MidWestOne Financial Group, Inc. [MOFG] Filings

10-Q 1 mofg-20240331.htm 10-Q mofg-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended March 31, 2024


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

For the transition period from to


			Commission file number			001-35968

MIDWESTONE FINANCIAL GROUP, INC.

(Exact name of Registrant as specified in its charter)


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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $1.00 par value

MOFG

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes x No

As of May 3, 2024, there were 15,755,319 shares of common stock, $1.00 par value per share, outstanding.

Table of Contents

MIDWESTONE FINANCIAL GROUP, INC.

Form 10-Q Quarterly Report

Table of Contents

Page No.

PART I

Item 1.

Financial Statements (unaudited)

Consolidated Balance Sheets

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Consolidated Statements of Shareholders' Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Item 4.

Controls and Procedures

Part II

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Item 6.

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 Quarterly Report on Form 10-Q ("Form 10-Q"), including "Item 1. Financial Statements" and "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations."


ACL	Allowance for Credit Losses	FHLB	Federal Home Loan Bank
AFS	Available for Sale	FHLBC	Federal Home Loan Bank of Chicago
AOCI	Accumulated Other Comprehensive Income	FHLBDM	Federal Home Loan Bank of Des Moines
ASC	Accounting Standards Codification	FHLMC	Federal Home Loan Mortgage Corporation
ASU	Accounting Standards Update	FNBF	First National Bank in Fairfield
ATM	Automated Teller Machine	FNBM	First National Bank of Muscatine
Basel III Rules	A comprehensive capital framework and rules for U.S. banking organizations approved by the FRB and the FDIC in 2013	FNMA	Federal National Mortgage Association
BHCA	Bank Holding Company Act of 1956, as amended	FRB	Board of Governors of the Federal Reserve System
BOD	Bank of Denver	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	MBEFD	Loan Modification for Borrowers Experiencing Financial Difficulty
COVID-19	Coronavirus Disease 2019	MBS	Mortgage-Backed Securities
CRA	Community Reinvestment Act	PCD	Purchase Credit Deteriorated
CRE	Commercial Real Estate	PPP	Paycheck Protection Program
DCF	Discounted Cash Flows	ROU	Right-of-Use
DNVB	Denver Bankshares, Inc.	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

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Item 1. Financial Statements (unaudited).

MIDWESTONE FINANCIAL GROUP, INC.

CONSOLIDATED BALANCE SHEETS


	March 31, 2024		December 31, 2023
(unaudited) (dollars in thousands, except per share amounts)
ASSETS
Cash and due from banks	$	68,430	$	76,237
Interest earning deposits in banks	29,328		5,479
Federal funds sold	4		11
Total cash and cash equivalents	97,762		81,727
Debt securities available for sale at fair value	797,230		795,134
Held to maturity securities at amortized cost	1,064,939		1,075,190
Total securities	1,862,169		1,870,324
Loans held for sale	2,329		1,045
Gross loans held for investment	4,433,258		4,138,352
Unearned income, net	(18,612)		(11,405)
Loans held for investment, net of unearned income	4,414,646		4,126,947
Allowance for credit losses	(55,900)		(51,500)
Total loans held for investment, net	4,358,746		4,075,447
Premises and equipment, net	95,986		85,742
Goodwill	71,118		62,477
Other intangible assets, net	29,531		24,069
Foreclosed assets, net	3,897		3,929
Other assets	226,477		222,780
Total assets	$	6,748,015	$	6,427,540

LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest bearing deposits	$	920,764	$	897,053
Interest bearing deposits	4,664,472		4,498,620
Total deposits	5,585,236		5,395,673
Short-term borrowings	422,988		300,264
Long-term debt	122,066		123,296
Other liabilities	89,685		83,929
Total liabilities	6,219,975		5,903,162

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 15,750,471 and 15,694,306	16,581		16,581
Additional paid-in capital	300,845		302,157
Retained earnings	294,066		294,784
Treasury stock at cost, 830,546 and 886,711 shares	(22,648)		(24,245)
Accumulated other comprehensive loss	(60,804)		(64,899)
Total shareholders' equity	528,040		524,378
Total liabilities and shareholders' equity	$	6,748,015	$	6,427,540

See accompanying notes to consolidated financial statements.

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MIDWESTONE FINANCIAL GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME


	Three Months Ended
	March 31,
(unaudited) (dollars in thousands, except per share amounts)	2024		2023
Interest income
Loans, including fees	$	57,947	$	46,490
Taxable investment securities	9,460		10,444
Tax-exempt investment securities	1,710		2,127
Other	418		244
Total interest income	69,535		59,305
Interest expense
Deposits	27,726		15,319
Short-term borrowings	4,975		1,786
Long-term debt	2,103		2,124
Total interest expense	34,804		19,229
Net interest income	34,731		40,076
Credit loss expense	4,689		933
Net interest income after credit loss expense	30,042		39,143
Noninterest income (loss)
Investment services and trust activities	3,503		2,933
Service charges and fees	2,144		2,008
Card revenue	1,943		1,748
Loan revenue	856		1,420
Bank-owned life insurance	660		602


Investment securities gains (losses), net	36		(13,170)
Other	608		413
Total noninterest income (loss)	9,750		(4,046)
Noninterest expense
Compensation and employee benefits	20,930		19,607
Occupancy expense of premises, net	2,813		2,746
Equipment	2,600		2,171
Legal and professional	2,059		1,736
Data processing	1,360		1,363
Marketing	598		986
Amortization of intangibles	1,637		1,752
FDIC insurance	942		749
Communications	196		261
Foreclosed assets, net	358		(28)

Other	2,072		1,976
Total noninterest expense	35,565		33,319
Income before income tax expense	4,227		1,778
Income tax expense	958		381
Net income	$	3,269	$	1,397

Per common share information
Earnings - basic	$	0.21	$	0.09
Earnings - diluted	$	0.21	$	0.09
Dividends paid	$	0.2425	$	0.2425

See accompanying notes to consolidated financial statements.

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MIDWESTONE FINANCIAL GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three Months Ended
	March 31,
(unaudited) (dollars in thousands)	2024		2023
Net income	$	3,269	$	1,397

Other comprehensive income, net of tax:
Unrealized gain from AFS debt securities:
Unrealized net gain (loss) on debt securities AFS	2,151		(285)
Reclassification adjustment for (gains) losses included in net income	(36)		13,170
Reclassification of the change in fair value of AFS debt securities attributable to change in hedged risk	882		—
Income tax (expense)	(758)		(3,260)
Unrealized net gain on AFS debt securities, net of reclassification adjustments	2,239		9,625
Reclassification of AFS debt securities to HTM:
Amortization of the net unrealized loss from the reclassification of AFS debt securities to HTM	501		581
Income tax expense	(127)		(147)
Amortization of net unrealized loss from the reclassification of AFS debt securities to HTM, net	374		434
Unrealized gain from cash flow hedging instruments:
Unrealized net gains in cash flow hedging instruments	2,772		138
Reclassification adjustment for net gain in cash flow hedging instruments included in income	(788)		—
Income tax expense	(502)		(35)
Unrealized net gains on cash flow hedge instruments, net of reclassification adjustment	1,482		103
Other comprehensive income, net of tax	4,095		10,162
Comprehensive income	$	7,364	$	11,559

See accompanying notes to consolidated financial statements.

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MIDWESTONE FINANCIAL GROUP, INC.

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, 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)	—		(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















Balance at December 31, 2023	$	16,581	$	302,157	$	294,784	$	(24,245)	$	(64,899)	$	524,378
Net income	—		—		3,269		—		—		3,269
Other comprehensive income	—		—		—		—		4,095		4,095
Release/lapse of restriction on RSUs (56,165 shares, net)	—		(1,953)		(167)		1,597		—		(523)

Share-based compensation	—		641		—		—		—		641
Dividends paid on common stock ($0.2425 per share)	—		—		(3,820)		—		—		(3,820)
Balance at March 31, 2024	$	16,581	$	300,845	$	294,066	$	(22,648)	$	(60,804)	$	528,040

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MIDWESTONE FINANCIAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended March 31,
(unaudited) (dollars in thousands)	2024		2023
Operating Activities:
Net income	$	3,269	$	1,397
Adjustments to reconcile net income to net cash provided by operating activities:
Credit loss expense	4,689		933

Depreciation, amortization, and accretion	2,992		2,891


Net change in premises and equipment due to writedown or sale	79		(19)
Share-based compensation	641		648
Net (gain) loss on call or sale of debt securities available for sale	(36)		13,170



Net change in foreclosed assets due to writedown or sale	311		(31)
Net gain on sale of loans held for sale	(181)		(75)
Origination of loans held for sale	(9,386)		(9,976)
Proceeds from sales of loans held for sale	8,283		8,110
Increase in cash surrender value of bank-owned life insurance	(661)		(602)
Increase in deferred income taxes, net	(221)		(410)

Change in:
Other assets	(2,430)		14,434
Other liabilities	2,239		(12,871)
Net cash provided by operating activities	$	9,588	$	17,599
Investing Activities:

Purchases of equity securities	$	(250)	$	—
Proceeds from sales of debt securities available for sale	52,323		218,667
Proceeds from maturities and calls of debt securities available for sale	27,951		34,746
Purchases of debt securities available for sale	(28,376)		(54,690)

Proceeds from maturities and calls of debt securities held to maturity	10,268		11,798
Net increase in loans held for investment	(79,756)		(77,890)
Purchases of premises and equipment	(519)		(404)
Proceeds from sale of foreclosed assets	2		134
Proceeds from sale of premises and equipment	—		183
Net cash paid in business acquisition	(19,980)		—


Net cash (used in) provided by investing activities	$	(38,337)	$	132,544
Financing Activities:
Net (decrease) increase in:
Deposits	$	(34,797)	$	86,175
Short-term borrowings	85,224		(247,892)


Payments on finance lease liability	(50)		(43)



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

Taxes paid relating to the release/lapse of restriction on RSUs	(523)		(549)
Dividends paid	(3,820)		(3,801)



Net cash provided by (used in) financing activities	$	44,784	$	(167,360)
Net change in cash and cash equivalents	$	16,035	$	(17,217)
Cash and cash equivalents at beginning of period	81,727		86,435
Cash and cash equivalents at end of period	$	97,762	$	69,218

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	Three Months Ended March 31,
(unaudited) (dollars in thousands)	2024		2023
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	33,369	$	16,599

Supplemental schedule of non-cash investing and financing activities:
Transfer of loans to foreclosed assets, net	$	281	$	—




Supplemental schedule of non-cash investing activities from acquisition:
Non-cash assets acquired:
Investment securities	$	52,493	$	—
Total loans held for investment, net	207,095		—
Premises and equipment	11,091		—
Assets held for sale	2,379		—
Goodwill	8,641		—
Core deposit intangible	7,100		—

Other assets	4,987		—
Total non-cash assets acquired	$	293,786	$	—
Liabilities assumed:
Deposits	$	224,248	$	—
Short-term borrowings	37,500		—

Other liabilities	3,417		—
Total liabilities assumed	$	265,165	$	—

See accompanying notes to consolidated financial statements.

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MidWestOne Financial Group, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

1. Nature of Business and Significant Accounting Policies

Nature of Business

The Company, an Iowa corporation formed in 1983, is a bank holding company under the BHCA and a financial holding company under the 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. We operate primarily through MidWestOne Bank, our bank subsidiary.

On January 31, 2024, the Company completed the acquisition of DNVB, a bank holding company whose wholly-owned banking subsidiary was BOD. Immediately following completion of the acquisition, BOD was merged with and into the Bank. As consideration for the merger, we paid cash in the amount of $32.6 million.

Basis of Presentation

The accompanying interim condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, certain disclosures accompanying annual consolidated financial statements are omitted. In the opinion of management, 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 conjunction with the audited consolidated financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2023, filed with the SEC on March 8, 2024.

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 months ended March 31, 2024 may not be indicative of results for the year ending December 31, 2024, or for any other period.

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, 2023, filed with the SEC on March 8, 2024.

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, 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, 2024

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 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.

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On November 27, 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. Enhanced disclosures about significant segment expenses are included within this ASU. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with an option to early adopt. The amendments should be applied retrospectively to all prior periods presented in the financial statements, with the segment expense categories and amounts disclosed in prior periods being based on the significant segment expense categories identified and disclosed in the period of adoption. The Company is currently evaluating the impact of ASU 2023-07.

On December 14, 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. Additional transparency about income tax information through improvements to income tax disclosures, primarily related to the rate reconciliation and income taxes paid information, will be required. The amendments are effective for annual periods beginning after December 15, 2024, with an option to early adopt. The amendments should be applied on a prospective basis, with retrospective application being permitted. The Company is currently evaluating the impact of ASU 2023-09.

Accounting Guidance Adopted in 2024

On March 29, 2023, the FASB issued ASU 2023-02, Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. Under this ASU, if certain conditions are met, a reporting entity may elect to account for its tax equity investments by using the proportional amortization method regardless of the program from which it receives income tax credits. The amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with an option to early adopt. The amendments must be applied on either a modified retrospective or a retrospective basis, with certain exceptions for low-income-housing tax credit structures that are not accounted for using the proportional amortization method. The adoption of ASU 2023-02 was applied on a modified retrospective basis and did not have a material impact on the Company's consolidated financial statements.

2. Business Combinations

On January 31, 2024, the Company acquired 100% of the equity of DNVB through a merger and acquired its wholly-owned banking subsidiary, Bank of Denver, for cash consideration of $32.6 million. The primary reason for the acquisition was to increase our presence in Denver, Colorado. Immediately following the completion of the acquisition, BOD was 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 January 31, 2024 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). Initial accounting for the assets acquired and liabilities assumed was incomplete at March 31, 2024. Thus, such amounts recognized in the financial statements have been determined to be provisional. The excess of the consideration paid over the fair value of the net assets acquired is recorded as goodwill. This goodwill is not deductible for tax purposes. The revenue and earnings amount specific to DNVB since the acquisition date that are included in the consolidated results for the three months ended March 31, 2024 are not readily determinable. The disclosures of these amounts are impracticable due to the merging of certain processes and systems at the acquisition date.

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The table below summarizes the amounts recognized as of the acquisition date for each major class of assets acquired and liabilities assumed:


(in thousands)	January 31, 2024

Merger consideration
Cash consideration	$	32,600
Identifiable net assets acquired, at fair value
Assets acquired
Cash and due from banks	$	462
Interest earning deposits in banks	3,517
Debt securities	52,493
Loans held for investment	207,095
Premises and equipment	13,470
Core deposit intangible	7,100
Other assets	4,987
Total assets acquired	289,124
Liabilities assumed
Deposits	$	(224,248)
Short-term borrowings	(37,500)
Other liabilities	(3,417)
Total liabilities assumed	(265,165)
Identifiable net assets acquired, at fair value	23,959
Goodwill	$	8,641

For illustrative purposes only, the following table presents certain unaudited pro forma information for the three months ended March 31, 2024 and March 31, 2023. This unaudited, estimated pro forma information was calculated as if DNVB had been acquired as of the beginning of the year prior to the date of acquisition. This unaudited pro forma information combines the historical results of DNVB and the Company and includes adjustments for the estimated impact of certain fair value purchase accounting, interest expense, acquisition-related expenses, and income tax expense for the respective periods. The pro forma information is not indicative of what would have occurred had the acquisition occurred as of the beginning of the year prior to the acquisition. Additionally, MidWestOne expects to achieve further operating cost savings and other business synergies, including revenue growth as a result of the acquisition, which are not reflected in the pro forma amounts that follow. As a result, actual amounts would have differed from the unaudited pro forma information presented.


