021
Securities sold under agreements to repurchase$137,536 $181,368 
Federal home loan bank advances167,000 — 
     Total short-term borrowings$304,536 $181,368 
Junior subordinated notes issued to capital trusts42,072 41,940 
Subordinated debentures63,974 63,875 
Finance lease payable830 951 
Federal home loan bank borrowings27,314 48,113 
Other long-term debt20,000 — 
     Total long-term debt$154,190 $154,879 
See Note 9. Short-Term Borrowings and Note 10. Long-Term Debt to our unaudited consolidated financial statements for additional information related to short-term borrowings and long-term debt.
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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:
September 30, 2022December 31, 2021
Total shareholders’ equity to total assets ratio7.28 %8.75 %
Tangible common equity ratio(1)
5.90 %7.49 %
Total risk-based capital ratio12.10 %13.09 %
Tier 1 risk-based capital ratio9.97 %10.83 %
Common equity tier 1 risk-based capital ratio9.18 %9.94 %
Tier 1 leverage ratio8.24 %8.67 %
Book value per share$30.23 $33.66 
Tangible book value per share(1)
$24.17 $28.40 
(1)A non-GAAP financial measure - see the “Non-GAAP Presentations” section for a reconciliation to the most comparable GAAP equivalent.
Shareholders' Equity:Total shareholders’ equity was $346.6$472.2 million as of September 30, 2017,2022, compared to $305.5$527.5 million as of December 31, 2016, an increase2021, a decrease of $41.1$55.2 million, or 13.5%. This increase was10.5%, 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 due to market value adjustmentsa decrease in AOCI that was largely a result of the unrealized loss 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 weredebt securities, 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, 2017,2022, 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 12. 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 assets11.43% 10.73%
Common equity tier 1 capital to risk-weighted assets10.52% 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 assets296,499
 11.43
 187,998
 7.250
 N/A
 N/A
Common equity tier 1 capital/risk based assets272,731
 10.52
 149,102
 5.750
 N/A
 N/A
Tier 1 capital/adjusted average assets296,499
 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 assets298,589
 11.55
 187,450
 7.250
 206,841
 8.00
Common equity tier 1 capital/risk based assets298,589
 11.55
 148,667
 5.750
 168,058
 6.50
Tier 1 capital/adjusted average assets298,589
 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 assets258,304
 10.73
 159,508
 6.625
 N/A
 N/A
Common equity tier 1 capital/risk based assets234,638
 9.75
 123,393
 5.125
 N/A
 N/A
Tier 1 capital/adjusted average assets258,304
 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 assets264,871
 11.04
 158,917
 6.625
 191,900
 8.00
Common equity tier 1 capital/risk based assets264,871
 11.04
 122,936
 5.125
 155,919
 6.50
Tier 1 capital/adjusted average assets264,871
 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 restrictedRestricted stock units were granted to certain officers and directors of the Company and on February 15, 2022, May 15, 2017, 7,600 restricted stock units were granted to members2022, and August 15, 2022 in the aggregate amount of the board of directors of the Company.67,608, 9,615, and 4,509, respectively. Additionally, during the first nine months of 2017, 26,8752022, 51,713 shares of common stock were issued in connection with the vesting of previously awarded grants of restricted stock units, of which 2,9578,634 shares were surrendered by grantees to satisfy tax requirements, and no nonvested1,074 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 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 hadExcess 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 (cashare 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.
Cash and cash equivalents) of $42.1 million as of September 30, 2017, compared with $43.2 million as ofequivalents are summarized in the table below. Since December 31, 2016. Interest-bearing2021, interest-bearing deposits 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 soldhave been used 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.fund loan growth.
Our
(dollars in thousands)As of September 30, 2022As of December 31, 2021
Cash and due from banks$77,513 $42,949 
Interest-bearing deposits1,001 160,881 
      Total$78,514 $203,830 
Generally, our principal sources of funds between December 31, 2016 and September 30, 2017 wereare 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 utilizeutilized particular sources of funds based on comparative costs and availability. This includes fixed-rateThe Bank maintains
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unsecured lines of credit with several correspondent banks and secured lines with the Federal Reserve Bank of Chicago and the FHLB borrowings that can generallywould allow us to borrow funds on a short-term basis, if necessary. We also hold debt securities classified as available for sale that could be obtained at a more favorable cost than depositssold to meet liquidity needs if necessary.
Net cash provided by operations was another major source of comparable maturity. We generally manageliquidity. The net cash provided by operating activities was $72.3 million for 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 ofnine months ended September 30, 2017, we had $13.82022 and $47.2 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. We also have $23.8 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 nine months ended September 30, 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 CPIConsumer Price Index without having a corresponding effect on interest rates or upon the cost of those goods and services normally purchased by us. In yearsInflation and related increases in market rates by the Federal Reserve generally decrease the market value of highinvestments and loans held and may adversely affect liquidity, earnings and shareholders' equity. Ongoing higher inflation levels and higher interest rates could have a negative impact on both our consumer and commercial borrowers. We anticipate our noninterest income may be adversely affected in future periods as a result of increasing interest rates and inflationary pressure, which has begun to and will continue to adversely affect mortgage originations and mortgage banking revenue. Additionally, the economic impact of the recent rise in inflation and highrising interest rates intermediatecould place increased demand on our liquidity if we experience significant credit deterioration and long-termas we meet borrowers' needs. There is also a risk that interest rates tendrate increases to increase, thereby adversely impacting the market values of investment securities, mortgage loans and other long-term fixed rate loans held by financial institutions. In addition, higher short-term interest rates caused byfight inflation tendcould lead to increase financial institutions’ cost of funds. In other years, the reverse situation may occur.a recession.
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 businessorder to meet the financing needs of our customers, whichcustomers. These financial instruments include commitments to extend credit, standbycommitments to sell loans, and performancestandby letters of credit. We follow the same credit andpolicy (including requiring collateral, if deemed appropriate) to make such commitments to originate residential mortgageas is followed for those loans held for sale. Commitments to extend creditthat are agreements to lend to customers at predetermined interest rates, as long as there is no violation of any condition establishedrecorded in the contracts. our financial statements.
Our exposure to credit losslosses 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 anticipateexpect 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 13. Commitments and Contingencies to our unaudited consolidated financial statements.
Residential mortgage loans soldContractual 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 lossesthe 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 termdisclosed 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.
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:

