What changed in MidWestOne Financial Group, Inc.'s 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of MidWestOne Financial Group, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+574 added−528 removedSource: 10-K (2024-03-08) vs 10-K (2023-03-13)
Top changes in MidWestOne Financial Group, Inc.'s 2023 10-K
574 paragraphs added · 528 removed · 445 edited across 1 sections
- Item 7A. Quantitative and Qualitative Disclosures About Market Risk+574 / −528 · 445 edited
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
445 edited+129 added−83 removed437 unchanged
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
445 edited+129 added−83 removed437 unchanged
2022 filing
2023 filing
Biggest changeNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Net deferred tax assets as of December 31, 2022 and December 31, 2021 consisted of the following components: December 31, (in thousands) 2022 2021 Deferred income tax assets: Allowance for credit losses $ 13,693 $ 13,732 Deferred compensation 3,299 3,483 Net operating losses (state and federal) 7,707 5,624 Unrealized losses on investment securities 30,355 3,131 Accrued compensation 1,565 1,365 ROU liabilities 852 984 Other 2,474 2,003 Gross deferred tax assets 59,945 30,322 Deferred income tax liabilities: Premises and equipment depreciation and amortization 5,020 4,356 Purchase accounting adjustments 3,220 2,880 Mortgage servicing rights 3,403 1,702 ROU assets 804 930 Other 1,237 937 Gross deferred tax liabilities 13,684 10,805 Net deferred income tax asset 46,261 19,517 Valuation allowance 7,190 5,624 Net deferred tax asset $ 39,071 $ 13,893 The Company has recorded a deferred tax asset for the future tax benefits of Iowa net operating loss carryforwards.
Biggest changeNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Income tax expense (benefit) based on statutory rate for the year ended December 31, 2023, 2022 and 2021 varied from the amount computed by applying the maximum effective federal income tax rate of 21%, to the income before income taxes, because of the following items: Year ended December 31, 2023 2022 2021 (dollars in thousands) Amount % of Pretax Income Amount % of Pretax Income Amount % of Pretax Income Income tax based on statutory rate $ 5,215 21.0 % $ 16,085 21.0 % $ 18,790 21.0 % Tax-exempt interest (2,391) (9.6) (3,505) (4.6) (3,500) (3.9) Bank-owned life insurance (525) (2.1) (484) (0.6) (451) (0.5) State income taxes, net of federal income tax benefit 1,476 5.9 3,805 5.0 4,624 5.2 Bargain purchase gain — — (792) (1.0) — — Non-deductible acquisition expenses 36 0.2 55 0.1 41 — General business credits (40) (0.2) (60) (0.1) 22 — State tax reduction — — 835 1.1 — — Other 203 0.8 (177) (0.3) 466 0.5 Total income tax expense $ 3,974 16.0 % $ 15,762 20.6 % $ 19,992 22.3 % Net deferred tax assets as of December 31, 2023 and December 31, 2022 consisted of the following components: December 31, (in thousands) 2023 2022 Deferred income tax assets: Allowance for credit losses $ 14,232 $ 13,693 Deferred compensation 3,441 3,299 Net operating losses (state and federal) 8,407 7,707 Unrealized losses on investment securities 22,172 30,355 Accrued compensation 1,189 1,565 ROU liabilities 781 852 Other 1,975 2,474 Gross deferred tax assets 52,197 59,945 Deferred income tax liabilities: Premises and equipment depreciation and amortization 5,272 5,020 Purchase accounting adjustments 2,674 3,220 Mortgage servicing rights 3,382 3,403 ROU assets 754 804 Other 756 1,237 Gross deferred tax liabilities 12,838 13,684 Net deferred income tax asset 39,359 46,261 Valuation allowance 8,141 7,190 Net deferred tax asset $ 31,218 $ 39,071 The Company has recorded a deferred tax asset for the future tax benefits of Iowa net operating loss carryforwards.
As a result of the foregoing, our ability to conduct business may be adversely affected by any significant disruptions to us or to third parties with whom we interact. 21 Table of Contents We are subject to certain operational risks, including, but not limited to, customer or employee fraud and data processing system failures and errors.
As a result of the foregoing, our 21 Table of Contents ability to conduct business may be adversely affected by any significant disruptions to us or to third parties with whom we interact. We are subject to certain operational risks, including, but not limited to, customer or employee fraud and data processing system failures and errors.
The Company’s holdings of corporate bonds are primarily comprised of securities that are rated in one of the three highest rating categories by at least one of the major statistical credit rating agencies. In evaluating corporate bonds, the company considers each issuers’ financial performance, liquidity, capital position and other company fundamentals in evaluating corporate securities.
The Company’s holdings of corporate bonds are primarily comprised of securities that are rated in one of the three highest rating categories by at least one of the major statistical credit rating agencies. In evaluating corporate bonds, the company considers each issuers’ financial performance, liquidity, capital position and other company fundamentals.