	Unaudited
	Three Months Ended
	March 31,
(in thousands, except per share amounts)	2024		2023
Total revenues	$	45,298	$	38,963
Net income (loss)	$	6,466	$	(1,662)
EPS - basic	$	0.41	$	(0.11)
EPS - diluted	$	0.41	$	(0.11)

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The following table summarizes the DNVB acquisition-related expenses incurred during the three months ended March 31, 2024 and IOFB acquisition-related expenses incurred during the three months ended March 31, 2023, which are included in the respective income statement line items, for the periods indicated:


	Three Months Ended
	March 31,
(in thousands)	2024		2023
Noninterest Expense
Compensation and employee benefits	$	241	$	70
Occupancy expense of premises, net	152		—
Equipment	149		—
Legal and professional	573		—
Data processing	61		65
Marketing	32		—
Communications	1		—
Other	105		1
Total acquisition-related expenses	$	1,314	$	136

3. Debt Securities

At March 31, 2024, there was $6.6 million of net unrealized after tax loss remaining in accumulated other comprehensive loss, related to the transfer of securities classified as available for sale to held to maturity on January 1, 2022.

The following tables summarize the amortized cost, gross unrealized gains and losses and the resulting fair value of debt securities as of the dates indicated:


	As of March 31, 2024
(in thousands)	Amortized Cost (1)		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Loss related to Debt Securities		Fair Value
Available for Sale
U.S. Treasury securities	$	247	$	—	$	—	$	—	$	247

State and political subdivisions	132,150		1		8,773		—		123,378
Mortgage-backed securities	5,347		3		151		—		5,199
Collateralized loan obligations	61,914		200		248		—		61,866
Collateralized mortgage obligations	201,242		—		22,620		—		178,622
Corporate debt securities	472,217		110		44,409		—		427,918
Total available for sale debt securities	$	873,117	$	314	$	76,201	$	—	$	797,230

Held to Maturity
State and political subdivisions	$	531,961	$	—	$	71,245	$	—	$	460,716
Mortgage-backed securities	73,668		—		12,685		—		60,983
Collateralized mortgage obligations	459,310		—		105,365		—		353,945
Total held to maturity debt securities	$	1,064,939	$	—	$	189,295	$	—	$	875,644
(1) Amortized cost for the held to maturity securities includes $231 thousand of unamortized gain in state and political subdivisions, $74 thousand of unamortized gains in mortgage-backed securities and $9.3 million of unamortized losses in collateralized mortgage obligations related to the re-classification of securities from available for sale to held to maturity on January 1, 2022.

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	As of December 31, 2023
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Loss related to Debt Securities		Fair Value
Available for Sale


State and political subdivisions	$	139,482	$	2	$	9,345	$	—	$	130,139
Mortgage-backed securities	5,448		5		142		—		5,311
Collateralized loan obligations	50,541		135		239		—		50,437
Collateralized mortgage obligations	190,304		—		21,108		—		169,196
Corporate debt securities	487,361		57		47,367		—		440,051
Total available for sale debt securities	$	873,136	$	199	$	78,201	$	—	$	795,134

Held to Maturity

State and political subdivisions	$	532,422	$	—	$	65,932	$	—	$	466,490
Mortgage-backed securities	74,904		—		11,635		—		63,269

Collateralized mortgage obligations	467,864		—		102,360		—		365,504

Total held to maturity debt securities	$	1,075,190	$	—	$	179,927	$	—	$	895,263
(1) Amortized cost for the held to maturity securities includes $227 thousand of unamortized gain in state and political subdivisions, $58 thousand of unamortized gains in mortgage-backed securities and $9.7 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.

Investment securities with a fair value of $1.24 billion and $1.16 billion at March 31, 2024 and December 31, 2023, respectively, were pledged on public deposits, securities sold under agreements to repurchase and for other purposes, as required or permitted by law.

Accrued interest receivable on available for sale debt securities and held to maturity debt securities is recorded within 'Other Assets,' and is excluded from the estimate of credit losses. At March 31, 2024 the accrued interest receivable on available for sale debt securities and held to maturity debt securities totaled $5.8 million and $3.5 million, respectively. At December 31, 2023 the accrued interest receivable on available for sale debt securities and held to maturity debt securities totaled $5.5 million and $3.7 million, respectively.

The following table presents debt securities AFS in an unrealized loss position for which an allowance for credit losses has not been recorded as of March 31, 2024, aggregated by investment category and length of time in a continuous loss position:


		As of March 31, 2024
	Number of Securities	Less than 12 Months				12 Months or More				Total
Available for Sale		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
(in thousands, except number of securities)
U.S. Treasury securities	1	$	247	$	—	$	—	$	—	$	247	$	—
State and political subdivisions	149	3,837		114		118,100		8,659		121,937		8,773
Mortgage-backed securities	21	5		—		4,808		151		4,813		151
Collateralized loan obligations	3	22,817		234		2,929		14		25,746		248
Collateralized mortgage obligations	22	54,982		718		123,640		21,902		178,622		22,620
Corporate debt securities	130	1,929		30		417,479		44,379		419,408		44,409
Total	326	$	83,817	$	1,096	$	666,956	$	75,105	$	750,773	$	76,201

As of March 31, 2024, 149 state and political subdivisions securities with total unrealized losses of $8.8 million were held by the Company. Management evaluated these securities through a process that included consideration of credit agency ratings and payment history. In addition, management evaluated securities by considering the yield spread to treasury securities and the most recent financial information available. Based on this evaluation, management concluded that the decline in fair value was not attributable to credit losses.

As of March 31, 2024, 21 mortgage-backed securities, and 22 collateralized mortgage obligations with unrealized losses totaling $22.8 million were held by the Company. Management evaluated the payment history of these securities. In addition, management considered the implied U.S. government guarantee of these agency securities and the level of credit enhancement for non-agency securities. Based on this evaluation, management concluded that the decline in fair value was not attributable to credit losses.

As of March 31, 2024, 3 collateralized loan obligations with unrealized losses of $0.2 million were held by the Company. Management evaluated these securities through a process that included consideration of credit agency ratings, priority of cash

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flows and the amount of over-collateralization. In addition, management may evaluate securities by considering the yield spread to treasury securities and the most recent financial information available. Based on this evaluation, management concluded that the decline in fair value was not attributable to credit losses.

As of March 31, 2024, 130 corporate debt securities with total unrealized losses of $44.4 million were held by the Company. Management evaluated these securities by considering credit agency ratings and payment history. In addition, management evaluated securities by considering the yield spread to treasury securities and the most recent financial information available. Based on this evaluation, management concluded that the decline in fair value was not attributable to credit losses.

The following table presents debt securities AFS in an unrealized loss position for which an allowance for credit losses has not been recorded as of December 31, 2023, aggregated by investment category and length of time in a continuous loss position:


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

State and political subdivisions	149	$	8,417	$	492	$	114,713	$	8,853	$	123,130	$	9,345
Mortgage-backed securities	19	—		—		4,906		142		4,906		142
Collateralized loan obligations	2	17,696		239		—		—		17,696		239
Collateralized mortgage obligations	20	6,278		90		127,792		21,018		134,070		21,108
Corporate debt securities	133	2,377		80		429,222		47,287		431,599		47,367
Total	323	$	34,768	$	901	$	676,633	$	77,300	$	711,401	$	78,201

The Company evaluates debt securities held to maturity for current expected credit losses. There were no debt securities held to maturity classified as nonaccrual or past due as of March 31, 2024. Held-to-maturity securities are evaluated on a quarterly basis using historical probability of default and loss given default information specific to the investment category. If this evaluation determines that credit losses exist, an allowance for credit loss is recorded and included in earnings as a component of credit loss expense. Based on this evaluation, management concluded that no allowance for credit loss for these securities was required.

Proceeds and gross realized gains and losses on debt securities available for sale for the three months ended March 31, 2024 and 2023, were as follows:


	Three Months Ended
(in thousands)	March 31, 2024		March 31, 2023
Proceeds from sales of debt securities available for sale	$	52,323	$	218,667


Gross realized losses from sales of debt securities available for sale(1)	—		(13,170)
Net realized loss from sales of debt securities available for sale(1)	$	—	$	(13,170)

(1) The difference in investment security gains, net reported herein as compared to the Consolidated Statements of Income is associated with the net realized gain from the call of debt securities of $36 thousand for the three months ended March 31, 2024, with no net realized gain from the call of debt securities recorded during the three months ended March 31, 2023.

The contractual maturity distribution of investment debt securities at March 31, 2024, is shown below. Expected maturities of MBS, CLO and CMO may differ from contractual maturities because the mortgages underlying the securities may be called or prepaid without any penalties. Therefore, these securities are not included in the maturity categories in the following summary.


	Available for Sale				Held to Maturity
(in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	60,692	$	59,887	$	2,510	$	2,484
Due after one year through five years	371,630		342,646		150,788		137,380
Due after five years through ten years	145,334		125,889		250,580		214,093
Due after ten years	26,958		23,121		128,083		106,759
	$	604,614	$	551,543	$	531,961	$	460,716
Mortgage-backed securities	5,347		5,199		73,668		60,983
Collateralized loan obligations	61,914		61,866		—		—
Collateralized mortgage obligations	201,242		178,622		459,310		353,945
Total	$	873,117	$	797,230	$	1,064,939	$	875,644

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4. Loans Receivable and the Allowance for Credit Losses

The composition of loans by class of receivable was as follows:


	As of
(in thousands)	March 31, 2024		December 31, 2023
Agricultural	$	113,029	$	118,414
Commercial and industrial	1,105,718		1,075,003
Commercial real estate:
Construction & development	403,571		323,195
Farmland	184,109		184,955
Multifamily	409,504		383,178
Commercial real estate-other	1,440,645		1,333,982
Total commercial real estate	2,437,829		2,225,310
Residential real estate:
One- to four- family first liens	495,408		459,798
One- to four- family junior liens	182,001		180,639
Total residential real estate	677,409		640,437
Consumer	80,661		67,783
Loans held for investment, net of unearned income	4,414,646		4,126,947
Allowance for credit losses	(55,900)		(51,500)
Total loans held for investment, net	$	4,358,746	$	4,075,447

Loans with unpaid principal in the amount of $1.12 billion and $1.13 billion at March 31, 2024 and December 31, 2023, respectively, were pledged to the FHLB as collateral for borrowings.

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. All loans rated doubtful or worse, and certain loans rated substandard, are placed on non-accrual.

A non-accrual loan 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.

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.

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The following tables present 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, 2024
Agricultural	$	112,185	$	384	$	—	$	460	$	113,029	$	—
Commercial and industrial	1,087,725		360		194		17,439		1,105,718		—
Commercial real estate:
Construction and development	403,571		—		—		—		403,571		—
Farmland	182,368		339		—		1,402		184,109		—
Multifamily	409,504		—		—		—		409,504		—
Commercial real estate-other	1,434,435		1,561		—		4,649		1,440,645		—
Total commercial real estate	2,429,878		1,900		—		6,051		2,437,829		—
Residential real estate:
One- to four- family first liens	488,382		3,362		1,279		2,385		495,408		925
One- to four- family junior liens	180,461		567		335		638		182,001		—
Total residential real estate	668,843		3,929		1,614		3,023		677,409		925
Consumer	80,306		242		71		42		80,661		42
Total	$	4,378,937	$	6,815	$	1,879	$	27,015	$	4,414,646	$	967























			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, 2023
Agricultural	$	117,852	$	338	$	—	$	224	$	118,414	$	—
Commercial and industrial	1,058,301		440		401		15,861		1,075,003		—
Commercial real estate:
Construction and development	323,165		30		—		—		323,195		—
Farmland	182,759		677		352		1,167		184,955		—
Multifamily	383,178		—		—		—		383,178		—
Commercial real estate-other	1,327,727		2,129		1,290		2,836		1,333,982		—
Total commercial real estate	2,216,829		2,836		1,642		4,003		2,225,310		—
Residential real estate:
One- to four- family first liens	453,212		3,572		1,741		1,273		459,798		468
One- to four- family junior liens	179,339		356		690		254		180,639		—
Total residential real estate	632,551		3,928		2,431		1,527		640,437		468
Consumer	67,622		118		28		15		67,783		—
Total	$	4,093,155	$	7,660	$	4,502	$	21,630	$	4,126,947	$	468

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The following table presents the 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:


	Nonaccrual				Nonaccrual with no Allowance for Credit Losses				90 Days or More Past Due And Accruing
(in thousands)	March 31, 2024		December 31, 2023		March 31, 2024		December 31, 2023		March 31, 2024		December 31, 2023

Agricultural	$	460	$	235	$	219	$	12	$	—	$	—
Commercial and industrial	17,966		17,770		12,455		12,549		—		—
Commercial real estate:
Construction and development	—		—		—		—		—		—
Farmland	1,538		1,654		1,390		1,490		—		—
Multifamily	—		—		—		—		—		—
Commercial real estate-other	4,926		3,441		2,486		853		—		—
Total commercial real estate	6,464		5,095		3,876		2,343		—		—
Residential real estate:
One- to four- family first liens	2,294		1,888		853		455		925		468
One- to four- family junior liens	1,078		876		124		—		—		—
Total residential real estate	3,372		2,764		977		455		925		468
Consumer	38		27		—		—		42		—
Total	$	28,300	$	25,891	$	17,527	$	15,359	$	967	$	468

The interest income recognized on loans that were on nonaccrual for the three months ended March 31, 2024 and March 31, 2023 was $129 thousand and $56 thousand, respectively.

Credit Quality Information

The Company aggregates loans into risk categories based on relevant information about the 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 loans as to credit risk. This analysis includes non-homogenous loans, such as 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:

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

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

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

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

Homogenous loans, including owner occupied residential real estate and consumer loans, are not individually risk rated. 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.

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The following table sets forth the amortized cost basis of loans 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, 2024. As of March 31, 2024, there were no 'loss' rated credits.


