Table of Contents

Page No.

PART I

Item 1.

Financial Statements (unaudited)

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

~~Form 10-Q Quarterly Report~~

~~Table of Contents~~

Table of Contents

PART I – FINANCIAL INFORMATION

Glossary of Acronyms, Abbreviations, and Terms

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

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


ACL	Allowance for Credit Losses	FHLBC	Federal Home Loan Bank of Chicago
AFS	Available for Sale	FHLBDM	Federal Home Loan Bank of Des Moines
AOCI	Accumulated Other Comprehensive Income	FHLMC	Federal Home Loan Mortgage Corporation
ASC	Accounting Standards Codification	FNBF	First National Bank in Fairfield
ASU	Accounting Standards Update	FNBM	First National Bank of Muscatine
ATM	Automated Teller Machine	FNMA	Federal National Mortgage Association
Basel III Rules	A comprehensive capital framework and rules for U.S. banking organizations approved by the FRB and the FDIC in 2013	FRB	Board of Governors of the Federal Reserve System
BHCA	Bank Holding Company Act of 1956, as amended	GAAP	U.S. Generally Accepted Accounting Principles
BOLI	Bank Owned Life Insurance	GLBA	Gramm-Leach-Bliley Act of 1999
CAA	Consolidated Appropriations Act, 2021	GNMA	Government National Mortgage Association
CARES Act	Coronavirus Aid, Relief and Economic Security Act	ICS	Insured Cash Sweep
CDARS	Certificate of Deposit Account Registry Service	IOFB	Iowa First Bancshares Corp.
CECL	Current Expected Credit Loss	LIBOR	The London Inter-bank Offered Rate
CMO	Collateralized Mortgage Obligations	MBS	Mortgage-Backed Securities
COVID-19	Coronavirus Disease 2019	PCD	Purchase Credit Deteriorated
CRA	Community Reinvestment Act	PPP	Paycheck Protection Program
CRE	Commercial Real Estate	ROU	Right-of-Use
DCF	Discounted Cash Flows	RPA	Credit Risk Participation Agreement
Dodd-Frank Act	Dodd-Frank Wall Street Reform and Consumer Protection Act	RRE	Residential Real Estate
ECL	Expected Credit Losses	SBA	U.S. Small Business Administration
EVE	Economic Value of Equity	SEC	U.S. Securities and Exchange Commission
FASB	Financial Accounting Standards Board	SOFR	Secured Overnight Financing Rate
FDIC	Federal Deposit Insurance Corporation	TDR	Troubled Debt Restructuring
FHLB	Federal 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 banks 2,988
1,764
Cash and cash equivalents 42,101
43,228
Investment securities:
Available for sale 427,241
477,518
Held to maturity (fair value of $183,946 as of September 30, 2017 and $164,792 as of December 31, 2016) 183,304
168,392
Loans held for sale 612
4,241
Loans 2,263,811
2,165,143
Allowance for loan losses (26,510 ) (21,850 )
Net loans 2,237,301
2,143,293
Premises and equipment, net 75,036
75,043
Accrued interest receivable 13,871
13,871
Goodwill 64,654
64,654
Other intangible assets, net 12,759
15,171
Bank-owned life insurance 59,432
47,231
Other real estate owned 1,343
2,097
Deferred income taxes 6,008
6,523
Other assets 20,537
18,313
Total assets $ 3,144,199
$ 3,079,575
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest-bearing demand $ 477,376
$ 494,586
Interest-bearing checking 1,137,592
1,136,282
Savings 203,506
197,698
Certificates of deposit under $100,000 324,024
326,832
Certificates of deposit $100,000 and over 347,917
325,050
Total deposits 2,490,415
2,480,448
Federal funds purchased 16,708
35,684
Securities sold under agreements to repurchase 87,964
82,187
Federal Home Loan Bank borrowings 145,000
115,000
Junior subordinated notes issued to capital trusts 23,768
23,692
Long-term debt 13,750
17,500
Deferred compensation liability 5,158
5,180
Accrued interest payable 1,449
1,472
Other liabilities 13,424
12,956
Total liabilities 2,797,636
2,774,119
Shareholders' equity:
Preferred stock, no par value; authorized 500,000 shares; no shares issued and outstanding at September 30, 2017 and December 31, 2016 $ —
$ —
Common stock, $1.00 par value; authorized 30,000,000 shares at September 30, 2017 and 15,000,000 shares at December 31, 2016; issued 12,463,481 shares at September 30, 2017 and 11,713,481 shares at December 31, 2016; outstanding 12,218,528 shares at September 30, 2017 and 11,436,360 shares at December 31, 2016 12,463
11,713
Additional paid-in capital 187,296
163,667
Treasury stock at cost, 244,953 shares as of September 30, 2017 and 277,121 shares as of December 31, 2016 (5,141 ) (5,766 )
Retained earnings 151,280
136,975
Accumulated other comprehensive income (loss) 665
(1,133 )
Total shareholders' equity 346,563
305,456
Total liabilities and shareholders' equity $ 3,144,199
$ 3,079,575


	March 31, 2023		December 31, 2022
(unaudited) (dollars in thousands, except per share amounts)
ASSETS
Cash and due from banks	$	63,945	$	83,990
Interest earning deposits in banks	5,273		2,445

Total cash and cash equivalents	69,218		86,435
Debt securities available for sale at fair value	954,074		1,153,547
Held to maturity securities at amortized cost	1,117,709		1,129,421
Total securities	2,071,783		2,282,968
Loans held for sale	2,553		612
Gross loans held for investment	3,932,900		3,854,791
Unearned income, net	(13,535)		(14,267)
Loans held for investment, net of unearned income	3,919,365		3,840,524
Allowance for credit losses	(49,800)		(49,200)
Total loans held for investment, net	3,869,565		3,791,324
Premises and equipment, net	86,208		87,125
Goodwill	62,477		62,477
Other intangible assets, net	28,563		30,315
Foreclosed assets, net	—		103
Other assets	219,585		236,517
Total assets	$	6,409,952	$	6,577,876

LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest bearing deposits	$	989,469	$	1,053,450
Interest bearing deposits	4,565,684		4,415,492
Total deposits	5,555,153		5,468,942
Short-term borrowings	143,981		391,873
Long-term debt	137,981		139,210
Other liabilities	72,187		85,058
Total liabilities	5,909,302		6,085,083

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 15,675,325 and 15,623,977	16,581		16,581
Additional paid-in capital	300,966		302,085
Retained earnings	286,767		289,289
Treasury stock at cost, 905,692 and 957,040 shares	(24,779)		(26,115)
Accumulated other comprehensive loss	(78,885)		(89,047)
Total shareholders' equity	500,650		492,793
Total liabilities and shareholders' equity	$	6,409,952	$	6,577,876

See accompanying notes to consolidated financial statements.

Table of Contents

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

CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~INCOME


	Three Months Ended
	March 31,
(unaudited) (dollars in thousands, except per share amounts)	2023		2022
Interest income
Loans, including fees	$	46,490	$	31,318
Taxable investment securities	10,444		8,123
Tax-exempt investment securities	2,127		2,383
Other	244		28
Total interest income	59,305		41,852
Interest expense
Deposits	15,319		2,910
Short-term borrowings	1,786		119
Long-term debt	2,124		1,487
Total interest expense	19,229		4,516
Net interest income	40,076		37,336
Credit loss expense	933		—
Net interest income after credit loss expense	39,143		37,336
Noninterest (loss) income
Investment services and trust activities	2,933		3,011
Service charges and fees	2,008		1,657
Card revenue	1,748		1,650
Loan revenue	1,420		4,293
Bank-owned life insurance	602		531


Investment securities (losses) gains, net	(13,170)		40
Other	413		462
Total noninterest (loss) income	(4,046)		11,644
Noninterest expense
Compensation and employee benefits	19,607		18,664
Occupancy expense of premises, net	2,746		2,779
Equipment	2,171		1,901
Legal and professional	1,736		2,353
Data processing	1,363		1,231
Marketing	986		1,029
Amortization of intangibles	1,752		1,227
FDIC insurance	749		420
Communications	261		272
Foreclosed assets, net	(28)		(112)

Other	1,976		1,879
Total noninterest expense	33,319		31,643
Income before income tax expense	1,778		17,337
Income tax expense	381		3,442
Net income	$	1,397	$	13,895

Per common share information
Earnings - basic	$	0.09	$	0.89
Earnings - diluted	$	0.09	$	0.88
Dividends paid	$	0.2425	$	0.2375

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

See accompanying notes to consolidated financial statements.

Table of Contents

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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three Months Ended
	March 31,
(unaudited) (dollars in thousands)	2023		2022
Net income	$	1,397	$	13,895

Other comprehensive income (loss), net of tax:
Unrealized gain (loss) from available for sale debt securities:
Unrealized net holding loss on debt securities available for sale arising during the period	(285)		(46,221)
Reclassification adjustment for losses (gains) included in net income	13,170		(40)
Income tax (expense) benefit	(3,260)		12,074
Unrealized net gain (loss) on available for sale debt securities, net of reclassification adjustments	9,625		(34,187)
Reclassification of available for sale debt securities to held to maturity:
Amortization of the net unrealized loss from the reclassification of available for sale debt securities to held to maturity	581		1,402
Income tax expense	(147)		(366)
Amortization of net unrealized loss from the reclassification of available for sale debt securities to held to maturity, net	434		1,036
Unrealized gain from cash flow hedging instruments:
Unrealized net holding gains in cash flow hedging instruments arising during the period	138		—

Income tax expense	(35)		—
Unrealized net gains on cash flow hedge instruments, net of reclassification adjustment	103		—
Other comprehensive income (loss), net of tax	10,162		(33,151)
Comprehensive income (loss)	$	11,559	$	(19,256)

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

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

See accompanying notes to consolidated financial statements.

Table of Contents

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

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY


Three Months Ended March 31,
	Common Stock
(unaudited) (dollars in thousands, except per share amounts)	Par Value		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Total
Balance at December 31, 2021	$	16,581	$	300,940	$	243,365	$	(24,546)	$	(8,865)	$	527,475
Net income	—		—		13,895		—		—		13,895
Other comprehensive loss	—		—		—		—		(33,151)		(33,151)
Release/lapse of restriction on RSUs (30,478 shares)	—		(995)		(31)		789		—		(237)
Repurchase of common stock (11,500 shares)	—		—		—		(356)		—		(356)
Share-based compensation	—		560		—		—		—		560
Dividends paid on common stock ($0.2375 per share)	—		—		(3,729)		—		—		(3,729)
Balance at March 31, 2022	$	16,581	$	300,505	$	253,500	$	(24,113)	$	(42,016)	$	504,457















Balance at December 31, 2022	$	16,581	$	302,085	$	289,289	$	(26,115)	$	(89,047)	$	492,793
Net income	—		—		1,397		—		—		1,397
Other comprehensive income	—		—		—		—		10,162		10,162
Release/lapse of restriction on RSUs (51,348 shares, net)	—		(1,767)		(118)		1,336		—		(549)

Share-based compensation	—		648		—		—		—		648
Dividends paid on common stock ($0.2425 per share)	—		—		(3,801)		—		—		(3,801)
Balance at March 31, 2023	$	16,581	$	300,966	$	286,767	$	(24,779)	$	(78,885)	$	500,650

(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.

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended March 31,
(unaudited) (dollars in thousands)	2023		2022
Operating Activities:
Net income	$	1,397	$	13,895
Adjustments to reconcile net income to net cash provided by operating activities:
Credit loss expense	933		—

Depreciation, amortization, and accretion	2,891		2,469


Net change in premises and equipment due to writedown or sale	(19)		410
Share-based compensation	648		560
Net loss (gain) on sale or call of debt securities available for sale	13,170		(40)



Net change in foreclosed assets due to writedown or sale	(31)		(112)
Net gain on sale of loans held for sale	(75)		(817)
Origination of loans held for sale	(9,976)		(32,564)
Proceeds from sales of loans held for sale	8,110		43,232
Increase in cash surrender value of bank-owned life insurance	(602)		(531)
(Increase) decrease in deferred income taxes, net	(410)		1,441

Change in:
Other assets	14,434		(7,514)
Other liabilities	(12,871)		5,747
Net cash provided by operating activities	$	17,599	$	26,176
Investing Activities:


Proceeds from sales of debt securities available for sale	$	218,667	$	—
Proceeds from maturities and calls of debt securities available for sale	34,746		45,174
Purchases of debt securities available for sale	(54,690)		(198,857)

Proceeds from maturities and calls of debt securities held to maturity	11,798		49,839
Net increase in loans held for investment	(77,890)		(9,239)
Purchases of premises and equipment	(404)		(938)
Proceeds from sale of foreclosed assets	134		196
Proceeds from sale of premises and equipment	183		8



Net cash provided by (used in) investing activities	$	132,544	$	(113,817)
Financing Activities:
Net (decrease) increase in:
Deposits	$	86,175	$	(36,825)
Short-term borrowings	(247,892)		(175)


Payments on finance lease liability	(43)		(39)

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

Payments of other long-term debt	(1,250)		—

Taxes paid relating to the release/lapse of restriction on RSUs	(549)		(236)
Dividends paid	(3,801)		(3,729)


Repurchase of common stock	—		(356)
Net cash used in financing activities	$	(167,360)	$	(56,360)
Net change in cash and cash equivalents	$	(17,217)	$	(144,001)
Cash and cash equivalents at beginning of period	86,435		203,830
Cash and cash equivalents at end of period	$	69,218	$	59,829













Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	16,599	$	5,466

Supplemental schedule of non-cash investing and financing activities:

Transfer of loans held for investment to loans held for sale	$	—	$	3,400
Investment securities purchased but not settled	—		6,509
Transfer of premises and equipment to assets held for sale	—		628
Transfer of debt securities available for sale to debt securities held to maturity	—		1,253,179

See accompanying notes to consolidated financial statements.

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

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

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

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

Nature of Business

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

The Company owns all of the outstanding common stock of MidWestOne Bank, an Iowa state non-member bank chartered in 1934 with its main office in Iowa City, ~~Iowa (the “Bank”), and all of the common stock of MidWestOne~~ ~~Insurance Services, Inc., Oskaloosa,~~ Iowa. We operate primarily through MidWestOne Bank, our bank ~~subsidiary,~~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 offices~~First National Bank in Fairfield, community banks located in ~~central~~Muscatine 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 was~~completion of the acquisition, First National Bank of Muscatine and First National Bank in Fairfield were merged with and into the ~~Company. In connection with~~Bank. As consideration for the merger, ~~Central Bank, a Minnesota-chartered commercial bank and wholly-owned subsidiary~~we 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 ~~unaudited~~interim condensed consolidated financial statements ~~have been~~are prepared in accordance with GAAP for interim financial information and pursuant to the ~~instructions to~~requirements for reporting on Form 10-Q and ~~therefore, do not include all~~Article 10 of Regulation S-X of the ~~information and notes necessary for complete~~Securities Exchange Act of 1934. Accordingly, certain disclosures accompanying annual consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”). The information in this Quarterly Report on Form 10-Q is written with the presumption that the users of the interim financial statements have read or have access to the most recent Annual Report on Form 10-K of the Company, which contains the latest audited financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations as of ~~December 31, 2016~~ ~~and for the year then ended. Management believes that the disclosures in this Form 10-Q~~ are ~~adequate to make the information presented not misleading.~~omitted. In the opinion of management, ~~the accompanying consolidated financial statements contain~~ all ~~adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company’s financial position as of~~ ~~September 30, 2017, and the results of operations and cash flows for the~~ ~~three and nine months~~ ~~ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016. All~~ significant intercompany accounts and transactions have been eliminated and adjustments, consisting solely of normal recurring accruals and considered necessary for the fair presentation of financial statements for the interim periods, have been included. The current period's results of operations are not necessarily indicative of the results that ultimately may be achieved for the year. The interim condensed consolidated financial statements and notes thereto should be read in ~~consolidation.~~conjunction with the audited consolidated financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2022, filed with the SEC on March 13, 2023.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect: (1) the reported amounts of assets and liabilities, (2) the disclosure of contingent assets and liabilities at the date of the financial statements, and (3) the reported amounts of revenues and expenses during the reporting period. These estimates are based on information available to management at the time the estimates are made. Actual results could differ from those estimates. The results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 may not be indicative of results for the year ending December 31, ~~2017,~~2023, 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~~.