The Company estimates the ACL based on the underlying assets’ amortized cost basis, which is the amount at which the financing receivable is originated or acquired, adjusted for collection of cash and charge-offs, as well as applicable accretion or amortization of premium, discount, and net deferred fees or costs.
The Company estimates the ACL based on the underlying assets’ amortized cost basis, which is the amount at which the financing receivable is originated or acquired, adjusted for collection of cash and charge-offs, as well as applicable accretion or amortization of premium, discount, and net deferred fees or costs.
When the Company deems all or a portion of a financial asset to be uncollectible, the appropriate amount is written off and the ACL is reduced by the same amount.
When the Company deems all or a portion of a financial asset to be uncollectible, the appropriate amount is written off and the ACL is reduced by the same amount.
The Company applies judgment to determine when a financial asset is deemed uncollectible; however, generally speaking, an asset will be considered uncollectible no later than when all efforts at collection have been exhausted. Subsequent recoveries, if any, are credited to the ACL when received.
The Company applies judgment to determine when a financial asset is deemed uncollectible; however, generally speaking, an asset will be considered uncollectible no later than when all efforts at collection have been exhausted. Subsequent recoveries, if any, are credited to the ACL when received.
The methodologies apply historical loss information, adjusted for asset-specific characteristics, economic conditions at the measurement date, and forecasts about future economic conditions expected to exist through the contractual lives of the financial assets that are reasonable and supportable, to the identified pools of financial assets with similar risk characteristics for which the historical loss experience was observed.
The methodologies apply historical loss information, adjusted for asset-specific characteristics, economic conditions at the measurement date, and forecasts about future economic conditions expected to exist through the contractual lives of the financial assets that are reasonable and supportable, to the identified pools of financial assets with similar risk characteristics for which the historical loss experience was observed.
For each of these pools, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, probability of default, and loss given default. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on historical internal data.
For each of these pools, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, probability of default, and loss given default. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on historical internal data.
The Company uses regression analysis of historical internal and peer data to determine which variables are best suited to be economic variables utilized when modeling lifetime probability of default and loss given default. This analysis also determines how expected probability of default and loss given default will react to forecasted levels of the economic variables.
The Company uses regression analysis of historical internal and peer data to determine which variables are best suited to be economic variables utilized when modeling lifetime probability of default and loss given default. This analysis also determines how expected probability of default and loss given default will react to forecasted levels of the economic variables.
For all DCF models, management has determined that four quarters represents a reasonable and supportable forecast period and reverts back to a historical loss rate over four quarters on a straight-line basis. Management leverages economic projections from a reputable and independent third party to inform its loss driver forecasts over the four quarter forecast period.
For all DCF models, management has determined that four quarters represents a reasonable and supportable forecast period and reverts back to a historical loss rate over four quarters on a straight-line basis. Management leverages economic projections from a reputable and independent third party to inform its loss driver forecasts over the four quarter forecast period.
Other internal and external indicators of economic forecasts are also considered by management when developing the forecast metrics. The combination of adjustments for credit expectations (default and loss) and timing expectations (prepayment, curtailment, and time to recovery) produces an expected cash flow stream at the instrument level.
Other internal and external indicators of economic forecasts are also considered by management when developing the forecast metrics. The combination of adjustments for credit expectations (default and loss) and timing expectations (prepayment, curtailment, and time to recovery) produces an expected cash flow stream at the instrument level.
Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce an instrument-level net present value of expected cash flows (“NPV”). An ACL is established for the difference between the instrument’s NPV and amortized cost basis.
Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce an instrument-level net present value of expected cash flows (“NPV”). An ACL is established for the difference between the instrument’s NPV and amortized cost basis.
Qualitative loss 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. Collateral Dependent Financial Assets Loans that do not share risk characteristics are evaluated on an individual basis.
Qualitative loss 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. Collateral Dependent Financial Assets Loans that do not share risk characteristics are evaluated on an individual basis.
When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the present value of expected cash flows from the operation of the collateral.
When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the present value of expected cash flows from the operation of the collateral.
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 76 Table of Contents MIDWEST ONE FINANCIAL GROUP, INC.
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 79 Table of Contents MIDWEST ONE FINANCIAL GROUP, INC.
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.
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.
These estimates are based on the most recently available appraisals by qualified licensed appraisers with certain adjustment made based on the type of property, age of appraisal, current status of the property, and other related factors to estimate the current value of the collateral (Level 3).
These estimates are based on the most recently available appraisals by qualified licensed appraisers with certain adjustment made based on the type of property, age of appraisal, current status of the property, and other related factors to estimate the current value of the collateral (Level 3).
Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Assessment of Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Assessment on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
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 for all loan types, except owner occupied residential real estate loans, 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 process of collection.
Non-accrual and Delinquent Status Loans are placed on non-accrual when (1) payment in full of principal and interest is no longer expected or (2) principal or interest has been in default for 90 days or more for all loan types, except owner occupied residential real estate, 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 process of collection.