	Term Loans by Origination Year												Revolving Loans
March 31, 2024 (in thousands)	2024		2023		2022		2021		2020		Prior				Total
Agricultural
Pass	$	7,515	$	9,909	$	12,420	$	7,156	$	2,399	$	1,847	$	66,311		$	107,557
Special mention / watch	—		319		452		635		124		488		1,643			3,661
Substandard	—		39		262		285		215		214		796			1,811
Doubtful	—		—		—		—		—		—		—			—
Total	$	7,515	$	10,267	$	13,134	$	8,076	$	2,738	$	2,549	$	68,750		$	113,029



Commercial and industrial
Pass	$	27,582	$	173,057	$	200,277	$	188,288	$	112,151	$	135,262	$	175,914		$	1,012,531
Special mention / watch	58		2,896		17,886		865		3,198		2,533		15,821			43,257
Substandard	—		931		1,221		3,074		136		37,472		7,096			49,930
Doubtful	—		—		—		—		—		—		—			—
Total	$	27,640	$	176,884	$	219,384	$	192,227	$	115,485	$	175,267	$	198,831		$	1,105,718



CRE - Construction and development
Pass	$	30,069	$	123,679	$	179,633	$	49,896	$	3,346	$	2,451	$	12,132		$	401,206
Special mention / watch	623		263		—		454		—		—		467			1,807
Substandard	—		327		231		—		—		—		—			558
Doubtful	—		—		—		—		—		—		—			—
Total	$	30,692	$	124,269	$	179,864	$	50,350	$	3,346	$	2,451	$	12,599		$	403,571



CRE - Farmland
Pass	$	6,592	$	26,072	$	43,144	$	45,254	$	18,449	$	19,303	$	2,540		$	161,354
Special mention / watch	—		—		6,695		2,405		5,804		1,070		719			16,693
Substandard	—		383		382		1,285		1,186		2,796		30			6,062
Doubtful	—		—		—		—		—		—		—			—
Total	$	6,592	$	26,455	$	50,221	$	48,944	$	25,439	$	23,169	$	3,289		$	184,109



CRE - Multifamily
Pass	$	456	$	42,595	$	97,726	$	114,264	$	69,748	$	22,308	$	5,352		$	352,449
Special mention / watch	5,318		—		1,230		272		29,979		12,384		—			49,183
Substandard	—		—		—		7,532		326		14		—			7,872
Doubtful	—		—		—		—		—		—		—			—
Total	$	5,774	$	42,595	$	98,956	$	122,068	$	100,053	$	34,706	$	5,352		$	409,504



CRE - Other
Pass	$	9,484	$	202,773	$	316,522	$	271,467	$	257,023	$	200,086	$	58,986		$	1,316,341
Special mention / watch	454		8,093		6,675		3,227		4,426		7,295		3,987			34,157
Substandard	1,670		284		26,247		18,401		19,018		24,527		—			90,147
Doubtful	—		—		—		—		—		—		—			—
Total	$	11,608	$	211,150	$	349,444	$	293,095	$	280,467	$	231,908	$	62,973		$	1,440,645




RRE - One- to four- family first liens
Pass / Performing	$	17,533	$	61,643	$	137,014	$	95,695	$	53,935	$	102,592	$	16,707		$	485,119
Special mention / watch	—		722		710		35		607		1,772		—			3,846
Substandard / Nonperforming	—		1,369		190		785		104		3,995		—			6,443
Doubtful	—		—		—		—		—		—		—			—
Total	$	17,533	$	63,734	$	137,914	$	96,515	$	54,646	$	108,359	$	16,707		$	495,408







RRE - One- to four- family junior liens
Performing	$	4,210	$	21,539	$	28,673	$	17,968	$	7,254	$	9,781	$	91,497		$	180,922
Nonperforming	—		—		406		—		23		650		—			1,079
Total	$	4,210	$	21,539	$	29,079	$	17,968	$	7,277	$	10,431	$	91,497		$	182,001



Consumer
Performing	$	7,922	$	30,997	$	16,110	$	8,941	$	3,898	$	7,990	$	4,765		$	80,623
Nonperforming	—		16		21		—		—		1		—			38
Total	$	7,922	$	31,013	$	16,131	$	8,941	$	3,898	$	7,991	$	4,765		$	80,661

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	Term Loans by Origination Year												Revolving Loans
March 31, 2024 (in thousands)	2024		2023		2022		2021		2020		Prior				Total

Total by Credit Quality Indicator Category
Pass	$	99,231	$	639,728	$	986,736	$	772,020	$	517,051	$	483,849	$	337,942		$	3,836,557
Special mention / watch	6,453		12,293		33,648		7,893		44,138		25,542		22,637			152,604
Substandard	1,670		3,333		28,533		31,362		20,985		69,018		7,922			162,823
Doubtful	—		—		—		—		—		—		—			—
Performing	12,132		52,536		44,783		26,909		11,152		17,771		96,262			261,545
Nonperforming	—		16		427		—		23		651		—			1,117
Total	$	119,486	$	707,906	$	1,094,127	$	838,184	$	593,349	$	596,831	$	464,763		$	4,414,646

	Term Loans by Origination Year												Revolving Loans
March 31, 2024 (in thousands)	2024		2023		2022		2021		2020		Prior				Total
Year-to-date Current Period Gross Write-offs
Agricultural	$	—	$	—	$	—	$	4	$	—	$	—	$	—		$	4
Commercial and industrial	—		—		128		129		29		13		—			299
CRE - Construction and development	—		—		—		—		—		—		—			—
CRE - Farmland	—		—		—		—		—		—		—			—
CRE - Multifamily	—		—		—		—		—		—		—			—
CRE - Other	—		—		—		—		—		35		—			35
RRE - One-to-four-family first liens	—		—		—		19		—		—		—			19
RRE - One-to-four-family junior liens	—		—		—		—		—		—		—			—
Consumer	—		276		7		3				4		—			290
Total Current Period Gross Write-offs	$	—	$	276	$	135	$	155	$	29	$	52	$	—		$	647

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The following table sets forth the amortized cost basis of loans by class of receivable by credit quality indicator and vintage based on the most recent analysis performed, as of December 31, 2023. As of December 31, 2023, there were no 'loss' rated credits.


	Term Loans by Origination Year												Revolving Loans
December 31, 2023 (in thousands)	2023		2022		2021		2020		2019		Prior				Total
Agricultural
Pass	$	11,859	$	12,149	$	8,352	$	2,752	$	689	$	1,139	$	71,680		$	108,620
Special mention / watch	266		550		670		91		5		522		3,705			5,809
Substandard	709		193		302		208		—		224		2,349			3,985
Doubtful	—		—		—		—		—		—		—			—
Total	$	12,834	$	12,892	$	9,324	$	3,051	$	694	$	1,885	$	77,734		$	118,414
Commercial and industrial
Pass	$	176,021	$	224,924	$	193,011	$	117,326	$	25,555	$	116,661	$	147,690		$	1,001,188
Special mention / watch	2,541		416		3,209		3,385		193		272		14,692			24,708
Substandard	897		2,921		2,010		561		8,507		29,432		4,779			49,107
Doubtful	—		—		—		—		—		—		—			—
Total	$	179,459	$	228,261	$	198,230	$	121,272	$	34,255	$	146,365	$	167,161		$	1,075,003
CRE - Construction and development
Pass	$	99,803	$	163,126	$	43,189	$	3,393	$	821	$	700	$	9,552		$	320,584
Special mention / watch	1,097		—		464		—		—		—		467			2,028
Substandard	343		240		—		—		—		—		—			583
Doubtful	—		—		—		—		—		—		—			—
Total	$	101,243	$	163,366	$	43,653	$	3,393	$	821	$	700	$	10,019		$	323,195
CRE - Farmland
Pass	$	25,666	$	44,907	$	47,068	$	18,863	$	6,587	$	14,845	$	1,642		$	159,578
Special mention / watch	1,229		6,898		2,409		5,982		—		965		276			17,759
Substandard	1,830		210		1,542		1,052		926		2,029		29			7,618
Doubtful	—		—		—		—		—		—		—			—
Total	$	28,725	$	52,015	$	51,019	$	25,897	$	7,513	$	17,839	$	1,947		$	184,955
CRE - Multifamily
Pass	$	32,077	$	96,969	$	111,032	$	77,532	$	8,701	$	6,508	$	4,208		$	337,027
Special mention / watch	5,318		1,237		277		18,984		7,850		4,586		—			38,252
Substandard	—		—		7,572		327		—		—		—			7,899
Doubtful	—		—		—		—		—		—		—			—
Total	$	37,395	$	98,206	$	118,881	$	96,843	$	16,551	$	11,094	$	4,208		$	383,178
CRE - Other
Pass	$	199,698	$	295,066	$	256,718	$	250,676	$	77,509	$	90,170	$	51,827		$	1,221,664
Special mention / watch	364		1,306		3,300		4,823		4,282		2,395		3,856			20,326
Substandard	325		26,555		19,253		19,103		8,242		17,876		638			91,992
Doubtful	—		—		—		—		—		—		—			—
Total	$	200,387	$	322,927	$	279,271	$	274,602	$	90,033	$	110,441	$	56,321		$	1,333,982
RRE - One- to four- family first liens
Pass / Performing	$	62,644	$	125,777	$	92,767	$	54,028	$	19,674	$	81,660	$	13,283		$	449,833
Special mention / watch	629		716		36		620		1,827		319		—			4,147
Substandard / Nonperforming	1,156		191		738		165		164		3,404		—			5,818
Doubtful	—		—		—		—		—		—		—			—
Total	$	64,429	$	126,684	$	93,541	$	54,813	$	21,665	$	85,383	$	13,283		$	459,798
RRE - One- to four- family junior liens
Performing	$	23,551	$	29,919	$	18,733	$	7,292	$	2,590	$	7,867	$	89,810		$	179,762
Nonperforming	—		192		—		25		23		637		—			877
Total	$	23,551	$	30,111	$	18,733	$	7,317	$	2,613	$	8,504	$	89,810		$	180,639
Consumer
Performing	$	26,028	$	14,319	$	10,042	$	4,421	$	1,451	$	7,350	$	4,145		$	67,756
Nonperforming	—		22		—		—		3		2		—			27
Total	$	26,028	$	14,341	$	10,042	$	4,421	$	1,454	$	7,352	$	4,145		$	67,783

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	Term Loans by Origination Year												Revolving Loans
December 31, 2023 (in thousands)	2023		2022		2021		2020		2019		Prior				Total
Total by Credit Quality Indicator Category
Pass	$	607,768	$	962,918	$	752,137	$	524,570	$	139,536	$	311,683	$	299,882		$	3,598,494
Special mention / watch	11,444		11,123		10,365		33,885		14,157		9,059		22,996			113,029
Substandard	5,260		30,310		31,417		21,416		17,839		52,965		7,795			167,002
Doubtful	—		—		—		—		—		—		—			—
Performing	49,579		44,238		28,775		11,713		4,041		15,217		93,955			247,518
Nonperforming	—		214		—		25		26		639		—			904
Total	$	674,051	$	1,048,803	$	822,694	$	591,609	$	175,599	$	389,563	$	424,628		$	4,126,947

	Term Loans by Origination Year												Revolving Loans
December 31, 2023 (in thousands)	2023		2022		2021		2020		2019		Prior				Total
Year-to-date Current Period Gross Write-offs
Agricultural	$	—	$	8	$	1	$	17	$	2	$	—	$	—		$	28
Commercial and industrial	239		343		223		133		464		45		—			1,447
CRE - Construction and development	—		—		—		—		—		—		—			—
CRE - Farmland	—		—		—		—		—		—		—			—
CRE - Multifamily	—		—		—		—		—		—		—			—
CRE - Other	—		—		—		—		—		2,337		—			2,337
RRE - One-to-four-family first liens	—		—		—		—		—		36		—			36
RRE - One-to-four-family junior liens	—		19		—		—		—		—		—			19
Consumer	—		621		30		12		12		10		—			685
Total Current Period Gross Write-offs	$	239	$	991	$	254	$	162	$	478	$	2,428	$	—		$	4,552

Allowance for Credit Losses

The following are the economic factors utilized by the Company for its loan credit loss estimation process at March 31, 2024, and the forecast for each factor at that date: (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 - decreases over the next four forecasted quarters; (4) year-to-year change in U.S. GDP - increases over the next four forecasted quarters; (5) year-to-year change in National Home Price Index – increases over the next four forecasted quarters; and (6) rental vacancy - increases over the next four forecasted quarters. 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, 2024 and December 31, 2023 reflects $3.1 million of day 1 credit loss expense related to acquired DNVB loans, as well as additional reserve taken to support loan growth. Net loan charge-offs were $0.2 million for the three months ended March 31, 2024 as compared to net loan charge-offs of $0.3 million for the three months ended March 31, 2023.

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 $20.6 million at March 31, 2024 and $19.7 million at December 31, 2023 and is excluded from the estimate of credit losses.

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The changes in the allowance for credit losses by portfolio segment were as follows:



	For the Three Months Ended March 31, 2024 and 2023
(in thousands)	Agricultural		Commercial and Industrial		Commercial Real Estate		Residential Real Estate		Consumer		Total
For the Three Months Ended March 31, 2024
Beginning balance	$	613	$	21,743	$	23,759	$	4,762	$	623	$	51,500

Charge-offs	(4)		(299)		(35)		(19)		(290)		(647)
Recoveries	355		46		8		9		40		458
Credit loss expense (benefit)(1)	(316)		392		3,040		262		1,211		4,589
Ending balance	$	648	$	21,882	$	26,772	$	5,014	$	1,584	$	55,900

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
(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 of $0.1 million related to off-balance sheet credit exposures for the three months ended March 31, 2024, with no credit loss expense related to off-balance sheet credit exposures being recorded for the three months ended March 31, 2023.

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


	As of March 31, 2024
(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	$	219	$	16,911	$	8,433	$	1,636	$	—	$	27,199
Collectively evaluated for impairment	112,810		1,088,807		2,429,396		675,773		80,661		4,387,447
Total	$	113,029	$	1,105,718	$	2,437,829	$	677,409	$	80,661	$	4,414,646
Allowance for credit losses:
Individually evaluated for impairment	$	—	$	2,804	$	47	$	118	$	—	$	2,969
Collectively evaluated for impairment	648		19,078		26,725		4,896		1,584		52,931
Total	$	648	$	21,882	$	26,772	$	5,014	$	1,584	$	55,900


	As of December 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	$	11	$	17,231	$	10,932	$	983	$	—	$	29,157
Collectively evaluated for impairment	118,403		1,057,772		2,214,378		639,454		67,783		4,097,790

Total	$	118,414	$	1,075,003	$	2,225,310	$	640,437	$	67,783	$	4,126,947
Allowance for credit losses:
Individually evaluated for impairment	$	—	$	2,616	$	705	$	16	$	—	$	3,337
Collectively evaluated for impairment	613		19,127		23,054		4,746		623		48,163

Total	$	613	$	21,743	$	23,759	$	4,762	$	623	$	51,500

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The following tables present 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, 2024
(in thousands)	Primary Type of Collateral
	Real Estate		Equipment		Other		Total		ACL Allocation
Agricultural	$	11	$	—	$	208	$	219	$	—
Commercial and industrial	16,911		—		—		16,911		2,804
Commercial real estate:
Construction and development	—		—		—		—		—
Farmland	2,334		—		1,278		3,612		—
Multifamily	—		—		—		—		—
Commercial real estate-other	4,821		—		—		4,821		47
Residential real estate:
One- to four- family first liens	853		—		—		853		—
One- to four- family junior liens	783		—		—		783		118
Consumer	—		—		—		—		—
Total	$	25,713	$	—	$	1,486	$	27,199	$	2,969


	As of December 31, 2023
(in thousands)	Primary Type of Collateral
	Real Estate		Equipment		Other		Total		ACL Allocation
Agricultural	$	11	$	—	$	—	$	11	$	—
Commercial and industrial	15,991		—		1,240		17,231		2,616
Commercial real estate:
Construction and development	—		—		—		—		—
Farmland	5,403		—		—		5,403		—
Multifamily	—		—		—		—		—
Commercial real estate-other	5,350		—		179		5,529		705
Residential real estate:
One- to four- family first liens	481		—		—		481		—
One- to four- family junior liens	—		—		502		502		16
Consumer	—		—		—		—		—
Total	$	27,236	$	—	$	1,921	$	29,157	$	3,337

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.