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 filingsfiled with the SecuritiesSEC 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.

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We qualify all
Three Months EndedNine Months Ended
Return on Average Tangible EquitySeptember 30, 2022September 30, 2021September 30, 2022September 30, 2021
(Dollars in thousands)
Net income$18,317 $16,311 $44,833 $55,230 
Intangible amortization, net of tax (1)
1,342 948 3,224 3,084 
Tangible net income$19,659  $17,259 $48,057 $58,314 
 
Average shareholders' equity$499,263  $539,052 $507,764 $526,261 
Average intangible assets, net(95,499) (84,288)(87,318)(85,579)
Average tangible equity$403,764  $454,764 $420,446 $440,682 
Return on average equity14.56 %12.00 %11.81 %14.03 %
Return on average tangible equity (2)
19.32 % 15.06 %15.28 %17.69 %
(1) Computed assuming a combined marginal income tax rate of 25%.
(2) Annualized tangible net income divided by average tangible equity.
Tangible Common Equity/Tangible Book Value per Share /
Tangible Common Equity Ratio		September 30, 2022December 31, 2021
(Dollars in thousands, except per share data)
Total shareholders’ equity$472,229 $527,475 
Intangible assets, net(94,563)(82,362)
Tangible common equity$377,666 $445,113 
Total assets$6,491,061 $6,025,128 
Intangible assets, net(94,563)(82,362)
Tangible assets$6,396,498 $5,942,766 
Book value per share$30.23 $33.66 
Tangible book value per share (1)
$24.17 $28.40 
Shares outstanding15,622,825 15,671,147 
Equity to assets ratio7.28 %8.75 %
Tangible common equity ratio (2)
5.90 %7.49 %
(1) Tangible common equity divided by shares outstanding.
(2) Tangible common equity divided by tangible assets.
Three Months EndedNine Months Ended
Net Interest Margin, Tax Equivalent/Core Net Interest MarginSeptember 30, 2022September 30, 2021September 30, 2022September 30, 2021
(dollars in thousands)
Net interest income$45,733 $40,340 $122,794 $117,462 
Tax equivalent adjustments:
Loans (1)
673 507 1,782 1,557 
Securities (1)
596 615 1,819 1,910 
Net interest income, tax equivalent$47,002 $41,462 $126,395 $120,929 
Loan purchase discount accretion(2,015)(774)(3,275)(2,745)
  Core net interest income$44,987 $40,688 $123,120 $118,184 
Net interest margin3.00 %2.92 %2.84 %2.91 %
Net interest margin, tax equivalent (2)
3.08 %3.00 %2.92 %2.99 %
Core net interest margin (3)
2.95 %2.94 %2.85 %2.92 %
Average interest earning assets$6,050,864 $5,489,917 $5,783,021 $5,404,777 
(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.
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Table 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.Contents