Under the 2017 Plan, the Company may grant restricted stock unit awards that vest upon the completion of future service requirements or specified performance criteria. Generally, all restricted stock units vest upon death, disability, or in connection with a change in control. In addition, both TRSUs and PRSUs receive forfeitable dividend equivalents.
Under the 2017 Plan and the 2023 Plan, the Company may grant restricted stock unit awards that vest upon the completion of future service requirements or specified performance criteria. Generally, all restricted stock units vest upon death, disability, or in connection with a change in control. In addition, both TRSUs and PRSUs receive forfeitable dividend equivalents.
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 SOFR).
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 or SOFR).
Exhibit 10.16 to the Company’s Annual Report on Form 10-K Executive Deferred Compensation Plan, effective filed with the SEC on March 11, 2021 December 15, 2020* 10.18 Amended and Restated Employment Agreement between Exhibit 10.18 to the Company’s Annual Report on Form 10-K MidWest One Financial Group, Inc. and Len D.
Exhibit 10.16 to the Company’s Annual Report on Form 10-K Executive Deferred Compensation Plan, effective filed with the SEC on March 11, 2021 December 15, 2020* 10.17 Amended and Restated Employment Agreement between Exhibit 10.18 to the Company’s Annual Report on Form 10-K MidWest One Financial Group, Inc. and Len D.
Specifically, the economic forecast used by the Company is sensitive to changes in the following loss drivers: (1) Midwest unemployment, (2) year-to-year change in national retail sales, (3) year-to-year change in the CRE Index, (4) year-to-year change in U.S. GDP, (5) year-to-year change in the National Home Price Index, and (6) Rental Vacancy.
Specifically, the economic forecast used by the Company is sensitive to changes in the following loss drivers: (1) Midwest unemployment, (2) year-to-year change in national retail sales, (3) year-to-year change in the CRE Index, (4) year-to-year change in U.S. GDP, (5) year-to-year change in the National Home Price Index (“HPI”), and (6) rental vacancy.
(2) On June 22, 2021, the Board of Directors of the Company approved a share repurchase program, allowing for the repurchase of up to $15.0 million of the Company's common stock through December 31, 2023. This new repurchase program replaced the Company’s prior repurchase program, which was due to expire on December 31, 2021.
(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.
Our ability to engage in routine funding and other transactions could be negatively affected by the actions and the soundness of other financial institutions. Financial services institutions are generally interrelated as a result of trading, clearing, counterparty, credit or other relationships.
Our ability to engage in routine funding and other transactions could be negatively affected by the actions and the soundness of other financial institutions. Financial services institutions are generally interrelated as a result of trading, clearing, counterparty, credit, reputational, or other relationships.
Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
On June 22, 2021, the Board of Directors of the Company approved a new share repurchase program, allowing for the repurchase of up to $15.0 million of the Company's common stock through December 31, 2023. The new repurchase program replaced the Company’s prior repurchase program, which was due to expire on December 31, 2021.
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. The repurchase program replaced the Company’s prior repurchase program, which was due to expire on December 31, 2021.
For the loan pools utilizing the DCF method, management utilizes one or multiple of the following economic variables: Midwest unemployment, national retail sales, CRE index, US rental vacancy rate, US gross domestic product, and national home price index (“HPI”).
For the loan pools utilizing the DCF method, management utilizes one or multiple of the following economic variables: Midwest unemployment, national retail sales, CRE index, US rental vacancy rate, US gross domestic product, and national home price index.
Private parties may also challenge an institution’s performance under fair lending laws in private class action litigation. Such actions could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Non-compliance with the USA PATRIOT Act, the Bank Secrecy Act or other laws and regulations could result in fines or sanctions against us.
Private parties may also challenge an institution’s performance under fair lending laws in private class action litigation. Such actions could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Non-compliance with the Bank Secrecy Act or other laws and regulations could result in fines or sanctions against us.
This section should be read in conjunction with the following parts of this Form 10-K: Part I, Item 1 “Business.” , Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” and Part II, Item 8 “Financial Statements and Supplementary Data,” For a discussion on the comparison of results of operations for the years ended December 31, 2021 and 2020, refer to Item 7.
This section should be read in conjunction with the following parts of this Form 10-K: Part I, Item 1 “Business.” , Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” and Part II, Item 8 “Financial Statements and Supplementary Data . ” For a discussion on the comparison of results of operations for the years ended December 31, 2022 and 2021, refer to Item 7.
In addition, management utilized qualitative factors to adjust the calculated ACL as 33 Table of Contents 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.
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 35 Table of Contents relating to credit quality, delinquency, non-performing and adversely rated loans, and reasonable and supportable forecasts of economic conditions.
Regulatory Capital Requirements and Restrictions on Subsidiary Cash to our consolidated financial statements for additional information related to our regulatory capital ratios. 44 Table of Contents In order to be a “well-capitalized” depository institution, the Company and the 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.