The following tables present the amortized cost basis of loans as of March 31, 2024 and March 31, 2023 that were modified during the three months ended March 31, 2024 and March 31, 2023 and experiencing financial difficulty at the time of the modification by class and by type of modification:


	For the Three Months Ended March 31, 2024
									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		Payment Delay & Term Extension		Total Class of Financing Receivable
Three Months Ended March 31, 2024

Commercial and industrial	$	—	$	—	$	350	$	—	$	—	$	—	$	—	$	—	0.03	%



CRE - Other	—		—		202		—		—		—		—		—		0.01	%
RRE - One- to four- family first liens	—		253		—		—		—		—		—		—		0.05	%
RRE - One- to four- family junior liens	—		—		136		—		—		—		—		—		0.07	%

Total	$	—	$	253	$	688	$	—	$	—	$	—	$	—	$	—

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	For the Three Months Ended 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		Payment Delay & Term Extension		Total Class of Financing Receivable
Three Months Ended March 31, 2023
Agricultural	$	—	$	16	$	1,502	$	—	$	—	$	—	$	—	$	—	1.42	%
Commercial and industrial	—		—		50		—		120		307		—		—		0.04	%



CRE - Other	—		—		—		—		—		—		20		—		—	%



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

The Company has no additional commitments to lend amounts to the borrowers included in the previous tables as of March 31, 2024 and March 31, 2023. For the three months ended March 31, 2024, the Company had 9 modified loans totaling $1.4 million to borrowers experiencing financial difficulty that redefaulted within 12 months subsequent to the modification. For the three months ended March 31, 2023, the Company had no modified loans totaling to borrowers experiencing financial difficulty that redefaulted within 12 months subsequent to the modification.

The following tables present the performance, as of March 31, 2024 and 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, 2024
(in thousands)	Current		30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total

Commercial and industrial	$	4,028	$	76	$	—	$	995	$	5,099
CRE - Construction and development	559		—		—		—		559
CRE - Farmland	29		—		—		352		381

CRE - Other	6,066		—		—		—		6,066
RRE - One- to four- family first liens	253		—		—		—		253
RRE - One- to four- family junior liens	149		—		—		—		149

Total	$	11,084	$	76	$	—	$	1,347	$	12,507

	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 tables present the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three months ended March 31, 2024 and March 31, 2023:


(dollars in thousands)	Principal Forgiveness		Weighted Average Interest Rate Reduction		Weighted Average Term Extension (Months)
Three Months Ended March 31, 2024

Commercial and industrial	$	—	—	%	4.4



CRE - Other	—		—	%	5.4

RRE - One- to four- family junior liens	—		—	%	122.0

Total	$	—	—	%	27.9

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



CRE - Other	18		7.00		2.47



Total	$	81	2.07	%	4.64

5. Derivatives, Hedging Activities and Balance Sheet Offsetting

The following table presents the total notional amounts and gross fair values of the Company’s derivatives as of the 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 consolidated balance sheets. The fair values of the Company's derivative instrument assets and liabilities are summarized as follows:


	As of March 31, 2024						As of December 31, 2023
	Notional Amount		Fair Value				Notional Amount		Fair Value
(in thousands)			Assets		Liabilities				Assets		Liabilities
Designated as hedging instruments:
Fair value hedges:
Interest rate swaps - loans	$	50,425	$	2,529	$	601	$	41,101	$	2,071	$	902
Interest rate swaps - securities	150,000		144		90		150,000		—		821
Cash flow hedges
Interest rate swaps	200,000		2,660		—		200,000		940		264
Total	$	400,425	$	5,333	$	691	$	391,101	$	3,011	$	1,987

Not designated as hedging instruments:
Interest rate swaps	$	522,777	$	22,429	$	22,438	$	432,648	$	22,028	$	22,038
RPAs - protection sold	31,175		5		—		18,778		4		—
RPAs - protection purchased	31,089		—		4		31,145		—		9
Interest rate lock commitments	3,623		77		—		1,461		50		—
Interest rate forward loan sales contracts	3,730		—		8		2,075		—		23
Total	$	592,394	$	22,511	$	22,450	$	486,107	$	22,082	$	22,070

Derivatives Designated as Hedging Instruments

The Company uses derivative instruments to hedge its exposure to economic risks. 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, including AFS debt securities and loans. The gain or loss on the loan fair value hedge derivative, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in interest income. The change in the fair value of the available for sale securities attributable to changes in the hedged risk is recorded in accumulated other comprehensive income and subsequently reclassified into interest income, as applicable, in the same period(s) to offset the changes in the fair value of the swap, which is also 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. The Company has previously entered into pay-fixed receive-variable interest rate swaps 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, including brokered deposits. The gain or loss on the derivatives is 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 the next 12 months, the Company estimates that an additional $2.2 million of income will be reclassified into interest expense.

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The table below presents the effect of cash flow hedge accounting on AOCI for the three months ended March 31, 2024 and 2023:


	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)	2024		2023			2024		2023
Interest rate swaps	$	2,772	$	138	Interest Expense	$	788	$	—

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,
	2024				2023
(in thousands)	Interest Income		Other Income		Interest Income		Other Income
Income and expense included in the consolidated statements of income related to the effects of fair value or cash flow hedges are recorded	$	408	$	—	$	159	$	—

The effects of fair value and cash flow hedging:
Gain (loss) on fair value hedging relationships in subtopic 815-20:
Interest contracts - loans:
Hedged items	(764)		—		562		—
Derivative designated as hedging instruments	1,023		—		(402)		—

Interest contracts - securities:
Hedged items	(882)		—		—		—
Derivative designated as hedging instruments	1,059		—		—		—

As of March 31, 2024, 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	$	48,539	$	(1,926)
Securities	$	149,937	$	(63)

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 or participation agreement. 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.

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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)		2024		2023
Interest rate swaps	Other income	$	—	$	—
RPAs	Other income	5		69
Interest rate lock commitments	Loan revenue	27		94
Interest rate forward loan sales contracts	Loan revenue	14		(30)
Total		$	46	$	133

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, 2024 and December 31, 2023, 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. The tabular disclosure of fair value provides the location that derivative assets and liabilities are 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, 2024
Asset Derivatives	$	27,844	$	—	$	27,844	$	—	$	17,998	$	9,846
Liability Derivatives	23,141		—		23,141		—		2,730		20,411

As of December 31, 2023
Asset Derivatives	$	25,093	$	—	$	25,093	$	—	$	15,549	$	9,544
Liability Derivatives	24,057		—		24,057		—		2,420		21,637

Credit-risk-related Contingent Features

The Company has an unsecured federal funds line with its institutional derivative counterparties. 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 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. As of March 31, 2024, fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $4.5 million.

6. Goodwill and Intangible Assets

The following table presents the changes in the carrying amount of goodwill for the period indicated:


(in thousands)	As of March 31, 2024		As of December 31, 2023

Goodwill, beginning of period	$	62,477	$	62,477
Goodwill from the acquisition of DNVB	8,641		—

Total goodwill, end of period	$	71,118	$	62,477

As indicated in Note 2. Business Combinations, the Company acquired a core deposit intangible in connection with its acquisition of DNVB on January 31, 2024 with an estimated fair value of $7.1 million, which will be amortized over its estimated useful life of 10 years.

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The following table presents the gross carrying amount, accumulated amortization, and net carrying amount of other intangible assets as of the dates indicated:


	As of March 31, 2024						As of December 31, 2023
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Core deposit intangible	$	65,345	$	(43,044)	$	22,301	$	58,245	$	(41,499)	$	16,746
Customer relationship intangible	5,265		(5,092)		173		5,265		(5,008)		257
Other	2,700		(2,683)		17		2,700		(2,674)		26
	$	73,310	$	(50,819)	$	22,491	$	66,210	$	(49,181)	$	17,029
Indefinite-lived trade name intangible					7,040						7,040
Total other intangible assets, net					$	29,531					$	24,069

The following table provides the estimated future amortization expense for the remaining nine months of the year ending December 31, 2024 and the succeeding annual periods:


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

2024	$	4,344	$	155	$	15	$	4,514
2025	4,924		18		2		4,944
2026	3,840		—		—		3,840
2027	2,757		—		—		2,757
2028	2,110		—		—		2,110
Thereafter	4,326		—		—		4,326
Total	$	22,301	$	173	$	17	$	22,491

7. Other Assets

The components of the Company's other assets as of March 31, 2024 and December 31, 2023 were as follows:


(in thousands)	March 31, 2024		December 31, 2023
Bank-owned life insurance	$	98,700	$	98,039
Interest receivable	30,728		29,768
FHLB stock	5,220		5,806
Mortgage servicing rights	12,965		13,333
Operating lease right-of-use assets, net	2,153		2,337
Federal and state income taxes, current	579		1,556
Federal and state income taxes, deferred	29,582		31,218
Derivative assets	27,844		25,093
Other receivables/assets	18,706		15,630
	$	226,477	$	222,780

8. Deposits

The following table presents the composition of our deposits as of the dates indicated:


(in thousands)	March 31, 2024		December 31, 2023
Noninterest bearing deposits	$	920,764	$	897,053
Interest checking deposits	1,349,823		1,320,435
Money market deposits	1,122,717		1,105,493
Savings deposits	728,276		650,655
Time deposits of $250 and under	992,851		973,253
Time deposits over $250	470,805		448,784
Total deposits	$	5,585,236	$	5,395,673

The Company had $14.0 million and $15.2 million in reciprocal time deposits as of March 31, 2024 and December 31, 2023, respectively. Included in money market deposits at March 31, 2024 and December 31, 2023 were $132.7 million and $128.0 million, respectively, of interest-bearing reciprocal deposits. Included in noninterest bearing deposits at March 31, 2024 were $64.2 million of noninterest-bearing reciprocal deposits, with $58.0 million noninterest-bearing reciprocal deposits at

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December 31, 2023. 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. In addition, included within the time deposits of “$250 thousand and under” was $205.0 million of brokered deposits as of March 31, 2024 and $221.0 million as of December 31, 2023.

As of March 31, 2024 and December 31, 2023, the Company had public entity deposits, which were collateralized by investment securities balances of $285.1 million and $183.4 million, respectively.

9. Short-Term Borrowings

The following table summarizes our short-term borrowings as of the dates indicated:


	March 31, 2024				December 31, 2023
(in thousands)	Weighted Average Rate		Balance		Weighted Average Rate		Balance
Securities sold under agreements to repurchase	0.68	%	$	4,988	0.72	%	$	5,064
Federal Home Loan Bank advances	—		—		5.64		10,200

Federal Reserve Bank borrowings	4.77		405,000		4.82		285,000
Unsecured line of credit	6.88		13,000		—		—
Total	4.79	%	$	422,988	4.78	%	$	300,264

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

Federal Home Loan Bank Advances - The Bank has a secured line of credit with the FHLBDM. Advances from the FHLBDM are collateralized primarily by one- to four-family residential, commercial and agricultural real estate first mortgages equal to various percentages of the total outstanding notes. See Note 4. Loans Receivable and the Allowance for Credit Losses of the notes to the consolidated financial statements.

Federal Funds Purchased - The Bank has unsecured federal funds lines totaling $155.0 million from multiple correspondent banking relationships. There were no borrowings from such lines at either March 31, 2024 or December 31, 2023.

Federal Reserve Bank Borrowing - At March 31, 2024 and December 31, 2023, the Company had no Federal Reserve Discount Window borrowings, while the borrowing capacity was $421.4 million as of March 31, 2024 and $428.8 million as of December 31, 2023. At March 31, 2024, the Company had $405.0 million of Bank Term Funding Program borrowings. The FRB announced that effective March 11, 2024, no additional loans would be made under the Bank Term Funding Program. As of March 31, 2024 and December 31, 2023, pledged to the Federal Reserve Bank of Chicago were investment securities consisting primarily of corporate debt, state and political subdivisions, mortgage backed, and collateralized mortgage obligations, with a market value of $790.3 million and $797.6 million, respectively.

Unsecured Line of Credit - The Company has a credit agreement with a correspondent bank with a revolving commitment of $25.0 million. The credit agreement was amended on September 19, 2023 such that the revolving commitment matures on September 30, 2024, with no updates made to the fee structure or the interest rate. Fees are paid on the average daily unused revolving commitment in the amount of 0.30% per annum. Interest is payable at a rate equal to the monthly reset term SOFR rate plus 1.55%. The Company had $13.0 million outstanding under this revolving credit facility as of March 31, 2024, with no amount outstanding as of December 31, 2023.

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10. Long-Term Debt

Junior Subordinated Notes Issued to Capital Trusts

The table below summarizes the terms of each issuance of junior subordinated notes outstanding as of the dates indicated:


			March 31, 2024		December 31, 2023			March 31, 2024		December 31, 2023
(in thousands)	Face Value		Book Value				Interest Rate(1)	Rate				Maturity Date	Callable Date
ATBancorp Statutory Trust I	$	7,732	$	6,980	$	6,970	1.68% Margin	7.27	%	7.33	%	06/15/2036	06/15/2011
ATBancorp Statutory Trust II	12,372		11,051		11,034		1.65% Margin	7.24	%	7.30	%	09/15/2037	06/15/2012
Barron Investment Capital Trust I	2,062		1,868		1,861		2.15% Margin	7.73	%	7.77	%	09/23/2036	09/23/2011
Central Bancshares Capital Trust II	7,217		6,974		6,964		3.50% Margin	9.09	%	9.15	%	03/15/2038	03/15/2013
MidWestOne Statutory Trust II	15,464		15,464		15,464		1.59% Margin	7.18	%	7.24	%	12/15/2037	12/15/2012
Total	$	44,847	$	42,337	$	42,293









(1) Interest rate is equal to the Three-month CME Term SOFR + 0.26% Spread + Applicable Margin

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

Subordinated Debentures

On July 28, 2020, the Company completed the private placement offering of $65.0 million of its subordinated notes, of which $63.75 million have been exchanged for subordinated notes registered under the Securities Act of 1933. The 5.75% fixed-to-floating rate subordinated notes are due July 30, 2030. At March 31, 2024, 100% of the subordinated notes qualified as Tier 2 capital. Per applicable Federal Reserve rules and regulations, the amount of the subordinated notes qualifying as Tier 2 regulatory capital will be phased-out by 20% of the amount of the subordinated notes in each of the five years beginning on the fifth anniversary preceding the maturity date of the subordinated notes. At March 31, 2024 and December 31, 2023, the Company had outstanding subordinated debentures of $64.2 million and $64.1 million, respectively.

Other Long-Term Debt

Other long-term borrowings were as follows as of March 31, 2024 and December 31, 2023:


	March 31, 2024				December 31, 2023
(in thousands)	Weighted Average Rate		Balance		Weighted Average Rate		Balance
Finance lease payable	8.89	%	$	554	8.89	%	$	604
FHLB borrowings	3.11		6,255		3.11		6,262
Note payable to unaffiliated bank	6.88		8,750		6.89		10,000
Total	5.44	%	$	15,559	5.56	%	$	16,866

On June 7, 2022, pursuant to a credit agreement with a correspondent bank, the Company entered into a $35.0 million term note payable maturing on June 30, 2027. Principal and interest are payable quarterly, and began on September 30, 2022. Interest accrues at the monthly reset term SOFR plus 1.55%. The credit agreement includes customary covenants requiring the Company to, among other things, maintain minimum levels of both regulatory capital and certain financial ratios; the Company certifies compliance with the covenants on a quarterly basis. On February 12, 2024, the credit agreement, including certain of its covenants, was amended.