~~In the consolidated statements of cash flows, cash and cash equivalents include cash and due from banks, interest-bearing deposits in banks, and federal funds sold.~~

~~Certain reclassifications have been made to prior periods’ consolidated financial statements to present them on a basis comparable~~2022, filed with the ~~current period’s~~SEC on March 13, 2023.

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 March 31, 2023

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.In addition, ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset

Table of Contents

Date of Topic 848, deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024, after which time entities will no longer be permitted to apply the relief in Topic 848.The adoption of ASU 2020-04 is not expected to have a material impact on the Company’s consolidated financial statements.

Accounting Guidance Adopted at March 31, 2023

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 adoption of ASU 2022-02 was applied prospectively and did not have a material impact on the Company's consolidated financial statements.

2. ~~Shareholders’ Equity~~Business 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 stock~~primary reasons for the ~~Company~~acquisition were to enter the Muscatine, Iowa market and increase our presence in Fairfield, Iowa. Immediately following the completion of the acquisition, FNBM and FNBF 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). The bargain purchase gain, which is ~~500,000. As~~recorded in 'Other' noninterest income, was generated as a result of ~~September 30, 2017~~, ~~none~~ ~~were issued or outstanding.~~

~~Common Stock: As~~the estimated fair value of ~~September 30, 2017~~,identifiable net assets acquired exceeding the ~~number~~merger consideration. Bargain purchase gains are recorded net of ~~authorized shares of common stock for the Company was~~ ~~30,000,000. At the Company’s 2017 annual meeting of shareholders, the Company’s shareholders approved an increase~~deferred taxes and are treated as permanent differences, resulting in lower effective tax rate 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.~~period recorded.

~~On March 17, 2017,~~The table below summarizes the ~~Company entered into an underwriting agreement to offer and sell, through an underwriter, up to 750,000 newly issued shares~~amounts recognized as of the ~~Company’s common stock, $1.00 par value per share, at a public purchase price~~acquisition date for each major class of ~~$34.25 per share. This included 250,000 shares~~assets acquired and liabilities assumed.


(in thousands)	June 9, 2022

Merger consideration
Cash consideration	$	46,672
Identifiable net assets acquired, at fair value
Assets acquired
Cash and due from banks	$	10,192
Interest earning deposits in banks	67,855
Debt securities	119,820
Loans held for investment	281,326
Premises and equipment	7,363
Core deposit intangible	16,500
Other assets	14,140
Total assets acquired	517,196
Liabilities assumed
Deposits	$	(463,638)
Other liabilities	(3,117)
Total liabilities assumed	(466,755)
Identifiable net assets acquired, at fair value	50,441
Bargain Purchase Gain	$	3,769

Table 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.Contents

On July 21, 2016, the board of directors of the Company approved a share repurchase program, allowing for the repurchase of up to $5.0 million of stock through December 31, 2018. During the third quarter of 2017 the Company repurchased no common stock. Of the ~~$5.0~~$281.3 million net loans acquired, $11.0 million exhibited credit deterioration on the date of ~~stock authorized under the repurchase plan, $5.0 million remained available for possible future repurchases as~~purchase. The following table provides a summary of ~~September 30, 2017.~~these PCD loans at acquisition:

~~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.


(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

The following table ~~presents~~summarizes the ~~computation of earnings per common share~~IOFB acquisition-related expenses, which are included in the respective income statement line items, for the ~~respective periods:~~periods indicated:


	Three Months Ended
	March 31,
(in thousands)	2023		2022
Noninterest Expense
Compensation and employee benefits	$	70	$	—

Equipment	—		5
Legal and professional	—		63
Data processing	65		38
Marketing	—		7
Communications	—		1
Other	1		14
Total acquisition-related expenses	$	136	$	128

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 ~~Loan~~Credit Losses

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


	As of
(in thousands)	March 31, 2023		December 31, 2022
Agricultural	$	106,641	$	115,320
Commercial and industrial	1,080,514		1,055,162
Commercial real estate:
Construction & development	320,924		270,991
Farmland	182,528		183,913
Multifamily	255,065		252,129
Commercial real estate-other	1,290,454		1,272,985
Total commercial real estate	2,048,971		1,980,018
Residential real estate:
One- to four- family first liens	448,459		451,210
One- to four- family junior liens	162,403		163,218
Total residential real estate	610,862		614,428
Consumer	72,377		75,596
Loans held for investment, net of unearned income	3,919,365		3,840,524
Allowance for credit losses	(49,800)		(49,200)
Total loans held for investment, net	$	3,869,565	$	3,791,324

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

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

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

Loans with unpaid principal in the amount of ~~$478.5 million~~$1.24 billion and ~~$498.3 million~~$1.01 billion at ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016~~,2022, respectively, were pledged to the ~~Federal Home Loan Bank (the “FHLB”)~~FHLB as collateral for borrowings.

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

Loans are placed on non-accrual when (1) payment in ~~the allowance~~full of principal and interest is no longer expected or (2) principal or interest has been in default for ~~loan losses by portfolio segment were as follows:~~

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

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

~~Loan Portfolio Segment Risk Characteristics~~

~~Agricultural~~ - Agricultural loans, most of which are secured by crops, livestock, and machinery, are provided to finance capital improvements and farm operations as well as acquisitions of livestock and machinery. The ability of the borrower to repay may be affected by many factors outside of the borrower’s control including adverse weather conditions, loss of livestock due to disease 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 one90 days or more ~~of the Company’s markets could increase the credit risk associated with its~~for all 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 securingtypes, except owner occupied residential real estate, ~~loans can fluctuate as a result of market conditions~~which are moved to non-accrual at 120 days or more past due, unless the loan is both well secured with marketable collateral and in the ~~geographic area in which the real estate is located. Adverse developments affecting real estate values in one~~process of collection. All loans rated doubtful or ~~more of the Company’s markets could increase the credit risk associated with its~~worse, and certain loans rated substandard, are placed on non-accrual.

A non-accrual 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~~restored to ~~recover~~an accrual status when (1) all past due principal and ~~may fluctuate in value based on condition. In addition, a decline in~~interest has been paid (excluding renewals and modifications that involve the ~~United States economy could result in reduced employment, impacting the ability~~capitalizing 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,interest) or the “nonaccretable difference,” are not recognized as a yield adjustment or as a loss accrual or valuation allowance. Expected cash flows at the purchase date in excess of the fair value of loans, if any, are recorded as interest income over the expected life of the loans if the timing and amount of future cash flows are reasonably estimable. Subsequent to the purchase date, increases in cash flows over those expected at the purchase date are recognized as interest income prospectively. The present value of any decreases in expected cash flows after the purchase date is recognized by recording an allowance for loan losses and a provision for loan losses. If the Company does not have the information necessary to reasonably estimate cash flows to be expected, it may use the cost-recovery method or cash-basis method of income recognition.

~~Charge-off Policy~~

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

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

~~Allowance for Loan and Lease Losses~~

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

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

~~Loans Reviewed Individually for Impairment~~

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

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

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

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

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

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

~~There is significant doubt as to whether~~

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

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

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

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

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

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

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

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

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

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

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


			Age Analysis of Past-Due Financial Assets								90 Days or More Past Due And Accruing
(in thousands)	Current		30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total
March 31, 2023
Agricultural	$	105,506	$	851	$	—	$	284	$	106,641	$	—
Commercial and industrial	1,078,687		627		378		822		1,080,514		—
Commercial real estate:
Construction and development	320,924		—		—		—		320,924		—
Farmland	180,721		31		—		1,776		182,528		—
Multifamily	255,065		—		—		—		255,065		—
Commercial real estate-other	1,289,988		—		48		418		1,290,454		—
Total commercial real estate	2,046,698		31		48		2,194		2,048,971		—
Residential real estate:
One- to four- family first liens	444,724		3,124		156		455		448,459		2
One- to four- family junior liens	161,357		120		30		896		162,403		—
Total residential real estate	606,081		3,244		186		1,351		610,862		2
Consumer	72,235		125		10		7		72,377		—
Total	$	3,909,207	$	4,878	$	622	$	4,658	$	3,919,365	$	2

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			Age Analysis of Past-Due Financial Assets								90 Days or More Past Due And Accruing
(in thousands)	Current		30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total
December 31, 2022
Agricultural	$	114,922	$	100	$	—	$	298	$	115,320	$	—
Commercial and industrial	1,052,406		922		111		1,723		1,055,162		—
Commercial real estate:
Construction and development	270,905		86		—		—		270,991		—
Farmland	182,115		729		—		1,069		183,913		—
Multifamily	252,129		—		—		—		252,129		—
Commercial real estate-other	1,266,874		5,574		45		492		1,272,985		—
Total commercial real estate	1,972,023		6,389		45		1,561		1,980,018		—
Residential real estate:
One- to four- family first liens	446,066		3,177		954		1,013		451,210		565
One- to four- family junior liens	161,989		301		78		850		163,218		—
Total residential real estate	608,055		3,478		1,032		1,863		614,428		565
Consumer	75,443		110		17		26		75,596		—
Total	$	3,822,849	$	10,999	$	1,205	$	5,471	$	3,840,524	$	565

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


	Nonaccrual				Nonaccrual with no Allowance for Credit Losses				90 Days or More Past Due And Accruing
(in thousands)	March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022

Agricultural	$	307	$	377	$	224	$	281	$	—	$	—
Commercial and industrial	2,192		2,728		483		1,049		—		—
Commercial real estate:
Construction and development	—		—		—		—		—		—
Farmland	1,931		2,278		1,776		1,997		—		—
Multifamily	—		—		—		—		—		—
Commercial real estate-other	6,191		6,397		4,121		5,647		—		—
Total commercial real estate	8,122		8,675		5,897		7,644		—		—
Residential real estate:
One- to four- family first liens	2,536		2,275		910		928		2		565
One- to four- family junior liens	1,258		1,165		—		—		—		—
Total residential real estate	3,794		3,440		910		928		2		565
Consumer	25		36		—		—		—		—
Total	$	14,440	$	15,256	$	7,514	$	9,902	$	2	$	565

The interest income recognized on loans that were on nonaccrual for the ~~stated periods:~~three months ended March 31, 2023 and March 31, 2022 was $56 thousand and $70 thousand, respectively.

Credit Quality Information

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

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

Troubled Debt Restructurings⁽¹⁾:

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

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

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

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

Troubled Debt Restructurings⁽¹⁾ That Subsequently Defaulted:

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

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

~~Loans Reviewed Collectively for Impairment~~

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

~~(1) As of the first quarter of 2017, the Company no longer considered credit cards a separate class of loans, and these balances are now included in~~agricultural, commercial and industrial, commercial real estate and non-owner occupied residential 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.

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

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

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

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

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

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

~~The following table presents the contractual aging of the recorded investment in~~greater than 90 days past due ~~loans by class of loans at September 30, 2017~~ and ~~December 31, 2016:~~

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

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

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

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

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

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

~~Non-accrual and Delinquent Loans~~

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

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

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

The following table sets forth the ~~composition~~amortized cost basis of ~~the Company’s recorded investment in~~ loans ~~on nonaccrual status and past due 90 days or more and still accruing~~ by class of receivable by credit quality indicator, and vintage, in addition to the current period gross write-offs by class of receivable and vintage, based on the most recent analysis performed, as of March 31, 2023. As of March 31, 2023, there were no 'loss' rated credits.


	Term Loans by Origination Year												Revolving Loans
March 31, 2023 (in thousands)	2023		2022		2021		2020		2019		Prior				Total
Agricultural
Pass	$	7,088	$	15,551	$	11,339	$	4,533	$	1,598	$	1,417	$	56,139		$	97,665
Special mention / watch	6		224		859		208		8		534		3,412			5,251
Substandard	1,918		114		193		258		3		294		945			3,725
Doubtful	—		—		—		—		—		—		—			—
Total	$	9,012	$	15,889	$	12,391	$	4,999	$	1,609	$	2,245	$	60,496		$	106,641



Commercial and industrial
Pass	$	37,423	$	253,594	$	224,460	$	142,132	$	44,485	$	134,002	$	184,382		$	1,020,478
Special mention / watch	465		1,788		1,544		4,770		418		4,988		14,638			28,611
Substandard	621		2,966		2,617		1,474		768		18,058		4,921			31,425
Doubtful	—		—		—		—		—		—		—			—
Total	$	38,509	$	258,348	$	228,621	$	148,376	$	45,671	$	157,048	$	203,941		$	1,080,514



CRE - Construction and development
Pass	$	22,423	$	167,846	$	80,378	$	20,349	$	968	$	1,534	$	26,621		$	320,119
Special mention / watch	—		38		493		—		—		—		—			531
Substandard	—		270		—		—		—		4		—			274
Doubtful	—		—		—		—		—		—		—			—
Total	$	22,423	$	168,154	$	80,871	$	20,349	$	968	$	1,538	$	26,621		$	320,924



CRE - Farmland
Pass	$	7,159	$	53,083	$	51,868	$	26,650	$	6,847	$	19,184	$	2,169		$	166,960
Special mention / watch	—		2,807		2,295		1,453		—		1,782		401			8,738
Substandard	—		148		1,670		1,201		1,143		2,668		—			6,830
Doubtful	—		—		—		—		—		—		—			—
Total	$	7,159	$	56,038	$	55,833	$	29,304	$	7,990	$	23,634	$	2,570		$	182,528



CRE - Multifamily
Pass	$	7,369	$	31,621	$	89,877	$	84,000	$	16,991	$	7,644	$	150		$	237,652
Special mention / watch	—		794		—		1,552		—		7,048		—			9,394
Substandard	—		—		7,687		332		—		—		—			8,019
Doubtful	—		—		—		—		—		—		—			—
Total	$	7,369	$	32,415	$	97,564	$	85,884	$	16,991	$	14,692	$	150		$	255,065



CRE - Other
Pass	$	62,285	$	323,167	$	304,661	$	276,595	$	82,956	$	112,999	$	51,359		$	1,214,022
Special mention / watch	1,228		1,556		2,106		17,769		4,344		3,390		4,200			34,593
Substandard	—		631		1,342		15,342		13,106		11,418		—			41,839
Doubtful	—		—		—		—		—		—		—			—
Total	$	63,513	$	325,354	$	308,109	$	309,706	$	100,406	$	127,807	$	55,559		$	1,290,454



RRE - One- to four- family first liens
Pass / Performing	$	14,958	$	133,357	$	101,064	$	61,623	$	22,345	$	93,970	$	10,811		$	438,128
Special mention / watch	—		702		465		726		1,973		1,091		—			4,957
Substandard / Nonperforming	—		257		527		172		172		4,246		—			5,374
Doubtful	—		—		—		—		—		—		—			—
Total	$	14,958	$	134,316	$	102,056	$	62,521	$	24,490	$	99,307	$	10,811		$	448,459

Table of Contents


	Term Loans by Origination Year												Revolving Loans
March 31, 2023 (in thousands)	2023		2022		2021		2020		2019		Prior				Total
RRE - One- to four- family junior liens
Performing	$	5,366	$	35,258	$	21,775	$	8,553	$	2,712	$	9,338	$	78,144		$	161,146
Nonperforming	—		24		23		29		149		933		99			1,257
Total	$	5,366	$	35,282	$	21,798	$	8,582	$	2,861	$	10,271	$	78,243		$	162,403



Consumer
Performing	$	6,868	$	27,975	$	16,296	$	6,940	$	2,894	$	7,226	$	4,153		$	72,352
Nonperforming	—		—		5		6		8		6		—			25
Total	$	6,868	$	27,975	$	16,301	$	6,946	$	2,902	$	7,232	$	4,153		$	72,377









Total by Credit Quality Indicator Category
Pass	$	158,705	$	978,219	$	863,647	$	615,882	$	176,190	$	370,750	$	331,631		$	3,495,024
Special mention / watch	1,699		7,909		7,762		26,478		6,743		18,833		22,651			92,075
Substandard	2,539		4,386		14,036		18,779		15,192		36,688		5,866			97,486
Doubtful	—		—		—		—		—		—		—			—
Performing	12,234		63,233		38,071		15,493		5,606		16,564		82,297			233,498
Nonperforming	—		24		28		35		157		939		99			1,282
Total	$	175,177	$	1,053,771	$	923,544	$	676,667	$	203,888	$	443,774	$	442,544		$	3,919,365

Current Period Gross Write-offs
Agricultural	$	—	$	—	$	1	$	—	$	—	$	—	$	—		$	1
Commercial and industrial	—		—		—		105		171		44		—			320
CRE - Construction and development	—		—		—		—		—		—		—			—
CRE - Farmland	—		—		—		—		—		—		—			—
CRE - Multifamily	—		—		—		—		—		—		—			—
CRE - Other	—		—		—		—		—		18		—			18
RRE - One-to-four-family first liens	—		—		—		—		—		—		—			—
RRE - One-to-four-family junior liens	—		—		—		—		—		—		—			—
Consumer	—		142		—		—		4		2		—			148
Total Current Period Gross Write-offs	$	—	$	142	$	1	$	105	$	175	$	64	$	—		$	487

Table of Contents

The following table sets forth the amortized cost basis of loans ~~excluding purchased~~by class of receivable by credit ~~impaired~~quality indicator and vintage based on the most recent analysis performed, as of December 31, 2022. As of December 31, 2022, there were no 'loss' rated credits.