Regulatory Capital Requirements and Restrictions on Subsidiary Cash to our consolidated financial statements for additional information related to our regulatory capital ratios. 45 Table of Contents In order to be a “well-capitalized” depository institution, the Company and the 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.
We believe that a significant portion of these deposits will remain with us upon maturity. 45 Table of Contents 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.
We believe that a significant portion of these deposits will remain with us upon maturity. 46 Table of Contents 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.
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. 50 Table of Contents I TEM 8. F INANCIAL S TATEMENTS AND S UPPLEMENTARY D ATA .
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. 51 Table of Contents I TEM 8. F INANCIAL S TATEMENTS AND S UPPLEMENTARY D ATA .
An established track record of performance is also considered when determining accrual status. Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement or any portion thereof remains unpaid after the due date of the scheduled payment. 73 Table of Contents MIDWEST ONE FINANCIAL GROUP, INC.
An established track record of performance is also considered when determining accrual status. Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement or any portion thereof remains unpaid after the due date of the scheduled payment. 74 Table of Contents MIDWEST ONE FINANCIAL GROUP, INC.
The success of the farm may be affected by many factors outside the control of the borrower, including adverse weather conditions that prevent the planting of a crop or limit crop yields, such as hail, drought and floods (although borrowers may attempt to mitigate this risk by purchasing crop insurance), loss of livestock due to disease or other factors, declines in market prices for agricultural products both domestically and internationally, and the impact of government regulations, including changes in price supports, 15 Table of Contents subsidies, tariffs, trade agreements, and environmental regulations.
The success of the farm may be affected by many factors outside the control of the borrower, including adverse weather conditions that prevent the planting of a crop or limit crop yields, such as hail, drought and floods (although borrowers may attempt to mitigate this risk by purchasing crop insurance), loss of livestock due to disease or other factors, declines in market prices for agricultural products both domestically and internationally, and the impact of government regulations, including changes in price supports, subsidies, tariffs, trade agreements, and environmental regulations.
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. 61 Table of Contents MIDWEST ONE FINANCIAL GROUP, INC.
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. 62 Table of Contents MIDWEST ONE FINANCIAL GROUP, INC.
Funk, dated October 18, 2017* Form 8-K filed with the SEC on October 18, 2017 10.7 Supplemental Retirement Agreement between Iowa State Exhibit 10.13 of the Company’s Registration Statement on Bank & Trust Company (now known as MidWest One Form S-4 (File No. 333-147628) filed with the SEC on Bank) and Charles N.
Funk, dated October 18, 2017* Form 8-K filed with the SEC on October 18, 2017 10.6 Supplemental Retirement Agreement between Iowa State Exhibit 10.13 of the Company’s Registration Statement on Bank & Trust Company (now known as MidWest One Form S-4 (File No. 333-147628) filed with the SEC on Bank) and Charles N.
I TEM 16. F ORM 10-K S UMMARY . None. 111 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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.
I TEM 16. F ORM 10-K S UMMARY . None. 115 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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.
The following table provides a summary of these PCD loans at acquisition: (in thousands) June 9, 2022 Par value of PCD loans acquired $ 15,396 PCD ACL at acquisition (3,371) Non-credit discount on PCD loans (1,005) Purchase price of PCD loans $ 11,020 68 Table of Contents MIDWEST ONE FINANCIAL GROUP, INC.
The following table provides a summary of these PCD loans at acquisition: (in thousands) June 9, 2022 Par value of PCD loans acquired $ 15,396 PCD ACL at acquisition (3,371) Non-credit discount on PCD loans (1,005) Purchase price of PCD loans $ 11,020 69 Table of Contents MIDWEST ONE FINANCIAL GROUP, INC.
Loans Receivable and the Allowance for Credit Losses of the notes to the consolidated financial statements. Federal Funds Purchased: The Bank has unsecured federal funds lines totaling $155.0 million from multiple correspondent banking relationships. There were no borrowings from such lines at either December 31, 2022 or December 31, 2021.
Loans Receivable and the Allowance for Credit Losses of the notes to the consolidated financial statements. Federal Funds Purchased: The Bank has unsecured federal funds lines totaling $155.0 million from multiple correspondent banking relationships. There were no borrowings from such lines at either December 31, 2023 or December 31, 2022.
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 primary reasons for the acquisition were to enter the Muscatine, Iowa market and increase our presence in Fairfield, Iowa.
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 primary reasons for the acquisition were to enter the Muscatine, Iowa market and increase the Company’s presence in Fairfield, Iowa.
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. 82 Table of Contents MIDWEST ONE FINANCIAL GROUP, INC.
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. 85 Table of Contents MIDWEST ONE FINANCIAL GROUP, INC.
The Company provides Health Savings Account contributions to its employees enrolled in high deductible plans. Company contributions for the years ended December 31, 2022, 2021 and 2020 were $0.3 million each year. Supplemental Executive Retirement Plans: The Company has entered into nonqualified supplemental executive retirement plans (SERPs) with certain executive officers.