As a member of the FHLBDM, the Bank may borrow funds from the FHLB, provided the Bank is able to pledge an adequate amount of qualified assets to secure the borrowings. In addition, the FHLB has established a credit capacity limit to the Bank that is equal to 45% of the Bank’s total assets. This credit capacity limit includes short-term and long-term borrowings, federal funds, letters of credit and other sources of credit exposure to the FHLB. Advances from the FHLB are collateralized primarily

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by one- to four-family residential, commercial and agricultural real estate first mortgages equal to various percentages of the total outstanding notes. See Note 4. Loans Receivable and the Allowance for Credit Losses of the notes to the unaudited consolidated financial statements.

As of March 31, 2024, FHLB borrowings were as follows:


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






Valuation adjustment from acquisition accounting			5
Total			$	6,255

11. Earnings per Share

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


	Three Months Ended March 31,
(dollars in thousands, except per share amounts)	2024		2023
Basic Earnings Per Share:
Net income	$	3,269	$	1,397
Weighted average shares outstanding	15,722,697		15,649,651
Basic earnings per common share	$	0.21	$	0.09

Diluted Earnings Per Share:
Net income	$	3,269	$	1,397
Weighted average shares outstanding, including all dilutive potential shares	15,773,521		15,691,168
Diluted earnings per common share	$	0.21	$	0.09

12. Regulatory Capital Requirements and Restrictions on Subsidiary Cash

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

As of March 31, 2024 and December 31, 2023, the Bank was not required to maintain reserve balances in cash on hand or on deposit with Federal Reserve Banks, and therefore no amounts were held in reserve for each of these periods.

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A comparison of the Company's and the Bank's capital with the corresponding minimum regulatory requirements in effect at March 31, 2024 and December 31, 2023, is presented below:


	Actual		For Capital Adequacy Purposes With Capital Conservation Buffer(1)		To Be Well Capitalized Under Prompt Corrective Action Provisions
(dollars in thousands)	Amount	Ratio	Amount	Ratio	Amount	Ratio
At March 31, 2024
Consolidated:
Total capital/risk weighted assets	$661,448	11.97%	$580,192	10.50%	N/A	N/A
Tier 1 capital/risk weighted assets	538,756	9.75	469,679	8.50	N/A	N/A
Common equity tier 1 capital/risk weighted assets	496,419	8.98	386,795	7.00	N/A	N/A
Tier 1 leverage capital/average assets	538,756	8.16	264,001	4.00	N/A	N/A
MidWestOne Bank:
Total capital/risk weighted assets	$675,287	12.25%	$578,805	10.50%	$551,243	10.00%
Tier 1 capital/risk weighted assets	617,596	11.20	468,557	8.50	440,995	8.00
Common equity tier 1 capital/risk weighted assets	617,596	11.20	385,870	7.00	358,308	6.50
Tier 1 leverage capital/average assets	617,596	9.36	263,801	4.00	329,751	5.00

At December 31, 2023
Consolidated:
Total capital/risk weighted assets	$668,748	12.53%	$560,596	10.50%	N/A	N/A
Tier 1 capital/risk weighted assets	554,177	10.38	453,816	8.50	N/A	N/A
Common equity tier 1 capital/risk weighted assets	511,884	9.59	373,731	7.00	N/A	N/A
Tier 1 leverage capital/average assets	554,177	8.58	258,487	4.00	N/A	N/A
MidWestOne Bank:
Total capital/risk weighted assets	$656,027	12.49%	$551,658	10.50%	$525,388	10.00%
Tier 1 capital/risk weighted assets	606,456	11.54	446,580	8.50	420,310	8.00
Common equity tier 1 capital/risk weighted assets	606,456	11.54	367,772	7.00	341,502	6.50
Tier 1 leverage capital/average assets	606,456	9.39	258,339	4.00	322,924	5.00

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

13. Commitments and Contingencies

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

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


	March 31, 2024		December 31, 2023
(in thousands)
Commitments to extend credit	$	1,230,612	$	1,203,001
Commitments to sell loans	2,329		1,045
Standby letters of credit	8,154		7,795
Total	$	1,241,095	$	1,211,841

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

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

Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements and, generally, have terms of one year or

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

Liability for Off-Balance Sheet Credit Losses - The Company records a liability for off-balance sheet credit losses through a charge to credit loss expense (or a reversal of credit loss expense) on the Company's consolidated statements of income and other liabilities on the Company's consolidated balance sheets. At March 31, 2024 and December 31, 2023, the liability for off-balance-sheet credit losses totaled $4.7 million and $4.6 million, respectively. For the three-months ended March 31, 2024, $0.1 million credit loss expense was recorded, with no credit loss expense recorded for the three-months ended March 31, 2023.

Litigation - In the normal course of business, the Company and its subsidiaries have been named, from time to time, as defendants in various legal actions. Certain of the actual or threatened legal actions may include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. Management, after consulting with legal counsel, is of the opinion that the ultimate liability, if any, resulting from these pending or threatened actions and proceedings will not have a material effect on the financial statements of the Company.

Concentrations of credit risk - Substantially all of the Bank’s loans, commitments to extend credit and standby letters of credit have been granted to customers in the Bank’s market areas. Although the loan portfolio of the Bank is diversified, approximately 66% of the loans are real estate loans, excluding farmland, and approximately 7% are agriculturally related. The concentrations of credit by type of loan are set forth in Note 4. Loans Receivable and the Allowance for Credit Losses. Commitments to extend credit are primarily related to commercial loans and home equity loans. Standby letters of credit were granted primarily to commercial borrowers. Investments in securities issued by state and political subdivisions involve certain governmental entities within Iowa, California, and Minnesota. The carrying value of investment securities of Iowa, California and Minnesota political subdivisions totaled 13%, 12%, and 10%, respectively, as of March 31, 2024.

14. Fair Value of Financial Instruments and Fair Value Measurements

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

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

•Level 2 – Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

•Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

For additional information regarding the valuation methodologies used to measure the Company's assets recorded at fair value, and for estimating fair value for financial instruments not recorded at fair value, see Note 1. Nature of Business and Significant Accounting Policies and Note 20. Estimated Fair Value of Financial Instruments and Fair Value Measurements to the consolidated financial statements in the Company's 2023 Annual Report on Form 10-K, filed with the SEC on March 8, 2024.

The Company uses fair value to measure certain assets and liabilities on a recurring basis, primarily available for sale debt securities, derivatives and mortgage servicing rights. For assets measured at the lower of cost or fair value, the fair value measurement criteria may or may not be met during a reporting period, and such measurements are therefore considered “nonrecurring” for purposes of disclosing the Company's fair value measurements. Fair value is used on a nonrecurring basis to adjust carrying values for collateral dependent individually analyzed loans and foreclosed assets.

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Recurring Basis

The following tables summarize assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023, by level within the fair value hierarchy:


	Fair Value Measurement at March 31, 2024 Using
(in thousands)	Total		Level 1		Level 2		Level 3
Assets:
Available for sale debt securities:
U.S. Treasury securities	$	247	$	—	$	247	$	—

State and political subdivisions	123,378		—		123,378		—
Mortgage-backed securities	5,199		—		5,199		—
Collateralized loan obligations	61,866		—		61,866		—
Collateralized mortgage obligations	178,622		—		178,622		—
Corporate debt securities	427,918		—		427,918		—
Derivative assets	27,844		—		27,767		77
Mortgage servicing rights	12,965		—		12,965		—

Liabilities:
Derivative liabilities	$	23,141	$	—	$	23,141	$	—


	Fair Value Measurement at December 31, 2023 Using
(in thousands)	Total		Level 1		Level 2		Level 3
Assets:
Debt securities available for sale:

State and political subdivisions	$	130,139	$	—	$	130,139	$	—
Mortgage-backed securities	5,311		—		5,311		—
Collateralized loan obligations	50,437		—		50,437		—
Collateralized mortgage obligations	169,196		—		169,196		—
Corporate debt securities	440,051		—		440,051		—
Derivative assets	25,093		—		25,043		50
Mortgage servicing rights	13,333		—		13,333		—

Liabilities:
Derivative liabilities	$	24,057	$	—	$	24,057	$	—

There were no transfers of assets between Level 3 and other levels of the fair value hierarchy during the three months ended March 31, 2024 or the year ended December 31, 2023. Changes in the fair value of available for sale debt securities, including the changes attributable to the hedged risk, are included in other comprehensive income.

The following table presents the valuation technique, significant unobservable inputs, and quantitative information about the unobservable inputs used for fair value measurements of the financial instruments held by the Company and categorized within Level 3 of the fair value hierarchy at the dates indicated:


	Fair Value at
(dollars in thousands)	March 31, 2024		December 31, 2023		Valuation Techniques(s)	Unobservable Input	Range of Inputs			Weighted Average
Interest rate lock commitments	$	77	$	50	Quoted or published market prices of similar instruments, adjusted for factors such as pull-through rate assumptions	Pull-through rate	71%	-	100%	86%

Nonrecurring Basis

The following table presents assets measured at fair value on a nonrecurring basis at the dates indicated:


	Fair Value Measurement at March 31, 2024 Using
(in thousands)	Total		Level 1		Level 2		Level 3
Collateral dependent individually analyzed loans	$	4,481	$	—	$	—	$	4,481
Foreclosed assets, net	3,897		—		—		3,897


	Fair Value Measurement at December 31, 2023 Using
(in thousands)	Total		Level 1		Level 2		Level 3
Collateral dependent individually analyzed loans	$	6,524	$	—	$	—	$	6,524
Foreclosed assets, net	3,929		—		—		3,929

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


	Fair Value at
(dollars in thousands)	March 31, 2024		December 31, 2023		Valuation Techniques(s)	Unobservable Input	Range of Inputs			Weighted Average
Collateral dependent individually analyzed loans	$	4,481	$	6,524	Fair value of collateral	Valuation adjustments	—%	-	33%	11%
Foreclosed assets, net	$	3,897	$	3,929	Fair value of collateral	Valuation adjustments	7%	-	11%	11%

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

Carrying Amount and Estimated Fair Value of Financial Instruments

The carrying amount and estimated fair value of financial instruments at March 31, 2024 and December 31, 2023 were as follows:


	March 31, 2024
(in thousands)	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	97,762	$	97,762	$	97,762	$	—	$	—
Debt securities available for sale	797,230		797,230		—		797,230		—
Debt securities held to maturity	1,064,939		875,644		—		875,644		—
Loans held for sale	2,329		2,357		—		2,357		—
Loans held for investment, net	4,358,746		4,220,905		—		—		4,220,905
Interest receivable	30,728		30,728		—		30,728		—
FHLB stock	5,220		5,220		—		5,220		—
Derivative assets	27,844		27,844		—		27,767		77
Financial liabilities:
Noninterest bearing deposits	920,764		920,764		920,764		—		—
Interest bearing deposits	4,664,472		4,635,692		3,200,816		1,434,876		—
Short-term borrowings	422,988		422,988		422,988		—		—
Finance leases payable	554		554		—		554		—
FHLB borrowings	6,255		5,929		—		5,929		—
Junior subordinated notes issued to capital trusts	42,337		37,990		—		37,990		—
Subordinated debentures	64,170		60,876		—		60,876		—
Other long-term debt	8,750		8,750		—		8,750		—
Derivative liabilities	23,141		23,141		—		23,141		—


	December 31, 2023
(in thousands)	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	81,727	$	81,727	$	81,727	$	—	$	—
Debt securities available for sale	795,134		795,134		—		795,134		—
Debt securities held to maturity	1,075,190		895,263		—		895,263		—
Loans held for sale	1,045		1,083		—		1,083		—
Loans held for investment, net	4,075,447		3,953,368		—		—		3,953,368
Interest receivable	29,768		29,768		—		29,768		—
FHLB stock	5,806		5,806		—		5,806		—
Derivative assets	25,093		25,093		—		25,043		50
Financial liabilities:
Noninterest bearing deposits	897,053		897,053		897,053		—		—
Interest bearing deposits	4,498,620		4,489,322		3,076,582		1,412,740		—
Short-term borrowings	300,264		300,264		300,264		—		—
Finance leases payable	604		604		—		604		—
FHLB borrowings	6,262		6,199		—		6,199		—
Junior subordinated notes issued to capital trusts	42,293		37,938		—		37,938		—
Subordinated debentures	64,137		61,940		—		61,940		—
Other long-term debt	10,000		10,000		—		10,000		—
Derivative liabilities	24,057		24,057		—		24,057		—

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15. Leases

The Company's lease commitments consist primarily of real estate property for banking offices and office space with terms extending through 2045. Substantially all of our leases are classified as operating leases, with the Company only holding one existing finance lease for a banking office location with a lease term through 2025.


(in thousands)	Classification	March 31, 2024			December 31, 2023
Operating lease right-of-use assets	Other assets	$	2,153		$	2,337
Finance lease right-of-use asset	Premises and equipment, net	231			255
Total right-of-use assets		$	2,384		$	2,592

Operating lease liability	Other liabilities	$	2,842		$	3,078
Finance lease liability	Long-term debt	554			604
Total lease liabilities		$	3,396		$	3,682


Weighted-average remaining lease term:	Operating leases	10.61 years			10.20 years
	Finance lease	2.42 years			2.67 years
Weighted-average discount rate:	Operating leases	4.54		%	4.43		%
	Finance lease	8.89		%	8.89		%

The following table represents lease costs and other lease information. As the Company elected, for all classes of underlying assets, not to separate lease and non-lease components and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance and utilities.


	Three Months Ended
	March 31,
(in thousands)	2024		2023
Lease Costs
Operating lease cost	$	388	$	292
Variable lease cost	7		7
Interest on lease liabilities(1)	13		17
Amortization of right-of-use assets	24		24
Net lease cost	$	432	$	340

Other Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	822	$	605
Operating cash flows from finance lease	13		17
Finance cash flows from finance lease	50		43

Supplemental non-cash information on lease liabilities:
Right-of-use assets obtained in exchange for new operating lease liabilities	156		292

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

Future minimum payments for finance leases and operating leases with initial or remaining terms of one year or more for the remaining nine-months ending December 31, 2024 and the succeeding annual periods were as follows:


(in thousands)	Finance Leases		Operating Leases
December 31, 2024	$	188	$	734
December 31, 2025	254		601
December 31, 2026	172		447
December 31, 2027	—		302
December 31, 2028	—		138
Thereafter	—		1,600
Total undiscounted lease payment	$	614	$	3,822
Amounts representing interest	(60)		(980)
Lease liability	$	554	$	2,842

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16. Accumulated Other Comprehensive Income (Loss)

The following table summarizes the changes in accumulated other comprehensive income (loss) by component, net of tax:


(in thousands)	Unrealized Gain (Loss) from AFS Debt Securities		Reclassification of AFS Debt Securities to HTM		Unrealized Gain from Cash Flow Hedging Instruments		Total
Balance, December 31, 2022	$	(91,852)	$	2,805	$	—	$	(89,047)
Other comprehensive (loss) income before reclassifications	(213)		434		103		324
Amounts reclassified from AOCI	9,838		—		—		9,838
Net current-period other comprehensive income	9,625		434		103		10,162
Balance, March 31, 2023	$	(82,227)	$	3,239	$	103	$	(78,885)

Balance, December 31, 2023	$	(69,915)	$	4,511	$	505	$	(64,899)
Other comprehensive income before reclassifications	1,607		374		2,071		4,052
Amounts reclassified from AOCI	632		—		(589)		43
Net current-period other comprehensive income	2,239		374		1,482		4,095
Balance, March 31, 2024	$	(67,676)	$	4,885	$	1,987	$	(60,804)

The following table presents reclassifications out of AOCI:


	Three-Months Ended March 31,
(in thousands)	2024		2023
Investment securities (gains) losses, net	$	(36)	$	13,170
Interest income	882		—
Interest expense	(788)		—
Income tax expense	(15)		(3,332)
Net of tax	$	43	$	9,838

17. Subsequent Events

The Company has evaluated events that have occurred subsequent to March 31, 2024 and has concluded there are no other subsequent events that would require recognition in the accompanying consolidated financial statements.