	Term Loans by Origination Year												Revolving Loans
December 31, 2022 (in thousands)	2022		2021		2020		2019		2018		Prior				Total
Agricultural
Pass	$	20,279	$	12,511	$	5,398	$	2,883	$	939	$	1,063	$	65,395		$	108,468
Special mention / watch	143		1,012		115		36		—		604		1,655			3,565
Substandard	48		646		366		4		7		302		1,914			3,287
Doubtful	—		—		—		—		—		—		—			—
Total	$	20,470	$	14,169	$	5,879	$	2,923	$	946	$	1,969	$	68,964		$	115,320
Commercial and industrial
Pass	$	262,500	$	232,263	$	151,567	$	48,199	$	27,680	$	115,877	$	163,205		$	1,001,291
Special mention / watch	3,975		3,574		5,465		592		3,299		1,864		12,299			31,068
Substandard	556		166		1,172		756		556		18,585		1,012			22,803
Doubtful	—		—		—		—		—		—		—			—
Total	$	267,031	$	236,003	$	158,204	$	49,547	$	31,535	$	136,326	$	176,516		$	1,055,162
CRE - Construction and development
Pass	$	144,597	$	73,832	$	19,324	$	989	$	1,058	$	549	$	28,069		$	268,418
Special mention / watch	1,787		499		—		—		—		—		—			2,286
Substandard	281		—		—		—		—		6		—			287
Doubtful	—		—		—		—		—		—		—			—
Total	$	146,665	$	74,331	$	19,324	$	989	$	1,058	$	555	$	28,069		$	270,991
CRE - Farmland
Pass	$	55,251	$	52,802	$	28,744	$	7,266	$	8,406	$	12,895	$	1,946		$	167,310
Special mention / watch	3,058		2,229		1,470		—		225		21		1,693			8,696
Substandard	148		1,974		1,192		1,136		1,459		1,998		—			7,907
Doubtful	—		—		—		—		—		—		—			—
Total	$	58,457	$	57,005	$	31,406	$	8,402	$	10,090	$	14,914	$	3,639		$	183,913
CRE - Multifamily
Pass	$	31,018	$	93,907	$	84,573	$	17,137	$	2,549	$	5,161	$	49		$	234,394
Special mention / watch	1,000		—		1,567		—		5,931		1,178		—			9,676
Substandard	—		7,725		334		—		—		—		—			8,059
Doubtful	—		—		—		—		—		—		—			—
Total	$	32,018	$	101,632	$	86,474	$	17,137	$	8,480	$	6,339	$	49		$	252,129
CRE - Other
Pass	$	322,753	$	314,376	$	296,368	$	79,408	$	31,041	$	81,708	$	51,064		$	1,176,718
Special mention / watch	8,858		3,399		13,245		10,365		1,137		8,122		2,518			47,644
Substandard	752		589		19,702		13,294		10,197		4,089		—			48,623
Doubtful	—		—		—		—		—		—		—			—
Total	$	332,363	$	318,364	$	329,315	$	103,067	$	42,375	$	93,919	$	53,582		$	1,272,985
RRE - One- to four- family first liens
Pass / Performing	$	139,289	$	103,534	$	63,627	$	23,831	$	21,868	$	77,967	$	11,438		$	441,554
Special mention / watch	1,074		611		672		1,920		150		702		—			5,129
Substandard / Nonperforming	175		438		174		175		674		2,891		—			4,527
Doubtful	—		—		—		—		—		—		—			—
Total	$	140,538	$	104,583	$	64,473	$	25,926	$	22,692	$	81,560	$	11,438		$	451,210
RRE - One- to four- family junior liens
Performing	$	37,296	$	22,908	$	8,906	$	3,058	$	3,757	$	6,330	$	79,798		$	162,053
Nonperforming	—		23		31		179		756		76		100			1,165
Total	$	37,296	$	22,931	$	8,937	$	3,237	$	4,513	$	6,406	$	79,898		$	163,218
Consumer
Performing	$	32,584	$	18,979	$	7,966	$	3,489	$	1,646	$	6,641	$	4,255		$	75,560
Nonperforming	—		2		16		9		4		5		—			36
Total	$	32,584	$	18,981	$	7,982	$	3,498	$	1,650	$	6,646	$	4,255		$	75,596

Total by Credit Quality Indicator Category
Pass	$	975,687	$	883,225	$	649,601	$	179,713	$	93,541	$	295,220	$	321,166		$	3,398,153
Special mention / watch	19,895		11,324		22,534		12,913		10,742		12,491		18,165			108,064
Substandard	1,960		11,538		22,940		15,365		12,893		27,871		2,926			95,493
Doubtful	—		—		—		—		—		—		—			—
Performing	69,880		41,887		16,872		6,547		5,403		12,971		84,053			237,613
Nonperforming	—		25		47		188		760		81		100			1,201
Total	$	1,067,422	$	947,999	$	711,994	$	214,726	$	123,339	$	348,634	$	426,410		$	3,840,524

Table of Contents

Allowance for Credit Losses

At March 31, 2023, 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 - increase in the first forecasted quarter and declines in the second through fourth forecasted quarters; (4) Year-to-year change in U.S. GDP - increases over the next four forecasted quarters; (5) Year-to-year change in National Home Price Index – declines over the next four forecasted quarters; and (6) Rental Vacancy - increases over the next four forecasted quarters. In addition, management utilized qualitative factors to adjust the calculated ACL as appropriate. Qualitative factors are based on management’s judgment of company, market, industry or business specific data, changes in underlying loan composition of specific portfolios, trends relating to credit quality, delinquency, non-performing and adversely rated loans, and reasonable and supportable forecasts of economic conditions.

The increase in the ACL between March 31, 2023 and December 31, 2022 is primarily driven by reserves taken to support loan growth. Net loan charge-offs were $0.3 million for the three-months ended March 31, 2023 as compared to net loan charge-offs of $2.2 million for the three-months ended March 31, 2022.

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 $16.0 million at March 31, 2023 and $15.3 million at December 31, 2022 and is excluded from the estimate of credit losses. The changes in the allowance for credit losses by portfolio segment were as follows:



	For the Three Months Ended March 31, 2023 and 2022
(in thousands)	Agricultural		Commercial and Industrial		Commercial Real Estate		Residential Real Estate		Consumer		Total
For the Three Months Ended March 31, 2023
Beginning balance	$	923	$	22,855	$	20,123	$	4,678	$	621	$	49,200

Charge-offs	(1)		(320)		(18)		—		(148)		(487)
Recoveries	26		75		5		4		44		154
Credit loss expense (benefit)(1)	(435)		(265)		1,723		(137)		47		933
Ending balance	$	513	$	22,345	$	21,833	$	4,545	$	564	$	49,800

For the Three Months Ended March 31, 2022
Beginning balance	$	667	$	17,294	$	26,120	$	4,010	$	609	$	48,700

Charge-offs	—		(233)		(2,184)		(30)		(184)		(2,631)
Recoveries	7		225		117		16		44		409
Credit loss expense (benefit) (1)	(294)		(11)		4		(88)		111		(278)
Ending balance	$	380	$	17,275	$	24,057	$	3,908	$	580	$	46,200
(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 $0.0 million and $0.3 million related to off-balance sheet credit exposures for the three months ended March 31, 2023 and March 31, 2022, respectively.

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


	As of March 31, 2023
(in thousands)	Agricultural		Commercial and Industrial		Commercial Real Estate		Residential Real Estate		Consumer		Total
Loans held for investment, net of unearned income
Individually evaluated for impairment	$	1,726	$	1,443	$	12,482	$	1,632	$	—	$	17,283
Collectively evaluated for impairment	104,915		1,079,071		2,036,489		609,230		72,377		3,902,082
Total	$	106,641	$	1,080,514	$	2,048,971	$	610,862	$	72,377	$	3,919,365
Allowance for credit losses:
Individually evaluated for impairment	$	—	$	234	$	1,664	$	180	$	—	$	2,078
Collectively evaluated for impairment	513		22,111		20,169		4,365		564		47,722
Total	$	513	$	22,345	$	21,833	$	4,545	$	564	$	49,800

Table of Contents


	As of December 31, 2022
(in thousands)	Agricultural		Commercial and Industrial		Commercial Real Estate		Residential Real Estate		Consumer		Total
Loans held for investment, net of unearned income
Individually evaluated for impairment	$	2,531	$	2,184	$	15,768	$	1,650	$	—	$	22,133
Collectively evaluated for impairment	112,789		1,052,978		1,964,250		612,778		75,596		3,818,391

Total	$	115,320	$	1,055,162	$	1,980,018	$	614,428	$	75,596	$	3,840,524
Allowance for credit losses:
Individually evaluated for impairment	$	500	$	600	$	705	$	180	$	—	$	1,985
Collectively evaluated for impairment	423		22,255		19,418		4,498		621		47,215

Total	$	923	$	22,855	$	20,123	$	4,678	$	621	$	49,200

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


	As of March 31, 2023
(in thousands)	Primary Type of Collateral
	Real Estate		Equipment		Other		Total		ACL Allocation
Agricultural	$	1,513	$	213	$	—	$	1,726	$	—
Commercial and industrial	716		198		529		1,443		234
Commercial real estate:
Construction and development	—		—		—		—		—
Farmland	4,298		—		—		4,298		—
Multifamily	—		—		—		—		—
Commercial real estate-other	7,985		—		199		8,184		1,664
Residential real estate:
One- to four- family first liens	911		—		—		911		—
One- to four- family junior liens	—		—		721		721		180
Consumer	—		—		—		—		—
Total	$	15,423	$	411	$	1,449	$	17,283	$	2,078


	As of December 31, 2022
(in thousands)	Primary Type of Collateral
	Real Estate		Equipment		Other		Total		ACL Allocation
Agricultural	$	68	$	2,463	$	—	$	2,531	$	500
Commercial and industrial	856		736		592		2,184		600
Commercial real estate:
Construction and development	—		—		—		—		—
Farmland	4,515		—		—		4,515		—
Multifamily	—		—		—		—		—
Commercial real estate-other	11,006		—		247		11,253		705
Residential real estate:
One- to four- family first liens	929		—		—		929		—
One- to four- family junior liens	—		—		721		721		180
Consumer	—		—		—		—		—
Total	$	17,374	$	3,199	$	1,560	$	22,133	$	1,985

Loan Modifications to Borrowers Experiencing Financial Difficulty

Occasionally, the Company may modify loans to borrowers who are experiencing financial difficulty. Loan modifications to borrowers experiencing financial difficulty may be in the form of principal forgiveness, term extension, an other-than-insignificant payment delay, interest rate reduction, or combination thereof.

Table of Contents

The following table presents the amortized cost basis of loans as of ~~September 30, 2017~~March 31, 2023 that were modified during the three months ended March 31, 2023 and ~~December 31, 2016:~~experiencing financial difficulty at the time of the modification by class and by type of modification.


	As of March 31, 2023
									Combination:
(dollars in thousands)	Principal Forgiveness		Payment Delay		Term Extension		Interest Rate Reduction		Term Extension & Interest Rate Reduction		Principal Forgiveness & Term Extension		Principal Forgiveness, Term Extension, & Interest Rate Reduction		Total Class of Financing Receivable
Agricultural	$	—	$	16	$	1,502	$	—	$	—	$	—	$	—	1.42	%
Commercial and industrial	—		—		50		—		120		307		—		0.04	%



CRE - Other	—		—		—		—		—		—		20		—	%



Total	$	—	$	16	$	1,552	$	—	$	120	$	307	$	20

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

~~Not~~The Company has no additional commitment to lend amounts to the borrowers included in the ~~loans above~~previous table as of ~~September 30, 2017 and December~~March 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, respectively.~~

~~As of September 30, 2017,~~2023. For the three months ended March 31, 2023, the Company had no ~~commitments~~modified loans to ~~lend additional funds~~borrowers experiencing financial difficulty that redefaulted within 12 months subsequent to ~~any~~the modification.

The following table presents the performance as of March 31, 2023 of loans that were modified while the borrower was experiencing financial difficulty at the time of modification in the last 12 months:


	As of March 31, 2023
(in thousands)	Current		30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total
Agricultural	$	1,518	$	—	$	—	$	—	$	1,518
Commercial and industrial	477		—		—		—		477



CRE - Other	—		—		—		20		20



Total	$	1,995	$	—	$	—	$	20	$	2,015

The following table presents the financial effect of the loan modifications presented above to borrowers ~~who have had a TDR.~~experiencing financial difficulty for the three months ended March 31, 2023:

~~Purchased Loans~~

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


March 31, 2023 (dollars in thousands)	Principal Forgiveness		Weighted Average Interest Rate Reduction		Weighted Average Term Extension (Years)
Agricultural	$	—	—	%	2.37
Commercial and industrial	63		1.25	%	11.89



CRE - Other	18		7.00	%	2.47



Total	$	81	2.07	%	4.64

Table of Contents

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

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


	As of March 31, 2023						As of December 31, 2022
	Notional Amount		Fair Value				Notional Amount		Fair Value
(in thousands)			Assets		Liabilities				Assets		Liabilities
Designated as hedging instruments:
Fair value hedges:
Interest rate swaps	$	23,819	$	1,995	$	—	$	24,018	$	2,556	$	—
Cash flow hedges
Interest rate swaps	50,000		161		23		—		—		—
Total	$	73,819	$	2,156	$	23	$	24,018	$	2,556	$	—

Not designated as hedging instruments:
Interest rate swaps	$	307,450	$	16,256	$	16,257	$	331,197	$	21,084	$	21,087

RPAs - protection purchased	24,812		—		—		9,421		—		—
Interest rate lock commitments	3,696		101		—		1,372		7		—
Interest rate forward loan sales contracts	3,950		—		22		1,400		8		—
Total	$	339,908	$	16,357	$	16,279	$	343,390	$	21,099	$	21,087

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.

Cash Flow Hedges - Derivatives are designated as cash flow hedges in order to minimize the variability in cash flows of earning assets or forecasted transactions caused by movement in interest rates. In March 2023, the Company entered into pay-fixed receive-variable interest rate swaps with a cumulative notional amount of $50.0 million to hedge against adverse fluctuations in interest rates by reducing exposure to variability in cash flows relating to interest payments on the Company's variable rate debt. The interest rate swaps were designated as a cash flow hedge. The gain or loss on the derivative was recorded in accumulated other comprehensive income and subsequently reclassified into interest expense, as applicable, in the same period(s) during which the hedged transaction affects earnings. During 2023, the Company estimates that an additional $561 thousand of income will be reclassified into interest expense.