The Company provides Health Savings Account contributions to its employees enrolled in high deductible plans. Company contributions for the years ended December 31, 2023, 2022 and 2021 were $0.3 million each year. Supplemental Executive Retirement Plans: The Company has entered into nonqualified supplemental executive retirement plans (SERPs) with certain executive officers.
Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances. As of December 31, 2022 and December 31, 2021, the Company did not have any significant contract balances.
Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances. As of December 31, 2023 and December 31, 2022, the Company did not have any significant contract balances.
Changes in Internal Control over Financial Reporting There were no changes in the Company’s internal controls over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2022 that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
Changes in Internal Control over Financial Reporting There were no changes in the Company’s internal controls over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2023 that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
The Definitive Proxy Statement will be filed with the SEC pursuant to Regulation 14A within 120 days of the end of the Company’s 2022 fiscal year. I TEM 12. S ECURITY O WNERSHIP OF C ERTAIN B ENEFICIAL O WNERS AND M ANAGEMENT AND R ELATED S TOCKHOLDER M ATTERS .
The Definitive Proxy Statement will be filed with the SEC pursuant to Regulation 14A within 120 days of the end of the Company’s 2023 fiscal year. I TEM 12. S ECURITY O WNERSHIP OF C ERTAIN B ENEFICIAL O WNERS AND M ANAGEMENT AND R ELATED S TOCKHOLDER M ATTERS .
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Reeves, dated November 1, 2022* filed with the SEC on October 19, 2022 10.21 Letter Agreement, dated January 24, 2023, from the Exhibit 10.1 to the Company’s Current Report on Form 8-K Compensation Committee of the Board of Directors filed with the SEC on January 26, 2023 of MidWestOne Financial Group, Inc., to Charles N.
Reeves, dated November 1, 2022* filed with the SEC on October 19, 2022 10.20 Letter Agreement, dated January 24, 2023, from the Exhibit 10.1 to the Company’s Current Report on Form 8-K Compensation Committee of the Board of Directors filed with the SEC on January 26, 2023 of MidWestOne Financial Group, Inc., to Charles N.
The number of banking offices per state at December 31, 2022 is detailed in the following table: Number of Banking Offices Iowa banking offices 35 Minnesota banking offices 12 Wisconsin banking offices 7 Florida banking offices 2 Colorado banking offices 1 57 Additional information with respect to premises and equipment is presented in Note 6.
The number of banking offices per state at December 31, 2023 is detailed in the following table: Number of Banking Offices Iowa banking offices 35 Minnesota banking offices 12 Wisconsin banking offices 7 Florida banking offices 2 Colorado banking offices 1 57 Additional information with respect to premises and equipment is presented in Note 6.
The Company has an agreement with its institutional derivative counterparty that contains a provision under which if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.
The Company has an agreement with its institutional derivative counterparties that contains a provision under which if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, has been audited by RSM US LLP, the independent registered public accounting firm who also has audited the Company’s consolidated financial statements included in this Annual Report on Form 10-K.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2023, has been audited by RSM US LLP, the independent registered public accounting firm who also has audited the Company’s consolidated financial statements included in this Annual Report on Form 10-K.
The information required by this Item 12 will be included in the Company’s Definitive Proxy Statement for the 2023 Annual Meeting of Shareholders under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” and is incorporated herein by reference.
The information required by this Item 12 will be included in the Company’s Definitive Proxy Statement for the 2024 Annual Meeting of Shareholders under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” and is incorporated herein by reference.
Devaisher, filed with the SEC on March 10, 2022 dated March 8, 2022* 10.19 Letter Agreement which revises the Amended and Restated Exhibit 10.1 to the Company’s Current Report on Form 8-K Employment Agreement between MidWest One Financial filed with the SEC on September 29, 2022 Group, Inc. and Len D.
Devaisher, filed with the SEC on March 10, 2022 dated March 8, 2022* 10.18 Letter Agreement which revises the Amended and Restated Exhibit 10.1 to the Company’s Current Report on Form 8-K Employment Agreement between MidWest One Financial filed with the SEC on September 29, 2022 Group, Inc. and Len D.
The USA PATRIOT Act and the Bank Secrecy Act require financial institutions to design and implement programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the Financial Crimes Enforcement Network of the Treasury.
The Bank Secrecy Act require financial institutions to design and implement programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the Financial Crimes Enforcement Network of the Treasury.
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.
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 or participation agreement.
The information required by this Item 11 will be included in the Company’s Definitive Proxy Statement for the 2023 Annual Meeting of Shareholders under the headings “Compensation Discussion and Analysis,” “Compensation Committee Report,” “Executive Compensation” and “Director Compensation” and is incorporated herein by reference.