On April 25, 2024, the board of directors of the Company declared a cash dividend of $0.2425 per share payable on June 17, 2024 to shareholders of record as of the close of business on June 3, 2024.

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

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

•the risks of mergers or branch sales (including the sale of our Florida branches and the recent acquisition of DNVB), including, without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and possible failures to achieve expected gains, revenue growth and/or expense savings from such transactions;

•credit quality deterioration, pronounced and sustained reduction in real estate market values, or other uncertainties, including the impact of inflationary pressures on economic conditions and our business, resulting in an increase in the allowance for credit losses, an increase in the credit loss expense, and a reduction in net earnings;

•the effects of significant increases in inflation and interest rates since 2020, including on our net income and the value of our securities portfolio;

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

•fluctuations in the value of our investment securities;

•governmental monetary and fiscal policies;

•changes in and uncertainty related to benchmark interest rates used to price loans and deposits;

•legislative and regulatory changes, including changes in banking, securities, trade, and tax laws and regulations and their application by our regulators, including the 1.0% excise tax on stock buybacks by publicly traded companies and any changes in response to the recent failures of other banks;

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

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

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

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

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

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

•volatility of rate-sensitive deposits;

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

•asset/liability matching risks and liquidity risks;

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

•changes in general economic, political, or industry conditions, nationally, internationally or in the communities in which we conduct business, including the risk of a recession;

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

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

•the occurrence of fraudulent activity, breaches, or failures of our or our third-party vendors' information security controls or cyber-security related incidents, including as a result of sophisticated attacks using artificial intelligence and similar tools;

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

•potential changes in federal policy and at regulatory agencies as a result of the upcoming 2024 presidential election;

•the concentration of large deposits from certain clients who have balances above current FDIC insurance limits;

•the effects of recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time that resulted in recent bank failures; and

•factors and risks described under “Risk Factors” in our Annual Report on Form 10-K and in other reports we file with the SEC.

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

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OVERVIEW

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

On January 31, 2024, the Company completed the acquisition of DNVB, a bank holding company headquartered in Denver, Colorado, and the parent company of BOD. Immediately following completion of the acquisition, BOD was merged with and into the Bank. As consideration for the merger, we paid cash of $32.6 million.

On September 25, 2023, the Company announced the execution of a definitive purchase and assumption agreement for the sale of its Florida operations to DFCU Financial. The transaction is an all cash deal and is expected to close in June 2024, subject to regulatory approvals.

The Bank is focused on delivering relationship-based business and personal banking products and services. The Bank provides commercial loans, real estate loans, agricultural loans, credit card loans, and consumer loans. The Bank also provides deposit products including demand and interest checking accounts, savings accounts, money market accounts, and time deposits. Complementary to our loan and deposit products, the Bank also provides products and services including treasury management, Zelle, online and mobile banking, credit and debit cards, ATMs, and safe deposit boxes. The Bank also has wealth management services through which it offers the administration of estates, trusts, and conservatorships, as well as financial planning, investment advisory, and brokerage services (the latter of which is provided through an arrangement with a third-party registered broker-dealer).

Our results of operations are significantly affected by our net interest income. Results of operations are also affected by noninterest income and expense, credit loss expense and income tax expense. Significant external factors that impact our results of operations include general economic and competitive conditions, as well as changes in market interest rates, government policies, and actions of regulatory authorities.

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes and the statistical information and financial data appearing in this report as well as our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 8, 2024. Results of operations for the three months ended March 31, 2024 are not necessarily indicative of results to be attained for any other period.

FINANCIAL SUMMARY

The Company reported net income for the three months ended March 31, 2024 of $3.3 million, an increase of $1.9 million, compared to $1.4 million of net income for the three months ended March 31, 2023, with diluted earnings per share of $0.21 and $0.09, respectively.

The period as of and for the three months ended March 31, 2024 was also highlighted by the following results:

Balance Sheet:

•Total assets increased to $6.75 billion at March 31, 2024 from $6.43 billion at December 31, 2023, driven primarily by the assets acquired from the acquisition of DNVB and organic loan growth.

•At March 31, 2024 the total amount of the held to maturity debt securities was $1.06 billion and the total amount of the debt securities available for sale was $797.2 million. There were $1.08 billion of held to maturity debt securities at December 31, 2023, while the total amount of the debt securities available for sale was $795.1 million at that date.

•Gross loans held for investment increased $294.9 million, from $4.14 billion at December 31, 2023, to $4.43 billion at March 31, 2024. This increase was primarily driven by acquired DNVB loans and organic loan growth.

•The allowance for credit losses was $55.9 million, or 1.27% of total loans at March 31, 2024, compared with $51.5 million, or 1.25% of total loans, at December 31, 2023. The increase in the ACL primarily reflected the $3.1 million of day 1 credit loss expense related to acquired DNVB loans, as well as reserve taken to support organic loan growth.

•Nonperforming assets increased $2.9 million, from $30.3 million at December 31, 2023, to $33.2 million at March 31, 2024.

•Total deposits increased $189.6 million, from $5.40 billion at December 31, 2023, to $5.59 billion at March 31, 2024, primarily due to deposits assumed in the DNVB acquisition.

•Short-term borrowings increased to $423.0 million at March 31, 2024, from $300.3 million at December 31, 2023, and long-term debt decreased to $122.1 million at March 31, 2024, from $123.3 million at December 31, 2023.

•The Company is well-capitalized with a total risk-based capital ratio of 11.97% at March 31, 2024.

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Income Statement:

•Tax equivalent net interest income (a non-GAAP financial measure - see the "Non-GAAP Presentations" section for a reconciliation to the most comparable GAAP equivalent) was $36.0 million for the first quarter of 2024, a decrease of $5.3 million, from $41.3 million in the first quarter of 2023. The decrease in tax equivalent net interest income was due primarily to an increase in interest expense on interest-bearing deposits and borrowed funds of $12.4 million and $3.2 million, respectively, in addition to a decrease of $1.5 million in interest income earned from investment securities. Partially offsetting these identified decreases in tax equivalent net interest income was an increase of $11.7 million in loan interest income.

•Credit loss expense of $4.7 million was recorded during the first quarter of 2024, compared to $0.9 million credit loss expense recorded in the first quarter of 2023. Credit loss expense in the current quarter reflected $3.2 million of day 1 credit loss expense related to the DNVB acquisition and reserve taken to support organic loan growth.

•Noninterest income increased $13.8 million, from a loss of $4.0 million in the first quarter of 2023 to income of $9.8 million in the first quarter of 2024, primarily due to investment securities losses, net, of $13.2 million recorded in the first quarter of 2023 as part of a balance sheet repositioning, which did not recur in the first quarter of 2024.

•Noninterest expense increased $2.2 million, from $33.3 million in the first quarter of 2023, to $35.6 million in the first quarter of 2024, primarily due to increases of $1.3 million, $0.4 million, and $0.4 million in compensation and employee benefits, equipment, and foreclosed assets, net, respectively, partially offset by a decline of $0.4 million in marketing.

Critical Accounting Estimates

Management has identified the accounting policies related to the ACL, fair value of assets acquired and liabilities assumed in a business combination, and the annual impairment testing of goodwill and other intangible assets to be critical accounting policies. Information about our critical accounting estimates is included under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 8, 2024, and there have been no material changes in these critical accounting policies since December 31, 2023.

RESULTS OF OPERATIONS

Comparison of Operating Results for the Three Months Ended March 31, 2024 and March 31, 2023

Summary


	As of or for the Three Months Ended March 31,
(dollars in thousands, except per share amounts)	2024			2023
Net Interest Income	$	34,731		$	40,076
Noninterest Income	9,750			(4,046)
Total Revenue, Net of Interest Expense	44,481			36,030
Credit Loss Expense	4,689			933
Noninterest Expense	35,565			33,319
Income Before Income Tax Expense	4,227			1,778
Income Tax Expense	958			381
Net Income	3,269			1,397
Diluted Earnings Per Share	$	0.21		$	0.09




Return on Average Assets	0.20		%	0.09		%
Return on Average Equity	2.49			1.14
Return on Average Tangible Equity(1)	4.18			2.70
Efficiency Ratio(1)	71.28			62.32
Dividend Payout Ratio	115.48			269.44

Common Equity Ratio	7.83			7.81
Tangible Common Equity Ratio(1)	6.43			6.48
Book Value per Share	$	33.53		$	31.94
Tangible Book Value per Share(1)	27.14			26.13
(1) A non-GAAP financial measure. See "Non-GAAP Financial Measures" for a reconciliation to the most comparable GAAP equivalents.

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Net Interest Income

The following table shows consolidated average balance sheets, detailing the major categories of assets and liabilities, the interest income earned on interest-earning assets, the interest expense paid for interest-bearing liabilities, and the related yields and costs for the periods indicated:


	Three Months Ended March 31,
	2024						2023
	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)	$	4,298,216	$	58,867	5.51	%	$	3,867,110	$	47,206	4.95	%
Taxable investment securities	1,557,603		9,460		2.44		1,811,388		10,444		2.34
Tax-exempt investment securities (2)(4)	328,736		2,097		2.57		397,110		2,649		2.71
Total securities held for investment (2)	1,886,339		11,557		2.46		2,208,498		13,093		2.40
Other	30,605		418		5.49		24,848		244		3.98
Total interest earning assets (2)	$	6,215,160	$	70,842	4.58	%	$	6,100,456	$	60,543	4.02	%
Other assets	420,219						423,609
Total assets	$	6,635,379					$	6,524,065

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest checking deposits	$	1,301,470	$	2,890	0.89	%	$	1,515,845	$	1,849	0.49	%
Money market deposits	1,102,543		8,065		2.94		930,543		3,269		1.42
Savings deposits	694,143		2,047		1.19		653,043		272		0.17
Time deposits	1,446,981		14,724		4.09		1,417,688		9,929		2.84
Total interest bearing deposits	4,545,137		27,726		2.45		4,517,119		15,319		1.38
Securities sold under agreements to repurchase	5,330		11		0.83		145,809		450		1.25

Other short-term borrowings	409,525		4,964		4.88		111,306		1,336		4.87
Total short-term borrowings	414,855		4,975		4.82		257,115		1,786		2.82
Long-term debt	123,266		2,103		6.86		139,208		2,124		6.19
Total borrowed funds	538,121		7,078		5.29		396,323		3,910		4.00
Total interest bearing liabilities	$	5,083,258	$	34,804	2.75	%	$	4,913,442	$	19,229	1.59	%

Noninterest bearing deposits	935,977						1,029,575
Other liabilities	88,611						82,501
Shareholders’ equity	527,533						498,547
Total liabilities and shareholders’ equity	$	6,635,379					$	6,524,065
Net interest income (2)			$	36,038					$	41,314
Net interest spread(2)					1.83	%					2.43	%
Net interest margin(2)					2.33	%					2.75	%

Total deposits(5)	$	5,481,114	$	27,726	2.03	%	$	5,546,694	$	15,319	1.12	%
Cost of funds(6)					2.33	%					1.31	%


(1)			Average balance includes nonaccrual loans.
(2)			Tax equivalent (a non-GAAP financial measure - see the "Non-GAAP Presentations" section for a reconciliation to the most comparable GAAP equivalent). The federal statutory tax rate utilized was 21%.
(3)			Interest income includes net loan fees, loan purchase discount accretion and tax equivalent adjustments. Net loan fees were $237 thousand and $95 thousand for the three months ended March 31, 2024 and March 31, 2023, respectively. Loan purchase discount accretion was $1.2 million and $1.2 million for the three months ended March 31, 2024 and March 31, 2023, respectively. Tax equivalent adjustments were $920 thousand and $716 thousand for the three months ended March 31, 2024 and March 31, 2023, respectively. The federal statutory tax rate utilized was 21%.
(4)			Interest income includes tax equivalent adjustments of $387 thousand and $522 thousand for the three months ended March 31, 2024 and March 31, 2023, respectively. The federal statutory tax rate utilized was 21%.
(5)			Total deposits is the sum of total interest-bearing deposits and noninterest bearing deposits. The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits.
(6)			Cost of funds is calculated as annualized total interest expense divided by the sum of average total deposits and borrowed funds.

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The following table shows changes to tax equivalent net interest income (a non-GAAP financial measure - see the "Non-GAAP Presentations" section for a reconciliation to the most comparable GAAP equivalent) attributable to (i) changes in volume and (ii) changes in rate. Changes attributable to both rate and volume have been allocated proportionately to the change due to volume and the change due to rate.


	Three Months Ended March 31,
	2024 Compared to 2023
	Change due to
(in thousands)	Volume		Yield/Cost		Net
Increase (decrease) in interest income:
Loans, including fees (1)	$	5,788	$	5,873	$	11,661
Taxable investment securities	(1,444)		460		(984)
Tax-exempt investment securities (1)	(425)		(127)		(552)
Total securities held for investment (1)	(1,869)		333		(1,536)
Other	66		108		174
Change in interest income (1)	3,985		6,314		10,299
Increase (decrease) in interest expense:
Interest checking deposits	(291)		1,332		1,041
Money market deposits	706		4,090		4,796
Savings deposits	18		1,757		1,775
Time deposits	215		4,580		4,795
Total interest-bearing deposits	648		11,759		12,407
Securities sold under agreements to repurchase	(326)		(113)		(439)

Other short-term borrowings	3,625		3		3,628
Total short-term borrowings	3,299		(110)		3,189
Long-term debt	(249)		228		(21)
Total borrowed funds	3,050		118		3,168
Change in interest expense	3,698		11,877		15,575
Change in net interest income	$	287	$	(5,563)	$	(5,276)
Percentage increase in net interest income over prior period					(12.8)		%
(1) Tax equivalent, using a federal statutory tax rate of 21%.

Our tax equivalent net interest income for the first quarter of 2024 was $36.0 million, a decrease of $5.3 million, or 12.8%, as compared to $41.3 million for the first quarter of 2023. The decrease in tax equivalent net interest income in the first quarter of 2024 as compared to the first quarter of 2023 was due primarily to an increase in interest expense on interest bearing deposits and borrowed funds of $12.4 million and $3.2 million, respectively, due to higher costs and volumes. The decrease in tax equivalent net interest income was also due to a decrease of $1.5 million, or 11.7%, in interest income earned from investment securities, which stemmed from lower volumes. Partially offsetting these decreases was an increase of $11.7 million, or 24.7%, in loan interest income due to the acquired DNVB loan portfolio, organic loan growth and an increase in loan yield.