Table of Contents

The table below presents the effect of cash flow hedge accounting on AOCI for the three months ended March 31, 2023 and 2022


	Amount of Gain (Loss) Recognized in AOCI on Derivative				Location of Gain (Loss) Reclassified from AOCI into Income	Amount of Gain (Loss) Reclassified from AOCI into Income
	Three Months Ended March 31,					Three Months Ended March 31,
(in thousands)	2023		2022			2023		2022
Interest rate swaps	$	138	$	—	Interest Expense	$	—	$	—

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 Hedging Relationships
	For the Three Months Ended March 31,
	2023				2022
(in thousands)	Interest Income		Other Income		Interest Income		Other Income
Total amounts of income and expense line items presented in the consolidated statements of income in which the effects of fair value or cash flow hedges are recorded	$	159	$	—	$	(104)	$	—

The effects of fair value and cash flow hedging:
Gain (loss) on fair value hedging relationships in subtopic 815-20:
Interest contracts:
Hedged items	562		—		(1,553)		—
Derivative designated as hedging instruments	(402)		—		942		—

Income statement effect of cash flow hedging relationships in subtopic 815-20:
Interest contracts:
Amount reclassified from AOCI into income	—		—		—		—

As of March 31, 2023, 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	$	21,854	$	(1,996)

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.

Table of Contents

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


	Location in the Consolidated Statements of Income	For the Three Months Ended March 31,
(in thousands)		2023		2022
Interest rate swaps	Other income	$	—	$	(5)
RPAs	Other income	69		(1)
Interest rate lock commitments	Loan revenue	94		381
Interest rate forward loan sales contracts	Loan revenue	(30)		(311)
Total		$	133	$	64

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 March 31, 2023 and December 31, 2022, which are generally marketable securities and/or cash. The collateral amounts in the table below are limited to the outstanding balances of the related asset or liability (after netting is applied); thus instances of over-collateralization are not shown. Further, the net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. ~~An allowance for loan losses is not carried over. These purchased loans~~The tabular disclosure of fair value provides the location that derivative assets and liabilities are ~~segregated into two types: purchased credit impaired loans and purchased non-credit impaired loans.~~presented on the consolidated balance sheets.


							Gross Amounts Not Offset in the Balance Sheet
(in thousands)	Gross Amounts Recognized		Gross Amounts Offset in the Balance Sheet		Net Amounts presented in the Balance Sheet		Financial Instruments		Cash Collateral Received / Paid		Net Assets /Liabilities
As of March 31, 2023
Asset Derivatives	$	18,513	$	—	$	18,513	$	—	$	15,091	$	3,422
Liability Derivatives	16,302		—		16,302		—		3,000		13,302

As of December 31, 2022
Asset Derivatives	$	23,655	$	—	$	23,655	$	—	$	18,858	$	4,797
Liability Derivatives	21,087		—		21,087		—		3,460		17,627

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

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

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

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

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

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

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

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

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

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

Net Interest Income

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

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

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

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

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

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

Three Months Ended September 30,
2017 2016

Average
Balance

Interest
Income/
Expense

Average
Rate/
Yield

Average
Balance

Interest
Income/
Expense

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

Cash and due from banks 35,774
35,287

Premises and equipment 74,962
75,882

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

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

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

Net interest spread⁽²⁾
3.71 % 3.59 %

Demand deposits 466,485
502,611

Other liabilities 22,214
20,863

Shareholders’ equity 344,961
307,005

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

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

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

Securities 820
739

Total tax equivalent adjustment 1,266
1,171

Net Interest Income $ 26,492
$ 24,581



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

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

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

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

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

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

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

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

~~Provision for Loan Losses~~

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

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

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

~~Noninterest Income~~

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

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

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

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

~~Noninterest Expense~~

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

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

~~Income Tax Expense~~

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

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

~~Summary~~

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

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

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

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

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

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

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

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

~~Net Interest Income~~

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

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

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

Nine Months Ended September 30,
2017 2016

Average
Balance

Interest
Income/
Expense

Average
Rate/
Yield

Average
Balance

Interest
Income/
Expense

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

Cash and due from banks 35,281
37,120

Premises and equipment 74,960
76,247

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

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

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

Net interest spread⁽²⁾
3.71 % 3.71 %

Demand deposits 472,482
514,991

Other liabilities 20,984
18,473

Shareholders’ equity 330,682
303,146

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

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

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

Securities 2,491
2,253

Total tax equivalent adjustment 3,742
3,538

Net Interest Income $ 77,764
$ 75,076


	Three Months Ended March 31,
	2023						2022
	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)	$	3,867,110	$	47,206	4.95	%	$	3,245,449	$	31,858	3.98	%
Taxable investment securities	1,811,388		10,444		2.34		1,835,911		8,123		1.79
Tax-exempt investment securities (2)(4)	397,110		2,649		2.71		450,547		2,998		2.70
Total securities held for investment (2)	2,208,498		13,093		2.40		2,286,458		11,121		1.97
Other	24,848		244		3.98		56,094		28		0.20
Total interest earning assets (2)	$	6,100,456	$	60,543	4.02	%	$	5,588,001	$	43,007	3.12	%
Other assets	423,609						326,603
Total assets	$	6,524,065					$	5,914,604

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest checking deposits	$	1,515,845	$	1,849	0.49	%	$	1,560,402	$	1,061	0.28	%
Money market deposits	930,543		3,269		1.42		953,943		499		0.21
Savings deposits	653,043		272		0.17		641,703		279		0.18
Time deposits	1,417,688		9,929		2.84		883,997		1,071		0.49
Total interest bearing deposits	4,517,119		15,319		1.38		4,040,045		2,910		0.29
Securities sold under agreements to repurchase	145,809		450		1.25		159,417		96		0.24

Other short-term borrowings	111,306		1,336		4.87		3,029		23		3.08
Total short-term borrowings	257,115		1,786		2.82		162,446		119		0.30
Long-term debt	139,208		2,124		6.19		140,389		1,487		4.30
Total borrowed funds	396,323		3,910		4.00		302,835		1,606		2.15
Total interest bearing liabilities	$	4,913,442	$	19,229	1.59	%	$	4,342,880	$	4,516	0.42	%

Noninterest bearing deposits	1,029,575						1,004,001
Other liabilities	82,501						42,872
Shareholders’ equity	498,547						524,851
Total liabilities and shareholders’ equity	$	6,524,065					$	5,914,604
Net interest income (2)			$	41,314					$	38,491
Net interest spread(2)					2.43	%					2.70	%
Net interest margin(2)					2.75	%					2.79	%

Total deposits(5)	$	5,546,694	$	15,319	1.12	%	$	5,044,046	$	2,910	0.23	%
Cost of funds(6)					1.31	%					0.34	%



(1)	~~(1)~~	~~Loan fees included in interest income are not material.~~Average balance includes nonaccrual loans.
(2)	~~(2)~~	~~Computed on a tax-equivalent basis, assuming a~~Tax equivalent. The federal ~~income~~statutory tax rate ~~of 35%~~utilized was 21%.
(3)	Interest income includes net loan fees, loan purchase discount accretion and tax equivalent adjustments. Net loan fees were $95 thousand and $674 thousand for the three months ended March 31, 2023 and March 31, 2022, respectively. Loan purchase discount accretion was $1.2 million and $732 thousand for the three months ended March 31, 2023 and March 31, 2022, respectively. Tax equivalent adjustments were $716 thousand and $540 thousand for the three months ended March 31, 2023 and March 31, 2022, respectively. The federal statutory tax rate utilized was 21%.
(4)	~~(3)~~	~~Non-accrual loans have been included in average loans, net~~Interest income includes tax equivalent adjustments of ~~unearned discount.~~$522 thousand and $615 thousand for the three months ended March 31, 2023 and March 31, 2022, respectively. The federal statutory tax rate utilized was 21%.
(5)	~~(4)~~Total deposits is the sum of total interest-bearing deposits and noninterest bearing deposits. The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits.
(6)	~~Net~~Cost of funds is calculated as annualized total interest ~~margin is tax-equivalent net interest income as a percentage~~expense divided by the sum of average ~~earning assets.~~total deposits and borrowed funds.

Table of Contents

The following table ~~sets forth an analysis of~~shows changes to tax equivalent net interest income attributable to (i) changes in volume and ~~rate~~(ii) changes in rate. Changes attributable to both rate and volume have been allocated proportionately to the change due to volume and the change due to rate.


	Three Months Ended March 31,
	2023 Compared to 2022 Change due to
(in thousands)	Volume		Yield/Cost		Net
Increase (decrease) in interest income:
Loans, including fees (1)	$	6,755	$	8,593	$	15,348
Taxable investment securities	(111)		2,432		2,321
Tax-exempt investment securities (1)	(360)		11		(349)
Total securities held for investment (1)	(471)		2,443		1,972
Other	(23)		239		216
Change in interest income (1)	6,261		11,275		17,536
Increase (decrease) in interest expense:
Interest checking deposits	(31)		819		788
Money market deposits	(12)		2,782		2,770
Savings deposits	6		(13)		(7)
Time deposits	991		7,867		8,858
Total interest-bearing deposits	954		11,455		12,409
Securities sold under agreements to repurchase	(9)		363		354

Other short-term borrowings	1,293		20		1,313
Total short-term borrowings	1,284		383		1,667
Long-term debt	(13)		650		637
Total borrowed funds	1,271		1,033		2,304
Change in interest expense	2,225		12,488		14,713
Change in net interest income	$	4,036	$	(1,213)	$	2,823
Percentage increase in net interest income over prior period					7.3		%
(1) Tax equivalent, using a federal statutory tax rate of 21%.

Our tax equivalent net interest income ~~and~~for the first quarter of 2023 was $41.3 million, an increase of $2.8 million, or 7.3%, as compared to $38.5 million for the first quarter of 2022. The increase in tax equivalent net interest ~~expense on our average interest-earning assets and average interest-bearing liabilities during~~income in the ~~nine~~ ~~months ended September 30, 2017,~~first quarter of 2023 as 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~~first quarter of 2022 was due primarily to average outstanding balances (changes in volume holding the initial interest rate constant) and the changes related to average interest rates (changes in average rate holding the initial outstanding balance constant). The change in interest due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.

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

~~Interest income and fees on loans~~ on a tax-equivalent basis increased $2.0 million, or 2.7%, in the first nine months of 2017 compared to the same period in 2016. This increase reflects the effect of the merger-related discount accretion for loans of $3.8 million in the first nine months of 2017, compared to $2.4 million of discount accretion in the first nine months of 2016. The increased income is mainly due to a 9 basis point increase in yield on loans, from 4.65% in the first nine months of 2016 to 4.74% in the same period of 2017. The yield on our loan portfolio is affected by the amount of nonaccrual loans (which do not 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%~~40.8%, 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~~interest income, which more than offset the increase of $14.7 million, or 325.8%, in ~~overall~~ interest ~~rates, we expect~~expense. The change in interest income reflected an increase of $15.3 million, or 48.2%, in loan interest income, which reflected higher loan volume from the IOFB acquisition and organic loan growth, and an increase in loan yield. The change in interest income also reflected an increase of $2.0 million, or 17.7%, in interest income earned from investment securities, which stemmed from the higher yield on ~~new~~such securities. The change in interest expense reflected increases in interest paid on interest bearing deposits and ~~renewing loans to remain relatively flat in the markets we serve~~borrowed funds of $12.4 million and $2.3 million, respectively, due to ~~competitive pressures for quality credits.~~higher costs and volumes.

~~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~~tax equivalent net interest margin for the first ~~nine months~~quarter of ~~2017 increased~~2023 declined to ~~3.13%~~2.75%, 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 of2.79% for the first quarter ~~and beginning~~ of ~~the second quarter~~2022, driven by higher funding costs, partially offset by higher interest earning asset yields. The cost 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~~interest bearing liabilities increased 117 bps to 1.59%, due to interest ~~expense on deposits for the nine months ended September 30, 2017 including no merger-related amortization~~bearing deposit costs of ~~the purchase accounting premium on certificates~~1.38%, short-term borrowing costs of ~~deposit~~2.82%, and ~~the nine months ended September 30, 2016, including $0.8 million in merger-related amortization. Additionally, average interest-bearing deposits for~~long-term debt costs of 6.19%, which increased 109 bps, 252 bps and 189 bps, respectively from the first ~~nine months~~quarter of ~~2017~~2022. Total interest earning assets yield increased ~~$97.5 million, or 5.1%, compared with the same period in 2016, due~~90 bps primarily ~~to an increased focus by the Company on gathering new deposits. The weighted average rate paid on interest-bearing deposits was 0.55% for the~~

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

~~Interest expense on borrowed funds~~ in the first nine months of 2017 was $2.6 million, compared with $2.5 million for the same period in 2016, an increase of $0.1 million, or 5.3%. Average borrowed funds for the first nine months of 2017 were $3.7 million higher compared with the same period in 2016. The decrease in the average level of FHLB borrowings of $2.3 million, or 2.2%, coupled with a $5.1 million, or 11.1%, decrease in long-term debt and junior subordinated notes, was partially offset by an increase in ~~the average balance~~loan and securities yields of ~~federal funds purchased~~97 bps and ~~repurchase agreements~~43 bps, respectively.

Credit Loss Expense

Credit loss expense of ~~$11.2~~$0.9 million ~~or 15.1%, all for~~was recorded during the first ~~nine months~~quarter 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~~

We2023, with no credit loss expense 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.~~2022. The ~~Company’s additional provision~~increase in ~~the third quarter of 2017 boosts the allowance for~~credit loss expense was primarily attributable to loan ~~losses to total non-acquired loans ratio to 1.34%.~~growth. Net ~~loans charged off in the first nine months of 2017 totaled $2.0 million compared with $1.3~~loan charge-offs were $0.3 million in the first ~~nine months~~quarter of ~~2016.~~2023 as compared to net loan charge-offs of $2.2 million in the first quarter of 2022. The economic forecast factors utilized by the Company for its loan credit loss estimation process are: (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 - increase in the first forecasted quarter and declines in the second through fourth forecasted quarters; (4) Year-to-year change in U.S. GDP - increases over the next four forecasted quarters; (5) Year-to-year change in National Home Price Index – declines over the next four forecasted quarters; and (6) Rental Vacancy - increases over the next four forecasted quarters. In addition, management utilized qualitative factors to adjust the calculated ACL as appropriate. Qualitative factors are based on management’s judgment of company, market, industry or business specific data, changes in underlying loan composition of specific portfolios, trends relating to credit quality, delinquency, non-performing and adversely rated loans, and reasonable and supportable forecasts of economic conditions.

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Noninterest Income (Loss)

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

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


	Three Months Ended March 31,
(dollars in thousands)	2023		2022		$ Change		% Change
Investment services and trust activities	$	2,933	$	3,011	$	(78)	(2.6)	%
Service charges and fees	2,008		1,657		351		21.2
Card revenue	1,748		1,650		98		5.9
Loan revenue	1,420		4,293		(2,873)		(66.9)
Bank-owned life insurance	602		531		71		13.4

Investment securities (losses) gains, net	(13,170)		40		(13,210)		(33,025.0)
Other	413		462		(49)		(10.6)
Total noninterest (loss) income	$	(4,046)	$	11,644	$	(15,690)	(134.7)	%

Total noninterest income for the first ~~nine months~~quarter of ~~2017 total noninterest income~~2023 decreased ~~$0.9~~$15.7 million, or ~~5.0%~~134.7%, to ~~$16.8~~a loss of $4.0 million from ~~$17.7~~$11.6 million ~~during~~in the ~~same period~~first quarter of ~~2016. This decline was~~2022, primarily due to investment security losses of $13.2 million related to the ~~$1.6 million decrease~~Company's balance sheet repositioning. In addition, noninterest income declined from the comparative period due to the first quarter of 2022 benefiting from a larger increase in ~~other gains~~the fair value of our mortgage servicing rights, as well as a larger gain on sale from residential mortgage loans as a result of higher mortgage origination volumes.