The information required by this Item 11 will be included in the Company’s Definitive Proxy Statement for the 2024 Annual Meeting of Shareholders under the headings “Compensation Discussion and Analysis,” “Compensation Committee Report,” “Executive Compensation” and “Director Compensation” and is incorporated herein by reference.
The information required by this Item 13 will be included in the Company’s Definitive Proxy Statement for the 2023 Annual Meeting of Shareholders under the headings “Corporate Governance and Board Matters” and “Certain Relationships and Related-Person Transactions” and is incorporated herein by reference.
The information required by this Item 13 will be included in the Company’s Definitive Proxy Statement for the 2024 Annual Meeting of Shareholders under the headings “Corporate Governance and Board Matters” and “Certain Relationships and Related-Person Transactions” and is incorporated herein by reference.
The Definitive Proxy Statement will be filed with the SEC pursuant to Regulation 14A within 120 days of the end of the Company’s 2022 fiscal year. I TEM 14. P RINCIPAL A CCOUNTANT F EES AND S ERVICES (PCAOB ID: 49).
The Definitive Proxy Statement will be filed with the SEC pursuant to Regulation 14A within 120 days of the end of the Company’s 2023 fiscal year. I TEM 14. P RINCIPAL A CCOUNTANT F EES AND S ERVICES (PCAOB ID: 49).
The information required by this Item 14 will be included in the Company’s Definitive Proxy Statement for the 2023 Annual Meeting of Shareholders under the caption “Proposal 4: Ratification of Appointment of Independent Registered Public Accounting Firm” and is incorporated herein by reference.
The information required by this Item 14 will be included in the Company’s Definitive Proxy Statement for the 2024 Annual Meeting of Shareholders under the caption “Proposal 4: Ratification of Appointment of Independent Registered Public Accounting Firm” and is incorporated herein by reference.
In addition, increases in criminal activity levels and sophistication, advances in computer capabilities, new discoveries, vulnerabilities in third party technologies (including browsers and operating systems) or other developments could result in a compromise or breach of the technology, processes and controls that 20 Table of Contents we use to prevent fraudulent transactions and to protect data about us, our clients and underlying transactions, as well as the technology used by our clients to access our systems.
In addition, increases in criminal activity levels and sophistication, advances in computer capabilities, new discoveries, vulnerabilities in third party technologies (including browsers and operating systems) or other developments could result in a compromise or breach of the technology, processes and controls that we use to prevent fraudulent transactions and to protect data about us, our clients and underlying transactions, as well as the technology used by our clients to access our systems.
Commitments and Contingencies Credit-related financial instruments : The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, commitments to sell loans, and standby letters of credit.
Note 18. Commitments and Contingencies Credit-related Financial Instruments : The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, commitments to sell loans, and standby letters of credit.
The Definitive Proxy Statement will be filed with the SEC pursuant to Regulation 14A within 120 days of the end of the Company’s 2022 fiscal year. I TEM 13. C ERTAIN R ELATIONSHIPS AND R ELATED T RANSACTIONS , AND D IRECTOR I NDEPENDENCE .
The Definitive Proxy Statement will be filed with the SEC pursuant to Regulation 14A within 120 days of the end of the Company’s 2023 fiscal year. I TEM 13. C ERTAIN R ELATIONSHIPS AND R ELATED T RANSACTIONS , AND D IRECTOR I NDEPENDENCE .
The Company also has an agreement with its derivative counterparty that contains a provision under which the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on the indebtedness.
The Company also has an agreement with its derivative counterparties that contains a provision under which the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on the indebtedness.
Any adverse change in these factors could have a significant impact on the recoverability of goodwill and could have a material impact on our consolidated financial statements. No goodwill impairment charge was recorded in 2022 and 2021 as a result of the Company’s internal assessment.
Any adverse change in these factors could have a significant impact on the recoverability of goodwill and could have a material impact on our consolidated financial statements. No goodwill impairment charge was recorded in 2023 and 2022 as a result of the Company’s internal assessment.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.
In addition, beginning in 2016, banking institutions that do not maintain a capital conservation buffer, comprised of Common Equity Tier 1 Capital, of 2.5% above the regulatory minimum capital requirements face constraints on the payment of dividends, stock repurchases and discretionary bonus payments to executive officers based on the amount of the shortfall, unless prior regulatory approval is obtained.
In addition, beginning in 2016, banking institutions that do not maintain a capital conservation 22 Table of Contents buffer, comprised of Common Equity Tier 1 Capital, of 2.5% above the regulatory minimum capital requirements face constraints on the payment of dividends, stock repurchases and discretionary bonus payments to executive officers based on the amount of the shortfall, unless prior regulatory approval is obtained.
Qualitative factors are based on management’s judgement 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 forecast of economic conditions. 51 Table of Contents We identified the qualitative factors applied to the allowance for credit losses as a critical audit matter, because auditing this matter required significant auditor judgement due to the highly subjective nature of management’s significant inputs and assumptions used in the allowance for credit losses model.