The tax equivalent net interest margin for the first quarter of 2024 declined to 2.33% from 2.75% for the first quarter of 2023, driven by higher funding costs and volumes, partially offset by higher interest earning asset volumes and yields. The cost of interest bearing liabilities increased 116 bps to 2.75%, due to interest bearing deposit costs of 2.45%, short-term borrowing costs of 4.82%, and long-term debt costs of 6.86%, which increased 107 bps, 200 bps and 67 bps, respectively from the first quarter of 2023. Total interest earning assets yield increased 56 bps from the first quarter of 2023, primarily as a result of the increase in loan yield of 56 bps.

Credit Loss Expense

Credit loss expense of $4.7 million was recorded during the first quarter of 2024, with $0.9 million credit loss expense recorded in the first quarter of 2023. Credit loss expense in the current quarter reflected $3.2 million of day 1 credit loss expense related to the DNVB acquisition, as well as additional reserve taken to support organic loan growth. Net charge-offs were $0.2 million in the first quarter of 2024, as compared to net charge-offs of $0.3 million in the first quarter of 2023. The estimation model utilized by the Company is sensitive to changes in the following forecast inputs: (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. 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:


	Three Months Ended March 31,
(dollars in thousands)	2024		2023		$ Change		% Change
Investment services and trust activities	$	3,503	$	2,933	$	570	19.4	%
Service charges and fees	2,144		2,008		136		6.8
Card revenue	1,943		1,748		195		11.2
Loan revenue	856		1,420		(564)		(39.7)
Bank-owned life insurance	660		602		58		9.6

Investment securities gains (losses), net	36		(13,170)		13,206		n/m
Other	608		413		195		47.2
Total noninterest income (loss)	$	9,750	$	(4,046)	$	13,796	n/m

Results are not meaningful (n/m)

Total noninterest income for the first quarter of 2024 increased $13.8 million to $9.8 million, compared to a loss of $4.0 million in the first quarter of 2023, primarily due to investment securities losses, net, of $13.2 million recorded in the first quarter of 2023 as part of a balance sheet repositioning, which did not recur in the first quarter of 2024. In addition, investment services and trust activities income increased $0.6 million compared to the first quarter of 2023, due to growth in assets under administration. Partially offsetting these identified increases was a decline of $0.6 million in loan revenue, which primarily reflected the unfavorable year-over-year change in the fair value of our mortgage servicing rights, from a positive adjustment of $315 thousand in the first quarter of 2023 to a negative adjustment of $368 thousand in the first quarter of 2024.

Noninterest Expense

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


	Three Months Ended March 31,
(dollars in thousands)	2024		2023		$ Change		% Change
Compensation and employee benefits	$	20,930	$	19,607	$	1,323	6.7	%
Occupancy expense of premises, net	2,813		2,746		67		2.4
Equipment	2,600		2,171		429		19.8
Legal and professional	2,059		1,736		323		18.6
Data processing	1,360		1,363		(3)		(0.2)
Marketing	598		986		(388)		(39.4)
Amortization of intangibles	1,637		1,752		(115)		(6.6)
FDIC insurance	942		749		193		25.8
Communications	196		261		(65)		(24.9)
Foreclosed assets, net	358		(28)		386		n/m
Other	2,072		1,976		96		4.9


Total noninterest expense	$	35,565	$	33,319	$	2,246	6.7	%

Results are not meaningful (n/m)

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	Three Months Ended March 31,
Merger-related expenses:	2024		2023
(dollars in thousands)
Compensation and employee benefits	$	241	$	70
Occupancy expense of premises, net	152		—
Equipment	149		—
Legal and professional	573		—
Data processing	61		65
Marketing	32		—
Communications	1		—
Other	105		1
Total merger-related expenses	$	1,314	$	136

Noninterest expense for the first quarter of 2024 increased $2.2 million, or 6.7%, to $35.6 million from $33.3 million for the first quarter of 2023, primarily due to increases of $1.3 million, $0.4 million, and $0.4 million in compensation and employee benefits, equipment, and foreclosed assets, net, respectively. The increase in compensation and employee benefits was primarily driven by annual compensation adjustments, increased headcount as a result of the DNVB acquisition, increased incentive and commission expense, and merger-related expenses. The increase in equipment reflected higher software costs and merger-related expenses. The increase in foreclosed assets, net, was due to a $0.3 million write-down of other real estate owned. Partially offsetting these increases was a decline of $0.4 million in marketing.

Income Tax Expense

Our effective income tax rate, or income taxes divided by income before taxes, was 22.7% for the three months ended March 31, 2024, as compared to an effective tax rate of 21.4% for the three months ended March 31, 2023. The effective tax rate for the full year 2024 is expected to be in the range of 21 to 23%.

FINANCIAL CONDITION

The table below presents the major categories of the Company's balance sheet as of the dates indicated:


(dollars in thousands)	March 31, 2024		December 31, 2023		$ Change		% Change
ASSETS
Cash and cash equivalents	$	97,762	$	81,727	$	16,035	19.6	%
Loans held for sale	2,329		1,045		1,284		122.9
Debt securities available for sale at fair value	797,230		795,134		2,096		0.3
Held to maturity securities at amortized cost	1,064,939		1,075,190		(10,251)		(1.0)
Loans held for investment, net of unearned income	4,414,646		4,126,947		287,699		7.0
Allowance for credit losses	(55,900)		(51,500)		(4,400)		8.5
Total loans held for investment, net	4,358,746		4,075,447		283,299		7.0
Other assets	427,009		398,997		28,012		7.0
Total assets	$	6,748,015	$	6,427,540	$	320,475	5.0	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Total deposits	$	5,585,236	$	5,395,673	$	189,563	3.5	%
Total borrowings	545,054		423,560		121,494		28.7
Other liabilities	89,685		83,929		5,756		6.9
Total shareholders' equity	528,040		524,378		3,662		0.7
Total liabilities and shareholders' equity	$	6,748,015	$	6,427,540	$	320,475	5.0	%

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Debt Securities

The composition of debt securities available for sale and held to maturity as of the dates indicated was as follows:


	March 31, 2024				December 31, 2023
(dollars in thousands)	Balance		% of Total		Balance		% of Total
Available for Sale
U.S. Treasuries	$	247	—	%	$	—	—	%

States and political subdivisions	123,378		15.5		130,139		16.4
Mortgage-backed securities	5,199		0.7		5,311		0.7
Collateralized loan obligations	61,866		7.8		50,437		6.3
Collateralized mortgage obligations	178,622		22.4		169,196		21.3
Corporate debt securities	427,918		53.6		440,051		55.3
Fair value of debt securities available for sale	$	797,230	100.0	%	$	795,134	100.0	%

Held to Maturity

States and political subdivisions	$	531,961	50.0		$	532,422	49.5	%
Mortgage-backed securities	73,668		6.9		74,904		7.0	%
Collateralized mortgage obligations	459,310		43.1		467,864		43.5	%

Amortized cost of debt securities held to maturity	$	1,064,939	100.0	%	$	1,075,190	100.0	%

As of March 31, 2024, there was $314 thousand of gross unrealized gains and $76.2 million of gross unrealized losses in our debt securities available for sale portfolio for a net unrealized loss of $75.9 million. As of March 31, 2024 there were no gross unrealized gains and $189.3 million of gross unrealized losses in our held to maturity debt securities.

See Note 3. Debt Securities to our consolidated financial statements for additional information related to debt securities.

Loans

The composition of our loan portfolio by type of loan was as follows, as of the dates indicated:


	March 31, 2024				December 31, 2023
(dollars in thousands)	Balance		% of Total		Balance		% of Total
Agricultural	$	113,029	2.6	%	$	118,414	2.9	%
Commercial and industrial	1,105,718		25.0		1,075,003		26.0





Commercial real estate	2,437,829		55.3		2,225,310		54.0



Residential real estate	677,409		15.3		640,437		15.5
Consumer	80,661		1.8		67,783		1.6
Loans held for investment, net of unearned income	$	4,414,646	100.0	%	$	4,126,947	100.0	%
Loans held for sale	$	2,329			$	1,045

Loans held for investment, net of unearned income, at March 31, 2024, increased $287.7 million, or 7.0%, from December 31, 2023 to $4.41 billion, driven primarily by loans acquired in the DNVB acquisition, organic loan growth, and higher line of credit usage. See Note 4. Loans Receivable and the Allowance for Credit Losses to our consolidated financial statements for additional information related to our loan portfolio. Our loan to deposit ratio increased to 79.04% as of March 31, 2024 as compared to 76.49% as of December 31, 2023.

Commitments under standby letters of credit, unused lines of credit and other conditionally approved credit lines totaled approximately $1.24 billion and $1.21 billion as of March 31, 2024 and December 31, 2023, respectively.

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The composition of our commercial real estate loan portfolio as of March 31, 2024 was as follows:



(dollars in thousands)	Amount		% of Total Loans
Construction & Development	$	403,571	9.1	%
Farmland	184,109		4.2
Multifamily	409,504		9.3
CRE Other:
NOO CRE Office	166,115		3.8
OO CRE Office	91,259		2.1
Industrial and Warehouse	429,080		9.7
Retail	285,020		6.5
Hotel	126,229		2.9
Other	342,942		7.8
Total CRE	$	2,437,829	55.2	%

Nonperforming Assets

The following table sets forth information concerning nonperforming loans by class of receivable and our nonperforming assets at March 31, 2024 and December 31, 2023:


(in thousands)	March 31, 2024			December 31, 2023

Nonaccrual loans held for investment	$	28,300		$	25,891
Accruing loans contractually past due 90 days or more	967			468
Total nonperforming loans	29,267			26,359
Foreclosed assets, net	3,897			3,929
Total nonperforming assets	33,164			30,288

Nonaccrual loans ratio (1)	0.64		%	0.63		%
Nonperforming loans ratio (2)	0.66		%	0.64		%
Nonperforming assets ratio (3)	0.49		%	0.47		%

(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.

Compared to December 31, 2023, nonperforming loans and asset ratios remained stable, with slight increases in both ratios of 2 basis points.

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. 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.

When a loan officer originates a new loan, based upon proper loan authorization, they document the credit file with an offering sheet summary, supplemental underwriting analysis, relevant financial information and collateral evaluations. This information is used in the determination of the initial loan risk rating. Segregation of owner-occupied and non-owner occupied residential real estate loans is made at the time of origination. 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. Credit relationships with larger exposure may pose incrementally higher risks. As a result, the Bank's loan review department is required to review all credit relationships with total exposure of $7.5 million or more at least annually. 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 and anticipated performance of the loan. The results of such reviews are presented to both executive 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 Special Mention/Watch (risk

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rating 5) or Classified (risk ratings 6 through 8) status is warranted. At least quarterly, the loan strategy committee will meet to discuss loan relationships with total exposure of $1.0 million or above that are Special Mention/Watch rated credits, loan relationships with total exposure of $500 thousand and above that are Substandard or worse rated credits, as well as loan relationships with total exposure of $250 thousand and above that are on non-accrual. Loan relationships outside these designated thresholds are reviewed upon request. The lending officer is 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 presented to the loan strategy committee. The minutes of the loan strategy committee meetings are 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 a loan relationship as 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 individual analysis when deemed necessary. These judgmental evaluations may produce an initial specific allowance for recognition in the Company’s allowance for credit losses calculation. An analysis for the underlying collateral value of each individually analyzed loan relationship is completed in the last month of the quarter. The 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 individually analyzed loans, the related allowances and foreclosed assets, net.

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 proper authority based upon the aggregate credit exposure before the rating can be changed.

Loan Modifications for Borrowers Experiencing Financial Difficulty

Infrequently, the Company makes modification to certain loans in order to alleviate temporary difficulties in the borrower's financial condition and/or constraints on the borrower's ability to repay a loan, and to minimize potential losses to the Company. GAAP requires that certain types of modifications be reported, including:

•Principal forgiveness.

•Interest rate reduction.

•An other than-insignificant payment delay.

•Term extension.

During the three months ended March 31, 2024, the amortized cost of the loans that were modified to borrowers in financial distress was $0.9 million, which represented 0.02% of total loans held for investment, net of unearned income.

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Allowance for 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, 2024					December 31, 2023
(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	$	648		2.6	%	$	613		2.9	%
Commercial and industrial	21,882			25.0	%	21,743			26.0	%
Commercial real estate	26,772			55.3	%	23,759			54.0	%
Residential real estate	5,014			15.3	%	4,762			15.5	%
Consumer	1,584			1.8	%	623			1.6	%
Total	$	55,900		100.0	%	$	51,500		100.0	%

Allowance for credit losses ratio(1)	1.27		%			1.25		%

Allowance for credit losses to nonaccrual loans ratio(2)	197.53		%			198.91		%

(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, 2024 and 2023
(in thousands)	Agricultural			Commercial and Industrial			Commercial Real Estate			Residential Real Estate			Consumer			Total
For the Three Months Ended March 31, 2024
Charge-offs	$	(4)		$	(299)		$	(35)		$	(19)		$	(290)		$	(647)
Recoveries	355			46			8			9			40			458
Net (charge-offs) recoveries	$	351		$	(253)		$	(27)		$	(10)		$	(250)		$	(189)

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

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)		%

















(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 ACL as of March 31, 2024 was $55.9 million, which was 1.27% of loans held for investment, net of unearned income as of that date. This compares with an ACL of $51.5 million as of December 31, 2023, which was 1.25% of loans held for investment, net of unearned income. The increase in the ACL primarily reflected the $3.1 million of day 1 credit loss expense related to the acquired DNVB loans, as well as an additional reserve taken to support organic loan growth. The liability for off-balance sheet credit exposures totaled $4.7 million as of March 31, 2024 and $4.6 million as of December 31, 2023, and is included in 'Other liabilities' on the balance sheet.

The Company recorded a credit loss expense related to loans of $4.6 million for the three months ended March 31, 2024, as compared to credit loss expense related to loans of $0.9 million for the three months ended March 31, 2023. Gross charge-offs for the first three months of 2024 totaled $0.6 million, while there were $0.5 million in gross recoveries of previously charged-off loans. The ratio of annualized net charge-offs to average loans for the first three months of 2024 was 0.02% compared to 0.03% for the three months ended March 31, 2023.

Economic Forecast: At March 31, 2024, 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 - decreases over the next four forecasted quarters; (4) year-to-year change in U.S. GDP - increases over the next four forecasted quarters; (5) year-to-year change in National Home Price Index – increases over the next four forecasted quarters; and (6) rental vacancy - increases over the next four forecasted quarters. In addition, management utilized qualitative factors to adjust the calculated ACL as appropriate. Qualitative factors are

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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.

Loan Policy: We review all nonaccrual relationships greater than $250 thousand 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. 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. Upon the Company's determination that a loan balance has been deemed uncollectible, the uncollectible balance is charged-off.