Noninterest Expense

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


	Three Months Ended March 31,
(dollars in thousands)	2023		2022		$ Change		% Change
Compensation and employee benefits	$	19,607	$	18,664	$	943	5.1	%
Occupancy expense of premises, net	2,746		2,779		(33)		(1.2)
Equipment	2,171		1,901		270		14.2
Legal and professional	1,736		2,353		(617)		(26.2)
Data processing	1,363		1,231		132		10.7
Marketing	986		1,029		(43)		(4.2)
Amortization of intangibles	1,752		1,227		525		42.8
FDIC insurance	749		420		329		78.3
Communications	261		272		(11)		(4.0)
Foreclosed assets, net	(28)		(112)		84		(75.0)
Other	1,976		1,879		97		5.2


Total noninterest expense	$	33,319	$	31,643	$	1,676	5.3	%


	Three Months Ended March 31,
Merger-related expenses:	2023		2022
(dollars in thousands)
Compensation and employee benefits	$	70	$	—

Equipment	—		5
Legal and professional	—		63
Data processing	65		38
Marketing	—		7
Communications	—		1
Other	1		14
Total merger-related expenses	$	136	$	128

Noninterest expense for the ~~nine months ended September 30, 2017, compared to the same period in 2016. The~~ first ~~nine months~~quarter 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 $0.32023 increased $1.7 million, or ~~9.8%~~5.3%, ~~between the comparative periods. These decreases were partially offset by a $0.5~~to $33.3 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~~from $31.6 million for the first ~~nine months~~quarter of 2017 compared with $4.2 million for the same period in 2016. Other service charges and fees increased $0.5 million, or 11.3%, to $4.6 million for the first nine months of 2017, from $4.1 million for the same period in 2016 due to a change in how electronic transaction expenses are classified. In prior periods these expenses were netted against

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

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

~~Noninterest Expense~~

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

Noninterest expense decreased to $60.0 million for the nine months ended September 30, 2017, compared with $66.7 million for the nine months ended September 30, 2016, a decrease of $6.7 million, or 10.0%, with all expense line items showing a decrease from the comparative period. The decrease was2022, primarily due to ~~the absence~~increases of ~~merger related expenses for the nine months ended September 30, 2017, compared to $4.2~~$0.9 million ~~for the nine months ended September 30, 2016 relating to the merger of Central Bank into MidWestOne~~ ~~Bank. Salaries~~and $0.5 million in compensation and employee benefits ~~decreased $1.9 million, or 5.0%, from $37.6 million for~~and amortization of intangibles, respectively. These increases primarily reflected costs associated with the ~~nine months ended September 30, 2016, to $35.7 million for~~acquired operations of IOFB, which closed in the ~~nine months ended September 30, 2017. This decrease included $1.6 million~~second quarter of ~~merger-related expenses for~~2022. Partially offsetting the ~~nine months ended September 30, 2016. The rest~~increases above was a decline of the decrease in salaries and employee benefits was primarily due to decreased staffing levels resulting from restructuring 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, compared to the nine months ended September 30, 2016, primarily due to the inclusion of $1.9$0.6 million in ~~contract termination expense~~legal and professional expenses stemming primarily from reductions in ~~connection with the bank merger in 2016. Other operating~~legal expenses ~~decreased $1.1 million, or 14.4%, from $7.8 million for the nine months ended September 30, 2016,~~related to ~~$6.7 million for the nine months ended September 30, 2017, primarily due to lower losses~~litigation and ~~deposit charge-offs.~~executive recruitment.

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Income Tax Expense

Our effective income tax rate, or income taxes divided by income before taxes, was ~~27.3%~~21.4% for the ~~first nine~~three months ended March 31, 2023, as compared to an effective tax rate of ~~2017, and 27.7%~~19.9% for the ~~first nine~~three months ~~of 2016. Income~~ended March 31, 2022. The effective tax ~~expense increased~~rate for the full year 2023 is expected to ~~$7.6 million~~be in the ~~first nine months~~range of ~~2017 compared with $6.3 million for the same period of 2016, primarily due~~19.5% to ~~the increase in the level of pre-tax income between the two periods.~~21.5%.

FINANCIAL CONDITION

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

~~Investment Securities~~

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


(dollars in thousands)	March 31, 2023		December 31, 2022		$ Change		% Change
ASSETS
Cash and cash equivalents	$	69,218	$	86,435	$	(17,217)	(19.9)	%
Loans held for sale	2,553		612		1,941		317.2
Debt securities available for sale at fair value	954,074		1,153,547		(199,473)		(17.3)
Held to maturity securities at amortized cost	1,117,709		1,129,421		(11,712)		(1.0)
Loans held for investment, net of unearned income	3,919,365		3,840,524		78,841		2.1
Allowance for credit losses	(49,800)		(49,200)		(600)		1.2
Total loans held for investment, net	3,869,565		3,791,324		78,241		2.1
Other assets	396,833		416,537		(19,704)		(4.7)
Total assets	$	6,409,952	$	6,577,876	$	(167,924)	(2.6)	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Total deposits	$	5,555,153	$	5,468,942	$	86,211	1.6	%
Total borrowings	281,962		531,083		(249,121)		(46.9)
Other liabilities	72,187		85,058		(12,871)		(15.1)
Total shareholders' equity	500,650		492,793		7,857		1.6
Total liabilities and shareholders' equity	$	6,409,952	$	6,577,876	$	(167,924)	(2.6)	%

Debt Securities

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


	March 31, 2023				December 31, 2022
(dollars in thousands)	Balance		% of Total		Balance		% of Total
Available for Sale
U.S. Government agencies and corporations	$	—	—	%	$	7,345	0.6	%
States and political subdivisions	184,581		19.3		285,356		24.7
Mortgage-backed securities	5,679		0.6		5,944		0.5
Collateralized loan obligations	54,074		5.7		—		—
Collateralized mortgage obligations	144,666		15.2		147,193		12.8
Corporate debt securities	565,074		59.2		707,709		61.4
Fair value of debt securities available for sale	$	954,074	100.0	%	$	1,153,547	100.0	%

Held to Maturity

States and political subdivisions	$	538,182	48.2		$	538,746	47.7	%
Mortgage-backed securities	79,597		7.1		81,032		7.2	%
Collateralized mortgage obligations	499,930		44.7		509,643		45.1	%

Amortized cost of debt securities held to maturity	$	1,117,709	100.0	%	$	1,129,421	100.0	%

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

As of March 31, 2023, there were $0.1 million of gross unrealized gains and $95.4 million of gross unrealized losses in our debt securities ~~(14.1%). Investment securities~~available for sale portfolio for a net unrealized loss of $95.3 million. As of March 31, 2023 there were no gross unrealized gains and $179.2 million of gross unrealized losses in our held to maturity ~~were $183.3 million at September 30, 2017, compared to $168.4 million at December 31, 2016, an increase of $14.9 million, or 8.9%.~~debt securities.

~~Loans~~

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

~~(1) As of~~During the first quarter of ~~2017,~~2023, the Company ~~no longer considered credit cards~~undertook 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~~balance sheet repositioning related to $2.26 billion at September 30, 2017. The mix of loans saw increases between December 31, 2016 and September 30, 2017 primarily concentrated in commercial real estate-other, commercial and industrial, construction and development, multifamily, and consumer loans. Decreases occurred in residential real estate, farmland, and agricultural loans. As of September 30, 2017, the largest category of loans was commercial real estate loans, comprising approximately 50% of the portfolio, of which 6% of total loans were multifamily residential mortgages, 6% of total loans were construction and development, and 4% of total loans were farmland. Commercial and industrial loans was the next largest category at 23% of total loans, followed by residential real estate loans at 21%, agricultural loans at 5%, and consumer loans at 2%. Included in these totals are $19.8 million, net of a discount of $2.2 million, or 0.9% of the total loan portfolio, in purchased credit impaired loans as a result of the merger betweenits debt securities portfolio. Specifically, the Company executed the sale of $231 million in book value of its AFS debt securities, with a pre-tax loss of $13.2 million and ~~Central in 2015.~~

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

~~Premises and Equipment~~

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

~~Deposits~~

Total deposits as of September 30, 2017 were $2.49 billion, an increase of $10.0 million, or 0.4% from December 31, 2016. Interest-bearing checking deposits were the largest category of deposits at September 30, 2017, representing approximately 45.7% of total deposits. Total interest-bearing checking deposits were $1.14 billion at September 30, 2017, unchanged from December 31, 2016. Included in interest-bearing checking deposits at September 30, 2017 were $36.5$220 million of ~~brokered deposits~~proceeds that were used to pay off short-term borrowings and reinvest in ~~the Insured~~higher yielding, floating rate securities.

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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~~Loans

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

~~FHLB borrowings totaled $145.0~~


	March 31, 2023				December 31, 2022
(dollars in thousands)	Balance		% of Total		Balance		% of Total
Agricultural	$	106,641	2.7	%	$	115,320	3.0	%
Commercial and industrial	1,080,514		27.6		1,055,162		27.5





Commercial real estate	2,048,971		52.4		1,980,018		51.6



Residential real estate	610,862		15.5		614,428		15.9
Consumer	72,377		1.8		75,596		2.0
Loans held for investment, net of unearned income	$	3,919,365	100.0	%	$	3,840,524	100.0	%
Loans held for sale	$	2,553			$	612

Loans held for investment, net of unearned income at March 31, 2023, increased $78.8 million, ~~as of~~ ~~September 30, 2017~~or 2.1%, ~~compared with$115.0 million~~ ~~as of~~from December 31, ~~2016. We utilize FHLB borrowings as a supplement~~2022 to ~~customer deposits to fund interest-earning assets~~$3.92 billion, driven primarily by new loan production, draws on construction loans, and ~~to assist in managing interest rate risk.~~higher line of credit usage during the first quarter of 2023. See Note ~~10. “Long-Term Borrowings”~~4. Loans Receivable and the Allowance for Credit Losses to our consolidated financial statements for additional information related to our ~~FHLB borrowings.~~loan portfolio.

~~Junior Subordinated Notes Issued to Capital Trusts~~

~~Junior subordinated notes that have been issued to capital trusts that issued trust preferred securities were $23.8 million~~Commitments under standby letters of credit, unused lines of credit and other conditionally approved credit lines totaled approximately $1.22 billion and $1.21 billion as of ~~September 30, 2017, substantially unchanged from~~March 31, 2023 and December 31, ~~2016. See Note 9. “Subordinated Notes Payable”~~2022, respectively.

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

~~Long-term Debt~~

Long-term debt in the form of a $35.0 million unsecured note, of which $25.0 million was drawn upon, payable to a correspondent bank was entered into on April 30, 2015 in connection with the payment of the merger consideration at the closing of the Central merger, of which $13.8 million was outstanding70.55% as of ~~September 30, 2017. See Note 10. “Long-Term Borrowings”~~March 31, 2023 as compared to ~~our consolidated financial statements for additional information related~~70.22% as of December 31, 2022. The loan to ~~our long-term debt.~~deposit ratio increased when compared to the prior year-end due to new loan production, draws on construction loans and higher line of credit usage, which offset the increase in total deposits.

Nonperforming Assets

The following ~~tables set~~table sets forth information concerning nonperforming loans by class of ~~loans~~receivable and our nonperforming assets at ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016~~:2022:


(in thousands)	March 31, 2023			December 31, 2022

Nonaccrual loans held for investment	$	14,440		$	15,256
Accruing loans contractually past due 90 days or more	2			565
Total nonperforming loans	14,442			15,821
Foreclosed assets, net	—			103
Total nonperforming assets	14,442			15,924

Nonaccrual loans ratio (1)	0.37		%	0.40		%
Nonperforming loans ratio (2)	0.37		%	0.41		%
Nonperforming assets ratio (3)	0.23		%	0.24		%

(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.

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

~~(1) As of~~When compared to December 31, 2022, overall asset quality improved. The nonperforming loans ratio declined 4 basis points from the ~~first quarter of 2017,~~prior year-end to 0.37%, while the ~~Company no longer considered credit cards a separate class of loans, and these balances are now included in commercial and industrial loans.~~

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

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

~~Our~~ nonperforming assets ~~(which include nonperforming loans and OREO) totaled $27.2 million as of September 30, 2017, a decrease of $3.3 million, or 10.9%,~~ratio declined 1 basis points from ~~December 31, 2016. The balance of OREO at September 30, 2017 was $1.3 million, down $0.8 million, from $2.1 million of OREO at December 31, 2016. During~~ the ~~first nine months of 2017, the Company had a net decrease of 21 properties in other real estate owned. All of the OREO property was acquired through foreclosures, and we are actively working~~prior year-end to ~~sell all properties held as of September 30, 2017. OREO is carried at appraised value less estimated cost of~~

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

Nonperforming loans decreased from $28.5 million, or 1.31% of total loans, at December 31, 2016, to $25.9 million, or 1.14% of total loans, at September 30, 2017. At September 30, 2017, nonperforming loans consisted of $19.9 million in nonaccrual loans, $5.5 million in troubled debt restructures (“TDRs”) and $0.5 million in loans past due 90 days or more and still accruing interest. This compares to nonaccrual loans of $20.7 million, TDRs of $7.3 million, and loans past due 90 days or more and still accruing interest of $0.5 million at December 31, 2016. Nonaccrual loans decreased $0.8 million between December 31, 2016, and September 30, 2017. The balance of TDRs decreased $1.8 million between these two dates, as the addition of six loans (representing three lending relationships) totaling $1.9 million was offset by payments collected from TDR-status borrowers totaling $2.8 million, and three loans totaling $0.9 million moving to non-disclosed status. Loans 90 days past due and still accruing interest were unchanged between December 31, 2016, and September 30, 2017. Loans past due 30 to 89 days and still accruing interest (not included in the nonperforming loan totals) decreased to $5.5 million at September 30, 2017, compared with $7.8 million at December 31, 2016. As of September 30, 2017, the allowance for loan losses was $26.5 million, or 1.17% of total loans, compared with $21.9 million, or 1.01% of total loans at December 31, 2016. The allowance for loan losses represented 102.40% of nonperforming loans at September 30, 2017, compared with 76.76% of nonperforming loans at December 31, 2016. The Company had net loan charge-offs of $2.0 million in the nine months ended September 30, 2017, or an annualized 0.12% of average loans outstanding, compared to net charge-offs of $1.3 million, or an annualized 0.08% of average loans outstanding, for the same period of 2016.0.23%.

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

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

When a loan officer originates a new loan, based upon proper loan authorization, ~~he or she documents~~they document the credit file with an offering sheet summary, supplemental underwriting analysis, relevant financial information and collateral evaluations. ~~All~~Segregation of ~~this~~

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owner-occupied and non-owner occupied residential real estate loans is made at the time of origination. This information is used in the determination of the initial loan risk rating. The Bank’s loan review department undertakes independent credit reviews of relationships based on either criteria established by loan policy, risk-focused sampling, or random sampling. ~~Loan policy requires~~Credit relationships with larger exposure may pose incrementally higher risks. As a result, the Bank's loan review department is required to review all ~~lending~~credit relationships with total exposure of $5.0 million or more ~~as well as all classified (loan grades 6 through 8) and watch (loan grade 5) rated credits over $1.0 million be reviewed no less than~~at least annually. ~~The~~In addition, the individual loan reviews consider such items as: loan type; nature, type and estimated value of collateral; borrower and/or guarantor estimated financial strength; most recently available financial information; related loans and total borrower exposure; and ~~current/~~current and anticipated performance of the loan. The results of such reviews are presented to both executive ~~management.~~management and the audit committee of the Company's board of directors.

Through the review of delinquency reports, updated financial statements or other relevant information, the lending officer and/or loan review personnel may determine that a loan relationship has weakened to the point that a ~~watch (loan grade~~Watch (risk rating 5) or ~~classified (loan grades~~Classified (risk ratings 6 through 8) status is warranted. ~~When a~~At least quarterly, the loan ~~relationship~~strategy committee will meet to discuss loan relationships with total ~~related~~ exposure of $1.0 million or ~~greater is adversely graded (loan grade 5~~above that are Watch rated credits, loan relationships with total exposure of $500 thousand and above that are Substandard or ~~above), or is classified~~Worse rated credits, as ~~a TDR (regardless~~well as loan relationships with total exposure of ~~size), the~~$250 thousand and above that are on non-accrual. Loan relationships outside 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~~The minutes of the ~~minutes of these~~loan strategy committee meetings are ~~presented~~provided to the board of directors of the Bank.