Qualitative factors are based on management’s judgement 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. 52 Table of Contents We identified the qualitative factors applied to the allowance for credit losses as a critical audit matter, because auditing this matter required significant auditor judgement due to the highly subjective nature of management’s significant inputs and assumptions used in the allowance for credit losses model.
(6) Cost of funds is calculated as total interest expense divided by the sum of average total deposits and borrowed funds. 32 Table of Contents Changes in Net Interest Income Net interest income is impacted by changes in volume, interest rate, and the mix of interest earning assets and interest-bearing liabilities.
(6) Cost of funds is calculated as total interest expense divided by the sum of average total deposits and borrowed funds. 34 Table of Contents Changes in Net Interest Income Net interest income is impacted by changes in volume, interest rate, and the mix of interest earning assets and interest-bearing liabilities.
Business Combinations , the Company acquired a core deposit intangible on June 9, 2022 with an estimated fair value of $16.5 million, which will be amortized over its estimated useful life of 10 years.
Business Combinations , the Company acquired a core deposit intangible from IOFB on June 9, 2022 with an estimated fair value of $16.5 million, which will be amortized over its estimated useful life of 10 years.
Events or transactions occurring after December 31, 2022, but prior to the date the consolidated financial statements were issued, that provided additional evidence about conditions that existed at December 31, 2022 have been recognized in the consolidated financial statements for the period ended December 31, 2022.
Events or transactions occurring after December 31, 2023, but prior to the date the consolidated financial statements were issued, that provided additional evidence about conditions that existed at December 31, 2023 have been recognized in the consolidated financial statements for the period ended December 31, 2023.
Any future goodwill impairment charge on the current goodwill balance, or future goodwill arising out of acquisitions that we are required to take, could have a material adverse effect on our results of operations by reducing our net income or increasing our net losses. Our ability to attract and retain management and key personnel may affect future growth and earnings.
Any future goodwill impairment charge on the current goodwill balance, or future goodwill arising out of acquisitions that we are required to take, could have a material adverse effect on our results of operations by reducing our net income or increasing our net losses. 19 Table of Contents Our ability to attract and retain management and key personnel may affect future growth and earnings.
(3) Exhibits: The exhibits are filed as part of this report and exhibits incorporated herein by reference to other documents are as follows: Exhibit Number Description Incorporated by Reference to: 2.1 Agreement and Plan of Merger dated November 1, 2021, Exhibit 2.1 to the Company’s Current Report on Form 8-K by and among MidWest One Financial Group, Inc., IFBC filed with the SEC on November 1, 2021 Acquisition Corp., and Iowa First Bancshares Corp.^ 3.1 Amended and Restated Articles of Incorporation of Exhibit 3.3 to the Company’s Amendment No. 1 to MidWest One Financial Group, Inc. filed with the Registration Statement on Form S-4 (File No. 333-147628) Secretary of State of the State of Iowa on March 14, 2008 filed with the SEC on January 14, 2008 3.2 Articles of Amendment (First Amendment) to the Exhibit 3.1 to the Company’s Current Report on Form 8-K Amended and Restated Articles of Incorporation of filed with the SEC on January 23, 2009 MidWest One Financial Group, Inc. filed with the Secretary of State of the State of Iowa on January 23, 2009 3.3 Articles of Amendment (Second Amendment) to the Exhibit 3.1 to the Company’s Current Report on Form 8-K Amended and Restated Articles of Incorporation of filed with the SEC on February 6, 2009 MidWest One 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) 3.4 Articles of Amendment (Third Amendment) to the Exhibit 3.1 to the Company’s Form 10-Q for the quarter Amended and Restated Articles of Incorporation of ended March 31, 2017, filed with the SEC on May 4, 2017 MidWest One Financial Group, Inc., filed with the Secretary of State of the State of Iowa on April 21, 2017 3.5 Third Amended and Restated Bylaws, as Amended of Exhibit 3.1 to the Company’s Current Report on Form 8-K MidWest One Financial Group, Inc. as of October 18, 2022 filed with the SEC on October 19, 2022 4.1 Reference is made to Exhibits 3.1 through 3.5 hereof N/A 4.2 Description of the Company’s Securities Registered Filed herewith Pursuant to Section 12 of the Securities Exchange Act of 1934 4.3 Indenture, dated July 28, 2020, by and between Exhibit 4.1 to the Company’s Current Report on Form 8-K MidWest One Financial Group, Inc. and U.S.