Three Months EndedNine Months Ended
Efficiency RatioSeptember 30, 2022September 30, 2021September 30, 2022September 30, 2021
(dollars in thousands)
Total noninterest expense$34,623 $29,778 $98,348 $86,148 
Amortization of intangibles(1,789)(1,264)(4,299)(4,112)
Merger-related expenses(763)— (1,792)— 
Noninterest expense used for efficiency ratio$32,071 $28,514 $92,257 $82,036 
Net interest income, tax equivalent(1)
$47,002 $41,462 $126,395 $120,929 
Noninterest income12,588 9,182 36,579 31,224 
Investment security gains, net163 (36)(272)(105)
Net revenues used for efficiency ratio$59,753 $50,608 $162,702 $152,048 
Efficiency ratio(2)
53.67 %56.34 %56.70 %53.95 %
(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 RatioSeptember 30, 2022December 31, 2021
(dollars in thousands)
Loans held for investment, net of unearned income$3,746,289 $3,245,012 
PPP loans(195)(30,841)
Core loans$3,746,094 $3,214,171 
Allowance for credit losses$52,100 $48,700 
Allowance for credit losses ratio1.39 %1.50 %
Adjusted allowance for credit losses ratio (1)
1.39 %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 Companyus as other types of market risk, such as foreign currency exchange rate risk and commodity price risk, play a lesser roledo 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$72.3 million in the first nine months of 2017,2022, compared with $32.1$47.2 million in the first nine 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$202.5 million in the first first nine months of 2017,2022, compared to net cash outflows of $27.3$284.1 million in the comparable nine-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. 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.
2021. Net cash inflows from financing activities in the first nine months of 20172022 were $41.4$4.8 million, compared with net cash inflows of $2.0 thousand$292.8 million for the same period of 2016. The largest financing cash inflows during the nine months ended September 30, 2017 were a net increase2021.



54
Table 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.Contents
To further mitigatemanage 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 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
•Federal Home Loan Bank Advances
•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 September 30, 2022, the Bank hasmaintains 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 September 30, 2022, the Bank had municipal securities with an approximate market value of $113.5 million pledged for liquidity purposes, and had a borrowing capacity of $104.3 million. There were no outstanding borrowings through the FRB Discount Window at September 30, 2022.
Federal Home Loan Bank Advances - The Bank has a secured line of credit with the FHLBDM. The principal function of these funds is to maintain short-term liquidity. 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.
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, 2017,2022, the Bank had $145.0$27.3 million in outstanding FHLB borrowings, leaving $162.2$357.4 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 oftime 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 depositretail 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 limitlimits 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 September 30, 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 September 30, 2022, the Company had $4.0 million of reciprocal time deposits through the CDARS program and $39.3 million of reciprocal non-maturity deposits through the ICS program that qualified for the brokered deposit exemption. These reciprocal deposits are part of the 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.
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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, 2017.2022.
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 morea significant market risks.risk. The major sources of the Company'sCompany’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 through the use of income simulation and valuation analyses. TheMultiple interest rate scenarios are used in suchthis analysis maywhich 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 forecastingprojecting 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'smanagement’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.

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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, or an immediate increase of 100 basis points or 200 basis points (an immediate decrease(the effects of 200 basis points was considered unlikely)which were not meaningful as of December 31, 2021 in the low interest rate environment):
  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
September 30, 2022   
Dollar change$1,984  $3,332  $(5,233) $(10,629)
Percent change1.2 % 2.0 % (3.1)% (6.4)%
December 31, 2021   
Dollar changeN/A N/A $(996) $(2,237)
Percent changeN/A N/A (0.7)% (1.5)%
As of September 30, 2017, 38.4%2022, 26.7% of the Company’s earning asset balances will reprice or are expected to pay down in the next twelve months, and 64.8%51.9% 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 earninginterest-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.


Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Under supervision and with the participation of certain members of ourThe Company’s management, including our chief executive officerthe Chief Executive Officer, the Chief Financial Officer, and chief financial officer, we completed an evaluation ofthe Chief Accounting Officer, evaluated the effectiveness of the design and operation of ourCompany’s disclosure controls and procedures (as defined in RulesRule 13a-15(e) andor Rule 15d-15(e) under the SecuritiesExchange 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, the Chief Financial Officer, and the Chief Accounting Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, our chief executive officerthe Chief Executive Officer, the Chief Financial Officer, and chief financial officerthe Chief Accounting 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.September 30, 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 waswere no changechanges in ourthe Company’s internal controlcontrols 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 September 30, 2022 that hashave materially affected or isare reasonably likely to materially affect ourthe Company's internal control over financial reporting.

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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
The CompanyWe and itsour subsidiaries are from time to time parties to various legal actions arising in the normal course of business. We believe that there areis no threatened or pending proceedings,proceeding, other than ordinary routine litigation incidental to the Company’s business, against the Companyus or itsour subsidiaries or of which any of theirour property is the subject, which, if determined adversely, would have a material adverse effect on theour consolidated business or financial condition of the Company.condition.