Depending upon the individual facts and circumstances and the result of the classified/watch review process, loan officers and/or loan review personnel may categorize ~~the~~a loan relationship as ~~impaired.~~requiring an individual analysis. Once that determination has occurred, the credit analyst will complete an individually analyzed worksheet that contains an evaluation of the collateral (for collateral-dependent loans) based upon the estimated collateral value, adjusting for current market conditions and other local factors that may affect collateral value. Loan review personnel may also complete an independent ~~impairment~~individual analysis when deemed necessary. These judgmental evaluations may produce an initial specific allowance for ~~placement~~recognition in the Company’s allowance for ~~loan and lease~~credit losses calculation. ~~Impairment~~An analysis for the underlying collateral value of each individually analyzed loan relationship is completed in the last month of the quarter. The ~~impairment analysis~~individually analyzed worksheets are reviewed by the Credit Administration department prior to quarter-end. The board of directors of the Bank on a quarterly basis reviews the classified/watch reports including changes in credit grades of 5 or higher as well as all ~~impaired~~individually analyzed loans, the related allowances and ~~OREO.~~foreclosed assets, net.

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

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

~~Restructured Loans~~

~~We restructure~~Loan Modifications for Borrowers Experiencing Financial Difficulty

Infrequently, the Company makes modification to certain loans ~~for our customers who appear~~in order 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~~alleviate temporary difficulties in the ~~near term due~~borrower's financial condition and/or constraints on the borrower's ability to ~~individual circumstances. We consider~~repay a loan, and to minimize potential losses to the ~~customer’s past performance, previous and current credit history, the individual circumstances surrounding the current difficulties and their plan to meet the terms~~Company. GAAP requires that certain types 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~~modifications be ~~present):~~reported, including:

~~The borrower receives a reduction of the stated interest~~

•Principal forgiveness.

•Interest rate ~~for the remaining original life of the debt.~~reduction.

~~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.~~•An other than-insignificant payment delay.

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

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

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

Generally, loans are restructured through short-term interest rate relief, short-term principal payment relief or short-term principal and interest payment relief. Once 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.

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023, the ~~Company restructured ten~~amortized cost of the loans ~~by granting concessions~~that were modified to borrowers ~~experiencing~~in financial ~~difficulties.~~distress was $2.0 million, which represented 0.05% of total loans held for investment, net of unearned income.

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

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

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

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Allowance for ~~Loan~~Credit Losses

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


	March 31, 2023					December 31, 2022
(dollars in thousands)	Allowance for Credit Losses			% of Loans in Each Segment to Total Loans		Allowance for Credit Losses			% of Loans in Each Segment to Total Loans
Agricultural	$	513		2.7	%	$	923		3.0	%
Commercial and industrial	22,345			27.6	%	22,855			27.5	%
Commercial real estate	21,833			52.4	%	20,123			51.6	%
Residential real estate	4,545			15.5	%	4,678			15.9	%
Consumer	564			1.8	%	621			2.0	%
Total	$	49,800		100.0	%	$	49,200		100.0	%

Allowance for credit losses ratio(1)	1.27		%			1.28		%

Allowance for credit losses to nonaccrual loans ratio(2)	344.88		%			322.50		%

(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) 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.

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



	For the Three Months Ended March 31, 2023 and 2022
(in thousands)	Agricultural			Commercial and Industrial			Commercial Real Estate			Residential Real Estate			Consumer			Total
For the Three Months Ended March 31, 2023
Charge-offs	$	(1)		$	(320)		$	(18)		$	—		$	(148)		$	(487)
Recoveries	26			75			5			4			44			154
Net (charge-offs) recoveries	$	25		$	(245)		$	(13)		$	4		$	(104)		$	(333)

Net (charge-off) recovery ratio(1)	—		%	(0.03)		%	—		%	—		%	(0.01)		%	(0.03)		%

For the Three Months Ended March 31, 2022
Charge-offs	$	—		$	(233)		$	(2,184)		$	(30)		$	(184)		$	(2,631)
Recoveries	7			225			117			16			44			409
Net (charge-offs) recoveries	$	7		$	(8)		$	(2,067)		$	(14)		$	(140)		$	(2,222)

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

















(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 ~~ALLL~~ACL as of ~~September 30, 2017~~March 31, 2023 was ~~$26.5~~$49.8 million, which was ~~1.17%~~1.27% of ~~total~~ loans ~~and 1.34%~~held for investment, net of ~~non-acquired loans~~unearned income as of that date. This compares with an ~~ALLL~~ACL of ~~$21.9~~$49.2 million as of December 31, ~~2016,~~2022, which was ~~1.01%~~1.28% of ~~total~~ loans ~~and 1.27%~~held for investment, net of ~~non-acquired loans~~unearned income. The increase in the ACL primarily reflected an additional reserve taken to support loan growth. The liability for off-balance sheet credit exposures totaled $4.8 million as of ~~that date.~~March 31, 2023 and December 31, 2022, and is included in 'Other liabilities' on the balance sheet.

The Company recorded a credit loss expense related to loans of $0.9 million for the three months ended March 31, 2023 as compared to a credit loss benefit related to loans of $0.3 million for the three months ended March 31, 2022. Gross charge-offs for the first ~~nine~~three months of ~~2017~~2023 totaled ~~$2.7~~$0.5 million, while there ~~was $0.7~~were $0.2 million in gross recoveries of previously charged-off loans. The ratio of annualized net ~~loan charge offs~~charge-offs to average loans for the first ~~nine~~three months of ~~2017~~2023 was ~~0.12%~~0.03% compared to ~~0.26%~~0.28% for the ~~year~~three months ended ~~December~~March 31, ~~2016. As of September 30, 2017,~~2022.

Economic Forecast: At March 31, 2023, the ~~ALLL was 102.4% of nonperforming loans compared with 76.8% as of December 31, 2016. Based on~~economic forecast used by the ~~inherent risk~~Company showed the following: (1) Midwest unemployment – 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 - increase 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,~~first forecasted quarter and ~~any growth~~declines in the second through fourth forecasted quarters; (4) Year-to-year change in U.S. GDP - increases over the next four

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forecasted quarters; (5) Year-to-year change in National Home Price Index – declines over the next four forecasted quarters; and (6) Rental Vacancy - increases over the next four forecasted quarters. In addition, management utilized qualitative factors to adjust the calculated ACL as appropriate. Qualitative factors are based on management’s judgment of company, market, industry or business specific data, changes in underlying loan ~~portfolio or uncertainty in the general economy will require that management continue~~composition of specific portfolios, trends relating to ~~evaluate the adequacy of the ALLL~~credit quality, delinquency, non-performing and ~~make additional provisions in future periods as deemed necessary.~~

~~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. Newadversely rated loans, and ~~loans renewed after the merger are considered non-acquired loans.~~reasonable and supportable forecasts of economic conditions.

At September 30, 2017

Gross Loans
(A)

Discount
(B)

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

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

At December 31, 2016

Gross Loans
(A)

Discount
(B)

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

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

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

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

Loan Policy: We review all ~~impaired and nonperforming~~nonaccrual loans greater than $250,000 individually on a quarterly basis to measure any amount to be recognized in the Company's allowance for credit losses by analyzing the borrower's ability to repay amounts owed, collateral deficiencies, and other relevant factors. In addition, PCD loans greater than $250,000 are evaluated individually to determine the required ACL. Loans modified to borrowers experiencing financial difficulty performing in accordance with their ~~level~~modified contractual terms for a reasonable period of ~~impairment due to collateral deficiency or insufficient cash-flow~~time may be included in the Company’s existing pools based on the underlying risk characteristics of the loan to measure the ACL. Upon the Company's determination that a ~~discounted cash-flow analysis. At September 30, 2017, TDRs were not~~modified loan (or a ~~material~~portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan ~~portfolio.~~is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. We review loans 90 days or more past due that are still accruing interest no less than quarterly to determine if the asset is both well secured and in the process of collection. If not, such loans are placed on non-accrual status.

Based on the inherent risk in the loan portfolio, management believed that as of March 31, 2023, the ACL was adequate; however, there is ~~a strong reason that~~no assurance losses will not exceed the ACL. In addition, growth in the loan portfolio or general economic deterioration may require the recognition of additional credit ~~should not be placed on non-accrual. The Bank’s board of directors has reviewed these credit relationships and determined that these loans~~loss expense in future periods. See Note 4. Loans Receivable and the ~~risks associated~~Allowance 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 March 31, 2023				As of December 31, 2022
(in thousands)	Balance		% of Total		Balance		% of Total
Noninterest bearing deposits	$	989,469	17.8	%	$	1,053,450	19.3	%
Interest checking deposits	1,476,948		26.6		1,624,278		29.8
Money market deposits	969,238		17.4		937,340		17.1
Savings deposits	631,811		11.4		664,169		12.1
Time deposits of $250 and under	599,302		10.8		559,466		10.2
Total core deposits	4,666,768		84.0		4,838,703		88.5
Brokered deposits	366,539		6.6		126,767		2.3
Time deposits of over $250	521,846		9.4		503,472		9.2
Total non-core deposits	888,385		16.0		630,239		11.5
Total deposits	$	5,555,153	100.0	%	$	5,468,942	100.0	%

Deposits increased $86.2 million from December 31, 2022, or 1.6%. Brokered deposits as of March 31, 2023 totaled $366.5 million, compared with ~~them~~$126.8 million as of December 31, 2022. Approximately 84.0% of our total deposits were ~~acceptable~~considered “core” deposits as of March 31, 2023, compared to 88.5% at December 31, 2022. 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 deposits. Deposit inflows and outflows are influenced by prevailing market interest rates, competition, local and national economic conditions, and fluctuations in our business customers own liquidity needs and may also be influenced by recent developments in the financial services industry. See Note 8. Deposits to our consolidated financial statements for additional information related to our deposits.

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Short-Term Borrowings and Long-Term Debt

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


(dollars in thousands)	March 31, 2023		December 31, 2022
Securities sold under agreements to repurchase	$	137,481	$	156,373
Federal home loan bank advances	6,500		235,500



Total short-term borrowings	$	143,981	$	391,873

Junior subordinated notes issued to capital trusts	42,160		42,116
Subordinated debentures	64,039		64,006
Finance lease payable	744		787
Federal home loan bank borrowings	17,288		17,301
Other long-term debt	13,750		15,000
Total long-term debt	$	137,981	$	139,210

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.

Capital Resources

Shareholder's Equity and Capital Adequacy

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


	March 31, 2023			December 31, 2022
Total shareholders’ equity to total assets ratio	7.81		%	7.49		%
Tangible common equity ratio(1)	6.48		%	6.17		%
Total risk-based capital ratio	12.31		%	12.07		%
Tier 1 risk-based capital ratio	10.18		%	10.05		%
Common equity tier 1 risk-based capital ratio	9.39		%	9.28		%
Tier 1 leverage ratio	8.30		%	8.35		%
Book value per share	$	31.94		$	31.54
Tangible book value per share(1)	$	26.13		$	25.60
(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~~$500.7 million as of ~~September 30, 2017,~~March 31, 2023, compared to ~~$305.5~~$492.8 million as of December 31, ~~2016,~~2022, an increase of ~~$41.1~~$7.9 million, or ~~13.5%. This increase was~~1.6%, 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 adjustments~~a decrease in AOCI due to a decrease in 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 were~~debt securities, which was partially offset by ~~the payment of $6.0 million~~a decrease 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.retained earnings.

~~Our Tier 1 capital to risk-weighted assets ratio was 11.43% as of September 30, 2017 and was 10.73% as of December 31, 2016.~~Capital Adequacy: Risk-based capital guidelines require the classification of assets and some off-balance-sheet items in terms of credit-risk exposure and the measuring of capital as a percentage of the risk-adjusted asset totals. Management believed that, as of ~~September 30, 2017,~~March 31, 2023, 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 assets 11.43 % 10.73 %
Common equity tier 1 capital to risk-weighted assets 10.52 % 9.75 %

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

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

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

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

On ~~February 15, 2017~~, ~~25,400~~ ~~restricted~~Restricted stock units were granted to certain officers and directors of the Company ~~and~~ on ~~May~~February 15, ~~2017, 7,600 restricted stock units were granted to members~~2023, in the aggregate amount of ~~the board of directors of the Company.~~80,745. Additionally, during the first ~~nine~~three months of ~~2017~~, ~~26,875~~2023, 68,962 shares of common stock were issued in connection with the vesting of previously awarded grants of restricted stock units, of which ~~2,957~~17,614 shares were surrendered by grantees to satisfy tax requirements, and ~~no nonvested~~446 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 had~~Excess liquidity is invested generally in short-term U.S. government and agency

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securities, short- and medium-term state and political subdivision securities, and other investment securities. Our most liquid assets ~~(cash~~are cash and due from banks, interest-bearing bank deposits, and federal funds sold. The balances of these assets are dependent on our operating, investing, and financing activities during any given period.

Cash and cash ~~equivalents) of $42.1 million as of September 30, 2017, compared with $43.2 million as of~~equivalents are summarized in the table below. Since December 31, ~~2016. Interest-bearing~~2022, 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 March 31, 2023		As of December 31, 2022
Cash and due from banks	$	63,945	$	83,990
Interest-bearing deposits	5,273		2,445

Total	$	69,218	$	86,435

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

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

Net cash provided by operations was another major source of liquidity. The net cash provided by operating activities was $17.6 million of indebtedness payable under junior subordinated debentures issued to subsidiary trusts that issued trust preferred securities in pooled offerings. See Note 9. “Subordinated Notes Payable” to our consolidated financial statements for ~~additional information related to our junior subordinated notes.~~the three-months ended March 31, 2023 and $26.2 million for the three-months ended March 31, 2022.

Inflation

The effects of price changes and inflation can vary substantially for most financial institutions. While management believes that inflation affects the growth of total assets, it is difficult to assess its overall impact on the Company. The price of one or more of the components of the Consumer Price Index ~~(“CPI”)~~ may fluctuate considerably and thereby influence the overall ~~CPI~~Consumer Price Index without having a corresponding effect on interest rates or upon the cost of those goods and services normally purchased by us. ~~In years~~Inflation and related increases in market rates by the Federal Reserve generally decrease the market value of ~~high~~investments 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 ~~high~~rising interest rates ~~intermediate~~could place increased demand on our liquidity if we experience significant credit deterioration and ~~long-term~~as we meet borrowers' needs. There is also a risk that interest ~~rates tend~~rate 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 ~~tend~~could 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 business~~order to meet the financing needs of our ~~customers, which~~customers. These financial instruments include commitments to extend credit, ~~standby~~commitments to sell loans, and ~~performance~~standby letters of credit. We follow the same credit ~~and~~policy (including requiring collateral, if deemed appropriate) to make such commitments ~~to originate residential mortgage~~as is followed for those loans ~~held for sale. Commitments to extend credit~~that are ~~agreements to lend to customers at predetermined interest rates, as long as there is no violation of any condition established~~recorded in ~~the contracts.~~ our financial statements.

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

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

~~Commitments under standby and performance letters of credit outstanding totaled $9.8 million as of September 30, 2017. We do not anticipate~~expect any significant losses as a result of these ~~transactions.~~commitments, and also expects to have sufficient liquidity available to cover these off-balance-sheet instruments. Off-balance-sheet transactions are more fully discussed in Note 13. Commitments and Contingencies to our unaudited consolidated financial statements.

~~Residential mortgage loans sold~~Contractual Obligations

There have been no material changes to ~~others are predominantly conventional residential first lien mortgages originated under our usual underwriting procedures, and are most often sold on a nonrecourse basis. At~~ ~~September 30, 2017, there were approximately~~ ~~$0.6 million~~ ~~of mandatory commitments with investors to sell not yet originated residential mortgage loans. We do not anticipate any losses~~the Company's contractual obligations existing at December 31, 2022, as ~~a result of these transactions.~~

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

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

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

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 filings~~filed with the ~~Securities~~SEC on March 13, 2023.