(3) Exhibits: The exhibits are filed as part of this report and exhibits incorporated herein by reference to other documents are as follows: Exhibit Number Description Incorporated by Reference to: 2.1 Agreement and Plan of Merger dated November 1, 2021, Exhibit 2.1 to the Company’s Current Report on Form 8-K by and among MidWest One Financial Group, Inc., IFBC filed with the SEC on November 1, 2021 Acquisition Corp., and Iowa First Bancshares Corp.^ 3.1 Amended and Restated Articles of Incorporation of Exhibit 3.3 to the Company’s Amendment No. 1 to MidWest One Financial Group, Inc. filed with the Registration Statement on Form S-4 (File No. 333-147628) Secretary of State of the State of Iowa on March 14, 2008 filed with the SEC on January 14, 2008 3.2 Articles of Amendment (First Amendment) to the Exhibit 3.1 to the Company’s Current Report on Form 8-K Amended and Restated Articles of Incorporation of filed with the SEC on January 23, 2009 MidWest One Financial Group, Inc. filed with the Secretary of State of the State of Iowa on January 23, 2009 3.3 Articles of Amendment (Second Amendment) to the Exhibit 3.1 to the Company’s Current Report on Form 8-K Amended and Restated Articles of Incorporation of filed with the SEC on February 6, 2009 MidWest One 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) 3.4 Articles of Amendment (Third Amendment) to the Exhibit 3.1 to the Company’s Form 10-Q for the quarter Amended and Restated Articles of Incorporation of ended March 31, 2017, filed with the SEC on May 4, 2017 MidWest One Financial Group, Inc., filed with the Secretary of State of the State of Iowa on April 21, 2017 3.5 Third Amended and Restated Bylaws, as Amended of Exhibit 3.1 to the Company’s Current Report on Form 8-K MidWest One Financial Group, Inc. as of October 18, 2022 filed with the SEC on October 19, 2022 4.1 Reference is made to Exhibits 3.1 through 3.5 hereof N/A 4.2 Description of the Company’s Securities Registered Exhibit 4.2 to the Company’s Form 10-K for the year ended Pursuant to Section 12 of the Securities Exchange Act of December 31, 2022, filed with the SEC on March 13, 2023 1934 112 Table of Contents Exhibit Number Description Incorporated by Reference to: 4.3 Indenture, dated July 28, 2020, by and between Exhibit 4.1 to the Company’s Current Report on Form 8-K MidWest One Financial Group, Inc. and U.S.
Events or transactions that provided evidence about conditions that did not exist at December 31, 2022, but arose before the consolidated financial statements were issued, have not been recognized in the consolidated financial statements for the period ended December 31, 2022.
Events or transactions that provided evidence about conditions that did not exist at December 31, 2023, but arose before the consolidated financial statements were issued, have not been recognized in the consolidated financial statements for the period ended December 31, 2023.
None. I TEM 9C. D ISCLOSURE R EGARDING F OREIGN J URISDICTIONS T HAT P REVENT I NSPECTIONS Not Applicable. PART III I TEM 10. D IRECTORS , E XECUTIVE O FFICERS AND C ORPORATE G OVERNANCE .
D ISCLOSURE R EGARDING F OREIGN J URISDICTIONS T HAT P REVENT I NSPECTIONS Not Applicable. PART III I TEM 10. D IRECTORS , E XECUTIVE O FFICERS AND C ORPORATE G OVERNANCE .
For collateral dependent financial assets where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the financial asset to be provided substantially through the operation or sale 29 Table of Contents of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date.
For collateral dependent financial assets where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the financial asset to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date.
As of December 31, 2022 and 2021, the Company’s mortgage-backed and collateralized mortgage obligations portfolios consisted of securities issued by government-sponsored enterprises (“GSEs”) such as the Federal National Mortgage Corporation, Federal Home Loan Mortgage Corporation, Government National Mortgage Corporation and private entities.
As of December 31, 2023 and 2022, the Company’s mortgage-backed and collateralized mortgage obligations portfolios consisted of securities issued by government-sponsored enterprises (“GSEs”) such as the Federal National Mortgage Corporation, Federal Home Loan Mortgage Corporation, Government National Mortgage Corporation and private entities.
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.
Risk ratings are selected from an 8-point scale with ratings as follows: ratings 1- 4 Satisfactory (pass), rating 5 Special Mention/Watch (potential weakness), rating 6 Substandard (well-defined weakness), rating 7 Doubtful, and rating 8 Loss.
Instead, these loans are categorized based on performance: performing and nonperforming. Nonperforming loans include those loans on nonaccrual and loans greater than 90 days past due and on accrual. 75 Table of Contents MIDWEST ONE FINANCIAL GROUP, INC.
Instead, these loans are categorized based on performance: performing and nonperforming. Nonperforming loans include those loans on nonaccrual and loans greater than 90 days past due and on accrual. 76 Table of Contents MIDWEST ONE FINANCIAL GROUP, INC.
If customers move money out of bank deposits and into other investments, we could lose a relatively low cost source of funds, 16 Table of Contents which would require us to seek other, potentially higher cost funding alternatives. Other primary sources of funds consist of cash from operations, investment securities maturities and sales, and funds from sales of our stock.
If customers move money out of bank deposits and into other investments, we could lose a relatively low cost source of funds, which would require us to seek other, potentially higher cost funding alternatives. Other primary sources of funds consist of cash from operations, investment securities maturities and sales, and funds from sales of our stock.
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