Item 1A. Risk Factors.
There have been no material changes fromto the risk factors set forth inunder Part I, Item 1A. “Risk Factors” of our Annual Report on1A "Risk Factors" in the Company's Form 10-K for the periodfiscal 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.

Repurchase of Equity Securities

The following table sets forth information about the Company’s purchases of its common stock during the third 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
July 1 - 31, 202214,586 $29.51 14,586 $3,042,363 
August 1 - 31, 2022833 32.92 — 3,042,363 
September 1 - 30, 2022— — — 3,042,363 
Total15,419 $29.70 14,586 $3,042,363 

(1) Common shares repurchased by the Company during the three months ended September 30, 2022 totaled 14,586 shares repurchased under the share repurchase program, as well as 833 shares surrendered by employees of the Company to pay withholding taxes on vesting of restricted stock unit 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 and through September 30, 2022, the Company repurchased 403,368 shares of common stock for approximately $12.0 million, leaving $3.0 million available to be repurchased.
Pursuant to the Company’s share repurchase program approved on June 22, 2021, the Company has purchased no shares of common stock subsequent to September 30, 2022 and through November 1, 2022 for a total cost of none inclusive of transaction costs, leaving $3.0 million available to be repurchased.



Item 3. Defaults Upon Senior Securities.
None.

Item 4. Mine Safety Disclosures.
Not Applicable.

Item 5. Other Information.
None.

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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
Number3.1
DescriptionIncorporated by Reference to:
Employment Agreement between MidWestOneAmended and Restated Articles of Incorporation of MidWestOne Financial Group, Inc. filed with the Secretary of State of the State of Iowa on March 14, 2008Exhibit 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, effectiveRestated Articles of Incorporation of MidWestOne Financial Group, Inc. filed with the Secretary of State of the State of Iowa on January 23, 2009
Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 23, 2009
3.3
Articles of Amendment (Second 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 February 4, 2009 (containing the Certificate of Designations for the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A)
Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 6, 2009
3.4
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. as of October 18, 20172022
Exhibit 10.13.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 18, 201719, 2022
10.210.1
Letter Agreement which revises the Amended and Restated Employment Agreement between MidWestOneMidWestOne Financial Group, Inc. and Kevin Kramer, effective October 18, 2017Len D. Devaisher, dated September 27, 2022
Exhibit 10.210.1 to the Company’sCompany's Current Report on Form 8-K filed with the SEC on September 29, 2022
10.2
Employment Agreement between MidWestOne Financial Group, Inc. and Charles N. Reeves, dated November 1, 2022
Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on October 18, 201719, 2022
10.331.1
Employment Agreement between MidWestOne Financial Group, Inc. and Kent L. Jehle, effective October 18, 2017Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on October 18, 2017
10.4
Employment Agreement between MidWestOne Financial Group, Inc. and Katie Lorenson, effective October 18, 2017Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on October 18, 2017
10.5
Employment Agreement between MidWestOne Financial Group, Inc. and James M. Cantrell, effective October 18, 2017Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on October 18, 2017
31.1
Certification of ChiefPrincipal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)Filed herewith
31.2
Certification of ChiefPrincipal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)Filed herewith
32.131.3
Certification of ChiefPrincipal Accounting Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)Filed herewith
32.1
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Filed herewith
32.2
Certification of ChiefPrincipal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Filed herewith
101.INS
32.3
XBRL Instance DocumentCertification of Principal Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Filed herewith
101.SCH101The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 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.SCHInline XBRL Taxonomy Extension Schema DocumentFiled herewith
101.CALInline XBRL Taxonomy Extension Calculation Linkbase DocumentFiled herewith
101.DEFInline XBRL Taxonomy Extension Definition Linkbase DocumentFiled herewith
101.LABInline XBRL Taxonomy Extension Label Linkbase DocumentFiled herewith
101.PREInline XBRL Taxonomy Extension Presentation Linkbase DocumentFiled herewith
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)Filed herewith

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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 3, 2022By:/s/ CHARLES N. REEVES
Charles N. Reeves
Chief Executive Officer
(Principal Executive Officer)
By:/s/ BARRY S. RAY
Barry S. Ray
Chief Financial Officer
(Principal Financial Officer)
MIDWESTONE FINANCIAL GROUP, INC.
By:		/s/ JOHN J. RUPPEL
John J. Ruppel
Dated:November 2, 2017By:
/s/ CHARLES N. FUNK
Chief Accounting Officer
Charles N. Funk(Principal Accounting Officer)
President and Chief Executive Officer
(Principal Executive Officer)
By:
/s/ KATIE A. LORENSON
Katie A. Lorenson
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
 

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