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, efficiency ratio, net interest margin (tax equivalent), and core net interest margin. Management believes these ratios and amounts provide investors with useful information regarding the Company’s

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~~We qualify all~~profitability, financial condition and capital adequacy, consistent with how management evaluates the Company’s financial performance. The following tables provide a reconciliation of ~~our forward-looking statements by~~each non-GAAP measure to the ~~foregoing cautionary statements. Because~~most comparable GAAP equivalent.


	Three Months Ended
Return on Average Tangible Equity	March 31, 2023			March 31, 2022
(Dollars in thousands)
Net income	$	1,397		$	13,895
Intangible amortization, net of tax (1)	1,314			920

Tangible net income	$	2,711		$	14,815

Average shareholders' equity	$	498,547		$	524,851
Average intangible assets, net	(92,002)			(81,763)
Average tangible equity	$	406,545		$	443,088

Return on average equity	1.14		%	10.74		%
Return on average tangible equity (2)	2.70		%	13.56		%

(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	March 31, 2023			December 31, 2022
(Dollars in thousands, except per share data)
Total shareholders’ equity	$	500,650		$	492,793
Intangible assets, net	(91,040)			(92,792)
Tangible common equity	$	409,610		$	400,001

Total assets	$	6,409,952		$	6,577,876
Intangible assets, net	(91,040)			(92,792)
Tangible assets	$	6,318,912		$	6,485,084

Book value per share	$	31.94		$	31.54
Tangible book value per share (1)	$	26.13		$	25.60
Shares outstanding	15,675,325			15,623,977

Equity to assets ratio	7.81		%	7.49		%
Tangible common equity ratio (2)	6.48		%	6.17		%

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


	Three Months Ended
Efficiency Ratio	March 31, 2023			March 31, 2022
(dollars in thousands)
Total noninterest expense	$	33,319		$	31,643
Amortization of intangibles	(1,752)			(1,227)
Merger-related expenses	(136)			(128)

Noninterest expense used for efficiency ratio	$	31,431		$	30,288

Net interest income, tax equivalent(1)	$	41,314		$	38,491
Noninterest income	(4,046)			11,644
Investment security losses (gains), net	13,170			(40)
Net revenues used for efficiency ratio	$	50,438		$	50,095

Efficiency ratio(2)	62.32		%	60.46		%
(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.

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


	Three Months Ended
Net Interest Margin, Tax Equivalent/Core Net Interest Margin	March 31, 2023			March 31, 2022
(dollars in thousands)
Net interest income	$	40,076		$	37,336
Tax equivalent adjustments:
Loans (1)	716			540
Securities (1)	522			615
Net interest income, tax equivalent	$	41,314		$	38,491
Loan purchase discount accretion	(1,189)			(732)
Core net interest income	$	40,125		$	37,759

Net interest margin	2.66		%	2.71		%
Net interest margin, tax equivalent (2)	2.75		%	2.79		%
Core net interest margin (3)	2.67		%	2.74		%
Average interest earning assets	$	6,100,456		$	5,588,001

(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.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

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

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

Liquidity Risk

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

Net cash inflows from operating activities were ~~$34.0~~$17.6 million in the first ~~nine~~three months of ~~2017,~~2023, compared with ~~$32.1~~$26.2 million in the first ~~nine~~three months of ~~2016. Net income before depreciation, amortization, and accretion is generally the primary contributor for net cash inflows from operating activities.~~

2022. Net cash ~~outflows~~inflows from investing activities were ~~$76.5~~$132.5 million in the first ~~first nine~~three months of ~~2017,~~2023, compared to net cash outflows of ~~$27.3~~$113.8 million in the comparable ~~nine-month~~three-month period of ~~2016. In the first nine months of 2017, investment securities transactions resulted in net cash inflows of $37.6 million, compared to outflows of $39.4 million during the same period of 2016.~~2022. Net cash outflows related to the net increase in loans were $100.9 million for the first nine months of 2017, compared with $7.1 million of net cash inflows related to the net decrease in loans for the same period of 2016. Purchases of bank owned life insurance resulted in $11.2 million of cash outflows in the first nine months of 2017.

~~Net cash inflows~~ from financing activities in the first ~~nine~~three months of ~~2017~~2023 were ~~$41.4~~$167.4 million, compared with net cash ~~inflows~~outflows of ~~$2.0 thousand~~$56.4 million for the same period of 2016. The largest financing cash inflows during the nine months ended September 30, 2017 were a net increase of $30.0 million in FHLB borrowings, $24.4 million of proceeds, net of expenses, from the issuance of common stock, and an increase of $10.0 million in deposits. Uses of cash were a decrease of $19.0 million in federal funds purchased, $6.0 million to pay dividends, and $3.8 million of payments on long-term debt.2022.

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

•Federal Home Loan Bank Advances

•Brokered Deposits

•Brokered Repurchase Agreements

Federal Funds ~~Lines:~~

Lines - Routine liquidity requirements are met by fluctuations in the federal funds position of the Bank. The principal function of these funds is to maintain short-term liquidity. Unsecured federal funds purchased lines are viewed as a volatile liability and are not used as a long-term funding solution, especially when used to fund long-term assets. ~~Multiple correspondent relationships are preferable and federal funds sold exposure to any one customer is continuously monitored.~~ The current federal funds purchased limit is 10% of total assets, or the amount of established federal funds lines, whichever is smaller. ~~Currently,~~As of March 31, 2023, the Bank ~~has~~maintains several unsecured federal funds lines totaling ~~$110.0~~$155.0 million, which lines are tested annually to ensure availability.

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Federal Reserve Bank Discount Window and Bank Term Funding Program - The Federal Reserve Bank Discount Window and the Bank Term Funding Program are additional sources of liquidity, particularly during periods of economic uncertainty or stress. The Bank has a borrowing capacity with the Federal Reserve Bank of Chicago limited by the amount of municipal securities pledged against the line. As of March 31, 2023, the Bank had municipal securities with an approximate market value of $494.1 million pledged for liquidity purposes, and had a borrowing capacity of $509.7 million. There were no outstanding borrowings through the FRB Discount Window, nor the Bank Term Funding Program at March 31, 2023.

Federal Home Loan Bank Advances - FHLB ~~Borrowings:~~

~~FHLB borrowings~~advances provide both a source of liquidity and long-term funding for the Bank. ~~Use of this type of funding is coordinated with both~~Advances from the ~~strategic balance sheet growth projections~~FHLBDM are collateralized primarily by one- to four-family residential, commercial and ~~interest rate risk profile~~agricultural real estate first mortgages equal to various percentages of the ~~Bank. Factors that are taken into account when contemplating use~~total outstanding notes. The current FHLB borrowing limit is 45% 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.~~total assets. As of ~~September 30, 2017~~,March 31, 2023, the Bank had ~~$145.0~~$6.5 million of short-term FHLB advances and $17.3 million in ~~outstanding~~long-term FHLB borrowings, leaving ~~$162.2~~$777.2 million available for liquidity needs, based on collateral capacity. ~~These borrowings are secured by various real estate loans (residential, commercial~~

Brokered Deposits and ~~agricultural).~~

~~Brokered Deposits:~~

Reciprocal Deposits - The Bank has brokered ~~certificate of~~time deposit ~~lines~~ and non-maturity deposit relationships available to ~~help~~ diversify its ~~various~~ funding sources. Brokered deposits offer several benefits relative to other funding sources, such as: maturity structures which cannot be duplicated in the current ~~deposit~~retail market, deposit gathering which does not cannibalize the existing deposit base, the unsecured nature of these liabilities, and the ability to quickly generate funds. However, brokered deposits are often viewed as a volatile liability by banking regulators and market participants. This viewpoint, and the desire to not develop a large funding concentration in any one area outside of theThe Bank’s ~~core market area, is reflected in an~~ internal policy ~~stating that the Bank limit~~limits the use of brokered deposits as a funding source to no more than 10% of total assets. Board approval is required to exceed this limit. The Bank will also have to maintain a “well capitalized” standing to access brokered deposits, as an “adequately capitalized” rating would require an FDIC waiver to do so, and an “undercapitalized” rating would prohibit it from using brokered deposits altogether. The Company had $366.5 million as of March 31, 2023 and $126.8 million as of December 31, 2022 of brokered deposits.

Under a final rule that was issued by the FDIC in December 2018, financial institutions that are considered "well capitalized" qualify for the exemption of certain reciprocal deposits from being considered brokered deposits. Such exemption is limited to the lesser of 20 percent of total liabilities or $5 billion, with some exceptions for financial institutions that do not meet such criteria. At March 31, 2023, the Company had $6.0 million of reciprocal time deposits and $39.3 million of reciprocal non-maturity deposits 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.

Brokered Repurchase ~~Agreements:~~

Agreements - Brokered repurchase agreements may be established with approved brokerage firms and banks. Repurchase agreements create rollover risk (the risk that a broker will discontinue the relationship due to market factors) and are not used as a long-term funding solution, especially when used to fund long-term assets. Collateral requirements and availability are evaluated and monitored. The current policy limit for brokered repurchase agreements is 10% of total assets. There were no outstanding brokered repurchase agreements at ~~September 30, 2017~~.March 31, 2023.

~~Federal Reserve Bank Discount Window:~~

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

Interest Rate Risk

Interest rate risk is defined as the exposure of net interest income and fair value of financial instruments (interest-earning assets, deposits and borrowings) to movements in interest rates. The Company’s results of operations depend to a large degree on its net interest income and its ability to manage interest rate risk. The Company considers interest rate risk to be ~~one of its more~~a significant market ~~risks.~~risk. The major sources of the ~~Company's~~Company’s interest rate risk are timing differences in the maturity and re-pricing characteristics of assets and liabilities, changes in the shape of the yield curve, changes in customer behavior and changes in relationships between rate indices (basis risk). Management measures these risks and their impact in various ways, including through the use of income simulation and valuation analyses. ~~The~~Multiple interest rate scenarios are used in ~~such~~this analysis ~~may~~which include ~~gradual or rapid~~ changes in interest rates, spread narrowing and widening, yield curve twists and changes in assumptions about customer behavior in various interest rate scenarios. A mismatch between maturities, interest rate sensitivities and prepayment characteristics of assets and liabilities results in interest-rate risk. Like most financial institutions, we have material interest-rate risk exposure to changes in both short-term and long-term interest rates, as well as variable interest rate indices (e.g., the prime rate, LIBOR, or ~~LIBOR)~~SOFR). There has been no material change in the Company’s interest rate profile between September 30, 2017 and December 31, 2016. The mix of earning assets and interest-bearing liabilities has remained stable over the period.

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

We use a third-party service to model and measure our exposure to potential interest rate changes. For various assumed hypothetical changes in market interest rates, numerous other assumptions are made, such as prepayment speeds on loans and

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securities backed by mortgages, the slope of the Treasury yield-curve, the rates and volumes of our deposits, and the rates and volumes of our loans. There are two primary tools used to evaluate interest rate risk: net interest income simulation and economic value of equity ("EVE"). In addition, interest rate gap is reviewed to monitor asset and liability repricing over various time periods.

Net Interest Income ~~Simulation:~~

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

The following table presents the anticipated effect on net interest income over a twelve month period if short- and long-term interest rates were to sustain an immediate decrease of 100 basis points or 200 basis points, or an immediate increase of 100 basis points or 200 basis ~~points (an immediate decrease of 200 basis points was considered unlikely):~~points:

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

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

Percent change (1.3 )% 0.2 % 0.5 %


	Immediate Change in Rates
(dollars in thousands)	-200			-100			+100			+200
March 31, 2023
Dollar change	$	6,426		$	4,191		$	(5,520)		$	(11,286)
Percent change	3.8		%	2.5		%	(3.3)		%	(6.7)		%
December 31, 2022
Dollar change	$	8,398		$	5,637		$	(6,738)		$	(13,921)
Percent change	5.2		%	3.5		%	(4.2)		%	(8.7)		%

As of ~~September 30, 2017, 38.4%~~March 31, 2023, 28.6% of the Company’s earning asset balances will reprice or are expected to pay down in the next twelve months, and ~~64.8%~~44.4% of the Company’s deposit balances are low cost or no cost deposits.

Economic Value of ~~Equity:~~

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

Interest Rate ~~Gap:~~

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

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

~~Under supervision and with the participation of certain members of our~~The Company’s management, including ~~our chief executive officer~~the Chief Executive Officer, the Chief Financial Officer, and ~~chief financial officer, we completed an evaluation of~~the Chief Accounting Officer, evaluated the effectiveness of the ~~design and operation of our~~Company’s disclosure controls and procedures (as defined in ~~Rules~~Rule 13a-15(e) ~~and~~or Rule 15d-15(e) under the ~~Securities~~Exchange Act) that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act ~~of 1934, as amended) as of~~ ~~September 30, 2017~~.is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer, the Chief Financial Officer, and the Chief Accounting Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, ~~our chief executive officer~~the Chief Executive Officer, the Chief Financial Officer, and ~~chief financial officer~~the Chief Accounting Officer, have concluded that the Company’s disclosure controls and procedures were effective as of ~~the end~~March 31, 2023.

Table 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.Contents

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

Changes in Internal Control over Financial Reporting

There ~~was~~were no ~~change~~changes in ~~our~~the Company’s internal ~~control~~controls over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) that occurred during the ~~last fiscal~~ quarter ended March 31, 2023 that ~~has~~have materially affected or isare reasonably likely to materially affect ~~our~~the Company's internal control over financial reporting.

Table of Contents

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

There have been no material changes ~~from~~to the risk factors set forth inunder Part I, Item ~~1A. “Risk Factors” of our Annual Report on~~1A "Risk Factors" in the Company's Form 10-K for the ~~period~~fiscal year ended December 31, ~~2016~~.2022. 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

~~We did not repurchase any~~

The following table sets forth information about the Company’s purchases of ~~our equity securities~~its common stock during the ~~third~~first quarter of ~~2017.~~2023:


	Total Number of Shares Purchased(1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs(2)	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program
January 1 - 31, 2023	—	$	—	—	$	3,042,363
February 1 - 28, 2023	17,614	30.97		—	3,042,363
March 1 - 31, 2023	—	—		—	3,042,363
Total	17,614	$	30.97	—	$	3,042,363

(1) During the three months ended March 31, 2023, no shares were repurchased under the current share repurchase program, while 17,614 shares were 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 repurchase program replaced the Company’s prior repurchase program, which was due to expire on December 31, 2021. Since June 23, 2021 and through March 31, 2023, the Company repurchased 403,368 shares of common stock for approximately $12.0 million, leaving $3.0 million available to be repurchased.

On ~~July 21, 2016,~~April 27, 2023, the ~~board~~Board of ~~directors~~Directors of the Company approved a new share repurchase program, allowing for the repurchase of up to ~~$5.0~~$15.0 million of the Company's common stock through December 31, ~~2018. The~~2025. This new repurchase program replaced the Company’s prior repurchase program, ~~pursuant~~which was due to ~~which~~expire on December 31, 2023. Since April 28, 2023 and through May 3, 2023, the Company ~~had~~ repurchased ~~$1.2 million~~no shares of common stock, ~~since the plan was announced in July 2014. Pursuant~~leaving $15.0 million available 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.repurchased.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

Table of Contents

Item 6. Exhibits.