Based on the inherent risk in the loan portfolio, management believed that as of March 31, 2024, the ACL was adequate; however, there is 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 loss expense in future periods. See Note 4. Loans Receivable and the 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, 2024				As of December 31, 2023
(in thousands)	Balance		% of Total		Balance		% of Total
Noninterest bearing deposits	$	920,764	16.5	%	$	897,053	16.6	%
Interest checking deposits	1,349,823		24.2		1,320,435		24.5
Money market deposits	1,122,717		20.1		1,105,493		20.5
Savings deposits	728,276		13.0		650,655		12.1
Total non-maturity deposits	4,121,580		73.8		3,973,636		73.7
Time deposits of $250 and under	992,851		17.8		973,253		18.0
Time deposits over $250	470,805		8.4		448,784		8.3
Total time deposits	$	1,463,656	26.2	%	$	1,422,037	26.3	%
Total deposits	$	5,585,236	100.0	%	$	5,395,673	100.0	%

Deposits increased $189.6 million from December 31, 2023, or 3.5%, primarily due to the $224.2 million of deposits assumed in the DNVB acquisition. Included within time deposits of “$250 thousand and under” is $205.0 million of brokered deposits at March 31, 2024, compared with $221.0 million as of December 31, 2023. Approximately 87.9% of our total deposits were considered “core” deposits as of March 31, 2024, compared to 87.6% at December 31, 2023. We consider core deposits to be the total of all deposits other than time deposits greater than $250 thousand and non-reciprocal brokered deposits. See Note 8. Deposits to our consolidated financial statements for additional information related to our deposits.

Short-Term Borrowings and Long-Term Debt

The following table sets forth the composition of short-term borrowings and long-term debt as of the dates presented:


(dollars in thousands)	March 31, 2024		December 31, 2023
Securities sold under agreements to repurchase	$	4,988	$	5,064
Federal Home Loan Bank advances	—		10,200

Federal Reserve Bank borrowings	405,000		285,000
Line of credit	13,000		—
Total short-term borrowings	$	422,988	$	300,264

Junior subordinated notes issued to capital trusts	42,337		42,293
Subordinated debentures	64,170		64,137
Finance lease payable	554		604
Federal Home Loan Bank borrowings	6,255		6,262
Other long-term debt	8,750		10,000
Total long-term debt	$	122,066	$	123,296

See Note 9. Short-Term Borrowings and Note 10. Long-Term Debt to our unaudited consolidated financial statements for additional information related to short-term borrowings and long-term debt.

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Capital Resources

Shareholders' Equity and Capital Adequacy

The following table summarizes certain equity capital ratios and book value per share amounts of the Company at the dates presented:


	March 31, 2024			December 31, 2023
Common equity ratio	7.83		%	8.16		%
Tangible common equity ratio(1)	6.43		%	6.90		%
Total risk-based capital ratio	11.97		%	12.53		%
Tier 1 risk-based capital ratio	9.75		%	10.38		%
Common equity tier 1 risk-based capital ratio	8.98		%	9.59		%
Tier 1 leverage ratio	8.16		%	8.58		%
Book value per share	$	33.53		$	33.41
Tangible book value per share(1)	$	27.14		$	27.90
(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 $528.0 million as of March 31, 2024, compared to $524.4 million as of December 31, 2023, an increase of $3.7 million, or 0.7%, driven by a decrease in the unrealized loss on available for sale debt securities, which decreased the negative balance included in AOCI, coupled with decrease in treasury stock, partially offset by a decline in additional paid-in capital and retained earnings.

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 March 31, 2024, 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.

Stock Compensation

Restricted stock units were granted to certain officers of the Company on February 15, 2024, in the aggregate amount of 104,326. Additionally, during the first three months of 2024, 77,443 shares of common stock were issued in connection with the vesting of previously awarded grants of restricted stock units, of which 21,278 shares were surrendered by grantees to satisfy tax requirements, and 582 unvested restricted stock units 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. Excess liquidity is invested generally in short-term U.S. government and agency securities, short- and medium-term state and political subdivision securities, and other investment securities. Our most liquid assets 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 are summarized in the table below.


(dollars in thousands)	As of March 31, 2024		As of December 31, 2023
Cash and due from banks	$	68,430	$	76,237
Interest-bearing deposits	29,328		5,479
Federal funds sold	4		11
Total	$	97,762	$	81,727

Generally, our principal sources of funds 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 funds provided by operations. While scheduled loan amortization and maturing interest-bearing deposits are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by economic conditions, the general level of interest rates,

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and competition. We utilized particular sources of funds based on comparative costs and availability. The Bank maintains unsecured lines of credit with several correspondent banks and secured lines with the Federal Reserve Bank of Chicago and the FHLB that would allow us to borrow funds on a short-term basis, if necessary. We also hold debt securities classified as available for sale that could be 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 $9.6 million for the three-months ended March 31, 2024 and $17.6 million for the three-months ended March 31, 2023.

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 may fluctuate considerably and thereby influence the overall Consumer Price Index without having a corresponding effect on interest rates or upon the cost of those goods and services normally purchased by us. Inflation and related increases in market rates by the Federal Reserve generally decrease the market value of 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 rising interest rates could place increased demand on our liquidity if we experience significant credit deterioration and as we meet borrowers' needs. There is also a risk that interest rate increases to fight inflation could lead to a recession.

Off-Balance-Sheet Arrangements

During the normal course of business, we are a party to financial instruments with off-balance-sheet risk in order to meet the financing needs of our customers. These financial instruments include commitments to extend credit, commitments to sell loans, and standby letters of credit. We follow the same credit policy (including requiring collateral, if deemed appropriate) to make such commitments as is followed for those loans that are recorded in our financial statements.

Our exposure to credit losses in the event of nonperformance is represented by the contractual amount of the commitments. Management does not expect any significant losses as a result of these 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.

Contractual Obligations

There have been no material changes to the Company's contractual obligations existing at December 31, 2023, as disclosed in the Annual Report on Form 10-K, filed with the SEC on March 8, 2024.

Non-GAAP Financial Measures

Certain ratios and 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 profitability, financial condition and capital adequacy, consistent with how management evaluates the Company’s financial performance.

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The following tables provide a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent:


	Three Months Ended
Return on Average Tangible Equity	March 31, 2024			March 31, 2023
(Dollars in thousands)
Net income	$	3,269		$	1,397
Intangible amortization, net of tax (1)	1,228			1,314

Tangible net income	$	4,497		$	2,711

Average shareholders' equity	$	527,533		$	498,547
Average intangible assets, net	(95,296)			(92,002)
Average tangible equity	$	432,237		$	406,545

Return on average equity	2.49		%	1.14		%
Return on average tangible equity (2)	4.18		%	2.70		%

(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, 2024			December 31, 2023
(Dollars in thousands, except per share data)
Total shareholders’ equity	$	528,040		$	524,378
Intangible assets, net	(100,649)			(86,546)
Tangible common equity	$	427,391		$	437,832

Total assets	$	6,748,015		$	6,427,540
Intangible assets, net	(100,649)			(86,546)
Tangible assets	$	6,647,366		$	6,340,994

Book value per share	$	33.53		$	33.41
Tangible book value per share (1)	$	27.14		$	27.90
Shares outstanding	15,750,471			15,694,306

Equity to assets ratio	7.83		%	8.16		%
Tangible common equity ratio (2)	6.43		%	6.90		%

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


	Three Months Ended
Efficiency Ratio	March 31, 2024			March 31, 2023
(dollars in thousands)
Total noninterest expense	$	35,565		$	33,319
Amortization of intangibles	(1,637)			(1,752)
Merger-related expenses	(1,314)			(136)

Noninterest expense used for efficiency ratio	$	32,614		$	31,431

Net interest income, tax equivalent(1)	$	36,038		$	41,314
Noninterest income (loss)	9,750			(4,046)
Investment security (gains) losses, net	(36)			13,170
Net revenues used for efficiency ratio	$	45,752		$	50,438

Efficiency ratio(2)	71.28		%	62.32		%
(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.

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	Three Months Ended
Net Interest Margin, Tax Equivalent/Core Net Interest Margin	March 31, 2024			March 31, 2023
(dollars in thousands)
Net interest income	$	34,731		$	40,076
Tax equivalent adjustments:
Loans (1)	920			716
Securities (1)	387			522
Net interest income, tax equivalent	$	36,038		$	41,314
Loan purchase discount accretion	(1,152)			(1,189)
Core net interest income	$	34,886		$	40,125

Net interest margin	2.25		%	2.66		%
Net interest margin, tax equivalent (2)	2.33		%	2.75		%
Core net interest margin (3)	2.26		%	2.67		%
Average interest earning assets	$	6,215,160		$	6,100,456

(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 us as other types of market risk, such as foreign currency exchange rate risk and commodity price risk, 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 (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 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 $9.6 million in the first three months of 2024, compared with $17.6 million in the first three months of 2023. Net cash outflows from investing activities were $38.3 million in the first three months of 2024, compared to net cash inflows of $132.5 million in the comparable three-month period of 2023. Net cash inflows from financing activities in the first three months of 2024 were $44.8 million, compared with net cash outflows of $167.4 million for the same period of 2023.

To 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

•Federal Reserve Bank Discount Window/Bank Term Funding Program

•Federal Home Loan Bank Advances

•Brokered Deposits

•Brokered Repurchase Agreements

Federal Funds Lines - Federal funds positions provide a source of short-term liquidity funding for the Bank. 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. The current federal funds purchased limit is 10% of total assets, or the amount of established federal funds lines, whichever is smaller. As of March 31, 2024, the Bank maintains several unsecured federal funds lines totaling $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 BTFP are additional sources of liquidity, particularly during periods of economic uncertainty or stress. Effective March 11, 2024, no new loans will be made under the BTFP. As of March 31, 2024, the Bank had investment securities consisting primarily of corporate debt, state and political subdivisions, mortgage backed, and collateralized mortgage obligations, with an approximate market value of $790.3 million pledged to the Federal Reserve Bank of Chicago for liquidity purposes and had additional borrowing capacity of $421.4 million. There were no outstanding borrowings through the FRB Discount Window at March 31, 2024. There were $405.0 million of Bank Term Funding Program borrowings outstanding at March 31, 2024.

Federal Home Loan Bank Advances - FHLB advances provide both a source of liquidity and long-term funding for the Bank. All credit exposure, including advances and federal funds borrowings from the FHLBDM are collateralized primarily by one- to four-family residential, commercial and agricultural real estate first mortgages equal to various percentages of the total outstanding notes. The current credit limit established by the FHLBDM is equal to 45% of the Bank's total assets. This credit capacity limit includes short-term and long-term borrowings, federal funds, letters of credit, and other sources of credit exposure to the FHLB. As of March 31, 2024, the Bank had no short-term FHLB advances and $6.3 million in long-term FHLB borrowings and additional borrowing capacity of $795.9 million.

Brokered Deposits and Reciprocal Deposits - The Bank has brokered time deposit and non-maturity deposit relationships available to diversify its funding sources. Brokered deposits offer several benefits relative to other funding sources, such as: maturity structures which cannot be duplicated in the current 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. The Bank’s internal policy limits the use of brokered deposits as a funding source to no more than 20% of total assets. Board approval is required to exceed this limit. The Bank must maintain a “well capitalized” rating to access brokered deposits without FDIC waiver. An “adequately capitalized” rating requires an FDIC waiver to access brokered deposits and an “undercapitalized” rating prohibits the Bank from using brokered deposits. The Company had brokered deposits of $205.0 million as of March 31, 2024 and $221.0 million as of December 31, 2023.

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 $5.00 billion, with some exceptions for financial institutions that do not meet such criteria. At March 31, 2024, the Company had $14.0 million of reciprocal time deposits, $132.7 million of reciprocal interest bearing non-maturity deposits, and $64.2 million non-interest bearing 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 - 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 15% of total assets. There were no outstanding brokered repurchase agreements at March 31, 2024.

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 a significant market risk. The major sources of the 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. Multiple interest rate scenarios are used in this analysis which include 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 or SOFR).

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

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way that changes in interest rates do not have a large negative impact. The risk is monitored and managed within approved policy limits.

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

Net Interest Income Simulation - 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 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 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:


	Immediate Change in Rates
(dollars in thousands)	-200			-100			+100			+200
March 31, 2024
Dollar change	$	2,832		$	1,273		$	(2,220)		$	(4,634)
Percent change	1.9		%	0.9		%	(1.5)		%	(3.1)		%
December 31, 2023
Dollar change	$	1,280		$	(347)		$	229		$	111
Percent change	0.9		%	(0.2)		%	0.2		%	0.1		%

As of March 31, 2024, 33.9% of the Company’s earning asset balances will reprice or are expected to pay down in the next twelve months, and 40.7% of the Company’s deposit balances are low cost or no cost deposits.

Economic Value of 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 - The interest rate gap is the difference between 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

The Company’s management, including the Chief Executive Officer, the Chief Financial Officer, and the Chief Accounting Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the 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 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,

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to allow timely decisions regarding required disclosure. Based on this evaluation, the Chief Executive Officer, the Chief Financial Officer, and the Chief Accounting Officer, have concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2024.

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 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 March 31, 2024 that have materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

There have been no material changes to the risk factors set forth under Part I, Item 1A "Risk Factors" in the Company's Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 8, 2024.

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

Repurchase of Equity Securities

The following table sets forth information about the Company’s purchases of its common stock during the first quarter of 2024:


	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, 2024	—	$	—	—	$	15,000,000
February 1 - 29, 2024	21,278	24.48		—	15,000,000
March 1 - 31, 2024	—	—		—	15,000,000
Total	21,278	$	24.48	—	$	15,000,000

(1) During the three months ended March 31, 2024, no shares were repurchased by the Company under the current share repurchase program, while 21,278 shares were surrendered by employees of the Company to pay withholding taxes on vesting of restricted stock unit awards.

(2) On April 27, 2023, the Board of Directors of the Company approved the current share repurchase program, allowing for the repurchase of up to $15.0 million of the Company's common stock through December 31, 2025. Since April 28, 2023 and through March 31, 2024, the Company repurchased no shares of common stock, leaving $15.0 million available to be repurchased.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

During the fiscal quarter ended March 31, 2024, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule10b5-1(c) or any "non-Rule 10b5-1 trading arrangement."

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Item 6. Exhibits.

Exhibit

Number

Description

Incorporated by Reference to:

3.1

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 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, 2022

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

4.1

Form of MidWestOne Financial Group, Inc. 2023 Equity Incentive Plan Restricted Stock Unit Award Agreement

Exhibit 4.7 to the Company’s Form S-8 filed with the SEC on May 5, 2023

4.2

Form of MidWestOne Financial Group, Inc. 2023 Equity Incentive Plan Performance-Based Restricted Stock Unit Award Agreement

Exhibit 4.8 to the Company’s Form S-8 filed with the SEC on May 5, 2023

10.1

Third Amendment to the Credit Agreement by and between MidWestOne Financial Group, Inc. and U.S. Bank National Association dated February 12, 2024

Exhibit 10.11 to the Company's Annual Report on Form 10-K filed with the SEC on March 8, 2024

31.1

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

Filed herewith

31.2

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

Filed herewith

31.3

Certification of 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 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

32.3

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

The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, 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

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

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SIGNATURES

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

MIDWESTONE FINANCIAL GROUP, INC.

Dated:

May 7, 2024

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)

By:

/s/ JOHN J. RUPPEL

John J. Ruppel

Chief Accounting Officer

(Principal Accounting Officer)