Exhibit

Number

Description

Incorporated by Reference to:

~~10.1~~3.1

~~Employment Agreement between MidWestOne~~

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

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

3.2

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

Exhibit 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, ~~2017~~2022

Exhibit ~~10.1~~3.1 to the Company’s Current Report on Form 8-K filed with the SEC on October ~~18, 2017~~19, 2022

~~10.2~~10.1

~~Employment Agreement between MidWestOne~~

Letter agreement, dated January 24, 2023, from the Compensation Committee of the Board of Directors of MidWestOne Financial Group, Inc. ~~and Kevin Kramer, effective October 18, 2017~~, to Charles N. Funk regarding compensation matters

Exhibit ~~10.2~~10.1 to the ~~Company’s~~Company's Current Report on Form 8-K filed with the SEC on ~~October 18, 2017~~January 26, 2023

~~10.3~~31.1

~~Employment Agreement between MidWestOne Financial Group, Inc. and Kent L. Jehle, effective October 18, 2017~~

~~Exhibit 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, 2017~~

~~Exhibit 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, 2017~~

~~Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on October 18, 2017~~

~~31.1~~

Certification of ~~Chief~~Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)

Filed herewith

31.2

Certification of ~~Chief~~Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)

Filed herewith

~~32.1~~31.3

Certification of ~~Chief~~Principal 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 2002

Filed herewith

32.2

Certification of ~~Chief~~Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed herewith

~~101.INS~~

32.3

~~XBRL Instance Document~~Certification of Principal Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed herewith

~~101.SCH~~101

The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Shareholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

Filed herewith

101.SCH

Inline XBRL Taxonomy Extension Schema Document

Filed herewith

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Filed herewith

~~101.DEF~~

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

Filed herewith

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

Filed herewith

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Filed herewith

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Filed herewith

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MIDWESTONE FINANCIAL GROUP, INC.

Dated:

May 5, 2023

By:

/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)

MIDW~~EST~~ONE F~~INANCIAL~~ G~~ROUP, I~~NC.

By:

/s/ JOHN J. RUPPEL

John J. Ruppel

~~Dated:~~

~~November 2, 2017~~

~~By:~~

~~/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)~~

6552



Iowa						42-1206172
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)



102 South Clinton Street, Iowa City, IA 52240						(319) 356-5800
(Address of principal executive offices, including zip code)						(Registrant’s telephone number, including area code)



	As of September 30, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
(in thousands)
U.S. Government agencies and corporations	$	5,714	$	3	$	3	$	5,714
State and political subdivisions	145,843		3,798		29		149,612
Mortgage-backed securities	50,939		403		42		51,300
Collateralized mortgage obligations	169,662		109		3,339		166,432
Corporate debt securities	51,731		196		98		51,829
Total debt securities	423,889		4,509		3,511		424,887
Other equity securities	2,266		120		32		2,354
Total	$	426,155	$	4,629	$	3,543	$	427,241



	As of December 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
(in thousands)
U.S. Government agencies and corporations	$	5,895	$	10	$	—	$	5,905
State and political subdivisions	162,145		3,545		418		165,272
Mortgage-backed securities	61,606		315		567		61,354
Collateralized mortgage obligations	175,506		148		4,387		171,267
Corporate debt securities	72,979		76		602		72,453
Total debt securities	478,131		4,094		5,974		476,251
Other equity securities	1,259		66		58		1,267
Total	$	479,390	$	4,160	$	6,032	$	477,518



	As of September 30, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
(in thousands)
State and political subdivisions	$	123,753	$	1,486	$	715	$	124,524
Mortgage-backed securities	2,093		7		5		2,095
Collateralized mortgage obligations	23,063		—		419		22,644
Corporate debt securities	34,395		638		350		34,683
Total	$	183,304	$	2,131	$	1,489	$	183,946


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



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



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



(unaudited) (dollars in thousands, except per share amounts)	Preferred Stock		Common Stock		Additional Paid-in Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance at December 31, 2015	$	—	$	11,713	$	163,487		$	(6,331	)	$	123,901		$	3,408		$	296,178
Net income	—		—		—			—			16,521			—			16,521
Dividends paid on common stock ($0.48 per share)	—		—		—			—			(5,487		)	—			(5,487		)
Stock options exercised (2,900 shares)	—		—		(22		)	60			—			—			38
Release/lapse of restriction on RSUs (25,633 shares)	—		—		(520		)	495			—			—			(25		)
Stock compensation	—		—		547			—			—						547
Other comprehensive income, net of tax	—		—		—			—			—			1,812			1,812
Balance at September 30, 2016	$	—	$	11,713	$	163,492		$	(5,776	)	$	134,935		$	5,220		$	309,584
Balance at December 31, 2016	$	—	$	11,713	$	163,667		$	(5,766	)	$	136,975		$	(1,133	)	$	305,456
Net income	—		—		—			—			20,289			—			20,289
Issuance of common stock (750,000 shares), net of expenses of $1,328,000	—		750		23,610			—			—			—			24,360
Dividends paid on common stock ($0.50 per share)	—		—		—			—			(5,984		)	—			(5,984		)
Stock options exercised (8,250 shares)	—		—		(81		)	172			—			—			91
Release/lapse of restriction on RSUs (26,875 shares)	—		—		(560		)	453			—			—			(107		)
Stock compensation	—		—		660			—			—			—			660
Other comprehensive income, net of tax	—		—		—			—			—			1,798			1,798
Balance at September 30, 2017	$	—	$	12,463	$	187,296		$	(5,141	)	$	151,280		$	665		$	346,563


	As of March 31, 2023
(in thousands)	Amortized Cost (1)		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Loss related to Debt Securities		Fair Value
Available for Sale
State and political subdivisions	$	196,497	$	24	$	11,940	$	—	$	184,581
Mortgage-backed securities	5,851		5		177		—		5,679
Collateralized loan obligations	54,224		—		150		—		54,074
Collateralized mortgage obligations	168,135		—		23,469		—		144,666
Corporate debt securities	624,673		22		59,621		—		565,074
Total available for sale debt securities	$	1,049,380	$	51	$	95,357	$	—	$	954,074

Held to Maturity
State and political subdivisions	$	538,182	$	—	$	71,250	$	—	$	466,932
Mortgage-backed securities	79,597		—		11,772		—		67,825
Collateralized mortgage obligations	499,930		—		96,152		—		403,778
Total held to maturity debt securities	$	1,117,709	$	—	$	179,174	$	—	$	938,535
(1) Amortized cost for the held to maturity securities includes $0.2 million of unamortized gain in state and political subdivisions, $10 thousand of unamortized losses in mortgage-backed securities and $11.4 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.


		As of March 31, 2023
	Number of Securities	Less than 12 Months				12 Months or More				Total
Available for Sale		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
(in thousands, except number of securities)

State and political subdivisions	187	$	58,853	$	2,606	$	111,956	$	9,334	$	170,809	$	11,940
Mortgage-backed securities	25	969		26		4,269		151		5,238		177
Collateralized loan obligations	2	9,708		150		—		—		9,708		150
Collateralized mortgage obligations	20	37,129		2,313		107,537		21,156		144,666		23,469
Corporate debt securities	152	133,706		5,121		424,397		54,500		558,103		59,621
Total	386	$	240,365	$	10,216	$	648,159	$	85,141	$	888,524	$	95,357



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




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




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



	~~Commission file number 001-35968~~



	Pass		Special Mention/ Watch		Substandard		Doubtful		Loss		Total
(in thousands)
September 30, 2017
Agricultural	$	84,594	$	22,265	$	1,329	$	—	$	—	$	108,188
Commercial and industrial⁽¹⁾	468,161		25,836		18,030		7		—		512,034
Commercial real estate:
Construction and development	140,547		1,066		2,136		—		—		143,749
Farmland	77,020		10,098		411		—		—		87,529
Multifamily	134,451		1,777		496		—		—		136,724
Commercial real estate-other	698,941		32,235		28,924		—		—		760,100
Total commercial real estate	1,050,959		45,176		31,967		—		—		1,128,102
Residential real estate:
One- to four- family first liens	349,582		2,978		10,135		—		—		362,695
One- to four- family junior liens	112,808		1,124		1,818		—		—		115,750
Total residential real estate	462,390		4,102		11,953		—		—		478,445
Consumer	36,930		—		79		33		—		37,042
Total	$	2,103,034	$	97,379	$	63,358	$	40	$	—	$	2,263,811



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



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


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

2023	$	4,098	$	360	$	36	$	4,494
2024	4,705		239		24		4,968
2025	3,751		18		2		3,771
2026	2,797		—		—		2,797
2027	1,843		—		—		1,843
Thereafter	3,650		—		—		3,650
Total	$	20,844	$	617	$	62	$	21,523



	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



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


(in thousands)	Weighted Average Rate		Amount
Due in 2023	2.79	%	$	11,000
Due in 2024	3.11	%	6,250




Total	2.91	%	17,250
Valuation adjustment from acquisition accounting			38
Total			$	17,288


	Actual		For Capital Adequacy Purposes With Capital Conservation Buffer(1)		To Be Well Capitalized Under Prompt Corrective Action Provisions
(dollars in thousands)	Amount	Ratio	Amount	Ratio	Amount	Ratio
At March 31, 2023
Consolidated:
Total capital/risk weighted assets	$654,151	12.31%	$557,940	10.50%	N/A	N/A
Tier 1 capital/risk weighted assets	540,980	10.18	451,666	8.50	N/A	N/A
Common equity tier 1 capital/risk weighted assets	498,820	9.39	371,960	7.00	N/A	N/A
Tier 1 leverage capital/average assets	540,980	8.30	260,813	4.00	N/A	N/A
MidWestOne Bank:
Total capital/risk weighted assets	$653,184	12.31%	$557,101	10.50%	$530,573	10.00%
Tier 1 capital/risk weighted assets	605,014	11.40	450,987	8.50	424,458	8.00
Common equity tier 1 capital/risk weighted assets	605,014	11.40	371,401	7.00	344,872	6.50
Tier 1 leverage capital/average assets	605,014	9.28	260,685	4.00	325,857	5.00

At December 31, 2022
Consolidated:
Total capital/risk weighted assets	$653,380	12.07%	$568,452	10.50%	N/A	N/A
Tier 1 capital/risk weighted assets	544,300	10.05	460,175	8.50	N/A	N/A
Common equity tier 1 capital/risk weighted assets	502,184	9.28	378,968	7.00	N/A	N/A
Tier 1 leverage capital/average assets	544,300	8.35	260,891	4.00	N/A	N/A
MidWestOne Bank:
Total capital/risk weighted assets	$654,297	12.10%	$567,684	10.50%	$540,652	10.00%
Tier 1 capital/risk weighted assets	610,217	11.29	459,554	8.50	432,522	8.00
Common equity tier 1 capital/risk weighted assets	610,217	11.29	378,456	7.00	351,424	6.50
Tier 1 leverage capital/average assets	610,217	9.36	260,776	4.00	325,970	5.00



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


	Fair Value Measurement at March 31, 2023 Using
(in thousands)	Total		Level 1		Level 2		Level 3
Assets:
Available for sale debt securities:
State and political subdivisions	$	184,581	$	—	$	184,581	$	—
Mortgage-backed securities	5,679		—		5,679		—
Collateralized loan obligations	54,074		—		54,074		—
Collateralized mortgage obligations	144,666		—		144,666		—
Corporate debt securities	565,074		—		565,074		—
Derivative assets	18,513		—		18,412		101
Mortgage servicing rights	13,736		—		13,736		—

Liabilities:
Derivative liabilities	$	16,302	$	—	$	16,302	$	—



	Fair Value Measurement at September 30, 2017 Using
(in thousands)	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Available for sale debt securities:
U.S. Government agencies and corporations	$	5,714	$	—	$	5,714	$	—
State and political subdivisions	149,612		—		149,612		—
Mortgage-backed securities	51,300		—		51,300		—
Collateralized mortgage obligations	166,432		—		166,432		—
Corporate debt securities	51,829		—		51,829		—
Total available for sale debt securities	424,887		—		424,887		—
Other equity securities	2,354		2,354		—		—
Total securities available for sale	$	427,241	$	2,354	$	424,887	$	—


	Fair Value Measurement at December 31, 2022 Using
(in thousands)	Total		Level 1		Level 2		Level 3
Assets:
Debt securities available for sale:
U.S. Government agencies and corporations	$	7,345	$	—	$	7,345	$	—
State and political subdivisions	285,356		—		285,356		—
Mortgage-backed securities	5,944		—		5,944		—

Collateralized mortgage obligations	147,193		—		147,193		—
Corporate debt securities	707,709		—		707,709		—
Derivative assets	23,655		—		23,648		7
Mortgage servicing rights	13,421		—		13,421		—

Liabilities:
Derivative liabilities	$	21,087	$	—	$	21,087	$	—


	Fair Value at
(dollars in thousands)	March 31, 2023		December 31, 2022		Valuation Techniques(s)	Unobservable Input	Range of Inputs			Weighted Average
Interest rate lock commitments	$	101	$	7	Quoted or published market prices of similar instruments, adjusted for factors such as pull-through rate assumptions	Pull-through rate	71%	-	100%	92%



	September 30, 2017
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
(in thousands)
Financial assets:
Cash and cash equivalents	$	42,101	$	42,101	$	42,101	$	—	$	—
Investment securities:
Available for sale	427,241		427,241		2,354		424,887		—
Held to maturity	183,304		183,946		—		183,946		—
Total investment securities	610,545		611,187		2,354		608,833		—
Loans held for sale	612		625		—		—		625
Loans, net	2,237,301		2,235,820		—		2,235,820		—
Accrued interest receivable	13,871		13,871		13,871		—		—
Federal Home Loan Bank stock	13,025		13,025		—		13,025		—
Financial liabilities:
Deposits:
Non-interest bearing demand	477,376		477,376		477,376		—		—
Interest-bearing checking	1,137,592		1,137,592		1,137,592		—		—
Savings	203,506		203,506		203,506		—		—
Certificates of deposit under $100,000	324,024		322,071		—		322,071		—
Certificates of deposit $100,000 and over	347,917		346,866		—		346,866		—
Total deposits	2,490,415		2,487,411		1,818,474		668,937		—
Federal funds purchased and securities sold under agreements to repurchase	104,672		104,672		104,672		—		—
Federal Home Loan Bank borrowings	145,000		144,381		—		144,381		—
Junior subordinated notes issued to capital trusts	23,768		19,514		—		19,514		—
Long-term debt	13,750		13,750		—		13,750		—
Accrued interest payable	1,449		1,449		1,449		—		—


(in thousands)	Classification	March 31, 2023			December 31, 2022
Operating lease right-of-use assets	Other assets	$	2,536		$	2,492
Finance lease right-of-use asset	Premises and equipment, net	326			350
Total right-of-use assets		$	2,862		$	2,842

Operating lease liability	Other liabilities	$	3,364		$	3,359
Finance lease liability	Long-term debt	744			787
Total lease liabilities		$	4,108		$	4,146


Weighted-average remaining lease term:	Operating leases	10.08 years			9.23 years
	Finance lease	3.42 years			3.67 years
Weighted-average discount rate:	Operating leases	4.33		%	4.23		%
	Finance lease	8.89		%	8.89		%


(in thousands)	Finance Leases		Operating Leases
December 31, 2023	$	184	$	845
December 31, 2024	250		892
December 31, 2025	255		422
December 31, 2026	172		328
December 31, 2027	—		243
Thereafter	—		1,708
Total undiscounted lease payment	$	861	$	4,438
Amounts representing interest	(117)		(1,074)
Lease liability	$	744	$	3,364


	As of or for the Three Months Ended March 31,
(dollars in thousands, except per share amounts)	2023			2022
Net Interest Income	$	40,076		$	37,336
Noninterest Income (Loss)	(4,046)			11,644
Total Revenue, Net of Interest Expense	36,030			48,980
Credit Loss Expense	933			—
Noninterest Expense	33,319			31,643
Income Before Income Tax Expense	1,778			17,337
Income Tax Expense	381			3,442
Net Income	1,397			13,895
Diluted Earnings Per Share	$	0.09		$	0.88




Return on Average Assets	0.09		%	0.95		%
Return on Average Equity	1.14			10.74
Return on Average Tangible Equity(1)	2.70			13.56
Efficiency Ratio(1)	62.32			60.46
Dividend Payout Ratio	269.44			26.69

Common Equity Ratio	7.81			8.46
Tangible Common Equity Ratio(1)	6.48			7.20
Book Value per Share	$	31.94		$	32.15
Tangible Book Value per Share(1)	26.13			26.98
(1) A non-GAAP financial measure. See "Non-GAAP Financial Measures" for a reconciliation to the most comparable GAAP equivalents.



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



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



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